Aviation Finance

Developments

Latest edition (August 18th): Leasing finds new opportunities
August 18th 2022: Commercial aviation has made a remarkable recovery since the world’s airlines were plunged into losses of some $35 billion last year. The evidence of optimism is now widespread. In this issue, for example, we report on Moody’s predictions that global airline operating profits could exceed $20 billion next year, while leading aircraft leasing executives such as Aengus Kelly, John Pleuger and Robert Martin all comment enthusiastically on the healthy outlook across all segments, including widebodies, cargo and rotorcraft.

August 4th edition: A return to airline profitability
August 4th 2022: As more airlines report their performance in the three months to end June, it is increasingly apparent that some have already managed to return to profit while others anticipate that they will do so for their full year. An upturn in yield has helped to offset the impact of rising costs, as have cargo revenues for many, but it is notable that the recovery includes low cost as well as traditional carriers. Those back in the black in Q2 include United, IAG, Lufthansa, Ryanair and Singapore.

 

Perspectives

Lessors place big orders with Boeing and Airbus


The latest batch lessors look to a peace to come includes one of the largest orders 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

July 21st edition: Successful Farnborough Air Show marks return to 'normality'
July 21st 2022: Even if orders were on the light side, the show demonstrated that the aviation industry is coping well at a time of ongoing stress. There continues to be interest in, for example, and funds available for, the sale and leaseback market while the aircraft manufacturer’ latest commercial market outlooks remain optimistic for the next two decades. Also: a resilient aviation sector is reflected in the latest Market Outlook presentations from three of the four main commercial aircraft manufacturers. In its Commercial Market Outlook 2022–2041 Boeing says the global market is recovering just as it had projected in 2020 and it forecasts a market value of $7.2 trillion for new airplane deliveries over the next two decades

July 7th edition: Investors still interested in aviation
July 7th 2022: Despite a resurgence of fears about Covid, continuing sector bottlenecks, reflected in staff shortages, and widespread flight and schedule curtailments, there is continued evidence of strong consumer demand for air travel, underpinning positivity regarding investment in the sector. The underlying vibrancy of the leasing sector is reflected in the launch and imminent arrival of two new leasing platforms, both with strong growth ambitions and backed by substantial investment funds.

June 23rd edition: 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.

 
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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.

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.

 

Developments - 2021

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.

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.


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;