Allison Poliniak: Great, thank you.
Operator: [Operator Instructions] Your next question comes from the line of Justin Bergner from Gabelli Funds. Your line is open.
Justin Bergner: Good morning, Bob. Good morning, Tom. Good morning, Shari.
Tom Ellman: Good morning.
Shari Hellerman: Good morning.
Bob Lyons: Good morning.
Justin Bergner: The first question I have would just relate to some cleanup questions. Did you repurchase any shares in the quarter?
Bob Lyons: We did not.
Justin Bergner: Okay. And then secondly, the other revenue in Rail International, could you just clarify sort of what’s in it and why it’s been ticking up over the last year? Is that just commensurate with the growth of the International business?
Tom Ellman: Yes, Justin, my guess is you’re actually referring to the Portfolio Management segment.
Justin Bergner: I guess you can cover that as well. But I was asking about the International.
Tom Ellman: Okay, so in Portfolio Management. The key driver is the GEL engines. So we’ve noted before that we have engines that are used to support the business in Rolls-Royce that has a — that supports their total care maintenance program. And this is a pool of engines that rather than being on a fixed lease to a single airline, are leased to several different airlines to support that program. And because the accounting is a little bit different, that shows up as other revenue rather than lease revenue, and those engines, those 15 engines that support that pool have been added between the fourth quarter of 2022 and July of 2023, and that’s why you see the big step-up in the Portfolio Management segment.
Bob Lyons: And on the International side, Justin, unlike in Rail North America, where other revenue primarily represents repair revenue that’s — those are repairs that we filled back to the customer. And International, it’s a much smaller percentage of the overall revenue line, less than 5%. And it’s really a myriad of items. Some of that is damage for railcar — recovery on damage for railcars. It can be billbacks to customers, we have some interest income in there as well. So there’s a whole host of items in there, but nothing in particular, and really should be no change in the trend line.
Justin Bergner: Okay. If you had to handicap sort of what parts of your business are tracking ahead of your earlier guidance to allow you to come in modestly ahead, which segments of the business would you [indiscernible]?
Bob Lyons: Yes. I’ll comment first, and maybe if you want some additional color, Tom can weigh in too. But the big driver has been Portfolio Management and the engine leasing business. When we were in the depths of the pandemic and coming out of it last year, the expectation was for the global aerospace sector for air travel to really not fully recover at the earliest until 2024. Domestic travel was above pre-pandemic levels already. International travels, at about 90% — 97% of what it was pre-pandemic. So the recovery there has been much faster. So our utilization of engines has been higher than anticipated. Bad debt expense is lower than anticipated. All the things you’d expect to see in a recovery just occurred much quicker than anyone anticipated. And we’ve been able to deploy capital directly into engines at a pace above what we originally thought. So you’re seeing that pick up in our other revenue within Portfolio Management, as Tom mentioned.
Justin Bergner: Great, thank you. If I could just get one last one in. The higher interest rate environment, how does that sort of affect the dynamic between higher lease rates and higher cost of capital?