(Yicai Global) July 20 -- Bohai Leasing and other major Chinese aircraft leasing firms which depend on international clients are feeling the pinch as the Covid-19 pandemic continues to take a heavy toll on the global travel industry.

Bohai, the world's third-largest aircraft leasing firm, is facing a slew of payment delays, defaults and the risk of airline bankruptcy, the company warned last week.

The Beijing-based firm predicts losses of up to CNY2.7 billion (USD386 million) in the first half, compared with CNY1.8 billion profit made in the same period last year, although half of that was due to the one-off sale of assets, it said.

The majority of Bohai’s leasing business is outside China. Some 55 percent is in the Asia Pacific region, which includes China, 26 percent is in Europe and Africa and the US accounts for 19 percent. As a result it has been harder hit than many of its Chinese peers.

Firms that rely on international clients are likely to face great uncertainty for many years to come, said Kong Xiang’an, a vice president and senior analyst at the department of financial institutions at Moody’s. They will have to make concessions on their rates and lease renewal terms in order to ensure their fleet remains in use. As a result, profits will fall.

To make matters worse, Bohai’s major shareholder, HNA Capital Group, is part of the cash-strapped conglomerate HNA Group. The decline in the value of its aircraft and the impairment due to airline defaults will also impact on Bohai's credit rating, Kong added.

The situation is different for the majority of Chinese aircraft leasing companies which depend on the domestic market, an industry insider told Yicai Global. Although passenger numbers remain much lower than before the outbreak, flights within China are mostly back to normal.

They are also mainly backed by big banks or state-owned firms, which makes it easier for them to leverage funding, Kong said.

Airplanes in China are leased on average for ten years, and a considerable number of these leases will expire soon, an executive at a finance firm told Yicai Global. However, how to dispose of these aircraft will be a major issue for many companies, he added.

Editors: Tang Shihua, Kim Taylor