Private equity giant KKR (KKR.US) throws 1.4 billion US dollars with Altavair, increasing investment in the aircraft leasing market.

Private equity giant KKR (KKR.US) disclosed on Wednesday that it has jointly invested $1.4 billion with partner Altavair, further betting on the aircraft leasing market. Due to the long-term aircraft supply shortage faced by Airbus and Boeing Company, the new aircraft supply remains tight, driving strong demand in the leasing market. With airlines facing greater financial pressure in the backdrop of limited aircraft supply, rising operating costs, and a recovery in travel demand, aircraft leasing companies and private equity firms are increasingly taking on the important role of providing financing for aircraft purchases. Currently, about half of the global commercial aircraft fleet is not directly owned by airlines, but operated through leasing. Since 2015, KKR has invested over $12 billion in the aviation sector. Altavair primarily focuses on acquiring new and used commercial aircraft and leasing them to global passenger and cargo airlines. Since 2018, KKR and Altavair have acquired a total of 188 aircraft and engine assets, leasing them to 67 airlines and cargo customers worldwide. A source close to the deal revealed that most of the funds are still in a pending allocation state, with gradual deployment expected over the next four years. KKR plans to directly acquire aircraft from airlines looking to free up cash flow, and will also acquire aircraft assets through Airbus, Boeing Company, and secondary market transactions. These transactions typically follow a "sale and leaseback" model, where after purchasing the aircraft from an airline, it is leased back to the airline through a long-term lease contract, allowing the airline to continue operating its fleet while receiving cash flow. The source stated that KKR is currently focusing on signing long-term lease agreements with established airlines and cargo operators, rather than participating in distressed companies or bankruptcy restructuring projects, such as the assets related to Spirit Airlines that ceased operations in May after failing to receive government bailout support. The source noted that the short-term impact of fluctuations in fuel prices and geopolitical tensions, such as those involving GEO Group Inc, on these investments is relatively limited, as aircraft leasing contracts typically have durations of 5 to 10 years, providing stable and predictable cash flow. Previously, KKR has been involved in several significant fleet financing transactions, including a deal with Etihad Airways in 2020. At that time, KKR acquired Boeing Company 777 and Airbus A330 aircraft from the airline and leased them back as part of its fleet transformation strategy.