MIAMI – Aviation leasing giant AerCap announced today that it had finalized plans to acquire GE Capital Aviation Services (GECAS).
The deal marks a substantial consolidation of leasing services in the global aviation industry. Despite not operating aircraft under their own name, AerCap owns one of the largest fleets in the world. The combined companies will manage a fleet of over 2,000 aircraft, 900 aircraft engines for over 300 customers around the world.
AerCap leases aircraft to many of the industry’s most recognizable airlines, making it an extremely important player in the aviation industry. The new AerCap will hold a major stake in the aviation industry and will hold a great deal of power.
Despite the positive outlook for the deal, AerCap was not immune to the damage of COVID-19 within the industry. Many airlines had to re-negotiate leasing agreements, and some were simply unable to pay leasing bills as hundreds of aircraft sat on airport aprons.
However, AerCap’s 2020 fourth quarter results saw a 21% increase in cash flow, giving the company flexibility to adapt to the industry’s changes.
Positive Market Outlook
AerCap sees an opportunity for growth utilizing the combined resources of the companies as the aviation industry recovers.
GECAS and AerCap, companies that competed vigorously against each other, can now use their respective customer bases to create a competitive advantage against other aviation leasing companies.
AerCap expects next generation aircraft to grow from 56% of their fleet to 75% in 2024, signaling a high demand for new aircraft from Airbus and Boeing.
Although narrowbody aircraft currently make up 60% of their fleet, their order book of 493 aircraft comprises more than 90% narrowbodies. AerCap’s order book can be used as an indicator of market projections for Airbus and Boeing’s new aircraft.
A lack of orders for wide body aircraft by AerCap signals a shift in the market towards medium haul next generation aircraft as the wave of the future.
Deal in Details
GECAS will own an approximated 46% stake in the combined company through an issuing of 111.5 million shares valued at $25bn.
Additionally, GECAS will be entitled to two seats on the AerCap Board of Directors. The company will retain the name AerCap, and GECAS will be retained as a business of AerCap.
The deal, financed by Citi and Goldman Sachs, will close in the fourth quarter of this year following regulatory approvals and the approval of AerCap shareholders.
Aengus Kelly, Chief Executive Officer of AerCap said the acquisition would “enhance our ability to provide innovative and attractive solutions for our customers and will strengthen our cash flows, earnings and profitability.”
GE Chairman and CEO, H. Lawrence Culp, Jr., stated, “AerCap is the right partner for our exceptional GECAS team. Combining these complementary franchises will deliver strategic and financial value for both companies and their stakeholders.
He continued, “Together we’re creating an industry-leading aviation lessor with expertise, scale and reach to better serve customers around the world, while GE gains both cash and upside in the stronger combined company as the aviation industry recovers.”
Featured Image: AerCap, GECAS