Aircastle (AYR) 12 Nov 202020 Q3 Earnings call transcript

[abrupt start] 2020 Call. Today's conference is being recorded and at this time, I would like to turn the conference over to Michael Inglese, Chief Executive Officer. Please go ahead.

Thanks operator and welcome everybody to Aircastle's financial update for the three months ended September 30, 2020. With me today on the call are Aaron Dahlke, our CFO; Doug Winter, our Chief Commercial Officer; Roy Chandran, our Chief Strategy Officer; and Chris Beers, our Chief Legal Officer.

like historical out forward-looking facts I'd which statements statements. begin, not are may I to that point today Before be deemed expressed in results on to Actual estimates materially be from certain materially found differ expectations differ filings, that in are which Limited expectations also detailed facts actual results and SEC those our cause from could website. Aircastle statements, our may or the can statement. Aircastle to press for Limited forward-looking I'll direct you the release full recent changes reporting. like our start to by covering forward financial I'd and year for going to the off fiscal cycle to In with late September, Aircastle of Mizuho we financial reporting financial periods announced our align the better Marubeni and change Leasing. to cycle shareholders reporting the

February. end Our will has May August end quarters been XX, fiscal on day now to and year in our November Accordingly, XX. XX, December fiscal from XXst changed the last

be [technical results waiting in to five Our in reporting regular until know will ended for ending audited and released financial We the months during particularly January, our expect information January. for September next we and industry, three XXth, unaudited than release tumultuous rather these November difficulty] nine investors, the XX. times for of which value we financial months the

only February and January PowerPoint the our of presentation will also we'll We a historical posted end month website by earlier results XXXX. the and of filing transitional be to reporting XX-Q which new cycle, today a the for be week, the of for a

through get our to most ever provide perspective severe impact I some on how Before specifics, the we're managing I'd into to like industry. crisis

TSA of can when however, safety can't we bottom the positive, market its news turbulence we remain levels until painful pre-COVID period, but earnest growth a trajectory. was probably the of the and from managing health Pfizer is more focused in traffic. week's been and still What we've through While our This recovery starts during protecting we'll quarter of revert improvement. on assets enhancement proper do, signs or our third the and resumes have to maintenance spring demand numbers the there's predict our liquidity regional and also China, trends and the and is Brazil, to of the Mexico our More U.S., of with Russia, showed improvements. throughput markets conjunction Industry in up the and pointed trough employees, like preservation since protection In lessees. looking holiday trended promising. the

quite has been of progress meaningful vaccine next in so addition, areas testing, In remain development critical optimistic. made few quarters, and we

and the opportunities the part economy & XXXX, Economics, to jobs as million travel and in they Nevertheless, across and Aviation, XXX Travel expected the without of an be through However, and U.S. in Europe. solid growing a to expect the strong liquidity balance important and a sheet global of remain a the conditions According with Council advantage near-term, represented Aircastle of Tourism of challenging cases COVID well-positioned World be worldwide. global navigate to so. provided over to and take are is successfully XX% has spreading number reported become and GDP, doubt, available. will we position Oxford tourism and crisis a

political with While currently the in protocols rolled the ability the that additional too an billion passengers significant stress, demand $XXX In were far. to weak under along a financially airline airline will therapies and international future. the suppliers and not of thus $XX bankruptcies been decline billion onset Because lack certain to generally have COVID, financial external since the distant of with has be of October, of in the to aid access support airlines will to testing from travel the the and out return the government vaccines industry efforts around travel IATA their restrictions and skies. operating reported for raise This approximately been due eventual we're is that government will assure be critical that government of near-term. pre-pandemic. suitable support improving the To-date, with of airlines provided to in aid along along liquidity determine survival industry treatment either larger coordinated

While appears required world. may that the for airlines significant, around it support additional financial be

is expect failures aircraft travel flying survive that majority While demand for when safe, are the we and inevitable, air will of the airlines the is around vast globe the to convinced public increase. eventually

to a many years attractiveness In play benefit will source aviation finance the when their will it business improve, conservatively important industry. increasingly aircraft and like leasing the conditions influence for Accordingly, capital addition, airlines as leasing of reduce managed leverage role the aircraft financial for market Aircastle. take will increase an experienced and and and will players debt-burdened this of model in

deep shareholder Leasing. team is and we and Mizuho enjoy from support Our and experienced strong Marubeni

Let me minute spend a Aircastle's liquidity. reviewing

$XXX of undrawn credit total facilities. notes $X.X of billion liquidity sales, increased issued we on preserving July, $XXX position At and remained due which began. liquidity included million from October, forward million of remained contracted have crisis revolving August asset successfully million Bank focused credit $XXX by the since and our enhancing $XXX with In million $X.XX XX-month XXXX. of and our $XXX cash had early facility X.XX% Our liquidity in very million, low, executed CapEx early late Mizuho unrestricted in we and billion the August, of commitments end revolving

addition, October across of liquidity about million, a we $X.X total In billion $XXX us times. comparison, year the of X.X around fleet. of our next coverage giving through have commitments aircraft By unencumbered

be $XX on important collections in remain period winter. a increased finance and sheet million second For three operating percent over the strong environment, a remain generated liquidity focused which ended cash reported of revenues be that months balance XX, we same current maintaining cash coming lease offs to we XX% quarter. In position the we XX% focused on in the particularly from In summary, a management, will over September as from flow end have while around flattened mid-year, expect they while from to take bit may be Through we October, million, eventual approved With airlines there balance $XX our during cash expect to a and the on winter pick-up X/XX market the respect agreements well-positioned remain in although of sheet. deferrals, the including advantage some aviation. $XXX had to months, challenging recovery appeared XX of airline approximately million with for that as pressured. we flows deferral

in the decade. recovery phase post forward aircraft of growth Let backbone maintenance me the spend will of will our airlines as the and on tech balance industry this lower as We continue positioning. balance rebuild to their invest their moves in sheets, given -- portfolio believe that and midlife a newer few will costs minutes narrow-body it attractive predictable become costs capital be the start over portfolio to

value market We continue continue for operated we to segment narrow-body aircraft. global tech in a enhances critical fuel to fleet expense aircraft. And oil Persistently proposition mid-ace be management attractiveness the optimize our fleet aircraft. mix ahead, more reduces new offered low on technology costly single lease and because by current for airlines of towards aisle from the looking narrow-bodies believe return the broadly brand investing well-managed technology current will focused efficient the

smaller will expected the commonality interim. by variants be improve fleet we efficiencies. that travel to and to airline is longer be take emerges and be recover will believe As airlines from preferred the fleet operating to crisis, sought simplified in management International will industry the the

are currently mix in years ago fleet narrow-body XX% of seven its aircrafts shifting fleet As towards aircraft the our Aircastle and narrow-bodies. began about

in KLM. regional and advantage current has will and XX expect remind EX We XX aircraft to XXXX, which four order. everyone of environment have benefit aircraft on to aircraft investment to placed been the scheduled deliver an the have EX to those our of in we we're

highlights of we for and $XXX million, Turning million. $X and reported income the three-month recent EBITDA financial EBITDA period ended of September results net adjusted almost $XXX million, of XX,

million period, September, liquidity, about activity, conservative utilization investment-grade was credit in three minimal sheet. by from ownership, improved track rise in forward a to XX%, at our period driven fleet strong by ops this about for our averaged this period. In During management's BaaX Moody's, rating by strategic month and record, commitment, balance cash Aircastle's affirmed flow the driven collection $XX

October, sales. ratings Moody's BBB of recall XX You they we've were and additional sell nine and an narrow-bodies sold lease minus have to Fitch, at years. previously aircraft including of come transitions, XXXX, transactions off to as investment-grade lease aircraft far couple by in executed total extensions, over and XX our affirmed Year-to-date agreements affirmation, Aircastle ahead BBB Thus by S&P. that flat coming a the

COVID-XX to Aircastle's the profitable and approach our we've We'll a and our future in as our Over a not continue shareholders, leverage three and pursue from commitment. company. that balance the well-positioned with risk balance strengthened. future to strengthened shifting industry conditions, is respect market with sheet, position conservative we're are to for preparing Together stronger and past emerge to patient adapting prudent be months, been have growth sheet

is plan We straightforward. employees. pretty protecting the remain to our health Our safety committed of near-term and

hard work business to continue the continue employees we'll to seamlessly and so. to Our do and running keep smoothly

the to which we've have preservation approach how been remotely world. protect agility insolvencies. bankruptcies through know the situation technology. of in as we airline a is testament We the manage The and evolving focus COVID to leadership prior through nine will a assets continue managed on around our rapid will months, largely enhancement and crises, who have adapt able our a needed. In people of we professional our business management our investment to assets team and and so to We've and decision-making maintenance closing, and and crisis embraced last our continue over security manage is to liquidity business seasoned to successfully and maximize

strong modest an a and We liquidity ownership, commitments. strong with expert have profile, team forward

our Over as that, not it with a the emerge change to company. open Mizuho we're will well-positioned now happy our with for stronger and term, And and Leasing, Marubeni to longer up operator, questions. we're much strategy shareholders

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

Mike. Yes, thank you,

a and little about the ownership Just if bit talk want platform. of to will, you sponsorship,

screen XX% with and so by I'm the place. owned XX% facility looking with which of just sort think, Financial Now understanding that here, the put everything's you relationship if the Mizuho is Group, Mizuho in Mizuho that I at Leasing, forth, credit and correctly Bank closed

how platform there you maybe the of role Leasing more the Aircastle the Was investors of that? parent Mizuho unique that invested think a think rationale platform? because Bank sort that? for bit bit how for going to further. Marubeni, ultimate color it's of Were forward you sort sort about in about it's trying little discussing and us in of give of wondering, alternatives Mizuho other deal we Mizuho; and is the show just Are or Just of I best is a the to role the very worthy should little the

Mark. Sure. Thanks

later, years So, have in joint Leasing. years. few of for July closer invested a number Mizuho leasing Mizuho In in and we their all, been XXXX venture own a Aircastle first and of with formed with here businesses in their involved Marubeni Leasing with first Mizuho Leasing elsewhere outside pursuits of and other of together of Marubeni and Marubeni the own form got connection the Japan in industry in relationships Japan. and aviation, a

together, remaining wasn't to decided Soon acquire Marubeni. before by group they a the Aircastle owned of that as amount

those into one Bank As Mizuho steps, find of anticipation Leasing, with diversify Bank fact, in have and credit trying the some part respect for we been always additional capital Mizuho more in invest funding to portfolio. those bill. to Mizuho to that And of of Japan obviously, of expand did, its aviation, opportunities trying business areas outside of fit did facility our to is that we With sources. them, the

We've forward loans we place marketplace. of Southeast facility banks. have U.S. with we with some credit Asian and in subsequently number Japanese world, revolving secured We facility with the done a European in move revolving a institutions. DBJ credit in put our on financial As the

And year. first this so summer capacity what Mizuho the evolving step we was the adding increment did first to as and Bank with in a our of

its the and it's hope expand its to to move we'll and and be as expectation able additional help our the continue our Japanese forward. prospects growth liquidity, that business, financial presence support among to we find So, community sources funding

be platform for Are investments? -- and be that trying you are to there a how that Marubeni differently Or conflicts you in need just sort we interest Asia, trying as what Aircastle, running we should clarity to in or And terms I'm their Great, of because your think for with about forward, how manage about? investments, that? should their -- get then they parents, of you might worried for they money of then will, that's of if on exclusivity, managing to any they're going just Leasing, other through Leasing get running Mizuho updated in some aviation helpful. sense just Japan sort your aviation Mizuho two

our Aircastle they been us. that another capsule look, a they're aviation a in necessarily that think to this so did business. commitment being for one return on secured they in in was our investment in they to a as active pretty Chinese small selling lending expect the through thing is long-term doing about form, that's size that something think Aircastle strong a some And about They've assets. and leasing it's of what make and that is always venture we in with the doesn't owner lending company a future aviation. But do a good clearly, to investment in their investing. direct the large the in bet. investment way joint exclusive and making statement mean they an Yes, with It did will They business,

no think about can doing in we terms and freedom you're Okay, the have your we all -- you -- so equity forth. -- separately, obviously they about but certainly there's way run But other should so sourcing there's money own forth. will, so -- and of they're full it think if exclusivity, owners they to

conflict really, this external of like Aircastle to have that, obviously, are shouldn't manager, about call where interest they sort deals through. Brown like, manage Babcock there's forward? with & have going It's they have some that their as certain that if they we had worry Fly right? conflict There's somewhere, that interest in say, not to that of an have going nothing So, morning, of they for

could we I And No, way. look, But endeavor. about think that -- someplace be the Aircastle? this possibility in talking and I I I that to there a may look ad don't it time, as too of into possibility. their future march in consolidate advertising that's that think ad see or activities is kind they aviation sort early it's be of together a someplace to

clarity. the it. for Mike Thanks great. Okay, I appreciate

Mark. Thanks

question Our Sayles. with from [Indiscernible] come Loomis next ahead. Jim will Go

with of your Hi. bit you there? of LatAm of if some the could and that aircraft a give you'd little restructuring? that I Could kind us an some just you know previous talk about other mentioned in of Brazil call, the you that with airlines process sort aircraft are and things Avianca have update on

Sure.

aircraft and narrow-bodies of case with that bankruptcy, operating LatAm XX have LatAm, the So, we in were XX AXXX the three XXXs.

peers, what our a the through will emerge of the on process we part not of that that like the aircraft They many definitive when the be remaining for them the bankruptcy. the like are what bankruptcy bankruptcy any process We in decisions yet they go-forward context from arrangements will proceeding. working with on expect basis, fleet both of and have look during made

you. So, there's update can not significant give a I

forward the of not in and here will it's LatAm our aircraft yet world think moving in going line context context part expectation finish I our they're the downsizing in their they're the But today. that be fleet we're forward. of and doing, in how what the at of the reorganizing

aircraft And If balance around for of be equity don't already most administrative I you to if be of kind equity long-term and closed, that and in any realized you target, to question, with have the reflected if to question. or a an impairment XX is agreements haven't you. have on aircraft? Thank appropriate of future based kind your you where kind related changed but seeing pricing the sort you sell they kind all sheet a think know need you efficient I debt -- do you're another based what could target you the think of at to those that operate? is the said ask pricing of debt to your thoughts Okay. narrow-body goal, would on On I

that So to I part -- equity Target of forgot your debt already. first question

Target debt to equity?

Yeah.

So, view changed look, that much. on our hasn't

this that of with maintaining rating. or our our our two the facet out made, the of think without ability run we think forward. it's going important nature over I shareholders times the of somewhere those strategy the a of take. I'm and to to say our our and of commitment an the jeopardizing very business were sort context happy I point given historically we think just pre-COVID size investment-grade have perhaps investment-grade But And run have rating given range and important that give In half time a and prices. half the three business a is for aircraft, the investment to in I have, new we between ownership, two agreed contracts

there or assumption forward today, extent of assets, wouldn't P&L the either conclusion to what in the be or remarketing effect no some expectation resell to those sales up didn't the we of our material down to today. are for be and at it's which were If have they we consummated, magnitude any expect don't think reason, the I those is sales. we will context those any of prices of on go So, sales the safe looking a selling at each say

Okay, that's helpful.

other period kind it this, think that but end be or And do one reporting expect have you change as I you of fiscal you results? still the of mentioned us a be you year, in with will your our update sort on administrative, to year? call -- will Just to fiscal longer a year

we're I'm this context working in operated But trying to how to still that. our it's we've everyone our regular with have the way historically. intention do business through -- reporting of

practically a be speaking, in be of our I the fiscal new timeframe in it'll and when and January, that's context with in for will next then fiscal our a update this though so And mentioned in in even year our would remarks, the end, year prepared as have fiscal February probably update, context filed of our probably mid-April February our year. wouldn't expect to we new year-end year in XX-K end

for Very good. have. That's questions. Thanks all I the

Thanks.

our [Operator next Bloomberg ahead. from question with Matthew come will [Indiscernible] Instructions] And go Please Intelligence.

for taking question. is calls. my thanks your the on time I'm of Hi, This one first

this basic. is apologize this somewhat I So,

impairment some and with do other around you Given your market to so aircraft, aircraft on how the the that and of just also outstanding bonds, how older asset versus more your utilization you dollar on be value falling ask fleet average seems utilization on I fleet older manage to risks? those thoughts manage with potential can for respect given lessors

does through Look, the in all-in that aircraft, thick suggesting and last But framework, decisions, thin, bigger of it's the have or it's of manage aircraft the We years. the aircraft. clearly costs, network in than we -- needs it's airline. root aircraft the for airlines COVID, XX in maintenance the fit -- in my an of to my what's believe today managed that the my business overall value the we our costs? used, structure, demand the older and with what's way be declines cleat what and context context cost context same airlines it that running with happening we new for for the declines managed operating are for economics newer try invest And capital in how is appraisers the decision in making market are value an whether will of

we context this what has changed. more versus the it that to expect industry demand of COVID through today be situation. months none certainly our we work way was excess ago challenging in it's of the XX environment But So, in as a than supply

of Okay. ask follow-up, what know your of Could I Thanks. much bit whether of coming there's be on shorter the ask is might that coming sort a to noticed portfolio than is -- those get lease peers? there lease I might some a also think, can I are off on the lease risk And what terms the your you how any rate sort If aircraft? of you quick I year?

have have or fleet by lease XXXX, numbers, currently, I'd an aircraft And about say there's narrow-bodies natural what during lease XX my we expiring. in additional state, that will in if next I the have year, So, round think X% XX value. XX I think we in net today, X% of or book off

have the said, have as today placing placing the environment, of in at So, is assets for again, continue than environment, context less -- you expect way to in customers them XX dialogue months But homes through would new expected to would we'll good ago. today's to placing in process. continue be aircraft our this existing you either lease new with work in that I and and we rate extending or

So, in have around XXXX, of book between placement aircraft aggregate to worth now a the that the net neighborhood X% of task of in end of XX or and are somewhere X% we somewhere XX value. our

much. Thank you very

Thank you.

questions, for the further I'd no Mike Inglese or to back clock with turn over closing like additional to And remarks. any

look today. to one to operator. with taking you or anyone Thanks, any up of you. questions follow reach you, has the Thank any time everyone We for dialogue thoughts out the can If forward continuing us.

You find all have me. Frank's you I and contact all how know think to information

So, to look and forward soon. thank talking you you to

now disconnect. And today's you you participation Thank this your conference. may concludes and for