Previous Statements by AYR
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And it’s a cyclical business. It’s a business which is entirely global. And despite the cyclicality, that performance of the business has been quite good. I will talk about the market, I’ll talk about what we have bought, how we have done over the cycle, our financial profile and where we see things in terms of opportunities in our plan going forward. But it is a distinct -- we have a different investment strategy as you heard and also different funding strategy.So a few comments about the market. I am going to talk about both in terms of long-term and short-term. Long-term the market tends to follow GDP and the relationship over time -- and I mean global GDP to be clear, because these are portable assets and when an aircraft lease is over we look around the whole world and find out where the best demand is. It’s a portable asset. And relationship between growth in air travel, which in turn is growth in aircraft demand and GDP, has been about 1.5 to 2 times. So it tends to grow and to move in the other direction in terms of GDP movement at an amplified way. And that’s true for both the freight market and the passenger market. Roughly the same relationship. Now what's driving our market isn’t what's happening in terms of Europe or in the U.S. to have an effect. But the growth in our markets come from the emerging economies. And the emerging economies have accounted for an increasing share of the order stream and frankly that’s where we see more and more of our business going. The effect of the -- I will just pause here and talk about American for a moment. We have zero aircraft in American airlines. U.S. airlines historically have done very very little with leasing companies. Although I think that’s changing for the upside. U.S. airlines tend to own their aircraft forever. For 20 years plus they used to rely on tax financings from -- tax shelter financings, they rely on the capital markets. And I think that as the capital markets have gone a little trickier, they have relied more and more, as you many have seen in the headlines, on leasing companies. I think that’s a positive trend.
What's coming out of the American airlines bankruptcy, what capacity they will share and they will share some, will be obsolete aircraft to go to the desert and don’t have any displacement effect on us or our peers. I view the bankruptcy as insignificant in our prospects. There may be some deal opportunities that come as they look to refinance some things coming out of bankruptcy, but in the short term none of the equipment that’s coming out is going to affect our market and we have no direct exposure.But the U.S. airlines in some respect are a little bit like the European flag carriers. They don’t -- the Europeans do a little bit more in the way of leasing. Air France for example, which has a fine credit, as a policy matter leases a quarter and a third of its fleet, for fleet flexibility reasons. And so I think the market share of the pie is going to grow. For of all this illustrates the long-term growth trends here are significant but I will come back to the near-term. What the top chart shows is the share of the pie that lessors have. And it’s gone from very small to about a third. And my sense is that you will see us getting close to about 50:50 in terms of the airlines and aircraft lessors ownership. So it’s a bigger share of the pie and it’s a growing pie that grows with the global GDP. And what happens, you know airlines are particularly volatility set of customers from a financial performance perspective, it’s a low margin business with high capital cost and very high economic cyclicality, sensitivity. Lessors though, if you look at the chart at the bottom, have a different profile. And it’s true for other suppliers to airlines. Just because the airline is having a hard time doesn’t mean that we necessarily do. When airlines go bust and we have reasonable aircraft involved, we can move it. And we have managed through that and I will take you through that in a few minutes in term of how we have managed through the downturns. Read the rest of this transcript for free on seekingalpha.com