AerCap Holdings N.V.

Good day and welcome to Aircap's fourth 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 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 2022 conference call. With me today is our Chief Executive Officer, Ingus Kelly, and our Chief Financial Officer, Pete Uhass. 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 March 2, 2023. 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 Ingus Kelly.

Thank you for joining us for our full year 2022 earnings call. I am pleased to report another quarter of strong earnings for AirCap. we generated adjusted net income of $645 million and adjusted earnings per share of $2.66 in the fourth quarter. On a full year basis, this amounted to adjusted net income of $2.2 billion and adjusted earnings per share of $9.01, surpassing our previous estimate of $8 to $8.50, which we updated in November 2022. This strong performance across all our business lines reflects how well our teams are working together to execute an extraordinary number of transactions. This level of transaction activity clearly demonstrates the success of the GCAS acquisition, the integration of the two companies, and the recovery in aviation. Cash generation also remains high, exceeding $5 billion of operating cash flow for the year, despite the impact of Russia. which helped us achieve a debt-to-equity ratio of 2.5 times at December 31, 2022. Given these strong earnings and cash flows, I am pleased to announce a new $500 million share repurchase program today. Continuing the theme of prior quarters, the environment for aircraft leasing continues to strengthen and will be further supported by the ongoing reopening of China. AirCap's level of activity in 2022 is unparalleled in the industry, completing 895 transactions over the course of the year. In the fourth quarter alone, the AirCap team completed a record 299 transactions across 159 lease agreements, 43 purchases, and 97 sales. Without the flawless integration of the two companies, this level of transaction activity simply would not have been possible, nor would it have been possible to take full advantage of the recovery in the aviation market. One area where the power of the platform was particularly pronounced was on the aircraft sales side, where we generated $229 million in gains, or a 12% margin, across aircraft, engines, and helicopters. We continue to see further evidence of the travel recovery as Europe, the Americas, and Asia all now exceed 80% of 2019 levels, with China being the latest driver. In particular, the growth in domestic flight activity in China since the zero COVID policy was lifted has been significant, surpassing 12,000 flights per day recently, compared to a low of approximately 3,000 flights per day at the end of November. Having spent the last two weeks seeing all our customers in China, it is clear from speaking to the leaders of these airlines that they are also optimistic about the future. As we have said time and again, when the consumer is allowed to travel, they do so and in large numbers. What we are seeing around the world is that consumers continue to prioritize travel well after restrictions are lifted, and this will be no different in China. As a result, the Chinese airlines are all planning to ramp up capacity. We believe this will further exacerbate the supply-demand imbalance for aircraft and engines, pushing lease rates higher. I believe this will be particularly acute on the wide-body side as the combination of severely restricted new aircraft production, continued traffic growth, and the retirement and cargo conversion of many wide-body aircraft that took place during COVID-19 puts a premium on aircraft that are available today. And AirCap is well positioned to address this opportunity. We have spoken before about the shortages on the narrowbody side, where production cuts due to groundings, COVID, and supply chain issues have had a significant impact. As you will see from the slide, this means there are approximately 1,800 fewer narrowbody aircraft built today compared to the production run rate in 2018. This is equivalent to approximately 11% of the 16,000 or so narrow-body aircraft in operation at that time. On the wide-body side, these reductions have been even more acute. Production rates for new technology aircraft such as the 787, the 330neo, and the A350 are also well below expectations. Airbus was targeting 5 A330neos per month in 2019 and delivered less than 3 per month in 2022. They were targeting 10 A350s per month in 2019 and delivered only 5 per month in 2022. Boeing were targeting 14 787s per month in 2019 and delivered less than 3 a month in 2022, with more than 80% of these coming from storage. This has resulted in approximately 740 fewer wide-body aircraft built since 2019, a 15% reduction relative to the 5,000 or so wide-body aircraft that were in service at the time. That's equivalent to almost two full years of normal production. So how are we capitalizing on this opportunity? The best example I can give you is that since the start of 2022, AirCap has completed nearly 100 wide-body transactions. which I suspect is possibly more than the rest of the aircraft leasing industry combined. We are seeing broad-based demand, and we expect this to be sustained by continued traffic growth and low production rates for wide-body aircraft. We believe that the issues affecting aircraft production are likely to persist for several years, resulting in strong demand and upward pressure on lease rates and values for the foreseeable future. One further topic I'd like to address is the impact of interest rates and inflation on aircraft lease rates and our business more generally. On our prior call, we outlined the way new aircraft leases are adjusted for changes in interest rates and escalation, which provides protection to air cap from interest rate volatility. This is the same exposure an airline would face if it were to purchase aircraft directly from the manufacturers and finance it with debt. So it's widely accepted that this should be reflected in lease rates. However, it's important to put these kinds of increases into context. As you can see on this slide, leasing costs make up approximately 5% of an airline's cost base on average. So changes here are much more palatable to pass through than fuel or labor costs may be. Of course, every airline looks to minimize whatever level of cost they can, but this should illustrate that even large percentage increases in interest expenses and leasing costs are less material to our airline customers than many investors may realize. In summary, this was another great quarter for AirCap, with record earnings and cash flows throughout the business. The market environment continues to improve, and this is reflected in our financial results. The company has successfully navigated an extraordinary period over the last three years, and now we are well positioned and on an upward trajectory for 2023 and beyond. Our confidence in the future is evidenced by today's announcement of our new share repurchase program. With that, I will hand the call over to Pete for a detailed review of our financial performance and outlook for 2023. Thanks, Gus.