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AerCap’s acquisition of GE’s leasing body is cause for concern: IATA

written by Hannah Dowling | March 18, 2021

GECAS Boeing 737-800BCF (Airlinerwatch)

Irish aircraft lessor AerCap’s acquisition of rival GECAS could reduce competition in the market and make aircraft leasing more expensive, the IATA has warned.

Alexandre de Juniac, director general of the International Air Transport Association, has shared his concerns over the recently announced US$30 billion acquisition of engine maker General Electric’s aircraft leasing unit GECAS to Irish counterpart AerCap.

The deal will see the world’s two biggest aircraft leasing bodies combine to create a new financing giant that will control over 2,000 plane leases worldwide, which de Junaic sees as a worry for airlines.

“We understand that the situation of the leasing companies is difficult,” de Juniac said in an interview with Reuters.

“But combining the two to have a big player [in] a very dominant situation is not good news for us.”

He added: “It’s never good news to have a supply chain dominated by a single player. We hope that it will not mean any increase in leases, which are a very big cost for [airlines].”

AerCap chief executive Aengus Kelly previously dismissed comments about market concentration, and stated there will still be “plenty of competition” in aircraft leasing due to the market’s overall size.

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Last week, World of Aviation reported that, after days of speculation, the US$30 billion deal had finally been confirmed.

GECAS is the biggest remaining piece of GE Capital, a lending operation that rivalled the biggest US banks but nearly sank the company during the 2008 financial crisis.

The sale of GECAS to AerCap serves as the latest move in a string of decisions by the industrial conglomerate to restructure its once-sprawling operations.

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The deal is expected to take nine to 12 months to close and will see GE take a 46 per cent stake in the newly combined company, and generate around US$24 billion in cash.

GE chief executive Larry Culp said the move will help GE become better capitalised, in line with peers.

″This is the right time to further accelerate our transformation,” Culp said.

“This action will enable us to significantly de-risk GE and continue on our path to being a well-capitalised company.”

Meanwhile, AerCap’s Kelly stated the Irish company had snagged the deal at an “attractive” discount.

Analysts expect the newly merged lessor could now have a lot of sway in the market due to their significant size in relation to competitors.

“They will have a lot of negotiating power,” said Eric Bernardini, co-head of the aerospace, defense and aviation practice at consulting firm AlixPartners.

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