Alafco to Focus on Sale-Leasebacks for Growth, Chairman Says

Aviation Lease & Finance Co., a Kuwaiti aircraft leasing company, will generally refrain from buying new airliners until it gets the first of 117 planes already on order in four years, its chairman said.

Aviation Lease, known as Alafco, now has 49 planes operating in its fleet. Until 2017, when Alfaco’s new Boeing Co. and Airbus SAS single-aisle planes start delivering, the company will add to the portfolio only with occasional sale-leasebacks, buying newly-delivered planes from airlines and leasing them back, Chairman Ahmad Al-Zabin said.

“We need to slow down now or stop rather, until we see what the coming days tell us about the market, about our ability in placing these aircraft,” Al-Zabin said in a May 5 interview at company headquarters in Kuwait City.

Alafco aims to increase operating profit by 10 percent every year by boosting income from leases on the current fleet, Al-Zabin said. While the company has “good expectations” for the business, it prefers to move cautiously on orders, he said.

Alafco is only now seeking to line up airlines to lease the planes coming online, and the results of that marketing effort will dictate decisions on possible further orders. Alafco has ordered 85 Airbus A320neos, a re-engined version of the A320 single-aisle plane, and 20 Boeing 737 MAX planes, an upgraded variant of the U.S. planemaker’s current 737.

Studying Wide-Bodies

“The main aircraft we are interested in now is Airbus A320 and Boeing 737 new generation or -800,” Al-Zabin said. If a good business opportunity arises with a larger aircraft, the company may go ahead, he said.

Besides the single-aisle planes, Alafco also has 12 A350-900s on order from Airbus and also already found takers for half of those. While Alafco has ordered A350-900s, it continues to monitor development of the -1000 version.

“We study whatever comes up in the market for these aircraft. Things can always change but for the time being we’re happy with the 900s,” Al-Zabin said.

Alafco has hired Deutsche Bank to study listing a portion of the company’s shares on a foreign exchange. Once the study is complete, shareholders will decide whether to list and where.

“Assuming they go for a listing, it takes some time to prepare Alafco for that list,” Al-Zabin said. “We’re talking about the remainder of the year before we can get to anything meaningful. It could be this year, it could be toward the end of this year, it depends.”