Aircastle (AYR) 30 Apr 222021 Q4 Earnings call transcript

Good day, and welcome to the Aircastle Q4 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to James Connelly, SVP of Corporate Communications. Please go ahead.

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

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

our freighter and future six X% predict and and narrow to the body Russia Russia. economic aircraft experiencing out by to customers to end wide international to the body and quarter, painful began exposure net have and start of invasion on a call quarter peaceful fiscal aircraft, shortages framing difficult commercial sanctions aircraft proved fleet. approximately by may XXX for on transit, strategies difficult average of leased cargo to tighter before global with sanctions three nine its the where the value By represented labor call variant. had Russia invasion Aircastle’s caused Eastern airlines enabled Ukraine Ukraine. restrictions throughout resulting These book that of leased make Omicron’s this followed Omicron of grow impact leasing It's and and financial I'd invasion Our began and compartmentalize while today's what of human thrive. which especially, included Decades Ukraine of typically aircraft talk hold Aircastle aviation results. I tragedy two about Europe. fourth like coexistence it the the the Russia's to

of in had of We a market relationships, began. also we imposed and Ukraine we Russian lot have compliance aircrafts but upon ceased a one good and Russia and XX narrow and sanctions of Ukraine continue activities which Aircastle on entities, we leasing the focus Russia. in the one customer aircraft, broad date to have imposition the repossession in body. body set aircraft relocated invasion was mentioned, wide Since to had sanctions a Of all success leased where we repossession. before one historically two will out of the Russia I with

favorable the the claims efforts filed As continue pursue on with we we remaining intend these. conclusion aircraft, and repossession to of to we vigorously have various the XX focus carriers insurance already of

in loss was will rigorous and conservative I'd net of management, fiscal Aircastle’s for Aaron the $XXX exposure risk to was This these unprecedented charge impairment, not net a uncertain nature timing required the this time. for amount result at was insurance aircraft fourth Given the to our million, our and leverage us of more of underscore contributor to surprisingly which quarter. $XXX events discuss the evaluate the these and any of to which because in primary million events, Russia manageable. recovery year of that like detail. the is These contained

return move a to While growth we can strategy. absorb on the and disciplined painful, losses,

Europe, infections in focus decreases America, data lose travel our and Travel XXXX especially North the their our But COVID-XX North XX% revenue. global we markets XXXX we XX% two-thirds in volumes supports in mentioned, I tragic Domestic daily passengers March shows positive because on of where Aircastle April and are XX% is impact strong for South Ukraine for As more we're of a points and resilient seeing leasing business. average TSA deaths. our the shouldn’t aircraft are Atlantic events shows improvement global XXXX. America unavoidable [indiscernible] a data aviation Elsewhere, discussion. and in a view Europe and versus recovery data within see improvement than of roots. and throughput environment improving recently RPK draws available from of customers. approximately of Most in markets

million optimism, fourth even XXX%, Southeast and overall Asia's XXX% to recovery net quarter, we has acquired our numerous XX% four were region the new is of see of domestic the caused the of body technology and finished higher Russia year, quarter, Singapore starting newt now rate than bringing are mostly recent reopening down travel into cash collections travelers. Full that restructuring. Despite for fourth operations longer recent deferral XX%, our for and year from which to cash improve to challenges improved the In investments, all in with been for finishing term there we the aircraft. year slower, $XXX previous such year costs the bundled tech but as developments new vaccinated flows within the fiscal related significant rate narrow off and items. aircraft

note sale we proceeds addition, the year. into which of moving of April of strong un based unsecured years, this X.X year billion $XX of jointed with facilities, be And had major months. an until XX the $X.X next aircraft, sold coverage fiscal average times credit of conservative generated of for obligations $XXXmillion XX produced our redemption XX gains won't with XXXX. We're million which In age the new on liquidity broad for next

body on diverse operating continuing markets regional footprints. aircraft domestic strong growing and plan we technology narrow with to in geographically to We to base. look forward our aircraft fleet newer of ahead capital, Looking fiscal emphasis deploy a broad our body narrow across XXXX, customer

rating strong to the least, by years to these Nonetheless, In the shareholders. celebrated of year has during challenging Mizuho continues the Lastly, grade support environment Aircastle partnership the have customers is and and we're for We proactively Leasing. as with look continuing any most To the strength a our conservative experiencing will before been challenges, We these say balance one a still such to assets, as Aaron. committed do aviation ownership rising And our challenges of inflation envisioned want maintaining to these market customers supply contractual not and wavered work Marubeni global prices, base and this industry as commitments closing, to call the anniversary not of resilient with just our fuel our Aviation our two strategic through what But through support and through shareholders maintaining credit times. recognize customers. March, item to investment the faces. two turn In our acquisition Corporation diversified certainly as Aircastle commitments forward a value the recover. concerns. I manage their issues while unique and airline with sheet issues I their more for solutions our past, we our chain minimal our in over partnering investment. will

tragic crisis. vital in your Aircastle support. As Ukraine partner which connects Airlink, give first to a and more in everyone quickly soon Airlink’s aviation Airlink, I learn about of crisis responders, of would in the work Since to began, has doing times the Europe. it partner resources rallied employees our NGOs encourage care mission they which refugee need support medical and been XXXX, fundraiser with outstanding Eastern proud events as is with our

an Aaron results our Now, detail. financial provide will update more on in

Thanks, Mike.

quarter, the aircraft. for fourth a Russian of as of net loss our million, non-cash had For charge we $XXX net $XXX primarily a million result impairment

$XXX and Russia tax excluding effect, related a related Excluding of quarter Russian lease XXX% We impacts and represented collections million million. the rentals, $XXX $XX of we Customer items. revenues and of sanctions one-time total million. in from for net EBITDA income finance adjusted had fourth had

sale for full finance $XX rentals one-time the year fiscal was full of full $XXX XX% year of lease we $XXX for million. total and year excluding the and collections net million gains revenues loss million aircraft. Adjusted EBITDA of Customer year Russia for For including represented had items. the of $XXX million, a related the on

because we comp down in and year, travel to interest costs historical lower to XXXX. from no compared $XX levels. our million, $XX base expense primarily continue had compared expenses Looking fiscal expense lower when for fiscal at XXXX was related SG&A average benefit the to million, was share of interest rate

SG&A related to certain due increase lease primarily global costs travel incurred up period unscheduled will the in expenses resulting around and an aircraft slightly extended see transition as to The We time resumes. of transitions is the other and and increase ’XX, ground fiscal aircraft from maintenance Transitions leases for termination. were of in new for year delays. transition

proceeds we had received approximately other LATAM million $XX income from claims. bankruptcy through Lastly, of

with approximately the book book or acquired to XXXX one of into for narrow XX collective $XXX furthering balance entered to technology these in our charges [indiscernible] year, aircraft in committed attractive for After We sheet. XX value the new XX initially of net customers. for and of This acquired Ukraine value aircraft impairment the continue approximately Turning our million. sustainable XX Russia to disciplined million most the growth % $XXX investments aircrafts our operating represents net strategy. X%. commitment procure body aircrafts, XX aircraft were we our

Mike test. the triggering activities a leasing and our recoverability for mentioned, Russia imposed our on As in invasion aircraft Russian constituted sanctions event constant

fiscal collections are that expect recoverability in and terminated future insurance leases. $XX $XXX deposits and and half recognized and believe sence the we ‘XX, we when flow we be settled are We the million year specifically With U.S. the million. paid. these of by have GAAP, charges, have collection legal important regard in to by of not claims channels. the in netting remaining used letters collect claims approximately result, insurance impairment excluded credit the it's security recorded a of pursue recoveries to reserves for As impacted credit impairment to that undicount of on analysis. held we assets, of offset those are approximately cash hence will sanctions maintenance Since Russian collected any note the we both these letters to future Expected end regulatory means those, under of for through the

funding fourth Turning year net our nearly the facility unsecured. year debt total two to at of Russian Mizuho million, $XXX XX% in sanctions, of equity diversified America's was structure, preference result Despite ‘XX, Corporation. our the senior with at was Marubeni times. of shares we fiscal our a revolving $X.X million a a with year Leasing the finished we quarter end, to new $X.X or unsecured and our on issuance ratio million debt and million $XXX took In credit X.X which, earnings ticket capital

maturity The decreased rate of versus end the average of on the the fiscal expanded In XXXX addition, million. at during weighted the X.XX% ‘XX, facilities X% end end to our existing size at XXXX. of by versus declined of at years we average years X.X XXXX. And $XXX fiscal X.X debt our

position cash improvement liquidity Our a $XXX robust, million versus year year. remains operations were last XXX% for flows ‘XX, fiscal from

$XXX With call billion, As that, includes I'll adjusted million. months of million security as We operating letters $XXX X, reserves, flows liquidity had this million, for billion $X$X total additional deposits undrawn $XXX projected from Mike an million of million of of we turn unrestricted $XX of the million of to $XXX and cash lessees. April revolving XX $X.X of asset as sales back credits closing cash hold of comments. credit, contracted well $X.X our

air of financial Having enable fleet towards liquid liquidity disciplined grade serve volumes sheet in Thanks, balance aircraft strong as customers impact conservative regions traffic position market. the their ranging where will look addressed Russia lagging has in to recovery pandemic to fiscal ’XX the post date. investment in diverse ratings making forward progress us to that we accelerate believe body capital, narrow broad of growth been position well. strongly us access to our our aircraft, and Aircastle’s We Aaron. this

long global our happy operator, focused for open the With owners grade rated we're focus questions. investment future. term seasoned optimistic solutions team, With up that, to were the management about employees call and the

with first JP We'll Snyder Thank our Morgan. take you. from question Ian Instructions] [Operator

dialed-in Mark actually it's Streeter [indiscernible], me. Ian Well, for

Aaron, Mike of a and couple So, questions.

to maintain equity little but forth, you about get you so your leverage, down to go debt sort more equity sort Russian so was, flexibility infusion are here to thinking of leverage off down and going slightly to ratings and And about enough times bit or to leverage where not dry sort obviously, So give managing back How forward? the it have elevated powder. you you whether in some top of write that's parents how a the up what about say, X.X are thinking here? wanted you're to of going you of let's the think did playing an

not we had are, but have it's before Yes. room as as think Mark, we still where Russia. clearly, so I think much we we some

nobody in looking to the still. And but would a the what believe to that it conversation the get time, of construct conversations our what's clearly so, lot with to beyond and a committed continue believe shareholders. more going capital grow We grow sheet business, in business industry. is where we is is to in the it think about have would I so a industry stand the the growth don't around balance left just our that's to and this to ongoing to at take finding ways intensive can participate fund with the shareholders like to are say I we

where there's would say you higher? Or -- about if a if but you you was think a there should So good that's say maybe we opportunity leverage bit is would some room, going. it fair really sort you X.X though, shareholders mean, and of have directional back is get opportunity a I where know would good help to which drive way little to that want your leverage it put you towards here. just it I it's is or of we in equity of it sure make sheet keep balance where the headed kind to finance

what either the for funding one could big just Well, a opportunity you mentioned. the be opportunity, things if in sense makes short of big there's that term

Okay.

we bring did that to move in it made unless to context that needle. whatever the won’t we leverage the it look of we We down back raise could believe

Okay. then just follow more one sort here. And topic of

out release, down are what or clear sort those net Russia Russia been trying Russia. or aircraft X%. I'm the the to You remains that's that in of mentioned hasn't transition it it’s exposure, that balance remainder just sort in trying part? of you already Is have right? to understand So of some make still some sheet down that on I'm sure in of written sort the just of were what's to

you to composed or largely think I Russia essentially pretty mark as else has of part of that think freighter. of out written should came remainder zero. XXX close Russia two stuck down been the that Everything in the on to

say you the to mark XXX forgive just want understand when sure So make I on freighters, I me, the that.

my two a still -- the still value get down value that we period. I'll against assessment back, XXX then If those is future So balance made I all come planes of XXX we’ve back planes, off is wrote freighter write be the fine. that probability those there's freighter never remaining possible, a in they those on sheet, if to me, which I'll freighter amount

others, companies or -- really to the think question, whatever. And say, now this insurance and here, down is, that your the down. to going the my the of into we've out? auditors last written plays great. everything this plays big ability air lease of right the gets writings Obviously, with go you wall you which on part part Okay, to take how air cap do everyone Obviously, to is the see,

back the me. to a to get into debated. trying aircraft that So on that's here it bit aircraft insurance down you insurance they just full the with be of you get -- -- scenario whether you be company little to where really sort the the Thanks. for proceeds how of the do I'm saying the position, may payout insurance value But and sheet like alluded ownership kind here maybe there to a you can of for keeping are plays and to value reunited road sort it step companies the insurance more into And expect back balance fully of aircraft the initiative or is negotiations. is the understand,

with terms, insurance that to their can't and back. come simple assets out, I in getting in on plays impact situation planes, them will they they insurers, discussions their an Everyone to complicated. are to that So speak filing lessors will believe specific fact, will our but policies everyone's own. the be is claims back How anyone's have be for not weather

but and know the I could of that given back. end proves nature will not. Time assessment owner, get two that think those to of nature whether year or chance true the I'm at if was assets, our of back, the So fiscal the planes there a we was given I getting tell don't reasonable the them the be

Okay. It's any differentiation, make see if interesting on just passenger Appreciate not that it'll interesting just leave be of aircraft sort on the very let but you assessment Thanks airplanes made color. and to that those Mike at much. and that. others it the

No worries. Thanks, Mark.

Robert with our to from UBS. question Smalley go We’ll next

taking for question. Good Thanks morning. Hi. my

Hi, Robert.

back Hi. Russia. you in income And aircraft? go at statement to I've How talk we parent the going got leases rating you these income the just higher another than should forward were earlier versus deal? the And capital cost on of margin get capital you that? these from of could look cost impact other you company in leverage, look of question might book? versus from first about on have what foregone how we possibility might on a capital leases -- evaluate preferred couple, at What's do market, then

baked lost part his can Aaron of second million of that the then a touch that cash of in the portfolio. question, yielding expectation $XXX the on forward become you million say is of the on a first And so lease were I specifically effectively of rentals. assets than my any about $X.X Russia part month Robert, Yeah, that or have non-earning going that. question, over And income other providing lower they operating into mentioned in were your already yielding maybe flows Roy, little And higher wouldn't remarks.

It’s Roy. Robert. Hi,

very kind it's ways [indiscernible] that, generally overriding takes the some and question to consideration. us. think response is In is is that -- broad answer really to the broad really anything investment principle we do grade So important I that the of to

earlier bearing very, So that mind very if we in can credit look obviously want important to to is it, the access Ultimately there's we to we'll in Mike’s try good opportunity, (ph) markets keep at sure [IG] place. that and point, a make us.

believes I think look what's vis-à-vis us trying credit and to that So opportunity But credit agency IG to criteria sure really do prioritize going that [indiscernible] have for operate continue more right? is boundaries key and of like. really balance it. there importantly What fail, does the markets what it a we is between is to within making the the be the ultimately metrics and the

look go and opportunity that that, market? or if you you for So to cheaper from for your like to at to the preferred an it like you is an financing parents opportunity get cheaper capital

a think ultimately agency some common and differently very being question investment I would extent, versus of of us rate, of investors that told cost a inherent is Well, -- to it's market, just what right? also the issuing the equity on from think prep. that. the credit attractive given think give versus that what of to But do yield the prep perspective conditions, at -- the pricing And a it's -- robust macro which a ultimately credit debt a I agencies me rate from just the And cost equity. a then you preferred on consider there's we

Well, your are yielding X%. current preps over

to me money So parent seem company from that you a attractive at it want assuming come rate. X% would plus the get more a you'd to deal would then much at that

true. would that world be perfect a In

sorry. I'm

investment of the in a the the do and temporary equity sort back world question be perfect that would my I equity said, come equity. point, true. long really bridging is this And see underlying I itls I or is we as what of think term to

and think long the they think, and business our I try shareholders investment a business. to really have support any make in term investment the equity is I that commitment

we you see perpetual at look are as of sort right, If issuer. you would the pref unless bridging of more prep market, equity, a

the very call. And you. helpful thanks and Thank for Understood. that's

Thanks, Robert. welcome. You're

are Instructions] to this back the no additional closing at I'll appears for Connelly, call further or questions It any there time. [Operator you turn Mr. remarks.

you have and for in questions. so out Thanks any everybody. Thanks reach Thanks if further much. calling

you Thank And this for concludes today's participation. your call.

You may disconnect. now