DSX Lover

Eye on Plane Leasing Sector

These things have come down, because they are heavy leveraged and keep missing the numbers. AYR and GLS have missed earnings the last 2 quarters. I won't be surprised if GLS misses again next week. FLY is the worst, borrowing in excess of Free Cash Flow to pay for the dividend. AYR and GLS have paid huge dividends above EPS because they been able to utilize the large depreciation expense, and easily available Finance from commercial paper to finance a large percentage of the fleet. Now the Financing is not that easy, and creditors are requiring lower debts on Net Asset Value of the Planes, which will contract the Dividend. AYR had to cut the dividend over 50%, and I assume that GLS will do so in the near term as well. I would wait until GLS reports before jumping in, AYR is interesting in the $10-$11 level with a 10% Dividend being supported by a dividend payout of 60% of EPS. Unlike the Shipping sector, where charterer's have to ship an excess of in demand for commodities, and Ship charter contracts are not dependent on fuel prices, the Air Leasing companies clients, are not as stable because the high fuel prices is putting bankruptcy pressure is smaller unprofitable airlines, making the business more risky, despite long-term leasing agreements with the airlines.