Aircastle Announces Third Quarter Results

STAMFORD, Conn., Nov. 8, 2011 /PRNewswire/ — Aircastle Limited (the “Company” or “Aircastle”) (NYSE: AYR) reported third quarter 2011 net income of $22.7 million, or $0.31 per diluted common share, and adjusted net income of $15.4 million, or $0.21 per diluted common share.

Commenting on the results, Ron Wainshal, Aircastle’s CEO, stated: “The Company’s strong performance during the third quarter benefited from effective asset management as well as the earnings power of our recent acquisitions. Once again, we demonstrated our ability to profit through our value-added approach to investing. Looking ahead, Aircastle is in an excellent position to make use of its bond market access to purchase attractively priced aircraft in the wake of more challenging bank market conditions. Indeed, since the end of the third quarter, Aircastle has invested $255 million to acquire eight aircraft. We are continuing our balanced approach of providing shareholders with value not only through new investments but also our share repurchase program and dividend policy.”

Mr. Wainshal continued, “Today’s dividend declaration represents the second time Aircastle has increased its distribution this year. In total, Aircastle has now increased its quarterly dividend 50% in 2011. The Company’s $0.15 per share quarterly dividend demonstrates the confidence the Board and management have in Aircastle’s ability to continue generating strong cash flows as well as their ongoing commitment to creating shareholder value.”

(1) Refer to the selected financial information accompanying this press release for a reconciliation of GAAP to Non-GAAP numbers.

Third Quarter Results

Lease rental revenue for the third quarter was $145.9 million, up by $12.4 million, or 9%, year-over-year, due primarily to the impact of aircraft acquisitions net of dispositions of $19.2 million. The increase was partially offset by lower lease rentals due to lease terminations, lease transitions and extensions of $6.8 million.

Total revenues for the third quarter were $141.5 million, up by $9.3 million, or 7%, year-over-year. The increase reflects higher lease rental revenue as discussed above, partially offset by a $2.5 million decrease in maintenance revenue. As expected, no maintenance revenue was recorded during the third quarter of 2011.

During the third quarter we recorded an impairment charge of $1.2 million related to one Boeing Model 737-400 aircraft which we are seeking to sell. The lease on this aircraft had been early terminated in the second quarter, at which time we had recorded a $5.2 million impairment charge and maintenance and other revenue totaling $3.1 million.

EBITDA for the third quarter was $137.6 million, up by $21.5 million from the third quarter of 2010, reflecting higher lease rental revenue of $12.4 million, gains totaling $9.0 million from the sale of aircraft and a reduction in impairment charges of $6.1 million compared to the prior period. The impact of these items was partially offset by a $2.5 million decrease in maintenance revenue as discussed above and higher maintenance and other costs of $2.9 million.

Adjusted net income plus depreciation and amortization for the quarter was $80.2 million, a year-over-year increase of $7.7 million. This was due primarily to an increase in lease rental revenue of $12.4 million, a quarter-to-quarter reduction in impairment charges of $6.1 million, partially offset by a decrease in maintenance revenue of $2.5 million and increases in adjusted interest expense of $3.4 million and maintenance and other costs totaling $2.9 million.

Adjusted net income for the quarter was $15.4 million, up $2.8 million year-over-year, reflecting an increase of $9.3 million in total revenues and a reduction in impairment charges of $6.1 million, partially offset by increases of $4.4 million in depreciation, $3.4 million in adjusted interest expense and maintenance and other costs of $2.9 million.

Aviation Assets

During the third quarter, we took delivery of one Airbus A330-200 passenger aircraft, which is on lease to South African Airways, one Airbus A330-200F freighter aircraft, which is on lease to an affiliate of the Hainan Group, and one Boeing Model 747-400 aircraft which is being converted to freighter configuration and for which we have an executed lease with Southern Air when the freighter conversion process is complete. We also purchased one Boeing Model 747-400 aircraft which is on lease to Singapore Airlines.

Michael Inglese, Aircastle’s CFO, stated: “Consistent with our value-added approach to portfolio management, we generated additional profits in the quarter through aircraft sales, including one Boeing 747-400F freighter aircraft and one of the six Airbus A330 aircraft on lease to South African Airways. These sales transactions generated a $9.0 million gain before certain non-cash charges related to previously terminated interest rate swap agreements.”

As of September 30, 2011, Aircastle owned 138 aircraft having a net book value of $4.2 billion.

During October, we acquired eight additional aircraft for an aggregate purchase price of approximately $255 million. The acquisitions include Aircastle’s first Boeing 777-300ER which is leased to Cathay Pacific. Acquisition financing for this aircraft was provided by Norddeutsche Landesbank Girozentrale through a $90 million term loan. We also acquired four Boeing 737-800 and three Boeing 757-200 aircraft leased to four different airlines.

Financing Update

During the third quarter, we entered into a 12-year term loan with Bank of Tokyo-Mitsubishi-UFJ, Ltd. for the financing of one new Airbus A330-200 passenger aircraft and a 12-year term loan with Citibank International PLC for the financing of one new Airbus A330-200F freighter aircraft. Both loans are supported by a guarantee from the French export credit agency, COFACE. These financings bear interest at fixed rates of 3.02% and 3.10%, respectively.

In September 2011, we entered into a new five-year forward starting interest rate swap arrangement for Securitization No. 2 with an average fixed rate of 1.27%. This rate plus the applicable spread for this financing equals a new fixed pay interest rate of 1.58%, which represents a significant reduction compared to the existing equivalent rate of 5.53%. The new interest rate swap arrangement begins at the expiration of the existing arrangement in June 2012 and is structured to hedge approximately 75% of the expected debt balance of Securitization No. 2 over the term of the new arrangement.

Share Repurchase Program

During the third quarter, Aircastle completed its share repurchase program previously authorized by the Company’s Board of Directors, purchasing an additional 2.6 million of its common shares at a cost of $30 million, including commissions. In total during 2011, Aircastle has purchased 7.6 million of its common shares, representing approximately 9.5% of the common shares outstanding at the beginning of 2011, at a total cost of $90 million, including commissions.

Quarterly Dividend

Aircastle’s Board of Directors declared a fourth quarter 2011 cash dividend on its common shares of $0.15 per share, representing a 20% increase. This equates to an annualized dividend of $0.60 per common share, compared to an annualized dividend of $0.50 per common share prior to this quarter’s increase.

The dividend is payable on December 15, 2011 to shareholders of record on November 30, 2011. With this declaration, the Company is shifting its future dividend declaration dates to correspond more closely with its earnings announcement timing during 2012. Therefore, during 2012, the Company expects to pay dividends in March, June, September and December.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Tuesday, November 8, 2011 at 11:00 A.M. Eastern Time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (866) 510-4578 (from within the U.S.) or (706) 634-9537 (from outside of the U.S.) ten minutes prior to the scheduled start and referencing the “Aircastle Third Quarter Earnings Call.”

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.aircastle.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available for three months following the call. In addition to this earnings release an accompanying PowerPoint presentation has been posted to the Investor Relations section of Aircastle’s website.

For those who are unable to listen to the live call, a replay will be available until 11:59 P.M. Eastern Time on Thursday, December 8, 2011 by dialing (855) 859-2056 (from within the U.S.) or (404) 537-3406 (from outside of the U.S.); please reference pass code “20331845.”

About Aircastle Limited

Aircastle Limited is a global company that acquires, leases and sells high-utility commercial jet aircraft to airlines throughout the world. As of September 30, 2011 Aircastle’s aircraft portfolio consisted of 138 aircraft and had 61 lessees located in 34 countries.