SMBC-led group acquires Air Lease Corp., reshaping global aircraft leasing sector

Air Lease Corporation has around 450 outstanding orders, making its backlog among the largest in the sector. This gives the new company considerable market influence. With headquarters remaining in Dublin—a central location for aircraft leasing—the deal may also narrow bid-ask spreads in sale-leaseback transactions, which are becoming more common according to the Financial Times.

The consortium behind this acquisition includes SMBC, Citigroup, Goldman Sachs, Apollo Global Management, and Brookfield. Both Apollo and Brookfield are investing about $1 billion each for stakes near 18.8%. Additionally, SMBC and its banking partners have arranged around $12 billion in committed financing. This diversified financial structure aims to lower the company's weighted average cost of capital.

By combining aerospace knowledge with financial resources, the new entity is positioned to make use of its large forward order book to maintain delivery schedules and facilitate lease transactions for airline customers. This should improve liquidity options for airlines seeking flexible solutions amid limited production slots from manufacturers like Airbus and Boeing—an issue expected to persist into the early 2030s.

The creation of such a large lessor makes it an influential player in determining which airlines can expand their fleets through leases.

Investors such as Apollo Global Management and Brookfield typically participate only when they foresee sustained industry growth potential. Current macroeconomic conditions—including high interest rates—are supporting expansion within aircraft leasing because airlines are reluctant to take on significant debt for purchases under these circumstances; instead, they prefer short- or medium-term leases as alternatives.

Additionally, general market uncertainty prompts airlines to favor leasing over buying until demand stabilizes—another factor contributing to continued growth in this segment.

"High interest rates, as we have previously discussed on Simple Flying, are one of the key factors driving growth in the aircraft leasing industry. Carriers have been hesitant to take on large amounts of leverage to finance aircraft acquisitions in high-rate environments, making short and medium-term leases an appealing alternative."

"Furthermore, general market uncertainty is another factor driving growth in the leasing sector. When airlines are not entirely certain about the nature of upcoming demand fluctuations, they will look towards medium-term leases as a stopgap solution while they wait for market conditions to normalize."