GE to promote plane leasing enterprise to AerCap in $30bn deal
General Electric has agreed to sell its more than $ 30 billion worth of aircraft leasing business to Irish rival AerCap. This brings the two largest lessors in the world together and marks a further step in the dismantling of the financial arm of the US industrial group.
GE will receive $ 24 billion in cash, approximately a 46 percent stake in the combined company and $ 1 billion in AerCap notes and / or cash when the deal is closed. GE also has the right to appoint two directors to the AerCap board of directors.
GE plans to reduce its debt by approximately $ 30 billion once the deal is closed, using the proceeds from the sale and existing cash. This will bring total debt deleveraging to over USD 70 billion since the end of 2018.
The combined company would overshadow its closest competitors and prompt the head of Iata, the trade association for the global aviation industry, to warn that the deal would exacerbate the airlines’ “monopoly” among their suppliers.
“You have two aircraft manufacturers, you have two or three big ones [equipment manufacturers], monopoly air traffic control, monopoly airports and now we have monopoly landlords, ”Alexandre de Juniac told the Financial Times. “Nice.”
Jefferies’ analysts said the combined company’s 2,000 or so jets would make up 7 percent of the global merchant fleet.
One analyst said antitrust concerns are likely to be diluted by the fact that there are many lessors in the fragmented market while airlines have other ways to finance their aircraft purchases.
The deal has the potential to spark further consolidation as rivals battle to catch up, Phil Seymour, president of IBA, told aviation consultancy.
“It’s a little surprise. . . It would be almost like a merger of Boeing and Airbus, “he said.” I can imagine the executives of these other lessors looking around and thinking, how do they keep up with a mega lessor? Is there a need for more consolidation among the other top 10? ”
Leasing companies have helped fund the explosive growth of air travel for the past 30 years, but they have suffered as the effects of the Covid-19 crisis caused airlines to postpone payments, cancel new orders and reduce the size of their fleets.
The steady introduction of vaccines has raised hopes for a way out of the crisis. AerCap is betting that airlines will increasingly seek out leasing deals for financial flexibility as they attempt to rebuild and reduce credit.
