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Abu Dhabi, UAEFriday 19 October 2018

Exclusive: Novus plans to double portfolio to 100 jets valued at $10bn 

Privately held Dubai-based aircraft lessor is in talks with peers and manufacturers to grow portfolio

Novus Aviation Capital is seeking to grow its leasing and financing business. Novus Aviation Capital
Novus Aviation Capital is seeking to grow its leasing and financing business. Novus Aviation Capital

Novus Aviation Capital is seeking to double its portfolio to at least 100 jets worth about $10 billion as the Dubai-based lessor pushes to grow its business and meet surging demand from global airlines.

The privately-held company is considering single-aisle and wide-body jets from Airbus and Boeing to grow its portfolio over the next two to three years, Hani Kuzbari, managing director of Novus Aviation Capital, told The National. The lessor is considering several options to acquire more jets.

"The major part will be acquiring aircraft through sale-and-leaseback from airlines and buying from other lessors," Mr Kuzbari said. "Placing additional orders with the manufacturers remains an avenue and we continue talks and may place an order if we see the right opportunity at the right price."

Novus, which begins its 25th year of operations in 2019, currently co-owns and manages a fleet of 60 aircraft valued at about $4bn and has an orderbook of $1.4bn at list prices. Regionally, it competes with Dubai Aerospace Enterprise, which shot to the top-tier of jet lessors after acquiring Ireland's AWAS in a deal that tripled its portfolio to 400 owned and managed aircraft worth over $14bn. Novus also competes with Kuwait-based Alafco.

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Novus is in talks with lessors from China, the US, Europe and the Middle East to acquire their portfolios as it expands its operating lease business.

"We're looking to acquire either small or large portfolios, or in some cases entire platforms," Mr Kuzbari said. "The idea is to gain scale by acquiring additional portfolios from other lessors, which is eligible only at the right prices."

Any potential deals may happen "soon" or fall through depending on pricing, available opportunities and market conditions, he said.

The lessor, which also offers financing services through its funds Cedar Aviation Finance and Tamweel Aviation Finance, is planning to grow its financing business. He declined to reveal size of the funds.

Through its Tamweel fund, Novus financed more than 30 aircraft over the last two years, and plans to double that in the next 12 to 18 months, Mr Kuzbari said.

"Demand is really global, spanning single and twin aisle aircraft, from airlines across the credit spectrum," he said.

Earlier this month, Novus partnered with the Development Bank of Japan, Germany’s Nord/LB and Boeing to start Cedar Aviation Finance, a debt fund for airlines and lessors. The fund will provide airlines with higher loan-to-value financing for Boeing jets, the company said.

Mr Kuzbari said Novus is expecting two to four aircraft financing deals for several airline customers by the fourth quarter of 2018.

"Cedar has ambitious plans and we'll announce a few deals this year," he said. "Its mandate is global but we also have a few opportunities in the Middle East in the pipeline."

In 2019, Cedar's pipeline is "looking quite substantial" but there will be more clarity on transactions by October or November, he said.

The lessor counts among its clients major Arabian Gulf aircraft buyers Emirates and Etihad Airways, Africa's fast-growing carrier Ethiopian Airlines, Virgin America, British Airways, Scandinavian Airlines, Jet Airways and Singapore Airlines, according to its website.

Novus has five offices, including in London and Dubai, with its sixth set to open in Dublin in the next quarter. The company currently has 42 employees, up from 30 in 2017.

Rising oil prices and uncertainties arising from escalating trade tensions between the US and China are among the biggest threats to airline profitability this year, according to International Air Transport Association.

Mr Kuzbari said he expects some slowdown in air traffic growth from these risks but the effect should be short-lived, with demand for air travel to continue its cycle of doubling every 12 to 15 years.

Overall, the jet-leasing industry is seeing pressure on returns from a "massive influx of liquidity" in the business from new entrants and existing players, he said. However the amount of deals are still growing but the number of players may decrease as a result of consolidation.