Avolon Aircraft Lessor Waits for Economies to Grow Before Sale

Avolon Leasing Group, the aircraft lessor formed in 2010 with private equity from Oak Hill Capital Partners, Cinven Ltd. and CVC Capital Partners Ltd., plans to wait two to three years for economies in Europe and the U.S. to strengthen before any sale.

“People say to us, you guys must be next” after recent acquisitions in the industry, John Higgins, Avolon’s chief commercial officer, said in an interview in Dublin, where the company is based. “It’s too early to bring the business for sale just as a reaction to other trades,” he said. “When we started three years ago we said we’re going to build the business and that’s what we are executing on.”

Avolon, set up by Irish investor Domhnal Slattery in 2010, will wait for economic expansion in the U.S., Europe and South America to achieve the best price, because aircraft values and use are directly tied to growth in gross domestic product, said Higgins.

Avolon and U.S. bank Wells Fargo & Co. announced last week that they plan to establish a joint venture in leasing that will initially invest $500 million to amass a fleet, primarily through sale and leaseback transactions with airlines on new aircraft. The venture is not intended as an initial step toward Wells Fargo moving to acquire Avolon, Higgins said.

“They want to understand what are the equity returns available in aircraft leasing, and the best way to do that is to selectively invest in a portfolio of planes,” Higgins said. “This is not a dance for us to be bought.”

Outstanding Orders

Avolon has raised $5.1 billion in capital including debt finance and has a fleet of 167 aircraft, it said in a statement Jan. 22. It delivered 40 planes last year valued at more than $2 billion, placing the company in the top-three lessors globally for new deliveries in 2012, Avolon said.

Avolon has orders outstanding for 20 Airbus A320 Neo planes and 20 Boeing 737 Max aircraft.

Avolon founder Slattery previously set up the Royal Bank of Scotland Group Plc’s aircraft-leasing division, which was sold for about $7.3 billion last year to a group led by Sumitomo Mitsui Financial Group Inc.

Also last year in the leasing industry, Oaktree Capital Group LLC’s Jackson Square Aviation was sold to Mitsubishi UFJ Lease & Finance Co. for 100 billion yen ($1.1 billion). Babcock & Brown Aircraft Management sold a 50 percent stake in December to Onex Corp., and now International Lease Finance Corp. is set to be sold to Chinese investors this year, Higgins said.

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