Executive Summary / Key Takeaways

• AerCap Holdings N.V. (AER) stands as a global leader in aviation leasing, strategically positioned to capitalize on the "lower for longer" aircraft supply environment and robust global passenger traffic growth, particularly in APAC and the Middle East.
• The company's core investment thesis is underpinned by its disciplined capital allocation, focusing on a modern, fuel-efficient fleet (75% new technology, targeting 85% by 2030) and a unique engine leasing business, which together drive superior asset utilization and strong financial returns.
• AerCap delivered record financial performance in Q2 2025, with GAAP net income of $1.3 billion and adjusted EPS of $2.83, driven by strong execution, asset demand, and a favorable $973 million insurance award related to the Ukraine conflict.
• Management has consistently raised its 2025 adjusted EPS guidance, now at approximately $11.60 (including $1.10 in H1 gains on sale), reflecting confidence in sustained lease revenue, expanding net spreads, and ongoing share repurchases.
• Key factors to watch include the continued impact of OEM delivery delays on the supply-demand dynamic, the successful integration and growth of strategic partnerships like the Air France-KLM engine leasing venture, and AerCap's ability to maintain its competitive edge through operational excellence and a diversified, high-quality asset portfolio.

The Enduring Power of Aviation Leasing

AerCap Holdings N.V., founded in 1995 and publicly traded for nearly two decades, has established itself as a cornerstone of the global aviation industry. As a leading provider of commercial flight equipment, AerCap's business model revolves around the lease, financing, sale, and management of aircraft, engines, and helicopters. This model allows airlines to manage capacity and capital expenditure efficiently, a value proposition that has seen lessors collectively grow to manage well over 50% of the world's fleet. AerCap's strategic journey has been marked by significant expansion, notably through the acquisition of GECAS, which substantially bolstered its engine leasing capabilities and global footprint.

The current industry landscape is characterized by a "lower for longer" supply environment, a trend expected to persist for several years. This dynamic, stemming from ongoing OEM production discipline and supply chain constraints, is a significant tailwind for AerCap, driving increased lease rates, strong demand for lease extensions, and robust gains on asset sales. Global passenger traffic continues its upward trajectory, led by strong growth in the Asia-Pacific region and the Middle East, with international travel consistently outpacing domestic growth. This broad-based demand, particularly for wide-body and narrow-body aircraft, underpins AerCap's operational strength and future profitability.

Technological Edge and Operational Prowess

AerCap's competitive advantage is deeply rooted in its commitment to a modern, fuel-efficient fleet and its sophisticated operational infrastructure. The company's portfolio is currently 75% new technology assets, with an ambitious target to reach approximately 85% by 2030 and 95-98% in the coming years. This strategic focus on new technology aircraft, such as the 787s, A350s, A320neos, and 737 MAXs, offers tangible benefits to its airline customers, including lower operating costs and reduced carbon emissions. For AerCap, this translates into higher residual values and sustained demand, as these assets are more desirable in an environment prioritizing efficiency and sustainability.

Beyond aircraft, AerCap's engine leasing business is a critical technological differentiator. With a portfolio of over 1,200 spare engines, 90% of which are new technology (including LEAP, GenX, GTF, and CFM56), AerCap acts as a vital partner to engine OEMs in providing after-sales service. This involves a complex logistics operation, moving hundreds of engines globally each year to support airline and MRO customers. The company's expanded MRO support capability, operating from 27 partner MROs worldwide, enhances its ability to manage engine maintenance, conduct inspections, and optimize lease returns. A recent engine leasing partnership with Air France-KLM (AFLYY) further solidifies this segment, providing spare engine support for Air France-KLM's MRO customers and securing quicker MRO slots for AerCap's own fleet. This specialized expertise and infrastructure create a significant competitive moat, ensuring high utilization and robust demand for its engine assets, especially given the reliability challenges faced by some new technology engines.

Competitive Strength and Strategic Positioning

AerCap operates in a competitive landscape alongside other major lessors like Air Lease Corporation (AL), Willis Lease Finance Corporation (WLFC), and GATX Corporation (GATX), as well as indirect competitors such as airlines opting for direct purchases. AerCap's comprehensive service offerings and unparalleled global scale provide a distinct advantage. While AL is known for its agility in fleet acquisition, AerCap's integrated solutions, encompassing maintenance monitoring, contract compliance, and restructuring negotiations, often lead to stronger customer relationships and greater operational efficiency. The company's in-house engine and technical teams are crucial for preserving asset value, particularly as aircraft age, a capability that differentiates it from less specialized players.

Against WLFC, which specializes in engine leasing, AerCap's broader portfolio and end-to-end asset management capabilities offer a more holistic solution to airlines. While WLFC might excel in niche engine-specific innovations, AerCap's global network and logistics expertise in engine movements provide a unique value proposition as a partner to OEMs. Compared to GATX, a diversified lessor across multiple industries, AerCap's singular focus on aviation allows for deeper expertise and more efficient operations within the sector. AerCap's strategic approach often involves bilateral transactions rather than open bids, leveraging its installed fleet and engine business to offer unique value propositions that competitors cannot easily match. This disciplined approach, coupled with significant barriers to entry in the industry (high capital requirements, regulatory hurdles, established relationships), helps AerCap maintain its leading market position.

Financial Performance: A Trajectory of Strength

AerCap's financial performance reflects its strategic execution and the favorable market environment. In the second quarter of 2025, the company reported a record GAAP net income of $1.3 billion and earnings per share of $7.09, with adjusted net income reaching $502 million and adjusted EPS of $2.83. This strong quarter included net recoveries of $973 million, or $5.48 per share, related to the Ukraine conflict, following a favorable decision by the London Commercial Court in June 2025. Basic lease rents in Q2 2025 stood at $1.653 billion, demonstrating consistent revenue generation.

The company's operational metrics underscore its robust demand: a 99% utilization rate and a 97% extension rate in Q2 2025. These high rates have translated into stronger returns, with new leases for extended aircraft often commanding higher rates despite the aircraft's age. AerCap also generated a net gain on sale of assets of $57 million in Q2 2025, achieving an unlevered gain on sale margin of 18%, equivalent to 1.7 times book value. For the full year 2024, AerCap reported a record adjusted EPS of $12.01 and generated $5.4 billion in operating cash flow. The fourth quarter of 2024 saw a record net gain on sale of assets of $260 million, with an unlevered margin of 43%, reflecting the deep embedded value in its portfolio and effective asset management.

AerCap maintains a robust liquidity position, with approximately $22 billion in total sources of liquidity as of June 30, 2025, providing around $10 billion in excess cash coverage. The company's leverage ratio has decreased to 2.2:1 in Q2 2025, well below its stated target of 2.7:1, and it has achieved investment-grade credit ratings of BBB+ across all three major agencies. This financial strength supports a shareholder-friendly capital allocation strategy. Year-to-date through Q2 2025, AerCap repurchased over $1 billion of stock and has approximately $800 million remaining in its current authorization. The company also plans to deploy another $3 billion in new equipment by the end of 2025, demonstrating its commitment to both shareholder returns and organic growth.

Outlook and Key Risks

AerCap's management has expressed strong confidence in the company's future, reflected in its upwardly revised 2025 full-year adjusted EPS guidance of approximately $11.60, which includes $1.10 of gains on sale from the first half of the year. This outlook is predicated on continued strong lease revenue, an expanding net spread (driven by increasing portfolio yield), and disciplined capital deployment. Projected 2025 financials include lease revenue of around $6.6 billion, maintenance revenues of $700 million, and asset sales of approximately $2.5 billion.

Despite the positive outlook, AerCap acknowledges several risks. While the company has seen "very limited impact" from tariffs and trade, escalating global trade tensions could lead to a "retrenchment of Boeing sales to focus on the U.S." and a shift in global aircraft supply dynamics. Persistent OEM supply shortages and production delays from both Boeing (BA) and Airbus (EADSY) continue to push delivery schedules to the right, impacting the company's order book. Furthermore, challenges with new technology aircraft, particularly engine reliability, contribute to robust spare engine demand but also highlight operational complexities. AerCap has proactively addressed credit risks, such as taking a $140 million provision against its Azul (AZUL) exposure in Q3 2024, which management believes is "fully provided" for. The company is also managing its exposure to the Chinese market, which has been reduced from a peak of 21% to 13.5% and is expected to trend further downwards.

Conclusion

AerCap Holdings N.V. is a compelling investment proposition, firmly entrenched as a leader in the global aviation leasing market. Its strategic focus on a modern, fuel-efficient fleet, coupled with its unique and robust engine leasing business, provides a significant competitive moat and drives consistent financial outperformance. The company's ability to generate record earnings and strong operating cash flows, maintain a low leverage profile, and consistently return capital to shareholders underscores its operational excellence and disciplined capital allocation.

AerCap's proactive management of industry challenges, from OEM delays to geopolitical risks, further solidifies its position. With a clear growth trajectory, supported by an expanding net spread and a strong demand environment for its technologically advanced assets, AerCap is well-positioned to deliver sustained value to its investors. The company's leadership in fleet modernization and its deep operational expertise in asset management are critical drivers that will continue to power its ascent in the dynamic global aviation landscape.