Abu Dhabi's Adia Partners with Avolon and I Squared Capital to Launch Major Aviation Investment Platform

Abu Dhabi Investment Authority (Adia), the sovereign wealth fund of Abu Dhabi, has joined forces with aviation finance firm Avolon and infrastructure investor I Squared Capital to establish a new aircraft leasing infrastructure investment platform named Constellation Aviation. This new venture aims to provide airlines with enhanced access to fleet capacity and offer investors opportunities for exposure to long-term contracted cash flows, as announced by the companies on Monday.

Upon completion of the transaction, Constellation Aviation is slated to acquire an initial portfolio of aircraft from Avolon, valued at approximately $1.4 billion. This seed portfolio comprises 22 aircraft, averaging about five years in age, which are currently leased to 17 airlines across 15 countries. The companies indicated that Constellation is designed for future scaling.

Khadem AlRemeithi, executive director of the infrastructure department at Adia, commented, “Aircraft leasing is a resilient and growing sector supported by strong structural demand for modern aircraft.” Adia, which does not disclose its assets, manages investments on behalf of the Abu Dhabi government and is recognized as the largest sovereign wealth fund in the Gulf, with assets estimated at $1.1 trillion by consultancy Global SWF. The authority engages in both direct and indirect investments across various asset classes, including equities, fixed income, infrastructure, private equity, and property globally. In September, Adia stated its intention to diversify its investment approach across different sectors to mitigate risks.

The aviation market is experiencing growth driven by a continuous increase in passenger demand. However, airlines are contending with shortages in aircraft supply and delays in deliveries, which is consequently boosting the demand for leased aircraft to facilitate fleet renewal and expansion. This trend mirrors other recent developments in the sector, such as the July partnership between plane lessor Dubai Aerospace Enterprise (DAE) and US-based Neuberger Specialty Finance to form Mustang Aerospace, an aircraft leasing co-investment vehicle targeting up to $6 billion in assets. Additionally, in April, DAE collaborated with Blackstone Credit & Insurance to establish a platform intended to invest $1.6 billion annually in a commercial aircraft portfolio.

Gautam Bhandari, co-founder, managing partner, and global chief investment officer of I Squared Capital, stated, “Aircraft manufacturers’ order books now stretch a decade or more into the future, and airlines rely on lessors with scale and aircraft delivery slots to grow their fleets.” He added, “Avolon has one of the largest order books with Boeing and Airbus and thus enjoys significant benefits of scale.”

Avolon will maintain a minority equity stake in the joint venture and will function as Constellation's exclusive aircraft manager and servicer. The transaction's closure is contingent upon obtaining the necessary regulatory approvals. A syndicated debt facility, provided by a consortium of international banks, will support the joint venture.