KBRA Comments on Air Lease Corporation’s Exposure to Alitalia

Kroll Bond Rating Agency (KBRA) currently carries issuer and senior unsecured debt ratings of A- with a stable outlook for Air Lease Corporation (NYSE:AL or “Air Lease”), an aircraft lessor based in Los Angeles, California. Following the May 2, 2017 announcement that the shareholders of Italy’s flag carrier, Alitalia, voted unanimously to file for extraordinary administration in Italy, KBRA commented on the situation with respect to the impact on aircraft lessors and KBRA-rated ABS transactions.

Presently, Air Lease has four Airbus A330-200s on lease to Alitalia, while Blackbird, a joint venture between Napier Park Global Capital (US) and Air Lease, has one Embraer E175 on lease to Alitalia. Per its first quarter 2017 earnings call, Air Lease reported that the Company is closely monitoring the developments relating to Alitalia’s extraordinary administration proceeding and is in daily communication with Alitalia’s management. Also, Alitalia is currently operating the aircraft as usual and is current on all lease payments. As a result, Air Lease does not currently anticipate the need to repossess its aircraft; however, Air Lease is prepared to take action if the situation changes.

KBRA is in contact with Air Lease’s management and is attentive to the situation. KBRA notes that these five aircraft are a small portion of the total fleet of 274 owned and managed aircraft, as of March 31, 2017, and any issues resulting from the Alitalia situation are not expected to result in a material impact on operations. Moreover, it is KBRA’s understanding that Alitalia’s long-haul operations are more profitable while experiencing less competition from the low-cost carriers compared to the inter-continental routes and the A330s are vital to the long-haul fleet. Furthermore, over the last year, Air Lease had reduced its exposure to the airline to five from fifteen aircraft. KBRA views Air Lease’s risk management as comprehensive, with suitable security packages in place including cash security deposits and cash maintenance reserves and management has exhibited the ability to respond to such market challenges quickly. Even so, KBRA remains alert in its monitoring of the situation.

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