Fitch Ratings-New York-15 September 2017: Link to Fitch Ratings Report: New Lessors Enter Aircraft ABS; Lessee Pool Mix Weakens
Smaller aircraft lessors have increasingly sponsored global aircraft ABS during the last 18 months, while larger, established lessors have sought financing elsewhere. More participation from new, less established lessors is leading to changes in the composition of the securitized aircraft collateral pools, which could raise risks, Fitch Ratings says.
Outstanding Fitch-rated aircraft ABS performance will continue to be within our expectations range for the remainder of 2017, as airlines, particularly U.S. carriers, continue to record solid revenue and profit levels from robust travel demand while fuel expenses should stay low.
Revenue-passenger-kilometers, or the volume of paying passengers carried by airlines, rose 7.9% in first-half 2017, according to The International Air Transport Association. This was the highest growth rate in the last 12 years. Passenger demand is expected to generally rise in future years, especially in APAC and other underserved emerging markets with expanding middle class populations.
However, more recent aircraft ABS pools have seen an increase in newer and/or smaller lessors. The recent insolvency of Alitalia and Air Berlin highlighted the importance of airline lessee credit and the ability to meet their obligations under leased aircraft securitized in ABS pools.
More recent ABS pools have a concentration of older commercial jet and turbo-prop aircraft. Of the six aircraft transactions issued in 2017, only one would be classified as a "new" aircraft transaction with a weighted average (WA) aircraft age of 3.4 years. The W.A. ages on the remaining five ranged from 9.2 years old-13.0 years old.
For detailed analysis and quantifications, see "Fitch: New Lessors Enter Aircraft ABS; Lessee Pool Mix Weakens", available at wwww.fitchratings.com or by clicking the link above.