Avation PLC (LSE:AVAP) said demand for aircraft is exceeding supply as air travel continues to recover, with leases signed for 17 of the 20 aircraft returned as a consequence of the pandemic.
The remaining three aircraft, two of which are ATR72s and one is a Boeing 737-800, are currently being marketed and have received interest from customers to either lease or purchase, all expected to be completed by the end of December, the company said in a statement on Friday.
As of its 30 June year-end, the London-listed company said it had a commercial aircraft fleet of 39 aircraft that are leased to 17 commercial airlines in 14 countries, with two more aircraft on order and long-term purchase rights over a further 28 fuel-efficient ATR72 aircraft.
Avation said it is conducting a review of the fleet valuation, having taken a cautious approach during the pandemic and twice made an annual impairment to the value of its fleet.
“It is our opinion that aircraft valuations will trend upwards as air travel recovers,” said executive chairman Jeff Chatfield.
He said the airline industry was “experiencing a rapid recovery with activity levels of most of our airline clients close to and in some cases above pre-COVID levels”.
“The results for the year are expected to reflect that the company has successfully navigated the pandemic and is experiencing improved cash collection rates, higher aircraft valuations and fleet utilisation.”
Cash collection rates as at 31 May 2022 were 105% compared to 70% in the year before, with total cash and bank balances of US$118.9mln including restricted cash at the year end. Repayment of US$55.6mln of secured loans during the past six months was also reported.
Chatfield said “material receipts” are also expected in the coming financial year from sales of aircraft, re-financing of existing planes, distributions from the Virgin Australia (ASX:VAH) administration as well as cashflow from operations.
“The company believes that the market has now returned to a position where the demand for aircraft exceeds supply. The current shortage of aircraft is supported by increased passenger numbers, fewer aircraft in the global fleet than pre-pandemic, the removal from the international fleet of approximately 550 aircraft previously on lease to Russian airlines and current aircraft production levels by the major manufacturers which are materially lower than pre-pandemic.
“The company both improved its strategic position by transitioning grounded aircraft, maintained liquidity and reduced debt during the financial year.
“The company is well positioned to take advantage of increased demand for aircraft in an aviation sector that will evolve into a more sustainable, low CO2 emission fleet."
More than half of Avation's fleet are ATR72 and Airbus A220 aircraft, which it said are "class leaders" in fuel efficiency and emissions.