'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.

Life and Style
health

Do you qualify – and how do you get it?

News
Food blogger and Guardian writer Jack Monroe with her young son
people
News
i100
News
Privately schooled, Oxford educated and a former editor of arguably the world's poshest magazine 'The Lady', it's perhaps unsurprising that Rachel Johnson rarely mixes with ordinary Proles.
people

The Mayor of London's sister, Rachel Johnson, apologises for shocking tweet about the PM

PROMOTED VIDEO
News
ebooksNow available in paperback
Environment
The plant ‘Nepenthes zygon’ was donated to Kew in 2004
environmentNepenthes zygon had been growing for almost a decade and helping to keep down cockroaches
News
This artist impression shows a modern-day Atlantis
news
Arts and Entertainment
booksPhotographer snapped celebrities for 40 years - but it wasn’t all fun and games
News
i100
Sport
Aguero - who single-handedly has kept City's Champions League dreams alive - celebrates his dramatic late winner
footballManchester City 3 Bayern Munich 2: Argentine's late hat-rick sees home side snatch vital victory
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

Citifocus Ltd: Product Development - Asset Management

£Attractive: Citifocus Ltd: High calibre individual with significant product d...

Citifocus Ltd: Credit Ratings - Banking Sector

£Negotiable: Citifocus Ltd: Leading global bank seeks experienced credit analy...

Citifocus Ltd: Economic Crime Investigation & Analysis

£Attractive Package: Citifocus Ltd: High calibre individual with a high degree...

Citifocus Ltd: Snr Risk Analyst - Capital & Liquidity

£Attractive: Citifocus Ltd: High calibre individual with superior academics an...

Day In a Page

Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
Colouring books for adults: How the French are going crazy for Crayolas

Colouring books for adults

How the French are going crazy for Crayolas
Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

What would you do as a local politician faced with an impossible choice of cuts?

Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

Call me Ed Mozart

Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
10 best stocking fillers for foodies

Festive treats: 10 best stocking fillers for foodies

From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
Phil Hughes head injury: He had one weakness – it has come back to haunt him

Phil Hughes had one weakness – it has come back to haunt him

Prolific opener had world at his feet until Harmison and Flintoff bounced him
'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

'I am a paedophile'

Is our approach to sex offenders helping to create more victims?
How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital