AerSale Corporation (NASDAQ:ASLE) Q4 2022 Earnings Call Transcript

Nick Finazzo: So, I think we have three or four aircraft in conversion now. One of them started I believe in December. The first one started in December; it was supposed to start in October. And that was — those were — we relied on our — on one of our SEC provider to have contracted for those slots and that got delayed. They ended up not being able to contract with one of their providers. Initially, we thought we would have three and now we have two. So, between us and the STC provider or the 757, we’ve now got all 12 slots booked. Some of those actually we took as cargo kits and then we contracted with a provider to do the installations. AerSale itself will not be doing any of these conversions. But that pushed back the second and third aircraft that we’re supposed to go in, in October and December and to push it back several months. I don’t know the exact dates out of top of my head.

Martin Garmendia: It’s supposed to be delivered in those periods.

Nick Finazzo: Well, the October 1 would be delivered in the first quarter, so deliveries that we expected to happen in the first quarter, I don’t even know if we may get one in the first quarter. As you previously asked and we mentioned, when we thought we would get all 12 in the year, we thought those would be fairly evenly spaced throughout the year. Now with the exception of maybe one in the first quarter, I don’t even know if it’s possible to get maybe two the balance will come in the rest of the year and we’ve got a pretty full line at this point on a go forward basis. But that whole thing shifts back a couple of months, so think aircraft that we expected to have delivered in the last quarter, three of those will push into the early first quarter and will be available in the first quarter of €˜24.

Ken Herbert: Okay, okay, that’s helpful. Are you finding with the delays that the cost for the conversions has significantly changed? It sounds like you’re doing more maybe of the kit purchasing relative to outsourcing that. How should we think about your costs associated with the conversions here on these next 12 aircraft, it sounds like there’s been a number of changes in your strategy around that?

Nick Finazzo: So, the actual cost of doing the conversions is actually better for us or by us buying the kits and having the vendor, our own vendor do the installation. It actually lowers our cost over having the FCC provider do the conversions for us. So, the actual shift where we had to buy kits and get them converted ourselves actually is a benefit to the conversion cost itself.

Martin Garmendia: Where we are seeing — yes Ken, we are seeing increases in the 757-conversion program is on the overall cost of engines and that we had the advantage of the benefit in the first two years of pretty robust spare engine inventory balance. Now the engines that we have require more engine work, so that’s increasing the cost and even for a few of those assets, we might have to go into the market to secure those overall assets. So, we reflected that in our guidance, which is why we’re projecting a lower margin profile for this year, compared to the last.

Ken Herbert: Okay. Thanks, Martin. Just finally, on the flight test associated with Artware, you commented you’ve completed two of the five that are outlined. Can you provide any indications of how those first two, sort of, flight test packages went? Was there anything you learned that either positively or negatively that was significantly incremental to expectations and how have those gone?