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China Aircraft Leasing Seeks to Expand in Asia After IPO

China Southern Airlines and China Eastern Airlines
A China Southern Airlines Co. aircraft, left, and China Eastern Airlines Corp. aircraft are parked at Beijing Capital International Airport. China Aircraft Leasing counts China Southern, China Eastern and Air China Ltd. among its customers. Photographer: Nelson Ching/Bloomberg

China Aircraft Leasing Group Holdings Ltd. seeks to expand in Asia after becoming the first plane lessor in the region to go public last month.

The company has signed an agreement with state-owned carrier Air India Ltd. to lease five Airbus Group NV A320s starting next year, Chief Financial Officer TT Yu said in an interview Aug. 1 in Hong Kong without providing a value for the contract. This is the company’s first leasing pact with a non-Chinese carrier, he said.

Leasing companies are boosting their fleet and expanding across Asia as the region is set to overtake the U.S. as the world’s largest plane market, spurred by demand from China, India and Southeast Asia. Last month, China said it will encourage its lessors to look for opportunities overseas and today Hong Kong billionaire Li Ka-shing’s Cheung Kong (Holdings) Ltd. said it submitted a preliminary proposal for some planes of Awas Aviation Capital Ltd.

Even with the overseas expansion, a majority of China Aircraft Leasing’s business will continue to come from its home market, Yu said. The company, which counts Air China Ltd., China Eastern Airlines Corp. and China Southern Airlines Co. among its customers, has said it has a 3.1 percent share of the business in the country.

“We will continue to focus on China,” Yu said.

Aircraft Demand

The company’s shares rose as much as 3.4 percent to HK$5.53 in Hong Kong trading today compared with an initial offer price of HK$5.53.

China Aircraft Leasing last month sold HK$728.9 million ($94 million) of shares in the IPO. The sale was “more to help us reduce borrowing costs as we start to look toward other parts of Asia,” Yu said.

China Aircraft Leasing had 32 planes in service with an average fleet age of 3.3 years as of the end of last year. The company aims to expand the fleet to 40 by the end of this year and to 64 by the end of 2016, according to its IPO prospectus.

Air travel demand in Asia is projected to expand 5.7 percent in the four years through 2017, the second fastest pace in the world, with routes within or connected to China being the single largest driver, according to an International Air Transport Association’s study last year.

Asia will push commercial aircraft sales to $5.2 trillion over the next 20 years as China overtakes the U.S. as the world’s largest aviation market, Boeing Co. predicted last month. China’s emergence as an aviation superpower will help drive the market expansion, said Randy Tinseth, vice president of marketing at Boeing’s commercial airplane unit.

BOC Aviation Pte, owned by Bank of China Ltd., is expected to have a record number of aircraft on its fleet this year, helped by growing demand for single-aisle planes. At the end of June, the Singapore-based lessor had 251 planes. Last month BOC Aviation ordered 43 A320s.

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