Employees work on an Airbus A220 at their plant in Mirabel, Quec, on Sept. 23, 2020.Christinne Muschi/Christinne Muschi/The Globe and
The Caisse de dépôt et placement du Québec is teaming up with the world’s second-largest lessor of aircraft to launch a US$1.5-billion platform for financing and leasing airplanes, capitalizing on strong commercial demand.
The Caisse and SMBC Aviation Capital are planning to deploy US$500-million each year for the next three years. The Montreal-based pension-fund manager will provide most of the capital to help SMBC build up its fleet, which will be focused on the newest aircraft models – mostly from Airbus and Boeing BA-N – that are typically more fuel-efficient.
Dublin-based, Japanese-owned SMBC will source transactions and service the platform, which will operate as Maple Aircraft Company Holdings Ltd., and also invest in opportunities alongside Maple Aircraft Co. SMBC currently owns and manages a fleet of more than 900 aircraft. This is the first time the Caisse, or CDPQ, has invested with the leasing company.
“Building on CDPQ’s experience in the aircraft financing industry, through this new platform, we will continue to provide flexible financing solutions for airlines to meet their future fleet requirements,” Marc Cormier, executive vice-president and head of fixed income at the Caisse, said in a news release Monday.
Ottawa wants other Canadian pension funds to act more like the Caisse
The partnership is the latest of several investments the Caisse has made in aircraft leasing, and its expansion in the sector comes as lessors are benefiting from higher rental revenues. With demand for travel booming and supply chain issues slowing the pace at which new aircraft reach the market, airlines are leasing planes from existing fleets at higher prices to keep up.
Though airlines often own some of their fleet of planes, they typically also lease some aircraft to avoid onerous upfront costs from buying them and to meet fluctuations in demand and capacity, including when planes are grounded as happened recently with some Boeing 737 Max 9 jets.
The Caisse’s agreement with SMBC follows a blueprint created when the pension-fund manager entered the aircraft leasing and financing market through a 2017 deal with GE Capital Aviation Services (GECAS) GE-N, which established a US$2-billion global platform called Einn Volant Aircraft Leasing (EVAL). GECAS was acquired in 2021 by AerCap Holdings NV AERN-N, which has continued the partnership with the Caisse.
The Caisse has also expanded its exposure to the sector by investing with other aircraft leasing companies, including in a US$300-million debt facility for Titan Aviation Holdings Ltd.
Both the GE Capital and SMBC Aviation agreements are managed through the pension fund’s $127-billion fixed-income portfolio.
The Caisse is one of Canada’s largest pension-fund managers with $424-billion in assets under management. It oversees money for 48 clients, mostly public pension and insurance plans such as the Québec Pension Plan, which represents more than six million people.
Peter Barrett, SMBC’s chief executive officer, said in a statement that the Caisse “is aligned with our own views on capital allocation and a sustainable aviation industry.”
With a report from Reuters
James Bradshaw