Aviation Finance

Developments

Latest edition (June 23rd): Despite huge headwinds, the outlook for commercial aviation and the providers of finance remains positive
June 23rd 2022: As IATA DG Willie Walsh neatly puts it ‘There is no way to sugar coat the bitter economic and political realities we face.’ Still reeling from its biggest ever setback, commercial aviation faces huge headwinds on a number of fronts. But it also has an enthusiastic customer base and the airlines are working hard to tailor their fleets, route networks and cost bases to meet changing requirements. Paradoxically, the damage to their balance sheets creates ever more opportunities for the providers of aircraft finance.

June 9th edition: Matching supply and demand amid rising costs and geo-political risks
June 9th 2022: In this issue we look at an aviation industry in flux, as carriers and service providers struggle to match supply with surging demand with recent reports from Moody’s Investor Services and EUROCONTROL highlighting the immediate challenges. Also: AerCap's latest moves amidst the Russian fall-out; the evolution of the eVTOL market as key players progress their plans; the battle for Spirit Airlines and SAS looks set to attract overseas investors.

 

Perspectives

Lessors place big orders with Boeing and Airbus


Undaunted by the war lessors look to a peace to come between 2025 and 2028. The latest batch includes one of the largest orders so far this year, for 80 A320 family aircraft by BOC Aviation, and the firming up of an order with Boeing for 32 MAXs from ALC.
Sanctions present varied legal issues for lessors
Insurers ponder true extent of their claims exposure
Delta, easyJet and Wizz see blue skies ahead
Assets trapped in Russia are an operational nightmare for financiers and lessors

Developments

May 26th edition: AerCap and SMBC Aviation Capital lead the way for lessors
May 26th 2022: The strong performance by AerCap, despite its Russian difficulties, is a testimony to the timing of its transaction with GE to acquire GECAS. Taking a $2.4 billion charge in Q1 it has covered itself in full and from here, with insurance claims already lodged, the only way is up. And the shake-up it initiated at the top of the leasing sector has continued, with SMBC Aviation Capital returning to number two, in terms of scale, through its acquisition of Goshawk.


May 12th: Traffic recovery 'real and sustainable' as Russia-linked impairment charges grow
May 12th 2022: Despite the continuing challenges presented by the war in Ukraine, traffic restrictions in China, much higher fuel prices and rising interest rates the mood within the aviation finance sector is predominantly positive on the back of unleashed pent-up demand for travel. It is significant that IATA has revised its view of when RPKs will return to 2019 levels, pulling that prospect back by 12 months to next year.


April 28th edition: The recovery in commercial aviation is stronger now than it has ever been since the start of the pandemic.
April 28th 2022: There is growing evidence of a strong recovery in global air traffic and in the operating performance of many carriers – despite the economic effects of the war in Ukraine and the upsurge in COVID 19 in some countries; Traffic volumes are edging back to pre-COVID levels in many regions and airlines across the world are anticipating a return to profitability this year. Earlier this week travel data analytics firm OAG reported that as travel restrictions continue to be eased throughout Asia capacity continues to rebuild, with airlines adding more capacity and consumer confidence returning to the market.

 
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April 14th edition: Insurance issues dominate, while strong positives remain in place
April 14th 2022: While the war in Ukraine remains to the forefront in all forecasts, the passage of time, and a prolongation of the war, however awful a prospect that is for the people of Ukraine, will inevitably be accompanied by a continual weakening of the Russian capacity to wage war. This may be a factor in the aviation industry’s current confidence levels. This confidence is evident in this issue, notably the strong uptick in order books at the two main aircraft manufacturers, new orders from lessors, and airline M&A activity in the US; Boeing and Airbus sales are up, even though orderbooks are affected by adjustments for sanctions and airline restructuring.


March 31st edition: Lessors prepare for legal pursuit of redress in latest Ukraine war developments
March 31st 2022: Having achieved limited success in redelivery of aircraft whose contracts have been terminated, lessors are focussing attention on insurers; Interview: Aergo Capital sets its sights on $10bn AUM; AerCap has net exposure of $2.5bn in Russia, and has already lodged claim for $3.5bn; Fitch Ratings says that although the total insured residual value of aircraft trapped in Russia is c.$13 billion, loss limits on hull insurance could put insurer claims at $5-$6bn; Lessors feature strongly in new jet orders: MUFG arranges Wizz JOLCO; Wings uses GATS.


Russia's breaches of international Conventions and the implications
March 17th 2022: The potential extent and scope of the war risks is the focus of this issue, with the success rate achieved in consensual termination of leases being an important factor. In other news: BOC Aviation remains upbeat on future as profits rise; Airports and airlines call for all remaining COVID restrictions in Europe to be lifted; ALC supports ISTAT relief fund; SMBC Aviation Capital joins IATA diversity push.

 

Developments - 2021

The implications of the sanctions on Russia for aircraft leasing
March 3rd 2022: It is estimated that of the 980 commercial passenger jets currently in operation with Russian carriers 777 are leased. Of these, 515 jets with an estimated value of $10 billion are leased from non-Russian lessors. On sanctions, f one lessor, speaking to Aviation Finance said ‘of course, you have to terminate those contracts as there are specific clauses requiring you to abide by the sanctions. But even though, under the lease terms, aircraft are required to be put into return condition, how can do you do that within one month? How do you get the spare parts, for example?’

In the February 17th edition: As aviation looks forward to the passing of the Covid crisis it faces more traditional challenges
February 17th 2022: As aviation returns to normal it faces the more traditional challenges of rising fuel prices, pending increases in interest rates and commodity price inflation. But players remain positive; BBAM Limited Partnership (BBAM) has closed its latest aircraft leasing fund, Incline Aviation II;

In the February 3rd edition: Aviation financiers step up to climate challenge
February 3rd 2022: In this issue we look at the efforts being made by lessors and airlines to meet the challenges of net-zero carbon emissions in collaboration with all the other players in the aviation eco system. Jan Melgaard, Executive Chairman of FPG Amentum said: ‘In order to get there, everybody needs to get involved and everybody is part of the solution'. JAL set to become the first entity in the aviation industry to issue Sustainable Development Goals (SDG) bonds; Castlelake has raised a total of $1.6 billion through its largest ever fund; German investment firm KGAL’s APF5 has raised €150 million; PwC's Dick Forsberg to Aviation Finance on the evolution of ABS and the changing role of capital markets in new aircraft deliveries; The rift between Airbus and Qatar Airways; Gol raises finances to kickstart fleet transformation.

In the January 20th edition: Interest rates and fuel issues could cloud otherwise bright outlook for aviation
January 20th 2022: The prospect of a strong recovery in global aviation over the next 12 months, supported by strong fundamentals, is now widely anticipated and even expected by industry participants and observers. Both the positive outlook and the concerns about headwinds, are reflected in stories in this issue; In Q4 trading updates leading lessors AerCap and Avolon both express strong optimism about the recovery in 2022; Both Boeing and Airbus enjoyed good months in December, despite the short-term negatives resulting from the impact of the Omicron variant on air travel in December; First finance deal linked to sustainability; Wizz Air raises €500m in bond issue;

In the January 6th edition: Positive outlook as aviation industry adjusts
January 6th 2022: Good evidence that the industry will both survive and subsequently thrive. Eurocontrol’s perspective on the future outlook is particularly welcome. It expects that air traffic in Europe will recover to 70-90% of 2019 levels, even though the evolving pandemic has seen traffic fall away from its earlier ‘optimistic’ forecasts. CDB Aviation, the wholly-owned subsidiary of China Development Bank Financial Leasing has completed delivery of a fleet of 15 new Boeing aircraft to United Airlines Holdings under a sale and leaseback transaction covering two 787-9 Dreamliners and 13 737 MAX 8 aircraft, which were delivered between 2020 and 2021.

In the December 9th edition: Aviation remains positive in face of Omicron
December 9th 2021: According to IATA, air travel drivers had been pointing to the gradual recovery continuing in November; The Kroll Bond Rating Agency expects the aircraft ABS market will continue to grow in the coming year, returning to close to the peak activity level seen in 2019; Reflecting the essentially forward looking nature of the commercial aviation sector, the blight of the new coronavirus variant has yet to impact on fleet strategies. This is reflected in a number of positive recent developments for plane manufacturers, including positive news at last for the MAX in China; Aircastle closes $100m revolver; Avolon delivers first of eight A330s to Cebu Pacific; ALC delivers A321-200s to China and Peach airlines; CDB Aviation delivers A320 to Allegiant; CALC takes its 150th aircraft; Norwegian 737 MAX 8 lease includes low season PBH.