I am struggling to figure out the consequences of all this new money chasing airplanes. Could they buy FLY. Or will all this money make it hard for FLY to release planes at a good return over the next couple of years?
Plus I was hoping for a small dividend increase, although it looks like continuing to buy the depressed stock is still a better deal for the company as a whole.
Barry -- good thinking.
Air Leasing is already commited to buying planes so they will need all of that cash to buy the planes. As far as "good" deals being harder to find - that will probably be true.
FLY is smart enough to not spend the money if the returns are not there. They will look at other ways to get good returns - buy back stock - other non-plane investments the other.
However this could push more consolidation among the other 3. Bigger is better in this industry - and all 3 of these rolled up together would be a nice company and give AL a run for its money.
The age of the planes for fly, ayr and aer - v the intended age of AL... AYR average age is like 13 yrs old.
Also, fly and aer (with gecas) have tangled lease management arrangements / subidiaries.
Also, AL was to be a "pure leasing" play. This means none of of this parts sales which is "off" message.
So, while there is a route to a massive roll - up here. I'd probably put the 4 together and then spit out dysfunctional business units.
Udvar-Hazy wants to finance over $6 billion of aircraft against the $800 Million raised in today's IPO.
By my estimation, that's a 150-200 planes. The question is, where they going to come from? He can't be getting on a waiting list with the manufacturers for that many planes. My guess is that he'll be gunning for aircraft on the secondary market. That could mean a rollup of some combination of FLY, AYR, AER, or part of his old fleet at ILFC. Hard to say, but it will be interesting to watch.
I'm still confused about this IPO overall, and my first reaction to it is negative. We're getting more leasing shares to go around in a sector where the existing companies are already trading at below book value. It sure feels like we don't need more supply of paper in this sector. The law of supply/demand would suggest that this will dilute the number of dollars to go around to each of these public companies, dragging the whole sector down. The only hope is that the IPO focuses the market on the value that exists in this sector bringing new money in with it (and a lot more than the $800M from the AL IPO alone).
The AL IPO really makes no sense. Another reminder that market efficiency has its limits.
Someone mentioned a pair trade (go short AL, and go long one of the other leasing companies). Seems like a high-probability winner long term. No way that AL can trade at a big premium to book if AER, AYR and FLY are trading at a discount.
Because of the book value difference I think a pair trade might be reasonable once the IPO mania wears off. I tried to short some AL a few minutes ago on Schwab but no luck yet. Just a small experimental amount of 200 shares.
Anyone know how long it usually takes to be shortable?
Well perhaps I'm mistaken. Just saw an article stating that AL has 160 aircraft on order.
It's as I feared, we are down due to money leaving the existing stocks to diversify into the new kid on the block. This could be quite bad for the sector. There are only so many dollars chasing these leasing stocks, and the supply just went up by a fairly large amount.