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SMBC Aviation Capital to drive growth by sale and leaseback deals with airlines

SMBC Aviation Capital says it intends to drive growth through sale and leaseback transactions with airlines.

Dublin-based SMBC is the former aviation finance unit of Royal Bank of Scotland and was acquired by Japanese bank Sumitomo Mitsui in June of last year.

This week it took control of two additional aircraft financing units – SMFL Aircraft Capital Corporation and Sumisho Aircraft Asset Management (SAAM). Both were already owned by its parent company Sumitomo Mitsui, but the deal added aircraft assets worth €1.3bn to the Irish firm's books.

The company says it is now the third largest global aircraft lessor in the world, with a fleet of 326 aircraft.

Chief executive Peter Barrett told the irish Independent he has no other immediate acquisitions on the horizon but said he will focus on building up the SMBC portfolio through sale and leaseback contracts.

In a sale and leaseback transaction, SMBC Aviation Capital buys jets owned by airlines only to lease the planes directly back to those airlines.

Such deals remove the risks associated with aircraft ownership, like depreciation, from the airline and places it on the shoulders of the lessor, who owns a huge portfolio of aircraft and can benefit from more economies of scale.

Ireland has become a world leader for aircraft leasing and is home to over 40pc of the industry.

There was an eight-month gap between this week's merger and Sumitomo's acquisition of SMBC Aviation Capital (formerly RBSA) from RBS.

The deal adds 13 customers to SMBC Aviation Capital's books, bringing its total to 89.

The planes come from a mixture of manufacturers – though it has a slight bias toward Boeing – but Mr Barrett says the company has equal regard for planes from both European manufacturer Airbus and US manufacturer Boeing.

Mr Barrett says SMBC Aviation Capital has increased its staff by 15pc since its acquisition by Sumitomo Mitsui and should have over 100 people working for it, most of them based in Dublin, by the end of this year.

Irish Independent