BOC Aviation Looking To Grow Leasing Portfolio
BOC Aviation (Hall 5, Stand D262) has grown from just another player in the aircraft leasing business to a prominent brand, and the world’s fifth largest aircraft lessor. Started in 1993 as Singapore Aircraft Leasing (Sale), it was acquired by Bank of China in December 2006 for $3.25 billion. In July 2007, its name was changed to BOC Aviation.
The current Sale fleet comprises one Boeing 747-400F, 18 Boeing 777s, four Airbus A330/200/300s, five Airbus A330-200Fs, 70 Boeing 737NGs, 87 Airbus A320s and nine Embraer E-190s. It has 87 aircraft on order in total, and expects to take delivery of 50 aircraft this year (it has received 20 already). BOC plans to take delivery of 40 aircraft, and sell 20, each year.
Bank of China has been aggressively financing aircraft for close to 36 years. As part of the Bank of China group, BOC Aviation assists airlines that are seeking debt financing by arranging financing through the bank. The bank is able to provide debt financing for aircraft on either a bilateral or syndicated basis.
BOC Aviation’s long-time managing director and CEO Robert Martin said the company has grown by sticking to an operating lease model, and having a long-term focus on getting the cost right when buying aircraft. While building a conservative but extremely well-financed brand it has been necessary, over the past 20 years, to build a banking group of more than 50 banks–coupled with a more recent move into capital markets. Martin said that in the leasing business it is crucial to have liquidity sufficient to buy aircraft when no one else is buying. “This is the fundamentals of the business,” he said.
BOC Aviation wants to be the leading Asian player in the world’s aircraft leasing market. Being headquartered in Singapore is a major cornerstone of its strategy; it is somewhere the world’s markets meet, and it has a AAA rating.
“We want to be seen as an airline’s long term partner and it is important to work with them when times are tough,” Martin said. This is exactly what the company did during the global financial crisis in 2008-2009, buying $2.3 billion of assets over a period as short as three months. “We have to set up strong relationships with customers to get to the top end of the market,” stressed Martin.
BOC Aviation started out as a widebody lessor but gradually changed its portfolio to comprise 70 percent single-aisle aircraft, Boeing 737NGs and the Airbus A320 family. Single-aisle aircraft are easier to lease to airlines and transition costs are low, said Martin. “Our aim is to have 70 percent in our portfolio the most popular type of single-aisle aircraft,” he added.
The 737NG and A320 family have shared a relatively equal split of the narrowbody aircraft market over the years. With changes in technology BOC Aviation is also moving to acquire the 737Max and the A320neo. Meanwhile, earlier this year it took delivery of two sharklet equipped A320s, both leased to Singapore-based low-cost carrier Jetstar Asia. Another seven are to join BOC Aviation’s fleet during the course of the year.
Martin said there is a lot of potential for growth in the single-aisle segment of the market. About 45 percent of the cities in Asia and 100 in China have a population of slightly more than one million. With air travel holding tremendous potential, the opportunity to link the cities with both passenger aircraft and freighters is huge.
On larger aircraft, BOC Aviation is interested only in Boeing 777s, Airbus A330s and–in time–may acquire Boeing 787s. Four-engine and very large aircraft (the Airbus A380 for example) are not options that BOC is looking at, due to high costs.
BOC Aviation also maintains a young fleet, with an average of four years, and intends to maintain this so that aircraft are easier to finance and trade–and more efficient and environment-friendly. “We want to have fuel-efficient aircraft in the market, which means lower maintenance cost,” Martin said.