AerCap, one of the global leaders in commercial aircraft leasing with one of the biggest order books in the industry has released details of its financial results for the second quarter of 2020.
The firm that has approximately 200 customers in as many as 80 countries with offices in Dublin, Shannon, Los Angeles, Singapore, Amsterdam, Shanghai, Abu Dhabi, Seattle and Toulouse has reported a net income of $246 million for the second quarter of 2020 and $523 million for the first half of 2020.
Highlights
- Approximately $12 billion sources of liquidity.
- 2.2x next 12 months' sources-to-uses coverage ratio, representing $6.4 billion of excess coverage.
- $3 billion of new financing raised in the second quarter of 2020.
- Approximately $27 billion of unencumbered assets.
- Adjusted debt/equity ratio of 2.5 to 1.
- Secured debt-to-total assets ratio of 23%.
- New technology aircraft comprise 59% of fleet.
- Average current lease expires in the fourth quarter of 2027.
"The Covid-19 pandemic continues to create significant challenges for the global aviation industry and for our airline customers," said Aengus Kelly, Chief Executive Officer of AerCap. "In response, we have maintained a record amount of liquidity and strong access to funding. We currently have $12 billion sources of liquidity, which is more than double our cash needs over the next 12 months. Since April, we have raised $3 billion of new funding, and have over $2 billion of additional funding initiatives in progress. With $27 billion of unencumbered assets, a record low leverage ratio of 2.5 to 1 and an unrivalled operating platform, we are well-positioned to weather an extended period of turbulence and support the recovery of the airline industry in the future."
Second Quarter 2020 Financial Results
- Net income was $246 million, compared with $331 million for the same period in 2019. Diluted earnings per share was $1.92, compared with $2.42 for the same period in 2019.
- The decrease in net income was primarily driven by lower basic lease rents and lower net gain on sale of assets.
- Diluted earnings per share was affected by the same factors as net income and by the repurchase of 11 million shares from April 2019 through June 2020.
Boeing 737 MAX
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 June 30, 2020, we had five Boeing 737 MAX aircraft delivered and on lease. It is uncertain 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 by our lessees, and additional leases may be cancelled in the future. In cases where lessees have the right to cancel Boeing 737 MAX leases, 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.
In July 2020, we reached agreement with Boeing to restructure our order book for Boeing 737 MAX aircraft, including the cancellation of 15 of our Boeing 737 MAX aircraft on order. Following this cancellation, we have 80 Boeing 737 MAX aircraft on order.
Aircraft Portfolio
As of June 30, 2020, AerCap's portfolio consisted of 1,357 aircraft that were owned, on order or managed, as adjusted to reflect our cancellation of 15 Boeing 737 MAX aircraft orders in in July 2020. The average age of our owned fleet as of June 30, 2020 was 6.4 years (2.7 years for new technology aircraft, 11.7 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years.
 |
| AerCap recently leased a brand new Airbus NEO to Canadian leisure airline AirTransat |
Revenue and Net Spread
Three months ended June 30,
|
Six months ended June 30,
| |||||||||||||||||
2020
|
2019
|
% increase/
(decrease) |
2020
|
2019
|
% increase/
(decrease) | |||||||||||||
(U.S. Dollars in millions)
|
(U.S. Dollars in millions)
| |||||||||||||||||
Lease revenue:
| ||||||||||||||||||
Basic lease rents
|
$948
|
$1,077
|
(12%)
|
$1,979
|
$2,152
|
(8%)
| ||||||||||||
Maintenance rents and other receipts
|
224
|
109
|
106%
|
359
|
196
|
83%
| ||||||||||||
Total lease revenue
|
1,172
|
1,186
|
(1%)
|
2,337
|
2,348
|
—
| ||||||||||||
Net gain on sale of assets
|
10
|
78
|
(87%)
|
68
|
100
|
(31%)
| ||||||||||||
Other income
|
15
|
17
|
(12%)
|
30
|
38
|
(22%)
| ||||||||||||
Total Revenues and other income
|
$1,197
|
$1,281
|
(7%)
|
$2,436
|
$2,486
|
(2%)
| ||||||||||||
Basic lease rents were $948 million for the second quarter of 2020, compared with $1,077 million for the same period in 2019. The decrease was primarily due to lease restructurings, transitions and the impact of airline bankruptcies.
Maintenance rents and other receipts were $224 million for the second quarter of 2020, compared with $109 million for the same period in 2019. The increase was primarily due to higher maintenance revenue recognized as a result of lease terminations during the second quarter of 2020.
Net gain on sale of assets for the second quarter of 2020 was $10 million, relating to nine aircraft sold for $188 million, compared with $78 million for the same period in 2019, relating to 22 aircraft sold for $502 million. The decrease was primarily due to the lower volume and composition of asset sales.
Other income for the second quarter of 2020 was $15 million, compared with $17 million for the same period in 2019.
Three months ended June 30,
|
Six months ended June 30,
| |||||||||||||||||
2020
|
2019
|
% increase/
(decrease) |
2020
|
2019
|
% increase/
(decrease) | |||||||||||||
(U.S. Dollars in millions)
|
(U.S. Dollars in millions)
| |||||||||||||||||
Basic lease rents
|
$948
|
$1,077
|
(12%)
|
$1,979
|
$2,152
|
(8%)
| ||||||||||||
Interest expense
|
312
|
332
|
(6%)
|
630
|
667
|
(5%)
| ||||||||||||
Adjusted for:
| ||||||||||||||||||
Mark-to-market of interest rate caps and swaps
|
(2)
|
(10)
|
(79%)
|
(15)
|
(26)
|
(43%)
| ||||||||||||
Interest expense excluding mark-to-market of interest rate caps and swaps
|
310
|
323
|
(4%)
|
616
|
641
|
(4%)
| ||||||||||||
Net interest margin (*)
|
$638
|
$755
|
(15%)
|
$1,363
|
$1,512
|
(10%)
| ||||||||||||
Depreciation and amortization, including maintenance rights expense
|
(424)
|
(435)
|
(3%)
|
(856)
|
(882)
|
(3%)
| ||||||||||||
Net interest margin, less depreciation and amortization
|
215
|
319
|
(33%)
|
508
|
629
|
(19%)
| ||||||||||||
Average lease assets (*)
|
$37,342
|
$37,644
|
(1%)
|
$37,506
|
$37,455
|
—%
| ||||||||||||
Annualized net spread (*)
|
6.8%
|
8.0%
|
7.3%
|
8.1%
| ||||||||||||||
Annualized net spread less depreciation and amortization (*)
|
2.3%
|
3.4%
|
2.7%
|
3.4%
| ||||||||||||||
(*) 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 of $2 million was $310 million for the second quarter of 2020, compared with $323 million for the same period in 2019. Our average cost of debt was 4.0% for the second quarter of 2020, compared with 4.3% 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 June 30,
|
Six months ended June 30,
| |||||||||||||||||
2020
|
2019
|
% increase/
(decrease) |
2020
|
2019
|
% increase/
(decrease) | |||||||||||||
(U.S. Dollars in millions)
|
(U.S. Dollars in millions)
| |||||||||||||||||
Selling, general and administrative expenses
|
$38
|
$46
|
(17%)
|
$85
|
$95
|
(11%)
| ||||||||||||
Share-based compensation expenses
|
15
|
19
|
(21%)
|
33
|
36
|
(10%)
| ||||||||||||
Total selling, general and administrative expenses
|
$53
|
$65
|
(18%)
|
$118
|
$131
|
(11%)
| ||||||||||||
Selling, general and administrative expenses decreased primarily as a result of lower compensation-related expenses.
Other Expenses
Leasing expenses were $78 million for the second quarter of 2020, compared with $65 million for the same period in 2019. The increase was primarily driven by an increase in our provision for expected credit losses, 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 $73 million for the second quarter of 2020, compared to $18 million recorded for the same period in 2019. Asset impairment charges recorded in the second quarter of 2020 primarily related to lease terminations and were largely offset by maintenance revenue.
Effective Tax Rate
Our effective tax rate for the second quarter of 2020 was 13.5%, compared to 13.0% for the second 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
June 30, 2020
|
June 30, 2019
| |||||
(U.S. Dollars in millions,
except share and per share data) | ||||||
Total AerCap Holdings N.V. shareholders' equity
|
$9,634
|
$9,013
| ||||
Ordinary shares outstanding
|
129,672,783
|
136,602,986
| ||||
Unvested restricted stock
|
(2,087,383)
|
(2,250,655)
| ||||
Ordinary shares outstanding (excl. unvested restricted stock)
|
127,585,400
|
134,352,331
| ||||
Book value per ordinary share outstanding (excl. unvested restricted stock)
|
$75.51
|
$67.08
| ||||
Book value per share has increased 13% since June 30, 2019.
Financial Position
June 30, 2020
|
December 31, 2019
|
% increase/
(decrease) over December 31, 2019 | |||||||
(U.S. Dollars in millions)
| |||||||||
Total cash, cash equivalents and restricted cash
|
$2,643
|
$1,300
|
103%
| ||||||
Total lease assets (*)
|
37,090
|
37,930
|
(2%)
| ||||||
Total assets
|
45,194
|
43,749
|
3%
| ||||||
Debt
|
30,684
|
29,486
|
4%
| ||||||
Total liabilities
|
35,491
|
34,367
|
3%
| ||||||
Total AerCap Holdings N.V. shareholders' equity
|
9,634
|
9,315
|
3%
| ||||||
Total equity
|
9,703
|
9,382
|
3%
| ||||||
(*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to this non-GAAP measure
|
Notes Regarding Financial Information Presented Here 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.
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.
June 30, 2020
|
December 31, 2019
| |||||
(U.S. Dollars in millions,
except debt/equity ratio) | ||||||
Debt
|
$30,684
|
$29,486
| ||||
Adjusted for:
| ||||||
Cash and cash equivalents
|
(2,383)
|
(1,121)
| ||||
50% credit for long-term subordinated debt
|
(1,125)
|
(1,125)
| ||||
Adjusted debt
|
$27,176
|
$27,240
| ||||
Equity
|
$9,703
|
$9,382
| ||||
Adjusted for:
| ||||||
50% credit for long-term subordinated debt
|
1,125
|
1,125
| ||||
Adjusted equity
|
$10,828
|
$10,507
| ||||
Adjusted debt/equity ratio
|
2.5 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, 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.
AerCap Holdings N.V
| ||||||||
Unaudited Consolidated Balance Sheets
| ||||||||
(U.S. Dollars in thousands)
| ||||||||
June 30, 2020
|
December 31, 2019
| |||||||
Assets
| ||||||||
Cash and cash equivalents
|
$2,382,655
|
$1,121,396
| ||||||
Restricted cash
|
260,466
|
178,951
| ||||||
Trade receivables
|
200,819
|
47,935
| ||||||
Flight equipment held for operating leases, net
|
35,356,328
|
35,870,781
| ||||||
Maintenance rights and lease premium, net
|
738,227
|
809,615
| ||||||
Flight equipment held for sale
|
145,805
|
336,592
| ||||||
Net investment in finance and sales-type leases
|
943,013
|
1,011,549
| ||||||
Prepayments on flight equipment
|
3,370,096
|
2,954,478
| ||||||
Other intangibles, net
|
293,316
|
307,394
| ||||||
Deferred income tax assets
|
106,970
|
95,077
| ||||||
Other assets
|
1,396,079
|
1,015,476
| ||||||
Total Assets
|
$45,193,774
|
$43,749,244
| ||||||
Liabilities and Equity
| ||||||||
Accounts payable, accrued expenses and other liabilities
|
$1,235,733
|
$1,032,623
| ||||||
Accrued maintenance liability
|
1,930,874
|
2,190,159
| ||||||
Lessee deposit liability
|
649,947
|
747,790
| ||||||
Debt
|
30,683,892
|
29,486,131
| ||||||
Deferred income tax liabilities
|
990,265
|
910,336
| ||||||
Total liabilities
|
35,490,711
|
34,367,039
| ||||||
Ordinary share capital €0.01 par value, 350,000,000 ordinary shares authorized as of June 30, 2020 and December 31, 2019; 138,847,345 and 141,847,345 ordinary shares issued and 129,672,783 and 131,583,489 ordinary shares outstanding (including 2,087,383 and 2,354,318 unvested restricted stock) as of June 30, 2020 and December 31, 2019, respectively
|
1,721
|
1,754
| ||||||
Additional paid-in capital
|
2,076,149
|
2,209,462
| ||||||
Treasury shares, at cost (9,174,562 and 10,263,856 ordinary shares as of June 30, 2020 and December 31, 2019, respectively)
|
(496,217)
|
(537,341)
| ||||||
Accumulated other comprehensive loss
|
(180,146)
|
(93,587)
| ||||||
Accumulated retained earnings
|
8,232,470
|
7,734,609
| ||||||
Total AerCap Holdings N.V. shareholders' equity
|
9,633,977
|
9,314,897
| ||||||
Non-controlling interest
|
69,086
|
67,308
| ||||||
Total Equity
|
9,703,063
|
9,382,205
| ||||||
Total Liabilities and Equity
|
$45,193,774
|
$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 June 30,
|
Six months ended June 30,
| |||||||||||||
2020
|
2019
|
2020
|
2019
| |||||||||||
Revenues and other income
| ||||||||||||||
Lease revenue:
| ||||||||||||||
Basic lease rents
|
$948,126
|
$1,077,068
|
$1,978,920
|
$2,152,350
| ||||||||||
Maintenance rents and other receipts
|
224,224
|
109,095
|
358,509
|
195,906
| ||||||||||
Total lease revenue
|
1,172,350
|
1,186,163
|
2,337,429
|
2,348,256
| ||||||||||
Net gain on sale of assets
|
10,002
|
78,157
|
68,368
|
99,698
| ||||||||||
Other income
|
14,927
|
16,956
|
29,659
|
38,349
| ||||||||||
Total Revenues and other income
|
1,197,279
|
1,281,276
|
2,435,456
|
2,486,303
| ||||||||||
Expenses
| ||||||||||||||
Depreciation and amortization
|
411,818
|
419,093
|
827,616
|
844,942
| ||||||||||
Asset impairment
|
73,421
|
17,819
|
87,368
|
22,850
| ||||||||||
Interest expense
|
311,758
|
332,441
|
630,375
|
666,620
| ||||||||||
Leasing expenses
|
77,574
|
65,244
|
180,871
|
156,965
| ||||||||||
Selling, general and administrative expenses
|
52,913
|
64,543
|
117,497
|
131,416
| ||||||||||
Total Expenses
|
927,484
|
899,140
|
1,843,727
|
1,822,793
| ||||||||||
Unrealized gain on investment at fair value
|
13,942
|
—
|
13,942
|
—
| ||||||||||
Income before income taxes and income of investments accounted for under the equity method
|
283,737
|
382,136
|
605,671
|
663,510
| ||||||||||
Provision for income taxes
|
(38,305)
|
(49,677)
|
(81,766)
|
(86,256)
| ||||||||||
Equity in net earnings of investments accounted for under the equity method
|
2,173
|
1,935
|
3,504
|
4,037
| ||||||||||
Net income
|
$247,605
|
$334,394
|
$527,409
|
$581,291
| ||||||||||
Net income attributable to non-controlling interest
|
(1,544)
|
(2,934)
|
(4,524)
|
(15,645)
| ||||||||||
Net income attributable to AerCap Holdings N.V
|
$246,061
|
$331,460
|
$522,885
|
$565,646
| ||||||||||
Basic earnings per share
|
$1.93
|
$2.44
|
$4.09
|
$4.13
| ||||||||||
Diluted earnings per share
|
$1.92
|
$2.42
|
$4.06
|
$4.09
| ||||||||||
Weighted average shares outstanding - basic
|
127,425,886
|
135,917,192
|
127,862,816
|
137,029,147
| ||||||||||
Weighted average shares outstanding - diluted
|
128,131,663
|
137,072,268
|
128,938,138
|
138,396,628
| ||||||||||
AerCap Holdings N.V
| ||||||||
Unaudited Consolidated Statements of Cash Flows
| ||||||||
(U.S. Dollars in thousands)
| ||||||||
Six months ended June 30,
| ||||||||
2020
|
2019
| |||||||
Net income
|
$527,409
|
$581,291
| ||||||
Adjustments to reconcile net income to net cash provided by operating activities:
| ||||||||
Depreciation and amortization
|
827,616
|
844,942
| ||||||
Asset impairment
|
87,368
|
22,850
| ||||||
Amortization of debt issuance costs, debt discount, debt premium and lease premium
|
31,242
|
42,783
| ||||||
Amortization of fair value adjustment on debt
|
(32,740)
|
(45,961)
| ||||||
Maintenance rights write-off
|
65,265
|
144,267
| ||||||
Maintenance liability release to income
|
(228,640)
|
(89,985)
| ||||||
Net gain on sale of assets
|
(68,368)
|
(99,698)
| ||||||
Deferred income taxes
|
84,658
|
88,055
| ||||||
Collections of finance and sales-type leases
|
26,991
|
45,448
| ||||||
Unrealized gains on investment at fair value
|
(13,942)
|
—
| ||||||
Other
|
133,876
|
92,232
| ||||||
Changes in operating assets and liabilities:
| ||||||||
Trade receivables
|
(157,410)
|
(21,075)
| ||||||
Other assets
|
(349,746)
|
(47,755)
| ||||||
Accounts payable, accrued expenses and other liabilities
|
3,229
|
(37,150)
| ||||||
Net cash provided by operating activities
|
936,808
|
1,520,244
| ||||||
Purchase of flight equipment
|
(159,930)
|
(1,483,186)
| ||||||
Proceeds from sale or disposal of assets
|
322,241
|
733,157
| ||||||
Prepayments on flight equipment
|
(723,729)
|
(579,217)
| ||||||
Other
|
—
|
(11)
| ||||||
Net cash used in investing activities
|
(561,418)
|
(1,329,257)
| ||||||
Issuance of debt
|
6,890,002
|
4,157,089
| ||||||
Repayment of debt
|
(5,652,418)
|
(4,618,972)
| ||||||
Debt issuance costs paid, net of debt premium received
|
(27,157)
|
(8,422)
| ||||||
Maintenance payments received
|
194,779
|
358,694
| ||||||
Maintenance payments returned
|
(208,630)
|
(206,456)
| ||||||
Security deposits received
|
43,791
|
147,200
| ||||||
Security deposits returned
|
(150,767)
|
(141,364)
| ||||||
Dividend paid to non-controlling interest holders and others
|
(2,746)
|
(3,045)
| ||||||
Repurchase of shares and tax withholdings on share-based compensation
|
(118,836)
|
(320,058)
| ||||||
Net cash provided by (used in) financing activities
|
968,018
|
(635,334)
| ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash
|
1,343,408
|
(444,347)
| ||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(634)
|
(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
|
$2,643,121
|
$970,285
| ||||||
SOURCE AerCap Holdings N.V.
.
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