AS China’s aviation market booms, local aircraft leasing companies are raising funds in finance hubs like Hong Kong and Singapore in a bet they can win market share from the international players that dominate the industry.

    With the country’s growing middle class fueling a surge in travel, Boeing Co. estimates Chinese airlines will need nearly 6,000 new jets over the next 20 years, valued at US$780 billion. Many of those aircraft will be leased rather than bought as carriers seek to cap long-term commitments: China’s 800-plane leasing market is set to grow 50 percent by 2018, according to consultancy Ascend.

    Friday’s market debut in Hong Kong of Asia’s first listed plane lessor, China Aircraft Leasing Group Holdings Ltd. (CALG), is the clearest example so far of local players chasing expansion. CALG said the nearly US$100 million it raised in its initial public offering (IPO) will be mostly spent on acquiring aircraft to try to expand its 3 percent share of the market.

    More IPOs are possible, but a more common tack for the leasing arms of big Chinese banks, such as Industrial and Commercial Bank of China (ICBC), Bank of Communications and Bank of China, is to set up subsidiaries in the aircraft financing hubs of Singapore and Dublin to raise funds.

    “A lot of the local companies are arms of the big Chinese banks and they are taking advantage of the connections. The relationships the parents have helped them get business,” said Ilya Ivashkov, a New York-based senior director at Fitch Ratings.

    Chinese lessors are expected to corner 55 percent of the local market by 2018, up from 38 percent last year, CALG said in its IPO prospectus, quoting consultancy Ascend.

    To do that, though, they’ll face stiff competition in the world’s fastest-growing aviation market from the biggest global aircraft lessors, International Lease Finance Corp., now part of AerCap, and GECAS, a unit of General Electric.

    “Major foreign leasing companies have been speeding up their expansion in China. As such, the competition will become more and more fierce down the road,” said Mark Jiang, managing director of aviation finance at ICBC Financial Leasing. (SD-Agencies)