Singapore-based BOC Aviation was executing a new business plan in response to the Covid-19 pandemic before many of its rivals had properly appreciated its severity, the lessor's managing director and chief executive office has told Airfinance Journal in an exclusive interview.
"We enacted our downturn plan in March last year when most of our competitors didn’t even realise we were in a downturn. People were still in Dublin at the AFJ conference while we were out here raising bond money because we could see what was coming here in Asia.
"Around the same time Steven Townend, who was our head of revenue in Europe at the time, and I got on a plane to the US, sat with the big carriers there, explained to them what we could see going on with Covid over here and what we could do for them. Then, within a month, we started executing. That laid out our Capex for that year and this year, as well as our deliveries,” Martin recalls.
Martin says that 2021 will be “another big year” as the Chinese bank-backed lessor expects 79 new aircraft deliveries.
BOC Aviation has a steady flow of aircraft deliveries coming up from deals agreed at the start of the Covid-19 pandemic, particularly purchase and leaseback (PLB) transactions.
Martin tells Airfinance Journal that his team transacted more than $6.6 billion in PLBs in 2020. Many of these were signed as early as March or April 2020.
“Asia had a good start to the Covid crisis, but the other regions have clearly taken over. We anticipated this right back at the start, when we did a rush of PLBs, transacting more than $6.6 billion, which was 40% of the net book value of our portfolio. Those have gradually been delivering both last year and this year,” Martin recalls.
BOC Aviation agreed PLBs in 2020 with airlines including Cathay Pacific, Southwest Airlines, United Airlines, American Airlines, Wizz Air and Indigo.
“We focused the PLBs heavily on the big domestic markets where we could see governments were going to help and where we could see functioning capital markets. This is why our overall cash flow has been strong throughout this period; because we invested in recovery markets and reduced the proportion of our exposure to those weaker parts of the world, i.e. Southeast Asia,” Martin says.
Earlier this week Martin told AFJ that he was concerned that the ASEAN airline recovery was falling far behind the rest of the world because of a lack of coordination, low vaccination rates and political struggles.
“We’ve done nothing in Southeast Asia in terms of PLBs, that type of business. We’ve had a few deliveries to people like Scoot, but basically that’s all we’ve done in SE Asia during this period. This takes me to one of the most important points: as an operating lessor portfolio diversification is crucial, active portfolio management is crucial,” says Martin.
In 2020, Singapore-based BOC Aviation delivered 54 aircraft to its airline customers, including one acquired by an airline customer on delivery. It sold 12 aircraft that year.
Martin reveals to AFJ that for ongoing 2021 BOC Aviation is “looking at 79 deliveries, with 11 of these PDP-like structures where the airlines will buy them on delivery”.
“We’ll have a net 68 aircraft delivering onto our balance sheet at the end of this year and that’s still a big year for us,” Martin notes.
As of 31 March, the Hong Kong-listed lessor had a total fleet of 405 aircraft owned and managed with another 144 aircraft in its orderbook.
In the three months to 31 March, BOC Aviation took delivery of 17 aircraft, including three acquired by airline customers on delivery.
It also sold six owned and one managed aircraft during the first quarter, including to Sirius Aviation as part of a 10-aircraft sale agreement.
Also in the first quarter, to 31 March, Martin’s team signed 13 new lease commitments and committed to purchase eight additional Airbus A320neo aircraft.