Babcock & Brown Air Limited Q1 2010 Earnings Call Transcript

Babcock & Brown Air Limited Q1 2010 Earnings Call Transcript
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Babcock & Brown Air Limited (FLY)

Q1 2010 Earnings Call

May 5, 2010 9:00 am ET

Executives

Matthew Dallas - Investor Relations Manager

Steve Zissis – President and CEO

Colm Barrington - Chief Executive Officer

Gary Dales – Chief Financial Officer

Analysts

Richard Shane – Jefferies & Co.

Andrew Light – Citi

William Mansfield - Barclays Capital

Presentation

Operator

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Good morning. My name is Rashira and I will be your conference operator today. At this time I would like to welcome everyone to the first quarter 2010 earnings conference call. [Operator instructions]. At this time, I would like to turn the call over to Mr. Matt Dallas of Investor Relations.

Matthew Dallas

Thank you. Good morning everyone. I’m Matt Dallas, the Investor Relations Manager of Babcock & Brown Air and I’d like to welcome everyone to our first quarter earnings conference call. Babcock & Brown Air, which we will refer to as B&B Air, or the Company throughout this call, issued its first quarter earnings results press release earlier today, which is posted on the Company’s website at www.babcockbrownair.com.

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

I’d 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 expectation and assumptions of B&B Air’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. Pease refer to these sources for additional information. B&B Air 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 B&B Air and cannot be distributed or broadcast in any form without the express written consent of the company. A replay of this earnings call is available for two weeks from today. An archived webcast of the call will be available for one year on the company’s website.

I will now hand over the call over to Steve Zissis, the President and CEO of BBAM, the company that manages and services B&B Air’s fleet, to give you his view on industry conditions.

Steve

Zissis

Thank you Matt, and thank you everyone for joining us on our first quarter earnings call. As many of you are already aware, the BBAM management team in partnership with B&B Air has recently completed the acquisition of Babcock & Brown’s aviation franchise. As the President and CEO of BBAM, it is with excitement that I continue to lead the business forward into this new chapter of growth and expansion.

Our team built a fantastic franchise in aircraft leasing at Babcock & Brown over the past 20 years, and we have successfully preserved the business in its entirety as part of this transaction. While the BBAM sales process took longer than any of us expected, it’s worth noting that throughout this period of uncertainly, the business was consistently profitable and generated significant amount of positive cash flow.

We’ve kept substantially all of the BBAM management team and core employee groups together, and the same team will lead the business forward in the years to come. The BBAM management team has contributed a significant amount of its own capital into the transaction and is fully invested alongside B&B Air.

We will be growing our aircraft leasing and management business and we couldn’t be better positioned to continue providing class leading services to B&B Air in the years ahead. As part of this transaction, and adopting best practices in corporate governance, I’ve handed the role of Chairman of the Board of B&B Air into the capable hands of Joe Donavan, our former lead independent director.

Joe has been on the board since our IPO and continues on as an independent director and Chairman of the audit committee. I will continue on as a director of B&B Air and will remain President and CEO of BBAM. With the uncertainty that hung over B&B Air as a result of Babcock & Brown’s financial distress now behind us, we intend to renew our focus on growth.

Activity in the commercial aviation business continues to improve. We are seeing strong demand from the emerging markets, particularly for Boeing next generation narrow body equipment. As I mentioned on the last call, the emerging market demand is being underpinned by the positive economic growth underway in these jurisdictions and the lack of over-ordering for the new aircraft in recent years. These trends are continuing and there are not enough aircrafts on order to support the growth.

Conversely, for the most part, airlines in the developed are coping with slower economic growth, historically low premium passenger traffic and high cost of capital. This has limited the amount of demand we are seeing from the developed regions. Not only have aircraft values stabilized in recent months, but they have also started increasing along with overall recovery in the sector.

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