AerCap sees no sign of travel boom end as lifts earnings forecast

AerCap raised its full-year earnings guidance on Monday, saying it saw no signs of travel demand abating and that it would take manufacturers "several years" to catch up with aircraft delivery delays and ease capacity constraints. The world's largest aircraft lessor said airlines will have to fly old planes for longer as a result, benefiting lessors who have increased lease rates sharply and sold older aircraft at higher margins since the post-pandemic recovery in travel.


AerCap also launched a new $500 million share buyback program on Monday after growing its second-quarter revenues by 15% year-on-year to almost $2 billion. "We see no signs of demand abating and some of the commentary that has come out of one or two of the US carriers in the last week or two about a decline in yields - that's off exceptionally high levels. They do not impact the demand for aircraft," Chief Executive Aengus Kelly told analysts.

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U.S. airline stocks tumbled last Tuesday after investors were spooked by a downbeat forecast from Alaska Air, while Southwest Airlines signaled softer pricing for the current quarter two days later. Kelly said that even if there is a mild European or U.S. recession, that would not derail the supply-demand dynamic as any weakness would be offset by positive momentum from Asia, where COVID-19 curbs have more gradually lifted.

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Kally added that the latest snag to hit Pratt & Whitney's Geared Turbofan (GTF) engines would exacerbate the capacity crunch and while he fully expected the RTX-owned (RTX.N) engine supplier to fix the issue, this could take until 2025. The Dublin-based lessor said in some cases it is now selling 18 and 19-year-old aircraft to airlines desperate to add more seats and made its highest-ever gain on the sale of aircraft, engines, and helicopters in the second quarter. AerCap now expects full-year adjusted earnings per share of $8.50-$9.00, including gains on the sale of assets in the first half of the year but excluding any potential gain on sale in the second half. It had forecast a range of $7.00-$7.50 in March, excluding any gains on sale.

Source: Reuters

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