Fly Leasing Limited (FLY)

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Fly Leasing Ltd. (FLY)

Q2 2010 Earnings Call

August 04, 2010 9:00 a.m. ET

Executive

Matt Dallas - IR

Steve Zissis - President and CEO BBAM

Colm Barrington - CEO

Gary Dales - CFO

Analyst

Jamie Baker - J.P. Morgan

Andrew Light - Citigroup

Richard Haden - Yield Capital

Chris Stroub - Private Investor

Helane Becker - Dahlman Rose

Gary Liebowitz - Wells Fargo Securities

Presentation

Operator

Good morning, my name is Tanya and I'll be your conference operator today. At this time I would like to welcome everyone to the Fly Leasing Limited Second Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be question-and-answer session. (Operator Instructions).

At this time I'd like to turn the call over to your presenter, Mr. Matt Dallas, Head of Investor Relation. Mr. Dallas you may begin your conference.

Matt Dallas

Thank you and good morning everyone. I am Matt Dallas, the Investor Relations Manager of Fly Leasing and I'd like to welcome everyone to our second quarter earnings conference call. Fly Leasing which we will refer to as FLY or the company throughout this call, issued its second quarter earnings results press release earlier today, which is posted on the company's website at www.flyleasing.com.

Representing the company on this call today will be Steve Zissis, the President and CEO of BBAM, Colm Barrington, our Chief Executive Officer and Gary Dales, our Chief Financial Officer.

I like to begin the call by reading the following Safe Harbor statement. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to statements regarding the outlook for the company's future business and financial performance. Forward-looking statements are based on current expectations and assumptions of FLY's management which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to factors that are summarized in the earnings press release and are described more fully in the company's filings with the SEC. Please refer to these sources for additional information. FLY expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.

This call is the property of FLY and can not be distributed or broadcast in any form without the expressed written consent of the company. A replay of this call is available for two weeks from today. An archived webcast of this call will be available for one year on the company's website.

I will now hand the call over to Steve Zissis, the President and CEO of BBAM to give you his view on industry conditions. Steve?

Steve Zissis

Thank you, Matt. The recovery in commercial aviation is progressing nicely. Internally speaking, our airline clients are enjoying higher low factors and pricing power that is enabling entry across the board. Fright traffic is also rebounded significantly of its lows. The former air show took place about two weeks ago and I can report that the airline and the manufactures in attendance were exhibiting confidence about the prospects for the industry.

Airlines and aircraft leasing companies are ordering aircrafts in large numbers. Both Airbus and Boeing have substantial demand for the new narrow body equipment and are virtually no delivery positions available from either manufacturer on user type for several years. Both Airbus and Boeing are increasing production rates in an effort to satisfy the demand. But we still see a favorable supply demand dynamic that we expect under pinning recovery in aircraft values and lease rates.

Lease rates particularly on Boeing 737 next generation equipment our rebounding in response to a recovery in the sector and we are seeing healthy demand for used aircraft from airlines around the world. Lease rates also recovering all be it a slower rate on Airbus A320 family and out of production Boeing aircraft type. It has been the case in the beginning of the recovery, several quarters ago, that the growth I've been talking was concentrated in the emerging market regions and in particular certain countries in Asia. Our optimism about the long-term progress for the sectors further supported by the spread of these healthy growth trends to other areas of the world.

As mentioned on previous earning calls there is a large amount of capital flowing in the aircraft leasing sector. Much of the capital is coming from the private equity community but the larger existing les-source are also allocating capital to grow their business. All of this capital is creating a demand for aircraft subject to operating leases and is causing aircraft prices to move up words.

The demand from leased aircraft is creating more liquidity for FLY's aircraft. We expect to take advantage of this liquidity to rebalance the portfolio with a handful of selected aircraft sales. We expect to use the cash proceeds for many aircraft sales combined with the company's significant unrestricted cash balances to acquire new aircraft. This will allow the company to manage less seat concentrations and to actually manage the obligate of the portfolio.

Cash can also be used to continue to repurchasing our stock given the value we see in the company's shares.

I'll now turn the call over to Colm

Colm Barrington

Good morning everyone. On June 29th Babcock & Brown Air Limited changed its name to Fly Leasing Limited. So from now on we'll refer to company as Fly Leasing or as FLY which cost is also out New York stock exchange ticker symbol. FLY is reporting not a strong quarter for the three months ending on June 30, 2010 with net income of 13.2 million and earnings per share of $0.46 broadly comparables to the result of the same quarter of 2009. This quarter figures were enhancing at the end leasing in relations to three of our aircraft. Our last year's figures were enhanced by significant gain of purchase of notes payable.

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