Thursday, March 05, 2009

Babcock & Brown Auto-Pilot To Where?

Babcock & Brown air (FLY) released Q4 and year end numbers and reported to shareholders that they have acquitted themselves rather well. The numbers support this assumption. They have had to repossess and remarket several aircraft which indicates the market is tough. What they do not report is who they have leased to, what the rates are, remaining term and if there have had to be any renegotiations.

Leasing is a financial transaction. The portfolio is approximately 60 jumbo jets. The receivables department is incredibly simple to operate. By understanding the end user you will be able to predict their behaviour. This is critical when indebtedness has increased exponentially and something called maintenance payment liability has also increased dramatically.

The company may be on auto-pilot and the investor is not sure what the destination will be.