AerCap Holdings N.V.

Good day and welcome to the Aircap Holdings NV fourth quarter 2020 financial results. 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 fourth quarter 2020 conference call. With me today is our Chief Executive Officer, Angus 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 ERCAP's earnings release dated March 2, 2021. A copy of our earnings release and conference call presentation are available on our website at ercap.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 analysts that they limit themselves to one question and one follow-up. I will now turn the call over to Ingus Kelly.

Good morning, everyone, and thank you for joining us for our fourth quarter 2020 earnings call. I'm pleased to report another strong quarter of cash collections for the company where we continued the significant progress we made in Q3. Operating cash flows in Q4 were almost double the Q2 level. So while we expect the airline sector has a couple of choppy quarters ahead of it, the resilience and necessity of this industry to the global economy is clear from our operating cash flow numbers. With 2020 now in the books, we are focused on returning the business to healthy levels of profitability and executing on the growth opportunities that are in front of us as the vaccine rollout gains traction and as the health of our airline customers continues to improve. Given this, we believe that the worst effects of the pandemic are firmly behind the aviation industry and that air cap we are looking to the future with increasing confidence. Our conviction is based on the fact that airlines are implementing new strategies that will be required to succeed in the post-pandemic world. The first priority for all airlines is to deleverage their balance sheets and increase their fleet flexibility going forward. Both of these objectives mean asset life balance sheets for the airlines. On our last earnings call, we highlighted that aircap will have significant growth opportunities in the post pandemic world. We strongly believe that this is the case and these opportunities are materializing now. So the four things I want to focus on for today's call are one, the significant structural shift towards leasing aircraft as airlines look to rebuild their balance sheets, creating significant growth opportunities. Two, the importance of the vaccine rollout and impact of vaccine passports. Three, the resilience of consumer demand. Four, we remain completely focused on discipline management as we navigate the pandemic. Regarding the structural shift to leasing aircraft, it is clear that the pandemic has had a lasting impact on many airlines' balance sheets. And so their appetite for deploying large amounts of scarce capital to aircraft purchases will remain muted for some time. The priority will be to repay debt or government subsidies, not to send money to the OEMs. This will result in an increased dependence on accessing the lessor's order books for new aircraft, and also for lessors to execute sale leasebacks of their existing aircraft. The sale leaseback channel is used not only to finance their new deliveries, this channel is also an effective way for airlines to raise capital from their existing fleets. We see this trend as a tailwind for air cap in 2021 and beyond. We are pleased to report that we've begun to capture opportunities in this market recently, agreeing LOIs for 10 aircraft to be delivered over the next 18 months. These transactions take time to bring to fruition. However, I believe the opportunity will be even greater when the OEMs get back to delivering aircraft in significant numbers. Airlines will not repair their balance sheets overnight. And so the flexibility that comes from leasing will remain attractive to airlines for years into the future, such that we see a number of very strong years ahead for the industry. Secondly, with numerous successful vaccine rollouts taking place around the world, an end to the pandemic is in sight. Of course, it won't be a seamless or linear return to normality, given the sheer scale and complexity of administering a global vaccination program. And not every airline will make it through unscathed, but we believe they will get there. In the last two months alone, over 250 million vaccine doses have been administered around the world. This is likely to grow exponentially in the coming months, creating an inflection point as further government approvals of new vaccines take place and significantly greater supply enters the market, which can only be good news for the airline industry. The vaccine rollout is also shaping our conversations with customers, who are buoyed by the improving sentiment. The improved outlook gives consumers the confidence to book further ahead, improving the cash flows of the airlines immediately. It has also helped a number of airlines to raise capital on more attractive terms. There have been a number of other positive initiatives, like the Clean Corridors, which were trialed by several U.S. majors, and the rollout of health passports and certificates. In the last few weeks, Iceland became the first country to issue vaccination certificates to citizens who have had both vaccination doses, with Poland following suit shortly after. Other countries reliant on tourism like Spain, Portugal, Greece, Cyprus, Denmark and Sweden are also putting their support behind the initiatives, as well as the European Commission. Separately, IATA has rolled out a health passport app to help airlines with the administration around this. with 20 airlines taking part in the initial trial and many more likely to adopt it in the coming months. Third, on the passenger side, which is what ultimately drives the airline industry, we see no reduction in the desire to travel going forward. The consumer wants to travel. If anything, the recent travel restrictions have heightened the desire to travel, and we believe there will be a strong snapback in demand as restrictions are eased over time. We witnessed the impact of this most clearly in Europe, the US and China during the summer of 2020. For example, in Europe, air travel increased from 2,000 daily flights to over 18,000 flights in just four months, showing the pent-up demand created from the first lockdowns. This was shown once again in the UK last week when Boris Johnson outlined their roadmap for reopening air travel. Tour operator TUI said reservations for popular European holiday destinations increased six-fold overnight. EasyJet also noted a four-fold increase in ticket sales. And lastly, we want to make it clear that we remain highly focused on managing the growth potential of the business and increasing shareholder value with every decision we make. In terms of capital allocation, which we are often asked about, we continue to review all options. Please know that any decision on this front will be made in keeping with managing the business for the long term and maintaining the strongest possible balance sheet. As you've heard me say, the best way for a company to navigate a crisis like the pandemic is from a position of strength. Over the past year, we have done exactly that. Despite all the turbulence this pandemic has thrown at the industry, I am pleased by how well AirCap has managed its way through the crisis. In the fourth quarter, our operating cash flow increased a further 21% to $653 million, representing a doubling of operating cash flow from the Q2 lows. Our cash collection rate for Q4 improved to 96%, and this strengthening cash flow profile wouldn't have been possible without the extraordinary work of our employees around the world, who've had a relentless focus on cash collection. Additionally, on the deferral side, I'm encouraged that the level of support being requested reduced sharply in the fourth quarter. In fact, over the period, our deferral balance increased by only $5 million. As I said many times, the airlines will be in a position to pay their cash expenses long before they are profitable, and this has been borne out in our results. So while our profitability has clearly been impacted during the last couple of quarters, it's notable that our cash generation has remained solid This places us in a very strong position to offer helpful solutions to our airline customers coming out of the crisis. Importantly, we have an especially strong balance sheet. We've gained this position by taking a series of deliberate steps over the course of 2020. These included extending the duration of our debt, accessing very competitive financing from multiple sources, and maintaining our investment-grade ratings with all three major rating agencies. all of which will have positive benefits to shareholders into the future. These factors have also supported our placement activity in the fourth quarter, during which we signed lease agreements for 22 narrow bodies and nine wide bodies. This included significant multi-year extensions and long-term lease agreements on narrow and wide-body aircraft. In addition, we have signed lease agreements for a further 24 aircraft since year-end and closed five further sales, including three wide bodies. So in summary, it is clear that the worst is behind us, and while there may be some choppiness for the industry, and accordingly for us in the next couple of quarters, it is clear that a number of growth opportunities are before us. We've already begun to deploy a small amount of capital into sale leasebacks, the first time we've done so since 2013, and we won't hesitate to act on other attractive opportunities as they arise. We've always managed the business with a long-term in mind, And with a backdrop of increased demand for leasing, vaccination rollouts continuing at pace, and confidence in the return of consumer demand, we see a bright future for the industry ahead. AirCap has a robust balance sheet, deep customer relationships, and a strong track record to take advantage of these opportunities. I'll now hand the call over to Pete for a review of the financials.