Capitalising on the increase demand for aircraft due to the recovery in passenger traffic and the slowdown in new aircraft deliveries, AerCap posted strong results for the second quarter of 2022. AerCap generated $1.91 of adjusted earnings per share and adjusted net income of $464 million.
The lessor reports “significant increase in activity across all businesses” for the quarter. Aengus Kelly, Chief Executive Officer of AerCap, said: “The ongoing recovery in air travel continued to strengthen across all major regions, and was manifested in high levels of cash collections and greater utilization of our fleet during the quarter. The strength in passenger demand, coupled with supply constraints across the industry, is resulting in a favourable leasing environment.”
AerCap executed 184 transactions in the second quarter of 2022, including 125 lease agreements, 16 purchases and 43 sales. Cash flow from operating activities was approximately $1.2 billion in the reporting period. AerCap significant delevered in the second quarter – “faster than expected” – said CFO Peter Juhas, with an adjusted debt/equity ratio of 2.8 and liquidity up to $17bn. In another positive development, Fitch revised its rating outlook for AerCap to positive in June.
Basic lease rents were $1.462bn for the second quarter of 2022, compared with $871 million for the same period in 2021. AerCap explained that the increase was primarily due to the impact of the GECAS acquisition and noted that basic lease rents were negatively impacted by the loss of revenues from Russian aircraft and were reduced by $52 million as a result of the amortisation of lease premium assets.
AerCap booked net gain on sale of assets of $35 million during the quarter, relating to 29 assets sold for $386 million, compared with $22 million for the same period in 2021, relating to 12 aircraft sold for $139 million.
Asset impairment charges were $12 million for the quarter, compared to $57 million for the same period in 2021. Asset impairment charges recorded in the second quarter of 2022 related to lease terminations and sales transactions that AerCap said were largely offset by related maintenance revenue. Leasing expenses were $193 million for the second quarter of 2022, compared with $59 million for the same period in 2021. The increase was primarily due to higher transition costs, lessor maintenance contributions and other leasing expenses and an increase in maintenance rights expense as a result of the GECAS acquisition.
As of June 30, 2022, AerCap's portfolio consisted of 3,599 aircraft, engines and helicopters that were owned, on order or managed. The average age of the company's owned aircraft fleet was 7.2 years (3.8 years for new technology aircraft, 13.1 years for current technology aircraft) and the average remaining contracted lease term was 7.2 years.
Kelly said on the earnings call that AerCap expects to take delivery of one 787 in 2022 – after an order for five more 787s in June, the lessor now has 125 787 orders in total, 99 of which have been delivered. “Following the positive developments between the FAA and Boeing regarding the resumption of 787 deliveries, we expect to receive one 787 this year,” said Kelly. “Of course, we would not have placed orders for further equipment unless we were confident that Boeing would solve certification issues on the 787, and that the aircraft will form the backbone of the long-haul market for many years to come.”
Kelly also noted the more permanence in airlines reliance on aircraft leasing coming out of the pandemic period. “Leasing is growing much faster than I had expected before the pandemic,” he said. “The OEMs, between sale-leasebacks and direct lessor orders, we're probably looking at 65% of all deliveries ending up in the leasing channels. Airlines have seen the benefits of leasing during the pandemic, because in the pandemic if you own the aircraft that was it, you were stuck with it forever. Airlines have begun to appreciate the benefits of flexibility that leasing brings. At one point, I did not believe that leasing would surpass 50%, of the global market. We're way past that now in terms of, value and it's only going one way.”