Avolon places €1.8bn order for 30 Boeing aircraft
IRISH AVIATION leasing company Avolon has placed an order with Boeing for 30 aircraft, with a price tag of $2.3 billion (€1.8 billion).
Yesterday’s announcement marks the Dublin-based company’s third such direct deal with an aircraft manufacturer. Avolon ordered 12 planes from Boeing in 2010, the first of which were delivered last month and placed with Japan Airlines.
The company, which counts the Government of Singapore Investment Corporation among its shareholders, ordered a further eight planes from Airbus at the end of 2010, the first of which will be delivered in 2014.
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Avolon’s chief commercial officer John Higgins described the 30-plane commitment as a “significant achievement” for the two-year-old company. “We don’t know where we’ll place them yet, but we know that the market will be there. There’s a strong market,” he said.
Leasing companies typically aim to place an aircraft with an airline 12-15 months before delivery.
The first of yesterday’s order will be delivered in 2015, while delivery of 20 737 MAX aircraft – Boeing’s newest design – will begin in 2018. This latest deal brings the company’s committed fleet to 135 aircraft, 84 of which have been delivered. Avolon’s existing fleet is valued at $4.9 billion.
It is understood the first two direct-purchase orders have generated a lucrative return, which encouraged the company’s shareholders to sign off on the third deal. About 70 per cent of Avolon’s existing business is done through sale-and-lease-back deals with airlines, however. The company plans to have 150 planes in its portfolio by 2014.
“We’ve been very selective on the type of aeroplanes that we’ll buy,” said Mr Higgins, when asked if the company was at risk of growing too quickly. “We’re positioning for future growth, as opposed to going out to buy a bunch of aeroplanes that will deliver in the next six months. We’ve said no to far more deals than we’ve said yes to, over the past two years,” he added.
Avolon says it invests “exclusively in modern, fuel-efficient aircraft” which, Mr Higgins maintains, is a crucial element of the company’s strategy.
“It’s almost a perfect hedge. If the market is booming, airlines will need more capacity; if it’s not, they’ll want them because of their fuel efficiency,” he said.
“Boeing is sold out now until 2020 on the 737 MAX. There’ll be a very strong demand for them because it’s the most efficient version of a narrowbody airplane out there. Every airline will want them,” he added.
About 40 per cent of the Avolon fleet is placed with carriers in the Middle East and Asia, with a further 20 per cent in Latin America.
Avolon was set up in 2010 by Dómhnal Slattery, a founder of RBS Aviation Capital. To date the company has raised $1.4 billion in equity from its shareholders, and a further $3.2 billion in debt.
Avolon has previously said that it will look to provide an exit for its private equity backers in 2015.
“Our current shareholders ultimately will want to transition out. That could be through a trade sale, it could be flotation but for us it’s just way too early to be looking at that,” said Mr Higgins.