AerCap N.V.(AER) - 2022 Q4 - Annual Report

Debt and Financial Exposure - As of December 31, 2022, the principal amount of the company's outstanding floating rate debt was $9.3 billion, representing 20$3.2 billion of floating rate debt linked to a SOFR index and $5.1 billion linked to USD LIBOR as of December 31, 2022[48] - Rising interest rates may negatively impact the company's net income, particularly if higher interest payments on floating rate debt are not hedged[42] - Negative changes in credit ratings could limit the company's ability to obtain financing or increase borrowing costs[46] - The transition from LIBOR to alternative benchmark rates like SOFR may expose the company to additional financial risks[48] Lease Revenue and Market Risks - During the year ended December 31, 2022, 98.2$2.7 billion in 2022 due to the inability to recover a significant portion of assets leased to Russian airlines amid geopolitical conflicts[52] - The ongoing Ukraine Conflict may lead to adverse effects on macroeconomic conditions, security, fuel prices, and financial markets, impacting the company's ability to lease aircraft and collect payments[91] - Increased fuel prices and volatility could adversely affect lessees' ability to meet lease payment obligations, with fuel prices reaching their highest levels since 2008 due to the Ukraine Conflict[105] - Terrorist attacks and geopolitical conflicts have historically negatively impacted the aviation industry, leading to increased costs and decreased demand[83] Regulatory and Compliance Risks - The company is subject to various international risks, including trade sanctions and export controls, which could negatively impact its business operations and financial condition[62] - The General Data Protection Regulation (GDPR) could impose significant costs, with potential fines of up to 4% of annual global revenue for non-compliance[65] - Environmental regulations related to climate change may require substantial compliance costs and could limit the usability or economic life of certain aircraft[66] - The EU Emissions Trading System (ETS) will phase out free emission allowances for the aviation sector by 2026, potentially impacting the company's ability to lease or sell less efficient aircraft[67] Insurance and Recovery Challenges - The company has experienced increased insurance costs and reduced coverage due to the Ukraine Conflict, which may adversely affect its financial condition[74] - The company has submitted insurance claims related to losses from the Ukraine Conflict, with uncertainty regarding timely recovery under its policies[85] - The company submitted an insurance claim for approximately 3.5 billion under its C&P Policy for aircraft remaining in Russia, and legal proceedings were initiated to recover this amount[88] - An additional insurance claim of approximately 97 million was submitted for the loss of one aircraft in Ukraine, with a total claim value of around $100 million for two aircraft[90] - The company has not recognized any claim receivables related to its insurance claims as of December 31, 2022, due to uncertainties in recovery[89] Operational and Competitive Challenges - The aviation leasing industry is highly competitive, with potential competition from emerging aircraft leasing companies and other market participants, which could adversely affect financial results[121] - The concentration of aircraft manufacturing among a few manufacturers poses risks related to delivery delays and market conditions, potentially affecting lease rates and aircraft values[98] - Manufacturing delays from major suppliers like Boeing could negatively impact cash flow and results of operations, as seen with the suspension of Boeing 787 deliveries[126] - The company anticipates that restructuring or terminating leases due to lessee financial difficulties may result in less favorable lease terms and reduced revenue[110] Cybersecurity and Governance Risks - Cyberattacks pose a risk to the company's IT systems, potentially leading to material disruptions and loss of sensitive information, which could harm business operations[131] - GE currently owns approximately 45% of the company's outstanding ordinary shares, and future sales by GE may negatively affect the market price of these shares[140] - The company may face difficulties in enforcing judgments against its directors and officers in the United States due to its incorporation in the Netherlands[136] - The financial instability of aircraft manufacturers could impact the delivery of aircraft and engines on order, negatively affecting cash flow and operational results[123] Taxation and Financial Reporting - The effective tax rate may be impacted by the division of earnings among different tax jurisdictions, which could materially affect financial results[145] - Irish corporate income tax rates are 12.5% on trading income, 33% on capital gains, and 25% on other income, with expectations that most Irish income will be treated as trading income[146] - The EU Anti-Tax Avoidance Directive may lead to changes in the effective tax rate in future periods[148] - The U.S. Corporate Alternative Minimum Tax (AMT) could impose a 15% minimum tax on adjusted financial statement income for corporations with significant average annual income[151] - The company may fail to qualify for benefits under income tax treaties, which could result in increased U.S. federal and state taxes[152] - The OECD's Base Erosion and Profit Shifting (BEPS) initiative may lead to a global minimum effective tax rate of 15% for groups with global turnover exceeding €750 million, potentially increasing the effective tax rate[154]