The sluggish recovery of the aviation market in the Southeast Asian region and the knock-on impact on carriers’ ability to pay their rents remains an area of concern for Aircastle, chief executive Michael Ingelese says, emphasising that some airlines are “struggling pretty significantly”.
Speaking on an analyst call on 21 April, Inglese focused on Thailand, Malaysia, Indonesia and Singapore as countries where “there is not the level of activity that anybody was hoping to see when we got to this point as we were looking forward as recently as six or four months ago”.
Regionally, Southeast Asia is place “where things are progressing a lot slower than everyone would like”, he adds.
Cirium fleets data shows that Aircastle leases aircraft to carriers including AirAsia, AirAsia X Thai Smile and Garuda Indonesia.
Ingelese says that AirCastle is continuing to work through “issues” with rental collections in Latin America and highlighted Azul, Avianca, Aeromexico and LATAM.
But he also notes that in both those regions the lessor has other customers that have continued to pay their rents or have smaller deferrals.
He says all 13 of the US lessor’s aircraft, representing approximately 5.5% of its netbook total fleet value, that are placed with LATAM are under by-the-hour contracts as part of the Latin American carrier’s Chapter 11 restructuring process.
Elsewhere there are a handful of “onesie, twosies” aircraft in such arrangements, with some placed with Aeromexico at times operating under by-the-hour clauses, along with a number of “smaller airlines in Europe” in the single aircraft exposure, and then couple of aircraft at Avianca.
Ingelese says that deferral agreements with carriers are “mixed”. Over the course of 2020 Aircastle granted a number of short term deferrals that did not necessarily include lease extension, but more often consisted of a “reasonably short payback with some interest associated with it”.
In the context of other credits longer term deferrals have “definitely” involved lease extensions really an “airline-by-airline dynamic”, he adds.
Overall, Ingelese noted that the widebody market is expected to remain “weak” due to the “evaporation of demand and excess supply” which the market will time to adsorb.
Norwegian’s exit from long-haul operations and the “questionable commitment” of some carriers to the Airbus A330s highlights the widebody imbalance, he adds.
The prospects for Aircastle’s narrowbody fleet is brighter, with Inglese believing the types will lead the domestic and regional aviation recovery.