AerCap Holdings N.V.

Please stand by. We're about to begin. Good day, everyone, and welcome to the AIRCAP's Q1 2025 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, sir.

Thank you, Operator, and hello, everyone. Welcome to our first quarter 2025 conference call. With me today is our Chief Executive Officer, Ingus Kelly, and our Chief Financial Officer, Pete Juhasz. 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. RCAP 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 RCAP's earnings release dated April 30th, 2025. 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 webcast simultaneously at aircap.com and will be archived for replay. 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-up. I will now turn the call over to Angus Kelly.

Thank you for joining us. for our first quarter 2025 earnings call.

We are pleased to report another strong quarter of earnings for AirCap, generating gap net income of $643 million and earnings per share of $3.48, adjusted net income of $679 million and adjusted earnings per share of $3.68. Given these strong results, we have increased our 2025 full-year EPS guidance and announced a new $500 million share repurchase program. Our airline customers around the world remain focused on locking in capacity despite the ongoing uncertainty regarding tariffs and trade. This is evidenced by our 99% utilization rates and 84% extension rate in the period. Today, I'd like to share a number of operational highlights with you from the first quarter that gives you a better sense to the level of activity taking place each day at air cap. On the passenger side, we continue to see strong bids for our assets with a couple of notable deals on the 787s in particular. we are seeing strong demand both for remarketing aircraft and the broadening of the user base more generally. And I'll give you a couple of examples. In Q1, we managed the successful transition of three mid-life 787s between two customers in Europe. They were on time and on budget. And we were able to increase the rents and improve the credit. highlighting the demand for these aircraft. We also executed a 787 sale leaseback at attractive pricing with a new customer, where the airline was keen to partner with AirCap specifically. Airlines know that when they are partnering with AirCap, they have that added oversight and trust, and that brings them validation in the marketplace. On the narrowbody side, we also agreed the extension of 26 midlife aircraft with a North American customer, keen to lock in that capacity for a further six years. This is a live example of the contrast between the monthly gyrations you may see in any given airline schedule capacity, or indeed their stock price, with the long-term mindset that airline fleet managers are required to adopt. On the engine side, you'll note that we ordered 268 new LEAP engines in 2024 as part of a deal with our joint venture, SES, where we take one third of these engines and SES take two thirds. We are making good progress on this front with over 120 of these engines already delivered, 60 more expected this year and 50 plus next year. This highlights the difference between ordering aircraft from the OEMs today which would be likely to deliver in 2030 and beyond versus ordering engines. Engines have a much lower lead time, making them an attractive avenue to deploy capital, particularly when you have the infrastructure of air cap. So I think it's worth spending some time talking about how we continue to expand our operational capacity on the engine side in line with our growing fleet. We now operate from 27 partner MROs around the world, located close to our key customers. This is in line with our expansion in LEAP leasing, but also supports other engine types like the Gen X, GE90, and CFM56 engines, and is focused on lease returns and portfolio optimization. These centers carry out a range of light MRO tasks like baroscope inspections, top case module swaps, QVC installations, and preservation services. This really adds to the industrial capability our customers have come to expect from AirCap and provides a significant amount of information on trends, costs, and outcomes, which can be used across our various business lines. Turning to milestone, we continue to see opportunities in the helicopter business. As an example, in Q1, we agreed the purchase and lease back of five new Leonardo AW189 helicopters with a new customer, Equinor Energy, a leading supplier of energy to Europe and the largest oil and gas operator on the Norwegian continental shelf. This deal involving a long-term lease of new technology equipment to a new customer and is a good example of the industry changing toward a direct model, i.e. leasing to the end-users. This structure replicates similar deals we completed with Far Energy, another listed Norwegian oil company, for two AW189 super medium helicopters around the same time. So in summary, the AirCap platform is strong and continues to perform well, finding new and complementary ways to support our customers across all our business lines. We expect demand to remain robust for the foreseeable future. With that, I'll now hand the call over to Pete to review the financials and the outlook for 2025.

Thanks, Gus. Good morning, everyone. Our gap net income for the first quarter was $643 million, or $3.48 per share. The impact of purchase accounting adjustments was $43 million for the quarter, or $0.23 a share. The net tax effect of these was $6 million, or $0.04 a share. As a result, our adjusted net income for the first quarter was $679 million, or $3.68 per share. There were three main drivers that affected our results for the first quarter. First, our net maintenance contribution, which is maintenance revenue less leasing expenses, was $82 million this quarter on an adjusted basis. That's higher than the $30 to $40 million net contribution that we see on average, mainly due to lower leasing expenses this quarter. But as I've mentioned many times in the past, these numbers tend to move around a lot from quarter to quarter based on maintenance activity levels. Second, net gain on sale of assets was $177 million for the first quarter. We sold 35 of our owned assets for total sales revenue of $683 million. That resulted in an unlevered gain on sale margin of 35%. which is equivalent to a multiple of 2.3 times book value. As of March 31st, we had $525 million worth of assets held for sale. Third, our other income was $105 million, which is higher than normal. During the quarter, we received shares related to an airline bankruptcy claim and also received some insurance proceeds related to a total loss on an aircraft. The combined impact of both of those on other income was around $30 million. Our liquidity position continues to be very strong. As of March 31st, our total sources of liquidity were approximately $20 billion. That includes slightly over $1 billion worth of cash and $11 billion of revolvers and other committed facilities. Our sources-to-uses coverage ratio was 1.8 times, which amounts to excess cash coverage of around $9 billion. Our leverage ratio at the end of the quarter was 2.4 to 1, which is similar to last quarter. Our operating cash flow is approximately $1.3 billion. During the quarter, we were upgraded to BBB Plus by Fitch in March. So we are now rated BBB Plus across the board with all three rating agencies. We also completed $1.5 billion of financing during the quarter. We bought back 5.7 million shares during the first quarter for a total of $558 million. In addition to this, we bought 4.7 million shares in April for $445 million, taking advantage of the recent market volatility. So that takes us to just over a billion dollars of share repurchases so far this year. With the $300 million of capacity remaining from our previous authorization plus the $500 million authorization that we announced today, That gives us $800 million of available capacity. As Gus mentioned, we're raising our full year 2025 adjusted EPS guidance to a new range of $9.30 to $10.30. That includes approximately 80 cents of gains on sale that we had in the first quarter, but it does not include any gains on sale for the remainder of the year. We've had a strong start to the year, in terms of net maintenance contribution and other income. However, we are seeing some delays in our 777 freighter conversion program. We've incorporated all of this into our updated guidance. Taking all of that into account, we expect to be in the top half of that range for the full year. But as you know, there is considerable uncertainty in the overall macroeconomic and market environment. In closing, AirCap continued to perform very strongly during the first quarter. We continue to be in a position of strength with a strong balance sheet, low leverage, and strong liquidity. We've taken advantage of the recent market volatility to buy back over a billion dollars worth of stock so far this year. And as Gus mentioned, today we've announced a new $500 million share repurchase program to be deployed during the remainder of this year. And with that, operator, let's go to Q&A.

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. Again, that is the star key followed by the digit 1. If you are joining us using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question.

We'll pause for just a moment. We'll take your first question from Terry Ma from Barclays.

Please go ahead.

Hey, thank you. Good morning. Gus, so you noted the engine and helicopter opportunity in your prepared remarks. Last year, you also kind of highlighted a number of bilateral transactions you executed with customers. I'm just curious if you kind of expect more of those opportunities to come to the market, just given the tariff uncertainty and how that kind of ranks relative to helicopters and engines.

Thanks, Terry. I would expect, given the scale of the company and the reach we have around the world, be it on aircraft, helicopters, ranges, that we should see one or two more bilateral negotiations. Yes, you're right. I mean, the The engine situation is created by the, I suppose, quasi-industrial infrastructure we have and our experience in supporting the engine OEMs. You saw also a sale lease back on a 787 that we did that was on a bilateral basis for an airline. So, you know, I do think that the current situation may throw up additional opportunities and we keep working hard for them.

Got it. That's helpful. And then maybe just on the buyback, you guys kind of leaned into it, reauthorized another amount. But you didn't actually kind of increase your EPS guidance for the year X gain on sale. Is that just completely offset by the freighter conversion delays you kind of called out? And any way to kind of quantify that? Thank you.

Sure, Terry. So I can go through that. So basically, we increased the full-year guidance by 80 cents, which was the amount of gains on sale in the first quarter. We did have a strong quarter that was driven primarily by two things. One was the higher net maintenance contribution. The other was higher other income. And the higher maintenance was a result of lower leasing expenses in the quarter, mainly lower transition costs, lower top-up expenses, lower lessor contributions, all of those things. Some of that's due to timing, but we're generally seeing lower transition costs because of the high number of airline extensions that we're having. In other income, we had a couple of one-time items, recoveries from airline bankruptcy from a few years ago and insurance proceeds on a total loss aircraft. So those were the things that made the first quarter higher than expected. You know, as we look out for the full year, I do think that we're going to be in the top half of that range. Yeah, the freighters, you know, we'll see some of those moving out of this year. But ultimately, I think these other positives are more than offset that factor. But we didn't narrow the range, really, because there is more uncertainty out there. But as it stands today, you know, we're pretty comfortable we'd be in the top half.

Got it. Thank you. Sure.

We'll hear next from Moshi Orenbuk from TD Cowen.

Great. Gus, maybe to come back to the two areas that you cited, you know, the engines and helicopters. Can you kind of tell us how much, given how much excess capital you've got, how much do you think you can deploy in those businesses kind of over the next year or two?

Well, first of all, I mean, we don't mind where we deploy the capital. The critical element is, is this going to be accretive to our shareholders? We've never been here to grow for the sake of growth. But if attractive opportunities come up, I mean, we have ample amounts of capital and certainly with the headroom that we have, we could easily deploy just in this year alone an additional, what, 4 billion piece if we desired. And that's only in this year. So if we're to look at a multi-year capacity to absorb additional assets, you're into double-digit billions. So that isn't in any way going to limit us. Our limiting factor as it comes to growth profitability we are here to make money that's it on a risk adjusted basis and so drive that ROE that's the key that's why we're here and so transactions that will enhance the ROE on a risk adjusted basis for the business there's no limit to what we can do I feel in terms of size gotcha gotcha okay and

Pete, you alluded to the answer to this about the leasing expenses kind of in the last answer, talking about the fact that some of it was a result of kind of more renewals as opposed to kind of switching airlines. I'm hoping you could kind of just flesh that out a little bit. Are there any other things that... that have caused these particular renewals to be low leasing costs because it seems like that process of having a high level of renewals is likely to continue certainly through this year and maybe even into next. So can you just talk about that and what that might mean for leasing expenses as we go through 2025?

Sure, Moshe. So as a general matter, when you're extending with the existing lessee, then the transition costs are going to be lower because you don't have to do anything to move it. The aircraft stays where it is. And so generally speaking, that's going to lower leasing expenses. So that was part of it this quarter. And then You know, the rest of it, I'd really say was due to timing. You know, we did see, I mean, just kind of lower activity on the maintenance side as well. And that's one of the reasons why you also saw like maintenance rights amortization, for example, was much lower this quarter, lower than normal. So I think it reverts back to kind of regular levels. I mean, as a general matter, I would say. You know, if you think of net maintenance contribution, I'd say $30 to $40 million a quarter is probably a good guide.

Gotcha. Thanks very much.

We'll move next to Jamie Baker from J.P. Morgan.

Oh, hey, and good afternoon. This is actually the first air cap call I've ever done from Europe, and I totally get the timing now. I love it. So, Gus, on tariff, look, it's a zero-sum game, okay? Somebody ends up paying, and it might not be air cap. And, you know, Mark and I get that. You know, maybe it's the airlines. Maybe, you know, the OEMs ultimately accept lower margins. But, you know, at the end of the day, higher costs, you know, it means less growth. So, maybe it does drive the business to midlife or less expensive aircraft at the margin. I mean, it I've seen that suggested by some appraisers. Any thoughts on that?

Well, I think you're right in what you say, Jamie. Ultimately, someone has to bear an additional cost on the system. Now, who that will be and the allocation of that between the ultimate consumer, the OEMs, the airlines, ourselves, we'll have to wait and see. Certainly from AirCap's perspective, as it relates to our current contracts with the OEMs, we have fixed caps of escalation in place. So on these contracts, it won't affect us. Now, that being said, though, what do we know at the moment? Well, we know there are tariffs on aircraft going into the United States. We know there are tariffs on aircraft going into China. So they're known. They're not having a significant impact as yet, but it's very early in the game. Ultimately, if the Europeans retaliate and match the U.S. tariffs and then run a more global basis, We will see, as you say, used aircraft values increase. We will see in China, I would imagine, that the pressure valve they can use is to take the age limitation of leased aircraft. Over half the fleet in China is leased. They have an age limitation of 20 years. If you were to remove that limitation in China and certain other countries in emerging markets and Asia, what you would find then is that demand for new aircraft would be dampened because that is a lot of aircraft that would not leave the market and would stay in service. However, all that being said, Jamie, I think my hope and I think everyone's hope in the industry is that we have had a tariff-free industry between Europe and the US and several other countries under the 1979 agreement. And if we could bring more countries into that, such as China and India, that'd be an even bigger win for U.S. industry. And we all hope something like that can be achieved.

Yeah, well, and I guess that's sort of my follow-up, because maybe the endgame is that aircraft are simply too important to the global economy to be subject to tariffs. Do you know of any examples where the headlines scream tariffs, but the reality is that aircraft and parts are carved out. I'm just wondering if there's any precedent for such an outcome. That's all. Thanks in advance. Take care.

Certainly. Well, I think, look, there are discussions ongoing, we understand, in China between the airlines and the regulators. And hopefully this will lead to aviation aerospace being exempted. But I think Jamie, what would be a tremendous achievement for the administration is if they could significantly enhance the 1979 agreement so that it doesn't just incorporate 34 odd countries, mainly North America and Europe, but also bring in heavyweights such as China and India. where there are small tariffs in China at the moment, 5% on it. Before, there were always small tariffs. Before, the recent ones, 5% on a narrow body, 1% on a wide body. I think that would be a tremendous win for the administration because the U.S. has a massive trade surplus in aerospace with the rest of the world. It's high-tech engineering, manufacturing, great paying jobs. And I think to expand the potential for that would be a tremendous achievement by the administration if it could be done to bring in those other countries into that zero tariff agreement.

That's great, Gus. Thanks so much for your thoughts.

As a reminder, ladies and gentlemen, it is the star key followed by the digit one if you have a question or comment. We'll hear next from Hilary Cacanando from Deutsche Bank.

Hi. Thank you so much. You know, I think, you know, in the last couple of weeks, we've seen airlines in the U.S., you know, pulling their guidance, cutting capacity, you know, given the uncertainty in the market and the softness that they're seeing in domestic bookings. I know you said that, you know, demand remains strong, but I was wondering if you could kind of talk about, you know, what are some of the metrics or indicators, you know, that would get you, you know, kind of more concerned about demand trends going forward?

So, You know, Hilary, you're right.

I mean, the carrier is in, first of all, it's a global market. The US is only 22% of it, give or take. Think about that in context. And other parts of the world, there has been a significant tailwind against falling yields. And that is weakness in the fuel price and weakness in the dollar. They rarely go in the same direction. We generally see crude and dollar go in the opposite direction. So that has been a tailwind that has insulated non-US dollar denominated economies, which is the vast majority of the world, from slowdowns in yields. But turning to your point in the US, yes, we do see weakness in the economy cabin in the US, and you're seeing airlines adjust capacity. But that's adjusting capacity for a three-month or six-month, nine-month period. When we're looking at fleet decisions with airlines, we're looking at 15-year decisions, 20-year decisions. And as I just referenced in my prepared comments earlier, in the quarter, we extended 26 midlife aircraft in the U.S., and these aircraft are over 15 years of age. So they're looking at long-term extension, six years, because they need to know they have the capacity for the longer term. You can't turn on a dime when it comes to planning your aircraft fleet Airlines are often buffeted by short-term gyrations in the global economy, but longer term, they have to know what seats they need and build to that. So because of that, we're not seeing any reduction in demand at the moment.

Got it. Great. Thank you. That's really helpful. And then, you know, one of the questions I've been getting from investors is regarding your portfolio, you know, right now, I think it's about like 75% new tech at the moment. And I guess over the course of the next few years, I would assume, you know, the proportion of the new tech will get bigger. So, you know, I've been getting questions from investors, you know, you've been doing so, like your gain on sale number has been great because you've been able to sell this older portfolio because of your barbell strategy, fleet strategy. And I think the question is, you know, what happens when you increase the number of new tech in your portfolio? Does that strategy go away? How do you think about, I guess, your portfolio going forward?

Well, Hillary, that's the thing about the barbell. You're always looking way into the future. When we get to the end of this decade, when we'll be out of the older tech We'll have 787s that are 18 years old. We'll have NEOs that will be 15 years old. So they will then be our midlife aircraft. We just, you know, where I've always said you don't want to be is at the end of this decade with 15-year-old 777-300ERs, 737s, A320s, or 330s. You want them gone, and you want them to have the foresight to position the businesses for future demand way into the future. You can't be looking short-term in this industry, just like indeed we referenced about the airlines. We can never get caught up in the short-term gyrations of, yes, there's an amazing bid tomorrow for a 15-year-old A320 and start buying those in, or 10-year-old A320, excuse me, and start buying them in because demand will fall off for one of that age. So I think when we looked in the several years' time, a significant portion of our portfolio was will be in that 15-year range, but it'll be the newer generation of the technology. And that's been how we've shown that barbell approach or the sunset, sunrise approach to how the portfolio has been developed since 2012.

That's very clear. Okay, so it's not that – so by barbell, you're not meaning like you're going to sell an aircraft because it turns 10 years old or something. I see what you mean. You're looking at the new tech.

No, no, no.

You got it.

It's got to be far more nuanced and thoughtful than that.

Perfectly clear. Thank you so much. Very helpful.

We'll move next to Catherine O'Brien from Goldman Sachs.

Good morning, everyone. Thanks for the time. You know, you already touched on what you're seeing from the airlines in the prepared remarks and just now with Hillary, and it sounds like airlines even in North America are still business as usual on looking to secure capacity from your fleet and order book. But we've had quite a few U.S. airlines talk about retiring more aircraft than planned a couple months ago, totally understand they're a fraction of the global industry. You know, Based on this quarter's gain, it doesn't seem like it so far, but are you seeing any impacted demand for your own fleet from buyers? Can you just remind us who the complexion of the buyers of your aircraft sold has been of late? Thanks.

I think, look, I mean, as I said, it's very important to realize the U.S. is 22%, 23% of the global market. That's it. It's important, but it's not the driving force. And so while you'll say rightly that some U.S. carriers are going to retire some aircraft, I think it's important to look at what aircraft are they retiring. Are they CRJs? I know in one airline it's 30 E1s. I don't care. It could be very old 757s. They're not relevant. These are 25-year-plus aircraft. We are not seeing current – we're not seeing – you know, 18, 19-year-old aircraft being retired and quite the opposite. I just announced there that we extend to 26 aircraft in the U.S. market, and they were close to that 18, 19-year-old. So, you know, people can say these things, retiring aircraft, true, but, you know, it could be aircraft that were on the way out anyway, inevitably. So I wouldn't read too much into that.

And Katie, in terms of the split of sales this past quarter, so it was about a quarter to airline's about a third to other lessors, and about a third to investors. And then the remaining 5% or so was to part-out end-of-life sales.

Great. Thank you so much. Gus, I thought your long-term take on what would happen if tariffs on aviation stayed in place on CNBC is very interesting, just in terms of airlines needing to adjust orders to avoid tariffs over the longer term. In the shorter term... How does this impact lessors? My understanding is it sounds like you're not on the hook for any tariffs if airlines are typically the importers of record, even in an operating lease situation. But, you know, over the next couple of years, if the airlines in the U.S. need more Boeing lifts shorter term or vice versa for a European airline, could the lessors step in and help with that? Not to discount the disruption at a cost, that would mean for the impacted airlines, but just thinking through some of the puts and takes.

Sure. Well, there are three sources of aircraft in the world for an airline. There's Boeing, Airbus, and the leasing market slash the used aircraft market. So if we do have, as I said on the CNBC interview, tit for tat, and the Europeans raise tariffs, the Chinese raise tariffs, the US continues with the tariffs, we will ultimately see absent Boeing and GE and Honeywell moving production offshore to Europe and to China, we're going to see a retrenchment of Boeing sales to focus on the U.S., and we're going to see Airbus then take most of the rest of the world. So that's one outcome. But then the other scenario is that if you eliminate, and in my discussions with governmental officials, what I've said is if you do put in tariffs, okay, suboptimal, but make sure that you don't tariff the used aircraft market so that the consumer, say, be it in the US or in Europe or in China, for that matter, does not get punished, that the bill for the consumer is minimized. If you were to tariff, for example, used Airbus and new Airbus in the US, that means that there's a smaller supply of aircraft available to US carriers, which will mean less seats. Now, if you let used aircraft in, you're not helping or hurting Airbus in any way, shape, or form. Airbus have manufactured those aircraft. They're gone. The same is true on the other side. In this worst-case scenario, the Europeans should allow European carriers to access used Boeing airplanes because they're not in any way helping or hurting Boeing by taking used aircraft. But if they don't take the used aircraft, they're hurting their own consumers more. The Joe Public... in the street is going to pay more for tickets if governments restrict the supply of aircraft to just new from one manufacturer. So I would hope that that is the way it will play out, which I guess if we go to, there's a lot of negatives in that whole scenario. Of course, we hope that never happens, but at least there should be good demand for our metal.

That's very clear.

As a final reminder, ladies and gentlemen, that is Mr. Keefe, fellow by the digit one. We'll move next to Christine LeWitt from Morgan Stanley.

Hey, good afternoon, everyone. Afternoon for you guys. So maybe two questions. I mean, Gus, on this tariff discussion, look, it seems like the rhetoric around it is more negative. But the way I see it is that historically Boeing was kind of the tip of the trade spear for the U.S. And if these countries want to actually look at the deficit, maybe buying more aircraft would be an easy way to do that. I mean, aerospace defense is a net exporting industry for the U.S. So I was wondering, in that context, if countries want to buy more aircraft, what's your role in that? Because ultimately it's got to be the country who's importing it. Would they increase lease from you because it's still manufactured in the U.S.? ? Would that solve some of that trade deficit issue? Would you be able to step in? Or do you anticipate higher demand for sale leasebacks if that were to materialize?

Well, I think it's more the former rather than the latter because Boeing doesn't have many slots this side of 2030. So I think the leasing industry and certainly AirCap would want to step in and assist in any way we could the administration achieve its targets and work with Boeing to make sure that to the extent, you know, aircraft off our skyline would help resolve trade issues, we would definitely step in to make that happen one way or the other. And I would imagine the other leasing companies will be similarly supportive because, of course, airlines can order aircraft for post-2030 delivery. That's a long way off, though. I think the U.S. would want to see something quicker than that, and that's where the lessors could be very helpful.

Great. Thank you for the color there. And on your commentary on the Shannon engine support business really caught my attention. Can you first discuss exactly what is it you're doing? What are you responsible for versus Safran and your 27 MRO partners? This engine module approach, especially in the CFM56, has been pretty attractive for some players with pretty fat margins. Can you discuss the economics of this JV and how large this could be for you?

Sure. Well, I mean, the way it works is we are just part of the after sales service that's provided by the OEM. So if an airline signs up for, say, a CFM product, it'll be our obligation when the engine comes off wing to have the spare engine on site, on time, on spec for the airline that has the off engine to go to the shop for repair. So we'd have to get it there. We'd have to take it back off the airline. We'd have to make sure whatever maintenance is done is done quickly, is done to specification, that it's ready to go out again to the next customer. So it's part of providing the after sales service. to the OEM customer. And that involves, I think last year, we did over 1,200 engine movements, I believe, which is quite a lot. That's three plus every single calendar day that we're moving engines around the world to support the after sales program. And that's why you need such a big global network And you have to have engines stationed in different pools around the world in order to facilitate that. You have to have very significant in-house logistics expertise. Can you imagine moving a 20 million asset 1,200 times in a given year, four times a day, three, four times a day? That takes a tremendous amount of infrastructure, knowledge, and systems to do that. So that's the primary thing we do as it relates to your talk about engine repairs, module repairs. Look, I think any well-run business will be doing that anyway.

Great, thank you. Moving next to Steven Trent from Citi.

Yes, good afternoon, everybody, and thanks for taking my question. Actually, as a follow-up to my counterpart from Morgan Stanley about the Shannon Engine JV, what do you guys also think about your CapEx kind of going forward? Should we expect a shift in the blend of purchases of helicopters and engines relative to plane purchases, or do you think we'd see sort of a similar mix to what it's been in recent quarters? Thank you.

Helicopters will always be on a dollar basis, a very small proportion of what's going on. But I think aircraft will far dominate any CAPEX program going forward. We have had a surge in engine CAPEX. That's driven by the fact that the 737 MAX and the A320 NEO are hitting higher levels of production, thereby requiring higher level of sparing. I don't think that isn't a run rate, I would say, for a level of engine CAPEX that we have had. But we will all have a level of engine CAPEX You can generally think about spare engines as somewhere around, if there are, say, 4,000 MAX aircraft in the world, that's 8,000 engines. There will generally be a spares requirement for 15% of that, so that's 1,200 LEAP-1Bs. If there's 8,000 NEO, say, 2-to-1, that's 2,400 would be needed in the world, a total of 3,600 that would build up over the course of the next five, six years. a portion of those will be held by the airlines. We'll be by far the biggest proportion of that globally. Obviously, we already are. Even if we didn't buy any more, we'd still be the biggest player for the next 10 years.

Super helpful, Angus. I appreciate it. And just a quick follow-up. I think I heard you guys mention basically, I believe, an 84% renewal rate on aircraft leases. Could you refresh my memory first if I heard it correctly? Could you give a high-level view on how that's evolved over the last couple of quarters as it's sort of gone up, or is it about the same? Thank you.

Historically, going back over a long time, it would have been 50% odd, but over the last few years, it's trended around 90-odd percent. Now, this quarter, it was a little bit lower than 90, but still extraordinarily high by historical standards. And that's because, as I called out, we moved certain aircraft during the quarter. We decided not to extend. We moved them 787s from one customer to another. And because of that, we were able to increase the credit and increase the lease rentals also. So you don't always extend because you need to make sure you get paid. Certainly, as we referenced at the start of this call, extending reduces leasing expense. So that's an incentive for us to extend. But there has to be a trade-off there where we still get a fair rental. And on some 787s, we decided to pull them out and go elsewhere. And that was the right thing to do. But yeah, if I look at the extension trends, it was 60% in 21, 65, 22, 75, and 23. and 80 and 24, and it got up as high as 90 in some of the recent quarters. So that's the situation. Evidence of demand.

Very helpful. Thanks very much.

You're welcome.

We'll hear next from Ron Epstein from Bank of America.

Hey, good morning, guys. Hey, guys, you spoke a little bit to this. What are you seeing in wide body demand? I mean, when we look at it, the fleet seems like it's aging. Are we moving up to a period where we really could see a surge in demand for wide bodies?

We've been seeing very strong demand for wide bodies for quite some time, Ron. We were the first to see it and we were calling it out several years ago because we're the biggest owner of wide bodies in the world. And we could see that demand was coming and it's unabated. As I just referenced, we pulled three 787-9s out of a customer recently, moved them to another customer, better credit, and materially higher lease rentals. And if there was more white bodies in the world, which there aren't, you could shift them tomorrow morning. There's very strong demand for 787-9s, A350-900s. Got it, got it.

And what's your expectation for 777-9, the Xs, when they start coming out?

I think it'll be, you know, it'll be a very large aircraft. I believe it'll be a very capable aircraft, very fuel-efficient aircraft. And once it's in service, you know, you would imagine that as it's the largest aircraft out there, that part of the market, it should dominate.

Got it, got it, got it. And then kind of back to your commentary on, you know, the WTO agreement. Is the industry actively lobbying right now? I mean... The automotive industry got really loud and vocal and lobbied pretty hard. Do you see that at all in the aerospace industry? I mean, is broadly anybody lobbying on the Hill to try to move things in a direction that would get us back to at least where we were and maybe even a better place?

I believe so, Ron. I believe so. I mean, in large-scale manufacturing, this is where the U.S. leads the world by a country mile. This is an industry the U.S. should protect and try and grow. And I said in my comments earlier on that would be an amazing win for the administration to accomplish is to bring more countries into that zero for zero tariff agreement. And that would really be quite the win, I would say, for U.S. aerospace, for U.S. manufacturing and the U.S. worker.

Yeah, no, I agree completely. I just wonder if anybody's actually pursuing that right now. I believe they are. And then maybe one more question. Maybe there's a broad question, big question. Ultimately, does the 737 need to be replaced? I've had some debates with some investors saying that no, it doesn't.

No.

No, it does not. There's no, I mean, what's the point? The MAX 8 is a good airplane. You need to get the MAX 10, the MAX 7 into service so that it's a more It's a better competitor for the 320 family. But I mean, I just think if you were to go to any buyer of the boardroom of an airline or a lessor today, if you're Boeing or Airbus and say, I've got a new airplane for you, I'd say make sure the door doesn't hit you on the way out. You've got to get the existing aircraft you are building more reliable, more durable in service. That's all I care about. The ones you've built do not have the same reliability and durability as your previous generation. Please don't come in here and tell me you're going to have another swing. I want the stuff you've built to work better. That's what I want.

Got it, got it. All right, cool. Thank you very much. Thanks, Rob.

And at this time, there are no callers in the queue. I'd like to turn the conference back over to Angus Kelly for any additional or closing comments.

Thank you, Operator, and thank you, everyone, for joining us for our first quarter earnings call.

We look forward to speaking to you in three months' time.

That does conclude today's teleconference. We thank you all for your participation.

You may now disconnect.