As it gears up to be sold, Asia Aviation Capital’s new management team indicates that it has grander plans than just being the captive lessor to the AirAsia group.
The appointment in recent months of GECAS veteran Stephane Dailliencourt as chief executive, Harry Forsythe as deputy CEO and chief commercial officer, and former Standard Chartered executive Simon Perkins as chief financial officer signaled that AirAsia intended to build a platform to sell, as opposed to a portfolio of aircraft.
As of the end of June, the portfolio comprised 55 aircraft which generated an operating profit of MYR22.2 million ($5.27 million) over the quarter, on revenue of MYR66.5 million.
Flight Fleets Analyzer shows that, outside the AirAsia group, the platform has six Airbus A320s leased to Chinese carriers – three to GX Airlines, two to Lucky Air and one to West Air. It also has two A320s leased to Pakistan International Airlines.
The leasing unit first drew attention in August when Air Asia group chief executive Tony Fernandes revealed that it had received an unsolicited takeover offer for the company. That started a sale process that is being led by RHB Investment Bank, and also includes BNP Paribas and Credit Suisse.
Fernandes has mentioned valuations of around $1 billion.
Such a valuation appears likely assuming the investment thesis is based on it remaining the captive lessor for the AirAsia Group. Recent statements by Perkins however, indicate larger ambitions.
SPREADING WINGS
Only one month into the role, Perkins disclosed more about the future of Asia Aviation Capital at the recent Airline Economics Growth Frontiers conference in Hong Kong. Asked if the company would look to acquire assets outside AirAsia’s orderbook for A320 family aircraft, he spoke of pushing the company to a new stage of growth.
“Our aim is to become a fully-fledged global lessor, that’s quite clearly our strategy at the moment, so we will be diversifying our risk from a credit perspective and in airlines, and also from an asset perspective,” said Perkins.
“Doing this means trading and making purchases in the secondary market, and we will bid in the sale and leaseback market as well.”
The lessor will also have a priority seat for the AirAsia group’s massive orderbook of 400 A320-family aircraft. Indeed, shortly after AirAsia ordered 100 A321neos at the Farnborough air show, it announced that AAC would take about 30% of these aircraft.
WHO’S BUYING?
Perkins says the sale process has been progressing, with a number of parties under non-disclosure agreements. A decision is expected in the first half of 2017.
Given the recent bidding war for CIT Aerospace, which ultimately saw Bohai Capital’s Avolon triumph, there was concern in the market that the AAC deal would not receive as much interest.
Perkins, however, says interest has been strong.
Naturally, this begs the question who is bidding?
Early on, many observers told FlightGlobal that likely bidders would be those looking to add the AirAsia portfolio to their existing platforms. In particular, it appeared to be suited to Avolon’s acquisitive streak. But with that lessor focusing on digesting the CIT acquisition, it seems an unlikely suitor.
It is more likely that smaller platforms or long-term/patient-capital investors will pursue the acquisition. China’s Ping An Leasing appears to fit both criteria. Reports indicate that Taiwanese and South Korean investors are also being wooed.
One market source in Korea, however, told FlightGlobal that he had not heard of any potential Korean bidders for the leasing platform.
AIRASIA STILL IN THE MIX
Interestingly, Perkins indicated that between 75% and 100% of the carrier would be up for sale. AirAsia has previously indicated that it was open to maintaining a minority stake. Perkins has said that some parties are keen to maintain the partnership with the airline.
“Some people would like to see AirAsia still in there,” he said.
In part, maintaining AirAsia’s involvement would help to ensure that AAC maintains its access to the airline’s keenly-priced orderbook, as well as maintaining the platform’s role as the ‘captive lessor’ for the AirAsia group.
Reports are that the lease agreements on AAC’s aircraft to AirAsia’s offshore affiliates have been priced at a premium to the market price. It is believed that the shareholder agreements for those affiliates give AirAsia control over fleet planning, and thus the budget carrier would logically like to keep a hand in the leasing platform.
Assuming that AAC continues to pursue a strategy of becoming a full-service lessor, the successful acquirer will have to have deep pockets to help build it up further. For AirAsia, that may become too expensive to maintain over the long-term.
From being part of AirAsia’s ancillary revenue stream, AAC has set forward some big ambitions. Just how much its new parents allow it to grow remains to be seen.
Source: Cirium Dashboard
