GECAS acknowledges short-term deferral requests from the majority its lessees but says the lessor is in better shape now to face difficulties than compared with previous downturns.
"We are better positioned today versus prior downturns in asset quality, customer concentration and geographic diversity," said GE chairman and chief executive officer Lawrence Culp, on an earnings call today. Short-term deferral requests are coming from 75-80% of the GECAS portfolio, he adds.
The lessor ended the quarter with assets of $37.3 billion compared with $38 billion at the end of the fourth quarter.
GECAS indicates in an earnings statement that it is "preparing for lease restructurings, repossessions and redeployments".
The lessor has cancelled orders for 69 Boeing 737 Max aircraft as part of a rebalance of its orderbook. Boeing still holds outstanding orders for 82 Max aircraft from GECAS, which maintains another 29 in its operating fleet.
Parent company GE Capital's revenues were down 13.7% year-over-year to $1.92 billion. It reported a loss of $194 million against earnings of $171 million in the year-ago quarter.
General Electric's aviation unit saw revenue slip 13% to $6.89 billion on year-over-year, with profit in the division falling 39% to $1 billion from $1.66 billion. Orders declined by 14%. First-quarter shipments of LEAP engines totalled 272, or a decline of 152 from the year-ago quarter.
“The impact from COVID-19 materially challenged our first-quarter results, especially in aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March," said Culp.
The Boston-based conglomerate is cutting $2 billion in costs to offset falling sales and profits and is preparing for $3 billion of cash preservation. It posted total first-quarter revenue of $20.52 billion, which represents a year-over-year decline of 8%.
It says free cash flow was negatively impacted by COVID-19 to the tune of $1 billion.
GE earned $6.16 billion in the three months and expects the second quarter to be worse hit. "The second quarter will be the first full quarter with pressure from COVID-19, and GE expects that its financial results will decline sequentially," it adds.
Cash and cash-equivalent holdings totalled $47 billion at the end of the quarter, and it has access to a revolving debt facility of $15 billion.
Culp adds: "While there are many unknowns, there will be another side—planes will fly again, healthcare will normalise and modernise, and the world still needs more efficient, resilient energy. We're embracing today's reality and accelerating our multi-year transformation to make GE a stronger, nimbler, and more valuable company."
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