Air Lease Corp (AL) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2012 Air Lease Corporation Earnings Conference Call. My name is Jeff, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Ryan McKenna, Head of Strategic Planning and Investor Relations, and you have the floor sir.

Thank you. Good afternoon, everyone and welcome to Air Lease Corporation's third quarter 2012 earnings call. This is Ryan McKenna, Assistant Vice President, Strategic Planning and Investor Relations. I'm joined this afternoon by Steve Hazy, our Chairman and 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 third quarter results for fiscal year 2012. A copy of our earnings release is available on the Investors' section of our website at www.airleasecorp.com. This conference call is being webcast and recorded today, Thursday, November 8, 2012 and the webcast will be available for replay 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, November 8, 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 the call, such as adjusted EBITDA and adjusted net income are non-GAAP measures and have been adjusted to exclude charges relating to amortization of discounts and debt issuance costs 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 their 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.

With that, I would like to now turn the call over to our Chairman and Chief Executive Officer, Steve Hazy.

Thanks, Ryan. Good afternoon and thank you for joining us today. I'm pleased to report that Air Lease doubled its earnings per share in the third quarter of 2012 over 2011's third quarter. We also recorded a 173% increase in the first nine months of 2012 EPS versus the first nine months of 2011 continuing the execution of our strong growth plan.

The fundamentals of our business plan are gaining traction and can be seen in the financial results. We now have the youngest fleet and the longest lease term remaining amongst all of our publically-traded peers. Contrary to the negative predictions earlier in 2012, European airline load factors held up very well to the summer season. Many of those airlines have buildup strong cash positions that will help them work through the winter months, which have historically been slower for the industry. Additionally, we have seen financing continue for these airlines at a healthy rate.

The capital markets have been open and export credit agency financing now offers the possibility of extend bond offerings as well. Even the commercial bank market has held up better than expected, even though some banks were predicted to significantly scale back their lending. However, this has not occurred and overall financing is in relatively good supply for the industry, especially for quality airlines and quality lessors.

It's been widely reported that the rate of growth in China has slowed. While we believe that these reports are accurate, we have not seen a meaningful impact on the demand for jet aircraft in the region. In fact, China's fleet has now reached a point where many of the 737s, 757s, and Airbus A320s delivered in the early 1990s have reached the final phases of their economic useful life. Thus we're seeing strong demand from carriers looking for solutions to transition these older generation aircraft out of their fleets and replace them with new technology equipment.

Additionally, demand for incremental aircraft has remained strong as the Chinese aviation infrastructure continues to expand with the construction of many new airports and the upgrade of ATC systems in the region. Industry wide the financial performance of the airlines is under some pressure. As a result of the rapid growth over the past decade, we have seen consolidation in the industry and the subsequent cost cutting measures to achieve more competitive operations.

Fuel prices have remained high, but relatively stable, and now appear to trade in the band that's moving based on global microeconomic outlook. Fuel is now the single biggest expense in the industry and the airlines know that they need modern, fuel efficient aircraft to compete effectively. Airlines have responded to these challenges in a much more disciplined fashion than in the past and are better equipped to handle these inevitable dislocations.

Recently, we have also witnessed ownership changes in the leasing industry. In the last year alone, we have seen two businesses acquired by Japanese financial institutions. We view this as a positive for the whole space as it brings fresh capital to our industry and increase global presence. We would not be surprised to see further M&A transactions occur as certain players look to sell and others look to buy. This will help shakeout the long-term players from those in the business to generate quick returns.

Air Lease Corporation will evaluate any opportunities that present themselves, but we remain focused on our core business of ordering new aircraft directly from the manufacturers and building a high-quality and profitable aircraft portfolio. We're optimistic about the growth opportunities in many sectors of the airline industry all around the globe.

John Plueger, our President and Chief Operating Officer will now expand upon ALC's results and our strategic positioning.

Thanks, Steve. During the third quarter, we took delivery of five aircrafts from our new order pipeline, finishing the quarter with 142 aircraft spread across a diverse and balanced operator base of 66 airlines spread over 37 countries. As mentioned during the prior earnings call, our order book is designed to match the industry's demand for aircraft. Therefore Q2's large number of deliveries owing to the heightened demand from airlines in the Northern Hemisphere prior to the busy summer season were followed by a light Q3 deliveries as demand in mid-summer trails off.

Our average fleet age remains very low, 3.4 years at the end of the third quarter. Excluding future prop up transactions, we have 11 aircrafts in our pipeline delivering during the final period of 2012 and our team is focused on delivering those aircrafts efficiently. Let me also note that a significant number of these 11 pipeline aircraft delivering in the fourth quarter are delivering in the back half of the quarter with several in December. Therefore, those aircraft will not have the full quarter impact on our revenues and profits in the fourth quarter.

Over the past 18 months, ALC chose to place our new aircraft with as much lead time as possible. This strategy has proven very successful as we've walked in attractive lease rates on long-term contracts. This gives us the ability to pursue incremental growth transactions and seize upon well-priced opportunities, which for the third quarter included the purchase and simultaneous sales of one Boeing 737-300 with the gain included in our other income line.

Our lessees are performing well, and we've got no significant insurance about any customers in our fleet. That being said, Passaredo, a Brazilian regional airline, which leases three ATR 72-600 turboprop aircraft from ALC, recently filed for judicial recuperation, which is different from US bankruptcy, allowing them to continue operations and pay their key creditors. As such, we are being paid currently and have not reduced our lease rates. This further underscores a fundamental premise of ALC's business model that airlines seek to keep our aircraft, which are the youngest and most fuel efficient in their fleet. And we believe that Passaredo will benefit from the switch to an ultramodern ATR 72-600 fleet. Now during the third quarter ALC observes stable lease demand overall for new advanced technology aircraft.

And as Steve indicated our load factors held up and in fact increased year-over-year in Europe, with capacity being controlled and managed. ALC concluded its placements for all of its new A320 current engine option aircraft many, many months ago at more favorable rates, but we've actually observed stabilization currently in the A320 market this quarter as we see it now. This coupled with financing rates they are at all-time lows, has primarily resulted in ALC's profitability, exceeding our internal plan at the founding of the Company. And given the results of the recent US election, we see the current low interest rate environment continuing.

The vast majority of our lease placements reflect airline, aircraft replacements versus growth. It's important to take a long-term view of this industry and its fundamentals rather than be overly optimistic when the market is robust or overly concerned when the market is softer. The nature of our business is designed long-term leases on aircraft to provide stable, multi-year cash flows, which allows for consistent profit generation through the cycles.

We're pleased with our success in securing forward lease placements of new aircraft. At the end of the third quarter, our new aircraft deliveries were 100% placed for 2012 deliveries, 100% placed for 2013 deliveries, and 100% placed for 2014 deliveries. Our attention is now focused on the back half of 2015 for placement of our order book. Our marketing team's ability to place aircraft years ahead of their delivery serves as an important risk mitigator for the Company.

As we've stated on past calls, the majority of our new aircraft lease placements during the past year took place in Asia. And now as those aircrafts begin to deliver, a shift in the geographic concentration of our fleet has begun to show up in the quarterly results. We've also made great financing progress.

And with that, let me now turn the financial review over to Greg Willis, our CFO who will walk you through the financial results in more detail. Greg?

Thank you, John. During the quarter, our rental revenue nearly doubled from the prior year to $172.9 million, up $90.5 million recorded in the third quarter of 2011. Additionally, our overhaul revenue percentage remained relatively flat increasing 20 bps to 3.9% as compared to the third quarter of 2011.

During the last week of the quarter, ALC launched our second debt capital markets transaction of the year, raising an additional $500 million in unsecured debt. The markets have been very receptive to our strong credit metrics. This has allowed us to construct a debt portfolio with a low composite cost of funds of 3.97%, a weighted average life of 5.1 years, of being nearly 60% unsecured.

This financing strategy provides our management team with the operational flexibility that translates into a competitive advantage for ALC in the marketplace. A key aspect of our financing strategy is that we look to opportunistically tap the markets to maintain a high level of liquidity, while minimizing interest expense. This provides us with a financial strength to optimize the funding of our order book and to capitalize on aircraft opportunities that are presented to us.

We are able to minimize the cost of carry associated with a $500 million on senior notes by closely matching the timing of the issuance with the intended use of proceeds. This resulted in our pre-tax margin rising to 32.7% for the quarter. We continue to execute on our plan to modestly increase our debt to equity ratio, but not to exceed 2.5:1. This will enhance the return on equity for our shareholders, but with a dampening insight on pre-tax margin over the long run.

In May of this year, we announced the closing of our unsecured $853 million revolving bank facility priced at LIBOR plus 175 with no LIBOR floor. Subsequently, we have added three additional banks on the same terms adding an incremental $190 million of capacity. The result is an upsized revolver that is now $1.043 billion in total size. We are very appreciative of the continuing support from our banking group as we continue to grow the Company.

Our SG&A and stock-based compensation expense were both down from the prior quarter. While quarterly variations will persist, SG&A will continue to decline as a percent of total revenue over the long run. We will continue to build a conservative and robust balance sheet to allow us the financial flexibility to deal with dynamic market conditions.

With that, I will now turn it back to Ryan.

Thanks, Greg. I'll hand it to the moderator for the question-and-answer session.

All right. Thank you. (Operator Instructions) John Godyn, Morgan Stanley.

Hey, thanks a lot for taking my question. First, can you just talk about the process for identifying the outlook for additional growth transactions, you had that commentary about further M&A. Are we just -- when we think about growth transactions should we be focused on sale leasebacks, or is there potential for sort of a large secondary market transaction to occur?

Hey, John, it's John Plueger. Thanks for your question, it's a good one. You know John, we continue to look all the way across the spectrum. Just by a way of reminder, during the second quarter, we bought three additional aircrafts. And those were primarily on a sale leaseback basis, couple from other lessors.

During this quarter, we did a simultaneous buy sell of a 737-300, but we made a profit, it wasn't a big one, but it was opportunistic. And we continue to work with our airline customers as we actually do see some more appetite for sale leaseback transactions, but we are also investigating a couple of portfolio sales of aircrafts from other lessors, typically that happens during the fourth quarter as lessors tend to rebalance their different portfolios. They're looking at their exposure to [set et cetera].

But to Steve's comment about M&A, we're focused on our core growth, but we never discount and we always look at any and all possibilities that presents [to us as well]. So the process is actually multi-pronged. It is looking at every single segment and I think that this -- what we've done to date on the sale leasebacks to small buy sell we did on the 737 indicates the depth of what is out there and we're actually pretty optimistic about further incremental transactions above our pipeline.

Just to amplify what John said, this is Steve, I think we've been more focused on asset acquisitions rather than acquiring organizations, because we already have the core talent here. We have the infrastructure to grow our fleet and so our focus is on airplanes or clusters of airplanes rather than corporate entities.

Okay, that's really helpful. And just one more question. Sometimes people present the argument that lessors focused on new deliveries are sort of locking in prices and maybe add prices depending on when they placed orders. Can you just talk about the flexibility that you might have over time as you take new deliveries and place new orders to renegotiate initial negotiated prices, does that happen? Is there flexibility there as you place new orders?

Well, I think there's a big difference between us ordering aircraft from the manufacturers and the airlines. The airlines generally order aircraft and there's significant periods of time that lapse between one order and another. In our case, we're almost like a living organism. We're constantly updating our orders. We're modifying our orders. We're shaping our orders. We're negotiating incremental business and it's an ongoing living activity that allows us to modify and optimize our aircraft purchase agreements both with the airframe manufacturers and the engine manufacturers on a continued basis.

So a transaction that we may have entered into, say, in 2010 has probably had a number of amendments to update the ratio of certain aircraft types, widebody narrow types. Within a family of aircraft, we have the flexibility to alter subtypes of airplanes. We move delivery dates around. We do a lot of things in an interactive way with the manufacturers that gives us a lot of flexibility going forward. So I don't think that we're handicapped or disadvantaged by ordering aircraft in bulk quantities. In fact, I think that's an advantage because we're able to fine-tune our economics on a continued basis.

Yes, let me remind you that this management team has been buying new aircraft under larger-scale purchase agreements with the manufacturers for more than 20 years, almost 25 years. So it's actually been quite a long and quite a routine process for it, and I think we know how to optimize our position and our pricing on these purchase agreements.

Okay, great. Thanks a lot guys.

Just to comment overall, if you look at our lease rental revenue as a percentage of our average assets in any quarter, it's probably superior to the other lessors, so we could not achieve that unless our acquisition costs were attractive.

Mike Linenberg, Deutsche Bank.

Hi, everyone. This is actually Richa Talwar filling in for Mike. Thanks for the opportunity to ask a question. So first, I just wanted to follow up Steve on your comments regarding the A319 and A320 stabilization of lease rates. I wanted to know if you could flush out maybe a little bit more detail on that, what you think might be causing that stabilization. And then in the same context, if you could specifically comment on lease rates for other aircrafts, if you've noticed any material changes, either negative or positive, in the market? Thanks.

Yeah, hi, thanks. It's actually John Plueger that was my comment in my remarks. And as we've said, we've already placed all of our A320 CEO's. I think over the past year it's set and perhaps a little longer, there has been a softening lease trend on the A320s and also the A319s. This is attributable to two factors; number one, a larger percentage of A320s in the lessor pipeline as compared to 737-800s, for example. And number two, a number of the bankruptcies that we've seen in airlines across the globe have actually have a higher percentage of A320 aircraft.

So that having been said, we have always predicted that as the order pipeline gets delivered by lessors on an ongoing basis, the supply demand balance will stabilize over time. And we actually think that we are seeing some first evidence of that. And let me repeat that we have not been in the A320 market ourselves for current generation placements, because we are done. What we are commenting on is transactions that we have seen and witnessed in the marketplace that are our new and younger A320 aircraft that we see some evidence of those lease rates now are stabilizing. We don't see any further decline at this point in time.

But that vis-a-vis third parties, not our own.

Not our own.

Our last A320 delivers next year and that aircraft was already placed more than a year ago. And virtually all of our new A320s and A321s that we've leased out in the last three years are on long-term 8, 10, 12-year leases. So short-term aberrations in lease rates on A320s has no effect on our financial performance, because our lease rate is already locked in on a long-term basis.

Okay, thanks. And anything else unusual or you can comment on for other aircrafts we see?

No, the 737-800 continues to be a very strong player. I think in many, many surveys, the airline leasing community and the financial community has voted the 737-800 is one of the strongest assets. We've seen very strong demand for our A330, 777s. All of our A330s are placed. We currently have only one 777 that's unplaced for delivery in 2015.

So I think on the widebody front, we're in good shape. On the 737-800s, we're seeing strong momentum. And again as John as indicated, we're fully placed in 2012, 2013, 2014 and we're now working on the back end of 2015 and 2016. So I think among all the lessors, we're the best positioned in terms of the ratio of aircraft that have already been placed over the next 36 months.

All right, great. That's it from me. Thank you.

You're welcome.

Jamie Baker, JP Morgan.

Hey, good afternoon everybody. Steve, any thoughts on the 787-10 Authority to Offer and whether you might be interested in serving as launch customer?

Ray Conner's telephone number is area code [206-637-8821]. The only thing I can say is that our team including myself and John Plueger and our purchasing management team, we were up in Seattle last week. We were up there again yesterday. We're working very closely with Boeing on the 787 family evolution and definition. And I think the Commercial Airplane Group in Seattle is working closely with Chicago to get that program kicked off in a very near future. I can't give you an exact date, because that's the Board decision.

Okay.

At the corporate level, but I would say, from all of our observations, the 787-10 will be launched or will be offerable to customers before any new derivatives of the 777 -- we see the 787 coming first.

I would add that based on what we've seen to date the 787-10 looks encouraging.

Okay.

The airplane was really good. We're talking to Boeing about increasing the range a little more, tweaking the payload characteristic to get it out to about 7,000 nautical miles. And with the additional 40 to 50 seats on that aircraft and the added cargo capacity, we think that -10 as we find by some of our latest inputs is going to be a really powerful airplane.

Okay, excellent color. In light of the gyrations at Iberia and Vueling, can you remind us if you have any exposure there?

We currently have a couple of A320s at Vueling. They have been performing very well under our leases. As you know they have a significantly lower cost structure than Iberia. Iberia has been having labor issues as they've always had and I think that was partly by their intend to start-up a company called Iberia Express, that has not gone well with labor, particularly the pilots. So I think Vueling will increasingly take on more and more of the both domestic Spain and intra-European network, because they can do it in a much lower unit cost than Iberia.

And lastly, both you and John talked about the Chinese replacement cycle in your comments. I've recalled last handful of leases that you've done there have been for durations that are significantly longer than your current portfolio average. Should we assume that that trend continues, and is that specific to China?

Yeah, I mean it's strongest in China, all those leases were 12 years Jamie, and that is longer than average, but that's also what it's going to help continue to drive our average remaining lease term across the fleet, to lengthen over time. It's a function of supply and demand. We have the right aircraft at the right time. We hit the right profiles of Air China, China Southern, and China Eastern.

All of these aircrafts that we placed and across those three airlines, which is the largest three in China, we placed 53 single-aisle aircraft. And every single one of those is replacing 737-300s or 400s or the first generation earliest A320s. And we see that continuing. I mean, these airlines in China have now bought a lot of Western aircraft over the last 15 to 20 years and they are on a replacement cycle.

So that's why we say that we think that, it's really going to offset whatever macroeconomic numbers are showing up and being printed in The Wall Street Journal and other financial publications, that combined with a huge infrastructure buildup, they've got more airports they are building there than anywhere else on the globe and the ATC upgrade modernization. So, but generally speaking over and above China, yes, we have also lengthened out our typical lease durations on single-aisle aircraft more towards the 9, 10, 11 and 12-year range.

Just to echo what John said, Jamie, we're seeing that same sort of halo effect in the region surrounding China whether it's Korea, Japan, Southeast Asia, Vietnam, Indonesia, Thailand, we are seeing the same sort of tendencies, where a lot of the aircraft that were built in the late 80s, early 90s are not coming up for replacement, and I think that trend will continue, and we feel pretty good about it.

We made a lot of trips out to Asia in the last few months and notwithstanding the slower rate of growth in the region both economically and in travel and cargo, we're seeing a giant replacement market. That will actually build momentum as we go into the latter part of this decade.

Got it. Thanks for taking my questions gentlemen.

Okay, thanks Jamie. Good to hear from you.

(Operator Instructions) Scott Valentin, FBR Capital Markets.

Good afternoon, and thanks for taking my question. Just with regard to the watch list and there has been couple of comments about going into the kind of slow period for airline travel and there's been a couple of airlines having some problems. Just wondering if you see any changes in the watch list on a seasonal basis, maybe worse than last year?

Our watch list or in general?

Your watch list.

No.

No, not really. No, we very careful and very focused on our placements. And as I said in my remarks, we have no significant concerns about anybody. Again Passaredo with three ATR 72-600s, very small capital dollars with us. But nevertheless, the type of recuperation, they're doing down there, allows them to pay their key suppliers on ongoing basis. Without our aircraft, they can't fly. They don't have an operation. They can't pay other creditors. So that's a pretty small capital dollars for us.

And as a reminder, we did pull out our single A320 with Kingfisher long time ago, in the May time period. We did not get stuck there like other people did. But the real answer is no. I mean I think the whole purpose of Steve's comment and the reason why we emphasized Europe is actually for the summer period in the beginning of the year, there was always gloom and doom about people were afraid, they were going to have job, they were going to travel during this summer, load factors going to in fact they didn't. Load factors went up strongly and nicely. And there's been a lot of capacity rationalization.

So we continue to get lease demand from Europe. We have a team, actually two teams over there, right now, talking about some additional transaction. So actually the industry while were going through some yield compression and typically you do see that especially going into the fourth quarter. The overall industry has actually held up better than I think what we all thought could have been in the first quarter of 2012.

Yeah, John and I were in Europe last week. We spent time with KLM and British Airways, Air France, Lufthansa. Those airlines have used a very disciplined approach on capacity control. There is massive cost reduction initiatives going on. And we think that lot of those customers of ours are pretty well positioned to get through the slow season of the winter and are well prepared to go into 2013.

Okay. And just a follow-up to your earlier comment, you mentioned the Japanese banks buying into the leasing sector. I'm just wondering, obviously you have a lot of different competitors in the space, but is there any concern that with the lower cost of capital, some of these new competitors have an advantage, maybe bring in some price competition?

We haven't seen any competitive advantage from the Japanese lessors. We haven't seen that translate it to any kind of a financial or lease flexibility, or rate advantage to date.

And let's not forget, Scott, it takes more than money.

Right. No, it's fair point. Other guys have low cost of capital as well. Okay, thanks very much.

Okay.

Arren Cyganovich, Evercore.

Thank you. Just a question on portfolio management. Would you expect to pare back some of the planes or so to rotate out of some of your aircraft maybe starting in 2013 as you are getting, I guess, you are not too close to your leverage target, but I think in 2013 you'll probably start to get close to it?

No, we really don't anticipate it getting close to that target in 2013. But to answer your question, look we've been in earnings growth mode, it's all there is to it. So we're buying aircraft, production-only aircraft. That having been said, it is part of our business model to start selling aircraft on our overall global portfolio basis when they are about a third of their way through their lifetime, and aircraft has a 25-year life, divide that by three, so at about eight years those aircrafts are going to be submit to sales.

So we do have some aircraft despite our just a little over three-years average fleet of age, we do have some aircraft that are in that space. So the bottom line is in 2013 if we see a good opportunity to sell aircraft that's going to be profitable for us. And we always balance what is the best deal. Is it better to run a present value for us to keep and enjoy the remaining lease stream and profitability over time on an aircraft versus an opportunity to sell, how much do we make keeping in our lease versus sell.

You could see some potential sales from our fleet in 2013 to carryout that part of our business model. But obviously we are primarily seeing and we are primarily working on building our fleet. It more depends upon on the opportunities that we see and if we see a good transactional basis, we'll seize upon it, but there is nothing specific I can comment to you over and above that.

Okay, thanks. And then lastly, is there any update on the ILFC/AIG lawsuit, any timing or anything you can add it with color with respect to the lawsuit?

There is no new development. There has been no new filings, the two legal sides are in communication. But there is nothing at this point to report. And our official position remains as we published back in April that we don't believe that suit has a merit. We had strong defenses and management is not really devoting a lot of resources to that project right now.

All right. Thank you very much.

Okay.

Glenn Engel, Bank of America Merrill Lynch.

Good afternoon. Two questions. One you don't have this issue as much as others, but you do have planes coming off lease over the next year. Can you talk about the few planes you've had come off lease that you have to extend to re-lease, how the rates have held up and what 2013 looks like?

Yeah, we had two A320s that came off lease this year. One was a repo from Kingfisher, which we leased to an airline in Eastern Europe. We also had an A320 coming off of scheduled lease from Aer Lingus, which we leased to a scheduled airline in Central Asia. We only have one A319 that will come off lease next year, and we had one A320 coming off lease from a Chinese airline, which we extended for three more years.

We do not have any widebody aircraft coming off lease next year. We do have only one 737, which is a 737-700 that's scheduled to come off lease in November of 2013. We are discussing the extension of that lease or alternatively we're talking with two different airlines about taking over that aircraft. So basically it's minimal lease expiries in 2013.

And the ones that have expired or the Kingfisher one, what percentage rate reduction do you see, 10%, 20%?

The way we look at those and only think I can comment, we don't comment on lease rates in particular. But I can just tell you that the lease rates we have gotten on the following aircraft have been pretty close in terms of the rate of the function of our net book value, pretty close to when we first bought them.

Second question is one financing. Looking at your, I think, yours is 54% fixed rate. I guess go through again what's the ideal fixed rate and when you're doing fixed rate, what's the ideal term of that fixed rate?

Hi, Glenn, this is Greg. Our fixed floating rate target is 70/30 and we're going to achieve that over time. We look to match the weighted-average life of our debt with the weighted-average life of our leases. The weighted-average life of our debt, as I mentioned in my remarks, is 5.1 years. The weighted-average life of our leases is seven. So as we'll continue to manage that fixed floating ratio by layering on longer-term fixed rate paper, to bring up that fixed floating ratio as well as to lengthen out the weighted-average duration of that portfolio.

So the average length of the fixed rate debt is 5.1 years, or just the average length of your debt in general is 5.1 years?

All of our debt, all.

That includes unsecured bonds, it includes institutional, private placements, and it includes term loans that we have.

And when you are locking in fixed debt, are you trying to do it for three years, five years, 10 years. What's the right number to pick?

Well, for example, last year we did a five-year $1 billion bond. We did a seven-year facility. The previous November, we did another seven-year convertible bond. So it's a matrix of maturities that goes anywhere from, say, three to seven years. But as Greg indicated, our target now is to lengthen maturities, taking advantage of the low interest rates in 2013.

Thank you very much.

Ladies and gentlemen, since there are no further questions in queue, I'd now like to turn the call over to Mr. Ryan McKenna for closing remarks.

That concludes our call for today. Thank you all for your participation. We'll talk to you in few months.

Ladies and gentlemen that concludes today's conference. Thank you for your participation. You may all disconnect. Have a wonderful day.