'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
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Life and Style
fashion
Arts and Entertainment
tv
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

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

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there