Aviation markets in Turkey and Brazil, flashpoints for political or economic uncertainty in the past year, are stabilising, a top aircraft leasing company says.
Reporting a 30 per cent increase in first-half pre-tax profit to US$142.9 million, the head of the Dublin-based SMBC Aviation Capital played down recent concerns about a broader downturn in aviation markets, which some see as oversupplied.
“Lease rates and demand for narrow-body aircraft remain very stable,” said the chief executive Peter Barrett.
SMBC’s revenues rose 19 per cent to $502.8m in the six months to the end of September.
SMBC owns or manages 453 aircraft and customers include Turkish Airlines and its domestic rival Pegasus Airlines but says its exposure is limited to five to six aircraft. Both airlines are current with their payments, Mr Barrett said.
“Turkey is obviously going through a relatively challenging time but the fundamentals of air travel in Turkey and the nature of the market there haven’t changed significantly, even though short-term demand is under pressure,” he said.
South America is broadly steady although the picture is varied he said, highlighting positive opportunities in Chile.
“Brazil has … definitely had a tough time but has probably stabilised in the last couple of months,” Mr Barrett said.
Turkey and Brazil have been a headache for airlines, aircraft owners and plane makers in the past year.
Brazil has been jolted by the impeachment of the president Dilma Rousseff, a huge corruption scandal and a brutal economic crisis.
Industry sources say Turkey was responsible in large part for a leap in customer financing by the plane maker Airbus this year, due to its reliance on suspended European export credits and turmoil after a coup attempt in July.
Airbus has provided financing for as many as six or seven wide-body A330 deliveries to the country, the sources said.
Airbus declined comment.
Government export credits have been halted in Europe by a British inquiry into the use of middlemen in aircraft negotiation and in the United States by political obstacles in Congress.
Mr Barrett said the temporary breakdown of the system, which traditionally supports exports to airlines that might otherwise find it hard to raise funds, had been cushioned by ample alternative sources of finance but warned this may not last.
“[Export agencies] were a significant player in the market and their stepping back at the moment is likely to give more opportunity to businesses like ours, particularly as the broader fiscal environment changes and liquidity reduces,” he said.
Mr Barrett suggested more aircraft lessors could seek public listings as the sector attracts yield-hungry investors. That comes after the Singapore-based BOC Aviation carried out the industry’s largest ever initial public offering in June.
“The last few weeks have been good for the stock markets and if that continues you may see more people looking to pull the trigger on potential IPOs,” Mr Barrett said.
He said Japanese-owned SMBC Aviation had no plans to go down that route itself. “We have a very strong and stable shareholder base and we expect that to continue.”
In 2012, Japan’s Sumitomo Mitsui Financial Group bought RBS Aviation Capital, the world’s fourth-largest aircraft lessor, for $7.3 billion and renamed it SMBC Aviation Capital.
* Reuters
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