SINGAPORE/HONG KONG • US lender CIT Group has kicked off the sale of its aircraft leasing assets by inviting more than a dozen entities to consider bidding, including China's HNA Group, Industrial and Commercial Bank of China's ICBC Leasing, and Japan's Orix Corp, sources familiar with the matter said.
The sale of CIT's Commercial Air unit could fetch between US$3 billion and US$4 billion (S$4.1 billion and S$5.5 billion), with Century Tokyo Leasing, sovereign wealth fund China Investment Corp, CDB Leasing, plus some global pension funds and insurers, also invited to bid, the sources added.
The strong line-up of Chinese and Japanese suitors in the auction underscores the growing importance of cashed-up Asian lessors which are investing billions of dollars in a sector that offers stable, long-term and dollar-based revenue. It also signifies the shifting balance of the global aviation industry to Asia, which is seen as the engine of growth.
First-round bids for CIT's leasing arm, which owns, finances and manages a fleet of over 350 planes, are due next month, said the sources. CIT Commercial Air has assets valued at about US$11 billion and some 100 clients, including Delta Air Lines and China Eastern Airlines.
Firms are showing a greater appetite for investing in aviation financing due to expectations of "mid to single digit" returns, and as other markets like real estate and stocks remain challenging, analysts said.
"In the past, a lot of airlines were opting for ownership of planes but now most airlines are open minded on the leasing options," said Mr Johnny Lau, who ran aircraft leasing units at some Chinese banks before starting his own consultancy. "There is a lot of capital you need... for owning aircraft but for leasing planes in the short term, you don't need much money to get the same type of assets to use," he said.
CIT, among the world's top 10 lessors, has said it is looking to sell or spin-off its Commercial Air unit by the end of the year as it focuses on domestic banking. "We do not comment on price or participants in the process," a CIT spokesman said when asked about the auction.
One of the sources said some of the prospective bidders will be given access to detailed financials of CIT's unit in a few weeks.
Chinese aviation and shipping conglomerate HNA, which is expanding aggressively, is a leading contender for CIT's aviation assets, the sources said. A spokesman for HNA said the company was not aware of a possible bid.
The push by Chinese lessors comes as China emerges as the fastest growing major air travel market, with overall annual passenger volume of 392 million in 2014, rising at more than 10 per cent a year, according to official data.
Airbus forecasts China will leapfrog the United States as the world's largest domestic air traffic market within 10 years.
Asian firms, led by Chinese lessors, have broken into the big league in the US$228 billion global aircraft leasing industry as they take on Western firms such as AerCap and General Electric's GECAS, which still dominate the sector.
Orix, Century Tokyo Leasing and ICBC Leasing declined to comment. CIC did not comment. CDB Leasing could not be reached for comment.