Tokyo Picker

Aircastle In Fine Shape; Fears Appear Unfounded

All airplane operating leases are always denominated in dollars (with the exception of some esoteric tax products not relevant here). It doesn't really matter where the company is domiciled - Aircastle is in fact a Bermuda corporation.

One issue to be aware of is that most of these companes are PFICs, certainly AYR and AER. I believe GLS and FLY also.

Aircastle In Fine Shape; Fears Appear Unfounded

Should have said - last post was response to Alan - sorry

Aircastle In Fine Shape; Fears Appear Unfounded

In fact 86% of AYR's planes are new generation. If you bother to check the facts (easily available in the presentation to Credit Suisse mentioned in the article) your comments may become more illuminating.

I think you're misunderstanding the way this business works. As the fuel price goes up, the sufferers are not these guys, but the airlines who own older, less fuel efficient airplanes. Those older airplanes tend more to be owned by airlines. The newer airplanes are owned more by these lessors. When the pressure gets too much, the airlines go under. The shareholders/lenders of the airline are stuck with the old airplanes (as well as the legacy pension costs, etc). The lessors can easily get back their planes, even in the US (thanks to section 1110 of the bankruptcy code), and lease them to the younger, stronger airlines, thus creating a virtuous cycle.

Obviously there is a frictional cost to this repossession and releasing, which can be quite substantial - the planes may be idle for a few months, although that is not happening yet. That's why, if you look at the history of operating leasing in the last 20 years, operating lessors with short-term lease-specific debt and hair trigger covenants (e.g. GPA) go under, whereas operating lessors with higher credit and more stable sources of funding (e.eg. GECAS and ILFC) survive. Obviously the backing that GECAS and ILFC have is not as valuable anymore. But the trick in picking winners here remains looking closely at the terms of their debt . If they are stable on that, they will make a lot of money. Provided that they do not try to buy cheap by buying older generation aircraft - that is a quick and easy form of suicide these days.