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AerCap Platform Strength On Display But Markets See Turbulence Ahead

May 08, 2020 8:19 AM ETAerCap Holdings N.V. (AER)6 Comments
Robert Ruggirello, CFA profile picture
Robert Ruggirello, CFA


  • Quarter 1 was solid but some rent is being deferred.
  • Management sends a strong signal paying back the majority of the revolver.
  • Operating fundamentals remained consistent through the first quarter.
  • AerCap's fleet is tilted towards new technology relative to the global fleet.
  • The current stock price implies an ROE scenario that is highly unlikely.

2020 Q1 Update

Debt maturities for the next twelve months are $3.8B and management expects to spend $1.7B in cash capex for a total of $5.5B. At quarter end AerCap Holdings NV (NYSE:AER) had cash on hand of $4.7B and expected to generate $2.7B of operating cash flow, enough to cover the immediate cash outflows. During the quarter AerCap sold 12 aircraft for $265M, a gain on book value of 28%, impressive in this environment. Customer rents of approximately $300M were deferred, and AerCap expects another $300M of deferrals. This significant amount of deferred rent, which totals approximately 13% of annual lease revenue, is expected to be paid back during the remainder of the year. AerCap notes that it has over $1B of security deposits and letters of credit. Sixty near term aircraft deliveries have been pushed out, including twenty six deliveries scheduled for 2020. Approximately $1.6B worth of 2020 expected capex has been deferred. Additionally, the firm reports it is close to securing incremental funding of $1B. AerCap Holdings NV (AER) reported that 70% of its airline customers are considered 'flag carriers'.

Management Signaling

In March AerCap drew down $4B from its revolver. In a strong show of confidence from Management, $3B was repaid during April. We are interpreting this as a signal that management is confident in obtaining long-term financing from the credit markets to replace maturing debt. However, it is worth noting that the yield to maturity on AerCap debt due 2028 is high at approximately 6.86%.


Balance Sheet

AerCap Holdings NV (AER) reported an increase in book value of 14% over the trailing one year ending March 31, 2020. The stock price is down over 40% from March 31 2019 through yesterday's close. Return On Equity ('ROE) was 13% over the trailing 12 months, higher than the median value of

This article was written by

Robert Ruggirello, CFA profile picture
Robert Ruggirello, CFA is the Managing Director of Brave Eagle Wealth Management, a NY based fee-only Registered Investment Advisor. Previously, Mr. Ruggirello served as an Analyst at Centre Asset Management, LLC. Robert holds a MS in Financial Statement Analysis & Securities Valuation from Baruch College and BBA in Finance from Pace University's Lubin School of Business. Robert is a CFA charterholder and a member of the CFA society of NY. Brave Eagle Wealth Management specializes in holistic portfolio management for retired members of the FDNY. Our approach is differentiated in how we incorporate human capital into the asset allocation decision. We use financial assets to build a completion portfolio that diversifies away from the risks associated with our clients human capital. We use a combination of active and passive investments in an expanded asset allocation framework that includes real assets and absolute return strategies.

Analyst’s Disclosure: I am/we are long AER. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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