Aircastle (AYR) 2 May 192019 Q1 Earnings call transcript

Good day and welcome to the Aircastle Q1 2019 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Frank Constantinople. Please go ahead.

Stephanie. you, Thank and Earnings everyone Aircastle First Limited's Good welcome XXXX Call. Quarter morning, to today Chief Officer; With Dahlke, Mike are me Inglese, Officer; Senior Winter, Kriedberg, Chief Executive Doug Chief Mike Commercial and Advisor. Financial Aaron Officer; would which not today, forward-looking historical that deemed are be to out may I like statements. statements point facts, in differ to the and detailed estimates may that could SEC differ facts expectations certain from our cause expectations Limited's expressed results can found Actual results which or materially from actual materially Aircastle statements, also in our on filings, those are be website. to earnings legend. I'll Aircastle direct forward-looking full for statement you Limited's release the And we'll now Inglese. turn the to Mike over call

after well. Air and remains leased up open GDP, it quite aircraft for the current I'll to previously our good. this and our quarter, and welcome growth to And transition Kriedberg, We're welcome I'm balance Q&A. who us the Frank. to been The week traffic briefly discuss happy we'll single-aisle Advisor strategy a perform XXXX, touch Senior to to cover the then as Dahlke Aaron since industry Thanks, going who to CCO and for new of has conditions a results which quarter, Mike year to we earlier and outpace demand to leasing Winter, as available operations. will continues results our upon Today, Commercial for as our Chief business the this ensure turn thank Aircastle's Earnings the for over our aircraft the first Mike Officer, strong be balance quarter through XXXX Doug year. to market the reported, call. us of to of call global to joined is smooth continues financial our

adjusted to EPS $X.XX we're with me After and touch strong share. a a EPS QX of diluted of quickly start off performance in our XXXX on good share a a Let XXXX, results. $X.XX for

book trailing was end at per around of and share our cash value XX-month was share just March Our the ROE $XX.XX per XX%.

growing profitable harvest to Our portfolio. proactively on we in strategy manage focus a and continues manner, our disciplined gains opportunistically in as and

conditions to will gains. demands of strong market take generate advantage aircraft investments offer for which We always

so, the three strong mid-aged total continues gains been million. XXXX, and past Over available along years liquidity. bid aircraft or XXX be beginning we've Accordingly, there's the with buyers $XXX a since to abundant aircraft, of sold from of of for

engines along XX quarter, first few a for $XXX CFM million in aircraft proceeds. with four million the for we narrow-body During acquired $XX aircraft and sold

of narrow remainder of bodies For speed. XXX a acquire to the mid-aged XXX of certainty years competitive the aircraft our transactions $XXX narrow-body. the book that 'XX, acquisition and of five ago. twice value Current fleet, have execution million and and pipeline our aircraft situations to continue that play we environment, we have find on. more than advantages to an other current sales we committed flexibility, we're competitive working XX structuring additional In of for healthy of or net of represented And 'XX the than total QX was from XX% we XX% those At generation remain on aircraft owned end of fleet aircraft narrow-body investment. more total number being with the our focused

the utilization Brazil to As aircraft expected was Jet be lease Airways. our Avianca call, that first I you on on quarter were told and our previously year-end to by impacted

Brazil, seven and quarter, Also aircraft have in to report with movers were We're happy with well first to on Our last to five to average under we the utilization aircraft over LATAM repossessed below XX% early long-term that was we that XX%, in of were leases Airways of ground new with AXXXs all signed have the lessee. previously years. our our of Avianca April. XX Airlines we transition historical the the Jet successfully first signed with just a one leases

utilization aircraft We into gradual utilization some of XX to the them expect during This net this the were leased and service the interest the of and quarter Jet all half begin revenue Avianca higher margin were normalized drift first this to of of previously during third may lead Brazil. on ground with the Brazil XX that at and quarter, with XXXs the year. quarter. will Of the those and end back to aircraft return Avianca the

We book XXXX, about net X.X% placement have just representing left place, task remaining for modest a value. to our of with three aircraft

at list these our aircraft have to aircraft. EX commitment. a position to Embraer market continue quarter to with campaigns strong we liquidity very develop of the the and potential forward in the end respect order, With Our work for was zero numerous SCs with with to conjunction monitoring we continue minimal

are first scheduled Our half XXXX. not deliveries second until of the

roughly million As plan yesterday's that includes committed stock paying acquired currently to Aircastle or shareholders' common dividends current has $X market of capital generated of consistently in this our billion XX% form rather approach, and $XX.XX. allocation cash today, of about narrow-body equity investors quarter XXXX multiple price on XX% allocation balanced we of common result maximization. This almost long-term will total $X.XX aircraft the in accretive of we've approach repurchasing business and the have underpinning based the for historical below and of first and the dividends of for that and quarterly strong returns our and initial price long-term to million share in our we stock, about focused in This average the growth conservative, Using $XXX the of X% to Since our tools repurchases. of growing in current remain now average our price first long-term back close XX% our fundamentals, offering book XXXX, have more than value cap. value acquire, our shareholders to our an capital combined yielding on manner. business of share $XX.XX August of creating and and returned approximately $XX.XX average conviction XX% investors public capital QX remain in of a at represents profitable quarter. We with our value, optimistic share strong strategy, our by represents

a return Since times, to per of a philosophy Given Board XXnd share shareholders, to providing our share payout increased payable dividend we've of approved tripling a per Aircastle's from regular quarterly XX. quarter. $X.XX capital of dividend $X.XX the the on Company's June consecutive the $X.XX share X XXXX,

few Let me a minutes on now current spend business environment. the

two going a GDP the traffic down down recent While through revised 'XX. Similarly was X.X% the from forecast X.X%, healthy X.X% the from months, air most forward. since in year, showed the recently growth modestly the X.X% beginning modestly XXXX results, to IATA global growth it's IMF in still RPK first of

We continue load growth see demand XX%. to in February, and current mid-aged at for continue to in very traffic in Capacity good growth was factors high January in averaging the aircraft, month. as February, for line technology, with be passenger narrow-body over X.X% particular,

X are extensions aircraft dialog clients at an in due of of this observing increase point. short-term lease We impact with the for grounding and to MAX near-term transitioning

issues strong strengthened values compared The competitive marketability remain in the year general. rates have aircraft are current fundamentals prices and decline mid-aged Strong low and affordability in for to Long-term the this oil demand strength. rents air we aircraft interest remained rentals and to the While narrow-body relatively low and interest investing and and aircraft, surrounding especially sell multi-year availability traffic in availability strong, technology growth, the availability rates aircraft attractiveness for have continue healthy, aircraft driving limited travel this opportunistically of aircraft. math financing narrow-body due to to into financing aircraft. enhanced of new new

global to rate faster continue at than We air GDP. grow expect traffic a to

nature for vary to investment grow time. of continue available, to believe We but aircraft be our demand the expect strategy leasing those We will opportunities well. to as over suited will opportunity the specific

remains focused strategy solid on in will deliver aircraft Our shareholder over that we growth expect time. value investing

and liquidity portfolio forward I themes. experienced to and risk over actively strong the of we globe advantage and the gains We three expect income One, around opportunities to capital take to ostensibly and value we to have and aircraft our an aircraft to now Aaron to In grade with the in an three, drive nimble minimal residual call highlight key our fashion. team and able reduce investment manage turn quarter offensively assets portfolio the to opportunistically investment and have and continue And disciplined as briefly managing first our Two, issuer, to also move that we commitment. results. want closing, a I'll attractively act growth to recognize sell present grow along have review way. will price to themselves. access

continued earnings core Thanks, had Mike. and solid. our another quarter profitable be Aircastle to

QX permits We IBJ total of million. $XX.X to the up 'XX, recorded revenues quarter, million Brazil maintenance and with with of were and from aircraft, gain. at resulting aircraft. the two lease $XX maintenance four aircraft primarily rental We from We million flight and $XX.X million, $XXX.X two versus year. revenue primarily sale transitions venture Avianca our sold to sale of lease related our engines on carryover an associated aircraft were of narrow-body recorded million, For revenue aircraft gain finance scheduled proceeds the the including leasing. joint in past repossessed $X.X X.X% Net

revenues. $XX.X driven interest and XX% maintenance diluted flight estimates. higher depreciation quarter. a million Adjusted direct gains our additional leases. to of EBITDA 'XX 'XX. to spite $XXX.X and related or to the higher of or average classification $X.XX income an higher had top-line with equipment million revenues expenses finance sale due X.X% Brazil million, of two higher growth QX X.X% Jet overall were year-over-year of share. net by our default Airways, We of aircraft [indiscernible] and Net versus with of balance increased $X.X Total million, the up 'XX also million, the versus per associated the expenses recorded acquisitions, and up due higher an on the $X.X $XXX.X aircraft portion and original higher was debt gains transitions million to Avianca due versus generated mostly profitable was mostly and expense aircraft QX by QX Total $XX.X In we of increase maintenance

XXXX, first interest For rental portfolio X.X%. XX.X% yield was of our lease net and our cash was margin quarter the

primarily by was driven lower aircraft. interest due Brazil lower cash margin lease Our Avianca Airways mostly revenue and to Jet net

half net to around that recover in year interest expect cash the year-end. by will the margin We second X% of

ratio our to debt-to-equity net X.X and is XX% of debt structure, unsecured. capital were times. Turning Total borrowings our is billion our $X.X

payable dividend weighted of credit revolving to unused unrestricted capacity. average June on coupon a share ended the approved X.X record years is on our $XX We debt with May April million cash On average quarter $X.XX a XX. Board per of X.X%. $XXX common of Our of with XX million shareholders weighted and XX,

As shares during Mike April have quarter. share XX% which is at of through and we $XX.XX the value our mentioned, quarter-end the share price than cost book lower at a XX, share, about of our per average of $X million first XX% repurchased average per weighted

dividends quarter, we including $XX total million to For repurchases, and our capital investors. the share a of returned of

have provided authorization We opportunistically. We guidance XXXX. will and share $XX the this in we repurchase current continue remaining of under the quarter second elements million our -- our quarter for initial second to use

Brazil Our re-enter guidance strong a To reflects service. and rental Avianca had repossessed revenue we to Aircastle aircraft Jet the quarter. Airways first summarize, higher and

for profitable be momentum skill minimize develop growth us Our nimble, to enabled management downtime asset XXXX. good in and

and sheet balance strong open that for benefit committed investors. maximum now allocating the And a with it we have our remain for can questions. operator, capital we of to We up

Compass [Operator with Valentin Instructions] question from comes Point. Scott first Our

Thanks Good taking morning. my for question.

market in market when secondary you just secondary any MAX XXX provide potential the would if you be now? color more buyers Just more the you Are with look that conditions, regard seeing aircraft? having Any could impact? competition grounding at wondering helpful. seeing is to you Are the

a Yeah, in sure but making market secondary difference not moment. the it's I'm material the at

way. But issues. at it's certainly lift there looking potential context or don't long-term think the the the affecting of there'll significant really market opportunities be sale and and who a for the sort are per are the moment, don't customers and I it's, interim current I real of phenomenon I extensions think assets in MAX at those some think in of strength acquisition a

question. just helpful. one That's thanks. Okay, then housekeeping And

XQ, the XX, On all does Brazil for lease you Jet service allowing revenue, assume into that on in back spillover some Avianca aircraft and the XQ? the rental Airways page are are guidance in or for

get think I back But bit in them I No, realistically on going a the think the there's planes. Brazil third June into of be the X. Avianca little of to service majority should quarter spillover by

much. Okay, very all right. Thanks

Thank you.

Orenbuch Our Suisse. next question comes from Credit Moshe with

actually Moshe. is on Ulan This James for morning. Good

James. Good morning,

a my book, given some We hey, -- ratio can price of equity and I most were the Thanks buyback little of was the you. were that and good And debt the We you important the in if if for wondering and expecting bit you question. to a factors a morning. price do the buyback higher taking to to and how little focus maybe bit you that influence could can. do? when your valuation and to much discussion, on on Thank to a multiple book describe decision

as of and basis. We'll some level, we over time, rule -- do think it's look of value continue of your to not I'm of this fast, a in an or don't stake it look, think for that white driver hard black I do Yeah, giant great a it's stock and kind not buybacks the don't but level. the the it's a ground on at fan to in I I opportunistic indicated at at at important there. and point term. Ultimately long put some shareholder past, this

And want over be cash the don't return so I and to that I marketplace, we'll continue on going to do in opportunistically can construct with time. prescriptive. else consider what's and the do or have predictable I overall what investors I an about thinking and think profile to so it to so

you. Thank

next Our with from Instructions] Stephens. comes [Operator Caintic Vincent question

morning. Hey, thanks. Good

to revenues $X.XX. out question if with that just balance to so, that expectation of of Just some I'm get two have you sheet. airlines a the an to the wondering the bankrupt you about being or able on associated -- Thanks. all are unrecognized called your back

than have we collect two that If context related will you're both lease all it's assets, network of because of net many the two. instances those construct back set I be to going rates. in Avianca Jet operate the to not revenue of Brazil QX LATAM we of were happy short-term that which the and of aircraft over take previous rates talking with think were the are to the the the to long-term or lease in the lower transition didn't come leases over in those new very next about the the leases expire them But to aircraft, in bankruptcies, their and year

were significantly of significantly of transitioning to out context in Jet assets. close we'll in be We be and will country those the generating -- revenue we what getting

how the Okay, the structures actually happening Got planes of with Avianca with does and now I guess, that old And would think you've or MAXs Brazil you. and what those the compare I some the the seeing even given with maybe versus Jet are and leased you are with supply what issues -- lease and AXXXs, with had you Brazil on Jet? rate those that

context effect rates rate got in has to the the and of like Look took the to I Avianca well se before the I with significant on our market. MAX In had get agreed impact the the an Brazil think restructure lease planes we -- I process know to had LATAM back. assets, it we into said per four-month before, don't that current

Thank got you. Okay, it.

And to say, you've back. should nice it's that get any those third airlines. of the maintenance be placed back for going aircraft to so, as we it's those there Any as that planes up is or you to ticked those when see got thinking get into quarter see about well revenue nice bankrupt the the be both And -- over -- service? transition quarter put expenses second

construct magnitude be of modest narrow-body anything the material but think a normal and some a aircraft. of be [ph] amount it'll transition of don't expenses, I the There'll

Thanks got very much. it. Okay,

you. Thank

Thank you.

with next from Our Goldman O'Brien Sachs. comes question Catherine

for Good gentlemen. the Thanks morning, so much time.

Just Any So and your be commitments, could tapping to here. it with thoughts XXXX end March into already that this up on Thanks. future quarter year's any kind something you're average acquisitions the year $X.X years? $XXX back where million think you of will this of opportunities last compare on think to CapEx and could five-year in with the billion? how line comments past

$XXX at we're May, over early it's little think million. I Look,

unreasonable think selling of really what context $X portfolio I move to depend expect the it's that north to we and going and think not how it also into balance fits in do upon we do we of It's we overall to how the year. billion. to can something see we the through think choose the of as or much do,

to context of how and this upon year. pursue choose opportunities So sense will think it will the environment there in to opportunities those and we for it the we depend be what I think business extent makes really

comment maybe then your And -- and is a just on sales. there follow-up on

the on balancing you on sales, thoughts aircraft from the helpful. maybe act versus up-level does seeing really continuing it leases between a of strong past there couple versus years, you're that you. given margins is to sales gains Any Just be revenue would Thank entice or the really those sales?

it look aircraft, balancing in relatively venture like of sold years assets four IBJ were into that couple them two quarter, bought of the the a we XX our is context them with selling -- Yes, of of and new particularly first we and act a joint them leasing. were in old

context first the so sales that And quarter activity. was around

a with we're of that the pursuing opportunities market out have now the number of sales We in potential number assets buyers.

that. A selling. was will it We think year less $XXX years million of number our last proceeds, certainly half of was ago, few some do something I sales north than

you you're think over closer trying I did did what of Maybe It's proceeds to comes context in don't is time. year. a expect to business those we XXXX. of do balancing somewhere to the the with reasonable, of but it we act what with can do a you last be So selling in your that, what balance to it's extent

the much Thank sense. for time. makes you It very

you. Thank

Thank you.

from of Liwag comes question next with Kristine Our America. Bank

guys. Hey,

Hi.

This disruptions other kind two and year risk to disruption? do had you airlines you hindsight, two In minimize any watch and And you've these with changed done have be to already of Avianca customer actions in Brazil events at have unexpected proactive look what list? how you could forward, Jet. going how our

So I or these both came the frankly, years four have Avianca decision Quite as transactions was I we Brazil about don't where and would we done of think out, there ago. is about they years lot a made five think differently.

plans ultimately action had Their similarly We airline we the the of doing. and rates. of on leases we As terminate of find about in for lease risk the we good Jet, it that we long-term them. made in the didn't we We in credit evaluated them what to as sense. talked the appropriate the plan timeframe context materialize. thought call, we last were worked very context they the and with took as thought And long new our homes thought

quoting Our to the them happened those what ultimately taking are those think leases short-term we out with them don't Jet. context on of deals and is those did there change what relatively in for when with outcome premised were the assets leases assets done. and I going

evaluating making you're time are asset underwriting and the every so an the credit. you And decision, evaluating you're

them think you asset your didn't and need credit is on generating And important, time call, return the for it's a in and important decision sometimes where don't a we the we cash over you make the get around history producing decision, but right more ultimately I very think for shareholders. right, our ultimately

they look contracted I both weighted XXX and cash year-over-year, age got if even portfolio lease of about interest net fleet basis older. at though And see. the points yield, average I your margin

that yield have utilized, that the were aircraft adjust would lease you If what number not -- been? for would what that

sort It's didn't margin that I charts. of things pro little over that a Yeah, a net basis those a we context in put the of PowerPoint on happen. forma X% think the interest the in

thank you. Great,

Thank you.

question Thank you. Tyler next Our [Operator comes Seidman Instructions] from with Cowen.

taking for my question. Thanks guys. Hey,

evaluating XX% new So country. think value your net the of you to the move potential or book of they'll exposure think Jet to just I country? India, have regions within within stay given Are do you Airways aircraft north the you your

I as expiring expecting this short-term of at -- think of of those I in their before, and Look, But were out a expecting seven were part we will next, stay a the in leases year end country. said number those leases. the were they those assets and

of it's context for for think to the forward. going those original naturally I going So pieces in the assets demand of our more assets underwriting the the the and happen -- parts

-- for remains go, that where seen. to other the few, they be As

I to about then Got XXXX? X% thinking you. the X% up you. The modeling What's think tax should guidance and bit, rate tax a the for And just to Thank quick we puts how rate inched question. there a be takes and X%. X% little or

it's Hey, Aaron.

think your tax rate I when of non-tax look the allocation you between and tax at jurisdiction. income it's the jurisdictions [ph]

fact, we in Jet, and permitted the Avianca in at as So was more side look it.

it's less income, range not And in of X%. year, kind to the of stay we're less it's think at I X% tax. then So the that looking for to

you. thank Great,

Thank questions additional are at you. no There this time.

additional Okay. desk Thank you, for for day. at today. your have if to Have of questions. Stephanie. balance the Feel good you I'll call time be a my the Thanks me free day.

this Thank gentlemen, presentation. and you, today's ladies concludes

may now disconnect. You