How GE’s Stake Sale in AerCap Affects the Aircraft Leasing Industry

General Electric has announced that it will sell a large portion of its stake in AerCap Holdings NV (AER), the world’s largest aircraft leasing company, through a public offering. The deal, which follows a previous sale in March 2023, will reduce GE’s ownership in AerCap from 33.6% to about 20%.

The stake sale is part of GE’s plan to exit the aircraft leasing business, which it entered in 2021 when it sold its own unit, GE Capital Aviation Services (GECAS), to AerCap in a $30 billion deal. The deal created a giant in the industry, with a combined fleet of over 2,000 aircraft and over 300 customers.

GE said that it will sell about 40.7 million shares of AerCap at $59 per share, raising about $2.44 billion. The offering was upsized from the initial plan to sell 32.4 million shares. GE also agreed to sell another 15.3 million shares back to AerCap for about $878 million. AerCap said that it will fund the buyback with cash on hand.

The transaction will have an impact on both GE and AerCap, as well as the broader aircraft leasing industry, which has been recovering from the pandemic-induced slump in air travel.

For GE, the stake sale will help the company reduce its debt and focus on its core industrial businesses, such as power, renewable energy, aviation, and healthcare. GE has been undergoing a major restructuring under CEO Larry Culp, who has been selling off non-core assets and streamlining operations.

For AerCap, the stake sale will increase its free float and liquidity, as well as reduce its exposure to GE’s influence and potential conflicts of interest. AerCap said that it will use the proceeds from the buyback to invest in new aircraft and opportunities in the market.

For the aircraft leasing industry, the stake sale will increase the competition and consolidation among the players, as AerCap becomes a more independent and dominant force. The industry has seen a wave of mergers and acquisitions in recent years, as leasing companies seek to gain scale and bargaining power with airlines and manufacturers.

The industry has also benefited from the rebound in air travel demand, especially in domestic and regional markets. Leasing companies have been able to lease out their idle aircraft, negotiate better terms with airlines, and take advantage of low interest rates and strong investor appetite.

However, the industry also faces some challenges and uncertainties, such as the uneven recovery across regions and segments, the ongoing health risks and travel restrictions, and the environmental and regulatory pressures.

The stake sale is expected to close on September 15, subject to customary closing conditions. GE has granted the underwriters a 30-day option to purchase up to 6.1 million additional shares of AerCap.

Sources: AirGuide Business airguide.info, msn.com, nasdaq.com, CNBC.com