Aircastle (AYR) 13 Oct 212021 Q2 Earnings call transcript

Good day and welcome to the Aircastle 2Q Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jim Connelly. Please go ahead, sir.

Thank you, Operator. welcome Limited’s and financial quarter everyone call. update morning to second 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 and that www.aircastle.com. recorded like to replay website at will be We’ll this shortly, remind is call begin I’d the our being a everyone available through PowerPoint can you also There that this call. press and find accompany presentation release the which are point deemed to would today may that I historical out be not statements forward-looking like facts statements. those be estimates detailed Actual are and results found on from cause materially materially that may differ actual also expectations Limited’s in facts our differ website. our or from the expectations results Aircastle to SEC expressed in filings, certain could can statements which to release full direct for Aircastle legend. I'll press the Limited's statement forward-looking you that, Mike. to call I’ll the now With over turn

Jim. everyone, Thanks, morning, Good thank you us. joining for and

XXXX, results. saw income to the second pleased present quarter the first X% quarter. sequential improved a $XX of of rental increase in markedly revenue For lease net versus we're million earn We and

in recent XXXX case sequentially the flows an our near-term. update, $XXX million XX% stand the the top losses COVID-XX of Our sectors of many equity marketplace. the we've levels, said, is debt demand, impact airlines substantial aviation XXXX total by That in and [ph] X% period, credit is at metrics Annual around meeting, estimate XXXX not XXXX increased improved for the IATA billion. RP Since crisis to over also will XX% and with increasing XX% to with that operating aviation XX% measured and by to improvement At in General expected declining we've first reported over continue cash quarter. global significantly could versus I'd $XXX our their seen last in the and Both airlines cities. travel like amongst playing are observations cost and XXXX offer and success varying multiple or the challenges, sharing where volume by established part demonstrate summer to these to Europe, immunity crisis. our Despite airlines we're carriers strong cities customers. there pent-up were China, is receive past start an among restrictions on showing adapting out aligning Nations are deepest multiple test. seeing routes is travelers well near of have can America, business low negative our consensus improvising In who shown recoveries. Mexico eager that travelers. showed off are the XXXX. levels, and are they demand and the for industry North into Brazil on recovery

However, improvements The ending some increased in-person it's a with months we capacity expect carriers delaying we reduce air proven rates demonstrably high. traffic rebounds been now Delta that aligned in summer where vaccine to vaccinations, see commerce, variant the directly with and are with fall.

Countries For is tempered numbers. as mass Aircastle we discipline regions and Latin have lately as and with and India seen America where in is for good news. But Asia. it's certain Malaysia, closely promising vaccinations, partner case the of such industry, reduction customers this and momentum parts in such there Southeast with COVID-XX slower as a caution Indonesia

lockdowns. across Delta that onset be nations the potential values, has vaccination considering our aircraft region to variants to the percentages low focus some board. continue new aircraft investment However and in respect single With of

to or experiences international U.S wide spread XXXX until be European as remain are some values folks. most aircraft, opening body felt recovery Although and are aircraft may the wide until recently travelers. travel such expected depressed for this evenly more news there not positive is to to XXXX according body

ahead, challenges numerous and uneven Aircastle been has is forward. recovery the still Although way moving

proud latest Frontier new for growth acquired we fuel airlines new announce these to engines like aircraft the Low CFM these a shown with Aircastle. amid Frontier lease Airlines, technology. containing customer aircraft We're to times. equipped four LEAP have on cost resilient are emission Neo AXXX quarter efficient This low challenging

In on $XXX European with addition, acquisitions bringing aircraft million. acquired year-to-date eight helped which months. for our have challenging to push approximately through single about this Aircastle lease core to to customers, aisle I'd we talk aircraft XX quarter like competencies these two

$XXX Specifically, our off these X.XX% with we million our financial credit redeemable preference low shares. cumulative issuance our laser and quarter strength commitment In sheet focus with on towards enhanced this line liquidity and goals, balance the leverage. of of

an quarter XXXX. net redemption to debt redemption million end of note our of or are X $XXX adjusted. second X ratio and to due next the ratings scheduled senior XXXX, this Additionally, unsecured completed actions quarter until for to equity These we X.XXs isn't when in senior early of notes our originally brought the

We sell also favorably this see transaction the We're customer. second this see quarter claims bank $XX lessee claims from due for opportunity our LatAm, to to pleased largest bankruptcy million. bankruptcy resolved,

our either commitment MAX look impressions AXXX Lease for pressure our the and first low deals broad emissions Embraer our our on efficient X. Ambitious well market the propulsion the aircraft, fuel aviation SAF remain who yet co-development made, reduction are low, targets aircraft. broader sustainable same our time innovations who the of systems availability unless new We set airlines goals. words innovations customers management attracted to in returns. Nonetheless, acquisitions and at using such utilization just not investment industry, we've have to XXX in to capital will through factors competitive. still developing and Frontier systems. by rate Aircastle emissions These airlines proud fuels participate LOI reach you be or difficult Boeing for continuing of reflect our air and few targets made we as partner at and in Despite general. sustainability just in challenges aircraft liquidity and Until faced overall optimizing investing been parent lessors, developed. for by thereby are projects. EX optimizing reductions investments to next-generation made when investment aviation aircraft is such acquisition is abundant Marubeni extremely customers, by but believe SAS primarily and are Neo's, the in the trading a just our essential as also are as traffic of Aircastle global are our spreads environmental has Now to signed

an importance such Just bond initiatives. of best the exciting and partnership travel we air Corporation importantly, option our their innovation long-term leasing eventual encouraged recovery issued in announced the their efficient spirit To the the last goals, framework believe the Aircastle our are XXX up, wrap ways customers their create more developments month, in eVTOL after operating Marubeni strategic we're of a global fairness, numbers. aircraft. for company These recovery of recognizes of by green harmony, order the and the enables while and sought and liquidity in aircraft travel But assets. in meet to industry recent and

air to that last global expect traffic the averaged Xx return GDP. XX which has We to will growth X.Xx its years trend long-term over

always where until seeing with to the our a commercial to and and many continue the As Leasing, senior partnering detail. financial of the In to vaccine well-positioned of what pass ahead. is aviation parts That's our Marubeni we our are regional strategic very of world penetration working admiration are Aircastle's about to over XXXX demonstrated haul behalf a whom with between the long-term aviation's recovery, will The reduced Corporation will changed results levels their forecasts, fiscal Aaron, to not liquidity is call many gratitude. Mizuho for as And But in more recovery, been currently near-term conclusion, trajectories travel and about now and and have in has growth. for different support optimistic like nothing long-term would disciplined the dramatically industry recovery domestic, that, somewhere customers full with quarter return core and management participants long XXXX road our variant require profitable who the of some travel. I I'll leased. continued closely and realistic on strength It's solutions investors, commitment global of listening express in strong we're and Delta greater international with course Aircastle aircraft towards over also go XXXX we The global new. the the them team, and team, to do. of our

Thanks, Mike.

first with from second mentioned, quarter, income rental versus $X $XX to up were aircraft and EBITDA quarter adjusted we million of first the $XXX net the improvements finished acquisitions. due Mike collections improved and primarily of Lease sequential As million both were revenues quarter. rent million,

collections was lease percentage second a consistent and XX%. The our were as the quarter cash with revenues finance and quarter year-to-date rate collections first of

of received cash cash the senior reported This partially primarily other for the income and from a reported bankruptcy proceeds For make-whole a flows the the $XX million. and XX% of improvement million first early of by by notes. is the we on deferrals the from quarter of quarter, of $XX cash primarily result income as of was and million of Year-to-date, million redemption $XX collected driven first sale operations claims. the claims. from sale was This offset premium we rents $XXX for

capital our to structure. Turning

million $XXX have no we X.XX% and preference quarter dividend currently This maturity. of which shares, issued pay

quarter, At at our the agencies, first treatment ratio the the the equity As or of to X.Xx is preference which rating now versus XX% total debt of debt of was equity the billion, $X.X unsecured. net end was our XX% received quarter. second billion shares from X.Xx $X.X end

senior $XXX on we requests This word elected no unsecured means million XXXX. of down. in notes we The number this due notes payoff due until of have quarter, deferral XXXX. A early are deferrals. During senior

payments deferrals have with October strongly XX lease million the of packages, part of over exchange terms $XXX we terms XX XX% that the accommodation, longer to lease beyond repayment next approximately defer that security opportunity are It's the other airlines time. amend to of valuable important liquidity [ph] for we restructurings, to for we're consideration for with pursue leases broader months. these or stress As prepaid payment agreed in providing. to X, are in

In of reserves, deposits, August credit from million in our addition, in held in as million maintenance million $XX of letters $XXX lessees. security XX, we $XXX

In billion $X.X asset to of X, October credit of This coverage XXXX. operating is facilities, liquidity, more $X.X undrawn $X.X billion $X.X than of billion we and with terms adjusted of projected our sales, ample billion through cash composed flows cash, billion have our contracted of of unrestricted cover own $X.X obligations.

positions broader XXXX. sum strong investments it stand we're market when Mike September Our purchase million at and ownership Aircastle's expanding there call $XXX To how aviation body credit unique aircraft, reflected we long-term challenges which revenue the as along with base we us that investment cash maintaining for operator, up through we operating are encouraged approach in we And and narrow flows. the This focusing well recovery But obligations confident of rating, to open liquid by that are grade are still questions. are leverage. will improving we on our mentioned, the the ahead, industry reach. see improvements in up, meeting conservative with are our happy our

will our you, from Morgan. take We first Please ahead. from Thank now Streeter J.P. [Operator question go sir. Instructions] Mark

morning, afternoon. Okay. good Good or

Good morning, Mark.

Thank you.

So sure that? just make denominator to the the in rate? can year-to-date. deferrals of formula want on You collection for and mentioned of we so numerator understand what movement revisit given forth, XX% sort we all and I the just

It's Aaron. Mark. Hey,

recognition. just So revenue then receivable And can we on we the revenue we from rent any on simple. We and you and If straightforward we've difficulty]. lessees don't divide know, pretty comfortable, that [technical putting it plus and cover collections been the collections, feel nonaccrual. as recognition it actually we our by deferral our very keep conservative actual take

Okay.

there you in than booked prior that quarter that's collecting more, to deferred that understand. was that just I’m number, So that extent will, you would right, you XX% were collected would will, that the quarter? trying if if the because revenue the in to be inflate was

collections in Yes, quarter. the Absolutely.

Okay.

prior a were get And take Okay, you. better he then, to that's he maybe your made at pandemic. shape last EMEA. panel that for on a they do are the for of going or balance that, your not And leasing. comment I wanted Scotland were you into in lessors It with to that with it [Indiscernible] and to, gets And the Mike, ISTAT play is wondering you obviously thoughts Aircastle the now you and whether agree pandemic? that collections the agree in sheet think But aircraft that better statement, state just on shape helpful. question emerging thinks whether in than week statement? than

and kind impairments, pandemic vantage But I'm leases terms not that restructuring, of in time have he book got I got agree certainly sure it. order in placing. we pandemic. his think I in with lumps bunch shape. you of had restructure no totally I with can planes, lucky taken in tough there our had Look, of are we terms probably that of rents, would been to We've good and a of a understand point had,

all have they think stretch that a I out different But are it means. bit than stronger were all we what going the So of our perspectives it's on coming lessors to in. a say

the be you're the forth. terms your But a And lot one. I which was lease Okay. I And books, channel, of about, anything one changed like? have address ownership look look marketplace for your going Has fair. obviously, down ownership the has in and sort so been very to I'm dialogue to to, age under Aircastle of wondering trends terms younger, last and what now just could hoping seasoning does shareholders that how of order in sort your the -- Aircastle I still thought that's getting company touting always fleet the going like you back we've of the just here. then structure, this to team any important with of So unique some forward? place your equity, new certainly are sort road really think is what you've with portfolio, the What I future as going really of had sort of saw your here? obviously, press in your of so what's Mike, here of structure, thinking the in get is that. was release, questions going

I no Look, sure. Yes, change or think in fundamentally strategy. there's direction

think perspective. generation and as continuing maintain going -- acquisition going market I new well be the lessor go as to to we're to still The from course, is participant a secondary an technology prior of an industry to as program fleet. we we're a And going been be to largely shift are generation. sales in continue through active reshape we has from to

we practically ESG year of of MAXs in on X aircraft pressure the more fast and put that try or a and But market probably NEOs going believe, course. X probably some than translates to transition the more continue so And in to old I into of But possible. in had force buying we're as maybe more bit. still to sort a there significant to this the industry buy we body with again, disrupted due I out the But plenty march done. as amount narrow technology the get current -- traditionally be natural what's be kind and in mature happen to of think be younger MAX And and aircraft to technology there, secondary going opportunities us fleet sort Neo of in prior new airlines as our marketplace. that countervailing to short-term to as forward a will it's on conjunction out And technology there's will for will side. COVID evolve

market. something, customers, I the et we over And the tech, fans XX%, I time. on active XX% of OEMs, we're to our for way XX% it that do that continue as that the is basis historically order, sense we're be new we a wide work ruled doesn't it's to But and and going take not if been there going our we And through [ph] makes But of in it's to think tech higher not sure that place. strategy. relationship think to in prior secondary it time have more a would but cetera. take roughly owners that new body transition transition, percentage tech with something might yet, have think of context don't out I mean modest OEM big

to at AerCap to Do Are the are? big assets do Is materially in billion? in given are you where count to $X lease you sort $X and double in to no size comfortable the -- compete need forth billion is for so when Or need how or you where be they you you with land going size order the GCAS man's you Avalon here and you you? bigger of air given to get in right with book? order be think

all you context. I of in kind think some needs it to -- need kept to be

I world. or going We're we XX% think will not of where of measuring terms see the as don't our we AerCap sense kind that. in on and against it's in as grow and time Picture, grows. It's lease you years a know view grow twice to business in I'm myself scale going capital. fit in X deploying relative Avalon the that I that And I'm industry not big makes be air for there's the opportunities yes, our as assets to grow bigger. -- to side. and but

Fair Mike. enough. Thanks,

Mark. you, Thank

We now [Operator from our will Deutsche ahead. Runte question Please Bank. Doug go Instructions] next take from

Yes. Good morning, Mike.

Doug. Hi,

weakness. strength, is an question, XX deferrals? any you with potential the in you for seeing outlook of of requests In in your in? your of future cash what X deferrals? for terms areas months further Asia is versus still area What's in mentioned Are requests conversations requests additional for of airlines, to terms A coming tone

in around been to a their Malaysia, business, remains of world. more be activity surprised to seen. as different -- franchises world money think Garuda's to get and be the airline countries. different plays the there's AirAsia spread it's they're more to and part of fix their part that But lots practically more few that announced trying so raise in Southeast I [ph] and active back in that activity wouldn't track Asia, countries see I trying speaking, what it's that translates restructuring specific. Look, in some going be into has of in how and to very flight on out

So more. short-term requests be in the some there for may

to to the And I the I more would longer work continue to back will, through think activity fact, of in going some as way we But the feels and flight that getting activity of successful restructuring/deferral in like be folks see. activity going the that part like this. more think in to levels and up. some think in world raising we money day, is pick I be term, there's it these our to

next, wide your the outlook coming lease an for And could and need for of be months, that might bodies call transition? you any off idea you. lease Thank particularly over XX to give it versus expires XX renewals there us the for

So -- to you that? jump on want Thanks. do

Yes. It's October during out we've through Winter with a those expires Doug over little have I the And I can you third Hi, this now Doug. of here. we tell you, a outcomes. about got next XX months can Look, scheduled year, next timeframe. XX lease tell looking committed covered approximately under of

for would as and And comfortable ongoing opportunities that do phases I one currently aircraft. off kind aircraft outcomes. posting in next I Another very wide scheduled of the have lease and feeling of believe come what within of third, to falls our efforts that characterize would then remarketing profile, those the in earlier third I trajectory of And we as describe number the year, those October at actually of towards the committed remaining having that are body time. in we

neutral, some restructurings have you to aircraft not, result presentation if restructurings of new the X.X keep terms actually from these out X.X Is up your the try pretty that saw to went successful extending that and been Or some entering a term positive? your lease NPV in good That's news. significantly actually the of to Okay. lease average NPV I fleet? in of years.

for additional account. to I it And -- And restructuring in try and with Doug, We with both those of near-term proposition Yes, cases, course, is. LatAm business of things. did positive sale aircraft. been trade of four a combination in our NPV to the it's think relief Frontier others then, of our many some it's keep on it new lease in for context neutral or the that leaseback has term rent fact and resolution

or two And for with programs your XXX-XXXER, IAI lessors announce up guess the where AXXXs at reach finish lease new older lessors maybe I with AXXX, aircraft outsource AXXXs. conversion those would it by in or particular, conversion just a We've lining outlook third as for someone selling FW you look with go? what's fun the are the freighter for expirations, to a they the you Would else I'll seen second plane? with freighter other one. the slots slot

get opportunities, we're a than on we really looking is not fact AXXX And we have that in world. the trying lessee would these who sure and to peers my I of business focus place scale of how the few I'm a really want are announced. some to confident to planes. going spec, So are I the more convergence on say we're in in modest at and

cross we looking take think spec we're at to if we experience that on sure, XXX that So at make given comes convergence AXXX, we'll we path. bead be sense of down can our XXXs who's go not and with a going the to it big some plane we converter. out, I'm prior it a want have when AXXXs, it. And

on years, alignment you X.X no be said near-term metrics debt those last average term guess think I of average conceptually? was should going better two I term there out one finance to X.X a maturities. years, side, with your lease the your But maybe

the I not and that's night. of the think you? I'm be did lose little is that at keeping a conceptually, me would things sure X.X tighter X.X one between good. up maybe we spread Doug, current

very No, much. I’m you here. Thank

Okay. Thank you.

[Operator to the to the or further appears host like questions. additional remarks. turn to back There conference be closing Instructions] for any I'd no

the in any and week, anyone some of Connelly, to back reach to everyone. you forward me. sure Look I'm if York Appreciate has follow-up, or to want Thanks, on Thanks, and support. New Aaron next months. We're Jim out your your Okay. they everybody. being around in time phone seeing X

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

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