Irish-based SMBC bounces back from Covid with Boeing Max jets tailored for low-cost carriers 

Leasing giant expects to be a major beneficiary of the recovery, with a renewed focus on planes configured for low-cost travel

Ireland-based SMBC Aviation — the world's fifth or sixth largest aircraft leasing firm as measured by fleet size — said it is preparing for recovery by bolstering its huge balance sheet and by buying more Boeing 737 Max planes for low-cost carriers as it attempts to put the Covid year behind it. 

The huge losses chalked up by airlines and airports since the onset of the Covid crisis showed the industry was among the worst hit in the past year. 

A large number of the aircraft leasing firms which are owned by huge US, Chinese, and Japanese funds and banks are based in Ireland for taxation purposes.  

'Resilient performance'

SMBC Aviation runs its global fleet from its main office in Dublin and other locations. It signalled it is planning for recovery from the Covid storm by adding shareholder funds for $11.8bn (€9.7bn),  including $8.7bn in debt, and posted a small profit of $15.2m "despite the worst year the industry has ever experienced".

Its customers include Ryanair, Aer Lingus, EasyJet, Wizz, Southwest, Delta, and United.

“Despite the challenges and ongoing uncertainty from Covid-19, SMBC Aviation Capital’s balance sheet strength, focused high-quality asset portfolio and rapid realignment of capex to close $3bn of transactions with leading airline credits, has anchored highly resilient performance over the year, strongly positioning us to be a leading beneficiary of the recovery now taking place," said chief executive Peter Barrett. 

It will take delivery starting later this year and into 2022 of 14 Boeing 737 Max jets — with the planes configured in seating layout used for low-cost travel, Mr Barrett said.

Customers have resumed paying 

"We believe that 2021 will be an inflection point for the industry and that our focus on the newest technology, lower carbon-emitting, narrow body aircraft types places us on the right side of customer demand for the short-haul and low-cost carrier led recovery that is under way," he said.  

Domestic markets in the US, Mexico, and increasingly Europe, are driving the recovery from the Covid-19 pandemic even as long-haul travel lags, Mr Barrett said. 

Most of SMBC’s customers that had asked for deferrals have begun paying again, and the lessor is seeing increased bids on single-aisle jets, he said.

“Different markets will obviously recover at different paces,” Mr Barrett said. 

Boeing 737 Max back in favour

Leasing firms, including AerCap, Avolon, and SMBC cancelled or delayed Max deliveries last year, but there are now signs the model is coming back into favour with the jet financers, which have played a key role in the market for new aircraft since the pandemic.

SMBC, the Dublin-based leasing unit of Japan’s Sumitomo Mitsui group, will now have a portfolio of 121 Max jets, according to a statement from Chicago-based Boeing. 

• Additional reporting Bloomberg