Monday 23 April 2018

Jet-leasing giant SMBC has eye on acquisitions

Peter Barrett, chief executive of SMBC Aviation
Peter Barrett, chief executive of SMBC Aviation
John Mulligan

John Mulligan

Dublin-based aircraft lessor SMBC Aviation Capital will continue to size up potential acquisitions but ceo Peter Barrett said the company "won't pursue growth for growth's sake".

He was speaking to the Irish Independent as the company - one of the world's top five aircraft leasing firms - reported profits of $142.9m (€135m) for the first half of its financial year, a 29.6pc increase on the corresponding period in 2015.

Its revenue rose 19.2pc to $502.8m in the latest period.

SMBC Aviation Capital has a fleet that includes 273 owned aircraft, and an additional 180 managed jets. Between those aircraft and orders, the company has a fleet of 669 aircraft.

Mr Barrett said that the sector remained strong globally, despite challenges such as Brexit that might impact locally.

"We have customers all over the world and the numbers reflect that," he said. "The numbers reflect two things: we're growing our business with modern aircraft that bring in higher revenues, and also we've continued to actively trade aircraft, selling some of our older aircraft. It's quite a good environment at the moment."

SMBC Aviation Capital is owned by a consortium of Japan's Sumitomo Mitsui Banking Corporation, Sumitomo Mitsui Finance and Leasing, and Sumitomo Corporation.

It's currently about the world's fourth-largest jet leasing company by portfolio size.

But it will be overtaken early next year following the completion of a takeover by Dublin-based Avolon of the jet leasing business of CIT Group.

Avolon sealed a deal in October to pay $10bn (€9.49) for that business. It will effectively double the size of Avolon, which was co-founded by and is headed by Domhnal Slattery, to having a fleet of over 900 operational and on-order aircraft. Avolon is part of Bohai Leasing, which is owned by China's HNA conglomerate.

SMBC Aviation Capital is among the companies that ran the rule over the CIT business, but Mr Barrett declined to confirm that.

"As one of the biggest players in the market, things will always be brought to our attention," he said."We continue to look at whatever opportunities there are. While we look at ones that make sense for us, we're not going to pursue growth for growth's sake alone."

He said that if SMBC Aviation Capital sees the right thing in terms of "strategy, portfolio and all those types of things" that it would look at any relevant opportunity.

He said corporate activity in the leasing sector, including consolidation, will remain a feature of the business.

"I've always been of the view that it's likely to continue," he said.

"The pace and nature of it will vary. There will be corporate activity in the next 12 months [in the sector]. Some of those things might be IPOs, some might be consolidation and some might be just change of ownership.

"I think a lot will depend on the seller and the nature of what they're trying to achieve."

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