GE Capital Aviation Services (GECAS) has moved to expand its position as a leading aircraft lessor and financier in China.

GECAS, the commercial aircraft leasing and financing division of GE, has agreed to deliver 20 new leased aircraft to airline customers in China throughout 2011.

The announcement has coincided with GECAS executive vice president and head of operations in China, Li Liu, speaking on the topic “Facilitating the Transformation of Civil Aviation” at the 2011 China Civil Aviation Forum.

Liu told Asset Finance International: “According to CAAC (Civil Aviation Administration of China), the average growth between 2006 and 2010 was 13% and 15% for capacity and traffic respectively. Capacity grew slower than traffic, therefore it enabled the Chinese airlines to enhance their load factor."

“CAAC’s forecast for the next five years (2011-15) is 13% traffic growth. On that basis, they plan for 11% capacity growth for the airlines (2% below traffic growth), again to encourage the airlines to further enhance load factor and enhance yield.”

“The current fleet is about 1,600 aircraft. By the end of 2015, CAAC projects the total fleet in China will be 2,700 aircraft, net increase of 220 aircraft per year.”

GECAS is scheduled to deliver 11 new Boeing 737s, two new Boeing 777Fs, and seven new Airbus A320s to airline customers, increasing its leased portfolio in China 10%. Already this year, GECAS has delivered aircraft to China Eastern Airlines, Shandong Airlines, Spring Airlines and Xiamen Airlines.

“We believe demand will outstrip the new order supply over the next several years and our experience and variety of aircraft types in our portfolio – from regional jets to cargo aircraft – positions us well in the years ahead,” said Liu.

“In addition to being a leading aircraft lessor and financier, we have become a true partner to China’s aviation industry as the first lessor of the new C919 aircraft.”

In November 2010, GECAS signed a letter of intent to purchase up to 10 of the C919 aircraft (see AFI November 24, 2010).

John Rice, GE vice chairman and head of international operations, commented at the time: “China is the fastest-growing aviation market in the world. These latest investments and agreements ensure GE’s long-term participation in China’s air transportation boom.”

Liu also noted the challenges that this growth would mean for GECAS, and how its relationships would aid the company: “Leasing in China is growing more competitive with the country building its own base of lessors. Partnerships like those we’ve developed over the years have therefore become even more important.”

“Because of the growth potential, China has become a very attractive market. Aircraft leasing industry has always had a lot of players. In the last two years, many new entrants emerged, some are backed by private equity firms but some are backed by the large Chinese banks. GECAS will have to continue to position itself for the long-term play."

GECAS was the first aircraft lessor in China, arriving in 1988. Since then, it has delivered more than 300 aircraft to Chinese carriers. It currently leases 204 aircraft to 21 airline customers from offices in Beijing, Hong Kong and Shanghai.

Liu attributes the success that GECAS has had in the Chinese aircraft leasing industry to the committed and versatile make-up of the company: “GECAS has a fantastic team. Our team members are located everywhere in the world but they work seamlessly together in 24 hours a day, always trying to find the best solution for our customers. The are all very experienced industry experts.”

“One thing that differentiates GECAS from others is that most of our front line staff (marketing & sales, technical, risk, legal) are local; they are physically close to our customers so they really understand customers’ needs, and they always respond to customers’ requests in a timely manner. And it enables us to be able to provide the best solution for a complex deal.”

And what lessons could other Western companies learn from GECAS’ success at growing its business in China?

“Commitment. China is the second largest economy in the world; it has the second largest aviation market. Long-term strategy is key. Therefore, you have to demonstrate your commitment to a long term relationship in order to gain the Chinese customers’ trust and respect.”