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Avation plays down the impact of Virgin Australia going into administration

Avation had leased 13 aircraft to Virgin Australia, five of which have already been leased to other airlines and the others have either been returned to Avation or will be soon

Avation PLC -

Avation PLC (LON:AVAP), the aircraft leasing company, has played down the impact of Virgin Australia going into administration.

Avation had a total of 13 aircraft on lease to Virgin Australia when it entered administration. These included six ATR72-500 aircraft, five ATR72-600 aircraft and two Fokker 100 jet aircraft. Since the airline went into administration, Avation said it has entered into new lease arrangements for five of these aircraft, including finance leases for the sale of the two Fokker 100 aircraft, operating leases for two ATR 72-500s with a new airline customer in Australia and a five-year operating lease for an ATR72-500 aircraft with a new airline customer in Asia.

The three remaining ATR72-500s have been returned to Avation and are now undergoing maintenance. The administrator has also commenced the return of the five ATR72-600 aircraft to Avation and the company is now seeking to reposition or sell eight ATR72 aircraft. The total secured debt outstanding against these eight aircraft amounts to US$30.7mln, Avation said.

The majority of the company's claim against Virgin Australia is made up of outstanding rent and lease end return maintenance compensation. At the date Virgin Australia entered administration, its future outstanding rent totalled US$48.4mln. The Avation preliminary proof of debt claim against Virgin Australia amounts to US$74.7mln.

"Avation is fortunate that the leases to Virgin Australia were mature with a range of only 1-3 years remaining duration on each lease,” said Avation’s executive chairman, Jeff Chatfield in a statement.

“The unearned contracted revenue associated with Virgin Australia represented less than 6% of Avation's total unearned contracted lease revenue across all customers as at the date of the administration. The relatively low levels of debt associated with the returned aircraft will be further reduced by the expected payment to Virgin Australia's creditors following the proposed DOCA approval,” he added.

Chatfield said Avation expects regional aviation will be the first part of the airline sector to recover when the coronavirus pandemic blows out.

“ATR72 aircraft are amongst the lowest cost commercial passenger aircraft to operate, on a per seat-km basis, and are well suited to regional routes which may present opportunities for other airline operators as well as those in Australia planning to fill the void left by Virgin. Avation is considering a variety of alternatives to redeploy these aircraft with different operators around the world,” he added.

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Price: 117.25 GBX

Market: LSE
Market Cap: £73.48 m

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