Bank of China leasing unit to expand fleet with 82 Boeings

PUBLISHED : Tuesday, 26 August, 2014, 1:10am
UPDATED : Tuesday, 26 August, 2014, 1:10am

Bank of China's aircraft leasing subsidiary, BOC Aviation, yesterday announced an order for a total of 82 Boeing planes with a listed value of US$8.8 billion, the largest single order in the lessor's 20-year history.

The order, for 50 new fuel-efficient 737 MAX 8s, 30 Next-Generation 737-800s to be delivered between 2016 and 2021 and two 777-300ERs already placed, came less than six weeks after the company ordered 43 A320 family planes from Airbus at the Farnborough International Airshow in July.

"This is a continuation of our commitment to be responsive to airline customers which are expanding or replacing older fleets," said BOC Aviation chief executive Robert Martin.

The Singapore-based lessor, the world's fourth largest by fleet value, currently has a portfolio of 251 planes, mostly B737 and A320 family aircraft with an average age of less than four years.

It will be taking delivery of an average 27 planes a year between 2015 and 2021 as a result of recent orders to replenish its fleet, while it usually sells 25 to 30 planes a year, company spokeswoman Claire Leow told the South China Morning Post. Demand will mainly be driven by customers in Asia-Pacific and North America.

Industry analysts said the speed at which BOC Aviation is boosting its fleet is in line with Boeing's and Airbus' market forecast.

"It is not aggressive in my book," said Dewey Yee, a consultant with 30 years of experience in the aircraft leasing industry. "There is enough demand because the passenger growth is growing, the aviation industry itself is growing, and it depends where they are going to place these aircraft. China still doesn't have enough lift."

Yee added the timing of orders from lessors depends on the lifecycle of their existing leases and is also driven by the need to buy the next generation technology. Boeing's 737 MAX and Airbus' 320neo are the two rivals' latest battleground in the single-aisle market, competing to be the most fuel-efficient jet sporting advanced engines and building materials.

Fitch Ratings warned in a report in July that growing orders by aircraft lessors raise financing risk due to the long-term nature of the order periods. Operating lessors have become one of the dominant distribution channels for aircraft manufacturers to sell new equipment over the past few years and comprise roughly 15 per cent of Boeing's and Airbus' backlogs, Fitch said.

BOC Aviation last week reported unchanged first-half net profit of US$163 million. In the six-month period which Martin described as "a busy first half with a strong delivery momentum", the company took delivery of 37 new aircraft and sold 12 owned and managed ones.