Aircraft lessor Avolon falls on market debut

Avolon Holdings, the Dublin-headquartered aircraft lessor backed by CVC Capital Partners, Cinven and Oak Hill Capital Partners, declined on its trading debut yesterday after raising $273 million (€218.8m) in a US initial public offering — the largest capital raising by an Irish company in the last seven years.

Avolon shares fell 4.5% to $19.10 after the IPO was priced at $20 apiece, below the marketed range.

Avolon’s owners are the latest to cash in as lessors consolidate and investors flock to the sector, particularly in the Asia-Pacific market, expected to replace North America as the largest for air travel.

Avolon chief executive, Domhnal Slattery said in an interview that Avolon’s $6.4 billion in aircraft orders and sale-leaseback agreements constitutes “locked-in growth,” while listed status will leave it better placed to pursue plane purchases and acquisition opportunities.

“To the extent that opportunities arise, whether portfolios or planes, or M&A, I think we would be alive to those opportunities,” he said.

Founded by Clare native Slattery in 2010 with $1.4bn in capital, Avolon now has 227 planes delivered or on order and clients including the former US Airways, now part of American Airlines, and Taiwan’s China Airlines.

The company is the latest Irish success story in the aviation field with the country now established as a leading hub for aircraft leasing.

Last year was a bumper year for Avolon with year-on-year profit growth of more than €11m revealed in its latest set of accounts, filed in October. Total revenue increased by more than €107m to €433.3m, thanks largely to growth in leasing revenues which rose €32m in the first nine months of the year.

Avolon’s fleet is the youngest of any large lessor at 2.5 years on average. Contracts include Airbus A320neo series, Airbus’s A330neo and Boeing Co’s 737 Max — all three being upgrades of existing plane models with new engines.

In July, Avolon announced a commitment to buy 15 of the new Airbus A330neo aircraft valued at $4.1bn at current list prices, with the company becoming the launch customer for the new aircraft scheduled for delivery from 2018 onwards.

While oil prices have plunged lately, Avolon president John Higgins said younger planes still offer an advantage, with reliability “a big part of the equation”.

The IPO comes after Avolon rebuffed an acquisition offer from a unit of Chinese planemaker Aviation Industry Corporation of China. AVIC Capital Co. said on December 1 that it had made an all-cash bid for a majority stake in Avolon.

American International Group sold International Lease Finance Corporation to AerCap Holdings for $7.6bn on May 15. China Aircraft Leasing Group Holdings earlier this year became the first Asian player to publicly list its shares.

Slattery previously set up the RBS aircraft leasing division. He left three years before it was sold to Sumitomo Mitsui Financial Group to form Avolon. Last year, six Avolon executives, including Mr Slattery, took home a combined €5.17m in remuneration.

The shares are listed on the New York Exchange under the symbol AVOL. JPMorgan Chase & Co., Morgan Stanley and Citigroup managed the offering.

* Bloomberg with additional reporting from Irish Examiner reporters