Value of airline assets takes a nose-dive
US airlines charged into debt markets after the pandemic began in an effort to weather an unprecedented collapse in demand. Investors have snapped up deal after deal, their money secured by jets, routes and take-off and landing slots all worth billions on paper. But with a recovery in air travel years away, how much could aviation assets fetch in a sale today? Lenders acknowledge little appetite for repossessing aeroplanes that, because capacity outstrips demand for air travel, can only be sold or leased at a discount, or worse, will cost money as they sit in storage. Meanwhile, slots, gates and routes — SGR in industry parlance — retain value as long as an airline continues to operate, or if another airline wants to buy them. The pandemic increases the likelihood of airline bankruptcies while reducing the number of ready buyers, as survivors struggle to preserve cash. “Aircraft, and slots, gates and routes, no longer have the same value they did at the end of January this year,” said Ernie Arvai, president of AirInsight Group. “Aircraft, as with many other assets, are subject to the laws of supply and demand.” Or as Nick Pastushan, CE of aviation finance company Warbird Capital, put it: “You might have a very wide spread between what’s on paper and what a third-party investor would be willing to write a cheque for.”<br/>
https://portal.staralliance.com/cms/news/hot-topics/2020-07-07/general/value-of-airline-assets-takes-a-nose-dive
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Value of airline assets takes a nose-dive
US airlines charged into debt markets after the pandemic began in an effort to weather an unprecedented collapse in demand. Investors have snapped up deal after deal, their money secured by jets, routes and take-off and landing slots all worth billions on paper. But with a recovery in air travel years away, how much could aviation assets fetch in a sale today? Lenders acknowledge little appetite for repossessing aeroplanes that, because capacity outstrips demand for air travel, can only be sold or leased at a discount, or worse, will cost money as they sit in storage. Meanwhile, slots, gates and routes — SGR in industry parlance — retain value as long as an airline continues to operate, or if another airline wants to buy them. The pandemic increases the likelihood of airline bankruptcies while reducing the number of ready buyers, as survivors struggle to preserve cash. “Aircraft, and slots, gates and routes, no longer have the same value they did at the end of January this year,” said Ernie Arvai, president of AirInsight Group. “Aircraft, as with many other assets, are subject to the laws of supply and demand.” Or as Nick Pastushan, CE of aviation finance company Warbird Capital, put it: “You might have a very wide spread between what’s on paper and what a third-party investor would be willing to write a cheque for.”<br/>
