BEIJING • The skies above Asia will get more crowded during the next 20 years as airlines acquire planes to fly more passengers from developing economies.
That timing could not be better for aircraft leasing company BOC Aviation, an arm of Bank of China, which is scheduled to debut on the Hong Kong exchange tomorrow after raising HK$8.7 billion (S$1.5 billion) in an initial public offering.
The company sold new and existing shares at HK$42 apiece in Asia's second-biggest IPO this year, and it plans to use the proceeds to help pay for new planes.
As airlines serving the Asia-Pacific move to triple their fleet, they are finding that it can be cheaper to lease jets instead of buying them. And for BOC, the leasing business can be more lucrative than running an airline.
"The Chinese are getting into leasing as they see huge potential in their own market, as well as the Asia-Pacific," said Mr Shukor Yusof, founder of Endau Analytics in Malaysia. "They are flush with cash."
The share offer has attracted such investors as Boeing and sovereign wealth fund China Investment Corp, according to terms of the deal obtained by Bloomberg.
Airlines in Asia will fly more than 16,000 planes within 20 years, almost tripling the current number, according to estimates by Boeing.
BOC Aviation, the biggest lessor in the region, has 270 planes, underscoring the growth prospects in what is set to be the world's largest aviation market.
In the past 30 years, the number of aircraft owned by operating lessors jumped 11 per cent annually, according to Singapore-based Phillip Capital. That is double the pace of growth in the commercial fleet, where 40 per cent of jets are leased. At the end of last year, BOC Aviation had 241 planes on order.
"In the Asia Pacific, we're seeing very good demand for aircraft," Mr Robert Martin, chief executive officer of Phillip Capital, said in a recent interview. "When we talk to investors, what they said to us is that they really want an Asian champion to come to the market."
BOC's customers include IAG's Vueling Airlines, Iberia, Southwest Airlines, Aeroflot, EVA Airways, Singapore Airlines' India affiliate Vistara, and WestJet Airlines, according to Bloomberg Intelligence.
BOC Aviation is poised to benefit from rising demand in China, India and South-east Asia, where higher incomes prompt more people to fly.
The BOC Aviation offering comes as IPO listings in Hong Kong are at their slowest pace in three years, according to data compiled by Bloomberg. So far this year, US$5.5 billion (S$7.6 billion) has been raised, against US$12.4 billion a year earlier.
BLOOMBERG
