Investor Day May 26th 2015 Welcome
Investor Day May 26th 2015 Introduction & Vision Dómhnal Slattery
Disclaimer Concerning Forward-Looking Statements and Non-GAAP Information This document includes forward-looking statements, beliefs or opinions, including statements with respect to Avolon s business, financial condition, results of operations and plans. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond our control and all of which are based on our management s current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as believe, expects, may, will, could, should, shall, risk, intends, estimates, aims, plans, predicts, continues, assumes, positioned or anticipates or the negative thereof, other variations thereon or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. No assurance can be given that such future results will be achieved. These risks, uncertainties and assumptions include, but are not limited to, the following: general economic and financial conditions; the financial condition of our lessees; our ability to obtain additional capital to finance our growth and operations on attractive terms; decline in the value of our aircraft and market rates for leases; the loss of key personnel; lessee defaults and attempts to repossess aircraft; our ability to regularly sell aircraft; our ability to successfully re-lease our existing aircraft and lease new aircraft; our ability to negotiate and enter into profitable leases; periods of aircraft oversupply during which lease rates and aircraft values decline; changes in the appraised value of our aircraft; changes in interest rates; competition from other aircraft lessors; and the limited number of aircraft and engine manufacturers. These and other important factors, including those discussed under Item 3. Key Information Risk Factors included in our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission on March 3, 2015, may cause our actual events or results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements contained in this document. Such forward-looking statements contained in this document speak only as of the date of this document. We expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this document to reflect any change in our expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law. The financial information included herein includes financial information that is not presented in accordance with generally accepted accounting principles in the United States ( GAAP ), including adjusted net income and adjusted return on equity ( adjusted ROE ). The Appendix to this presentation includes a reconciliation of adjusted net income and adjusted ROE with the most directly comparable financial measures calculated in accordance with GAAP. Avolon Slide 3
Welcome & Agenda TODAY S AGENDA Afternoon Evening 2.00pm Introduction & Vision Dómhnal Slattery 3.55pm Aircraft Trading Brian Foley 2.15pm Industry Outlook Dick Forsberg 4.15pm Risk Management Tom Ashe 2.35pm Sale & Leaseback Market John Higgins 4.35pm Growth in Asia Pacific Simon Hanson 2.55pm Financial Overview Andy Cronin 4.55pm Q&A 3.15pm Q&A 5.15pm Closing remarks Dómhnal Slattery 3.30pm Break Cocktails 6.00pm 7.00pm Entertainment Event concludes Avolon Slide 4
The View from 35,000 Feet Leveraging secular growth trends to generate Consistent, Long-Term Value for shareholders Capitalising on the Stability and Predictability of a global supply duopoly Five Essential Pillars for success in aircraft leasing Avolon Slide 5
Primary Drivers of Long-Term Value Creation Favourable global demographics Global middle class population forecast to expand from 2.4bn today to 3.7bn by 2023 (+54%) 1 Air Transport is a leveraged play on global GDP growth Passenger traffic has grown by 1.6x global GDP over last 30 years Widespread proliferation and acceptance of the LCC 2 model Most new airlines since 2000 have been LCCs Wholesale migration to an asset-light, marketing-heavy airline business model Structural, long term demand from replacement of ageing assets 40% of the global fleet approaching the end of its useful economic life 1 OECD 2 Low Cost Carrier Avolon Slide 6
Rational, Predictable and Stable Supply Airbus (Europe) vs Boeing (USA) Multi-decade supply-side and political duopoly Natural 50:50 market share Fluctuating at ±5% around this equilibrium through the cycle Rational competition prevails Engenders stability in production levels and through-cycle residual aircraft values Limited risk of technological obsolescence Efficiency coming predominantly from engines not airframes Avolon Slide 7
Five Essential Pillars for Success 1 2 3 4 5 Minimum scale requirement of $10bn on BS 1 and locked in growth Multi-cycle management experience Sustainable and efficient access to capital Recurring, long term relationships with OEMs 2 Depth & quality of airline relationships Top 10 lessors account for 60% of delivered and committed fleet on operating lease Founded & scaled two leading global lessors with a core focus on risk management Repeat access to deep pools of liquidity with global capital markets & banks 20 year order history with Boeing & Airbus Network of 150+ airline customers globally 1 Balance Sheet 2 Original Equipment Manufacturer Avolon Slide 8
Avolon Prime Strategic Position Minimum Scale - $10bn $13bn 251 aircraft, 2.6 years age 1 Delivered and committed fleet In-demand, modern, fuel efficient aircraft Multi-cycle Management Experience Sustainable, Efficient Capital Deep, Valuable Relationships Consistent, High-Quality Shareholder Returns Note: As of 31 March 2015 1 Average age of delivered fleet 2 Non-GAAP measure, see appendix for details 3 Based on FY15 outlook as at 31 March 2015 24 years Average executive leadership experience $10bn Capital Raised Since inception 20 years Boeing & Airbus order history 14.7% - 15.0% Adjusted ROE (FY15) 2 12.8% - 13.1% ROE 3 Strong Risk Ethos Disciplined, proactive approach $568m Embedded fleet value - at 31 Dec 14 150+ Airlines 51 clients in 29 countries Organic Growth 57% adjusted net income CAGR 2012-2014 2 Avolon Slide 9
Investor Day May 26th 2015 Industry Outlook Dick Forsberg
Focus on Five Key Themes 1 2 3 4 5 Commercial aviation is a global business with sustainable growth underpinned by emerging markets world fleet will double to 45,000 aircraft by 2033 The industry is a voracious consumer of capital - $3.5 trillion required over 20 years, $522bn for deliveries through 2018 The leasing sector is the largest single financing channel and is growing Disciplined OEMs are carefully matching capacity to demand The industry environment remains healthy with a positive outlook Source: IATA, Boeing and Airbus Avolon Slide 11
Strong & Durable Industry Fundamentals Airline industry achieved a 5th consecutive year of profitability in 2014 Forecast to reach record $25bn in 2015 Air passengers forecast to grow by 7% in 2015 and c.5% per annum to 2033 Asian economies forecast to generate 100 million new passengers a year Equivalent to adding one new Ryanair every year VFR traffic close to 200 million annual passengers Growth from rising urbanisation and labour migration Highly stable, even during economic downturns Rising numbers of fleet retirements will absorb >40% of deliveries Record OEM backlogs with long lead times Extended book:bill provides locked-in growth and buffer 10-15% overbooking is routine Source: IATA, Boeing and Airbus Avolon Slide 12
Growth Centred On Emerging Markets Expanding air travel in emerging regions is driving significant demand for aircraft Trips per Capita 2013* Log scale Trips per Capita 2013* - Log scale 100.00 100.00 10.00 10.00 1.00 1.00 0.10 0.10 0.01 0.01 Traffic and Propensity to Fly Australia Australia UK Turkey S.Korea Japan Germany UK Russia Turkey Japan Germany IndonesiaRussia S.Korea Brazil Indonesia Brazil Mexico China Mexico China India India USA USA Market penetration still low in emerging markets: 85% of population, but 40% of trips 0.00 0.00 10,000 20,000 30,000 40,000 50,000 60,000-10,000 20,000 30,000 40,000 50,000 60,000 85% of world 2013 GDP per Capita (constant 2005 US$) 85% of world 2013 GDP per Capita (constant 2005 US$) population 40% of trips population - 40% of trips Passengers carried by airlines domiciled in the country * Passengers carried by airlines domiciled in the country Sources: World Bank, ICAO Sources: World Bank, ICAO Avolon Slide 13
Growth Centred On Emerging Markets (continued) Expanding air travel in emerging regions is driving significant demand for aircraft Asia-Pacific Becoming the Dominant Region 2013-2033 Passenger Traffic Growth by Region Asia-Pacific Europe North America Latin America Middle East CIS Africa 2003 2013 2033 6.2% 4.0% 2.9% 6.0% 6.1% 4.4% 6.1% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Source: Boeing 2014 CMO, company analysis RPKs (Trn) % of 2003 RPKs % of 2013 RPKs % of 2033 RPKs 23% 30% 39% 27% 24% 20% 36% 27% 18% 6% 7% 9% 3% 6% 7% 2% 3% 3% 3% 3% 3% Traffic in mature markets will be overtaken by Asia-Pacific economies Asia-Pacific forecast to grow to a 39% share by 2033 Avolon Slide 14
OEM Discipline & Record Backlogs Most products sold out to the end of the decade # of aircraft 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Airbus + Boeing Order & Backlog History Airbus + Boeing Book:Bill History Boeing strike 10 8 6 4 2 0 Years Orders to deliveries ratio ( book:bill ) averaged 1.8x over past 10 years Backlog, measured by years of production, has doubled to 9 years Source: Ascend Backlog Orders Deliveries Backlog (Years) Source: Ascend Avolon Slide 15
OEM Discipline & Record Backlogs (continued) Most products sold out to the end of the decade Production is up to 15% lower than orders 800 700 600 500 400 300 200 100 0 Single Aisle Production & Over-booking Overbooking 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 CEO NEO NG Max Production Production Delivery rates protected by deliberate over-booking Source: Ascend Avolon Slide 16
Many Direct Customers Lack New Gen Orders Neutralises concerns over double counting orders 65% of A320 direct customers have no NEO backlog 65% of A320 Family operators that order direct from Airbus have no NEO backlog CEO Only, 29 NEO only, 15 CEO and NEO, 27 74% of 737 direct customers have no MAX backlog 74% of 737 operators that order direct from Boeing have no 737MAX backlog NG Only, 24 MAX only, 8 NG and MAX, 17 No Backlog, 48 No Backlog, 46 Source: Ascend Passenger aircraft only. Source: Ascend Narrowbody customers are significantly under-ordered Avolon Slide 17
$522bn Delivery Funding Requirement to 2018 Multiple funding choices, with leasing taking the dominant share Average $130bn funding requirement over next 4 years ~40% Lessor Share 50% Airlines will need 36,000 new aircraft, valued at $3.5 trillion, over the next 20 years $115B $124B $125B $132B $141B 16,000 deliveries in the next 10 years Lessor share of aircraft deliveries has increased from 6% in 1984 to 40% in 2014 Share is expected to increase to 50% by 2020 2014 2015 2016 2017 2018 2020 Cash Capital Markets Bank Debt Export Credit Tax Equity Source: Boeing Capital Diverse lessor funding sources, with capital markets taking growing share Source: Boeing Avolon Slide 18
Positive Near-term Outlook Growing, efficient and profitable utilization of fleets and capacity Traffic: +7% forecast in 2015 Load factors: ~80% globally above trend record high DEMAND Utilization: +15% vs. 2003 Parked fleet: Post-recession low Profits: $25bn forecast in 2015 Stable values & lease rates record high record high FLEET VALUE Source: Boeing, IATA Avolon Slide 19
Investor Day May 26th 2015 Sale & Leaseback Market John Higgins
Sale & Leaseback Market Core Thesis How does a SLB Work? Why do Airlines & Lessors do SLBs? Factors for Success Are the Returns Robust? Thesis Revisited How Big is the Market? Avolon Slide 21
Core Thesis The SLB market is a proven, substantial and growing origination channel that offers significant growth opportunities for well-placed lessors and delivers strong, low-risk, high visibility returns Avolon Slide 22
How does a SLB Work? AIRLINE 1 5 5 O.E.M 2 3 4 1 2 3 4 Sale & Leaseback Model Airline orders aircraft Airline and Avolon agree: 1. Purchase price & reference date 2. Rental ( LRF ) & reference rate 3. Lease term 4. Maintenance and redelivery conditions Airline and Avolon fix rental 2 days prior to delivery based on prevailing interest rates Avolon match fund the interest rate on lease and debt Simultaneously 5 Manufacturer sells aircraft to Airline who simultaneously sells to Avolon & leases back Avolon Slide 23
Why do Airlines & Lessors do SLBs? Airline Provides capital / financing Flexibility in fleet and capacity management Management of residual value exposure Consistent with outsourcing of non-core airline operations Lessor Lower risk compared to direct orders Broadens relevance to the growth airline customer base Avoids drag of forward order deposits Capital Efficient - short fuse to deployment SLB is a major financing source across the credit, geographical and sectoral spectrum Avolon Slide 24
How Big is the Market? Growing delivery finance requirements Financing forecast for global commercial airplane deliveries in 2015 $115 2% 24% $522bn $124 $125 $132 2% 23% $141 $156 $522bn financing requirement to 2018 28% 32% 31% 28% 15% 15% $bn 2014 2015F 2016 2017 2018 2019 Cash Capital Markets Bank Debt Export Credit Tax Equity Source: Boeing Avolon Slide 25
How Big is the Market? (continued) $522bn Delivery Financing Lessor Overall Share 40% 50% Of Which: - Direct Order 50% 60% - SLB 50% 40% - SLB Share of Overall 20% 20% Source: Boeing, Airbus, Avolon $104bn to 2018 Avolon Slide 26
Factors for Success $ Competitive and Diverse Sources of Capital Precedent Relationship Global Platform with Reach Proven Appetite for Scale # of Competitors Higher Speed Lower A Significant proportion of our SLB deals are Originated Off Market Avolon Slide 27
Are the Returns Robust? INCREASING YIELD Annualised Lease Yield 1 Interest Rate 2 Rising SLB lease yields 15.0% 10.0% 5.0% 0.0% 2011 2012 2013 2014 11.0% 3.8% Reduced funding cost Widening net yield 1) Annualised Lease Yield - annualised lease revenue for flight equipment held at the end of each reporting period divided by the aggregate Net Book Value of flight equipment held at each reporting period 2) Interest Rate -annualised cost of debt as at the end of each period, does not include the effect of up front fees, undrawn fees, issuance cost amortization or fair value gains / losses on derivative financial instruments. Increasing ROE Financially Rational Competitive Dynamic Underpins Market Returns Avolon Slide 28
Thesis Revisited The SLB market is a proven, substantial and growing origination channel that offers significant growth opportunities for well-placed lessors and delivers strong, low-risk, high visibility returns Avolon Slide 29
Investor Day May 26th 2015 Financial Overview Andy Cronin
Q1 2015 Sustained Strong Growth NET BOOK VALUE $ millions $ millions 8,000 6,000 4,000 2,000 0 4,389 5,844 Q1 2014 Q1 2015 INTEREST EXPENSE $ millions 60 50 40 30 20 10 0 48 +33% + 14% 55 Q1 2014 Q1 2015 REVENUE 200 150 100 50 60 40 20 0 0 136 176 Q1 2014 Q1 2015 NET INCOME $ millions + 36% 36 + 29% 49 Q1 2014 Q1 2015 Avolon Slide 31
Our Liability Management Objectives 1 1 2 3 Access to Liquidity Stable Liability Profile Optimal D:E / Cost of Funds $10bn Capital since 2010 $1.6bn Undrawn Debt 2 4.5year WAL Match hedged 3:1 Net Debt:Equity 3.7% CoF 3 1) Data as of 31 March 2015 unless otherwise stated 2) $920m at end Q1 and $675m April 2015 new facility 3) Annualised Cost of Funds at end of period does not include the effect of up-front fees, undrawn fees, issuance cost amortization or fair value gains / losses on derivative financial instruments Avolon Slide 32
Debt Capital Market Trends Market Share -19% Export Credit +61% Delivery Volume since 2010 25-30% +18% Bank Market US Capital Markets 60+ Banks active in the market Avolon Slide 33
Increasing Scale and Credit Profile NET BOOK VALUE CAGR 1 25% $ millions $ millions REVENUE CAGR 1 36% 8,000 1,000 6,000 4,000 2,000 0 3,576 4,260 5,607 5,844 2012 2013 2014 Q1 2015 500 0 606 450 326 176 2012 2013 2014 Q1 2015 NET INCOME CAGR 1 22% ADJUSTED NET INCOME 2 CAGR 1 57% $ millions 150 100 50 0 61 113 91 49 2012 2013 2014 Q1 2015 1 CAGRs represent growth from 2012FY to 2014FY 2 Non-GAAP measure. See appendix for details $ millions 200 100 0 73 125 179 62 2012 2013 2014 Q 1 2015 Avolon Slide 34
Driving Price Tension Prepayment flexibility No Libor floor Delayed draw (1-2yr) Geographically diversified Substitution rights Corporate flexibility April 2015 - $675m 8yr @ 165bps Avolon Slide 35
Protected Against Rising Rates 1 Debt Stack 100% 80% 60% 40% 20% 0% 1 As of 31 March 2015 68.7% WAL 4.7 Years 12.2% Average Cap Strike Rate 3.05% 21.4% Fixed Rate Debt Caps & Swaps Floating Rate Leases Libor Lease and Loan Interest Rate Exposures are matched either by fixed rate financing or floating rate financing + interest rate cap Portfolio Level Interest Rate Risk is reviewed and considered periodically All future lease contracts and LOIs include rental formula pegged to reference swap rate Avolon Slide 36
Forward Delivery Rentals Typical Rental Formula Rent = Fixed Base Rent + (Actual Fixed Rate Assumed Swap Rate) x N x 100) Fixed Base Rent equals ($xxx,xxx) (expressed in Delivery Date Dollars) Actual Fixed Rate means the interest rate determined by the Lessor with reference to the x-year US Dollar fixed interest ask rate swap Assumed Swap Rate means (x.xx%) per annum N equals ($xxx) (the amount to compensate for 1bp increase in interest rate) Avolon Slide 37
Positioned for Growth FY 2015 Outlook Commitments 2 Adjusted ROE 1 14.7% -15% ROE 12.8% -13.1% Liquidity 2 $1.6bn undrawn debt $1.67bn in FY15 $900m in FY16 $4.9bn Orders: A320 NEO A330 NEO B737 MAX B787-9 1 Non-GAAP measure. See appendix for details 2 As of 31 March 2015. Includes recently announced new $675m debt facility. For FY 15 Commitments includes aircraft delivered as of 31 March 2015 and commitments for the remainder of 2015 Avolon Slide 38
Investor Day May 26th 2015 Q&A Part 1
Investor Day May 26th 2015 Aircraft Trading Brian Foley
Our Trading Platform Co-ordinated Approach Across the Origination Platform Chief Commercial Officer John Higgins Trading Team Regional Origination Heads Head of Aircraft Trading Brian Foley Vice President Aircraft Trading Ross O Connor Vice President Aircraft Trading Paraic Quinn Sole focus on aircraft trading Global Investor Coverage Management of all sales opportunities Provides input to all Origination underwriting activity Development of trading analytical tools and templates Head of Asia Simon Hanson Head of Greater China Susan Guo Head of EMEA Pat Hannigan Head of the Americas Paul Geaney 5 global offices with primary focus on airline coverage, secondary focus on aircraft trading Regional, high level coverage of all identified trading counterparties Identification of new investors within region for inclusion in Top 50 process Communication of trading opportunities to the aircraft trading team Avolon Slide 41
Our Trading Philosophy Trading through the cycle makes sense 1 Portfolio Risk Management Proves the value and liquidity of the aircraft portfolio Maintain industry leading portfolio age metric Manage aircraft and customer experience Validates core underwriting assumptions 2 Financial Management Value creation through increased ROE Fee generation from asset management Facilitate larger scale underwriting: Originate to Syndicate Disciplined through-cycle capital allocation Avolon Slide 42
Why are Aircraft Attractive Assets? 1 Hard Assets Tangible, liquid and globally mobile Long useful economic life of 25+ years Inflation linked residual 2 Yield Generation Long term, contracted and predictable cash flows Attractive yield Less volatility relative to other asset classes 3 Supply / Demand Stability Airbus & Boeing supply 90% of commercial jets Order backlog extends to 9 years Stable technology Avolon Slide 43
Who Buys Aircraft? 1 2 Lessors 4 different profiles Tax Investors Top 10 meet volume or customer diversity requirements Intermediary portfolio diversification & build airline relationships Emerging achieve scale to justify investment Niche establish specific airline, country or regional presence Attractive cash flow dynamics Tax shelter benefits (JOL / JOLCO structures) 3 4 Airlines Structured Transactions Deploy surplus capital from time to time ABS E-note structure Growing retail investment channel (Germany, UK, Hong Kong) Avolon Slide 44
Embedded Equity Value Independently appraised potential embedded value highlights management's successful track record in acquiring aircraft and positions the portfolio for trading gains Owned Portfolio Appraisal Summary Value of Portfolio ($m) $6,500 $5,607 +$568m Potential Embedded Equity Value 1 $6,175 Net Book Value $5,000 Potential Embedded Equity Value $3,500 Net Book Value of Fleet Estimated Current Market Value Note: Data as of December 31, 2014; Current market value is our estimate of the most likely sales price that may be generated for an aircraft under the market circumstances that are perceived to exist at the time 1 Our estimates are based on the value opinions for our portfolio that we have received from independent aircraft appraisers, reports by industry analysts and data providers, news of similar aircraft sales and other assumptions. Although we believe our estimated values are based on reasonable assumptions and estimates, our estimates may not be indicative of the current or future market value of our portfolio or of prices that we could achieve if we were to sell the portfolio. Avolon Slide 45
Sustainable Trading Gains Track Record 29 AIRCRAFT SOLD 1 Cumulative Trading Gains of $121m on $1.37bn of aircraft sold 1 $m FY 2012 FY 2013 FY 2014 FY 2015 Guidance Trading Gain 2 11.3 31.1 64.4 55-60 Total Interest Breakage Costs 7.5 Net Book Value 154.9 564.1 510.2 700 % Gain on Sale 3 7.3% 5.5% 12.6% 8.0% Average 8.7% Gain Sources: Company data 1 As at 31 March 2015 2 Trading gain defined as actual sale price less disposal expenses less book value at sale of asset; number of aircraft sold in 2013 includes one aircraft constituting an insured total loss 3 Gain on sale % calculated as trading gain / Net Book Value 4 As of 31 March 2015 2015 TRADING VOLUME Target $700m 4 Q1 Closed 21% Volume Gap 26% Letters of Intent 53% Avolon Slide 46
Aircraft Trading Key Messages 1 Aircraft trading is a fundamental and sustainable element of Avolon s business model, delivering superior risk-adjusted returns 2 New types of investors and new sources of capital continue to enhance both the breadth and depth of the secondary market for aircraft 3 Our business model allows us to consistently generate embedded equity value which underpins our trading platform Avolon Slide 47
Investor Day May 26th 2015 Risk Management Tom Ashe
Risk Management Overview Effective risk management derives from: Ethos and Culture Process and Structure Use of Models & Tools Multi-cycle Experience Avolon Slide 49
Risk Management Framework Asset Risk Capital Allocation Airline Credit Risk Liability Risk Avolon Slide 50
Airline Credit Risk Activity Credit risk team of 6 executives More than 90 face-to-face airline meetings in LTM Focus on quantitative AND qualitative assessment Use of rating and monitoring tools Airline Credit Rating Model Watch System Avolon Slide 51
Airline Credit Rating Model Operational Quantitative Factors Profitability Liquidity Liquidity 115 airlines scored across five key credit risk categories Solvency Leverage Qualitative Factors Management Strategy Fleet Market Management Competition Market Avolon Slide 52
Airline Watch Programme = On watch serious problems anticipated = Warning signs warranting heightened scrutiny = No concerns Green to Amber Increase the frequency of oversight Customer site visit Re-assess basis for downgrade Monthly - review by management Quarterly - Risk Management Committee Close receivables management Amber to Red Meet with the airline Review lease and security position Assess technical status Assess restructuring or redeployment alternatives Aircraft recovery if required Avolon Slide 53
Airline Credit Risk Summary Why is this important? Proactively identify and minimise the risk of lessee default Identify value creation opportunities Avolon Slide 54
American Airlines Case Study AMR enters Chapter 11 AMR exits Chapter 11 Invest Divest Avolon Transactions 1 x B737-800 5 x B737-800 1 x B777-300ER 4 x A319-100 4 x A321-200 2 x B737-800 3 x B737-800 2 x A319-100 1 x B777-300ER Avolon s risk management expertise led to early positive conviction on AMR s long term prospects Investment strategy and timing helped generate strong returns Avolon Slide 55
Risk Management Summary No credit losses No overdue receivables No impairments Significant value creation As of 31 March 2015 Avolon Slide 56
Investor Day May 26th 2015 Growth in Asia Pacific Simon Hanson
Asia Pacific Sustainable Growth Engine 1 Asia Pacific is home to over 60% of the world s population 2 Massive, structural shift in demographics The Flying Middle Class 3 $2 trillion financing required for 13,000 aircraft to 2033 1 1 Source: Boeing, Airbus Avolon Slide 58
Experienced Presence On the Ground Ranga Karumbunathan Managing Director, Origination Dubai Experience: 17 years Susan Hao Guo Head of Greater China Shanghai Experience: 21 years Simon Hanson Head of Asia Singapore Experience: 15 years Avolon Slide 59
Avolon Asia Pacific Portfolio Snapshot 1 52 Aircraft 38% Portfolio share $2.8bn Delivered & Committed 1 As of 31 March 2015 Avolon Slide 60
Explosive Growth Dynamics 7.1% Asia Pacific Total 2014 Traffic Growth 2014 GDP: +6.3% 11% China Domestic 2014 Traffic Growth 2014 GDP: +7.3% 8% India Domestic 2014 Traffic Growth 2014 GDP +7.2% 12% Indonesia Domestic 2014 Traffic Growth 2014 GDP: +5% Avolon Slide 61
The Flying Middle Class 1 2 3 4 50 countries, c.29% of the global land area and 60% of the world s population (4.38bn people) 1 Asia Pacific middle class will grow by 2.6bn people to 3.23bn by 2030 2 Aircraft penetration per 1m of population in the US is 13x that of Asia Pacific China alone will see passenger numbers increase by 850m to 1.3bn per annum over the next 20 years 1 What happens when 2.6bn people start to fly? 1 OECD 2 OECD defines the middle class as those earning a income between $10 and $100 per day Avolon Slide 62
Growth Markets China KEY FACTS 1 Today 2033 Global Economy 2nd 1st Consuming Population 160m 1bn No. Airports 230 2,000+ In-service fleet c.2,400 c.6,200 6,000 5,000 4,000 3,000 2,000 Aircraft deliveries China (units) 1840 5080 1,000 0 910 660 60 130 230 80 200 50 Large widebody Medium widebody Small widebody Single aisle Regional jet 1 Data according to OECD, Boeing and CAAC Source: Boeing 2013 2033 Avolon Slide 63
Growth Markets Indonesia KEY FACTS 1 Today 2033 Global Economy 16 th 7 th Indonesian Air Passenger Traffic Population 255m 290m Consuming Population 45m 135m In-service fleet c.600 c.1,500 1 Source: OECD, Boeing & Avolon Avolon Slide 64
Asia Pacific Sustainable Growth Engine 1 Asia Pacific will be the world s largest air travel market by 2033 1 2 The region is 30% under-ordered - China is 60% under-ordered 1 3 Favourable demographics and widespread adoption of the LCC model for airline growth in the region 1 Boeing, Airbus Avolon Slide 65
Investor Day May 26th 2015 Q&A Part 2
Investor Day May 26th 2015 Closing Remarks Dómhnal Slattery
Avolon Prime Strategic Position Minimum Scale - $10bn $13bn 251 aircraft, 2.6 years age 1 Delivered and committed fleet In-demand, modern, fuel efficient aircraft Multi-cycle Management Experience Sustainable, Efficient Capital Deep, Valuable Relationships Consistent, High-Quality Shareholder Returns Note: As of 31 March 2015 1 Average age of delivered fleet 2 Non-GAAP measure, see appendix for details 3 Based on FY15 outlook as at 31 March 2015 24 years Average executive leadership experience $10bn Capital Raised Since inception 20 years Boeing & Airbus order history 14.7% - 15.0% Adjusted ROE (FY15) 2 12.8% - 13.1% ROE 3 Strong Risk Ethos Disciplined, proactive approach $568m Embedded fleet value - at 31 Dec 14 150+ Airlines 51 clients in 29 countries Organic Growth 57% adjusted net income CAGR 2012-2014 2 Avolon Slide 68
Investor Day May 26th 2015 Thank you
Investor Day May 26th 2015 Appendix
Appendix 1 Reconciliation of Adjusted Net Income Adjusted net income is a measure of both liquidity and operating performance that is not defined by GAAP and should not be considered as an alternative to net income, income from operations, net cash provided by operating activities, or any other liquidity or performance measure derived in accordance with GAAP. We use adjusted net income to assess our core operating performance on a consistent basis from period to period. In addition, adjusted net income helps us identify certain controllable expenses and make decisions designed to help us meet our near-term financial goals. Adjusted net income has important limitations as an analytical tool and should be considered in conjunction with, and not as substitutes for, our results as reported under GAAP. $ thousands FY 2012 FY 2013 FY 2014 Q1 2014 Q1 2015 Net Income 61,161 112,800 91,103 36,422 49,354 Amortization of debt issuance costs 9,457 18,766 24,277 5,711 5,626 Unrealized (gain) loss on derivatives 2,199 (6,390) 12,240 4,134 5,895 Share based compensation - - 53,733-1,555 Tax effect 268 (25) (2,359) (345) (726) Adjusted net income 73,085 125,151 178,994 45,922 61,704 Avolon Slide 71