NYSE:AER Aercap Q2 2025 Earnings Report $108.48 +1.23 (+1.15%) Closing price 08/1/2025 03:59 PM EasternExtended Trading$107.28 -1.20 (-1.11%) As of 08/1/2025 07:15 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Aercap EPS ResultsActual EPS$2.83Consensus EPS $2.75Beat/MissBeat by +$0.08One Year Ago EPS$3.01Aercap Revenue ResultsActual Revenue$1.89 billionExpected Revenue$2.03 billionBeat/MissMissed by -$145.23 millionYoY Revenue Growth-3.60%Aercap Announcement DetailsQuarterQ2 2025Date7/30/2025TimeBefore Market OpensConference Call DateWednesday, July 30, 2025Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Aercap Q2 2025 Earnings Call TranscriptProvided by QuartrJuly 30, 2025 ShareLink copied to clipboard.Key Takeaways Positive Sentiment: We reported record GAAP net income of $1.3 billion and EPS of $7.09 in Q2, with adjusted EPS of $2.83 and raised full-year adjusted EPS guidance to about $11.60. Positive Sentiment: Aircraft demand remained robust with 99% utilization and a 97% lease extension rate, and renewal rates were higher than prior leases despite older asset ages. Positive Sentiment: Widebody availability is exceptionally low, with only two aircraft open for lease out of more than 250 until 2027, highlighting sustained global demand. Positive Sentiment: We strengthened our financial position with $22 billion in total liquidity, reduced leverage to 2.2×, and repurchased over $1 billion of shares year-to-date, with $800 million still available. Positive Sentiment: Engine leasing soared, delivering 84 new LEAP engines year-to-date, acquiring 31 in Q2, and forming an MRO partnership with Air France-KLM to expand spare engine support. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallAercap Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Day, and welcome to AerCap's Q2 twenty twenty five Financial Results. Today's conference is being recorded and a transcript will be available following the call on the company's website. At this time, I would like to turn the conference over to Joseph McGinley, Head of Investor Relations. Please go ahead, sir. Joseph McginleyHead - IR at AerCap00:00:20Thank you, operator, and hello, everyone. Welcome to our second quarter twenty twenty five conference call. With me today is our Chief Executive Officer, Angus Kelly and our Chief Financial Officer, Pete Euhas. Before we begin today's call, I would like to remind you that some statements made during this conference call, which are not historical facts, may be forward looking statements. Forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. Joseph McginleyHead - IR at AerCap00:00:51AerCap undertakes no obligation other than that imposed by law to publicly update or revise any forward looking statements to reflect future events, information, or circumstances that arise after this call. Further information concerning issues that could materially affect performance can be found in AerCap's earnings release dated 08/30/2025. A copy of the earnings release and conference call presentation are available on our website at aircap.com. This call is open to the public and is being webcast simultaneously at aircap.com and will be archived for replay. We will shortly run through our earnings presentation and will allow time at the end for Q and A. Joseph McginleyHead - IR at AerCap00:01:30As a reminder, I would ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Angus Kelly. Aengus KellyCEO & Executive Director at AerCap00:01:37Thank you for joining us for our second quarter twenty twenty five earnings call. We are pleased to report a record quarter of earnings generating GAAP net income of $1,300,000,000 and earnings per share of $7.09. This reflects strong execution and demand for our assets as well as the successful outcome in our contingent and possessed insurance case in the commercial court in London in June. Adjusted net income was $502,000,000, and adjusted EPS was $2.83. Given these strong results and our improved outlook for the year ahead, we have increased our twenty twenty five full year adjusted EPS guidance again today. Aengus KellyCEO & Executive Director at AerCap00:02:30Global passenger traffic continues to grow, led by APAC and The Middle East. In The US, domestic traffic declined after slower growth in April, but international traffic performed better, demonstrating the resilience of long haul demand. This phenomenon of international growth outpacing domestic growth is a trend that we've seen throughout the year and around the world. On the aircraft side, we continue to see strong demand from our customers despite the uncertainty regarding tariffs and trade. This is evidenced by our 99% utilization rate and 97% extension rate in the second quarter. Aengus KellyCEO & Executive Director at AerCap00:03:15These high levels of utilization and extension rates have persisted over recent years, resulting in more options on placements and stronger returns overall. In fact, across the 30 extensions we completed in q two, the new leases signed were on average higher than their previous lease despite being older aircraft now. The resilience of international travel means the broad based demand for wide bodies continues. This was shown by the lease agreements we signed for triple sevens and a three thirty seals with carriers in Asia, The Middle East, and Europe in q two. Furthermore, as a result of the deals we have signed or have in the pipeline in q three, we have only two wide bodies available for lease between now and the 2027 out of a fleet of more than 250 wide bodies. Aengus KellyCEO & Executive Director at AerCap00:04:14On the narrow body side, we see similar trends. We signed lease agreements with 12 different carriers in the quarter, including six a three twenty neo placements from our order book with a carrier in The Middle East. We extended 26 used aircraft with an average age of 16 years that are on lease to carriers predominantly in Europe and Asia. There has been a lot of focus on the OEM supply shortages over the last number of years, which, of course, have been helpful for lease rates and sales pricing. These delays have also resulted in fewer opportunities for organic growth via sale leasebacks. Aengus KellyCEO & Executive Director at AerCap00:04:58That dynamic is beginning to change, and deals are beginning to present themselves. Of course, they have to meet our return targets, but I am confident that as OEMs ramp up deliveries over the next few years, AerCap will be well positioned to take advantage of these opportunities given the combined strength of our balance sheet and customer relationships. Spare engine demand remains particularly robust today, given the challenges with new technology aircraft in particular, keeping utilization levels high. Our engine platforms are focused on supporting their OEM airline and MRO customers. Spare engine support is a key part of AerCap's overall proposition to customers, And our portfolio of over 1,200 spare engines, 90% of which are new technology, mean AerCap is well positioned to do so. Aengus KellyCEO & Executive Director at AerCap00:05:57On new deliveries, our organic growth strategy continues with the purchase of 31 new LEAP engines across the SES and AerCap platforms, taking total deliveries for the year to date to 84. A further 46 LEAPS are expected to deliver through the end of this year. We also delivered 36 engines to various airline customers in q two alone under commercial lease agreements. So overall, activity remains robust across the platforms. Finally, we are set to expand our MRO support capability with an engine leasing partnership with Air France KLM announced at the Paris Air Show, which we hope to finalize later in the year. Aengus KellyCEO & Executive Director at AerCap00:06:43This mutually beneficial partnership provides spare engine support for customers of Air France KLM's MRO operation and quicker MRO slots for our own fleets. Turning to milestone. Overall, the helicopter landscape remains reasonably robust. Global fleet utilization remains high, aided by continued OEM production discipline and supply chain constraints, which like the aircraft industry are likely to persist for some time. From an aircraft fleet perspective, we continue to adopt a balanced portfolio management strategy, investing in new technology helicopters at accretive returns while divesting of midlife and out of production types. Aengus KellyCEO & Executive Director at AerCap00:07:30During the quarter, we continue to see a high percentage of helicopters of varying types extending with their existing operators. This included deals with operators in The US, South Korea, India, and The UK. So in summary, this was another great quarter for AerCap with earnings and cash flows remaining strong throughout the business. We continue to deploy your capital effectively with the purchase of approximately $3,000,000,000 of new equipment and the repurchase of over $1,000,000,000 of stock year to date. In addition, we expect to spend another $3,000,000,000 in new equipment through the 2025 and have a further 800,000,000 in share repurchase authorizations outstanding. Aengus KellyCEO & Executive Director at AerCap00:08:17Going forward, this means that AerCap is in an exceptional position to provide unique support to our customers and strong returns to our shareholders. With that, I'll now hand the call over to Pete to review the financials and the outlook for 2025. Peter JuhasCFO at AerCap00:08:33Thanks, Gus. Good morning, everyone. Our GAAP net income for the second quarter was a record $1,259,000,000 or $7.09 per share. This included net recoveries related to the Ukraine conflict of $973,000,000 or $5.48 per share. This reflects the award we received and the favorable decision by the London Commercial Court in June. Peter JuhasCFO at AerCap00:09:01The impact of purchase accounting adjustments was $82,000,000 for the quarter or $0.46 per share. The net tax effect of both of these items was $134,000,000 or $0.75 per share. As a result, our adjusted net income for the second quarter was $5.00 $2,000,000 or $2.83 per share. Besides the insurance award, there were two main items that affected our results for the second quarter. First, we had a tax provision release of $41,000,000 And second, our SG and A expense was higher than normal due to higher stock based compensation expense, which was driven by some upfront recognition of expenses. Peter JuhasCFO at AerCap00:09:44Going forward, we expect stock based compensation expense to return to a more normal run rate of around $30,000,000 a quarter. Turning to sales, our net gain on sale of assets was $57,000,000 We sold 18 of our owned assets during the quarter for total sales revenue of $374,000,000 That resulted in an unlevered gain on sale margin of 18%, which is equivalent to a multiple of 1.7 times book value. The sales volume was a little lower than normal during the second quarter, mainly due to timing of deals closing. As of June 30, we had $470,000,000 of assets held for sale, and I currently expect our sales to be around $2,500,000,000 for the full year. Our liquidity position continues to be very strong. Peter JuhasCFO at AerCap00:10:34As of June 30, our total sources of liquidity were approximately $22,000,000,000 That includes 2,700,000,000 of cash and $12,000,000,000 of revolvers and other committed facilities as well as expected sales and operating cash flow. Our sources to uses coverage ratio at the end of the quarter was 1.9 times, which amounts to excess cash coverage of around 10,000,000,000 Our leverage ratio was 2.2 to one, down from 2.4 to one last quarter. That decrease was primarily driven by the favorable insurance judgment that we received in June. Our operating cash flow was approximately $1,300,000,000 for the second quarter and our average cost of debt remained the same at 4.1%. We bought back 4,700,000.0 shares during the quarter for a total of $445,000,000 That takes us to over $1,000,000,000 of share repurchases so far this year. Peter JuhasCFO at AerCap00:11:31We currently have around $800,000,000 of available capacity remaining in our existing share repurchase authorization. Turning now to guidance. In February, we projected adjusted earnings per share of $8.5 to $9.5 for the full year 2025, not including any gains on sale. On our last earnings call, given the strong performance in the first quarter, we raised our guidance to the top half of that range. As Gus mentioned, today we're raising our full year 2025 adjusted EPS guidance to approximately $11.6 That includes the $1.1 of gains on sale that we had in the first half of the year, but it doesn't include any gains on sale for the second half of the year. Peter JuhasCFO at AerCap00:12:19In the first half, the outperformance relative to guidance was driven by higher lease revenue, including net maintenance contribution, and we would expect lease revenue to continue to be strong in the second half of the year. We also had some benefits from higher other income in the first quarter as well as the tax release in the second quarter. So that results in full year guidance of $11.6 This reflects our strong performance year to date and our positive outlook for the rest of the year. So in closing, we're coming off another strong quarter for AerCap in terms of earnings and EPS and, of course, the favorable decision in our insurance case. We continue to be in a position of strength with a strong balance sheet, low leverage and strong liquidity. Peter JuhasCFO at AerCap00:13:02We're confident about the outlook for the business as you can see from our increase in full year guidance and our repurchases of over $1,000,000,000 of stock so far this year. And with that, operator, we'll open up the call for Q and A. Operator00:13:16Thank Q Terry MaSenior Equity Research Analyst at Barclays00:13:49Hi, thank you. Good morning. Maybe just to start off with the partnership with Air France KLM. Is there any way you can maybe size that opportunity and talk about how much excess capital you can deploy into that? We kind of take a step back, maybe just update us on how you're thinking about capital allocation. Terry MaSenior Equity Research Analyst at Barclays00:14:08You guys are continue to be underlevered relative to target. So maybe just talk about deployment of that capital overall. Aengus KellyCEO & Executive Director at AerCap00:14:19Sure. Let me start with the, Air France KLM joint venture. This opens up another broad customer base to our engine business. And the great advantage for Air France KLM as they move into the LEAP overhaul business is that they have a partner now that has experience of moving hundreds of LEAP engines around the world on time and on spec for the existing OEM CFM. So that's very important. Aengus KellyCEO & Executive Director at AerCap00:14:53As regards to how big it will grow, we'll have to see over time. Initially, it'll be a small amount. But like all these, investments, these are long term in nature like the business is and something we're looking to regarding the long term. I'll let Pete answer the question on the capital allocation. Peter JuhasCFO at AerCap00:15:13Sure. Thanks, Gus. So, Terry, in terms of capital allocation, so far this year, we've deployed a little over a billion dollars for share buybacks. We've also bought $3,000,000,000 of aircraft, as Gus mentioned, and we've got another $3,000,000,000 of buybacks, of of of CapEx later this year as well as the remaining 800,000,000 in our program. And as we look at it, look. Peter JuhasCFO at AerCap00:15:37You know, we always look at all different alternatives for deploying excess capital. We are seeing some what we think will be attractive opportunities with some of the airlines now Now that you're starting to see more aircraft delivering, in their order books, we think there will be opportunities there. We also think that there will be opportunities on the engine side to deploy more capital there. And, of course, share repurchases continue to be attractive. So I'd say those will be the main avenues as we look out today in terms of deployment of excess capital for the remainder of the year. Terry MaSenior Equity Research Analyst at Barclays00:16:11Got it. That's helpful. And then I guess as a follow-up, I think leasing expenses ex the maintenance amortization expense was, you know, in the $60,000,000 range this quarter. It's been kind of below average last two quarters. Kinda what's the outlook for that for the remainder of the year? Thank you. Peter JuhasCFO at AerCap00:16:30Yes. So leasing expenses have been lower. They were also lower in the first quarter. They came down a bit more in the second quarter. Mainly, that has been due to the high level of extensions and fewer transitions that we've been seeing. Peter JuhasCFO at AerCap00:16:43Yeah. As you saw, our extension rate in the quarter was 97%. So that's, that's almost a record high. And what the impact of that is, it's reducing the amount of leasing expenses that we have. So I think that will continue to trend at lower levels than we had originally expected because of the those factors. Operator00:17:14Any further questions, Mr. Ma? Terry MaSenior Equity Research Analyst at Barclays00:17:16No, that's it. Thank you. Peter JuhasCFO at AerCap00:17:19Great. Thank you. Operator00:17:21We will take our next question from Moshe Orenbuch with TD Cowen. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:17:27Great. Thanks. I apologize because I missed a a bit at the beginning, but the increase in your h your second half or full year kind of CapEx, does that already encompass your expectation for potentially higher sale leasebacks, or is that something that would be, you know, kind of additive to it? Peter JuhasCFO at AerCap00:17:48No. That that 3,000,000,000 that we mentioned, Moshe, is just, what we've contracted to date. So that's just from the order book. Okay. But any so any incremental things that we do would be additive to that number. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:18:02Got it. And, you know, I guess I mean, is you know, how how should we sort of think about the, you know, the the potential for that number to be higher than 3,000,000,000 versus, you know, kind of lower at this stage? Like, you know, the kind of the upside downside, if you will. Peter JuhasCFO at AerCap00:18:18Well, we're starting to see the OEMs pick up their pace of deliveries. I mean, you saw Boeing's results the other day. So I think that we are seeing production rates increase, albeit off a relatively low base. So I think as a starting point, that 6,000,000,000 for the year is a reasonable one for us just on in terms of our order book and what's currently contracted. And then things can be additive, from there. Peter JuhasCFO at AerCap00:18:45And and one of the benefits that you get if you're doing sale leasebacks or, in particular, engine deals is that allows for more rapid deployment of capital than, you know, say, if you were doing an OEM order where you're gonna get those a new order, you're gonna get those aircraft in the 20 thirties. So that is one of the benefits of those two. How much will it be this year? Hard to know, but, you know, we do have excess capital available, and and we would like to deploy it. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:19:12Got it. And maybe since you did bring up the engine business, is, you know, could you talk about how much you know, what's the possible amount of capital you could deploy in that, you know, over you know, I mean, you can kinda pick the period to to discuss and just, you know, talk about how, you know, important that could be for your account. Thanks. Peter JuhasCFO at AerCap00:19:34Well, we did $5,000,000,000 of engine orders last year, and that's and $10,000,000,000 since we did the GKS acquisition. So that gives you some idea of how of how large these can be. And as I said, in contrast to just an order for on, of aircraft from an order book, engines can deliver, in some cases, weeks after we've concluded that contract. Because if you think about it, these are spare engines that are immediately needed. That's why they are that's why, that's why we are doing those purchases so they can be immediately put into the spare engine pools for the OEMs. Peter JuhasCFO at AerCap00:20:12And so that can lead to rapid deployment of capital. So I it it can be quite large. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:20:18Yeah. Thanks very much. Peter JuhasCFO at AerCap00:20:20Sure. Operator00:20:26We'll take our next question from Catherine O'Brien with Goldman Sachs. Catherine O'BrienVice President at Goldman Sachs00:20:32Hey. Good morning, everyone. Thanks for the time. Maybe just a follow-up the capital allocation question. You know, leverage is running well below target. Catherine O'BrienVice President at Goldman Sachs00:20:40Sounds like you have potentially new opportunities in the sale leaseback market. But how do you think about the relative attractiveness of of those sale leaseback opportunities versus maybe deploying more capital engines versus buying back your cap shares. Is is the lack of a re up on the buyback just that you still have $800,000,000 left? Just just would love to know kind of how you're thinking about ranking those opportunities. Peter JuhasCFO at AerCap00:21:04Yeah. That's the rationale, Katie, for in terms of the buyback at the moment. We have a little over $800,000,000 remaining, and so we'd like to utilize that first. So that's, that's why we're not announcing a new authorization at the moment. But as you note, our leverage ratio is low. Peter JuhasCFO at AerCap00:21:21It's 2.2 to one. A lot of that is because the we got the judgment in June on our insurance case, and those funds just came in at the June and early July. So that decreased the leverage ratio by about 20 basis points from 2.4 to 2.2. So when we think about the opportunities, for sure, buybacks are one of them, but we also think between some of these sale leaseback opportunities with airlines, some of the engine deals that that we're considering, I think all of those are are in the mix. You know, we'll look at each individually, but I think some combination of those things is the most likely deployment of excess capital this year. Peter JuhasCFO at AerCap00:22:01I think beyond that, you know, things like M and A, and new orders of aircraft are prob probably behind that at the moment. Catherine O'BrienVice President at Goldman Sachs00:22:11Okay. Great. Thanks. And maybe just for my follow-up, an 18% gain on sale is nearly double your historical average, so it's definitely not trying to poke at that. But there's been a lot of focus from investors across the aviation industry on what Boeing, you know, starting to get their act together in production could mean. Catherine O'BrienVice President at Goldman Sachs00:22:29And and that 18% is a little bit lower than the last couple of quarters. Is there any difference in the types or ages of assets you'd call it this quarter versus the last two or three? Just trying to see if there's any read through to demand for aircraft in secondary market or if this is just really, like, a normal fluctuation based on the types of assets you sold. Thanks. Peter JuhasCFO at AerCap00:22:48Sure. I really think it's a normal Aengus KellyCEO & Executive Director at AerCap00:22:53Katie Katie, I was just gonna say there that this is just a normal fluctuation. There's nothing more to see there. In terms of demand, it's still extremely strong. Look. The real evidence of that is the extension rates. Aengus KellyCEO & Executive Director at AerCap00:23:05You can see that we extended an all time high of 99% of the aircraft. That's what speaks to the strength in the market. You know, whether Boeing are making 34, 36, or 38 airplanes is not going to affect that demand. Catherine O'BrienVice President at Goldman Sachs00:23:21Okay. Great. I thought that would answer. Thank you. Operator00:23:28We will take our next question from from Ron Epstein with Bank of America. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:23:33Hey. Yeah. Good good good morning, guys. Maybe the first one for for Pete. You know, when we met up at the Air Show, you know, we had a pretty in-depth discussion with you on tariffs. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:23:44Given how things have sort of moved around, how how are you thinking about it now, and, you know, how is the tariff environment kind of impacting the business? Peter JuhasCFO at AerCap00:23:53Sure. Thanks, Ron. So we've seen a very limited impact of tariffs on our business so far. As you know, we've been strong advocates for the zero for zero tariff regime around the world. We were very glad to see that, to see the announcements between The US and The UK, and then The US and the EU that came over the weekend. Peter JuhasCFO at AerCap00:24:14I believe those remove a lot of the uncertainty around tariffs for aviation, so that's very helpful. And what we'd like to see, I think those are a good precedent for other deals that could be done around the world. So that's very helpful. Look. All that being said, all this has moved very quickly. Peter JuhasCFO at AerCap00:24:30But, if those can serve as a precedent and we get back to the zero for zero regime, I think that's best for aviation. It's helpful for the industry overall. And as I said so we've seen very minimal impact, and we hope that, that a lot of this is behind us now. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:24:48Got it. Got it. And then maybe just a a broader question. When you think about the return profile on an engine versus the return profile on an airframe, kind of at a high level, how do you guys think about that? I mean, what's what what's better for you all? An airframe or an engine? Aengus KellyCEO & Executive Director at AerCap00:25:08Ron, I wouldn't say one is better than the other. There's different aspects to them. The engine initially has a lower lease yield, because no one is paying for seats, lavatories, all that bio furnished equipment. However, over time, the aircraft depreciates faster than the engine because you have to depreciate those components that are specific to the first lessee. So, yeah, you get a higher lease rate at the start on aircraft, but you have a shallower depreciation curve over the long term on the engines. Aengus KellyCEO & Executive Director at AerCap00:25:42The key point of investing in anything in aviation is that you are buying the right assets for its remaining economic life, be that five years or twenty five years, and you're buying it at the right price, and you know the value of the assets when you buy it. And AerCap has demonstrated that in this industry, for twenty plus years that no one has that judgment better than this company. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:26:08Got it. Got it. And then maybe just one last one. You know, with demand for wide bodies clearly picking up, do do you think you need to, you know, how I say, you know, build out your backlog on on wide body orders, your your skyline more so? Aengus KellyCEO & Executive Director at AerCap00:26:25Definitely not. I will build my skyline when it makes money for my shareholders. I have no interest in buying any asset at all if it doesn't make adequate return for shareholders in AerCap. I still believe the cheapest wide bodies in the world are available on the New York Stock Exchange under the ticker Alpha Echo Romeo. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:26:46Okay. Alright. Thanks, guys. Yeah. Have a good one. Yep. Operator00:26:53We will take our next question from Jamie Baker with JPMorgan. James BakerManaging Director & Investment Specialist at JP Morgan00:26:58Oh, thanks for the time. So, Gus, do you think we are at peak returns? And if not, when do we get there? And the reason we're asking is, you know, lease rates obviously haven't, you know, fully kept up with the cost of debt. And we're starting to wonder whether competing capital may be one of the reasons, you know, could less disciplined capital be chasing deals lower. James BakerManaging Director & Investment Specialist at JP Morgan00:27:24And look, we're just thinking out loud, you know, but, you know, some of the recent deals from United, you know, that was business away from AerCap. So we're we're just trying to we're just wondering what the read through might be. Aengus KellyCEO & Executive Director at AerCap00:27:38Sure, Jamie. I mean, look, can't speak to anyone else in the industry, but I'll I'll hand it over to Pete in a second. But you can see over a very long period of time, that we are AerCap is able to pass on, the cost of interest, and we've done that for this, this year as well, as you'll see. Interest expense is up 5%, and the lease revenue matches it. But, you know, look, from my perspective, I've always said to you that we target that return of 8% to 10% over the the treasury rate, and that's what this company has always returned in in every in all markets. Aengus KellyCEO & Executive Director at AerCap00:28:15That's what it's averaged in that in in in that zone exactly. So, you know, this business is extremely stable if you're good at it and you're in it for the long term. If you're one of the tourists, then, you know, yeah, you can have, you can put money to work. Whether you'll make any, whether you'll be successful at it or not is another matter. We've ex exhibited great restraint, when it comes to deploying capital. Aengus KellyCEO & Executive Director at AerCap00:28:37And from our perspective, how we allocate capital, you know, be it buying our own shares, which as I just said to Ron, I believe the cheapest aircraft are available every day on the New York Stock Exchange under under our ticker. And, you know, you won't see us. You're right. Yes. Of course, some deals trade away from us, but that's where we exercise discipline. Aengus KellyCEO & Executive Director at AerCap00:28:58And, you know, you've seen us for twenty years, through all markets exercise that discipline, and we'll continue to do that. James BakerManaging Director & Investment Specialist at JP Morgan00:29:05Okay. I appreciate that. And then maybe for Pete, you know, you're nicely below the, you know, 2.7 debt to equity target. You touched on that in your prepared remarks. So what what's more likely from here? James BakerManaging Director & Investment Specialist at JP Morgan00:29:16Running it back up to the target or maybe tightening that target and pushing for low a ratings? Thanks in advance. Peter JuhasCFO at AerCap00:29:26Yeah, Jamie. So I think that we will run it closer to the target. I'd expect it to get up to, you know, get closer to 2.7, whether that's two four, two five, somewhere in that ballpark. We're not intending to lower that target because, fundamentally, I think we're in a good place for the rating agencies now. Look. Peter JuhasCFO at AerCap00:29:47If we can get to A minus ratings, that would be great. But, ultimately, we're focused on what's the what is the most beneficial for our shareholders? How can we how can we return, create the highest returns for our shareholders? And so if you think about do we would we need to do that by lowering the leverage target over, you know, a long period and putting in place higher liquidity and other things like that. If there's a cost to that, obviously, I think where we are today, having come up from low, triple b minus ratings a couple years ago to where we are today, triple b plus across the board, That's a very strong performance. Peter JuhasCFO at AerCap00:30:25Sure. We'd like to go higher, but I think, fundamentally, there are a lot of opportunities for us to deploy capital, and and we'll look to do that. James BakerManaging Director & Investment Specialist at JP Morgan00:30:34Okay. Thanks to you both. Appreciate it. Peter JuhasCFO at AerCap00:30:37Sure. Operator00:30:40We will take our next question from Christine Lewag with Morgan Stanley. Kristine LiwagExecutive Director at Morgan Stanley00:30:46Hey. Good morning, everyone. And maybe, Gus, following up on your comments on AerCap's success for the past twenty years, I mean, we've seen all the numbers. And at this point, I mean, you are the largest aircraft lessor in the entire world, so congratulations on on that success. But, you know, I guess, when we look for growth, and Wall Street's always looking for the incremental growth, As you continue to deliver that strong return and the business continues to delever and we look at your forward order book and purchase and leasebacks, it it kinda decelerates starting 2027. Kristine LiwagExecutive Director at Morgan Stanley00:31:18I mean, how do we think about the size of AerCap in the next five years or even I mean, twenty years maybe a little too far out, but maybe the next three to five years. How big could you be? And are you getting to the point on return that you're you're too big that getting that outsized, you know, eight to 10% consistently over the treasury rate may be getting harder? And if that's the case, you know, where do you see incremental growth? Aengus KellyCEO & Executive Director at AerCap00:31:47Thanks, Christine. Well, look. From our perspective, this is a growing industry, aviation. Every twenty years, it doubles in size, and aircraft leasing is doubling within that itself. So it's continuing to grow every year. Aengus KellyCEO & Executive Director at AerCap00:32:02So I'm not worried about growth over the long term. It always comes. And indeed, if you just look at the amount of, CapEx we contracted in 2024, it was 6,000,000,000 plus that we managed to contract that wasn't there at the beginning of the year. So I'm not concerned about where the order book is. I'd be extraordinarily concerned if I was ordering airplanes that were going to have a negative effect to my shareholders, and we followed the gap model of growth at any price. Aengus KellyCEO & Executive Director at AerCap00:32:31That's something we'll never do. The objective of this company is to create value for our shareholders, and that means growing profitability. And that does not necessarily mean growing revenue. Of course, we have grown revenue tremendously. We've grown the balance sheet tremendously, but at the right times. Aengus KellyCEO & Executive Director at AerCap00:32:47And, I'm very confident that given the growth industry, AerCap's position in the industry, the relationships we have, the influence we have, that profitable growth opportunities will come our way. And in any event, as I said earlier on in the call twice, I certainly believe that the best value aircraft in the world are available under the ticker alpha echo Romeo down on the NYSE. Kristine LiwagExecutive Director at Morgan Stanley00:33:13Thanks. Thanks, Gus. And maybe, Pete, as a follow-up, look. We have seen a modest compression in the annualized net spread, over the past few years as net in as interest expense has been ticking up. Are there we know, with the balance sheet continuing to improve and leverage going down, are there different ways in which you could further reduce cost of interest? Kristine LiwagExecutive Director at Morgan Stanley00:33:33And when would you expect the annualized net spread to start expanding again? Peter JuhasCFO at AerCap00:33:40Yeah. Thanks, Christine. So the net spread will be expanding. I'd expect it to to be going up from here kind of on a sequential level quarterly and then into the next few years as well. Because what we're seeing is the portfolio yield, the lease rate factor is going up. Peter JuhasCFO at AerCap00:33:56That's gonna continue to climb, and and so overall, net spread is going to increase. I would remind you, though, that net spread obviously isn't the whole story. There is a lot beyond net spread. We're not managing to that. We're managing to EPS. Peter JuhasCFO at AerCap00:34:10But I do think the profitability will increase going forward. And maybe just to to touch for a second on Jamie's question before in terms of whether we've reached peak profitability for the industry, I don't think so, in part because even the deals that we're doing today, there is a lag in terms of seeing the financial results come through for those. So even if you did reach peak profitability in terms of the market being great today, you're not gonna see the financial results of those really flow through for the next few until the next few years. So I think we've got a good tailwind on that. We've got a good tailwind in terms of COVID leases rolling off. Peter JuhasCFO at AerCap00:34:48That will take time, but it is a tailwind. So I think there are a number of things that that are positive for us as a company, going to the next few years. Kristine LiwagExecutive Director at Morgan Stanley00:34:57Great. Thank you very much, guys. Peter JuhasCFO at AerCap00:35:00Sure. Operator00:35:03We will take our next question from Hillary Coconando with Deutsche Bank. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:35:09Hi. Thank you for taking my questions. I know you already wrote down your exposure to Azul late last year, but, you know, that was before they filed for bankruptcy. I was just wondering if there could be, you know, any other impact from bank Azul bankruptcy from your end? Peter JuhasCFO at AerCap00:35:28Thanks, Hillary. Yes. So so last year, you're right. We did take a provision against Azul. And as we look out today, so Azul is still in bankruptcy. Peter JuhasCFO at AerCap00:35:40They've been they've been making progress in their restructuring plan. We don't see any impact, compared to where we were. So I think, minimal impact this quarter from Azul, and we think we're fully provisioned there for how this restructuring should play out. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:35:57Okay. Thank you. Thank you for that. And then, you know, so far, we saw about, you know, 10 very young a three twenty neos getting retired in the market and, you know, parted out to harvest the engines just, you know, given the demand for spare engines. You know, I guess that speaks to the to the strength of the engine market. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:36:15So, you know, I just I just wanted to get your thoughts on on that phenomenon and, know, you if that's something that you expect to continue. Aengus KellyCEO & Executive Director at AerCap00:36:25Well, there's a couple of items there, actually. On those, the report of those neos being torn down, there are, two twenty aircraft that were in Egypt. They are being disassembled. The other aircraft, the a three twenty aircraft that you're speaking about, it's my understanding that it's only the engines that have been removed. The aircraft themselves are not being torn down, and that is in order for Pratt and Whitney to support the obligations it has to its customers. Aengus KellyCEO & Executive Director at AerCap00:36:56So I I that's not happening as as far as I'm aware on a 03/20 neos, the teardowns. It is only happening on the February that were in Egypt. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:37:07Got it. Great. That's that's very helpful. Thank you. Operator00:37:12We will go back to Catherine O'Brien with Goldman Sachs. Catherine O'BrienVice President at Goldman Sachs00:37:17Oh, hey. Thanks for the extra time. Maybe just one more on the sale leaseback opportunity. Are these, you know, more opportune opportunistic from distressed airlines? Or is this just a function of more deliveries driving less competition per RFP? Catherine O'BrienVice President at Goldman Sachs00:37:31Just just was curious as I know that market has been pretty competitive and and not very attractive the last couple of years. Just wondering what's driving the shift. Thanks. Aengus KellyCEO & Executive Director at AerCap00:37:41Well, Catherine, first of all, we have to execute on them. Now we have done so over the years, and you can see that indeed last year with the amount of CapEx we put on the books that was not there at the beginning of the year. You know, it's highly unlikely we're, going to be competing in open bid sale leaseback transactions. It's where we bring other things to the table in terms of our installed fleet, our engine business, etcetera. There are different things we bring to the table that others don't. Aengus KellyCEO & Executive Director at AerCap00:38:09So I can't say that every deal is, uniquely bilateral, but we certainly wouldn't be entering into many sale leaseback transactions I don't think we have where there's just open bids where everybody's bidding against us. Catherine O'BrienVice President at Goldman Sachs00:38:23Okay. Great. Thanks. Operator00:38:26There are no further questions at this time. Mr. Kelly, at this time, I will turn the conference back to you for any additional or closing remarks. Aengus KellyCEO & Executive Director at AerCap00:38:36Thank you very much, everyone, for joining us for the call, and we look forward to speaking to you during the quarter. Enjoy the rest of the summer. Goodbye. Operator00:38:46This concludes today's call. Thank you for your participation. You may now disconnect.Read moreParticipantsAnalystsJoseph McginleyHead - IR at AerCapAengus KellyCEO & Executive Director at AerCapPeter JuhasCFO at AerCapTerry MaSenior Equity Research Analyst at BarclaysMoshe OrenbuchMD & Senior Analyst at TD CowenCatherine O'BrienVice President at Goldman SachsRon EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of AmericaJames BakerManaging Director & Investment Specialist at JP MorganKristine LiwagExecutive Director at Morgan StanleyHillary CacanandoDirector - Equity Research at Deutsche BankPowered by Earnings DocumentsSlide DeckPress Release(8-K) Aercap Earnings HeadlinesAerCap Holdings Second Quarter 2025 Earnings: EPS Beats Expectations, Revenues LagAugust 1 at 10:46 PM | finance.yahoo.comAerCap Holdings N.V. (NYSE:AER) Q2 2025 Earnings Call TranscriptAugust 1 at 4:50 AM | msn.comThis Crypto Is Set to Explode in JanuaryThis Could Be the Most Important Crypto Law in History While the world celebrates Bitcoin becoming 2025’s top-performing asset, smart hedge funds are accumulating elsewhere. During the upcoming Crypto Hedge Fund Summit, you'll discover exactly which coins they’ve loaded up on before this historic vote.August 2 at 2:00 AM | Crypto 101 Media (Ad)Aercap Holdings N.V. (NYSE:AER) Given Consensus Recommendation of "Moderate Buy" by BrokeragesAugust 1 at 2:24 AM | americanbankingnews.comAerCap shares fall on revenue miss as asset sales, maintenance rents declineJuly 30 at 4:54 PM | msn.comAerCap Holdings N.V. (AER) Q2 2025 Earnings Call TranscriptJuly 30 at 12:15 PM | seekingalpha.comSee More Aercap Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Aercap? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Aercap and other key companies, straight to your email. Email Address About AercapAercap (NYSE:AER) engages in the lease, financing, sale, and management of commercial flight equipment in China, Hong Kong, Macau, the United States, Ireland, and internationally. The company offers aircraft asset management services, such as remarketing aircraft and engines; collecting rental and maintenance rent payments, monitoring aircraft maintenance, monitoring and enforcing contract compliance, and accepting delivery and redelivery of aircraft and engines; and conducting ongoing lessee financial performance reviews. Its aircraft asset management services also include periodically inspecting the leased aircraft and engines; coordinating technical modifications to aircraft to meet new lessee requirements; conducting restructuring negotiations in connection with lease defaults; repossessing aircraft and engines; arranging and monitoring insurance coverage; registering and de-registering aircraft; arranging for aircraft and engine valuations; and providing market research services. In addition, the company provides cash management services, including treasury services, such as the financing, refinancing, hedging, and ongoing cash management of vehicles; and administrative services comprising accounting and corporate secretarial services consisting of the preparation of budgets and financial statements. Further, it offers airframe and engine parts and supply chain solutions to airlines; maintenance, repair, and overhaul service providers; and aircraft parts distributors. The company had a portfolio of owned, managed, or on order aircraft. AerCap Holdings N.V. was founded in 1995 and is headquartered in Dublin, Ireland.View Aercap ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon's Earnings: What Comes Next and How to Play ItApple Stock: Big Earnings, Small Move—Time to Buy?Microsoft Blasts Past Earnings—What’s Next for MSFT?Visa Beats Q3 Earnings Expectations, So Why Did the Market Panic?Spotify's Q2 Earnings Plunge: An Opportunity or Ominous Signal?RCL Stock Sinks After Earnings—Is a Buying Opportunity Ahead?Amazon's Pre-Earnings Setup Is Almost Too Clean—Red Flag? 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PresentationSkip to Participants Operator00:00:00Day, and welcome to AerCap's Q2 twenty twenty five Financial Results. Today's conference is being recorded and a transcript will be available following the call on the company's website. At this time, I would like to turn the conference over to Joseph McGinley, Head of Investor Relations. Please go ahead, sir. Joseph McginleyHead - IR at AerCap00:00:20Thank you, operator, and hello, everyone. Welcome to our second quarter twenty twenty five conference call. With me today is our Chief Executive Officer, Angus Kelly and our Chief Financial Officer, Pete Euhas. Before we begin today's call, I would like to remind you that some statements made during this conference call, which are not historical facts, may be forward looking statements. Forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. Joseph McginleyHead - IR at AerCap00:00:51AerCap undertakes no obligation other than that imposed by law to publicly update or revise any forward looking statements to reflect future events, information, or circumstances that arise after this call. Further information concerning issues that could materially affect performance can be found in AerCap's earnings release dated 08/30/2025. A copy of the earnings release and conference call presentation are available on our website at aircap.com. This call is open to the public and is being webcast simultaneously at aircap.com and will be archived for replay. We will shortly run through our earnings presentation and will allow time at the end for Q and A. Joseph McginleyHead - IR at AerCap00:01:30As a reminder, I would ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Angus Kelly. Aengus KellyCEO & Executive Director at AerCap00:01:37Thank you for joining us for our second quarter twenty twenty five earnings call. We are pleased to report a record quarter of earnings generating GAAP net income of $1,300,000,000 and earnings per share of $7.09. This reflects strong execution and demand for our assets as well as the successful outcome in our contingent and possessed insurance case in the commercial court in London in June. Adjusted net income was $502,000,000, and adjusted EPS was $2.83. Given these strong results and our improved outlook for the year ahead, we have increased our twenty twenty five full year adjusted EPS guidance again today. Aengus KellyCEO & Executive Director at AerCap00:02:30Global passenger traffic continues to grow, led by APAC and The Middle East. In The US, domestic traffic declined after slower growth in April, but international traffic performed better, demonstrating the resilience of long haul demand. This phenomenon of international growth outpacing domestic growth is a trend that we've seen throughout the year and around the world. On the aircraft side, we continue to see strong demand from our customers despite the uncertainty regarding tariffs and trade. This is evidenced by our 99% utilization rate and 97% extension rate in the second quarter. Aengus KellyCEO & Executive Director at AerCap00:03:15These high levels of utilization and extension rates have persisted over recent years, resulting in more options on placements and stronger returns overall. In fact, across the 30 extensions we completed in q two, the new leases signed were on average higher than their previous lease despite being older aircraft now. The resilience of international travel means the broad based demand for wide bodies continues. This was shown by the lease agreements we signed for triple sevens and a three thirty seals with carriers in Asia, The Middle East, and Europe in q two. Furthermore, as a result of the deals we have signed or have in the pipeline in q three, we have only two wide bodies available for lease between now and the 2027 out of a fleet of more than 250 wide bodies. Aengus KellyCEO & Executive Director at AerCap00:04:14On the narrow body side, we see similar trends. We signed lease agreements with 12 different carriers in the quarter, including six a three twenty neo placements from our order book with a carrier in The Middle East. We extended 26 used aircraft with an average age of 16 years that are on lease to carriers predominantly in Europe and Asia. There has been a lot of focus on the OEM supply shortages over the last number of years, which, of course, have been helpful for lease rates and sales pricing. These delays have also resulted in fewer opportunities for organic growth via sale leasebacks. Aengus KellyCEO & Executive Director at AerCap00:04:58That dynamic is beginning to change, and deals are beginning to present themselves. Of course, they have to meet our return targets, but I am confident that as OEMs ramp up deliveries over the next few years, AerCap will be well positioned to take advantage of these opportunities given the combined strength of our balance sheet and customer relationships. Spare engine demand remains particularly robust today, given the challenges with new technology aircraft in particular, keeping utilization levels high. Our engine platforms are focused on supporting their OEM airline and MRO customers. Spare engine support is a key part of AerCap's overall proposition to customers, And our portfolio of over 1,200 spare engines, 90% of which are new technology, mean AerCap is well positioned to do so. Aengus KellyCEO & Executive Director at AerCap00:05:57On new deliveries, our organic growth strategy continues with the purchase of 31 new LEAP engines across the SES and AerCap platforms, taking total deliveries for the year to date to 84. A further 46 LEAPS are expected to deliver through the end of this year. We also delivered 36 engines to various airline customers in q two alone under commercial lease agreements. So overall, activity remains robust across the platforms. Finally, we are set to expand our MRO support capability with an engine leasing partnership with Air France KLM announced at the Paris Air Show, which we hope to finalize later in the year. Aengus KellyCEO & Executive Director at AerCap00:06:43This mutually beneficial partnership provides spare engine support for customers of Air France KLM's MRO operation and quicker MRO slots for our own fleets. Turning to milestone. Overall, the helicopter landscape remains reasonably robust. Global fleet utilization remains high, aided by continued OEM production discipline and supply chain constraints, which like the aircraft industry are likely to persist for some time. From an aircraft fleet perspective, we continue to adopt a balanced portfolio management strategy, investing in new technology helicopters at accretive returns while divesting of midlife and out of production types. Aengus KellyCEO & Executive Director at AerCap00:07:30During the quarter, we continue to see a high percentage of helicopters of varying types extending with their existing operators. This included deals with operators in The US, South Korea, India, and The UK. So in summary, this was another great quarter for AerCap with earnings and cash flows remaining strong throughout the business. We continue to deploy your capital effectively with the purchase of approximately $3,000,000,000 of new equipment and the repurchase of over $1,000,000,000 of stock year to date. In addition, we expect to spend another $3,000,000,000 in new equipment through the 2025 and have a further 800,000,000 in share repurchase authorizations outstanding. Aengus KellyCEO & Executive Director at AerCap00:08:17Going forward, this means that AerCap is in an exceptional position to provide unique support to our customers and strong returns to our shareholders. With that, I'll now hand the call over to Pete to review the financials and the outlook for 2025. Peter JuhasCFO at AerCap00:08:33Thanks, Gus. Good morning, everyone. Our GAAP net income for the second quarter was a record $1,259,000,000 or $7.09 per share. This included net recoveries related to the Ukraine conflict of $973,000,000 or $5.48 per share. This reflects the award we received and the favorable decision by the London Commercial Court in June. Peter JuhasCFO at AerCap00:09:01The impact of purchase accounting adjustments was $82,000,000 for the quarter or $0.46 per share. The net tax effect of both of these items was $134,000,000 or $0.75 per share. As a result, our adjusted net income for the second quarter was $5.00 $2,000,000 or $2.83 per share. Besides the insurance award, there were two main items that affected our results for the second quarter. First, we had a tax provision release of $41,000,000 And second, our SG and A expense was higher than normal due to higher stock based compensation expense, which was driven by some upfront recognition of expenses. Peter JuhasCFO at AerCap00:09:44Going forward, we expect stock based compensation expense to return to a more normal run rate of around $30,000,000 a quarter. Turning to sales, our net gain on sale of assets was $57,000,000 We sold 18 of our owned assets during the quarter for total sales revenue of $374,000,000 That resulted in an unlevered gain on sale margin of 18%, which is equivalent to a multiple of 1.7 times book value. The sales volume was a little lower than normal during the second quarter, mainly due to timing of deals closing. As of June 30, we had $470,000,000 of assets held for sale, and I currently expect our sales to be around $2,500,000,000 for the full year. Our liquidity position continues to be very strong. Peter JuhasCFO at AerCap00:10:34As of June 30, our total sources of liquidity were approximately $22,000,000,000 That includes 2,700,000,000 of cash and $12,000,000,000 of revolvers and other committed facilities as well as expected sales and operating cash flow. Our sources to uses coverage ratio at the end of the quarter was 1.9 times, which amounts to excess cash coverage of around 10,000,000,000 Our leverage ratio was 2.2 to one, down from 2.4 to one last quarter. That decrease was primarily driven by the favorable insurance judgment that we received in June. Our operating cash flow was approximately $1,300,000,000 for the second quarter and our average cost of debt remained the same at 4.1%. We bought back 4,700,000.0 shares during the quarter for a total of $445,000,000 That takes us to over $1,000,000,000 of share repurchases so far this year. Peter JuhasCFO at AerCap00:11:31We currently have around $800,000,000 of available capacity remaining in our existing share repurchase authorization. Turning now to guidance. In February, we projected adjusted earnings per share of $8.5 to $9.5 for the full year 2025, not including any gains on sale. On our last earnings call, given the strong performance in the first quarter, we raised our guidance to the top half of that range. As Gus mentioned, today we're raising our full year 2025 adjusted EPS guidance to approximately $11.6 That includes the $1.1 of gains on sale that we had in the first half of the year, but it doesn't include any gains on sale for the second half of the year. Peter JuhasCFO at AerCap00:12:19In the first half, the outperformance relative to guidance was driven by higher lease revenue, including net maintenance contribution, and we would expect lease revenue to continue to be strong in the second half of the year. We also had some benefits from higher other income in the first quarter as well as the tax release in the second quarter. So that results in full year guidance of $11.6 This reflects our strong performance year to date and our positive outlook for the rest of the year. So in closing, we're coming off another strong quarter for AerCap in terms of earnings and EPS and, of course, the favorable decision in our insurance case. We continue to be in a position of strength with a strong balance sheet, low leverage and strong liquidity. Peter JuhasCFO at AerCap00:13:02We're confident about the outlook for the business as you can see from our increase in full year guidance and our repurchases of over $1,000,000,000 of stock so far this year. And with that, operator, we'll open up the call for Q and A. Operator00:13:16Thank Q Terry MaSenior Equity Research Analyst at Barclays00:13:49Hi, thank you. Good morning. Maybe just to start off with the partnership with Air France KLM. Is there any way you can maybe size that opportunity and talk about how much excess capital you can deploy into that? We kind of take a step back, maybe just update us on how you're thinking about capital allocation. Terry MaSenior Equity Research Analyst at Barclays00:14:08You guys are continue to be underlevered relative to target. So maybe just talk about deployment of that capital overall. Aengus KellyCEO & Executive Director at AerCap00:14:19Sure. Let me start with the, Air France KLM joint venture. This opens up another broad customer base to our engine business. And the great advantage for Air France KLM as they move into the LEAP overhaul business is that they have a partner now that has experience of moving hundreds of LEAP engines around the world on time and on spec for the existing OEM CFM. So that's very important. Aengus KellyCEO & Executive Director at AerCap00:14:53As regards to how big it will grow, we'll have to see over time. Initially, it'll be a small amount. But like all these, investments, these are long term in nature like the business is and something we're looking to regarding the long term. I'll let Pete answer the question on the capital allocation. Peter JuhasCFO at AerCap00:15:13Sure. Thanks, Gus. So, Terry, in terms of capital allocation, so far this year, we've deployed a little over a billion dollars for share buybacks. We've also bought $3,000,000,000 of aircraft, as Gus mentioned, and we've got another $3,000,000,000 of buybacks, of of of CapEx later this year as well as the remaining 800,000,000 in our program. And as we look at it, look. Peter JuhasCFO at AerCap00:15:37You know, we always look at all different alternatives for deploying excess capital. We are seeing some what we think will be attractive opportunities with some of the airlines now Now that you're starting to see more aircraft delivering, in their order books, we think there will be opportunities there. We also think that there will be opportunities on the engine side to deploy more capital there. And, of course, share repurchases continue to be attractive. So I'd say those will be the main avenues as we look out today in terms of deployment of excess capital for the remainder of the year. Terry MaSenior Equity Research Analyst at Barclays00:16:11Got it. That's helpful. And then I guess as a follow-up, I think leasing expenses ex the maintenance amortization expense was, you know, in the $60,000,000 range this quarter. It's been kind of below average last two quarters. Kinda what's the outlook for that for the remainder of the year? Thank you. Peter JuhasCFO at AerCap00:16:30Yes. So leasing expenses have been lower. They were also lower in the first quarter. They came down a bit more in the second quarter. Mainly, that has been due to the high level of extensions and fewer transitions that we've been seeing. Peter JuhasCFO at AerCap00:16:43Yeah. As you saw, our extension rate in the quarter was 97%. So that's, that's almost a record high. And what the impact of that is, it's reducing the amount of leasing expenses that we have. So I think that will continue to trend at lower levels than we had originally expected because of the those factors. Operator00:17:14Any further questions, Mr. Ma? Terry MaSenior Equity Research Analyst at Barclays00:17:16No, that's it. Thank you. Peter JuhasCFO at AerCap00:17:19Great. Thank you. Operator00:17:21We will take our next question from Moshe Orenbuch with TD Cowen. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:17:27Great. Thanks. I apologize because I missed a a bit at the beginning, but the increase in your h your second half or full year kind of CapEx, does that already encompass your expectation for potentially higher sale leasebacks, or is that something that would be, you know, kind of additive to it? Peter JuhasCFO at AerCap00:17:48No. That that 3,000,000,000 that we mentioned, Moshe, is just, what we've contracted to date. So that's just from the order book. Okay. But any so any incremental things that we do would be additive to that number. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:18:02Got it. And, you know, I guess I mean, is you know, how how should we sort of think about the, you know, the the potential for that number to be higher than 3,000,000,000 versus, you know, kind of lower at this stage? Like, you know, the kind of the upside downside, if you will. Peter JuhasCFO at AerCap00:18:18Well, we're starting to see the OEMs pick up their pace of deliveries. I mean, you saw Boeing's results the other day. So I think that we are seeing production rates increase, albeit off a relatively low base. So I think as a starting point, that 6,000,000,000 for the year is a reasonable one for us just on in terms of our order book and what's currently contracted. And then things can be additive, from there. Peter JuhasCFO at AerCap00:18:45And and one of the benefits that you get if you're doing sale leasebacks or, in particular, engine deals is that allows for more rapid deployment of capital than, you know, say, if you were doing an OEM order where you're gonna get those a new order, you're gonna get those aircraft in the 20 thirties. So that is one of the benefits of those two. How much will it be this year? Hard to know, but, you know, we do have excess capital available, and and we would like to deploy it. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:19:12Got it. And maybe since you did bring up the engine business, is, you know, could you talk about how much you know, what's the possible amount of capital you could deploy in that, you know, over you know, I mean, you can kinda pick the period to to discuss and just, you know, talk about how, you know, important that could be for your account. Thanks. Peter JuhasCFO at AerCap00:19:34Well, we did $5,000,000,000 of engine orders last year, and that's and $10,000,000,000 since we did the GKS acquisition. So that gives you some idea of how of how large these can be. And as I said, in contrast to just an order for on, of aircraft from an order book, engines can deliver, in some cases, weeks after we've concluded that contract. Because if you think about it, these are spare engines that are immediately needed. That's why they are that's why, that's why we are doing those purchases so they can be immediately put into the spare engine pools for the OEMs. Peter JuhasCFO at AerCap00:20:12And so that can lead to rapid deployment of capital. So I it it can be quite large. Moshe OrenbuchMD & Senior Analyst at TD Cowen00:20:18Yeah. Thanks very much. Peter JuhasCFO at AerCap00:20:20Sure. Operator00:20:26We'll take our next question from Catherine O'Brien with Goldman Sachs. Catherine O'BrienVice President at Goldman Sachs00:20:32Hey. Good morning, everyone. Thanks for the time. Maybe just a follow-up the capital allocation question. You know, leverage is running well below target. Catherine O'BrienVice President at Goldman Sachs00:20:40Sounds like you have potentially new opportunities in the sale leaseback market. But how do you think about the relative attractiveness of of those sale leaseback opportunities versus maybe deploying more capital engines versus buying back your cap shares. Is is the lack of a re up on the buyback just that you still have $800,000,000 left? Just just would love to know kind of how you're thinking about ranking those opportunities. Peter JuhasCFO at AerCap00:21:04Yeah. That's the rationale, Katie, for in terms of the buyback at the moment. We have a little over $800,000,000 remaining, and so we'd like to utilize that first. So that's, that's why we're not announcing a new authorization at the moment. But as you note, our leverage ratio is low. Peter JuhasCFO at AerCap00:21:21It's 2.2 to one. A lot of that is because the we got the judgment in June on our insurance case, and those funds just came in at the June and early July. So that decreased the leverage ratio by about 20 basis points from 2.4 to 2.2. So when we think about the opportunities, for sure, buybacks are one of them, but we also think between some of these sale leaseback opportunities with airlines, some of the engine deals that that we're considering, I think all of those are are in the mix. You know, we'll look at each individually, but I think some combination of those things is the most likely deployment of excess capital this year. Peter JuhasCFO at AerCap00:22:01I think beyond that, you know, things like M and A, and new orders of aircraft are prob probably behind that at the moment. Catherine O'BrienVice President at Goldman Sachs00:22:11Okay. Great. Thanks. And maybe just for my follow-up, an 18% gain on sale is nearly double your historical average, so it's definitely not trying to poke at that. But there's been a lot of focus from investors across the aviation industry on what Boeing, you know, starting to get their act together in production could mean. Catherine O'BrienVice President at Goldman Sachs00:22:29And and that 18% is a little bit lower than the last couple of quarters. Is there any difference in the types or ages of assets you'd call it this quarter versus the last two or three? Just trying to see if there's any read through to demand for aircraft in secondary market or if this is just really, like, a normal fluctuation based on the types of assets you sold. Thanks. Peter JuhasCFO at AerCap00:22:48Sure. I really think it's a normal Aengus KellyCEO & Executive Director at AerCap00:22:53Katie Katie, I was just gonna say there that this is just a normal fluctuation. There's nothing more to see there. In terms of demand, it's still extremely strong. Look. The real evidence of that is the extension rates. Aengus KellyCEO & Executive Director at AerCap00:23:05You can see that we extended an all time high of 99% of the aircraft. That's what speaks to the strength in the market. You know, whether Boeing are making 34, 36, or 38 airplanes is not going to affect that demand. Catherine O'BrienVice President at Goldman Sachs00:23:21Okay. Great. I thought that would answer. Thank you. Operator00:23:28We will take our next question from from Ron Epstein with Bank of America. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:23:33Hey. Yeah. Good good good morning, guys. Maybe the first one for for Pete. You know, when we met up at the Air Show, you know, we had a pretty in-depth discussion with you on tariffs. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:23:44Given how things have sort of moved around, how how are you thinking about it now, and, you know, how is the tariff environment kind of impacting the business? Peter JuhasCFO at AerCap00:23:53Sure. Thanks, Ron. So we've seen a very limited impact of tariffs on our business so far. As you know, we've been strong advocates for the zero for zero tariff regime around the world. We were very glad to see that, to see the announcements between The US and The UK, and then The US and the EU that came over the weekend. Peter JuhasCFO at AerCap00:24:14I believe those remove a lot of the uncertainty around tariffs for aviation, so that's very helpful. And what we'd like to see, I think those are a good precedent for other deals that could be done around the world. So that's very helpful. Look. All that being said, all this has moved very quickly. Peter JuhasCFO at AerCap00:24:30But, if those can serve as a precedent and we get back to the zero for zero regime, I think that's best for aviation. It's helpful for the industry overall. And as I said so we've seen very minimal impact, and we hope that, that a lot of this is behind us now. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:24:48Got it. Got it. And then maybe just a a broader question. When you think about the return profile on an engine versus the return profile on an airframe, kind of at a high level, how do you guys think about that? I mean, what's what what's better for you all? An airframe or an engine? Aengus KellyCEO & Executive Director at AerCap00:25:08Ron, I wouldn't say one is better than the other. There's different aspects to them. The engine initially has a lower lease yield, because no one is paying for seats, lavatories, all that bio furnished equipment. However, over time, the aircraft depreciates faster than the engine because you have to depreciate those components that are specific to the first lessee. So, yeah, you get a higher lease rate at the start on aircraft, but you have a shallower depreciation curve over the long term on the engines. Aengus KellyCEO & Executive Director at AerCap00:25:42The key point of investing in anything in aviation is that you are buying the right assets for its remaining economic life, be that five years or twenty five years, and you're buying it at the right price, and you know the value of the assets when you buy it. And AerCap has demonstrated that in this industry, for twenty plus years that no one has that judgment better than this company. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:26:08Got it. Got it. And then maybe just one last one. You know, with demand for wide bodies clearly picking up, do do you think you need to, you know, how I say, you know, build out your backlog on on wide body orders, your your skyline more so? Aengus KellyCEO & Executive Director at AerCap00:26:25Definitely not. I will build my skyline when it makes money for my shareholders. I have no interest in buying any asset at all if it doesn't make adequate return for shareholders in AerCap. I still believe the cheapest wide bodies in the world are available on the New York Stock Exchange under the ticker Alpha Echo Romeo. Ron EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of America00:26:46Okay. Alright. Thanks, guys. Yeah. Have a good one. Yep. Operator00:26:53We will take our next question from Jamie Baker with JPMorgan. James BakerManaging Director & Investment Specialist at JP Morgan00:26:58Oh, thanks for the time. So, Gus, do you think we are at peak returns? And if not, when do we get there? And the reason we're asking is, you know, lease rates obviously haven't, you know, fully kept up with the cost of debt. And we're starting to wonder whether competing capital may be one of the reasons, you know, could less disciplined capital be chasing deals lower. James BakerManaging Director & Investment Specialist at JP Morgan00:27:24And look, we're just thinking out loud, you know, but, you know, some of the recent deals from United, you know, that was business away from AerCap. So we're we're just trying to we're just wondering what the read through might be. Aengus KellyCEO & Executive Director at AerCap00:27:38Sure, Jamie. I mean, look, can't speak to anyone else in the industry, but I'll I'll hand it over to Pete in a second. But you can see over a very long period of time, that we are AerCap is able to pass on, the cost of interest, and we've done that for this, this year as well, as you'll see. Interest expense is up 5%, and the lease revenue matches it. But, you know, look, from my perspective, I've always said to you that we target that return of 8% to 10% over the the treasury rate, and that's what this company has always returned in in every in all markets. Aengus KellyCEO & Executive Director at AerCap00:28:15That's what it's averaged in that in in in that zone exactly. So, you know, this business is extremely stable if you're good at it and you're in it for the long term. If you're one of the tourists, then, you know, yeah, you can have, you can put money to work. Whether you'll make any, whether you'll be successful at it or not is another matter. We've ex exhibited great restraint, when it comes to deploying capital. Aengus KellyCEO & Executive Director at AerCap00:28:37And from our perspective, how we allocate capital, you know, be it buying our own shares, which as I just said to Ron, I believe the cheapest aircraft are available every day on the New York Stock Exchange under under our ticker. And, you know, you won't see us. You're right. Yes. Of course, some deals trade away from us, but that's where we exercise discipline. Aengus KellyCEO & Executive Director at AerCap00:28:58And, you know, you've seen us for twenty years, through all markets exercise that discipline, and we'll continue to do that. James BakerManaging Director & Investment Specialist at JP Morgan00:29:05Okay. I appreciate that. And then maybe for Pete, you know, you're nicely below the, you know, 2.7 debt to equity target. You touched on that in your prepared remarks. So what what's more likely from here? James BakerManaging Director & Investment Specialist at JP Morgan00:29:16Running it back up to the target or maybe tightening that target and pushing for low a ratings? Thanks in advance. Peter JuhasCFO at AerCap00:29:26Yeah, Jamie. So I think that we will run it closer to the target. I'd expect it to get up to, you know, get closer to 2.7, whether that's two four, two five, somewhere in that ballpark. We're not intending to lower that target because, fundamentally, I think we're in a good place for the rating agencies now. Look. Peter JuhasCFO at AerCap00:29:47If we can get to A minus ratings, that would be great. But, ultimately, we're focused on what's the what is the most beneficial for our shareholders? How can we how can we return, create the highest returns for our shareholders? And so if you think about do we would we need to do that by lowering the leverage target over, you know, a long period and putting in place higher liquidity and other things like that. If there's a cost to that, obviously, I think where we are today, having come up from low, triple b minus ratings a couple years ago to where we are today, triple b plus across the board, That's a very strong performance. Peter JuhasCFO at AerCap00:30:25Sure. We'd like to go higher, but I think, fundamentally, there are a lot of opportunities for us to deploy capital, and and we'll look to do that. James BakerManaging Director & Investment Specialist at JP Morgan00:30:34Okay. Thanks to you both. Appreciate it. Peter JuhasCFO at AerCap00:30:37Sure. Operator00:30:40We will take our next question from Christine Lewag with Morgan Stanley. Kristine LiwagExecutive Director at Morgan Stanley00:30:46Hey. Good morning, everyone. And maybe, Gus, following up on your comments on AerCap's success for the past twenty years, I mean, we've seen all the numbers. And at this point, I mean, you are the largest aircraft lessor in the entire world, so congratulations on on that success. But, you know, I guess, when we look for growth, and Wall Street's always looking for the incremental growth, As you continue to deliver that strong return and the business continues to delever and we look at your forward order book and purchase and leasebacks, it it kinda decelerates starting 2027. Kristine LiwagExecutive Director at Morgan Stanley00:31:18I mean, how do we think about the size of AerCap in the next five years or even I mean, twenty years maybe a little too far out, but maybe the next three to five years. How big could you be? And are you getting to the point on return that you're you're too big that getting that outsized, you know, eight to 10% consistently over the treasury rate may be getting harder? And if that's the case, you know, where do you see incremental growth? Aengus KellyCEO & Executive Director at AerCap00:31:47Thanks, Christine. Well, look. From our perspective, this is a growing industry, aviation. Every twenty years, it doubles in size, and aircraft leasing is doubling within that itself. So it's continuing to grow every year. Aengus KellyCEO & Executive Director at AerCap00:32:02So I'm not worried about growth over the long term. It always comes. And indeed, if you just look at the amount of, CapEx we contracted in 2024, it was 6,000,000,000 plus that we managed to contract that wasn't there at the beginning of the year. So I'm not concerned about where the order book is. I'd be extraordinarily concerned if I was ordering airplanes that were going to have a negative effect to my shareholders, and we followed the gap model of growth at any price. Aengus KellyCEO & Executive Director at AerCap00:32:31That's something we'll never do. The objective of this company is to create value for our shareholders, and that means growing profitability. And that does not necessarily mean growing revenue. Of course, we have grown revenue tremendously. We've grown the balance sheet tremendously, but at the right times. Aengus KellyCEO & Executive Director at AerCap00:32:47And, I'm very confident that given the growth industry, AerCap's position in the industry, the relationships we have, the influence we have, that profitable growth opportunities will come our way. And in any event, as I said earlier on in the call twice, I certainly believe that the best value aircraft in the world are available under the ticker alpha echo Romeo down on the NYSE. Kristine LiwagExecutive Director at Morgan Stanley00:33:13Thanks. Thanks, Gus. And maybe, Pete, as a follow-up, look. We have seen a modest compression in the annualized net spread, over the past few years as net in as interest expense has been ticking up. Are there we know, with the balance sheet continuing to improve and leverage going down, are there different ways in which you could further reduce cost of interest? Kristine LiwagExecutive Director at Morgan Stanley00:33:33And when would you expect the annualized net spread to start expanding again? Peter JuhasCFO at AerCap00:33:40Yeah. Thanks, Christine. So the net spread will be expanding. I'd expect it to to be going up from here kind of on a sequential level quarterly and then into the next few years as well. Because what we're seeing is the portfolio yield, the lease rate factor is going up. Peter JuhasCFO at AerCap00:33:56That's gonna continue to climb, and and so overall, net spread is going to increase. I would remind you, though, that net spread obviously isn't the whole story. There is a lot beyond net spread. We're not managing to that. We're managing to EPS. Peter JuhasCFO at AerCap00:34:10But I do think the profitability will increase going forward. And maybe just to to touch for a second on Jamie's question before in terms of whether we've reached peak profitability for the industry, I don't think so, in part because even the deals that we're doing today, there is a lag in terms of seeing the financial results come through for those. So even if you did reach peak profitability in terms of the market being great today, you're not gonna see the financial results of those really flow through for the next few until the next few years. So I think we've got a good tailwind on that. We've got a good tailwind in terms of COVID leases rolling off. Peter JuhasCFO at AerCap00:34:48That will take time, but it is a tailwind. So I think there are a number of things that that are positive for us as a company, going to the next few years. Kristine LiwagExecutive Director at Morgan Stanley00:34:57Great. Thank you very much, guys. Peter JuhasCFO at AerCap00:35:00Sure. Operator00:35:03We will take our next question from Hillary Coconando with Deutsche Bank. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:35:09Hi. Thank you for taking my questions. I know you already wrote down your exposure to Azul late last year, but, you know, that was before they filed for bankruptcy. I was just wondering if there could be, you know, any other impact from bank Azul bankruptcy from your end? Peter JuhasCFO at AerCap00:35:28Thanks, Hillary. Yes. So so last year, you're right. We did take a provision against Azul. And as we look out today, so Azul is still in bankruptcy. Peter JuhasCFO at AerCap00:35:40They've been they've been making progress in their restructuring plan. We don't see any impact, compared to where we were. So I think, minimal impact this quarter from Azul, and we think we're fully provisioned there for how this restructuring should play out. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:35:57Okay. Thank you. Thank you for that. And then, you know, so far, we saw about, you know, 10 very young a three twenty neos getting retired in the market and, you know, parted out to harvest the engines just, you know, given the demand for spare engines. You know, I guess that speaks to the to the strength of the engine market. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:36:15So, you know, I just I just wanted to get your thoughts on on that phenomenon and, know, you if that's something that you expect to continue. Aengus KellyCEO & Executive Director at AerCap00:36:25Well, there's a couple of items there, actually. On those, the report of those neos being torn down, there are, two twenty aircraft that were in Egypt. They are being disassembled. The other aircraft, the a three twenty aircraft that you're speaking about, it's my understanding that it's only the engines that have been removed. The aircraft themselves are not being torn down, and that is in order for Pratt and Whitney to support the obligations it has to its customers. Aengus KellyCEO & Executive Director at AerCap00:36:56So I I that's not happening as as far as I'm aware on a 03/20 neos, the teardowns. It is only happening on the February that were in Egypt. Hillary CacanandoDirector - Equity Research at Deutsche Bank00:37:07Got it. Great. That's that's very helpful. Thank you. Operator00:37:12We will go back to Catherine O'Brien with Goldman Sachs. Catherine O'BrienVice President at Goldman Sachs00:37:17Oh, hey. Thanks for the extra time. Maybe just one more on the sale leaseback opportunity. Are these, you know, more opportune opportunistic from distressed airlines? Or is this just a function of more deliveries driving less competition per RFP? Catherine O'BrienVice President at Goldman Sachs00:37:31Just just was curious as I know that market has been pretty competitive and and not very attractive the last couple of years. Just wondering what's driving the shift. Thanks. Aengus KellyCEO & Executive Director at AerCap00:37:41Well, Catherine, first of all, we have to execute on them. Now we have done so over the years, and you can see that indeed last year with the amount of CapEx we put on the books that was not there at the beginning of the year. You know, it's highly unlikely we're, going to be competing in open bid sale leaseback transactions. It's where we bring other things to the table in terms of our installed fleet, our engine business, etcetera. There are different things we bring to the table that others don't. Aengus KellyCEO & Executive Director at AerCap00:38:09So I can't say that every deal is, uniquely bilateral, but we certainly wouldn't be entering into many sale leaseback transactions I don't think we have where there's just open bids where everybody's bidding against us. Catherine O'BrienVice President at Goldman Sachs00:38:23Okay. Great. Thanks. Operator00:38:26There are no further questions at this time. Mr. Kelly, at this time, I will turn the conference back to you for any additional or closing remarks. Aengus KellyCEO & Executive Director at AerCap00:38:36Thank you very much, everyone, for joining us for the call, and we look forward to speaking to you during the quarter. Enjoy the rest of the summer. Goodbye. Operator00:38:46This concludes today's call. Thank you for your participation. You may now disconnect.Read moreParticipantsAnalystsJoseph McginleyHead - IR at AerCapAengus KellyCEO & Executive Director at AerCapPeter JuhasCFO at AerCapTerry MaSenior Equity Research Analyst at BarclaysMoshe OrenbuchMD & Senior Analyst at TD CowenCatherine O'BrienVice President at Goldman SachsRon EpsteinSenior Research Analyst - Aerospace & Defense Electronics at Bank of AmericaJames BakerManaging Director & Investment Specialist at JP MorganKristine LiwagExecutive Director at Morgan StanleyHillary CacanandoDirector - Equity Research at Deutsche BankPowered by