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Aviation and Aircraft Leasing News Roundup

Aviation and Aircraft Leasing News Roundup

Ireland has become synonymous with excellence in the aviation industry with the top four global lessors now located here. The industry contributes approximately $660 million each year to the economy employing approximately 1,500 people with another 3,500 jobs created in support industries. Here are some of the major stories from the sector in 2019 so far.

Award for Avolon chief

This month saw Dómhnal Slattery, chief executive of Irish aircraft lessor Avolon, named The Irish Times Business Person of the Month. It’s not hard to see why when you look at the company’s bumper performance last year.

The Dublin based aircraft leasing company, is the third largest player in its sector in the world. Its profit last year was $717 million, up a an impressive $167 million from the year before. The group maximised its fleet, with plane utilisation for the year at 99.5 per cent while its aircraft portfolio rose by 7 per cent to 971 serving 150 customer airlines.

In 2018, Avolon delivered 33 new aircraft to customers around the world including the first Airbus A330 neo. The company recently raised €970 million through the private placement of unsecured bonds. It plans to use this to pay down existing debt taking a key step towards one of its key goals an investment grade rating.

With over three decades in the aviation industry, Slattery began his career in marketing roles for Guinness Peat Aviation (GPA) and GE Capital Aviation Services (GECAS). He went on to establish International Aviation Management Group, which became RBS Aviation Capital following a buyout by Royal Bank of Scotland.

Slattery founded Avolon in 2010 and has led it through private equity ownership, flotation on the New York Stock Exchange and subsequent takeover by China’s HNA Group.

It’s certainly proved a difficult last 18 months for Avolon’s ultimate owner. The huge Chinese conglomerate’s debt crisis has forced it to sell billions in assets. That fire sale included a $2bn minority stake in Avolon to Japan’s Orix Corp.

The jettisoning of assets looks set to continue with HNA Group currently looking at a potential sale for its Swiss aircraft-maintenance firm SR Technics. It has more than 3,000 employees globally with three offices here in Ireland.

Aerospace Engineering Solutions Shannon expansion

More good news for the aviation sector this quarter with the announcement that Aerospace Engineering Solutions (AES Global), a UK aerospace design and certification organisation, will be extending its operations here in Ireland. The company, designs and integrates engineering modification programs on commercial aircraft for airlines and aircraft leasing companies worldwide. It has opened an engineering design office in Shannon and has already gained EASA Part 21 approval for its Irish base.

Director of Engineering in Ireland for AES, Eamonn McAuley said: “The move to Ireland and particularly the Shannon zone, is testament to AES Global’s well established Irish customer base and also brings to the area enhanced Part 21 experience backed up by quality and reliability.”

Star takeover of ASL Aviation

In a deal said to be worth more than €200 million, European investor Star Capital has bought Irish airline services provider ASL Aviation Holdings (ASL).

Dublin based ASL flies both passengers and cargo for airlines in Europe, Africa and Asia. With a fleet of 130 aircraft it carried over 3.2 million passengers in 2018 with the company handling cargo for global businesses such as DHL and FedEx. According to its last published accounts, the company earned revenues of €960 million in 2017 while its operations generated profits of €24.2 million.

The deal leaves Star with 51% of the Irish company which was previously owned by Belgian shipping group Compagnie Maritime Belge. The other 49 per cent is held by 3P Air Freighters, which is controlled by Brussels-based Bank Degroof Petercam.

ASL Holdings chief executive Hugh Flynn welcomed the announcement saying the deal would provide a foundation for future growth. He added: “Our aim is to be the aviation services provider of choice and we will work with Star Capital to continue to deliver on that by expanding our product offering, developing our geographical compass and focussing on core values including safety, reliability and quality.”

Star Capital are known to invest in businesses worth between €50 million and €1 billion that hold strong positions in their markets. It owns Swedish shipping company, MPC Container Ships and Eversholt Rail Group, a British train leasing business that owns about 29% of the rolling stock in the UK.

Managing partner at Star Capital, Paul Gough, said the move is seen as a “perfect fit for our strategy to invest in strong asset-based businesses and support their growth ambitions”.

Aircraft Leasing Ireland — Blockchain is the future

The establishment of Aircraft Leasing Ireland (ALI), a trade body for Irish aviation lessors, last July marked an important moment in the aircraft leasing sector. In much the same way that IATA speaks for the airlines, ALI provides a unified voice for aircraft leasing in Ireland. Its membership includes all the major international aircraft leasing companies based here and was setup to ensure the country maintains its position as a leading player in global aircraft leasing.

In a recent interview with Aviation Finance, ILI’s inaugural chairman, SMBC Aviation Capital Chief Operating Officer David Swan, said they are looking to establish a working group to explore ways in which emerging fintech companies can benefit the aviation industry here. The group is also looking to identify education requirements for the industry for the next two decades — and ensure they are being met by the Government.

Swan has specifically earmarked blockchain technology to play a key role in the aircraft leasing industry of the future. He told Aviation Finance: ‘I believe blockchain is the next internet and that it will transform the way things are done in our industry. There will be smart contracts between companies and digitisation is going to transform the legal industry as well, so there are definitely exciting times ahead.’

Looking ahead, Swan believes having a clear, industry-wide voice, “instead of scampering around in an uncoordinated way” is vital for the continued success of the industry here.

Willie Walsh – Shocking Brexit uncertainty

IAG chief executive Willie Walsh has described as “shocking” the continuing uncertainty over Brexit. In the newly-released IAG annual report for 2018, Walsh voiced his disbelief at the UK’s haphazard withdrawal from the European Union: “It has been quite shocking to get so far in the political process without having any real clarity about the future. That can’t be positive for the economy.”

Walsh believes there’s been “lot of scaremongering” over the possible impact on UK transatlantic operations due to Brexit. But the recent post Brexit pact between the UK and US governments has provided security for IAG’s main UK operator, British Airways.

“I was always confident the alignment of interests between the UK and US [governments] would result in a new deal,” says Walsh. He expects Brexit to remain the “biggest unknown” affecting the company this year but insists: “We refuse to be distracted by the uncertainty.”