Fly Leasing Limited
Q3 2014 Earnings Call Transcript

Published: 13 Nov 2014

[Operator:]

Good day ladies and gentlemen and welcome to the FLY Leasing Third Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question and answer session and instruction will be given at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I'd now like to turn the call over to host for today Mr. Matt Dallas. Sir, you may begin.

[Matt Dallas:]

Thank you. Good afternoon everyone. I'm Matt Dallas, the Investor Relations Manager at FLY Leasing. And I’d like to welcome everyone to our third quarter 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 earlier today, which is posted on our company’s website at www.flyleasing.com. We have a slide presentation today that accompanies the call which is available to participants on today's webcast. If you are not accessing the webcast, you can find a copy of today's presentation in the Investor Relations Section of our website on the presentation’s page. If you are listening to both, the live call, and the webcast, you may want to mute your computer as there will be a slight delay in the webcast audio. 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 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 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 the property of FLY and cannot be distributed or broadcast in any form without the express written consent of the company. A replay of this call is available for one week from today and an archived webcast of the call will be available for 90 days on the company’s website. I would now hand the call over to Steve Zissis, the President and CEO of BBAM. Steve?

[Steve Zissis:]

Thank you Matt. And welcome to our third quarter 2014 earnings call. The core themes that I have touched on recent calls all remain intact today. Overall we're operating in a very healthy industry environment. Notwithstanding pockets of geopolitical tensions in a handful of areas around the world. Global passenger traffic is growing at about 6% rate, a very healthy clip for our industry and a demand for our aircraft from our airline customers remain strong in particular in production narrow bodies. Lease rates on these aircraft type remains at high end of recent historical ranges. Also we are seeing many of our airline clients from all over the world looking for additional aircraft to support their plans for further capacity growth in 2015 and beyond. This means that in most cases when it comes time to release equipment at the end of the existing lease term, a very high percentage of these aircraft are renewing with existing leases. It also means that we're able to place these aircraft with a wider array of airlines. You can see the impact of this demand in FLY's fleet utilization statistics with a 100% fleet utilization year-to-date. The impact is also evident when you look at our re-marketing task ahead of the company. FLY originally had 30 scheduled maturities in 2015 and we have already successfully re-marketed 19 of these aircraft. Of the 11 aircraft available, we project a well over half of these will be re-marketed with existing clients. These strong demand trends further support by an ever lowering price of jet fuel in today’s market. We expect that this lower cost of fuel usually the single large expense when operating an airline to support higher airline profitability and provide a nice stable bases for continued growth and passenger traffic and capacity globally. Some of the benefits to lower fuel is offset in certain regions because of the strengthening US dollar relative to other global currencies, but overall the combination of these two price moments leave our industry healthier on a net basis globally. On the acquisition and disposition side of our business, the market continues to be active. FLY’s fleet will grow 20% in 2014 exceeding its 15% annual growth target for the second year running. We continue to work every corner of the market to seek our relative value and attractive returns and the assets we like will be immediately accretive to EPS and cash flow per share. In addition to growing the business carefully we're also selectively selling aircraft to re-balance the portfolio and redeploy capital into newer equipment. We are proud of our track record of selling older aircraft against the book value and reinvest in our capital in the business. Just raise [ph] announced by the company to sell eight older 757’s is another great example. The average age of these out of production aircraft was 16 years and the transaction will on an overall basis generate more cash than the holding value of these assets on FLY’s books. We expect to continue delivering this strategy in the fourth quarter and beyond. I will now turn the call over to Colm.

[Colm Barrington:]

Thank you Steve and thank you everyone for joining us. FLY had a strong third quarter on all accounts, net income, revenue growth, aircraft utilization and rental yield. Our net income of $15.4 million or $0.37 per share is significantly ahead of the same period of last year and our total revenues of 105.5 million were 33% ahead of the same period in 2013 FLY’s third quarter performance was driven by the increase in our fleet size a near 100% fleet utilization and the growth rental yield of 12.7%. On October 9th, we declared a quarterly dividend of $0.25 per share. We continue to be encouraged by industry conditions, experiencing strong demand from airlines and leasing aircraft strong interest from investors and buying aircraft and buoyancy in the capital markets. Global air traffic which is the driver of our industry continues to grow with a 5.8% year-on-year increase reported in the eight months through August. This compares to a long-term industry forecast of 4.7% annually and this is the forecast of which the aircraft manufacturers have based their production rates. Meanwhile many airlines reporting strong profit growth and strengthening balance sheets and this trend is particularly apparent in North America. FLY has contained its pace of fleet growth in the third quarter with a purchase of five aircraft for more than $350 million. Since the end of that quarter we have purchased two more aircraft and contracted to purchase another six for a total cost of $374 million. So year-to-date, FLY spent -- contracted spent over $1 billion on 24 aircrafts, a very positive continuation of our program of fleet renewal. We continue to find attractive opportunities in the sale and leaseback market particularly for new or nearly new aircraft. For 2014, we have set a target of going our fleet by 15%. I'm happy to report that we have all but achieved this target on the first nine months of the year. At September 30th, the net book value of our 121 aircraft was $3.5 billion as compared to $3 billion at December 31, 2013 an increase of 14.6%. We expect to continue this positive growth trajectory in the fourth quarter and into 2015. By the way it should be noted that our fleet growth is less of the book value of aircraft sold in the period and the normal fleet depreciation. Meanwhile, we have not ignored the liability side of our balance sheet raising $400 million in the unsecured bond market in the early October. These bonds combined with FLY's unrestricted cash, positive cash flow from our portfolio and $327 million of available funds in our aircraft acquisition facility provide FLY with ample resources to achieve our 2015 growth targets of 15%. In the nine months to September 30th, FLY acquired 16 aircraft for $664 million and since the end of the quarter we've acquired two more aircraft from 91 million and contracted to purchase six more for $283 million. As a result, our total actual and committed spend in aircraft year-to-date is over $1 billion. These 24 aircraft have an average age of 2.2 years and are on leases with an average remaining term with 9.2 years. Our larger fleet is producing annualized rents of $412 million as of September 30th and this figure will grow as the increase the fleet through year end. So since the beginning of 2013, FLY's portfolio metrics have been significantly trend forward. In this 21 month period, the average age of our fleet has been reduced by 12.8% from 9.4 years to 8.2 years. At the same time, our average remaining lease term has increased by over 50% from 3.2 years to 4.9 years. Our annualized lease rent revenues have increased by 26.4% from $326 million to $412 million. In the same 21 month period, FLY purchased a total of 30 aircraft and sold the total of 18 aircraft increasing our fleet size from 109 aircraft to 121 aircraft and increasing the net book value of our flight equipment from $2.6 billion to $3.5 billion and increase of 33% in this period. This ongoing program of fleet renewal which we intend to maintain will have a further positive impact on FLY's portfolio metrics and as importantly on our earnings and cash flow generation. I look forward to reporting these positive outcomes to shareholders in future calls. FLY continues its program of disposing of older aircraft as reported yesterday, we have contracted to sell eight of our 11 B-757 aircraft to a single party with the sale scheduled to close by the end of 2015 coinciding with the expiries of the leases on each aircraft. These eight aircraft had an average age of 15.7 years on September 30th and so the sales will further contribute to reducing FLY's fleet age. As reported, the total proceeds from the transaction will exceed the net book values of the eight aircraft and will therefore continue FLY's record of selling older aircraft and transactions to produce a premium to our net book values. We believe that this transaction once again reinforces the points that I made in our last call namely the FLY continues to successfully execute sales of older aircraft and also that FLY continues to demonstrate with the market value of its fleet exceeds its net book value. FLY continues to be the leading dividend payer amongst the public aircraft leftovers [ph] there is an annual dividend of $1 per share. On October 9th, we declared our 28th consecutive quarterly dividend since our IPO in 2007. This quarterly dividend of $0.25 per share will be paid to shareholders on November 20th. Since 2008, FLY has declared total dividends of $7.12 per share. There is no doubt that FLY is stable and going dividend continues to enhance shareholder returns. Thank you for your attention. I'll now ask Gary to explain the third quarter and first nine months number in more details. Gary?

[Gary Dales:]

Thank you, Colm. As Colm mentioned, it was an excellent quarter. All metrics are moving in the right direction. We're reporting net income for the quarter of $15.4 million, or $0.37 per share on total revenues of $105.5 million. This compares with net income of $304,000 million and zero cents per share for the same period in 2013. The primary driver is the increase in operating lease revenue as a result of the fleet growth and improved utilization of our portfolio. Operating lease revenue has increased over 30% with most of the increase attributable to an improvement in top line lease rental revenue and $14.12 million of end of lease income. For the nine months ended September 30, 2014, our net income was $40.6 million or $0.95 per share, as compared to net income of $39.1 million or $1.20 per share. Total revenues are up $22.4 million driven by the increase in the top line lease rental revenue which has increased by $46.3 million or 20% to $283.1 million. The increase is due primarily to rents generated from aircraft acquired over the last two years, operating lease revenue increased by only $10.1 million at end of lease revenue for the nine months ended September 30, 2013 totaled $47.6 million versus only $18 million in the current nine month period. During 2014, we have recognized gains of $18.9 million on the sale of eight aircraft. During the same nine month period in 2013 there were 10 aircraft sales and they generated gains of $6.3 million. Total expenses for the third quarter of 2014 were $88.1 million, this compares to $78 million for the same period in the previous year. The increase in expenses is primarily due to depreciation on aircraft acquired during 2013 and 2014 and the increase in interest associated with our senior unsecured notes issued last December, partially offset by a reduction in maintenance expenses. It is worth noting that our interest expense in the third quarter included 4.3 million of non-cash charges reflecting amortization of fair value adjustments relating to debt assumed in our GAM [ph] transaction original issue discounts and amortization of loan fees. For the nine months ended September 30, 2014, our total expenses were $260 million compared with $238.4 million for the same nine month period in the previous year, an increase of $21.6 million. The increase is primarily due to increases in depreciation expense as a result of the aircraft that we have acquired and the increase in interest expense associated with our senior unsecured notes that were issued last December. These increases were partially offset the declines in maintenance and other costs and net gains associated with debt extinguishment. At September 30, 2014, our assets totaled $3.7 billion of which $3.5 billion is invested in flight equipment held for operating lease. Our total cash balance was $212.8 million of which $81.3 million was unrestricted. These amounts do not include the $400 million that was raised in our recent offering of unsecured notes. We also have $327 million of availability under our acquisition facility giving us ample resources to meet our growth targets. Finally, let me cover a few items with guidance for the fourth quarter of 2014. We are expecting operating lease rental revenue to be between $92 million and $94 million. Our end of lease income is expected to be at least $20 million. As we've discussed before end of lease income is a regular part of our operating lease revenue. However, it is lumpy and the timing of its accounting recognition is difficult to predict with absolute certainty. We have several aircraft that are redelivering in the fourth quarter and if the re-delivery is delayed, the recognition of the end of lease income may get deferred until the first quarter of 2015. We expect depreciation expense will be between $48 million and $50 million. You'll notice that this is an increase of $4 million to $6 million over the depreciation expense recognized in the third quarter. In addition to depreciation, the aircraft that we acquired in the third quarter and we'll be acquiring in the fourth quarter will also have accelerated depreciation expense on the 757 aircraft that are under contract to be sold over the course of the next five quarters. As Colm mentioned, we entered into a transaction to sell eight 757 aircraft. This transaction will generate a net economic gain to the company. However not all of the gain we recognized as a gain on sale. Because a portion of total proceeds from this transaction will come in the form of end of lease income. When accounting for this transaction under US GAAP we will require to accelerate the depreciation on these aircraft between now and the expected disposition dates to a value that matches only the proceeds from the buyer while excluding the proceeds from end of lease income. As a result, the recognized depreciation over the next five quarters will increase until these aircraft are sold. Offsetting this depreciation although not necessarily on an identical timing pattern will be recognition of end of lease income when each aircraft is sold. A couple more items, we expect book interest expense of between $39 million and $41 million which includes the interest expense on the unsecured notes which were issued recently which are recently issued in October. Maintenance and other expenses should run between $3 million and $4 million which is greater than the quarterly amounts recognized in any of the earlier quarters of 2014. As I mentioned we have several aircraft that are transitioning in the fourth quarter which is a driver of this expenses. With that, let me turn it back to Colm for his closing remarks.

[Colm Barrington:]

Thank you Gary and thank you everyone. I hope that over the last few minutes, we have given you an appreciation of the continuing progress we are making at FLY. Our enhanced fleet utilization, our continuing success in selling aircraft at premiums book value, the fleet growth and improved metrics that we have achieved year-to-date, and our growth prospects at the remainder of the year and into 2015 supported by our significant liquidity position. Meanwhile FLY has continued to pay attractive dividends with the next $0.25 quarterly dividend to pay on November 20th. With that, we are now ready to take your questions.

[Operator:]

(Operator Instructions). Our first question today comes from the line of Gary Liebowitz of Wells Fargo Securities. You line is open. Please go ahead.

[Gary Liebowitz:]

Thank you operator and good afternoon gentlemen.

[Colm Barrington:]

Hi, Gary.

[Gary Liebowitz:]

We keep hearing that the sale lease back of new narrow bodies is still a very highly competitive market I wonder if you can talk to us about that and maybe talk about the types of returns on any pressures on returns that you are seeing from that market.

[Steve Zissis:]

Hey, Gary it’s Steve. I think we have had this question three to four times in the last year and the market on the sale lease back side continues to be competitive. However what we are seeing is that when you get down to the Tier 2 type of airlines and some of these emerging markets, there is less competition and the reason for that is that some of this very aggressive capital is coming from first time investors who tend to shy away from those type of deals and focus either on the tier one sale lease backs or buying directly from less source where they find it much easier to originate and understand the transaction. So the way that we see it is on one level it’s very competitive but on the other level we're still finding attractive deals for FLY and keep in mind Gary that our acquisition budget is always stated between 10% and 15% growth so we don’t need a lot of deals to meet our growth targets for FLY. So the way that we see it is that there are still plenty of opportunities for us to originate attractive deals.

[Gary Liebowitz:]

And can you just remind Steve is there a stated ROIC target and are you having to work with these Tier 2 airlines to meet those ROE hurdles or ROIC hurdles?

[Colm Barrington:]

Gary Colm here, look we don’t want to go into too many specifics on each individual transaction might some airlines listening in but I think we have talked in general that our return, our IRR targets are in the low to mid-teens and certainly in todays with the cost of money today that’s a pretty good return. So we are achieving those targets. Now that takes into account our purchase price, the rental we received during the term of the lease and the residual value which we expect to get for the aircraft to the end. So you obviously put those returns higher or lower or those expected returns higher or lower depending on the residual assumption we try and be reasonably conservative in our residual substance.

[Gary Liebowitz:]

Okay. And Colm I know you have talked in the past a good amount about the valuation discount at which your stock trades relative to book value if I look back at 2010 you were buying shares at the price to book valuation where the stock currently trades how are you thinking about buybacks today and just confirm you sold that $30 million authorization?

[Colm Barrington:]

Still at a $30 million authorization Gary we’re returning over $40 million to shareholders in the forms of dividends right now so sort of our view is that if shareholders want to employ some of that capital to buy the shares I think they are discounted that’s their call we have set ourselves pretty aggressive growth targets and so currently we are more focused on deploying our capital towards growing the company rather than buying back shares.

[Gary Liebowitz:]

Okay, thanks. And then one last one how should we think about the 757 sales so is that going to be like a few each quarter or they will happen at one time late in the year or just how should we be modeling that?

[Gary Dales:]

Look the 757 they're on existing leases right Gary so it is a forward sale and so the aircraft will be sold as they come off lease and most of those will happen in 2015 and there is a chance that a few would trickle over into ‘16.

[Gary Liebowitz:]

Okay, thank you very much.

[Colm Barrington:]

Thanks, Gary.

[Operator:]

Thank you. Our next question comes from the line of Richa Talwar of Deutsche Bank. Your line is open, please go ahead.

[Richa Talwar:]

Hello everyone, good morning.

[Colm Barrington:]

Good morning, Richa.

[Richa Talwar:]

Hi. So first I did notice that your rent receivable balance ticked up a bit from last quarter I see it was recorded as $12.4 million versus $3.4 million at the end of the June quarter hoping you could tell us what drove that?

[Gary Dales:]

Hi Richa, I am glad you're paying attention, indeed the balance is up it’s primarily due to one end of lease comp that we recorded at the end of the quarter which has been subsequently paid. So our receivable balance is back down now.

[Richa Talwar:]

Got it, great. And then we have seen some strategic JVs being established by some of your peers with a variety of diverse parties that unsurprisingly interested in getting access to the high returns in cash flows that the aircraft leasing business offers, so I was wondering if that’s a potential opportunity for FLY down the line if you are even being approached by any such parties to engage in something like this?

[Gary Dales:]

Richa we’re looking at different opportunities at the time and if we do find something like a joint venture that we find attractive then we’ll obviously pursue it, but remember unlike some of the other companies we do not have multi-billion dollar order book. So we’re not looking for condos to load some of our aircraft too. So we don’t need that to achieve our own target within FLY.

[Richa Talwar:]

Okay, great. And I guess…

[Gary Dales:]

We do actually have a small joint venture on 47, 67s but that’s not a very significant part of our business.

[Richa Talwar:]

Got it. Okay and then the last one Colm you kind of already answered this a bit in the last question but on the dividend looking at it as a percentage of cash flow I think pre-financial crisis you were paying out close to 50% of that cash flow in dividends and now by our math you are doing something in the mid-teens. So I was hoping you could elaborate on whether we should expect that figure to inch back up towards 50% or if you are seeing more opportunity out there just to purchase aircraft and that's how you want deploy your capital?

[Colm Barrington:]

I mean we're reasonably comfort with our dividend at the moment Richa. It's about an 8% cash and cash return on our share price. So we think that's pretty good return in today's market and as we have set ourselves pretty aggressive growth targets for the company as well. We think we better off employing our capital towards growth while maintaining that very attractive dividend.

[Richa Talwar:]

Agree, alright. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Jamie Baker of J.P. Morgan. Your line is open. Please go ahead.

[Jamie Baker:]

Hey, good morning everybody. I'll start with the -- I guess inevitable question given how it's emerged as somewhat of a theme this earning season. It relates to fuel have any of your customers made any revisions or discussed any revisions with you as to their fleet plans given sharply lower fuel and similarly as it relates to the 757 sale. I'm not sure when that deal closed or when contracts were signed but if it occurred after fuels decline commenced did that potentially improved the economics, it's part of the negotiation.

[Steve Zissis:]

Jamie its Steve, on the 75's that deal has been in works for I am going to say nine months.

[Jamie Baker:]

Okay.

[Steve Zissis:]

Pre-days the drop in fuels. So we didn't see any fuel issues driving that deal one way or the other. On your more general question, we're getting some airlines talking about keeping some of the older aircraft longer now. But besides that we haven't seen any material movement from [indiscernible] about taking additional aircraft because fuels come down.

[Jamie Baker:]

Got it. And second and you may have alluded to this in your response to question before the line was breaking up on this and a little bit as it relates to an air lease Blackbird type JV structure. I just want to confirm that something that you would not envision flight pursuing just given the reality with smaller order book was that the response?

[Colm Barrington:]

Yeah, I mean basically we don't have as you know a forward order book with manufacturers it's not part of our strategy. So as of now we don't see any need for joint venture like this.

[Jamie Baker:]

Got it. Alright, thank you very much.

[Operator:]

Thank you. Our next question comes from the line of Helane Becker of Cowen & Company. Your line is open. Please go ahead.

[Helane Becker:]

Thanks [indiscernible] thanks for the time. I just have a question in terms of interest rates for most of the past, I don't know 20 years this industry has operated in an environment of either stable to a falling rates and since rates are probably not going much large it may not go higher for a period of time. How should we think about the business in an environment of actually rising rates? And your lease contracts.

[Colm Barrington:]

Well in terms of our lease contracts most of our leases are fixed rate Helane and then we hedge our interest cost for the term of those leases to match the terms of those leases. Secondly, we do have some floating rate leases and obviously as interest rates go up and down we're again matched with the lease rentals. But I think I sort of question your premise I think there is a lot of bleak view now that interest rates are actually likely to stay low for the foreseeable future. But it really doesn't bother us too much because to say we are hedged in our business.

[Helane Becker:]

Yeah, no I necessarily disagree that rates want to stay low for a while it's just unlikely to go lower and then I just had one follow-up question. I noticed that actually through an article that the government of Hong Kong is actually trying to attract capital to its market to set up leasing companies and to offer capital and I know there I think your Chief Executive is intending to give a presentation in January that may include reasons why company should set up in Hong Kong. Is that something that would be of interest to you guys or you just pretty much focused on Ireland type base?

[Steve Zissis:]

Helane, its Steve. BBAM has offices as you know around the world and we have established our Asian presence in Singapore and Singapore has been very proactive and according less sources into Singapore so I don't see us changing that strategy right now. We have a pretty good presence in Asia and probably would continue to grow our footprint in the Asia market to our Singapore office.

[Helane Becker:]

Okay, thanks very much for the time.

[Colm Barrington:]

Thanks Helane.

[Operator:]

Thank you. Our next question comes from the line of Glenn Engel of Bank of America. Your line is open. Please go ahead.

[Glenn Engel:]

Hi good morning, two questions one, you say your annualized lease rentals going into the fourth quarter is $412 million which is $103 million for the quarter and yet your guidance for the operating lease rentals is 92 to 94, the $10 million gap is caused by what?

[Gary Dales:]

Well the contracted lease rentals before '12 is the contract rate. As you know we have some items that impact the booked rental revenues and that includes the amortization of lease premiums and discounts and lease incentives and the amortization of lease incentives is the primary cause for the difference between the contracted lease rentals and the amount that was recorded under GAAP.

[Glenn Engel:]

So it's gone from $7 million in the third quarter to about $10 million in the fourth.

[Gary Dales:]

Well that sounds a little high I don't think it's quite that much but I don't have the answer on the top of my head right now. It could the timing of some of the aircraft coming in as well. So in another words the aircraft is acquired part way through the quarter then there is only half of the rents that recorded for the quarter.

[Glenn Engel:]

And the second question is that can you give a rough range of expected CapEx in 2015.

[Gary Dales:]

Well I mean we said Glenn in broad terms that we're going to spend, we're going to grow the fleet by 15%, so 15% on give or take $4 billion is $600 million, so $600 million plus would be our -- the range of our expenditure in 2015.

[Glenn Engel:]

Thank you very much.

[Operator:]

Thank you. Our next question comes from the line of Bill Mastoris of Robert W. Baird & Company. Your line is open. Please go ahead.

[Bill Mastoris:]

Thank you and Gary with the notion that your leverage levels have been -- up on a gross basis not a net basis. I'm just kind a wondering and if you can remind us where your comfort level is as far as your leverage level where you would like to be and following up on Colm recent rough estimation of $600 million and 215 CapEx. I am assuming that a good portion of that is going to be finance. So where do you want to settle in, where is your comfort level how high might we see it go on a gross basis or a net basis if you could just kind give us a range that would be appreciated and then also if you have a number for your unencumbered assets that would be great.

[Gary Dales:]

Okay. Well I mean I think we're in the -- our comfort levels Bill is in the 3.5 to 4 times region. And I think as of now we have about $420 million of unencumbered aircraft or 70 I think. It changes day to day but it's between 400 million and 500 million of unencumbered aircraft.

[Bill Mastoris:]

Okay and a quick follow up would Delta and United and many other carriers now for really the first time in recent memory accessing the used aircraft market. And reevaluating their general fleet plans, have you seen them coming into the market and maybe changing or strengthening some of those lease rates on some of the more attractive if you will maybe not classic but maybe 767s and maybe some of the other aircraft which have been out of production maybe for just a couple of years. Any color that you could lend there would be greatly appreciated.

[Steve Zissis:]

Yeah we haven't seen anything on the out of production. But certainly on the NG side so 737-800s and 700s we do see some US demand for those aircraft. But just keep in mind that the US guys are very disciplined in their approach to the marketplace. So they'll be very careful not to push up lease rates excessively but certainly the demand is there from several of the US airline guys.

[Bill Mastoris:]

Okay. Thank you.

[Colm Barrington:]

Thanks Bill.

[Operator:]

Thank you. And that does conclude our question-and-answer session. I'd like to turn conference back over to Mr. Colm Barrington for any closing remarks.

[Colm Barrington:]

Well thank you everybody for joining us. We look forward to talking to you again in March I think when we will be announcing our 12 months results. Thank you indeed. Bye-bye.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Have a great day.