GLOBAL INSURANCE giant AIG’s Irish-based aircraft leasing operation made profits of close to €360,000 last year, according to the latest accounts filed.
Whitney Ireland Leasing Ltd, which specialises in leasing aircraft to European and Asian airlines, had pre-tax profits of $505,350 (€357,500) in 2008 on the back of a $77.2 million turnover. Pre-tax profits were level when compared to the previous year, but turnover was more than 10 per cent up on the $69.1 million recorded in 2007.
The company’s accounts warn that, if a rescue plan agreed by its troubled US parent with New York’s Federal Reserve Bank fails, it could impact on its operations, its ability to issue new debt and get support from AIG.
Last October, Whitney Ireland’s ultimate parent, AIG, was forced to enter an $85 billion rescue package with the New York federal reserve after it emerged that it had insured bonds issued by banks at the centre of the collapse of the global financial system.
At the end of the first quarter of the year, AIG said it had adequate resources to continue trading and to sell non-core businesses. However, the notes accompanying Whitney Ireland’s accounts state that if the actual outcome of its parents plans are materially different from what is expected, or if its predictions prove to be wrong, and it cannot get further federal support, then this could have a serious impact on Whitney’s operations.
The Irish company’s direct parent is Bermuda-based Whitney Leasing.
Whitney Ireland leases aircraft from its parent and in turn sublets them to European and Asian airlines and charter operators.
The accounts show that Bank of Scotland financed most of its transactions, which largely involved Airbus aircraft.
Aircraft leasing is essentially a financial service. The leasing companies provide airlines with the finance needed to acquire aircraft.
They keep ownership of the aircraft, lease them to airlines and receive rental income in return. The accounts show that the bulk of its revenues, $66.2 million, came from gross lease revenue and flight hours.
In general, the leasing companies cash in the asset at an early stage in the lease by securitising it, that is, transferring it to a special-purpose company, which is funded by the capital markets.
The special purpose company receives the rental income, while the leasing company uses the money raised to pay off the original debt and to finance further aircraft purchases and leasing deals.
