Aircastle announces third quarter 2018 results

During the third quarter of 2018, Aircastle’s total revenues were $190.8 million, a decrease of $22.2 million, or 10.4%, from the third quarter of 2017. Core lease rental and finance and sales-type lease revenues increased by $12.7 million, which was offset by an $18.7 million decrease in gains from the sale of flight equipment and a $14.5 million decrease in maintenance revenue. Gains from the sale of flight equipment declined because the lessor sold fewer aircraft in the third quarter of 2018 than in the prior year. Maintenance revenues declined as no aircraft transitioned during the third quarter of 2018.

Lease rental and finance and sales-type lease revenues were $190.8 million versus $178.1 million the prior year. The 7.2% increase reflects the net year-over-year impact from aircraft acquisitions, dispositions and lease extensions. Since the beginning of the third quarter of 2017, acquisitions have outpaced sales. Over that period, Aircastle acquired 89 aircraft and sold 48 aircraft.

In the third quarter of 2018, net income was $36.3 million, a decrease of $21.1 million. Adjusted net income was $38.2 million, a decline of $26.2 million versus the prior year. Similarly, adjusted EBITDA declined by $20.3 million versus the third quarter of 2017 to $179.2 million.

The declines in net income, adjusted net income and adjusted EBITDA were all primarily due to an $18.7 million decline in gains from the sale of flight equipment and $14.5 million of lower maintenance revenue, partially offset by higher lease rental and finance and sales-type lease revenue of $12.7 million.

During the third quarter, Aircastle acquired eight aircraft for $262.4 million, including two new A320neos, the lessor’s first investment in new technology aircraft. For the first nine months of 2018, it purchased 21 aircraft for $674.8 million. The aircraft acquired year-to-date had a weighted average age of 7.4 years and a weighted average remaining lease term of 5.5 years. For the full year, Aircastle expects to complete $1.35 billion in aircraft acquisitions, including eight additional A320neos.

During the third quarter of 2018, the lessor sold three aircraft, including one 777-300ER, for total sales proceeds of $98.0 million.

Year-to-date, Aircastle sold eleven aircraft for proceeds of $276.2 million and a net gain on sale of $28.6 million. The average age of the aircraft sold was 12.9 years with an average remaining lease term of 4.2 years.

The fleet utilization during the third quarter was 100%. As of September 30, 2018, Aircastle owned 234 aircraft having a net book value of $6.8 billion. It also manages twelve aircraft with a net book value of $621.1 million dollars on behalf of its joint ventures.

During the third quarter, Aircastle received its third Investment Grade credit rating, when Moody's Investors Service raised the Company's senior unsecured and corporate family ratings to Baa3 from Ba1. Earlier this year, Standard and Poor's Global Ratings raised its ratings on Aircastle, including the corporate credit rating, to 'BBB-' from 'BB+' while Fitch Ratings assigned an initial 'BBB-' rating to Aircastle's senior unsecured debt.

During the third quarter of 2018, Aircastle issued $650 million of unsecured Senior Notes due 2023 bearing a coupon of 4.40%. This was the lessor’s first senior unsecured note issue with Investment Grade credit ratings.

In addition, earlier this year Aircastle increased the size of one of its unsecured revolving credit facilities to $800 million from $675 million, extended the facility maturity by more than two years to June 2022, and lowered the borrowing margin by 75 basis points.

On October 30, 2018, Aircastle's Board of Directors declared a fourth quarter 2018 cash dividend on its common shares of $0.30 per share, payable on December 14, 2018 to shareholders of record on November 30, 2018. This is our 50th consecutive dividend and represents a 7.1% increase over the previous quarter's cash dividend. Over the last eight years, Aircastle has increased its dividend nine times.

Since the beginning of the year, the Company acquired 2,655,299 shares at an average price of $20.22 per share. Aircastle's Board of Directors increased the authorization to repurchase shares to $100 million from the $42 million that was remaining under the previous authorization. Since 2011, the Company has repurchased 17.1 million shares at an average cost of $14.36 per share, for approximately $246.3 million.

Commenting on the results, Mike Inglese, Aircastle's Chief Executive Officer, stated, "We remain confident in our business model as the leading investor in the secondary aircraft market with a best-in-class asset management platform, and have increased our dividend for the ninth time in eight years. Now with an investment grade credit rating from all three major rating agencies, we can capitalize on growth opportunities with access to attractively priced capital. We are pleased to have recently issued our first investment grade note on very attractive terms."

Inglese concluded, "We are also pleased to announce that our Board approved an increase in Aircastle's share repurchase program to $100 million, from the $42 million that was remaining under the prior authorization. With our strong balance sheet, shareholder-friendly capital allocation policy, and the unique ability to source attractive, value-added transactions, we are positioned to increase value in the current market environment, and will continue to grow profitably and opportunistically well into the future.