Fly Leasing Limited (FLY)

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FLY Leasing Limited (FLY)

Q3 2012 Earnings Call

November 8, 2012 4:30 PM ET

Executives

Matt Dallas - Manager, Investor Relations

Colm Barrington - Chief Executive Officer

Gary Dales - Chief Financial Officer

Steven Zissis - President and Chief Executive Officer, BBAM

Analysts

Helane Becker - Dahlman Rose

Michael Coleman - Wells Fargo

John Evans - Edmunds White Partners

Presentation

Operator

Good afternoon and welcome to the FLY Leasing Limited third quarter 2012 earnings conference call. (Operator Instructions) At this time, I would now like to turn the show over to Mr. Matt Dallas.

Matt Dallas

Good afternoon, everyone, and thank you for joining us. I am Matt Dallas, the Investor Relations Manager of FLY Leasing and this is our third quarter 2012 earnings conference call. FLY Leasing, which we will refer to as FLY or the company throughout this call, issued its third quarter earnings results press release after the market closed today, which is posted on the company's website at www.flyleasing.com.

Representing the company today on this call will be, Colm Barrington, our Chief Executive Officer; Gary Dales, our Chief Financial Officer; and Steve Zissis, the President and CEO of BBAM, the company that manages and services FLY's fleet.

I'd like to begin the call today 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 a property of FLY and cannot be distributed or broadcast in any form without the expressed written consent of the company. A replay of this conference 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, for an update on the aircraft leasing industry.

Steven Zissis

Thank you, Matt, and good afternoon, everyone. In general, the overall supply and demand dynamics in the industry are largely unchanged since the last quarter, when we last discussed the market on the second quarter call. Given that the aircraft leasing industry is still influenced most heavily by activity in the Northern hemisphere, the fall season tends to be a seasonally weaker period than other periods in the calendar year.

As we look forward in the first half of 2013, we are encouraged by what appears to be a relatively normal demand from our airline customers for aircraft and operating lease. We continue to see good demand from emerging economies, particularly Southeast Asia and South America. The U.S. Airlines continue to show discipline in managing capacity, leading to improved profitability, despite concerns about slowing macroeconomic growth in the U.S.

We've had a lot of planned and some unplanned remarketing activity in FLY fleet in 2012, and we've made good progress in recent months in getting the aircraft signed up to new lessees and backend service. We are optimistic about being able to deliver a near fully utilized fleet in the early part of 2013, given a good demand from airlines for spring and summer season of 2013.

Although, lease rates on A320 families remain soft, we are starting to see firming of lease rates, as we move into the first quarter of 2013. This recovery in the A320 family aircraft is being driven by two different segments of demand. First, airlines that operate much older equipment have come to recognize that lease rate being offered in the current market on these types of aircraft, represent a compelling economic opportunity to replace last generation less-fuel efficient aircraft with current generation equipment.

Second, many airlines have focused in the recent history on brand new equipment, recognize that some of the current generation mid-life aircraft represent good relative value, as they think about growing their capacity. Demand for Boeing narrow-body equipment continues to hold up very well, and we see no deterioration in lease rates for these types. Under recent circumstances we see lease rates inching upward, as we work our remarketing projects for 2013.

In terms of fleet growth through aircraft acquisitions, we continue to look for good value in both new aircraft and mid-life aircraft. The new or nearly new equipment, particularly from Boeing, represent in our view a relatively safe corner of the market to deploy capital for predictable returns.

And given some of the supply demand factors, I've just described in the overall market, we continue to see good relative value in mid-life equipment. In many deals, we are seeing in today's market, investment in mid-life equipment represent strong prospects for its active returns with reasonable downside protection from current pricing levels.

Finally, in terms of aircraft sales, we continue to look for opportunities to trade our aircraft, where we see opportunities to harvest attractive gains, generate free cash after debt repayment and to balance our fleet by aircraft type and age. Look for FLY trading activity to continue as we move towards through the balance of 2012 and into 2013.

Read the rest of this transcript for free on seekingalpha.com