Century City company Air Lease Corp. has been placing big orders of planes from manufacturers. But plane makers are building aircraft faster than in the past, creating a glut in the market.
That’s creating turbulence for Air Lease by lowering the prices the company can charge airlines to use the jets, and that trend has taken some of the lift out of Air Lease’s stock.
Shares of Air Lease, which trade on the New York Stock Exchange, fell 4.6 percent to $26.41 for the week ended April 24, making it one of the biggest losers on the LABJ Stock Index. (See page 50.)
“Manufacturers ramping up production, softness in the leasing rates and early scrapping of late-model airplanes are really going to hurt the leasing business,” said George Ferguson, a senior analyst at Bloomberg Industries in Princeton, N.J., who covers the aerospace, defense and airline industries.
Air Lease executives did not respond to requests for comment.
Last week’s dip in the stock follows a busy year for Air Lease, which billionaire Steven Udvar-Hazy founded in 2010 after he left International Lease Finance Corp.
Air Lease has been expanding the fleet of planes that it leases to airlines. The company in February ordered $9 billion worth of jets from Airbus SAS, including 25 A350 wide-body planes. Also, Air Lease placed a $7.2 billion order for fuel-efficient planes made by Boeing Co. in July.
For fiscal 2012, Air Lease reported net income of $132 million ($1.28 a share), more than double the year earlier. Revenue nearly doubled to $656 million.
Manufacturers have ramped up production, with Airbus increasing the output of its A320 jets by 25 percent since 2009, for example.
At the same time, slow economic growth in the United States and Europe, along with a downturn in China, continues to be a drag on air travel.
The difficulties in the market also have affected Air Lease’s competitors, which include Irish company Fly Leasing Ltd., Dutch firm AerCap Holdings N.V. and General Electric Co.’s leasing arm GE Capital Aviation Services.
The oversupply of aircraft has even led companies to start scrapping later-model airplanes early rather than take on storage costs as they wait for demand to pick up.
Some models are being scrapped after just 13 years.
“It’s not a good sign,” Ferguson said. “If there were a robust travel market, they would be flown 20, 25 or 30 years.”
Udvar-Hazy, a pioneer in the aircraft leasing business, ranked 11th on the Business Journal’s list of Wealthiest Angelenos last year with an estimated net worth of $3.2 billion.
