Fitch Affirms Sumisho Air Lease at 'BBB'; Outlook Remains Negative

Published: 2026-05-11 06:19:12 ET AL

Published on 05/11/2026 at 06:19 am EDT

Fitch Ratings has affirmed Sumisho Air Lease Corporation's (SAL; previously trading as Air Lease Corporation) Long-Term Issuer Default Rating (IDR) at 'BBB' and Short-Term IDR at 'F3'.

The Rating Outlook on the Long-Term IDR remains Negative. Fitch has also affirmed SAL and Air Lease Corporation Sukuk LTD's senior unsecured debt ratings at 'BBB', SAL's preferred share rating at 'BB+' and SAL's Short-Term debt rating at 'F3'.

These rating actions are being taken in conjunction with Fitch's global aircraft leasing sector review. For more information on the sector review, please see 'Fitch Completes Aircraft Lessor Peer Review; Revises Sector Outlook to Deteriorating,' available at www.fitchratings.com.

Key Rating Drivers

Negative Outlook: The Negative Rating Outlook reflects the evolution of SAL's business strategy following its completed acquisition by a Sumitomo-led consortium in April 2026 and the associated uncertainty around its long-term business profile and franchise strength. While Fitch views the involvement of SMBC Aviation Capital Limited (SMBC AC; BBB+/ Stable) as a dedicated servicer for a part of SAL's existing portfolio positively, given its expertise in managing a large-scale leasing platform and diversified leasing channels, the sale of its order book to SMBC AC increases uncertainty around the firm's growth trajectory. The firm's new ownership structure also adds complexity, particularly regarding its long-term strategic direction, corporate governance and financial policies.

Fitch may downgrade the rating by one notch over the next 18-24 months if the firm does not maintain a leading global franchise, demonstrate effectiveness of its operating strategy to manage growth and scale, or sustain risk-appropriate leverage. Unforeseen execution challenges impacting key financial targets of its business plan could also trigger a negative rating action.

Established Franchise: The ratings affirmation reflects SAL's liquid aircraft portfolio relative to peers, strong asset quality performance, a predominantly unsecured funding profile, and a meaningful base of unencumbered assets. The credit profile also incorporates Fitch's expectations that the firm will remain an established global aircraft lessor of scale, leverage suited to its portfolio risk profile, and anticipated funding and business profile advantages from its affiliation with Sumitomo and SMBC AC.

Sector Rating Constraints: Rating constraints applicable to the aircraft lessor industry more broadly include the monoline nature of the business; potential exposure to residual value risks, the reliance on wholesale funding sources; and vulnerability to exogenous shocks, including sensitivity to higher oil prices, inflation and unemployment, which could negatively impact travel demand. Fitch also notes the ongoing Iran conflict and risk of protracted jet fuel shortages. While airlines globally have responded by cutting capacity on less-profitable routes, lessors may still face increased requests for lease deferrals. If granted, these deferrals could negatively impact liquidity and internal capital generation over time.

Good Portfolio Diversification: As of March 31, 2026, SAL's portfolio comprised 496 owned and 40 managed aircraft, with the net book value (NBV) of its owned fleet amounting to $28.9 billion. The portfolio is well diversified, with 103 airline customers in 52 countries, and no single customer representing more than 5% of the total portfolio by market value, by Fitch's estimate. Fitch expects SAL's portfolio to be moderately right-sized over time as SMBC AC adopts a more trade-focused portfolio management approach; however, the portfolio mix should remain well diversified by lessee and geography, supporting sustained business profile strength.

Evolving Strategy: Fitch notes some execution risk related to the evolution of SAL's business strategy, which, following the transfer of its order book to SMBC AC, will likely be focused more on active trade sales. While SMBC AC, main servicer of a large portion of the portfolio, has sufficient expertise, some uncertainty prevails around future fleet growth in desirable new technology aircraft absent an order book and given current competitive market dynamics. The new dispersed shareholding structure, which also includes Apollo and Brookfield as minority shareholders, adds to governance complexity and could negatively impact strategic execution.

Solid Asset Performance; Widebody Exposure: SAL's asset quality metrics remain strong, with no impairments reported since 2023. SAL's widebody exposure is above the peer average and expected to remain higher over time. While this implies incrementally higher asset risk, this is mitigated by the portfolio's high quality. The majority of its customers are flag carriers and more than 70% of the widebody aircraft, by value, are comprised of new technology, by Fitch's estimate. The weighted average age of the owned portfolio was five years at March 31, 2026, which compares well to peers. Fitch expects SAL to maintain a relatively young fleet going forward.

Flat Net Spread: SAL's net spread was 4.6% for TTM 1Q26, below the average of 5.3% from 2022-2025, as growth in lease yields continued to lag higher funding costs. This corresponds with the 'bbb' category benchmark range of 5%-15% for aircraft lessors. Fitch expects net spreads to increase incrementally over time, as the company accesses more attractive funding through its shareholder affiliation; however, pre-tax profits will likely be more constrained by servicing and asset trading fees paid to SMBC AC.

Incrementally Higher Leverage Appetite: SAL's gross debt to tangible equity ratio was 2.3x at 1Q26, down from 2.7x in 2024, driven by sizeable insurance proceeds from its Russia/Ukraine exposure. Over the short term, Fitch expects leverage will increase to partially-fund the acquisition; however, over the medium term management plans to manage leverage between 2.5x and 3x, which is within Fitch's 'bbb' benchmark range.

Focus on Unsecured Debt; Adequate Liquidity: SAL's funding mix remains focused on unsecured debt, accounting for 98% of total at March 31, 2026. While Fitch expects funding to remain largely unsecured, market debt is expected to decline as the firm accesses more related party funding through its affiliation with Sumitomo and SMBC AC, which Fitch views favorably for funding flexibility. At March 31, 2026, SAL had $11.1 billion in liquidity, including unrestricted cash on hand and a $3.5 billion revolving credit facility (RCF). Future liquidity needs will be more limited after the transfer of the order book and the repayment of initial 2026 maturities. The firm is targeting liquidity coverage of around 2x, which Fitch considers adequate.

Short-Term IDR: The Short-Term IDR of 'F3' reflects the rating linkage between the Short-Term IDR and SAL's Long-Term IDR of 'BBB' and Fitch's view of the company's funding, liquidity and coverage profile. According to Fitch's 'Non-Bank Financial Institutions Rating Criteria,' a Long-Term IDR of 'BBB' corresponds to a Short-Term IDR of 'F2' or 'F3'. To achieve the higher rating, SAL would have to have a minimum Funding, Liquidity and Coverage (FLC) score of 'bbb+'. SAL's score is currently 'bbb'. Accordingly, Fitch has assigned a Short-Term IDR of 'F3'.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Negative rating pressure could result from a sustained weakening of the firm's franchise and any change in business strategy, especially if this leads to a material reduction in portfolio size that erodes scale efficiencies or produces lower-than-projected net operating income;

Governance challenges resulting from the new ownership structure or SMBC AC's role as the primary servicer negatively impacting franchise strength;

A material increase in secured debt; leverage exceeding 3.0x on a sustained basis as a result of capital returns, impairments or a higher risk appetite; liquidity coverage sustained below 1.5x; net spreads consistently below 5.0%; or an inability to maintain a fleet profile compromising highly liquid Tier 1 aircraft and manageable widebody exposure;

Macroeconomic and/or geopolitical-driven headwinds that pressure airlines and lead to additional lease restructurings, rejections, lessee defaults, and increased losses.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An Outlook revision to Stable over the next 18 to 24 months could be driven by demonstrated execution against the firm's new business strategy, supporting sufficient scale and solid net operating income generation. Additionally, leverage sustained below 3.0x, net spreads consistently above 5.0%, and sources-to-uses coverage sustained around 2x would be required for an Outlook revision;

Beyond that, positive rating momentum could be driven by differentiated risk management and asset quality performance supporting improved business profile strength, sustained improvement in net spread profitability above 7% and maintaining leverage below 2.5x;

A rating upgrade would also be contingent on maintaining a predominantly unsecured funding profile, diversified access to funding sources, and proactive management of near-term debt maturities;

Demonstrated strategic importance and integration of SAL into Sumitomo Corporation and its larger group over time may lead Fitch to consider shareholder support, which may benefit the rating;

SAL's Short-Term IDR is primarily sensitive to the Long-Term IDR and would move in tandem with it. However, an improvement in SAL's FLC subfactor score from 'bbb' to 'bbb+' could result in an upgrade of the Short-Term IDR to 'F2'.

DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS

The ratings on the senior unsecured debt are equalized with SAL's Long-Term IDR, reflecting the unsecured funding profile and availability of sufficient unencumbered assets, which provide support to unsecured creditors and suggest average recovery prospects in a stressed scenario.

SAL's preferred shares are rated two notches below the company's Long-Term IDR, in accordance with Fitch's 'Corporate Hybrids Treatment and Notching Criteria,' dated April 8, 2025. The preferred share rating reflects the deep subordination and heightened risk of non-performance relative to other obligations, namely unsecured debt. Fitch has afforded the issuance 100% equity credit given the noncumulative nature of the distributions, the preferred shares are perpetual and the lack of change of control provisions and events of default.

The CP program rating is equalized with SAL's 'F3' Short-Term IDR.

DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES

The ratings of the senior unsecured debt are primarily sensitive to changes in SAL's Long-Term IDR and secondarily to the level of unencumbered balance sheet assets in a stressed scenario, relative to outstanding debt. A decline in the level of unencumbered asset coverage, combined with a material increase in the use of secured debt, could result in the notching of the unsecured debt down from the Long-Term IDR.

The rating on the preferred shares is primarily sensitive to changes in SAL's Long-Term IDR and is expected by Fitch to move in tandem. However, the preferred shares rating could be downgraded by an additional notch to reflect further structural subordination should the firm consider other hybrid issuances. Fitch has afforded SAL's preferred shares 100% equity credit given the noncumulative nature of the distributions, the fact that the preferred shares are perpetual and the lack of change of control provisions and events of default.

The CP program rating is equalized with SAL's Short-Term IDR and is expected by Fitch to move in tandem with it.

SUBSIDIARY AND AFFILIATE RATINGS: RATING SENSITIVITIES

Air Lease Sukuk, in its capacity as issuer and trustee of SAL's sukuk issuance, is an exempted company with limited liability incorporated in the Cayman Islands under the Companies Act (as amended) on Oct. 27, 2022. Air Lease Sukuk has been incorporated solely for the purpose of participating in the sukuk transaction governed by the underlying Transaction Documents to which it is a party.

The senior unsecured sukuk rating is in line with SAL's Long-Term IDR and senior unsecured debt rating of 'BBB'. The sukuk ratings are driven solely by SAL's IDR. This reflects Fitch's view that default of these senior unsecured obligations would reflect the default of SAL in accordance with the agency's rating definitions.

Fitch has given no consideration to any underlying assets or any collateral provided, as the agency believes that Air Lease Sukuk's ability to satisfy payments due on the certificates will ultimately depend on SAL satisfying its unsecured payment obligations to the trustee as per the applicable transaction documents.

The rating of the sukuk issuance is principally sensitive to changes in SAL's Long-Term IDR. The ratings could also be sensitive to changes to the roles and obligations of SAL under the sukuk's structure and documents.

Fitch will review the sukuk rating if the IDR drops from current levels, or upon the emergence of any information or events which could jeopardize the payment conditions under the indemnity.

ADJUSTMENTS

The Standalone Credit Profile (SCP) has been assigned in line with the implied SCP.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

SAL has an ESG Relevance Score of '4' for Management Strategy due to the execution risk associated with the operational implementation of the company's outlined strategy post transaction close. This has a negative impact on the credit profile and is relevant to the ratings in conjunction with other factors.

SAL has an ESG Relevance Score of '4' for Governance Structure due to the potential governance and conflict of interests associated with its externally managed portfolio for the substantial majority of its fleet. This has a negative impact on the credit profile and is relevant to the ratings in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com

RATING ACTIONS

Entity / Debt

Rating

Prior

Air Lease Corporation Sukuk LTD

senior unsecured

BBB

Affirmed

BBB

Sumisho Air Lease Corporation

LT IDR

BBB

Affirmed

BBB

ST IDR

Affirmed

senior unsecured

BBB

Affirmed

BBB

preferred

BB+

Affirmed

BB+

senior unsecured

Affirmed

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The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.

APPLICABLE CRITERIA

Non-Bank Financial Institutions Rating Criteria (pub. 01 Feb 2025) (including rating assumption sensitivity)

Corporate Hybrids Treatment and Notching Criteria (pub. 08 Apr 2025)

Sukuk Rating Criteria (pub. 14 Oct 2025)

Financial Institutions Climate Vulnerability Rating Criteria (pub. 09 Dec 2025)

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