The Saudi Public Investment Fund (PIF) has announced it is set to acquire the aircraft leasing division of Standard Chartered in a $3.6bn deal.

This move is part of Saudi Arabia’s larger strategy to diversify its economy and become a significant player in the global aviation investment scene, looking to enhance Riyadh Air’s competitive position against regional rivals Emirates, Etihad, and Qatar Airways.

The deal, executed by AviLease, a PIF-owned company, will result in a business with 167 aircraft leased to 46 airlines globally. 

Aviation industry recovery

As the aviation industry recovers, with an estimated 4.35 billion people expected to travel in 2023 – closing in on the 4.54bn who flew in 2019 – airline industry net profits are expected to reach $9.8bn in 2023, which is more than double the previous forecast – asset managers are expected to reap the rewards.

Historically, banks have dominated the arena of aviation financing, yet with the retraction of these traditional lenders’ support throughout the years of the pandemic, private equity firms and alternative investment platforms are seizing the opportunity to enter the fold, purchasing the new planes originally ordered by airlines.

This move indicates a big shift in aviation financing, a recent report published by Spherical Insights LLP expects the global aviation asset management market size to grow from $177.79bn in 2022 to $288.34bn by 2032.

Jared Ailstock, Managing Partner at AIP Capital, an aviation asset management and investment company, said: “There are a lot of really different and attractive ways to get yield in the environment we are living in right now. I think a lot of people have looked at different parts of that market and said ‘Well, the risk/return in X, Y, Z investment is way better than aviation’, and I think some of those participants wouldn’t have said that a couple of years ago.

“Where we have seen success are folks that have either been coming into the space for the very first time, because they view the entry point as being a lot more attractive today because there isn’t as much equity in the space, or guys who have been able to weather the storm and they view aviation as a core part of their strategy and they will continue to deploy equity throughout various cycles.”

Signals: Standard sells aviation finance leasing business to AviLease