AerCap Holdings

Section 1

The Business

AerCap Holdings (AER), headquartered in Dublin, is the world's largest aircraft leasing company. It owns over 1,600 aircraft, 1,200 engines and 300 helicopters. It buys aircraft years before delivery, leases each one to an airline (typically for seven years at a time), re-leases it when the lease ends, and sells it after roughly 15 years of service. The fleet holds roughly 100 aircraft of each vintage year, and AerCap buys and sells roughly 100 aircraft a year.

AerCap has a market capitalization of $24.8 billion and reported book equity of $18.6 billion. Over the trailing twelve months it generated just over $9 billion in revenue, $3.13 billion in net income, and a trailing price-to-earnings ratio of 7.9.

Section 2

How the market has valued AerCap

Aircraft lessors are normally valued against book value, because their balance sheets are mostly aircraft. AerCap has generally traded near its reported book value (Chart 1). AerCap was below book for most of 2016 through 2023 and has been modestly above it since early 2024. Reported equity of $18.6 billion, spread over about 154 million shares,¹ is $121 per share. But I believe reported book value underestimates the true net value of assets.

Section 3

Why reported book value is too low

Aircraft sit on the balance sheet at cost less depreciation. Since COVID, demand for aircraft has outrun the supply of new aircraft (partly because of increased demand and partly because of production issues at Boeing and Airbus). New and used aircraft prices and lease rates have risen sharply, so aircraft AerCap bought years ago are now worth more than their carrying value. For example, in Q3 alone, AerCap had approximately $1.1B in asset sales and booked $353m in gains on sales (that is, the assets sold for 47% more than their book value). For fiscal years 2023, 2024, and 2025, AerCap has booked annual gains on sale of $490m, $651m, and $819m, respectively.

At Q3, 2026, the net value of flight equipment on its balance sheet was $58.8B. Based on current lease rates, replacement costs and resale values, I estimate it is worth approximately 30% more than book² (roughly $17.6B above carrying value) or roughly $76.4B. The result is that total equity increases from the stated $18.6B to adjusted total equity of $36B, or $234 per share.

The table shows how adjusted equity and adjusted equity per share would change for various alternative estimates. The after-tax row deducts tax of about 15% from the gain, which would be paid over time as aircraft are sold.

Equity per share on about 154 million shares, applying the uplift to $58 billion of flight equipment.

Section 4

Value that is not in these numbers

Section 5

Share repurchases

AerCap has repurchased shares aggressively, especially when the stock has traded below its estimated value. Repurchasing shares when the shares are undervalued increases the book value per share for the remaining shares. At $163.10, each $1 billion of repurchases retires about 6.1 million shares that carry about $1.43 billion of adjusted equity at $234 per share. The remaining holders keep the difference, about $0.43 billion.

In 2025 AerCap repurchased 22.1 million shares for about $3 billion. In the first three quarters of 2026 it spent $2.22 billion to repurchase 15.7 million shares, an average of about $141 per share. Shares issued to employees, mostly through stock options, offset about 4.8 million of those, so the net share count fell by about 10.9 million. In Q3, AerCap just announced a further $1 billion repurchase program.

Section 6

Earnings

Basic lease rents, the contractual rent airlines pay for aircraft, are the core of AerCap's earnings. They fell when lease rates dropped during COVID and have recovered only gradually, because leases are long (the average remaining term is over seven years) and each lease is repriced only when it expires. Dividing basic rents by the average net value of flight equipment gives a rough measure of lease yield. That yield was about 12.1% in 2019, about 10.6% in 2020 and 2022, and about 11.5% in 2025. Basic rents rose 2% in 2024 and 5% in 2025. Management has said AerCap is more than halfway through resetting its COVID-era leases, which leaves about five more years of resets. This driver will slowly increase basic lease rents for the next five years.

Net income has been stable and growing with two exceptions (Chart 3). COVID hurt it badly, and it was disrupted again when Russia confiscated aircraft AerCap had leased there. Insurance has since paid $2.9 billion of $3.5 billion in claims. I exclude any further recoveries from my forward estimates, as the company does.

AerCap's guidance implies net income of about $3.0 billion in 2026. That includes $866 million of pre-tax gains on sale in the first nine months (about $0.75 billion after tax) and assumes no gains in the fourth quarter. Excluding gains, 2026 earnings are about $2.3 billion. Gains are a regular part of the business, because AerCap sells roughly 100 aircraft a year. Gains were $490 million, $651 million and $819 million before tax in 2023 through 2025. They vary with the market, so I treat them separately.

I estimate net income of about $3.0 billion in 2026, rising to $3.2 billion by about 2029 and staying there afterwards. Of the $3.2 billion, about $2.5 billion is earnings before gains and about $0.7 billion is gains on sale. Share repurchases do not change these figures, but they reduce the share count, so earnings per share should grow faster than net income (Section 5). I do not assume any further insurance recoveries, higher gains than recent years, or any benefit from the Spirit aircraft, which are not due for several years. I think steady state net income of $3.2 billion per year is conservative, for three reasons:

• Supply is constrained. Boeing and Airbus are years behind (Section 4), and that is likely to continue for many years. I assume no lease-rate increases beyond the resets already built into existing leases.
• Lease resets continue. COVID-era leases will keep repricing for about five more years. In my model this lifts basic rents about 2% a year. Higher interest and depreciation absorb much of that, so net income grows more slowly than rents.
• The fleet grows slowly. AerCap has 347 aircraft on order, with 62 deliveries scheduled for 2027 and 68 for 2028. Deliveries through 2027 are fully placed with airlines, as are 80% of 2028 deliveries. Sales offset part of the additions, so I assume net fleet growth of only about 1% a year.

Discounted at 9%, this earnings stream is worth about $35.5 billion, or about $230 per share on 154 million shares. That is broadly similar to my adjusted equity estimate of $33.4 to $36.0 billion ($217 to $234 per share).

Section 7

Why is the stock cheap?

AerCap's P/E ratio has mostly been between about 5 and 9 outside of the COVID and Russia distortions (Chart 4). That is low for a company with steady earnings. These reasons may include the following:

• Leverage. Total liabilities are about $53 billion against $18.6 billion of reported equity, or about 2.8 times. A 10% fall in aircraft values would reduce my estimate of equity by about 20%.
• Shocks recur. The 9/11 attacks, the 2008 financial crisis, COVID and the war in Ukraine each hit the sector hard. COVID cut AerCap's market value by more than half before earnings recovered.
• Limited growth. Earnings depend on the size of the fleet and on lease rates. A no-growth earnings stream is worth about 8 to 11 times earnings at required returns of 9% to 12%.
• Capital intensity. Aircraft must be replaced, so earnings are not free cash flow, and earnings include gains on sales that vary with the cycle.

Because aircraft leasing is ultimately a commodity business, I do not expect a large re-rating of the P/E multiple. Long-term returns should come from growth in value per share, through buybacks and gains on sale, and from the gap to adjusted book value narrowing.

Section 8

Risks

• Aircraft supply normalizes. My thesis depends on a shortage of new aircraft. If Boeing and Airbus production catches up, used aircraft values and lease rates could fall back toward book value.
• Recession or war. A major disruption to air travel is the main risk, and a recession is not unlikely. It would probably lower the share price, though AerCap has bought back more stock when shares are cheap. But it would also lower lease rates and aircraft values, and repurchases depend on AerCap staying within its leverage and credit-rating limits. Realizing the value could take several years.
• Airline credit. A lessee failing, as Spirit did, can leave aircraft idle. Spirit's failure also created an opportunity for AerCap (Section 4), but that benefit is not guaranteed.
• Geopolitics. The Russia loss shows that aircraft can be stranded for years and recovered only in part.
• Interest rates. Higher refinancing costs can squeeze margins if lease rates do not rise with them.
• My estimate. The 30% uplift is my own estimate. The table in Section 3 shows what happens if it is lower.