AerCap Holdings N.V.

Good day and welcome to the AirCap Holdings fourth quarter 2018 financial results call. At this time, all participants are in a listen-only mode. This call is being webcast and audio version of the call will be available on the company's website. At this time, I'd 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 full year 2018 conference call. With me today is our Chief Executive Officer, Ingus Kelly, and our Chief Financial Officer, Pete Youhas. 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 in such statements. AirCap 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 AirCap's earnings release dated February 14, 2019. A copy of the earnings release and conference call presentation are available on our website at aircap.com. This call is open to the public and is being webcast simultaneously at aircap.com and will be archived for replay. We will shortly run through our earnings presentation and it will allow time at the end for Q&A. As a reminder, I would ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Ingus Kelly.

Thank you, Joe. Good morning, everyone, and thank you for joining us for our fourth quarter 2018 earnings call. I am pleased to report another quarter of robust earnings. We generated earnings per share of $1.62 and $6.83 for the full year. This is our 13th consecutive year of profitability since our IPO in 2006. In the past five years alone, we have generated $5.1 billion of net income, $15 billion of operating cash flow, and $29 of earnings per share. We have also grown our book value per share by almost 200% in that timeframe. The creation of shareholder value year after year is the result of our relentless focus on excellence and execution at all levels of the company, as well as our unrivaled market knowledge. To put this in context, in the last five years, AirCap bought, sold, or leased over 2,000 aircraft. This represents approximately 10% of all in-service commercial aircraft in the world today. Let me remind you of the four pillars of our business. One, we purchase in-demand aircraft from the OEMs at the right prices. Two, we place them on long-term attractive leases around the world. Three, we actively oversee them with robust portfolio and risk management procedures, including selling aircraft to keep our portfolio in demand, And four, we ensure the stability of the business by putting in place a long-term, durable capital structure. These are the core tenets of our philosophy. We have proven that when we do these things well, strong results follow. The AirCap platform was again very active in Q4, executing a record 145 aircraft transactions, including 20 widebodies. This level of activity is clear evidence of the demand for our fleet and the unique capabilities of AirCap. For the full year, we executed a total of 436 aircraft transactions. This includes signing lease agreements for 257 aircraft. To put this into perspective, there are only 11 aircraft lessors in the world that even have 250 aircraft in their entire fleet. This gives us tremendous insight into market trends and customer behavior, which better informs our overall decision making. Similarly, we sold 103 aircraft this year, which gives us unmatched knowledge about the sales market for used aircraft. Turning to the demand environment, we continue to see a generally healthy environment for airlines, notwithstanding some recent smaller airline failures. Furthermore, the recent drop in oil prices is having a positive impact on the airline industry. As we look out at the operating environment, we continue to see good overall demand for aircraft. with IATA reporting a 6.5% increase in global RPKs in 2018, and it is forecasting a further 6% in 2019. Global RPK growth in December was solid at 5.3%, led by strong performances in Europe at almost 8%, Asia Pacific and Latin at approximately 6%. Obviously, our record level of transaction activity in the fourth quarter is a reflection of good market demand for aircraft. Global load factors remain near all-time highs in December at 80.4%. Efficiency gains such as higher utilization and densification of aircraft cabins have allowed airlines to grow more PKs without adding new aircraft. However, we believe a natural ceiling exists in this area, which will support the need for additional aircraft in the coming years. On the delivery side, this was also a record quarter for AirCap. We purchased 37 new technology aircraft in Q4, and even brought forward a number of aircraft from 2019 to bring our total purchases for the year to 76 new technology aircraft. In the fourth quarter, we delivered our first Embraer E190E2 to a carrier in Asia that is enjoying the aircraft's strong performance and significant fuel savings. We have now placed virtually all of our 50 E2 aircraft on order. We believe that the tie-up with Boeing has been very positive for the marketability of the E2, and we look forward to working with them as our orders deliver. Looking forward, we operate a long-term stable business model. This means that as of now, in the middle of February 2019, AirCap has already contracted 95% of its expected lease revenues through the end of 2021. Few businesses in any industry can show that level of top-line predictability on a consistent and sustained basis. Now, I know some of you have raised concerns about airline credit. As you all know, we see airline credit events every year. And last year, and this year, and the year after, and the year after that will be no different. We've experienced airline credit events every year for the last 13 years. But for every year for the last 13 years, AirCap has generated very healthy, steady profits. Airline failures will always remain part of the cut and thrust of this industry. but we prepare for them accordingly at the outset. At a micro level, this manifests itself in two ways. Firstly, prior to any lease, we ensure that our airline credit team assesses and rates both the credit worthiness and the technical capability of the potential customer. And if we decide to do business with them, an appropriate security package is put in place. Secondly, but far more important than a security package, is our relentless culture around risk management, acting quickly and decisively to protect our interests. This is far more important than the security package. At a macro level, we protect ourselves through the global diversification of our customer base. The combination of these factors is why AirCap's credit costs have averaged approximately 1% of lease revenues for the last 13 years. AirCap's ability to move aircraft quickly into pockets of strength anywhere in the world creates much better opportunities for consistent earnings than even the strongest airlines would have on an individual basis. On capital allocation, we've been able to buy back over 37% of the company at a significant discount to book value since 2015. Please bear in mind this is while we delivered the business from 2014. So long as the market continues to fundamentally undervalue the company and the resilience of not only our earnings but our book values, we will continue to take advantage of these dislocations. Today, we announced a new 200 million share repurchase program. In closing, our fourth quarter results are another demonstration of the power of the AirCap platform. We will continue to run our business according to our core principles because we know that by doing so, we will continue to generate significant value for our shareholders. With that, I will hand the call over to Pete to take you through the financials.