Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Jet leasing shake-up looms as AerCap and GE unit discuss tie-up

Stock MarketsMar 08, 2021 11:40AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: A General Electric aircraft used for testing jet engines is shown at Victorville Airport in Victorville, California

By Tim Hepher, Laurence Frost and Rachit Vats

(Reuters) - Aircraft leasing is poised for its biggest shake-up in almost a decade as its top two players AerCap and General Electric (NYSE:GE)'s GECAS discuss a deal to forge an industry titan with more than 2,000 jets, financial sources said on Monday.

Talks over a tie-up follow years of speculation over a sale of GECAS and come as COVID-19 is expected to shift more of the world's jetliner fleet from the balance sheets of debt-laden airlines into the arms of the $60 billion leasing industry.

Aircraft lessors, who typically rent out aircraft for up to 12 years at a time, already account for about half of deliveries of jets built by Airbus and Boeing (NYSE:BA).

The Wall Street Journal, which first reported the possible deal, said the transaction could be worth $30 billion and that an announcement could come as early as Monday.

The two sides have been in discussions since late last year, one of the sources said.

General Electric (GE) said it did not comment on speculation. AerCap did not respond to requests for comment.

New York-listed shares in Ireland's AerCap jumped as much as 15% in early trading before stabilising with a gain of 12%. Shares in GE rose 2.8%, outpacing a mixed U.S. market.

AMBITIOUS EXPANSION

AerCap is the world's largest owner of commercial aircraft, with 1,080 jets directly on its books or managed on behalf of others. GECAS has 984 aircraft owned or under management, according to UK-based consultancy IBA Group.

The proposed tie-up would mark AerCap's most ambitious expansion under tenacious Chief Executive Aengus Kelly, who in 2013 struck a deal to buy its largest rival, Los Angeles-based International Lease Finance Corp, after the financial crisis.

It would also involve the latest move by GE Chief Executive Larry Culp to offload businesses and reduce debt since he took the reins of the struggling conglomerate in 2018. GE has already taken steps to reduce its exposure to aircraft financing.

Vertical Research Partners analyst Rob Stallard said the resulting behemoth would be the "mother of all leasing companies".

However, if a deal goes ahead, its sheer size could attract attention from antitrust regulators because AerCap and GECAS are already almost twice as big in fleet terms as the sector's third-largest player, Dublin-based Avolon, analysts said.

"The main question mark will be around the antitrust implications," said Bertrand Grabowski, a former senior aviation banker turned independent adviser.

"One option for AerCap will be to dispose of several hundred airplanes over time to comply with possible antitrust requirements," he added.

CONSOLIDATION

A mega-merger in leasing could also spur further consolidation in a sector that has featured multiple takeovers in recent years.

"They will all be thinking there’s probably going to be more consolidation," IBA Group President Phil Seymour said of smaller lessors, adding that this was the "natural impact of a downcycle".

The structure of any deal to acquire GECAS was not immediately clear, but several sources predicted that it would be based on a similar stock structure to that by which ILFC's owner, insurer AIG (NYSE:AIG), become a shareholder in the new AerCap.

Major leasing companies are eyeing growth as airlines focus on repairing balance sheets wrecked by the drop in air travel during the COVID-19 pandemic, even though vaccines have prompted some talk of recovery.

Singapore bank DBS Group (OTC:DBSDY) said it expected aircraft lessors would largely emerge stronger from the crisis, but it warned that the weak finances of airlines meant some lessors would face extra problems collecting money from carriers or be forced to accept payment delays.

Kelly last week told investors that the vast majority of AerCap's customers were paying their bills.

Jet leasing shake-up looms as AerCap and GE unit discuss tie-up
 

Related Articles

Burberry's pandemic recovery accelerates
Burberry's pandemic recovery accelerates By Reuters - May 13, 2021

LONDON (Reuters) -Burberry said on Thursday its recovery from the COVID-19 pandemic was accelerating, partly due to a rebound in China, allowing the British luxury brand to...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Sam F
Sam F Mar 08, 2021 4:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
GE is on the path to better days!!
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email