AerCap Holdings N.V.

Good day and welcome to the AIRCAP second quarter 2019 financial results 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 at AIRCAP. Please go ahead, sir.

Thank you, operator, and hello, everyone. Welcome to our second quarter 2019 conference call. With me today is our Chief Executive Officer, Ingus Kelly, and our Chief Financial Officer, Pete Juhasz. 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. ERCAP 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 July 30th, 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 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 second quarter 2019 earnings call. I'm extremely pleased to report to you, our shareholders, an all-time record quarter with earnings per share of $2.42. This outstanding result is a product of our unrivaled platform capabilities and our disciplined approach to capital allocation. A focus on acquiring only the most in-demand new technology aircraft type rather than end-of-line current technology aircraft and selling large numbers of older aircraft at a considerable premium has produced an excellent portfolio. This strategy has also enabled us to repurchase over 40% of our outstanding shares at a discounted book value, while reducing our leverage and maintaining the highest liquidity levels in our industry. In the last 12 months, we have taken delivery of 77 aircraft and increased our average lease assets by $2.7 billion. Today, our portfolio is 53% new technology aircraft, This is the highest percentage of any major aircraft lessor in the world. And just as importantly, for the last eight years, Aircap has avoided ordering any end-of-line current technology aircraft. This barbell approach means we only acquire certain variants of new technology aircraft, such as A320neos and 787-9s, not end-of-line current technology aircraft. As in our view, This is the best way to maximize long-term returns for our shareholders. This is actually a contrarian view, as many investors and some rating agencies look purely at the average age of a fleet rather than the components behind it to measure fleet quality. We believe that this approach does not fully capture the risks and the rewards of an aircraft leasing business. Today, AirCap has an order book of 331 of the most in-demand variants of new technology aircraft that will deliver between now and 2023. We are well placed out into the future, including 90% placed on all of our new deliveries through the end of 2021. Relative to our balance sheet size of $43 billion, our remaining forward order cash commitments of $16.3 billion over the next five years are very manageable, particularly when this is tied to our industry-leading liquidity position. This quarter is another example of the consistency of the earnings power of AirCap, which is driven primarily by the capabilities of the platform. The average lease expiry date of our fleet today is the end of 2026. This is almost seven and a half years from now, and this despite having an older average age of our fleet than several of our competitors. Like our industry-leading EPS of $2.42, this is a tangible example of the superior capabilities of the AirCap platform. The longevity of our contracted revenue gives us significant visibility into our future cash flows and profits. The consistency and reliability of our performance is one of the key hallmarks of AirCap's business model. AirCap also has the world's leading platform for the sale of used aircraft. For the last five years, we have accounted for a significant portion of all the sales of mid-life and older aircraft in the global market. In an opaque market, that volume of activity gives us tremendous informational advantages and knowledge about aircraft values, which we use to make intelligent decisions that create value for our shareholders. There continues to be very strong demand from buyers for older and midlife assets. In the second quarter, we continue to sell assets into a strong secondary market, with sales of 22 owned aircraft in Q2 for just over $500 million. We have sold 81 owned midlife and older aircraft in the last 12 months. These sales have reduced our exposure to certain aircraft types, airline credits, and recycled capital into more accretive opportunities. As we look at our capital deployment options between aircraft purchases, de-levering, M&A, and capital returns to shareholders, it is clear that the discount of book value that currently exists provides us with the greatest opportunity to create value for our shareholders. Given this, we announced a further 200 million repurchase authorization in June, so we have the ability to continue to take advantage of this opportunity throughout the year. On the topic of the MACs, Boeing continues to work with the civil aviation authorities to ensure the aircraft's return to service. And they now assume they will obtain regulatory approval in the fourth quarter of this year. To date, we have taken delivery of five MAX aircraft. We had originally expected to receive 17 this year. The number that we actually receive will ultimately depend on the timing of the fix and when Boeing can deliver the aircraft to our airline customers. Turning to the demand side, IATA reported an increase in RPK growth of 4.5% in May, which is above the 3.1% posted in March, but below the 20-year average of 5.5%. That growth in May was broad-based, but led by Latin America at 6.5%. Load factors, however, reached a new record for May at 81.5%, which we believe underpins the demand for aircraft. As we said before, the best indicator for air cap of whether or not there is support for growth at these levels is is what is actually happening with our aircraft placement activity every day in the market. And we continue to see solid demand. In closing, our record results this quarter demonstrate once again the competitive advantages and consistency of Aircap's business. We will continue to run the business to optimize shareholder value and generate sustainable and consistent returns for our shareholders. With that, I will hand the call over to Pete.