By Neha Dimri and Tim Hepher
Dec 12 U.S. insurer American International Group
is in talks to sell its aircraft leasing business to
AerCap Holdings NV, a person briefed on the discussions
AIG, which was nearly wiped out by derivative bets in the
financial crash, has been seeking for some time to sell
International Lease Finance Corp (ILFC) to help repay the costs
of a 2008 U.S. government bailout.
Netherlands-based AerCap is also in touch with private
equity firms and others who may be interested in taking part of
the assets of ILFC, which is the world's second largest aircraft
lessor by fleet size, the person said.
"AerCap gets new aircraft and private equity for example can
manage some of the older aircraft, but this is quite surprising
as it is still an enormous portfolio," said the person, an
industry source who asked not to be identified.
AerCap, whose shares rose 11.6 percent in New York on
Thursday on reports of the talks, declined to comment.
"As a company policy, we do not comment on market rumours,"
a spokeswoman said in an email.
ILFC and AIG also declined to comment. AIG shares rose 1.5
percent on Thursday against a weaker market.
Philip Tozer-Pennington, managing editor of Airline
Economics magazine which first reported the negotiations, said
the move was the latest sign of consolidation in the leasing
industry, which has seen several deals involving Asian buyers.
"Consolidation is already fast paced in aircraft leasing and
the market has a great deal of room for growth left in it yet as
those that remain in the market are struggling to cope with the
high levels of business."
Japan's Sumitomo Mitsui Financial Group and
Sumitomo Corp last year bought the aircraft leasing
business of Royal Bank of Scotland in a deal worth $7.3 billion
as European banks began offloading non-core assets.
In December 2012, AIG said it had reached agreement to sell
a stake of up to 90 percent of California-based ILFC to a
consortium of investors based mainly in China for $4.7 billion,
but it has struggled to complete the deal.
While in talks with AerCap, AIG has not formally ended its
agreement with the Chinese group, Bloomberg News reported.
AIG has said it continues to regard the leasing unit as a
non-core business and is pursuing other options, including an
alternative sale or an initial public offering.
Chief Executive Officer Robert Benmosche said in November
that AIG hoped to decide on a sale or an initial public offering
of ILFC in the fourth quarter.
A combination of ILFC and AerCap would remain second by
fleet size to General Electric's aircraft leasing
division GECAS, which has a fleet of 1,700 passenger jets.
AerCap has a fleet of 373 aircraft, according to its website.
ILFC and GECAS are among the largest buyers of jets from
Europe's Airbus and U.S. planemaker Boeing.
Tozer-Pennington said a deal could benefit Boeing as ILFC is
seen as overweight in planes from EADS subsidiary Airbus.
AerCap agreed in 2011 to sell its AeroTurbine airplane and
engine-dismantling business to ILFC for $228 million.