Avation PLC (AVAP) Earnings Call Transcript & Summary

Hello, everyone. Good morning to those of you in the European time zones, and good afternoon to everyone who's joining us from Asia. Welcome to our Bloomberg Intelligence webinar today with Avation plc's Executive Chairman, Jeff Chatfield. We will be talking today on the late leasing recovery and innovation in the industry. A few things to sort of just go over administratively. I just want to remind everyone that today's presentation will be recorded. It will be available for playback. Those of you who are Bloomberg Terminal subscribers, it will be on the terminal, and there will be a link, I believe, as well on Avation's Investor Relations page. Later in the session, we will be doing Q&A. When you have a question, please just type it into the Q&A box, which you should see at the bottom of your screen in terms of the Zoom controls. A quick introduction to those of you who may not be familiar with Bloomberg Intelligence. We're a global research team within Bloomberg. There's around 350 to 400 research professionals globally and offices around the world. We are covering industries, companies and both on the equity and the credit side, but we also have analysts covering strategy, quants, ESG, government litigation, et cetera, as well. So you're able to find us on the terminal under BI. So I think with that, I'd like to just get into our main event today, and I'll just do a quick introduction of myself and of Jeff and also give you a quick rundown on how today's format will go. So in the beginning, we will have around 20 minutes, where Jeff will be presenting a presentation on the company and his views on broader sort of industry trends. After that, Jeff and I will have a fireside chat format, where I'll interview him on some key topics and trends of the day, which I think are of interest to both debt and equity investors in the aircraft leasing space. And then we'll finally we'll open up to all the participants for Q&A for the final 20 minutes. So we'll do 20-20-20 type format. So a quick word on myself. I've been covering the aircraft and leasing space or the airline and leasing space in Asia Pacific for more than 25 years now. I spent a long time on the sell side with investment banks, but I've also worked with aircraft leasing companies on the risk management side, and I also have done work in aircraft debt origination as well for commercial banks. I joined Bloomberg Intelligence about a year ago to be their senior equity research analyst for aviation in Asia Pacific. And I'd also then now like to introduce our main speaker today, Jeff Chatfield. Jeff has had a long history in aviation. I've known him myself personally for more than 10 years, I'd say, Jeff. And he used to run an airline in Australia. He's been running a leasing company now for many, many years. He started Avation PLC in 2006. And has grown that it to be one of the premier sort of regional aircraft and other asset class lessors in the space. And this company Avation was listed on the main board of the London Stock Exchange in 2010. So with that, I think, Jeff, it's probably time to hand the mic over to you for your presentation. Thanks.

Thanks, Tim. I'll just work out how to share the presentation with everyone. And hopefully, the -- I noticed the volume was going up and down a little bit earlier. But I assume that's okay now. So here's the presentation. So we're presenting Avation PLC initially. We're listed on the London Stock Exchange. We issued bonds in the United States, we also have a bond -- a warrant as well listed. So the company has been going for -- since 2006. The snapshot at the moment, we own 36 commercial aircraft with 17 airline customers around the world, customers located in 14 countries. We're sort of unique in that we do all our wide-body, narrow-body and turboprop aircraft. We have 6.2-year weighted average aircraft age. So commercial aircraft usually last 25 years. So we have a very young fleet. We have 5.3 years remaining lease term on average, $907 million in aircraft and $540 million in contracted revenues. So that's sort of income is contracted. So our fleet, we are very interested in ATR72 aircraft because clearly, there's a monopoly situation with ATR. They are carbon friendly, very low CO2, probably the only commercial aircraft that can be 100% sustainable aviation fuel from 2025. We like modern narrow-body aircraft as well. So we have a number of those. We really like Airbus A321s and Airbus A220s and we own 2 wide-body commercial aircraft, an A330 and a 777. So we're sort of by value we're 51% narrow-body. Some of our history and competencies. So since inception, we purchased 73 aircraft. We've executed 80 leases. We've financed $1.9 billion worth of debt. We've sold 37 aircraft. We've transitioned between airlines 13, we've repossessed 19, and we managed to sell 2 purchase options. During COVID, which has been the challenge for all of the lessors, we had a deferral scheme, so we lent airlines money for a while. We rearranged our capital structure. We managed to pay off $322 million of our own debt, which was important to delever the company. So we're now quite unlevered actually. We transitioned 11 aircraft and we're now fully placed. So we've placed 100% of our inventory. So we've got nothing left to place at the moment. So they are [ come ] of all that is -- we have delivered 69 aircraft. We've traded, which mean sold, bought and sold 54%, and our net asset value per share over our history has gone from $0.42 to $3.42. We paid out $0.43 dividends. And this is an interesting fact for this industry because as I said earlier, we're one of the -- probably the only -- one of the few lessors that do all 3. We -- in terms of arrears as at March 23, 22% were associated with turboprop, 78% narrow-body and 0% wide-body, which means, in reality, the narrow-body aircraft are financially quite more risky than the other 2 types. Our net asset value per share is consistently grown even during COVID, it's a 13.8% per annum, which is good. Our share price hasn't tracked that, but our NAV has achieved that. Our customer base is all over the world. So we like modern technology and good airlines, ranging from Air Tahiti, to Fiji, Philippine Airlines, VietJet, Mandarin Airlines, which is in Taiwan, EasyJet, airBaltic, which is a big customer, that [indiscernible] and others. So we're all over the place. And we like diversification. On the market, Tim was in his introduction speaking of the market. We think that the global, if you like, airline capacity will be within 1% of 2019 sometime later this year. So that means that there will be -- that's a recovery from COVID in terms of airline capacity. Broken down a little bit in terms of asset type, there is an argument that single aisle has actually exceeded the other 2019 levels. ATRs have almost fully recovered, which is great. Some other types are behind. Clearly, the wide-bodies are not there yet as our other types of turboprops and regional jets. So the 2 strongest recovery aircraft at single-aisle narrow-body aircraft and ATRs. Just on the ATR a little bit more. It's a very successful program. There's 200 operators. More operators of ATRs than 737s. There's 1,800 aircraft sold. There's 1,600 deliveries. 1 billion passengers. It's a very successful program. And great customer base all over the world. So some of those names in this slide, you'll see on our slide. There's a huge opportunity in this area in that because there's 1,200 turboprop aircraft over retirement age, which means there's a massive demand -- there will be a massive demand for replacement in the coming years because airline -- aircraft don't last forever, and they need to be replaced. And hence, there's a big opportunity in that sector. Fortunately, for us, ATR are on the road towards 100% sustainable aviation fuel capacity. So one of our customers has already flown -- in June '22 flew a flight with 100% sustainable aviation fuel in both engines, and it's anticipated that by 2025, all of the ATRs will be 100% sustainable aviation fuel compatible, which is a very important milestone. So they'll meet very low CO2 emission rules. We're a believer in the green financing and in December 2019, we actually did the first aircraft lessor of a green line with Deutsche Bank, and that was for 2 ATR72 aircraft. That was an important milestone. Our order book is we have 28 purchase rights for new aircraft with the new engine type, which is more fuel-efficient and sustainable aviation fuel compatible and they run out to June 2027. So the company has got a lot of growth optionality about it to deliver low CO2 aircraft. We also have 2 on order for next year's delivery, which we are in the process of placing at the moment. On values, we see -- our opinion is that aircraft valuations are rising. The narrow-body base has certainly recovered. Widebodies are gradually improving in line with the -- obviously, the genuine market dynamics. Clearly, interest rates are an issue. We -- our leases are 100% hedged. So we have basically a 99% fixed cost of borrowings. So our borrowings are 6.08%, which compares favorably with many other lessors, which you can see on this slide. So some recent issues by some of the big lessors in the world have been above our sort of cost of funds, which is an interesting trend. Some of the smaller ones have paid very high yields. So at the moment, our focus is to make sure that we're 100% utilized, which we are. It's interesting that the ATR turboprops have a lower rate arrears compared to narrow bodies, which is an interesting sort of credit dynamic. ATRs are at the forefront of CO2 -- reducing CO2 emissions, and we're fully hedged, which we're super pleased about because we started that program some years ago. So that's an introduction to our company. We're leveraging our competencies. We're harnessing the ATR innovation in terms of low CO2 stuff. Clearly, inflation is great for aircraft valuations and driving them up. And if you own an aircraft, it's a good thing. And we're 100% hedged. Now what I might do is pass it back to Tim to continue.

Thanks, Jeff. I appreciate that introduction to the company and some of your thoughts on the market. I apologize earlier, there must have been some issues with the microphone. And how is it coming through now, Jeff? Is that better?

Well, I can hear you fine. Maybe you just stick at a constant distance from the mic.

I don't think I was moving. But great. All right. So why don't we get into some -- I think, a little deeper dive into some of the topics of the day, things maybe that you did actually raise in your presentation. And it looks like we ended the 20 minutes a little early, so we've got maybe some more time for Q&A at the end. So for the next 20 minutes or so, let's have this chat. So I think, look, the first thing when I think of investing in the space right now, whether I'm a debt investor or I'm an equity investor in aircraft leasing, has to be cost of funds, rising interest rates, and you did touch upon that in your presentation. And of course, the opposite side of that is lease rate factors and where they're going. Are they advancing quick enough to begin to cover the cost of debt every year. Of course, leases roll off, the old legacy ones you replace them with some new higher lease rate factors, hopefully. And of course, the debt rolls off and you have to maybe replace that with higher cost of debt. So I mean, let's talk a little bit about the dynamics of what you're seeing there in the marketplace. Maybe what your marketing teams are seeing in terms of campaigns, airlines, willingness to pay those higher rates? Is the shortage of new aircraft with the OEM supply chain issues, et cetera, and booming airline demand. Does that actually have an impact on lease rates that you're seeing?

Thank you. My view on it is, airlines seem to have been very interested in secondhand aircraft. And that may be because in general, they're cheaper then new aircraft. And so we could -- if we had more inventory, it would be easy to place, which is completely different to, say, what, 12 months ago. Clearly, interest rates are a real issue for them because the reason airlines lease from lessors is lessors may have equipment available. But also there, it's quite a good deal for me. It gives airlines operational leverage. And what's fascinating to me is that some of the investment-grade lessors are willing to go out and issue quite high-yield bonds to finance aircraft, they have to be passing those costs on to their customers or else they'll go out of business and they're not. So clearly, there's evidence that airlines are paying more. And it's an interesting dynamic between new and old aircraft. We're not seeing, if you like, massive demand for new aircraft, we're seeing great demand for secondhand aircraft. And I think the reason is just lease rate is cost for the airlines. I mean the airlines are still recovering from COVID, and they want aircraft, but are not really willing yet to pay -- overpay for them. It's -- so it's a very interesting market. I think that will catch up because there's no very few ATRs available out there. It's very hard to get secondhand unleased good narrow-body aircraft at the moment. Clearly, there's supply chain issues that mean that to fix an aircraft takes a lot of time as well as new aircraft are not being delivered. So it is a very interesting and complicated market, is the answer to that question, I think.

Is the -- do you think that some of the -- let's say -- I wouldn't say downgrade, that may be the wrong word, but the airlines looking to lease in secondhand aircraft because they're potentially cheaper is also a function of the fact that lease rates are increasing for the newer aircraft because they are so far in demand. Is there an element of that in the market dynamic at the moment?

Yes. And also inflation means that aircraft are more expensive. So your lease rate factor could be the same, but if the price of the planes, the new ones $10 million more than you thought it was, then clearly, it's going to be more money each month. And I think a lot of these -- a lot of airlines are suffering a bit of sticker price shock where they've done deals in COVID for low lease rents for a while and these are running out or will run out. And now they're thinking about they're going to have to pay double the rent, which might be the same lease rate factor, but it's twice the amount of money for a new aircraft that does the same thing. And to be frank, the current generation of aircraft are not that much more fuel efficient than the last generation, have technological risk in that they're not all 100% SAF yet. There's issues around there. And you've also got issues around the engines and all these sort of things. So if you're an operator, if I was running -- I used to run an airline, but if I was running an airline now, I'd be very interested in actually the old stuff because it'd be cheaper, more reliable, you know it works, and there's a lot of good things going for it. But anyway, at some point, you're going to have to bite the bullet and go for new planes.

Yes. I mean I think in terms of sustainability and ESG, which just seems to be becoming more ever present in terms of discussions every day that -- again, you're going to have to, like you say, bite the bullet and get the new aircraft. I mean so speaking of new aircraft, you raised something there about the engines. You've got some A220 exposures that are running the Pratt GTFs. Are you seeing from your own customer base issues with engines in particular? Or is that not really a factor for the moment?

Well, in the preparation for this call, I did a bit of research for you, Tim. You sort of warned me on that question. And so I thought -- the answer is -- the -- we're exposed to it in the sense that we have 2 customers that have a lot of GTF engine. And both of those customers have managed that issue extremely well. So during COVID, one of our customers is VietJet and during COVID, they basically identified the 4 deficiencies that they -- identified 4 deficiencies with the GTF engines in their fleet, including in our aircraft. And they managed to get them all shop visited during COVID. So they actually don't -- they're 100% operating now. So there's no issue for that customer because they managed it really well. The other one that's exposed to is airBaltic and they've sort of had the same thing. But I understand that Pratt & Whitney have been very, very aggressive in fixing up the issues around the A220 engines. And they're not as bad because the A220 is a lighter aircraft, it's a more modern aircraft, the engines are not doing as much work. And so they haven't had problems either. So in our customer base, it looks like everything is okay. But obviously, if you read the press, some airlines are struggling with a few issues, which may be a combination of technology as well as management.

Got it. So thinking about growth channels for the company. I think you touched a little bit on that and where your focus might be in the next few years. I'm thinking about pre-COVID Avation was beginning to diversify its asset classes a little bit, going into more wide-body and narrow-body from a historical ATR focus, as you mentioned. Just thinking about like the lessons learned coming out of COVID, and where you see the growth channels for the company, both from an asset side, so wide-bodies, narrow-bodies, [ reaches ] at turboprops? And also, I think from an origination channel side, that is the sale and leaseback market, which seems to be very competitive at the moment. And I think the lease rate factors are not as strong there versus actually increasing your order book or exercising some purchase rights, et cetera. So kind of 2 questions in there, asset classes and then which channel in terms of growth. Yes.

I have a view that our lessor at the moment, if they can grow, should be growing. So it depends on their cost of funds. So the investment grade lessors should be buying everything they can because clearly, the supply channel issues of aircraft deliveries are not going to go away in the next few years. So they should be grabbing as much existing aircraft as they can finance at a reasonable price, we're looking at a lot of trading opportunities. And we've made a fortune out of literally trading aircraft. We've sold more aircraft than what's in our fleet, if you know what I mean. And we've done very well out of that. And in terms of valuations, we sold -- and the most recent aircraft we sold was at a premium to book of like 15%. It's a very, very good market to sell aircraft into, which makes it a hard market to buy them. But anyway, but in terms of growth, responsible growth, the world is changing, and the low CO2 thing is a real thing. It's a real issue that airlines really will face. The passengers will face and you've got to deal with it, which means you've got to go from modern technology aircraft. You've got to have modern engines, assuming they work. The ATR stuff is perfectly placed for that. And we're fortunate enough, probably -- we're probably -- I think we're the world's largest option holder. We've got $0.5 billion worth of options out to 2027 on new aircraft that are perfectly low CO2 and all the ESG stuff and easy to finance through green financing and all those good things. So there's a growth channel for us. We also love the A220 market for similar reasons. The A220 is the only modern jet out there. The Airbus A220-300 is a fantastic aircraft and investors should really get into it. Unfortunately, they're not making many -- Airbus is not capable of delivering many of them. So there's an issue that you can't actually buy many. And I don't think there's any for sale in the world at the moment. So it's a hard market to grow in. I think the one -- the people that will do well are the investment-grade companies, people with really good trading teams that can buy and sell aircraft, people with order books of modern technology like ATRs, like A220s and probably A321neos. They're the 3 probably best investments out there. And in our case, we can trade aircraft, we can place aircraft and place new ATR72s, for example, and grow that way. So certainly, there's plenty of growth out there. But the easy way to grow at the moment would be if you were -- had a good credit rating, you could find some value in the trading market.

To the question. It's hard to get aircraft right now, obviously. Then I guess maybe it's more of a wishlist kind of thing than if you could get aircraft, where would you want to increase your exposure to? You mentioned that your widebodies, for example, they're not in arrears at all. A lot of people would say, well, that's a riskier end of the market. Obviously, more capital put at risk or to put to work. Would you -- given the wherewithal, would you want to increase widebodies at the moment, reduced narrow-bodies versus turboprops, et cetera? Or where do you think that, that kind of...

Well, it's a risk reward thing. The least riskiest thing you can do at the moment is something like an A321neo because they're so popular. They're the perfect aircraft. They're like a widebody, only they've got single-isle with 2 engines. They're very good aircraft. We would increase our exposure to Airbus A220 and we would increase our exposure to ATR72s. We're unlikely to increase our exposure to twin aisle old technology aircraft because I think that they will have -- there'll be governments putting taxes on travel and CO2 and all the rest of it. And hence, there's issues around that. I think the compelling value equation is actually the ATR market because they're not that expensive. There's 200 operators out there. It's just a matter of doing the work to go and find them.

And any comment about, again, the sale and leaseback channel? Obviously, you've got your own purchase rights. But is there -- is the sale and leaseback market, something you want your marketing teams out there and in on those campaigns? Or it's really probably looking at the right time to exercise your own order book?

I think that the best way is lessor to lessor trading. It's not airline to lessor sale and leaseback for -- there's a number of reasons there because of -- I mean the biggest obvious one is the airlines with order books, there was COVID and delays in delivery. And so there's been escalation in price. So when they signed up for -- I'm picking numbers. They signed up for $50 million and what they thought they've signed up to might now -- at delivery might be $60 million. And so there's a bit of a mismatch there through inflation and escalation that may make some of those aircraft really expensive. So I don't know how good or I don't know how liquid or strong the SLB market really is. And I don't know how big it is right now, whereas I think lessor to lessor trading is pretty strong.

Good. Good. Any comments on -- obviously, it's a global market. Any comments on any pockets of strong demand for the aircraft that you're looking at? Obviously, you've got everything placed at the moment. But I'm just wondering if there are -- given like, for example, regional aircraft, they're sort of a different demand profile in terms of the globe versus maybe narrow bodies, et cetera. Any comments about anything interesting there?

Well, we're sold out at the moment. I mean the -- all airlines seem to be looking for aircraft because they lost a lot during COVID. I think they're going to -- a lot of them are going to be shocked when the leases that they got extended during COVID run out because the lessors will be saying, great, we'll have the plane back or the rent will be double. So there's going to be a few issues. There will be airlines looking for aircraft, mainly on price dynamics because they'll be worried about what they've got to pay for.

Right. Got it. Maybe we'll switch gears a little bit and talk a little bit about risk management. I think and how -- maybe your views have changed on this. The pandemic in the last 3, 4 years have changed. I think the paradigm a little bit. You've had obviously the pandemic, but then things like the Russian invasion, which has put just entire jurisdiction and jurisdictional risk, geographical risk to the 4 -- you've had things in the recent just weeks even regarding things like Vietnam and India and their adherence to the Cape Town Convention with regard to repossessing aircraft assets. So maybe just touch on a few points on how Avation may have changing its look or outlook on risk management and some of these trends in the marketplace.

Yes. Thanks. I mean we tend to only place planes in places where we've got a reasonable chance of getting the aircraft back. So by policy, in my opinion, and I'm sure other lessors will disagree. We -- during COVID, Russia was an easy place to place aircraft because they wanted them. But -- and so a lot of lessors placed aircraft in Russia. And now can't get them back. Now we avoided that by policy because we didn't have a clue on how to repossess an aircraft there. So that hasn't changed. What probably -- you alluded to CTC, there is a belief among -- a hope among investors and lessors that Cape Town works. I'm on record of saying I actually don't think it does work. It doesn't work the way it's advertised, which is a shame. We -- so during COVID, we had to repossess a lot of aircraft. We repossessed 19 -- during COVID, we repossessed I think, 18 aircraft. Whereas in our history, we'd only have to repossess 1 prior to that. And so we had to be almost a mini airline. We had to be able to fly them. We had to have pilots on the payroll. We had to have a maintenance system. So we -- the company built a maintenance control system like in Europe, we call it a CAMO. We had to establish all that and to be able to move aircraft around. Now there was a view that if Cape Town was working correctly, those airlines would make those aircraft available to you and not just leave them at random places around the world. So yes, there's some questions there that investors might not like the answer to, and that is it's a lot more complicated than what it's supposed to appear. That's my opinion. Other lessors may have a different view. But yes, I mean, if Capetown worked, it would be better and easier and things would be cheaper, but there are -- I don't know whether -- I really don't -- in times of stress, which is when you need it, it appears it doesn't work that well, if at all.

Yes. Look, I mean, I think you're making a very strong and important point at least providing an opinion. From my view, Cape Town does seem to be having some issues. Just again, we're talking topic of the day here in recent weeks and months in our part of the world. Again, I mentioned India, Vietnam. I think you're mentioning Australia. So yes, it's got some work to be done there on that front. I think I'm going to have one -- maybe one other question in terms of just our fireside chat, and then let's open it up to some broader Q&A. I think it's really the last one point is about -- it's slightly touching on Russia, but it's a broader issue, I think, with regards to insurance cost and how this will play out. I think you're aware that there are a number of lessors who are suing their insurers and the reinsurers in the marketplace in Ireland, in the U.K. and the United States, I think of the primary venues for those cases. There was a $10 billion asset grab by Russia, plus or minus a few billion dollars there. Someone's got to pay for all that. Many of the lessors who are listed and unlisted or have debt listed have publicly described how much they've written off somewhere again around that $8 billion to $10 billion range. I think the lawsuits are in that range as well. If the insurers have to pay out, somebody's got to pay up later on. So how do you view what's happening in those markets? Is that a big impact on lessors at the moment? Or is it kind of a minor side show?

I think -- well, it's a $10 billion problem, right? So it's a real issue. I think that lessors assume the insurance would work and then found that maybe the insurers don't have the money. So there's a lot of angry lessors out there and how it plays out. It will play out in the courts I would have thought eventually some money would need to change hands because you can't sell insurance and then, sorry, we don't have the money, I'm not going to pay you. It's a tough one, but I do expect there'll be higher premiums. I do expect there'll be plenty of litigation, fortunately not involving us. Thank goodness. I think it raises interesting questions about what happens to the planes in Russia. Presumably, it's -- hopefully at some time, this war ends and those aircraft will come out. Now the condition of the aircraft then will be problematic because they won't be traceable, they probably won't be -- you probably won't be able to place them anywhere else. So it will be a tough one. I do think that Russia was a little bit of a dumping ground for aircraft during COVID so the lessors probably should have thought it through a little bit better. Yes, I have a lot of sympathy for them. The Indian thing at the moment is interesting, a friend of ours, another lessor is talking about the aircraft being at remote airports in India where the engines have been taken off and there's just an main frame there. And that's a tough one. That's really hard one to deal with. But yes, I mean, what it shows is that the big lessors, the ones that really know what they're doing well, perhaps the investment-grade lessors. I mean, we know what we're doing because we can do everything. We've got the technical team and can fly stuff around and the legal team and all the rest of it. But -- which is great. That's a small scale. But if you think about the big lessors that are investment grade, they've faced up to their issues in Russia and faced up to the insurance issues and moved on. There's -- you've had a real credit challenge and they've prospered. So it demonstrated -- demonstrates how good their management is and how good the business is and the industry is and demonstrates the value in having competent management teams to manage losing the aircraft.

Great. Jeff, look, thank you very much for that opportunity to provide some of your insights. I learned a few things. I think those are some great opinions. I hope that the audience is -- will take away some good stuff from that as well. We're going to go to their questions now. I think I've got about 6 or so in the queue, so let's just start going at them in the order, which they're coming in. And if you do have a question, please go ahead and just type it in. First question is, can you further discuss Avation's pathway to growth, such as the time frame for taking delivery of new aircraft and raising external capital, both equity and debt, will Avation require any new equity investors to utilize its purchase rights?

Good question. We have organic growth opportunities open to us. The next 2 purchase rights. We've actually paid all the equity required for those. So we can take delivery of those 2 aircraft and finance them without putting up any more money. So that's a good position to be in. Clearly, the order book goes out some years, and we need to contemplate how we fund that. And historically, we've raised debt. We've raised a little bit of equity. We've bought and sold a lot of aircraft, which has made us plenty of money. And we've used a combination of those things to be able to finance growth. And so when we talk about growth, we're really looking primarily at organic growth, and that means stuff that we finance or can fund easily. So I hope that answers the question. We better move on.

So the next one, a quick one. Who bears the maintenance cost of leased aircraft?

If the aircraft is leased to an airline, it's always the airline. If it -- but if you repossess it, we have to. Now we don't like repossessing them. But when we repossess 18 aircraft during COVID, we had to maintain them all. So I think that was many, many millions of dollars, which is now almost finished. So hopefully, we don't have to do that again.

Great. Next question, I think this one is from, I believe, from the sell side, John. With regards to Avation's purchase rights to put it in context, how many ATR72-600s, are you currently anticipating HR to produce in the next few years? Aviation has successfully sold or leased all the aircraft that were off lease as a result of COVID other than being secondhand turboprops and single-aisle aircraft, what were the other key factors, airline customers were looking for when you were marketing these? And the last question, the 3 there is, given the focus on sustainability and the technological change, you've spoken about what are your thoughts post pandemic on separately leasing aircraft engines. So the last one is on just pure engines.

Okay. The -- okay, so I think ATR can only produce about 35 aircraft a year in the short term. And so they'll basically be sold out. We have 27 purchase rights over the next few years. And that's a very small amount of aircraft compared with the number of aircraft that are being retired, which is why there's basically very, very few ATR72s in the world at the moment for sale. What else? What are they looking for? Airlines are looking for aircraft that they can operate quickly. So when they decide -- at the moment when an airline decides it wants a plane, it wants it really quickly. which is an interesting one given their supply chain problems and OEM issues. And the last one, give the focus on sustainability, what are your thoughts on leasing engines? It's a bad business if you're leasing old engines in the short -- in the long term. It's probably a fantastic business in the short term. But obviously, each engine type as it comes out, it's more fuel efficient and better in terms of environmental parameters. So I think it's a -- I think the engine leasing business, and we've had a little bit of experience here. I think it's a very complicated business, and it's not that investor-friendly. I wouldn't invest in a huge scale engine leasing business, but it's a sort of a side dish to a lessor. A lessor can do it if they really want to do it, but it's complicated.

Got it. Next question is how does the current demand for aircraft translate into demand for lesser platforms? Is Avation seeing interest in its platform or fleet in its entirety?

Good question. We have had inbound inquiries for portions of the fleet, but the issue with selling a big proportion of the fleet as we have lower revenue. So it needs to be a fantastic price. But we've -- quite surprisingly, we have had inbound inquiries for big numbers of aircraft. I don't see a lot of -- there hasn't been many lessor platform transactions. There's always talk and rumors and all the rest of it. But in real life, there hasn't been many things happen lately. We -- sort of 2019, we had a proposal from an investor to actually buy the company. We haven't had one lately. Yes, I think it will, over a period of time, I think investors will recognize the value in this sector. I mean, it's done super well out of COVID. So you'll see more consolidation. And I'm shocked that we're not seeing more investment-grade lessors, not just by the sub-investment-grade ones, because it's an obvious trade, right? You've got a lot of cost of funds, therefore, you're going to make more money.