Air Lease Corp (AL) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the first quarter 2012 Air Lease Corporation earnings conference call. My name is Chris, and I will be your conference moderator for today. Presently, all participants are in a listen-only mode. Later we will facilitate a question and answer session. (Operator instructions). As a reminder, this conference is being recorded for replay purposes. And at this time I would now like to turn the conference over to your presenter for today, Mr. Ryan McKenna. Sir, you may proceed.

Good afternoon, everyone, and welcome to Air Lease Corporation's first quarter 2012 earnings call. this is Ryan McKenna, Assistant Vice President, Strategic Planning and Investor Relations. I'm joined this afternoon by Steven Hazy, our Chief Executive Officer; John Plueger, our President and Chief Operating Officer; and Greg Willis, our Senior Vice President and Chief Financial Officer.

Earlier today, we published our first quarter results for fiscal year 2012. A copy of our earnings release is available on the investor section of our website at www.airleasecorp.com.

This conference call is being webcast and recorded today, Monday, May 14, 2012 and an audio replay will be available on our website. At this time, all participants to this call are in listen-only mode. At the conclusion of today's conference call, instructions will be given for the question-and-answer session.

Before we begin, please note that certain statements in this conference call, including answers to your questions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including without limitation, statements regarding our future operations and performance, revenues, operating expenses, other income and expense and stock-based compensation expense. These statements and any projections as to the Company's future performance represent management's estimates of future results and speak only as of today, May 14, 2012. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the Securities and Exchange Commission for a more detailed description of the risk factors that may affect our results. Air Lease Corporation assumes no obligation to update any forward-looking statements or information in light of new information or future events.

In addition, certain financial measures we will use during this call, such as adjusted EBITDA and adjusted net income, are non-GAAP measures and have been adjusted to exclude charges relating to discounts on certain convertible notes and stock-based compensation expense, among other charges. A description of our reasons for utilizing these non-GAAP measures as well as our definition of them and the reconciliation to corresponding GAAP measures can be found in the earnings release we issued today. This release can be found in both the investors and the press section of our website at www.airleasecorp.com. Unauthorized recording of this conference call is not permitted.

I would now like to turn the call over to our Chairman and Chief Executive, Steven Hazy.

Thanks, Ryan. Good afternoon and thank you for joining us today. I'm pleased to report that for the three months ended March 31, 2012 Air Lease Corporation reported pre-tax income of $41.6 million and net income of $26.9 million, resulting in $0.27 earnings per share for the first quarter of 2012. Our cash flow from operations was $101.5 million.

ALC saw demand holding up for new aircraft lease placements in the 2013 to 2015 delivery time frame, particularly in Asia, as global passenger traffic continued to grow, partially offsetting higher fuel costs and lower airline financial performance during the first quarter. Much attention has been focused on Europe in the media industry press. ALC has no significant concerns about our European customers to date. All are performing well and we do not have any significant lease arrearages.

We anticipate that regional economic factors and reduced airline financial performance may have some negative impact on the order books of the airframe manufacturers, and we intend to capitalize on those opportunities. The overall supply of new aircraft available to the marketplace for the next several years from the aircraft manufacturers remains limited, helping to make ALC an attractive leasing solution for airlines looking to procure new aircraft they need to optimize their fleets, maximize their flexibility and reduce their own financing risk.

Our forward lease placements have been well-balanced as to credit quality and airline strength. To date, ALC is approximately 80% placed on all of our new aircraft deliveries through the end of 2015. We see continued and robust demand for our remaining unplaced positions on new Boeing 737-800, A321-200 aircraft with sharklets, our remaining ATR 72-600 aircraft and our future orders for Boeing 777-300 ER aircraft.

As we told you last quarter, many months ago we placed 100% of our current engine option A320 future deliveries. The last A320 will deliver in 2013, and we are now looking forward to initial placements of our Airbus neo single lot aircraft along with assessing lease demand for the new Boeing 737 MAX.

As many of you know, AIG and ILFC filed a trade secrets lawsuit against ALC on April 24 in Los Angeles. Air Lease and the Indigo employees named in the complaints intend to vigorously contest the allegations. I want to make it clear that there is no secret sauce in the aircraft leasing business. ALC's success is a result of its strong management team with extensive experience and solid industry relationships. We have experienced lawyers that will defend the litigation and our management will continue to focus on growing ALC and fulfilling our Company's commitment to achieving industry-leading results.

As this is an ongoing legal matter, we are unable to provide any further comments or answer any questions on this matter. We believe that by executing our growth plan, ALC has achieved very impressive results in its short operating history and we are well positioned for the future.

John Plueger, who is traveling on business out of the country, who is our President and Chief Operating Officer, will now expand upon ALC's results and strategic positioning. John?

Thanks, Steve. Executing our plan, during Q1, we took delivery of 12 aircraft from our pipeline, finishing the quarter with 114 aircraft spread across a diverse and balanced customer base of 59 airlines based in 34 countries. Our average fleet age decreased to 3.4 years from 3.6 years at the end of 2011.

Additionally, our average lease to (technical difficulty) remaining increased to 6.9 years from 6.6 years at the end of last year. These positive fleet trends are demonstrating the merits in our business model of ordering aircraft directly from the manufacturers and placing them with a diverse customer base. By acquiring our own product pipeline we can diversify our customer base and balance the number of Airbus and Boeing planes in our fleet as well as Embraer and ATR aircraft in building the highest-quality portfolio of assets. We are not beholden to the pricing degradation and potentially limited aircraft options available in the spot market that others focus on in the sale-leaseback business. We at ALC -- we negotiate our own prices from the manufacturers by placing orders of substantial scale with attractive pricing. This includes favorable predelivery payment schedules which we prefer to control as opposed to overpaying the capitalized interest and profit margin costs we believe are inherent in many sale leaseback transactions.

The success of our operating model translates into our financial results, where we were able to generate a 31.4% pre-tax operating margin, making the third consecutive quarter over 30%. The continuing low interest rate environment combined with our pricing of aircraft and leases allow ALC's overall portfolio to maintain consistent lease yields.

Since the end of the quarter, we've closed two incremental aircraft purchases above our delivery plan and are assessing additional opportunistic transactions. As of today, we have 124 aircraft operating in our fleet.

Our forward lease placements of new aircraft on order are strong. As of March 31, we were 100% placed in 2012, 93% placed in 2013 and 84.6% placed in 2014. Our marketing team's ability to place aircraft years ahead of their delivery serves as an important risk mitigator for the Company. During the past three quarters, the majority of our new aircraft lease placements were in Asia.

With our strategic aircraft strategy and placements in such a healthy state, these past few months our management team has focused intently on capital raising. We've raised a significant amount of unsecured, attractively priced debt capital over the past two months, which has added to our liquidity and balance sheet strength.

With that, let me now turn the financial review over to Greg Willis, who will walk you through these transactions in more detail. Greg?

Thank you, John. During the quarter, our fleet generated $131.7 million in rental revenue, which includes overhaul revenue of $3.5 million compared to rental revenue of $113.6 million, which included overall revenue of $3.4 million in the fourth quarter of 2011. As a reminder, ALC adds aircraft throughout the quarter, so the full impact of rental revenue for aircraft acquired during the quarter will be reflected in subsequent periods.

ALC closed two landmark debt transactions during the last two months, which have helped further mature and diversify our capital structure. We completed a $1 billion unrated, unsecured senior notes offering on March 16. The term is for five years and was priced at 5.625. This successful offering of note helps to benchmark ALC paper relative to our competitors.

Currently, over half of our debt is now unsecured and at fixed rates. Further, this deal helps to lengthen the tenor of our aggregate debt portfolio as we look to approximately match the average lease term of our aircraft portfolio.

Secondly, we closed an Ex-Im revolving bank facility in excess of $850 million on May 4. This is a three-year facility priced at LIBOR plus 1.75% without a LIBOR floor. With this facility, we were able to tighten the pricing our prior revolvers by 25 basis points from 200 over LIBOR, reflecting the growing financial strength of our Company. ALC has now amassed a banking group that includes 31 institutions. We greatly appreciate the support of our banking group has given us to date.

The aircraft leasing business is optimized with an unsecured funding model. Unsecured funds allow our Company the flexibility to move aircraft around the world without local mortgages and encumbrances. The covenants that we have included in our notes offering and our corporate revolver facilitate this flexibility. Let me remind you, ALC has set an internal limit for leverage at 2.5 to 1 and we have covenanted 3 to 1 on Company-wide basis. Our bond covenants require a minimum net worth of $2 billion, interest coverage of 1.5 times, an unencumbered asset coverage test of 125% which equates to an 80% advance rate on unencumbered assets; or, stated differently, a leverage ratio of 4 to 1 on our unsecured debt. And we have a restricted on dividend payment of 15% of the current net income. This covenant provides us with the operational flexibility and reasonable protections to both our debt and equity investors and are common across other industries.

Industry expense increased this quarter, in line with the debt that ALC has accumulated during the quarter. Our philosophy is one of balance and risk aversion. Therefore, we chose to secure liquidity in the event that the capital markets might tighten in the near future. ALC has lined up significant financing and liquidity well into 2013, which, coupled with our strong operating cash flow, positions the Company on a very solid foundation.

Our SG&A was $13.6 million for the quarter and continues to decline as a percent of revenue. ALC has accumulated $7.1 billion in total capital in only 27 months in business. Companies often speak about a commitment to a robust and conservative balance sheet, and we view our results as evidence of this fundamental corporate philosophy at ALC. I will now turn it back to Ryan.

That concludes managements remarks. For the question and answer session, each participant will be allowed one question and one follow-up. Now I'd like to hand the call over to the operator. Operator?

(Operator instructions) John Godyn, Morgan Stanley.

Thanks a lot for taking my question. I just want to ask a little bit about the pipeline for opportunistic growth transactions. If you could just give us your remind us of what are the key characteristics you're looking for in opportunistic growth, and specifically are there any deals that could move the earnings needle in 2012? Or are these more longer dated than that?

Well, originally, we had 45 aircraft, new aircraft in our delivery pipeline for 2012. A few months ago, we moved a January 2013 Embraer 190 into October of this year because we had leased that aircraft to one of our customers. And since the close of the first quarter, we've acquired two incremental aircraft that were not in our business plan. One is a 777-300 ER, and one is a Boeing 737-800. So those two aircraft incrementally will add more than $10 million of revenue from for the balance of this year.

In addition, we are negotiating for a number of additional aircraft that fall into our portfolio criteria for deliveries in the second and third quarter of 2012. So if we are able to complete those transactions, and I can't give you assurances that we will, but at the moment we are on track to do that, those will improve the revenue profile at the tail end of the second quarter and for the third and fourth quarters of 2012.

And, obviously those aircraft will have lease rate factors that are approximately the same as our existing portfolio, therefore they will be accretive to our earnings through the balance of the year.

Okay, that's helpful. And just to follow up, when we think about the economics of the aircraft that you already have under contract for lease in 2013-2014, can you just talk about how the economics compare to your current ROE? And is mid-to high teens the right pre-tax ROE that we should be thinking about three to five years down the line? Thanks.

Well, as you know, you are allowed one question; we'll make an exception. I can tell you that the aircraft that we've added so far in the first 4.5 months of this year are exhibiting lease rate characteristics on our investment that are similar to the aircraft we acquired last year. I think in terms of ROE and lease rate factors, virtually all of the aircraft that were taken delivery of, in 2012, fall into that same band.

Okay, thanks a ton, guys.

Jamie Baker, JPMorgan.

Hey, good afternoon, everybody. When I look at these aircraft placements between now and 2015, it looks like in the past 90 days you haven't logged any additional placements. I'm wondering if this is by design or if there's any pushback from airlines. You cite robust demand for the remaining aircraft. I'm just wondering if the lag of incremental placements since Q4 is potentially, I don't know, inconsistent with some of your prepared remarks.

Not at all. We have a number of transactions where we are awaiting final government approval and other corporate approvals to be able to publicize those. And we'll make that information available at the appropriate time.

This is John Plueger. Let me just also add, don't forget that we are already 80% placed for 2015. So we have, by definition, much less aircraft in place than we did even three or six months ago.

Yes, sure. I don't question that, I was just looking at incremental change over the last three months or so. For my allotted follow-up, it's been reported that you placed, or I guess you are close to placing a 737 MAX order. First, is this accurate? Second, Steve, any thoughts on the recent changes in specs, the new wing length and so forth?

Well, we've had a parade of Boeing executives and engineers and experts down here for the last several months. We are working with both Boeing and Airbus on a regular basis to define the configuration, performance and specifications for their new aircraft designs. I really can't comment on negotiations that are ongoing. But obviously the media has access to information that we don't have.

(laughs) Okay, we'll leave it at that. Thanks, everybody.

But to amplify what John said, we are leased out completely for this year. There's only a couple of airplanes for 2013, and those are two ACR 72s that are about to be leased out of and finalized. So we really don't have anything of substance until 2015 and 2016. And, currently, our management team's already working on some of these long lead time placements.

Perfect, I appreciate the additional color there, Steve. Thanks very much.

Gregory Lewis, Credit Suisse.

Yes, thank you and good afternoon. John or Steve, could you provide a little more rationale or color on the Vietnam Airlines transaction, where -- those aircraft were placed out -- I guess those go on lease in 2017-2018. How should we think about in terms of the pricing, given the long lead times for those? And is there something that we should expect Air Lease to do going forward in terms of placing aircraft for delivery that far out in advance or even potentially further out?

That transaction really complements our existing order for 787-9s. We had corporate approval to acquire 12 787-9s. The delivery positions that Boeing could offer us an incremental aircraft were a little too far for our liking, too far out. So the opportunity arose where Vietnam Aircraft Leasing Corporation is in the process of being dismantled by the government of Vietnam and the other investors. And Boeing and the airline approached us with this opportunity to step into these delivery positions, which we felt were attractive. And the economic terms of the transaction are extremely attractive to ALC, and we were able to lock in 12 year leases with the flag carrier, Vietnam, at attractive lease rates, which will give the Company a very long stream of earnings for a decade and a half ahead.

Let me add that we've assumed these aircraft now under our own purchase agreement with Boeing, so this is not a sale-leaseback. This is under our direct contract now with the Boeing Company for the aircraft to be leased to Vietnam Airlines.

Okay, perfect, thank you for the time.

And they are 12-year leases on terms that are favorable to the Company.

Michael Linenberg, Deutsche Bank.

This is actually Katy O'Brien filling in for Mike. I just had a quick question on some comments you made on this particularly strong demand you saw in placements in Asia. Just because recently two large Asian carriers, Cathy Pacific and Singapore Airlines, noted a weakening in their passenger and cargo demand trends, and in fact, Cathay just recently cut its capacity plans. Can you give us any potential going forward that you'll see a reversal of the strength you saw in Asia this quarter? And could that affect you going forward?

Let me comment on that, because I was in Singapore and Hong Kong a few days ago, and I met with senior executives of both airlines. The rate of growth for some of these what I call network legacy carriers has slowed down compared to 2010 and 2011. But please remember that a significant amount of our placement activity in Asia is replacing older aircraft that are not as fuel-efficient, not as economical to operate. So we continue to see very strong demand from our Asian customers for both incremental capacity growth in the 2014 through 2017 time frame as well as replacing their older planes that are anywhere from 15 to 25 years old. So we have not really seen any slowdown in demand for our product. In fact, it's just the opposite. A number of airlines that we're talking to in Asia and elsewhere were planning to use ECE financing, or Ex-Im Bank financing, that is not grandfathered under ASU agreement for deliveries beyond 2013 are now seriously looking at the operating lease model. So we actually anticipate an increase in demand for our services and our products.

I agree. Thanks for that color. Just one quick follow-up -- just wondering if you've seen any significant changes on your watchlist, focus on a particular region or kind of status quo from last quarter?

John?

No, not really. We mentioned last quarter that we had one A320 with Kingfisher. That aircraft is still on lease, however, I would call it a conditional lease. We do have physical custody of the aircraft and its records and the engines under our control and we are just pending a waiting period that we've come to agreement with the airline for the continuous or not of that aircraft. And should it not continue with Kingfisher, we have a standby lessee already lined up.

Just to enumerate, we have not had any credit losses or write-downs or lease defaults that would create a liability for the Company to date since inception. So aside from this one AC20, every one of our leases are performing satisfactorily and we're not having any financial issues with any of our customers.

I agree. Thanks for the color and thanks for your time.

Arren Cyganovich, Evercore.

You've done a good job on the debt side so far and have got a lot of unsecured debt recently. Your release said in its commentary about using the export markets for financing, which is consistent with what you said in the past. But I didn't know if there was an increased focus on looking into those markets to finance any of your aircraft going forward?

As I mentioned earlier, under the global ASU agreement, the aircraft sector understanding, aircraft that were ordered before the end of 2010 and will deliver by the end of this year are eligible and grandfathered under the old rules that apply to both Ex-Im Bank, the European ECAs and the Canadian/Brazilian export credit agencies. So we currently have commitments from those agencies for a certain amount of guaranteed facilities covering our 2012 deliveries, and our finance team is evaluating the trade-off between utilizing those facilities versus just using normal unsecured funding that's become more and more available to the Company.

Beyond 2013, the cost of these guarantees goes up significantly and makes that type of financing basically not as competitive against commercial sources. So our Board and our finance teams are evaluating the merits of utilizing those facilities after the end of this year.

Okay, that's helpful. And then as a follow-up, you have some leverage covenants on some of your new unsecured debt that you mentioned in your commentary. It looks like a 4 to 1, I think you said, leverage ratio, which I believe would be above what you would be seeking to carry, anyway. Is that (multiple speakers) --

Let me elaborate. We have a Board policy which allows the Company to go up to a maximum of 2.5 to 1 leverage, and our covenants, I believe, are 3 to 1.

3 to 1 on a Company-wide basis.

So we have no plans to deleverage 4 to 1 or even 3 to 1. That's the outside battery, 3 to 1, in our current credit agreements. But our in-house corporate policy is to stay within the realm of 2.5 to 1 or lower. And at the present time, it's like 1.7 to 1. Keep in mind that as we add more earnings each quarter, our shareholder equity goes up so that we have a larger base off which do the calculation.

Right, thank you very much.

Gary Liebowitz, Wells Fargo Securities.

Thank you, operator, and good afternoon, gentlemen. Steve, you mentioned that you are starting to talk to customers about the A320neo placements. Could you qualify for us how much of a premium, if any, you're seeing in those lease rates over your last A320 placements?

We have not concluded any leases on A320 or A321neos, but we are targeting a lease rate premium, depending on the circumstances and the airline and the operating parameters and the stage length that they operate, of somewhere between 12% and 16% premium for the equivalent A320 or A321 lease rate. And we have seen a lot of lease rates from the airlines in that. Some airlines are projecting a $150 oil price. It depends, really, on their calculations of calculating the operating cost of the aircraft, including the capital costs.

So I suspect a different airlines will have different assumptions. But that's about the range that we're looking at, about a 12% to 16% premium on both the A320neo and the A321neo. We're specially bullish about the A321neo because with the increased range, payload range performance, it becomes a much more capable Boeing 757 replacement than the existing A321. So we're seeing a lot of interest in the A321neo.

And my follow-up for Greg would be, Greg, the SG&A number seems to go up every quarter. It was somewhat higher than the fourth quarter of last year. Was that because of litigation expenses? Or maybe you can tell us what the big moving pieces in there are.

It's primarily just continued buildout of the Company's infrastructure. It continues to decline as a ratio to revenue and we expect it to continue to decline as we continue to get up to scale.

And litigation expenses were?

We haven't disclosed litigation expenses.

Thank you.

Mark Streeter, JPMorgan.

Steve, just a follow-up on Gary's last question, the 12% to 16% premium on A320 lease rates, can you tell us are you paying more or less of a premium for the aircraft? What I'm really wondering -- and I know you're not going to tell us exactly what you're paying for it, but are you making greater margin, or do you think you will make a higher margin on A320neos than on A320 current engine option aircraft?

Yes, our target is to make at least a 10% better margin on the Neo versus the placements that we have already done on A320 and the A321s. That's sort of our internal target.

Okay, great, that's very helpful. And then a question for Greg -- just looking at the balance sheet now, the split between secured and unsecured pretty much at 50-50 right now. I know you can fund the business plan with the capital that you have at work here, but you are going to at some point announce some new orders and so forth. So I'm just wondering if you can give us an update on timing for the rating agencies, timing for just when you think you'll next raise capital? Is it really just going to replace more secured debt with unsecured debt, or is it going to be driven by future craft orders?

We're going to continue to focus on layering our new unsecured debt going forward. That's our business plan that we've drafted from the very beginning. So as we continue to go on, we're going to be looking to put on more and more unsecured debt.

And we're having ongoing discussions with the rating agencies. Virtually every week, we're updating them and positioning them so they understand the Company sufficiently so that they will be able to make a determination in the future.

But is that just going to be replacement of secured debt or incremental growth capital when you issue unsecured next?

Well, there's two aspects to that. One, you have to look at our existing secured debt, which really falls into two parts. One is the warehouse facility that we have with Credit Suisse and Credit Agricole, which is just a shade over $1 billion currently. We're talking to those lenders about the possibility of converting those into some kind of an amortizing term loan at, obviously, better economics than we currently have.

And then the second part is, I believe, around $700 million plus of secured amortizing bank loans that are tied to the financing of specific aircraft. And those loans are all being paid down systematically on a regular monthly or quarterly basis. So that portfolio is coming down at a pretty fast clip. And as that paydown occurs, as Greg mentioned, we will be looking at layering on additional unsecured debt of different maturities. So we'll have a nice ladder structure on unsecured debt maturities that kind of ties in with the cash flows of our portfolio.

It's John Plueger. Let me just add that this is somewhat dependent upon the extent and the level of additional incremental transactions that we're able to procure for the balance of this year.

Sure, no, makes sense, thank you.

Helane Becker, Dahlman Rose.

Just on the fleet, on the Embraers, the 175s and 190s, they're kind of not more original jet, I guess. So can you just discuss how you're thinking about that versus the other aircraft in the fleet? Is it that you're just seeing huge demand for it? Just your thoughts on that.

Let me elaborate on it. I think there's a misconception when people talk about the Embraer e-jet family. There's really two segments to that family. One is the 170-175. A lot of those are flown in the US under contract for the legacy carriers, by regionals because of the scope clause. But our primary focus on the e-jets is the 190. And those aircraft are generally around 100 seats, some go up as high as 108 seats.

And what we've found is that our lessees are utilizing those aircraft to replace mainline aircraft. For example, we did a number of airplanes with Alitalia on E-190s, five aircraft, and they're actually replacing MD82s and they're adding frequency with the 190s and it's replacing larger aircraft. We just did another transaction with another airline in the Africa/Middle East region that's replacing a Boeing 737-500 with the E-190. And with the 175s, there are also, in many cases, replacing mainline aircraft. For example, we have two with Belavia of their going in, in September-October, that are replacing two Boeing 737-500s. So these aircraft are being used as mainline airplanes rather than regional feeders.

All right, thank you for that clarification.

I hope that's helpful for you.

Much, thank you.

Incidentally, we'll take delivery of our last Embraer under our current order base in the fourth quarter, and that will give us a total of 30, 3-0, e-jets.

Thank you.

Dave Fintzen, Barclays Capital.

Good afternoon, everyone, I'm just curious, to come back to 80% of the fleet that's placed and the order book that's placed, just curious how you balance some of the economic and oil risk that the airlines are facing over the next year or so. Does that incentivize you to try to place those a little quicker, or is that something we could see -- do you want to hold back and not place those until you have a little more visibility into what the world could look like in 2014 or 2015?

John?

Sure. You're right, it's a question of balance. We've always aired on the side of early placement. We found that over time, over many decades of running this business, that has served us well. We are not always in a hurry to place the last 5% or 10% because history has shown many, many times that we do get the incremental demand, and sometimes that does come at a premium. So we are very comfortable with our level of placement right now. And the forward placements for the remaining 20%-odd or so that we have -- that gives us a great luxury of choosing very carefully who we want to place the aircraft with and under what economic terms because they're so far forward out there and there are so few units left. So it gives us a great luxury of picking and choosing and picking our spots, and that's where we like to be.

And just as a follow-up to that, is the strategy different between, say, a narrow-body or a wide-body, or is it pretty much the same approach to both?

Well, by definition, a wide-body requires a longer build time and a longer time in advance production to order seats, galleys, in-flight equipment and that sort of thing. So on the wide-bodies, we do tend to look towards longer placement times.

Okay, great, appreciate the color. Thanks.

[John Key] [EOS] Partners.

Thanks for taking my call. I just had a quick question. I know you said you weren't going to comment directly on the lawsuit, but I'm just curious if you give some detail around like maybe some key dates or like milestones that you have to hit in terms of the reply to the courts or things like that, or if that's something you can give information on.

Any information about the litigation is contained in our 10-Q for the first quarter, filed with the SEC. We're not really going to get into speculation on time scales or calendars. That's really not something that is appropriate at this time.

Okay, thank you.

(Operator instructions) Glenn Engel, Bank of America.

Good afternoon. You touched on the A321 as a plane -- neo -- that you're excited about. If you could get more aircraft today, which would be your favorite planes that you think you would get the best returns? And secondly, you are mainly passenger. When would you consider the freight side?

Well, that's a good question. All of the aircraft we're taking deliveries of now are going out lease rates that are within a very attractive band in terms of returns. On the single-aisle aircraft, the 737-800s and the Embraer 190s have actually been, O would say, the -- on an average, the strongest. We're seeing some strengthening of demand for the A321. All of our A320s are placed. Our last current generation current engine option A320 delivers next year, and that leads to an Asian airline long-term lease. We are also seeing strength in the A330 market, both with the -200 and the -300, and for the 777-300ER as a replacement of older fuel-guzzling 747s. But all of these aircraft that we've chosen way back in 2010 are performing pretty close to one another in terms of lease rate economics. There's not a large disparity at the moment. I would say the A320, if we had more to place, would probably be the weakest. But that could only be a temporary phenomenon, anyway. So I would have to say, currently, the 737-800 and the E-190 are the two best performing single-aisle aircraft for us on just pure numbers.

And the passenger versus freighter business?

Yes, at this point, we have focused primarily on building our passenger portfolio. Please keep in mind that even our single-aisle aircraft and our a A330, 777s, 787s have significant cargo carrying capability. For example, the 777-300ER can carry 30 tons of cargo with a full passenger load. We're seeing more volatility in the air cargo traffic trends because more than half of the global freight traffic is carried in the bellies of aircraft, so when there's a slowdown in freight traffic, the all-cargo aircraft appear to be affected more than the combination passenger/cargo aircraft.

So at this point, we're watching that market very carefully. We've looked at several opportunities on the 777-200 [LRX]. We've looked at the 747-8 in a Continental freighter. We've looked at the A330 freighter. We've looked at conversions of 737 classics. We continue to look at that market, but right now our fundamental core business is performing so well that that's where we're directing our capital.

Thank you very much.

We have no further questions at this time. I would now like to turn the call back over to our speakers for any closing remarks.

That concludes our call for today. Thank you all for your participation.

Ladies and gentlemen, that concludes today's conference. Thank you so much for your participation. You may now disconnect. Have a great day.