Specialist
Former Director at Aercap Holdings NV
Agenda
- Outlook on lease rates for single-aisle and widebody aircraft
- Lease renewal rates and lessor incentives, including PBH (power by the hour) lease structures
- Aercap's (NYSE: AER) fleet placement, utilisation and asset value trends
- CAPEX and PDP (pre-delivery payment) deferral dynamics
Questions
1.
What are your expectations for narrow- and wide-body leasing in 2021 and 2022? Are there any signs of the market picking up in terms of lease rates and the volume of new leases being signed? What is your general market outlook?
2.
How do you think about the potential for lease rejection or non-renewal of assets this year and next on the wide-body side? Do you think those will come back to lessors?
3.
Do you think the nearly USD 1bn impairment in Q3 2020 fully accounts for the negative outlook on wide-body? It’s specifically related to the wide-body fleet, the 777s and the 330s. Is that a conservative impairment?
4.
You mentioned being able to lease a 330 for USD 150,000 per month. What kind of discount does that reflect relative to pre-coronavirus lease rates?
5.
Why do you think the 330 won’t come back into service, whereas the 777 is still strategically important to carriers?
6.
What is the cost of converting a 330 from a passenger configuration to a freighter?
7.
What is the typical duration of the leases being signed at the moment? Is the typical duration changing due to coronavirus?
8.
Is 12 years still the typical length of the first lease?
9.
Is the ABS [asset-backed security] market falling away as it relates to channels for offloading assets?
10.
There were widespread rent deferrals in March, typically for 3-6 months. How would you expect carriers and lessors to approach deferrals now, given that the market hasn’t come back as quickly as we might have anticipated? Do you expect additional deferrals in 2021 and into 2022?
11.
What kind of extensions are happening in exchange for deferred rents?
12.
Are lessors now generally offering a PBH [power-by-the-hour] option for 12-24 months, then stepping back up to a fixed lease after that?
13.
Do you expect haircuts on the deferred lease amounts, or are they going to be recoverable over the extended life of the lease in most instances? Presumably it’s still going to be hard for some carriers to get out from under these liabilities, which have grown pretty large.
14.
What options does Aercap have around collections? There has been some collections activity, for example with AirAsia. Do you expect that to be more of a feature in 2021?
15.
How should we think about lease revenue recognition and how it compares or is reconciled with cash coming in? I think most leases are accounted for on an accrual basis. How different are the typical numbers? Can a lessor use security deposits or maintenance rents? How do those different streams interact in a scenario where a lessee may not be making full payments, or any payments at all?
16.
Do you expect any changes to maintenance rents, especially related to taking amounts over and above the cost incurred to the P&L? Do you expect new leases to be signed with different maintenance rent terms?
17.
What collections would you expect from the lease revenue that is currently on a cash-accounting basis? As of the end of Q3 2020 that represented about 15% of aggregate annual lease revenue. What are your expectations around collections? What might be the typical characteristics in play for Aercap to move someone to a cash-accounting basis?
18.
How challenging are post-bankruptcy collections for Aercap or for lessors more generally? Is there a normal haircut in those scenarios?
19.
How much flexibility do you think Aercap has with aircraft purchase contract payments and delivery schedules? Do you think OEMs [original equipment manufacturers] are amenable to changes in those contracts?
20.
Will Aercap be able to seek additional deferrals? It delayed a lot of CAPEX in 2020. Do you think it can continue doing that if markets don’t recover?
21.
What are the typical milestone payments a lessor has to make to an OEM as part of its PDP [pre- delivery payments] schedule?
22.
Do you think Aercap, given its size, negotiates better discounts or payment terms from OEMs, compared to carriers or other large leasing companies?
23.
What do you think of Aercap’s competitive positioning relative to other lessors? Does it have a structural advantage or disadvantage when competing with bank-backed lessors?
24.
Would you anticipate a structural reset of lease rates, even in a post-coronavirus environment? Do you think lease rates will at some point recover to pre-coronavirus levels? Presumably the answer is different for narrow-body and wide-body.
25.
How do you think carriers will approach getting governments back off the register? Where and how can lessors play a role in that?
Gain access to Premium Content
Submit your details to access up to 5 Forum Transcripts or to request a complimentary 48 hour week trial
The information, material and content contained in this transcript (“Content”) is for information purposes only and does not constitute advice of any type or a trade recommendation and should not form the basis of any investment decision.This transcript has been edited by Third Bridge for ease of reading. Third Bridge Group Limited and its affiliates (together “Third Bridge”) make no representation and accept no liability for the Contentor for any errors, omissions or inaccuracies in respect of it. The views of the specialist expressed in the Content are those of the specialist and they are not endorsed by, nor do they represent the opinion of, Third Bridge. Third Bridge reserves all copyright, intellectual and other property rights in the Content. Any modification, reformatting, copying, displaying, distributing, transmitting, publishing, licensing, creating derivative works from, transferring or selling any Content is strictly prohibited
