Aircraft securitization is returning to its pre-Covid health, said market participants at SFVegas this week, bringing with it a likely jump in issuance volumes and new structural features.
Panelists at SF the conference said that the sector would likely see between $7bn and $10bn in 2025 — up from $5.7bn in all of 2024.
As part of this influx of issuance and healthy demand after a very quiet couple of years a previously quiet sector, issuers and originators are coming up with new structures.
Castlelake, for example, introduced a BB/BB rated class ‘C’ tranche in its most recent transaction, CLAST 2025-1. It was one of only two of the 14 aircraft ABS deals priced since the start of 2024 to include a sub-investment grade tranche.
And Carlyle has become the first aircraft ABS issuer to use a master trust, as it did on AASET 2025-1 in January.
One panelist said that these new structures were providing greater diversification to the sector. And panelists expected these features to continue appearing in some aircraft transactions going forward as the sector gains confidence.
“The existence of an ABS master trust has not been there in the past,” said one panelist, “but Carlyle wanted to improve liquidity in the ABS market by imitating the style of the master trust over time.”
Additionally, the inclusion in recent new issues of mid and late life aircraft is a good sign for the future of the sector.
“You constantly see migration towards pre-Covid [style market], with older aircraft,” said one panelist.
Another panelist noted that in reality older aircraft are often better suited for ABS than their younger jets, which have comprised the bulk of collateral in securitizations from 2022 through 2024.
“We don’t really see newer aircraft as the perfect collateral for ABS,” said the panelist. “But also investors are starting to appreciate what the servicer means as well as what’s in the portfolio and the nuances in the leases.”
Moreover, with bottlenecks from suppliers such as Boeing and Airbus not showing any signs of easing, lessors and lessees will have to get more comfortable continuing to use older aircraft well into the tail end of their 15-20 year lifespans.
“Airlines that were previously operating aircraft until they were 15-18 years old and then retiring them don’t have that luxury any more,” said one panelist. “They don’t know when the next aircraft is coming or the scale of the next shipment.”