Chai Lease, All Win purchase aircraft from China Airlines

Chai Lease Finance Corp and All Win International Finance Corp borrowed NT$8 billion (US$247.3 million) to buy two planes from China Airlines (華航), the nation's largest air carrier, bankers involved in the deal said.

The two airline leasing companies would rent out the planes to China Airlines for 12 years, said the bankers, who declined to be identified. The carrier had the two Airbus A330s delivered at the end of last year to renew its fleet.

"China Airlines does not have to borrow from the banks to buy planes by renting them from leasing companies," said Andrew Lin, an analyst with KGI Securities Co Ltd (中信證券) in Taipei. "It can pass on the borrowing risk and costs to the leasing companies and reduce its debt."

Chai Lease Finance has hired Hua Nan Commercial Bank (華南銀行), Taiwan Cooperative Bank (合作金庫) and Taipei Fubon Bank (台北富邦銀行) to arrange its loan, bankers said. All Win International hired International Commercial Bank of China (中國國際銀行). The two loans will be launched to syndication to other banks next week, bankers said.

Both loans are for NT$4 billion each with a 12-year tenure and offer an interest margin of 45 basis points, or 0.45 percentage point, over the market interest rate on commercial paper, bankers said. Commercial paper is an unsecured short-term promise to repay principal on a specific date.

The carrier is seeking ways to cut costs as its net profit last year fell 85 percent because of soaring jet fuel costs. Fuel costs made up 40 percent to 45 percent of China Airlines' total costs, company Chairman Philip Wei (魏幸雄) said on March 16. The price of jet fuel jumped to a record US$85.36 a barrel on Oct. 3 in Singapore, according to Platts pricing service.

Global airlines may report an industry loss of US$2.2 billion this year based on crude oil selling at US$57 a barrel, the International Air Transport Association, which represents 265 carriers, said on March 22.