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AMERICAN INTERNATIONAL GROUP (AIG)
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ILFC Aircraft Charges Moderate; Repossessions Could 'Drag'

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05/04/2012 | 08:44pm CEST
   By Doug Cameron 
   Of  
 

International Lease Finance Corp. may suffer a "drag" on profits this year after repossessing aircraft from bankrupt airlines during the first quarter, though write-downs on its huge fleet have stabilized.

The unit of American International Group Inc. (>> American International Group, Inc.) reported pre-tax profits of $120 million in the quarter, level with a year ago, including $55 million in impairments against a fleet of 930 planes.

High jet fuel prices, sluggish demand and over-ambitious expansion strategies have taken their toll on the global airline industry, with high-profile collapses including Spain's Spanair and Hungary's Malev, both ILFC customers. This has forced leasing companies to recover planes and find new customers.

ILFC also revealed that it opted to scrap some of the repossessed planes, using a parts specialist it acquired last year.

The company has taken almost $3 billion in write-downs over the past two years, rattling an industry that had prospered from the growing popularity of airlines renting rather than buying planes. The company attributed part of the charges to the depressing impact on existing plane values from new aircraft such as the Airbus A320neo and the 737 Max from Boeing Co. (>> The Boeing Company).

Most rivals, including the market-leading Gecas unit of General Electric Co. (GE) did not take parallel write-downs, and have said it is too soon to determine the impact of new planes that won't come into service until late 2015 at the earliest.

Robert Benmosche, AIG's chief executive, said on a post-earnings call that ILFC had done an "outstanding job" in repossessing planes from bankrupt clients. However, the cost of recovery and remarketing "will see some drag [on earnings] in the remaining three quarters."

"We are still looking to find the right time to do an IPO for ILFC," Benmosche said on the call.

The company earlier this year disclosed bank-style stress tests detailing how a potential downturn in its business could hit aircraft values.

ILFC said in a regulatory filing last month that four customers had stopped flying or filed for court protection in 2012, returning 42 planes.

While more than half of those planes have since been placed with other carriers, the plight of airlines this year is worse than in 2011 when ILFC had nine planes returned from seven distressed carriers. Last year's returns led to a charge of $40 million.

-By Doug Cameron, Dow Jones Newswires; 312-750-4135; [email protected]

Stocks mentioned in the article : American International Group, Inc., The Boeing Company
Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN INTERNATIONAL GROUP 0.25% 55.54 Delayed Quote.-7.02%
BOEING COMPANY (THE) -0.02% 342.79 Delayed Quote.11.58%
GENERAL ELECTRIC COMPANY 2.35% 14.38 Delayed Quote.-15.87%
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Financials ($)
Sales 2018 49 439 M
EBIT 2018 5 730 M
Net income 2018 5 041 M
Debt 2018 -
Yield 2018 2,51%
P/E ratio 2018 10,02
P/E ratio 2019 9,17
Capi. / Sales 2018 1,01x
Capi. / Sales 2019 0,98x
Capitalization 49 997 M
Chart AMERICAN INTERNATIONAL GRO
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American International Gro Technical Analysis Chart | AIG | US0268747849 | 4-Traders
Technical analysis trends AMERICAN INTERNATIONAL GRO
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TrendsNeutralBearishBearish
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 18
Average target price 67,6 $
Spread / Average Target 22%
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Managers
NameTitle
Brian Duperreault President, Chief Executive Officer & Director
Douglas M. Steenland Independent Non-Executive Chairman
Peter Zaffino Global Chief Operating Officer & Executive VP
Siddhartha Sankaran Chief Financial Officer & Executive VP
Martha J. Gallo Chief Information Officer & Vice President
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