AerCap Holdings N.V.

Good day and welcome to AirCap's third quarter 2022 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'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 third quarter 2022 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. RCAP 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 November 3, 2022. A copy of our 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 Angus Kelly.

Thank you for joining us for our third quarter 2022 earnings call. We are pleased to report another quarter of strong earnings for AirCap. During the third quarter, we generated $2.21 of adjusted earnings per share and adjusted net income of $537 million. We generated strong net income and cash flow and achieved our target leverage ratio well ahead of our expectations. As a result, we are raising our full-year EPS guidance from a range of $6.50 to $7.00 to a range of $8.00 to $8.50. As we've discussed in prior quarters, the environment for aircraft leasing continues to strengthen. And we are seeing this reflected in our financial results. On the operational side, the impact of this strengthening demand is clearly evident. The best indication of this was in the execution of a record 255 transactions in the third quarter. This included lease agreements for 137 aircraft, 24 helicopters, and 23 engines. We also completed the purchase of 15 aircraft, 16 engines, and 3 helicopters, and sold 21 aircraft, 13 engines, and 3 helicopters. The amount of data emanating from this level of transaction activity is unparalleled and gives AirCap unique insights into the market. allowing us to make meaningful decisions earlier and with more conviction. Today is the reason we are considerably more optimistic about global wide-body demand than many others. We believe that the shortages we are currently experiencing in the narrow-body market will be replicated in the wide-body market. And like the narrow-body market, the tight supply will persist for the next few years. As an example, In the third quarter alone, AirCap signed 30 wide-body leases, of which 11 were from our order book and 19 were for used aircraft, with broad base demand in Europe, Asia, and South America. This will be sustained by the low production rates for new Boeing 787, Airbus A350, and 330neo aircraft, as well as significantly longer lead times for components, engines, and shop visits. which are impacting the supply of older kit. In fact, it may surprise you to learn that storage rates for Boeing 787s are actually lower than for Airbus A320neos today. As a result, we believe that we will continue to see strong demand and upward pressure on lease rates for wide-body aircraft. As I described in our last earnings call, we are continuing to see significant delivery delays on new aircraft from the OEMs. This is caused by a number of factors, including the shortage of engines available to service both new aircraft deliveries and spare engine requirements, and a shortage of MRO capacity to repair engines in a timely manner. On the first point, the engine OEMs are under pressure to increase the production rates for new engines by the airframe manufacturers. This creates a steep industrial challenge and it's also coming at a time when the new technology engines are coming off wing earlier than expected. This means airlines are becoming frustrated at the lack of spare engine availability and are therefore demanding that more new engines are diverted to the in-service pool rather than to new aircraft deliveries. The issues around the new engine technology coming off-wing early are not unique to these engines. They are a predictable part of the teething process of inducting new technology. However, it's happening at a time when supply chains and labor availability are already under pressure. Working in an MRO is a highly skilled job, and finding qualified engineers or mechanics to fill these roles is not straightforward. as it requires up to several years of training. So we believe turnaround times will continue to be elevated. On top of this, few people outside the industry realize how complex the approval, certification, and delivery processes are for the manufacturers, especially after an unexpected hiatus in production. It's not just as simple as building the inventory, and when the aircraft is recertified, you deliver it. Airplanes are not meant to sit idle. So there are numerous checks that need to take place before an airplane can be reactivated. For example, engine power levels, critical systems such as cockpit instrumentation and cabin pressurization, et cetera, which can easily take up to a month per aircraft. And then any modifications like cabin changes will have to be made after that. Further, The increased oversight from the FAA on their processes is also adding to the logistical challenges of delivering new aircraft. This is why Boeing, for example, has not been able to deliver all of its fully built 737 MAXs, despite its recertification in most of the world. Likewise, on the 787, which is the most popular widebody, Boeing has only delivered nine through September 30, compared to over 150 in full year 2019. which is contributing to further tightness in supply. Given the events of the last few years, it is no surprise that all of the OEMs are facing higher scrutiny on deliveries and quality assurance, but we are confident they will address these issues. In the meantime, our leading engine leasing business is well placed to provide solutions to customers affected by these delays. and we are seeing continued strength in this area as a result. Cargo demand also continues to be robust, notwithstanding the recent normalization of shipping rates over the past few months. It's worth noting that the underwriting case for cargo aircraft was never predicated on those supernormal lease rates being sustained. They were certainly beneficial for placements in the last few quarters, but the real change in that area is the improved quality and breadth of customers looking to lease cargo aircraft. Much of the historical cyclicality in cargo leasing was reflective of the binary nature of many of the operators, which were either very strong, well-capitalized airlines, or startup, high-growth, opportunistic ones. What we are seeing now is a filling out of the middle, where the commercial benefits of managing your supply chain in-house are becoming increasingly important, and cargo aircraft are seen as another part of the critical infrastructure of very large companies. In light of this, we placed firm orders for 15 Airbus A321 passenger to freighter aircraft conversions with EFW, with an option for a further 15 units. which are expected to begin delivery in 2023 through 2025. This aircraft is the best in class and most fuel-efficient aircraft to replace the Boeing 757-200 freighter, so we expect to see strong demand for these aircraft. On the helicopter side, we continue to see increased activity with 24 leases signed in the quarter, three purchases, and three sales. Again, we witnessed broad-based demand, which shows our global reach. we completed lease agreements with operators in Australia, Europe, South America, North America, and the East. This increasing demand, coupled with our focus on improving terms and extending tenor, should provide more reliable and resilient returns in this business going forward. So moving back to passenger aircraft, the demand for narrow-body aircraft preceded the first leg of the recovery, and it's proven to be a reliable forward-looking indicator on travel recovery. I expect the demand that we are currently seeing for wide-body aircraft will continue to drive the recovery. I believe it's important to consider that while passenger traffic is still well below 2019 levels, supply constraints are already occurring. As a result, airlines are seeing higher yields and revenues. In fact, IATA forecasts that worldwide airline revenues will reach $782 billion this year, This equates to 93% of 2019 revenues and only 82% of the traffic. Bringing all this together, the supply-side dynamics are going to persist. Traffic demand continues to surprise to the upside, and leasing costs form a relatively small part of an airline's total costs. As such, I expect that the environment for aircraft leasing will continue to improve. In summary, this was another great quarter for AirCap, with earnings and cash flows remaining strong throughout the business. The market environment continues to improve, and as you'll have seen from this quarter, the financial impact is already beginning to come through. As we sit here now, 12 months on from the closing of the GCAS acquisition, we are optimistic about the future. We have come through COVID, the Russian aircraft write-off, and we have still hit our target debt equity ratio ahead of schedule. As we look forward, it is clear to me that the resilience and stability of our industry is becoming more and more apparent, and AERCAP will be in an even healthier position to provide great support to our customers and strong returns to our shareholders. With that, I will hand the call over to Pete for a detailed review of our financial performance and our increased guidance for the full year.