Avation PLC (LON:AVAP), the commercial passenger aircraft leasing company, has announced unaudited results for the six months ended 31 December 2024.
Avation has also announced that it has entered into an agreement to acquire an Airbus A320 on lease to Etihad Airlines. This secondary market transaction adds a high credit quality airline to Avation’s customer list and further enhances Avation’s narrow-body aircraft fleet. The acquisition is expected to close in March 2025, subject to the completion of customary conditions precedent. By value more than half of Avation’s fleet are narrow-body commercial aircraft.
Avation’s Executive Chairman, Jeff Chatfield said: “We are delighted to announce this Airbus A320 CEO aircraft acquisition today which adds a top-quality operator to Avation’s fleet, further improving revenue diversification and the overall credit quality of our portfolio. We also note that, as announced in our half-year results announcement issued earlier today, the average remaining lease term from our fleet has increased to 4.2 years at 31 December 2024. This is the first increase in this metric since the COVID pandemic ended.”
Financial Highlights
· Revenue and other income increased to US$55.4 million (2023: US$46.3 million) displaying continued business momentum;
· EBITDA increased to US$55.6 million (2023: US$38.3 million) demonstrating enhanced cash generation;
· Operating profit US$18.8 million (2023: US$17.5 million);
· Total cash increased to US$125.6 million (30 June 2024: US$117.9 million);
· Net indebtedness reduced by US$45.2 million to US$606.3 million (30 June 2024: US$651.5 million), representing 56.1% of total assets (30 June 2024: 57.0%);
· Ratio of net debt to EBITDA improved significantly to 5.7x (30 June 2024: 7.3x); and
· Net asset value per share increased 3.2% to £2.94 (30 June 2024 restated: £2.85).
Operational Highlights
· Avation’s fleet was 100% utilised throughout the period, showing strong airline demand and effective asset management;
· Two ATR 72-600 aircraft were sold pursuant to the exercise of purchase options held by the lessee;
· The Company sold a new ATR 72-600 aircraft on delivery from the manufacturer in November 2024 realising a profit of US$1.7 million and US$5.0 million net cash proceeds;
· In January 2025 an early lease termination option for the Company’s Boeing 777-300ER aircraft expired, providing certainty for an additional four years lease revenue for the aircraft; and
· The Company has signed an agreement to purchase an Airbus A320 aircraft which is on lease to Etihad Airlines. The addition of Etihad to Avation’s lessee portfolio improves customer diversification and the Company’s overall credit risk profile.
Outlook
According to IATA, in 2024 international passenger traffic reached new highs, growing 13.6% year-on-year. Passenger load factors increased in all regions reflecting strong demand for air travel. The strength of the overall air travel market is supportive for commercial aircraft leasing.
Avation’s fleet is currently 100% utilised and is set to grow through the recently agreed acquisition of an Airbus A320 aircraft on lease to Etihad Airlines. We expect to close this aircraft acquisition in March 2025 and the addition of Etihad to our roster of customer airlines provides meaningful improvements to both revenue diversification and the overall credit risk profile of our fleet.
We will also take delivery of a new ATR 72-600 in Q2 2025 from our orderbook. This aircraft has been pre-sold to an airline in the Caribbean in a transaction expected to generate a profit and release net cash proceeds of around US$4.9 million.
Further fleet growth is expected in Q4 2025 with the scheduled deliveries of two additional ATR 72-600 aircraft from our orderbook. The first delivery, scheduled for October 2025, has been placed on long-term lease with a Japanese airline and the second aircraft is expected to be placed for long-term lease with an airline in South Korea. Both airlines are new customers for Avation, further improving revenue diversification.
The Company has also just announced the agreement of an US$85 million portfolio financing facility with a major international aviation finance bank. This sophisticated loan facility is expected to provide a significant improvement in Avation’s cash flows and other benefits including the ability to pool certain maintenance reserve liabilities, releasing surplus cash for use in the business. The expected cashflow benefit is around US$ 400,000 per month.
Having observed the significant profit volatility created by the option pricing model used to value aircraft purchase rights, Avation intends to seek a financial partner to invest in a joint venture for the purchase rights with the desired outcome of funding future conversions to firm orders and reducing volatility in Avation’s reported profits.
The Company’s future strategy will focus on leasing modern, low CO2 emissions, fuel-efficient aircraft, reducing revenue concentrations and generating further improvements in the overall credit quality of the Company’s portfolio. Avation’s ATR orderbook and purchase rights provide a valuable growth opportunity and the Company will also look to the secondary markets to add additional narrow-body aircraft opportunistically.
The Company continues to focus on optimising its capital structure and is pleased to have reduced leverage significantly from the peak seen during and immediately after the COVID pandemic. Reduced levels of leverage have created a platform which allows the Company to consider further growth opportunities and for re-financing the Company’s unsecured bonds which are due to mature in October 2026.
Executive Chairman, Jeff Chatfield, said:
“During the six months ending 31 December 2024 Avation generated improvements in revenue, EBITDA and operating profit, sold an aircraft at a profit, added to liquidity and continued to reduce leverage. These are pleasing results and show that the Company has fully overcome the challenges created by the impact of the COVID pandemic on our business. We may now look forward with confidence to the future having established a strong platform for a return to fleet growth.
We are particularly pleased with our agreement to purchase an Airbus A320 aircraft on lease to Etihad Airlines, a world-class operator that enhances our customer base and credit quality. We were also pleased to see the expiry of an early lease termination option for our Boeing 777-300ER widebody aircraft last month. This is a welcome development which increases our future contracted revenue significantly and provides certainty for our most valuable aircraft asset.
We note that long OEM order backlogs, supply chain issues and delays to new aircraft deliveries have created an environment where airlines are keen to extend existing aircraft leases, and aircraft coming off-lease are in demand. We have an ATR 72-600 lease expiring next month and we expect to complete the transition of this aircraft to a new lessee quickly. Our next lease expiries are for three ATR 72-600 aircraft in early 2026. Our marketing team are seeing high levels of interest in the market for these aircraft and we are confident that we will be able to re-lease them at healthy lease rates.
Avation has continued to de-lever its balance sheet, reducing debt by US$36.7 million during the six-month period and achieving a reduction to 56.1% in the ratio of net debt to total assets as at 31 December 2024. Strong cash generation, improved earnings visibility, cost control and reduced leverage have created a stable platform for the Company to grow. We are also seeing opportunities for refinancing transactions on attractive terms, which the Company intends to take advantage of. The recently announced US$85 million loan facility is a good example and we are confident of concluding further refinancing transactions including for the Company’s unsecured bonds which mature in October 2026.
Reflecting the Company’s growth ambitions and market position, the Board is considering an application to transfer from the Transition Category to the Equity Shares (Commercial Companies) (“ESCC”) category of the Official List and Main Market of the London Stock Exchange. While still at an early stage, this move would further enhance Avation’s visibility and access to capital markets. The Board will make appropriate further announcements in due course.”
Financial Summary
| US$ ‘000s | Six months ended 31 December, | |
| 2024 | 2023 | |
| Revenue | 52,980 | 44,733 |
| Other income | 2,468 | 1,544 |
| 55,448 | 46,277 | |
| EBITDA (1) | 55,553 | 38,280 |
| Operating profit | 18,816 | 17,547 |
| Profit/(loss) before tax | (9,769) | (9,583) |
| Profit/(loss) after tax | 868 | (8,804) |
| EPS | 1.23c | (12.42c) |
| US$ ‘000s | 31 December 2024 | 30 June2024 |
| Fleet assets (2) | 787,230 | 832,818 |
| Total assets | 1,081,048 | 1,142,321 |
| Cash and bank balances (3) | 125,612 | 117,940 |
| Unrestricted cash and cash equivalents | 32,176 | 23,561 |
| Net asset value per share (US$) (4) | $3.67 | $3.62 |
| Net asset value per share (GBP) (5) | £2.94 | £2.85 |
1. EBITDA is a non-GAAP financial measure used as an indicator of a company’s ability to incur and service debt. EBITDA has been calculated as the sum of profit before tax, finance expenses, depreciation and impairment and unrealised losses on aircraft purchase rights and deposits paid for aircraft. EBITDA presented herein may not be comparable to similarly titled measures presented by other companies.
2. Fleet assets are defined as property, plant and equipment plus assets held for sale plus finance lease receivables.
3. Cash and bank balances as at 31 December 2024 comprise cash and cash equivalents of US$32.2 million (30 June 2024: US$23.6 million), restricted cash balances of US$54.2 million (30 June 2024: US$94.4 million) and investment in fixed term deposits US$39.3 million (30 June 2024: US$ nil).
4. Net asset value per share is total equity divided by the total number of shares in issue, excluding treasury shares.
5. Based on GBP:USD exchange rate as at 31 December 2024 of 1.25 (30 June 2024:1.27).
Aircraft Fleet
| Aircraft Type | 31 December 2024 | 30 June 2024 |
| Boeing 777-300ER | 1 | 1 |
| Airbus A330-300 | 1 | 1 |
| Airbus A321-200 | 6 | 6 |
| Airbus A320-200 | 2 | 2 |
| Airbus A220-300 | 5 | 5 |
| ATR 72-600 | 13 | 15 |
| ATR 72-500 | 4 | 4 |
| Total | 32 | 34 |
At 31 December 2024, Avation’s fleet comprised 32 aircraft, including three aircraft on finance lease. Avation currently serves 15 customers in 13 countries. The weighted average age of the fleet is 7.9 years (30 June 2024: 7.3 years) and the weighted average remaining lease term is 4.2 years (30 June 2024: 4.1 years).
Two ATR 72-600 aircraft were sold during the period pursuant to the exercise of purchase options held by the lessee. Avation’s fleet comprises 55% narrowbody, 27% turboprop and 18% widebody aircraft by book value as at 31 December 2024. Fleet assets have decreased 5.5% to US$787.2 million (30 June 2024: US$832.8 million). As at the date of this report all aircraft are on-lease.
The company took delivery of an ATR 72-600 aircraft in November 2024. The aircraft was sold on delivery realising a profit of US$1.7 million.
Avation has eleven new ATR 72-600 aircraft on order for delivery between Q2 2025 and Q2 2028 and purchase rights for a further 24 aircraft as at 31 December 2024.
Debt summary
| US$ ‘000s | 31 December 2024 | 30 June2024 |
| Current loans and borrowings | 55,948 | 49,668 |
| Non-current loans and borrowings | 582,494 | 625,426 |
| Total loans and borrowings | 638,442 | 675,094 |
| Unrestricted cash and bank balances | 32,176 | 23,561 |
| Net indebtedness (1) | 606,266 | 651,533 |
| Net debt to total assets | 56.1% | 57.0% |
| Net debt to EBITDA | 5.7x | 7.3x |
| Weighted average cost of secured debt (2) | 4.9% | 4.8% |
| Weighted average cost of total debt (3) | 6.6% | 6.4% |
1. Net indebtedness is defined as loans and borrowings less unrestricted cash and bank balances.
2. Weighted average cost of secured debt is the weighted average interest rate for secured loans and borrowings at period end.
3. Weighted average cost of total debt is the weighted average interest rate for total loans and borrowings at period end.
Net indebtedness was reduced by 6.9% to US$606.3 million (30 June 2024: US$651.5 million).
The weighted average cost of total debt has increased to 6.6% at 31 December 2024 (30 June 2024: 6.4%) due to repayments of lower cost secured loans in the period. The weighted average cost of secured debt also increased to 4.9% at 31 December 2024 (30 June 2024: 4.8%).
At the end of the period, Avation’s net debt to total assets ratio improved to 56.1% (30 June 2024: 57.0%). At 31 December 2024, 96.5% of total debt was at fixed or hedged interest rates (30 June 2024: 96.4%). The ratio of unsecured debt to total debt was 48.5% (30 June 2024: 44.8%).
Financial Analysis
Revenue
| US$ ‘000s | Six months ended 31 December, | |||
| 2024 | 2023 | |||
| Lease rental revenue | 44,558 | 43,887 | ||
| Less: amortisation of lease incentive assets | (1,628) | (1,169) | ||
| 42,930 | 42,718 | |||
| Interest income from finance leases | 780 | 1,036 | ||
| Maintenance reserves revenue | 9,270 | 979 | ||
| 52,980 | 44,733 | |||
Lease rental revenue increased by 1.5% from US$43.9 million in the six months ended 31 December 2023 to US$44.6 million in the six months ended 31 December 2024. The increase was principally due to improved fleet utilisation. All of Avation’s aircraft were on-lease throughout the period.
Interest income from finance leases decreased by 24.7% from US$1.0 million in the six months ended 31 December 2023 to US$0.8 million in the six months ended 31 December 2024. There were three aircraft leased on finance leases at 31 December 2024.
Other income
| US$ ‘000s | Six months ended 31 December, | |||
| 2024 | 2023 | |||
| Fees for late payment | 753 | 608 | ||
| Deposit released | – | 350 | ||
| Foreign currency exchange gain | 1,002 | – | ||
| Claim recovery | 442 | 385 | ||
| Others | 271 | 201 | ||
| 2,468 | 1,544 | |||
Claim recoveries recognised in other income in the six months ended 31 December 2024 and 31 December 2023 are distributions paid to creditors of Virgin Australia in excess of amounts allocated to trade receivables.
Foreign currency exchange gains in the six months ended 31 December 2024 arose principally from the revaluation of Euro denominated loans during the period.
Administrative expenses
| US$ ‘000s | Six months ended 31 December, | |||
| 2024 | 2023 | |||
| Staff costs | 2,875 | 2,792 | ||
| Other administrative expenses | 1,725 | 1,739 | ||
| 4,600 | 4,531 | |||
Staff costs increased by 3.0% from US$2.8 million in the six months ended 31 December 2023 to US$2.9 million in the six months ended 31 December 2024 as a result of inflationary pressures.
Other administrative expenses were unchanged at US$1.7 million in both the six months ended 31 December 2023 and 31 December 2024.
Finance income
| US$ ‘000s | Six months ended 31 December, | |||
| 2024 | 2023 | |||
| Interest income | 2,752 | 2,814 | ||
| Fair value gain on financial derivatives | – | 645 | ||
| Finance income from discounting non-current deposits to fair value | 315 | 332 | ||
| Gain on repurchase of unsecured notes | – | 311 | ||
| Gain on early full repayment of borrowings | 1,084 | 161 | ||
| 4,151 | 4,263 | |||
Interest income was US$2.8 million in the six months ended 31 December 2024. The group deploys surplus cash balances into fixed term deposits while maintaining sufficient liquidity to meet near-term payment obligations.
Avation generated a gain of US$0.3 million on the repurchase of US$8.0 million of Avation Capital S.A. 8.25%/9.0% unsecured notes at a discount in December 2023.
A gain of US$1.1 million on early full repayment of borrowings arose when in-the-money interest rate swaps were terminated concurrently with repayment of two loans on the sales of aircraft in August 2024.
Finance expenses
| US$ ‘000s | Six months ended 31 December, | |||
| 2024 | 2023 | |||
| Amortisation of IFRS 9 gain on debt modification | 7,440 | 4,730 | ||
| Interest expense on secured borrowings | 8,447 | 10,125 | ||
| Interest expense on unsecured notes | 13,677 | 15,555 | ||
| Amortisation of loan transaction costs | 699 | 543 | ||
| Amortisation of interest expense on non-current borrowings | 314 | 326 | ||
| Fair value loss on financial derivatives | 2,002 | – | ||
| Others | 157 | 114 | ||
| 25,296 | 26,663 | |||
Amortisation of IFRS 9 gain on debt modification of US$7.4 million represents the non-cash accretion in the book value of Avation Capital S.A. 8.25%/9.0% unsecured notes resulting from the accounting treatment of the extension and changes to the terms of the notes agreed with noteholders in March 2021. The extension was accounted for as a substantial modification of a debt instrument in accordance with IFRS 9. The face value of Avation Capital S.A. 8.25%/9.0% unsecured notes outstanding as of 31 December 2024 is US$331.6 million.
Interest expense on secured borrowings reduced by 16.6% to US$8.4 million in the six months ended 31 December 2024 from US$10.1 million in the six months ended 31 December 2023 as a result of repayments of secured loans. Secured loans have been paid down by US$108.8 million from US$437.5 million at 31 December 2023 to US$328.7 million at 31 December 2024.
Interest expense on unsecured notes reduced by 12.1% from US$15.6 million in the six months ended 31 December 2023 to $13.7 million in the six months ended 31 December 2024. The reduction results from repurchases of notes which have reduced the outstanding principal amount by US$18.0 million since December 2023 and the company’s choice to pay the November 2024 coupon payment using the 8.25% all cash option instead of the 9.0% part cash part payment-in-kind option.
A mark to market loss of US$2.0 million arose on the revaluation of interest rate swap agreements as a result of changes in floating interest rates in the six months ended 31 December 2024.
Results Conference Call
Avation’s senior management team will host an investor update call on 25 February 2025, at 12:00 PM GMT (UK) / 7:00 AM EST (US) / 8:00 PM SGT (Singapore), to discuss the Company’s financial results.
A replay of the investor update call will be made available on the Investor Relations page of the Avation PLC website.
Forward Looking Statements
This release contains certain “forward looking statements”. Forward looking statements may be identified by words such as “expects,” “intends,” “initiate”, “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for Avation’s future business and financial performance. Forward looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks. Further information on the factors and risks that may affect Avation’s business is included in Avation’s regulatory announcements from time to time, including its Annual Report, Full Year Financial Results and Half Year Results announcements. Avation expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.
Basis of presentation
This announcement covers the unaudited results of Avation PLC for the six months ended 31 December 2024.
Financial information presented in this announcement is being published for the purposes of providing preliminary Group financial results for the six months ended 31 December 2024. The financial information in this preliminary announcement is not audited and does not constitute statutory financial statements of Avation PLC within the meaning of section 434 of the Companies Act 2006. The Board of Directors approved this financial information on 29 February 2024. Avation PLC’s most recent statutory financial statements for the purposes of Chapter 7 of Part 15 of the Companies Act 2006 for the year ended 30 June 2024, upon which the auditors have given an unqualified audit, were published on 25 October 2024 and have been annexed to the annual return and delivered to the Registrar of Companies.
All “US$” amounts in this release are US Dollar amounts unless stated otherwise. Certain comparative amounts have been reclassified to conform with current year presentation.
