KKR bets US$1.4 billion on aircraft leasing as Boeing and Airbus supply shortages boost demand

[NEW YORK] Private equity firm KKR on Wednesday (Jun 17) disclosed a US$1.4 billion fresh bet on aircraft leasing with partner Altavair, as persistent supply shortfalls at Airbus and Boeing keep plane availability tight.

Leasing companies and private equity firms have been playing a bigger role in funding aircraft purchases as airlines face rising costs and recovering travel demand amid limited aircraft supply. Airlines now lease or rent, rather than own about half of the global fleet, with KKR having invested more than US$12 billion in aviation since 2015.

Altavair focuses on acquiring new and used commercial aircraft and leasing them to passenger and cargo airlines worldwide. Most of the capital is still free to be allocated, which will happen over the next four years, a source close to the transaction said.

KKR plans to source aircraft directly from airlines seeking to free up cash, as well as from manufacturers, such as Airbus and Boeing, and through secondary market transactions.

These deals typically involve buying aircraft and leasing them back to carriers under multi-year contracts, allowing airlines to raise cash while continuing to operate their fleets.

The firm is focusing on long-term leases with established airlines and cargo operators rather than distressed or bankruptcy situations, such as those involving Spirit Airlines, which ceased operations in May after failing to secure support for a government bailout plan, the source said.

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Since 2018, KKR and Altavair have acquired 188 aircraft and engine assets and leased them to 67 airline and cargo customers globally.

Fuel price volatility and geopolitical tensions have limited near-term impact on such investments, as leases typically run for five to 10 years and provide predictable cash flows, the source said.

KKR has previously backed fleet transactions, including a 2020 deal with Etihad Airways, which saw it acquire Boeing 777 and Airbus A330 aircraft and lease them back to the airline as part of its fleet transition strategy. REUTERS