Avation PLC Reports US$110M Expected Revenue and US$416.8M Debt Reduction in Trading Update

What are Senior PIK Toggle Notes due 2026?

PIK stands for “payment-in-kind”, a feature that allows interest to be paid by issuing more debt rather than cash. A “toggle” lets the issuer switch between cash interest and PIK. These notes are senior within their structure but typically carry higher cost. Buying them back below face value can reduce future interest expense and 2026 refinancing risk.

Avation’s ongoing buybacks suggest the notes are trading at a price where repurchases make economic sense. That is a rational use of surplus cash if it does not pinch liquidity.

The maturity wall: US$298.0 million still due in 2026

The company has made visible progress, but the remaining US$298.0 million due 2026 is still the key refinancing task. Improved ratings (see below) help, as does a fully placed fleet, but investors will want colour on the refinancing plan at results. Expect questions on timing, cost of capital, and the mix between further buybacks, asset sales, and new secured debt.

Ratings upgrades to B1/B: a welcome tick up, still sub-investment grade

Moody’s has assigned a B1 corporate family rating and Fitch a B long-term issuer default rating. That is an improvement and signals a stronger credit profile than in recent periods. Better ratings can lower borrowing costs and widen funding options, which matters with 2026 maturities approaching.

It is still firmly non-investment grade, so finance will not be cheap. But each notch up can translate into real savings when refinancing or issuing secured loans against aircraft.

Leasing progress, fleet mix and a de-risking asset sale

Management says the ATR orderbook has been successfully leased to new and existing airlines, the narrowbody fleet has expanded, and a widebody has been contracted for sale at a profit. In plain terms: turboprops (ATR aircraft) are placed, single-aisle jets have grown, and a large twin-aisle is being monetised.

That widebody sale is described as “contracted”, not completed, and the profit is not quantified. Still, it fits a prudent playbook: sell a larger asset to recycle cash, reduce concentration risk, and support buybacks or capex without pressuring liquidity.

Positives, drawbacks and my read

• Positive: Five-year net debt reduction of US$416.8 million shows discipline and resilience through a volatile period for aviation finance.
• Positive: Continued note buybacks reduce refinancing risk and likely lower interest expense over time.
• Positive: Ratings upgrades to B1/B can further ease funding access and pricing.
• Positive: Fully leased, fully utilised fleet underpins cash generation and minimises downtime risk.
• Watch-out: US$298.0 million of 2026 notes remains the big job. The path – more buybacks, asset sales, or secured refinancing – needs clarity.
• Watch-out: Revenue is given without profit, cash flow, or comparison – we will need the full set of numbers in October to assess earnings quality.
• Watch-out: The widebody sale is not yet closed; timing and proceeds are not disclosed.

Overall, this is a tidy update. It signals operational momentum and continued deleveraging, with credible steps taken against the 2026 maturity. The tone is confident without being promotional, which I like.

What to watch into results on or around 3 October 2025

• Refinancing plan for the 2026 notes: target mix between further buybacks and new debt, expected pricing, and timelines.
• Cash flow detail: operating cash flow, capex, and liquidity headroom to support ongoing buybacks.
• Widebody sale: completion status, proceeds, and where the cash will be allocated.
• Lease placement and fleet development: any new ATR deliveries, narrowbody additions, or extensions with existing customers.
• Rating outlooks: whether Moody’s or Fitch see potential for further upgrades if deleveraging continues.

Bottom line

Avation is doing the right things: keeping the fleet working, selling at a profit where it makes sense, and steadily taking down debt. The next catalyst is the full-year print in early October, where the market will look for a clear 2026 refinancing roadmap and proof that cash generation matches the confident language here. For now, the direction of travel looks positive, with the remaining notes stack the key swing factor for equity holders.