AerCap continues upward momentum with strong second quarter results

Dublin-based lessor AerCap has yet again posted strong results in its second quarter 2024 earnings report. Its total revenues were approximately $2bn, up from $1.9bn last year in the quarter and meeting analysis consensus. It initiated a quarterly dividend of 25 cents per share. The company’s net income for the quarter was $448 million, or $2.28 per share. Adjusted net income was $592 million, or $3.01 per share, beating expectations. “In an industry environment that has remained positive, AerCap continued to produce strong results in the second quarter,” said AerCap CEO Aengus Kelly. “We were pleased to receive credit rating upgrades from Moody's and S&P reflecting the company's best-in-class performance. “We continue to actively deploy capital for growth opportunities and to return capital through share repurchases and dividends to our shareholders.” For the first half of the year, the company recorded a net income of $1.1bn, or $5.30 per share. Adjusted net income was $1.3bn, or $6.29 per share. Basic lease rent, excluding amortisation of lease premium/deficiency, revenues were flat at $1.6bn. Its net gain on sale of assets for the quarter was $129 million, relating to 29 aircraft sold as well as seven engines and one helicopter. The company said it made $1.7bn in sales in the first half of the year, adding that the “robust sales market continues”. He added the US is AerCap's largest market - equating to 14.6% of revenues. ""This is is due to the combination of strong placement of aircraft into the US as well as strong demand from buyers for our Chinese aircraft. As a result, China now represents now represents 14% of our assets, down from over 20% at its peak."" In its earnings call, Kelly said: ""The shortage of aircraft in the system is supporting strong gains on sales... 90% of our sales revenues was generated from sales to airlines and other airlines who are keen to have access to aircraft and I expect this will continue to be the case for some time."" Kelly added: ""The smaller number of aircraft delivering into the system as a result of the OEM delays has provided some respite to airlines from a financing perspective. But this will change over time and AerCap is well positioned to take advantage of that."" He added that - with airlines lowering guidance and still seeing high demand for aircraft - there is a ""complexity"" for airlines trying to transition their fleets to new aircraft. ""There are these hidden costs in the airlines that they have and having to keep prolonging the life of assets they prefer not to have, that are older, that are more complex from a maintenance standpoint, that are more complex from a cabin configuration standpoint, which leads to inefficiencies in the airline sector. So, when we say a shortage of aircraft, we're saying particularly a shortage of new aircraft."" The strong big for older aircraft, Kelly said, has been driven by engines. ""If you have a 20 year old airplane and you're an airline, do you put this thing to the shop and spend $20 million on overhauling... it makes no sense to do that. But [the airlines] do know the problems with Boeing and Airbus are going to last for up to the end of the decade."" He said that airlines will ""avoid that massive spend by buying half-life engines or aircraft that have half-life engines to avoid the shop business with the engine OEM. ""These are the things that are hidden inefficiencies in the airlines due to the lack of delivery of new aircraft. "" Following the strong results, AerCap is raising its full year 2024 earnings guidance to approximately $10.25 per share, up from its previous guidance of $9.20 per share it made during its first quarter earnings. The raised guidance also builds upon its initial guidance at the end of last year, which it forecast an earnings per share (EPS) of around $7.50-$8.50. Cash flow from operating activities generated $1.4bn in the second quarter. It also returned $345 million to shareholders through the repurchase of 3.9 million shares during the period, at an average price of $88.66 per share. As of June 30, 2024, its total cash, cash equivalents and restricted cash was $1.6bn. Total assets were valued at $71.1bn. Debt was at $45.7bn while its total liabilities were at $54.1bn. AerCap’s shareholders’ equity was $17bn at the end of the second quarter. Furthermore, as of June 30, it reported an adjusted debt-to-equity ratio of 2.4 to 1. AerCap is continuing to invest in new technology equipment with the delivery of 25 new next-generation aircraft, along with a further 20 engines which were mostly new technology LEAP engines from CFM. The company's expenses totalled $1.44bn in the second quarter, up from $1.38bn a year prior. Leasing expenses were down from $229.2 million from last year's second quarter to $172.8 million this year. The company said in its earnings release it entered into an agreement with Airbus in July 2024 to purchase 36 A320neo family aircraft. The aircraft are to be leased to Spirit Airlines upon delivery in 2027 and 2028. AerCap also delivered the first three new A321neo aircraft to AirAsia, it revealed after publishing its second quarter report. The deliveries are part of a 15 aircraft deal. “These A321neo aircraft will complement AirAsia's current fleet and will bring improved cost and operational efficiencies, with more capabilities to support its continued expansion throughout the region, and well into the future,” said AerCap chief commercial officer Peter Anderson. AirAsia Aviation Group CEO Bo Lingham commented: “This year marks a pivotal year for AirAsia's growth as we resume our Airbus A321neo deliveries, aligning with the strong forecast demand.” The remaining 12 new aircraft are set to be delivered in the remainder of 2024 and the following year. Kelly said the deal takes its total aircraft added this year to over 50 and that he is ""confident there will be similar opportunities for organic growth to come"".