Aircastle (AYR) 12 Jul 232023 Q1 Earnings call transcript

Good morning. Thank you.

If you -- at this time, we'll begin the Aircastle Limited First Quarter 2023 Financial Update Conference Call. Today's conference is being recorded.

And at this time, I'd like to turn the floor over to James Connelly, SVP of Corporate Communications. Mr. ahead, go Please Connelly.

Financial morning, they'll financial welcome today update Executive on Chandran, Inglese, Good management of first are available team are Aircastle during quarter Chief also Chief Roy and XXXX call. line Officer; Other everyone, you. members to the and and the Limited’s Mike Officer. be Thank With me Q&A.

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

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

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

strategy, shareholders' industry. of continue philosophy prospects time. aviation Thanks, a you us. commitment their week the Corporation we our status it's long-term and for source were believe will and our everyone, We as Last and this narrow-body equity over additional share Jim. our team, and the additional in solidify We're to validation news Aircastle's and liquidity investment-grade sufficient the pleased aircraft our joining to $XXX an of investment shareholders, of ability investment Marubeni confidence clear to morning, we about enhance million for and grow Good fleet from thank commitment Mizuho our newer grateful passenger believe Leasing.

that ago, XXXX. XXXX CAPA into while and profitability pleased When below North America exceeds we Latin the weeks above return the XXXX. by Europe improvements to reported single-digits, in see levels. seat sustaining capacity Middle months macroeconomic Africa in spoke ago, three are we're slightly highlighted East, and continuing Two XXXX Despite to equivalents I and industry's levels the last capacity for XXXX America volatility,

demand, this their global global air industry-wide of economic the headwinds. average RPKs remains pent-up shares On recently longer-term spite which to is for demand travel X.X%. IATA also be of due rate by an about positive growing released double in predicts and transport, of predicts outlook IATA XXXX, of horizon, demand to air aviation a IATA will for approximately XX% at primarily XXXX, view buoyant the XXXX's expected annual

new Show, narrow-bodies. Lastly, consensus that at Airbus most path significant We last of aviation month's a passenger long-term Paris orders received growth. shared for the aircraft, and on Air industry Boeing is notably

higher changes by persistent rates, shortages rising higher be growth OEMs impacted impacts which trend transition. delays deglobalization, structural enact logistic fully have to connectivity; advance not international and been resulting environment, and macroeconomic pressures; this growth at saw airport have costs will blockages, lastly, carbon including labor economic we costs, industry's frustration financing in will resolved; summer to However, and global interest towards stakeholders and the the slowing consumer in GDP and MROs; supply inflationary at chain aviation last improvements political ambitious

our have fundamental pursue are cycles. maintaining path and we and the principles we economic that are these balance that us our founding. through since These weathering prioritizing challenges, strategy conservative As principles anchored amid liquidity, in growth pandemic, risks, the managing the volatility believe growth these saw to are sheet

Despite portfolio finished Turning EBITDA significant new and quarter $XX compared the in $XXX now tech XX% with growth continued six of of million our competition new fleet you now quarter AXXX successfully of up our At one makes adjusted for our [Indiscernible] to and technology We one-third first new update XXXX. technology aircraft of net to CEO. We're end, nearly aircraft, results. year on during a pleased QX acquired team million. and fiscal to income the profitability quarter our ago.

Over the assets tech three we of aircraft. last XX% acquired the new quarters, were

recent line on long-term challenges as of remains investments delays, new our fleet engines. of some robust mid-life trends, technology Although our keep aircraft as in well us in production because demand, technology servicing with OEM experienced

Not lending Our Likewise, built the are effective having team's and equally book billion in us about to early and transaction July raise relationships forward built well have confident order trading move the secured with we positions as professional our total who of $X.X our markets. gives a efficient the capital leveraging of have liquidity strong flexibility we execution. us relationships as large and deploy quickly unsecured we partners, forward.

As maintaining customers, while to risk-focused team look experienced our creative future, our we a to of continue provide solutions the will the broader marketplace. for aviation objectivity

of while across abreast base, taking technological customer tech demand. place mid-life the strong new in growing aircraft our Our transition our keeps us remain fleet

As our our customers, commitment sustainability in continue investment of fuel-efficient, and those our we a the our own demonstration focus most of to goals low-emission aircraft.

feedback. Mizuho month, growth. releasing sheet, rating be We investment-grade well continue and of support report, Aircastle a ESG we'll XXXX be invite also for all Leasing, the our conservative read sustainability Aircastle to and balance and Corporation share to we Second. story strong Later our XXXX With positioned about an Marubeni their stakeholders this future

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

Mike. Thanks,

$XX a an finance routine $XX of well of from leases Gains first four EBITDA income as million the of $XX we million XX the of XX% XX-years, age adjusted $XX sales gain operating net $XXX from For million and of million, reported million XXXX. from with of as leases. to aircraft conversion increase include quarter quarter, the of average first from type sales

quarter, six were in technology. seven first cash the to $XXX which $XXX first adding of quarter X% body invested Operating when a the compared aircraft, quarter the million, were We new uptick flow for narrow fourth XXXX. million of

our testament team a execution nearly quarter have into invested that consecutive It body this competitive dollars they we market where can Mike of our is third As new deals for acquisition to in close our XX% is narrow aircraft. investment new technology. mentioned, a

We funding [Jolco] our closing (ph) sources, in third on diversify March. continue our financing to

million senior we out successfully in notes due April, paid of $XXX maturity. In

next major repayment the is always, Our access ready in as remain steady September. -- appropriate. And markets to when we unsecured

equity to debt end was net quarter X.X Our at of the the times.

factoring which billion, was interest to XX% net weighted the debt on quarter the debt in shareholders. end forma equity to We times, at commitment the Our first $XXX rate quarter. with finished X.XX% pro The end expecting the the at X.X from total average when we're year of unsecured. down equity million the goes debt of our of of $X.X our was

Xth, operating committed had total this $X.X $XXX July and cash $X.X of billion As and liquidity, million. million, with million includes liquidity projected of undrawn flows proceeds liquidity XX-month on $XX billion, of we of sales cash adjusted facilities, Continuing equity unrestricted $XXX of of

source ratings. strategic we Looking improve ahead, our our opportunities, maintain priority thus attractive we commitments, conservative it affirm and our and limit our forward to as dedication make a leverage will IT maintaining growth status to

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

Streeter from your [Operator first Instructions] question. from JPMorgan. Please comes Our you. ahead go today Thank Mark question with

$XXX your X.X times important, for things said million you mentioned there. Roy, pro two in team. Aircastle leverage forma parent. morning, think, I from the the very remarks prepared Number Good your you one,

also because think to clarify was So that, I your wanted your improve I you credit line added last ratings.

implying continue which set sort forth, and S&P used of to of up for upgrades to be could I talked mid-BBB? reduction X growth, and I've technology assumption agree would and going think of you be of, maybe used it's an running that you're leverage, I a So but that could was at go straight that sort so newer get Moody's to aircraft at that, sort times to and couple investors, lower towards, there And so $XXX for debt younger to million buy forth

you level? just I was and think because so I to because just leverage of can lower about your you of, the try that it down was going fund market as are to, forth, think But don't to go talk don't it growth assumed plans your here, to exactly what sort sort --

good for Hey, Thanks morning. that.

I additional will us post-COVID, back towards stable correct and run it in majority go getting right? So sort -- onto the rate. think is of the ultimately rebuild if -- and equity business acquisitions to of, the you're exactly more,

peers, rating market. the credit single biggest thing markets point option. we improve as could my think to is better don't about think I higher getting think to if And to kind your tend level of, I alternative at, we reception us of to that rating, trade strategic ultimately in to well, a believe get remains a relative and look credit a how we you we it the do that our the treat

track it's our So during on X.X first invasion we're And the get most us, I like COVID of reset going blows is Russian peers of body not like times. message operating I the portfolio, to foremost, at Ukraine. and to took and the yes, think think, some be back

else from times from do an need mean, do X.X fair agencies. the probably Ultimate million. get the we is times, where operating everything to I to operate. $XXX output we'll just to that we'd to And think that's hearing that's X.X I leverage like a

Okay.

Moody's, with to where second So a it's already you Do now? that which be convince, know, Is function to XX needs a focused Fitch. to that more to that's just it you to you do or of holding back little the think is part you level? think do the continuing want more get saying leverage really with you lower? those qualitative do is newer you're order think it leverage to they're S&P aircraft? the need going is where more it, on in But technology Is of for Or see you quantitative there mid-BBB? you and mentioned, getting right to it question, was to be the get bit younger, the upgrades you because

right. the ultimately equity a tend debt I risk. Historically, secondary market. up it's proxy both, to bit held to we used in And the that operate given think us standard, for they've of agencies have higher a always to as always

is we'll dropping far do we'll But us the freshen have leverage classify the and both. know, right get think leverage portfolio We'll to a returns. which to improve profitability, think to the just that, as have sense makes the don't agencies. get level up so to go dramatically I I to you portfolio, to

Okay.

But we turns you have more bigger of I doubles, $XXX expect Now saw younger We piece more Does open up by been some at they it about does so Alaska X.X did there's for in, to this possibilities portfolios portfolio? you portfolio leverage get dramatically when to example, for should we $XXX some two sale. Aircastle? million of allow coming trades Macquarie, this it's as the for continue speak, still thinking forth, looking in it Alaska purchase. about and stub know not million, march and a tranches. there to singles think younger towards Or so on of a plane

Mark, hitting But business about singles growing run. that home the know, get if think Yankees. down opens counting counting be obviously, So, York a more not but we up And one be we New be it doubles. I middle, not the home planning that up possibility here. we're the on it's, we're runs. and to plate. it's We're necessarily you on to may not hit we something as going think the from We'll We'll

All-Star guess I my mind. have game on Well, I the

why I the reference. So made that's baseball

behind a Roy, you, behind that little what's going Okay, switch I and question and sort why that to I'm well last as on exactly Back can on the bit not sure some wondering -- talk sure there. investors the results about here especially, reclassification you what's probably in the accounting game? exactly And know are me. that, the of there's bond here I'm just lease for

in level, require at was from assumption high COVID, right? a the lease, Well, time these the them change. lease not restructured. onset I particular, the of leases you these underlying length right? say, restructurings were was mean, to up. reclassify sales-type of repayments. number was screw that restructuring And mind restructuring, so given would I'll the a consistent they the in let's to But the it to try But classification that of it terms a obviously, and during ultimately with and not operating at the their the And done, very

hang that, what sheet. a up continue the is of asset, And so doing but depreciate consequence you up effectively as on you to receivables end the the balance

conversion, fully. get the you to do you conversion repayments consistent are when so fully let's And and when see, affect to point a And fairly it's then depreciated. able predictable, you in the the when you is

the Now receivables of, sitting a on you've have and balance substantially depreciated yet you that's of, sheet. up the level still asset sort high

certain results income game, And just due. To right? a in that so the a the you're bringing were reclassification into receivables back extent,

high-profile more? whatever Or this just within And you one a bit one-off sort this can one more see to sort And should related little a that? us of expect any on of give restructurings? we last color Okay. should it's or of the, of, the the moves of book? COVID-related pretty much accounting we sort Or

Yes.

-- gains the COVID of you're It's review fairly of the restructuring, we the think don't one-off, as of conversion I is it a of And sort is -- lessee. it same prediction and anticipate correct. we future. level legacy sort in sort

very much. it. and Appreciate great. Okay, thanks Mike Roy

you. Thank

ahead go Our with question. [Operator from from question Bank. your Please Runte Instructions] comes next Doug Deutsche

I of a or years my over A you've of aircraft question seller equity. net morning. Yes, the shrinking. many questions. portfolio Mark last the And asking X.X on been with the good guess, for thanks so

equity which seem guess doesn't question more are necessarily the seeing why up on set the So here that be makes with the opportunities revenues lease to to time opportunities have picture caught in now interest I consideration you now the jump be, What's case? equity? rates, with the would lease or the in rise now big

the I be that I simplistically, heading lease right that forever. in XX-months, the to don't last with is the in expect interest tell we the up case the have From but rise kept Yes. realignment, think a Look, in would I rates market rates think not you direction.

And in next a in line equity and finding with is the, so year, sort to think them. consistent of, year opportunities capture for bringing this somewhere and we time some those being position

if a then lot to shopping have go can't you get later. out to from going You money do your where figure of you're

put and do putting of okay, and big I'm traditionally way saying, to no to think we think business to is consistent So the approach. thing, not and we're now the going with nature in years. sure equity we've executed business. just looking we're playing it's And the going XX-plus strategy this how last our in do not that's over specific our game specific been to hunting There's it. I this equity way necessarily timing more this be then

very That's question then Roy. for And helpful. a

your quarters thinking maturity guess, I question Is I've You do you revisit think this asked interest Or the talked term? they opportunity average structure about better are upcoming and a end, of debt strategy? to I'll cap rates with average short where couple spreads of an debt maturity. I a with guess it's to, ago. lease your better terms are, you stay on the in what match

always But know, always, fairly facilities. to you and do liquidity positioned liquidity We, option, from hasn't transaction strategy a structure -- against materially. think, our it as remain a I of changed with makes sense. cap when have obviously, the sort robust

an the possible as be out objective. given, we'd kind strategically, it obviously stack push far So term, that's the to the maturities efficient we always of debt lease can, think offset business. not try by I maturity to financing. like It's But nature build match term, of, longer able and to and raise want we as at ability the to out always

the the other and to you on on the like But is, it got In -- pick peers hand, is we our know, sidelines your it’s, forever. current right? it what can't you've thoughts. sit market, So

we if always ready be in sense, -- market. we as we're but the -- back So makes proved we'll it and before,

note. then And an up question, finishing last Great. on a

of since category assume for appraisers We've last demand I'm their some if this talked XX-months and the over you're seen more maybe little can move wondering there anecdotes. anecdotes bit you for up provide pretty lease about wondering You if a aircraft actually you valuations continuing color, narrow-bodies. dramatically middle-aged numbers? could just and I'm the stuff. color, more the a doing bit rates some little provide

have in you've anecdotally, I'm a a and levels, with really Numbers chain I historical as number supply discussions seen not time. happening moving I for shape as on the extension -- those we heard more prospects aren't into. say, But our I and basis, think, many, with would the from are prepared And look, placement in peers, ongoing there this given sure production are then to what's we've assets good and these cases in customers, of opportunities, happening, would are seen. where some think, get

new So those for demand. what's the activity and And benefit There's issue us and with in good means in the -- team. the old of and of for the the what of a dynamic there's production in context context lease it continues today new. clearly supply-demand the that extension world aircraft placement discussions happening to

much. team conference. the Deutsche forward to very in look Bank September and Thanks And Mike seeing Great. you on

Thanks, Sounds Doug. good.

And any ladies James I'd appears to like and gentlemen, to back are additional over questions no turn at time, the floor this additional for it there Connelly remarks.

out joining thank for Just call to everyone Please want today. if have any the questions. you reach

You you can made great further have day. a And you. thank Hope be information.

that, you and call we'll ladies thank joining. gentlemen, conclude today's presentation. conference with We And and for

You may lines. now your disconnect