Earnings Call: H1 2019

Aug 16, 2019

Ladies and gentlemen, welcome to the BOC Aviation first half 2019 results conference call. Timothy Ross, please begin. Thank you, operator, and welcome everybody to BOC Aviation's earnings call to discuss our interim results for the six months ended 30 June 2019. With me today are our Managing Director and Chief Executive Officer, Robert Martin, our Deputy Managing Director and Chief Financial Officer, Phang Thim Fatt, and our Chief Operating Officer, David Walton. Please note that some of the information you'll hear during our discussion today may consist of forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. You should not place undue reliance on any forward-looking statements, and you should review our results announcements for full details. Please also note that all currency references in today's call are in U.S. dollars only. A copy of our earnings announcement is available both via the Hong Kong Stock Exchange and in the investor section of our website at www.bocaviation.com. A conference call presentation is also available in the investor section of our website. This call is being recorded and will be available for replay from our website within the next 24 hours, as is a transcript of today's management presentation. I'll now turn over the call to Robert Martin for his comments. Thanks, Tim, and good afternoon to everyone on the line. Thank you for joining us for our 2019 half-year results earnings call. We're pleased to have just achieved a major milestone during this period, having earned $4 billion of cumulative profit since inception. We're also delighted to report a net profit after tax of $321 million for the first half of 2019, up 8% on the same period last year, and equivalent to earnings per share of $0.46. We saw sustained growth in our total revenues and other income, up 13% to $930 million. Our core lease rental contribution continues to be the principal revenue component of our pre-tax earnings. This held steady in first half 2019 and represents a sustainable long-term income stream that recurs across the cycle. We ended the first half with total assets of $19.2 billion and grew the net book value of our aircraft to $15.9 billion. Given a weighted average remaining lease term of 8.2 years, this provides a solid base for our future earnings. Reflecting the ongoing growth in our financial performance in the first half of 2019, our board has declared an interim dividend of $0.1388 per share, payable to shareholders of record on the 3rd of October. This represents a payout ratio for the first half of 30% of net profit after tax and is consistent with previous interim distributions. The board's policy continues to be to pay up to 35% of full-year net profit after tax to shareholders in the form of dividends. We finished the first half with cash and committed liquidity of $3.8 billion. This positions the company well to fund both our contracted investments in aircraft and to finance further growth in the portfolio. Turning to the market backdrop, macro conditions remain generally positive for our industry. On the demand side, the airline industry continues to match long-term growth expectations, with air travel demand remaining robust. Airline passenger traffic, as measured by IATA, the trade association for the world's airlines, rose 4% in the first half, in line with the long-term trend rate. This underpins IATA's earning estimates for 2019 for the airline industry of over $28 billion. Its fifth year of substantial industry profits in a row. These are underpinned by oil prices of an average 8% lower than 2018, and anticipated passenger traffic growth of 5% in 2019. On the aircraft sale side of the business, the availability of U.S. dollar liquidity and the investor market remains strong. This continues to drive the healthy demand by aircraft investors for purchase of our aircraft with lease attached. We signed an agreement to sell an aircraft portfolio to Silver Aircraft Lease Investment Limited in mid-July. Sales of the 17 aircraft with lease attached are expected to close in the second half of this year, and we will continue to provide management services for this portfolio. We expect to hit our sales guidance for the full year of around 30 aircraft. Obviously, manufacturer delivery delays have been a key challenge for the first half of 2019 and will continue to be for the balance of the year. By the end of the first half, we encountered delays over the half year of a total of 18 aircraft, comprising 12 Airbus and six Boeing, of which 12 were due to come onto our balance sheet. We continue to see delays in Airbus deliveries arising from industrial constraints that will affect up to seven Airbus aircraft in the second half, delaying these into 2020. With regards to Boeing, in its latest second quarter earnings call, it acknowledged that the return to service date for the 737 MAX aircraft has been further delayed to October 2019 earliest, but subject still to regulatory approvals. Therefore, we expect that some or all of our 23 remaining 737 MAX aircraft that were scheduled for delivery in 2019 will now occur later, and we're working with Boeing and our customers on a revised delivery timeframe. As a result, we expect delays could result in delivery of up to 30 aircraft currently scheduled before the end of this year, now occurring in 2020 or beyond. We are currently working hard to replace the delayed CapEx. The total number of aircraft already delivered or scheduled for delivery onto our balance sheet in 2019 is currently expected to be 39. I will now hand the call over to David Walton to speak to our operations and business development, and then Tim Fatt will take over for a more detailed review of our P&L and balance sheet. Thank you, Robert Martin, and let me add my thanks to you all for joining us this afternoon. In the first half of 2019, we delivered 25 new aircraft to airline customers from our order book, including five where the customer exercised purchase options at delivery, giving us 20 new aircraft added to the owned portfolio. Our total fleet stood at 499 aircraft at the end of June, comprising 314 owned and 23 managed aircraft, and an order book of 162 aircraft. Some of the highlights of the first six months included delivering our 350th Airbus aircraft, an A320neo, to our longstanding customer, TAP Air Portugal. Delivering the first three A320neo aircraft on lease to Air Macau, and the delivery of the first of seven Boeing 787-9 aircraft to Air Europa. After the period end, we announced three significant transactions. We signed leases for 10 new Airbus A320neo aircraft placed to Air China, scheduled for delivery in 2019 and 2020. We signed a purchase leaseback agreement with Qatar Airways for three Airbus A350-900 aircraft, which are expected to deliver in the third quarter of this year. We signed leases for four new Airbus A321neo aircraft placed with Scoot, a subsidiary of Singapore Airlines. These transactions illustrate the strength of our global customer reach, the longevity of our manufacturer relationships, the speed with which we can capitalize on opportunities, and the benefits of our scale. Our team continues to build good long-term business as we signed 39 lease commitments with airline customers in the first half of 2019. Also during the first half, we generated nearly 54% of our lease revenues out of Asia Pacific, reflecting the region's growth, and we delivered our first new Airbus A330-900 aircraft to Lion Air. Our net lease yield was stable at 8.4% for the first half of this year. During the first half, we had 10 aircraft to redeploy due to customers that eventually ceased operations. Seven of these were owned aircraft and three were managed. We rapidly put these aircraft back on revenue, relying on our fully in-house technical, legal, risk, and portfolio management teams, who were well prepared and who acted quickly. On our leasing team, which found good redeployment opportunities. Due to these efforts, the aircraft we redeployed were off lease for less than one month on average, and we had another period with strong portfolio utilization of 99.6%. With that, I'll turn it over to Tim Fatt. Thank you, David. Our post-tax earnings were $0.46 per share, up 8% over the first half of 2018. Net asset per share, meanwhile, rose 2% to $6.18 from 31st December 2018. The principal driver of the growth in earnings was a 13% increase in total revenues and other income. This was supported by rising core lease rental contribution of $341 million, which net of costs represented 80% of profit before tax. Our lease rental income rose 11% compared to first half of 2018, as we increased the size of the fleet. Depreciation, our largest expense item, increased by a similar amount relative to first half 2018, also driven by the growth in the size of our fleet. We sold nine aircraft from the owned fleet during the first half of 2019, compared sold in the first half of 2018. Gains on aircraft sales were $22 million and accounted for 6% of pre-tax earnings. We expect a greater contribution in the second half, as we are now focused on concluding a portfolio sale of 17 aircraft with leases attached that was signed in July. Our aircraft portfolio remain one of the youngest in the industry, and we have kept the weighted average age of our owned portfolio at 3.1 years. Interest and fee income amounted to $57 million, almost twice first half 2018 levels, as we generated more fee income from pre-delivery payment transactions. After deducting apportioned interest expenses, this item comprised 8% of our profit before tax. Finance expenses increased by $50 million, driven primarily by an increase in our borrowing as we invested in more aircraft. As the proportion of fixed rate leases has increased, we have lifted the proportion of our fixed rate debt during the first half, which also contributed to increase in our average cost of funds to 3.6% in the first half of 2019, from 3.3% for the full year of 2018. At the end of the period, our total asset had increased 5% to $19.2 billion from the end of 2018. We had capital expenditure of $1.5 billion in the first half of 2019, primarily related to our aircraft delivery and pre-delivery payments. We have committed CapEx of $1.5 billion for the second half, and we expect to grow total CapEx for 2019 to $3 billion-$3.5 billion. Our indebtedness increased, rising 5% to $13.1 billion as at 30th June compared with end 2018, with our gross debt to equity ending the period at 3.1. S&P Global Ratings and Fitch Ratings have reaffirmed our industry-leading A- credit rating, which we continue to leverage to raise more than $1.3 billion under our GMTN program. Now back to Robert for his final comments. Thanks, Tim Fatt. We're proud of the results that we've delivered in the first half, and we believe that they demonstrate the benefits of our disciplined approach to fleet growth, our financial strength, and our dedicated team of employees. We're pleased to note that the annualized first half total return for our shareholders, according to Bloomberg, was 35%. This concludes our review of the industry, our company's financials, and our outlook. I'll pass the call back to Timothy Ross. Thanks, Robert. This wraps up management's formal commentary. We now have time for Q&A, and request that each participant restrict themselves to one question and one follow-up, unless time permits for additional queries. I'll hand the call back now to the operator for the Q&A session. Thank you. We will now begin the question and answer session. Participants with question to pose, please press 01 on the telephone keypad now and you'll be placed in the queue. To cancel, please press 02. Our first question, Ivan Chow from BOCI, please go ahead. Okay, thank you. Thank you for taking my questions, and congratulations on the very strong set. My question is about the outlook for the interest and the fee income. It looks very strong in the first half. Also, is there any risk associated with this PDP finance? Because maybe some of them will be about the MAX aircraft. Thank you. Okay. Ivan, it's Robert. Firstly, we've seen a lot of demand for this product over the last 12 months. The results you're seeing in the first half are a period when we have, for the first time, the full impact of all of the transactions we've put in place. That's one of the reasons why the amount is much higher than previously. Interestingly, in the pre-delivery financing part of the marketplace, there aren't that many players. Because of our unique situation, where we have contracts in place with all the manufacturers and we have access to unsecured financing, that allows us to do this more easily than others in the market. In terms of the risk, we obviously do this with an eye to if anything goes wrong, we actually take the aircraft onto our balance sheet and we lease it out to other customers, which is part of our core competency of the company. So, we will only do things for aircraft that we would otherwise consider investing in. This is not something where we move away from that. Okay. Okay, I see. Thank you. Can I ask a follow-up question? Because the sales this month, the MAX is about to delay into next year. So, what's our strategy for the PLB business? Are we going to be more aggressive to get a deal or something? Thank you. Okay. It is clear, Ivan, and you can tell from the way that we have been very frank in our news to the investors on how we think it could impact us with potentially losing up to 23 MAXes in the second half of the year. This is something that is out of our control. But as when we have had previous situations where we have lose balance sheet, we have looked at alternative ways to grow the balance sheet through our pre-delivery payment and lease financing and also our purchase leaseback financing. You will already note we have announced the transaction for three A350 aircraft on long-term leases to Qatar Airways, and we will be looking for other similar transactions in the second half of the year, both single aisle and wide body aircraft. Okay. Thank you. Thank you, Robert. Thank you. Our next question, Paul Yong from DBS, please go ahead. Hi. Hi, Robert and hi, Mr. Pang. I am going to start off with a question on the staff costs. I think staff compensation costs was down by about 9%, and I think the reason stated was lower bonuses accruing to staff. Perhaps you can explain to me why staff bonuses are lower given that the results look pretty decent from my perspective. Thanks. First of all, Paul, thanks for your sympathy towards our staff. They appreciate it. Last year was a unique year because we had two things happening at once. One is we had the final payments accruing from our previous five-year plan, which had been the period up until the end of 2016, where there was a tail on adjustment for that plan. This year, we do not have that. That basically will cover part of the amount. The second thing is we only accrue for bonuses in line where our performance is. Obviously, we have a larger equity base than we had at the end of last year. That is the base of which we are accruing. Those are the two main reasons why it looks low at this point. Do not worry, though, I am driving the troops very hard, and I hope to get it up by the end. Thanks, Robert. Let me follow up with another question, and this is more on some of the other costs. There was a $3.8 million charge on trade receivables in excess of what the security deposits cover. Can you provide a little bit more color on that situation and whether or not you think actually that we could collect back the rest or what restitution there we could do? Then, of course, the cost of repossessing the aircraft, perhaps a little bit more color on what that quantum was as well. Thanks. Why do I take the first one? I will let David take the second one because David is our leader when it comes to moving planes around. Okay. On the provision. First of all, let's be very clear what the provision is for. It's a provision for financial receivables, meaning payments due under leases. The way that we run the company, first of all, is remember, we collect our lease rentals monthly in advance, and we also collect a security deposit. Yeah. If we have with any lessee at the balance sheet date, a situation where they're even $1 above the security deposit, we will put a provision in our accounts. Where we ended up, we had two types of situation at 30 June where we had that. One was where we had one particular airline group in North Asia who basically was slow on payments at the half year, and a couple of their subsidiaries did go above the security deposit. But we intend to collect that as soon as possible in the second half. And the second is we had two individual single aircraft exposures on the MAX side, where those two counterparties basically went slightly above their security deposit. And so we've provisioned for that as well. Right. Does it mean that they are still, how do I say, the relationship is still ongoing, the aircraft have not been repossessed? Yeah. They're just slow on their payments. That's correct. Okay. Bear in mind, as a leasing company, if you compare us with collecting money from a bank, we collect monthly in advance. At a bank, they'll collect quarterly in arrears. So we're always four months for about 120 days ahead of a bank in terms of when we do collections. Yeah. Okay. But these are all situations where they are surviving customers. The customer is not defaulted. Okay. Well, they have not gone bankrupt. Basically, we expect to recover the money. Okay, great. Thanks for the clarification. Maybe let me just turn to David then, who will respond to the second question. David. Thanks, Robert. The repossession costs that we recorded in the first half were really quite low. It was not material. The reason for that is because we had aircraft two that we redeployed, that we repossessed at the end of last year and delivered in the first few days of January. The impact of those aircraft was really felt last year. As I am sure you are well aware, Jet Airways ceased operations this year, and that was the one that was the major activity in the first half. Got it. We transitioned very quickly with not a lot of out-of-pocket expense. Remember, as Robert was saying, we have very well-structured leases. We collect security deposits. We have maintenance reserves for our customers who are sort of down on the lower end of the food chain in terms of credit quality, and so we can use those resources as well. I would just say that the total expenses that we recorded in the first half were not material. Thanks, Dave. That clarifies it for me. Thanks, David. Thank you. Our next question, K. Ajith from UOB Kay Hian, please go ahead. Hi, Robert. Thanks for taking my call. Again, congratulations for a good set of results. Two questions from me. One is on the cash flow. I noticed an increase in receivables. Is that something that we should be concerned with? Is that something to do with some of the five repossessed aircraft? That is my first question. Then I will follow up with another question. Okay. In terms of the receivables, as I just explained to Paul, the main receivables situations are this one North Asian airline group, and secondly, a couple of smaller situations relating to the MAX. I am not overly concerned about receivables in total at this point. I think we will get them under control. As you know, the management here, one of our KPIs is collection of cash. You can be sure we are very focused on that. Okay, thanks. Second question is relating to the finance cost. I noticed that finance cost amounted to about 3.5% or 3.6% for first half 2019. Given the fact that LIBOR rates continue to decline and the general trend for interest rates is down, do you expect the growth in financing cost to taper down in second half 2019? Okay. The first thing to note is, if you look at the presentation, you look at our proportion of fixed rate leases, we are now up at 79%. The proportion of fixed rate debt has now gone up to 73%. Our rates are actually pretty much fixed. We do not have a lot of floating rate debt. We are in a very strange point in the cycle where actually LIBOR is above fixed rate, which certainly I do not remember in the last 15 years of being here. We took the decision to fix basically so that we could protect the operating margin in our leases. That is why we have done that. Given that we have done so much fixing, then in the second half, it is only going to be the impact of any incremental financing that we do or any refinancing. We have refinancing due, I think, of $0.6 billion, if I remember correctly. Then basically, it is a matter of the additional assets we intend to add to the balance sheet. As Mr. Pang mentioned, we are aiming to try and get up around $3.5 billion in total by the end of the year. That is about another half a billion dollars worth of assets that we would need to finance. The net effect, I feel it is not going to move around very much. Okay. The 3.6% at the half year, it may come down slightly, but it is not going to come down significantly. Okay, great. Thanks. Yeah. That is all from me. Yeah, good. Thank you. The next question, Shaurya from Goldman Sachs. Please go ahead. Hi, Robert, Mr. Pang, and David. Thank you for taking my question. This is Shaurya from Goldman Sachs. I have a quick one for you on your lease rates. First is on the news that you are currently signing the deals on and placing for the next year. Are you seeing higher lease rates than your current book? On a related note, second is on MAX. The MAX that will come in next year, do you expect the lease rates to be lower there? Also, do you think to some extent that will be offset by a lower pricing from Boeing? That is from my side. Thank you. Okay. There's a lot of things there, Shaurya. Let me basically go through them one by one. First of all, used aircraft placements. Because we write long-term leases and we tend to trade aircraft in the first lease, we actually don't have a lot of aircraft coming off lease. Our next available used aircraft is not until August 2020. That's a year away. On the placements that we've done during this year so far, most of the aircraft have been eight years or older. I think it's unrealistic to expect the same rental as you would have done on a new aircraft. But what I can say is, relative to what we'd seen the year before on similarly aged aircraft, we've seen an increase in rates. Okay? Okay. That was the first question. The second question was MAX rates lower than they were. Okay. MAX rates, the jury is out, I think is the best thing to say there. Realistically, when you look at the situation, 2020 is going to be a big year for Boeing deliveries. It has to be. They are going to have to catch up with all of those that were not delivered in 2019. That will certainly put some pressure on the marketplace. I think there will be some pressure on rates during 2020 on the MAX. Then in terms of offset by Boeing prices, all I can tell you is we are in significant negotiations with Boeing as to how we close out this whole situation of the delayed deliveries this year. I can't give you any feedback on that now, but I will maybe at the end of the year when we are able to do so. Thank you. That's very helpful. Thank you. Thank you. Our next question, Christian from Liontrust. Please go ahead. Hi there. Thanks for taking my question. My name is Shashank Savla from Liontrust. The first question was on the, you mentioned that the cost of funding has increased to 3.6% because of the increase in the fixed rate debt. Why hasn't the lease rate factor gone up? Because similarly, you've seen an increase in the fixed rate leases as well. Yeah. Okay. So there's two elements going on. One is the increase in the amount of hedging we've done. Bear in mind, we haven't put on those existing leases, we've just hedged them, we haven't added new debt. In addition to that, there's debt we've raised against the increased size of the portfolio this year. If you look in the presentation, let me just find the page. Page 8 in the presentation, you'll see that we've added, in net terms, about $0.9 billion of aircraft in the first half of this year. So it's a combination of those two factors. Now, why hasn't the overall return gone up? Because at the same time, we've seen floating rates drifting downwards, and we have a number of floating rate leases, where obviously those lower floating rates have come through. So it's a combination of those factors. The final thing is, obviously, there was some short period, as David mentioned earlier, when we're moving planes around where we weren't to receive rental for that month's transition. Great. Can I ask about the 737 MAX, the six aircraft which you currently own, are they grounded or are they operational? What happens to the lease payments for those aircraft? Okay. First of all, they are grounded. Nobody is allowed to fly a 737 MAX for commercial service at the moment. Until the aviation authorities basically change their view, that is the situation. As I mentioned earlier in the call, Boeing indicating they thought the earliest return to service is likely to be around October this year. When they are parked, they are put in a parking program. Our technical team have inspected them to make sure they are in proper parking programs, because you cannot just park an aircraft and leave it. You have to make sure that certain minimum maintenance is done, even when it is parked. What was the final question? What happens to the lease payments? Oh, the lease payments. Okay. Varying approaches from our customers. The good ones pay us on time, and there are a couple of single aircraft exposures where they have not been so good in terms of paying us. Okay. Thanks a lot. Next question, Leah Yu from Volcom International. Hi, everyone. Congratulations, first of all, on the major milestone. I really just have one very quick question on the MAX again, and it is on what happens after it does get reapproval by the FAA. Because we do know that, I think right now, one of the issues is, it could be slightly piecemeal in terms of all the different countries approving the 737 MAX once it is approved by the FAA. For a global lessor like BOC, would there be a potential issue between just like a much longer delayed of time between when it is approved in the U.S. and when it is approved everywhere else in the world? Okay. I will try and summarize what was a one-hour discussion between myself and the board earlier today into a short period. First of all, let us split the 737 MAX into three categories. The first one is those aircraft that have already been delivered to customers. In our case, that is six aircraft. There, you are reliant on the local aviation authority, whoever is overseeing the operations of that airline, reauthorizing the aircraft to fly. That depends on the local authority. In addition, the airlines will have an eye to which authorities around their country that they fly to also needs to authorize it. Because if you are in a small country, Singapore being an example, you cannot just fly your plane around Singapore, you have got to fly to other locations. You will also need to make sure that whichever countries you are flying to have also authorized. That is the first point. Those are the six that are delivered. Then there is those planes coming down the production line, but have not been parked by Boeing. With those aircraft, as soon as the individual aviation authorities basically have approved, then basically the planes can be delivered to customers. There is then a final group, which is then those aircraft that have already been delivered and are parked. Well, they are not delivered to us, they are parked in Boeing. Those are the ones that will take longer to come back to market, because generally they will be in parking programs, and there will also be limitations on how many Boeing can deliver in total each month to customers. We estimate that at the moment they are producing 42 on the production line. Maybe they could deliver a total of 70 a month. Above that becomes much more logistically difficult for them. For those parked aircraft, we could be talking up to a year's worth of delays, to be very frank with you. Now, the big debate, which is still ongoing, is, how much training and what type of training will be needed by the individual aviation authorities? There is no conclusion yet on that. That is still being discussed, and ultimately, that will also drive how long it takes before each of these aircraft will be able to fly under each aviation authority. Okay. That's the short version. Thank you. Our next question, Armin from JK Capital. Please go ahead. Hi. Thanks for taking my question. I just wanted to clarify the point you made on the MAX relaunch. When the MAX gets relaunched, you said the lease rate will come down. Are you saying that Boeing will reduce the procurement cost for you as well so that your lease yield remains the same in these deployments whenever it happens? That's not what I said. No. Basically, what I said was there'll be a lot of aircraft delivering into the market next year, so there'll be market pressure downwards on MAX rates. What we do with Boeing and the purchase prices are an entirely separate discussion to that, which we will progress during the balance of this year as it becomes clearer what is the damage to us and basically, how much compensation we need and what form we take that compensation in. In that case, do we have a clarity on what kind of net lease yield we might generate on these MAX aircraft when they get relaunched? No. It is too early to tell yet. Let us get to the point of the aircraft being able to fly first, and then we can assess that. Okay. One more follow-up question on the lease rates being strong this year. Is it due to the short supply of aircraft due to the 737 MAX issue? If you look at our portfolio as a whole as to what has delivered and will deliver this year, it is a combination of purchase leasebacks we have done, pre-delivery payment and leases, plus leases on our Airbus fleet. We are now at a point where we only have two A320neo left to place out of our total orders of A320neos, and those are really what have been driving our lease returns this year. Okay. Thank you. Okay. Thank you. Our next follow-up question, Paul Yong from DBS. Please go ahead. Hi, thanks. I have got a couple of follow-up questions. First one is with regards to making bulk orders. The number of aircraft that we have on order is now down to 162. Have we started thinking about making bulk orders from, I guess, both OEMs and how do we think about that? Obviously, I think because organic deliveries help our business to have a higher growth and visibility beyond 2020. That is my first question. For my second question, if I assume that the rest of the aircraft scheduled for delivery in 2019 has been fully placed out, what is the situation for 2020? How much of the aircraft scheduled for delivery in that year has been placed out? Thanks. Paul, let us take bulk orders first. Yes. As you know, we planned well in advance about our future procurement. We tend to work in five-year plans, and we are already thinking about the period right the way through to 2025 at this point. How we engage and what we engage and when the manufacturers is still under discussion, but we are certainly focused on that point. Traditionally, we have taken over 60% of our aircraft under direct manufacturer orders. Okay, so I do not see that changing. We are focused on that. What is your placement rate? So placement rate. Put aside the MAX, we only have one Airbus plane left next year, which is in November. On the used aircraft, we have a couple, I think it is one in August, one slightly later in the year. On MAX, basically, it is up in the air at the moment, and let me give you more guidance on that once we have had discussions with Boeing, because at the moment, we are not sure which planes deliver when next year. So most of the uncertainties with regards to the MAX program? All except for one new aircraft, yes. Okay. I am very confident for that one new aircraft. Of course. Thank you. Thanks, Robert. Thank you. Our next question, Krishan from Ryan Trust. Please go ahead. Hi, thanks. Just a follow-up question. The cash collection rate, which was close to 100% for the last couple of years, that has come down to 97%. Is there any particular reason for that? Yeah. As I had mentioned earlier, we have one particular North Asian group who are slow on payments. Secondly, it's the impact of those couple of MAX late payers. Of course, we had Jet Airways, where we had a small amount of non-collected revenues. Thank you. On the gearing, which is the gross debt to equity of 3.1 times. What's the target or the level you're comfortable with, and when do you think you'll reach that level? Okay. The honest answer is slower than I thought. When you lose 30 single aisle aircraft out of the second half of the year, that's quite disappointing. I think we'd originally indicated to everyone we're planning to get up to 3.5 to 1, whenever we can, but realistically, that's going to take us well past this year, probably into the end of next year. Great. Thanks a lot. Great. Thank you. Ladies and gentlemen, if that concludes your questions for the afternoon, I would like to thank you for your attendance and look forward to speaking to you, if not before, in six months' time. Thank you, operator. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.