Thank you. Good day, everyone. Welcome to the 2012 third 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 third quarter earnings. In addition to this earnings call, AerCap will also host a lunch for analysts and investors today at the New York Palace in the Garrison 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 judgments only as of the date of the live 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 earning release dated November 7, 2012. 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.

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 third quarter earnings call. During the third quarter, AerCap generated an adjusted net income of $62 million or 0.48 per share. This very healthy profit is a result of the focus on our operating strategy. During the quarter, we maintained a fleet-wide utilization rate of 98%. We continued with our efforts to optimize our fleet through the acquisition of new modern technology, fuel-efficient aircraft and the disposal of older aircraft. In addition, we raised over $200 million of long-term debt. We have now sold over $1.1 billion worth of assets in the last 15 months, mainly older, out-of-production aircraft and engine. We have also raised over $1.5 billion of financing, and we have acquired $1.3 billion of assets, all of which are new, modern technology, fuel-efficient aircraft on long-term leases. In addition, during the third quarter, due to our robust liquidity position, we were able to take advantage of a unique opportunity to further enhance shareholder value by acquiring 12.9 million shares at an average price of $11.99. This represents a 33% discount to book value per share and brings the total amount of capital return to our shareholders over the course of the last 18 months to $317 million. This repurchase demonstrates our commitment and focus to enhancing shareholder value. Now, turning to the leasing business, we have maintained a utilization rate of over 98% for the last 12 months. Importantly, the average lease term of new aircraft acquisition is 139 months and the average term of re-leases is 65 months. The longevity of our leases will drive long-term stable profits at AerCap. On our previous earnings call,…

Thanks, Gus. Good morning, everyone. I'll now take you through the highlights of our third quarter 2012 financial performance. I'll begin on Page 5 of the presentation. Our reported net income for the third quarter was $57.6 million. Adjusted net income, which excludes the mark-to-market on interest rate caps and the cost of share-based compensation was $62.2 million. Adjusted net income for the first 9 months of 2012 was $190 million. Moving to Page 6, reported earnings per share was $0.45 in the third quarter 2012 and adjusted earnings per share was $0.48 during the same period. The average shares outstanding during the quarter was 128.4 million. Page 7, total revenue. Total revenue in third quarter 2012 was $269 million, down from $276 million in third quarter 2011. The decrease was driven primarily by a lower net gain on aircraft sales and lower maintenance revenue. Page 8, net interest margin or net spread was $176 million in third quarter. The annualized margin as a percent to average lease assets was 8.77%. Page 9, the impact on sales for third quarter 2012 was a gain of $500,000. During the third quarter, we sold one A330 aircraft, one A320 aircraft. The number of aircraft we sell in any given period may vary depending on the market conditions and other factors. Page 10, leasing expenses were $23.3 million for third quarter 2012, up from $13.5 million for the same period in 2011. The increase was driven primarily by the impact related to defaults and restructurings that occurred in late 2011. Page 11, SG&A expenses were $22.3 million in the third quarter of 2012, down significantly from the same period in 2011. Included in the SG&A amount in third quarter 2011 was $11.4 million relating to the mark-to-market of foreign currency hedges and cash…

Thank you, Keith. So in conclusion, AerCap remains highly disciplined, and we continue to deliver industry-leading returns. We remain extremely well funded with no near-term debt maturities, and we are well positioned to take advantage of market opportunities that may arise in 2013. So operator, with that, we will open the call for questions and answers, please.

[Operator Instructions] Our first question comes from Gary Liebowitz from Wells Fargo Securities.

I noticed that in September, your share repurchase activity was de minimis. And based on your comments about the outlook for aircraft acquisition opportunities, do you think the pendulum is swinging now back more towards aircraft acquisition versus share buyback, given where your stock price is.

Well, Gary, we've done an awful lot of share buybacks over the course of the last 15-odd months -- $317 million worth. And we continue to evaluate further share buyback programs, and we'll continue to do that throughout the new year. At the same time, we'll also look at new aircraft acquisition opportunities. So again, whenever we deploy capital, we always look at what's in the best interest of the shareholder and what maximizes the return. So if we get into next year, and we see that the aircraft market, that there's still a lot of money chasing airplanes, we'll probably sell into that. And if our own share price remains at a significant discount, we'll probably look to increase the buyback programs. But it will all be dependent, Gary, on the market dynamics of the time. So there's no change in approach to how we deploy capital.

Okay, thanks. And also, could you just talk about perhaps some of the financing initiatives that might be underway, and your willingness to go out and do another unsecured debt deal even if you don't have specific acquisitions lined up?

Gary, this is Keith. Yes. I mean, you saw last week that we completed another transaction relating to the American Airlines purchase leaseback transaction. Obviously, that's the forefront of our debt initiative at the moment on the secured side. So that will -- that brings our total committed financing toward the American Airlines aircraft at 23 aircraft, which also then matches the amount of committed aircraft that we have with American Airlines. So we're keeping pace on the financing side there. The unsecured market, we're continuously looking at where it is. And, yes, depending upon the amount of investment opportunities that we find and pursue, we could be back on the unsecured market again in 2013.

Our next question comes from John Godyn from Morgan Stanley.

Gus, I like the comments that you had on sort of some firming trends and the possibility of a less competitive sale-leaseback environment in 2013. When I think about some of these comments, it sounds like certainly, you're getting more bullish on just lessor fundamentals in general. But this 2013 ROE, you've got it flat versus 2012 at 10%. I feel like the qualitative nature of your comments would suggest that we should see it kind of improving here. Can you just give us some -- can you elaborate a little bit on maybe some of the puts and takes in 2013 that drive sort of a flat ROE outlook?

Well, as we look at 2013, as Keith said, we have just put in over $1 billion of acquisitions. If you look at AerCap's behavior in the past, as you know, if we do see the right opportunity, we would probably go for substantially more than that. The capital structure of the company could certainly support more than that. If we continue to see a very strong bid on sale-leasebacks, we will probably continue to sell assets into the market, as I said. But my suspicion is that a lot of the money, as you know, that came in when the market was pretty toughish in 2010 and '11, was deployed or is committed into big order books. So there just isn't as much competitive pressure out there, and there's still quite a large number of deliveries coming next year. And so if we see the right opportunity, provided it makes sense for the shareholders, we would probably go beyond the level of committed purchases that we have outlined in the guidance Keith gave you.

Okay. So is it fair to say that the upside to the 10% in 2013, with the -- aside from some of these maybe opportunistic things that you just described would be gains on sale. And that's where we would - look for sort of the more natural lever to the upside, is that fair?

No, no, no. Not necessarily. What I'm saying is that, given that a lot of the new leasing companies that came into the market have deployed the vast majority of the capital, I suspect that there will be less competition out there for the standard sale-leaseback product, which may enable us to deploy more capital. If it turns out that, that is not the case, and that these guys still raise more money and are willing to pay up for airplanes, in that case, we will sell to them.

Got it. Okay. Great. Now can I follow up on some of the comments on the buyback? I think at the Investor Day, Gus, you mentioned that, as you guys were executing the buybacks, it was actually very difficult to find large shareholders that wanted sell to you. Can you just update us on that commentary? Is that still the case today?

Well, as I said, at the time, we -- since -- or should I say for the last 15 months, we've spent $370 million buying back, give or take, 20% of the company. During the summer, it was the case that there was a limited number of large shareholders, as I said at the Investor Day, that were interested in selling. So we were confronted with just buying the maximum amount we could in the market every day. As we go into the new year, if we see that there is still good value, and we see that there are large shareholders who are willing to sell blocks of their shares, we will certainly enter into those discussions at that time.

Okay, that's helpful. And just last question on this topic. Can you just update us on your thoughts on sort of a dividend policy? I know it comes up frequently, but just given the fact that you have had some difficulty in finding shareholders, large shareholders for large blocks that wanted to sell into your buyback, does it -- at what point does it make more sense to kind of revisit the dividend, and maybe provide a more balanced approach of returning cash to shareholders.

Sure, no problem. On the buyback, let's be clear now, we've managed to do 20% of the company. That is a very substantial portion to actually -- to buy back. So that's a very significant number. When we look at the dividend policy and we discuss this at every board meeting, we would say, well, if we're going to returning capital to the shareholders, what's the best format to do it in? And so far, we have been able to find people who are willing to sell or just buy daily in the market. If that is not the case and the share price gets closer to book value and we can't find opportunities in the market to acquire aircraft, then, of course, the most efficient way to return capital to our shareholders will be through dividends. But this is something -- how we deploy capital is discussed at every single board meeting, be it dividends, buybacks or the acquisition of new aircraft. And the pros and cons of each one are debated at each board meeting.

Our next question comes from Helane Becker from Dahlman Rose.

Just one little housekeeping thing, Keith. How many shares outstanding will be there then for the fourth quarter?

Approximately 121 million.

Okay. And then is that the number we should use for into 2013.

Until you see more share repurchase activity, yes.

Okay, great. And then, Gus, so I appreciate all your very detailed answers, and thanks very much for the information. Just had one question on the timing of when you do your valuations for your aircraft. When in the year does that come up?

We'll do it twice a year, so the next one will be done at the year end. And then we'll disclose that in the first quarter earnings call.

Okay. So should we be thinking that some of the classics might have to have different valuations to them, or are you comfortable with your valuations?

Well, we're comfortable with our valuations, but I think what's important to know here, Helane, is that in AerCap, we have an accelerated depreciation policy, as you know, that once the airplane reaches 15 years of age, we actually increase the level of depreciation. And we do not keep it constant. So that then insulates our equity providers and our shareholders from declines in asset value. And very importantly, though, Helane, as you know, this company sells airplanes. It's a core competence of this platform. And 3 out of 4 airplanes that reach -- never reach 15 years of age in the AerCap portfolio because we sell them. We have a dedicated aircraft trading unit that their job, there's 8 of them in the unit, and their job is to make sure they know where all buyers of aircraft are in the world, what type of asset they want to acquire, on what terms they want to acquire them. And during the year, we've sold everything from MD80s for less than $1 million up to A330-300s for north of $100 million, and most of everything in between. That's a core competence of this platform. Keith, would you like to comment on the depreciation just once again?

Yes. I mean at 15 years, typically, you'll have a better idea as to what the specifics are to that particular aircraft. So with our accountants, we define specific aircraft depreciation schedule unit by unit. But again, this is only on the aircraft that reach 15 years of age. And as Gus mentioned, 75% of our aircraft never reach that level. But again, because we put that depreciation policy in place, it effectively limits the amount of impairment that we have.

Okay. And then, are there any change of control issues with -- or I don't -- that's not the right word, but I'm not sure what is -- in the American leases that you have?

In so far as change of control, you mean in the event that American was to be acquired by another airline or was to merge with another airline, is that what you mean?

Yes, yes, yes. Exactly.

No, not at all. Our leases are court-approved, so no aircraft that we take from American is not approved by the court. Therefore, the lease terms cannot be amended.

Okay. Great. I remember you had said that last quarter.

Our next question comes from Arren Cyganovich from Evercore.

Maybe touching on the credit quality aspect. I think, last quarter, you mentioned that past dues were at the lowest level that you've had in your distance. Maybe any update you have from that perspective? I know we're probably getting into a less favorable season for airlines today.

Well, Arren, receivables are still running at very low levels versus historical trends. And as I said, we don't see anything on the receivables book that is unusual, given the time of year. The key to managing receivables is just being quick to act. If you don't do something about a problem, it's unlikely to fix itself. And in AerCap, we're extremely proactive managing it. We did, as I mentioned, have a recent repossession at Hello Airlines in Switzerland. But our airplane was within our control within 24 hours of the airline ceasing operations. The real problems with receivables build up if you don't act quickly, and then problems arise on the technical condition of the asset.

Okay, thank you. And then the leasing expenses that were higher this quarter, you mentioned, or Keith mentioned, that they were from late 2011 defaults. What's the reason for the long lag time of recognizing those lease costs?

Well, the recognition is based on actual cash accounting effectively. So many of these leases were terminated in the fourth quarter, and so the reserves that we held became revenue items. So you saw significant revenue generation and earnings generation when these leases actually went into default. And now, the expenses are being recorded. So the accounting - the expenses follow, unfortunately, the revenue recognition.

And it can just take time before the engine shop actually sends you the bill, and you agree terms with an engine shop as well before you put the engines in. So there's a lag between when the work is done and when the invoice is actually paid. And as Keith mentioned, it's on a cash basis rather than on accrual basis.

Okay. So you can actually have the aircraft back in service under a new lease, but then have the recognition after that fact?

Effectively, yes. Yes.

Okay. And then not to beat a dead horse, but the 2013 guidance of acquisitions of $1.2 billion is only $100 million higher than, I guess, what you have contractual or committed thus far to date. That's not a whole lot of additional expected purchases on top of that, seems fairly conservative. Is that your focus just to be a little bit more conservative on your guidance, even though it seems likely that you'd be able to achieve that fairly easily?

Well, we will only exceed it if the transactions make sense for our shareholders and are accretive to the shareholders. And as I mentioned, we may see a better market for acquisitions in 2013 than we've seen the course of 2010 and 2011 as a lot of the new money has been deployed. And if that is the case, and we do see asset acquisition opportunities, we will pursue them. But we will be patient and make sure that we do them, do the ones that are in the best interest of our shareholders. As we've always said to you, we're not here for the -- to be big just for the sake of being big, it's got to be profitable. And if the asset acquisition opportunities aren't there, then we look at alternatives, like we did last year. We're always very focused on shareholder value. And if the share price is low, next year then we will probably look more towards the share buyback program if we can't see the appropriate asset acquisitions.

And I'll just add, the purpose of the guidance pages really are to show you where the contractual levels are, not just with that but with many of the assumptions. We're trying to give you a firm foundation to be able to work from. But as things change and things are modified, we'll continue to provide more guidance to you, more updates.

Our next question comes from David Fintzen from Barclays.

This is actually Isaac sitting in for Dave. I wanted to ask a question about the 2012 guidance. Initially, I think, midyear, you guided for basic lease revenue to grow by 2% to 5%. Now it's looking like it's going to be flat relative to 2011. So we know that the lease rate market has softened over the last couple of quarters, but I was wondering if you could price out that change in the guidance? How much of it was due to lease rate weakness that we've seen over the last 6 months? And how much was just timing of assets coming on the book?

I would say that -- I mean, the previous guidance again just had a very few percentage increase year-over-year. So I would say roughly half of the decrease is associated with normal rollover activity, the other half is associated with some of the default size restructurings. Although, you know it's been a limited amount, it still has had some impact on the revenue year-over-year.

Okay, that's helpful. And then I guess to follow-up on a question that was asked a couple of different ways. If I assume that assets are being added at the same rate under your book in a somewhat of a soft lease rate environment and cost of lease interests are inching up a little bit, that would explain probably some pressure on the ROEs that we're seeing in the guidance in the 2013 ROEs. So that said, how do you internally balance that or justify the growth then with the returning capital to shareholders? And obviously, I understand that the issue with some of the share buybacks that you've tried to implement and then how difficult it was to find substantial owners who were willing to sell? But just wanted to see if you can give us some more color on that thought.

When it comes to the acquisition of assets, any new asset that are being put on the book, the target ROE must be comparable to what we would generate from a share buyback. Notwithstanding the issue about the amount of the volume of share buybacks that's available in the market. So any new assets we put on next year would have to be accretive to the ROE of the business. You can take that as a given.

Our next question comes from Ray Neidl from Maxim Group.

Yes, just a general summary of the softness in rates that you're seeing. What is your view of the overall economic environment going forward here, especially, now that the presidential race is over? And I think, tied to, I think you mentioned that there'll be less competition in the aircraft leasing market next year. I was just wondering if you could clarify that.

Certainly. Well, on the general economic environment, talking about aviation, we will continue to see growth. IATA's forecasting around 4.5% growth in available seat kilometers next year. So the growth will happen. This industry, with the exception of a couple of extreme downturn years over the course of the last 40 years, has always exhibited growth because there are extremely resilient trends in this industry, which is, emerging market growth, people do want to travel when they make some money. It's either for work, visiting friends or family or to see the world. And you have what we know is the absolute necessity to replace older equipment in the developed market. And generally, you have the increased demand for operating leasing. Those trends are still very prevalent in the market today. And what we see is that given the portfolio that AerCap has of modern, fuel-efficient aircraft based around the 737, which is now our largest single exposure, the 320 family and the 330 family, we see -- we don't see any ability -- we don't see any issue placing those airplanes. What we do see going forward probably is the older, out-of-production technology assets continuing to suffer. If you look at the world's fleet today, almost, almost 1/3 of the entire fleet today is made up of aircraft that are out-of-production types. So those -- and they have an average age of 20 years -- so those airplanes are all going to go. So that is, if you will, even if we had no economic growth globally, those aircraft are still going to go. So as long as you have the right airplanes, you will continue to place them. And that's why I mentioned on prior calls what we saw on the 320 market for the new technology 320, that it was starting to firm earlier this year. And now we're seeing the same trend on the 319. But yes, we had experienced declines in those lease rates on the 319 in 2011 and the first part of this year, but now we're seeing them firm, and we're seeing more airlines interested in them. As I said, there's 14 new operators this year already. And we have one of the largest airlines in the world, at the moment, looking for a package of 319s as well.

And there's less competition going forward because some entries have older aircraft? Is that what you're saying?

No, what I'm talking about -- when I spoke about less competition, I was referring to sale leasebacks and dealing with the manufacturers. So the acquisition side of the business. Because as you know, in 2010 and 2011, there was just a substantial amount of new money that came into the market that was spent. We sold heavily into those new buyers, as you know. But a lot of that capital is being deployed or is committed to be deployed by our order book. So that was the reference to less competition. When it comes to the lease or to rollover of leases, there isn't really a difference. The leasing companies with modern technology assets will be the people we'll be competing against and who we compete against week in, week out.

Okay. And you mentioned the 10% ROE for 2012, 2013. Does the company have a target, a specific target, where they want to get the ROE up to?

Well, any new assets we're putting on, clearly, they need to be accretive to the ROE of the business. So as you put on new assets, we certainly want to be into the mid-teens in the ROE, and that's the target level we go for. We have bid on, over the course of the last 18 months, we've bid on over 200 aircraft. The transactions we've been successful on were with Singapore Airlines and with American Airlines. And we recently signed up just very recently in the last couple of weeks, 2 more 737-800s. And those transactions have those types of ROEs on them, but all the other transactions did not. And we walked away and we put money into the share buyback program instead. So that's the discipline that AerCap has when it comes to deploying capital.

And I'll just mention as well. Obviously, the ROE would be expected to be correlated to effectively the interest rate environment. So with the low interest rate environment that we have in 2012, as well as expected in 2013, it would be very difficult to expect to see mid ROEs at that point. But again, over time, the 2 do correlate. So if interest rates improve, the economy improves; obviously, the ROE should increase as well.

Okay. Good. That's very interesting. And finally, your outlook of the fleet, how strong it is for passenger versus freighters?

Sorry, Ray, you just broke up a little bit there. Were you asking for the commentary on pax versus freighter?

Yes, what's your outlook in the demand or how solid the market is for freighter aircraft versus passenger aircraft?

Currently, the freight market is undergoing some difficulty. We are not, as you know, a big freight operator. We only have 3 freighters on our books. So we're not particularly big in the market, so we don't have as much knowledge as some other players in the sector. But what we do generally see is that the 747 model is under some pressure to move them at the moment. One of the reasons that may be the case is not necessarily the freight market in and of itself, but the 777-300 ER passenger airplane is a fantastic airplane and the payload of that airplane is so good that it's almost a quasi-freighter for some airlines. So as well as being a pax aircraft, it can almost act as a quasi-freighter, which means that the demand for pure freighters from certain airlines, from certain airlines now is less because of how good that airplane is. But in general, at the moment, yes, there's no doubt the freight market is a bit stressed. On the pax side, it's all about having the modern fuel-efficient aircraft. As I said, in the end, if you invest in the most popular airplane types in the world, and they've got the right technology on them, the most fuel-efficient ones, you look at the 320 family, the single biggest user base in the world is on the 320. The second biggest user base in the world is the 737-800. The biggest user base in the world on the 330s are -- on the wide bodies is the 330. They're the ones to coalesce the leasing company around. And thereby, you always know that you'll have somewhere to put the asset. Sure, of course, in time of distress, the lease rate may not be everything you want, but you'll always move the airplane. There'll always be a bid on the asset.

Our next question comes from Mike Linenberg from Deutsche Bank.

Just a couple of questions here, guys. Thanks for giving us the information on the new -- or on the used airplanes, the length of the, I guess, the renewals. What I'm interested in is, what are you hearing from customers who had airplanes coming up for -- that would be renewed or released in the latter part of 2012? And as we look into 2013, how many airplanes do you have coming up for renewal? What percent of customers are renewing with you? What percent are saying, "You know what, we don't need the airplane. We want to hand it back." What -- can you give us kind of the update on that, any color on that?

Sure. In -- as you can see, the utilization rate is run at 98%, which is full utilization because you'll always have aircraft transitioning from A to B. So the aircraft are all getting moved. And the split between extensions and renewals is about 40% odd on extensions, about 60%, give or take, on renewals. As we go into next year, we have about 4% of the value of our assets to place. It's about $335 million of assets that we have to move and that are yet to be placed. I would expect that some of those will be extended, others will be released. I would still say it will be around that 40%/60% odd split, maybe 1/3, 2/3. You've got a remember that for an airline to give -- for an airline, it's often just very efficient and easy to keep an airplane that they know is working, that is the configuration they want. And it's more difficult to bring in new assets. Now of course, against that, if an airline has a very big order book, it may not have a choice and it has to hand it back. And that's the reality. So these are the [indiscernible] that you see, but I don't see any difficulty with us moving these assets. We'll place these airplanes, and we always have, in far more severe markets than we're in right now.

Okay. And, Gus, I mean, and I was also sort of alluding to the fact that you are seeing some carriers where they're facing some distress or carriers that we know are pretty good credits, like Lufthansa, who have publicly said, we have 1,500-too-many flight attendants and 500-too-many pilots, and we thought we were going to grow our capacity next year and now we're going to contract 3%. We need to get out of some of these airplanes. And I know, some of this is -- it's hitting the wires now, but I'm sure that these conversations have been ongoing with people like yourselves probably for some time.

Certainly, and that's nothing new, you know? But what you do find, if we go back to 2009, which is a very stressed situation, you saw the utilization rate of the big leasing companies always stayed above that 97-odd-percent point. The key to it, though, is having the right asset type. If you think about it, let's say that Lufthansa wants to exit some A320s or 737s, and they want hand them back to us because it's the end of the lease -- they can never hand them back prematurely, of course. But if they wanted to hand them back -- and so we would have no choice, we would take them back. But we would find other homes around the world for those aircraft because as I said, 1/3 of the world's fleet is currently out-of-production technology. That's 1/3. So if you take a 320 or a 737 to an operator and say, we have an example of one in Indonesia, which is one of the fastest growing markets in the world, where that operator is currently using 737 Classics, and he wants to get his hands on 737-800s, that's what happens. So he kicks out the Classics. So you will find a home. It will be at the expense of the older technology asset. The home will be found. You know, the key is having the right machines, the ones with the -- on the 320 side, the 5B, the V2500-A5 engine. And on the 737, the 7B engine. And on the 330s, the same. You want the modern technology. So -- and the assets who will suffer will be those older technology ones, be it the 74, 75, the early generation M320s, the 737 Classics. They're the ones that will suffer.

Okay, great. And then just my second question. When we look at the next year's CapEx plan of $1.2 billion, 18 airplanes are going to be with American, what, just in rough numbers, the American piece, what percent does that account for when we look at the $1.2 billion? Is that 2/3 of that? Is that 80%? What are you guys using for that?

Just need to be a little bit careful because there are some very confidential terms about the American Airlines transaction.

So that's -- yes, that's why I said -- you could do very rough numbers, nothing, or can you not say?

I just prefer not to say.

Our next question comes from Glenn Engel from Bank of America.

A couple of questions. One, a follow-up on the renewal side. You've got -- given all the aircraft additions you have, you would've expected base rentals to be up more than 10%, I thought. Is that just sales that is reducing to 6% or 7%, or is that just headwinds from lease renewals at lower rates?

Yes, some of it is related to the sale activity, as Gus pointed out. We have sold a number of aircraft again this year, relative to our portfolio management strategy. But again, some of the renewals are at less lower rate than effectively where they were before. And there has been some decrease in some of the rentals as a result of the defaults and restructurings that we had late in 2011, early 2012. So a combination of all those items.

Is a good benchmark on sales to assume that 2013 will look similar to 2012?

Yes, but again, I mean, we're not expecting to have a high amount of profit generated from the aircraft sales. But the amount itself would probably be similar.

You commented that A320 and A319 rates had stabilized. Can you go through the 737-800, the A330 and 777 lease rates?

Sure. So I go through -- let me just start again with the Airbus family. So the A321 is an asset that we see significant demand for the moment, actually. We did have a package of 7-year-old A321s where there was competition between an Asian flag carrier and a low-cost carrier in the American hemisphere. And we ended up going with the Asian flag carrier for those ones. But that airplane, because it's a bit bigger, is one that we have seen, I would say, an upward movement in lease rates. On the A320 family, as I mentioned on prior calls, we have seen the lease rate just start to flatten out at this point. And we don't see any further degradation there. And we spotted -- we saw that probably, as I mentioned in the last earnings call, about 5 months ago. And then over the course of the last month or 2, we've seen a similar trend on the 319 market. On the Boeing market, on the 737-800, it's remained pretty resilient. The 737-800 in particular has been a resilient asset. And we've said that all along over the course of the last few years that we did not see the decline on the 737-800 that we saw on the 320. The 737-700, a bit like -- there was a level of pressure on those lease rates again, less so than on the 319 market because the 700 market is so concentrated with one large carrier, Southwest Airlines is effectively the 737-700 market, and they hold their assets for 20-odd years. They own them on the balance sheet. So you don't see the 700 come in to the market that much. And turning to the 330, the 330 is the one airplane where we've seen lease rates rise,…

Finally, the 777s?

On the 777-300 ER is an airplane that's doesn't really get into the leasing market that much. It's more on a sale-leaseback basis because the 777-300 ER doesn't have quite the same user base as an A330. It's a great -- it's a fantastic airplane, don't get me wrong, but it's not one that lessors traditionally tend to order speculatively because most of the operators, if not all of them, have their own order books of that aircraft size, and it's a large widebody. So therefore, the transition costs are very significant for a 300 ER. But don't get me wrong, it's a fantastic aircraft and most of the -- any operator who has it thinks it's a great asset. That doesn't have the same broad user base as the 330.

Our next question comes from Ryan Zacharia from JAM.

In 2012, you guys were -- Q1 of 2012, you were estimating net maintenance contributions of minus $20 million. Through the first 3 quarters of this year, we're at minus $5.5 million. So is Q4 going to be this big kind of true-up period where there's a minus $15 million contribution from?

No, no. The impact that we expect from net maintenance is actually about neutral for 2012. So effectively, the leasing expenses and the maintenance revenue should more or less match. I think we had previously a $45 million adjustment in previous guidance. That was the delta between 2011 and 2012. And again, last year, the reason we had such a big positive contribution was because on some of those defaults, we had large maintenance balances and that was recorded as revenue upon lease termination. And again, that goes back to the timing thing that we talked about before between the revenue recognition and the expense.

Right. No, I got that. I just thought that in the Q1 presentation, the estimate was for minus $20 million contribution, not the delta.

Okay, okay. Yes. So some of the events have -- the timing of events have changed. Obviously, it's been impacted by the defaults that have occurred. But yes, it will now be minimal, effectively neutral for 2012. And currently it's expected to be the same for 2013.

Our final question is a follow-up question from David Fintzen from Barclays.

A quick one. When we look at, on the used aircraft side, the lease terms coming down about 10 months or so over the last year. I know that's not a new trend, but is there anything to read into that? Does that go kind of with some of the softening in the lease rates? Are you seeing airlines looking for and maybe even paying up for flexibility? I'm just curious if there's any behavioral changes in there.

Actually, no. The 65 months is pretty long term for used aircraft. The reason why you see a decline versus last year was that last year, during the Arab Spring, we had 3 aircraft that were more or less brand-new 320s that we took out after -- they were very new airplanes, and we took them out and then we put them out on -- I think there was over 10 years each airplane went out on lease. So that somewhat distorted the average lease term last year for used airplanes. Because technically, it was used, but they were quite new, so they went out on very long dated leases. What you're seeing in the 65 months is actually a pretty long duration for the used airplanes.

Thank you, sir. We appear to have no further questions at this time. Please continue with any further points you wish to raise.

Well, thank you very much, everybody, for joining us on the third quarter call. We look forward to seeing as many of you as possible at the lunch today in the New York Palace. As Peter mentioned, we're in the Garrison room. And failing that, we'll talk to you on the first quarter earnings call in the new year. Thank you very much.

Thanks, everyone.