Aircraft leasing a US dollar game, says BOC Aviation boss ahead of Hong Kong IPO
Hong Kong public offering of BOC Aviation at HK$42 apiece runs from May 19 to noon May 24
The public offering (IPO) of shares in Asia’s largest aircraft lessor BOC Aviation will start in Hong Kong on Thursday with an offer price 1.25 times the company’s 2015 post-money price-to-book ratio.
Robert Martin, the company’s chief executive, said in an interview that the firm is coming to the Hong Kong stock market because of an abundance of cash-rich investors, insurances companies and funds looking for a fixed return.
Aircraft leasing — where a company purchases planes at a price advantage from the manufacturers and monthly rents them out to airlines and often on decade-long contracts — is gaining popularity, with deep-pocketed Asian investors. That’s because the business offers steady returns and a lower risk compared with airlines.
BOC Aviation’s average return on equity from 2013 to 2015 was 15.1 per cent according to the company.
Despite recent trends that have seen airlines try to put their aircraft bills in local currencies in order to lower foreign exchange risks, Martin said he thinks aircraft leasing remains predominantly a US dollar business.
“We are a pure US dollar-based company and we don’t intend to change that,” he said, “Aircraft are bought and sold in US dollars. [With other currencies] you are just introducing additional risks and complexity to your business model that you don’t need.”
BOC Aviation has a portfolio of 270 owned and managed aircraft leased to 62 airlines in 30 countries.
