Update on COVID-19 Pandemic Impact

9 Months Ended

Sep. 30, 2021

Unusual or Infrequent Items, or Both [Abstract]

Update on COVID-19 Pandemic Impact

Update on COVID-19 Pandemic Impact

In response to the COVID-19 pandemic, governments around the world have implemented numerous measures to try to contain the virus, including travel restrictions. These measures, coupled with a significant decrease in spending on travel as a result of COVID-19, have materially impacted airline traffic and operations throughout the world, including the Company's airline customers.

While domestic and regional airline traffic have improved since the industry low in April 2020, passenger traffic remains challenged, especially with respect to international and business air travel demand, due to ongoing cases of the virus, the emergence of new variants of the virus, vaccine availability and acceptance, and continuing travel restrictions.

On a case-by-case basis, the Company has agreed to accommodations, such as deferrals of lease payments or other lease concessions, with approximately 64% of its lessees since the pandemic began in the first quarter of 2020. The majority of these accommodations have been in the form of partial lease deferrals which, in many cases, include lease extensions. The Company has also entered into some lease restructurings. The impact of these restructurings decreased the Company’s total revenues by $26.6 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The Company remains in active discussions with its airline customers and may continue to provide accommodations on a case-by-case basis.

While lease deferrals may delay the Company's receipt of cash, the Company generally recognizes lease revenue during the period even if a deferral is provided to the lessee, unless it determines collection is not reasonably assured. The Company monitors all lessees with past due lease payments and discusses relevant operational and financial issues facing those lessees in order to determine an appropriate course of action. In addition, if collection is not reasonably assured, the Company will not recognize rental income for amounts due under the Company’s lease contracts and will recognize revenue for such lessees on a cash basis. For a lessee whose revenue the Company recognizes on a cash basis, the Company will not recognize revenue from the lessee if the lease receivables from such lessee exceed the lease security package held by the Company. For those lessees whose revenue the Company recognizes on a cash basis, the Company recorded $5.4 million in incremental revenue during the three months ended September 30, 2021, primarily due to cash payments received from Vietnam Airlines. During the three months ended September 30, 2020, the Company was not able to recognize $25.3 million in rental revenue from lessees on a cash basis of accounting because collection was not reasonably assured.