Genesis Lease Could Be a Highflier

Now add the fact that a third of that worldwide total is on operating lease, which is the business that GLS is in. That percentage is expected to grow to 50% of the fleet over just the next 10 years. To finance its grab for a piece of that growth, GLS locked in a billion-dollar credit facility in April at 5.67% for five years, and LIBOR (London inter-bank offered rate) plus 1.5 percentage points after that, which is very favorable.

McMahon says that he buys most of his planes from airlines that have ordered directly from either Airbus or Boeing(BA Quote). The carrier then sells the plane to GLS and leases it back; this allows the carrier to focus on its main business of attracting passengers and cargo -- not maintaining planes.

Most Genesis jets are leased to passenger carriers, though GLS has four cargo planes as well. The youth of its fleet is a selling point, because these planes are in the most demand by new international carriers. And the passenger planes are more versatile than cargo-specific jets, because they can carry cargo in their bellies as opportunities present themselves.

Jets in Short Supply

I always prefer companies that have pricing power, and GLS fits that bill well. McMahon says that because the supply of jets is tight, he is renewing 2009 leases now at rates that are 30% above 2008 levels, which is impressive. And I also prefer companies with diversified regional customer bases, and that is at work here, too.

McMahon said that 38% of leases are to companies in Asia-Pacific, 37% to North America, 15.7% Latin America and 7.1% Africa and the Mideast. The customers themselves are also non-concentrated, with 6.7% of the planes leased to Air China Cargo, 6.1% to MyTravel Airways in the United Kingdom, 5.3% to GOL(GOL Quote) in Brazil, 5.3% to United Airlines in Chicago and 5.2% to AVA in Taiwan.