Lessor Avolon has drawn down a US$3.2bn unsecured revolving credit facility, cancelled orders for 75 unplaced B737MAX aircraft, and removed commitments to acquire 4 A330neo aircraft due to deliver in 2021, in response to what chief executive Dómhnal Slattery, described as, "the most challenging period in the history of commercial aviation”.
Avolon also revealed it has received requests from more than 80% of its current owned and managed customer base for relief from payment obligations under their leases - accounting for more than 90% of annualised contracted rental cashflow of the current owned and managed fleet, according to its Q1 business update.
The update said these requests have vary from short term rent deferrals for part or all of monthly rental for a specified period of time and it said that as of March 31 it had agreed a number of rent deferral arrangements for an average of 3 months.
“It is expected that some form of short term rental deferral arrangement will be agreed with a majority of our customers…and given the ongoing impact on our customers’ operations we expect that additional requests for rent relief will be received and that a number of lessees will fall behind on their rental obligations with a related increase in Avolon’s trade receivable balance,” said the update.
“The global fleet has been effectively grounded as countries work hard to slow the spread of COVID-19.
The impact of the virus has been far reaching and the required response, both on an individual and on a community basis, is without parallel. As a leader in our industry, Avolon is working closely with our global customer base to support them during this period. While we have never seen a crisis of this nature, we remain confident that the industry will recover once the impact of COVID-19 recedes, said Slattery.
Slattery said Avolon was still committed to the MAX jet despite the cancelations and that in addition to the cancelled commitments for 4 A330neo aircraft it had deferred delivery dates for an additional 25 narrowbody aircraft to 2024 and beyond.
“The net impact of our actions in the first quarter is to reduce our aircraft commitments in the 2020 to 2023 timeframe from 284 aircraft, as at year end, to 165 aircraft today and thereby significantly reducing our near-term capital commitments,” he said.