Air Lease Corp (NYSE:AL) Q1 2022 Earnings Conference Call May 5, 2022 4:30 PM ET Company Participants Jason Arnold - Assistant VP, Finance John Plueger - CEO, President & Director Steven Hazy - Executive Chairman Gregory Willis - EVP & CFO Conference Call Participants Catherine O'Brien - Goldman Sachs Group Jamie Baker - JPMorgan Chase & Co. Moshe Orenbuch - Crédit Suisse- Hillary Cacanando - Deutsche Bank Mark Streeter - JPMorgan Chase & Co. Operator Ladies and gentlemen, welcome to the Air Lease First Qu ...

Air Lease Corp (NYSE:AL) Q4 2021 Earnings Conference Call February 17, 2022 4:30 PM ET Company Participants Mary Liz DePalma - IR Steven Házy - Executive Chairman John Plueger - CEO and President Greg Willis - EVP and CFO Conference Call Participants Jamie Baker - JPMorgan Catherine O’Brien - Goldman Sachs Vincent Caintic - Stephens Helane Becker - Cowen Hillary Cacanando - Deutsche Bank Operator Ladies and gentlemen thank you for standing by. And welcome to the Air Lease Fourth Quarter 2021 Earnings Confer ...

Air Lease Corp (NYSE:AL) Q3 2021 Earnings Conference Call November 4, 2021 4:30 PM ET Company Participants Jason Arnold - Assistant VP, Finance John Plueger - CEO, President & Director Gregory Willis - EVP & CFO Steven Házy - Executive Chairman Conference Call Participants Catherine O'Brien - Goldman Sachs Group Helane Becker - Cowen and Company Jamie Baker - JPMorgan Chase & Co. Moshe Orenbuch - Crédit Suisse Vincent Caintic - Stephens Inc. Hillary Cacanando - Deutsche Bank Operator Good day, and thank you ...

Financial Data and Key Metrics Changes - For Q2 2021, total revenues were reported at $492 million, a decrease of 6% compared to the same quarter last year, while diluted EPS was $0.75, down 41% year-over-year [9] - The company experienced an improvement in collection rates to 87% from 84% in Q1, and lease utilization was strong at 99.7% [10] - The net deferrals balance declined to $115 million from $131 million, with over half of the deferrals granted to date having been repaid [10][32] Business Line Data and Key Metrics Changes - The company took delivery of approximately $1 billion in new aircraft during Q2, which was $200 million less than anticipated, with 50% of these deliveries occurring in June [10] - Rental revenues were negatively impacted by $87 million due to cash basis accounting and lease restructurings, with $42 million attributed to one customer, Vietnam Airlines [11][30] Market Data and Key Metrics Changes - The recovery of air travel varies significantly by geography, with regions like the US, China, and parts of Europe seeing a rebound, while many Asian countries face challenges due to lower vaccination rates [7][8] - Domestic travel has improved more quickly than international travel, with domestic RPKs down only 22% compared to June 2019, while international RPKs were down 81% [22] Company Strategy and Development Direction - The company is focused on maintaining a strong asset base and is currently in a buyer's market for aircraft, preferring to acquire rather than sell [41] - The company aims to maintain a balanced fleet composition, targeting 20% to 25% wide-body aircraft in the long term while increasing single-aisle aircraft [77] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing recovery in air travel, despite challenges posed by the Delta variant and varying recovery rates across regions [18] - The company anticipates continued demand for modern, fuel-efficient aircraft, driven by sustainability initiatives and the need for airlines to modernize their fleets [28] Other Important Information - The company declared a dividend of $0.16 per share for Q2 2021, reflecting confidence in the ongoing recovery [18] - The company has $27.1 billion in revolving commitments on its current fleet and forward order book, indicating strong future growth potential [13] Q&A Session Summary Question: Where are the most attractive opportunities to acquire additional aircraft? - The company sees good prospecting opportunities and plans to make announcements regarding aircraft acquisitions in the coming quarters, emphasizing a preference to hold onto existing assets due to delivery delays [41] Question: How should rental income be modeled going forward? - Management indicated that lease restructurings typically involve extending lease terms at lower rates, but they aim to achieve equivalent recovery over time [46] Question: What is the outlook for cash basis loans and claims recoveries? - Management noted that while they received a partial payment from Vietnam, future outcomes are uncertain and depend on governmental support for the airline [58] Question: How does the company view the impact of global warming on emissions reduction targets? - Management acknowledged the importance of achievable goals and emphasized that the industry must balance aspirational targets with practical capabilities [80]

[PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Air Lease Corporation as of June 30, 2021, reflecting asset growth from fleet expansion but a year-over-year decline in revenue and net income due to COVID-19 impacts [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to **$25.76 billion** by June 30, 2021, driven by flight equipment, while liabilities slightly increased and shareholders' equity expanded to **$6.50 billion** Consolidated Balance Sheet Highlights (in billions) | Metric | June 30, 2021 (unaudited) | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$25.755** | **$25.215** | | Flight equipment, net | $21.531 | $20.380 | | **Total Liabilities** | **$19.253** | **$19.142** | | Debt financing, net | $16.540 | $16.518 | | **Total Shareholders' Equity** | **$6.501** | **$6.072** | [Consolidated Statements of Income and Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Q2 2021 total revenues decreased to **$491.9 million**, with net income available to common stockholders falling to **$85.6 million**, resulting in **$0.75** diluted EPS Q2 and H1 2021 vs 2020 Income Statement (in millions, except per share data) | Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$491.877** | **$521.349** | **$966.704** | **$1,032.736** | | Rental of flight equipment | $452.044 | $497.869 | $920.139 | $994.556 | | **Net Income** | **$93.422** | **$147.625** | **$177.514** | **$284.776** | | Net income available to common stockholders | $85.587 | $143.781 | $165.835 | $277.088 | | **Diluted EPS** | **$0.75** | **$1.26** | **$1.45** | **$2.43** | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) H1 2021 net cash from operations increased to **$602.7 million**, while investing activities used **$1.40 billion**, leading to a net cash decrease of **$525.0 million** Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $602.665 | $468.342 | | Net cash used in investing activities | ($1,401.373) | ($902.563) | | Net cash provided by financing activities | $273.701 | $1,038.150 | | **Net (decrease)/increase in cash** | **($525.007)** | **$603.929** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail operations, **$16.7 billion** total debt, **$22.2 billion** aircraft purchase commitments, and **$90.3 million** unrecognized H1 2021 rental revenue due to COVID-19 impacts - As of June 30, 2021, the company owned **354 aircraft**, managed **89**, and had **338** aircraft on order[30](index=30&type=chunk) - Total debt financing stood at **$16.7 billion** as of June 30, 2021, with senior unsecured notes comprising the majority at **$16.4 billion**[33](index=33&type=chunk)[34](index=34&type=chunk) - The company has commitments to acquire **338 aircraft** for an estimated aggregate price of **$22.2 billion** for delivery through 2027[49](index=49&type=chunk)[50](index=50&type=chunk) - Due to collection uncertainty related to the COVID-19 pandemic, the company did not recognize rental revenue of **$41.6 million** in Q2 2021 and **$90.3 million** in H1 2021 for certain lessees[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses COVID-19's impact on operations, including lease deferrals and reduced collection rates, while highlighting **$7.6 billion** liquidity, fleet growth, and declining revenues due to unrecognized rental income [Impact of the COVID-19 Pandemic](index=18&type=section&id=Impact%20of%20the%20COVID-19%20Pandemic) COVID-19 continues to impact airline customers, leading to accommodations with **63%** of lessees, **87%** Q2 2021 collection rate, and **$41.6 million** unrecognized rental revenue - The company has agreed to accommodations, mainly lease deferrals, with approximately **63%** of its lessees. As of August 5, 2021, total net deferrals stood at **$115.0 million**[85](index=85&type=chunk) - The collection rate was **87%** for Q2 2021 and **86%** for H1 2021. The company expects this rate to remain under pressure[86](index=86&type=chunk) - In Q2 2021, **$41.6 million** of rental revenue was not recognized because collection was not reasonably assured for certain lessees, who represent **10.9%** of the fleet's net book value[86](index=86&type=chunk)[87](index=87&type=chunk) [Our Fleet](index=21&type=section&id=Our%20Fleet) As of June 30, 2021, the owned fleet grew to **354 aircraft** with a **$21.5 billion** net book value, complemented by **338** aircraft on order and geographic diversification Fleet Metrics as of June 30, 2021 | Metric | Value | | :--- | :--- | | Owned Fleet | 354 aircraft | | Managed Fleet | 89 aircraft | | Aircraft on Order | 338 aircraft | | Aggregate Fleet Net Book Value | $21.5 billion | | Weighted-Average Fleet Age | 4.3 years | | Weighted-Average Remaining Lease Term | 6.9 years | | Total Committed Rentals | $27.1 billion | - The company faces significant delivery delays from manufacturers, particularly for the Boeing 737 MAX and 787 models, which may lead to further lease and order cancellations[104](index=104&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) - As of August 5, 2021, the company has placed **100%** of its aircraft scheduled for delivery in 2021 and **87.7%** of those for 2022 on lease[116](index=116&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained a strong liquidity position of **$7.6 billion** in Q2 2021, with **$16.7 billion** total debt, **99.1%** unsecured, and a **2.91%** composite cost of funds - Total available liquidity was **$7.6 billion** as of Q2 2021, including a **$6.4 billion** unsecured revolving credit facility[133](index=133&type=chunk)[95](index=95&type=chunk) Debt Profile | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Debt Financing | $16.7 billion | $16.7 billion | | Unsecured Debt % | 99.1% | 98.2% | | Fixed-Rate Debt % | 94.6% | 93.0% | | Composite Interest Rate | 2.91% | 3.13% | - In H1 2021, the company issued approximately **$2.6 billion** in Medium-Term Notes and **300,000 shares** of Series B Preferred Stock with a liquidation preference of **$300.0 million**[139](index=139&type=chunk)[145](index=145&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section details financial results for Q2 and H1 2021, showing declining rental revenue due to unrecognized income and lease restructurings, alongside increased interest and depreciation expenses - **Q2 2021 vs Q2 2020:** Rental revenue decreased primarily due to **$41.6 million** of unrecognized revenue and a **$45.1 million** negative impact from lease restructurings[164](index=164&type=chunk) - **H1 2021 vs H1 2020:** Rental revenue decreased due to **$90.3 million** of unrecognized revenue and an **$82.1 million** negative impact from lease restructurings[169](index=169&type=chunk) - Aircraft sales, trading and other revenue in Q2 2021 included **$34.0 million** from the sale of unsecured claims related to Aeromexico's insolvency proceedings[165](index=165&type=chunk) - Interest expense increased in both the three and six-month periods due to a higher average debt balance to fund fleet growth, partially offset by a lower composite interest rate[166](index=166&type=chunk)[171](index=171&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include interest rate risk, where a **1.0%** rate increase would add **$9.0 million** in annual interest expense, and largely mitigated foreign exchange risk - As of June 30, 2021, the company had **$0.9 billion** in floating-rate debt. A **1.0%** increase in interest rates would result in an additional **$9.0 million** in annualized interest expense[180](index=180&type=chunk)[181](index=181&type=chunk) - Foreign exchange risk is largely mitigated as most revenues, expenses, and debt are denominated in U.S. dollars. The company's Canadian dollar-denominated notes are hedged with a cross-currency swap[183](index=183&type=chunk)[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[186](index=186&type=chunk) - No changes occurred during the quarter ended June 30, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[187](index=187&type=chunk) [PART II—OTHER INFORMATION](index=36&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is not presently a party to any material legal proceedings[188](index=188&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes in risk factors from those discussed in the Annual Report on Form 10-K for the year ended December 31, 2020[189](index=189&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including amendments to credit and aircraft purchase agreements, and CEO/CFO certifications - Exhibits filed include the Sixth Amendment to the company's credit agreement and various amendments to purchase agreements with Airbus and Boeing[191](index=191&type=chunk)[192](index=192&type=chunk)[197](index=197&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are included as exhibits[198](index=198&type=chunk)[199](index=199&type=chunk)

Financial Data and Key Metrics Changes - For Q1 2021, total revenues were reported at $475 million, a decrease of 7% compared to the same period last year, while diluted EPS was $0.70, down 40% year-over-year [10] - The company faced an impact of approximately $86 million in rental revenues not recognized due to cash versus accrual basis revenue recognition and lease restructurings [10][33] - Cash collections and lease utilization rates were solid at 84% and 99.6% respectively, although slightly lower than Q4 [11] Business Line Data and Key Metrics Changes - The company took delivery of approximately $600 million in new aircraft during the quarter, which was $200 million more than initially anticipated [10] - Lease placements remained strong, with 95% of the order book placed on long-term leases for aircraft delivering through 2022 and 80% through 2023 [13] - The management business is growing, with over $600 million of aircraft sourced for Blackbird Capital II in a 100-day period [16] Market Data and Key Metrics Changes - The company noted a shift towards leasing, which now accounts for about half of the marketplace, driven by airlines' focus on operating younger aircraft and sustainability initiatives [13] - The recovery of air travel is anticipated as vaccination rates rise and travel restrictions ease, with TSA reporting over 1.6 million passengers per day recently, compared to below 200,000 a year ago [22][25] Company Strategy and Development Direction - The company remains committed to supporting airline customers through the pandemic, strengthening relationships and positioning itself as a long-term partner [12] - A focus on sustainability and operating younger aircraft is driving demand, with the company well-positioned to benefit from these trends [13][20] - The company plans to maintain its dividend policy and has extended its share buyback authorization, indicating a commitment to shareholder returns [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of air travel and the company's ability to navigate the challenges posed by the pandemic [9][12] - The pace of requests for rent deferrals and lease restructuring has slowed significantly, indicating a shift towards recovery [11][70] - Management highlighted the importance of maintaining an investment-grade balance sheet and robust liquidity position, with $7.5 billion available at the end of Q1 [40] Other Important Information - The company announced a donation of $100,000 to COVID-19 relief efforts in India, reflecting its commitment to social responsibility [18] - The company is actively exploring supplemental aircraft investment opportunities outside of its order book [14] Q&A Session Summary Question: Can you discuss the impact of lease restructurings on future quarters? - Management indicated that lease restructurings are expected to continue but should decrease over time, with efforts to recover cash basis amounts [43][45] Question: What are the dynamics behind the lack of incremental acquisitions this quarter? - Management clarified that the absence of acquisitions in one quarter should not be interpreted as a change in market dynamics, emphasizing a selective approach to aircraft purchases [47][48] Question: How is the company managing customers who have not yet agreed to accommodations? - Management noted that the rate of deferrals and restructuring requests has significantly decreased, indicating a shift towards recovery [70]