ILFC sells 53 aircraft to Macquarie Group, AerCap released 1Q2010 aircraft portfolio update


Second-tier aircraft lessors are rapidly closing the gap between the established two lessors, ILFC and GECAS. Macquarie Group announced a USD1,987 million acquisition of 53 aircraft from ILFC yesterday, mostly for the popular A320/B737 narrowbodies (more than 70% of the portfolio), with on-order widebodies making up the remainder. ILFC stated the entire portfolio has a book value of USD2,316 million.

  • Macquarie Group acquires 53 aircraft from ILFC, positioning itself as a major player in the aircraft leasing and financing business.
  • ILFC sells aircraft to offset debt as part of its reorganization.
  • AIG, the parent company of ILFC, supports ILFC through a secured-term loan but its long-term support is uncertain.
  • AerCap completes its merger with Genesis Lease, adding 54 aircraft to its portfolio.
  • AerCap signs new lease agreements, completes aircraft deliveries, and acquires and sells various aircraft and engines.
  • Share prices of aviation suppliers, including AerCap, Aircastle, Babcock & Brown Air, and Aerocentury, experience gains.

Macquarie Group will transfer the purchase rights on six of the 53 aircraft to Macquarie Aircraft Finance, a global aircraft leasing company of which Macquarie owns 37.5%.

Macquarie is seeking to position itself as a major player in the aircraft leasing and financing business. Its business includes nine aircraft owned under Macquarie Asset Leasing Trust and a 37.5% share in Macquarie AirFinance, which owns/manages 124 aircraft. Macquarie Asset Leasing Trust was formed in 2006, through the USD1.5 billion acquisition of GATX Air.

For ILFC, the sale is part of a reorganisation as it struggles with its debt load. The company stated in 2009 that it wanted to sell up to USD3.5 billion in aircraft to offset debt.

Parent of ILFC, AIG, recently abandoned plans to sell the unit early, following the departure of several key senior managers, including founder and CEO, Steven Udvar-Hazy, and his replacement, John Plueger. Mr Udvar-Hazy had been attempting to purchase an aircraft portfolio from ILFC since 2008. But where Udvar-Hazy failed, Macquarie has succeeded.

AIG has promised to support ILFC through to Feb-2011, announcing a new secured-term loan of up to USD750 million, backed by its aircraft inventory, in late Feb-2010. However, AIG's long-term willingness to extend support to the company has been questioned. ILFC reportedly has debt commitments of more than USD30 billion, while AIG has been selling assets to repay the USD182.3 billion government bail-out it received.

Aercap portfolio movements

AerCap, which completed its merger agreement with Genesis Lease on 25-Mar-2010, released an update on its aircraft portfolio. The portfolio consists of 338 aircraft and 88 engines, including 54 aircraft that AerCap added through the merger with Genesis Lease in March 2010. These aircraft are still managed by GECAS and the respective transactions have not yet been included in AerCap's activity report.

During 1Q2010, AerCap signed four new lease agreements and 12 new aircraft engine agreements. The company completed 12 aircraft deliveries.

In the first three months of the year, 22 aircraft were acquired. Two new A319s, eight A320s, one A321 and three A330s were delivered under commitments to Airbus. In addition, AerCap acquired four used A320s and two used B737s. The company also acquired five engines.

AerCap sold two A320s and one A330 from its forward order portfolio and two B757s from its owned portfolio. The company also executed agreements for the sale of one B737 from its managed portfolio and four B757s from its owned portfolio. LOIs were signed for the sale of two A320s from its owned portfolio and four A320s from its forward order portfolio.

Aercap shares were up 5.3%, while Aircastle shares climbed 4.9%. Babcock & Brown Air (+1.9%) and Aerocentury (+2.3%) also reported strong share price gains.

Selected Aviation suppliers' daily share price movements (% change): 14-Apr-2010

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