A study by Airfinance Journal of 2017 financial statements for the world’s major aircraft operating leasing companies shows the industry in robust financial health. The study covers 16 lessors and includes eight of the 10 largest. The aggregate results are shown in Figure 1.
We have included the few key figures for GE Capital Aviation Services (GECAS) that are available in the GE Annual Report. While some discontinuities result from unavailability of financial data for certain periods (e.g. we do not have access to the Avolon (third-largest lessor) financial statements for 2017), certain ratios and indicators provide an insight into the rude health of the industry. All members of the sample are “pure” aircraft operating lessors except CDB Financial Leasing, which has a substantial portfolio of non-aircraft financial leases. However, close to 100% of its operating lease assets are aircraft.
These aggregate figures show that the leading players in the industry generated net income of $4.8 billion in 2017, even without counting Avolon and excluding $1.3 billion of one-off tax benefits reported by ALC and ACG. As a reference, Avolon and CIT Aerospace platform reported aggregate net income for 2016 of $738 million so their inclusion would have made 2017 a record year for the industry. The sample’s Property, Plant and Equipment was $151 billion for 2017.
Much has been discussed about the wave of new money pouring into into operating leasing and exerting pressure on lease rates. This may have occurred in sale-leasebacks of new aircraft and among emerging lessors who are not included in the study. However, the aggregate values show that lease yield for our sample of lessors, shown in Figure 2, held up in 2017 at 12.4% and, more interestingly, return on equity (ROE) increased from 9.4% to 11% (Figure 3).
One of the explanations for the higher ROE in our sample is an increase in leverage from 2.7x to 3.4x (Figure 4) resulting from the exclusion of Avolon and CIT (which had leverage of only 0.5x in 2015). Another is a further slight decline in average interest cost at 4.1%. A further efficiency was the enhanced scale arising from consolidation: Aggregate selling, general and administration expenses declined from 7.4% of revenues in 2016 to 6.7% in 2017 (and down from 9.1% as recently as 2014).
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The sample of lessors whose 2017 financials are included in the study comprises:
AerCap, Air Lease (ALC), Aircastle, ALAFCO, Amedeo Air4 Plus, Avation, AviaAM, Aviation Capital (ACG), BOC Aviation, CALC, CDB Leasing, DAE Aerospace, FLY Leasing, GECAS (headline numbers only), MCAP Europe, Nordic Aviation Capital and SMBC Aviation Capital.
For more information, please contact: Michael Duff- mduff@theairlineanalyst.com / +44 7736 804460
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