• Revenue: $690 million total revenue, with $625 million from rental revenues and $65 million from aircraft sales, trading, and other activities.
• Diluted Earnings Per Share: $0.82.
• Aircraft Purchases: 20 new aircraft purchased, adding $1.9 billion in flight equipment.
• Aircraft Sales: Sold nine aircraft for approximately $340 million, generating $42 million in gains (14% gain on sale margin).
• Fleet Utilization Rate: 100%.
• Weighted Average Fleet Age: 4.6 years.
• Weighted Average Lease Term Remaining: 7.1 years.
• Interest Expense: Increased by $42 million year over year, with a composite cost of funds at 4.21%.
• Debt-to-Equity Ratio: 2.63 times on a GAAP basis, 2.57 times net of cash.
• Liquidity Position: $7.5 billion.
• Quarterly Cash Dividend: Increased by 5% to $0.22 per share.

• Warning! GuruFocus has detected 8 Warning Signs with AL.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Air Lease Corp (NYSE:AL) generated $690 million in revenues for the third quarter, with $0.82 in diluted earnings per share, benefiting from fleet expansion.
• The company added $1.9 billion in flight equipment to its balance sheet by purchasing 20 new aircraft, while maintaining a strong fleet utilization rate of 100%.
• Air Lease Corp's forward order book is fully placed through 2026, providing a strong foundation for future growth.
• The company expects to receive approximately $900 million in deliveries in the fourth quarter, aligning with its full-year guidance of $4.5 billion to $5.5 billion in deliveries.
• Air Lease Corp increased its quarterly cash dividend by 5% to $0.22 per share, reflecting confidence in its financial position and future prospects.

Negative Points

• The company experienced lower end of lease revenue compared to the prior year, impacting short-term revenues.
• Interest expenses rose by $42 million year over year, driven by a 54 basis point increase in the composite cost of funds.
• The Boeing labor strike caused delays in aircraft deliveries, impacting the company's operations and future delivery schedules.
• Air Lease Corp's debt-to-equity ratio remains relatively high at 2.63 times on a GAAP basis, indicating significant leverage.
• The company faces ongoing challenges with OEM delays and manufacturing flaws, which could affect future aircraft deliveries and financial performance.

Q & A Highlights

Q: How do you see the relationship between OEMs and lessors evolving, especially with smaller platforms? A: Steven Udvar-Hazy, Executive Chairman of the Board, explained that OEMs are now focusing on quality over quantity with lessors. This trend benefits Air Lease as they have been a launch customer for many aircraft and have brought new airline customers to both Boeing and Airbus.

Q: What is your view on the sale leaseback market, and how does it relate to Air Lease? A: John Plueger, CEO, noted that while airlines are using sale leasebacks more due to increased aircraft deliveries, this does not impact Air Lease's order book business. The demand for their aircraft remains strong.

Q: Can you discuss the factors affecting profit margins and the outlook for improvement? A: Gregory Willis, CFO, highlighted positive factors such as strong lease extensions, aircraft sales pipeline, and potential benefits from interest rate cuts. He expects margins to improve over time as they work through COVID-era deals.

Q: Are rising lease rates a concern for airlines, and could they push back? A: John Plueger stated that airlines have always claimed lease rates are high, but leasing costs are a small part of their expenses. The demand for aircraft remains strong, indicating that airlines will continue to lease despite rate increases.

Q: What are your thoughts on industry consolidation and potential M&A activity? A: Steven Udvar-Hazy mentioned that Air Lease constantly evaluates acquisition opportunities but has not found any that would be accretive. They continue to sell older assets at significant gains and focus on their strong order backlog.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.