Operating lessor Aircastle remains on track to repeat its 2012 investment target of $850 million after ending the first quarter with $450 million in committed aircraft purchases.
"Beyond these commitments, we are encouraged by the flow of new investment opportunities," said Ron Wainshal, chief executive officer of Aircastle, during a first quarter earnings call.
The $450 million worth of purchases, involving 10 aircraft, are due to close during the second and third quarters, he says.
Wainshal sees opportunities in the secondary market where bank debt has "dried up", limiting the number of aircraft buyers in this space.
"I think our situation, in terms of not relying on banks, and being able to fund through the bond market, gives us a leg up."
Aircastle's chief financial officer, Mike Inglese, noted new narrowbody aircraft have seen the "biggest change" in buyer appetite, as investors in this market are heavily backed by capital in search of yield.
"We're seeing a lot of interest [in new narrowbodies], and a push-up in prices, corresponding to a return drop," he says, adding: "And some of that is fuelled by very low interest rates."
Inglese acknowledges there are some players in that market that have "ultra-low debt costs" and new aircraft "might make sense for them, but it doesn't make sense" for Aircastle.
"And for that reason, we are kind-of stepping aside and let that market do as it does."
At the end of the first quarter, Aircastle's unrestricted cash balance was $693 million. Operating cash flow, which includes collections from finance leases, was $94.6 million and $453 million during the past 12 months - representing a 23% increase over the prior 12-month period ended March 2012.
According to Wainshal, unencumbered aircraft totalled $2.1 billion, or 44% of the net book value of the lessor's flight equipment. "This is essentially flat with year-end 2012," he says.
Total borrowings at quarter-end were $3.5 billion, down from $3.6 billion at year-end 2012. Net debt outstanding was $2.8 billion, which is approximately 60% of the net book value of flight equipment at the end of the quarter.
During January, Aircastle repurchased approximately 700,000 shares at the cost of $8.6 million. Since the beginning of 2011, the lessor has repurchased 11.7 million shares at an average price of $11.87 a share. The lessor has $30 million remaining under its existing share repurchase authorisation.