Aircastle (AYR) 14 Jul 212021 Q1 Earnings call transcript

Good day and welcome to the Aircastle first quarter earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Frank Constantinople, SVP of Investor Relations. Please go ahead.

Thank you Operator. welcome Limited’s and financial quarter everyone call. update morning to first 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 release and that www.aircastle.com, recorded like to replay along website and at will presentation. be with We’ll this shortly, remind is press call our begin PowerPoint I’d the our the being a everyone available through today to which be like out point facts statements made not would may are I deemed that historical statements. forward-looking can materially results may that website. our the Actual to Limited’s SEC expressed expectations also in actual 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, to Aircastle press Limited’s the release legend. statement full direct I’ll you forward-looking for the Mike. I’ll over that, With call turn now to

to last preferred liquidity Since Thanks April, June, a Aircastle Frank. joining In of profile. priced for Good we continued of rate dividend us. at its you early morning successfully and $XXX in call and thank credit strengthen million operating shares our everyone, has X.XX%. position, platform,

of we to everyone, this closing Moody’s upgraded preferred major issue, remind increased capital billion. our three agencies. our transaction the almost rated four pro than of by to with this over-subscribed. forma times equity stable, outlook launch demand $X.X to common more We rating investment all preferred XX% and the Simultaneous credit grade are and to see pleased with shares transaction, by were strong the the With for coming in

to first delivered XX delivered XXXX, two Embraer months EXs three City Embraer KLM our to XXX book. from KLM XX, the be order During aircraft of EX to May the Cityhopper, we ended

with We balance deliveries have XXXX. of between the year KLM to this more XXXX to and two expected deliver later scheduled aircraft

KLM XXXX. goal their meet to of XX% by carbon We’re at by their least helping reducing proud be footprint

AXXX to prosper. look four to Frontier delivered as Frontier and with first to and end We delivered partner valued Airlines for to quarter a we close, Neo Following another years forward aircraft three being the continue grow and of they many summer. to come the be this KLM trusted expected to later

activities, on management In sold engines highly for our around $X the aircraft remained million and gain we’re portfolio and active three front. a of acquisition addition $XX We of proceeds million. to total eight

We lease also extensions amendments. dozen several and signed

As keep position our with XXX XXX end ERs bankruptcy the the three LATAM’s the AXXXs of of our the approved on York LATAM XX and June, and court airline. to the New has managing extend proceedings leases

the to in With widespread safety begun travel rollout of confidence vaccines, has rise.

a with in a observing releasing travel positive larger and pent-up recovery domestic developments in demand markets. market aviation we’re the leisure for result, traffic economy strong in As

better, fragile. be it adapt, several will finances to appear ways. adapt However, financial has many they’ll world need the air travel condition COVID-XX getting take and to to years airlines in remains while airline changed industry’s the significantly and for

billion components, most terrorist travel amounts essential industry, travel is IATA of which of created haul This decline airline of airline billion hesitancy ratio in return remain projecting $XX $X.X they in $XXX new airline fell to their market. XXX% the XXX% slower Zoom, XX% to XXXX financial revenue pre-COVID by XXXX. industry eventually. by pressure CAPA, XXXX. and global for the historically Business as attack for industry forecasting and the of somewhere the the to long April haul travel between from December and to industry’s travel are XXXX, to cash X/XX customers business is X.X% pairs during profitable Between may under in of XX% industry’s further passengers profitable lose Reduced The According budgets, further long decline expected to travel, will to and recover Revenues technology The have trillion crisis. an for wide is the revenues. burned $XXX the will burden. an ambivalence from debt debt will business accounts XX% and add to to recovery. the XX% Mackenzie be dwarfs $XXX is pre-COVID. and over and have years business city much expected global debt. recover, the massive decline additional but recovery spending XX% fewer but travel lost and in both substitutes, XXXX, the airlines As five are as i.e. which almost body of earned the international and billion billion a employee on XX% after slow

every downturn, we no with remain As business convinced substitute return. for is meetings and eventually travel face-to-face other there will

of more under aircraft near will increasingly body of the single important to aircraft point-to-point remain for become important an leasing wide to the Aircraft structural strong pick and expect during Although lessors term, change. range losers leverage, sheets it remain the balance but from in and manageable pressure source for rents finance, from aisle will aircraft winners will values lessors travel. with remain longer this will benefit we period

Both profitable to disciplined in uncertain In the significant environment Aircastle commitments, enhanced liquidity in remains restructure of have the aircraft contractual prudently With leasing COVID remained manner. of well the books rating the both and the effective the and strong agencies cost levels to lessor onset further with OEMs been with airlines supportive. at have liquidity very to raised current sponsorship, amounts the positioned and order industries. liquidity limited a with industry and their the able downturn, significant work grow

bench believe of While are term will intact teams the air long Aircastle the deep to for the and experience multiple strength travel take experience management turnaround. fundamentals change, industry airline advantage structural the we and cycle has with

liquidity position Our very strong. current remains

liquidity July coverage of of of represents $X.X about billion This total obligations versus contractual billion. we X, As X.X had of times. liquidity one-year $X.X

bodies historically crisis approach management of crisis. proactive our portfolio portfolio of downturn, to declined While up allowed at mid-XXXX a the peak Wide of as and quarter. significantly leading conservative anticipated in from first fiscal the to end us quality our a fleet the in nobody our to severe improve XX% our COVID-XX as XX% the years

XX% deposits, fleet Our XXX These times reserves have aircraft, sheet low to own banks XXX heavily out center aisle of weighted would of aircraft. bank currently single the XX% XX in-demand airlines value reserves fleets common are and is credit Most Aircastle’s on well balance in importantly, fleet letters lessee is by a of towards credit aircraft very representing very enhanced diversified managed owned geography. portfolio. XX by from now also We net strength book of financial The and level equity. countries. leverage, a multiple bank manage and is loan sheet off security maintenance, and reserves and for against balance money of and

and of the at of traffic in around is encouraging In vaccination sponsorship an and we cases over $XX world Mizuho economic billion. by delta spread areas travel. travel of privately increased in the largest the confidence as Air global also safety countries help at and world improve a large with Mizuho recovery. in Founded low widespread cross-border In releasing Leasing in strong recovering rates solidify pent-up strategic markets with of $XX demand. the a slower and XXth time is billion despite to Marubeni industry’s leisure uneven is market rates, offices an assets. demand the XXXX, vaccination increase airline pace domestic in much in the enjoy bank market is pace; however, Marubeni a variant cap Mizuho is fall, rebound revenues more leading XX held and travel As and company, the of vaccines around Leasing. of rollout and conditions rising will the with Corporation has considerable for pent-up barriers Financial summary, affiliate the XXX recovering demand further Group,

from industry managed airlines without previous to be crisis this with carriers capital in Without additional has such will support this and during willing remain had that COVID-XX lead survive. began for remain support we more however, will better to Low Airlines government Government legacy downturn. the sense ensure likely likely to positions many will markets, vulnerable While support to will cost with it that either carriers to capital financial shock the struggles to this airline drastic and a that and crisis less airlines likely essential profits, selective. was probably provide consolidation. been Airlines and access survival. to are such domestic investors changes more massive benefit struggle will during are government consolidation. are strong require become and some will before also versus prosper, downturns, market

quarter. the will who minutes the results over few turn for financial call Aaron, now on me Let spend our a to

Mike. solid quarter. Thanks We a had first

sales represented represented During collection and the the of reported direct and lease XXXX. type rate fourth of XX% in an this to revenues, of rental and quarter quarter first XX% improvement we collections XXXX, compared financing

For million. the cash customers quarter of the our of the into from XXXX. of We consistent flow trend sequential from represented will operations we deferrals. this $XX second the and first anticipate fourth This of XXXX continue payments repayment core reported quarter, improvement see versus a quarter as upward we

for also of net the improvement sequential net quarter first the a narrower of $XX million, quarter, of loss This the XXXX $XX first For compared a $XX fourth of net million. was loss million quarter it we loss reported a versus represented when XXXX. with and

finance in lease revenues. to to Our fourth revenues maintenance which first non-accrual significantly first quarter $XXX million million the deferrals. related down lower the customers XXXX is quarter were to and the compared rentals sequentially primarily versus $XX Total fourth the lease and declined quarter, primarily for due quarter, of

XXXX, for and compared were lower fourth to Excluding expense. million non-cash total which depreciation the to $X quarter is expenses first interest quarter primarily down the of impairments, due

and preferred at unsecured. total on the demand combined has the was of our treatment $X.X of a shareholders equity of billion, the to of to quarter. was rating There pays received capital shares debt at to which Turning equity leverage was X.XX and billion QX, equity billion, priced dividend the structure, agencies our or times of debt maturity. forma At which QX. net XX% end billion we $X.X The This than pro of X.X our which X.X versus preferred the forma brings our to $X.X higher XX% end $XXX $X.X reduced XX% pro the issue, June no X our shares. capital million is from equity end for the

at on of bonds seven-year of You’ll $XXX we coupon million unsecured XX, January recall senior a record low priced X.XX%.

X.XX% versus our points As the of on to at points. of XXX the Over costs May average our basis approximately the X.XX% basis at issuance on with XXX funding rate maturity comparable spread the time, weighted debt from treasury to of debt securities have XXXX July, declined end overall in end the XXXX. January declined falling

As our position liquidity remains Mike robust. mentioned,

million, X, contracted million. of As of sales a undrawn of we unrestricted revolving $X.X $X projected of operating billion liquidity $X.X total asset had flows of billion, $XXX July and included of $XXX billion. cash This XX-month cash credit,

We have airline agreed to payments with defer lease customers. near some term certain

agreed approximately accommodation, As in with defer have better to $XXX XX leases packages, These valuable this lease of over airline to restricting include security longer considerations. other In term customers repay payments generally or agreed amount July terms, million this airlines. for X, we to are the we near time. exchange have

extended restrictions maintaining payments, long on conditions closing, global $XX narrow the lessees. on our with market million and of improve pent-up term in in body demand. barriers U.S. The of deferral term travel releasing XX, down is further. focusing vaccines. should million believe is $XXX strong $XXX portfolio In the letters of rollout security slowing, our financial in economy downturn. May conservative million of liquid through and Airline confidence safety our insulates come an us travel widespread in cross-border travel and maintenance in are we from held rise deposits, credit As leverage, long limiting requests XXXX, aircraft strategy as We commitments, industry and

investment grade new Operator, aircraft are are of With the remain taking our that, market to term airlines Our will portfolio we who open rated attractive With up are advantage future. owners, technology emerging and we to body questions. narrow about to the call focus, optimistic long mid-life happy of opportunities.

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you. hear to unable We’re

Snyder stepping Mark for Streeter. you me? Hi, this Ian hear Can is in

you Ian? how doing, Yes,

delay the to ask questions wanted for I apologize I just couple Hey, a here. there.

part huge of your For us, a equity is story. ownership credit your

this anything point. to more dig tangible a benefiting point how at to the wanted about there’s in Aircastle this the pandemic recovery, to Mizuho relationship point with Just Marubeni little it’s whether at and in bit and and

Look, the tangible agencies’ credit, think parent. I with biggest as is of view our them rating the our

the be publicly equity the not that on we would happened the story still different of York context most last a that’s XX the it Stock had tangible a were last happened New if in and us for what’s Exchange, biggest, think year I listed so change in months.

are terms tangible in had helpful of context accessing throughout whether us that helping things to sale-leaseback and potential or clearly not other where In assets secure Asia, business done to we of in placing countries different it’s financial airlines, us people introducing business institutions the with opportunities. previously

most things I patience that as see benefits XX its our company, trading particularly as their we horizon have their and global countries tangible owners. them they world, and call, the physical mentioned in the we a think Marubeni on term long are having the as around the history and given view investment presence that their of a and as

have curious Great, portion are bottomed set, but the Then it rate flow thanks cash you was you a so can had do here, you during it’s and point? of the large regarding has you and the terms as that’s sight helpful. other I them from and to very line once process was I the think leases. a with revised restructuring for one run of where--the expect EBITDA at answered question point this if are restructuring call, just that,

world. point Look, of out delta at around I’m the anything not we sure has in kind bottomed see different places if this the raising variant as

now, for hoping moving Southeast and months terms industry or a slower are pace as where it still is our a quarters, of we’ve our In for things been was part at six world saying as Asia the of months number the of XX affects restructuring, business, ago, than ago. even much anyone forward

million cash forward cash trending you’ll that’s ago, do talked of of as bit think Indonesia Asia up customers uncertainty, see flow, Southeast flow there’s months but - terms about so and things months etc. Malaysia, of bit still today’s direction Thailand, our three that I we we are $XXX in from our around press In the XX around our some right a fair our guidance million in a release think is with particularly in we restructurings $XXX

was the and that Wonderful, very in for all me. I’ll jump helpful, queue. that’s back

you. Thank

We’ll time, Runte with Just a reminder, if star, next press you’d take from question our this like please to question ask a Doug one. Bank. at Deutsche

you Thank the presentation. morning. good much Yes, for very

Good morning Doug.

fleet versus you highlight the restructuring Good provided perspective reserves reserve strength customers morning wondering your from presentation, process? and are guess, your what Mike. payors right maintenance maintenance in In payors I’m by your are, collections. or percentage reserves ELL, the I of maintenance the your customers

industry it the it’s But the a a sake to decade payor anybody number matter, Honestly, do, tool is credit percentage as leases. Who our front practical a around would in compared the peers as the definitely of little fleet mix I context ago, seen people of XX with try have our use today our not the like Doug, don’t mix than would years world me, enhancement guess bit fewer in of for the you of leasing I to have maintenance I as who probably two different ago. we, than a a payors in get--try accurate to but to an is think want don’t and different maintenance a as a of between is guessing. and as

little ’XX, possible wondering the expirations about or very talk the for status you you lease what is can of thank remainder extensions Okay, and of replacements. I’m ’XX much. if a bit

on touch a to little want you bit? that Doug,

Doug it’s Winter Doug, here. hi Yes,

very even I of with out think we the where runs into days in can closing close fiscal got ’XX, have which think we’re aircraft. you balance off signed or for last I of got aircraft tell it, eight through lease. year we that a we’ve and nine just ’XX, three LOIs is expiries, to aircraft look of we have, about we it’s XX February scheduled approximately--what We’ve aircraft our obviously also As the approximately so, LOIs. couple still

delivery in of But did supply caution, Aaron, pace. somewhat vibrant, still a more are hope or so at pick-up and approximately for QX. moving in activity lease to so the signed forward steady, a not more seeing our Mike seeing alluded We the did overhang as interest space. the our if during to either would at I out frame, pervades things rates to work look to pick-up or pressure Mike as are we airlines as of as leases a start LOIs more vibrant does dozen or XXXX as we comments, a his in through even even signed a As remain that time on aircraft, we there activity a least active that continue well, are closed

what one, little Southeast what area bit with, much, in coming I about wondering on. going other Mike, an very Doug. seeing you’re if Thanks I’m you guess, they going, One restructuring on are touched regions you can that direction last Asia as where - some they of of still color requests, deferral potential a your speed from. the direction, are of provide concern

on be little could more a geographies, it If would helpful. you just color provide bit other

thing duration Yes, restructuring, - for should bit that, there. in have anybody, as time of not North pretty bit a Colombia, I our would position Avianca to economy Latin and their a through of help in same leases through that, Argentina is things restructuring term as folks than they is basis short doing LATAM a America, see to out some ago haven’t and months of taking in XX than up team of, our the pace, surprise three would so six said, in country as a country with and still think longer but it I approved to by expected requests terms Asia--you find may good story ago, AXXXs and has now imagined the on work do months mixed it the context context some long their as XX a in for restructuring XXXs, court proceedings. six is has no the I the look be a as than bag. our way - out smaller a Garuda size to Southeast America the of airline. summer mixed of out or well. It’s bit the be want looking their Other figure comes to was their In still and have folks to three a we this hired some think ago, struggle. for we bankruptcy continues deferrals, LATAM know, what picked little is they the different restructured

do through its to is to to try the group. things working proceeding, better Air still Thailand process. to and mixed context would of large with the through is Philippines bag rest restructuring something dynamic pre-pack, it’s for there. creditors moving Asia. get We’re their Southeast in Lion’s get how slowly what Asia I a the Airlines working they It’s done by but than a be expect seeing if the world, of in a we’re

thanks Great, much. very

know, to don’t Winter, add if want Doug I you anything?

add would I to comments. Doug, of one Mike’s element maybe elaborate just on Yes

or a of of with looking In a in we’re not In necessarily already to so help, looking, new worked terms modify working way. seeing number of is most coming certainly it the material to customers framework, not sort extend those or terms, for we’re receiving, in looking requests agree the or restructured or people we’ve they’re deferral some growth and of parties. some from we’re with they’re restructuring deferral instances, not

much. very Great, thanks

you. Thank

one. that no this questions. Again, time, star, if Again, this have one are time. at there any please is It at further questions press star, appears you for questions

joining just and today. investor your the of to want some summer. fall, We the seeing to in Okay, and the enjoy conferences on us thank aircraft person you rest forward look everyone Thanks everybody. for in hopefully of

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

disconnect. now may You