Aircastle (AYR) 13 May 202020 Q1 Earnings call transcript

Good morning, everyone, and welcome to Aircastle Limited's First Quarter 2020 Conference Call.

Our call today is being conducted from several locations.

On the line are Mike Inglese, Chief Executive Officer; Aaron Dahlke, Chief Financial Officer; and Doug Winter, Chief Commercial Officer.

We'll begin the presentation shortly, but I'd like to remind everyone that this call is being recorded, and a replay will be available through our website at www.aircastle.com, along with our first quarter press release and PowerPoint presentation.

I would like to point out that statements today, which are not historical facts, may be deemed forward-looking statements. Aircastle materially and estimates cause which certain to materially differ in expectations actual can may detailed differ statements are on those facts from also results be from SEC our or the expressed results in found Actual our expectations website. filings, Limited's that could legend. you to release I'll Limited's direct for the press Aircastle full forward-looking statement

over I'll Mike. the call to turn now

Frank, everyone. and Thanks, good morning,

professionals our responders and conveying by best to and our will coronavirus. health first cover first morning, with brief care the then impacted Let provide me begin our Aaron along quarter This others the wishes mitigation the response by a individuals, plan. results. crisis, briefly our I'll update to on

be franchise can to to of the moved stakeholders good owners. focused faith customers on As capital protect to and through our strong onset operated we've and well-being in other we and the work what keep the of do of will this marketplace. interest our quickly positioned protect the we challenging in well crisis, Since and employees, the we providers our key period,

long-term the Our investors. Corporation of result employees safely working closed successfully home Aircastle focused mid-March. new private company our have of two On We're we and XX, by with and since Marubeni a Leasing. stable and March a Mizuho from stronger been acquisition as structure ownership

as bond environment, will many Our the stabilizing are help our unique through agencies investors and a work visibility which this owners our new positively on by ownership us recognized factor, fronts. and lacks private structure rating

at flat our confirmed from acquisition, Poors Fitch the Moody's Aircastle rating BaaX. BBB rating BBB issuer at credit Standard and minus, affirmed minus. and closing BBB to similarly Aircastle's the of Following upgraded

lessors approach It and pandemic Aircastle's see difficult other to dislocation compared CapEx always financial as industry. long is strategy commitments. view and do and significantly The as leverage lower we been for our other will different lower are the world forward with many our leasing companies. last. current has significant fundamentally We its because how see to unprecedented for risk our the have not COVID-XX effects

conservative and a we the laddered entered historic believe trends. that a and our majority Aircastle position, and always in strong travel this it will of Along have to and significant leverage, growth we has crisis liability business revert survive will with our liquidity leisure longer-term as structure. customers

until demand will While established sheets growth lessor managed generally customer. when. travel and for crisis to eventually definitely maintaining travel real the well-diversified is strong, balance asset conservatively historic levels, question stabilize In and capitalized are opportunities who our We conditions for industry base. strategy pressure air growth see return the and the with a long-term this that comfortable will and customer disciplined are will time, airline for those short-term create resumes feel

With one, our mind, safe. on are employees that in we keeping focusing key priorities: number

Our recovery to to long-standing allow crisis. during operating our disaster plans keep devised the were company

this We lasts; managing managing came, crisis continue and keep long employees safe, our prepared we our our business this number can processes. when and systems So effectively however, with were two, liquidity.

liquidity crisis, currently they proactively are with appropriate issues working managing through where customers issues through the them helping face. our We and with

interest. of near-term airlines, defer set million XX lease with by totaling which approximately repaid with payments year-end to be agreed have $XX most to We are

will additional three, cover his of number customers shortly; we already the that or of have which strong in Aaron liquidity remarks we made; we'll extend bolster have take deferrals already some fourth, other we'll advantage will our prepared preserve, and position, and optimize be expect We to probably to deferrals opportunities.

seek the to as advantage of airlines take and market in capital deploy to opportunistically seek liquidity. will raise We dislocations

future to pursue commitments. the not unfolded. In our we are to leverage risk past, and balance sheet prepared with balance entered that will conservative will sheet, unsettled and for patient and an we and a well in environment we closing, has the continue crisis As approach prudent strong be a

have management task liquidity of will hand our in We a is sponsorship at our modest liquidity the COVID-XX with professionals, position. the a well deal market position. strong owners, of asset commitment strong the profile, new platform stronger positioned from with solid and expert a to and team emerge forward Aircastle our crisis

I'll our discuss to now hand briefly the call quarter over results. to first Aaron

Mike. Thanks,

incurred after $XXX year. a X.X% versus net first Lease results up of adjusting XXXX. costs in $XX in were Our the the lease million. $XX and finance of quarter for prior rental QX were nonrecurring income million revenues quarter strong $XX net first merger-related million of loss We million versus

During QX We opportunistically quarter, and resulted a on million. Total increase the up proceeds age and million. versus This quarter. during approximately gain margin aircraft recorded $XX and sold revenues on The revenues of XXXX, we equipment. the of sold an was in maintenance sales rental, average of of years to due higher first million, were first the mostly million, narrow-body $XXX aircraft lease XX% the proceeds flight XX.X were $XXX gains sale of net eight $XX XX%.

impairment $XX million XXXX. returned costs deposits. lease South This combined rental to African associated Total non-reoccurring was AXXXs. impairments due security were in of advance received XX% $XX million the expenses with noncash versus $XX by maintenance, increased early noncash offset of primarily payments of that an merger-related million QX and partially by charges we million four aircraft The or $XXX

was million EBITDA or primarily increase gains XX%. maintenance of an other rental, driven $XX combined lease increase The sale. and by $XXX was revenues and million, Adjusted on

first lease year yield the first portfolio compared XX.X% XX.X%. with and in our was XX.X% rental of quarter Our XXXX yield quarter utilization was XX.X% for the prior versus XXXX, of the

liquidity Turning to capital and structure. our

estimated XX-month coverage cash `X.Xx. As in is XX, April our of of excess ratio

cash, million billion, of operating sources unused $XXX $XXX which $XXX Our unrestricted credit flows next million net includes liquidity of the months. and XX million revolving for exceeds of of capacity cash $X.X

our with up $XXX and well line million contractual XX, April These through combined of resources commitments are XXXX. significant

a XXXX operating- flight million and net also due $XX billion. represents We an and We We into unencumbered of our of average $X.X which to XXXX agreed PPP months, payments. lease late value finance-based with book delivery revenues. three X.X% agreed our of defer rescheduled XXXX for deferrals rental had equipment

Our and ratio debt was Total XX% of were X.X net quarter borrowings times. at unsecured at billion our $X.X end, was debt-to-equity end. quarter

weighted Our our to weighted X.X on average debt years average and X.XX%. coupon was debt declined

continues the to closing, through COVID-XX well Aircastle is positioned manage In work situation. crisis and through current to

with We have management team deep and skills bench and professional a asset depth. strong experienced

investor Mizuho have executing a commitments. With with we mid-life remain CapEx our Corporation partners, balance We our in to solid aircraft. sheet Marubeni a strategy as and disciplined Leasing, committed minimal new long-term

future our about optimistic prospects. are We

With up call operator, open we now to can that, questions. the

[Operator Instructions] you. Mark Thank JPMorgan. to Streeter We'll go at first

your Thanks for cash can rate the gentlemen. you first quarter? on collection comment Wondering, call. Hello what was for holding the

covers quarter XX%, Mark first The Mark. about

year? And of Mike you plays how do think the for the that rest out

$XX,XXX that of to enough remember us show. Look, for that's those old the quiz question

– of over As where an the next with is in of factored that we've – our $XX lessees out. going in say how granted sure expectation XX I opening discussions give we've flows balance of with discussions have And over with I've we I number percentage remarks. that's number, the we and is We're the said, can as a it but have this with will expected. think we we'll discussions my mentioned I've in and expected guess some the number, operating think pretty would where be the but deferrals what we many isn't the still get we sure the you I there shakes and not But can't not months, million our today year. that and concluded on as cash for good repaid the requests clearly it's pain, I that will about those have. feel similar are what final

this, traffic that And China, of still the me, what it's exactly still But other pencil see. number hard markets. days, patterns domestic It's in to would seeing going be. first although and to we're to reemerge some early and out we're is what wave

your tell then which think write-down something between as that goodwill. can will, just of that yen equate do and what is on announced conversion of to Great. trying in I'm Marubeni, I the that. maybe you the values? opinion about to obviously Just on write-down, comment March so of use that if and If aircraft Should Marubeni sort the that you that about to what – wondering XX% closed million, Is $XXX-ish the maybe Okay. if sort pay. And us does of XX. write-down their deal correctly, general? of I they one-to-one Mizuho, a guide? like aircraft dollar relationship, partners, we a values the just that on

different Their years. Number not. been different was is use for because simple, has standard. Look, Yes. basis assets seven here it's wish life an accounting that in they I a one, very investor Marubeni our but

it extrapolate asset So record what trying from they just not implies to to something simple. to financials that their Aircastle's values in is Japanese

Okay. bond And turn just shifting peers here. Obviously, like and then your I'll spreads it over. blown then have gears, out your

your out wide some wait funding access sort you point? to wondering you Just funding business, order new business? go-forward plan now. issuing of unsecured lower you you right this about yields consider the are would in bond of this at can the to a – with pretty have the talk to trading Aircastle are secured of at the in looking at you Are sort about unsecured, You're How commitment yield? how thinking all-in just owners terms for

look going owners over parameter, term. say practically the committed I but speaking, we're an for look, avenues, to very profile all overarching Aircastle are as investment-grade So our maintaining at think, an to new would I long

blown we that the to that on how them the buy, months. And if see whatever market do finance soon. to out have plays to what cost-effective the have so need the over that We'll that, spreads might time. we we're of interesting most to the industry's go the since the clearly, things And have a I And year. and have see way out to I going think XX the we'll is that. at to revisit next have context anytime that to in don't of do beginning implications

will those three. great. it it. I I Thanks with appreciate Okay, keep Mike.

Mark. Thanks,

[Operator go Bank. Runte Deutsche to next Doug at Instructions] We’ll

good Yes, yes, do morning $XX,XXX I remember gentlemen. question. the And

couple a of So questions.

is there South there off AXXXs that says at them SAA. the AXXXs Slide lease. come on situation. It X, And it Africa mentioned expected back? of recall, four two You If all I were are

Yes, fact, we're expected back. expecting South from smoothly. four to this is over all aircraft point States two, United the the to It week logistics transfer that or will Africa those And come all is Doug Winter. physically, in next

may if payers then too say granular little question, be they EOL? but can you or were maintenance for And the

maintenance payers. were They

potential of aircraft what And where That's unplaced terms Great. what $XXX,XXX year the then expect when releasing remainder remarketed? next see your do And question. into are leases And of things activity? year? for as to you be look need the your outlook is you forward, these and in to

relates $XX,XXX be the give going eight market start earmarked answer. me with that I that end-of-life can it existing or you, needs only hear and that to And need saying I tell And of by as XXXX, for we – this are to to me can only have extend let to XX operators. you were aircraft to which existing you five those okay? But transitioned either aircraft, then can operators dispositioned.

Yes, I can. you. Thank

Sorry.

lease transitioned market, to to And expiries aircraft XXXX, extended eight then or other So this in we XX listen point. operators, X scheduled XXXX. relates as it will at to be part-out the have dispositioned have XX to

of All narrow-body aircraft, XXX XXX, those AXXX, types.

we fleet right that's sit our where now. So with

We situation ourselves the operations that from that are There situation interest. the we with find of ourselves opportunity folks, looking find moment. in. are There at in at arising notwithstanding pockets the airline we engaged are are

As ACMI operators. an example, type

customers these with get we're we So transitioning some aircraft aircraft and we'll about a these aircraft, number and of that some continue placed. these extending of engaged dialogue, of or either will

Is of eight mix? wide? your reflected is or general towards aircraft Or the Okay. it narrow skewed fleet

of our It's mix. fleet very overall reflective

All right, great. Thanks very much.

time, I'll management closing the for back over And turn at to conference any we remarks. have questions. further no this

joining us, for Thanks everyone.

thank through Constantinople would questions, like catch If appreciate any folks patience can Frank much. stay who your any to. and you stay up further have to And of safe and those very follow-up and happy I you time IR and healthy. you with with