KBRA released research discussing the pandemic’s economic impact on aircraft values and lease rates. In this update to research published in April, KBRA provides its observations over the past four months and outlines its expectations for the industry moving forward.

Some key takeaways in this report include:

• Airlines continue to be proactive in preserving liquidity through accelerating the retirement of older aircraft as well as grounding of certain mid-life, less fuel-efficient aircraft for prolonged periods.
• Aircraft values and lease rates could face further downward pressure as initial U.S. government pandemic-related subsidy programs expire at the end of September.
• Aircraft lessors are expected to be challenged with remarketing numerous aircraft post-airline defaults, which may drive lease rates downward. That said, lease rates have improved on newer aircraft, as carriers demand for sale-leaseback aircraft have increased significantly as airlines try to boost their liquidity and needed cash.
• KBRA still believes that next generation narrowbody aircraft will be the most in-demand for both airlines’ and lessors’ future operations and therefore, are best positioned to recover post-pandemic. Nonetheless, KRBA notes that, the concerted effort of OEMs to reduce production and delivery rates for newer aircraft could create some respite for the values of existing aircraft as the supply and demand dynamics adjust to the new reality of a smaller global fleet over the next few years.