Fly Leasing's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Fly Leasing Ltd (FLY)

Q1 2012 Earnings Call

May 3, 2012 9:00 am ET

Executives

Matt Dallas Investor Relations Manager

Steven Zissis – President and Chief Executive Officer of BBAM

Colm Barrington – Chief Executive Officer

Gary Dales – Chief Financial Officer

Analysts

Gary Liebowitz – Wells Fargo Securities

John Godyn – Morgan Stanley

Andrew light – Citigroup

Glenn Engel – Bank of America Merrill Lynch

Helane Becker – Dahlman Rose & Company

James Ellman – Seacliff Capital

Joe Gill – Blackstone

Jonathan Evans – Edmunds White Partners

Presentation

Operator

Good morning. My name is [Randy] and I will be your conference operator today. At this time, I would like to welcome everyone to the FLY Leasing Limited First Quarter 2012 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. (Operator Instructions) Thank you. 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 first quarter 2012 earnings conference call. FLY Leasing, which we will refer to as FLY 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.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 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 cannot 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. And an archived webcast of the call will be available for one year on the Company's website.

I’d now like to hand the call over to Steve Zissis, the President and CEO of BBAM, to give you his insight and views on the aircraft leasing industry. Steve?

Steven Zissis

Thank you, Matt, and thank you for joining us today. As we progressed into the peak demand seasons for new and used aircraft, we are delighted to report the demand remain solid and most of the excess supply thrown into the market from the bankruptcies reported last quarter, has now been absorbed, removing a large supply overhang from the market. However, this supply situation especially for Airbus narrow bodies resulted in lower lease rate and weaker lease terms.

Lease rates for NG’s remain firm with only a small change from prior year remarketings. But indicative demand suggests that lease rates will remain firm and possibly move up as expected demand outstrip supply.

As I indicated, lease rates for airbus narrow-bodies remain weak with rates down some 20% to 30% from prior year rates. However, these declines are partially offset by lower interest rates. The situation especially in a competitive global economy should not last and we expect this market to firm in the next few quarters, providing no additional unexpected supply that’s thrown into the market.

We continue to see opportunities on the sale leaseback front although new aircraft sale leasebacks remain actively bid by aggressive capital sources. We see more attractive opportunities in the used and mid-life aircraft markets where less capital competes and available financing is very limited.

On the wide-body front, we’re starting to see some attractive deals as less capital is willing to compete in this area and mainline credit start a heavy program of new deliveries in 2013. As we reported on our last call, our traditional aviation banks remain active albeit at a slower pace and with more conservative lending parameters. However, on a more positive note, the U.S. capital markets have finally awakened. And as evidence by a flurry of deals in the past six months, we expect the capital markets to play a bigger role and financing less source in 2012.

Even in the BBAM size and history aviation, we provide a very scalable platform for FLY to grow and capture opportunities not otherwise available to smaller leasing companies. We managed 450 aircrafts on lease to 58 airlines around the world with an active management team comprised of a 110 people.

I’ll now turn the call over to our CEO, Colm Barrington.

Colm Barrington

Thank you, Steve and good morning everyone and thank you for joining us on this morning's call. I would like to address four aspects of FLY’s Q1 quarter activities this morning: our earnings, our cash generation, our financings and our dividend.

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