Domestic

BOC to increase aircraft assets

By Harry Suhartono (China Daily)
Updated: 2011-01-25 11:16

SINGAPORE - BOC Aviation, the aircraft-financing unit of Bank of China, said on Monday that it is looking to order more aircraft from manufacturers such as Airbus and Boeing this year, as the airline industry rebounds strongly from the global economic downturn.

BOC Aviation Chief Executive Officer Robert Martin said the company, which owns and manages around $6.6 billion worth of aircraft assets, was aiming to increase the assets to between $7.5 and $8 billion by the end of 2011.

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"We could easily do $1 billion worth of 'purchase and lease back' business this year if the opportunities are available," Martin said.

"We will also this year review our own orders for the years 2012 to 2016. We want to have a pipeline of aircraft coming into our portfolio and we will engage in some discussions with manufacturers over that issue," he said.

Martin, a former Aircraft Finance Director at HSBC Investment Bank in Hong Kong, said BOC Aviation has just started the research process for aircraft procurement, which could last six to nine months.

BOC Aviation is wholly owned by Bank of China, which bought the company in December 2006 for an enterprise value of $3.25 billion. The company owns and manages 167 airplanes, mostly from the single-aisle Airbus A320 and Boeing 737 families, and has another 64 on order. More than 50 percent of its business comes from Asia-Pacific clients.

The industry, which suffered a massive downturn during the global economic recession in 2009, is now beginning to recover. The International Air Transport Association forecast a profit of $15.1 billion for 2010 and $9.1 billion for 2011, compared with a loss of $9.9 billion in 2009.

"From what we are seeing in the leasing industry, certainly the demand for new aircraft is significant. We are beginning to see forward orders for leased aircraft as well as aircraft from the manufacturer," Martin said.

"The only thing tempering that is inflation and, in particular, the increase in fuel costs. The question is, will the airlines be able to pass the increases in fuel cost to the passengers?"