Visualizing Your Exposure On Rent Deferrals

As we’re all aware, the severe slow down in air travel has led to cash flow constraints for airlines around the world. This has had a downstream effect on lessors who are dealing with rent deferral requests from almost all of their customers.

As per Aercap’s Q1 2020 earnings call, the company has received rent deferrals from a majority of their customers. On the call, Gus Kelly, CEO of Aercap said “We are providing them with assistance in unprecedented time in the form of rent deferrals. We've entered into approximately $300 million of rental deferrals and expect to enter into another approximately $300 million of deferrals. The amount deferred is generally the equivalent of two to three months of rent and repayment generally begins four to six months after.”

We heard about these requests among our lessor customers in January from their Chinese lessees. By late March, these requests were coming in at a much faster pace from airlines all over the world and started to overwhelm our customers. Based on what we heard, we started to work on a feature that would help automate rent deferral approvals and made this available in March to all our lessor customers at no additional charge.

THE PROBLEM:

Here’s what we were hearing from lessors about issues associated with rent deferral requests:

• Missing information: Marketing teams weren’t always capturing all the details of the rent deferral request. Key pieces of information such as payback period and metrics that discord the health of the airline were key for management to entertain requests.
• Tunnel vision: Management needed context about the strength of the customer relationship and the overall health of the operator. Metrics such as maintenance reserve balances or security deposits on the assets were key to approve the requests.
• No defined process and approval delays: Deferral approvals were requested through multiple emails and with varying degrees of detail. Approvals were bogging down and sometimes in the wrong inbox.
• Excel chaos: Requests from different airlines on multiple assets were collated in spreadsheets that quickly became outdated, and they were distributed by email, leading to revision confusion and search delays. 

THE SOLUTION

Electronic approvals to streamline the decision process

Submit time-stamped requests to management with links to all related conversation and analysis. Managers can review requests details and related benchmarks, ask for clarifications from team members via Chatter. On approval of the request in whole or in part, team members are kept in synch via email alerts.

Centralize your data, analysis, and decisions

Complete details about and requests are available in LeaseWorks at any time, and automated daily or weekly summary reports keep all stakeholders in the loop at all times. Understand trends in these requests by operator, region, asset types, credit scores, or any other metric you can imagine.