Air Lease Corp continues to benefit from steady yields, an attractive owned fleet, and high demand for aircraft due to delays in Boeing MAX issues and production levels for Airbus aircraft, despite “transitory” factors affecting the broader sector, said analysts Cowen.
In a report, the firm said that while Coronavirus will hurt some airlines, which defer rentals as a result it also presents an opportunity to help clients transition their aircraft, and that overall 2020 should ultimately be a good year for the aircraft leasing sector
Cowen reiterated it outperform rating on Air Lease Cor, increasing its target prices to $51 from $50, - or 0.9x the analyst’s 2020 book value estimate, saying that while the firm would see a choppy delivery stream due to issues with the 737 MAX recertification and continued delays at the A320neo program, the net result is a robust sales market.
“Although Air Lease's fleet is young, there are still select aircraft that could be sold at healthy gains,” said the report. “The company is seeing high demand for single-aisle aircraft in Europe as MAX delays have caused a temporary shortage. Air Lease has exposure in China, but expectations are for the coronavirus to be a transitory issue and for demand to return post containment.”
Cowen went onto say that the coronavirus might present the company with an opportunity to purchase aircraft from struggling Chinese airlines and reallocate those assets to areas of strength.
Cowen said that with the MAX and NEO delays and availability of cheap financing for buyers, the secondary sales market remains robust with Air Lease expects to sell about $1 Bn worth of aircraft in 2020, with most occurring after Q1.
“Ultimately, with the delays in new production aircraft there should be further opportunities for Air Lease to sell aircraft if the bid is right,” said the report.
While Air Lease said that it expects 25 and 35 deliveries of the MAX in 2020, lower than last quarter's expected 46 and 28, Cowen cautioned there were likely to be multiple revisions of this timetable over the next two years.
“Boeing is attempting to be transparent, but until the aircraft is being produced again, there will be no clear line of sight on deliveries,” said Cowen.
Steady yields and high demand to keep Air Lease Corp buoyant says Cowen
