KBRA Says Airlines ‘Have Borne the Brunt’ of COVID-19’s Impact on the Aviation Sector



Kroll Bond Rating Agency released its outlook on the corporate aviation sector and examined notable events and trends one year into the COVID-19 pandemic.

While all segments of global aviation have faced headwinds due to COVID-19, airlines, as the operators of passenger aircraft, have borne the brunt of it. Travel restrictions and lockdowns resulted in mass groundings and historically low levels of air passenger demand, which led to significant capacity reductions and forced airlines to cut variable costs, implement furloughs or permanent staff reductions, and other cost efficiencies. Further, a focus on reducing capital expenditure — a major cost for carriers with aircraft orders — has led to efforts to right-size the fleet composition, with many older aircraft on their way to early retirement. While most airlines have tried to avoid bankruptcies, several have filed for debt restructuring and, in some cases, outright liquidation.

KBRA noted, however, that while certain airlines may fail during this crisis, those that survive will likely have stronger franchises going forward, albeit with more leverage than they had pre-pandemic.

The report also highlights:

  • Aircraft leasing companies’ efforts to work through a wave of deferral requests as airlines sought relief from lease payments.
  • The impact on aircraft production and deliveries from OEMs and new supply and demand dynamics.
  • How aircraft market values and lease rates have been pressured given the dearth of trading and limited liquidity.
  • Capital market activity as airlines, lessors and OEMs have taken steps to raise liquidity amid the COVID-19 economic disruption.
  • KBRA’s current views on passenger and air cargo market trends and the global aircraft fleet.


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