SMBC Aviation Capital makes $319m profit on $1bn revenues

Dublin-based aircraft lessor has 90 customers in 40 countries

SMBC buys aircraft from manufacturers and leases them to airlines around the world. Photograph: iStock

SMBC buys aircraft from manufacturers and leases them to airlines around the world. Photograph: iStock

 

Irish aircraft lessor SMBC Aviation Capital made a $319.4 million (€270 million) profit in its last financial year, which ended on March 31st.

The Dublin-based company said on Thursday that overall revenues held steady at $1 billion during the 12-month period.

Profits before tax rose 2.2 per cent to $319.4 million during the year from $312.5 million in 2017.

SMBC buys aircraft from manufacturers Airbus and Boeing and leases them to airlines around the world.

The company has about 90 customers in 40 countries and owns, manages or has committed to buying a total of 675 craft.

SMBC has been supplying planes to Scandinavian carrier SAS, which is renewing its fleet. It has also done deals with Avianca in Colombia and Aero Mexico.

However, chief executive Peter Barrett said Asia remained a key market as demand there for air travel was growing strongly.

China is now the world’s second-biggest aviation market and is poised to take the number slot at the end of the decade.

Last month, SMBC agreed to provide Chinese carrier Ruili with two Boeing 737 Max 8 aircraft. “Asia is going to continue to be the primary engine of growth,” Mr Barrett observed.

Fuel costs

Rising fuel and increasing interest rates threaten the global aviation business with turbulence as both factors are driving up airline costs.

The International Air Transport Association estimates that jet fuel prices will grow 26 per cent this year to $84 a barrel.

A recent report from the group acknowledges that industry profits have been slipping since 2016 as costs have increased.

Mr Barrett acknowledged that rising fuel was an element in increasing airline costs.

He pointed out that new fuel-efficient craft such as the Airbus A320 neos make up one fifth of SMBC’s fleet.

Airlines say that these craft cut fuel costs by about 20 per cent. “That’s probably going to benefit our business in years to come,” he said.

Interest rate increases have a direct impact on lessors as they borrow much of the money used to buy aircraft.

Barry Flannery, SMBC’s chief financial officer, said that the company’s balance sheet remained strong.

$600m raised

During the year, the company raised $1.4 billion, including $600 million from syndicates of Asian banks.

SMBC’s shareholders, Japan’s SMFG and Sumitomo Corporation have pledged to provide $1 billion up to March 31st next year.

SMBC regularly trades craft to manage and update its own fleet. It sold 50 craft over its last financial year

In a statement, Mr Barrett said that had been another year of record profitability for the company.