Strong demand from airlines and investors has increased Dublin-based SMBC Aviation Capital’s interim pre-tax profit to $200 million, marking 19% growth on the $168 million interim figure that it posted in 2018.

SMBC Aviation Capital CEO Peter Barrett said the improved result stemmed from SMBC’s strong aircraft portfolio, asset-interest from trade investors and a “relentless focus” on customer relationships.

“This has allowed us to deliver a strong financial performance in the first half of the year, demonstrating our ability to deliver profitable growth,” he said.

For the six months ended Sept. 30, “robust demand” from airlines and investors drove SMBC’s revenue up 13% to $597.4 million. After costs, this translated into a $200 million pre-tax profit, with a 41% operating margin.

“The global aviation industry is continuing to face some challenges. Our young, fuel-efficient fleet and close collaboration with the aircraft manufacturers, combined with a strong track record over 18 years of delivering a disciplined strategy, means we are confident that we can continue to deliver further growth,” Barrett said.

SMBC has been pursuing a “new technology” strategy for its portfolio. At the end of the six-month period, latest-generation aircraft made up 42.2% of the Irish lessor’s portfolio, up from 30.6% in September 2018.

In an exclusive phone interview with ATW, Barrett said lease rates for incumbent aircraft have generally remained stable and the company is seeing good demand, including its A320neo placements.

SMBC is a narrowbody specialist, primarily taking on widebodies only through sale and leasebacks. Barrett said this is a “different dynamic” to direct orders, but he observed a softening market for A330s and Boeing 777s.

During the first half, SMBC took delivery of 17 aircraft, comprising two Airbus A320s, one A321, 13 A320neos and one Boeing 787, taking its average fleet age to 4.2 years.

SMBC signed letters of intent to place 21 aircraft from its order book and sold 16 owned aircraft, with an average age of 7.3 years. The company also signed commitments to sell a further 15 aircraft during second half, with an average age of 10.7 years.

“The market for trading aircraft remains good,” Barrett told ATW. “We have weighted a lot of our trading into the first half.”

As of Sept. 30, these transactions left SMBC with a portfolio of 717 owned, managed and committed aircraft, spanning 83 airline customers in 37 countries.

SMBC said its global asset spread comprised 43.6% in Asia, 28.2% in Europe, Middle East and Africa (EMEA) and 28.2% in the Americas. “We see Asia as an incredible driver for growth. It continues to be an important market,” Barrett said.

The SMBC portfolio includes 237 owned aircraft, valued at $12.4 billion, which marks a 10% increase in owned-aircraft value compared with September 2018.

SMBC was established in 2001 and, in 2012, was acquired by a consortium of two of Japan’s biggest companies: SMFG and Sumitomo Corp.

“Ongoing cooperation with our shareholders continues to reap benefits in selling aircraft into the Japanese market, the largest standalone aircraft investment market globally,” SMBC said, with nine aircraft sold to Japanese investors during the first half.

In terms of investment, SMBC said it has received $10.6 billion in financial backing from its shareholders, with $5.3 billion in available liquidity. Over the six-month period, SMBC also raised $620 million in third-party funding.

Victoria Moores