Impact of Russia-Ukraine Conflict on Aircraft Leasing ABS
The escalating Russian military invasion of Ukraine creates uncertainties for some aircraft lessors and aircraft leasing asset-backed securities (ABS) transactions as they have exposure to these jurisdictions. The situation is fluid, so it’s unclear at this point to what extent sanctions will affect or enforce an airline's ability and/or willingness to pay its leases. DBRS Morningstar does not have outstanding ratings on any aircraft ABS that contain collateral domiciled in Russia or Ukraine. Nonetheless, some airlines, like Ryanair and Wizz Air, which are not based in Ukraine or Russia, had a significant number of either routes or pieces of equipment in these countries. The overall exposure across aircraft ABS in the market is expected to be relatively limited to a handful of transactions; however, any additional cash flow stress on certain outstanding transactions could lead to further credit deterioration on deals already stressed by the Coronavirus Disease (COVID-19) pandemic. We expect the effects of the conflict, if any, to occur primarily on the aircraft lessor side.
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