Irish leasing company in record €9bn Airbus deal

SMBC order represents biggest single-aisle aircraft purchase deal

Irish-based SMBC Aviation Capital will tap capital markets to fund the delivery of the 115 aircraft that it has ordered from European manufacturer Airbus, in a record-breaking deal valued at close to €9 billion.

The Japanese-owned and Dublin-headquartered aviation leasing specialist, formerly part of Royal Bank of Scotland, announced yesterday it had placed a firm order with Airbus for 110 A320neo and five A320ceo aircraft.

The deal is valued at $11.8 billion (€8.7 billion) at list prices, although SMBC chief executive, Peter Barrett, said yesterday the company had negotiated its own terms with the manufacturer.

SMBC’s order is the largest ever placed with a manufacturer by an Irish-based lessor, and is also the biggest single-aisle aircraft purchase deal announced by anyone in the leasing industry.


“We will have to raise financing to pay for the aircraft,” Mr Barrett confirmed. However, he pointed out that while the order was a large one, the aircraft would be delivered over a period of eight years and would be paid for over this time.

Anticipated demand

The lessor has not lined up any clients for the planes at this point. Its chief executive said it had placed the Airbus order to meet anticipated demand.

Mr Barrett said much of this would come from airlines in regions where there is strong economic growth, including South America, east Asia, eastern Europe and the Middle East.

In more mature markets, he said, many airlines have ageing fleets and need to begin replacing their aircraft.

“It’s both growth and replacement,” he said. “We would be confident that we will be able to place these aeroplanes with airlines around the world.

“We would expected to start placing them in the next 12 to 16 months; typically, we place aircraft a year to 18 months before taking delivery.” Mr Barrett added that SMBC’s last substantial order was for 50 aircraft and all of those planes have now been placed.

He ruled out any likelihood SMBC would follow rivals like Avolon and seek a stock market listing. "Our shareholders are very happy and we are very happy being part of a large and successful financial institution," he said.

Tokyo- and New York-listed Sumitomo Mitsui Financial Group and its subsidiaries own SMBC, which the Japanese group formed in late 2012 after buying the Dublin-based RBS Aviation Capital from Royal Bank of Scotland for $7 billion and merging it with its own leasing arms, which were in Amsterdam.

SMBC is the world's third- biggest aircraft lessor. Its chairman, Shinichi Hayashida, said yesterday's announcement was proof of the group's intention to invest in the Irish company to cement its position in the industry. Airbus chief operating officer, John Leahy, also welcomed the deal, which was announced at the Farnborough Airshow.

SMBC has a fleet of 350 owned and managed aircraft valued at more than $10 billion.

AVOLON ORDER: 15 Airbus A330neo aircraft
Dublin-based aircraft financier, Avolon, followed news of a €1 billion deal with Boeing earlier this week with news yesterday that it plans to buy 15 Airbus A330neo aircraft, valued at $4.1 billion (€3 billion).

The Irish company said the order represented the launch of the newly-re-engined widebody A330 and would bring its fleet to 222 aircraft.

Avolon made the announcement at the Farnborough Airshow in Britain, where earlier this week it revealed it had ordered six Dreamliners from US manufacturer Boeing, in a deal worth more than $1.5 billion

Commenting on the agreement , Avolon chief executive Dómhnall Slattery said it represented an additional investment in the neo range of aircraft.

“We have already experienced great interest from customers in the A320neo range,” he added.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas