Air Lease (US:AL)2019-02-22 04:24Financial Data and Key Metrics Changes - For Q4 2018, the company reported diluted earnings per share of $1.24, with revenues increasing by 13% compared to the same quarter last year [9] - The total balance sheet grew to $18.5 billion, with 275 owned aircraft at year-end [9] - For the full year 2018, diluted earnings per share reached $4.60, with a pre-tax margin of 38.1% and a pre-tax return on equity of 14.3% [10] Business Line Data and Key Metrics Changes - The company took delivery of 12 new aircraft during Q4 and sold five aircraft, indicating active fleet management [9] - The total number of aircraft owned, managed, and on order reached 708, with 91% of the order book placed on long-term leases through 2020 [11] Market Data and Key Metrics Changes - The global airline market remains robust, with continued demand driven by passenger growth and the replacement of aging aircraft [13] - The company noted that the leasing market is highly competitive, but key competitors remain rational and disciplined [14] Company Strategy and Development Direction - The company anticipates 2019 to be a high growth year, with 80 aircraft deliveries under long-term profitable lease contracts [11] - The strategy includes a focus on maintaining a strong balance sheet and investment-grade ratings while expanding its fleet [12] - The company is not participating in the sale-leaseback market, which allows it to control new aircraft positions [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the airline industry's health, despite potential airline failures, and emphasized prudent risk management practices [15][16] - The company remains watchful of industrial recovery and production rates from OEMs, particularly regarding Airbus and Boeing [17] - Management highlighted the importance of modern aircraft in mitigating risks associated with older fleets [16] Other Important Information - The company achieved significant success in debt capital markets, issuing $3 billion in unsecured and senior unsecured notes [10] - The effective tax rate for 2018 was 20.2%, benefiting from tax reform [30] Q&A Session Summary Question: Overview of expectations for 2019 compared to 2018 - Management noted expectations for more stable fuel prices and interest rates in 2019 compared to 2018, with continued growth in the marketplace [39] Question: Lease rates and cost of funds outlook - Lease rate factors have remained stable, and while rising interest rates typically influence lease rates, the company does not foresee immediate changes [41] Question: CapEx financing and fleet growth metrics - The company expects no significant changes in portfolio metrics despite increased CapEx, maintaining a target debt-to-equity ratio of 2.5 to 1 [46] Question: Impact of delivery delays on customers - Management emphasized a focus on customer relationships and mitigating impacts from delivery delays, working closely with manufacturers [50] Question: Sale-leaseback market dynamics - Management observed a slowdown in the sale-leaseback market, with less aggressive interest and lower returns, indicating a potential market bottom [53] Question: Supply side dynamics and production rates - The company believes that Boeing and Airbus are maintaining production rates in line with demand, but remains concerned about supply chain vulnerabilities [84]