AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
As of September 30, 2021 and December 31, 2020
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Note
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September 30, 2021
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December 31, 2020
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(U.S. Dollars in thousands, except share data)
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Assets
|
|
|
|
|
|
Cash and cash equivalents
|
4
|
|
$
|
1,311,234
|
|
|
$
|
1,248,772
|
|
Restricted cash
|
4
|
|
223,271
|
|
|
246,518
|
|
Trade receivables
|
|
|
79,504
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|
|
170,675
|
|
Flight equipment held for operating leases, net
|
5
|
|
34,411,391
|
|
|
35,156,450
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|
Investment in finance and sales-type leases, net
|
6, 18
|
|
814,989
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|
|
878,451
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|
Flight equipment held for sale
|
|
|
192,403
|
|
|
—
|
|
Prepayments on flight equipment
|
22
|
|
1,872,387
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|
|
2,111,659
|
|
Maintenance rights and lease premium, net
|
7
|
|
594,685
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|
649,914
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|
Other intangibles, net
|
7
|
|
207,569
|
|
|
224,634
|
|
Deferred income tax assets
|
13
|
|
121,812
|
|
|
131,532
|
|
Other assets
|
8
|
|
1,670,083
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|
|
1,229,434
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Total Assets
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|
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$
|
41,499,328
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|
|
$
|
42,048,039
|
|
|
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|
|
|
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Liabilities and Equity
|
|
|
|
|
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Accounts payable, accrued expenses and other liabilities
|
10
|
|
$
|
881,173
|
|
|
$
|
1,109,325
|
|
Accrued maintenance liability
|
11
|
|
1,596,414
|
|
|
1,750,395
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|
Lessee deposit liability
|
|
|
497,178
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|
|
600,321
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|
Debt
|
12
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|
27,539,694
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|
|
28,742,081
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|
Deferred income tax liabilities
|
13
|
|
1,054,915
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|
|
913,431
|
|
Commitments and contingencies
|
22
|
|
|
|
|
Total Liabilities
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|
|
31,569,374
|
|
|
33,115,553
|
|
|
|
|
|
|
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Ordinary share capital, €0.01 par value, 450,000,000 and 350,000,000 ordinary shares authorized as of September 30, 2021 and December 31, 2020, respectively; 138,847,345 and 138,847,345 ordinary shares issued and 133,379,789 and 130,398,538 ordinary shares outstanding (including 5,244,285 and 2,552,346 shares of unvested restricted stock) as of September 30, 2021 and December 31, 2020, respectively
|
19
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|
1,721
|
|
|
1,721
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Additional paid-in capital
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1,946,529
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2,078,125
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Treasury shares, at cost (5,467,556 and 8,448,807 ordinary shares as of September 30, 2021 and December 31, 2020, respectively)
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(313,907)
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(459,994)
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Accumulated other comprehensive loss
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(101,972)
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(155,085)
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Accumulated retained earnings
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8,322,581
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7,399,703
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Total AerCap Holdings N.V. shareholders’ equity
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9,854,952
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|
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8,864,470
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Non-controlling interest
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|
75,002
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|
|
68,016
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|
Total Equity
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|
|
9,929,954
|
|
|
8,932,486
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|
Total Liabilities and Equity
|
|
|
$
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41,499,328
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|
|
$
|
42,048,039
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|
|
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|
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Supplemental balance sheet information—amounts related to assets and liabilities of consolidated Variable Interest Entities (“VIE”) for which creditors do not have recourse to our general credit:
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Restricted cash
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$
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123,231
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|
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$
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163,596
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Flight equipment held for operating leases and held for sale
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3,635,141
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|
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4,339,176
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Other assets
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177,427
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|
|
97,417
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|
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|
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Accrued maintenance liability
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$
|
125,421
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|
|
$
|
115,079
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Debt
|
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1,407,083
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|
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2,454,187
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Other liabilities
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|
|
76,797
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|
109,606
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|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Income Statements
For the Three and Nine Months Ended September 30, 2021 and 2020
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Three Months Ended September 30,
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Nine Months Ended September 30,
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Note
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2021
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2020
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|
2021
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2020
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(U.S. Dollars in thousands, except share and per share data)
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Revenues and other income
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|
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Lease revenue:
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|
|
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|
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|
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Basic lease rents
|
|
|
$
|
847,650
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|
|
$
|
897,358
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|
|
$
|
2,607,974
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|
|
$
|
2,876,278
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|
|
|
|
|
Maintenance rents and other receipts
|
|
|
110,423
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|
|
90,743
|
|
|
424,252
|
|
|
449,252
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|
|
|
|
|
Total lease revenue
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|
|
958,073
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|
988,101
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|
|
3,032,226
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|
|
3,325,530
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|
|
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|
|
Net gain on sale of assets
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|
|
37,633
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|
|
7,151
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|
|
64,881
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|
|
75,519
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|
|
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|
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Other income
|
16
|
|
458,700
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|
|
31,304
|
|
|
684,717
|
|
|
60,963
|
|
|
|
|
|
Total Revenues and other income
|
|
|
1,454,406
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|
|
1,026,556
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|
|
3,781,824
|
|
|
3,462,012
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|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
5, 7
|
|
393,366
|
|
|
415,970
|
|
|
1,182,086
|
|
|
1,243,586
|
|
|
|
|
|
Asset impairment
|
17
|
|
49,201
|
|
|
972,921
|
|
|
122,587
|
|
|
1,060,289
|
|
|
|
|
|
Interest expense
|
|
|
287,213
|
|
|
307,316
|
|
|
860,917
|
|
|
937,691
|
|
|
|
|
|
Loss on debt extinguishment
|
|
|
2,894
|
|
|
42,835
|
|
|
8,955
|
|
|
42,835
|
|
|
|
|
|
Leasing expenses
|
|
|
53,519
|
|
|
51,211
|
|
|
157,061
|
|
|
232,082
|
|
|
|
|
|
Selling, general and administrative expenses
|
14
|
|
68,197
|
|
|
60,918
|
|
|
198,619
|
|
|
178,415
|
|
|
|
|
|
Transaction-related expenses
|
15
|
|
100,859
|
|
|
—
|
|
|
195,534
|
|
|
—
|
|
|
|
|
|
Total Expenses
|
|
|
955,249
|
|
|
1,851,171
|
|
|
2,725,759
|
|
|
3,694,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Gain (loss) on investment at fair value
|
|
|
2,156
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|
|
(128,363)
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|
|
(307)
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|
|
(114,421)
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and income of investments accounted for under the equity method
|
|
|
501,313
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|
|
(952,978)
|
|
|
1,055,758
|
|
|
(347,307)
|
|
|
|
|
|
Income tax (expense) benefit
|
13
|
|
(62,132)
|
|
|
106,077
|
|
|
(142,527)
|
|
|
24,311
|
|
|
|
|
|
Equity in net earnings (loss) of investments accounted for under the equity method
|
|
|
1,848
|
|
|
(3,901)
|
|
|
5,703
|
|
|
(397)
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
441,029
|
|
|
$
|
(850,802)
|
|
|
$
|
918,934
|
|
|
$
|
(323,393)
|
|
|
|
|
|
Net (income) loss attributable to non-controlling interest
|
|
|
(7,108)
|
|
|
873
|
|
|
(7,237)
|
|
|
(3,651)
|
|
|
|
|
|
Net income (loss) attributable to AerCap Holdings N.V.
|
|
|
$
|
433,921
|
|
|
$
|
(849,929)
|
|
|
$
|
911,697
|
|
|
$
|
(327,044)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
19
|
|
$
|
3.39
|
|
|
$
|
(6.66)
|
|
|
$
|
7.12
|
|
|
$
|
(2.56)
|
|
|
|
|
|
Diluted earnings (loss) per share
|
19
|
|
$
|
3.35
|
|
|
$
|
(6.66)
|
|
|
$
|
7.04
|
|
|
$
|
(2.56)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic
|
|
|
128,131,157
|
|
|
127,589,905
|
|
|
128,087,006
|
|
|
127,771,182
|
|
|
|
|
|
Weighted average shares outstanding - diluted
|
|
|
129,378,791
|
|
|
127,589,905
|
|
|
129,585,420
|
|
|
127,771,182
|
|
|
|
|
|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended September 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
(U.S. Dollars in thousands)
|
Net income (loss)
|
$
|
441,029
|
|
|
$
|
(850,802)
|
|
|
$
|
918,934
|
|
|
$
|
(323,393)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on derivatives (Note 9), net of tax of $(2,249), $(1,600), $(7,588) and $10,766, respectively
|
15,741
|
|
|
11,200
|
|
|
53,113
|
|
|
(75,359)
|
|
|
|
|
|
Total other comprehensive income (loss)
|
15,741
|
|
|
11,200
|
|
|
53,113
|
|
|
(75,359)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
456,770
|
|
|
(839,602)
|
|
|
972,047
|
|
|
(398,752)
|
|
|
|
|
|
Comprehensive (income) loss attributable to non-controlling interest
|
(7,108)
|
|
|
873
|
|
|
(7,237)
|
|
|
(3,651)
|
|
|
|
|
|
Total comprehensive income (loss) attributable to AerCap Holdings N.V.
|
$
|
449,662
|
|
|
$
|
(838,729)
|
|
|
$
|
964,810
|
|
|
$
|
(402,403)
|
|
|
|
|
|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
(U.S. Dollars in thousands)
|
Net income (loss)
|
$
|
918,934
|
|
|
$
|
(323,393)
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
Depreciation and amortization
|
1,182,086
|
|
|
1,243,586
|
|
Asset impairment
|
122,587
|
|
|
1,060,289
|
|
Amortization of debt issuance costs, debt discount, debt premium and lease premium
|
50,305
|
|
|
45,802
|
|
Amortization of fair value adjustments on debt
|
(12,452)
|
|
|
(41,418)
|
|
Maintenance rights write-off (a)
|
48,480
|
|
|
101,791
|
|
Maintenance liability release to income
|
(206,085)
|
|
|
(297,815)
|
|
Net gain on sale of assets
|
(64,881)
|
|
|
(75,519)
|
|
Deferred income taxes
|
143,222
|
|
|
(21,737)
|
|
Share-based compensation
|
63,956
|
|
|
49,513
|
|
Collections of finance and sales-type leases
|
94,626
|
|
|
47,117
|
|
Loss on investment at fair value
|
307
|
|
|
114,421
|
|
Loss on debt extinguishment
|
8,955
|
|
|
42,835
|
|
Transaction-related expenses
|
158,746
|
|
|
—
|
|
Other
|
22,780
|
|
|
150,937
|
|
Changes in operating assets and liabilities:
|
|
|
|
Trade receivables
|
87,855
|
|
|
(148,184)
|
|
Other assets
|
(413,811)
|
|
|
(382,914)
|
|
Accounts payable, accrued expenses and other liabilities
|
(246,296)
|
|
|
(87,468)
|
|
Net cash provided by operating activities
|
1,959,314
|
|
|
1,477,843
|
|
Purchase of flight equipment
|
(738,090)
|
|
|
(306,048)
|
|
Proceeds from sale or disposal of assets
|
393,373
|
|
|
379,518
|
|
Prepayments on flight equipment
|
(75,930)
|
|
|
(564,927)
|
|
|
|
|
|
Net cash used in investing activities
|
(420,647)
|
|
|
(491,457)
|
|
Issuance of debt
|
1,486,567
|
|
|
10,165,837
|
|
Repayment of debt
|
(2,678,134)
|
|
|
(8,451,299)
|
|
Debt issuance and extinguishment costs paid, net of debt premium received
|
(227,472)
|
|
|
(145,260)
|
|
Maintenance payments received
|
267,925
|
|
|
266,654
|
|
Maintenance payments returned
|
(172,035)
|
|
|
(312,136)
|
|
Security deposits received
|
155,794
|
|
|
53,915
|
|
Security deposits returned
|
(264,674)
|
|
|
(216,975)
|
|
Dividend paid to non-controlling interest holders and others
|
(251)
|
|
|
(2,843)
|
|
Repurchase of shares and tax withholdings on share-based compensation
|
(67,453)
|
|
|
(119,779)
|
|
Net cash (used in) provided by financing activities
|
(1,499,733)
|
|
|
1,238,114
|
|
Net increase in cash, cash equivalents and restricted cash
|
38,934
|
|
|
2,224,500
|
|
Effect of exchange rate changes
|
281
|
|
|
939
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
1,495,290
|
|
|
1,300,347
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
1,534,505
|
|
|
$
|
3,525,786
|
|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
(U.S. Dollars in thousands)
|
Supplemental cash flow information:
|
|
|
|
Interest paid, net of amounts capitalized
|
$
|
925,901
|
|
|
$
|
946,322
|
|
Income taxes paid (refunded), net
|
2,192
|
|
|
(7,286)
|
|
(a)Maintenance rights write-off consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of Lease (“EOL”) and Maintenance Reserved (“MR”) contract maintenance rights expense
|
$
|
6,196
|
|
|
$
|
39,719
|
|
MR contract maintenance rights write-off due to maintenance liability release
|
16,096
|
|
|
18,117
|
|
EOL contract maintenance rights write-off due to cash receipt
|
26,188
|
|
|
43,954
|
|
Maintenance rights write-off
|
$
|
48,480
|
|
|
$
|
101,790
|
|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows (Continued)
For the Nine Months Ended September 30, 2021 and 2020
Non-Cash Investing and Financing Activities
Nine Months Ended September 30, 2021:
Flight equipment held for operating leases in the amount of $19.9 million was reclassified to investment in finance and sales-type leases, net.
Flight equipment held for operating leases in the amount of $273.0 million was reclassified to flight equipment held for sale.
Accrued maintenance liability in the amount of $21.0 million was settled with buyers upon sale or disposal of assets.
Nine Months Ended September 30, 2020:
Flight equipment held for operating leases in the amount of $37.7 million was reclassified to investment in finance and sales-type leases, net.
Flight equipment held for operating leases in the amount of $81.0 million was reclassified to flight equipment held for sale.
Accrued maintenance liability in the amount of $95.0 million was settled with buyers upon sale or disposal of assets.
Other assets and Accounts payable, accrued expenses and other liabilities each increased by $185.7 million due to the Norwegian Air Shuttle ASA recapitalization.
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
For the Three Months Ended September 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of ordinary shares issued
|
|
Ordinary share capital
|
|
Additional
paid-in
capital
|
|
Treasury
shares
|
|
Accumulated other comprehensive loss
|
|
Accumulated retained earnings
|
|
AerCap Holdings N.V. shareholders’ equity
|
|
Non-controlling interest
|
|
Total equity
|
|
(U.S. Dollars in thousands, except share data)
|
Balance as of
June 30, 2021
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
1,924,771
|
|
|
$
|
(313,952)
|
|
|
$
|
(117,713)
|
|
|
$
|
7,888,710
|
|
|
$
|
9,383,537
|
|
|
$
|
67,962
|
|
|
$
|
9,451,499
|
|
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(68)
|
|
|
(68)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
issued, net of
tax withholdings
|
—
|
|
|
—
|
|
|
(213)
|
|
|
45
|
|
|
—
|
|
|
(50)
|
|
|
(218)
|
|
|
—
|
|
|
(218)
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
21,971
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,971
|
|
|
—
|
|
|
21,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,741
|
|
|
433,921
|
|
|
449,662
|
|
|
7,108
|
|
|
456,770
|
|
Balance as of
September 30, 2021
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
1,946,529
|
|
|
$
|
(313,907)
|
|
|
$
|
(101,972)
|
|
|
$
|
8,322,581
|
|
|
$
|
9,854,952
|
|
|
$
|
75,002
|
|
|
$
|
9,929,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of ordinary shares issued
|
|
Ordinary share capital
|
|
Additional
paid-in
capital
|
|
Treasury
shares
|
|
Accumulated other comprehensive loss
|
|
Accumulated retained earnings
|
|
AerCap Holdings N.V. shareholders’ equity
|
|
Non-controlling interest
|
|
Total equity
|
|
(U.S. Dollars in thousands, except share data)
|
Balance as of
June 30, 2020
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
2,076,149
|
|
|
$
|
(496,217)
|
|
|
$
|
(180,146)
|
|
|
$
|
8,232,470
|
|
|
$
|
9,633,977
|
|
|
$
|
69,086
|
|
|
$
|
9,703,063
|
|
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(97)
|
|
|
(97)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
issued, net of
tax withholdings
|
—
|
|
|
—
|
|
|
(3,221)
|
|
|
4,184
|
|
|
—
|
|
|
(1,842)
|
|
|
(879)
|
|
|
—
|
|
|
(879)
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
17,004
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17,004
|
|
|
—
|
|
|
17,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,200
|
|
|
(849,929)
|
|
|
(838,729)
|
|
|
(873)
|
|
|
(839,602)
|
|
Balance as of
September 30, 2020
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
2,089,932
|
|
|
$
|
(492,033)
|
|
|
$
|
(168,946)
|
|
|
$
|
7,380,699
|
|
|
$
|
8,811,373
|
|
|
$
|
68,116
|
|
|
$
|
8,879,489
|
|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
For the Nine Months Ended September 30, 2021 and 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of ordinary shares issued
|
|
Ordinary share capital
|
|
Additional
paid-in
capital
|
|
Treasury
shares
|
|
Accumulated other comprehensive loss
|
|
Accumulated retained earnings
|
|
AerCap Holdings N.V. shareholders’ equity
|
|
Non-controlling interest
|
|
Total equity
|
|
(U.S. Dollars in thousands, except share data)
|
Balance as of
December 31, 2020
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
2,078,125
|
|
|
$
|
(459,994)
|
|
|
$
|
(155,085)
|
|
|
$
|
7,399,703
|
|
|
$
|
8,864,470
|
|
|
$
|
68,016
|
|
|
$
|
8,932,486
|
|
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(251)
|
|
|
(251)
|
|
Repurchase of
shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,668)
|
|
|
—
|
|
|
—
|
|
|
(28,668)
|
|
|
—
|
|
|
(28,668)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares
issued, net of
tax withholdings
|
—
|
|
|
—
|
|
|
(195,553)
|
|
|
174,755
|
|
|
—
|
|
|
11,181
|
|
|
(9,617)
|
|
|
—
|
|
|
(9,617)
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
63,957
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63,957
|
|
|
—
|
|
|
63,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
53,113
|
|
|
911,697
|
|
|
964,810
|
|
|
7,237
|
|
|
972,047
|
|
Balance as of
September 30, 2021
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
1,946,529
|
|
|
$
|
(313,907)
|
|
|
$
|
(101,972)
|
|
|
$
|
8,322,581
|
|
|
$
|
9,854,952
|
|
|
$
|
75,002
|
|
|
$
|
9,929,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of ordinary shares issued
|
|
Ordinary share capital
|
|
Additional
paid-in
capital
|
|
Treasury
shares
|
|
Accumulated other comprehensive loss
|
|
Accumulated retained earnings
|
|
AerCap Holdings N.V. shareholders’ equity
|
|
Non-controlling interest
|
|
Total equity
|
|
(U.S. Dollars in thousands, except share data)
|
Balance as of
December 31, 2019
|
141,847,345
|
|
|
$
|
1,754
|
|
|
$
|
2,209,462
|
|
|
$
|
(537,341)
|
|
|
$
|
(93,587)
|
|
|
$
|
7,734,609
|
|
|
$
|
9,314,897
|
|
|
$
|
67,308
|
|
|
$
|
9,382,205
|
|
Dividends paid
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,843)
|
|
|
(2,843)
|
|
Repurchase of
shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(117,302)
|
|
|
—
|
|
|
—
|
|
|
(117,302)
|
|
|
—
|
|
|
(117,302)
|
|
Share cancellation
|
(3,000,000)
|
|
|
(33)
|
|
|
(149,203)
|
|
|
149,236
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Ordinary shares
issued, net of
tax withholdings
|
—
|
|
|
—
|
|
|
(19,840)
|
|
|
13,374
|
|
|
—
|
|
|
(1,088)
|
|
|
(7,554)
|
|
|
—
|
|
|
(7,554)
|
|
Share-based
compensation
|
—
|
|
|
—
|
|
|
49,513
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49,513
|
|
|
—
|
|
|
49,513
|
|
Cumulative effect due
to adoption of new
accounting standard
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,778)
|
|
|
(25,778)
|
|
|
—
|
|
|
(25,778)
|
|
Total comprehensive
(loss) income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(75,359)
|
|
|
(327,044)
|
|
|
(402,403)
|
|
|
3,651
|
|
|
(398,752)
|
|
Balance as of
September 30, 2020
|
138,847,345
|
|
|
$
|
1,721
|
|
|
$
|
2,089,932
|
|
|
$
|
(492,033)
|
|
|
$
|
(168,946)
|
|
|
$
|
7,380,699
|
|
|
$
|
8,811,373
|
|
|
$
|
68,116
|
|
|
$
|
8,879,489
|
|
The accompanying notes are an integral part of these Unaudited Financial Statements.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
1. General
The Company
AerCap Holdings N.V., together with its subsidiaries (“AerCap,” “we,” “us” or the “Company”), is the global leader in aircraft leasing. Our ordinary shares are listed on the New York Stock Exchange under the ticker symbol AER. Our headquarters is located in Dublin, and we have offices in Shannon, Los Angeles, Singapore, Amsterdam, Shanghai and Abu Dhabi and other locations. We also have representative offices at the world’s largest aircraft manufacturers, The Boeing Company (“Boeing”) in Seattle and Airbus S.A.S. (“Airbus”) in Toulouse.
The Condensed Consolidated Financial Statements presented herein include the accounts of AerCap Holdings N.V. and its subsidiaries. AerCap Holdings N.V. was incorporated in the Netherlands as a public limited liability company (“naamloze vennootschap” or “N.V.”) on July 10, 2006.
GECAS Transaction
AerCap completed the acquisition of GE Capital Aviation Services (“GECAS”) from General Electric (“GE”) (the “GECAS Transaction”) on November 1, 2021 (the “Closing Date”). Under the terms of the transaction agreement, GE received 111.5 million newly issued AerCap shares, approximately $23 billion of cash and $1 billion of AerCap notes. GE now owns approximately 46% of AerCap’s outstanding shares. In connection with the GECAS Transaction, Jennifer VanBelle has joined the Board of Directors of AerCap, bringing the number of directors serving on AerCap’s Board of Directors to ten. The GE shares are subject to a lock-up period which will expire in stages from nine to 15 months after the Closing Date. GE has entered into agreements with AerCap regarding voting restrictions, standstill provisions and certain registration rights.
The GECAS Transaction will be accounted for in accordance with the acquisition method of accounting, which requires that assets acquired and liabilities assumed are recognized at their fair values as of the acquisition date. Due to the limited time since the Closing Date, the initial purchase allocation for the business combination has not been completed. Also, the Company is unable to provide pro forma revenues and earnings of the combined entity. This information will be included in the Company’s Annual Report on Form 20-F for the year ended 2021.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
2. Basis of presentation
General
Our Condensed Consolidated Financial Statements are presented in accordance with Accounting Principles Generally Accepted in the United States of America (“U.S. GAAP”).
We consolidate all companies in which we have direct and indirect legal or effective control and all VIEs for which we are deemed the Primary Beneficiary (“PB”) under Accounting Standards Codification (“ASC”) 810. All intercompany balances and transactions with consolidated subsidiaries are eliminated. The results of consolidated entities are included from the effective date of control or, in the case of VIEs, from the date that we are or become the PB. The results of subsidiaries sold or otherwise deconsolidated are excluded from the date that we cease to control the subsidiary or, in the case of VIEs, when we cease to be the PB.
Unconsolidated investments where we have significant influence are reported using the equity method of accounting.
Our Condensed Consolidated Financial Statements are stated in U.S. dollars, which is our functional currency.
Our interim financial statements have been prepared pursuant to the rules of the U.S. Securities and Exchange Commission (“SEC”) and U.S. GAAP for interim financial reporting, and reflect all adjustments that are necessary to fairly state the results for the interim periods presented. Certain information and footnote disclosures required by U.S. GAAP for complete annual financial statements have been omitted and, therefore, our interim financial statements should be read in conjunction with our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 2, 2021. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of those for a full fiscal year.
Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Use of estimates
The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The use of estimates is or could be a significant factor affecting the reported carrying values of flight equipment, intangible assets, investment in finance lease and sales type-leases, investments, trade and notes receivables, deferred income tax assets and accruals and maintenance liabilities. Actual results may differ from our estimates under different conditions, sometimes materially.
Reportable segments
We manage our business and analyze and report our results of operations on the basis of one business segment: leasing, financing, sales and management of commercial aircraft and engines.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies
Our significant accounting policies are described in our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 2, 2021.
Future application of accounting standards:
Reference Rate Reform
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2020-04, Reference Rate Reform (ASC 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASC 848”). ASC 848 provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to reduce the financial reporting burden in light of the market transition from London Interbank Offered Rates (“LIBOR”) and other reference interest rates to alternative reference rates.
Under ASC 848 companies can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform if certain criteria are met. An entity that makes this election would not be required to remeasure the contracts at the modification date or reassess a previous accounting determination. The amendments of ASC 848 apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in ASC 848 are effective from March 12, 2020 through December 31, 2022 and can be adopted prospectively for any interim period that includes or is subsequent to March 12, 2020. We have not adopted ASC 848 for this interim period and are currently evaluating the adoption impact the standard may have on our financial statements.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
4. Cash, cash equivalents and restricted cash
Our restricted cash balance was $223.3 million and $246.5 million as of September 30, 2021 and December 31, 2020, respectively, and was primarily related to our Export Credit Agency (“ECA”) financings and Export-Import Bank of the United States (“Ex-Im”) financings, our AerFunding revolving credit facility, our Brazilian Development Bank (“BNDES”) financing and other debt. See Note 12—Debt.
The following is a reconciliation of cash, cash equivalents and restricted cash as of September 30, 2021, December 31, 2020 and September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
September 30, 2020
|
Cash and cash equivalents
|
$
|
1,311,234
|
|
|
$
|
1,248,772
|
|
|
$
|
3,244,433
|
|
Restricted cash
|
223,271
|
|
|
246,518
|
|
|
281,353
|
|
Total cash, cash equivalents and restricted cash
|
$
|
1,534,505
|
|
|
$
|
1,495,290
|
|
|
$
|
3,525,786
|
|
5. Flight equipment held for operating leases, net
Movements in flight equipment held for operating leases during the nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
Net book value at beginning of period
|
$
|
35,156,450
|
|
|
$
|
35,870,781
|
|
Additions
|
1,120,955
|
|
|
1,168,219
|
|
Depreciation
|
(1,163,646)
|
|
|
(1,224,638)
|
|
Disposals and transfers to held for sale
|
(559,891)
|
|
|
(81,025)
|
|
Transfers to investment in finance and sales-type leases, net
|
(19,890)
|
|
|
(37,678)
|
|
Impairment (Note 17)
|
(122,587)
|
|
|
(959,962)
|
|
Net book value at end of period
|
$
|
34,411,391
|
|
|
$
|
34,735,697
|
|
|
|
|
|
Accumulated depreciation and impairment as of September 30, 2021 and 2020
|
$
|
(10,722,627)
|
|
|
$
|
(9,525,280)
|
|
6. Investment in finance and sales-type leases, net
Components of investment in finance and sales-type leases, net as of September 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Future minimum lease payments to be received
|
$
|
527,703
|
|
|
$
|
608,950
|
|
Estimated residual values of leased flight equipment
|
574,383
|
|
|
589,872
|
|
Less: Unearned income
|
(235,812)
|
|
|
(260,708)
|
|
Allowance for credit losses (Note 18)
|
(51,285)
|
|
|
(59,663)
|
|
|
$
|
814,989
|
|
|
$
|
878,451
|
|
During the three months ended September 30, 2021 and 2020, we recognized interest income from investment in finance and sales-type leases, net of $12.1 million and $14.6 million, respectively, included in basic lease rents. During the nine months ended September 30, 2021 and 2020, we recognized interest income from net investment in finance and sales-type leases of $36.8 million and $41.8 million, respectively, included in basic lease rents.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
7. Intangibles
Maintenance rights and lease premium, net
Maintenance rights and lease premium, net consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Maintenance rights
|
$
|
591,983
|
|
|
$
|
642,825
|
|
Lease premium, net
|
2,702
|
|
|
7,089
|
|
|
$
|
594,685
|
|
|
$
|
649,914
|
|
Movements in maintenance rights during the nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
Maintenance rights at beginning of period
|
$
|
642,825
|
|
|
$
|
794,798
|
|
EOL and MR contract maintenance rights expense
|
(6,196)
|
|
|
(39,719)
|
|
MR contract maintenance rights write-off due to maintenance liability release
|
(16,096)
|
|
|
(18,117)
|
|
EOL contract maintenance rights write-off due to cash receipt
|
(26,188)
|
|
|
(43,954)
|
|
EOL and MR contract maintenance rights write-off due to sale of aircraft
|
(2,362)
|
|
|
(18,860)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance rights at end of period
|
$
|
591,983
|
|
|
$
|
674,148
|
|
Other intangibles
Other intangibles consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Customer relationships, net
|
$
|
203,707
|
|
|
$
|
219,589
|
|
Contractual vendor intangible assets
|
3,862
|
|
|
5,045
|
|
|
$
|
207,569
|
|
|
$
|
224,634
|
|
The following tables present details of customer relationships and related accumulated amortization as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Gross carrying amount
|
|
Accumulated
amortization
|
|
Net carrying amount
|
Customer relationships
|
$
|
360,000
|
|
|
$
|
(156,293)
|
|
|
$
|
203,707
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Gross carrying amount
|
|
Accumulated
amortization
|
|
Net carrying amount
|
Customer relationships
|
$
|
360,000
|
|
|
$
|
(140,411)
|
|
|
$
|
219,589
|
|
During the three months ended September 30, 2021 and 2020, we recorded amortization expense for customer relationships of $5.3 million. During the nine months ended September 30, 2021 and 2020, we recorded amortization expense for customer relationships of $15.9 million.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
8. Other assets
Other assets consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
December 31, 2020
|
Notes receivable, net of allowance for credit losses (a) (b)
|
$
|
461,202
|
|
|
|
$
|
529,172
|
|
Straight-line rents, prepaid expenses and other
|
197,749
|
|
|
|
125,541
|
|
Investments
|
167,132
|
|
|
|
138,065
|
|
Lease incentives
|
159,475
|
|
|
|
177,028
|
|
Debt issuance costs
|
52,822
|
|
|
(c)
|
20,722
|
|
Operating lease right of use assets
|
33,416
|
|
|
|
40,603
|
|
Other tangible fixed assets
|
20,800
|
|
|
|
22,512
|
|
Derivative assets (Note 9)
|
9,766
|
|
|
|
3,303
|
|
Other receivables
|
567,721
|
|
|
(d)
|
172,488
|
|
|
$
|
1,670,083
|
|
|
|
$
|
1,229,434
|
|
(a)Notes receivable as of September 30, 2021 and December 31, 2020 included $427 million and $490 million, respectively, related to agreements we have executed with customers to reschedule certain lease payments under our leases that are due at the reporting dates. Notes receivable as of September 30, 2021 and December 31, 2020 also included $34 million and $39 million, respectively, related to aircraft sale and other transactions.
(b)As of September 30, 2021 and December 31, 2020, we had $32 million and $7 million, respectively, allowance for credit losses on notes receivable. Please refer to Note 18—Allowance for credit losses for further details.
(c)Debt issuance costs as of September 30, 2021 included $38 million primarily related to fees associated with the bridge financing for the GECAS Transaction.
(d)Other receivables as of September 30, 2021 included $409 million related to proceeds from the sale of unsecured claims that were received in October 2021.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
9. Derivative financial instruments
We have entered into interest rate derivatives to hedge the current and future interest rate payments on our variable rate debt. These derivative financial instruments can include interest rate swaps, caps, floors, options and forward contracts.
As of September 30, 2021, we had interest rate caps and swaps outstanding, with underlying variable benchmark interest rates ranging from one to six-month U.S. dollar LIBOR.
Some of our agreements with derivative counterparties require a two-way cash collateralization of derivative fair values. We had not advanced any cash collateral to counterparties as of September 30, 2021 or December 31, 2020.
The counterparties to our interest rate derivatives are primarily major international financial institutions. We continually monitor our positions and the credit ratings of the counterparties involved and limit the amount of credit exposure to any one party. We could be exposed to potential losses due to the credit risk of non-performance by these counterparties. We have not experienced any material losses to date.
Our derivative assets are recorded in other assets and our derivative liabilities are recorded in accounts payable, accrued expenses and other liabilities in our Condensed Consolidated Balance Sheets. The following tables present notional amounts and fair values of derivatives outstanding as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
Notional amount (a)
|
|
Fair value
|
|
Notional amount (a)
|
|
Fair value
|
Derivative assets not designated as accounting hedges:
|
|
|
|
|
|
|
|
Interest rate caps
|
$
|
2,734,500
|
|
|
$
|
8,255
|
|
|
$
|
3,022,000
|
|
|
$
|
2,790
|
|
Derivative assets designated as accounting cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps
|
$
|
475,000
|
|
|
$
|
1,511
|
|
|
$
|
475,000
|
|
|
$
|
513
|
|
Total derivative assets
|
|
|
$
|
9,766
|
|
|
|
|
$
|
3,303
|
|
(a)The notional amount is excluded for caps and swaps which are not yet effective.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
Notional amount (a)
|
|
Fair value
|
|
Notional amount (a)
|
|
Fair value
|
Derivative liabilities not designated as cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
400,000
|
|
|
$
|
9,441
|
|
|
$
|
400,000
|
|
|
$
|
14,933
|
|
Derivative liabilities designated as accounting cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
2,966,000
|
|
|
$
|
95,188
|
|
|
$
|
3,331,000
|
|
|
$
|
152,370
|
|
Total derivative liabilities
|
|
|
$
|
104,629
|
|
|
|
|
$
|
167,303
|
|
(a)The notional amount is excluded for caps and swaps which are not yet effective.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
9. Derivative financial instruments (Continued)
We recorded the following in other comprehensive income (loss) related to derivative financial instruments for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Gain (Loss)
|
|
|
|
|
|
|
|
Effective portion of change in fair market value of derivatives designated as accounting cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
17,239
|
|
|
$
|
12,662
|
|
|
$
|
57,182
|
|
|
$
|
(81,297)
|
|
Interest rate caps
|
(145)
|
|
|
(291)
|
|
|
997
|
|
|
(5,922)
|
|
Derivative premium and amortization
|
896
|
|
|
429
|
|
|
2,522
|
|
|
1094
|
|
Income tax effect
|
(2,249)
|
|
|
(1,600)
|
|
|
(7,588)
|
|
|
10,766
|
|
Net gain (loss) on derivatives, net of tax
|
$
|
15,741
|
|
|
$
|
11,200
|
|
|
$
|
53,113
|
|
|
$
|
(75,359)
|
|
We expect to reclassify approximately $59 million from accumulated other comprehensive income (loss) (“AOCI”) as an increase in interest expense in our Condensed Consolidated Income Statements over the next 12 months.
The following table presents the effect of derivatives recorded as reductions to or (increases) in interest expense in our Condensed Consolidated Income Statements for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Gain (Loss)
|
|
|
|
|
|
|
|
Derivatives not designated as accounting hedges:
|
|
|
|
|
|
|
|
Interest rate caps and swaps
|
$
|
1,268
|
|
|
$
|
(11)
|
|
|
$
|
10,956
|
|
|
$
|
(14,665)
|
|
Reclassification to Condensed Consolidated Income Statements:
|
|
|
|
|
|
|
|
Reclassification of amounts previously recorded within AOCI
|
(21,780)
|
|
|
(20,618)
|
|
|
(59,590)
|
|
|
(35,699)
|
|
Loss recognized in interest expense
|
$
|
(20,512)
|
|
|
$
|
(20,629)
|
|
|
$
|
(48,634)
|
|
|
$
|
(50,364)
|
|
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
10. Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities consisted of the following as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Deferred revenue
|
$
|
276,833
|
|
|
$
|
399,820
|
|
Accounts payable and accrued expenses
|
263,560
|
|
|
222,203
|
|
Accrued interest
|
196,160
|
|
|
270,576
|
|
Derivative liabilities (Note 9)
|
104,629
|
|
|
167,303
|
|
Operating lease liabilities
|
39,991
|
|
|
49,423
|
|
|
|
|
|
|
$
|
881,173
|
|
|
$
|
1,109,325
|
|
11. Accrued maintenance liability
Movements in accrued maintenance liability during the nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
Accrued maintenance liability at beginning of period
|
$
|
1,750,395
|
|
|
$
|
2,190,159
|
|
Maintenance payments received
|
267,925
|
|
|
266,654
|
|
Maintenance payments returned
|
(172,035)
|
|
|
(312,136)
|
|
Release to income upon sale
|
(20,958)
|
|
|
(95,042)
|
|
Release to income other than upon sale
|
(206,085)
|
|
|
(291,232)
|
|
Lessor contribution, top-ups and other
|
(22,828)
|
|
|
69,843
|
|
Accrued maintenance liability at end of period
|
$
|
1,596,414
|
|
|
$
|
1,828,246
|
|
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
12. Debt
As of September 30, 2021, the principal amount of our outstanding indebtedness totaled $27.7 billion, which excluded fair value adjustments of $7.2 million and debt issuance costs, debt discounts and debt premium of $191.7 million, and our undrawn lines of credit and other available secured debt were approximately $6.0 billion, availability of which is subject to certain conditions, including compliance with certain financial covenants. As of September 30, 2021, we remained in compliance with the financial covenants across our various debt obligations.
The following table provides a summary of our indebtedness as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Debt obligation
|
|
Collateral (Number of
aircraft)
|
|
Commitment
|
|
Undrawn amounts
|
|
Amount outstanding
|
|
Weighted average interest rate (a)
|
|
Maturity
|
|
Amount outstanding
|
Unsecured
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ILFC Legacy Notes
|
|
|
|
$
|
1,034,274
|
|
|
$
|
—
|
|
|
$
|
1,034,274
|
|
|
6.63 %
|
|
2022
|
|
$
|
1,198,888
|
|
AerCap Trust (b) & AICDC (c)
Notes
|
|
|
|
12,966,787
|
|
|
—
|
|
|
12,966,787
|
|
|
4.05 %
|
|
2021-2028
|
|
12,797,126
|
|
Asia Revolving Credit Facility
|
|
|
|
684,000
|
|
|
684,000
|
|
|
—
|
|
|
—
|
|
|
2024
|
|
—
|
|
Citi Revolving Credit Facility
|
|
|
|
4,000,000
|
|
|
4,000,000
|
|
|
—
|
|
|
—
|
|
|
2024
|
|
—
|
|
Other unsecured debt
|
|
|
|
1,874,000
|
|
|
—
|
|
|
1,874,000
|
|
|
1.80 %
|
|
2022-2024
|
|
1,759,000
|
|
Fair value adjustment
|
|
|
|
|
|
|
|
8,649
|
|
|
|
|
|
|
21,716
|
|
TOTAL UNSECURED
|
|
|
|
$
|
20,559,061
|
|
|
$
|
4,684,000
|
|
|
$
|
15,883,710
|
|
|
|
|
|
|
$
|
15,776,730
|
|
Secured
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export credit facilities (d)
|
|
33
|
|
|
1,217,812
|
|
|
—
|
|
|
1,217,812
|
|
|
2.06 %
|
|
2023-2033
|
|
1,023,912
|
|
Institutional secured term loans
& secured portfolio loans
|
|
183
|
|
|
6,570,231
|
|
|
—
|
|
|
6,570,231
|
|
|
2.57 %
|
|
2022-2032
|
|
6,989,633
|
|
AerFunding Revolving Credit
Facility
|
|
31
|
|
|
2,075,000
|
|
|
1,022,762
|
|
|
1,052,238
|
|
|
2.83 %
|
|
2025
|
|
2,074,881
|
|
Other secured debt
|
|
23
|
|
|
1,043,110
|
|
|
327,772
|
|
|
715,338
|
|
|
3.21 %
|
|
2022-2039
|
|
778,273
|
|
Fair value adjustment
|
|
|
|
|
|
|
|
(1,214)
|
|
|
|
|
|
|
(1,827)
|
|
TOTAL SECURED
|
|
|
|
$
|
10,906,153
|
|
|
$
|
1,350,534
|
|
|
$
|
9,554,405
|
|
|
|
|
|
|
$
|
10,864,872
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Notes
|
|
|
|
2,250,000
|
|
|
—
|
|
|
2,250,000
|
|
|
4.98
|
%
|
|
2025-2079
|
|
2,250,000
|
|
Subordinated debt issued by joint
ventures
|
|
|
|
43,521
|
|
|
—
|
|
|
43,521
|
|
|
—
|
|
|
2023-2026
|
|
43,521
|
|
Fair value adjustment
|
|
|
|
|
|
|
|
(216)
|
|
|
|
|
|
|
(219)
|
|
TOTAL SUBORDINATED
|
|
|
|
$
|
2,293,521
|
|
|
$
|
—
|
|
|
$
|
2,293,305
|
|
|
|
|
|
|
$
|
2,293,302
|
|
Debt issuance costs, debt discounts and debt premium
|
|
|
|
|
|
|
|
(191,726)
|
|
|
|
|
|
|
(192,823)
|
|
|
|
270
|
|
|
$
|
33,758,735
|
|
|
$
|
6,034,534
|
|
|
$
|
27,539,694
|
|
|
|
|
|
|
$
|
28,742,081
|
|
(a)The weighted average interest rate for our floating rate debt is calculated based on the U.S. dollar LIBOR rate as of the last interest payment date of the respective debt, and excludes the impact of related derivative financial instruments which we hold to hedge our exposure to floating interest rates, as well as any amortization of debt issuance costs, debt discounts and debt premium. The institutional secured term loans and secured portfolio loans also contain base rate alternatives.
(b)AerCap Global Aviation Trust, a Delaware Statutory Trust (“AerCap Trust”).
(c)AerCap Ireland Capital Designated Activity Company, a designated activity company with limited liability incorporated under the laws of Ireland (“AICDC”).
(d)An additional $0.8 billion of commitment has been approved by the Export Credit Agencies, subject to customary conditions at drawdown.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
12. Debt (Continued)
Additional details of the principal terms of our indebtedness can be found in our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 2, 2021. The material changes to our indebtedness since the filing of that report, except for scheduled repayments, are described below.
AerCap Trust & AICDC Notes and ILFC Legacy Notes
In January 2021, AerCap Trust and AICDC co-issued $1.0 billion aggregate principal amount of 1.75% Senior Notes due 2026 (“January Notes Offering”). The proceeds from the January Notes Offering will be used for general corporate purposes.
In February 2021, AerCap Trust and AICDC repurchased and retired $544.0 million aggregate principal amount of 4.50% Senior Notes due 2021 for an aggregate total consideration of approximately $555.4 million.
Revolving Credit Facility
On March 30, 2021, AerCap and AICDC entered into a $4.35 billion unsecured revolving credit agreement (the “Revolving Credit Facility”) with a syndicate of lenders and Citibank N.A., as administrative agent, and a maturity of the earlier of September 30, 2025 and the date that is four years after the closing of the GECAS Transaction.
The obligations under the Revolving Credit Facility are guaranteed by AerCap and certain of its subsidiaries. Availability of borrowings under the Revolving Credit Facility became effective upon the Closing Date.
The Revolving Credit Facility contains covenants customary for unsecured financings of this type that will apply from and after the closing of the GECAS Transaction, including financial covenants that require us to maintain compliance with a maximum ratio of consolidated indebtedness to shareholders’ equity, a minimum fixed charge coverage ratio and a maximum ratio of unencumbered assets to certain financial indebtedness. The Revolving Credit Facility also contain covenants that will apply from and after the closing of the GECAS Transaction that, among other things, restrict, subject to certain exceptions, the ability of AerCap to sell assets, make certain restricted payments and incur certain liens.
GECAS Transaction Financings
Bridge Credit Facility and Term Loan Credit Facility
On March 30, 2021, AerCap and AICDC entered into a $19.0 billion 364-day unsecured Bridge Credit Agreement (the “Bridge Credit Facility”) and a $5.0 billion twelve-month Term Loan Credit Agreement (the “Term Loan Credit Agreement” and, together with the Bridge Credit Facility, the “GECAS Transaction Financings”), each with a syndicate of lenders and Citibank, N.A., as administrative agent. Commitment costs relating to the GECAS Transaction Financings are capitalized and included in other assets. Please refer to Note 8—Other assets. The amortization of commitment costs is included in transaction-related expenses. Please refer to Note 15—Transaction-related expenses. The obligations under each of the GECAS Transaction Financings were guaranteed by AerCap and certain of its subsidiaries.
As of September 30, 2021 there were no loans outstanding under the GECAS Transaction Financings. In addition to the satisfaction of other customary conditions precedent, the availability of loans under the GECAS Transaction Financings was subject to the closing of the GECAS Transaction. The GECAS Transaction Financings contained covenants customary for unsecured financings of this type that applied from and after the closing of the GECAS Transaction, including financial covenants that required us to maintain compliance with a maximum ratio of consolidated indebtedness to shareholders’ equity, a minimum fixed charge coverage ratio and a maximum ratio of unencumbered assets to certain financial indebtedness. The GECAS Transaction Financings also contained covenants that applied from and after the closing of the GECAS Transaction that, among other things, restrict, subject to certain exceptions, the ability of AerCap to sell assets, make certain restricted payments and incur certain liens.
On October 29, 2021, the Bridge Credit Facility was terminated in connection with the closing of the GECAS Transaction. On November 1, 2021, $2.0 billion was drawn under the Term Loan Credit Agreement to pay a portion of the cash consideration due under the transaction agreement. On November 5, 2021, the Term Loan Credit Agreement was repaid and terminated in connection with the closing of the GECAS Transaction.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
12. Debt (Continued)
GECAS Acquisition Notes
AerCap Trust and AICDC co-issued $21 billion of Senior Unsecured Notes in aggregate (the “GECAS Acquisition Notes”) in connection with the GECAS Transaction on October 29, 2021. The GECAS Acquisition Notes consist of $1.75 billion aggregate principal amount of 1.15% Senior Notes due 2023, $3.25 billion aggregate principal amount of 1.65% Senior Notes due 2024, $1.0 billion aggregate principal amount of 1.75% Senior Notes due 2024, $3.75 billion aggregate principal amount of 2.45% Senior Notes due 2026, $3.75 billion aggregate principal amount of 3.0% Senior Notes due 2028, $4.0 billion aggregate principal amount of 3.3% Senior Notes due 2032, $1.5 billion aggregate principal amount of 3.4% Senior Notes due 2033, $1.5 billion aggregate principal amount of 3.85% Senior Notes due 2041 and $500 million aggregate principal amount of Floating Rate Senior Notes due 2023. The GECAS Acquisition Notes are fully and unconditionally guaranteed on a senior unsecured basis by AerCap and certain other AerCap subsidiaries. The proceeds from the issuance of the GECAS Acquisition Notes were used to fund a portion of the cash consideration to be paid in the GECAS Transaction, and to pay related fees and expenses, with any excess proceeds to be used for general corporate purposes.
Institutional Secured Term Loan
A $2.0 billion institutional secured term loan (“Setanta”) was entered into on November 5, 2021. The Setanta loan contains customary covenants and events of default for financings of this type, including covenants that limit the ability of the subsidiary borrowers and their subsidiaries to incur additional indebtedness and create liens, and covenants that limit the ability of the guarantors, the subsidiary borrowers and their subsidiaries to consolidate, merge or dispose of all or substantially all of their assets and enter into transactions with affiliates. The proceeds from the Setanta loan were used to repay the amount borrowed under the Term Loan Credit Agreement.
GE Notes
On November 1, 2021, AerCap Trust and AICDC co-issued $1.0 billion of 1.899% Senior Unsecured Notes due 2025 to a subsidiary of GE in connection with the closing of the GECAS Transaction.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
13. Income taxes
Our effective tax rate for the full year 2021 is expected to be 13.5%, compared to the effective tax rate of 5.5% for the full year 2020. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions as well as the amount of permanent tax differences relative to pre-tax income.
Our effective tax rate was 12.4% and 13.5% for the three and nine months ended September 30, 2021, respectively, and 11.1% and 7.0% for the three and nine months ended September 30, 2020. Our effective tax rate in any period can be impacted by revisions to the estimated full year rate.
14. Selling, general and administrative expenses
Selling, general and administrative expenses consisted of the following for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Personnel expenses
|
$
|
30,860
|
|
|
$
|
28,602
|
|
|
$
|
84,196
|
|
|
$
|
77,983
|
|
Share-based compensation
|
21,971
|
|
|
17,004
|
|
|
63,957
|
|
|
49,513
|
|
Professional services
|
6,673
|
|
|
5,084
|
|
|
20,915
|
|
|
16,586
|
|
Office expenses
|
3,060
|
|
|
3,195
|
|
|
10,008
|
|
|
9,677
|
|
Travel expenses
|
1,244
|
|
|
1,445
|
|
|
2,899
|
|
|
6,725
|
|
Other expenses
|
4,389
|
|
|
5,588
|
|
|
16,644
|
|
|
17,931
|
|
|
$
|
68,197
|
|
|
$
|
60,918
|
|
|
$
|
198,619
|
|
|
$
|
178,415
|
|
15. Transaction-related expenses
Expenses related to the GECAS Transaction consisted of the following for the three and nine months ended September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2021
|
|
|
|
2021
|
|
|
Banking fees
|
$
|
84,146
|
|
|
|
|
$
|
158,747
|
|
|
|
Professional fees and other expenses
|
16,713
|
|
|
|
|
36,787
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,859
|
|
|
|
|
$
|
195,534
|
|
|
|
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Other income
Other income consisted of the following for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Proceeds from unsecured claims
|
$
|
442,420
|
|
|
$
|
—
|
|
|
$
|
635,075
|
|
|
$
|
—
|
|
Management fees
|
1,918
|
|
|
1,917
|
|
|
5,437
|
|
|
7,733
|
|
Interest and other income
|
14,362
|
|
|
29,387
|
|
|
44,205
|
|
|
53,230
|
|
|
$
|
458,700
|
|
|
$
|
31,304
|
|
|
$
|
684,717
|
|
|
$
|
60,963
|
|
Proceeds from unsecured claims primarily related to the sale of certain unsecured claims against LATAM Airlines Group S.A., as further described below.
On April 22, 2021, we entered into a claims sale and purchase agreement with a third party for the sale of certain unsecured claims filed by various AerCap companies against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered). The sale of the unsecured claims is subject to such claims becoming allowed claims in the Bankruptcy Case and other customary closing conditions. The quantum of sale proceeds for each claim actually sold will be determined as a percentage of the amount of such claim allowed by the Bankruptcy Court. To the extent any of our unsecured claims are not allowed by a specified date, the buyer has the option to terminate the agreement with respect to any or all such non-allowed claims, and to the extent the aggregate allowed amount of claims amount exceeds a specified amount, the buyer has the option not to purchase claims above the specified amount.
In May 2021, the sale of a portion of the unsecured claims closed, subsequent to the Bankruptcy Court entering an order establishing the allowed claim amount. The sale proceeds amount of approximately $186 million was recognized in Other income during the three months ended June 30, 2021.
In September 2021, the sale of a further portion of the unsecured claims closed, subsequent to the Bankruptcy Court entering an order establishing the allowed claim amount. The sale proceeds amount of approximately $409 million was recognized in Other income during the three months ended September 30, 2021. We have other claim amounts outstanding that remain subject to the claims sale and purchase agreement and will be sold if and when such claims are allowed by the Bankruptcy Court.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
17. Asset Impairment
Our long-lived assets include flight equipment held for operating lease and definite-lived intangible assets. We test long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. We perform event-driven impairment assessments of our flight equipment held for operating lease each quarter.
During the three and nine months ended September 30, 2021, we recognized impairment charges of $49.2 million and $122.6 million, respectively. For the three months ended September 30, 2021, the impairment charges related to lease terminations and were largely offset by lease revenue recognized when we retained maintenance-related balances or received EOL compensation. For the nine months ended September 30, 2021, the impairment charges related to lease terminations and sales transactions and were more than offset by lease revenue recognized when we retained maintenance-related balances or received EOL compensation.
During the three and nine months ended September 30, 2020, we recognized impairment charges of $972.9 million and $1,060.3 million, respectively. For the three and nine months ended September 30, 2020, the impairment charges primarily related to impairment of our flight equipment held for operating lease, primarily Airbus A330 and Boeing 777 aircraft and indefinite-lived goodwill assets.
18. Allowance for credit losses
Movements in the allowance for credit losses during the nine months ended September 30, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
2020
|
|
|
Allowance for credit losses at beginning of period
|
$
|
67,153
|
|
|
$
|
—
|
|
|
|
Cumulative effect due to adoption of new accounting standard
|
—
|
|
|
30,264
|
|
|
|
Current period provision for expected credit losses
|
15,881
|
|
|
33,999
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses at end of period
|
$
|
83,034
|
|
|
$
|
64,263
|
|
|
|
During the nine months ended September 30, 2021 and 2020, we increased our credit provision, classified in leasing expenses, primarily related to the increased credit risk due to the Covid-19 pandemic.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
19. Earnings per share
Basic Earnings Per Share (“EPS”) is calculated by dividing net income by the weighted average of our ordinary shares outstanding, which excludes 5,244,285 and 2,163,670 shares of unvested restricted stock as of September 30, 2021 and 2020, respectively. For the calculation of diluted EPS, the weighted average of our ordinary shares outstanding for basic EPS is adjusted by the effect of dilutive securities provided under our equity compensation plans. The number of shares excluded from diluted shares outstanding was 152,446 and 152,446 for the three and nine months ended September 30, 2021, because the effect of including these shares in the calculation would have been anti-dilutive. Due to the reported loss for the three and nine months ended September 30, 2020, basic EPS was not adjusted by the effect of dilutive securities.
Basic and diluted EPS for the three and nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
Net income (loss) for the computation of basic EPS
|
$
|
433,921
|
|
|
$
|
(849,929)
|
|
|
$
|
911,697
|
|
|
$
|
(327,044)
|
|
|
|
|
|
Weighted average ordinary shares outstanding - basic
|
128,131,157
|
|
|
127,589,905
|
|
|
128,087,006
|
|
|
127,771,182
|
|
|
|
|
|
Basic EPS
|
$
|
3.39
|
|
|
$
|
(6.66)
|
|
|
$
|
7.12
|
|
|
$
|
(2.56)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
Net income (loss) for the computation of diluted EPS
|
$
|
433,921
|
|
|
$
|
(849,929)
|
|
|
$
|
911,697
|
|
|
$
|
(327,044)
|
|
|
|
|
|
Weighted average ordinary shares outstanding - diluted
|
129,378,791
|
|
|
127,589,905
|
|
|
129,585,420
|
|
|
127,771,182
|
|
|
|
|
|
Diluted EPS
|
$
|
3.35
|
|
|
$
|
(6.66)
|
|
|
$
|
7.04
|
|
|
$
|
(2.56)
|
|
|
|
|
|
Ordinary shares outstanding, excluding shares of unvested restricted stock, as of September 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
Number of ordinary shares
|
Ordinary shares issued
|
138,847,345
|
|
|
138,847,345
|
|
Treasury shares
|
(5,467,556)
|
|
|
(8,448,807)
|
|
Ordinary shares outstanding
|
133,379,789
|
|
|
130,398,538
|
|
Shares of unvested restricted stock
|
(5,244,285)
|
|
|
(2,552,346)
|
|
Ordinary shares outstanding, excluding shares of unvested restricted stock
|
128,135,504
|
|
|
127,846,192
|
|
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
20. Variable interest entities
We use many forms of entities to achieve our leasing and financing business objectives and we have participated to varying degrees in the design and formation of these entities. Our involvement in VIEs varies and includes being a passive investor in the VIE with involvement from other parties, managing and structuring all of the VIE’s activities, or being the sole shareholder of the VIE.
During the nine months ended September 30, 2021, we did not provide any financial support to any of our VIEs that we were not contractually obligated to provide.
Consolidated VIEs
As of September 30, 2021 and December 31, 2020, substantially all assets and liabilities presented in our Condensed Consolidated Balance Sheets were held in consolidated VIEs.
We have determined that we are the PB of these entities because we control and manage all aspects of these entities, including directing the activities that most significantly affect the entities’ economic performance, absorb the majority of the risks and rewards of these entities and guarantee the activities of these entities.
The assets of our consolidated VIEs that can only be used to settle obligations of these entities, and the liabilities of these VIEs for which creditors do not have recourse to our general credit, are disclosed in our Condensed Consolidated Balance Sheets under Supplemental balance sheet information. Further details of debt held by our consolidated VIEs are disclosed in Note 12—Debt.
Wholly-owned ECA and Ex-Im financing vehicles
We have created certain wholly-owned subsidiaries for the purpose of purchasing aircraft and obtaining financing secured by such aircraft. The secured debt is guaranteed by the European ECAs and the Export-Import Bank of the United States. These entities meet the definition of a VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes.
Other secured financings
We have created a number of wholly-owned subsidiaries for the purpose of obtaining secured financings. These entities meet the definition of a VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes.
Wholly-owned leasing entities
We have created wholly-owned subsidiaries for the purpose of facilitating aircraft leases with airlines. These entities meet the definition of a VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes, which serve as equity.
Limited recourse financing structures
We have established entities to obtain secured financings for the purchase of aircraft in which we have variable interests. These entities meet the definition of a VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes. The loans of these entities are non-recourse to us except under limited circumstances.
AerCap Partners I Holding Limited (“AerCap Partners I”), AerCap Partners 767 Limited (“AerCap Partners 767”) and AerFunding are entities where we have determined we are the PB of the entity because we direct the activities that most significantly affect the economic performance of the entity and we absorb a significant portion of the risks and rewards of the entity. We provide lease management, insurance management and aircraft asset management services to AerCap Partners I, AerCap Partners 767 and AerFunding for a fee.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
20. Variable interest entities (Continued)
AerCap Partners I and AerCap Partners 767
AerCap Partners I and AerCap Partners 767 are 50%-50% joint ventures owned by us and Deucalion Aviation Funds.
As of September 30, 2021, AerCap Partners I had $54.4 million of subordinated debt outstanding, consisting of $27.2 million due to us and $27.2 million due to our joint venture partner.
During the three months ended September 30, 2021, AerCap Partners 767 completed the sales of its two aircraft. As of September 30, 2021, AerCap Partners 767 had $32.6 million of subordinated debt outstanding, consisting of $16.3 million due to us and $16.3 million due to our joint venture partner.
AerFunding
We hold a 5% equity investment and 100% of the subordinated notes (“AerFunding Class E-1 Notes”) in AerFunding.
As of September 30, 2021, AerFunding had $1,052.2 million outstanding under a secured revolving credit facility and $1,945.6 million of AerFunding Class E-1 Notes outstanding due to us.
Non-consolidated VIEs
The following table presents our maximum exposure to loss in non-consolidated VIEs as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
Carrying value of debt and equity investments and maximum exposure to loss
|
$
|
131,373
|
|
|
$
|
125,955
|
|
|
|
|
|
|
|
|
|
The maximum exposure to loss is the loss amount that would be absorbed by us in the event that all of our assets held in the VIEs, for which we are not the PB, had no value.
AerDragon Aviation Partners Limited and its subsidiaries (“AerDragon”), AerLift Leasing Limited (“AerLift”), Acsal Holdco, LLC (“ACSAL”) and Peregrine are investments that are VIEs in which we have determined that we do not have control and are not the PB. We do have significant influence and, accordingly, we account for our investments in AerDragon, AerLift and ACSAL under the equity method of accounting. We account for our equity investment in Peregrine under the cost method of accounting.
We have variable interests in other entities in which we have determined we are not the PB because we do not have the power to direct the activities that most significantly affect the entities’ economic performance.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
21. Related party transactions
The following tables present amounts received from related parties for management fees, transaction-related fees and dividends for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
2021
|
|
2020
|
|
Management fees and other
|
|
Dividends
|
|
Management fees and other
|
|
Dividends
|
AerDragon
|
$
|
137
|
|
|
$
|
—
|
|
|
$
|
136
|
|
|
$
|
—
|
|
ACSAL
|
120
|
|
|
121
|
|
|
120
|
|
|
83
|
|
AerLift
|
2,196
|
|
|
—
|
|
|
188
|
|
|
—
|
|
|
$
|
2,453
|
|
|
$
|
121
|
|
|
$
|
444
|
|
|
$
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
Management fees and other
|
|
Dividends
|
|
Management fees and other
|
|
Dividends
|
AerDragon
|
$
|
416
|
|
|
$
|
—
|
|
|
$
|
404
|
|
|
$
|
—
|
|
ACSAL
|
360
|
|
|
286
|
|
|
360
|
|
|
177
|
|
AerLift
|
2,260
|
|
|
393
|
|
|
440
|
|
|
—
|
|
|
$
|
3,036
|
|
|
$
|
679
|
|
|
$
|
1,204
|
|
|
$
|
177
|
|
22. Commitments and contingencies
Aircraft on order
As of September 30, 2021, we had commitments to purchase 270 new aircraft scheduled for delivery through 2027. These commitments are based upon purchase agreements with Boeing, Airbus and Embraer S.A. (“Embraer”). These agreements establish the pricing formulas (including adjustments for certain contractual escalation provisions) and various other terms with respect to the purchase of aircraft. Under certain circumstances, we have the right to alter the mix of aircraft types ultimately acquired.
Prepayments on flight equipment include prepayments of our forward order flight equipment and other balances held by the aircraft manufacturers. Movements in prepayments on flight equipment during the nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
Prepayments on flight equipment at beginning of period
|
$
|
2,111,659
|
|
|
$
|
2,954,478
|
|
Prepayments and additions during the period, net
|
135,632
|
|
|
451,466
|
|
Interest paid and capitalized during the period
|
13,640
|
|
|
42,751
|
|
Prepayments and capitalized interest applied to the purchase of flight equipment
|
(388,544)
|
|
|
(738,425)
|
|
Prepayments on flight equipment at end of period
|
$
|
1,872,387
|
|
|
$
|
2,710,270
|
|
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
22. Commitments and contingencies (Continued)
Legal proceedings
General
In the ordinary course of our business, we are a party to various legal actions, which we believe are incidental to the operations of our business. The Company regularly reviews the possible outcome of such legal actions, and accrues for such legal actions at the time a loss is probable and the amount of the loss can be estimated. In addition, the Company also reviews indemnities and insurance coverage, where applicable. Based on information currently available, we believe the potential outcome of those cases where we are able to estimate reasonably possible losses, and our estimate of the reasonably possible losses exceeding amounts already recognized, on an aggregated basis, is immaterial to our Condensed Consolidated Financial Statements.
VASP Litigation
We are party to a group of related cases arising from the leasing of 13 aircraft and three spare engines to Viação Aerea de São Paulo (“VASP”), a Brazilian airline. In 1992, VASP defaulted on its lease obligations and we commenced litigation against VASP to repossess our equipment and obtained a preliminary injunction for the repossession and export of 13 aircraft and three spare engines from VASP. We repossessed and exported the aircraft and engines. VASP appealed and, in 1996, the Appellate Court of the State of São Paulo (“TJSP”) ruled that the aircraft and engines should be returned or that VASP could recover proven damages arising from the repossession.
We have defended this case in the Brazilian courts through various motions and appeals. In 2004, the Superior Court of Justice (the “STJ”) dismissed our then-pending appeal. In 2005, we filed an extraordinary appeal with the Federal Supreme Court (the “STF”). On June 24, 2020, the STF reversed its earlier contrary rulings and granted our extraordinary appeal, ordering a new panel of the STJ to review the merits of our challenge against TJSP’s original order. VASP has appealed the STF’s latest order.
In 2006, VASP commenced a related proceeding to calculate the amount of alleged damages owed under the TJSP’s 1996 judgment. In 2017, the court decided that VASP had suffered no damages even if the TJSP’s 1996 judgment regarding liability were affirmed. On April 20, 2018, VASP appealed this decision. We believe, however, and we have been advised, that it is not probable that VASP will ultimately be able to recover damages from us even if VASP prevails on the issue of liability. The outcome of the legal process is, however, uncertain. The ultimate amount of damages, if any, payable to VASP cannot reasonably be estimated at this time. We continue to actively pursue all courses of action that may reasonably be available to us and intend to defend our position vigorously.
In 2006, we brought actions against VASP in English and Irish courts seeking damages arising from the 1992 lease defaults. These actions resulted in judgments by the English court in the aggregate amount of approximately $40 million plus interest and judgments by the Irish court in the aggregate amount of approximately $36.9 million, all in our favor. VASP had meanwhile in 2008 been adjudicated as insolvent by a Brazilian bankruptcy court, which commenced bankruptcy proceedings. We have caused the English and Irish judgments to be domesticated in Brazil and submitted them as claims in the bankruptcy proceeding. The bankruptcy court has allowed the claims in the amount of $40 million in respect of the English judgments and $24 million in respect of the Irish judgments. We have been advised that it is not probable that VASP’s bankruptcy estate will have funds to pay its creditors but our court-approved claims may be used to offset any damages that VASP might be awarded in the Brazilian courts if for any reason we are not successful in defending ourselves against VASP’s claim for damages.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
22. Commitments and contingencies (Continued)
Transbrasil Litigation
We are party to a group of related actions arising from the leasing of various aircraft and engines to Transbrasil S/A Linhas Areas (“Transbrasil”), a now-defunct Brazilian airline. By 1998, Transbrasil had defaulted on various obligations under its leases with AerCap-related companies (the “AerCap Lessors”), along with other leases it had entered into with General Electric Capital Corporation (“GECC”) and certain of its affiliates (collectively, with GECC, the “GE Lessors”). GECAS was the servicer for all these leases at the time. Subsequently, Transbrasil issued promissory notes (the “Notes”) to the AerCap Lessors and GE Lessors (collectively, the “Lessors”) in connection with restructurings of the leases. Transbrasil defaulted on the Notes and the Lessors individually brought enforcement actions against Transbrasil in 2001 (GECC also filed an action for the involuntary bankruptcy of Transbrasil).
Transbrasil brought a lawsuit against the Lessors in February 2001 (the “Transbrasil Lawsuit”), claiming that the Notes had in fact been paid at the time the Lessors brought the enforcement actions. In 2007, the trial judge ruled in favor of Transbrasil and the Lessors appealed. In April 2010, the appellate court published a judgment (the “2010 Judgment”) rejecting the Lessors’ appeal, ordering them to pay Transbrasil statutory penalties equal to double the face amount of the Notes (plus interest and monetary adjustments) as well as damages for any losses incurred as a result of the attempts to collect on the Notes. The 2010 Judgment provided that the amount of such losses would be calculated in separate proceedings in the trial court (the “Indemnity Claim”). In June 2010, the Lessors filed special appeals before the STJ in Brazil. In October 2013, the STJ granted the special appeals filed by the GE Lessors, effectively reversing the 2010 Judgment in most respects as to all of the Lessors. Transbrasil appealed this order, but the appellate panel in November 2016 rejected Transbrasil’s appeal, preserving the 2013 reversal of the 2010 Judgment. All appeals in respect of the Transbrasil Lawsuit based on the merits of the dispute have now concluded.
However, in July 2011, while the various appeals of the 2010 Judgment were pending, Transbrasil brought three actions for provisional enforcement of the 2010 Judgment (the “Provisional Enforcement Actions”): one to enforce the award of statutory penalties; a second to recover attorneys’ fees related to that award; and a third to enforce the Indemnity Claim. Transbrasil submitted its alleged calculation of statutory penalties, which, according to Transbrasil, amounted to approximately $210 million in the aggregate against all defendants, including interest and monetary adjustments.
In light of the STJ’s ruling in October 2013, the trial court has ordered the dismissal of the Transbrasil Provisional Enforcement Actions. The TJSP has since affirmed the dismissals of the actions seeking statutory penalties and attorneys’ fees. Lessors’ motion to clarify relating to the dismissal of the Provisional Enforcement Action with respect to the Indemnity Claim remains pending. We believe we have strong arguments to convince the court that Transbrasil suffered no material damage as a result of the defendants’ attempts to collect on the Notes.
The only matters remaining to be resolved are: (i) a motion to clarify relating to the dismissal of a lower court appeal with respect to the Indemnity Claim and (ii) a number of court-mandated legal fee assessments for (a) proofs of claim filed by the Lessors against the Transbrasil bankruptcy estate and (b) various otherwise-concluded enforcement proceedings, including the Provisional Enforcement Proceedings.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
23. Fair value measurements
The Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy as described below. Where limited or no observable market data exists, fair value measurements for assets and liabilities are primarily based on management’s own estimates and are calculated based upon the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results may not be realized in actual sale or immediate settlement of the asset or liability.
The degree of judgment used in measuring the fair value of a financial and non-financial asset or liability generally correlates with the level of pricing observability. We classify our fair value measurements based on the observability and significance of the inputs used in making the measurement, as provided below:
Level 1 — Quoted prices available in active markets for identical assets or liabilities as of the reported date.
Level 2 — Observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow value to be determined.
Level 3 — Unobservable inputs from our own assumptions about market risk developed based on the best information available, subject to cost-benefit analysis. Inputs may include our own data.
Fair value measurements are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
Assets and liabilities measured at fair value on a recurring basis
As of September 30, 2021 and December 31, 2020, our derivative portfolio consisted of interest rate swaps and caps. The fair value of derivatives is based on dealer quotes for identical instruments. We have also considered the credit rating and risk of the counterparty of the derivative contract based on quantitative and qualitative factors. As such, the valuation of these instruments was classified as Level 2.
The following tables present our financial assets and liabilities that we measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
Investment, at fair value
|
$
|
35,759
|
|
|
$
|
35,759
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
9,766
|
|
|
—
|
|
|
9,766
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
104,629
|
|
|
$
|
—
|
|
|
$
|
104,629
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
Investment, at fair value
|
$
|
12,110
|
|
|
$
|
12,110
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Derivative assets
|
3,303
|
|
|
—
|
|
|
3,303
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Derivative liabilities
|
$
|
167,303
|
|
|
$
|
—
|
|
|
$
|
167,303
|
|
|
$
|
—
|
|
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
23. Fair value measurements (Continued)
Assets and liabilities measured at fair value on a non-recurring basis
We measure the fair value of certain definite-lived intangible assets and our flight equipment on a non-recurring basis, when U.S. GAAP requires the application of fair value, including when events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. Additional details of recoverability assessments performed on certain definite-lived intangible assets and our flight equipment are described in our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 2, 2021.
Management develops the assumptions used in the fair value measurements. Therefore, the fair value measurements of definite-lived intangible assets and flight equipment are classified as Level 3 valuations.
Flight equipment
Inputs to non-recurring fair value measurements categorized as Level 3
We use the income approach to measure the fair value of flight equipment, which is based on the present value of estimated future cash flows. Key inputs to the income statement approach include the discount rate, current contractual lease cash flows, projected future non-contractual lease cash flows, extended to the end of the aircraft’s estimated holding period in its highest and best use, and a contractual or estimated disposition value.
The current contractual lease cash flows are based on the in-force lease rates. The projected future non-contractual lease cash flows are estimated based on the aircraft type, age, and the airframe and engine configuration of the aircraft. The projected non-contractual lease cash flows are applied to follow-on lease terms, which are estimated based on the age of the aircraft at the time of re-lease and are assumed through the estimated holding period of the aircraft. The estimated holding period is the period over which future cash flows are assumed to be generated. Shorter holding periods can result when a potential sale or future disassembly of an aircraft for the sale of its parts (“part-out”) of an individual aircraft has been contracted for, or is likely. In instances of a potential sale or part-out, the holding period is based on the estimated sale or part-out date. The disposition value is generally estimated based on aircraft type. In situations where the aircraft will be disposed of, the disposition value assumed is based on an estimated part-out value or the contracted sale price.
The estimated future cash flows, as described above, are then discounted to present value. The discount rate used is based on the aircraft type and incorporates assumptions market participants would use regarding the likely debt and equity financing components, and the required returns of those financing components.
The significant unobservable inputs utilized in the fair value measurement of flight equipment are the discount rate and the non-contractual cash flows. The discount rate is affected by movements in the aircraft funding markets, including fluctuations in required rates of return in debt and equity, and loan to value ratios. The non-contractual cash flows represent management’s estimate of the non-contractual cash flows over the remaining life of the aircraft. An increase in the discount rate would decrease the fair value measurement of the aircraft, while an increase in the estimated non-contractual cash flows would increase the fair value measurement of the aircraft.
Fair value disclosures of financial instruments
The fair value of restricted cash and cash and cash equivalents approximates their carrying value because of their short-term nature (Level 1). The fair value of our long-term unsecured debt is estimated using quoted market prices for similar or identical instruments, depending on the frequency and volume of activity in the market. The fair value of our long-term secured debt is estimated using a discounted cash flow analysis based on current market interest rates and spreads for debt with similar characteristics (Level 2). Derivatives are recognized in our Condensed Consolidated Balance Sheets at their fair value. The fair value of derivatives is based on dealer quotes for identical instruments. We have also considered the credit rating and risk of the counterparties of the derivative contracts based on quantitative and qualitative factors (Level 2).
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
23. Fair value measurements (Continued)
As of September 30, 2021, we held an investment at fair value of $35.8 million, based on quoted market price. The valuation of this investment was classified as Level 1.
All of our financial instruments are measured at amortized cost, other than our derivatives and investment which are measured at fair value on a recurring basis. The carrying amounts and fair values of our most significant financial instruments as of September 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
Carrying value
|
|
Fair value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,311,234
|
|
|
$
|
1,311,234
|
|
|
$
|
1,311,234
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
223,271
|
|
|
223,271
|
|
|
223,271
|
|
|
—
|
|
|
—
|
|
Investment, at fair value
|
35,759
|
|
|
35,759
|
|
|
35,759
|
|
|
—
|
|
|
—
|
|
Derivative assets
|
9,766
|
|
|
9,766
|
|
|
—
|
|
|
9,766
|
|
|
—
|
|
|
$
|
1,580,030
|
|
|
$
|
1,580,030
|
|
|
$
|
1,570,264
|
|
|
$
|
9,766
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Debt
|
$
|
27,731,420
|
|
(a)
|
$
|
28,594,857
|
|
|
$
|
—
|
|
|
$
|
28,594,857
|
|
|
$
|
—
|
|
Derivative liabilities
|
104,629
|
|
|
104,629
|
|
|
—
|
|
|
104,629
|
|
|
—
|
|
|
$
|
27,836,049
|
|
|
$
|
28,699,486
|
|
|
$
|
—
|
|
|
$
|
28,699,486
|
|
|
$
|
—
|
|
(a)Excludes debt issuance costs, debt discounts and debt premium.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
Carrying value
|
|
Fair value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,248,772
|
|
|
$
|
1,248,772
|
|
|
$
|
1,248,772
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Restricted cash
|
246,518
|
|
|
246,518
|
|
|
246,518
|
|
|
—
|
|
|
—
|
|
Investment, at fair value
|
12,110
|
|
|
12,110
|
|
|
12,110
|
|
|
|
|
|
Derivative assets
|
3,303
|
|
|
3,303
|
|
|
—
|
|
|
3,303
|
|
|
—
|
|
|
$
|
1,510,703
|
|
|
$
|
1,510,703
|
|
|
$
|
1,507,400
|
|
|
$
|
3,303
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Debt
|
$
|
28,934,904
|
|
(a)
|
$
|
29,798,305
|
|
|
$
|
—
|
|
|
$
|
29,798,305
|
|
|
$
|
—
|
|
Derivative liabilities
|
167,303
|
|
|
167,303
|
|
|
—
|
|
|
167,303
|
|
|
—
|
|
|
$
|
29,102,207
|
|
|
$
|
29,965,608
|
|
|
$
|
—
|
|
|
$
|
29,965,608
|
|
|
$
|
—
|
|
(a)Excludes debt issuance costs, debt discounts and debt premium.
AerCap Holdings N.V. and Subsidiaries
Notes to the Unaudited Condensed Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
24. Subsequent events
GECAS Transaction
AerCap completed the acquisition of GECAS from GE on November 1, 2021. Under the terms of the transaction agreement, GE received 111.5 million newly issued AerCap shares, approximately $23 billion of cash and $1 billion of AerCap notes. GE now owns approximately 46% of AerCap’s outstanding shares. In connection with the GECAS Transaction, Jennifer VanBelle has joined the Board of Directors of AerCap, bringing the number of directors serving on AerCap’s Board of Directors to ten. The GE shares are subject to a lock-up period which will expire in stages from nine to 15 months after the Closing Date. GE has entered into agreements with AerCap regarding voting restrictions, standstill provisions and certain registration rights.
GECAS Transaction Financings
AerCap Trust and AICDC co-issued $21 billion of Senior Unsecured Notes in aggregate (the “GECAS Acquisition Notes”) in connection with the GECAS Transaction on October 29, 2021. The GECAS Acquisition Notes consist of $1.75 billion aggregate principal amount of 1.15% Senior Notes due 2023, $3.25 billion aggregate principal amount of 1.65% Senior Notes due 2024, $1.0 billion aggregate principal amount of 1.75% Senior Notes due 2024, $3.75 billion aggregate principal amount of 2.45% Senior Notes due 2026, $3.75 billion aggregate principal amount of 3.0% Senior Notes due 2028, $4.0 billion aggregate principal amount of 3.3% Senior Notes due 2032, $1.5 billion aggregate principal amount of 3.4% Senior Notes due 2033, $1.5 billion aggregate principal amount of 3.85% Senior Notes due 2041 and $500 million aggregate principal amount of Floating Rate Senior Notes due 2023. The GECAS Acquisition Notes are fully and unconditionally guaranteed on a senior unsecured basis by AerCap and certain other AerCap subsidiaries. The proceeds from the issuance of the GECAS Acquisition Notes were used to fund a portion of the cash consideration to be paid in the GECAS Transaction, and to pay related fees and expenses, with any excess proceeds to be used for general corporate purposes.
A $2.0 billion institutional secured term loan (“Setanta”) was entered into on November 5, 2021. The Setanta loan contains customary covenants and events of default for financings of this type, including covenants that limit the ability of the subsidiary borrowers and their subsidiaries to incur additional indebtedness and create liens, and covenants that limit the ability of the guarantors, the subsidiary borrowers and their subsidiaries to consolidate, merge or dispose of all or substantially all of their assets and enter into transactions with affiliates. The proceeds from the Setanta loan were used to repay the amount borrowed under the Term Loan Credit Agreement.
On November 1, 2021, AerCap Trust and AICDC co-issued $1.0 billion of 1.899% Senior Unsecured Notes due 2025 to a subsidiary of GE in connection with the closing of the GECAS Transaction.
The Bridge Credit Facility and the Term Loan Credit Agreement were terminated in connection with the closing of the GECAS Transaction. See Note 12—Debt for further details.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read this discussion in conjunction with our unaudited Condensed Consolidated Financial Statements and the related notes included in this Interim Report. Our financial statements are presented in accordance with U.S. GAAP, and are presented in U.S. dollars. Due to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Special note about forward looking statements
This report includes “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We have based these forward looking statements largely on our current beliefs and projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed in this report, could cause our actual results to differ substantially from those anticipated in our forward looking statements, including, among other things:
•the severity, extent and duration of the Covid-19 pandemic, including the impact of Covid-19 vaccine distribution and vaccination rates, and the rate of recovery in air travel, the aviation industry and global economic conditions; the potential impacts of the pandemic and responsive government actions on our business and results of operations, financial condition and cash flows;
•the availability of capital to us and to our customers and changes in interest rates;
•a downgrade in our credit rating;
•the ability of our lessees and potential lessees to make lease payments to us;
•our ability to successfully negotiate aircraft purchases, sales and leases, to collect outstanding amounts due and to repossess aircraft under defaulted leases, and to control costs and expenses;
•changes in the overall demand for commercial aircraft leasing and aircraft management services;
•the effects of terrorist attacks on the aviation industry and on our operations;
•the economic condition of the global airline and cargo industry and economic and political conditions;
•development of increased government regulation, including travel restrictions, regulation of trade and the imposition of import and export controls, tariffs and other trade barriers;
•competitive pressures within the industry;
•the negotiation of aircraft management services contracts;
•our ability to successfully integrate GECAS or achieve the anticipated benefits of the GECAS Transaction;
•the potential impact of the consummation of the GECAS Transaction on our relationships, including with employees, suppliers, customers and competitors;
•regulatory changes affecting commercial aircraft operators, aircraft maintenance, engine standards, accounting standards and taxes; and
•the risks set forth or referred to in “Part II. Other Information—Item 1A. Risk Factors” included below.
The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward looking statements. Forward looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward looking statements speak only as of the date they were made and we undertake no obligation to update publicly or to revise any forward looking statements because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward looking events and circumstances described in this report might not occur and are not guarantees of future performance.
Aircraft portfolio
We are the global leader in aircraft leasing. We focus on acquiring in-demand aircraft at attractive prices, funding them efficiently, hedging interest rate risk prudently and using our platform to deploy these assets with the objective of delivering superior risk-adjusted returns. We believe that by applying our expertise, we will be able to identify and execute on a broad range of market opportunities that we expect will generate attractive returns for our shareholders. We are an independent aircraft lessor, and, as such, we are not affiliated with any airframe or engine manufacturer. This independence provides us with purchasing flexibility to acquire aircraft or engine models regardless of the manufacturer.
As of September 30, 2021, we owned 930 aircraft and we managed 104 aircraft. As of September 30, 2021, we had commitments to purchase 270 new aircraft scheduled for delivery through 2027. As of September 30, 2021, the weighted average age of our 930 owned aircraft fleet, weighted by net book value, was 6.7 years. We operate our business on a global basis. As of September 30, 2021, 863 of our 930 owned aircraft were on lease and 67 aircraft were off-lease. As of November 5, 2021, of the 67 aircraft, 37 aircraft were designated for sale or part-out (which represented less than 1% of the aggregate net book value of our fleet), 23 were re-leased or under commitments for re-lease and seven aircraft were being marketed for re-lease (which represented less than 1% of the aggregate net book value of our fleet). During the three and nine months ended September 30, 2021 our owned aircraft utilization rate was 94%, calculated based on the number of days each aircraft was on lease, weighted by the net book value of the aircraft.
The following table presents our aircraft portfolio by type of aircraft as of September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft type
|
|
Number of
owned
aircraft
|
|
Percentage of
total
net book value
|
|
Number of
managed
aircraft
|
|
Number of on
order aircraft
|
|
Total owned,
managed and on
order aircraft
|
Airbus A320 Family
|
|
272
|
|
|
12
|
%
|
|
43
|
|
|
—
|
|
|
315
|
|
Airbus A320neo Family
|
|
180
|
|
|
25
|
%
|
|
5
|
|
|
142
|
|
|
327
|
|
Airbus A330
|
|
58
|
|
|
4
|
%
|
|
9
|
|
|
—
|
|
|
67
|
|
Airbus A350
|
|
27
|
|
|
10
|
%
|
|
—
|
|
|
—
|
|
|
27
|
|
Boeing 737NG
|
|
218
|
|
|
15
|
%
|
|
43
|
|
|
—
|
|
|
261
|
|
Boeing 737 MAX
|
|
11
|
|
|
1
|
%
|
|
—
|
|
|
72
|
|
|
83
|
|
Boeing 767
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Boeing 777-200ER
|
|
16
|
|
|
1
|
%
|
|
2
|
|
|
—
|
|
|
18
|
|
Boeing 777-300ER
|
|
21
|
|
|
3
|
%
|
|
1
|
|
|
—
|
|
|
22
|
|
Boeing 787
|
|
90
|
|
|
28
|
%
|
|
1
|
|
|
23
|
|
|
114
|
|
Embraer E190/195-E2
|
|
17
|
|
|
1
|
%
|
|
—
|
|
|
33
|
|
|
50
|
|
Other
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
Total
|
|
930
|
|
|
100
|
%
|
|
104
|
|
|
270
|
|
|
1,304
|
|
Following the fatal accidents of two Boeing 737 MAX aircraft, the worldwide fleet of these aircraft was grounded by aviation authorities in March 2019 and production was temporarily suspended by Boeing in January 2020, resulting in ongoing delays in the delivery of our aircraft on order from Boeing. Various jurisdictions have now approved the Boeing 737 MAX return to service, including the United States and Europe. In November 2020, the U.S. Federal Aviation Administration (“FAA”) rescinded the order that halted commercial operations of Boeing 737 MAX aircraft, thus allowing airlines that are under the FAA’s jurisdiction to take the steps necessary to resume service and Boeing to begin making deliveries. In January 2021, the European Union Aviation Safety Agency also approved the Boeing 737 MAX return to service. The Civil Aviation Administration of China has not yet approved the return to service. As of September 30, 2021, we had 11 Boeing 737 MAX aircraft delivered and on lease.
During the nine months ended September 30, 2021, we had the following activity related to flight equipment:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for
operating
leases
|
|
Investment in
finance and
sales-type leases, net
|
|
Held for
sale
|
|
Total
owned
aircraft
|
|
Number of owned aircraft at beginning of period
|
863
|
|
|
76
|
|
|
—
|
|
|
939
|
|
|
Aircraft purchases
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
Aircraft reclassified to held for sale
|
(19)
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
Aircraft sold or designated for part-out
|
(20)
|
|
|
—
|
|
|
(12)
|
|
|
(32)
|
|
|
Aircraft reclassified from investment in finance and sales-type leases, net
|
2
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
Number of owned aircraft at end of period
|
849
|
|
|
74
|
|
|
7
|
|
|
930
|
|
|
Critical accounting policies
There have been no significant changes to our critical accounting policies from those disclosed in our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 2, 2021, except for the addition and updates as described in “Part I. Financial Information—Item 1. Financial Statements (Unaudited)—Note 3—Summary of significant accounting policies.”
Comparative results of operations
Results of operations for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Increase/ (Decrease)
|
|
2021
|
|
2020
|
|
|
|
|
|
(U.S. Dollars in thousands)
|
Revenues and other income
|
|
|
|
|
|
|
|
Lease revenue:
|
|
|
|
|
|
|
|
Basic lease rents
|
$
|
847,650
|
|
|
$
|
897,358
|
|
|
$
|
(49,708)
|
|
|
|
Maintenance rents and other receipts
|
110,423
|
|
|
90,743
|
|
|
19,680
|
|
|
|
Total lease revenue
|
958,073
|
|
|
988,101
|
|
|
(30,028)
|
|
|
|
Net gain on sale of assets
|
37,633
|
|
|
7,151
|
|
|
30,482
|
|
|
|
Other income
|
458,700
|
|
|
31,304
|
|
|
427,396
|
|
|
|
Total Revenues and other income
|
1,454,406
|
|
|
1,026,556
|
|
|
427,850
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Depreciation and amortization
|
393,366
|
|
|
415,970
|
|
|
(22,604)
|
|
|
|
Asset impairment
|
49,201
|
|
|
972,921
|
|
|
(923,720)
|
|
|
|
Interest expense
|
287,213
|
|
|
307,316
|
|
|
(20,103)
|
|
|
|
Loss on debt extinguishment
|
2,894
|
|
|
42,835
|
|
|
(39,941)
|
|
|
|
Leasing expenses
|
53,519
|
|
|
51,211
|
|
|
2,308
|
|
|
|
Selling, general and administrative expenses
|
68,197
|
|
|
60,918
|
|
|
7,279
|
|
|
|
Transaction-related expenses
|
100,859
|
|
|
—
|
|
|
100,859
|
|
|
|
Total Expenses
|
955,249
|
|
|
1,851,171
|
|
|
(895,922)
|
|
|
|
Gain (loss) on investment at fair value
|
2,156
|
|
|
(128,363)
|
|
|
130,519
|
|
|
|
Income (loss) before income taxes and income of investments accounted for under the equity method
|
501,313
|
|
|
(952,978)
|
|
|
1,454,291
|
|
|
|
Income tax (expense) benefit
|
(62,132)
|
|
|
106,077
|
|
|
(168,209)
|
|
|
|
Equity in net earnings (loss) of investments accounted for under the equity method
|
1,848
|
|
|
(3,901)
|
|
|
5,749
|
|
|
|
Net income (loss)
|
$
|
441,029
|
|
|
$
|
(850,802)
|
|
|
$
|
1,291,831
|
|
|
|
Net (income) loss attributable to non-controlling interest
|
(7,108)
|
|
|
873
|
|
|
(7,981)
|
|
|
|
Net income (loss) attributable to AerCap Holdings N.V.
|
$
|
433,921
|
|
|
$
|
(849,929)
|
|
|
$
|
1,283,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic lease rents. The decrease in basic lease rents of $49.7 million, or 6%, was attributable to:
•a decrease in basic lease rents of $102.1 million primarily due to lease transitions and lease restructurings, the accounting for which requires the remaining rental payments to be recorded on a straight-line basis over the remaining term of the original lease plus any extension period; and
•the sale of 51 aircraft between July 1, 2020 and September 30, 2021 with an aggregate net book value of $0.4 billion on their respective sale dates, resulting in a decrease in basic lease rents of $17.2 million;
partially offset by
•the acquisition of 50 aircraft between July 1, 2020 and September 30, 2021 with an aggregate net book value of $2.6 billion on their respective acquisition dates, resulting in an increase in basic lease rents of $43.7 million; and
•a $25.9 million lower impact on basic lease rents as a result of the application of Cash Accounting during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
Maintenance rents and other receipts. The increase in maintenance rents and other receipts of $19.7 million, or 22%, was attributable to:
•an increase of $11.4 million in maintenance revenue and other receipts from lease terminations; and
•an increase of $8.3 million in regular maintenance rents, primarily due to higher EOL and other compensation received.
Net gain on sale of assets. The increase in net gain on sale of assets of $30.5 million was primarily due to the higher volume and composition of asset sales. During the three months ended September 30, 2021, we sold 11 aircraft for proceeds of $100.7 million and during the three months ended September 30, 2020, we sold seven aircraft for proceeds of $63.3 million.
Other income. The increase in other income of $427.4 million was primarily driven by proceeds from unsecured claims during the three months ended September 30, 2021.
Depreciation and amortization. The decrease in depreciation and amortization of $22.6 million, or 5%, was primarily due to a lower average lease assets balance during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
Asset impairment. For the three months ended September 30, 2021, asset impairments related to lease terminations and were largely offset by lease revenue recognized when we retained maintenance-related balances or received EOL compensation. For the three months ended September 30, 2020, the impairment charges primarily related to impairment of our flight equipment held for operating lease, primarily Airbus A330 and Boeing 777 aircraft and indefinite-lived goodwill assets.
Interest expense. The decrease in interest expense of $20.1 million, or 7%, was primarily attributable to a $2.6 billion decrease in the average outstanding debt balance to $28.0 billion as of September 30, 2021 from $30.6 billion as of September 30, 2020.
Loss on debt extinguishment. During the three months ended September 30, 2020, we recognized loss on debt extinguishment of $42.8 million primarily related to the premium paid on the repurchase of debt as a result of the tender offer completed in July 2020.
Leasing expenses. The increase in leasing expenses of $2.3 million, or 4%, was primarily due to $18.6 million of higher expenses primarily related to airline defaults, partially offset by $11.6 million of lower maintenance rights asset amortization and $4.7 million of lower aircraft transition costs, lessor maintenance contributions and other leasing expenses.
Transaction-related expenses. During the three months ended September 30, 2021, we recognized $100.9 million of expenses related to the GECAS Transaction primarily related to the amortization of the fees associated with the Bridge Credit Facility.
Income tax (expense) benefit. The effective tax rate for the full year 2021 is expected to be 13.5%, compared to the effective tax rate of 5.5% for the full year 2020. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions as well as the amount of permanent tax differences relative to pre-tax income. The effective tax rate was 12.4% for the three months ended September 30, 2021, and 11.1% for the three months ended September 30, 2020. The effective tax rate in any period can be impacted by revisions to the estimated full year rate.
Comparative results of operations
Results of operations for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Increase/ (Decrease)
|
|
2021
|
|
2020
|
|
|
|
|
|
(U.S. Dollars in thousands)
|
Revenues and other income
|
|
|
|
|
|
|
|
Lease revenue:
|
|
|
|
|
|
|
|
Basic lease rents
|
$
|
2,607,974
|
|
|
$
|
2,876,278
|
|
|
$
|
(268,304)
|
|
|
|
Maintenance rents and other receipts
|
424,252
|
|
|
449,252
|
|
|
(25,000)
|
|
|
|
Total lease revenue
|
3,032,226
|
|
|
3,325,530
|
|
|
(293,304)
|
|
|
|
Net gain on sale of assets
|
64,881
|
|
|
75,519
|
|
|
(10,638)
|
|
|
|
Other income
|
684,717
|
|
|
60,963
|
|
|
623,754
|
|
|
|
Total Revenues and other income
|
3,781,824
|
|
|
3,462,012
|
|
|
319,812
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
Depreciation and amortization
|
1,182,086
|
|
|
1,243,586
|
|
|
(61,500)
|
|
|
|
Asset impairment
|
122,587
|
|
|
1,060,289
|
|
|
(937,702)
|
|
|
|
Interest expense
|
860,917
|
|
|
937,691
|
|
|
(76,774)
|
|
|
|
Loss on debt extinguishment
|
8,955
|
|
|
42,835
|
|
|
(33,880)
|
|
|
|
Leasing expenses
|
157,061
|
|
|
232,082
|
|
|
(75,021)
|
|
|
|
Selling, general and administrative expenses
|
198,619
|
|
|
178,415
|
|
|
20,204
|
|
|
|
Transaction-related expenses
|
195,534
|
|
|
—
|
|
|
195,534
|
|
|
|
Total Expenses
|
2,725,759
|
|
|
3,694,898
|
|
|
(969,139)
|
|
|
|
Loss on investment at fair value
|
(307)
|
|
|
(114,421)
|
|
|
114,114
|
|
|
|
Income (loss) before income taxes and income of investments accounted for under the equity method
|
1,055,758
|
|
|
(347,307)
|
|
|
1,403,065
|
|
|
|
Income tax (expense) benefit
|
(142,527)
|
|
|
24,311
|
|
|
(166,838)
|
|
|
|
Equity in net earnings (loss) of investments accounted for under the equity method
|
5,703
|
|
|
(397)
|
|
|
6,100
|
|
|
|
Net income (loss)
|
$
|
918,934
|
|
|
$
|
(323,393)
|
|
|
$
|
1,242,327
|
|
|
|
Net income attributable to non-controlling interest
|
(7,237)
|
|
|
(3,651)
|
|
|
(3,586)
|
|
|
|
Net income (loss) attributable to AerCap Holdings N.V.
|
$
|
911,697
|
|
|
$
|
(327,044)
|
|
|
$
|
1,238,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic lease rents. The decrease in basic lease rents of $268.3 million, or 9%, was attributable to:
•a decrease in basic lease rents of $284.5 million primarily due to lease transitions and lease restructurings, the accounting for which requires the remaining rental payments to be recorded on a straight-line basis over the remaining term of the original lease plus any extension period;
•the sale of 72 aircraft between January 1, 2020 and September 30, 2021 with an aggregate net book value of $0.7 billion on their respective sale dates, resulting in a decrease in basic lease rents of $69.4 million; and
•a $35.6 million decrease in basic lease rents due to the application of Cash Accounting during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020;
partially offset by
•the acquisition of 63 aircraft between January 1, 2020 and September 30, 2021 with an aggregate net book value of $3.2 billion on their respective acquisition dates, resulting in an increase in basic lease rents of $121.2 million.
Maintenance rents and other receipts. The decrease in maintenance rents and other receipts of $25 million, or 6%, was attributable to:
•a decrease of $83.9 million in maintenance revenue and other receipts from early lease terminations;
partially offset by
•an increase of $58.9 million in regular maintenance rents, primarily due to EOL and other compensation received.
Net gain on sale of assets. The decrease in net gain on sale of assets of $10.6 million, or 14%, was primarily due to the lower volume and composition of asset sales. During the nine months ended September 30, 2021, we sold 32 aircraft for proceeds of $424.2 million and during the nine months ended September 30, 2020, we sold 28 aircraft for proceeds of $516.9 million.
Other income. The increase in other income of $623.8 million was primarily driven by proceeds from unsecured claims during the nine months ended September 30, 2021.
Depreciation and amortization. The decrease in depreciation and amortization of $61.5 million, or 5%, was primarily due to a lower average lease assets balance during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.
Asset impairment. For the nine months ended September 30, 2021, asset impairments related to lease terminations and sales transactions were more than offset by lease revenue recognized when we retained maintenance-related balances or received EOL compensation. For the nine months ended September 30, 2020, the impairment charges primarily related to impairment of our flight equipment held for operating lease, primarily Airbus A330 and Boeing 777 aircraft and indefinite-lived goodwill assets.
Interest expense. The decrease in interest expense of $76.8 million, or 8%, was primarily attributable to a $1.9 billion decrease in the average outstanding debt balance to $28.5 billion as of September 30, 2021 from $30.4 billion as of September 30, 2020.
Loss on debt extinguishment. During the nine months ended September 30, 2020, we recognized loss on debt extinguishment of $42.8 million primarily related to the premium paid on the repurchase of debt as a result of the tender offer completed in July 2020.
Leasing expenses. The decrease in leasing expenses of $75 million, or 32%, was primarily due to $66.2 million of lower aircraft transition costs, lessor maintenance contributions and other leasing expenses, including a decrease in our provision for expected credit losses and $33.9 million of lower maintenance rights asset amortization, partially offset by $25.1 million of higher expenses primarily related to airline defaults and restructurings.
Transaction-related expenses. During the nine months ended September 30, 2021, we recognized $195.5 million of expenses related to the GECAS Transaction primarily related to the amortization of the fees associated with the Bridge Credit Facility.
Income tax (expense) benefit. The effective tax rate for the full year 2021 is expected to be 13.5%, compared to the effective tax rate of 5.5% for the full year 2020. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions as well as the amount of permanent tax differences relative to pre-tax income. The effective tax rate was 13.5% for the nine months ended September 30, 2021 and 7.0% for the nine months ended September 30, 2020. The effective tax rate in any period can be impacted by revisions to the estimated full year rate.
Liquidity and capital resources
The following table presents our consolidated cash flows for the nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2021
|
|
2020
|
|
(U.S. Dollars in millions)
|
Net cash provided by operating activities
|
$
|
1,959.3
|
|
|
$
|
1,477.8
|
|
Net cash used in investing activities
|
(420.6)
|
|
|
(491.5)
|
|
Net cash (used in) provided by financing activities
|
(1,499.7)
|
|
|
1,238.1
|
|
Cash flows provided by operating activities. During the nine months ended September 30, 2021, our cash provided by operating activities of $1,959.3 million was the result of net income of $918.9 million, other adjustments to net income of $1,518.0 million and collections of finance and sales-type leases of $94.6 million, partially offset by the net change in operating assets and liabilities of $572.2 million. During the nine months ended September 30, 2020, our cash provided by operating activities of $1,477.8 million was the result of net loss of $323.4 million, other adjustments to net loss of $2,372.7 million and collections of finance and sales-type leases of $47.1 million, partially offset by the net change in operating assets and liabilities of $618.6 million.
Cash flows used in investing activities. During the nine months ended September 30, 2021, our cash used in investing activities of $420.6 million primarily consisted of cash used for the purchase of aircraft and other assets of $814.0 million, partially offset by cash provided by asset sales of $393.4 million. During the nine months ended September 30, 2020, our cash used in investing activities of $491.5 million primarily consisted of cash used for the purchase of aircraft and other assets of $871.0 million, partially offset by cash provided by asset sales of $379.5 million.
Cash flows (used in) provided by financing activities. During the nine months ended September 30, 2021, our cash used in financing activities of $1,499.7 million primarily consisted of cash used for debt repayments, debt issuance and debt extinguishment costs, net of new financing proceeds and debt premium, of $1,419.0 million, cash used for the repurchase of shares and payments of tax withholdings on share-based compensation of $67.5 million, cash used for the payment of dividends to our non-controlling interest holders of $0.2 million and cash used for the payment of maintenance and security deposits of $13.0 million. During the nine months ended September 30, 2020, our cash provided by financing activities of $1,238.1 million primarily consisted of cash provided by new financing proceeds, net of debt repayments, debt issuance costs, debt extinguishment costs and other cash outflows of $1,569.3 million, partially offset by cash used in net receipts of maintenance and security deposits of $208.6 million, cash used for the repurchase of shares and payments of tax withholdings on share-based compensation of $119.8 million and cash used for the payment of dividends to our non-controlling interest holders of $2.8 million.
We have significant capital requirements, including making pre-delivery payments and paying the balance of the purchase price for aircraft on delivery. As of September 30, 2021, we had commitments to purchase 270 new aircraft scheduled for delivery through 2027. In October 2021, we incurred significant additional debt to fund the acquisition of GECAS. See Note 12—Debt.
As of September 30, 2021, our cash balance was $1.5 billion, including unrestricted cash of $1.3 billion, and we had approximately $6.0 billion of undrawn lines of credit available under our revolving credit and term loan facilities and other available secured debt. As of September 30, 2021, our total available liquidity, including undrawn lines of credit, unrestricted cash, cash flows from contracted asset sales and other sources of funding, was $8.1 billion and, including estimated operating cash flows for the next 12 months, our total sources of liquidity were $10.9 billion. As of September 30, 2021, our existing sources of liquidity were sufficient to operate our business and cover approximately 1.7x of our debt maturities and contracted capital requirements for the next 12 months. As of September 30, 2021, the principal amount of our outstanding indebtedness, which excludes fair value adjustments of $7.2 million and debt issuance costs, debt discounts and debt premium of $191.7 million, totaled $27.7 billion and consisted of senior unsecured, subordinated and senior secured notes, export credit facilities, commercial bank debt, revolving credit debt, securitization debt and capital lease structures.
In order to satisfy our contractual purchase obligations, we expect to source new debt financing through access to the capital markets, including the unsecured and secured bond markets, the commercial bank market, export credit and the asset-backed securities market.
In the longer term, we expect to fund the growth of our business, including acquiring aircraft, through internally generated cash flows, the incurrence of new debt, the refinancing of existing debt and other capital-raising initiatives.
During the nine months ended September 30, 2021, our average cost of debt, excluding the effect of mark-to-market movements on our interest rate caps and swaps, debt issuance fees, upfront fees and other impacts was 3.8%. As of September 30, 2021, our adjusted debt to equity ratio was 2.3 to 1. Please refer to “Part I. Financial Information—Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP measures” for further information on our average cost of debt and reconciliations of adjusted debt and adjusted equity to the most closely related U.S. GAAP measures as of September 30, 2021 and December 31, 2020.
Contractual obligations
Our contractual obligations consist of principal and interest payments on debt (excluding fair value adjustments, debt issuance costs, debt discounts and debt premium), executed purchase agreements to purchase aircraft and rent payments pursuant to our office and facility leases. We intend to fund our contractual obligations through unrestricted cash, lines-of-credit and other borrowings, operating cash flows and cash flows from asset sales. We believe that our sources of liquidity will be sufficient to meet our contractual obligations.
The following table provides details regarding our contractual obligations and their payment dates as of September 30, 2021 and is not adjusted to reflect the GECAS Transaction and GECAS Transaction Financings as described in Note 24—Subsequent events:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 - remaining
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
|
Total
|
|
|
(U.S. Dollars in millions)
|
Unsecured debt facilities
|
|
$
|
301.1
|
|
|
$
|
3,153.9
|
|
|
$
|
3,120.1
|
|
|
$
|
3,000.0
|
|
|
$
|
2,650.0
|
|
|
$
|
3,650.0
|
|
|
$
|
15,875.1
|
|
Secured debt facilities
|
|
230.6
|
|
|
1,322.8
|
|
|
1,954.4
|
|
|
1,653.2
|
|
|
2,653.0
|
|
|
1,741.6
|
|
|
9,555.6
|
|
Subordinated debt facilities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,293.5
|
|
|
2,293.5
|
|
Estimated interest payments (a)
|
|
189.2
|
|
|
998.1
|
|
|
796.8
|
|
|
597.2
|
|
|
443.4
|
|
|
4,479.5
|
|
|
7,504.2
|
|
Purchase obligations (b)
|
|
658.7
|
|
|
2,896.5
|
|
|
2,969.2
|
|
|
2,946.7
|
|
|
2,768.6
|
|
|
1,484.7
|
|
|
13,724.4
|
|
Operating leases (c)
|
|
1.1
|
|
|
6.6
|
|
|
8.8
|
|
|
6.7
|
|
|
5.6
|
|
|
23.0
|
|
|
51.8
|
|
Total
|
|
$
|
1,380.7
|
|
|
$
|
8,377.9
|
|
|
$
|
8,849.3
|
|
|
$
|
8,203.8
|
|
|
$
|
8,520.6
|
|
|
$
|
13,672.3
|
|
|
$
|
49,004.6
|
|
(a)Estimated interest payments for floating rate debt are based on rates as of September 30, 2021. Estimated interest payments include the estimated impact of our interest rate swap agreements.
(b)Includes commitments to purchase 264 aircraft and six purchase and leaseback transactions. The timing of our purchase obligation payments in this table is based on our current estimates. Due to the current Covid-19 pandemic, we expect that the delivery of certain of our aircraft on order will be delayed to future periods. In addition, we have the right to reschedule the delivery dates of certain of our aircraft on order to future dates.
(c)Represents contractual payments on our office and facility leases.
Off-balance sheet arrangements
We have interests in variable interest entities, some of which are not consolidated into our Condensed Consolidated Financial Statements. Please refer to “Part I. Financial Information—Item 1. Financial Statements (Unaudited)—Note 20—Variable interest entities” for a detailed description of these interests and our other off-balance sheet arrangements.
Book value per share
The following table presents our book value per share as of September 30, 2021, December 31, 2020 and September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
September 30, 2020
|
|
(U.S. Dollars in millions, except share and per share data)
|
Total AerCap Holdings N.V. shareholders’ equity
|
$
|
9,855
|
|
|
$
|
8,864
|
|
|
$
|
8,811
|
|
|
|
|
|
|
|
Ordinary shares issued
|
138,847,345
|
|
|
138,847,345
|
|
|
138,847,345
|
|
Treasury shares
|
(5,467,556)
|
|
|
(8,448,807)
|
|
|
(9,090,732)
|
|
Ordinary shares outstanding
|
133,379,789
|
|
|
130,398,538
|
|
|
129,756,613
|
|
Shares of unvested restricted stock
|
(5,244,285)
|
|
|
(2,552,346)
|
|
|
(2,163,670)
|
|
Ordinary shares outstanding, excluding shares of unvested
restricted stock
|
128,135,504
|
|
|
127,846,192
|
|
|
127,592,943
|
|
|
|
|
|
|
|
Book value per ordinary share outstanding, excluding shares of
unvested restricted stock
|
$
|
76.91
|
|
|
$
|
69.34
|
|
|
$
|
69.06
|
|
Non-GAAP measures
The following are definitions of our non-GAAP measures and a reconciliation of such measures to the most closely related U.S. GAAP measures for the nine months ended September 30, 2021.
Net interest margin, annualized net spread, annualized net spread less depreciation and amortization and average cost of debt
Net interest margin is calculated as the difference between basic lease rents and interest expense, excluding the impact of the mark-to-market of interest rate caps and swaps. Annualized net spread is net interest margin expressed as a percentage of average lease assets. Annualized net spread less depreciation and amortization is net interest margin less depreciation and amortization, including maintenance rights expense, expressed as a percentage of average lease assets. Average cost of debt is calculated as interest expense, excluding mark-to-market on interest rate caps and swaps, debt issuance costs, upfront fees and other impacts, divided by the average debt balance. We believe these measures may further assist investors in their understanding of the changes and trends related to the earnings of our leasing activities. These measures reflect the impact from changes in the number of aircraft leased, lease rates and utilization rates, as well as the impact from changes in the amount of debt and interest rates.
The following is a reconciliation of basic lease rents to net interest margin, annualized net spread and annualized net spread less depreciation and amortization for the nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Percentage
Difference
|
|
2021
|
|
2020
|
|
|
(U.S. Dollars in millions)
|
|
|
Basic lease rents
|
$
|
2,608
|
|
|
$
|
2,876
|
|
|
(9
|
%)
|
Interest expense
|
861
|
|
|
938
|
|
|
(8
|
%)
|
Adjusted for:
|
|
|
|
|
|
Mark-to-market of interest rate caps and swaps
|
11
|
|
|
(15)
|
|
|
NA
|
Interest expense excluding mark-to-market of interest rate caps and swaps
|
872
|
|
|
923
|
|
|
(6
|
%)
|
Net interest margin
|
$
|
1,736
|
|
|
$
|
1,953
|
|
|
(11
|
%)
|
Depreciation and amortization, including maintenance rights expense
|
(1,188)
|
|
|
(1,283)
|
|
|
(7
|
%)
|
Net interest margin less depreciation and amortization
|
$
|
548
|
|
|
$
|
670
|
|
|
(18
|
%)
|
|
|
|
|
|
|
Average lease assets
|
$
|
36,158
|
|
|
$
|
37,313
|
|
|
(3
|
%)
|
|
|
|
|
|
|
Annualized net spread
|
6.4
|
%
|
|
7.0
|
%
|
|
|
Annualized net spread less depreciation and amortization
|
2.0
|
%
|
|
2.4
|
%
|
|
|
Lease assets
Lease assets include flight equipment held for operating leases, flight equipment held for sale, investment in finance and sales-type leases and maintenance rights assets.
Adjusted debt to equity ratio
This measure is the ratio obtained by dividing adjusted debt by adjusted equity. Adjusted debt means consolidated total debt less cash and cash equivalents, and less a 50% equity credit with respect to certain long-term subordinated debt. Adjusted equity means total equity, plus the 50% equity credit relating to the long-term subordinated debt. Adjusted debt and adjusted equity are adjusted by the 50% equity credit to reflect the equity nature of those financing arrangements and to provide information that is consistent with definitions under certain of our debt covenants. We believe this measure may further assist investors in their understanding of our capital structure and leverage.
The following is a reconciliation of debt to adjusted debt and equity to adjusted equity as of September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
(U.S. Dollars in millions,
except debt/equity ratio)
|
Debt
|
$
|
27,540
|
|
|
$
|
28,742
|
|
Adjusted for:
|
|
|
|
Cash and cash equivalents
|
(1,311)
|
|
|
(1,249)
|
|
50% credit for long-term subordinated debt
|
(1,125)
|
|
|
(1,125)
|
|
Adjusted debt
|
$
|
25,104
|
|
|
$
|
26,368
|
|
|
|
|
|
Equity
|
$
|
9,930
|
|
|
$
|
8,932
|
|
Adjusted for:
|
|
|
|
50% credit for long-term subordinated debt
|
1,125
|
|
|
1,125
|
|
Adjusted equity
|
$
|
11,055
|
|
|
$
|
10,057
|
|
|
|
|
|
Adjusted debt/equity ratio
|
2.3 to 1
|
|
2.6 to 1
|
Summarized financial information of issuers and guarantors
Historically, in accordance with Rule 3-10 of Regulation S-X, AerCap has presented separate financial statements and other disclosures with respect to the entities that issue and guarantee its registered debt securities in a note to its consolidated financial statements.
In March 2020, the SEC adopted amendments to reduce and simplify the financial disclosure requirements for guarantors and issuers of guaranteed registered securities. The amendments became effective on January 4, 2021, but voluntary compliance in advance of January 4, 2021 was permitted. We elected to comply with the amended regulation starting with our Interim Report on Form 6-K for the quarter ended March 31, 2020, filed with the SEC on May 5, 2020.
AGAT/AICDC Notes
From time to time since the completion of the acquisition of ILFC, AerCap Trust and AICDC have co-issued senior unsecured notes (the “AGAT/AICDC Notes”). Please refer to “Part I. Financial Information—Item 1. Financial Statements (Unaudited)—Note 12—Debt” for further details on the AGAT/AICDC Notes. The AGAT/AICDC Notes are jointly and severally and fully and unconditionally guaranteed by AerCap Holdings N.V. (the “Parent Guarantor”) and by AerCap Ireland Limited, AerCap Aviation Solutions B.V., ILFC and AerCap U.S. Global Aviation LLC (the “Subsidiary Guarantors” and, together with the Parent Guarantor, the “AGAT/AICDC Guarantors”).
Subject to the provisions of the indenture governing the AGAT/AICDC Notes (the “AGAT/AICDC Indenture”), a Subsidiary Guarantor will be automatically and unconditionally released from its guarantee with respect to a series of AGAT/AICDC Notes under the following circumstances: (1) the sale, disposition or other transfer of (i) the capital stock of a Subsidiary Guarantor after which such Subsidiary Guarantor is no longer a Restricted Subsidiary (as defined in the AGAT/AICDC Indenture) or (ii) all or substantially all of the assets of a Subsidiary Guarantor; (2) the permitted designation of the Subsidiary Guarantor as an Unrestricted Subsidiary as defined in and pursuant to the AGAT/AICDC Indenture; (3) the consolidation, amalgamation or merger of a Subsidiary Guarantor with and into AerCap Trust, AICDC or another AGAT/AICDC Guarantor with such person being the surviving entity, or upon the liquidation of a Subsidiary Guarantor following the transfer of all of its assets to AerCap Trust, AICDC or another AGAT/AICDC Guarantor; or (4) legal defeasance or covenant defeasance with respect to such series, each as described in the AGAT/AICDC Indenture, or if the obligations of AerCap Trust and AICDC with respect to such series under the AGAT/AICDC Indenture are discharged.
The guarantee obligations of each Subsidiary Guarantor are limited (i) to an amount not to exceed the maximum amount that can be guaranteed by a Subsidiary Guarantor (after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of all other AGAT/AICDC Guarantors in respect of the obligations under their respective guarantees) without rendering the guarantee, as it relates to such Subsidiary Guarantor, voidable under applicable fraudulent conveyance or transfer laws and (ii) as necessary to recognize certain defenses generally available to guarantors, including voidable preference, financial assistance, corporate purpose, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally or other considerations under applicable law. In addition, given that some of the AGAT/AICDC Guarantors are Irish and Dutch companies, it may be more difficult for holders of the AGAT/AICDC Notes to obtain or enforce judgments against such guarantors.
Because AICDC and certain AGAT/AICDC Guarantors are holding companies with very limited operations, their only significant assets are the equity interests of their directly held subsidiaries. As a result, AICDC and certain AGAT/AICDC Guarantors are dependent primarily upon dividends and other payments from their subsidiaries to generate the funds necessary to meet their outstanding debt service and other obligations, and such dividends or other payments will in turn depend on factors, such as their subsidiaries’ earnings, covenants in instruments governing their subsidiaries’ indebtedness, other contractual restrictions and applicable laws (including local law restricting payments of dividends).
Junior Subordinated Notes
In October 2019, AerCap Holdings N.V. issued $750.0 million aggregate principal amount of 5.875% fixed-rate reset junior subordinated notes due 2079 (the “Junior Subordinated Notes”). Please refer to “Part I. Financial Information—Item 1. Financial Statements (Unaudited)—Note 12—Debt” and our audited Consolidated Financial Statements and “Note 13—Debt”, included in our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the SEC on March 2, 2021 for further details on the Junior Subordinated Notes. The Junior Subordinated Notes are jointly and severally and fully and unconditionally guaranteed by AerCap Trust, AICDC, AerCap Ireland Limited, AerCap Aviation Solutions B.V., ILFC and AerCap U.S. Global Aviation LLC (the “Subordinated Notes Guarantors”).
Subject to the provisions of the indenture governing the Junior Subordinated Notes (the “Subordinated Notes Indenture”), a Subordinated Notes Guarantor will be automatically and unconditionally released from its guarantee under the following circumstances: (1) the sale, disposition or other transfer of all or substantially all of the assets of a Subordinated Notes Guarantor; (2) the consolidation, amalgamation or merger of a Subordinated Notes Guarantor with and into AerCap Holdings N.V. or another Subordinated Notes Guarantor with such person being the surviving entity, or upon the liquidation of a Subordinated Notes Guarantor following the transfer of all of its assets to AerCap Holdings N.V. or another Subordinated Notes Guarantor; or (3) legal defeasance or covenant defeasance, each as described in the Subordinated Notes Indenture, or if the obligations of AerCap Holdings N.V. under the Subordinated Notes Indenture are discharged.
The guarantee obligations of each Subordinated Notes Guarantor are limited (i) to an amount not to exceed the maximum amount that can be guaranteed by a Subordinated Notes Guarantor (after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of all other Subordinated Notes Guarantors in respect of the obligations under their respective guarantees) without rendering the guarantee, as it relates to such Subordinated Notes Guarantor, voidable under applicable fraudulent conveyance or transfer laws and (ii) as necessary to recognize certain defenses generally available to guarantors, including voidable preference, financial assistance, corporate purpose, capital maintenance or similar laws, regulations or defenses affecting the rights of creditors generally or other considerations under applicable law. In addition, given that some of the Subordinated Notes Guarantors are Irish and Dutch companies, it may be more difficult for holders of the Junior Subordinated Notes to obtain or enforce judgments against such guarantors.
Because AerCap Holdings N.V. and certain Subordinated Notes Guarantors are holding companies with very limited operations, their only significant assets are the equity interests of their directly held subsidiaries. As a result, AerCap Holdings N.V. and certain Subordinated Notes Guarantors are dependent primarily upon dividends and other payments from their subsidiaries to generate the funds necessary to meet their outstanding debt service and other obligations, and such dividends or other payments will in turn depend on their subsidiaries’ earnings, covenants in instruments governing their subsidiaries’ indebtedness, other contractual restrictions and applicable laws (including local law restricting payments of dividends).
Summarized Combined Financial Information
Summarized financial information (the “SFI”), as defined under Rule 1-02(bb) of Regulation S-X, is provided below for the issuers and the guarantor entities and includes AerCap Holdings N.V., AerCap Trust, AICDC, AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Limited and ILFC (collectively, the “Obligor Group”) as of September 30, 2021 and December 31, 2020, and for the nine months ended September 30, 2021. The SFI is presented on a combined basis with intercompany transactions and balances among the entities included in the Obligor Group eliminated. The Obligor Group SFI excludes investments in non-obligor entities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized combined financial information of issuers and guarantors
|
|
|
September 30, 2021
|
|
December 31, 2020
|
|
|
(U.S. Dollars in millions)
|
Flight equipment held for operating leases, net
|
|
$
|
8,368
|
|
|
$
|
9,607
|
|
Intercompany receivables
|
|
15,303
|
|
|
15,155
|
|
Total assets
|
|
28,223
|
|
|
28,913
|
|
|
|
|
|
|
Debt
|
|
17,667
|
|
|
17,557
|
|
Intercompany payables
|
|
3,984
|
|
|
4,154
|
|
Total liabilities
|
|
24,295
|
|
|
24,661
|
|
Non-controlling interest
|
|
77
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30, 2021
|
|
|
(U.S. Dollars in millions)
|
Total revenues and other income (a)
|
|
$
|
1,652
|
|
Total expenses (b)
|
|
1,330
|
|
Income before income taxes and income of investments accounted for under the equity method
|
|
322
|
|
Net income
|
|
282
|
|
Net income attributable to AerCap Holdings N.V.
|
|
282
|
|