The aircraft leasing giant AerCap has released its latest results which make interesting reading as the firm has managed to maintain a strong liquidy during the ongoing crisis that is affecting the global aviation industry.
"The Covid-19 pandemic is creating significant challenges for the global aviation industry and for economies around the world. We would like to express our support for those directly affected by this illness and those whose jobs and businesses have been impacted," said Aengus Kelly, Chief Executive Officer of AerCap.
The firm saw its net income increased by 18% to $276.8 million, from $234.2 million for the same period in 2019 and managed to achieve a 98% active lease rents through to 2022 already contracted. During the first quarter, it also experienced a 99% fleet utilization rate. There are still concerns over the grounded Boeing 737 MAX aircraft, with no clear date of when the aircraft will gain regulatory approval or under what special conditions they will be allowed to fly. The firm has 95 of the type on order with Boeing, but it is sure many of its Boeing 737 MAX leases have now been cancelled, furthermore, it fully expects additional leases to be cancelled in the future. In cases where leases have been cancelled, AerCap now has the right to cancel its corresponding orders for delivery of those aircraft from Boeing. Nevertheless, those lease cancellations could have an adverse effect on future cash flows and results.
AerCap is one of the largest aircraft leasing firms with 1,372 aircraft owned, managed or on order and $47.1 billion of total assets as of March 31, 2020. AerCap has one of the most attractive order books in the industry. AerCap serves approximately 200 customers in approximately 80 countries with comprehensive fleet solutions. AerCap is listed on the New York Stock Exchange (AER) and has its headquarters in Dublin with offices in Shannon, Los Angeles, Singapore, Amsterdam, Shanghai, Abu Dhabi, Seattle and Toulouse.
.- Net income of $276.8 million for the first quarter of 2020
- Diluted earnings per share of $2.14 for the first quarter of 2020
Highlights
- Approximately $11 billion sources of liquidity.
- Over $28 billion of unencumbered assets.
- Adjusted debt/equity ratio of 2.5 to 1.
- Secured debt-to-total assets ratio of 19.6%.
- 100% of new aircraft deliveries through December 2021 already leased.
- New technology aircraft comprise 59% of fleet.
- Approximately 98% of lease rents through 2022 already contracted.
- Average current lease expires in the third quarter of 2027.
- 99% fleet utilization rate for the first quarter of 2020.
- 27% increase in diluted EPS year over year.
- 14% increase in book value per share since March 31, 2019 to $73.69.
"The Covid-19 pandemic is creating significant challenges for the global aviation industry and for economies around the world. We would like to express our support for those directly affected by this illness and those whose jobs and businesses have been impacted," said Aengus Kelly, Chief Executive Officer of AerCap. "AerCap entered this crisis in a position of strength, with a strong balance sheet and liquidity position, an attractive aircraft portfolio and a high-quality customer base including many of the world's leading airlines. Most importantly, we have an unrivalled operating platform with a strong track record of successfully managing through challenging environments. With approximately $11 billion sources of liquidity, over $28 billion of unencumbered assets and a record low leverage ratio of 2.5 to 1, we are well-positioned to weather an extended period of turbulence and support the recovery of the airline industry in the future."
First Quarter 2020 Financial Results
- Net income increased by 18% to $276.8 million, from $234.2 million for the same period in 2019. Diluted earnings per share was $2.14, compared with $1.68 for the same period in 2019.
- The increase in net income was primarily driven by higher maintenance revenue and higher net gain on sale of assets.
- Diluted earnings per share increased 27%, driven by the same factors as net income and the repurchase of 14.1 million shares from January 2019 through March 2020.
Revenue and Net Spread
Three months ended March 31,
| |||||||||
2020
|
2019
|
% increase/
(decrease) | |||||||
(U.S. Dollars in millions)
| |||||||||
Lease revenue:
| |||||||||
Basic lease rents
|
$1,030.8
|
$1,075.3
|
(4%)
| ||||||
Maintenance rents and other receipts
|
134.3
|
86.8
|
55%
| ||||||
Total lease revenue
|
1,165.1
|
1,162.1
|
—%
| ||||||
Net gain on sale of assets
|
58.4
|
21.5
|
171%
| ||||||
Other income
|
14.7
|
21.4
|
(31%)
| ||||||
Total Revenues and other income
|
$1,238.2
|
$1,205.0
|
3%
|
Basic lease rents were $1,030.8 million for the first quarter of 2020, compared with $1,075.3 million for the same period in 2019. The decrease was primarily due to downtime relating to re-leasing activity and the write-off of certain lessee receivables.
Maintenance rents and other receipts were $134.3 million for the first quarter of 2020, compared with $86.8 million for the same period in 2019. The increase was primarily due to higher maintenance revenue recognized as a result of lease terminations and higher end of lease compensation recognized during the first quarter of 2020.
Net gain on sale of assets for the first quarter of 2020 was $58.4 million, relating to 12 aircraft sold for $265 million, compared with $21.5 million for the same period in 2019, relating to 19 aircraft sold for $340 million. The increase was primarily due to the composition of asset sales.
Other income for the first quarter of 2020 was $14.7 million, compared with $21.4 million for the same period in 2019. The decrease was primarily due to higher interest income and income from net insurance proceeds in the first quarter of 2019.
Three months ended March 31,
| |||||||||
2020
|
2019
|
% increase/
(decrease) | |||||||
(U.S. Dollars in millions)
| |||||||||
Basic lease rents
|
$1,030.8
|
$1,075.3
|
(4%)
| ||||||
Interest expense
|
318.6
|
334.2
|
(5%)
| ||||||
Adjusted for:
| |||||||||
Mark-to-market of interest rate caps and swaps
|
(12.5)
|
(15.9)
|
(21%)
| ||||||
Interest expense excluding mark-to-market of interest rate caps and swaps
|
306.1
|
318.3
|
(4%)
| ||||||
Net interest margin (*)
|
$724.7
|
$757.0
|
(4%)
| ||||||
Depreciation and amortization, including maintenance rights expense
|
(432.0)
|
(447.2)
|
(3%)
| ||||||
Net interest margin, less depreciation and amortization
|
$292.7
|
$309.8
|
(6%)
| ||||||
Average lease assets (*)
|
$37,671
|
$37,266
|
1%
| ||||||
Annualized net spread (*)
|
7.7%
|
8.1%
| |||||||
Annualized net spread less depreciation and amortization (*)
|
3.1%
|
3.3%
| |||||||
(*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to these non-GAAP measures
|
Interest expense excluding mark-to-market of interest rate caps and swaps of $12.5 million was $306.1 million for the first quarter of 2020, compared with $318.3 million for the same period in 2019. Our average cost of debt was 4.1% for the first quarter of 2020, compared with 4.2% for the same period in 2019. Our average cost of debt includes debt issuance costs, upfront fees and other impacts of approximately 0.3% to 0.4%.
Selling, General and Administrative Expenses
Three months ended March 31,
| |||||||||
2020
|
2019
|
% increase/
(decrease) | |||||||
(U.S. Dollars in millions)
| |||||||||
Selling, general and administrative expenses
|
$46.8
|
$49.5
|
(5%)
| ||||||
Share-based compensation expenses
|
17.8
|
17.4
|
2%
| ||||||
Total selling, general and administrative expenses
|
$64.6
|
$66.9
|
(3%)
|
Other Expenses
Leasing expenses were $103.3 million for the first quarter of 2020, compared with $91.7 million for the same period in 2019. The increase was primarily due to an increase in leasing expenses as a result of higher lessor maintenance contributions, partially offset by a decrease in maintenance rights expense as a result of lower maintenance activity during the period and the lower maintenance rights asset balance. Asset impairment charges were $13.9 million for the first quarter of 2020, compared to $5.0 million recorded for the same period in 2019. Asset impairment charges recorded in the first quarter of 2020 related to sales transactions and lease terminations and were more than offset by maintenance revenue.
Effective Tax Rate
Our effective tax rate for the first quarter of 2020 was 13.5%, compared to 13.0% for the first quarter of 2019. The effective tax rate for the full year 2019 was 12.5%. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions.
Book Value Per Share
March 31, 2020
|
March 31, 2019
| |||||
(U.S. Dollars in millions,
except share and per share data) | ||||||
Total AerCap Holdings N.V. shareholders' equity
|
$9,382.9
|
$8,906.2
| ||||
Ordinary shares outstanding
|
129,637,008
|
139,597,805
| ||||
Unvested restricted stock
|
(2,300,595)
|
(2,418,788)
| ||||
Ordinary shares outstanding (excl. unvested restricted stock)
|
127,336,413
|
137,179,017
| ||||
Book value per ordinary share outstanding (excl. unvested restricted stock)
|
$73.69
|
$64.92
|
Book value per share has increased 14% since March 31, 2019.
Financial Position
March 31, 2020
|
December 31, 2019
|
% increase/
(decrease) over December 31, 2019 | |||||||
(U.S. Dollars in millions, except debt/equity ratio)
| |||||||||
Total cash, cash equivalents and restricted cash
|
$4,882.5
|
$1,300.3
|
275%
| ||||||
Total lease assets (*)
|
37,658.6
|
37,930.4
|
(1%)
| ||||||
Total assets
|
47,144.8
|
43,749.2
|
8%
| ||||||
Debt
|
32,760.8
|
29,486.1
|
11%
| ||||||
Total liabilities
|
37,692.8
|
34,367.0
|
10%
| ||||||
Total AerCap Holdings N.V. shareholders' equity
|
9,382.9
|
9,314.9
|
1%
| ||||||
Total equity
|
9,452.0
|
9,382.2
|
1%
|
(*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to these non-GAAP measures
|
In March 2020, we borrowed $4.0 billion under a senior unsecured revolving credit facility. This resulted in an increase in total cash, cash equivalents and restricted cash, debt and total liabilities during the first quarter of 2020. In April 2020, we repaid $3.0 billion of the outstanding amount.
As of March 31, 2020, AerCap's portfolio consisted of 1,372 aircraft that were owned, on order or managed. The average age of our owned fleet as of March 31, 2020 was 6.2 years (2.5 years for new technology aircraft, 11.5 years for current technology aircraft) and the average remaining contracted lease term was 7.5 years.
Boeing 737 MAX Delays
Following the fatal accidents of two Boeing 737 MAX aircraft, the worldwide fleet of these aircraft was grounded by aviation authorities in March 2019 and production was temporarily suspended by Boeing in January 2020, resulting in ongoing delays in the delivery of our aircraft on order from Boeing. As of March 31, 2020, we had 95 Boeing 737 MAX aircraft on order with Boeing and five already delivered and on lease. Boeing currently expects that the necessary regulatory approvals will be obtained in time to support resumption of the Boeing 737 MAX deliveries during the third quarter of 2020. It is uncertain, however, when and under what conditions our Boeing 737 MAX aircraft will return to service and when Boeing will resume making deliveries of our Boeing 737 MAX aircraft on order. As a result, we expect to incur future delays on our scheduled Boeing 737 MAX deliveries, and any such future delays are likely to have an impact on our financial results. Certain of our Boeing 737 MAX leases have now been cancelled, and we expect additional leases to be cancelled in the future. In cases where leases have been cancelled, we have the right to cancel our corresponding orders for delivery of those aircraft; nevertheless, these lease cancellations may have an adverse effect on our future cash flows and results of operations, which could be material.
AerCap Holdings N.V
| ||||||||
Unaudited Consolidated Balance Sheets
| ||||||||
(U.S. Dollars in thousands)
| ||||||||
March 31, 2020
|
December 31, 2019
| |||||||
Assets
| ||||||||
Cash and cash equivalents
|
$4,693,872
|
$1,121,396
| ||||||
Restricted cash
|
188,671
|
178,951
| ||||||
Trade receivables
|
94,558
|
47,935
| ||||||
Flight equipment held for operating leases, net
|
35,670,631
|
35,870,781
| ||||||
Maintenance rights and lease premium, net
|
774,039
|
809,615
| ||||||
Flight equipment held for sale
|
331,387
|
336,592
| ||||||
Net investment in finance and sales-type leases
|
978,783
|
1,011,549
| ||||||
Prepayments on flight equipment
|
3,108,703
|
2,954,478
| ||||||
Other intangibles, net
|
302,100
|
307,394
| ||||||
Deferred income tax assets
|
106,267
|
95,077
| ||||||
Other assets
|
895,817
|
1,015,476
| ||||||
Total Assets
|
$47,144,828
|
$43,749,244
| ||||||
Liabilities and Equity
| ||||||||
Accounts payable, accrued expenses and other liabilities
|
$1,108,037
|
$1,032,623
| ||||||
Accrued maintenance liability
|
2,149,884
|
2,190,159
| ||||||
Lessee deposit liability
|
723,949
|
747,790
| ||||||
Debt
|
32,760,773
|
29,486,131
| ||||||
Deferred income tax liabilities
|
950,199
|
910,336
| ||||||
Total liabilities
|
37,692,842
|
34,367,039
| ||||||
Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of March 31, 2020 and December 31, 2019; 138,847,345 and 141,847,345 ordinary shares issued and 129,637,008 and 131,583,489 ordinary shares outstanding (including 2,300,595 and 2,354,318 unvested restricted stock) as of March 31, 2020 and December 31, 2019, respectively
|
1,721
|
1,754
| ||||||
Additional paid-in capital
|
2,067,647
|
2,209,462
| ||||||
Treasury shares, at cost (9,210,337 and 10,263,856 ordinary shares as of March 31, 2020 and December 31, 2019, respectively)
|
(498,003)
|
(537,341)
| ||||||
Accumulated other comprehensive loss
|
(174,581)
|
(93,587)
| ||||||
Accumulated retained earnings
|
7,986,142
|
7,734,609
| ||||||
Total AerCap Holdings N.V. shareholders' equity
|
9,382,926
|
9,314,897
| ||||||
Non-controlling interest
|
69,060
|
67,308
| ||||||
Total Equity
|
9,451,986
|
9,382,205
| ||||||
Total Liabilities and Equity
|
$47,144,828
|
$43,749,244
| ||||||
AerCap Holdings N.V
| ||||||||
Unaudited Consolidated Income Statements
| ||||||||
(U.S. Dollars in thousands, except share and per share data)
| ||||||||
Three months ended March 31,
| ||||||||
2020
|
2019
| |||||||
Revenues and other income
| ||||||||
Lease revenue:
| ||||||||
Basic lease rents
|
$1,030,794
|
$1,075,282
| ||||||
Maintenance rents and other receipts
|
134,285
|
86,811
| ||||||
Total lease revenue
|
1,165,079
|
1,162,093
| ||||||
Net gain on sale of assets
|
58,366
|
21,541
| ||||||
Other income
|
14,732
|
21,393
| ||||||
Total Revenues and other income
|
1,238,177
|
1,205,027
| ||||||
Expenses
| ||||||||
Depreciation and amortization
|
415,798
|
425,849
| ||||||
Asset impairment
|
13,947
|
5,031
| ||||||
Interest expense
|
318,617
|
334,179
| ||||||
Leasing expenses
|
103,297
|
91,721
| ||||||
Selling, general and administrative expenses
|
64,584
|
66,873
| ||||||
Total Expenses
|
916,243
|
923,653
| ||||||
Income before income taxes and income of investments accounted for under the equity method
|
321,934
|
281,374
| ||||||
Provision for income taxes
|
(43,461)
|
(36,579)
| ||||||
Equity in net earnings of investments accounted for under the equity method
|
1,331
|
2,102
| ||||||
Net income
|
$279,804
|
$246,897
| ||||||
Net income attributable to non-controlling interest
|
(2,980)
|
(12,711)
| ||||||
Net income attributable to AerCap Holdings N.V
|
$276,824
|
$234,186
| ||||||
Basic earnings per share
|
$2.16
|
$1.70
| ||||||
Diluted earnings per share
|
$2.14
|
$1.68
| ||||||
Weighted average shares outstanding - basic
|
128,299,745
|
138,153,456
| ||||||
Weighted average shares outstanding - diluted
|
129,340,501
|
139,618,644
| ||||||
AerCap Holdings N.V
| ||||||||
Unaudited Consolidated Statements of Cash Flows
| ||||||||
(U.S. Dollars in thousands)
| ||||||||
Three months ended March 31,
| ||||||||
2020
|
2019
| |||||||
Net income
|
$279,804
|
$246,897
| ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
| ||||||||
Depreciation and amortization
|
415,798
|
425,849
| ||||||
Asset impairment
|
13,947
|
5,031
| ||||||
Amortization of debt issuance costs, debt discount, debt premium and lease premium
|
16,298
|
19,033
| ||||||
Amortization of fair value adjustment on debt
|
(16,267)
|
(27,060)
| ||||||
Maintenance rights write-off
|
33,393
|
52,357
| ||||||
Maintenance liability release to income
|
(63,422)
|
(46,285)
| ||||||
Net gain on sale of assets
|
(58,366)
|
(21,541)
| ||||||
Deferred income taxes
|
44,616
|
37,769
| ||||||
Collections of finance and sales-type leases
|
19,115
|
19,890
| ||||||
Other
|
75,395
|
56,079
| ||||||
Changes in operating assets and liabilities:
| ||||||||
Trade receivables
|
(49,342)
|
(55,039)
| ||||||
Other assets
|
(96,013)
|
(10,172)
| ||||||
Accounts payable, accrued expenses and other liabilities
|
13,962
|
42,892
| ||||||
Net cash provided by operating activities
|
628,918
|
745,700
| ||||||
Purchase of flight equipment
|
(61,326)
|
(815,274)
| ||||||
Proceeds from sale or disposal of assets
|
176,961
|
312,431
| ||||||
Prepayments on flight equipment
|
(350,836)
|
(280,335)
| ||||||
Other
|
—
|
(11)
| ||||||
Net cash used in investing activities
|
(235,201)
|
(783,189)
| ||||||
Issuance of debt
|
4,200,000
|
1,816,306
| ||||||
Repayment of debt
|
(918,422)
|
(537,246)
| ||||||
Debt issuance costs paid, net of debt premium received
|
(1,739)
|
(13,863)
| ||||||
Maintenance payments received
|
144,876
|
174,390
| ||||||
Maintenance payments returned
|
(95,189)
|
(108,437)
| ||||||
Security deposits received
|
28,392
|
86,860
| ||||||
Security deposits returned
|
(48,608)
|
(78,270)
| ||||||
Dividend paid to non-controlling interest holders and others
|
(1,228)
|
(1,674)
| ||||||
Repurchase of shares and tax withholdings on share-based compensation
|
(118,571)
|
(140,978)
| ||||||
Net cash provided by financing activities
|
3,189,511
|
1,197,088
| ||||||
Net increase in cash, cash equivalents and restricted cash
|
3,583,228
|
1,159,599
| ||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(1,032)
|
(403)
| ||||||
Cash, cash equivalents and restricted cash at beginning of period
|
1,300,347
|
1,415,035
| ||||||
Cash, cash equivalents and restricted cash at end of period
|
$4,882,543
|
$2,574,231
| ||||||
Recommended for you...