Demand for jets soars as Chinese airlines leap to lease

Overseas investment by Chinese companies in the aviation industry has grown in Q3 this year, reports the Guangzhou-based 21st Century Business Herald.

A study by Morning Whistle Group, a Chinese investment management service provider, shows that the trade value of the three overseas aviation industry investments made by Chinese companies in Q3 topped about US$5.1 billion.

This figure placed aviation as China's third most invested overseas industry.

Among the acquisitions, Cheung Kong Holdings and its head Li Ka-shing, the richest person in Asia, has proposed a US$5 billion bundle of aviation equipment from Ireland-based aircraft lessor AWAS.

This is the first large-scale investment the Hong-Kong based property conglomerate has made in the field of aviation.

Chinese businesses are increasing their investments in the industry in anticipation of the profit to be made from the country's expanding domestic industry. Fu Shang, an analyst with Morning Whistle Group, said China has ordered about 700 aircraft, 40% of global orders made in 2014. China now only trails the US in the size of its industry.

As the competition among China's airlines intensify, they are looking to cut costs with fuel-efficient jets. More budget operators are emerging. Relaxed aviation policy has spurred this trend into demand for new aviation equipment, said the report.

France-based Airbus Group also predicts that China will need more than 3,200 jets with over 100 seats over the next two decades.

Jet leasing, under such circumstances, could be a good option for airliners. Businesses can be more adventurous trying out new models and new routes with leased jets. The lead time of the jets is relatively shorter, with flexible leasing time and allocation of crew.

Plane-leasing is more cost effective than buying planes as it only requires the lease payment, said the report.

The jet leasing market share is largely dominated by foreign companies, led by the Los Angeles-based aircraft lessor International Lease Finance Corp, and General Electric's Capital Aviation Services.

The leverage is gradually turning towards Chinese companies, however, as the Chinese government, aiming to promote the growth of the domestic aviation industry, has been more open in terms of regulations, said the report.

Source: Want China Times