AerCap Holdings N.V. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; filed March 2, 2023. 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 and asset manager. At year-end it had 1,572 owned aircraft, 187 managed aircraft and 435 new aircraft on order; its broader portfolio also included engines and helicopters. The GECAS acquisition closed November 1, 2021, so 2022 included a full year of GECAS operations, compared with only two months in 2021.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenues and other income | $7.014 billion | $5.224 billion |
| Lease revenue | $6.531 billion | $4.412 billion |
| Net income (loss) attributable to AerCap | $(726) million | $1.001 billion |
| Diluted earnings (loss) per share | $(3.02) | $6.71 |
| Net cash provided by operating activities | $5.171 billion | $3.694 billion |
| Net cash used in investing activities | $(2.160) billion | $(23.459) billion |
| Net cash used in / provided by financing activities | $(3.161) billion | $20.184 billion |
Net loss included a separately presented $2.666 billion pre-tax net charge related to the Ukraine conflict. Interest expense was $1.592 billion; the company reported an average cost of debt of 3.1%, down from 3.6% in 2021. The filing does not provide a single headline operating-margin measure.
At December 31, 2022, total assets were $69.727 billion, debt carrying value was $46.533 billion, and shareholders’ equity attributable to AerCap was $16.118 billion. The principal amount of debt, before specified discounts, premiums and issuance costs, was $46.8 billion. Cash and cash equivalents were $1.597 billion, with a further $160 million of restricted cash. Undrawn revolving and term-loan lines were $10.7 billion. Management reported $13.1 billion of available liquidity, or $18 billion including estimated operating cash flows for the next 12 months, and said existing sources covered approximately 1.4 times the next 12 months’ debt maturities and contracted capital requirements.
Owned aircraft utilization averaged 96% for the year. Basic lease rents were 98.2% fixed-rate and 1.8% floating-rate. Book value per ordinary share, excluding unvested restricted stock, was $66.85, compared with $69.17 at year-end 2021.
Material changes versus FY2021
- Revenue rose $1.790 billion, with basic lease rents up $2.091 billion, primarily reflecting the GECAS acquisition and other asset acquisitions. The comparison is affected by GECAS being consolidated for only two months in 2021.
- AerCap moved from $1.001 billion of attributable net income to a $726 million loss, principally due to the Ukraine-related charge. The charge reflected asset write-offs and impairments, partly offset by derecognized lease-related balances and letter-of-credit proceeds.
- Interest expense increased $361 million, or 29%, largely because average debt rose to $48.5 billion from $32.3 billion, mainly to finance GECAS; the average cost of debt nevertheless declined.
- Net gain on asset sales increased to $229 million from $89 million. Asset-sale proceeds were approximately $2.2 billion, versus $0.8 billion in 2021.
- Other income fell to $254 million from $723 million, chiefly because unsecured-claims proceeds declined to $99 million from $635 million.
- Operating cash flow increased to $5.171 billion. Investing cash outflow was much lower than in 2021, when it included $22.5 billion of net cash used to acquire GECAS; financing shifted from a large inflow in 2021 to a $3.161 billion outflow in 2022.
Outlook, risks and unusual items
- Ukraine and insurance: AerCap recovered 22 of 135 aircraft and three of 14 engines that had been on lease to Russian airlines; it concluded recovery of the remaining Russian assets was unlikely. It recorded no receivable for its approximately $3.5 billion Russian-asset claim under its contingent and possessed policy or claims under Russian airlines’ policies. Collection, timing and amount remain uncertain. Claims of approximately $100 million were filed in January 2023 for two aircraft remaining in Ukraine; no receivable was recognized at year-end.
- Demand and industry: Management reported continued recovery in air travel in 2022, with weakness in China. It cited IATA’s estimate that global passenger traffic in November 2022 was about 75% of 2019 levels and its expectation that most regions would reach or exceed pre-pandemic traffic by end-2023; forecasts remain exposed to renewed restrictions and other downside risks.
- Funding and commitments: AerCap had commitments for 435 aircraft, 47 engines and 18 helicopters, with $24.052 billion of purchase obligations shown through 2027. It expects to fund commitments through debt facilities, additional financing, operating cash flow and asset sales. Debt covenants, refinancing conditions and higher interest rates could constrain flexibility.
- Rates and inflation: Floating-rate debt was $9.3 billion, or 20% of principal debt. The company estimated that a 1 percentage-point rate increase would reduce annual pre-tax income by approximately $15 million, after current hedges and offsets. Most operating-lease rents are fixed, which limits near-term ability to pass through higher funding costs. LIBOR-linked debt and derivatives were expected to transition or mature by June 30, 2023.
- Concentration and other risks: China accounted for 16.9% of 2022 lease revenue and 16.9% of long-lived assets. Other disclosed risks include lessee credit and restructuring, aircraft residual values and impairments, manufacturer delivery delays, insurance availability, cyber risk, sanctions, and evolving environmental and tax rules.
- Subsequent events: In March 2023, the board authorized up to $500 million of share repurchases through September 30, 2023. The company also disclosed extension of a revolving credit facility to February 2027.
- Controls and audit: Management and the external auditor reported effective internal control over financial reporting as of December 31, 2022. KPMG identified impairment testing of operating-lease aircraft as a critical audit matter, citing sensitivity to follow-on lease assumptions, residual values, maintenance forecasts and discount rates.
Important facts for investors to verify
- Progress, timing and any recognized recoveries on the Russian and Ukrainian aircraft insurance claims and related litigation.
- Current liquidity and covenant headroom against the scheduled debt maturities and aircraft purchase commitments, including the assumptions behind the $18 billion sources-of-liquidity estimate.
- Subsequent aircraft deliveries, purchase-obligation timing, and any changes to the order book or cancellation and rescheduling rights.
- Whether air-travel recovery, particularly in China, supports lease collections, utilization and residual-value assumptions; review lessee credit exposures and receivables.
- Changes in funding costs, floating-rate exposure and hedge effectiveness following the LIBOR-to-SOFR transition.
- Execution and funding of the announced share-repurchase authorization, and the effects of GE share sales and its governance rights.