Funds managed by affiliates of Apollo Global Management and Merx Aviation have closed a sale and leaseback deal with Delta Air Lines for 10 Airbus A220-100 aircraft. Manufactured last year, they were acquired by an aviation platform established by Apollo, which invests in a diverse set of aircraft types, vintages and jurisdictions, and is serviced by Merx.

Gary Rothschild, CEO of Merx and Head of Aviation Finance at Apollo, said: ‘In a time of significant market stress, the Apollo platform and Merx were able to act as a capital solutions provider in a transaction that contributes to Delta’s increased financial liquidity to manage a challenging aviation market. We look forward to continuing our relationship with Delta and other airlines to provide greater financial flexibility.’

The aggregate cash sales proceeds on six A320s, from six months to two years in age, were $255 million against their aggregate net book value of GBP141 million - easyjet.

Also involving Delta, UK lessor Falko Regional Aircraft is to acquire 11 Bombardier CRJ900 aircraft in a sale-and-leaseback transaction. The aircraft will continue to be operated as part of the Delta Connection regional network in the United States. Falko CCO Mark Hughes observed that in the last year Delta has become one of Falko’s most important customers, with 25 aircraft on long term lease.

SMBC Aviation Capital has concluded a sale-and-leaseback agreement for six A320neo aircraft with easyJet on aircraft varying in age from six months to two years. Agreements for three of these aircraft were concluded in early June, with the remaining three contracted at the end of the month. Peter Barrett, Chief Executive Officer, SMBC Aviation Capital said: ‘This transaction highlights how SMBC Aviation Capital can effectively leverage its strong capital position and industry leading credit rating to offer flexible long-term financing solutions to its customers facing the most challenging of circumstances.’

SMBC Aviation Capital has a fleet of 720 owned, managed and committed aircraft, and benefits from a close relationship with its shareholders Sumitomo Mitsui Financial Group and Sumitomo Corporation.

easyJet provided some detail of the deal, identifying that the aggregate cash sales proceeds of the deal were $255 million and that the net book value of the aircraft was approximately GBP 141 million as at 31 March 2020. In a statement the carrier said the transaction was executed in two parts, with the initial proceeds of $126 million relating to three A320NEO aircraft and already reported and the remaining $129 million forming part of the anticipated remaining proceeds from SLB transactions. The aircraft will be leased back for terms of between 110 and 122 months. The lease obligations generated amount to a total of approximately GBP155 million. ‘Over the terms of the leases the average net annual headline cost reflected in easyJet's income statement will be in the mid-single digit millions of pounds,’ the airline said.

It added that ‘easyJet and SMBC Aviation Capital have also identified other unencumbered aircraft in the easyJet fleet and, if easyJet decide to sell these aircraft over the next 18 months, SMBC Aviation Capital will be our preferred partner for the transaction under financial metrics equivalent to those already established in the transaction announced today.’ SMBC Aviation Capital has also concluded sale and leaseback agreement deals two A321neo aircraft with Turkish Airlines, both newly manufactured and delivered to the airline at the Airbus production facility in Hamburg.

Pat Hannigan, CEO, CDB Aviation: 'We have been successful with SLB engagements in the past ... I anticipate this avenue for growth will continue to be available to us for the foreseeable future.'

Meanwhile two Chinese-owned leasing companies have also been active recently in the sale and leaseback marketplace. CDB Aviation, a wholly owned Irish subsidiary of China Development Bank Financial Leasing (CDB Leasing), has closed a new sale-and-leaseback deal with long-standing customer SAS for four Airbus aircraft – three A320neos and one A350-900, expected to deliver between June 2020 and May 2022. CDB Aviation Chief Marketing Officer Peter Goodman, said in a statement that the lessor’s commercial team ‘is pointedly expanding outreach in all aviation markets, energetically pursuing emerging opportunities for aircraft transactions, including in the sale and leaseback channel.’

CDB Aviation CEO Patrick Hannigan commented to Aviation Finance: 'Our highly competitive position among lessors offers unmatched access to the range of innovative financings the airlines need for both immediate and longer-term requirements as they navigate their way through a challenging environment. With the backing of our shareholder, CDB Leasing, and the unique resources of China Development Bank, our team is expressly poised to go the proverbial 'extra mile' in delivering the industry’s best professional, full-service support in these hard times.’

‘Aircraft trading is core component of our full-service leasing platform and our interest and abilities to conduct “sale-and-leaseback’ opportunities is certainly heightened during current market conditions. We have been successful with SLB engagements in the past as they provide an important element in the growth of CDB Aviation’s position. I anticipate this avenue for growth will continue to be available to us for the foreseeable future. Our work with SAS is a good example of finding a solution that works for the airline and ourselves which directly reflects on the value of relationships and the team in place to accomplish success.’

CDB Aviation’s investment grade rating has recently been reaffirmed by S&P Global, Fitch Ratings and Moody's Investors Service, something which underscored ‘the unwavering support of our shareholder, CDB Leasing, and the unique resources of China Development Bank, for which we are grateful,’ Hannigan said. ‘This support is important in enabling us to advance the disciplined growth of our global footprint, fleet, and market presence.’

In light of evolving aviation market dynamics, CDB Aviation ‘will continue to capitalize on the enhanced flexibility facilitated by these ratings in order to diversify our financing sources and investor base, while maintaining our highly competitive market position as a leading, global full-service lessor,’ he added.

‘CDB Aviation is firmly invested in the strategy focused on meeting both near-term and long-term needs of the airline community. Our investment grade status is significant for us especially during challenging times like we are currently operating in and where our resources and positive working with our shareholder enable us to deliver from a position of strength and advance our market position.

‘Being assigned an “investment grade” rating is very powerful in terms of demonstrating financial strength and wherewithal. I believe it reflects not only a strong shareholder underpinning but also a recognition of the capabilities the CDB Aviation team possesses and importantly – has demonstrated in understanding our industry and supporting our customers.’

SAS plans to raise around 12 billion Swedish kronor ($1.3 billion) in new funds to deal with the impact of COVID 19. Supported by the three largest shareholders, including the Swedish and Danish governments, the aid campaign will result in a boost to the airline’s equity as it will convert some existing bonds into 14.25 billion kronor equity.

Another Chinese-owned entity has also indicated its intention of expanding market share by way of sale and leaseback activity. BOC Aviation recently cancelled an order for 30 Boeing 737 Max jets and has indicated that it intends to defer delivery of others, with the intention, instead, of pursuing purchase and leaseback opportunities.

Last May BOC Aviation demonstrated its commitment to this approach, signing purchase-and-leaseback agreements with Southwest Airlines for 10 Boeing 737 MAX 8 aircraft and with Wizz Air for six new Airbus A321neo aircraft.