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
3.30pm
Break
Dómhnal Slattery
Cocktails
6.00pm
Entertainment
7.00pm
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 LCC2 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

1
2
OECD
Low Cost Carrier
40% of the global fleet approaching the end of its useful economic life
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
Minimum scale
requirement of
$10bn – on BS1
and locked in
growth
 Top 10 lessors
account for 60%
of delivered and
committed fleet
on operating
lease
1
2
Balance Sheet
Original Equipment Manufacturer
2
Multi-cycle
management
experience
 Founded & scaled
two leading
global lessors
with a core focus
on risk
management
3
Sustainable
and efficient
access to
capital
 Repeat access to
deep pools of
liquidity with
global capital
markets & banks
4
Recurring,
long term
relationships
with OEMs2
 20 year order
history with
Boeing & Airbus
5
Depth &
quality of airline
relationships
 Network of 150+
airline customers
globally
Avolon | Slide 8
Avolon | Prime Strategic Position
$13bn
251 aircraft, 2.6 years age1
Delivered and committed fleet
In-demand, modern, fuel efficient aircraft
24 years
Strong Risk Ethos
Average executive leadership experience
Disciplined, proactive approach
Sustainable,
Efficient Capital
$10bn Capital Raised
$568m
Since inception
Embedded fleet value - at 31 Dec ‘14
Deep, Valuable
Relationships
20 years
150+ Airlines
Boeing & Airbus order history
51 clients in 29 countries
14.7% - 15.0% Adjusted ROE (FY15) 2
Organic Growth
12.8% - 13.1% ROE3
57% adjusted net income CAGR 2012-20142
Minimum Scale - $10bn
Multi-cycle
Management Experience
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
Avolon | Slide 9
Investor Day | May 26th 2015
Industry Outlook
Dick Forsberg
Focus on Five Key Themes
1
Commercial
aviation is a
global business
with sustainable
growth
underpinned by
emerging
markets – world
fleet will double
to 45,000 aircraft
by 2033
Source: IATA, Boeing and Airbus
2
The industry is a
voracious
consumer of
capital - $3.5
trillion required
over 20 years,
$522bn for
deliveries
through 2018
3
The leasing
sector is the
largest single
financing channel
and is growing
4
Disciplined
OEMs are
carefully
matching
capacity to
demand
5
The industry
environment
remains healthy
with a positive
outlook
Avolon | Slide 11
Strong & Durable Industry Fundamentals
Airline industry achieved a 5th consecutive year of profitability in 2014
 Forecast to reach record $25bn in 2015
Air passengers forecast to grow by 7% in 2015 and c.5% per annum to 2033
Asian economies forecast to generate 100
million new passengers a year
 Equivalent to adding one new Ryanair every year
VFR traffic close to 200
million annual passengers
 Growth from rising urbanisation and labour migration
 Highly stable, even during economic downturns
Rising numbers of fleet retirements will absorb >40% of deliveries
Record OEM backlogs with long lead times
 Extended book:bill provides locked-in growth and buffer
 10-15% overbooking is routine
Source: IATA, Boeing and Airbus
Avolon | Slide 12
Growth Centred On Emerging Markets
Expanding air travel in emerging regions is driving significant demand for aircraft
Traffic and Propensity to Fly
Trips per Capita 2013* - Log scale
Trips per Capita 2013* - Log scale
100.00
100.00
 Market penetration still low
10.00
10.00
1.00
1.00
Turkey
Turkey
Russia
Brazil
IndonesiaRussia
Mexico
Brazil
Indonesia
Mexico
China
China
India
India
0.10
0.10
S.Korea
S.Korea
in emerging markets: 85%
Australia
USA
Australia
UK
USA
Germany
UK
Germany
Japan
Japan
of population, but 40% of trips
0.01
0.01
0.00
0.00
-
10,000
10,000
20,000
20,000
30,000
30,000
40,000
40,000
2013 GDP per Capita (constant 2005 US$)
85% of world
2013 GDP per Capita (constant 2005 US$)
85% of world
population - 40% of trips
population - 40% of trips
* Passengers carried by airlines domiciled in the country
*Sources:
Passengers
carried by airlines domiciled in the country
World Bank, ICAO
50,000
50,000
60,000
60,000
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 2003 2013
2033 6.2%
Europe
4.0%
North America
2.9%
Latin America
6.0%
Middle East
6.1%
CIS
4.4%
Africa
6.1%
0
% of
2003
RPKs
% of
2013
RPKs
% of
2033
RPKs
23%
30%
39%
27%
24%
20%
 Traffic in mature markets will
be overtaken by Asia-Pacific
economies
36%
27%
18%
 Asia-Pacific forecast to grow to a
6%
7%
9%
3%
6%
7%
2%
3%
3%
3%
3%
3%
39% share by 2033
1,000 2,000 3,000 4,000 5,000 6,000 7,000
Source: Boeing 2014 CMO, company analysis RPKs (Trn)
Avolon | Slide 14
OEM Discipline & Record Backlogs
Most products sold out to the end of the decade
Airbus + Boeing Order & Backlog History
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Boeing
strike
Backlog
 Orders to deliveries ratio
(“book:bill”) averaged
10
8
6
4
2
0
Orders
Deliveries
1.8x over past 10 years
Years
# of aircraft
Airbus + Boeing Book:Bill History
 Backlog, measured by years
of production, has doubled
to 9
years
Backlog (Years)
Source: Ascend
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
Single Aisle Production & Over-booking
Overbooking
800
 Delivery rates protected by
deliberate over-booking
700
600
500
400
300
200
100
0
2015
2015
2016
2016
CEO
Source: Ascend
NEO
2017
2017
NG
Max
2018
2018
Production
2019
2019
20202020
Production
Avolon | Slide 16
Many Direct Customers Lack New Gen Orders
Neutralises concerns over “double counting” orders
65% of A320 direct customers
65% of A320 Family
operators
that order
direct from Airbus
have
no NEO
backlog
have no NEO backlog
CEO Only, 29
NEO only, 15
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
CEO and NEO,
27
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%
$115B
$124B
valued at
years
50%
Lessor Share
$125B
• Airlines will need
$132B
$141B
36,000 new aircraft,
$3.5 trillion, over the next 20
 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
by 2020
2014
2015
Cash
Capital Markets
2016
Bank Debt
2017
2018
Export Credit
2020
Tax Equity
•
50%
Diverse lessor funding sources, with capital
markets taking growing share
Source: Boeing Capital
Source: Boeing
Avolon | Slide 18
Positive Near-term Outlook
Growing, efficient and profitable utilization of fleets and capacity
Load factors: ~80% globally
record high
Utilization: +15% vs. 2003
record high
Parked fleet: Post-recession low
Stable values & lease rates
Source: Boeing, IATA
record high
VALUE
Profits: $25bn forecast in 2015
FLEET
above trend
DEMAND
Traffic: +7% forecast in 2015
Avolon | Slide 19
Investor Day | May 26th 2015
Sale & Leaseback Market
John Higgins
Sale & Leaseback Market
Core Thesis
Factors for Success
How does a SLB Work?
Are the Returns Robust?
Why do Airlines & Lessors do SLBs?
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?
Sale & Leaseback Model
O.E.M
1
1
2
5
AIRLINE
5
2
4
Airline and Avolon agree:
1. Purchase price & reference date
2. Rental (“LRF”) & reference rate
3. Lease term
4. Maintenance and redelivery conditions
3
Airline and Avolon fix rental
2 days prior to delivery based
on prevailing interest rates
4
Avolon – match fund the
interest rate on lease and debt
5
Manufacturer sells aircraft to Airline
who simultaneously sells to Avolon
& leases back
Simultaneously
3
Airline orders aircraft
Avolon | Slide 23
Why do Airlines & Lessors do SLBs?
Airline
Lessor
Provides capital / financing
Lower risk compared to direct
orders
Flexibility in fleet and capacity
management
Broadens relevance to the
“growth” airline customer base
Management of residual value
exposure
Avoids ‘drag’ of forward order
deposits
Consistent with outsourcing of
non-core airline operations
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
$522bn
$124
$115
23%
28%
32%
Cash
Source: Boeing
2016
2017
$141
$522bn
financing
requirement
to 2018
28%
15%
15%
2014
$132
2%
2%
24%
31%
$bn
$125
$156
2015F
Capital Markets
Bank Debt
2018
Export Credit
2019
Tax Equity
Avolon | Slide 25
How Big is the Market? (continued)
$522bn
Delivery Financing
Lessor Overall Share
40%
50%
- Direct Order
50%
60%
- SLB
50%
40%
- SLB Share of Overall
20%
20%
Of Which:
$104bn to 2018
Source: Boeing, Airbus, Avolon
Avolon | Slide 26
Precedent Relationship
Global Platform with Reach
Proven Appetite for Scale
Speed





A Significant proportion of our SLB deals are Originated “Off Market”
Lower
Competitive and Diverse Sources of Capital
# of Competitors
$
Higher
Factors for Success
Avolon | Slide 27
Are the Returns Robust?
INCREASING YIELD
Annualised Lease Yield 1
Rising SLB lease yields
Interest Rate 2
15.0%
11.0%
10.0%
Reduced funding cost
5.0%
3.8%
0.0%
2011
1)
2)
2012
2013
2014
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
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.
Widening net yield
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
REVENUE
+33%
$ millions
8,000
6,000
4,000
2,000
4,389
5,844
60
50
40
30
20
10
0
136
Q1 2014
Q1 2015
NET INCOME
INTEREST EXPENSE
+ 14%
$ millions
200
150
100
+ 29%
176
50
0
0
Q1 2014
$ millions
$ millions
Q1 2015
+ 36%
60
48
55
40
20
49
36
0
Q1 2014
Q1 2015
Q1 2014
Q1 2015
Avolon | Slide 31
Our Liability Management Objectives1
1)
2)
3)
1
Access to Liquidity
$10bn Capital since 2010
$1.6bn Undrawn Debt2
2
Stable Liability Profile
4.5year WAL
3
Optimal D:E /
Cost of Funds
Match hedged
3:1 Net Debt:Equity
3.7% CoF3
Data as of 31 March 2015 unless otherwise stated
$920m at end Q1 and $675m April 2015 new facility
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
+61%
Delivery Volume
since 2010
-19%
Export Credit
25-30%
Bank Market
+18%
US Capital Markets
60+ Banks active in the market
Avolon | Slide 33
Increasing Scale and Credit Profile
NET BOOK VALUE
CAGR1 25%
REVENUE
$ millions
$ millions
8,000
6,000
4,000
2,000
0
1,000
3,576
4,260
5,607
5,844
500
0
2012
2013
NET INCOME
2014
$ millions
150
200
50
113
100
49
0
2012
1CAGRs
2013
represent growth from 2012FY to 2014FY
2Non-GAAP measure. See appendix for details
2014
606
176
2013
2014
Q1 2015
CAGR1 57%
179
91
61
450
ADJUSTED NET INCOME2
$ millions
100
326
2012
Q1 2015
CAGR1 22%
CAGR1 36%
Q1 2015
125
73
62
0
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 - $675m 8yr @ 165bps
Avolon | Slide 35
Protected Against Rising Rates1
100%
21.4%
Debt Stack
80%
Rate Exposures are
matched either by fixed
rate financing or floating
rate financing + interest
rate cap
12.2%
60%
40%
68.7%
• Portfolio Level Interest Rate
20%
Risk is reviewed and
considered periodically
0%
1As
of 31 March 2015
• Lease and Loan Interest
Fixed Rate Debt
Caps & Swaps
WAL 4.7 Years
Average Cap
Strike Rate 3.05%
Floating Rate Leases
Libor
• All future lease contracts
and LOIs include rental
formula pegged to
reference swap rate
Avolon | Slide 36
Forward Delivery Rentals
Typical Rental Formula
Rent = Fixed Base Rent + (Actual Fixed Rate – Assumed Swap Rate) x N x 100)
Fixed Base Rent
Actual Fixed Rate
equals ($xxx,xxx)
(expressed in
Delivery Date
Dollars)
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
Adjusted ROE1 14.7% -15%
ROE 12.8% -13.1%
Liquidity2
$1.6bn undrawn debt
1 Non-GAAP
2 As
Commitments2
$1.67bn in FY15
$900m in FY16
$4.9bn Orders:
A320 NEO
A330 NEO
B737 MAX
B787-9
measure. See appendix for details
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
Head of Aircraft
Trading
Brian Foley
 Sole focus on
aircraft trading
Regional Origination Heads
Head of Asia
Simon Hanson
 5 global offices with primary focus
Head of Greater China
Susan Guo
 Regional, high level coverage of all
 Global Investor Coverage
Vice President
Aircraft Trading
Ross O’Connor
Vice President
Aircraft Trading
Paraic Quinn
 Management of all
sales opportunities
 Provides input to all
Origination underwriting
activity
 Development of trading
analytical tools and
templates
on airline coverage, secondary
focus on aircraft trading
identified trading counterparties
 Identification of new investors
Head of EMEA
Pat Hannigan
within region for inclusion in
“Top 50” process
 Communication of trading
Head of the Americas
Paul Geaney
opportunities to the aircraft
trading team
Avolon | Slide 41
Our Trading Philosophy
Trading through the cycle makes sense
 Proves the value and liquidity of the aircraft portfolio
1
Portfolio Risk
Management
 Maintain industry leading portfolio age metric
 Manage aircraft and customer experience
 Validates core underwriting assumptions
 Value creation through increased ROE
2
 Fee generation from asset management
Financial 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
 Airbus & Boeing supply 90% of commercial jets
3
Supply / Demand Stability
 Order backlog extends to 9 years
 Stable technology
Avolon | Slide 43
Who Buys Aircraft?
1
Lessors
4 different profiles
2
Tax Investors
3
Airlines
4
Structured
Transactions




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)
 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
+$568m Potential Embedded
Equity Value1
Value of Portfolio ($m)
$6,500
$6,175
Net Book Value
$5,607
Potential Embedded
Equity Value
$5,000
$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 SOLD1
2015 TRADING VOLUME
Cumulative Trading Gains of $121m on $1.37bn of aircraft sold1
FY 2015
FY 2012 FY 2013 FY 2014
Guidance
$m
Target $700m4
Trading Gain2
11.3
31.1
64.4
–
–
7.5
Net Book Value
154.9
564.1
510.2
700
% Gain on Sale3
7.3%
5.5%
12.6%
8.0%
Total Interest Breakage
Costs
55 - 60
Q1
Closed
21%
Volume
Gap
26%
Letters
of Intent
53%
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
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
AirlineCredit
Credit
Airline
RatingModel
Model
Rating
Watch System
Avolon | Slide 51
Airline Credit Rating Model
Quantitative Factors
Operational
Profitability
Liquidity
Leverage
Liquidity
115 airlines
scored across
five key credit
risk categories
Solvency
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
Amber to Red
 Increase the frequency of oversight
 Customer site visit
 Re-assess basis for downgrade




 Monthly - review by management
 Quarterly - Risk Management Committee
 Close receivables management
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
1
Asia Pacific is home to over 60% of the world’s population
2
Massive, structural shift in demographics
3
$2 trillion financing required for 13,000 aircraft to 20331
Source: Boeing, Airbus
“The Flying Middle Class”
Avolon | Slide 58
Experienced Presence On the Ground
Susan Hao Guo
Ranga
Karumbunathan
Head of Greater China
Shanghai
Experience: 21 years
Managing Director, Origination
Dubai
Experience: 17 years
Simon Hanson
Head of Asia
Singapore
Experience: 15 years
Avolon | Slide 59
Avolon Asia Pacific Portfolio Snapshot1
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
11% | China
Domestic 2014 Traffic Growth
2014 GDP: +7.3%
2014 GDP: +6.3%
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
50 countries, c.29% of the global land area and 60% of the world’s population
(4.38bn people)1
2
Asia Pacific middle class will grow by 2.6bn people to 3.23bn by 20302
3
Aircraft penetration per 1m of population in the US is 13x that of Asia Pacific
4
China alone will see passenger numbers increase by 850m to 1.3bn per annum
over the next 20 years1
What happens when 2.6bn people start to fly?
1
2
OECD
OECD defines the middle class as those earning a income between $10 and $100 per day
Avolon | Slide 62
Growth Markets | China
KEY FACTS1
Aircraft deliveries China (units)
Today
2033
Global Economy
2nd
1st
6,000
Consuming
Population
160m
1bn
5,000
No. Airports
230
2,000+
In-service fleet
c.2,400
c.6,200
5080
4,000
3,000
1840
2,000
1,000
910
660
60
80
130
230
50
200
0
Large widebody Medium widebody Small widebody
1
Data according to OECD, Boeing and CAAC
Source: Boeing
2013
Single aisle
Regional jet
2033
Avolon | Slide 63
Growth Markets | Indonesia
KEY FACTS1
Today
2033
Global Economy
16th
7th
Population
255m
290m
Consuming
Population
45m
135m
In-service fleet
c.600
c.1,500
1
Indonesian Air Passenger Traffic
Source: OECD, Boeing & Avolon
Avolon | Slide 64
Asia Pacific | Sustainable Growth Engine
1
1
Asia Pacific will be the world’s largest air travel market by 20331
2
The region is 30% under-ordered - China is 60% under-ordered1
3
Favourable demographics and widespread adoption of the LCC
model for airline growth in the region
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
$13bn
251 aircraft, 2.6 years age1
Delivered and committed fleet
In-demand, modern, fuel efficient aircraft
24 years
Strong Risk Ethos
Average executive leadership experience
Disciplined, proactive approach
Sustainable,
Efficient Capital
$10bn Capital Raised
$568m
Since inception
Embedded fleet value - at 31 Dec ‘14
Deep, Valuable
Relationships
20 years
150+ Airlines
Boeing & Airbus order history
51 clients in 29 countries
14.7% - 15.0% Adjusted ROE (FY15) 2
Organic Growth
12.8% - 13.1% ROE3
57% adjusted net income CAGR 2012-20142
Minimum Scale - $10bn
Multi-cycle
Management Experience
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
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
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
-
-
53,733
-
1,555
268
(25)
(2,359)
(345)
(726)
73,085
125,151
178,994
45,922
61,704
Net Income
Share based compensation
Tax effect
Adjusted net income
Avolon | Slide 71
Appendix 2 | Reconciliation of 2015 Adjusted ROE
%
FY 2015
FY 2015
12.8%
13.1%
Amortization of debt issuance costs
1.4%
1.4%
Unrealized (gain) loss on derivatives
-
-
0.6%
0.6%
Tax effect
(0.1%)
(0.1%)
Adjusted ROE outlook range
14.7%
15.0%
ROE outlook range
Share based compensation
Avolon | Slide 72