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Stranded Jets In Russia Cause BOC Aviation To Write Down $800 Million

BOC Aviation has written off 18 of its aircraft that are being held hostage in Russia, writing them off in their June 30 accounts.

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BOC Aviation of Singapore is the most recent lessor to remove Russian-bound planes from its books. Lessor took a $804 million impairment charge due to the planes, resulting in a $313 million half-year loss. Revenue for BOC Aviation (BOC) was up 8% to $1.196 billion in 1H 2022 from $1.11 billion in 1H 2021, despite a number of write-downs.

BOC has close to $6 billion in available funds.

There has been a rise in demand for the brand new Boeing B737 Max from lessor BOC. A Boeing photo

BOC cited “the termination of leases with Russian airlines of 18 owned aircraft and aircraft that were off lease” as the reason for the decline in lease rental revenue from $927 million in 1H 2021 to $877 in 1H 2022. The net book value of BOC’s 17 aircraft in Russia is $804 million. Even though the company has written off $804 million, the $223 million in cash collateral for those planes helps to mitigate the loss. There was a $63 million tax credit recorded, bringing the net effect of the write-down down to $518 million. In addition to the $5.5 billion in undrawn committed credit facilities as of June 30th, it has $454 million in cash and short-term deposits.

There were a total of 608 aircraft in BOC’s possession as of the end of June, between those that were owned, managed, and those that were on order. The average age of the fleet is 4.1 years, and there are 8.4 years left on the average lease. BOC has a 96.1% utilization rate, meaning that only 11% of their owned fleet of 390 aircraft are currently inactive. Out of the total number of aircraft being returned, five are twin-aisle, eleven are single-aisle, and one is a freighter. Additionally, out of the 37 aircraft in the managed fleet, three are already committed for lease, leaving four single-aisle aircraft available.

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There are only next-generation planes on the order books.

BOC Aviation is particularly proud of its policy of only purchasing aircraft of the latest generation, such as the Airbus A321neo. In this picture, an Airbus airplane.

Sixty-nine percent of BOC’s fleet consists of newer models, and all planes on order are brand new as well. There are 344 Airbus planes, 258 Boeing planes, and six unspecified freighters among the 608 planes that are either owned, managed, or on order. There are a total of 208 A320 family and 136 B737 family single-aisle aircraft under its control, and 32 B777s, 20 B787s, 16 A330s, and 9 A350s among its widebodies. BOC had ordered 111 A321neos, 49 B737 MAXs, and 21 B787s in the first half of 2018. With effect from the 30th of June, it has canceled its order for three B787s and instead committed to purchasing six additional aircraft from the A320neo family, all of which are scheduled for delivery in 2024.

Within the first half of the year, BOC Aviation took delivery of 20 planes, with five of those going directly to airline customers as purchases. It sold five planes from its own fleet and transferred six others to new owners, earning a total of $13 million in the process. There were 46 new lease commitments signed in the first half of 2002, and all of the aircraft on BOC’s order book with a delivery date before 2023 were sold to airline customers.

A fair number of the lessor’s 79 clients can be found in each of the world’s regions. With 24% of its aircraft net book value in Asia/Pacific, 20% in Europe, 17% in the Americas, and 12% in Africa, BOC is a truly global airline. China, Hong Kong, Macau, and Taiwan together make up 27% of the region, making them its largest.