Bohai Could Merge Air-Leasing Businesses After Avolon Deal

  • $7.6 billion acquisition due to be completed in early 2016
  • Growth won't come at the expense of quality, Boylan says

Bohai Leasing Co. probably will combine its air-leasing businesses under one brand when it completes a $7.6 billion acquisition of Avolon Holdings Ltd. early next year, according to the chief executive officer of Hong Kong Aviation Capital, in which Bohai owns a majority stake.

"In all likelihood we will settle on one brand going forward, probably Avolon. It would be a merger," Donal Boylan said in an interview Tuesday at the Airline Economics conference in Hong Kong. Boylan also is a director of HNA Group Co., Bohai’s largest shareholder.

Bohai is aiming to challenge BOC Aviation Pte.’s lead among Chinese air lessors, which are seeking to expand overseas as increased travel drives demand for aircraft. Leased planes account for 36 percent of the total fleet in the Asia-Pacific region, second only to Europe, according to Bloomberg Intelligence.

In an e-mailed statement Wednesday, Bohai referred to an Oct. 31 filing to the Shenzhen stock exchange that said Hong Kong Aviation Capital and Avolon "will effectively integrate operations" and "raise the company’s competitiveness in aircraft leasing."

“In scale we’d like to be top five, even top three in the world, but we will not do that at the price of quality,” Boylan said. "It’s this dichotomy of wanting to get to the top in terms of size, but how to do it and maintain your discipline about long leases, collateral, good customers and good aircraft."

Global Competitors

GE Capital Aviation Services Inc. and Aercap Aviation Solutions BV are the world’s largest aircraft lessors by fleet size, each with more than 1,000 planes, according to data compiled by Bloomberg Intelligence and Ascend Flightglobal Consultancy. BOC Aviation ranks eighth globally with 253 aircraft, while Avolon is next with 162. Hong Kong Aviation has 77 aircraft, according to its website.

Avolon accepted Bohai’s offer of $31 a share in September. The deal is expected to close by the first quarter of 2016, Avolon said at the time.

Haikou, China-based HNA Group owns 44 percent of Bohai, whose leasing business also includes containers, ships and infrastructure. Bohai holds a 68 percent stake in Hong Kong Aviation, with HNA Group owning the rest.