AerCap's (AER) CEO Aengus Kelly on Q4 2015 Results - Earnings Call Transcript

| About: AerCap Holdings (AER)

AerCap Holdings N.V. (NYSE:AER)

Q4 2015 Earnings Conference Call

February 23, 2016 09:00 ET

Executives

John Wikoff - Head, Investor Relations

Aengus Kelly - Chief Executive Officer

Keith Helming - Chief Financial Officer

Analysts

Gary Liebowitz - Wells Fargo

Helane Becker - Cowen & Company

Moshe Orenbuch - Credit Suisse

Catherine O’Brien - Deutsche Bank

Arren Cyganovich - D.A. Davidson

Jason Arnold - RBC Capital

Jamie Baker - JPMorgan

Vincent Caintic - Macquarie

Kristine Liwag - Bank of America

Justine Fisher - Goldman Sachs

Christopher Nolan - FBR & Company

Darryl Genovesi - UBS

Andrew Light - Citi

Reno Bianchi - Seaport Global

Operator

Welcome to today’s AerCap Holdings’ Fourth Quarter and Full Year Results Conference Call. [Operator Instructions] This call is being webcast, and an audio version of the call will be available on the company’s website. The call is also being recorded for replay purposes. I will now hand the call over to Mr. John Wikoff, Head of Investor Relations. Please go ahead, sir.

John Wikoff

Thank you, operator and hello everyone. Welcome to our 2015 fourth quarter results conference call. With me today is our Chief Executive Officer, Aengus Kelly and our Chief Financial Officer, Keith Helming.

Before we begin today’s call, I would like to remind you that some statements made during this conference call that are not historical facts maybe 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. AerCap 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 earning release dated February 23, 2016. A copy of the earnings release and conference call presentation are available on our website at aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay.

And now, I will turn the call over to Aengus Kelly.

Aengus Kelly

Thank you, John. Good morning, everybody and thank you for joining us for our 2015 fourth quarter and full year earnings call. We are delighted to be reporting industry leading earnings for 2015 as the aircraft leasing sector continues to deliver strong results despite the market’s macroeconomic concerns. Today, in addition to running through a financial and operational performance, I would like to discuss certain issues that the investment community has recently focused on. Our perspective on these topics is informed by our unique view of global demand for aircraft as a result of our daily activity in over 80 countries. Let’s begin by looking at our financial and operational performance.

Earlier today, we reported an extremely healthy adjusted net income of $282 million for the fourth quarter and a record $1.28 billion for the full year. We also reported an adjusted earnings per share of $1.43 for the fourth quarter and $6.26 for the full year. We finished the year with $44 billion of total assets on the balance sheet and an all-time high liquidity position of $9.2 billion. Our net spread, an important measure of our performance, was $874 million for the quarter. This represents a healthy annual net interest margin of 9.8%, which we achieved thanks to the attractive financing terms we are able to secure as a result of the capabilities of our platform, the quality of our portfolio and our track record.

Moving on to some operational trends, AerCap’s portfolio operated at a utilization rate 99.5% throughout 2015. We completed 405 aircraft transactions, more than one every 24 hours, including transactions involving 117 wide-body aircraft. These 405 transactions include the signing of 276 lease agreements, the purchase of 46 aircraft and the sale of 83 aircraft. The average remaining lease term of our portfolio is 5.9 years, which means that our revenue line is booked well into the future. We have already placed over 85% of our aircraft deliveries through 2018. This level of activity gives us unequaled insight into the market, including tremendous insights into end-user sentiment and general market conditions as well as specific aircraft values and lease rate.

With that in mind, I would like to provide our perspective around certain issues that the investment community is focused on. Firstly, the impact of lower oil prices; secondly, weakness in China and other emerging markets; thirdly, current trends in wide-body aircraft values; and fourthly, liquidity and access to credit. So, starting with the impact of lower oil prices on book values and demand for operating leases. I would like to say unequivocally that low oil prices are a significant positive for all airlines. For aircraft lessors, low oil is also a positive as it helps drive traffic, particularly as airlines improve their credit quality and expand the route networks. We would much rather see our customers healthy and growing and that is what we are observing. Going forward, as we think about the impact of lower oil prices, it is important to keep in mind the following. Even at lower oil prices, oil still represents one of the largest cost items for an airline. The useful life of an aircraft remains 25 years and the airlines need to take a long-term view in their fleet planning. We have not seen the spot price of oil to be a relevant factor in airlines long-term fleet planning. Airlines can only really hedge against oil price increases for 1 year at most. Buying fuel efficient aircraft is the only way that airlines can protect themselves from price increases over the life of these assets. Therefore, as oil prices have been falling, we have maintained high levels of placement, which if airlines were thinking differently about new technology aircraft would otherwise suffer. Regardless of the oil environment, airlines still need to look at fleet planning with the long-term in mind if they are to remain competitive and this is the key point.

Next, let me talk about the secondary of concern which is China and the emerging markets. Taking China first, there are three key facts that are driving lessor performance in China, which underscore why the market remains robust despite volatility in economic output. Firstly, 2015 saw an 11% increase in passenger traffic in China driven by inelastic demand from a new middle class in the country. 12% of our portfolio was in China. We monitor our clients closely and we are seeing increases in demand as clients continue to re-fleet with the long-term in mind. Secondly, in terms of the performance of Chinese airlines, 3 of the largest 10 airlines in the world are based in China and they remain very profitable. AerCap aims to serve those stable customers in its market and approximately 80% of the aircraft AerCap has placed in China are contracted to the three largest carriers. Thirdly, while GDP growth in China has been slowing, the Chinese economy continues to lift unprecedented numbers of people into the middle class. This leads to demand for air travel for people who have never flown before. China has a need for over 6,000 new aircraft by 2034 and we expect Chinese passenger growth to run at 8.6% annually over the next 5 years.

So in summary, we are not observing softness in China and we continue to see opportunities in the Chinese market. As far as the broad or emerging markets go, overall traffic remains healthy. There are areas of softness as you will always see. In particular, we are seeing softness in Russia and South America where the economies are feeling the impact of low oil and commodities prices. The market has expressed particular concern about Brazil, which represents less than 1% of our total revenue, and South America, as a whole, represents less than 5%. But we operate a global business and it is not unusual to see pockets of weakness in certain parts of the world. Several years ago, airlines in India and Mexico were facing very significant problems, but now they have turned the corner and are operating profitably. We do keep an unrelentingly close eye in clients in markets where we see risk. Because of our global platform, we are more often than not aware of problems before they emerge and this allows us to act early and be proactive in managing these exposures to redirect capacity to where it is needed.

For instance, we began taking aircraft out of Russia in late 2014 and have reduced our exposure there by 32 aircraft over the past 18 months. Europe and North America continue to remain strong with traffic growth of 5.1% and 4.3% respectively in 2015. The global used aircraft market, particularly in the U.S. and Europe has absorbed the volumes coming out of some of the emerging market countries. For instance, all of the aircraft we moved out of Russia were moved to areas of growth. Our ability to move these aircraft is a testament to the power of our global platform. Furthermore, overall global traffic growth remains healthy. Traffic growth in 2016 is projected to increase to 6.9% compared to 6.5% in 2015. So what is driving demand in these emerging markets, there was a strong demand for air travel, particularly in geographies where the population is growing and the middle class is expanding. In many of these countries, the distances are great and the infrastructure for over-line travel is poor. In these countries, the long-term secular trend of growing air travel far outstrips the effect of short-term economic volatility.

Now moving on to the third area of concern which is wide-body aircraft value, these are aircraft types that it AerCap moves around the world far more than anybody else. In fact, on average, AerCap leases or sells two wide-body aircraft every week and we have not observed unusual softness in demand for the vast majority of wide-body aircraft. This is evidenced by our sale and re-leasing activity. We continue to lease current technology models such as the Airbus A330 and the Boeing 777-300ER on attractive terms. We leased or sold 45 of these aircraft in 2015 and this is being driven by demand for long-haul travel.

Now there has been softness in the 777-200ER market mainly on the Trent powered 777-200, these are the Rolls-Royce engine. The bankruptcies of Malaysian Airlines and TransAero have put a loss of supply of this specific aircraft type into the markets over the past six months. But let’s look at some specific trends on Slide 8 where we compare our current 3-year outlook in wide-body placements with our position at the beginning of 2015. At the beginning of 2015, we have 100 wide-bodies expiring through the end of 2018. As of February 2016, we have only 38 remaining and the vast majority of these aircraft are in 2018. We normally place aircraft around 12 months to 18 months in advance. So our focus to-date has been primarily on the 2016 and 2017 deliveries and we have already placed 83% of these aircraft.

We are not seeing anywhere near the level of softness that would justify the strong negative perception around these aircraft types. As further evidenced, in the last 60 days alone, we have signed LOIs or lease contracts for 15 Boeing 777 aircraft with four different airlines. We cannot forget a critical fact of today’s aviation market, which is that the Boeing 777 remains by far the aircraft of choice for large scale, long-haul traffic. This fact underpins demand for the aircraft. In fact, the trends we are seeing enabled us to complete a $600 million sale in late September for ten aircraft portfolio consisting primarily of 777s and A330s. I know there has been a lot of speculation regarding 777 values, but to give you an idea based on actual evidence, rather than speculation. In the last six months, AerCap has sold six 777-200s at an average age of 13 years and the average price was approximately $50 million per share. The lease rates that we are currently seeing for this aircraft are supportive of these values.

Moving on to the fourth concern, which is liquidity as ongoing access to credit. All of us have watched the recent widespread downturn in equities and increased volatility in the capital markets. As of December 31, 2015, AerCap had a record $9.2 billion of available liquidity. This gives us enough liquidity to fund the business for 18 months without any access to funding. We continued to enjoy strong access to capital at an attractive cost of fund. To put this in context, this December, we have raised $1.9 billion of funding at a blended cost of 3.6% and we expect to close approximately $1 billion of additional long-term funding in the first half of 2016 at costs that are comparable to what we were able to achieve in 2015.

As you heard me say many times, funding is the lifeblood of this business. This is why we will always manage AerCap’s balance sheet in a conservative and prudent manner to ensure that we have strong liquidity and access to funding from globally diversified sources, including the secured banking markets, the unsecured and secured bond markets and export credit funding. Since the announcement of the ILFC acquisition n December 2014, we have raised over $20 billion from 75 banks and over 400 institutional investors around the globe. AerCap has an unrivaled track record of sourcing debt financing at all stages of the economic cycle. We have consistently demonstrated an ability to obtain funding and we continue to see strong demand around the world for the AerCap name.

Finally, I would like to say a few words about our share repurchase program. AerCap’s excellent financial and operational performance since the closing of the acquisition of ILFC has allowed us to significantly de-lever our balance sheets and our debt to equity ratio is now 2.9 to 1. This target has been achieved a full year ahead of schedule. We believe this gives us an appropriate capital structure to run the business. As a result, we are announcing a $400 million share repurchase program. Especially at AerCap’s current stock price, we have no doubt that returning capital to the shareholders is the best use of our excess capital. For the full year 2016, we expect to generate $800 million plus of excess capital that will be available for deployment. This is materially higher than the $500 million we talked about during our Investor Day last September, which was based on our original target of $1 billion of asset sales per annum. We did almost double that amount last year and this increase in the amount of excess capital available for deployment, primarily due to these higher asset sales. As we continue to generate excess capital through both operating income and asset sales, we will always look to deploy it in ways that creates the greatest long-term value for our shareholders. In summary, we continue to see strong demand for our products, strong demand for banks to finance the products and a robust credit environment for our customers.

With that, I will hand the call over to Keith for a detailed review of our financial performance.

Keith Helming

Thanks Gus. Good morning everyone. I will turn on Page 11 of the presentation. Our reported net income for the fourth quarter was $264.2 million and adjusted net income was $282.1 million. The adjustments made to derive adjusted net income include the elimination of costs relating to the mark to market of interest rate caps and swaps, transactions and integration expenses relating to the ILFC acquisition and maintenance rights expense. The most significant adjustment was $16.7 million for maintenance rights expense. For the full year 2015, reported net income was $1,178.7 billion. Adjusted net income for the full year was $1,275.8 billion.

Slide 12, reported basic earnings per share were $1.34 in fourth quarter and adjusted basic earnings per share were $1.43. For the full year 2015 reported basic earnings per share were $5.78 and adjusted basic earnings per share were $6.26, fully diluted earnings per share on an adjusted basis was $1.42 in fourth quarter and for the full year 2015 adjusted fully diluted earnings per share were $6.19. Slide 13, as you know, for purchase accounting, a portion of the acquired ILFC aircraft value was classified as an intangible asset. The amortization cost for this asset is recorded as lease expense instead of depreciation expense. Prior to the acquisition, this asset was part of the aircraft book value and subject to normal depreciation. Now, the amortization of the intangible asset is expensed more quickly over the remaining lease term instead of the remaining economic life of the aircraft. This difference in cost is effectively accelerate depreciation and was $19 million pretax and $16.7 million after tax in fourth quarter 2015.

Slide 14, total revenue in fourth quarter was $1.338 billion. Maintenance related revenue was $136.7 million. Net gain on the sale of assets was $43.4 million and other income was $1.9 million. Total revenue in fourth quarter increased 4% over the same period in 2014. For the full year 2015, total revenue was $5.2876 billion, up 47% over the prior year, reflecting the full year impact in 2015 of the ILFC acquisition.

Slide 15, net interest margin or net spread was $874.3 million in fourth quarter. The annualized margin as a percent to average lease assets was 9.8% and the average lease assets were $35.8 billion in the quarter. For the full year 2015, net spread was $3.554 billion, also up significantly over the prior year as a result of the ILFC acquisition. The annualized margin as a percent to average lease assets was also 9.8% and the average lease assets were $35.8 billion for the full year as well.

Slide 16, the impact from asset sales in fourth quarter was a pre-tax gain of $43.4 million. During fourth quarter, we sold or parted out 25 aircraft from our own aircraft portfolio. In addition, 11 aircraft were purchased during the fourth quarter. For the full year 2015, the impact from asset sales was a pre-tax gain of $183.3 million, which reflects a sales margin of 11%. For the full year, 68 aircraft from our own portfolio were sold and 46 aircraft were purchased.

Slide 17, leasing expenses were $126.3 million and SG&A was $103.6 million in fourth quarter. Leasing costs include $85 million relating to the expensing of the maintenance rights assets and $12.6 million relating to aircraft that terminated early or defaulted. During fourth quarter, we incurred $50.8 million of transaction – of restructuring-related expense and the full year tax rate for 2015 is 13.7%. The restructuring expenses relate primarily to our AeroTurbine business. These expenses are driven by the decision to reduce the size of the AeroTurbine business to that which is needed to support only the aircraft leasing business. Reducing the size of AeroTurbine will free up capital, which can be used for more accretive purposes. The fourth quarter charge is made up of a write-down of intangibles, severance-related expenses and a write-down of assets moved to held-for-sale.

Slide 18, AerCap’s unrestricted cash balance at the end of fourth quarter was $2.4 billion and our total cash balance, including restricted cash was $2.8 billion. Operating cash flows were $953.8 million in the fourth quarter. Our available liquidity sources over the next 12 months, including estimated operating cash flows, is $12.5 billion and contracted debt maturities and CapEx over the same period is $7.9 billion. This results in excess liquidity coverage of $4.6 billion and a ratio of sources to uses of 1.6 times. And of course, these sources do not include additional capital we expect to generate from financing of our new aircraft purchases.

Slide 19, the average cost of our debt in the fourth quarter was 3.7% at the end of the fourth quarter and debt-to-equity ratio was 2.9 to 1, which is down from 3.4 to 1 at year end 2014. At the end of fourth quarter 2015, the adjusted debt balance was $26.7 billion and the adjusted equity balance was $9.2 billion.

Moving to Slide 21, the financial performance for 2015 was significant and well above our previous guidance partly as a result of gains generated by the sale of aircraft and other one-off income items. 2015 core earnings, which exclude gains and the other one-off items was also exceptionally strong. From core earnings, the fully diluted earnings per share in 2015 were $5.24 on an adjusted basis.

With regard to the financial outlook for the coming years, we are still on track for the 7% to 9% core earnings growth per annum from 2015 through 2018. That was discussed at our Investor Day in September of last year. Those were the financial highlights for the fourth quarter. I would like to now open the call to Q&A. Operator can we have our first question?

Question-and-Answer Session

Operator

Thank you, sir. [Operator Instructions] We will now take our first question and that comes from Gary Liebowitz from Wells Fargo. Please go ahead.

Gary Liebowitz

Thank you, operator. Good morning, gentlemen.

Aengus Kelly

Good morning, Gary.

Gary Liebowitz

Gus, you mentioned that you exceeded your 2015 asset sales target by a wide margin. I was curious if you can characterize the asset sale market for 2016. Have you continued to sell planes in the first quarter or maybe talk about LOIs or perhaps even something bigger like an ABS transaction later down the road?

Aengus Kelly

The market remains robust, Gary. There is demand for aircraft across the board and we would expect to sell several hundred million in the first quarter. In regard to the ABS market, this is still a market where the cost of senior funding in that particular structure is materially higher than the cost of funding available to AerCap. As such, even though you may result in some asset sales, you do have to give up a lot in the cost or the debt because of what AerCap is able to raise our funding rates at.

Gary Liebowitz

Okay. And then one maybe for Keith, in your annual filing, you give more details about your annual impairment test review namely the number of aircraft that don’t substantially exceed a threshold of book value. I was wondering if you had any extra details on the results of your impairment test that you can share?

Keith Helming

Well, obviously you can see the results there. There has been no impairments even though we went through a thorough review of the entire portfolio. We will provide the same sort of information in our upcoming 20-F in March, but again I don’t think you will see much has changed in terms of the coverage.

Gary Liebowitz

Okay, thanks. I will get back into queue.

Operator

Thank you. We will now take our next question from Helane Becker from Cowen & Company. Please go ahead.

Helane Becker

Thank you very much, operator. Hi, gentlemen. Thank you for the time. So, my first question is on the comments, Gus that you made with respect to the wide-body aircraft that are coming off lease. I think these are your aircraft. But as you think about the market in general from a worldwide perspective, are there – do you see a lot of aircraft coming available that would put pressure on lease rates in the 2018 to 2020 timeframe, because that seems to be what’s causing investor concern more than 2016 to 2018?

Aengus Kelly

Well, what we can also say is that quite a number of the airplanes we have placed and we will explain this later on in the one-on-one call with the analysts is that a number of the aircraft we placed in the 777s have been beyond the 2018 timeframe and in the 2018 2020. You have to remember, Helane that a lot of the noise around wide-body demand comes from participants in the market who have absolutely no experience of moving wide-bodies. Nobody else in the world moves wide-bodies like we do. And so you can see the results there at the quantum that we have moved almost two a week for the last 12 months.

Helane Becker

Right, okay. And then just a follow-up question on forward order book, have you given any thought to – and probably the answer is no, but to selling any of your delivery positions?

Aengus Kelly

Selling future delivery positions requires the cooperation of the manufacturer and that could be a very challenging thing to do as the manufacturers have the view that it’s sold to AerCap. Now, certainly, we have sold airplanes in the past that they delivered if we believe we get the right price and the right return.

Helane Becker

Okay. Well, that was very helpful. Thank you.

Aengus Kelly

My pleasure.

Operator

Thank you. We will now take the next question from Moshe Orenbuch from Credit Suisse. Please go ahead.

Moshe Orenbuch

Great, thanks. I guess I was sort of wondering if you could talk a little bit about the guidance that you have got out there given that you finished off ‘15 on a pretty strong note and starting out with the buyback in the first half of the year of probably about 5% of the stock kind of gives you at least a couple of points kind of tailwind on that. Can you maybe think – is there a way to discuss the elements of that and how you see the achievability of it here and kind of over the ‘16, ‘17 timeframe?

Aengus Kelly

Well, first of all, as I mentioned in my prepared remarks, the 7% to 9% EPS growth per annum up to 2018 is still very much on track. So in fact, depending on how much of the excess capital we use, we potentially could exceed that. We have sold a lot of aircraft obviously in the last couple of years and in particular, 2015. So that combined with a more limited amount of CapEx in 2016, the assets – the leased assets will remain relatively flat year-over-year – excuse me in ‘17 and ‘18, there is heavier CapEx, so you are going to see our lease assets grow there. We will provide more detail on 2016 specifics in terms of the guidance, but if you look at 3 year period, certainly ‘17 and ‘18 are going to have the higher growth rates relative to the 3-year period.

Moshe Orenbuch

Got it. Just kind of following-up, Gus you had kind of alluded to the idea that you would have an extra roughly $300 million of cash flow expected this year and we talk about – could you talk a little bit about the things that in the current environment would be other areas that might be good sources to deploy that?

Aengus Kelly

Well, when it comes to the allocation of capital, that’s always the forefront of our mind, of course. And so given where the stock price is at the moment, we believe that excess capital is best used to return to the shareholders by acquiring our own stock. And of course, we always look at what other alternatives there are. Over the course of the last 2 years, it is being focused on de-leveraging the balance sheet given that we levered up quite significantly in order to execute the ILFC transaction. At this point, though we feel that the debt equity ratio is at the right point and to run the business at. And so any additional capital will either be returned to the shareholders or used to reinvest in the business And as I said, given where the stock price is now, we feel that the right thing to do is to acquire our own stock.

Moshe Orenbuch

Great. Thank you.

Aengus Kelly

You are welcome.

Operator

Thank you. We will now take our next question from Michael Linenberg from Deutsche Bank. Please go ahead.

Catherine O’Brien

Good morning gentlemen. This is actually Catherine O’Brien filling in for Mike. We have recently heard some commentary that the spread between current generation aircraft and next generation aircraft lease terms are not as wide as one would have once expected given the current fuel price environment, I know you addressed this a bit in your prepared remarks, but are you also seeing that as you place NEOs and MAXes in your order book?

Aengus Kelly

Well, the spread is there, but you have to remember that the real driver of some of the movements in lease rates is the underlying treasury rates. And as the treasury rates move around just say on an A320 or 737, each 1% move in the treasury yield is worth about $30,000 in the lease rates. So there has been obviously a significant drop off in the 10-year treasury yield over the course of the last few months, which has impacted the lease rates of both the new and the old. But the premium is very much still there. And if you looked at the slide that we have in the deck that shows the pace at which we are leasing new technology assets, it is unchanged. And over the course of the last several weeks, we tested this ourselves with a number of the CEOs of very large global carriers in Asia, Europe and the U.S. And the resounding answer is look, in the near-term, it makes sense to extend some older less fuel efficient assets such as 747s or A340s. But in the longer term, over the 18 – 12 year to 18 year horizon of long-term fleet plan looks at, you still need the most fuel efficient assets available in order to hedge yourself if you are an airline from the largest and most volatile item in your cost structure. So the behavior hasn’t changed.

Catherine O’Brien

Okay, great. And then just any updates to your watch list from last quarter, are you still really just monitoring the country’s you mentioned such as Brazil and Russia?

Aengus Kelly

It’s primarily focused around Brazil, South America and Russia and the neighboring countries. We haven’t seen a spread beyond that. There is always one or two guys or pockets of weakness here and there, but there is nothing unusual in the watch list at the moment.

Catherine O’Brien

Okay, great. Thanks for the time.

Aengus Kelly

You are welcome.

Operator

Our next question comes from Arren Cyganovich from D.A. Davidson. Please go ahead.

Arren Cyganovich

Thanks. I was wondering if you could talk a little bit more details about the AeroTurbine charge, what specifically drove you to shrink the business there and why you don’t add that back into your adjusted earnings as a one-time charge?

Keith Helming

Yes. Again, as I mentioned – again in my prepared remarks, we took a look at obviously the amount of capital that we have tied up in AeroTurbine and we decided that downsizing the business to a level that really just supports the AerCap leasing business was most appropriate path forward. So as a result, we took these charges, a large part had to do with the intangibles that were part of the business. Obviously, a number of the assets were moved to held for sale and we did a number of reduction in force initiatives already, so that drove some severance cost as well. So going forward, again, we will have the AeroTurbine business, but again it will be there primarily supporting just the AerCap leasing business itself.

Arren Cyganovich

Although it is just a one-time charge though, correct?

Keith Helming

It is. And again, as I think we might have mentioned before, AeroTurbine didn’t generate a significant amount of earnings for the overall AerCap business. So again, you won’t see a dramatic impact on the future results.

Arren Cyganovich

Okay. And then on the financing side of the business, obviously we saw yields on unsecured gap cap out significantly and now they have come back in, maybe you can just talk a little bit about what your options are whenever you do have pockets of weakness in the unsecured bond market, what other options are available to you and how do you look to maneuver through those periods wherein you have some stress on that side of the business?

Keith Helming

Well, as you see by our results, we are sitting on record levels of liquidity. And that’s not just coincidental. I mean obviously, we have CapEx requirements coming up in the coming years. So we have done a lot of work in preparation for that. We access capital obviously both from the unsecured bond market as well as from our bank partners’ unsecured financing. So we don’t need to go to the unsecured bond market anytime soon. That’s the position that we would like. I mean obviously, if there is an opportunity, we will be opportunistic and issue if we can. But again, we don’t need to go to the bond market until the latter part of this year or even if need be, we can push it off to next year.

Aengus Kelly

I think it’s also worth noting that over the last couple of months, we raised almost $2 billion at 3.6%. And as we have often said to you, the funding is the life blood of the business and it’s vital that you are not over-reliant on one particular source of capital. You must have access to every source of capital around the globe. That means everywhere from Taiwanese banking syndicates to the unsecured market here in the U.S. and all in between. And you must continue to access those markets through the good times and the more volatile times. And based on our experience, we have never had a large shareholder behind us. We have known that you must always carry very significant amount of liquidity to ensure that this business will not just survive in periods of volatility, but it will thrive like it has done in prior periods of volatility.

Arren Cyganovich

Thank you.

Operator

[Operator Instructions] We will now take our next question from Jason Arnold from RBC Capital. Please go ahead.

Jason Arnold

Hi guys, great to see the sizable buyback. I was just curious if there are any constraints around your ability to use that right away blackout period wise. I would assume you would probably be pretty aggressive putting money to work here at current levels?

Aengus Kelly

We don’t have any restraints in terms of using the cash. Obviously, the only limitations we have is the limitation that we can – the amount that we can buy on a daily basis just based on the last several months worth of trading activity.

Jason Arnold

Okay, great. Thank you. And then also thanks for the color on the markets pure factors, just a follow-up on oil, it seems like many I speak with continue to be narrowly focused on the thesis that low oil means high demand for old aircraft, which I think this has affected old aircraft of high maintenance expenses and limited useful lives, so just curious if you can kind of frame a little bit of extra color around that as well?

Keith Helming

Sure. I mean, there are really three categories of aircraft at the moment in the world. There is a new technology assets which are the 320neos, the MAX, the 787 and the A350, which aren’t really in any significant production at the moment. Then you have current technology assets which is the 777, the 330, the 320 and 737 and all of those are in high demand. Then you have the less fuel-efficient assets, older tech, which would be 747, 767, first-generation A330, A320 is pre-1995. Now what is happening with those older assets is that airlines are operating them for longer than either us or they had envisaged. However, there is a hard stop to it. And as you point out, that is driven by the maintenance condition of the asset. We had assumed, for example, when we bought the ILFC fleet that quite a number of those older tech assets would be scrapped at the end of their existing leases.

Now, what we are observing is the airlines are coming back to us and saying we would like to extend those assets for a period of time. However, the extension period was capped out at the engine overhaul date or the cabin reconfiguration date. To reconfigure the cabin of a 747 would be $20 million. So, airlines will not spend that on that type of asset, because they were afraid that fuel would go back up and the asset would be as highly and fuel efficient asset and very costly assets to operate. Same is true on engine overhauls, but they are quite willing to take a view for the next 2 or 3 years that they believe oil will stay at levels where it still makes sense to operate these airplanes. So that’s the behavior we are seeing. We are seeing an additional lease of life, if you will, for 2 or 3 years on these asset types, but there is a hard stop due to the engine overhaul costs or the maintenance costs.

Jason Arnold

Excellent. Thanks so much for the color, guys.

Aengus Kelly

You’re welcome.

Operator

We will now take our next question from Jamie Baker from JPMorgan. Please go ahead.

Jamie Baker

Hey, good morning gentlemen. As you have pointed out several times and has been asked on the call a few times, the topic as to whether lower fuel and perpetuity causes airline to retain current generation kit for longer is a pretty popular topic and of course, Delta has made it look easy in terms of achieving high dispatch reliability with significantly older aircraft. So, two questions. Based on your knowledge of the world’s airlines, how many actually today have the technical wherewithal to rival what Delta has managed? And second, have you seen any evidence of airlines investing in that capability as to me that would be the leading indicator that everybody seems to be looking for?

Aengus Kelly

Look, I think it’s important to note that very, very few airlines in the world have maintenance capabilities to manage their own fleet. You are looking at a handful of carriers. Furthermore, in the end, these airplanes are going to be discontinued from production or already have been discontinued. And the cost of operating them longer term will be very significant as you try to find replacement engine that aren’t in the market, you may have to fully overhaul engines that are out of production at extremely high costs where there is no prospect of really getting the full life back out of those engines. So in summary, the vast majority of airlines out there do not want to operate the older aircraft, when I mean the older aircraft, I mean, the older technology that I referenced in prior answer 74, 76s or anything beyond the upcoming engine overhaul days or cabin reconfiguration days. For two reasons, one, they don’t believe it’s worth the cost and two, the maintenance capabilities required to do it, they just don’t have those. So we don’t see any drop off in demand for 320, 737s in the contrary. And as you can see, from our forward placement activity, that hasn’t slowed down either.

Jamie Baker

That’s exactly the point I was hoping you would make. I appreciate you would be willing – being willing to continue to beating the dead horse. So, thank you for that. Take care.

Aengus Kelly

You’re welcome.

Operator

Thank you. We will now take our next question from Vincent Caintic from Macquarie. Please go ahead.

Vincent Caintic

Great, thanks so much guys. Two questions. First, I appreciate the slide deck #10 about thought the $802 billion of excess cash is very useful. With the buyback program you have in place, what does that imply about say, your ratings for the investment grade rating or your confidence in getting that rating?

Aengus Kelly

Yes. In terms of our use of excess capital and our rating, I mean, we have been very clear as to the metrics and – that we use to manage and run the business. And from our point of view, things like the capital structure that we maintained 2.9 or less than 3 to 1, all of those things lead to, in our view, an investment grade rating. With regard to use of excess capital, we are not going to use any capital unless it’s truly excess in the bank. So, you won’t be seeing us rise above 3 to 1. We will use fixed cash once we generate it and it’s available to deploy and we will. We don’t see one offsetting or driving the other.

Vincent Caintic

Got it. Thanks. And the second question I had, had to do with AeroTurbine and Arren asked a lot of the questions that I had, but some of the investor questions I have had is that the – say the engine impairments might be translatable to the rest of your portfolio and I was just wondering if you can lay that fear or just discuss that topic? Thanks.

Keith Helming

Yes, it doesn’t have any direct correlation to our own portfolio. Again, these are leases that can continue to be leased long-term. But again, they are not engines that we need to support the AerCap portfolio. So, we are going to sell them on a very quick basis. So maybe move to held-for-sale and as a result, there have been some charges taken on that.

Vincent Caintic

Got it. It makes sense. I am inclined to add back that $0.21 impairment then. Thanks very much, guys.

Aengus Kelly

You’re welcome.

Operator

Thank you. We will now take the next question from Kristine Liwag from Bank of America. Please go ahead.

Kristine Liwag

Hi, good morning everyone. For the new aircraft deliveries that you have contracted through 2018, can you discuss how many are under firm contract versus letters of intent? And when do you expect the letters of intent to firm up?

Aengus Kelly

The vast majority, Kristine, are all under firm contract and on average, over 90% of our LOIs convert into contracts.

Kristine Liwag

Great. And another fear I think we hear from investors often is that the question of whether or not the airlines can cancel some of these contracts. Can you discuss perhaps the penalty payments that are usually embedded in these contracts that you have done for your forward order book?

Aengus Kelly

Yes, it’s called bankruptcy. So, that’s a penalty payment wiping out their equity.

Kristine Liwag

Great. And as a follow-on, of the 15% of new deliveries that you have yet to place through 2018, can you discuss which aircraft types these are and then when you expect them to firm up?

Aengus Kelly

There are a few NEOs there that we are holding back. There were several campaigns ongoing at the moment, which those aircraft are in competition for and there was a couple of 787s. We don’t envisage any difficulty placing those airplanes.

Kristine Liwag

Great, thank you.

Aengus Kelly

You’re welcome.

Operator

Thank you. We will now take the next question from Justine Fisher from Goldman Sachs. Please go ahead.

Justine Fisher

Hi, how are you doing? The first question I have is on wide-bodies. When we talk to investors about their concerns on wide-bodies, they talk about the lease rate risk, the re-leasing risk and then obviously, the impairment risk. And I think what people are missing in the wide-body market is that they are saying, alright, if we look over the last 6 months, wide-body lease rates are down x percent and wide-body values are down y percent. But what we don’t know is the lease rates on your particular wide-bodies and the base that we are starting from and where you might roll those over. So, those are not – these might be booked at rates that were much lower than what we saw 6 months ago. And so the delta maybe way less than what you are seeing in the market and the same is true for where they are booking your balance sheet. I can look 9 months ago and tell you what the delta has been and the value for 777, but if I – we don’t know where they are written on your books. So I know you can’t tell us where your aircraft are leasing. I know you can’t tell us where they are booked. Is there anything you can tell us to allay our concerns about where we see the market versus what is actually the case for you guys? I mean, maybe the gains on the 777-200s that you booked are a good example of the fact that you wrote the ILFC fleet down so significantly that we may not see at all for AerCap what we observe in the market. So, is there anyway you can give us any data on these two issues to make people a little bit more comfortable?

Aengus Kelly

I do think, Justine it’s worth noting that the market data is based in observation or assumptions. None of the participants who have been giving data on the market have actually been active in any significant way in the market at all in the wide-body. So, we gave you specific information on 6 777-200ERs that we have sold to several different counterparties over the course of the last 6 months. That’s pretty much one every 4 weeks. And the price is $50 million. In terms of lease rates that we are leasing the airplanes at, if we had leased all these airplanes that we have done last year at levels that were significantly below where they have been previously, we would be looking at impairment charges. Again, that is not the case as you have seen in our results today. So the wide-body market overall, if you look at our activity of moving two of these a week. That’s – we are the most active participant in the market. We do see more data than anyone else in the market and we would say that we have shared as much as we can in terms of the prices we sold these assets at and the level of leasing activity that’s there.

Justine Fisher

Okay. Thanks. And then the second question I had was just on the balance sheet, so I am looking at the maturities this year and you have got the $1.3 billion of those old secured ILFC bonds and then $1.6 billion of unsecured. And I know that you guys had mentioned earlier that you have done credit facilities. There is a lot of liquid at the company. So if you need to draw down on those instead of going to the unsecured markets, you could. But the first question is, if – I don’t know where you can do a deal on unsecured [ph] market, is it 7% based on where your current bonds are trading, but the coupons of the debt rolling off are still kind of at a higher than where you might be able to do new debt. So what would make a new deal, so what would make the company not go unsecured. And then the second part of that question is I know that agencies look at unencumbered assets. And so obviously the secured rate is there. We saw ILFC use it during the financial crisis, I don’t think anyone doubts that it’s available, but does it affect the ratings if you guys go to secured route even if it’s temporarily, because then that changes your unencumbered asset structure and then we kind of go down that road of maybe delaying an IG rating, have you spoken to agencies about that?

Aengus Kelly

Just before Keith answers, I want to say current bonds trading in the 4s, I don’t know where you got the 7s from.

Justine Fisher

No, that’s what I am saying, I mean even if there is a crazy discount to where your existing bonds are trading, it’s still at or below the coupons that are rolling off?

Keith Helming

With regard to the use of secured financing, again we have imposed ourselves a limit as to how much of the secured financing we will access. So we try to limit the amount of secured financing to 30% or low-30% of total assets. And having that sort of constraint still allows us to access several billions of dollars a year per annum of secured financing. So again, we are not using the secured financing to the extreme and to the detriment of the investment grade rating. And the other comment or other question you have was relating to the yield and the cost of the old ILFC bonds. If you recall, in purchase accounting, we did have to mark or we did mark to market all those bonds to what effectively the rate was that we at AerCap today could effectively borrow at.

Justine Fisher

Okay. So there is nothing that’s discouraging the company from going to the unsecured market at present?

Keith Helming

Absolutely not.

Justine Fisher

Okay. Good to hear.

Keith Helming

The way we are positioned is we have plenty of liquidity and we will be opportunistic accessing capital once again when those things occur.

Justine Fisher

Okay. That was the question I was getting at, because I think people are concerned about the secured issuance, but if there is nothing stopping the company from going unsecured that was what I wanted to confirm. So thanks.

Operator

Thank you. We will now take the next question from Christopher Nolan from FBR & Company. Please go ahead.

Christopher Nolan

Would you consider selling AeroTurbine?

Aengus Kelly

There are certain parts of AeroTurbine that are very important for us to keep, so what we have looked at all the alternatives of the company and we do need a portion of the AeroTurbine platform to support AerCap and that’s primarily focused around the aircraft maintenance teardown and the engine leasing and trading aspects of the business.

Christopher Nolan

Okay. And were the write-downs on the AeroTurbine engines related to Rolls-Royce engines related to the problems Rolls was having these days?

Aengus Kelly

No, they were not. They were a mix of engines really and that aren’t that strategic to the AerCap portfolio any longer.

Christopher Nolan

Also, Aviation Week has a brief article talking about how Boeing sometime this year may make a go decision on a 757 replacement, are you in this Boeing and you guys are in discussions in terms of you helping define that aircraft?

Aengus Kelly

We are always talking to the manufacturers about what we see in terms of demand for in the market, except in different types of aircraft that we believe we will be successful or not successful and we share our views with the manufacturers in that regard.

Christopher Nolan

Great. Thank you for taking my questions.

Aengus Kelly

You are welcome.

Operator

Our next question comes from Darryl Genovesi from UBS. Please go ahead. Your line is open.

Darryl Genovesi

Hi guys. Thanks for the time. Maybe just a quick housekeeping question to start, did you guys and I joined a couple of minutes late, but did you disclose the net P&L impact of the 17 aircraft that you’re taking back early?

Aengus Kelly

We didn’t, but there is a significant amount of maintenance revenues that you see in the quarter and that helped drive some of the excess.

Darryl Genovesi

Okay. And would you say that everything basically came through in Q4 is there sort of still more to go from a remarketing perspective?

Keith Helming

Most of that came through in Q4. So there was probably around $50 million to $60 million of the maintenance revenue that was driven by terminations/defaults, if you will. So most of – and the costs have been incurred as well. So you saw most of activity here in the fourth quarter.

Darryl Genovesi

Thanks for that. And then, Gus message received on lower fuel helping probably boost traffic growth here, but at the same time, your decision to take AeroTurbine to 100% captive input stream would seem to corroborate some of the concerns around lower replacement demand as a result of lower fuel. So when you net those two things out, I guess where do you kind of come out in terms of the overall supply demand balance for commercial airplanes or their current production rates and out over the next couple of years when the manufacturers are planning on going higher still?

Aengus Kelly

Well, look at the moment you saw we ran at 99.5% utilization for 2015. And you see that the vast – over 80% of our deliveries going through 2018 are already placed on the new side that’s almost on 12-year leases. So at the moment, we continue to place airplanes in the face of a very robust market on a global basis. Now as we look forward, what will the manufacturers do, you have to remember that we do have a rational duopoly from the OEMs. Now, they can say whatever they like about future deliveries. What really important is what they actually deliver. And the manufacturers have to overbook their order book. They must do it. No OEM knows which start-up airline will be around in 5 years and no credit analyst could possibly work it out either. The only way you can hedge against it when you have a massive fixed cost production lines like Boeing and Airbus is to overbook. So if you go back 5 years, they have no idea that Russia would be the country that would get into trouble or that Brazil will be the country that will get into trouble. All they knew is that someone would get into trouble and so they needed to over order to protect themselves from inevitable volatility in certain parts of the world. So I don’t pay a huge amount of attention to the OEMs announcements about what they will do in 3 years time. I am far more interested in what they are doing based on the current market. In essence, they have two choices in how to regulate supply. One is that they can control it themselves. Two, is that they will let the market control it. If the market is to control it, if an airline has ordered too many airplanes and they ask Boeing and Airbus for help and they say no and they forced them to take the assets and then the airlines will either go into bankruptcy itself and cancel its order or will damage a competitor who will cancel its order and go into bankruptcy itself. That’s one way the market will automatically do it or secondly, they can do it the way they have always done it in the past which is that they always oversell to airlines knowing that many times the airlines will have to come back and discuss deferrals, which can result in price increases, etcetera. And in that regard, that’s how they will give airlines as many aircraft as they possibly can, but not put the airline out of business. And so that’s how we look at the behavior of the OEMs much more based on the near-term traffic demand that they see, rather than what our order books indicate in 2020.

Darryl Genovesi

Great. Thanks very much.

Aengus Kelly

You are welcome.

Operator

[Operator Instructions] Our next question comes from Andrew Light from Citi. Please go ahead.

Andrew Light

Hi, good morning. Just on wide-bodies, it would seem that that’s the most risky end of the market, do you think lessors in general you have a time will reduce their appetite for wide-body leasing instead focus on narrow-body leasing, I am not necessarily referring to AerCap, but just leasing in general. And I know you are seeing as much slide on leaseback competition in wide-bodies from these new entrant lessors as in the narrow-body side?

Keith Helming

I mean look, the wide-body market is going to be a bigger and bigger component of our total global aircraft production. A lot of that will be driven by China. China traffic has focused initially on domestic growth and near international work, but as these restrictions are way throughout the world for Chinese citizens over the course of next 10, 15 years, you will see a very big surge in wide-body demand for aircraft. So, we don’t see a structural change in the demand for the wide-body airplanes. Now, what you do need to do when you are involved in the wide-body market is you do want to have a big platform yourself or have a partner with you who is able to move these aircraft. So, when you look at AerCap of course, I referenced, we are moving two wide-bodies a week. You would not be able to do that no matter how capable you were, there wasn’t demand for the product out there.

Andrew Light

Okay, thanks. I was thinking, for example, you would see it in the freighter market, there was a lot of interest 4, 5 years ago from leasing companies and after vehicle impairments you see hardly an interest or appetite for that business as well. And I was just wondering if perhaps, the wide-body passenger segment could go that way given it’s not as liquid as the narrow-body side?

Aengus Kelly

Well, the freight market has got some structural differences to be fair. First of all, you have a very small group of operators there, which always makes life difficult. And then of that small group of operators, there are three giants and who will always own everything themselves in UPS, FedEx and Lufthansa, Deutsche Post, DHL. And also, the freight market has been hit hard by the capability of the new technology wide-body. The 777-300ER has so much capability that’s a quasi freighter. About a tremendous amount of freight is actually carried in the belly of that airplane, which has killed off some of the demand for full freighters. The freight market is a bit different. I certainly wouldn’t compare it in anyway to the long-term structural demand we see for pax wide-bodies.

Andrew Light

Okay. Just a final question on your CapEx, I had penciled it and I think from your Investor Day last year of the order of $5 billion to $6 billion a year, which is roughly $1 billion a year running higher than your forward order commitments the next few years. Do I take it from your comments about disposals and excess capital that really it’s just a question you would be having very little additional CapEx beyond what you have committed to with the OEMs?

Keith Helming

Well, I mean, I think as Gus pointed before and I think as we pointed out many times before, based on obviously the current market conditions, the share price where it’s at today and the marketplace itself, excess capital will be used to effectively buyback shares, if you will. We do have a reasonable amount of CapEx in the coming years. We have just under $4 billion CapEx in 2016 and then $5 billion plus in ‘17 and ‘18. So, we do have a portfolio that will continue to grow with the committed CapEx that we have already in place today.

Aengus Kelly

I think, Andrew, what we were getting at, at the Investor Day was that we do have, of course, the contracted order book, but in addition, we expected to generate an amount of excess capital and that excess capital could be either used to return to the shareholders or reinvest in the business. If we reinvest in the business then the CapEx would of course risen and allocation of capital is always at the forefront of our minds. So, as we go through the next couple of years, we will look at what is the best use of the money that could well be increased CapEx or given where we are at the moment, obviously, if these conditions continue we would expect to use it to return to the shareholders by the buybacks.

Andrew Light

Would you still have the appetite for doing strategic business like the deals you have done in the past, with United and with LAN, for example, given your size and the relationship that you did additional sale and leasebacks?

Aengus Kelly

Of course, they are not completed transactions, they are very different types of transactions that are only available to someone like ourselves and if they make sense for our shareholders, of course we look at them, but if they don’t, we won’t.

Andrew Light

Okay, great. Thanks very much for that.

Aengus Kelly

You’re welcome.

Operator

We will now take our next question from Reno Bianchi from Seaport Global. Please go ahead.

Reno Bianchi

Yes, good morning. Thank you very much for taking my call. You started this presentation making a pretty compelling case for your company and for the health of the sectors. And just before I ask my question, I want to applaud for doing that. It’s refreshing to have a conference call starting addressing these kind of general topics rather why reported EPS saw a $0.01 or $0.02 off the consensus forecast. But I was wondering as you were listing all these things that concern you or that you felt like you had to address, one thing that I noted you did not address was foreign exchange, which I find a little peculiar given the fact that these are dollar-denominated assets. So, my question – my first question is what gives you confidence that foreign exchange is not an issue in U.S. business?

Aengus Kelly

So the foreign exchange in almost every country, absent Brazil and Russia, the decline in the foreign exchange rate against the dollar has been dwarfed by the decline in fuel. So yes, of course, there is a foreign exchange impact, you are correct, but the key cost item in the P&L is fuel. And the drop in fuel has offset the decline in the FX rate and the vast majority of the jurisdictions we deal in.

Reno Bianchi

Okay. My second question related to another topic that you mentioned, which was China. And one thing that I noticed is there has been a proliferation whether in Mainland China or Hong Kong of Chinese aircraft leasing company to a certain extent even encouraged by the government to expand their presence in the sector. So, my question is even if you assume the economy is not growing as fast as it was in the past, what gave you comfort that competitive price pressures are going to abate or not been particularly acute given the fact that you have several companies there really fighting hard for market share?

Aengus Kelly

You have to remember that the market itself is growing at a very significant level and the current complex of aircraft leasing companies cannot keep up with demand for the products with the best part of $100 billion being delivered every year. As the leasing companies are to maintain their existing share of the market, we have to come up with $40 billion of capital every year. At the moment, there are two giants in the industry, AerCap and GECAS. And then you have a handful of other guys who could claim that they have global platform. We will need to see other people move into that second tier category in order to satisfy demand for the product. As yet of the Chinese leasing companies that have started up, we have not seen any of them approach that level. I hope that one or two of them will because we will need them in the long-term in order to satisfy the demand for the product.

Reno Bianchi

Thank you very much.

Aengus Kelly

You are welcome.

Operator

[Operator Instructions] We will now take our next question from Gary Liebowitz from Wells Fargo. Please go ahead.

Gary Liebowitz

Yes. Thanks. A few housekeeping questions, first on the other revenue line, it was only $9 million, I mean I don’t think it was management fees and other items and AeroTurbine, so is there a big operating loss at AeroTurbine in addition to the charges that you took?

Keith Helming

There was lower income driven by lower sales margin on the AeroTurbine inventory. So there was an additional mark to market on parts of the AeroTurbine inventory which effectively went through that particular line item, other income. But again, you won’t see that as a recurring item going forward.

Gary Liebowitz

Okay. And was there a – the MetroJet recovery in the quarter?

Keith Helming

Whatever financial impact we did have from that tragic event was obviously recorded in the quarter.

Gary Liebowitz

Okay. And also, your – relative to the third quarter your depreciation expense rose a bit even though your average asset balance went down, is this changes in residual values and useful life assumptions?

Keith Helming

Yes. I mean I think we have mentioned many times before. We are always evaluating the portfolio and whenever we think there is a need to accelerate depreciation on certain aircraft types, we do so. So again as part of the annual review, we would look at every single aircraft type. And then in some parts of the portfolio, we did increase depreciation, albeit not that significantly.

Gary Liebowitz

Okay. And last quick one, maybe for Gus. I just saw a couple of A320neos got pushed out of your 2016 delivery schedule, are you confident that this is just a temporary issue with the engine?

Aengus Kelly

Yes, we are Gary. We expect that the NEO delivery program will be back online by the end of the year.

Gary Liebowitz

Thank you very much.

Aengus Kelly

You are welcome.

Operator

Thank you. We will now take our final question from Christopher Nolan from FBR & Company. Please go ahead.

Christopher Nolan

Hi, Aengus as a quick – in your prepared comments, you were talking about the excess capital again, was that a change from your previous guidance of $500 million in 2016, I missed it?

Aengus Kelly

Correct. At the Investor Day, we have guided towards $500 million per annum for the next 3 years. Now, what happened in the fourth quarter of the year was that we did accelerate asset sales and the operational performance was also ahead of schedule and that has resulted in the excess amount being available.

Christopher Nolan

Okay. So has that $500 million changed at all, increased or...

Aengus Kelly

Yes. Well, we will see how the year runs out. As Keith referenced, we will not spend money that we haven’t earned and put in the bank. But we did expect this year to generate $800 million plus of excess capital.

Christopher Nolan

Great. And final question would be on the gain of sale, I estimate that you are making the average $2 million per aircraft that you sold on average, which was down from roughly $3.9 million over the last couple of quarters, any particular reason for that?

Keith Helming

Well, when you look at our sales results over the past 4 years or 5 years, whatever it is, I mean we have been averaging about $2 million per aircraft. So these results are pretty much in line with that higher amount that you would have saw perhaps in the last few quarters, but obviously higher amounts of wide-bodies sales, which is naturally would be a higher gain.

Christopher Nolan

Great. Okay. Thanks for taking my questions.

Aengus Kelly

You are welcome.

Operator

As there are no further questions at this time, I would like to turn the call back to Mr. Wikoff for any additional or closing remarks.

John Wikoff

Thank you very much, Operator. Thank you all for joining us for the call. And we look forward to speaking to you again either on the first quarter earnings call, if not before.

Operator

Ladies and gentlemen, that concludes today’s conference call. Thank you all for your participation. You may now disconnect.

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