Bombardier Inc., which has signed two customers for its CSeries jetliner, expects leasing companies to account for half its clients as weak balance sheets keep many airlines from buying planes.
Airlines worldwide are moving toward acquiring half of their new planes through operating lessors and that will be reflected in Bombardier’s own sales, said Gary Scott, commercial aviation chief at the Montreal-based company.
“One of the major issues airline customers face is how to finance their planes,” Scott told journalists today at a briefing in Dublin. Banks have curtailed their financing, pushing airlines toward other options, he said.
The CSeries plane, which will carry 100 to 145 passengers and compete with Boeing Co.’s 737s and Airbus’s A320s, both smaller models, is scheduled for entry into service by late 2013. It has won orders only from Deutsche Lufthansa AG and Lease Corp. International Aviation, a closely held lessor based in Dublin.
Bombardier has a firm contract from Lufthansa for 30 planes and one from Lease Corp. International for 17.
Scott said Bombardier has put together a structured finance team to work with its sales and marketing group, introducing them to lessors and other companies that may help finance planes. Scott and his team were in Dublin today to address about 100 officials from banks, airlines and other organizations that may have an interest in the CSeries, he said.
Scott said lessors are the best avenue for airlines “because leasing companies have the balance sheet and credit ratings to support the aircraft,” more so than most airlines.
He said Bombardier may have difficulty winning orders from General Electric Co.’s GE Capital Aviation Services, or Gecas, the world’s biggest lessor as measured by aircraft.
While Gecas buys many different types of planes, the unit finance primarily the purchase of planes carrying GE’s own engines. The CSeries engine is built by GE rival Pratt & Whitney, a unit of United Technologies Corp.
International Lease Finance Corp., the world’s biggest lessor as measured by the value of its portfolio, and second to Gecas by number of planes, last June expressed an interest in buying CSeries planes.
ILFC isn’t currently in a position to make purchases, Scott said. The credit rating of the American International Group Inc. unit was slashed to junk by Moody’s Investors Service in December, saying the bailed-out insurer may cut off funding for the business next year.
AIG has drawn on funds it got in its $182 billion rescue to prop up Los Angeles-based ILFC, which is shut off from its usual credit sources after earlier downgrades.
Scott today said Bombardier is talking to most of the leasing community, though he named only one company — Hong Kong Aviation Co., the lessor backed by HNA Group Co. and Bravia Capital Partners Inc. In September Hong Kong International won approval from Australia’s Foreign Investment Review Board to buy Allco Finance Group Ltd.’s aviation assets.