Panellists at the Airfinance Journal LATAM 2020 virtual conference have agreed that the prospects for aircraft financing in the region will be limited in the near term.
Benoit de Vimal, president at Natixis, does not see immediate appetite from financial institutions in the region.
“Liquidity is very limited at the moment because of the uncertainty with regards to the outcome of the crisis. We have three major bankruptcies ongoing. They are making progress in restructuring the companies and their fleets but it is only the beginning of the process. We know that process is going to take at least 12-18 months.
“The recovery is far from certain and how it will play out. We will have liquidity but this will be at a premium, given the lack of government support in the region.”
Rafael Kuhn, Deutsche Bank director, head of aviation capital markets, notes that institutional investors have long memories.
“Various aspects of this crisis will remain in people’s mind, and how they will invest in the future,” he says.
“If you are an investor that faces LATAM via an EETC, you will think a bit more holistically about potentially engaging, not just with respect to Latin American carriers but probably carriers abroad.”
He says one of the developments that many investors had not anticipated was the use of Chapter 11 in the context of bankruptcies outside the USA. “That put a spin on the process of dealing with workouts in the region.”
Kuhn says there are some institutional investors who are comfortable with Latin America because they “see it as an opportunity now”.
“Everything is about relative value and figuring how you are getting the right risk-return ratio. Even in the near term, we will see financings in Latin America. One of the things that helps here is that we probably won’t see new aircraft in the region in the near term because orderbooks are being aggressively managed,” he says.
“Will there be capacity to finance aircraft in the future? Yes, because history shows that it is cyclical and demand for credit will come back,” he adds.
De Vimal expects a “big shift for financing in the sale and leaseback market” in the region, but pricing will likely reflect credit risk.
He says that for sale and leaseback transactions operating lessors will be able to raise sufficient capital “at a cost that covers the risk they are taking in the region”.
“Lots of people are going to be more cautious in the way they structure deals in the region. And I don’t expect to see the pricing we have seen in recent years before a certain time,” he adds.
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