Q2 2021 AerCap Holdings NV Earnings Call
[music].
Good day and welcome to the Aercap Holdings N V second quarter 2021 financial results.
<unk> conference is being recorded on a transcript will be available following the call on the company's website at.
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 on Hello, everyone welcome to our second quarter 2021 conference call.
With me today is our Chief Executive Officer Angus.
On our Chief Financial Officer, PD loss 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 may be forward looking statements forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied.
As Kelly 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.
Further information concerning issues that could materially affect performance can be found in aercap earnings release.
It's dated July 29.2021.
A copy of the earnings release and conference call presentation are available on our website at Aercap Dot Com. This call is open to the public on 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.
I'm at the end for Q&A as a reminder, I would ask that analysts limit themselves to 1 question and 1 follow on.
I will now turn the call over to Angus Kelly.
Good morning, everyone and thank you for joining us for our second quarter 2021 earnings call.
I am pleased to report strong quarter of earnings with 250.
$50 million of net income or $1.92 of earnings per share.
The positive headline for the quarter is that the airline industry is witnessing and on precedented and rapid recovery in air travel in many of the world's major markets.
For Aercap this.
This has led to increased demand for our aircraft and a significant.
An increase in our cash flow for the period.
Looking ahead, we expect further improvement for the remainder of the year.
With solid earnings a strong balance sheet and an improving leasing environment. We are excited about the opportunities that lie ahead for aercap.
When we look at the global leasing environment, we have become.
Coming increasingly optimistic with clear signs of a rebound in markets around the world.
There may of course be some setbacks along the way.
But there can be no doubt in the huge progress made in the past 6 months in particular to get the world Flying again.
The global vaccination program is clearly having a pause.
Significant packed reducing infection rates and serious illness.
This is giving many governments around the world the confidence to relax restrictions on daily life, including Air travel.
According to the CDC early evidence in the U S suggest that 99, 5% of the Covid related deaths in the loss.
Positive ex months, where amongst beyond vaccination.
This reflects the efficacy of the vaccine even against the highly contagious delta variance in protecting against serious illness caused by COVID-19.
On slide 4 you will see the clear link between the growth in air travel and the percentage of people.
Vaccinated.
In the U S Europe, and China, which together made up 67% of the world's commercial flights taken in 2019.
There has been a marked improvement.
TSA data from the U S chose passenger throughput is consistently around 2 million passage.
<unk> today.
Which is approximately 80% of 2019 levels.
China is flying over 13000 flights a day.
Which is more than 105% of the same period in 2019.
And in Europe.
Thanks.
<unk> 25000 daily flights in July which is around 70% of 2019 levels.
These numbers show the strength of the rebound as well as the fact, there is plenty of room for air travel to grow further.
Which will feed into stronger cash flows for our.
<unk> and for Aercap.
The EU digital Covid certificate is now accepted by all 27 EU countries of.
Of which 20 have already opened the borders to American citizens for non essential travel.
We hope in the near term debt this action by the European.
Europeans will be reciprocated by the U S administration.
This would be particularly meaningful for the trans Atlantic markets, which is 1 of the most important and profitable routes in the world.
So while the pace of vaccination of rollout varies by country.
It is clear from those countries that have made.
Significant progress that the recovery in air travel follows swiftly thereafter.
To that end Aercap has made a contribution of $100000 to support the equitable access and scale up of COVID-19, vaccinations in lower income countries.
For the Gabby Kovacs program.
For our industry will not be the same until everyone has the opportunity to be vaccinations.
Getting back to Aercap. We are also seeing this recovery expressing itself in our numbers, including higher cash collections increased leasing activity and fewer requests for assistance from our airline customers.
While there undoubtedly are parts of the world, which continue to face challenges in the second quarter Aercap saw a 30% reduction in trade receivables of.
A 10% reduction in the deferral of violence and our operating cash flow was up as a result.
So as the recovery continues to.
We too should benefit from of further uplift in our collections.
On the leasing activity front, we signed lease agreements for 51 aircraft in the quarter, including 13 wide body leases.
In addition to this we also executed agreements with Delta Airlines.
For the long term lease of 7 <unk> hundred 50 aircraft, which will help support delta's fleet modernization and efficiency targets.
This was a landmark deal and we look forward to further enhancing our relationship with Delta.
We also monetize of part of our claim from the time airlines for $186 million.
And we expect to receive several hundred million dollars more subject to core confirmation by year end.
Turning to the <unk> transaction, we continue to make progress on the various integration work streams to ensure we are ready to hit the ground running from day 1.
We have already received approval.
Approvals in a number of important jurisdictions, so far including the United States on Europe.
This is in line with our expectations and we continue to expect of fourth quarter closing.
We have followed <unk> closely as our largest peer for many years.
When we were completing our due diligence for the transaction we very much.
Liked what we saw then.
Now as the recovery takes hold much faster than was anticipated in our underwriting case, we are even more enthusiastic about this transaction.
I truly believe that our combined company will be able to offer a best in class service to our customers and emerge from the pandemic.
<unk> stronger than ever.
So as we look forward.
The global vaccine rollout is proving effective.
More and more countries are opening up to air travel and the demand for aircraft leasing is growing stronger.
These factors are all contributing to a stronger financial performance of Aercap.
I am.
I'm so proud of what our people on our company has achieved over the course of the last 18 months.
We have successfully navigated our way through the toughest stress test imaginable and have emerged with a strong balance sheet lower leverage and an exciting transaction that will provide benefits to aercap for many years to come where.
We're truly excited about what lies ahead with that I will hand, the call over to Pete for a review of our financial performance. Thank you.
Thanks, Scott Good morning, everyone. Our total revenues for the second quarter for $1.232 million compared to $1 billion $197 million for the second quarter.
Of 2020.
Basic lease rents for lower in the second quarter, primarily due to airline restructurings and aircraft transitions. This includes the impact of cash accounting, which was $54 million for the quarter.
We saw a significant improvement in our cash flows in the second quarter, our cash flow from operations.
<unk> was $771 million, an increase from $400 million in the first quarter.
As of June 30 of our deferral balance was $463 million a decrease of 10% from $514 million as of March 31.
Our accounts receivable balance was $150 million.
A decrease of 30% from $215 million as of March 31.
Our maintenance rents for $131 million in the second quarter, which was down from $224 million in the prior year period.
Maintenance rents were particularly high in the second quarter of 2020 due to a net higher number of lease.
Termination.
In the second quarter, we sold 12 of our owned aircraft for a total of $139 million. The average age of the aircraft. We sold was 19 years old and our net gain on sales for the quarter was $22 million, an increase from $10 million in the second quarter of 2020.
As I mentioned on our first quarter earnings call. We've agreed to sell our unsecured claims related to Latam Airlines and we received the first portion of those proceeds in early July and recognize them in the second quarter.
Since these proceeds were received after the quarter end. They are not included in the 771 million.
Of operating cash flow for the quarter.
We also received some proceeds from other unsecured claims in the second quarter. So in total we recognized $193 million and other income relating to unsecured claims which was the driver for the increase in other income this quarter we.
We expect to receive per.
Proceeds from our <unk>.
Other of the 10 claims during the remainder of this year. Once those claims are approved by the bankruptcy court and we expect those remaining proceeds to be several hundred million dollars.
Turning now to expenses, our total expenses were $943 million for the quarter, a slight increase from $927 million for the second quarter.
2020.
Our depreciation and amortization expenses were 392 million of decreased from $412 million last year, primarily due to a decrease in average lease assets.
Asset impairments for $57 million in the second quarter of decrease from $73 million last year.
Asset.
This quarter related to lease terminations and asset sales and were more than offset by maintenance releases for those aircraft.
Our interest expense was $293 million for the quarter down from $312 million last year and that decrease was primarily due to a lower debt balance this quarter.
Our maintenance rights expense.
Order of towards only $2 million for the quarter down from $12 million last year, primarily due to lower maintenance activity and the decrease from the balance of the maintenance rights asset.
Other leasing expenses were $57 million for the second quarter of decrease from $66 million in 2020, and that was mainly due to lower credit provisions.
<unk> and lower lesser contributions are top of expenses during the quarter.
SG&A expenses were $73 million, an increase from $53 million last year and the increase was primarily due to the timing of compensation related expenses.
We also recognize expenses related to the <unk> transaction of 69.
<unk>.
Which was mainly the bridge financing fees.
So putting all of that together in the second quarter Aercap generated net income of $250 million for $1.92 per share.
As I mentioned that includes costs related to the GE cash transaction of $69 million pretax of 60 million.
After tax excluding those costs net income for the second quarter was $310 million or $2.39 per share.
Okay.
We continue to maintain a very strong liquidity position as of June 30 of our total sources of liquidity were $9.7 billion, resulting in a next 12.
9 million horses to uses ratio of 1.7 times that remains well above our current target of 1.5 times, our excess coverage continued to remain high at $4.2 billion.
Our balance sheet continues to be strong with a leverage ratio that is currently 2.4 to 1 that represents.
Months of record low for Aercap, and it's well below our target ratio of 2.701.
Our secured debt percentage continues to remain low at 24 percentage of total assets and we currently have over $26 billion worth of unencumbered assets.
Our average cost of debt excluding debt issuance cost continues to remain low at 3.
3.8% for the second quarter.
So in summary, this quarter our results continued to improve our leasing activity has picked up our operating cash flow is up and our deferrals and accounts receivable balances are down.
And as we look at where we stand overall, it's useful to compare of what has happened.
Presents our balance sheet versus the balance sheets of the airlines.
To get through the pandemic airlines had to raise significant amounts of debt and in many cases, they need to raise equity as well in order to raise those funds of encumbered almost every asset available on their balance sheets and they raise debt at high cost most of their ratings.
Were downgraded and.
In contrast, aircrafts balance sheet has remained strong throughout the pandemic our leverage ratio was 2.6 to 1 in December 2019, it's 2.4 to 1 today are.
For our secured debt to total assets of virtually the same as it was prior to Covid our liquidity is higher.
Our they'll have over $26 billion worth of unencumbered assets.
That's why we believe that the strong position that we had coming into COVID-19 as well as the decisive actions we've taken since the beginning of the pandemic leave us well positioned to take advantage of the air travel recovery that is currently gathering speed and with that operator.
And we still can open up the call for Q&A.
Thank you.
I'd like to ask a question. Please signal by pressing star 1 on your telephone keypad.
If you are using a speaker phone. Please make sure you're on mute function is turned off.
Again press Star 1.
<unk> you for your question well pause for just a moment to allow everyone an opportunity for cigna.
We will take all of our first question from Helane Becker of Cowen. Please go ahead. Your line is open.
Thanks, very much operator, hi, everybody I hope.
Everybody is.
So I don't know who had on answering this question may be you on <unk>.
I could answer it.
Trying to get a sense, if you think that Chinese airlines.
I don't know of stockpiling is the right word, but if they are acquiring a lot of lease aircraft to cover.
Doing well.
Domestic demand because they don't plan on having Max's flying anytime soon.
Well Helane the first thing about the Chinese market you can see on the slide.
Is the rapid rebound we've seen there.
And you can see that of the 3 major markets in the world.
World. It's the 1 that has surpassed 2019 traffic levels.
So all of our customers in China are doing well.
And I would say about the Chinese carriers. They are not stockpiling airplanes. They are taking all of the airplanes. They can satisfy the demand that they see in front of them there and the Chinese carriers don't have huge.
Huge order books of aircrafts, they have not ordered Boeing airplanes in several years and indeed, the last time they paid they ordered Airbus aircraft has been a couple of years ago. So what that actually means Helane is that day, we'll need to take airplanes from the leasing market. As we go forward that can be used airplanes. We have put the first just signed deals for the first.
Used aircraft to go into China, which is an innovative thing for.
For anyone to have done and as the leader and Thats, what we do will be the first to do these things and then on the.
The forward order aircraft, we are continuing and we are seeing now demand from the Chinese customers for effort for aircraft off of the order book and we expect that to continue.
Market continues to grow.
Gotcha and those are are those wide bodies are narrow bodies that you are signing or both.
At the moment its predominant of new technology narrow bodies aercap for wide body and new technology assets. Our first 1 isn't debatable until 2024.
Okay.
Every single day.
That's that's awesome. Thank you and then actually thank you for that answer and then my other question is on EV Tal.
How are you thinking about those assets, especially in light of the <unk> acquisition, where youre going to get a bunch of Hello.
Sure.
Or sort of VTOL spent not necessarily new technology E. VITAS is is this a business that you would be thinking about getting involved in.
At the moment of lane, our focus is on the <unk> transaction.
Yes, as I said in my comments.
We look.
A couple of as the analysis, we did of that of GE cash in December of 2020 January of 2021, we are in a very different environment. The vaccine hadn't even started to be rolled out really anywhere in the world.
And our expectation of a recovery on a global basis, what's very different about.
Looked expired if we look at the level of vaccine deployment.
In the advanced economies of the world on the resulting increase in air travel.
We like the transaction a lot than where we like it a lot more now to be honest you referenced for the helicopters it'll be a long long long time before any of <unk>.
It is trying to go out and do search and rescue for humans.
Fast at the moment, it's coffees that are being delivered on local drones and.
Prescriptions.
Okay.
Okay, that's really fair enough. Thank you very much for.
For your health and your answers of a nice day pleasure.
Pleasure measure.
Thank you we will take our next question from Jamie Baker of Jpmorgan. Please go ahead.
Hey, good afternoon.
So.
Given the <unk>.
Progress that youre, making on the regulatory front.
Mark and I are sitting here wondering what the.
And gating items might be before you're comfortable pulling the trigger.
On the debt raise in order to stay on track for a fourth quarter closing of any thoughts on that.
Yeah.
Jamie I think we're looking at <unk> am.
A fourth quarter close still.
We've made.
There remains tremendous progress in this quarter, we had the shareholder vote from Aercap.
We had the Doj approval, we've had the European Union approval and we're on track and we're monitoring all the time as to whether or not it's appropriate to look to the debt financing, but you want to get through the regulatory all of the regulatory approvals.
Okay that helps and then just given the recovery of that we'd seen in the ABS market.
Improved I guess viscosity for lack of a better return on the aircraft market.
Base case.
Thinking about the pace of asset sales post closing has that changed at all.
First of all earlier this week Avalon stated that they were of the.
The mindset that many.
Values have bottomed and just looking for some color on that if you were great.
I certainly would Jamie I think in our underwriting case again.
If I recall back to when we were acquiring the economics.
The transaction you know around Christmas of last year.
You had a very different outlook of the pace of recovery as you see there was no vaccine deployed at that point in time line and our view on asset sales was that it would be a longer road before we would be able to sell significant amounts.
<unk> of of assets and the market would recover clearly that is not the case the market is recovering we see the bids coming in for assets and so I would be confident that we will continue to delever the balance sheet ahead of.
Our original base case as well.
Okay. That's helpful guys.
Thank you very much for everybody.
Pleasure.
Thank you if you feel like your question has been an ask Pete you can remove yourself from the queue by pressing star 2.
Our next question will come from Ross Harvey from Davy. Please go ahead.
Amounts of of hydroxide.
I just wanted to ask about the unsecured claims.
On firstly cost if I hear you correctly around.
On the Honduras.
Hundreds of millions of potential further benefits from later this year you might clarify us on.
Also can you just cover whether there are other customers.
Perhaps on the farm during Covid within on you expect to let of claims that they haven't got around to just yes.
What type of.
Yeah.
What type of sectors might commodity for us quicker channel on the future.
Okay.
Well to answer your question first of all we have received of $186 million in cash.
From the other time claim that was received on the <unk> of July So as Pete noted that is not included in that improved operating cash flow of number of our 700 million plus for Q2.
The remainder of the claim it is agreed with the counterparty of what they will pay on.
And we would expect.
That subject to court approval we.
We would expect to receive several $100 million during the course of this year.
Other claims beyond that are not at that level of materiality Ross.
A lot of time frame, given our exposure to us on the.
The size, we had mentioned it was an outsized claim on the recovery of the early.
Itself in its operating performance of driven that.
That's great thanks for that kindly.
I'm just looking at the odds of Brooklyn, It looks as though.
Increased by about 10 aircraft if that just luck of the Q1 order book of <unk> purchases. During Q2 is there anything behind that of mine during the maths wrong or was there a.
Sale lease back maybe on there.
There was a sale lease back in there that we transacted on some of the Max airplanes, which we're very happy about it we started taking delivery of Max is during the quarter. It's received an extremely positive response from our customer base and we're quite confident about the Max going forward. So that's where the increase in those.
Airline them from.
Great. Thanks, I think of as much for questions. Thank you.
We will take our next question from Kasey O'brien from Goldman Sachs. Please go ahead. Your line is open.
Hey, good morning, everyone. Thanks, so much for the time.
Units go Lee just kind of coming back to this cash from ops is significantly better than last quarter and I think the highest it has been since the start of the pandemic do you expect this to trend higher going forward just given the positive trends youre seeing on collections of deferral requests or are there any other puts and take for you should think about thanks.
Yeah.
Located so it was.
For sure of it was a significant improvement from the first quarter.
We're seeing cash collections run into very high rates of over 100% for the second quarter. So that was a big positive.
And as the recovery continues we expect to see that trend continue so I do expect the.
Both the collection rates and.
Overall amounts of cash to come up going forward.
So yes, I mean, I think that I think that we're going to see is <unk>.
Over the course of the year as we deliver the new of the aircraft that we have transitioned their currently in transition we will start to see revenues pick up and we will start to see cash collections, increasing as the year progresses.
That's great and then.
With credit markets pretty open open for aviation paper as Jimmy noted earlier EPS market back open sounds like bank debt is making a come back have you seen a resurgence of some of the tourist capital of that seem to be declining pre pandemic or kind of status quo, just love to get some high level thoughts.
Thanks.
I certainly think theres more educated.
Tourist in town now to keep using my turn from the past.
I think that.
Those people who knew what they were doing pre pandemic have understood the resilience of the value.
<unk> of an aircraft assets.
And on a relative risk reward basis to what else is available in the world today.
See that it is a good store of value and does provide a fair risk return profile for an investor.
And I think those staffs.
Of the capacity to manage assets.
Or have a manager all of those assets that is of tier 1 player in the industry.
Harvests that return and so I would say Casey like a lot of things in life there was M.
Some exuberance pre pandemic and the loss of into probably the 18.
For months prior to that but I think those SaaS.
Investing in our platform or a manager were.
Our sophisticated and are back and we think it will be a robust sales market for aercap as we get into 2022.
That's great.
Maybe just sneak 1 more quick modeling, 1 cash accounting impact with $54 million of quarter down from $100 million of first quarter at what point do you think that's kind of flip to.
On a net positive to revenue.
As you get some of that out of more back.
25, so so the cash coming impact was down in the quarter.
And we're going to see cash accounting continue as I've mentioned before during the course of this year of I do expect it to come down this quarter was a little further down just due to some 1 time items then we then.
So it would have normally been a.
A little higher than that $54 million, but the trend will continue and then what happens when the aircraft. We are of placing these aircraft in many cases with new airlines and so there is some transition period for those aircraft and so once as I was saying once those aircrafts get to those new lessees. When they are delivered then you then you have the revenue pick up we start to earn revenue on.
On them again, and so that's why I say, we will see a couple of quarters, where our revenues are lower as we saw this quarter.
As the year progresses that will continue and that's really how that cash accounting in that will flip in in terms of increased revenues.
Great. Thank you.
We will take our next question from back to for ease of Barclays. Please go ahead.
Yes, I think.
Sure.
Proceeds.
Okay.
Your line.
We lever of SaaS for the plan in front of us.
The speed test deal.
Should we assume that youre not going to have to issue.
It does.
On a plan operator Procures me sorry, operator, you might just go to the next question will give mark an opportunity towards the end of just it seems like his line is a bit of muscle at the moment. So we might just move on to the next question then will put mark back in the queue again.
We will take our next.
And for most Orenbuch of credit Suisse. Please go ahead.
Great. Thanks.
Given that.
You've had greater aircraft sales and other lessors of reporting that could you talk about the environment as you see it in the expectations that you had with respect to.
On the G cash deal back in March and where they stand today and sort of how you think about anything.
When you think about the outlook for that.
Sure Moshe.
As we look forward as I said.
We think that those participants who are in the markets are now and have been in the market prior to that.
The pandemic understand how resilient and aircraft as it is the right aircraft assets well managed and we'd.
We'd be quite confident on the recovery continues to gather pace of therapy.
There will be a strong bid for aircraft assets.
We come out of the far side of the G cash transaction.
Yeah.
Good that's.
Good to hear also.
I guess, a little bit confusing your cash flow is obviously significantly improved when you talked about some opportunities in other cash that's going to be collected.
Yeah.
I mean, I assume obviously cash is cash, but when you think about.
In the quarter, you talked about our expectation of $2.6 billion I think it's a couple of hundred million higher than it was in the first quarter, but at the same time.
You had just mentioned or Peter just mentioned that you are expecting some significant collections in Q3.
You know from or already received collections in Q3.
3 from Latam.
I guess as we're looking at your cash flow can you talk a little bit about how.
You know how the debt those recoveries will impact that over the next couple of quarters.
Sure Moshe.
So I would view the 2.6 I'd say in general we.
Tend to be pretty conservative about these numbers as you've probably seen so without incorporates is that that includes that.
On the 186 million that I mentioned that came in on July 3rd right. So that's in that 2.6 but beyond that we haven't included anything else for any other Latam recoveries.
Or any other airline recoveries for that matter of frankly.
I I would be I'd be very surprised if we didnt come in above that number but.
But you know we've put it out there as I said, we've historically been conservative and protecting this we're doing this in order to look at our liquidity and make sure we have enough to cover.
<unk> of the debt maturities that are coming up on the capex that come up so that's not something that we want to mess around with and that's that's how we look at it.
Okay got it thanks, so much.
We will take our next question from Vincent kinetic of Stephens. Please go ahead.
Hey, Thank you for.
Taking my question for.
First question on portfolio lease rate expectations I was just wondering if you could talk about.
Sort of if you could help us how should we expect the portfolio rate going forward I know you have improved activity.
Cash collections are coming down so that's that's great and you've got some of the new leases.
I think you've also had restructuring.
Some leases, where maybe there's some variable aspect to it but maybe if you could help us.
And out of forecast the portfolio lease rate going for it.
Sure.
Just to clarify there are cash collections have been going up not.
And then.
In terms of the portfolio lease rate is.
It's really driven by the same things that I was talking about before so I mean, it's predominantly it's those are basic lease rents are that are coming through and as those aircraft that are currently transitioning go back on lease or is.
Towns that are currently in cash accounting they start to return to regular regular service a regular accrual accounting that's when you'll see those numbers picking up so it's really that's what will drive it more so than the cash collections number.
And I do expect that that will go up as I said during the course of the year.
Great and I apologize for that and so those aircrafts returning I guess.
Back to service or back on lease.
Is there sort of like Oh.
On timeframe or where you can see like a chunk of these aircrafts coming back and generating rents.
Really over the next over the next couple of quarters.
The aircraft, that's what I would really look at it I mean, that's from the bulk of it will happen, it's spread out, but but most of it over the next 6 to 7 months or so.
Okay, great. Thank you and the second question So and this is on capital management of it.
Particularly share buybacks. So I know we of the pending GE acquisition, but.
<unk> on your Leverages is the lowest than 2.4 times, you've got good gains on sale of of aircrafts.
These unsecured.
Claims that are in the hundreds of millions and cash collections are improving and more cash flow coming in so and then finally your book value of 75, while the stocks trading at 52.
So.
Just wondering what your thoughts are there or are you going to maybe continue.
Continue to pause until the <unk> acquisition is complete or maybe any thoughts of taking advantage of the lower share price. Thank you.
Well today, the focus is all about getting the <unk> acquisition done.
We want to get the business back on the upward.
Factory as you May recall, just prior to the pandemic, we were on the verge of upgrades from Moody's who at the time and we held on to the investment grade rating throughout the pandemic and we want to put ourselves back there, where we moved the racing operating an upward trajectory that would be job number 1 and debt from that point for.
<unk> seen us as very prudent managers and stewards of the capital and wheel there.
Take the right decisions as we get to the far side.
Yes.
Understood. Thank you very much.
As a reminder, if you wish to ask of telephone question. Please signal by pressing star.
Star 1 on your keypad.
We'll take our next question from Ron Epstein from Bank of America. Please go ahead.
Okay.
Hey, Yeah. Good morning, good afternoon.
What impact are you seeing from 787.
It's our understanding of it.
Yeah.
You might not see.
Many of our many aircrafts delivered until very late in the year or maybe early next year, how are your customers reacting to it.
And from your point of view do you have on your walkway rights can you renegotiate price.
It's just.
That program seems to be the.
In some ways of gift.
Turning to me.
[laughter].
Well Ron.
You know the 787 has been the most popular wide body ever introduced and so we have tremendous confidence in the aircraft.
Note, though the delivery process of Boeing is not going well at the.
The moment of NSA announced yesterday.
They only expected labor I think it was less than half of the inventory. They currently have.
At the moment from our perspective, we don't have any 780 sevens to place until 2024, we do have aircrafts delivering of course that are that are leased and are being built and we're working with our customer.
<unk> on with Boeing.
For the right outcome.
I do think that in general on the wide body market.
What we'd like to see of course is a return to them.
Normal traffic on the North Atlantic Route because that's the biggest wide body market in the world and debt would be of help for the 787 no doubt.
As.
Some of the Europeans have opened up 2 non essential travel to the Americans.
And we would be hopeful that in the near term the U.
U S administration will reciprocate.
It will have a huge benefit to American industry to do it on it'll improve the demand for the aircraft as well.
At the moment in fairness as you saw on our chart the European Union as a whole has the same level of vaccination of the United States, but the North Atlantic market is based on Western Europe and in most of those countries. The vaccination rate is substantially materially ahead of what's in the United States. So I.
I do think that in relation to your 787 program, we can get those markets up and running I think it'll be a big boost for the U S aerospace industry as a whole.
And then what are you expecting to take delivery of the 7 day. Its now do you of any idea.
Well it'll be customer by customer.
And Youre working with Boeing on the customer on a case by case basis, and we can't go into for comps geology reaches the specifics of that.
Got it got it and then maybe just following up on 1 of lines of questions.
What are you guys thinking broadly about.
Urban Air mobility.
It all is there a business there for a lessor.
Ken those aircrafts be leased even I mean, how how would wouldn't even think about residual values. I know this is a giant question, but maybe just in and of snippet of it is there anything interesting to do there for a lessor.
I do think in time, there is a market there.
Question as you hit the nail on the head there on it.
Pick up LLC.
For once an asset that can be transitioned amongst customers around the globe.
If if on.
That is uniquely configured for a specific mission.
On to reconfigure of low value assets.
Looking at who wish to in other parts of the globe, maybe from Canada to.
Jakarta, that's what you need to be able to do for of lessors product to work on but.
But I do think that the electric powered vehicles are coming I think that's a given.
On the timeframe on to what the missions will be and as to.
And manav and they can be commercially sized for aircraft that can carry humans, that's another matter altogether.
Got it alright, thank you.
Our next question will come from Andrew Knippenberg of HSBC. Please go ahead.
Oh, hi, there.
I'm really intrigued to ask you about the sort of compare and contrast between your efforts to re market. The 7 day to North Atlantic and net 2015 is going to Delta and I know you obviously constrained on what you can say about other individual client contract.
On track, but the comp the current.
Trust in that nature of debt components is quite dramatic.
How do you think it'll what debt.
2 very high value transactions for you on that so I'm just interested to understand that the relative of attractions on the relative economics of of all of those for me.
What for you, obviously accepting you'll be completely constrained and then my other question after that would be just to see.
I mean since the biggest area of pain within the industry now of South East Asia, and I played on thinking about too much exposure to it but how daunting is it's the development.
He aviation industry and in southeast Asia on the restructurings, which might be.
Yes.
First of all to lead perhaps than the 1 thing of Latin America, they've had exposure to.
Sure Let me start with the last question, Andrew Eric comps exposure to Southeast Asia, It's 5% of our book.
If.
We haven't been a big player there.
We didn't really get involved and the airlines that we're placing mass of speculative orders and building the business on sale leasebacks.
As you know we didn't do a sale lease back prior to the pandemic I think it was 2013 on.
So we werent really and that's where a lot of the sale leaseback market was now as it relates to the 2 wide body planes.
<unk> that you were referring to as I said in the earlier question of the key for a lessor in the portfolio is assets that of global applicability and global demand and that's where you need to have the best in class assets and the 787 is without doubt.
The best in class small or midsize widebody out their NDA.
2.900 is the most popular of the larger wide body aircraft. So we're going to get demand for them of key variable in these transitions is transition expense.
When we look at north of Atlanta guests, it's not Delta airlines, but by the same token.
1 it raised significant capital to.
3 feet of much slimmed down business model than what Norwegian was doing on the North Atlantic and very importantly for US there was little to no transition cost involved in that transaction.
And of course look Delta speaks for itself.
We're very happy to get those aircraft away. It also shows the advantages of scale in that scenario.
Mario where you have of large package of airplanes that can help on airline actually materially impact their fleet rather than ones and twos.
Yeah.
Yeah fair enough alright. Thanks.
Thank you.
This will conclude today's question.
It is an answer session.
I would like to hand, the conference back to Mr. Kelly for any additional or closing remarks.
Thank you operator, thank you all for joining us today for the earnings call.
We look forward to seeing you all in person in the near future.
Certainly on I've seen quite a number.
And then I'll be at the Deutsche Bank Conference on in September with channel I'll be out in person as well and I think the sooner we can all see each other in person in the bedroom. So thank you very much indeed.
Okay.
This will conclude today's conference call. Thank you all for your participation you may now disconnect.
Okay.