Apollo broadens Abu Dhabi partnership through Mubadala Capital stake

The Abu Dhabi Investment Authority, Avolon, and I Squared Capital have formed a new joint venture called Constellation Aviation. This platform aims to provide airlines with access to fleet capacity and investors with exposure to long-term contracted cash flows. Upon completion, Constellation Aviation is expected to acquire a portfolio of 22 aircraft from Avolon, valued at $1.4 billion.

These planes, aged around five years on average, are currently leased to 17 airlines in 15 countries. The joint venture is expected to grow over time, according to the companies. Khadem AlRemeithi, executive director of the infrastructure department at Adia, noted that aircraft leasing is a resilient and expanding sector driven by strong structural demand for modern aircraft.

The Abu Dhabi Investment Authority, which manages assets totaling $1.1 trillion for the Abu Dhabi government, plans to diversify its investments in sectors like equities, fixed income, infrastructure, private equity, and property across the globe. The aviation industry is expanding due to rising passenger demand, but airlines face challenges such as aircraft supply shortages and delivery delays, which have increased the demand for leased aircraft.

In July, Dubai Aerospace Enterprise (DAE) collaborated with US-based Neuberger Specialty Finance to establish Mustang Aerospace, an aircraft leasing co-investment vehicle aiming for an asset base of up to $6 billion in the medium term. DAE also signed an agreement with Blackstone Credit & Insurance to launch a platform investing $1.6 billion annually in a portfolio of commercial aircraft.

Gautam Bhandari, co-founder, managing partner, and global chief investment officer of I Squared Capital, highlighted that aircraft manufacturers' order books span a decade or more, and airlines depend on lessors with scale and aircraft delivery slots to expand their fleets. Avolon maintains a minority equity stake in the joint venture and serves as Constellation Aviation's exclusive aircraft manager and servicer.

The transaction is subject to obtaining the necessary regulatory approvals and will be supported by a syndicated debt facility from international banks.