Airline recourse/aircraft ABS debt has minimal Middle East airline exposure

The ongoing volatile Middle East conflict in Iran and surrounding countries and resulting disruptions to the aviation sector across the region will not have a material effect on the aviation debt in the short term across airline recourse and EETCs, loan/lease asset-backed securities (ABS), and secured loans transactions that we rate. Furthermore, while air travel in the Middle East and Asia-Pacific regions is severely disrupted, we see no material immediate near-term impact in the ability of aircraft leasing companies to adequately service their leased aircraft that back rated aviation debt transactions.

This conflict has led to the temporary shutdown of the airspace over Bahrain, Jordan, Iran, Iraq, Israel, Kuwait, the United Arab Emirates, and Qatar, closing major international airports. Moreover, five Middle Eastern airports, including Dubai International Airport and Zayed International Airport in Abu Dubai, have been hit by Iranian missiles or drones. As a result, airlines have canceled thousands of flights, stranding travelers throughout the region.

The aviation industry is experiencing severe disruptions across the Gulf region, given that the major international airports in Doha, Dubai, and Abu Dhabi are large connecting hubs used by global airlines to link travelers between the east and the west. According to the International Air Transport Association (IATA), the Middle East region accounted for approximately 9% of global air passenger volume in January 2026. Further, there is a major disruption to flights between Asia-Pacific and Europe as closures of airspace over the Middle East have severely limited available flight routes between these two regions, while all these events are also compounded by the closure of Russian airspace, all combining to create challenging route scenarios for airlines across these regions.

Aircraft Loan and Lease ABS

We rate one aircraft lease ABS transaction, AASET 2024-2 serviced by Carlyle Aviation Management Ltd. (a subsidiary of Carlyle Aviation Partners), which has no Middle Eastern airline lessees in the pool.

Meanwhile, the six rated loan ABS (or collateralized loan obligation (CLO)-like aviation loan ABS transactions) in our portfolio have limited exposure to airlines in the region. Five of these transactions were issued from the PK ALIFT platform, and one was issued by volofin Finance (Ireland) Designated Activity Company (VFIN 2024-2) serviced by volofin Capital Management Ltd. We are not concerned about any exposures or deal performance impact from the conflict at this time, and each transaction has performed well and within our expectations to date through early March. We will continue to monitor the events over the coming months for any meaningful deterioration in airline credits in pools across these six outstanding transactions.