While the pandemic’s effects on aviation will continue for a long time to come, KPMG believe the recovery is clearly underway and that aircraft leasing is well placed to prosper even in this dislocated environment. “While aviation has always been a cyclical sector, COVID-19 is causing the greatest disruption we have ever seen. However, what is clear is that once restrictions lift, people are keen to return to the sky,” says Head of Aviation Finance and Tax Partner, Joe O’Mara.

While air travel collapsed after the pandemic hit, we have seen strong recoveries in domestic markets this year and an international market that is rebounding, albeit slower in some markets than others. “While the challenges stemming from new variants of concern are significant, there have been clear positive trends with the introduction of the EU vaccine passport and the reopening of transatlantic travel. The question is when, not if, we will see a full recovery”, notes O’Mara. 


Coming into 2020, air travel was in an unprecedented period, having enjoyed a ten-year super-cycle of growth. The pandemic has clearly delivered the largest exogenous shock the sector has ever faced, with airline financial losses exceeding $130bn last year, there have been fewer airline failures and formal restructurings than expected. Kieran O’Brien, who leads KPMG’s aviation advisory team, notes that “the primary driver of this has been government support, which has now topped $200bn. The strategic importance of air travel, both from a trade and tourism perspective, is what has driven this remarkable level of support. While the pandemic’s impact persists, that crucial underlying factor does too.”

KPMG's aviation history

KPMG is well placed to comment on the current status of the aviation finance sector and how its recovery is taking shape. It was an original advisor to Guinness Peat Aviation (GPA) in the 1970s and has been involved in the sector for over 40 years. It is recognised as one of the most influential firms operating in the global aviation sector. KPMG Ireland’s team of over 200 aviation finance professionals have unrivalled experience, providing a range of audit, tax and advisory services to leasing companies and investors into the space. It has the biggest concentration of aircraft leasing clients of any firm in the world, and it has advised those clients though several different cycles. 

Sources of finance

In addition to government support, what has also been key to airline survival has been the availability of the aircraft leasing as source of finance and support. The crisis has been extremely challenging for aircraft lessors, but the crisis has highlighted the resilience of the leasing business model. “You only have to look to how receptive the capital markets have been to aircraft lessors over the course of 2021 to see the faith that investors have in high quality leasing platforms” said Killian Croke, who leads KPMG’s aviation audit team.

Airline balance sheets have been decimated by the pandemic. The government supports and additional debts that have been taken on will mean that most airlines will be severely capital constrained for the foreseeable future. Accordingly, the flexibility that leasing can offer airlines will likely prove even more attractive.

“Since the outset of the pandemic, we have seen airlines enter into billions of dollars’ worth of sale and leaseback transactions with lessors. Some of these transactions were airlines seeking liquidity by selling their existing owned aircraft to lessors and leasing them back from the lessor. More frequently, lessors were stepping in to fulfil orders that airlines had placed with Boeing or Airbus and entered into a lease of that new aircraft with that same airline. This sale and leaseback market has continued to prosper over the course of 2021”, notes Croke. 

Joe O’Mara, Partner & Head of Aviation Finance at KPMG Ireland

Joe O’Mara, Partner & Head of Aviation Finance at KPMG Ireland

Market growth

The leasing market has grown substantially in the last 20 years. “We have gone from 25% of all commercial aircraft being owned by lessors in 2000, to that number recently breaking the 50% barrier. There is a real possibility that the pandemic may further accelerate this longer-term shift. Lessors funded 55% of new Airbus deliveries in 2020 and there is a belief in some circles that the percentage of leased aircraft could climb towards the 60% mark over the next few years,” said Kieran O’Brien.

This has meant a busy time for the KPMG aviation team said O’Mara. “Like most businesses, we were preparing for the worst in March 2020, but thankfully that never came to pass. Last year we spent a lot time helping clients manage the crisis, through complicated lease restructurings and significant debt raises. From the start of 2021 we have worked on even more interesting projects, whether it is large capital markets deals, significant M&A activity or helping new entrants establishing new leasing platforms in Ireland. The resilience and drive of our team during what has been a challenging time on many fronts has been extraordinary.” 

What's ahead?

What does all this mean for Ireland and its place at the centre of the aviation finance? “We are well placed to continue to be the market leaders”, said O’Mara. “Talent, track record and the tax environment are key for us maintaining our competitive advantage. While there are significant changes coming on the international tax front as a result of BEPS, I don’t see these materially eroding the tax benefits Ireland can offer.”

The current wave of market consolidation may also cause some people challenges in the near term but O’Brien notes “the sector has always attracted smart, driven people and those that join the leasing sector rarely leave. Given the continued investor interest, you would be hopeful that we will see new platforms continue to establish and grow in Ireland and that ultimately will result in employment in the sector continuing to grow too”. 

This article originally appeared in the Sunday Business Post and is republished here with their kind permission.

Get in touch

The pace of change is challenging leaders like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with our team below. We’d be delighted to hear from you. 

More in Aviation Finance