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LAXintl
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Asia's Richest Man Buys 160 Planes. From Lessor

Thu Nov 06, 2014 10:40 pm

Asia's richest man Li Ka-shing and his Hong Kong based Cheung Kong Holdings empire has been on a USD $7billion aircraft shopping spree the last couple months.

First came what is a pending $5Billion deal to acquire portfolio of 100 aircraft from Irish AWAS Capital, and now Li Ka-shing is negotiating another $2Bil in deals with 45 planes from GECAS, Bank Of China and Jackson Square.

In addition he seeks to take a 60% share as part of a $733mil new joint venture with Mitsubishi to be known MC Aviation to market 15 MRJ aircraft.

With the initial portfolio of 160 aircraft, Cheung Kong would be propelled into a large aircraft leasing practice overnight.


Story:
Li Ka-shing's US$2 billion aviation deal could spark spending spree
http://www.scmp.com/business/compani...s-aircraft-leasing-business-buy-60

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I suppose the man sees a huge growing demand for aircraft leasing within China and other markets in Asia particularly as LCC sector grows rapidly.
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BreninTW
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 12:27 am

Quoting LAXintl (Thread starter):
I suppose the man sees a huge growing demand for aircraft leasing within China and other markets in Asia particularly as LCC sector grows rapidly.

There was a report on the radio news here that LCC's account for only 8% of capacity in North-East Asia, compared to a global average of 30%. According to the unnamed "Boeing VP" the growth of LCCs in North-East Asia is expected to be significant over the next decade or so.

EDIT: Add newspaper report stating same as radio report.

[Edited 2014-11-06 17:29:18]
 
Prost
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 12:33 am

Are there tax benefits to owning depreciating assets that would help his overall financial picture? Or is this just a good business to get in to right now?
 
lutfi
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 12:46 am

Not a particularly good business, but not bad either. He's "parking" money in high quality assets, but at quite low yields, but still better than having money in the bank.

He isn't (apart from MRJ) buying new, he is buying aircraft that have already flying, with decent leases attached
 
JAAlbert
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 1:04 am

So several leasing companies are selling their stock to this new venture? What's the reason (other than I suppose the price is right!). Are these lessors getting rid of older planes or does the deal involve newer models?

Does the fact that GECAS is unloading 60 planes say anything about GECAS's confidence in the leasing market going forward?
 
Wingtips56
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 1:09 am

Quoting JAAlbert (Reply 4):
Does the fact that GECAS is unloading 60 planes say anything about GECAS's confidence in the leasing market going forward?

Or are these older planes that would be coming off lease in the not-too-distant future that might not have a secondary market? Better for GECAS and others not to be stuck with them?
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LAXintl
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 5:38 pm

WSJ (subscription required) had following describing the move:


The acquisition would be Li’s first major investment in aircraft leasing as Hong Kong billionaire’s flagship company diversifies its investments from real estate, retailers, ports and power producers into transportation infrastructure.

It had been previously reported that Li was aiming to buy his way into the global aircraft leasing business as his flagship investment firm holds talks with lessors on building a large portfolio of modern planes.

“The group as a whole is an investing machine,” said Jonas Kan, a Hong Kong-based analyst at Daiwa Securities Group Inc., referring to the number of companies owned by Li. “In the past, Cheung Kong had a lot of capital tied up in property development in across Asia, but that’s now coming to fruition. With strong surplus cash, they’re considering areas outside of property and investing in infrastructure such as modern efficient aircraft is not too great a risk.”

With air travel demand in Asia is projected to expand near 6 percent annually through 2017, the fastest pace in the world, with routes within or connected to China being the single largest driver, according to an International Air Transport Association’s study last year. Asia will push commercial aircraft sales to $5.2 trillion over the next 20 years as China overtakes the U.S. as the world’s largest aviation market, Boeing Co. predicted last month.

Cheung Kong said it will increase investments in the infrastructure sector on July 31 in the company’s earnings report. The company reported a 59 percent increase in first-half 2014 profit. Li has a net worth of $34.2 billion, according to the Bloomberg Billionaires Index.


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aviationaware
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Asia's Richest Man Buys 160 Planes. From Lessor

Fri Nov 07, 2014 7:09 pm

Quoting Prost (Reply 2):
Are there tax benefits to owning depreciating assets that would help his overall financial picture? Or is this just a good business to get in to right now?

It's a matter of alternatives. Aircraft have become a very attractive asset class in the current low interest environment, and we are seeing a general movement of the leasing market towards a very liquid Asia (predominantly Japan and China) currently due to classic European and American institutions divesting these entities, in part to raise cash to fulfill stricter captial requirements.

They are a pretty safe investment right now with high quality recurring payment streams in place, so they are a very attractive way to get a decent return with minimal risk in the current environment.

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