UpdateCrowded skies risk a hard landing: Cut-throat competition in Chinese aviation attracts corruption suspicions
Mainland firms have surged into the world's top ranks of aircraft leasing companies. But some firms are now in the sights of anti-graft authorities
From very little presence a few years ago in a market dominated by western firms, mainland leasing companies have found their way into the world's top ranks as they compete to provide planes to fuel the growth of the top domestic airlines.
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But the meteoric growth of some companies appears to have attracted the attention of the nation's anti-graft authorities. The South China Morning Post has found a number of executives at Chinese leasing companies linked with China Southern have been probed since the Central Commission of Discipline Inspection visited the airline late last year.
"The amount of money at stake in aviation is too big. And many people who deal with these contracts are just modestly paid. There are bound to be people overcome by their greed if the internal controls of the company are not good," said Johnny Lau, an industry veteran who recently returned to his native Hong Kong to run his own consultancy business, Astro Leasing. He was previously aviation head at two of the mainland's largest leasing firms, ICBC Leasing and Minsheng Financial Leasing.
Before 2007, the year mainland banking regulators started allowing banks to set up their own leasing subsidiaries, the domestic aircraft leasing market was dominated by Western firms including Gecas and AerCap.
Leasing takes the depreciation cost and risk of an expensive plane off an airline's balance sheet. It also provides airlines with an aircraft procurement channel, as lessors tend to have better access to cheap funding than airlines given their strong cash flow. Lessors acquire their fleet from other lessors, airlines, or from the manufacturer.