personal debt

Lessor Avation says Virgin Australia owes it nearly $ 75 million

Singapore-based Avation PLC says it lost nearly US $ 75 million as a result of the collapse and sale of Virgin Australia. The lessor had 13 planes leased from Virgin Australia when the airline went into voluntary administration in April. Five of those planes went to new operators, three are back at Avation and five planes remain in Australia. In total, preliminary proof of Avation PLC’s claim against Virgin Australia amounts to $ 74.7 million. Most of it comes from the rent arrears and the end-of-lease maintenance allowance.

A Virgin Australia ATR72-600 entering Canberra Airport. Photo: Bidgee via Wikimedia Commons

Avation PLC had 13 planes with Virgin Australia

When Virgin Australia collapsed, its fleet comprised 79 leased aircraft comprising 40 Boeing 737-800, six Airbus A330, one Boeing 777, 13 Airbus A320, five Embraer E190 and 14 ATR 72. The majority of these leases were due to expire by 2025. The mixed fleet and the high ongoing costs associated with leases were two of the many issues that faced Virgin Australia.

During the voluntary administration, the decision was made to streamline the fleet and relaunch the airline as a fully 737 operation (Virgin Australia owns 41 Boeing 737s). This saw airline administrators sever existing contracts and start returning surplus planes to their owners.

Avation PLC had six ATR72-500, five ATR72-600 and two Fokker 100 at Virgin Australia. ATRs flew over regional routes around Queensland and NSW while Fokkers focused on charter and FIFO headed for mines. Five of the ATR72-600s remain in Australia, but Avation PLC has started the return process.

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A Virgin Australia Fokker 100. Photo: Virgin Australia

Avation has entered into new leases for five former Virgin Australia planes, including finance leases for the sale of the two Fokker 100 aircraft, operating leases for two ATR72-500s with a new airline customer in Australia and a five-year operating lease for an ATR72- aircraft. 500 with a new airline customer in Asia.

The other three ATR72-500s are back at Avation and are currently undergoing maintenance with a view to re-marketing for rental or sale.

Aircraft rental company optimistic about the future

Virgin Australia is not the only Avation PLC customer to go bankrupt this year. Avation PLC had leased two ATR72-600s from Braathens when he entered administration. Fortunately, the bulk of the company’s 48 planes are in places where the worst impact of 2020 has ended or is in the process of being contained.

“We are now seeing a return to service of certain customers including VietJet, airBaltic, EVA Air and Mandarin Airlines which together represent around 60% of Avation’s future unearned rental income,” says Executive Chairman Jeff Chatfield in a statement seen by Simple Flying.

Virgin Australia will become a fully 737 airline. Photo: Virgin Australia

With fewer people flying and airlines looking to operate smaller planes, Avation PLC’s focus on ATRs could prove very useful in the years to come. It has only two large carriers, 18 single aisles (including six A220s and the pair of Fokker formerly from Virgin Australia). More than half (58%) of its planes are post-2020 friendly ATRs.

Although Avation PLC may take back its planes, it has virtually no chance of recovering all of the money it is owed. A report to creditors released two months ago suggests that unsecured creditors can expect to recover between 9% and 13% of the total amount owed.

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