Tycoon Li Ka-shing’s latest initiative to tap into the aviation industry will bolster expectations for a rebound of the sector, columnist T Y Ko wrote in the Hong Kong Economic Journal Thursday.
Li’s property flagship Cheung Kong Holdings (00001.HK) announced in a regulatory filing late Tuesday that it plans to buy up to 60 aircraft in a series of transactions that could add up to more than US$2.5 billion.
The company is foraying into aircraft leasing services as the business could offer better margins even compared to letting of commercial properties, Ko noted.
The top two aircraft leasing services providers in the world are US-based conglomerate General Electric Co. and investment guru Warren Buffett’s Berkshire Hathaway Inc.
The two companies are well-known for their strong cash flow. Cheung Kong is taking up the new business as it sees as a potential cash cow, Ko said.
According to data from the International Air Transport Association, an average 9 percent return on capital has been recorded globally from 2004 through 2011 on aircraft leasing activities.
The business model is usually a long-term one, and has to deal with ups and downs in the economy.
Li’s deal suggests that he is upbeat on the Chinese economy, which is seen as a demand driver for new aircraft.
The air transport association has estimated that more than 300 planes will be delivered from 2013 through 2023 on average globally per year.
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