Aircastle (AYR) 21 Apr 212020 Q4 Earnings call transcript

Good day, and welcome to the Aircastle 4Q Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Frank Constantinople, Head of Investor Relations. Please go ahead.

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

joining Thanks, thanks and for Frank. today. morning, Good us everyone,

to me begin year again of going reminding and everyone Let recent by cycle our financial our the reporting. fiscal forward for changes the

As in late period the Mizuho change December last reporting At and financial with shareholders, February. we explained, better time, to that our our end announced announced year officially we that shifted align of Aircastle’s financial to to the Leasing. the Marubeni fiscal XX reporting September, cycle previously from day of

and new XX XXXX. May, quarter day and fiscal our February and XX, November year August the Our fourth on last and call and of on ended cover quarters this we’ll results months the three full for

to weakness February. remained passenger statistics early Aircastle, to According very industry, released in and February airline challenging recent traffic border know, to COVID-XX year which continued RPKs a down traffic. pointed and International down for including As variants. primarily in to in you by due April domestic been XX%. IATA weak aviation XXXX the was IATA, remain was level, compared below January's new travel XX% pressured restrictions and travel levels has closures the decelerating due Industry-wide markets pre-crisis to global were the almost

as continues sensibly the long-term fleet pandemic. fundamentals to the conviction affordable the Aircastle’s will term manage While of remain macro challenging aircraft in-demand improve, we the have survivors of intact, desirable to remains environment travel and supporting remain air near that

While signs travel domestic we lead will recovery virus domestic side. continue restrictions new the there We're carriers have due cost of market as been the on to certain believe and markets accelerates. domestic improvement in to vaccine to observe low variants, beginning rollout demand that the

the in for April of show XX million As XX, excess throughput TSA consecutive travel checkpoint days. of X traveler numbers

versus QX impacted While in travel dramatically which the was throughout are Things was by moving in the date versus pandemic. than more right down up direction. XX% the XXXX, XXXX, was same it XX-fold

which in be February. China, New and continue restrictions across is strict lockdowns the in Europe to domestic Asia saw declined an traffic headwinds. early recovery, leader Pacific travel XX% in

the focused questionable current side, Aircastle’s XX%. the considerably in fleet currently traffic, better aircraft to that market sluggish. a international traffic primarily these been muted and carriers and the longer that close Norwegian’s wide-bodies will long exit on for of evaporation because for know from market has take recovery will with reliance remain expect medium severely demand particular the commitments will of depressed down weak to to passenger imbalance, demand supply highlights wide-body airlines haul the fare wide-body we Accordingly, in AXXX over term. based the absorb. for long excess On number Middle their the haul is East versus narrow-body due the the we time and that RPKs to

passing made have frequently by or travel of there's lack recently so airline's the through to in question of we latest and lack season? travelers closures is difficult patchwork peak global of suggests trends of by changed. the continue They able will guided is decision resulting The vaccine the a in connections will will rates IATA have recovery is that designed ambiguous. miss that implemented harmonized facing the virus answer of season, while no airlines, well connectivity has now the The the and open partially recovery the be a rules far. fares occur, to only to a clearly that of lost that would are near-term upcoming timing to certain end economic might of have were do. more air pandemic infection we're borders over gains where amongst at which wave geographies globally, decade The how of March Travel previous now question the not to arriving COVID-XX XX% border is hamper The XXXX support decimated globally bubbles and each worked home [ph] a connectivity delayed and airport and and revenue air While March would tunnel, that individuals sovereign the plan reported to be the confident in visibility. peak the the reopen light boost country, pre-pandemic There's rollout from. limitations recovery. that been at predict. to still was perpetual in number only XXXX, in existed the boost

critical So mean? management what airlines and investment if access, longer, an benefits capital like lessors grade remain does Aircastle. with will perspective, this delayed capital that and From aircraft lessors to liquidity, recovery markets takes surviving spend strong liquidity the

to management when the have and Moody's cycles, Our positioned investment we Fitch, and a we us. were to thrive credit ratings be crisis is various grade by experience recently well continue aviation behind affirmed seasoned through team with S&P and

in beginning. liquidity. coupon fiscal placed, for in reducing of expected be to notes. levels to placement We're and by February, seven-year the in proud year, sustainable very we the in first X.XXX% And X.XX. raised a two on XXXX perspective, record footprint million retire helping portion and with we KLM COVID million was XX% operating XXX long-term and X.XX% order, finance XXXX. A and record of we now airlines From maturing bank Mizuho reduction our crisis, active difficult Embraer two to KLM. raised an and central XXX results meet The an capital dollars. EX Beginning days of global expense XXX fleet August, is a ago, and used of low of XXXX markets are to their A EX While we have Leasing. role A environment aircraft carbon the aircraft at May. And XXXX. in XX owned aircraft million with March our favorable onset few accomplished we operations XX companies this have second institutions, Cityhopper. by during at the XX later additional policy scheduled general. annual access in cash to were of of and five-year facilitating $XXX goal private Both benefited significant quickly interest investment a accommodative quite their playing about lessors we since of minded harvest the between bit we debt jets the KLM company the and a XXXX. year, XX to shift a of including of We KLM’s been deliver took the in the Marubeni an delivered to by moved more the coupon rated XXXX. million proceeds And differential grade these debt $XX.X additional have the platform least to leasing was delivered balance with renewal, have KLM EX be in Of at

months For the sold ended acquired February, five a and total XX aircraft XX. we of

in conversations that lease approximately deferral activity with our a total stabilizing. During cash appears And we to the and recent observing customers, transactions. year completed be collection of XXX we're

approved York addition, LATAM managing our position keep on the In airline. with extend AXXXs and proceeding XX the New leases recently our to LATAM’s the Court bankruptcy

a of our aircraft footprint. Our we'll portfolio and committed let to to we're our few obligations. core that airlines is expanding avoid the capital and strong the geographically across base strengthen investment sheet to narrow-body our aircraft strategy on markets an outside we'll Aaron in on by center management base perspective, me with over regional From incorporating diversified. domestic balance a We’ll fleet to to newer credit further technology the to broad owners, broad emphasis With along Tactically, maintaining turn into maintain will minutes in-demand rating that, continue contractual an customer liquidity continuing fleet earnings operated of with with spend forward. results. and our financial look on call grade deploy focus to around operating profile. a And going now

Mike. Thanks,

proceeds net for the we million narrow-bodies five For XX for XXX XXX sold year, and aircraft million. acquired of

million was age gain was XX of quarter The the for XX.X million sold of average we year. sale for the Our on X the years. equipment flight aircraft and

fourth the March collections During direct rental equal lease finance revenues. we lease increase and more lease direct XX% rental quarter, in of revenue. to lease And and collections saw finance than represented

breakeven fourth we balance quarter, total maintenance in narrow-bodies million quarter, XX charges AXXXs, to million improvement, revenues million. from million three revenue nice of incurred by offset four reported including of write were while revenue. down charges For AXXX. and maintenance older XXX rose the XXX of net is to a XX impairments, driven The the we of million younger lease and typical quarter one relates fourth net impairment and loss net our primarily a and The charges XX non-cash impairment by sequentially in XX third maintenance was primarily which of million of the transactional

X.X% year Total year, full third XXX December this totaled revenues to full impairment million, the but the million. period, increased COVID was revenues ended million. XXX XX, pandemic, were realized XXXX. due while XXXX, maintenance the the totaled plus revenues gains charges down versus XXX full the For net X.X% quarter loss year versus Over

was at unsecured coupon was billion to end billion seven-year XXX year our of XX% million a X.XX%. unsecured. low January, X.X In of record Turning at structure, which capital of or total priced bonds debt X.X we our

X.XX XXX debt a maturing we earlier, stated to million the proceeds coupon XXXX. As in used portion of retire of

XXXX, the XXXX. funding weighted versus increased at to the versus to end our end X.X maturity at the have average 'XX years of average declined, As on at our our and years of X.XX X.XX of declined end rate X.X costs the debt February

remains Our robust. liquidity position

of million billion. of billion cash liquidity total operating a XXX and had revolving XXX of X.X we million. sales X, of That's projected April cash contracted undrawn assets X.XX included credit, flows million, of of unrestricted XX-month As XXX

issues actively been quarter since XX deferral environment lessees’ closing, In with the dealing in-demand letters of is from through are third been airline the million intact. by a minimum contractual improving balance undrawn down fleet which Aircastle’s traffic fourth aviation addition, strongly challenging, crisis. of lessees. and In our airlines strong we survive managing of positioned are lessees, million ended air the the aircraft who industry XXX We XX with by the long-term with environment has to lessees deferrals due commitments. affordable believe having have desirable with the we to payments. XXX We of is quarter have of and while remains credits to the see with fundamentals macro the

will to market domestic better white-bodies considerably fare predominantly narrow-body demand will benefit medium expect the We will than and recovery, long over aircraft fleet. lead term. the This to that Aircastle’s narrow-body

us and team that We critical clients. are position investment the strong credit broad and sheet, in highly and metrics remain to conservative management management dedication on of seasoned focus least, position airlines express grade spend We to open the Last investment appreciation grade and we're about enough owners, future. ahead. also say our years capital we access, with Aircastle. long-term our And up was but people. our not that will the Aircastle’s the unusual rated call of With gratitude ratings about liquidity delayed XXXX we the professionalism the liquidity assist market our for to believe difficult our have capital the our year. balance well questions. and would an respect management like for optimistic and to employees operator, can't team happy and for

from question Mark Instructions]. with JPMorgan. We’ll [Operator Streeter first our take

gentlemen. Good morning,

I'm usual, on as collection So confused the front.

then if press reporting represent right, the I of revenue. the revenue at you're deferrals your of But XX% here, is look in and lease XX% sort of collection. lease some of sort proceeding XX% So release restructuring

run like the you like because investors at way back the can I sort look up, this to numbers, So XX%, XX%, the and we this and should know is just how seem at the pre-pandemic I unaffected doesn't we to of which to look the foot. the XX%, guess it rate, --

how of real get XX% this maybe and and of your color wondering behind around what the interacts So collection sort rate with XX%. is us if or provide can adjusted collection XX% help I'm rate, our just you sort it arms some just or

Aaron, that? do you want to take

to. so been about to happy think will our revenue have Hi, on to the we way Sure, conservative cash trail is recognition. Mark. it The that that revenue recognition,

the And so fourth it came quarter, in for at XX%.

And are uptick at in we we're release, talking the months, March. in we're as around that flows We next XXX. forecasted coming seeing our cash operating about in looking XX for earnings right

than months, is end the ended So more XX where that it obviously of for February. last

Okay.

So last that XX next cash, operating what that at then? for the does is that so months XX -- how months compare XXX to

Yes.

it filed And to was So months XX going then that be for at at you for XX-K last XXX. came roughly when when adjust that's look class, the the XXX. we the you merger today in

ops in next XX So almost from double the we're projecting months. flow cash our that

Great. very S&P of uplift, ask agencies, BBB And S&P. the to notch standalone, still but that's specifically. at she your at helpful you get you number. appreciate Betsy what spoke want and is, S&P you that's I what then one what the BBB-. take and to Okay, right, some trying so BBB-, assuming at back And stayed rating -- I you to get know so to downgraded will it right, spot did, wondering of uplift, mid I'm your standalone you that. one the recently of about to I sort path to same notch her is gave actually a right, just and just

goal to wondering a have get if is I'm that's And to up notch? get that what do another rating to you there? standalone So

touch you do want to Roy, on that?

Yes, at of a think sort and from extent, it's some Good peers, to proportion And Mark. any technology, I aircraft sort longer of formula criteria new what has different been look sure. the I you morning, Hi. don't profile. of today. the think it typically, of is function our age if lease

as up a of this tick get we sort to is obviously, attributes, those technology. agencies, the those to and template, the portfolio not all or liquidity have longer you something lower kind newer, have of them management do the but think us think are of group certain peer aggregate add agreed with closer the And what and for transition I So kind and team a but together, not consistently will of agencies we that with, is. obviously It's looking I need weighted lease lease, I question think boxes. on agencies new a still terms into

a once uplift. to we have start moves, probability of So rate, back back I flat kind a think making definition with those model obviously BBB by of to getting we flat the being then kind of higher BBB-

sorry. like ahead, So a Roy. it sounds Go plan. Thanks,

as to some I portfolio, to recovery we move just time going couple the so of industry was the what's to years. it's transition say, take to obviously through and to going then happening extent see next of the

appreciate it. Roy. Aaron and That’s great. I Mike and Thanks,

Thanks, Mark.

we’ll Doug with from Bank. And Deutsche take Instructions]. [Operator Runte our question next

Good aircraft, the extended on backend? We've what presumably to a extensions been questions. the contractually? quo you've seen with on wondering deferrals have federal you transactions grants. quid what cash lease perhaps ABS successful with extent thanks see on morning I'm granted, conjunction average actually, getting many you've that terms wondering for pro getting I'm the the taking and in extent to flow extensions

been year, It's with pro Doug. And short-term the rate per it. you're a period quid some with short bag, say extension. the mixed with more hasn't with associated a typically a would it It's course when quo reasonably se typically, over through typically interest a last I of deferral, granting payback been

Okay.

their deferrals, fleet airline an definitely you're it's and what's some their to then relates flying. involved context it when of specific with their the But airline looking what dynamic and to it. market other it are by with what's at prospects happening and component really has airline extension longer term happening In realistic the credits, and and mostly a in

that's agreements. restructurings long-term court negotiations, is either short-term own also a supervised either your Okay, wondering you. or I'm power-by-the-hour consensual your what Thank of on or now of percentage as result helpful. fleet

at something since represent in value. in or and If look has last May, XX clearly our people aircraft you X.X% of around they similar LATAM been XX and book net Chapter situations, the of court

We've have a aircraft and Avianca. of a one in smaller some We've that, aircraft. some of got in Beyond with then exposure, out Aeromexico. handful back with onesie-twosies. Europe it's had actually we And in been have whom We airlines single out. couple come aircraft

my but of don't of the since top same the middle about talking last off -- answer value, people aircraft book I have it's been the of net we've the and head, it's So year. been crisp

as well. versus you think what that concern? wondering mentioned saw the particular used Europe collections, helpful Americas, that's region, granularity can perhaps you the by if provide maybe Okay, and I'm you areas versus lastly, you Asia stabilizing. then some And I word are of

anybody and by those customers activity looking we was pretty on generalize who've continued But as got to in other had all Indonesia. of But who we recently in of Aeromexico LATAM, Avianca deferrals way regions, through in lessors to of each Latin in our other Mexico. of the pay what those clearly of honor context its continue smaller arrangements. issues some the forward as American Thailand, not Malaysia, that if working have did had or hard to terms we're hand, -- in Southeast struggling the In Colombia; see of we deferrals, to work with Azul have point, level We've significantly, It's four ago. it's still certainly a this would Singapore, I months whether the when is quite as say were Asia generalization, six was region there frankly. hoping or there's to

progressing like. would a regionally, Asia broad but everyone lot slower generalization, than say is where things would clearly, Southeast place So are not a a I

much That's the very you for Thank additional Thank you. me. for Interesting. it details.

Thanks, Doug.

Instructions]. next [Operator Smalley take with UBS. We’ll our Robert from question

and very for much Hi, thanks my questions. taking

guess obligations first question. on How to and does they Just I your standing auction had a my that's AerCap some that there valuation? couple, tried first the and So your company. your impact LATAM. with relationship

the and the between of got financing How could the on and two, affect the in Number again, what then for of that a do impact financing competitive environment, end the Second, How one. Thanks. year. we of lot merger does have latter plans your you doing now they've competitively? in number And does you big layout space. to part this you're that [indiscernible] a year?

So LATAM, and unsecured claims was a do marketplace. of the in in reference reference is AerCap, think little something their you with think terms made you and I to made looking but it to muddle, be to I rumored

right. That's

can't Yes. lessor about overall the to I'm Look, kind what is our basis at I continuing will of in it. or those an strategy and talk what our on position situation about We're comment we're rumors. context on as the of certainly tactically relationship be our how looking a worth, claims a not in thinking

they'll of had of that in the even lot or started with here. the before of And maybe I'm So can't or Xx year. With each color AerCap assuming together. the second half to of they and people, a respect there. over or to was really clearly I bigger be GECAS course Xx sometime of which a gets summer taking two them this you're and than us [ph], give summer, lot putting clearly, do you Xx getting financing

on trading and year. in the And course we investors may second So the not I to out next of obviously some of a GECAS have a the amongst don't with over as the forms. the today been taken They move basis. of they're purchasing significant through our appetite in terms both those competitive or in financing From half standpoint, of may notice will have we market implications variety don't nine a what aircraft doing. see six of go-forward entities an But that in years, think own we of counterparties pricing we will both sort needs for that change months. be have the clearly of from of AerCap. amount

in was it the I merger. their it expect a But be ILFC. matter, current doing after year they'll as that AerCap practical the into very pretty seller like feels after probably acquired be they'll heading a little As merger active trading would as

very That's doing again, you helpful. appreciate for And call. Greatly it. the Thanks. thank

you. Thank

further no this are there questions appears It at time.

has the to support. Constantinople, Thanks, to taking Frank or Appreciate please talking Okay. you follow-up you forward us. and so. reach any everybody. like questions Look time to anybody soon your do join to would If out appreciate to

This concludes your for participation. today's call. you Thank

disconnect. You may now