Thursday, November 21, 2013

Seeking Alpha: AerCap Holdings At A Good Cruising Altitude

With commercial aviation demand continuing to grow quite well in developing markets and the funding environment in developed markets getting better with each quarter, this is a pretty good time to be an aircraft leasing company. It's not so surprising, then, that AerCap Holdings (AER) shares are up more than 65% over the past year.

As for the future, I would argue that AerCap is still looking at a multi-year period of strong operating conditions. AerCap's focus on smaller airlines in developing markets is in tune with where the growth is likely to be, and the company's focus on maintaining a younger fleet and demonstrated skill in managing credit/default risk (as well as selling aircraft to maximize portfolio value) should result in significant cash flows in the coming years. Valuation for leasing companies is trickier and more subjective than for many other types of companies, but I nevertheless maintain that AerCap is still about 10% to 15% undervalued today - not the most appealing bargain out there, but still undervalued and with the potential of a dividend in the coming years.

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AerCap Holdings At A Good Cruising Altitude

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