Impairments drag CDB Aviation into the red | Analysis | Airfinance Journal

Impairments drag CDB Aviation into the red

CDB Leasing’s aircraft leasing business recorded a RMB306 million ($47 million) loss before income tax for the 12 months to 31 December, reversing a RMB1.6 billion pre-tax profit the previous year. Profit before impairment losses and income tax was RMB1.9 billion for 2020.

An impairment charge of RMB1.5 billion was recognised on 42 aircraft in 2020, up from RMB462 million charged against 14 aircraft in 2019.

Aircraft operating lease income grew 1.2% in 2020, to RMB7.35 billion, and accounting for 86% of CDB Leasing’s total operating lease income through 31 December.

Finance lease income from aircraft dropped to RMB9 million in 2020, from RMB125 million in 2019.

Total aircraft segment revenues and other income was RMB8.25 billion, down from RMB8.53 billion, which represented 43% of CDB Leasing’s total segment revenues and other income in 2020.

Aircraft leasing segment assets amounted to RMB94.7 billion in 2020, up from RMB93.8 billion the previous year.

In 2020, CDB Aviation signed new lease transactions (including order placement, sale and leaseback (SLB), remarketing and extension) for a total of 77 aircraft with 20 customers, including five new airline customers.

CDB Aviation sold 18 aircraft for a total gain of $78.5 million during 2020.

The lessor acquired 29 aircraft on operating lease, including three via direct OEM orders, 21 via SLB transactions, three via Japanese operating lease with call option (Jolco) purchase options and two via portfolio acquisitions.

The aircraft leasing company signed financing transactions for $4.7 billion in 2020.

CDB Aviation Lease Finance was reaffirmed at an investment grade rating by S&P (A/Stable), Fitch (A+/Stable) and Moody’s (A1/ Negative).

As of 31 December 2020, CDB Leasing had 236 owned aircraft, two managed aircraft and 161 committed aircraft. Of those, 235 owned aircraft were held for operating lease and a single owned aircraft remained under finance lease.

As of 31 December, the weighted average age by net book value of the group’s owned aircraft held for operating lease was 4.5 years, the weighted average remaining lease term by net book value of the owned aircraft held for operating lease was 7.2 years.

Weighted by net book value, the group’s aircraft fleet consisted of 67% narrowbody aircraft, 29% widebody aircraft and 4% regional and other aircraft at year-end 2020. The net book value of the owned aircraft was $9.6 billion.

As at 31 December 2020, CDB Leasing had committed to purchase 138 aircraft under direct OEM orders, including 66 aircraft from Boeing and 72 aircraft from Airbus.

“A total of 35 undelivered Boeing 737 MAX 8 order has been cancelled by the Group and all 737 MAX 10 aircraft order has been transferred to 737 MAX 8 in 2020,” stated CDB Leasing.

Earlier this week, CDB Leasing announced the cancellation of a further 20 737 Max aircraft, taking its remaining order tally down to 46 737 Max orders, based on the above numbers. Boeing continues to list just 37 remaining Max units in CDB Aviation’s backlog, which the lessor previously explained to AFJ was due to certain orders having been moved into ‘undisclosed’.

The group also had contractual commitments to acquire a further 23 aircraft under SLB transactions at year-end 2020. This follows the cancellation by CDB Leasing of three A330neo SLBs in 2020. AFJ understands that CDB Aviation’s A330neo SLB deal with Garuda Indonesia has collapsed.

The aggregate of these commitments net of predelivery payments paid is RMB48 billion.

In addition to the aforementioned committed aircraft, the group has 65 non-binding entitlements with other OEMs, consisting of 20 ARJ21 and 15 C919 aircraft from COMAC, and 30 MA700 aircraft from AVIC Aircraft.

Of the 161 aircraft committed as of 31 December (including direct OEM orders and SLBs), 38 are scheduled for delivery in 2021, 19 in 2022, 32 in 2023 and 72 after 2023.

Of the 138 aircraft committed to be purchased directly from OEMs, 20 were committed for lease as at year-end 2020, of which 17 were scheduled for delivery in 2021 and three in 2022. The remaining two aircraft scheduled for delivery in 2021 had letters of intent signed, said CDB Leasing.

As at 31 December, the group was committed to SLB transactions covering 23 aircraft, including 19 scheduled for delivery in 2021 and four in 2022.

During 2020, the group signed lease extensions for 16 aircraft and lease transitions for 10 remarketed aircraft. As of 31 December 2020, all owned and managed aircraft were committed to lease, except for one aircraft that was terminated early by South African Airways and is under remarketing to new lessees.

CDB Aviation sold 18 aircraft in 2020 with a gain on disposal of $78.5 million and a total net book value of $549 million.

In 2020, the net lease yield of the operating leased aircraft was 7.8%, the lease yield of the finance leased aircraft was 4.9%.

Transaction SnapshotCDB Aviation | Bond issuance | 11-20 | $500m

Financial Close:
01/11/2020
SPV:
CDBL Funding 1
Value:
$500.00m USD
Full Details

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