Update on COVID-19 Pandemic Impact

12 Months Ended

Dec. 31, 2021

Unusual or Infrequent Items, or Both [Abstract]

Update on COVID-19 Pandemic Impact

Update on COVID-19 Pandemic Impact

Throughout 2021, passenger air travel gradually improved. The strong recovery in most domestic markets, together with robust global cargo demand, resulted in steady improvements in airline financial results throughout the year. While domestic travel improved significantly in the United States, Europe, China and Latin America, Inter-Asia traffic did not fare as well given more widespread travel restrictions. It is unclear how long and to what extent travel restrictions will remain in place. In the aggregate, the recovery of passenger traffic from pandemic-level lows has led to a firming market for aircraft values and lease rates. We also expect that the continued recovery of passenger traffic and production-related issues at Boeing and Airbus may contribute to a shortage of new technology aircraft in the years ahead, which could present a favorable environment for aircraft lessors.

Throughout the pandemic, on a case-by-case basis, the Company has agreed to accommodations with approximately 66% of its lessees. The majority of these accommodations have been in the form of partial lease deferrals which, in many cases, include lease

extensions. As of December 31, 2021, we had $203.2 million in outstanding deferred rentals as compared to $144.3 million in the prior year, the increase is primarily related to Vietnam Airlines. The majority of our outstanding deferred rentals are scheduled to be repaid within the next two years. In addition to lease deferral arrangements, the Company has from time to time agreed to restructure some of its lease agreements. As part of its lease restructuring agreements, the Company has typically modified its existing leases by extending the lease term and reducing its lease rates. In the aggregate, the impact of these restructurings have extended the weighted average lease term remaining of the Company’s fleet and have decreased its total revenues by $132.5 million for the year ended December 31, 2021.

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. During the year ended December 31, 2021, the Company was not able to recognize $72.7 million in rental revenue from lessees on a cash basis of accounting because collection was not reasonably assured.