AerCap reported its first quarter income increased by 18% to $276.8 million, from $234.2 million for the same period in 2019, while also saying it had cancelled some outstanding MAX deliveries.
While basic lease revenue declined 4.1% to just over $1 billion the driver of better than expected results was higher maintenance rents and sales earnings as the firm appears to be dealing with the impact of COVID 19. During the first quarter the Irish lessor renegotiated its agreed MAX deliveries with Boeing, leading to a number of cancellations which the firm said could increase.
“Certain of our Boeing 737 MAX leases have now been cancelled, and we expect additional leases to be cancelled in the future. In cases where leases have been cancelled, we have the right to cancel our corresponding orders for delivery of those aircraft;” said the results statement.
Aengus Kelly, chief executive of AerCap said that the Covid-19 pandemic was creating significant challenges for the global aviation industry and for economies around the world. But he emphasised the firm’s financial strength - in April, for example, the firm repaid $3 billion of a $4 billion senior unsecured revolving credit facility it took out in March.
"AerCap entered this crisis in a position of strength, with a strong balance sheet and liquidity position, an attractive aircraft portfolio and a high-quality customer base including many of the world's leading airlines,” said Kelly.
“Most importantly, we have an unrivalled operating platform with a strong track record of successfully managing through challenging environments. With approximately $11 billion sources of liquidity, over $28 billion of unencumbered assets and a record low leverage ratio of 2.5 to 1, we are well-positioned to weather an extended period of turbulence and support the recovery of the airline industry in the future."
Analysts Cowen said AerCap’s results were better than it had expected but there was still uncertainty over how the firm would manage the ongoing issue of lease deferrals.
“We are interested in hearing how the company is handling lease deferrals, though we are likely to hear many airlines are requesting deferrals but approval is on a case-by-case basis,” said Cowen.
“Airlines are stretched on liquidity and airline bankruptcies are increasingly common. AerCap stated they are granting lease deferrals of 2 to 3 months which are expected to be repaid through the end of the year…We are looking for additional details on the situation.”