'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.

PROMOTED VIDEO
News
ebooksNow available in paperback
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

Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

Reach Volunteering: Charity Treasurer

Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

SThree: Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

Ampersand Consulting LLP: Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

Kenyans still waiting for justice over Mau Mau uprising

Thousands join class action over Britain's role in the emergency
Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

The last Christians in Iraq

After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

Britain braced for Black Friday
Bill Cosby's persona goes from America's dad to date-rape drugs

From America's dad to date-rape drugs

Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
Clare Balding: 'Women's sport is kicking off at last'

Clare Balding: 'Women's sport is kicking off at last'

As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

Oh come, all ye multi-faithful

The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
Dr Charles Heatley: The GP off to do battle in the war against Ebola

The GP off to do battle in the war against Ebola

Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

Flogging vlogging

First video bloggers conquered YouTube. Now they want us to buy their books
Saturday Night Live vs The Daily Show: US channels wage comedy star wars

Saturday Night Live vs The Daily Show

US channels wage comedy star wars
When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

When is a wine made in Piedmont not a Piemonte wine?

When EU rules make Italian vineyards invisible
Look what's mushrooming now! Meat-free recipes and food scandals help one growing sector

Look what's mushrooming now!

Meat-free recipes and food scandals help one growing sector
Neil Findlay is more a pink shrimp than a red firebrand

More a pink shrimp than a red firebrand

The vilification of the potential Scottish Labour leader Neil Findlay shows how one-note politics is today, says DJ Taylor
Bill Granger recipes: Tenderstem broccoli omelette; Fried eggs with Mexican-style tomato and chilli sauce; Pan-fried cavolo nero with soft-boiled egg

Oeuf quake

Bill Granger's cracking egg recipes
Terry Venables: Wayne Rooney is roaring again and the world knows that England are back

Terry Venables column

Wayne Rooney is roaring again and the world knows that England are back
Michael Calvin: Abject leadership is allowing football’s age-old sores to fester

Abject leadership is allowing football’s age-old sores to fester

Those at the top are allowing the same issues to go unchallenged, says Michael Calvin