AerCap Holdings N.V. Q4 2025 earnings call

Thank you, Operator, and hello everyone. Welcome to our fourth quarter 2025 conference call. With me today is our Chief Executive Officer, Aengus Kelly and our Chief Financial Officer, Pete Juhas. Before we begin today's call, I would like to remind you that some statements made during this conference call, which are not historical facts, may be forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. AerCap undertakes no obligation other than that imposed by law to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after this call. Further information concerning issues that could materially affect performance can be found in AerCap's earnings release dated February the 6th, 2026.

A copy of the earnings release and conference call presentation are available on our website at aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay. We will shortly run through our earnings presentation and will allow time at the end for Q&A. As a reminder, I will ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Aengus Kelly.

Thank you for joining us for our fourth quarter 2025 earnings call. This was a record year for AerCap, with exceptional financial and operating performance driven by disciplined execution across all of our business lines. In 2025, we reported record GAAP net income of $3.8 billion, or $21.30 per share, and adjusted net income of $2.7 billion, or $15.37 per share. Full-year revenues reached an all-time high of $8.5 billion, while sales volumes totaled a record $3.9 billion. During the year, we had Cash CapEx of $6.1 billion, and we generated $5.4 billion of operating cash flow for the full year 2025. Building on these record results, we returned $2.6 billion of capital to our shareholders last year, our highest annual amount ever, through the repurchase of approximately 22.1 million shares and the payment of quarterly dividends.

At the same time, we strengthened our balance sheet, resulting in a credit rating upgrade from Fitch and a net debt-to-equity level of 2.1x at year-end. We received $1.5 billion of insurance and other recoveries related to the Ukraine conflict in 2025, in large part due to the successful court judgment in June. This brings total pre-tax recoveries related to the Ukraine conflict since 2023 to approximately $3 billion, which exceeds the net charge of $2.7 billion that we recognized in 2022. These key achievements underscore the strength of our company and the value we deliver to you, our shareholders, every single day. As we look to the year ahead, our outlook remains strong, and that is why we are announcing an adjusted EPS range of $12-$13 per share for 2026, not including any gains on asset sales.

We have also increased our quarterly dividend to $0.40 per share. This is on top of the new $1 billion share repurchase program we announced in December. Moving to business activity during the year, ongoing secular trends continue to underpin the strength of aviation assets globally. Demand remains robust, with recent industry-wide load factors at record highs, while delivery delays and maintenance backlogs have kept supply constrained. To that point, it is encouraging to see increases in OEM production rates in recent months, which should start to alleviate some of the backlog for new aircraft. That said, we do not expect to see a normalization of the supply-demand imbalance until sustained higher monthly production rates are achieved. As I have said before, aircraft manufacturing is a complex industrial process, and production surprises to the upside simply do not occur.

So while demand dynamics may evolve, we remain confident that the current structural shortage of aircraft will persist at least through the end of this decade. Against this backdrop, in 2025, we executed 705 transactions, positioning AerCap to capitalize on these favorable market conditions. This included the sale of 189 assets, delivering a gain-on-sale margin of 27%, or 2x the book equity on our owned assets. The high volume of sales and consistently strong margins underscore the persistent demand we are seeing for our assets and our conservative book values. It is worth mentioning that aircraft sales were particularly elevated last year. We sold 108 owned aircraft at an average age of 15 years, generating strong gains while improving the overall quality of our portfolio. We also extended 87% of our leased aircraft in 2025, up from 79% in 2024, which further highlights the strength of customer demand.

Airlines and lessors remain prominent buyers, accounting for more than 80% of the aircraft sales revenues last year. Balancing our robust sales activity, we also delivered strong organic fleet growth in 2025, with full-year Cash CapEx reaching $6.1 billion. As noted on our last call, we acquired Spirit's order book of 52 Airbus A320neo family aircraft last year, along with an additional 45 options from Airbus. More recently, in January, we announced a sale-leaseback for six new Airbus A330neos with Virgin Atlantic, which we'll start delivering in the coming months. These are just two examples of bilateral transactions that enable us to secure today's most in-demand aircraft outside traditional OEM channels, and in most instances with delivery certainty before the end of the decade. With our scale, market intelligence, and strong financial position, AerCap is uniquely positioned to continue executing such strategic transactions.

Turning to the engine business, in 2025, we strengthened our engine offering by expanding our existing partnership with GE Aerospace, which will provide support to the GE9X engine. This partnership enhances AerCap's value proposition for airline customers worldwide at a time when engine support and spare engines are in exceptionally high demand. Our engine leasing business continues to offer a very attractive investment opportunity in this regard. At year-end, we have approximately 100 engines on order, which, once delivered, will further expand our capabilities and reinforce our leadership in this critical space. Now turning to cargo. 2025 was a landmark year for our cargo business, as we received certification for the 777-300ERSF passenger-to-freighter conversion program. This milestone allowed us to deliver the first eight of our converted 777 aircraft to customers worldwide, helping them to meet strong and growing air cargo demand.

The cargo market has shown tremendous resilience despite global trade tariffs and other geopolitical challenges. In addition to meeting demand, our cargo platform also extends the useful life of former passenger aircraft, enabling us to extract further value from our assets. Looking ahead, we remain focused on executing our robust pipeline of feedstock and expect to deliver another 15 cargo aircraft from our cargo conversion programs in 2026, five of which are part of the 777 conversion program. 2025 was equally momentous for Milestone, our helicopter business, as it celebrated 15 years in operation. Demand across multiple segments remained strong, reflected in the full-year utilization rate reaching 99%. Today, we have no Sikorsky S-92 helicopters available for lease. To put this into perspective, Milestone had 18 S-92 helicopters on the ground in 2020, which underscores the sustained recovery in this market.

Last year, we further strengthened our helicopter-operator relationships by signing 71 lease agreements with 23 customers, the most recent being with Bristow Group for five new Airbus H160s in the fourth quarter of 2025, becoming the first lessor to bring this aircraft type into their fleet. In closing, 2025 was a tremendous year for AerCap, a year that showcased the inherent strength and capabilities of our global industrial platform. Combining scale, expertise, and disciplined execution, we completed 705 transactions during the year, repurchased approximately 22.1 million of our outstanding shares, and generated $5.4 billion of operating cash flow, all while strengthening our balance sheet and growing book value per share. Looking ahead, we enter 2026 ready to build on this position of strength.

We have over $3 billion of excess capital to deploy, which we will continue to allocate with the flexible and disciplined approach that has defined our strategy since inception. 95% of our order book is placed for the next two years, and we have an average remaining lease term of seven years on our existing fleet, providing us with exceptional visibility into future cash flows. This degree of forward revenue certainty is something very few sectors can offer. These factors, together with structural supply constraints and the strong demand for aviation assets, give us a high level of confidence in the outlook for the business. We look forward to executing our strategy and continuing to deliver long-term value for our shareholders in 2026 and beyond. I will now hand the call over to Pete to review the financials in more detail.

Thanks, Gus. Good morning, everyone. Our GAAP net income for the fourth quarter was $633 million, or $3.79 per share. The impact of purchase accounting adjustments was $74 million for the quarter, or $0.45 a share. That included lease premium amortization of $25 million, which reduced basic lease rents, maintenance rights amortization of $36 million, which reduced maintenance revenue, and maintenance rights amortization of $13 million, which increased leasing expenses. During the fourth quarter, we had $43 million of recoveries related to the Ukraine conflict, or $0.26 per share. The tax effect of the purchase accounting adjustments and the net recoveries related to the Ukraine conflict was $5 million, or $0.03 per share. So taking all of that into account, our adjusted net income for the fourth quarter was $660 million, or $3.95 per share. I'll briefly go through the main drivers that affected our results for the fourth quarter.

Basic lease rents were $1.688 billion, basically flat compared to last quarter, and maintenance revenues were $225 million. Net gain on sale of assets was $253 million. We sold 55 of our owned assets during the fourth quarter for total sales revenue of just over $1.3 billion, resulting in an unlevered gain-on-sale margin of 24% for the quarter. As Gus mentioned, this brought our sales for the full year to a record $3.9 billion and a gain-on-sale margin of 27%, which translates into 2x book equity value. Interest expense was $474 million for the fourth quarter. Leasing expenses were higher than usual due to restructuring costs related to the Spirit Airlines bankruptcy.

When we look at maintenance revenue and leasing expenses, we generally look at them in terms of net maintenance contribution on an adjusted income basis, which is maintenance revenue less leasing expenses other than maintenance rights amortization. When we generally expect the contribution to be around $30 million-$50 million a quarter on average, although it does tend to fluctuate from quarter to quarter, mainly due to the level of maintenance activity. In the fourth quarter, the net maintenance contribution was -$106 million, so approximately $130 million-$150 million lower than normal. This reflects the net impact of the Spirit restructuring as well as other unusual items, as well as the timing of maintenance activity that I mentioned earlier. Our income tax expense for the fourth quarter was $78 million.

Equity and net earnings of investments accounted for under the equity method was $80 million, and that was primarily driven by continued strong earnings and gains on sale in the fourth quarter from our Shannon Engine Support joint venture. On the next slide, you can see a walk of our full-year earnings and EPS. As you can see, it was a record year for AerCap across a number of areas, including GAAP net income, adjusted net income, GAAP EPS, and adjusted EPS. We had approximately $3.8 billion of GAAP net income for the year, which included $1.5 billion of net recoveries related to the Ukraine conflict. That resulted in a record $21.30 of GAAP EPS for the year. After adjusting for the insurance recoveries as well as for purchase accounting items, our adjusted net income was approximately $2.7 billion.

That's an adjusted EPS of $15.37 per share, which is also a record. Our GAAP ROE for the full year was 21%, and our adjusted ROE was 15%. Operating cash flow was $5.4 billion for the year. As a reminder, this does not include any proceeds from Russian insurance settlements or any gains on sale, both of which go through investing cash flow. We continue to maintain a strong liquidity position. As of December 31st, our total sources of liquidity were approximately $21 billion. That compares to uses of around $11 billion, resulting in a next 12 months sources-to-uses coverage ratio of 1.8x, and that reflects excess cash coverage of around $9 billion. Our leverage ratio at the end of the quarter was 2.1 to 1, and our operating cash flow was approximately $1.2 billion for the fourth quarter.

Our secured debt-to-total assets ratio was 10% at the end of December, the same as last quarter, and our average cost of debt was 4.1%, a slight increase from 4% last quarter. During the fourth quarter, we bought back 3.5 million shares at an average price of $127.63 for a total of $444 million. In December, we announced a $1 billion share repurchase program, and today we've announced an increase in our dividend to $0.40 a share. One of the metrics that we focus on is growing book value per share. On this slide, you can see that AerCap's book value per share has increased by over $45, or 68%, since the end of 2022. Over the past year, book value per share increased by 19%, and in fact, over the past three years, it has increased at a compound annual growth rate of 19%.

Of course, this reflects in part the significant amount of insurance recoveries that we've had over the last three years, but it also reflects the company's ability to generate significant amounts of capital year after year. So that covers our 2025 performance. Now I'll turn to our guidance for 2026. For 2026, we're projecting adjusted EPS of $12-$13, not including any gains on sale. On the next slide, you can see a walk from our record adjusted EPS of $15.37 in 2025 to our guidance for 2026. The largest item is gains on sale of $3.95 that we had in 2025, and we have not included any gains in our 2026 forecast. We had high levels of other income in 2025 related to a number of specific items as well as high interest income, so we're projecting other income to be $0.45 lower in 2026.

Our effective tax rate was 13.6% in 2025 due to some releases related to prior years. For 2026, we're projecting an ETR of 15.5%, so that results in a reduction of $0.30. Other than those items, we're projecting our EPS to be higher by $1.80, which reflects the impact of lease rents, net maintenance contribution, SG&A, share repurchases, and other items. On the following slide, you can see a breakdown of our projected income statement for 2026 showing the major line items. For full year 2026, we expect to have lease rents of around $6.7 billion, maintenance revenues of around $700 million, and other income of around $200 million for total revenue of around $7.6 billion. On the expense side, we're projecting depreciation amortization of around $2.6 billion and interest expense of around $2 billion.

We expect leasing expenses, SG&A, and other expenses to total around $1.2 billion for the year. And I would note that the majority of the leasing costs associated with the Spirit restructuring were recognized in the fourth quarter of 2025. We will, of course, have downtime on aircraft that we've taken back from Spirit, which has an impact on lease revenue, and that's been reflected in this forecast. We've assumed that we'll have Cash CapEx of around $5.2 billion for the year, and we're forecasting asset sales of $2 billion-$3 billion. As you know, these figures can vary significantly as CapEx is largely dependent on OEM deliveries, and sales volume depends on the demand for assets and the time it takes to close those sales. As I mentioned, we've assumed an effective tax rate of 15.5%, which assumes no specific tax releases as we had in 2025.

In 2026, we expect to recognize earnings around $200 million from our equity investments, and that's primarily our engine leasing joint venture, SES. So altogether, that gives us projected GAAP net income of around $1.7 billion. After adding back purchase accounting adjustments of around $300 million, we expect to have adjusted net income of around $2 billion for the year. That gives us an adjusted EPS range of $12-$13, again, not including any gains on sale. So in closing, AerCap continued to perform very strongly during the fourth quarter, concluding a record year for the company across many fronts. As Gus mentioned, we continue to see a strong environment for leasing and a strong environment for aircraft sales, which is reflected in the record level of gains on sale for the full year.

We're continuing to generate strong cash flows that, in turn, result in greater profitability and more financial flexibility, and we're deploying capital where we see the most attractive opportunities. We also continue to return capital to shareholders. In 2025, we returned $2.6 billion to our shareholders through share repurchases and dividends. We announced another new share repurchase authorization of $1 billion in December, and today we've announced an increase in our quarterly dividend to $0.40 per share. These actions reflect our strong confidence in the value of AerCap and in our outlook for the future. And with that, operator, we can now open up the call for Q&A.