Lessors in the time of
Covid
Jul/Aug 2020
The Covid-19 shock should be immense for the operating lessors, partly because, unlike the manufacturers, airlines and airports, they have no plausible case for state aid. They have expanded consistently over the past 25 years, navigated September 11 and the Global Financial Crash with minimum casualties, while pulling in capital from Japan and China. The last major crisis was back in 1992, when the Irish mega-lessor GPA imploded, which is outside the experience of the large majority of leasing executives, even if most are located in Dublin.
It might be worth recalling that investors lost faith in GPA because it had over-expanded, it was over-enthusiastic about residual values, to the extent that it seemed to argue that aircraft did not depreciate in real terms, and it was over-confident about the resilience of airlines in a downturn. There might be some lessons for today’s myriad leasing companies.
Looking at the sample of results for the first half of 2020 (see table), lessors’ revenues were down about 6% on 2019 while overall net profit was halved. This is a much better performance than that of the airlines, but the full financial damage to the lessors from Covid-19 is not yet reflected in the accounts.
| 2019 | 2020 | |||||
|---|---|---|---|---|---|---|
| Revenues | Net Result | Margin | Revenues | Net Result | Margin | |
| GECAS | 4,548 | 158 | 3.5% | 3,768 | -271 | -7.2% |
| AerCap | 2,486 | 565 | 22.7% | 2,435 | 523 | 21.5% |
| ALC | 937 | 262 | 28.0% | 1,032 | 277 | 26.8% |
| BOC | 933 | 320 | 34.3% | 1,035 | 323 | 31.2% |
| Aircastle | 437 | 66 | 15.1% | 537 | -225 | -41.9% |
| CALC | 218 | 41 | 18.7% | 213 | 43 | 20.3% |
| Total | 9559 | 1412 | 14.8% | 9020 | 670 | 7.4% |
Lessors generally account for payment deferrals by treating them as a loan from the lessor to the airline, placing the unpaid rentals on the balance sheet as an asset which is amortised as the airline resumes payment of the arrears. The rental deferrals plus accumulated interest are recorded as revenue for the period in which they are due. But if the airline cannot make the lease payment in full or in part then the debt has to be fully or partly written off, and only cash payments are recorded In the P&L. A decision then has to be made about whether or not to repossess. Security deposits usually cover three months or less, so the protection offered to the lessor in these unprecedented times may be limited.
All the lessors that have disclosed detail about their numerous deferrals (see review below) have emphasised that they are short-term: airlines are expected to repay either later this year or in early 2021. This timescale is looking more and more unrealistic as airlines fail to restore anything like their pre-Covid schedules.
In these circumstances some lessors are making the argument that they do not depend on airline profitability: if airlines are state-owned or are being supported by governments, some of the support funding will filter through to the lessors. Having a high proportion of flag-carriers and/or state-subsidised airlines — 70%-plus — in a leasing portfolio is presented as being a major asset. This argument is meant to reassure investors and financiers that lessors, which do not have obvious political clout, will not be squeezed out by subsidised airlines on the one side and subsidised manufacturers on the other.
At some point, lessors will have to address the painful question of asset value impairment, which depends on how much new and second-hand aircraft values have declined and how permanent that decline is. To assess the extent of value loss, lessors and investors have to rely on the appraisal companies.
AVAC is unique among the leading appraisal companies in that it publishes its view of actual and future market values of aircraft based on its assessment of current economic reality, as opposed to the Fair Market Values, an arcane concept used by the most other appraisers that assumes a balanced market between buyers and sellers. To be fair, almost all appraisers now also estimate Current Market Values, but we suspect that they are reluctant to show a huge gap between the two valuations.
AVAC’s latest value and lease rate assessments are shown. They indicate a 20-25% fall in narrowbody values since 2019 and a 25-50% decline for widebodies. By contrast IBA, another leading appraiser, quoted in a generally positive analysis of stockmarket-quoted lessors prepared by the Dublin stockbroker Davy, sees just a 5-8% fall in value for new-tech narrowbodies and widebodies. Airlines, lessors and OEMs would be content if this assessment proves accurate.
Last year the 737 MAX situation looked to be a major concern for lessors which had just under 1,000 units on order, about 20% of the total orderbook, with the most exposed being GECAS, Air Lease Corp, Avolon and Aviation Capital Group, all of which had parked aircraft as well as outstanding orders. However, in the Covid-19 world the MAX situation has acted almost like as an escape valve, allowing lessors to reduce the pressure on cashflow from capex by cancelling (about 300 MAXes so far) or deferring deliveries into the distant future without the normal financial penalties, as Boeing has been unable to deliver within 12 months of the scheduled date. In some cases, lessors have extracted compensation payments from the manufacturers. This has also meant that the lessors have been able to preserve the orders for A320/21neos at Airbus, the aircraft type that would appear to be most suited to the post-Covid world, for both short- and long-haul.
More generally, the Covid crisis is causing a rapid clear-out of older types across the board — 737 Classics and early NGs, early A320 family, 757s, 767s, 747s, A330s, A340s, A380s. As most lessors tend to have young fleets (under five years on average), heavily weighted towards narrowbodies, they should be in a strong position to exploit the upturn, when it eventually materialises. (Some lessors, like Carlyle, which specialises in older aircraft are now in a painful situation; Carlyle had over 80% of its fleet grounded in the summer.)
Also, airlines’ lack of liquidity will, it is argued, accelerate the trend to leasing rather than owning. As an example offered by ALC, Korean Air finalised in mid-2019 an order for 20 787s that was split equally between direct purchases from Boeing and leased aircraft from ALC. Originally, aircraft from Boeing were to be the first to be delivered, then the leased aircraft, but the Covid crisis has meant that Korean has delaying deliveries from Boeing and plans to take the leased aircraft first. Three-month security deposits on leased aircraft absorb a fraction of the capital required for PDPs.
A key element in the lessors’ financial performance has been the historically low interest rates in recent years, creating the profit gap between lessor finance costs and lease rates. As central banks desperately attempt to stimulate economies, interest rates are being forced down towards zero, possibly into negative territory. The graph shows the trend for LIBOR one-year rates and also the actual recent pricing for debt in the crisis, which reflects the credit worthiness of the borrower. Whereas the most efficient lessor, ALC, was able in June to raise $850m of unsecured funds at just over 3% pa, American Airlines ended up paying 12% for its $2.5bn junk bond issue at the same time. AerCap’s pricing on its debt this summer was over 6% but still below that of Delta, the best US network carrier.
Lessors’ investing activity is being diverted from new aircraft orders to purchase/leasebacks, such as the $270m transaction recently completed between easyJet and BoCom. So lessors could have an important role in financing the recovery of the airline industry, though their ability to do so depends on airlines resuming lease payments and asset values not falling enough to trip defaults on loan covenants. But they don’t want to end up owning distressed airlines, as AerCap and BOC have been obliged to do with Norwegian.
These contradictory trends are encapsulated in a review by Fitch of ten operating lessors published in July. On the one hand, the industry scenarios presented by Fitch look grim. In the Base case the agency sees, for instance 17% of airlines defaulting and deferrals equal to 40% of annual revenues. In the Downside case — a second wave of Covid-19 and a further tightening of travel restrictions — 34% of airlines default and 80% of annual rental revenue is deferred.
| BASE | DOWNSIDE | |
|---|---|---|
| Lease Deferrals of 3-4 months | ||
| (% of Annual Rental Revenues) | 40% | 80% |
| Defaulting Lessees | ||
| (% of Client Airlines) | 17% | 34% |
| Reposessions | ||
| (% of Leased Fleet) | 11% | 22% |
| Value Impairments | ||
| (% of Aircraft Net Book Values) | 15% | 20% |
On the other hand, Fitch concluded that all ten of the lessors deserved to retain their investment grade rating, ranging from BBB- to A-, albeit it with negative outlooks. The reasoning focused on the lessors’ access to funding and the strength of their parent corporations.
China is a major factor, not just because of the Chinese state’s ownership of leasing companies but also because of the recovery in the Chinese domestic air travel market. As the peak of Covid-19, in late May, Western lessors had 80% of their fleet grounded but the Chinese lessors has only around 40%. CALC has made a big play over the fact that only 33% of its aircraft were grounded then, and the inactive proportion has since fallen to 12%.
According to Steven Udvar-Házy, the best lessors, especially his own ALC, are very well positioned to ride out the crisis. They are “active” lessors, those that have carefully built up balanced young fleets, mostly narrowbodies but also widebodies for the future; have a low cost of capital and access to the capital markets; and know the lessees intimately so that they can effectively manage their lease agreements. The other lessors are either small newcomers — which will be rationalised out of business, but through opportunistic portfolio purchases rather than company takeovers — or they are slow-moving institutional lessors — or as Udvar-Házy dubs them, “cheque-book lessors”.
US/Asian:BBAM;
Australian:MAF;
Middle East state enterprise:DAE, Alafco;
Japanese financial institution:Orix, SMBC, Aircastle, ACG;
Chinese/Japanese:Avolon, AMCK;
Chinese (HK, Singapore):CALC, SC, Goshawk;
Chinese state bank:BoCom, CDB, BOC, ICBC
The extent of the control of the operating leasing business by institutional lessors is shown, approximately, in the pie charts which divide the mainstream lessors’ owned fleets and firm orderbook by geo-political ownership (specialist lessors like BCG and NAC are excluded). They account for over half of the fleet and well over half of the backlog.
Chinese state banks alone control 19% of the capacity with a further 17% owned by other Chinese-backed entities or in joint ownership with giant Japanese financial institutions. Which raises the disturbing question of what would happen to the global aircraft leasing business if trade and political relations between the US and China deteriorate further.
Individual Lessors
The following is an update on the major lessors’ positions in relation to Covid-19.
General Electric Capital Aviation Services (GECAS)
The GE unit, GECAS, based in Dublin and with another 22 offices, remains the world’s largest lessor, with an owned fleet of 965 commercial aircraft as at June 2020. GECAS’s firm orderbook totals 292 plus 53 secondary orders placed via airlines.
GECAS has received deferral requests from about 80% of its lessees, with 60% approved to date. In the second quarter of 2020 GECAS’s rental income was $795m, 22% down on the same period in 2019.
It has set up a daily operational system to monitor repossessions and/or restructurings. The bright spot is that the portfolio is more diverse today than in previous downturns: about 60% of the fleet comprises narrowbody types, with widebodies making up less than 30%, the remainder being RJs and freighters. In short, GECAS comments: “We’re planning for a steep market decline this year and … slow multiyear recovery”
The lessor has cancelled orders for 69 undelivered 737 MAXes, though it is maintaining 29 MAXes plus 82 on order. The cancellation was described as “a mutual agreement between GECAS and Boeing to rebalance the lessor’s skyline orderbook for 737 MAX aircraft”, the diplomatic language reflecting the fact that GE’s Aviation division is one half of CFM (the other half being Safran), which is the sole supplier of LEAP engines for the entire MAX fleet.
AerCap
AerCap, headquartered in Dublin, purchased ILFC from the insurance conglomerate, AIG, in 2014, and is listed on the NYSE. As at mid-year its owned fleet totalled 931 aircraft plus 322 on firm order.
AerCap too has cancelled 737 MAX orders — 15, out of a total of 95 — that had passed their contractual delivery dates, meaning that the lessor would have no penalties and Boeing would have to pay compensation. Moreover, it has postponed the delivery of over 100 aircraft that were originally scheduled for delivery during 2020-22, reducing cash outflow by $5.3bn or 60% over this period.
In the second quarter lease rentals totalled $948m, just 12% down on the same period in 2019, and net profit was reported as $246m against $331m in the previous year. However, the P&L does not yet reflect the full impact of deferrals — AerCap has stated that these currently amount to $430m and are expected to rise to $700-800m, on an annual basis equivalent to over 20% of revenues, though the lessor does hold about $1bn in security deposits.
AerCap’s liquidity remains solid, having successfully raised $2.5bn In June from the debt capital markets, issuing three- and five-year unsecured notes with an interest rate of 6.5% pa.
AerCap has also emerged from the restructuring of Norwegian as a major if reluctant shareholder in the airline, taking 15.9% of the equity.
Air Lease Corporation
ALC, based in Los Angeles and Dublin, and headed by the legendary Steven Udvar-H´zy, is listed on the NYSE. It owns a fleet of 301 aircraft, with an average age of under four years, and has firm orders for 398 units (including 150 MAXes).
It is one of the few lessors projecting an optimistic message at present, reporting an improvement in net profit in the first half of 2020 of $284m compared to $266m in the same period of 2019. The lessor contends that its relatively strong position derives from:
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A high percentage of its operators, around 75%, being either flag-carriers or receiving state aid;
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A young fleet, with an average age under 4 years;
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A widely diversified portfolio with no lessee accounting for more than 2% of the total asset value of the owned fleet;
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Exposure weighted towards China, Asia and Europe rather than North America (with the threat of Chapter 11); and
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Unique operating experience dating back to the foundation of ILFC by Udvar-H´zy.
ALC enjoys the best credit rating of the lessors, and in June issued $850m of unsecured debt notes due in 2025 at a fixed rate of just 3.375% pa.
Nevertheless, ALC states that 59% of its lessees have requested and been granted rental deferrals totalling $190m Each has been dealt with on a case-by-case basis, and airlines are generally offered partial lease deferrals with repayments due within one year. Extensions to the leases have frequently been added as part of the agreement. The rental collection rate for the second quarter of 2020 was 91%, though this refers to collections after agreed deferrals.
No cancellations have been announced but ALC expects the delivery schedule to be elongated and capex cut back significantly from planned levels.
Avolon
Based in Dublin, Avolon is 70% owned by Bohai Leasing (part of the Chinese HNA Group) and 30% by Japan’s Orix Corporation. As at June its portfolio its comprised 486 owned commercial aircraft, mostly narrowbodies, and an orderbook of 277 units.
Avolon has ruthlessly downsized its 737 MAX orderbook by 107 aircraft, leaving it with 9 aircraft currently grounded and a remaining 37 on order. It has also cancelled one A330 neo and deferred delivery of three A320neos.
Avolon claims liquidity of over $5bn at mid-year, having cut capex outflow by 52% from the planned level over the 2020-23 timeframe. However, it also notes that “Many of our customers have entered into short-term rental deferral arrangements or were in arrears on their rental obligations”.
As a result, its revenue collection rate during the first half of 2020 fell to 68% of the originally contracted lease amounts, with two thirds of the shortfall related to deferral arrangements.
BBAM
BBAM is owned 35% by the Onex Corporation (a Canadian private equity company), 35% by its management and 30% by GIC, Singapore’s sovereign wealth fund. The headquarters is in San Francisco.
BBAM describes itself as “the leading provider of asset origination and management services in the aircraft leasing industry”. BBAM had over $28.9bn of assets under management at the end of the first quarter of 2020, including a fleet of 540 aircraft, though it has zero orders. BBAM manages assets for a various capital partners, most notably FLY leasing, which along with B Aviation and Nomura Babcock and Brown, acquired Asia Aviation Capital, the leasing arm of AirAsia, in 2018.
FLY Leasing, which is quoted on the NYSE, with BBAM holding 23% of the shares, currently has a fleet of 86 aircraft, with a core of A320ceos, 737NGs and 787s.
It states that it received 84% of the rentals due in the second quarter, though lessees representing two thirds of the fleet are requesting deferrals. It estimates that total deferrals will amount to $83m, about a quarter of revenues, and is expecting all of this to be repaid by the end of 2021.
SMBC Aviation Capital
SMBC is owned by the Sumitomo Mitsui Financial Group and is based in Dublin.
Its owned fleet totalled 251 units at mid-year, mostly young narrowbodies, while the orderbook comprised 283 aircraft (including 116 MAXes and 167 A320/21neos). In June the lessor reached agreement with Boeing to postpone delivery of 68 MAXes until 2025-2027, but has stated that it will not cancel any orders “at this point”.
SMBC has agreed rental deferrals with airlines representing about 60% of its portfolio by revenue. The deferral periods are reported to be only for two to three months, so account for just 10% of annual revenue. It has also announced that 13% of its fleet, as measured by net book value, was under restructuring measures as at mid-year.
Backed by the financial resources of SMFG, which provides about half of its funding requirements, SMBC has retained its A- credit rating from Fitch, albeit with a negative outlook, which has enabled it to complete major sale/leaseback transactions with easyJet and THY.
Nordic Aviation Capital
Based in Limerick, Ireland, and Denmark, NAC is owned by its founder Martin Møller, of the Maersk Containerline company; EQT, a British investment fund and GIC, Singapore’s sovereign wealth fund. It is the world’s leading regional aircraft leasing company, with an owned fleet of 483 turboprops and regional jets. In 2019 it placed a firm order for 105 ATRs and 20 A220s.
NAC has just published its financial results for the 12-month period ending 30 June 2020. It increased lease revenue marginally to $760m and generated operating cashflow of $377m, but impairments meant that a loss of $639m for the year was reported.
NAC states that “many of [its] customers had entered into short-term rental deferral agreements and/or were in arrears on their payment obligations.”
The lessor has taken two key actions:
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Shareholders collectively injected US$60m of new equity into the business; and
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Through an approved Scheme of Arrangement, NAC reached an agreement with lenders to standstill on and defer debt obligations for a period of 6-12 months.
A new CEO, Patrick de Castelbajac, was appointed in July.
ICBC Leasing
Beijing-based and fully-owned by the Industrial and Commercial Bank of China, ICBC Leasing, is in effect a state-owned lessor, with an estimated portfolio of 386 aircraft (mostly A320 family and 737 aircraft, but also 787s and A330s).
There has been no specific information on deferrals issued by the lessor, although it is assumed that ICBC has a role supporting not just the Chinese airline industry but also strategically important airlines globally. Fitch’s view of ICBC Leasing is that “it will receive extraordinary support from ICBC, in times of stress”.
BOC Aviation
Singapore-based BOC Aviation, Asia’s largest lessor by value, is 70% owned by the Bank of China, one of the big four Chinese state-owned commercial banks, and 30% floated on the HKSE. Its owned fleet comprises 334 aircraft (mostly A320 family and 737NGs, plus 777s and 787s). It has an orderbook of 194 aircraft.
Remarkably the 28-slide presentation of first half 2020 financials did not mention Covid 19 or lease deferrals once. BOC concentrated on its profitability — net result of $323m; its A- credit rating and 3.4% cost of capital; its liquidity — a $2bn facility from its parent among other sources; and the recovery in Chinese domestic traffic.
However, BOC too is postponing deliveries and has cancelled 30 MAX orders, and is diverting its cashflow to sale and leasebacks. And it is exposed to Norwegian, which accounts for about 5% of its asset base. Having participated in the debt to equity rescue, it now owns 12.7% of the airline, and has converted its 787 leases to a power by the hour basis.
CDB Aviation
CDB Aviation is a wholly owned Irish subsidiary of CDB Leasing, which is ultimately owned by the China Development Bank. As such, CDB Aviation’s credit rating reflects the sovereign status of its parent, the world largest development bank (A1 by Moody’s, for instance).
The owned fleet totals 228 units, mostly modern narrowbodies. Leased out to 73 airlines. Its firm orderbook of 154 aircraft includes 70 MAXes. In June it cancelled 30 MAXes and delayed deliveries of the rest by between four and six years.
Aviation Capital Group
ACG is owned by the Tokyo Century Corp, a Japanese conglomerate currently valued at $7bn on the Tokyo exchange and which manages some $52bn of assets. ACG is based in Newport Beach, California. ACG’s owned fleet totals 329 units, 86% narrowbodies. Its orderbook comprises 129 aircraft, 72 of which are MAXes. Net income for the first half of 2020 was $108m, 26% down on 2019.
Continuing a leasing theme. ACG points out that 71% of its lessees are flag-carriers or recipients of state aid, hence affording the lessor protection (its biggest lessees are S7, LOT and American). It states that most of its customers have requested some form of rental relief and as at June it had deferred $64m in lease payments, about 6% of annual revenues. These deferrals are due to be repaid during the remainder of 2020.
Meanwhile, ACG is negotiating with Boeing to “align our MAX order book to our strategic objectives”, noting the cancellation rights as a result of delayed deliveries. It is also seeking to postpone A320neo deliveries from Airbus.
ACG’s credit rating is BBB-. Liquidity looks robust with $1.7bn in cash and undrawn facilities of $2.6bn
Aircastle
Aircastle was jointly purchased by the Japanese conglomerate Marubeni and Mizuoho Lease in March this year. It is based in Stamford, Connecticut, Singapore and Dublin. The owned fleet totalled 274 units (78% narrowbodies), with an average age of 10 years as at mid-year. 25 E-Jets are on order from Embraer, delivery of which are currently being put back.
Total lease revenues in the second quarter of 2020 were $177m, down 12% on 2019., and a net loss of $191m was reported, due to a non-cash aircraft impairment charges of $178m.
In August Aircastle reported that six of its lessees, including LATAM, were in some form of insolvency proceedings. Its exposure is 21 aircraft or 12% of net book value. 40 lessees, 50% of the customer base, have been granted deferrals on rentals. The amount deferred is $99m or 12% of annual lease revenue, with these deferrals structured for repayment this year or in early 2021.
Orix Aviation
As well as its shareholding in Avolon, Orix Aviation, owned by Japanese financial services group Orix Corporation, acts as a lessor in its own right. Headquartered in Dublin it owns 72 aircraft, 85% narrowbodies by value. The lessor trades in the second-hand market so no orders for new aircraft have been placed.
Orix’s aviation and shipping division, in which the lessor resides, showed a net profit of Y1.4bn ($18m) in the June quarter, 81% down on the same period in 2019. Plans to double the owned and manage fleet to 400 by 2021 are presumably on hold.
Dubai Aerospace Enterprise Capital
Dubai Aerospace Enterprise Capital (DAE) is state-owned and an integral part of the Dubai aviation matrix (Emirates accounts for 13% of its fleet by value). Owned aircraft totalled 132 at mid-year, mostly A320 family and 737NGs but also 52 ATR72 turboprops. It has a single 777F on order.
DAE reported a net profit of $122m for the first half of the year, down 38% on 2019. 58 of its 114 lessee airlines have requested deferrals of which over half had been granted so far. The deferral amount, according to DAE, is equivalent to 16% of annual revenues, so around $200m. However, its credit rating reflects the state ownership and liquidity is strong — $2.8bn available.
Alafco
Alafco is majority owned by the Kuwait Finance House, the state investment vehicle. It has an owned fleet of 65 aircraft and orders for 100 aircraft, including 40 MAXes.
Macquarie AirFinance
Macquarie AirFinance, based in Dublin, is 50% owned by the Australian finance giant Macquarie Group, The other 50% was sold off to two pension funds last year — PGGM of the Netherlands and Sunsuper of Australia.
MAF’s fleet as at mid-year totalled 183 units (mostly A320s, A220s and 737NGs leased out to 88 airlines based mostly in the Asia/Pacific region. It has firm orders for 60 aircraft (A320neos and A220s).
MAF has no exposure the MAX and not reported any detail on deferrals. The parent, Macquarie Bank, however, has revealed Covid-related deferrals on its total portfolio of personal and business loans of Aus$9bn ($6.5bn)
Jackson Square Aviation
JSA is based in San Francisco, with offices in Dublin and Singapore. The lessor is a fully-owned subsidiary of Tokyo-based Mitsubishi UFJ Lease & Finance Company, which also runs the aircraft financing unit bought from DVB last year.
JSA has a portfolio of 190 owned aircraft, mostly young narrowbodies plus A330s, A350s and 787s), placed with 55 airlines. It also has a 30-aircraft order for 737 MAX 8s.
As seems to be the norm with many Japanese financial institutions, no public comment has been made about the impact of Covid-19 on lease performance.
BoCom Leasing
BoCom Leasing is a wholly-owned subsidiary of the Bank of Communications (China’s fifth largest bank), headquartered in Shanghai. Its Hong Kong subsidiary, described as a funding platform for offshore shipping and aviation assets, has just been rated as A by Fitch.
The owned fleet totals 210, mostly A320 family and 737NGs plus 7 parked MAXes, leased out to about 50 airlines. It has a heavy exposure, 23 units, to Hainan. It is active in the sale and leaseback market, and has no orders under its own name at present.
China Aircraft Leasing Company
Hong Kong based China Aircraft Leasing Company (CALC) is the largest independent Chinese lessor. The ownership structure is: Everbright, the Hong Kong investment fund, 36%; Mike Poon, founder, 28%; public float on the HKSE, 36%.
The owned fleet totals 111 units, all narrowbodies. The orderbook is substantial: 218 units in total (A320neos and 737 MAXes, plus 40 Comac ARJ-21s).
CALC maintains that it is protected by the relative strength of the Chinese domestic market, noting that the proportion of its fleet grounded during the worst of the crisis was the lowest among all lessors. It reported an improvement of 6% in net profit to HK$332m ($39m) in the first half of 2020. It also alludes to the “relative abundance of liquidity in the domestic market in China” which enabled it to issue short term bonds at a 4% pa interest rate in June.
SC Aviation
SC Aviation is the leasing unit of Hong Kong’s Standard Chartered Bank and is based in Dublin. It has 127 owned aircraft in the fleet, mostly narrowbodies, leased to 30-plus airlines concentrated in the Asia/Pacific region. It has no orders.
Goshawk Aviation
Goshawk, based in Dublin, is owned by two related Hong Kong entities — NWS Holding, an infrastructure and transport investment conglomerate with businesses throughout Greater China and CTFE, the private investment holding company of the Cheng family.
Its current portfolio of about 190 owned aircraft (mostly narrowbodies) is placed with 63 airlines. It has 40 aircraft on order split equally between A320neos and 737 MAXes.
The lessor has grown rapidly following the acquisition of the Irish subsidiary of San Francisco-based Sky Leasing in 2018. The stated aim was to move to an IPO, but Covid-19 must have put an end to that plan.
AMCK
A relative newcomer, AMCK is the product of a takeover by Japan’s MCAP (Mitsubishi) of Dublin-based Accipiter. The owners are Hong Kong-based CK Asset Holdings with 50%, Li Ka Shing Foundation, 10%, and Mitsubishi Corp., 40%. The owned fleet numbers 132 aircraft, nearly all narrowbodies, plus 20 orders for A320neos.
There have been no details released about deferrals, but the lessor portfolio does include Norwegian, LATAM and Avianca.
Carlyle Aviation Partners
Apollo Aviation Group was bought by giant US private equity company, The Carlyle Group, in December 2018, changing its name to Carlyle Aviation Partners. The owned fleet comprises 227 aircraft, generally older 737NG, A320 family and A330 types, reflecting the company’s specialism in mid-life aircraft.
Carlyle’s client airlines typically have only one or two aircraft on lease, which spreads the risk. No specific details have been released about the impact of Covid-19 on the lessor, but the long-established management have gone through three major aviation crises — in contrast to 42% of Carlyle Group’s executives who were still in college at the time of the Global Financial Crisis, as co-founder and CEO Robert Korn pointed out in a recent interview with Bernstein.
Boeing Capital Corporation
Based at Renton, Washington, Boeing Capital Corporation (BCC) is a lender of last resort finance for all Boeing equipment.
We estimate BCC’s portfolio of fully- and partially-owned aircraft stands at around 200 aircraft. At the end of June 2020 the net value of BCC’s portfolio’s value was $2.2bn. Lease rentals in the first half of the year were $134m, 5% down on 2019, while operating profit fell to $17m from $57m.
Timaero
The Dublin-based subsidiary of the Russian lessor VEB has 40 aircraft on order but is embroiled in a $740m lawsuit against Boeing over the 737 MAX grounding.
Castlelake Aviation
Castlelake Aviation is a lessor specialising in mid- and end-life aircraft, which may have sub-performing leases. Its portfolio is estimated at 150 narrowbodies, widebodies and turboprops. Based in Minneapolis, it also has offices in Dublin, London and Singapore.
