ICBC's aircraft-leasing arm aims to double number of planes

Mainland lessor to double current levels as firm flies into market dominated by global players

PUBLISHED : Friday, 15 August, 2014, 5:23pm
UPDATED : Saturday, 16 August, 2014, 1:42am

ICBC Financial Leasing, the mainland's biggest domestic aircraft lessor, aims to deliver more than 300 planes to customers by the end of 2016, nearly double current levels, a senior executive said.

ICBC Financial's drive into a market dominated by global players comes as mainland leasing firms, backed by state lenders, play an increasingly important role in the growing domestic aviation business. Nearly 6,000 new jets, worth US$780 billion, are expected to be delivered over the next 20 years, according to aircraft-maker Boeing.

"Local companies have been expanding quickly and the growth potential is huge," said Mark Jiang, the managing director of aviation finance at ICBC Financial. ICBC Financial is backed by Industrial and Commercial Bank of China, while Bank of China and other state lenders support other lessors.

Jiang said ICBC Financial, which signed a US$1.1 billion deal with Embraer for 20 E190-E2 jets during President Xi Jinping's visit to Brazil last month, currently owned and managed 384 planes, up from 60 three years ago.

Even though International Lease Finance, part of AerCap, and Gecas, a unit of General Electric, still dominate the market, mainland lessors led by ICBC Financial and CDB Leasing, backed by China Development Bank, have managed to win a big chunk of business in recent years.

Jiang said mainland lessors now handled 80 per cent of all new domestic leasing business, up from almost zero five years ago. ICBC Financial now has 17 domestic clients and 34 overseas clients.

By 2018, mainland lessors are expected to corner 55 per cent of the mainland market, up from 38 per cent last year, according to industry consultancy Ascend.

"Chinese firms have shown the ability to go into the market in a very significant way," said Fitch Ratings senior director Illya Ivashkov. "Some of them have placed sizeable orders."

Growth prospects in the mainland's expanding leasing market helped China Aircraft Leasing raise nearly US$100 million in an initial public offering in Hong Kong last month.

More offerings are possible, industry observers say, but a more common approach for the leasing arms of big mainland banks may be to set up subsidiaries in the recognised international aircraft financing hubs of Singapore and Dublin to raise funds.