Singapore-based Avation PLC says they are nearly US$75 million out of pocket following the collapse and sale of Virgin Australia. The lessor had 13 planes on lease to Virgin Australia when the airline went into voluntary administration in April. Five of those planes have gone to new operators, three are back at Avation, and five planes remain in Australia. All up, Avation PLC's preliminary proof of debt claim against Virgin Australia amounts to US$74.7 million. Most of that derives from outstanding rent and end-of-lease return maintenance compensation.
Avation PLC had 13 planes with Virgin Australia
When Virgin Australia collapsed, its fleet included 79 leased planes comprising 40 Boeing 737-800s, six Airbus A330s, one Boeing 777, 13 Airbus A320s, five Embraer E190s, and 14 ATR 72s. The majority of these leases were expected to expire by 2025. The mixed fleet and high on-going costs associated with the leases were two of the many issues dogging Virgin Australia.
While in voluntary administration, a decision was made to simplify the fleet and relaunch the airline as an all 737 operation (Virgin Australia owns 41 Boeing 737s outright). That saw the airline's administrators tear up existing contracts and start returning excess planes to their owners.
Avation PLC had six ATR72-500s, five ATR72-600s, and two Fokker 100 jets at Virgin Australia. The ATRs flew regional routes around Queensland and New South Wales while the Fokkers focused on charter and FIFO runs out to mines. Five of the ATR72-600 aircraft remain in Australia, but Avation PLC has commenced the return process.
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Avation has entered into new lease arrangements for five former Virgin Australia aircraft, including finance leases for the sale of the two Fokker 100 aircraft, operating leases for two ATR72-500s with a new airline customer in Australia, and a five-year operating lease for an ATR72-500 aircraft with a new airline customer in Asia.
The other three ATR72-500s are back at Avation and now undergoing maintenance in preparation for re-marketing for lease or sale.
Aircraft lessor upbeat about the future
Virgin Australia is not Avation PLC's only customer who went broke this year. Avation PLC had two ATR72-600 aircraft on lease to Braathens when it entered administration. Fortunately, the bulk of the company's 48 aircraft are in places where the worst impact of 2020 is over or being contained.
"We are now observing a return to service of certain customers including VietJet, airBaltic, EVA Air and Mandarin Airlines which combined represent of the order of 60% of Avation's future unearned contracted leasing revenue," says Executive Chairman, Jeff Chatfield in a statement seen by Simple Flying.
With fewer people flying and airlines looking to operate smaller planes, Avation PLC's emphasis on ATRs may stand it in good stead over the coming years. It owns just two widebodies planes, 18 single-aisle jets (including six A220s and the pair of Fokkers formerly at Virgin Australia). Over half (58%) of its owned planes are post-2020 friendly ATRs.
While Avation PLC can take its planes back, it faces next to no chance of recouping the full monies it is owed. A report to creditors released two months ago suggests unsecured creditors can expect back between 9% and 13% of the full amount owed.