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Fleet expansion boosts BOC Aviation first half profit

BOC Aviation increased its profit before tax for the first half of the year by 7% to $352 million owing to robust fleet growth.

“Revenue rose 13% to $930 million from $825 million, and our fleet net book value grew 6% to $15.9 billion from 31 December 2018, as we continued to take delivery of modern, fuel efficient aircraft,” says chief executive Robert Martin.

Nearly 90% of its revenue came from lease rental income, which grew by 11% as the lessor’s owned portfolio grew from 294 to 314 aircraft. It also had 23 managed aircraft.

Meanwhile, costs and expenses were up 17% to $579 million. Major factors included an 11% gain in depreciation costs due to the expanded fleet, and a 31% increase in finance expenses from taking on more debt at higher costs.

Overall, BOC Aviation’s net profit grew a healthy 8% to $321 million.

During the period, it signed 39 lease commitments and the average lease term of its portfolio held steady at 8.2 years, and committed lease revenue of $15.4 billion.

A further 162 aircraft are on order or committed to purchase, including 87 737 Max and 52 A320neo family jets.

The lessor observes a continued shift towards fixed rates in the leasing market. These accounted for nearly 80% of its leasing portfolio in the first half of 2019, though its net lease yield was broadly steady at 8.4%.

At 30 June 2019, cash and short-term deposits amounted to $295 million, up from $243 at the end of 2018. The lessor raised $1.5 billion in new financing in the first half of 2019, and closed the period with $3.8 billion liquidity.

During this time, BOC Aviation’s assets increased 5% to $19.2 billion. It took delivery of 25 aircraft, including five acquired by airline customers on delivery. It sold nine owned aircraft and two from its managed fleet; repossessed five owned and three managed aircraft from airlines that had ceased operations, and redelivered all eight to new customers.

Twelve Airbus aircraft scheduled to arrive in the first half of 2019 were delayed “primarily due to industrial constraints”, while six Boeing 737 Max jets were affected by the grounding of the type.

BOC Aviation maintains an optimistic outlook, on the back of healthy passenger growth forecast by IATA.

“We had solid performance in the first half of 2019, and we expect further expansion of our business in the second half,” the lessor says.

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