Saudi Arabia launches aircraft leasing company as part of aviation expansion mission

To further accelerate its efforts to diversify the economy and boost the growth of the non-oil economy, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), has launched a new aircraft leasing company called AviLease.

What you need to know about AviLease

The leasing company aims to be a leading institution across the entire aviation leasing value chain by maintaining an optimal portfolio of assets. AviLease plans to have a neat fleet of next-generation narrow- and wide-body aircraft and will initially focus on ascension through buy-and-leaseback transactions with airlines, acquisitions of portfolio and direct orders from aircraft manufacturers.

Going forward, AvilLease will also be eager to expand through acquisitions of other companies and will be led by a top management team to drive the desired growth. With localized expertise and knowledge, the management team is confident to enable the development of AviLease to gradually become a national leader in the aircraft leasing market.

Backed by one of the largest and most influential sovereign wealth funds in the world, the creation of AviLease will contribute significantly to reducing value leakage for Saudi Arabia thanks to the PIF’s abundant liquidity and strong balance sheets. In addition, the leasing company will also help improve the Kingdom’s integration into the global aircraft finance market niche.

Supporting the aeronautical ecosystem

The introduction of AviLease comes at a time when Saudi Arabia is developing its aviation sector in line with Vision 2030, a national initiative which, in addition to increasing non-oil international trade, also aims to develop tourism and to strengthen economic and investment activities within the Kingdom. With strong local carriers such as Saudia, flyadeal and flynas, the Kingdom’s aviation ecosystem needed additional elements to be added to the mix.

PIF underlined in a press release:

“The launch of ‘AviLease’ is a central part of the expanding aviation ecosystem in Saudi Arabia and is part of PIF’s strategy to activate the capabilities of promising sectors in Saudi Arabia.”

Although aircraft leasing may seem like a giant step to diversify the economy, it is relatively strategic at present, as the size of the global aircraft leasing market is expected to grow at a compound annual rate of 7 .8% through 2029. The massive growth is due to the rental market having gained popularity following pent-up demand from the pandemic as airlines lack the financial means to place new orders.

However, older aircraft needed to be replaced in times of fuel crisis, and leasing proved the cheapest and most ideal solution at such short notice. Flag carrier Saudia doesn’t lease any aircraft for its fleet, but low-cost carriers flyadeal and flynas do, and that’s where AviLease would be very useful to help. Additionally, the leasing company could potentially lease cargo planes from Saudia Cargo, the flag carrier’s cargo subsidiary.

Possible future diversifications

Since AviLease would be a great support for the aviation ecosystem in Saudi Arabia, it could be possible that the next stages of expansion include a new airline. Although not necessarily on the lines of a new commercial carrier, the Kingdom could expand its air cargo sector by introducing a new cargo airline to complement Saudia Cargo.

Currently, Saudia Cargo offers scheduled and charter freight services using its fleet of seven freighters to 11 destinations covering Asia, Africa, Europe, the Far East and North America. Although the cargo airline also operates nearly 60 international belly destinations across six continents, the possibility of introducing a new entrant into this industry segment seems likely as it would be tied to Vision 2030. But what would come next in the Kingdom’s aviation mix remains anyone’s most anticipated guess.