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Air Lease Corp’s Q1 Earnings: Navigating Headwinds in a Volatile Aviation Landscape

Philip CarterSunday, May 4, 2025 5:40 pm ET

5min read

Air Lease Corporation (NYSE: AL) is set to report its first-quarter 2025 earnings on May 5, 2025, a critical juncture for the aviation lessor as it grapples with rising costs, Boeing’s production delays, and shifting market dynamics. Analysts project mixed results, with revenue growth tempered by margin pressures and operational challenges. Investors will scrutinize whether AL can sustain its growth trajectory or if near-term headwinds will dominate the narrative.

Key Metrics to Watch

The consensus estimates for Q1 2025 are as follows:
- Revenue: $710.84 million (+7.2% year-over-year).
- EPS: $1.24 (-5.3% YoY).

Despite revenue growth, AL’s profitability faces significant hurdles. Analysts highlight rising interest expenses, operating cost inflation, and Boeing’s delayed aircraft deliveries as key drags on earnings. The company’s leverage ratio (Debt/EBITDA) of 7.52x—among the highest in the sector—adds pressure to manage cash flow amid CAPEX-heavy investments.

The Boeing Factor: A Persistent Headwind

Boeing’s production delays, particularly for its 737 MAX and 787 programs, remain a critical concern. AL relies on Boeing for 80% of its $3–3.5 billion in expected 2025 aircraft deliveries, but delays have pushed many orders into 2026 and beyond. This disruption has two major implications:
1. Revenue Growth: Undelivered aircraft cannot be leased, limiting top-line expansion.
2. Fleet Modernization: AL’s orderbook includes 269 new aircraft, but delayed deliveries may force the company to rely on used aircraft sales to offset losses.

The International Air Transport Association (IATA) forecasts global aircraft deliveries to drop to 1,802 units in 2025, a 21% decline from pre-pandemic levels. For AL, this means fewer new planes to lease, even as demand for wide-body jets like the 787 surges.

Cost Pressures and Margin Challenges

AL’s Q1 results will hinge on its ability to contain costs:
- Interest Expenses: Rose 3.7% in 2024, driven by higher debt levels and rising interest rates.
- Depreciation Costs: Elevated due to investments in new aircraft.
- SG&A Expenses: Upward revisions to estimates suggest ongoing inflationary pressures in administrative costs.

Analysts warn that these factors could compress margins further. For context, AL’s Q1 2025 EPS is projected to lag the S&P 500’s estimated 12.5% EPS growth, underscoring its out-of-step trajectory.

Analyst Sentiment: Caution Amid Growth Opportunities

While AL’s Zacks Rank of #3 (Hold) reflects neutral sentiment, there are divergent views:
- BofA Securities: Downgraded AL to Underperform in March 2025, citing valuation and margin risks.
- JP Morgan: Maintained an Overweight rating, highlighting AL’s long-term fleet strategy and demand for fuel-efficient aircraft.

Investors should note that AL’s stock has risen 9.2% year-to-date, driven by optimism around post-pandemic travel recovery. However, the March 7 downgrade by BofA signals skepticism about near-term execution.

Strategic Moves to Watch

AL’s Q1 report may include updates on:
1. Debt Management: Progress on its $2 billion commercial paper program to stabilize cash flow.
2. Fleet Sales: Proceeds from the sale of older aircraft, such as the $520 million from Q1 aircraft divestitures.
3. Boeing Updates: Any new agreements or production timelines that could alleviate delivery backlogs.

Conclusion: AL’s Q1 Earnings Will Test Resilience

Air Lease Corp’s Q1 results are a microcosm of the broader aviation leasing sector’s challenges. While revenue growth is achievable, margin pressures and Boeing’s delays make the path to profitability bumpy. Analysts will scrutinize whether AL can:
- Control costs: With interest expenses and leverage ratios under scrutiny.
- Offset delivery delays: Through used aircraft sales or strategic partnerships.
- Maintain investor confidence: Amid a Hold rating and mixed analyst sentiment.

The stock’s $54.50 average price target (16% upside from April 2025 levels) suggests cautious optimism, but execution in Q1 will be pivotal. If AL can demonstrate resilience in margin management and fleet utilization, it may weather current headwinds and position itself for recovery. However, a miss on EPS or further cost escalations could reignite concerns about its valuation and growth prospects.

In short, Q1 2025 earnings are a litmus test for AL’s ability to navigate a volatile landscape—and investors will be watching closely.

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