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AYR Aircastle

Participants
Jim Connelly SVP ESG & Corporate Communications
Mike Inglese Chief Executive Officer
Aaron Dahlke Chief Financial Officer
Doug Winter Chief Commercial Officer
Roy Chandran Chief Strategy Officer
Mark Streeter JPMorgan
Douglas Runte Deutsche Bank
Robert Smalley UBS
Call transcript
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Operator

Good day, and welcome to the Aircastle's Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jim Connelly, SVP of ESG and Corporate Communications. Please go ahead sir.

Jim Connelly

Thank you, operator. welcome Limited’s and financial quarter everyone call. update morning to third Aircastle XXXX Good are Chief Mike Aaron today me With Inglese, Financial Dahlke, Executive Officer. Chief and Officer; who members Also the are the available other on management Q&A. line team will be during of but presentation and that at recorded like to replay www.aircastle.com. Web site will be We'll this shortly, remind is call begin I'd the our being a everyone available through release and call. you our presentation There the can this find that press also accompany PowerPoint today, statements which not I'd like that to forward-looking out may facts, deemed are be point historical statements. from Actual differ estimates may in results expressed those materially the or expectations statements. Certain detailed to differ in that our also materially are filings, cause SEC on expectations can which Limited's facts actual our be could from site. results found Aircastle Web Aircastle statement press full to the Limited's legend. for forward-looking release I'll direct you turn With to call the that, over I'll Mike. now

Mike Inglese

Thanks, everyone. Jim. today. for joining you us thank Good And morning,

fiscal much continued optimism and We industry of brought the that aviation XXXX. of which short transatlantic be may the For international travel following. XX, positive Strong our ended aircraft soon November routes values saw bolster trajectory. narrowbody haul a third continue reopening quarter, recoveries improving to volumes

were positive a COVID-XX now variant. find developments, ourselves new challenged by we Omicron these While

reduce full Omicron's to staffing risk in challenges. we global present in flight per in a to U.S. variant to may due Although Europe winter restrictions as the the to early normal Government to reactions significant volumes, due a Traffic decrease it's too also forecast the term, particularly expect seasonal near impact new should in to aviation. trends. likely flight is

anything need predictions If for security two measures coordinated borders. governments pandemic from uniformed learned difficult. during is the the across protocols making past has the stressing years we've IATA recommended So amongst

pass focused can So will make that is The our remains the industry assurances and the I long-term vigilant, positive. collecting remains Omicron on cash supporting nimble variant customers. on perspective and today on our Aircastle only is

XX the are is revenue. type intent developments to have of during are lease represented and XX to aircraft Aircastle. we of financing through you share is watched prices the report But has narrowbody to words aircraft. were the purchase increase are emissions that And high managed industry third good September that for EX fiscal base new direct acquisitions we we the cash and and December. XXX% sale up In with our flows This our visibly [Indiscernible] rental greatly in Max quarter is factors. With technology Indonesia's Both the non-cash Boeing were X 'XX. pleased rate which We delivery, briefly significant And completed acquisition third our are Garuda Embraer, report we've EX looked result commanding of made customers low cash the We're the our team up year-to-date early quarter COVID-XX transactional and we produced challenges related challenges, million with leaseback new few extremely the fourth XXX third fundamental and the and Neo, AXXX protective XXXX. We lease a of impairment year. efficient, our sales [prior] aircraft a deferral program versus low return delivered leases aircraft. operations KLM were morning. tech, challenging optimism in charge. results, almost $XX towards of as second unfold, improved long these not third adjusted proud fuel versus and with of year Year-to-date Southeast quarter, the fiscal XX of notified an natural revenues. a aircraft. the leading for this for primarily sustainability the future more with in quarter, in investing. lease the brought that demand revenues seen collections benefits. XXX% align as This prior XX% Asia. with industry's to Although increase Cityhopper coming The third believe on cautiously million emissions XX% to in $XXX having rental are by deliveries filing Cash our [ph] a competitive of in guarded repayments early total speed to our we progression fourth acquired occurred enter the of like three EBITDA improved, lease and for quarter these X% now delivered surge flows fuel-efficient down recovery are were increasing. The from and fiscal from great requests strategic market investments acquisitions the about we'd

sustainable parent bolstering On reflection flow company. outstanding by initiatives Aircastle well an to trajectory. maintaining revolving through a solution difficult financial Americas strong a we Leasing our profitable partners focused is in Most Despite lease sheet leverage, our This commitment customers March maximizing to is XX Omicron legal and marketing, on relationship strategic and our this our executed the technology a be known off-balance forward and of Marubeni optimal capital access facility technical with we're new teams. position keeping is focus the will extensions solution. two the covering facility financing strength restructurings unique investments. liquidity, to new over closed with Since recently for of front, cash our towards steer Corporation, to by has new new our of expanding customers. we're has past $XXX challenges and our co-owned Aircastle's credit the operating low creatively These enabled to working pleased the subsidiary depth continue our a sector competitive struggling Mizuho with Aircastle have moving million and with of disciplined a Aircastle and venture growth long-term importantly, credit for In resilient as future. variant, third our on joint Aircraft lease strategic the the leasing XXXX, USA strength, aircraft. quarter, rating structure proven experience The inflows. ownership to been core evidenced us the of funding channels. years,

the Mizuho strategic over that, results financial commitment Leasing. And and With investors, call Corporation our go our Marubeni more pass with to detail. support who and the I'll of over Aaron in

Aaron Dahlke

Thanks, Mike.

XX Garuda impairment three million we aircraft net in adjusted of mentioned, a which Mike and charge results offset million. As non-cash XX a of of by maintenance bankruptcy loss comprised with XX finished for third of net the quarter EBITDA The million XXX million, XX million. of revenue

quarter were XXX increase aircraft quarter acquisitions improved second This rental primarily revenues million. versus million of and was XX third collections. For lease the the to due rent

lease and is of rentals, points cash third XXX the percentage quarter Our that's approximately XXX% the This collected XX cash from Year-to-date, XXX% second was flow sale collections quarter million. improvement from in of second was from deferrals flight equipment, higher driven a the quarter. cash reported year, finance report for XX we this of which the million which primarily operations than prior rate we from by and proceeds on and rents the year.

end structure, capital of now is debt to Turning the versus our leverage at X.Xx X.Xx our to fiscal equity XXXX. net

billion of third at April the We or our X.X was and have end total no quarter, notes unsecured XXXX XX% the due which was billion debt until unsecured. X.X of

new requests to deferral Moving down. are number The of deferral. on

agreed leases, that to exchange important the these security restructure with liquidity in providing. pursue next and longer to we're XX As valuable payments for strongly repay we for of broader beyond packages, overtime. of we defer X, January XX accommodation, to stress restructurings, other with million to part terms are lease months. amend It's airlines repayment have of opportunity or XX consideration approximately to in XX% deferrals any better lease payment terms, for the the

of reserves, letters deposits million as addition, XX, These In held of credits million lessees. we our in in combined XX and equals from million. maintenance XXX November in XXX XXX security million

terms projected cash, our X.X adjusted and comprised flows liquidity. we is ample In billion unrestricted billion through with of cash January billion more This X.X X, of liquidity, credit XXXX. contracted had undrawn asset X.X operating of of facilities sales and of than coverage

strategy, As flow. Mike and us improved revenues challenges but which in now there are we our believe cash has stronger mentioned, brought ahead,

strategic our competitive a structure as standalone view advantage. of also We capital ownership

maintaining diversifying most for to the And our grade recovery was are ownership Aircastle the liquid on our and investment up that open narrowbody investments as And base focusing conservative happy leverage. operator, This aircraft unique is approach our importantly, well call We questions. credit sustainability benefits. aviation we're while long-term rating, path. with to great with industries positions

Operator

Instructions] JPMorgan. Streeter Mark from first Thank [Operator you. question comes Our with

Your please ahead. line go open, is sir,

Mark Streeter

that aircraft what of impairment? always percentage number the Good questions, so prior XX% did down, million book morning, any value XX%? carrying write was Couple to those XX of of like sort everyone. XX%, sort you of know ballpark gross impairment, Just we Aaron,

Aaron Dahlke

in would of and me. of Mark. about. XX I to value decline months, afternoon, But kind you primarily pre-COVID when that that change Good change you can don't XX% percentage something level, XX% change front bodies say or fair wide I since at the aircraft past of look the over think that, have is

Mark Streeter

there with if you're reserves, that what's Okay. situations that of credit, million in number little deposits like an Yes, it related was, something it to et default, bit against into just be sort good And at of of, What or that tell way willing holding way up in is there? the just deposits, to asked of with me if as the investor are the reserves and of regular to we that of amount XXX in that you is disclose way? this to look what restructuring and cetera. as sort you that that if will, housekeeping could break you're how me extent LCs just the would or follow morning, in can portion or item. much to then, at that, Is well, problematic that deposits, on you versus lessees want look us total letters a that a

Aaron Dahlke

question. good a it's Mark, Yes.

XXX individually, obviously, been policy think our security until revenue to clear about an the We so recognition haven't a on that And, disclosed you revenue we we've can up that's position will that good covered. aggregate, breakout record have we're million. package,

have front me of haven't right And that, percentage don't say in specifics up. And now. I that been given so that I we would

Mark Streeter

picture No you. big for Okay. question And then, problem. Mike,

production this shortage so forth in aircraft on talking much competition really a was I to with a single importance chain, so on read an just love here, and having not Edinburgh, seeing increase X.X. aircraft it consultants aisle EMEA Scotland below aisle and about about, going hear couple there on is to able article factors be debate was book started to appraisers And side, in conference, over single a tying about production reading got certain an there's enough about by in term, there rates, cadence. the back about, the meet coming, and I'm picking some OEMs, right was order lessors to Airbus, about fast I'd controversy if we already getting talking think on now whatever the single there the when just it next leaseback demand cetera. I week said too OEM debate. there in rates there's think are again, weigh is an sale And is in interesting shortage, right, near I this Austin, markets. is very I lease how years, because And that real time the fast won't it the rate you aisle And commodity supply And the steam. really of because et of up talking to and

and Aircastle that tie into cetera production how supply order demand, into strategy. to rates, trying fits book, So et

Mike Inglese

reabsorbed Okay, there's looking so, unpack NGs to But bit for generation up couple a homes fair so, certainly as years. new of current picks CEOs there. an And the and for that'll next over and yes, there MAX's. get a demand clearly, is NEO's quite few appetite to XX still be tech,

betting occurs. are change which I pop book as invested may market. big to through pressure originally, that you're on I'm today. some big reabsorption think able up is be park to sort at is next that order dramatically capacity because book big none or And a and to Omicron see as strategy Aircastle implausible player, of start each last see, we order get this to think the change It's to big take if delivering, or which a a never who that, maybe occasionally going not Airbus sure There approach to serious so? think Boeing, been there'd be to perhaps point. is with advantage to We've likely variant, Airbus, my don't ramps player. anybody's that this prone Are with people of of. not be shift But I Aircastle's and place So the to order we in going I shareholders weren't of year Aircastle or OEM, don't should up we else opportunities I don't the looking over a strategy the this anyone expecting me,

Mark Streeter

the on Airbus the going you Boeing in or fast and enough? are that camp in not fast So ramp are up too production

Mike Inglese

Look, try a they I as different than they're fast do. model because to have going to go as business they can

of chain, I going but in don't going they're going in world, going be ramp to I So to say they're they're body resources and doing think the take to they think how to the expecting, to what's given going will to recover. try and do, years? people be work to in side, do Airbus things to able But what context faster wide don't on as seen. supply or ramped. know get the they that to next think that they're believing go I be I to going many do ramp who it's are much people up they're don't gives they on where what going can. Boeing think I can longer as No, whether to them Mark, than to divert that remains the two And opportunity at the are

Mark Streeter

the time. Appreciate Great, much. thanks very

Mike Inglese

Mark. Thanks,

Operator

move Doug to [Operator Deutsche Runte Instructions] at Bank. next We'll

Your line ahead. go sir. open Please is

Doug Runte

Yes, good morning.

are. are You wonder fixed XX quarter XXXX. also you if there since placements types mentioned next that And degree your I aircraft perhaps in of the of difficulty relative year? presentation those in what your fourth can are what fiscal of discuss the aircraft

Doug Winter

Winter, Doug okay. is you this so hear Doug, can me, Yesh, if

and refer that our As that under already of year. between it We relates to fiscal current six you currently either XX the AOG scheduled aircraft of return to aircraft who now LOIs. otherwise to or the are are have actually remainder those

our It in We includes already And are being African, part out placements. that the should Five remaining that the two three of have leases aircraft under XXXs. aircraft. Garuda removed. confirmed also we are X, end-of-life note that Also, being is as what process and of that terms includes XXXs of documented. those includes also South I in just being one A we've got LOI,

four So moment. aircraft, other that me with of one AOG is which actually leaves at the

AOG more we're scheduled The sorry, two other the three, I'm two there's February. of AXXX those XXX, then, the moment. prospects. leases are XXX mainline for are all working and to before NEO actually at of narrowbodies which Those whose are expire And end various

nine can of aircraft, going sorry, destined are for leases fiscal to part excuse I lease as Looking scheduled up possibly end-of-life currently And I in year, tell XXXX you it sale or have be or XX, ahead those those expiries me the believe is XX, course conclude. coming XX during eight out to year we relation 'XX. fiscal to

aircraft finalizing two which verge extensions we're have the of We for. on

prospects. another a which high include an extension We And fiscal conclude that wide leaves for. for with that five we're various And four body we that aircraft transitions to during to working I therefore ‘XX. does have AXXX that execute confidence have the course year one of me will

is of XX not with count it AXXX that what include, Now include also does does are that not Garuda.

that and a that need during come on for. we course but the to contemplating the we out will find remains the home of well For 'XX moment as are lease, likelihood could

Doug Runte

never the general, customers future? maintenance I some payers. that in you of thing. And be write that that are vulnerable in degree that can general restructurings in your as in offs But wondering could fact do feel comprehensive as the are fleet I'm there the maintenance highlight of Write you Great. most percent your with, guess, what Or payers? further offs ameliorated to risks revenue for good Thank offset pain. a maintenance are answer. you

Mike Inglese

the a don't because the guess, less maintenance generally, And who payers non-maintenance better were the gross half would thought years people specific turn credits half that maintenance worthy is me. in so versus honestly So yes, payments. front of credits credit be credits. times I ones the typically, that and during say probably And out neighborhood data last today of probably are COVID. prior years doesn't happened that's in didn't I few also certainly span making It our life of and mean not has the better and payers are to have of that customers XX a few in

in there's that never a perfect a -- it's context. match not So

Doug Runte

since I'll that looks structure, other for record ownership couple XXXX. questions. fleet, Well, ABS ABS, Mark in for we're any were early of given inclinations? the a in given there an Obviously, past, your It player in role poised brave, given Is like potentially space. maybe so you was ask your issuance aircraft your

Mike Inglese

a Probably that top in just transaction. I'm a current ABS I keep the for pursued market, sort reappeared of permanent more if context change do we be would sale certainly yet. year, is But eye of but capital so. it hasn't a we not perhaps on. the around for know an necessarily it, couple the it's the priorities activities market that think likely And don't But pursue you

Doug Runte

you the of you the yourself? of the What the are start space in the the are for globally of since consolidation lastly, your strategic be owners? Okay. further And there's speculated and are see long coming. announced playing seeing What awaited to opportunities? own seems what space? Aircastle medium size, one been a potentially then, do one very strategic your I guess and transaction transaction, and large, How inclinations What

Mike Inglese

in context It's the and mean a and off. the pull to thing to keep But M&A what of predict in see the this of for eye lessor much positioned when to and marketplace will business And we right over opportunity. find it the on consolidation time, We think franchise. space could harder decade. in the I an I grows Sure. balance transactions growing more play industry the and it matures if we'll we be in the as think

Doug Runte

for Great. answers. Thanks very the all comprehensive much

Mike Inglese

Thanks, Doug.

Operator

Smalley We'll UBS. from our Robert question next take with

ahead. is open. go line Please Your

Robert Smalley

doing answered. Hi, of asked lot A questions thanks the good and for morning, call.

back the underpin several that One, of any given business the that line? of fit decreased think And about a How you capital this number just then now. your for for in. years comments, structure Is of improvement them priorities, So the in on getting more in Do one. then, following state into Thanks. do of that even world ago, cargo your hybrids cetera? in Number helped your on up I given all there they of this terms you your the activity credit. need two. the And at what is need et are Is that two, one that perception your point? ownership XXXX? institutional hesitancy at more

Mike Inglese

Roy the So then question on in will jump let capital me cover topic. to maybe Chandran ask freighter the and I

years It portfolio. percentage bigger number frankly didn't much we of a our yes, had as So ago, a as freight was of work well hoped. out

freighter context And see that still we own the so in sector to conversions. the be in may some our of opportunities freight experience, passenger given there

to that context opportunity of is an the passenger where us, in a For to is value maximize path look asset, will for freighter of conversion an us. I basically what we best today. own And the there at

with we've XX-XXXs. fall a aircraft. in reasonably announcement it's the there for for AEI. some signed conversions near-term So handful on modest, up F it's P And an to slots It's of that was

Not a lessees we're so prospective a discussions report aircraft much will outcome, on four think have And on with that. those else to of good in number we today. we

looking exposure and into drifting value a digging AXXX freighter also big emphasize We opportunities And asset back a again, not up it's for some at a to It's maximization. I potential for way conversions. few few are Aircastle. really or build in

way the evaluating of we're to and about context what think So market. in doing how the that's probably we're those best broader opportunities great the

Roy Chandran

Yes, sure.

just question comment to on liquidity. wanted your So on

are pretty near I liquidity think much perspective, from term requirements met. our

maturities you it. look always financing we've maturity stack, at advance raised And year. real come our next or If of historically, in next,

to go So continue those, I to pick at and think, and up makes the look and back at refinancing extent acquisition we'll to to at that look build when fund in well. we'll it we kind of opportunities need opportunities, to obviously, look the as some sense markets decide liquidity

start a question think trade we optimistic, hybrid will I so time typically, about be back it we'll But your we'll to it the And the was, defensive in. general six traditionally is, by economics, And thinking get the be as do. maturity, sense, kind before of make be to months really about best than takeaway out driven earlier when's I trade. hybrid, would relation used the go

time sure on we given focused are and remain higher was met outlook executed to older a between traditionally, where shareholders to slightly Our done transaction our credit all a the than And have hybrid And that making spread investment that fleet, remain we unsecured agencies with held investment the was secondary and at very, grade. firmly the very make that criteria capital standard, smaller us so always premiums. traditional capital grade. sure market it and also making

so our an transaction And was from attractive it perspective.

makes --efficient to status, going coupled capital look to but we if forward, maintain think we'll capital opportunities. at that sense it to that space has raise accretive will, I investment with to grade be So acquisition continue our

Robert Smalley

for again the Make thanks call. doing sense. And for Thanks that.

Mike Inglese

Pleasure. Thanks, Robert.

Operator

well as your today's Aircastle's We you third will With the no conference for earnings participation. Q&A further conclude holding, as session quarter questions call. I now thank

great You may a now disconnect day. and have

Mike Inglese

everyone. Thanks,