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AerCap Holdings N.V. (NYSE:AER)
Q4 2019 Earnings Call
Feb 13, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the AerCap's Fourth Quarter and Full Year 2019 Financial Results Call. 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.

Joseph McGinley -- Head of Investor Relations

Thank you, operator, and hello, everyone. Welcome to our full year 2019 conference call. With me today is our Chief Executive Officer, Aengus Kelly; and our Chief Financial Officer, Pete Juhas. 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. AerCap 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 AerCap's earnings release, dated February 13, 2020. A copy of the earnings release and conference call presentation are available on our website at aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay. We will shortly run through our earnings presentation, and we'll allow time at the end for Q&A. As a reminder, I would ask that analyst limit themselves to one question and one follow-up. I will now turn the call over to Aengus Kelly.

Aengus Kelly -- Chief Executive Officer & Executive Director

Thank you, Joe, and thank you for joining us for our fourth quarter 2019 earnings call. I am delighted to report record earnings per share of $8.43. In the fourth quarter, AerCap generated $2.34 of earnings per share, a 44% increase over Q4 2018, continuing our long track record of consistent earnings growth. During the year, the AerCap team executed 353 aircraft transactions, which included 192 lease agreements, 65 aircraft purchases, and the sale of 96 midlife and older aircraft. This unmatched scale of activity demonstrates the breadth and depth of AerCap's relationships with airlines, manufacturers and investors around the world. We enter 2020 in a position of strength. We have $40 billion of contracted future lease rents. For the next three years, over 97% of our lease rents are already contracted. Our average lease does not expire until the third quarter of 2027. All of this gives us tremendous visibility into our future cash flows. Moreover, today, new technology aircraft make up 58% of our fleet. That is the highest percentage of new technology aircraft of any major lessor in the world.

AerCap has taken delivery of more new technology aircraft than any other aircraft lessor or airline in the world. As a result, AerCap is helping its customers meet their environmental and sustainability objectives. Our new technology fleet today is concentrated on the most in-demand variants: the A321, A320neo, the A321neo, the Boeing 787-9 and A350-900. The average age of our new technology aircraft is approximately two years, and we know that these aircraft will form the core of the world's passenger fleet for decades to come. Our current technology fleet is also concentrated on the most liquid aircraft types, the Boeing 737NG, the A320ceo, and among the wide-body, the A330 and 777, which remain the mainstay of global long-haul routes. But very importantly, the average age of our current technology fleet is 11.3 years, with our 777 fleet being over 13 years. You can see this in the slide in the deck. We do not have young current technology aircraft because we have focused all of our new orders for the last decade on new technology aircraft. We know that over the next decade, current technology aircraft will be in demand, but will gradually become less so, as the portion of new technology equipment grows.

Given the average age of our current technology aircraft, AerCap is the best positioned of any major lessor for this trend, and we've clearly been positioning the company for the last seven years with this in mind. This is one of the key competitive advantages of our capabilities and scale. AerCap sees trends before anyone else, and crucially, we act on these trends. During 2019, we continue to actively manage our fleet by purchasing new technology aircraft and selling our midlife and older assets. In the fourth quarter of 2019, we took delivery of 14 A320neo, two 787-9, four Embraer E2 and a 350-900. We also sold 28 of our owned aircraft.

For the full year, we sold 88 owned aircraft that had an average age of 15 years. We sold these aircraft for an average gain on sale of 10% over our carrying value. This represents a 35% premium to their book equity value. These sales have resulted in a further reduction in the average age of our portfolio to 6.1 years and an increase in our average remaining lease term to 7.5 years, which is one of the longest in the industry. Furthermore, these sales allow us to recycle capital into more accretive opportunities.

Turning to the coronavirus. It is, of course, affecting our Chinese customers, their staff, families and our own employees in China, and our thoughts are with those who are suffering from the impact of the coronavirus. These airlines have been our partners for decades, and they will be our partners for decades to come.

We will help them where we can through this very challenging period. In terms of AerCap's exposure to Chinese customers, approximately 2/3 of our revenue comes from the big three state-owned carriers. As with prior academics -- as with prior epidemics and given the efforts of the Chinese state, we do expect that traffic will return to normal later in the year. On the MAX, we did not take any deliveries in Q4, and we await further information from the FAA and Boeing with regards to the safe reentry of the aircraft into service. Boeing currently estimates that the MAX will return to service in mid-2020. On demand, our utilization rate in the quarter was 99.8% as demand for our aircraft remains high. No doubt the MAX delays, the coronavirus will impact RPK growth in the short term, but we expect that over time, these issues will be resolved. At our Capital Markets Day -- day in November, we mentioned that large sales of stock and stock options on AerCap's stock by two legacy shareholders, AIG and Waha led to elevated volatility in our share price over the past several years.

Second of these shareholders, Waha Capital completely exited its position in early December, which removes an overhang in our stock. Going forward, we would hope to see a greater correlation between the consistent performance of our business and the market value of our company. We will, of course, continue to take advantage of that mismatch, if it persists, and we announced a further $250 million share repurchase program today.

In summary, this was another strong quarter for AerCap with Q4 2019 EPS up 44% over Q4 2018. Our consistent growth in earnings is the result of our platform, our processes and our relentless focus on execution. We will continue to manage this company to deliver long-term value for our investors as we look to the decade ahead. With that, I will hand over to Pete for detailed review of our results.

Peter L. Juhas -- Chief Financial Officer

Thanks, Gus. Good morning, everyone. AerCap produced a very strong performance in the fourth quarter and a record performance for the full year. As Gus mentioned, in the fourth quarter, we generated earnings per share of $2.34, an increase of 44% over the fourth quarter of 2018. Our net income for the quarter was around $310 million, a 33% increase over the fourth quarter of 2018. For the full year, our net income was $1.146 billion, an increase of 13% over 2018, and our EPS was a record $8.43, an increase of 23% over the prior year. Our utilization rate was very high at 99.8% for the fourth quarter. We were upgraded to BBB flat by S&P in October, and we're on positive outlook from Moody's. So we continue to have an upward rating trajectory. Our credit metrics continue to improve, and we ended the year with a debt-to-equity ratio of 2.6:1. We've also reduced our secured debt to total assets to around 22%, which is down from 25% at the beginning of the year, and we expect to get down below 20% during the course of this year. Our average lease assets increased by $1.4 billion over the fourth quarter of 2018 as a result of new deliveries. Our book value per share continued to increase at a strong double-digit pace and was up 15% over the past year to $72.08 as of December 31.

We've continued with our share repurchase program. And in the fourth quarter, we bought 3.4 million shares for just under $200 million. For the full year 2019, we bought 12 million shares for a total of $607 million. And today, we also announced a new $250 million share repurchase program that will run through the end of June. So altogether, it was a very strong quarter that reflects our consistent operating performance, the power of the AerCap platform and our disciplined approach to managing our assets and allocating our capital.

Turning to slide seven. Our total revenues for the fourth quarter were $1,257 million, an increase from $1,220 million last year. This was primarily driven by higher maintenance revenues as a result of higher end of lease compensation that we received during the fourth quarter, but we also had higher lease rents and a higher gain on sale of assets in the fourth quarter than in the fourth quarter of 2018. Our other income was higher than normal in the fourth quarter of 2018 because of some inventory sales that we had that quarter.

Turning to slide eight. For the fourth quarter, our net interest margin was $747 million, which was roughly flat year-over-year. Our average cost of debt for the fourth quarter was around 3.8% before debt issuance costs and fees and other impacts of around 40 basis points. And when you clear those costs and fees, it was around 4.2% for the fourth quarter, which is the same as the previous quarter. The slight increase in the fourth quarter of 2018 was driven primarily by the roll-off of fair value of debt related to purchase accounting. Going forward, we expect the average cost of debt to trend down somewhat as we continue to replace older, more expensive debt with new debt at a lower cost.

Our net spread was 7.9% for the fourth quarter and our net spread less depreciation was 3.2%, which is the same as in 2018. The average age of our fleet continued to decrease during 2019 to 6.1 years by the end of the year. We achieved this through a combination of purchases of new technology aircraft and sales of older current tech aircraft.

The average age of our new tech aircraft, which represent 58% of our fleet today, is 2.3 years, while the average age of our current tech fleet is 11.3 years. Our average main lease term has continued to increase and is now at 7.5 years, one of the longest in the industry.

Turning to slide nine. Our net gain on sales was around $49 million for the fourth quarter, an increase from the fourth quarter of 2018. During the quarter, we sold 28 of our owned aircraft, including 17 narrow-bodies and 11 wide-bodies, with an average age of 15 years for a total of $729 million. Our gain on sale margin was around 7% for the quarter. For the full year, we sold 88 of our owned aircraft, again with an average age of 15 years, for a total of just over $2.1 billion and an average gain on sale of around 10%. On the purchasing side, in the fourth quarter, we purchased 21 new technology aircraft for total capex of $1.3 billion. And for the full year, we took delivery of 65 aircraft for a total capex of around $4.6 billion.

Now turning to slide 10. I mentioned that during 2019, we sold our aircraft to an average gain on sale of around 10% on an asset basis, which equates to around a 35% premium to book equity. On average, the aircraft that we sold were 15 years old, and these were aircraft that we wanted to exit for portfolio management reasons. At the same time, we were able to buy back our own stock at an average discount to book value of 26% during the year. So we continue to take advantage of this valuation arbitrage to reinvest in our own portfolio of aircraft that was made better as a result of the sales. And of course, this had a positive impact on our EPS and on our book value per share.

Turning to slide 11. Our SG&A expenses were around $71 million for the fourth quarter, which was about the same as in 2018. For the full year 2019, our SG&A expenses were around $268 million, which is a 12% reduction from 2018.

This includes all-stock compensation expense, and it's only 5.4% of our total revenues, which illustrates the efficiency of our platform. Our maintenance rates expense was around $25 million for the quarter, down from about $36 million in 2018. This was primarily driven by the lower maintenance rates asset balance as that asset continues to roll off and is also affected by the level of maintenance activity during the quarter. Our other leasing expenses were about $62 million for the quarter, a decrease from $90 million in 2018, and this was due to lower expenses related to these terminations compared to that prior year period. The asset impairments to the fourth quarter all related to these terminations in aircraft sales and were more than offset by maintenance revenue recognized upon termination.

On slide 12, we continue to maintain a very strong liquidity position. As of December 31, we had available liquidity of $8.2 billion, which includes our cash, our revolvers or other undrawn facilities and our contracted sales. In October, we amended and extended our main revolving credit facility. We kept the size of that facility at $4 billion and extended the maturity until 2024 with better pricing and improved commercial terms. Our total cash sources of $11.3 billion or 1.5 times of our cash needs over the next 12 months, which amounts to excess cash coverage of just under $4 billion.

Turning to the next slide. Our shareholders' equity at the end of December was $9.315 billion and our book value per share was $72.08 compared to $62.95 at the end of 2018, that's a 15% increase over the past year.

And over the past five years, we've grown our book value per share by an average of 14% a year. Through our operating performance and our capital allocation strategy, we can continue to generate strong growth in book value per share year after year. So in summary, we had another very strong quarter and a record year in 2019 with EPS up 44% for the fourth quarter and 23% for the year. Our utilization rate was high. Our fleet continues to improve with the addition of new tech aircraft. We are placed far out into the future, and we continue to sell used aircraft at attractive prices. If we look back to 2015, over the past four years, we've increased our EPS from $5.72 to $8.43. We’ve reduced our leverage from 2.9:1 to 2.6:1. We've gone from non investment-grade rating to investment grade. We've reduced our average age from 7.7 years to 6.1 years. And we've increased the new tech portion of our fleet from 12% in 2013 to 58% today. Fundamentally, what that means is that today, we have a much more profitable company with a much better credit profile. We're entering 2020 in a position of strength with over $8 billion of liquidity and the most advanced fleet of new technology aircraft in the industry. And we believe this positions us well for the year and for the new decade ahead. With that, now I'll turn it over for Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We will now take our first question from Jamie Baker from JPMorgan. Please go ahead.

Abdulrahman S. Tambal -- JP Morgan Chase & Co -- Analyst

Morning. This is Abdul Tambal on for Jamie Baker. Just a quick one for me. Could you comment on the level of support the Chinese government can provide for the airlines in the region? And have the airlines asked for a rent relief at this point?

Aengus Kelly -- Chief Executive Officer & Executive Director

Sure. The Chinese government has said that they are waiving taxes and other duties associated with fares. That's public knowledge. I'm sure like they've stated that they've encouraged the financial institutions to work with all Chinese companies in the economy to help them through this difficult period. In terms of our own participation in that, our customers, they've been with us for over 40 years, some of them, and of course, we're going to try and then help them through this period. They've been around for 40 years, I have every confidence they’re going to be around for another 40 years.

Abdulrahman S. Tambal -- JP Morgan Chase & Co -- Analyst

Got it. Thank you. And just a quick follow-up. So what are Moody's and Fitch waiting for to upgrade you? Since -- haven't you already met their respective hurdles? And if so, is it just a matter of time at this point?

Aengus Kelly -- Chief Executive Officer & Executive Director

Well, look, we have a good dialogue with all the rating agencies. We speak to them all frequently. So as you know, we're on positive outlook from Moody's right now. So we're hopeful that we'll get an upgrade from them sometime soon. With Fitch, we've also had good discussions, and we believe that based on their metrics that we do deserve an upgrade today. We think we meet all of their metrics. So you'd really have to ask them what they're waiting for. But from our perspective, we will continue to push for an upgrade because we do think it's warranted. And certainly, if you look at how we manage the leverage of the balance sheet over the course of 2019 and into the year-end as well as the discipline around that, we firmly believe that we've met the metrics for Fitch.

Abdulrahman S. Tambal -- JP Morgan Chase & Co -- Analyst

Got it. Thank you very much.

Operator

We will now take our next question from Moshe Orenbuch from Credit Suisse. Please go ahead.

Moshe Ari Orenbuch -- Credit Suisse -- Analyst

Great. Thanks. Guys, as you think about the opportunity once Boeing does start delivering the MAXs. How do you think about what's best for you and your customers? Do you want to be at the front end of that? Can you get better economics by being more flexible? Can you talk a little bit about what you're thinking about in that perspective?

Aengus Kelly -- Chief Executive Officer & Executive Director

Sure. Well, there are -- most of our, I think we had leased over 50% of our order book already. So most of our leases are contracted with customers that are going to deliver for the first couple of years after the aircraft returns to service. That's assuming that all the customers want the airplanes. I imagine that the majority of them will continue to want the aircraft. I believe that it will be a good airplane when it's returned to service. And in terms of opportunity, I just don't see the situation where Boeing will have that many white tails. I mean the only situation with the white tails is when the lessors have not leased an airplane, and it's being built. And that's kind of their own fault really and they're going to have to place that in a hurry. But Boeing won't have white tails to spare because they're so far behind because of the production halt on the deliveries to customers who needed them to meet their growth targets, particularly if you're an all-Boeing customer. If you had expected to receive 20, 30, 40 of these airplanes, and you only receive half that amount, Boeing would have an obligation to you, I believe, to try and give you any additional slots that became free. So I don't envisage a huge amount of opportunity at the front end, once it comes into service. Now, will there be opportunity further out? Perhaps, there might be. And of course, we'll always be talking with Boeing about opportunities like that.

Moshe Ari Orenbuch -- Credit Suisse -- Analyst

Got it. And Peter, I guess, since your lease rates are contracted and your depreciation is pretty much set, the fact that interest rates have been lower. It should be -- you talked about your spread being stable and some -- can you kind of frame out what that benefit could be in the cost of funds over the course of 2020?

Peter L. Juhas -- Chief Financial Officer

Sure, Moshe. So look, I think that we'll continue to have an average interest rate for the year of around 4.2%, which is what I said at the Capital Markets Day. So I think that's probably still our best estimate. We have about $3 billion of funding to do this year, and so that's going to be done at lower rates than that average amount. So it's going to start bringing it down, but we've got $29 billion of debt in total. So it takes time for that to roll through, but we should still see some steady decrease in that number over time. But just because the $3 billion is a small percentage of the overall 29%, it takes time for that -- for you to really see much of an effect.

Aengus Kelly -- Chief Executive Officer & Executive Director

I think it's very important, Moshe, when you look at the net spread, you have to factor in we could have held on to those aircraft that we sold or we could have taken the sales proceeds and bought additional airplanes. That may well have elevated the net spread in the near term, but may have been the wrong things to buy in the long term. And so what we did instead of doing that, we bought our own stock. And as Pete said, you've seen that our earnings per share from 2015, where the company has a much better portfolio with the fully integrated companies, lower leverage, higher credit ratings, and the earnings are up from $5 and change to $8.43 and a much better company as it were. So they are all part of how to think about the net spreads. And also it's worth noting, once again, of course, that when we give you an interest number, it includes all fees and costs associated with terminations. So the cash coupon is obviously less than that.

Moshe Ari Orenbuch -- Credit Suisse -- Analyst

Great. Thanks. I certainly understand the impact on the net spread of buybacks. Thanks

Operator

We will now move to our next question from Catherine O'Brien from Goldman Sachs. Please go ahead.

Catherine Maureen O'Brien -- Goldman Sachs -- Analyst

Good morning, everyone. Thanks for the time. So from data that we have, 2019 looks like it actually had the highest number of aircraft coming back into the market from airline defaults we've seen in quite some time, while we didn't see any impact on AerCap's portfolio lease yield. So just two questions on this. First, is that more a function of your risk department doing a good job avoiding the majority of situations? Or is it really, overall supply being tight to the MAX grounding and other OEM delays? And then second question on this is, have all these planes already been absorbed probably by the market? Or there is still some aircraft out there that needs to be placed, that could impact supply and demand this year? Thanks.

Aengus Kelly -- Chief Executive Officer & Executive Director

Catherine, first of all, I would say that the capability of AerCap's platform is unrivaled, and that's proven time and time again. But what is also true is that, no doubt, airline defaults make headlines, but they don't necessarily make big charges on highly diversified extraordinarily capable aircraft leasing platforms. And so if you go back over the last 15 years, going through the worst downturn we've seen ever in aviation following the financial crisis, fuel being at $146 a barrel, the Eurozone crisis, the list goes on. Our credit costs have averaged just over 1% of lease revenue. That hasn’t historically been the primary driver of return in AerCap's business. So I think it's very different. You've got to really separate the world's leading platform and AerCap from anyone else when you think about capabilities to deal with defaults. And again, in 2019, as you've seen in previous years, we tend to outperform any issues like that.

Catherine Maureen O'Brien -- Goldman Sachs -- Analyst

Okay, understood. And then, we've been talking about the competitive backdrop in pricing in the sale leaseback market improvement for the last couple of quarters now. Can you give us any color on how far we are off the bottom in that market? And if you're getting any closer to where AerCap would consider participating? Thanks

Aengus Kelly -- Chief Executive Officer & Executive Director

Catherine, we did actually come close there. In January, we did come close to a sale leaseback on some A350-900s. We didn't quite get there in the end. But so there was certainly much closer than we had been so that's a positive, and we'll see how this year unfolds. Having said that, of course, we had pretty much everyone involved in the aircraft financing business in Dublin, the several thousand people here for the Airfinance Conference two weeks ago. And there, you could see that there was still, of course, extremely buoyant and stable demand for investments in aircraft.

Catherine Maureen O'Brien -- Goldman Sachs -- Analyst

Great, thank you for the time.

Operator

We will now take our next question from Helane Becker from Cowen. Please go ahead.

Helane R. Becker -- Cowen and Company -- Analyst

Thanks very much, operator. Hi, everybody and thank you very much for the time. So two I think, relatively easy questions. One is, do you still -- I think at Investor Day, Pete, you talked about $1 billion in aircraft sales. Is that still your target?

Peter L. Juhas -- Chief Financial Officer

Yes. Helane, that's still our best guess for the year. I mean, I would say, if conditions continue, we as Gus mentioned, at the Airfinance Conference a few weeks ago here, there was a huge interest continue to be a huge interest in used midlife and older aircraft. So the demand continues to be there. The ABS market continues to be very strong. So from a financing side, buyers can get financing attractive financing for these portfolios. So I think that if that continues throughout the year then could it be more than $1 billion, it could. But at this point, we're only in mid-February. So I would say $1 billion is still probably our best guess for the year.

Helane R. Becker -- Cowen and Company -- Analyst

Okay. And then my other question really has to do with the delays. See, you're more an Airbus than a Boeing-focused firm. Although, obviously, you do have the MAX on order and the 787s and so on. But two questions with regarding to that. With all the delays from the OEMs, is the core EPS target that you talked about at Investor Day still intact? A; and B, the airlines get to go back to Boeing and ask for compensation. Do you guys get to do the same thing?

Aengus Kelly -- Chief Executive Officer & Executive Director

Why don't I take the first part of that, just on the EPS target. Yes, so our guidance is unchanged. We still think it will be between $7, $7.40 for the year, excluding any gain on sale.

Peter L. Juhas -- Chief Financial Officer

So Helane, of course look, the sharper split pretty much down the middle. We're actually 50% Boeing, as I just touted it up there on the appendix slide of all our airplanes. But of course, you can go back to Boeing. And of course, we have losses associated from the MAX. And we will ensure that the shareholders of AerCap do not bear those losses, and that we will receive adequate compensation from Boeing in connection with those costs that we are suffering and what format that takes. So I don't mind what currency it is, as long as I can cash that currency in.

Helane R. Becker -- Cowen and Company -- Analyst

Right, exactly. That makes sense. Okay. Well, thanks, guys. I appreciate the help.

Operator

We will now take our next question from Ross Harvey from Davy. Please go ahead.

Ross Harvey -- Davy -- Analyst

Good afternoon guys. Three questions for me please. The first one is partly related to a question earlier, but having set a very strong base on the core EPS from 2019. Just wondering what specific factors within the cost lines we should expect to see move such that the figure would come in broadly flat year-on-year in 2020? Secondly, in relation to marketing, so obviously, you've got 97% of the lease rents through end 2022 contract and this is case at the CMD. It sort of implies you’ve got a conservative time horizon on a lot of your forward placements, clear benefits for revenue visibility. But in light of the recent OEM delays, would you be minded to adjust that at all in the future? And finally, on the exercising of the A320neo family aircraft options, can you shed any light on what particular variance you're attracted to within that? And the reasons behind it?

Aengus Kelly -- Chief Executive Officer & Executive Director

Sure. Well, Ross, let me take the first one. So and if you look at our 2019 performance, excluding gains on sales. So if we take that out, that's about $7.20, which puts us roughly in the range for 2020 in the middle of that range that I gave before of $7 to $7.40. And when we look at what's going to happen with the overall balance sheet during the course of the year, given these delays, we expect that it will be roughly flat. So there aren't really any big movements on the cost side. SG&A, I think, we talked about before, but I think that will continue to run at maybe $65 million to $70 million a quarter. The depreciation rate, that will be, as I said at the Capital Markets Day, I still expect it will be around 4.6%, 4.7% for the year. And average interest rate, as I said before to Moshe, around 4.2%. So I don't think -- you're not going to see any major changes in any of those items during the course of the year. The big thing that can swing, obviously, is leasing expenses and maintenance revenues, right? Those are the two things that can swing a lot, and some of that is timing, but other parts, it's permanent benefits that you get. So that's what I would say for the year.

Peter L. Juhas -- Chief Financial Officer

And Ross, on our leasing strategy of placing airplanes far out. That's a function of our capability as an aircraft lessor to be able to do that. So we'll continue to do that to place well into the future. In terms of the option, it was focused on the A320 and A321 variant.

Ross Harvey -- Davy -- Analyst

Okay, Chris, thank you very much.

Peter L. Juhas -- Chief Financial Officer

You're welcome.

Operator

We will now take our next question from Michael Linenberg from Deutsche Bank. Please go ahead.

Koosh Rohit Patel -- Deutsche Bank -- Analyst

Hey, guys, this is Koosh Patel. Just quick question here. So one of your largest competitors recently announced that they are committing $6 billion to proactively work with their customers as they deal with the coronavirus. Are you in a position where you may consider stepping up to do something similar? Or what are your thoughts on that?

Aengus Kelly -- Chief Executive Officer & Executive Director

I think at the moment, our customers are suffering and their families are suffering, and we want to try and support them in any way we can and whatever we can do to help them, we will be able to do. We carry $10 billion of liquidity on hand at any given time. No one carries more liquidity in the world than AerCap. So I'm sure we can more than outmatch anyone, but at this point in time, the focus of the company is helping the partners that have been loyal to this company for 40 years.

Koosh Rohit Patel -- Deutsche Bank -- Analyst

Great. And then just shifting gears here and one on the modeling side as well. On the $7 to $7.40 core GAAP EPS, you guys talked about at the Investor Day, what's driving the contraction in lease yields in 2020 that you guys guided as well?

Peter L. Juhas -- Chief Financial Officer

Well, that trend has been going on, as you look at over the years. I mean, it's really a function of some continued drop in the average age of the fleet. So it's going down. The average age will go down to about six years by the end of 2020. So that's the biggest contributor to that. And part of that is, it's obviously the new deliveries that we're taking that when they come on, like, they're at a lower yield, and that grows over time. But it's also due to the fact that, as Gus mentioned before, the aircraft that we sold, so we're selling mid-life, some higher-yielding aircraft, but we're reinvesting those proceeds in buying back our stock. So that's why you see that effect on the lease yields.

Aengus Kelly -- Chief Executive Officer & Executive Director

And very important, though, what you're seeing is that we've been able to hold the yield, less depreciation and interest constant while using the proceeds to significantly boost earnings per share by taking advantage of the arbitrage of selling our assets at 135% of book equity and buying back the same equity at 76%. So as long as that arbitrage exists, it's something we're certainly going to continue to do. And it's really the geography of the P&L that's being moved, but underneath is a really substantive point is that the quality of the company has improved and the earnings have improved also.

Koosh Rohit Patel -- Deutsche Bank -- Analyst

Got it. Thanks, guys.

Aengus Kelly -- Chief Executive Officer & Executive Director

Sure.

Operator

We will now take our next question from Vincent Caintic from Stephens Inc. Please go ahead.

Vincent Albert Caintic -- Stephens Inc -- Analyst

Thanks for taking my questions. So back on the effects of the coronavirus and this is kind of going to be maybe a broader question, but sort of I fully expect this to be a short-term phenomenon. But what sort of things, I guess, should we be paying attention to, in terms of maybe risks and opportunities? So to the extent that maybe it's versus others, are there opportunities for you to step into other financings. And if kind of if you do and give us a history lesson in past epidemics, what has happened, and how you sort of -- what's the challenges have you seen in sort of maybe even what opportunities have you seen if other, say, liquidity providers, have had issues with this? Thanks.

Aengus Kelly -- Chief Executive Officer & Executive Director

Look, I think, thousands of people have died. I'm not sure I necessarily want to talk about opportunities that arise from something like that. What I can tell you is that in the past what we have done is we've worked with our customers. We know that China is the future. Those customers that we have will be with us for a long, long time to come. They're going through an extraordinarily difficult time right now, but they all come through. And what I expect to see is what we've seen in the past when customers get into some difficulty is that we'll see we'll probably defer some rents given that their revenue line has obviously fallen significantly, and you'll probably defer rents for a month or two to help them out on a case-by-case basis. But that will be the focus of our efforts is how can we help our customers through this period rather than profit from us.

Vincent Albert Caintic -- Stephens Inc -- Analyst

Okay, understood. Thank you. And then the second question on that then, if you were -- understanding that this is hopefully a short-term phenomenon, the -- if you were to defer rents, does it actually show up on your lease [Indecipherable] near term? Or do you continue to accrue that and then eventually collect on those rents? Thank you.

Aengus Kelly -- Chief Executive Officer & Executive Director

Yes. What you'll normally do with that if you do defer a rent and that will be case-by-case basis, and that will just be a receivable that will be repaid over time. And that's typically that's always been the case. I mean at the year-end, our total receivables for the entire company was $47 million, and now it's for the entire business. And in the past, when our partners have had issue for whatever reason, we have worked with them, and it gets repaid pretty promptly.

Vincent Albert Caintic -- Stephens Inc -- Analyst

Okay, great. Thanks.

Operator

[Operator Instructions] We'll now take a follow-up question from Catherine O'Brien from Goldman Sachs. Please go ahead.

Catherine Maureen O'Brien -- Goldman Sachs -- Analyst

Thanks for the follow up. Just one quick modeling one. So at the Investor Day, I think you guided to $4.2 billion in expected capex this year. And I was just wondering, is that number still intact? And if so, how much of that is driven by MAX deliveries? Thank you.

Aengus Kelly -- Chief Executive Officer & Executive Director

Sure, Catherine. So we if you look at the appendix slides, you'll see that we moved out our estimates of MAX deliveries for the year. So now we're only assuming four aircraft delivering. And so that really takes our capex for the year down to about $3.3 billion is our estimate for the year. Again, look, obviously, there is a lot of uncertainty around those MAX deliveries, both this year and next year. So we'll have to see how that plays out, but that's our best guess at the moment.

Catherine Maureen O'Brien -- Goldman Sachs -- Analyst

Okay, got it. Apologies for not having gone through appendix yet. Thank you.

Operator

As there are no further questions, I would now like to hand the call back to our speakers for any additional or closing remarks.

Aengus Kelly -- Chief Executive Officer & Executive Director

Thank you very much all for joining us for the full year 2019 results. In closing, with another strong quarter of earnings, with EPS up 44%, and this has been achieved through the strong leasing capabilities of AerCap, disciplined approach to portfolio management and proactive risk management. We look forward to speaking to you all in three months time. Goodbye.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Joseph McGinley -- Head of Investor Relations

Aengus Kelly -- Chief Executive Officer & Executive Director

Peter L. Juhas -- Chief Financial Officer

Abdulrahman S. Tambal -- JP Morgan Chase & Co -- Analyst

Moshe Ari Orenbuch -- Credit Suisse -- Analyst

Catherine Maureen O'Brien -- Goldman Sachs -- Analyst

Helane R. Becker -- Cowen and Company -- Analyst

Ross Harvey -- Davy -- Analyst

Koosh Rohit Patel -- Deutsche Bank -- Analyst

Vincent Albert Caintic -- Stephens Inc -- Analyst

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