Q4 2020 Air Lease Corp Earnings Call

Okay.

Ladies and gentlemen, thank you for standing by and welcome to Air lease.

Before 2020 earnings conference call at this time, all participant lines are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask the question during the session you'll need the press star one on your telephone please.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like.

Turning the conference over to your Speaker today, Mary Liz Depalma head of Investor Relations. Thank you. Please go ahead Madam.

Thanks, Justin Hello, everyone and welcome the Air lease Corporation's fourth quarter and year end 2020 earnings call. This the.

Is Mary Liz Depalma, and I'm joined this afternoon by Steve Hardy, our executive Chairman.

John Kinzer, our Chief Executive Officer, and President and Greg Willis, Our executive Vice President and Chief Financial Officer.

Earlier today, we published our fourth quarter and year end 2020 results.

Copy of our earnings release is available on the investors section of our website at Www Dot Air lease Corp Dotcom.

The Hey, this conference call is being.

Webcast and recorded today Monday February 22021, and the webcast will be available for replay on our website at this time all participants of this call are in listen only mode.

Before we begin please note that certain statements in this conference call, including certain answers to.

To your questions are forward looking statements within the meaning of the private Securities Litigation Reform Act. This includes without limitation statements regarding our future operations and performance revenues operating expenses stock based compensation expense and other income and expense items.

These statements and any projections as to the Companys future performance.

Represent management's estimates for future results and speak only as of today February 22021. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the securities and Exchange Commission for a more detailed description of risk factors that may affect our results.

Air lease Corp.

<unk> assumes no obligation to update any forward looking statements or information in light of new information or future events.

In addition, certain financial measures, we will be using during the call such as adjusted net income before income taxes adjusted diluted earnings per share before income taxes and adjusted pretax return on equity are non-GAAP measures of description of our reasons.

For utilizing these non-GAAP measures as well as our definition of them and reconciliation to corresponding GAAP measures can be found in the earnings release and 10-K, we issued today. This release can be found in both of the investors and press section of our website at Www Dot Air lease Corp. Dot Com unauthorized recording of this conference call is not.

Permitted I would now like to turn the call over to our Chief Executive Officer, and President John Cougar.

Thanks, Mary Liz good afternoon, everyone and thank you for joining us.

2020 was an amazingly difficult year for the world the aviation industry and for millions of people personally dealing with the impacts.

Of the COVID-19 pandemic.

The ALC team met the challenges of the past 12 months head on working tirelessly to move our business forward.

While no business in the commercial aviation space is immune to the stress of the industry has endured thanks to our team's ongoing efforts at our fundamental business.

In this model the strength of our platform is more evident today than ever before.

For the first time this year, we exceeded $25 billion in total assets and for the full year 'twenty 'twenty, our revenues once again surpassed $2 billion in line with the prior year.

For the fourth quarter our revenue.

Revenues of $489 million were down 10, or 10, 9% year over year.

Our diluted earnings per share of $4.39 for the full year and 94 cents for the fourth quarter are down, 13.8% and 33, 8% respectively.

Despite.

Approximately $2.4 billion of aircraft investments this year, which were well below our expectations at the beginning of 2020, both revenues and earnings were impacted by a slowdown in the growth of our fleet and our planned major reduction in aircraft sales activity. In addition to rental revenue.

Fight of recognized as we had certain lessees on cash basis recognition and impacts from lease restructurings.

Our cash collections remained healthy at 88% in the fourth quarter up from 86% in the third quarter with an equally strong lease utilization rate of 99.8% in the fourth.

None are slightly higher than what we saw in Q3.

To date, we have agreed to accommodations with approximately 61% of our lessees with deferrals totaling $240 million.

Importantly, however, our total deferrals net of those that have already been repaid stands at.

CT and $44 million as of today.

That is to say that 40% of all of the deferrals, we have granted to date or $96 million have already been repaid and the remaining net balances of $144 million, which represents less than 2% of our total available liquidity.

100 into the fourth quarter.

Now I know many of you are interested to know what we expect going forward as it relates to incremental lease accommodations.

We expect 2021 to remain a challenging year for the airline industry.

How deferrals and other requests ultimately trend will be based.

At the at the Airlines indoor from now to the start of the summer season and further what the summer season holds.

While we are all encouraged by the vaccines. The Bottomline is the virus resurgence of this winter has curtailed even domestic travel and cross border travel restrictions remain in place.

For this reason we.

We have received and May see additional requests for not only of deferrals, but also lease restructurings, which began to have some impact this quarter and last quarter.

The lease restructurings, we have entered into include lease extensions as well.

As we await and help our airline customers plan for the broader recovery of air travel.

We are encouraged by the trends we are seeing throughout the industry of the bode well for our fleet and order book, including one of.

Our focus on operating the youngest most of the reliable and efficient aircraft.

Two a shift towards leasing versus buying as many airlines have largely utilized all capital alternatives available to them.

Free and accelerated replacement cycle that will likely continue and potentially grow as the longevity of the pandemic continues.

As I've been saying quarter after quarter environmental sustainability initiatives are driving fleet decisions now more than ever.

Driven by those needs and trends are at lease placements.

And the strong at 92 per cent of our order book placed on long term leases for aircraft delivery through 'twenty, two and 73% through 'twenty three.

As it relates to lease terminations out of our total fleet of 332 owned aircraft. We only have 21 lease is expiring in 2020.

The remaining and we expect most of the old leases will be extended.

In the fourth quarter, we delivered $1 $1 billion of aircraft, including 10 aircraft from our order book and 14 aircraft acquired via sale leaseback opportunities.

I mentioned last quarter that we are beginning to see additional capital deployment opportunities.

One aspect of the sale leaseback transactions and the purchase of young single aisle aircraft.

Through these transactions as we not only put our capital to use by young aircraft, but we also placed new aircraft from our order book at each airline.

Sale lease back transactions of this nature are very beneficial to our business.

And our disciplined approach up to this point allowed us to execute one of the time was right.

It's difficult to quantify it today, how many sale leaseback transactions like this or of a different forum may come to fruition for us in the near term.

We keep our eye on and do our best to seek out opportunities that.

Maybe on the horizon with the goal of finding deals that are accretive to our returns and which lead to larger opportunities with an airline.

As you will see in our commitment table in the 10-K.

Our purchase contracts indicate taking delivery of 72 aircraft this year, including 21, 7% and 37.

Kraft in fact, just earlier this month, we took delivery of our first two new 737 day rates since the grounding dealer.

Both aircraft the Sun wing Airlines in Canada.

However, our deliveries are still limited by the slow reintroduction of the 737 by Boeing.

Tariffs on Boeing aircraft delivering.

<unk> into Europe summer.

Some remaining delays at Airbus on the <unk> hundred 20 family deal.

The delivery delays or deferrals due to travel or other governmental restrictions and more recent manufacturing issues, which have caused delays on our 787 aircraft.

For these reasons and other industry circumstances as happened.

During 2020, we believe our actual delivery schedule will continue with the experienced material changes to the downside compared to what its technically contracted.

Of course, as we do every quarter in our filings and earnings call. We'll keep you updated on our current delivery of expectations and Greg will comment further on this in his remarks.

In addition, especially with the change in presidential administration in the U S. We are closely monitoring the trade environment and how the U S ongoing dialog with Europe, and China is evolving.

Specifically, we are encouraged by high level comments that would suggest the elimination or suspension of.

On the importation of aircrafts in both Europe, and the United States.

As we enter 2000 of 'twenty. One we are seeing significantly increased interest from a variety of aircraft buyers and we do anticipate the resumption of our aircraft sales program this year, which will be targeted more towards the second half of the year.

Additionally, we plan on growing our aircraft management business further and are making good progress on that front.

As we did in 'twenty 'twenty, we continue to look for opportunities in the marketplace and will act upon them accordingly.

We continue to have strong access to the investment grade capital markets in 2020.

Tara of successfully issued four and a half a billion dollars of senior unsecured notes at a weighted average cost of two 9%, which is inside of our composite cost of funds.

More than $3 billion of those notes were issued after the Covid pandemic began.

In mid January of.

<unk>, where we again access the market and raising $750 million of three year notes at a coupon of 0.7%, which represents alc's lowest interest rate to date on any of its senior unsecured notes.

While we remain opportunistic as it relates to future issuances I'm.

I am pleased to say our liquidity position of $7 $7 billion as of the end of 2020 places us on solid footing as we proceed into the remainder of 2021.

ALC has a long term partner to the airline industry and I believe that without us and the leasing community the airline.

The industry would be in far worse shape than it is today.

We work with our customers every day to help them maneuver back to a place where they were once again able to transport the people of the world, who want to see family and friends of 10 business meetings get away for the weekend or explore of new place.

You've all heard executives from the airline.

Hospitality and financial service sector of speak of pent up demand the eagerness of people to once again get out and travel.

To us these fundamental drivers of air traffic remain and are what keep us focused and give us confidence in the long term outlook for the airline industry.

We are all working towards it.

Line forward to the recovery of an industry, which has become so integral to the connectivity of movement of people and goods worldwide.

And with that let me turn the call over to Steve Hazy for additional commentary Steve.

Thanks, very much John.

As many of you know for years.

Air lease Corp, we're preparing our business to take between five and $6 billion new aircraft deliveries per year.

In 2019 2020 and beyond.

This growth.

It was obviously curtailed by the <unk> delayed and production issues at the menu.

Looking for <unk>.

And then of course like we did in fact the dependent.

With fewer new aircraft delivery.

He was left in early 2020 with substantial liquidity.

And an investment grade balance sheet, and we did our very best the manage our own business throughout the year all helped.

Our airlines and working with the Oems.

The last 12 months, the further proven that our strategy and differentiated platform and our business.

Continue to be agile and resilient.

Despite what the world has endured since the pandemic began last spring.

In fact in the virus resurgence that began in the fall of 2020.

More importantly, we are now seeing progress worldwide in the vaccination of asthma.

Yeah.

More than 90 countries around the world have begun administering the COVID-19 vaccine.

In the United States as of early.

The small.

We officially had more individuals receiving at least one dose of the vaccine than those that have tested positive for the virus.

I joined John and our management team in the hope that increase vaccine distribution.

And fewer new cases in the hospitalization.

Well.

It really can reduce travel restrictions.

And therefore, greater consumer confidence the once again travel.

That said I.

I do think it is important for us not to forget that.

At the when the virus was surging and there was no vaccine.

People were still getting on an airplane.

Following mostly the right procedures to Stacy <unk>.

<unk> pre flight testing and wearing masks.

For instance in regions, where there were limited travel restrictions last summer.

We saw a very rapid rise in discretionary travel.

Well.

We're the we're more restriction.

We saw much less demand for travel.

This shows of cases and infection rates.

Not the only drivers of the passenger travel plans.

And that perhaps equally as important is the ability of people to freely move across borders.

And continents.

I believe that of travel restrictions are progressively removed.

If people remain open to new safe ways of travel.

And if alternately the traveling public believes the vaccination effort is working.

Then over a period of time, we will see travel recovery.

I have received over the last few months.

It had been about business travel widebody aircrafts.

And the evolution of the dynamics between less sort of an airline.

And manufacturers going forward.

I would agree with many of my industry colleagues the business travel.

The question will most likely come back over time.

There is no replacement for interactions between people face to face.

Over the past two decades, the rollout of Skype zoom Facetime Microsoft teams.

And other virtual connectivity features.

It has not hindered the growth of air travel.

Nor have they seem to replace the in person interaction enabled by air travel.

That said it is not unreasonable to expect that the return of business travel will likely be in phases based on purpose of the travel and the destination.

Region.

As an example, a study done in late 'twenty 'twenty showed the 35 per cent of the market for business travel.

Individuals and sales roles.

Securing client rules.

And supporting the existing customers.

It would not be surprising to me if this.

Country of first sector the returns of business travel.

Similarly, the economic composition of business sectors in the country or region of in fact the velocity.

At which business travel returns.

For instance, the study in China prior to COVID-19, and during the early travel rebound indicated.

The industrial sectors within the country.

Such as construction and machinery and equipment.

He turned to the business travel more quickly than others.

If this holds true for a broader recovery.

And based on the industrial and economic composition.

Certain countries.

In Asia Pacific region and throughout Europe.

We'll likely to return to the business travel more quickly.

The other places like the United States.

As a reminder, 95 per cent of our aircraft our operating internationally.

With our largest two markets being Asia and Europe.

As it relates to wide body aircrafts.

Had it not been some of the continuous need the transport cargo.

The world within the airline industry, particularly for wide bodies would be more trouble than what we have today.

Airlines that have modern wide body aircraft, such as <unk> hundred 50.

700.

Kevin.

And triple seven 300 yards.

Quickly we adapted their business model.

The utilized most or all of the belly capacity the aircraft per aircraft and cargo configurations.

The airlines boosted yields with the international cargo operations and lower passenger load factors.

Eight the allowing them to sustain operations.

The airlines adapted quickly and greatly in this regard.

And many of our ALC customers, particularly in Asia did quite well in 2020 in the cargo business segment.

And we're able to increase the relative revenue stays on carnival.

So.

From our experience in conversations with our airline customers.

We know that the airlines at that.

The reduced demand for long haul travel by down gauging the size of the aircraft.

So instead of flying and Airbus eight to the 87.

A lot of them.

And Airbus AC 4600.

They may not fly 787.

<unk> hundred 30 <unk>.

Or even in <unk> hundred 21, Neil L. R.

If you compare the Intercontinental networks from 2019.

So what we may see a year from now.

One.

Of course largest differences will likely be a decline in.

And the average number of seats per departure and Intercontinental operations.

For these reasons, we see the landscape shifts.

Where most of the older.

Largest wide body aircrafts.

He never see passenger servicing.

One of the land.

Additionally, Boeing and Airbus have both substantially curtailed wide body production rates.

In fact, Airbus currently is not producing any new wide body all cargo aircrafts.

And Boeing as of now that they will discontinue the 747.

Dash eight.

Continental trader the.

These factors plus the eventual recovery of global International travel.

Will lead to an improved supply and demand equation in the wide body space.

Finally, I believe the crisis will change the dynamics between the lessors.

Or is the guidance and manufacturers.

With less sort of state and one of a stronger role.

Never before in the World of commercial Air Transportation.

Seen the industry.

Have two thirds of the fleet.

Grounded during an unprecedented drop in passenger traffic.

Most airlines.

The old contingency plans.

The 20 to 25 per cent reduction.

Due to some external crisis.

But no one no airline at the contingency plan for nearly all travel coming to a halt.

Had it not been for massive amounts of government support.

The airline.

We would be in a different place to the.

The increase kicking of large quantities of debt by the airlines.

The drop in manufacturers revenue, the blades and ground lease.

Have certainly changed the dynamic of the industry for the foreseeable future.

It will be in.

I think process to see how balance sheets of companies.

Of the airline and manufacturer side of the ball.

Despite most less sort of experiencing margin pressure during the pandemic.

Many still have stronger credit rating.

Of the airlines with the serve themselves.

And we expect many will turn to the aircraft leasing companies to help finance the airline industry.

Ask the years of being asked the question when will leasing hits 50 per cent of the market.

I can tell you is the fact that 55 per cent.

Of all aircraft deliveries.

The interest Airbus in.

In the year, 'twenty 'twenty where lease.

So we are not at a point, where we expect the aircraft lessors.

We will finance, 50% or more.

Of all new aircraft deliveries going forward in the near future.

Air lease Corp.

<unk> is certainly ready to rise to debt occasion.

We remain optimistic.

Yet vigilant and as John said, we stand by the airline industry long term.

And we will see them to better days ahead of providing the aircraft they need to get there and to succeed going forward.

And with that I will turn the call over to Greg to provide more detail on our financial results.

Thank you, Steve and good afternoon, everyone in.

In the fourth quarter of 2020, ALC generated total revenues of approximately $489 million.

Including rental revenues of 480.

$4 million and $5 million of aircraft sales trading and other activities.

Total revenues in the fourth quarter decreased by approximately 10, 9% as compared to the prior year. This.

This decline was primarily due to the following factors.

First <unk>.

Similar to last quarter, we were unable to record of approximately.

<unk> $21 million and rental revenues due to collections of lease receivables not being reasonably assured this was down from $25 million in the third quarter as collections from these lessees were modestly stronger than expected as you will remember remember from last quarter when lease receivables exceed our security package.

We deem the collectability of can no longer be reasonably assured and the us we've reverted to recognizing only cash payments received from the lessee during the period as rental revenue.

I do want to note that we have been receiving cash payments from all of our cash basis lessees and that a majority of them are in a form of restructuring.

Yeah.

And have expressed to us about that.

They desire to keep our we.

We remain hopeful that as these lessees will emerge from the restructuring and we will continue to see these numbers improve.

Although despite the positive trend of collections from our cash basis lessees.

Sure I mean, it's very difficult to predict how this will trend going forward until we see a more meaningful improvement in passenger traffic and airline financial health.

Second we have continued to enter into restructuring agreements with our airline customers as discussed in the past the primary form of accommodation that we provide.

The seats to our lessees is it the.

The agreement whereby the airline is granted the temporary rental reduction which is typically repaid within 12 months. However in select circumstances, we have entered into lease restructuring agreements.

Whereby we typically will reduce our rental rate in exchange for the lease extension similar to the deferrals.

Provides some of these are not one way agreements and we typically attach of lease extensions and other forms of renovation to these agreements as an offset.

That said as a result of lease restructurings, we estimated that our lease revenue for the fourth quarter was negatively impacted by approximately $21 million.

Although it should be noted.

For all between cash basis of accounting and lease restructurings, there impacts represent less than five per cent of total revenues.

And that our lease utilization rates at least collection of rate remained very strong at 99, 8% and 88 per cent for the fourth quarter of 2020, respectively.

Lastly, as previously.

We saw no aircraft in the fourth quarter as compared to the fourth quarter of 2019, while we sold 19 aircraft generating $33 million in gains, which were primarily related to our Thunderbolt III transaction.

Right challenging operating environment, we continue to generate healthy peer leading margins and returns on equity with our keep.

Key portfolio metrics of lease term remaining and average age.

The relatively constant.

Turning to expenses interest expense increased year over year, primarily due to the rise in our average debt balances driven by the growth of our fleet and an increase in our liquidity position.

Partially offset by.

Hi line in our composite cost of funds.

Our composite rate decreased to $3 one per cent from three three per cent in the fourth quarter of 2019.

Depreciation continues to track the growth of our fleet.

While SG&A remained very low relative to the past down 35 per cent and $11 million realm.

The same period last year and representing approximately four 2% of total revenues.

The decrease is a product of our lower operating and transactional related expenses incurred during the last two quarters.

Coming back to liquidity and deferral agreements since our last call, we had granted roughly $39 million and incremental.

Rental deferrals well below the accommodations granted during the first half of 2020 on.

On a net basis, including the $96 million in repayments, our net deferral balance is $144 million as of today I want to reiterate that we believe are accommodations remain manageable relative to all.

Liquidity position, which is the highest in our company's history at $7 $7 billion at the end of the fourth quarter.

As I've shared in the past our balance sheet was originally designed to support $6 billion of aircraft investments annually, which is well above what we delivered in 2020 and Wayne and what we anticipate taking.

Taking delivery of in 2021.

Turning to our aircrafts invest.

The investment expectations for 'twenty and 'twenty, one we have commitments to take delivery of 72 aircraft the.

Given the continued delays we currently expect to deliver only of 54 aircraft.

Presenting of approximately $4 3 billion in aircraft.

Aircrafts investments.

But it could be as low as $3 billion, representing a modest increase from 2020.

As of today, we are anticipating approximately 400 million of these deliveries to occur in the first quarter of John highlighted earlier, we were expecting.

Are actually executing on aircraft investment opportunities outside of.

Our order book that are profitable and makes sense for ALC over the long term, we will continue to seek out more opportunistic transactions like these to support the growth of our fleet as we go forward.

On that note I want to spend a few minutes to reiterate our thoughts around capital allocation we continue.

To have a well balanced framework for which we analyze our decisions regarding the best use of capital.

Our priority sense of founding air lease has been to maintain and grow a young fleet comprised of the most modern in demand fuel efficient aircraft. So that we can profitably grow our aircraft leasing business, while maintaining strong fleet metrics.

This remains the priority number one we fundamentally believe that this is most of the most sustainable way to create long term shareholder value and we are pleased that since inception, we have invested well over $30 billion of aircrafts that fit our strategy and we continue to do so today.

We have maintained our dividend policy.

And our share buyback authorization of $100 million.

Although we have not repurchased any shares as of today, we continue to evaluate the balance of opportunities between placing additional orders with the Oems embarking on an additional sale leaseback opportunities and returning excess capital to investors.

As always we looked at the best opportunities.

Charities to generate long term returns for shareholders by evaluating all of our capital deployment options.

Lastly, I would like to touch briefly on financing, which has provided us a significant edge over our competition. We are dedicated to maintaining an investment grade balance sheet utilizing unsecured debt as our primary form of financing.

And had $23 6 billion in unencumbered assets at year end, we ended the year with the debt to equity ratio of two seven times on a GAAP basis, primarily due to the elevated liquidity position we've maintained over the past year with approximately 1.8 billion in total cash.

Our debt to equity ratio.

Net cash on our balance sheet was approximately 2.4 times.

In 'twenty 'twenty, one we had we continued to maintain our strong liquidity position in January we issued $750 million in senior unsecured notes that mature in 2024 at a record low coupon of 0.70 per cent and.

In addition, we.

So of the size of our revolver by 200 million, bringing our revolving unsecured line of credit at 6.2 billion, we anticipate maintaining elevated levels of liquidity until the broader aviation market recovers and with that I will turn the call back over to Mary Liz for the question and answer session.

Thank you Greg.

Increased this concludes management's remarks for the question and answer session. We ask each participant to limit their time to one question and one follow up I would now like to turn the call over to the operator to open up the lines of the Q&A.

Thank you as a reminder to ask the question you'll need the press star one on your telephone to withdraw your question press the pound key.

Greg the them by while we compile the Q&A roster and our first question is going to come from Moshe Orenbuch from Credit Suisse. Your line is now open.

Great, Thanks, and Steve I wanted to kind of return to one of the comments that you've made.

The debt the lessors, taking on the stronger role.

Please.

Clearly the yeah as you said or are some of the car finance and more than half since the new deliveries are there other ways in which you know that's going to manifest.

Manifest itself in the things that are you know could help air lease and its and its shareholders.

Yeah, we have had actually a significant.

For the airlines.

Net of approached us.

In saying the following we the airline of X number of Boeing and Airbus deliveries in 'twenty, one 'twenty two 'twenty three 'twenty four.

Because of all of the debt that we the airlines have taken R. We'd like the deferral of deliveries into later years.

Second the loose our of Capex isn't the airlines reduce our progress payments to the Oems as an airline.

And we'd like to have your leads fill in.

<unk> earlier in 'twenty, two 'twenty, three and 'twenty four debt.

We the airline would've taken directly now we'd rather lease those aircraft one of them.

We balance sheet operating lease from air lease.

And take the direct order planes at the airline order later on so it's a dramatic shift.

And the composition and the ratio between leased and owned aircraft.

It also creates a situation where the airline recognizes.

All of our cost of funds are significantly lower than what the airline has the pace so in effect.

Even though we can have a very strong profit margin on these leases going forward.

The airlines point of view it is still the dramatic savings over what they would have to pay to finance their direct buy aircrafts.

So where we're seeing the seismic shift.

The lessors.

Both in terms of.

Lease back opportunities, which is the less are.

Are you know of appetite basket, but more toward filling in these gaps using our slots are direct order.

Crafts.

In the years to come, particularly right and the other focuses on 'twenty 'twenty two of 23 and through the spring of 'twenty 'twenty four we're getting a lot of requests from airlines.

The kind of shift their orders and backfill with air lease the lease.

Yes.

Got it.

And then Greg you noted in the release that the you know the amount of effect of.

Essentially the deferrals was kind of flattish as you look out into the balance of 2021, obviously you know you're the.

The airlines themselves are kind of looking at the this.

The summer travel season.

And then.

So I think that there are some additional requests how do you think that tracks a you know as we go through 'twenty one.

I think the to clarify the comments of the additional request came through in the at the end of Q4 and the first part of January to bring us to where we are about on a net basis of it.

And of roughly 141.

You mentioned Ryan.

Or excuse me out of 44 million.

Think of it really depends on what it looks like going forward as to how the recovery goes right. As you see bookings take place I think youre going to see airlines with more and more of confidence. It also will depend on what happens with border restrictions and of the rollout of the.

Of the vaccines. So it's really it's almost too soon to say I like the improvement I think that I saw on the cash basis of players as they were paying more than they were last quarter and they seem to have good plans to lay the mouth, but you know it's really too soon to to waive the all clear sign because other airlines could fall.

Our category and we won't really know until we see more improvement from the airlines themselves.

Thank you.

[laughter] am Thank you and our next question comes from Helen Becker.

Your line is now open.

Oh, thanks very.

Following the operator, hi, everybody and thank you very much for the time.

To clarify one point, even that answer too much debt when you talked about the airlines.

Bring their own orders and using your orders to backfill them.

Does that imply.

Much of that there that you're that other deferrals that you're giving airline's scope.

Beyond 2023.

No I was talking about delivery of deferral of.

Not financial deferrals.

Okay. That's helpful. Thank you sorry for my D C Airlines, they're looking.

To use our aircraft in 'twenty, one 'twenty two 'twenty three will pay market rates as we determine.

What I was talking about they wanted to defer their own direct purchase orders from Boeing and Airbus.

And backfill at the leased aircraft that come from our order book.

Gotcha Okay.

Thank you and then my other question kind of just an upbeat one.

You know the United launch last week of the week before announced this investment in or an order with Arthur aviation and and I've heard a lot about E. VTOL recently and I know, it's gonna be like four seven years away but are.

That makes the talking to any of the manufacturers and thinking about placing orders for those types of the aircraft.

You know at some point in the second maybe for delivery in the second half of the decade.

Well, let me let me, let me answer the way.

So look we are always talking about long term future goals.

Holes of the manufacturers Airbus in particular has seem to be focused on.

Electric and hydrogen technology Boeing on the other hand, even like the recently announced probably a greater emphasis on biofuels or the use of more of process and more sustainable fuel that can be used in current generation of engines.

Yes, it's quite obvious to us that the use of electric or hybrid technology or hydrogen technology and the mainline aircraft the bread and butter single aisles, you know the eighth in 'twenty and 'twenty, one the OS the 737, eights and nines et cetera, as well as the wide bodies is probably.

It seemed probably of quite a distant future.

But the of course the alternative fuels are is probably much sooner on the horizon. So your specific question of how we've talked about orders the.

The question would be orders for what [laughter].

You have the specifically come out with your program.

And say, what you're offering so the answer is no not orders, but definitely a conceptual discussions and one thing I'd like to point out in all of these.

The discussions that's common to all of the power plants or all of the means of propulsive technology and that is how are these technologies gonna be supported.

Field.

It was an air with airlines of operating globally, and presumably different different technologies being used there.

So you know I think that's one thing that's not been addressed a lot.

In the industry is.

It's one thing to speculate.

And intellectual.

And the flea and academic talk about how's the things are possible, but it is a greater leap to determine to what degree of there realistically supportable.

The airline fleet operations over the next five to 10 years.

Gotcha, Okay on your question about the smaller.

Actually I mean, the smaller rotorcraft the planes for urban mobility.

We think the technology will grow in leaps and bounds.

So as an aircraft lessor as an asset investor, it's very hard for us to project.

What the useful lives of those new assets would be.

And will.

We remain economical ones better technologies come along so.

We're going to watch that very carefully but also the dollar amounts of ball per unit are so small.

Debt literally we'd have to buy thousands and thousands of these urban mobility.

Electric and other.

Hybrids to even make a dent in our financial performance.

Okay. That's all very helpful. Thank you very much gentlemen, you're very welcome and.

And thank you and our next question comes from Rob Epstein from Bank of America.

Your line is now open.

Yeah, Hey, good afternoon guys.

Can you talk a little bit about the the seven day Sevens I noticed in your K you were.

Talking about some of your seven eight and seven delivery slots might be upwards of 12 months plus of late and that gives you the option to.

To cancel if you. So chose so what are you guys thinking about them, where do we stand on some of the sevens in them. If you could give us some color there.

Well first of all Ron it's clear that.

The production issues that have arisen on the 77th.

It seemed to have mushroomed.

And Theres, just greater and greater levels of inspection going on due to the nonconformity findings of that you know that have transpired.

As yet today is.

The call to see a definitive.

Fix our debt is agreeable by the aviation.

Jason authorities in all going forward I think the goal of course is to do a lot of engineering work to determine that the aircraft are on the use as is basis in other words of the tolerances and the.

Schimming issues et cetera.

Have we will propose no threat to safety.

But I don't think that.

Year, yet and this has been dragging on longer than any of us have imagine. The fact I don't think Boeing has delivered a 787 to anyone since the end of October.

So we have several aircraft a number of aircrafts are waiting and yes. Some of them are coming up on their 12 months in some of already passed the 12 month point.

That were the delivery.

Having said that you know that decision as to cancellation is largely driven by our customers.

And if we give that customer of the same rate that we have that if it's greater than 12 months.

So suffice it to say, we're working with those impacted customers.

And we will.

The past action as we've done with the Max based upon what those customers want to do.

So look it's it's it's still in the an unfolding story. It is I wish I could say that we know definitively there was an end to it and when things would start.

Also don't mean to say that things can go on for.

Take care of lots of months, we just don't know and we're just waiting for more definition from the Boeing company, We're certainly hope.

Things will get back on track very quickly.

Got it got it and then and then maybe shifting to the other end of the spectrum to the of the 80 20 is that you guys have it.

How's the market looked for that what are you hearing.

Per months customers on that platform and and given you know the adjustment post pandemic would you expect to see more demand for that size of aircrafts going forward.

Yeah No question, Ron we're seeing 18 19 operators.

That are looking at replacing the oldest.

For the 19th.

We're looking at airlines would have.

Older 737, seven hundreds.

Some airlines that might convert out of an E 190 of E 195.

So we are seeing a pick up.

Uh huh.

Eight of last 12 months in and interest in the 220.

Our first deliveries are not going to be until the latter part of next year and then it starts out very modestly, but we are seeing a lot of activity.

Across multiple continents.

And we've already signed the agreement.

And those.

And the announced in due course, when we in the airline.

He'll then it's appropriate timing.

And yes, a lot of the airlines are looking at operating 840 seat aircrafts instead of 180 seat aircraft in certain.

The market segments, I think air France is a good example of that.

Those of where they will be replacing their 8019th and <unk> hundred Twenty's.

60.

820.

We've seen delta.

Replace.

Some of the oldest of.

You know the MD 88, and MD 90.

And.

Some of the oldest aircraft the acquired from Northwest Zone.

The merger with <unk> to 'twenty.

So.

Look at it it got off the slow start because of the number of aircrafts. They can produce the Montreal is.

It is limited.

Like maybe four or five aircrafts a month now.

Now they've got mobile production going which is feeding the U S carriers like the Alto and Jetblue.

But I think the momentum is definitely picking up.

And the vast majority of our deliveries are in 2023 and 2024, So I think we're.

As the only in the right spot.

In terms of what we have available slots and one of airlines with the work but.

It's really a replacement market more than a growth market.

In fact.

Literally every campaign, we have Ron is replacing plane.

Planes that are hitting.

Going to hit the 25 years of age.

Great. Thank you.

Well.

Thank you and our next question comes from Catherine O'brien from Goldman Sachs. Your line is now open.

Hi, This is Katie Buda Entre Cathy O'brien.

And in terms of the placing additional aircraft from the order book of your holding back on placing aircrafts as far out as you usually right given the current lease rate environment for the incremental aircrafts alright.

Alright, James numeric of holding and various pre COVID-19 levels.

And unrelated note have terms of indirect operating leases diapers at all three of those on sale lease backs.

20.

Well, let me answer the first part of it and then I'll triangle of the second part the answer is we really haven't changed our philosophy at all on full replacement of aircraft you know.

Each one stands on its own and we evaluate.

We evaluate.

The answer desire to keep some airplanes in the store if you will keep some inventory to have available for forward campaigns.

Alongside the ability to place more aircraft than we have today.

So we take each of those.

Each campaign on its own.

Arts and suffice to say there really has been no change to how much we so called hold back or not you know certainly market lease rates in commercial terms are a big determinant of that but actually they've always been there's really been no change.

The to that at all.

And can you.

Mary remind me again, the second part of your question.

Hum terms on direct operating leases they vary at all from those onset of lease financing.

Diverse well you're talking about terms the length of the leases.

Oh, yes.

Well I would say.

You just you know to Steve's comments earlier, we are seeing.

Our movement towards taking aircrafts from our order book in the face of some airlines deferring their own deliveries.

And so when you say that there is a divergence I think.

The.

Based upon not only supply demand, but I'm on the specific needs of the airlines I think it's probably safe to say that right now the operating lease platform still has a commercial premium in terms of placing our order book in terms of the the terms of were getting as compared to the sale leaseback marketplace.

You know, although having said that.

With the demand having grown so much for sale lease backs the less lessors are in a stronger position. So if anything other.

Of those lease rates have improved lease rate factors have improved and no longer are of lessors, just willing to pay almost any price the that on air.

And.

Veteran airline puts for it so.

No I I would broadly say that we still enjoy a bit of a premium on our operating lease.

Portfolio on our.

Directly ordered aircraft.

Understood. That's helpful and then I just had one follow up.

Airline to go with the current size of your order book over the next couple of years and what kind of flexibility do you still have free this year and 'twenty 'twenty two to potentially adjust closer in.

Any future changes more likely be due to OEM delays the brace of request for deferrals from air lease and its customers.

Well you know what's the dynamic.

Are you pushing our order books are not fixed in concrete.

And we pride ourselves since 2010, when we started the company having a flexible of the order book.

So generally how we look at it is we plan of certain dollar amount of capex in given years and.

And within that dollar amount we.

Each of the weight of lot of choices.

As to the composition of the deliveries going forward.

As long as we give the the Oems anywhere from 12 to 15 months advance notice.

They gave us a lot of leeway.

And what are the quantities and subtypes of aircrafts in the order so.

For example, if the order they AC 50.

For delivery of 2022.

And we see an airline they would rather have to <unk> hundred 21 Neo L. R's.

We then have the flexibility to make that adaptation and.

Satisfy our airline customer.

At the same time.

Adjust our fleet composition to meet the demand.

Yeah.

Got it thank you.

You're welcome.

Thank you and our next question comes from Mark Devries from Barclays. Your line is now open.

Yeah Yeah.

Thanks, Steve I appreciate it the specific comments you made around the supply demand imbalance or dynamics for wide bodies, but was hoping to get your broader thoughts on kind of where we are in the global aviation industry in finding kind of the new equilibrium.

Given what you're seeing with like the early retirements.

Production delays and an increasing demand for seats.

Yeah, if you look at the total.

Landscape in the last day 11 months.

You see a dramatic decrease in the number of available total seat passenger seats. The airlines are offering of wide body aircraft.

And the primary reason for that is the retirement of grounding of the H D. Eighties, many of which are not going to come back in the service.

The literally 100% elimination of all 747 passenger aircraft.

And then the retirement of a lot of the four engine airplanes.

And like the <unk> hundred 4500, 800 4600 so.

If you look at the whole wide body.

Landscape.

The number of seats that have come out of the widebody sector on a global scale is phenomenal probably more than 35% of <unk>.

Total wide bodies.

Planes per se.

Aggregate everything from the 7678 to 30 upwards.

Come out.

Secondly, there's also a wave of cargo conversion.

Whether it's the 837.

760 Sevens, you see companies like Amazon Prime day of converting.

A lot of 760 sevens to freighters, that's going on in China, that's going on in Europe.

830, they are being converted and now there is the new program that will begin to gain momentum the convert the oldest seven.

7773 out of the yards in the cargo so.

We have of.

The nation of retirements of the largest wide body aircraft.

And then we also have an active and lively cargo conversion program going off of multiple aircraft types.

It takes them out of passenger rules and puts them into afraid of roles and all of those things are helping to achieve this equilibrium that you would.

Cognizant.

So the pace of retirements in the widebody sector was actually outstrip the single aisle.

And we find that very comforting debt.

That the marketplace is working efficiently between supply and demand.

And I really hope that by the middle of 'twenty, two will reach the point.

First where things will be back to some level of normalcy in the widebody market.

Okay. That's helpful. And then just just one follow up just.

Given the increasing importance of the leasing community that you've kind of highlighted on this call.

Is this having any impact on kind of.

Vacations for the returns that you can realize on this business going forward, whether it's because of you know.

The increase leverage negotiating prices with the Oems or are just more favorable terms on sale leasebacks or other leases that you're negotiating.

I think the broad answer to your question Mark is yes over time.

Of your excellently, we and other lessors and and others that other companies in the industries. It serve the airline industry were all impacted by by the by the problems and the.

And the great difficulties, we've all been talking about.

But taking a larger view going forward and yes, with a larger percentage of with lessors, taking a larger and larger.

Now what percentage of the aircrafts space, we mentioned in the current or in our prepared remarks that.

In 2000 2055 per cent of all deliveries that Airbus did where each of them to where to the leasing Avenue. So over the long term, we believe the debt that does.

[noise] bid well for.

Continuing.

Our margins to start.

And however, they end up over the next one two or three years as the pandemic unfolds and hopefully get into recovery no. We definitely see an improving trend beyond that for those reasons because once the lessors start taking such a large market.

Shares are good.

Forward, you know that that has a profound impact for many many years to come so I think it bodes well I'm not I'm not forecasting, but I think.

It does bode well for an improvement overall long term I don't know if we get back to pre COVID-19 levels of margins.

The et cetera, but definitely an improvement over the next year the two.

Okay and the other factor that influenced that is the cost of capital.

John.

If if interest rates remain relatively low.

Obviously, that's that's the big factor in the future.

The cost to us because depreciation expense and interest expense of the two largest components.

The components of our cost structure.

So.

As long as we have rising demand are robust.

Appetite from the airlines for our planes.

See a steady recovery in lease rate factor.

Factors.

As long as we don't have any major.

The catastrophic changes in the in the interest rate environment.

Makes sense. Thank you.

You're welcome.

And thank you.

And our next question comes from Vincent can take.

Stephens Your line is now open.

Hey, Thanks, Good afternoon, Thanks for taking my question.

First question on the sales lease back pipeline I'm, just wondering if you could.

Maybe talk about that and then the the deal you did recently just wondering if you could talk about the appetite.

More of that in greater detail of it was interesting that you were able to get.

The the sale leasebacks, what seems to be pretty attractive economics, and then also get new aircraft. The placements as part of that I was just wondering if you could talk about maybe.

More appetite for that in the pipeline.

The only thing I would think that yeah, well certainly Vincent as we demonstrated.

In 2020 by the examples you just pointed out yes, we're very much looking for that in 2021, but again.

We're doing somewhat of a very disciplined basis, whereby we can bias it much more towards a sale leaseback transaction.

That is co located if you will with the simultaneous placement.

[noise] of aircraft from our order book, we do believe those opportunities will continue to present themselves in 2021. So we're quite open to that especially as we as in my remarks, I indicated that you know the deliveries that we have under contract technically speaking in 2021, probably.

For the reasons that we've already talked about you know may not all materialize, whether it's the 787 manufacturing delays or you know of protracted time to get the you.

Are of 737, eights or nines European tariffs etcetera. So.

You know knowing that that the likely.

<unk> will be that our capital debt, our capex will not be a proportional to what's contractually there we're.

We're very much looking for those opportunities, but again I would just emphasize it's a very disciplined approach.

And you know you haven't seen us rushed to the floodgates of scale.

The lease back you've seen us in a very targeted specific basis and the.

That will absolutely continue for 2021.

Okay, great. Thank you.

Next question is the and it's a broad question, but.

It sounds like I think your.

Ben.

<unk> com.

Tom in the aviation industry and it sounds as just from my read of maybe you're sounding a bit more positive you know the.

The net deferrals, our debt down and it sounds like it's more of opportunities here and so I'm kind of wondering if you maybe think debt.

We're past the low of the this aviation cycle, even if the recovery slow and sort of what.

Are you looking for in watching out for.

In terms of the next year in terms of the just the global aviation cycle. Thank you.

Hello, we're talking to more than 100 airlines.

In any given point in time.

We are watching their advanced bookings.

We're watching the cancellations you know the word.

In other words at the.

The family makes the booking to fly in June to Europe or the.

We're going to cancel the flight or are they going the opposite.

Go on that flight and it looks like the ratios are starting to look a little better.

But the real key is this.

These government restrictions.

On quarantines on testing prior to departure.

And and the different rules and regulations in multiple countries that seem to be changing literally overnight. So I think once the traveling public and.

The business travelers.

There's a few.

You'll have a greater sense of call.

Our greatest sense of normalcy.

In talking to our airline customers all over the world, We do expect a progressive delivery sort of recovery, but it won't be uniform across all continents. So we're gonna have to just watch.

Our political leaders.

Adapt.

The post vaccine environment.

But I think as you can gather some of my comments we are seeing.

Light at the end of the tunnel.

We still have of waste to go.

And I really hope that by the third and fourth quarter.

That recovery will be meaningful.

Immeasurable.

So in the meantime, we keep our seatbelt fastened yep, that's what I would add I think you know most of the eyes are really focused on the summer season, you know for the for the Northern Hemisphere Airlines, that's a real that's a real benchmark that's a real its.

And typically the time when a lot of cash is generated so.

You know, we're still holding our breath a bit and all of the things Steve was indicating are out there, but I think.

I think of lot of this will depend upon how the summer season actually unfolds.

And so the restrictions and such you know you've been you've all been reading about things.

It's like a vaccine passports and instantaneous testing right at the airport.

Right at the the jetway there for a negative tests, etc. The these things are still under development, but but in its broadest sense I think 2021.

Will really be largely geared to how things.

So over the summer season.

Great very helpful. Thank you.

Right.

Thank you.

And our next question comes from Jamie Baker from Jpmorgan. Your line is now open.

Hey, good afternoon, everybody a new headset.

Here. So I hope you can hear me.

Yeah, we can hear you planting.

Great Great. So Steve at the doubling of that you noted the.

The Airbus of share in the single aisle market I think inclusive of the 221.

Is gonna be.

Getting up to 65% you know of level of it.

Upsets the duopoly for lack of the better term and of course, the middle of the market rumors are percolating again, so what should but what you do or more importantly, let me ask it this way what the air lease want Boeing to do as it relates to resurrect in the middle of the market effort.

Efforts.

Well look Boeing had some very very tough.

Tough decision to me about where do they invest their R&D, which segment of the market.

And I think it comes down to the two segments. One is the the ultimately.

<unk> the 737.

And then second the void that exists today between the 737 and the 700 et cetera.

And I think that Boeing and Airbus both recognize the Airbus does have a product.

In the 200 seat plus category, particularly.

Placement of the age of 21, LR and the extra of our debt.

Sales some of that void.

Now you know better than us debt the airlines balance sheets across the globe have been seriously damage. So airlines debt would have signed up per se 50, or 60 middle market.

Now the 90 Sevens.

Three years ago.

Are they in a posture today to do that.

I I don't have a crystal ball, but I would think debt airlines have a much more conservative.

Capex outlook.

Until they can repay the.

The government.

<unk> loans of government.

That said low.

For the convert some of the debt that they've taken on in the equity or some form of other.

The non debt securities so.

So I think.

Think the airlines balance sheets today as you know are a much different shape than they were in 2018 and 19.

So airlines.

The ability to make large scale multibillion dollar commitments is different today than it was.

And then secondly.

You know how much the Boeing wanting to invest in the long term future.

And then make that decision in 'twenty, one of 22 I'm not sure.

Net where at that point yet.

That's Boeing as a company can make a definitive commitment.

To index.

And the right sized aircraft because.

Ted there's two categories, there's the 737 replacement.

And then there's the $75 seven and 767 mid market size.

And there's probably.

The need for both sizes.

But is that something that an OEM can embark upon.

When we are just.

Entering the second most difficult years since World War two.

Jamie Let me just out of you specifically asked what does air lease one of Boeing to do.

Let me give you a very specific answer.

Or we want Boeing.

To continue to make to get Us house right to get its house in order.

The 787 delays are impacting us as well as the rest of the delivery of the manufacturing process boring has gone through a tremendously difficult time and while we certainly have made a lot of progress the blunt truth is.

Is we need them to fix the remainder of their house first before we have any interest in talking about new aircraft.

Understood I appreciate that John.

The follow up looking at the Alaska deal it seems that air lease quite of a pretty significant role in helping.

Them.

Recommit to being an all Boeing operator, I I think most investors think of aircraft leasing you know and this is the problem.

It is just a simple commoditize the business, but you know of Alaska feels like it was much more you know an example of a partnership.

You've touched on that a little bit earlier in his prepared remarks.

Mark and I were wondering any war stories, you can share about that particular deal or any other similar transactions.

Well look the debt.

The DNA of air lease of fleet planning.

Of the DNA of air.

Air lease is not just financing planes.

So I think it's the intimate understanding of the airlines that we work with that really makes a difference and in the case of Alaska as you know well they acquired Virgin America, which had an all <unk> hundred 19, <unk> hundred 20 fleet at <unk> hundred 21 meals.

It was on the order.

Most of those aircrafts of at least.

And the ones that were owned outright air.

Lease agreed.

And some very tough negotiations with air with Alaska to acquire on the condition that they would lease them back number one.

And number two they would lease.

Lease a higher number of new 737 of the Dash nines.

Which have a greater passenger capacity than the <unk> hundred <unk>, they're replacing.

But this is a multiyear process.

And I think it was a three way partnership between Boeing and air lease in Alaska to come.

Come to a fleet solution.

That Alaska is comfortable with for the next day decade at lease for another 10 years.

And of.

Even the the configuration of these aircraft on the <unk> hundred 20 that the inherited from Virgin America. As you know are completely different than the.

Alaska standard two class configurations. So.

It was really a strong effort.

You know I don't want to get into the war stories, but it was not an easy transaction.

And it took more than 12 months to put that together.

And all during that period, we had the pandemic and.

And we had.

Boeing stop the production of the Max none of US have any idea of Jamie when the backs of the re certified by the FAA.

Alaska already have some orders for the Max that were delayed and not deliver it so we.

We were dealing with the complex world of unknowns, but yet through all of that Alaska had enough cockpit.

In the air lease.

Debt, we would persevere and put a deal together that's a win win for air lease Alaska and in the Boeing company.

And we will redeploy those the <unk> hundred Twenty's.

And perhaps you can bring in some new customers for Airbus. So.

There's some interesting.

And in some elements of that transaction that ultimately when the book is written.

It's going to be quite eight eight.

Case study.

Of Reconfiguring and Airlines fleet composition.

That's great Mark and I really appreciate your thoughts on the topics. Thanks, gentlemen take care. Thank you James.

Thank you and the next question comes from <unk> Patel from Deutsche Bank. Your line is now open.

Hey, good afternoon, guys I am I appreciate the all the commentary around the asset disposal and managed platforms.

But I wanted to get a sense about how we should think about the sales margin on the assets.

Net sales program.

On the one hand, you mentioned theres, a good appetite for assets aircraft assets for investors.

Which would seem to.

Indicate upward pressure, but on the other hand there.

To be a record number of assets in storage.

And just some of the challenges of the passenger market.

Market faces right now would suggest downward price. So just wanted to get some of your thoughts there and then secondly.

I just wanted to see if you could maybe help us quantify the program a bit is it are we thinking something closer to the $150 million you did in 2020 or something.

Closer to the $1 billion you had.

The asset sales front sure most of them.

Let me start off the first part the.

Look.

We are seeing a renewed interest and despite your reference of some aircraft being on the ground. The the reason why we're getting a lot more interested at all of aircraft are flying and you've seen our.

Aircraft utilization.

Our rates are very very high so with our young fleet, I would say that and and that fleet flying.

<unk> creates a more compelling investment scenario and people want to buyers wanted to take advantage of that.

So you know.

We mentioned this because we do believe that the environment is looking better and ripe. If you will for us to restore air sales program.

I indicated in my prepared remarks, that's probably towards the second half of the year and that also.

Means that we will in the end if we sell aircraft they will they.

It will be a respectable gains they'll believe b that we they believe they will be at levels that we think our overall of the best interest of our company and our shareholders as opposed to holding these aircraft because they are very profitable for a period of time. We go through that exercise frequently. So I think the environment is ripe whether or not it's the same level or percentage.

Or a gain of last year of the prior year I can't foresee except that we will apply the same the same level of discipline in the analysis of when and so and the gains that we would that we would make so as to the volume, it's really really hard to say.

And.

And I and I hesitate and I pause to just give you an idea of the volume except to say that you'll see more of whatever transpires more likely in the second half of the year are but suffice it to say it should be much much higher than what we saw in 2020.

Yeah, John just to add to that just the touch I mean, the one thing.

To think about also is.

The amount of aircraft will be buying from both Boeing and Airbus If things remain slow the need the cell is clearly much lower.

I mean, I think that's the big variable play we don't really have that many aircraft that are really in that category to be sold if you will right we usually.

Usually low to sell airplanes over eight years of age and we just don't have that many of them because of our average ages four.

I think the other thing to keep in mind, which I think bodes well for the sales market as the resurgence that we're starting to see in the ABS market I think youre seeing financings get there.

Oh at levels that you wouldn't see pre COVID-19 just because.

The overall rate environment, I think that is helping to make some of the math work for some of the buyers as well, but I think to John's point, it's very much of a wait and see but I really like the fact that we have the airplanes that you know a lot of these buyers are looking for because of with high quality lessees are young and non long leases.

Great. Thanks, a lot guys.

You're welcome and thank you and the next question comes from Ross Harvey from Davy. Your line is now open.

Yeah. Thanks for your time on.

On share buybacks, you don't appear to transact on that of the shares in the hundreds of millions dollar programming of the Q3 of the month.

Can you comment on the us on maybe whether or not it's related to the leverage being of two seven times is that a level of do you want to see come down in the coming quarters.

I'll take this one of those Greg.

It has nothing to do with where our leverage is currently I think the leverage is where it is as I mentioned in my prepared remarks due to our elevated liquidity position.

And on the net basis net of cash is at two four times. So we really have the availability to do so we just haven't disclosed what level of we're willing to acquire stock back at it and of course, we won't do that but suffice to say, there's been plenty of opportunities and we study the regularly as to Oh, where the what the best uses.

For us to deploy capital into buying back stock raising the dividend.

Buying from the Oems or doing the sale leaseback transactions, but you kind of have to trust enough that where the real run the math of we're making the right decisions along the way.

That makes sense, one follow up maybe on the aircraft values.

I mean notwithstanding that.

Of that Greg of out of your net seat on cash accounting of repaying some levels and Steve Obviously, you mentioned the the door engaging trend among wide bodies and the improving supply demand bump.

Just wondering if there are risks that the lease restructurings that you're discussing the day triggered on the impairment reviews in the in the wide.

This is at a current attack a section of Air fleet.

Yeah, I think it's important to note that only 7% of our fleet is on a cash basis and I think we've noted in prior calls we've.

Non had exposure to the major airline bankruptcies that we've seen at the industry.

We've done very well from a credit perspective, not the name individually.

Wide volumes, but I think if you look at our fleet relative to a lot of our peers, we have far fewer bankrupt.

The bankrupt carriers in our and our.

The fleet. So I think it's I think it's important to look through that lens as well but.

All in all I think we're not a pretty strong position and it doesn't surprise me that.

We're not we haven't taken impairment charges, we have a four year old fleet it under GAAP to non discounted cash flow test and.

As you would expect Theres a lot of cash flows that support the values of the airplanes on our balance sheet.

Great. Thanks, John.

And thank you and we have.

Have a follow up question from Ron Epstein from Bank of America. Your line is now open.

Yeah, just a maybe.

Couple of more detailed questions.

When you look out over the next.

The four quarters.

Are there any customers that you better potential.

The.

At risk of not taking deliveries.

Well I mean, we have not we don't have any indication at this point Ron debt in the airline than as of contractual can take of new plane. This year is not going to take it.

Now.

And trying to look at the Crystal ball, if we don't have a reasonable degree of of recovery.

As we go into the summary of the Jai emphasized the summer is going to be crucial.

You could I'm not saying this is going to happen you could have an air like of the let's say.

The John Greg, We Havent airplane that we're supposed to take.

Say mid year this year.

We'd rather not take it we don't really have the full need for it.

But could we get some kind of the.

The concession.

For the first of.

Six months or something.

Uh huh.

At a slightly reduced lease rates and we'll make it up over the following six months in other words.

Lease debt was maybe $100 of months' airlines the space well I'll give you of $90 a month for six months and.

And then I'll pay you $110 a month for the following six months.

That kind of a scenario.

Of request, it's probably a higher probability if an airline doesn't really.

The recovery than just the outright saying.

We're going to renege on our contract case the claim from ALC debt that is more difficult to see at this at this stage, but even it.

In the current.

The environment that we're in.

I doubt that.

There'll be any airlines are asking for what I, just described but there could be exceptions.

But it would be certainly the a very small number of the airplanes that would be subjected to that type of request.

Ryan I'm I'm more of I'll just.

Be very straightforward here are I'm more concerned today that the tariff situation gets solved the visa b the importation of tariffs Boeing aircraft going into Europe, you know air lease has the Europe is our second largest market place behind Asia.

And so.

The factors.

Factors of Steve sorry, It says to the airlines willingness to take so far it looks pretty good across all of it but the one handicap. We're gonna have is for any deliveries whether they'd be on the 737 eight or nine or the 787 are just sort of gave example, we've had of 77 that was supposed to go to L O T in Poland.

Year, the still hasn't delivered so I'm actually more concerned from the tariff situation than I am from a customer receptivity or ability to take because none of these airlines you know the airline is technically the import or and so the import tax is assessed directly on the airlines.

One last one airline is going to take that these days and I think the Boeing company that was in the we know it nor are we going to take that risk. So frankly, it's actually on the European side, the bigger risk is with what happens with tariffs.

And the need for both governments of both on the Eve in the U S to get to a quick place.

To eliminate.

Both sides of those tariffs.

Whether it's permanently or temporarily until things are sorted out or whatever that's actually a bigger factor that I look at this year over the next several months of especially.

Yes, that's the biggest thing.

Ron to.

Delivering aircraft in Europe, because no airline is going to want to pay 50% duty.

Because they're not the guilty once it was the Airbus and Boeing debt at various kinds of subsidy the government assistance in their various programs and so.

Five of the pointing fingers at each other.

But the airlines and the leasing companies cannot be the victims, they're not the perpetrators of these various.

Subsidies and other things that the <unk>.

Two sides of our accusing each other up.

So John is right commercially is not where we see the problem is.

It's the only the terra it could be a barrier to the <unk>.

The export of these aircrafts of Europe.

Got it and then and then maybe just one more detail when we when we think about your collections or revenue. However, you want to sort of frame it what.

What percentage is on cash accounting now because you've got.

It's been some customers like for example, Malaysian air in pretty tough shape. I mean are the Aon cash Academy, how do I think about who is on cash accounting and who's not and how you think about it.

Malaysia is paying us they're totally up to date, there's no there's no problem with Malaysia, but Greg you can answer it.

Yeah, we have about we disclose in the K.

Got 47 per cent of our fleet of subject to cash accounting as you would expect most of those customers are in some form of reorganization.

You have to remember the good part of our underwriting requirements or the criteria that we focus on having cash reserves and large security. The packages. So we have a lot of the runway with our customers more so than maybe.

Some of our competitors, but John right now, it's only 7% all in if you look at cash basis as I mentioned in my prepared remarks, plus the restructurings at the less than five per cent of revenue. So I think we've been navigating a very tough situation, especially good.

Got it okay. Thank you guys. Thanks, Ron Thanks, Ron.

Dan.

I would now like to turn the call back over to Mary Liz Depalma for closing remarks.

Okay, well. Thank you everyone that concludes our call for today, we will look forward to speaking with you again after the conclusion of the first quarter Justin. Thank you. So much you can now disconnect the line, ladies and gentlemen. This concludes.

And today's conference call. Thank you for participating you may now disconnect.

Okay.

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