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FLY Leasing Limited Message Board

  • ben392 ben392 Apr 14, 2008 12:34 PM Flag

    FLY and GLS vs. AYR

    The same thing that happened to AYR is now happening to FLY and GLS. Using AYR as a guide, FLY and GLS should bottom around 11 and then bounce back up a few bucks. I personally wouldn't panic sell right now. Just my opinion though.

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    • Aircraft Lessors
      Mixed Impact on Aircraft Values and Lease Rates from Airline
      Bankruptcies, Aerospace Production Delays and New Start-Ups
       Recent airline bankruptcies clearly not positive — 4 small US carriers (Aloha,
      ATA, Frontier and SkyBus) and 1 Asian airline (Oasis Hong Kong) have filed for
      bankruptcy recently. Apart from Frontier, all have ceased flying. All were lossmaking
      and given a weak economy and record fuel prices, their demise was not
      surprising. Further filings are expected in the US and Europe. 42 planes are
      grounded. The US failures cover 7% of domestic capacity, with Frontier the
      largest at around 4%. Survivor airlines should benefit from capacity discipline.
       Quoted lessor exposures limited — Genesis had 2x9 year old B737-700s with
      Aloha and 1x5 year old A319 with Skybus. B&BAir had 4x10-12 year old B757s
      with ATA. AerCap had 4x1-year old A319s with SkyBus, 3 of which via its 50%
      owned AerVenture. Security deposits of up to 3 months’ rent should cover any
      non-payment of monthly rent. Re-possession is relatively straight-forward with
      airlines that have ceased flying as opposed to continuing (like Frontier). Main
      cost is around $0.3m per plane re-painting/light maintenance/downtime/S,G &
      A between lessees. GECAS and ILFC are the most exposed lessors.
       Current strong demand in emerging markets should absorb aircraft freed up —
      Air Arabia and Tiger Airways, for example, urgently need aircraft. Emirates
      Group has announced a new LCC to launch ASAP. We expect strong demand in
      the Middle East and Russia. Reports by our China and India analysts, however,
      suggest a cooling of demand in these countries (‘Indian Aviation – Passenger
      Traffic Growth Trends Down’, Jamshed Dadabhoy, 24 March, and ‘Chinese
      Airlines – Downgrading Sector: The Upcycle Is Softening’, Ally Ma, 10 April).
       Narrowbody values and lease rates likely to fall — In the last downturn, aircraft
      values and lease rates fell by 40-50% from their peaks in exceptional
      circumstances (9/11, Iraqi War, Sars). We expect a decline of around 20% this
      time (as already reflected in depressed lessor share prices), followed by a rebound.
      Aircraft values have proven to decline by an average 4% p.a. over their
      25 year lives. New gen and widebody planes should hold their values better.
       B787 and A380 production delays positive for widebodies — A330s, A340s,
      B767s and B777s are in high demand as launch customers seek alternative
      capacity, mainly in the form of leasing due to their interim requirements.
      Increasing aviation liberalization in also supporting demand with the launch of
      new start-ups, such as Fly Asia X and V Australia, seeking long-haul planes.
       AER and AYR best placed - AerCap and Aircastle would benefit most from widebody
      strength and are proportionately less exposed to so-far failed airlines.

 
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