Saab and British Aerospace are playing down reports that they plan to merge their regional turboprop leasing operations following BAe's decision to buy a 35% stake in the Swedish manufacturer. Instead, the companies say they have begun "benchmarking" their respective asset management operations "-to identify best practices-with a view to maximising shareholder value".
"There have been no conversations on a merger," stresses Henrik Schroder, president of Saab Aircraft Finance. "We are trying to find a common platform for discussions," he explains. "As an established asset management company with five years of experience, we look forward to exchanging our experiences with Saab," says Stephen O'Sullivan, executive vice-president of BAe Asset Management.
The Swedish manufacturer entered the asset management business late last year when it decided to phase out production of the Saab 340 and 2000 by mid-1999. This left Saab with financial liabilities on 296 aircraft, which will increase to 326 by the time production ends.
By the end of 1997, Schroder says, Saab had issued guarantees totalling $744 million to support leases on the 296 aircraft - 85 Saab 340As, 190 Saab 340Bs and 21 Saab 2000s - plus another $40 million to cover Swedish export credit agreements. The asset management operation was formed at that time to sublease the turboprops to help offset Saab's head lease obligations to the financial institutions owning the aircraft.
Schroder says the book value of Saab's portfolio of turboprops has been reduced to $120 million with $350 million in reserves set aside to cover the expected shortfall in sublease revenue over the next 17 years. The company's goal is to generate sufficient rental revenue to eliminate the reserve - a target that more experienced BAe describes as "ambitious".
The Swedish company points out that 87% of the 410 Saab 340s in service are with just 11 operators, most on long-term leases. Of these, Schroder says, five are increasing their Saab 340 fleets, including Northwest Airlink carrier Mesaba. Only around 15 used 340s are available worldwide, he says, while just two of Saab's portfolio of 340s are inactive.
Source: Flight International
