Earnings Call: Q1 2021

Apr 27, 2021

Good day, and welcome to the AerCap Holdings N. V. Q1 2020 Financial Results Conference Call. Today's conference is being recorded and a transcript will be available following the call on the company's website. At this time, I would like to turn the conference over to Joseph McGinley, Head of Investor Relations. Please go ahead, sir. Thank you, operator, and hello, everyone. Welcome to our Q1 2021 conference call. With me today is our Chief Executive Officer, Aengus Kelly and our Chief Financial Officer, Pete Uhas. Before we begin today's call, I would like to remind you that some statements made during this conference call, which are not historical facts, may be forward looking statements. Forward looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed are implied in such statements. AerCap undertakes no obligation other than that imposed by law to publicly update or revise any forward looking statements to reflect future events, Further information concerning issues that could materially affect performance can be found in AerCap's earnings release dated April 28, 2021. A copy of our earnings release and conference call presentation are available on our website at aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay. We will shortly run through our earnings I will now turn the call over to Aengus Kelly. Good morning, everyone, and thank you for joining us for our Q1 earnings call. I'm pleased to report a strong quarter of earnings with $228,000,000 of net income or $1.76 per share. While there are still many challenges facing the aviation industry, we continue to see an improving environment with significant momentum in air traffic recovery in certain regions of the world and airlines looking to the future with increased confidence as evidenced by our strong leasing performance in the Q1. It is a testament to the focus and commitment of the AerCap team During the Q1 of this year, we were able to lease 60 aircraft, including 28 wide bodies, a quarterly record for AerCap. This was accomplished despite the pandemic and the efforts required by our team to complete the GECAS due diligence, negotiate the GECAS transaction and raised $28,000,000,000 of funding. So clearly the Q1 was an exceptional one for AerCap As we announced the GECAS transaction, we believe that this is the right acquisition at the right time in the cycle to create value for all our shareholders. As we mentioned in our announcement, we expect the transaction to close in the Q4 of 2021. Until then, we will continue to work hard to make sure we are positioned to hit the ground running from the start. I am pleased to report that we recently closed $28,000,000,000 of funding commitments with our banking syndicate related to the transaction, consisting of a $19,000,000,000 bridge loan, a $5,000,000,000 term loan And importantly, we have also secured an additional $4,300,000,000 revolving credit facility, which will further enhance the financial strength of the combined company. Now, as I mentioned above, we firmly believe consumer demand will return quickly once markets reopen. This is of course tied to the successful rollout of the various vaccination programs, which unfortunately have not been smooth in some parts of the world. That said, we continue to see green shoots of recovery in a number of regions. The U. S. Has seen demand for air travel gain significant momentum in recent weeks, translating into traffic of around 65% of pre pandemic levels. This recovery is being led by the leisure sector, But with business and international travel to come that should move higher over the course of the year as businesses reopen. Many of you will have heard the more positive commentary from the U. S. Majors in the past couple of weeks, which echo what we're hearing in other regions too. We are seeing renewed strength in domestic travel in Asia, where the traffic levels in a number of countries have surpassed those of 2019, including China, where we're now at 96,000 weekly flights or 116% of pre pandemic levels. Russia, Comparatively, it's 11,300 flights or 101 percent Vietnam, 6,000 flights, 125 percent South Korea, 3,700 flights and 127%. Together, these countries account for 115,000 weekly flights. This is equivalent to the U. S. Market of 116,000 a week. In Europe, the environment remains relatively weak As the slow start of the vaccine rollout coupled with a 4th wave in certain countries has led to further travel restrictions and related quarantines. Only Greece and Turkey continue to fly at levels in excess of 50% of 2019 levels. However, Positive developments on vaccine availability in the coming weeks and the agreement of the European Union to put in place a green travel certificate in time for the summer will spur improvement in the European market. Switching back to AerCap. We continue to see greater levels of demand and activity from our customers. As I mentioned, we signed 60 aircraft lease agreements in the quarter with airlines from 15 countries, the highest in 18 months and this compares to 97 lease agreements for all of 2020. In fact, 28 of the 60 lease agreements in Q1 were for wide body aircraft, a record number of quarterly wide body leases. This level of activity reflects a clear pickup in demand and confidence. I believe there are 2 key themes emerging from our conversations with customers. The first is that our confidence in the return of travel demand is strong and growing and mostly it's simply as a matter of timing. The second is that lessors will continue to be the partner of choice for aircraft financing. So on the first point, there is an abundance of evidence to show that once restrictions are eased, consumers react accordingly. The vaccine rollout is driving consumer confidence in the U. S, China and the UK, where consumers are enjoying additional freedoms. This consumer confidence will inevitably spread to other regions As further progress is made around the vaccine rollout, giving governments the ability to roll back on restrictions and airlines the confidence to add greater levels of capacity. Over 1,000,000,000 vaccine doses have already been administered with the latest weekly figures running at over 100,000,000 doses per week and rising. This will be equivalent to approximately 1,000,000,000 doses every 7 to 8 weeks. The acceleration of this rollout provides clear hope that an end will soon be in size. The second theme we are seeing is how aircraft leasing is growing in market share and we believe that aircraft leasing will continue to grow to over 50% of all aircraft financing. Airlines see the clear benefits of leasing, which frees up capital, allows a faster transition into new technology and eliminates residual value risk. This demand for aircraft leasing will inevitably help with future aircraft placements, though we have no availability from our order book until 2023. So as we look forward, the vaccine rollout gathering pace, the health of our airline customers improving And the demand for travel continuing to be strong, we have significant reason to be optimistic about the future. No doubt, we are in unprecedented times. But as you can see from the actions AerCap has taken to date and the actions we will continue to take that we are focused on delivering on behalf of our shareholders. With that, I will hand the call over to Pete for a detailed review of our financial performance. Thanks, Gus. Good morning, everyone. Our total revenues for the Q1 were $1,095,000,000 compared to $1,238,000,000 for the Q1 of 2020. Basic lease rents were lower in the Q1, primarily as a result of airline restructurings and aircraft transitions. This includes the impact of cash accounting, which was $100,000,000 for the quarter. Our cash collection rate was around 80% for the Q1 and our deferral balance modestly increased by 5% $514,000,000 as of March 31. The Q1 tends to be seasonally slower for airlines because it's the winter season in the Northern Hemisphere. And of course, this year we've had the additional impact of ongoing COVID related travel restrictions in many countries. We expect these metrics to improve over the course of the year as the vaccine rollout continues and as passenger traffic recovers. We're currently seeing progress on a number of major airline restructurings. As these restructurings are completed, we expect to see these airlines come off of cash accounting during the course of the year. LATAM is one of the airlines that's making progress on its restructuring and emergence from bankruptcy. We recently agreed to sell some of our unsecured claims And the proceeds of that sale will ultimately be determined by the bankruptcy court in the LatAm case. Turning back to the P and L, our maintenance rents were $183,000,000 in the Q1, which was an increase from $134,000,000 in 2020. The increase was primarily due to higher maintenance revenue resulting from lease terminations. In terms of aircraft sales, during the Q1, We sold 9 of our owned aircraft for a total of $184,000,000 The average age of the aircraft we sold was 18 years old And our net gain on sales for the quarter was $5,000,000 demonstrating our sound carrying values. Other income was $19,000,000 The Q1 and the increase over the Q1 of last year was mainly due to higher interest income. Turning now to expenses. Our total expenses were $827,000,000 for the Q1, a decrease from $916,000,000 for the Q1 of 2020. Our depreciation and amortization expense was $397,000,000 in the Q1, a decrease from $416,000,000 last year, primarily due to a decrease in average lease assets. Interest expense was $281,000,000 in the quarter, down from $319,000,000 last year. That was due to a lower average cost of debt and lower debt balance as well as lower mark to market expenses this year. We had asset impairments of $16,000,000 in the 1st quarter, which related to lease terminations and asset sales and were fully offset by corresponding maintenance revenue. Other leasing costs were $40,000,000 for the Q1, a decrease from $87,000,000 in 2020, and that was mainly due to lower or lesser contributions or top up expenses during the quarter. Our SG and A expenses were $57,000,000 for the quarter compared to $65,000,000 for the Q1 of 2020, a decrease of about 11%. Putting all of that together, in the Q1 AerCap generated net income of $228,000,000 or $1.76 per share. That includes costs related to the GECAS transaction of $25,000,000 pretax or $22,000,000 after tax. Excluding those costs, net income for the Q1 was $250,000,000 or $1.93 per share. We continue to maintain a strong liquidity position. As of March 31, our total sources of liquidity were $8,600,000,000 resulting in a next 12 months sources to usage ratio of 1.7 times. That remains well above our current target of 1.5 times. Our excess cash coverage also remained high at $3,700,000,000 We continue to maintain a very strong balance sheet. Our leverage ratio is currently 2.5:one, which is below our target ratio of 2.7:one and below where we began 2020. Our secured debt percentage continues to remain low at 24% of total assets. We currently have around $26,000,000,000 worth of unencumbered assets. Our average cost of debt excluding debt issuance costs, fees and other impacts was 3.7% for the Q1. In January, we raised $1,000,000,000 of 5 years senior unsecured bonds with a coupon of 1.75 percent, the lowest coupon in the company's history. As Gus mentioned, we also completed the syndication process The bridge financing for the GECAS transaction. The $19,000,000,000 bridge facility and the $5,000,000,000 term loan facility that were originally provided by Citibank and Goldman Sachs were syndicated to a total of 20 banks and we saw extremely strong demand from banks to participate. At the same time, we also entered into a new 4 year revolving credit facility for $4,350,000,000 which will be available upon closing the GECAS transaction. We had very strong interest in that facility as well with a total of 26 banks participating. I'd like to thank our banking group for all of their strong support throughout this transaction. So overall, on the operating side, we had a positive quarter with net income of $250,000,000 excluding transaction expenses and EPS of $1.93 As the vaccine rollout progresses, We're seeing more airlines looking to the future and putting fleet plans in place for the recovery of air traffic. And you can see that reflected in the 60 leases we signed up this quarter. Of course, the biggest news of the quarter was the GECAS transaction, which we believe will be a significant positive for our shareholders. With the syndication of the bridge financing and the submission of the first regulatory approvals, we're making progress towards the closing of that transaction. With that, operator, you can open up the call for Q and A. We will begin with Jamie Baker with JPMorgan. Hey, good afternoon, everybody. So a couple of questions from Mark and me. The final slide, operating cash flow estimate for the next 12 months, dollars 2,400,000,000 That's the same number that it was last quarter. So obviously a positive that you affirmed the guide, but some might push back On the fact that you didn't increase it with 1 more quarter rolling forward. So how does this guide tie into Current collections and lease rate trends. What can we read from the 2.4? Well, Jamie, we've really assumed a gradual recovery here in terms of air traffic. And so As we forecast operating cash flow for the future, we've assumed that our aircraft gradually increased their flying during the course of the 12 months, but we haven't built in a rapid recovery there. So look, I think it could be higher than that. It's maybe a conservative projection in that respect, but I think it's a reasonable one for us. Okay. And second question, what sort of regulatory, I guess goalposts or mile markers are you looking for, whatever you need to be clear and comfortable issuing GECAS Deal related debt and have you hedged any of the financing costs? Spreads have obviously rallied as of late. So Just curious why you're not locking in the funding sooner rather than later? Yes. So Jamie, we've got a number of milestones there. We've got our AGM coming up. As We've got we're putting in our regulatory approvals. We should have about half of them submitted by the end of May. And Those are key things that we're progressing and as part of those you're in dialogue with some of those regulators before you submit them. So on the hedging side, we're monitoring the market and we'll look to put things in place at the appropriate time. Okay. Thank you very much. Sure. We'll now move to a question from Ross Harvey with Davy. Go ahead please. Hi, afternoon, Guston, please. I'm just wondering in advance of the GECAS deal completion, can you comment on your priorities for the The aircraft business itself, particularly in regards to leverage levels as the objective is simply to reduce as much as possible and on sale leasebacks, I mean, are you looking to get Meaningfully involved. Well, Ross, I think 1st and foremost, the priority of the business on an operational from an operational standpoint Hasn't changed for one minute over the course of the last 6 months. And the focus is on getting our airplanes leased and getting paid. And I think you saw clear evidence of that in the Q1 by the quantum of aircraft that we were able to sign leases for at 60 aircraft. So that will remain front and center of the business every single day. And when we get To closing, of course, we are working closely with GE to be able to hit the ground running. In reference to sale leasebacks, I think that would be at the margin, Ross, to be quite honest. Understood. Thanks, Gus. Second one as a follow-up. I'm just wondering, you highlighted €150,000,000 of SG and A In the recent 6 ks, I'm just wondering can you talk us through that number and whether we should consider benefits and other cost lines? Well, Ross, you'll see other benefits in terms of depreciation and things like that, coming through. I think you'll also see some interest benefits relative to where GECAS is today when we put the financing in place. So you will see it in other lines as well. And that's going to be on the depreciation side, we expect that to be several $100,000,000 relative to where they are today. Chris, thank you very much. Sure. Now moving to our next question and that will come from Moshe Orenbuch with Credit Suisse. Great. Thanks. You had mentioned that the You know that you're fully leased through 2022, but I guess is there some possibility that you'll have Once the deal closes that there will be kind of aircraft that are available because of the GE business that would allow you to create some transactions Sure. I mean, when we say we're fully leased at the AerCap order book, we don't have anything available until 2023. What the state of where GECAS stands on its order book, that's managed separately within the parameters of the sale agreement, purchase agreement. And we'll see then Moshe when we get to the post closing, how many airplanes they have left and what time frame and how that positions them to take advantage of trends in the market. Got it. Thank you. And You mentioned the LatAm bankruptcy situation. Pete, could you talk about how that's accounted for where those assets are, how they're marked and what that might mean when there's a resolution? Well, we don't have anything on our balance sheet for that Moshe. So we haven't accrued anything. Ultimately, I would expect that to come in as other income. But as I said, ultimately it will be decided by the bankruptcy court. I think in terms of amount, it could be several $100,000,000 but we'll really have to wait and see how that all plays out. So you're saying it would be all revenue essentially? Yes. Great. But again, that's subject to it's hard to predict the timing of that and the ultimate amount. I'm just giving you an idea of what it could be. Right. But anything would be more than 0, right? Yes, that's true. Very good. Thanks very much. Sure. We'll now hear from Helane Becker with Cowen. Go ahead. Thanks very much, operator. Hi, everybody. Thanks for the time. Did you say how your deferral requests are trending? I think you talked about the cash Collections being 80%, but have airlines now then stopped asking for further deferrals and are just paying you back? It's a mix there, Helane. As we look around the world at the moment, as you heard the news from the U. S. Carriers during the week, things are going well there. China, things are going well in other parts. But you have to remember the Q1, obviously, we had recent events in Brazil And we had a slowdown in Europe post Christmas in January, February, which and a lot of European countries are still under lockdown. So in that environment, We had to give a little bit more ground to some of the carriers, but in return for that then, we'll always try and keep these deals NPV neutral. So we may have got Okay. So then would that be included in the portion maybe of customers that you've restructured leases for? Like is there some percentage that you might have Had to restructure leases at either lower rates or extensions or would you do extensions in that case If you are restructuring outlays. Of course, you are. I mean, you're not talking about big numbers here. I mean, as we said, the total number of the increase in deferrals is $24,000,000 $24,000,000 Elaine, it's not a big number in totality. Right. Got you. Okay. All right. And then will you be filing Approvals that you're asking for the regulatory forms, will they be filed so we'll be able to see what's happening there? I think that depends on the jurisdiction, Helane. There are about 20 approvals at the moment that we're expecting to file. So I think it depends on each individual jurisdiction whether that's publicly available or not. Okay. And what language is flying into Helane, there won't be English. Yes. I'll need to get Google Translator out. All right. Thank you. Have a nice afternoon. You're trying to push up on your Kazakh. Sure. And now we'll take a question from Vincent Caintic with Stephens. Hey, thanks. And first question on the lease rates going forward. So it's nice to see that the net spread expanded 30 basis Quarter to quarter. I was curious with your strong the 60 orders you have What are the 60 placements you have, how are the lease rates looking on new deliveries? And then when I think about the Rent deferrals you have and the repayment of those deferrals, how does that affect your yield? Since I think we're in cash accounting here, As those airlines pay back their rent, should we just expect the net spread to climb over the next coming quarters? Thank you. Let me answer the first part about the lease rate. So Vincent, look, as you noted, we moved at least 60 airplanes, a huge number given the pandemic and the background we are facing and the other demands on the organization. In terms of the lease rates, of course, look, it's evident There is demand out there. When an airline takes an aircraft, no matter what they pay for it, there's still a lot of cost associated with it. They're committing to crew costs, labor costs, Maintenance costs, all those costs are part of taking an airplane. So the fact that they're willing to take them means there is confidence out there in the future. Now As part of that transaction, there is a variable element to most of these new leases at the beginning for the 1st 12 months or so, where the rental will move around based on utilization. And then following that period, it will go into a fixed rate lease and that varies from aircraft to aircraft. But it's over the 1st 12 months or so where there's variability on the lease rates to facilitate the airlines restarting traffic. Pete, do you want to comment on the deferrals? Yes. So Vincent, on the second one, so the repayment of the deferrals themselves Won't affect the net spread because if you think about it in the deferral cases, We have recognized we're accruing the revenue in those cases and we're building up a deferral balance. So obviously, As those deferrals get repaid, that's a positive for cash flow, but it doesn't have an impact on revenue and therefore on net spread. What will have an impact on revenue and on net spread is when you have airlines coming off of cash accounting and actually flying these flying these planes, because that's obviously impacting revenue today. I mentioned it's about 100,000,000 Right. So that's going to be the biggest driver, the return of flight for most of those because obviously those have mostly been airlines that are in bankruptcy or other restructuring, right. And so as they emerge from those, you'll start to see those revenues come in because they've basically been almost no revenues now. Okay. That's very helpful. And yes, I was mixing up the deferrals on the cash accounting. So I appreciate that and Looks good for net spreads. So second question, so I had a chance to go through your shareholder circular and I appreciate all the detail there. I just wanted to talk about any incremental thoughts and particularly one of the frequent investor questions I get is on The prior revenue guide of at least $7,000,000,000 because it seems like if we add AerCap and GECAS together, that revenue should be at least 8 $1,000,000,000 And given it seems like net spreads are doing better, I just wanted to get your thoughts on whether 1 plus 1 equals 2 on the Combined revenue side, if there's something else we need to consider? Thank you. Yes. I mean, it's not as simple as that unfortunately, because you have a number of purchase Accounting impacts that you're going to have, and also the accounting is just different the way that GECAS and AerCap do it, right? It's not apples to apples and everything. And so I think that's really why we got into what we did in thinking about it. So you can't just sum up the 2 and then, and say, okay, that's what it's going to be. Okay, got you. I'll follow-up offline. Thanks very much. Sure. Okay, no problem. Next question will come from Ghush Patel with Deutsche Bank. Hey, good morning guys. When we think about the cash accounting balance, what is the view internally on this? Do you guys think that the $100,000,000 is representative of a peak number here? And just following on to that, how do we think about reintegrating this figure into the revenues? What do we think is the possible upside here? Do you think maybe over time we get maybe $60,000,000 to $60,000,000 of that back? And if you could provide any Type Horizon, that you guys kind of have in mind, that would be great too. Sure. So I think that The cash we will continue to see impact of cash accounting, I would say, throughout this year. But we're going to it's going to abate over time basically. So I think that $100,000,000 is a reasonable guide if we're thinking about it over the next couple of quarters. But As I said, as the airlines come out and as they as those bankruptcies or restructurings are completed, then we're going to see that Those come back. So it's going to happen over time. But in terms of how much of that recovers, Yes. Look, I think that you could see 60,000,000 on that 100,000,000 you probably see like 60,000,000 Recover, as I said, it's not going to be an all at once thing, but it's going to come back $60,000,000 to $70,000,000 something like that, I would guess. Okay, great. And then the second question I had, sorry, The second question I had was recently we saw Aeromexico announce that they've Some agreements to restructure some of the 787 leases they have. And just wanted to see if you could update us as to whether any of the Aircraft that AerCap owns and has on lease to Aeromexico are included in this or just in general status update on The aircraft you guys have in place with Aeromexico and do you intend for them to stay with Aeromexico long term or are you in the process of remarketing these? We expect the Aeromexico aircraft to stay there and the Aeromexico procedures now are in front of The court for approval and assumption of the revised transaction. Okay. Thanks a lot guys. I appreciate the time. We'll move to a question from Catherine O'Brien with Goldman Sachs. Good morning, everyone. Thanks for the time. I actually have one more on cash accounting. This is the first time we'd actually Seeing that cash accounting impact decline since the start of the pandemic, at least versus what I've tracked. And that's despite the H and A Bankruptcy earlier this year. So I was just wondering what's driving that? Are some of the aircraft back on new contracts? Or is any of that driven by Aircraft on the ground, but no longer officially under lease. I was just wondering what was driving the sequential decline? Thanks. Sure, Katie. So well, H and A actually we had put them on cash accounting in the Q4. So they were already on it. But we've had a couple of airlines come off it. I mean, part of the impact that you saw in some of the quarters last year was due to For example, and we've placed all of our Norwegian planes now with other carriers. So you are seeing What we've been doing, obviously, in many of these cases, the majority of the planes will stay with those carriers, as Gus mentioned, with Aeromexico, for example. But in other ones, We have moved those planes elsewhere and so you're going to see a less of an impact, right, because they're just you're moving the planes out of where they were. So I think that's the main driver because if I look at last, I think, Q4, we said it was $117,000,000 So Yes, it's down somewhat this quarter. It's hard to know exactly as I was saying in the previous answer, exactly how that's going to play out over the next few quarters, but I do expect that to come down over the course of the year. Maybe one quick follow-up to that Pete. So should we Like what a good exercise for us to be to just track the progress of these bankruptcy proceedings and that will give us probably a good sense of when we should expect to see the remainder of that $100,000,000 come down if you're expecting the majority of those aircraft to stay with their current lessees. Is that The right way to think about it? Well, I think for certainly for the major ones, I mean, some of these are not bankruptcies. They're just where we have assessed The airline is not probable of collection and some of those are quite small. And frankly, I don't think it would be worth following those situations. But for the major ones, yes, I mean, it will be once the restructuring is agreed and you have an agreed Leases on those planes and that bankruptcy court or equivalent in some countries has certified that, Yes. Then you should see them coming back, right? So that's that will be the trigger in most of those cases. I think, Katie, it's fair to say underpinning that And the exit from bankruptcy will be driven by the vaccination profile. That airlines will exit from those Protect from those structures when they're confident that the vaccine is moving along well in all of those countries. That totally makes sense. And then just for my second question, just on this higher level of placement activities on the quarter, Can you give us a sense of how far out those placements are delivering? And then a little bit of a follow-up to an earlier question, but how should we think about Lease rate factors on deliveries that you are contracting a couple of years out in the future versus perhaps lease rate factors of what you're seeing now in terms of used aircraft that you're putting onto a second lease and just how those compare versus pre COVID? I realize that's a little bit of a multi part one, but thanks for the color. Sure. Well, if I start with airplanes that have come back to us over the course of the last 12 months, They just have to be moved now and all those airports, about half of the 60 were airplanes that have either come back or And those aircrafts being placed in this environment. And in that example, as I said, there it's Positive that the airlines want to see want to take additional metal, which is great. But by the same token, given the pandemic is still with us And the vaccine rollout is still progressing. There's a variable element to the lease rental, which we based on utilization for the 1st 12 months. And then after that, it will flip into a fixed rate rental, which will be down a bit from where it was pre pandemic, that's obvious. As to the airplanes that are coming off our order book in a couple of years' time, that's a totally different market. That's one where You don't have to do any business and you'll wait and you'll see how it goes. Understood. Thanks so much for the time. Sure. And now we will hear from Andrew Lobbenberg with HSBC. Hi, there. I'm just quite curious to build on the previous question because Gus, you were speaking about the Aircraft that are being placed in the current market that are on powered by the hour and then are going on to a fixed rate, but at a discount. I don't know what you can say, but I mean the aircraft that are transitioning from Norwegian to North, I mean, North Atlantic are going around telling everyone they're paying precisely half what Norwegian are paying. I don't know what commentary you can offer to it, but I'd be interested to see what you can say around that. And then just the other Bunch of aircraft that I'm curious about is the 350s. I think you had LatAm, which they look to be keeping, but now they're not. A bit surprised given what lovely shiny planes they are that they don't want them. But how is that impacting your economics or why have they held on to them and then returning them and how easy will it be to remarket? Sure. Yes. Look On the North Atlantic rates, I can't comment on what they were what North Atlantic is saying about Their perception of what Norwegian used to pay, I just don't know. But again, on that rental, it will step up Over time and then it will be a reasonable deal for us. But very importantly from our standpoint, a very attractive Aspect of the Nors transaction was, 1, they're getting a lot of cash and that cash has come in and 2, we don't have transition costs associated With reconfiguring a wide body airplane for a new customer. In relation to the A350s, yes, you're correct. LATAM are handing them back. And yes, they'll be leased at a lower rate in today's market, but they will get leased. These are attractive airplanes and we have quite a number of discussions ongoing around them. But of course, as you heard earlier from Pete, our claim against the LatAm Estate Will be based on any loss that we suffer from the reduced rental that LATAM would have paid us versus what we will get in the market for those aircraft. So that should the idea of that is to offset the losses we would incur. Lovely, thanks. But is it fair to say that the 350s will be easier to remarket than the 7.8s because it's a tighter market or is that naive? No, I wouldn't say that. I think the 787 is an aircraft that has it's a smaller airplane and so it has a very large user base And it's been an excellent aircraft into service, but the A350 is a slightly larger airplane, We'll deal with this. Okay, fair enough. Thank you. And ladies and gentlemen, this will conclude your question and answer session. I will turn Call back over to Angus Kelly for any additional or closing remarks. Well, thank you all very much for joining us on this call. We look forward to seeing many of you, well, I suppose virtually by proxy at our AGM, that's coming up shortly. But I would like to hand you back to Joe. As you may have seen on Monday, we published our annual report on Environmental, Social and Governance Aspects, our ESG report. Joe, do you want to say a few words? Sure. Thanks, Gus. So just for those of you who are new to the AerCap story, ESG is something that our Board and senior management have been hugely involved in for a long period of time. And what's always formed a part of the strategy of the company, We've made concerted efforts in recent years to increase our transparency and reporting in the area. So with that in mind, we published our comprehensive 2021 ESG report earlier in the week. I'd like to just highlight a couple of key initiatives from that report. The first is that we doubled the level of carbon offsetting of our own operations and business travel to 40% in 2020 and we anticipate that higher in the coming years. And to do this, we partner with First Climate to invest in solar cell modules that Electricity in China as well as a biodiversity project in Brazil, which helps prevent deforestation as well as providing sustainable income for local families. And the second is that we increased our target for the most fuel efficient new technology aircraft in our fleet to 75% by the end of 2024 and that includes the impact of the GECAS transaction. And we see that as the best way for us to make an impact on the industry. So you'll find more of that report on our website and feel free to reach out to me directly after the call if you have any further follow So with that operator, you can now close the call. Thank you. Ladies and gentlemen, this will conclude your conference for today. Thank you for your participation and you may now disconnect.