How Lessors Are Helping Chinese Airlines Cope With Coronavirus

Aircraft leasing firms are in danger of losing a share of the world’s next biggest aviation market unless they intervene to relieve struggling Chinese carriers affected by the coronavirus.

Air China, United States, Domestic Flights
Leasing firms have offered to make deals to ease the financial pressure on Chinese carriers. Photo: Getty Images

What are the details?

The coronavirus has been devastating for Chinese airlines. Up to 80% of all international travel originating from or heading to the country has been restricted in one form or another, and estimates are that Asia-Pacific traffic is down 13%. Some Chinese airlines have found that entire fleets of widebody aircraft, capable of making over a million per flight, are sitting empty and dark.

If an airline isn’t making any money from an aircraft, then they are going to look at the expensive lease payments with aircraft leasing firms and wonder if they can find a better deal. As such, aircraft leasing firms, like Air Lease Corporation, are approaching their clients with new deals.

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What is the plan?

Speaking to CH-Aviation, Air Lease Corporation suggested that it could provide additional loans to the carriers, or even offer better sale-leaseback deals on existing aircraft that will improve their debt books.

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“We are making outright cash aircraft purchase offers, as well as offering sale-leaseback transactions, which will provide our customers cash and positively contribute to ALCs growth this year. Furthermore, the purchase of selected aircraft could also help our MAX customers who are struggling to find summer lift in the face of still uncertain MAX delivery timing,” Chief Executive John Pilger said during a quarterly investors call, as reported by CH-Aviation.

boeing 737 MAX china getty
Chinese airlines have also been hard hit with the 737 MAX grounding. Photo: Getty

The company may even allow airlines to defer lease payments, in special situations. The firm has 10 clients in China and has 66 aircraft currently flying for Chinese carriers (or not flying, as it happens).

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CEO of AerCap Aengus Kelly mentioned in a recent call with investors that they are willing to meet with their Chinese clients and work on some bespoke deals, which may include deferring lease payments. The firm is one of the biggest in China, with 151 aircraft on lease and has deals with 22 airlines.

“[The epidemic] is affecting our Chinese customers, their staff, families, and our own employees in China, and our thoughts are with those who are suffering from the impact of the coronavirus. These airlines have been our partners for decades, and they will be our partners for decades to come. We will help them where we can through this very challenging period,” he said.

Coronavirus, United States, Arrival Airports
Chinese airlines have been the worst affected by the virus. Photo: Getty Images

Another firm Avolon, who has 18 clients in China, has prepared a brief to spend up to $6 billion on sale-leaseback deals. Lastly, the Chinese government is also prepared to step in and offer loans and bailouts for airlines affected by the crisis… but at a cost of consolidation of the industry, with the possibility of merging some of the state-owned carriers.

There is no mention at this time if the air lease firms intend to extend their generosity to airlines outside of China (such as Cathay Pacific who is based in Hong Kong), who arguably are equally affected by the situation. 

What do you think of this news? Do you think this will help the aviation industry in China? Let us know in the comments.

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atlas

Of course.
But this is no help, this is just about not loosing money. If they bankrupt, the lessor will get back the planes, and have to lease them to someone else. Which is no problem if you have just few returned airplanes.
So the lessors are actually saving themselves.

B777-350

I am very surprised by the comment that one Chinese carrier wide body is capable of making over a million (I assume in dollars). Could you please elaborate? Thank you.