Joint venture: CASC Willis Engine Leasing Co., Ltd.
Datenna continuously tracks and conducts research on China-EU joint ventures in Europe. In this series of articles, we have decided to highlight our research and data on interesting joint venture cases. This article analyses the joint venture CASC Willis Engine Leasing Co., Ltd., jointly set up by U.S. company Willis Lease Finance Corporation and China Aviation Supplies Co., Ltd.
- The joint venture, CASC Willis Engine Lease Company Limited was established in 2014 and is based in Shanghai.
- The main purpose of the joint venture is to respond to Chinese demand for leased commercial aircraft engines, aviation assets and supply engine support solutions for Chinese airlines.
- According to our research, China Aviation Supplies Co., Ltd. (CASC) has state-owned entities among its shareholders and has concluded a series of agreements with domestic and foreign companies related to maintenance and supply of aviation components.
The Joint Venture CASC Willis Engine Leasing Co., Ltd
CASC Willis Engine Leasing Co., Ltd is a joint venture whose core business combines the two shareholders’ relative strengths with the aim of supplying engine support solutions to Chinese airlines and creating an engine resource sharing platform. The joint venture was established on June 9, 2014, and the ownership is divided 50/50 by Willis Lease Finance Corporation and China Aviation Supplies Co., Ltd. The target market is China, where the demand for leased commercial aircraft engines is seeing rapid growth. Statistics show that in China, out of 4,054 registered passenger planes by the end of 2021, 62 percent were leased, up from 35 percent in 2010. Generally, airline companies prefer to lease rather than buy new aircrafts as they can enjoy more flexibility and liquidity. The joint venture is established within the Shanghai Pilot Free Trade Zone to benefit from the incentives offered by local authorities to companies that establish their business there.
Willis Lease Finance Corporation: an established player in engine leasing
Willis Lease Finance, the U.S. partner, is a jet engine lessor which mainly leases commercial aircraft and engines to airlines and manufactures as well as repairs aircraft engines. It was established more than 30 years ago by Charles F. Willis and has the largest and most diverse engine portfolio in the industry, surpassing $1 billion in total assets. The company does not only work with the domestic market but is also present in 110 other countries including China. In fact, Willis Lease has been a long-time leader in engine leasing and maintenance, repair, and overhaul operations in China. With the joint venture these operations will be further strengthened.
CASC and its links with government entities
The main business scope of the Chinese partner, China Aviation Supplies Co. Ltd. (CASC[1]), is providing supplies assets to state-owned aviation enterprises. Moreover, it aims at facilitating innovation, especially in the field of industrial security. The company was officially established following joint investment from five state-owned entities under the direction of the SASAC (State-owned Assets Supervision and Administration Commission). China Southern Airlines, an SOE in which the government holds majority ownership, is the biggest shareholder with a 24% stake in the company.
CASC is already engaged in several partnerships and has provided aviation components and supplies services for several airlines. All these partnerships aim at strengthening innovation and cooperation, using the companies’ respective advantages and forming strong linkages with strategic agreements. For example, it collaborates with Air China, the flag carrier of the People’s Republic of China, providing customized solutions and support systems, and signed a long-term total component maintenance contract with Lufthansa Technik Shenzhen. According to the deals signed with Guangzhou Aircraft Maintenance Engineering Company Limited [MGD2] (GAMECO), the two companies will cooperate in aviation material sharing, consumable parts supply, component support and other fields.
[1] It is important to note that China Aviation Supplies Co., Ltd. (CASC), the Chinese shareholder of the joint venture, is a different entity from China Aerospace Science and Technology Corporation (CASC). The latter company is one of the ten military-industrial conglomerates that form the backbone of China’s national defence industry.
China’s aviation industry and it’s national plans
The joint venture analysed in this case study, and more generally the investments, MoUs and cooperation agreements concluded in the aviation sector, is connected to China’s aim to gain additional technological expertise in the field of aviation with the ultimate goal of producing air planes domestically.
In aviation, China still primarily relies on other nations in terms of production. With the national plan Made in China 2025, the goal is to reduce reliance on foreign technology in many fields, including aviation, and help domestic companies to be competitive at a global level. In this context, China is speeding up the reorganization of its SOEs to improve their competitiveness and make strategic alliances and acquisitions.
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