Air Lease (AL) 7 Nov 24 2024 Q3 Earnings call transcript

Air Lease Corporation (ALC) held its third quarter 2024 earnings call, showcasing a resilient performance despite facing challenges in the aviation industry. The call, led by CEO John Plueger, provided insights into ALC's operations, financial performance, and strategic outlook.

Financial Performance and Fleet Expansion

ALC reported revenues of $690 million for the third quarter, with diluted earnings per share at $0.82. The company's fleet expansion was a significant driver, with the acquisition of 20 new aircraft and the sale of 9 others. This strategic move added $1.9 billion in flight equipment to ALC's balance sheet. Despite the Boeing labor strike, ALC managed to achieve record deliveries, underscoring its ability to navigate industry challenges.

Deliveries and Sales

The third quarter saw ALC receive four 787s and expect approximately $900 million in deliveries for the fourth quarter. This aligns with the company's guidance of $4.6 billion in deliveries for the full year 2024. The outlook for 2025 is promising, with a fully placed forward order book through 2026. ALC's young fleet and large order book of new aircraft are key strengths, especially amidst Boeing and Airbus' limited aircraft production.

Lease Rates and Aircraft Supply

ALC's lease rates remain strong, reflecting robust commercial aircraft demand. The company expects lease rates to continue being high, with deliveries in 2025 at higher factors than those in 2024. Aircraft supply constraints are expected to persist, prompting ALC to remain tactical in its placements to maximize lease rates and optimize customer mix.

Aircraft Sales and Lease Extensions

ALC's sales pipeline remains robust at $1.5 billion, with approximately $400 million expected for the fourth quarter. The company's focus on lease extensions, which are currently high, has led to lower end-of-lease revenue in the short term but significant long-term benefits. The higher lease rates on lease extensions enhance the gains realized when aircraft are sold, positioning ALC for strong economic returns.

Future Outlook

Looking ahead, ALC remains optimistic about its business performance. The company anticipates benefits from lower financing costs due to Fed rate cuts and the normalization of yield curves. ALC's young existing fleet and its $18 billion order book of new-technology and fuel-efficient aircraft are strategic assets, particularly in the context of the ongoing commercial aircraft supply-demand imbalance.

Conclusion

Air Lease Corporation's third quarter earnings call revealed a company that has navigated industry challenges with resilience and strategic foresight. Despite the impact of the Boeing labor strike, ALC's focus on fleet expansion, lease rates, and sales pipeline positions the company for continued growth and success in the aviation sector. With a robust outlook for 2025 and beyond, ALC is well-positioned to capitalize on the commercial aircraft demand and supply dynamics, ensuring a strong future for the company.