Editor’s picks: Dashboard highlights

Editor’s picks:Dashboard highlights

26 October - 1 November 2021

› Dynam Aviation seals Wizz A321 sale-and-leaseback

› ANALYSIS: Boeing lays out Max production and delivery plans

› AerCap to raise $2 billion secured senior loan

› Norwegian signals intent to lease 13 737s

› Avenue Capital ABS features Lion Air and Virgin Australia

Editor’s picks: Dashboard highlights 26 October - 1 November 2021

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Dynam Aviation seals Wizz A321 sale-and-leaseback

Oliver Clark 27 Oct 2021

n “This SLB transaction reinforces our commitment to the industry as the market begins to recover,” states Dynam Aviation chief executive Katsuhiko Ando

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ANALYSIS: Boeing lays out Max production and delivery plans

AerCap to raise $2 billion secured senior loan

Norwegian signals intent to lease 13 737s

Avenue Capital ABS features Lion Air and Virgin Australia

SNAPSHOT: Deals report, 23-29 October 2021

Dynam Aviation Ireland together with its sister company Sato Aviation Ireland have purchased and leased back four Airbus A321neos with Wizz Air.

The aircraft will be delivered in 2022 and bring Dynam Aviation’s combined fleet to 12 aircraft. The asset manager lists IndiGo, Air France-KLM, Wizz Air, Vueling and Volaris as airline customers.

The company’s main shareholder Dynam Japan is the largest operator of pachinko slot machines in its home country. It is listed on the Hong Kong Stock Exchange.

“This SLB transaction reinforces our commitment to the industry as the

market begins to recover,” states Katsuhiko Ando, Dynam Aviation’s chief executive. “We are delighted to partner with one of the most successful low-cost carriers in the world, and we look forward to working with Wizz Air for many years to come.”

Owain Jones, chief supply-chain and legal officer at Wizz Air, states: “We are delighted to have signed this transaction with Dynam Aviation and Sato Aviation. These four new Airbus A321neo aircraft will allow us to continue to fly the most sustainable and cost-efficient aircraft currently available in the market.” n


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Tom Risen 28 Oct 2021

n Boeing ended the third quarter with a backlog of around 4,100 commercial aircraft orders, include 3,300 for the 737 Max

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Boeing plans to increase output of 737 Max jets from 19 per month to 31 by early 2022 while taking on the additional challenge of accelerating deliveries to avoid growth of the inventory.

The US airframer ended the third quarter with a backlog of around 4,100 commercial aircraft orders valued at $290 billion, including orders for 3,300 Max aircraft, chief executive David Calhoun noted on 27 October during a third-quarter earnings call.

Given this high level of demand, Calhoun acknowledges that “we have to get better at delivering” Max jets to meet a goal of delivering the 370 undelivered examples in its inventory by the end of 2023.

Boeing increased deliveries of Max jets from 14 in August to 26 in September but that pace of ramp-up isn’t high enough to meet the airframer’s goal, Calhoun indicated in response to an analyst’s estimate of the delivery challenge.

The airframer delivered 241 commercial aircraft during 2021’s first nine months, and has handed over 195 Max jets since November 2020 when the US Federal

Aviation Administration allowed the aircraft to resume flights in the USA.

The supply chain is of course key to increasing production. “Raw materials, logistics, and labour availability will also be key watch-items for future rate increases,” adds Calhoun.

Based on the recovery of air travel, he says, “by the second half of next year our industry will be supply-constrained”, particularly in narrowbody aircraft production. But after assessing the ability of suppliers to increase manufacturing, he says 31 aircraft per month is an achievable goal.

Calhoun said in June that he would be wary of overestimating how fast Boeing could produce new jets because suppliers that overcommitted to an aircraft production schedule could be forced to lay off extra staff or face unnecessary expenses.

CHINA UNCERTAINTYBoeing’s goal of delivering the 370 Max aircraft it has in storage is also contingent on resuming Max deliveries to China during the first quarter of 2022. ›


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ANALYSIS: Boeing lays out Max production and delivery plans (continued)

Tom Risen 28 Oct 2021

n Pending FAA certification of the Max 10, Boeing expects the first delivery of that variant to be in 2023

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China is the largest market where regulators have yet to lift the flight ban on Max aircraft. Operators in that nation account for a third of Max aircraft awaiting delivery, Boeing chief financial officer Brian West said during the earnings call.

The airframer remains in contact with China’s Civil Aviation Administration, Calhoun says, adding that he is confident that Beijing will complete Max certification in time for deliveries to be resumed during next year’s first quarter.

When regulators grounded Max jets in March 2019, operators in China grounded 97 Max jets, which now represent 58% of the 167 grounded by airlines worldwide, Cirium fleets data shows.

More than 175 nations have approved the resumption of Max flights since the FAA lifted its Max ban in November 2020, Boeing says.

FAA OVERSIGHTPending FAA certification of the Max 10, Boeing expects the first delivery of that variant to be in 2023. The airframer also

aims for the 777X to be certificated in time for a first to be delivered by late 2023.

Deliveries of 787 aircraft remain paused as Boeing co-ordinates with the FAA to conduct quality inspections, so meeting programme goals is dependent on the regulator’s approval.

Boeing ended the third quarter with 105 undelivered 787s in storage. The airframer is building two Dreamliners per month and Calhoun says “we expect to return to five per month over time” after it resumes deliveries of the widebody type.

Addressing issues with the 787, including quality inspections of the titanium fitting that helps secure the floor beam of one fuselage section, Calhoun says: “While our review is ongoing, there are no immediate safety of flight concerns.”

He adds: “We’re conducting inspections, and we work and we continue to engage in detailed discussions with the FAA regarding the required actions for resuming deliveries.” n

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n The “Baa2” rating assigned to Setanta’s senior secured credit facility by Moody’s is one notch above AerCap’s “Baa3” backed long-term issuer rating

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Moody’s Investors Service has assigned a “Baa2” rating to a proposed $2 billion senior secured credit facility to be issued by Setanta Aircraft Leasing, an indirect subsidiary of AerCap, as part of the lessor’s funding for its acquisition of GECAS.

The US ratings agency says that it expects the credit facility to feature a “strong underwritten” loan-to-value ratio of 57%. The aircraft collateral pool comprises of 94 aircraft with a half-life base value of around $3.5 billion.

There are 35 airline lessees of which the top five account for a “relatively high” 59% of the pool, Moody’s states. Narrowbodies make up 57% of the asset pool, including Boeing 737-800s (23% of the total) and Airbus A320neos (15%). The other 16% spans A320, A321neo, 737 Max, Embraer 195-E2 and other types.

The 43% made up of widebodies features A350s (17%) and 787s (15%), as well as older models including 777-300ERs (6%) and others (5%). The weighted average age of the pool is 7.2 years and the weighted average remaining lease term is 7.4 years.

The “Baa2” rating assigned to Setanta’s senior secured credit facility is one notch above AerCap’s “Baa3” backed long-term issuer rating,

Moody’s observes.This notching differential is based

on the facility’s collateral pledge of a perfected first priority lien of the shares and equity interests of certain special-purpose entities (SPEs) that own commercial aircraft leased by AerCap to its airline customers, as well as other loan terms that Moody’s expects will reduce the loss given default of the credit facility compared to AerCap’s senior unsecured obligations.

Moody’s says the credit facility is guaranteed on a joint and several basis by AerCap, AerCap Ireland, and SPE and related holding company and lessor entities.

The agency expects that loan service will be provided primarily by the cash flows from the leases of the owner SPE aircraft, but because the facility is recourse to AerCap through the guarantee, any deficiency will be met by the Irish lessor’s overall cash flow and liquidity.

Earlier this month AerCap priced $21 billion of senior unsecured notes which it intends to use to fund the acquisition of GECAS, set to occur on 1 November. This refinances will replace a $19 billion bridge credit agreement with lenders and administrative agent Citibank. n


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n The additional aircraft are scheduled for delivery in the fourth quarter of 2021 through the first quarter of 2022

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Norwegian has signed letters of intent for the lease of up to 13 Boeing 737-800s under what it describes as “favourable terms”.

The Scandinavian low-cost carrier has not disclosed the identities of the lessors involved, but says in a stock-market disclosure that they are “experienced and have prior relationships with Norwegian”.

Cirium fleets data shows that Norwegian operates a fleet of 27 737-800s leased from various entities including Avolon, AerCap, AMCK Aviation, Goshawk and SMBC Aviation Capital.

The additional aircraft are scheduled for delivery in the fourth quarter of 2021 through the first quarter of 2022 to deliver Norwegian’s summer 2022 flying

programme with flights to over 250 destinations.

The lease terms are between five to eight years, depending on aircraft age. They include by-the-hour utilisation arrangements for both the current and next winter seasons, giving Norwegian “necessary flexibility” to manage capacity through the low season as the world emerges from the Covid-19 pandemic.

The carrier has the right, under some of the leases, to substitute the 737-800s for new-technology narrowbody aircraft from either Boeing or Airbus.

Norwegian jettisoned its long-haul fleet to focus on short-haul and regional flying after emerging from restructuring processes in Ireland and Norway. n


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n Two aircraft on lease to Virgin Australia and one on lease to Volaris are subject to by-the-hour utilisation agreements

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Avenue Capital Group is bringing a $282 million asset-backed securities (ABS) issuance to market, backed by 21 aircraft, lessees of which include Lion Air and Virgin Australia.

The Stellar 2021-1 ABS issuance features three tranches of notes, consisting of $216 million Class A, $39 million Class B and $27 million Class C, to which Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings of “A”, “BBB” and “B” respectively.

The ABS is being sponsored by Avenue Capital but will be serviced by Deucalion Aviation. Proceeds from the notes will be used to acquire the 21-aircraft portfolio. Two of the aircraft are off lease (9.9% by value) and the rest are spread across 13 lessees.

Stellar Jay Ireland and Stellar Jay US are the ABS issuers, and funds managed by Avenue or affiliates will retain 100% of the equity of the issuance at closing but may subsequently sell part or all of the e-notes.

As of 30 September, the weighted

average age of the portfolio is 14.9 years and the weighted average remaining term of the initial lease contracts is 3.2 years (excluding off-lease and delinquent aircraft).

The portfolio contains five Airbus A319s, eight A320s, two A330s and six Boeing 737s. One A319 and one A320 will be off lease, and KBRA views them “as a credit risk since there is no guarantee that they will be leased in the near term”.

The A330s are on lease to Hong Kong Airlines (10.1% by value) and Air France (5.5%). The Air France lease ends in September 2024, and the Hong Kong Airlines lease ends in February 2022, KBRA states.

Two aircraft on lease to Virgin Australia and one on lease to Volaris are subject to by-the-hour utilisation agreements. KBRA says these are set to end between September 2022 and March 2024.

The agency says it understands that Deucalion is in the process of extending six leases to four lessees and remarketing others that are coming off lease in the ›


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Avenue Capital ABS features Lion Air and Virgin Australia (continued)


n Two lease extensions are currently pending to Virgin Australia, two to British Airways, one to Volaris and one to Alaska Airlines

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short term. Two lease extensions are currently pending to Virgin Australia, two to British Airways, one to Volaris, and one to Alaska Airlines. The nearest lease expiry is not until February 2022, for one aircraft.

The largest lessee is British Airways, representing 13% of the total, followed by Lion Air (12.4%) and Hong Kong Express (12.1%). Other lessees include Air Serbia and SunExpress.

With its initial weighted average age of approximately 14.9 years, the portfolio is older compared with other recent mid-life aircraft ABS transactions, KBRA observes.

The agency notes that the issuance features several enhancements. These include a covenant that requires a minimum of six aircraft to be delivered or the transaction will be in rapid amortisation to pay down the notes faster, first to the Series A and then the Series B, sequentially, as well as lock out equity.

Other enhanced structural features are

present, including “more reactive” debt service coverage ratio (DSCR) tests, partial cash sweeps, and a “more favourable” security deposit account which can be used for additional liquidity.

If on a single payment date rent collections are less than 75% of what is due, an amount equal to the scheduled principal due for the Series B notes on that payment date will be used to pay down the Series A prior to the Series B receiving scheduled principal from any available funds.

There is a $4.25 million reserve account available for shortfalls on expenses, interest and principal on the notes. If the DSCR is above 1.75x for six consecutive payment dates, the amounts in this account will be transferred to collections. This account will not be replenished if used.

MUFG Bank is the liquidity facility provider. Morgan Stanley is the sole structuring agent and joint lead bookrunner. n

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Michael Allen 29 Oct 2021

n AerCap completed its acquisition of GECAS on 1 November

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The subdued aircraft trading market has yet to pick back up, and lessors have been bemoaning the difficult trading environment.

“It’s almost a bit like musical chairs, and no one is getting up at the moment with aircraft trading,” an Asia-based source tells Cirium.

The person adds: “They can only sell if they know they are going to buy, and there have been very few opportunities for these guys to buy, so I think they just hold on [to the aircraft].”

A second leasing source, based in Europe, agrees: “A lot of those portfolios… they probably have only sold or agreed to sell half of them because a lot of these people don’t want to shrink their portfolios down too low.”

One lessor that put out a double-digit portfolio earlier this year managed to sell about half of it, not the whole thing, Cirium understands.

The reluctance to sell may largely come down to accounting, a second Asia-based source says, because “if

people sell right now then they are crystallising losses”.

ROBUST CAPITAL MARKETS The capital markets continue to be robust for lessors, despite some rising benchmark rates, such as the 10-year Treasury rate that hit 1.67% on 20 October, its highest since May. Yields rise as prices fall.

AerCap disclosed pricing on 21 October for a huge $21 billion offering of senior notes, with maturities extending as far out as 20 years.

A few days earlier, SMBC Aviation Capital had come out with $500 million of five-year senior notes, for which it achieved a 1.9% coupon, or US Treasuries plus 93 basis points.

“Fundamentally, there’s a wall of money out there,” a Europe-based leasing source says. “There’s a huge volume of liquidity, and that liquidity is trying to find homes. Anything that is perceived as a safe bet – which is basically investment-grade – those guys will get very attractive pricing.” n


DEALS: AerCap is on course to complete its acquisition of GECAS on 1 November. GE said on 22 October that all required regulatory clearances for the transaction had been obtained, and the two parties expect to close the transaction at the start of November.

Moody’s Investors Service assigned a “Baa2” rating to a proposed $2 billion senior secured credit facility to be issued by Setanta Aircraft Leasing, an indirect subsidiary of AerCap, as part of the lessor’s funding for its acquisition of GECAS.

American Airlines priced a $758 million single-tranche EETC issuance for the financing of 26 aircraft, having originally indicated in a 25 October investor presentation that it was seeking to raise $592 million via an EETC issuance for the financing of 21 aircraft. It is also issuing $202 million of Class B certificates.

Avenue Capital Group is bringing a $282 million asset-backed securities (ABS) issuance to market, backed by 21 aircraft, lessees of which include Lion Air and Virgin Australia.A company owned by Filipino billionaire

Lucio Tan plans to buy shares worth Ps12.75 billion (about $251 million) in Philippine Airlines’ parent PAL Holdings, as well as to provide a five-year $250 million loan, as part of the financing requirements for the flag carrier’s US Chapter 11 process.

MUFG’saviation finance team led and closed as agent a $600 million limited recourse warehouse facility, known as Incline II Warehouse. The facility involves a syndicate of five banks and supports the aircraft acquisition for BBAM’s Incline II fund.

The deadline for the first round of bids for Japanese carrier Peach’s request for proposals for the sale-and-leaseback of three A320neos and one A321LR has passed, Cirium understands.

A cash offer by Hawaiian Airlines for the outstanding Class A and B certificates of its $262 million 2020 EETC issuance met with a “lukewarm reception”, according to Fitch Ratings.

Spirit Airlines selected Pratt & Whitney GTF engines for its latest order of 100 firm and 50 option Airbus A320neo-family aircraft, deliveries of which are set to begin in 2023.

SNAPSHOT: Deals report, 23-29 October 2021 (continued)

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n Spirit Airlines selected Pratt & Whitney GTF engines for its latest order of 100 firm and 50 option Airbus A320neo-family aircraft

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GA Telesis won six additional firm orders for Boeing 737-800SF cargo conversions from Aeronautical Engineers (AEI).

HNA Group’s creditors voted to approve four plans relating to its restructuring.

Brazilian low-cost carrier Gol completed the refinancing of its R$1.2 billion ($215 million) short-term bank debt.

Acumen Aviation was awarded a mandate for the sale of one 2007-vintage A330-200 powered with CF6-80E1 engines.

India’s Alliance Air issued a tender for the dry lease of two new ATR 42-600 turboprops, with a bidding deadline of 16 November.

GTLK placed $600 million of eurobonds, with a coupon rate of 4.35% per annum and maturing in February 2029, on the Vienna multilateral trading facility.

The Indian government signed a share purchase agreement relating to the sale of Air India with local conglomerate Tata Sons.

Japanese domestic start-up low-cost carrier Toki Air leased two new ATR 72-600s from Nordic Aviation Capital. The aircraft are set to enter service in 2022

Wings Capital Partners added two 737-800s and one A320 to its portfolio and the aircraft are on lease to undisclosed airlines in the USA and Europe.

Dynam Aviation Ireland, together with its sister company Sato Aviation Ireland, purchased and leased back four A321neos with Wizz Air.

China Aircraft Leasing agreed to purchase 12 A321s from China Eastern Airlines and its non-wholly-owned subsidiary China Eastern Airlines Jiangsu.

Norwegian signed letters of intent for the lease of up to 13 737-800s under what it describes as “favourable terms”.

DELIVERIES: Colombian carrier Ultra Air is taking delivery of two used A320s (MSNs 2712 and 3044) on lease from Avolon

Red Wings took delivery of its third 777-200.

CDB Aviation delivered one A320neo (MSN 9563) to Volaris on 28 October, according to Cirium fleets data.

BOC Aviation delivered one A320neo to IndiGo.

SNAPSHOT: Deals report, 23-29 October 2021 (continued)

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n HNA Group’s creditors voted to approve four plans relating to its restructuring

This issue of Editor’s Picks compiled by: Niall O’Keeffe

Contact us: [email protected] or [email protected]

Dashboard editor Niall O’KeeffeDashboard editor Asia Simin NgaiAsia finance editor Michael AllenAir finance editor EMEA & Americas Oliver ClarkAerospace editor Michael GubischAir transport reporter APAC Naomi Neoh Air transport reporter EMEA Jonathan RobinsAir transport reporter Americas Steve GoldsteinNorth America air transport reporter Tom Risen

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Editor’s picks: Dashboard highlights