Aviation Finance

Developments

In the latest edition of Aviation Finance (November 26th 2020): Thanksgiving - the 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.

 

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 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.

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.

 

Aircraft Leasing & Lessors

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Aircraft & Airlines

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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.

 

Analysis

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.


In the August 6th 2020 edition of Aviation Finance - returns heading to 10 p.c.?
Could Covid drive unlevered investor returns on aircraft back up to around 10 per cent? European air traffic is rising slowly, but is still less than half of last year’s level; ACG cuts planned capex to $1.3bn for next 18 months; Kroll Bond Rating Agency downgrades 138 aviation ABS securities and affirm the rating of just one; AerCap looks forward to a return to market equilibrium, when airlines can cover cash operating costs; CDB in three-plane US sale & leaseback deal and delivers ‘Chinook the Gray Wolf’ to Frontier; Nordic Aviation scheme approved; Hawaiian Airlines launches EETCs.focussed on aircraft leasing opportunities for Korean investors; a new name for Max.


In the July 23rd 2020 edition of Aviation Finance
Regulatory issues which emerged in Japan and the US have prevented the deal between MUFG Bank and DVB closing; ACG closes jumbo bond; Aercap buys back $1.45bn in outstanding notes; GECAS appoints Buckley as SVP & Regional Manager for Commercial, Europe & Canada; CDB Aviation appoints O'Neill as CFO; Embraer delivered four commercial planes in Q2; Jet Time files for bankruptcy; Cathay Pacific profit warning; Icelandair Group expects $100m operating loss; China traffic update; SR Technics to ‘stick to the knitting’; airBaltic secures €250 million in new equity; Air Serbia in debt restructuring talks with Etihad; Virgin Atlantic recapitalises; Bondholders still seek Virgin Australia deal; Cargojet raise C$100m; DHL Express orders four BCFs; World's first hybrid electric 70+ seater aircraft; 'A reasonable recovery in air travel over Europe, but traffic at this peak time of year is still running at less than half of last year’s volume'.


In the July 9th 2020 edition of Aviation Finance
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.


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.