Coronavirus: Dubai Aerospace looks to capitalize on more aircraft lease-back deals

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Dubai Aerospace Enterprise (DAE), one of the world’s biggest aircraft leasing companies, expects air traffic to start rebounding by the middle of next year and is looking for more deals with airlines to buy and lease back their jets.

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Chief Executive Firoz Tarapore told Reuters on Thursday that air traffic would rebound faster than expected, possibly as soon as early 2021 in a best case scenario, though the middle of next year is more likely.

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DAE, which is owned by sovereign wealth fund Investment Corporation of Dubai, said on Wednesday that it had secured 31 sale and lease back agreements this year that will expand its portfolio by a net $1.1 billion.

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But group profit fell to $167.3 million for the nine months to September 30 from $260.5 million a year earlier as airlines delayed rent payments due to the pandemic.

“We entered this pandemic period with a very strong liquidity position,” Tarapore told Reuters in an interview on Thursday.

Opportunities for more purchase and leasing deals had improved with fewer leasing companies able to effectively deploy liquidity and capital, while airlines had “immediate and urgent” requirements, he said.

DAE had a total fleet of 381 planes worth $12.5 billion as of September 30.

Tarapore said DAE expected to sign sale and lease back deals next year representing just over $1 billion in net fleet growth.

DAE has shunned buying jets from major planemakers Airbus and Boeing over pricing disagreements.

Instead, it has looked at acquiring aircraft through a takeover of a rival lessor.

But Tarapore said at present that was unlikely to happen as sellers were not pricing in the uncertainty of the coronavirus crisis in their valuations.

DAE has targeted increasing its fleet to 800 jets by 2026-28, which Tarapore said was an “aggressive” objective but the company still planned to get to “that sort of number.”

The firm has delayed rent payments worth $155 million this year, of which $20 million has been paid, and has extended leases as an amendment on $84 million of owed rent as airlines face financial strain due to the pandemic.

Tarapore said DAE believed the grounded Boeing 737 MAX would soon return to service and the plane accounted for some of DAE’s purchase and lease back deals this year. He declined to identify the customers.

DAE may raise debt next year depending on market conditions, he said.

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