Growing Asian travel boosts Singapore-based BOC Aviation in trading debut

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Investors made a beeline for the shares of aircraft leasing company BOC Aviation on its Hong Kong trading debut, a vote of confidence for the Asian air travel market.

By midday, shares of the Singapore-based company gained as much as 4.4 percent to $43.85 ($5.64) from its initial public offering price of HK$42 a share.

Despite concerns about the economic and business fallout of low oil prices hitting corporate travel, BOC Aviation's managing director and chief executive Robert Martin said the sector has long-term growth prospects.

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"Over the last couple of years, we have picked up aircrafts from airlines in parts of the world where the circumstances may have changed (and moved them) to areas in other parts of the world where they (still) have excess demand for aircraft," he told CNBC's "Street Signs".

The listing had attracted $1.1 billion in funding that will go to buying new aircraft inventory. BOC Aviation expects to make about 60 deliveries this year.

In Asia, growth in aircraft orders have been driven by an increase in travel, particularly middle-class travelers from China.

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But carriers in the region have used sale and leaseback (SLB) options more often, according to Dinesh Keskar, senior vice-president of Asia Pacific and India sales at Boeing Commercial Airplanes. Rather than place large orders of a 100 or more planes at a time, most carriers in the region have been requesting 40 or fewer or seeking out leasing deals, Keskar said.

That trend is driving BOC Aviation, which has a fleet of 270 aircrafts that are being leased out to 62 airlines in 30 countries.

BOC Aviation's Martin said 80 percent of the company's profit is from long-term lease rental while the rest comes from gains on the sale of aircrafts.

Still, some analysts see risks for BOC Aviation's business model.

Ample Capital 's director of asset management Alex Wong said that low barriers to entry and competition are likely to be challenges for BOC Aviation in the future.

Leslie Shaffer contributed to this article.

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