Avolon's third quarter results

Avolon, a leading global aviation finance company, announced results for the third quarter of 2023, which demonstrated the firm executed 43 lease transactions comprising new aircraft leases, follow-on leases and lease extensions.

Andy Cronin, Avolon CEO, commented:  “The third quarter showed the continuing positive trajectory of our financial performance, helped by strong demand for aircraft and rising lease rates.  We continued to support our customers’ demand for capital and have underwritten US$2.9 billion in new sale and leaseback volume year to date.  These transactions, along with lease extensions and aircraft placed from our orderbook at attractive lease rates, will drive our long-term profitability. We expect the current strong demand for travel and undersupply of aircraft to remain for the foreseeable future.”

Income Statement	Three Months Ended September 30					Nine Months Ended September 30
(US$M)	2023	2022	$ Change	% Change		2023	2022	$ Change	% Change
Lease revenue	588	546	42	+8%		1,799	1,743	56	+3%
Operating cashflow	626	278	348	+125%		1,307	903	404	+45%
Net income	97	141	(44)	(31%)		229	(33)	262	N/A
Adjusted net income*	103	104	(1)	(1%)		235	215	20	+9%

* Excluding impact of Russia and unrealized gains/losses on investments

 

 

Balance Sheet (US$M)	September 30, 2023		December 31, 2022	$ Change	% Change
Total available liquidity		7,536	5,546	1,990	+36%
Total assets	30,351		30,796	(445)	(1%)
Secured debt / Total assets	22%		22%	-	N/A
Net debt to Equity	2.2x		2.3x	(0.1x)	N/A

 

Cathay Pacific and Avolon agree on sale and leaseback deal for 9 Airbus A320 family jets.

The aircraft leasing and management company, Avolon, has just agreed on the sale and leaseback of nine new Airbus A320neo family aircraft with the Cathay Group, a leading Asian airline group. The aircraft are scheduled for delivery in 2026 and 2027 and the transaction comprises a mix of A321neos and A320neos.

 

The transaction adds new technology aircraft to support the Cathay Group’s long-term commitment to growing connectivity at its home hub, Hong Kong. A320neo family aircraft deliver a 20% fuel savings and CO2 reduction compared to previous-generation Airbus A320 aircraft. The A321neo is the extended version of this aircraft type, capable of carrying up to 244 passengers and with a range of 7,400km.

Avolon has 101 A320neo family aircraft in its fleet, with a significant order book pipeline for a further 192 of this aircraft type as of September 30 2023. 

The Cathay Group currently flies to more than 75 passenger and cargo destinations worldwide, serving an additional 160 destinations through codeshare agreements, and has a fleet of 225 aircraft as of 30 June 2023. 

Paul Geaney, President and Chief Commercial Officer, Avolon commented: “The Cathay Group is a leading airline operator in Asia, and we are very pleased to agree this sale and leaseback transaction with them and look forward to our future partnership. Passenger traffic in and out of Hong Kong has bounced back strongly this year, and these aircraft will help to support the Cathay Group’s fleet strategy and future expansion.”

Avolon is a leading global aviation finance company connecting the capital with customers to drive the transformation of aviation and the economic and social benefits of global travel. The company has built a good reputation for customer relationships and a collaborative team approach. The firm is now working with 147 airlines in 65 countries, Avolon has an owned, managed, and committed fleet of 897 aircraft, as of 30 September 2023

50 Airbus A320neos on order converted to larger A321neo model by Avolon

Avolon, a leading global aviation finance company, has signed a binding agreement for its order of 20 new A330neo aircraft from Airbus. The order firms up a memorandum of understanding signed at the Paris Airshow in June. The new aircraft are scheduled to be delivered between 2025 and 2028.

Avolon was a launch customer for the A330neo programme in 2014 and is enjoying strong customer demand for additional widebody aircraft having fully placed its current order book. With over 1,400 A330ceo aircraft in operation, airlines are considering options to upgrade to the A330neo aircraft, which has an increased range of range of over 13,300km (7,200 nautical miles) and 25% lower fuel consumption and CO2 emissions.

The agreement with Airbus also confirms that 50 of the A320neo aircraft Avolon has on order with Airbus will convert to the larger A321neo model.

Andy Cronin, CEO of Avolon, commented:   “We see a high level of widebody demand within the delivery window for these aircraft. With our existing widebody pipeline already placed, these new aircraft will support our future growth plans and allow us to provide options for carriers looking to replace older A330ceo aircraft with the more fuel-efficient A330neo. The order builds on our strong relationship with Airbus as a launch customer for the A330neo, and our position as the leading lessor for this aircraft type.”

Christian Scherer, Chief Commercial Officer and Head of International at Airbus commented:   “It’s fantastic to see Avolon once again commit additional investment in the A330neo aircraft and lead the lessor market reordering widebody aircraft. Avolon’s vision and timing could not be better with this commitment for a further 20 aircraft to its portfolio. Avolon will benefit from the strong wave of growth and replacements that we currently observe across all markets, and we welcome our continuing partnership with them.”

Avolon partners with Soisa Aircraft Interiors to turn scrap material from old aircraft into craft products.

Avolon, a leading global aviation finance company, has partnered with Soisa Aircraft Interiors on a project to turn scrap material from old aircraft into craft products. Waste materials, including over 800kg of leather, are donated to members of the Tarahumara tribe in Chihuahua, Mexico, who make them into traditional artisan products like wallets, bags, aprons, and tablecloths.

Interior furnishings of aircraft being decommissioned or refitted, such as seat covers and curtains, often end up in a landfill. Through the ‘Waste to Wonder’ project they are instead helping to provide an income stream for the families of 55 Tarahumara tribe members who have participated in the project.

The project is supported by FODARCH (Fomento y Desarrollo Artesanal de Chihuahua), a government body that promotes indigenous cultural traditions. They have provided training and facilitate the sale of the finished products in a shop popular with visitors to Chihuahua, the largest state in Mexico.

Avolon’s sustainability strategy includes a commitment to support the circular economy by increasing the reuse and recycling of materials from old aircraft in a sustainable manner. Avolon recently joined a coalition of partners in a pledge to use only tear down facilities accredited by the Aircraft Fleet Recycling Association (AFRA).

Enda Swan, Head of Technical, Avolon said: “The Waste to Wonder project provides an excellent example of how, through creativity and collaboration, better use can be made of materials in the aviation supply chain that were previously regarded as scrap. The ability of the Tarahumara tribe members in Chihuahua to produce beautiful artisan products out of old leather from seat covers has been inspiring to see. Avolon is committed to finding more opportunities to decommission end-of-life aviation materials in a sustainable manner.”

Jacobo Mesta, Chief Executive, Soisa Aircraft Interiors, commented:  “Working closely with members of the Tarahumara tribe in Chihuahua, we have been honored to establish this project with the support of Avolon and FODARCH. Working more sustainably is a key objective at Soisa and this project has provided a perfect opportunity to convert something previously regarded as waste into a craft product that can be sold to improve the livelihoods of local communities.”

US-Bangla Airlines to lease two Airbus A330-300s from Avolon

Avolon, the international aircraft leasing company, has added US-Bangla Airlines as a new customer, with an agreement to lease the Bangladeshi carrier two Airbus A330-300 aircraft.   

These will be the first widebody aircraft operated by US Bangla, adding another carrier to the A330 fleet. The new deliveries will help to support US Bangla’s passenger growth and expansion plans on medium-haul routes such as Jeddah, Riyadh, Dammam, Bahrain, and Kuwait. The aircraft are scheduled for delivery in September 2023. 

US Bangla launched in 2014 and is Bangladesh’s largest privately owned carrier. 

Paul Geaney, President and Chief Commercial Officer, Avolon commented: “We welcome this lease agreement with US-Bangla for two of our Airbus A330s. We are delighted to add a new customer to the A330 programme, offering widebody capability to US-Bangla’s fleet which will help support its route expansion in the Middle East. We look forward to building further on this partnership in the future.” 

Mohammed Abdullah Al Mamun, Managing Director, US-Bangla Airlines Ltd. commented: “US-Bangla Airlines has ambitious growth plans for its international operations, and we appreciate the support of a leading lessor like Avolon. This is our first widebody aircraft and represents our aspirations to position US-Bangla Airlines as an airline of choice for travel to medium haul routes. We look forward to deploying our new A330s into service providing premium flight experience at the most reasonable costs to our esteemed passengers travelling for Hajj, Umrah and business.”

Avolon's second-quarter 2023 results

Avolon, the international aircraft leasing company, has just released details of its second-quarter 2023 results which show the firm saw lease revenue increase by 14%. The highly regarded firm also placed orders for 40 Boeing aircraft and 20 new Airbus A330neo jets and these new aircraft are scheduled to be delivered between 2026 and 2028.

The deal was signed at the Paris Air Show and at the time, Christian Scherer, Chief Commercial Officer and Head of International at Airbus said: "It’s fantastic to see Avolon once again commit additional investment in the A330neo aircraft and lead the lessor market reordering widebody aircraft. Avolon’s vision and timing could not be better with this commitment for a further 20 aircraft to its portfolio. Avolon will benefit from the strong wave of growth and replacements that we currently observe across all markets."

Andy Cronin, Avolon CEO, commented: “This was an excellent quarter for Avolon which demonstrates the positive net income and lease revenue trajectory of the business. Our increased trading and sale and leaseback activity, along with placement from our order book at attractive lease rates, will drive our financial performance in the future setting the foundation for long-term profitability.

 

Our commitment with Boeing for 40 new 737 MAX aircraft and Airbus for 20 new A330neo aircraft reflects our confidence in the future outlook of the industry and our customers’ demand for additional aircraft to meet future growth plans in an undersupplied market.”

Key Highlights....

• Strong performance in net income with a 9x increase year-on-year to US$76 million;

 

• 22% increase in operating cashflow to US$371 million;

 

• 14% increase in lease revenue year-on-year to US$613 million;

 

• Raised US$3.4 billion of debt capital in the quarter, including:

 

•      Private offering of US$750 million of senior unsecured notes maturing in 2028;

 

•      US$1.7 billion Term Loan B refinancing with new loan maturing in 2028; and,

 

•      Letter of intent for a US$950 million term financing facility maturing in 2030;

 

• Total available liquidity of US$7.3 billion, including US$401 million of unrestricted cash, US$6.2 billion of undrawn debt facilities and US$616 million of contracted sales;

 

-        Net debt to equity of 2.2 times, a secured debt to total assets ratio of 22% and US$15 billion of unencumbered assets; and

 

• Fitch affirmed Avolon’s BBB- rating and improved the rating outlook from Stable to Positive.

2023 SECOND QUARTER | FINANCIAL HIGHLIGHTS

 

income statement (US$M)	Q2 2023	Q2 2022	CHANGE	CHANGE%
Lease Revenue	613	539	74	+14%
Operating Cashflow	371	305	66	+22%
Net Income	76	8	68	9x
EBITDA	578	486	92	+19%

 

BALANCE SHEET (US$M)	Q2 2023		FY 2022		CHANGE	CHANGE%
Total Available Liquidity (incl contracted sales)		7,263		5,567	1,696	+30%
Total Assets	29,985		30,796		(811)	(3%)
Secured Debt / Total Assets	22%		22%		-	-
Net Debt to Equity	2.2x		2.3x		(0.1x)	(6%)

 

 

 

Avolon's brief update on Q2 activity....

Avolon, the international aircraft leasing company, issues an update for the second quarter of 2023, which show the firm executed 31 lease transactions comprising new aircraft leases, follow-on leases and lease extensions.

Entered into letters of intent for the sale and leaseback of 9 aircraft;

Confirmed order for 40 Boeing 737 MAX aircraft and agreed to order 20 Airbus A330neo aircraft;

Delivered 5 new aircraft and transitioned 13 aircraft to a total of 10 customers;

Sold 3 aircraft and executed sale agreements for a further 17 aircraft;

Entered into letters of intent to place 23 aircraft from our orderbook during the quarter;

Added 2 new customers, giving a total of 149 airline customers operating in 65 countries; and,

Ended the quarter with an owned and managed fleet of 578 aircraft, with total orders and commitments for 297 fuel-efficient, new technology aircraft.

Q2 Business Highlights

Fitch improved Avolon’s BBB- rating outlook from Stable to Positive; 

Raised US$3.4 billion of debt capital in the quarter, including:

Private offering of US$750 million of senior unsecured notes maturing in 2028;

US$1.7 billion Term Loan B refinancing with new loan maturing in 2028; and,

Letter of intent for a US$950 million term financing facility maturing in 2030;

Porter Airlines and Avolon agree sale and leaseback deal for 10 Embraer E195-E2 jets

The total list price of US$841 million 

The first delivery is scheduled for Q4 2023

Avolon, the international aircraft leasing company, and Canadian regional airline Porter have signed a sale and leaseback deal for 10 new Embraer E195-E2 aircraft. The new aircraft will support Porter’s expansion of routes within Canada and further into the North American market. The deal has a value of US$841 million based on current list prices but in reality, is considerably lower.  

 

The transaction represents Avolon’s fifth leasing customer in Canada and will increase Avolon’s portfolio exposure in North America. Four of the aircraft are scheduled for delivery in 2023, with the balance to be delivered in 2024. 

Porter introduced the E195-E2 to commercial service in February 2023 and plans to expand its fleet in coming years, with 50 firm orders and the option to purchase 50 additional aircraft. Porter’s E2 configuration offers passengers a comfortable 132-seat, all-economy, two-by-two set up, with no middle seats. Initial routes for Porter’s E2 fleet are focused within Canada, but the airline has ambitions to expand quickly to the south, soon offering service for its customers to key markets in the US, as well as Mexico and the Caribbean. 

The E195-E2 has been designed to maximize returns and efficiency in achieving 25% lower carbon emissions and fuel burn compared to the previous generation aircraft. The new aircraft also supports Avolon’s progress towards its fleet target of 75% new technology aircraft by 2025.

Paul Geaney, President and Chief Commercial Officer, Avolon commented: “Porter is renowned for its customer experience and has exciting plans for the expansion of its E2 fleet. We are delighted to welcome them as a customer and look forward to partnering on their future growth. Our decision to add the E2 to our portfolio is supported by its growing operator base, with the transaction further diversifying our portfolio, whilst offering attractive returns.  The E2 is a modern fuel-efficient aircraft that offers excellent operating performance, competing effectively with other smaller narrowbody platforms.” 

Jeffrey Brown, Executive Vice President and Chief Financial Officer, Porter Airlines, commented: “The E2 is an incredible addition to Porter’s fleet, offering best-in-class seat cost economics and providing an ideal platform to deliver the truly differentiated in-flight economy passenger experience that Porter is known for. This means treating everyone with care and offering complimentary amenities like WiFi, and beer and wine served in glassware throughout the cabin. We are excited to partner with Avolon and value their reputation and expertise in aircraft leasing, which makes them an ideal new partner.” 

Martyn Holmes, Chief Commercial Officer, Embraer Commercial Aviation, commented: “Embraer is excited to welcome Avolon to the E2 program, another sign that the momentum the E2 is enjoying in the market is set to continue. Adding a lessor of Avolon’s stature to the E2 program is a further endorsement for this great family of aircraft, and the value it delivers to operators and owners alike.”