Li Ka-shing charges into aircraft-leasing business
Cheung Kong in talks to form joint venture with MC Aviation Partners and buy 100 planes from AWAS Aviation Capital for US$5 billion
Li Ka-shing, the richest man in Asia, is making a new investment, but instead of investing in real estate, which has helped him make the bulk of his wealth, he is taking to the air.
In a further step to diversifying his investments and business risk, Li is reportedly aiming to buy his way into the global aircraft leasing business.
Cheung Kong (Holdings), of which Li is the chairman, is in discussions to form a joint venture with Mitsubishi's MC Aviation Partners leasing arm, Reuters quoted a source as saying.
Cheung Kong is already bidding for a US$5 billion fleet of 100 planes that lessor AWAS Aviation Capital has put up for sale.
Cheung Kong was unavailable for comment yesterday.
The potential investment comes as the property heavyweight has been staying away from the city's land market. It has not won any of the 69 sites tendered by the government, MTR Corp and the Urban Redevelopment Authority since last year,
The company even did not submit a bid in some government tenders, such as the ones for two residential sites in Tin Shui Wai in July, according to analysts.
Alfred Lau, an analyst at Bocom International, said diversification was sensible because real estate was not in a profitable cycle at the moment.
"Taking into account its cycle, investors find it difficult to profit on real estate, no matter whether they are in Hong Kong or on the mainland," Lau said. "It is sensible to sell and look for investments elsewhere with better return."
Cheung Kong and its associate Hutchison Whampoa have been disposing of assets in Hong Kong and on the mainland.
The series of sales triggered debate whether the group is pulling out of Hong Kong and the mainland, which has been repeatedly denied by Li.
Hutchison said last month it was planning to sell its 71.36 per cent stake in Hutchison Harbour Ring to Shenzhen-listed Oceanwide Holdings for between HK$3.5 billion and HK$3.8 billion.
Three commercial properties - in Shenzhen, Guangzhou and Shanghai - owned by Cheung Kong and Hutchison were sold for a total of 12.8 billion yuan (HK$16.1 billion) last year.
According to Reuters, the venture with MC Aviation, which owns and manages about 100 mostly narrow-body jets, will give Cheung Kong access to a pool of about 20 aircraft.
Details of the venture are still being worked out and an announcement is expected in a couple of weeks.
The planned MC Aviation and AWAS deals are not the only aircraft leasing avenues Li is exploring.
Cheung Kong has also approached large lessors to buy about 20 planes in a single transaction, according to Reuters.
Dewey Yee, the chairman of Future Gate Finance and an aircraft leasing expert, said: "Cheung Kong has been liquidating its property companies and is putting its capital in something similar that would give it a steady return."
Aircraft leasing was a good fixed-income product that required specialist knowledge, Yee said, and Cheung Kong had been making a series of moves into aviation.
