Irish aircraft lessor Avolon sees 30% increase in profit

Company may refinance up to $3bn of its secured debt this year as it seeks investment-grade rating

Dómhnall Slattery with Taoiseach Leo Varadkar at the opening of Avolon’s headquarters building in Dublin  last year.

Dómhnall Slattery with Taoiseach Leo Varadkar at the opening of Avolon’s headquarters building in Dublin last year.

 

Irish aircraft lessor Avolon grew 30 per cent to $717 million (€633m) last year, the latest figures show.

The company’s chief commercial officer, John Higgins, indicated that it could refinance up to $3 billion of its secured debt this year as it seeks an investment-grade rating.

Avolon published accounts on Wednesday showing that it grew revenues from leasing aircraft to airlines in 2018 by 10 per cent to $2.57 billion from $2.34 billion the previous year.

Profit for the year rose by close to one third to $717 million last year from $550 million in 2017. The company paid a dividend of $490 million.

Avolon combines its own cash with debt to buy aircraft from manufacturers such as Airbus and Boeing and lease them to airlines around the world.The company had $5.7 billion in cash and credit facilities available to it on December 31st.

Financier Orix, which has offices in Dublin and Hong Kong, took a 30 per cent share in Avolon during the year. Chinese giant Bohai ultimately owns 70 per cent.

The company owed $17.6 billion to creditors. Speaking after it published results, Mr Higgins said it hoped to cut the portion of this that is secured against company assets to around 30 per cent from 42 per cent.

He added with the right market conditions Avolon could refinance up to $3 billion of secured debt by issuing unsecured bonds. “It could be of that quantum,” he said.

Avolon is aiming to get an investment “A” grade rating from the international agencies that assess companies’ ability to repay debt. This would give it greater scope for raising money and potentially cut borrowing costs.

Investment

Orix’s investment should help the company in reaching this target, but Mr Higgins said that it also needed to cut the proportion of secured debt on its books.

On Wednesday ratings agency Fitch upgraded its assessment of Avolon from BB to BB+, a step closer to investment grade. “We have made good progress from our starting position,” Mr Higgins said.

During the year Avolon delivered 33 new aircraft to airline customers, including the first Airbus A330neo.

Avolon sold 87 craft, which contributed to $2.2 billion proceeds from disposing property, plant and equipment during the year.

On December 31st, Avolon owned or managed a total 971 aircraft around the world, a 7 per cent increase on 12 months earlier.

Dómhnal Slattery, chief executive, called 2018 an “excellent” year for Avolon.

“It was a record year for the business in which we generated $2.2 billion of net cash from operating activities and delivered a 30 per cent increase in profit.”