Because they are planes there is a vast amount of regulation about servicing, upkeep and insurance so AVAP has good visibility that the asset is being looked after well.
The main routine effort is in finding a customer to lease the plane and to make sure that the company has a good handle on residual value. Residual value matters as the differential between the borrowing and lending rates also has to cover the depreciation on the plane over the lease period. AVAP has historically been overoptimistic on the residual value but has admitted this and has put in place stricter depreciation rates.
Without going into detail I think it is fair to say that the company has been operating well for the last 6 months and has grown revenues by 14%. It is not brilliant but it is good, particularly given the growth last year and growth does look to be sustainable.
What is disappointing is that the company has massively over borrowed and the profits have been severely impacted by the borrowing costs. To be clear the company has borrowed $100 million that it doesn't currently need, but is paying for. Now I do not know whether they have failed to pick up a number of deals that they were expecting. Or indeed whether they are forecasting significant problems in the near future in companies being able to borrow or to borrow at anything like the rates AVAP is getting. Or indeed whether whoever decided to take on the debt so early is a moron fooled into it by a fast talking investment banker. But regardless the company is paying for way too much debt.
Now as AVAP grows this debt, which is already costing, can be used to finance planes. So there will eventually be income to cover it. But they have ruined their figures for YE June 2016 and probably damaged them for YE 2017. But by 2018 they should be sorted and for those not looking too carefully there should be very good profit growth over the period as they introduce revenue to meet their preexisting costs.
This of course presumes that they don't do something stupid in the interim. I continue to hold AVAP but they are now in the critical watchlist and would be sold if cash was required.