Los Angeles billionaire Steven Udvar-Hazy's new aircraft-leasing venture is headed for a multimillion-dollar arrival on the New York Stock Exchange this week.
Air Lease Corp., started last year by industry pioneer Udvar-Hazy, is set to go public with a stock offering that will fuel the Century City company's buying power to add to its fleet of new passenger jets.
The deal also will boost the company's ability to take on larger global competitors, including Udvar-Hazy's former firm, International Lease Finance Corp., owned by insurance behemoth American International Group Inc.
Air Lease, or ALC, could sell as many as 28.75 million shares of Class A common stock at $25 to $28 a share, raising as much as $805 million. The company will list on the NYSE under the symbol AL.
In its roadshow presentation for the IPO, the executive team said it intends to use the money to buy commercial aircraft and for general corporate purposes.
ALC already has 46 aircraft and expects that its fleet will grow to about 100 planes by the end of the year.
"In the leasing business, the more planes you have, the higher your revenue is going to be," said Nick Einhorn, analyst at IPO tracker Renaissance Capital in Greenwich, Conn.
ALC's business is similar to leasing an automobile. ALC leases planes to airlines and then sells or re-leases them after a fixed period. Airlines like leasing because they can get new planes at a lower cost than buying them outright.
For ALC, it buys planes in bulk and gets the kind of discounts few airlines can get on their own.
ALC had a net loss of $52 million last year. But Einhorn said much of that loss can be attributed to start-up costs and noted that losses narrowed to $3 million in the fourth quarter from $8 million in the third quarter.
One of the company's biggest risk factors is that it borrows heavily to buy aircraft.
"They will add more debt as they grow," Einhorn said, noting that ALC has nearly $900 million in floating-rate debt. "A rise in interest rates could hurt their profitability."
Udvar-Hazy co-founded International Lease Finance in 1973 and built it to be the world's largest airliner-renting enterprise. He became one of the richest men in Los Angeles when he sold it to AIG in 1990. AIG allowed him to continue running the company.
But in 2008, AIG was on the brink of collapse. As part of a federal bailout, the government began overseeing AIG operations, including that of ILFC. Fed up, Udvar-Hazy left to start ALC.
ALC is going public at a time when passenger totals and the percentage of airplane seats that are filled have increased for 12 straight months for the nation's largest airlines. The latest data from the U.S. Bureau of Transportation Statistics show that U.S. airlines carried 53.7 million passengers in January, up 2.2% from a year earlier.
"We believe that we entered the aircraft leasing industry at an opportune time," the company said in its prospectus.