Aircraft lessor AerCap finds Hainan Air viable

Money Glitz | 12 Feb 2018

AerCap Holdings NV, the aircraft-leasing company, is willing to work with Hainan Airlines Holding Company given its viable business model even as its parent HNA Group Co comes under intense pressure to repay mounting debts.

"We're working very closely with the Hainan group of course at the moment," AerCap chief executive Aengus Kelly told Bloomberg Television at the Singapore Airshow.

"The issue around Hainan Airlines is not the airlines themselves - they are viable business models - so we're willing to work with those airlines because we know there's a viable business."

Debt-burdened HNA Group's flagship unit Hainan Airlines, as well as the Chinese conglomerate's Yunnan Lucky Air, are both customers of Aercap.

After spending tens of billion of dollars on acquisitions, HNA has told creditors it will seek to sell about 100 billion yuan (HK$124.6 billion) in assets in the first half of this year to repay debt and stave off a liquidity crunch, according to people familiar with the matter last month.

The carriers in which Hainan Airlines holds a stake include Yunnan Lucky Air Co., Tianjin Airlines Co., Air Chang'an, Shanxi Airlines and Urumqi Air.

Aercap, which vies for the top spot with rival GE Capital Aviation Services, is always looking at how to protect and manage its exposure to any customer, and if a client's business is unviable, the lessor would pull aircraft out, Kelly told Bloomberg. "But with Hainan Airlines at the moment, we see a viable business model for them," he says.

Kelly expects further consolidation in the aircraft-leasing industry but "slowly," given that stable returns mean asset owners will not be ready to sell unless they are under pressure.

"There'll be lots of talk, lots of bankers trying to generate activity, but unless the owner, the parent is under stress, I don't think we are going to see that much in the way of M&A," Kelly says. "The owners of these businesses know these businesses produce very stable, steady returns."

BLOOMBERG

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