BEIJING • China's HNA Group, controlled by billionaire Chen Feng, has agreed to buy the aircraft-leasing business of CIT Group for US$10 billion (S$13.7 billion) in a deal that would create the world's third-largest rental fleet.
HNA's Avolon Holdings will expand its line-up to 910 aircraft valued at more than US$43 billion, including planes on order, the company said in a statement on Thursday. The acquisition is scheduled to close in the first quarter after regulatory and shareholder approval.
"Our strategic objective is to build the No. 1 aircraft-leasing company in the world in terms of size, shape and scale," Mr Domhnal Slattery, chief executive officer of Avolon, said in a telephone interview. "This transaction enables that journey," he said, adding that the CIT unit has a "top-class portfolio, great management team, (is) well run and is really the jewel in the crown of CIT's non-banking business".
The purchase will roughly double Avolon's fleet and vault it into the ranks of the top aircraft lessors worldwide. Founded in 2010, Avolon is betting on rising demand for global air travel and airlines' desire to replace ageing jets, especially in the Asia-Pacific, where China is poised to become the biggest aviation market within two decades.
Avolon, based in Hong Kong and Dublin, aims to overtake market leaders GE Capital Aviation Services, a unit of General Electric, and AerCap Holdings. "The transaction fits right in the middle of our wheelhouse," Mr Slattery said.
The deal doubles HNA's more than US$10 billion of acquisitions already announced this year, according to data compiled by Bloomberg, and expands its travel and leisure business spanning airports, airlines and hotels.
Number of aircraft combined entity will have.
Value of the fleet.
For Mr Chen, 63, who two decades ago walked the aisle of his start-up Hainan Airlines' lone airplane serving refreshments, the latest acquisition is part of his ambition to make HNA one of the world's top 100 companies by the end of this decade and among the top 50 by 2030.
Mr Will Horton, a Hong Kong-based analyst at Capa Centre for Aviation, said: "This is an essential part of a strategy to make China a hub, not just for airlines, but also for aircraft manufacturing, for leasing, for components, for engines.
"Demand for leasing should remain high. It's certainly more profitable than running an airline."
CIT, a New York-based bank, intends to return as much as US$3.3 billion of common equity to shareholders, it said in a separate statement on Thursday. CIT is seeking to reduce annual operating expenses by US$125 million over the next two years as it targets a return on tangible common equity of 10 per cent, the firm said in March.
The bank has been exploring a sale of its aircraft business, which comprised about 23 per cent of assets before the deal, since last year.