Asian tycoon buys up aircraft for leasing JV

Asia’s richest businessman, Li Ka-shing, is to buy up to 60 aircraft and form a leasing joint venture with Mitsubishi as his company, Cheung Kong, develops its plans to enter the aviation industry.

The Hong Kong businessman will take the aircraft, worth a collective $2.5bn, through a number of transactions with established lessors.

Cheung Kong will buy 15 aircraft from Mitsubishi’s MC Aviation Partners (MCAP) for $733.5m in a deal linked to its JV with the company. 

Under the venture, Cheung Kong will own 60 per cent of the new leasing platform and MCAP 40 per cent. MCAP will also provide the introductions, experience and contacts needed to make the business work.

In addition, Cheung Kong will buy an extra 45 aircraft from other lessors, including 18 aircraft from GECAS for $714.8m, which will include 11 A320-200s, five 737-800s and two 737-900ERs. It will also buy an additional three 737-800s from GE affiliates for $101.2m.

Cheung Kong will buy 10 aircraft from BOC Aviation in two purchases of $213.3m and $278.7m, as well as taking 14 aircraft from Jackson Square Aviation for $584.2m. 

Cheung Kong took its first step into aviation back in August when it announced plans to buy into the Irish leasing company AWAS. Cheung Kong’s history lies in real estate and its unit, Hutchinson Whampoa, is involved in port operations, retail, energy and telecommunications.

It comes at a great time – last year, China lifted a six-year ban on establishing new private airlines. And, the number of passengers traveling in Asia is expected to climb by an average of 4.9 per cent annually in the next 20 years through to 2034, according to IATA. China is predicted to be the driving force with an estimated 5.6 per cent growth annually. 

We’ve seen an increase in Asian financing and there are expectations that will increase significantly, but it’s interesting that western lessors have been so willing to trade to with Cheung Kong knowing that it will increase competition. Perhaps western lessors, acknowledging the inevitable, prefer to be a part of this future success story.

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