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2013 Annual Report to Shareholders

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2013 Annual Report to Shareholders 2013 ANNUAL REPORT TO SHAREHOLDERS FLY BY THE NUMBERS* 113 aircraft in the fleet FLY Leasing is a global leader in aircraft leasing. FLY acquires and leases the most modern, high-demand and fuel-efficient 62 commercial jet aircraft. We have long-term lease contracts with a diverse airlines group of carriers throughout the world, including many of the most well- known airlines. 34 At the end of 2013, FLY’s fleet totaled 113 commercial jet aircraft with a net countries book value of over $3 billion. The Company’s fleet, on lease to 62 airlines in 34 countries, consists mainly of Boeing 737 next generation and Airbus $ A320 family aircraft, which are the most popular aircraft in the world and 1.00 forward annual dividend rate are flown by the majority of commercial airlines around the globe. per share FLY has consistently returned capital to shareholders in the form of a quarterly dividend. FLY has paid a cash dividend every quarter since it 24 listed on the New York Stock Exchange in September 2007. consecutive dividends paid FLY is managed and serviced by BBAM LP (“BBAM”), the world’s $ third-largest aircraft lease manager with 25 years of industry expertise. 600 million FLY benefits significantly from BBAM’s global footprint, extensive assets aquired in 2013 industry experience and long-standing relationships with airlines and financial institutions around the world. BBAM’s principals are long-term shareholders in FLY with closely-aligned interests. 48 Boeing 737-800 aircraft in fleet $3 billion book value of FLY’s fleet *As of December 31, 2013 Letter from the CEO Dear Fellow Shareholders, I am pleased to report that FLY has made tremendous As we look forward into 2014, we are confident that progress in 2013. Helped by improving conditions in we can meet or exceed last year’s growth, and we the global airline and aircraft leasing industries, we have the financial resources to do so. were able exceed our growth targets for the year. FLY had a very active year in the capital markets, A steady growth in top-line revenues has laid the raising a total of $1.1 billion of debt financing and groundwork for further improvements in earnings $173 million of equity. We also had a landmark year and cash flow in 2014 and beyond. “With no capital commitments, a strong reserve of unrestricted cash and excellent access to financing, FLY is well positioned to take advantage of attractive opportunities to grow while continuing our focus on enhancing shareholder value.” We achieved our primary objective of expanding our in the context of liability management. We repriced, fleet by investing $600 million in our portfolio and upsized and extended our term loan, increased adding 14 new and nearly new aircraft. The majority availability in our warehouse facility, restructured and of the aircraft were brand new Boeing 737 Next extended one of our secured bank facilities and issued Generation models, which helped to further diversify our first senior unsecured bonds. our fleet and lower the average age to 8.6 years at Our first venture into the unsecured debt market was year end. In addition, the new aircraft are on long particularly noteworthy. Late in the year FLY raised contracted leases, with an average remaining lease $300 million by issuing senior unsecured notes due term of 8.5 years. in December 2020. We were particularly pleased with Our aircraft acquisitions had a positive impact on how well our first unsecured debt issue was received. our contracted annualized lease rentals, which We expect that the unsecured debt market will grew by 14% during the year to $371 million. Our continue to be a significant source of funding for FLY lessee base has also broadened as we increased in the future, and at a reducing cost as we become our customers to 62 airlines in 34 countries. better known in this market and as we increase the number of unencumbered aircraft in our portfolio. 2 COLM BARRINGTON CEO GARY DALES CFO FLY was also active in the secured financing markets We remain dedicated to returning capital to our by raising over $600 million of secured debt in 2013. shareholders. Following our successful fleet growth Fly has no significant debt maturities until 2018. during the year, we increased FLY’s dividend in the fourth quarter by raising it 14% to $0.25 per share per During the year we sold ten aircraft with an average quarter. The dividend will now be $1.00 per share on age of 13.6 years for a total gain of $6.3 million above an annualized basis, significantly above our peers. FLY net book value. Since 2008, FLY has sold a total of has declared a dividend every quarter since it went 22 aircraft with an average age of 12.5 years and for public on the NYSE in 2007, representing a cumulative an aggregate gain of $48.6 million, or 14%, above cash return of $6.37 per share. net book value. FLY has continued to demonstrate its ability to sell older aircraft at gains. With no capital commitments, a strong reserve of unrestricted cash and excellent access to financing, This success underscores our mantra of only FLY is well positioned to take advantage of attractive buying aircraft opportunistically and at the right opportunities to grow while continuing our focus price. Our strategy of acquiring aircraft through sale on enhancing shareholder value. As we look ahead and leaseback transactions with airlines and in the into 2014 we are confident we can meet our fleet secondary market, rather than placing forward orders growth target. Our acquisition pipeline is robust with with the manufacturers, gives us a distinct advantage a number of attractive opportunities. We are certainly when it comes to pricing. We will also continue to sell looking forward to another exciting year ahead. older aircraft in order to maintain a young fleet of the most popular and modern aircraft types. On behalf of our management team, I would like to thank our shareholders for their continued support. Our activity in the capital markets, as well as our aircraft purchases, leases and sales are managed by BBAM, who has been our strategic partner since our inception in 2007. With 25 years of industry experience and its extensive relationships with airlines and Colm Barrington financial institutions around the world, BBAM brings Chief Executive Officer significant value to FLY. The principals in BBAM are also long-term shareholders in FLY, with holdings of approximately 5% of our shares. 3 Metrics AIRCRAFT IN PORTFOLIO (at December 31) NET INCOME UNRESTRICTED CASH CUMULATIVE DIVIDENDS (in millions, at December 31) (in millions, at December 31) (in dollars at December 31) $52 $404 $48 $163 2012 2013 2012 2013 TOTAL SHAREHOLDER RETURN 2013 (including dividends) FLY 38.7% S&P 500 32.4% 4 Our Fleet FLY has a modern and attractive fleet of 113 aircraft, with a focus on Airbus A320 family and Boeing 737 Next Generation narrow-body aircraft, which are the most popular and widely-used aircraft by airlines around the world. ATTRACTIVE MODERN FLEET Mainly Popular Narrow-Bodies Airbus 50 Boeing 63 A319 19 B737 48 A320 27 B747 1 A330 1 B757 11 A340 3 B767 1 B777 1 B787 1 TOTAL AIRCRAFT IN FLEET (AS OF DECEMBER 31, 2013) 113 5 BBAM — Our Fleet Manager and Servicer FLY benefits significantly from BBAM’s global footprint, extensive industry experience and long-standing relationships with airlines and financial institutions around the world. FLY’s fleet of 113 aircraft is managed and serviced on managing aircraft, BBAM has a complementary by BBAM, one of the world’s largest managers of business model that brings many significant benefits commercial jet aircraft with more than 25 years of to FLY, including: history and industry experience. n Extensive global footprint BBAM is a strategic partner and its principals are n Full-service platform long-term shareholders in FLY. Managing a fleet of n Relationships with over 200 airlines around more than 450 commercial aircraft on lease to 200 the world airlines in more than 50 countries, BBAM provides FLY with significant scale and reach. With a focus n 25 year history of providing aircraft financing solutions BBAM employs professional staff around the world in all areas of aircraft leasing and investor management including: marketing professionals, airframe and powerplant engineers, lawyers, capital market and corporate finance experts and accountants. 6 GLOBAL PRESENCE BBAM Office Locations FLY CONSISTENTLY AND PROFITABLY MONETIZES AIRCRAFT Proven track record of selling older aircraft at gains n Sold 22 aircraft for $48.6 million above net book value n Average age of aircraft sold is 12.5 years n Sales price premium to net book value of aircraft sold since inception: 14% $48.6 $42.3 $33.9 $24.8 $11.4 $11.4 2008 2009 2010 2011 2012 2013 Cumulative Net Gains of Aircraft Sold ($ in millions) 7 Board of Directors FLY’s Board of Directors is comprised of industry veterans. Our Chairman and the majority of our directors are independent. JOSEPH M. DONOVAN PAT O’BRIEN Chairman of the Board of Directors and Director Chairman of the Audit Committee ROBERT S. TOMCZAK COLM BARRINGTON Director Chief Executive Officer & Director SUSAN M. WALTON ERIK G. BRAATHEN Director and Chairman of the Nominating Director and Chairman of the and Corporate Governance Committee Compensation Committee STEVEN ZISSIS Director 8 Well-Diversified Global Customer Base FLY has a well-diversified base of airline customers around the world, with no lessee comprising more than 5% of our revenues. FLY’s airline customers include some of the strongest credits in the industry.
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