General Electric Co is exploring options for its aircraft leasing operations, including the sale of all or part of the business, as Chief Executive John Flannery searches for new divestitures, according to people familiar with the matter.
GE is considering options for GE Capital Aviation Services (GECAS), the world’s second-largest lessor, following expressions of interest from some of its competitors, the sources said on Monday.
A spin-off of the business is also a possibility, the sources said, cautioning that GE may decide to keep the business. The sources asked not to be identified because the deliberations are confidential. GE declined to comment.
GECAS has a fleet of 1,339 planes worth an estimated US$25 billion, ranking behind only U.S.-listed AerCap Holdings NV, which is estimated to have a portfolio of US$30 billion, according to data from consultancy FlightGlobal.
Some 40 percent of the airline industry’s aircraft are leased to avoid the fixed costs of owning planes. GECAS’ clients include Boeing Co and Airbus SE. Consolidation in the sector has intensified in the last few years, as Asian competitors chip away at the market shares of AerCap and GECAS.
Avolon Holdings, the aircraft leasing company owned by China’s shipping-and-airline giant HNA Group Co Ltd, has catapulted to become the world’s third biggest lessor after acquiring U.S. rival CIT Group Inc’s plane leasing business earlier this year.
In June, GECAS struck a partnership with Caisse de dépôt et placement du Québec, Canada’s second largest pension fund, to create a new company focused on leasing high-tech, fuel-efficient narrow-body aircraft.
Flannery has been looking for divestitures to meet his goal of identifying more than US$20 billion worth of assets for GE. The company has also been exploring divesting its transportation and healthcare information technology businesses, sources said last month.
GE is looking to bounce back after what Flannery last month called horrible results in the third quarter. He has argued that GE’s strong businesses are being held back by others that “drain investment and management resources without the prospect for a substantial reward.”
Flannery is due to update GE shareholders on the company’s strategy at an event on November 13.
(Reporting by Anshuman Daga in Singapore and Greg Roumeliotis in New York; Additional reporting by Alwyn Scott in New York; Editing by Steve Orlofsky and Tom Brown)
Photo courtesy of Airbus SAS