Ladies and gentlemen, thank you for standing by, and welcome to the Fly Leasing Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to Matt Dallas with Investor Relations. Thank you. Please go ahead, sir.

Thank you, and good afternoon. I'm Matt Dallas, the Investor Relations Manager of Fly Leasing. And I'd like to welcome everyone to our third quarter 2020 earnings conference call. Fly Leasing, which we will refer to as FLY or the company issued its third quarter earnings results press release today which is posted on the company’s website at flyleasing.com. We have a slide presentation that accompanies today’s call, which is available to participants on the webcast. If you are not accessing the webcast, you can find a copy of today’s presentation in the Investor Relations section of our website on the Events & Presentations page. Representing the company today on this call will be Colm Barrington, our Chief Executive Officer; and Julie Ruehl, our Chief Financial Officer. This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to statements regarding the outlook for the company’s future business and financial performance. Forward-looking statements are based on current expectations and assumptions of FLY’s management which are subject to uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to factors that are summarized in the earnings press release and are described more fully in the company’s filings with the SEC. Please refer to these resources for additional information. An archived webcast of this call will be available for one year on the company’s website. And with that, I would now like to hand the call over to Colm Barrington, the CEO of FLY. Colm?

Thank you, Matt, and welcome, everyone, to this morning's call and thank you all for joining us. As you all know, the last six months has been a time of great difficulty for the entire global aviation industry due to the continuing spread of the COVID-19 virus and the increasing restrictions on travel. Absence the loosening of government restrictions on travel, the difficult environment is likely to continue into the winter, which in any event is historically the low season for airlines. Fortunately, many governments who recognized the importance of air travel to their economic recoveries and to save as many jobs as possible, have extended support to the airlines and that now totals more than $160 billion worldwide. This government support has taken place alongside the measures taken by airlines themselves to conserve cash, enhance the liquidity during this very challenging period. Meanwhile there are green shoots. In particular, the long-awaited prospect of a viable vaccine now appear to be getting much closer. And hopefully, it will be having a positive impact maybe in a limited way by year-end and certainly as we proceed through 2021. This should have a positive impact on global traffic as it encourages governments to lift restrictions and gives consumers confidence to get up and go again. Even without a vaccine, domestic travel is gaining momentum in several jurisdictions. Reports suggest the travel within major markets such as China and Russia is now back at or close to 2019 levels. While in the United States, TSA daily records for October show that more than 1 million people traveled, the first such daily total since March. While this is still less than 50% of passenger volumes compared to the prior year, it is a positive trend. These positive trends are being supported by an increasing number of airlines and airports that are now offering acceptable COVID 19 tests, so to avoid the requirement for long periods of isolation for travelers. Airline passenger survey shows that there is still a strong desire to travel, particularly among families that have been separated now for nearly a year. Hopefully, this desire, along with the measures just mentioned, will be reflected in the upcoming Thanksgiving and Christmas holiday periods. From Fly's perspective, while the current environment is certainly a challenge, we believe that improving airline traffic trends would support the leasing industry generally and that Fly’s mainly narrow-body fleet will particularly benefit from the earlier improvements in domestic and short-haul traffic. Optimism for the future among our airline customers is reflected in the fact that FLY has collected more rent in Q3 as compared to Q2. In addition, in recent months, FLY has signed six lease extensions and three new leases with airlines, leaving us only with one aircraft, representing less than 1% of our net book value to remarket this year. We're also finding there is a market for aircraft sales. We've recently signed contracts to sell two older aircraft by year-end and expect to complete further sales in early 2021. That will reduce some of our lessee exposures and enhance our liquidity. Lastly, in October, we closed a new $180 million five-year secured term loan, which was well supported in the financial community. We’ve already used some of the proceeds of this loan to repurchase approximately $77 million of our $325 million unsecured notes due in October 2021 and intend to use the balance of these funds and a portion of our free cash to call the balance of these notes by year-end. FLY benefits from the prudent business model, which provides us with levels of protection from the current adverse conditions. For several years, we’ve focused our fleet on the most popular narrow-body aircraft types, in particular, Airbus A320s and Boeing 737 NGs. These types comprise of 86% of our fleet by number and 67% by net book value. We expect that the demand for relatively new and midlife A320s and 737 NGs, which form the core of our fleet will be the first to recover as they satisfy domestic and regional airline operations. Demand for these types will also be strengthened by continuing lower fuel prices. Also it should be noted that the two Boeing 777s in our fleet are freighters on lease to a flag carrier, who is performing well in its current underpayments. The airfreight market has remained buoyant throughout the period of the pandemic. FLY’s 2.1 times debt to equity ratio at the end of September equals the record low for the company and reflects our strategy of aggressively selling aircraft during the last two years when markets for aircraft sales were very strong. Following repayment of our 2021 notes later this year, FLY would have no significant debt maturities until mid-2023. FLY has no aircraft orders from the manufacturers. FLY has consistently shooed making speculative aircraft orders on the basis that in our cyclical industry, we can't predict the demand and lease terms for aircraft that would be delivered several years out towards the financing environment at the time of delivery. In addition to the new $180 million facility I just referred to, we will continue to focus on enhancing liquidity through management of rent deferrals, pursuit of additional aircraft sales and opportunistic liability management. FLY benefits from the experience of the BBAM team, which has more than 30 years of experience, has managed aviation assets through several industry crises. BBAM is a full-service global lease manager with strong and positive relationships with most of the world's airlines and financing institutions. BBAM is a strong partner to help FLY navigate through the present situation and the alignment of interests of FLY and BBAM is greatly enhanced by the fact that BBAM’s shareholders now own more than 20% of FLY’s stock, by far the largest insider holding of any publicly traded aircraft leasing company. Like all lessors, we have received request for rent deferrals from most of our lessees and are working closely with our customers in this regard. To date, we have granted total rent deferrals of $60 million to 14 airlines, covering 35 aircraft. Of this total, we've agreed to defer $11 million in quarter four. Nearly $2 million of deferred rents have been repaid to date and approximately 50% of the deferred amounts are scheduled to be repaid by the end of 2021. However, there are still some airlines that require financial assistance and we continue discussions with some of them regarding further lease restructurings. In the third quarter, FLY produced a net loss of $8.1 million on total revenues of $60.1 million. This loss is the result of non-recognition of revenue of about $23 million, of which $7 million is due to the reversal of some of the prior quarter’s rents, and Julie will explain this in more detail in her remarks later. Year-to-date, FLY is reporting positive net income of $39.6 million, or $1.30 cents per share. It should be noted that our financial results for the quarter were without the benefit of any aircraft sales gains, which have recently been a significant contributor. Our EPS loss of $0.26 in the quarter, which used our net book value per share marginally. However, our net book value per share still stands at $29.28. At the end of September, FLY had cash and unencumbered assets of $714 million, including unrestricted cash of $285 million and unencumbered aircraft of $429 million. And at quarter-end, our financial leverage equaled its all-time low of 2.1 times net debt to equity, a sharp and positive decline over the preceding 12 months. Following completion of the new $180 million secured term loan, on a pro forma basis for September 30, FLY had a total of $655 million of unrestricted cash and unencumbered assets, of which $454 million was unrestricted cash and $201 million was unencumbered assets. Our net debt to equity ratio remained 2.1 times. FLY has a prudent business model that will position as well for the recovery to come. We have long-dated financing and following the expected repayment of our 2021 secured notes. We have no near-term financing or refinancing needs. We have zero CapEx commitments and no aircraft orders with the manufacturers. As a result, we have no cash tied up in predelivery payments, and we have proven financing flexibility with a strong track record of diversified financing sources. With that, I will hand you over to Julie to take you to the Q3 financial results in detail. Julie?

Thank you, Colm. FLY is reporting a net loss of $8.1 million or $.26 per share for Q3 2020. The sustained and unprecedented impact of the COVID pandemic on the airline industry is causing airlines continued financial distress and it’s heightened distress is now affecting our top line due to the non-recognition of revenue for certain losses. During the quarter, FLY also granted $5 million in lease restructuring, $2.5 million of which impacted revenue for the quarter. Further, the year ago quarter included $39 million of sales gains while there were no sales in the current quarter. FLY's net spreads suffered due to the revenue decline coming in at 3.8% for the quarter. Despite lower lease revenue, Q3 cash receipts were up sequentially over Q2. FLY’s unrestricted cash balance was $285 million at quarter end, which was bolstered by an additional cash infusion post September 30 from the new $180 million five-year term loan. We have used approximately $77 million of cash since quarter end to repurchase some of FLY’s 2021 unsecured notes on the open market and plan to call the remaining outstanding 2021 notes before the end of the year. While no aircraft sales were completed in Q3, we expect to complete some aircraft sales in the next few months and we'll consider additional opportunistic aircraft sales in the near term which would further enhance FLY’s liquidity position. Turning to the comparison to the prior year quarter, FLY’s operating lease rental revenue in Q3 2020 decreased to $54.3 million driven by the non-recognition of revenue for certain lessees because we do not believe collection is probable as well as our smaller fleet size. To provide a bit more granularity on the decrease in operating lease rental revenue this chart bridges from Q3 2019 revenue to Q3 2020 revenue. As I noted a moment ago the distress being felt by airlines has caused fly to no longer believe the collectability of revenue from four airline customers leasing a total of 11 aircraft is probable. And therefore we placed these airlines on non-accrual status in Q3. This means that FLY only records revenue to the extent of cash receipts inclusive of cash security deposits. More information regarding non-accrual accounting is contained in the appendices to the presentation. Non-accrual lessees accounted for a $22.8 million drop in revenue in Q3 as compared to Q3 2019. Of this amount about $7 million relates to periods prior to Q3. Aircraft sold were the next largest driver of the revenue decline at $18.5 million followed by lease extensions restructurings and remarketing which contributed to $4.7 million decrease. About $2.5 million of the $4.7 million relates to lease restructurings granted in Q3. The last category driving the decline is the decrease in LIBOR, which is offset by lower interest expense and other items. With all of these decreases being partially offset by $6.4 million increase due to revenue recognized from aircraft purchased in the last year. Total revenues for Q3 were $60.1 million which includes $6.3 million of end of lease income. About half of which was related to the early return of an aircraft due to the airline’s bankruptcy filing. And as I noted earlier there were no aircraft sales in the quarter as compared to eight aircraft sold in the year ago quarter. On the expense side Q3 depreciation and interest expense both decreased as compared to the prior year quarter due to aircraft sales. In addition to the lower leverage driven by aircraft sales interest expense also declined as a result of a lower weighted average cost of debt. SG&A expense decreased $0.3 million in Q3 2020 as compared to Q3 2019 due to the smaller fleet partially offset by primarily unrealized foreign currency losses as well as higher general corporate costs. Also in the current quarter we recorded an additional allowance for uncollectable operating lease receivables of $1 million. In Q3 2020 FLY recognized an unrealized loss of $2.3 million to write down marketable securities to estimated fair value. This relates to Fly's investment in the equity tranche of aviation ABS vehicles commonly referred to as E notes. Following this Write Down Fly's investment in E notes is $3.2 million as of September 30. I'll now take you through some information regarding Fly’s rent deferrals. In Q3 Fly collected 53% of pre-deferral contracted rent an improvement from 47% in Q2. Through the first nine months of 2020, Fly had approximately $40 million of rent deferrals, of which about $35 million is included in rent receivables at September 30. Deferrals for the fourth quarter are expected to be approximately $11 million or about 4% of trailing 12 months operating lease rental revenue. The table 1 on Slide 16 provides the details of rent deferrals and scheduled repayments by period based on executed deferral agreements. Note that the aggregate amount of deferrals presented is less than the amount presented last quarter as it is now based on executed deferral agreements. Whereas last quarter in an effort to be transparent we included expected deferrals based on discussions with our airline customers. Please note that Fly continues to work with lessees regarding rental payments and as a result these amounts may change over time including in some cases revisions to previous deferral agreements or lease restructurings that may be granted. Based on contracted deferrals to date, the amount of rent being deferred steps down in Q4 and then steps down substantially in 2021 with about half of deferrals due to be repaid by the end of 2021. I'll turn it back to Colm now for its closing remarks.

Thank you, Julie. So in summary, FLY has many defenses against the current difficult industry conditions. First, we have an attractive fleet comprised predominantly of the most popular narrow body aircraft. Secondly, we have no near-term capital expenditure requirements, no commitments to aircraft manufacturers and no pre-delivery payments tied up with them. Thirdly, we have low financial leverage of 2.1 times net debt to equity. Fourthly, we have cash in unencumbered assets totaling $655 million pro forma following the raise of our term loan debt. And finally with the world leading aircraft and lease management from BBAM with this global scale of airline and financing relationships and shareholders significant interest in FLY’s stock. While we will undoubtedly face further turbulence over the coming months, there have been some positive developments with the successful vaccine trials, the rising demand the domestic air travel as well as more airlines and airports providing acceptable COVID testing to allow travelers to bypass quarantine requirements. We believe that FLY is well equipped to benefit from the improved conditions ahead. With that, we will now take your questions.

[Operator Instructions] Our first question comes from the line of Catherine O'Brien with Goldman Sachs. Your line is open. If your phone is on mute, please unmute. Our next question comes from the line of Jamie Baker with JPMorgan. Your line is open.

Hey, good morning, everybody. So Slide 7, you mentioned working with a handful of airlines on further restructurings. How should we think about that? Are those airlines that you are having first-time conversations with? Are they ones that you've already helped and they're trying to double dip now? And also, how does the ask from this group of airlines compare to the requests that you got early on? Are they any different in duration as its giving towards power by the hour? Any additional color there would be helpful?

Julie, do you want to take this one?

Sure. Hi, Jamie, thanks for the question. It's a mix. I think most of them are airlines we’ve been in discussions with and have been granted some previous deferrals. And the discussion is now moving toward extending the deferral period perhaps going to power by hour. So it's a mix, but yes it's…

Okay.

It's the same group of customers that we've been in discussions with and, in some cases, as I said, granted previous deferrals too.

Got it. And then, Colm, this is more of a long-term question. But some of your competitors this earnings season have spoken about the potential for increased global leasing demand, as airlines try to become more variable in their cost structures. There has been discussions about what happens to lease duration in the future. I'm not faulting your deck or your prepared remarks today and you certainly identified some of the current green shoots. But there isn't much on the long-term is it that you have a differentiated view or you just are trying to make that point right now. I just want to make sure that the lack of longer-term optimism isn't driven uniquely by anything relative to what we've heard from some of the other lessors?

Well, perhaps, Jamie, we haven't tried to divert from difficult market conditions that exist today. But I…

Good answer.

I agree. I agree that things are pretty bad with the airline industry right now. But we do see, as I say, the green shoots. I think that the medium to long-term, I can't see any reason why airlines should move away from the sort of 40-odd percent of their aircraft of their feet that are leased. And particularly, as we've seen quite a lot of retirements, particularly of the bigger aircraft, the A380s and the 747s and so on. So if as we hope and believe once the vaccine works on the pandemic dissipates, we think there will be a real boost in traffic again probably towards the middle of 2021. And if history is anything to go by and that would be when airlines would certainly want to pool up their fleets again and it's lessors they turn to. So I think the very good prospect that in the medium-term, there will be good demand for leased aircraft. Secondly…

Yes. Go ahead. I’m sorry.

…and airlines – a lot of airlines have had to take on additional liquidity to keep their – keep themselves going. So the balance sheet will be – balance sheets will be a bit bloated with debt. So I do think there will be prospects again in the medium to long-term for airlines taking on more leased aircraft rather than going back to the financial markets.

And if I could just sneak in a third and this is revisiting sort of a pre-pandemic theme that you've been willing to discuss. But what do I tell clients when they ask me why should FLY even stay public? I mean, BBAM has more than adequate access to capital and the equity market is broken. Is the public market really the right place for FLY just given this persistent discount to book and discount relative to peers? It's kind of a throwback to what – what you've been at in the past. But I'm wondering if you have any new thoughts on it. Thank you.

Yes. Yes. I don't thought of any new thoughts. We have certainly been frustrated by the company's market valuation for many years. The share price has been significantly discounted and that's been in both bull and bear markets and, of course, today is no different. We have been focused on a strategy of trying to unlock per share value. We've been cutting overhead. We've been borrowing cost. We've been selling assets for substantial gains to that book value. And we've been producing very good earnings, but over the view to expanding our ROE and making the business more profitable. However, the market has still lagged. The market value of the shares is still lagged, the book value. So we're open to any strategy that will unlock the value on a per share basis and including potentially a sale of sometime in the future if that makes sense.

That’s great. Thanks for letting me ask so many questions. Appreciate it. Everybody, take care.

Good to talk to you, Jamie.

Thanks. Colm.

Thank you. And our next question is from Catherine O'Brien with Goldman Sachs. Your line is open.

Hi, everyone. Apologies. Some back to office growing pains, I just hung up instead of unmuted myself there. Thanks for coming back to me. So a couple for you this morning. Just on – a couple on the cash accounting. I guess, first, can you share some color on what drove the need to move to cash accounting? All of the impacted aircraft, are those still with airlines that are operating? And then have you had any discussions with these airlines and the likelihood of them continuing to operate these aircraft? Thanks. And I have a couple more after.

Julie, do you want to take this one?

Yes. So in the - for the airline to put on non-accrual in the quarter and none have actually filed bankruptcy proceedings that they are all operating continuing to operate, there are a mix of factors that we considered and putting them on non-accrual, primarily payment history and having some discussions with a possibly lease restructurings, and we have had specific conversations about whether or not they’re going to keep the aircraft. I think these are evolving situations. We don’t have the firm answers on all of those yet, but I think it's just an evolving situation. We're going to - we’ll continue to evaluate.

Understood. Thanks for that. And then maybe one little more forward-looking, so it seems like there's a lot of airlines looking for sale leaseback financing over the next couple of years. I guess, first, do you think the terms of these sale leaseback RFPs are likely to be more attractive to lessors than they have been over the last couple of years? And if so, are you - review that your balance sheet is well equipped to potentially capitalize on some of these opportunities? Or would you want to raise additional funding or perhaps wait for operating cash flow to cover a bit more? Just would love to know your thoughts on sale leaseback market in general and if you guys are poised to participate? Thanks.

Yes. Well, it's all a bit speculative, Catherine, at this point in time. But I think airlines tend to be focused on the liquidity, although, we have seen some airlines doing sale leaseback transactions to generate liquidity. Certainly, we will look at further sale leaseback transactions over the coming years provided the assets are good, provided the credit is reasonably good. I suppose in the current environment and from where we are today provided, we can raise financing to cover a substantial portion of the capital cost of the assets. But certainly FLY is still open for business. We hope to continue to sell some of our older aircraft and we hope to continue to purchase aircraft in the sale and leaseback - newer aircraft the sale leaseback market. And hopefully the present conditions will put manners in some of the industry. And they want to bid down prices bid up prices whatever - they would have made these as competitive as they've made them in the past. So there will be more transactions that make sense for us.

Understood, and I might just want to copy Jamie and ask a quick third one. For your 12 schedule lease expires next year what are conversations looking like on those any ballpark idea of how many of those are likely to be extended or are conversations on extensions happening later just given uncertainty. And that's it from me? Thank you so much.

Yes Catherine it’s probably still a little bit early as you know operating leases tend to get extended at relatively short notice. And so while we are certainly having discussions with some of the airlines there is nothing really to report on any of those at this point of time. I think that's particularly the case now we’re a little bit more uncertain than it was a year ago. So we really won't have much report on those until we start getting closer and into 2021.

And our next question comes from the line of Helane Becker with Cowen. Your line is open.

Just maybe two questions from me. One is you have the two 777 freighters and obviously the freight market has gone from not being great to being fairly great is - would you consider getting into that business in a bigger way?

Helane we look at every opportunity. It could be that - one of the reasons why the freight business air freight business is very good at the moment is that it's because there is so little passenger. So - reduced number of passenger flights, so there is not much daily capacity traveling around the world. So freighters have become more attractive. Will that trend last for good, I don't know. But we'll certainly look at opportunities. But I don't think you will see FLY taking on a significant portion of its portfolio in freighter aircraft in the future.

Fair enough. And then the other question I had on the - I understand why you wouldn't need to write down the 777s because they're freighters. But on the A330s, can you just talk about the fleet and I mean I know you talked about the book value being what it is. But I think one of the issues for investors is that concern that when you go to sell an aircraft it's maybe not worth what you're carrying them on the books for and that's why the stock gets marked down? I mean, I don't disagree with you and Jamie that maybe the discounts a little aggressive right now. But I think that's one of the pushbacks I get on the company is what about write-downs on fleet. So, little long winded question, but wonder if you could just talk about the way you're thinking about that?

Okay, well Julie has been very much involved in all of that analysis. So Julie, would you like to respond to that one.

Yes, hi Helane how are you. So we have three A330s in the fleet. And one of them is nearly 20 years old which has been impaired previously in prior years. So the book value on that is pretty low. The other two A330s are about six years old each. And they along with the rest of the entire fleet have gone through our robust impairment review process this quarter - again this quarter. And as a reminder the U.S. GAAP requires that we look at on discounted cash flows versus the net book value. So we utilize expected cash flows appraised values for lease rates and residuals on these. And at this time, we haven't recorded any write-downs on those. But as you know it doesn't mean that we could sell them to that much today because of the GAAP requirements used on discounted cash flows. So, I think something we're going to continue to watch as we move forward.

Okay, that’s helpful.

And Helane on a more general basis, I'm just wondering once traffic rebounds again considering all the aircraft that have been retired to be the larger aircraft the A380s and the 747s that I referred to earlier. I'm just wondering will that be a good strong demand for A350s, 787s and modern A330s in the future. So, I wouldn't be as negative about A330s as I might have been before and again because of the retirals of - older very large aircraft.

Yes I don't disagree with you. Thanks Colm. Thank you very much. That's helpful.

Our next question comes from the line of Koosh Patel with Deutsche Bank. Your line is open.

Just on the nonaccrual counting just prompted this question. Are there any cash flow related debt covenants which you may face breaching or is there anything that concerns there?

Julie, do you want to take this?

Yes, yes hi Koosh. We have one facility that has a debt service coverage ratio requirements, but it’s doesn't result in a default. And it's just going to - it just puts the facility into a cash sweep. And so that means there is no like any excess cash to the company based on cash coming in each month or each quarter. So - there is only just - one facility that could affect.

Understood. And then, just as a follow-up, could you just give us an update on your exposure to the AirAsia Group and anything that investors might want to be privy to there? Just because it's a complex situation, I think that is involving many different jurisdictions some of which have provided government support and some of which haven’t. So just wanted to get your take on that?

Yes well, our predominant exposure is to AirAsia, Malaysia and Thailand both of whom have received support. So, we are comfortable enough that those two airlines will be with us sometime. As you know AirAsia has informed the market that this won’t be taking any new deliveries for - quite some time. So, we don’t see our exposure there increasing in the near-term. So, we’re reasonably comfortable where we are with the AirAsia Group as a whole.

Okay great. Thanks a lot guys.

And I’m not showing any further questions. I’ll now turn the call back over to Mr. Dallas for closing remarks.

Thank you everyone for joining us for our third quarter earnings call. We look forward to updating you again next quarter. You may now disconnect.

Ladies and gentlemen, this does conclude the program. Thank you for participating. Have a wonderful day.