AerCap, the world’s largest aircraft lessor, has continued to make strong gains on asset sales throughout 2024 as the supply of new aircraft remains constrained. Chief executive of AerCap, Aengus Kelly, said that he didn’t expect the situation to resolve for several years, creating a positive environment for aircraft leasing. The fourth quarter of 2024 was a particularly strong period for asset sales, Kelly shared on the earnings call that the company generated a gain on sale of $260 million – a margin of 43% or 260% of the associated book equity – which was the highest in a single quarter for the company.
For the full year 2024, AerCap net income of $2.1bn with earnings per share (EPS) of $10.79; with adjusted net income of $2.3 billion, and adjusted EPS of $12.01. AerCap had a very strong year with $5.4 billion in operating cash flow, which excluded the $651 million from gains on sales.
With such robust results and with $45 billion of contracted future lease cash flows in place on its existing fleet, with more than 40% to be received in the next three years, AerCap remains positive for the future. With a three-year cashflow visibility, Kelly said that AerCap could allocate capital “effectively and thoughtfully” to continue to create shareholder value. AerCap has announced its largest share repurchase scheme to date, with $1bn authorised, taking its total buyback amount to $5bn for the past two years. Kelly said that such action underlined “the significant value we see in AerCap stock today and our confidence in the outlook for 2025 and beyond”. He added that it was clear the industry continues to plan for a “lower-for-longer” supply environment that he said was evidenced by the continuation of lease extension demand, high lease rates and those strong gains on sales.
With record asset sales of $651 million for the full year 2024, Kelly noted that the demand for assets was consistent across asset types and vintages owing to continued manufacturer delivery delays and challenges with the reliability of new engine types. A trend Kelly expects to continue into 2025 “and beyond”. In response to an analyst’s question on when new aircraft deliveries will return to target volumes, Kelly said that airframes will take several years to reach their delivery targets but he also noted that once they do, those new aircraft are “more fragile” and “spend more time in the shop”, which would enhance used aircraft values “well into the future”.
AerCap expects a continuation of positive trends in 2025, with an EPS range of $8.50 to $9.50, which was commented on by analysts as conservative given the market environment and the general upwards trajectory of lease rates. CFO Pete Juhas commented that AerCap was expecting a “steady progression” of higher lease rates due to the positive environment but he cautioned that “takes a while to roll through the portfolio” even though he sees that having a positive impact the bottom line throughout next year and beyond.
AerCap has its own engine leasing business in house as well as a 50% share in SES, which Kelly notes as a particular advantage in the current market. The company ordered over $2 billion of CFM LEAP engines in the fourth quarter of 2024, bringing total new engine orders by AerCap and SES to over $5 billion for the full year.
Despite the robust demand for engines, Juhas pointed out that the net income from engine deals was within guidance range and not higher than expected due to a change in how maintenance reserves are treated. “For new engine deals, we have changed the terms so that rather than receive monthly maintenance reserves, we receive full engine life at the end of the lease,” said Juhas. “We think that is a better economic result but it does result in lower monthly maintenance revenue.”
AerCap’s book value per share of $94.57 as of December 31, 2024, an increase of approximately 13% from December 31, 2023. The lessor’s adjusted debt/equity ratio of 2.35 to 1 as of December 31, 2024, well below its 2.7x target. Kelly recognised that this was the lowest leverage but noted that AerCap had deployed a lot of capital in the form of share buybacks and that it was continuing to look for “opportunities to grow”.