China aircraft leasing market thrives but glut lurks
Big mainland Airbus contract lures newcomers to sector, spurring analysts to warn on glut, cyclical swings and high capital requirements
The lure of a potential US$1 trillion worth of aircraft orders with a significant chunk bound for the mainland has seen a flurry of new activity in the aviation leasing market.
Investors keen to cash in include Li Ka-shing, but analysts warn new entrants may risk getting caught out by a glut of planes in the industry.
They say deep pockets will be needed to cope with the severe cyclical swings that plague the aviation industry - together with the knowledge of how to survive them.
Dewey Yee, a Hong Kong government adviser with more than 30 years of experience in the aircraft leasing sector, said the fact that two mainland lessors accounted for almost a third of the 363 orders Airbus got for the A320 at the Farnborough air show last month was an indication of Chinese investors' speculation in booking orders to bet on the rosy prospects of the aircraft leasing market.
The China Banking Regulatory Commission urged domestic lessors last week to expand abroad. This was followed by the report that China Aircraft Leasing Group Holdings had signed its first foreign lessee, Air India.
The mainland's five largest lenders entered the aircraft leasing market in 2007 when CBRC allowed the creation of bank-owned aircraft leasing companies. They have since been growing rapidly and now want to compete with international lessors.