air castle analyst presentation - december 2010
TRANSCRIPT
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Investor and Analyst Day Presentation
December 14, 2010
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Certain items in this presentation and other information we provide from time to time, may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to,
statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues,
earnings, EBITDA, Adjusted Net Income and Adjusted Net Income plus Depreciation and Amortization and the global aviation
industry and aircraft leasing sector. Words such as anticipates, expects, intends, plans, projects, believes, may, will,would, could, should, seeks, estimates and variations on these words and similar expressions are intended to identify
such forward-looking statements. These statements are based on managements current expectations and beliefs and are subject
to a number of factors that could lead to actual results materially different from those described in the forward-looking
statements; Aircastle Limited can give no assurance that its expectations will be attained. Accordingly, you should not place undue
reliance on any forward-looking statements contained in this presentation. Factors that could have a material adverse effect on
our operations and future prospects or that could cause actual results to differ materially from Aircastle Limiteds expectations
include, but are not limited to, prolonged capital markets disruption and volatility, which may adversely affect our continued
ability to obtain additional capital to finance our working capital needs, our pre-delivery payment obligations and other aircraft
acquisition commitments, our ability to extend or replace our existing financings, and the demand for and value of aircraft; ourexposure to increased bank and counterparty risk caused by credit and capital markets disruptions; volatility in the value of our
aircraft or in appraisals thereof, which may, among other things, result in increased principal payments under our term financings
and reduce our cash flow available for investment or dividends; general economic conditions and business conditions affecting
demand for aircraft and lease rates; our continued ability to obtain favorable tax treatment in Bermuda, Ireland and other
jurisdictions; our ability to pay dividends; high or volatile fuel prices, lack of access to capital, reduced load factors and/or reduced
yields, operational disruptions caused by volcanic activity and other factors affecting the creditworthiness of our airline customers
and their ability to continue to perform their obligations under our leases; termination payments on our interest rate hedges; and
other risks detailed from time to time in Aircastle Limiteds filings with the SEC, including Risk Factors as previously disclosed in
Aircastles 2009 Annual Report on Form 10-K, and in our other filings with the SEC, press releases and other communications. In
addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact
of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-
looking statements speak only as of the date of this presentation. Aircastle Limited expressly disclaims any obligation to release
publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations
with regard thereto or change in events, conditions or circumstances on which any statement is based.
The information contained herein is the property of Aircastle Limited and shall not be disclosed, copied, distributed or
transmitted, or used for any purpose, without the express written consent of Aircastle Limited.
Forward-Looking Statements / Property of Aircastle
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3
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
Table of Contents
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Overview
Aircastle (NYSE: AYR) is a leading commercial jet aircraft lessor
132 aircraft with 63 lessees in 36 countries as of September 30, 2010
Formed six years agoA purpose-built top tier, global leasing company
Q3 2010 LTM Revenue of $529 million and ANIDA of $309 million
Modern fleet financed with a conservative capital structure
4
Lessee Countries
SINGAPORE
STAMFORD, CT
DUBLIN, IRELAND
Aircastle Offices
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Key Highlights
5
132 aircraft with 63 lessees in 36 countries
Diversified by lessee, geography and aircraft type Cargo aircraft expertise
Modern Aircraft Portfolio
& Diverse Customer Base
Experienced management team drawn from industry leaders
Global presence with in-house expertise
World ClassManagement Team
Strong Servicing &Origination Track Record
Over 98% revenue utilization for the past two years
Completed more than 125 aircraft leases
Fleet acquired via 65 transactions with 54 counterparties
LTM 9/30/10 ANIDA of $309 million
Fleet is long-term financed
61% net debt to net book value of assets
Stable Cash Flow &Conservative, Long-Term
Capital Structure
Long-term growth market expanding at a multiple of global GDP
Trend towards more leasing vs. owning by airlines
Positive Long-TermIndustry Fundamentals
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6
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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Air Travel Industry in the Midst of a Recovery
7
Source: IATA, September 2010.
-$2.7
-$4.3
-$2.7
-$0.6
$0.5
-$0.1
$3.5
-$1.3
$5.2
$0.4$1.0
$0.1
$1.4
$0.0
$3.0
$0.3$0.6
$0.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
$4.0
$6.0
North America Europe Asia-Pacific Middle East Latin America Africa
IATA Net Profit Projections ($, Billions)
2009 2010F 2011F
7.4%
1.3%
-2.1%
7.7%
4.9%5.4% 5.4%
4.7%
-1.3%
-9.8%
19.8%
5.3%6.3% 6.4%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2007 2008 2009F 2010F 2011F 2012F 2013F
IATA Traffic Projections (Y/Y % Change)
Passenger Traffic (RPK) Cargo Traffic (FTK)
2010 exhibited a strong recovery driven by demand improvements and disciplined capacity
growth
Through October, year-over-year passenger and freight traffic demand improved 8.5% and 24.0%,
respectively
Current passenger and cargo traffic levels are above pre-recession peaks
Air cargo traffic has outpaced the recovery in passenger traffic in 2010
Asia-Pacific expected to exhibit greatest year-over-year improvement
Latin American and Middle Eastern traffic has also been relatively strong, but Europe continues to lag
A return to long-term growth rates in 2011 and beyond expected
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Long-Term Air Travel Growth Drivers
8
Future growth will be driven by emerging markets, including the BRIC countries
Enplanement levels remain very low
Emerging middle class will drive air traffic growth
Chinese airlines accounted for 17% of Boeing and Airbus deliveries in 2009
Growth in the Chinese economy drove intra-Asia travel to eclipse intra-North American traffic to become
the worlds largest aviation market
The Indian market has strong potential but suffered from excessive growth during 2008-09
Middle East has developed into a global transit hub
Aircraft on order from BRICs and the Middle East represents 32% of Boeing / Airbus total orders
Source: Ascend (www.ascendworldwide.com ).
Orders excludes lessors based in these countries.
2.68x
0.35x 0.29x0.15x 0.10x
0.00x
0.50x
1.00x
1.50x
2.00x
2.50x
3.00x
USA Russia Brazil China India
Airline Passengers per Capita
Source: US DOT, Indian CAA, CAAC, ANAC, Russian Ministry of Transportation, CIA Factbook.
Data for calendar year 2008, except India, which is based on an April fiscal year.
0
100
200
300
400
500
600
700
800
USA China United Arab
Emirates
India Brazil Russia
Boeing / Airbus Orders by Country
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Aircraft Supply and Demand
9
Source: IATA.
0%
5%
10%
15%
20%
25%
May-0
9
Jun-0
9
Jul-09
Aug-0
9
Sep-0
9
Oct-09
Nov-0
9
Dec-0
9
Jan-1
0
Feb
-10
Mar-10
Apr-10
May-1
0
Jun-1
0
Jul-10
Aug-1
0
Sep-1
0
Oct-10
Nov-1
0
Percentage of Fleet Parked
737 -700/80 0/900/900ER A319/20/21 (excl A320 Classic s)
737-300/400/500 A330-200/300
767-300ER 747-400F/SF/BCF/ERF
Source: Ascend (www.ascendworldwide.com ).
70.0%
73.0%
76.0%
79.0%
82.0%
85.0%
t- -
J
- - -
J
- - -
J
- - -
J
- t- -
J
- -
Passenger Load Factor Trend
12 Month Rolling Average Load Factor Passenger Load Factor
New deliveries are sold out for several years and idle capacity of modern aircraft is at low levels
Production rate of mainline aircraft (>100 seats) remained stable during 2009
Boeing and Airbus delivered ~970 aircraft in 2009
The global mainline passenger fleet is currently ~16,000 aircraft
Total production (including 787 introduction) is forecast to increase by ~100 units by 2012
Current generation aircraft at near full utilization levels
However, stored levels of out of production aircraft are not improving
Passenger load factors are at record highs showing building airline demand
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Airline Fleet Distribution
10
Top global airlines continue to operate large numbers of seasoned but current generation
aircraft
Of the top 50 global airlines, 43 airlines operate aircraft older than 10 years
The majority of aircraft operated by the top 50 airlines are more than five years old
Growing demand combined with production limits on new aircraft will ensure continued
demand for older aircraft
Aircraft technology is the key driver of continued demand
0
5
10
15
20
25
30
35
40
45
50
0 - 5 Ye ars 6 - 1 0 Ye ar s 1 1 - 1 5 Ye ar s 1 6 - 2 0 Ye ar s Ove r 20 Ye ar s
Nu
mberofOperators
Top 50 Airlines Distribution
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0 - 5 Years 6 - 10 Years 11 - 15 Years 16 - 20 Years Over 20 Years
Num
berofAircraft
Top 50 Airlines Fleet Distribution - Current
Generation Aircraft
Source: Ascend (www.ascendworldwide.com ).
Current generation include 737-600/700/800/900, 747-400/400F, 757-200/300/200F, 767-
200/300/400/300F, 777-200/300/200LRF, A319/320NG/321, A330-200/300/200F, A340-
200/300/500/600, A380.
Source: Ascend (www.ascendworldwide.com ).
Top 50 airlines measured by the size of mainline fleet (aircraft with 100+ seats).
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Freight Market Dynamics
11
The world air freighter fleet has an average age of more than 24 years
The supply of freighter aircraft adjusts more easily to changes in demand than passenger
Given relatively lower capital costs, marginal capacity is removed, particularly as maintenance events arise
Pressure on older technology aircraft increased significantly for high use, long-haul missions
Fuel costs play a much bigger role
Air freight is becoming more focused on high value, time-sensitive shipments, so dispatch reliability is
critical
Current generation aircraft are returning to service as the market recovers while older
technology aircraft are being removed from service, in many cases permanently
Source: Ascend (www.ascendworldwide.com ).
Current generation includes, 747-400F, 757-200F, 767-200F, 767-300F, 777-200LRF.
Classics include 707F, 737-300/400F, 727F, 747-100/200/300F, A300F, A310F, DC-10F, DC-8F, DC-9F, L-1011F, MD-11F.
448473
531
1237 39
0 0 10
100
200
300
400
500
600
November 2008 November 2009 November 2010
Current Generation Freighters
In Service Storage L TM Retireme nts
1,165
979 974
334452
396
91 85 71
0
200
400
600
800
1,000
1,200
1,400
November 2008 November 2009 November 2010
Classic Freighters
In Service Storage LTM Retire ments
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Increasing Lessor Market Share
12
Percentage of global fleet owned by lessors has increased steadily
Attractive value proposition for airlines
100% off balance sheet financing
Transfer of residual risk
Manage fleet capacity, particularly during downturns
We expect the percentage of leased aircraft will continue to increase
3%
17%
24%
32%
0%
5%
10%
15%
20%
25%
30%
35%
1980 1990 2000 2009
Percentage of Global Fleet Leased
Source: Ascend (www.ascendworldwide.com ).
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1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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World Class Platform
ORIGINATION &
PLACEMENT
10 Professionals
TECHNICAL &
ENGINEERING
10 Professionals
LEGAL & CONTRACT
MANAGEMENT
12 Professionals
76 Full-Time
Employees
KEY AIRCRAFT LEASING FUNCTIONS
In-house capabilities across all aircraft leasing functions
Experienced management team drawn from leading industry
players
Rigorous portfolio management monitored from business, riskand technical viewpoints
Complete focus on our own portfolio
Team structured to source and execute opportunistic
transactions
Fleet acquired via 65 transactions with 54 counterparties
Acquisitions, leasing, sales and freighter conversions
Significant platform scalability potential
Global presence with offices in Stamford, Dublin and Singapore
Strong freighter market in-house skills to help optimize residual
values
IndustryLeading
Team
Global
Presence
Own FleetFocus
ProactivePortfolio
Management
In-HouseFreighterExpertise
14
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Demonstrated Servicing Track Record
Since inception, more than 125 aircraft placed on lease with over 60 customers
Excellent performance amidst volatile economic conditions
Q3 2010 revenue utilization of ~100% and rental yield of 14.1%
(1) Yield is calculated as lease rental revenue / average NBV.
Figures as of 9/30/10
15
11%
12%
13%
14%
15%
16%
80%82%
84%
86%
88%
90%
92%
94%
96%
98%100%
Q1:07 Q2:07 Q3:07 Q4:07 Q1:08 Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 Q3:09 Q4:09 Q1:10 Q2:10 Q3:10
Historical Revenue Utilization and Yield
Utilization Yield
(1)
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Capitalizing on Market Opportunities
747-400 Investment Example:
Purchased three off-lease 747-400 aircraft in 2007
Freighter conversion feedstock
Near-term conversion slot availability at attractivepricing
A380 delays led to strong short-term demand for 747-
400 passenger aircraft
Signed passenger to freighter conversion
agreement for all three aircraft
One aircraft inducted almost immediately Placed other two aircraft at Singapore Airlines and Air
India on short-term leases to lead into the remaining
freighter conversion slots
First two converted freighters delivered on long-
term leases in 2008 to World Airways
Third aircraft sold at the end of the short-termpassenger lease
Freight market slowdown changed our plan
Took on transition maintenance planning / monitoring
Terminated conversion agreement
Closed sale in December 2008
16
Nimble asset management
Ability to capitalize on marketopportunities
Technical, lease placement andsales capabilities
Demonstrates:
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Proactive Asset Management Approach
Disciplined approach to maximizing residual values
Methodical approach to exploiting the best available opportunity whether lease placement,
sale or cargo conversion
21 aircraft sold or committed for sale with a total sales price of more than $400 million
Leveraging our world-wide connections
Have utilized freighter conversion as a way of extending an aircrafts useful life
In-house cargo market expertise
17
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Proactive Portfolio Management
Narrowbody Classic Freighter Conversion Example:
4 x 737-400 aircraft operating in India with leases
expiring in 2009
AYR desire to reduce exposure in India
Marketing team identifies an affiliate of the Chinese
Post Office for long-term freighter lease
Lack of feedstock makes conversion slot
availability/pricing favorable
Building the deal:
Freighter lease LOI signed in late 2007
Competitive bid process for conversion work
Negotiated lease amendments with returning customer
to line up conversion timing and return conditions
Complex transaction
First of type into China
Two transitions per aircraft Lining up the financing, legal and tax issues among the
various parties in multiple jurisdictions
Successful realization on the investment
All aircraft converted and delivered by Q1:10
Signed sales agreement with closing expected in Q4:10
or Q1:11
18
Demonstrates:
Ability to realize on value-add
through sale
Technical capability to managefreighter conversion
Early work to find the bestredeployment opportunity
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19
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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(1) Percentage of NBV. Figures as of 9/30/10
(2) Includes one A330-200 Freighter
Modern Portfolio with Strong Revenue Stream
Diversification Aircraft Type(1)
20
Modern commercial jet portfolio
89% by value is latest generation of
technology
Investments oriented to early and middle
part of an aircrafts production
Longer useful lives than last off the line
units
30% of our portfolio by value in cargo
aircraft
Diversification by end market
Excellent lessee performance throughout
downturn
Long remaining average lease term
Provides strong cash flow performance
A320 Family16%
A330s (2)
22%
737 NGs18%
747-400 Ftrs24%
767s & 777s9%
737 & A320Classics
4%
757s3%
OtherFreighters
4%
Other11%
# Lessees / # Countries 63 / 36
Lease Term 4.6
Freighter Lease Term 7.3
Weighted Average Age 11.2
Portfolio Statistics(1)
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Diversified Customer Base
21
Portfolio spread across a variety of carriers around the world
Largest customer exposure is less than 7% of net book value
Combined, the top 10 customers represent 48% of net book value
As of 9/30/10.
Asia
23%
Europe46%
LatinAmerica
9%
Middle East& Africa
11%
NorthAmerica
11%
Geographical Diversity(*)
(*) Percentage of NBV. Figures as of 9/30/10.
% of NVB Customer Country # Aircraft
Greater than 6%per customer
Emirates United ArabEmirates
2
Martinair (1) Netherlands 5
3% to 6% percustomer
US Airways USA 8SriLankan Airlines Sri Lanka 5
Avianca Colombia 2China Eastern Airlines (2) China 8
HNA Group (3) China 7Iberia Airlines Spain 6
GOL (4) Brazil 6Airbridge Cargo (5) Russia 1
(1) Martinair is a wholly owned subsidiary of KLM. Although KLM does not guarantee Martinairs obligations under the relevant lease, if we combined Martinair
with our one aircraft on lease with KLM, the two, together with another affiliated customer, represent 11% of flight equipment held for lease.
(2) Includes the aircraft leased to Shanghai Airlines, which was recently acquired by China Eastern Airlines. China Eastern Airlines does not guarantee the
obligations of the aircraft we lease to Shanghai Airlines.
(3) Seven aircraft on lease to affiliates of the HNA Group, although the HNA Group does not guarantee the leases.
(4) GOL has guaranteed the obligations of an affiliate, VRG Linhas Aereas, and accordingly, the two are shown combined in the above table.
(5) Guaranteed by Volga-Dnepr.
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Very Few Unplaced Aircraft through 2011
Lease roll-offs are well dispersed; three scheduled lease expirations left to place in 2010-11
All 2010 scheduled lease expirations have executed or committed leases, renewals, sales or lease
LOIs
11 of 13 2011 scheduled expirations placed
Eight aircraft have executed or committed leases or lease renewals
Two aircraft subject to sales agreements
One aircraft with a signed letter of intent for lease
Starting to make progress on 2012 lease roll-off
Scheduled Lease Expiration Status
22
2
17
9
2
2
0
4
8
12
16
20
2010 2011
Sale Agreement
Signed or LOI for
Extension/Placement
Marketing
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New Order Airbus A330
23
Program is in very good shape
11 of 12 new Airbus A330 aircraft subject to long-term leases
Executed letter of intent for 12th aircraft to deliver in spring 2012
Completed acquisition and delivery of first four aircraft subject to long-term leases
Two A330-200 passenger aircraft to Avianca during 2009
Two A330-200F freighters to Hong Kong Airlines, an affiliate of HNA Group, in September and
November 2010
~$700 million in remaining deliveries spread during H1 2011 H1 2012
Built-in growth
Strong A330 demand due to recovery in long-haul premium travel
787 delays also contributing
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24
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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$100
$235
$350 $326
$232$183
$381
$583 $571
$393
$0
$200
$400
$600
2006 2007 2008 2009 YTD 9/30/10
ANI+D&A Revenue
Strong Financial Performance
Consistent lease rental revenue drives strong cash flow
Ended Q3:10 with $310.9 million of unrestricted cash and $190.3 million of restricted cash
(1) Adjusted Net Income plus Depreciation and Amortization excludes gains from assets sales, charges related to
interest rate contracts and other non-recurring charges.25
(1)
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Conservative Long-Term Capital Structure
(1) As of 9/30/10. Book Equity excludes mark to market of derivative liabilities of $217 million.
$2.4 billion
Net Debt(1)
$3.9 billion aircraft
132 aircraft(1)
$1.5 billionBook Equity(1)
Established access to financial markets
Net debt to book equity 1.6 to 1
No immediate financing needs, earliest scheduled maturity 2015
26
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Liquidity and Long-Term Debt
27
Ended Q3:10 with $310.9 million of unrestricted cash and $190.3 million of restricted cash
Continued strong cash flow performance from portfolio
Long-Term Debt Summary as of September 30, 2010
$ millions, except # of aircraft Maturity # Aircraft Interest Rate(1) Outstanding
Securitization No. 1(2) Jun 31 33 5.78% $ 420.4
Securitization No. 2(2) Jun 37 55 5.53% 1,013.0
Term Financing No. 1(2) May 15 28 5.79% 666.1
ECA Supported Financings May-21 Aug-22 3 2.65% - 4.48% 201.6
A330 PDP financing - 2.76% 82.8
2010-1 Notes Aug-18 - 9.75% 296.0
Unencumbered Aircraft - 13 - -Total 132 5.89% $ 2,679.9
(1)
2
Reflects current swap rate or index + spread, for all financings except the ECA financings which are fixed rate debt
For Securitization No. 1 and No. 2 and Term Financing No. 1, all cash flows available after expenses and interest will be
applied to debt amortization if the debt is not refinanced by June 2011, June 2012 and May 2013, respectively
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Estimated Term Financing Debt Amortization Profile
28
$46$64 $63 $63
$78 $76
$26$-
$99 $98
$153 $148 $155 $132$113
$99
$51 $44$72
$91
$384
$-
$100
$200
$300
$400
2011 2012 2013 2014 2015 2016 2017 2018
Sec. No.1 Sec. No.2 Term No.1
Expect YE 2010 lease rental exit run rate of ~$560 million annualized including $92 million from unencumbered
aircraft assets
All aircraft portfolio term financings are non-recourse to Aircastle Limited and each deal pays remarketing
servicer and admin fees to Aircastle
Estimated debt amortization profile assumes each financing runs to estimated full payout date, or, to final
maturity of for Term No. 1 of May 2015
Debt amortization after 5th anniversary of each financing based on excess cash flows available from rents, net
maintenance funding and proceeds from asset dispositions after payments for expenses and interest payments,
all of which are based on current estimates
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Airbus A330 Program Financing
29
Successfully financed first four deliveries with Export Credit Agency (ECA)-backed debt
Our ECA debt is guaranteed by COFACE, French government export credit agency
Substantial progress made on A330 financing during 2010
In June, closed $108 million loan facility to finance a portion of the pre-delivery payments on
six new Airbus A330-200 aircraft
Received commitments to finance next seven deliveries based on ECA support
Other financing sources available
Received ~$700 million in commitments from Sumitomo Mitsui Banking Corporation, Citibank
and Bank of Tokyo-Mitsubishi UFJ to finance nine new A330s based on ECA support
$69 million funded by Citibank for 12 years @ 2.645% for September 2010 delivery
$69 million funded by BTMU for 12 years @ 2.685% for November 2010 delivery
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30
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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Financing Sources for New Aircraft
31
Commercial
Banks
$18B
Commercial
Banks
$16B
Export Credit
Agencies
$21B
Export Credit
Agencies
$20B
Cash
$14B
Cash
$13B
Lessors
$9B
Lessors
$6.5B
$1B $0.5B$2.5B $2B
$1B $1.5B$2.5B $2.5B
2009 Actual ($69B) 2010 Forecast ($62B)
Tax
Equity
RJ ECAS
Manufacturers
Tax
Equity
RJECAS
CAP Mkts
Manufacturers
CAP Mkts
Export credit agencies filled in the financing gap
during last years financial crisis
Supported one third of new deliveries in 2009 vs.normal level of ~15%
Played an important stabilizing role last year
Similar level of activity this year
Smaller role by lessors since many were alsoaffected badly by the financial crisis
Parent company issues figured in many cases
Many lessors have looked to ECA financing too
Commercial lending by banks still at very low levelsdespite the financial markets recovery
Strong regional bias/orientation
Source: Boeing Capital.
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US Capital Markets Have Recovered Faster
U.S. institutional market has recovered quickly
Deep and broad pool of investors
Over $9 billion of aircraft lessor deals without ECA support
Mix of secured and unsecured deals
Market access for borrowers much more limited than in bank market
Significant rally in aircraft-backed securitizations
32
$60
$64
$68
$72
$76
$80
$84
$88
$92
Pric
e
Aircastle 2006-1A Genesis 2006-1A Babcock 2007-1A Airspeed 2007-1G1 Aercap 2007-1
Historical Commercial Aircraft ABS Trading Levels
Source: Goldman Sachs.
These are historical estimated prices and do not purport to be prices at which securities can currently be purchased or sold.
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33
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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Aircraft Sales Activity Still Low
34
Aircraft trading levels are coming back from all time lows
Sharp drop caused by the collapse of the credit markets
Weve seen a modest recovery in 2010, but still well off historical levels, particularly for mid-lifeaircraft
Source: Ascend (www.ascendworldwide.com ).
Used Aircraft Sales Historical Transaction Volume
0
50
100
150
200
250
300
350
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2007 2008 2009 2010
http://www.ascendworldwide.com/http://www.ascendworldwide.com/ -
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Aircraft Valuation Trends
Trends in values are comparable to the decline seen during the last downturn
However, financial market liquidity is worse now, limiting transaction volume
We believe there are excellent investment opportunities for those with investable funds
Midbody and widebody aircraft values have been more volatile than narrowbodies
We believe narrowbody values are turning the corner (appraisal data tends to lag the market)
Midbody and widebody aircraft values will likely recover with the return of long-haul market demand
Market to Base Value Relationships Since 1997
35
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Widebodies - 5 Year Constant Age
A330-200 A330-300 767-300ER 777-200ER
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Narrowbodies - 5 Year Constant Age
A319-100 A320-200 737-700 737-800
Source: Ascend (www.ascendworldwide.com ).
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Increasing Rental Levels
Aircraft rentals dropped sharply during 2009,
after peaking in late 2007
Declines for new generation aircraft were more
modest during 2008s fuel price spike
Classic narrowbody and widebody lease rates were
hit hard as were freighters
Recovery in lease rental rates for newer 737NGs
and A320s began late last year
Recovery in widebody rentals is at an earlier stagebut accelerating
Airlines appear far more willing to make long-term
fleet commitments now vs. last year
Passenger rental movements tend to lag the
economy; freighter rentals more contemporaneous
Currently, lease rates for latest generation aircraft
a little better than half way back
Airline demand continuing to strengthen
Strong, ongoing recovery for freighters
36
Time Period Monthly Rent
Market Peak: Late 2007 $300 325
Market Trough: Early 2009 $235 270
Current Market: Dec 2010 $280 - 300
Illustrative Rental Rates ($000s)
Time Period Monthly Rent
Market Peak: Late 2007 $900 1,000
Market Trough: Early 2009 $600 - 700
Current Market: Dec 2010 $750 - 850
15 Year Old 747-400 Converted Freighter
Note: Aircastle market estimates assuming 5-6 year lease term for
737 and 747-400 freighter and 6-8 year lease term for A330 and
orderly market placement.
5 Year Old 737-800
Time Period Monthly Rent
Market Peak: Late 2007 $750 800
Market Trough: Early 2009 $300 350
Current Market: Dec 2010 $550 - 600
New A330-200
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Aircraft Acquisitions
37
~$700 Million of Built-in Growth via Airbus A330 Program
New aircraft deliveries Q1:11 H1:12
$310 Million in Additional Investments
Acquired three Airbus A330 aircraft in sale leaseback with SriLankan Airlines in Q3:10
Purchased two Boeing 747-400F production freighters in late Q4:10
Expect to deliver both aircraft on long-term leases by year end 2010
Acquired three Boeing 737-800 aircraft in Q4:10
Growing and Attractive Base of Investment Opportunities
Built-in growth and new investments position the company for solid performance in 2011
Leverage Aircastles origination, placement and freight market strengths
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38
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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Key Investments Highlights
Strong Portfolio Utilization and Yield
World Class Management Team with Demonstrated Track Record
Modern Aircraft Portfolio & Diverse Customer Base
Conservative, Long-Term Capital Structure with Multiple Funding Sources
Large and Growing Market
39
Built-in Growth Combined with New Investments Position the Company for Solid
Performance in 2011
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40
1. Introduction
2. Industry
3. Company Profile and Servicing Capabilities
4. Portfolio Overview
5. Financial Performance and Capital Structure
6. Financial Markets
7. Investment Opportunity
8. Conclusion
9. Appendix
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Supplemental Financial Information
(In thousands, except per share amounts)
41
Three Months Ended
September 30,
Nine Months Ended
September 30,
2009 2010 2009 2010
Revenues................................................................................ $ 165,740 $ 132,247 $ 434,791 $ 392,992
EBITDA ................................................................................ $ 135,035 $ 116,081 $ 377,111 $ 356,397
Adjusted net income ...... ...................................... ................. $ 35,668 $ 12,561 $ 83,677 $ 53,638Adjusted net income allocable to common shares ................. $ 35,060 $ 12,396 $ 82,295 $ 52,872
Per common share - Basic ................................................. $ 0.45 $ 0.16 $ 1.06 $ 0.67Per common share - Diluted .............................................. $ 0.45 $ 0.16 $ 1.06 $ 0.67
Adjusted net income plus depreciation andamortization ........................................................................... $ 92,790 $ 72,467 $ 247,975 $ 231,867
Adjusted net income plus depreciation andamortization allocable to common shares .............................. $ 91,208 $ 71,513 $ 243,880 $ 228,555
Per common share - Basic ................................................. $ 1.17 $ 0.91 $ 3.13 $ 2.91Per common share - Diluted .............................................. $ 1.17 $ 0.91 $ 3.13 $ 2.91
Basic common shares outstanding ...................................... ... 78,013 78,537 77,977 78,470Diluted common shares outstanding ................................... ... 78,013 78,537 77,977 78,470
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Reconciliation of GAAP to Non-GAAP Measures
(In thousands)
42
Three Months EndedSeptember 30, Nine Months EndedSeptember 30,
2009 2010 2009 2010
Net income ................................................................................... $ 33,458 $ 8,569 $ 79,500 $ 45,587Depreciation ................................................................................. 53,130 55,703 156,379 164,272Amortization of net lease discounts and lease incentives ............. 3,992 4,203 7,919 13,957Interest, net ................................................................................... 43,032 47,453 127,925 128,578
Income tax provision .................................................................... 1,423 153 5,388 4,003
EBITDA ....................................................................................... $ 135,035 $ 116,081 $ 377,111 $ 356,397
We define EBITDA as income from continuing operations before income taxes, interest expense, and depreciation and amortizatio n. Weuse EBITDA to assess our consolidated financial and operating performance, and we believe this non -GAAP measure is helpful inidentifying trends in our performance. Using EBITDA assists us in comparing our operating performance on a consistent basis b yremoving the impact of our capital structure (primarily interest charges on our outstanding debt) and a sset base (primarily depreciationand amortization) from our operating results.
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Reconciliation of GAAP to Non-GAAP Measures
(In thousands)
43
Management believes that Adjusted Net Income (ANI) and Adjusted Net Income plus Depreciation and Amortization (ANIDA), wh enviewed in conjunction with the Companys results under GAAP and the above reconciliation, provide useful information about operatingand period-over-period performance, and provide additional information that is useful for evaluating the underlying operating performanceof our business without regard to periodic reporting elements related to interest rate derivative accounting as well as gains/(losses) relatedto flight equipment and debt investments. Additionally, management believes that ANIDA provides investors with an additional metric toenhance their understanding of the factors and trends affecting our ongoing cash earnings, from which capital investments are made, debt isserviced and dividends are paid. However, ANI and ANIDA are not measures of financial performance or liquidity under GAAP and ,accordingly, should not be considered as alternatives to net income (loss) or cash flow from operating activities as indicators of operati ngperformance or liquidity.
__________________
(1) Included in Interest, net
(2) Included in Other income (expense)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
LTM EndedSeptember 30,
20102009 2010 2009 2010
(Dollars in thousands)
Net income ................................................................................. $ 33,458 $ 8,569 $ 79,500 $ 45,587 $ 68,579Ineffective portion and termination of cash flow hedges ) .... 1,633 1,077 4,764 3,299 3,922Mark to market of interest rate derivative contracts ) ............ 608 444 (556) 990 587Write-off of deferred financing fees........................................ 2,471 2,471 2,471(Gain) loss on sale of aircraft ) .............................................. (162) (162) 1,291 291Loss on sale of debt investments(2) ......................................... 131 131 (5,096)
Contract termination ..............................................................
4,000Adjusted net income .................................................................. 35,668 12,561 83,677 53,638 74,754
Depreciation ............................................................................ 53,130 55,703 156,379 164,272 217,374Amortization of net lease discounts and lease incentives ........ 3,992 4,203 7,919 13,957 17,267
Adjusted net income plus depreciation and amortization ........... $ 92,790 $ 72,467 $ 247,975 $ 231,867 $ 309,395
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Supplemental Financial Information
(In thousands)
44
Three Months Ended
September 30, 2010
Nine Months Ended
September 30, 2010
Shares Percent(2)
Shares Percent(2)Weighted average shares
Common shares outstandingBasic 78,537 98.68 % 78,470 98.57 %Unvested restricted common shares 1,048 1.32 % 1,137 1.43 %Total weighted average shares outstanding 79,585 100.00 % 79,607 100.00 %
Common shares outstandingBasic 78,537 100.00 % 78,470 100.00 %Effect of dilutive shares(1) Common shares outstanding - Diluted 78,537 100.00 % 78,470 100.00 %
Net income allocation
Net income $8,569 100.00 % $ 45,587 100.00 %
Distributed and undistributed earningsallocated to unvested restricted shares (113) (1.32)% (651) (1.43)%
Earnings available to common shares $8,456 98.68 % $ 44,936 98.57 %
Adjusted net income allocationAdjusted net income $12,561 100.00 % $ 53,638 100.00 %Amounts allocated to unvested restricted
shares (165) (1.32)% (766) (1.43)%
Amounts allocated to common shares $12,396 98.68 % $ 52,872 98.57 %
Adjusted net income plus depreciation andamortization allocationAdjusted net income plus depreciation and
amortization $72,467 100.00 % $231,867 100.00 %Amounts allocated to unvested restricted
shares (954) (1.32)% (3,312) (1.43)%
Amounts allocated to common shares $71,513 98.68 % $228,555 98.57 %
(1)The Company had no dilutive common share equivalents for the periods presented.(2)
Percentages rounded to two decimal places.
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Supplemental Financial Information
(In thousands)
45
(1)
The Company had no dilutive common share equivalents for the periods presented.
(2) Percentages rounded to two decimal places
Three Months Ended
September 30, 2009
Nine Months Ended
September 30, 2009
Shares Percent(2) Shares Percent(2)Weighted average shares
Common shares outstandingBasic 78,013 98.30 % 77,977 98.35 %Unvested restricted common shares 1,353 1.70 % 1,309 1.65 %
Total weighted average shares outstanding 79,366 100.00 % 79,286 100.00 %
Common shares outstandingBasic 78,013 100.00 % 77,977 100.00 %Effect of dilutive shares(1)
Common shares outstanding - Diluted 78,013 100.00 % 77,977 100.00 %
Net income allocation
Net income $33,458 100.00 % $ 79,500 100.00 %Distributed and undistributed earnings
allocated to unvested restricted shares (570) (1.70)% (1,313) (1.65)%Earnings available to common shares $32,888 98.30 % $ 79,187 98.35 %
Adjusted net income allocationAdjusted net income $35,668 100.00 % $ 83,677 100.00 %Amounts allocated to unvested restricted
shares (608) (1.70)% (1,382) (1.65)%
Amounts allocated to common shares $35,060 98.30 % $ 82,295 98.35 %
Adjusted net income plus depreciation and
amortization allocationAdjusted net income plus depreciation andamortization $92,790 100.00 % $247,975 100.00 %
Amounts allocated to unvested restrictedshares (1,582) (1.70)% (4,095) (1.65)%
Amounts allocated to common shares $91,208 98.30 % $243,880 98.35 %
l bl
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Contractual Obligations
46
See footnotes on next page.
Payments Due By Period as of November 30, 2010
Total
Less than
1 Year 1-3 years 3-5 years
More than
5 Years
Principal payments:
2010-1 Notes(1)
300,000$ -$ -$ -$ 300,000$
Securitization No. 1(2)
416,891 43,426 126,119 140,511 106,834
Securitization No. 2(3)
1,005,945 96,477 250,227 304,209 355,032
Term Financing No. 1(4)
647,176 52,105 112,621 482,449 -
ECA term Financings(5)
268,895 19,643 41,402 44,422 163,428
A330 PDP Facil ity (6) 88,488 88,488 - - -Total principal payments 2,727,393 300,138 530,370 971,591 925,294
Interest payments:
Interest payments on debt obl igations(7)
510,486 73,062 162,438 145,563 129,423
Interest payments on interest rate derivatives (8) 203,283 84,882 84,302 31,397 2,702
Total interest payments 713,769 157,944 246,740 176,960 132,125
Office Leases (9) 2,925 1,107 1,363 352 103
Purchase obl igtions (10) 499,550 387,018 112,532 - -
Total 3,943,637$ 846,208$ 891,004$ 1,148,903$ 1,057,522$
(Dollars in thousands)
C l Obli i
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Contractual Obligations - Footnotes
(7) Future interest payments on variable rate, LIBOR-based debt obligations are estimated using the interest rate in effect at
November 30, 2010.
(8) Future interest payments on derivative financial instruments are estimated using the spread between the floating interest
rates and the fixed interest rates in effect at November 30, 2010.
(9) Represents contractual payment obligations for our office leases in Stamford, Connecticut; Dublin, Ireland and Singapore.
(10) At November 30, 2010, we had aircraft purchase agreements including the acquisition of eight New A330 Aircraft from
Airbus.
(1) Includes scheduled balloon payment on August 1, 2018.
(2) For this non-recourse financing, includes principal payments based on amortization schedules so that the loan to assumed
aircraft values are held constant through the June 2011 payment date; thereafter, estimated principal payments for this
financing are based on excess cash flows available from forecasted lease rentals, net maintenance funding and proceeds from
asset disposition after the payment of forecasted operating expenses and interest payments, including interest payments on
existing swap agreements and policy provider fees.
(3) For this non-recourse financing, includes principal payments based on amortization schedules so that the loan to assumed
aircraft values are held constant through the June 2012 payment date; thereafter, estimated principal payments for this
financing are based on excess cash flows available from forecasted lease rentals, net maintenance funding and proceeds from
asset disposition after the payment of forecasted operating expenses and interest payments, including interest payments on
existing swap agreements and policy provider fees.
(4) For this non-recourse financing, includes scheduled principal payments through May 2013; thereafter estimated principalpayments for this financing are based on excess cash flows available from forecasted lease rentals, proceeds from asset
disposition after the payment of forecasted operating expenses and interest payments, including interest payments on ex isting
swap agreements until maturity in May 2015.
(5) Includes scheduled principal payments based upon fixed rate, 12 year, fully amortizing loans.
(6) Includes principal payments based upon the scheduled delivery of aircraft. The final maturity date is the earlier of the
delivery date or nine months after the scheduled delivery date.