Danke, Bavaria International

German lessor helps Boeing launch new airplane models

BY CHERYL ADDAMS

Bavaria International Aircraft Leasing may not be the largest commercial airplane lessor that purchases Boeing jetliners, but the Munich, Germany-based company is one of the oldest and most loyal.

It was 25 years ago that Bavaria, a division of Germany's Schoerghuber Group, bought its first Boeing airplane, a 737-200. At present, the company owns 12 737-300s, five 717s and four 737-700s among the 25 airplanes that are leased to airlines all over the world. Late last year the company signed up for six more 737-700s as well as placing options for another six.

The parent company, Schoerghuber, is a private firm with divisions in the hotel, brewery, commercial and residential real estate, and construction industries. Bavaria, its aircraft leasing division, is the world's largest privately owned aircraft leasing firm.

"Because we are a private company and responsible for managing our own funds, we have been able to take certain risks and order new airplane models Boeing is just bringing to the market," said Karsten Sensen, Bavaria's chief operating officer.

Bavaria became the third customer and the first leasing company in the world to order the Boeing Next-Generation 737-700 back in January 1995. "When the Next-Generation 737 program was launched, we ordered some and placed them all," Sensen said. "They are an important product for airlines that operate on longer-distance routes than the 737 Classics can fly."

Sensen lauded Next-Generation 737s for flying at a higher speed and for having lower fuel consumption, lower noise readings, higher payload and more advanced technology systems.

Sensen attributes the success of Bavaria to controlled, well-managed growth. "We don't compete with big lessors like General Electric Capital Aviation Services and International Lease Finance Corp.," he said. "We focus on strategic positions. That's why we ordered the 737-700 and 717 early on."

Now, Bavaria has airplanes placed with several carriers in Europe, as well as in Australia, India, China, Central and South America, Russia and the United States.

"We have developed a good relationship with our lessee partners," Sensen said. "We helped them to manage during the industry's recent bad years, which began in late 1999. We have had no aircraft sitting on the ground during these times."

Like other aircraft lessors, Bavaria offers airlines different leasing options. Although it primarily signs with carriers for operating leases of about five to 10 years' duration, the company also engages in finance leases and "sale and leaseback transactions."

Airlines that sign operating leases can introduce new airplanes into their fleets without having to purchase them. A finance lease allows an airline to lease an airplane for some years, and then purchase it when the lease expires. With a sale leaseback agreement, a carrier can purchase an airplane from an airframe manufacturer, then immediately sell it to a lessor, which, in turn, leases it back to the carrier.

Bavaria has positioned itself as a specialist in the short- to medium-haul sector of the market and acquires 100- to 200-seat airplanes. Currently, the company is focusing on potential customers in high-growth regions such as Asia, India and Russia.

The strategy must be working. While very few leasing companies are ordering new aircraft these days, Bavaria, with its recent order, is an exception.

"Bavaria always has been a company to look ahead and invest for the future," said Marlin Dailey, vice president of Sales for Europe & Central Asia for Boeing Commercial Airplanes. "When the industry fully comes out of the slump, Bavaria will be ahead of the game."