Q2 2020 AerCap Holdings NV Earnings Call
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Good day and welcome to the Aercap Holdings, NV second quarter Twentytwenty financial results cool.
This conference is being recorded and will be available for replay on the company's website. After the conference is finished.
This time I would like to turn the conference over to Joseph Mcginley head of Investor Relations. Please go ahead Sir.
Thank you operator, Hello, everyone welcome to our second quarter 2020 conference call.
With me today is our Chief Executive Officer, Ingots, Kelly Chief Financial Officer Pete.
Before we begin todays call I would like to remind you that some statements made during this conference call, which are not historical facts, maybe forward looking statements forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements.
Yeah, a couple undertakes no obligation other than not imposed by the ought to publicly update or revise any forward looking statements to reflect future events information or circumstances that arise after this call.
Further information concerning issues that could materially affect performance can be find an aircrafts are a news release dated July 29 Twentytwenty.
A copy of the earnings release and conference call presentation are available on our website <unk> Dot com.
This call is open to the public and is being webcast middle Tennessee pickup dot com and will be archived replay.
We will sharkey run through our earnings presentation will allow time at the end for QNX as a reminder, I would ask that I'm not limit themselves to one question and one follow up.
We'll now turn the call it will work to in this Kelly.
Good morning, everyone I'm not sure for joining us for a second quarter Twentytwenty earnings call.
Clearly the environment remains very challenged but I'm pleased to report that you're kind of platform continues to perform well and reported net income of $246 million an earnings per share what dollar 92 for the second quarter.
Turning to the markers and the global environment.
We have just going through what was the worst six months aviation had ever experienced and I hope ever will.
Positive is that the industry in pretty much a lie I did starting to recover in certain parts of the world in other parts. This is not the case.
So starting with where the virus was first detected in China, we see that the recovery is well underway.
Last Friday, there were over 11500 domestic flights, which is equivalent to 90% of the pre colbert levels in January.
Demonstrates that once customers believe it is safe to fly and they have clear procedures to follow they will and want to travel.
Next in the U.S., we saw the bottom on April 14.
We observed a steady improvement that began to accelerate into June.
Since the beginning of July the U.S. recovery has run out its being under treated it will take control of the virus to get the U.S. recovery back on track.
In contract in Europe, we are seeing the largest recovery your problems on April 12, with 2099 flights. However, last Friday July 24, there were 16300 flights in Europe.
So the recovery and its critical market is well underway no doubt there will be setbacks, but the willingness and desire up the consumer to travel is very clear.
In terms of scale the European market is leading to global recovery.
In Latin America, we are still in the throws at the crisis.
In southeast Asia, some large tourist markets, such a Thailand and Vietnam appear to have extremely low levels infection, but they were effectively close to air travel which of course means we're not seeing any meaningful recovery in international travel in those markets.
This information I just quoted is actual public data now what we're seeing in our business is reflected in the number I just quoted we have begun leasing airplanes again, but it's almost exclusively focused on the European markets in the last month, we hope you got to sign leases and letters of intent.
What was clear when we last spoke in early May what's that was cobot 19 effect in every region of the world. It Didnt necessarily do so in the same way or at the same time.
That's stage it was really only in China, where cobot cases were falling and where we could see the early stages of an air traffic recovery today other parts of Asia, and Europe are coming out the other side and are flying again.
A key factor into recovery if the level of government support that has reached over $130 billion. So far across 74 different countries around the world.
Again, it is clear the governments around the world recognized the critical importance of maintaining a functioning airline industry.
This support has been achieved through a combination of loans subsidies and guaranteed.
This is allowed many airlines enough breathing room to get through the worst of the traffic declines I provide the stronger footing for their recovery.
What we've also seen is a significant acceleration of retirements from airlines around the world who are rightsizing their fleets in the future.
Many airlines were reluctant to do this in prior years has the opportunity cost of spilling passengers is too high but.
But the crisis today fourth in the opportunity to do so.
We have seen 950 aircraft retirements announced so far this year.
Moving to 4.5% to the world's fleet, but over 5% of global seat.
All of which go towards helping to supply demand imbalance to reach equilibrium at a faster pace.
Importantly, the vast majority of these retirements are focused on aircraft such a 767747 athree hundred Fortys and seven five sevens, which collectively represent less than 1% appear cap fleets.
As mentioned previously no other entity owns a greater percentage of new technology aircraft and Erica.
In addition to this there'll be a very significant reduction in the number of new aircraft entering the market as a result at the production cuts announced by the Oems.
Todays Boeing and Airbus have announced production cuts of approximately 33%.
We expect they will announce further production cuts in the coming months the combination of retirement on production cuts will contribute to the industry reaching equilibrium.
Very importantly, though for Aircat Mark what market equilibrium is not 29 gene traffic when airlines were making record profits for Ross Equolibrium has achieved when traffic can enable airline to cover their cash operating costs of course, we want to see airlines returned to 2019 profit levels, but for.
Aercap that will occur after they can cover cash operating expenses and paid or lease rents.
Switching back to air Comm, specifically, what measures that we take it over the past number of months to offset the impact of the crisis.
Well, our first priority in the midst of this crisis was to ensure that we maintained high levels of liquidity.
The likely magnitude and then of the impact was unknown at that point in an environment like did you ask it is as important to manage spending cuts funding. So early on we negotiated we've got three OEM partners Airbus Boeing in Embraer for the rescheduling of aircraft purchases into timeframe to more suitable for ourselves.
Our airline customers.
New production framework.
Working in concert with the Oems and our airline customers air cap as rescheduled the disease. The delivery of over 100 aircraft that were originally expected to deliver in Twentytwenty 2021, and twentytwenty to the rescheduling of pizza delivery has reduced our cash capex in Twentytwenty Twentytwenty, one by a total of 5.3 billion.
In dollars.
We also recently canceled orders for 15, falling 77, Max aircraft, which a path or contracts you will delivery dates.
We have also being very busy supporting the business by managing the liability side at the balance sheet with additional sources of cash and liquidity.
Our capital at the first aircraft next door to access the unsecured bond markets since the crisis. When you raised 2.5 billion of unsecured funding in June we attracted over 15 billion of orders across the two deals and pricing has improved significantly since then showing the confidence the market has in hair cap.
This along with our numerous other funding sources on initiatives managed our average cost of debt issued since the beginning of April was only 4.2%.
Lastly, the team have been working hard to ensure that we continued to collect cash everyday from our customers.
It's important to note that we continue to collect cash from the majority of our customers every day.
At the end of June our deferral balance was $430 million, which is equivalent to roughly 9% of our annual revenue.
Against this amount we have over 1 billion of security the level of request for deferrals had slowed down its tropic has begun to recover obviously there are some customers who will file for bankruptcy in the last number of months, which would be no surprise to anyone given the level of disruption in the industry.
That doesn't automatically mean, we will have the aircraft returned in many cases, we expect the aircraft to stay in place. After the airlines emerged from bankruptcy in other cases, we will take aircraft back, but I expect this to be manageable for a platform of air capsize.
Against all this given the very strong levels of liquidity, we have a record high sources to uses and low leverage levels. There will come a point, where we will be able to take advantage of the opportunity debatable jurors, we've not completely competitive sale lease backs in 2013, but it is clear that the terms of those transactions are improving and we win remain open.
At the doing business in that channel should the right opportunity present itself and our cap was always found a way to add value in the prices in various ways like opportunistic M&A, our large scale sale leasebacks, but only when the timing is right.
If you look at the opportunity set at the moment, we remain patients ready.
Looking forward air cap as being through numerous challenges before and wants this price is more global and uniform our platform continued to perform well on cash collection and seeking an opportunity I firmly believe weve. The right mix of assets people then strategy strategy to ensure that aircraft remains a market leader for years to come with that I will turn the call over to page for it.
Detailed review our financial performance.
Thanks, Scott Good morning, everyone I'll start on slide seven.
Aercap produced a solid financial performance in second quarter, with net income $246 million and earnings per share of $1.92.
The first half of the year, our net income was $523 million and our EPS was $4.06. The decrease compared to the second quarter 2019 was primarily driven by lower lease rents as well as by a lower gain on sale of assets.
On slide eight our total revenues for the second quarter 1 billion 197, $9 a decrease from $1.281 billion last year, our basic lease rents were lower due to lease restructuring aircraft transitions and the impact of airline bankruptcies during the quarter.
Our maintenance rents were $224 million in the quarter and were higher due to lease terminations.
In the second quarter, we sold nine of our owned aircraft for a total of $188 million. The average age of the aircraft. We sold was 14 years net gain on sales for the quarter with $10 million for gain on sales margin of around 6%.
And finally, our other income was roughly the same as last year.
Turning to slide nine Kristina expense was $53 million in the second quarter, a decrease from $65 million last year, primarily due to lower compensation related expenses.
Our maintenance rights expense was slightly lower than last year, and our other leasing expenses were $66 million compared to $49 million last year.
The increase was primarily due to increase our provision for expected credit losses as part of the new Cecil accounting Convention.
We had asset impairment charges of $73 million in the quarter, which primarily related to lease terminations. Our maintenance revenue was also higher than normal this quarter as result of lease terminations.
Turning to slide 10, we continue to maintain and very strong liquidity position. We're currently holding a record level of liquidity, but $12 billion in total sources of liquidity as of June thirtyth.
Against that amount, we had $5 billion debt maturing over the next 12 months unexpected capex and half a billion dollars for total uses a $5 billion. So we currently have a record level of liquidity equal to 2.2 times, our cash needs over the next 12 months and excess cash coverage around.
$6.4 billion.
As Scott mentioned, our Capex requirements for both 2020, and 2021 come down significantly this year they over $5 billion.
During the second quarter, we took delivery of only two new aircraft and we only have $500 million that cash capex remaining over the next 12 months.
Our strong liquidity position is the direct result of actions we've taken since the co that 19 pandemic.
Since the beginning of April we've raised $3 billion of new funding, both unsecured and secured and it's just mentioned the average cost of debt. We've issued is around 4.2%, which is similar to our overall average cost of debt of 4.1%.
While we've seen significant compression in our unsecured bond spreads over the last few months. They are still wide of where we think they should be for a company with the liquidity and balance sheet that we have.
Our leverage ratio with two and a half to one the lowest levels from 2014, and our secured debt to total assets ratio remains in the low twentys.
Going forward, we'll continue to maintain a very strong liquidity position. We believe that's the prudent thing to do in the current environment.
Therefore, we're planning to run continue to run at a higher liquidity level of at least one and half times sources and uses coverage until things normalize near term, we will likely run an excess of that level.
And we believe this will be viewed positively by the rating agencies.
Now more than ever we see the importance of having strong global access to funding. So far this year, we've executed approximately $10 billion of liquidity initiatives that includes $5 billion capex and $5 billion in funding.
Since June Thirtyth, we've undertaken two and half billion dollars of liability management actions, including the billion in the half dollar tender offer that we completed earlier this month as well as the early retirement of $1 billion a debt maturing later this year.
In addition, we currently have over 2 billion dollars' worth of additional funding plans that are currently well advanced and then we expect to close over the next few months on attractive terms.
We will continue to be proactive in our funding to make sure we maintain a significant amount of liquidity headroom and excess cash coverage.
We have $27 billion of unencumbered quite equipment assets, which can be used for additional financing in the future.
This of course continues to be a very challenging time for the aviation industry, given our strong balance sheet record liquidity position, an unmatched operating platform, we remain well positioned and prepared to weather the storm and with that operator, you can open up the call for today.
Thank you.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad.
If you are using a speakerphone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again that star one to ask a question.
I will now take our first question from Jamie Baker from JP Morgan. Please go ahead.
Hey, good afternoon.
Gentlemen, so so mark and I have a question on operating cash flow yearend. So pre covered obviously the 12 months.
Figuring or deck was $3.1 billion declined to 2.7 last quarter and its 2.3 billion today So thats.
26% decline.
How should we interpret that is that.
Sort of the best estimate now going forward for what percentage of rents you expect to collect or should I come at it differently.
Was this influenced by Capex or visit maybe some other inputs and if those inputs now are baked are we at the trough and should any further changes be driven solely by deferrals were just need some guidance here on how best to interpret this metric and and the recent decline.
Sure Jamie so the main impacts of that.
As you alluded to it's really what we're seeing is is mostly due to the deferrals.
And I think as we go forward.
So it's the deferrals and then as we look at our estimates of the 2.3 billion dollar estimate for the next 12 months.
We've baked in our deferrals into that we've also reflected the lower capex. So you've seen capex and has come down a fair amount right from our previous estimates so thats reflected in there too. So you know really what you're seeing and if I compare to last quarter. For example, I'd say some of that effect is.
You know as we look at what's going on in the deferral side, we're seeing somewhat longer repayment periods for some of those deferral. So as you push those out right you are not youre getting back to regular rents from those lessees, but you're not seeing as much of the repayment of that deferral amount during the 12 month period.
Okay. That's helpful and second question or requests to convert existing leases to power by the hour structure significant right now and would that be captured in deferred revenue going forward to the extent that.
Conversions are temporary just trying to get a feel for how material. This phenomenon might be it feels like we're taking more investor questions on the topic with every passing week. Thank you.
Yes, no Jamie that there are cases of course, where you have certain power by the hour arrangements, but the vast majority of the fleet is most definitely not on that arrangement. We do have airlines in bankruptcy of course.
They're not paying anything at the moment and we would hope that that probably troughed in the second quarter.
But in relation to the power by the hour question add that a stark may yet and does not apply to the vast majority of this nation.
Thats great. Thank you gentlemen take care.
Sure.
We will now move to our next question from Moshe Orenbuch from Credit Suisse. Please go ahead.
Great. Thanks.
Hey.
Peter I Hope I was hoping you could kind of just help us understand a little bit kind of building on the previous question when you've got lease revenue recorded like.
The different alternatives I guess, an airline in bankruptcy how does that is there any difference between that.
Recording and a regular.
Kind of lease contract and then.
Given that you've now started to take some.
I guess, a little bit of write downs can you talk a little bit. It also about the level of receivables that you're carrying and and.
Perhaps any other.
Differences that this has kind of made within the financials. Thanks.
Sure Moshe So I guess I'll start on the the bankruptcy question. So what happens when I went in airline goes into bankruptcy, obviously, we still got at least with them.
But they're not paying on that and we assess those we look at them and say okay are those rents probable of collection and if they're in bankruptcy of that just kind of bankruptcy, then you'd say no and so we wouldn't recognize any revenue associated with any of those customers while they're in bankruptcy.
So until they are emerging and you've got a plan and if you've got an agreement.
So at least those planes with them going forward than than you might start but for now you wouldnt. So for any of those airlines that have gone into bankruptcy recently, we're not recognize any revenues for those.
Maybe as I look at you mentioned you mentioned.
Write Downs I think was your next question.
Yes, so so during the quarter, we had $73 million of impairments on about eight aircraft and so every quarter. We do an impairment analysis of course, we look at our fleet and see if we have impairment triggers for any of our aircraft and when we have a trigger we perform a test to see if the or.
With the aircrafts impaired.
So these this quarter fees.
Impairments were triggered by lease terminations during the quarter.
Were offset by around $50 million maintenance revenue that we recognized on those aircraft.
Now of course beyond on those kind of airlines specific or aircraft specific credit triggers. We also look at the overall environment and determine whether there are other trends are factors that we ought to be considering one of the things that we look out there is early retirement announcements by airlines to date as Gus men.
And we've seen announcements for their retirements of around 950 aircraft in total and most of those have been.
For 775 Sevens Athree fortys those types of aircraft that collectively make up less than one that less than 1% of our fleet. So we havent seen an impact there what we have observed though is that there have been some announcements of early retirements of triple seventh and eighth through Thirtys and together those make up around 10% of our fleet.
So as we go forward I think Thats, an area, where we'll have to monitor developments to see if there is any impact on those aircraft types.
And the line on your on your balance sheet trade receivables did go up about $100 million in the quarter.
He asked to trade receivables.
Trade receivables was 200 million at the end of June and what we would expect on some of those.
I'd say, probably 120 million or so of that we would expect that to go into deferrals essentially there are deferrals being discussed with customers, where they just weren't completed before the end of June So I would expect that movement to go in there. So if you think about our deferrals balance at the end of June was.
$430 million.
I would expect dot 120 to go in there.
Okay.
And then maybe just.
So my Big Picture question gets you talked about sale lease backs and you're seeing some of your competitors kind of doing that.
To a greater degree.
Is there is it a question if the level of returns on those agreements now is the level of seeing some kind of liquidity.
Level or for air cap like what it what is that what's going to be the factor that gets you to start to Matt if that's something that's of interest.
Well, it's a combination of the return level send the risk in terms of be airplane and the assets now at the moment there isn't a huge amount of supply on the sale leaseback side, because a lot of airplanes were just not being delivered I do think that will change as we go into 2021.
The OEM start to lead deliver aircraft.
Point in time, it would be clear that the airlines balance sheet have been stretched the airlines will have significant amounts of debt on their balance sheets or significant amount of state aid. The objective of the airlines will be to reduce that state aid as fast as possible. It's certainly won't be to be buying airplanes. So I do expect that there'll be a structure.
I will turn a structural turn in the market in the demand for sale lease backs and I do think that on the Farsightedness there will be less less stores that are in the market.
And that will have the liquidity take advantage of it also.
Thanks, so much.
We will now move to our next question from Catherine O'bryan from Goldman Sachs. Please go ahead.
Hello, everyone. Thanks, so much from time.
So maybe just one more on all these deferrals.
Maybe that number tick back up a little bit.
120 gets moved into the balance, but but down from last quarter.
The end of June so what's driving that is is that less or.
Going from the under different view and plan to lease termination or that you know customers, maybe who started beginning regular payments and any color there.
Sure Katy So I would say if you look at the end of March the balance.
The balance sheet, then of deferrals was around $140 million and what we said during the call was that we expected it to that we had done by the time of the call. It was around $300 million or so and that we expected. It would go up to 600.
So as I look out today right I would I would look at as say we had completed new we had notes receivable of 140 million as of March 30, Onest that went up to 430 as of June Thirtyth and if I look at where is that balance going to go to over time, where do we expected to go to based on.
What we've talked to customers bought and what we foresee I expect that that balance on the balance sheet should grow to around $7 million to $800 million over the next couple of quarters, That's where I would expect it to go and you have to look at the security behind that as well that we reference of a billion and in addition, it has to be seen in context of the revenue of the business as well.
It's still less than 20, that's 90% of the business 20 to 20, 23% with revenue.
Right Okay understood.
And then maybe just note.
I'd love to understand a little bit more how you guys are thinking through adjusting your order book right now of course, there. They're also lessees canceling orders in some cases.
But in general how do you determine what the right balance between men and managing liquidity today, just lumpy today in long term growth absent a recovery and one quick housekeeping one just a 14 million unrealized gain what was that that the region. Thanks. So much.
Yes, so just on that last one that was Norwegian that was we're accounting for the Norwegians taken a mark to market basis. So every quarter, we will just market based on the value of the ended the quarter.
On the Capex. It is something you have to be very cognizant of managing the future as well as the current liquidity needs and what you have seen is that we acted very quickly.
In March and April to significantly reduce the Capex and now this at very low amount left for the year 500 million and a low amount next year relatively to where it was 2.2.
So we've reduced capex by 5.3 in total now what you want to make sure of course that you believe you have attractive pricing on your Capex, we do know.
Very important to remember and sometimes it's hard to see us.
Travel will come back.
That's demonstrably clear from what we've seen in other markets around the world once the government lifts restrictions and the consumer believes it's safe to travel they will travel and they will travel quicker than you think that's what we've seen in Europe, that's what we've seen in China.
Yes, as I said the market installed so the structural growth in this industry has not changed over the long term and you have to keep that in mind as you negotiate with the Oems and with your customers striking a balance between maintaining what you believe as an attractive order book, particularly on the 737 Max.
I do believe seven to seven Max will be an aircraft of choice and an aircraft in demand as we come to the other side of this in 2023 2024 as I've mentioned before we deliberately positioned our overall strategy in our portfolio.
That if there was a trend to move into new technology quickly air cap will be best positioned for that and because we stayed away from buying any end of line current flash old technology assets has bought any of those are ordered them since 2011.
So our exposure to that trend is less than many others.
Our people moving rapidly out of current tech into new Tech.
So I do think that it's very delicate balance and it's something I think we've managed at pretty well and we'll see the benefit of that in the years to come.
Understood. Thank you very much the time.
Sure.
We will now move to our next question from Mark Jefferies from Barclays. Please go ahead.
Yes. Thank you.
Got you alluded to the fact that Youre equilibrium is determined more by airlines, reaching their cash operating costs can you talk about how close we are to that and how much more if any capacity needs to come out of the global fleet.
I mean look where to go up and away from that I mean on a global basis at the fact.
Yeah.
I think that we will need to get back to probably around.
60, maybe maybe close to 70% because airlines that have done two things.
The cash cost won't be the same if they were in 2019, so that's come down structurally as well and so you don't be quite as much revenue to cover and where they'll be they'll be more efficient.
So I do think that we'll probably get closer to cash operating costs being covered if we can get to around 70 odd percent depending on yields of course.
Of where that the airlines revenue base loss and 29, T., but we're just not there at the moment. There. So there is it because a long way to go before we get to that I can assure you I don't see that happening.
Decided fat.
Anytime soon on the airplane side of things as well we've seen a lot of the fleet grounded as Pete mentioned I mentioned, there really are about 21000 large commercial airplanes in the world.
So we see 950 retirements most of those though our large airplanes. So the amount of seats. That's coming it seeks is what matters is not the numbers shallots seats and seats or what you want that so every time, a very big airplane comes out of course that is a positive and so we've seen over 5% of the global offense come out but I.
I do think we'll see more add also I talked about production cuts from the manufacturers. We saw another production cut today from Boeing. So that's in addition to the 33% I said in my opening comments and I think you'll see more production cuts both from Boeing and Airbus as well to help us to get to that Equolibrium. The reason is.
Not out of any philanthropic add nature from Boeing and Airbus. It's a reality if they don't copper production.
And they put into many airplanes into the system. The airlines they are giving forcing the airplanes into.
We'll either filed for bankruptcy other competitors will file for bankruptcy and Boeing and Airbus will lose their order books. So I'm much more sensible way to do it is restructure us with the with with the lessee with the customers excuse me.
On a consensual basis and maintain the order book for some dates in the future I think those discussions are still ongoing I would be helpful that tomorrow when Airbus I think released our results we will see another production cut their like we did from Boeing today.
Okay. That's helpful and sorry, if I missed this but did you talk about what your exposure to Aeromexico's.
No. We have fair we have several 7872 aeromexico and we had 1737 800, an old airplane and that was taken back.
Okay got it thank you.
I will now take our next question from Helane Becker from Cowen. Please go ahead.
Hi, everybody and thank you very much operator, I just have.
A couple of questions. One is on the Predelivery deposits will will this.
Now on since you've just heard you know so many aircraft in cancelled. So many aircraft can you recapture some of that got money.
Yes, but I think that both of those is yes on both counseling.
Okay. Thank you and then my other question as you talk about having significant unencumbered assets and.
Is that how are you getting to that number is that a third party appraisal or is that just youre.
View as I guess list price to the aircraft that are unencumbered, how should we think about that number because I get that question a lot like how do you come up with that and I, probably don't ever have really great answer.
Yeah, I mean, that's just if we look at our balance sheet to where we're carrying the aircraft and then subtracting the the secured debt against us.
So, but as you can see it's an enormous number 27 billion.
So and the reason we put that down there frankly is like obviously, we're not looking to do anything close to that in terms of secured financing, but I. Just think its noteworthy to include that because you know it is it is a very large number and I think in contrast, if you're looking at the airlines or others, who are looking.
Yes, I mean, non airplane assets to finance against I mean these are these are hard assets.
I do think that gives us options as we as we need to think about financing the future as I've said before.
Most of our financing is unsecured and that will continue to be the case, but I think what you're seeing in the current environment is that it really does you do see the benefit of having all these different finance so financing option certainly skus mentioned before our average cost of debt for the first half the year, 4.2%.
No that's a pretty good number in this environment. So helane, it's just the net book value, what we carried the assets out and it's very different sometimes if you think of what airline say are unencumbered assets, which can be confusing where you're assessing slots gates and rights et cetera routes, which is very different am ours are just hard aircraft assets.
Okay, and then just if I can sneak one more in.
The Norwegian Lockups expire would you consider selling the shares or will you be long term holder.
I mean look we're just going to assess that situation and overtime and Dan will do what's in the best interest of aircraft on Norwegian for the long term.
Okay, all right well that's very helpful. Thanks, guys have a nice today.
Sure.
We will now take our next question from Ross Harvey from Davy. Please go ahead.
Hi, good afternoon.
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Two questions from me first is that just wondering can you help us spreads to sequential change and lease rate from Q on Q2, when you look us.
Our second restructurings like say Norwegian on the non recognition of revenue from a bankruptcy.
The straight lining of rents from from extensions just spread out amongst the other.
And second question. If I may have you you mentioned that we should expect further changes on the delivery schedule based on this question Winter Haven.
On a modern swats agree that might impact page two of 2020 or 2021 or as a further done that I know you know maybe internet access.
Allocate capital to use rather than you see a lease box with what sounds back to customers.
Sure. So I'll I'll answer your first question Ross I mean, the mean the main driver of the difference during the quarter was the aircraft that we've got on cash accounting right, we're not recognizing revenue and that so those are.
Aircraft in bankruptcy or others, where we think it's a it's that are weak at the moment and in total that was about $76 million in the second quarter.
Normally normally we would be getting not enough. So that that was really the big driver in bringing down the revenues during the quarter.
And then the other factors are you got some aircraft, where we saw where are we terminated leases as a result, a default till we brought those aircraft back in their non earning revenue at the moment. So it's a combination of those things, but cash accounting would be the biggest biggest factor there.
Just to echo.
In terms of the sale leaseback.
I don't think we would do you used airplanes at this point.
I think it'd be mall, it would stick to if theres better value in the new technology assets, I think thats, where we would stick with that because I do believe that there'll be a significant increase in supply and demand for those sale lease backs as the Oems start to deliver significant numbers of airplanes and 2021, So I think your you'd be better off.
Waiting for that when there is probably a supply demand mismatch in our favor.
Right and just in terms of Capex by the way would you expect much changed or hedge to 20 or 2021 or or is it more further down the line that we might expect changes.
I think it second half 20 unlikely I mean, it is now down at $900 million and in the second half in 2021 at the 2.2 billion I think to the vast majority of the movements. There have occurred could you see a few hundred million more move yet, but not the scale of what has happened over the course about four months.
Okay, great. Thank you very much.
As there are no further questions I would like to hand, the call back to Angus Kelly for any additional are closing remarks.
Thank you very much everybody. We look forward to speak if you again in three months time I very much hope that at some point in that three months, we may get to see each other face to face. Thank you.
Ladies and gentlemen, this concludes today's cool. Thank you for your participation you may now disconnect.
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