Aircraft lessors drop sharply, Boeing and Airbus down – Suppliers Share Wrap

Boeing’s share price, which suffered a 4% fall on Friday, was down another 1.6% on Monday, amid heightened investor anxiety on Wall Street. New B787 issues with fuselage sections are not expected to materially affect production of the aircraft.

Boeing’s European rival, EADS, fell 3.0%, while Brazilian aircraft manufacturer Embraer lost 2.2%

Aircraft leasing companies were also caught up in the sell-off. Aercap was down 7.2% in trading yesterday. Genesis Lease was down 5.2%, while Babcock & Brown Air fell 5.0%. Aircastle lost 4.7%.

Volatility for aircraft lessor shares is likely to continue, with three lessors, ILFC (the world’s largest aircraft lessor), CIT Aerospace and Babcock & Brown Air all currently up for sale. There has been concern that the prices for these companies will be depressed by the tough economic conditions and the continued poor traffic performance that airlines are experiencing.

Babcock & Brown Air recently voiced concern that airlines had been unable to use the (traditionally strong) Summer period to build up liquidity reserves to compensate for a slower expected Winter schedule. Prices for aircraft, particularly second-hand aircraft, have already dropped notably from their 2007-2008 peak (when aircraft ordering hit historic highs), and the concern is that more airline collapses, or sharper capacity cuts, could affect lease rates, which are already expected to drop in 2010.

Selected Aviation suppliers’ daily share price movements (% change): 17-Aug-09