Eleven aircraft leasing companies surveyed by Airfinance Journal have a combined $59 billion in bond maturities through 2030.
US lessors have the most bonds to repay, followed by their counterparts in Europe and Asia-Pacific, although large differences exist.
Irish platform Aercap leads the pack with $13.3 billion in outstanding bonds, followed by US lessor Air Lease (ALC) with $12.6 billion, Avolon with $11.1 billion, BOC Aviation with $9.2 billion, Aviation Capital Group (ACG) with $5.2 billion and Aircastle with $3.3 billion.
In 2020, Aercap has $1.5 billion of bonds coming due, split between $500 million at an interest rate of 4.25% on 1 July and $1 billion at 4.625% due on 30 October.
Also in 2020, ACG needs to repay $600 million with a 7.125% coupon by 15 October; while BOC Aviation has RMB1 billion ($141 million) at 4.5% to be settled by 17 October.
The following year, in 2021, the numbers become much bigger. Aercap has $2.6 billion due, ALC has $1.95 billion, BOC Aviation has $1.13 billion and ACG has $1.05 billion. Singapore-based regional lessor Avation has $350 million due on 15 May 2021.
Repayments will be even higher in 2022 and 2023, ringing in at a combined $10.1 billion and $9.8 billion respectively.
Until now, an extremely attractive long-term financing environment of low rates offered by the bond market helped fuel the unprecedented growth of aircraft leasing companies observed particularly over the past decade, providing an indispensable source of cheap capital to the industry’s major players. But what will the future hold?
Airfinance Journal analysis shows that the $58 billion in total outstanding bonds have a weighted average coupon rate of just over 4.2% but those days appear to be over as Covid-19 continues to wreak havoc in the aviation industry with now at least $314 billion in airline revenue losses predicted by IATA in 2020 only. And even that number is likely to increase as devastating second and third quarter results will start coming in.
As a result, yields on lessor bonds continue to blow out as investors balk at the growing prospect of unprecedented airline collapses and OEM supply chain bankruptcies leading to a glut of aircraft coming onto the market. The widebody market in particular could shrink to just 20% of its forecast output numbers over the next three years, or longer, analysts say.
Data shows that yields on 2024/25 public bond maturities have reached 8-10%. If such debt cost becomes reality for future issuance, lease yield factors would need to increase by 0.33-0.50% per month to preserve lessor spreads and return on equity.
This raises questions about what the future bond market might look like and whether the bond and bank markets would shy away from aircraft transactions. If so, will the lessors have enough existing cash to meet all maturities?
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