Dynamic leasing industry changes likely
As the Covid-19 crisis unfolds across the aviation complex, leasing companies are having to rapidly adjust their tactical and strategic decision-making.

With fleets being grounded worldwide airlines are seeking relief from lease commitments and capital expenditure programmes are grinding slower. In addition airlines are prioritising cash in their businesses and in that context carriers with unencumbered aircraft assets are exploring options to undertake sale and leaseback transactions.
Bank Of China Aviation B777

In the past week alone Bank Of China Aviation has conducted two significant deals by acquiring 22 Boeing 787s from American Airlines and six Boeing 777s from Cathay Pacific. These are being leased back to both carriers for 10 years. They release cash immediately for the airlines while allowing BOCA to expand its portfolio with blue-chip customers.

On a conference call updating investors IAG CEO Willie Walsh noted a pick up in communications between airlines and lessors. He suggested this process will lead the leasing community to identify survivors in the industry amid the crisis. If true, this will accelerate the consolidation process that seems inevitable as this industry catharsis unfolds.

In the leasing community, too, change is inevitable. A number of lessors have held back from expanding their balance sheets over the past couple of years. They considered aircraft values and lease returns stretched amid a flow of cheap money. This is radically changing so these lessors, if backed by strong owners, can be expected to grow their footprints significantly over coming months.

A number of Asian lessors, including SMBC Aviation and Bank of China Aviation, for example, are owned and supported by major Asian banks. If these choose to step up capital commitment to aircraft in the current environment they could grow scale and gain market share quickly through a range of sale and leaseback transactions or via M&A deals.

Vol. 10 Issue 6 of Aviation Finance