Fly Leasing Limited (

FLY

)

Q1 2011 Earnings Call

May 4, 2011 9:00 am ET

Executives

Matt Dallas – IR

Colm Barrington – CEO

Gary Dales – CFO

Steve Zissis – President and CEO of BBAM

Analysts

Helane Becker – Dahlman Rose

Ray Neidl – Maxim Group

Joe Gill – Bloxham

John Evans – Edmunds White

Richard Haydon – Yield Capital

Richard Diamond – Green Drake Partners

Presentation

Operator

Compare to:
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Good morning. My name is Kearie and I will be your conference operator today. At this time, I would like to welcome everyone to the Fly Leasing Limited first quarter 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to turn the call over to Mr. Matt Dallas. Mr. Dallas you may begin.

Matt Dallas

Thank you and good morning everyone. I am Matt Dallas, the Investor Relations Manager of Fly Leasing and I'd like to welcome everyone to our first quarter earnings conference call. Fly Leasing, which we will refer to as FLY or the Company throughout this call, issued its first quarter earnings results press release earlier today, which is posted on the Company's website at www.flyleasing.com.

Representing the company on this call today will be Colm Barrington, our Chief Executive Officer, Gary Dales, our Chief Financial Officer and Steve Zissis, the President and CEO of BBAM the company that manages and services FLY’s fleet.

I’d like to begin the call by reading the following Safe Harbor statement. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to statements regarding the outlook for the Company's future business and financial performance.

Forward-looking statements are based on current expectations and assumptions of FLY's management which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to factors that are summarized in the earnings press release and are described more fully in the Company's filings with the SEC. Please refer to these sources for additional information. FLY expressly disclaims any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise.

This call is the property of FLY and cannot be distributed or broadcast in any form without the expressed written consent of the Company. A replay of this call is available for two weeks from today. An archived webcast of this call will be available for one year on the Company's Web site.

I will now hand the call over to Steve Zissis, the President and CEO of BBAM to give you his view on industry conditions. Steve?

Steve Zissis

Thank you, Matt, and thank you for joining us today. The Commercial Aviation sector continues to perform strongly. We are seeing strong demand for virtually all aircraft types, while demand in the earlier stages of the recovery was focused almost exclusively on the Boeing 737-800 product; we now experience a similar uptick in demand, not only for Airbus narrow body aircrafts, but also for more common light body aircrafts like the Boeing 777 and the Airbus A-330s.

In terms of geographical demand, interest is well balanced and we are fielding many inquiries for additional aircrafts from our airline clients in Asia, Eastern and Western Europe, Latin America and North America. Lease rate on in-production aircraft types have rebounded sharply off their lows from the period of time immediately following the global credit crisis.

Even after adjusting for interest rate environment today, compared to 2006 and 2007 period when the industry was last firing on all cylinders, net margins from capitalized source are comparable in a certain cases even higher for the most in-demand aircraft types.

Notwithstanding these positive dynamics in the industry, our positive outlook is tempered somewhat by rising fuel prices in social unrest, in the Middle East, in North Africa. Our rising fuel prices do put financial pressures on airlines, it’s more of a concern for the industry given the impact, high fuel prices can have on consumer demand more broadly in the economy.

It is also worth noting that operating leases in the business are written so that lessors do not take direct risk on airline operating expenses like higher fuel prices. As I mentioned on our recent earnings calls there is a large amount of capital flowing into the aircraft lessee sector.

Much of the capital is coming from private equity community, with the larger existing lessors are also allocating capital to grow their businesses. All of this capital is creating a demand for aircrafts subject to operating leases and aircraft prices continue to move upward.

We have taken advantage of this liquidity in the past to rebalance the portfolio through selective sales of aircrafts. In the each case, at premiums to book values. We will continue to evaluate future sell opportunities. We continue to see attractive value to FLY share given current operating prices that are below our book value. We’ve proven that our – in the market at premiums to book value, 100% of our aircrafts are on lease. We are generating positive cash flow in current periods. We’re paying substantial dividend and we have built up a very large cash position that will allow us to grow the business in the near future.

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