FLY LEASING September 2018
DISCLAIMER Forward-Looking Statements: This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as expects, intends, anticipates, plans, believes, seeks, estimates, will, or words of similar meaning and include, but are not limited to, statements regarding the outlook for FLY s future business, operations and financial performance, including the expected benefits of the AirAsia portfolio transactions (the Transactions ); whether and when the Transactions will be consummated; the amount of cash and stock consideration to be paid by FLY; the type, amount and terms of the acquisition financing to be obtained by FLY; and, the amount of any fees and expenses incurred in connection with the Transactions. Forwardlooking statements are based on management s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including risks relating to the satisfaction of conditions to the closing of additional assets as contemplated in connection with the Transactions; risks relating to satisfaction of conditions to the financing of additional assets as contemplated in connection with the Transactions; risks relating to FLY s ability to obtain additional required financing for the Transactions on favorable terms, or at all; the risk that expected benefits of the Transactions may not be fully realized or may take longer to realize than expected; the risk that business disruption resulting from the Transactions may be greater than expected; and the risk that FLY may be unable to achieve its portfolio growth expectations, or to reap the benefits of such growth. Further information on the factors and risks that may affect FLY s business is included in filings FLY makes with the Securities and Exchange Commission (the SEC ) from time to time, including its Annual Report on Form 20-F and its Reports on Form 6-K. FLY expressly disclaims any obligation to update or revise any of these forwardlooking statements, whether because of future events, new information, a change in its views or expectations, or otherwise. Notes: 1. All period end figures are as of June 30, 2018 except as otherwise noted. Any 2018 year-to-date data is as of August 31, 2018. 2. Fleet age and lease term are calculated using the weighted net book value of flight equipment held for operating lease, including maintenance rights, investment in finance lease, and aircraft held for sale at period end. 3. In addition to U.S. GAAP financials, this presentation includes certain non-gaap financial measures. These non-gaap financial measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. We have provided a reconciliation of those measures to the most directly comparable GAAP measures in the Appendix. For further information, please refer to FLY s earnings press release dated August 23, 2018. 4. Industry data per IATA. PAGE 1
FLY AT A GLANCE 85 AIRCRAFT $3.0 billion net book value YOUNG FLEET 6.8 years average age LONG LEASES 6.2 years average lease term DIVERSIFIED LESSEES 45 airlines in 27 countries 55 AIRCRAFT CONTRACTED plus 20 options $2.1 billion COMMITTED PIPELINE Opportunity to acquire up to 41 A320neo family aircraft CONSERVATIVE FINANCING 6.0 years weighted average debt maturity, rates hedged LOWER DEBT MARGIN MANAGED BY BBAM Industry leader with 30 year track record SIGNIFICANT INSIDER OWNERSHIP 17% owned by BBAM shareholders PAGE 2
FAVORABLE INDUSTRY FUNDAMENTALS ROBUST GLOBAL AIR TRAFFIC GROWTH CONTINUED AIRLINE PROFITABILITY HEALTHY DEMAND FOR LEASED AIRCRAFT POSITIVE FINANCIAL MARKETS 7.0% 2018 GROWTH FORECAST ON TRACK $33.8 billion GLOBAL AIRLINE 2018 PROFIT FORECAST UNDERPINNED BY PASSENGER GROWTH AND MANUFACTURER BACKLOGS AMPLE CAPACITY AT ATTRACTIVE RATES PAGE 3
STRATEGY DRIVING HIGHER ROE AND EPS SELLING OLDER AND UNDER-PERFORMING AIRCRAFT REINVESTING IN NEWER, MORE PROFITABLE AIRCRAFT REDUCING SG&A PAGE 4 REDUCING FINANCING COSTS REPURCHASED SHARES AT A DISCOUNT TO BOOK VALUE
INCREASING FINANCIAL RESULTS Adjusted Net Income NBV per Share 3.4x $37.6 million 10% $21.02 $11.0 million $19.08 (1) 1H 2017 1H 2018 Adjusted ROE 30-Jun-17 Adjusted EPS 30-Jun-18 3.6x 13.4% 3.9x $1.34 3.7% $0.34 (1) 1H 2017 1H 2018 (1) 1H 2017 1H 2018 Full year 2018 pre-tax income guidance of $75 80 million on target (1) Revised to conform to current period presentation. PAGE 5
PORTFOLIO ACQUISITION UPDATE 2018 INITIAL PORTFOLIO TRANSFERS 34 A320 aircraft 7 CFM engines COMPLETED YTD 22 aircraft IMMINENT 12 aircraft and 7 engines in September 2019 and beyond PURCHASE-LEASEBACKS 21 new A320neo family aircraft Delivering 2019 2021 A320neos A321neos 4 3 1 2 2H 2019 2020 2021 NEO OPTIONS 20 new A320neo family aircraft Delivering 2019 2025 6 4 11 6 5 PAGE 6
FINANCING & LEVERAGE INITIAL PORTFOLIO FINANCING $574.5 million term loan facility 2-year and 5-year tranches Blended pricing of L + 1.725% Syndicate of 18 banks IMPACT ON LEVERAGE Gross leverage temporarily at 4.7x Projected to reduce to 3.5x: Planned aircraft sales Contracted debt amortization PROJECTED GROSS DEBT / EQUITY RATIO 4.7x 4.3x 3.5x (1) Initial Within 1 Year Within 3 Years (1) Proforma at September 30, 2018, assuming all Initial Portfolio assets have been acquired. PAGE 7
AIRCRAFT SALES 2018 SALES SALE STRATEGY 3 Aircraft sold YTD Average age 12.6 years Average remaining lease term 2.5 years Economic gain of $21.3 million (1) (19% premium to NBV) Targeting to sell $150+ million of AirAsia exposure Targeting mandates by year end; transfers to follow into 2019 Reduces leverage Manages lessee concentrations Similar target for 2019 (1) Economic gain includes gain on sale and end of lease income. Economic gain of $15.6 million in Q2 for sale of two aircraft and $5.7 million anticipated in Q3 for sale of one aircraft. PAGE 8
ALIGNMENT OF INTERESTS BBAM SHAREHOLDERS INCREASING OWNERSHIP IN FLY BBAM shareholders own 17% of FLY shares Largest insider holding of any public aircraft lessor Purchased 1.3 million shares at $15.00 per share in July Apr 2010 Purchased 1.0 million shares Dec 2012 Purchased 2.2 million shares Jan 2016 Purchased 0.9 million shares Jul 2018 Purchased 1.3 million shares Recent AirAsia portfolio acquisition enabled by BBAM s scale and reach PAGE 9
APPENDICES
CAPITAL STRUCTURE & LIQUIDITY OVERVIEW (In millions) June 30, 2018 December 31, 2017 Unrestricted cash and cash equivalents $407 $329 Unencumbered assets $250 $331 O / S Rate (1) O / S Rate (1) Maturity Securitization $96 2.95% $102 3.06% 2033 2012 Term Loan 419 5.16% 431 4.25% 2023 Nord LB Facility 122 4.92% 153 4.47% 2018 CBA Debt 45 4.52% 49 5.53% 2020 Other Bank Debt Facilities 801 4.37% 906 3.83% 2019-2028 Aircraft Acquisition Facility 131 3.67% 86 3.41% 2022 Magellan Acquisition Facility 318 4.14% 332 3.15% 2025 Unamortized Discounts and Loan Costs (25) (29) Total Secured Debt $1,907 4.43% $2,030 3.84% 2021 Notes 325 6.38% 325 6.38% 2021 2024 Notes 300 5.25% 300 5.25% 2024 Unamortized Discounts and Loan Costs (8) (9) Total Unsecured Debt $617 5.84% $616 5.84% Total Debt 2,524 4.77% 2,646 4.30% Shareholders' Equity 588 544 Total Capitalization $3,112 $3,190 Debt to Equity 4.3x 4.9x Net Debt to Equity (2) 3.6x 4.3x Secured Debt to Total Debt 76% 77% Total Debt to Total Capitalization 81% 83% (1) Represents the contractual interest rates and effect of derivative instruments and excludes the amortization of debt discounts and debt issuance costs. (2) Represents the ratio of total debt, less unrestricted cash and cash equivalents, divided by shareholders equity. PAGE 11
(# of aircraft) REMARKETING OVERVIEW Last 2018 remarketing requirement is a narrowbody on lease expiring in December More than 50% of 2019 remarketing requirements have been completed Market remains robust for remarketing aircraft AIRCRAFT REMARKETING REQUIREMENTS Remarketings Completed YTD Remaining Aircraft to be Remarketed 20 10 19 14 12 0 1 FY 2018 FY 2019 FLY s portfolio has a weighted average remaining lease term of 6.2 years PAGE 12
DIVERSE GROUP OF GLOBAL LESSEES FLY Top 10 Lessees # Lessee % of Value 1 12% 2 11% 3 9% 4 4% 5 4% 6 4% 7 4% 8 3% 9 3% 10 3% Top 10 Lessees 55% Initial Portfolio # Lessee % of Value 1 AirAsia 41% 2 Thai AirAsia 23% 3 Indonesia AirAsia 14% 4 AirAsia India 13% 5 Philippines AirAsia 7% 6 Pakistan Int. Airlines 2% Lessees 100% Proforma Top 10 Lessees (1) # Lessee % of Value 1 AirAsia 10% 2 9% 3 8% 4 7% 5 Thai AirAsia 6% 6 Indonesia AirAsia 3% 7 3% 8 AirAsia India 3% 9 3% 10 3% Top 10 Lessees 54% AirAsia Group Exposure 24% AirAsia Group (currently five different airlines in five countries) exposure will decline with a disciplined disposition strategy. FLY is targeting $150 million of AirAsia Group sales annually PAGE 13 Note: Sums may not foot due to rounding. (1) Pro forma for FLY and Initial Portfolio on a combined basis assuming no sales. For FLY, NBV as of June 30, 2018. For Initial Portfolio, estimated purchase price allocation, excluding engines.
ADJUSTED NET INCOME & ADJUSTED ROE (In thousands) Q2 2018 Q2 2017 (1) 1H 2018 1H 2017 (1) Net Income $24,344 $2,880 $33,974 $7,932 Plus: Unrealized foreign exchange (gain) loss (864) 1,309 (456) 1,528 Deferred income taxes 3,974 930 6,327 1,988 Fair value changes on undesignated derivatives (2,238) (28) (2,240) (495) Adjusted Net Income $25,216 $5,091 $37,605 $10,953 Average Shareholders' Equity $571,881 $587,283 $562,490 $589,267 Adjusted ROE (2) 17.6% 3.5% 13.4% 3.7% (1) Revised to conform to current period presentation. (2) Percentages have been annualized. PAGE 14