AerCap Holdings N.V. (NYSE:AER) Q2 2023 Earnings Conference Call July 31, 2023 8:30 AM ET Company Participants Joseph McGinley - Head of Investor Relations Aengus Kelly - Chief Executive Officer Pete Juhas - Chief Financial Officer Conference Call Participants Helane Becker - TD Cowen Catherine O'Brien - Goldman Sachs Jamie Baker - JPMorgan Stephen Trent - Citi Hillary Cacanando - Deutsche Bank Christopher Stathoulopoulos - Susquehanna International Group Operator Good day, everyone, and welcome to the AerC ...

Financial Performance - Total revenues and other income for Q2 2023 reached $1,924,381 thousand, a 15.1% increase from $1,670,712 thousand in Q2 2022[17] - Lease revenue for Q2 2023 was $1,717,382 thousand, up 9.8% from $1,564,324 thousand in Q2 2022[17] - Net income for Q2 2023 was $496,870 thousand, compared to $340,562 thousand in Q2 2022, representing a 46% increase[17] - Basic earnings per share for Q2 2023 were $2.13, an increase from $1.41 in Q2 2022[17] - Net income for the six months ended June 30, 2023, was $932,147 thousand, a significant improvement from a loss of $1,660,119 thousand in the same period of 2022[22] - Total comprehensive income attributable to AerCap Holdings N.V. for the three months ended June 30, 2023, was $547,079 thousand, compared to $368,439 thousand for the same period in 2022[20] - For the six months ended June 30, 2023, AerCap reported total comprehensive income of $949.4 million, compared to $368.4 million for the same period in 2022[36] - Basic Earnings Per Share (EPS) for the six months ended June 30, 2023, was $3.93, compared to a loss of $(6.92) for the same period in 2022[140] - The company reported net income of $924.999 million for the six months ended June 30, 2023, compared to a net loss of $(1.661 billion) for the same period in 2022[140] Assets and Liabilities - Total assets as of June 30, 2023, were $69,928,407 thousand, slightly up from $69,726,918 thousand as of December 31, 2022[15] - Total liabilities stood at $53,537,899 thousand as of June 30, 2023, compared to $53,531,868 thousand at the end of 2022[15] - The company’s accumulated retained earnings increased to $8,598,005 thousand as of June 30, 2023, from $7,674,922 thousand at the end of 2022[14] - As of June 30, 2023, AerCap Holdings N.V. had total assets of $70 billion, with 2,132 aircraft owned, managed, or on order[40] - The total equity of AerCap Holdings N.V. as of June 30, 2023, was $16.39 billion, which includes $8.60 billion in additional paid-in capital[36] - The principal amount of AerCap's outstanding indebtedness totaled $46.5 billion, with undrawn lines of credit amounting to $11.3 billion[103] Cash Flow and Expenses - Net cash provided by operating activities for the six months ended June 30, 2023, was $2,556,596 thousand, slightly up from $2,508,450 thousand in the prior year[22] - Interest expense for Q2 2023 was $427,376 thousand, an increase from $399,994 thousand in Q2 2022[17] - Selling, general and administrative expenses for the six months ended June 30, 2023, totaled $230.341 million, an increase from $202.347 million in the same period of 2022[130] - Interest paid, net of amounts capitalized, for the six months ended June 30, 2023, was $821,700 thousand, an increase from $760,509 thousand in the same period of 2022[25] Asset Management - The company reported a net gain on the sale of assets of $165,909 thousand in Q2 2023, significantly higher than $35,200 thousand in Q2 2022[17] - The company experienced a net gain on the sale of assets of $265,449 thousand for the six months ended June 30, 2023, compared to a loss of $38,485 thousand in the same period of 2022[22] - The net book value of flight equipment held for operating leases at the end of the period was $55,604.91 million, an increase of 0.7% from $54,306.78 million as of June 30, 2022[59] - Flight equipment held for sale had a total net book value of $808.5 million as of June 30, 2023, compared to $292.8 million as of December 31, 2022[63] - Maintenance rights and lease premium, net, decreased to $2,977.73 million as of June 30, 2023, from $3,364.45 million as of December 31, 2022[65] Debt and Financing - The company issued debt totaling $2,327,579 thousand during the six months ended June 30, 2023, compared to $84,996 thousand in the same period of 2022[22] - The company has $12.03 million in secured debt, with a weighted average interest rate of 6.07%[104] - Total unsecured debt outstanding is $43.52 million, with a weighted average interest rate of 3.06%[104] - The company completed the redemption of $600 million of 4.125% Senior Notes due 2023 in February 2023[108] - A secured facility agreement of $900 million was entered into in March 2023, maturing on November 29, 2030[108] Shareholder Actions - The company repurchased 5,057,892 ordinary shares at an average price of $58.54 per share during the three months ended June 30, 2023[112] - A new share repurchase program was approved for up to $500 million through December 31, 2023[112] - AerCap repurchased 8,788,890 ordinary shares from GE for $500 million, with an average repurchase price of $58.96 per share during the three months ended June 30, 2023[156] Insurance and Claims - The company submitted claims totaling approximately $4.1 billion against Russian airlines' insurers for aircraft and engines lost in Russia, with ongoing legal proceedings initiated in June 2023[123] - The company submitted an insurance claim for approximately $3.5 billion under its contingent and possessed insurance policy related to aircraft and engines leased to Russian airlines[169] - The company has not recognized any claim receivables related to its claims under the C&P Policy and Russian airlines' insurance policies as of June 30, 2023, due to uncertainties in recovery[124] - AerCap intends to vigorously pursue claims under its insurance policies, with potential recoveries being uncertain as of June 30, 2023[171] Market and Operational Risks - The company is facing significant risks due to the ongoing Ukraine Conflict, which has led to sanctions affecting its business operations and financial condition[207] - Recovery in air travel post-Covid-19 remains uncertain, impacting the aviation industry's demand for leasing services[207] - Competitive pressures within the aviation leasing industry are increasing, potentially impacting market share and profitability[207] - Regulatory changes, including travel restrictions and trade regulations, could further complicate operational strategies[207] - Economic conditions in the global airline and cargo industry are being closely evaluated for their potential impact on business performance[207] Transition and Compliance - The company has transitioned its LIBOR-based instruments to SOFR, with the transition expected to conclude by September 30, 2023[51] - AerCap has transitioned its longer-dated derivative instruments from LIBOR to Term SOFR since October 2022, with completion expected by September 30, 2023[83] - The company remains in compliance with financial covenants across its various debt obligations as of June 30, 2023[103]

Financial Data and Key Metrics Changes - AerCap generated adjusted net income of $566 million and adjusted earnings per share (EPS) of $2.34 for Q1 2023, reflecting a strong recovery in air travel demand [5][6] - Operating cash flows were robust at $1.4 billion, driven by strong collections and higher asset utilization [6][19] - GAAP net income for the quarter was $432 million or $1.79 per share, impacted by purchase accounting adjustments totaling $167 million [15][16] Business Line Data and Key Metrics Changes - Basic lease rents increased to $1.537 billion, up $43 million from the previous quarter, benefiting from strong cash collections [16] - Maintenance revenues were $187 million, reflecting a $45 million reduction due to maintenance rights amortization [16] - The net gain on sale of assets was $100 million, with 35 owned assets sold for total proceeds of $639 million, resulting in an 18% gain on sale margin [17] Market Data and Key Metrics Changes - Demand for air travel is robust, with airlines reporting record performance metrics across bookings and revenues [6][7] - In the U.S., record passenger numbers were announced by the TSA as airlines reopen routes, particularly to Asia [7] - European carriers are exceeding expectations despite geopolitical uncertainties, while Asian airlines are rapidly returning to pre-pandemic capacity levels [7] Company Strategy and Development Direction - AerCap plans to leverage strong market conditions to continue executing transactions and generating shareholder value through share repurchases [12][14] - The company aims to sell aircraft at strong gains and redeploy capital into share buybacks, enhancing shareholder returns [12][13] - AerCap's strategy includes maintaining a diversified portfolio and focusing on asset quality, with approximately 70% of its portfolio in new technology aircraft [83] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future aircraft demand, citing a supply-demand imbalance in the industry [26] - The company anticipates continued strong earnings and cash flows, supported by robust demand for its products [14][26] - Management noted that the reopening of China is a significant driver for global aviation recovery [59] Other Important Information - AerCap has a strong liquidity position with total sources of liquidity around $18 billion, resulting in a coverage ratio of 1.3 times [18] - The company executed $6.7 billion in financing, reducing its funding requirement for the remainder of the year to approximately $4 billion to $5 billion [20][86] - A new $500 million share repurchase program was announced, reflecting the company's commitment to returning capital to shareholders [21] Q&A Session Summary Question: Discussion on sales margins and asset mix - Management indicated that the strong sales margin was driven by a combination of asset types and the strategic construction of both legacy AerCap and GCAS portfolios [24][25] Question: Engine leasing business and demand for spare engines - Management noted that lease rates for engines have increased significantly, driven by a lack of supply and longer lead times for critical parts [28][29] Question: Thoughts on larger scale sales and market opportunities - Management expressed readiness to capitalize on market opportunities, indicating a strong pipeline for asset sales [32][33] Question: Aircraft placements and management strategy - Management highlighted a proactive approach to managing aircraft placements, anticipating increased demand and adjusting strategies accordingly [40][41] Question: Impact of China reopening on business - Management acknowledged that China's reopening is a major driver for global aviation and indicated a strategic reduction in exposure to China over time [59][60] Question: Insurance claims and rates - Management confirmed that insurance rates have increased, reflecting broader industry trends, and emphasized the pursuit of valid claims [64][66] Question: Helicopter leasing business performance - Management reported positive performance in the helicopter leasing business, particularly in the oil and gas sector [72]

FIRST QUARTER 2023 FINANCIAL RESULTS AERCAP HOLDINGS N.V. FORWARD LOOKING STATEMENTS AND NON-GAAP FINANCIAL INFORMATION ...

[Introduction and Filing Information](index=1&type=section&id=Introduction%20and%20Filing%20Information) [Form 6-K Filing Details](index=1&type=section&id=Form%206-K%20Filing%20Details) This Form 6-K reports AerCap Holdings N.V.'s interim financial results for the quarter ended March 31, 2023, filed on May 2, 2023, with information incorporated by reference into the Company's registration statements - Filing Type: **Form 6-K**, Report of Foreign Private Issuer[3](index=3&type=chunk) - Reporting Period: For the month of May 2023, covering the quarter ended **March 31, 2023**[3](index=3&type=chunk)[5](index=5&type=chunk) - Purpose: Furnished interim financial report for Q1 2023[5](index=5&type=chunk) - Incorporation by Reference: Information incorporated into Form F-3 and S-8 Registration Statements[5](index=5&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This item provides AerCap Holdings N.V.'s unaudited condensed consolidated financial statements for the three months ended March 31, 2023 and 2022, including balance sheets, income statements, comprehensive income, cash flows, and equity, along with explanatory notes [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a slight decrease in total assets and total equity from December 31, 2022, to March 31, 2023, while total liabilities remained relatively stable | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | Change (USD thousands) | | :--------------------------------- | :------------------------------- | :-------------------------------- | :--------------------- | | Total Assets | 69,684,403 | 69,726,918 | (42,515) | | Total Liabilities | 53,560,780 | 53,531,868 | 28,912 | | Total Equity | 16,123,623 | 16,195,050 | (71,427) | | Cash and cash equivalents | 1,089,046 | 1,597,147 | (508,101) | | Flight equipment held for operating leases, net | 55,487,268 | 55,220,809 | 266,459 | | Investment in finance leases, net | 1,277,630 | 1,356,072 | (78,442) | | Flight equipment held for sale | 607,485 | 292,808 | 314,677 | | Debt | 46,295,924 | 46,532,960 | (237,036) | [Unaudited Condensed Consolidated Income Statements](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Income%20Statements) AerCap reported a significant turnaround from a net loss of **$2.0 billion** in Q1 2022 to a net income of **$435.3 million** in Q1 2023, primarily driven by the absence of large charges related to the Ukraine Conflict and a substantial increase in net gain on sale of assets | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | Change (USD thousands) | YoY Change (%) | | :---------------------------------------------------------------- | :---------------------- | :---------------------- | :--------------------- | :------------- | | Total Revenues and other income | 1,865,722 | 1,790,016 | 75,706 | 4.23% | | Total Expenses | 1,406,640 | 4,070,400 | (2,663,760) | -65.44% | | Net income (loss) | 435,277 | (2,000,681) | 2,435,958 | 121.76% | | Net income (loss) attributable to AerCap Holdings N.V. | 432,105 | (2,000,830) | 2,432,935 | 121.59% | | Basic earnings (loss) per share | 1.81 | (8.35) | 10.16 | 121.68% | | Diluted earnings (loss) per share | 1.79 | (8.35) | 10.14 | 121.44% | | Net (recoveries) charges related to Ukraine Conflict | (14,108) | 2,728,718 | (2,742,826) | -100.52% | | Net gain on sale of assets | 99,540 | 3,285 | 96,255 | 2929.98% | | Interest expense | 436,222 | 380,785 | 55,437 | 14.56% | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported comprehensive income of **$405.5 million** in Q1 2023, a significant improvement from a comprehensive loss of **$1.95 billion** in Q1 2022, primarily due to the shift from net loss to net income | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | Change (USD thousands) | | :---------------------------------------------------- | :---------------------- | :---------------------- | :--------------------- | | Net income (loss) | 435,277 | (2,000,681) | 2,435,958 | | Other comprehensive (loss) income | (29,787) | 53,648 | (83,435) | | Comprehensive income (loss) | 405,490 | (1,947,033) | 2,352,523 | | Total comprehensive income (loss) attributable to AerCap Holdings N.V. | 402,318 | (1,947,182) | 2,349,500 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities remained strong at **$1.36 billion** in Q1 2023, slightly up from Q1 2022, while net cash used in investing activities significantly increased to **$1.28 billion** mainly due to higher flight equipment purchases and prepayments, and net cash used in financing activities decreased due to lower debt repayments and higher share repurchases | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | Change (USD thousands) | | :-------------------------------------- | :---------------------- | :---------------------- | :--------------------- | | Net cash provided by operating activities | 1,363,401 | 1,336,556 | 26,845 | | Net cash used in investing activities | (1,278,075) | (646,552) | (631,523) | | Net cash used in financing activities | (579,729) | (1,259,055) | 679,326 | | Net decrease in cash, cash equivalents and restricted cash | (494,403) | (569,051) | 74,648 | | Purchase of flight equipment | (1,291,077) | (881,608) | (409,469) | | Proceeds from sale or disposal of assets | 470,323 | 405,107 | 65,216 | | Repurchase of shares and tax withholdings on share-based compensation | (501,031) | (3,517) | (497,514) | - Non-cash investing activities in Q1 2023 included reclassification of **$36.8 million** flight equipment to finance leases and **$506.0 million** to held for sale, and settlement of **$42.4 million** accrued maintenance liability with buyers[25](index=25&type=chunk) [Unaudited Condensed Consolidated Statements of Equity](index=11&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Equity) Total AerCap Holdings N.V. shareholders' equity slightly decreased from **$16.12 billion** at December 31, 2022, to **$16.05 billion** at March 31, 2023, primarily due to significant share repurchases, partially offset by net income | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | Change (USD thousands) | | :------------------------------------------ | :------------------------------- | :-------------------------------- | :--------------------- | | Total AerCap Holdings N.V. shareholders' equity | 16,045,416 | 16,117,507 | (72,091) | | Treasury shares, at cost | (731,517) | (254,699) | (476,818) | | Accumulated retained earnings | 8,104,773 | 7,674,922 | 429,851 | | Repurchase of shares | (500,736) | — | (500,736) | | Total comprehensive (loss) income | 402,318 | — | 402,318 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and breakdowns for the financial statements, covering significant accounting policies, asset categories, liabilities, equity, and specific events like the Ukraine Conflict and related party transactions [Note 1. General](index=15&type=section&id=Note%201.%20General) AerCap Holdings N.V. is a global leader in aviation leasing, with a portfolio of 2,161 aircraft, over 900 engines, and over 300 helicopters, totaling **$70 billion** in assets as of March 31, 2023 - Global Leader: AerCap is the **global leader in aviation leasing**[31](index=31&type=chunk) - Asset Portfolio (as of March 31, 2023): **2,161 aircraft** (owned, managed, or on order), over **900 engines**, over **300 owned helicopters**[31](index=31&type=chunk) - Total Assets: **$70 billion**[31](index=31&type=chunk) - Headquarters: Dublin, with offices globally[31](index=31&type=chunk) [Note 2. Basis of presentation](index=15&type=section&id=Note%202.%20Basis%20of%20presentation) The condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting, consolidating entities under effective control or as primary beneficiary of VIEs, and are stated in U.S. dollars - Accounting Standards: Presented in accordance with **U.S. GAAP**[33](index=33&type=chunk) - Consolidation Policy: Consolidates all companies with effective control and all variable interest entities (VIEs) for which AerCap is the Primary Beneficiary[34](index=34&type=chunk) - Functional Currency: **U.S. dollars**[36](index=36&type=chunk) - Use of Estimates: Preparation requires significant management estimates, particularly for flight equipment, intangible assets, and maintenance liabilities[40](index=40&type=chunk)[41](index=41&type=chunk) - Reportable Segments: Manages and reports results based on one business segment: leasing, financing, sales, and management of commercial flight equipment[42](index=42&type=chunk) [Note 3. Summary of significant accounting policies](index=17&type=section&id=Note%203.%20Summary%20of%20significant%20accounting%20policies) AerCap adopted ASU 2020-04 (Topic 848) on Reference Rate Reform in Q4 2022, providing optional expedients for contract modifications and hedge accounting related to the transition from LIBOR to SOFR, with the company transitioning its LIBOR-based instruments to SOFR by June 2023 - Reference Rate Reform Adoption: Adopted Topic 848 in Q4 2022, providing expedients for LIBOR transition[44](index=44&type=chunk) - LIBOR Transition: Commenced transition of LIBOR-based instruments to SOFR in October 2022, expected to conclude by **June 2023**[45](index=45&type=chunk) - Floating Rate Debt (as of March 31, 2023): **$5.6 billion** linked to SOFR, **$3.2 billion** linked to three-month U.S. dollar LIBOR[47](index=47&type=chunk) - Floating Rate Derivatives (as of March 31, 2023): Approximately **$2.2 billion** notional linked to SOFR, **$3.2 billion** notional linked to LIBOR[47](index=47&type=chunk) [Note 4. Cash, cash equivalents and restricted cash](index=18&type=section&id=Note%204.%20Cash%2C%20cash%20equivalents%20and%20restricted%20cash) Total cash, cash equivalents, and restricted cash decreased to **$1.26 billion** as of March 31, 2023, from **$1.76 billion** at December 31, 2022, with restricted cash primarily relating to ECA and Ex-Im financings, AerFunding, BNDES financing, and other debt | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | March 31, 2022 (USD thousands) | | :------------------------------------ | :------------------------------- | :-------------------------------- | :------------------------------- | | Cash and cash equivalents | 1,089,046 | 1,597,147 | 1,185,702 | | Restricted cash | 174,621 | 159,623 | 160,532 | | Total cash, cash equivalents and restricted cash | 1,263,667 | 1,756,770 | 1,346,234 | - Restricted cash primarily relates to Export Credit Agency (ECA) and Export-Import Bank of the United States (Ex-Im) financings, AerFunding revolving credit facility, Brazilian Development Bank (BNDES) financing, and other debt[50](index=50&type=chunk) [Note 5. Flight equipment held for operating leases, net](index=18&type=section&id=Note%205.%20Flight%20equipment%20held%20for%20operating%20leases%2C%20net) The net book value of flight equipment held for operating leases increased slightly to **$55.49 billion** as of March 31, 2023, from **$55.22 billion** at the beginning of the period, driven by additions and partially offset by depreciation and disposals | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | | :------------------------------------------ | :---------------------- | :---------------------- | | Net book value at beginning of period | 55,220,809 | 57,825,056 | | Additions | 1,677,164 | 1,104,801 | | Depreciation | (602,294) | (625,317) | | Disposals and transfers to held for sale | (739,562) | (280,547) | | Transfers from/to investment in finance leases, net/inventory | (36,786) | (276,823) | | Write-offs and impairments | (32,063) | (3,178,688) | | Net book value at end of period | 55,487,268 | 54,568,482 | [Note 6. Investment in finance leases, net](index=19&type=section&id=Note%206.%20Investment%20in%20finance%20leases%2C%20net) Investment in finance leases, net, decreased to **$1.28 billion** as of March 31, 2023, from **$1.36 billion** at December 31, 2022, with interest income from these leases at **$27.1 million** in Q1 2023, down from **$37.0 million** in Q1 2022 | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | | :------------------------------------ | :------------------------------- | :-------------------------------- | | Investment in finance leases, net | 1,277,630 | 1,356,072 | | Future minimum lease payments to be received, net | 1,258,903 | 1,299,724 | | Estimated residual values of leased flight equipment | 545,780 | 630,538 | | Less: Unearned income | (509,329) | (551,165) | | Less: Allowance for credit losses | (17,724) | (23,025) | - Interest income from investment in finance leases, net, was **$27.1 million** for Q1 2023, down from **$37.0 million** for Q1 2022[53](index=53&type=chunk) [Note 7. Flight equipment held for sale](index=19&type=section&id=Note%207.%20Flight%20equipment%20held%20for%20sale) Flight equipment held for sale significantly increased to **$607.5 million** as of March 31, 2023, from **$292.8 million** at December 31, 2022, with aggregate maintenance and security deposits of **$34.4 million** to be assumed by buyers - Flight equipment held for sale (March 31, 2023): **$607.5 million** net book value[54](index=54&type=chunk) - Flight equipment held for sale (December 31, 2022): **$292.8 million** net book value[55](index=55&type=chunk) - Associated Deposits: Aggregate maintenance and security deposit amounts of approximately **$34.4 million** will be assumed by buyers[54](index=54&type=chunk) [Note 8. Intangibles](index=20&type=section&id=Note%208.%20Intangibles) Maintenance rights and lease premium, net, decreased to **$3.16 billion** as of March 31, 2023, from **$3.36 billion** at December 31, 2022, primarily due to various write-offs and amortization, while other intangibles, mainly customer relationships, also slightly decreased | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | | :------------------------------------ | :------------------------------- | :-------------------------------- | | Maintenance rights and lease premium, net | 3,155,197 | 3,364,453 | | Maintenance rights | 2,383,503 | 2,540,286 | | Lease premium, net | 771,694 | 824,167 | | Other intangibles, net | 179,741 | 185,210 | | Customer relationships, net | 171,941 | 177,235 | - Maintenance rights decreased due to EOL and MR contract maintenance rights expense, write-offs due to maintenance liability release, cash received, and sale of aircraft[56](index=56&type=chunk) - Amortization expense for lease premium assets was **$46.2 million** in Q1 2023 (vs. **$61.8 million** in Q1 2022) and for customer relationships was **$5.3 million** in Q1 2023 (same as Q1 2022)[58](index=58&type=chunk)[59](index=59&type=chunk) [Note 9. Associated companies](index=21&type=section&id=Note%209.%20Associated%20companies) Investments in associated companies, accounted for under the equity method, increased to **$841.2 million** as of March 31, 2023, from **$811.2 million** at December 31, 2022, primarily driven by Shannon Engine Support (SES) | Associated Company | % Ownership (March 31, 2023) | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | | :--------------------------------------- | :----------------------------- | :------------------------------- | :-------------------------------- | | Shannon Engine Support (SES) | 50.0% | 667,096 | 634,701 | | AerDragon Aviation Partners Limited | 16.7% | 88,264 | 88,240 | | Other | 5.7-39.3% | 85,888 | 88,278 | | Total Associated Companies | | 841,248 | 811,219 | [Note 10. Other assets](index=22&type=section&id=Note%2010.%20Other%20assets) Total other assets slightly decreased to **$2.55 billion** as of March 31, 2023, from **$2.59 billion** at December 31, 2022, with notes receivable and loans receivable, net of allowances, also seeing decreases | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | | :------------------------------------ | :------------------------------- | :-------------------------------- | | Total Other Assets | 2,549,356 | 2,590,439 | | Notes receivable, net | 444,366 | 486,223 | | Loans receivable, net | 336,396 | 351,357 | | Derivative assets | 175,711 | 211,993 | - Allowance for credit losses on notes receivable was **$72 million** (March 31, 2023) and **$111 million** (December 31, 2022)[61](index=61&type=chunk) - Allowance for credit losses on loans receivable was **$2 million** (March 31, 2023) and **$4 million** (December 31, 2022)[62](index=62&type=chunk) [Note 11. Derivative financial instruments](index=23&type=section&id=Note%2011.%20Derivative%20financial%20instruments) AerCap uses interest rate derivatives to hedge variable rate debt, transitioning from LIBOR to Term SOFR for longer-dated instruments, resulting in total derivative assets decreasing to **$175.7 million** as of March 31, 2023, from **$212.0 million** at December 31, 2022, while derivative liabilities increased to **$14.9 million** - Purpose: Hedge current and future interest rate payments on variable rate debt[64](index=64&type=chunk) - LIBOR to SOFR Transition: Transitioned longer-dated derivative instruments from LIBOR to Term SOFR since October 2022, applying optional expedients under Topic 848[66](index=66&type=chunk) | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | | :------------------------------------ | :------------------------------- | :-------------------------------- | | Total derivative assets (Fair value) | 175,711 | 211,993 | | Total derivative liabilities (Fair value) | 14,903 | 0 | | Notional amount of derivative assets designated as cash flow hedges | 4,175,000 | 3,641,000 | | Notional amount of derivative liabilities designated as cash flow hedges | 350,000 | 0 | - Expected Reclassification: Expect to reclassify approximately **$67 million** from accumulated other comprehensive income (AOCI) as a reduction in interest expense over the next 12 months[72](index=72&type=chunk) - Net (Loss) Gain on Derivatives: Recorded a net loss on derivatives, net of tax, of **$31.6 million** in Q1 2023, compared to a net gain of **$53.6 million** in Q1 2022[72](index=72&type=chunk) [Note 12. Accounts payable, accrued expenses and other liabilities](index=25&type=section&id=Note%2012.%20Accounts%20payable%2C%20accrued%20expenses%20and%20other%20liabilities) Total accounts payable, accrued expenses, and other liabilities increased to **$1.67 billion** as of March 31, 2023, from **$1.49 billion** at December 31, 2022, primarily due to increases in deferred revenue, accounts payable, accrued interest, and the recognition of derivative liabilities | Metric | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | | :------------------------------------------ | :------------------------------- | :-------------------------------- | | Accounts payable, accrued expenses and other liabilities | 1,671,896 | 1,494,953 | | Deferred revenue | 593,588 | 547,662 | | Accounts payable and accrued expenses | 581,969 | 475,166 | | Accrued interest | 348,061 | 336,910 | | Derivative liabilities | 14,903 | 0 | [Note 13. Accrued maintenance liability](index=25&type=section&id=Note%2013.%20Accrued%20maintenance%20liability) Accrued maintenance liability slightly decreased to **$2.49 billion** as of March 31, 2023, from **$2.50 billion** at the beginning of the period, influenced by maintenance payments received and returned, and releases to income | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | | :------------------------------------------ | :---------------------- | :---------------------- | | Accrued maintenance liability at beginning of period | 2,503,202 | 2,900,651 | | Maintenance payments received | 177,737 | 202,541 | | Maintenance payments returned | (31,185) | (127,541) | | Release to income upon sale | (42,434) | (14,079) | | Release to income other than upon sale | (110,953) | (668,164) | | Accrued maintenance liability at end of period | 2,487,969 | 2,241,084 | [Note 14. Debt](index=26&type=section&id=Note%2014.%20Debt) Total outstanding indebtedness decreased slightly to **$46.6 billion** as of March 31, 2023, from **$46.5 billion** at December 31, 2022, with the company maintaining **$11.3 billion** in undrawn lines of credit and remaining in compliance with financial covenants, while extending Citi Revolver I and redeeming **$600 million** Senior Notes due 2023 - Total Outstanding Indebtedness (March 31, 2023): **$46.6 billion** (excluding debt issuance costs, discounts, and premium)[77](index=77&type=chunk) - Undrawn Lines of Credit (March 31, 2023): **$11.3 billion**[77](index=77&type=chunk) - Compliance: Remained in compliance with financial covenants[77](index=77&type=chunk) | Debt Type | March 31, 2023 (USD thousands) | December 31, 2022 (USD thousands) | Weighted Average Interest Rate (March 31, 2023) | | :-------------------------- | :------------------------------- | :-------------------------------- | :-------------------------------------------- | | Unsecured Debt | 34,174,500 | 34,710,500 | 3.02% (Notes) / 6.29% (Other) | | Secured Debt | 10,100,318 | 9,814,176 | 2.12% - 6.83% | | Subordinated Debt | 2,277,219 | 2,277,007 | 6.36% (Notes) | | Total Debt Outstanding | 46,295,924 | 46,532,960 | | - Debt Changes: Extended Citi Revolver I maturity to February 2027 and amended Citi Revolvers to replace LIBOR with Term SOFR; entered into a new **$900 million** secured facility agreement in March 2023; redeemed all **$600 million** outstanding 4.125% Senior Notes due 2023 in February 2023[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) [Note 15. Income taxes](index=27&type=section&id=Note%2015.%20Income%20taxes) The effective tax rate for Q1 2023 was **14.0%**, compared to **12.2%** for Q1 2022, with the Q1 2022 rate including a significant income tax benefit of **$341 million** due to the Ukraine Conflict charges - Effective Tax Rate (Q1 2023): **14.0%**[86](index=86&type=chunk) - Effective Tax Rate (Q1 2022): **12.2%**[86](index=86&type=chunk) - Q1 2022 Impact: Included approximately **$341 million** income tax benefit from Ukraine Conflict charges[86](index=86&type=chunk) [Note 16. Equity](index=27&type=section&id=Note%2016.%20Equity) AerCap repurchased **8,788,890** ordinary shares from General Electric (GE) for **$500 million** on March 13, 2023, completing a share repurchase program, which decreased GE's ownership to approximately **33.6%** as of March 31, 2023, and a new **$500 million** share repurchase program was approved in April 2023 - Share Repurchase (March 2023): Repurchased **8,788,890 ordinary shares** from GE for **$500 million** at **$56.89 per share**[87](index=87&type=chunk) - GE Ownership: GE's stake decreased to approximately **33.6%** as of March 31, 2023[123](index=123&type=chunk) - New Share Repurchase Program: Approved in April 2023 for up to **$500 million** through September 30, 2023[88](index=88&type=chunk)[164](index=164&type=chunk) [Note 17. Other income](index=28&type=section&id=Note%2017.%20Other%20income) Other income decreased to **$42.4 million** in Q1 2023 from **$47.2 million** in Q1 2022, primarily due to lower management fees and interest and other income | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | | :-------------------- | :---------------------- | :---------------------- | | Management fees | 9,115 | 10,197 | | Interest and other income | 33,262 | 36,993 | | Total Other Income | 42,377 | 47,190 | [Note 18. Net charges related to Ukraine Conflict](index=28&type=section&id=Note%2018.%20Net%20charges%20related%20to%20Ukraine%20Conflict) In Q1 2023, AerCap recognized net recoveries of **$14.1 million** related to the Ukraine Conflict, primarily from letters of credit and other collateral, contrasting sharply with Q1 2022's pre-tax net charge of **$2.7 billion** due to asset write-offs and impairments, while the company has received all payments related to **$260 million** in letters of credit as of March 31, 2023, and continues to pursue insurance claims for assets remaining in Russia and Ukraine - Q1 2023 Impact: Net recoveries of **$14.1 million**, primarily from letters of credit and collateral[93](index=93&type=chunk)[94](index=94&type=chunk) - Q1 2022 Impact: Pre-tax net charge of **$2.7 billion**, including **$3.2 billion** in write-offs/impairments of flight equipment[92](index=92&type=chunk)[94](index=94&type=chunk) - Sanctions Compliance: Terminated all Russian airline leases in March 2022 due to sanctions[91](index=91&type=chunk) - Letters of Credit: Received all payments related to approximately **$260 million** in letters of credit as of March 31, 2023[94](index=94&type=chunk) - Insurance Claims: Submitted a **$3.5 billion** claim under C&P Policy for assets in Russia (trial scheduled for Oct 2024) and approximately **$100 million** for two aircraft in Ukraine[95](index=95&type=chunk)[97](index=97&type=chunk) [Note 19. Asset impairment](index=29&type=section&id=Note%2019.%20Asset%20impairment) Asset impairment charges increased to **$34.3 million** in Q1 2023 from **$2.4 million** in Q1 2022, primarily related to lease terminations and sales transactions, excluding the **$3.2 billion** write-offs and impairments related to the Ukraine Conflict in Q1 2022 - Q1 2023 Impairment Charges: **$34.3 million**[99](index=99&type=chunk) - Q1 2022 Impairment Charges: **$2.4 million** (excluding Ukraine Conflict)[99](index=99&type=chunk) - Primary Cause: Lease terminations and sales transactions, partially offset by maintenance revenue[99](index=99&type=chunk) - Ukraine Conflict Exclusion: Q1 2022 also included **$3.2 billion** in write-offs and impairments related to the Ukraine Conflict[100](index=100&type=chunk) [Note 20. Selling, general and administrative expenses](index=30&type=section&id=Note%2020.%20Selling%2C%20general%20and%20administrative%20expenses) Selling, general and administrative (SG&A) expenses increased to **$110.6 million** in Q1 2023 from **$97.5 million** in Q1 2022, driven by higher personnel expenses, travel, and other expenses, partially offset by a slight decrease in share-based compensation | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | | :------------------------------------ | :---------------------- | :---------------------- | | Total SG&A Expenses | 110,604 | 97,475 | | Personnel expenses | 48,448 | 45,067 | | Share-based compensation | 26,863 | 27,503 | | Travel expenses | 10,819 | 4,064 | [Note 21. Allowance for credit losses](index=30&type=section&id=Note%2021.%20Allowance%20for%20credit%20losses) The allowance for credit losses decreased to **$92.4 million** as of March 31, 2023, from **$137.9 million** at the beginning of the period, due to an **$8.6 million** decrease in credit provision and **$36.9 million** in write-offs for one lessee in Q1 2023, contrasting with a **$61.7 million** increase in credit provision in Q1 2022 mainly due to the Ukraine Conflict | Metric | March 31, 2023 (USD thousands) | March 31, 2022 (USD thousands) | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Allowance for credit losses at beginning of period | 137,861 | 117,547 | | Current period (decrease) increase in provision for expected credit losses | (8,585) | 61,687 | | Write-offs charged against the allowance | (36,883) | (63,334) | | Allowance for credit losses at end of period | 92,393 | 115,900 | - Q1 2023 Decrease: Due to **$8.6 million** decrease in credit provision and **$36.9 million** write-offs for one lessee[103](index=103&type=chunk) - Q1 2022 Increase: Credit provision increased by **$56.4 million** primarily reflecting losses from the Ukraine Conflict[103](index=103&type=chunk) [Note 22. Earnings per share](index=31&type=section&id=Note%2022.%20Earnings%20per%20share) Basic EPS was **$1.81** and diluted EPS was **$1.79** for Q1 2023, a significant improvement from a basic and diluted loss per share of **$(8.35)** in Q1 2022, with the number of ordinary shares outstanding (excluding unvested restricted stock) decreasing to **232.6 million** as of March 31, 2023, from **241.1 million** at December 31, 2022 | Metric | Q1 2023 | Q1 2022 | | :------------------------------------------ | :------ | :------ | | Net income (loss) for the computation of basic EPS | $432,105 | $(2,000,830) | | Weighted average ordinary shares outstanding—basic | 239,368,415 | 239,645,460 | | Basic EPS | $1.81 | $(8.35) | | Net income (loss) for the computation of diluted EPS | $432,105 | $(2,000,830) | | Weighted average ordinary shares outstanding—diluted | 241,559,712 | 239,645,460 | | Diluted EPS | $1.79 | $(8.35) | | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------------------------------------------------- | :------------- | :---------------- | | Ordinary shares outstanding, excluding shares of unvested restricted stock | 232,632,094 | 241,093,673 | [Note 23. Variable interest entities](index=32&type=section&id=Note%2023.%20Variable%20interest%20entities) Substantially all assets and liabilities are held in consolidated VIEs where AerCap is the primary beneficiary, with no uncontractual financial support provided to VIEs in Q1 2023, and non-consolidated VIEs, accounted for using the equity method, have a maximum exposure to loss of **$118.3 million** as of March 31, 2023 - Consolidated VIEs: Substantially all assets and liabilities are held in consolidated VIEs where AerCap is the Primary Beneficiary[110](index=110&type=chunk)[111](index=111&type=chunk) - Financial Support: No uncontractual financial support provided to VIEs in Q1 2023[109](index=109&type=chunk) - Non-consolidated VIEs: Investments accounted for under the equity method, with maximum exposure to loss of **$118.3 million** as of March 31, 2023[119](index=119&type=chunk) - Limited Recourse Financing Structures: As of March 31, 2023, these entities had aggregate subordinated debt outstanding of **$54.4 million**[116](index=116&type=chunk) [Note 24. Related party transactions](index=34&type=section&id=Note%2024.%20Related%20party%20transactions) General Electric (GE) remains a related party, holding **33.6%** of AerCap's shares as of March 31, 2023, with AerCap recognizing **$40 million** in rental income from GE and **$53 million** in purchases from GE in Q1 2023, and Shannon Engine Support (SES), a 50% joint venture, providing **$28 million** in lease rental income - GE Ownership: GE held approximately **33.6%** of AerCap's shares as of March 31, 2023[123](index=123&type=chunk) - Transactions with GE (Q1 2023): Rental income of approximately **$40 million**, purchases of approximately **$53 million**, sales of approximately **$14 million**[124](index=124&type=chunk) - SES (50% joint venture): Recognized **$28 million** in lease rental income from SES in Q1 2023[126](index=126&type=chunk) - Other Related Parties (Q1 2023): Management fees and other of **$3.0 million**, dividends of **$2.5 million**[127](index=127&type=chunk) [Note 25. Commitments and contingencies](index=34&type=section&id=Note%2025.%20Commitments%20and%20contingencies) AerCap has significant commitments to purchase **421** new aircraft, **16** engines, and **18** new helicopters through 2028, with prepayments on flight equipment increasing to **$3.95 billion** as of March 31, 2023, and the company actively pursuing a **$3.5 billion** insurance claim under its C&P Policy for assets in Russia (trial scheduled for October 2024) and approximately **$100 million** for assets in Ukraine, alongside ongoing legal proceedings in Brazil - Flight Equipment on Order (March 31, 2023): Commitments to purchase **421 new aircraft** (through 2028), **16 engines**, and **18 new helicopters** (through 2025)[128](index=128&type=chunk) - Prepayments on Flight Equipment (March 31, 2023): **$3.95 billion**[129](index=129&type=chunk) - C&P Policy Claim (Russia): Submitted a **$3.5 billion** insurance claim for 135 aircraft and 14 engines in Russia; legal proceedings commenced in London, trial scheduled for **October 2024**[131](index=131&type=chunk)[132](index=132&type=chunk) - C&P Policy Claim (Ukraine): Submitted claims for approximately **$100 million** for two aircraft in Ukraine[97](index=97&type=chunk) - Legal Proceedings: Ongoing VASP and Transbrasil litigations in Brazilian courts, with uncertain outcomes regarding damages[135](index=135&type=chunk)[137](index=137&type=chunk)[141](index=141&type=chunk)[143](index=143&type=chunk) [Note 26. Fair value measurements](index=38&type=section&id=Note%2026.%20Fair%20value%20measurements) AerCap classifies fair value measurements into Level 1 (quoted prices in active markets), Level 2 (observable market data), and Level 3 (unobservable inputs), with derivative financial instruments primarily Level 2, investments at fair value mostly Level 1, and flight equipment and certain definite-lived intangible assets measured at fair value on a non-recurring basis using Level 3 valuations based on discounted future cash flows - Fair Value Hierarchy: Level 1 (quoted prices), Level 2 (observable market data), Level 3 (unobservable inputs)[147](index=147&type=chunk)[148](index=148&type=chunk) - Derivative Instruments: Fair value based on dealer quotes, classified as **Level 2**[150](index=150&type=chunk) - Investments at Fair Value: Primarily classified as **Level 1**[150](index=150&type=chunk) - Flight Equipment & Intangibles: Measured at fair value on a non-recurring basis using **Level 3 valuations** (income approach, discounted future cash flows)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) | Financial Instrument | Carrying Value (March 31, 2023, USD millions) | Fair Value (March 31, 2023, USD millions) | Fair Value Level 1 | Fair Value Level 2 | Fair Value Level 3 | | :------------------------- | :------------------------------------------ | :---------------------------------------- | :----------------- | :----------------- | :----------------- | | Cash and cash equivalents | 1,089.0 | 1,089.0 | 1,089.0 | 0 | 0 | | Restricted cash | 174.6 | 174.6 | 174.6 | 0 | 0 | | Loans receivable | 336.4 | 315.9 | 0 | 0 | 315.9 | | Notes receivable | 444.4 | 444.4 | 0 | 0 | 444.4 | | Investments, at fair value | 69.6 | 69.6 | 39.5 | 0 | 30.1 | | Derivative assets | 175.7 | 175.7 | 0 | 175.7 | 0 | | Debt | 46,552.0 | 43,040.4 | 0 | 43,040.4 | 0 | | Derivative liabilities | 14.9 | 14.9 | 0 | 14.9 | 0 | [Note 27. Subsequent events](index=41&type=section&id=Note%2027.%20Subsequent%20events) In April 2023, AerCap's Board of Directors approved a new share repurchase program, authorizing repurchases of up to **$500 million** of ordinary shares through September 30, 2023, to be funded by cash on hand and operations - New Share Repurchase Program: Approved in **April 2023**[164](index=164&type=chunk) - Authorization: Up to **$500 million** of ordinary shares[164](index=164&type=chunk) - Period: Through **September 30, 2023**[164](index=164&type=chunk) - Funding: Cash on hand and cash generated from operations[164](index=164&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on AerCap's financial performance and condition for Q1 2023, highlighting the flight equipment portfolio, comparative results, liquidity, capital resources, and non-GAAP measures, emphasizing the significant recovery from the prior year's Ukraine Conflict charges [Special note about forward looking statements](index=42&type=section&id=Special%20note%20about%20forward%20looking%20statements) This section cautions readers that the report contains forward-looking statements based on current beliefs and projections, which are subject to various risks and uncertainties that could cause actual results to differ materially - Nature: Includes "forward looking statements" as defined by the Private Securities Litigation Reform Act of 1995[167](index=167&type=chunk) - Disclaimer: Actual results may differ substantially due to important factors, including capital availability, lessee payment ability, market demand, Ukraine Conflict impacts, and regulatory changes[168](index=168&type=chunk) - No Obligation to Update: The company undertakes no obligation to update or revise forward-looking statements[168](index=168&type=chunk) [Flight equipment portfolio](index=43&type=section&id=Flight%20equipment%20portfolio) AerCap is a global leader in aviation leasing with a portfolio of **3,500** aircraft, engines, and helicopters (owned, on order, or managed) as of March 31, 2023, with the owned aircraft fleet having a weighted average age of **7.2 years** and a utilization rate of **98%** in Q1 2023, and the company executed **252** aviation asset transactions during the quarter - Total Portfolio (March 31, 2023): **3,500 aircraft, engines, and helicopters** (owned, on order, or managed)[169](index=169&type=chunk) - Owned Aircraft (March 31, 2023): **1,557 aircraft**[170](index=170&type=chunk) - Aircraft on Order (March 31, 2023): Commitments to purchase **421 new aircraft** through 2028[170](index=170&type=chunk) - Weighted Average Age (Owned Fleet): **7.2 years** (weighted by net book value)[170](index=170&type=chunk) - Owned Aircraft Utilization Rate (Q1 2023): **98%**[170](index=170&type=chunk) - Transactions (Q1 2023): Executed **252 aviation asset transactions**[169](index=169&type=chunk) - Off-lease Aircraft (March 31, 2023): **71 aircraft**, with 35 re-leased or under commitment, 29 for sale/part-out, and 5 marketed for re-lease[170](index=170&type=chunk) | Aircraft Type | Number of owned aircraft (March 31, 2023) | Percentage of total net book value | Number of on order aircraft | Total owned, managed and on order aircraft | | :------------------------ | :---------------------------------------- | :--------------------------------- | :-------------------------- | :----------------------------------------- | | Passenger Aircraft | 1,497 | 97% | 421 | 2,094 | | Airbus A320neo Family | 350 | 32% | 207 | 580 | | Boeing 787 | 101 | 21% | 24 | 126 | | Boeing 737NG | 281 | 12% | 0 | 342 | | Freighter Aircraft | 60 | 3% | 0 | 67 | | Total | 1,557 | 100% | 421 | 2,161 | [Critical accounting estimates](index=44&type=section&id=Critical%20accounting%20estimates) There have been no significant changes to AerCap's critical accounting estimates from those disclosed in its Annual Report on Form 20-F for the year ended December 31, 2022 - No Significant Changes: No material changes to critical accounting estimates since the 2022 Annual Report on Form 20-F[173](index=173&type=chunk) [Comparative results of operations](index=45&type=section&id=Comparative%20results%20of%20operations) AerCap's total revenues and other income increased by **4%** to **$1.87 billion** in Q1 2023, while total expenses significantly decreased by **65%** due to the absence of large Ukraine Conflict charges from the prior year, leading to a net income of **$435.3 million**, a substantial turnaround from a **$2.0 billion** net loss in Q1 2022, driven by a **$96.3 million** increase in net gain on asset sales and a **$2.74 billion** decrease in Ukraine Conflict-related charges | Metric | Q1 2023 (USD thousands) | Q1 2022 (USD thousands) | Increase/(Decrease) (USD thousands) | YoY Change (%) | | :------------------------------------------------ | :---------------------- | :---------------------- | :---------------------------------- | :------------- | | Total Revenues and other income | 1,865,722 | 1,790,016 | 75,706 | 4.23% | | Total Expenses | 1,406,640 | 4,070,400 | (2,663,760) | -65.44% | | Net income (loss) attributable to AerCap Holdings N.V. | 432,105 | (2,000,830) | 2,432,935 | 121.59% | | Basic lease rents | 1,536,663 | 1,553,646 | (16,983) | -1.09% | | Net gain on sale of assets | 99,540 | 3,285 | 96,255 | 2929.98% | | Net (recoveries) charges related to Ukraine Conflict | (14,108) | 2,728,718 | (2,742,826) | -100.52% | | Interest expense | 436,222 | 380,785 | 55,437 | 14.56% | | Equity in net earnings of investments accounted for under the equity method | 32,544 | 1,283 | 31,261 | 2436.55% | - Basic lease rents decreased by **$17 million (1%)** due to Ukraine Conflict lease terminations, transitions, and restructurings, and asset sales, partially offset by **$81 million** increase from asset acquisitions[176](index=176&type=chunk) - Net gain on sale of assets increased by **$96.3 million** due to higher volume and composition of asset sales (**35 assets sold for $639 million** in Q1 2023 vs. **23 assets for $452 million** in Q1 2022)[177](index=177&type=chunk) - Interest expense increased by **$55 million (15%)** due to a **$50 million** increase in mark-to-market movements on interest rate caps/swaps (loss in Q1 2023 vs. gain in Q1 2022) and a **$33 million** increase in average cost of debt, partially offset by a **$28 million** decrease from lower average outstanding debt[180](index=180&type=chunk) [Liquidity and capital resources](index=48&type=section&id=Liquidity%20and%20capital%20resources) AerCap's total available liquidity, including undrawn lines of credit and unrestricted cash, was **$13.6 billion** as of March 31, 2023, with total sources of liquidity (including estimated operating cash flows) at **$18 billion**, sufficient to cover **1.3x** debt maturities and contracted capital requirements for the next 12 months, while net cash provided by operating activities was **$1.4 billion**, and net cash used in investing activities increased to **$1.3 billion** due to higher flight equipment purchases - Total Available Liquidity (March 31, 2023): **$13.6 billion** (including **$11.3 billion** undrawn lines of credit and **$1.1 billion** unrestricted cash)[189](index=189&type=chunk) - Total Sources of Liquidity (March 31, 2023): **$18 billion** (including estimated operating cash flows for next 12 months)[189](index=189&type=chunk) - Liquidity Coverage: Sufficient to cover approximately **1.3x** debt maturities and contracted capital requirements for the next 12 months[189](index=189&type=chunk) | Cash Flow Activity | Q1 2023 (USD millions) | Q1 2022 (USD millions) | | :-------------------------------------- | :--------------------- | :--------------------- | | Net cash provided by operating activities | 1,363.4 | 1,336.6 | | Net cash used in investing activities | (1,278.1) | (646.6) | | Net cash used in financing activities | (579.7) | (1,259.1) | - Net cash used in investing activities increased due to **$1.7 billion** for flight equipment purchases and prepayments, partially offset by **$470.3 million** from asset sales[186](index=186&type=chunk) - Net cash used in financing activities decreased due to lower debt repayments and higher share repurchases[187](index=187&type=chunk) - Average cost of debt (excluding mark-to-market, issuance costs, etc.) was **3.3%** in Q1 2023, up from **3.0%** in Q1 2022[191](index=191&type=chunk)[204](index=204&type=chunk) [Contractual obligations](index=49&type=section&id=Contractual%20obligations) As of March 31, 2023, AerCap's total contractual obligations amounted to **$83.7 billion**, with significant portions due in 2023 (remaining), 2024, and 2025, including debt facilities, estimated interest payments, purchase obligations for flight equipment, and operating leases - Total Contractual Obligations (March 31, 2023): **$83.7 billion**[193](index=193&type=chunk) | Obligation Type | 2023 - remaining (USD millions) | 2024 (USD millions) | 2025 (USD millions) | Total (USD millions) | | :-------------------------- | :------------------------------ | :------------------ | :------------------ | :------------------- | | Unsecured debt facilities | 3,500.0 | 6,880.0 | 3,650.0 | 34,174.5 | | Secured debt facilities | 1,689.0 | 906.8 | 2,239.5 | 10,098.6 | | Subordinated debt facilities | 0 | 0 | 0 | 2,277.2 | | Estimated interest payments | 1,327.8 | 1,534.2 | 1,355.5 | 14,693.2 | | Purchase obligations | 5,083.6 | 7,125.3 | 4,945.1 | 22,298.3 | | Operating leases | 47.6 | 46.8 | 14.2 | 151.2 | - Purchase obligations include commitments for **421 aircraft**, **16 engines**, and **18 helicopters** through 2028[194](index=194&type=chunk) [Off-balance sheet arrangements](index=50&type=section&id=Off-balance%20sheet%20arrangements) AerCap has interests in variable interest entities (VIEs), some of which are not consolidated in its financial statements, with details provided in Note 23 - VIE Interests: Holds interests in variable interest entities, some non-consolidated[197](index=197&type=chunk) - Reference: Details are in Note 23[197](index=197&type=chunk) [Book value per share](index=50&type=section&id=Book%20value%20per%20share) Book value per ordinary share outstanding (excluding unvested restricted stock) increased to **$68.97** as of March 31, 2023, from **$66.85** at December 31, 2022 | Metric | March 31, 2023 | December 31, 2022 | March 31, 2022 | | :-------------------------------------------------------------------- | :------------- | :---------------- | :------------- | | Total AerCap Holdings N.V. shareholders' equity (USD millions) | 16,045 | 16,118 | 14,653 | | Ordinary shares outstanding, excluding shares of unvested restricted stock | 232,632,094 | 241,093,673 | 239,773,861 | | Book value per ordinary share outstanding, excluding shares of unvested restricted stock | $68.97 | $66.85 | $61.11 | [Non-GAAP measures and metrics](index=50&type=section&id=Non-GAAP%20measures%20and%20metrics) This section defines and reconciles non-GAAP measures, including adjusted debt to equity ratio and average cost of debt, which provide additional insights into the company's performance and capital structure, with the adjusted debt to equity ratio at **2.56 to 1** as of March 31, 2023 - Purpose: Provide additional understanding of performance and capital structure, not to be viewed in isolation[199](index=199&type=chunk) - Adjusted Debt to Equity Ratio (March 31, 2023): **2.56 to 1** (vs. 2.53 to 1 at Dec 31, 2022)[202](index=202&type=chunk) | Metric | March 31, 2023 (USD millions) | December 31, 2022 (USD millions) | | :------------------------------------------ | :------------------------------ | :------------------------------- | | Debt | 46,296 | 46,533 | | Adjusted for: Cash and cash equivalents | (1,089) | (1,597) | | Adjusted for: 50% credit for long-term subordinated debt | (1,125) | (1,125) | | Adjusted debt | 44,082 | 43,811 | | Equity | 16,124 | 16,195 | | Adjusted for: 50% credit for long-term subordinated debt | 1,125 | 1,125 | | Adjusted equity | 17,249 | 17,320 | | Adjusted debt/equity ratio | 2.56 to 1 | 2.53 to 1 | - Average cost of debt (excluding mark-to-market, issuance costs, etc.) was **3.3%** for Q1 2023, up from **3.0%** for Q1 2022[204](index=204&type=chunk) [Summarized financial information of issuers and guarantors](index=52&type=section&id=Summarized%20financial%20information%20of%20issuers%20and%20guarantors) This section provides summarized combined financial information for the Obligor Group (AerCap Holdings N.V. and its guarantors) as of March 31, 2023, and for the three months ended March 31, 2023, reporting total assets of **$44.56 billion** and total liabilities of **$41.71 billion** as of March 31, 2023, with net income of **$375 million** for Q1 2023 - Scope: Summarized financial information for the "Obligor Group" (AerCap Holdings N.V. and its guarantors), excluding non-obligor entities[214](index=214&type=chunk) | Metric | March 31, 2023 (USD millions) | December 31, 2022 (USD millions) | | :------------------------------------ | :------------------------------ | :------------------------------- | | Total assets | 44,561 | 44,131 | | Debt | 36,247 | 36,605 | | Total liabilities | 41,712 | 41,567 | | Metric | Q1 2023 (USD millions) | | :-------------------------------------------------------------------- | :--------------------- | | Total revenues and other income | 990 | | Total expenses | 561 | | Income before income taxes and loss of investments accounted for under the equity method | 429 | | Net income | 375 | | Net income attributable to AerCap Holdings N.V. | 372 | - Guarantee Obligations: The guarantee obligations of Subsidiary Guarantors are limited by fraudulent conveyance laws and other legal defenses[207](index=207&type=chunk)[211](index=211&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) AerCap's primary market risk is interest rate risk, managed through interest rate swaps and caps, while foreign currency risk is not significant due to most revenues and expenses being in U.S. dollars, and inflation poses a risk by increasing costs and potentially decreasing the value of fixed lease payments [Interest rate risk](index=55&type=section&id=Interest%20rate%20risk) AerCap manages interest rate risk, arising from mismatches between fixed/variable rate leases and debt, primarily using interest rate caps and swaps, with the company's derivative financial instruments sensitive to changes in LIBOR or Term SOFR, and all LIBOR-referencing instruments transitioning to Term SOFR by June 30, 2023 - Primary Risk: Exposure to changes in interest rates and spreads[219](index=219&type=chunk) - Management Strategy: Uses interest rate caps and swaps to manage exposure, based on a cash flow-based risk management model[220](index=220&type=chunk) - Derivative Instruments: Variable benchmark interest rates range from one- to three-month U.S. dollar LIBOR or Term SOFR[222](index=222&type=chunk) - LIBOR Transition: All U.S. dollar LIBOR instruments will expire or transition to Term SOFR by **June 30, 2023**[222](index=222&type=chunk) | Derivative Type | 2023 - remaining (USD millions) | 2024 (USD millions) | 2025 (USD millions) | Fair value (USD millions) | | :------------------ | :------------------------------ | :------------------ | :------------------ | :------------------------ | | Interest rate caps (Average notional amounts) | 2,521.7 | 1,903.3 | 854.2 | 114.1 | | Interest rate swaps (Average notional amounts) | 2,700.0 | 2,400.0 | 2,375.0 | 42.0 | [Foreign currency risk and foreign operations](index=56&type=section&id=Foreign%20currency%20risk%20and%20foreign%20operations) Foreign currency risk is not significant to AerCap's operations as most revenues and expenses are in U.S. dollars, and all aircraft purchase agreements are in U.S. dollars, with only a limited number of leases and helicopter purchase agreements denominated in foreign currencies - Significance: Foreign currency transaction gains and losses are **not significant**[224](index=224&type=chunk) - Currency Denomination: Substantially all revenue and most expenses are in U.S. dollars; all aircraft purchase agreements are in U.S. dollars[224](index=224&type=chunk) - Limited Exposure: Limited number of leases and helicopter purchase agreements in foreign currencies, and some foreign currency cash/tax/expenses[224](index=224&type=chunk) [Inflation](index=56&type=section&id=Inflation) High inflation rates pose adverse effects, potentially increasing operational costs and decreasing the real value of fixed lease payments, with a possible lag in adjusting lease rates, and could also negatively impact suppliers and lessees - Current Environment: Inflation rates are high in the US, EU, UK, and other countries[225](index=225&type=chunk) - Adverse Effects: May increase costs of goods, services, and labor; decrease the value of fixed lease payments; and negatively impact suppliers and lessees[225](index=225&type=chunk) - Lease Rate Lag: Multi-year leases may cause a lag in adjusting lease rates to inflation[225](index=225&type=chunk) [PART II. OTHER INFORMATION](index=57&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) This item refers to Note 25 ("Commitments and contingencies") for details on legal proceedings - Reference: Legal proceedings details are in Note 25—Commitments and contingencies[227](index=227&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since those reported in its Annual Report for the year ended December 31, 2022 - No Material Changes: No material changes in risk factors since the 2022 Annual Report[228](index=228&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In March 2023, AerCap repurchased **8,788,890** ordinary shares at an average price of **$56.89** per share, completing a publicly announced program | Month | Number of ordinary shares purchased | Average price paid per ordinary share | Total number of ordinary shares purchased as part of our publicly announced program | Maximum dollar value of ordinary shares that may yet be purchased under the program (USD millions) | | :---------- | :---------------------------------- | :------------------------------------ | :---------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------- | | January 2023 | — | — | — | — | | February 2023 | — | — | — | — | | March 2023 | 8,788,890 | 56.89 | 8,788,890 | — | | Total | 8,788,890 | 56.89 | 8,788,890 | — | - Reference: Further details on share repurchase programs are in Note 16—Equity[229](index=229&type=chunk) [Item 3. Defaults Upon Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities - No Defaults: None[230](index=230&type=chunk) [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Applicability: Not applicable[231](index=231&type=chunk) [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) No other information to report - No Other Information: None[232](index=232&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) No exhibits are included - No Exhibits: None[233](index=233&type=chunk) [Signature](index=58&type=section&id=Signature) The report is duly signed by Aengus Kelly, Authorized Signatory, on behalf of AerCap Holdings N.V. on May 2, 2023 - Signatory: Aengus Kelly, Authorized Signatory[237](index=237&type=chunk) - Date: May 2, 2023[237](index=237&type=chunk)

Debt and Financial Exposure - As of December 31, 2022, the principal amount of the company's outstanding floating rate debt was $9.3 billion, representing 20% of the total indebtedness[41] - The company had $3.2 billion of floating rate debt linked to a SOFR index and $5.1 billion linked to USD LIBOR as of December 31, 2022[48] - Rising interest rates may negatively impact the company's net income, particularly if higher interest payments on floating rate debt are not hedged[42] - Negative changes in credit ratings could limit the company's ability to obtain financing or increase borrowing costs[46] - The transition from LIBOR to alternative benchmark rates like SOFR may expose the company to additional financial risks[48] Lease Revenue and Market Risks - During the year ended December 31, 2022, 98.2% of the company's basic lease rents from flight equipment under operating leases were attributable to leases with fixed lease rates[42] - The company derives 53% of its lease revenue from airlines in emerging market countries, which are more vulnerable to economic and political problems[55] - As of December 31, 2022, 16.9% of the company's fleet was on lease to Chinese airlines, exposing it to economic and political risks in China[61] - The company faces risks related to market demand for flight equipment, which may decline due to changes in economic conditions and overall air travel health[93] - The financial strength of lessees is critical, as deteriorating conditions could lead to delays or failures in rental payments, impacting the company's revenue[103] Geopolitical and Economic Risks - The company recognized a pre-tax net charge of $2.7 billion in 2022 due to the inability to recover a significant portion of assets leased to Russian airlines amid geopolitical conflicts[52] - The ongoing Ukraine Conflict may lead to adverse effects on macroeconomic conditions, security, fuel prices, and financial markets, impacting the company's ability to lease aircraft and collect payments[91] - Increased fuel prices and volatility could adversely affect lessees' ability to meet lease payment obligations, with fuel prices reaching their highest levels since 2008 due to the Ukraine Conflict[105] - Terrorist attacks and geopolitical conflicts have historically negatively impacted the aviation industry, leading to increased costs and decreased demand[83] Regulatory and Compliance Risks - The company is subject to various international risks, including trade sanctions and export controls, which could negatively impact its business operations and financial condition[62] - The General Data Protection Regulation (GDPR) could impose significant costs, with potential fines of up to 4% of annual global revenue for non-compliance[65] - Environmental regulations related to climate change may require substantial compliance costs and could limit the usability or economic life of certain aircraft[66] - The EU Emissions Trading System (ETS) will phase out free emission allowances for the aviation sector by 2026, potentially impacting the company's ability to lease or sell less efficient aircraft[67] Insurance and Recovery Challenges - The company has experienced increased insurance costs and reduced coverage due to the Ukraine Conflict, which may adversely affect its financial condition[74] - The company has submitted insurance claims related to losses from the Ukraine Conflict, with uncertainty regarding timely recovery under its policies[85] - The company submitted an insurance claim for approximately $3.5 billion under its C&P Policy for aircraft remaining in Russia, and legal proceedings were initiated to recover this amount[88] - An additional insurance claim of approximately $97 million was submitted for the loss of one aircraft in Ukraine, with a total claim value of around $100 million for two aircraft[90] - The company has not recognized any claim receivables related to its insurance claims as of December 31, 2022, due to uncertainties in recovery[89] Operational and Competitive Challenges - The aviation leasing industry is highly competitive, with potential competition from emerging aircraft leasing companies and other market participants, which could adversely affect financial results[121] - The concentration of aircraft manufacturing among a few manufacturers poses risks related to delivery delays and market conditions, potentially affecting lease rates and aircraft values[98] - Manufacturing delays from major suppliers like Boeing could negatively impact cash flow and results of operations, as seen with the suspension of Boeing 787 deliveries[126] - The company anticipates that restructuring or terminating leases due to lessee financial difficulties may result in less favorable lease terms and reduced revenue[110] Cybersecurity and Governance Risks - Cyberattacks pose a risk to the company's IT systems, potentially leading to material disruptions and loss of sensitive information, which could harm business operations[131] - GE currently owns approximately 45% of the company's outstanding ordinary shares, and future sales by GE may negatively affect the market price of these shares[140] - The company may face difficulties in enforcing judgments against its directors and officers in the United States due to its incorporation in the Netherlands[136] - The financial instability of aircraft manufacturers could impact the delivery of aircraft and engines on order, negatively affecting cash flow and operational results[123] Taxation and Financial Reporting - The effective tax rate may be impacted by the division of earnings among different tax jurisdictions, which could materially affect financial results[145] - Irish corporate income tax rates are 12.5% on trading income, 33% on capital gains, and 25% on other income, with expectations that most Irish income will be treated as trading income[146] - The EU Anti-Tax Avoidance Directive may lead to changes in the effective tax rate in future periods[148] - The U.S. Corporate Alternative Minimum Tax (AMT) could impose a 15% minimum tax on adjusted financial statement income for corporations with significant average annual income[151] - The company may fail to qualify for benefits under income tax treaties, which could result in increased U.S. federal and state taxes[152] - The OECD's Base Erosion and Profit Shifting (BEPS) initiative may lead to a global minimum effective tax rate of 15% for groups with global turnover exceeding €750 million, potentially increasing the effective tax rate[154]