Fly Leasing's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Fly Leasing Limited (FLY)

Q2 2012 Earnings Call

August 2, 2012 9:00 am ET


Matt Dallas – Manager, Investor Relations

Steve Zissis – President and Chief Executive Officer, BBAM

Colm Barrington – Chief Executive Officer and Director

Gary Dales – Chief Financial Officer


Gary Liebowitz – Wells Fargo Securities

John D. Godyn – Morgan Stanley & Co. LLC

Jamie Baker – JPMorgan

Victor Zajdel – Maxim Group

Glenn Engel – Bank of America/Merrill Lynch



Good morning. My name is Christy, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the FLY Leasing Limited Second Quarter 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Matt Dallas, you may begin your conference.

Matt Dallas

Thank you, operator. Good morning, everyone. I’m Matt Dallas, the Investor Relations Manager of FLY Leasing and I’d like to welcome you to our second quarter 2012 earnings conference call. FLY Leasing, which we will refer to as FLY or the company throughout this call, issued its second quarter earnings press release on July 25, which is posted on the company’s website at

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 of 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 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 the call will be available for one year on the company’s website.

I’d now hand the call over to Steve Zissis, the President and CEO of BBAM, for an update on the aircraft leasing industry. Steve?

Steven Zissis

Good morning, everyone. I’d like to make a few remarks regarding the health of the overall leasing market. In general, I’d describe the dynamics in the industry to be relatively healthy notwithstanding the uncertainty in Europe and slowing of the economic recovery in the United States and certain other jurisdiction. In particular, the demand for used Boeing narrow-body remains relatively active with good demand coming from Russia, Central Asia, Latin America and certain parts of Southeast Asia.

Lease rates remained stable with a slight uptick for the 737-800. On the other side, demand for used A319s and 320s is slowly recovering as many airlines keep bargaining these rates at levels attractive enough to replace older and less productive aircrafts. We see this is a healthy development as airlines are reacting to the marketplace.

We believe that lease rates for A319s have reached the bottom and we expect to see rates slowly improve over the next 12 months. For the more popular A320s, we’re seeing a slight improvement in the lease rates as demand continues to improve, while supply has been reduced to a more normal level. As we grow our fleet and evaluate investment opportunities, we continue to see still lease back interest from the lesser community, very strong for new equipment for both Boeing and Airbus.

We are pursuing these acquisition opportunities aggressively; however, our ability to win these bids will be tempered by our desire to ensure that we are earning attractive equity returns on any investment. We continue to see good relative value in the mid-aged equipment, but prefer to invest in newer equipments as long as the return profile meets our requirements.

With flight fleet now well in excess of 100 aircrafts, we have been focused on selling aircraft opportunistically to make gains relative to our book values and to take advantage of proposals that we believed offer full value for the equipment. Two of the aircrafts that we sold in the prior quarter were 17-year-old and one aircraft was 11 years old. The sales of these aircrafts is also consistent with our desire to improve the average age of our portfolio and to refresh with this new investment.

Finally, I’m pleased to report that FLY’s 15% ownership in BBAM yielded another quarter of attractive returns. BBAM’s asset management business continues to grow profitably and we expect its contribution to FLY’s bottom line to continue in the foreseeable future.

Now, I’ll hand over the call over to Colm.

Colm Barrington

Good morning, everyone, and thank you all for joining us on this morning’s call. We are obviously pleased to report very strong financial results for the second quarter following our strong first quarter earnings. Our second quarter net income is $25.7 million or $0.99 per share brings our six month earnings to $46.1 million or $1.77 per share as compared to $6.9 million or $0.26 per share in the same period of last year.

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