DAE is 'well positioned' to manage Covid-19 impact despite nine-month profit slide

Airlines' recovery helped plane lessor improve its collection rate to 89 per cent and increase operating cash flow by 33 per cent

Firoz Tarapore, chief executive of Dubai Aerospace Enterprise, at his office in DIFC, Dubai. Leslie Pableo / The National

Dubai Aerospace Enterprise (DAE), one of the world's biggest plane lessors, posted a lower nine-month profit this year but said it is well positioned to manage the impact of Covid-19 due to its strong balance sheet.

Profit for the period fell to $90.5 million in the first nine months of 2021, from $167.3m in the same period last year, DAE said. Adjusted profit for the period stood at $128.8m, after adding back one-off debt redemption costs.

Total revenue for the first nine months dropped to $925.3m, from $984.1m in the same period in 2020, as net lease revenue fell 8.7 per cent year-on-year.

"Our financial results for the first nine months of 2021 demonstrate our continued focus in the leasing division on investing in new technology, fuel-efficient narrow body aircraft, sales of portfolio aircraft in the secondary market and extending further relief to our airline customers," Firoz Tarapore, chief executive of DAE, said.

The outlook for plane lessors has been brightening as confidence to travel returns gradually. The global commercial aircraft leasing market is projected to grow at a compound annual growth rate of 4.9 per cent between 2020 and 2027 despite the Covid-19 pandemic, according to a report by ResearchandMarkets.com.

DAE said the gradual start of airlines' recovery helped to improve its collection rate, or the sum of all cash collected from lease rentals as a percentage of the total contracted receivables due for the period after factoring in any lease amendment or deferral agreements, to 89 per cent as of September 30.

"Many airlines are beginning to return to normal operations which has helped to improve our collection rate to 89 per cent for the period and increase our operating cashflow by 33 per cent to $800m in the first nine months of 2021," Mr Tarapore said. "Approximately seven billion vaccine doses have been administered globally, but the deployment is uneven across jurisdictions, impacting recovery of long-haul air traffic."

DAE offered relief packages to 40 airline customers as of September 30, up from 33 customer as of December 31, 2020. This was in the form of rent deferrals, loans to airlines or other leases amendments, DAE said.

The total value of rent deferrals and loans to airlines is $216.6m or 18.7 per cent of Trailing Twelve Months (TTM) lease revenue, it said. Of the total, $213.4m has been incurred and $3.2m relates to future rental.

In addition, DAE have entered into various lease amendments mainly involving near-term relief in exchange for lease extensions and other lease value enhancements, with the total value of these amendments at $172.6m.

"If the impact of Covid-19 is prolonged, the amounts due from our airline customers and associated loss allowance may increase in future periods," DAE said in its financial statement. "However, we expect the global travel industry to recover, and we are well positioned to manage the impact of Covid-19 on our business due to the strength of our balance sheet and liquidity position."

It holds approximately $484m in the form of cash or letters of credit. It also holds maintenance reserves of $1,147.1m. In addition, it has access to $3.4 billion of available liquidity to support the on-going operation of the group as needed.

"We continue to monitor air traffic recovery trends and maintain a strong and healthy balance sheet and exceptional liquidity to assist our clients and grow our franchise," Mr Tarapore said.