General Electric (GE) is reportedly nearing a $30 billion deal to combine its aircraft-leasing business with Ireland’s AerCap Holdings (AER), as the coronavirus pandemic stress-tests its core aviation business. GE stock rose and AerCap stock jumped.


The industrial conglomerate could announce the merger as soon as Monday, sources told the Wall Street Journal. The move could speed up GE’s turnaround, improving its balance sheet and cash flow.

GE Capital Aviation Services (GECAS) is largest remnant of the company’s once mighty financial services unit, which dragged down GE stock during the 2007-2008 financial crisis.

GE scaled back from the lending business even before undertaking a vast, multiyear restructuring in recent years, which has seen sales of the biotech unit, light bulb business, and a majority stake in its oil field services segment.

GECAS owns or has on order 1,600 aircraft and lost $786 million last year on revenue of $3.95 billion. It leases jets made by Boeing (BA) and Airbus (EADSY) to airline customers.

Meanwhile, AerCap has 1,400 planes owned or on order. The merger would give the potential new entity from greater say in negotiations with the plane makers.

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GE Stock

Shares rose 4.2{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6} to close at 14.17 in Monday’s stock market trading, hitting the highest level since July 2018. AerCap popped 13.25{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6}, and rival Air Lease (AL) added 5.25{98cae0078f524eff3ab8ec32cf55b261677ef6c8a6ed6e94d92a4234b93f46b6}.

GE stock is extended off a 12.01 three-weeks-tight entry and an alternative entry around 11 off support at the 10-week line, according to MarketSmith chart analysis.

The relative strength line for GE stock is rising within a multiyear downtrend. The rally reflects expectations that GE’s turnaround will benefit from a recovering economy as a covid vaccine rolls out.

GE Aviation, the industrial giant’s jet-engine unit, has been hurt as the pandemic guts global air travel. GECAS, too, suffered, as airlines sought to defer lease payments and new aircraft purchases.

GE, which slashed thousands of aviation jobs, will update 2021 financial outlook at an investor day event Wednesday.

Earlier, GE CEO Larry Culp warned of a long recovery from the pandemic. Management also promised a smaller commercial aviation business.

Find Aparna Narayanan on Twitter at @IBD_Aparna.


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