Aviation Finance

Developments

In the latest edition of Aviation Finance (July 9th 2020)
Sale and leaseback deals, designed to inject liquidity into carriers, are growing in evidence, with private investors as well as lessors taking an interest. Latest deals involve Apollo and Merx Aviation with Delta Airlines, Falko also with Delta, SMBC Aviation Capital with easyJet and Turkish Airlines, and CDB Aviation with SAS; Lessors detail rent deferral terms, with Avolon reporting that it collected two thirds of lease payments due in H1; Consultancy IBA further revises values of aircraft down - with mid-life aircraft and those in their twilight years getting the sharpest discounts. It identifies young narrowbody values as having declined between 5-15% and out-of-production widebody by 20-40%, with mid-life and older current generation narrowbody values down 15-20%.


In the June 25th 2020 edition of Aviation Finance
Strong liquidity is evident in the aviation capital markets as AerCap issues notes twice in just three weeks to raise a total of $2.5 billion while Air Lease Corporation enjoys strong support for offerings from a swathe of leading institutional investors; John Slattery, Embraer’s chief executive of Commercial Aviation, is to succeed David Joyce as president and chief executive of GE Aviation; Signs of stress continue however in airline markets as an IATA survey suggests travellers are becoming more reluctant to return to the skies with IATA DG de Juniac warning that airlines will need further State aids to get through this winter; the war of words between OEMs and some airlines over order cancellations.

 

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 June 11th 2020 edition of Aviation Finance
Moody’s expresses concern over ‘breadth and severity of shock’ to aircraft leasing sector; Aircraft market values and lease rental factors falling amid subdued demand for air transport, according to Scope Ratings; Surge in airline share prices as investors encouraged by signs of upturn in demand; Eurocontrol paints positive picture for resumption of passenger air traffic in Europe; SMBC delivers record profits in year to March 2020; $1.250 bn bond issuance by AerCap; Aircraft Manufacturing: Boeing 737 MAX finally prepares to return to the skies.


In the May 28th 2020 edition of Aviation Finance
Downward pressures on aircraft supply continue to grow as AerCap reschedules 100 aircraft deliveries, while SAS and Air New Zealand are among the latest batch of airlines to announce similar delays. The restructuring of Norwegian Air Shuttle and the decisions by LATAM and Avianca to enter Chapter 11; Growing consensus behind guidelines for return to ‘normality’ in European airspace – UK and Ireland excepted; With a threatened action in the European Court by Ryanair over state funding of Air France KLM, Simon de Broise, and Gurpreet Chhokar at Collyer Bristow LLP, consider the extent to which state aid is permissible under EU regulations.


In the May 14th 2020 edition of Aviation Finance
Some green shoots are in evidence, as airlines begin to envisage the beginnings of a recovery to a new normal, lease payments resume, and financing initiatives bear fruit. Setbacks are still probable, but as we report across this issue there can be hope that the 'end of the beginning' may be contemplated. Cargo provides a ‘bright spot in a dark sky’ with new opportunities for P2F conversions; Regional aircraft and VLAs bear brunt of crisis; Ryanair and other LCCs set to seize network opportunities in Europe.

 

Aircraft Leasing & Lessors

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Aircraft & Airlines

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In the April 30th 2020 edition of Aviation Finance
As the Covid turmoil continues, we focus on progress as the airline financing industry battles to ensure sustainability of a healthy industry after the pandemic. The position of investors in aircraft ABS in the still unlikely event that they might come under stress, compared with lenders and lessors. State bailouts and Government finance packages across the world continue to be a key part of the response to the crisis, as are posited solutions, such as aircraft recycling.


In the April 16th 2020 edition of Aviation Finance
Stock markets may be showing a degree of confidence that the worst of the covid crisis is over, but uncertainty continues to prevail for aviation. We speak with Fitch analysts, and elaborate on their views. They say lessor liquidity is key, of course, for that sector, but, of most immediate concern is the financial health of airlines, which IATA continues to monitor with great authority.


Irish aircraft leasing industry acts to secure and deliver PPE to the Irish healthcare system from China as part of the response to the Covid-19 crisis
17th April-20th April: Three charter flights from China to Ireland supported by Irish leasing firms, and ALI, the aircraft leasing unit of IBEC, representing 33 lessors in Ireland have delivered much needed PPE equipment for the Irish healthcare system. Among the firms stepping up were Avolon, Aercap, GECAS, and SMBC. Assisting in the airlift have also been Aer Lingus, the Irish embassy in China and IDA Ireland.

 

Analysis

Avolon CEO says loss figure for world airlines will be ‘far greater’ than the $252bn forecast by IATA last week
8th April 2020: Avolon CEO Dómhnal Slattery said today his ‘gut instinct’ is that losses for global airlines as a result of Covid will be ‘far greater’ than IATA’s most recent estimate of $252 billion. In an interview he said that of the lessor’s 160 airline customers globally, over 150 are not flying a single aircraft ‘and the marketplace is in turmoil.’


IBA predicts a contraction in outstanding aircraft leases in 2020 for first time in over a decade, as investor opportunities are evaluated for the $21 billion aviation ABS paper market
3rd April 2020: IBA in a Seminar, in conjunction with aviation finance advisory firm Split Rock provided an in depth assessment of the aviation ABS market as of April 3rd. It can be seen here. In it IBA President Phil Seymour predicts a contraction of aircraft leases this year - which will make it the first year in over a decade where the number of outstanding aircraft leases will contract. This year''s predicted decline will follow 2019 which saw a decline in the rate of growth in new leases to a net number of about 240. This was significantly down on what we now can say was the peak of the cycle, 2018, when some 2,250 lease start events took place, compared with 1,400 lease ends, for a net increase that year of 850.


In the April 2nd 2020 edition of Aviation Finance
The scale and shape of the crisis begins to emerge - and it is not an encouraging picture. Liquidity issues are to the fore, but most lessors and certain airlines are set to emerge strongest from the inevitable cull. At the same time the aviation complex as a whole must look to a relative downgrade for a time in capital markets. Cowen managing director and senior research analyst Helane Becker predicts that it will take perhaps 18 to 24 months for traffic to start to recover and much longer for any kind of return to normalcy in an interview with Aviation Finance. Also: Stronger airlines well positioned to grasp opportunities in post-pandemic world.


IATA calls for governments to provide aid as severity of cash crisis grows
IATA now believes that its ‘worst case scenario’ warning, issued earlier this month, that passenger revenues worldwide will fall $113 billion in 2020, will be exceeded. It says that before COVID-19 much of the industry was fragile, with only around 30 airlines achieving economic profit improvements and a long tail of weaker airlines. Now it is calling on governments worldwide to provide financial aid to the industry. In the April 2nd issue of Aviation Finance: 'This is apocalypse now’ warns IATA’s DG


Aviation Finance.aero: Markets view - 'airline casualties, market value and lease rate corrections'
March 26th 2020: IATA increased its estimate of the cost for airlines from last week's $113 bn to $250 bn, this in addition to an assessment that one third of the commercial fleet will be in storage by the weekend, cuts in flights, and downgrades of credit ratings of lessors. IBA in an assessment of the industry said: "for 2020 we expect airline casualties, especially amongst those that have been limping along over recent years......Their full assessment is at: iba.aero/insight.


In the March 19th edition of Aviation Finance
The scale of the crisis is only beginning to sink in. Two weeks ago IATA estimated COVID-19 would cost the world’s airlines some $113 million in revenue. Now it will only say that ‘things are clearly worse than this.’ .