Global Knafaim: The cash is there, but 2026 still has to replace Delta

Company Overview

Global Knafaim is not an airline, and it is not a scaled aircraft lessor either. It is a small public vehicle, controlled by Knafaim Holdings, running a concentrated mid-life aircraft leasing book. Even the reported fleet size needs nuance. At the publication date the company refers to four aircraft, but one of them, the Boeing 737-800, still sat on the December 2025 balance sheet as only a $0.5 million deposit and was acquired only in February 2026. Another, the A330-300, is a body-only position, while the engines belong to a partner.

What already works is clear. At year-end 2025 the company had about $41.2 million of cash and deposits, against $23.8 million of bank debt and $9.6 million of bonds. Equity-to-assets stood at 56%, far above the 15% bond covenant threshold, and equity stood at $61 million against a $48 million minimum. This is not a company entering 2026 under immediate covenant stress.

But that balance-sheet comfort can be misread. Revenue fell 20% to $8.131 million, fourth-quarter revenue fell 28% year on year, fourth-quarter EBITDA fell 36% to $1.291 million, and 44% of 2025 customer revenue came from two buckets that are already in transition: 27% from Delta, after the company sold the two A220-100 aircraft leased to it during 2025, and another 17% from Sunclass, whose A330-300 lease is now expected to end in June 2026. The live bottleneck is not covenant headroom. It is whether the A320, the 737, and the A330-300 follow-on lease can rebuild the earning base that was sold or rolled off.

That matters even more because the equity is small and illiquid. On April 6, 2026 the share traded at 93.9 agorot, implying a market cap of about NIS 152.5 million on roughly 162.4 million shares outstanding, while daily turnover was only about NIS 112 thousand. In a vehicle of this size, one aircraft deal, one refinancing, or one maintenance event moves the whole story.

Quick Economic Map

One more detail explains the scale. The company has no employees and receives management services from the parent. The annual management fee was $1.5 million in 2025. Against $8.131 million of revenue, that is a fixed overhead layer worth 18.4% of revenue and about 25.1% of gross profit. In other words, fleet expansion is not only a growth lever. It is also how the company tries to absorb its fixed overhead better.

Events and Triggers

Trigger one: the Delta disposals cleaned up the balance sheet, but they also removed long-duration cash flows. In April and June 2025 the company sold the rights in the two A220-100 aircraft leased to Delta Air Lines through the end of Q2 2035. The first deal generated about $15 million of free cash and a capital gain of about $2.2 million after repaying roughly $19.6 million of debt. The second generated about $14 million of free cash and a $1.3 million capital gain after repaying roughly $19.3 million of debt. This helped liquidity sharply, but it also replaced long-duration leased assets with shorter, more active ones.

Trigger two: the A320 is already in the book, but it is not a passive carry asset. At the end of May 2025 the company acquired an A320-200 leased to Volaris. Gross purchase cost was about $28.3 million, while the net payment was about $17.6 million, in addition to a $1 million deposit placed earlier. Most of the gap reflects about $10.4 million of historical lessee maintenance reserves that the company assumed together with the aircraft. That is not fresh cash. It is a maintenance liability transferred into the structure.

Trigger three: the 737 transaction changes the 2026 risk layer. The deal was approved in November 2025, the purchase agreement was signed on December 30, 2025, the loan agreement was signed on February 5, 2026, and closing took place on February 10, 2026. Total cost was about $25 million, net cash paid was about $15.2 million, and the company also stepped into about $8.4 million of existing lessee reserves. The key difference is in funding: up to $16 million of financing, full Recourse to the company, SOFR plus a 2% to 3% spread, Cross Default, and a change-of-control clause. That is already a different funding profile from what the December 2025 balance sheet still showed.

Trigger four: the A330-300 can become a high-cash-yield asset, but for now it remains an open execution item. The A330-300 is currently leased to Sunclass, but in February 2026 the lessee exercised an early-termination right that brings lease end forward to June 2026, subject to compensation that does not materially change the expected receipts. In December 2025 the company signed an LOI with a new European lessee for about three years and about $3 million of lease receipts attributable to the company’s body interest. That is interesting because the fuselage is debt-free, but it is still not a binding lease.

Trigger five: the outside market still gives the company credit. On September 30, 2025 S&P Maalot reaffirmed the company at ilBBB with a stable outlook and the bond series at ilBBB+. That is an external sign that the balance sheet is seen as more stable. It still does not eliminate the gap between a clean 2025 snapshot and a more complex 2026 funding mix.

Efficiency, Profitability and Competition

The core story of 2025 is portfolio substitution rather than clean operating improvement. The company sold the Delta aircraft, cut debt, added the A320, and completed the 737 only after the balance-sheet date. The balance sheet improved faster than the recurring operating engine.

What Really Remains After Selling the Delta Aircraft

Revenue fell 20% in 2025 to $8.131 million. This was not a general market collapse. It was the direct result of the two Delta A220 disposals in Q2. Operating expenses fell 45% to $2.15 million, largely because the company stopped depreciating the sold aircraft while the A320 only started contributing depreciation from the end of May. That is why gross profit fell only 3% to $5.981 million. It looks resilient, but part of that resilience comes from disappearing depreciation rather than better lease quality.

Other income of $3.885 million explains much of the gap between the operational picture and reported earnings. Most of it came from about $3.458 million of gains on the Delta aircraft sales, plus a $226 thousand reversal of impairment on the A330-200 and a $95 thousand fair-value gain on the investment property. These are legitimate earnings items, but they do not mean the recurring lease engine improved by the same amount.

Finance expense also tells a transition story. Net finance expense rose to $2.729 million from $1.74 million in 2024. The main reason was not a higher ongoing interest burden, but the disappearance of a 2024 gain tied to the partial TUS monetization, plus the immediate expensing of about $0.7 million of residual issuance costs on the Delta aircraft loans that were repaid during the year. In other words, the benefits of lower leverage have started to come through, but 2025 still carries part of the closing cost of the old book.

The Fourth Quarter Shows That the Run Rate Has Not Been Rebuilt Yet

The fourth quarter matters because it gets much closer to the post-Delta picture. Revenue was only $1.819 million, down 28% year on year, and EBITDA fell 36% to $1.291 million. Net profit of $746 thousand looked better than the operating run rate because the quarter also included about $0.2 million of fair-value income from the investment property, while net finance expense eased somewhat.

That is the real read-through. 2025 still did not include a full-year contribution from the A320, since it was acquired only at the end of May, and it obviously did not include the 737, which closed in February 2026. But it already no longer included Delta beyond the first half. Anyone trying to understand today’s earning power should therefore spend less time on the annual net profit figure and more on the fourth-quarter run rate, the contract structure, and the 2026 bridge.

What Competition Means for a Small Lessor

The industry backdrop is still supportive. The company describes an aircraft market with continued supply shortages, weak delivery growth at Boeing and Airbus, and solid demand for mid-life aircraft. That is exactly why it moved into the A320 and 737 transactions. But the same filing also says competition in the secondary market has intensified because more capital has entered the sector and more players are now bidding for used-aircraft opportunities. So the company is not only benefiting from the industry window. It also has to execute quickly enough to win deals that still justify a double-digit equity return.

Cash Flow, Debt and Capital Structure

The All-In Cash Flexibility View

The right framework here is all-in cash flexibility. The central question is not how much EBITDA the company can show, but how much real room it has left after actual cash uses and after obligations already sitting on the balance sheet.

At year-end 2025 the company had $12.377 million of cash and cash equivalents, $18.81 million of current bank deposits, and another $10 million of non-current bank deposits, or $41.187 million in total. That is a sharp increase from the prior year. But the source of that increase was not recurring lease cash flow alone. Operating cash flow was only $4.315 million. Investing activity generated a net $34.649 million because the company received $68.346 million from the Delta aircraft sales, $2.159 million from monetizing the residual TUS stake and shareholder loans, and $1.066 million from the partial Sde Dov real-estate sale, against $18.112 million of aircraft investment and $18.81 million placed into bank deposits.

Put differently, 2025 cash was built mostly through asset rotation. That is not a flaw. It is part of the strategy. But it does mean the year-end liquidity position is a function of monetization and recycling, not just of a recurring lease engine that is already scaling up on its own.

What Looks Like a Cushion, and What Is Already Spoken For

There is a narrow way to look at the balance sheet and say the company even carries excess liquidity: $41.2 million of cash and deposits against $33.4 million of gross bank debt and bonds. But that is too narrow. Sitting against that liquidity are also $14.12 million of lessee-deposit liabilities, versus only $3.434 million a year earlier. Most of the increase came from the A320 acquisition, where the company stepped into roughly $10.371 million of pre-existing lessee maintenance reserves. That is not financial debt, but it is also not free dividend cash.

The company itself makes that point indirectly. It says that the current cash-and-deposit position, after taking into account future obligations tied to the existing fleet and a minimum cash buffer, is sufficient for about $75 million of aircraft deals, roughly three aircraft in its target market segment. In other words, the cash is real, but it already has a job: maintenance support, a safety buffer, and equity funding for new deals.

Debt, Covenants, and the Gap Between the 2025 Snapshot and 2026 Reality

Bank debt fell in 2025 from $52.436 million to $23.829 million, and the bond balance fell from $10.174 million to $9.577 million. That is a material clean-up. Bond covenants are comfortably wide: equity-to-assets at 56% versus a 15% minimum, equity at $61 million versus a $48 million minimum, and cash in the covenant sense at $41.2 million versus a $10 million minimum. The banks do not impose financial covenants either. So the active pressure point today is not covenant stress.

But the annual report still gives a somewhat cleaner picture than the one the company is already carrying into 2026. As of December 31, 2025 the entire credit book was fixed-rate, and the bank loans were non-recourse. After the 737 closing in February 2026, the company itself says that about 77% of the credit book is fixed-rate. A new risk layer has therefore already entered the story: part of the debt is now SOFR-based, the new loan is Recourse, and it carries Cross Default and change-of-control language. Anyone reading only the year-end balance sheet does not fully see that.

The company’s own lease-receipts-versus-debt-service table is especially useful because it separates the comfortable cash balance from the self-funding power of the signed contracts. In the first two periods, 4/26 to 3/27 and 4/27 to 3/28, expected lease receipts of $8.59 million and $7.6 million are below even regular principal-plus-interest debt service of $9.106 million and $8.895 million, before balloons. In 4/28 to 3/29 and 4/29 to 3/30 the picture looks manageable before balloons, but then $21.293 million and $5 million of balloon repayments appear.

The company explicitly says it expects to handle those balloons through re-leasing, refinancing, or aircraft sales. That is reasonable in aircraft leasing. But it is also a reminder that the current portfolio does not fund itself from signed rent alone. It depends on existing liquidity, refinancing ability, and residual value realization.

Outlook

Finding one: 2025 was a monetization-and-replacement year, not an organic acceleration year. The company sold two long-duration Delta A220-100 aircraft, freed capital, and replaced them with shorter, more demanding assets. Anyone focusing only on lower debt is missing that the company also deliberately moved up the operating-risk curve.

Finding two: the less comfortable part of 2026 sits after the balance-sheet date. As of December 31, 2025 one could still say that the entire credit book was fixed-rate and non-recourse. In reality, February 2026 already brought in the 737 with Recourse SOFR funding, a $6 million credit facility, and maintenance participation that may reach about $5 million.

Finding three: the core asset, the Iberia A330-200, is relatively stable, but even there the valuation is not neutral. The September 30, 2025 value-in-use analysis assumed that Iberia would exercise its extension option and keep the aircraft through Q2 2030, and based on that assumption the company reversed $226 thousand of prior impairment. That is not a large number on its own, but it does show that the largest asset in the book already leans partly on an extension scenario.

Finding four: the A330-300 can become a very attractive asset precisely because it is debt-free at the fuselage level, but right now it is still an option rather than a fact. If the LOI becomes binding, the company should receive about $3 million of lease income attributable to its share over roughly three years, plus reserves. If it does not, then 17% of the 2025 revenue base remains open just as the newer assets are still early in their cycle.

Finding five: 2026 looks like a proof year. Not a breakout year, and not a reset year. The company has already done the clean-up, and it has explicitly said it is targeting double-digit equity returns on new deals. Now it has to show that it can actually earn those returns without turning the cash cushion into a thin one.

2026 Is a Proof Year, Not a Harvest Year

Management is now explicitly targeting mid-life narrow-body aircraft, known but not necessarily top-tier lessees, and at least a double-digit average annual return on invested equity in each deal. That is an important statement because it explains the move from Delta toward Volaris and Eastar Jet. Delta offered longer-duration paper and higher asset quality, but also lower equity returns. The new acquisitions are supposed to improve returns, at the price of heavier maintenance exposure, more deal-specific funding, and more active execution.

That means 2026 will not be judged by whether the company has enough cash to buy another aircraft. That question is already answered. It will be judged by three others: whether the A320 can produce a full year without giving back too much through maintenance economics, whether the 737 justifies the step up into Recourse and variable-rate debt, and whether the A330-300 remains continuously leased or opens a cash-flow gap.

What Supports the Thesis

The company still has several solid anchors. The first is Iberia. The A330-200 generated 38.5% of customer revenue in 2025, the original lease term runs through the second half of 2028, there is an option into 2030, and in May 2025 a sublease to Level was signed while Iberia itself remained the guarantor. That is the anchor asset in the fleet.

The second is liquidity and covenant room. Even if the signed contracts do not self-fund all future debt service on their own, the company has time, cash, deposits, unencumbered assets, and access to credit markets. So the current risk is less a distress risk than an allocation-discipline risk.

The third support is the sector backdrop. The company describes a market where demand for mid-life aircraft remains strong, new-aircraft supply remains constrained, and airlines continue to lean on leasing as a practical answer. That is exactly the window in which a small lessor with a cleaner balance sheet can try to grow.

What Is Still Missing

First, the A330-300 needs a binding follow-on lease. The LOI is a good start and even includes a seriousness deposit, but it is still not a contract. Until that turns binding, the fleet still rests on one large stable asset, one newly added asset that has not completed a full cycle yet, and one even newer asset that entered only after the balance-sheet date.

Second, the market still needs one or two quarters of evidence showing what remains after funding and maintenance. In the A320 transaction the company stepped into $10.4 million of prior lessee reserves. In the 737 transaction it stepped into about $8.4 million of reserves and may still have to fund up to $5 million of additional maintenance participation. These are standard structures, but they are exactly where a “cheap” aircraft can become less cheap in real cash terms.

Finally, management itself has marked the boundary. It says that the current cash position supports roughly three aircraft, around $75 million of deals, and that any expansion beyond that would require additional equity or debt capital. That means the company cannot keep accelerating without another market test if it wants to scale materially faster.

Risks

Lessee Risk and Fleet Transition Risk

All 2025 customer revenue came from four lessees. Iberia accounted for 38.5%, Volaris for 17.5%, Sunclass for 17%, and Delta for 27% until the aircraft were sold. Even though Delta is already out of the book, the point remains: in a portfolio this small, one aircraft change can redefine the whole profile. The real risk is not only default. It is also the gap between an asset leaving and the replacement asset becoming fully seasoned.

Maintenance, Funding, and FX

The A320 and the 737 are not assets that simply throw off passive lease rent. In the A320 there are no monthly maintenance-reserve payments, and the end-of-lease economics depend on a true-up against the aircraft’s maintenance condition. In the 737 there are monthly reserves, but the company may still have to participate in maintenance costs by as much as $5 million beyond the relevant reserve balance. On top of that sits the new funding layer: the 737 loan is SOFR-based, Recourse, and carries Cross Default.

FX exposure looks managed, but not eliminated. The shekel bonds are hedged with dollar-shekel options, and the fair value of the hedge position was a $220 thousand asset at year-end 2025. The company says a 10% strengthening of the shekel would have implied about $0.7 million of expense, versus about $0.2 million of income if the shekel weakened by 10%. This is not the heart of the thesis, but it is a reminder that the shekel funding structure still carries a real economic cost.

Liquidity, Control Structure, and Capital Discipline

Share liquidity is very weak, which matters because any fleet expansion beyond what current cash can support will not make equity raising trivial. At the same time, the company depends operationally on a management agreement with the parent, has no employees of its own, and pays a fixed $1.5 million annual management fee. In a four-aircraft vehicle, that is a relatively rigid cost layer that makes capital discipline unusually important.

One additional risk sits on the edge of the filing. In December 2025 the government adopted a decision in principle to cut the tax depreciation rate recognized on aircraft acquired from 2026 onward from 30% to 5%, although legislation had not advanced by the report date. If that rule is eventually enacted and also applies to used aircraft, it could alter cash-tax timing and change the economics of future acquisitions.

Conclusion

Global Knafaim finishes 2025 in a better position than it occupied a year earlier. It has more liquidity, less debt, wider covenant room, and a clearer strategy. But it is still not a company that has already proved that the new fleet works better than the fleet it sold.

Current thesis in one line: Global Knafaim has gone through a real balance-sheet clean-up, but 2026 will decide whether that was value creation or just a clean asset swap on paper.

What changed from the old picture is straightforward. The company exited TUS, monetized the two Delta aircraft, acquired the A320, completed the 737 after the balance-sheet date, and moved from a more defensive structure toward one that explicitly targets higher returns on equity. What remains unresolved is just as clear: the new revenue base has not been tested enough, the A330-300 still depends on an unsigned follow-on lease, and the 737 already adds variable-rate Recourse funding to the mix.

The strongest counter-thesis is that the market may still be too conservative. On that view, the company now has an anchor Iberia asset, a debt-free A330-300 body interest, enough cash to be patient, and an industry backdrop that still supports mid-life aircraft. If the follow-on leasing and the new deals work as intended, the company could look larger and more profitable faster than the market currently assumes.

What may change the market’s interpretation over the next few quarters is not another clean year-end balance-sheet line. It is a sequence of proof points: a binding A330-300 follow-on lease, full-quarter evidence from the A320 and the 737 after funding and maintenance, and a cash position that remains comfortable even if the company adds another aircraft.

Why this matters: because in a vehicle of this size, the whole story is whether clean cash can be turned into a better aircraft book.

What has to happen over the next 2 to 4 quarters for the thesis to strengthen is clear: the A330-300 needs a binding follow-on lease, the A320 and the 737 need to prove their economics after funding and maintenance, and the cash cushion needs to remain comfortable without forcing earlier-than-planned capital raising. What would weaken the thesis is just as clear: a failed rollover, heavier-than-expected maintenance, or a need for new capital earlier than management currently implies.