China's insurers eye aircraft leasing
The relaxation of investment rules for Chinese insurers opens up new financing channels at a time when order backlogs are at all time high
China's growing appetite for jets and a diversification of financing channels are boosting investor interest in aircraft leasing.
"We currently have the largest commercial aircraft order book in history, and with that comes the greatest financing need," said Paul Jebely, global head of aviation finance at law firm Clyde & Co.
Airbus' latest annual report showed it had a backlog of 6,386 aircraft valued at US$919 billion at the end of last year, while Boeing's said its backlog had grown to US$502 billion. "A very significant proportion of that order book, particularly in Asia, is going to be supported by lessors," Jebely said.
The vibrancy is not only seen in Cheung Kong's recent entrance into the business but is also evident in the 75.5 per cent profit jump posted by China Aircraft Leasing Group (CALC), the region's only publicly traded lessor, in its first annual report to the Hong Kong Stock Exchange last month.
CALC, a relatively small lessor with 47 planes and mostly Chinese customers, said revenue rose 66.7 per cent in 2014 to HK$1.145 billion on rising lease income and a HK$111.5 million contribution from four lease receivables realisations, or securitisation of the lease contracts as income in advance.
CALC also said insurance companies as well as banks are among its financiers following the China Insurance Regulatory Commission's (CIRC) recent relaxation of the areas Chinese insurance companies are permitted to invest in.