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Business deals

Orix to invest $2.2bn in HNA Group aircraft leasing company

Tie-up with Chinese conglomerate will form the world's third largest fleet

Avolon Aerospace Leasing CEO, Domhnal Slattery attends a commercial annoucement at the Paris Air Show in June 2017.    © Reuters

TOKYO -- Japanese financial services group Orix is set to claim a stake in Irish aircraft lender Avolon Holdings, part of China's HNA Group, Nikkei has learned.

Orix will pay 250 billion yen ($2.2 billion) for 30% of Avolon's outstanding voting shares, making the investment the largest-ever for Orix.

The company's Irish subsidiary and Bohai Capital -- owner of Avolon and a leasing arm of HNA -- will seal the deal as early as Wednesday.

Avolon held the third-largest fleet of aircraft for lease in 2017. The deal will push previously 12th-ranked Orix to third place in the fast-growing airplane leasing market.

The aircraft market continues to boom as Asia's middle class grows and low-cost carriers in the region proliferate. Japan Aircraft Development Cooperation expects the number of jets worldwide to increase 80% to just shy of 40,000 in 20 years.

Airline companies are increasingly unloading assets and shifting to leased planes so they can open new routes and offer more flexible flight schedules.

Avolon mainly leases aircraft made by Boeing and Airbus to large airline companies, while Orix leases used planes to midsize airlines and LCCs. Orix also manages planes owned by domestic or foreign funds through leasing.

Orix intends to expand into the primary airplane leasing market, where Avolon is performing well. In turn, Orix will introduce Avolon to its fund customers who are buyers of airplanes.

Masayuki Yuda in Tokyo contributed to this article.

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