Jet Lessor DAE Sees Gap for Narrow-Body Deal After AWAS Takeover

  • Dubai company could place first Airbus A320neo, 737 Max orders
  • CEO mulling sukuk to help fund purchase of Irish rival

Aircraft-leasing company Dubai Aerospace Enterprise Ltd. said it sees scope for the purchase of its first new-generation Airbus SE A320 and Boeing Co. 737 short-haul jets as the takeover of AWAS Aviation Capital Ltd. propels it into the top ranks of global players.

The multi-billion-dollar AWAS deal swells the DAE fleet to 394 planes valued at more than $14 billion and gives the company “exactly what we need,” with the emphasis on narrow-bodies and smaller wide-bodies like the Boeing 787 and Airbus A330, DAE Chief Executive Officer Firoz Tarapore said Wednesday.

There’s scope for further orders even with the addition of the 263 aircraft that AWAS owns, manages or has coming, with the most obvious gap being for the re-engined A320neo and 737 Max, Tarapore said in an interview in Dubai. While the enlarged fleet will feature more than 200 narrow-bodies, neither lessor has so far bought the upgraded models.

“Our focus in the future will be to make sure we have enough of the new-technology assets in our portfolio, which is Maxs and Neos,” the CEO said, adding that the timing of any purchases isn’t certain. “Placing an order is a complex equation in terms of where you are in replacement cycle and customer needs, so it’s more of an iterative decision.”

The existing joint fleet, including orders, is already assigned to operators with a “handful” of exceptions, he said. About 75 percent of the AWAS portfolio is made up of single-aisle types, while half of the smaller DAE fleet comprises ATR 72 turboprops, including planes purchased from General Electric Co.’s leasing division, the industry leader. The companies have a smattering of wide-bodies, with 787s at AWAS and Airbus A350s at DAE, plus A330s at both.

Sukuk Option

DAE, already the Middle East’s biggest plane-leasing firm, is considering a bond or sukuk issuance to finance the purchase of Dublin-based AWAS from U.K. private equity firm Terra Firma Capital Partners and the Canadian Pension Plan Investment Board, which was announced on Monday.

“We have committed debt financing from Morgan Stanley and ultimately it will be an issue in the capital market,” Firoz said. “What form that takes is too early to tell.”

With the addition of AWAS, DAE will become a major leasing force behind the first rank of GE, AerCap Holdings NV and HNA Group’s Avolon Holdings Ltd., giving it increased purchasing power and ultimately allowing it to price aircraft rentals more competitively and win more business, the executive said.

“If that means in the future that we need to be bigger, that’s something we would consider,” he said. “We have only one overarching objective which is when we deploy capital, we have a very high degree of predictability on the expected return. Everything else is a secondary decision.”’

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