Irish aircraft lessor SMBC Capital Aviation spent about €8.5 million with local aerospace companies which it hired over the last year to prepare aircraft it was switching to new airlines. SMBC has reported that profits before tax grew 30 per cent to $142.9 million (€135.3 million) in the six months ended September 30th, while revenues rose 19 per cent to $502.8 million (€476.2 million).
Chief executive Peter Barrett said that during the six-month period, a number of its craft came off lease and it moved them to new clients, including Korean low-cost operators Jeju Air and T'Way Air.
It used Irish companies Dublin Aerospace and Eirtech in Dublin and Shannon to modify the crafts' interiors and repaint and rebrand them before they were passed to their new airlines. In all, SMBC estimates that this would have been worth $9 million – about €8.5 million – to suppliers and local economy.
SMBC’s Aircraft assets stood at $9.6 billion at the end of September, made up of 273 owned and 180 managed craft. In July SMBC borrowed $500 million using senior unsecured notes. Mr Barrett said this was an important step forward as the company continued to diversify its sources of funding.
New rules due to come into force under Basel IV by the end of decade could make it more expensive for banks to lend to aircraft lessors, which could force businesses such as SMBC to seek cash from the capital markets.
Mr Barrett acknowledged that the proposed changes were one of the reasons that SMBC opted for July’s bond issue, which was backed by money managers rather than banks, thus giving the company a fresh source of capital. However, he argued that it was too early to predict the precise consequences of the banking rules. “I do recall, before Basel II and Basel III, that there was a lot of speculation on the impact that it was going to have. some of that speculation was right and some of it was not,” he said.
SMBC closed 48 deals during the six-month period. It extended 10 leases and moved 13 craft to new lessees.