Abu Dhabi Investment Authority, the emirate's sovereign wealth fund, has teamed up with aviation finance company Avolon and infrastructure investor I Squared Capital to launch an aircraft leasing infrastructure investment platform.
The new platform, Constellation Aviation, will provide airlines with access to fleet capacity and investors with exposure to long-term contracted cash flows, the companies said in a statement on Monday.
Once the transaction is completed, Constellation is expected to acquire a seed portfolio of aircraft from Avolon with a current market value of $1.4 billion.
The seed portfolio includes 22 aircraft with an average age of about five years, on lease to 17 airlines in 15 countries. Constellation is expected to scale over time, the companies said.
“Aircraft leasing is a resilient and growing sector supported by strong structural demand for modern aircraft,” said Khadem AlRemeithi, executive director of the infrastructure department at Adia.
Adia, which does not disclose its assets, invests on behalf of the Abu Dhabi government and is the largest sovereign wealth fund in the Gulf, with assets touching $1.1 trillion, according to consultancy Global SWF.
The authority makes direct and indirect investments in asset classes including equities, fixed income, infrastructure, private equity and property across continents.
The sovereign investor said in September that it aimed to diversify its approach across sectors to manage risks.
The aviation market is growing amid a continued rise in passenger demand, but airlines continue to face aircraft supply shortages and delivery delays, driving demand for leased aircraft to finance fleet renewal and expansion.
In July, plane lessor Dubai Aerospace Enterprise (DAE) partnered with US-based Neuberger Specialty Finance to launch Mustang Aerospace, an aircraft leasing co-investment vehicle targeting up to $6 billion in assets over the medium term.
DAE in April also agreed with Blackstone Credit & Insurance to launch a platform that will invest $1.6 billion annually to build a portfolio of commercial aircraft.
“Aircraft manufacturers’ order books now stretch a decade or more into the future, and airlines rely on lessors with scale and aircraft delivery slots to grow their fleets,” said Gautam Bhandari, co-founder, managing partner and global chief investment officer of I Squared Capital.
“Avolon has one of the largest order books with Boeing and Airbus and thus enjoys significant benefits of scale.”
Avolon will retain a minority equity interest in the joint venture and serve as Constellation's exclusive aircraft manager and servicer, the statement said.
The transaction is expected to close subject to securing the necessary regulatory approvals. The joint venture will be supported by a syndicated debt facility provided by a group of international banks.
