True Value

AER leases new and mid-life airplanes to airlines globally. AER’s 99%+ utilization rate and7.5- year average remaining lease term support a high degree of earnings visibility.
Additionally, the company is well-managed and a strong capital allocator. Since we invested in the company in 2014, AER has disposed of about 500 planes to improve its fleet age, technology mix and customer concentration, while generating strong gains-on-sale consistent with its conservative carrying values. During this period, the company has delevered, bought back 42% of its shares outstanding and grown book value per share annually by 15%. The shares recovered from a 2018 sell-off and gained 55% in 2019. In September and November, two smaller peers with inferior platforms and returns on equity agreed to be acquired for 111% and 117% of book value. The suspension of Boeing 737 MAX deliveries since March 2019 and the subsequent recent production halt has reduced global narrow-body deliveries by 50% and structurally strengthened the demand for (and the value of) AER’s airplanes on a multi-year basis. For the last few years, technical overhangs have increased the volatility of AER stock and generally harmed the shares. We believe these issues have been fully resolved and the company is poised for strong economic and equity performance in 2020.