Avenue Capital's Lasry leases old planes while Boeing's 737 MAX sits grounded
By Jonathan Stempel
NEW YORK (Reuters) - Boeing Co's (NYSE: BA) struggle to return its 737 MAX planes to the skies after two fatal crashes has been a boon for Marc Lasry, the billionaire chief executive of Avenue Capital Group, who is buying inexpensive, older aircraft for his leasing business.
Speaking at the Reuters Global Investment Outlook 2020 Summit in New York, Lasry said he is raising $1 billion to buy "mid- to end-of-life" planes, including the narrow-body Airbus 320 (NYSE: AIR) and wide-body Airbus 330, to lease to airline customers, often for three or five years.
Lasry specializes in distressed and undervalued debt, as well as equity opportunities in the United States, Europe and Asia at Avenue, which invests $10.4 billion of assets. He also co-owns the National Basketball Association's Milwaukee Bucks.
Forbes magazine estimates Lasry's net worth at $1.8 billion.
He said older planes can be more profitable to lease than newer, more fuel-efficient planes because they cost far less to buy, at a time when fuel prices are low.
"There's just more and more people flying," Lasry said. "You can either go out and buy a plane for $100 million that's more fuel-efficient, or buy a plane for $10 million and lease it out. They're paying more in fuel but they didn't spend $100 million."
It can be lucrative too. "The fact that we are generating sort of mid-teen type of returns, I think we can raise $2 or $3 billion," he said. "The reason we said a billion is we know we'll raise a billion."
Boeing has said it hopes to return the 737 MAX to the air this year, after making software changes following two crashes that killed 346 people.
The U.S. Federal Aviation Administration grounded the 737 MAX in March, as have regulators in other countries.
On Monday, the head of the European Union Aviation Safety Agency said the plane was likely to return to European skies in the first quarter of 2020.
Lasry said Boeing's problems have helped his strategy.
"It is a trickle-down, so it has been beneficial to us," he said. "There is a demand for older planes... and people can demand a higher price for that."
Passengers, moreover, are not flying less just because 737 MAX planes are parked, he said.
"You're either going train, or going by car, or flying," he said. "If you're going from New York to Florida, you're going by plane, especially for business."
(For other news from the Global Investment Outlook 2020 Summit, click on http://www.reuters.com/summit/investment20 http://www.reuters.com/summit/investment)
(Reporting by Jonathan Stempel in New York; Additional reporting by Lawrence Delevingne; Editing by Dan Grebler)