Aircraft Lessor Avolon Reveals $37 Million Loss For 2020

Dublin-based aircraft lessor Avolon has today released its annual results for 2020, including a massive $37 million loss. In 2019 the company achieved a $225 million profit. We’ve taken a closer look at what its numbers mean as well as its predictions for 2021.

avolon airbus a320 neo annual results
Avolon posted a $37 million loss for 2020. Photo: Airbus

Yet another set of results and yet another staggering loss. It comes as no surprise that airlines and aviation companies are reporting record-breaking annual losses after perhaps the most difficult year in the industry’s history.

International aircraft lessor Avolon has become the latest in a line of companies to announce a staggeringly large loss. The company leases a fleet of almost 850 aircraft to 142 airlines in 61 countries, but travel restrictions have meant many aircraft have been grounded for a year. In a press statement accompanying the results, Avolon CEO Domhnal Slattery said,

“2020 was an extremely challenging year for the aviation industry globally. As the pandemic developed, governments were forced into imposing travel bans, resulting in grounded fleets with a severe and immediate impact on the world’s airlines. We worked closely with our customers to provide support while also prudently managing our own capital position.”

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Some positives

But it wasn’t all doom and gloom. The lessor did manage to deliver 57 new aircraft and move a further 10 to 26 airlines around the world. It also agreed on sale and leaseback agreements for 44 aircraft for a total of $2.3 billion and sold a further 29 aircraft. It also negotiated sales for 28 planes and 141 leases. The company also claims that 98% of its fleet was in use throughout the year, a figure considerably higher than most airlines.

easyJet and Ryanair
Avolon has predicted that LLCs like easyJet and Ryanair will recover faster than major airlines. Photo: Getty Images

The results also show that steps to manage cash flow and boost liquidity saw Avolon finish the year with $6.9 billion of available liquidity, the best figure in the company’s history. In 2019 the company ended with $5.7 billion in liquidity, a 20% difference. However, despite the increase in liquidity, the company has 2.3 times its net debt amount and an increase of just 0.1% on 2019 figures.

Fearless forecasts

Besides focusing on the positives from last year, Avolon is also looking forward to 2021, which it believes will be a year of recovery. Specifically, Avolon is relying on the roll-out of the vaccine to boost numbers in the second half of the year. In a paper called the Fearless Forecasts, Avolon made six predictions about 2021, the first of which states that recovery will be much quicker than expected. Let’s hope Avolon is right!

Boeing aircraft landing
Leasing aircraft rather than buying new from Boeing or Airbus may become more popular as airlines try to manage cash spends. Photo: Getty

The same paper also suggests that major airlines will survive the downturn, but it will be low-cost carriers that truly thrive during the recovery as people seek to travel regionally over the coming months. Avolon all proposes that we will see more start-up airline join the skies than we saw airlines fail in 2020.

In a boost for its own business, the next speculation suggests that aircraft lessors will make up two-thirds of new passenger aircraft deliveries as airlines look to lease and buyback rather than purchase new. If this is the case, Avolon does look well-positioned to withstand the remaining months of difficulty. Its debt to liquidity ratio is substantial, and although it suffered heavy losses last year, this year does not look set to be the same.

What do you think of Avolon’s predictions? Will we see an increase in leasing aircraft, or is that Avolon’s wishful thinking? Let us know what you think in the comments.