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1H 2021 Earnings Call6-month period ending on March 31, 2021 ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.1
STARTING SHORTLY1H 2021 Earnings Call6-month period ending on March 31, 2021 ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.2
DisclaimerThe information, contained herein, is for the exclusive use of the institutions to which it is being sent solely and is provided upon the express understanding that allInformation will be regarded and treated by each recipient and by its directors, officers, employees and advisors as strictly confidential and will not, without the priorwritten consent of ALAFCO Aviation Lease and Finance Co. KSCP be disclosed to any other person.None of the Information shall be (i) reproduced or disclosed, in whole or in part, to any person (other than as may be required by law and other than to the directors,officers, employees and advisors of the recipient who are made aware of the confidential nature of the Information and for whom the recipient shall be responsiblehereunder) or (ii) used, in whole or part, except by the recipient and its directors, officers, employees and advisors and only for the purpose of considering the recipient'sparticipation in transaction(s) described herein.If the recipient of the information, contained herein, does not wish to receive it, he/she must promptly destroy or return to ALAFCO Aviation Lease and Finance Co. KSCPthe Information and any copies, extracts and summaries hereof.Each recipient of the Information, acknowledges and confirms that it and its directors, officers, employees and advisors will not contact any other entity described in theInformation without ALAFCO’s prior approval. Upon receipt of the Information, each recipient will be deemed to agree to the foregoing paragraphs.This information, contained herein, may present certain statements, estimates and forecasts with respect to future performance and events. These statements,estimates and forecasts are “forward-looking statements”. In some cases, forward-looking statements can be identified using forward-looking terminology such as “may,”“might,” “should,” “expect,” “plan,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “potential” or “continue” or the negatives thereof or variations thereon or similarterminology. All statements other than statements of historical fact included in this presentation are forward-looking statements and are based on various underlyingassumptions and expectations and are subject to known and unknown risks, uncertainties and assumptions and may include projections of our future financialperformance based on our growth strategies and anticipated trends in our business. There are important factors, such as the Covid-19 pandemic, that could cause ourperformance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied in the forward-lookingstatements.Accordingly, you should not rely upon forward-looking statements as a prediction of actual results, and we do not assume any responsibility for the accuracy orcompleteness of any of these forward-looking statements. Except as required by applicable law, we do not undertake any obligation to, and will not, update any forwardlooking statements, whether as a result of new information, future events or otherwise. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.3
Agenda1. ALAFCO Highlights2. Industry Update3. Operational Review4. Financial Review5. Sustainability Strategy6. Outlook for 2021 and Beyond ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.4
ALAFCO HighlightsAs of 31st March 202179Aircraft in Portfolio2472Aircraft on Order17CustomersPresentlyCountriesPresently4.4 years86%Portfolio WeightedAverage AgeSERVICES:AIRCRAFT COMPOSITIONB737 NG19%Americas,18%A320ceo30%B777-300 ER6%Europe,8%A350-900XWB8%Asia, 56%A320neo37%Narrow-body Aircraftin FleetLEASINGDISTRIBUTIONAIRCRAFTTRADINGMiddleEast, 13%Africa, 4%SALE &LEASEBACKAIRCRAFT LEASINGMANAGEMENT ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.5
ALAFCO Highlights Pandemic has demonstrated the strength of ALAFCO’s fleet focus on young,popular, liquid aircraft types and a diversified portfolio of airlines credits. Strong order pipeline of new generation, narrow-body aircraft to meet longterm demand. Reduced aircraft purchase commitments in the 2020-2023 timeframe througha combination of cancellations and deferrals. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.6
INDUSTRY UPDATE ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.7
Industry Review: A Year Into the PandemicIMPACT ON LEASINGIMPACT ON AIRLINESPOSITIVE SIGNS Slowdown in demand for leasedaircraft and requests for rentaldeferrals from airlines. IATA forecasts a net loss of 47.7 billion for airlines in 2021,but a 62% improvement over2020. ty to return at a slowerpace than traffic. Air traffic is increasing in the twobiggest domestic markets, Chinaand USA, with positive signs fortravel within Europe, indicatingthat a recovery has started. Cost remains a challenge withairlines focused on preventingcash burn in 2021. This has caused an increase inrental arrears and difficulties inleasing aircraft to airlines. Airlines are receiving help fromgovernments and suppliers(lessors and banks). Vaccine rollout continues atpace, with Europe and NorthAmerica leading the way,signaling international travel toresume by July 2021. Moody’s changed their outlookfor global airlines to positivefrom negative (May 2021). ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.8
Market Overview Domestic travel recovering faster than international travel largely driven bybuoyant economic growth, accumulated consumer savings, pent-up demand andlack of travel restrictions within borders. Short-term aviation environment remains challenging, but medium-term outlookimproving as vaccine rollout progressing quickly. Aircraft leasing model remains strong. Significant capital has been raised in theaviation sector supporting aircraft values. Lessors seen as conduit to re-capitalize airlines and enable OEMs to deliver newaircraft, fueling continued growth of leased fleet. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.9
OPERATIONAL REVIEW ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.10
Lease Update: Deliveries as a, 56%MiddleEast, 13%Africa, 4%As % of number of aircraft at 31st March 2021Q1DELIVERIESQ2DELIVERIES Delivered a new A320neo toSAS, fourth to be deliveredas part of a five A320neoagreement deal signed in2019. DeliveredthesecondA320neo to Volaris, which isa Mexican low-cost carrierand the country’s secondlargest airline. Delivered the first A320neoto Volaris as part of the saleand leaseback agreementfor four aircraft signedearlier in 2020. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.11
Order Book: Ready to Support Recovery72 Aircraft on Order 72 new technology advanced aircraft onorder from Airbus and Boeing. Majority of deliveries are scheduled to startin 2024 and beyond.42A320neo10A321neo20B737-8 MAX ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.12
Fleet Update: Young and BalancedAIRCRAFT COMPOSITIONB737 NG19%B777-300 ER6%A350-900XWB8%Portfolio WeightedAverage AgeA320ceo30%794.4 Years Well-diversified and young portfolio of newgeneration liquid aircraft. Lower exposure to widebody aircraft, thuslimiting impact of current near-termheadwinds. Young fleet preserves source of future longterm revenue.A320neo37%As % of number of aircraft, as on 31st March 2021 One newly delivered aircraft maintains a youngaverage portfolio age and ALAFCO shallsustain a younger fleet with future deliveries. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.13
FINANCIAL REVIEW ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.14
H1 EarningsTOTAL REVENUE*51.8 millionKDOPERATING LEASEREVENUE51.7 millionKDNET PROFIT / LOSS(2.5) millionKDEPS(2.66) fils-14%-11%-43%-119%KD 60.2 million in H1 2020KD 58.2 million in H1 2020KD (4.5) million in H1 2020(4.71) fils in H1 2020* Total revenue comprises LeaseRevenue, Trading and Other Income ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.15
Financial Highlights (IN KD)INCOME STATEMENTOperating Lease Revenue1H 9)(22,631,195)11%Finance cost(16,531,857)(19,670,970)-16%Staff Cost(1,609,522)(1,732,372)-7%Other %(8,661,951)(191,431)4,425%Gain on Sale of %Profit Before Tax(2,361,459)(4,486,785)-47%Net Profit after Tax(2,535,830)(4,486,785)-43%Other incomeAllowance for credit losses / Reversal1H 2020CHANGEComparatively lower net losses havebeen recorded by the company duringthe current period. Such improvementin net result is mainly due to noimpairment charge during the currentperiod compared to impairment of KD15.5 million recorded during theprevious period. Improvement in netresultsachievedthroughnoimpairment is partly offset byincreased allowance for credit lossesand reduced lease income during thecurrent period. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.16
Financial Highlights (IN KD)BALANCE SHEET1H 29%Cash and Cash 421,003,682-5%95,209,34895,209,3480%Retained Earning and Reserves202,521,371208,817,689-3%Total Equity297,730,719304,027,037-2%Loans and 67023%Total Liabilities1,058,881,6591,116,976,645-5%Total Equity and Liabilities1,356,612,3781,421,003,682-5%Aircraft, Engines and EquipmentCapital AdvancesTotal AssetsShare Capital and premiumsSecurity DepositsMaintenance Reserves ProvisionsOther Liabilities1. Although, three new A320neo aircraftadded during the period, total assetshave declined by 5% which is acombination of decline in receivables,decline in cash and depreciationcharge for the current period.2. Movement in equity represented thenet loss recorded during the year, inaddition to the negative movement inFCTR* as the Kuwaiti dinar weakenedagainst the dollar.3. Decline in in total liabilities from theprevious year represents (a) therepayment of loans and (b) the declinein maintenance reserve liabilities whichis settled or reduced as part ofrestructuring of the leases. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.17
Financial PositionASSET GROWTH (in KD bln)1.6001.4001.4211.2001.0001.2831.3571.123EQUITY GROWTH (in KD bln)LIABILITY GROWTH (in KD .4000.2000.0500.2000.0000.0000.0002018201920201H 20212018201920201H 20211.1171.0000.9641.0590.8122018201920201H 2021 ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.18
Key Financial RatiosCURRENT RATIOAVERAGE LEASE RATE %2Q2111.9%11.2%8.9%Average Lease Rate Factor LeaseRevenue / Net Book Value of Aircrafts2Q18DEBT-TO-EQUITY 2Q21PROFIT MARGINS60%3.002.092.9840%20%2.360%51%23% 18% 24%-8% 17% -5% 12%-20%2Q182Q182Q192Q202Q212Q19Net Profit Margin2Q202Q21Adjusted Profit MarginAdjusted Profit Margin Net ProfitBefore Adjusting ECL, Impairments,provision for Heavy maintenance andGain of Sale ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.19
Average Remaining Lease 2%3%3%3335202120222023202430 Most of the leases are expiring beyond 2025. Average remaining lease term is 7.7 years for the aircraftcurrently on lease. Until 2024, ALAFCO has few aircraft to be delivered and20coming out of lease. The company is currently working10either to sell or lease these aircraft.02025andBeyondNo. of leases expiring% of aircraft NBV with leases expiring ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.20
SUSTAINABILITY ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.21
Sustainability CommitmentYOUNG, FUELEFFICIENT FLEETFINANCING SWITCHTO NEW AIRCRAFTSOCIALCOMMITMENTALAFCO remains committed tobuy and rent the most fuelefficient aircraft to supportairlines.Lessors like ALAFCO enable cashstrapped airlines to switch soonerto new fuel-efficient aircraft.Our commitment to local causesremain as strong as ever. Currentpandemic has created furtherdisparities among communitieswhich require our ongoingsupport.Our new generation aircraft willsupport airlines to meet theirCORSIAobligations(CarbonOffsetting and Reduction Schemefor International Aviation).Lessors will finance up to twothirds of the new, modern fuelefficientaircraftforairlineoperators. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.22
OUTLOOK ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.23
Market OutlookAPPETITE FOR TRAVELREMAINS STRONG Stronger rebound in economicrecovery expected as higherconsumerssavingsdrivespending splurge. Divergence between hdomestic travel witnessing asharper rebound, highlightingthe appetite for travel whenpermitted.FLEET EFFICIENCY Airlines continue to focus oncost containment and seek torestructure fleet post-Covidwhich offer lower cost andlong-term sustainability. Near-term focus for mostairlines is towards recoveryrather than growth demand,and therefore rationalization offleet towards fuel-efficiencyremains key.LESSORS MARKETSHARE Lessors to re-capitalize airlines,with Sale and Leaseback beingthe primary growth channel. Long-term, the share of leasedaircraft is likely to increase asairlines seek more robust,liquidityfocusedbalancedsheets. ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.24
Q&A ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.25
ContactFor more information please contact:Investor Relations (965) 22902896investor relations@alafco.comALAFCO KSCP is listed on Boursa KuwaitISIN Code: KW0EQ0602221Reuters: ALAF.KWhttps://www.alafco.com/en/investors/ ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.26
THANK YOU ALAFCO Aviation Lease and Finance Company. This presentation contains “forward-looking statements” with no warranty or representation given concerning such information.
agreement deal signed in 2019. Delivered the first A320neo to Volaris as part of the sale and leaseback agreement for four aircraft signed earlier in 2020. Lease Update: Deliveries as scheduled Delivered the second A320neo to Volaris, which is a Mexican low-cost carrier and the country'ssecond largest airline. Q2 DELIVERIES 11 Americas .
