General Electric Capital Aviation Services Grows Steadily
2018-12-05 11:13 Wednesday
In order to lessen the financial burden associated with buying new models, provide extra capacity for a limited time, or temporarily replace unavailable aircraft, many aviation companies have opted to lease aircraft rather than purchase them. In 1990, leased aircraft accounted for 15% of airline fleets; that figure surged to over 40% in 2018.
GECAS (General Electric Capital Aviation Services), the aircraft leasing arm of GE Capital, rose to global prominence between 1993 and 1996 when it acquired many of the assets of leasing pioneer Guinness Peat Aviation.
After GE Capital sold off its banking unit, GECAS was cut off from a key source of capital with extremely favorable conditions, leading to a shrinking of its portfolio from $34.1 billion in 2012 to an estimated $23.6 billion. Conditions in 2018 are expected to improve, and GE estimates that GECAS will earn $1.2 billion in 2018.
As of 2018, GECAS has a fleet of nearly 2,000 airplanes in operation or on order, which it leases to 270 customers across 75 countries. Its planes have helped fuel the growth of the low-cost carrier industry, and airlines like JetBlue, Southwest, and AirAsia.
GECAS has expanded to include a variety of aircraft, including regional jets, turboprops, freighters and helicopters. In 2014, the business acquired Milestone Aviation Group, the world's leading helicopter leasing and financing company, which currently accounts for approximately 12% of the GECAS portfolio. Milestone supports a variety of industries, including offshore oil and gas, search and rescue, emergency medical services, police surveillance, and mining, as well as others. With fleet utilization currently at 90%, GECAS expects the subsidiary to earn $50 million in 2018 and remain profitable in 2019, in spite of the volatility in offshore oil and gas prices.
In the meantime, the passenger jet segment — GECAS's main business — keeps climbing. "Aircraft leasing continues to grow in absolute size while maintaining a 40 percent global market share. We expect lessors to sustain their growth throughout 2018 while taking advantage of record demand and strong liquidity", Boeing stated in its Aircraft Finance Market Outlook 2018.