Jet demand sees profits soar to €280m at SMBC Aviation


SMBC Aviation Capital’s Peter Barrett says demand is strong
SMBC Aviation Capital’s Peter Barrett says demand is strong

Dublin-based SMBC Aviation Capital, one of the biggest aircraft lessors in the world, saw its pre-tax profit edge 2.2pc higher to $319.3m (€280.8m) last year as the sector continued to benefit from strong demand from airlines for jets.

Revenue at the firm, owned by Japan’s Sumitomo Mitsui Financial Group and Sumitomo Corporation, fell 4.7pc to $1.03bn (€906m) in the 12 months to the end of March. That figure included $962.6m in lease revenue.

The company, headed by chief executive Peter Barrett, had $10.3bn (€9bn) in assets at the end of the financial year, alongside $7.2bn in borrowings.

The accounts for the business also show that total executive compensation at the company rose 7.6pc last year to $22.5m (€19.8m). That increase was primarily accounted for by a $1.1m increase in long-term benefits.

SMBC generated 29.2pc of its lease revenue in Europe, 8.1pc in Asia, 18.5pc in emerging Asian countries, and 21pc in South America. Another 11.9pc was derived from emerging European countries, 6.8pc from North America, and 4.5pc from the Middle East and Africa.

“Current demand fundamentals for aircraft leasing are strong,” declared Mr Barrett in the annual report.

“Driven by continuing growth in air travel, airlines are continuing to expand their networks and flight frequencies, stimulating demand for new and replacement aircraft.”

The lessor paid $67.5m (€59.3m) in staff costs during the financial year, when it had 173 employees.

In its 2015 financial year, SMBC placed orders for 110 Airbus A320neo jets and 5 A321ceo aircraft. It also has orders placed for 90 Boeing 737 Max8 jets. In 2017 and 2018 the lessor submitted orders for nine more aircraft.

It currently has 675 owned, managed and ordered aircraft.

The combined remaining purchase commitment for orders is $25.9bn (€22.8bn) and delivery dates are scheduled between 2018 and 2023.

“These commitments are based upon fixed-price agreements with the manufacturers, an element of which are adjusted for inflation and include price escalation formulas, but are also subject to agreed-price concessions where applicable,” it noted in the accounts.

“As a result, the effective purchase price of each aircraft will be lower than the combined purchase commitment disclosed above.”

All of the aircraft SMBC is due to receive by the end of March 2019 have already been placed with customers.

Irish Independent

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