Air Lease: Tighter Margins And Elevated Debt Limit Upside

Summary

• Air Lease shares have underperformed, rising 15% but lagging the market's return, due to overcapacity fears and softening used plane market.
• Air Lease's large order book and investment-grade rating provide cost advantages, but higher interest rates and refinancing costs are squeezing margins.
• Aircraft resale profitability has disappointed, with lower-than-expected margins despite tight supply, driven by overcapacity concerns and slowing airline demand.
• Balance sheet concerns, high debt levels, and future order commitments limit capital returns to shareholders, justifying a "hold" rating despite potential 33% upside to book value.