Aviation Finance

Developments

In the latest edition of Aviation Finance ( February 18th 2021): details of the ongoing cash burn highlighted by loss data.
February 18th 2021: The extent of the ongoing cash burn is again highlighted by reported losses, the latest coming from Air France-KLM, with a net loss of €7.1 billion in 2020. But successful fund raisings by Lufthansa, which issued four and seven bonds to the value of €1.6 billion, and equity issues by UK’s Jet2 and Norwegian start-up Flyr, show that investors remain positive; MAX groundings mean 737NG values have fallen less than A320ceo – up to now; Vaccinated-Only Flights could enjoy high load factors; Latest 'Data Snapshot' from Eurocontrol says the vast bulk of aviation emissions are by long haul flights; ESG impact - the focus of governments on the climate change agenda is putting pressure on equity investment managers and debt providers to seek compliance with ESG criteria from the companies they invest in or lend to. CORRECTION: In the E-zine sent to subscribers of the February 18th issue the headline "Aero acquires 20 aircraft from easyJet as lessors continue to acquire and place aircraft" originally erroneously referred to "Aergo" rather than "Aero" as the acquirer.


In the February 18th 2021 edition of Aviation Finance
February 4th 2021 The severity of the third wave of Covid-19 mitigated by daily improvements on the vaccine news front have combined to clarify the nature and scale of the challenges facing aviation financing. But a combination of steadfast resilience and the courage to persevere with sound business plans, along with innovation and creativity in finance, are key to the successful recovery. Examples such as AFIC's innovation, new approaches in securitisation, to legal remedies, such as NAS's reorganisation, as reported in this issue, will hasten the recovery when it comes. Also: Aircastle prices $750m senior notes; DAE prices $300m, redeems $500m notes; Anderson to become CCO at AerCap; Board changes at Nordic Aviation Capital; BOC sells five aircraft to Sirius; GOAL sells two E190-100LRs to US lessor; Flair Airlines adds 13 new 737 MAX 8s; Oliver Wyman predicts 2030 fleet of over 36,500 units; Doric in engine securitisation; easyJet Q1 sale and leasebacks raise $1bn; SMBC Aviation Capital deliveries; Thomas Cook Balearics to dissolve.

 

Perspectives

GECAS's Anton Tams on lessors' electronic maintenance records

Since its introduction the ATA Aircraft Transfer Records Working Group’s Spec2500 standard is finding a growing audience with both airlines and lessors. Anton Tams on the challenges involved in developing the new standards.

Trevor Ricards, GECAS on ABS
DVB's Kieran O'Keefe on the lease rate factor (LRF)
IBA's Dr Stuart Hatcher on lease rates

Analysis

In the January 21st 2021 edition of Aviation Finance: A growing sense of optimism
January 21st 2021: The continued availability of ample debt provision at ultra low costs due to Central Bank actions is still in evidence. In a move that signposts return to some degree of normality, Castlelake has marked the re-opening of the aircraft securitisation market with the launch of a $595 million, 27 aircraft ABS. Other signals are the launches of two new leasing platforms, a $1.5 billion platform created by Kennedy Lewis Investment Management in partnership with Arena Aviation Capital, and a $500m platform established by Ares Management Corporation. The rising sense of opportunity is also evident in Alan Joyce’s insistence that the Qantas ultra-long-haul Project Sunrise will be even more relevant in the post Covid world to the enthusiasm of Norwegian start-up Flyr; In Avolon’s 2021 Outlook its Head of Portfolio Management, Jim Morrison, predicts that traffic may recover more quickly than expected. On the (needed) caution side, IBA President Phil Seymour is saying nevertheless that there is a still 'a long road ahead' for the sector.


In the January 7th 2021 edition of Aviation Finance: Cash rich private equity investors await in the wings
January 7th 2021: Our Interview with SMBC Aviation Capital CEO Peter Barrett outlines its capital deployment strategy; Airlines, lessors remain focussed on liquidity; Contributing Editor Joe Gill says cash rich investors are in the wings, awaiting opportunities to buy modern aircraft at prices not seen for years; Leading lessors are taking a long-term perspective; The Green agenda goes beyond the MAX, neo A350 and 777X programmes; Covid difficulties offer start up airline and lessoropportunities; Lessor restructurings highlights value of specialist financial advisors in positive outcomes.


In theDecember 10th 2020 edition of Aviation Finance: Growing optimism as deals begin to materialise again
December 10th 2020: Interview: CDB Aviation's Pat Hannigan takes heart from arrival of vaccines, but tempers optimism with caution; Cash burn may lift state holdings in Europe's carriers; Leasing forecast: Lessors’ share of the market will grow, with airlines focusing more on leasing to de-risk their balance sheets with consolidation in the fragmented end of the leasing market; Covid and climate change stimulate demand for smaller jets; Norwegian Air secures court protections in Ireland and Norway; Ryanair deal far more than an order book boost for Boeing; Goshawk deferrals low, BOC Aviation raises RCF to $3.5bn; Vaccine boost for airline share prices.

 

Aircraft Leasing & Lessors

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Aircraft & Airlines

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In theNovember 26th edition of Aviation Finance: Thanksgiving - a turning point has arrived
November 26th 2020: Boeing's 2020 Commercial Market Outlook is upbeat - predicting annual 4.1% growth in air freight over next 20 years and China’s passenger traffic growth will grow at 5.5%; Norwegian’s Examinership; SMBC AC transacts over $2bn in sale and leaseback deals as credit losses and impairments clip profits; former CEO of IAG, Willie Walsh new Director General of IATA in April 2021 - 'his leadership style and actions are likely to differ markedly from those of his predecessor'; Avolon prices TLB, upsizes debt tender offer; new investors enter sale & leaseback market; PE fund enters sale & leaseback market with Allegiant deal; Castlelake launches aviation lending programme; ACG in four plane deal with SKY express; SIA raises raises further $1bn; Korean Air bid for Asiana; EXIM back in business; Virgin Australia exits administration; CDB Aviation enters P2F market with two A330 conversions; ALC in 23 plane deal with Alaska Airlines, prices $1.5bn of Senior MTNs; Boeing MAX may be about to stage a timely return.


In the November 12th edition of Aviation Finance : Impairment looms
November 12th 2020: Q3 results from a number of leading platforms reveal the extent which Covid-19 is feeding through into the aircraft leasing sector and more widely. AerCap, for example, took an impairment charge of just under $1 billion and reported a net loss of $850 million. EY's Niamh Tobin examines from an accounting perspective the impact of the important issue of impairment, which is a theme as we look to build the new foundations of a recovering sector in 2021. In an interview in this issue the chairman of ALI, Declan Kelly, speaks about this. Aviation consultancy IBA has produced an interesting chart showing that the number of airline failures is tailing off, and that is a hopeful sign of what is to come.


In the October 29th edition of Aviation Finance: - the shape of things to come in 2021
October 29th 2020: As the second wave of the pandemic rises, underlying indicators across the industry point to the shape of things to come in 2021, the first year of the new reality in aviation finance. We provide an overview of investment experiences so far this year, as airline and lessor share prices continue to fall. With Investor focus on airlines shifting from analysing revenue and profit trends to monitoring liquidity and cash flows a key metric for investment analysts is how many months can airlines exist in prevailing revenue conditions without resorting to additional liquidity measures.

 

Analysis

PIMCO & GECAS to create $3bn Aircraft Leasing Platform
October 19th 2020: PIMCO, one of the world’s premier fixed income investment managers, and GE Capital Aviation Services (GECAS) have reached a preliminary agreement to develop an aviation leasing platform to support up to $3 billion in aircraft asset financings. The platform will enable PIMCO and GECAS to acquire new and young aircraft to lease, It is aimed to provide financing to help airlines upgrade their fleets at 'a critical time for the aviation industry'. The transaction is subject to customary closing conditions and regulatory approvals.


In the October 15th 2020 edition of Aviation Finance - Latest operating results from leading lessors show resilience
An improved trend in lease revenue collection in Q3 at Avolon, financing transactions for approximately $2.2 billion at AerCap; $7 billion in available liquidity at ALC and an owned-aircraft utilisation rate of 99.7 per cent at BOC Aviation are some of the positive features highlighted in the latest business performance updates by four of the leading lessors for the third quarter; But: a significant proportion of lease deferrals currently being granted to airline customers by lessors will end up being written off, according to a new in-depth sectoral report by Moody’s Investors Services; Also: Norwegian converts $1.9 million lease debt into bonds.


In the October 1st 2020 edition of Aviation Finance- Signs of optimism as some clouds grow darker
A darker September, linked to the evident resilience of the virus, despite recovery in some passenger markets, notably China but Kroll nonetheless sounds a note of optimism: ‘air passenger demand will rebound to levels seen pre-pandemic, as it has done through all previous downturns’. In the meantime, portfolios will continue to change, as IBA forecasts, and others, for example, CDB Aviation, take advantage of opportunities the turmoil is uncovering; Also: AerCap, Avolon, ACG in fund raisings; US Court approves Aeromexico PBH deal; TAP defers lease payments; AA and SkyWest in new Treasury loan agreements; Air Canada extends funding terms; El Al unhappy with new shareholder; SAA ceases all operations; Ryanair offers ‘2-for-1’ flights; Genesis appoints O’Byrne to lead trading team.


In the September 17th 2020 edition of Aviation Finance - In a world of no winners, the question is how bad will it be?
The articles in this issue of Aviation Finance reflect the continuing uncertainty – and confusion – that is being experienced in the commercial aviation ecosystem. The upsurge in infection rates in many countries is causing carriers to scale back their capacity plans and industry veterans, such as aviation finance consultant Peter Chang, are taking a cautious view of how the landscape is set to change. At the same time, investors demonstrated enthusiasm for Ryanair's first note issuance in three years and CarVal Principal Justin Bradburn is now talking about preparing for ‘very attractive investment opportunities’ arising from ‘perhaps the most distressed environment that the aviation industry has faced to date.’


In the September 3rd 2020 edition of Aviation Finance - Lessors continue to restructure portfolios
Lessors continue to cancel orders and sign sale and leaseback deals; The impact of lease deferrals on cash flows and asset values could put pressure on lessor balance sheets; Test flights for the aircraft formerly known as MAX commence outside US; Silver lining: the air cargo recovery continues; Qantas and Air New Zealand opt to take pain now; Qatar warns Boeing to ‘stand with us’; EVA adjusts Dreamliner order; Brennan bows out as Stellwagen gets new owners.


In the August 20th edition of Aviation Finance - Aircraft leasing continues to hold its head above water
Air Freight & Conversion programmes: as revenues exceed expectations; Activity details in sale-and-leasebacks; BOC Aviation details careful navigation of Covid-19 crisis as Bob Martin describes ‘the most volatile that we have navigated our way through in our 26 year history'; Op-Ed: Innovation and leadership are desperately needed to bring air travel back: Joe Gill; IATA revises recovery projections down for third time; Qantas' pandemic impact revealed, as Bain outlines plans for Virgin Australia; a new platform focussed on aircraft leasing opportunities for Korean investors; a new name for Max.