International Lease Finance Corp (ILFC), the aircraft leasing arm of American International Group Inc , has shrugged off threats from a growing number of domestic players in China, its biggest single market, saying it has the "first mover" advantage with over 200 planes on order.
China's insatiable appetite for air travel thanks to a growing wealthy population has created great opportunities for leasing firms, which own about two aircraft in five of the global fleet.
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ILFC, whose multi-billion dollar initial public offering is on hold, is the largest aircraft lessor in China with a 35 percent market share, or 180 planes deployed there, its chief executive officer Henri Courpron said.
China will need 5,260 new aircraft worth $670 billion through 2031, according to Boeing Co, of which about 40-50 percent of the new planes would be owned by leasing firms, taking the market size to $268 billion in the next two decades.
The China market is fragmented with at least 20 domestic players -- many of them small and new to the market. But it is the foreign players, including ILFC and rival General Electric's GE Capital Aviation Services (GECAS), that dominate the market, taking a combined 90 percent of the business.
ILFC has a portfolio of more than 1,000 owned or managed aircraft, and another 239 new fuel-efficient aircraft, including Boeing 787s and Airbus A320neos, on order. And it has the rights to purchase an additional 50 of such aircraft.
If the new lessors in China were to order those planes today, they could only get them in 2018 or 2019.
"We have the first mover advantage," Courpron told Reuters on Friday.
ILFC has been looking for areas of growth and beefed up its presence in the Asia Pacific region by opening offices in Singapore and Beijing this year.
"China is a big consumer of new aircraft. We are well positioned to take advantage of that," ILFC head of Asia Pacific David Nixon told Reuters in a joint interview alongside Courpron.
"We have 240 aircraft coming in over the next five years and we expect a lot of those airplanes to wind up with Chinese airlines, Chinese carriers."
ROOM FOR EVERYONE
Aircraft leasing firms sprung up in China over the past few years with Industrial and Commercial Bank of China Ltd <1398.HK> <601398.SS> and Bank of Communications <3328.HK> <601328.SS> setting up financial leasing arms in 2007. They were followed by China Construction Bank Corp <0939.HK> <601939.SS>, China Minsheng Banking Corp <1988.HK> <600016.SS> and China Development Bank.
"Airbus and Boeing deliver more and more planes every year and the share of financing organized by leasing companies is also increasing, so there is room for everybody," Courpron said.
He also said the world's top commercial aircraft lessor was ready for an IPO as its parent AIG had made clear that ILFC was a non-core unit and that it would like to sell all of its interest in it over time.
The company was still waiting for the right time, which could be 2013 or even 2014, he said.
"We are in a zone from a calendar stand point that is not favorable to an IPO because of the uncertainty in the U.S. because of the election," Courpron said.
ILFC on Thursday reported operating income of $39 million in the third quarter, compared to an operating loss of $1.3 billion a year ago when it took $1.5 billion of impairment charges and fair value adjustments.
($1 = 6.2372 Chinese yuan)
(Editing by Jeremy Laurence)