Asia’s Biggest Airplane Lessor Seeks $1.1 Billion From IPO

  • BOC Aviation, owner plan to offer shares at HK$42 each
  • Half of offering is existing stock being sold by Bank of China

Asia’s biggest aircraft lessor is seeking to raise $1.1 billion to fund an expansion as the region is poised to become the world’s top air travel market in about two decades.

BOC Aviation Ltd., the Singapore-based company that has more than 100 planes leased out to airlines around the world, will sell new and existing shares at HK$42 apiece in a Hong Kong initial public offering. It will become the second Asian plane-leasing company to get listed in the stock markets after China Aircraft Leasing Group Holdings Ltd. went public in July 2014.

Spurred by strong economic growth in the past decade and rising incomes in the world’s two most-populous countries, China and India, Asia is on course to beat the U.S. as the biggest market, according to Airbus Group SE and Boeing Co. That potential has lured billionaires such as Li Ka-shing and budget-carrier pioneer Tony Fernandes to the plane-leasing market, where returns from multiyear contracts can exceed those of airlines.

“Asia is the fastest-growing aviation market with demand for pilots, aircraft and leased aircraft,” said Mark Martin, founder of Dubai-based Martin Consulting LLC. “Strategically, it’s a perfect time for BOC to capitalize on what they have already achieved.”

Additional Option

The lessor was established in 1993 as Singapore Aircraft Leasing Enterprise Pte., a business that was sold to Bank of China Ltd. in 2006 and renamed BOC Aviation the following year.

BOC Aviation and Bank of China plan to offer a combined 208.2 million shares, according to a statement to the Hong Kong exchange Thursday. Half the offering will be comprised of new shares, with the rest being sold by Bank of China, according to the statement.

Bank of China may sell an additional 31.2 million BOC Aviation shares if an over-allotment option is exercised, the statement showed. The company plans to use the proceeds from the IPO to fund pre-delivery payments for new aircraft, as well as future plane purchases, according to preliminary terms for the deal obtained by Bloomberg last month.

Established Company

“What is different with BOC is that it is an established lessor,” said Will Horton, a Hong Kong-based analyst at CAPA Centre for Aviation. “The initial placement of aircraft with airlines is comparatively easy. The challenge is re-marketing them.”

Its parent company’s overseas investment-banking arm, BOC International Holdings Ltd., and Goldman Sachs Group Inc. are joint sponsors of the offering, the company said in an April 24 pre-listing filing with the Hong Kong stock exchange.

“Our core business model is focused on purchasing new, fuel-efficient, in-demand aircraft at competitive prices directly from aircraft manufacturers,” BOC Aviation said in the prospectus. The company also regularly replaces some of its planes to “maintain a young fleet.”

At the end of 2015, the average age of its fleet was 3.3 years, according to the prospectus.

The leasing company owned and managed 270 aircraft at the end of 2015, with narrow-body planes from Airbus Group SE and Boeing Co. making up 79 percent of the total, according to its website. It had 241 airplanes on order at the end of last year.

Record Earnings

BOC Aviation posted a record net income of $343 million in 2015, 11 percent more than a year earlier. Revenue rose 10 percent to $1.09 billion.

Li’s Cheung Kong Holdings Ltd., now part of CK Hutchison, agreed in 2014 to pay $1.9 billion to buy 45 planes from companies including General Electric Co.’s aviation services unit. Malaysian low-fare carrier AirAsia Bhd. entered the leasing market the same year.

Cathay Pacific Airways Ltd., Qantas Airways Ltd. and and Lion Air Group are among BOC Aviation’s customers, according to the prospectus. Rental income from its clients in Asia Pacific made up for a third of the total at the end of last year, followed by Europe at 23.9 percent. China, Hong Kong, Taiwan and Macau accounted for about 17 percent.

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