Chairman’s Review
I’m delighted to be issuing my first Chairman’s Review since assuming the role in May 2023. The last 12 months have been transformative for SMBC Aviation Capital. Most notably, the Company completed its acquisition of Goshawk and has since hit the ground running with the considered integration of the two businesses.
Beyond this, the last year has seen SMBC Aviation Capital continue to successfully navigate the challenges posed by the war in Ukraine and the lingering effects of Covid-19. This speaks to the quality of the management and broader team, as well as the strength of SMBC Aviation Capital’s capabilities. I would also like to take this opportunity to convey my sincere appreciation and thanks to my predecessor, Tom Tanaka, who worked tirelessly with the business to navigate this challenging period.
SMBC Aviation Capital’s resilience and agility validates the potential we saw in the business over 10 years ago when I was part of the team that led its acquisition by SMFG and Sumitomo Corporation in 2012. Having been closely involved in the post-merger integration back then, my appointment as Chairman was a full circle moment of which I am truly proud of.
When the acquisition of SMBC Aviation Capital occurred in 2012, the business was a third of the size it is now, with the number of people employed having grown from 80 to 250. The Goshawk acquisition has not only been additive to this figure, but it is also pivotal to the business in terms of increasing its scale and providing new market opportunities. This larger scale gives us more flexibility, for example: with an enlarged portfolio, SMBC Aviation Capital can increase our trading activity.
SMBC Aviation Capital’s substantial portfolio and world-class resources are underpinned by the consistent support of shareholders, SMFL, a leading general leasing company in Japan, SMBC, one of the world’s leading banks and Sumitomo Corporation, one of the leading trading and investment companies in Japan, which have supported the business with the execution of its strategy – including during the pandemic. Specifically, their support enabled SMBC Aviation Capital to capitalise on pandemic-related opportunities while the shareholders provided capital for the Goshawk acquisition. The fact that SMBC Aviation Capital can grow even in challenging periods is an example of the quality of its management team and gives me confidence the business is well-positioned to maintain its upward growth trajectory despite prevalent macroeconomic headwinds.
Due to SMBC Aviation Capital’s standing as the second-largest aircraft leasing company globally, the business has a responsibility to consider not only its financial and operational strength, but also its environmental and social contributions. As the business grows, so too does this responsibility, which we take extremely seriously. This is why SMBC Aviation Capital has a clearly defined ESG strategy – with particular focus on environmental and social initiatives.
We are investing in the latest technology, most fuel-efficient aircraft and we are working with the industry on the research and development of sustainable aviation fuel (“SAF”). Additionally, we have invested in carbon credit initiatives in Africa, Asia, and Central America.
Among the main challenges facing our industry is the need to reduce carbon emissions and achieve our 2050 net zero target. We are investing in the latest technology, most fuel-efficient aircraft and we are working with the industry on the research and development of sustainable aviation fuel (“SAF”). Additionally, we have invested in carbon credit initiatives in Africa, Asia, and Central America. These projects involve the use of energy-efficient cookstoves to reduce emissions and improve the lives and health of the people in many countries across those regions. The carbon credits produced align with the United Nations’ Sustainable Development Goals (“SDGs”). In March 2023, US-based Southwest Airlines agreed to purchase over 400,000 such carbon credits from this portfolio.
In terms of giving back to society, SMBC Aviation Capital has made great strides towards investing in our local communities through a range of excellent projects. To name but a few, I am impressed by the CSR projects that we support in Malawi and India, as well as our CSR activities here in Ireland – including the partnerships with Belvedere Youth Club and the National Gallery of Ireland.
Looking ahead, we believe the aviation industry will continue to evolve and this will present further opportunities for SMBC Aviation Capital to solidify and grow its market position. As it stands, there are clear opportunities for the business to work closely with its shareholders to sell aircraft to Japanese investors. Our network in Japan, one of the leading investor markets for aircraft trading, can support this activity. Having Japanese financial institutions and a trading company as shareholders is an important competitive advantage, not least because our shareholders understand the nature of aircraft leasing. They can therefore bring unique expertise to the management team to further support the continued long-term, profitable growth of SMBC Aviation Capital and assist the business as it grows – particularly when counter-cyclical investment opportunities arise. These business decisions will be made with our ESG strategy at the centre.
SMBC Aviation Capital has a long and expansive runway ahead and I am looking forward to serving the business as it continues to harness its many resources – our people, our management expertise and support from the shareholders - to strengthen its position in the market.
Noriyuki Hiruta
Chairman