A number of firms are eyeing up Singapore-based lessor, Avation PLC, following the January 6 announcement that the firm was conducting a comprehensive strategic review which included the possibility of a sale after it received an unsolicited approach for the firm.
According to Avation’s 2H results statement, since the firm announced it was conducting it’s a review, a number of other potential buyers have expressed interest in acquiring either the entire lessor, or some of its portfolios of aircraft.
While the Avation PLC did not offer any further information on the state of progress of these enquires it did say the board viewed the firm’s market value as above its net asset value for a number of reasons.
These ranged from; the value of its aircraft and leasing platform itself, and its Singapore tax domicile, to the potential for a larger entity to make debt refinancing gains given Aviation PLC’s positive ratings trajectory – 2019 it saw both S&P and the Japan Credit Rating Agency upgrade their outlook for the lessor.
Interest in the firm is understandable given AvationPLC’s positive H2 results which saw the firm post a 15% increase in revenue to $67.6 million, while profit after tax jumped 180% to $38.2 million compared to the H1 of 2019.
Likewise, the firm’s operational performance was strong with Avation PLC managing to repossess and then release two aircraft which were being used by the insolvent operator Thomas Cook, while increasing its total number of airline customers to 18. The firm also reported the acquisition of three new ATR72-600 aircraft and a deal to lease five of this aircraft type to be delivered to Braathens by 30 June 2020;
In a statement accompanying the results Avation PLC’s executive chairman, Jeff Chatfield was positive about the expansion of the firm’s customer base and said that this diversification was reflected in its smooth handling of the Thomas Cook insolvency.
“During the period, Avation repossessed two Airbus A321 aircraft from Thomas Cook and transitioned the aircraft to a new lessee. While the airline sector performed profitably as a whole, 2019 saw a record number of airline insolvencies. Avation’s limited exposure to Thomas Cook and lack of exposure to other airline failures results from increased scale and diversification and the application of stringent investment criteria.
Avation has a strong cash position with four new aircraft expected to be added to the fleet through deliveries to Braathen’s and US Bangla between now and 30 June 2020. The Company believes it has sufficient liquidity to fund further fleet growth which will be sourced from the orderbook for ATR-72-600 aircraft and through aircraft acquisition,” he said.
At the end of 2019 Aviation PLC’s fleet stood at 49 aircraft, including seven aircraft on finance lease. The weighted average age of the fleet is 3.7 years, while the weighted average remaining lease term is 7.2 years. The firm has orders for six ATR72-600 aircraft for delivery by 2022 and purchase rights for a further 25 aircraft.
January saw 2020 Avation make its first engine acquisition with the purchase of a Pratt & Whitney PW127M model, and it has already released this to a new airline customer.
“Airlines require access to spare engines to ensure continuous operation of aircraft. This new business line is highly synergistic to Avation’s core aircraft leasing business. Avation will look to leverage its position in the aviation industry and will consider further investment in aircraft engines in the future,” the firm said in its results statement.