UPDATE – Lessor BOC Aviation said that eighteen aircraft with a book value of $935 million may be affected by the sanctions on Russia. It is too early to say if this means that it won’t be able to repossess these aircraft, but every option must be taken into account. The lessor clarified its position on March 10 in its 2021 financial statements. BOC Aviation happy with higher profit but worried about Russia.
BOC Aviation is one of many lessors that is exposed to the current situation in Russia, which follows the invasion of Russian troops into Ukraine. The EU, UK, US, Singapore, and other countries have imposed sanctions on Russia that include a ban on the selling and trading of aircraft and aircraft parts. The Russian Ministry of Transportation issued a draft on March 10 that outlines how leased aircraft should be returned to its owners. One of the conditions is that aircraft will be paid in Russian roubles instead of dollars, but also mentions a nationalization of the foreign assets.
According to its website, BOC Aviation has leased aircraft to Aeroflot, Pobeda, S7, and AirBridge Cargo, representing 4.8 percent of its portfolio. BOC said the eighteen aircraft are three widebody freighters and fifteen single aisle. The by-origin Hong Kong-based lessor says that it will fully comply with the sanctions and other laws applicable to the aircraft business, but in the investors webcast, Chief Operating Officer, David Walton, called the March 28 deadline for the return to lessors of these aircraft “frankly an unrealistic timetable.”
In its financial statements on its 2021 results that were released on March 10, BOC Aviation adds on the situation in Russia: “The international aviation insurance markets are progressively canceling certain elements of insurance policies in relation to aircraft located in Russia or leased to Russian airlines. This is a complex and rapidly developing situation that we are monitoring closely.”
Net profit up to $561 million
BOC Aviation ended 2021 with a net profit after tax of $561 million compared to $510 million in 2020. Revenues increased to $2.183 billion from $2.054 billion. The lessor will pay a dividend of $0.28 to its shareholders. Last year, the lessor raised $3.5 billion in new notes and loan facilities and repaid $1.9 billion in previous debt.
The lease collection rate improved from 94 to 97 percent, but it felt the effects of the Covid-crisis as ‘several’ customers deferred payments and sought lease restructurings. Of all its leasing contracts, 82.3 percent expires in 2027 or beyond. Its 2022 portfolio is fully booked, but the lessor says it still needs to place its 2023 order book deliveries and secure new contracts for aircraft that come out of lease this year.
BOC places eleven MAX 8s with Lynx Air
The company grew its fleet net book value to $19.6 billion, consisting of 417 owned and managed aircraft. It took an impairment of $146 million on 32 aircraft that had a value below the net book value. Despite delivery delays that affected 29 aircraft and reduced capital expenditures, it delivered 52 aircraft to customers and sold 26. Of the 52, seven were purchased by the customer on delivery from the manufacturer, sixteen were from BOC’s orderbook, and 29 were purchase and leasebacks.
BOC Aviation took delivery of 31 Airbus A320neo-family aircraft and eighteen Boeing MAX. Delayed aircraft included sixteen Boeing 787s, with more deferrals likely this year until Boeing will resume deliveries. According to BOC, the sale of the 26 aircraft reflects the return of liquidity to the aircraft financing market, especially in the second half of the year.
On December 31, BOC Aviation had 104 aircraft on order, including 35 Airbus A320neo-family aircraft, 45 Boeing MAX, and 21 787s. On March 2, it concluded a purchase agreement for another eleven MAX 8s that will be placed with Canadian start-up Lynx Air for delivery in 2023 and 2024.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.