FLY LEASING May 2016
DISCLAIMERS AND NOTES Forward‐Looking Statements This presentation contains certain “forward‐looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward‐looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for FLY’s future business and financial performance. Forward‐looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks. Further information on the factors and risks that may affect FLY’s business is included in filings FLY makes with the Securities and Exchange Commission from time to time, including its Annual Report on Form 20‐F and its Reports on Form 6‐K. FLY expressly disclaims any obligation to update or revise any of these forward‐looking statements, whether because of future events, new information, a change in its views or expectations, or otherwise. Notes: 1. All fleet and lease metrics are as of 31 December 2015 and are weighted by net book value. 2. Adjusted SG&A and Adjusted Return on Equity are non GAAP measures. See the Appendix for reconciliation. 3. Industry data per IATA. PAGE 1
FLY AT A GLANCE 80 aircraft: $2.6 Billion Book Value Young Fleet on Long Leases Leased to 44 airlines in 28 countries 6.6 years average age and average lease term Selling Older Aircraft Buying Attractive Aircraft Sold and contracted to sell 57 older aircraft in 2015 Acquired 10 aircraft for $615 million in 2015 Significant Share Repurchases Decreasing Debt & SG&A Costs Repurchased 19% of shares since September 2015 Cost of secured debt reduced to less than 4% Managed by Industry Leader Growing Insider Ownership BBAM manages 400+ aircraft, established in 1989 Company insiders own 13% PAGE 2
POSITIVE INDUSTRY CONDITIONS Global air traffic growing strongly • 6.5% increase in 2015 • Similar thus far in 2016 Airlines prospering • 2015 a record year for airline profits and 2016 expected to be better • Strong demand helped by lower fares, low cost airlines, increasing middle classes • Costs helped by cheaper hedged fuel Manufacturers experiencing strong demand • Record backlog for several aircraft types Strong demand for leased aircraft • FLY has minimal remarketing in next few years PAGE 3
DIVERSE GROUP OF GLOBAL LESSEES Lessee Country % of NBV Region % of NBV Asia & South Pacific 1 Ethiopia 13% 36% Europe Philippines 11% 31% Middle East & Africa UK 5% 15% North America India 5% 10% Mexico, Central & South America Germany 4% 7% Off‐Lease Thailand 4% 1% Chile 3% Total 100% China 3% USA 3% Czech Republic 3% Top 10 Lessees 54% (1) 9% in China. PAGE 4
DRIVERS OF IMPROVING ROE Repurchased $105 million of Share shares at a Sold or Repurchases significant contracted to discount to sell 57 aircraft NBV in 2015 (13 year average Sell Under‐ age) Reduced Reduce Performing Adjusted SG&A SG&A Assets by 14% YoY Improving EPS & ROE Bought 10 newer aircraft Reduced cost for $615 of secured million in 2015 debt to < 4% Reinvest in Actively Higher (two year at YE 2015 Manage Yielding average age) Liabilities Assets PAGE 5
FLY’S FOUR YEAR TRANSFORMATION Transformed Fleet—Younger, More Profitable FY 2011 FY 2015 % Change Fleet Age (years) 8.4 6.6 (21%) Lease Term (years) 3.7 6.6 78% Secured Cost of Debt 5.1% 3.9% (24%) Adjusted SG&A as a % of Total Revenue 9.5% 7.5% (21%) Adjusted Return on Equity 6.8% 18.7% 175% PAGE 6
SIGNIFICANT PORTFOLIO IMPROVEMENT 2011 2015 % of % of Aircraft Type # Age # Age NBV NBV A320 Family 49 42% 8 27 24% 8 A330 1 2% 11 4 10% 6 A340 3 7% 7 3 5% 9 B737 Family 37 38% 7 39 43% 7 B717 / 757 17 9% 13 3 1% 20 B747 / 767 2 2% 17 1 1% 19 B777F ‐‐ ‐‐ ‐‐ 2 13% <1 B787 ‐‐ ‐‐ ‐‐ 1 3% 2 Total 109 100% 8.4 years 80 100% 6.6 years PAGE 7
FLY’S ACQUISITION STRATEGY 2016 Aircraft Acquisitions • $750 million acquisition target • $445 million pipeline identified • Average age of ~2 years, remaining lease term of ~11 years • Ample liquidity: $800+ million in cash and unencumbered assets to invest in younger aircraft • New $385 million aircraft acquisition facility • • Acquisitions immediately accretive to bottom line Historical Aircraft Acquisitions 2013 2014 2015 Aircraft Acquired 14 22 10 Average Age at Acquisition Date 2 3 2 Total Acquisition Costs $642 million $952 million $615 million PAGE 8
MAJOR TRANSFORMATION UNDERWAY Sales of older, less profitable aircraft generated significant cash Portfolio metrics improving from fleet rejuvenation Investment in newer aircraft accretive to revenue and bottom line Strategic approach to liability and cost management reducing costs Focus on creating value for stakeholders through improved ROE and EPS PAGE 9
APPENDIX
CAPITAL STRUCTURE & LIQUIDITY SUMMARY Capital Structure Year Ending Year Ending December 31, 2015 December 31, 2014 ($ in millions) Unrestricted cash and cash equivalents $276 $338 11 ‐ Restricted cash available to purchase aircraft Rate 1 Rate 1 O / S O / S Maturity Securitization $296 3.38% $546 3.04% 2033 2012 Term Loan 2 428 4.39% 452 5.19% 2019 Nord LB Facility 255 4.04% 416 4.15% 2018 CBA Debt 88 5.02% 115 4.63% 2018‐2020 Bank Debt Facilities 663 3.63% 723 3.89% 2016‐2027 Aircraft Acquisition Facility 3 ‐ ‐ 122 4.15% ‐ Unamortized Discounts (25) (41) Total Secured Debt $1,705 3.91% $2,333 4.04% 2020 Notes 375 6.75% 375 6.75% 2020 2021 Notes 325 6.38% 325 6.38% 2021 Unamortized Discounts (9) (11) Total Unsecured Debt $691 6.58% $689 6.58% Total Debt 2,396 4.68% 3,022 4.61% Shareholders' Equity 657 756 Total Capitalization $3,053 $3,778 Net Debt to Equity 4 3.2x 3.6x Secured Debt to Total Debt 71% 77% Total Debt to Total Capitalization 78% 80% (1) Represents the contractual interest rates and effect of derivative instruments and excludes the amortization of debt discounts and debt issuance costs. (2) In April 2015, FLY re‐priced its 2012 Term Loan reducing the margin by 0.75% and the LIBOR floor by 0.25%. (3) Facility terminated in March 2015. (4) Represents the ratio of total debt, less unrestricted cash and cash equivalents, divided by shareholders’ equity. PAGE 11
FLY REMARKETING OVERVIEW Annual Aircraft Remarketing Requirements 11 12 10 9 10 (# of aircraft) 8 6 6 4 1 2 0 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FLY took advantage of robust market conditions in 2015 to sell and remarket aircraft, decreasing remarketing exposure PAGE 12
ADJUSTED NET INCOME & ADJUSTED ROE FY 2015 FY 2014 $ in thousands Net Income 22,798 60,184 Plus: Aircraft Impairment 66,093 1,200 Amortization of debt discounts and debt issuance costs 11,922 12,516 Amortization of lease discounts/premiums and other items 2,046 2,841 Amortization of GAAM acquisition date fair market value adjustments 3,650 6,260 Net loss (gain) on debt modification and extinguishment 17,491 (2,194) Share‐based compensation expense 195 30 Unrealized foreign exchange gain (1,247) ‐ Deferred income taxes expense 4,919 5,733 Loss on ineffective, dedesignated and terminated derivatives 4,134 72 Adjusted Net Income 132,001 86,642 Average Shareholders' Equity 706,609 749,175 Adjusted ROE 18.7% 11.6% PAGE 13
ADJUSTED SG&A FY 2015 FY 2014 $ in thousands Selling, General & Administrative 33,674 41,033 Less: Share‐Based Compensation 195 30 Unrealized Foreign Exchange Gain (1,247) ‐ Adjusted Selling, General & Administrative 34,726 41,003 Total Revenue 462,397 425,548 Adjusted SG&A as a % of Total Revenue 7.5% 9.6% PAGE 14
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