Earnings Call: Q2 2021

Jul 29, 2021

Good day, and welcome to the AerCap Holdings N.V. second quarter 2021 financial results. 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 2Q 2021 conference call. With me today is our Chief Executive Officer, Aengus Kelly, and our Chief Financial Officer, Peter Juhas. 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 or 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, information, or circumstances that arise after this call. Further information concerning issues that could materially affect performance can be found in AerCap's earnings release dated July 29th, 2021. A copy of the 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 presentation and will allow time at the end for Q&A. As a reminder, I would ask that analysts limit themselves to one question and one follow-up. I will now turn the call over to Aengus Kelly. Good morning, everyone, and thank you for joining us for our second quarter 2021 earnings call. I am pleased to report strong quarter of earnings with $250 million of net income or $1.92 of earnings per share. The positive headline for the quarter is that the airline industry is witnessing an unprecedented and rapid recovery in air travel in many of the world's major markets. For AerCap, this has led to increased demand for our aircraft and a significant increase in our cash flows for the period. Looking ahead, we expect further improvement for the remainder of the year. With solid earnings, a strong balance sheet, and an improving leasing environment, we are excited about the opportunities that lie ahead for AerCap. When we look at the global leasing environment, we are becoming increasingly optimistic with clear signs of a rebound in markets around the world. There may, of course, be some setbacks along the way, there can be no doubting the huge progress made in the past 6 months, in particular to get the world flying again. The global vaccination program is clearly having a positive impact, reducing infection rates and serious illness. This is giving many governments around the world the confidence to relax restrictions on daily life, including air travel. According to the CDC, early evidence in the U.S. suggests that 99.5% of the COVID-related deaths in the last 6 months were amongst the unvaccinated. This reflects the efficacy of the vaccines, even against the highly contagious Delta variant, in protecting against serious illness caused by COVID-19. On slide 4, you will see the clear link between the growth in air travel and the percentage of people vaccinated. In the U.S., Europe, and China, which together made up 67% of the world's commercial flights taken in 2019, there has been a marked improvement. TSA data from the U.S. shows passenger throughput is consistently around 2 million passengers a day, which is approximately 80% of 2019 levels. China is flying over 13,000 flights a day, which is more than 105% of the same period in 2019. In Europe, they surpassed 25,000 daily flights in July, which is around 70% of 2019 levels. These numbers show the strength of the rebound, as well as the fact there is plenty of room for air travel to grow further, which will feed into stronger cash flows for our airlines and for AerCap. The EU Digital COVID Certificate is now accepted by all 27 EU countries, of which 20 have already opened their borders to American citizens for non-essential travel. We hope in the near term that this action by the Europeans will be reciprocated by the U.S. administration. This would be particularly meaningful for the transatlantic market, which is one of the most important and profitable routes in the world. While the pace of vaccination rollout varies by country, it is clear from those countries that have made significant progress that the recovery in air travel follows swiftly thereafter. To that end, AerCap has made a contribution of $100,000 to support the equitable access and scale-up of COVID-19 vaccinations in lower income countries through the Gavi COVAX program. Our industry will not be the same until everyone has the opportunity to be vaccinated. Getting back to AerCap, we are also seeing this recovery expressing itself in our numbers, including higher cash collections, increased leasing activity, and fewer requests for assistance from our airline customers. While there undoubtedly are parts of the world which continue to face challenges. In the second quarter, AerCap saw a 30% reduction in trade receivables, a 10% reduction in the deferral balance, and our operating cash flow was up as a result. As the recovery continues to gather pace, we too should benefit from a further uplift in our collections. On the leasing activity front, we signed lease agreements for 51 aircraft in the quarter, including 13 wide-body leases. In addition to this, we also executed agreements with Delta Air Lines for the long-term lease of 7 A350 aircraft, which will help support Delta's fleet modernization and efficiency targets. This was a landmark deal, and we look forward to further enhancing our relationship with Delta. We also monetized a part of our claim from LATAM Airlines for $186 million, and we expect to receive several hundred million dollars more, subject to court confirmation, by year-end. Turning to the GECAS transaction, we continue to make progress on the various integration workstreams to ensure we are ready to hit the ground running from day one. We have already received approvals in a number of important jurisdictions so far, including the United States and Europe. This is in line with our expectations, and we continue to expect a fourth quarter closing. We have followed GECAS closely as our largest peer for many years. When we were completing our due diligence for the transaction, we very much liked what we saw then. Now, as the recovery takes hold much faster than was anticipated in our underwriting case, we are even more enthusiastic about this transaction. I truly believe that our combined company will be able to offer a best-in-class service to our customers and emerge from the pandemic stronger than ever. As we look forward, the global vaccine rollout is proving effective. More and more countries are opening up to air travel, and the demand for aircraft leasing is growing stronger. These factors are all contributing to a stronger financial performance for AerCap. I am so proud of what our people and our company have achieved over the course of the last 18 months. We have successfully navigated our way through the toughest stress test imaginable and have emerged with a strong balance sheet, lower leverage, and an exciting transaction that will provide benefits to AerCap for many years to come. We're truly excited about what lies ahead. With that, I will hand the call over to Pete for a review of our financial performance. Thank you. Thanks, Gus. Good morning, everyone. Our total revenues for the second quarter were $1,232 million, compared to $1,197 million for the second quarter of 2020. Basic lease rents were lower in the second quarter, primarily due to airline restructurings and aircraft transitions. This includes the impact of cash accounting, which was $54 million for the quarter. We saw a significant improvement in our cash flows in the second quarter. Our cash flow from operations was $771 million, an increase from $400 million in the first quarter. As of June 30th, our deferral balance was $463 million, a decrease of 10% from $514 million as of March 31st. Our accounts receivable balance was $150 million, a decrease of 30% from $215 million as of March 31st. Our maintenance rents were $131 million in the second quarter, which was down from $224 million in the prior year period. Maintenance rents were particularly high in the second quarter of 2020 due to a higher number of lease terminations. In the second quarter, we sold 12 of our owned aircraft for a total of $139 million. The average age of the aircraft we sold was 19 years old, and our net gain on sales for the quarter was $22 million, an increase from $10 million in the second quarter of 2020. As I mentioned on our first quarter earnings call, we've agreed to sell our unsecured claims related to LATAM Airlines, and we received the first portion of those proceeds in early July and recognized them in the second quarter. Since these proceeds were received after the quarter end, they're not included in the $771 million of operating cash flow for the quarter. We also received some proceeds from other unsecured claims in the second quarter. In total, we recognized $193 million in other income relating to unsecured claims, which was the driver for the increase in other income this quarter. We expect to receive proceeds from our other LATAM claims during the remainder of this year, once those claims are approved by the bankruptcy court, and we expect those remaining proceeds to be several hundred million dollars. Turning now to expenses. Our total expenses were $943 million for the quarter, a slight increase from $927 million for the second quarter of 2020. Our depreciation and amortization expenses were $392 million, a decrease from $412 million last year, primarily due to a decrease in average lease assets. Asset impairments were $57 million in the second quarter, a decrease from $73 million last year. The asset impairments this quarter related to lease terminations and asset sales and were more than offset by maintenance releases for those aircraft. Our interest expense was $293 million for the quarter, down from $312 million last year. That decrease was primarily due to a lower debt balance this quarter. Our maintenance rights expense was only $2 million for the quarter, down from $12 million last year, primarily due to lower maintenance activity and a decrease in the balance of the maintenance rights asset. Other leasing expenses were $57 million for the second quarter, a decrease from $66 million in 2020. That was mainly due to lower credit provisions and lower lessor contributions or top-up expenses during the quarter. SG&A expenses were $73 million, an increase from $53 million last year. The increase was primarily due to the timing of compensation-related expenses. We also recognized expenses related to the GECAS transaction of $69 million, which was mainly the bridge financing fees. Putting all of that together, in the second quarter, AerCap generated net income of $250 million, or $1.92 per share. As I mentioned, that includes costs related to the GECAS transaction of $69 million pre-tax, or $60 million after tax. Excluding those costs, net income for the second quarter was $310 million, or $2.39 per share. We continue to maintain a very strong liquidity position. As of June 30th, our total sources of liquidity were $9.7 billion, resulting in a next 12-month sources to uses ratio of 1.7 times. That remains well above our current target of 1.5 times. Our excess coverage continued to remain high at $4.2 billion. Our balance sheet continues to be strong with a leverage ratio that is currently 2.4 to one. That represents a record low for AerCap, and it's well below our target ratio of 2.7 to 1. Our secured debt percentage continues to remain low at 24% of total assets, and we currently have over $26 billion worth of unencumbered assets. Our average cost of debt, excluding debt issuance costs, continues to remain low at 3.8% for the second quarter. In summary, this quarter, our results continued to improve. Our leasing activity has picked up, our operating cash flow is up, and our deferrals and accounts receivable balances are down. As we look at where we stand overall, it's useful to compare what has happened to our balance sheet versus the balance sheets of the airlines. To get through the pandemic, airlines had to raise significant amounts of debt, and in many cases, they needed to raise equity as well. In order to raise those funds, they encumbered almost every asset available on their balance sheets. They raised debt at high costs. Most of their ratings were downgraded. In contrast, AerCap's balance sheet has remained strong throughout the pandemic. Our leverage ratio was 2.6 to 1 in December 2019. It's 2.4 to 1 today. Our secure debt to total assets is virtually the same as it was prior to COVID. Our liquidity is higher, and we still have over $26 billion worth of unencumbered assets. That's why we believe that the strong position that we had coming into COVID, as well as the decisive actions we've taken since the beginning of the pandemic, leave us well-positioned to take advantage of the air travel recovery that's currently gathering speed. With that, operator, you can open up the call for Q&A. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. We will take our first question from Helane Becker of Cowen. Please go ahead. Your line is open. Thanks very much, operator. Hi, everybody. I hope everybody's doing well. I don't know who would answer this question. Maybe you, Angus, could answer it. I'm trying to get a sense if you think the Chinese airlines are, I don't know if stockpiling is the right word, but if they're acquiring a lot of leased aircraft to cover their domestic demand because they don't plan on having MAXes flying anytime soon. Well, Helane, the first thing about the Chinese market you can see on the slide is the rapid rebound we've seen there. You can see that of the 3 major markets in the world, it's the one that has surpassed 2019 traffic levels. All of our customers in China are doing well. I would say about the Chinese carriers, they are not stockpiling airplanes. They are taking all the airplanes they can to satisfy the demand that they see in front of them there. The Chinese carriers don't have huge order books of aircraft. They have not ordered Boeing airplanes in several years. Indeed, the last time they ordered Airbus aircraft has been a couple of years ago. What that actually means, Helane, is that they will need to take airplanes from the leasing market as we go forward. That can be used airplanes. We have just signed deals for the first used aircraft to go into China, which is an innovative thing for anyone to have done. As a leader, that's what we do. We'll be the first to do these things. On the forward order aircraft, we are seeing now demand from the Chinese customers for aircraft off the order book, and we expect that to continue as their market continues to grow. Got you. Are those wide bodies or narrow bodies that you're signing, or both? At the moment, it's predominantly new technology, narrow bodies. AerCap's wide body Narrow-body new technology assets. Our first one isn't available until 2024. Okay. We've placed everything up to there. That's awesome. Thank you. Actually, thank you for that answer. My other question is on eVTOL. How are you thinking about those assets, especially in light of the GECAS acquisition, where you're going to get a bunch of helicopters, which are sort of VTOLs, but not necessarily new technology, eVTOLs. Is this a business that you would be thinking about getting involved in? At the moment, Elaine, our focus is on the GECAS transaction. As I said in my comments, when we looked at the analysis we did of GECAS in December of 2020, January of 2021, we were in a very different environment. The vaccine hadn't even started to be rolled out really anywhere in the world. Our expectation of a recovery on a global basis was very different to what has transpired. If we look at the level of vaccine deployment in the advanced economies of the world and the resulting increase in air travel, we liked the transaction a lot then. We like it a lot more now, to be honest. Your reference to the helicopters, it'll be a long, long, long time before any eVTOL can go out and do search and rescue for humans. At best, at the moment, it's coffees that are being delivered on local drones and prescriptions. That's fair. Okay. That's really fair enough. Thank you very much for your help and your answers. Have a nice day. Pleasure. Thank you. We will take our next question from Jamie Baker of JPMorgan. Please go ahead. Hey, good afternoon, everybody. Given the progress that you're making on the regulatory front, Mark and I are sitting here wondering what the remaining gating items might be before you're comfortable pulling the trigger on the debt raise in order to stay on track for a fourth quarter closing. Any thoughts on that? Jamie, I think we're looking at a fourth quarter close still. We've made tremendous progress in this quarter. We had the shareholder vote from AerCap. We had the DOJ approval. We've had the European Union approval, and we're on track, and we're monitoring all the time as to whether or not it's appropriate to look to the debt financing. You want to get through all the regulatory approvals first. Okay. That helps. Then just given the recovery that we've seen in the ABS market, in the improved, I guess, viscosity, for lack of a better term, in the aircraft market, has your base case, thinking about the pace of asset sales post-closing, has that changed at all? Earlier this week, Avolon stated that they were of the mindset that many values have bottomed and just looking for some color on that, if you agree. I certainly would, Jamie. I think in our underwriting case, again, if I go back to when we were agreeing the economics of the transaction, around Christmas of last year. We had a very different outlook of the pace of recovery. As you see, there was no vaccine deployed at that point in time. Yeah. Our view on asset sales was that it would be a longer road before we would be able to sell significant amounts of assets, and the market would recover. Clearly, that is not the case. The market is recovering. We see the bid coming in for assets, I would be confident that we will continue to delever the balance sheet ahead of our original base case as well. Okay. That's helpful, guys. Thank you very much, everybody. Pleasure. Thank you. If you feel like your question has been asked, you can remove yourself from the queue by pressing star 2. Our next question will come from Ross Harvey from Davy. Please go ahead. Hi, guys. Hi, Pete. I just wanted to ask about the unsecured claims. Firstly, Gus, did we hear you correctly around the $hundreds of millions of potential further benefits to come later this year? You might clarify it. Also, can you just cover whether there are other customers that perhaps underperformed during COVID with whom you expect to submit claims, maybe haven't got around to just yet, what type of figures might come out of that particular channel in the future? Well, to answer your question, first of all, we have received $186 million in cash from the LATAM claim that was received on the 3rd of July. As Pete noted, that is not included in that improved operating cash flow number of our $700 million plus for Q2. The remainder of the claim, it is agreed with the counterparty what they will pay. We would expect that subject to court approval, we would expect to receive several hundred million during the course of this year. Other claims beyond that are not at that level of materiality, Ross. The LATAM claim, given our exposure to it, and the size we had meant that it was an outsized claim, and the recovery of the airline itself and its operating performance have driven that. Yeah. That's good. Thanks, Gus. Secondly, I'm just looking at the order book, and it looks as though it increased by about 10 aircraft. If I just look at the Q1 order book, take out the purchases during Q2. Is there anything behind that? Am I doing the math wrong, or was there a sale leaseback maybe in there? There was a sale leaseback in there that we transacted on some MAX airplanes, which we're very happy about. We started taking delivery of MAXes during the quarter. It's received an extremely positive response from the customer base, and we're quite confident about the MAX going forward. That's where the increase in those units came from. I think I've used my two questions. Thank you. We will take our next question from Catherine O'Brien from Goldman Sachs. Please go ahead. Your line is open. Hey, good morning, everyone. Thanks so much for the time. Maybe just coming back to this cash from ops, it was significantly better than last quarter, and I think the highest it has been since the start of the pandemic. Do you expect this to trend higher going forward, just given the positive trends you're seeing on collections and deferral requests? Are there any other puts and takes we should think about? Thanks. Well, Katie, for sure it was a significant improvement from the first quarter. We're seeing cash collections run at a very high rate. They're over 100% for the second quarter, so that was a big positive. As the recovery continues, we expect to see that trend continue. I do expect both the collection rates and the overall amounts of cash to come up going forward. Yes, I think that what we're going to see is, over the course of the year, as we deliver the aircraft that we've transitioned, that are currently in transition, we will start to see revenues pick up, and we'll start to see cash collections increasing as the year progresses. That's great. With credit markets pretty open for aviation paper, as Jamie noted earlier, ABS market back open. Sounds like bank debt is making a comeback. Have you seen a resurgence in some of the tourist capital that seemed to be declining pre-pandemic, or kind of status quo? Just love to get some high-level thoughts. Thanks. I certainly think there's more educated tourists in town now, to keep using my term from the past. I think that those people who knew what they were doing pre-pandemic have understood the resilience of the value of an aircraft asset. On a relative risk-reward basis to what else is available in the world today, see that it is a good store of value and does provide a fair risk-return profile for an investor. I think those that have the capacity to manage assets or have a manager of those assets that is a tier 1 player in the industry, can harvest that return. I would say, Katie, like a lot of things in life, there was some exuberance pre-pandemic in probably the 18, 24 months prior to that. I think those that invested in a platform or a manager are sophisticated and are back, and we think it will be a robust sales market for AerCap as we get into 2022. That's great. I can maybe just sneak one more quick modeling one. Cash accounting impact was $54 million this quarter, down from $100 million the first quarter. At what point, Pete, do you think that's going to flip to a net positive to revenue as you get some of that added more back? Thanks. The cash accounting impact was down in the quarter. We're going to see cash accounting continue, as I've mentioned before, during the course of this year, but I do expect it to come down. This quarter was a little further down just due to some one-time items, so it would've normally been a little higher than that $54 million. The trend will continue. What happens when the aircraft, we are placing these aircraft, in many cases, with new airlines. There's some transition period for those aircraft. Once, as I was saying, once those aircraft get to those new lessees, once they're delivered, then you have the revenue pickup. You start to earn revenue on them again. That's why I say we'll see a couple of quarters where our revenues are lower, as we saw this quarter. As the year progresses, that will continue. That's really how that cash accounting, and that will flip in terms of increased revenues. Great. Thank you. We will take our next question from Mark DeFries of Barclays. Please go ahead. Yeah, thanks. Some significant cash proceeds. De-levering a little bit faster than planned in front of this GECAS deal. Should we assume that you're not going to have to issue as much debt as you had planned? Operator. Excuse me, sorry. Operator, you might just go to the next question. We'll give Mark an opportunity towards the end. It seems like his line is a bit muffled at the moment, so we might just move on to the next question, and then we'll put Mark back in the queue again. We will take our next question from Moshe Orenbuch of Credit Suisse. Please go ahead. Great. Thanks. Given that you've had greater aircraft sales and other lessors are reporting that, could you talk about the environment as you see it and the expectations that you had with respect to the GECAS deal back in March and where they stand today, and sort of how you think about the outlook for that? Sure, Moshe Orenbuch. As we look forward, as I said, we think that those participants who are in the market now and have been in the market prior to the pandemic understand how resilient an aircraft asset is, the right aircraft asset well managed. We'd be quite confident that as the recovery continues to gather pace, that there'll be a strong bid for aircraft assets as we come out the far side of the GECAS transaction. Good. That's good to hear. I guess a little bit confusing, your cash flow is obviously significantly improved, and you talked about some opportunities and other cash that's going to be collected. I assume, obviously, cash is cash, when you think about in the quarter, you talked about an expectation of $2.6 billion. I think it's a couple of hundred million higher than it was in the first quarter. At the same time, you had just mentioned, or Peter just mentioned, that you're expecting some significant collections in Q3 from, or already received collections in Q3 from LATAM. I guess as we're looking at your cash flow, can you talk a little bit about how those recoveries will impact that over the next couple of quarters? Sure, Moshe. I would view the $2.6, I'd say in general, we tend to be pretty conservative about these numbers, as you've probably seen. What that incorporates is that includes the $186 million that I mentioned that came in on July 3rd. Right? That's in that $2.6, but beyond that, we haven't included anything else for any other LATAM recoveries or any other airline recoveries for that matter, frankly. I would be very surprised if we didn't come in above that number. We've put it out there. As I said, we've historically been conservative in projecting this. We're doing this in order to look at our liquidity and make sure we have enough to cover the debt maturities that are coming up and the CapEx that come up. That's not something that we want to mess around with, and that's how we look at it. Okay. Got it. Thanks so much. We will take our next question from Vincent Caintic of Stephens. Please go ahead. Hey, thank you for taking my question. First question on portfolio lease rate expectations. I was just wondering if you could help us, how should we expect the portfolio rate going forward? I know you have improved activity. Your cash collections are coming down, so that's great. You've got some new leases that I think you've also had restructurings of some leases where maybe there's some variable aspect to it. Maybe if you could help us understand how to forecast the portfolio lease rate going forward. Thank you. Sure. Just to clarify there, our cash collections have been going up, not down. In terms of the portfolio lease rate, Vincent, it's really driven by the same things that I was talking about before. It's predominantly those basic lease rents that are coming through, and as those aircraft that are currently transitioning go back on lease, or as the aircraft that are currently in cash accounting, they start to return to regular service, regular accrual accounting, that's when you will see those numbers picking up. It's really that's what will drive it more so than the cash collections number. I do expect that that will go up, as I said, during the course of the year. Right, apologies for that. Those aircraft returning, I guess, back to service or back on lease, is there a time frame where you can see a chunk of these aircraft coming back and generating rents? Yeah, really over the next couple of quarters. That's what I would really look at. That's when the bulk of it will happen. It's spread out, but most of it over the next six to seven months or so. Okay, great. Thank you. Second question. This is on capital management and particularly share buyback. I know we have the pending GE acquisition, but your leverage is the lowest it's been, 2.4 times. You've got good gains on sale of aircraft. You've got these unsecured claims that are in the hundreds of millions, and cash collections are improving and more cash flow's coming in. Then finally, your book value is $75, while the stock's trading at $52. Just wondering what your thoughts are there. Are you going to maybe continue to pause until the GE acquisition's complete, or maybe any thoughts of taking advantage of the lower share price? Thank you. Today the focus is all about getting the GECAS acquisition done. We want to get the business back on the upward rating trajectory. As you may recall, just prior to the pandemic, we were on the verge of upgrades from Moody's at the time, and we held onto the investment grade rating throughout the pandemic, and we want to put ourselves back there where we move the rating up in an upward trajectory. That'll be job number one. From that point forward, then you've always seen us as very prudent managers and stewards of the capital, and we'll take the right decisions as we get to the far side. Understood. Thank you very much. As a reminder, if you wish to ask a telephone question, please signal by pressing *1 on your keypad. We will take our next question from Ronald Epstein from Bank of America. Please go ahead. Hey. Yeah. Good morning, good afternoon. What impact are you seeing from 787? It's our understanding that you might not see any or many aircraft delivered until very late in the year, maybe early next year. How are your customers reacting to it? From your point of view, do you have walkaway rights? Can you renegotiate price? That program seems to be the, in some ways, the gift that keeps on giving. Well, Ron, the 787 has been the most popular wide-body ever introduced. We have tremendous confidence in the aircraft. As you note, though, the delivery process of Boeing is not going well at the moment, and as they announced yesterday, they only expect to deliver, I think it was less than half of the inventory they currently have. At the moment, from our perspective, we don't have any 787s to place until 2024. We do have aircraft delivering, of course, that are leased and are being built. We're working with our customer and with Boeing for the right outcome. I do think that, in general, on the wide-body market, what we'd like to see, of course, is a return to normal traffic on the North Atlantic route, because that's the biggest wide-body market in the world, and would be a help for the 787, no doubt. As we saw, the Europeans have opened up to non-essential travel to the Americans. We would be hopeful that, in the near term, the U.S. administration will reciprocate that. It'll have a huge benefit to American industry to do it. It'll improve the demand for the aircraft as well. At the moment, in fairness, as you saw in our chart, the European Union as a whole has the same level of vaccination as the United States. The North Atlantic market is based on Western Europe, and in most of those countries, the vaccination rate is substantially and materially ahead of what's in the United States. I do think that in relation to your 787 program, if we can get those markets up and running, I think it'll be a big boost for the U.S. aerospace industry as a whole. When are you expecting to take delivery of the 787s now? Do you have any idea? Well, it'll be customer by customer. You're working with Boeing and the customer on a case-by-case basis. We can't go into- Good for confidentiality reasons, the specifics of that. Got it. Then maybe just following up on one of Helane's questions. What are you guys thinking broadly about urban air mobility, eVTOL? Is there a business there for a lessor? Can those aircraft be leased even? How would one even think about residual values? I know this is a giant question, but maybe just in a snippet. Is there anything interesting to do there for a lessor? Look, I do think in time, there is a market there. The big question is, you hit the nail on the head there, Ron, it's the applicability. A lessor wants an asset that can be transitioned amongst customers around the globe. If an asset is uniquely configured for a specific mission, to reconfigure a low-value asset and move it to another part of the globe, maybe from Canada to Jakarta, that's what you need to be able to do for a lessor's product to work. I do think that the electric-powered vehicles are coming. I think that's a given. The timeframe and to what the missions will be and as to whether or not they can be commercially sized to aircraft that can carry humans, that's another matter altogether. Got it. All right, cool. Thank you. Our next question will come from Andrew Lobbenberg of HSBC. Please go ahead. Oh, hi there. I'm really intrigued to ask you about the sort of compare and contrast between your efforts to remarket the 787s to North Atlantic and the A350s going to Delta. I know you're obviously constrained on what you can say about individual client contracts, but the contrast in the nature of the companies is quite dramatic. How do you think it'll work? They're two very high-value transactions for you, aren't they? I'm just interested to understand the relative attractions and the relative economics of how those moves work for you, obviously accepting you'll be completely constrained. My other question after that would be just to see, I sense the biggest area of pain within the industry now is Southeast Asia, and happily, I don't think you've got too much exposure to it. How daunting is the development in the aviation industry in Southeast Asia and the restructurings, which may be less orderly, perhaps, than ones in Latin America that you've had exposure to? Sure. Well, let me start with the last question, Andrew. AerCap's exposure to Southeast Asia is 5% of our book. That's it. We haven't been a big player there. We didn't really get involved in the airlines that were placing massive speculative orders and building the business on sale-leasebacks. As you know, we didn't do a sale-leaseback prior to the pandemic. I think it was 2013. That's where a lot of the sale-leaseback market was. As it relates to the two wide-body placements that you're referring to, as I said in the earlier question, the key for a lessor in the portfolio is assets that have global applicability and global demand, and that's where you need to have the best-in-class assets. The 787 is without doubt the best-in-class, small or mid-sized wide-body out there, and the A350-900 is the most popular of the larger wide-body aircraft. We were going to get demand for them. A key variable in these transitions is transition expense. When we look at North Atlantic, yes, it's not Delta Air Lines, but by the same token, 1, it raised significant capital. 2, it is in a much slimmed-down business model than what Norwegian was doing on the North Atlantic. Very importantly for us, there was little to no transition cost involved in that transaction. Of course, look, Delta speaks for itself. We were very happy to get those aircraft away. It also shows the advantages of scale in that scenario, where you have a large package of airplanes that can help an airline actually materially impact their fleet rather than ones and twos. Yeah. Fair enough. All right. Thanks. Thank you. This will conclude today's question and answer session. I would like to hand the conference back to Mr. Aengus Kelly for any additional or closing remarks. Thank you, operator. Thank you all for joining us today for the earnings call. We look forward to seeing you all in person in the near future. Certainly, I assume quite a number of you will be at the Deutsche Bank conference in September, which I'll be at in person as well. I think the sooner we can all see each other in person, the better. Thank you very much indeed. This will conclude today's conference call. Thank you all for your participation. You may now disconnect.