Aircraft leasing group AerCap reports record quarter

Chief executive predicts trade this year will be ‘normal’ despite increased pressures

AerCap chief executive Aengus Kelly said airlines were likely to fail this year, but argued this would be nothing out of the ordinary. Photograph: Dara Mac Dónaill

AerCap chief executive Aengus Kelly said airlines were likely to fail this year, but argued this would be nothing out of the ordinary. Photograph: Dara Mac Dónaill

 

Irish aircraft leasing giant AerCap had a record quarter in the final three months of 2018, according to its chief executive, Aengus Kelly.

Responding to fears that rising oil, higher borrowing charges and other pressures on airlines could hit businesses such as his, Mr Kelly predicted that trade this year would be at “normal” levels.

“We had our busiest quarter ever in the fourth quarter of 2018,” Mr Kelly told the audience at Airfinance Journal Dublin, an annual industry conference in Convention Centre Dublin.

“We moved 145 planes between buying, selling and placing them. If 2019 is going to be slow, we were not going to be moving that many planes,” he added.

Dublin-based, New York-listed AerCap is one of the world’s biggest aircraft lessors, with a fleet of 1,100 craft worth more than $40 billion (€35 million), that it rents to airlines around the globe.

Mr Kelly agreed that airlines are likely to fail this year, but argued this would be nothing out of the ordinary. “I think that is the normal cut and thrust of the business,” he said.

Headwinds

Dómhnal Slattery, chief executive of Avolon, one of several Irish-headquartered rivals to AerCap, said that his company had been “praying for headwinds”.

Mr Slattery, who founded his business during the financial crisis, argued that buoyant conditions over the past few years had led to companies placing aircraft with airlines on uneconomic terms.

He predicted that the headwinds would separate “the chaff” and ensure that those with scale would survive.

Mr Slattery said that by scale he meant the number of airline customers that a lessor had rather than simply the size of their balance sheet.

“If you have 10 airlines and one of them gets into trouble, then you have a problem, if you have 100 or 150 and one of them gets into trouble, once you’re not too exposed to it, it’s just business as usual,” he said.

Alec Burger, chief executive of GECAS, whose key operations are based in Shannon, Co Clare, told the conference that his company was planning for “some degree” of Brexit-related disruption, but did not see it as a threat.

He agreed that the UK’s departure from the EU and developments such as the US-China trade row had generated huge uncertainty in just a few years.

“But the exciting thing about this industry is that people are still flying,” he said.

Mr Burger predicted that the leasing industry should remain profitable in the current environment .

Aircraft leasing is worth €600 million a year to the Republic’s economy and supports about 5,000 jobs according to some estimates. It is home to four of the industry’s top five players.