Earnings call transcript: AerCap Q2 2025 sees mixed results, stock dips

AerCap Holdings NV reported its Q2 2025 earnings on July 30, revealing a mixed financial performance. The company posted an adjusted earnings per share (EPS) of $2.83, slightly surpassing the forecast of $2.81. However, actual revenue fell short of expectations, coming in at $1.89 billion against a projected $2.03 billion. Following the announcement, AerCap’s stock experienced a pre-market decline of 4.82%, dropping to $107.25 from $112.68. According to InvestingPro data, the stock trades at an attractive P/E ratio of 7.01, significantly below industry averages.

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Key Takeaways

• AerCap’s adjusted EPS of $2.83 narrowly exceeded expectations.
• Revenue missed estimates by $140 million, impacting investor sentiment.
• Pre-market stock price fell by 4.82% to $107.25.
• Full-year 2025 adjusted EPS guidance was raised to $11.60.
• AerCap continues strong capital deployment with over $1 billion in share buybacks.

Company Performance

AerCap’s Q2 2025 performance showed resilience in earnings but faced challenges with revenue shortfalls. The company achieved a record GAAP net income of $1.3 billion and an adjusted net income of $502 million. Despite revenue challenges, AerCap maintained robust operational metrics, including a 99% aircraft utilization rate and a 97% lease extension rate, indicating strong demand for its leasing services. InvestingPro analysis reveals impressive gross profit margins of 58.63% and strong management performance, with aggressive share buybacks enhancing shareholder value.

Financial Highlights

• Revenue: $1.89 billion, below the forecast of $2.03 billion.
• Earnings per share: Adjusted EPS of $2.83, slightly above the $2.81 forecast.
• Operating cash flow: Approximately $1.3 billion.
• Leverage ratio: Improved to 2.2 from 2.4 last quarter.
• Total liquidity sources: Approximately $22 billion.

Earnings vs. Forecast

AerCap’s adjusted EPS of $2.83 marginally beat the forecast by $0.02, reflecting a surprise percentage of 0.71%. However, the revenue miss of $140 million represented a significant shortfall, with a negative surprise of 6.9%. This discrepancy between earnings and revenue likely contributed to the negative market reaction.

Market Reaction

Following the earnings announcement, AerCap’s stock experienced a pre-market decline of 4.82%, falling to $107.25 from $112.68. This reaction underscores investor concerns over the revenue miss despite a slight EPS beat. The stock’s movement contrasts with its 52-week high of $118.07, signaling market apprehension. Notably, analysts maintain a strong bullish consensus with a target range of $120-$144, suggesting potential upside. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels.

Outlook & Guidance

AerCap raised its full-year 2025 adjusted EPS guidance to $11.60, reflecting confidence in its ongoing operational efficiency and strategic initiatives. The company anticipates continued strong lease revenue and is exploring additional sale-leaseback and engine deal opportunities. AerCap aims to maintain a leverage ratio closer to 2.7, indicating a focus on disciplined financial management.

Executive Commentary

CEO Angus Kelly highlighted the company’s strategic positioning, stating, "The cheapest wide bodies in the world are available on the New York Stock Exchange under the ticker Alpha Echo Romeo." Kelly also emphasized AerCap’s consistent returns, noting, "We target that return of 8% to 10% over the treasury rate, and that’s what this company has always returned in all markets."

Risks and Challenges

• Revenue shortfalls may impact future earnings and investor confidence.
• Global trade uncertainties could affect aircraft leasing demand.
• Macroeconomic pressures may influence capital allocation and leasing rates.
• Market saturation in certain regions could limit growth opportunities.
• Fluctuations in fuel prices may impact airline profitability and leasing demand.

Q&A

During the earnings call, analysts queried the impact of tariffs on AerCap’s operations, to which management responded with minimal expected impact. Discussions also covered the company’s strategic focus on engine versus airframe investments, highlighting AerCap’s balanced approach to capital allocation and growth potential.

Full transcript - AerCap Holdings NV (AER) Q2 2025:

Conference Operator: Day, and welcome to AerCap’s Q2 twenty twenty five Financial Results. Today’s conference is being recorded and a transcript will be available following the call on the company’s website. At this time, I would like to turn the conference over to Joseph McGinley, Head of Investor Relations. Please go ahead, sir.

Joseph McGinley, Head of Investor Relations, AerCap: Thank you, operator, and hello, everyone. Welcome to our second quarter twenty twenty five conference call. With me today is our Chief Executive Officer, Angus Kelly and our Chief Financial Officer, Pete Euhas. 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 08/30/2025. A copy of the earnings release and conference call presentation are available on our website at aircap.com. This call is open to the public and is being webcast simultaneously at aircap.com and will be archived for replay. We will shortly run through our earnings presentation and will allow time at the end for Q and A.

As a reminder, I would ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Angus Kelly.

Angus Kelly, Chief Executive Officer, AerCap: Thank you for joining us for our second quarter twenty twenty five earnings call. We are pleased to report a record quarter of earnings generating GAAP net income of $1,300,000,000 and earnings per share of $7.09. This reflects strong execution and demand for our assets as well as the successful outcome in our contingent and possessed insurance case in the commercial court in London in June. Adjusted net income was $502,000,000, and adjusted EPS was $2.83. Given these strong results and our improved outlook for the year ahead, we have increased our twenty twenty five full year adjusted EPS guidance again today.

Global passenger traffic continues to grow, led by APAC and The Middle East. In The US, domestic traffic declined after slower growth in April, but international traffic performed better, demonstrating the resilience of long haul demand. This phenomenon of international growth outpacing domestic growth is a trend that we’ve seen throughout the year and around the world. On the aircraft side, we continue to see strong demand from our customers despite the uncertainty regarding tariffs and trade. This is evidenced by our 99% utilization rate and 97% extension rate in the second quarter.

These high levels of utilization and extension rates have persisted over recent years, resulting in more options on placements and stronger returns overall. In fact, across the 30 extensions we completed in q two, the new leases signed were on average higher than their previous lease despite being older aircraft now. The resilience of international travel means the broad based demand for wide bodies continues. This was shown by the lease agreements we signed for triple sevens and a three thirty seals with carriers in Asia, The Middle East, and Europe in q two. Furthermore, as a result of the deals we have signed or have in the pipeline in q three, we have only two wide bodies available for lease between now and the 2027 out of a fleet of more than 250 wide bodies.

On the narrow body side, we see similar trends. We signed lease agreements with 12 different carriers in the quarter, including six a three twenty neo placements from our order book with a carrier in The Middle East. We extended 26 used aircraft with an average age of 16 years that are on lease to carriers predominantly in Europe and Asia. There has been a lot of focus on the OEM supply shortages over the last number of years, which, of course, have been helpful for lease rates and sales pricing. These delays have also resulted in fewer opportunities for organic growth via sale leasebacks.

That dynamic is beginning to change, and deals are beginning to present themselves. Of course, they have to meet our return targets, but I am confident that as OEMs ramp up deliveries over the next few years, AerCap will be well positioned to take advantage of these opportunities given the combined strength of our balance sheet and customer relationships. Spare engine demand remains particularly robust today, given the challenges with new technology aircraft in particular, keeping utilization levels high. Our engine platforms are focused on supporting their OEM airline and MRO customers. Spare engine support is a key part of AerCap’s overall proposition to customers, And our portfolio of over 1,200 spare engines, 90% of which are new technology, mean AerCap is well positioned to do so.

On new deliveries, our organic growth strategy continues with the purchase of 31 new LEAP engines across the SES and AerCap platforms, taking total deliveries for the year to date to 84. A further 46 LEAPS are expected to deliver through the end of this year. We also delivered 36 engines to various airline customers in q two alone under commercial lease agreements. So overall, activity remains robust across the platforms. Finally, we are set to expand our MRO support capability with an engine leasing partnership with Air France KLM announced at the Paris Air Show, which we hope to finalize later in the year.

This mutually beneficial partnership provides spare engine support for customers of Air France KLM’s MRO operation and quicker MRO slots for our own fleets. Turning to milestone. Overall, the helicopter landscape remains reasonably robust. Global fleet utilization remains high, aided by continued OEM production discipline and supply chain constraints, which like the aircraft industry are likely to persist for some time. From an aircraft fleet perspective, we continue to adopt a balanced portfolio management strategy, investing in new technology helicopters at accretive returns while divesting of midlife and out of production types.

During the quarter, we continue to see a high percentage of helicopters of varying types extending with their existing operators. This included deals with operators in The US, South Korea, India, and The UK. So in summary, this was another great quarter for AerCap with earnings and cash flows remaining strong throughout the business. We continue to deploy your capital effectively with the purchase of approximately $3,000,000,000 of new equipment and the repurchase of over $1,000,000,000 of stock year to date. In addition, we expect to spend another $3,000,000,000 in new equipment through the 2025 and have a further 800,000,000 in share repurchase authorizations outstanding.

Going forward, this means that AerCap is in an exceptional position to provide unique support to our customers and strong returns to our shareholders. With that, I’ll now hand the call over to Pete to review the financials and the outlook for 2025.

Pete Euhas, Chief Financial Officer, AerCap: Thanks, Gus. Good morning, everyone. Our GAAP net income for the second quarter was a record $1,259,000,000 or $7.09 per share. This included net recoveries related to the Ukraine conflict of $973,000,000 or $5.48 per share. This reflects the award we received and the favorable decision by the London Commercial Court in June.

The impact of purchase accounting adjustments was $82,000,000 for the quarter or $0.46 per share. The net tax effect of both of these items was $134,000,000 or $0.75 per share. As a result, our adjusted net income for the second quarter was $5.00 $2,000,000 or $2.83 per share. Besides the insurance award, there were two main items that affected our results for the second quarter. First, we had a tax provision release of $41,000,000 And second, our SG and A expense was higher than normal due to higher stock based compensation expense, which was driven by some upfront recognition of expenses.

Going forward, we expect stock based compensation expense to return to a more normal run rate of around $30,000,000 a quarter. Turning to sales, our net gain on sale of assets was $57,000,000 We sold 18 of our owned assets during the quarter for total sales revenue of $374,000,000 That resulted in an unlevered gain on sale margin of 18%, which is equivalent to a multiple of 1.7 times book value. The sales volume was a little lower than normal during the second quarter, mainly due to timing of deals closing. As of June 30, we had $470,000,000 of assets held for sale, and I currently expect our sales to be around $2,500,000,000 for the full year. Our liquidity position continues to be very strong.

As of June 30, our total sources of liquidity were approximately $22,000,000,000 That includes 2,700,000,000 of cash and $12,000,000,000 of revolvers and other committed facilities as well as expected sales and operating cash flow. Our sources to uses coverage ratio at the end of the quarter was 1.9 times, which amounts to excess cash coverage of around 10,000,000,000 Our leverage ratio was 2.2 to one, down from 2.4 to one last quarter. That decrease was primarily driven by the favorable insurance judgment that we received in June. Our operating cash flow was approximately $1,300,000,000 for the second quarter and our average cost of debt remained the same at 4.1%. We bought back 4,700,000.0 shares during the quarter for a total of $445,000,000 That takes us to over $1,000,000,000 of share repurchases so far this year.

We currently have around $800,000,000 of available capacity remaining in our existing share repurchase authorization. Turning now to guidance. In February, we projected adjusted earnings per share of $8.5 to $9.5 for the full year 2025, not including any gains on sale. On our last earnings call, given the strong performance in the first quarter, we raised our guidance to the top half of that range. As Gus mentioned, today we’re raising our full year 2025 adjusted EPS guidance to approximately $11.6 That includes the $1.1 of gains on sale that we had in the first half of the year, but it doesn’t include any gains on sale for the second half of the year.

In the first half, the outperformance relative to guidance was driven by higher lease revenue, including net maintenance contribution, and we would expect lease revenue to continue to be strong in the second half of the year. We also had some benefits from higher other income in the first quarter as well as the tax release in the second quarter. So that results in full year guidance of $11.6 This reflects our strong performance year to date and our positive outlook for the rest of the year. So in closing, we’re coming off another strong quarter for AerCap in terms of earnings and EPS and, of course, the favorable decision in our insurance case. We continue to be in a position of strength with a strong balance sheet, low leverage and strong liquidity.

We’re confident about the outlook for the business as you can see from our increase in full year guidance and our repurchases of over $1,000,000,000 of stock so far this year. And with that, operator, we’ll open up the call for Q and A.

Conference Operator: Thank Q

Analyst: Hi, thank you. Good morning. Maybe just to start off with the partnership with Air France KLM. Is there any way you can maybe size that opportunity and talk about how much excess capital you can deploy into that? We kind of take a step back, maybe just update us on how you’re thinking about capital allocation.

You guys are continue to be underlevered relative to target. So maybe just talk about deployment of that capital overall.

Angus Kelly, Chief Executive Officer, AerCap: Sure. Let me start with the, Air France KLM joint venture. This opens up another broad customer base to our engine business. And the great advantage for Air France KLM as they move into the LEAP overhaul business is that they have a partner now that has experience of moving hundreds of LEAP engines around the world on time and on spec for the existing OEM CFM. So that’s very important.

As regards to how big it will grow, we’ll have to see over time. Initially, it’ll be a small amount. But like all these, investments, these are long term in nature like the business is and something we’re looking to regarding the long term. I’ll let Pete answer the question on the capital allocation.

Pete Euhas, Chief Financial Officer, AerCap: Sure. Thanks, Gus. So, Terry, in terms of capital allocation, so far this year, we’ve deployed a little over a billion dollars for share buybacks. We’ve also bought $3,000,000,000 of aircraft, as Gus mentioned, and we’ve got another $3,000,000,000 of buybacks, of of of CapEx later this year as well as the remaining 800,000,000 in our program. And as we look at it, look.

You know, we always look at all different alternatives for deploying excess capital. We are seeing some what we think will be attractive opportunities with some of the airlines now Now that you’re starting to see more aircraft delivering, in their order books, we think there will be opportunities there. We also think that there will be opportunities on the engine side to deploy more capital there. And, of course, share repurchases continue to be attractive. So I’d say those will be the main avenues as we look out today in terms of deployment of excess capital for the remainder of the year.

Analyst: Got it. That’s helpful. And then I guess as a follow-up, I think leasing expenses ex the maintenance amortization expense was, you know, in the $60,000,000 range this quarter. It’s been kind of below average last two quarters. Kinda what’s the outlook for that for the remainder of the year?

Thank you.

Pete Euhas, Chief Financial Officer, AerCap: Yes. So leasing expenses have been lower. They were also lower in the first quarter. They came down a bit more in the second quarter. Mainly, that has been due to the high level of extensions and fewer transitions that we’ve been seeing.

Yeah. As you saw, our extension rate in the quarter was 97%. So that’s, that’s almost a record high. And what the impact of that is, it’s reducing the amount of leasing expenses that we have. So I think that will continue to trend at lower levels than we had originally expected because of the those factors.

Conference Operator: Any further questions, Mr. Ma?

Analyst: No, that’s it. Thank you.

Analyst: Great. Thank you.

Conference Operator: We will take our next question from Moshe Orenbuch with TD Cowen.

Analyst: Great. Thanks. I apologize because I missed a a bit at the beginning, but the increase in your h your second half or full year kind of CapEx, does that already encompass your expectation for potentially higher sale leasebacks, or is that something that would be, you know, kind of additive to it?

Pete Euhas, Chief Financial Officer, AerCap: No. That that 3,000,000,000 that we mentioned, Moshe, is just, what we’ve contracted to date. So that’s just from the order book. Okay. But any so any incremental things that we do would be additive to that number.

Analyst: Got it. And, you know, I guess I mean, is you know, how how should we sort of think about the, you know, the the potential for that number to be higher than 3,000,000,000 versus, you know, kind of lower at this stage? Like, you know, the kind of the upside downside, if you will.

Pete Euhas, Chief Financial Officer, AerCap: Well, we’re starting to see the OEMs pick up their pace of deliveries. I mean, you saw Boeing’s results the other day. So I think that we are seeing production rates increase, albeit off a relatively low base. So I think as a starting point, that 6,000,000,000 for the year is a reasonable one for us just on in terms of our order book and what’s currently contracted. And then things can be additive, from there.

And and one of the benefits that you get if you’re doing sale leasebacks or, in particular, engine deals is that allows for more rapid deployment of capital than, you know, say, if you were doing an OEM order where you’re gonna get those a new order, you’re gonna get those aircraft in the 20 thirties. So that is one of the benefits of those two. How much will it be this year? Hard to know, but, you know, we do have excess capital available, and and we would like to deploy it.

Analyst: Got it. And maybe since you did bring up the engine business, is, you know, could you talk about how much you know, what’s the possible amount of capital you could deploy in that, you know, over you know, I mean, you can kinda pick the period to to discuss and just, you know, talk about how, you know, important that could be for your account. Thanks.

Pete Euhas, Chief Financial Officer, AerCap: Well, we did $5,000,000,000 of engine orders last year, and that’s and $10,000,000,000 since we did the GKS acquisition. So that gives you some idea of how of how large these can be. And as I said, in contrast to just an order for on, of aircraft from an order book, engines can deliver, in some cases, weeks after we’ve concluded that contract. Because if you think about it, these are spare engines that are immediately needed. That’s why they are that’s why, that’s why we are doing those purchases so they can be immediately put into the spare engine pools for the OEMs.

And so that can lead to rapid deployment of capital. So I it it can be quite large.

Analyst: Yeah. Thanks very much.

Angus Kelly, Chief Executive Officer, AerCap: Sure.

Conference Operator: We’ll take our next question from Catherine O’Brien with Goldman Sachs.

Catherine O’Brien, Analyst, Goldman Sachs: Hey. Good morning, everyone. Thanks for the time. Maybe just a follow-up the capital allocation question. You know, leverage is running well below target.

Sounds like you have potentially new opportunities in the sale leaseback market. But how do you think about the relative attractiveness of of those sale leaseback opportunities versus maybe deploying more capital engines versus buying back your cap shares. Is is the lack of a re up on the buyback just that you still have $800,000,000 left? Just just would love to know kind of how you’re thinking about ranking those opportunities.

Pete Euhas, Chief Financial Officer, AerCap: Yeah. That’s the rationale, Katie, for in terms of the buyback at the moment. We have a little over $800,000,000 remaining, and so we’d like to utilize that first. So that’s, that’s why we’re not announcing a new authorization at the moment. But as you note, our leverage ratio is low.

It’s 2.2 to one. A lot of that is because the we got the judgment in June on our insurance case, and those funds just came in at the June and early July. So that decreased the leverage ratio by about 20 basis points from 2.4 to 2.2. So when we think about the opportunities, for sure, buybacks are one of them, but we also think between some of these sale leaseback opportunities with airlines, some of the engine deals that that we’re considering, I think all of those are are in the mix. You know, we’ll look at each individually, but I think some combination of those things is the most likely deployment of excess capital this year.

I think beyond that, you know, things like M and A, and new orders of aircraft are prob probably behind that at the moment.

Catherine O’Brien, Analyst, Goldman Sachs: Okay. Great. Thanks. And maybe just for my follow-up, an 18% gain on sale is nearly double your historical average, so it’s definitely not trying to poke at that. But there’s been a lot of focus from investors across the aviation industry on what Boeing, you know, starting to get their act together in production could mean.

And and that 18% is a little bit lower than the last couple of quarters. Is there any difference in the types or ages of assets you’d call it this quarter versus the last two or three? Just trying to see if there’s any read through to demand for aircraft in secondary market or if this is just really, like, a normal fluctuation based on the types of assets you sold. Thanks.

Pete Euhas, Chief Financial Officer, AerCap: Sure. I really think it’s a normal

Angus Kelly, Chief Executive Officer, AerCap: Katie Katie, I was just gonna say there that this is just a normal fluctuation. There’s nothing more to see there. In terms of demand, it’s still extremely strong. Look. The real evidence of that is the extension rates.

You can see that we extended an all time high of 99% of the aircraft. That’s what speaks to the strength in the market. You know, whether Boeing are making 34, 36, or 38 airplanes is not going to affect that demand.

Catherine O’Brien, Analyst, Goldman Sachs: Okay. Great. I thought that would answer. Thank you.

Conference Operator: We will take our next question from from Ron Epstein with Bank of America.

Angus Kelly, Chief Executive Officer, AerCap: Hey. Yeah. Good good good morning, guys. Maybe the first one for for Pete. You know, when we met up at the Air Show, you know, we had a pretty in-depth discussion with you on tariffs.

Given how things have sort of moved around, how how are you thinking about it now, and, you know, how is the tariff environment kind of impacting the business?

Pete Euhas, Chief Financial Officer, AerCap: Sure. Thanks, Ron. So we’ve seen a very limited impact of tariffs on our business so far. As you know, we’ve been strong advocates for the zero for zero tariff regime around the world. We were very glad to see that, to see the announcements between The US and The UK, and then The US and the EU that came over the weekend.

I believe those remove a lot of the uncertainty around tariffs for aviation, so that’s very helpful. And what we’d like to see, I think those are a good precedent for other deals that could be done around the world. So that’s very helpful. Look. All that being said, all this has moved very quickly.

But, if those can serve as a precedent and we get back to the zero for zero regime, I think that’s best for aviation. It’s helpful for the industry overall. And as I said so we’ve seen very minimal impact, and we hope that, that a lot of this is behind us now.

Angus Kelly, Chief Executive Officer, AerCap: Got it. Got it. And then maybe just a a broader question. When you think about the return profile on an engine versus the return profile on an airframe, kind of at a high level, how do you guys think about that? I mean, what’s what what’s better for you all?

An airframe or an engine?

Angus Kelly, Chief Executive Officer, AerCap: Ron, I wouldn’t say one is better than the other. There’s different aspects to them. The engine initially has a lower lease yield, because no one is paying for seats, lavatories, all that bio furnished equipment. However, over time, the aircraft depreciates faster than the engine because you have to depreciate those components that are specific to the first lessee. So, yeah, you get a higher lease rate at the start on aircraft, but you have a shallower depreciation curve over the long term on the engines.

The key point of investing in anything in aviation is that you are buying the right assets for its remaining economic life, be that five years or twenty five years, and you’re buying it at the right price, and you know the value of the assets when you buy it. And AerCap has demonstrated that in this industry, for twenty plus years that no one has that judgment better than this company.

Angus Kelly, Chief Executive Officer, AerCap: Got it. Got it. And then maybe just one last one. You know, with demand for wide bodies clearly picking up, do do you think you need to, you know, how I say, you know, build out your backlog on on wide body orders, your your skyline more so?

Angus Kelly, Chief Executive Officer, AerCap: Definitely not. I will build my skyline when it makes money for my shareholders. I have no interest in buying any asset at all if it doesn’t make adequate return for shareholders in AerCap. I still believe the cheapest wide bodies in the world are available on the New York Stock Exchange under the ticker Alpha Echo Romeo.

Angus Kelly, Chief Executive Officer, AerCap: Okay. Alright. Thanks, guys. Yeah. Have a good one.

Yep.

Conference Operator: We will take our next question from Jamie Baker with JPMorgan.

Jamie Baker, Analyst, JPMorgan: Oh, thanks for the time. So, Gus, do you think we are at peak returns? And if not, when do we get there? And the reason we’re asking is, you know, lease rates obviously haven’t, you know, fully kept up with the cost of debt. And we’re starting to wonder whether competing capital may be one of the reasons, you know, could less disciplined capital be chasing deals lower.

And look, we’re just thinking out loud, you know, but, you know, some of the recent deals from United, you know, that was business away from AerCap. So we’re we’re just trying to we’re just wondering what the read through might be.

Angus Kelly, Chief Executive Officer, AerCap: Sure, Jamie. I mean, look, can’t speak to anyone else in the industry, but I’ll I’ll hand it over to Pete in a second. But you can see over a very long period of time, that we are AerCap is able to pass on, the cost of interest, and we’ve done that for this, this year as well, as you’ll see. Interest expense is up 5%, and the lease revenue matches it. But, you know, look, from my perspective, I’ve always said to you that we target that return of 8% to 10% over the the treasury rate, and that’s what this company has always returned in in every in all markets.

That’s what it’s averaged in that in in in that zone exactly. So, you know, this business is extremely stable if you’re good at it and you’re in it for the long term. If you’re one of the tourists, then, you know, yeah, you can have, you can put money to work. Whether you’ll make any, whether you’ll be successful at it or not is another matter. We’ve ex exhibited great restraint, when it comes to deploying capital.

And from our perspective, how we allocate capital, you know, be it buying our own shares, which as I just said to Ron, I believe the cheapest aircraft are available every day on the New York Stock Exchange under under our ticker. And, you know, you won’t see us. You’re right. Yes. Of course, some deals trade away from us, but that’s where we exercise discipline.

And, you know, you’ve seen us for twenty years, through all markets exercise that discipline, and we’ll continue to do that.

Jamie Baker, Analyst, JPMorgan: Okay. I appreciate that. And then maybe for Pete, you know, you’re nicely below the, you know, 2.7 debt to equity target. You touched on that in your prepared remarks. So what what’s more likely from here?

Running it back up to the target or maybe tightening that target and pushing for low a ratings? Thanks in advance.

Pete Euhas, Chief Financial Officer, AerCap: Yeah, Jamie. So I think that we will run it closer to the target. I’d expect it to get up to, you know, get closer to 2.7, whether that’s two four, two five, somewhere in that ballpark. We’re not intending to lower that target because, fundamentally, I think we’re in a good place for the rating agencies now. Look.

If we can get to A minus ratings, that would be great. But, ultimately, we’re focused on what’s the what is the most beneficial for our shareholders? How can we how can we return, create the highest returns for our shareholders? And so if you think about do we would we need to do that by lowering the leverage target over, you know, a long period and putting in place higher liquidity and other things like that. If there’s a cost to that, obviously, I think where we are today, having come up from low, triple b minus ratings a couple years ago to where we are today, triple b plus across the board, That’s a very strong performance.

Sure. We’d like to go higher, but I think, fundamentally, there are a lot of opportunities for us to deploy capital, and and we’ll look to do that.

Jamie Baker, Analyst, JPMorgan: Okay. Thanks to you both. Appreciate it.

Pete Euhas, Chief Financial Officer, AerCap: Sure.

Conference Operator: We will take our next question from Christine Lewag with Morgan Stanley.

Joseph McGinley, Head of Investor Relations, AerCap0: Hey. Good morning, everyone. And maybe, Gus, following up on your comments on AerCap’s success for the past twenty years, I mean, we’ve seen all the numbers. And at this point, I mean, you are the largest aircraft lessor in the entire world, so congratulations on on that success. But, you know, I guess, when we look for growth, and Wall Street’s always looking for the incremental growth, As you continue to deliver that strong return and the business continues to delever and we look at your forward order book and purchase and leasebacks, it it kinda decelerates starting 2027.

I mean, how do we think about the size of AerCap in the next five years or even I mean, twenty years maybe a little too far out, but maybe the next three to five years. How big could you be? And are you getting to the point on return that you’re you’re too big that getting that outsized, you know, eight to 10% consistently over the treasury rate may be getting harder? And if that’s the case, you know, where do you see incremental growth?

Angus Kelly, Chief Executive Officer, AerCap: Thanks, Christine. Well, look. From our perspective, this is a growing industry, aviation. Every twenty years, it doubles in size, and aircraft leasing is doubling within that itself. So it’s continuing to grow every year.

So I’m not worried about growth over the long term. It always comes. And indeed, if you just look at the amount of, CapEx we contracted in 2024, it was 6,000,000,000 plus that we managed to contract that wasn’t there at the beginning of the year. So I’m not concerned about where the order book is. I’d be extraordinarily concerned if I was ordering airplanes that were going to have a negative effect to my shareholders, and we followed the gap model of growth at any price.

That’s something we’ll never do. The objective of this company is to create value for our shareholders, and that means growing profitability. And that does not necessarily mean growing revenue. Of course, we have grown revenue tremendously. We’ve grown the balance sheet tremendously, but at the right times.

And, I’m very confident that given the growth industry, AerCap’s position in the industry, the relationships we have, the influence we have, that profitable growth opportunities will come our way. And in any event, as I said earlier on in the call twice, I certainly believe that the best value aircraft in the world are available under the ticker alpha echo Romeo down on the NYSE.

Joseph McGinley, Head of Investor Relations, AerCap0: Thanks. Thanks, Gus. And maybe, Pete, as a follow-up, look. We have seen a modest compression in the annualized net spread, over the past few years as net in as interest expense has been ticking up. Are there we know, with the balance sheet continuing to improve and leverage going down, are there different ways in which you could further reduce cost of interest?

And when would you expect the annualized net spread to start expanding again?

Pete Euhas, Chief Financial Officer, AerCap: Yeah. Thanks, Christine. So the net spread will be expanding. I’d expect it to to be going up from here kind of on a sequential level quarterly and then into the next few years as well. Because what we’re seeing is the portfolio yield, the lease rate factor is going up.

That’s gonna continue to climb, and and so overall, net spread is going to increase. I would remind you, though, that net spread obviously isn’t the whole story. There is a lot beyond net spread. We’re not managing to that. We’re managing to EPS.

But I do think the profitability will increase going forward. And maybe just to to touch for a second on Jamie’s question before in terms of whether we’ve reached peak profitability for the industry, I don’t think so, in part because even the deals that we’re doing today, there is a lag in terms of seeing the financial results come through for those. So even if you did reach peak profitability in terms of the market being great today, you’re not gonna see the financial results of those really flow through for the next few until the next few years. So I think we’ve got a good tailwind on that. We’ve got a good tailwind in terms of COVID leases rolling off.

That will take time, but it is a tailwind. So I think there are a number of things that that are positive for us as a company, going to the next few years.

Joseph McGinley, Head of Investor Relations, AerCap0: Great. Thank you very much, guys.

Pete Euhas, Chief Financial Officer, AerCap: Sure.

Conference Operator: We will take our next question from Hillary Coconando with Deutsche Bank.

Joseph McGinley, Head of Investor Relations, AerCap1: Hi. Thank you for taking my questions. I know you already wrote down your exposure to Azul late last year, but, you know, that was before they filed for bankruptcy. I was just wondering if there could be, you know, any other impact from bank Azul bankruptcy from your end?

Pete Euhas, Chief Financial Officer, AerCap: Thanks, Hillary. Yes. So so last year, you’re right. We did take a provision against Azul. And as we look out today, so Azul is still in bankruptcy.

They’ve been they’ve been making progress in their restructuring plan. We don’t see any impact, compared to where we were. So I think, minimal impact this quarter from Azul, and we think we’re fully provisioned there for how this restructuring should play out.

Joseph McGinley, Head of Investor Relations, AerCap1: Okay. Thank you. Thank you for that. And then, you know, so far, we saw about, you know, 10 very young a three twenty neos getting retired in the market and, you know, parted out to harvest the engines just, you know, given the demand for spare engines. You know, I guess that speaks to the to the strength of the engine market.

So, you know, I just I just wanted to get your thoughts on on that phenomenon and, know, you if that’s something that you expect to continue.

Angus Kelly, Chief Executive Officer, AerCap: Well, there’s a couple of items there, actually. On those, the report of those neos being torn down, there are, two twenty aircraft that were in Egypt. They are being disassembled. The other aircraft, the a three twenty aircraft that you’re speaking about, it’s my understanding that it’s only the engines that have been removed. The aircraft themselves are not being torn down, and that is in order for Pratt and Whitney to support the obligations it has to its customers.

So I I that’s not happening as as far as I’m aware on a 03/20 neos, the teardowns. It is only happening on the February that were in Egypt.

Joseph McGinley, Head of Investor Relations, AerCap1: Got it. Great. That’s that’s very helpful. Thank you.

Conference Operator: We will go back to Catherine O’Brien with Goldman Sachs.

Catherine O’Brien, Analyst, Goldman Sachs: Oh, hey. Thanks for the extra time. Maybe just one more on the sale leaseback opportunity. Are these, you know, more opportune opportunistic from distressed airlines? Or is this just a function of more deliveries driving less competition per RFP?

Just just was curious as I know that market has been pretty competitive and and not very attractive the last couple of years. Just wondering what’s driving the shift. Thanks.

Angus Kelly, Chief Executive Officer, AerCap: Well, Catherine, first of all, we have to execute on them. Now we have done so over the years, and you can see that indeed last year with the amount of CapEx we put on the books that was not there at the beginning of the year. You know, it’s highly unlikely we’re, going to be competing in open bid sale leaseback transactions. It’s where we bring other things to the table in terms of our installed fleet, our engine business, etcetera. There are different things we bring to the table that others don’t.

So I can’t say that every deal is, uniquely bilateral, but we certainly wouldn’t be entering into many sale leaseback transactions I don’t think we have where there’s just open bids where everybody’s bidding against us.

Catherine O’Brien, Analyst, Goldman Sachs: Okay. Great. Thanks.

Conference Operator: There are no further questions at this time. Mr. Kelly, at this time, I will turn the conference back to you for any additional or closing remarks.

Angus Kelly, Chief Executive Officer, AerCap: Thank you very much, everyone, for joining us for the call, and we look forward to speaking to you during the quarter. Enjoy the rest of the summer. Goodbye.

Conference Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.

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