AerCap reports strong first quarter

Dino D'Amore
By Dino D'Amore May 12, 2016 18:14

AerCap reports strong first quarter

AerCap has reported adjusted net income of $301.6 million or earnings per share of $1.54, for the first quarter of 2016. The Irish lessor said that the increase in adjusted earnings per share was primarily due to a lower number of outstanding shares as a result of share repurchases completed in 2015 and the first quarter of 2016.

AerCap’s reported net income was $223.1 million, compared with $311.5 million for the same period in 2015, with reported basic earnings per share of $1.14.

Reported net income and earnings per share were driven by the same factors as adjusted net income and earnings per share in addition to losses related to AeroTurbine included in the results for the first quarter of 2016 and higher maintenance rights related expenses relative to those included in the results for the first quarter of 2015, said AerCap in a statement.
During the quarter, AerCap executed 131 aircraft transactions, including 36 widebody transactions. The lessor’s fleet utilization rate was 99.3%. The fleet has a 6.1 years of average remaining lease term, as of March 31, 2016.

AerCap confirmed that 90% of new aircraft deliveries through 2018 have been leased under a contract or letter of intent on an average 12-year lease term, as of May 9, 2016.

As of March 31, 2016, AerCap has $9.1 billion of available liquidity and a debt/equity ratio of 2.8 to 1. In the first quarter of 2015, AerCap’s debt/equity ratio was 3.2 to 1, the fall to 2.8 to 1 reflects on ongoing and conscious effort to bring down debt.

Also during the quarter, AerCap was upgraded to investment grade rating (BBB-) by Standard & Poor’s and to Ba1 by Moody’s. As mentioned, the lessor also repurchased 5.4 million shares in the first quarter of 2016 (repurchased 8.1 million shares in total through May 9, 2016).

“AerCap produced strong first quarter results, demonstrating the consistent earnings power of our global leasing platform,” says Aengus Kelly, CEO of AerCap. “We delivered adjusted earnings per share of $1.54, and expect to generate $800 million of excess capital during 2016. We continue to see global demand for our aircraft and have access to $9.1 billion of liquidity to meet our strategic objectives. Our proactive portfolio management initiatives, coupled with return of capital, are focused on maximizing long-term value for our shareholders.”

Basic lease rents were $1,139.3 million for the first quarter of 2016, compared with $1,157.9 million for the same period in 2015. The decrease was primarily due to the sale of older aircraft. Average lease assets for the first quarter of 2016 were $35.5 billion, compared with $36.4 billion for the same period in 2015.

Maintenance rents and other receipts were $150.4 million for the first quarter of 2016, compared with $68.2 million for the same period in 2015. The increase was driven primarily by lease terminations and amendments in the first quarter of 2016.
Net gain on sale of assets for the first quarter of 2016 was $19.0 million, relating to 19 aircraft sold and nine aircraft reclassified to finance leases, compared with a gain of $33.7 million for the same period in 2015, relating to 12 aircraft sold and five aircraft reclassified to finance leases.

Other income for the first quarter of 2016 was $9.3 million, compared with $29.4 million for the same period in 2015. The decrease is primarily related to lower AeroTurbine gross profit on engine, airframe, parts and supplies sales as a result of the restructuring and downsizing of AeroTurbine.

Adjusted interest expense was $273.6 million in the first quarter of 2016. Net spread was $865.7 million in the first quarter of 2016, a 1% decrease compared with the same period in 2015, driven primarily by lower average lease assets resulting in lower basic lease rents.

Asset impairment was $44.6 million for the first quarter of 2016, compared to $4.7 million for the same period in 2015. The increase was primarily driven by impairments recorded as a result of lease terminations and amendments, and were more than offset by revenue of $62.1 million due to the release of associated maintenance reserves and other collateral. Leasing expenses were $167.4 million for the first quarter of 2016, compared with $89.7 million for the same period in 2015. The increase was driven primarily by higher maintenance rights related expenses. Transaction, integration and restructuring related expenses were $12.6 million for the first quarter of 2016, compared with $4.4 million for the same period in 2015.
Transaction, integration and restructuring related expenses in the first quarter of 2016 are related to the restructuring and downsizing of AeroTurbine and in the first quarter of 2015 are related to the acquisition of ILFC.

AerCap’s effective tax rate during the first quarter of 2015 and 2016 was 13.5%. The effective tax rate for the full year 2015 was 13.9%. The effective tax rate in any year is impacted by the source and amount of earnings among AerCap’s different tax jurisdictions.

As of March 31, 2016, AerCap’s portfolio consisted of 1,672 aircraft that were owned, on order, under contract or managed (including aircraft owned by AerDragon, a non-consolidated joint venture).

Dino D'Amore
By Dino D'Amore May 12, 2016 18:14