AIG turns to AerCap to sell jet business

American International Group (AIG), which has been unable to complete the sale of its jet-leasing business to a group of Chinese bidders, is now in talks to sell that unit to AerCap Holdings, people with knowledge of the matter said.

AIG has not formally ended its accord with the Chinese group that said in 2012 it would buy a majority of International Lease Finance Corp (ILFC) for about US$4.2 billion, said one person, who asked not to be identified because details are private. AerCap, the largest independent plane lessor, may work with other bidders, two people said. AerCap shares rose the most in 17 months on Thursday.

"We view this as a surprising but positive development that would allow AIG to dispose of this non-core and highly leveraged unit," Jay Gelb, a Barclays analyst in New York, said in a report to investors. He rates AIG as overweight.

AIG has sought to sell ILFC since 2008 as the insurer began divesting units to repay a US bailout. Its December 2012 sale agreement has suffered several missed deadlines by the original group of investors led by Hong Kong-based P3 Investments. AIG chief executive Robert Benmosche also has said he may pursue an initial public offering for ILFC.

ILFC is the last major unit for sale at AIG, which last year repaid the US rescue that swelled to US$182.3 billion. Benmosche has been narrowing the New York-based company's focus to US life insurance and global property-casualty coverage after selling more than US$70 billion in assets. The divestitures include non-US life insurers such as AIA Group, a consumer lender and real estate in New York and Japan.

AIG rose 1.5 per cent to US$49.42. AerCap jumped 12 per cent to US$23.91, the highest since November 2007, in New York trading on Thursday. The increase pushed this year's gain for the Netherlands-based company to 74 per cent.