Air­craft leas­ing set for rapid growth

China ex­pected to ac­count for 35% of global mar­ket by 2022, says re­port

China Daily (Hong Kong) - - BUSINESS - By ZHU WENQIAN zhuwen­qian@ chi­

Chi­nese com­pa­nies are ex­pected to dom­i­nate the global air­craft leas­ing mar­ket with a 35 per­cent mar­ket share by 2022, ac­cord­ing to a new re­port.

Bri­tish avi­a­tion data provider FlightGlobal said air­craft leas­ing is poised for rapid growth in China and do­mes­tic firms are ex­pected to play a much big­ger role in the global mar­kets.

In 2008, Chi­nese cap­i­tal ac­counted for just 5 per­cent of the avi­a­tion leas­ing mar­ket. This year, that share has risen to 28 per­cent, and it will reach 35 per­cent by 2022, it said.

Dur­ing the past decade, the cap­i­tal de­ployed by air­craft leas­ing com­pa­nies rose 51 per­cent to $261 bil­lion and out of this, nearly $71 bil­lion came from Chi­nese en­ter­prises.

The rapid rise of Chi­nese banks and lessors in the air­craft leas­ing sec­tor has also been putting pres­sure on in­dus­try re­turns, FlightGlobal said.

ICBC Fi­nan­cial Leas­ing Co Ltd, China’s largest air­craft leas­ing com­pany by as­sets and the sub­sidiary of In­dus­trial and Com­mer­cial Bank of China, said as of Oc­to­ber this year, it has man­aged to­tal cap­i­tal of 300 bil­lion yuan ($45 bil­lion) and 555 air­craft, in ad­di­tion to a large num­ber of ship­ping as­sets and largescale equip­ment.

“The strong de­mand for air­craft in the do­mes­tic mar­ket has laid a strong foun­da­tion for the air­craft leas­ing in­dus­try in China, with leas­ing in­creas­ingly be­ing ac­cepted by car­ri­ers. The do­mes­tic mar­ket will con­tinue to grow rapidly,” said Zhao Guicai, CEO of ICBC Leas­ing.

“The air­craft leas­ing busi­ness also gives Chi­nese com­mer­cial lenders ad­e­quate lever­age in over­seas mar­kets. On the other hand, Euro­pean and US banks are shrink­ing their air­craft leas­ing op­er­a­tions due to su­per­vi­sory con­cerns.”

Over the next two decades, Chi­nese car­ri­ers are ex­pected to pur­chase 7,240 air­craft val­ued at $1.1 tril­lion, ac­cord­ing to es­ti­mates from US air­craft maker Boe­ing Co. China’s fleet size is ex­pected to grow at a pace well in ex­cess of the global av­er­age, and al­most 20 per­cent of the new air­craft de­mand would come from Chi­nese car­ri­ers, Boe­ing said.

ICBC Leas­ing added that it plans to fur­ther ex­pand its busi­ness in mar­kets as­so­ciat- ed with the Belt and Road Ini­tia­tive. Cur­rently, it has op­er­a­tions in for­eign mar­kets such as In­dia, Rus­sia, In­done­sia and some Euro­pean coun­tries.

Mean­while, lead­ing do­mes­tic air­craft leas­ing com­pa­nies have be­come big cus­tomers of the home de­vel­oped large pas­sen­ger jet C919. ABC Fi­nan­cial Leas­ing Co Ltd has or­dered 75 C919 air­craft, the largest num­ber of or­ders. It is fol­lowed by CCB Fi­nan­cial Leas­ing Co Ltd and Ping An In­ter­na­tional Fi­nan­cial Leas­ing, with each of them or­der­ing 50 jets, and ICBC Fi­nan­cial Leas­ing Co Ltd with 45.

“The suc­cess­ful op­er­a­tion of home­made air­craft needs the sup­port from the in­dus­try, and leas­ing com­pa­nies can help it to im­prove sales, de­velop over­seas mar­kets, and re­duce the cost of air­lines. The huge do­mes­tic mar­ket has pro­vided de­mand for the C919, an air­craft with ad­vanced de­sign and qual­ity,” said ICBC Leas­ing’s Zhao.

Lin Zhi­jie, an avi­a­tion in­dus­try an­a­lyst and colum­nist at Carnoc, a lead­ing civil avi­a­tion web­site in China, said Chi­nese com­mer­cial lenders, flush with as­sets, have been fo­cus­ing on the growth of their air­craft leas­ing units. Be­sides, fa­vor­able tax poli­cies have also helped boost the growth of the air­craft leas­ing sec­tor in China.

“In ad­di­tion, do­mes­tic air­craft leas­ing com­pa­nies have ad­van­tages in trans­ac­tion prices and this has helped them to grow the mar­ket share rapidly in a few years. Still, they need to im­prove their pro­fes­sional ca­pa­bil­i­ties like fleet man­age­ment.”

Do­mes­tic air­craft leas­ing com­pa­nies have ad­van­tages in trans­ac­tion prices ...”

Lin Zhi­jie,

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