TIDMAVAP
RNS Number : 1748U
Avation PLC
01 December 2021
Via RNS and SGXNET
AVATION PLC
("Avation" or "the Company")
CHAIRMAN'S AGM ADDRESS
Avation PLC (LSE: AVAP), the commercial passenger aircraft
leasing company advises that the Annual General Meeting being held
today in Singapore includes the following Chairman's address. The
purpose of this statement is to provide investors with an update on
current operations for the half-year financial period commencing 1
July 2021.
Fleet Update
As at 1 December 2021, Avation's fleet totals 42 aircraft.
Included in this number are:
-- three ex-Virgin Australia ATR72-600 aircraft that are subject
to a sale agreement with Aegean Airlines (announced November
2021);
-- three unutilised ex-Virgin Australia ATR72 aircraft that may be leased or sold.
Excluding the aircraft subject to sale agreements the average
age of the fleet is 5.1 years and the average remaining lease term
is 6.3 years. Avation's customers include 17 airlines in 13
countries.
The Company confirms that it is concluding the transition of an
Airbus A320 from Air France to a new client in the coming days and
that it expects to take re-delivery of a Boeing 737-800 from Garuda
Indonesia in the coming weeks. This aircraft may be sold or leased
depending on market demand. Avation is also remarketing two
ATR72-600 aircraft that are at the end of lease from Loganair.
Avation advises that the next aircraft scheduled to come off lease
is not until March 2023.
Avation's airline customers continue to return to service. In
the past few months, all major airline customers have increased
utilisation of aircraft with many flying at close to pre-COVID
levels.
Return to Fleet Growth in 2022
In order to facilitate a return to fleet growth, Avation has two
ATR72-600 aircraft on order for delivery into the fleet in 2022.
With clear signs that airlines are looking to increase capacity as
the travel restrictions associated with COVID-19 are removed
Avation has, for the first time since the pandemic, begun
responding to requests for proposals to finance new aircraft and
also re-initiated the search for opportunistic aircraft
acquisitions from airlines and other lessors.
Operational Update
At the outset of the COVID-19 pandemic, Avation instituted a
programme of support for its airline customers by agreeing to defer
payment of a portion of their rent in the short-term. The cashflow
impact of this support programme has been mitigated by adjusting
the amortisation profiles of related financings with the agreement
of lenders. Avation provided support to 14 airline customers.
As at today's date, 14 of 17 airline customers are being charged
normal monthly rental levels.
Debtor collection has been challenging during the pandemic due
to the severe disruption to airline cashflows and Avation has had
to monitor and work closely with airlines to ensure operational
cashflow is maintained.
Airline Customers subject to Restructuring or Insolvency
Virgin Australia
Avation's claim against Virgin Australia has been adjudicated by
the Trustee of the Creditors Trust in the sum of AUD101.4 million.
The Administrator advised in December 2020 of an expected pay-out
of 9.5-13 cents on the dollar for unsecured claims. In November
2021 the Trustee of the Creditors Trust advised that unsecured
claims in respect of Virgin Australia had increased from initial
estimates provided by the Administrator by AUD1.7 billion to AUD5.8
billion in total. Avation expects that this increase in claims will
lower the pay-out to creditors from the estimate provided by the
Administrator.
The Company believes that around 45% of its claim should take
priority over unsecured claims and is participating in group
litigation in order for its priority claims to be recognised. A
decision is expected in March 2022.
Avation has three unutilised ATR aircraft which were previously
on lease to Virgin Australia, having re-positioned or sold ten of
the thirteen aircraft that were returned. Avation is discussing
opportunities for these aircraft with a number of interested
parties.
Philippine Airlines
On 6 September 2021, Avation announced that P hilippine Airlines
("PAL") had filed a voluntary petition for relief under Chapter 11
of the United States Bankruptcy Code in order to complete a
prearranged restructuring process. Avation and PAL have agreed
terms for PAL to retain the use of a Boeing 777-300ER aircraft on
lease from Avation. The restructuring appears to be progressing on
track with support from creditors.
Avation has commenced collecting rent on the aircraft for the
first time since early 2020. Under the restructuring, Avation will
also be entitled to receive payments relating to utilisation since
1 September 2020 on a power by the hour basis along with a
promissory note for a portion of rent outstanding for the period
prior to 1 September 2020. In March 2022 the aircraft will return
to a fixed monthly rent.
Garuda Indonesia
It is anticipated that Garuda Indonesia will enter some form of
restructuring or insolvency in the near future. In anticipation of
this, the Company has entered into a termination agreement with
Garuda Indonesia with regard to the lease for one Boeing 737-800,
pursuant to which the aircraft is expected to be returned in the
coming weeks. The aircraft is unencumbered and will be re-marketed
for sale or lease following its return.
Finance Update
Cashflow
Cashflow from operations continues to improve as the return to
normal trading conditions continues as countries open air travel to
vaccinated travellers. Avation's largest five customers, which make
up almost 70% of monthly revenue, are either current or in
compliance with repayment plans.
Cash inflows for the reminder of the financial year are expected
to be boosted through the settlement of aircraft sales, collections
from insolvency proceedings/restructuring related to Virgin
Australia and Philippine Airlines and from collections of
outstanding amounts related to rent deferral arrangements and the
increase in receivables as a result of COVID-19.
Secured Debt
Avation confirms that it is current with all payments to secured
lenders. The Company advises that as at todays date it is either in
compliance with or has received temporary waivers in respect of all
financial covenants in place with secured lenders.
The Company has recently been in contact with secured lenders to
determine the appetite for secured lending against aircraft.
Lenders have advised that they are amenable or expect to return to
lending against the type of young popular aircraft that Avation's
strategy focuses upon in the near term.
Avation has three aircraft financed by a warehouse facility,
which matures in August 2022 and is a current liability. These
aircraft are on long-term leases and it is the intention of the
Company to re-finance these assets with long-term amortising debt
facilities that match the lease duration of the aircraft.
Outlook
Avation and the airline industry are emerging from the COVID-19
pandemic and returning to normal operations. In the coming months
aircraft sales, collections of receivables from customers and the
insolvency proceedings of Virgin Australia and PAL in addition to
cashflow from operations should provide Avation with sufficient
cash to support a return to fleet growth in 2022. Other than the
two ATR aircraft on order for delivery in 2022 Avation will
consider aircraft sale and leaseback opportunities or opportunistic
purchases from lessors or airlines.
Avation will also consider applying cash to de-lever the balance
sheet with a specific focus on the outstanding Avation Capital S.A.
Senior Notes ("Notes") due October 2026. Any repurchase of Notes
improves future profitability, lowers the cost of the debt, lowers
future cash interest payments and will support the long-term
refinancing of the Notes. Avation does not provide guidance as to
the value of any future repurchases or the split between applying
cash to fleet growth and de-leveraging which will be driven by
market conditions at the relevant time.
Avation is optimistic about the long-term opportunity for air
travel particularly the turbo-prop and narrow-body aircraft
sectors. The Company intends to position itself for a return to
growth through opportunistic purchases and delivery of its
orderbook in a post-pandemic environment.
- ENDS -
Enquiries
Avation PLC - Jeff Chatfield, Executive Chairman +65 6252 2077
Avation welcomes shareholder questions and comments and advises
the email address is: investor@avation.net
Notes to Editors:
Avation PLC is an aircraft leasing company, headquartered in
Singapore, owning and managing a fleet of commercial passenger
aircraft which it leases to airlines around the world.
More information on Avation is available at www.avation.net
.
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