KKR Bets $1.4 Billion on Aircraft Leasing With Altavair Amid Supply Crunch
KKR and Altavair's Strategic Investment in Aircraft Leasing
By Sabrina Valle
Private Equity's Expanding Role in Aviation
NEW YORK, June 17 (Reuters) - Private equity firm KKR on Wednesday disclosed a $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.
Leasing Versus Ownership Trends
Airlines now lease - or rent - rather than own about half of the global fleet, with KKR having invested more than $12 billion in aviation since 2015.
Altavair's Business Model
Altavair focuses on acquiring new and used commercial aircraft and leasing them to passenger and cargo airlines worldwide.
Capital Allocation and Sourcing Strategies
Future Investment Plans
Most of the capital is still free to be allocated, which will happen over the next four years, a person close to the transaction said.
Aircraft Sourcing Methods
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.
Sale-Leaseback 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.
Focus on Stability and Long-Term Leases
Target Customers and Risk Strategy
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 person said.
Track Record and Portfolio Growth
Since 2018, KKR and Altavair have acquired 188 aircraft and engine assets and leased them to 67 airline and cargo customers globally.
Market Conditions and Investment Resilience
Impact of External Factors
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 person said.
Previous Notable Transactions
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.
(Reporting by Sabrina Valle; Editing by Stephen Coates)
