Omega Advisors and AerCap Holdings
Omega Advisors’ 13F filing reveals that it initiated a position in AerCap Holdings N.V. (AER) that accounts for 2.25% of the fund’s third quarter of 2014, or 3Q14, portfolio.
Overview of AerCap Holdings
Netherlands-based AerCap is an integrated global aviation company with a leading market position in aircraft leasing. The company acquires aviation assets at attractive prices and leases the assets to suitable lessees. It efficiently manages the funding and other lease-related costs. It also provides aircraft management services.
AerCap has 1,300 owned and managed aircraft in its current fleet. It has an attractive portfolio of 363 high-demand, fuel-efficient aircraft on order. The company serves over 200 customers in more than 90 countries with comprehensive fleet solutions. It provides part-out and engine leasing services through its subsidiary, AeroTurbine.
AerCap finalized the $7.6 billion purchase of International Lease Finance Corp., or ILFC, in May. AerCap shares have surged since December when the company announced the acquisition of ILFC from American International Group Inc., or AIG. In its latest 3Q14 earnings release, Aercap said, “The integration of the ILFC business remains on track. The primary IT systems were successfully integrated on schedule by the end of the third quarter of 2014.”
Third-quarter results boosted by ILFC transaction
AerCap said its 3Q14 net income grew to $340.9 million from $83.6 million in the same period of 2013. Third-quarter 2014 reported basic earnings per share of $1.61, compared with $0.74 for the same period in 2013. The increase in profit and earnings was “driven primarily by the ILFC transaction.”
Total revenues, made up of lease revenue and other income, surged to $1.25 billion from $279.37 million in the same period a year ago. The increase in lease rents was due mainly to the ILFC transaction and to new aircraft purchases.
Fitch comments on aircraft leasing sector
An August release from Fitch Ratings said, “The aircraft leasing sector has experienced another year of strong performance, which has been characterized by strong airline industry fundamentals, favorable credit markets, improving lease rates and consolidation among lessors.” Fitch added, “Among the challenges aircraft lessors will need to navigate over the coming years are industry cyclicality, competitive pressures on underwriting standards, large aircraft order books, residual value risk associated with older model planes, and rising interest rates.”
Omega’s 3Q14 positions
The fund added new positions in AerCap Holdings N.V. (AER), Nordic American Offshore (NAO), and Melco Crown Entertainment (MPEL). It exited its positions in Qualcomm (QCOM), Ocwen Financial Corp. (OCN), Freeport-McMoRan (FCX), and Boston Scientific Corp. (BSX). Notable position increases during the third quarter were QEP Resources (QEP) and United Continental Holdings (UAL).
The next part of the series will highlight Omega’s top new position in Nordic American Offshore.