Return to https://www.castlelake.com/2021-esg-report.x-draft.html#case-studies

Promoting Fuel-Efficient Aircraft Through Aviation Lending

Within our aviation strategy, we remain committed to lowering emissions and measuring the carbon footprint of our aviation fleet, as well as enhancing resource efficiency and operational technology both within our firm and across the industry. Castlelake’s aviation lending strategy, which we launched in November 2020, plays an important role in this overall effort.

We have conducted a granular analysis of the pandemic’s impact on the world’s airlines and their fleets, as well as its effect on airlines’ plans to retire older aircraft and bring in newer, more fuel-efficient models. While pandemic-induced capacity rationalization helped airlines in this effort, COVID-19 also created a significant capital dislocation. We believe that traditional sources of financing are no longer lending at affordable levels, leaving many airlines with insufficient capital to take delivery of new aircraft.

Through our lending strategy, Castlelake has stepped in to help address the shortage and facilitate the transition to more fuel-efficient aircraft. As an example, we recently reached an agreement to provide a loan to one of the world’s largest airlines, enabling it to take delivery of four newer Boeing 787-9 aircraft, a more fuel-efficient model that the airline will purchase intends to purchase in the near-term.

Despite leading the world by traffic and overall fleet size, the airline had seen a severe reduction in passenger demand since the beginning of the global pandemic, resulting in a 65% year-over-year loss of revenue, or about $7 billion as of Q1 2021. Castlelake believed the airline would pull through the crisis, however, due to its strong balance sheet and market position. We recognized that the 787-9 aircraft represented a key aircraft for the airline’s future fleet plans, serving as a critical asset for its popular long-haul routes while also helping the airline transition to lower GHG emissions.

Our loan to the airline demonstrates how we integrated ESG principles into our investments while continuing to deliver on our mission to generate risk-adjusted returns for our investors. By offering competitive financing solutions that helped airlines acquire newer and more fuel-efficient aircraft in a period of disruption rather than delay these efforts, we believe we have played an important role in accelerating the transition to lower emissions while supporting an industry that offers economic and social benefits worldwide.