Airline industry may be rebounding

 

There is a major air show underway in Farnborough, UK that is held every other year. It is one of the important dates for the airline industry as many aircraft orders take place for both military and civilian planes. This time around, the military sector has been overshadowed by the civilian side, due to two important events. The first was the yet to be released Boeing 787 Dreamliner which made its first transatlantic flight and European debut. It is an exciting plane that is made mostly of composite materials, which is a first for the industry.

The second and more important bit of news from this air show is that one of the industry’s juggernauts placed an unexpectedly large order for 136 planes worth over $10 billion. What seems to be even more important here is not the order itself, even though it is meaningful considering the state of the global economy, but the person behind the decision is what the real story is. His name is Steven Udvar-Hazy, an American immigrant from Hungary and perhaps the single most respected person in the airline industry.

Hazy used to own one of the largest aircraft leasing companies until he sold it to AIG (before they tanked, of course). He is known for being incredibly good at predicting the performance of the airline industry and he recently started a new company, hence his large plane order. He thinks the industry is starting to bounce back, especially outside the U.S. Just about all the big players in the industry, including the top guys at Boeing are confident that he will be successful with his new leasing company.

Plane leasing is not something many people know much about. However, leased planes account for about 40% of all commercial planes in the sky. It is similar to leasing a company truck in that it allows companies to be more flexible and not have to pour all their capital in to it, not leaving enough to actually run the business. Hazy is actually an interesting person to read up on because he is a self made billionaire entrepreneur that saw an opportunity and ran with it. Although he had partners in his venture, he is the one that is revered as a genius of the industry. Hazy became a billionaire in 1990 when he sold his leasing company to AIG.

Hopefully Hazy is right in his prediction because the only way the airline industry can have a solid rebound is if the greater global economy also rebounds. He did specifically indicate that the industry outside the U.S. is where he is looking for the most recovery, but hopefully that will only be a relative growth and not that he expects the U.S. economy to not grow at all. Ultimately, I don’t see how the global economy can recover very much if the U.S. economy stagnates. The two go hand-in-hand and in fact, the single biggest driver of global economic growth is the U.S. economy. Either way, all experts seem to think that Hazy’s new company will succeed, so if it goes public, perhaps it is something to consider investing in.