Air Lease Corporation Q2 FY2025 earnings call

• New aircraft deliveries: Purchased 12 new aircraft during the quarter, adding ~$890 million in flight equipment, and sold 4 aircraft for $126 million. Fleet net book value and book value per common share reached record levels.
• Russia insurance recoveries: Recognized a net benefit of $344 million from insurance settlements in Q2, expect an additional $60 million net benefit in Q3, and have recovered 104% of initial Russia fleet write-off.
• Aircraft sales: Intent to continue pace of aircraft sales, sales pipeline at $1.4 billion, expected $1.5 billion of aircraft sales for 2025, with $300 million projected for Q3 and balance in Q4 2025.
• Order book: 100% placed through 2026, canceled order for 7 A350 freighter aircraft, freeing over $1 billion in forward CapEx commitments.
• Lease rates: Strong, lease extensions high with lease rates on extensions higher than previous periods, including wide-body extensions of A330 and Boeing 777 aircraft.

In the second quarter, Air Lease generated revenues of $732 million. Rental revenue increased by 13.5% due to fleet growth, end-of-lease revenue, and portfolio yield. Sales proceeds for the quarter totaled $126 million from the sale of 4 aircraft. The aircraft sales pipeline sits at $1.4 billion with healthy gain on sales margins above the historical average of 8% to 10%.

• Full year order book deliveries: Likely to hit upper end of $3 billion to $3.5 billion, with ~$600 million of deliveries anticipated for Q3.
• Aircraft sales: Expect around $1.5 billion of aircraft sales for 2025, with $300 million projected for Q3 and balance in Q4 2025.
• Portfolio yield: Expected to trend higher due to roll-off of COVID-era leases, seasoning of existing fleet, and lease extensions.

• Litigation: Ongoing litigation related to Russia fleet insurance claims, with no questions allowed about this during the call.
• Aircraft sales timing: Uncertainties in aircraft sales closings due to airline customer, legal, and jurisdictional matters.
• Macroeconomic/geopolitical: Uncertainties in the airline industry, aircraft/engine delivery delays, and geopolitical risks impacting the business.

Q: Talked about lease expirations and maturities, and capital allocation.

A: Greg Willis noted tracking along previous path with 150-200 basis point yield improvement still valid; John Plueger mentioned buybacks as attractive capital allocation with strong balance sheet.

Q: View on sale-leaseback channels and capital allocation.

A: John Plueger said sale-leaseback marketplace could be competitive, but open to unique opportunities; focus on building strong balance sheet and meaningful capital deployment.

Q: End of lease revenue modeling and extension rates.

A: Gregory B. Willis said end of lease revenue expected similar to 2025 in 2026 assuming strong environment; extension rates higher than previous leases, with wide-bodies extending to longer terms.

Q: Production stability and aircraft sales.

A: John Plueger said Boeing has lived up to delivery projections, Airbus has no further slippage; Gregory B. Willis said targeting $1.5 billion aircraft sales per year with A350 freighter cancellation freeing CapEx for future periods.