Japan’s Development Bank Doubles New Aircraft Financing

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Aircraft stand on the tarmac at Terminal 3 of Heathrow airport in London, U.K. Photographer: Chris Ratcliffe/Bloomberg

Development Bank of Japan Inc. will lend about $1 billion for plane purchases this year, more than double its forecast, as airlines seek funding sources amid cuts by European banks.

“We were able to ride a wave of requests,” Masao Masuda, a director of its global aviation team, said in an interview in Tokyo Nov. 6. The bank had planned to lend $400 million in the year ending March, about the same as in the previous period, its first in the sector, he said.

State-owned DBJ also expects to lend about $1 billion next fiscal year as rising demand helps offset the beginning of a resumption in lending by European banks, Masuda said. Other Japanese companies including Mitsubishi UFJ Lease & Finance Co. and Sumitomo Mitsui Financial Group Inc. have also expanded in plane leasing this year as they seek new markets to offset a shrinking domestic population.

“Japan has a surplus of cash at the moment that needs a market,” Masuda said. Aircraft financing is “very promising,” he said.

DBJ has financed plans for carriers including Latam Airlines Group and Vietnam Airlines, Masuda said. Global spending on new planes will probably climb to $104 billion next year from about $100 billion this year, DBJ said, citing Boeing Co. figures. The amount will reach $128 billion in five years, it said.

Mitsubishi UFJ Lease last month agreed to buy Jackson Square LCC to add about 70 planes to its commercial-aircraft fleet. Sumitomo Mitsui completed its purchase of Royal Bank of Scotland Group Plc’s plane-leasing unit in June.

Tokyo Star Bank Ltd., a Japanese lender backed by Orix Corp., also said last month that it’s seeking to boost its foreign-currency lending for planes and other assets. The bank intends to grow this market as more of its depositors switch to non-yen accounts in search of higher interest rates.

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