- AerCap report 402 airline transactions in 2017 including 119 widebody
AerCap reported net income of $1.0bn in 2017 on revenues down 2pc to $5.0bn, with 402 aircraft transactions including 119 widebody, $5.3bn of aircraft purchased and $2.4bn of aircraft sold.
AerCap ended with $9.6bn of available liquidity and adjusted debt/equity ratio of 2.8 to 1. A new $200m share repurchase program was authorsed.
Since June 2015, AerCap has repurchased over 30pc of AerCap’s outstanding shares for $2.8 bn. Q4 net income wasf US$266.3m with revenues down 8pc to $1.2bn.
AerCap expects to deliver approximately $6bn of aircraft assets in 2018, reinforcing the return to asset growth, which began again in Q4. This level of delivery may be impacted by recent developments on the Pratt & Whitney geared turbofan engine on the A320 family.
CEO Aengus Kelly said: There is quite a few tourists (investors who have just dipped in and could dip out again) in the sector who have arrived here due to the paucity of yields available in other asset classes. So as the yields on those increase, I have no doubt that we will see money leave the sector. I do think we will see an increased opportunity for people like ourselves, if we do continue to see rising (interest) rates.
We are leasing many airplanes into the market where (Boeing’s proposed mid-market) aircraft will go. That mission is done by A330s, B767s and A321s, mainly older B767s and A330s. For a new airplane to successfully dislodge those very reliable tried and tested assets, it will have to come in at a competitive price.
If (interest) rates rise, then there is a corresponding rise in the lease rental to offset the rise in rates … If we see a reasonably controlled grind higher of lease rates that will be a good thing – we’re assuming that that reflects a stronger global economy with improved GDP outlook will lead to some inflation of the asset value also. It will probably lead to the departure of some of the tourist capital has come into the space. But of course the big risk would be if you haven’t hedged yourself before rates began to rise and you’re running an open book, which, as you know, AerCap does not.
We are always looking at allocation of capital. There are four avenues for us. We can do sale leasebacks in the markets, we can buy from the manufacturers, we can buy another company, we can buy ourselves. I am excluding repayment of debt, because we have de-levered quite a bit over the last few years. And so we’re always looking at what’s the most attractive alternative.
if you just look out over the next 24 months to the end of 2019, in terms of the placement activity on an overall basis we’re 95pc placed. On the (Embraer) E2s, we’ve got either under lease contract or LOI 40pc of the E2 order book. There is quite a number of discussions going on out there around the world. I think it is clear that the recent acquisition, or the acquisition, that is in progress of Bombardier by Airbus validates the space and of course the public interest that Boeing has expressed in Embraer also validates the space. The E2-195 is where most of the activity is. And in a 2-class configuration, you’re in the mid-120s (for seats); and in a very dense configuration, you will get up to 144. So it’s not the 100-seat market. What we are seeing, of course, what is generating some interest in it is that Boeing and Airbus have left that market space sub-150 seats. And so we are seeing demand there and for customers who are looking at that 120 to 140 seat space, and it is a mixture of missions, some are connecting into a hub in a large domestic market, others are with the GTF engine on-board and the fuel burn that it brings are looking at some longer missions. So it is a mix.
Press release, presentation slides and edited transcript with Q&A here.