Jet Leasing Reshuffle Looms As AerCap and GE Unit Discuss Merger


PARIS (Reuters) – Aircraft leasing is on the verge of its biggest upheaval in nearly a decade as its two main players, AerCap Holdings and General Electric Co’s GECAS, discuss a deal to forge a industry titan with more than 2,000 jets the deal said on Monday.

FILE PHOTO: A General Electric aircraft used to test jet engines is shown at Victorville Airport in Victorville, California, United States, March 26, 2019. REUTERS / Mike Blake

Discussions of a tie-up follow years of speculation over a GECAS sale and come as COVID-19 is expected to move more of the global airliner fleet from the balance sheets of indebted airlines to the arms of the world. $ 60 billion leasing industry.

Aircraft lessors, who typically lease aircraft for up to 12 years at a time, already account for around half of deliveries of aircraft built by Airbus SE and Boeing Co.

The two sides have been in talks since late last year, one of the sources said. If negotiations are successful, an agreement on all actions could be reached as early as this week, another source added.

The Wall Street Journal, which first announced the possible deal, said the deal could be as high as $ 30 billion.

GE said he had not commented on the speculation. AerCap did not respond to requests for comment.

Irish-listed shares of AerCap closed trading on Monday with a gain of 13.2%. Shares of GE closed 4.2% higher, compared with a 0.5% decline in the S&P 500 index.

AN AMBITIOUS EXPANSION

AerCap is the world’s largest owner of commercial aircraft, with 1,080 aircraft directly on its books or managed on behalf of third parties. GECAS has 984 planes owned or managed, according to British consulting firm IBA Group.

The proposed merger would mark AerCap’s most ambitious expansion under the leadership of tenacious CEO Aengus Kelly, who in 2013 struck a deal to buy its biggest rival, Los Angeles-based International Lease Finance Corp, after the financial crisis.

It would also involve GE CEO Larry Culp’s latest move to offload operations and reduce debt since taking over the struggling conglomerate in 2018. GE has already taken steps to reduce its exposure to the market. aircraft financing.

Vertical Research Partners analyst Rob Stallard said the resulting giant would be the “mother of all leasing companies.”

However, if a deal is struck, its size could attract the attention of antitrust regulators as AerCap and GECAS are already almost twice the size in terms of fleets as the third largest player in the industry, Dublin-based Avolon, analysts said.

“The main question mark will be around the antitrust implications,” said Bertrand Grabowski, a former senior aviation banker turned independent adviser.

“One option for AerCap will be to have several hundred aircraft over time to comply with possible antitrust requirements,” he added.

CONSOLIDATION

A mega-merger in the leasing industry could also boost consolidation in an industry that has seen multiple takeovers in recent years.

“They will all think there is likely to be more consolidation,” IBA Group chairman Phil Seymour said of small donors, adding that it was “the natural impact of a downward cycle. “.

Major leasing companies envision growth as airlines focus on repairing balance sheets wrecked by declining air travel during the COVID-19 pandemic, even as vaccines have been the talk of a recovery.

Singaporean bank DBS Group has said it expects aircraft lessors to emerge significantly stronger from the crisis, but warned that weak airline finances meant some lessors would face problems. to collect money from carriers or would be forced to accept late payments.

Kelly told investors last week that the vast majority of AerCap customers pay their bills.

Reporting by Tim Hepher and Laurence Frost in Paris, and Rachit Vats in Bengaluru; Additional reports by Bhargav Acharya, Anshuman Daga and Alexander Cornwell; Written by Tim Hepher; Editing by David Goodman and Matthew Lewis



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