Q1 2021 AerCap Holdings NV Earnings Call
Ladies and gentlemen, please standby good.
Good day and welcome to the Aercap Holdings N V Q1, 2020 financial results Conference call. Today's conference is being recorded and a transcript will be available following the call on the company's website at this time I would like to turn the conference over to Joseph Mcginley head of Investor Relations. Please go ahead Sir.
Thank you operator, and Hello, everyone welcome to our first quarter 2021 conference call with me today is our Chief Executive Officer, Angus Kelly and our Chief Financial Officer before we begin today's call I would like to remind you that some statements made during this conference call, which are not historical facts.
<unk> may be forward looking statements.
We're looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements.
<unk> undertakes no obligation other than that imposed by law to publicly update or revise any forward looking statements to reflect future events information or circumstances that arise after this call.
Information concerning issues that could materially affect performance can be signed and aircrafts earnings release dated April 28, 2021, a copy of our earnings release and conference call presentation are available on our website at Aercap Dot com.
This call is open to the public and is being webcast simultaneously at Aercap dot com and will be archived for replay.
We will shortly run through our earnings presentation, and we'll allow time at the end for Q&A as a reminder, I would ask that analysts limit themselves to one question and one follow.
I will now turn the call over to Angus Kelly.
Good morning, everyone.
And thank you for joining us for our first quarter earnings call.
I am pleased to report a strong quarter of earnings with 228 million of net income from $1 76 per share.
While there are still many challenges facing the aviation industry, we continue to see an improving environment with significant momentum in air traffic recovery in certain regions of the world.
Your line is looking to the future.
With increased confidence as evidenced by our strong leasing performance in the first quarter.
It is a testament to the focus and commitment of the Aercap team set during the first quarter of this year, we were able to lease 60, aircrafts, including 28 wide bodies, a quarterly record for Aercap.
This was accomplished despite the pandemic and the efforts required by our team to complete the Qi cash due diligence negotiate the G cash transaction and raised $28 billion of funding.
So clearly the first quarter was an exceptional one for Aercap as we announced the G. Cash transaction. We believe that this is the right acquisition at the right time in the cycle to create value for all our shareholders.
As we mentioned in our announcement, we expect the transaction to close in the fourth quarter of 2021 until then we will continue to work hard to make sure. We are positioned to hit the ground running from the start.
I am pleased to report that we recently closed $28 billion of funding commitments with our banking syndicate relates to the transaction consisting of a $19 billion bridge loan.
$5 billion term loan and importantly, we have also secured an additional $4 3 billion dollar revolving credit facility, which will further enhance the financial strength of the combined company.
Now as I mentioned above we firmly believe consumer demand will return quickly once markets reopen.
This is of course tied to the successful rollout of the various vaccination programs, which unfortunately have not been smoothed in some parts of the world.
That said, we continue to see green shoots of recovery in a number of regions.
The U S has seen demand for air travel gained significant momentum in recent weeks translating into traffic of around 65% of pre pandemic levels.
This recovery has been led by the leisure sector, but what business and international travel to come that should move higher over the course of the year as businesses reopen.
Many of you will have heard the more positive commentary from the U S majors in the past couple of weeks, which echo what we're hearing in other regions too.
We are seeing renewed strength in domestic travel in Asia, where the traffic levels in a number of countries have surpassed those of 2019, including China, where we're now at 96000 weekly flights are 116% of pre pandemic levels, Russia comparatively it's 11300 flights are 101%.
Vietnam, 6000 flights, 125%, South Korea, 3700 flights and 127%.
Together. These countries account for 115000 weekly flights. This is equivalent to the U S market of 116000 a week.
In Europe, the environment remains relatively weak as the slow start to the vaccine rollouts coupled with our fourth wave in certain countries has led to further travel restrictions and related quarantine.
Ali, Greece, and Turkey continued to fly at levels in excess of 50% of 2019 levels.
However, positive developments on vaccine availability in the coming weeks and the agreements of the European Union to put in place a green travel certificates in time for the summer will spur improvement in the European market.
Switching back to Aercap, we continue to see greater levels of demand and activity from our customers.
As I mentioned, we signed 60 aircraft lease agreements in the quarter with airlines from 15 countries the highest in 18 months.
And this compares to 97 lease agreements for all of 2020 in fact 28 of the 60 lease agreements in Q1 or for wide body aircraft a record number of quarterly wide body leases. This level of activity reflects a clear pickup in demand and confidence.
I believe there are two key themes emerging from our conversations with customers.
The first is that their confidence in the return of travel demand is strong and growing and mostly it simply as a matter of timing.
The second is that lessors will continue to be the partner of choice for aircraft financing.
So on the first point there was an abundance of evidence to show that once restrictions are eased consumers react accordingly.
The vaccine rollout is driving consumer confidence in the U S, China and the U K.
Where consumers are enjoying additional freedoms.
This consumer confidence will inevitably spread to other regions. As further progress is made around the vaccine rollouts, giving governments the ability to roll back on restrictions.
And the airlines the confidence to add greater levels of capacity.
Over 1 billion vaccine doses have already been administered with the latest weekly figures running at over 100 million doses per week and rising this will be equivalent to approximately 1 billion doses every seven to eight weeks.
The acceleration of this rollout provides clear hope that in and will soon be inside the.
The second thing we are seeing as how aircraft leasing is growing in market share and we believe that aircraft leasing will continue to grow to over 50% of all aircraft financing.
Airlines see the clear benefits of leasing, which frees up capital allows a faster transition into new technology and eliminates residual value risk.
This demand for aircraft leasing will inevitably help with future aircraft placements. So we have no availability from our order book until 2023.
So as we look forward the vaccine rollout gathering pace, the health of our airline customers improving and the demand for travel continuing to be strong. We have significant reason to be optimistic about the future no doubt we are in unprecedented times, but as you can see from the actions Aercap has taken to date and the actions we will continue to take.
That we are focused on delivering on behalf of our shareholders with that I will hand, the call over to Pete for a detailed review of our financial performance.
Thanks, Gus good morning, everyone. Our total revenues for the first quarter were $1 billion $95 million compared to $1 billion $238 million for the first quarter of 2020.
Basic lease rents were lower in the first quarter, primarily as a result of airline restructurings and aircraft transitions. This includes the impact of cash accounting, which was a $100 million for the quarter.
Our cash collection rate was around 80% for the first quarter and our deferral balance modestly increased by 5% to $514 million as of March 31.
The first quarter tends to be seasonally slower for airlines because it's the winter season in the northern Hemisphere and of course. This year, we've had the additional impact of ongoing COVID-19 related travel restrictions in many countries. We expect these metrics to improve over the course of the year as the vaccine rollout continues and as passenger traffic recovers.
We're currently seeing progress on a number of major airline restructurings as these restructurings are completed we expect to see these airlines come off of cash accounting during the course of the year.
The Tam is one of the airlines, it's making progress on its restructuring and emergence from bankruptcy.
We recently agreed to sell some of our unsecured claims in the Tam bankruptcy and the proceeds of that sale will ultimately be determined by the bankruptcy court in the Latam case.
Turning back to the P&L, our maintenance rents were $183 million from the first quarter, which was an increase from 100 or $134 million in 2020. The increase was primarily due to higher maintenance revenue, resulting from lease terminations.
Terms of aircraft sales during the first quarter, we sold nine of our owned aircraft for a total of $184 million. The average age of the aircraft. We sold was 18 years old and our net gain on sales for the quarter was $5 million demonstrating our sound carrying values.
Other income was $19 million for the first quarter and the increase over the first quarter of last year was mainly due to higher interest income.
Turning now to expenses, our total expenses were $827 million for the first quarter, a decrease from $916 million for the first quarter of 2020.
Our depreciation and amortization expense was $397 million from the first quarter, a decrease from $416 million last year, primarily due to a decrease in average lease assets.
Interest expense was $281 million in the quarter down from $319 million last year that was due to a lower average cost of debt and lower debt balance as well as lower mark to market expenses. This year.
We had asset impairments of $16 million from first quarter, which related to lease terminations and asset sales and were fully offset by corresponding maintenance revenue.
Other leasing costs were $40 million for the first quarter, a decrease from $87 million in 2020, and that was mainly due to lower lesser contributions or top up expenses during the quarter.
Our SG&A expenses were $57 million for the quarter compared to $65 million for the first quarter of 2020, a decrease of about 11%.
Putting all that together in the first quarter Aercap generated net income of $228 million or $1 76 per share value.
That includes costs related to the <unk> transaction of $25 million pre tax or $22 million after tax excluding those costs net income for the first quarter with $250 million or $1 93 per share.
We continue to maintain a strong liquidity position as of March 31, our total sources of liquidity were $8 $6 billion, resulting in the next 12 months sources to uses ratio of one seven times that remains well above our current target of one five times.
Excess cash coverage also remained high at $3 7 billion.
We continue to maintain a very strong balance sheet. Our leverage ratio is currently two and a half to one which is below our target ratio of two seven to one and below where we began 2020.
Our secured debt percentage continues to remain low at 24% of total assets and we currently have around $26 billion worth of unencumbered assets.
Our average cost of debt excluding debt issuance cost P. As in other impacts was three 7% for the first quarter.
In January we raised $1 billion of five year senior unsecured bonds with a coupon of 175% the lowest coupon in the company's history.
As Gus mentioned, we also completed the syndication process for the bridge financing for the G cash transaction, the $19 billion bridge facility and the $5 billion term loan facility that were originally provided by Citibank and Goldman Sachs, where syndicated to a total of 20 banks and we saw extremely strong demand from banks to participate.
At the same time, we also entered into a new four year revolving credit facility for $4 $35 billion, which will be available upon closing the G. Cash transaction, we had very strong interest in that facility as well with a total of 26 banks participating.
And I'd like to thank our banking group for all of their strong support throughout this transaction.
So overall on the operating side, we had a positive quarter with net income of $250 million, excluding transaction expenses and EPS of $1 93 as.
As the vaccine rollout progresses, we're seeing more airlines looking to the future and putting fleet plans in place for the recovery of air traffic and you can see that reflected in the 60 leases we signed up this quarter.
Of course, the biggest news of the quarter was the G cash transaction, which we believe will be a significant positive for our shareholders and with the syndication of the bridge financing and the submission of the first regulatory approvals, we're making progress towards the closing of that transaction and with that operator, you can open up the call for Q&A.
Ladies and gentlemen, if you would like to ask a question you could settle by pressing star one on your telephone keypad just keep in mind. If you were using your speaker phone. Please make sure. Your mute function is released to allow you a signal to reach our equipment. Once again for your questions. Today Star One we will begin with Jamie Baker with J P. Morgan.
Yes.
Hey, good afternoon everybody.
So a couple of questions.
From Mark and me.
Final slide operating cash flow estimate for the next 12 months $2 4 billion. That's the same number that it was last quarter.
So obviously a positive that you affirmed the guide, but some might push back on the fact that you didnt increase it with.
With one more quarter rolling forward. So so how does this guide tie into current collections and lease rate trends, what can we read from the <unk>.
2.4.
Well, Jamie we've really assumed a gradual recovery here in terms of air traffic and so you know as we as we forecast operating cash flow for the future we've assumed that our aircraft.
Gradually increase their flying driving during the course of the next 12 months, but we haven't built in a rapid recovery. There. So look I think it could be it could be higher than that.
Maybe a conservative projection that respect, but I think it's.
I think its a reasonable one for us.
And second question, what sort of regulatory.
I guess goalposts are mile markers are you looking for you know whatever you need to be.
To be clear and comfortable issuing G cash deal with deal related debt and have you hedged any of the financing costs.
Spreads have obviously rallied as of late so just curious why youre not locking in the funding sooner rather than later.
Yes, so Jamie we've got a number of milestones there we've got our AGM coming up as you know we've got we're putting in our regulatory approvals, we should have about half of them submitted by the end of May.
So.
Those are those are key things that we're progressing and as part of those you're in dialogue with some of those regulators before you said net.
So.
On the hedging side, we're monitoring the market and we will look to put things in place at the appropriate time.
Okay. Thank you very much.
Sure.
Well now move to a question from Ross Harvey with David Go ahead. Please.
Afternoon, Gus and pace.
I'm just wondering in advanced of the GE cash sale completion can you comment on your priorities for the Aercap business itself, particularly in regards to leverage levels as the objectives of day to reduce as much as possible.
And on sale leasebacks are you looking to get meaningfully involved.
Well Ross I think first and foremost the priority of the business on an operational from an operational standpoint, hasnt changed for one minute over the course of the last six months.
Focus is on getting our airplanes leased and getting paid.
And I think you saw clear evidence of that in the first quarter by the quantum of aircrafts that we were able to sign leases for 60 aircrafts, So that will remain front and center.
Of the business every single day.
And when we get to closing of course, we are working closely with that which day.
To be able to hit the ground running and referenced to sale leasebacks I think that would be at the margin Ross to be quite honest.
Understood. Thanks.
One follow up I'm, just wondering you highlighted $150 million of SG&A, there, Jason and <unk>.
Hey, I'm just wondering can you talk us through that number and whether we should have.
There are benefits and other cost lines.
Well Ross Youll see other benefits in terms of depreciation and things like that coming through I think you'll also see some interest benefits relative to where <unk> is today when we put the financing in place. So you will see it in other lines as well and thats going to be on the depreciation side.
We would expect that to be several hundred million dollars relative to where they are today.
Great. Thanks very much.
Sure.
Now moving to our next question and that will come from Mr. <unk> Orenbuch with credit Suisse.
Great. Thanks.
You had mentioned that the.
That you are fully leased through 2022.
But.
I guess.
Is there is there some possibility that you'll have.
Once the deal closes that still be kind of aircrafts that are available.
Because of the GE business that would allow you to create some transactions for activity.
Sure.
When we say we're fully leased SD Aercap order book, we don't have anything available until 2023.
What with the state of where <unk> on its order book, that's managed separately within the parameters of the sale of St agreement purchase agreement.
And we will see then Moshe when we get to the polls closing how many airplanes day have left and what time frame.
How that positions them to take advantage of that trend in the market.
Got it thank you and you mentioned.
The Latam bankruptcy situation.
Pete could you talk about how.
Thats accounted for where those assets are how their mark.
What that might means when there is a resolution.
Well, we don't have anything on our balance sheet for that Moshe. So we haven't accrued anything ultimately I would expect that to come in as other income.
But but as I said ultimately will be decided by the bankruptcy court.
Think in terms of amount it could be several hundred million dollars, but we'll really have to wait and see.
How that all plays out.
So you are saying.
It would be all revenue essentially.
Yes.
Great, but again, thanks from me now that subject to its hard to predict the timing of that and the ultimate amount I'm, just giving you an idea of what it could be.
Right.
But and if anything we'd be more than zero right.
Yes, that's true [laughter] very good thanks very much.
Sure.
We'll now hear from Helane Becker with Cowen go ahead.
Thanks, very much operator, hi, everybody. Thanks for the time.
Did you say how your deferral requests are trending I think you talked about the cash collections being 80%, but have airlines now then stop asking for further deferrals and Rguest pay you back.
It is a mix there helane as we look around the world at the moment as you heard the news from the U S carriers during the way things are going well, there China things are going well and other parts, but you have to remember the first quarter.
Obviously, we had recent events in Brazil, and we had a slowdown in Europe Post Christmas and January February, which and a lot of European countries are still under lockdown so in that environment.
We have to give a little bit more grant some of the carriers, but in return for that then we will always try and keep these deals NPV neutral. So we may have got extensions to our leases as part of those discussions as well.
Okay. So.
Then with that be included in a portion maybe as customers that you've restructured leases for like it's there.
Some percentage that you might have had to restructure or at least does that either lower rates or extensions or would you do extensions.
In that case, if you are restructuring out lower of course, I mean, youre not talking about big numbers here I mean, as we said the total number of inquiries from deferrals is 2024 $24 million. The line is not a big number in totality.
Right Gotcha, Okay, Alright, and then will you be filing documents.
Publicly on the key cash.
That day.
Civil set youre asking for the regulatory forms will they be filed so won't be Alberta.
See what's happening there.
I think that depends on the jurisdiction Helane.
There are about 20 approvals at the moment that we're expecting to file.
Depends on each individual jurisdiction, whether that's publicly available or not.
Okay now what language filed into a line there won't be.
[laughter], Yeah, all day to get Google trends later out.
Alright, Thank you Jonathan.
Jonathan brush up on your <unk>.
[laughter] true [laughter].
Thanks.
Sure.
And now we'll take a question from Vincent <unk> with Stephens.
Hey, thanks.
And first question on the lease rates going forward. So it's nice to see that the net spread expanded 30 basis points quarter to quarter.
I was curious.
With your strong.
60 delivery orders you have.
<unk> placements you have Howard the lease rates looking on new deliveries and then.
When I think about the rent deferrals you have at the repayments of those deferrals how the status.
To your yield.
Since I think where we're at.
In cash accounting here at this.
Airlines pay back the range should we just expect that net spread decline over the next coming quarters. Thank you.
So let me answer the first part of the lease rates.
Look as you know, we moved 60 airplanes, a huge number given the pandemic.
In the background we are facing.
And the other demands on the organization.
In terms of the lease rates of course book, it's evident that there is demand after when an airline it takes an aircraft no matter what they pay for us there's still a lot of cost associated with it they are committing to crew costs labor costs.
Maintenance costs, all those costs are part of taking an airplane. So the fact that they are willing to take them. Maybe if there is confidence out there in the future now as part of that transaction and there is a variable element to most of these new leases at the beginning for the first 12 months or so, whereas the day of rental will move around based on utilization and then following that period to go into.
Our fixed rate lease and that varies from and that varies from from aircraft to aircraft.
But it's over the first 12 months or so where theres variability on the lease race to facilitate the airlines.
Restarting traffic.
Pete you want to comment on the deferrals, yes, so Vincent on the second one.
So the repayment of the deferrals themselves wont affect.
It won't affect the net spread because if you think about it in the deferral of cases, we have recognized where we're accruing the revenue in those cases, and we're building up a deferral balance.
So obviously as those deferrals get repaid that's a positive for cash flow, but it doesn't have an impact on revenue and therefore on net spread.
We will have an impact on revenue and on net spread is when you have airlines coming off of cash accounting and actually flying these flying these planes.
That's that's obviously impacting revenue today I mentioned is about $100 million right. So that's going to be the biggest driver. The return of flight for most of those because obviously those have mostly been airlines that are in bankruptcy or other restructuring right and so as they emerge from those youll start to see those revenues come in.
Cause they basically been almost no revenues now.
Okay. That's very helpful. Yeah, I was mixing up the deferrals on the cash accounting so I appreciate that and looks good for net spreads.
So second question.
So I had a chance to go through your shareholder circular and I appreciate all the detail there.
Just wanted to talk about any incremental thoughts and <unk>.
Particularly one of the frequent investor questions I get is on the.
The prior revenue guidance.
<unk> 7 billion.
Because it seems like if we add in Aercap and <unk> together that revenue should be at least 8 billion given it seems like net spreads are doing better I just wanted to get your thoughts on whether one plus one equals two on the combined revenue side or if there's something else we didn't need to consider thank you.
Yeah, I mean, it's not as simple as that unfortunately, because you have a number of purchase accounting.
Impacts that youre going to have.
And also the accounting is just different the way that <unk> and Aercap do it right. It's not it's not apples to apples on everything and so I think that's really why we guided to what we did in.
Thinking about it.
So you can't you can't just sum up the two and then say okay. That's what it is going to be.
Okay got you I'll follow up offline, but thanks, so much.
Sure Okay no problem.
Next question will come from <unk> Patel with Deutsche Bank.
Hey, good morning, guys.
When we think about the cash accounting balance what is the view internally on this do you guys think that the $100 million is representative of a peak number here and just following on to that how do we think about re integrating this figure into the revenues what do we think is the possible upside here.
Do you think maybe over time, we get maybe $60 million to $60 million of that back and if you could provide any type of horizon that you guys can add that'd be great too.
Sure So I think that the cash.
We'll continue to see impact of cash accounting I would say throughout this year, but we're going to it's going to abate over time basically so I think that $100 million is a reasonable guide if we're thinking about it over the next couple of quarters, but as I said as the airlines come out and as they as their bank.
From Cesar or restructurings are completed then we're going to see that.
Those come back so it is going to happen over time.
But.
In terms of how much of that recovers yeah look I think that I think that you could see 60 on that $100, you probably see like $60 million recover as I said, it's not going to be an all at once thing, but it is going to come back $60 million to $70 million something like that I would guess.
Okay, Okay, Great and then the second question I had.
Sorry, Lisa.
Okay.
The second question I had was recently, we saw aeromexico announced that they've struck some agreements to restructure some of the 77 leases. They have and just wanted to see if you could update us as to whether any of the aircraft Aercap aircrafts that aercap owns and has at least two aeromexico are included in this or just.
The general status update on.
The aircraft you guys have in place with Aeromexico and do you intend for them to stay with Aeromexico long term or are you in the process of remarketing. These.
We expect the aeromexico aircraft to stay there.
And.
The aeromexico procedures now are in front of the court for approval and assumption of the revised transaction.
Okay. Thanks, a lot guys I appreciate the time.
And as a reminder to everyone that is star one to ask a question, we'll move to a question from Catherine O'brien with Goldman Sachs.
Good morning, Ron Thanks for the time I actually have one more on cash accounting.
This is this is the first time, we've actually seen that cash accounting impact declines since the start of this pandemic at least versus what I have tracked.
And that's despite the <unk> bankruptcy earlier this year. So I was just I was just wondering what what's driving that are some of the aircraft back on new contracts or are there any of that driven by aircraft from the guidance on the ground, but no longer, especially on <unk> just wondering what was driving the sequential decline. Thanks.
Sure Katy so while each day and actually we had put them on cash accounting in the fourth quarter. So they were already on it.
But we've had a couple of airlines come off it I mean part of the impact that you saw in some of the quarters last year was due to Norwegian for example, and we've placed all of our Norwegian planes now with other carriers. So you are seeing what we've been doing obviously in many of these cases the.
80 of the planes will stay with those carriers as Gus mentioned with Aeromexico for example, but in other ones. We have moved those planes elsewhere, and so youre going to see a less of an impact right because they're just youre moving the planes out of where they were so I think that's the main driver because if I look at last I think fourth quarter. We said it was 107.
$17 million, so, yes, it's down somewhat this quarter.
Hard to know exactly as I was saying in the previous answer exactly how thats going to play out over the next few quarters, but I do expect that to come down over the course of the year.
Maybe one quick follow up to that piece so should we.
Like what a good a good exercise from Davita is track the progress of these bankruptcy proceedings and that will give us good senses.
Of.
When we should expect to see the remainder of that $100 million come down here expecting the majority of those aircraft to stay with their current lessees that the right way to think about it.
Well I think for certainly for the major ones I mean, some of these are not bankruptcies. There just where we have assessed the airliners is not probable of collection and so some of those are quite small and frankly I don't think it would be worth following those situations, but you know for the major ones, Yes, I mean, it will be.
Once once the restructuring is agreed and you have an agreed.
Leases on those planes.
And the bankruptcy court or equivalent in some countries.
Has certified that yes, then you should see them coming back right. So that's.
That will be the trigger in most of those cases, I think it's fair to say that underpinning that and the exit from bankruptcy will be driven by the vaccination profile.
That airlines will exit from beef from those protect from those structures.
When they're confident that the vaccine is moving along well and all of those countries.
That totally makes sense and then and then just for my second question.
On this higher level of placement activity you saw in the quarter can you just give us a sense of how far out those placements are delivering and then a little bit of a follow up to an earlier question, but how should we think about lease rate factors on on deliveries that you are contracting a couple years out in the future.
Versus perhaps lease rate factors of what Youre seeing.
Now in terms of used aircraft that are putting onto secondly, and just how those compare versus pre COVID-19 you realize that it's a little bit of a multipart line, but thanks for the color.
Sure.
If I start with airplanes that.
Have come back to us over the course of the last 12 months day, just have to be move now.
And.
All of those areas, it's about half of the 60, where airplanes that have either come back are coming back in the very near future.
And those aircrafts being placed in this environment.
And in that example, as I said there is.
It's positive that the airlines want to see want to take additional natural which is great but by the same token given the pandemic is still with us and the vaccine rollout is still progressing there is a variable element to the lease rental which we based on utilization for the first 12 months.
And then after that it will flip into a fixed rate rental.
Which will be down a bit from where it was pre pandemic that's obvious as to the.
Airplanes that are coming off our order book and a couple of Years' time, that's a totally different market. That's one where you know you.
You don't have to do any business in your weight and Youll see how it goes.
Yes, thanks, so much for the time.
Sure.
And now we will hear from Andrew Logan Berg with HSBC.
Oh, hi that.
And then just quite curious to build on the previous question discussed you were speaking about the <unk>.
Aircraft that are being placed in the current market to their own power by the hour and then getting on to a fixed rate, but at a discount.
And what you can say, but I mean.
The aircraft that are transitioning from Norwegian to know us.
No its atlantica going around telling everyone that paying precisely half what Norwegian are paying.
I don't know what commentary you can answer to it.
The interest.
Let's see what you can say around that and then just the other bunch of aircrafts that I'm curious about is the three.
<unk>.
I think you had latam, which look to be keeping but now that no.
Given what lovely shiny play and say that they don't want them, but how is that impacting your economics or what they held onto them and then retaining them and how long he will lead me to a market.
Sure Yeah look on on them on the North Atlantic rates I can't comment on.
What they were what north Atlantic are saying about their their perception about Norwegian used to pay.
Just don't know.
But.
Again on that rental it will step up overtime, and then it'll be it'll be it'll be a reasonable it would be a reasonable deal for us, but very importantly from our standpoint that are very attractive aspect of the north transaction was one they are getting a lot of cash and net cash has come in and two we don't have transition costs associated with <unk>.
Configuring a wide body airplane for a new customer.
In relation to the <unk> hundred <unk>, Yes, you are correct in Latam are handing them back and yes, they will be leased.
A lower rate.
Today's market, but they will get leased these are attractive airplanes, and we have a quite a number of discussions ongoing around them.
But.
Of course as you heard earlier from Pes.
Our claim against on a time of stays.
It'll be based on any loss that we suffer.
From the reduced rentals like Latam would've paid us versus what we will get in the market for those aircraft so that should the.
The idea of that is to all SaaS.
The losses, we would incur.
Anthony Thanks, but is it fair to say.
<unk> market than the seven eight.
Tied to market or is that right.
No I would say that I think the 787.
As an aircraft Dosshouse interest.
Smaller airplane and so it has a very large user base and it's been an excellent aircraft engine.
Into service.
But the.
The <unk> hundred 50 is a slightly larger airplane.
But we'll deal with us.
Okay. Thank.
Thank you.
And ladies and gentlemen, this will conclude your question and answer session I will turn the call back over to Angus Kelly for any additional or closing remarks.
Well. Thank you all very much for joining us on this call and we.
We look forward to seeing many of you well actually both virtually by proxy at our AGM.
Thats coming up shortly but.
But I would like to hand, you back to Joe.
As you may have seen on Monday, we published our annual report on environmental social and governance aspects. Our ESG report, Joe maybe want when I say, a few words share. Thanks.
So just for those of you who are newer to the Aercap story, you know ESG is something that our board and senior management have been hugely involved in for a long period of time and what's always formed part of the strategy of the company. We've made concerted efforts in recent years to increase our transparency and reporting in the area. So with that in mind, we published a comprehensive 2021 ESG report.
During the week.
Like to just highlight a couple of key initiatives from that report.
First is that we doubled the level of carbon offsetting of our own operations and business travel to 40% in 2020, and we have to take that higher in the coming years to do this we partnered with first climate to invest in solar cell module that provide P&L electricity in China as well as the biodiversity project in Brazil, which helps prevent deforestation as well as providing sustained.
Income from local families and the second is that we increased our target for the most fuel efficient new technology aircrafts in our fleet to 75% by the end of 2024 and that includes the impact of the <unk> transaction and we see that as the best way for us to make an impact on the industry. So youll find more.
Of that reported on our website and feel free to reach out to me directly after the call. If you have any further follow ups. So with that operator, you can now close the call.
Thank you ladies and gentlemen, this will conclude your conference for today. Thank you for your participation and you may now disconnect.
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