Irish Lessor Avolon Looks To Defer Aircraft Lease Payments

Irish leasing firm Avolon has received requests to defer lease payments from 80% of its airline customers. In its quarterly results briefing, released today, the company says it has already arranged rent relief for many of its airlines, with an average relief period of three months applied.

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Irish leasing firm Avolon is deferring airline rent payments to help them through the coronavirus crisis. Photo: Avolon

Deferrals requested by 80% of airlines

As part of its first-quarter results briefing, major aircraft leasing firm Avolon has said it expects to defer payments for aircraft rentals for the majority of its airline customers. The company said it has already agreed to defer rent payments due from several airlines since March 31st, with an average delay of three months.

The ongoing coronavirus related crisis in the aviation industry has seen airlines around the world grounding the majority of their fleets. Avolon stated that, during the quarter, it received requests from more than 80% of its customer base for payment relief.

While not all these requests have been for full payment deferral, many have involved short term rent relief for all or part of the airline’s bill. The company said that this 80 % of its customers account for more than 90% of its rental cashflow.

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Avolon’s fleet numbers over 600 aircraft, with an average age of below five years. Photo: Airbus

Dómhnal Slattery, Avolon CEO, commented in a statement,

“While Avolon entered 2020 in its strongest position as a company, the impact of COVID-19 has been severe for the aviation industry. The forced lockdown by governments around the world has resulted in the effective grounding of the global fleet.

“Looking ahead, the COVID-19 global pandemic will materially reshape the commercial aviation industry for the foreseeable future. Uncertainty remains as to the length of this crisis and we expect that it will likely be some time before air traffic returns to more normalised levels.”

The company further said that, given the ongoing impacts on its customers’ operations, it expected more airlines to fall behind with rent payments and for requests for rent relief to continue to flood in.

Re-evaluating its order book

To mitigate the effect of a lower income going forward, Avolon has already canceled its order for 75 Boeing 737 MAX aircraft, which were due to be delivered between now and 2023. It also rescheduled the delivery of 16 737 MAX to 2024 and pushed back deliveries of nine A320neo family aircraft from 2021 to 2027.

Although the company’s lease revenue was up by 5% for the first quarter year on year, its profits were down 13% to $154m. However, the company remains in a strong position going forward, with more than $5bn of total available liquidity.

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Last month Avolon removed 75 Boeing 737 MAX orders. Photo: Boeing

The movement of its order book has reduced future capital commitments by $4.1bn, effectively halving its obligations compared to its position in December 2019. Despite the anticipated slump in revenue for the next three months, CEO Slattery retains a positive outlook for his business, and for aviation in general, closing his remarks with the statement,

“We remain confident in the ability of our team to navigate the current environment, and the resiliency of the aviation industry to recover.”

Headquartered in Ireland, Avolon is one of the world’s largest leasing firms, serving 154 airlines across 62 countries. It has 855 aircraft on its books, supplying them to major airlines, including Virgin Atlantic, Qatar, Delta, and AirAsia.

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