Saudi Arabia’s Public Investment Fund launches aircraft leasing company

The Public Investment Fund is a central plank of Saudi Arabia's Vision 2030 initiative that seeks to diversify the Arab world's largest economy and reduce its reliance on oil. EPA

Saudi Arabia’s Public Investment Fund has launched an aircraft leasing company, AviLease, as the kingdom accelerates its efforts to diversify the economy and boost non-oil economic growth.

The new company aims to be a “leading institution across the aviation leasing value chain”, maintaining a portfolio of assets with its core focus on leasing, trading and asset management services, PIF said in a statement on Thursday.

AviLease will initially focus on scaling through purchase-and-lease-back transactions with airlines, portfolio acquisitions and direct orders from aircraft manufacturers.

It will also look into expansions through corporate acquisitions. The company’s fleet will consist of new generation narrow-body and wide-body aircraft from the “world’s leading manufacturers”, PIF said, without providing any further details.

“AviLease is managed by a top-tier team that will lead its growth, localise knowledge and expertise, and enable the development of the company’s desired infrastructure, with plans to become a national champion in the aircraft leasing market,” the statement said.

“Additionally, the company’s establishment will contribute to the reduction of value leakage for Saudi Arabia, while enhancing integration into the global aircraft financing market,” it added.

The global aircraft leasing market size is expected to grow at a compound annual growth rate of 7.8 per cent through to 2029 from more than $167.8 billion last year, New York-headquartered Polaris Market Research reported.

The industry is gaining popularity due to increasing demand for air travel following the Covid-19 pandemic, which hit the industry hard.

Airlines around the world are gradually boosting their fleet sizes as they look to cope with future demand and replace older aircraft.

“PIF’s ample liquidity and strong balance sheet, combined with its depth of financing and investment-structuring expertise will help the company [AviLease] leverage the opportunity in the aircraft leasing market,” it said.

The company will also support the “thriving aviation sector” and drive financial sustainability within the aviation ecosystem.

The launch of AviLease underlines PIF’s mandate to “unlock the capabilities of promising sectors locally that can help drive the diversification of the economy”, the fund said.

Saudi Arabia is diversifying into several future growth sectors as part of its Vision 2030 initiative that seeks to reduce the country's reliance on oil, with the PIF playing a key role in enacting the strategy.

By the end of the first quarter of this year, its assets under management reached about $620bn across a diversified portfolio spanning 13 strategic sectors both in Saudi Arabia and abroad.

Since 2017, the fund has established 54 companies and created both directly and indirectly more than half a million jobs as of the end of last year.