Operator: Good day and welcome to the Aircastle Q1 Earnings Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Frank Constantinople, Senior Vice President, Investor relations. Please go ahead sir. Again I'd like to turn the conference over to Frank Constantinople, Senior Vice President, Investor relations. Please go ahead sir.

Frank Constantinople: Thank you, Chris. Good morning everyone and welcome to Aircastle Limited's first quarter 2017 earnings call. With me today are Mike Inglese, Chief Financial Officer and acting CEO; and Mike Kriedberg, Aircastle Chief Commercial Officer. We'll begin the presentation shortly, but I'd like to remind everyone that this call is being recorded and a replay will be available through our website at www.aircastle.com, along with the earnings press release and our PowerPoint presentation. I would like to point out that statements today which are not historical facts may be deemed forward-looking statements. Actual results may differ materially from the estimates or expectations expressed in those statements and certain facts that could cause actual results to differ materially from Aircastle Limited's expectations are detailed in our SEC filings, which can also be found on our website. I'll direct you to Aircastle Limited's earnings release for the full forward-looking statement legend. And will now turn the call over to Mike Inglese.

Mike Inglese: Thanks Frank. Good morning everybody and welcome to call. The first quarter of 2017 was strong as we continue to expand and optimize our fleet in a disciplined accretive manner, while also generating substantial savings through opportunistic refinancing. We closed $190 million of new investments during the first quarter and have -- currently have either closed or committed to close an additional $220 million in a competitive market environment. We also have another $100 million or so in our pipeline awaiting LOI confirmation. Our owned and managed fleet totaled 213 aircraft at the end of the quarter. We ended with a very strong liquidity position due to a healthy year end cash balance and a highly successful note financing during the first quarter, where we raised $500 million of seven year money. Net income per share increased 17% to $0.54 a share in the first quarter, up from $0.46 a share a year earlier. Adjusted net income per share increased 4% to $0.58 per share, up from $0.56 per share on the year earlier period. Cash ROE was a solid 12%. Aircastle continues to be a disciplined value-oriented investor in commercial aircraft. By not having large forward commitments and, instead, maintaining significant liquidity, we can be nimble, flexible, and opportunistic in our investment approach. We feel that this strategy has served us well and expect that it will continue to do so over the long-term. We had solid acquisition activity during the quarter, where we acquired or committed to acquire 18 aircraft having an average age of just under eight years with an average remaining lease term of around seven and a half years. We closed eight of these aircraft during the first quarter. As we've stated many times before, we do not target aircraft age specifically in determining what makes sense to buy or sell, and we continue to source what we feel are good relative-value aircraft investments given the current and expected environment. We expect to continue to take advantages of investor demand for aircraft and expect to sell aircraft during the second quarter, some of which were previously expected to close during Q1. In 2015 and 2016, we sold to combine 61 aircraft for total gains of nearly $100 million. Our aircraft sales have increased our liquidity and earnings, while enabling us to upgrade the overall quality of the portfolio. At the end of Q1, our owned and managed fleet was 213 aircraft, up from 167 at the end of 2015. Over the past five years, the net book value of our owned and managed fleet has grown at a compound rate of just under 10% per year and is now close to $7.3 billion. Prudent growth is consistent with our strategic goals of expanding our franchise value and reaching an investment-grade rating. An investment grade rating would significantly expand our borrower base with access to a deeper pool of capital and further reduce our funding cost going forward. Our first quarter utilization was 98.3%, indicating that our portfolio continues to perform very well. We placed three of the four A330s that are scheduled to come off lease with Singapore Airlines during 2017. We've also placed the two ex-TransAsia A321s that will return to us late in the fourth quarter. While these aircraft were AOG at the end of first quarter, they were returned to service later during Q2. As of today, we have one A330 and one production freighter remaining to place this year, and are in active discussion with new homes for both of these aircraft. Aircastle has a broadly diversified fleet with risk spread across 72 lessees operating in 37 countries. We proactively monitor and manage credit and political risk, which enables us to quickly and efficiently move assets around the globe. The aircraft leasing mile is durable on attendant cash flow because the assets are portable. Finally, our conservative capital structure remains a key competitive advantage and provides us with significant investment flexibility. During the first quarter of 2017, we took advantage of strong markets to raise $500 million in new seven year notes at a record low coupon for us of 4.125%. During the second quarter, we also retired a five year note which matured in mid-April and had a coupon of 6.75%. The difference between these two will result in roughly $13 million of annual interest expense per annum or about $0.17 a share going forward. Let me now turn to the business environment. We remain cautiously optimistic as we continue to reserve a steady flow of new business opportunities, that we feel represent good value. It serves Aircastle well to have considerable liquidity and minimal forward commitments. The long-term fundamentals for aircraft leasing remain solid and we're well-positioned for steady and profitable growth over the long-term. The World Bank is projecting global GDP growth of about 2.7% for the year and according to IATA, year-to-date through March, revenue passenger kilometers are up about 7%, and air travel remains robust. Airline load factors continue to be high and in spite of higher expected fuel and labor cost versus last year, IATA is estimating airline profitability at a healthy $30 billion in 2017. With oil prices and interest rates at relatively historic low levels, the business environment is fundamentally positive. In the longer term, the global fleet is expected to double over the next 20 years and there should continue to be solid demand for modern aircraft and for aircraft leasing growth. However, we also recognize the world can change rapidly. And unexpectedly, rising protectionism, a strong dollar, some wide body weakness, and planned increases in narrow body production are among the topics we continue to monitor closely. That said, Aircastle's strategy remains simple. We're disciplined investors and keep a realistic view of the environment. We're prudent and skilled managers of our business and our assets and we remain focused on the bottom-line. We intend to put capital to work in situations where we can earn strong risk adjusted returns and avoid tying up capital and assuming large positions far into the future. We feel that our approach leads to a lower risk business with strong shareholder returns over the long run. We remained disciplined and selective in our first quarter purchases. Our cash ROE for the first quarter was 12% with GAAP ROE at 8.7%. Our view of the best value opportunities at the moment remains with mid-age current generation narrow bodies, a market which continues to perform well. There's certainly a lot of competition for new investments given the strong fundamentals of the aircraft leasing and investing business, but we believe we can source an adequate number of new transactions, given our track record, and the liability of the strong counter-party for sellers and a very large dollar market for assets in relation to our size. We won't fight the few tangible longevity and value of current generation aircraft and we expect this to remain the case during 2017. Accordingly, we expect narrow bodies to remain in focus in terms of our acquisitions. While wide body demand remains relatively weak, we're seeing more airlines recognizing the value of lower price current technology wide bodies. That said, we remain cautious on adding wide bodies to the fleet and continue to wind down our exposure to freighter aircraft as we move forward. Now, let me provide a short update on our financial performance in the quarter. As we said earlier, Aircastle had a very strong quarter with net income up 17%, to $42 million as total revenues reached $204.3 million. Our operating cash flows came in at a strong $131.6 million for the quarter, up 9% over the prior year. We continued to enjoy strong utilization of 98.3% in Q1. For the quarter, lease rental revenues were $194.7 million, up 6% year-over-year, due primarily to the net impact of aircraft investments and sales. Total revenues for the quarter were $204.3 million up 11%, mostly due to higher maintenance revenue compared to the prior period. The year-over-year change in maintenance was driven by return compensation received from two lessees during the first quarter. Adjusted EBITDA for Q1 was $193.4 million versus $183.9 million in the prior year. Higher lease rental and maintenance revenue of $22.6 million or partly offset by lower gains from aircraft sales of $12.1 million. Adjusted net income for the first quarter was $45.7 million, up approximately 4%. Higher revenues were partly offset by lower gains from aircraft sales and slightly higher depreciation expense. Interest expense for the quarter was $63.1 million, a decrease of 2%, as higher wage average debt balances were offset by lower hedging amortization. Depreciation for the quarter rose to $2.5 million versus the first quarter of 2016, primarily as the result of adding 65 aircraft over the past 12 months, while having sold 19 older aircraft over that period. At the end of the quarter, we owned 200 aircraft with a net book value of $6.6 billion, including 163 unencumbered aircraft with a net book value of $4.7 billion. In addition to the end of the year, we managed another 13 aircraft through the two joint ventures with Ontario Teachers and IBJ Leasing that had a net book value of almost $700 million. For the first quarter our annualized portfolio lease rental yield was 12.3% and our net cash interest margin was 8.7%, which has remained consistent over the last four quarters. As mentioned earlier, in mid-April, we repaid $500 million of 6.75% coupon notes, prior to that debt repayment. At the end of the first quarter; we had $872 million of unrestricted cash and $810 million of unused revolving credit capacity. Total borrowings were approximately $5 billion, including $3.8 billion of unsecured debt. The weighted average coupon of our debt was 4.97% and the weighted average maturity of our debt portfolio was approximately 3.8 years. Our net debt to equity ratio remained at 2.2 times and unsecured debt represented 76% of total debt at quarter end. For the second quarter, our Board has approved a $0.26 per share common dividend payable to shareholders on record at May 31st. This will be our 44th consecutive dividend. Since going public in 2006, we've paid out $706 million in dividends and have increased the dividend seven times since 2011, representing a total increase since then of 260%. As usual, our guidance elements for the second quarter have been included in the earnings press release and the PowerPoint, both of which were posted to our website today. As a reminder, maintenance revenue flows through our income statement as leases expire or when aircrafts are sold. A wide range of guidance for both maintenance revenue and for expected gains from sale, reflect potential timing issues between quarters. In conclusion, the first quarter was solid and on track for what we expect to do on a full year basis. We continue to grow the fleet by opportunistically acquiring attractive assets and selling assets into a strong market to reduce the residual value risk, manage customer concentration, and enhance our overall asset mix. Accordingly, our longer term earnings profile, we believe, is improving each quarter. We currently have significant liquidity, our operating cash flow remains very strong, and our future annual capital commitments are modest. Finally, our conservative capital structure is flexible and affords us strong access to additional financing. As a leading value investor in commercial aircraft leasing, we're well-positioned to continue to drive shareholder value and returns by executing our disciplined and flexible approach in an ever-changing market. And finally, let me conclude with a quick update on Ron Wainshal's medical leave, as mentioned briefly in this morning's earnings release, Ron continues to make progress on his recovery. In the meantime, our mission remains unchanged. With the firm support of our world-class Board of Directors, our leadership team will methodically execute our business plan. And with that, operator, we're happy to open up the call to Q&A.

Operator: Thank you. [Operator Instructions] And we'll go first to Gary Liebowitz of Wells Fargo Securities.

Gary Liebowitz: Thanks operator. Good morning gentlemen.

Mike Inglese: Good morning Gary.

Gary Liebowitz: Mike given what you've said about how competitive it is out there for acquiring aircraft, I would assume that the $1.5 billion or so that you've done in the prior years is not a realistic number this year, but is $1 billion still a reasonable estimate of what 2017 might look like?

Mike Inglese: Yes. I don't think that's an unreasonable way to think about it.

Gary Liebowitz: Okay. Also on the wide bodies, I hate to focus on the 1.7% that's unutilized, but what's the best case scenario for those two remaining wide body placements? In other words, how -- you're going to have some downtime on those planes I would imagine, but maybe you can size it up in terms of months of how much downtime we could see?

Mike Inglese: Look, we're in a number of discussions on both of those assets, and some -- and one or two directions on those may result in some downtime, but there are others that will result in minimal downtime. So, I don't know what the outcome will be. But we're pursuing a number of options on each of those and we'll have an update for you the next time we're speaking.

Gary Liebowitz: Okay. And last one, anymore E2 placements that you can talk about?

Mike Inglese: No. we have not made any firm commitments or replacements of E2s since the last quarter. We still have three of our total order stream placed at the moment. We're actively engaged in a number of campaigns with the manufacturer and we hope to make some more progress on that as we head into the second half of this year.

Gary Liebowitz: Great. Thank you very much.

Mike Inglese: Thank you.

Operator: Our next question comes from Arren Cyganovich of DA Davidson.

Arren Cyganovich: Thank you. Looking at your net debt to equity, a relatively low level compared to some of your peers. I think in the past, we've talked about potential portfolio opportunities that would sometimes present themselves. Is there anything from that side of the business, either lessors or airlines that you could have been in discussion for any kind of larger portfolios to take advantage of?

Mike Inglese: Look I think practically speaking we're in discussions with both airlines and other lessors for portfolios of different sizes from time-to-time. I can't tell you that there's some giant portfolio that's on my plate at the moment, but it doesn't mean that something larger than we've seen recently might not appear that could make sense for us. So, it's always -- the pipeline is always a mixed bag of size, asset types, and prospective sellers. And we continue to sort through what we think makes sense for us and we look to win deals that we think make sense in the context of our business and our cost of capital.

Arren Cyganovich: Okay. Thanks. And then the second quarter, you have guidance for gain on sale, it sounds like some of your planned sales slipped into the second quarter. Can you put some size context on the dollar amount that you expect to sell in the second quarter?

Mike Inglese: To be honest with you, I'd rather not do that at this point and it's kind of imbedded in the context of what that wide range of sales would be. But we expect to be within that range and we'll talk about what the sort of size and proceeds are when we get there.

Arren Cyganovich: Okay, fair enough. Thanks.

Operator: Our next question comes from Helane Becker, Cowen & Company.

Unidentified Analyst: Hey guys, it's actually Steve on for Helane.

Mike Inglese: Hey Steve.

Unidentified Analyst: Can you, I guess, just give us kind of some overall commentary on the sales market? Are you still seeing strong demand for kind of middle-aged aircraft, is that just continuing?

Mike Inglese: Yes, look I think there is still continuing appetite from investors and people like us for mid-aged aircraft and for aircraft that -- frankly, across the whole age spectrum. The world has realized over the last few years, this is a good asset class, and it's attracted a lot of capital. So, we -- frankly, sometimes we're selling assets to some people who we might be competing with and buying assets at a different part in the year. So, it's a competitive market and we're finding opportunities that make sense for us in both the buying and selling context of this marketplace.

Unidentified Analyst: Okay. And there seems to be, I guess, some commentary going around that some of the purchase lease back transactions that are out there right now, kind of lower credit quality, and just kind of some decreasing yields. How do you guys stay away from that? And how do you source your aircraft without, I guess, the race to the bottom that seems to be occurring in that market?

Mike Inglese: Look, practically speaking, as we look at potential new purchase lease back opportunities, we look at what we want to do in the context of what our cost of capital is. We're not often -- in fact, very rarely can we win in the context of some of what's going for some of the newer aircraft today. And so, look, we're -- we try to stay in the mix and the deal flow across the whole age spectrum of what's out there because it gives you some market intelligence about what people are doing and what their interests are. So, we don't -- not show up in the context of trying to understand what's happening, but it's pretty -- I'm not counting on winning a lot of new purchase lease backs to grow my business this year.

Unidentified Analyst: Okay. And I guess just a final thing -- and I'm sorry if I missed this, but the higher maintenance revenues and I guess the utilization being a little lower, was that a result of a returned aircraft during the quarter?

Mike Inglese: Maintenance revenue were a couple of leases that expired during the quarter under normal expirations. And the utilization being down a bit was impacted by a transition of an A330 that took place earlier in the quarter. And the two A321s that came back from TransAsia in late December, those two aircraft were effectively AOG for the entire quarter.

Unidentified Analyst: Okay, perfect. Thanks guys.

Operator: Next is Rajeev Lalwani of Morgan Stanley.

Rajeev Lalwani: Hi, good morning. Thanks for the time.

Mike Inglese: Good morning.

Rajeev Lalwani: Can you talk about where you are on placing some of your 2018 lease expirations? And maybe a little bit of color on dialogue around narrow body versus wide body?

Mike Inglese: Sure. I mean obviously we're actively beginning and talking about 2018 lease expiries as we're sitting here today. And Mike can give you little commentary on the kinds of things we're looking at.

Mike Kriedberg: Yes, Rajeev, we have a few narrow bodies we feel pretty good about those. We're finding -- and generally, we're trying to stay a year plus out on narrows and about a year and a half to two on wide bodies as a general rule of thumb. So, on the narrow bodies, we're finding good interest, still very strong interest across the Board in 800s, in 320 family aircraft, and we're not finding any issues with that. And we have homes that we're moving on. In some cases, older assets that will likely be parted-out, we're finding good prices on the part-out side as well. The main focus is on some of the key narrow-bodies -- on some of the key wide-bodies of which we have several. We have some in the Emirates and some in the LATAM that come back as well as some Cathay -- Cathay 777. So, our main focus is on those and we're in discussions on the number of those aircraft as we speak, along with the two wide bodies that Mike mentioned earlier for this year.

Rajeev Lalwani: Very helpful. And then with short-term rates moving up here more recently, what impact has that had on the market in terms of yields and players looking at assets?

Mike Inglese: Frankly, it's hard to discern at this point, but I -- talking to other people who do what we do, obviously, people are looking at an expectation of a higher rate environment and trying to put that in the context of what will anyone's particular funding costs be for any opportunity and making sure people believe they can get an adequate return given what's expected to be higher funding costs in the not too distant future.

Rajeev Lalwani: But no real sort of market data points that show that maybe [Indiscernible]

Frank Constantinople: Yes, there's not a lot of black and white, look at this, and it demonstrates that just yet.

Rajeev Lalwani: Yes, understood. Thank you for your time gentlemen.

Mike Inglese: Thank you.

Operator: From Credit Suisse, we go next to Moshe Orenbuch.

Moshe Orenbuch: Great. Thanks. Mike could you kind of maybe expand a little bit on the financing side, I mean, you mentioned pretty impressive improvement in your cost of funds from the swap of the debt that you did. How much more that you could do? And then as a follow-up, does that have any kind of strategic implications about your ability to kind of grow and bid on aircraft?

Mike Inglese: So, there's not a lot of low-hanging fruit left in the context of refinancing high coupon debt in the near-term, Moshe. This was the obvious and best example of what we did just recently. And in the context of what it does for our -- our overall funding cost is down a bit. And as I just said about looking at new investment opportunities, we need to be conscious of the rate environment and have a view that what we're going to putting our money into, in the context of how we're financing it provides an adequate spread and return to our shareholders.

Moshe Orenbuch: And you had mentioned the stable kind of cash margin, would this be enough to kind of drive it to improvement or are there offsetting factors that you are looking at?

Mike Inglese: Well, I think it's kind of hard to predict quite frankly. Obviously, it gives us a benefit on the interest expense side, but there will also be some wide bodies that role into their next leases at lower rates that will probably have a little bit of pressure on the revenue yield side. So, I'm not expecting it, frankly, to be rising and I think it will sort of bounce around where it is for the foreseeable future, depending obviously upon what we do in the context of new acquisitions and sales.

Moshe Orenbuch: Got it. Thanks very much.

Operator: Our next question comes from Catherine O'Brien of Deutsche Bank.

Catherine O'Brien: Good morning gentlemen.

Mike Inglese: Good morning.

Catherine O'Brien: After several strong years of aircraft sales and some additional sales expected to be completed in this next quarter, how much more of your fleet, you would say, is eligible for sale? And when do you think your fleet will be fully optimized?

Mike Inglese: Fully optimized is probably never, as a practical matter and we still think there are some attractive assets in the context of what people are interested in buying that might make sense for us to look at selling and as we continue to move through the year. So, we have done quite a bit in the last two to three years and have -- in that context; have dramatically dealt with, over that time period, a lot of our older aircraft. So, we're looking at the remainder of what we have. And again, as a said, when you're in the process of bidding and trying to learn -- find new acquisitions, you also learn about what other people want. And when you lose a few things, you start to ask yourself, well, if people are paying that price for that, maybe I have some of that that might make some sense to part ways with. So, that's how we try to approach the topic across both buying and selling.

Catherine O'Brien: Okay. That makes sense. And then, just, kind of, given the context of the competitive nature of bidding for aircraft this year, do you think free cash flow that you generate this year would be better utilized in going after those aircraft acquisitions or maybe increasing shareholder returns?

Frank Constantinople: Well, look, we will make acquisitions when we think it makes sense in the context of our cost of capital. And we raised our dividend in the fall. We'll look at that again in the coming fall in the context of where we are with the business, what we think the sustainable cash flow is. And in terms of potential other uses of cash, i.e., stock buybacks, if my stock is in a certain place where I think that make sense, we've proven in the past that we'll do that when we think that is the logical thing to do.

Catherine O'Brien: Okay, great. Thanks for all that color.

Operator: Up next is Scott Valentin of Compass Point.

Scott Valentin: Good morning. Thanks for taking my question.

Mike Inglese: Hey Scott.

Scott Valentin: Just with regard to credit, you point out the IATA data is showing strong trends in paths to travel, RPKs, et cetera. Any areas or part of a portfolio, aside from wide bodies, maybe, where you have concern around credit?

Mike Inglese: Not in particular, I think, our current -- our receivables are very low. At the moment, we have nothing over 30 days and we keep a close eye on all of our customers, but there is no particular place I would say, per se, that is getting additional scrutiny in the context of our current lessee make up and fleet composition.

Scott Valentin: Okay. And just on the 2Q guidance, just looking at the lease rental revenue, it looks like it comes down a little bit from the first quarter. Just wondering is that -- I assume that's a fleet size issue or is it maybe a margin -- a yield issue as well?

Mike Inglese: I'd say, it's largely driven by the expected sales and there'll also be, as I mentioned, a little bit of revenue pressure in the context of releasing wide bodies into their next lease.

Scott Valentin: Okay. And then just a final question. In terms -- I think you mentioned that kind of eight years, I think, was the average age of the narrow bodies that you are acquiring. I mean, do you see -- and maybe going to a question earlier, the $1 billion target or $1 billion potential acquisition, I guess, you see that accelerating in the back half of the year, given what's happened or occurred in the first half of the year. And then I assume you'll stay kind of that same type of target product type that's kind of middle-aged narrow body?

Mike Inglese: Yes, look, I think when we think about where we are today, we've done or have committed somewhere around $400 million. We have another $100 million that we expect to get into the confirmed LOI stage in the near-term. So, that puts us at around $500 million in mid-May. So, as I said earlier, $1 billion doesn't feel like an unrealistic bogey in the context of what we might see for the balance of the year.

Scott Valentin: Okay. And focused on that kind of middle-aged narrow body, you don't see yourselves going after wide bodies despite kind of the prices?

Mike Inglese: We never say never, there might be a wide body or two in the context of what we do in portfolio purchase, but when we do that, and what we've been doing more recently, is looking at stronger credits on assets that we think the current lease can take us to a part-out scenario in the context of the wide-body asset.

Scott Valentin: Okay, all right. Thanks very much.

Operator: Our next question comes from Christopher Nolan of FBR & Company.

Christopher Nolan: Hey, Mike what do you think of using the excess liquidity? Your cash balances look pretty high.

Mike Inglese: Well look, remember at the end of the quarter, we had just raised $500 million, which, in the middle of April, we used to refinance the 6.75% notes. So, pro forma for that, the $872 million is $372 million and we have a lot of revolving capacity left. So, our expectation is to try to put that balance to work. And we have the revolving facility capacity to help do what else we think makes sense in the context of putting more assets on the book. And then if we do that in the context of using the revolver, we'll look to turn that out as we move forward.

Christopher Nolan: All right. As a follow-up, strategically, when you look at airline customers, particularly in the emerging markets, are you seeing their cost of funds actually start to increase unless they're looking at aircraft leasing companies, such as yourself, more actively than in the past?

Mike Kriedberg: I wouldn't say that. It's Mike Kriedberg. I wouldn't say that, but I see a number of them maybe starting to look at transitioning, as, perhaps, they're taking on some new -- a lot of them are taking on new technology and a lot of them are using leasing -- op leasing as a way to transition and move out of aircraft. That's what I've seen more of. But no, I wouldn't say I've seen an increased cost of funds, per se.

Christopher Nolan: So, the transitions of the fleet would be more of an operational issue rather than a financial issue for these airline clients?

Mike Kriedberg: Correct.

Mike Inglese: Yes and a number of these folks around the world have always used operating leasing as a meaningful portion of their overall fleet management strategy, even in the context of what they've done historically and it's logical to think that it makes sense for them to continue to do so going forward.

Christopher Nolan: Final question. We got some narrow bodies coming -- being developed in China and Russia, and so forth. Given global trends towards nationalism, are you seeing any of these airlines basically saying that they are being encouraged to buy local, in terms of airlines -- aircraft and they would like to lease those local planes?

Mike Inglese: Look I think -- I don't think it's quite there yet in the context of what Comac is doing in China and what Sukhoi is doing in Russia. Ultimately, they're going to be capturing hometown market share. I wouldn't discount either of them, over time, but I think have they have ways to go in that context. And at the current stage, Boeing and Airbus are still doing a lot of business in both of those places.

Christopher Nolan: Great. Thank you for taking my questions.

Operator: And from Goldman Sachs, we go next to Justine Fisher.

Justine Fisher: Hi, good morning.

Mike Inglese: Good morning.

Justine Fisher: The first question I have is on those wide bodies that you were talking about for 2018 that you're in discussions with Emirates and LATAM and Cathay. Are you seeing these airline try and renegotiate to extend the leases on those? Or does it sound like they're just not interested in leasing anymore and you're looking to other customers? And the reason I ask is that some of those airlines, Emirates, as an example, have said that they want to keep the average age of their fleet at kind of the younger end of the spectrum. So, even if there were -- so I'm wondering, even if there is an attractive opportunity to lease the wide bodies for longer at a good rate, do they still want to cycle out of those aircraft as they take new deliveries? Or might they just say, look, we might extend the life of our existing aircraft and then potentially push off new deliveries?

Mike Inglese: So, the answer, of course, is it depends. And each of them have different circumstances and are potentially thinking about things in different ways. I think, practically speaking, the freighters coming out of Emirates, there's very little chance they're staying at Emirates for an extension. Those will be finding a new home. In the context of the passenger, the 777 at Cathay and the others at LATAM, I'd say extension is a possibility, but it's not a path that we're necessarily banking on as we look for the next opportunities for those aircraft. And those guys do, in fact, have wide body orders that they may wish to do something with. And if they might be successful with that, there may be a greater interest in extending, but it's not something we can count on as we think about what we're going to do with these assets to keep them generating cash for Aircastle.

Justine Fisher: Okay. Thanks. I know you guys don't have big exposure to Alitalia, but could you comment on what you think the fallout for the industry might be from that, if there was either a full or a partial liquidation of the fleet?

Mike Kriedberg: Well, it wouldn't -- look a liquidation wouldn't be great -- wouldn't be good because you're going to have a quick supply thrown into the market. I think the general view -- I mean, I don't know what to fully expect, but the general view would be you expect some sort of restructuring, you expect some sort of adjustment in overall fleet in terms and rent, and we'll have to watch and see. And we don't have any exposure, as you mentioned, there's some holders, but it just becomes a question of how much Italy needs Alitalia, and how much everybody is willing to work to make it stay in place. I suspect some of those planes are going to be needed regardless of what happens, which is usually the case, even on a liquidation basis, but it remains to be seen. I would hope -- let me put it this way, I would hope that it gets restructured and worked out as opposed to a full liquidation. So, we'll just have to watch it and see.

Justine Fisher: Okay. Thanks. And then the last question is just on the money out of China that has been coming into the market. And this was something that FLY Leasing talked about on its quarterly call last quarter. But I wanted to ask you guys the question as to whether you've seen less competition from Chinese money in the market? I mean, again, we're kind of hearing about tightening in capital controls in China, but it doesn't seem as though these sale leaseback deals are any less competitive. So, can you give us some color as to what you're seeing on that end?

Mike Kriedberg: Yes, Justine, its Mike. Yes, I know, I mean, you sort of mentioned this last time. I still haven't really seen it. We'll see -- now remember we're also buying from lessors, so in some cases, we've seen some Chinese lessors looking at -- again, with newer or better portfolios, generally speaking, better portfolios. We've seen them looking at some lessor sales in the marketplace. We've seen them doing good credit transactions. I haven't seen them they remove themselves, by any means. But that's the best I can give you color on. They definitely are still very selective for the hometown, if you would; there's no doubt about that. But we still see them on transactions here and there. But not older stuff, to be clear, mostly good, newer stuff with good credit. That's where you'll see them show up still.

Justine Fisher: Okay, excellent. Thank you guys so much for the color. I appreciate it.

Mike Inglese: Thank you.

Operator: We'll go next to Kristine Liwag with Bank of America.

Kristine Liwag: Hey guys, good morning.

Mike Inglese: Good morning.

Mike Kriedberg: Good morning.

Kristine Liwag: For the 18 aircraft that you have acquired and committed, can you discuss lease rate factor for these assets and also your residual value assumptions?

Mike Inglese: We don't really disclose the lease rate factor or the RV assumptions. I would say it's a mix. It's mostly narrow body. It's a mixture of assets that -- some of which we think will take to part-out at the expiration of their current leases and others which we think there will be another lease turn on. But on average, they're about eight years old. They have weighted remaining lease terms of about seven and a half years and by and large, it's been narrow bodies.

Kristine Liwag: So, you mentioned that some of them would be part-out and I guess, by the time these contracts expire, the assets would be at an average year of 15 to 16 years old. Could you quantify maybe how many of those assets you're expecting to part-out versus release? And also I mean, with these older assets, do you have an oil price in mind embedded in your assumptions?

Mike Inglese: So, we look at forward curves about where we think oil is going, like most people do. But - and so, we factor that into our thinking about what releasing might look like in the context of part-outs of these pretty liquid narrow bodies. There is pretty strong demand for the engines and other pieces, we think, at the end of the existing leases.

Kristine Liwag: No, you mentioned that there could be pressure from releases of wide bodies; can you quantify what those discounts are? And also for the scheduled lease expirations in 2018, and 2019, how many of those assets are wide body aircraft?

Mike Inglese: I'll refer you to our 10-K for the mix of assets, specific expiries going forward, I frankly don't have that list in front of me. But typically, if an asset is coming off its first lease, which is 10 years long, the next lease is going to be at a substantial discount to what the lease rate was on the first lease. And I won't get into specifics, but that's just the nature of every asset, whether it's narrow body or wide body and how this market functions.

Kristine Liwag: Thank you.

Operator: Our next question comes from the Reno Bianchi of Cantor Fitzgerald.

Reno Bianchi: Yes, thank you very much operator. Good morning everyone and please convey my best wishes to Ron when you have a chance. A couple of questions. I want to poke a little bit deeper with respect to some of the credit issues that we were mentioned during the call. And in particularly, Avianca and Avianca Brazil have been in the news recently. And you guys have a pretty decent exposure to those two credits. So, I was wondering whether you can provide a little bit of color. On the same line, also, with Air Berlin, which I think just posted another very challenging first quarter result this year?

Mike Inglese: So, look obviously, we've been keeping an eye on both of those customers as they move forward. They're paying their rent in accordance with our agreements and they're both current at the moment. But their situations we are working with and continue to keep a close eye on.

Reno Bianchi: Fair enough. And another kind of general topic, I think it was approached many times in the past. On the topic of investment grade, I mean, your guys are tantalizing close to achieve investment high grade ratings. And I understand that you don't want to run a business exclusively for that objective. But I just wondered whether you can give a little bit of update of where you stand? Whether you've had another conversation with the rating agencies? And overall, what your philosophy toward that objective is?

Mike Inglese: So, fundamentally, we continue to manage our business in what we think is the best way to take money to our shareholders. We have, in fact, grown the business. We have -- and continue to have a regular dialogue with the rating agencies. But as we've said many times and maybe someday I will be able to stop saying it, I don't control the timing and there's no clear line to step over to magically get there. So, we've had very constructive dialogues with both of them. I think we've done a lot of constructive things from their vantage point in the context of our business over the last few years, but there's not much more clarity I can give on the magical when.

Reno Bianchi: Yes, I'm sorry, if I asked you this question. But let me ask you just a follow-up on this one, not just to beat a dead horse again, but you are so close that you must have done some kind of pro forma. Can you give me some sense -- or can you give us some sense, if you were investment grade, do you think you would achieve some meaningful financial savings from your existing -- where you are right now?

Mike Inglese: Look there's -- the answer is yes, but of course, it will take time. So, let's just pretend I was announced to be investment grade tomorrow, my next financing I would benefit, but my existing financing, they'll trade up, but it won't benefit me in terms of my interest expense until I can refinance that stuff. So, the benefit, as I mentioned earlier, for the long-term is to be in the different place in the context of the depth of the pool of the capital, the reliability and the availability of that capital, and then ultimately, of course, the pricing. And if you just did simple math and said, well, if I have $3.X billion of unsecured debt and it got re-rated by 100 basis points, that's $30 million to $40 million of annual earnings that magically appear.

Reno Bianchi: Thank you very much.

Operator: We'll go to our next question from Vincent Caintic of Stephens.

Vincent Caintic: Hey, thanks very much. Just a quick question. Your tax rate, so now you're guiding for full year taxes of 4% to 7%, taking it down from 9% to 11%. Just wondering, first, what's driving that? And then if this is permanent, if we can think about that tax rate for 2018 and going forward? Thanks.

Mike Inglese: Yes, so fundamentally, we did some restructuring to some of the subsidiaries to move out of a European tax jurisdiction, which helped the overall effective tax rate during the last part of last year. So, I think we're probably back into the mid to high single-digit effective tax rate for the foreseeable future. Of course, that will depend on a lot of things going forward, but the fundamental downtick was the result of some subsidiary restructuring we did and which concluded in the later part of the last year.

Vincent Caintic: Okay, great. That's all I had. Thank you.

Operator: And that concludes today's question-and-answer session. Mr. Constantinople, at this time, I'd like to turn the conference back to you for any additional or closing remarks.

Frank Constantinople: Okay, thanks for your time today. If you have any follow up questions, feel free to call me at 203-504-1063. Have a good day.

Operator: And this does conclude today's presentation. Thank you all for your participation and you may now disconnect.