Japan's Orix Corp (8591.T) has struck a $2.2 billion deal to buy a 30 percent stake in aircraft lessor Avolon Holdings, which is controlled by cash-strapped Chinese conglomerate HNA Group Co Ltd, marking a big consolidation in the global leasing industry.
The stake purchase in the world's No. 3 lessor is aimed at boosting Orix's presence in the global aircraft leasing market, where demand is expected to grow, supported by a rise in low-cost carriers and passenger traffic, the Japanese firm said on Wednesday.
The deal will help Orix Aviation Systems Ltd, a fully-owned subsidiary of Orix, to gain partial control of a lessor that is nearly three times its size, while Orix could also tap into the 300-plus aircraft on order by Avolon.
"Orix Aviation will continue to enhance and grow its unique third-party asset management platform and trading platform whilst achieving continued sustainable growth through this strategic investment," said David Power, CEO of Orix Aviation.
Orix Aviation is ranked as the world's No. 12 lessor according to fleet size, data from industry consultancy Flightglobal shows.
Avolon is currently fully owned by Bohai Capital Holding Co. Ltd (000415.SZ), which is in turn controlled by HNA.
The aviation-to-financial services Chinese conglomerate has been shedding assets such as real estate to slash the massive debt it accumulated from its acquisition spree in recent years. It has also started selling aviation-related assets - once considered as core business.
HNA bought Avolon for $2.5 billion in 2015 through Bohai. Avolon then struck a deal to buy the aircraft leasing arm of CIT Group (CIT.N) for $10.4 billion in 2016, creating the world's third-biggest lessor.
U.S.-listed AerCap (AER.N) and General Electric's (GE.N) GE Capital Aviation Services are the world's top two lessors.