Avation PLC (AVAP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Avation PLC 2022 financial year results and investor update conference call. My name is Mark, and I'll be your conference moderator for today. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you give that your kind of attention, I'm sure the company will be most grateful. I'd now like to hand over to Duncan Scott, Group General Counsel. Good afternoon.

Thank you, and good afternoon to everyone. Today, on 29th of September, Avation published its unaudited financial results for the financial year ended 30th June 2022. A copy of our earnings release is available on our website at www.avation.net. This conference call is being webcast and recorded, and the webcast will be available for replay on our website. Please note that certain statements in this conference call, including answers to your questions are forward-looking statements, including without limitation, statements regarding our future operations and performance, revenues, operating expenses, other income expense items. These statements and any projection as to the company's future performance represent management's estimates of future results and speak only as of today, 29th of September 2022. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information on the factors and risks that may affect Avation's business are included in Avation's regulatory announcements from time to time, including its annual report and half year results announcements. Avation assumes no obligation to update any forward-looking statements or information in light of new information or future events. Unauthorized recording of this conference call is not permitted. I will now hand over to Executive Chairman, Jeff Chatfield.

Thank you very much for your time. In the year ended 30 June 2022, Avation has returned to profitability, increased net asset value per share, maintained the liquidity, lowered net debt and developed its new CO2 strategy. The company is positioned to execute its business strategy as the aviation sector recovers from the pandemic. There has been a significant recent recovery in passenger numbers in the airline industry. The company is optimistic about the future for the leasing industry, characterized by high demand for aircraft as the global fleet transitions to low CO2 technology in the coming years. Fleet utilization has improved as unused aircraft are being transitioned. Significant impacts of airline insolvencies and restructurings have mostly been reflected in previous periods and distribution of creditors from these insolvencies are now being received. The company is seeing increasing levels of interest from airlines to buy or lease aircraft at sustainable lease rates. Senior lenders willing to lend the grants against aircraft assets. These factors confirm the emergence of an industry from the pandemic. The company's strategy will be a focus on leasing modern low CO2 emissions, fuel-efficient aircraft in the future. Avation is supportive of the aviation industry's goal becoming more sustainable through a transition to new technology, more fuel-efficient aircraft engine and the use of sustainable aviation fuel. The company will position itself to return to growth through opportunistic trading and deliveries from its order book in the post-pandemic environment. As at 30 June, the company had 39 aircraft in the fleet, serving 17 different customers in 14 countries. Avation owns regional narrowbody and twin-aisle aircraft. The fleet is split 17% widebody, 52% narrowbody and 31% turboprop by value. Aircraft fleet has a 5.6-year weighted average age and a 5.7-year weighted average remaining lease term. Avation has total assets in excess of $1.2 billion. Attached to that fleet is 504 -- sorry, $507 million in unearned contracted lease receivables from existing operating leases and a further $61 million in finance lease receivables. That's over $568 million in receivables and remaining leases with which to repay debt. And at that point, on average, the fleet will still be less than halfway through its life. The company has begun positioning itself for the eventual transition of the industry with aircraft using 100% sustainable aviation fuel to produce low CO2 emissions on a net basis. Low CO2 emissions will advantage airlines in terms of taxes and government regulation. The company is engaged in a number of campaigns driven by the airlines wanting to increase and renew their fleets for delivery of new aircraft. Avation's fleet at 30 June is dominated by fuel-efficient regional and narrowbody aircraft. These sectors are fastest in the return to service from the pandemic. 83% of Avation's fleet is focused on regional and domestic travel, which is close to returning to 2019 pre-COVID levels. Avation believes newer aircraft carry a lower risk of obsolescence, provide greater long-term cash flow service debt through long-term leases. And importantly, we'll continue to deliver improvements in emissions and sustainability in the airline sector as it moves to a carbon-neutral future. Avation holds orders for 2 aircraft and purchase rights of 28 ATR 72-600 aircraft. This access to new aircraft represents a growth asset that has increased in value during the financial period as customer demand drives airlines to increase capacity and provides investors with a visible pathway to Avation's future growth. Avation is returning to a high level of operational efficiency, which simply means that a high percentage of the fleet is generating rent. Today, Avation has 4 unutilized aircraft as a result of repositioning of selling 17 of the 21 aircraft that we returned from customers during the pandemic. We have strong interest in the remaining aircraft, and our expectation is that we will sell or lease these remaining unutilized aircraft in the short term. Avation has reviewed the values of aircraft in the fleet and revised some of this -- reversed some of the impairment, increased the overall value of the fleet. The increase in valuation only represents a small recovery of the impairment taken during the pandemic. As the world continues to emerge from the pandemic, demand for aircraft is expected to continue increasing. As airline travel continues to gain strength, improvement in lease rates may lead to further increases in aircraft value in the future. The next slide shows airline customers. Today, we have 17 customers in 14 countries. Avation's customers include 5 flag carriers. These flag carrier airlines appear to be more resilient as they typically receive support and continue to service domestic routes as countries have removed -- have moved beyond the peak of the pandemic. Domestic travel has recovered faster than international air travel. It is important to note Avation's geographical spread of customers with pandemic has impacted different areas at different times. Around 2/3 of Avation's customers by revenue are located in Asia with the remainder in Europe, where our largest customer, airBaltic has been performing well. The PAL restructuring plan became effective on 31st December '21, short-term restructuring plan, PAL has retained a Boeing 777-300ER aircraft on lease from Avation in accordance with the plan. The lease for this aircraft will continue until the scheduled -- original scheduled termination date. PAL has met its commitments under the restructuring agreement and continues to meet the ongoing lease terms. As we've been able to conserve the majority of our customers, fleet team and business model through the pandemic, we believe Avation's business is largely intact. Avation has no and never has had any direct exposure to Russia or any Russian airline. Avation is currently not aware of any sanctions resulting from the invasion of Ukraine that will impact the company. Avation is focused on new or young aircraft and therefore, is a natural seller of mid-life aircraft. I'll now hand over to Richard to run through the FY '22 results.

Thanks, Jeff. The next few slides of the presentation provide a summary of our FY '22 financial results. Further detail is included in today's stock exchange announcement, which is also available on the company's website. On to the financial '22 summary. During the financial period, Avation generated total income of $116.4 million with revenue of $112.2 million. Operating profits saw a dramatic turnaround to $90.2 million profit from a loss of $62.7 million in 2021. Profit before tax before noncash loan modification charges saw a $150 million turnaround to $34.9 million from a loss last year of $120.5 million. We have highlighted profit before tax number pre these charges due to the material noncash charges skewing the profit and loss as a result of loan modifications in their treatment under IFRS 9. The extension of the maturity date and other revisions to the terms and the conditions of the notes were accounted for as a substantial modification of the terms of a debt instrument in accordance with IFRS 9, which led to a noncash gain being recognized of $50 million in the statement of profit loss in the year-end -- last year in the year ended 30 June 2021. Under IFRS 9, this gain is required to be amortized over the term of the extension of the Notes. Investors should note that the current financial year ended 30 June 2022, amortization of this gain led to a noncash charge of $8.8 million being recognized as a finance expense. In addition to this, a further noncash charge of $3.5 million was created when Avation successfully extended the aircraft loan warehouse facility to 30 September 2026. As a result of this, total profit after tax of $17.1 million was earned, which is a significant turnaround from a loss of $84.9 million in the corresponding period last year. Total assets declined by 5% to $1.21 billion. However, net indebtedness was able to be reduced by 14% to $793 million, down from $923 million the previous year. Earnings per share were USD 0.24 for the period, up from a loss of $1.312 last year. NAV per share rose by 63% to GBP 2.68 from GBP 1.64 a year ago. On to the operational highlights for the financial year 2022. The company managed to sell 5 aircraft, including an Airbus A220, an Airbus A321 and 2 of the ex-Virgin Australia ATR 72 aircraft. A further 2 ATR 72 aircraft were returned and are in the process of being sold with completion next month. Two aircraft leases were extended with Hevilift and a third ATR 72 was leased to Hevilift as well. The PAL restructuring was completed with the airline retaining the Boeing 777-300 ER, as Jeff just mentioned. And the next -- and another ex-Virgin Australia ATR 72 was leased with the delivery to a new customer occurring this month. Another lease on Airbus A320 was extended by 44 months with easyJet. A couple of aircraft transitions as well. Boeing 737 was repossessed, and we're remarketing that aircraft now, and Airbus A320 was returned and that has been transitioned already to a new customer. And an ex-Golden Myanmar ATR 72 aircraft has recovered and is being transitioned to a new customer with expected completion next month. In addition to this, the -- as I mentioned, the aircraft warehouse loan facility maturity date was extended to 30 September 2026. On the following slide, we have a quick debt analysis on our debt position, which has improved significantly over the past year. Total loans and borrowings, current and noncurrent, dropped by 13% to $828 million from $948 million a year ago. Net indebtedness has declined by almost $130 million since 30 June 2021 to $793 million, down from $923 million. There was an increase in the weighted average cost of the group's secured debt facilities to 4%, up from 3.9% as a result of repayment of some lower cost debt that increases the number of unencumbered aircraft in the fleet in the period. The weighted average cost of debt of the company increased to 5.7%. At the end of the year, 89% of total debt was at fixed or hedged interest rates. Avation's net debt to assets ratio improved significantly to 65.1% over the past year from 73.9% (sic) [ 71.9% ]. And the chart at the bottom of the page shows the evolution of the group's cost of debt over the past 9 years. In the next slide, we provided some key ratios for a comparative basis. The net asset value per share saw a significant increase of 45% to $3.27 from $2.26 last year. That's in U.S. dollars. As a result of the weakening of the pound against the [ green buck ], this saw the NAV per share in pounds increase 63% to GBP 2.68 from GBP 1.64. As of the date of this release with the pound weakening further since the end of the financial year, measured at today's exchange rates, the NAV per share approximates GBP 3.06. This is important as the U.S. dollar reservations functional currencies, most aircraft leasing transactions, purchases of sales and lease agreements are in U.S. dollars. Lease yields decreased slightly to 9.6% from 10.3% (sic) [ 10.1% ]. Administrative expenses on a cash basis, excluding warrant expense, increased to 7.2% from 6.6%, but still by comparative standards in the industry quite low. Debt to equity saw a large improvement to 3.6x from 6x over the past year. And net debt over EBITDA saw a similar improvement to 7.6x versus 12.5x as at 30 June 2021. Debt to total assets dropped to 68% from 73.9%, and EBITDA as a function of interest expense also improved to 1.9x from 1.4x a year ago. The next slide will provide a summary of Avation's liquidity position. And the maintenance of that liquidity position has been Avation's key focus during the pandemic as we've noted a number of times in these past conference calls. Cash has been preserved over the past couple of years during a period of extreme uncertainty when a significant proportion of the fleet was unutilized and the remaining airline customer debtors were building. This was a difficult exercise, and we are now fortunate that it will not require the focus and attention it has as the industry continues to return to more positive operational conditions. The unsecured bonds have a maturity date of 31 October 2026 and are callable at any time. Avation has made an opportunistic repurchase of the unsecured bonds just after the completion of the financial year following the direct approach from a bondholder. Cash collections are returning to normal with the cash collection rate running at 108% for the year ended 30 June 2022, which is a significant improvement over the last financial year, where the cash collection rate was 67%. The company also has 3 unencumbered aircraft as at 30 June. Liquidity is expected to continue to improve in the first half of the new financial year, beginning with the completion of the sales of 2 ex-Loganair ATR aircraft, and then in the second half, with regular significant repayments of some of the deferred rent from the pandemic period. Other positive cash flows can potentially include further aircraft sales, which could include any of the unutilized aircraft being the Boeing 737, and the 2 ATRs that we are currently remarketing, collections of debtors from customers, the opportunity to refinance existing aircraft in the fleet and collections from the Virgin Australia insolvency and potential realization of the Philippine Airlines shares that we hold. Avation's claim against Virgin Australia has been adjudicated by the trustee of the Creditors trust in the sum of AUD 101.4 million. Avation was notified of an initial distribution from the creditors trust of $0.054 in the dollar on 15th September 2022 in respect to the claim. A further distribution based on funds withheld by the trustee is also expected. And in addition to this, further funds may be made available to Creditors should Virgin Australia meet performance targets in the financial year ended 30 June 2023. The potential total of these additional distributions is estimated to be in the range of $0.01 to $0.02 in the dollar. On to the next slide, which talks -- which shows our liability structure and loan maturities. On this slide, we show over the coming years the loan maturities. The secured debt loan maturities in blue match the underlying lease terms of aircraft and obviously are manageable and will pay themselves off the orange. Maturity represents aircraft warehouse loan facility, which Avation successfully extended out to 30 September 2026. As such, there is no cash crunch as a result of senior debt coming as a result of the loan amortization, restructuring, Avation has negotiated with senior lenders as part of our COVID-19 coping strategy. There is also a long pathway to maturity of the unsecured bonds represented in green out to October 2026. Loan maturities are typically aligned with lease terms and with a long average lease duration of 5.7 years, most of the Avation senior debt, which makes up close to 60% of total debt has significant duration. Avation confirms that it is current with all payments to secured lenders, Avation complies with or has received waivers with all senior bank loan covenants. Avation is in discussions with senior lenders to permanently amend or remove some covenants that no longer reflect the current capital structure. I'll hand back to Jeff for the final couple of slides that talk about the company's strategy and pathway forward.

Thank you, Richard. Avation strategy in COVID was to reserve liquidity and reposition or sell aircraft return from customers as they occur, which was -- it's basically been successful. The implementation of this strategy has enabled the company to materially lower net indebtedness, support our customer survival, maintain adequate liquidity and keep the core business intact. Now that the industry is returning positively with opportunities increasing, the company will transition into a more forward-looking strategy that is intended to return the company to the growth and profitability experienced pre-COVID. The return of air travel and the confirmation of passenger demand around the world is surprised to the upside of the past couple of months. This combined with the expected further reduction in unutilized aircraft represents an opportunity for Avation and its investors to focus on the future rather than the recent history of having to react to the problems and obstacles inflicted by the pandemic. We have developed a very sensible low CO2 strategy for the company going forward. So in '23, the focus is to position transition, sell place for last 3 unutilized aircraft, maintain a focus on liquidity. There is significant opportunities around the ATR 72 order book with the new Pratt & Whitney 127XT engines. The commercial team is now able to focus on the new opportunities for the order book rather than just transitioning repossessed aircraft. And so clearly, the team will be able to focus on new customers rather than repossessing and transitioning aircraft. The strategy, this is very important, very important. The company has got a focus on low CO2 emission aircraft. So there's low CO2 fuel-efficient aircraft becoming available in all types, but the first one that's been successful is the ATR 72, where we have seen one of our customers demonstrate commercial aircraft flying on a 100% sustainable aviation fuel. So gradually, over years, we expect that we will trade out of older aircraft types and focus on aircraft types, such as the NEOs and the A220 series in addition to the ATR 72 with the recently announced new generation engines. And I should make it plain that all of our order book, all of our -- the orders for those aircraft in the future all have the new engines, the PW127XT, which is very important because the engine itself provides a 20% lower maintenance cost, extended time on wing, 3% lower fuel consumption, 5% more power than the current engine. The manufacturer expects that the PW127XT engine will be certified to operate with 100% sustainable aviation fuel in the near term. With -- when using sustainable aviation fuel, net emissions of CO2 are reduced by 80%, which is very important because, obviously, regulations and governments are foreseeing low CO2 operations on airlines. Avation supports and is committed to the eventual transition of the industry towards aircraft using 100% sustainable aviation fuel to produce low CO2 emissions on a net basis. Low CO2 emissions will advantage airlines in terms of taxes, government costs and are also key in providing a substantial -- sustainable future for global aviation. So in conclusion, the disruption created by the COVID-19 pandemic is receding following a successful rollout of vaccines and other things, and this has supported the return to increased levels of air travel. This trend is evidenced in regional and domestic travel passenger numbers and is being followed by a recovery in international travel. The completion of the restructuring by Philippine Airlines, the payment of the initial distribution from Virgin and the extension of our aircraft warehouse facility resolves some of the key remaining issues generated by the pandemic. Avation is set to emerge with the pandemic with a smaller fleet, with higher levels of utilization and a long time frame for the repayment of the company's unsecured Notes and warehouse. Cash flow from operations continues to improve to normal as trading conditions -- as the normal trading conditions as countries open up, Avation's largest 5 customers, which make up almost 70% of the revenue with current -- with or in compliance with repayment plans as at 30 June. Cash flows for the remainder of the financial year will be boosted through the settlement of announced aircraft sales and expected further sales of unutilized aircraft, collections from insolvency proceedings relating to Virgin Australia, the Philippine Airlines and collections of outstanding amounts related to rent deferral arrangements and the increase in receivables as a result of COVID-19. There are likely to be opportunities to buy aircraft from airlines and lessors looking to adjust or reduce their portfolio, which with the Avation is positioning itself to take advantage of in future years. Avation is optimistic about the long-term opportunity for airline travel, particularly in the low CO2 turboprop and narrowbody aircraft sectors. We, as a management team, continue to support, believe and are in line with the company and its investors. And I'll now hand over for the Q&A session.

That's great. Jeff, thank you very much indeed for your presentation, and I'll bring up everybody's cameras, that's happening now. So thank you very much indeed. [Operator Instructions] I just want the company take a few moments to review those questions submitted already. I'd like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your Investor Meet Company dashboard. Jeff, as you can see, you've had a number of questions from investors throughout today's call. So thank you to everybody for your engagement this afternoon. Maybe if I may, Jeff, hand back to you, if you could perhaps read out the questions and distribute them as appropriate, and I'll pick up from you at the end.

Okay. Well, we'll start with the results of poll because they're interesting. Are your shareholder of Avation PLC? 54% of you are. I don't know what the rest of them are. Should Avation's credit rating increase now that we've shown that we've survived COVID? 87% of you think we should. That's great. The interesting question is how much more would you pay to be zero CO2 if you spend $500 on an air ticket? 65% of you say $0, 28% of you say $100 and 7% of you say $500. The bad news is that today's prices, the real number is more likely to be $1,000. So that's why it's important that we have low CO2 engines. So only 4 of you -- 4% of you will pay -- sorry, 7% of you will pay $500, it's not a very good result. So the Q&A, we've got lots of questions. So Jake, pre-submitted question. Historically, Avation was approached in the past with sale of substantial portions of the fleet and indeed prior to COVID, Avation is reviewing a strategic review after being approached by a bona fide offerer. Given the substantial discount to NAV, Avation -- has Avation receiving expressions of interest in the company with a substantial part of its fleet taken in the recent months? Or is the general outcome of M&A subdued? Well, we, the company receives inbound inquiries from various investors with various qualities every couple of weeks, but they're not generally well formed, and we -- that's why we have brokers and advisers. Those people come in to our brokers and they deal with them in the normal way. I don't see a lot of M&A activity in this sector given that COVID is only just finished and people are still working on what's going on, and there's a lot of volatility in the financing markets. The second question would Jeff Chat -- would I look forward to creating a new aircraft leasing coming through scratch again? We'll seek to have a secondary role within an enlarged. The answer is Avation is doing super well now, super well positioned. So we don't need anything else. Question from Brandon. After COVID, I believe we converted 1 or 2 receivables from lessees into effectively term loans. In relation to these, could you detail how much of the current -- of this currently stands at when the repayments commence, the period over which these will be paid in the monthly installments? That's a question for Iain.

Yes. Brandon, so the amount at 30th of June outstanding on that loan is $21 million, repayments will start in January '23 and continue over the 24 months until December 2024.

Excellent. Phil asks what is the company's ability to monetize PAL's shares and what is the expected value? Iain?

Yes. I mean, there's no restrictions on us selling those -- our shares if we can find a market for them. And the valuation...

Have they convert to listed shares?

I think at some point.

At some point.

At the moment, they're still unlisted. So I mean, our valuation is based on the listed holding company, and we have added the shares between $3 million and $4 million.

The next question is, given the current NAV and dollar rate and the share price, do you have a thought to launch a substantial buyback or would there be a better use of spare cash? Well, ultimately, the company has got to manage all parts of capital structure. So bonds, shares and bank debt and clearly, the expected money at the moment on the bonds. So -- and also it's got to be able to grow and survive. So it's a juggling match with several balls. So the shares are part of it. The bonds are part of it and growth is a part of it. And clearly, you need to fuel all of those activities. Ken B. asked what level of inflation rate are you seeing on new ATR -- 320, 220 ATR aircraft? How is this reflected in existing fleet valuations over and above the normalizing and the asset revaluation is the question. Iain?

Yes. I mean we've, obviously, seen inflation jump last year. So we've increased our inflation estimate which we use for our residual values, which forms part of our lease encumbered valuation of the aircraft fleet. So we've basically increased the near-term inflation factors to match current rate of inflation and then that turns back down to the sort of long-term 2% inflation factor.

Well -- we're way under. If you read the news about the inflation rates of 3x, I'm going to [indiscernible]?

Yes. I mean we did this exercise before 30th of June. And I think what we've seen is that inflation has continued to increase since 30th June, so.

We use published -- the published numbers back in about May. And clearly, the -- obviously, the published numbers now could be double or triple of that. Next one, Keith B. The aircraft, 2 ATR 72s for completion in October '22, not '23 as on slide. We have 2 available for sale lease at the moment, correct, in 2022. We want have -- there might be an error on the slide.

[indiscernible] 2 are being -- 2 are in the process of being completed. And the last 2 Virgin Aircraft, we're still trying to sell.

That's in 2022.

In the [indiscernible] the 2 that are currently for sale.

Yes, there is an error on Slide 9 that he's referring to, which is the second bullet point 2 ATR 72-600 have been returned and sold with completion expected October '23. That should be October 2022.

Jonathan B. Is there any reason why the debt has not hedged? These -- 90-odd percent of the debt is hedged, Jon. The only bits that are not hedged are in the warehouse, which is what a warehouse does.

Yes. There's 2 components to unhedged debt. It's the warehouse line, which is about 8% of our debt. And then we also have 2 aircraft, which are on floating rate leases. So we've kept the debt at floating rate because there's a natural hedge there, although we don't call it hedged in the reporting.

Next question from [indiscernible]. Which aircraft is currently unutilized and what are the plans to re-lease or sell? Do these 4 aircraft represent the $130 million assets held for sale? Rod, what have we got to place this?

Well, we have -- currently, we have 737, which still needs to be replaced. And we have 2 ATRs. The last 2 of the Virgin ATRs which we're still trying to place or sell -- lease or sell.

And the Myanmar.

And the Myanmar one, although it's in the contract -- we have a commitment.

Transition. Assets held for sale as at 30 June, there was a number of aircraft. You've seen a number of aircraft transactions occur and occurring. Phil H. What was the size of the bond repurchase and what is the price? Iain?

So we repurchased $4.4 million face value of Notes at $0.75.

Ryan C. Generally speaking, the current market, where do you expect to utilize proceeds from assets and sell, that's for new aircraft or toward debt pay down? Well, if you look at our current liabilities are relatively low and -- but we do have a growth -- a small growth pipeline, and we do have to pay our bond coupons, and we do need to continue on our business. So there's not a sort of a -- we need to continue as normal. Keith B., could you explain how low carbon emissions fuels are manufactured? Well, the thesis is that the fossil fuels are, obviously, pulled out of the ground, processed and distributed, whereas sustainable aviation fuel is a manufactured product mainly from sustainable inputs. And the advantage from a number of perspectives is it's a manufactured product. So people have offtake agreements, and they're not exposed to the oil price changing every day. But at the moment, the manufacturing is quite energy-intensive, and it's much more expensive than normal fuel. So clearly, in the coming days, fuel efficiency is very, very important. And new technology is very, very important, and aircraft engines will need to be changed to be able to support it. But fortunately, ATR's engines can and will be certified to support it in the very near term, but other types will take a bit of time. Probably by the end of the decade, all aircraft types will be able to use it. Phil H., why the assets held for sale jump so much? Well, because we've sold -- transitioned lot of planes. We have -- still how many do we have to transition? 21 or something?

Yes, [indiscernible].

Last year, the number was based on 3 ATRs, which were sold in the last year. And this year, the number is based on 2 A321s and 2 ATRs which are currently available for sale.

And the next one is, can you expand more on the situation with customers less compliant with payment terms? Iain?

Yes. I mean there's a number of customers in arrears. But I mean I think the position has improved compared to last year. I mean if you look at some of our major customers, I mean we spoke earlier about the conversion of some of those arrears into an interest-bearing loan. But yes, I mean, we regularly follow up with customers over the arrears and sometimes take steps to recover those arrears. There's a couple of claims out at the moment.

The next one is from [indiscernible]. Should we expect a higher pay down of secured debt in FY '23? Probably not more than normal because it follows amortization.

Unless you sell an aircraft.

Unless you trade an aircraft, but there's only a few we're trading in. Should we expect further material bond, buybacks? Well, no comment on that because probably not. From a modeling perspective, any guidance on revenues and EBITDA for '23 again from [indiscernible]. No, not at the moment. How much should we expect exactly in asset sale processes? We don't know the answer to that. James is asking, it was going great pre-COVID. How we're doing now compared to pre-COVID? Well, we're recovering from COVID. Clearly, there's plenty of opportunity now because the manufacturers haven't manufactured that many aircraft during COVID. The airlines are recovering 5% or 6% or 7% of all the world's aircraft sort of lost forever into Russia. And interest rates higher mean that airlines actually need leasing companies. So in theory, we're going into a fantastic time for aircraft leasing companies because what we provide is in demand. And also quite interestingly, with the technology change of low CO2 means you can do it all again. You've got to -- there's a lot of aircraft that will need to be replaced. So the whole aircraft leasing industry is going to be sitting there and thinking we have a lot of work to do, a lot of opportunity here and there'll be a lot of growth. So we're not there yet, but clearly, it's a very opportunistic time. Ken B., is there an opportunity the spare engine support the new engine type, could it become a tool to attract and support more customers? The answer to that is probably not because airlines want aircraft, and they often have their own arrangements around engines. Like there are people that have tried to set up fuel leasing aircraft fleet -- engine leasing businesses, and they don't seem to have the scale that they could. Phil asked, should legal professional fees come down or will it remain at recent levels? Well, Duncan's on the line, so why don't you answer that one?

Thanks, Jeff. Well, during COVID, we did legal transactions with almost every lessee and almost every bank often more than once. So during the period, external counsel fees were much higher than we would normally expect. I mean normally our fees are a proportion of new transactions that we do, but they've been extremely high during the COVID period, and we do expect them to come down significantly in the future.

JC says, with the expected influence from rents, what is the minimum cash you need to hold? What are your priorities for excess cash? We have no excess cash. We like to hold. I think a $100 million dollars. I think the minimum would be $100 million. Next one, Brandon B. Is there revised broken Notes? Yes, there were 2 or 3. Canaccord had one, Davy had one and WH Ireland had one. Charles C. What is ACCC credit? [indiscernible] would be minus now. We've been upgraded. If you would issue debt today, what yield would it be required and how is it compared to your asset? Well, I don't know how. I think the market is pretty tough for anyone at the moment. I see we -- it's a struggle on that one. Are there any more questions?

Jeff, you've been very kind and you've read through every single question that's come through from investors. If there are any other that we've missed or whatever, obviously, we'll make those available post today's call. Jeff, thank you and to the team for updating investors this afternoon. I know investor feedback will be important to you all. I'll shortly redirect those on the call to give you their feedback. But, Jeff, before doing so I wonder if I may just ask you for a few closing comments.

Look, thank you so much for your support. I mean, clearly, it's been a torrid time and it's still a lot of risk in the industry. There's wars, there's pandemics, and there's technology change around the CO2 stuff. So clearly, there are plenty of risks, but at the moment, it does seem to be that the fundamental which is passenger demand is demonstrably there, airlines are -- people want to travel, airlines are recovering, and the ones that survived will do well and therefore, we'll do well. So thanks for your time, and please feel free to contact us with questions at any time, and we remain available. Thank you very much.

That's great. Jeff, thank you very much indeed. Can I please ask investors on this call not to close this session as we'll automatically redirect you for the opportunity to provide your feedback and all the management team can better understand your views and expectations. So it take a few moments to complete, but I am sure it will be greatly valued by the company. On behalf of the management team of Avation PLC, we'd like to thank you for attending today's presentation. We wish you all a very pleasant afternoon. Thank you.