JP Morgan cut both Genesis Lease (GLS) and Aircastle (AYR) from Overweight down to Neutral today. I haven’t seen the reports but my understanding is that JP Morgan expects the current state of equity markets to hurt both lessors.

2008 should prove to be an interesting year for leasing companies (and obviously the airline industry in general). On the one hand, $100+ oil will compel carriers with an older, fuel inefficient fleet to update at least a portion of their aircraft. On the other hand, if a recession develops and demand severely tapers off, carriers can just ground those old jets. If times get too hard, and those old jets are on lease, some leases could be cut short or renegotiated. My crystal ball isn’t working properly today, though (I think it is out of compliance with an AD mandated inspection), so I guess I’ll just have to wait and see.