Avation PLC (LON:AVAP) is the topic of conversation when WH Ireland’s Deputy Head of Capital Markets, John Cummins, caught up with DirectorsTalk for an exclusive interview. Avation announced on 10th May that it has entered into a new lease agreement for its final remaining aircraft to an airline in the Pacific at a market rate for six years and is scheduled for delivery in July 2023. 

Q1. Why is the placing of Avation’s final off-lease aircraft an important milestone?

Avation’s most recent aircraft placing represents a key moment for the group, marking an end to a period in which the company suffered the cost of up to 14 off-lease aircraft which were taken back over the pandemic. Not only does the placing bring the financial benefit of additional lease revenue, but it also reflects the wider recovery in the market for these aircraft types– as further evidenced by Avation’s most recent sale of an ATR 72-600, which was sold above book value in April. 

Q2. How do you view the market dynamics and outlook for Avation?

Market dynamics are beginning to provide a much more positive backdrop for aircraft lessors such as Avation. Air traffic is increasing, the costs of maintaining and operating older aircraft are rising, many airlines’ balance sheets have weakened considerably and OEMs are struggling with stepping up production rates of new aircraft – these factors in combination leading to higher demand, rising leasing rates and increased asset values for lessors. 

Q3. How do you see the company in terms of fair value? 

Avation is currently trading at around a 58% discount to the last reported NAV, which given the improving market dynamics and ratings within Avation’s peer group, is unjustified in our view.

Avation PLC (LON: AVAP) is a commercial passenger aircraft leasing company owning a fleet of aircraft which it leases to airlines across the world. Avation’s future focus is new technology low CO2 emission aircraft. Its current customers include easyJet, Eva Air, Philippine Airlines, Alliance Air India, Vietjet Air, Fiji Airways, Mandarin Airlines, Cebu Pacific, airBaltic and Danish Air Transport.