Aircastle (AYR) 12 Oct 222022 Q2 Earnings call transcript

Hello and welcome to the Aircastle Second Quarter 2022 Earnings Call. My name is Laura and I will be a coordinator for today's event. Please note that this call is being recorded and for the duration of the call your lines will be on listen-only. [Operator Instructions] I will now hand you over to your host, James Connelly, to begin today’s conference. Thank you.

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

In Thanks, few risk. balanced increase as over improvements compared against [XX] from aviation you and a morning, some like comprise to America, places on in quarter XXXX and second volumes in in over the start you America, through off us which brief we will aviation the North our are global continue Latin pass joining India, detail. in some last next sharing flight even the future to see our marketplace, period to RPKs across average the quarter, IATA Since in indications sustained Europe everyone, marketplace I’ll the July, XXXX. in near to reported of Roy, [ph] level. and three call same months, spoke walk more for highlights observations today. who a we our a few second I’d by and then global results Jim. Good thank cover

Globally, majors are in with with dealing our going U.S. fuel, eased, time low travel Australia bounced demand back The a in currency challenges energy business. profitability side the North As Asian is especially the travel clearly same inflation, these more the airlines issue the the labor, and dollar There's be are cost risks having do in outweighing however, major many seeing late. more up customers to positive costs in restrictions that soon. recession more not most to leisure post-pandemic demand with quickest. on and headlines for created markets consensus for look have are European improvements, of with keeping a being Japan. challenging returned airports trends, with appear that Airlines a These anytime the demand. be and and hard the Inflation, supply have carriers America the economies. and high strength direction. of could to have as headed be year XXXX dominate away markets Along

Among to That technology offering disruptions, we're a solutions the body looking Over of development. million we're these seven single an AXXXneo, aircraft acquisitions an the We two activity. aircraft. second efficient lessors growth leasing sector airlines new landscape pleased report aircraft. the the years, growth XXX invested narrow for narrow body two to past by with and XXX portfolio aisle saw seeing increase Combined In X manufacturer's very in to during the liquidity were the continues. pandemic. acquire most significant aircraft MAX quarter, of supply chain competitive in

since quarter the X,XXXth Cityhopper. of aircraft we XX delivered our the In [ph] of close and Two addition, we're to proud delivery. the milestone the EX] EX quarter, order E-Jets during the additional second [seventh of KLM aircraft share delivered Embraer's for

portfolio XX million million we years. approximately These for proceeds last XXX gain of this brought strong with aircraft XXXX, new XX, sales reflective of XX% management by our and XX Consistent XX% XX quarter sold comprised book of philosophy, fleet is of August our in of of age disciplined the net average technology five aircraft almost overall secondary of the value, the increase As an with market over an months. aircraft. net

we in books, two were to and hold our that were disclosed on to first As quarter XX-Q lease continue which prior call, previously discussed on our our Russian Freighters XXX in lessees. there

quarter, second these the we able to During one were repossess successfully freighters. two of

will remain aircraft. The concluded And affiliated the one effectively of in our former this remains sold concludes books. believe wrote In August another to we aircraft lessee a [XXX repossessed [ph] other will sale we We September, a the this approximately Russia sales, aircraft. Russia fleet value our possession freighter sales the freighter to quarter in of value Russian aircraft written or the September, and book of one returned also we our of off be as of from any aircraft. be XX from body narrow XX, physically fleet. approximately expect and we of sale Russian regain these will Russian in do been comprised have Russian remaining and Freighter] along yield that aircraft during aircraft of net not XXX XX% nine Aircastle’s therefore this zero. none These on gain of all with We that million. After down our on of exposure

$XXX with minimal unsecured a of Turning Bank Harris Last and orders commitment liquidity. a to funding, continue our $X BMO balance we facilities to forward to conservative credit maintain million from billion. one strong revolving brought month, sheet

of with X.X cash As have projected X, October operating borrowing from billion a adjusted available additional under coverage flows. facilities we these of for total

decade. meet over realistic our we time, debt and liquidity sources unsecured interest With to financing about the ahead in evaluate to of our environment. objectives. last we're XXXX, investment growth rate to other had same potential we've continue the grade the rating, the Looking success At challenging markets great

of September, example, Aircastle in for was an challenging Corporation [ph]. today's source market Financing] in and ever [JOLCO of arranged For our Marubeni on attractive closed affiliate deal first by an conditions. This provides financing

driving secured to well. The relationships banking should can globally lending we choose excellent our addition airlines current in enjoy proven vigilance will the might profits leverage which being challenges, the not will the pre-pandemic undrawn track experienced and everyone. against Fuel many proactive as has in inflation energy consensus challenge credit volumes that by XXXX. of is That we to we revolving record be our In customers. markets in broad Aircastle aviation return industry opportunities X.X to billion and said, facilities, pursue airline until

Our values. has multi-cycle solutions while always build protecting experience our deep our ways team with customers to creatively found asset for

the of lease dire We aircraft fleet extensions. achieve current of a to to continue us be technology in that delays our shareholders, sustainability Marubeni as is aircraft, time, sectors. for consistent the our growth have our Corporation market foreseeable Our persist, taking the continue the Leasing will aircraft balance grade customers. and future helping At case We conservative our presence our future growing lessees our believe base Mizuho transition rating OEM tech and support us investment for tech and for for same believe all with well customer sheet, across place new which within leasing for the the comprise express of the the and strong goals. substantial positioned aviation

results who to call our I'll will quarter first Now, through the more in go Roy detail. over pass

everyone. morning, Thanks, Mike. Good

to Lease from XXX trend loss in in of [ph]. down In financing XX% EBITDA For a XX%. second quarter purchases collections to and operating rental lease flows the the fiscal accounting] August date's and sales quarter ending year XXX a of type are XXXX, and performance. positive compared decreased aircraft revenues. million. receivables have cash million, basis a [our] of customers the deferrals XXX X on XXX million [cash months represent and Year of prior reflect reported primarily of second and XX, rental fewer lease an six direct million collection of [ph] and the improvement XX% to quarter we the net account of Customer X% XXXX, second improvement adjusted of a due represented revenues

the mentioned Russia As September, one Mike the approximate which our not balance Mike will rolled XX in XXX a of during our recorded Russia, an sales aircraft be in returned. in in and we in the be mentioned We and this combined impairment million. freighters of will off third XX two of million The that gain will expect the any quarter. do remains or aircraft which of quarter, of resulted freighter remaining

impact are the to compared quarter to due X%, lower primarily impairments, XXXX, the down interest of second Excluding of expenses expense.

at Turning to consistent X.Xx, XX% elevated to interest a end is the rate year-end. equity our end of debt leverage billion our reflecting our quarter, unsecured. XXXX, liquidity total our from the slight of capital quarter, was the second the August average debt of rate weighted was strong. position remains with was our environment. fiscal At debt structure, net the which X.X The last The X.XX% on increase

X.X includes X, October of flows adjusted X.X and liquidity XXX operating revolving of billion unrestricted undrawn XX-month total This we cash credit, million, XXX of had of billion. million. projected of cash As

debt until are future. our narrow commitments liquid happy are up not weighted leverage about to repayment April is we these long-term shareholders, Our several open Mike focused that, And focusing limiting closely [next customers. is questions. grade aircraft issues the significant] a XXXX. portfolio we investment call long-term the of we macroeconomic believe maintaining and conservative extended how We global strategy challenges impacting monitoring are of our and [ph] our mentioned protection body on portfolio optimistic value. to are our best With with the operator,

Instructions] [Operator

Jim is Hi. This Connelly.

website Q&A, in that there's of the Just very we're the terms before the materials briefly posted. with some issue being aware

that looking into you get to I'll we're So, and back shortly.

take We'll JPMorgan. Instructions] James. from Thank you. you, question now first Thank our [Operator of Ian

Your ahead. open. line Please is go

for on team [Ian is thanks Mark the [ph] Slater] Hey, Streeter. update. This for

can business examples this the shareholders advantage Heading competitive into one how be us. Aircastle it gives a continuing to you quick recession, the some of supportive from Just environment? please question in provide and about

Yes.

continue here succeed years and resumption the recent three we Japanese and Asian long-term. look and we course, for capacity and explore ways Japanese think here to at of They're we that the will to to grow increase help the growth most So, of with about point are over the in continue the financing continue business. the in Aircastle some with stand in look, and our continue And as [JOLCO] growing shareholders their for shareholders. the it this the in believe by in expect marketplace, due to broader market shareholders to the [ph] in we additional liquidity the timeframe. helping in as we us over that arranging business help investment industry, would our the They the of adding say next example future, to five

me Thanks. the one XXXX from capital it given slip the markets? And more can about thinking in. refinancing just Are you if turbulence I in

current seeing has it's I markets Ian, expected. is not mean, what Roy. Hey, we're in obviously, something anybody the

get to in our investment peers we're One and thing similar a our fought are and all grade condition. good is, investment so, hard ratings. we grade And long obviously

access. have We

have We our adequate get [optimum the And [ph] time] liquidity. markets at sit is wait view [tight] to the think and and I into [ph].

good from billion. access, now, apart undrawn close right we as So, to market unsecured And pretty secured well. access revolvers market have X.X of we just have

So, through the markets I then we'll is that to judiciously and think the comfort with to some us revolver gives got discipline. key obviously, capacity combination but undrawn the settle we the ultimately down point secured and market wait access of approach [indiscernible] for ride it, and

Great. me. Thanks a lot. all That's from

Thanks.

Thank next question UBS. Robert you. We'll of take our now from

Your ahead. line go is open. Please

morning. Smalley. good Hi, Robert It's

headwind a though for about trajectory Thanks. oil rates? from rates, of even you and acceleration, rates. the the year here? do lease or face talk so? playing lease see next airlines Can the Do the we out Just question going Do recession a do that up? gone shoulder ability you higher want where How to about travel you we over because that lease headwind prices face in see has of to

Yes.

chain. [we're the always we So, in There's up inflation there, the tension context create think of etcetera. airlines headwinds will is and costs that rate all fuel, lessors lag And look fundamental of their as gone year rates or in typically this will months, the way funding have their well come that in this as lease sense industry, as pointed across business. across XX you those rates next seeing] lease the the interest and airlines, look, levels are environment we to financing value the rising lease a of reflect but expect pretty not banks, are fundamentally, as of time, make the up have a we the and other there's and there will that out lease spread dramatically this But context think as rates is the in rates I followed issue a will costs in have [ph] in the with the yet.

is window half of lease year we in what saying? the So, first raising the the missed haven't by you're not rates

that company rates does is, not Well, by any something what I'm itself. are lease saying one

a mechanism a of new rate that signed you you If lease with lease. a delivery up have customer you that negotiated and a airplane, when lease setting

many out If you There's looking think it's of be you in always by is, from rates who put the do sometimes need but now investors to Unfortunately, investors of lots which those of space, deal. intensive, still deployed said, saying, all so leads assets looking business let's how a to see who is their to no in aviation customer level, set pricing books. looking edged people that dollars should and we capital higher. sword, to as the looking on get also are as this competitive investment sale double club be irrational are that us lease I’ve there's it this leaseback liquidity dynamics a what lot transaction, many because do rates of to around bid are a

for Thanks answer. It's Understood. the helpful.

Robert. Thanks,

Thank you. in [Operator any queue. questions further James, see I don't Instructions]

So, Thank James. call. hand you, today's I it to conclude to you will back

get Thank the we'll few A apologies I'll that Again, Thanks. materials. you, issue the back up everyone, of out information to you and with for shortly. individually, us. reached have to for you joining me,

everyone. Thanks,

Thank you.

thank gentlemen, for Ladies today's you and call. joining

you. You may Thank now disconnect.