AerCap Holdings N.V. (AER) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A highlight strong financial performance, increased EPS guidance, robust aircraft demand, and strategic partnerships. The management's disciplined capital allocation, shareholder returns, and investments in technology further support a positive outlook. Despite some uncertainties, such as unresolved litigation and Spirit aircraft downtime, the overall sentiment is positive, with strong demand and strategic initiatives likely to drive stock price growth.
Key Financial Performance
GAAP net income $3.8 billion or $21.30 per share in 2025, a record high. This includes $1.5 billion of net recoveries related to the Ukraine conflict.
Adjusted net income $2.7 billion or $15.37 per share in 2025, also a record. This excludes the Ukraine conflict recoveries and purchase accounting items.
Full year revenues $8.5 billion in 2025, an all-time high. Driven by strong demand and operational execution.
Sales volumes $3.9 billion in 2025, a record. Aircraft sales were particularly elevated, with 108 owned aircraft sold at an average age of 15 years.
Cash CapEx $6.1 billion in 2025. Reflects robust fleet growth and strategic acquisitions.
Operating cash flow $5.4 billion in 2025. Indicates strong cash generation capabilities.
Capital returned to shareholders $2.6 billion in 2025, the highest annual amount ever. Achieved through share repurchases and dividend payments.
Net debt-to-equity level 2.1x at year-end 2025. Improved due to strengthened balance sheet and credit rating upgrade from Fitch.
Insurance and other recoveries related to Ukraine conflict $1.5 billion in 2025. Total pretax recoveries since 2023 reached $3 billion, exceeding the net charge of $2.7 billion recognized in 2022.
Transactions executed 705 in 2025. Included the sale of 189 assets with a gain on sale margin of 27%.
Engine leasing business Approximately 100 engines on order at year-end 2025. Expanded partnership with GE Aerospace to support GE9X engine.
Cargo business Delivered the first 8 converted 777 aircraft in 2025. Achieved certification for the 777-300ERSF passenger to freighter conversion program.
Helicopter business utilization rate 99% in 2025. No Sikorsky S-92 helicopters available for lease, reflecting strong demand.
GAAP net income for Q4 2025 $633 million or $3.79 per share. Adjusted net income was $660 million or $3.95 per share.
Basic lease rents $1.688 billion in Q4 2025, flat compared to the previous quarter.
Net gain on sale of assets $253 million in Q4 2025. Full year gain on sale margin was 27%, translating to 2x book equity value.
Interest expense $474 million in Q4 2025.
Net maintenance contribution Negative $106 million in Q4 2025, approximately $130 million to $150 million lower than normal due to Spirit Airlines restructuring and other unusual items.
Operating cash flow for Q4 2025 $1.2 billion. Reflects strong cash generation.
Book value per share Increased by over $45 or 68% since the end of 2022. Grew by 19% in 2025 alone.
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Operating Highlights
Record GAAP net income: Achieved $3.8 billion or $21.30 per share in 2025.
Adjusted net income: Reported $2.7 billion or $15.37 per share.
Revenue growth: Full year revenues reached $8.5 billion, an all-time high.
Fleet growth: Acquired Spirit's order book of 52 Airbus A320neo family aircraft and 45 additional options from Airbus.
Engine business expansion: Expanded partnership with GE Aerospace to support GE9X engine and ordered approximately 100 engines.
Cargo business milestone: Received certification for 777-300ERSF passenger-to-freighter conversion program and delivered 8 converted aircraft.
Helicopter business growth: Signed 71 lease agreements and introduced Airbus H160 into fleet.
Aircraft sales: Sold 108 owned aircraft at an average age of 15 years, generating strong gains and improving portfolio quality.
Leased aircraft extensions: Extended 87% of leased aircraft in 2025, up from 79% in 2024.
Demand for aviation assets: Robust demand driven by supply constraints and high load factors.
Capital return to shareholders: Returned $2.6 billion through share repurchases and dividends.
Balance sheet strengthening: Achieved a net debt-to-equity level of 2.1x and received a credit rating upgrade from Fitch.
Operating cash flow: Generated $5.4 billion in 2025.
Structural aircraft shortage: Projected to persist through the end of the decade due to supply-demand imbalance.
Cargo platform strategy: Focused on extending the useful life of passenger aircraft through conversions.
Excess capital deployment: Over $3 billion of excess capital to be allocated flexibly in 2026.
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Risk or Challenges
Supply Chain Constraints: Delivery delays and maintenance backlogs have constrained supply, and while OEM production rates have increased, normalization of the supply-demand imbalance is not expected until sustained higher production rates are achieved.
Aircraft Manufacturing Complexity: Aircraft manufacturing is a complex process, and production surprises to the upside are unlikely, which could prolong supply constraints.
Economic and Geopolitical Risks: Global trade tariffs and geopolitical challenges, such as the Ukraine conflict, have impacted the cargo market and could pose risks to operations.
Spirit Airlines Bankruptcy: Restructuring costs related to the Spirit Airlines bankruptcy have increased leasing expenses and negatively impacted net maintenance contribution.
Interest Rate Environment: The average cost of debt increased to 4.1%, reflecting a higher interest rate environment, which could impact financial performance.
Maintenance Revenue Fluctuations: Net maintenance contribution was significantly lower than normal in Q4 2025 due to the Spirit restructuring and other unusual items, indicating potential volatility in maintenance-related income.
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Guidance & Outlook
Adjusted EPS for 2026: AerCap is projecting an adjusted EPS range of $12 to $13 per share for 2026, not including any gains on asset sales.
Dividend Increase: The company has increased its quarterly dividend to $0.40 per share.
Share Repurchase Program: AerCap announced a new $1 billion share repurchase program in December 2025.
Aircraft Supply and Demand: The structural shortage of aircraft is expected to persist at least through the end of this decade, despite recent increases in OEM production rates.
Cargo Aircraft Deliveries: AerCap plans to deliver another 15 cargo aircraft from its cargo conversion programs in 2026, including 5 from the 777 conversion program.
Cash CapEx for 2026: The company is forecasting cash CapEx of around $5.2 billion for the year.
Asset Sales for 2026: AerCap is forecasting asset sales of $2 billion to $3 billion in 2026.
Revenue Projections for 2026: The company expects total revenue of around $7.6 billion for 2026, with lease rents of approximately $6.7 billion and maintenance revenues of around $700 million.
Expense Projections for 2026: Projected expenses include depreciation and amortization of around $2.6 billion, interest expense of around $2 billion, and leasing expenses, SG&A, and other expenses totaling around $1.2 billion.
Effective Tax Rate for 2026: AerCap is projecting an effective tax rate of 15.5% for 2026.
Equity Investments Earnings: The company expects to recognize earnings of around $200 million from equity investments, primarily from its engine leasing joint venture, SES.
Excess Capital Deployment: AerCap has over $3 billion of excess capital to deploy in 2026, which will be allocated flexibly and strategically.
Fleet Order Book: 95% of AerCap's order book is placed for the next 2 years, providing exceptional visibility into future cash flows.
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Shareholder Return Plan
Quarterly Dividend Increase: AerCap announced an increase in its quarterly dividend to $0.40 per share for 2026.
Dividend Payments in 2025: AerCap paid quarterly dividends as part of its $2.6 billion capital return to shareholders in 2025.
Share Repurchase Program in 2025: AerCap repurchased approximately 22.1 million shares, returning $2.6 billion to shareholders in 2025.
New Share Repurchase Program for 2026: AerCap announced a new $1 billion share repurchase program in December 2025.
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Key Q&A
Q:Is there a point where the backlog window would grow so significant that you might feel you have no choice but to get in with an incremental sizable order?
A:Aengus Kelly stated that while they hope any downturn is far off, the supply dynamics in the market are structural and long-term. He mentioned that AerCap added 103 aircraft to their order book last year without direct OEM orders and also ordered 22 helicopters and 281 new engines. He emphasized that they would order with OEMs if the right opportunity arises but highlighted AerCap's unique capabilities and global reach.
Q:Is there any size where individual lessors simply become potentially too large?
A:Aengus Kelly explained that AerCap has been able to maintain price and placement discipline despite its size, as evidenced by their results. He noted that the liability side of the business has changed dramatically over the years, with more investment-grade lessors and public debt offerings, making aircraft a safe store of value.
Q:What is your take on the A220-500 and its potential impact on the market?
A:Aengus Kelly expressed skepticism about the need for the A220-500, stating that it would likely cannibalize Airbus's own market share and incur significant costs. He suggested that Airbus should focus on improving the efficiency of manufacturing the A220-300 rather than scaling up.
Q:When does the trade of selling aircraft at a gain end, and how does AerCap transition to a traditional leasing model?
A:Aengus Kelly highlighted that the majority of AerCap's earnings come from the operating business, and they have consistently sold assets at a gain for 20 years. He attributed this to disciplined asset acquisition and management. He expressed confidence in continuing to generate value through disciplined management and sales.
Q:What worries you in terms of risk mitigation?
A:Aengus Kelly emphasized the importance of day-to-day operations, internal processes, and audit procedures. He stated that maintaining efficient operations and adhering to processes are critical to the company's success and risk mitigation.
Q:How do you see the deployment of excess capital, and is it embedded in your guidance for 2026?
A:Peter Juhas mentioned that the guidance assumes some buybacks and other capital deployment. He emphasized focusing on opportunities that provide the most value, whether through buybacks, adding to the order book, or other investments. Aengus Kelly added that discipline in capital allocation is key.
Q:Do you think future years will have comparable levels of aircraft additions to the order book?
A:Aengus Kelly expressed confidence in the growth of the aviation industry and leasing space. He highlighted AerCap's ability to find attractive opportunities for shareholders and mentioned recent additions to their order book, including 103 aircraft and 281 engines in the last two years.
Q:What is the timing for Spirit aircraft to be released and go back into service?
A:Peter Juhas stated that the guidance includes the downtime for Spirit aircraft, with the first aircraft expected to return in the second half of the year and some extending into early 2027.
Q:What are the most attractive uses of capital for 2026?
A:Aengus Kelly stated that capital allocation priorities include shareholder returns, asset acquisitions, and M&A. He emphasized that the key is discipline and ensuring that any capital allocation increases the company's value on a risk-adjusted basis.
Q:Are you seeing more unique opportunities to acquire assets, and how does that impact leverage and shareholder returns?
A:Aengus Kelly noted that the company's current leverage is influenced by a large insurance recovery. He emphasized that AerCap has consistently found attractive uses of capital, whether through buybacks or asset acquisitions, and will continue to do so.
Q:Are you exploring converting engines to power turbines for data centers?
A:Aengus Kelly confirmed that they are exploring this opportunity but want to ensure the demand is durable. He highlighted AerCap's position as the largest owner of CFM56 engines and their focus on serviceable engines.
Q:How do you measure the value of aircraft slots acquired from Spirit?
A:Aengus Kelly explained that value is assessed based on market knowledge, delivery slots, and price levels. He declined to quantify the value but emphasized the importance of understanding price and value differences.
Q:Can you provide an update on unresolved or unsettled litigation related to Ukraine?
A:Peter Juhas mentioned ongoing litigation in London and stated that no further recoveries are included in their guidance. He noted that they have already recovered $3 billion, which is a significant result.
Q:What technology investments are you making to improve efficiency?
A:Aengus Kelly highlighted investments in IT and technology systems to enhance data efficiency and asset management. He emphasized the importance of data in assessing asset value and maintenance costs.
Q:Why has the CapEx guide for the year decreased from $5.8 billion to $5.2 billion?
A:Peter Juhas explained that the decrease is due to significant CapEx in the fourth quarter of the previous year, including cash payments and deliveries. He noted that the $5.3 billion estimate for the next year is reasonable and could grow with additional opportunities.
Q:Do you foresee systemic risk to aircraft lessors from financially weaker airlines failing to meet contractual return conditions?
A:Aengus Kelly acknowledged the risk but emphasized AerCap's ability to provide alternatives, such as engine leasing or securing MRO slots, to manage such situations. He noted that this is part of their regular business operations.
Q:When do you expect lease renewal rates to normalize, and what percent of your fleet are COVID leases?
A:Aengus Kelly stated that elevated lease extensions are driven by OEM production delays and the durability of new technology. He expects this trend to persist into the 2030s. Peter Juhas added that COVID-era leases account for 12% of the fleet and will roll off by 2031-2032.
Q:What is your view on the supply-demand balance in the aircraft market?
A:Aengus Kelly believes that supply will be structurally limited well into the 2030s due to production constraints and the durability of new technology. He emphasized that engine OEMs are not incentivized to allow oversupply, as it would impact their long-term profitability.
Q:Can you explain AerCap's barbell approach to managing its portfolio?
A:Aengus Kelly explained that AerCap focuses on having older variants of older technology and young variants of new technology. This approach ensures that they avoid the risk of young older-technology assets becoming obsolete while investing in assets with durable demand.
Q:Review of Unclear Management Responses
A:Management avoided directly quantifying the value of aircraft slots acquired from Spirit and did not provide specific details on unresolved litigation related to Ukraine. Additionally, they used general terms like 'discipline' and 'opportunities' when discussing capital allocation without providing concrete examples or figures.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AerCap line
AerCap market
AerCap strength
AerCap value
Aerospace support
Airbus Aneos
Airbus lessor
Airbus sale
Airlines lessor
Aneos Virgin
Atlantic month
Brian Canniffe
Bristow Group
Canniffe Group
Demand
Milestone helicopter
Ukraine conflict
activity
aircraft sale
aviation asset
backlog
certainty
conversion program
demand cargo
dividend
end decade
equity
high
production rate
recovery Ukraine
revenue
scale
support engine
volume
AER Transcript
AerCap Holdings N.V. (AER) Q4 2025 Earnings Call Transcript
Positive2-6
The earnings call summary and Q&A highlight strong financial performance, increased EPS guidance, robust aircraft demand, and strategic partnerships. The management's disciplined capital allocation, shareholder returns, and investments in technology further support a positive outlook. Despite some uncertainties, such as unresolved litigation and Spirit aircraft downtime, the overall sentiment is positive, with strong demand and strategic initiatives likely to drive stock price growth.
AerCap Holdings N.V. (AER) Q3 2025 Earnings Call Transcript
Positive10-29
The earnings call summary and Q&A session highlight strong financial performance, a raised EPS guidance, and robust market demand for aircraft. Positive factors include record sales volume, high utilization rates, and substantial share repurchases. The Q&A reveals management's optimistic outlook on aircraft demand and strategic capital allocation. Concerns about Spirit's engine costs and cautiousness on electric aircraft financing are noted but do not overshadow the overall positive sentiment. The company's strong financial health and strategic positioning suggest a positive stock price movement.
AerCap Holdings N.V. (AER) Q2 2025 Earnings Call Transcript
Positive7-30
The earnings call highlights strong financial performance, with a raised EPS guidance, a robust liquidity position, and a new share repurchase program, all indicating positive sentiment. The Q&A section suggests optimism about future growth and capital allocation. The Air France-KLM partnership and strategic capital deployment further enhance prospects. Despite market uncertainties, the overall sentiment leans positive, supported by strong operational metrics and strategic initiatives.
AerCap Holdings N.V. (NYSE:AER) Q1 2025 Earnings Call Transcript
Positive5-1
The earnings call indicates strong financial performance with increased EPS and net income, a substantial share repurchase program, and a solid liquidity position. Despite some uncertainties around tariffs and supply chain issues, the company projects optimistic EPS guidance for 2025 and has a strong demand for aviation assets. The Q&A reveals some concerns about guidance and freighter delays, but overall sentiment remains positive due to strong operational performance and strategic share buybacks. The market is likely to react positively to the robust financials and shareholder returns.
AER Slides
AER Report
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