Non-Subscriber Extract
Domestic leasing signals take-off for Chinese carriers
8 March 2007
Although there is considerable liquidity in China, the country has not really produced an aircraft leasing industry set to compete with international players. That is, it would seem, until now.
The operating lease market is now moving into another stage, with domestic financial institutions and leasing companies in China starting to source capital needed to acquire Western-built commercial aircraft to be leased to their home country carriers.
The net result for the ever-crowded international operating leasing industry particularly with the advent of private equity-backed lessors is that the industry is facing greater competition from grass-roots players. And the big concern for international lessors is that domestic leasing companies in China are willing to do business at lower lease rates than international counterparts are offering.
However, borrowing at market rates in China is likely to be a challenge for the country’s leasing companies, particularly given that many mainland China bank branches have limited or no experience in asset-based lending. Much of Chinese bank lending in aircraft finance has been overseas or in the main cities of mainland China.
"Chinese banks have not approached asset-based lending that much. They will need to ramp up their capabilities by importing international banks' technologies if they want to start to compete with international banks. However, there will be a time lag before this happens," says Simon Briscoe, a partner at law firm Norton Rose in Singapore.
"The critical thing for these domestic leasing companies is going to be accessing onshore domestic capital from the debt and equity markets. The debt side is going to be more of a challenge," he adds.