Q3 2024 Willis Lease Finance Corp Earnings Call
Good day and welcome to the Willis lease Finance Corporation third quarter, 'twenty 'twenty four earnings call.
Today's conference is being recorded.
Speaker Change: We would like to remind you that during this conference call management will be making forward looking statements, including statements regarding our expectations related to financial guidance outlook for the company and our expected investment and growth initiatives.
Speaker Change: Please note these forward looking statements.
Based on current expectations and assumptions.
Which are subject to risks and uncertainties.
These statements reflect W. L F fees.
Speaker Change: Only as of today.
Speaker Change: You should not be relied upon as representative of views as of any subsequent date.
Speaker Change: And W. E. L. F. C undertakes no obligation to revise or publicly release the results of any revision to these forward looking statements in light of new information or future events.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
For further discussion of the material risks and other important factors that could affect W. E. L. F. These financial results. Please refer to as filings with the S E T whole, including without limitation.
Speaker Change: F L fees, most recent quarterly report on Form 10-Q.
The annual report on Form 10-K.
Speaker Change: And other periodic reports, which are available on the Investor Relations section of W. E. L F fees website.
At.
<unk> H T T P S colon for it slash four it slashed.
W. W. W Dot.
W. L F C dot global for it slash Investor Dash relations.
Speaker Change: At this time I would like to turn the conference over to Austin Willis Chief Executive Officer. Please go ahead.
Thank you.
Austin Willis: With me today is Scott Flaherty, our CFO and Brian Hall, our president.
Austin Willis: Firstly I'd like to thank our employees for delivering another strong quarter and in particular I'd like to recognize our legal department.
The finance Department and those others, who have been involved in our capital markets transactions over the past two years from completing our H E B.
Austin Willis: Last year, two establishing what we understand to be the industry's first ever engine warehouse in closing the first engine gelco.
And more recently, expanding our revolver to $1 billion and extending and expanding the company's preferred stock with an increased investment from the development bank of Japan.
I would also like to announce our second quarterly dividend of 25 per share to be paid on November 21st 2024 to holders as of November 12 2024.
Austin Willis: Our core leasing business is performing extremely well and continues to show improvement relative to prior quarters.
Our Q3 pre tax earnings or EBIT of approximately 35 million is our second highest on record.
Represents our highest when you adjust for long term maintenance reserves, which tend to run lower when lessees op to extend leases rather than return engines.
Demand for engines remains robust little has changed from the second quarter and the supply chain issues continue to affect the Oems <unk> ability to produce new assets and parts.
And the MRO continue to struggle to repair engines in a timely manner.
This continues to bode well for our utilization and rates.
Austin Willis: The Boeing strike is exacerbating this problem and is resulting in more of our customers seeking to extend the lives of their current generation narrow body aircraft.
Speaker Change: We have seen specific examples recently, where airlines had rfps in the market to sell their fleets of aircraft over the next 12 months, but have recently retracted those rfps as they don't have a clear picture of when they can expect their new aircraft to deliver.
Speaker Change: Generally airlines, we will plan to retire a fleet when they have used the green time or serviceable life of an engine and when the airframes require major checks.
Speaker Change: By extending the lives of their fleets. Many airlines are faced with the prospect of making major investments in their aircraft. They may not fully realize the value of it.
Speaker Change: Our programs like constant thrust where are we in source. The airlines engine maintenance enabled the airlines to only pay for the incremental hours and cycles that they consume on their engines rather than paying for full overhauls.
Speaker Change: We have seen an increase in airlines requesting this service in recent months.
Speaker Change: We are exceptionally well placed to fulfill these program requirements due to our size diversity of engine assets and in house materials and maintenance capabilities.
Speaker Change: Well some airlines have looked to reduce capacity in recent months, we have not seen a reduction in demand.
And in fact, our average lease rental factor has increased over the prior quarter.
Speaker Change: Well, we feel that some engine lease rates may be stabilizing at a higher level. There is still significant upside for more presenting portfolio.
Speaker Change: Our ability to reprice the lease is a distinguishing factor relative to the aircraft lessors given the proportion of our portfolio on short term leases.
Speaker Change: Growth has been a focal point for us as we are seeing opportunities to acquire assets that are resulting in attractive returns.
Speaker Change: During the third quarter, we purchased 27 engines and for airframes and sold 13 engines.
Speaker Change: Resulting in net portfolio growth of $182 million.
Speaker Change: Our ability to grow in this environment is the direct result of our flywheel business model, where our different businesses create value and opportunity.
For example, we purchased a number of turboprops that will be added to our pool of engines used to support constant thrust programs, we have with an ATR operator.
We provided a debt like product to a customer where the underlying collateral is V 2500, and GTS engines, because we're exceptionally comfortable with the asset types.
Speaker Change: And we speculatively purchased a number of new generation engines, both from the OEM as well as on the open market.
Speaker Change: The ability to pursue multiple asset strategies as well as offering a services enhanced leasing products enables us to grow in a variety of market conditions.
Speaker Change: I mentioned, our recent completion and upsizing of our preferred stock and revolving credit facility.
Speaker Change: When combined with our warehouse facility. These financings evidenced our exceptional ability to access diverse capital at attractive rates.
Speaker Change: We intend to deploy this capital over time as we grow our equity in order to properly manage our leverage in accordance with our long term goals.
Speaker Change: We see many opportunities to grow and believe our platform and financial structure will help support that growth, earning us a premium return.
Speaker Change: Thank you and I'll hand, it off to Scott <unk> our CFO.
Scott Flaherty: Thank you Austin and good morning, all as you can see from this morning's earnings release. The company produced strong earnings as evidenced by both the $34 5 million of third quarter earnings before tax or EBT and $122 3 million of year to date EBT.
<unk>, which exceeds full year performance in any prior year of our company's history. This performance was up $14 1 million or 69%.
Parable quarter of 2023, and up $76 1 million or 165% on a comparable year to date basis.
Walking through the P&L revenue for the quarter were $146 2 billion significant revenue drivers worth core leasing revenues inclusive of lease rent revenues and interest revenues on notes receivables and sales type leases were $68 3 billion. Another all time high reflecting the increased.
Speaker Change: Total portfolio size of nearly $2 7 billion at quarter end as the company purchased equipment totaling $229 8 million in the quarter only slightly offset by $47 9 million of equipment sales.
Maintenance reserve revenues for the quarter were $49 8 million up $12 1 million or 32% from the comparable quarter. In 2020 312 million of these revenues were long term maintenance reserve revenues associated with engine coming off lease and the associated release of.
Speaker Change: Any maintenance reserve liabilities and $48 5 million of these revenues were short term maintenance revenues, which are highly correlated to the amount of time our portfolio is flying as we get paid hourly and cyclic rate on our lease assets. These short term maintenance revenues were up $14 2 million or <unk>.
41% when compared to the comparable period in 2023.
Speaker Change: Their parts and equipment sales of $10 9 million in the quarter were up $7 $5 million or 223, 4% from the comparable quarter in 2023 and produced 18, 4% gross margin.
Speaker Change: The increase in spare part sales reflects the demand for surplus materials that we are seeing as operators extend the lives of their current generation fleets. We have also benefited from some strategic surplus material purchases made in the first quarter of the year as well as our vertically integrated platform, allowing us to provide this value to our customer.
Speaker Change: As well as our own portfolio.
Speaker Change: Gain on sale of our portfolio assets, our net revenue metric was $9 5 million in the quarter as mentioned above associated with $47 9 million of gross sales and compares to zero point $8 billion of gain on sale in the comparable period in 2023, which was associated with $4 7 million.
Speaker Change: Gross sales during the quarter the company sold 13 engines and other parts and equipment to various trading partners maintenance services, which represents fleet management engineering aircraft storage repair services and revenues related to management of fixed based operators services was $5 9 million slightly down.
Speaker Change: From a $6 2 million in the comparable period of 2023 reported revenues reflect only our sales to third parties and not our intercompany sales, which support our fleet at all material to those businesses are maintenance capability allows us to be more efficient in our leasing operations as well as more relevant to our customers.
Speaker Change: But being able to offer a broader bundled product solution, which provides other business opportunities for our core leasing business on.
Speaker Change: On the expense side of the equation cost of spare parts and equipment sales was $8 9 million up $6 8 million or 337, 9%, which was influenced by the large increase in third party sales from the comparable period of 2023.
Speaker Change: Depreciation slightly at two 4%.
Speaker Change: Terrible quarter, and 23 to $23 7 million reflective of the growth in the portfolio.
Speaker Change: Technical expense.
Speaker Change: $5 2 million was down $3 5 million for the comparable period as well as generally has had had less unplanned non capitalized maintenance visits G&A was 40 million up $13 4 million for the comparable period in 2023, the cost increases include $7 $8 million.
Speaker Change: Costs related to share based compensation.
Speaker Change: Which was influenced by the appreciation in the price of the company's public equity Securities 3 million related to a special bonus paid to our executive chairman at the direction of the compensation Committee for the company's performance and $2 5 million of incentive compensation, which is derivatives to the performance of the company net.
Speaker Change: Finance costs were $27 8 million for the quarter compared to $19 1 million in Q3 2023, the $8 8 million increase in costs related to an increase in average indebtedness in the respective quarters by $161 million increase in financing cost as the weightings of borrowings.
Speaker Change: Did across finance vehicles, and $3 3 million reduction in derivative related to receipts of certain hedge positions that the company had matured the weighted average cost of debt inclusive of our interest rate hedge positions.
Speaker Change: 4.04% at 932023 compared to 513% at 932024.
Speaker Change: As mentioned earlier EBIT was $34 5 million for the quarter and the company produced $23 1 million of net income attributable to common shareholders factoring GAAP taxes low cost of our preferred equity diluted weighted average income per share was $3 37 up 58, 2%.
Speaker Change: <unk> from the comparable period in 2023.
Speaker Change: Cash flow from operations through the third quarter of the year was up 28, 1%.
Speaker Change: $216 4 million and driven by growth in pre tax earnings as the business enjoys significant tax depreciation shield strong cash flows associated with our sales type leases.
Speaker Change: Solid collections relative to the prior comparable period, partly offset by growth in spare parts inventory as the company Opportunistically purchased an attractive portfolio of engine parts early in the year.
Speaker Change: In September the company refinanced and expanded its $50 million preferred stock position held by the development bank of Japan into a $65 million preferred stock position, the new preferred position will accrue quarterly dividends at a rate of 835% per annum. The incremental capital raise will be utilized to further support the grow.
The business just last week on October 31, the company refinanced and expanded its $500 million revolving credit facility into a new $1 billion size facility with a five year term and a $250 million accordion feature.
Speaker Change: Facility alongside the $500 million warehouse facility, we put in place in May of this year will provide capital support the continued growth of the company.
Speaker Change: Historically, we have looked to diversified capital sources to support the growth of our business as we continue to see opportunity for growth, we do not foresee any changes to the strategy.
Speaker Change: With our Q3 earnings release. This morning, we announced a 25 cent per share regular quarterly dividend our second.
Speaker Change: This will be payable on November 21 to record holders November 12. The company has brought balance sheet leverage defined as total debt obligations to equity inclusive of preferred stock to 343 times at Q3 2024 compared to $3 seven one times in the comparable period of 2023.
Speaker Change: When factoring debts.
Speaker Change: Net of cash and restricted cash leverages that three to five times, we have been successful and continuing to reduce our leverage levels. While also growing our lease portfolio by a net $460 million or 17, 3% on a year to date basis.
Speaker Change: At times, we maintain higher levels of restricted cash as we recycle ABS asset.
Speaker Change: All proceeds which are held as restricted cash to purchase new assets. This allows the company to benefit from attractive fixed rate debt pricing and therefore, a lower cost of capital with that I will now open up the call to questions operator.
Speaker Change: Thank you and if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: <unk> pumped on the phone line will indicate that your line is open. So please state your name and your company name before posing your question.
Speaker Change: Again, you can post all wanted to ask a question and we'll pause for just a brief moment to allow everyone an opportunity to signal for questions.
Speaker Change: Yeah, Hi, this is Frank Galanti, calling from Stifel. I. Appreciate you guys taking my questions.
Speaker Change: I wanted to ask about asset values and lease rates, particularly for the narrow body engine. The older ones. The CFM 56, it'd be 25 hundreds.
Speaker Change: Sort of what Youre seeing from a recent trends perspective.
Speaker Change: Hi, Frank This is Austin Willis.
Austin Willis: We have seen year over year about 37% increase in lease rates and I believe we published our.
Speaker Change: Our book values at the end of last year from an appraisal appraisal to book value perspective. So you can see that that change there were.
Speaker Change: We're not going to get into details on specific engine types, but we have seen a significant increase.
Speaker Change: What's interesting, though is if you look at lease rates now relative to where they were in 2019 for the most part they're not that dissimilar. So while there has been a significant increase in rates year over year I think there's still room to go certain types I think have stabilized at a higher level, but others certain.
Speaker Change: We have a lot more runway on the newer engine types. The Leafs GTS G annex lease rates have been climbing, but I think thats more reflective of asset values than anything else I mean, when you've got engines that are selling in excess of $20 million.
Speaker Change: Going to be reflected in the lease rates.
Speaker Change: Great.
Speaker Change: Thanks for that.
Speaker Change: And then another question if I could.
Speaker Change: I wanted to ask about sort of.
Speaker Change: Maintenance overhaul costs, what you've seen from that perspective in terms of trends and sort of.
Speaker Change: Maintenance or MRO.
Speaker Change: Morrow availability.
Speaker Change: Then if I could.
Speaker Change: Can you sort of walk through how you guys think about the decision.
Speaker Change: To repair your engines versus using modules for your own assets.
Speaker Change: Sure I'd be happy to.
Speaker Change: In terms of MRO availability.
Speaker Change: It's fairly tight but its tightest with the larger MRO as you know the.
Speaker Change: Lufthansa KLM.
Speaker Change: And to use the smaller MRO I think theres, a little bit more availability currently.
Speaker Change: In terms of overhaul cost.
Speaker Change: The <unk> 2500, all sort of paint them with a similar brush, but youre looking at $10 million plus for a full overhaul with LLP.
Speaker Change: So it's a significant investment.
Speaker Change: Core modules are going to be in the neighborhood of 7 million and that's <unk>.
Speaker Change: HPT blades LLP and the remainder of the engine. So again, it's it's expensive.
Speaker Change: And in terms of your last question.
Speaker Change: Do we think about what we do with our assets when they come off lease or they've become on service level, we have a formal process to evaluate engines.
Speaker Change: We really look at four different outcomes and we run a present value analysis on each so first is sort of the repair and and that could be module swaps or overhaul and the preference is module swaps. When we have the appropriate modules available the real difficulty is finding core modules.
Speaker Change: Our serviceable because there isn't there isn't a great deal of availability for core modules much less core module Mlps. So then you look at the overhaul scenario and then you look at the part out a scenario, where we send it through our parts business losses, and then the final scenarios looking at selling it outright where we take.
Speaker Change: Multiple bids from the marketplace and we value each scenario and whichever one results in the highest present values generally.
Speaker Change: The path that we take.
Speaker Change: Great I really appreciate it thanks for taking my questions.
Speaker Change: Yes, no problem.
Speaker Change: Hi, Good morning, everyone. This is Greg Dahlberg on for Myles Walton at Wolfe Research.
Speaker Change: I was just giving chrome will add a part of Peru last week in the Hot section PMA Wise I guess can you just comment philosophically your view on PMA usage.
Speaker Change: Sure so.
Speaker Change: PMA certainly has the potential of saving money on the on the Bill of an overhaul I think the question is really twofold. One is it going to have the same on wing life as a as an OEM part.
Speaker Change: That really is reflected in the cost per cycle and then two what are the impacts with re marketability of the asset for US historically, we found that most of our airline customers or the lion's share of our airline customers have opted for engines that are are free of <unk>.
Speaker Change: I'm, sorry are free of D. R and PMA parts. So if we were to introduce those it was limit.
Speaker Change: The ability to remarket those assets both for lease and sale considerably. So we're watching what happens in the future.
Speaker Change: Got it thank you.
Speaker Change: And then just on engine acquisition activity I saw you acquired 19 engines.
Speaker Change: Can you comment broadly on the availability of engines I guess are you seeing any signs of a slowdown at all.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Our.
Speaker Change: Nations are fairly broad we've got an order book with the Oems. So we purchase some engines directly from them.
Speaker Change: Others are through big programmatic deals, we do like the one we did with with Air India, which is a classic constant thrust deal, where we do a sale leaseback and when one of the engines becomes unserviceable, we take that engine back and replace it with one from our portfolio and then with that Unserviceable engine, we run it through.
Speaker Change: The formal process that I mentioned earlier, where we may sell it we made part of that we may we may repair it.
Speaker Change: So we do originate a fair amount from programs and then we also originate from just the open market generally where we find that because of the different the different elements of our business model, having the in house parts business, having our own <unk>.
Speaker Change: And also just having diversity of assets, we're usually able to originate.
Speaker Change: Assets, where other people may struggle because we've got.
Speaker Change: Better avenues of monetizing them.
Speaker Change: Got it thank you for the time.
Speaker Change: You bet.
Speaker Change: This is will Waller from M. Three just wondering if you could comment on what your average utilization rate for equipment for lease was in the third quarter.
Speaker Change: Sure Yeah, Hey will this is this is Austin Willis it was a little under 83% for the third quarter.
Will Waller: Okay and one question I have is that it kind of ran that same level in the second quarter.
Speaker Change: And just curious if we go back a couple of years and I know that 83% is actually a pretty high number.
Speaker Change: When it comes to leasing any sort of asset because theres just times when things are down, but you had been in the upper $80. A couple like I don't know, it's probably been three or four years ago, just kind of curious to hear if you think you could ever get back to those levels and if theres something thats keeping the levels down in the low eighties. It just seems like the demand for equipment is so high right now that it would be the highest it's ever been here.
Speaker Change: Directly so I'm just wondering if there's something that's going on different in today's world versus I don't know four or five years ago.
Speaker Change: Sure Yeah, no. It's a few different things one of them is it's a little bit deceptive because when we originate new transactions often times those assets are off lease and it takes sometimes a little bit of time to put them on lease.
Speaker Change: Some of it is holding.
Speaker Change: Collection of assets for a big programmatic deals.
Speaker Change: And then it is just putting assets through maintenance and just the normal churn of assets coming on and off lease.
Speaker Change: Okay that makes perfect sense and then one last question on your order book that you have what is the order book look like for engines that you have got orders placed on but haven't yet taken delivery on.
Speaker Change: Okay.
Speaker Change: Sure, it's it's about 400 million more.
Speaker Change: Okay.
Speaker Change: And when were most of those orders placed.
Speaker Change: Those orders are through 2027.
Speaker Change: Building Dolby purchased through 2027, and Youll see that Youll see that in more.
Speaker Change: <unk>.
Speaker Change: We'll later when we later today when we post our Q.
Speaker Change: Okay, great. Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: I'm, Eric Greg before trailing advisory great quarter a.
Speaker Change: A few questions here one is what is the average lease life on the line on the engine portfolio at this point.
Speaker Change: So our average lease term remaining is in the neighborhood of two years.
Speaker Change: Okay great.
Speaker Change:
Speaker Change: And Aercap came out last week and announced that they were taking a provision for.
Speaker Change: Last quarter for.
Speaker Change: Xul, which I saw based on your October 14th update is meaningful.
Speaker Change: Meaningful customer for Willis, what what do you anticipate.
Speaker Change: Anything is going to happen there with potential provision or <unk>.
Speaker Change: That need to be taken with regards to that situation.
Speaker Change: Sure so.
Speaker Change: Won't get into too much detail with regard to specific discussions with us all other than to say, we have a zero balance with them right. Now. So we don't have any any issues and we don't have any immediate expectations for provisions.
Speaker Change: Okay great.
Speaker Change: And then in terms of capital allocation I know you have a lot of obviously commitments to buy more engines.
Speaker Change: Engines here, but as per that update you provided.
Speaker Change: I had it back in the middle of October.
Speaker Change: Or is it.
Speaker Change: Very significant daylight between your valuation and that of FTAA, which a lot of people look at as your closest comparable.
Speaker Change: How are you thinking about capital allocation with regards to stock buybacks.
Speaker Change: And shareholder payouts.
Speaker Change: So I'm not going to speak specifically on capital markets transactions other than to say you know the appreciation in our share price over I don't know the last nine months has been.
Speaker Change: Welcome to I think by all investors and it certainly gives us optionality.
Speaker Change: Okay.
Speaker Change: And then <unk>.
Speaker Change: Finally.
Speaker Change: We saw this year over year over year some.
Speaker Change: Negative operating leverage specifically in G&A. We also saw kind of negative operating leverage quarter over quarter from Q2 to Q3 with revenues down a little bit but costs up in that kind of double digits. When do we when do we start.
Speaker Change: When do you forecast, we're going to start seeing actually positive operating leverage here with the great growth in the top line leading to.
Speaker Change: Arjun improving again on a quarter over quarter basis.
Speaker Change: Sure.
Speaker Change: I think one thing that we did mention in the in our.
Speaker Change: Our script earlier in the call was a lot of what you saw on the G&A side was related to stock stock based comp and specifically the movement.
Speaker Change: In the stock price.
Speaker Change: What we are seeing as you know Eric is is we are getting better or improvement I think if you look on the on a year to date basis Youre seeing improvement in G&A margin. So I think you're going to continue to see that improvement in the G&A margins to leverage through the P&L with growth as.
Speaker Change: As we move forward, but I think that there was a large component that we did experience in Q in Q3 due to the stock based comp phenomena.
Speaker Change: Okay.
Speaker Change: And then finally in terms of the maintenance.
Speaker Change: Reserve revenues.
Speaker Change: Seems pretty lumpy and it was pretty lumpy or a big difference between I mean, it was great basic lease rent improvement, but the maintenance reserve revenues, where we're down a bit in Q3 over Q2 is there a way for us to think about that going forward and I. Appreciate those comments you made earlier about a lot has to do with that being lower when when leases are extended with with <unk>.
Speaker Change: Customers, but any more color you can provide there would be helpful.
Speaker Change: Yeah. That's that's the majority of it I mean, it is lumpy exactly as you described and when when lessees up to extend rather than return engines. We do tend to see lower long term reserves and the increased short term reserves the significant increase short term reserves year over year.
Speaker Change: Are really the results of both portfolio growth as well as increased utilization Scott is there anything else you'd like to touch on there yes, no no I think thats right I think if you look at the short term maintenance component, which we disaggregate discussion and in our Q you can see that that is the recurring piece, which we see strong growth in.
Speaker Change: And clearly you can see from quarter to quarter Lumpiness in the long term, but we think it is simply that.
Speaker Change: Yes.
Speaker Change: Great results. Thanks, a lot guys.
Speaker Change: Thank you Sir.
Speaker Change: Hi, This is Justin here the phase III.
Speaker Change: Hi, Justin.
Speaker Change: Hi.
Justin: Two questions one on leverage if I look year over year you highlighted in your comments your financial leverage came down that's despite a lot of really good growth prospects initiating a dividend paying a special dividend et cetera.
Speaker Change: Going forward would you expect to continue to deleverage or do you think that there is enough demand for leasing side that the portfolio growth will pick up enough to kind of offset the capital generation that you're doing.
Speaker Change: Doing right now.
Speaker Change: So our objective is to both grow and Delever in terms of whether or not we'll delever further from where we are our objective is generally to have a double b type credit profile.
Speaker Change: So Scott do you want to talk to that anymore.
Speaker Change: I think.
Speaker Change: As we mentioned on the.
Speaker Change: Prepared remarks Justin.
Scott Flaherty: We're on a net basis, we are in the low threes three in the quarter on a net basis that I think as you start to get in that area. That's probably reflective of where we are a double b is so I think we will de lever just as the company produces earnings like we have been producing but we're probably getting to more of a comfort zone in there.
Speaker Change: Low three range.
Speaker Change: Okay. Thank you and then second question on the $3 million bonus for for Charlie is that something we should build into forward numbers is that a is that a onetime item.
Speaker Change: How should we think about that going forward.
Speaker Change: Sure that was a one time item, where he was compensated for strategic initiatives and goals that he executed upon through the year.
Speaker Change: Okay are there similar targets for next year that we could that we could look at so that we can see if they're going to get hit that we can build them in the estimates.
Speaker Change: Not currently.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Hi, This is Josh trials from Pekin Hardy Strauss guys.
Speaker Change: Guys great quarter.
Speaker Change: Very happy about that.
Speaker Change: Uh huh.
Speaker Change: <unk>.
Speaker Change: Couple of questions I guess, what are the things that I was looking at was with regards to <unk>.
Speaker Change: Revenues per employee based on publicly.
Speaker Change: Publicly youll be able data.
Speaker Change: The FTAA.
Speaker Change: And then looking at $1 2 million in revenues for every employee while Willis as far.
Speaker Change: Far short of that around 420.
Speaker Change: I just was curious why is wilsons operations so much more.
Speaker Change: Labor intensive versus FTE AI and is there some sort of opportunity in order for wells to improve on that metric.
Speaker Change: Yes, thanks for that so.
Speaker Change: I won't speak to specifics about FTA and compare ourselves there, but I will tell you that theres really two elements one when you comp us to the majority of leasing companies, we are much more hands on.
Speaker Change: Half of our portfolio is short term leases. So when you look at us relative to an aircraft lessor when where they put an aircraft out on lease for 10 years, They really don't interact with the customers frequently as we do it takes a lot more touch and thats everything from accounting.
Speaker Change: To legal to really technical and.
Speaker Change: And Theres a lot more manpower involved there. So that's part of the story and the other part of the story is the services businesses. If we were strictly a leasing company you would see the dollar amount per employee be much higher but the nature of the services business, obviously is lower revenue per person and as we've grown that over the past few.
Speaker Change: Two years.
Speaker Change: Thats influenced that number pretty significantly.
Speaker Change: Great. Okay. Thank you.
Speaker Change: Indian parts manufacturing.
Speaker Change: FCA does.
Speaker Change: It's an area that will simply going to get into.
Speaker Change: So youre talking about PMA, yes, I covered that briefly a moment ago and that's something that we've shied away from in the past for the reasons that I discussed, particularly from.
Speaker Change: Our remarketing and marketability standpoint, but we're not proud we sit back and we evaluate what happens in the marketplace all the time.
Speaker Change: Alright got it.
Speaker Change: And your utilization rates prior to Covid.
Speaker Change: Were very high.
Speaker Change: And.
Speaker Change: I think I missed with a utilization rate was this quarter, but it just seemed like Q2 year on 84% and I was curious given how strong the environment is why those utilization rates arent just through the roof.
Speaker Change: Yeah, and again I touched on that briefly earlier, so I would point you back to those prior comments.
Speaker Change: Okay. Thank you thanks very much.
Speaker Change: You bet. Thank you.
Speaker Change: And our final question is coming from Josh Sullivan.
Speaker Change: With the benchmark company.
Speaker Change: Yes.
Speaker Change: Hey, good morning, Hi, Josh.
Josh Sullivan: I just wanted to get your perspective on kind of the lifecycle of the CFM and <unk> 2500, I think you talked about shop visits, peaking in 'twenty, five and flattening out 27.
Speaker Change: But whats your perspective on the lights of SKU curves and I guess for the B 2500 as well.
Speaker Change: Does that seem right or do you think these engines and given the market dynamics may help a little bit longer lifecycle.
Speaker Change: Okay.
Speaker Change: I think the engines in general have a long time to to continuing operation on wing.
Speaker Change: <unk> thousand 500, a lot of these I would say slightly less than half haven't even had their first shop visit yet. So I think they've got a lot of longevity, but you've also got the introduction of a lot of newer generation assets as well the leap.
Speaker Change: The Gen X. The GTS. So that's why we're trying to really make sure we have a well balanced portfolio of the most in demand asset types for our customers going forward.
Speaker Change: And then you talked a bit about originations for leases you mentioned the year India deal.
Speaker Change: How important is it to have a dynamic offering at this point.
Speaker Change: Is the market strong enough, where it's just get out there or the specialization.
Speaker Change: <unk> come with a lot of your your lease contracts does that is that important or more important that's been in the past.
Speaker Change: Look I think this is certainly a.
Speaker Change: A seller's market if you've got assets I think if you are a lessor and you have the right in demand assets youre going to be doing okay right now.
Speaker Change: But our our model in our programmatic business definitely enables us to to fetch a premium return relative to competition and I think it offers an element of resilience to if and when things do change having that long term built in.
Speaker Change: Programmatic work is as important for for helping maintain long term demand for the assets.
Speaker Change: Thank you for the time.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: This concludes today's call. Thank you so much for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Right.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].