U.S. private investment firm Castlelake LP has struck a deal to buy a portfolio of about 30 narrowbody planes from AirAsia Group Bhd for a total price of roughly $800 million, people familiar with the transaction said.
The deal underscores the strong appetite of funds to invest in the global aircraft leasing sector, which is benefiting from growing demand on the back of a rise in low-cost carriers and passenger traffic.
For AirAsia, the deal marks another move to monetize its assets as Asia’s biggest budget airline seeks to transform itself into an asset-light, digitally focused firm. The carrier is cashing in on a booming leasing sector after ordering hundreds of Airbus SE planes at bargain prices in recent years to become one of Airbus’ biggest customers.
Castlelake, a global fund focused on alternative investments, has been stepping up its exposure to aviation assets. In June last year, it raised $1 billion from investors including family offices, sovereign wealth funds, endowments and pension funds.
“Castlelake is growing at a fast pace and looking to buy aviation assets,” said one of the people. “This is one of their biggest deals in Asia with one airline.”
Castlelake clinched the deal from Malaysia’s AirAsia after edging out U.S. lessors, funds and leasing units of major Chinese banks in a tightly contested deal, said the people, who did not wish to be identified as they were not authorized to speak publicly about the transaction.
Castlelake and AirAsia are expected to close the deal in the next few weeks, the people said.
Castlelake and AirAsia declined comment.
Earlier this year, AirAsia agreed to sell part of its aircraft leasing portfolio in a staggered deal for $1.2 billion to firms managed by BBAM Ltd, one of the world’s largest aircraft portfolio managers.
Castlelake is buying older aircraft which are under lease to AirAsia’s affiliated airlines, the people said. AirAsia’s leasing subsidiary, Asia Aviation Capital, manages AirAsia’s planes.
“This is an upcoming sector for asset managers. They see an opportunity to buy older aircraft and sell them once the lease expires,” said another person familiar with the transaction.
Castlelake was ranked as the 32nd biggest lessor with the value of its total fleet estimated at $2.1 billion in consultancy FlightGlobal’s ranking of top global lessors as of September 2018.
Chinese bank-owned leasing units and the likes of U.S. listed AerCap Holdings NV <AER.N> and General Electric Co’s GE Capital Aviation Services dominate the leasing industry, but the share of asset managers and funds is gradually rising.