$30bn aircraft leasing deal brings a bumpy ride for Airbus and Boeing

General Electric is selling its aircraft leasing business to an Irish rival in a deal that will form a $30bn (£21bn) aviation powerhouse and create problems for Airbus and Boeing.

GE Capital Aviation Services and AerCap are already the two biggest players in the sector. The combined business will own more than 2,000 aircraft - about 7pc of the global fleet - and some 300 helicopters.

GE will take a 46pc stake in the company and two board seats. 

The deal comes with the aviation industry taking a pounding from coronavirus, with the number of global flights currently running at about half pre-pandemic levels.

Aengus Kelly, AerCap chief executive said the tie-up would “enhance our ability to provide innovative and attractive solutions” for customers while boosting profitability.

“As the recovery in air travel gathers pace, this transaction represents a unique opportunity that we believe will create long-term value for our investors,” he said.

Lawrence Culp, GE chairman and chief executive, said the tie-up would create “an industry-leading aviation lessor”.

Mr Culp is focusing GE on its core power, energy, aviation and healthcare operations, and will use some of the proceeds to reduce the group’s debt.

The transaction, subject to approval by shareholders and regulatory approvals, is expected to close in the fourth quarter of 2021.

Robert Stallard, analyst at Vertical Research, described the new company as the “mother of all leasing companies”.

While there are concerns about the power such a giant could wield in the market, especially for airlines which lease aircraft, Mr Stallard said the tie-up could have some advantages for Airbus and Boeing, although its sheer size would allow it to negotiate even greater discounts.

He added: “The initial thought is likely to be that this is bad for Airbus and Boeing, as one of their biggest customers has now got even bigger, and thus has more purchasing power.

“However, we think the implications are more nuanced. Airbus and Boeing would much prefer to have a customer base that is well financed and stable, versus a plethora of small airlines and leasing customers that cannot survive through a downturn.”

Mr Stallard described the new business as a “sophisticated investor”, adding it would be unlikely to make “speculative aircraft orders that some airline start-ups are prone to do, for example”. 

Reference: Daily Telegraph: Alan Tovey  1 day ago