Increase Spending for Aviation Leasing Agents
Air Lease Corporations (NYSE: AL) during their first Quarter results spoke of adjustments that have been made to adjust to the unprecedented impact to the airline and aerospace industry. Air Lease Corporations (ALC) (NYSE: AL) First Quarter financials were released on May 7th 2020. They reported a revenue of $511 Million which was an increase of 9.7%.
As the Airline industry takes struggles to find some balance in the upcoming future aircraft leasing companies look to potentially fill a gap in the market. Projections for future flight routes and demands are still uncertain and many airlines have cancelled orders of new aircraft. As airlines continue to look for new ways to maximize their profits and remain flying the options to lease new aircraft may be more appealing for major carriers around the world.
While we do expect continuing customer challenges, including possible airline bankruptcies and aircraft repossessions, our fleet is young, our global customer base is diversified, and our financial position is strong. We believe in the fundamentals of the global airline business and we are well positioned for the recovery that will take place,” – said John L. Plueger, Chief Executive Officer and President.
In the First Quarter ALC took delivery of eight new aircraft as well as one secondary market which was purchased during the quarter, total value of $709 million in investments. During the time of writing owns 300 aircraft in their lease portfolio with a net value of $19.2 Billion. The Average age of the aircraft is currently only 3.7 years and the average lease term is 7.2 years.
When we take a look at the Financial statement provided by ALC in dept we can seen more progress being made to expand their credit lines for the potential acquisition of new aircraft in this current market. ALC has an unsecured revolving credit facility with JPMorgan Chase Bank. During Q1 of 2020 the company increased their aggregate capacity of the credit by $250.0 million to $6.1 Billion.
On May 5, 2020, commitments totaling $92.7 million of the Revolving Credit Facility matured. Lenders hold revolving commitments totaling approximately $5.5 billion that mature on May 5, 2023, commitments totaling $245.0 million that mature on May 5, 2022 and commitments totaling $5.0 million that mature on May 5, 2021. As of May 7, 2020, after giving effect to the commitments that matured on May 5, 2020, the aggregate capacity of the Revolving Credit Facility was approximately $6.0 billion. This information was found directly from their Official Report.
Awaiting Delivery of Boeing 737 MAX
The worldwide grounding of the Boeing 737 MAX aircraft that began back on march 10th 2019 continues to remain in effect after the tragic accidents that occurred last year. Over the year of the grounding of the aircraft the Boeing Factory in Seattle is collecting Boeing 737 MAX aircraft in abundance as deliveries cannot be made.
With the factory experiencing a storage issues having run out of space to park the complete aircraft, production of new aircraft have slowed down and at one point completely came to a stop. As COVID-19 continues to impact the manner which industry conduct business, Boeing has had to redesign their factories to ensure that the safety and health of their staff members is kept a priority.
Based on the chart that can be seen above we can see that a large percentage of aircraft that Air Leasing has made order to purchase include to Boeing 737 MAX varients and the Airbus A320/321neo.
With over 126 orders on the books Air lease is patiently waiting for the approval for the FAA to begin making deliveries of the aircraft to their clients. These new aircraft will increase the total value of Air Lease assets and allow them to increase their revenue by leasing out the aircraft to other airlines.
As airlines continue to struggle to find their footing in today’s current market Air Lease is in a great position to provide aid to the airlines while also generating revenue. Their business model of owning over 300 aircraft that are being leased out to commercial and private airlines ensure that they are able to generate consistent cash flow while holding many of the assets on their on books. Having dropped down to a low of just over $10 a share AL has been able to make a quick bounce back towards the current price of $31 a share.
Initially we had looked at some long calls down during the consolidation range that we experienced after the major lows. As price continues to rise up the volatility of the stock remains to stay low in correlation to previous high. The company reported a profitable 1st quarter which brings a great deal of optimism for the aircraft leasing industry as a whole.
Drawing a Fibonacci Channel from the previous high and the most recent lows we can create a sideways trending pattern that is parallel to the channel that we were trading within. We can see how the stock is making pushes towards new highs and we can potentially see a previous resistance level turn to a support level. As the market conditions change for the airlines there is new opportunity for different players in the market to start reaping some rewards.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options: https://www.theocc.com/components/docs/riskstoc.pdf
Air Market Group content is provided solely by Air Market Group LLC and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction, or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. Air Market Group, through its content, financial programming, or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon, or risk tolerance. Air Market Group is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher transaction costs as they involve multiple commission charges. Air Market Group is not a licensed financial advisor, registered investment advisor, or registered broker-dealer. Options involve risk and are not suitable for all investors. Please read the Characteristics and Risks of Standardized Options before deciding to invest in options.
Leave a Reply