Fitch Ratings revises outlook for leasing sector to negative on coronavirus impact

Fitch Ratings revised (16-Mar-2020) its sector outlook for global aircraft lessors from stable to negative, reflecting elevated downside risks from the global spread of the coronavirus. The dramatic reduction in global travel demand is already increasing financial pressure on airlines, which Fitch expects will result in increased lease deferrals or restructurings, airline bankruptcies, and ultimately, aircraft repossessions. Fitch added that while lessors have historically benefited from the ability to move aircraft from regions or countries with weak demand to others with stronger demand, the global scale of the current stress significantly impairs this traditional risk mitigation strategy. These dynamics are expected to pressure aircraft lessors' cash flow and earnings in the near term, and aircraft utilisation rates, residual values and capitalisation levels in the medium term. The negative sector outlook also reflects Fitch's expectation that aircraft lessors will face far less accommodative funding markets in the near term, due both to aviation sector specific concerns as well as broader market volatility and risk aversion. Fitch has not made issuer specific changes to rating outlooks, but does estimate that standalone investment grade rated lessors can withstand a 75% decline in 2020 lease payments and still maintain sufficient liquidity to meet funding obligations over the same time period. [more - original PR]