Highlights:
Completed the GECAS acquisition on November 1, 2021, making AerCap the worldwide industry leader across all areas of aviation leasing: aircraft, engines and helicopters.Completed the offering of $21 billion of senior unsecured notes in October 2021 and a $2 billion secured institutional term loan in November 2021 to finance the GECAS acquisition with an average coupon of approximately 2.6% and an average tenor of 7.1 years.Adjusted debt/equity ratio of 2.3 to 1 at September 30, 2021, which was a record low for the company. Pro forma for the GECAS acquisition, our adjusted debt/equity ratio was 2.8 to 1 as of September 30, 2021.Continued to see significant improvements in cash collections, trade receivables and deferral requests.Special items in the third quarter of 2021 included $442 million ($387 million after-tax) of other income related to proceeds from unsecured claims and $101 million ($88 million after-tax) of expenses related to the GECAS transaction.Signed lease agreements for 42 aircraft in the third quarter of 2021.100% of new aircraft order book placed through 2022.
Revenue and Net Spread
Three months ended September 30, | Nine months ended September 30, | ||||||||||||
2021 | 2020 | % increase/ | 2021 | 2020 | % increase/ | ||||||||
(U.S. Dollars in millions) | (U.S. Dollars in millions) | ||||||||||||
Lease revenue: | |||||||||||||
Basic lease rents | $848 | $897 | (6%) | $2,608 | $2,876 | (9%) | |||||||
Maintenance rents and other receipts | 110 | 91 | 22% | 424 | 449 | (6%) | |||||||
Total lease revenue | 958 | 988 | (3%) | 3,032 | 3,326 | (9%) | |||||||
Net gain on sale of assets | 38 | 7 | 422% | 65 | 76 | (14%) | |||||||
Other income | 459 | 31 | 1,365% | 685 | 61 | 1,022% | |||||||
Total Revenues and other income | $1,454 | $1,027 | 42% | $3,782 | $3,462 | 9% | |||||||
Basic lease rents were $848 million for the third quarter of 2021, compared with $897 million for the same period in 2020. The decrease was primarily due to lease restructurings, transitions and the impact of airline bankruptcies.
Maintenance rents and other receipts were $110 million for the third quarter of 2021, compared with $91 million for the same period in 2020. The increase was primarily due to higher maintenance revenue recognized as a result of lease terminations during the third quarter of 2021.
Net gain on sale of assets for the third quarter of 2021 was $38 million, relating to 11 aircraft sold for $101 million, compared with $7 million for the same period in 2020, relating to seven aircraft sold for $63 million. The increase was primarily due to the higher volume and composition of asset sales.
Other income for the third quarter of 2021 was $459 million, compared with $31 million for the same period in 2020. The increase was primarily driven by proceeds from unsecured claims in the third quarter of 2021.
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2021 | 2020 | % increase/ | 2021 | 2020 | % increase/ | |||||||
(U.S. Dollars in millions) | (U.S. Dollars in millions) | |||||||||||
Basic lease rents | $848 | $897 | (6%) | $2,608 | $2,876 | (9%) | ||||||
Interest expense | 287 | 307 | (7%) | 861 | 938 | (8%) | ||||||
Adjusted for: | ||||||||||||
Mark-to-market of interest rate caps and swaps | 1 | — | NA | 11 | (15) | NA | ||||||
Interest expense excluding mark-to-market of interest rate caps and swaps | 288 | 307 | (6%) | 872 | 924 | (6%) | ||||||
Net interest margin (*) | $559 | $590 | (5%) | $1,736 | $1,952 | (11%) | ||||||
Depreciation and amortization, including maintenance rights expense | (393) | (428) | (8%) | (1,188) | (1,283) | (7%) | ||||||
Net interest margin, less depreciation and amortization | $166 | $164 | 2% | $548 | $670 | (18%) | ||||||
Average lease assets (*) | $36,095 | $36,926 | (2%) | $36,158 | $37,313 | (3%) | ||||||
Annualized net spread (*) | 6.2% | 6.4% | 6.4% | 7.0% | ||||||||
Annualized net spread less depreciation and amortization (*) | 1.8% | 1.8% | 2.0% | 2.4% | ||||||||
(*) 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 was $288 million for the third quarter of 2021, compared with $307 million for the same period in 2020. AerCap's average cost of debt was 3.8% for the third quarter of 2021, and 3.8% for the same period in 2020, excluding debt issuance costs, upfront fees and other impacts.
Selling, General and Administrative Expenses
Three months ended September 30, | Nine months ended September 30, | |||||||||||||
2021 | 2020 | % increase/ | 2021 | 2020 | % increase/ | |||||||||
(U.S. Dollars in millions) | (U.S. Dollars in millions) | |||||||||||||
Selling, general and administrative expenses | $46 | $44 | 5% | $127 | $129 | (1%) | ||||||||
Share-based compensation expenses | 22 | 17 | 29% | 71 | 50 | 44% | ||||||||
Total selling, general and administrative expenses | $68 | $61 | 12% | $199 | $178 | 11% | ||||||||
Total selling, general and administrative expenses increased primarily due to the timing of compensation-related expenses.
Other Expenses
Asset impairment charges were $49 million for the third quarter of 2021, compared to $973 million for the same period in 2020. Asset impairment charges recorded in the third quarter of 2021 related to lease terminations and were largely offset by maintenance releases. Asset impairment charges recorded in the third quarter of 2020 included $915 million of impairment of flight equipment, related primarily to current technology widebody aircraft, in particular Airbus A330 and Boeing 777 aircraft, as well as the write-off of $58 million of goodwill.
Leasing expenses were $54 million for the third quarter of 2021, compared with $51 million for the same period in 2020. The increase was primarily due to higher leasing expenses as a result of lease terminations, 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.
Effective Tax Rate
AerCap's effective tax rate for the full year 2021 is expected to be 13.5%, compared to an effective tax rate of 5.5% for the full year 2020. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions as well as the amount of permanent tax differences relative to pre-tax income.
The company's effective tax rate was 12.4% for the third quarter of 2021, compared to 11.1% for the third quarter of 2020. Our effective tax rate in any quarter can be impacted by revisions to the estimated full-year rate.
Other Assets
Other assets increased from $1,229 million as of December 31, 2020 to $1,670 million as of September 30, 2021, primarily due to receivables related to proceeds from unsecured claims that were received in October 2021 and unamortized debt issuance costs related to the bridge financing for the GECAS transaction.
Book Value Per Share
September 30, 2021 | September 30, 2020 | |||||
(U.S. Dollars in millions, except share and per share data) | ||||||
Total AerCap Holdings N.V. shareholders' equity | $9,855 | $8,811 | ||||
Ordinary shares outstanding | 133,379,789 | 129,756,613 | ||||
Unvested restricted stock | (5,244,285) | (2,163,670) | ||||
Ordinary shares outstanding (excl. unvested restricted stock) | 128,135,504 | 127,592,943 | ||||
Book value per ordinary share outstanding (excl. unvested restricted stock) | $76.91 | $69.06 | ||||
Financial Position
September 30, 2021 | December 31, 2020 | % increase/ (decrease) over December 31, 2020 | |||||||
(U.S. Dollars in millions) | |||||||||
Total cash, cash equivalents and restricted cash | $1,535 | $1,495 | 3% | ||||||
Total lease assets (*) | 35,962 | 36,642 | (2%) | ||||||
Total assets | 41,499 | 42,048 | (1%) | ||||||
Debt | 27,540 | 28,742 | (4%) | ||||||
Total liabilities | 31,569 | 33,116 | (5%) | ||||||
Total AerCap Holdings N.V. shareholders' equity | 9,855 | 8,864 | 11% | ||||||
Total equity | 9,930 | 8,932 | 11% | ||||||
(*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to this non-GAAP measure | |||||||||
Aircraft Portfolio
As of September 30, 2021, AerCap's portfolio consisted of 1,304 aircraft that were owned, on order or managed. The average age of the company's owned fleet as of September 30, 2021 was 6.7 years (3.6 years for new technology aircraft, 12.7 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years.
Notes Regarding Financial Information Presented in This Press Release
The financial information presented in this press release is not audited.
Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
The following are definitions of non-GAAP measures used in this press release. We believe these measures may further assist investors in their understanding of our operational performance.
Net income / earnings per share excluding GECAS transaction-related expenses
Net income excluding GECAS transaction-related expenses is calculated as net income excluding the after-tax impact of transaction-related expenses. Earnings per share excluding GECAS transaction-related expenses is calculated by dividing net income excluding GECAS transaction-related expenses by the weighted average of our ordinary shares outstanding. Given the relative significance of this item during 2021, we have chosen to present this measure in order to assist investors in their understanding of the changes and trends related to our earnings.
Three months ended September 30, 2021 | Nine months ended September 30, 2021 | |||||||||
Net income | Earnings per share | Net income | Earnings per share | |||||||
(U.S. Dollars in millions, except per share data) | ||||||||||
Net income / earnings per share | $434 | $3.35 | $912 | $7.04 | ||||||
Transaction-related expenses | 101 | 0.78 | 196 | 1.51 | ||||||
Income tax benefit | (13) | (0.10) | (24) | (0.19) | ||||||
Net income / earnings per share excluding GECAS transaction-related expenses | $522 | $4.04 | $1,083 | $8.36 | ||||||
Adjusted debt/equity ratio
This measure is the ratio obtained by dividing adjusted debt by adjusted equity.
- Adjusted debt means consolidated total debt less cash and cash equivalents, and less a 50% equity credit with respect to certain long-term subordinated debt.
- Adjusted equity means total equity, plus the 50% equity credit relating to the long-term subordinated debt.
Adjusted debt and adjusted equity are adjusted by the 50% equity credit to reflect the equity nature of those financing arrangements and to provide information that is consistent with definitions under certain of our debt covenants. We believe this measure may further assist investors in their understanding of our capital structure and leverage.
Pro Forma for GECAS acquisition | AerCap stand-alone | |||||||
September 30, 2021 | September 30, 2021 | December 31, 2020 | ||||||
(U.S. Dollars in millions, except debt/equity ratio) | ||||||||
Debt | $51,477 | $27,540 | $28,742 | |||||
Adjusted for: | ||||||||
Cash and cash equivalents | (1,651) | (1,311) | (1,249) | |||||
50% credit for long-term subordinated debt | (1,125) | (1,125) | (1,125) | |||||
Adjusted debt | $48,701 | $25,104 | $26,368 | |||||
Equity | $16,513 | $9,930 | $8,932 | |||||
Adjusted for: | ||||||||
50% credit for long-term subordinated debt | 1,125 | 1,125 | 1,125 | |||||
Adjusted equity | $17,638 | $11,055 | $10,057 | |||||
Adjusted debt/equity ratio | 2.8 to 1 | 2.3 to 1 | 2.6 to 1 | |||||
Net interest margin, annualized net spread, annualized net spread less depreciation and amortization and average cost of debt
Net interest margin is calculated as the difference between basic lease rents and interest expense, excluding the impact of the mark-to-market of interest rate caps and swaps. Annualized net spread is net interest margin expressed as a percentage of average lease assets. Annualized net spread less depreciation and amortization is net interest margin less depreciation and amortization, including maintenance rights expense, expressed as a percentage of average lease assets. Average cost of debt is calculated as interest expense, excluding mark-to-market on interest rate caps and swaps, debt issuance costs, upfront fees and other impacts, divided by average debt balance. We believe these measures may further assist investors in their understanding of the changes and trends related to the earnings of our leasing activities. These measures reflect the impact from changes in the number of aircraft leased, lease rates and utilization rates, as well as the impact from changes in the amount of debt and interest rates.
Lease assets
Lease assets include flight equipment held for operating leases, flight equipment held for sale, net investment in finance and sales-type leases and maintenance rights assets.
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