BAE Systems has sold its asset management division to a US-based investment company confirming the long-expected exit from a business that was non-core for the UK company.

Fortress Investment Group, which also has interests in US lessor Aircastle, will take over 151 regional aircraft in the $187 million acquisition.

The UK business primarily comprises a portfolio of older British Aerospace 146s, Jetstream turboprops and Avro RJs. While the business has sought to expand, and made inroads into managing other aircraft types, it has lacked the vital financing.

It was established 18 years ago, originally as the Asset Management Organisation, to handle BAe's jet portfolio and reduce lease exposure, and subsequently expanded by combining with BAe's specialist Jetstream management arm JSX.

BAE 146
The deal includes a portfolio of older jets like the BAe 146

In the late 1990s BAe tried to forge co-operation with Saab in the leasing market, taking a 35% share in the Swedish firm, as both companies had to cope with supporting a large regional fleet of out-of-production aircraft. It also participated in an unsuccessful attempt to take over lessor AWAS.

Plans to develop a new 70-seat regional aircraft with ATR fell apart in 1998. Instead it looked to modernise its Avro RJs by developing a variant known as the RJX, which was cancelled in late 2001.

As a result, BAE Systems' regional aircraft arm opted to concentrate on asset management and build third-party work, although BAE's focus on defence and the abandonment of civil aircraft production effectively relegated the division to non-core status.

"We believe this business will have a promising future and that we have found a buyer with the resources and expertise to support the growth of this activity," said BAE Systems Regional Aircraft managing director Alan Fraser.

The support and engineering activities of BAE Systems Regional Aircraft are not part of the sale.

Fortress co-chairman Peter Briger said the asset management arm had a "proven business model" and that it could "support significant growth" over time. "We believe that this will provide an outstanding investment."

BAE expects the sale to Fortress, which will reduce net debt by $180 million, to complete in the third quarter of 2011.

Source: Flight International