'Nothing short of madness': General Electric's GECAS accused of cashing in on cheap auction of planes it repossessed from Blue Wings

 

The way General Electric’s aeroplane-leasing division handled the sale of planes on behalf of Alpstream, a Swiss-based aviation company, was “nothing short of madness”, the High Court was told this week.

Speaking as an expert witness for Alpstream, Adrian Lee, who specialises in selling second-hand aircraft, was harshly critical about what he claimed was the lack of effort GE made when marketing the seven Airbuses. GE denies any such negligence.

GE had lent a mortgage on the planes but repossessed them when the Alpstream-backed Blue Wings airline got into financial difficulties. GE had a duty of care to obtain the best price as part of its mortgage contract, so that all money obtained after it had recouped its loan could be passed on to Alpstream, a company in which Alexander Lebedev, whose son Evgeny Lebedev owns The Independent,  has a major stake.

In the event, Alpstream claims, GE carried out a lavish refurbishment of the planes before selling them at an auction in London to another division of GE. No other bidders turned up to the auction apart from the GE division. The planes sold at a knockdown price leaving no money left for Alpstream, the Lebedev-backed company says.

Under cross-examination, Mr Lee said it was highly unusual for planes in relatively good condition to be sold in an auction, rather than through a wide-ranging negotiated sale process.

He said that, in his experience, auctions had a reputation for being mainly for older, less desirable planes. Stephen Moriarty, QC for General Electric’s GECAS division, pointed out that another witness had claimed auctions were not uncommon – a claim Mr Lee disputed.

Mr Lee said GE had not contacted nearly as many potential bidders as he would have done in a negotiated sale process, reducing the number of potential buyers.

GE had contact with 38 potential bidders and advertised the auction in trade magazines, but Mr Lee said that did not constitute anywhere near as much of a marketing effort as would be normal for such a number of high value planes.

“With the particular type of model that you have here, Airbus A320-200s, there are over 300 operators worldwide with around 3,000 aircraft in service amongst them, so from my point of view, to only contact…40… seems to be falling short of the effort required to gain best value for these aircraft.”

He said he would have contacted all 300 by email and then telephone to flush out the maximum potential interest.

However, he admitted that he was not an expert in the auctioning of aircraft, having only ever conducted negotiated sales.

Mr Lee was also extremely critical of GE’s decision to spend an average of $9 million per plane on refurbishments before the auction, describing it as “madness”. “If someone asked me ‘shall we do this?’ before we auctioned aircraft I would shout from the tallest steeple: “No.”… This is a huge investment in time and effort and resources and with the auction process there is no guarantee that anyone is going to buy the aircraft.”

Mr Moriarty countered that doing up the aircraft could make them easier to sell. He also pointed out that Mr Lee had not been selling aeroplanes at the time of the GE auction in 2010 and described his seven years in the aircraft remarketing industry as “footloose and fancy free” because he had been employed in other industries during his 30 year career.

He also cast doubt on Mr Lee’s independence as a witness, given that parts of his report into the planes sale had used the same wording as the Lebedev team’s own legal claim documents. Mr Lee said the fact that the wordings were identical did not detract from their accuracy.

The two sides also battled over whether a negotiated sale might have taken longer than an auction.

The case continues.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Mortgage Advisor - OTE £95,000

£40000 - £95000 per annum: Recruitment Genius: This is an exciting opportunity...

SThree: Trainee Recruitment Consultant

competitive: SThree: Are you passionate about sales?Do you have a keen interes...

Recruitment Genius: Loan Adviser - OTE £30,000

£17000 - £30000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Day In a Page

Isis in Syria: Influential tribal leaders hold secret talks with Western powers and Gulf states over possibility of mobilising against militants

Tribal gathering

Influential clans in Syria have held secret talks with Western powers and Gulf states over the possibility of mobilising against Isis. But they are determined not to be pitted against each other
Gaza, a year on from Operation Protective Edge: A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians

Gaza, a year on from Operation Protective Edge

A growing population and a compromised and depleted aquifer leaves water in scarce supply for Palestinians
Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously

Illnesses, car crashes and suicides

Dozens of politicians, bureaucrats and businessmen linked to Indian bribery scandal die mysteriously
Srebrenica 20 years after the genocide: Why the survivors need closure

Bosnia's genocide, 20 years on

No-one is admitting where the bodies are buried - literally and metaphorically
How Comic-Con can make or break a movie: From Batman vs Superman to Star Wars: Episode VII

Power of the geek Gods

Each year at Comic-Con in San Diego, Hollywood bosses nervously present blockbusters to the hallowed crowd. It can make or break a movie
What do strawberries and cream have to do with tennis?

Perfect match

What do strawberries and cream have to do with tennis?
10 best trays

Get carried away with 10 best trays

Serve with ceremony on a tray chic carrier
Wimbledon 2015: Team Murray firing on all cylinders for SW19 title assault

Team Murray firing on all cylinders for title assault

Coaches Amélie Mauresmo and Jonas Bjorkman aiming to make Scot Wimbledon champion again
Wimbledon 2015: Nick Bollettieri - Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!

Nick Bollettieri's Wimbledon Files

Vasek Pospisil must ignore tiredness and tell himself: I'm in the quarter-final, baby!
Ashes 2015: Angus Fraser's top 10 moments from previous series'

Angus Fraser's top 10 Ashes moments

He played in five series against Australia and covered more as a newspaper correspondent. From Waugh to Warne and Hick to Headley, here are his highlights
Greece debt crisis: EU 'family' needs to forgive rather than punish an impoverished state

EU 'family' needs to forgive rather than punish an impoverished state

An outbreak of malaria in Greece four years ago helps us understand the crisis, says Robert Fisk
Gaza, a year on from Operation Protective Edge: The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas

Gaza, a year on from Operation Protective Edge

The traumatised kibbutz on Israel's front line, still recovering from last summer's war with Hamas
How to survive electrical storms: What are the chances of being hit by lightning?

Heavy weather

What are the chances of being hit by lightning?
World Bodypainting Festival 2015: Bizarre and brilliant photos celebrate 'the body as art'

World Bodypainting Festival 2015

Bizarre and brilliant photos celebrate 'the body as art'
alt-j: A private jet, a Mercury Prize and Latitude headliners

Don't call us nerds

Craig Mclean meets alt-j - the math-folk act who are flying high