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The European Union announced it will prohibit the supply of aircraft to Russia, which means aircraft lessors are likely to take a hit in earnings. But the impact should be manageable due to Asian lessors’ limited exposure to Russia, and growing aircraft demand as passenger volumes trend higher on easing travel restrictions.
The sanctions on Russia led to a steep correction in the sector, which we believe is overdone, given the pain inflicted on lessors should be short-lived. DBS Group Research estimates aircraft lessors’ net earnings to register solid growth from now to 2023.
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Aircraft Lessors
Aircraft leasing is poised to become more mainstream, with lessors projected to account for 60-65% of all aircraft deliveries over the next few years as airlines increasingly depend on lessors for capacity. Buoyant jet fuel prices will also stimulate demand for fuel-efficient next-generation aircraft which are widely held by dominant aircraft lessors.
In our view, BOC Aviation and China Aircraft Leasing Group are at attractive entry points. Valuations are compellng after the recent correction.
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5-min article
