Aercap Holdings N.v. · NYSE:AER
Aercap — Investor Day (November 2016)
76 slides from Aercap's investor day presentation, Nov 16, 2016
Slide 1: 2016 Investor Day
2016 Investor Day AerCap Holdings N.V. November 16, 2016
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 correct. In light of these risks, uncertainties and assumptions, the future respect to future performance and events. These statements, estimates and performance or e
Slide 3: Agenda
Agenda | Introduction John Wikoff Head of Investor Relations | AerCap Update Aengus Kelly Chief Executive Officer | Leasing Philip Scruggs President & Chief Commercial Officer | Q&A and Break 334
Slide 4: Agenda
Agenda | Portfolio Management Edward O’Byrne Chief Investment Officer Keith Helming Chief Financial Officer | Financial Performance Peter Juhas Deputy Chief Financial Officer | Q&A and Closing Remarks 344
Slide 5: AerCap Update
Aengus Kelly AerCap Update Chief Executive Officer
Slide 6: 10 Years of Consistent Profitability
10 Years of Consistent Profitability Combination of factors unique to AerCap and the aircraft leasing industry REVENUE GENERATORS RISK MITIGANTS Airline/Passenger Traffic Portfolio Management 10 YEARS Few Global Competitors Proper Liability Structure • Consistent Profitability Well Priced Fleet & Or
Slide 7: 10 Years of Consistent Profitability: Reinvesting profits
10 Years of Consistent Profitability Reinvesting profits from a position of strength REAL PROFITS REAL CASH FLOW 10 YEARS AerCap’s SLB for 41 AerCap’s SLB for 7 acquisition of 737NGs acquisition of 787s VAA Genesis American ILFC • Large Opportunistic M&A and SLBs 2007 2008 2009 2010 2011 2012 2013 2
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
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 billi
Slide 10: Air Travel Resilience
Air Travel Resilience Air travel remains resilient in an unpredictable world Air Traffic Growth1 (RPKs, billion per month) Peak oil Financial Euro Russian China, $147/bbl crisis crisis MERS Ebola ISIS crisis, Zika Brazil Brexit Turkey 650 Average 550 5.5% growth, seasonally 450 adjusted 350 250 150
Slide 11: Orders Cycle
Orders Cycle Aircraft orders are cyclical in nature and can vary significantly from one year to another Airbus Orders Cycle1 1,600 1,400 1,200 1,000 800 600 400 200 - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (1) Airbus orders to Septemb
Slide 12: Deliveries vs. Orders Cycle
Deliveries vs. Orders Cycle Deliveries cycle does not match orders cycle Airbus Deliveries vs. Orders Cycle1 1,600 Deliveries Orders 1,400 1,200 1,000 800 600 400 200 - 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (1) Airbus orders to Septe
Slide 13: AerCap's Competitive Advantage
AerCap’s Competitive Advantage Our global vision, reach and scale differentiate us from other lessors INDUSTRY LEADER Broad market penetration with long-standing customer relationships Independent company with unmatched speed of execution Entrenched position with OEMs and diversified aircraft portfo
Slide 14: AerCap's Business Principles
AerCap’s Business Principles AerCap’s consistent profitability is rooted in our key business principles • Proactive risk management • Focus on highly diversified, • Highly diversified customer long-term funding & long-term LEASING CAPITAL base STRATEGY assets STRUCTURE • Security deposits & • Flexib
Slide 15: Industry Landscape
Industry Landscape Since 2014, the Industry has evolved through consolidation and emergence of new platforms Consolidation among the largest lessors has resulted in relatively few platforms with global reach Bohai Avolon / CIT Macquarie AWAS1 AerCap ILFC Emergence of China-based leasing platfo
Slide 16: AerCap's Consistent Profitability
AerCap’s Consistent Profitability Ten consecutive years of strong profitability Net Income and Return on Equity1 ($ million) 1,500 30% ~$4.7 BILLION ADJUSTED NET INCOME over the past 10 years 1,200 TBD 20% 900 Average RoE 15% 600 10% 300 0 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Adjuste
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 GOOD • Emerging SLB opportunities in the $100+ billion market for new technology aircraft in the coming years STEWARD OF SHA
Slide 18: Leasing
Leasing Philip Scruggs President & Chief Commercial Officer
Slide 19: The Sky is Falling!
The Sky is Falling! A pe fORE EAN CONS areyented the Confidential property of the company, not for disclosure or use without permission AERCAP.COM
Slide 20: Nope. The Sky is Still in Place
Nope. The Sky is Still in Place TRAFFIC GROWTH AND LOAD FACTORS1 GLOBAL TRAFFIC INDUSTRY LOAD FACTOR +5.9% 80.6% Worldwide Domestic Worldwide International Worldwide Domestic Worldwide International +5.4% +6.3% 82.0% 79.8% (1) IATA Passenger Analysis for January – September 2016. 3 20 4
Slide 21: Air Travel Growth is Resilient
Air Travel Growth is Resilient 2015 & 2016 crises did not derail air travel growth 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 2035 Air traffic doubles every 15 years1 4.5% 2016
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 History Forecast 5,000 4,830 4,000 3,776 3,000 2,792 3,528 Emerging Countries 2,602 2,000 1,867 1,738 1,297 911 1,000 455 310 441 Developing Countries 130 206 66 776
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 Growth North Replacement 45,240 America 21% Stay in service Latin 22,730 Asia America Pacific 8% 39,620 38% 22,510 NEW AIRCRAFT Middle
Slide 24: 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 18,000 17,997 86% Virgin Atlantic Ow
Slide 25: AerCap's Platform Capabilities
AerCap’s Platform Capabilities AerCap has executed 283 lease transactions over the past 12 months 223 Narrowbody Aircraft Lease Transactions1 60 Widebody Aircraft Lease Transactions1 Embraer Other Other E190/E195-E2 9 2 5 Airbus A330 14 Boeing 787 15 Boeing 737NG 53 Airbus A320ceo Family Airbus A350
Slide 26: Used Aircraft Placement Remains Strong
Used Aircraft Placement Remains Strong Future unplaced expiries lowest it has been in years We Have Placed the Majority of Our Upcoming Scheduled Expiries 154 152 121 96 27 2016 2017 2018 Placed scheduled expiries1 Unplaced scheduled expiries1 (1) Owned fleet scheduled expiries as of December 31, 20
Slide 27: Forward Order Placement Remains Strong
Forward Order Placement Remains Strong 95% of our committed aircraft deliveries through 2018 are leased We Have Placed the Majority of Our Upcoming New Aircraft Deliveries 92 87 58 21 54 8 Remaining 2016 2017 2018 2019 Placed scheduled deliveries1 Unplaced scheduled deliveries (1) Placements include
Slide 28: AerCap Understands Widebody Aircraft
AerCap Understands Widebody Aircraft AerCap leased or sold over 230 widebody aircraft since the ILFC acquisition 35 33 31 7 Sold1 5 27 26 8 7 21 21 9 20 17 9 3 11 10 Leased1 28 28 23 20 17 14 12 10 10 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 (1) As of September 30, 2016. 3 28 4
Slide 29: 777 Placements Are on Track
777 Placements Are on Track Placement Status of Boeing 777s 28 View as of: 12 YE 12 1 4 20141 2015 2016 2017 2018 2019 View as of: 38 777s YE 17 10 leased or sold in - 5 1 past 22 months3 20152 2015 2016 2017 2018 2019 View as of: 3 8 10 Now - - 1 2015 2016 2017 2018 2019 (1) Scheduled expiries as o
Slide 30: Vision, Reach & Scale – The AerCap Advantage
Vision, Reach & Scale – The AerCap Advantage Aircraft leasing is the mechanism by which the market quickly and efficiently distributes capacity around the world 3 30 4
Slide 31: Largest Lessor Partner to Airlines Worldwide
Largest Lessor Partner to Airlines Worldwide Long-standing, strong customer relationships Years of Number of AerCap Lessor Years of Number of AerCap Lessor Customer Customer Relationship Aircraft1 Market Position1 Relationship Aircraft1 Market Position1 28 85 #1 25 20 #2 22 49 #1 24 47 #1 22 52 #1 2
Slide 32: Resilient Business
Resilient Business Revenue for the next 3 years already contracted Contracted revenues through 2019 Contracted revenues Assumed 99% 7% 94% 85% 93% 2017 2018 2019 Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. 3 32 4
Slide 33: Our Planes are Consistently Flying and Earning Revenue
Our Planes are Consistently Flying and Earning Revenue 99.5% UTILIZATION RATE1 (1) YTD as of September 30, 2016. 3 33 4
Slide 34: Strong Company in a Solid Sector
Strong Company in a Solid Sector STABLE PROFITS FOR SHAREHOLDERS 3 34 4
Slide 35: Portfolio Management
Edward O’Byrne Portfolio Management Chief Investment Officer
Slide 36: Portfolio Management
Portfolio Management Discipline enables sustainable superior returns for our leasing portfolio GOALS ACTIONS RESULTS1 Maintain the Most Liquid Disciplined Investment / 99+ % Portfolio Portfolio of In-Demand Divestment Policy Utilization Assets Proactive Depreciation Consistently Profitable, Balance
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 Current Portfolio1 2020 Portfolio1 FLEET: 1,134 / VALUE: ~$36 billion FLEET: 1,040 / VALUE: ~$34 billion FLEET: ~1,160 / VALUE: ~$47 billion AV
Slide 38: Buy-Side
6 ( AERCAP GLOBAL LEADER IN AVIATION ) Buy-side
Slide 39: Buy-Side: Leveraging Scale but Staying Disciplined
Buy-Side: Leveraging Scale but Staying Disciplined UNIQUE BARGAINING PIPELINE POWER Leveraging our Market OEMs: Largest buyer ~200 customer base Intelligence of aircraft We see all deals Airlines: Large We create our own scale SLBs opportunities (LATAM, AMR, VAA) 3 39 4
Slide 40: Attractive Order Book of Liquid Aircraft
Attractive Order Book of Liquid Aircraft AerCap well-positioned to meet current and future demand Order Book Strategy Average of ~70 New Aircraft Deliveries per Year1 • Bulk orders to obtain best pricing • Airbus largest customer Narrowbody Widebody Regional Jet Already delivered • Boeing 787 larges
Slide 41: SLB Opportunities Set to Increase Tenfold
SLB Opportunities Set to Increase Tenfold Significant opportunity for incremental growth beyond contracted deliveries # OF AIRCRAFT AVAILABLE FOR SLB TRANSACTIONS 600 SLB 400 MARKET1: ~30% OF TOTAL DELIVERIES CURRENT TECH. AIRCRAFT $100+ 200 AERCAP DOES NOT PARTICIPATE IN BILLION NEW TECH. AIRCRAFT
Slide 42: Sell-Side
0 ( AERCAP GLOBAL LEADER IN AVIATION 1) sell-side
Slide 43: Aircraft Trading Results
Aircraft Trading Results Aircraft trading generates cash, gains on sale and reduces impairment risk Track Record Since ILFC Acquisition 10-Year Track Record $2.5B $2.0B 177 $1.6M ~$5B 400+ Aircraft $1.5B $1.0B Sold2 Post-ILFC $1.0B Acquisition Yearly Sales Target Owned Trading gain Total sales aircr
Slide 44: Widebody Sales: Liquid Trading Supported by Solid Fundamentals
Widebody Sales: Liquid Trading Supported by Solid Fundamentals 13 15 37 777s A330s Other $1.0B $0.7B $0.7B DYNAMIC LEVERAGING INTERNATIONAL AERCAP SERVICING TRAVEL1 PLATFORM2 Int’l traffic (+6.3%) 65 OWNED 162 outpacing WIDEBODIES widebodies SOLD domestic leased (+5.4%) $2.4 billion ~$180 million OF
Slide 45: Aircraft Trading Process
Aircraft Trading Process Trading target: Mid-life aircraft AVERAGE TRADING AGE1 AIRCRAFT LIFE 0 8 12 15 25 Hold Sell Hold KEY TRADING TARGET: Part-Out MID-LIFE AIRCRAFT Sale to Airlines Part out 4% Airline INVESTOR CONSIDERATIONS 16% • Tangible/Infrastructure • Diversification BUYER Like Asset • Sta
Slide 46: Key Investment Themes
6 ( AERCAP GLOBAL LEADER IN AVIATION j Key Investment Themes
Slide 47: Strong Outlook
Strong Outlook Strong outlook for short and medium term aircraft demand Efficiency Gains Maxing Out = More Aircraft Needed Increased Appetite for Used Aircraft ~20% more seats produced in 10 years with Swing capacity management same aircraft1 Higher Load Factors & Reaching More airlines recognize th
Slide 48: Manufacturers Backlog Management
Manufacturers Backlog Management Matching short-term supply & demand through cycles Stable Aircraft Deliveries (as % of the fleet)1 OEMs Rational Delivery Policy Asian Financial Gulf Crisis Crisis 9/11 Crisis • Reduced delivery volatility: 30% • Regional diversification permits OEMs to reallocate de
Slide 49: Conclusions
Conclusions Disciplined approach to portfolio management Profitable trading history demonstrates integrity of balance sheet DISCIPLINED PORTFOLIO MANAGEMENT Well positioned portfolio mix with New Tech migration in progress Strong locked-in asset growth with significant incremental opportunities 3 49
Slide 50: Financial Performance
Financial Keith Helming Peter Juhas Performance Chief Financial Officer Deputy Chief Financial Officer
Slide 51: Key Financial Highlights
Key Financial Highlights ~$4 billion of cash flow (net of sales) used for Capex capex to buy new technology aircraft Strong Earnings & Cash Flows ~$2 billion of cash flow used to de-lever Significant balance sheet from 3.8x to 2.7x debt-to-equity Generated $2.8 billion of Deleveraging adjusted net i
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 Adjusted Net Income (~$2.8 billion)1 Operating Cash Flows (~$7.5 billion) ($ million) ($ million) 400 1,000 350 800 Average: ~$800 million per quarter 300 Average: ~$30
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 Adjusted Debt / Equity Ratio1 Book Value Per Share 3.8x $47 3.5x ~$2 billion of $45 cash flows 3.4x $44 used to de-lever 3.3x $42 3.2x $41 3.1x $39 $39 $37 3.0x $36 2.9x 2.8x 2.
Slide 54: Commitment to Investment Grade Ratings
Commitment to Investment Grade Ratings AerCap has regained Investment Grade credit ratings from S&P and Fitch Standard & Poor’s INVESTMENT GRADE RATINGS (STABLE) BBB- Fitch (STABLE) BBB- MAR. 2016 APR. 2016 JUL. 2016 Standard & Poor’s Moody’s Fitch upgrades AUG. 2015 upgrades AerCap to BBB- upgrades
Slide 55: Track Record of Returning Capital to Shareholders
Track Record of Returning Capital to Shareholders Return of Capital / Market Cap1 Share Repurchases2 9% 9% Over 35 million shares repurchased 17% 6% Pre-Acquisition 2015 3QYTD 2016 (1) Total dollar volume of share repurchases over market capitalization at the beginning of each period. Pre-Acquisitio
Slide 56: Approach to Capital Deployment
Approach to Capital Deployment Disciplined, dynamic approach to deploying excess capital • In general, our preferred choice for • Continuously monitoring deployment of excess capital opportunities • Focus on new technology aircraft Aircraft M&A • Recent opportunities are not as • Actively evaluate s
Slide 57: Liquidity & Funding
6 ( AERCAP GLOBAL LEADER IN AVIATION Liquidity @ Funding
Slide 58: Conservative Approach to Liquidity & Funding
Conservative Approach to Liquidity & Funding Target: ≥ 1.2x NTM sources-to-uses coverage Liquidity • 1.5x NTM sources-to-uses • $9 billion of available liquidity Target: Diverse sources of funding Access • ~$23 billion of funding raised since the ILFC transaction to Capital announcement AerCap is co
Slide 59: Strong Liquidity Position
Strong Liquidity Position Current available liquidity covers next ~18 months of future cash needs Sources vs. Uses (Next 12 Months) Liquidity Levels Since ILFC Acquisition ($ billion) Sources (for 12 months to September 30, 2017) ($ billion) 10.5 10.0 3.0x Unsecured Revolver 3.0 9.2 9.1 9.0 2.8x Oth
Slide 60: Diversified Funding Sources
Diversified Funding Sources AerCap sources capital from a wide array of secured and unsecured markets $3.8 $3.8 $2.6 $0.5 billion billion billion billion SENIOR UNSECURED NEW REVOLVING TAKE OUT NEW JUNIOR NOTES ISSUED FACILITIES UNSECURED NOTES SUBORDINATED 4 issuances NOTES ~$4.5 ~$5.8 ~$2.0 billio
Slide 61: Global Funding Partners
Global Funding Partners Over 85 bank relationships and over 450 fixed income investors Europe Asia Pacific Allied Irish Bank European ECAs AKA Helaba Aozora Bank First Commercial Bank NTT Barclays HSBC Bank of Kaohsiung of Taiwan Samsung Life BAWAG First Gulf Bank Insurance U.S.A. & Canada ING Bank
Slide 62: AerCap's Hedging Program
AerCap’s Hedging Program AerCap’s hedging program protects the company against increases in interest rates Forms of Hedging1 Floating Rate Leases, 17% Cash & Other We continuously monitor our interest rate exposure to ensure Interest Rate Caps & Swaps 12% we remain fully hedged Fixed Rate Debt A 100
Slide 63: Portfolio Valuation
0 ( AERCAP GLOBAL LEADER IN AVIATION j Portfolio Valuation
Slide 64: AerCap's Prudent Approach to Depreciation
AerCap’s Prudent Approach to Depreciation Components of AerCap’s depreciation policy INDUSTRY STANDARD CURVE ILFC ACQUISITION TAILORED APPROACH • Based on 25-year useful life and • ILFC aircraft fair valued at time of • We perform a detailed review of 15% residual value acquisition depreciation sche
Slide 65: Aircraft Portfolio Valuation
Aircraft Portfolio Valuation Average of Third-Party Appraisals is Above AerCap’s Carrying Value ($ billion) Carrying Value1 $2.8 8-9% Flight Equipment $32.8 Maintenance Rights Intangible 2.6 Maintenance Liability $35.4 (2.8) $32.6 Net Carrying Value $32.6 Market Value from Appraisers2 $35.4 Differen
Slide 66: Financial Outlook
6 ( AERCAP GLOBAL LEADER IN AVIATION j Financial Outlook
Slide 67: On Track for a Strong Full Year 2016
On Track for a Strong Full Year 2016 Expected full year 2016 financial performance ~$5.1 ~$1.4 ~$1.2 ~$6.50 billion billion billion TOTAL ADJUSTED PRE- ADJUSTED ADJUSTED REVENUE TAX EARNINGS NET INCOME DILUTED EPS Refer to slide 2: Disclaimer Incl. Forward Looking Statements & Safe Harbor. 3 67 4
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 AERCAP EXPECTED PORTFOLIO SIZE $47B $44B $41B $37B $35B 2017 2018 2019 2020 Contracted Purchases 5.5 6.8 5.4 4.0 ($ billion) Expected Sales ~1.0 ~1.0 ~1.0 ~1.0 ($ billion)
Slide 69: Highly Predictable Contracted Revenue
Highly Predictable Contracted Revenue Revenue line booked well into the future • ~93% of our lease rents through 2019 are already contracted • Total contracted lease revenues are ~$13 billion through 2019 99% 94% 85% • Average remaining lease term of 6.1 years • Provides significant visibility and s
Slide 70: Key Drivers
Key Drivers Younger aircraft portfolio while maintaining strong margins 2016E 2017E 2018E • Weighted average age of Weighted Average Age1 7.4 6.9 6.5 portfolio will decrease as we take delivery of new aircraft, Yield2 12.6% 12.1% 11.6 - 11.7% resulting in both a lower yield and a lower depreciation
Slide 71: Excess Capital Generation
Excess Capital Generation AerCap will continue to generate significant excess capital going forward ($ billion) 2017 2018 • We expect to generate a total of $1.0+ billion of excess Excess capital available before contracted capital during 2017 and 2018 ~$2.0 ~$1.9 purchases after contracted purchase
Slide 72: EPS Outlook
EPS Outlook Core EPS will continue to grow through 2018 ADJUSTED DILUTED EPS OUTLOOK • 2016 Earnings on Track: • Core EPS of ~$5.50 and adjusted EPS of ~$6.50 including gains and $6.58 ~$6.50 TBD non-recurring items $0.94 TBD ~$1.00 • 2017 Core EPS: • ~($0.15) reduction in EPS from impact of deliver
Slide 73: Financial Summary
Financial Summary AerCap continues to exceed financial targets PERFORMANCE TO DATE $70 • Very strong earnings and cash flow generation • Completed ~$5 billion of aircraft sales since the ILFC acquisition, de-risking the portfolio and further increasing cash flows $60 • De-levered rapidly and returne
Slide 74: Conclusions
Conclusions Strong, predictable earnings and cash flow generating significant excess capital Strong balance sheet with broad access to capital and liquidity CREATING LONG-TERM VALUE FOR Attractive growth and return profile INVESTORS driven by contracted revenues and portfolio growth Good steward of
Slide 75: AerCap Global Leader in Aviation
6 ( AERCAP GLOBAL LEADER IN AVIATION
Slide 76: AerCap Holdings N.V. contact details
AerCap Holdings N.V. AerCap House 65 St. Stephen’s Green Dublin 2, Ireland +353 1 819 2010 [email protected] Follow us on