Aercap Holdings N.v. · NYSE:AER
Aercap — Investor Day (November 2017)
67 slides from Aercap's investor day presentation, Nov 13, 2017
Slide 1: 2017 Investor Day
2017 Investor Day AerCap Holdings N.V. November 13, 2017
Slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor
Disclaimer Incl. Forward Looking Statements & Safe Harbor This presentation contains certain statements, estimates and forecasts with not rely upon forward-looking statements as a prediction of actual results and respect to future performance and events. These statements, estimates and we do not ass
Slide 3: Agenda
Agenda | Introduction Brian Canniffe Head of Investor Relations | AerCap Update Aengus Kelly Chief Executive Officer | Leasing Philip Scruggs President & Chief Commercial Officer 334
Slide 4: Agenda
Agenda | Portfolio Management Edward O’Byrne Chief Investment Officer | Financial Performance Peter Juhas Chief Financial Officer | Q&A and Closing Remarks 344
Slide 5: AerCap Update
AerCap Update Aengus Kelly Chief Executive Officer
Slide 6: Key Highlights Since Last Investor Day
Key Highlights Since Last Investor Day AerCap continued to perform strongly over the past 12 months… Significant Level of Aircraft Transactions • Executed 418 transactions: leased 240, purchased 52, and sold and parted-out 126 aircraft1 2 Strong Marketing Activity • Leased 100% of new aircraft deliv
Slide 7: Key Highlights Since Last Investor Day
Key Highlights Since Last Investor Day …and achieved several key milestones New Order for 30 Boeing 787-9s • Making AerCap the largest customer for the 787 Dreamliner Investment Grade Credit Ratings • Only independent lessor with Investment Grade ratings from Moody’s, Fitch, and S&P 10 Year Unsecure
Slide 8: Industry Overview
Industry Overview Stable Demand U.S. Profitability Peaked? Stable Demand Facilitate Portfolio Sales European Rationalization Travel Airline Competitive OEM Managed Capital Widebodies Growth Health Landscape Production Platforms Markets Larger Platforms in Hands Rational Duopoly Attracted by Stable o
Slide 9: The Importance of Scale
The Importance of Scale 937 LEASED Market Intelligence 340 Information SOLD Advantage Value vs. Price 137 BOUGHT Number of transactions from July 1, 2014 to September 30, 2017. Includes owned and managed aircraft. 394
Slide 10: Optimal Decision-Making
Optimal Decision-Making LEASING DECISION Market Intelligence Information SALES Advantage DECISION Value vs. Price BUYING DECISION 3 10 4
Slide 11: AerCap's Business Principles
AerCap’s Business Principles Our key business principles result in AerCap’s consistent profitability PORTFOLIO LEASING STRATEGY HEDGING PROGRAM MANAGEMENT CAPITAL STRUCTURE • Focus on maintaining • Proactive risk • Focus on highly • Protection against the most liquid aircraft management diversified,
Slide 12: Consistent Earnings & Cash Flow Generation
Consistent Earnings & Cash Flow Generation AerCap’s platform has generated strong and consistent results US GAAP Net Income (~$2.1 billion) ($ million) 400 350 300 AVERAGE: ~$265 MILLION PER QUARTER 250 200 365 150 264 283 266 261 223 233 226 100 50 0 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 3 12 4
Slide 13: Book Value Per Share Growth
Book Value Per Share Growth AerCap has grown book value per share by ~16% per year since 3Q 2014 $55 $55 $53 $51 $50 $49 $47 $45 $45 $44 $42 $41 $40 $39 $39 $37 $36 $35 $30 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q'16 1Q'17 2Q'17 3Q'17 3 13 4
Slide 14: Conclusions
Conclusions Strong Demand for Aircraft Due to High Travel Growth Scale is a Competitive Advantage Positive Outlook for AerCap 3 14 4
Slide 15: Leasing
Leasing Philip Scruggs President & Chief Commercial Officer
Slide 16: Growing Industry
Growing Industry AIR TRAFFIC IS A GROWING MARKET Since 1986, air traffic has doubled every 15 years, growth forecast to continue1 MIDDLE CLASS IS GROWING AND FLYING Middle class to grow from 2.9 billion to 4.9 billion in 20 years2 AIRLINES NEED OVER 41,030 NEW AIRCRAFT Boeing has increased 20-year f
Slide 17: Strong 2017 Traffic Figures
Strong 2017 Traffic Figures TRAFFIC +7.7% GROWTH 81.7% GLOBAL AND LOAD GLOBAL LOAD TRAFFIC FACTORS FACTOR +7.0% 83.0% Worldwide Worldwide Domestic Domestic +8.0% 81.0% Worldwide Worldwide International International IATA Passenger Analysis as of September 2017. 3 17 4
Slide 18: Global Demand Movement from 2012
Global Demand Movement from 2012 High Low 2017 IATA: Passenger Traffic Growth (RPK) %, 2012-2017F. 3 18 4
Slide 19: Aircraft Placement Remains Strong
Aircraft Placement Remains Strong The placement of our upcoming scheduled expiries and new aircraft deliveries is on track Used Aircraft Required Placements1 Order Book Required Placements2 85 33 18 0 0 0 Remaining 2017 2018 2019 Remaining 2017 2018 2019 AERCAP HAS EXECUTED 240 LEASE TRANSACTIONS OV
Slide 20: Vision, Reach & Scale – The AerCap Advantage
Vision, Reach & Scale – The AerCap Advantage Lessor scale enables fleet-wide solutions Air Berlin Monarch Loong Air 10 x Widebodies 9 x Narrowbodies 20 x Narrowbodies 3 20 4
Slide 21: AerCap's 787 Vision
AerCap’s 787 Vision Timing, vision and product will make this order successful This aircraft will We know the 30 787-9 Makes AerCap We have We are already be an integral size and aircraft – first the largest already placed placing aircraft part of many location of the widebody customer for 97% of ou
Slide 22: AerCap Understands Widebody Aircraft
AerCap Understands Widebody Aircraft AerCap leased, purchased and sold 395 widebody aircraft since July 20141 395 WIDEBODY TRANSACTIONS 230 64 101 LEASED PURCHASED SOLD (1) Number of transactions from July 1, 2014 to September 30, 2017. Includes owned and managed aircraft. 3 22 4
Slide 23: Widebody Aircraft – What Drives Demand
Widebody Aircraft – What Drives Demand Long-Haul Operations by LCCs Growing Demand for Long-Haul Travel Connecting New Destinations 3 23 4
Slide 24: 777 Aircraft Continue to Be Placed
777 Aircraft Continue to Be Placed Placement status of Boeing 777s 28 View as of: 12 12 1 YE 2014 1 4 2015 2016 2017 2018 2019 17 View as of: 10 2 5 YE 2015 - 1 51 777s 2015 2016 2017 2018 2019 LEASED OR SOLD SINCE YE 20144 View as of: 8 9 3 - 1 YE 2016 - 2015 2016 2017 2018 2019 View as of: - - - -
Slide 25: Clear Visibility of Top Line Revenue
Clear Visibility of Top Line Revenue Revenue for the next 3 years already contracted Contracted revenues through 2020 Contracted revenues as a % of expected total rental revenue Assumed ~5% ~99% ~96% ~86% ~95% 2018 2019 2020 Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor
Slide 26: Our Planes Are Consistently Flying and Earning Revenue
Our Planes Are Consistently Flying and Earning Revenue 99.5% UTILIZATION RATE YTD as of September 30, 2017. 3 26 4
Slide 27: Conclusions
Conclusions Strong Demand for Aircraft Scale is a Competitive Advantage Clear Visibility of Future Revenue 3 27 4
Slide 28: Portfolio Management
Edward O’Byrne Portfolio Management Chief Investment Officer
Slide 29: Portfolio Management
Portfolio Management Discipline enables sustainable superior returns for our leasing portfolio GOALS ACTIONS RESULTS • Maintain the Most • Disciplined Investment • 99+ % Portfolio Liquid Portfolio of / Divestment Policy Utilization In-Demand Assets • Prudent Depreciation • Consistently Profitable, •
Slide 30: Portfolio Transformation
Portfolio Transformation 2014 2017 2021 Our portfolio will grow by over 25% from today, new technology will represent over two-thirds of our fleet by 2021 ~$36B ~$43B VALUE VALUE New Tech. (Potential SLBs) 7.6 ~6 AVG. AGE AVG. AGE New Tech. Current Technology WB Actual & Contracted 1 & Out-of-Produc
Slide 31: Attractive Order Book of Liquid Aircraft
Attractive Order Book of Liquid Aircraft AerCap is well-positioned to meet future demand ($ billion) CAPITAL EXPENDITURE 6.0 A320neo Family 5.0 A350 4.0 E-Jet E2 ORDERBOOK 3.0 $6.0 MAKEUP $5.5 $5.5 737 MAX $5.0 $4.5 2.0 787 1.0 0.0 2017 2018 2019 2020 2021 As of September 30, 2017. 3 31 4
Slide 32: Trading Depth, Scale & Diversification
Trading Depth, Scale & Diversification Over a decade of proactive trading End of Life, 2% Airline, 11% 63% 17% 6% Lessor, 30% $12B+ NORTH EUROPE AMERICA 14% MIDDLE OWNED AIRCRAFT EAST & SOLD SINCE 2006 OTHER ASIA PACIFIC 500+ AIRCRAFT Financial Investor, 57% As of September 30, 2017. 3 32 4
Slide 33: Aircraft Trading Results
Aircraft Trading Results Last 12 months’ trading activity remains above targets 109 $2.5B 15 years Owned Sales Average Age Aircraft Sold2 37% Proceeds1 63% of Aircraft Sold2 Widebody Narrowbody FOCUS ON MID-LIFE AIRCRAFT TO IMPROVE OVERALL QUALITY OF OUR PORTFOLIO & EARNINGS See Appendix for Endnote
Slide 34: The Business Case for Aircraft Investments
The Business Case for Aircraft Investments Investment rationale is different across investor spectrum % OF AER SALES1 INVESTOR SEGMENT RATIONALE STRONG INDUSTRY FUNDAMENTALS • Far East / High Growth • Strategic Growth / Scale Up 7% 0–8 Lessors • Stable Long-Term Contracted • Proven long-term resilie
Slide 35: Key Investment Themes
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Slide 36: Are Supply & Demand Balanced?
Are Supply & Demand Balanced? White OEMs Tails Deliveries Cancellations 2016 Deliveries Stable Very Limited No White Tails 1 at ~8% Fleet Cancellations Stored Secondary Forward LESSORS Aircraft Market Placements ~6% in 2016, Lowest 99.5% Utilization 91% of AerCap Forward Orderbook Rate Since 20001 R
Slide 37: High Productivity Gains … Maxed Out?
High Productivity Gains … Maxed Out? Aircraft productivity has reached optimum levels and thus will be difficult to improve further; This will lead to a tighter correlation between traffic growth and aircraft demand 2004 A330-200 10.4 188 73.5% Hours/day PAX/flight Load factor Present A330-200 11.5
Slide 38: Traffic Growth Continues to Exceed OEM Production
Traffic Growth Continues to Exceed OEM Production Elevated traffic growth and diminishing efficiency gains are driving aircraft demand; While the delivery rate remains stable, fleet growth is resulting in higher demand for used aircraft and low retirement 10% 8.0% 8% 7.4% Traffic Growth Rate 6% 5.9%
Slide 39: Conclusions
Conclusions Balanced Supply and Demand for Aircraft Disciplined Portfolio Transformation Strategy Scale is a Competitive Advantage 3 39 4
Slide 40: Financial Performance
Financial Performance Peter Juhas Chief Financial Officer
Slide 41: Financial Summary
Financial Summary STRONG EARNINGS RAISED ~$11 BILLION AND CASH FLOW OF FINANCING 2017 is another $1.7+ BILLION AIRCRAFT year of strong RETURNED ~$900 MILLION TO SHAREHOLDERS THROUGH SALES YTD operating and SHARE REPURCHASES financial performance INVESTMENT GRADE RATINGS FROM DOUBLE DIGIT BVPS MOODY’
Slide 42: Improved Debt / Equity Ratio
Improved Debt / Equity Ratio AerCap has significantly de-levered since July 2014 Adjusted Debt / Equity Ratio1 3.8x 3.5x 3.4x S&P Fitch Moody’s 3.3x Upgrade to BBB- Upgrade to BBB- Upgrade to Baa3 3.2x 3.1x 3.0x 2.9x 2.7x 2.8x 2.8x 2.7x 2.7x 2.7x 2.7x 2.7x Jun-2014 Sep-2014 Dec-2014 Mar-2015 Jun-201
Slide 43: Excess Capital Deployment
Excess Capital Deployment We have continued to deploy excess capital for share repurchases $53.06 $55.06 $51.20 $49.33 $46.91 $45.26 $43.66 $49.26 • In 2016, we repurchased 25 million shares $44.73 $45.04 at an average price of $38.62 for a total of $42.43 $966 million $38.03 $37.73 $36.49 • Average
Slide 44: Track Record of Returning Capital to Shareholders
Track Record of Returning Capital to Shareholders Returned more capital to our shareholders than 96% of S&P 500 companies1 Shares Repurchased since June 2015 2 Remaining AerCap Shares 28% 72% See Appendix for Endnotes. 3 44 4
Slide 45: Conservative Approach to Liquidity & Funding
Conservative Approach to Liquidity & Funding Target: ≥ 1.2x NTM sources-to-uses coverage Liquidity • 1.3x NTM sources-to-uses • $8.9 billion of available liquidity Target: Diverse sources of funding Access • ~$36 billion of funding raised since the ILFC transaction to Capital announcement AerCap is
Slide 46: Strong Liquidity Position
Strong Liquidity Position $8.9 billion of available liquidity as of September 30, 2017 Sources vs. Uses (Next 12 Months) Liquidity Levels Since July 2014 ($ billion) 10.5 10.0 3.0x Sources (for 12 months to September 30, 2018) ($ billion) 9.5 9.5 9.2 9.1 9.0 9.0 8.9 2.8x Unsecured Revolver 3.9 9.0 2
Slide 47: Global Funding Partners
Global Funding Partners Over 100 bank relationships and over 450 fixed income investors Asia Pacific North America Aozora Bank First Abu Dhabi Bank The Nomura Trust and The Bank of East Asia Banking Co. Fuyo General Lease Co. AIG MetLife NTT Finance Bank of Kaohsiung The Gunma Bank Apple Bank Morgan
Slide 48: AerCap's Hedging Program
AerCap’s Hedging Program AerCap’s hedging program protects the company against increases in interest rates FORMS OF HEDGING1 We continuously monitor our interest rate exposure to CASH, FLOATING 13% RATE LEASES & OTHER ensure we remain fully hedged INTEREST RATE CAPS & SWAPS 19% A 100 bps increase in
Slide 49: AerCap's Prudent Aircraft Values
AerCap’s Prudent Aircraft Values Disciplined approach to carrying values AIRCRAFT VALUE CONSERVATIVE DEPRECIATION GAIN ON SALE APPROACH • Focused on buying • We perform detailed • Average gain on sale of aircraft at the right reviews of depreciation 5 – 10% price schedules by aircraft each year • ~7
Slide 50: Financial Outlook
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Slide 51: On Track for a Strong Full Year 2017
On Track for a Strong Full Year 2017 Expected full year 2017 financial performance ~$5.0 ~$1.2 ~$1.0 ~$6.20 billion billion billion TOTAL GAAP PRE-TAX GAAP GAAP REVENUE EARNINGS NET INCOME DILUTED EPS Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. 3 51 4
Slide 52: Highly Predictable Revenue
Highly Predictable Revenue Revenue line booked well into the future ~95% of our lease rents through 2020 are already contracted ~99% ~96% Average remaining lease ~86% term of 6.6 years Provides significant visibility 2018 2019 2020 and stability to our future Contracted Assumed revenues and cash flo
Slide 53: Key Drivers
Key Drivers Younger aircraft portfolio while maintaining strong margins 2017E 2018E 2019E Weighted Average Age1 ~6.9 ~6.4 ~6.2 Yield2 ~12.2% ~11.6% ~11.2% Average Interest Rate3 (including debt issuance costs & fees) ~4.0% ~4.0% ~4.0% Net Spread ~9.0% ~8.5% ~8.1% Depreciation Rate (including mainten
Slide 54: Excess Capital Generation
Excess Capital Generation AerCap will continue to generate significant excess capital ($ billion) 2018E 2019E • We expect to generate a total of $1.0+ Contracted purchases ~6.0 ~5.5 billion of excess capital during 2018 and 2019 after contracted purchases Expected sales ~1.5 ~1.0 • This assumes ~$1.
Slide 55: EPS Outlook
EPS Outlook Core EPS will continue to grow GAAP DILUTED EPS OUTLOOK • 2017 Earnings on Track: ~$6.20 TBD • Core EPS of ~$5.05 and total EPS of TBD ~$6.20 ~$1.15 • 2018 Core EPS: • Up ~5% over 2017, primarily driven by redeployment of excess capital ~$6.00 - ~$5.30 - $6.20 ~$5.05 $5.50 • 2019 Core EP
Slide 56: Financial Summary
Financial Summary Positive outlook for AerCap BOOK VALUE PER SHARE TRAJECTORY STRONG PERFORMANCE IN 2017 ~$57 $49 PRUDENT $42 $37 BALANCE SHEET ATTRACTIVE GROWTH OUTLOOK 2014A 2015A 2016A 2017E 2018E 2019E 2020E FOR BVPS Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. 3
Slide 57: Closing Remarks
Closing Remarks LEVERAGING SCALE INVESTMENT DISCIPLINE RELENTLESS EXECUTION CONSISTENT PROFITABILITY VALUE CREATION 3 57 4
Slide 58: AERCAP
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Slide 59: Appendix
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Slide 60: Strong Growth Over the Long Term
Strong Growth Over the Long Term Airlines need 41,030 new aircraft over the next 20 years Boeing Has Increased its Forecast from the 2016 Current Market Outlook by 1,410 Aircraft1 Growth North 46,950 America Replacement 21% Stay in-service 23,470 Latin Asia America Pacific 8% 41,030 38% 23,480 NEW A
Slide 61: Air Travel Growth
Air Travel Growth Resilient, growing air travel market expected to continue World Annual Traffic1 Robust Global Traffic Oil, Financial, Expected Oil Gulf Asian 9/11 & Euro crises growth p.a. crisis crisis crisis & SARS & Russia, Ebola through 2036 • Air traffic doubles every 15 years1 4.4% • 2017 wo
Slide 62: Middle Class Is Growing and Flying
Middle Class Is Growing and Flying Middle class to grow from 2.9 billion to 4.9 billion in 20 years Middle Class (millions of people)1 History Forecast 5,000 4,950 4,000 3,900 3,624 Emerging Countries 3,000 2,900 2,695 2,000 1,950 1,822 1,350 981 501 456 Developing Countries 1,000 216 322 73 144 781
Slide 63: Increasing Demand for Operating Leases
Increasing Demand for Operating Leases Over the past 20 years the world fleet has DOUBLED while the operating lease fleet size has QUADRUPLED Leasing Represents a Significant Proportion of Global Fleet on Operating Lease1 Share of Major Airlines’ Fleets2 % Leased 19,000 18,929 86% VIRGIN ATLANTIC 17
Slide 64: Investment Grade Ratings
Investment Grade Ratings AerCap is the only independent lessor with three IG ratings Standard & Poor’s BBB- Fitch BBB- Moody’s Baa3 INVESTMENT GRADE RATINGS (STABLE) Stable (STABLE) Stable (STABLE) Stable APR. 2016 JUL. 2016 FEB. 2017 MAR. 2016 Moody’s upgrades Fitch upgrades Moody’s upgrades Standa
Slide 65: Adjusted Debt / Equity Ratio
Adjusted Debt / Equity Ratio Adjusted Debt/Equity Calculation ($ million) Sept. 30, 2017 Debt (including fair value adjustments) 27,288 Adjusted for: • Unrestricted cash & cash equivalents (1,454) • 50% equity credit for long-term subordinated debt (750) 2.7 to 1 ADJUSTED Adjusted Debt 25,084 DEBT /
Slide 66: Endnotes
Endnotes SLIDE 16: Growing Industry SLIDE 36: Are Supply and Demand Balanced? 1. Airbus Global Market Forecast 2017-2036; Boeing Current Market Outlook 1. FlightGlobal Fleets Analyzer as of October 27, 2017: Airbus, Boeing, 2017. McDonnell-Douglas in-service, on order and in-storage passenger jets.
Slide 67: 65 St. Stephen's Green
AerCap Holdings N.V. AerCap House 65 St. Stephen’s Green Dublin 2, Ireland +353 1 819 2010 contact@aercap.com Follow us on