Hong Kong’s CK Asset Holdings to sell airline leasing businesses

CK Asset Holdings, the Hong Kong conglomerate founded by the city’s richest man, has agreed to sell its aircraft leasing businesses for a total of $4.28bn, as it draws back from an industry hit hard by the coronavirus pandemic.

An investment company managed by Carlyle Group will purchase CK Asset’s aircraft assets, said the Hong Kong company in a statement on Friday.

The sale comes as the Omicron coronavirus variant has upended the aviation sector and clouded the outlook for the international travel industry just as parts of the world were beginning to open up.

“Covid-19 has caused a paradigm shift in the aircraft leasing sector. The risk and return dynamics has become volatile and unpredictable, and the industry has undergone increased consolidation, mergers and acquisitions activities to mitigate such volatility,” CK Asset said in a filing to the Hong Kong stock exchange.

The company, founded by Hong Kong’s richest man Li Ka-shing, estimated that the sale would generate about $170m in profits. The group’s shares rose as much as 4.1 per cent on Friday, their biggest gain in more than a month.

CK Asset said the businesses had generated consistent returns but the proceeds from the sale would generate working capital allowing it to “enhance its strategic focus during the pandemic”.

The travel industry has suffered a series of setbacks with the emergence of the Omicron variant weakening the prospect of a recovery in the travel industry.

In Asia, countries including Thailand, Singapore and Japan restricted their borders to most foreign travellers this month to prevent the spread of the new variant. In Europe, Germany and Austria were among the countries to also reintroduce curbs.

Airlines have closely monitored the latest restrictions, with low-cost carrier Ryanair warning on Wednesday that its losses this year could be more than double what it had previously feared.

“The outlook for the first quarter of next year is quite gloomy because of this new variant,” said Brendan Sobie, an independent aviation analyst at Sobie Aviation in Singapore. “The momentum that we were expecting only a month ago . . . obviously that’s not going to happen any more.”

Sobie added that aircraft leasing companies had played a “critical role” in supporting airlines throughout the pandemic by allowing them to cut costs through renegotiations and deferred payments.

But as the pandemic continues to restrict travel, aircraft lease rates and values have fallen, he added, putting some leasing companies in distress.