SAS Bankruptcy Manageable for Aircraft Lessors
This commentary reviews the impact of the Scandinavian Airlines Chapter 11 bankruptcy filing.Key highlights include:
• SAS leases more than 75% of its fleet from 29 lessors and its restructuring may result in aircraft rejections, negatively impacting cash flows of certain aircraft lessors.
• DBRS Morningstar notes that the exposure of the majority of lessors is not material relative to their respective fleets and we do not expect SAS' insolvency to result in major impairment charges for the industry or have any material impact to the credit profiles of the lessors.
• DBRS Morningstar has concerns that the upcoming traditionally slower winter travel period could result in additional airline bankruptcies if fuel and employee costs remain high while accompanied by a strong U.S. dollar.
“We view aircraft lessors as generally well positioned to absorb costs associated with a normal level of bankruptcies given that lessor pre-impairment and tax earnings have been strengthening in recent quarters.” said David Laterza, Senior Vice President, Head of Non-Bank FIG – Global FIG.
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