Fitch Ratings has downgraded a swathe of global aircraft lessors to negative from stable, with Avation being placed downgraded by one notch and placed on rating watch negative, as Covid 19 bites the broader aviation sector
The lessors who outlook was switched to negative are; Air Lease Corporation (BBB), AerCap Holdings (BBB-), Aviation Capital Group (BBB-),Avolon Holdings Limited (BBB), and Dubai Aerospace Enterprise (BBB-), while Avation has been downgraded by one notch and placed on rating watch negative:
Citing strong institutional support Fitch held the ratings of Aircastle(BBB- positive) BOC Aviation (A-, Rating stable), and SMBC Aviation Capital (A- stable).
BOC is a subsidiary of the Bank of China and Fitch said that in its instance – and for lessors with a similar structure – their ratings outlook will continue to be primarily influenced by the credit risk profiles of their institutional support providers and Fitch's ongoing assessment of these providers' willingness to extend financial support.
Fitch said these rating actions reflect the unprecedented decline in global air traffic as a result of the coronavirus pandemic, which could lead to widespread lease deferrals/defaults, airline bankruptcies, aircraft repossessions and impairments absent abatement of the virus in the near- to intermediate-term and/or material sovereign intervention.
Fitch previously revised the global aircraft leasing sector outlook to Negative from Stable on March 16.
Fitch said it believes issuers placed on rating outlook negative have sufficient liquidity to withstand near-term reductions in financing availability and lease cash flows, combined with sufficient capitalization headroom to withstand moderate impairments.
Ratings for such issuers would be expected to be more adversely affected in a scenario where pandemic-driven declines in air traffic, airline solvency and financing availability are expected to last well into or beyond 2H20, particularly if liquidity coverage declines.