AerCap’s reports it has settled an insurance claim of $646m (€611m) in respect of 17 aircraft and five spare engines on lease to the Aeroflot group at the time of Russia’s invasion of Ukraine in February 2022.
The settlement was under under the Aeroflot group’s insurance policies.
The leasing company headed up by Gus Kelly reports in its latest portfolio update lists 3,451 aircraft, engines, and helicopters, owned, on order or managed. The third quarter 2023 report shows:
- Adjusted net income of $639m and adjusted earnings per share of $2.81.
- Raised full-year 2023 adjusted earnings per share guidance to approximately $9.50.
- Authorized a new $500m share repurchase program, bringing the total authorizations to $2.65 billion for the year.
- Repurchased approximately 36m shares year-to-date, totaling approximately $2.1 billion.
- GE’s ownership decreased from 33.6pc to 14.5pc following a successful secondary offering.
- Reported a 27pc return on equity and a 16pc adjusted return on equity for the quarter.
Other highlights include strong lease revenue growth, a net gain on sale of assets, increased book value per share, and a positive cash flow from operating activities during the quarter. AerCap’s effective tax rate for the full year is expected to be 14pc.
The average age of the company’s owned aircraft fleet as of September 30, 2023 was 7.3 years (4.4 years for new technology aircraft, 14.0 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years.
Aengus Kelly said during a sales call: “Of the used aircraft lease agreements signed in the quarter, nearly 80pc were extensions, which is one of the highest extension rates we have ever seen. Remarkably, this was even higher on the widebody side, hitting over 90pc. most of these extensions are very long term. There’ll be three to eight years. In some cases, on the wide-bodies, they could be even longer on the extensions. Some discussions at the moment are double-digit years on the wide-bodies.
This reflects the ongoing shortage of aircraft; we also continue to see strong demand for our assets in the sales channel with many bidders competing for our portfolios. This was reflected in both healthy quarterly sales volumes of $682m as well as gains on sale with unlevered margins of 24pc.
This was another great quarter for AerCap. We generated adjusted net income of $639m and adjusted earnings per share of $2.81. As a result of this strong performance and our outlook for the rest of the year, we are once again raising our (earnings) guidance for the year.
Our underlying business continues to perform well and demand for our assets remains robust, evidenced by the significant number of transactions completed during the quarter. We are pleased to announce a new $500m share repurchase program, taking total authorisations to $2.65 bn so far this year and underlying our confidence in the value on offer today.
One thing we will never do is grow for the sake of growth. As I said many times, there’s always a bunch of clowns hanging around the tents in Farnborough and Le Bourget waiting to order aircraft when everyone else is there. That’s not the time to be ordering airplanes. The last time we ordered a significant number of airplanes was in March of 2020 when we ordered Neos. That is when you buy. That’s also in the same environment where we bought GECAS. So, great discipline is required and that discipline is dealing with the manufacturers, but just overall in the capital structure, realising why you’re here. You’re here for your shareholders and no one else.”
Helane Becker with TD Cowen asked: “Could you take the Company private and borrow at the same cost that you borrow as a public company? And does it make any sense to go down that path?”
CEO Aengus Kelly responded: “As we generate the type of capital and cash flow that we’re generating, we’re going to keep buying back more and more of the Company if the opportunity continues to present itself. To do a levered buyout now, I think that would be challenging on our balance sheet. But if you just simply look at the quantum of capital that this business is generating every year and for that matter, has generated for 15 years over some period of time, we will get there or thereabouts, I suspect.”
