Our Fleet
References throughout this Quarterly Report on Form 10-Q to “our fleet” refer to the aircraft included in flight equipment subject to operating leases and do not include aircraft in our managed fleet or aircraft classified as net investments in sales-type leases unless the context indicates otherwise. Portfolio metrics of our fleet as of June 30, 2022 and December 31, 2021 are as follows:
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| June 30, 2022 | | December 31, 2021 | | | | | | | | | | | |
Net book value of flight equipment subject to operating lease | $ | 23.5 | billion | | $ | 22.9 | billion | | | | | | | | | | | |
Weighted-average fleet age(1) | 4.4 years | | 4.4 years | | | | | | | | | | | |
Weighted-average remaining lease term(1) | 7.1 years | | 7.2 years | | | | | | | | | | | |
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Owned fleet | 392 | | 382 | | | | | | | | | | | |
Managed fleet | 89 | | 92 | | | | | | | | | | | |
Aircraft on order | 430 | | 431 | | | | | | | | | | | |
Total | 911 | | 905 | | | | | | | | | | | |
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Current fleet contracted rentals | $ | 15.0 | billion | | $ | 14.8 | billion | | | | | | | | | | | |
Committed fleet rentals | $ | 16.3 | billion | | $ | 16.1 | billion | | | | | | | | | | | |
Total committed rentals | $ | 31.3 | billion | | $ | 30.9 | billion | | | | | | | | | | | |
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(1) Weighted-average fleet age and remaining lease term calculated based on net book value of our flight equipment subject to operating lease. | | | | | | | | | | | |
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The following table sets forth the net book value and percentage of the net book value of our flight equipment subject to operating leases in the indicated regions based on each airline’s principal place of business as of June 30, 2022 and December 31, 2021:
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| June 30, 2022 | | December 31, 2021 |
Region | Net Book Value | | % of Total | | Net Book Value | | % of Total |
| (in thousands, except percentages) |
Europe | $ | 7,339,480 | | | 31.3 | % | | $ | 7,439,993 | | | 32.5 | % |
Asia (excluding China) | 6,609,314 | | | 28.2 | % | | 5,952,981 | | | 26.0 | % |
China | 2,871,509 | | | 12.2 | % | | 2,934,224 | | | 12.8 | % |
The Middle East and Africa | 2,359,738 | | | 10.1 | % | | 2,447,919 | | | 10.7 | % |
Central America, South America, and Mexico | 1,724,076 | | | 7.3 | % | | 1,566,133 | | | 6.8 | % |
U.S. and Canada | 1,662,953 | | | 7.1 | % | | 1,638,450 | | | 7.2 | % |
Pacific, Australia, and New Zealand | 900,672 | | | 3.8 | % | | 919,304 | | | 4.0 | % |
Total | $ | 23,467,742 | | | 100.0 | % | | $ | 22,899,004 | | | 100.0 | % |
The following table sets forth the number of aircraft in our owned fleet by aircraft type as of June 30, 2022 and December 31, 2021:
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| | June 30, 2022 | | December 31, 2021 |
Aircraft type | | Number of Aircraft | | % of Total | | Number of Aircraft | | % of Total |
Airbus A319-100 | | 1 | | | 0.3 | % | | 1 | | | 0.3 | % |
Airbus A320-200 | | 28 | | | 7.1 | % | | 31 | | | 8.1 | % |
Airbus A320-200neo | | 26 | | | 6.6 | % | | 23 | | | 6.0 | % |
Airbus A321-200 | | 24 | | | 6.1 | % | | 26 | | | 6.8 | % |
Airbus A321-200neo | | 70 | | | 17.9 | % | | 69 | | | 18.1 | % |
Airbus A330-200 | | 13 | | | 3.3 | % | | 13 | | | 3.4 | % |
Airbus A330-300 | | 5 | | | 1.3 | % | | 8 | | | 2.1 | % |
Airbus A330-900neo | | 11 | | | 2.8 | % | | 9 | | | 2.4 | % |
Airbus A350-900 | | 13 | | | 3.3 | % | | 12 | | | 3.1 | % |
Airbus A350-1000 | | 6 | | | 1.5 | % | | 5 | | | 1.3 | % |
Boeing 737-700 | | 4 | | | 1.0 | % | | 4 | | | 1.0 | % |
Boeing 737-800 | | 84 | | | 21.4 | % | | 88 | | | 23.0 | % |
Boeing 737-8 MAX | | 39 | | | 9.9 | % | | 28 | | | 7.3 | % |
Boeing 737-9 MAX | | 10 | | | 2.7 | % | | 7 | | 1.8 | % |
Boeing 777-200ER | | 1 | | | 0.3 | % | | 1 | | | 0.3 | % |
Boeing 777-300ER | | 24 | | | 6.1 | % | | 24 | | | 6.3 | % |
Boeing 787-9 | | 26 | | | 6.6 | % | | 26 | | | 6.8 | % |
Boeing 787-10 | | 6 | | | 1.5 | % | | 6 | | | 1.6 | % |
Embraer E190 | | 1 | | | 0.3 | % | | 1 | | | 0.3 | % |
Total (1) | | 392 | | | 100.0 | % | | 382 | | | 100.0 | % |
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(1) As of June 30, 2022, we had six aircraft classified as flight equipment held for sale. As of December 31, 2021, we did not have any flight equipment classified as held for sale. |
As of June 30, 2022, we had contractual commitments to acquire a total of 430 new aircraft, with an estimated aggregate purchase price (including adjustments for anticipated inflation) of $27.6 billion, for delivery through 2028 as follows:
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| | Estimated Delivery Years | | |
Aircraft Type | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
Airbus A220-100/300 | | 4 | | | 16 | | | 24 | | | 20 | | | 12 | | | — | | | 76 | |
Airbus A320/321neo(1) | | 17 | | | 23 | | | 23 | | | 24 | | | 35 | | | 64 | | | 186 | |
Airbus A330-900neo | | 6 | | | 6 | | | 4 | | | — | | | — | | | — | | | 16 | |
Airbus A350-900/1000 | | 1 | | | 3 | | | 3 | | | — | | | — | | | — | | | 7 | |
Airbus A350F | | — | | | — | | | — | | | — | | | 2 | | | 5 | | | 7 | |
Boeing 737-8/9 MAX | | 14 | | | 31 | | | 34 | | | 19 | | | 16 | | | — | | | 114 | |
Boeing 787-9/10 | | 3 | | | 7 | | | 8 | | | 6 | | | — | | | — | | | 24 | |
Total(2) | | 45 | | | 86 | | | 96 | | | 69 | | | 65 | | | 69 | | | 430 | |
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(1) The Company’s Airbus A320/321neo aircraft orders include 26 long-range variants and 49 extra long-range variants. |
(2) The table above reflects Airbus and Boeing aircraft delivery delays based on contractual documentation. |
Aircraft Delivery Delays
Pursuant to our purchase agreements with Boeing and Airbus, we agree to contractual delivery dates for each aircraft ordered. These dates can change for a variety of reasons, however for the last several years, manufacturing delays have significantly impacted the planned purchases of our aircraft on order with Boeing and Airbus. We are currently experiencing delivery delays with both Boeing and Airbus aircraft. However, the most significant delivery delays pertain to our aircraft orders for Boeing 787 aircraft.
During 2020, Boeing began to experience manufacturing issues on its 787 aircraft, which resulted in significant aircraft delivery delays. Boeing halted 787 deliveries in May 2021 and has not indicated when they will resume. We have not received any 787s since the halting of the deliveries by Boeing. It is our understanding that, in July 2022, the FAA approved Boeing’s plan to inspect and repair 787 aircraft, which will allow deliveries to resume. However, the pace and the timing of deliveries of the aircraft for the remainder of this year and potentially beyond still remains uncertain.
Our purchase agreements with Boeing and Airbus generally provide each of us and the manufacturers with cancellation rights for delivery delays starting at one year after the original contractual delivery date, regardless of cause. In addition, our lease agreements generally provide each of us and the lessees with cancellation rights related to certain aircraft delivery delays that typically parallel the cancellation rights in our purchase agreements.
We believe that the majority of our 787 aircraft deliveries in our orderbook will be delayed, which could give us, our airline customers and Boeing the right to cancel these aircraft commitments.
As a result of continued manufacturing delays as discussed above, our aircraft delivery schedule could continue to be subject to material changes and delivery delays could extend beyond 2022.
The following table, which is subject to change based on Airbus and Boeing delivery delays, shows the number of new aircraft scheduled to be delivered as of June 30, 2022, along with the lease placements of such aircraft as of August 4, 2022. As noted above, we expect delivery delays for all aircraft deliveries in our orderbook. We remain in discussions with Boeing and Airbus to determine the extent and duration of delivery delays, but we are not yet able to determine the full impact of these delays.
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Delivery Year | Number Leased | | Number of Aircraft | | % Leased |
2022 | 45 | | 45 | | | 100.0 | % |
2023 | 85 | | 86 | | | 98.8 | % |
2024 | 58 | | 96 | | | 60.4 | % |
2025 | 35 | | 69 | | | 50.7 | % |
2026 | 16 | | 65 | | | 24.6 | % |
Thereafter | 9 | | 69 | | | 13.0 | % |
Total | 248 | | 430 | | |
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Aircraft Industry and Sources of Revenues
Our revenues are principally derived from operating leases with airlines throughout the world. As of June 30, 2022, we had a globally diversified customer base of 116 airlines in 62 different countries, with over 95% of our business revenues from airlines domiciled outside of the U.S., and we anticipate that most of our revenues in the future will be generated from foreign customers.
Performance of the commercial airline industry is linked to global economic health and development. Despite the disruption caused to the commercial airline industry by the COVID-19 pandemic since early 2020, global air travel continues to recover and has accelerated in most markets. The International Air Transport Association (“IATA”) reported that passenger traffic was up 76% in the month of June 2022 relative to the same month in the prior year, benefiting from a significant acceleration in international traffic and strong continued expansion of domestic traffic in most markets. International traffic in June of 2022 rose 230% relative to the prior year, though it remains 35% lower than the same month in 2019. Global domestic passenger traffic in June 2022 rose 5% relative to the prior year, with all major markets rising except China domestic given residual impact of COVID-related travel constraints, and
was 19% lower than the same month in 2019. According to IATA, several international routes are now exceeding 2019 traffic levels or are expected to exceed those levels near-term, several other domestic markets are quickly approaching 2019 levels. China domestic traffic is also recently showing signs of stabilization. We believe COVID-19 vaccination progress, therapeutic treatments and the easing of travel restrictions will continue to support the recovery of air passenger traffic and the commercial airline industry.
Currently, we are experiencing increased demand for our aircraft as global air traffic recovers from the pandemic. We believe supply chain challenges will further exacerbate what was already shaping up to be a shortage of commercial aircraft. The increased demand for our aircraft, when combined with rising interest rates and inflation, is providing a catalyst for rising lease rates. Lease rates can be influenced by several factors including impacts of changes in the competitive landscape of the aircraft leasing industry, supply chain disruptions, evolving international trade matters, epidemic diseases and geopolitical events and therefore, are difficult to project or forecast.
Our airline customers are facing higher operating costs as a result of rising fuel costs, interest rates and inflation, ongoing labor shortages and disputes, as well as delays and cancellations caused by the global air traffic control system and airports, although the magnitude of underlying pre-pandemic demand returning and still-to-return to the market is offering a strong counterbalance to these increased costs. Many of these customers are also exposed to currency risk related to the appreciation of the U.S. dollar because they earn revenues in their local currencies while a significant portion of their liabilities and expenses are denominated in U.S. dollars, including their lease payments to us. If our airline customers are not able to effectively manage their operating costs and currency risk, it could impact our financial results and cash flows.
We continue to expect more airline reorganizations, liquidations, or other forms of bankruptcies, which may include some of our aircraft customers and result in the early return of aircraft or changes in our lease terms. As of the date of this filing, we had eight aircraft across three airlines which were subject to various forms of insolvency proceedings.
We believe the aircraft leasing industry has remained resilient over time across a variety of global economic conditions and remain optimistic about the long-term fundamentals of our business. We expect the aviation industry to continue to recover from the impact of COVID-19.
Liquidity and Capital Resources
Overview
We ended the second quarter of 2022 with available liquidity of $7.6 billion which is comprised of unrestricted cash of $1.0 billion and undrawn balances under our unsecured revolving credit facility of $6.6 billion. We finance the purchase of aircraft and our business operations using available cash balances, internally generated funds, including through aircraft sales and trading activity, and an array of financing products. We aim to maintain investment-grade credit metrics and focus our debt financing strategy on funding our business on an unsecured basis with primarily fixed-rate debt from public bond offerings. Unsecured financing provides us with operational flexibility when selling or transitioning aircraft from one airline to another. We also have the ability to seek debt financing secured by our assets, as well as financings supported through the Export-Import Bank of the United States and other export credit agencies for future aircraft deliveries. We have also issued preferred stock with a total aggregate stated value of $850.0 million. Our access to a variety of financing alternatives including unsecured public bonds, private capital, bank debt, secured financings and preferred stock issuances serves as a key advantage in managing our liquidity. Aircraft delivery delays as a product of manufacturer delays are expected to further reduce our aircraft investment and debt financing needs for the next six to twelve months and potentially beyond.
We have a balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, investing in modern, in-demand aircraft to profitably grow our core aircraft leasing business while maintaining strong fleet metrics and creating sustainable long-term shareholder value; second, maintaining our investment grade balance sheet utilizing unsecured debt as our primary form of financing; and finally, in lockstep with the aforementioned priorities, returning excess cash to shareholders through our dividend policy as well as regular evaluation of share repurchases, as appropriate.
We ended the second quarter of 2022 with total debt outstanding of $18.5 billion compared to $17.2 billion as of December 31, 2021. Our unsecured debt outstanding increased to $18.4 billion as of June 30, 2022 from $17.1 billion as of December 31, 2021. Our unsecured debt as a percentage of total debt was 99.3% and 99.2% as of June 30, 2022 and December 31, 2021, respectively.
Material Cash Sources and Requirements
We believe that we have sufficient liquidity from available cash balances, cash generated from ongoing operations, available borrowings under our unsecured revolving credit facility and general ability to access the capital markets for opportunistic public bond offerings to satisfy the operating requirements of our business through at least the next 12 months. Our long-term debt financing strategy is focused on continuing to raise unsecured debt in the global bank and investment grade capital markets. Our material cash sources include:
•Unrestricted cash: We ended the second quarter of 2022 with $1.0 billion in unrestricted cash.
•Lease cash flows: We ended the second quarter of 2022 with $31.3 billion in committed minimum future rental payments comprised of $15.0 billion in contracted minimum rental payments on the aircraft in our existing fleet and $16.3 billion in minimum future rental payments related to aircraft which will deliver between 2022 through 2027. These rental payments are a primary driver of our short and long-term operating-cash-flow. As of June 30, 2022, our minimum future rentals on non-cancellable operating leases for the next 12 months was $2.2 billion. For further detail on our minimum future rentals for the remainder of 2022 and thereafter, see “Notes to Consolidated Financial Statements” under “Item 1. Financial Statements” in this Quarterly Report on Form 10-Q.
•Unsecured revolving credit facility: As of August 4, 2022, our $7.1 billion revolving credit facility is syndicated across 53 financial institutions from various regions of the world, diversifying our reliance on any individual lending institution. The final maturity for the facility is May 2026. The facility contains standard investment grade covenants and does not condition our ability to borrow on the lack of a material adverse effect to us or the general economy.
•Senior unsecured bonds: We are a frequent issuer in the investment grade capital markets, opportunistically issuing unsecured bonds, primarily through our Medium-Term Note Program at attractive cost of funds. In 2022, we have issued $1.5 billion of Medium-Term Notes with a weighted average interest rate of 2.54% and we expect to have continued access to the investment grade bond market in the future, although we anticipate interest rates for issuances in the near term will increase from those available in recent years.
•Aircraft sales: Proceeds from the sale of aircraft help supplement our liquidity position. We are targeting to sell up to $750.0 million in aircraft for 2022, subject to any further significant delivery delays we might experience during the second half of this year.
•Other sources: In addition to the above, we generate liquidity through other sources of debt financing (including unsecured and secured bank term loans), issuances of preferred stock and cash received from security deposits and maintenance reserves from our lease agreements.
Our material cash requirements are primarily for the purchase of aircraft and debt service payments, along with our general operating expenses. The amount of our cash requirements depends on a variety of factors, including, the ability of aircraft manufacturers to meet their contractual delivery obligations to us, the ability of our lessees to meet their contractual obligations with us, the timing of aircraft sales from our fleet, the timing and amount of our debt service obligations, potential acquisitions, and the general economic environment in which we operate.
While we have experienced a low interest rate environment for many years, substantial improvement in the labor markets, higher inflation and geopolitical events have led to an increase in borrowing rates. We expect short-term interest rates to continue to rise. A higher interest rate environment may adversely affect our businesses through increased borrowing costs, although this impact may be offset in whole or in part if increased interest rates lead to an increase in leasing activity by our airline customers.
Our material cash requirements as of June 30, 2022, are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
Long-term debt obligations | | $ | 1,291,611 | | | $ | 2,566,329 | | | $ | 2,885,280 | | | $ | 2,404,761 | | | $ | 3,963,094 | | | $ | 5,420,177 | | | $ | 18,531,252 | |
Interest payments on debt outstanding(1) | | 265,327 | | | 488,339 | | | 412,246 | | | 339,308 | | | 235,360 | | | 432,636 | | | 2,173,216 | |
Purchase commitments(2) | | 3,082,573 | | | 6,057,223 | | | 6,223,538 | | | 4,186,938 | | | 3,641,767 | | | 4,433,109 | | | 27,625,148 | |
Total | | $ | 4,639,511 | | | $ | 9,111,891 | | | $ | 9,521,064 | | | $ | 6,931,007 | | | $ | 7,840,221 | | | $ | 10,285,922 | | | $ | 48,329,616 | |
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(1) Future interest payments on floating rate debt are estimated using floating rates in effect at June 30, 2022. |
(2) Purchase commitments reflect future Boeing and Airbus aircraft deliveries based on information currently available to us based on contractual documentation. |
The above table does not include any tax payments we may pay nor any dividends we may pay on our preferred stock or common stock. Based on our expected cash sources and requirements for the remainder of 2022, we believe that we have sufficient liquidity to meet our cash requirements for aircraft deliveries and debt service obligations. We expect that we will continue to access the capital markets for public bond offerings over the next 12 months.
The actual delivery dates of the aircraft in our commitments table and expected time for payment of such aircraft may differ from our estimates and could be further impacted by the pace at which Boeing and Airbus can deliver aircraft, among other factors. We expect to make approximately $3.5 billion to $4.5 billion in aircraft investments in 2022, which reflects a high degree of uncertainty around the Boeing 787 program as well as other potential production delays.
As of June 30, 2022, we were in compliance in all material respects with the covenants contained in our debt agreements. While a ratings downgrade would not result in a default under any of our debt agreements, it could adversely affect our ability to issue debt and obtain new financings, or renew existing financings, and it would increase the costs of certain financings. Our liquidity plans are subject to a number of risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and other SEC filings.
Cash Flows
Our cash flows provided by operating activities increased by 14.3% or $86.2 million, to $688.8 million for the six months ended June 30, 2022 as compared to $602.7 million for the six months ended June 30, 2021. Our cash flow provided by operating activities during the six months ended June 30, 2022 increased due to the continued growth of our fleet and an increase in our cash collections as compared to the six months ended June 30, 2021. Our cash flow used in investing activities was $2.0 billion for the six months ended June 30, 2022 and $1.4 billion for the six months ended June 30, 2021, which resulted primarily from the purchase of aircraft. Our cash flow provided by financing activities was $1.3 billion for the six months ended June 30, 2022 as compared to $273.7 million for the six months ended June 30, 2021. The increase is primarily due to the issuance of debt, net of debt repayments, related in part to the acquisition of aircraft investments.
Debt
Our debt financing at June 30, 2022 and December 31, 2021 is summarized below:
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| June 30, 2022 | | December 31, 2021 |
| ( in thousands, except percentages) |
Unsecured | | | |
Senior notes | $ | 17,685,728 | | | $ | 16,892,058 | |
Term financings | 190,325 | | | 167,000 | |
Revolving credit facility | 520,000 | | | — | |
Total unsecured debt financing | 18,396,053 | | | 17,059,058 | |
Secured | | | |
Term financings | 120,226 | | | 126,660 | |
Export credit financing | 14,973 | | | 18,301 | |
Total secured debt financing | 135,199 | | | 144,961 | |
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Total debt financing | 18,531,252 | | | 17,204,019 | |
Less: Debt discounts and issuance costs | (195,177) | | | (181,539) | |
Debt financing, net of discounts and issuance costs | $ | 18,336,075 | | | $ | 17,022,480 | |
Selected interest rates and ratios: | | | |
Composite interest rate(1) | 2.81 | % | | 2.79 | % |
Composite interest rate on fixed-rate debt(1) | 2.85 | % | | 2.90 | % |
Percentage of total debt at a fixed-rate | 92.4 | % | | 94.8 | % |
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(1) This rate does not include the effect of upfront fees, facility fees, undrawn fees or amortization of debt discounts and issuance costs. |
Senior unsecured notes (including Medium-Term Note Program)
As of June 30, 2022, we had $17.7 billion in senior unsecured notes outstanding. As of December 31, 2021, we had $16.9 billion in senior unsecured notes outstanding.
During the six months ended June 30, 2022, we issued $1.5 billion in aggregate principal amount of senior unsecured notes comprised of (i) $750.0 million in aggregate principal amount of 2.20% Medium-Term Notes due 2027, and (ii) $750.0 million in aggregate principal amount of 2.875% Medium-Term Notes due 2032.
For more information regarding our senior unsecured notes outstanding, see Note 2 of Notes to Consolidated Financial Statements included in Part III, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2021.
Unsecured revolving credit facility
As of June 30, 2022, we had $520.0 million outstanding under our unsecured revolving credit facility (the “Revolving Credit Facility”). As of December 31, 2021, we did not have any amounts outstanding under our Revolving Credit Facility. Borrowings under the Revolving Credit Facility are used to finance our working capital needs in the ordinary course of business and for other general corporate purposes.
In April 2022, we amended and extended our Revolving Credit Facility through an amendment that, among other things, extended the final maturity date from May 5, 2025 to May 5, 2026, increased the total revolving commitments to approximately $7.0 billion as of May 5, 2022 and replaced LIBOR with Term SOFR as the benchmark interest rate and made certain conforming changes related thereto. As of June 30, 2022, borrowings under the Revolving Credit Facility accrued interest at Adjusted Term SOFR (as defined in the Revolving Credit Facility), plus a margin of 1.05% per year. We are required to pay a facility fee of 0.20% per year
in respect of total commitments under the Revolving Credit Facility. Interest rate and facility fees are subject to increases or decreases based on declines or improvements in the credit ratings for our debt.
In June 2022, we increased the aggregate facility capacity by an additional $122.5 million and also extended the maturity of $125.0 million in commitments to May 5, 2026. As of August 4, 2022, we had total revolving commitments of approximately $7.1 billion. Lenders held revolving commitments totaling approximately $6.7 billion that mature on May 5, 2026, commitments totaling $32.5 million that mature on May 5, 2025 and commitments totaling $375.0 million that mature on May 5, 2023.
The Revolving Credit Facility provides for certain covenants, including covenants that limit our subsidiaries’ ability to incur, create, or assume certain unsecured indebtedness, and our subsidiaries’ abilities to engage in certain mergers, consolidations, and asset sales. The Revolving Credit Facility also requires us to comply with certain financial maintenance covenants including minimum consolidated shareholders’ equity, minimum consolidated unencumbered assets, and an interest coverage test. In addition, the Revolving Credit Facility contains customary events of default. In the case of an event of default, the lenders may terminate the commitments under the Revolving Credit Facility and require immediate repayment of all outstanding borrowings.
Other debt financings
From time to time, we enter into other debt financings such as unsecured term financings and secured term financings, including export credit. As of June 30, 2022, the outstanding balance on other debt financings was $325.5 million and we had pledged three aircraft as collateral with a net book value of $217.1 million. As of December 31, 2021, the outstanding balance on other debt financings was $312.0 million and we had pledged three aircraft as collateral with a net book value of $222.2 million.
Preferred equity
The following table summarizes our preferred stock issued and outstanding as of June 30, 2022 (in thousands, except for share amounts and percentages):
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| Shares Issued and Outstanding as of June 30, 2022 | | | | Carrying Value as of June 30, 2022 | | Issue Date | | Dividend Rate in Effect at June 30, 2022 | | Next dividend rate reset date | | Dividend rate after reset date |
Series A | 10,000,000 | | | | | $ | 250,000 | | | March 5, 2019 | | 6.150 | % | | March 15, 2024 | | 3M LIBOR plus 3.65% |
Series B | 300,000 | | | | | 300,000 | | | March 2, 2021 | | 4.650 | % | | June 15, 2026 | | 5 Yr U.S. Treasury plus 4.076% |
Series C | 300,000 | | | | | 300,000 | | | October 13, 2021 | | 4.125 | % | | December 15, 2026 | | 5 Yr U.S. Treasury plus 3.149% |
Total Preferred Stock | 10,600,000 | | | | | $ | 850,000 | | | | | | | | | |
For more information regarding our preferred stock issued and outstanding, see Note 4 of Notes to Consolidated Financial Statements included in Part III, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2021.
The following table summarizes the cash dividends that we paid during the six months ended June 30, 2022 on our outstanding Series A, Series B and Series C Preferred Stock:
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Title of each class | | March 15, 2022 | | June 15, 2022 | | | | | | | | |
| | (in thousands) | | | | | | |
Series A Preferred Stock | | $3,844 | | $3,844 | | | | | | | | |
Series B Preferred Stock | | $3,487 | | $3,487 | | | | | | | | |
Series C Preferred Stock | | $3,094 | | $3,094 | | | | | | | | |
Off‑balance Sheet Arrangements
We have not established any unconsolidated entities for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We have, however, from time to time established subsidiaries or trusts for the purpose of leasing aircraft or facilitating borrowing arrangements which are consolidated.
We have non-controlling interests in two investment funds in which we own 9.5% of the equity of each fund. We account for our interest in these funds under the equity method of accounting due to our level of influence and involvement in the funds. Also, we manage aircraft that we have sold through our Thunderbolt platform. In connection with the sale of certain aircraft portfolios through our Thunderbolt platform, we hold non-controlling interests of approximately 5.0% in two entities. These investments are accounted for under the cost method of accounting.
Impact of LIBOR Transition
On March 5, 2021, the Chief Executive of the U.K. Financial Conduct Authority, which regulates LIBOR, publicly announced that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021, and that publication of certain tenors of U.S. dollar LIBOR (including overnight and one, three, six and 12 months) will permanently cease after June 30, 2023. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”). SOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate. For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.
As of June 30, 2022, we had approximately $0.8 billion of floating rate debt outstanding that used either one or three-month LIBOR as the applicable reference rate to calculate the interest on such debt, of which $155.5 million is set to mature after June 30, 2023. Additionally, our perpetual Series A Preferred Stock is set to accrue dividends at a floating rate determined by reference to three-month LIBOR, if available, beginning March 15, 2024. While all of our agreements governing LIBOR-linked debt obligations and Series A Preferred Stock obligations that are set to mature after June 30, 2023 contain LIBOR transition fallback provisions, the lack of a standard market practice and inconsistency in fallback provisions in recent years is reflected across the agreements governing our floating rate debt and Series A Preferred Stock. For our Series A Preferred Stock, if we determine there is no such alternative reference rate as of March 15, 2024, then we must select an independent financial advisor to determine a substitute rate for LIBOR, and if an independent financial advisor cannot determine an alternative reference rate, the dividend rate, business day convention and manner of calculating dividends applicable during the fixed-rate period of the Series A Preferred Stock will be in effect.
In April 2022, we amended and extended our Revolving Credit Facility through an amendment that, among other things, replaced LIBOR with Term SOFR as the benchmark interest rate. After that amendment, borrowings under the amended Revolving Credit Facility accrue interest at Adjusted Term SOFR (as defined in the Revolving Credit Facility), plus a margin of 1.05% per year subject to increases or decreases based on declines or improvements in the credit ratings for our debt.
The implementation of a substitute reference rate for the calculation of interest rates under our LIBOR linked debt and Series A Preferred Stock obligations may cause us to incur expenses in effecting the transition and may result in disputes with our lenders or holders of Series A Preferred Stock over the appropriateness or comparability to LIBOR of the substitute reference rate selected. However, we do not expect the LIBOR transition impact will have a material effect on our financial results based on our anticipated LIBOR linked outstanding debt and Series A Preferred Stock at June 30, 2023.
If the rate used to calculate interest on our outstanding floating rate debt that as of June 30, 2022, used LIBOR and our Series A Preferred Stock were to increase by 1.0% either as a result of an increase in LIBOR or the result of the use of an alternative reference rate determined under the fallback provisions in the applicable financial instrument when LIBOR is discontinued, we would expect to incur additional interest expense and preferred dividends of $8.4 million and $2.5 million, respectively on such indebtedness and our Series A Preferred Stock as of June 30, 2022 on an annualized basis.
Credit Ratings
In June 2022, Fitch Ratings reaffirmed our corporate rating, long-term debt credit rating and outlook. Our investment-grade corporate and long-term debt credit ratings help us to lower our cost of funds and broaden our access to attractively priced capital. The following table summarizes our current credit ratings:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Rating Agency | | Long-term Debt | | Corporate Rating | | Outlook | | Date of Last Ratings Action |
Kroll Bond Ratings | A- | | A- | | Stable | | March 25, 2022 |
Standard and Poor's | BBB | | BBB | | Stable | | April 21, 2022 |
Fitch Ratings | BBB | | BBB | | Stable | | June 28, 2022 |
While a ratings downgrade would not result in a default under any of our debt agreements, it could adversely affect our ability to issue debt and obtain new financings, or renew existing financings, and it would increase the cost of our financings.
Results of Operations
The following table presents our historical operating results for the three and six months ended June 30, 2022 and 2021 (in thousands, except per share amounts and percentages): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (unaudited) |
Revenues | | | | | | | | |
Rental of flight equipment | | $ | 545,271 | | $ | 452,044 | | $ | 1,111,825 | | $ | 920,139 |
Aircraft sales, trading and other | | 12,425 | | 39,833 | | 42,533 | | 46,565 |
Total revenues | | 557,696 | | 491,877 | | 1,154,358 | | 966,704 |
| | | | | | | | |
Expenses | | | | | | | | |
Interest | | 118,997 | | 113,598 | | 236,274 | | 231,584 |
Amortization of debt discounts and issuance costs | | 13,413 | | 12,513 | | 26,610 | | 24,538 |
Interest expense | | 132,410 | | 126,111 | | 262,884 | | 256,122 |
Depreciation of flight equipment | | 235,284 | | 217,817 | | 470,591 | | 426,782 |
Write-off of Russian fleet | | — | | — | | 802,352 | | — |
Selling, general and administrative | | 38,512 | | 26,687 | | 71,277 | | 53,601 |
Stock-based compensation expense | | 6,558 | | 6,700 | | 4,035 | | 12,108 |
Total expenses | | 412,764 | | 377,315 | | 1,611,139 | | 748,613 |
Income/(loss) before taxes | | 144,932 | | 114,562 | | (456,781) | | 218,091 |
Income tax (expense)/benefit | | (28,655) | | (21,140) | | 104,065 | | (40,577) |
Net income/(loss) | | $ | 116,277 | | $ | 93,422 | | $ | (352,716) | | $ | 177,514 |
Preferred stock dividends | | (10,425) | | (7,835) | | (20,850) | | (11,679) |
Net income/(loss) attributable to common stockholders | | $ | 105,852 | | $ | 85,587 | | $ | (373,566) | | $ | 165,835 |
| | | | | | | | |
Earnings/(Loss) per share of common stock: | | | | | | | | |
Basic | | $ | 0.95 | | $ | 0.75 | | $ | (3.32) | | $ | 1.45 |
Diluted | | $ | 0.95 | | $ | 0.75 | | $ | (3.32) | | $ | 1.45 |
| | | | | | | | |
Other financial data | | | | | | | | |
Pre-tax margin | | 26.0 | % | | 23.3 | % | | (39.6) | % | | 22.6 | % |
Pre-tax return on common equity (trailing twelve months) | | (3.0) | % | | 8.5 | % | | (3.0) | % | | 8.5 | % |
Adjusted net income before income taxes(1) | | $ | 154,478 | | $ | 125,940 | | $ | 355,366 | | $ | 243,058 |
Adjusted diluted earnings per share before income taxes(1) | | $ | 1.39 | | $ | 1.10 | | $ | 3.15 | | $ | 2.13 |
Adjusted pre-tax margin(1) | | 27.7 | % | | 25.6 | % | | 30.8 | % | | 25.1 | % |
Adjusted pre-tax return on common equity (trailing twelve months)(1) | | 12.2 | % | | 9.6 | % | | 12.2 | % | | 9.6 | % |
__________________________________________
(1)Adjusted net income before income taxes (defined as net income/(loss) attributable to common stockholders excluding the effects of certain non-cash items, one-time or non-recurring items, such as write-offs of our Russian fleet, that are not expected to continue in the future and certain other items), adjusted pre-tax margin (defined as adjusted net income before income taxes divided by total revenues), adjusted diluted earnings per share before income taxes (defined as adjusted net income before income taxes divided by the weighted average diluted common shares outstanding) and adjusted pre-tax return on common equity (defined as adjusted net income before income taxes divided by average common shareholders’ equity) are measures of operating performance that are not defined by GAAP and should not be considered as an alternative to net income/(loss) attributable to common stockholders, pre-tax margin, earnings/(loss) per share, diluted
earnings/(loss) per share and pre-tax return on common equity, or any other performance measures derived in accordance with GAAP. Adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity are presented as supplemental disclosure because management believes they provide useful information on our earnings from ongoing operations.
Management and our board of directors use adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity to assess our consolidated financial and operating performance. Management believes these measures are helpful in evaluating the operating performance of our ongoing operations and identifying trends in our performance, because they remove the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue in the future and certain other items from our operating results. Adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity, however, should not be considered in isolation or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity do not reflect our cash expenditures or changes in our cash requirements for our working capital needs. In addition, our calculation of adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity may differ from the adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity, or analogous calculations of other companies in our industry, limiting their usefulness as a comparative measure.
The following table shows the reconciliation of the numerator for adjusted pre-tax profit margin (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (unaudited) |
Reconciliation of the numerator for adjusted pre-tax margin (net income/(loss) attributable to common stockholders to adjusted net income before income taxes): | | | | | | | |
Net income/(loss) attributable to common stockholders | $ | 105,852 | | $ | 85,587 | | $ | (373,566) | | $ | 165,835 |
Amortization of debt discounts and issuance costs | 13,413 | | 12,513 | | 26,610 | | 24,538 |
Write-off of Russian fleet | — | | — | | 802,352 | | — |
Stock-based compensation expense | 6,558 | | 6,700 | | 4,035 | | 12,108 |
Income tax expense/(benefit) | 28,655 | | 21,140 | | (104,065) | | 40,577 |
Adjusted net income before income taxes | $ | 154,478 | | $ | 125,940 | | $ | 355,366 | | $ | 243,058 |
| | | | | | | |
Denominator for adjusted pre-tax margin: | | | | | |
Total revenues | $ | 557,696 | | $ | 491,877 | | $ | 1,154,358 | | $ | 966,704 |
Adjusted pre-tax margin(a) | 27.7 | % | | 25.6 | % | | 30.8 | % | | 25.1 | % |
| | | | | | | |
| | | | | | | |
(a) Adjusted pre-tax margin is adjusted net income before income taxes divided by total revenues |
The following table shows the reconciliation of the numerator for adjusted diluted earnings per share before income taxes (in thousands, except share and per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (unaudited) |
Reconciliation of the numerator for adjusted diluted earnings per share (net income/(loss) attributable to common stockholders to adjusted net income before income taxes): | | | | | | | |
Net income/(loss) attributable to common stockholders | $ | 105,852 | | | $ | 85,587 | | | $ | (373,566) | | | $ | 165,835 | |
Amortization of debt discounts and issuance costs | 13,413 | | | 12,513 | | | 26,610 | | | 24,538 | |
Write-off of Russian fleet | — | | | — | | | 802,352 | | | — | |
Stock-based compensation expense | 6,558 | | | 6,700 | | | 4,035 | | | 12,108 | |
Income tax expense/(benefit) | 28,655 | | | 21,140 | | | (104,065) | | | 40,577 | |
Adjusted net income before income taxes | $ | 154,478 | | | $ | 125,940 | | | $ | 355,366 | | | $ | 243,058 | |
| | | | | | | |
Denominator for adjusted diluted earnings per share: | | | | | | | |
Weighted-average diluted common shares outstanding | 111,043,836 | | | 114,377,965 | | | 112,373,092 | | | 114,373,576 | |
Potentially dilutive securities, whose effect would have been anti-dilutive | — | | | — | | | 301,279 | | | — | |
Adjusted weighted-average diluted common shares outstanding | 111,043,836 | | | 114,377,965 | | | 112,674,371 | | | 114,373,576 | |
Adjusted diluted earnings per share before income taxes(b) | $ | 1.39 | | | $ | 1.10 | | | $ | 3.15 | | | $ | 2.13 | |
| | | | | | | |
| | | | | | | |
(b) Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes divided by adjusted weighted-average diluted common shares outstanding |
The following table shows the reconciliation of pre-tax return on common equity to adjusted pre-tax return on common equity (in thousands, except percentages): | | | | | | | | | | | |
| Trailing Twelve Months June 30, |
| 2022 | | 2021 |
| (unaudited) |
Reconciliation of the numerator for adjusted pre-tax return on common equity (net (loss)/income attributable to common stockholders to adjusted net income before income taxes): | | | |
Net (loss)/income attributable to common stockholders | $ | (131,242) | | $ | 389,636 |
Amortization of debt discounts and issuance costs | 52,693 | | 46,802 |
Write-off of Russian fleet | 802,352 | | — |
Stock-based compensation expense | 18,443 | | 21,415 |
Income tax (benefit)/expense | (40,258) | | 100,165 |
Adjusted net income before income taxes | $ | 701,988 | | $ | 558,018 |
| | | |
Reconciliation of denominator for pre-tax return on common equity to adjusted pre-tax return on common equity: | | | |
Common shareholders' equity as of beginning of the period | $ | 5,951,715 | | $ | 5,619,801 |
Common shareholders' equity as of end of the period | $ | 5,589,634 | | $ | 5,951,715 |
Average common shareholders' equity | $ | 5,770,675 | | $ | 5,785,758 |
| | | |
Adjusted pre-tax return on common equity(c) | 12.2 | % | | 9.6 | % |
| | | |
| | | |
(c) Adjusted pre-tax return on common equity is adjusted net income before income taxes divided by average common shareholders’ equity |
Three months ended June 30, 2022, compared to the three months ended June 30, 2021
Rental revenue
During the three months ended June 30, 2022, we recorded $545.3 million in rental revenue, which included overhaul revenue, net of amortization expense related to initial direct costs of $2.4 million, as compared to $452.0 million, which included amortization expense related to initial direct costs, net of overhaul revenue of $9.9 million for the three months ended June 30, 2021. Our owned fleet increased to 392 aircraft with a net book value of $23.5 billion as of June 30, 2022 from 354 aircraft with a net book value of $21.5 billion as of June 30, 2021. The increase in rental revenues was primarily driven by the growth in our fleet and the recognition of cash basis revenue of $8.7 million as compared to $41.6 million of cash basis losses in the three months ended June 30, 2021. This increase was partially offset by the loss of revenues from the termination of our leasing activities in Russia during the first quarter of 2022.
Aircraft sales, trading and other revenue
Aircraft sales, trading and other revenue totaled $12.4 million for the three months ended June 30, 2022 compared to $39.8 million for the three months ended June 30, 2021. The decrease in our aircraft sales, trading and other revenue is primarily attributable to $34.0 million in revenue recognized from the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings during the quarter ended June 30, 2021. We did not sell any aircraft during the three months ended June 30, 2022 and June 30, 2021.
Interest expense
Interest expense totaled $132.4 million for the three months ended June 30, 2022 compared to $126.1 million for the three months ended June 30, 2021. Our interest expense increased due to an increase in our average debt balance, which was offset by a decline in our composite cost of funds as compared to the prior year. Due to the rising interest rate environment, we expect our interest expense will increase as our average debt balance outstanding and our composite cost of funds each increase in the future.
Depreciation expense
We recorded $235.3 million in depreciation expense of flight equipment for the three months ended June 30, 2022 compared to $217.8 million for the three months ended June 30, 2021. The increase in depreciation expense for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, is primarily attributable to the growth of our fleet during the last twelve months. We expect our depreciation expense to increase as we continue to add aircraft to our fleet.
Selling, general and administrative expenses
We recorded selling, general and administrative expenses of $38.5 million for the three months ended June 30, 2022 compared to $26.7 million for the three months ended June 30, 2021. The increase in selling, general and administrative expenses was primarily due to the increase in business activity, increased expenses related to insurance premiums and the transition of aircraft. During the three months ended June 30, 2022, we renewed our insurance which resulted in an annualized increase in our insurance premiums of approximately $16.0 million that we anticipate will increase our selling, general and administrative expenses in future periods. We expect an increase in operating costs due to higher inflation, increased insurance premiums, and certain geopolitical events, such as the Russia-Ukraine conflict. Selling, general and administrative expenses as a percentage of total revenue increased to 6.9% for the three months ended June 30, 2022 compared to 5.4% for the three months ended June 30, 2021.
Taxes
Our effective tax rate for the quarter increased to 19.8% from 18.5% in the prior year. The effective tax rate increased due to changes in permanent items.
Net income attributable to common stockholders
For the three months ended June 30, 2022, we reported consolidated net income attributable to common stockholders of $105.9 million, or $0.95 per diluted share, compared to a consolidated net income attributable to common stockholders of $85.6 million, or $0.75 per diluted share, for the three months ended June 30, 2021. Our net income attributable to common stockholders and diluted earnings per share increased due to the continued growth of our fleet, partially offset by the loss of revenues from the termination of our leasing activities in Russia and the $34.0 million recognized from the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings during the quarter ended June 30, 2021.
Adjusted net income before income taxes
For the three months ended June 30, 2022, we recorded adjusted net income before income taxes of $154.5 million, or $1.39 per adjusted diluted share, compared to an adjusted net income before income taxes of $125.9 million, or $1.10 per adjusted diluted share, for the three months ended June 30, 2021. Our adjusted net income before income taxes and adjusted diluted earnings per share before income taxes increased for the three months ended June 30, 2022 as compared to 2021, primarily due to the continued growth of our fleet and the increase in revenues as discussed above.
Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by GAAP. See Note 1 under the “Results of Operations” table above for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and reconciliation of these measures to net income available to common stockholders.
Six months ended June 30, 2022, compared to the six months ended June 30, 2021
Rental revenue
During the six months ended June 30, 2022, we recorded $1.1 billion in rental revenue, which included overhaul revenue, net of amortization expense related to initial direct costs of $42.1 million, as compared to $920.1 million, which included amortization expense related to initial direct costs, net of overhaul revenue of $12.3 million for the six months ended June 30, 2021. Our owned fleet increased to 392 aircraft with a net book value of $23.5 billion as of June 30, 2022 from 354 aircraft with a net book value of $21.5 billion as of June 30, 2021. The increase in rental revenues was primarily driven by the growth in our fleet and the recognition of cash basis revenue of $5.6 million as compared to $90.3 million of cash basis losses in the six months ended June 30, 2021. This increase was partially offset by the loss of revenues from the termination of our leasing activities in Russia during the first quarter of 2022.
Aircraft sales, trading and other revenue
Aircraft sales, trading and other revenue totaled $42.5 million for the six months ended June 30, 2022 compared to $46.6 million for the six months ended June 30, 2021. During the six months ended June 30, 2022, we had approximately $17.9 million in forfeiture of security deposit income from the termination of our leasing activities in Russia and $7.2 million in gains from four sales-type lease transactions in the current year period. Despite the revenue items discussed above, Aircraft sales, trading and other revenue decreased due to $34.0 million in revenue recognized from the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings during the six months ended June 30, 2021. We did not sell any aircraft during the six months ended June 30, 2022 and June 30, 2021.
Interest expense
Interest expense totaled $262.9 million for the six months ended June 30, 2022 compared to $256.1 million for the six months ended June 30, 2021. Our interest expense increased due to the increase in our average debt balance, which was offset by a decline in our composite cost of funds as compared to the prior year. Due to the rising interest rate environment, we expect our interest expense will increase as our average debt balance outstanding and our composite cost of funds each increase in the future.
Depreciation expense
We recorded $470.6 million in depreciation expense of flight equipment for the six months ended June 30, 2022 compared to $426.8 million for the six months ended June 30, 2021. The increase in depreciation expense for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, is primarily attributable to the growth of our fleet during the last twelve months. We expect our depreciation expense to increase as we continue to add aircraft to our fleet.
Write-off of Russian fleet
As further described above under “Impact of Russia-Ukraine Conflict”, in response to the sanctions against certain industry sectors and parties in Russia, in March 2022 we terminated all of our leasing activities in Russia, including 24 aircraft in our owned fleet and eight aircraft in our managed fleet. As of August 4, 2022, 21 aircraft in our owned fleet and six aircraft in our managed fleet remain in Russia. The operators of these aircraft have continued to fly most of the aircraft notwithstanding the termination of leasing activities and our repeated demands for the return of the assets. While we or the applicable managed platform maintain title to the 21 aircraft, we determined that it is unlikely we or they will regain possession of the aircraft that have not been returned and that remain in Russia. As such, during the six months ended June 30, 2022, we recorded a write-off of our interests in our owned and managed fleet that remain in Russia, totaling approximately $802.4 million. We did not have any losses from asset write-offs for the three months ended June 30, 2022. In June 2022, we submitted insurance claims to our insurers to recover our losses relating to these aircraft and are vigorously pursuing all available insurance claims.
Stock-based compensation
We recorded stock-based compensation expense of $4.0 million for the six months ended June 30, 2022 compared to stock-based compensation expense of $12.1 million for the six months ended June 30, 2021. The decrease in stock-based compensation relates to reductions in the underlying vesting estimates of certain book value RSUs as the performance criteria are no longer considered probable of being achieved.
Selling, general and administrative expenses
We recorded selling, general and administrative expenses of $71.3 million for the six months ended June 30, 2022 compared to $53.6 million for the six months ended June 30, 2021. The increase in selling, general and administrative expenses was primarily due to the increase in business activity, increased expenses related to insurance premiums and the transition of aircraft. During the six months ended June 30, 2022, we renewed our insurance which resulted in an annualized increase in our insurance premiums of approximately $16.0 million that we anticipate will increase our selling, general and administrative expenses in future periods. We expect an increase in operating costs due to higher inflation, increased insurance premiums, and certain geopolitical events, such as the Russia-Ukraine conflict. Selling, general and administrative expenses as a percentage of total revenue increased to 6.2% for the six months ended June 30, 2022 compared to 5.5% for the six months ended June 30, 2021.
Taxes
For the six months ended June 30, 2022 and June 30, 2021, we reported an effective tax rate exclusive of any discrete items of 19.8% and 18.6%, respectively. Due to discrete items related to the write-off of our Russian fleet, we reported an overall effective tax rate of 22.8% for the six months ended June 30, 2022.
Net income/(loss) attributable to common stockholders
For the six months ended June 30, 2022, we reported a net loss attributable to common stockholders of $373.6 million, or loss of $3.32 per diluted share, compared to a net income attributable to common stockholders of $165.8 million, or $1.45 per diluted share, for the six months ended June 30, 2021. Despite the growth of our fleet, our net income attributable to common stockholders and diluted earnings per share decreased due to the impact of the write-off of our Russian fleet.
Adjusted net income before income taxes
For the six months ended June 30, 2022, we recorded adjusted net income before income taxes of $355.4 million, or $3.15 per adjusted diluted share, compared to an adjusted net income before income taxes of $243.1 million, or $2.13 per adjusted diluted share, for the six ended June 30, 2021. Our adjusted net income before income taxes and adjusted diluted earnings per share before income taxes increased for the six months ended June 30, 2022 as compared to 2021, primarily due to the continued growth of our fleet and the increase in revenues as discussed above.
Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by GAAP. See Note 1 under the “Results of Operations” table above for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and reconciliation of these measures to net income available to common stockholders.
Critical Accounting Estimates
Our critical accounting estimates reflecting management’s estimates and judgments are described in our Annual Report on Form 10-K for the year ended December 31, 2021. We have reviewed recently adopted accounting pronouncements and determined that the adoption of such pronouncements is not expected to have a material impact, if any, on our Consolidated Financial Statements. Accordingly, there have been no material changes to critical accounting estimates in the six months ended June 30, 2022.