White & Case report finds that senior executives are cautiously optimistic about the state of global aviation financing in 2022.
The past two years have been a period of intense turbulence for the aviation sector, with a number of bankruptcies, bailouts and collapsing revenues, driven by the COVID-19 pandemic and resulting border closures and lockdowns.
But it’s not all doom and gloom. In spite of persistent volatility and uncertainty, new research from global law firm White & Case (attached) has found that senior executives are cautiously optimistic about the state of global aviation financing in 2022. First, airlines and operating lessors now have access to a wider range of funding opportunities than ever before, and closely linked to the evolving financing environment, there is also a rising awareness of environmental, social and governance (ESG) considerations within aviation, with the industry taking its first significant steps towards decarbonisation.
In the fourth quarter of 2021, White & Case, in partnership with Mergermarket, surveyed 100 senior-level executives at entities that have either financed or invested in the aviation industry in the past three years, to analyse sentiment regarding aviation finance.
The report highlighted the following key trends:
- The Future of Investment in Aviation
- 81% of leaders expect investment will be maintained or increased in 2022, with 47% suggesting an increase (p. 3)
- APAC stands out as the region where sentiment is most positive, with 60% expecting global aviation sector investment to rise in the year ahead (p. 3)
- 69% expect aircraft financing in the global aviation sector to increase in 2022, with 84% of EMEA-based respondents pointing to a rise in the financing, followed by APAC with 80%. Notably, no respondents in APAC expect aircraft financing to decrease in the year ahead (p. 4)
- A Closer Look at Liquidity and Refinancing
- EMEA-based respondents are most likely to believe that there is not enough capital and liquidity (72%), followed by those in APAC (60%) (p. 13)
- Globally, nearly two-thirds (65%) expect capital liquidity to increase, while only 4% think it will fall. North America–based respondents are more likely to predict an increase (71%), with those in APAC less likely (63%). (p. 13)
- In the past year, respondents were slower to take advantage of the record-low interest rates than might have been expected, however, the report indicates refinancing is likely to gain momentum in 2022, with 57% of all respondents expecting to refinance significant amounts of their existing debt – only 27% of respondents based in APAC refinanced any of their existing debt to take advantage of currently low-interest rates, while 57% plan to in the next year (p. 14)
- A majority of respondents expect restructurings and insolvencies to increase in 2022 – this opinion is prevalent in APAC, with 90% of respondents expecting such an increase (p. 16)
- Change is in the Air
- Focusing on the global regions that respondents think are likely to see the fastest aviation sector growth in 2022, APAC (excluding Australasia) stands out and is highlighted by a large majority (85%) of respondents
- APAC’s burgeoning middle class and strong regional travel market are key factors, as is China’s growing influence in the region
- The United States’ new focus on the Indo-Pacific region under the Biden administration could provide further stimulus (p. 19)
- 58% expect significant M&A-driven airline and leasing company consolidation (p. 19)
- 71% are using green bonds and 70% are financing new equipment, the first steps towards decarbonising aviation with initiatives from the development of sustainable aviation fuel (SAF) to the first, albeit short-range, electric aircraft, as ways to align themselves with growing trends in energy transition and sustainability (p. 26)
See the full report White & Case_Aviation Report 2022.
Edited by: Stephen Morton
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