Joint Venture CASC Willis Engine Leasing Co., Ltd.

As part of our ongoing research into American joint ventures in China, Datenna decided to highlight and research relevant cases. This case considers the joint venture set up by the U.S. Willis Lease Finance Corporation and China Aviation Supplies Co., Ltd.

  • The joint venture CASC Willis Engine Lease Company Limited has been established in 2014 and it is based in Shanghai.
  • The main purpose of the joint venture is to respond to the Chinese demand for leased commercial aircraft engines and aviation assets and supply engine support solution to Chinese airlines.
  • According to our research, the Chinese partner, 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, all related to maintenance and supply of aviation components.

The aim is to supply engine support solutions to Chinese airlines and creating an engine resource sharing platform.

The Joint Venture CASC Willis Engine Leasing Co., Ltd

 

CASC Willis Engine Leasing Co., Ltd is a joint venture whose core business is to combine the two shareholder companies’ 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 participation is equally divided 50/50 by Willis Lease Finance Corporation and China Aviation Supplies Co., Ltd. The target market is the Chinese one, where the demand for leased commercial aircraft engines is growing the most. 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. In the broader picture, this practice helps the overall development of the national industry. The joint venture is established within the Shanghai Pilot Free Trade Zone to benefit from the incentives offered to those companies that establish their business there.

 

Willis Lease Finance Corporation

 

Willis Lease Finance, the U.S. partner, is a jet engine lessor which mainly leases commercial aircraft and engines to airlines and manufactures and repairs aircraft engines. It was established more than 30 years ago by Charles F. Willis and has the largest and most diverse engine portfolios in the industry, surpassing $1 billion in total assets. The company does not just work with the domestic market but also with 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 set-up of the joint venture these operations will be further strengthened.

The Chinese partner and its links with Government Entities

The main business scope of the Chinese partner, China Aviation Supplies Co. Ltd. (CASC[1]), is to provide 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, a company of 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 supplies services for several airlines. All these partnerships aim at strengthening innovation and cooperation of the companies’ respective advantages and form strong alliances with strategic agreements. For example, it collaborates with Air China, the flag carrier of the People’s Republic of China, providing customized solutions and supporting 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 supplying, component support and other fields.

[1] China Aviation Supplies Co., Ltd. (CASC), the Chinese shareholder of the joint venture in place is a different entity than China Aerospace Science and Technology Corporation (CASC), as the latter 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 object of this case study, and more generally of the investments, MoU and cooperation agreements concluded in this sector, is connected to China’s aim to gain additional knowledge in the field of aviation, with the ultimate goal of producing air planes domestically.

When it comes to aviation, in fact, China still mainly relies on other nations, in terms of production. With the national plan “Made in China 2025”, the goal is to reduce the 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.