Avation PLC (AVAP) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Avation half year results investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company of your 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 your kind of attention, I'm sure the company will be most grateful. I'd now like to hand over to Group General Counsel, Duncan Scott.

Thank you, and good morning to everyone. Today, on the third of March, Avation published its unaudited financial results for the 6 months ended 31 December, 2022. A copy of our results announced 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 and expense items. These statements and any projections as to the company's future performance represent management's estimates of future results and speak only as of today, 3rd of March, 2023. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Further implementation 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 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, Duncan. Good afternoon or evening, everybody. Thank you for joining this investor conference call, where we discuss our half year results. for the 6 months ended 31st of December, 2022. Avation generated a profit, increased its net asset value per share, maintained liquidity and continue to reduce debt. The company is well positioned to execute its business strategy as the aviation sector continues to recover from the impacts of the COVID-19 pandemic. So the snapshot of the company as at December 31. At the half -- at the end of the half year period, Avation's fleet comprises 37 aircraft leased to 16 airlines in 13 countries. By value, we own a diverse fleet of aircraft, including 50% narrowbody -- 52% narrowbody, 30% and turboprop and 18% widebody by value. This [ stubborn ] fleet has excellent metrics with 6.1-year weighted average age and 5.4-year weighted average remaining lease to. Fleet assets have net book value of $936 million, and we have $536 million in future contracted lease receivables. The portfolio as of 31st of December, 2022, it's dominated by modern, fuel-efficient regional and narrowbody aircraft, which generally operate on domestic and short-haul routes. These have been the fastest recovery after the COVID-19 pandemic. The number of unutilized aircraft has been reduced to now 2, with the sale of an off lease 737-800 and commencement of a lease announced this week. There is only 1 lease for an Airbus A3200 aircraft set to expire this year. Then the next scheduled lease expiry is not until the year 2025. Moving on to our outlook. Avation has placed 2 firm orders for 2 new ATR72-600, We hold purchase rights for a further 28 ATR72-600 aircraft. The 2 aircraft are due to be delivered in 2024, while the purchase rights for aircraft are to be delivered out to June 2027. The order book and purchase rights provide the company with a visible fleet growth opportunity. Avation's purchase rights have increased in value partly due to a capped inflation formula, which we believe is now significantly below the actual cost inflation. In respect to the first 2 aircraft, Avation's paid all predelivery installments and believes that the balance of the purchase price can be funded with secured debt. Avation is reasonably confident that it can source an attractive lease contract for the older aircraft. Avation's aircraft come with the Pratt & Whitney 127XT-M engine, which provides lower fuel consumption and 5% more power and also can operate a sustainable aviation fuel. And we expect that will be able to operate with 100% sustainable aviation fuel from 2025. If we just go forward again, so this is an ATR slide, which shows the range of [indiscernible] customers around the world for ATR72 aircraft. It's actually got as many customers as our operators is, for example, 737, Boeing 737 aircraft and more than the DASH 8s and EJets and so. So it's an extremely popular aircraft type all over the world. So there's plenty of choices on where to place aircraft. Now this is another ATR slide, but it's actually really important in the sense that it demonstrates that of the ATR aircraft that have been made, over 1,200 are over retirement age. So in other words, as they retire, and hopefully get replaced, we'll be well positioned. So for example, there was 1,600 delivered, but as I've just said, there's 1,200 over retirement age. So that's a really important business opportunity because clearly, there's a market there for a lot of replacements, which is very important. Because I think that Avation is 1 of the world's largest, if not the largest option for that type of aircraft. They're a very extremely fuel-efficient and low-carbon-dioxide aircraft. So at the moment, you've got ATRs operating with sustainable aviation fuel. And as I said earlier, by 2025, you can operate an aircraft, an ATR72 with 100% sustainable aviation fuel. So the CO2 production will basically be virtually zero. And so we have a background with green finance. I mean late 2019, we established the world's first commercial aircraft financing with a green loan, which was provided by Deutsche Bank, and it was signed off by an agency, and we won an award for doing that. So we have a history of green financing. This is another ATR slide. So at the moment -- that's actually -- that plane is operated by one of our customers, which was financed by -- that customer has financed that aircraft for that customer is financed by the green loan, is already 50% sustainable aviation fuel compliant. And so it is sort of happening now, the transition to low CO2 operations. And as I said earlier, the ATR is a very successful program. In total of all ATR models, it's 1,800 sold, 200 operators, 1 billion passengers. So it's a sort of #1 turboprop in the world, and we believe, given the CO2 initiatives around the world with governments and taxes, [indiscernible] it will have a strong future. So -- but overall, coming back to our broader business, we have 16 countries and -- 16 customers in 13 countries. We're now 14 given the events of this week. We have 70% of our customers by revenue were in Asia, with the remainder in Europe. Our top 3 customers by revenue of the Vietjet, Air Baltic and EVA Air. We have no exposure to anything Russia. We have no impact -- we're not aware of any impact from sanctions resulting from Russia. We tend to only want to lease aircraft in places where we're confident that we'll be able to repossess it in the event of a default. So we are sort of a buyer of new or relatively new aircraft and the natural seller midlife and older aircraft. So you've seen us sell older aircraft so we can transition to new modern technology aircraft going forward. Some of the highlights. We sold 2 ATR72-600 aircraft in the period. We transitioned and sold Boeing 737-800 that we repossessed. We wrote a new [indiscernible] airline [indiscernible]. And we've successfully repossessed an aircraft from Myanmar. So we're good at transitioning, selling and leasing aircraft. Now we talk about the financial results, and I'll hand over at this point to Iain Cawte, who's the CFO, to continue this presentation.

Thanks, Jeff, and good morning, everybody. The next few slides of the presentation provide a summary of the financial results. Further detail is included in today's stock exchange announcement, which is also available on the company's website. In the half year to 31 December, 2022, total revenue and other income was $55.3 million. The reduction in revenue is mostly a reflection of the reduced fleet size. Operating profit increased by 86% to $35 million compared with the prior year. Operating profit includes a $3.2 million gain on derecognition of a finance lease, a $6.9 million unrealized valuation gain on an equity investment, and $5.8 million of aircraft transition costs. The gain on derecognition of a finance lease represents the positive difference between the outstanding finance lease receivable and an independent broker valuation from the ATR72 aircraft repossessed from an airline in Myanmar. The gain on an equity investment is a mark-to-market adjustment to the value of shares in Philippine Airlines, which Avation received following the airline's [indiscernible] restructuring process. Aircraft transition costs are principally costs incurred in the transition of a buying 737-800 repossessed from Garuda, which was sold in February. Profit after tax of $8.3 million for the period compared with a loss of $15.3 million in the comparable period. Profit after tax includes a gain of $1.7 million on the early full repayment of 2 loans that were refinanced in the period and a gain of $0.5 million on repurchase bond. Finance expenses were reduced by 9.5% to $31.7 million compared with $35 million in the prior year. Net indebtedness was reduced by $46 million in the half year period as the company continued to delever its balance sheet. Total assets were largely unchanged at around $1.2 billion at both the 31st of December and 30th of June. Moving to the next slide, an analysis of our debt. As noted on the previous slide, net indebtedness has been reduced. Weighted average cost of debt increased from 5.7% to 6.1% over the 6-month period. Base value of unsecured notes outstanding was largely unchanged at $348 million as at 31st of December. Weighted average cost of secured debt increased to 4.5% from 4.0% in the period due to increases in floating rates and mandatory scheduled repayments skewed towards lower cost facilities. Following the refinance of 2 floating rate euro loans with long-term fixed rate debt in November 2022, the proportion of fixed-rate debt increased to 94.8%. The ratio of net debt to total assets was further reduced to 62.9% as at 31st of December, and is forecast to continue to fall as scheduled loan repayments exceed depreciation of aircraft. Looking at some key ratios. Obviously, net asset value per share has increased to GBP 282 in the period from GBP 268 at 30th of June. Lease yield was 9.4%, and but will increase slightly once all off linked aircraft are placed or sold. Lease yields for aircraft on lease was around 9.6% in the period. Credit ratios have all improved over the period as net debt has been reduced. Looking at our summary of liquidity, the company has preserved liquidity over the half year period, while deploying funds generated from operations and aircraft sales to pay down debt. Other current assets includes 8 million shares in Philippine Airlines issued as part of the restructuring of the airline via Chapter 11 bankruptcy process. The shares are due to the exchange for listed shares in Power Holdings Inc. later this year. We have revalued the shares based on the ratio for the share exchange, which has been established by an independent valuation and the published share price for Power Holdings at 31st of December. We include unencumbered aircraft as potential sources of liquidity as they may be used as security for new loans or sold. Boeing 737 aircraft was sold in February 2023. Following slide shows the maturity profile of Avation's loans and borrowings, and following the successful extension of Avation's warehouse loan facility in June 2022, there are no significant near-term debt maturities other than scheduled monthly and quarterly loan installments. The following slide illustrates how scheduled repayments of secured debt exceed projected depreciation of aircraft over time, reducing the expected senior loan LTV ratio. The bars represent estimated amounts at each fiscal year-end for the current fleet only. I'll now pass you back to Jeff for the conclusion of the presentation.

So let's talk about the future. Clearly, we are -- there's a -- we've got to leverage the industry recovery from COVID. The management plan is to transition, reposition, sell, lease, the last couple of unutilized aircraft, continue to manage capital structure and repay debt. Clearly, obviously, in an environment where there's 1,200 ATR aircraft over retirement age, there is opportunities to organically grow by the self-funding the delivery of ATRs to that client pool, which should be a very steady progression as we deliver aircraft. In conclusion, there's obviously -- and the sector has demonstrated recovery. Our companies returning to profitability slowly and getting lower leverage. Clearly, the macro environment is changing where people want modern technology and low CO2 aircraft, which is sort of being forced on them by governments more than anything else. So we're aligned with that as far as a sustainable future goes. Now what we will do is we can have a question-and-answer session, please feel free to use your system to answer questions.

That's great. Jeff and to the team for aviation. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the right-hand corner of your screen, just please simply at any time, press -- but just what Jeff and the team take a few moments to review those questions you've submitted already. I'd like to remind you that a recording of this presentation, along with a copy of the slides and the Q&A will be available via your Investor Meet company dashboard. Jeff, no surprise, probably as you can see, you've got a number of questions from investors given the attendance on today's call. If I may, Jeff, just to hand back to you, if I could ask you to read out the question, and then obviously, a response where it's appropriate to do so, and then I'll pick up from you at the end.

Okay. Well, there's 1 from the IMC host, which is, over the years Avation has been proud of the fact that there was a young fleet, put a stock to [indiscernible] when can investors expect to see genuine fleet growth, especially amongst A220s. Well, we've got 2 aircraft due to be delivered in early '24. So that's growth. And we have purchase rights for ATR72, which is more growth. A220 is more difficult given that they're probably 1 of the best aircraft -- commercial aircraft in the world at the moment. So they're not particularly easy to come by. There, we do see opportunities but it's not that easy. So that's that question. I think the next one, is when is AVAP expected to pay dividends? Well, at the moment, we're focused on lowering the cost of debt and lowing the amount of debt. And once there is excess free cash flow above and beyond what we need for that, we will be paying dividends again. Next one is Nick B, can you help explain how purchase rights work? Well, I think Soeren Ferre, which would love to take this question. So why don't you take, Soeren?

Just bringing Soeren back in.

Am I on?

Go ahead, sir.

Okay. Well, basically, purchase rights are -- it's like an option you have with the aircraft manufacturer in this case, ATR, where basically you give a notice. So unlike option, [indiscernible] are just pure options. They don't have a date attached to it. So in our case, we basically give notification to ATR and ATRs to give best efforts to give us a slot at least in the coming 18 months. Traditionally, it's never been an issue. So that enables us today, like for example, today, we have 2 firm aircraft, but we have actually submitted offers for 3 aircraft to some campaigns. -- because we've already discussed with ATR, the aircraft available. So if we exercise purchase right, basically, we can get the slots. And once the purchase right has been firmed up, the order the benefit we have with the fleet of aircraft as part of the old contract apply as well. So we -- as Joe said, we have an excellent escalation cap. That discretion cap will be transferred to all the purchase rights without a limitation of time.

Thank you. Next one, I think, could you discuss the outlook and time for asset sales? Well, they're slowing down. Our preference is to lease the remaining aircraft. We may sell one because clearly, there's interest in it, but we certainly would like to lease the others. And we like to have it all wrapped up by June 30. Another questions regarding the delivery of time for the former Golden Myanmar ATR? Well, that's -- we've transitioned that aircraft, I believe. Nick [ Bs]asked, any plans to have exposure in the U.S.? We tend to find that the United States has very low cost of money to airlines. So they tend not to be that attractive to lessors, but there's sort of some second-tier and third-tier airlines that we could look at in the future. The next one, what's the total free cash flow from the sale of 3 aircraft. It's not something we would ordinarily discuss in any great detail. I think you'll see it if you study the accounts, you should be able to work out roughly what it is. Unless, Iain, you want to take that? No he does not. He is on mute. The next question is, thanks for the presentation. Why do you think that the current share price is only about 50% of the net asset value? There's no real, very simple answer to that. I mean, it's a question of Investor Relations, promotion, risk size. Clearly, over the coming days, our job is to promote the company so that the shares are at least in the same postcode as net asset value, like the rest of the lessors. But clearly, we've come out of COVID, and there's a lot of disruption in the world and it's very difficult. Stephen P. asked, what does the company to do with the equity investments in airlines received in the receipt of debt? Well, our business is leasing aircraft. So typically, we sell those. Jonathan Jay, Is Richard will ask you still the [ FD ] Avation? On the call, we -- the way we manage the company is we effectively had 2 people dealing with different types of investors and finances on the call is Ashley Nicholas, who has taken Richard's role in terms of Investor Relations. So Ashley is on this call and feel free to introduce yourself if you want, Ashley.

Thank you, Jeff. Yes, if investors have questions, -- after this call, then they can certainly send them through to the [email protected], or my e-mail address, which I think is at the end, and we'll happily answer those questions post this call.

Actually, he's been with the company for many years and principally deals with banks. So he's raised most of the asset-backed finance. The next question is from Damian both United and the [ Braathens ] have talked about new aircraft and other shortages, limited industry growth. What impact does this have on aircraft values, lease rates, useful leasing lives for the existing fleet in ATR orders and purchase rights? #2, has stated a focus on organic growth, can you expand on how you view industry consolidation with standard chartered exploration of the disposal to 1 of the latest might this create more opportunities as airlines seek diversity of supply? So I think Soeren really like to talk about. Soeren was one of the as Airbus and [indiscernible] background. I'm sure that you would like to talk about aircraft shortage industry growth and impact on aircraft values.

Yes. What we've seen, I would say, since the last half of 2022 was slowly -- I mean, in 2022, beginning of '22, we had an oversupply of ATRs as the traffic from COVID hasn't totally recovered. But things got -- the regional traffic and domestic traffic is the traffic that has recovered the most compared with international. And what -- the situation we're in today is basically now we have a shortage of ATRs. We are getting all of our ATRs now spoken for, either they're being sold or they are being placed with new operators, actually not disclosed yet. And we are getting about, I would say, 2 calls a week from existing airlines or start-up airlines who are looking for ATRs because basically that's the only aircraft in its category, which can do the job. The Bombardier is not being made anymore, and now that goes to what Jeff was saying when he was saying that there are 1,200 aircraft to be replaced, they can only be replaced by ATR. Whereas in the past, you had actually 2 suppliers, you had Bombardier and ATR. So we're in a situation where we have a shortage, and I don't think the shortage is going to improve, I would say, in the next 2 years. We're already seeing that the lease rates for aircraft in the last 6 to 8 months have increased by about 20%. We were talking about aircraft that, at $60,000, $65,000 midyear last year. we are talking now -- we're not looking to any 1 now with these rates for older aircraft below $80,000. And the trend is clearly going up. And as the lease rate goes up, clearly, valuations are going up. We even have customers who are on the market looking for used aircraft. They just can't find them. So now they're talking to us and say, well, is there a way we can make it work with new aircraft obviously at much higher lease rates. So yes, I think we -- there is a good momentum for us simply because the exposure we have on the regional market and that also includes the A220 as really the biggest potential today.

I will -- on #2, organic -- what I mean by organic growth is self-funded growth. So investor question that we've had in the past was, are you going to raise money, for example, to fund the 2 aircraft that you've ordered for early 2024 as in terms of raise money from shareholders. And the answer is no, we don't need to because we paid from that from operations, and we paid all of the PDPs. And when we're talking about organic growth, we're talking about self-funded growth rather than heading up shareholders for more money to fund growth. Because clearly, with the share price where it is, it's an expensive undertake. I've got no comment really on [indiscernible] standard chartered in particular. However, I will say that some pure financial investors have sort of struggled because they don't have the technical capacity to transition an aircraft. For example, we must have transitioned 14 aircraft in the last couple of years. We've had to get them fly them somewhere, fix them, pay for the engine shop visits, do everything. And that's a bank or a normal financial institution is not really geared up to do that. So they sort of -- you can understand it might be too complicated. The next question comes from Ken B. With the historic low LTV age, you're not making yourselves vulnerable to be acquired? I don't know that LTV is driven by M&A appetite. But yes, I mean, we've -- with what we want is to make profit for our shareholders. And so getting rid of debt is a really good thing. Killing what the net -- Well, we own that aircraft, that 737, I don't really want to go into the precise details, but we did -- we actually did super well with the aircraft because Avation has a technical team. And we basically spent about roughly, say, 60% of what we -- someone else would expect to bring that aircraft up to the state that it needed to be sold. So we manage 2 engines to go through the shop. We managed to repossess the aircraft from [indiscernible] in the first place. With flied to Malaysia. We put the airplane through the shop. And so we did super well. So our proceeds proportionately were above what a lot of lessors would have achieved with that aircraft. So we're very, very pleased with the technical transition team. Next question is, James, are you strategically attempted recycled capital tied up in widebodies and new ATR aircraft? Well, that's -- we're constantly buying and selling aircraft. So every aircraft you buy, at some point, you've got to sell. So that's all we've done to grow the company in the last 16 years. So at some point, a whole lot gets sold. So not any particular aircraft. Next question is for Iain. I think how much secured debt will be -- actually, how much secured debt will be needed to fund the remaining delivery payments for the next [indiscernible]? There's no predelivery payments required. But actually, do you want to talk about your process to raise the debt to finance loans?

Yes. I mean we go out to the whole universe of secured bank lenders and the balance of the payments that's due to ATR, we would expect to most likely pay -- we'll get all of that financed through the secured debt market. So having already paid the PDPs, we would expect the rest of the balance at delivery to be paid or funded by secured lenders.

I think he's asking how much secured debt is required?

Around $15-or-so million per aircraft.

Next one, John C. You've made good progress to reduce the number of off-lease aircraft? Two, what was the peak number of off-lease aircraft in the fleet during the pandemic? From what you can see, what is the current monthly production rate? Well, I think the annual production rate of ATR72s is literally about 35%. Is that correct, Soeren?

And then...

Sorry?

Yes, yes, they are at 35% and they are going to 40% next year.

All right. And Iain, do you want to answer the first one. Where did we peaked out? Was it about...

Yes. Well, we peaked with off-lease aircraft on the day that Virgin went bankrupt and redelivered 13 aircraft. So we actually had 1 aircraft -- one unutilized aircraft already at that time. So that took us to 14. And since then, we've obviously brought that back down to 2. But yes, 14 is the answer to the question.

Yes. A number that you won't see in the repeat, we hope, is we've spent millions and millions of dollars transitioning those aircraft, which was, for all shareholders, a horrible impost and hopefully, it doesn't repeat. The next question was [ Callon ], considering the $100 million tender offer concluded with only $7 million of bonds, would you consider open market purchases of unsecured bonds going forward? Yes, we would. We now know where the market is. Clearly, bondholders view of the company's possibly got a bit better than it was. And -- but we now certainly know where the market is so that's something we would consider. Could we see any orders in the near future for narrowbody jets? Well, we've looked for organic growth at some stage. And if we sell something, we typically recycle it because clearly, if we just sell everything, there won't be anything left. So we wouldn't speculate, but you could see some -- in the future, some narrowbody action, which is a good thing. The next question is Brandon, approximately where aircraft values currently compared to COVID? How far off the bottom reached are they? Soeren, do you want that one?

Yes. I think in terms of ATR, I think we -- the ATR market was actually very soft before COVID. So the values were actually fairly low. The lease rates were under stress. So we are definitely, in terms of valuation, I think, above COVID level.

Next question, how is it will be to raise finance in the current interest rate environment? Well, it's easy, but it's -- obviously, interest rates have gone up. So lease rates have got to go up proportionately. Stephen B, how much of the profit is a result of exceptional nonrecurring items? Well, there's plenty of nonrecurring costs. Do you want to try and deal with that one, Iain, or...

Yes. I can have -- I mean, it's not an easy question to answer, obviously, because the fact that we have nonrecurring items in this period doesn't mean we won't have more nonrecurring items in the next period. But I mean, if you just look down the P&L, within other income, there's a $3.4 million exchange gain. Obviously, we're going to get more exchange gains in future, but I can't tell you what the numbers will be. Within further down the P&L account, there's a gain on derecognition of a finance lease. We hope not to have to do further derecognition of finance leases because we only had to do that because the original lessee defaulted. And then on the cost side, there's a loss on disposal. But an aircraft, I see that only happens if we sell an aircraft, and we hope to make a profit on future aircraft sales. The purchase rights revaluation, I mean, that will be a feature of our P&L account while we hold purchase rights because we will be revaluing them at every balance sheet date. And I can't tell you if that will be a gain or a loss in future. The gain on the equity investment, again, as long as we hold those shares, we're required to mark them to market. So we will have further movements on that share price for sure. And then on the transition expenses, I mean, obviously, our business is not to pay maintenance costs for aircraft. We don't -- we hope to not have to transition aircraft, and if leases are performing, we shouldn't have too many transition costs in future, but that has been a feature of the P&L account over the last couple of years because of the numbers of aircraft that were redelivered by airlines that defaulted through the COVID pandemic. So I probably haven't really answered your question, except in general terms, but I hope that's helpful.

The next question was, if you had excess cash today, how would you rank repurchasing of notes on discount, stock buyback and through dividend? Well, clearly, while notes are available at a discount, they're very attractive, as would be dividend down the track. So I guess it's notes first, then the future dividends and #3, stock buybacks. Question from , what is the lease expiry schedule currently? Any risk of nonrenewal over the next 2 years? We've only actually got 1 aircraft that is due to come off in the next 2 years. Soeren, what are our prospects on transitioning or re-leasing or extending that particular aircraft?

Well, fairly good. We're actually reasonably close to extend the aircraft for up to 6 years with the existing lessee. And if it plays difficult, we already have a handshake agreement with another operator to take the aircraft.

So we don't see a lot of problems in the next 2 years. What other regions do you see placement opportunities for Avation place ATR other than Southeast Asia? Well, in the slide that we have, the ATR slide, there's 100 operators around the world. So it's 200, where is the ATR slide?

Yes, it's 200.

200 operators. So you -- it's a risk versus return question. You look for the optimal risk/return. And you're in an environment where a lot of the a lot of them are getting old, so they need to be replaced. So your ideal strategy is to go to an ATR operator that's got a lot that are old and to effectively do a fleet rollover. And whether you're probably the only lessor in the world can do that given the size of the order book. Can you comment regards on [indiscernible] transition costs? Are they higher than normal? And if so, why? Asking about Myanmar. No, it was -- actually, the 737 was the most expensive -- and also the number of -- we put a lot of aircraft through the shops. But the 737, we had to do 2 very expensive engines in-shop visits, 1 of them -- what we are clearly putting 2 engines through a shop is -- 2 jet engines sort of shops expensive. Tim F. Did you say the option -- ATR option price low cost? Well, what happens with when you buy aircraft, you don't really know the delivery price until you get delivery. So for example, if you rang up Airbus today and said, "I'd like to buy an A320neo, they'd say, "Great, here's your order." But on the delivery in 2028 or 2029, whenever they're going to deliver it to you, the price has changed with inflation. And what we've got is we've got an inflation cap with ATR, which is lower than the real-world inflation, it's something we negotiate in our purchase contract because we were scared about interest rates and inflation. And so as time goes on, our price gets better, which makes them valuable in their own right. And ATR will honor that because clearly, we've been a giant customer, and they're fully motivated to sell us another $500 million or $600 million worth of aircraft. So those options are very valuable and the exercise price of the option is extremely useful. Next one is from [ Cypress ], is there a debt ratio target the company is looking to achieve and sustain? We're mainly interested in the cost of debt, [ Cypress ]. So we're looking to lower the relative cost of debt -- average cost of debt versus the lease yield in the then current environment. Because if interest rates are high for us, they're also high for airlines. So that's okay as long as we get a higher lease rent, but to improve our profitability what we need is a cost of funds. So it's not really -- I mean, we've got relatively low percentage of leverage compared with some lessors, but our issue is we need to get the cost of debt down. Jonathan J. Sorry to press [indiscernible] Richard -- still work Avation, what is his role? Richard has left the company, Jonathan. He is not -- no longer whether he's moved back to Perth is doing other things. Adele E, how well residual values for ATRs held up in the past years? Well, over historically, turboprops have got the best residual value equation of any type of aircraft. And the reason for that is they have relatively long lives compared to commercial jet aircraft. And so the residual value is quite high and more importantly, not that valuable. But as Soeren just said a couple -- a little while ago, the market values of ATR is has increased dramatically lately because there's only been 35 made -- there is only 35 made a year, there's not a lot for sale in the secondhand market. And consequently, their value is increasing. Jonathan J. 2020, you put Avation up for sale by a formal sales process doing business happening in the [indiscernible]? We didn't put it up for sale. We have an inbound proposal from another lessor that wanted to acquire the company and obviously COVID stop to that. And if you're a public company, that -- these things occur -- from time to time, we have Citigroup adviser as an adviser to the company on standby if that ever happens. It hasn't happened lately. So -- but will it happen? Who knows. [indiscernible] how will the new ATR impact value of your ATRs? Are you able to switch your existing orders in this variant. Yes, we are. But the stol and ATR 42. So stol means short takeoff in landing. So it's really ideal for very challenging environments. So in theory, we are able to do that. we probably would be reluctant to do that because it's -- we like aircraft where there are a lot of aircraft out there in the world. So there's a secondary market. And as a new variant, we don't know how well the secondary market is going to develop on that type. It's sort of at this stage of a special mission. Next 1 is from Nandeep, [indiscernible] trades at a substantial discount to NAV. Are there any restrictions in your debt agreements that will prevent you from repurchasing shares? Well, the answer to that is no. So that's, I think, all the questions.

Jeff, you've been very generous. So you've taken every question from investors this afternoon. And should any further questions come in, we will make these available to you post today's meeting. Now Jeff, I know investor feedback will be particularly important to you and to the rest of the company, and I'll shortly redirect those on the call to give you their thoughts and expectations, But Jeff, I wondered before doing so, if I may, just ask you for a few closing comments just to wrap up with and then I will redirect investors for their feedback.

Well, we want to thank you for your support. We want to reassure you that we don't intend to go and issue new shares for the purchase of aircraft in the short term. So we've been very motivated to sort of survive and lower our leverage and manage all the problems. And clearly, the Covid thing has been a real challenge, and it's -- I mean, it's still challenging for a lot of airlines. And clearly, we've got to overcome that. We're well placed because the CO2 thing is real. Governments want low CO2 aircraft. And so As, for example, are very variable -- and A220s are very well placed to satisfy those requirements. So thank you for your support. And I think there's a lot of the most ever investor interest we've ever had. And operator, how many people have we got on the call?

You had 152 that have accepted. You have currently at this precise moment in this conversation 76 are live on the quarter as we stand here now.

Right. There's a late question from Rob. Please clarify the comments share purchases restrictions on the data grant? The indenture does not -- does single payments to shareholders. There are buckets -- within the indenture there's buckets of money that you can apply to certain things. It's not our intention but they're fairly big buckets. It's not our intention to repurchase shares. It's more our potential to repay debt, which is what we've been doing. We've been jumping through $46 million in the last 6 months, for example. If I hope that answers your question. If you've got any other questions, you're going to e-mail us at any time. All right. Thank you very much.

Jeff, you've been most generous with your time, and thank you once again to all the investors for their engagement and their questions this afternoon. Could I please ask investors on this call not to close this session as we're now automatic redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. Just wanted to take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Avation Group PLC, we'd like to thank you for attending today's presentation. Good afternoon or good evening to you all.