Avolon Reports $619MM in Q2/20 Lease Revenue



International aircraft leasing company Avolon reported lease revenues for Q2/20 were $619 million and adjusted profit of $152 million for the quarter, when adjusted for non-cash impairment charges and accelerated amortization related to airline restructurings, with a net loss of $162 million for the quarter.

Avolon also reported:

  • Total liquidity in excess of $5.1 billion
  • A 34% reduction in near-term capital commitments to the end of 2021, resulting in a year-to-date cumulative 52% reduction in capital commitments in the 2020-2023 timeframe
  • Buyback of $639 million of Avolon senior unsecured notes maturing between 2021 and 2024, at a discount to par, realizing a net gain of $61 million and further reducing near-term debt maturities

As of June 30, Avolon reported that many customers had entered into short-term rental deferral arrangements or were in arrears on their rental obligations. As a result, Avolon’s aggregate increase in trade receivables and deferred revenue asset implied a lease revenue collection rate during the first half of 2020 of 68%, with two thirds of the collection shortfall related to deferral arrangements. During Q2/20, 12 of Avolon’s customers were due to start repayments at the scheduled expiry of their deferral arrangements. According to Avolon, seven of these customers made payments in full and five customers have fallen into arrears or sought an extension to their short-term rental deferral arrangement for some or all of their rental obligations.

Q2/20 Operational Highlights

  • Cancelled commitments to acquire 27 B737MAX aircraft in the 2020 to 2022 timeframe, in addition to the 75 B737MAX aircraft cancelled in Q1/20
  • Removed commitment to acquire one A330neo aircraft due to deliver in 2022 and deferred three A320neo family aircraft from 2020/21 to 2022
  • Delivered three new aircraft and transitioned four aircraft to follow-on lessees
  • Sold 10 aircraft during the quarter, including one managed aircraft, of which five were sold to the Sapphire 2020-1 vehicle
  • Executed a total of 16 lease transactions in the quarter comprising new aircraft leases, follow-on leases and lease extensions
  • Owned and managed a fleet of 547 aircraft at the end of Q2/20, with total orders and commitments for 277 new technology aircraft
  • Had a total of 145 airline customers in 62 countries.

“The second quarter was undoubtedly a challenging period for the aviation sector, and our results clearly show the impact of this crisis. The lockdown of the global economy caused severe disruption to the demand for air travel and uncertainty remains around the pace and timing of a recovery,” Dómhnal Slattery, CEO of Avolon, said. “Based on our experience, we have taken decisive action since the start of the year. Ee have removed US$7.9 billion of near-term capital commitments and bought back US$639 million of our unsecured bonds at a discount to par, all while maintaining over US$5 billion of total liquidity. These actions enhanced our capital strength and provide a strong foundation to support our customers in this critical period and to manage our business through the recovery. While at an early stage, we have seen traffic trends in certain markets that suggest that the structure and quality of our portfolio leaves us well positioned to take advantage of the recovery when it does take hold.”

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