Similar to all travel companies, Aircastle spots an opportunity in Asia’s growing aviation industry where its job will be to convince carriers they need new planes, but not ones they’ll keep forever.
Aircastle Ltd. aims to double its aircraft leasing assets to $10 billion over the next five years as rising travel in Asia spurs demand for planes.
The jet-leasing company, which owns 159 aircraft, plans to invest $850 million this year, Chief Executive Officer Ron Wainshal said in an interview in Tokyo yesterday.
Aircastle, based at Stamford, Connecticut, joins Sumitomo Mitsui Financial Group Inc., Asia’s largest aviation leasing company, and Orix Corp. in expanding business as economic growth in Asia boosts travel demand. Asia-Pacific air travel will expand 6.4 percent a year and the region will drive almost half of the world’s air traffic growth in the next two decades, Boeing Co. has forecast.
“Everyone is looking at Asia as the main growth center,” said Paul Sheridan, chief Asia consultant at Ascend Worldwide Ltd. “While it is competitive, there is still going to be a pretty decent amount of supply. Airlines are all willing to consider selling to leasing companies and leasing back.”
Aircastle’s revenue may increase to $703.8 million this year, according to the average of nine analysts’ estimates compiled by Bloomberg. Profit will probably almost triple to $93.6 million, the average of six analysts’ estimates showed.
The leasing company, which employs 85 people worldwide, increased the number of staff at its Singapore office to eight this year from two, Wainshal said. The company will remain flexible on doubling assets, he said.
“It’s not a number set in stone,” Wainshal said referring to doubling assets. “If the market gets too high we will sell more planes.”
Aircastle rose 0.8 percent to $15.55 in New York trading yesterday. The shares have gained 24 percent this year, compared with a 16 percent increase in the Standard & Poor’s 500 Index.
The company, rated BB+ by Standard & Poor’s, may take advantage of increased demand for speculative-grade corporate bonds that pushed rates on the securities to a record low last week. A bond sale could be for new capital or refinancing, Wainshal said.
Record Low Yields
The yield to maturity on high-yield corporate bonds worldwide fell below 6 percent last week, compared with a record high of 23.2 percent in December 2008, according to the Bank of America Merrill Lynch Global High Yield index.
Aircastle, whose biggest shareholder is the Ontario Teachers’ Pension Plan Board, has four bonds outstanding and is paying a 9.75 percent coupon on $450 million of fixed-income securities issued in 2010 that mature in August 2018, according to data compiled by Bloomberg.
“At the moment the bond market is incredibly attractive,” Wainshal said. “I expect we could do something in the bond market this year for growth or refinancing. The refinancing is driven by what you have to pay to get out of existing financing.”
Aircastle is interested in buying used planes or new wide- body planes, such as Boeing 777s, he said. The company isn’t interested in ordering directly from Boeing and Airbus SAS at the moment, Wainshal said.
“It has the strongest possibility of still being in production at the end of the decade,” he said about the Boeing 777. “There is nowhere in the world that has more demand for wide-body aircraft than Asia.”
Editors: Subramaniam Sharma and Vipin V. Nair.
To contact the reporters on this story: Chris Cooper in Tokyo at [email protected]; Kiyotaka Matsuda in Tokyo at [email protected]. To contact the editor responsible for this story: Vipin V. Nair at [email protected].
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