Aircraft leasing set for rapid growth

China expected to account for 35% of global market by 2022, says report

Chinese companies are expected to dominate the global aircraft leasing market with a 35 percent market share by 2022, according to a new report.

British aviation data provider FlightGlobal said aircraft leasing is poised for rapid growth in China and domestic firms are expected to play a much bigger role in the global markets.

In 2008, Chinese capital accounted for just 5 percent of the aviation leasing market. This year, that share has risen to 28 percent, and it will reach 35 percent by 2022, it said.

During the past decade, the capital deployed by aircraft leasing companies rose 51 percent to $261 billion and out of this, nearly $71 billion came from Chinese enterprises.

The rapid rise of Chinese banks and lessors in the aircraft leasing sector has also been putting pressure on industry returns, FlightGlobal said.

ICBC Financial Leasing Co Ltd, China's largest aircraft leasing company by assets and the subsidiary of Industrial and Commercial Bank of China, said as of October this year, it has managed total capital of 300 billion yuan ($45 billion) and 555 aircraft, in addition to a large number of shipping assets and large-scale equipment.

"The strong demand for aircraft in the domestic market has laid a strong foundation for the aircraft leasing industry in China, with leasing increasingly being accepted by carriers. The domestic market will continue to grow rapidly," said Zhao Guicai, CEO of ICBC Leasing.

"The aircraft leasing business also gives Chinese commercial lenders adequate leverage in overseas markets. On the other hand, European and US banks are shrinking their aircraft leasing operations due to supervisory concerns."

Over the next two decades, Chinese carriers are expected to purchase 7,240 aircraft valued at $1.1 trillion, according to estimates from US aircraft maker Boeing Co. China's fleet size is expected to grow at a pace well in excess of the global average, and almost 20 percent of the new aircraft demand would come from Chinese carriers, Boeing said.

ICBC Leasing added that it plans to further expand its business in markets associated with the Belt and Road Initiative. Currently, it has operations in foreign markets such as India, Russia, Indonesia and some European countries.

Meanwhile, leading domestic aircraft leasing companies have become big customers of the home developed large passenger jet C919. ABC Financial Leasing Co Ltd has ordered 75 C919 aircraft, the largest number of orders. It is followed by CCB Financial Leasing Co Ltd and Ping An International Financial Leasing, with each of them ordering 50 jets, and ICBC Financial Leasing Co Ltd with 45.

"The successful operation of homemade aircraft needs the support from the industry, and leasing companies can help it to improve sales, develop overseas markets, and reduce the cost of airlines. The huge domestic market has provided demand for the C919, an aircraft with advanced design and quality," said ICBC Leasing's Zhao.

Lin Zhijie, an aviation industry analyst and columnist at Carnoc, a leading civil aviation website in China, said Chinese commercial lenders, flush with assets, have been focusing on the growth of their aircraft leasing units. Besides, favorable tax policies have also helped boost the growth of the aircraft leasing sector in China.

"In addition, domestic aircraft leasing companies have advantages in transaction prices and this has helped them to grow the market share rapidly in a few years. Still, they need to improve their professional capabilities like fleet management."