Chinese lessors are looking outside the Middle Kingdom for new growth opportunities, as they aim to expand their reach and improve returns.
Bank of Communications Financial Leasing (BoCom Leasing), CMB Financial Leasing and Ping An International Financial Leasing are among the country’s lessors focused on growing their business outside of China.
“[Ping An] is looking into every opportunity to boost up our business quickly” to become a “world recognised lessor”, says Joe Tian, deputy managing director of Ping An International Financial Leasing, at the ISTAT Asia conference in Tokyo.
He cites the lessor’s recent sale and leaseback transaction for four Airbus A321s with LATAM Airlines Group as an example of its work abroad.
“We are trying to move our focus from inside China to outside China,” says Peter Gao, chief executive of BoCom Leasing’s Irish subsidiary, at ISTAT Asia.
About 60% of BoCom Leasing’s transactions will be outside of China this year, he says, adding that they hope to increase this to 70% in 2017.
The lessor has closed sale and leaseback transactions with Aeroflot Russian Airlines for two Boeing 777-300ERs, Garuda Indonesia for one Airbus A330-300 and SAS for one A330-300 to date in 2016, says Gao.
“We have expanded our business from inside China to outside China,” says Huang Bo, chief commercial officer of CMB Financial, at ISTAT Asia. The lessor is increasing its operating lease business, especially outside of China, he says.
Competition within China is one reason for the push abroad. Lessors face 15 to 20 domestic competitors for sale-and-leasebacks in the country, which drives down purchase prices and returns for lessors, says Gao.
BoCom Leasing can secure “much more reasonable” purchase prices for transactions outside of China, he says.
The rapid expansion of Chinese lessors is depressing lease rates in the country, various participants at ISTAT Asia said
“There’s certainly a fight for yield,” says one lessor on the market at the conference. “These guys want to build a book fast.”
Chinese lessors are actively acquiring portfolios of aircraft – even other lessors – in a dual effort to expand their fleets and share abroad.
CMB Leasing is interested in portfolio deals, says Bo, and encouraed attendees at ISTAT Asia to reach out if they are selling.