Bellevue-based Boullioun Aviation Services, an aircraft-leasing company founded by a former Boeing president and now boasting a fleet of...
Bellevue-based Boullioun Aviation Services, an aircraft-leasing company founded by a former Boeing president and now boasting a fleet of 102 jetliners worth billions, will soon fly off to California.
WestLB, the German bank that owns Boullioun, is selling the company for more than $2.5 billion in a deal expected to be finalized within weeks, according to knowledgeable industry sources.
The buyer, Aviation Capital Group, an aircraft leasing company based in Newport Beach, Calif., wants Boullioun’s airplanes and little else. Though some of Boullioun’s 60 employees will likely stay on during a transition period and some may be offered jobs in Newport Beach, its local presence will disappear, said people familiar with the deal.
When it absorbs Boullioun, Aviation Capital will become the largest aircraft-leasing firm outside the industry’s two giants, GE and International Lease Finance Co. (ILFC).
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The pending sale was a hot topic among bankers and leasing executives at the industry’s Airfinance conference in New York earlier this week. “It’s sad,” said one banker, “Boullioun has extremely competent management.”
For a well-regarded company built from scratch in 19 years, it’s a disappointing ending, forced by a series of ownership shifts and internal problems within the parent banking company unrelated to the operation here.
Boullioun Aviation Services
Business: Leasing aircraft to airlines worldwide.
Headquarters: Bellevue. The entire 25th floor and part of another floor of the City Center tower, a total of 20,000 square feet of prime downtown office space.
Employees: 60 people. Experts in the financial, tax and legal aspects of aircraft leasing as well as engineering and technical appraisal and management.
Assets: 102 commercial jets with a value of more than $3 billion. One is a Boeing 767 widebody. The rest are narrow-bodies: Airbus A320s and Boeing 737 Next Generation jets. The company manages another 19 jets as well.
Prospective sale: Aviation Capital Group, of Newport Beach, Calif., a subsidiary of insurance giant Pacific LifeCorp, will buy Boullioun for more than $2.5 billion. The Bellevue operation will close.
A 15-month bidding war for Boullioun ended with Aviation Capital winning over three private equity firms. Aviation Capital is owned by insurance giant Pacific LifeCorp.
Private investment firms are vying to put cash into low-cost carriers and aircraft lessors, betting the depressed aviation industry will turn upward.
With the major airlines weakened and cash-poor, leasing is increasingly more attractive than buying. An airline can lease a Boeing 737-800 for about $350,000 per month, rather than pay Boeing around $46 million for a new one. (The list price is $65 million.)
However, neither leasing giant GE nor ILFC are in growth mode.
To rebalance its corporate activities, GE wants to expand its industrial capacity and tone down its financial-services segment.
ILFC must sell planes, rather than buy more, to maintain its high credit rating and finance the heavy load of orders it placed with Airbus and Boeing before the Sept. 11 attacks.
Boullioun was founded in 1986 by Ernest “Tex” Boullioun, the renowned former Boeing salesman who was president of the jet maker’s commercial-airplane division from 1972 until 1981. It was a handshake in 1978 between Boullioun and Frank Borman, president of Eastern Airlines, that led to development of the 757.
On Boullioun’s retirement from his leasing firm in 1995, banker Robert Genise, a company veteran, became chief executive.
The company was initially backed by a $300 million line of credit from Sumitomo Trust, a major Japanese bank.
In 1994, Sumitomo bought the company outright, providing capital that was used to launch Singapore Aircraft Leasing Enterprise (SALE), a 50-50 Boullioun joint venture with Singapore Airlines that became a successful lessor of wide-body jets. (WestLB, in preparation for the sale of Boullioun, took over the company’s stake in SALE.)
The Sumitomo deal marked the beginning of sustained growth, as Boullioun focused on supplying airlines with Boeing and Airbus narrow-body jets popular with low-cost carriers.
When its founder retired in 1995, Boullioun had $380 million in assets. By the end of last year, the airplane portfolio was worth $3.4 billion.
After previously owning only used jets, Boullioun in 1998 ordered its first new airplanes, 30 Boeing 737-700/800 jets. Six months later, it placed its first Airbus order for 30 new A320s.
Boullioun’s planes are on lease to 48 airlines around the world. Regular maintenance and overhaul work is often done at the Goodrich jet-maintenance facility in Everett.
The company’s stellar trajectory changed course with two ownership shifts.
In late 1998, with the Japanese banking industry in some difficulty, Sumitomo sold at a premium to Germany’s Deutsche Bank.
In 2001, Deutsche Bank sold Boullioun to WestLB, another German bank.
Later that year, the Sept. 11 attacks staggered the aviation industry. Boullioun’s response was to become more aggressive, buying jets at depressed prices and leasing them back to the airlines.
The strategy worked. In the industry’s worst downturn ever, Boullioun continued to flourish.
But parent WestLB was soon in serious trouble.
It lost big on bad loans; it threw away $700 million on a British TV-rental business, and it invested in WorldCom. In 2003, shareholders ousted WestLB’s management, and the new team decided to divest its nonbanking assets.
Boullioun was once again put on the block, and this time it won’t survive as a distinct entity.
Its sale leaves the region with aircraft-leasing company AWAS, also based in Bellevue and owned by Morgan Stanley.
Given the interest in aircraft lessors, AWAS could also become an acquisition target. However, its planes are older than Boullioun’s and the company would not fetch nearly as high a price.
Dominic Gates: 206-464-2963 or email@example.com