[photopress:air_robert_martin.jpg,full,alignright]BOC Aviation, Bank of China’s aircraft-leasing unit, aims to buy up to $2 billion worth of aircraft that airlines have ordered and are unable to finance with bank loans because of the global credit squeeze.
Chief Executive Officer Robert Martin said Asia’s biggest lessor plans to more than double aircraft purchases from airlines next year from the $700 million it bought in 2007. The Singapore-based company received a $1 billion credit facility, its largest loan, from Bank of China this month at a rate lower than it would get from other banks.
He said, ‘With issues that are hitting financiers in Europe and US related to subprime, we are now seeing a slowing down of liquidity growth in Asia as well, With a financing market that is going to be tighter, this is the right time for us to go back to the sale and leaseback market.’
According to Frost & Sullivan, a New York-based research company, the global market for leased aircraft will be worth $144 billion by 2008, from $115 billion in 2004. Growth has attracted new entrants such as DAE Capital, the leasing unit of Dubai Aerospace Enterprise, and lenders including Standard Chartered and Macquarie Bank.
Borrowing costs jumped in mid-August as banks, including Bear Stearns and Merrill Lynch started reporting losses on securities tied to U.S. subprime mortgages. The global credit slump may force banks, brokerages and hedge funds to cut lending by $2 trillion.
The loan from Bank of China, which bought the BOC Aviation leasing unit last year, will be at an interest margin lower than the rate BOC Aviation has been getting from other banks.
Robert Martin said, ‘That positioned us very well to be able to assist our airline customers in financing their aircraft.’
The International Air Transport Association said this week airline earnings will fall 11% next year because of higher oil prices and an expected slump in demand in the U.S.