Lessor Avolon thinks that the airline industry has reached an inflection point and is now in the re-build phase to sustained profitability. The company returned to profitability in 2021, reporting a $47 million net profit on February 8. Avolon thinks the worst is over for the industry.
“While challenges remain in the short-term, and recovery will be uneven across markets, we have passed an inflection point and we are in the re-build phase for our industry”, CEO Domhnal Slattery says in a media statement. But there is now “clear evidence” of the recovery in both the leasing and airline industry.
The 2021-profit compares to a $37 million loss for 2020. Lease revenues were still slightly down, however, to $2.144 billion from $2.279 billion in the previous year. Avolon generated $895 million in net cash from operations.
Avolon grow its owned and managed portfolio from 572 to 592 aircraft, with orders and commitments for 232 new aircraft. The lessor reduced its new aircraft orders by some 100 in 2020 but entered the eVTOL market with an order for 500 VX4s from Vertical Aerospace. Avolon says that it has already placed seventy percent of these with airlines like GOL and Japan Airlines.
It delivered 49 aircraft compared to 57 in 2020 (including the 23rd Airbus A321neo to American Airlines on the main picture) and transitioned 23 to thirty customers compared to ten aircraft and 26 customers in the previous year. The lessor added fourteen new customers to its portfolio, bringing the total to net 150 customers versus a net 142 in 2020. Avolon sold 24 aircraft versus 29 the year before.
Avolon concludes 45 sale and leasebacks
The Dublin-based company that is an indirect subsidiary of Bohai Leasing concluded 45 sale and leasebacks with airlines, one more than in 2020. As recently presented by IBA consultancy, the number of SLBs in 2021 has been at the lowest point in the past decade at around 360, down from the average 500 per year. With fewer new aircraft deliveries, the SLB market has become very competitive with new lessors that aggressively try to capture market share at the cost of very low margins of just 0.4 to 0.5 percent. Some bigger lessors have backed out from the SLB market, but Avolon remained active.
In total, Avolon executed 228 lease transactions in 2021, including new leases, follow-on leases, extensions, and sale agreements. It hasn’t announced its lease collection rate or the number of restructurings. Quite a few lessors have been restructuring previous contracts or suffered from payment deferrals as airlines went default on payments.
Avolon ended 2021 with $6.3 billion in liquidity, down from $6.9 billion in 2020. Liquidity includes $775 million in unrestricted cash and $5.5 billion of undrawn debt facilities. The lessor raised $3.7 billion in new debt and extended $2.0 billion of unsecured note maturities until 2027.
