Adia buys into USD 1.4 bn of Avolon jets as Gulf capital moves deeper into aircraft leasing

Abu Dhabi’s sovereign wealth is buying into the jets airlines lease: The Abu Dhabi Investment Authority (Adia) is joining Irish lessor Avolon and infrastructure investor I Squared Capital to set up Constellation Aviation, a leasing platform that will start with 22 Avolon jets worth USD 1.4 bn at current market value, Avolon said in a statement. The aircraft average about five years old and are on lease to 17 airlines in 15 countries.

Adia is coming in as an infrastructure investor: It is investing through a wholly owned subsidiary, and the platform is built to give investors long-term contracted lease income. Aircraft leasing is a resilient, growing sector on the back of demand for modern jets, Khadem AlRemeithi, executive director of Adia’s infrastructure department, said in the statement.

Avolon keeps the keys

Avolon will still run the fleet, which could grow well past USD 1.4 bn. It keeps a minority equity stake and becomes Constellation’s exclusive aircraft manager and servicer. The partners plan to grow the platform to as much as USD 6 bn, a source familiar with the agreement told Reuters. The venture will also carry bank debt, with BNP Paribas, Crédit Agricole CIB, Société Générale, ING, MUFG, and Mizuho as joint lead bookrunners on a syndicated facility.

Backlog premium

Airbus and Boeing can’t build planes fast enough: Their combined order backlogs stretch beyond 11 years, pushing lease rates higher as airlines struggle to add capacity. High fuel costs make younger, more efficient aircraft more attractive, while factory and engine bottlenecks slow fleet renewal.

That makes a lessor’s place in the delivery queue worth paying for. Avolon holds one of the largest order books with Boeing and Airbus, I Squared co-founder and global CIO Gautam Bhandari said in the statement, and partnering with it gives Constellation a ready-made fleet and a team that can source more.

IN CONTEXT- Constellation is the latest in a string of Gulf-backed leasing platforms. Dubai Aerospace Enterprise (DAE) launched with Neuberger Speciality Finance in July, targeting around USD 6 bn in aircraft investments, three months after setting up Equator with Blackstone to deploy roughly USD 1.6 bn a year. Qatar’s Lesha Bank agreed in September to acquire 33 leased aircraft from Avolon, a portfolio valued at c. USD 1.6 bn.