Flight control: China banks pilot jet leasing firms in chase for $228 billion market

Wed Feb 3, 2016 6:13pm EST
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By Siva Govindasamy and Anshuman Daga

SINGAPORE (Reuters) - Fresh from taking on the world in financial services, China's cashed-up banks are targeting a bigger slice of the surging global aviation market, beefing up affiliates bent on supplying planes to airlines around the planet.

Chinese lenders have grown big in traditional business like investment banking and brokerage, flush with Beijing backing and cheap funding. Now institutions are investing in operators that specialize in jet leasing, a newer financial service that was once the exclusive preserve of Western players.

Bank of China Ltd's (601988.SS: Quote) BOC Aviation Pte arm is set to go public this year with an estimated $3 billion listing, the industry's biggest. Four Chinese lessors - including BOC Aviation - are among the world's top 15 by fleet value in a $228 billion industry, according to consultancy Flightglobal.

Western firms like AerCap Holdings NV (AER.N: Quote) and GE Capital Aviation Services LLC still dominate a sector that underpins aviation - some 40 percent of carriers' aircraft are leased to avoid the fixed costs of owning planes. But China, through its banks, is aiming to create its own global champions.

"The political drive is there for China to be part of the global economy," said Johnny Lau, who ran the aircraft leasing arms of Industrial and Commercial Bank of China Ltd (ICBC) (601398.SS: Quote) and China Minsheng Banking Corp (600016.SS: Quote) before starting his own consultancy.

Against a backdrop of oil prices falling to 12-year lows, at least temporarily reducing aircraft operating costs and boosting carriers' profitability hopes, the drive is already under way.

GROWING PAINS?   Continued...

A passenger jet flies past the setting sun in Shanghai in this September 17, 2013 file photo. REUTERS/Aly Song