• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Business Aviation

Switch to cash accounting confirms pressures on aircraft lessors

5 years ago
in Aviation, highlights, Home, home-news, latest News
1 min read
0 0
0
flight - norvanreports

flight - norvanreports

88
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

The emerging trend of aircraft lessors switching a portion of their lease exposure to cash accounting from accrual accounting underscores the credit and liquidity risks facing the sector, Fitch Ratings says.

Cash accounting, in and of itself, is not a credit concern, but is an indicator of increasing pressure on underlying airline lessees and the reduced likelihood of collecting on lease payments. Overall cash collections from lessees on cash accounting tend to be significantly lower than those utilizing accrual accounting.

As of 3Q20, the percentages of fleet net book value that had been switched to cash from accrual accounting were 15% for AerCap (‘BBB-’/Outlook Negative), 10% for Avolon (‘BBB-’/Outlook Negative) and 6.6% for Air Lease Corp. (‘BBB’/Outlook Negative).

Fitch believes rated lessors have sufficient headroom to withstand the non-payment of the portion of fleets on cash accounting, as the agency’s base and downside cases for default of 17% and 34%, respectively, already build in conservative assumptions around airline performance in a stressed scenario. However, a sizable increase of cash-based accounting may indicate a meaningful decline in future cash flow generation.

The switch to cash-based accounting is usually preceded by a drawdown of security deposits, with lessors switching accounting methodologies when lease receivables exceed security packages. Fitch anticipates higher impairment risk for aircraft underlying leases subject to cash accounting, as lessors have typically depleted cash deposits from the lessees prior to switching the accounting standard, thereby lowering possible recoveries on aircraft if leases are rejected during a lessee’s restructuring.

Most of the leases that transitioned to cash accounting relate to airlines which were granted lease deferrals earlier in 2020 amid the fallout from the pandemic, and subsequently became uncollectable due to insolvency or restructuring of the airlines. The switch to cash accounting is generally triggered when the lessor has determined that the collectability of lease payments can no longer be reasonably assured or when lease receivables exceed lessors’ security packages.

In addition, lessors typically switch to cash accounting for lease contracts under which the airline pays the lessor for actual hours used at a specific rate (also known as “power by the hour”) instead of the monthly lease payment due to the unpredictability of the associated cash flows. Power by the hour arrangements are concessions typically granted by aircraft lessors to stressed airlines.

RelatedPosts

The 10 Fastest-Growing Trading Nations in Africa

Nigeria’s 1.6 Million Container Trade Far Less Than it’s Ports Potential – Logistics Expert

Inside Details of Presco’s $172m Acquisition of SOP, Ghana Oil Palm Firm

Source: FitchWire
Via: norvanreports
Tags: accrual accountingaircraft lessorscash accountingcredit and liquidity riskshigher impairment risk for aircraft underlying leases
No Result
View All Result

Highlights

Africa’s Richest Economy’s Currency Hits Nine-Month High as Fed’s Dovish Signal Weakens Dollar

Trump Weighs Using $2 Billion in CHIPS Act Funding for Critical Minerals

Moving Gold, Moving Economies: The Rise of Migrant Women in Zimbabwe’s Mining Sector

Senegal and Mercedes-Benz Partner to Build Trucks

INTERPOL Recovers Over $90 Million From African Crime Syndicates

Djokovic and Gauff Gear Up for US Open with Strategic Focus

Trending

Business

The 10 Fastest-Growing Trading Nations in Africa

August 23, 2025

The 10 Fastest-Growing Trading Nations in Africa Against the backdrop of shifting dynamics in global trade, several...

Nigeria’s 1.6 Million Container Trade Far Less Than it’s Ports Potential – Logistics Expert

August 23, 2025

Inside Details of Presco’s $172m Acquisition of SOP, Ghana Oil Palm Firm

August 23, 2025

Africa’s Richest Economy’s Currency Hits Nine-Month High as Fed’s Dovish Signal Weakens Dollar

August 23, 2025

Trump Weighs Using $2 Billion in CHIPS Act Funding for Critical Minerals

August 23, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.