As the effects of the global travel shutdown ripple through the industry, asset manager Acumen Aviation has found its customers – mostly aircraft lessors, banks and investors – leaning heavily on it for support and guidance.
Topping their concerns is the fear that airlines will fail or be unable to make payments on aircraft. “We prepare for different situations that can play out,” Acumen chief executive Alok Anand tells Cirium.
Airlines are increasingly asking lessors for payment flexibility, Anand says, and with frequent success. “From a lessor’s perspective, there’s not much choice about it,” he notes. For now, this is taking the form of payment deferrals rather than cancellations, and varies depending on the lessee’s circumstance. “We are not seeing panic, yet – there is not much that you can do at the moment,” says Anand.
In the near term, the chances of placing aircraft with airlines are non-existent, but this is only gradually filtering through to cancelled orders at the main OEMs, Anand observes. It stands to reason, though, that with reduced demand and a shortage of routes, fewer aircraft will be required.
Aircraft valuations have so far not been adjusted downward, but this is mostly a reflection of the fluidity of the situation, Anand suggests. “No one is willing as yet to depress values while there is so much uncertainty,” he says. “Market values [of aircraft] will be impacted. Widebodies in particular were already not in a good position – but now it is even worse.”
Differences in approach are also emerging between smaller, often newer entries to the aircraft leasing market, and older, more experienced players. “We should not dismiss smaller players,” says Anand, whose company has clients in both camps, “but the big lessors are using experience to their advantage. They are saying much more: ‘We don’t want to do anything for the time being.'”
In contrast, many smaller players face tougher circumstances arising from short-term liquidity issues. “Lessors depend on lessees; smaller lessors rely on fewer lessees, and are more likely to become under stress,” he notes. “It may not be that they go out of business, but it could be a change in their mergers and acquisitions, or their ownership structure.” If activity stays depressed for the remainder of the year, there will be challenges, he warns.
He expects more of a “hockey shaped” recovery than a V-shaped one. He also notes that although China’s economy is now reopening, at least domestically, there is little sign of renewed activity in the leasing market.
Despite this, the impact of the coronavirus on Acumen’s business has, so far, been relatively limited. However, given the difficulty of moving employees around the world, the company has had to lean heavily on local teams, who in turn have been impacted by lockdowns. Still, having dispersed expertise helps in weathering the storm. “When you are running the kind of business we are, diversity is the way to go,” Anand says.
The company’s Asian clients were the first to start planning for Covid-19, he recalls, and lessors then reacted to local lockdowns in their home territories. “Europe’s calls on planning only started coming when lockdowns started,” he says.
He reports an increase in use of Acumen’s data-management and fleet-records services, as the company scouts for new customers in these areas.
This article was published 15 April and has been re-produced with the kind permission of Cirium.