The global aviation sector is set to experience one of its most robust periods in recent years, driven by rising passenger demand and limited aircraft supply from manufacturers. Avation plc (LON:AVAP), a leading commercial aircraft lessor, is primed to capitalise on this growth, benefiting from strategic advantages and a solid foundation for expansion.
Recent research from Zeus Capital highlights Avation’s diversified fleet, strong financial performance, and future-focused growth strategies. The company’s results for the financial year 2024 (FY24) underscore its resilience and recovery post-pandemic, with fleet utilisation reaching 100% for the first time since COVID-19. Additionally, Avation holds a promising order book for up to 36 ATR 72 aircraft, a model known for its efficiency and low carbon footprint, aligning well with the industry’s growing emphasis on sustainability.
Avation’s fleet of 32 aircraft, leased to 15 airlines across 13 countries, is a testament to its global reach and diversity. The fleet includes narrow-body, turboprop, and wide-body aircraft, with over half of its value tied to highly sought-after models like the Airbus A320 and ATR 72-600. These aircraft provide operational reliability and eco-friendly benefits, particularly the ATR 72-600, which reduces CO₂ emissions by 45% compared to similar regional jets. This makes Avation’s fleet highly attractive as airlines worldwide adapt to stricter environmental regulations.
The company’s financial performance in FY24 further demonstrates its effective strategic execution. Revenues remained steady at $92.4 million, while adjusted pre-tax profits increased by 80%, reaching $40.8 million. Avation also reduced its net debt to $651.5 million, aided by strong cash collections and successful aircraft sales. This improvement in its financial standing allows the company to strengthen its position in the market and further drive shareholder value.
Zeus Capital’s analysts point out that Avation’s shares are currently undervalued, trading at a 45% discount to their net asset value (NAV). With a fair value estimate of 250p, this represents a compelling 59% upside from current levels, indicating significant potential for the company’s stock to perform well in the future.
Avation’s growth is also supported by its long-term commitments with aircraft manufacturer ATR, including firm orders and purchase rights for up to 36 ATR 72 aircraft. These agreements give Avation the flexibility to expand its fleet or generate immediate cash flow through strategic sales. The company has already realised profits from selling two aircraft from this order, demonstrating the tangible benefits of its purchase strategy.
Looking ahead, Avation is positioned to take advantage of rising lease rates and increasing aircraft valuations. The company’s proactive management and improved balance sheet place it in a favourable position to refinance its upcoming unsecured loan notes, mitigating potential risks.
Avation plc’s strategic vision, operational excellence, and market-driven investments have positioned it as a key player in the global aircraft leasing market. The company’s commitment to sustainability, a diverse fleet, and its ability to generate shareholder value make it well-prepared to thrive in the evolving aviation industry. With strong financials and growth prospects, Avation is set to soar to new heights in the years ahead.
