Lessor BOC Aviation returned to profitability during HY1, reporting a $262 million net profit for the period. This compares to a $-313 million loss in 2022, which includes the impairment for aircraft in Russia. The owned portfolio exceeded 400 aircraft for the first time in BOC’s history, with more new deliveries scheduled for HY2 to grow the fleet even further.
In December, BOC Aviation’s owned fleet stood at 392 aircraft. This has grown to 404, thanks to the introduction of the first five Airbus A220s into the portfolio, three extra A320neo family aircraft for a total of 94, three additional MAX 8s and -9s for a total of 55, and four 787s that brought the fleet to 28. The A320ceo fleet was reduced by three to 95. The number of managed aircraft remained unchanged at 35.
BOC Aviation’s order backlog stands at 213, representing a value of $11 billion. It consists of 120 A320neo family aircraft, up five from December, 88 MAX 8s and -9s (up by six aircraft), and of five 787s (down by four that were delivered in HY1).
“We continued to see the impact of manufacturer delivery delays with twelve aircraft, which were scheduled for delivery in 1H 2023 being delayed into the second half. Of the deliveries that did occur in the first half, a significant number occurred in June, delaying our revenue. We believe that supply chain and labor issues will continue to impact our OEM partners at least for the remainder of this year and may take another one or two years to recover but once the delays have stabilized then the net effect will abate,” said Chief Operating Officer Tom Chandler during the earnings call. Earlier this year, BOC Aviation adjusted deliveries following delays in the supply chain.
He added: “To offset the effects of delays, we have made considerable progress in sourcing replacement capex and have increased committed deliveries for 2023 to 41 from the 24 reported in March. Adding new positions to our 2023 and 2024 delivery skylines has been a key focus and in 1H 2023 we transacted for seven A320neo, scheduled for delivery in 2H 2023, six 737-8 aircraft, four of which deliver this year, with a further two next year, and two A321NEO and five A220-300, scheduled for delivery this year.”
Most deliveries to the Americas
BOC Aviation delivered sixteen aircraft to seven different customers, with one aircraft purchased by the (unnamed) airline on delivery. Most deliveries were to customers in the Americas, like American Airlines, JetBlue, Lynx, and Viva Aerobus. Except for five A320neo family aircraft that were purchased in HY1, all 2023 deliveries have been placed with customers, or seventy percent for 2024.
Eight used aircraft were sold to customers, including three from the owned fleet, compared to seventeen in HY1 2022. The net gain was $14 million. Chandler adds that demand for young aircraft remains solid. “We have letters of intent already signed for eleven aircraft sales in the second half, suggesting a full-year sales pattern similar to that of 2022.” Rising aircraft values driven by high demand and low deliveries drove to the average appraised value of the fleet to $20.3 billion, which represents a five percent premium to net book value of $19.3 billion.
Lease collection rate of 102 percent
Half-year revenues were $1.061 billion compared to $1.196 billion last year but are actually up by nine percent when adjusted for $223 million in non-recurring income arising from the termination of leases that were recognized in HY1 2022. The lease collection rate was 102 percent, which boosted the operating cash flow to $721 million. BOC Aviation will pay out $78 million in dividends, up from $62 million in HY1 last year, or 11.31 cents per share.
Total liquidity stood at $5.7 billion. Total debt grew to $15.8 billion to fund fleet growth. The lessor raised $1.7 billion in new financing, comprising $1 billion from the debt capital markets and $660 million from banks. “Cashflow generated from our financing and operating activities allowed us to fund our capex and repay $1 billion in maturing bonds and loans. We have $1.4 billion in debt obligations scheduled for repayment in 2H 2023, which – together with our anticipated capex – can be funded from our cash flow and our committed liquidity of $5.7 billion,” said Chief Financial Officer Steve Townend.
“We remain well-positioned to capitalize on growth opportunities given our strong liquidity and valuable pipeline of committed deliveries, to which we are continuing to add through selective purchase and lease-back and finance lease investments. We are confident that the progress that we have recorded so far in 2023 will continue to translate into returns for our stakeholders and are excited about our prospects for the future.”
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.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News and until July 1 2023 in a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.