AIG's aircraft leasing arm confident of China dominance

Sun Nov 4, 2012 4:21pm EST
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By Alison Leung

HONG KONG (Reuters) - International Lease Finance Corp (ILFC), the aircraft leasing arm of American International Group Inc (AIG.N: Quote), has shrugged off threats from a growing number of domestic players in China, its biggest single market, saying it has the "first mover" advantage with over 200 planes on order.

China's insatiable appetite for air travel thanks to a growing wealthy population has created great opportunities for leasing firms, which own about two aircraft in five of the global fleet.

ILFC, whose multi-billion dollar initial public offering is on hold, is the largest aircraft lessor in China with a 35 percent market share, or 180 planes deployed there, its chief executive officer Henri Courpron said.

China will need 5,260 new aircraft worth $670 billion through 2031, according to Boeing Co, of which about 40-50 percent of the new planes would be owned by leasing firms, taking the market size to $268 billion in the next two decades.

The China market is fragmented with at least 20 domestic players -- many of them small and new to the market. But it is the foreign players, including ILFC and rival General Electric's (GE.N: Quote) GE Capital Aviation Services (GECAS), that dominate the market, taking a combined 90 percent of the business.

ILFC has a portfolio of more than 1,000 owned or managed aircraft, and another 239 new fuel-efficient aircraft, including Boeing 787s and Airbus EAD.PA A320neos, on order. And it has the rights to purchase an additional 50 of such aircraft.

If the new lessors in China were to order those planes today, they could only get them in 2018 or 2019.

"We have the first mover advantage," Courpron told Reuters on Friday.   Continued...