Lunar Aircraft 2020-1 notes affirmed as aircraft ABS shows stronger amortization

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Lunar Aircraft ABS notes

Highlights

Lunar Aircraft 2020-1 Limited's series A notes affirmed at 'Asf' (Stable) and series B notes at 'BBB+sf' (Positive) after July 2026 review, with full repayment of C notes and A/B balances amortizing ahead of schedule.
Aircraft pool valuation decreased to $138 million, down 3% from July 2026, improving loan-to-value ratios to 40.3% for A notes and 46.8% for B notes.
Lessee credit quality remains weak—84% rated 'CCC' to 'CC'—while Fitch maintains a Neutral 2026 aviation finance outlook but flags deteriorating airline sector sentiment and persistent Middle East risk.

Rating action follows updated aviation ABS criteria

As reported by Fitch Ratings, the agency has affirmed Lunar Aircraft 2020-1 Limited's series A notes at 'Asf' and series B notes at 'BBB+sf'. The outlook remains Stable for the A notes and Positive for the B notes, after Fitch placed this transaction and its other aviation asset-backed securities ratings Under Criteria Observation in October 2026 following publication of new aviation ABS rating criteria.

The ratings reflect current transaction performance, modeled cash flows and coverage levels based on lease terms, lessee credit quality and operating performance. Fitch says no material changes have occurred since its July 2026 review other than the full repayment of the C notes, while the A and B balances continue to amortize ahead of schedule.

The agency values the Lunar aircraft pool at $138 million, down $4 million, or 3%, from the July 2026 review because of depreciation. Based on that value, loan-to-value metrics improved to 40.3% for the A notes from 41.1%, and to 46.8% for the B notes from 47.8%.

The collateral pool consists of 10 narrowbody aircraft with a weighted-average age of 16.4 years, leased to seven lessees in seven countries. Fitch identifies Avion Malta as the largest exposure at 22% of the pool by value and says concentration risk is likely to increase over time as aircraft are sold closer to the end of their leasable lives.

Weak lessee credit remains key risk for aviation finance

Fitch says the pool remains heavily concentrated in lessees with weak credit quality, assigning ratings of 'CCC' to 'CC' to 84% of the pool by Fitch Value. Several lessees also have outstanding arrears, although delinquencies have marginally decreased since the prior review and the agency has maintained the lessee credit ratings used previously.

Despite that weak lessee profile, Fitch says the metal value of the remaining aircraft relative to outstanding note balances supports strong modeling results. The agency also considers Deucalion Aviation Limited to be an effective servicer based on its lessor experience, servicing capabilities and historical ABS performance.

For the broader market, Fitch keeps its 2026 asset performance outlook for aviation finance at Neutral, citing global passenger traffic growth broadly in line with or modestly below long-term trends and continued tight aircraft supply. At the same time, its 2026 outlook for the global airline sector is Deteriorating because of pressure from higher jet fuel prices, possible weaker demand from higher ticket prices and wider macroeconomic risks.

Fitch adds that the conflict in the Middle East continues to affect airlines unevenly and is monitoring the potential impact on aviation ABS. The agency expects aviation ABS ratings to remain stable under its baseline scenario, but says downside risks remain high if hostilities, operational disruptions and elevated oil prices persist.

Our earlier article on the WTO’s assessment of conflict-driven trade disruption examined how wars in the Middle East and Ukraine are reshaping global commerce beyond short-term fixes. It highlighted forecasts for a sharp drop in Middle East exports and imports, and noted that firms are redesigning supply chains and shipping routes toward costlier but more resilient options as geopolitical and tariff risks persist.

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