International Finance Lease Corp. (ILFC) has or will part out at least 11 of the 54 aircraft that have been returned to the lessor this year by airlines that ceased operations or filed for bankruptcy protection.
According to a U.S. Securities and Exchange Commission filings this month by ILFC and parent company American International Group (AIG), the lessor has placed 37 of the 54 aircraft, which came from nine airlines, and sold another two. But ILFC still is trying to lease the other four.
AIG also says that 36 of the 82 leases in ILFC’s fleet that were due to expire in 2013 had not been extended as of Oct. 24. If the current holders do not extend them, ILFC will have to remarket those aircraft as well
ILFC has 918 aircraft in its leased fleet.
The good news for ILFC is that it has signed leases for all the new aircraft it will receive in 2013. It also managed a $39 million operating profit, which compares to a $1.3 billion operating loss in the third quarter of 2011, although that loss included $1.5 billion of impairment charges and other adjustments due primarily to unfavorable residual values for some of its fleet.
The impairment charges of $98 million for the third quarter of 2012 suggest that the valuations have stabilized.
Also, through the first nine months of this year, ILFC sold nine aircraft and four engines for about $237.1 million in gross proceeds. It sold an additional six aircraft in October, and ILFC says it expects to sell more through the final two months of this year.
Last October, ILFC acquired an aircraft dismantling company—AeroTurbine—for $228 million to make it more economical for ILFC to disassemble an aircraft for the sale of its parts. By acquiring the new subsidiary, ILFC says it avoids paying a 15-30% commission to third parties to do the work and improves its access to a network of parts buyers.
As Aviation Week previously reported, the Los Angeles-based lessor in September said it plans to increase the number of aircraft designated for part-out over the next year. So far this year, through October, ILFC has designated 10 aircraft for part-out and transferred them to AeroTurbine.
The AeroTurbine acquisition was driven in part by the need to deal with the older aircraft in ILFC’s fleet, out-of-production aircraft and lessened demand for used aircraft because of new-technology, more fuel-efficient replacements.
But airline industry financial troubles, particularly in Europe, also contributed to higher part-out numbers. Nine ILFC customers, including one with two separate operating certificates, have declared bankruptcy or ceased operations this year: Spanair, Malev, Global Aviation Holdings, Strategic Airlines (trading as Air Australia Airways), Mint Airways, Air Finland, OLT Express Poland, Wind Jet and Air Nigeria.