Long-term bet on airlines drives investors to aircraft leasing bonds

A string of successful bond deals for aircraft leasing companies reflects a view among investors that this niche of the travel industry is a safer way to bet on a recovery in the sector. In total, seven leasing companies, which own planes they lease to airlines, have raised a combined $14.9b in January, according to data from Dealogic, with several receiving cut-price borrowing costs. Investors said the deals nonetheless offered attractive returns in a corner of the airline industry more protected against further fallout from the spread of coronavirus.  “Out of the whole travel sector they are probably one of the better positioned,” said Monica Erickson, head of the investment-grade corporate team at DoubleLine Capital. “It’ll be a while before anything normalises but the types of planes they have will remain out there. The terms they have with the airlines . . . they can withstand the expected downturn.” Last week, Aircastle raised a $750m seven-year bond with an additional yield, or spread above US Treasuries, of 2.3%, down from an early indication of 2.6% when the deal was first marketed to investors, according to people familiar with the transaction. Air Lease also raised $750m, this time for three years at a spread of 0.72%. Earlier this month, AerCap raised $1b. The five-year deal priced with a spread of 1.55%, down from initially being marketed at around 1.8%. Most lessors typically enjoy long lease times, which enables them to straddle difficult patches for the airline industry. Their main risks stem from airlines failing to pay rents, or even going bankrupt. But since airlines have secured capital to help survive the shock of the pandemic, that in turn has bolstered the position of the lessors.<br/>