Sale-and-leaseback deals gain further momentum

Recent sale and leaseback deals, designed to inject much needed liquidity into carriers, reflect a growing level of appetite for such transactions, with private investors as well as lessors taking an interest in the kind of deals currently available. 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.
Airline Business
Air Asia auditor concerned over 'going concern' status

Air Asia’s auditors Ernst & Young issued an unqualified audit opinion to the Kuala Lumpur stock exchange on Tuesday stating there was material uncertainty ‘relating to going concern in respect of [the airline’s] audited financial statement for the financial year…2019’. With so many planes currently grounded by the pandemic, the current financial performance indicates the ‘existence of material uncertainties that may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern,’ the auditors said.
Aircraft Leasing
Avolon collected two thirds of lease payments due in H1, cancels a further 27 737MAX

In a Q2 business update Avolon has afforded an insight into what is happening with deferrals as they come to the end of their initial terms.
Developments
DAE details rent deferrals; ALC, BOC Aviation, AerCap business updates

DAE details rent deferrals; ALC, BOC Aviation, AerCap business updates; Sharp rise in 9 month profits at Avation; NAS cancels big orders in dispute with Boeing; Five airlines agree loan deals with US Treasury; Airbus to cut production by 40%, 15,000 jobs; Air France to cut 7,000 jobs; Aeromexico files for Chapter 11; Opposition to Bain deal for Virgin Australia; Finnair’s rights issue fully subscribed; ATR sells two aircraft to Korean start-up; Global air cargo improved in May; Adam Smyth new CFO at Genesis.

In this issue
In this issue

Acceptance that the restoration of traffic levels will still be some time off seems to capture the mood pervading the industry, even as more and more airlines seek to restore services and try to get back to some kind of normality. ‘We seem to be living in some kind of twilight zone,’ remarked one highly experienced industry executive. And against a backdrop of increased financial difficulties, Chapter 11s and extensive lease payment deferrals, some of the first signs of what that means in practical terms to aviation financiers and investors are starting to emerge.
Perspectives
Thin market makes impact on asset values opaque – for now

The aircraft asset sector, like all markets, is a function of demand and supply. The Covid crisis has created unprecedented dysfunction on both sides of that equation and the results in terms of assets pricing cannot be easily calculated, writes Aviation Finance Contributing Editor Joe Gill.
Aircraft Economics
Covid-19 drives down current market values of aircraft

Aviation consultancy and aircraft valuer, IBA, has further revised downwards its views on the market values of aircraft as a result of the Covid-19 crisis. Mid-life aircraft and those in their twilight years have received the sharpest market value discounts, with older generation aircraft suffering the greatest corrections. 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%. However, IBA says, it has retained its long-term view on values, with Base Values remaining unaltered for most types of aircraft, with a few exceptions.
Airline Economics
Emirates and flydubai closer to merger, Emirates CCO says

Changing market conditions could result in an even closer relationship developing between Emirates and LCC flydubai, which currently have a cooperation agreement, according to Emirates’ Chief Commercial Officer (CCO) Adnan Kazim.
Aviation Economics
Innovation in testing could be key to unlocking air travel

Policymakers and regulators continue to scramble in an effort to devise safe practices for the airline industry to adopt as a recovery after Covid takes place. This process is being complicated by the pathway taken by Covid itself, something that is disturbing recovery in geographies around the world, including the United States.