Air Lease Corporation Q3 FY2024 earnings call

• Generated total revenues of $690 million and diluted earnings per share of $0.82. • Purchased 20 new aircraft and sold 9 aircraft during the quarter. • Fleet weighted average age declined to 4.6 years, lease term remaining extended to 7.1 years, and utilization at 100%. • Order book deliveries for the third quarter were close to the expected $2 billion, despite the Boeing strike. • Sales pipeline stood at $1.5 billion, with an expected $400 million in sales for the fourth quarter and ~$1.5 billion for the full year. • Lease extension activity was high in 2024, with limited lease maturities, positively impacting long-term economic returns. • Board approved a 5% increase in the quarterly cash dividend to $0.22 per share, effective early January 2025. • Emphasized strong demand for new commercial aircraft and highlighted air traffic control inefficiencies as a key area for reducing aviation emissions.

During the third quarter of 2024, Air Lease Corporation generated revenues of $690 million. Revenue was composed of approximately $625 million in rental revenues and $65 million from aircraft sales, trading, and other activities. The company purchased 20 new aircraft during the quarter, adding $1.9 billion to its flight equipment balance sheet, and sold 9 aircraft for approximately $340 million. The weighted average age of the fleet decreased slightly to 4.6 years, while the weighted average lease term remaining extended to 7.1 years. The fleet utilization rate remained exceptionally strong at 100%.

• Full-year 2024 deliveries are expected to be approximately $4.6 billion, within the previously guided range of $4.5 to $5.5 billion. • Deliveries in 2025 are anticipated to have higher lease factors compared to 2024, moving beyond pandemic-era impacts. • The sales pipeline remains strong at $1.5 billion, with an expected $400 million in sales during the fourth quarter and ~$1.5 billion for the full year 2024. • While 2025 lease maturities will be higher, significant rebound in end-of-lease revenue is not expected, as most leases are likely to be extended with current customers. • The forward order book is fully placed through 2026, leveraging the young fleet and strong airline demand.

• Boeing strike impact: Prolonged strike affected supply chain, potentially impacting future aircraft deliveries and supply chain dynamics. • Air traffic control inefficiencies: Delays in air traffic control lead to increased fuel consumption, emissions, and operating costs. • Geopolitical risks: Uncertainties in geopolitical environments may affect airline operations and aircraft deliveries. • Supply chain delays: Ongoing supply chain challenges from the Boeing strike could impact future production timelines for aircraft.

Q: Jamie Baker at JPMorgan inquired about OEMs concentrating on larger platforms and the sale-leaseback market.

A: Steven Hazy noted OEMs are focusing on quality with lessors now, and John Plueger/S Steven Hazy discussed sale-leaseback as a tool for airlines with high aircraft demand, citing examples like Indigo in India.

Q: Terry Market at Barclays asked about profit margins.

A: Gregory Willis mentioned positive drivers including aircraft deliveries, lease renewals, aircraft sales, and interest rate cuts, with 80% of debt fixed and expected benefits from Fed rate cuts.

Q: Hillary Cacanando at Deutsche Bank asked about consolidation and deliveries.

A: Steven Hazy stated no accretive acquisitions found to date, and Gregory Willis mentioned ongoing industry consolidation.

Q: Stephen Trent at Citigroup asked about interest rates and risk management.

A: John Plueger and Gregory Willis discussed the 80-20 fixed-floating rate mix and ongoing risk assessment, including geopolitical and supply chain risks.

Q: Ronald Epstein at Bank of America asked about net interest margin and third OEM.

A: Gregory Willis talked about net interest margin direction, and Steven Hazy discussed challenges for a third OEM due to regulatory and capital-intensive hurdles.