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Steven Udvar-Hazy returns to aircraft leasing in a big way

With a multibillion-dollar deal to buy 51 Airbus airliners for his start-up Air Lease Corp. and an eye on 50 Boeing planes, the aircraft leasing pioneer says he's ready to regain the industry's top perch.

July 20, 2010|By W.J. Hennigan, Los Angeles Times

Just days after officially announcing his return to the aircraft leasing business he pioneered, Steven Udvar-Hazy took center stage at one of the world's premier air shows to reveal he had signed a multibillion-dollar deal to buy 51 Airbus airliners.

Monday's blockbuster purchase, potentially worth $4.4 billion based on the plane's list price, signaled to the aviation industry that Udvar-Hazy was back in a big way.

Just six months earlier, the Los Angeles billionaire had retired from Century City's International Lease Finance Corp., or ILFC, the company he co-founded nearly four decades ago and grew into the world's largest aircraft leasing business.

Now, Udvar-Hazy, 64, says he is eager to do it all over again, this time with start-up Air Lease Corp., or ALC. In a rare, wide-ranging interview, Udvar-Hazy said he was re-energized and was wasting no time to regain his perch atop the world of buying and leasing planes.

"Three hours into retirement, I was restless," he said. "I just decided that I didn't want to be retired at the beach."

Udvar-Hazy is expected to announce another multibillion-dollar deal to buy 50 planes from Boeing Co. at the Farnborough International Airshow, one of the aviation world's more important showcases. Many of the biggest deals are announced at the show, which is held every other year in England.

The planes are likely to be the popular 150-seat 737 commercial jets, according to Scott Hamilton, an aviation industry consultant and managing director of Leeham Co. in Issaquah, Wash. Each plane can cost as much as $87 million.

Last week, Udvar-Hazy announced that ALC had secured $3.3 billion in financing and plans to buy about 125 commercial planes by spring of next year. They would in turn be leased to airlines.

Analysts said because of the sheer volume and his reputation as a tough-as-nails negotiator, Udvar-Hazy is likely to be buying the planes at a significant discount.

"Nobody, least of all Hazy, pays list price," Hamilton said, speculating that Udvar-Hazy would get a discount of 25% to 30%.

Tom Captain, principal and vice chairman of Deloitte's aerospace and defense consulting practice, said that Udvar-Hazy's long-standing relationships with airlines and aircraft manufacturers make him once again a formidable player in the leasing business.

"He is nothing short of an icon in this industry," Captain said. "As an icon, everyone will be watching him and what he does."

Udvar-Hazy still has so much clout that aircraft maker Airbus paid for full-page advertisements in newspapers, including The Times, congratulating him on his return to the leasing business and thanking him for buying its planes.

In 1990, Udvar-Hazy became a billionaire and one of the richest men in Los Angeles when he sold ILFC to insurance giant American International Group Inc. AIG allowed him to continue running the company.

But in 2008, AIG was on the brink of collapse and received commitments of up to $182.5 billion in bailout money from the federal government. As part of the bailout, the government began overseeing AIG operations, including that of ILFC, which Udvar-Hazy said hamstrung his ability to manage the company.

For decades, Udvar-Hazy was able to make billion-dollar deals over dinner with friends in the industry, he said.

"We'd be able to sketch out a deal on the back of an envelope and then implement the deal within a few days," he said. "But ILFC wasn't in a position to buy planes after the bailout. No matter how good of a deal it was. The priority was to pay back the government."

On Feb. 8, Udvar-Hazy announced his retirement and cleaned out his desk at ILFC's posh offices in the top floors of Century City's MGM Tower.

But less than two weeks later, Udvar-Hazy said he was itching to strike a deal and was able to get Air Berlin to lease an Airbus A320 from him. The deal harked back to his first in the mid-1960s, when as an economics undergraduate at UCLA he struck his first million-dollar agreement with an airline that eventually spawned the aircraft leasing business.

Though Udvar-Hazy sees ILFC as a competitor, he said his objective was not to hurt the company that he co-founded.

"We have a lot of friends over there" at ILFC, he said. "Our children grew up together. We go to barbecues together. I'm not looking to hurt them. I think there's a big enough market out there that we both can prosper."

ILFC's parent, AIG, declined to comment.

Udvar-Hazy said his goal was to have ALC own as much as 125 aircraft by spring. Within the next five years, he expects ALC's fleet to grow to 350 to 500 planes, placing the firm among the largest aircraft leasing companies but still far behind ILFC's fleet of nearly 1,000 aircraft.

"I think that's a manageable, healthy size," he said, noting that he has a staff of only about 25. "It's nice to work from a blank sheet of paper."

william.hennigan@latimes.com

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