Initiating Coverage of BOC Aviation With No Moat and FVE of HKD 68

BOC Aviation’s role as an aircraft leasing firm is mainly to provide liquidity to global airlines, either through operating leases or financing arrangements, in their access to aircraft. Rather than lock up their capital in fixed assets, airlines increasingly opt to lease aircraft. Based on data from Ascend Analytics and BOC Aviation, the proportion of the global airline fleet on operating leases has risen to 52% in September 2022 from 23% in 1990. We expect BOC Aviation’s market share to be stable, so its volume of leases should at least track global commercial fleet growth of about 2.9% per-year CAGR through 2033, based on Oliver Wyman data.