Jet leasing in shake-up as AerCap, GE unit discuss tie-up

[March 08, 2021]    (Reuters) - Aircraft leasing is on the brink of its biggest shake-up in almost a decade as its top two players AerCap and General Electric's GECAS discuss a deal to forge an industry titan with over 2,000 jets, financial sources said on Monday.

 A General Electric aircraft used for testing jet engines is shown at Victorville Airport in Victorville, California, U.S., March 26, 2019. REUTERS/Mike Blake

Negotiations for a tie-up follow years of speculation over the sale of GECAS and come as COVID-19 is expected to shift more of the world's passenger aircraft fleet into the arms of the leasing industry, which already takes about half of Airbus and Boeing deliveries.

The Wall Street Journal, which first reported the possible deal, valued it at $30 billion and said an announcement could come as early as Monday, barring a last-minute hitch.

General Electric (GE) said it did not comment on speculation. AerCap did not respond to requests for comment.

New York-listed shares in AerCap jumped 8.25% ahead of the market opening, while GE was up 3%.

A deal would be the most ambitious expansion yet under AerCap Chief Executive Aengus Kelly who in 2013 struck a deal to buy the firm's largest rival, Los Angeles-based International Lease Finance Corp, in the wale of the financial crisis.

It would also mark the latest move by GE Chief Executive Larry Culp to offload businesses and reduce debt, after taking over the reins at the struggling conglomerate in 2018.

A tie-up would create comfortably the world's largest aircraft leasing company, with more than 2,000 aircraft owned or under management and hundreds of planes on order.

Vertical Research Partners analyst Rob Stallard described the resulting behemoth as the "mother of all leasing companies".

However, if a deal goes ahead, its sheer size could attract attention from antitrust regulators as AerCap and GECAS are already each roughly twice as big in fleet terms as the sector's third-largest player, Dublin-based Avolon, analysts said.

The structure of any deal to acquire GECAS was not immediately clear but several industry sources predicted it would include a similar stock structure that saw ILFC's insurance owner AIG become a shareholder in the new AerCap.

Major leasing companies, which rent out airplanes for a monthly fee, are eyeing growth as airlines focus on repairing balance sheets wrecked by the drop in air travel during the pandemic.

DBS analysts said more airlines were expected to shift towards aircraft leasing as they emerge from the crisis.

(Reporting by Bhargav Acharya, Tim Hepher, Anshuman Daga, Alexander Cornwell, Laurence Frost. Editing by Keith Weir and Mark Potter)

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