Dubai Aerospace Enterprise (DAE) has reported a strong start to its financial year as the lessor started to reap the benefits of acquiring the Sky 1 portfolio at the end of 2022. DAE’s total revenue rose to $315.2 million for the three months ended March 31, 2023. Profits also rose by 49% for the fiscal first quarter to $69.2 million compared to $46.6 million in the year-ago period.
Commenting on the results, Firoz Tarapore, chief executive officer of DAE, stated: “Our first quarter 2023 financial results reflect a strong operating environment for airlines, an improving collections and credit profile, and profitable divestment activity. We have successfully integrated the acquisition of SKY Fund I into our platform following the acquisition in the fourth quarter of 2022.
“Our profitability metrics improved substantially during the quarter, and our credit quality and liquidity metrics remained strong. Interest rate volatility allowed us to repurchase US$205 million of principal amount of our bonds during the quarter. We have increased our bond repurchase authorization following additional repurchases in the second quarter.”
Operating cash flow dipped to $283.8 million. As a result of the higher cost of debt, DAE’s net finance cost increased to $169 million from $121 million but profit margins improved despite the increased costs. DAE’s adjusted pre-tax profit margin rose to 23.3% from 15.3% in the 2022 quarter, while the adjusted pre-tax return on equity was 9.9% from 6.1% a year ago.
DAE total assets stands at $12.607bn, with net loans at $7.9bn, down from $8bn a year ago. DAE has a total fleet of 429, with 322 owned, 103 managed and four committed aircraft at the end of the quarter. The fleet has an average age of 7.1 years and an average remaining lease term of about six years.
The lessor has $2.643bn in available liquidity and its net-debt-to-equity ratio declined from 2.64x in the first fiscal quarter of 2022 to 2.47x at end March 2023, its unsecured debt percentage rises to 70.4%.
Tarapore also commented that DAE Engineering had continued to expand its offering and reach new milestones. “We commenced over 80 checks in the first quarter of 2023, and announced a number of new maintenance agreements, including with Air Europa and Emirates,” he said.
On the investor call held on August 2, Tarapore added that DAE Engineering had been breaking records for the past few quarters demonstrating demand for MRO services. He said: “We see more and more operators coming to us asking to lock in capacity, not just for the near term, but for the next two plus years. That's a phenomenal development from our perspective as we plan around that both for revenue and for more predictable profitability. So engineering business demand is still very high and functioning at very high levels.”
Tarapore described new business activity for the first half of the year as “extremely modest” having acquired seven aircraft and 20 from its owned and managed portfolios, and as a result he expects the second half of the year to produce much more trading activities on both the sale and acquisition sides.
During the latest quarter, KBRA affirmed DAE’s triple B rating and Fitch raised its outlook for the lessor from stable to positive.
Looking ahead, DAE has a $850 million maturity coming in August 2024, which Tarapore noted on the investor call that the team was looking for opportunities to refinance next year but certainly would not consider an early refinancing arrangement due to the unattractive interest rate environment. DAE has access to $2bn in revolving credit capacity, which Tarapore confirmed the company was currently speaking to banks to seek to increase that capacity by the next quarter.