MIAMI – AerCap Holdings has reported a net loss of US$850m or US$6.66 per share for Q3 2020, including special items.

This compares to a net income of US$270m, or earnings per share of US$2.01, for the same period in 2019. Excluding special items, net income for the Q3 of 2020 was US$158m or US$1.24 per share.

AerCap A320Neo. Photo: AerCap

Highlights of the Report

  • Cash Flow Recovery:
    • Cash flow from operating activities was US$541m, an increase of 76% from the Q2 of 2020.
    • New deferral requests in the Q3 were lower than in the Q2, with deferral notes receivable increasing by only US$56 m during the Q3.
  • Strong Balance Sheet:
    • AerCap ended the Q3 with over US$11 bn in total sources of liquidity, representing a record next 12 months’ sources-to-uses coverage ratio of 2.9x.
    • Adjusted debt/equity ratio of 2.67 to 1, below the company’s target of 2.7x to 1.
    • Secured debt-to-total assets ratio of 24%.
    • Approximately US$26bn of unencumbered assets, providing a high degree of flexibility.
  • Attractive Aircraft Fleet:
    • AerCap is the world’s largest owner of new technology aircraft, which comprise 62% of the company’s fleet, compared with approximately 12% of the global in-service passenger fleet as of January 2020.
    • AerCap’s average current lease expires in 2028, and only 7% of the company’s aircraft by book value is scheduled to come off lease through the end of 2022.
AerCap Airbus A350-900. Photo: AerCap

Revenue and Net Spread

Three months ended September 30,
Nine months ended September 30,
 20202019% increase/  (decrease)20202019% increase/  (decrease)
 (U.S. Dollars in millions)(U.S. Dollars in millions)
Lease revenue:      
   Basic lease rents$897 $1,067 (16%) $2,876 $3,219 (11%) 
   Maintenance rents and other receipts91 73 25% 449 269 67% 
Total lease revenue988 1,139 (13%) 3,326 3,487 (5%) 
Net gain on sale of asset41 (82%) 76 140 (46%) 
Other income31 14 117 61 53 16 
Total Revenues and other income$1,027 $1,194 (14%)$3,462 $3,680 (6%)
Three months ended September 30,Nine months ended September 30,
 20202019% increase/ (decrease)20202019% increase/  (decrease)
 (U.S. Dollars in millions)(U.S. Dollars in millions)
Basic lease rents$897 $1,067 (16%) $2,876 $3,219 (11%) 
Interest expense307 312 (2%) 938 979 (4%)
Adjusted for:      
   Mark-to-market of interest rate caps and swaps(3)(100%) (15)(29)(49%) 
Interest expense excluding mark-to-market of interest rate caps and swaps307 309 (1%) 923 950 (3%)
Net interest margin (*)$590 $758 (22%) $1,953 $2,269 (14%) 
Depreciation and amortization, including maintenance rights expense(428)(429)— (1,283)(1,312)(2%) 
Net interest margin, less depreciation and amortization$163 $329 (51%) $670 $957 (30%) 
Average lease assets (*)$36,926 $37,663 (2%) $37,313 $37,524 (1%) 
Annualized net spread (*)6.4% 8.0%  7.0% 8.1%  
Annualized net spread less depreciation and amortization (*)1.8% 3.5%  2.4% 3.4%

Selling, General and Administrative Expenses

Three months ended September 30,Nine months ended September 30,
 20202019% increase/  (decrease)20202019% increase/  (decrease)
 (U.S. Dollars in millions)(U.S. Dollars in millions)
Selling, general and administrative expenses$44 $49 (10%) $129 $144 (11%)
Share-based compensation expenses17 16 (8%)50 52 (4%)
Total selling, general and administrative expenses$61 $65 (6%)$178 $196 (9%)
AerCap Boeing 737 MAX. Photo: AerCap

Asset Impairment

According to the report, asset impairment charges were US$973m for the Q3 of 2020, compared to US$31m for the same period in 2019.

Asset impairment charges recorded in the Q3 2020 included US$915m 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 US$58m of goodwill.

Leasing expenses were US$51m for the Q3 of 2020, compared with US$44m for the same period in 2019.

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.

Book Value Per Share

September 30, 2020September 30, 2019
 (U.S. Dollars in millions,
except share and per share data)
Total AerCap Holdings N.V. shareholders’ equity$8,811 $9,175 
Ordinary shares outstanding129,756,613 134,742,482 
Unvested restricted stock(2,163,670)(2,229,371)
Ordinary shares outstanding (excl. unvested restricted stock)127,592,943 132,513,111 
Book value per ordinary share outstanding (excl. unvested restricted stock)$69.06 $69.24
AerCap E190E2. Photo: AerCap

Financial Position

September 30, 2020December 31, 2019% increase/
(decrease) over
December 31, 2019
 (U.S. Dollars in millions)
Total cash, cash equivalents and restricted cash$3,526 $1,300 171% 
Total lease assets (*)36,252 37,930 (4%) 
Total assets44,421 43,749 2% 
Debt31,087 29,486 5% 
Total liabilities35,542 34,367 3% 
Total AerCap Holdings N.V. shareholders’ equity8,811 9,315 (5%) 
Total equity8,879 9,382 (5%)
Three months ended September 30, 2020
 Net (loss) income(Loss) earnings
per share
(U.S. Dollars in millions, except per share data)
Net loss / loss per share($ 850)($6.66)
Special items:  
Asset impairment973 7.63
Unrealized loss on investment128 1.01
Loss on debt extinguishment43 0.34
Income tax effect(136)(1.06)
Net income / earnings per share excluding special items$158$1.24
September 30, 2020December 31, 2019
 (U.S. Dollars in millions, except debt/equity ratio)
Debt$31,087 $29,486 
Adjusted for:  
   Cash and cash equivalents(3,244)(1,121)
   50% credit for long-term subordinated debt(1,125)(1,125)
Adjusted debt$26,718 $27,240 
Equity$8,879 $9,382 
Adjusted for:  
   50% credit for long-term subordinated debt1,125 1,125 
Adjusted equity$10,004 $10,507 
Adjusted debt/equity ratio2.67 to 12.59 to 1

Aircraft Portfolio

AerCap’s portfolio consisted of 1,342 aircraft that were owned, on order or managed.

The average age of the company’s owned fleet was 6.3 years (2.9 years for new technology aircraft, 11.9 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years.

AerCap had also five Boeing 737 MAX aircraft delivered and on lease. During the Q3 of 2020, the company cancelled its orders for 24 Boeing 737 MAX aircraft.

Aengus Kelly CEO of AerCap. Photo: AerCap

Statement from AerCap

Aengus Kelly, CEO of AerCap, said “While the aviation industry continues to face challenges, we are seeing a steady recovery in air travel and in AerCap’s cash flows from the lows of April.”

“The positive developments announced yesterday regarding the near-term availability for a Covid-19 vaccine, as well as the planned roll-out of rapid pre-departure testing, should provide a further boost to the industry.”

“Throughout this pandemic, AerCap has taken numerous proactive steps to manage through this environment, including executing over US$12bn of liquidity initiatives, which resulted in the company ending the quarter with our strongest ever liquidity position.”

Kelly also said, “As we look forward, we are confident that there will be significant attractive opportunities for AerCap to deploy its capital as the recovery continues.”

Featured image: AerCap Boeing 787-9 Dream)liner. Photo: AerCap