Aercap NYSE: AER reported second-quarter adjusted earnings of $5.14 per share and raised its full-year 2026 adjusted earnings guidance to approximately $16.80 per share, excluding any additional gains on asset sales in the second half.
Chief Executive Officer Aengus Kelly said the aircraft lessor’s results reflected continued transaction activity, constrained aircraft and engine availability, and demand that remains above supply across the aviation market. The company generated $1.5 billion in operating cash flow during the quarter and reported an adjusted return on equity of 18%.
“This was another strong quarter for AerCap, as reflected in our financial results, disciplined capital deployment, and increased full-year guidance,” Kelly said.
Quarterly Results and Asset Sales
Chief Financial Officer Peter Juhas said second-quarter GAAP net income was $726 million, or $4.59 per share. After accounting for purchase accounting adjustments, Ukraine-related recoveries and related tax effects, adjusted net income totaled $811 million, or $5.14 per share.
Basic lease rents were $1.677 billion, while maintenance revenue totaled $177 million. Net maintenance contribution was $131 million, which Juhas said was above typical levels because of the timing of maintenance revenue, transition expenses and claims. He said the company expects net maintenance contribution to return to more normal levels in the second half of the year.
AerCap sold 38 owned assets during the quarter for $1.4 billion in sales revenue, producing a $223 million net gain on asset sales. The company reported an unlevered gain-on-sale margin of 20%, equivalent to 1.7 times book value on an equity basis. As of June 30, it held just over $400 million of assets for sale.
The company completed $2.8 billion of asset sales during the first half and now expects full-year asset sales of $4 billion to $5 billion. Juhas said demand from buyers remained strong, although he does not expect second-half sales to match the unusually high level recorded in the first half.
Kelly said gains on sale are not the primary factor in deciding whether to sell aircraft. Instead, the company assesses whether a sale improves the overall quality of its portfolio, including the average age, seating capacity and remaining lease term of its assets.
Capital Deployment, Liquidity and Buybacks
AerCap repurchased 4.9 million shares for $691 million in the second quarter. Through the first half, the company repurchased more than 6% of shares outstanding at the start of the year and returned more than $1.5 billion to shareholders through buybacks and dividends.
Since 2023, AerCap has bought back 93 million shares, or nearly 40% of its outstanding shares, for a total of $8 billion, according to Juhas.
At June 30, the company had approximately $22 billion in total liquidity sources, including nearly $1.7 billion in cash, $10 billion of revolvers, $3 billion of other committed facilities, and estimated asset sales and operating cash flow. Its sources-to-uses coverage ratio was 1.9 times, representing about $10 billion of excess cash coverage.
AerCap’s leverage ratio was 2.05 to 1 at quarter-end, roughly unchanged from the prior quarter. Secured debt represented 9% of total assets, while the average cost of debt was 4.2%.
Juhas said low leverage has largely reflected the cash generation of the business. He said AerCap expects leverage to move over time toward the mid-2-times range, but that process may take time. The company continues to view share repurchases as attractive while also evaluating larger investment opportunities.
Wide-Body Order and Market Outlook
AerCap ordered 15 Boeing 787 wide-body aircraft, with deliveries scheduled to begin in 2030 and continue through 2033. Kelly said the company believes the 787 offers favorable economics, broad global airline appeal and strong secondary-market liquidity.
The order expands AerCap’s position in the aircraft type. Kelly said AerCap has both the largest 787 fleet and the largest 787 order book among lessors.
Kelly said wide-body supply has been constrained by production shortages and delivery delays. Airlines have also kept older wide-body aircraft in service longer, resulting in more than 200 fewer retirements over the past five years than in a comparable pre-pandemic period, according to the company.
While wide-body production rates have begun recovering, Kelly said a large number of aging aircraft remain in service, supporting a long-term replacement cycle and demand for newer wide-body equipment.
On narrow-body aircraft, Kelly said demand remains strong, particularly for the Airbus A321neo. He said the Boeing 737 MAX 10 certification would be important for Boeing and could improve placement activity for the MAX 8 by giving airlines greater flexibility to operate a single aircraft family.
Lease Trends and Engine Operations
AerCap reported an 85% passenger-aircraft lease extension rate during the quarter. Juhas clarified that the figure excludes aircraft being sold: among aircraft either extended or placed with a new customer, 85% were extensions and 15% were re-leased.
Kelly said it is relatively uncommon for aircraft that are not extended to return and be re-leased, though it occurs occasionally. He said such assets are more often parted out.
The company expects certain aircraft returning from Spirit Airlines and an additional 10 aircraft to be placed later in 2026, which Juhas said should support lease yields and net spread. Lease yield was up about 30 basis points year over year, while net spread increased about 50 basis points.
Juhas also said more than half of the less favorable leases entered into during and shortly after the pandemic have rolled off. He expects the remaining leases to provide a gradual lift to portfolio yield and net spread over approximately the next five years.
Kelly said AerCap continues to evaluate potential opportunities for aerospace engines converted into gas-powered aeroderivative turbines for data centers. However, he said the company would need the right strategic partners, operational expertise and a clear path to returns that exceed those available in AerCap’s core leasing business before pursuing the market.
About Aercap (NYSE:AER)
AerCap Holdings N.V. NYSE: AER is a global aircraft leasing and aviation finance company that acquires, leases, sells and manages commercial aircraft and engines. Its core services include operating leases, finance leases, sale-and-leaseback transactions, aircraft trading and remarketing, and asset management for airline customers. The company also provides related commercial and technical support services designed to optimize fleet utilization and residual values over the life cycle of aircraft and engines.
Operating with a broad global footprint, AerCap serves airlines and other aviation customers across North America, Europe, Asia-Pacific, Latin America, the Middle East and Africa.
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