Domhnal Slattery and Robert Martin are two of the most closely watched leasing company chief executive officers (CEO) in Asia right now, the former being based in Hong Kong and the latter in Singapore.

Both have steered their companies through major events over the past year.

For Martin’s BOC Aviation, he guided the lessor’s listing on the Hong Kong stock exchange, while Slattery oversaw Avolon’s acquisition by Bohai Leasing, a subsidiary of Chinese conglomerate HNA Group.

In addition, Slattery’s Avolon has recently agreed to acquire CIT Aerospace’s leasing platform. As of 30 June, Avolon is paying $10 billion for the platform and plans to close the deal in the first quarter of next year, though Slattery says the actual price it will be paying once that time comes is close to $11.5-12 billion.

“We will fund that with $8.5 billion of acquisition debt put in place by Morgan Stanley and UBS,” he told an industry audience at the 17^th Annual Asia Pacific Air Finance Conference on 2 November.

Slattery adds that on 31 October Avolon closed a 35% syndication of the $8.5 billion, saying that it was “significantly oversubscribed”.

“The balance of the funding will be provided by equity, cash and new “fresh equity” from Avolon’s shareholder Bohai,” he says.

BOC Aviation has spent most of this year “very focused” on placing the backlog of aircraft, Martin says, adding that lease rates are “holding up to expectations” and that the lessor is getting the long-term leases that it wants.

“We are…one of those players that wants to hold out for longer leases...and that's how you create value,” he says.

Martin adds that BOC Aviation has no speculative orders for widebodies.

“We are not in that market – we only do that in back-to-back deals, purchase and leasebacks,” he says.

Slattery says that, unlike BOC Aviation, Avolon does have a commitment for widebody aircraft.

“That market is soft – has been soft for the last 12 months. It’s been driven by oversupply of equipment,” he says. 

Slattery, like Martin, is keen on long-term leases over shorter ones.

“I'm certainly not going to lease new aircraft for six year leases. That’s just a fool’s game and we will not go there,” he says. 

Going public

Slattery says that Avolon’s experience of going public has been different to that of US-based lessor Air Lease (ALC), which went public in 2011.

“Our performance for our public shareholders was – by any metric – acceptable, giving a 55% return in a year. ALC’s stock is now…around $30; they went out at $26.50. That’s a pretty anemic return for any CEO or chairman – for a business that's churning out an 18% ROE on long-term leases and is investment grade having just got upgraded. If I was sitting on the board of ALC...forget about what Steve Hazy says…I would be feeling pretty browned off.”

Getting to number one

Slattery asserts that Avolon’s aspiration is to become the number one lessor in the world.

“Yes, that is our strategic intent,” he says, but cautions that his company would pursue that in “a very prudent and conservative way”.

He adds that this would not be able to come about through organic growth alone.

“If the strategic intent is to get to number one and you’re number three, you will not get there through organic activity. Everyone is growing...even just to stand still, you need to be knocking out two to three billion dollars of volume every year,” he says.

Awas sale

But not all lessors are growing through acquisitions; some are divesting, including Terra Firma-owned Awas, which is up for sale again, having already sold a 90-aircraft portfolio to Macquarie AirFinance in 2015.

Asked for a “yes” or “no” answer on whether Terra Firma will sell off Awas this time around, Slattery was more confident that this would happen than Martin, saying “he thinks” the answer is “yes”.

“I think they will get a fair price and I think they will move on. If they don’t sell it, I wouldn’t like to be a limited partner investor in Guy Hands’ funds – I would be pretty upset,” Slattery adds.  

Martin, however, believes that any sale “depends on the price” that Terra Firma’s founder and chairman is looking for.

“The one thing you can never control is your shareholder, so it depends on the price that Guy Hands, the founder and chairman of Terra Firma, has in his head. If he hits that price then he will sell. I think there is more likelihood this time than previously,” he says.  

Perils of listing

Being listed means that both Avolon and BOC Aviation must be more cautious about how they present themselves in public and what they disclose.

“With being listed on the stock exchange, you have to be very careful about what you present externally…the actual filings we do with the exchange have to be accurate and translated into Chinese,” Martin says.

Slattery adds that Avolon spent a year prepping for its New York stock exchange listing.

“Since our Bohai acquisition in January, we remain a public company…everything we do and say is within the realm of a public entity,” he says, adding that one learns a lot as a CEO by having to prepare a public offering.

Resisting novations

Chinese leasing companies are taking on a record numbers of aircraft and rapidly growing their portfolios. However, Slattery believes that this comes at a cost, saying he is seeing Chinese competitors who have ordered a lot of aircraft directly from the manufacturers “a little stressed”.

“Not financially stressed, but the actual reality of managing deliveries and re-deliveries. We are concerned about that because that creates risk,” he says.

He adds that Avolon is seeing some airlines around the world resisting Chinese lessor novations because of the latters’ lack of experience.