Financial & Logistics Business Unit - Business Overview
Many people taking a trip for business or pleasure prefer to travel by air because flying is the fastest and most comfortable means of mass transportation between major cities at home and abroad.
Up until the early 1990s, air services were generally wholly provided by airlines which purchased aircraft of their own to fly. Due to this operation style, each carrier needed a huge amount of investment to buy aircraft, for example, a small jet plane with less than a 200-seat capacity was priced at ¥5 billion and a jumbo jet with a more than 500-seat capacity cost at least ¥20 billion. An air carrier operating both domestic and international services needs to secure a fleet of 200 to 300 airplanes, which would cost the company a massive ¥2 to ¥3 trillion, assuming the average cost to buy one aircraft was ¥10 billion.
The airline industry, previously led by government-run carriers or similar public organizations with the capacity to raise such massive amounts of fund, changed dramatically in the mid-90s when private carriers entered the market, resulting in intensified competition and industry reorganization, and an alternative to the costly aircraft procurement style had to be sought.
Airline companies make close market analyses to determine planes to be used and flight volumes for specific routes. Those companies would like to be able to also respond flexibly to changeable market trends. Such flexibility was almost impossible for airlines which had to buy their own fleets. This unmet need could be satisfied by aircraft leasing, which makes it possible to procure aircraft suited for specific routes in a timely manner for desired periods. That is why demand for aircraft leasing has rapidly increased.
To respond to this market trend, SC launched an aircraft leasing business in 1995, shifting the focus of its aircraft business from sales to leasing. In this move SC established Sumisho Aircraft Asset Management B.V. (SAAM), SC's aircraft leasing subsidiary located in the Netherlands.
It is essential within the aircraft leasing business to own a wide selection of aircraft to meet carriers' needs at any one time. Our fleet has been purchased via SAAM with preference for Boeing 737s and Airbus 320s, two of the most popular airplanes among air carriers worldwide. However, SC alone could no longer on its own provide sufficient funds for the leasing business.
SC and Sumitomo Mitsui Financial Group, Inc. (SMFG) developed a strategic partnership to integrate leasing companies, resulting in the October 2007 establishment of Sumitomo Mitsui Finance & Leasing Co., Ltd. (SMFL). SC launched its aircraft leasing business jointly with SMFL as a focus of the leasing partnership strategy.
SMFL, one of Japan's largest leasing companies, boasts a robust financial base, which supported sales revenues of more than ¥940 billion in fiscal 2008. Combining SMFL's strong financial power and its own accumulated expertise, SC pursues sound and effective planning of purchasing aircraft to lease.
