AerCap Holdings NV Q3 FY2024 earnings call

• AerCap reported adjusted net income of $463 million and adjusted EPS of $2.41 for Q3 2024, with operating cash flows reaching a record $5.6 billion over the last 12 months.
• Earnings guidance for the year was increased from $10.25 to approximately $10.70.
• Continued to improve fleet quality with delivery of $1.8 billion of new technology aircraft engines and helicopters in the last quarter.
• Added $500 million share repurchase authorization in September, with total authorizations year-to-date at $1.5 billion. Announced a $0.25 per share dividend for Q3.
• Executed 226 transactions across aircraft, engines, and helicopters in Q3, with a 99% utilization rate and extension rates exceeding 90%.
• Strong sales activity with unlevered margins of 27% in the quarter, selling 22 owned assets for $479 million, and $521 million of assets held for sale as of September 30th.
• Purchased 27 aircraft including various new technology models and 13 new technology engines. Boeing strike and Airbus delays impacted deliveries, with aircraft pushed into 2025 and 2026.

AerCap generated adjusted net income of $463 million and adjusted earnings per share of $2.41 in Q3 2024. Operating cash flows reached a record $5.6 billion for the last 12 months. Basic lease rents increased to $1,605 million from $1,568 million in the prior quarter. Maintenance revenues were $161 million. Net gain on sale of assets was $102 million, with an unlevered gain on sale margin of 27% for the quarter. Other income was $79 million, interest expense was $516 million, and leasing expenses were $275 million. As of September 30th, total sources of liquidity were approximately $23 billion, leverage ratio was 2.4 to 1, and operating cash flow for Q3 was approximately $1.4 billion.

• Increased earnings guidance for the year from $10.25 to approximately $10.70, excluding gains on sale in the fourth quarter.
• Guidance does not include any gains on sale in the fourth quarter. Still expecting around $9 of EPS for the full year excluding gains on sale, with an additional $0.45 of gains during Q3.

• Ongoing court case means no questions regarding insurance claims will be taken on this call.
• Boeing strike began in mid-September, impact on deliveries hard to predict, and could have unintended consequences including affecting the aftermarket.
• Airbus delays in deliveries. Credit loss provision taken against Azul exposure, a legacy COVID receivable.

Q: Concern about undisciplined capital entering the space with easing rates and airlines saying lease rates are untenable A: Aengus Kelly stated the sector is attractive with stable hard assets, investors understand the industry, and lease rates are a tiny fraction of an airline's P&L, questioning airlines' competence if they raise concerns about lease rates Q: Sales environment sustainability into 2025 and relationship with interest rates A: Aengus Kelly said selling fixed cash flows in lower rate environment should lead to higher sales prices, but AerCap runs a hedged book, so movements in interest rates don't drive performance if hedged. Peter Juhas added hard assets in inflationary environment drive margins Q: Detail on $140 million credit loss provision related to Azul restructuring A: Aengus Kelly said it's a provision against Azul exposure, a legacy COVID receivable, and they took a proactive provision. Peter Juhas said it's likely a fourth quarter event but provision taken in Q3, fully provided for going forward Q: Boeing strike impact and when it could be harmful A: Aengus Kelly said strike could have unintended consequences affecting the in-service fleet and aftermarket, hoping for speedy resolution Q: Timeframe for narrowing aircraft supply and demand balance in narrowbody market A: Aengus Kelly said equilibrium now expected at end of the decade, with customer behavior indicating prolonged supply constraints, such as high extension rates and airlines keeping aircraft longer Q: Exposure to China and regional market behavior A: Aengus Kelly mentioned strong domestic demand in China, near international market to China expected to do well as China opens up, with passport issuance issues easing