Lion Group breaks into aircraft leasing industry

August 07, 2014 - 12:00:00 am

SINGAPORE: Indonesia’s Lion Group, which boasts an order backlog of about 500 Boeing and Airbus aircraft, has clinched the first deal for its leasing subsidiary in a key diversification move for one of the world’s fastest-growing airlines.

Two years after setting up shop in Singapore, Transportation Partners (TP) has signed a deal to lease three new Boeing 737-800 planes to 9 Air, the low-cost airline of China’s Juneyao Airlines, TP’s chief operating officer said.

Though TP’s deal with 9 Air involves just three aircraft, the potential is significant in a market like China where airlines will need nearly 6,000 new jets over the next 20 years. Many of those aircraft, valued at $780bn at list prices in total, will be leased rather than bought as carriers seek to cap long-term commitments.

The three aircraft will come from Lion’s existing order for Boeing 737 aircraft, said John Duffy, a former banker hired by Lion co-founder Rusdi Kirana to head TP.

“If we could do a couple more deals like this this year, then we’d be really pleased. We would hope to announce other deals during the fourth quarter,” said Duffy, without disclosing the value of the deal with 9 Air.

The value of leasing transactions are typically not released to the public due to commercial considerations.

The China deal comes after Kirana started TP to help manage some of the aircraft in Lion’s portfolio. Lion has placed plane orders worth about $45bn at list prices and deliveries are spread over the next 10 years.

Lion and Boeing did not immediately respond to requests for comment on this story.

In an interview with industry publication Flightglobal in April, Kirana described the move as a “backup plan” for Indonesia’s largest airline by passenger numbers.

Lion hopes a strong leasing business will offer flexibility to cope with any regional oversupply of aircraft at a time when Southeast Asian rivals such as Malaysia’s AirAsia Bhd  are deferring orders due to deteriorating markets.