'You're in their pockets': High Court row over valuation in General Electric planes deal with Lebedev-controlled Blue Wings airline


One of the world’s biggest aircraft valuers was accused in the High Court of being in the pockets of General Electric’s vast GECAS commercial aeroplane leasing division.

The allegation against Avitas came during the court battle between GECAS and Alpstream, an investment company in which Alexander Lebedev - whose son Evgeny owns The Independent newspaper - is a major investor. Alpstream claims GE rigged the auction of the seven planes, selling them to itself at a knockdown price. GECAS strongly disputes all the allegations.

Avitas vice president Douglas Kelly was appearing as an independent expert witness on behalf of GECAS, and Alpstream’s QC accused him of being biased when he claimed the planes were sold for a fair price.

QC Charles Béar, accused Mr Kelly’s organisation of being too closely involved with GECAS to be independent, comparing it to Arthur Andersen’s relationship with Enron. “[Arthur Anderson] were led astray, weren’t they, by the commercial relationship that they had with their client?”

Mr Kelly vehemently denied that to be the case with his company, stating that GE only represented 2% of Avitas’s business.

Mr Béar went on to quote the International Air Transport Association chief Giovanni Bisignani who, at the time of the 2010 auction of the Alpstream planes, declared “the pace of the upturn is strong”. Mr Béar demanded to know why Mr Kelly had not mentioned that view in his valuation report.

Mr Kelly responded that Mr Bisignani had  not been specifically discussing the market for Airbus A320s, so his comments were not relevant.

But Mr Béar said: “Let’s face it, Mr Kelly, you know that if you make any admission contrary to your client’s interests, the money you earn from GECAS is at stake. That’s the reality of your evidence, isn’t it?”

“No it’s not,” responded Mr Kelly.

“You are protecting your wallet, aren’t you?” Mr Béar replied.


“You can be bought.”


Mr Kelly said he gave his valuation because he considered the auction to be a “distressed” sale. This was because Alpstream’s airline Blue Wings had defaulted on GE’s mortgage over the planes. In all but the rarest of instances, a repossession situation represented a distressed sale that inevitably carries a discount in the valuation, Mr Kelly said.

He added: “What was going on at that time… we weren’t coming out of a recession, we were still in a global downturn, and what happened was, because of the financial crisis and the weakness of the banking system, it became difficult for airlines to get financing for aircraft, except for new aircraft.”

He said it was especially difficult for anybody to get financing for A320s of the type GECAS was selling for Alpstream.

However, Mr Béar pointed out that there had been some potential buyers with access to funding at the time. In fact, Macquarie, the Australian investment giant, expressed an interest in bidding for Alpstream’s planes. An offer such as this, Béar said, highlighted that it was not a “distressed sale” and should not have been valued as one.

Mr Kelly disagreed, saying Macquarie did not state a price, and that for a mortgage company like GE suddenly getting seven aeroplanes to sell due to a mortgage default did represent a distress situation.

The case continues.

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