BofA downgrades Air Lease, raises AerCap target amid industry supply constraints

Investing.com -- Bank of America downgraded Air Lease Corporation (NYSE:AL) to "Underperform" from "Buy" while reiterating its "Buy" rating on AerCap Holdings NV (NYSE:AER) given the differences in positioning amid ongoing aircraft supply constraints.

While higher aircraft and engine lease rates have boosted profitability, limited new aircraft inflows and rising debt costs have constrained near-term growth opportunities for lessors.

In this environment, AerCap is better positioned than Air Lease due to its broader business model, capital deployment strategy, and exposure to the high-demand engine leasing market.

AerCap, which acquired GECAS in 2021, has benefited from profitable aircraft sales, sale-leasebacks, and a diverse portfolio that includes engines and helicopters. Meanwhile, Air Lease’s reliance on OEM deliveries remains a headwind, with BofA highlighting potential downside risks from Boeing-related delays.

The bank raised its price target for AerCap to $125 from $105, reflecting a higher price-to-tangible book value multiple of 1.2x. Conversely, it cut Air Lease’s target to $50 from $72, applying a lower 0.7x multiple.

BofA also lowered its adjusted EPS estimates for both companies, citing expected fleet composition changes and lower transaction-related adjustments. AerCap’s 2025 EPS forecast was reduced to $9.90 from $10.50, while Air Lease’s was cut to $5.50 from $6.50.

The firm said AerCap’s ability to offload non-core assets at favorable prices, its significant engine leasing exposure, and its shareholder-friendly capital deployment, including a new $1 billion buyback and a dividend increase, support its premium valuation relative to Air Lease.