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The Middle East represents less than 12% of the fleet value of global lessors under our coverage.

We are not concerned about lease payments, as a significant proportion of their Middle East exposure is to government-controlled airlines, which should receive liquidity support in a stress scenario.

We do not think the Middle East airlines can seek cancellation or postponement of scheduled deliveries by invoking force majeure under the current circumstances, but new orders may decline if the conflicts persist for an extended period, or that the airlines believe that secular demand destruction for traffic through their Middle East hubs has occurred.

We believe the greater challenge could come from the fuel shock – with insufficient hedging and lagged pass-through, soaring jet fuel will hit airlines’ profitability and cashflows.

We expect lease delinquencies to rise among weaker airlines if fuel prices remain elevated for a prolonged period, but the impact on lessors should be manageable, supported by sustained aircraft shortages.

Higher fuel costs should also increase demand for new-technology aircraft, which favors top lessors, as new-tech aircraft comprise the majority of their owned fleets and orderbooks.

Financing costs could rise if the Fed turns more hawkish in response to higher inflation.