China needs 750 more planes, says Avolon chief

Beijing: China, which needs $1 trillion worth of aircraft over the next 20 years, has under-ordered by some 750 planes over the next decade, the chief executive officer of lessor Avolon Holdings said, suggesting more orders lie ahead for Boeing and Airbus.
“The Chinese market is driven by demographics,” Domhnal Slattery said on Monday in a Bloomberg TV interview. “Quite simply, if we look at Asia there’s 600 million to 700 million in the middle class. That’s going to grow in the next 20 years to 2.6 billion people. That’s 400 percent growth.”
China’s Bohai Leasing completed its $7.6 billion acquisition of the Avolon over the weekend, paving the way for the formation of the world’s fourth-largest air lessor by asset value. With Boeing and Airbus projecting China to become the world’s largest air travel market over the next 20 years, plane-leasing companies in China have been mentioned as parties to more than $16 billion worth of mergers and acquisitions since last year, according to figures.
Rapid growth of air travel in Asia is lifting orders for Boeing and Airbus, with China forecast to soon surpass the United States as the world’s largest plane market. The country’s economic expansion is making air travel affordable to more people, prompting carriers such as China Southern Airlines and Air China to expand their fleets.
More growth
China’s total aircraft fleet will surge to 7,210 by 2034 from 2,570 last year, Boeing said in August. The Chicago-based company forecast China will need 6,330 new planes valued at $950 billion in the next two decades.
Recent turmoil in Chinese financial markets hasn’t led to major revisions to such forecasts. Still, Airbus strategy chief Marwan Lahoud said on January 7 the company will closely watch China orders and deliveries.
Haikou, China-based HNA Group owns 44 per cent of Bohai, whose leasing business also includes containers, ships and infrastructure. With the completion of the Avolon acquisition, Bohai will also combine Hong Kong Aviation Capital’s aircraft leasing business with Avolon’s, while retaining Avolon’s management and base in Dublin, the companies said in a January 10 statement.
M&A options
Slattery said Monday he hopes to grow the combined company’s balance sheet to $40 billion in the next five to seven years, from $22 billion now. The company expects to see more opportunities for acquisitions in the coming year or two and hopes to become one of the top three air lessors in the world, Slattery said.
"Our core DNA is to grow organically," he said, "but we are alive to M&A opportunities and my sense is that over the next year or two, there will be opportunities for acquisitions."
GE Capital Aviation Services and Aercap Aviation Solutions are the world’s largest aircraft lessors by fleet size, with more than 1,000 planes each, according to data compiled by Bloomberg Intelligence and Ascend Flightglobal Consultancy. The merged Avolon-Bohai entity would have more than 410 planes, Slattery said.