Avation (LSE:AVAP) — Results for the financial year ended 30 June 2022

0:01 Good afternoon, ladies and gentlemen, and welcome to the AVAPION PLC twenty twenty two Financial Year Results and Investor Update Conference Call. My name is Mark, and I'll be your conference moderator for today. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we

0:32 would like to submit the following poll. And if you give that your kind attention, I'm sure the company would 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 September 29, AVATION published its unaudited financial results for the financial year ended 06/30/2022. A copy of our earnings release is available on our website at www..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.

1:25 These statements and any projection as to the company's future performance represent management's estimate of future results and speak only as of today, 09/29/2022. 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.

2:13 Thank you very much for your time. In the year ended 06/30/2022, 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.

2:55 Fleet utilization has improved as unused aircraft have been transitioned. Significant impacts of airline insolvencies and restructurings have mostly been reflected in previous periods, and distributions to 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 willing lenders willing to lend against against aircraft assets. These factors confirm the emergence of an industry from the pandemic. The company's strategy will be to focus on leasing modern low c o two emissions, fuel efficient aircraft in the future. AVATION is supportive of the aviation industry's goal, becoming more sustainable through a transition to a new technology, more fuel efficient aircraft engine and the use of sustainable aviation fuel.

3:49 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 June 30, the company had 39 aircraft in the fleet, serving 70 different customers in 14 country. AVATION owns regional narrow body and twin aisle aircraft. The fleet is split 70% wide body, 52% narrow body, and 31% turboprop by value. The aircraft fleet has a five point six year weighted average age and a five point seven year weighted average remaining lease term.

4:35 AVATION has total assets in excess of $1,200,000,000 Attached to that fleet is $50.04 sorry, dollars $5.00 7,000,000 in unearned contracted lease receivables from existing operating leases and a further $61,000,000 in finance lease receivables. That's over $6.05 $68,000,000 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 a 100% sustainable aviation fuel to produce low c o two emissions on a net basis. Low c o two emissions will advantage airlines in terms of taxes and government regulation.

5:26 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 June 30 is dominated by fuel efficient regional and narrow body aircraft. It's these sectors that are fastest in their return to service from the pandemic.

5:54 83% of AVATION's fleet is focused on regional and domestic travel, which is close to returning to 2,019 pre COVID levels. AVATION believes newer aircraft carry a lower risk of obsolescence, provide greater long term cash flow to service debt through long term leases, and importantly, will continue to deliver improvements in emissions and sustainability in the airline sector as it moves to a carbon neutral future. AVATION holds orders for two aircraft and purchase rights of 28 ATR seventy two six hundred aircraft. This access to new aircraft represent represents a growth asset that has increased in value during the financial period as customer demand drive up drives airlines to increase capacity and provides investors with a visible pathway to AVATION's future growth.

6:45 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 four 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 the reversed some of the impairment and increased the overall value of the fleet. The increase in valuation only represents a small recovery of the impairment taken during the during the pandemic. As the world continues to emerge from the pandemic, demand for aircraft is expected to continue increasing.

7:34 As airline travel continues to gain strength, improvement in lease rates may lead to further increases in aircraft value in the future.

7:54 The next slide shows airline customers. Today, we have 17 customers in 14 countries. AVATION's customers include five flag carriers. These flag carrier airlines appear to have been 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 that pandemic has impact impacted different areas at different times. Around two thirds of AVATION's customers by revenue are located in Asia with the remainder in Europe, where our largest customer, Air Baltic, has been performing well.

8:41 The power restructuring plan became effective on 12/31/2021. Assured to the restructuring plan, power has retained a Boeing triple seven three hundred ER aircraft on lease from AVATION in accordance with the plan. The lease will for this aircraft will continue until the scheduled original scheduled termination date. Power 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 never had 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.

9:30 AVATION is a focus on new or young aircraft and therefore is a natural seller of midlife aircraft.

9:43 I'll now hand over to Richard to run through the FY twenty two results. Thanks, Jeff. The next few slides of the presentation provide a summary of, our FY twenty two 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 2022 summary. During the financial period, AVATION generated total income of $116,400,000 with revenue of 112,200,000. Operating profit saw a dramatic turnaround to $90,200,000, profit from a loss of $62,700,000 in twenty twenty twenty twenty twenty twenty one.

10:31 Profit before tax before noncash loan modification charges saw a $150,000,000 turnaround to $34,900,000 from a loss last year of a $120,500,000. We have highlighted profit before tax number pre these charges due to the material non cash charges skewing the profit and loss as a result of loan modifications and their treatment under IFRS

10:55 nine. 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 nine, which led to a noncash gain being recognized of $50,000,000 in the statement of profit loss in the year end last year in the year ended 06/30/2021. Under IFRS nine, 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 06/30/2022, amortization of this gain led to a non cash charge of $8,800,000 being recognized as a finance expense. In addition to this, a further non cash charge of $3,500,000 was created when AVATION successfully extended the aircraft loan warehouse facility to 09/30/2026.

11:48 As a result of this, total profit after tax of $17,100,000 was was earned, which is a significant turnaround from a loss of $84,900,000 in the corresponding period last year. Total assets declined by 5% to $1,210,000,000. However, net indebtedness was able to be reduced by 14% to $793,000,000, down from $923,000,000 the previous year. Earnings per share, were 24.7 US cents for the period, up from a loss of a 131.2¢ last year. NAV per share rose by 63 to £2.68 from a pound 64 a year ago. On to some of the operational highlights, for the financial year 2022.

12:41 The company managed to sell five aircraft including an Airbus a two twenty, an Airbus an Airbus a three twenty one, and three three of the ex Virgin Australia ATR 72 aircraft. A further two ATR 72 aircraft were returned and are in the process of being sold with completion next month. Two aircraft leases were extended with heavy lift and a third ATR 72 was leased to heavy lift as well. The PLC restructuring was completed with the airline retaining the Boeing seven seventy seven-300ER 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 an Airbus a three twenty was extended by forty four months with easyJet.

13:31 A couple of aircraft transitions as well. Boeing seven thirty seven was repossessed, and we're remarketing that aircraft now. And the Airbus a three twenty was returned, and that has been transitioned already to a new customer. And the next Golden, Myanmar ATR 72 aircraft is 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 09/30/2026. On the following slide, we have a quick debt analysis on our on our debt position, which has improved significantly over the past year. Total loans and borrowings, current and non current, dropped by 13% to $828,000,000 from $948,000,000 a year ago. Net indebtedness has declined by almost a $130,000,000 since 06/30/2021 to $793,000,000 down from $923,000,000.

14:32 There was an increase in the weighted average cost of the group secured debt facilities to to 4%, up from 3.9% as a result of repayment of some lower cost debt that increased the number of unencumbered aircraft in the fleet in the period. The weighted average cost of debt for 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%. And the chart at the bottom of the page shows the evolution of the group's cost of debt over the past nine years. 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 US dollars. As a result of the weakening of the pound against the greenback, this saw the NAV per share in pounds increase 63% to £2.68 from a pound 64.

15:35 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 £3.00 6. This is important as, the US dollar reservations functional currencies, most aircraft leasing transactions, purchases, sales, and lease agreements are in US dollars. Lease yields decreased slightly to 9.6% from 10.3%. 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 3.6 times from six times over the past year, and net debt over EBITDA saw a similar improvement to 7.6 times versus 12.5 times as at 06/30/2021.

16:27 Debt to total assets dropped to 68 percent from 73.9%, and EBITDA as a function of interest expense also improved to 1.9 times from 1.4 times a year ago. The next slide would 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 the 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.

17:20 The unsecured bonds have a maturity date of 10/31/2026 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 a 108% for the year ended 06/30/2022, which is a significant improvement over the last financial year where the, cash collection rate was 67%. The company also has three unencumbered aircraft as at June 30. Liquidity is expected to continue to improve in the first half of the new financial year, beginning with the completion of the sales of two ex Logan air air ATR aircraft, and then in the second half with regular significant repayments of some of the deferred rent from the pandemic period.

18:15 Other positive cash flows can potentially include further aircraft sales, which could include any of the, unutilized aircraft being the Boeing seven thirty seven, the two 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 101,400,000 Australian dollars. AVATION was notified of an initial distribution from the creditors trust of 5.4¢ in the dollar on 09/15/2022 in respect to the claim. A further distribution based on funds withheld by the trustee is also expected and in addition to this, funds may be made available to creditors should Virgin Australia meet performance targets in the financial year ended 06/30/2023.

19:17 The potential total of these additional distributions is estimated to be in the range of $1 to 2¢ 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 thirty September twenty twenty six. As such, there is no cash crunch as as as a result of the sea of of senior debt coming as a result of the loan amortization restructuring AVATION has negotiated with senior lenders as part of our COVID nineteen coping strategy.

20:09 There is also a long pathway to maturity of the unsecured bonds represented in Greenout to October 2026. Loan maturities are typically aligned with lease terms and with a long average lease duration of five point seven years. Most of this AVATION senior debt, which makes up close to 60% of total debt has significant duration.

20:31 AVATION confirms that it is current with all payments to secured lenders. AVATION either 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 cap the current capital structure. I'll hand back to Jeff for the final couple of couple of slides that talk about the company's strategy and pathway forward.

20:59 Thank you, Richard. AVATION's strategy during COVID was to reserve liquidity and reposition or sell aircraft returned from customers as as they occurred, which basically been successful. The implementation of this strategy has enabled the company to materially lower net indebtedness, support our customers' survival, maintain adequate liquidity, and keep the core business intact. Now that the industry is returning positively with opportunities increasing, the company will transition to into a more forward looking strategy that is intended to return the company to the growth and profitability experienced pre COVID.

21:48 The return of air travel and the confirmation of passenger demand around the world is surprised to the upside in 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 CO two strategy for the company going forward. So in '23, the focus is to position, transition, sell, place the last three unutilized aircraft, maintain a focus on liquidity.

22:37 There is significant opportunities around the ATR 72 order book with the new Pratt and Whitney one two seven XT 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 and transitioning aircraft. The strategy, this is very important, very important. The company's 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.

23:36 So gradually, over years, we we expect that we'll trade out of older aircraft types and focus on aircraft types such as the the neos and the a two twenty 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, yeah, all of our the orders for those aircraft in future all have the the new new engines, the p w one two seven XT, 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.

24:21 The manufacturer expects that the p w one two seven XT engine will be certified to operate with a 100% sustainable aviation fuel in the near term. With when using sustainable aviation fuel, net emissions of c o two are reduced by 80%, which is very important because, obviously, regulations and governments are forcing low c o two operations on on airlines. AVATION supports and is committed to the eventual transition of the industry towards aircraft using 100% sustainable aviation fuel to produce low c o two emissions on a net basis. Low c o two of o two low c o two emissions will advantage airlines in terms of taxes, government's costs, and are also key to providing a substantial future for global aviation.

25:18 So in conclusion, the disruption created by the COVID nineteen pandemic is receding following the successful rollout of vaccines and and other things, and this has supported the return to increased levels of air travel. This trend is evidence evidenced in regional and domestic trap 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 resolved some of the key remaining issues generated by the pandemic.

26:05 AVATION is set to emerge from 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 to normal trading conditions as countries open up. AVATION's largest five customers, which make up almost 70% of the revenue, were current with or in compliance with repayment plans as of June 30. 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, Philippine Airlines, and collections of outstanding amounts related to rent deferral arrangements and the increase

26:57 in receivables as a result of COVID nineteen. There are likely to be opportunities to buy aircraft from airlines and lessors looking to adjust or reduce their portfolio, which with 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 in the low two low CO two turboprop and narrow body aircraft sectors. We, a management team, to continue to support, believe it and align with the company and its investors. And I'll now hand over for the, q and 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.

27:42 Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen.

27:57 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, 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 the poll because they're interesting. Are you a shareholder of AVATION PLC? Well, 54% of you are, so I I don't know what the rest of it. Should AVATION's credit rating increase now that we've shown that we've survived COVID? Eighty seven percent of you think we should. That's great. The interesting question is how much more would you pay to be zero two at CO two if you 'd spent $500 on an air ticket?

28:42 65% of you say 28% of you say $100, and 7% of you say $500. The bad news is that today's prices, the real number's more likely to be a thousand dollars. So that's why it's important that we have low c o two engines. So I said, you know, if only four of you 4% of you will pay sorry. 7% of you will pay $500, it's not a very good result. So the q and a, we've got lots of questions. So, Jake, presubmitted question. Historically, AVATION has been approached in the past for sale of substantial portions of the fleet, and, indeed, prior to COVID, AVATION was reviewing a strategic review after being approached by a bona fide offeror.

29:34 Given these substantial discounts to NAV, AVATION has aVATION receiving expression of interest in the company with substantial part of its fleet taken in recent months,

29:44 or is the general appetite for M and A subdued? Well, we the company receives

29:50 inbound inquiries from various investors of various qualities every couple of weeks, but they're not, generally well formed. And we yeah. That's why we have brokers and advisers. You know, those people come into our brokers, and and they deal with them in

30:09 the normal way. I I don't I don't see a lot of m and a activity in this sector given that COVID's only just finished and people are sort of still working out what's going on, and there's a lot of volatility in the in the financing markets. The second question, would Jeff Chapman or would I look forward to creating a new aircraft leasing coming from scratch again or seek to have a secondary role within an enlarged group? The answer is, OVATION's doing super well now. It's super well positioned, so we don't need, anything else. Question from Brandon. After COVID, I believe you converted one or two receivables from lessees into effectively term loans.

30:57 In relation to these, could you detail how much 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 Ian. Yeah. Hi, Brandon. So the amount at June 30, outstanding on that that loan is $21,000,000. The repayments will start in January 23 and continue over the twenty four months until December 2024.

31:26 Excellent. Phil asks, what is the company's ability to monetize Powell shares, and what is the expected value?

31:35 Ian?

31:37 Yeah. I mean, there's there's no restrictions on us selling those our shares if we we can find a a market for them. And the the valuation They do convert to listed shares. I think at some point. At some point. At the moment, they're they're still unlisted. So, I mean, our valuation is based on the listed holding company, and we value the shares between 3,000,000 and $4,000,000 The

32:00 next question was given the current NAV and dollar rate on the share price, do you have thoughts to launch a substantial buyback, or would there be a better use of spare cash?

32:13 Well, ultimately, the company's gotta manage all parts of capital structure, so bonds, shares, and bank debt. And, clearly, the expensive money at the moment are the bonds. So and, also, it's gotta be able to grow and survive. So it's a juggling match with several balls so that the shares are part of it. The bonds are part of it, and growth's a part of it. And you clearly you you need to fuel all all of those activities. Ken B asks, what level in inflation rate are you seeing on new ATR three twenty two twenty ATR aircraft?

32:55 How is this reflected in existing fleet valuations over and above the normalizing of the asset revaluation? This is a question. Ian?

33:05 Yeah. I mean, we've obviously seen inflation jump in the last year. So we've increased our inflation estimate, which we use for our residual values, which which forms part of our lease incumbent valuation of the aircraft fleet. So we've we've basically increased the near term, you know, inflation factors to to match current rates of inflation, and and then that trends back down to a a sort of a long term 2% inflation factor. Well, we're we're Helen, we're under if you read the newspaper, the inflation rate's at three times what our inflation rate is. I mean, we we we did this exercise before June 30, and I think what everybody's seen is that inflation has continued to to increase since June 30. So Yeah. We we use published the published numbers back in about May.

33:55 And, clearly, the obviously, the published numbers now could be double or triple that.

34:04 Next one, Keith, the aircraft sales two ATR 70 twos for completion in October 22, not '23 as on slide. We have two available for sale lease at the moment, correct, in 2022. We might have there might be an error on a slide. That's nice. Two are being two are in the process of being completed,

34:29 and the last two Virgin aircraft, we're still trying to sell. Yeah. That's in 2022. The health health of sale are the two that are currently for sale. Yeah. There is there is an error in slide nine that he's referring to, which is the second bullet point, two ATR 72,600 have been returned and sold with completion expected October 23. That should be October 2022. Jonathan P, is there any reason why the debt is not hedged? Well, it is. Ninety ninety odd percent of the debt's hedged, Jonathan. The only bits that are not hedged are in the warehouse, which is what a warehouse does. Yeah. And there there's there's two components to unhedged debt. There's the the the warehouse loan, which is about 8% of our our debt.

35:20 And then

35:22 we also have two aircraft, which are on floating rate leases. So we've kept the debt at floating rate because there's a natural hedge debt, although we don't we don't call it hedged in the reporting. Next question from Angie. Which aircraft are currently unutilized, and what are their plans to release or sell? Do these four aircraft represent the 130,000,000 assets held for sale? Rod, what have we got to place? Well, we have currently, we have seven three seven, which still needs to be needs to be placed, and we have two two ATRs. The last two are the Virgin ATRs, which we're still trying to place or sell lease or sell.

36:11 The Myanmar one. Although, it's the contract. We have a commitment. Transition. Transition. Assets have held for sale as of June 30. There was a number of aircraft. You've you've seen a number of aircraft transactions occur and occur in Phil H, what was the size of the bond repurchase, and what was the price, Ian? So we we repurchased 4 mill $4,400,000 face value of notes at 75¢. Brian, see, generally speaking, the current market, where do you expect to utilize process from assets of sale investment, new aircraft, award, debt, pay down?

36:57 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 in our business. So there's not a sort of a you know, we need to continue as normal. Right. Keith b, could you explain how low carbon emissions fuels are manufactured? Well, the the thesis is that fossil fuels are obviously pulled out of the ground, processed, and distributed, whereas sustainable aviation fuels are manufactured product mainly from sustainable inputs.

37:48 And the advantage from a from a number of perspectives is it's a manufactured product. So people have offtake agreements, and they're not exposed to the, you know, the the oil price changing every day. But at the moment, you know, the manufacturing is quite energy intensive, and it's more 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 manufacture 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.

38:42 Probably by the end of the decade, all aircraft types will be able to use it. Phil H. Why did assets held for sale jump so much? Well, because we've sold we've sold and transitioned lots of planes. We had how many did we have to transition? 21 or something? Yeah. I mean Yeah. Two. Yeah. One way or another. Last year, the number was based on three ATRs, which were sold in the in the last year. And this year, the number is based on two a three twenty ones and two ATRs, which are currently available for sale. The next one is, can you expand more on the situation with the customers less compliant with compliant with payment terms, Lee?

39:34 Yeah. I mean, you know, there's there's a number of customers Small number. Who are in arrears. But, I mean, I think the position has improved compared to last year. I mean, if you look at, you know, some of our major customers, I mean, we spoke earlier about the conversion of some of those arrears into a into an interest bearing loan. But, yeah, I mean, we we regularly follow-up with with customers over arrears and and sometimes take steps to recover those arrears. There's a couple of claims out at the moment. The next one is from. Should we expect higher pay down of secured debt in FY twenty three?

40:23 Probably not more than normal because it follows amortization. Unless you sell an aircraft. Unless you're trading aircraft, but there's only a few we're trading in. Should we expect further material bond buybacks? Well, no comment on that. There's probably not. From a modeling perspective, any guidance on revenues and EBITDA for '23 again for most of them? No. Not at the moment. How much should we expect exactly in asset sale process? We don't know the answer to that. James is asking, it was going great pre COVID. How are we doing now compared to pre COVID? Well, we're recovering from COVID.

41:13 Clearly, there's plenty of opportunity now because the manufacturers haven't manufactured that many aircraft during COVID. The airlines are recovering. Five or six or 7% of all the world's aircraft are 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 is in demand. And and and I was also quite interestingly, with the technology change of low CO two, it means you can do it all again.

42:02 You know, you've got to there's a lot of aircraft that will need to be replaced. So the whole aircraft leasing industry is gonna be sitting there thinking we have a lot of work to do and a lot of opportunity, and there'll be a lot of lot of growth. So we're not there yet, but, clearly, it's a very opportunistic time. Can be is there an opportunity to revisit spare engine support in the new engine type? It could have 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 pure leasing, aircraft fleet, engine leasing businesses, and they don't seem to have had the have the scale that they could've.

42:59 Feel like should legal professional fees come down, 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 we did legal transactions with almost every, lessee and almost every bank, often more than once. So during the period, our external council fees were were much higher than we would normally expect. I mean, normally, our fees are are a a proportion of new trunk of transactions that we do, but have been extremely high during the COVID period, and we do expect them to come down significantly, in the future. J c says with the expected influence from rents, what is the minimum cash you need to hold?

43:46 What are your priorities for excess cash? We have no excess cash. We'd like to hold over a $100,000,000. Easy. I think the minimum would be a 100. Next slide. Random b is a revised broken note. Yes. There are two or three. Canaccord have one. Davy have one, and W. H. Island have one. Charles C. Vacian's triple c. Creditable, not triple c. Minus. Would be minus now. It would be an upgrade. If you had issued debt today, what yield would it be required, and how does it compare to your asset? Well, I don't know how I think the market's pretty tough for anyone at the moment. I see all the, it's a struggle on that one. Are there any more questions?

44:36 Jeff, you've been very kind, and you've read through every single question that that has 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 to the team for updating investors this afternoon. I know investor feedback will be important to you all. I'll surely redirect those on the call to give you their feedback. But, Jeff, before doing so, 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 a torrid time, and there's it's still a lot of risk in the industry. You know, 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 fundamentals, which are passenger demand, is is demonstrably there.

45:29 You know, airlines are people wanna travel. Airlines are recovering, and the ones that have survived will will will do well and therefore will do well. So thanks thanks for your time, and please, feel free to contact us with questions at any time, and we we remain available. Thank you so 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 now automatically redirect you for the opportunity to provide your feedback in order management team can better understand your views and expectations? So it'll 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 PLC, we'd like to thank you for attending today's presentation, and I wish you all a very pleasant afternoon. Thank you.