Aviation finance: expect market turbulence as Covid-19 hits air transport hard
The Covid-19 pandemic and disease-containment measures by governments, most drastically the US ban on flights from most of Europe, will shake up the aviation finance sector as airlines struggle to conserve cash amid a collapse in international traffic. Scope Ratings says the rising risk of airlines defaulting on their debt payments – see Airlines: coronavirus outbreak accelerates industry consolidation; conserving cash key to survival (5 March) - will lead to a steep decline in aircraft values across the board. “Investors need to brace themselves for a direct hit on aircraft values which will increase the credit risk of aircraft-financing transactions,” says Helene Spro, aviation finance analyst at Scope. “Investors exposed to some highly leveraged transactions are likely to see a loss,” says Spro. One caveat concerns the degree to which governments, particularly in Europe, will be will...