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 "Now, what we are particularly seeing is the growth rate has picked
up in North America," Robert Martin, chief executive and managing
director of the fully-owned leasing subsidiary of Bank of China Ltd,
told Reuters in an interview.
Speaking after the lessor placed the biggest order in its 20-year
history, for 82 Boeing jets worth $8.8 billion at list prices,
Martin said North American carriers are driving demand for newer,
fuel-efficient aircraft as they replace ageing planes.
"Now that the airlines have consolidated there, they are going to be
very profitable," said Martin, an industry veteran of more than 25
years, who has overseen Singapore-based BOC Aviation's rise to
become the world's fifth largest lessor by fleet value after joining
the company in 1998.
Lessors such as BOC Aviation, which place their aircraft with
airlines globally, are emerging as important customers for plane
makers. Industry publication Flightglobal estimates the top 50
lessors have a total fleet valued at nearly $200 billion.
The global airline industry is forecast to make a profit of $18
billion in 2014, with North America alone making up half of the
profit, data from the International Air Transport Association shows.
The top four U.S. carriers, all the products of mergers and
acquisitions, have put the sector on a sound financial footing.
BOC Aviation, formed after Bank of China acquired the Singapore
Airlines-backed company in 2006, had an estimated fleet value of
$8.9 billion in 2013, according to Flightglobal.
Japanese-owned SMBC Aviation Capital is Asia's biggest lessor, with
a fleet valued at $9.4 billion. Monday's order by BOC Aviation came
weeks after SMBC Aviation placed its own company-record order for
115 Airbus jets.
SOUTHEAST ASIA OVERCAPACITY
Though a booming middle class is set to catapult Asia Pacific past
North America as the world's biggest aviation market over the next
20 years, Southeast Asia is showing signs of overcapacity, with
airlines such as AirAsia Bhd deferring orders.
"We see some regional differences between the numbers of aircraft
they have ordered versus what they need in the short term," said
Martin, referring to carriers in Southeast Asia. "It's not a global
imbalance. It's purely a regional imbalance that you are seeing at
the moment."
BOC Aviation's fleet is operated by 56 airlines, including Southwest
Airlines, Emirates Airline and Aeroflot. It has a portfolio of 251
aircraft, with the fleet mainly based on the Airbus A320 family and
Boeing Next Generation 737 series.
"We are sitting in a situation today where 100 percent of our planes
in 2014 are placed, 83 percent for next year are placed and even 50
percent of 2016 is placed," said Martin.
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In an industry where cost of funding is critical for a lessor's
profitability, Martin helped BOC Aviation secure an investment grade
credit rating in 2012. The lessor has tapped into different types of
financing, including the first offshore renminbi-denominated bonds
by an aircraft lessor.
This has helped it take on competition from the biggest lessors,
GECAS, a unit of General Electric, and International Lease Finance
Corp, now part of AerCap.
Ilya Ivashkov, a New York-based senior director at Fitch Ratings,
said being part of Bank of China had helped BOC Aviation tap into
various funding sources, giving the lessor an edge over some other
players.Chinese banks such as Industrial and Commercial Bank of
China and China Development Bank have also emerged as significant
global players with their fast-growing leasing subsidiaries.
Dinesh Keskar, Boeing's vice president for sales at Asia Pacific and
India said airlines in India, Indonesia and China are increasingly
tapping lessors to operate modern fleets, instead of making capex-heavy
plane purchases.
The introduction of more economic reforms in some of Asia's biggest
economies will ultimately boost travel growth in the region, Martin
said.
"Now particularly with three reform-minded leaders in place in the
three biggest countries in the region - in Indonesia, China and
India, we are going to see further stimulation to traffic growth,"
he said, adding that growth in intra-Asia trade will drive demand
for business travel and also boost tourism."
(Editing by Kenneth Maxwell)
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