Aircraft lessor Avolon lost €30m in 2020 as Covid-19 hit travel

Chief executive Dómhnal Slattery predicts second-half recovery

Aircraft lessor Avolon lost €30 million last year as Covid-19 restrictions hit air travel, the Irish company said on Thursday.

Dublin-headquartered Avolon buys aircraft from manufacturers Airbus and Boeing, which it leases to 142 airlines in 61 countries, earning revenues from the rent they pay.

Results for 2020 show that the company lost $37 million (€30.5 million) in 2020, against a profit of $725 million the previous year.

Lease revenues fell 13 per cent to $2.28 billion last year from $2.62 billion in 2019.

However, the company boosted its available cash by 20 per cent to $6.87 billion at the end of 2020 from $5.75 billion 12 months previously, aided by borrowing $4.4 billion last year at an average interest of 3.7 per cent.

Dómhnal Slattery, Avolon chief executive, acknowledged that Covid-19 restrictions posed extreme challenges to global aviation in 2020.

“As the pandemic developed, governments were forced into imposing travel bans, resulting in grounded fleets with a severe and immediate impact on the world’s airlines,” he said.

Mr Slattery added that Avolon worked to support airline customers while managing its own financial commitments.

The steps it took included cutting near-term liabilities by $1.4 billion through buying back bonds due for repayment between this year and 2026.

Overall, it cut spending and debt commitments for the 2020 to 2024 period by more than $9.5 billion.

Avolon sold 19 aircraft to a special purpose vehicle, Sapphire 2020-1, which funded this through investment from a third party and by borrowing $620 million in bonds.

The Irish company declared a dividend of $193 million in the first quarter of 2020, but withheld $65 million of this, in line with its shareholder agreement.

Since the end of December, Avolon has borrowed $1.5 billion through issuing unsecured bonds.

Avolon owned or managed 572 aircraft at the end of last year while it has 270 ordered from manufacturers.

Cancelled or deferred

The company cancelled or deferred orders for new planes last year, cutting the number of aircraft that it was due to buy between 2020 and 2023 by 100.

In 2020 it delivered 57 new planes to airline customers and transferred a further 10 between clients. It sold 29 planes during the year, three of which were managed on behalf of investors.

Mr Slattery predicted that a recovery could begin in the second half of 2021 as countries vaccinate against the virus.

“We expect 2021 to be 2020 in reverse and to see a pick-up in travel in the second half of the year,” he said.

He pointed out that Avolon had ended with the year with the “strongest liquidity position in our history”.

China's Bohai Leasing owns 70 per cent of Avolon while Dublin-headquartered Orix Aviation holds the remaining 30 per cent.

Adam Tan, Avolon's chairman stepped down from the board this week to concentrate on the re-organisation of HNA, the debt-laden Chinese conglomerate that is a majority shareholder in Bohai.

Chris Jin replaced Mr Tan. Bohai also nominated Rachel Bai and Yi Shen to the Avolon board.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas