BOC Aviation has quietly become a serious player in the aircraft leasing business. Backed by Bank of China, the company is in the midst of a growth spurt that will ensure it becomes one of the industry’s leading players. We sent some questions to Robert Martin, Managing Director & Chief Executive Officer of BOC Aviation and here are his responses.
- Please tell us about BOC Aviation. It is a brand that is attracting ever more industry attention.
A: Headquartered in Singapore, BOC Aviation was originally founded in 1993 as Singapore Aircraft Leasing Enterprise. In December 2006 the company was acquired 100% by Bank of China for an enterprise value of US$3.25 billion. Following the acquisition, the company changed its name to BOC Aviation in July 2007.
Since establishment 20 years ago, BOC Aviation have acquired and ordered over US$21 billion worth of aircraft. We currently have a portfolio of 203 aircraft on lease to 56 airlines in 32 countries and another 99 aircraft on firm order as well as 24 on committed purchase and leasebacks.
BOC Aviation was ranked by Airline Business as the world’s 5th largest aircraft operating lessor by fleet value (owned and managed aircraft) and if the ranking is based on owned aircraft, we are number four. In June last year, we obtained our inaugural long-term investment grade credit ratings of A- from Fitch and BBB from S&P. Following this major milestone, we launched our very successful first Euro Medium Term Note programme and raised US$500 million from the debut issue. We have also just issued a 10 year unsecured bond via private placement at a coupon of 4.3%p.a.
- What is the Bank of China angle in aircraft financing? Why is the market so attractive?
A: The Bank of China Group has been financing aircraft for over 35 years. Air travel is a basic mode of transport closely tied to GDP growth and the underlying asset that is being financed is highly mobile – aircraft can be moved quickly and fairly easily between airlines and jurisdictions. We see the air travel market holding a lot of potential, especially in Asia because 45% of cities with population of more than one million are here and the opportunity to link the cities with both passenger and freighter aircraft is huge.
- 84% of the owned BOC Aviation fleet is A320 and 737. Do you see this ratio staying as it is over the next decade?
A: We started out as a widebody lessor but over the years, our portfolio mix has changed to comprise roughly 70% narrowbody and 30% widebody aircraft by net book value. This is in line with how the world is split. The popular narrowbody aircraft e.g. B737 family, A320 family and E190 family all have large operator and investor bases. Single aisle aircraft can be leased out quickly to airlines and transition costs are low because there is very little customisation, unlike widebody aircraft.
- You recently took delivery of your first sharklet equipped A320. Do you see the sharklet bringing the A320 in line with 737NG performance or exceeding it?
A: The A320 family and B737NG family of aircraft have shared a relatively even split of the narrowbody market over the years. To maintain this share both manufacturers have continued to develop and improve their products. BOC Aviation maintains a young fleet which incorporates these ongoing improvements for the benefit of our airline customers and when Airbus developed the sharklet equipped A320s, we considered the technical and operational implications, the price of the improvement and assessed the fuel saving benefits our airline customers would enjoy. We concluded the investment was worthwhile and are already seeing good results from our placement activities. Our first sharklet equipped aircraft was delivered last week to Jetstar Asia and it was also their first of the type. Jetstar Asia will be taking another 3 sharklet equipped aircraft from BOC Aviation this year. We are also scheduled to deliver to a European airline their first sharklet equipped aircraft in the coming months.
- Finally, can you give us a view on the future of the C919? How long before that airplane becomes a serious player in the segment?
A: C919 is a national project and China is committed to make it successful. COMAC reported 380 commitments for the aircraft and believe the C919 will penetrate the Chinese market first as it has stated that it aims to capture half of China’s demand for narrowbody aircraft over the next 15 years. COMAC is looking at having the C919 take its first flight in 2014, with deliveries to follow in 2016.