Low oil is good for aircraft leasing group AerCap’s gas guzzlers

Airlines are extending leases on gas-guzzling, four-engine jets on a bet that fuel prices will stay low for as long as the next three years, the world’s biggest aircraft leasing group said.

It is getting “a boost we did not think we would get”, said Aengus Kelly, the executive director and chief executive of AerCap Holdings, in an interview on Bloomberg Television. “The gas-guzzler type airplanes, 747s, we had assumed all of these airplanes would be scrapped. Airlines are saying we think fuel is going to stay low for 18, 24 maybe 36 months.”

Airlines are eliminating fuel surcharges as fuel prices move below the levels established for adding the extra fees. Singapore kerosene slumped by 44 per cent in the past year to $41.49 in trading on Wednesday.

The Abu Dhabi-listed investment group Waha Capital is AerCap’s biggest shareholder with a 15.62 per cent stake, according to Bloomberg data. The investment has been hugely profitable for Waha Capital since the US$7.6 billion deal in 2014 in which Aercap acquired American International Group’s aircraft leasing unit.

Waha Capital’s net profit for last year increased by 18 per cent to Dh588 million compared to 2014 driven by earnings from the aircraft leasing sector, it said this month.

Last month, New York-listed AerCap’s share price took a knock on fears that a slowing Chinese economy could affect its business. Its shares are down some 28 per cent year to date.

Chinese demand for aircraft remains robust and the lessor does not expect a drop-off in demand there, Mr Kelly said. Air traffic in China is growing by 10 to 12 per cent a year, he added.

About 10 per cent of AerCap’s planes are leased to operators in China.

Last year, AerCap bought 46 new aircraft, signed lease agreements for 276 aircraft, and executed sale and part-out transactions for 83 aircraft.

* With Bloomberg

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