Share-based compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement, Noncash Expense [Abstract]

Under our equity incentive plans, we grant restricted stock units and restricted stock to directors, officers and employees to attract and retain them on competitive terms, and to incentivize superior performance with a view to creating long-term value for the benefit of the Company, its shareholders and other stakeholders.

AerCap equity grants

In March 2012, we implemented an equity incentive plan (the “Equity Incentive Plan 2012”) which provides for the grant of equity awards to participants of the plan selected by the Nomination and Compensation Committee of our Board of Directors. The maximum number of equity awards available under the plan is equivalent to 8,064,081 ordinary shares. The Equity Incentive Plan 2012 is not open for equity awards to our directors.

On May 14, 2014, we implemented an equity incentive plan (the “Equity Incentive Plan 2014”) which provides for the grant of equity awards to participants of the plan selected by the Nomination and Compensation Committee of our Board of Directors. The maximum number of equity awards initially available under the plan was equivalent to 4,500,000 ordinary shares. The 2021 AGM increased the number of equity awards available under the plan to 8,500,000 ordinary shares. The Equity Incentive Plan 2014 is open for equity awards to our directors.

The Equity Incentive Plan 2014 and Equity Incentive Plan 2012 are collectively referred to herein as “AerCap Equity Plans.”

The terms and conditions, including the vesting conditions, of the equity awards granted under AerCap Equity Plans are determined by the Nomination and Compensation Committee and, for our directors, by the Board of Directors in line with the remuneration policies approved by the General Meeting of Shareholders. The vesting periods of the majority of equity awards range between three and five years. Our long-term equity awards are subject to long-term performance vesting criteria, based on the Company’s U.S. GAAP EPS budget over the specified periods, in order to promote and encourage superior performance over a prolonged period of time. Our Chief Executive Officer receives an annual equity award as part of his compensation package. All outstanding awards of restricted stock units are convertible into ordinary shares of the Company at a ratio of one-to-one, prior to deduction for payroll withholding taxes, if applicable. Ordinary shares subject to outstanding equity awards, which are not issued or delivered by reason of, amongst others, the cancellation or forfeiture of such awards or the withholding of such ordinary shares to settle tax obligations, shall again be available under the AerCap Equity Plans.

In 2021, we granted certain restricted stock units the terms of which provided that those units would only vest if the average closing price of AerCap’s ordinary shares on the New York Stock Exchange is at least $75 or $90 for any 30 calendar day period to April 30, 2026 (the “Market Condition RSUs”). As discussed below, the Ukraine Conflict, the Sanctions and the actions of our former Russian lessees and the Russian government together represent an unusual and infrequent event that required us to recognize a pre-tax net charge of $2.7 billion to our earnings. Refer to Note 5—Net charges related to Ukraine Conflict to our Consolidated Financial Statements included in this annual report for further details. After considering the impact of the foregoing, our Board of Directors determined that, if we are unable to successfully collect on our claims under the C&P policy or the Russian airlines’ policies, the share price targets for the Market Condition RSUs would no longer effectively serve their purpose of retaining and properly incentivizing our key employees. Our Board of Directors therefore determined that, to ensure that the Market Condition RSUs served as an effective retention and incentive tool, the share price targets for the Market Condition RSUs should be adjusted to reflect the impact on the Company of the net charges related to Ukraine Conflict. The adjustments also provide that the revised share price targets will be appropriately raised if we collect on any of our claims under the C&P Policy or the Russian airlines’ policies, with the targets potentially resetting to or exceeding their original levels.

The following table presents movements in the outstanding restricted stock units and restricted stock under the AerCap Equity Plans during the year ended December 31, 2022:


	Year Ended December 31, 2022
	Number of service-based restricted stock units and restricted stock	Number of performance-based restricted stock units and restricted stock	Weighted average grant date fair value of service-based grants ($)		Weighted average grant date fair value of performance-based grants ($)
Number at beginning of period	3,140,879	5,009,792	$	47.80	$	51.15
Granted (a)	505,843	295,311	50.00		51.68
Vested (b)	(689,780)	(1,269,994)	40.77		51.31
Forfeited	(27,357)	(24,118)	46.23		46.91
Number at end of period	2,929,585	4,010,991	$	49.94	$	51.18

(a)Includes 390,659 shares of restricted stock granted under the AerCap Equity Plans, of which 282,532 shares of restricted stock were issued, with the remaining 108,127 ordinary shares being withheld and applied to pay the taxes involved. As part of the 108,127 ordinary shares withheld to pay for taxes, 56,041 ordinary shares were treated as granted and subsequently vested on the grant date under specific Irish tax legislation. As a result, we recognized an expense of $2.6 million on the grant dates associated with these ordinary shares.

(b)424,608 restricted stock units, which were previously granted under the AerCap Equity Plans, vested. In connection with the vesting of the restricted stock units, the Company issued, in full satisfaction of its obligations, 262,106 ordinary shares to the holders of these restricted stock units, with the remainder being withheld and applied to pay the taxes in respect of those awards. Restrictions on 1,479,126 shares of restricted stock (1,242,598 shares of restricted stock net of withholding for taxes) lapsed during the period. In addition, 56,041 ordinary shares were treated as granted and subsequently vested on the grant dates, as described in (a) above.

In general, the amount of share-based compensation expense is determined by reference to the fair value of the restricted stock units or restricted stock on the grant date, based on the trading price of the Company’s shares on the grant date and reflective of the probability of vesting. The share-based compensation expense was $102.8 million and $96.1 million, and the related income tax benefit was $13.1 million and $10.5 million for the years ended December 31, 2022 and 2021, respectively.

The following table presents our expected share-based compensation expense based on existing grants, assuming that the established performance criteria are met and that no forfeitures occur:


	Expected share-based compensation expense
	(U.S. Dollars in millions)
2023	$	82.0
2024	67.8
2025	33.1
2026	5.9