FLY Leasing Q3 Earnings Hurt by Lower Lease Rental Revenue

FLY Leasing reported Q3/16 net income of $22.9 million, down from $27.5 million in the same quarter in 2015. Total Q3/16 revenue of $85.3 million was down from $112.7 million in the same quarter a year earlier.

The following highlights were excerpted from the news release:

  • Operating lease rental revenue of $82.7 million was down from $104.4 million in Q3/15.
  • FLY acquired seven aircraft at a cost of $467 million in Q3/16 and sold sold three older aircraft for a gain of $4.1 million, a 19% premium to net book value
  • At September 30, 2016, FLY’s total assets were $3.5 billion, including investment in flight equipment totaling $3.1 billion.
  • At September 30, 2016, FLY’s 81 aircraft were on lease to 43 airlines in 28 countries.

“FLY is continuing to execute its program to enhance shareholder value,” said Colm Barrington, FLY’s CEO. “We are selling older aircraft at gains to book value and investing the proceeds in newer models, mainly in attractive sale and leaseback transactions, as well as repurchasing our shares. These initiatives are producing solid operating results, with net income of 70 cents per share for the quarter.”

“In the quarter we sold three aircraft with an average age of 15 years, generating a gain of $4.1 million, a 19% premium to net book value,” Barrington added. “Meanwhile, we invested $467 million in seven aircraft with an average age of about two-and-one-half years. The impact of these and earlier transactions on our portfolio metrics was significant, reducing our fleet age to 6.2 years and increasing our average lease term to 6.7 years.  FLY continues to have ample resources to fund its growth strategy with more than $1 billion of unrestricted cash, available debt capacity and unencumbered assets providing more than $2 billion of purchasing power.”

“FLY continued to repurchase shares, acquiring nearly 900,000 shares in the quarter,” Barrington said. “Since September 2015, we have repurchased 22% of our shares at a significant discount to net book value, which helped increase FLY’s book value to nearly $20.00 per share.”

“Our clients continue to perform strongly,” Barrington concluded. “2016 will be the most profitable year for the world’s airlines due to strong passenger growth, high load factors and low fuel prices. This is good news for the aircraft leasing industry, as are recent decisions by the manufacturers to reduce aircraft supply by cutting the production rates of certain aircraft types. We continue to see a strong market for aircraft sales and opportunities for aircraft purchases.”

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