Air Lease (AL) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2019, the company reported diluted earnings per share of $1.23, a pre-tax net margin of 37.5%, and a pre-tax return on common equity of 14.7% [8] - Revenues increased by 22% compared to Q1 2018, reaching approximately $466 million [27] - The balance sheet grew to $19.2 billion with 280 owned aircraft at the end of the quarter [8] Business Line Data and Key Metrics Changes - The company signed lease placements with 14 airlines covering 45 aircraft, including seven wide bodies [8] - Aircraft deliveries totaled $1 billion, which was $400 million lower than anticipated due to delays at Airbus and Boeing [9] Market Data and Key Metrics Changes - IATA reported a 4.8% increase in year-to-date revenue passenger kilometers (RPKs) with load factors over 80.6% [19] - The overall trend in air travel demand remains healthy, with passenger growth expected to persist at roughly two times global GDP [9] Company Strategy and Development Direction - The company adjusted its full-year 2019 estimate for aircraft investments from $6.5 billion to approximately $5.8 billion, still representing a 71% increase over the previous year [14] - The company remains focused on long-term leases, with strong demand for aircraft as airlines seek to modernize their fleets [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong profitability and continued growth of the business despite delivery delays from OEMs [18] - The company sees no material impact from ongoing trade disputes on lease placements and continues to sign new lease agreements [18] Other Important Information - The company expects its balance sheet to exceed $20 billion in total assets shortly [25] - The company has a significant forward visibility into revenue with over $25 billion in total committed rentals [9] Q&A Session Summary Question: Changes in delivery schedules and impact on future years - Management indicated that some aircraft deliveries scheduled for 2019 may spill over into 2020 due to delays from Airbus and Boeing [36][37] Question: Lessee obligations during aircraft grounding - Lessees are required to remain current on their leases even if the aircraft are grounded, as payments must continue [44] Question: Secondary market demand and aircraft substitution - Some airlines have substituted wide body aircraft for grounded Max aircraft, but overall utilization remains high [49] Question: Trends in lease rates - Management noted that lease rates have bottomed out and are beginning to rise due to strong demand for aircraft [84] Question: Impact of preferred equity issuance on financial flexibility - The preferred equity issuance provides financial flexibility and is attractively priced compared to long-term debt financing [82]