Even as the aviation sector begins to think hard about the implications of the coronavirus on passenger traffic, which comes on top of the ongoing Boeing MAX crisis and rising environmental concerns, there is no indication that investors and financiers are unduly concerned about the sector’s long-term prospects. Indeed, the launch of three new securitisations and announcements of a number of substantial unsecured banking facilities for lessors indicates a continued appetite for, and understanding of, the industry’s fundamentals.

As predicted, the aircraft securitisation market has got off to a brisk start in 2020, with three new note issuances offered to investors in the past two weeks alone worth just shy of $1.7 billion. The offerings are Avolon’s second ABS, the $620 million Sapphire Aviation Finance II (SAPA 2020-1), DVB’s third ABS, the $630 million KDAC Aviation Finance (KDAC 2020-1), and Carlyle Aviation Holdings’ $409 million AASET 2020-1, the 10th securitisation by the former Apollo Aviation platform. The latter two are refinancings of earlier securitisations issued in 2016 and 2017.

Bank funding of lessors also remains buoyant, with SMBC Aviation Capital closing a $600 million syndicated financing, comprising a $200 million term loan and a $400 million revolving credit facility, with a consortium of Asian-Pacific and European banks.

DAE has secured a $300 million 5-year dual tranche unsecured term financing facility with Emirates Islamic and Emirates NBD Capital, the investment banking arm of Emirates NBD. The facility, which will contain a conventional and an Islamic tranche, can be upsized to US$600 million. SKY Leasing has closed a $600 million warehouse debt financing facility for its Sky Fund I Irish, with MUFG Bank Ltd. and Citibank as co-structuring agents and joint lead arrangers and Bank of America, Morgan Stanley, and Natixis also joint lead arrangers. A syndicate of financial institutions that includes Barings, Nord LB, Bayern LB, and Investec have arranged a secured term loan collateralized by a 777-200LRF on lease to Korean Airlines.

In an interesting take on DAE’s business model, Moody’s says that by foregoing new aircraft orders, ‘DAE avoids the speculative lease-up and financing risk associated with long-dated capital acquisition commitments’ and that, with the support of its shareholder, the Investment Corporation of Dubai (which is an investing arm of the Government of Dubai) DAE ‘could explore alternate opportunities to grow its business, including through portfolio and platform acquisitions’.

Elsewhere in this issue we report on the aviation industry’s multifaceted response to the challenge of global climate change which has seen IATA creating a dedicated exchange on which airlines can trade carbon credits, the establishment of a new working group by the AWG and increasing use of big data based technologies to optimise fuel efficiency. Meanwhile the design of an electric motor to drive a proposed 186 seater, 300nm short haul electric aircraft is about to progress from the drawing board to the test bench.

We also review the way in which Ryanair is positioning itself for strategic opportunity on the MAX10. While releasing better than expected quarterly results, Ryanair hinted that it would be interested in acquiring Boeing 737 MAX 10 aircraft – at the right price.

An intriguing $1 billion aircraft transaction in the Gulf, involving investment firm KKR, Altavair AirFinance and Etihad, underlines the volatile nature of residual valuation and also highlights the fading importance of Middle East carriers to wide body order backlogs.

As the MAX crisis evolves Airbus continues to iterate the engineering capabilities of its A220 model, a jet that could replace MAX equipment in some airlines if the grounding of the latter continues for much longer.

We also report on the agreements reached by Airbus with French, UK and US authorities to resolve their investigations into allegations of bribery and corruption. In return for paying penalties totalling €3.6 billion it has entered into agreements that do not amount to an admission of liability and suspend prosecution of Airbus for three years, subject to certain conditions. Crucially, it ensures the company avoids a criminal conviction that would disbar it from public tenders.

Boeing posted its first annual loss since 1997 as the losses due to the grounding of the 737 MAX now approach $19 billion. With current costs incurred already at $14.6 billion, Boeing has indicated that a further $4 billion in charges will likely be incurred in 2020. The company reported a net loss of $636 million last year, compared to a $10.5 billion profit in 2018. But its core commercial aircraft operation lost $6.7 billion last year, almost entirely because of Boeing's continued problems with the 737 Max.