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AerCap Holdings N.V. (NYSE:AER)
Q1 2021 Earnings Call
Apr 28, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, please standby. Good day and welcome to the AerCap Holdings NV Q1 2020 Financial Results Conference Call. [Operator Instructions].

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 First Quarter 2021 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 not 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 April 20, 2021. A copy of our 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 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 Aengus Kelly.

Aengus Kelly -- Chief Executive Officer and Executive Director

Good morning, everyone. And thank you for joining us for our first quarter earnings call. I'm pleased to report a strong quarter of earnings with $228 million of net income or $1.76 per share. Though there are still many challenges facing the aviation industry, we continue to see an improving environment with significant momentum in air traffic recovery in certain regions of the world. And airline is looking to the future with increased confidence as evidenced by our strong leasing performance in the first quarter. It is a testament to the focus and commitment of the AerCap team that during the first quarter of this year, we were able to lease 60 aircraft, including 28 wide bodies. A quarterly record for AerCap.

This was accomplished despite the pandemic and the efforts required by our team to complete the GCash due diligence, negotiate the GCash transaction, and raise $28 billion of funding. So, clearly the first quarter was an exceptional one for AerCap. As we announced the GCash transaction, we believe that this is the right acquisition, at the right time in the cycle, to create value for all our shareholders. As we mentioned in our announcement, we expect the transaction to close in the fourth quarter of 2021. Until then, we will continue to work hard to make sure we are positioned to hit the ground running from the start.

I'm pleased to report that we recently closed $28 billion of funding commitments with our banking syndicate related to the transaction, consisting of a $19 billion bridge loan, a $5 billion term loan, and importantly, we have also secured an additional $4.3 billion revolving credit facility, which will further enhance the financial strength of the combined company.

Now as I mentioned above, we firmly believe consumer demand will return quickly once markets reopen. This is, of course, tied to the successful rollout of the various vaccination programs which unfortunately have not been smooth in some parts of the world. That said, we continue to see green shoots of recovery in a number of regions. The US has seen demand for air travel gain significant momentum in recent weeks, translating into traffic of around 65% of pre-pandemic levels. This recovery is being led by the leisure sector, but with business and international travel to come, that should move higher over the course of the year as businesses reopen. Many of you will have heard more positive commentary from the US majors in the past couple of weeks which echo what we are hearing in other regions, too.

We are seeing renewed strength in domestic travel in Asia where the traffic levels in a number of countries have surpassed those of 2019, including China, where we're now at 96,000 weekly flights or a 116% of pre-pandemic levels. Russia, comparatively, it's 11,300 flights or a 101%. Vietnam, 6,000 flights, 125%. South Korea, 3,700 flights and 127%. Together these countries account for 115,000 weekly flights. This is equivalent to the US market of 116,000 a week. In Europe, the environment remains relatively weak, as the slow start of the vaccine rollout, coupled with a fourth wave in certain countries has led to further travel restrictions and related quarantines. Only Greece and Turkey continue to flight levels in excess of 50% of 2019 levels. However, positive developments and vaccine availability in the coming weeks and the agreement of the European Union to put in place a green travel certificate in time for the summer will spur improvement in the European market.

Switching back to AerCap. We continue to see greater levels of demand and activity from our customers. As I mentioned, we signed 60 aircraft lease agreements in the quarter, with airlines from 15 countries, the highest in 18 months. And this compares to 97 lease agreements for all of 2020. In fact, 28 of the 60 lease agreements in Q1 were for wide-body aircraft. A record number of quarterly widebody leases. This level of activity reflects a clear pickup in demand and confidence. I believe there are two key themes emerging from our conversations with customers. The first is that our confidence in the return of travel demand is strong and growing. And most see it simply as a matter of timing. The second is that lessors will continue to be the part of choice for aircraft financing.

So, on the first point, there was an abundance of evidence, to show that once restrictions are eased, consumers react accordingly. The vaccine rollout is driving consumer confidence in the US, China and the UK, where consumers are enjoying additional freedoms. This consumer confidence will inevitably spread to other regions as further progress is made around the vaccine rollout, giving governments the ability to roll back on restrictions and the airlines the confidence to add greater levels of capacity. Over one billion vaccine doses have already been administered, with the latest weekly figures running at over 100 million doses per week and rising. This will be equivalent to approximately 1 billion doses every 7-8 weeks. The acceleration of this rollout provides clear hope that an end will soon be in size.

The second thing we are seeing is how aircraft leasing is growing in market share. And we believe that aircraft leasing will continue to grow to over 50% of all aircraft financing. Airlines see the clear benefits of leasing which frees up capital allows a faster transition into new technology and eliminates residual value risk. This demand for aircraft leasing will inevitably help the future aircraft placements, though we have no availability from our order book until 2023. So, as we look forward, the vaccine rollout gathering pace, the health of our airline customers improving, and the demand for travel continuing to be strong, we have significant reason to be optimistic about the future. No doubt, we are in unprecedented times, but as you can see from the actions AerCap has taken to date and the actions we will continue to take that we are focused on delivering on behalf of our shareholders.

With that, I will hand the call over to Pete for a detailed review of our financial performance.

Peter Juhas -- Chief Financial Officer

Thanks, Gus. Good morning, everyone. Our total revenues for the first quarter were $1.95 million, compared to $1.238 million for the first quarter of 2020. Basic lease rents were lower in the first quarter, primarily as a result of airline restructurings and aircraft transitions. This includes the impact of cash accounting, which was $100 million for the quarter. Our cash collection rate was around 80% for the first quarter and our deferral balance modestly increased by 5% to $514 million as of March 31. The first quarter tends to be seasonally slower for airlines because it's the winter season in the Northern Hemisphere. And of course, this year, we've had the additional impact of ongoing COVID related travel restrictions in many countries. We expect these metrics to improve over the course of the year as the vaccine rollout continues and as passenger traffic recovers.

We are currently seeing progress on a number of major airline restructurings. As these restructurings are completed, we expect to see these airlines come off of cash accounting during the course of the year. LATAM is one of the airlines that's making progress on its restructuring and emergence from bankruptcy. We recently agreed to sell some of our unsecured claims in the LATAM bankruptcy and the proceeds of that sale will ultimately be determined by the bankruptcy court in the LATAM case.

Turning back to the P&L. Our maintenance rents were $183 million in the first quarter, which was an increase from $134 million in 2020. The increase was primarily due to higher maintenance revenue resulting from lease terminations. In terms of aircraft sales during the first quarter, we sold nine of our owned aircraft for a total of $184 million. The average age of the aircraft we sold was 18 years old. And our net gain on sales for the quarter was $5 million, demonstrating our sound carrying values. Other income was $19 million for the first quarter and the increase over the first quarter of last year was mainly due to higher interest income.

Turning now to expenses, our total expenses were $827 million for the first quarter, a decrease from $916 million for the first quarter of 2020. Our depreciation and amortization expense was $397 million in the first quarter, a decrease from $416 million last year, primarily due to a decrease in average lease assets. Interest expense was $281 million in the quarter, down from $319 million last year. That was due to a lower average cost of debt and lower debt balance, as well as lower mark to market expenses this year. We had asset impairments of $16 million in the first quarter, which related to lease terminations and asset sales and were fully offset by corresponding maintenance revenue. Other leasing costs were $40 million for the first quarter, a decrease from $87 million in 2020 and that was mainly due to lower lessor contributions or top up expenses during the quarter. Our SG&A expenses were $57 million for the quarter compared to $65 million for the first quarter of 2020, a decrease of about 11%.

Putting all that together, in the first quarter, AerCap generated a net income of $228 million or $1.76 per share. That includes costs related to the GCash transaction, a $25 million pre-tax or $22 million after tax. Excluding those costs, net income for the first quarter was $250 million or $1.93 per share. We continue to maintain a strong liquidity position. As of March 31, our total sources of liquidity were $8.6 billion dollars, resulting in the next 12 months sources to uses ratio of 1.7 times. That remains well above our current target of 1.5 times. Our excess cash coverage also remained high at $3.7 billion.

We continue to maintain a very strong balance sheet. Our leverage ratio is currently 2.5 to 1, which is below our target ratio of 2.7 to 1, and below where we began 2020. Our secured debt percentage continues to remain low at 24% of total assets. We currently have around $26 billion worth of unencumbered assets. Our average cost of debt, excluding debt issuance costs, fees and other impacts was 3.7% for the first quarter.

In January, we raised $1 billion of 5-year senior unsecured bonds with a coupon of 1.75%-the lowest coupon in the company's history. As Gus mentioned, we also completed the syndication process for the bridge financing for the GCash transaction. The $19 billion bridge facility and the $5 billion term loan facility, that were originally provided by Citibank and Goldman Sachs, syndicated to a total of 20 banks and we saw extremely strong demand from banks to participate. At the same time, we also entered into a new 4-year revolving credit facility for $4.35 billion, which will be available upon closing the GCash transaction. We had very strong interest in that facility as well, with a total of 26 banks participating. And I'd like to thank our banking group for all of their strong support throughout this transaction.

So, overall, on the operating side, we had a positive quarter with net income of $250 million excluding transaction expenses and EPS of $1.93. As the vaccine rollout progresses, we're seeing more airlines looking to the future and putting fleet plans in place for the recovery of air traffic. And you can see that reflected in the 60 leases we signed up this quarter. Of course, the biggest news of the quarter was the GCash transaction, which we believe will be a significant positive for our shareholders. And with the syndication of the bridge financing and the submission of the first regulatory approvals, we're making progress toward the closing of that transaction.

And with that, Operator, you can open up the call for Q&A.

Questions and Answers:

Operator

[Operator Instructions] We will begin with Jamie Baker with JP Morgan.

Jamie Baker -- JP Morgan -- Analyst

Hey, good afternoon everybody. So couple of questions from Marc and me. The final slide, operating cash flow estimate for the next 12 months $2.4 billion, that's the same number that it was last quarter. So, obviously, a positive that you affirmed the guide but some might push back on the fact that you didn't increase it with one more quarter rolling forward. So, how does this guide tie into current collections and lease rate trends? What can we read from the -- the 2.4?

Peter Juhas -- Chief Financial Officer

Well, Jamie. We've really assumed a gradual recovery here in terms of air traffic. And so, as we -- as we forecast operating cash flow for the future, we've assumed that our aircraft gradually increase their flying drones [Phonetic] or in the course of the next 12 months, but we haven't built in a rapid recovery there. So, look, I think it could be -- it could be higher than that. It's maybe a conservative projection in that respect. But I think it's -- I think it's a reasonable one for us.

Jamie Baker -- JP Morgan -- Analyst

Okay. And second question, what sort of regulatory, I guess, goalposts or mile markers are you looking for, whatever you need to be, to be clear or be comfortable issuing GCash deal -- deal related debt and have you hedged any of the financing costs? Spreads have obviously rallied as of late. So, just curious why you are not locking in the funding then sooner rather than later?

Yeah, so, Jamie, we've got a number of milestones there. We've got our AGM coming up as you know. We've got -- we're putting in our regulatory approvals. We should have about half of them submitted by the end of May. And so, those are -- those are key things that we're progressing. And as part of those, you are in dialog with some of those regulators before you submit them. So, on the hedging side, we're monitoring the market and we'll look to put things in place at the appropriate time. Okay, thank you very much.

Peter Juhas -- Chief Financial Officer

Sure.

Operator

We'll now move to a question from Ross Harvey with Davy. Go ahead please.

Ross Harvey -- Davy -- Analyst

Afternoon, Gus and Pete. I'm just wondering in advance of the GCash, it's completion, can you comment on your priorities for the AerCap business itself, particularly in regards to leverage levels as the objective simply is to reduce as much as possible? And on sale-leasebacks, I mean are you looking to get meaningfully involved?

Aengus Kelly -- Chief Executive Officer and Executive Director

Well, Ross, I think first and foremost, the priority of the business on an operational -- from an operational standpoint hasn't changed for one minute over the course of the last six months, and the focus is on getting our airplanes leased and getting paid. And I think you saw clear evidence of that in the first quarter by the quantum of aircraft that we were able to sign leases for, it's 60 aircraft. So that will remain front and center of the business every single day. And when we get to closing, of course, we are working closely with the -- with GE to be able to hit the ground running. In reference to sale-leasebacks, I think that would be at the margin, Ross, to be quite honest.

Ross Harvey -- Davy -- Analyst

Understood. Thanks, Gus. Second one, the follow-up. I'm just wondering you highlighted $150 million of SG&A synergies in the -- in the recent 6K. And just wondering can you talk us through that number and whether we should consider benefits and other cost lines? Thanks.

Aengus Kelly -- Chief Executive Officer and Executive Director

Well, Ross, you'll see other benefits in terms of depreciation and things like that coming through. I think you will also see some interest benefits relative to where GCash is today, when we put the financing in place. So you will see it in other lines as well. And that's going to be on the depreciation side. We would expect that to be several hundred million dollars relative to where they are today.

Ross Harvey -- Davy -- Analyst

Brisk. Thank you very much.

Aengus Kelly -- Chief Executive Officer and Executive Director

Sure.

Operator

Now moving to our next question. And that will come from Moshe Orenbuch with Credit Suisse.

Moshe Orenbuch -- Credit Suisse -- Analyst

Great, thanks. You had mentioned that the -- that you're fully leased through 2022, but I guess, is there -- is there some possibility that you'll have, once the deal closes, that there'll still be kind of aircraft that are available, because of the GE business, that would allow you to create some transactions or activity?

Aengus Kelly -- Chief Executive Officer and Executive Director

Sure, I mean when we say we are fully leased, that's the AerCap order book. We don't have anything available until 2023. What with the state of -- where GCash stands on its order book, that's managed separately within the parameters of the sale agreement, purchase agreement, and we'll see then, Moshe, when we get to the post closing, how many airplanes they have left in what time frame and how that positions them to take advantage of trends in the market.

Moshe Orenbuch -- Credit Suisse -- Analyst

Got it. Thank you. And you mentioned the LATAM bankruptcy situation, Pete, could you talk about how -- how that's accounted for, where those assets are, how they're marked and what that might mean when there is a resolution?

Peter Juhas -- Chief Financial Officer

Well, we don't have anything on our balance sheet for that, Moshe, so we haven't accrued anything. Ultimately, I would expect that to come in as other income but -- but as I said, ultimately, it will be decided by the bankruptcy court. I think in terms of amount, it could be several hundred million dollars, but we'd really have to wait and see how that all plays out.

Moshe Orenbuch -- Credit Suisse -- Analyst

So, you're saying it would be all revenue, essentially? Great.

Peter Juhas -- Chief Financial Officer

But again, that's subject to -- it's hard to predict the timing of that and the ultimate amount. I'm just giving you an idea of what it could be.

Moshe Orenbuch -- Credit Suisse -- Analyst

Right. But anything would be more than zero, right?

Peter Juhas -- Chief Financial Officer

Yes, that's true.

Moshe Orenbuch -- Credit Suisse -- Analyst

Very good. Thanks very much.

Peter Juhas -- Chief Financial Officer

Sure.

Operator

We'll now hear from Helane Becker with Cowen. Go ahead.

Helane Becker -- Cowen -- Analyst

Thanks very much, operator. Hi, everybody. Thanks for the time. Did you say how your deferral requests are trending? I think you talked about the cash collections being 80% but have airlines now then stopped asking for further deferrals and are just paying you back?

Aengus Kelly -- Chief Executive Officer and Executive Director

It's a mix there, Helane. As we look around the world at the moment, as you heard the news from the US carriers, during the week, things are going well there. China, things are going well and other parts. But you have to remember the first quarter. Obviously, we had recent events in Brazil and we had a slowdown in Europe post Christmas in January, February, which I know a lot of European countries are still under lockdown. So, in that environment, we had to give a little bit more ground to some of the carriers, but in return for that then we'll always try and keep these deals NPV neutral. So we may have got extensions to our leases as part of those discussions as well.

Helane Becker -- Cowen -- Analyst

Okay. So then would that be included in the portion, maybe as customers that you've restructured leases for, like, is there some percentage that you might have had to restructure lease to that, either lower rates or extensions or would you do extensions in that case? If you are restructuring --

Peter Juhas -- Chief Financial Officer

Of course. I mean we are not talking about big numbers here. I mean, as we said, the total number of the increase in deferrals is $24 million, Helane. It's not a big number in totality.

Helane Becker -- Cowen -- Analyst

Right. Gotcha. Okay, all right. And then, will you be filing documents publicly on the Kuka's? The approvals that you're asking for the regulatory forum, will they be filed, so we'll be able to see what's happening there?

Peter Juhas -- Chief Financial Officer

I think that depends on the jurisdiction, Helane. There are about 20 approvals at the moment that we're expecting to file.

Helane Becker -- Cowen -- Analyst

Okay.

Peter Juhas -- Chief Financial Officer

So, I think it depends on each individual jurisdiction whether that's publicly available or not.

Helane Becker -- Cowen -- Analyst

Okay.

Aengus Kelly -- Chief Executive Officer and Executive Director

And what language it's filed into, Helane. There won't be we English.

Helane Becker -- Cowen -- Analyst

Yeah, I'll need to get Google Translator out. All right, thank you, Have a nice rest of the --

Aengus Kelly -- Chief Executive Officer and Executive Director

[Overlapped speech] push-up on your Kazakh.

Helane Becker -- Cowen -- Analyst

True. Thanks.

Aengus Kelly -- Chief Executive Officer and Executive Director

Sure.

Operator

And now we'll take a question from Vincent Caintic with Stephens.

Vincent Caintic -- Stephens -- Analyst

Hey, Thanks. And first question on the lease rates going forward. So it's nice to see that the net spread expanded 30 basis points quarter-over-quarter. I was curious, with your strong -- the 60 delivery orders you have, or 60 placements [Phonetic] you have, how are the lease rates looking on new deliveries?

And then, when I think about the rent deferrals you have and the repayment of those deferrals, how does that affect your yield since I think we're -- we're in cash accounting here does as all [Phonetic] airlines pay back the rent? Should we just expect the net spread to climb over the next coming quarters? Thank you.

Aengus Kelly -- Chief Executive Officer and Executive Director

Let me answer the first part about the lease rates. So, Vincent, look, as you noted, we move 60 airplanes, a huge number, given the pandemic and the background we are facing, and the other demands on the organization. In terms of the lease rates, of course, look, it's evident that there is demand out there. When an airline takes an aircraft no matter what they pay for us, there is still a lot of cost associated with their committing to crew cost, labor cost, maintenance costs, all those cost are part of taking an airplane. The fact that they're willing to take them means there is confidence out there in the future. Now, as part of that transaction, yeah, there is a variable element to most of these new leases at the beginning for the first 12 months or so, where the rental will move around based on utilization and then following that period we'll go into a fixed rate lease and that varies from -- and that varies from aircraft to aircraft. But it's over the first 12 months or so, where there is variability on the lease rate to facilitate the airlines restarting traffic. Pete, you want to comment on the deferrals?

Peter Juhas -- Chief Financial Officer

Yeah. So, Vincent, on the second one. So, the repayment of the deferrals themselves won't affect -- it won't affect the net spread, because if you think about it in the deferral of cases we have recognized -- we're accruing the revenue in those cases and we're building up a deferral balance. So obviously, as those deferrals get repaid, that's a positive for cash flow, but it doesn't have an impact on revenue and therefore on net spread. What will have an impact on revenue and on net spread is when you have airlines coming off of cash accounting and actually flying these -- flying these planes, because that's obviously impacting revenue today. I mentioned it's about $100 million, right? So, that's going to be the biggest driver, the return of flight for most of those, because obviously those have mostly been airlines that are in bankruptcy or other restructuring, right. And so, as they emerge from those, you'll start to see those revenues come in because there's basically been almost no revenues now.

Vincent Caintic -- Stephens -- Analyst

Okay, that's very helpful. And yeah, I was mixing the deferrals and the cash accounting. So, I appreciate that, and looks good for net spreads. So, second question. So, I had a chance to go through your shareholder circular and I appreciate all the detail there. I just wanted to talk about any incremental thoughts and particularly one of the frequent investor questions I get is on the prior revenue guidance, at least 7 billion, because it seems like if we add AerCap and GCash together that revenue should be at least 8 billion and given it seems like net spreads are doing better. I just wanted to get your thoughts on whether one plus one equals two on the combined revenue side or if there is something else we need to consider? Thank you.

Peter Juhas -- Chief Financial Officer

Yeah, I mean it's not as simple as that, unfortunately, because you have a number of purchase accounting impacts that you're going to have, and also the accounting is just different, the way that GCash and AerCap do it, right, it's not -- it's not apples to apples on everything. And so, I think that's really why we guided to what we did in thinking about it. So you can't -- you can't just some up the two and then -- and say, OK, that's what it's going to be.

Vincent Caintic -- Stephens -- Analyst

Okay, got you. I'll follow up offline, but thanks so much.

Peter Juhas -- Chief Financial Officer

Sure.

Aengus Kelly -- Chief Executive Officer and Executive Director

Okay, no problem.

Operator

Next question will come from Koosh Patel with Deutsche Bank.

Koosh Patel -- Deutsche Bank -- Analyst

Hey, good morning, guys. When we think about the cash accounting balance, what is the view internally on this? Do you guys think that the 100 million is representative of a peak number here? And just following on to that, how do we think about reintegrating this figure into the revenues? What do we think is the possible upside here? Do you think maybe over time we get maybe 60 to -- 60 million of that back? And if you could provide any horizon that you guys are going to have in mind, that will be great too.

Peter Juhas -- Chief Financial Officer

Sure. So I think that the cash will -- we will continue to see impact of cash accounting, I would say throughout this year. But we're going to -- it's going to abate over time, basically. So, I think that 100 million is a reasonable guide for thinking about over the next couple of quarters. But as I said, as the airlines come out and as they -- as those bankruptcies or restructurings are completed, then we're going to see that -- those come back. So, it's going to happen over time. But in terms of how much of that recovers, yeah, look, I think that -- I think that you could see 60 -- on that 100, you probably see like 60 million recover. As I said, it's not going to be an all at once thing, but it's going to come back $60 million to $70 million, something like that, I would guess.

Koosh Patel -- Deutsche Bank -- Analyst

Okay. Okay, great. And then the second question I had, sorry -- The second question I had was, recently we saw Aeromexico announced that they've struck some agreement to restructure some of the 7 leases they have, and just wanted to see if you could update us as to whether any of the aircraft -- AerCap aircraft that AerCap owns and has on lease to Aeromexico are included in this or just a general status update on the aircraft you guys have in place with Aeromexico and do you intend for them to stay with Aeromexico long-term or are you in the process of remarketing these?

Aengus Kelly -- Chief Executive Officer and Executive Director

We expect the Aeromexico aircraft to stay there. And the Aeromexico procedures now are in front of the court for approval in assumption of the revised transaction.

Koosh Patel -- Deutsche Bank -- Analyst

Okay, thanks a lot guys. I appreciate the time.

Operator

[Operator instructions] We'll move to a question from Catherine O'Brien with Goldman Sachs.

Catherine O'Brien -- Goldman Sachs -- Analyst

Good morning, Ron. Thanks for the time. Actually I have one more on cash accounting. This is the first time we've actually seen that cash accounting impact decline since the start of the pandemic at least versus what I've tracked. And that's despite the 18A [Phonetic] bankruptcy earlier this year. So I was just -- I was just wondering what's driving that? Are some of the aircraft back on new contracts or is any of that driven by aircraft from -- on the ground, but no longer efficient release, was just wondering what was driving the sequential decline? Thanks.

Peter Juhas -- Chief Financial Officer

Sure, Katy. So, while -- HNA, actually we had put them on cash accounting in the fourth quarter. So they were already on it. But we've had a couple of airlines come off it. I mean part of the impact that you saw in some of the quarters last year was due to Norwegian, for example, and we've placed all of our Norwegian planes now with other carriers. So you are seeing, what we've been doing, obviously, in many of these cases, the majority of the planes will stay with those carriers as Gus mentioned with Aeromexico, for example, but in other ones, we have moved those planes elsewhere. And so you're going to see a less of an impact, right, because they're just -- you're moving the planes out of where they were. So I think that's the main driver because if I look at last -- I think fourth quarter we said it was $117 million. So, yes, it's down somewhat this quarter. It's hard to know exactly as I was saying in the previous answer, exactly how that's going to play out over the next few quarters, but I do expect that to come down over the course of the year.

Catherine O'Brien -- Goldman Sachs -- Analyst

Maybe one quick follow-up to that, Pete. So, should we -- like, would a good -- a good exercise for us would be to just track the progress of these bankruptcy proceedings and that will give us probably a good sense of -- of -- of when we should expect to see the remainder of that 100 million come down if you're expecting the majority of those aircraft to just stay with their current lessees, is that the right way to think about it?

Peter Juhas -- Chief Financial Officer

Well, I think for -- certainly, for the major ones. I mean some of these are not bankruptcies, they're just where we have -- we have assessed the airliners as not probable of collection and so some of those are quite small. And frankly, I don't think it would be worth following those situations. But for the major ones, yes, I mean, it will be once -- once the restructuring is agreed and you have an agreed leases on those plans and that bankruptcy court or equivalent in some countries has certified that, yes, then you should see them coming back, right? So that's -- that will be the trigger in most of those cases.

Aengus Kelly -- Chief Executive Officer and Executive Director

I think it is fair to say that, underpinning that and the exit from bankruptcy will be driven by the vaccination profile. I mean, you know, that airlines will exit from -- from those protect -- from those structures when they are confident that the vaccine is moving along well in all of those countries.

Catherine O'Brien -- Goldman Sachs -- Analyst

That totally makes sense. And then -- and then just for my second question, just on this higher level of placement activity you saw in the quarter, can you give us a sense of how far out those placements are delivering? And then a little bit of a follow-up to an earlier question, but how should we think about lease rate factors on deliveries that you are contracting a couple of years out in the future versus, perhaps, lease rate factors of what you're seeing now in terms of used aircraft that you're putting onto a second lease and just how those compare versus pre-COVID? Really sounds a little bit of a multi-part one, but thanks for the color.

Aengus Kelly -- Chief Executive Officer and Executive Director

Sure. Well, if I start with airplanes that have come back to us over the course of the last 12 months. They just have to be moved now. And all those air -- about half of the 60 were airplanes that have either come back or coming back in the very near future. And those aircraft are being placed in this environment. And in that example, as I said there, it's -- it's positive that the airlines want to see -- want to take additional metal, which is great, but by the same token, given the pandemic is still with us and the vaccine rollout is still progressing, there is a variable element to the lease rental which we based on utilization for the first 12 months. And then after that it will slip into a fixed rate rental, and which will be down a bit from where it was pre-pandemic, that's obvious. As to the airplanes that are coming off our order book in a couple of years' time, that's a totally different market. That's one where you don't have to do any business and you wait and you'll see how it goes.

Catherine O'Brien -- Goldman Sachs -- Analyst

Sure, Gus. Thanks so much for the time.

Aengus Kelly -- Chief Executive Officer and Executive Director

Sure.

Operator

And now we will hear from Andrew Lobbenberg with HSBC.

Andrew Lobbenberg -- HSBC -- Analyst

Oh, hi, there. I'm just quite curious to build on the previous question, because, Gus, you were speaking about the aircraft that are being placed in the current market that are on power by the hour and then are going on to a fixed rate but at a discount. Don't know what you can say, but I mean the aircraft that are transitioning from Norwegian to North, I mean North Atlantic are going around telling everyone that they are paying precisely half what Norwegian are paying. I don't know what commentary you can offer to it, but I'd be interested to see what you can say around that. And then just the other bunch of aircraft that I'm curious about is the 350s. I think you had LATAM, which they looked to be keeping but now they're not. A bit surprised given what lovely shiny planes they are that they don't want them, but how is that impacting your economics or why did they held onto them and then returning them? And how easy will they be to remarket?

Aengus Kelly -- Chief Executive Officer and Executive Director

Sure. Yeah, look, on the North Atlantic rates, I can't comment on what they were -- what North Atlantic are saying about their -- their perception about Norwegian used to pay. I just don't know. And but again on that rental, it will step up over time and then it will be -- it will be -- it will be a reasonable -- it would be a reasonable deal for us. But very importantly, from our standpoint, a very attractive aspect of the North transaction was, one, they are getting a lot of cash and that cash has come in. And two, we don't have transition costs associated with reconfiguring a wide-body airplane for a new customer.

In relation to the A350s, yes, you're correct and LATAM are handing them back. And yes, they will be leased at a lower rate in today's market, but they will get leased. These are attractive airplanes and we have quite a number of discussions ongoing around them. But of course, as you heard earlier from Pete, our claim against the LATAM stays. It will be based on any loss that we suffer from the reduced rentals that LATAM would have paid us versus what we will get in the market for those aircraft. So that should -- the idea of that is to offset and the losses we would incur.

Andrew Lobbenberg -- HSBC -- Analyst

Certainly, thanks. But is it fair to say that the 350s will be easier to remarket then the 78s because it's a tighter market or is that naive?

Aengus Kelly -- Chief Executive Officer and Executive Director

No, I wouldn't say that. I think the 787 is an aircraft that has, it's a smaller airplane and so it has a very large user base and it's been an excellent aircraft into service. But the A350 is a slightly larger airplane, but we'll deal with this.

Andrew Lobbenberg -- HSBC -- Analyst

Okay, fair enough. Thank you.

Operator

And ladies and gentlemen, this will conclude your question-and-answer session. I will turn the call back over to Aengus Kelly for any additional or closing remarks.

Aengus Kelly -- Chief Executive Officer and Executive Director

Well, thank you all very much for joining us on this call. We look forward to seeing many of you -- well, I suppose, virtually by proxy at our AGM and that's coming up shortly. But I would like to hand you back to Joe, as you may have seen on Monday, we published our annual report on environmental, social and governance aspects, our EFG report. Joe, may want to say a few words?

Joseph McGinley -- Head of Investor Relations

Sure. Thanks, Gus. So, just for those of you who are newer to the AerCap story, ESG is something that our Board and senior management has been hugely involved in for a long period of time and what's always formed a part of the strategy of the company. We've made concerted efforts in recent years to increase our transparency in reporting in the area. So with that in mind, we published our comprehensive 2021 ESG report earlier in the week. I'd like to just highlight a couple of key initiatives from that report. The first is that we doubled the level of carbon offsetting of our own operations and business travel to 40% in 2020 and we have to take that higher in the coming years. And to do this, we partnered with First Climate to invest in solar cell modules to provide clean electricity in China as well as a biodiversity project in Brazil, which helps prevent deforestation, as well as providing sustainable income for local families.

And the second is that we increased our target for the most fuel-efficient new technology aircraft in our fleet to 75% by the end of 2024, and that includes the impact of the GCash transaction. And we see that is the best way for us to make an impact on the industry. So, you'll find more of that report on our website. And feel free to reach out to me directly after the call if you have any further follow-ups.

So with that, operator, you can now close the call.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

Joseph McGinley -- Head of Investor Relations

Aengus Kelly -- Chief Executive Officer and Executive Director

Peter Juhas -- Chief Financial Officer

Jamie Baker -- JP Morgan -- Analyst

Ross Harvey -- Davy -- Analyst

Moshe Orenbuch -- Credit Suisse -- Analyst

Helane Becker -- Cowen -- Analyst

Vincent Caintic -- Stephens -- Analyst

Koosh Patel -- Deutsche Bank -- Analyst

Catherine O'Brien -- Goldman Sachs -- Analyst

Andrew Lobbenberg -- HSBC -- Analyst

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