COVID-19: What next for aviation finance and leasing?

COVID-19 has had a tremendous effect on the aviation industry. In the months since the W.H.O declared COVID-19  a pandemic, there has been a negative impact on airline share prices, air travel, airline workforce, and liquidity of operators and lessors generally. In addition to the more apparent issues facing the aviation industry, there has also been a flurry of activity behind the scenes. Operators, lessors, and financiers are realigning to salvage ongoing lease and financing arrangements in light of reduced operator liquidity.

Despite the disruption brought on by the pandemic, aircraft lease rentals have remained payable because aircraft leases are hell or high-water agreements; i.e., rentals are to be paid by airline lessees/operators irrespective of circumstances. Carve-outs in a hell or high-water clause would typically include scenarios where there is a total loss of the aircraft but rarely risks related to pandemics.

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