Introduction Nowadays, there are several approaches of long-term financing which depends on the needs of each sector of business. With strengthening Asian currencies and lowering prices of aircraft, Asian buyers are given an edge to engage in acquiring leasing business. The shift of leasing form West to East is more apparent in Japan and China, where healthy stable economic growth persists and the needs of domestic and international aviation increases.
The articles “Aircraft Leasing Shifts East From West” published by The Wall Street Journal Asia (2012) and “Jettisoning the Aircraft Leasing Business” by The New Year Times (2012) provided valid evidence to the afore mentioned phenomenon.
First, in January of 2012, the Royal Bank of Scotland Group agreed to sell its aircraft-leasing operations to Japanese investor Sumitomo Mitsui for $7.3 billion dollars. Then Mitsubishi UFJ Lease and Finance Company, the leasing unit of Mitsubishi UFJ Lease and Financial Group, acquired U.S. aircraft-leasing entity Jackson Square Aviation for $1.3 billion dollars. However, a major highlight was 80.1 percent sales made by American International Group (AIG) of its International Leasing Finance Corporation (ILFC) to a Chinese consortium for $4.2 billion dollars, with a 9.9 percent option for later acquisition. Mostly state-owned enterprises, a Chinese consortium which included China Aviation Industrial Fund, owned by Aviation Industry Corporation of China and China Construction Bank; New China Trust, a trust company with Barclays’ 19.5 percent ownership; and P3 Investments Limited. Thus the American International Group, as a result of transaction, would only retain 10 percent of its International Leasing Finance Corporation.
Indeed, such a rapid, dramatic shift from western to eastern hemisphere makes not only aircraft leasing, but leasing in general, a fascinating topic of research. It is therefore imperative that further, more in-depth examination regarding history, rules and regulations, advantages and disadvantages, and the future of leasing be conducted. The knowledge derived from the research would create a significant impact toward the students and equip those individuals with up-to-date information for practical use in real-life scenarios. 1
General explanation of leasing Leasing is a big business internationally .In a simple term, leasing is an arrangement whereby a person uses an expensive asset on a long term basis by paying monthly rent to the owner. It is very popular in house and building rent market.
By the definition, we know that leasing is a contractual arrangement calling for the lessee to pay the lessor for use of an asset. Written or implied contract by which an owner (lessor) of a specific asset (such land, building, equipment, or machinery) grants a second party (the lessee) the right to its exclusive possession and use for a specific period and under specified conditions, in return for specified periodic rental or lease payments.
Pervasive and highly suitable, leasing is an appropriate form of financing for machinery, equipment and vehicles for industry and the public sector. You choose the supplier and the equipment and lessor (owner) pays the cost price to the supplier and becomes the owner of the equipment. Your organization obtains the use of the equipment by paying a rental charge over an agreed period. Costs are distributed over the period the equipment is used and generates earnings.
Leasing provides individuals and business firms the opportunities and convenience, but there are some complications will arises which caused by the laws in each of countries, for instance, different accounting and reporting requirements, currency risk and exchange control ,enforcement of contract and withholding tax and income tax ,and so on. In order to benefit from leasing, we must consider different issues it implied.
Types of leasing In practice, there are many kinds of lease concept, but most of...
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