Despite it being the toughest year ever for airlines and aviation in general due to the ongoing COVID-19 global pandemic, leading aircraft leasing company, Avolon leased and sold 224 aircraft in 2020. A press release from the Irish aircraft leasing company seen by Simple Flying Avolon says that it is in a strong capital position as we enter 2021, having total available cash liquidity of $6.5 billion at the end of 2020. this figure can be confirmed by global credit rating agencies Fitch, KBRA, Moody’s, and S&P Global.
Financial highlights of the year were:
- Entering into the sale and leaseback for 44 aircraft
- Selling 29 aircraft, three of which were managed
- Executing 28 sales agreements and 141 lease transactions comprising new aircraft leases along with follow on leases and extensions
- Successfully raising $4.4 billion of debt that included $3.4 billion of senior unsecured notes and $675 million of secured term loan debt
- Reducing near term debt maturities by $1.4 billion through a tender offer of $723 million of notes that will mature in 2022 and 2023
- An opportunistic buyback of $651 million of senior secured Avolon notes at a discount that will mature between 2021 and 2026
- Ending 2020 with $4.7 billion in revolving debt with maturities from 2024 and an undrawn balance of $4.2 billion
- Closing the sale of 19 aircraft to the Sapphire 2020-1 vehicle, which were acquired from Avolon’s fleet following the issuance of US$620m of senior secured notes and a majority equity investment from a third-party investor
Avolon declared a first-quarter dividend of $193, of which $65 million was withheld due to provisions in Avolon’s Shareholder Agreement, bringing the total withheld amount to $167 million.
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2020 was a difficult year for aviation
When speaking in the statement about some of the difficulties faced in 2020, Avolon CEO Dómhnal Slattery made the following remarks:
“2020 was the most challenging year the commercial aviation industry has ever faced. The level of airline distress truly tested the resilience of the leasing sector business model. Through Avolon’s decisive actions to reduce our capital commitments, strengthen our liquidity, and reduce our future obligations, the business is now well-positioned to benefit from the recovery.
“We steadfastly supported our airline partners through temporary deferrals during the year and have seen cash flows improve in the second half of the year from a low in the second quarter. It will take time for the aviation industry to recover. The pace and scale of recovery will not just be determined by the roll-out of vaccines but also by rapid testing programs and the depth of coordination between Governments.
“Air travel will drive economic recovery. It is clear there is a strong desire to travel and latent demand in markets across the world. It is incumbent on Governments to provide appropriate policies to facilitate that demand and drive recovery. We are well-positioned and looking forward to building on continued positive momentum as the recovery takes hold through 2021.”
Founded in 2010, Avolon is a leading aircraft leasing company based in Dublin, Ireland, with offices in the United States, Dubai, Singapore, Hong Kong, and Shanghai. Avolon is 70% owned by a subsidiary of the Bohai Leasing Co., Ltd., a public company listed on the Shenzhen Stock Exchange (SLE: 000415), and 30% owned by Tokyo and New York-listed ORIX Aviation Systems, a subsidiary of ORIX Corporation.
Avolon is the third-largest airline leasing company globally, with a fleet of 842 aircraft as of December 31, 2020. Avolon prides itself on having one of the youngest fleets in the aircraft leasing business and works with airlines such as Taiwan’s China Airlines, Americas Delta, and the Netherlands KLM, amongst many others.
Why is Avolon based in Ireland?
While Ireland might seem like a strange place to base an aircraft leasing company, many large corporations base their companies in Ireland due to the Emerald Isles pro-business environment and attractive taxation rates. As a member of the European Union, Ireland is a stable place to do business and has a pool of young, well-educated people from whom they can draw talent.
Other perks of doing business in Ireland include:
- One of the lowest corporation tax rates in Europe at 12.5%
- A 25% tax credit against research and development costs
- A double taxation agreement with more than 60 countries, including every major trading partner
All in all, Avolon has come out of 2020 in not that bad a shape and should, with the aid of the coronavirus vaccine, start to see business pick up once people start flying like the levels seen in 2019.
What do you think about Avolon’s 2020 results? Please tell us what you think in the comments.