Story

The Full Story

Avation's narrative across FY2021–H1 FY2026 is a survival-and-refinancing story: management talked through a near-fatal pandemic, a five-year deleveraging programme, and a successful refinancing of the 2026 unsecured notes. The "low-CO2 / sustainable aviation" pivot that dominated the FY2022 reset has quietly receded from headline language as the refinancing topic, customer diversification and credit ratings took its place. The promises that mattered most to creditors — debt reduction, full utilisation, replacement of the 2026 notes — were delivered, mostly on schedule. What is louder now is non-GAAP framing (EBITDA, FFO, lease yield) after a reported loss in FY2025, and what is quieter is the option-pricing-driven gains on aircraft purchase rights that flattered earnings between FY2022 and FY2024.

1. The Narrative Arc

The story has three legible chapters: survive the pandemic (FY21–FY22), deleverage and refit the fleet (FY23–FY24), refinance and re-rate (FY25–HY26). The first chapter was forced; the second was paid for; the third was the management's strategic test, and it cleared the most consequential hurdle — replacing the October 2026 unsecured notes — by December 2025, ten months early.

2. What Management Emphasised — and Then Stopped Emphasising

Three themes have risen as the company's situation improved: refinancing, customer diversification, and non-GAAP performance framing. Three themes have fallen: the pandemic narrative, the off-lease aircraft drag, and — more interestingly — the explicit "low-CO2 strategy" that Jeff Chatfield introduced in FY2022. It still appears in the standard "market positioning" boilerplate, but it no longer leads outlook commentary.

The non-GAAP shift is worth pausing on. EBITDA and FFO did not appear as headline metrics until H1 FY2025; they now lead almost every results release. This coincides with the introduction of significant non-cash drags (option-pricing losses on purchase rights, IFRS 9 amortisation, refinancing redemption losses) into pre-tax profit.

3. Risk Evolution

Three observations:

• Climate-related risks were absent from the FY2021 strategic report and were added in FY2023 as a discrete risk category with a TCFD section. They have remained at moderate emphasis — disclosure-driven, not strategy-driven.
• OEM supply-chain risk is new and rising. Management framed it as a positive in FY2025 (constrained supply props up lease rates) but also as a risk (their own ATR deliveries have slipped from 2024 to Q4 2025+).
• Profit volatility from the option-pricing model is a risk management introduced themselves in H1 FY2025 to justify the proposed JV. This is unusual — most companies do not add new risks; the candour was notable, even if the JV solution went quiet afterward.

What has not changed: the boilerplate framing of airline-industry, asset-value and credit risks is virtually identical in FY2021 and FY2025 risk-factor sections. The substance shifted; the prose did not.

4. How They Handled Bad News

Pattern: operational bad news (repossessions, delivery slippage) is disclosed promptly and with workmanlike detail. Accounting/valuation bad news is reframed using non-GAAP metrics, pre-emptive policy changes, or the FX cross. The FY2025 reported loss is the cleanest example — a $27M swing from profit to loss, simultaneously presented as a 20% EBITDA increase. Both characterisations are technically true.

5. Guidance Track Record

Credibility score: 7/10. The promises that matter most for solvency and capital structure — bond repurchases, the 2026 maturity refinancing, full utilisation, balance-sheet de-leveraging — were delivered, in some cases earlier than guided. Operational guidance (ATR deliveries, off-lease placement) ran 6–12 months late but the company communicated slippage in real time. The deductions: the joint-venture-for-purchase-rights idea was floated and silently abandoned; the ESCC listing transfer was floated and not followed up; the FY2025 dividend re-introduction was technically delivered but at 10% of the pre-pandemic level. None of these are dishonest, but they erode the precision of the management voice.

6. What the Story Is Now

The current story is much simpler than at any point in the prior five years. Avation is a re-rating story now, not a survival story or a green-aviation story. The pitch is: the balance sheet has been rebuilt, three credit ratings have been earned, the maturity cliff has been cleared, the fleet is fully utilised, an orderbook of ten new aircraft is being placed at favourable contract prices, and a small dividend has resumed. The risks worth pricing are: GAAP earnings will remain noisy because of mark-to-model accounting on purchase rights; growth from here requires fresh debt at higher coupons than the legacy book; the management voice is concentrated in a single executive chairman.