Special Reports: Aircraft Leasing
Airline financial standings worsen for regional aircraft lessors
October 22nd 2021
Even though their customers are not using their aircraft in hard-hit long-haul markets lessors of regional jets and turboprops have had just as many hurdles to jump during the pandemic. Read More »
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| 'Aviation is a complex system. Airlines need to benefit from hub and spoke models with transit hubs to justify their fleet sizes and become profitable. As long as vaccinations in other large countries in the Asia-Pacific are lagging behind [herd immunity rates] widespread travel within the region will probably not be possible in 2022, but hopefully in 2023. So a full recovery of aviation will take some years' |
| Carst Lindeboom TrueNoord Asia-Pacific sales director |
“The Asia-Pacific cannot be seen as a whole region as every country is in a different situation, but in general we see that due to the ongoing border closures, airline financial standings are continuing to worsen,’’ lessor TrueNoord’s sales director for the region, Carst Lindeboom, told Orient Aviation.
“It is a challenge to find decent credit in this market. Another challenge is dealing with aircraft deliveries and redeliveries, or worse, repossessions in these times of COVID measures, quarantine and border closures. The restrictions result in an inability to access your asset, which can be a substantial risk.”
“TrueNoord is coping with this by hiring local representatives and carefully planning ferry flight crews around the various country restrictions. It is proving to be a rather complex puzzle every time.”
The aircraft lessor, with offices in Singapore, Dublin, London and Amsterdam, leases regional aircraft to clients across the globe. In Asia, it has one Embraer E190 with Taiwan’s Mandarin Airlines, two Dash 8 400s with Philippine Airlines, four ATR72-600s with Indonesia’s Wings Air, three ATR72-600s with US-Bangla Airlines in Myanmar and five ATR72-600s with India’s leading LCC, IndiGo.
The timing of the industry’s recovery from the pandemic will depend on new waves of COVID-19 and its variants as well as vaccination rates, TrueNoord believed. “With the current vaccination rate, some countries, like Malaysia, Korea, Japan, Australia and New Zealand will soon reach levels required to open again,” Lindeboom said. “This will probably lead to more and more green lanes between countries in Q4 and in the first quarter of next year.’’
Lindeboom pointed out that at the start of 2021 everyone was sure the situation would be better. “It was for a while, but in recent months it has worsened in Asia and we have had to adjust again. We are hopeful things will pick up in coming months and that 2021 will indeed be better than 2020. We are in constructive talks with our current lessees and in the process of doing some new remarketing deals in region,” he said.
TrueNoord, like other regional aircraft lessors, benefits from the fact its aircraft are present in strong domestic markets. “As cross-border travel will remain limited in the coming period, countries with a large domestic market will recover quite well. Before the recent surge due to the Delta variant, we had seen 100% + levels in some domestic markets and between city pairs in China, Vietnam and Taiwan. Also across India, Australia and Indonesia, domestic traffic picked up quite well. As soon as the current surge of the Delta variant is under control, I expect those markets to be the first to lift back up,” Lindeboom said.
Assuming vaccinations reach required levels by 2022, he expects aviation will need another year to reach a new normal level. “People are very keen to travel and are able to afford it as they have been saving money during COVID. As soon as restrictions are lifted, I expect a rapid increase in travel,” he said.
“This will probably not be 100% of 2019 levels because in general people will travel less, especially for business purposes. Studies have shown it will take another two years to return to 2019 market performance.
“I am afraid in the coming year the Asia-Pacific will be lagging behind the U.S. and Europe, but in the long run the region is where the most growth potential is. I am confident Asia-Pacific aviation will get back on its feet in the years ahead.”
