In spite of global challenges, SMBC Aviation Capital is a stronger business than ever before. The past few years have been transformational for SMBC Aviation Capital and the aviation industry. The ongoing challenges of Covid, the Russian invasion of Ukraine and increasing economic inflation have tested the resilience of both business and society.
In spite of how difficult these periods have been for our business, it is in large part due to these experiences that we have emerged stronger as a global leader in aircraft leasing.
The war in Ukraine shocked the world and disrupted the global economy, including our own business. We recorded an impairment of $1.6bn for aircraft lost in Russia. In one of the most difficult moments for aviation, our shareholders remained committed and invested in our long-term future.
While there were challenges, we also saw the recovery take hold. Because of our deep understanding of our customers and how closely aligned our fleet was to the shape of air travel demand, we were ready to capitalise. We are reaping the benefits of our long-term strategy to future-proof the business with young, new technology, narrowbody aircraft that remain in high demand across a competitive market.
SMBC Aviation Capital has always been highly disciplined in its approach to M&A to deliver growth at the right moment with the right business. The acquisition of Goshawk (announced on 16 May 2022) is in line with our strategy. Goshawk is a high-quality company with assets and people that complement ours. The deal unites two strategically aligned and complementary businesses. On top of this, we will enhance our best in-class portfolio and extend our global footprint.
We stuck to our principles and continued to look for ways to add value for our customers – that’s one of the strengths of SMBC Aviation Capital.
Shareholder support for Goshawk acquisition shows we are a key strategic business partner
A common thread throughout our response to both crisis and opportunity has been the steadfast and deepening support of our shareholders who remain critical to our success. Their confidence in SMBC Aviation Capital’s leadership team, strategy and potential continues to grow, based on mutual trust and understanding. After a decade of Sumitomo Mitsui Financial Group and Sumitomo Corporation’s stewardship, SMBC Aviation Capital has experienced unprecedented growth and profitability.
Financially, shareholder support was $11bn at the end of the financial year comprising $2.3bn equity and $8.7bn debt. Subsequently after year end, our shareholders materially increased their support of the business to $17bn in total. This enabled us to continue our shift (during the pandemic) away from direct orders to sale and leaseback of aircraft already owned by the airlines, an approach enhanced by longstanding relationships that we have built with world-leading airlines over several years. It also meant we could actively support our customers when they needed it most, alongside acquiring a select number of aircraft which has further strengthened our fleet.
The shareholder support that provided financing for the Goshawk acquisition enabled us to maintain industry leading Investment Grade ratings and reaffirmed that SMBC Aviation Capital is a highly strategic partner within the group’s ambitions in aviation finance.
Facing challenges and opportunities together – we are ready to continue delivering
But the hard work doesn’t stop there. The integration of the newly enlarged business is a process, not an event. As well as ensuring that the enlarged SMBC Aviation Capital is best placed to deliver for our customers and shareholders, we will also look to ensure our colleagues are confident of the road ahead.
Amid the green shoots in the sector, many challenges remain. The expected economic downturn as a result of Covid and the war in Ukraine is intensifying, requiring us to adapt and remain focused on our objectives. While we have recorded successes with the Goshawk transaction, we will not remain complacent.
We will continue our path to maintaining profitability and providing strong returns on capital invested amid an intensely competitive environment and rising prices. We have always evolved to stay at the cutting-edge of our industry. With our highly-skilled colleagues, top-quality assets and an innovative strategy, I am sure we will continue to lead the way in aircraft leasing.
Our existing leadership is clear on climate change. SMBC Aviation Capital recognises that leasing must step up and play a leading role in helping airlines achieve their sustainability targets. Our recently announced sustainability solution for customers, including an initial $53 million investment in high quality carbon credit programmes, demonstrates our ambition to go further and faster on decarbonisation in aviation. It is a first step, but a crucial one that brings together the best minds in our business.
SMBC Aviation Capital believes in working together, with supportive shareholders, world-leading customers and talented colleagues. This collective approach is what has enabled our success before and will stand us in good stead in the future.
TOM TANAKA
CHAIRMAN
30 June 2022
NEXT
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Executive’s Review
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