With WOW airlines ceasing operations, Phil Seymour, CEO of IBA Group looks at what’s coming down the track for Lessors.
The WOW fleet lessors are: ALC (7 aircraft – a mix of A321/A320 Neo), BoComm (2 aircraft – A321CEO) and Sky (Goshawk) with 2 A321CEOs.
We fully expect these lessors to say that all is well and new lessees had already been lined up or are very close to being found. But what costs/loss of revenue can be expected in the short term?
- Are the current rentals up to date? It is likely that the rentals will not be up to date and depending upon the specific lease rate the above fleet will have typical rentals (estimated) from between 280KUSD per month to 400KUSD per month.
- It is likely that maintenance reserves for future maintenance events are also behind and those can be close to 200KUSD per month on top of the rentals.
- Outstanding debts/loans – Eurocontrol is often the biggest exposure. Recent failures have seen unpaid fees in the order of a few hundred thousand Euros having to be paid by a lessor to have the aircraft “released” by the airport/local aviation authority. Others debts may include local airport unpaid fees/catering/maintenance firms all looking to the lessors for handouts before releasing the aircraft….(budget circa 150KUSD).
- Ongoing Insurance/Storage/Parking/Ferry flights to MRO facilities. These can also add up to be close to 100KUSD for a 3-4 month period.
- Delivery to the next lessee – possibly the biggest variable as it may cost virtually nothing if the next lessee takes the aircraft “as-is” through to several hundred thousand if painting/reconfig and maintenance is due. It can become a multi-million dollar issue if engines are in need of refurbishment as we saw with several Germania A319 aircraft recently. This is okay if the maintenance reserves are up to date but rarely is every dollar in the hands of the lessors. (Budget 100KUSD for a good outcome – 750KUSD for a poorer one)
Upside – is there any?
- We would expect lessors to be holding security deposits of around 3 months lease rental per aircraft so using the above lease rate these deposits will vary from around 750KUSD to 1.2mUSD. These will be useful to cover part of if not all of the above costs.
- Future lease rates? Can lessors expect higher or lower lease rates compared to the WOW rates? We would expect the next lease rates to be close to the WOW rates but obviously variable according to the airline credit rating.