Japan's SMBC Aviation Capital to buy 60 Airbus planes for $3.4bn

Aircraft lessor SMBC Aviation Capital has signed a contract to purchase 60 medium-haul passenger jets, Nikkei has learned, as the company bets on air travel's continued post-pandemic recovery. The company is purchasing Airbus' A320neo, whose high fuel efficiency has made it an attractive model for airlines. The purchase, thought to be worth more than 500b yen (around $3.4b) based on the A320neo's market price, will be financed through bank loans and bond issues. SMBC Aviation Capital, which counts Sumitomo Mitsui Finance and Leasing and Sumitomo Mitsui Banking Corp. among its shareholders, is the world's second-largest aircraft leasing company. It contributed almost 20b yen to Sumitomo Mitsui Financial Group's profits during the April to September period of this year. Airlines are increasingly moving towards leasing aircraft rather than owning them, with around 47% of passenger aircraft currently owned by leasing companies. Although the recent rise in interest rates will push up the cost of funds needed for SMBC Aviation Capital's purchase, the burden for the company is expected to be limited as payments for the order will be made in installments. The company also aims to gain an advantage in price negotiations given the large size of the order. Single-aisle narrow-body jets like the A320neo are popular on domestic routes and account for just under 70% of the passenger jets in use around the world. The average market lease fee for SMBC Aviation Capital's A320neos is estimated to be around $280,000 to $380,000 per month. The high number of airlines using the A320neo will make it easier to secure buyers when the company ultimately decides to sell, making the model a highly liquid asset. SMBC Aviation Capital also ordered 25 medium-haul Boeing jets in September, an order worth approximately 200b yen based on market price. With the new purchase, the company's fleet will grow to around 1,000 aircraft. Although the number falls short of industry leader AerCap's more than 2,000 aircraft, SMBC Aviation Capital is boosting its status as a specialist in medium-haul aircraft. This latest purchase is its first move to significantly expand its fleet since the pandemic.<br/>