AerCap Holdings N.V. — FY2023 Form 20-F
Reporting period: Year ended December 31, 2023; filed February 23, 2024. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under U.S. GAAP and reported in U.S. dollars.
Business context
AerCap is a global aviation lessor with aircraft, engine, helicopter, cargo, asset-management and aviation-parts operations. At year-end it owned 2,308 flight-equipment assets, managed 761, and had 383 on order; owned-aircraft utilization was 98%. Management said air-travel demand continued to recover, with global passenger traffic at about 94% of 2019 levels in 2023. IATA expected passenger demand to return to pre-pandemic levels in 2024.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Total revenue and other income | $7.58 billion | $7.01 billion |
| Lease revenue | $6.86 billion | $6.53 billion |
| Net income (loss) attributable to AerCap | $3.14 billion | $(726) million |
| Diluted earnings (loss) per share | $13.78 | $(3.02) |
| Net cash provided by operating activities | $5.26 billion | $5.17 billion |
| Net cash used in investing activities | $3.18 billion | $2.16 billion |
| Net cash used in financing activities | $2.01 billion | $3.16 billion |
Reported net margin was approximately 41.5% in 2023, compared with approximately negative 10.3% in 2022; the comparison is heavily affected by Ukraine-related insurance recoveries and prior-year losses. FY2023 included $1.29 billion of net Ukraine-related recoveries, principally insurance settlements. FY2022 included $2.67 billion of net charges. Excluding those unusual items, the filing does not provide a single adjusted net-income figure in the summarized results.
Interest expense rose 13% to $1.81 billion; the reported average cost of debt increased to 3.5% from 3.1%. Interest paid, net of amounts capitalized, was $1.65 billion. The company reported $46.7 billion of debt principal ($46.48 billion carrying value) and total assets of $71.27 billion at year-end. Shareholders’ equity was $16.59 billion.
Year-end cash and cash equivalents were $1.63 billion, including $1.6 billion of unrestricted cash; restricted cash was $198 million. AerCap reported $11.0 billion of undrawn credit lines, $14 billion of available liquidity including other identified sources, and $19 billion including estimated operating cash flows for the next 12 months. Management said available sources covered approximately 1.4 times the following 12 months’ debt maturities and contracted capital requirements. Floating-rate debt was $10.3 billion, or 22% of debt; management estimated a 1% rate increase would reduce annual pretax income by about $17 million, subject to stated limitations.
Material changes versus FY2022
- Revenue increased 8%, with lease revenue up 5% and net gain on asset sales rising to $490 million from $229 million.
- Net income swung to $3.14 billion from a $726 million loss, principally reflecting the reversal from $2.67 billion of Ukraine-related charges in 2022 to $1.29 billion of recoveries in 2023.
- Operating cash flow was broadly stable, up to $5.26 billion from $5.17 billion.
- Interest expense increased $215 million, mainly because of higher average borrowing costs and derivative mark-to-market movements; lower average debt partly offset the increase.
- AerCap repurchased 44.3 million shares for approximately $2.6 billion and cancelled 34.8 million repurchased shares. GE sold its remaining AerCap shares by November 16, 2023.
Outlook, risks and unusual items
- Investment and funding: Year-end commitments included 338 aircraft, 37 engines and eight helicopters. Purchase obligations totaled $17.87 billion, including $7.22 billion scheduled for 2024. Management expects to fund commitments through operating cash flow, committed facilities, capital markets and other financing; asset sales may be needed if financing is unavailable. No company earnings guidance is provided in the supplied filing text.
- Ukraine claims: AerCap received $1.3 billion in 2023 settlements for 67 aircraft and ten spare engines lost in Russia. Further insurance claims remain uncertain; no receivable for potential additional recoveries was recognized at year-end. Litigation includes substantial claims against insurers and reinsurers.
- Interest rates and leases: Most operating-lease rents are fixed for multiple years, limiting the speed at which higher funding costs can be passed through. Inflation, refinancing costs and lessee credit quality may also affect results.
- Asset and customer exposure: China represented 16.8% of lease revenue and 15.7% of long-lived assets. Emerging-market airlines generated 53% of lease revenue. Airline defaults, restructurings, repossession obstacles and aircraft-value impairment are material risks.
- Manufacturers and fleet: Boeing delivery and quality issues and Pratt & Whitney geared-turbofan inspection requirements may delay deliveries or ground aircraft, affecting lessor economics and customers. Emissions rules may pressure older, less fuel-efficient assets.
- Cybersecurity: A January 2024 ransomware incident resulted in exfiltration of data representing less than 0.5% of company data by volume. AerCap reported no material operating disruption or financial loss to date; its review of the data exposure continued.
- Taxes: Ireland’s Pillar Two minimum-tax rules took effect in 2024 and may raise the group’s effective tax rate or cash taxes. AerCap also described uncertainty around other tax-rule changes.
- Capital allocation: In February 2024, the Board authorized up to $500 million of additional share repurchases through September 30, 2024. In January 2024, AerCap issued $1.5 billion of senior notes in two tranches.
Important facts for investors to verify
- How much of 2023 earnings and cash generation is repeatable after separating the $1.29 billion Ukraine-related recovery and asset-sale gains.
- Timing, collectability and legal outcomes of remaining Russian-aircraft insurance and reinsurance claims.
- Funding and refinancing plans for 2024 debt maturities and aircraft purchase commitments, including the availability and conditions on undrawn facilities.
- Lessee credit exposure, particularly China and emerging markets, and developments in the Azul restructuring and other customer concessions.
- Aircraft delivery and engine-inspection delays, their effects on customer leases and asset values, and sensitivity of impairment estimates to lease-rate and residual-value assumptions.
- Progress and costs of the cybersecurity investigation, including potential data exposure, and the effect of Pillar Two on future cash taxes.