ATW Daily News

AerCap, Aircastle post third-quarter profits, see signs of recovery

Monday November 9, 2009

AerCap Holdings and Aircastle Ltd., two midsized operating lessors, each reported solid third-quarter financial results and cited positive signals pointing toward a market recovery.

Aircastle, headquartered in Stamford, Conn., posted a 14.2% rise in net income to $33.5 million from $23.6 million in the year-ago period. CEO Ron Wainshal said, "Operating performance during the third quarter was excellent, with utilization at almost 100% and with unrestricted cash building to $132 million at Sept. 30." Revenue rose 14.7% to $165.7 million as higher maintenance and lease termination revenue offset a reduction in lease rental revenue and higher lease incentive amortization.

Amsterdam-based AerCap, meanwhile, netted $35.5 million for the period, down 31% from $51.3 million last year but considered it a strong result in view of the current market dislocation. The slide was attributed to falling maintenance revenue and income from asset sales in the current period. Total revenue declined 29.6% to $212.5 million, primarily driven by lower sales, but the company noted that "basic lease rents" rose 7% $142.4 million while interest expense excluding the mark-to-market of interest rate caps lowered by 30% and "net spread," the difference between basic rents and adjusted interest expense, rose 23%.

In a webcast to discuss the results, CEO Klaus Heinemann said, "We're delighted to report that our core leasing business, measured by our net spread, continues to grow strongly in a climate that remains extremely challenging."

Commenting on the state of the market, he said that "early signs of a market recovery we saw in March. . .[have] continued. There has been a recovery among our emerging market clients as well as among some of the low-cost carriers." He added that AerCap expects the winter season "to be challenging for airlines, but it is encouraging to see that so far, most remain able to fulfill their contractual obligations."

Heinemann said the company expects to complete its previously announced share-for-share merger with Genesis Lease early next year (ATWOnline, Sept. 21).

At the end of the third quarter, AerCap owned 171 aircraft and managed 53. It had 67 on order, a mix of Airbus narrowbodies and A330s.

During the Aircastle results webcast, Wainshal said the lessor is seeing "positive signals both from industry data and from our customers. . .For modern narrowbody aircraft, particularly 737-800s and A320s, we believe lease rentals may have bottomed out and started increasing," but demand for older-generation aircraft continues to be "soft," he added.

Aircastle's fleet numbered 128 aircraft on Sept. 30. "We see exciting growth opportunities in the market and we've started pursuing them actively. With so many of the leading aircraft lessors on the sideline or worse, we believe we are entering an incredibly attractive investment climate," Wainshal said.

by Perry Flint

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