For many years, asset ownership has been central to how companies think about growth.
A larger aircraft fleet, more manufacturing facilities, additional logistics capacity or a broader portfolio of infrastructure assets has often been viewed as evidence of a stronger business.
In capital-intensive industries, that relationship remains important. Physical assets are essential to generating revenue, serving customers and maintaining operating capacity.
But owning every asset outright is not always the most efficient way to build a business.
An increasingly relevant question is whether a company can preserve the economic value of its expertise while allowing other investors to finance a greater share of the assets it operates.
I find this distinction particularly important in the current environment.
The ownership of an asset, the responsibility for managing it and the right to participate in its financial returns do not necessarily have to remain with the same entity.
Separating these functions can create opportunities for operators and institutional investors to use capital more efficiently.
It can also introduce new risks.
A transaction may release cash today while reducing future ownership income, introducing new contractual obligations or changing the balance of control between the parties.
This is why I believe co-investment platforms should be evaluated as strategic changes to a business model rather than simply as alternative financing arrangements.
What makes the Avolon transaction interesting?
On 2 November 2026, Avolon announced an agreement to establish Constellation Aviation with I Squared Capital and an investment vehicle ultimately owned by the Abu Dhabi Investment Authority, or ADIA.
The new platform is expected to acquire an initial portfolio of 22 leased aircraft from Avolon.
The portfolio has an estimated market value of approximately $1.4 billion.
The aircraft have an average age of around five years and are leased to 17 airlines operating across 15 countries.
A more detailed filing from Avolon's parent company, Bohai Leasing, indicates that the average remaining lease term was approximately 8.3 years as of 30 June 2026.
This is relevant because the platform is expected to begin with aircraft that already have established leasing relationships.
It is not simply acquiring an empty fleet and hoping to find customers later.
Existing leases offer a degree of visibility over future income, although that visibility should not be confused with guaranteed cash flow.
Airline creditworthiness, maintenance obligations, contract terms and future aircraft values remain important risks.
The most interesting element of the transaction, however, is the structure of the joint venture.
According to Bohai Leasing's regulatory disclosure, the proposed equity distribution is as follows.
| Investor | Proposed ownership |
|---|---|
| I Squared Capital-managed investment vehicle | 50.1% |
| ADIA-related investors | 34.9% |
| Avolon | 15.0% |
| Total | 100.0% |
The same ownership proportions are disclosed for the investment partnership and its general partner entity.
The general partner's six-member board is expected to include three representatives from the I Squared Capital side, two from the ADIA-related investors and one from Avolon.
Avolon will also act as the exclusive aircraft manager and servicer.
Its responsibilities will include leasing and lease renewals, remarketing, technical asset management, contract administration and aircraft redelivery processes.
In return, Avolon will earn management fees and commissions.
Avolon is therefore changing its economic relationship with the aircraft rather than simply walking away from them.
That is the central point of the transaction.
Selling an asset is not necessarily the same as exiting its economics
There is an important distinction to make.
Avolon is not merely keeping the aircraft on its balance sheet and raising additional financing against them.
The transaction involves the planned sale of the aircraft, or the relevant ownership and economic interests, to the new investment structure.
Once completed, the aircraft will belong to the purchasing entities under the agreed arrangements.
Avolon's previous direct ownership and its new 15% investment in the platform are not the same economic interest.
Nevertheless, Avolon will retain participation in the investment through that minority stake.
It will also continue providing asset-management services.
This potentially creates three sources of economic value.
The first is the proceeds and capital released through the aircraft disposals.
The second is the return associated with Avolon's retained equity interest.
The third is the revenue generated through asset-management fees and related commissions.
These are economically distinct.
The sale proceeds affect capital availability.
The retained investment provides exposure to the future performance of the platform.
Management fees compensate Avolon for continuing to provide specialist operational services.
The attraction is straightforward.
Avolon can work alongside long-term institutional investors instead of having to finance the entire asset portfolio itself.
But it also gives up a substantial portion of the future ownership returns associated with the transferred aircraft.
Whether that trade-off creates value depends on the sale economics, financing costs, management arrangements and the opportunities available for redeploying capital.
A $1.4 billion portfolio does not mean $1.4 billion of unrestricted cash
The transaction also illustrates why the distinction between asset value and released capital is important.
The announced $1.4 billion represents the approximate market value of the seed portfolio.
It should not automatically be treated as the amount of free cash that Avolon will receive.
Bohai Leasing's filing values the portfolio at approximately $1.398 billion, with the final sale price to be determined under the transaction agreements.
The platform's initial equity investment is expected not to exceed $500 million.
Avolon's own capital commitment, representing its proposed 15% interest, is expected to be up to $75 million.
A syndicated banking facility is also expected to support the platform.
These are different financial measures.
The market value of the aircraft is not the same as the equity capital required by the investment vehicle.
The equity commitment is not the same as the amount of debt that will ultimately be drawn.
And the purchase price is not the same as the net cash released to the seller.
Existing financing arrangements, transaction costs, taxes and reinvestment obligations may all affect the seller's actual liquidity benefit.
Consider a simplified example unrelated to Avolon's disclosed transaction figures.
Assume a company sells an asset portfolio for $100 million.
The portfolio has $60 million of existing financing that must be repaid.
The seller reinvests $6 million into the new investment platform and incurs $2 million in transaction-related costs and taxes.
| Cash movement | Amount |
|---|---|
| Gross sale proceeds | $100 million |
| Repayment of existing financing | ($60 million) |
| Reinvestment in the new platform | ($6 million) |
| Transaction costs and taxes | ($2 million) |
| Net cash released | $32 million |
Under these assumptions, the company transfers a $100 million portfolio but releases $32 million of net cash.
The financial benefit must then be assessed against the income and returns the company has surrendered, as well as the future returns it expects from the retained investment and management contract.
The broader point is that capital efficiency cannot be measured through the gross transaction value alone.
The economic benefit begins with the net capital released and depends on how productively that capital is used afterwards.
Capital recycling can change the growth equation
Avolon's third-quarter results, published on 5 November, help place the transaction in a wider strategic context.
The company reported quarterly net income of $214 million and operating cash flow of $512 million.
Total assets were approximately $34.2 billion, while available liquidity stood at around $14.1 billion at the end of September.
Avolon's owned, managed and committed fleet totalled 1,092 aircraft.
The company also placed firm orders for 250 additional aircraft from Boeing and Airbus, bringing its total firm aircraft commitments to 749.
These commitments create a substantial future need for capital.
Growth is not simply about the aircraft currently held.
It also involves financing future deliveries, expanding leasing relationships and replacing older aircraft.
If an aircraft lessor finances every new asset on its own balance sheet, asset growth and financing requirements may increase together.
A platform structure offers another possibility.
The company can release capital through selected disposals while continuing to manage assets on behalf of institutional investors.
It may then redeploy part of that capital into new aircraft or other business opportunities.
This can support the expansion of assets under management without requiring identical growth in directly owned assets.
The economic attraction is not that the business becomes completely free of capital requirements.
It is that the relationship between capital employed and operating scale can change.
That distinction matters for return on equity, return on invested capital and long-term balance-sheet resilience.
Asset management has a value of its own
One of the most interesting aspects of Constellation Aviation is the recognition of asset management as a separate economic activity.
Owning an aircraft requires capital.
Managing an aircraft through its useful life requires specialist knowledge.
Aircraft must be placed with suitable customers, lease contracts need to be administered, maintenance conditions monitored and future remarketing opportunities evaluated.
A successful aircraft lessor develops these capabilities over many years.
Institutional investors may want exposure to the income generated by aircraft without building the operational infrastructure required to manage them directly.
Avolon can provide that expertise.
The investors bring long-term capital.
The operating company contributes origination capabilities, customer relationships and asset-management expertise.
The arrangement allows the parties to specialise in different parts of the same economic activity.
However, a management fee should never be viewed only as a source of income for the operator.
For investors, it is also a cost.
Higher management fees and commissions reduce the cash available for distribution.
At the same time, high-quality management can potentially improve collections, reduce downtime, protect aircraft condition and support better residual values.
The relevant question is therefore not simply whether management fees are low.
It is whether the services provided generate more economic value than they cost.
That is the basis on which management arrangements should be assessed.
Contract economics determine who captures the return
In my view, the financial outcome of a co-investment structure is inseparable from its contractual terms.
Bohai Leasing's filing explains that the platform will receive lease income, proceeds from aircraft disposals and other operating revenues.
After operating costs, including relevant management fees and commissions paid to Avolon, remaining amounts will be distributed according to the agreements between the investors.
The public disclosures do not provide enough information to calculate the precise management fee rates or the future return on equity.
That limitation matters.
Two platforms holding similar assets could produce very different returns for their investors and operators.
The difference could arise from financing terms, fee structures, maintenance responsibilities, the allocation of residual-value risk and the decision rights assigned to each party.
The economic rights matter just as much as the ownership percentages.
For example, an operator receiving management income may have incentives that differ from those of an investor seeking the highest possible distributable cash return.
A structure that rewards asset growth without adequately considering investment performance could create conflicts.
Well-designed governance and contractual protections are therefore essential.
The objective should be to align the operator's commercial incentives with the long-term investment performance of the assets.
A minority stake and an exclusive management mandate do not mean full control
Avolon's proposed 15% ownership and exclusive servicing role should not be interpreted as giving it unilateral control over the platform.
The proposed general partner board contains six representatives.
Avolon is entitled to one seat, while the remaining five are allocated to the institutional investor groups.
The parties' decision-making rights will depend on the governance provisions of the relevant agreements.
This distinction also matters for financial reporting.
Managing an asset does not automatically mean controlling the entity that owns it.
Under IFRS 10, control depends on the combination of decision-making power, exposure to variable returns and the ability to use that power to influence those returns.
Whether a manager acts as a principal or as an agent is also relevant.
It would therefore be inappropriate to conclude that the transaction automatically removes all related assets or financing exposures from Avolon's consolidated financial statements.
The accounting outcome requires an assessment of the contractual arrangements, control rights, asset transfers and any continuing obligations.
A transaction can change the economic allocation of capital and risk without necessarily producing every balance-sheet effect that might initially be expected.
Why institutional investors are attracted to these structures
The operator's motivation is only one side of the transaction.
The investment case for ADIA and I Squared Capital is different.
Institutional investors can gain exposure to specialised infrastructure assets and contractual income without having to develop the operational capabilities required to manage those assets themselves.
The initial Constellation portfolio is leased to airlines across several countries.
That provides a degree of customer and geographic diversification.
The long remaining lease terms also create visibility over future contractual revenues.
But visibility is not certainty.
Airlines may experience financial difficulties.
Maintenance expenses may exceed expectations.
Aircraft can remain unleased following the end of a contract.
Residual values can change with interest rates, technology preferences and aviation market conditions.
Borrowing can increase the potential return on equity, but it can also amplify losses and refinancing risk.
For an institutional investor, the essential question is whether expected lease revenues and residual values are sufficient to cover operating costs, debt service, maintenance obligations and the required return on capital.
Long-duration assets, suitable financing and experienced management need to work together.
The existence of a long-term lease does not remove the need for detailed underwriting.
The CFO's decision is not simply whether to sell
When evaluating a proposal to transfer assets into a co-investment platform, I would not begin and end with the reduction in reported assets.
A more useful approach is to compare the entire economic position before and after the transaction.
At least three elements need to be assessed together.
First, the net amount of capital released.
Second, the economic value of the retained equity position and management contract.
Third, the future cash flows and returns surrendered through the asset transfer.
| Evaluation area | Central question |
|---|---|
| Net capital released | How much cash remains after debt repayment, reinvestment and transaction costs? |
| Foregone returns | Which future ownership cash flows are being transferred to investors? |
| Management economics | How sustainable and profitable are management fees and commissions? |
| Retained equity | What cash distributions and long-term value can the remaining stake generate? |
| Financing exposure | What debt, guarantees or future capital commitments remain? |
| Governance | Who controls acquisitions, disposals, budgets and financing decisions? |
| Capital redeployment | Where will the released capital be invested and at what expected return? |
| Alternative case | Would retaining full ownership produce greater risk-adjusted value? |
I consider the final question particularly important.
The fact that a transaction can be financed does not necessarily make it the best capital-allocation decision.
The company should compare the risk-adjusted value of retaining the assets with the combined value of sale proceeds, released capital, management income and retained investment returns.
The cost of capital, liquidity requirements and available growth opportunities will influence the answer.
In some cases, retaining ownership may create more value.
In others, releasing capital while managing a larger portfolio alongside institutional investors may be more attractive.
The structure is not the objective.
The objective is superior risk-adjusted economic value.
Relevance beyond aircraft leasing
I believe these models are also relevant when considering the financing needs of businesses in Türkiye and other developing markets.
Many companies operate with substantial capital committed to manufacturing facilities, machinery, energy assets, logistics infrastructure and commercial property.
Retaining full ownership may be strategically necessary in some cases.
In others, different capital structures could be considered.
A manufacturing company whose competitive advantage lies in production may be able to finance selected infrastructure assets alongside long-term investors.
A logistics business with strong operating expertise may be able to manage a larger asset base without owning every facility or vehicle directly.
Energy and data-centre projects may also benefit from combining institutional capital with specialised operating capabilities.
However, these are possible applications, not interchangeable transaction structures.
An aircraft leasing portfolio, a power generation facility and a data centre have different operating characteristics, contractual arrangements and residual-value risks.
Their financing structures should reflect those differences.
Local conditions also matter.
In Türkiye, financing costs, foreign exchange exposure, inflation, collateral arrangements, taxation and regulation can materially change the economics.
The transaction must clearly establish which party owns each right, receives each revenue stream and carries each risk.
Otherwise, a structure that appears to improve liquidity today may create a more expensive or restrictive financial position over time.
Where is the value actually created?
The Constellation transaction illustrates a distinction that is becoming increasingly important across private capital and infrastructure.
Ownership is one way of creating economic value.
It is not the only one.
For some businesses, competitive advantage comes primarily from the assets they own.
For others, a significant part of the advantage lies in their ability to originate assets, operate them efficiently, serve customers and manage performance throughout the assets' economic lives.
In the second case, combining specialised expertise with institutional capital can create opportunities that differ from simply expanding a wholly owned portfolio.
But three conditions need to be met.
The transaction must release usable capital.
The retained investment and management activities must generate sufficient economic value.
And the contractual framework must create a sustainable alignment of interests between investors and the operator.
If those conditions are not satisfied, the expected improvements in capital efficiency may not materialise.
That is why the Avolon, I Squared Capital and ADIA partnership deserves attention beyond the aircraft leasing industry.
It offers a useful example of how the relationship between asset ownership, institutional capital and operating expertise is evolving.
Conclusion
For many years, expanding a corporate balance sheet was closely associated with expanding the business itself.
In capital-intensive sectors, that relationship is becoming more flexible.
A company may continue to play an economically important role in an asset without owning it outright.
It may release part of its invested capital while retaining operational responsibilities.
It may expand the scale of assets it manages by working alongside long-term institutional investors.
None of this guarantees a better financial outcome.
The result depends on how much net capital is released, what happens to that capital, the value of retained rights and the future returns surrendered through the transaction.
My central conclusion is that capital efficiency cannot be assessed solely by looking at which balance sheet holds the asset.
It requires understanding who provides the capital, who manages the asset, who bears the risk and how the resulting economic returns are allocated.
The real innovation in co-investment platforms is not that ownership becomes irrelevant.
It is that ownership, expertise and capital can be organised in different ways.
I believe that distinction will become increasingly important in how private capital and infrastructure investments are structured over the coming years.
Mehmet Taşdemir
Co-Founder & CEO, Finance & Strategy Focus
11 November 2026
Sources
Avolon, Constellation Aviation Joint Venture Announcement, 2 November 2026
https://www.avolon.aero/news/avolon-constellation-aviation-launch
Bohai Leasing, Establishment and Investment Structure of Constellation Aviation, Regulatory Disclosure 2026-094, 3 November 2026
https://money.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?id=12688374&stockid=000415
Bohai Leasing, Aircraft Portfolio Disposal, Regulatory Disclosure 2026-095, 3 November 2026
https://static.cninfo.com.cn/finalpage/2026-11-03/1225653766.PDF
Avolon, Third Quarter 2026 Financial Results, 5 November 2026
https://www.avolon.aero/newsrooms/avolon-q3-2026-net-income-results
I Squared Capital, Constellation Aviation Joint Venture Announcement, 2 November 2026
https://isquaredcapital.com/news/avolon-isq-aida-launch-constellation-aviation/
Avolon, Asset Management
https://www.avolon.aero/asset-management
Reuters, Avolon Creates New Aircraft Leasing Platform with ADIA and I Squared Capital, 2 November 2026
IFRS Foundation, Control Assessment under IFRS 10, June 2026
https://www.ifrs.org/news-and-events/updates/ifric/2026/ifric-update-june-2026/