BAE Systems has sold its asset management business and commercial aircraft lease portfolio to New York management firm Fortress Investment Group for $187 million.
BAE Systems will transition 151 BAE legacy aircraft to Fortress, a portfolio comprised of BAe 146 and Avro regional jets as well as Jetstream and ATP turboprop models. However, BAE plans to retain its engineering and support services.
According to a spokesman, BAE has ceased to function as an operating lessor largely because defense remains its core capability.
The spokesman says BAE made profits from the asset management business in 2010 but admits that its regional portfolio has never been one of its strong points, due to leasing mismanagement that BAE Systems inherited from now-defunct British Aerospace plc.
“Over the years, it has been quite a drain on BAE Systems,” he says.
As a partial owner of aircraft lessor Aircastle Ltd., Fortress is not a stranger overseeing leases for large airlines like US Airways, Southwest Airlines and Emirates. Fortress will use BAE’s legacy aircraft as a starting point for growing its overall commercial aircraft portfolio.
“Fortress has plans to use the platform of the BAE systems asset management team and the portfolio of aircraft as a means of creating a large aircraft leasing company,” says BAE’s spokesman.
Many of BAE’s aircraft less than 20 years old will continue to be leased out by European airlines for the next four to five years until new aircraft roll out. BAE says Swiss International Airlines will likely keep its Avro RJ100 jets through 2016 until it receives the Bombardier CSeries, while Lufthansa has already started sending back its 12 Avro RJ85s in favor of the Embraer 190.
BAE says its maintenance support team still takes care of about 800 aircraft worldwide. As European airlines send their aircraft back, Fortress will try to move them into second-tier markets.
BAE announced this week that it would start developing a regional support strategy for Latin America, which could involve using an external freight company to reduce turn times and the cost of shipping rotables. It is working on similar regional support programs for Africa and Southeast Asia, but the going may be tough as other spares suppliers step up with parts for these aging aircraft.
“There’s a lot of competition on the spares business,” says the company’s spokesman.
In 2010, BAE introduced its Avro RJ “Total Support” spares package, but CityJet remains the only customer so far for its RJ85 fleet.
