Ladies and gentlemen, welcome to BOC Aviation Limited's 2024 Final Results Conference Call. I will now hand the session to Mr. Timothy Ross to begin today's presentation. Mr. Ross, please begin.
Thank you, Ray, and welcome everybody to BOC Aviation's earnings call to discuss our final results for the year ended 31st of December 2024. With me today are our Chief Executive Officer and Managing Director, Steven Townend, our Chief Operating Officer, Tom Chandler, and our Chief Financial Officer, Wen Lan. Please note that some of the information you'll hear during our discussion today may consist of forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. You should not place undue reliance on any forward-looking statement, and you should review our results announcements for full details. Please also note that all currency references in today's call are in US dollars.
A copy of our earnings announcement is available both via the Hong Kong Stock Exchange and in the investor section of our website at bocaviation.com, and a conference call presentation is also available in the investor section of our website. This call is being recorded and will be available for replay from our website within the next 24 hours, as the transcript of today's discussion. I'll now turn over the call to Steven Townend for his comments.
Thanks, Tim, and thank you to everyone for joining us for our 2024 Final Results earnings call, where core business growth, insurance proceeds, and physical aircraft recoveries drove another year of record earnings. We're delighted to report net profit after tax of $924 million for the year ended 2024, equivalent to earnings per share of $1.33. This compared with net profit after tax of $764 million in 2023. Adjusted for recovery of the write-down in aircraft values in 2022, core net profit after tax rose 16% to $633 million. Our board has recommended a final dividend of $0.267 per share payable to shareholders of record on June 6th. Combined with 2024's interim dividend, this would be a record total of $0.4658 per share, an increase of 21% on the total dividend paid for 2023.
This represents 35% of reported net profit after tax for the year, a payout ratio consistent with prior years. Our total revenues and other income rose 4% to $2.6 billion for 2024. We ended the year with total assets at $25.1 billion and net assets per share up 11% since end 2023 to $9.07. Our collection rate remained above 100% as airline customers continued to pay previously deferred amounts, and this helped to lift our operating cash flow net of interest to a full-year record of $1.9 billion. We finished the year with cash and undrawn committed liquidity at a record $6.5 billion. Airline traffic that supports demand for aircraft had another year of double-digit growth in 2024, rising over 10% for the IATA members that account for over 90% of the world's passenger activity.
High fares, record passenger load factor, and a strong performance from airline freight activity are expected to have maintained global airline earnings above $30 billion for the second year in a row. All geographies reported traffic growth, and all regions were profitable for only the second time in over a decade. IATA expects that this positive momentum will persist into 2025, where airlines are forecast to report a record $36.6 billion in global profits. We leverage this global strength in customer demand to continue building our delivery pipeline in most of the world's major markets and to focus on the larger value lease transactions that leverage our scale and reach. Examples of these are the 15 A320neo aircraft purchase and lease back signed with Frontier in the US and the financing of 14 737-8 aircraft for TUI in Europe.
Our expansion continues to be constrained, however, by supply-side shortages affecting both aircraft and engines. These have been a hallmark of our industry since 2018 but have become particularly acute in the last two years, where availability of resources and skilled manpower have hampered production and delivery of the aircraft that we have on order. While the number of new aircraft deliveries are anticipated to rise by over 25% in 2025 compared with last year, we do not expect a more balanced supply-demand picture before the end of the decade. The corollary of the tight supply situation is evident in firming aircraft valuations and rising placement aircraft lease yields. We're seeing a clear upward trajectory in both monthly rentals and current fleet market value. Tom will talk further to this later on the call and will detail how we are capitalizing on these developments to generate value for our shareholders.
Boeing and Airbus's current record backlog, worth a combined $1.2 trillion, reflects both the strength of airline demand and the cumulative effects of delivery delays. This year alone, we anticipate that the requirement for new aircraft financing will rise to $100 billion, its highest since 2018 and representing a 30% increase on 2024. This number reflects our addressable markets and is expected to rise a further 40% over the subsequent two years to almost twice 2024's level. Turning to macroeconomic environment, the calm that characterized it when last we spoke in August largely persisted for the rest of the year. Although spiking early in the new year, the U.S. Dollar Exchange Rate Index is in line with 2024's average, which was flat on 2023. Meanwhile, the average price of jet fuel fell over 9% in 2024 and is a further 12% lower today, a positive for our airline customers.
Cuts to the federal funds rate that we saw in second half 2024 positively affected our funding costs, and any future reductions will lower the rates on our predominantly floating bank debt and hence our cost of funds. All else being unchanged, every annualized 10 basis point reduction in our cost of funds would lift our NPAT by about $2.1 million. Towards the end of 2024, we reached settlement agreements with more of our insurers in respect of Russia-based aircraft, which, when added to the $393 million in previous recoveries, meant that we had recovered the full $507 million written down in 2022. As of today, we believe that we are the only major lessor to have achieved this. Since the end of the year, we have welcomed Jin Yan to our board, who replaces Chen Jing, and we thank Ms. Chen for her contribution.
Meanwhile, changes at our senior management level included Chen Xiaofeng, who replaced Deng Lei in September, while Wen Lan replaced Wu Jianguang, who retired in February. Paul Kent's role as Chief Commercial Officer was also enlarged to oversee global airlines' leasing and sales activities, and we thank Mr. Deng and Mr. Wu for their service. I'll now hand over the call to Tom to speak to our operations and business development, and then Lan will present a more detailed review of our P&L and balance sheet.
Thank you, Steven. Our operational and business development report is as follows. We delivered 39 aircraft to 13 different airline customers, of which one was purchased by the customer at delivery, giving us 38 net new aircraft deliveries for the year. We also signed lease commitments for 118 aircraft. As at the end of 2024, our total portfolio stood at 709 aircraft and engines, comprising 445 owned aircraft and engines, 32 managed aircraft, and an order book of 232 aircraft, representing a record-committed CapEx of over $12 billion. Our order book was little changed from 2023's record levels, with nine aircraft added during the year, along with 10 engines. This strong pipeline will support our growth to the end of the decade and comprises the most popular new technology aircraft types, predominantly Airbus A320neo family and Boeing 737-8.
The new additions to our portfolio during the year were all fuel-efficient latest technology aircraft, including five A220, 21 A320neo family, 11 737-8, and one 787-9 aircraft. Manufacturer delivery delays had a material effect on our CAPEX during the year, with 27 committed aircraft originally scheduled for 2024 delayed into later periods. The causes of the delays remained similar to those impacting our first half targets and included airframe and engine supply chains falling behind planned increases and compounded by industrial action at Boeing in Q4 2024. We started the year with 47 aircraft scheduled for delivery in 2025, and we are confident of adding to this against a backdrop of an anticipated increase in delivery numbers by the two main aircraft manufacturers.
During 2024, we transitioned 11 used owned and managed aircraft to airline customers, with no aircraft off lease at the end of the year, the first time that we can report this since March 2020. The weighted average age of our owned portfolio was five years at the end of December, remaining one of the youngest in the aircraft leasing industry. We also continue to have one of the industry's longest weighted average remaining lease terms for our owned portfolio at 7.9 years. The proportion of our fleet that is latest technology continues to rise as we take delivery of new aircraft and sell older ones. Today, this stands at 80%, up from 77% at the end of 2023. The average appraised value of our operating leased fleet also continues to rise and was $21.1 billion as at 31st December, representing a 15% premium to that fleet's net book value.
We sold 29 aircraft from the owned fleet in 2024, improving on 2023's 20 aircraft sales as we capitalized on the prevailing strong demand for used assets. These aircraft had an average age of 9.3 years, close to twice the fleet average, and included five mid-life widebodies, for which we've seen resurgent demand in the secondary market. Ongoing improvements in aircraft values lifted our gain on sale margin to just under 11%, slightly ahead of 2023's level. Lease rate factor at 10% was unchanged from 2023, reflecting the timing effects of older aircraft sold and the delayed aircraft delivery of new aircraft. Net lease yield improved 10 basis points to 7.2%, aided by a lower cost of funds in second half 2024. However, the monthly rentals achieved for the A320neo and Boeing 737 models that constitute the majority of our order book have risen strongly in line with the market.
Our average lease rentals for A320neos rose 20% from 2019 to 2024, while for Boeing 737 aircraft, these are up 24% over the same timeframe and will become evident in our numbers as these aircraft deliver. Turning to our ESG targets, we continue to exceed the Hong Kong Stock Exchange's target of 30% for female board participation by 2030. Four of our 11 directors, including our chairman, are female, which is also considerably ahead of today's Hong Kong Stock Exchange company average of around 21%. During the year, we retained a strong focus on community-based projects in the cities and regions where our offices are based, with over 80% of our employees participating in a total of 14 CSR events around the world.
In Singapore, we built on our first half achievements, arranging another two separate volunteering sessions with Food from the Heart, while our Dublin colleagues supported Breakthrough Cancer Research. We also had a total of 108 employees participate in the Orbis Virtual Challenge in September. That concludes the overview of our operations and business development performance for the year ended December 2024, and with that, I'll now turn it to Wen Lan for a deeper review of our financial performance.
Thank you, Tom. As Steven mentioned earlier, we reported a net profit after tax of $924 million for 2024, equivalent to earnings of $1.33 per share in our record annual profits. Total revenue was $2.6 billion, rising 4% on 2023, with growth especially attributable to our leasing business and gains on aircraft sales. Operating lease rental income was $1.8 billion, supported by a stable lease rate factor of 10%. Finance lease revenue again contributed strongly, up $148 million to $270 million, as finance lease receivables rose 50% from year-end 2023 to $3.7 billion. Our gains on aircraft sales increased by over 50% to $180 million compared with the year-end 2023, as we lifted the number of aircraft sold to 29 compared with the 20 aircraft sold last year.
Our income of $297 million was derived from a wide range of sources, but fell primarily on account of lower insurance settlement proceeds than in the prior year. Other interest and fee income was down 11% to $76 million in 2024 because of lower contributions from pre-delivery payment financing. On the cost side, our two largest expenses continue to account for around 90% of the total. When adjusted for the $175 million buyback of aircraft impairments recorded in the first half, depreciation, our largest expense, was flat at $794 million compared with 2023. This reflected sales of operating leased aircraft from the owned fleet and the growth in finance leased aircraft, for which depreciation is not incurred. Finance expenses, our second-largest item, rose 12% to $710 million.
This was mainly due to a higher cost of debt of 4.5% per annum in 2024 compared with 4.1% the previous year, while gross debt at $16.6 billion was little changed from the end of 2023. Excluding inflation effects, aircraft impairment of $11 million was marginally higher than last year's $9 million, but amounted to only 0.06% of fleet value. Moving to the balance sheet, we ended 2024 with total assets of $25.1 billion, funded by total debt of $15.6 billion. Total equity reached a record $6.4 billion compared with $5.7 billion at the end of 2023. This was mainly attributable to profit for the period and partially offset by the payment of dividends, amounting to $327 million for the largest distribution in our company's history.
We raised $5.5 billion in new financing, comprising $1.5 billion from the debt capital markets, with a further $4.0 billion from facilities with our banking group of over 50 banks. This combined with record operating cash flow net of interest of $1.9 billion saw us fund our $2.5 billion of CAPEX and repay $3.6 billion in maturing bonds and loans. Our total debt was largely unchanged from last year, and our gross debt to equity ratio fell to 2.6 times as retained earnings continued to rise. Rating agencies S&P and Fitch both confirmed our A-minus credit rating earlier in the year. We have only $2.6 billion of debt obligations scheduled for payment during 2025, which, together with our anticipated CAPEX, can be funded from our cash flow as well as our committed liquidity of $6.5 billion.
Finally, our effective tax rate was 11.1% in 2024, in line with 2023's rate of 11.2%, mainly due to the recovery of impairment losses in the first half of the year, partially offsetting the effect of minimum global tax implementation in a number of jurisdictions. I'll now hand the call back to Steven for his closing remarks.
Thanks, Lan. In 2024, we sustained our focus on delivering value for our stakeholders. We achieved this through growing earnings from our leasing activities, through realizing our investments in aircraft at historically high margins, and our relentless focus on securing both insurance settlements and assets in respect of Russia-related aircraft. Without the support of our board, our employees, and our business partners, this would not have been possible. In 2025, the fundamentals of our business remain unchanged from last year, with passenger demand for travel and airline demand for new and used aircraft at record levels, which are not matched by new aircraft availability. The challenges associated with receiving contracts and deliveries as scheduled that have characterized the last five years should ease compared to 2024, but will persist to some extent for a number of years.
Despite this, we expect to continue growing our aircraft assets in 2025, whose appraised market value ended the year with a record $2.6 billion premium to net book value. Our order book of 232 aircraft is a valuable commodity in the manufacturer's production skylines, which, together with our $6.5 billion in available liquidity, positions us well to achieve our growth targets. With that, I conclude our review of the industry, our company's financials, and our outlook, and I'll pass the call back to Tim.
Thanks, Steve. This wraps up management's formal commentary. We now have time for Q&A, and out of fairness to others, request that each participant restrict themselves to one question and a follow-up unless time permits for additional queries. I'll hand the call back now to the operator for the Q&A session.
Thank you. We now begin a question-and-answer session. In the interest of time, participants are limited to one question each. If you have any follow-up question, please join the queue again. Participants with a question to pose, please press Star 1 on your telephone keypad, and you will be placed in the queue. To cancel the queue, please press Star 2. Once again, Star 1 on your telephone keypad now. Our first question, Ms. Amy Chen from Citi, please go ahead.
Hi, first I want to congratulate the management on such a robust result for the year of 2024. Looking ahead for the year of 2025, what is your aircraft delivery pipeline looking like, and what is your CAPEX in the year of 2025? Thank you.
Hi, Amy. It's Steven. So as we stand today, we have 47 aircraft contracted for delivery this year, and we anticipate being able to add to that as we move through the year. And so we're maintaining similar CAPEX guidance to that that we had last year, and we expect that this year, with deliveries improving, we're seeing more stability in supply chains that we should be able to achieve it.
Thank you. Because I wanted to follow up on your plan regarding operating lease and finance lease. Because in the past 18 months or so, we've been doing quite a few finance leases. And going ahead, what is our plan?
So Amy, I think the way that we've always looked at the finance lease product, it's part of our, if you like, our suite of financing products that we can use for airlines. And it's something that we think will be strong in certain parts of the cycle and not in others. Currently, that's about 15% of our portfolio is finance lease assets, finance lease receivables. We anticipate that that will grow further. But as we've always said, we aim to be predominantly an aircraft operating lease company. And so as our order book starts to deliver in greater volume, now that the supply chain is starting to resolve itself, we should expect to see greater growth in the operating lease business than we see in the finance lease business during the course of this year.
Thank you. That is very clear.
Our next question, Mr. Paresh Chand from HSBC. Please go ahead.
Hi, Steven. This is Paresh here. I'm just wondering if you can help us understand how should we think about the net yield given the fluctuation that we saw with respect to the interest rate cycle. But the fact that now the delivery is on track at rather an elevated level, is it fair to say that we have seen the drop in terms of net yield? And 2025 is a matter of how much improvement do we see versus 2024? Thank you.
Hi, Paresh. Yes, I think you're right. I think that there's really three things that drive that net lease yield. Firstly is being able to take delivery of more aircraft, which have been placed in recent years and so are at higher lease rates. Secondly is that the aircraft that we have on low-yielding leases from the pandemic period, either we are selling those or the leases are expiring and we're renewing them at higher levels, and then thirdly, as interest rates come down, if in fact they do, then we'll get a further tailwind from that as well, so if we can get all of those three things happening together, then we should start to see a material upturn in net lease yield.
I think that was really sort of. Thank you and have a good day.
Thanks, Paresh.
Our next question, Mr. Jay Sun from DBS Bank Limited. Please go ahead.
Hi, good evening. Just a quick question from me. I wanted to follow up on the earlier question. Could you maybe clarify how much of your fleet is still tied to the below-market leases that were structured during the pandemic? What is the expiry profile of these leases? And maybe if you have any color to share on what kind of rate uplift do you anticipate once those leases expire and can be remarketed at today's stronger rates?
So if we look at what percentage of the book is still on leases that were contracted during that period, it's about 13% or 14% that is still on that. And so as I said earlier, the way that we address it is two ways. It's either when we are selling the aircraft as they're getting to the end of their leases. And we are seeing a lot of appetite at the moment from some of our airline customers to acquire aircraft at the end of those leases. But it's also where we are remarketing the aircraft up and either keeping them with the same airline but at higher lease rates or where we're moving the aircraft and achieving higher lease rates. And we're seeing where that is happening, an uplift of 30%-40% from rates that we wrote at the very bottom of the market.
We will start to, from those two different sources, we'll start to see the effects of that feeding through on the existing portfolio.
Thank you. That's really clear. Appreciate the color. Thank you.
Our next question, Harry Yeung from UBS. Please go ahead.
Hi. Thank you very much for taking my questions. I have two questions. One is related to the CapEx. I think, Steven, you just mentioned you are maintaining similar CapEx guidance versus last year. And I remember last year we are targeting $4 billion for the total CapEx. So is it reasonable to expect for this year we will see $4 billion CapEx come into play? That's my question. That's my first question. And my second question is related to the alternative revenue source growth. So obviously, we have some supply chain issues which weigh on our operating lease rental income growth. But I'm curious as to whether we see other areas where we have more opportunities to grow.
For example, the pre-delivery payment financing, which I think, Steven, you mentioned before that this is an area where we see more opportunities as more delivery schedules to be in place in 2026. Just curious as to whether you have more color on the alternative revenue source? Thank you.
Okay. Thanks, Harry. So CapEx, yes, that is where we're guiding people to. And I think if we look at the dollar volume of aircraft delivering, so in 2024, the total volume of new aircraft delivered was worth about $80 billion, which is still well below 2018 levels. That's kind of how bad the supply chain was. But we're anticipating that that will step up from $80 billion in 2024 to $100 billion in 2025, and then continue to move up again in subsequent years. And so to some extent, the way to think about that is each year that's our addressable market. And so if our addressable market is growing at that speed, we should be able to expand our CapEx. In terms of the PDPs, yes, you're right.
As we start to see delivery rates and production rates go back up again, then for our airline customers, they will need to start making increased pre-delivery payments to the manufacturers and will need to fund that, and so we're already seeing a marked uptick in those discussions that we're having with our customers, and I think you'll start to see a number of deals coming through that perhaps we originally anticipated would have come last year, but the deliveries didn't tick up, but as we start to see that now, we'll start to see those coming through this year.
I see. That's very clear. Thank you so much.
Thanks, Harry.
Our next question, Chen Fan from Morgan Stanley. Please go ahead.
Thank you. Congratulations for the very robust results. I have two questions. The first one is about the lease yield on your finance lease. I noticed that there is an expansion in the lease yield, and I assume the net yield on that finance lease should have expanded on a year-on-year basis. So going forward, what's the outlook for the yield on your finance lease business? This is the first. The second question, can you remind us how the global engine issue—I mean, it's related with engine problems, the prolonged maintenance cycle, or higher cost from engines, the delay in engine delivery—impacts your operations and your financials? Thank you.
Okay. Thanks, Chen Lei. Maybe what I'll do is I'll talk about the finance lease first, and then I'll let Tom talk about the engines, so what we've seen year-on-year on the finance lease side is that our yield on that business has gone up by 60-70 basis points, and so we're seeing quite a bit of expansion, and I would think that we should be able to maintain that same yield going forward. So it is a credit business that we're adding to the portfolio, and so we're positive on that. Maybe then I'll pass over to Tom to address the engine question that you asked.
Thank you, Steve. So looking at first, you mentioned about the impact on the deliveries from the engine durability issues. This is fairly limited, and really it's the engine manufacturers striking a balance between supporting existing operators by delivering increased numbers of spare engines, where this is required to support ongoing operations, against the deliveries of new engines to support aircraft deliveries. So over the past year or so, that effect has been relatively modest. We do still see signs of it at times. I think in terms of the overall engine durability on the new generation of aircraft, one of the things that's perhaps been missed in the reporting over the past six months or so has been that there have been certification of the improved durability parts on the new engine programs. And these will start seeing the benefits from over the next year or two.
There is some benefit coming on the new engine programs that will help alleviate some of the operational issues that airlines have seen over the past couple of years.
May I confirm two things? One is you said finance lease yield should be at least maintained at the current level, but going forward, interest rates probably will drop. So that means your net yield margin on that business should expand. Is that correct?
So what we were saying was that we should be able to maintain the gross yield. So the bulk of that is locked in at fixed rates. So yes, that should stay in place. And as interest rates fall, we should see some expansion in net yield. So yes, that's correct.
Thanks. And second question, follow-up on engine. So the maintenance on engines, the repair cost, etc., it has nothing to do with our business, right? We don't pay for that?
Correct. We don't pay for the maintenance cost on the engines.
Thank you. Thank you. That's very clear.
There are currently no questions in queue. If you would like to ask a question, please press star one on your telephone keypad now.
Okay. I'll phrase it as, and thank you very much. We'll draw a line under this call. Thank you all very much for joining. If you have any follow-up questions, please don't hesitate to contact either myself or Kelly Kang at our email addresses or via the numbers you have on our website. Thank you very much, and we look forward to speaking to you all again in six months' time. Good night.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.