AerCap Holdings' CEO Discusses Q1 2013 Results - Earnings Call Transcript

|
 |  About: AerCap Holdings N.V. (AER)
by: SA Transcripts

AerCap Holdings N.V. (NYSE:AER)

Q1 2013 Earnings Call

May, 07, 2013, 09:30 am ET

Executives

Peter Wortel - VP, Investor Relations

Aengus Kelly - CEO

Keith Helming - CFO

Analysts

Catherine O'Brien - Deutsche Bank

Gary Liebowitz - Wells Fargo Securities

Scott Valentin - FBR Capital Markets

John Godyn - Morgan Stanley

Isaac Husseini - Barclays

Arren Cyganovich - Evercore Partners

Glenn Engel - Bank of America Merrill Lynch

Andrew Light - Citigroup

Operator

Welcome to the AerCap Holdings’ 2013 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. The call is being webcast and an audio version of the call will be available on the company’s website. This call is also being recorded for replay purposes.

I‘ll now hand over the call over to Peter Wortel, Head of Investor Relations. Please go ahead sir.

Peter Wortel

Thank you, operator. Good day everyone. Welcome to the 2013 first quarter results conference call. With me today are Aengus Kelly, AerCap’s CEO and Keith Helming, AerCap’s CFO. In today’s call, we will discuss our first quarter earnings for 2013 and in addition to this earnings call, AerCap will also host a lunch for analysts and investors today at the Waldorf Astoria in the Peacock Alley West Room. The lunch will not be webcasted.

Before we begin, I want to remind you that some statements made during this conference call that 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.

In addition, this conference call contains time-sensitive information that reflects management’s best judgment only as of the date of the last call. AerCap does not undertake any ongoing 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 related to forward-looking statements can be found in AerCap’s earnings release dated May, 07, 2013. 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.

I’ll now turn the call over to Aengus Kelly.

Aengus Kelly

Thank you, Peter. Good morning to everyone in the U.S. and good afternoon to those of you in the Middle East and Europe. Thank you for joining us today for our first quarter earnings call.

Net income for the first quarter of 2013 was a very healthy $68 million, or $0.60 per share. This represents a 22% increase in earnings per share over Q1 2012. The first quarter really highlights the results of our portfolio management strategy. The combination of our asset sales over the course of the last 24 months that were executed at or above book value and the subsequent purchase of our shares at a deep discounted book value has driven our earnings per share up by 22% year-on-year.

We also invested new aircraft by acquiring prime assets like the American Airlines 737-800s, a transaction we agreed at a time when no one else had the capability to do such a deal. This disciplined approach to both investing in and divesting of aircraft is a key pillar of AerCap’s industry leading results.

Furthermore, the combination of our active portfolio management strategy and our effectively covenant free long term financing structures have enabled us to not only convert our book equity into cash, but to also return a substantial amount of capital to our shareholders, reinvest in the most in-demand aircraft in the world such as the Singapore Airlines A330s and the American Airlines 737-800s and all the while maintaining an investment grade credit rating.

As you know, over the course of the last two years we have returned $420 million to the shareholders. If you were to annualize this since we went public in November 2006, it equates to an annual dividend yield of 4.5%. In the coming years, I am confident that AerCap will continue to generate industry leading profitability and will also be able to return substantial amount of capital to our shareholders while investing in the most modern fuel efficient aircraft.

With this in mind, it is imperative to maintain a young portfolio. A young portfolio is achieved by both selling older equipment as well as acquiring new equipment. AerCap sales are a core competence of AerCap. We have sold over 240 owned and managed aircraft as well as AeroTurbine in the last six years. In the first quarter, we sold three aircraft at a gain of $11 million, another indication of the conservative nature of AerCap’s book values. As a result of these actions, AerCap’s portfolio is among the youngest in the industry with an average age of 5.1 years.

A further benefit of our sales strategy is that we often continue to manage the aircraft after the actual sale. At the quarter end, we had increased our managed assets to $2.1 billion. By increasing the amount of managed assets, we are able to generate a long-term stable income stream without having to commit capital.

Turning to the buy side; we are currently committed to purchasing $1.1 billion of new aircraft in 2013 of which $400 million worth was acquired in the first quarter. The average lease term of the new aircraft acquired during the first quarter was 115 months. These long-term leases will drive long-term stable profits for the years to come. I am also pleased to report that during the first quarter, we confirmed the remaining 11 737-800 aircraft with American Airlines on the same terms and conditions as originally contracted.

Now turning to additional growth opportunities. We are very encouraged by the level of demand for aircraft financing from airlines around the world. Even though there have been a number of new entrants to the aircraft leasing industry over the last three years, there are still very few truly global aircraft leasing platforms in the business, probably 10 or 11 at the most. But against that, there are almost 800 airlines out there with record order books all of which currently use and will continue to use the operating lease as a key financing tool.

As of today, we have $1.6 billion worth of committed purchases contracted. All of these aircraft are placed on long leases. In addition, as a result of the record orders that were replaced in 2010 and 2011, we believe that the opportunities for large scale transactions have further improved as airlines begin to take delivery of the record orders towards the end of 2013 and beyond.

In terms of the airline marketing general, the improvement in global air travel demand that we started to see towards the end of 2012 is continuing into 2013 in spite of the mixed macroeconomic signals coming from certain parts of the world. The lease rates that we are seeing for the aircraft in our portfolio are good, rates for the A320 continue to firm and both the Boeing 737-800 and the Airbus A330 aircraft continue to be in high demand. All three types are very wide user basis, which ensures placement throughout the cycle.

Moving on to the portfolio, we executed 34 aircraft transactions during the quarter or one every three days. Our utilization rate was a very healthy 99.6% and the average lease term of the used aircraft placements during the quarter was 68 months. Again, these relatively long-term leases for used aircraft will underpin future profitability. We did not see any airline failures during the first quarter and we are not observing any unusual activity on the receivable side.

Now turning to the funding side of the business; we see very strong global demand for the AerCap name from all capital providers to the aviation industry. This is evidenced by yesterday’s press release in relation to our associate company AerDragon, where we are delighted to welcome East Epoch as a new investor. As we have always said to you, one of the key pillars of the success of an operating lessor is having access to all available funding sources around the world as one of more can shutdown and any given time.

During the first quarter, we closed $100 million worth of debt financing transactions to fund additional growth having already raised $1.5 billion during 2012. Furthermore, with our investment grade credit ratings, we have excellent access to funding on a true unsecured basis.

On that note, I will hand the call over to Keith, who will go through the financials before we open up to your questions.

Keith Helming

Thanks, Gus, hello everyone. I will take you through the specifics now on the first quarter financial performance and I will start on page four the presentation. Our reported net income for the first quarter was $67.5 million. Adjusted net income as mentioned, which excludes the items listed, was $68 million. The slight decrease in adjusted net income was driven by the sale of our ALS portfolio plus other aircraft sales which were completed since first quarter 2012 and was partially offset by income generated from new aircraft purchases over the same period.

Page five; reported earnings per share were $0.59 in the first quarter and adjusted earnings per share were $0.60 during the same period, an increase of $0.11 over the prior year. The average shares outstanding during the first quarter of 2013 were 113.4 million which is 26.5 million shares lower than the same period of last year due to the shares that were repurchased in 2012.

Page six, total revenue; total revenue in first quarter of 2013 was $246 million. The small decrease from prior year was driven by lower basic lease rents, again as a result of the sale of the ALS portfolio. This decrease in basic lease rents was partially offset by higher gain on the sale of aircraft.

Page 7 net interest margin or net spread was $153 million in first quarter of 2013. The annualized margin as a percentage of average lease assets was 8.3%.

Page 8, the impact from sales in the first quarter of 2013 was a pre-tax gain of $11 million. In the first quarter, we sold one A330, one 737-800 and one MD-11 aircraft.

Page 9, leasing expenses were $14.9 million for the first quarter of 2013. A decrease in leasing expenses was driven primarily from a lower impact from default and restructurings. SG&A for the first quarter was $20.2 million. The increase in SG&A was driven primarily from the movement in the mark-to-market of foreign currency and other derivatives. The impairment charge recognized in the first quarter related to the redelivery of two older 737 aircraft and was triggered by the release of nearly $10 million of maintenance reserves which was recorded as revenue. Our tax rate for the first quarter was 8%.

Page 10, AerCap’s free and unrestricted cash balance at the end of the quarter was $375 million and our total cash balance including restricted cash was $664 million. Operating cash flows were $149 million for the first quarter. In addition, an undrawn working capital facility of $290 million was available.

Page 11, at the end of the quarter AerCap’s debt balance was $5.8 billion and our debt-to-equity ratio was 2.6 to 1. Our book equity is $2.2 billion and the average cost of debt in the quarter was 4%.

Page 12, for the full year financial outlook currently in the committed aircraft purchases are $1.1 billion. The maintenance contribution to income is expected to be minimal for the year and the pre-tax gain from committed aircraft sales is expected to be approximately $20 million. The average cost of debt at around 4% and the blended tax rate should be approximately 8%. So those are the first quarter financial highlights and I will turn it back over to Aengus now.

Aengus Kelly

Thanks, Keith. Operator, whenever you are ready, please open up the call for questions and answers.

Question-and-Answer Session

Operator

(Operator Instructions) And we will take our first question from Michael Linenberg from Deutsche Bank. Please go ahead.

Catherine O'Brien - Deutsche Bank

This is actually Catherine O'Brien filling in for Mike. Just a quick one. One of your competitors recently noted there's been a bit of a shift as to the wide body markets that they have noticed recently from the narrow body market just given how competitive the narrow body market has been. Are you guys seeing that?

Aengus Kelly

I think on the wide body side, there's certainly a lot of shift into things like the 777 etcetera. They do offer short term bank but certainly there's a more limited user base for the 777 market. It’s a great airplane but slightly more limited. The airplane and that has a much bigger user base than wide body markets, the A330, and that to be honest has been a very popular aircraft for a long time.

In relation to competition, if you are buying ones and twos airplanes, you get sure there is a lot of competition, but that’s not where AerCap plays. We're not in the weekly bake-off for the odd airplane here and there. So we don’t see that really so much in the type of transactions we're doing with people like American Airlines and Singapore Airlines. That’s the benefit of the scale.

Catherine O'Brien - Deutsche Bank

Okay, right. That makes sense. And I guess just one kind of question, have you guys seen any significant changes in your sort of watch list or are you feeling pretty comfortable with situation right now?

Aengus Kelly

No, we have it. As I mentioned, we didn’t have any airline failures during the quarter and the receivables are trending at very low levels as you will see from the quarterly filings. So we haven't seen anything there untoward at all.

Operator

We will take our next question from Gary Liebowitz from Wells Fargo Securities. Please go ahead.

Gary Liebowitz - Wells Fargo Securities

It wasn't in the slides but are you affirming your prior basic lease revenue guidance, I think it was down 3%, 6%?

Keith Helming

Yes, the 3%, 6% still holds relative to the committed purchases that we have, but the reason we don’t have it in the slide to be quite frank is because we think that there will be additional purchases beyond the level that we currently have. So we do expect the revenue growth should be better than what we had previously.

Gary Liebowitz - Wells Fargo Securities

Okay, good. As you’re adding assets class, is there sort of a stronger preference to add Boeing product to sort of make the portfolio more even between Airbus and Boeing or is it just a function of where the best deals are?

Aengus Kelly

Well, the biggest single exposure we have actually the 737-800. That’s by quite some distance actually the biggest exposure we have on the book when you look at what's actually contracted to buy and what's delivered. Particularly since we offloaded ALS last year, we really have a much lower exposure on some of the Airbus stuff and the A330 is an airplane you want to be in Gary, that’s the one you want to have.

But that being said, the A320 we will buy them all day long, it's just a question of the right price, it has the biggest user base in the world, it is the ultimate you pick with this type aircraft out there. You can place them all day long and you can sell them as well. So it's a question of price really tell you the truth. It always has been for us. The three aircraft of the current technology we want to buy are the 330s, the 737-800s and then the 320s as well, 321s are very popular to Gary to be fair.

Gary Liebowitz – Wells Fargo Securities

Okay. And then just one last one. On SG&A if you take out the mark-to-market, it looks like it's significantly lower than in prior period, is this function of the ALS sale or is it just a somewhat favourable timing that helped your Q1 number?

Keith Helming

Let me. The small part of it Gary is the effect of the ALS portfolio was sold, but I think if you look at the 20 million per quarter level, that’s what you would expect to see as a run rate going forward.

Operator

And we will take our next question from Scott Valentin from FBR Capital Markets. Please go ahead.

Scott Valentin - FBR Capital Markets

Just a question on sale leaseback, it seemed little more bullish than you were in the past, are you seeing more opportunities in this, a follow-up on that theme? We’ve heard that the banks are very interested in sale leaseback given their new aircraft. I am just wondering if you are seeing a lot more price competition maybe than you have seen the several months ago.

Aengus Kelly

The level of price competition is probably at its highest in 2011 to tell you the truth and all the new money came into the market, but it's not going to really sold quite heavily into that in last year. What we are seeing now is, as I mentioned to you on this call and the previous calls, is those record orders that were placed in 2010 and 2011. They are starting to deliver now, you know what really towards the end of this year in 2014 and 2015 they are coming and there is plenty of supply out there.

And as I said there is only at most 10 or 11 truly global operating platforms out there who really see everything that’s in the market and we see plenty of opportunity in that regard as we look forward. Banks aren't really a feature in the sales leaseback market at all. There certainly a feature when it comes to financing, the bank as well, the big change we have seen at the banks have drifted away from funding airlines particularly in emerging markets and more preferred to fund the big leasing companies themselves.

So that is where my comments come from. I do think that the record deliveries you are seeing, the fact that we are in a global platform like AerCap give us access to everything that is out there. Certainly there is a lot of heat, don't get me wrong if there is one 737-800 or one or two A320s (inaudible) there are every week, that is not really where you see us participate. In fact, we don't participate in that market. We sell into that market as I said on my prepared remarks.

We have sold 240 airplanes. There is nobody else in the world out there who has traded that many airplanes [Chicas] maybe close, but then there is no one that's even close to the two of us after that. So we tend to buy and bulk and then distribute down into those smaller players who are looking for growth or want to get their hands on particular aircraft are names for example.

Scott Valentin - FBR Capital Markets

Okay. And just a follow-up question. Kind of the buybacks, you guys had I guess expended the buyback last quarter and I think the Board meeting is coming up, just wondering your thoughts there, you know I know its the Board’s decision but stock still trades below book value, I was just wondering where you see maybe risk reward and your thoughts on return of capital.

Aengus Kelly

Sure return of capital or something we are always looking at, clearly we’ve given a tremendous amount of money back to the shareholders over the course of last two years, but whenever we evaluate an asset investment decision which we are doing everyday in the company, we have a team of people that's all they do as compared against what's in the best interest of the shareholders, is it to buy the airplanes and generate value that way or else to return capital to the shareholders. So you can be rest assured like we have always done in the past evidenced by the Singapore transaction, the American transaction, AerCap won't be buying airplanes unless the return is better than buying back the shares.

Operator

And we will take our next question from John Godyn from Morgan Stanley. Please go ahead.

John Godyn - Morgan Stanley

Gus I wanted to follow-up on your commentary about sort of some of the extended term or long term leases that you were talking about. I was hoping you could elaborate on that. Is that an indication of sort of changing behavior at the customer level or is that something that you specifically sort of by design wanted to negotiate into the contracts, I am just wondering if there are something to read into there.

Aengus Kelly

To be fair John it’s more by design and how rigorous we are when it comes to buying airplanes. It has to meet the return hurdles of AerCap. Certainly you can write six or seven, eight year leases and get pretty high lease rate factors, but then of course you got to remarket the airplane or you want to try and sell the airplane, its not as attractive, when its got the shorter term lease. So you always want to try and drive when you are buying airplanes as long term as you can on the leases. And we are very selective as you know when we buy airplanes and its got to make sure it hits those return requirements. On the used market, again over five years almost six years is the release term which is good long leases too. Some of those come from extensions as well. But again that's by design just working hard, making sure that you have the sales team out there turning over every stone looking for the right deal for the company. So I would say in summary it’s more by design. If we are in a rush to deploy capital of course we have much shorter leases as we just accept what the market gave us, but as you know we are very selective when it comes to deploying capital.

John Godyn - Morgan Stanley

I see. So is it fair to say then that more of a traditional lease term structure the deals that you are looking at are sort of non-satisfying your return hurdles.

Aengus Kelly

Well, some of them are obviously we did with American and we did with Singapore so they hit them and plenty of deals that we are looking at right now are in the ballpark of what we expect to generate through returns for shareholders, and if they do meet those returns we will do the deals. And given the amount of supply that the airlines are taking, as I said I think that over the near term we are going to near to medium term we are going to see transactions that will match our return criteria.

John Godyn - Morgan Stanley

And if I could ask one more. Gus, I thought I heard in the prepared remarks that you made a comment about returning substantial cash to shareholders in the years to come, it was just stuck out to me I think it was the first time I heard you describe it that way on a go forward basis. Maybe I'm reading too much into it, but I was just hoping that you could sort of clarify or elaborate on that comment and of course you know that and we know that you and the Board are always sort of thinking about buybacks versus dividend if you could just sort of update us on that thought process as well.

Aengus Kelly

Sure. What we have done over the course of the last four years, that would probably be a good benchmark for what we will do as we go forward. Over the course of the last four years, we’ve generated about $800 million of net income after tax on an unadjusted basis. Yeah, we show adjusted profits quarter in quarter out because these can be things that move around that distort the profits, but over a four, five year period those adjustments should all even out. So when you look back, you’ve got the best part of $800 million of retained earnings at produced by the company. Those retained earnings can be turned in to cash. As we've shown you the amount of airplanes we sell, we sell generally at least at [$0.100] on a $1.00 of book equity, generally north of that. So those retained earnings are turned in to cash and in the last couple of years, we split those retained earnings in to reinvesting in the business and returning a substantial amount of capital to the shareholders at the appropriate time. And John in my prepared remarks, that’s how we look at the business going forward that we would expect to continue to continue to generate substantial profits on a go-forward basis and they will turned in to cash and then either reinvested in the business and or distributed to shareholders depending on the what the Board thinks at the right thing to do at the time.

John Godyn - Morgan Stanley

That’s very helpful. As you can imagine, one thing that would give investors sort of even more confidence about the amount of cash that you are going to return in the years to come would be a dividend. I know that you've been sort of reluctant to go down that path and preferring the sort of repurchase method. Can you just update us on the thoughts around the dividend and how the thought process has evolved?

Aengus Kelly

When it comes to capital, I think John, it would be fair to say that if you looked at the transactions we did over the course of the last three years, you saw that we sold a substantial amount of assets as or above book value, and there was an opportunity to buyback a substantial amount of shares at a very large discount of book value. So I think that was a pretty obvious trade to do. Now if we go forward and say few years time and we see that there is a very substantial amount of capital available to the company and the shares are trading at or north of book value then obviously this buyback is not as compelling and a dividend is probably more compelling. But that’s something that will be judged at the time. Also at the moment, we want to make sure that we have plenty of capital available to move on any attractive asset acquisitions that we see.

Operator

We will take our next question from Isaac Husseini from Barclays. Please go ahead.

Isaac Husseini - Barclays

Gus a question for you this more long term in nature, when we start thinking about airlines at least in the US and maybe eventually, globally to covering and finding ways to be profitable with high fuel prices and a type of economic outlook. I would image even if airlines really rely on leasing, their negotiating position might likely improve slightly at least, if that’s the case, how would you think about lease rates over the cycle, will lease rates turn less volatile and will the difference in peak and tough lease rates become smaller than it has been in the past?

Aengus Kelly

So, if you are assuming a very profitable airline industry going forward globally, then I guess the customer base that we are dealing with has a much stronger credit rating, and therefore you would expect that the credit margin that’s charged in all of our leases would reduce to reflect that and our own credit strength would increase to given that the customer bases much stronger. Let’s just take that for a second assume that actually comes to pass, then I think that’s probably true that you’d see lower lease rates, you might see less volatility in the sector because of the fact that it wouldn’t be quite as cyclical if you had much fewer airlines, much stronger airlines. So that is one potential future scenario, we see no evidence about happening and which is good news and we think the airlines always needed.

Now the US industry at the moment is clearly, probably most healthy in the globe at the moment, but if you go back 10 odd years that certainly wasn’t the case and we have never seen that the airline industry has been an investment grade industry and I don't think we are going to see that. I think the buyers to entry, I think in the national protection that’s surrounds some of the airlines will prevent that. The infrastructure constraints that are out that will prevent that. So I think that as we look forward it’s a growth industry. That’s the one thing we know about aviation but sure this thing is going to grow.

If you have any faith in emerging markets and I mean when people get a few bucks they want to travel, they want to see the world, they want to visit friends and family, they are going to travel, it’s going to double in size and we know that, and so there will be providers of those seats. Now whether they all be the same once they are in existence today, will they be the same in 10 years time probably not. Some will go away, some will merge etcetera but they will always, always need people like us, that will be very simple about us affectively we are like the guys we are selling the shovels in the gold rush. People are always going to walk us and it’s a steady state business in the operating lease business.

As I said in my prepared remarks, there is only 10 or 11 leasing company is out there that are truly global platform and that really hasn't changed that much over the course of last seven or eight years, and it’s not likely to change that much in the future, I don't think. Maybe there will be one or two more, but the industry is growing so much you can easily absorb that. But again that you have 800 airlines out there, so there is plenty of opportunity and this is a growth business.

Isaac Husseini - Barclays

Okay. And then just a quick one also on the 737s, the ones that caused the impairment this quarter. I assume those are classics, did you mention what the plan was for those, would those at all be possible to be released or are those going to be sold or parted out?

Aengus Kelly

Those aircrafts have been released effectively.

Isaac Husseini - Barclays

So they have equipment.

Aengus Kelly

Yes.

Isaac Husseini - Barclays

Okay. And then just a small modeling question on the share count going forward assuming no more buyback, is it fair to just model the 113 million shares?

Aengus Kelly

That's correct, yes.

Operator

We will take our next question from Arren Cyganovich from Evercore Partners. Please go ahead.

Arren Cyganovich - Evercore Partners

The larger transaction opportunities that you mentioned from the order books from 2010 to 2011, are those more or less your view of the opportunities or are you actually in more advanced discussions with different airlines about providing capital?

Aengus Kelly

I think at the macro level, the fact that you have these huge record orders and they are all delivering as I said starting the end of this year and going into 2014, ’15, ’16 and beyond. There's no doubt that there's going to be a greater than ever demand for the operating lease product. So, on that basis, I'm pretty sure we are going to get our fair share. We are always talking to different airlines about potential opportunities as well. That's just part of our day-to-day business. But at a general level, when you look out there, given the dynamic of the industry with these record order books, there's going to be opportunity out there and the fact that you don't have that many global lessors, as I said you really only have 10 or 11 of us.

Arren Cyganovich - Evercore Partners

Okay. And then the timing of the 20 million of additional gains from aircraft sales, is that mostly going to be in the second or third quarter what's the time there?

Keith Helming

Well, half it happened in the first quarter and the other half will be third quarter.

Operator

We will take our next question Glenn Engel from Bank of America. Please go ahead.

Glenn Engel - Bank of America Merrill Lynch

Couple of questions, one, if I look at your base rentals they were down 9% to 10%, the assets were down 6% to 7%, are your rentals down more than your net assets?

Keith Helming

You have to look at the -- when you look at the assets themselves, if you look at the average amount of assets in the quarter, so if you look at it on an average basis, the two numbers should be pretty comparable.

Aengus Kelly

And Glenn, one of the other things on that point is clearly a lot of the assets that were sold have moved into the managed asset category which is now $2.1 billion.

Glenn Engel - Bank of America Merrill Lynch

Can you also go through claims that are due to come off leases that progresses and how those are placed?

Aengus Kelly

Everything is placed, the three airplanes to place, one of the three is already under LOI and the other two are very close as well. So there isn't a huge placement task out there for us.

Glenn Engel - Bank of America Merrill Lynch

And how many are coming up that get released in the next few months?

Aengus Kelly

In the next few months…

Glenn Engel - Bank of America Merrill Lynch

In the next few quarters?

Aengus Kelly

There will be nothing unusual. It will be normal turn of portfolio. It’s all disclosed in the filing that will just be made. Actually you will see it there year by year all the way out.

Glenn Engel - Bank of America Merrill Lynch

So it’s spread evenly through the year.

Aengus Kelly

It’s pretty much. There's no big surge in placements.

Operator

(Operator Instructions) We will take our next question from Andrew Light from Citigroup. Please go ahead.

Andrew Light - Citigroup

Just a fairly detailed question; at the investor day last September you gave guidance on net losses attributable to non-controlling interest of $15 million to $20 million. I was just wondering has that been superceded by the ALS transaction or was that your stand.

Aengus Kelly

Well, that was generated by with a particular joint venture that we have restructured. The way that accounting was working previously as you saw it in the non-controlling interest and then the offset was in the higher interest cost on debt. But we restructured that joint venture. So what you see now on the non-controlling interest basis, is it should be pretty comfortable with what you see going forward and the interest cost are slightly lower than what we would have previously. Use this quarter as the benchmark going forward.

Operator

We will take our next question, a follow up question from Scott Valentin from FBR Capital Markets. Please go ahead.

Scott Valentin - FBR Capital Markets

Gus kind of something you hit on earlier. I guess three of the aircraft you sold this quarter, somewhat in to aircraft or their management. Just wondering, with the AerDragon announcement, what we can expect from the managed fee revenue line?

Aengus Kelly

I think what you will see, it's a method that we've used obviously over the last five, six years, to diversify our risks to put in to managed assets where we might hold the minority stake in the vehicle maybe a 20 odd percent stake and then we would get a management fee as well. As we go forward, I think you will probably see that more, we will add more managed assets and probably at a similar cliff on average what we've done over the last five or six years and of course that does generate the revenue stream without the capital and asset risk associated with the holding the aircraft.

Operator

(Operator Instructions)

Aengus Kelly

Operator, are there any further questions?

Operator

As there are no further questions in the queue, gentlemen I would like to turn the call back to you for any additional or closing remarks.

Aengus Kelly

Thank you. Thank you very much for dialling in for the earnings call and we will speak to you soon at the next call. Thank you.

Peter Wortel

Thank you.

Operator

That will conclude today’s conference call. Thank you for your participation ladies and gentlemen. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!