Sumitomo Corporation's Soaring Commercial Aviation Business: Powered by the World's Second Largest Aircraft Leasing Operation

Aircraft leasing, which underpins Sumitomo Corporation's commercial aviation business, now accounts for over 50% of the world's aircraft. Four main factors drive this demand:

●Lower Upfront Costs and Financial Flexibility
Leasing reduces the high initial investment required to purchase aircraft and improves cash flow stability. In addition, because aircraft are traded in USD, leasing minimizes residual value risk and currency risks.

●Flexible Fleet Planning
Due to significant order backlogs and the production capabilities of aircraft manufacturers (as of July 2025), orders placed now for new aircraft, especially narrow-body, won't be delivered until 2030. Leasing enables earlier access to aircraft.

●Cash Generation During Crises
In economic downturns, airlines can secure liquidity by selling aircraft and leasing them back via "sale and leaseback" arrangements.

●Support for Fleet Modernization
With the increasing urgency to upgrade to more fuel-efficient aircraft, leasing plays a key role. Newer aircraft are over 15% more fuel efficient than older models. Promoting the use of newer aircraft is another crucial role leasing companies fulfill.

The success of the aircraft leasing business is rooted in the collaborative efforts of Sumitomo Corporation, SMFL and SMFG. Here's how their unique strengths drive growth.

A key strength lies in SMBC AC's ability in "discerning quality," a vital skill in the aviation industry where knowledge and experience are everything. Given the sector's high volatility – subject to economic swings and sudden global events – accurately assessing the value of assets, particularly aircraft, is essential. SMBC AC maintains strong asset value by keeping the average age of its fleet young. The ability to make shrewd judgments was particularly evident during the COVID-19 pandemic. While many non-financial lessors hesitated, SMBC AC anticipated post-pandemic demand and stepped in, committing capital to acquire a large number of aircraft. That bold decision became a major driver of the company's recent rapid growth.

Another standout capability is its on-the-ground responsiveness, honed through years of experience. SMBC AC currently serves 150 customers across 50 countries, and to mitigate geopolitical risks such as conflict or terrorism, it carefully distributes its aircraft across multiple regions across the globe.

Among the three partners, Sumitomo Corporation’s standout strength as an integrated trading company lies in its ability to build new businesses from the ground up – what it calls its "business development capability." Tapping into its global network of airlines and manufacturers, Sumitomo Corporation has launched numerous joint ventures and partnerships. One prime example is the establishment of SMBC Aero Engine Lease (hereinafter "SAEL"). Aircraft engines require removal and major maintenance every few years, creating demand for spare engines during that downtime. Recognizing this need, Sumitomo Corporation launched the new venture. The company's track record in aviation helped it secure a partnership with MTU Aero Engines, the world's largest independent engine maintenance provider. Its collaboration with MTU enabled it to steadily grow its customer base. The business was later transferred to SMFL – which added its financial strength to the mix – helping the venture grow into the world's fifth-largest engine lessor (excluding engine manufacturers), with over 100 engines owned and under management.