Primus co-founder in aircraft leasing club deal
During a week in which it emerged that Primus Financial Holdings was no more, two of its co-founders reemerged in new guises. First, Dexia announced that it was in exclusive negotiations with GCS Capital, a financial services-focused PE firm run by GuocangHuan, over the sale of its asset management arm. Then, P3 Investments, an entity controlled by Wing-fai Ng, joins a Chinese consortium in acquiring a majority interest in American International Group’s aircraft leasing unit.
The latter transaction is particularly interesting as it points to a wider trend of Asian investors snapping up private jet interests globally.
P3 has teamed up with New China Trust and China Aviation Industrial Fund to buy 80.1% of International Lease Finance Corporation (ILFC) for approximately $4.23 billion. New China Life Insurance and an investment arm of ICBC International, will join the consortium pending regulatory approval. The consortium has the option to buy an additional 9.9% of ILFC.
ILFC is the world's second-largest jet-leasing company by assets after General Electric's Gecas unit. According to Ascend, an aerospace consultancy, the company has 1260 owned or managed aircraft and relationships with more than 200 airlines, including 17 carriers covering China, Hong Kong and Macau. More than half the ILFC fleet comprises medium-range narrow-body Airbus and Boeing aircraft often used by Chinese airlines for domestic flights. It currently has 150 aircraft in service in China.
Leasing companies are looking to leverage two trends: that passenger numbers will continue to increase, prompting Chinese airlines to rely on a combination of aircraft leasing and purchases as they respond to demand; and that private jets will grow in popularity, for practical and vanity reasons.
In September, Boeing released its latest annual projections for China's commercial aircraft market. It expects domestic carriers to need 5,260 new planes worth $670 billion through 2031. The country's fleet of business jets is tipped to reach 200 by the end of this year and then 2,470 by 2030.
"There are more Chinese billionaires and entrepreneurs who understand the business benefits of travelling by business jet," Chris Buchholz, CEO of Hongkong Jet, told AVCJ earlier this year. "When we look at the 11,000 business jets in the US at the moment, it is pretty clear that there is still ample room for growth in China."
NetJets, a private aviation company owned by Warren Buffett's Berkshire Hathaway, announced a China joint venture with local private equity players Hony Capital and Fung Investments in March.
There have also been two major aircraft leasing acquisitions by Japanese players. Mitsubishi UFJ Lease & Finance bought Jackson Square Aviation from Oaktree Capital for $1.3 billion in October, while Sumitomo Mitsui Financial Group and Sumitomo Corp. purchased 70% of Royal Bank of Scotland's leasing business for $7.3 billion in January.
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