Carcosa,
#606864 regarding DAE Capital
DAE expected to own up to 100 ATRs when it acquired ATRs from GECAS (https://dubaiaerospace.com/2017/03/15/d ... m-gecas-2/). DAE has increased from 55 ATRs at Year-End 2019 prior to Covid (Page 4, https://dubaiaerospace.com/wp-content/u ... r-2019.pdf) to 67 presently (Page ix, https://dubaiaerospace.com/wp-content/u ... n-2023.pdf). Perhaps DAE would also be interested in the Purchase Rights.
#610979 regarding Purchase Rights
I simply consider the value of the Purchase Rights to be their fundamental value (others can purchase for $x but Avation can purchase for $x-$y and $y is the economic value rather than the Black-Scholes result).
#610979 regarding ANZ
Have you spoken with Avation about ANZ as a potential customer?
#612046 regarding Standard Chartered
Somebody on Twitter said that it was worth 1.1x book value (https://twitter.com/puppyeh1/status/169 ... av3eg&s=19).
#612426 regarding Standard Chartered
Could you share where Avilease said that they're only interested in jet aircraft? Any insight on their cost of capital? I presume much lower than Avation!
#612426 regarding Purchase Rights
Have you asked Avation about their plan for the Purchase Rights?
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Avation (AVAP)
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Carcosa
- Lemon Slice
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Re: Avation (AVAP)
Many thanks for the informed comments jwk88.
That's an interesting observation that may well have merit.
No, although it is in Jeff's 'back yard' so to speak. If memory serves, ANZ have historically financed all their ATR purchases themselves using JOLCO's so Avation would not be a consideration.
At the time I worked it out as 1.08x but the publicly disclosed figures were imprecise so I did not quote it at the time. However 1.1 is certainly in the expected upper range, based on prior reports.
It was quoted in some media press at the time, and currently on their website There was also along form article about Avilease future.
Nowadays you just get the official company non-committal responses from Avation, now that Richard has gone. Jeff is more forthcoming nowadays but the only practical way of getting hold of him is via investor calls or site visit (which I had planned to do and then cancelled last month). It's on my subject list to be raised in the next Q&A session.
News Related to Avation
Island Aviation Services, owner of Maldivian, launched another request for proposals (RFP) to finance the delivery of two new ATR42-600 turboprops. The airline is in final negotiations to order the additional ATRs.mDelivery of the first unit is expected in the fourth quarter of 2023, the second one is due in the first quarter of 2025.The terms for the finance leases are 15 years.
Perhaps DAE would also be interested in the Purchase Rights.
That's an interesting observation that may well have merit.
Have you spoken with Avation about ANZ as a potential customer?
No, although it is in Jeff's 'back yard' so to speak. If memory serves, ANZ have historically financed all their ATR purchases themselves using JOLCO's so Avation would not be a consideration.
regarding Standard Chartered
Somebody on Twitter said that it was worth 1.1x book value
At the time I worked it out as 1.08x but the publicly disclosed figures were imprecise so I did not quote it at the time. However 1.1 is certainly in the expected upper range, based on prior reports.
Could you share where Avilease said that they're only interested in jet aircraft? Any insight on their cost of capital? I presume much lower than Avation!
It was quoted in some media press at the time, and currently on their website There was also along form article about Avilease future.
Have you asked Avation about their plan for the Purchase Rights?
Nowadays you just get the official company non-committal responses from Avation, now that Richard has gone. Jeff is more forthcoming nowadays but the only practical way of getting hold of him is via investor calls or site visit (which I had planned to do and then cancelled last month). It's on my subject list to be raised in the next Q&A session.
News Related to Avation
Island Aviation Services, owner of Maldivian, launched another request for proposals (RFP) to finance the delivery of two new ATR42-600 turboprops. The airline is in final negotiations to order the additional ATRs.mDelivery of the first unit is expected in the fourth quarter of 2023, the second one is due in the first quarter of 2025.The terms for the finance leases are 15 years.
Re: Avation (AVAP)
Dear Carcosa,
I expect the 11th September RNS refers to the aircraft that was previously with Avion Express. Does that reconcile with your records?
The RNS reference to: "market rate lease" appears positive since that should reflect the current interest rate environment.
Cheers,
jwk88
I expect the 11th September RNS refers to the aircraft that was previously with Avion Express. Does that reconcile with your records?
The RNS reference to: "market rate lease" appears positive since that should reflect the current interest rate environment.
Cheers,
jwk88
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Carcosa
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Re: Avation (AVAP)
Hi jwk,
Avation announced a short term 4 year lease of a Airbus A320 to Cebu Pacific Air. CPA are an existing AVAP customer with one ATR72-600. I think this is the existing A320 on lease with Avion Express Malta, as you say, which is sub-leased it to Eurowings (suggesting Avion don't have need of the aircraft). Serial number 4820
As this is a 12.5 year old aircraft, and given market conditions that I have mentioned a few times recently, it should allow a greater lease rate factor than Avation had with Avion which perhaps explains Jeff's statement "Once the aircraft is delivered in December 2023 this lease will positively impact our fleet metrics." Additionally the aircraft may be approaching its unencumbered status. Who knows, with a bit of luck Avation may also make a gain on the maintenance fees too.
This aircraft remains as 'held for sale'. Should be noted that Avation thought they had a buyer for this aircraft back in February 2022 but the deal fell through. Probably a good thing it did in hindsite.
Avation announced a short term 4 year lease of a Airbus A320 to Cebu Pacific Air. CPA are an existing AVAP customer with one ATR72-600. I think this is the existing A320 on lease with Avion Express Malta, as you say, which is sub-leased it to Eurowings (suggesting Avion don't have need of the aircraft). Serial number 4820
As this is a 12.5 year old aircraft, and given market conditions that I have mentioned a few times recently, it should allow a greater lease rate factor than Avation had with Avion which perhaps explains Jeff's statement "Once the aircraft is delivered in December 2023 this lease will positively impact our fleet metrics." Additionally the aircraft may be approaching its unencumbered status. Who knows, with a bit of luck Avation may also make a gain on the maintenance fees too.
This aircraft remains as 'held for sale'. Should be noted that Avation thought they had a buyer for this aircraft back in February 2022 but the deal fell through. Probably a good thing it did in hindsite.
Re: Avation (AVAP)
Thank you. Not long until the results now. I look forward to hearing Jeff describe market conditions and the Purchase Rights.
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Carcosa
- Lemon Slice
- Posts: 390
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Re: Avation (AVAP)
Lease Rate Factors.
One of the principle aircraft leasing figures that you will likely come across within the industry is Lease Rate Factor (LRF) often expressed as a number e.g. 0.6 (Although the decimal point appears to move around on occasion!)
To calculate the annualised yield based on a LRF of 0.6:
Divide the LRF by 100. In this case, 0.6 divided by 100 equals 0.006.
Calculate the monthly yield: Subtract the decimal value from 1. In this case, 1 - 0.006 equals 0.994.
Calculate the annualised yield: Raise the monthly yield to the power of 12 (months in a year) and subtract 1. In this case, (0.994^12) - 1 equals approximately 0.075, or 7.5%.
Therefore, with an LRF of 0.6, the annualised yield is 7.5%. This means that the lessor can expect to receive an annual return of 7.5% against the original value of the aircraft based on the lease payments received from the lessee.
What can complicate matters is that when a re-lease occurs the LRF can be calculated against the value of the aircraft at the time of the re-lease. So if Jeff mentions the latest A320 re-lease (transition) has resulted in a higher LRF then question as to whether that is calculated using the original acquisition price or the market price at time of transaction.
News Related to Avation
Air Baltic A220's
Back in in May I highlighted (#587013) Air Baltic was in the market to lease more Airbus A220 jets. They are an existing customer of Avation. It turns out Jackson Square Aviation has now closed a deal to lease 5 A220-300s to Air Baltic, with deliveries completed this month.
However Air Baltic holds 30 options and purchase rights. Air Baltic wishes to secure sale and leaseback financing for the remaining six A220-300s. Three of these are expected in November and December, while the final three are scheduled for delivery in March 2024; so still time for Avation to bid for the business although it seems likely Air Baltic want a lessor for multiple aircraft which Avation may not be willing to do.
ATR Bidding Up Korea
ATR shared their forecast at Korea’s inaugural GADLEX Aviation Show last week in which they stated plans to of having an in-country fleet of 25-30 ATR 72 aircraft within the next seven years.
ATR also sees opportunities for its aircraft to open new short-haul passenger routes linking Korea to Northeast China and Southern Japan, as well as dedicated freighter services to these markets.
I would imagine, if able, Avation would bid for some of this business.
Bit of a shame that Crew shortfalls forced Korea's Hi Air (ATR operator) to suspend operations this week
Avation mentioned...
Bit of a Puff piece of Avation news can be found on directors talk interviews
A New Leasing Company
Irish based Formidion Aviation has closed its inaugural transaction with the acquisition of 16 Bombardier Dash 8-400 turboprops from Nordic Aviation Capital. Their focus is on the 50 to 150-seat segment of turboprop and jet aircraft.
I have no idea about their finances but with an additional lessor in this sector maybe there is a possibility of Avation doing some business with them; although unlikely IMO.
One of the principle aircraft leasing figures that you will likely come across within the industry is Lease Rate Factor (LRF) often expressed as a number e.g. 0.6 (Although the decimal point appears to move around on occasion!)
To calculate the annualised yield based on a LRF of 0.6:
Divide the LRF by 100. In this case, 0.6 divided by 100 equals 0.006.
Calculate the monthly yield: Subtract the decimal value from 1. In this case, 1 - 0.006 equals 0.994.
Calculate the annualised yield: Raise the monthly yield to the power of 12 (months in a year) and subtract 1. In this case, (0.994^12) - 1 equals approximately 0.075, or 7.5%.
Therefore, with an LRF of 0.6, the annualised yield is 7.5%. This means that the lessor can expect to receive an annual return of 7.5% against the original value of the aircraft based on the lease payments received from the lessee.
What can complicate matters is that when a re-lease occurs the LRF can be calculated against the value of the aircraft at the time of the re-lease. So if Jeff mentions the latest A320 re-lease (transition) has resulted in a higher LRF then question as to whether that is calculated using the original acquisition price or the market price at time of transaction.
News Related to Avation
Air Baltic A220's
Back in in May I highlighted (#587013) Air Baltic was in the market to lease more Airbus A220 jets. They are an existing customer of Avation. It turns out Jackson Square Aviation has now closed a deal to lease 5 A220-300s to Air Baltic, with deliveries completed this month.
However Air Baltic holds 30 options and purchase rights. Air Baltic wishes to secure sale and leaseback financing for the remaining six A220-300s. Three of these are expected in November and December, while the final three are scheduled for delivery in March 2024; so still time for Avation to bid for the business although it seems likely Air Baltic want a lessor for multiple aircraft which Avation may not be willing to do.
ATR Bidding Up Korea
ATR shared their forecast at Korea’s inaugural GADLEX Aviation Show last week in which they stated plans to of having an in-country fleet of 25-30 ATR 72 aircraft within the next seven years.
ATR also sees opportunities for its aircraft to open new short-haul passenger routes linking Korea to Northeast China and Southern Japan, as well as dedicated freighter services to these markets.
I would imagine, if able, Avation would bid for some of this business.
Bit of a shame that Crew shortfalls forced Korea's Hi Air (ATR operator) to suspend operations this week
Avation mentioned...
Bit of a Puff piece of Avation news can be found on directors talk interviews
A New Leasing Company
Irish based Formidion Aviation has closed its inaugural transaction with the acquisition of 16 Bombardier Dash 8-400 turboprops from Nordic Aviation Capital. Their focus is on the 50 to 150-seat segment of turboprop and jet aircraft.
I have no idea about their finances but with an additional lessor in this sector maybe there is a possibility of Avation doing some business with them; although unlikely IMO.
Re: Avation (AVAP)
For anyone interested, here is a recent interview with the founder of Air Lease:
https://open.spotify.com/episode/4sREuf ... d6234c482c
https://open.spotify.com/episode/4sREuf ... d6234c482c
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Carcosa
- Lemon Slice
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Re: Avation (AVAP)
Financial Results
Avation PLC will publish results for the financial year on 28 September 2023. There will also be an investor update call on 28 September 2023 at 1:00pm BST (UK), 8:00am EST (USA), 8:00pm SGT (Singapore). Investors may sign up to Investor Meet Company and meet Avation PLC via Investor Meet.
News Related to Avation
Buy, Don't Rent?
Dutch asset manager Arena Aviation Capital said “...airlines have reportedly been buying a lot of older aircraft from lessors, rather than extending leases, which further limits the potential supply of deal flow. But the most dominant factor was the sharp increase in cost of capital for buyers driving down pricing to where a sale would lead to book value issues for sellers”. Looking forward, expectations are more bullish, “The rest of 2023 should be more exciting for the mid-life aircraft space, with increased levels of trading and lease rates continuing to climb powered by a sustaining relative shortage of aircraft, new and old. “Lessors will likely sell more aircraft to turnover their portfolio, fund new deliveries and repay debt. We will see a healthier and more colourful deal pipeline I´m sure”; Again consistent with Jeff's Bloomberg presentation.
FYI A321/B737 Market Value and Lease Rates:
ATR Market Values and Lease Rates
Although 10 months out of date this ATR72-500/600 Review may be of interest to some readers. It contains CMV and operating lease rates (Ref: "An Appraisers View"). The numbers are consistent with my previous posts.
Also, this extract is of interest: "Market values and lease rates for both the ATR72-600 and ATR42-600 have recovered since the lows recorded in 2020, but they still remain some 25% below those achieved in 2019.
Achievable operating lease rates are highly correlated to the technical status rather than year of build. Even if DeHavilland elects to restart the Dash 8-400 production line, this is unlikely to occur before 2025 at the earliest leaving the field wide open for ATR."
Narrowbody Jet Lease Rates Being Left Behind?
Here is anextract from Cirium, a respected industry leader in aviation analytics...
"..the constrained supply of new-build aircraft in the face of burgeoning demand can eventually drive Values and Lease Rates for older aircraft upwards, as airlines seek out alternative means of rebuilding capacity. In recent months the Cirium Ascend Consultancy Values Review Board has increased its Current Market Value opinions for the A320ceo Family by up to 29%, while 737NG Values have risen by up to 28%. Even older widebodies, which have previously been seen as laggards, have had their recoveries move up a gear in recent months. In June our Airbus A330 Market Lease Rate opinions saw increases of up to 30%, depending on vintage, albeit from a low starting point. This followed Lease Rate increases of up to 23% and 17% for A320ceo family and 737NG aircraft respectively in late Q2, based on extensive data capture.
The final piece in the puzzle is aircraft lessors. One might imagine that in this new world of rising Lease Rates, lessors are in a position of strength, as I wrote back in April. However, while a shift in the balance of supply and demand may have allowed lessors to charge higher rents as evidenced above, for many their cost of capital has also increased, placing pressure on margins.
Indeed, on a fleet-weighted average basis, while narrowbody aircraft have now almost recovered to pre-pandemic levels in terms of Market Values, Lease Rates remain some 14% lower. This is almost unprecedented, as nearly every previous recovery from a downturn in the last 40 years has been Lease Rate led."
EU SAF
The European Parliament has agreed to new rules for sustainable aviation fuel (SAF) to increase its use in aviation and help the industry move towards net zero emissions by 2050. From 2025, a minimum of 2% of SAF will be mandated within the fuel mix for EU airports and fuel suppliers, increasing every five years up to 70% in 2050. The transition from fossil fuels to SAF should be supported through incentives that reflect the environmental benefit of SAF and make them more competitive for aircraft operators.
Avation PLC will publish results for the financial year on 28 September 2023. There will also be an investor update call on 28 September 2023 at 1:00pm BST (UK), 8:00am EST (USA), 8:00pm SGT (Singapore). Investors may sign up to Investor Meet Company and meet Avation PLC via Investor Meet.
News Related to Avation
Buy, Don't Rent?
Dutch asset manager Arena Aviation Capital said “...airlines have reportedly been buying a lot of older aircraft from lessors, rather than extending leases, which further limits the potential supply of deal flow. But the most dominant factor was the sharp increase in cost of capital for buyers driving down pricing to where a sale would lead to book value issues for sellers”. Looking forward, expectations are more bullish, “The rest of 2023 should be more exciting for the mid-life aircraft space, with increased levels of trading and lease rates continuing to climb powered by a sustaining relative shortage of aircraft, new and old. “Lessors will likely sell more aircraft to turnover their portfolio, fund new deliveries and repay debt. We will see a healthier and more colourful deal pipeline I´m sure”; Again consistent with Jeff's Bloomberg presentation.
FYI A321/B737 Market Value and Lease Rates:
ATR Market Values and Lease Rates
Although 10 months out of date this ATR72-500/600 Review may be of interest to some readers. It contains CMV and operating lease rates (Ref: "An Appraisers View"). The numbers are consistent with my previous posts.
Also, this extract is of interest: "Market values and lease rates for both the ATR72-600 and ATR42-600 have recovered since the lows recorded in 2020, but they still remain some 25% below those achieved in 2019.
Achievable operating lease rates are highly correlated to the technical status rather than year of build. Even if DeHavilland elects to restart the Dash 8-400 production line, this is unlikely to occur before 2025 at the earliest leaving the field wide open for ATR."
Narrowbody Jet Lease Rates Being Left Behind?
Here is anextract from Cirium, a respected industry leader in aviation analytics...
"..the constrained supply of new-build aircraft in the face of burgeoning demand can eventually drive Values and Lease Rates for older aircraft upwards, as airlines seek out alternative means of rebuilding capacity. In recent months the Cirium Ascend Consultancy Values Review Board has increased its Current Market Value opinions for the A320ceo Family by up to 29%, while 737NG Values have risen by up to 28%. Even older widebodies, which have previously been seen as laggards, have had their recoveries move up a gear in recent months. In June our Airbus A330 Market Lease Rate opinions saw increases of up to 30%, depending on vintage, albeit from a low starting point. This followed Lease Rate increases of up to 23% and 17% for A320ceo family and 737NG aircraft respectively in late Q2, based on extensive data capture.
The final piece in the puzzle is aircraft lessors. One might imagine that in this new world of rising Lease Rates, lessors are in a position of strength, as I wrote back in April. However, while a shift in the balance of supply and demand may have allowed lessors to charge higher rents as evidenced above, for many their cost of capital has also increased, placing pressure on margins.
Indeed, on a fleet-weighted average basis, while narrowbody aircraft have now almost recovered to pre-pandemic levels in terms of Market Values, Lease Rates remain some 14% lower. This is almost unprecedented, as nearly every previous recovery from a downturn in the last 40 years has been Lease Rate led."
EU SAF
The European Parliament has agreed to new rules for sustainable aviation fuel (SAF) to increase its use in aviation and help the industry move towards net zero emissions by 2050. From 2025, a minimum of 2% of SAF will be mandated within the fuel mix for EU airports and fuel suppliers, increasing every five years up to 70% in 2050. The transition from fossil fuels to SAF should be supported through incentives that reflect the environmental benefit of SAF and make them more competitive for aircraft operators.
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Carcosa
- Lemon Slice
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Re: Avation (AVAP)
Here are the pre-submitted questions I have asked on Investor Meet Company.
Pre-submitted Questions, Sept 22/23:
PURCHASE RIGHTS
Avation has around 6 ATR purchase rights/year until mid 2027 to fulfill. Will you be able to secure customers and attractive finance for this fleet expansion to keep pace with your ATR purchase rights expiry schedule or do you have alternative plans for some of these purchase rights e.g. able to dispose of them at current value to someone like Dubai Aerospace Enterprise who have expresed a desire to procure several ATR's.
STRATEGIC REVIEW
In April 2020 Avation announced a Strategic Review and Formal Sale Process to maximise value for shareholders at a time when P/NAV was ~0.8. Currently AVAP has a P/NAV of ~0.5. Castlelake Aviation, Avilease, Formidion Aviation and others have been doing deals around double that of Avation's P/NAV. Will Avation consider revisiting a Strategic Review?
2024 ATR DELVERIES
Can you confirm the status of the two ATR aircraft for future delivery. Are they in storage and what financial obligations are associated with those aircraft prior to customer delivery?
SPECULATIVE ORDERS
Presumably having an ATR available on demand for a customer would allow a higher lease rate factor. Hence placing speculative orders may not be a foolhardy strategy. Is this a valid statement and if it is will Avation place speculative orders?
TERMINLOGY
Can you clarify for us retail investors the overall differences of the terms, Purchase Rights, Purchase Options and Firm options, including Avation's financial commitments with each (option fees & PDP's)?
SINGAPORE LEASING SCHEME
In May 2019 you advised a further 5 year extention to the Singapore Aircraft Leasing Scheme. Have you any reason to think this will not be renewed at same or better terms, come 2024?
TECHNICAL TEAM
Avation highlight the fact that you have a great technical/legal team that enabled the recovery of several aircraft and indeed you have seemingly added to the legal team last April. Is there scope to utilise this capability as a service for other leasing companies?
OPTION EXPIRY DATES
Avation previously published option dates expiry (e.g. GMTN documentation). Given the materiality of the number of rights/options you have, can these dates be published in the Annual Report or elsewhere for investors to see?
That's quite a list. I expect some of those questions would be responded to in the results, presentation material and/or discussion, so may become superfluous. Hopefully other investors will add to the list of questions; it usually happens.
Pre-submitted Questions, Sept 22/23:
PURCHASE RIGHTS
Avation has around 6 ATR purchase rights/year until mid 2027 to fulfill. Will you be able to secure customers and attractive finance for this fleet expansion to keep pace with your ATR purchase rights expiry schedule or do you have alternative plans for some of these purchase rights e.g. able to dispose of them at current value to someone like Dubai Aerospace Enterprise who have expresed a desire to procure several ATR's.
STRATEGIC REVIEW
In April 2020 Avation announced a Strategic Review and Formal Sale Process to maximise value for shareholders at a time when P/NAV was ~0.8. Currently AVAP has a P/NAV of ~0.5. Castlelake Aviation, Avilease, Formidion Aviation and others have been doing deals around double that of Avation's P/NAV. Will Avation consider revisiting a Strategic Review?
2024 ATR DELVERIES
Can you confirm the status of the two ATR aircraft for future delivery. Are they in storage and what financial obligations are associated with those aircraft prior to customer delivery?
SPECULATIVE ORDERS
Presumably having an ATR available on demand for a customer would allow a higher lease rate factor. Hence placing speculative orders may not be a foolhardy strategy. Is this a valid statement and if it is will Avation place speculative orders?
TERMINLOGY
Can you clarify for us retail investors the overall differences of the terms, Purchase Rights, Purchase Options and Firm options, including Avation's financial commitments with each (option fees & PDP's)?
SINGAPORE LEASING SCHEME
In May 2019 you advised a further 5 year extention to the Singapore Aircraft Leasing Scheme. Have you any reason to think this will not be renewed at same or better terms, come 2024?
TECHNICAL TEAM
Avation highlight the fact that you have a great technical/legal team that enabled the recovery of several aircraft and indeed you have seemingly added to the legal team last April. Is there scope to utilise this capability as a service for other leasing companies?
OPTION EXPIRY DATES
Avation previously published option dates expiry (e.g. GMTN documentation). Given the materiality of the number of rights/options you have, can these dates be published in the Annual Report or elsewhere for investors to see?
That's quite a list. I expect some of those questions would be responded to in the results, presentation material and/or discussion, so may become superfluous. Hopefully other investors will add to the list of questions; it usually happens.
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Carcosa
- Lemon Slice
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Re: Avation (AVAP)
Some initial Notes:
Avation issued its FY 2023 results. Sadly they failed to update their own website in a timely manner and forgot to send out a notice via X/Twitter (not that it matters because they don't use the #AVAP tag anyway...)
Overall I was pleased with my independent forecasts of the results that I posted here in May especially when taking into account post May events.
If you compare the analyst consensus forecasts (on Sharepad) headline results with actual results:
Turnover 89.8 / 99.25
EBITDA 91 / 109.2
EBIT 55.3 / 70.6
PTP 6.69 / 13.0
EPS 8.84c / 17.43c
..and the share price did nothing in response. I can only summise the market is discounting those Purchase Rights. If Avation can't use them, then that asset becomes a big liability.
A brief recap:
Financial year revenue and other income for Avation was $99.3m in 2022/23, down from $116m the previous year.
Fleet assets were $898.6m and total assets were $1.18b at 30 June 2023.
Net indebtedness fell by 7.8% to $731.2million (2022: $792.9million); total cash and bank balances of $116.9mn (2022: $119.2m); operating profit of $70.6m (2022: $90.2m); profit after tax of $12.2m (2022: $17.1m).
Avation noted that a Southeast Asian airline has reduced its arrears by $5.1million since 30 June 2023.
Avation sold two ATR72-600 and a Boeing 737-800 aircraft.
One ATR72-600 aircraft was repossessed from Myanmar and subsequently commenced a new lease with with Tahiti; one off-lease ATR72-500 started a lease with a new airline customer in Nepal (Yeti)
Avation received a creditor distribution of $3.4m from Virgin Australia last year.
Refinanced two Airbus A220-300 aircraft with fixed-rate long-term loans, reducing Avation's exposure to interest rate changes.
Recently entered into an agreement to sell an 11-year-old off-lease ATR72-600;and a second 11-year-old off-lease ATR72-600, which is expected to be sold in November.
Avation=will have a fully utilised fleet.
Avation has continued to de-lever its balance sheet, achieving a reduction to 62% in the ratio of net debt to total assets as at 30 June 2023. A significant portion of the cashflow generated by the fleet is directed towards repayments of debt. Scheduled loan repayments for the 2024 financial year,amounting to around $62m, exceed expected depreciation of the fleet over the same period. Avation noted that it is hedged against further interest rate changes on 95.8% of its loans and borrowings. In the 12months to 30 June, Avation reversed around $3.3million of previously recognised impairment charges as aircraft valuations improved.
Some of the takeaways from the numbers can be summarised as follows:
Fleet Asset values are trending up; in fact we have evidence the A220 valuations have powered ahead post these results.
Balance sheet deleveraging; now stands at 4.9x returning to normalised levels (but still horrendous in practically any other business!).
If I have calculated the primary rating agencies ratios properly then:
Net Debt to Equity is better at 3.0x (3.5x) and Funds From Operations to Debt is OK but EBITDA to Interest Ratio and EBIT Interest Cover is poor.
With a NAV of $3.41 (£2.80) per share that gives us a P/B of 0.37. Remarkable. However although there are 70,883,124 shares in issue there are also 5,857,408 warrants out there that investors should consider so NAV/Share is nearer $3.15, (£2.58) giving a P/B 0.4
Overall though the results and presentation was exactly what I was looking for. Avation have finally got through the COVID induced problems and navigated their way around a high interest rate environment.
Key takeaways into a new phase for Avation is getting rid of older aircraft, growing the fleet again with Airbus NEO and A220 series in addition to ATR turboprop. This is a multi-year programme and is not new news really. Interesting they are avoiding Boeing 737 MAX (less environmentally friendly)
Additionally Avation will consider the acquisition or sale of individual or smaller portfolios of aircraft. Personally I can't see them buying a portfolio of aircraft any time soon. A sale of a portion of the fleet, on the other hand is, certainly my preference. Outside of that it seems the only thing that is going to move the shareprice is some sort of corporate action.
A return to dividends is someway off
With references to A321-NEO's I posted come current market values and lease rates earlier this month.
Sept 2024 is the next lease expiry.
PAL shares to be sold perhaps in Q1 2024
Identify opportunities to widen ATR customer base with Purchase Rights being used strategically. (I guess that may mean in partnerships/JV's)
All of my questions were addressed in the presentation:
PURCHASE RIGHTS. ATR can't manufacture aircraft quickly enough due to supply chain issues. Avation has discussions next week with ATR to discuss re-timing of ATR Purchase Rights.
STRATEGIC REVIEW. Enquiries all around the ATR order book. Would consider a review if there is a good inbound enquiry.
2024 ATR DELVERIES. 100% equity paid. LOI for these aircraft. Aircraft paid and under manufacture. (Although I do think that may be a play on words!). Jeff intimated they might start to announce LOI's in future.
SPECULATIVE ORDERS: No. Deliver organically as and well orders are received.
TERMINLOGY: Jeff gave a response which is inline to what current understanding is. However with all options being Purchase Rights then its a bit of a mute point.
SINGAPORE LEASING SCHEME: Expires in May 2024. Will apply again. Expect 8% tax rate again.
TECHNICAL TEAM: Not really an option. However did comment that these finance funds e.g. AA4, DNA etc get stuck with poor consultants and have to hire in third parties to deal with it.
OPTION EXPIRY DATES: Expiry Dates not being published given they change so often.
Bank market viable for finance, as Avation is not investment grade so too expensive there.
No share buy backs except chomp through the bonds which is NAV accretive
Refinance when bank loans paid,
"Fantastic Opportunity" if you have an aircraft.
(Whoever asked the question about Joint Ventures probably gets my vote for the most interesting question of the day!)
Overall I felt my concerns regarding the Purchase Rights have been alleviated.
Share Price: There has been practically nil commentary on investor boards and other social media. I wonder if the old Richard Wolanski road shows should be re-introduced?
2024/5 should be interesting.
Avation issued its FY 2023 results. Sadly they failed to update their own website in a timely manner and forgot to send out a notice via X/Twitter (not that it matters because they don't use the #AVAP tag anyway...)
Overall I was pleased with my independent forecasts of the results that I posted here in May especially when taking into account post May events.
If you compare the analyst consensus forecasts (on Sharepad) headline results with actual results:
Turnover 89.8 / 99.25
EBITDA 91 / 109.2
EBIT 55.3 / 70.6
PTP 6.69 / 13.0
EPS 8.84c / 17.43c
..and the share price did nothing in response. I can only summise the market is discounting those Purchase Rights. If Avation can't use them, then that asset becomes a big liability.
A brief recap:
Financial year revenue and other income for Avation was $99.3m in 2022/23, down from $116m the previous year.
Fleet assets were $898.6m and total assets were $1.18b at 30 June 2023.
Net indebtedness fell by 7.8% to $731.2million (2022: $792.9million); total cash and bank balances of $116.9mn (2022: $119.2m); operating profit of $70.6m (2022: $90.2m); profit after tax of $12.2m (2022: $17.1m).
Avation noted that a Southeast Asian airline has reduced its arrears by $5.1million since 30 June 2023.
Avation sold two ATR72-600 and a Boeing 737-800 aircraft.
One ATR72-600 aircraft was repossessed from Myanmar and subsequently commenced a new lease with with Tahiti; one off-lease ATR72-500 started a lease with a new airline customer in Nepal (Yeti)
Avation received a creditor distribution of $3.4m from Virgin Australia last year.
Refinanced two Airbus A220-300 aircraft with fixed-rate long-term loans, reducing Avation's exposure to interest rate changes.
Recently entered into an agreement to sell an 11-year-old off-lease ATR72-600;and a second 11-year-old off-lease ATR72-600, which is expected to be sold in November.
Avation=will have a fully utilised fleet.
Avation has continued to de-lever its balance sheet, achieving a reduction to 62% in the ratio of net debt to total assets as at 30 June 2023. A significant portion of the cashflow generated by the fleet is directed towards repayments of debt. Scheduled loan repayments for the 2024 financial year,amounting to around $62m, exceed expected depreciation of the fleet over the same period. Avation noted that it is hedged against further interest rate changes on 95.8% of its loans and borrowings. In the 12months to 30 June, Avation reversed around $3.3million of previously recognised impairment charges as aircraft valuations improved.
Some of the takeaways from the numbers can be summarised as follows:
Fleet Asset values are trending up; in fact we have evidence the A220 valuations have powered ahead post these results.
Balance sheet deleveraging; now stands at 4.9x returning to normalised levels (but still horrendous in practically any other business!).
If I have calculated the primary rating agencies ratios properly then:
Net Debt to Equity is better at 3.0x (3.5x) and Funds From Operations to Debt is OK but EBITDA to Interest Ratio and EBIT Interest Cover is poor.
With a NAV of $3.41 (£2.80) per share that gives us a P/B of 0.37. Remarkable. However although there are 70,883,124 shares in issue there are also 5,857,408 warrants out there that investors should consider so NAV/Share is nearer $3.15, (£2.58) giving a P/B 0.4
Overall though the results and presentation was exactly what I was looking for. Avation have finally got through the COVID induced problems and navigated their way around a high interest rate environment.
Key takeaways into a new phase for Avation is getting rid of older aircraft, growing the fleet again with Airbus NEO and A220 series in addition to ATR turboprop. This is a multi-year programme and is not new news really. Interesting they are avoiding Boeing 737 MAX (less environmentally friendly)
Additionally Avation will consider the acquisition or sale of individual or smaller portfolios of aircraft. Personally I can't see them buying a portfolio of aircraft any time soon. A sale of a portion of the fleet, on the other hand is, certainly my preference. Outside of that it seems the only thing that is going to move the shareprice is some sort of corporate action.
A return to dividends is someway off
With references to A321-NEO's I posted come current market values and lease rates earlier this month.
Sept 2024 is the next lease expiry.
PAL shares to be sold perhaps in Q1 2024
Identify opportunities to widen ATR customer base with Purchase Rights being used strategically. (I guess that may mean in partnerships/JV's)
All of my questions were addressed in the presentation:
PURCHASE RIGHTS. ATR can't manufacture aircraft quickly enough due to supply chain issues. Avation has discussions next week with ATR to discuss re-timing of ATR Purchase Rights.
STRATEGIC REVIEW. Enquiries all around the ATR order book. Would consider a review if there is a good inbound enquiry.
2024 ATR DELVERIES. 100% equity paid. LOI for these aircraft. Aircraft paid and under manufacture. (Although I do think that may be a play on words!). Jeff intimated they might start to announce LOI's in future.
SPECULATIVE ORDERS: No. Deliver organically as and well orders are received.
TERMINLOGY: Jeff gave a response which is inline to what current understanding is. However with all options being Purchase Rights then its a bit of a mute point.
SINGAPORE LEASING SCHEME: Expires in May 2024. Will apply again. Expect 8% tax rate again.
TECHNICAL TEAM: Not really an option. However did comment that these finance funds e.g. AA4, DNA etc get stuck with poor consultants and have to hire in third parties to deal with it.
OPTION EXPIRY DATES: Expiry Dates not being published given they change so often.
Bank market viable for finance, as Avation is not investment grade so too expensive there.
No share buy backs except chomp through the bonds which is NAV accretive
Refinance when bank loans paid,
"Fantastic Opportunity" if you have an aircraft.
(Whoever asked the question about Joint Ventures probably gets my vote for the most interesting question of the day!)
Overall I felt my concerns regarding the Purchase Rights have been alleviated.
Share Price: There has been practically nil commentary on investor boards and other social media. I wonder if the old Richard Wolanski road shows should be re-introduced?
2024/5 should be interesting.
Re: Avation (AVAP)
Carcosa wrote:
(Whoever asked the question about Joint Ventures probably gets my vote for the most interesting question of the day!)
Dear Carcosa:
That was me again! I asked upon Jeff stating that he had received enquiries about the ATR portfolio in response to your question about the strategic review.
Imo, the Purchase Rights are worthless if Avation cannot exercise or monetise them so it is encouraging to learn that there are enquries about the Purchase Rights and that Jeff is open to a Joint Venture program. Presumably, any program would ensure funding at an attractive valuation.
I also note that Jeff said he has increased his shareholding in response to a question about the trading value of the shares.
Cheers,
jwk88
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Carcosa
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Re: Avation (AVAP)
Seems like Oceanwood Capital Management has sold 13.6 million shares of their 16.2 million holding on 29 September, reportedly at 78.88p. That's about 19% of the company.
Seems that Oceanwood is shutting down.
Guess we will get a confirmation RNS on Monday/Tuesday. Be interesting to see who has bought them.
Seems that Oceanwood is shutting down.
Guess we will get a confirmation RNS on Monday/Tuesday. Be interesting to see who has bought them.
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Carcosa
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Re: Avation (AVAP)
ATR Current & Future Production
I heartily recommend reading the full article as it directly reflects upon Avation's potential use of Purchase Rights. Here are some highlights I have picked out:
ATR's CEO, Nathalie Tarnaud Laude, maintains ATR recovery is “on track” and that it will deliver at least 40 aircraft this year, after shipping 20 units in the first eight months. ATR has also taken 22 firm orders in 2023, with “more in the pipeline”. It follows a poor 2022 in which ATR delivered just 25 aircraft due tough supply chain problems that will continue into 2024.
ATR fleet utilisation is back to 2019 levels, with just under 1,200 ATRs in operation, and a 160-strong backlog. A glut of used examples on the market – something that hampered new aircraft sales during 2022 – has also dried up.
Her target is to bring annual production back up to 80, the level ATR enjoyed through much of the 2010s – by the “second half of the decade...That clearly means we will need to sell more” she remarks.
Oakwood Capital Shareholding Sale
So we finally discovered 19.2% of the company was bought by Christopher C. DeMuth Jr, the founder of Rangeley Capital LLC together with acting in concert with Jeremy Micheal Kersten Raper who headsRaper Capital , essentially a blogger with some ex-Goldman Sachs banking experience. The latter 'only' has a relatively small number of shares representing 0.1905% of the total shareholding.
According to the trade report the transaction completed at 78.9p. Oakwood retains a 3.61% holding. Can only imagine that will be sold soon.
Rangeley Capital LLC is an investment firm founded in 2006 by Christopher C. DeMuth Jr. He comes from a prominent conservative family. His father, Christopher DeMuth, was president of the American Enterprise Institute.
Rangeley Capital focuses on taking concentrated positions in small and mid-cap public companies. Its investment strategy tends to be activist in nature.
In an interview Christopher said "We are event-driven value investors. I work on a team of a half dozen people. We look for deep discounts to intrinsic value. We focus on primary sources for idea generation.... I am interested in corporate transactions. I am particularly interested in deep discounts to NAV, ideally discounts to liquid securities and cash on the balance sheet, and discounts to our view of expected value during complex corporate transactions.
Overall I see this as a positive move on behalf of all shareholders although I somewhat doubt they are will be a very long term investor. If/how it may affect the Avation's business remains to be seen.
News Related to Avation.
Sustainable Aviation Fuels
A reality check via YouTube.
IBA Data
For those that are really keen you can review IBA presentation here FOC regarding airline industry, aircraft valuation and leasing; mostly covering Jet narrowbody and widebody aircraft which includes aircraft types belonging to Avation (A220, A330 & B777).
Broad generalisation suggest that new narrowbody market, base and lease rates increasing. A320-200's mid-life outpacing inflation. Mid-life widebodies starting to tick up; which again suggests that further fleet NAV increases can be expected in Aviation's post year end accounts.
(Click the image to enlarge)
India & Cape Town Convention
Further to earlier commentary in this thread, India has amended its insolvency law to exclude leased aircraft from assets that can be frozen, addressing discrepancies between global and local rules and more aligned to the 2001 Cape Town Convention. That should ease some concerns over Avation's two ATR's in the country; albeit Jeff has stated the CTC is not fit for purpose.
IPO
Yeti Airlines, a customer of Avation, is planning an IPO (as is Air Baltic)
Griffin Global Asset Management
Marc Baer, president of Griffin Global Asset Management recently indicated that
- Interest rates and aircraft lease rates are both rising, but not at the same pace.
- Lessors are now repricing debt at higher interest rates, which will lead to higher lease rates for airlines. Aercap recently issued bonds at 6.1%, indicating lease rates will rise.
- Inflation can benefit aircraft residuals, helping to keep lease returns stable long-term.
- Lease rates are increasing faster now but there is a lag effect as leases are negotiated over months/years versus interest rates changing instantly.
- Strong aircraft demand versus tight supply is also pushing lease rates higher. Delays, retirements, and normal growth have reduced available aircraft.
- The industry should expect elevated interest rates and higher lease rates for the medium term, not pre-Covid-19 rates. Lessors will need to pass higher funding costs to airlines.
- Airlines must adjust to higher lease rate factors for the foreseeable future.
I heartily recommend reading the full article as it directly reflects upon Avation's potential use of Purchase Rights. Here are some highlights I have picked out:
ATR's CEO, Nathalie Tarnaud Laude, maintains ATR recovery is “on track” and that it will deliver at least 40 aircraft this year, after shipping 20 units in the first eight months. ATR has also taken 22 firm orders in 2023, with “more in the pipeline”. It follows a poor 2022 in which ATR delivered just 25 aircraft due tough supply chain problems that will continue into 2024.
ATR fleet utilisation is back to 2019 levels, with just under 1,200 ATRs in operation, and a 160-strong backlog. A glut of used examples on the market – something that hampered new aircraft sales during 2022 – has also dried up.
Her target is to bring annual production back up to 80, the level ATR enjoyed through much of the 2010s – by the “second half of the decade...That clearly means we will need to sell more” she remarks.
Oakwood Capital Shareholding Sale
So we finally discovered 19.2% of the company was bought by Christopher C. DeMuth Jr, the founder of Rangeley Capital LLC together with acting in concert with Jeremy Micheal Kersten Raper who headsRaper Capital , essentially a blogger with some ex-Goldman Sachs banking experience. The latter 'only' has a relatively small number of shares representing 0.1905% of the total shareholding.
According to the trade report the transaction completed at 78.9p. Oakwood retains a 3.61% holding. Can only imagine that will be sold soon.
Rangeley Capital LLC is an investment firm founded in 2006 by Christopher C. DeMuth Jr. He comes from a prominent conservative family. His father, Christopher DeMuth, was president of the American Enterprise Institute.
Rangeley Capital focuses on taking concentrated positions in small and mid-cap public companies. Its investment strategy tends to be activist in nature.
In an interview Christopher said "We are event-driven value investors. I work on a team of a half dozen people. We look for deep discounts to intrinsic value. We focus on primary sources for idea generation.... I am interested in corporate transactions. I am particularly interested in deep discounts to NAV, ideally discounts to liquid securities and cash on the balance sheet, and discounts to our view of expected value during complex corporate transactions.
Overall I see this as a positive move on behalf of all shareholders although I somewhat doubt they are will be a very long term investor. If/how it may affect the Avation's business remains to be seen.
News Related to Avation.
Sustainable Aviation Fuels
A reality check via YouTube.
IBA Data
For those that are really keen you can review IBA presentation here FOC regarding airline industry, aircraft valuation and leasing; mostly covering Jet narrowbody and widebody aircraft which includes aircraft types belonging to Avation (A220, A330 & B777).
Broad generalisation suggest that new narrowbody market, base and lease rates increasing. A320-200's mid-life outpacing inflation. Mid-life widebodies starting to tick up; which again suggests that further fleet NAV increases can be expected in Aviation's post year end accounts.
(Click the image to enlarge)
India & Cape Town Convention
Further to earlier commentary in this thread, India has amended its insolvency law to exclude leased aircraft from assets that can be frozen, addressing discrepancies between global and local rules and more aligned to the 2001 Cape Town Convention. That should ease some concerns over Avation's two ATR's in the country; albeit Jeff has stated the CTC is not fit for purpose.
IPO
Yeti Airlines, a customer of Avation, is planning an IPO (as is Air Baltic)
Griffin Global Asset Management
Marc Baer, president of Griffin Global Asset Management recently indicated that
- Interest rates and aircraft lease rates are both rising, but not at the same pace.
- Lessors are now repricing debt at higher interest rates, which will lead to higher lease rates for airlines. Aercap recently issued bonds at 6.1%, indicating lease rates will rise.
- Inflation can benefit aircraft residuals, helping to keep lease returns stable long-term.
- Lease rates are increasing faster now but there is a lag effect as leases are negotiated over months/years versus interest rates changing instantly.
- Strong aircraft demand versus tight supply is also pushing lease rates higher. Delays, retirements, and normal growth have reduced available aircraft.
- The industry should expect elevated interest rates and higher lease rates for the medium term, not pre-Covid-19 rates. Lessors will need to pass higher funding costs to airlines.
- Airlines must adjust to higher lease rate factors for the foreseeable future.
Re: Avation (AVAP)
Carcosa,
Thank you as always.
The link to the ATR article isn't working. Might you have saved the article?
It is interesting to see shares continue to trade c.110p after the Oceanwood/Rangeley-Raper trade. Much of the book value is in the Purchase Rights; let us see how Jeff maximises their value considering the balance sheet and financial obligation.
Jwk88
Thank you as always.
The link to the ATR article isn't working. Might you have saved the article?
It is interesting to see shares continue to trade c.110p after the Oceanwood/Rangeley-Raper trade. Much of the book value is in the Purchase Rights; let us see how Jeff maximises their value considering the balance sheet and financial obligation.
Jwk88
Re: Avation (AVAP)
Thank you. I suppose the big question remains how Avation would fund any Purchase Right executions.
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Carcosa
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Re: Avation (AVAP)
Aviation's recent Presentation material plus the Q&A breakout can be found on and Investormeet Company website.
There is also a 'new' Directorstalk interview here with Jeff. If this was recorded post discussions with ATR regarding the Purchase Rights then I get the impression those Purchase Rights will remain unused for quite some time.
News Related to Avation
VietJet (Avation Customer)
The head of e-commerce at VietJetAir was arrested along with several others over allegations that he provided bribes to secure profitable COVID-19 repatriation flights for the airline. Prosecutors allege bribes totalling $6.8 million were paid 515 times. The arrest is part of an ongoing corruption investigation related to the repatriation flights, in which 54 people were sentenced in July, including 4 government officials who received life sentences.
PW127XT-L engine / ATR42-600S
Pratt & Whitney Canada and ATR have announced the certification of the PW127XT-L engine by Transport Canada. This engine variant offers increased performance to match the requirements of ATR’s future short take-off and landing version, the ATR42-600S.
ATR expects the engine modification validation by EASA before the end of the year with a target of entry into service in 2025.
Virgin Australia
Restructured Virgin Australia has returned to profitability for the first time in 11 years, reporting a statutory net profit of $83m.
Share Price
Avation's share price increased.
There is also a 'new' Directorstalk interview here with Jeff. If this was recorded post discussions with ATR regarding the Purchase Rights then I get the impression those Purchase Rights will remain unused for quite some time.
News Related to Avation
VietJet (Avation Customer)
The head of e-commerce at VietJetAir was arrested along with several others over allegations that he provided bribes to secure profitable COVID-19 repatriation flights for the airline. Prosecutors allege bribes totalling $6.8 million were paid 515 times. The arrest is part of an ongoing corruption investigation related to the repatriation flights, in which 54 people were sentenced in July, including 4 government officials who received life sentences.
PW127XT-L engine / ATR42-600S
Pratt & Whitney Canada and ATR have announced the certification of the PW127XT-L engine by Transport Canada. This engine variant offers increased performance to match the requirements of ATR’s future short take-off and landing version, the ATR42-600S.
ATR expects the engine modification validation by EASA before the end of the year with a target of entry into service in 2025.
Virgin Australia
Restructured Virgin Australia has returned to profitability for the first time in 11 years, reporting a statutory net profit of $83m.
Share Price
Avation's share price increased.
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Carcosa
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Re: Avation (AVAP)
I suppose the big question remains how Avation would fund any Purchase Right executions
Jeff did state that the bank market remains viable for finance. Their poor credit rating does not allow financing from other sources. The Green Loan they obtained in December 2019 may allow a marginal cheaper interest rate again but I've not actually seen these types of loans being widely applied for lessors. Some more info on that subject can be found here.
ATR Market
ATR has seen healthy turboprop orders so far in 2023, including 22 new aircraft orders at the Paris Air Show in June. Customers include Air New Zealand (4 ATR72-600s) and Maldivian (2 ATR42-600s).
ATR forecasts a market for 2,500 new turboprops over the next 20 years, consisting of 620 ATR42s and 1,830 ATR72s.
ATR faces little competition in the turboprop market as production of the Dash 8-400 remains suspended and Embraer has delayed plans for a new turboprop.
Outlook is positive for ATR42-600 values and lease rates due to low supply and potential to replace 30-seat fleets. ATR72-600 also seeing improved demand, although supply is higher.
Overall positive outlook for ATR turboprops given lack of competition and environmental benefits, as long as ATR maintains production restraint.
News Related to Avation
Cebu Pacific
Cebu Pacific (an Avation customer) is looking to order between 100 and 150 narrowbody aircraft from either Boeing or Airbus.
The airline has taken delivery of 21 aircraft this year and now has 64 aircraft in total, including A320s, A321s, A320neos, A321neos and A330s.
Aurigny ATR
It has been reported (again) that Guernsey based Aurigny is on track to be an all ATR fleet. Currently they have 1 Embraer 195, 4 ATR's, 2 Dornier 228's
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Carcosa
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Re: Avation (AVAP)
Addendum to todays news post:
Braathens Regional Airlines
The airline (an Avation customer) has applied for corporate restructuring in Sweden under a process it says is similar to the Chapter 11 procedure in the United States, for seven of the thirteen companies in the group .On this current occasion, “the owners are willing to inject new capital in connection with a successful reorganisation process and are considering broadening the ownership.” It is also “considering broadening its ownership.”
Braathens Regional Airlines
The airline (an Avation customer) has applied for corporate restructuring in Sweden under a process it says is similar to the Chapter 11 procedure in the United States, for seven of the thirteen companies in the group .On this current occasion, “the owners are willing to inject new capital in connection with a successful reorganisation process and are considering broadening the ownership.” It is also “considering broadening its ownership.”
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Carcosa
- Lemon Slice
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Re: Avation (AVAP)
ATR PDP's
I thought it might be worth clarifying Jeff's response to my query regarding the 2024 x2 ATR payments so I contacted the company (whose designated responder is not particularly forthcoming). It was said in the presentation that all equity payments had been made. What that really meant that the appropriate Pre-Delivery Payment schedules had been met.
The first pre-payment is made upon agreeing for the aircraft to become firm deliveries, a second pre-payment 12 months prior to the delivery of each individual aircraft and a third pre-payment six months prior to the delivery of each individual aircraft. So presumably 2 out of those three PDP'd have been made. The balance is then paid upon delivery which Avation intend to be secured bank loans, according to an email reply I had from the company.
The two ATR's for 2024 delivery either has one or both of them up for sale. I have a sense their book value is around $18.812m (Note 19 ) so potentially ~$2m profit each should they be able to sell them with a lease attached.
News Related to Avation
ATR's in the US
An interview with ATR's Senior VP of Commercial from a US based interviewer is worth a look. There is also a video suggesting why turbo-props are not favoured in the USA.
Should be noted that Avation have suggested it would be very difficult to lease ATR's to a US based operator; although that does not preclude Avation using their Purchase Rights with an agreed partner of selling the aircraft upon delivery.
More Data Points
The Financial Times had an article this week regarding aircraft lease rates.
...lease rates for the Airbus A321neo have risen from lows of around $340,000...to as much as $420,000...according to aviation data group Ishka.
Rates for Boeing’s newest single-aisle jet, the 737 Max 8, have also risen above pre-pandemic levels to around $360,000-$370,000 a month.
Leasing rates had increased for “good used aircraft like 737-800s, A320s, younger A330s... as much as 30-40 per cent in the last 12 to 15 months”, he added.
“Older A320s are potentially able to realise around one-third higher monthly rental today than they were at the peak of the last demand cycle.”
International Society of Transport Aircraft Trading Conference
Air Finance Journal issued an article and I have quoted some extracts below.
“There is a lag between lease rates and interest rates. Previously it was 18 months, and it is now getting longer, ”said Clover Aviation Capital’s senior vice-president, deputy head of financing, Mabel Ying Peng...investment grade rated Clover Aviation Capital is not currently looking at the bond market as a source of financing.
AirLease’s executive vice-president and chief financial officer, Gregory Willis “We are pretty balanced and try to tap the bank market a lot heavier that we have been in the past,” he adds.
She observes that in the bank debt market, loan to values (LTVs) were relatively low during the Covid-19 period. “We now have values with higher LTVs on secured loans. Usually what we can do is 85% for new aircraft. Last week we closed a deal at 100% LTV but this was a special advance rate from the bank.” Ying Peng adds that spreads are higher than before but manageable.
I thought it might be worth clarifying Jeff's response to my query regarding the 2024 x2 ATR payments so I contacted the company (whose designated responder is not particularly forthcoming). It was said in the presentation that all equity payments had been made. What that really meant that the appropriate Pre-Delivery Payment schedules had been met.
The first pre-payment is made upon agreeing for the aircraft to become firm deliveries, a second pre-payment 12 months prior to the delivery of each individual aircraft and a third pre-payment six months prior to the delivery of each individual aircraft. So presumably 2 out of those three PDP'd have been made. The balance is then paid upon delivery which Avation intend to be secured bank loans, according to an email reply I had from the company.
The two ATR's for 2024 delivery either has one or both of them up for sale. I have a sense their book value is around $18.812m (Note 19 ) so potentially ~$2m profit each should they be able to sell them with a lease attached.
News Related to Avation
ATR's in the US
An interview with ATR's Senior VP of Commercial from a US based interviewer is worth a look. There is also a video suggesting why turbo-props are not favoured in the USA.
Should be noted that Avation have suggested it would be very difficult to lease ATR's to a US based operator; although that does not preclude Avation using their Purchase Rights with an agreed partner of selling the aircraft upon delivery.
More Data Points
The Financial Times had an article this week regarding aircraft lease rates.
...lease rates for the Airbus A321neo have risen from lows of around $340,000...to as much as $420,000...according to aviation data group Ishka.
Rates for Boeing’s newest single-aisle jet, the 737 Max 8, have also risen above pre-pandemic levels to around $360,000-$370,000 a month.
Leasing rates had increased for “good used aircraft like 737-800s, A320s, younger A330s... as much as 30-40 per cent in the last 12 to 15 months”, he added.
“Older A320s are potentially able to realise around one-third higher monthly rental today than they were at the peak of the last demand cycle.”
International Society of Transport Aircraft Trading Conference
Air Finance Journal issued an article and I have quoted some extracts below.
“There is a lag between lease rates and interest rates. Previously it was 18 months, and it is now getting longer, ”said Clover Aviation Capital’s senior vice-president, deputy head of financing, Mabel Ying Peng...investment grade rated Clover Aviation Capital is not currently looking at the bond market as a source of financing.
AirLease’s executive vice-president and chief financial officer, Gregory Willis “We are pretty balanced and try to tap the bank market a lot heavier that we have been in the past,” he adds.
She observes that in the bank debt market, loan to values (LTVs) were relatively low during the Covid-19 period. “We now have values with higher LTVs on secured loans. Usually what we can do is 85% for new aircraft. Last week we closed a deal at 100% LTV but this was a special advance rate from the bank.” Ying Peng adds that spreads are higher than before but manageable.
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