Aviation Financiers Look Past Volatility
- Financiers at the annual ISTAT Americas conference were bullish on the the aviation finance market, even with concerns over the war in Ukraine and elevated oil prices. Most spoke of ample capital looking for a home in the market, whether that’s investing new leasing companies or other ventures, aircraft-backed debt like enhanced equipment trust certificates, or EETCs, or in aircraft portfolio asset-backed securitizations (ABS) deals from lessors. That said, volume in both the EETC and ABS markets remain low amid concerns over the volatility from the Ukraine war and lingering affects of Covid, but not for lack of interest or capital. “As we move past this volatility, we have deals in the pipeline, and the market is going to come back,” Mizuho Securities USA Executive Director Kinnary Armstrong said. That sentiment was echoed by Deutsche Bank Managing Director Rafael Kuhn.
One topic that came up was the potential sale by United Airlines of a stake in its MileagePlus loyalty program. Several lenders indicated that such a sale, if it occurred, would generate significant interest from investors. United estimated the value of MileagePlus as north of $20 billion when it issued $6.8 billion in debt backed by the program in 2020. United Chief Financial Officer Gerry Laderman declined to comment when asked if the airline was considering a sale.
As for the implications of the aircraft likely nationalized by Russia (see Weekly Skies), lenders doubted there would be any significant fallout for either lessors or investors. No one anticipates either ratings downgrades or defaults as a result. The value of the leased Russian fleet is estimated at roughly $10 billion but concentrated in a few lessors.
- Republic Airways continues to eye an initial public offering in the U.S., sources at ISTAT Americas indicated. The Indianapolis-based regional carrier has submitted the necessary documents confidentially to the Securities and Exchange Commission for a public listing but is holding off due to the current softness in the market, they indicated. An IPO could occur late this year, or in early 2023 if that softness, which includes concerns over the war in Ukraine and the U.S. pilot shortage, eases. Republic is the second largest regional carrier in the U.S. by flights, and is partially owned by American Airlines, Delta Air Lines, and United.
- Thai Airways risks delisting from the Stock Exchange of Thailand. The airline faces possible removal from the bourse due to its bankruptcy and on-going restructuring. Thai posted a profit on one-time restructuring related financial benefits in 2021 but also warned investors that it faced a “capital deficiency” of 71.3 billion Thai baht ($2.2 billion) at the end of December.