Aercap Holdings N.v. · NYSE:AER
Aercap — Investor Day (November 2016)
76 slides from Aercap's investor day presentation, Nov 17, 2016
Slide 1: 2016 Investor Day
November 16, 2016 2016 Investor Day AerCap Holdings N.V.
Slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor
This presentation contains certain statements, estimates and forecasts with respect to future performance and events. These statements, estimates and forecasts are “forward-looking statements”. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such
Slide 3: Agenda
Agenda | Introduction John WikoffHead of Investor Relations | AerCap Update Aengus KellyChief Executive Officer | Leasing Philip ScruggsPresident & Chief Commercial Officer | Q&A and Break
Slide 4: Agenda
Agenda | Portfolio Management Edward O’ByrneChief Investment Officer | Financial Performance Keith HelmingChief Financial Officer Peter JuhasDeputy Chief Financial Officer | Q&A and Closing Remarks
Slide 5: AerCap Update
AerCap Update Aengus KellyChief Executive Officer
Slide 6: Years of Consistent Profitability
10 Years of Consistent Profitability Combination of factors unique to AerCap and the aircraft leasing industry Airline/Passenger TrafficFew Global CompetitorsWell Priced Fleet & Order BookLT Assets on LT Leases REVENUE GENERATORS RISK MITIGANTS Portfolio Management Proper Liability StructureCredit R
Slide 7: Years of Consistent Profitability: Reinvesting profits from a position of strength
10 Years of Consistent Profitability Reinvesting profits from a position of strength 2012 2013 2014 2015 2009 2010 2011 2007 2008 AerCap’s acquisition of Genesis SLB for 41 737NGs American NUMBER OF AIRCRAFT SOLD SLB for 25 widebodies LATAM ~17%1Share buyback ~24%1Share buyback 49 31 15 20 29 70 28
Slide 8: Key Highlights
Key Highlights AerCap has delivered on a number of strategic objectives… ILFC Acquisition Complete Exceeded all financial and integration targets set at ILFC acquisition announcement Record Level of Aircraft Transactions Executed 996 transactions: leased 697, purchased 85 and sold and parted-out 214
Slide 9: Key Highlights
Key Highlights …which have generated strong performance and several key milestones Strong Earnings & Cash Flow Generated $2.8 billion of adjusted net income1 Investment Grade Credit Ratings Regained Investment Grade credit ratings from S&P and Fitch Distribution to Capital Providers $3.7 billion ret
Slide 10: Air Travel Resilience
Air Travel Resilience Air travel remains resilient in an unpredictable world Air Traffic Growth1 (RPKs, billion per month) 650 550 450 350 250 150 50 China, Brexit Russiancrisis, Zika Average growth, seasonally adjusted 5.5% Ebola MERS ISIS 2007 2008 2009 2010 Turkey 2011 2012 2013 2014 2015 2016 Br
Slide 11: Orders Cycle
Orders Cycle Aircraft orders are cyclical in nature and can vary significantly from one year to another Airbus Orders Cycle1 Airbus orders to September 30, 2016.
Slide 12: Deliveries vs. Orders Cycle
Deliveries vs. Orders Cycle Deliveries cycle does not match orders cycle Airbus Deliveries vs. Orders Cycle1 Airbus orders to September 30, 2016 and deliveries to October 14, 2016. Growth in deliveries has remained consistent over the past 20 years
Slide 13: AerCap's Competitive Advantage
AerCap’s Competitive Advantage Our global vision, reach and scale differentiate us from other lessors INDUSTRY LEADER Broad market penetration with long-standing customer relationships Entrenched position with OEMs and diversified aircraft portfolio Strong balance sheet and access to capital Indepen
Slide 14: AerCap's Business Principles
AerCap’s Business Principles AerCap’s consistent profitability is rooted in our key business principles Protection against interest rate volatility through a mix of interest rate caps, swaps & fixed-rate loansRelationships with over 85 banking institutions globally Focus on maintaining the most liqu
Slide 15: Industry Landscape
Industry Landscape Since 2014, the Industry has evolved through consolidation and emergence of new platforms Consolidation among the largest lessors has resulted in relatively few platforms with global reachBohai Avolon / CITMacquarie AWAS1 AerCap ILFCEmergence of China-based leasing platforms
Slide 16: AerCap's Consistent Profitability
AerCap’s Consistent Profitability Ten consecutive years of strong profitability Adjusted Net income Net Income and Return on Equity1 Adjusted RoE ($ million) Average RoE15% ~$4.7 BILLION ADJUSTED NET INCOMEover the past 10 years Adjusted net income and adjusted RoE.
Slide 17: Conclusions
Conclusions VISIBILITY AND CONSISTENCY OF EARNINGS ~2.5x increase in EPS1 CONTRACTED & OTHER OPPORTUNITIES FOR GROWTH 6% contracted growth from our order book through 2020 Emerging SLB opportunities in the $100+ billion market for new technology aircraft in the coming years ADVANTAGES OF SCALE AND P
Slide 18: Leasing
Leasing Philip ScruggsPresident & Chief Commercial Officer
Slide 19: The Sky is Falling!!
The Sky is Falling!! BRAZIL RUSSIA COUP D’ETAT FINANCIAL CRISIS IN CHINA EBOLA is here! BREXIT GLOBAL ECONOMIC GROWTH SLOWING Another Terrible Attack! ZIKA OIL PRICE CRASHING
Slide 20: Nope. The Sky is Still in Place
Nope. The Sky is Still in Place TRAFFIC GROWTH AND LOAD FACTORS1 IATA Passenger Analysis for January – September 2016. +5.9% GLOBAL TRAFFIC 80.6% INDUSTRY LOAD FACTOR +5.4% Worldwide Domestic +6.3% Worldwide International 82.0% Worldwide Domestic 79.8% Worldwide International
Slide 21: Robust Global Traffic
Robust Global Traffic World Annual Traffic1 Air Travel Growth is Resilient 2015 & 2016 crises did not derail air travel growth Airbus Global Market Forecast 2016, RPK: Revenue-Passenger-Kilometers.IATA June 2016 Forecast – Actual or estimate for 2015 and forecast for 2016 for global commercial airli
Slide 22: Middle Class is Growing and Flying
Middle Class is Growing and Flying Middle Class to move from 2.8 billion to 4.8 billion in 20 years Middle Class (millions of people)1 2005 1,867 130 1995e2 1,297 2015 2,792 206 66 Emerging Countries Developing Countries Mature Countries 2035 4,830 2025 3,776 5.7 6.5 7.2 8.1 8.8 World population (bi
Slide 23: Airlines Need Over 39,600 New Aircraft
Airlines Need Over 39,600 New Aircraft Airlines and lessors are expected to receive 5 new aircraft every day for the next 20 years Global Commercial Aircraft Fleet1 Boeing Current Market Outlook 2016 (includes regional jets). Stay in service Replacement Growth 39,620 NEW AIRCRAFT
Slide 24: Leasing Represents a Significant Share of Major Airlines' Fleets
Leasing Represents a Significant Share of Major Airlines’ Fleets2 Increasing Demand for Operating Leases Over the past 20 years the world fleet has DOUBLEDwhile the operating lease fleet size has QUADRUPLED Proportion of Global Fleet on Operating Lease1 Leased fleet Owned fleet 21% 42%Leased % Lease
Slide 25: AerCap's Platform Capabilities
AerCap’s Platform Capabilities 60 Widebody Aircraft Lease Transactions1 AerCap has executed 283 lease transactions over the past 12 months 223 Narrowbody Aircraft Lease Transactions1 As of September 30, 2016.
Slide 26: Used Aircraft Placement Remains Strong
Used Aircraft Placement Remains Strong Owned fleet scheduled expiries as of December 31, 2015. Placements include aircraft leased either under a lease or letter of intent and aircraft identified as sale or part-out as of November 10, 2016. Future unplaced expiries lowest it has been in years We Have
Slide 27: Forward Order Placement Remains Strong
Forward Order Placement Remains Strong We Have Placed the Majority of Our Upcoming New Aircraft Deliveries Placed scheduled deliveries1 Unplaced scheduled deliveries Placements include aircraft leased either under a lease or letter of intent as of November 10, 2016. 95% of our committed aircraft del
Slide 28: AerCap Understands Widebody Aircraft
As of September 30, 2016. AerCap Understands Widebody Aircraft Leased1 Sold1 AerCap leased or sold over 230 widebody aircraft since the ILFC acquisition
Slide 29: 777 Placements Are on Track
Scheduled expiries as of December 31, 2014.Required placements as per our 4Q 2015 financial results presentation.Placed aircraft include released, extended, sold or to be parted-out either under a contract or letter of intent as of November 10, 2016. Placement Status of Boeing 777s 777 Placements A
Slide 30: Vision, Reach & Scale – The AerCap Advantage
Aircraft leasing is the mechanism by which the market quickly and efficiently distributes capacity around the world Vision, Reach & Scale – The AerCap Advantage
Slide 31: Long-standing, strong customer relationships
Long-standing, strong customer relationships Largest Lessor Partner to Airlines Worldwide Customer Years of Relationship Number of Aircraft1 AerCap Lessor Market Position1 28 85 #1 22 49 #1 22 52 #1 17 21 #1 24 16 #1 22 19 #2 19 11 #1 13 20 #1 22 7 #1 Customer Years of Relationship Number of Aircraf
Slide 32: Resilient Business
Resilient Business Revenue for the next 3 years already contracted Contracted revenues through 2019 Assumed Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. 99% 94% 85% Contracted revenues
Slide 33: Our Planes are Consistently Flying and Earning Revenue
UTILIZATION RATE1 99.5% Our Planes are Consistently Flying and Earning Revenue YTD as of September 30, 2016.
Slide 34: Strong Company in a Solid Sector
Strong Company in a Solid Sector STABLE PROFITSFOR SHAREHOLDERS
Slide 35: Portfolio Management
Portfolio Management Edward O’ByrneChief Investment Officer
Slide 36: Portfolio Management
Portfolio Management Discipline enables sustainable superior returns for our leasing portfolio Maintain the Most Liquid Portfolio of In-Demand Assets Balance Yield & Manage Residual ValueGenerate Minimum of $1 Billion in Annual Liquidity GOALS RESULTS1 99+ % Portfolio UtilizationConsistently Profita
Slide 37: Portfolio Transformation
Portfolio Transformation By 2020, our portfolio will have grown by more than a 1/3rd and will consist of 2/3rd new technology Portfolio at ILFC Acquisition1 As of June 30, 2014; September 30, 2016; December 31, 2020 respectively. Includes maintenance rights intangible and finance leases. Refer to sl
Slide 38: Buy-side
U) ( AERCAP GLOBAL LEADER IN AVIATION ll Buy-side
Slide 39: Buy-Side: Leveraging Scale but Staying Disciplined
Buy-Side: Leveraging Scale but Staying Disciplined SCALE DISCIPLINE BARGAININGPOWEROEMs: Largest buyer of aircraftAirlines: Large scale SLBs (LATAM, AMR, VAA) UNIQUE PIPELINE Leveraging our ~200 customer baseWe see all dealsWe create our own opportunities Market Intelligence
Slide 40: Attractive Order Book of Liquid Aircraft
Average of ~70 New Aircraft Deliveries per Year1 Attractive Order Book of Liquid Aircraft AerCap well-positioned to meet current and future demand Bulk orders to obtain best pricingAirbus largest customerBoeing 787 largest leasing customerEmbraer E2 launch customerFocus on the most liquid aircraftCo
Slide 41: SLB Opportunities Set to Increase Tenfold
SLB Opportunities Set to Increase Tenfold Significant opportunity for incremental growth beyond contracted deliveries SLB MARKET1: ~30% OF TOTAL DELIVERIES Ascend Fleets – Airbus and Boeing only; New Tech. aircraft: A320neo Family, A330neo, A350, 737MAX, 787, 777X. AerCap purchase price estimates. #
Slide 42: Sell-side
U) ( AERCAP GLOBAL LEADER IN AVIATION [| sell-side |
Slide 43: 10-Year Track Record: Aircraft Trading Results
10-Year Track Record Track Record Since ILFC Acquisition Aircraft Trading Results Aircraft trading generates cash, gains on sale and reduces impairment risk Sales since the ILFC acquisition, i.e., from 3Q 2014 and expected to close by year end as of September 30, 2016. Includes sales and reclassific
Slide 44: Widebody Sales: Liquid Trading Supported by Solid Fundamentals
LEVERAGING AERCAP SERVICING PLATFORM2 Widebody Sales: Liquid Trading Supported by Solid Fundamentals $2.4 billionOF WIDEBODIES TRADED SINCE ILFC ACQUISITION3 ~$180 millionIN TRADING GAINS3 $0.7B 15A330s $1.0B 13777s $0.7B 37Other 65OWNED WIDEBODIESSOLD IATA Passenger Analysis for January – September
Slide 45: Aircraft Trading Process
Aircraft Trading Process Trading target: Mid-life aircraft AIRCRAFT LIFE Hold Sell Hold 8 0 15 25 KEY TRADING TARGET:MID-LIFE AIRCRAFT Part-Out Sale to Airlines AVERAGE TRADING AGE1 12 Tangible/Infrastructure Like AssetCurrent YieldTermDiversificationStable Cash FlowsSelf Depreciating Asset Reducing
Slide 46: Key Investment Themes
U) ( AERCAP GLOBAL LEADER IN AVIATION | Key Investment Themes a 4
Slide 47: Efficiency Gains Maxing Out = More Aircraft Needed
Efficiency Gains Maxing Out = More Aircraft Needed 1 2 ~20% more seats produced in 10 years with same aircraft1More aircraft required to produce the same capacity growth Traffic Growth Capacity Growth Higher Load Factors & Seat densification Increase of a/c utilization Reaching physical limitations
Slide 48: OEMs Rational Delivery Policy
OEMs Rational Delivery Policy Manufacturers Backlog Management Matching short-term supply & demand through cycles Stable Aircraft Deliveries (as % of the fleet)1 Reduced delivery volatility:Regional diversification permits OEMs to reallocate deliveries Differentiated airline business models growing
Slide 49: Conclusions
Conclusions Conclusions DISCIPLINEDPORTFOLIOMANAGEMENT Profitable trading history demonstrates integrity of balance sheet Disciplined approach to portfolio management Well positioned portfolio mix with New Tech migration in progress Strong locked-in asset growth with significant incremental opportun
Slide 50: Financial Performance
Financial Performance Keith HelmingChief Financial Officer Peter JuhasDeputy Chief Financial Officer
Slide 51: Key Financial Highlights
Key Financial Highlights Strong Earnings & Cash Flows Generated $2.8 billion of adjusted net income and $7.5 billion of operating cash flows since the ILFC acquisition1 Capex Significant Deleveraging Return of Capital ~$4 billion of cash flow (net of sales) used for capex to buy new technology aircr
Slide 52: Consistent Earnings & Cash Flow Generation
Consistent Earnings & Cash Flow Generation AerCap’s Platform Has Generated Strong and Consistent Results since the ILFC Acquisition Operating Cash Flows (~$7.5 billion) Adjusted Net Income (~$2.8 billion)1 Net income adjusted for maintenance rights related expenses, mark-to-market on interest rate c
Slide 53: Improved Debt / Equity Ratio & Book Value Per Share
Improved Debt / Equity Ratio & Book Value Per Share AerCap has significantly de-levered while growing book value per share Book Value Per Share Adjusted Debt / Equity Ratio1 Debt/equity ratios calculated by dividing adjusted net debt by adjusted equity. Adjusted net debt calculated as follows: debt
Slide 54: Commitment to Investment Grade Ratings
Commitment to Investment Grade Ratings AerCap has regained Investment Grade credit ratings from S&P and Fitch MAY 2014Acquisition of ILFC FEB. 2015Both Standard & Poor’s and Moody’s place AerCap on positive outlook AUG. 2015Fitch places AerCap on positive outlook MAR. 2016Standard & Poor’s upgrades
Slide 55: Share Repurchases
Share Repurchases2 Return of Capital / Market Cap1 Total dollar volume of share repurchases over market capitalization at the beginning of each period. Pre-Acquisition covers January 1, 2011 through June 30, 2014 period.Since the ILFC acquisition, i.e., based on June 30, 2014 shares outstanding thro
Slide 56: Approach to Capital Deployment
Disciplined, dynamic approach to deploying excess capital Approach to Capital Deployment We approach capital deployment dynamically, taking into account both the operating and market environments Evaluated in context of overall environment as well as our stock priceExecuted systematically through st
Slide 57: Liquidity & Funding
U) ( AERCAP GLOBAL LEADER IN AVIATION I) Liquiaity & Funding a 4
Slide 58: Conservative Approach to Liquidity & Funding
Conservative Approach to Liquidity & Funding AerCap is committed to maintaining a strong balance sheet Liquidity Target: ≥ 1.2x NTM sources-to-uses coverage1.5x NTM sources-to-uses$9 billion of available liquidity Status as of September 30, 2016. ILFC acquisition announced in December 2013. Access t
Slide 59: Strong Liquidity Position
Strong Liquidity Position Current available liquidity covers next ~18 months of future cash needs Liquidity Levels Since ILFC Acquisition Sources vs. Uses (Next 12 Months) Sources assume no additional financing for deliveries of new aircraft purchases.Includes cash payments for next 12 months’ aircr
Slide 60: Diversified Funding Sources
Diversified Funding Sources AerCap sources capital from a wide array of secured and unsecured markets UPSIZE OF EXISTING REVOLVERS AND LCs ~$2.0billion REFINANCING OF EXISTING SECURED TERM LOANS ~$5.8billion TAKE OUT UNSECURED NOTES $2.6billion NEW SECURED CREDIT FACILITIESfor 90+ new & used aircraf
Slide 61: Global Funding Partners
Global Funding Partners Over 85 bank relationships and over 450 fixed income investors U.S.A. & Canada Apple Bank Bank of America BankUnited Capital Bank Citi City National Bank Columbia State Bank Everbank Fifth Third Bank FirstBank Goldman Sachs IDB NY JP Morgan Key Corp Morgan Stanley New York Li
Slide 62: AerCap's Hedging Program
AerCap’s Hedging Program AerCap’s hedging program protects the company against increases in interest rates Forms of Hedging1 Interest Rate Caps & Swaps Floating Rate Leases,Cash & Other Fixed Rate Debt Total Debt ~$28 Billion We continuously monitor ourinterest rate exposure to ensure we remain full
Slide 63: Portfolio Valuation
U) ( AERCAP GLOBAL LEADER IN AVIATION | Portfolio Valuation
Slide 64: AerCap's Prudent Approach to Depreciation
AerCap’s Prudent Approach to Depreciation Components of AerCap’s depreciation policy INDUSTRY STANDARD CURVE ILFC ACQUISITION TAILORED APPROACH Overall depreciation rate of ~5.8%1, versus 5.0% implied by industry standard curve.Depreciation policy validated by sales of 177 aircraft since the ILFC ac
Slide 65: Average of Third-Party Appraisals is Above AerCap's Carrying Value
Average of Third-Party Appraisals is Above AerCap’s Carrying Value Aircraft Portfolio Valuation AerCap’s and appraisers’ values as of March 31, 2016, adjusted for subsequent aircraft purchases and sales through September 30, 2016.Average of three appraisers’ half-life current market values as of Mar
Slide 66: Financial Outlook
U) ( AERCAP GLOBAL LEADER IN AVIATION | Financial Outlook a 4
Slide 67: On Track for a Strong Full Year 2016
On Track for a Strong Full Year 2016 Expected full year 2016 financial performance Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. TOTAL REVENUE ~$5.1billion ~$6.50 ADJUSTED DILUTED EPS ~$1.4billion ADJUSTED PRE-TAX EARNINGS ~$1.2billion ADJUSTED NET INCOME
Slide 68: Contracted Portfolio Growth
Contracted Portfolio Growth By 2020, our portfolio will grow by 1/3rd driven by $22B of contracted new tech. aircraft purchases Old Technology Current Technology New Technology 2017 2018 2019 2020 Contracted Purchases ($ billion) 5.5 6.8 5.4 4.0 Expected Sales ($ billion) ~1.0 ~1.0 ~1.0 ~1.0 Weighte
Slide 69: Highly Predictable Contracted Revenue
Highly Predictable Contracted Revenue Revenue line booked well into the future Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. Assumed Contracted ~93% of our lease rents through 2019 are already contractedTotal contracted lease revenues are ~$13 billion through 2019Avera
Slide 70: Key Drivers
Key Drivers Younger aircraft portfolio while maintaining strong margins Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor.Age at year end.Basic lease rents divided by average book value of flight equipment and maintenance rights intangible.Interest expense including fair va
Slide 71: Excess Capital Generation
Excess Capital Generation AerCap will continue to generate significant excess capital going forward Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. We expect to generate a total of $1.0+ billion of excess capital during 2017 and 2018 after contracted purchasesThis assume
Slide 72: EPS Outlook
EPS Outlook Core EPS will continue to grow through 2018 Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. 2016 Earnings on Track:Core EPS of ~$5.50 and adjusted EPS of ~$6.50 including gains and non-recurring items2017 Core EPS:~($0.15) reduction in EPS from impact of deli
Slide 73: Financial Summary
Financial Summary AerCap continues to exceed financial targets Very strong earnings and cash flow generationCompleted ~$5 billion of aircraft sales since the ILFC acquisition, de-risking the portfolio and further increasing cash flowsDe-levered rapidly and returned to investment grade status ahead o
Slide 74: Conclusions
Conclusions Conclusions CREATING LONG-TERM VALUE FOR INVESTORS Strong balance sheet with broad access to capital and liquidity Strong, predictable earnings and cash flow generating significant excess capital Attractive growth and return profile driven by contracted revenues and portfolio growth Good
Slide 75: AerCap Global Leader in Aviation
U) ( AERCAP GLOBAL LEADER IN AVIATION
Slide 76: AerCap Holdings N.V. contact details
AerCap Holdings N.V.AerCap House65 St. Stephen’s GreenDublin 2, Ireland+353 1 819 2010contact@aercap.com Follow us on