Air Partner leads decline in lessor stocks, Embraer stabilises – Suppliers Share Wrap

Shares in aircraft lessors fell substantially on Monday, lead by Air Partner, which lost 6.8%, to close at 505 pence. Genesis Lease (-5.2%), Aercap (-4.9%) and Babcock & Brown Air (-4.1%) were all also down heavily. Uncertainty in the market continues, with several major players still up for sale and Genesis Lease and Aercap due to merge later in the year. However, there have been positive signs in the market in recent months. Dubai-based Air Charter International noted at the beginning of the week that it has seen a pick-up in demand in the Asia Pacific region.

Meanwhile, Embraer finished yesterday flat, after a dramatic 13.7% fall in its share price on Friday, when CFO, Luiz Carlos Aguiar, forecast a 10% fall in revenue for the manufacturer in 2010. Operating margins are expected to be maintained at similar levels to 2009, of approximately 7%. Embraer expects to generate approximately USD5.5 billion in revenue in 2009.

An official guidance for 2010 is due to be announced in Dec-2009.

The lower revenue outlook has prompted Credit Suisse to downgraded Embraer’s shares from ‘neutral’ to ‘underperform’ with a price target of USD22, noting a disappointing set of 3Q2009 results and the manufacturer’s move to cut delivery targets from 242 to 232 aircraft, the third reduction this year.

Aguiar stated the company is “going through a rough ride in terms of new sales”, seeing its order backlog drop from USD20.9 billion to USD18.6 billion in the past 12 months. Further cuts to the backlog are expected, as the outlook for the aviation industry “remains weak” and Embraer will “rely on its order backlog to ride out the global slowdown”.

Other manufacturers traded up slightly, with Boeing gaining 1.0% and EADS, parent of Airbus, up 0.7%.

Selected Aviation suppliers’ daily share price movements (% change): 02-Nov-09