AerCap Holdings: The Market Is Worried About Brexit, But I Am Not

Aug. 03, 2016 10:13 AM ETAerCap Holdings N.V. (AER)4 Comments
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Discount Fountain


  • The market continues to undervalue AerCap Holdings (AER) due to the implications for Britain's airline industry as a result of leaving the European Union.
  • However, AerCap Holdings is sufficiently diversified to weather any potential relocations.
  • I continue to remain bullish on this company, and believe that the market is undervaluing this company.


In my last article on AerCap Holdings (NYSE:AER) on May 13 of this year, I made the argument that the company is significantly undervalued and investors were simply not recognizing the inherent value in AerCap Holdings. Since that time, the share price has largely stayed where it is:

The recent events as a result of Brexit has spooked the airline industry, with Michael O'Leary of Ryanair Holdings (RYAAY) stating that the company intends to diversify from its London bases long-term. British low-cost carrier Easyjet (OTCQX:EJTTF) also intends to follow suit and could well relocate its European headquarters.

As a result of this, speculation has mounted as to whether this will adversely affect the business of AerCap Holdings. In reality, the UK market accounts for just about 5 percent of the company's overall business. Moreover, as the company itself puts it, the business model of AerCap Holdings or indeed any airline leasing company is to move airplanes around in times of crisis.

For instance, speculation has grown that Easyjet will relocate a significant portion of its operations to other markets in Europe in light of Britain's vote to leave the European Union. With Easyjet being a significant customer of AerCap Holdings, this means that the company is in a good position to potentially supply additional aircraft for such operations.

Moreover, AerCap Holdings continues to do well in diversifying itself across European and global markets, having leased, purchased and sold 68 aircraft for Q2 2016. For instance, Ireland has been a significant base for airline leasing companies and AerCap Holdings continues to expand in this country having supplied several A350 aircraft to national carrier Aer Lingus. The company has also delivered the model to Cathay Pacific Airways (OTCPK:CPCAF), Vietnam Airlines and Ethiopian Airlines, illustrating the firm's ability to

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I am an independent investor with an interest in analyzing stocks across the consumer, finance, telecommunication, and travel sectors. As a data scientist, I also have a great interest in using data tools to better understand a company's financial position.Some examples include:- Aggregating quarterly churn and ARPU data for Deutsche Telekom (DTEGY) and analysing trends over time using SQL: Building a Monte Carlo simulation in Python to analyze loss ratios for Zurich Insurance Group (ZURVY): Examining ADR and RevPAR trends by brand for Hilton Worldwide Holdings (HLT) using SQL: All of the author's articles are written on an "as is" basis and without warranty. They represent the author's opinion only and in no way constitute professional investment advice. It is the responsibility of the reader to conduct their due diligence and seek investment advice from a licensed professional before making any investment decisions. The author disclaims all liability for any actions taken based on the information contained in any articles published.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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