Aviation leasing: Why AerCap is flying higher than Air Lease
The aviation industry is in the spotlight as part of today's Good Buy or Goodbye. Citi Research Managing Director and Airlines Analyst Stephen Trent joins Julie Hyman to talk about aviation lease operators AerCap (AER) and Air Lease (AL).
Trent underlines AerCap's M&A activity and fleet scale as two of its biggest strengths: "Twenty years ago, looking at the global fleet, 30% of that global fleet was leased. Today, it's closer to 50-50, and with the production problems at Boeing (BA) and Airbus (AIR.PA), I think it's conceivable that the aircraft lessors could even gain a few points."
He goes on to cite AerCap's capital deployments and cash flow generation.
On the other hand, Trent is avoiding Air Lease's stock based on the operator's fleet size and costs its assume.
"Air Lease has a little bit more than 500 aircraft in its fleet in terms of its accounting policy. Air lease will actually not smooth out the additional lease revenue that it receives when customers return planes," Trent explains. "So why is that important? The customers responsible for the airlines, the aircraft operating certificate, and they're responsible for the maintenance. So when they return a plane to the lessor, they're responsible for some heavy maintenance, which gets recorded as incremental lease revenue."
AerCap shares have moved higher by 28% in 2024, while Air Lease saw more nominal year-to-date gains of 7%.
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