Aircastle (AYR) 12 Jan 232022 Q3 Earnings call transcript

Good day, and welcome to the Aircastle Limited Third Quarter 2022 Financial Update Call. Today's conference is being recorded.

And at this time, I would like to turn the conference over to James Connelly, Senior Vice President of Corporate Communications. Please go ahead, Mr. Connelly.

you. Thank and Limited's everyone, financial quarter to call. update welcome morning, third 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

accompany I'd website shortly, this being you call. the also at this a www.aircastle.com. We'll and remind be will press is to PowerPoint find but There the everyone like release presentation begin available recorded replay presentation that call through that and our can

detailed I may statements. statements from historical on SEC may be press statement would results could expressed out can also website. which our which release in today, that that materially forward-looking our facts expectations to materially cause like to be point to for expectations in actual differ Aircastle found filings, legend. are not Certain direct those the from I'll differ you Aircastle full Actual Limited's facts, estimates or forward-looking the statements. are Limited's deemed results

that, Mike. call over I'll to the now With turn

Good morning, everyone. off us. start to a Jim. wishing for you everyone like and by I'd happy joining healthy Thank XXXX. Thanks,

I'll our sharing few aviation call which happy more provide observations our results, this As usual on financial a our global some to kick after marketplace we're Roy on by the highlights with questions. then will per brief along take from agenda, quarter. off third detailed some color

through headwinds. shown the for shared demand have rooted air continued this airlines outlook in which as airlines is by they economic its I resiliency travel to IATA optimism year. global and for Last this month, profitability transport, significant returning believe manage forecasted the

wide headwinds rates, reporting seen travel at a Aircastle Strong latest market to analysis Latin exchange RPKs pre in Despite inflation, levels many their of XXXX. prices, customers. XX% increase continue where airlines IATA air ways of for travel released managing India pandemic number and due their while and rates foreign that for demand Earlier find demand a serves America, this with to are fuel interest week, Europe, from significant XX% growing is passenger costs. parts North regions to meet Asia, industry America,

restrictions because demand is by third observed creativity overall with customers financial restrictions While the local allowing same on quarter similar grow. crisis. experienced and of the the Chinese adapt in their new remains meet somewhat broader XXXX. Asia region to skilled the to offset continued seeing times we China who travelers, during volatile versus resilience easing during a RPKs we're in The increase from The being sector fiscal our the XXXX situation to our period what in Pacific operators international weather aviation the challenging to travel airlines for XXX%

the and growth and a with wide-body past of providing trajectory. long in more have indication growth new large of We've for orders this lessors aircraft weeks. strong Boeing Aviation's Airbus term evidence airlines Major seen placed key few narrow-body aircraft and

measurable orders, are relevance impacted chain aircraft improvement. leasing for in the look has Aircastle's to further This continue issues there be manufacturers of take little position market. supply that unique by to the to which new been lift happy Although proving continue means airlines they for to existing

for aircraft, new it's said, we're extensions requests a alike. That and supply demand Because still exceeds for passenger lessors on lease planes. narrow-body landscape our seeing for customers steady challenging

very volumes favorable quarter. profitable fiscal our fuel presents that headwinds S. headwinds. of and in formidable dollar remain elevated. Aircastle and XXXX I'm continue and quarter to the high achieved Yet as prevent travel inflation U. prices pleased third these despite interest rates risk report strong recession Relatively also a

these million. Roy results quarter million in total EBITDA success details on in $XXX million revenue But this effective in the team. of income, provide with by quarter's transaction and We adjusted execution minute. $XX was deciding finished our a net I $XXX believe the more third factor in will

in overall on we As quarter, to technology is from expected trading. environment interest of our to Despite two portfolio another costs debt acquiring including the aircraft. pace a AXXXneo X. slowed momentum be continue narrow-body of and aircraft see XXX-MAX increased our an this, aircraft growth EXs, new the somewhat AXXXneos have and Clearly, rate second strategy X spikes, focused

a Two-thirds XX% made in best efficient last narrow-body XX emissions value been increase tech. We've over of has the months acquisitions the new net our sought Aircastle the fuel have new customers. book aircraft by achieved

extremely on aircraft has and investors. trading heavily goals. forced attracts credits, landscape to I and our believe sustainability airlines partners. ability the strong aviation Acquiring a of to a X availability remains technology our net experienced in to airlines the competitive. focused Narrow-body many execute aircraft attract industry's goals ambitious to the team sustainable add among limited are help relationships we've reach is fuel, new use good While built new sectors challenging testament aircraft the staff and of such the tech

us having market. and deploy assets large Not forward most also pursue to book the order attractive flexibility a gives capital the in

are competitors quickly counterparties reputation and for strengths to our among professionalism. reliability execute Our and ability

gain our and On portfolio these sales, were make After up two side, of aircraft a sales XX% passenger of sold portfolio. and narrow-body freighters, other XXX. of these XXX X flight $XX we million. the equipment aircraft our the a management for Among

our ratings trading financing our rate Shifting banking the landscape. by November, our to we relationships. Marubeni afforded us in conservative team a secured during $XXX to many challenging interest facility markets Leasing. has opportunities and unique with After a finance, which our borrowings, track structure years Corporation and success ownership record, Mizuho our million grade investment from deep strong appreciate Lenders aircraft bolsters in capital announced cultivated profile of debt unsecured new

creatively customers broader a aviation confident possessing focused to aviation our there It's experience cycle maintaining way. near can build is objectivity team we're that for term suited XXXX deep ensure and we values. protecting but aviation our marketplace for whatever that Aircastle's our understood risk always for are asset brings well solutions headwinds multi We're while

our the transition while grade the sustainability taking their to investment achieve keeps helping the technology place Our the Because for our be sheet, growing We're shareholders, also customers portfolio, addressed of new us of fleet across strong customer value goals. and rating of continue balance we our our of technology base. of future. strengthening conservative aircraft positioned well support our

Roy Now through I'll call results. to third our go the over pass quarter to

Thanks, morning, everyone. Mike. Good

we reported flight income sale were equipment For million. $XX million of EBITDA and gains of the million. $XX revenues of quarter, on third million of including Total $XXX adjusted net $XXX

letters former to that everything We was leases Russian also related successfully outstanding. of collected still $XX million basically outstanding credits of

over same flow reflect a this cash period. million stabilized operating $XXX invested $XXX performance our decrease from We the Year-to-date as improvement was XX% million, prior XX% customer in AR year does average quarter of for brought The X $XXX mentioned million. Mike sold years. in which of aircraft, was X was narrow-body technology. of proceeds XX sales aircraft aircraft new X age The

and Transactional impairments were as received offset million of by as $XX other maintenance credit. letters from revenues, largely related Russia-related a well

primarily effective the costs third fewer are from to Excluding to the XXXX, expenses on impairments, assets resulting down due ground. compared quarter maintenance lower X% of

term closed financing and facility. the equity months. successfully we debt to aircraft Continuing a X-year facility secured our million a next over has This structure, mentioned, funded to $XXX our with three with XX% down be stood capital we from billion finished the Mike last expect a rate which it $X.X net unsecured. quarter. average of of total weighted debt The quarter quarter. We was uptick from average on was debt slightly last at our X.XX% X.Xx, -- slight As

cash of had X, liquidity January on $XXX months total flows operating billion liquidity $XXX adjusted sales were $X.X projected million. million includes This we contracted facilities, as unrestricted of undrawn in cash Continuing and $X.X -- billion. $XXX million of XX of

April, debt now and repay repayment in is maturity. we but expect to sometime major next Our between

portfolio. to a priority aircraft XXXX, ahead new Looking will narrow-body technology our high for be

expect conservative while about to the As term maintaining to With focused optimistic forward rated we are grade adhere trade constantly shareholders, the allow in we long XXXX. usual leverage market, our commitments. investment we

And to operator, the that, open to happy call we're up with questions.

And Mark we'll go question [Operator our Instructions] ahead. JPMorgan. take from Streeter from first Please

recent facility. think mentioned gave Roy, I you -- morning. Journal. Good saw interview Thanks. an the Finance Great. you in Air secured I

to decision the add to recourse about talked You that.

secured talk has grade a is company very don't How your see to if recourse? much investment an recourse. can secure borrow that sort for lot. how So Just curious of you of much I'm wondering secured? We non-recourse through debt, with

So I'm Maybe that recourse. wondering about what maybe can you through you that. can if us offering by talk saved that walk just you

Sure.

our the operational benefit I off. mean, flexibility. secured of financings used status, and report was think investment grade I for effectively recourse traded We've all recourse in are recourse. non-recourse our traditionally some maybe the -- that slightly

assets, trading our the consents I assets the not but So, back at was matters, go flexibility around to day think the say of lenders wouldn't us important. moving around pricing it's end having for I for to obviously

terms. range And so very a have our of we flexibility wide operating within

to go effectively back done financings if So haven't all and recourse, is purely anything, really you non-recourse. which we have our been

this you the for going recourse So similar you secured think when most think versus bonds, unsecured recent do how much secured duration facility transaction, about issuing saved a you route?

a unsecured points. given to somewhere basis settle we've a say have at always did of I'd much when moving the XXX transaction, enter to I'd subsequent we target couple right? to delta points. market where between bank the to decided XXX the to peers looked volatile average, in is usually XXX bonds versus bit markets, XXX obviously, transactions, secured that a that, the were we of say That's When more been to between down. basis on But markets the guess my range,

wide. opinion. they shared still bunch. And view. were I wide, obviously, that way I think probably your too They've were a your in too certainly I know come spreads in And They're

for that yields you you XXXX, market have it secured we comfortable unsecured? more think think much do issue be are? should next you where when secured flexibility the are it going think secured And would be think to if a you Is or going now deal what's tomorrow, how look you you unsecured were or So you to do do about more getting about like? to do forward how deal think

comfortable we're we XX, as keep think of be trying capacity. we constraints adhere rates are natural transactions. are, to always than are We've to issue, a theoretically now sort within of never to so some right, Right secured There some on have less an always boundary XX%. I lower. wanted we where secured

we in deepest got do is form flipside issuer market unsecured want capital. the be of a The to unsecured The market. have the frequent

capacity things think think market I don't in we But think know. I be to being wait for look and markets, to at at the some I'd of kind that also But to be and the at we'll say notice of So I are enough the sort some call. next go months. prepared term to little we We're first liquidity When deal other sure, some a and plan down quarter really, but all have unsecured near financing I first reasonably frequently alternative point more. is our we, in the with market equal, bit six We'll when to markets maturity. at always exactly maintain in priority markets. the short sell looking will in our as

newer And So the how last continue is Great. mid-life this age important generation but down strategy, forth when you have almost drive obviously me. and term portfolio down at average of quarter, mentioned you're average least, more then so that to your you questions down you long come continues what still to came age the of technology right? of of trend Thanks. right for you're buying. Mike, what the because is sort know, buying it all it you

where about to? just and may thinking So you're I'm average portfolio how evolve the that of wondering age sort the

Yes.

new-tech which about reasonable mid five, that for tech focus or old as if from speaking, become simplistically now, the investment over forward so be or because aged you year aircraft, probably we practically of we've tech you add will our the as if levels change technology in four mix in target. marketplace new there'll your the some investment tech three may think think four thinking will roll and I new and last the investing begin or grow, and years

of new will tech increases. probably age what the penetration So we're increase as buying market of

nine around think realistically somewhere sort to XX how most of going I So between wind and is up. somewhere from XX XX down will likely to

from two we're won't to not XX from not XX and it -- we're going five. So to going be probably

travels. Thanks Okay. and into in week. hope Dublin run Safe to much, That's very helpful. you next

next from Bank. Our Doug Deutsche ahead. question comes Runte go from Please

question A on said believe a morning. Good on it impressive sale? very the Yes. two was XXX? XXXs you gain and I

That's correct.

million, is created quarter? there on the was that like looks And sale? $XX net some the And so impairment triggering in a a that million gain $XX

and the came sale of the impaired. XXX out and So were yes, that the gain previously one of and Russia XXX assets XXX, on the of more

just So clear, to period for accounting different realities assets. it's those be

looks in more improving? pretty it maybe higher relative bit your Are overall And helpful. maintenance revenue of utilization quarter, maintenance the lease that's little color like of to revenue? that in uptick assets Is Okay, rental. being you function on a percentage a there maintenance a seeing was simply payers, sharp a

Yes.

an for I Doug, maintenance is that transactional for one think the us, revenue recognized driven lease lease asset. the gets pending in by another typically activity sale of and more beginning

it customers reflective of who maintenance of are maintenance a the collections necessarily change all our of in So quarter wasn't payers. from

have guess, still be? and very airlines At you impressive have then expect to what utilization do forward point particularly going of And significant them the number. do or I COVID deferrals that extent in they last back Okay. What on you where Asia should cycle, to most with Pacific a this question reopening? quick operations,

defer when collection the context a our period in that deferrals lease think our significant Southeast about time. So will of restructurings, a essence, I of we over customer revenue two did in of Asia, customers long in base, of

in happening track. has back the most good part that of those a momentum what's the world with of world getting on been positive recently, the seeing airlines context from has we're so recovery, of that And the in lagged which part

Great. last to earlier. Mark's question And maybe linked a question

numbers term be now debt closer X.X. extended little comfort your somehow, works? I Your your a with should are or two average average you Conceptually, bit X.X those lease tenure guess, shareholders getting to years, that nicely lease term

financings mean, always to things long tried think far more to be be to right? sync. is tough can. XXs, to curve push the we X% I X% Doug, is going day of those of two in them you to close, X% out how of But and No, say a sort our should want bring I the day, the X%, ultimately think, debt that numbers continue I'd of do. to maturities to and to perfect terms two we've and to closer as from but out try end plan X% game end steep So that percent push those in world, that's term In as

the for and Dublin. Right, my the Thanks I'll understood. information. Well, save very of much for granular the rest questions presentation

Thanks Doug.

Thanks Doug.

that time. back to questions it this conference I'll for And Connelly turn [Operator appears additional Instructions] additional the there are any James no at remarks.

you for to have I and if just you want thank out everyone day. hope joining today. Please questions reach a great have any

now The attending conference has Thank you for concluded. today's presentation.

now disconnect. may You