AerCap CEO urges cool heads on geopolitical turmoil

By Tim Hepher and Padraic Halpin

DUBLIN, Jan 26 (Reuters) – The head of the world’s largest aircraft leasing company, AerCap, cautioned investors on Monday against overreacting to recent geopolitical and economic uncertainty and said the aviation financing industry worked on secure long-term cycles.

Speaking to Reuters at the industry’s largest annual gathering, CEO Aengus Kelly said soaring gold prices reflected currency movements as much as wider risk and that he saw “absolutely no sign” of weaker appetite for dollar-based assets.

Some economists have voiced concerns that trade tensions and political discord among major Western trading partners could hurt consumption and spill over to demand for travel and planes.

“This is a very long-term business, with long-cycle 25-year assets, leases that are 12 years. You just can’t react to what’s happening on a day-to-day basis in the media or in the political spectrum,” Kelly said.

SEES NO SIGN OF INVESTMENT DROP-OFF

The Airline Economics event brings more than 5,000 delegates to Dublin, the world’s air finance hub, underscoring the sector’s emergence as an alternative asset class as well as a barometer of economic risks and trade flows across the globe.

The gathering once again tests the mood of investors after last week’s Davos summit exposed an array of political and economic tensions that have pounded the dollar, sending gold prices past $5,000 an ounce for the first time on Monday.

“Some would say about the price of gold that we’ve had a depreciating major currency for many years… but I know that gold is often seen as a hedge for risk too,” Kelly said.

However, he added that other risk indicators like U.S. Treasury yields were still “reasonably low”.

Asked whether investors appeared less eager to invest in dollar-denominated assets like aircraft – an appetite seen as underpinning the sector in recent years – Kelly said: “We see absolutely no sign of that. There’s no alternative.”

Kelly’s comments contrast with concerns over “unsettling” geopolitical developments in an Airbus memo reported by Reuters.

TIGHT SUPPLIES

Kelly, whose company owns 1,700 commercial aircraft, said he expected tight supplies of serviceable airplanes to last for some time as planemakers remain behind their production targets and jet engines require more maintenance than first expected. He said it would take Airbus and Boeing until the end of the decade to reach the delivery numbers they are hoping for and that their output targets are “aspirational”. He also dismissed the case for a potential larger version of the Airbus A220 jet and urged the world’s largest planemaker to focus on producing what it has before launching anything new. An Airbus spokesperson said the company is focused on the A220 production ramp-up and that it is “studying options” for the jet. Airbus has said supply chains are gradually improving.

(Reporting by Tim Hepher; Editing by Louise Heavens, Emelia Sithole-Matarise and Andrew Heavens)