Air Lease Corporation Q1 FY2025 earnings call

• Fleet expansion: Purchased 14 new aircraft in Q1, added ~$800 million in flight equipment. Sold 16 aircraft for $521 million. Fleet net book value, total revenue, and book value per common share reached all-time highs.
• Revenue sources: Benefited from gains-on-sale revenue, Russia fleet insurance settlements ($329 million in Q1, with an additional $227 million received last week), and continued fleet expansion. Rental revenue rose 5% year-over-year, but was partially offset by higher interest expense and retirement expenses related to Steve Hodge.
• Fleet metrics: Weighted average age of fleet rose to 4.7 years, weighted average lease term remained 7.2 years, fleet utilization at 100%.
• Delivery outlook: Expected $3 billion to $3.5 billion of new aircraft delivered from order book in 2025, with ~$800 million expected in Q2. Received additional Airbus delay notifications affecting 2027-2028 A320 and A321neo deliveries by about a year.
• Sales pipeline: Solid at $741 million, with expected $1.5 billion of aircraft sales in 2025, ~$300 million anticipated in Q2.
• Tariffs and market impact: 87% of business is outside North America. Airlines' demand for aircraft remains strong despite tariffs. Air Lease not responsible for tariffs, which are the airline's responsibility. Uncertainty around tariffs, but Air Lease believes they will be sorted out.

During the first quarter, Air Lease generated total revenues of $738 million. Rental revenue was approximately $645 million, contributing around 87.4% of total revenue, and aircraft sales, trading, and other activities accounted for $93 million, or about 12.6% of total revenue. The company purchased 14 new aircraft adding ~$800 million to the balance sheet and sold 16 aircraft for $521 million in sales proceeds.

• Delivery outlook: Expected $3 billion to $3.5 billion of new aircraft delivered from order book in 2025, with ~$800 million expected in Q2.
• Airbus delays: Received additional delay notifications from Airbus impacting 2027-2028 A320 and A321neo deliveries by about a year.
• Sales pipeline: Expecting around $1.5 billion of aircraft sales for 2025, with ~$300 million anticipated in Q2.

• Litigation: Ongoing litigation prevents questions about Russia fleet insurance claims.
• Tariff uncertainty: Potential impact on aerospace supply chain, uncertainty in tariff developments and their effects on airline operations and aircraft deliveries.
• Interest rate risk: Higher interest expense compared to prior year, impacting results.

Q: Catherine O'Brien asked about real-time examples of lease extensions or order book placements post-tariffs.

A: John Plueger mentioned signing an extension term sheet with a major Asian airline on two A330-300s and one A321, with A330-300 lease rates 50% above pre-COVID levels. Also, additional wide-body extensions expected to close in coming quarter.

Q: Hillary Cacanando asked about capital allocation priority and working with airlines on tariffs.

A: John Plueger said they are considering all options including buyback, M&A, increased dividends. Reemphasized airlines are responsible for tariffs, no immediate requests from airlines regarding tariffs yet.

Q: Moshe Orenbuch asked about organic growth opportunities and Q1 relative to yield improvement.

A: John Plueger mentioned potential opportunities like exploring Chinese aircraft if approached. Greg Willis said Q1 was tracking models nicely and trending towards internal targets for yield improvement.