Global credit rating agency Morningstar DBRS has predicted a stable outlook for aircraft lessors in 2024, with industry fundamentalists ‘remaining supportive of sound aircraft lessor performance and credit ratings’.
In line with airline profitability improving across most regions, a low level of airline defaults is expected in the coming year. Lease rates and aircraft values will continue to improve, underpinned by what Morningstar describes as a ‘notable imbalance of new aircraft deliveries from the OEMs and demand from airlines to increase capacity’.
‘Lessors continue to benefit from the ongoing recovery in global aviation with increasing passenger volumes driving airline demand for aircraft. As a result, financial results for the past year have largely evidenced a return to a normalized operating environment with cash collection rates and rent deferral balances improved and no longer a material impact to performance,’ said Morningstar.
Despite the necessary debt funding to be raised in 2024, lessors will remain disciplined on leverage. “With asset-backed securities (ABS) markets remaining dormant, we expect the large lessors will continue to lean on the unsecured corporate debt market, as well as bank facilities to meet most financing requirements,” said David Laterza, senior vice president – Global FIG Head of Non-Bank FIG.