Q3 2023 AerCap Holdings NV Earnings Call

Please standby.

Good day and welcome to the Aercap Holdings N V third quarter 2023 financial results. Today's conference is being recorded and a transcript will be available following the call on the company's website.

At this time I would like to turn the conference over to Joseph Mcginley head of Investor Relations. Please go ahead.

Thank you operator, and Hello, everyone welcome to our third quarter 2023 conference call with me today is our Chief Executive Officer, Angus Kelly and our Chief Financial Officer, Pete You Us before.

Before we begin today's call I would like to remind you that some statements made during this conference call, which are not historical facts may be forward looking statements forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements Aercap undertakes no obligation other than that imposed.

By law to publicly update or revise any forward looking statements to reflect future events information or circumstances that arise after this call.

Further information concerning issues that could materially affect performance can be found in aircrafts earnings release dated October 27 2023.

A copy of the earnings release and conference call presentation are available on our website at Aercap dotcom.

This call is open to the public and is being webcast simultaneously at Aercap com and will be archived for replay.

We will shortly run through our earnings presentation on what a lot of time at the end for Q&A.

A reminder, I would ask that analysts limit themselves to one question and one follow up.

Now I'll turn the call over to Angus Kelly.

Thank you for joining us for our third quarter 2023 earnings call.

I am pleased to report another quarter of strong earnings for Aercap.

The underlying business continues to perform very well.

Generating adjusted EPS of $2.81, our highest quarterly EPS since the closing of the <unk> acquisition.

As a result of the strong performance and an improved outlook for Q4.

I'm delighted to announce that we are once again, increasing our earnings guidance for the year.

On a GAAP basis.

We generated net income of $1 $1 billion in the third quarter.

And earnings per share of $4.86.

This includes $646 million of proceeds from the settlement of certain insurance claims related to aircraft, formerly on lease to the Aeroflot group.

Was the result of tremendous efforts made by many teams in Aercap over the course of the last 18 months.

I am also pleased to announce.

Another $500 million share repurchase program.

This takes total authorization this year to $2.65 billion.

Which is equivalent to 18, 5% of our market cap at the beginning of the year.

This has allowed us to mitigate the impact of the overhang from G E sales and reduced their stake from 45% at the beginning of the year.

To approximately 14% today.

It should be clear from our actions.

But we see significant value in our stock today.

And that these repurchases create long term value for our shareholders.

Aviation assets continue to be in high demand.

Once again reflected in strong levels of activity in the third quarter.

Over the last three months, our platform executed 219 transactions across aircraft engines and helicopters.

Price of 134 lease agreements.

Hershey III purchases and 52 sales.

Demand from our customers is robust.

Our customers are increasingly motivated.

To lock in lift for the years ahead.

Of the used aircraft lease agreements signed in the quarter.

80% of them were extensions.

Which is one of the highest extension rates, we have ever seen.

Remarkably.

This was even higher on the wide body side hissing over 90%.

This reflects the ongoing shortage of aircraft, which I'll go into more detail later on.

For similar reasons.

We also continue to see strong demand for our assets in the sales channel with many bidders competing for our portfolios.

This was reflected in both healthy quarterly sales volumes of $682 million as well as gains on sale with unlevered margins of 24%.

As I referenced in prior quarters.

This is equivalent to the near doubling of the equity held against those assets on a levered basis.

Compared to where our equity is trading in the public market at just over 80% of book.

So in assets during the last quarter, we sold aircraft at almost 200% of the book equity value to expert aircraft buyers.

And repurchased our book equity at 80% of book value in the public equity markets.

These gains speak to the deep embedded value in our portfolio and the strength of our book values.

Switching to the supply side you can see from the chart on the left the Oems are significantly behind the target delivery SaaS in 2018.

We have spoken many times about how today's supply demand dynamics, resulting from the Max grounding COVID-19, and more recently production challenges have led to supplier capacity constraints and in service reliability.

I think it's worth scaling the impact of the supply chain disruptions by taking the most recent Pratt <unk> Whitney announcements as one example.

In August Pratt <unk> Whitney issued a special instruction to operators of G. T. F powered <unk> hundred 20 aircraft, requiring Aegean removals for accelerated inspections due to our production quantity escape.

This they expect will lead to an average of 350 aircraft on the ground from 'twenty to 'twenty four through 2026.

Peaking at 600 to 650 aircraft in the first half of next year.

A shop visit turnaround times remain more elevated than usual.

At approximately 250 to 300 days.

This will cause significant disruption to both existing Pratt and Whitney operators as well as delaying slot availability for other programs.

Putting that peak of 650 aircrafts into context in the first nine months of the year Airbus delivered 488 commercial aircraft in total.

Which if that rate continues would be equal to 650 units.

So as a result of these properly Whitney issues the market will be lives on a net basis hundreds of aircraft further tightening demand.

The problem with my team is working around the clock to address these issues and we are confident they will execute on this but it will certainly take time.

Other manufacturers are also working through their own unique challenges.

From an aircraft perspective.

We continue to run the business for the long term.

Today that is best served by recycling capital from assets into equity.

Given the robust demand for our assets, we are able to generate significant amounts of excess capital from operations every quarter supplemented by sales at significant gains.

On the deployment side, we are taking advantage of the G E overhang as well as general weakness in the stock market to repurchase large blocks of stock at a significant discount to book value.

In fact, we've already bought back more stock in 'twenty two 'twenty three than we did in any other year. Both in terms of number of shares and percentage of shares outstanding which underlines our confidence in the value on offer today.

To put numbers on us those 35.7 million shares were repurchased at an average price of $58.03.

The discount of 26% to todays value.

The positive impact of these repurchases.

As well as the strong underlying performance of the operational business.

The annualized book value per share growth of 18% over the last six quarters.

As many of you will know our sole focus is on creating long term value for aercap shareholders.

So whether it's buying aircraft from the manufacturers.

Completing sale and leaseback deals with airlines retiring deaths are repurchasing shares we will continue to focus our efforts on whatever generates the highest risk adjusted returns.

With book value of $78.28 at the end of Q3, the clear winner today is share repurchases given the significant discounts.

So in summary, Aercap had another very strong quarter.

The utilization of our assets continues to improve our fleet continues to grow with the addition of new technology aircraft. Our order book is well placed into 2020 five.

And we continue to sell used assets at attractive prices.

We ended the quarter with a strong balance sheet as evidenced by our low debt equity ratio and high levels of liquidity.

And through our capital allocation strategy, we continue to return capital to shareholders and to generate strong double digit growth in our book value per share.

With that I'll hand, the call over to Pete for a review of the financials. Thank you.

Thanks, Gus good morning, everyone.

Aercap had a record performance for the third quarter, our GAAP net income was $1 $1 billion or $4.86 per share.

This included a recovery of $646 million related to our Russian aircraft, which is included in net recoveries related to the Ukraine conflict.

The impact of purchase accounting adjustments was $113 million for the quarter. This included lease premium amortization of $41 million, which reduced our basic lease rents maintenance rates amortization of $23 million that reduced our maintenance revenue and maintenance rights amortization of $49 million that increased our leasing expenses.

The tax effect of the insurance settlement proceeds and the purchase accounting items was $67 million. So taking all of that into account. Our adjusted net income for the third quarter was $639 million or $2.81 per share.

I'll talk briefly about the main drivers that affected our results for the third quarter base.

Basic lease rents were $1.575 billion, an increase of $13 million from last quarter. This reflected strong cash collections and we also continue to benefit from power by the hour rents from our lessees that are on P. B H arrangements in their leases.

As I mentioned, our basic lease rents reflected $41 million of lease premium amortization.

These premium assets are amortized over the remaining term of the lease as a reduction to basic lease rents.

Maintenance revenues for the third quarter were $126 million and that reflects $23 million the maintenance rights assets that were amortized to maintenance revenue during the quarter in other words maintenance revenue would've been $23 million higher or $149 million without this amortization.

Net gain on sale of assets was $130 million for the quarter and we sold 45 of our owned assets during the third quarter for total sales revenue of $682 million that resulted in a gain on sale margin of 24% for the third quarter.

We also had $421 million worth of assets held for sale at the end of the quarter.

Through the first nine months of this year, we've sold over $2 $1 billion worth of assets and for the full year, we expect sales to be between two 5 billion and $3 billion.

As I mentioned earlier net recoveries related to the Ukraine conflict, where $646 million in the quarter and that represents recoveries of insurance claims and a Russian aircraft on lease to the Aeroflot group.

Interest expense was $447 million, which includes $7 million of mark to market losses on derivatives.

Our leasing expenses were $166 million for the quarter, including $49 million in maintenance rates amortization expenses and in the third quarter. We also had a onetime tax benefit of $44 million.

We continue to maintain a strong liquidity position as of September 30th our total sources of liquidity were approximately $20 billion, which resulted in next 12 months sources to uses coverage ratio of one seven times, that's well above our target of one two times coverage and represents excess cash coverage.

Of around $8 billion.

Our leverage ratio at the end of the quarter was 2.51 times the same as last quarter, even after $1.6 billion of cash Capex and almost $1.2 billion of share repurchases during the quarter. So that really shows the significant amount of capital that aercap generates on a consistent basis.

Our total operating cash flow was approximately $1.3 billion for the quarter, which was driven by continued strong cash collections are.

Our secured debt to total assets ratio was around 13% at the end of September down slightly from 14% last quarter.

Our average cost of debt is three 5% a slight increase from three 4% last quarter.

And our book value per share was $78.28 as of September 30th which represents an increase of 21% over our book value per share of 64 59 as of September 30th 2022.

During the third quarter, we repurchased approximately 20 million shares at an average price of 50 825 for a total of $1.2 billion. During the first nine months of this year, we've repurchased around 34 million shares for just under $2 billion.

As Gus mentioned today, we've announced a new $500 million share repurchase program that will run through March 2024.

As a result of the strong performance for the first three quarters, we're raising our earnings guidance for the full year. The outperformance has mainly been driven by higher lease revenue both from strong cash collections as well as higher utilization of assets that are on power by the hour rents most of those terrible there are arrangements will end later this year.

But for now they're continuing to contribute additional revenue for US for example, this quarter, we had around $50 million of revenue from PVH leases.

The significant amount of share repurchases that we've done. This year are also a driver of higher EPS, because we've reduced our share count by 34 million shares during the course of this year.

In terms of updated guidance on the last earnings call. We said that we expected to be in a range of $8.50 to $9 of EPS for the full year, which included 98 cents of gains on sale for the first half of the year, but excluded any gains for the second half of the year.

We now expect to be at the top end of that range. So around $8 at EPS before gains on sale and for the first nine months, we've had gains of $1 47, So that takes us to our updated guidance of around $9.50 of EPS for the full year before any fourth quarter gains on sale and setup.

<unk> GE completed another secondary offering of Aercap stock and following these two successful offerings G is now reduced stake in Aercap from just over 45% at the beginning of the year to 14, 5% at the end of September.

In addition to the shares that GE is sold to the public concurrent with these two offerings Aercap has repurchased approximately 28 million shares from GE for a total of around $1.6 billion.

So overall this was a record quarter for Aercap in terms of GAAP earnings as well as adjusted EPS. Our financial performance was very strong mainly driven by higher revenues, we recovered $646 million from our Russian insurance claim we were the first aircraft lessor to do so and of course, we still have.

Outstanding insurance claim that we'll continue to pursue vigorously.

Following the strong performance for the first three quarters with a positive supply demand environment, continuing we once again raised our earnings guidance for the full year.

So far this year, we bought back over 14% of the stock and today, we've announced a new $500 million share repurchase program, bringing our total share repurchase program for the year to $2.65 billion and with that operator, we can now open up the call for Q&A.

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you use a little speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.

Again, Please press star one to ask a question.

For just a moment.

Our first question comes from the line of Jamie Baker with J P. Morgan.

Hey.

Good afternoon, gentlemen, so cost of debt.

About 30 30 basis points year on year, but you still managed an increase in net spread this quarter and of course, that's what the market wants to see.

I got to assume that deferrals catching up.

Contributed to that somewhat we also know of course that lease rates are increasing but with a lag.

I guess the question comes down to how do these two issues.

Sac deferrals fading at some point lease rates continuing to firm I mean is that the way we should be thinking about it.

Can you hazard, a guess as to where net spreads might settle out next year.

Sure Jami. So you know in terms of the deferrals, we had some repayments of past amounts really some kind of a catch ups on cash counting lessees that impacted a little bit. This year, we also benefit as I mentioned.

In terms of the PVH rents right now that was a benefit in 2022 as well to be fair right, but that is something that has helped us there.

But you know what we are seeing and I'll turn it over to Gus for this but we are seeing significant increases in lease rates. That's been a feature really throughout you know last year and this year and I think if anything that has really been accelerating pretty much across the board because do you want to comment on that for sure Pete Yeah lease rates have gone up across our asset classes.

P S aircrafts.

Aircraft engines helicopters all are up significantly this year, but I think Jamie was really important to knows about net spread is it can't be looked at in isolation, because as we sell older assets and.

And bear in mind of course.

And as it has the same rental in the first month as it does on the hundred and 20th month, but of course, the cost associated with that asset is a lot lower in terms of its interest expense. So you have a much wider net spread on older assets. So as we sell those older assets, we take that money, we sell it at a big gain and then we buyback our stock at a discount.

So the thing to really look at you have to look at it in combination is the net spread and the earnings per share because I'm, taking an earnings away from the revenue line, but I'm maximizing their value by putting it through the EPS line.

Whilst improving the portfolio because as we're selling our older assets at book gains buying our stock we have sold off assets that are older than the ones that are left in the books.

Okay that all makes sense. That's helpful. And then second you know Mark Streeter and I were talking to one of your competitors I guess last week, they mentioned that they're seeing four out of five expiring leases.

Being under discussion for extension or are you seeing that same trend or are more customers simply buying the aircraft from you also whats the incremental.

Our window leases extended added original terms I mean I'm sure. It varies widely but could could you quantify what that typically does for returns.

Well, what I can say, Jamie it's as I said in the comments is that 80% on average of our assets are extending when it comes to wide bodies that number is 90%.

As it pertains to how extensions work and the benefits that will very much depend on the terms of those extensions, it's very hard to say.

Whether how much of an incremental improvement today is to extend or to release the assets.

But what we will do at the moment of course, it's not you always make the best economic decision and at the moment, that's definitely in our favor and and I would also say that the airlines know that look the fundament stepped back from August Jamie everybody knows that the Oems are not going to make the number of airplanes theyre, saying, that's just not going to happen every year.

Airline worth their salt in the world knows us and they've known it for years. So what are they doing they're saying, okay. I don't believe that these guys are telling me I need to have the lift I can't take the risk that that would have us. So we've seen massive purchases of aircraft from us as where the biggest seller of used aircraft in the world we've seen massive numbers of extensions.

That's what the airlines see that's the reality and it Ain't going to change for years to come in my opinion.

Okay very helpful Pete and got it thank you.

Sure.

Well go next to Stephen Trent with Citigroup.

Yes. Good morning can you guys hear me okay.

Yeah.

Oh, great. Thank you very much and I apologize I'm, having some trouble with my phone today.

Thank you and good afternoon, rather and I. Appreciate you taking my question I was just curious you know.

And I'm deeply intrigued how you guys have been repurchasing shares we've seen G cast.

Stake down to 14, or 14, 5% or what have you what do we think about medium term.

Sort of your high level I guess.

Capital structure efficiency and capital deployment.

You know what.

Where do you guys think your your target capital structure is ideally.

And when do you think about all of that cash you're generating.

Any sort of high level view on.

Dividends and what have you just wanted to get your take thank you.

Yeah.

Sure Steven Thank you for your question.

In terms of capital structure, I mean, you can see where we're running today.

Net debt to equity of just over two and a half times that's below our target of 2.7 times and I think that will continue to run kind of in that range. You know I mean, Bruce ultimately going to manage to a 2.7 times target, sometimes it could be lower sometimes it could be a little higher than that but that's that's really where we plan to oriented.

And look obviously in terms of the share repurchases, we just see a tremendous opportunity there given where the stock has been and obviously there's been the ability you know with the excess capital that we generated to help accelerate and facilitate GE a sell down and it's I mean, when you step back at it look I mean going.

<unk> from 45% to 14% and being shot of getting out entirely that's a pretty significant amount of shares to be sold during the course of the year and so I think that it has certainly been helpful for us to be able to participate in that.

Your point about the cash flow generation, it's well made we have managed to buyback already 14, and a half the new authorization will take it to close to 20%, which would put us in the 99 percentile of the S&P for buybacks, but we did it without borrowing money we deleverage while we did is that is the.

A key point is again, if you put everything to the side and say how is this business doing we bought back almost or buying back 20% of the business and deleverage, while we were doing it.

Fantastic color really appreciate that gentlemen, and thank you for the time.

Sure sure.

Yeah.

We'll take our next question from Helane Becker with PD Cowen.

Thanks, very much operator, hi, gentlemen, and thank you very much for the time.

You mentioned during your prepared remarks, I think Gus that you were seeing.

Demand for even wide bodies accelerating.

On the win win.

When you think about releasing.

Re leasing those aircraft or.

Extending the leases on those aircraft are taking them back.

How long are people wanting these aircraft for is it.

On the narrow bodies is it just to cover it but they think the gap will be for like a year or two or is it more like six to seven years.

Nearing the lost or delayed it varies from asset to asset, but generally speaking most of these extensions are very long term.

That'd be three to eight years in some cases on the wide bodies that could be even longer I'll be extensions. Some discussions at the moment are double digit years on the wide bodies.

Okay. That's really helpful. Thank you and then just for my follow up question.

Like I understand the whole share repurchase idea and it makes perfect sense, but could you take the company private and borrow at the same cost that you borrow as a public company and does it make any sense to go down that path.

Well I think look over time as we generate the type of capital and cash flow that we're generating we're going to keep buying back more and more of the company. If at the opportunity continues to present itself and if you look at our past behavior Lane, that's what we did to do them.

Our levered by out now I think that would be challenged you got our balance sheet, but if you just simply look at the quantum of capital that this business is generating every year and for that matter has generated for 15 years and.

Operator: Please stand by. Good day and welcome to the AerCap Holdings NV 3rd quarter 2023 financial results. Today's conference is being recorded and the transcript will be available following the call on the company's website.

Over some period of time, we will get there or thereabouts I suspect.

Okay, Alright, well that's really helpful. Thank you have a great day.

Thank you.

Joseph Mcginley: At this time, I would like to turn the conference over to Joseph McGinley, head of the investor relations. Please go ahead. Thank you operator and hello everyone.

Our next question comes from the line of Catherine O'brien with Goldman Sachs.

Hey team thanks for the time.

Coming back to the comment you made earlier about you know I think any any airline team worth their salt.

Joseph Mcginley: Welcome to our 3rd quarter 2023 conference call.

Joseph Mcginley: With me today is our chief executive officer, Aengus Kelly, and our chief financial officer, Peter Juhas. Before we begin today's call, I would like to remind you that some statements made during this conference call, which are not historical facts, maybe forward looking statements. Forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. AerCap undertakes no obligation other than that imposed by law to publicly update or revise any forward looking statements to reflect future events, information, or circumstances that arise after this call.

Is that those that the Oems are probably deliver less than what they are telling them.

Had a couple of U S airline management teams talk about needing to be more proactive in managing their positions in the skyline you further into the future than they have historically just given how long those lead times are in the persistent delays.

Aercap of course is a very large order book starts to Peter out in 2027, although of course, maybe thats a moving target how do you think about future orders of airlines start to try to get in line earlier than usual I know, it's only a comment from a couple of airlines now, but but does that impact your thinking at all.

Joseph Mcginley: Further information concerning issues that could materially affect performance can be found in AirCap's earnings release dated October 27 2023. A copy of the earnings release and conference call presentation are available on our website at aircap.com. This call is open to the public and is being broadcast simultaneously at aircap.com and will be archived for weekly. We will shortly run through our earnings presentation and will allow time at the end for Q&A. As a reminder, I would ask that analysts limit themselves to one question and one follow.

No really no I mean, the only thing that we think cabarrus. It has to create value for our shareholders as I said at one of our conference recently my shareholders pay my wages, the shareholders of Boeing and Airbus definitely do NAS.

And so we are more than happy to order aircrafts. When we believe that the price is right for the risk. We're taking there are plenty of ways to grow in this business it can be sale leasebacks.

Can be orders from the manufacturers it can be M&A. It can be repurchases of shares return of capital to our shareholders, but one thing we will never do is grow for the sake of growth as I've said many times, there's always a bunch of clouds hanging around the tenths in Farnborough and labore, Jay waiting to order aircraft when everyone else is there.

Aengus Kelly: I will now turn the call over to Aengus Kelly. Thank you for joining us for our 3rd quarter 2023 earnings call. I am pleased to report another quarter of strong earnings for AirCap, where the underlying business continues to perform very well, generating adjusted EPS of $2.81, our highest quarterly EPS since the closing of the GKAS acquisition.

That's not the time to be ordering airplanes. The last time, we ordered a significant number of airplanes was in March of 'twenty 'twenty. When we ordered Neil's Vas is way nearby.

Aengus Kelly: As a result of this strong performance and an improved outlook for Q4, I am delighted to announce that we are once again increasing our earnings guidance for the year. On a gap basis, we generated net income of $1.1 billion in the third quarter and earnings per share of $4.86. This includes $646 million of proceeds from the settlement of certain insurance claims related to aircraft formally unleashed to the AeroFot Group, which was the result of tremendous efforts made by many teams in AirCap over the course of the last 18 months.

That's also in the same environment when he bought Chi cats. So great discipline is required and that discipline is dealing with the manufacturers, but just overall in the capital structure, realizing why you're here.

Here for your shareholders and no one else.

That's great shareholder on the line, who appreciate that one thanks guys.

Maybe just one on the guidance for Pete.

Want to sound too greedy because you guys beat my numbers on both core and games.

We're not core, but X games and with gains, but on my math year to date adjusted EPS ex gains is about $6 20.

So your eight dollar guidance implies a small step down in four key EPS ex gains versus <unk> is there something on timing of leases expenses expenses or something we should be aware of or a power by the hour rolling off or perhaps there's some element of conservatism on timing of deliveries versus sales given everything going on the supply chain. Thanks, so much for the time.

Aengus Kelly: I am also pleased to announce another $500 million share repurchase program. This takes total authorizations this year to $2.65 billion, which is equivalent to 18.5% of our market cap at the beginning of the year. This has allowed us to mitigate the impact of the overhang from GE sales and reduce their stake from 45% at the beginning of the year to approximately 14% today. It should be clear from our actions that we see significant value in our stock today and that these repurchases create long-term value for our shareholders, scholars.

Sure so power by the hour I think it will be about the same in the fourth quarter may be slightly down, but we did have a benefit JD this quarter of $44 million benefit on the tax line and that was basically the release of a deferred tax liability that had been we had set up a while ago.

And realized we should we should be releasing so that's about 20 cents give or take this quarter, which helped helped the earnings.

Aengus Kelly: Aviation assets continue to be in high demand, once again reflected in strong levels of activity in the third quarter. Over the last three months, our platform executed 219 transactions across aircraft, engines, and helicopters, comprised of 134 lease agreements, 33 purchases, and 52 sales. Demand from our customers is robust. Our customers are increasingly motivated to lock in lift for the years ahead. Of the used aircraft lease agreements signed in the quarter, nearly 80% of them were extensions, which is one of the highest extension rates we have ever seen.

But really the answer is no I mean, there's no change in the environment and nothing noteworthy about the fourth quarter as we see it.

I think could we do better than $8, hopefully, we will do better and you've seen you know that's the way it's turned out during the course of the year, whether on the core whether on the excluding gains or with gains as well. So yeah I'm hopeful that we can.

Great that does happen.

Thanks, so much for the time.

Sure.

Okay.

Well go next to Henry Cackermander with Deutsche Bank.

Yes.

Hi, Thanks for taking my question.

Just on the DTF with you I know that you know the maintenance at the airlines aren't available, but all types of investors.

Aengus Kelly: Remarkably, this was even higher on the wide body side, hitting over 90%. This reflects the ongoing shortage of aircraft, which I'll go into more detail later on. For similar reasons, we also continue to see stronger demand for our assets in the sales channel, with many bitters competing for our portfolios. This was reflected in both healthy quarterly sales volumes of 682 million, as well as gains on sale with unlevered margins of 24%.

Mario when airlines.

Aercap.

Yeah.

<unk>.

The aircraft back.

What people inspection.

Hello.

So the burden that to Kevin's question actually fall into that.

Now I'll.

I'll begin likely event that an air of payments to behind it back which is highly unlikely.

But in the unlikely event it was under the lease the airline has obligations certainty in our leases to return the engine in the condition. It received a switch would be full life conditions. They either have to do that as a full repair or give us the cash in kind. So we will not be out of pocket that burden ban will ultimately fall upon reis.

Aengus Kelly: As I referenced in prior quarters, this is equivalent to the near doubling of the equity held against those assets on a levered basis, compared to where our equity is trading in the public market at just over 80% of book. So, in essence, during the last quarter, we sold aircraft at almost 200% of their book equity value to expert aircraft buyers, and repurchased our book equity at 80% of book value in the public equity markets.

Beyond the Pratt and Whitney.

Got it okay.

They have to do.

Thanks, Greg.

Correct, Okay got it and then.

Yeah I know.

As you know, it's a maturity coming up early next year.

Globally, our capital markets.

Yeah.

Aengus Kelly: These gains speak to the deep embedded value in our portfolio and the strength of our book values. Switching to the supply side, you can see from the chart on the left, the OEMs are significantly behind the target delivery set in 2018. We have spoken many times about how today's supply demand dynamics, resulting from the max grounding, COVID-19, and more recently production challenges, have led to supplier capacity constraints and in-service reliability. I think it's worth scaling the impact of the supply chain disruptions by taking the most recent Pratt & Whitney announcements as one example.

Sure. So if you look at this year I mean, we've we've come both to the capital markets funding, but also done a number of other financings outside the capital markets. So unsecured bank loan secured bank loans, the small amount of ECA financing et cetera, and we will look to do the same thing next year.

<unk>.

And I'd say that probably means you know three to four trips to the market or markets.

And we will try to vary that but that's that's kind of how we're looking at it and I think you know when you look at it in total the total amount of financing that will do next year is pretty much the same as what we've done over the last 12 months.

Aengus Kelly: In August, Pratt & Whitney issued a special instruction to operators of GTF-powered A320 aircraft, requiring engine removals for accelerated inspections due to a production quality escape. This they expect will lead to an average of 350 aircraft on the ground from 2024 through 2026, peaking at 600 to 650 aircraft in the first half of next year. A shop visit turnaround times remain more elevated than usual at approximately 250 to 300 days. This will cause significant disruption to both existing Pratt & Whitney operators, as well as delaying slot availability for other Pratt & Whitney operators, programs.

Thank you very much.

Sure.

Okay.

Well take our next question from Vincent <unk> with Stephens.

Hey, Thanks for taking my question. So wanted to talk about lease extensions of economics, So very interesting to hear about the 80% to 90% of the activities lease extensions.

Just wondering the lease extension versus say a new aircraft delivery is the economics similar to that or are you may be able to get higher.

Higher lease rates or just maybe if you can compare and contrast.

Thank you.

Aengus Kelly: Putting that peak of 650 aircraft into context, in the first nine months of the year, Airbus delivered 488 commercial aircraft in total, which, if that rate continues, would be equal to 650 units. So as a result of these Pratt and Whitney issues, the market will be lies on a net basis hundreds of aircraft, further tightening demand. The Pratt and Whitney team is working around the clock to address these issues and we are confident they will execute on this, but it will certainly take time.

Well I mean, they all vary of course, and I'm not trying to be evasive new aircraft lease on day. One of course, that's when you have your smallest margin because the capital cost of data attributes to it at a very high level.

I would say at the moment and Doe for our aircraft new aircraft out releasing our aircraft that we're extending both of them are saying the same type of rental of upward rental pressure I wouldn't say you differentiate much between the two when we held back quite a number of aircraft.

To lease and you saw that we did some large transactions were announced recently on new technology assets and similar on the extensions across the board you'll see EM.

You will see.

Aengus Kelly: Other manufacturers are also working through their own unique challenges. From an aircraft perspective, we continue to run the business for the long term. Today, that is best served by recycling capital from assets into equity. Given the robust demand for our assets, we are able to generate significant amounts of excess capital. From operations every quarter, supplemented by sales at significant gains. On the deployment side, we are taking advantage of the GE overhang, as well as general weakness in the stock market to repurchase large blocks of stock at a significant discount to book value.

David the same levels as I said.

Okay, Great. That's helpful. Thank you.

And then just second quick question on the guidance.

So for the $9.50 doesn't include any.

Implied fourth quarter gains.

But if you could talk about the pipeline I think I heard two and a half to $3 billion of sales. So that number came up it is the recent trend of over 20% gain on sale margin is.

Has that continued.

To be achievable going forward. Thank you.

Sure. So first in terms of the volume we have about $420 million of.

Aengus Kelly: In fact, we have already bought back more stock in 2023 than we did in any of the year, both in terms of number of shares and percentage of shares at standing, which underlines our confidence in the value unoffered today. To put numbers on us, those 35.7 million shares were repurchased at an average price of $58.3 at discount of 26% to today's value. The positive impact of these repurchases, as well as the strong underlying performance of the operational business, has led to annualized book value per share growth of 18% over the last six quarters.

Of assets held for sale at the end of September and so as I said I think it will be somewhere between two and a half and three for the full year.

Depending on when some of those close in terms of the of the gain on sale margins. If you look back at the kind of a long history of the company I mean every year basically we have generated gains of and typically those have been in the range of 8% to 10%. If you look back over the last 15 years, obviously this year they've been running.

At higher levels, and I think that's a function. It's a function of three things really Vincent it's a function of the environment, where we see the strong demand that guests had mentioned across the board, whether that's for leasing or for sales.

Aengus Kelly: As many of you will know, our sole focus is on creating long-term value for aircraft shareholders. So whether it's buying aircraft from the manufacturers, completing sale and lease back deals with airlines, retiring debts, or repurchasing shares, we will continue to focus our efforts on whatever generates the highest risk adjusted returns. With book value at $78.28 at the end of Q3, the clear winner today is share repurchases given these significant discounts.

But it's also a function of the assets that we're selling and our and the buyers and I think in terms of the assets that we are selling this quarter they tended to be a little bit older on average about 17 years old so that can push up the margin. Some cases, but overall I'd say, we would expect to continue to run at kind of <unk>.

Levels that are above our historical ones.

And it's just as Pete said, there historically for the last 15 years, we're running at circa 10% gain on sale margin, but that gain on sale on an equity basis on a levered equity basis is about 133% of our book equity.

Aengus Kelly: So in summary, aircraft had another very strong quarter. The utilization of our assets continues to improve. Our fleet continues to grow with the addition of new technology aircraft. Our order book is well placed into 2025, and we continue to sell used assets at attractive prices. We ended the quarter with a strong balance as evidenced by our low-dead equity ratio and high levels of liquidity. And through our capital allocation strategy, we continue to return capital to shareholders and degenerate strong double-digit growth in our book value per share.

Great Good point, great. Thanks, so much.

Sure.

We will take our next question from Jordan.

With bank of America.

Hey, good afternoon.

Just had a quick question on the lease extensions are you guys seeing any differences in the 80% affecting the age of the fleet.

Peter Juhas: With us, I'll hand the call over to Peace for a review of the financials. Thank you. Thanks, Gus.

That could be released and then also too on those older ones.

Peter Juhas: Good morning, everyone. Aircap had a record performance for the third quarter. Our gap in income was $1.1 billion or $4.86 per share. This included a recovery of $646 million related to our Russian aircraft, which is included in net recoveries related to Effect. The impact of purchase accounting adjustments was $113 million for the quarter. This included lease premium amortization of $41 million, which reduced our basic lease rents, maintenance rights amortization of $23 million that reduced our maintenance revenue, and maintenance rights amortization of $49 million that increased our leasing expenses.

Is there still a strong market for selling them.

Yes, I mean look there's it's across the board you know you are not really extending younger aircraft to be honest I mean the.

The youngest aircraft that'll come off lease would be 12 years old. So the majority of what we're extending it into the into the teens in terms of age.

So it's pretty much across the board and as you've seen we sold a lot of assets during the quarter in.

May predominantly older aircraft as has been the case for the last 15 years most of what we saw was older than the average age of the book.

And I don't see that changing much as we go forward.

Peter Juhas: The tax effect of the insurance settlement proceeds and the purchase accounting items was $67 million. So taking all of that into account are adjusted in income for the third quarter with $639 million or $2.81 per share. I'll talk briefly about the main drivers that affected our results for the third quarter. Basic lease rents were $1,575 million, an increase of $13 million from last quarter. This reflected strong cash collections, and we also continue to benefit from power by the RORNs from our lessseas that are on PBH arrangements in their leases.

For instance, prior quarters.

And to my earlier comments on this call the airlines know theres going to be delays for years and years into the future.

That's why the extension or so long dated in nature and also why so many of our sales of aircraft over the last 12 months have been to airlines and Doe average age of those aircraft getting sold to the airlines is over 15 years of age. So they know that this isn't just a one or two year problem.

As I said before if it was that they would just be asking me and paying up for short term extensions, but they know that's not the case.

Got it thank you so much.

Peter Juhas: As I mentioned, our basic lease rents reflected $41 million of lease premium amortization. Lease premium assets are amortized over the remaining term of the lease as a reduction to basic lease rents. Maintenance revenues for the third quarter were $126 million, and that reflects $23 million in maintenance rights assets that were amortized to maintenance revenue during the quarter. In other words, maintenance revenue would have been $23 million higher or $149 million without disammarization.

You're very welcome.

This does conclude the question and answer session I will now turn the call back over to Ken.

Thank you operator, and thank you all for joining the call.

This was a record quarter in our history for earnings.

During the year, we've had a record level of buybacks.

With the new authorization will have bought back almost 20% of the business.

As I mentioned, we'd be in the 99 percentile of the S&P 500 for buybacks and vitally, we did that without borrowing money in fact, aercap de levered, while Adidas and also grew its balance sheets. The large overhang that we faced at the beginning of the year are from G. With a 46% stake is now down at 40.

Peter Juhas: Next gain on sale of assets was $130 million to the quarter, and we sold 45 of our own assets during the third quarter for total sales revenue of $682 million. That resulted in a gain on sale margin of 24% for the third quarter. We also had $421 million worth of assets held for sale at the end of the quarter. Through the first nine months of this year, we've sold over $2.1 billion worth of assets, and for the full year, we expect sales to be between $2.5 billion and $3 billion.

8%.

And so as we look forward with the challenges facing the supply chain in the industry and our own position as being the largest largest marginal supplier of aircraft and engines in the world and we feel very positive about the outlook for the company in the long term. Thank.

Thank you very much operator, and thank you for joining us.

Peter Juhas: As I mentioned earlier, network coverage related to the Ukraine Conflict were $646 million in the quarter, and that represents recoveries of insurance claims on our Russian aircraft on lease to the Aeroflot Group. Interest expense was $447 million, which included $7 million in March market losses on derivatives. Our leasing expenses were $166 million for the quarter, including $49 million in maintenance rights and amortization expenses. And in the third quarter, we also had a one-time tax benefit of $44 million.

This does conclude today's presentation you may now disconnect.

[music].

Peter Juhas: We continue to maintain a strong liquidity position as of September 30, our total sources of liquidity were approximately $20 billion, which resulted in next 12 months sources to use this coverage ratio of 1.7 times. That's well above our target of 1.2 times coverage and represents excess cash coverage of around $8 billion. Our leverage ratio at the end of the quarter was 2.51 times the same as last quarter, even after $1.6 billion of cash catbacks and almost $1.2 billion of sherry purchases during the quarter. To that really shows the significant amount of capital that aircraft generates on a consistent pace.

Yeah.

[music].

Okay.

[music].

Peter Juhas: Francis. Our total operating cash flow was approximately $1.3 billion for the quarter, which was driven by continued strong cash collections. Our secured debt to total assets ratio was around 13% at the end of September down slightly from 14% last quarter. Our average cost of debt was 3.5%, a slight increase from 3.4% last quarter. And our book value per share was $78.28 as of September 30, which represents an increase of 21% over our book value per share of $64.59 as of September 30, 2022.

Peter Juhas: During the third quarter, we repurchased approximately 20 million shares at an average price of $58.25 for a total of $1.2 billion. During the first nine months of this year, we repurchased around $34 million shares for just under $2 billion. As Gus mentioned, today we've announced a new $500 million shared purchase program that will run through March 2024.

Peter Juhas: As a result of the strong performance for the first three quarters, we're raising our earnings guidance for the full year. The outperformance has mainly been driven by higher lease revenue, both from strong cash collections, as well as higher utilization of assets that are on power by the hour rents. Most of those power by the hour arrangements will end later this year, but for now, they're continuing to contribute additional revenue for us.

Peter Juhas: For example, this quarter, we had around $50 million of revenue from PVH leases. The significant amount of shared purchases that we've done this year are also a driver of higher EPS because we've reduced our share count by 34 million shares during the course of this year. In terms of updated guidance, on the last earnings call, we said that we expected to be in a range of $8.50 to $9.00 of EPS for the full year, which included 98 cents of gains on sale for the first half of the year, but excluded any gains for the second half of the year.

Peter Juhas: We now expect to be at the top end of that range, so around $8.00 at EPS before gains on sale, and for the first nine months, we've had gains of $1.47. So that takes us to our updated guidance of around $9.50 of EPS for the full year before any fourth quarter gains on sale. In September, GE completed another secondary offering of ARCAP stock, and following these two successful offerings, GE has now reduced staking ARCAP from just over 45% at the beginning of the year to 14.5% at the end of September.

Peter Juhas: In addition to the shares that GE sold to the public, concurrent with these two offerings, ARCAP has repurchased approximately 28 million shares from GE for a total of around $1.6 billion. So overall, this was a record quarter for ARCAP in terms of gap earnings, as well as adjusted EPS. Our financial performance was very strong, mainly driven by higher revenues. We recovered $646 million from our Russian insurance claim, and we were the first to ARCAP last year to do so. And of course, we still have an outstanding insurance claim that will continue to pursue vigorously.

Peter Juhas: Following the strong performance for the first three quarters, with a positive supply demand environment continuing, we once again raised our earnings guidance for the full year. So far this year we've bought back over 14% of the stock and today we've announced a new $500 million share purchase program bringing our total share purchase program for the year to $2.65 billion.

Operator: And without operator, we can now open up the call for Q&A. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad.

Operator: If you're using a speaker phone, please make sure your meet function is turned off to lie your signal treachery equipment. Again, please press star one to ask a question. We'll pause for just a moment.

Jamie Baker: Our first question comes from the line of Jamie Baker with JP Morgan. Hey, good afternoon, gentlemen. So cost of debt is up about 30 basis points here on year, but you still managed an increase in net spread this quarter. And of course, that's what the market wants to see. But I've got to assume that deferrals catching up contributed to that somewhat. We also know of course that lease rates are increasing, but with a lag, I guess the question comes down to how do these two issues intersect, you know, deferrals fading at some point, lease rates continuing to firm. I mean, is that the way we should be thinking about it and can you hazard a guess as to where net spreads might settle out next year?

Peter Juhas: Sure, Jamie. So, you know, in terms of the deferrals, we had some repayments of past amounts, really some kind of catch ups on cash counting less ease that impacted it a little bit this year. We also benefit, as I mentioned, in terms of the PBH rents, right? Now that was a benefit in 2022 as well to be fair, right, but that is something that has helped us there. But, you know, what we are seeing, and I'll turn over to Gus for this, but we are seeing significant increases in lease rates. That's been a feature really throughout, you know, last year and this year. And I think if anything, that's really been accelerating pretty much across the board.

Aengus Kelly: But Gus, do you want to comment on that? Yeah, for sure. Yeah, lease rates have gone up across our asset classes, this aircraft engines, helicopters, all are up significantly this year. But I think Jamie was really important to know about net spread is it can't be looked at in isolation because as we sell older assets and repair mine, of course, an asset has the same rental in the first month as it does on the 120th month.

Aengus Kelly: But of course, the cost associated with that asset is a lot lower in terms of its interest expense. So you have a much wider net spread on older assets. So as we sell those older assets, we take that money, we sell it at a big gain, and then we buy back our stock at a discount. So the thing to really look at you have to look at it in combination is the net spread and the earnings per share because I'm taking earnings away from the revenue line, but I'm maximizing their value by putting it through the EPS line.

Aengus Kelly: Whilst improving the portfolio, because as we're selling our older assets at book gains, buying our stock, we have sold off assets that are older than the ones that are left in the book. Okay, that all makes sense. That's helpful.

Jamie Baker: And then second, you know, Mark Streeter and I were talking to one of your competitors, I guess last week, they mentioned that they're seeing four out of five, expiring leases, being, you know, under discussion for extension, are you seeing that same trend? Or are more customers simply buying the aircraft from you? Also, what's the incremental IRR, when a lease is extended at its original terms, I mean, I'm sure it varies widely, but could you quantify what that typically does for returns?

Jamie Baker: Well, a lot I can say, Jamie, as I said in the comments, is that 80% on average of our assets are extending when it comes to wide bodies, that number is 90%. As it pertains to how extensions work and the benefits that will very much depend on the terms of those extensions, it's very hard to say, whether how much of an incremental improvement it is to extend or to release the assets.

Aengus Kelly: So what do they do? They're saying, OK, I don't believe what these guys are telling me, I need to have the lift. I can't take the risk I don't have us. So we've seen massive purchases of aircraft from us as we're the biggest seller of used aircraft in the world. We've seen massive numbers of extensions. That's what the airlines see. That's the reality and it ain't going to change for years to come in my opinion.

Jamie Baker: OK, very helpful.

Jamie Baker: Pete and Gus, thank you.

Unknown Executive: Sure.

Stephen Trent: What go next to Steven Trent with City Group? Yes, good morning, can you guys hear me? OK. Yeah. Oh, great. Thank you very much. And I apologize having some trouble with my phone today.

Stephen Trent: Thank you and good afternoon, rather, and then appreciate you taking my question. I was just curious, you know, I'm deeply intrigued to how you guys have been repurchasing shares we've seen G-CAST stake, you know, down to 14 or 14 and a half percent or what have you. When we think about medium term, sort of your high level ideas on capital structure efficiency and capital deployment. You know, where do you guys think your target capital structure is ideally? You know, and when you think about all that cashier generating any sort of high level view on, you know, give it ends and then what have you just wanted to get your take.

Peter Juhas: Thank you. Sure, Steven, thank you for your question. Look, in terms of capital structure, I mean, you can see where we're running today net debt equity of just over two and a half times. That's below our target of 2.7 times. And I think that we'll continue to run kind of in that range. You know, I mean, we're ultimately going to manage to 2.7 times target. Sometimes it could be lower, sometimes it could be a little higher than that.

Peter Juhas: But that's that's really where we plan to orient it. And look, obviously, you know, in terms of the sharing purchases, we just see a tremendous opportunity there, given where the stock has been. And obviously there has been the ability, you know, with the excess capital that we've generated to help accelerate and facilitate GE sell down. And it's, I mean, when you step back at it, look, I mean, going down from 45% to 14% and being in shot of getting out entirely.

Peter Juhas: That's a pretty significant amount of shares to be sold during the course of the year. And so I think that it has certainly been helpful for us to be able to participate in. And to your point about the cash flow generation is well made, we have managed to buy back already 14 and a half the new authorization will take it to close to 20% which would put us in the 99th percentile of the S&P for buybacks, but we did us without borrowing money.

Peter Juhas: We delivered while we did us. That is the key point is again, if you put everything to the side and say, how is this business doing? We bought back almost are buying back 20% of the business and de-lavered while we were doing us.

Stephen Trent: Fantastic color really appreciate that gentlemen and then thank you for the time. Sure, sure.

Helane Becker: We'll take our next question from Helane Becker with PD Cowan. Thanks very much operator. Hi gentlemen and thank you very much for the time. You mentioned during your prepared remarks, I think Gus that you were seeing demand for even more wide bodies accelerating. When you think about releasing those aircraft or extending the leases on those aircraft or taking them back, how long are people wanting these aircraft for? Is it in even on the narrow bodies?

Helane Becker: Is it just to cover what they think the gap will be for like a year or two? Or is it more like six to seven years? You're in the latter, Helane. It's very semester to ask. I put generally speaking, most of these extensions are very long term. They'll be three to eight years. In some cases on the wide bodies, they could be even longer on the extensions. Some discussions at the moment are double digit years on the wide bodies.

Helane Becker: Okay, that's really helpful. Thank you. And then just for my follow up question, like I understand the whole sherry purchase idea and it makes perfect sense. But could you take the company private and borrow at the same cost that you borrow as a public company and does it make any sense to go down that path? Well, I think look over time as we generate the type of capital and cash flow that we're generating, we're going to keep buying back more and more of the company if the opportunity continues to present itself.

Helane Becker: And if you look at our past behavior, Elaine, that's what we did to do. I think that would be challenging on our balance sheet. But if you just simply look at the quantum of capital that this business is generating every year and for that matter has generated for 15 years over some period of time, we will get there. They're about to suspect. All right. Well, that's really helpful. Thank you. Have a great day.

Helane Becker: Thank you.

Catherine O'brien: Our next question goes from the line of Catherine O'Brien with Goldman Sachs. Hey, team, thanks for the time. Gosh, maybe coming back to a comment you made earlier about, you know, I think any airline team worth their salt knows that those at the OEMs will probably deliver less than what they're telling them.

Aengus Kelly: We've actually had a couple of US airline management teams talk about needing to be more proactive in managing their positions in the skyline, you know, further into the future than they have historically just given how long those lead times are and the persistent delays. You know, AirCAP of course has a very large order book, you know, starts to peter out in 2027, you know, although of course, maybe that's a moving target.

Aengus Kelly: You know, how do you think about future orders of airlines start to try to get in line earlier than usual? I know it's only a comment from a couple airlines now, but does that impact your thinking at all? Now, really, no. I mean, the only thing that we think about is how to create value for our shareholders. As I said at one of the conference recently, my shareholders pay my wages. The shareholders of Boeing and Airbus definitely do not.

Aengus Kelly: And so we are more than happy to order aircrafts when we believe that the price is right for the risk we're taking. There are plenty of ways to grow in this business. It can be say least backs. It can be orders in the manufacturers. It can be evident. When a it can be repurchases of shares return of capital to our shareholders. But one thing we will never do is grow for the sake of growth.

Aengus Kelly: As I said many times, there's always a bunch of clowns hanging around the tents in Farmer and LeBorgia waiting to order aircraft when everyone else is there. That's not the time to be ordering airplanes. The last time we ordered a significant number of airplanes was in March of 2020 when we ordered nios. That is when you buy. That's also in the same environment when you bought e-cats. So great discipline is required.

Aengus Kelly: And that discipline is dealing with the amount of fixtures. But just overall in the capital structure realizing why you're here. You're here for your shareholders and no one else. That's great for the shareholders on the line who appreciate that one. So thanks Gus.

Katie: Maybe just one on the guys repeat and I don't want to sound too greedy because you guys beat my numbers on both core and and gain. Or not core but X gains and with gains. But on my math here to date adjusted EPS X gains is about $6.20. So your $8 guy and supplies a small step down in 4QPS X gains versus 3Q. Is there something on timing of leases expenses or something we should be aware of or powered by the hour rolling off?

Katie: Or perhaps there's just some element of conservatism on timing of deliveries versus sales given everything going on the supply chain. Thanks so much for the time. Sure. So powered by the hour I think we'll be about the same in the fourth quarter. Maybe slightly down. But we did have a benefit Katie this quarter of $44 million benefit on the tax line. And that was basically the release of a deferred tax liability that had been we had set up a while ago and realized we should we should be releasing.

Katie: So you know that's about 20 cents give or take this quarter which helped help the earnings. But really the answer is no I mean there's no change in the environment and nothing noteworthy about the fourth quarter as we see it. You know I think could we do better than $8 hopefully we will do better and you've seen you know that's the way it's turned out during the course of the year weather on the core weather on the you know excluding gains or with gains as well. So yeah I'm hopeful that we can. Great that's what we'd say thanks much for the time. Sure.

Hillary Cacanando: We'll go next to Hillary Kekanando with Deutsche Bank. Hi thanks for taking my question. Just on the GTS issue I know the you know the maintenance is the airlines responsibility but I have some investors ask if they're you know put the scenario where an airline that has been affected aircraft on these expiring next year. You know decide to return the aircraft back to the last door before inspection because that actually happened and it's so you know with the burden of GTS inspection actually fall on the last door.

Hillary Cacanando: No, on the unlikely event that an airplane must be handed back, which is highly unlikely, but in the unlikely event it was, under the lease, the airline is obligated, certainly in our leases, to return the engine in the condition it received us, which would be full life conditions. They either have to do that as a full repair or give us the cash in kind so we will not be out of pocket. That burden then will ultimately fall upon Raytheon and Pratt and Whitney. So even if they do return it to you, they have to return it in a condition that would, that's the burden that's been done.

Hillary Cacanando: Okay, got it. And then in the next year, I know you have, you know, some maturity is coming up early next year, I was wondering if it's kind of go over your capital markets strategy. Sure. So, you know, if you look at this year, I mean, we've, we've come both to the capital markets for funding, but also done a number of other financing outside the capital markets, so unsecured bank loans, secured bank loans, small amount of ECA financing, et cetera, and we'll look to do the same thing next year.

Hillary Cacanando: And I'd say that probably means, you know, three to four trips to the market or markets, you know, and we will try to vary that, but that's that's kind of how we're looking at it. And I think, you know, when you look at it in total, the total amount of financing that we'll do next year is pretty much the same as what we've done over the last 12 months.

Hillary Cacanando: Got it. Great. Thank you very much. Sure.

Vincent Caintic: What's the next question from Vincent Cantic with Stevens? Hey, thanks for taking my questions. I wanted to talk about the least extensions of the economics, so very interesting to hear about the 80 to 90% of the activities, least extensions. Just wondering, the least extension versus say a new aircraft delivery is the economic similar to that where you may be able to get, you know, higher lease rates or just maybe if you can compare and contrast the two.

Vincent Caintic: Thank you. Well, I mean, they all vary, of course, and I'm not trying to be evasive. A new aircraft lease on day one, of course, that's when you have your smallest margin because the capital cost the debt of tribute to it is at a very high level. I would say at the moment, and though for aircraft, new aircraft that we're leasing or aircraft that we're extending, both of them are seeing the same type of rental, upward rental pressure.

Vincent Caintic: I wouldn't say you're differently much between the two when we held back quite a number of aircraft to lease and you saw that we did some large transactions were announced recently on new technology assets and similar on the extensions across the board. You'll see, you will see the same level, so they said.

Vincent Caintic: Okay, great. That's helpful. Thank you.

Vincent Caintic: And then this second quick question on the guidance. So for the $9.50 of the cents doesn't include any implied fourth quarter gains. But if you could talk about the pipeline, I think I heard two and a half to three billion of sales, so that that number came up and is the recent trend of over 20% gain on sale margin. Is that continued to be achievable going forward? Thank you. Sure. So, first in terms of the volume, we have about 420 million of assets held for sale at the end of September.

Vincent Caintic: And so, as I said, I think it will be somewhere between two and a half and three for the full year, depending on when some of those clothes. In terms of the gain on sale margins, if you look back at the kind of long history of the company, every year basically we have generated gains of that typically those have been in the range of 8% to 10% if you look back over the last 15 years.

Vincent Caintic: Obviously, this year they've been running at higher levels. And I think that's a function, it's a function of three things, really Vincent. It's a function of the environment where we see the strong demand that Gus has mentioned, you know, across the board, whether that's for leasing or for sales. But it's also a function of the assets that we're selling and the buyers. And I think in terms of the assets that we are selling, you know, this quarter, they tended to be a little bit older, you know, on average, about 17 years old.

Vincent Caintic: So, that can push up the margin in some cases. But, you know, overall, I'd say we would expect to continue to run at kind of levels that are above historical ones. And Vincent, just as Pete said, their history for the last 15 years, they're running at circa 10% gain on sale margin. But that gain on sale on an equity basis on a levered equity basis is about 133% of our book equity. Right. Good point.

Vincent Caintic: Great. Thanks very much. Sure.

Jordan Lioney: We'll take our next question from Jordan Lioney with Bank of America. Good afternoon. It's just got a quick question on the recent tensions. Are you guys seeing any differences in the 80% affecting the age of the sweet that could be released? And then also to on those older ones, is there still a strong market for selling them? Yeah. And I mean, look, there's it's across the board, you know, you're not really extending younger aircraft to be honest.

Jordan Lioney: I mean, the youngest aircraft that will come off least to be 12 years old. So the majority of what we're extending is into the into the teens in terms of age. So it's pretty much across the board. And as you've seen, we sold a lot of assets during the quarter and may predominantly older aircraft as it's been the case for the last 15 years, most of what we sell is older than the average age of the book.

Jordan Lioney: And I don't see that changing much as we go forward. You know, as I referenced in prior quarters and to my earlier comments on this call, the airlines know there's going to be delays for years and years into the future. That's why these tensions are so long days of the nature. And also why so many of our sales of aircraft over the last 12 months have been to airlines. And though average age of those aircraft getting sold to the airlines is over 15 years of age.

Jordan Lioney: So they know that this isn't just a one or two year problem. As I said before, if it was that, they would just be asking me and paying up for short term extensions, but they know that's not the case. Got it. Thank you so much. Very welcome.

Operator: This does conclude the question and answer session.

Aengus Kelly: I will now turn the call back over to guests. Thank you operator and thank you all for joining the call.

Aengus Kelly: This was our record quarter in our history for earnings. During the year we've had a record level of buybacks. With the new authorization, we'll have bought back almost 20% of the business. As I mentioned, we've been the 99th percentile on the S&P 500 for buybacks. And vitally we did that without borrowing money. In fact, AerCap delivered while it did us and also grew its balances. The large overhang that we faced at the beginning of the year from GE with a 46% stake is now down to 14%.

Aengus Kelly: And so as we look forward with the challenges, facing the supply chain in the industry and our own position as being the largest margin of supply of aircraft and engines in the world, we feel very positive about the outlook for the company in the long term.

Aengus Kelly: Thank you very much operator and thank you for joining us.

Operator: This does conclude today's presentation. You may now disconnect. Thank you.