Plane lessor DAE to acquire 64 Boeing 737 Max jets from China Aircraft Leasing

Transaction is expected to be completed in third quarter of the year

A Boeing 737 Max. DAE's orderbook includes 737-8, 737-9 and 737-10 variants. Photo: DAE

Dubai Aerospace Enterprise, one of the world's biggest aircraft lessors, said it signed a definitive agreement to acquire 64 Boeing 737 Max jets from a unit of China Aircraft Leasing Group Holdings amid rapid growth in the global airline industry.

The order book includes 737-8, 737-9 and 737-10 variants, with delivery of the narrow-body aircraft scheduled to begin in 2023 and through to 2026, DAE said in a statement on Monday.

The company did not disclose the value of the deal.

"This transaction will add certainty to our growth trajectory," Firoz Tarapore, chief executive of DAE, said.

"On a pro forma basis, this transaction will increase our fleet of owned, managed, committed and mandated-to-manage aircraft to approximately 550 aircraft, valued at approximately $20 billion."

The move comes as the global aviation industry sees no signs of air travel demand abating on one hand and as plane makers struggle to deal with aircraft delivery delays and ease capacity constraints on the other.

Airlines seeking to capitalise on a boom in global air travel have been struggling with a limited supply of jets and are increasingly turning to plane lessors to supplement their capacity.

Global passenger traffic continued to improve in June, reaching 94 per cent of pre-Covid levels, as the summer travel season in the Northern Hemisphere got off to a strong start, the International Air Transport Association said in its latest report.

Record global temperatures are adding further environmental pressure on airlines to replace older aircraft with more fuel-efficient models, potentially positioning plane lessors to capture the strong demand.

DAE's latest deal will boost the percentage of new, fuel efficient jets in its owned fleet to about 66 per cent, up from 50 per cent, the company said.

About 20 per cent of the acquired portfolio is on lease to airline customers who are also existing clients of DAE, the lessor said.

The remainder of the acquired portfolio of assets will be placed directly by DAE in the "coming quarters", it said.

The deal is expected to be completed in the third quarter of 2023 and is expected to have no impact on any of the company’s capital adequacy, liquidity, and funding ratios, according to the statement.

Since its establishment, and including this latest transaction, DAE has acquired and is committed to acquire about 500 Boeing aircraft, the Dubai-based company said.

DAE was advised on the deal by international law firm Milbank LLP and consultancy KPMG Ireland.

The company's profit for the first half of 2023 increased marginally amid robust demand from airlines for aircraft to meet the surge in air travel.

Profit before exceptional items in the six months to the end of June inched up to $141.1 million, compared to $140.1 million during the same period of 2022, the company said earlier this month.