Lessors trading down as news of another bid for ILFC emerges, Boeing rating outlook downgraded

Aircraft leasing companies had a mixed day on Thurday, as media reports surfaced of another interested party in ILFC.

The French daily, La Tribune, reports that Jean-Paul Gut, formerly COO at EADS, is studying options to acquire ILFC, supported by funds from unnamed Qatari sources.

However, throwing some doubt on the reports, Airbus COO, John Leahy, who was linked to the deal in the French media, has denied any association. Mr Leahy told Reuters that “to the best of my knowledge he [Jean-Paul Gut] is not involved in anything like that either”, casting doubt on the veracity of the deal.

Earlier this week, there were more reports that ILFC’s CEO, Steven Udvar-Hazy, and two unnamed private equity firms are in talks to acquire a fraction of ILFC’s fleet (less than 10%) as the lessor looks to repay USD2 billion in short-term debt. A deal is expected to be concluded within two months.

Genesis Lease and Aercap finished Thursday down 3.0%. Babcock & Brown traded against the trend, up 0.3% yesterday. Air Partner traded down for the second consecutive day, after reporting a 90% fall in full-year operating profit midway through the week, falling 3.5% by the close of trading.

Boeing rating outlook dropped

Boeing traded down 1.4% yesterday, as Moody’s Investor Services revised ratings outlooks on Boeing and Boeing Capital Corp from 'stable' to 'negative'. The ratings agency cited a series of negative developments, including the machinists strike in 2008 and the continued lengthy B787 programme delays, as weakening Boeing’s financial flexibility and stability.

The recently announced delays to the B747-8 programme also suggest “continued stress in the company’s new aircraft development process”. Pension liabilities have also become a “significant funding issue” for the company, with funding requirements of over USD1 billion per year from 2011 onwards.

Moody’s also expects continued weakness in business fundamentals to force Boeing (and Airbus) to cut production next year. It estimates that a 20% reduction in profit could cut Boeing’s operating profits by approximately USD1 billion. Changes to military procurement, which accounts for just under 50% of Boeing’s business, could also place pressure on profitability.

Moody’s maintained its 'A2' long-term and 'P-1' short-term debt ratings for Boeing and Boeing Capital Corp.

Other aircraft manufacturers also fell yesterday, with EADS dropping 0.3% and Embraer falling back 1.7%. 

Selected Aviation suppliers’ daily share price movements (% change): 15-Oct-09