What happened
Aviation broker and maintenance company AerSale (ASLE 5.47%) reported an unexpected quarterly loss and lowered full-year revenue guidance. Investors are running for the exits, sending AerSale shares down more than 15%.
So what
AerSale is involved in the sale and lease of used aircraft, engines, and components and provides a range of maintenance, repair, and overhaul services to aviation customers. It is currently a seller's market for aircraft, but most of that demand is on the commercial passenger side.
AerSale is seeing significantly softer demand in the freight and cargo market, where it has a strong emphasis, and it is weighing on results. AerSale lost $0.03 per share in the quarter on revenue of $69.3 million, falling well short of analyst expectations for a profit of $0.11 per share on revenue of $87 million.
Flight equipment sales came in at $13.3 million in the quarter, comprising four engines and no aircraft. By comparison, in the second quarter of 2022, AerSale generated $92.5 million from sales of three engines and three aircraft.
"As noted in our first quarter report, second quarter volume was meaningfully lower than the second quarter of 2022," CEO Nicolas Finazzo said. "This is entirely the result of fewer flight equipment sales, which fluctuate significantly from quarter to quarter."
Now what
AerSale sees the freight market weakness continuing through the rest of the year due to higher interest rates and tightening economic conditions, leading the company to reduce its expectations for its freighter conversion program. AerSale now expects full-year revenue to come in at between $400 million and $440 million, down from $460 million and $490 million.
The company did say it expects the recently completed three months to be "the trough quarter," with better times ahead. AerSale is also optimistic about an eventual contribution from its "AerAware" product, an enhanced flight vision system for older Boeing 737 models. AerAware is currently in testing with the Federal Aviation Administration.
There is reason to hope AerSale can get airborne eventually, but not a lot of evidence to suggest it will happen overnight.
