What I'm currently eyeballing is the cash that comes in during the quarter where I am hoping to see strong sequential improvement and AerCap did not disappoint one bit there. Operating cash flowįigure 2: Operating cash flow AerCap 2020 (Source: AerCap) Obviously, the charges should not be ignored but having earnings drop more or less in line with revenue is somewhat appreciable. The loss on investment is merely the result of revaluing the shares in Norwegian ( OTCPK:NWARF) that AerCap had in its possession and was offset maintenance revenues as leases on some Norwegian aircraft ended.Įarnings were heavily impacted, but the bottom line still showed a small profit for the quarter which marks a significant improvement from Q3 2020 when AerCap booked a $850 loss driven by impairment charges on flight equipment.įor the full year, revenues declined by 9% while earnings excluding one-off items declined by 7.4%. That's not necessarily a negative thing as debt can be paid off due to a strong a cash position or opportunities to refinance at attractive terms. Furthermore there was a $76 million loss on debt extinguishment to account for the difference between fair value and carrying value of the debt when the debt is recalled before the majority date. The bigger adjustment was the $117 million cash accounting charge as results were corrected for airlines entering into cash accounting from the traditional accrual accounting method. In Q4 2020 comparable impairments remained absent, but there was a “different” $27 million asset impairment related to lease terminations and aircraft sales. In the third quarter of 2020, asset impairments drove costs higher as a fleet review showed the need for those adjustments to be made to the books. Sequentially, revenues were stable which is a good sign in my view and for the full year the revenues came down by 9% showing that the leasing business is shielded relatively well.Īnother positive was that lease deferrals increased by just $5 million to $490 million and it seems AerCap still expects the aggregated lease deferrals to come in lower than the initial expected range of $700 million to $800 million.įigure 2: Income AerCap 2020 (Source: AerCap) Overall, the year-over-year decline in revenues was 18% up from 14% in the last quarter. Gains on assets were lower, driven by mix and volume. For the full year because lease terminations ending abruptly, there still were maintenance rents due or reserves that the lessor has now recognized as revenue. If the aircraft is in an extremely good condition, the lessor should pay the lessee, and when the state of the aircraft is less than agreed on previously, the lessee should pay the lessor. When leases end, the aircraft is supposed to be handed to the lessor in a certain stage. Maintenance rents were $23 million lower for Q4 compared to last year due to lower end of lease compensations. Around $310 million or 60% of the basic lease rent revenue was driven by some payments being accounted for as they occur. For the full year, basic lease rents declined by 13% and while that is a double digit decline, it is one that is not completely unexpected. Year-over-year the decline in Q4 basic lease rents was 17% driven by lease terminations, lease restructuring, bankruptcies and a switch to cash accounting. I believe you can consider this stabilization of the basic lease rents. That can partially be explained by a $117 million pressure during the quarter because for some lessees the revenues is being accounted for when the cash comes in rather than the accrued accounting method. Obviously, AerCap already provided its Q4 results a month ago but I have not seen an analysis of the results that is why I am providing an analysis now as I believe the full year results are important also when assessing the results in 2021 to see how things develop, Revenues stabilizeįigure 1: Revenues and other income AerCap Q4 (Source: AerCap)īasic lease rents came in quite a bit lower at $885 million year-over-year but marking a very modest sequential decline of $12 million. In this report, I will be analyzing the lessor's Q4 2020 performance to see how COVID-19 is affecting the company’s business with special attention for the sequential trajectory in 2020. At the time of writing, shares of AerCap are up 135% since I marked AerCap a buy. Photo by Zhonghui Bao/iStock via Getty ImagesĪerCap (NYSE: NYSE: AER) has been one of the companies I marked as a buy, a risky one, but still a nice buy if you believe in the long term trajectory of the air travel market and the role that aircraft lessors could be playing in that market.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |