The Strategist

General Electric sells air leasing division for $30B

03/11/2021 - 02:47

US corporation General Electric (GE) announced the sale of its aircraft leasing division GE Capital Aviation Service (Gecas) to its Irish competitor AerCap Holdings.
The transaction amounted to $30 billion, with AerCap paying $24 billion in cash and the rest in shares of the combined company. Thus, after the completion of the deal GE will continue to hold a 46% stake in the combined company. The deal is expected to be completed within 12 months.

It was reported earlier that the companies were close to the deal. Gecas, with a fleet of 1,600 aircraft, is one of the biggest players in the aircraft leasing market, along with AerCap itself and US-based Air Lease Corp. It leases aircraft ranging from Boeing and Airbus passengers to cargo aircraft and small regional jets to airlines, various start-ups, etc. AerCap had assets valued at $35.9 billion at the end of last year and owns 1,400 aircraft. After the merger, AerCap will become the largest player in this market.

Gecas is the largest of the divisions left from GE Capital, GE's financial business. GE Capital was the company's most profitable division until the 2008-2009 global financial crisis, when it began to make losses and threatened the company's very existence. In 2015, GE decided to sell its banking assets and most of GE Capital as a whole. In the end, most of those assets were indeed sold: for example, in the same year the company sold its private equity lending division for $12bn.

Airline leasing companies, like airlines and other players in the sector, have recently fallen on hard times due to the decline in flights during the pandemic. Gecas' loss for 2020 was $786 million. The merger of assets should help Gecas and AerCap cut costs and deal better with the current crisis. For its part, GE is looking to simplify its structure, focus on its core industrial activities and get rid of assets it does not consider key. Last year, for example, the company sold its light bulb division.