Summary
There has probably never been a better time to be ceo of GECAS, the leasing arm of GE, just as there has probably never been a worse time to be head of ILFC. One industry, two outlooks, same old story...
Analysis
Boeing or Airbus, GE or ILFC? Where would you rather be? Of course, there's no correct answer to such a subjective if not moot question, nonetheless such idle speculation is far more constructive than much of the ill-informed nonsense that clogs up today's aerospace media and web bandwidths.
Because just as no-one with a free choice and any sense of ambition today would opt for a troubled company like Airbus, so no-one who had to pick a lessor would go for ILFC over GE, based solely on corporate outlook in both cases. Forgetting the larger trials and tribulations which currently afflict GE and AIG, it is educational to take a quick look at the ways in which two ostensibly similar companies in one narrow industry field can have such different outlooks.
The parallels with Airbus and Boeing are valid throughout this analogy, so don't need to be repeated ad nauseam but can simply be summarised thus: Airbus has wasted $bns on the A380, A350 and A400M and can't proceed with any of these fiascos without more, direct government help -- you can quickly surpass $35bn in Airbus costs, waste and losses on these three programs alone if you've a head for big negative numbers. Boeing on the other hand is down a couple of $bns on the 787 and has the largest pre-certification backlog in commercial aerospace history against which to amortize these delay-driven extra costs. No-brainer.
The difference between GE and ILFC is internal, not external. Basic leasing industry rules are the same for both: buy low, lease high. Where ILFC has come unstuck, permanently, and where GE will continue to prosper is in not losing sight of one simple fundamental: aircraft leasing is not rocket science. GE's outlook, as evidenced by this excellent article on new ceo Liu, clearly takes this into account.
GE is therefore led by the market and the market points to increased aircraft leasing opportunities. ILFC however is led by the its ceo, Steve Udvar-Hazy, with the market only filling the role of stage backdrop to his self-professed greatness (the Steven F. Udvar-Hazy Center, for goodness' sake?) Only trouble is, Steve, you're now in the wrong play...
There has rarely been a better opportunity for leasing companies to talk business with the aircraft OEMs, where high backlogs are accompanying higher rates of deferral and market uncertainty. GE can take advantage, ILFC can merely talk about it. And has done. Talk is, of course, cheap.
There is more stability in the leasing marketplace today despite monthly rates being down perhaps 8-10% on last year on broad average. GE plans to take advantage of this stability for the future since there is no major collapse in sight, due primarily to the steady production outlooks of Airbus and Boeing.
ILFC can only talk (about 12 Boeing/Airbus analogies there, but we'll skip them for now).
Boeing and Airbus between them delivered roughly 500 aircraft in the first half of 2009. The second-half probably will see a slightly lower number (holidays etc), but the full-year total should be around 970. The same is likely to be true for 2010, maintaining supply and therefore price stability in the new (and therefore used) aircraft market and allowing airlines time to make with the Band-Aid® on their balance-sheets.
So, a final analogy, to round off: although the exact same market conditions prevail for GE as for ILFC or what's left of it, only the former has a positive outlook. Ditto Boeing and Airbus. It's all in how you read those markets and Airbus, like ILFC, is finding out the hard way that a mirror makes a far poorer reading-aid than a magnifying-glass.
