AerCap Holdings N.V. (AER) Earnings Call Transcript & Summary

Thanks for coming back, everybody. I need to transition. I just came from the Joby presentation. So now I have to shift back from the aviation product that someday I may enjoy to the business and the product that I actually enjoy on a weekly basis. So with that, Pete Juhas, thank you for being back here once again, on our stage, CFO of AerCap. I'll let you kick it off.

Thanks, Jamie. And this advances, right? Great. All right. Well, thank you all for coming today. It's nice to be here and see you all in person. I've got a few slides to go through, and then we can take Q&A after that. So you can read this very quickly here, and then we'll move on. So I have a few topics that I wanted to cover today in terms of highlights. So I think you're all familiar with AerCap. We are the global leader in aviation leasing. That's across aircraft engines and helicopters now with the GECAS acquisition having been completed. It is a very favorable environment for leasing right now, and that's driven by a lot of the supply-demand issues that I'm sure you've been hearing about elsewhere at this conference. We think that's going to persist for a number of years, and we're certainly seeing it across our various businesses. We did complete the GECAS acquisition in November of 2021 and since then have fully completed the integration of GECAS, which went very successfully. That's been done now across all areas, including people, teams, some processes, systems, all of that is now done. And we're seeing the benefits of that. So the last few years, obviously, have been very challenging for the aviation industry, as everyone knows. One benefit of that was we were able to show the business model resilience of AerCap. I'm hopeful that we won't have to continue showing the resilience of AerCap going forward. But there are benefits to having done that, which I'll touch on. And then finally, with a strong finish to 2022 with the ratings upgrades that we just got and these industry dynamics that we're talking -- that I mentioned, we are heading into 2023 with a lot of positive momentum behind us. So first off, just in terms of the leadership in leasing. So I think you all know, we're the largest aircraft lessor. We have total lease assets across aircraft, engines and helicopters around $60 billion on lease. That puts us significantly above everybody else in the industry. And that's really about 1,800 owned and managed aircraft, around 900 engines, including our SES joint venture with Safran and over 300 helicopters through Milestone Aviation. We also have -- well, at the end of the year, we had 435 new technology aircraft on order and about 300 customers around the world. When we look at the demand trends, so if you look at this -- what we've shown on this page at the far left, you can see this is the total daily flights as a percentage of 2019 levels for the major regions around the world. And what you're really seeing there is that for all 4 major regions, they're all above 80% now. In fact, domestically, China last week was 97% of their 2019 flight level. So that's obviously been a very recent recovery on the Chinese side, and you could see that in this chart. But I think there are 2 things that I'd like to focus on there. One is look, we are back. The recovery has been strong, and it was led by the U.S. and Europe. And then elsewhere in the world, Asia Pacific lagged largely because of China because there was no Chinese outbound travel to speak of. And that's a significant part of the market in places like Korea, Thailand, Vietnam, et cetera. Now that is coming back. So Chinese domestic travel was, as I said, 97% of 2019 levels. International is still only about 20%, but that is going to come back during the course of the year. But when you look more broadly, we're still at only about 80% of total traffic levels from a passenger standpoint than we were in 2019. And so there is room to go in the recovery to get back to where we were, which I think is worth noting when we think about things like the impact of recessions in some parts of the world. How could that affect that? For sure, recessions can have an impact because some people are not going to travel because they have less disposable income. But we still have a fair way to go globally in terms of getting back to those traffic levels we were at. And so from our standpoint, because this is a global market, we would expect ultimately that, that broader trend is going to overcome any recessionary impact that we're going to see in some of the economies. When you look at storage rates in the middle, you can see that storage rates are down across all new technology aircraft really significantly over the course of the last year. And then finally, and I'm sure you've heard this elsewhere, but in terms of airline revenues, despite the fact that we're not back to -- there are a lot fewer flights happening today even than there were in 2019. Looking at global airline revenues, those have recovered significantly, and we would expect -- and I mean Jamie and Mark can talk about that more, but in 2023 for that to continue. On the supply side, so what we've laid out here is a chart just showing the production rates, historically, the OEM deliveries. And really, what you see here, what's notable is the level -- the number of aircraft that weren't produced over the last several years. And that really starts with the MAX in 2019, relative to the production levels that were happening in 2018, for example, you've got over 1,500 aircraft that were not produced that we originally expected to be. And that includes 740 wide-body aircraft that were not produced. And as a result of that, you're looking at -- I think it's around 11% of the narrow-body fleet, 15% of the wide-body fleet, those are major numbers. Now obviously, during COVID and during the last few years, those aircraft weren't needed, right? But now that you're seeing that demand recovery come back, this is where I think the pinch point is occurring because it's not as though those aircraft that the OEMs can suddenly make that up. They would love to do that, right, and be able to deliver them. But as we've seen with the recent announcements from Airbus, for example, where they're pushing their 65 aircraft -- 65 neos a month out by a couple of years, that's easier said than done. And so we expect those issues to persist which is going to continue. We would think that the supply/demand imbalance will continue to persist for at least the next couple of years. And really, there is a catch-up that is going on here that's going to affect -- it's going to affect our business. Certainly, we're seeing that today in higher lease rates and greater demand for aircraft because they are a scarce commodity. So the GECAS acquisition and integration. So the GECAS acquisition obviously took us to a new level in terms of size but also in terms of capabilities. When we looked at the GECAS business, we found that it was very complementary to ours across a number of areas, including the existing fleet. They were higher narrow-body component, which was helpful in the most recent environment than we were. But importantly, they had a very similar approach to ordering new aircraft that we did, which was they were all new technology aircraft that they were focused on. And so now when we look at that combined fleet, the combined order book of 435 aircraft, it is all new tech aircraft, and I think that positions us well. The new business lines, the engine leasing business, the helicopter business are also doing -- frankly, they're doing better than expected. We always thought the engine leasing business was a very strong part of GECAS and a key aspect of that business that we were keen to acquire. And given the engine issues that we're seeing and the demand for spare engines being so strong, that business has been outperforming. I mean I think we've had higher utilization than they've ever seen in that business before, at least over the last 10 years. On the helicopter side, we've also seen very strong demand. I mean, to give you an example, at the beginning of 2022, so just after we acquired or completed the GECAS acquisition, we had about 30 Milestone -- had about 30 helicopters on the ground, mainly -- a lot of them were S-92s, so the heavy helicopters, and that was a significant amount of value that was on the ground. Today, that's low single digits numbers. And we expect that the rest of those should be flying shortly. So that's a huge change, and we see that in the number of transactions that they did. So there's very strong demand there across all areas of the helicopter business. And then finally, from a credit perspective, I think the GECAS acquisition was very positive because it did bring in stronger revenues, higher yields because of the discount that we're able to get on GECAS. And in general, more diversification from a customer standpoint, from a geographic standpoint, all of which, I think, was contributed to our recent rating upgrades. So as I said, the integration is done. The last thing that we had to do was the systems, which we moved to a combined general ledger in January of this year. And with that done, I think that's all behind us and has been done quite well. There we go. So I mentioned the activity across the business lines. So last year, we did close to 900 transactions across all 3 areas. That was the record number for AerCap. And I think this is a good testament to how did that integration occur, how well was that done, because if we hadn't been able to successfully bring those businesses together, there's no way you could be accomplishing this number of transactions. And that's really -- it's not just a function of the leasing team or the OEM ordering team. It's all of it working together, including legal, including finance, including all aspects of it, the company coordinating to do that. And I'd like to give you an example. I mentioned the helicopters. So they had over 150 transactions last year. That was double the number that they had the previous year, and the number of leases was more than double what they had in 2021, which shows you just how much activity there is in that business and the demand for helicopters. And we're seeing that pretty much across the board. I mentioned business model resilience. So going into COVID, if you look at some of the key measures in terms of leverage, liquidity, secured debt to total assets, what we've shown here on this page is how all of those looked pre-COVID, and then over the last few years, as we navigated through COVID, through the Ukraine conflict, et cetera. And I think what's noteworthy here is you look at -- take leverage, for example. So when we went into COVID, we were at roughly 2.7:1 debt to equity. And we managed during COVID to reduce that number. We ended really before in the fourth quarter of 2019, before we announced the GECAS acquisition, we were at 2.6:1. So -- or sorry, fourth quarter of -- yes. So we had -- we actually delevered during COVID, which is not something that you could say really about any other business in the aviation sector. We obviously took our leverage up during -- as a result of the write-off of the Russian assets to 2.9:1. But again, within 2 quarters, we were able to delever back to our target level to 2.7 and we were 2.5:1 by the end of the year, which I think shows the amount of excess capital that this business fundamentally generates year after year. And if we were not to deploy it, if we were not to do any share repurchases or anything like that, we would continue to see a delevering along those lines over the next several years. That gives us a lot of flexibility in terms of how we manage the business. From a liquidity standpoint, and you see this in the sources-to-uses ratio. So fundamentally, when COVID hit, our first thought was we need to build up as much liquidity as we can. And you can see that we increased our target to 1.5x liquidity coverage, and we actually ran at more than 2x coverage for most of the next couple of years. As we pushed out aircraft deliveries, right, we're able to do that, particularly on the MAX. We pushed them out with Boeing. But also, we raised a lot of liquidity. And we did bond deals back -- we did 2 bond deals in June, beginning of June and end of June of 2020. We were the first ones to do that. And I think it's indicative of how we look at the business because we do want to put the balance sheet first because ultimately, that's really what drives everything. If you have a strong balance sheet, that enables you to weather these crises and do things like the GECAS acquisition, which fundamentally we would not have been able to do had we not had that strong balance sheet. And you can see some of the other credit metrics there as well. I think fundamentally, you see a big shift in terms of secured debt to total assets when we -- once we did the GECAS acquisition, that went down to 14%. It's now the lowest it's ever been for the company. And similarly, unencumbered assets are at their highest level. So I think that positions us well for the current environment. As we look at -- this is a comparison of how AerCap performed versus some other sectors in the industry. And so we show here just the major U.S. airlines as well as the OEMs. And this chart shows you the cash flow from operations for those 3 sectors. And I think it's indexed to 100% on 2019 levels. And what you really see here, I think it is a pretty stark differentiator because you see AerCap's operating cash flow. While it went down in 2020, it was still significantly positive. And then if you look at the cumulative level from 2020 to 2022, it's very positive. Whereas looking at the U.S. airlines, obviously, they had negative operating cash flow for a couple of years. Only now have they returned to positive levels. And obviously, the OEMs, significantly negative before they return.

How about GECAS though? Come on, on the left side.

Well, but the operating cash flow would have still been -- would have -- I mean, it would have still been higher, right? I mean, even -- Mark, looking at 2020, I mean look at that. In the worst environment ever for aviation, I mean we still collected, for the full year, 80% of the amounts we invoiced.

Trust me. You're talking what we like to say. But is the indexing into 2019 including GECAS or excluding GECAS?

I'd have to look at that. Let me check.

Because that's what I'm wondering. The blue bar for 2021 being at 188%, if it's indexed to 100%, it's got to include GECAS in the blue.

Yes. But 2021 would only for -- that would only be the -- we only had GECAS for 1 month or 2 months because we did it November 1. So okay, so maybe 2 months of GECAS are in there. But nonetheless, the point is this. So it could be [ 160% ].

We like this chart. Don't worry. I like this chart. As a matter of fact, I'd love to see it on revenue, not just cash flow, because it's even arguably more stark because it shows the airlines down 85%, 90%. You weren't down nearly that much.

Yes. No, for sure, for sure. So look, I think -- yes, and 2022 so would be favored because of GECAS. But '21, really not much. And I do think, look, at a high -- I mean the point, the reason for showing it was really just to indicate when you think of the different business models, I think there is an inherent resilience to the leasing model, if you manage it correctly, that doesn't exist in these other areas. So 2022. So obviously, the year started in a difficult way with the Ukraine conflict and the seizure of our Russian assets. And we took that write off. I mean we were the first ones. I think we were pretty clear on our earnings call at the end of March that we were going to write them all off. That's what we expect to do, and that's what we did, rounded to 0, so that was a $2.5 billion hit that we took. But fundamentally, as we go through the year from an operating performance standpoint, we had total revenues of around $7 billion. We had operating cash flow of over $5 billion. We had $2.5 billion of sales or $2.2 billion of sales at a 12% gain on sale margin. And at times, that was even much higher. It's 14% in the fourth quarter. And we felt very good about that. I mean the sales market was good. And I think that shows the value how we've marked our assets and where they sit on our balance sheet in terms of the ability to, year after year, generate those gains on sales, I think, is pretty profound. And frankly, that's not a new thing. I mean we saw that after the ILFC acquisition, where on average, we were selling for 8% to 10% margins. But even if you go back over the long term back to -- almost back to AerCap's IPO, year after year, we've sold aircraft at a roughly 8% to 10% margin. And I do think that, that shows some of the conservatism with how we approach the balance sheet and how we approach things like impairments and depreciation. So as I mentioned, we delevered by the end of the year to 2.5:1, which was, I think, pretty significant following the write-off of the Russian assets. That's below our target. And even with the share repurchase that we did with the GECAS -- or GECAS sell-down, we're still below our target leverage. Our source-to-uses liquidity margin is very high at 1.4x. We have $18 billion of liquidity, so we're in a good position there. And then in terms of just the net income of $2.2 billion, adjusted EPS, so our initial guidance for the year was $6.50 to $7. We increased that in the third quarter to $8.50. And then we did $9.01 of EPS. And so I think that was a very good result, and it takes us -- it was a good way to finish the year and take us into 2023. I mentioned the ratings before. So now we are at BBB flat ratings with all 3 major rating agencies, which is great. We had hoped to be there actually before COVID, and we were pretty optimistic. And I talked to some of you about that then back in 2019 after S&P had upgraded us. Thank you, Betsy. We were optimistic about getting there with Moody's and Fitch. But then obviously, COVID intervened and nothing was going to happen there. But I think fundamentally, we have been pushing. We've been making the point that it will be hard to engineer or design a more difficult stress test than what we went through with COVID, what the industry went through. And I think that while it was difficult at the time, being able to look back and see how the business actually performed during a real-life stress test like that, that is pretty indicative of what type of ratings you deserve. And I think that fundamentally, Moody's and Fitch recognized that with these upgrades over the last weekend, that's the culmination of a lot of work, but I think that's very positive as we go into this year. And then the last thing, recent development, was the GE offering, of which many of you are aware. So GE had 45% of our stock. They got that when we did the acquisition. And part of their thesis for taking that stock, I mean this was really modeled on the AIG -- on the acquisition of ILFC. I mean they took almost exactly the same percentage that AIG did back in 2014. And the thought process there was this is -- it's a positive transaction. That stock should appreciate in value, and this is some -- a way that GE can monetize its business and obviously led to the wind-down of GE Capital overall, but also benefit from the recovery rather than just selling at the trough of a pandemic. And we've seen that. So GE did the first step in their monetization of that stake last week. They listed -- the offering was originally launched after a 2-day [ roll-across ] process for 18 million shares, so just over $1 billion. We have very strong demand. It was about 5x oversubscribed, and so they upsized it to 23 million shares. And at the same time, we announced that we would do a direct buyback from GE at the net offering price, so the price less the underwriting discount in the offering. And ultimately, GE was able to price that deal at $58.50. We bought the stock at $56.89, which was roughly a 15% discount to our book value per share. I realize, obviously, the stock is lower now given other developments since then. But fundamentally, the thought process behind doing this was really that if we can deploy capital -- to deploy a portion of our excess capital, all at once, in a transaction like this, it's very -- it's helpful for us because it helps us reduce the GE overhang. So it facilitates their exit. It helps -- we're able to benefit from the offering discount and the underwriting discount, which is helpful. But it also helps GE because they're able to sell, all else equal, more stock at less of a discount. And so I'd say it was a very cooperative process in doing that. And I think it is a pretty good template for how we could look to do this going forward. I can't speak to what GE's plans are around exiting. But I think fundamentally, I know in talking with them, they wanted to make sure that this deal was appropriately sized for the market. That it should perform well because they know that this is a multistage process in selling down. And so look, this is, I think, a good start to that. And it brings their stake down to around 33.5% today. And so as they look to exit over the next couple of years, we would plan to be there alongside them. We have the excess capital available to deploy. And finally, that takes us to 2023. So for this year, we gave guidance a couple of weeks ago on the earnings call. So we have just under $7 billion of CapEx this year. We're expecting 79 deliveries of new tech aircraft. We should have around $5 billion of operating cash flow. We expect $2.5 billion of asset sales. If we can do some more than that, that would be great. But that's our target today, and I'm pretty confident in that target. And then, of course, the other things I talked about in terms of the balance sheet, we will still maintain strong liquidity. We'll still manage to our leverage ratio over the course of the year. And with the roughly $1.7 billion that we've guided to of adjusted net income, that's excluding any gains on sale, which, as I said, historically, we have been able to do year in and year out. We should generate over $1 billion of excess capital that we can look to put to work over the course of the year. So that really concludes my prepared remarks, but happy to take any questions. Yes. Do we have a microphone?

I'd like to ask about retirement plans or expectations of the prior generation. Let's stick to narrow-bodies, next-gens and [ COs ]. In the context of the supply issues and the maintenance capacity constraints and the situation with the MAX neo engines, what, if anything, has that done to, I'll say, both your experience in terms of retirements of prior-generation aircraft and your expectations of how you're going to retire these? And if you can give -- if you can say this in terms of years, like extended X number of years, that would be interesting. But if not, that's...

Sure. So it's hard to put a specific number on it. But I can tell you, I mean, what we're seeing is that aircraft are being extended longer than we expected. So we had some aircraft that are 18, 20 years old that we didn't or even in their 20s where we didn't expect those to continue flying, and they are being extended by the airlines because fundamentally, they are seeing these delays and are facing capacity shortages because they were expecting to get, particularly on the MAX, I'd say, that's where it's been most pronounced because the delays have been more significant. And if you look at Boeing saying they'll deliver -- I think it was a majority, a majority of the 250 MAXs on the ground by 2024, that still leaves a lot of MAXs to be delivered after that. And so what -- I think -- I don't think this is a moment in time. We expect that for a few years now, we are going to see an elevated demand for those used aircraft and more extensions of those. And frankly, some of that, we're seeing where airlines are buying aircraft, so we had sold about 40% of our sales last year were to airlines directly, which was probably double. Normally, it's about 15% to 20%, so that was double. And now those were on lease to those airlines, but I think part of what they were aiming for was to secure that capacity in the future to make sure that they have them, given the uncertainty about how long those delay -- how prolonged those delays will be. So we would expect that to continue. But certainly, it's happening today.

Your slide that showed your recent rating agency actions. I think it was titled Upward Rating Trajectory, and it showed a upward sloping line with an arrow that maybe suggests that you want further ratings improvement. And I wanted to say -- I wanted to see if, one, is that the case? And then two, with your existing leverage and sources-to-uses target, do you think that you can achieve ratings improvement at those targets? Or would you need to adjust those targets to get the ratings improvement and get the ratings to where you want them over the long term?

Sure. Well, so the main reason for the upward sloping was because the trajectory has been positive up until now, so we figured we may as well reflect that there. But look, I think that fundamentally, we wanted to get to BBB flat ratings because we thought being at the lowest rung of investment grade, it wasn't a great place to be long term because fundamentally, if you do get downgraded for whatever reason, I mean, whether it's company specific or totally exogenous, right, that is a risk that everybody has to recognize. And so we thought by having some cushion from that -- from all agencies, that would be helpful. It would be helpful. We had heard from some bond investors, for instance, that while they like the credit, some were limited in terms of how much they could deploy if you were at BBB- because of the fear that, well, if you go below investment grade, there is a limit to how much you can have in that bucket. So I think that was our first objective. I mean we did just get upgraded, so we can't rush things too much. But I would say, fundamentally, look, I think that there is a justification for higher ratings for sure. We didn't -- one thing you'll notice is when we set our leverage target of 2.7x back in 2019, and we didn't change that, that didn't -- we didn't bring that down further to achieve those upgrades, right, with Moody's and Fitch recently. That was just -- we managed to that, but I think importantly, proved that, that was an appropriate level through COVID and through the Russia situation. So if we could get a higher rating, that would be helpful, but it's not immediately, right? That's not our first objective. But I'd say, over time, hopefully, the business performance can continue to warrant upward trajectory in ratings.

I'm just looking at your new -- is that your new logo? Never Stand Still?

This is our new branding actually.

I know about the brand. But -- so I have 2 questions. You said that 40% of your aircraft was sold to airlines last year. How are you seeing the market this year with higher funding costs maybe for some of the potential buyers? And my second question is potential M&A because you already are, by far, the largest -- you have the largest -- you have one of the largest order books. Are you still interested in M&A opportunities if they're around?

Sure. So on the airlines -- or on the sales side, I think it's hard to know on how much will go to airlines this year. I mean as we look out today, it's not as big a percentage because we've got some portfolios that we're in the process of closing, including both on the aircraft side and on the engine side. So -- but what tends to happen with some of those airline deals, it was a lot of older aircraft. So it was a large -- I mean Southwest, I think, was 39 aircraft that we sold, so that was a very large number. Now they were older aircraft, of course. But nonetheless, that was a single transaction that happened there. And I think that there will be more of that given what we said before about the retirements and just the lack of capacity out there. I think that we will see more. I can't say will it be that large as that one was, I don't know. So I do think it probably will still be elevated. On the portfolio side, so what -- fundamentally, I think that we can -- I think that we will get to the $2.5 billion size. And if we can do more than that, that would be great. The thing that really constrains it at some point is the return of the ABS market because you're seeing people who have maybe strategic players who were selling to other lessors, right? And they can -- they have their own funding on those. But fundamentally, where you have people who are relying on warehouses and then ultimately an ABS takeout, I think that one is a bit harder now because it's that -- how near term is that ABS takeout. So until that market recovers, I don't -- I think that puts some sort of ceiling on it. And fundamentally, the other thing, as we look at portfolio sales, is just when we and GECAS were each doing them, you could have multiple sales in the market at a given time. It's kind of difficult to do that because then you start confusing buyers if you're offering 3 different portfolios at once. So that is -- that's a natural, I'd say, inhibitor to how big could we go. Sometimes, people ask, well, could you do -- if you're getting 12% on average, why not sell $4 billion or $5 billion worth? And I think in order to do those type of things, you'd have to do some bespoke deal with somebody, I think, which we've done before. But it's not a regular way thing. And what was your second? M&A. Yes. So look, there are some things out there now. I mean, having just finished the GECAS integration, obviously, that was a big -- that was a huge amount of growth for us. I mean, fundamentally, as we look at M&A, we -- our goal is to try and to get assets at a discount, and we got GECAS at roughly 60% of book value on an equity basis. We got ILFC at a discount as well. And so if those opportunities are out there, yes, look, I mean, we would still pursue them. I think they tend to be few and far between though. As you could see from all the other activity in the sector, it just doesn't happen that much. And so for kind of a regular way portfolio, where there are a bunch of people bidding it and it's going to go at book or above book, it's hard to see how that makes better sense than if we buy our own assets. Like if we buy back stock, right, then we can buy -- as I said, with the GECAS deal, we bought it at a 15% discount. If we bought it today, we've got a bigger discount, and we know that portfolio very well, and there is no integration risk or anything. So I think that's an easier one to do. But for sure, we'll continue looking. And we like it when -- I mean, we don't like to stress generally. But when there are those opportunities, it's good to take advantage of them. Yes, Jamie?

First off, the presentation is available on the website. I did notice a couple of people taking pictures though maybe, those were personal pictures of you in the presentation. Would it be...

I'll be available afterwards for photos.

You're a cheap date. Would it be unreasonable for me to assume that at least for the foreseeable future, your repurchase activity takes the form with GE that it most recently had, until that 30% or, I guess, 33% stake is sold down, is that an unreasonable modeling and transaction assumption for me to have?

Well, so I think if GE comes to market, I think that's an efficient way for both us and them to do it, right, because it just solves multiple issues in terms of managing the overhang. But if GE doesn't come to market and the -- we think it's a good buy, then that wouldn't stop us from doing it. And so I mean, we tend to look at these -- do these authorizations, as you know, we don't tend to do big chunks and announce a $2 billion authorization that we're going to do over the next 3 years, right? That's just not the way we do it. But if we -- coming up next quarter, if we'll have excess capital that we've generated and then we'd look at how to deploy that, I think we will do it in both ways, frankly. I mean open market is good as well. And -- but I think the benefit of doing it with -- in concert with GE is you accomplish all those other objectives too, and you could deploy a lot at once. Rather than doing a couple of million dollars a day or $3 million a day for -- I mean that would have taken over 100 rating days to do that. That's a lot of time.

And just on the topic of Russia, and I guess this was about a month ago that we first heard that Aeroflot had approached some of the insurance agencies and lessors about finding some purchase solution. We asked Air Lease about it on their earnings call. Cold water seems to have been thrown on the idea more recently. What's your latest view on whether there is a potential path to that outcome?

Yes. So there -- I can't say much about the Russian insurance situation. I mean I think we -- on our call, Gus confirmed that we had been approached by Russian airlines and their insurers about an insurance settlement. And that is the case, and we understand others have been approached too. And you can see press out there. It's hard to know how much to believe, frankly, right? I mean that's the hard part, right? You'll see some Russian press that says they have a $4 billion fund. Okay, maybe, right? There's no way for us to verify that. But fundamentally, our approach has been, look, we want to recover whatever value that we can. And so if there are ways to do that, then we'll pursue them just as we're pursuing our own insurers in London. That's a longer time frame, probably. But we feel like we need to explore these things. And if something comes of it, that's great. But it's just hard to handicap that really, will it actually happen, yes. Sorry, you have them and there are 2 who's been waiting.

Where was everyone earlier today?

Just to interrupt, Mark, sorry. Just if you could all try and make it quick so we can squeeze in more question here. Just the durability of the tailwind that you're seeing on the engine leasing side of the business from LEAP reliability, how do you think about that? On the one hand, the population of LEAP engines is going to be increasing significantly every year going forward. On the other hand, one would hope that the reliability of the engine is going to improve as well. So how do you think about where that tailwind shakes out from your engine leasing business from here?

Yes. So you're right. I mean, both will increase. We would -- I think that it will be at least 2 to 3 years for this to happen -- I mean, to have this in balance, right? Because it just takes a long time to work through all of these issues. And for sure, some of them in terms of labor are going to be resolved, right? MROs should be able to cut their time for doing repairs. I mean that should happen, logically speaking, and we would expect that. But nonetheless, the spares pools will need to go up, and that's part of our opportunity because we manage those spares pools, right? I mean, SES manages it for CFM, and we took additional engines to support them in that. And as I said, we're seeing the highest utilization rates that we've ever seen. Now will that continue forever? No. But we do think that it has at least a couple of year runway, 2- to 3-year runway, for that to play out.

Anyone else? Okay. Then I'll ask my last one because we're running out of time. I was going to say, you're like a kid with a brand-new shiny bicycle with your 3 now mid-BBB ratings, but it's raining outside. But when do you want to take the bike out for a spin? As soon as it stops raining?

Well, it is -- I mean we were hopeful, right, that we could get all of those rating upgrades before we issued this year. Although, as I think I said previously, it's not like that was a prerequisite. But for sure, we thought that -- we thought it would be helpful to get those, and we previewed those, our fourth quarter results, with the agencies in order to try and expedite that. So I would say we expect to do 2 to 3 bond deals this year, I would think. At least one of those is going to be in the first half of this year for sure. As you said, the environment rating today isn't great. But I think -- look, I mean, there will be opportunities to do that for sure. I mean we've seen very strong feedback. We're starting to see a lot of reverse inquiry from our debt investors, and so I think that we would look to go to the market. And it's -- we have about $6 billion overall funding to do. That's not all bonds, but a lot of that is going to be bonds. And so there will be opportunities during the year. But yes, I mean, fundamentally, as we looked at last year, we didn't do any bond deals, as you know. And that was really not because we thought, well, we're just going to sit out this year and our treasury team is going to take the year off. It was that we just didn't have the funding to do because of how we had done the GECAS acquisition. And then we had -- our cash flow was better than we had initially forecast, and we had some things come in positively that helped there. And so that all kind of drove it and that there was just no need. I mean we did -- extended a few bank deals. But fundamentally, those were really just extensions and upsizes of existing deals. So I'd say 2 to 3 times this year and sometime in the first half.

And I know it's going to be market dependent and so forth, and it's changing every day, God knows. But you are the one lessor that has really used the full breadth of the duration curve out there available to you. Is there -- if you had your way, and again, it's so market-dependent at this point. But are you thinking of doing the classic sort of 5-year bonds, 10-year bonds? Would you look to do 30-year bonds again? I get that question all the time.

Yes. Well, we went out to 20. I don't know if we would go out -- I mean, that's pretty far out, right? So I think 20, unlikely, but I would say within the 5 to 10 range, for sure. That's really the heart of where we would be looking to do them, particularly given the maturities over the next several years.

I think we've run out the clock.

We have.

All right. Thanks, Pete.

All right. Thank you.