Air Lease Corporation Q2 FY2024 earnings call

• OEM Delays: Further OEM delivery delays impacted Q2 results, with deliveries $600 million below expectations due to Boeing MAX and Airbus supply chain issues. - Sales and Deliveries: Purchased 13 new aircraft, sold 11 aircraft for ~$530 million. Sales pipeline was $1.5 billion, expecting to close $1.5 billion in sales for 2024. - Lease Extensions: Lease extensions were elevated, benefiting the business with reduced time off lease and attractive lease rates on extensions. - Order Book: $20 billion order book was 100% placed through 2025, 96% through 2026, with strong demand for delivery slots supporting lease rates. - Air Freight: Strong air freight market due to Middle East attacks and Panama Canal constraints, with robust inquiries for A350 freighter positions. - Farnborough Airshow: Met with customers, new order activity pushed sold-out status of aircraft types, A321XLR received EASA Type Certification, first delivery expected late 2025. - Financials: Interest expense rose due to higher composite cost of funds, but funding costs declined slightly with fixed rate financings in June. Liquidity was $8.2 billion, debt-to-equity ratio was 2.69.

During the second quarter, Air Lease Corporation (ALC) generated revenues of $667 million. Rental revenues were approximately $610 million, contributing ~91.45% of total revenues, while aircraft sales, trading, and other activities accounted for $57 million (~8.55% of total revenues). ALC purchased 13 new aircraft for $940 million and sold 11 aircraft for ~$530 million. Deliveries were $600 million below expectations, but sales were roughly in line. The weighted average fleet age was 4.7 years, weighted average lease term remaining was 6.9 years, and fleet utilization was 100%. ALC's forward order book was 100% placed through 2025, 96% placed through 2026, and 64% of the entire order book was placed.

• Full-Year 2024: Expect deliveries in the $4.5 billion to $5.5 billion range, midpoint ~$5 billion. Q3 deliveries expected ~$2 billion, but potential Boeing strike could impact. - Sales: Expect to close $1.5 billion in sales for 2024, ~$350 million in Q3 sales. - Lease Rates: Strong lease rates on new placements relative to pre-pandemic, benefit from Fed rate cuts and supply chain dynamics.

• OEM Delays: Ongoing aircraft and engine delivery delays and manufacturing flaws impacting deliveries and revenue. - Boeing Strike: Potential Boeing strike could impact third-quarter delivery expectations. - Insurance Lawsuits: Lawsuits pending against insurers regarding aircraft retained in Russia, uncertainty around resolution.

Q: Hillary Cacanando asked about gain on sale being at the lower end of historical range.

A: John Plueger said gain on sale mix varies due to timing of individual sales and packages, with packages having healthy gains but individual aircraft timing causing quarter-to-quarter fluctuations.

Q: Jamie Baker asked about reconciling aircraft shortage and airline overcapacity.

A: John Plueger said overriding demand for aircraft despite some airlines citing overcapacity, historical trend favors leasing during financial squeezes.

Q: Moshe Orenbuch asked about Q3 deliveries and aircraft sales.

A: John Plueger mentioned potential Boeing strike as a big contingency, deliveries dependent on Boeing's operations, and most aircraft sales to other lessors.

Q: Stephen Trent asked about China exposure and aircraft sales.

A: Steven Hazy said China exposure under 5%, most aircraft sales to other lessors.