Fitch Confirms Stable 'Asf' Rating for Willis Lease's New $393M Engine Trust

Fitch Ratings has assigned final ratings to the notes issued by Willis Engine Structured Trust IX (WEST IX). This action secures $392.9 million for the latest aircraft engine asset-backed securitisation (ABS) from Willis Lease Finance Corp. (WLFC).

WEST IX’s $337.4 million Series A notes received an ‘Asf’ rating. The $55.5 million Series B notes were assigned an ‘A-sf’ rating. Both series carry a Stable Outlook, reflecting confidence in the underlying aviation assets and transaction structure. This marks the 10th aircraft engine ABS trust sponsored by WLFC.

Transaction Overview and Collateral

The notes are backed by lease payments and sale proceeds from a portfolio of assets. This portfolio includes 47 aircraft engines and two airframes. WLFC, the sponsor and servicer, manages the ongoing leasing and maintenance activities.

Key Asset Quality Drivers

Fitch highlighted the strong asset quality as a positive rating driver. Approximately 59% of the pool value supports new-generation aircraft. These include engines for the Airbus A320neo and Boeing 737 MAX families. Another 40% of the pool consists of engines for the widely-used A320ceo and 737 NG aircraft. The remaining 1% is one engine for an Embraer E190 regional jet.

• Tier I aircraft collateral makes up 97% of the pool, indicating high-demand assets.
• The pool is diversified across 47 engines and two airframes, leased to 19 lessees in 14 countries.
• The top three lessees—Delta, VietJet, and Air India Express—represent 34% of the portfolio’s value.

Aviation Finance Market Impact

The successful issuance of the WLFC Series A notes provides crucial liquidity for the commercial jet engine leasing market. Proceeds will be used to acquire the assets from WLFC and refinance existing debt. This transaction is a key indicator of investor appetite for aviation-backed securities.

Fitch views WLFC as a strong servicer due to its history and ability to remarket engines. The transaction structure includes protective features for noteholders. These include a liquidity facility and debt service coverage ratio (DSCR) triggers.

Rating Sensitivities and Risks

Rating agencies consider the cyclicality and volatility of the commercial aviation industry. Fitch tested the transaction against stressed scenarios:

• A 10% drop in residual value realization would lower both note ratings by one notch.
• A combined stress of lower lessee credit quality and a 10% value drop could lead to a one-to-two notch downgrade.

The weighted average Issuer Default Rating (IDR) for the lessees is between ‘B+’ and ‘BB-’. This is considered stronger than most aviation asset-backed securitisation deals. However, the relatively short average remaining lease term of 2.5 years offsets this strength. Six engines, representing 14% of the pool value, are currently off lease.

This financing structure helps airlines maintain operational flexibility. It allows them to access engines without large capital expenditures. The continued demand for spare engines, especially for popular models like the A320neo and 737 MAX engines, underscores the importance of the engine operating lease trust model in global commercial aviation news [flying.flights].