Home' Asian Aviation : AAV June 2017 Contents AsianAviation | June 2017 21
FINANCE & LEASING
While the future may have challenges, according to UBS, les-
sors based in Asia are still reporting top profits. China Aircraft
Leasing Group in March reported record net profit for 2016. The
Hong Kong-listed company said its 2016 net income rose 67.9 per-
cent to HK$638.4 million (US$81.9 million). BOC Aviation reported
record profits for 2016 as well. The
group’s net profit after tax hit US$418
million, a 22 percent increase over
2015. And both companies have an-
nounced plans to use funds they ’ve
raised through IPOs and via the bond
market to expand.
Timothy Ross, the head of investor relations and corporate com-
munications at BOC Aviation believes the UBS report is a little too
negative and says the outlook for his company and other lessors
is bright. He explains that BOC Aviation’s access to capital is “as
robust as it’s ever been”.
“ We’ve got 79 aircraft committed for delivery this year and have
an order book of 201 aircraft,” Ross explained. “ We’re looking at ex-
panding that and adding more...the reason we’re so sanguine is we
see our business affected by three cycles...none are flashing amber,
let alone red.” Ross said the passenger demand cycle is positive
because of the high annual growth rate and the supply cycle
for planes is also positive despite some people having concerns
over mid-life models that are being retired.
“ The thing that differentiates leasing from other businesses
is that there’s only two suppliers in the world of any magnitude,
Boeing and Airbus. They have no interest in producing specu-
lative capacity so every plane has a home...they don’t want to
blow their customer base up,” Ross said.
The third cycle is liquidity, Ross said, and “to the extent we
see commentary on cheap Chinese capital...I think that cer-
tainly some parts of the market are overheated but not widely...
when you have a rash of new entrants, there’s only certain parts
they can affect,” he added, and some of those new entrants are
putting their money to work buying planes and often overpaying
to build up capacity.
Commercial lessors are not the only ones expanding. A recent
report from Global Jet Capital said it expects demand to grow for
operating leases to buy mid to heavy private jets, which are growing
in popularity in Asia. The Gulfstream G650 and 650ER for example,
are the most popular business jets in the region, according to a
recent report from Asian Sky Group.
Violet Kwek, sales director for Greater China and North Asia at
Global Jet Capital, said: “ The purchase prices of mid to large private
jets are in the mid-to-high eight figures and this can have a signifi-
cant impact on a prospective owner ’s balance sheet, their available
working capital and lines of credit with existing lenders. In addition
to this, the timeframes for both planning and ownership of larger air-
craft are often significantly longer than for smaller ones and owners
therefore need to understand where the majority of the financial risk
falls. Operating leases allow the owner to assume less of the risk of
the asset and buyers in Asia are waking up to the benefits.
a quirk of the product that allows companies to choose their base
of operations. Low corporate tax rates, as well as double treaty
networks, will continue to be key factors in shaping that choice.”
Deloitte and Euromoney said “ongoing uncertainty makes it
hard to take concrete actions, but in some key areas companies
should be making preparations now ” to deal with the “challenging,
but necessary ” implementation of BEPS. Europe’s Anti-Tax
Avoidance Directive (ATAD) requires all necessary changes to be
in effect by 1 January 2019, but 41 percent of airlines and aircraft
lessors believe that is not enough time for their companies.
...the reason we’re so sanguine is we see our business affected
by three cycles...none are flashing amber, let alone red.
TIMOTHY ROSS, BOC AVIATION
AAV_June 2017.indd 21
1/06/2017 5:44:59 PM
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