SMBC Aviation Capital to open subsidiary in Hong Kong

Irish aircraft lessor SMBC Aviation Capital is opening a subsidiary in Hong Kong in a move to bring it closer to Asian customers.

Dublin-headquartered SMBC, one of its industry’s leading players, has had a presence in Hong Kong through an affiliate for several years.

However, chief executive Peter Barrett said on Wednesday the group would open a subsidiary in Hong Kong next month as the island is a key centre for aviation-related business.

"Asia is a big market for us so we felt it was appropriate time to have a direct subsidiary in Hong Kong," he explained.

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Mr Barrett added that the subsidiary would allow SMBC to maintain close relationships with its customers and investors from the region. “It’s to try and give our customers the best service possible,” he said.

About 40 per cent of its assets are based with airlines in the Asia Pacific region. SMBC has placed 105 craft from its fleet with carriers there and has orders for a further 46.

In May, the Irish company agreed to provide Chinese carrier Ruili with two Boeing 737 Max 8 aircraft. China is the world's second-biggest air travel market.

Raising cash

SMBC employs 10 people in Hong Kong at the moment. Mr Barrett predicted that this would grow at one or two a year until it reaches the mid-teens or twenties.

Hong Kong is competing with the Republic to attract aircraft lessors to set up shop there.

However, Mr Barrett said that Dublin would remain as SMBC’s headquarters with responsibility for key activities such as raising cash, as its aircraft are registered in the Republic. “Borrowing will all be done through our Irish operation,” he stressed.

In a statement, Mr Barrett said that SMBC was fully committed to Dublin as the industry here benefits from the Republic’s tax treaty network and Government support.

SMBC combines its own cash with bank borrowings to buy aircraft from manufacturers Airbus and Boeing that it leases to airlines around the world.

The company has about 100 customers in 40 countries and owns, manages or has committed to buying 670 craft. Along with Asia, it leases craft to carriers in Europe and the Americas.

Oil costs

It earned $1 billion (€880 million) in revenues during its last financial year, which ended on March 31st and generated profits of $319.4 million (€282 million).

Mr Barrett said that the business was continuing to perform well despite “a few more clouds on the horizon” for aviation.

“Higher interest rates, higher oil prices and exchange rates are creating headwinds for airlines, but it’s not like we didn’t see them coming,” he said.

Mr Barrett suggested that some of these factors, such as higher oil costs, could work in SMBC’s favour as the lessor has a large number of modern fuel-efficient craft on its books.

These include the A320 neos which now make up about one fifth of the company’s fleet.

In 2012 a partnership of two of Japan's biggest companies, Sumitomo Mitsui Banking Corporation (SMBC) and Sumitomo Corporation, bought the Irish business.