AviLease flags up Saudi ambitions

AviLease, which aims to become a leading global aircraft operating lessor, is another example of Saudi Arabia’s expanding aviation ecosystem, and will likely not be the last.

Over the past year or so, flag-carrier Saudia has launched a raft of new services from Jeddah, low-cost player Flynas is growing its fleet and network in Riyadh, the Saudi air connectivity programme has been incentivising carriers to add routes to serve the kingdom, and a major new Riyadh-based international carrier is in the works.

Saudi Arabia is investing in air transport at an astonishing pace.

It is surprising that a country as wealthy as Saudi Arabia has taken so long to enter the lucrative aircraft leasing business at scale. AviLease has been launched by the kingdom’s public investment fund (PIF), “one of the largest and most impactful wealth funds in the world”, counting its assets under management at the end of March 2022 at approximately $620 billion.

Saudi Arabia is the latest wealthy country to move into the aircraft leasing market, coming around a decade after Chinese money began entering the sector in a major way with the formation of numerous lessors in that country.

Analysts expect AviLease to follow a similar route and build scale and market share in an aggressive expansion that has the potential to disrupt the air finance market. It said it will also manage third-party equity for investors looking to allocate capital in aviation assets.

The company’s vision is to become a top-tier lessor, starting with deals in Saudi Arabia and then moving into the global market. Its first deal was announced at the Farnborough International Air Show in July with a sale-and-leaseback deal with Flynas for 12 new Airbus A320neos to be delivered in 2022 and 2023.

Speaking at the launch, Bander Almohanna, chief executive officer and managing director of Flynas, said: “The agreement will help our ambitious efforts to support the national aviation strategy, which aims to increase the annual passenger traffic to 330 million and connect Saudi Arabia with more than 250 destinations worldwide by 2030.”

Edward O’Byrne, chief executive officer of AviLease, added: “Our company has global ambition and the robust financial backing of PIF. We are ready to capitalise on the strong and growing Saudi market to scale rapidly and become a leading aviation lessor.”

O’Byrne was named as the head of AviLease in June. He is an experienced air finance industry executive, who spent nearly three years as managing director and co-head of aviation at Carlyle Aviation Partners and, prior to that, was chief investment officer at leading lessor AerCap for 11 years.

There are several heavyweight air finance names behind AviLease, with David Power, a former CEO of major lessor Orix Aviation, and Alec Burger, the former CEO of GECAS, among its board members.

Moreover, the launch of AviLease has been supported by global aviation consultancy, Plane View Partners, which was co-founded and is chaired by Henri Courpron, the former CEO of International Lease Finance Corporation.

PIF said that AviLease will grow through more sale-and-leaseback deals, secondary portfolio acquisitions, direct orders from the aircraft manufacturers, and corporate acquisitions. The plan is to focus its fleet growth on the latest generation narrow-bodies and wide-bodies.

Based in Riyadh, AviLease plans to “become a national champion in the aircraft leasing market” and “will contribute to the reduction of value leakage for Saudi Arabia”. Its launch “underlines PIF’s mandate to unlock the capabilities of promising sectors locally that can help drive the diversification of the economy and contribute to non-oil GDP growth,” explained PIF.

Within a couple of years, it could be that PIF-backed AviLease will advance to become a significant global player, possibly even breaking into the top ten of lessors worldwide.