While I do understand that AerCap presents the results in this way, it would have been useful if they would have provided a like-for-like comparison with the same quarter last year. It would have been somewhat helpful to have a like-for-like comparison. That's understandable as a year-over-year comparison provides little inside as it's basically a comparison between AerCap and the AerCap-GECAS combination. First quarter resultsĪerCap has altered the way it presents its revenues. So, I don't think it makes any difference. But the reality is, all these aircraft are gone, whether they were to private or state-owned. And just on that, three quarters of our exposure of our Russian assets were on lease to private airlines and a quarter or two to Aeroflot and Rossiya. And I don't expect it will make any difference. On relation to the Russian aircraft, we never believed there was any difference between whether it was private or not, that didn't make any difference. In my assessment and in exchanges with readers, I already determined that this was not the case and this was also confirmed by Aengus Kelly, CEO of AerCap: Previously, Air Lease Corporation created the impression that there was a significant difference in impairment risk between state-owned and private airlines in Russia.
Our estimate on the write-off on the flight equipment was off by around 4.5%, which is quite a good estimate as accurate data on the number of aircraft as well as the valuation of those assets is not widely available. This would bring our estimate on the write-off to $3 billion to which the value of the engines stuck in Russia should still be added. We were able to successfully track 15 repossessions. Overall, the figure is in the right range.ĪerCap said it was able to detain 22 aircraft and three engines. There's a slight difference between the reported numbers and what we found, which can be attributed to data availability and accuracy and the difference between the engines being leased and the entire aircraft being leased. Our initial assessment showed that 144 aircraft from AerCap and GECAS were released to airlines in Russia. AerCap shared that it had 135 aircraft and 14 engines in Russia. This was partially offset by recognition of maintenance revenue and letters of credit. The path forward I described was a loss of revenues from Russian airlines as well as impairment that would be partially offset by maintenance reserves, deposits and credit letters.ĪerCap took a $3.2 billion charge on the flight equipment that was stuck in Russia. We also found that shares of competitors such as Air Lease Corporation held relatively well on the back of assumptions that were not realistic. What I found was that AerCap did not have any outsized exposure compared to peers. In line with the work I do at The Aerospace Forum, I performed a deep dive into the market collecting data for nearly 1,000 aircraft in Russia in an interactive data visualizer and analyzed that data. AerCap's stock prices were hit hard and readers on Seeking Alpha had attributed that to an outsized exposure of AerCap to Russia compared to peers such as Air Lease ( AL). I previously explained that the way in which sanctions were implemented, chances to repossess or detain aircraft were limited, thereby increasing the potential impairment sum for lessors.
So, a big item for lessors has been the impairment of aircraft stuck in Russia.
By imposing lockdowns over and over, the exposure to virus is reduced but exposure to the immune system also is reduced which means that a population is created that's very vulnerable to the virus making lockdowns and re-openings a sinusoidal motion. While quick lockdowns seem to be an effective tool to stop the spread of the coronavirus, at some point opting for a lockdown each time there's an increase in infections might become an ineffective way to battle the virus while economic activity takes a hit. Rapid closings and re-openings are really putting a damper on recovery. In the Asia Pacific region, the trend also is up, but still a bit further off the pre-pandemic levels. North America and Europe are very close to pre-pandemic levels in terms of daily flights. Many airlines have provided rather bullish outlooks over the past several weeks and AerCap's demand recovery sheet also shows that.
AER SEEKING ALPHA UPDATE
In this report, I will have a look at the demand side, company earnings, provide an update on the situation in Russia regarding leased assets and update the price target for AerCap. AerCap ( NYSE: AER) reported earnings recently and shares have gained modestly on the publication of earnings results.
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