Mitsubishi UFJ Financial Group Inc. intends to buy the aviation finance unit of major German financial group DZ Bank AG for about 700 billion yen (6.3 billion dollars), it has been learned.
The Japanese megabank has concluded that it can secure stable profits through the unit due to growth in the airline industry driven mainly by an increase in the number of flights operated by low-cost carriers in emerging economies and elsewhere, according to sources.
Aviation finance entails offering loans to carriers to procure aircraft and leasing airplanes. Carriers incur substantial costs when purchasing aircraft for lump sums as the price of one aircraft can exceed 10 billion yen.
However, LCCs, which have become more prominent in recent years, often lack substantial financial resources. As a result, aviation financing businesses have increasingly offered loans or leased aircraft to LCCs that are expected to generate future profits.
Megabanks and major trading houses have increasingly sought to purchase aviation finance units in expectation of high profits.
DZ Bank boasts strong loan and leasing operations for aircraft and vessels through its group companies.
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