UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35121

AIR LEASE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		27-1840403
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2000 Avenue of the Stars, Suite 1000N Los Angeles, California		90067
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (310) 553-0555

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	AL	New York Stock Exchange
6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A	AL PRA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer ☒		Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At ~~August~~May 5, ~~2020,~~2021, there were ~~113,778,906~~114,124,428 shares of Air Lease Corporation’s Class A common stock outstanding.

Air Lease Corporation and Subsidiaries

Form 10-Q

For the Quarterly Period Ended ~~June 30, 2020~~March 31, 2021

TABLE OF CONTENTS

		Page
Note About Forward-Looking Statements		3
PART I—FINANCIAL INFORMATION
Item 1	Financial Statements	4
	Consolidated Balance Sheets—~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (unaudited)	4
	Consolidated Statements of Income and Comprehensive Income—Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)	5
	Consolidated Statement of Shareholders’ Equity—Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)	6
	Consolidated Statements of Cash Flows—~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (unaudited)	87
	Notes to Consolidated Financial Statements (unaudited)	98
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1816
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3532
Item 4	Controls and Procedures	3533
PART II—OTHER INFORMATION
Item 1	Legal Proceedings	3633
Item 1A	Risk Factors	3633
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3634
Item 3	Defaults Upon Senior Securities	3634
Item 4	Mine Safety Disclosures	3634
Item 5	Other Information	3634
Item 6	Exhibits	3735
	Signatures	3937

NOTE ABOUT FORWARD-LOOKING STATEMENTS

~~Statements in this quarterly report~~This Quarterly Report on Form 10-Q contains statements that ~~are not historical facts may~~ constitute ~~“forward-looking~~forward-looking statements~~” including any~~ within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements ~~about~~appear in a number of places in this Form 10-Q and include statements regarding, among other matters, the state of the airline industry, the impact of the coronavirus (“COVID-19”) pandemic on us, our ~~expectations, beliefs, plans, predictions, forecasts, objectives, assumptions~~lessees and aircraft manufacturers, our anticipated capital expenditures and aircraft sales, our access to the capital markets, aircraft delivery delays and other factors affecting our financial condition or ~~future events or performance. These statements are often, but not always, made through the use~~results of ~~words or phrases~~operations. Words such as ~~“anticipate,” “believes,”~~ “can,” “could,” “may,” “predicts,” “potential,” ~~“should,”~~ “will,~~” “estimate,” “plans,~~” “projects,” “continuing,” “ongoing,” “expects,” ~~“intends”~~“anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and “should,” and variations of these words and similar ~~words or phrases. These~~expressions, are used in many cases to identify these forward-looking statements. Any such forward-looking statements are ~~only predictions~~not guarantees of future performance and involve ~~estimates, known~~risks, uncertainties, and ~~unknown risks, assumptions and uncertainties~~other factors that ~~could~~may cause our actual results, performance or achievements, or industry results to ~~differ~~vary materially from our future results, performance or achievements, or those of our industry, expressed or implied in such ~~statements, including as a result of the following~~forward-looking statements. Such factors include, among others:

●

the extent to which the ~~coronavirus (“COVID-19”)~~COVID-19 pandemic and measures taken to contain its spread ultimately impact our business, results of operation and financial condition;

●

our inability to obtain additional ~~financing~~capital on favorable terms, ~~if required,~~or at all, to ~~complete the acquisition~~acquire aircraft, service our debt obligations and refinance maturing debt obligations;

●

increases in our cost of ~~sufficient aircraft as currently contemplated~~borrowing or ~~to fund the operations and growth of our business;~~changes in interest rates;

●

our inability to ~~obtain refinancing prior to the time~~generate sufficient returns on our ~~debt matures;~~

●

~~our inability to make acquisitions of, or lease,~~ aircraft ~~on favorable terms;~~

●

~~our inability to sell aircraft on favorable terms or to predict the timing of such sales;~~

●

~~impaired financial condition~~investments through strategic acquisition and ~~liquidity of our lessees;~~

●

~~changes in overall demand for commercial aircraft leasing and aircraft management services;~~

●

~~deterioration of economic conditions in the commercial aviation industry generally;~~

●

~~potential natural disasters and terrorist attacks and the amount of our insurance coverage, if any, relating thereto;~~

●

~~increased maintenance, operating or other expenses or changes in the timing thereof;~~

●

~~changes in the regulatory environment, including tariffs and other restrictions on trade;~~

●

~~our inability to effectively oversee our managed fleet;~~profitable leasing;

●

the failure of ~~any manufacturer~~an aircraft or engine manufacturers to meet its ~~contractual aircraft~~ delivery obligations to us, including or as a result of technical or other difficulties with aircraft before or after ~~delivery, resulting~~delivery;

●

obsolescence of, or changes in overall demand for, our ~~inability~~aircraft;

●

changes in the value of, and lease rates for, our aircraft, including as a result of aircraft oversupply, manufacturer production levels, our lessees’ failure to ~~deliver~~ maintain our aircraft, and other factors outside of our control;

●

impaired financial condition and liquidity of our lessees, including due to lessee defaults and reorganizations, bankruptcies or similar proceedings;

●

increased competition from other aircraft lessors;

●

the failure by our lessees to adequately insure our aircraft or fulfill their contractual indemnity obligations to ~~our lessees;~~us;

●

increased tariffs and other restrictions on trade;

●

changes in the regulatory environment, including changes in tax laws and environmental regulations;

●

other ~~factors~~events affecting our business or the business of our lessees and aircraft manufacturers or their suppliers that are beyond our or their control, ~~including~~such as the threat or realization of epidemic diseases in addition to COVID-19, natural disasters, ~~pandemics (such as COVID-19) and measures taken to contain its spread, and governmental actions;~~terrorist attacks, war or armed hostilities between countries or non-state actors; and

●

~~the~~any additional factors discussed under “Part I — Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2019, “Part II — Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2020 and other SEC filings, including future SEC filings.

The factors noted above and the risks included in our other SEC filings may be increased or intensified as a result of the COVID-19 pandemic, including as a result of ~~the recent resurgence~~ongoing resurgences of the COVID-19 virus ~~in certain parts of the world, including the United States,~~ and ~~any future resurgences of the virus.~~its variants. The extent to which the COVID-19 pandemic ultimately impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted. ~~See the risk factor in “Part II — Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, “~~The coronavirus (COVID-19) pandemic and related efforts to mitigate the pandemic have impacted our business, and the extent to which the COVID-19 pandemic and measures taken to contain its spread ultimately impact our business will depend on future developments, which are highly uncertain and are difficult to predict.” All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations. You are therefore cautioned not to place undue reliance on such statements. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

PART I—FINANCIAL INFORMATION

~~ITEM 1.~~

ITEM 1.FINANCIAL STATEMENTS

Air Lease Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)


	June 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020

	(unaudited)				(unaudited)
Assets
Cash and cash equivalents	$	926,435	$	317,488	$	1,327,999	$	1,734,155
Restricted cash		15,555		20,573		24,194		23,612
Flight equipment subject to operating leases		22,067,957		21,286,154		24,331,511		23,729,742
Less accumulated depreciation		(2,959,884)		(2,581,817)		(3,557,552)		(3,349,392)
		19,108,073		18,704,337		20,773,959		20,380,350
Deposits on flight equipment purchases		1,790,935		1,564,188		1,767,489		1,800,119
Other assets		1,152,722		1,102,569		1,295,740		1,276,939
Total assets	$	22,993,720	$	21,709,155	$	25,189,381	$	25,215,175
Liabilities and Shareholders’ Equity
Accrued interest and other payables	$	497,709	$	516,497	$	451,094	$	492,473
Debt financing, net of discounts and issuance costs		14,639,045		13,578,866		16,166,904		16,518,338
Security deposits and maintenance reserves on flight equipment leases		1,037,233		1,097,061		1,075,845		1,072,704
Rentals received in advance		131,951		143,692		132,684		142,915
Deferred tax liability		817,981		749,495		934,642		916,404
Total liabilities	$	17,123,919	$	16,085,611	$	18,761,169	$	19,142,834
Shareholders’ Equity
Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 10,000,000 shares of 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A (aggregate liquidation preference of $250,000) issued and outstanding at June 30, 2020 and December 31, 2019, respectively		100		100
Class A common stock, $0.01 par value; 500,000,000 shares authorized; 113,777,723 and 113,350,267 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		1,138		1,134
Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 10,300,000 (aggregate liquidation preference of $550,000) and 10,000,000 (aggregate liquidation preference of $250,000) shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively					$	103	$	100
Class A common stock, $0.01 par value; 500,000,000 shares authorized; 114,120,862 and 113,852,896 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively						1,141		1,139
Class B non-voting common stock, $0.01 par value; authorized 10,000,000 shares; 0 shares issued or outstanding		—		—		—		—
Paid-in capital		2,781,832		2,777,601		3,088,302		2,793,178
Retained earnings		3,089,082		2,846,106		3,339,588		3,277,599
Accumulated other comprehensive loss		(2,351)		(1,397)
Accumulated other comprehensive (loss) / income						(922)		325
Total shareholders’ equity	$	5,869,801	$	5,623,544	$	6,428,212	$	6,072,341
Total liabilities and shareholders’ equity	$	22,993,720	$	21,709,155	$	25,189,381	$	25,215,175

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In thousands, except share and per share amounts)


	Three Months Ended				Six Months Ended				Three Months Ended
	June 30,				June 30,				March 31,
	2020		2019		2020		2019		2021		2020

	(unaudited)								(unaudited)
Revenues
Rental of flight equipment	$	497,869	$	463,870	$	994,556	$	919,609	$	468,095	$	496,687
Aircraft sales, trading and other		23,480		7,525		38,180		17,837		6,732		14,700
Total revenues		521,349		471,395		1,032,736		937,446		474,827		511,387
Expenses
Interest		102,693		96,824		210,234		186,044		117,986		107,541
Amortization of debt discounts and issuance costs		10,233		8,712		20,761		17,252		12,025		10,528
Interest expense		112,926		105,536		230,995		203,296		130,011		118,069
Depreciation of flight equipment		194,020		171,689		382,915		331,160		208,965		188,895
Selling, general and administrative		26,581		27,771		54,903		57,473		26,914		28,322
Stock-based compensation		3,892		5,863		8,321		10,037		5,408		4,429
Total expenses		337,419		310,859		677,134		601,966		371,298		339,715
Income before taxes		183,930		160,536		355,602		335,480		103,529		171,672
Income tax expense		(36,305)		(32,231)		(70,826)		(69,081)		(19,437)		(34,521)
Net income	$	147,625	$	128,305	$	284,776	$	266,399	$	84,092	$	137,151
Preferred stock dividends		(3,844)		(4,271)		(7,688)		(4,271)		(3,844)		(3,844)
Net income available to common stockholders	$	143,781	$	124,034	$	277,088	$	262,128	$	80,248	$	133,307

Other Comprehensive Income/(Loss):
Change in foreign currency translation adjustment		(10,239)		—		13,238		—
Change from current period hedged transaction		10,905		—		(14,481)		—
Total tax benefit/(expense) on other comprehensive income/loss		(142)		—		289		—
Other Comprehensive income/(loss) available for common stockholders, net of tax		524		—		(954)		—
Foreign currency translation adjustment										(3,807)		23,477
Change in fair value of hedged transactions										2,221		(25,386)
Total tax benefit on other comprehensive income/loss										339		431
Other Comprehensive income/(loss), net of tax										(1,247)		(1,478)
Total comprehensive income available for common stockholders	$	144,305	$	124,034	$	276,134	$	262,128	$	79,001	$	131,829

Earnings per share of common stock:
Basic	$	1.26	$	1.11	$	2.44	$	2.36	$	0.70	$	1.17
Diluted	$	1.26	$	1.10	$	2.43	$	2.33	$	0.70	$	1.17
Weighted-average shares outstanding
Basic		113,690,839		111,371,790		113,581,392		111,196,011		113,958,403		113,471,945
Diluted		113,773,127		112,807,023		113,840,929		112,598,623		114,237,109		113,785,028

Dividends declared per share of common stock	$	0.15	$	0.13	$	0.30	$	0.26	$	0.16	$	0.15

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~SHAREHOLDERS’~~STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

Class B Non-

Accumulated

Class A

Voting

Other

Preferred Stock

Common Stock

Common Stock

Paid-in

Retained

Comprehensive

(unaudited)

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Earnings

(Loss)/Income

Total
Balance at December 31, 2019

10,000,000

$
100

113,350,267

$
1,134

—

$
—

$
2,777,601

$
2,846,106

$
(1,397)

$
5,623,544
Issuance of common stock upon vesting of restricted stock units and upon exercise of options

—

—

480,978

4

—

—

2,021

—

—

2,025
Dividends declared on preferred stock

—

—

—

—

—

—

—

(3,844)

—

(3,844)
Stock-based compensation

—

—

—

—

—

—

4,429

—

—

4,429
Cash dividends (declared $0.15 per share of Class A common stock)

—

—

—

—

—

—

—

(17,045)

—

(17,045)
Change in foreign currency translation adjustment and from current period hedged transaction

—

—

—

—

—

—

—

—

(1,478)

(1,478)
Tax withholding related to vesting of restricted stock units and exercise of stock options

—

—

(191,334)

(2)

—

—

(8,411)

—

—

(8,413)
Net income

—

—

—

—

—

—

—

137,151

—

137,151
Balance at March 31, 2020

10,000,000

$
100

113,639,911

$
1,136

—

$
—

$
2,775,640

$
2,962,368

$
(2,875)

$
5,736,369
Issuance of common stock upon vesting of restricted stock units and upon exercise of options

—

—

144,417

2

—

—

2,500

—

—

2,502
Issuance of preferred stock

—

—

—

—

—

—

—

—

—

—
Dividends declared on preferred stock

—

—

—

—

—

—

—

(3,844)

—

(3,844)
Stock-based compensation

—

—

—

—

—

—

3,892

—

—

3,892
Cash dividends (declared $0.15 per share of Class A common stock)

—

—

—

—

—

—

—

(17,067)

—

(17,067)
Change in foreign currency translation adjustment and from current period hedged transaction

—

—

—

—

—

—

—

—

524

524
Tax withholding related to vesting of restricted stock units and exercise of stock options

—

—

(6,605)

—

—

—

(200)

—

—

(200)
Net income

—

—

—

—

—

—

—

147,625

—

147,625
Balance at June 30, 2020

10,000,000

$
100

113,777,723

$
1,138

—

$
—

$
2,781,832

$
3,089,082

$
(2,351)

$
5,869,801

~~Air Lease Corporation and Subsidiaries~~

~~CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY~~

~~(In thousands, except share and per share amounts)~~


														Accumulated
				Class A			Class B Non-Voting							Other
	Preferred Stock			Common Stock			Common Stock			Paid-in		Retained		Comprehensive
(unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Earnings		Income/(Loss)		Total
Balance at December 31, 2020	10,000,000	$	100	113,852,896	$	1,139	—	$	—	$	2,793,178	$	3,277,599	$	325	$	6,072,341
Issuance of preferred stock	300,000		3	—		—	—		—		295,446		—				295,449
Issuance of common stock upon exercise of options and vesting of restricted stock units	—		—	425,232		4	—		—		1,437		—		—		1,441
Stock-based compensation expense	—		—	—		—	—		—		5,408		—		—		5,408
Cash dividends (declared $0.16 per share of Class A common stock)	—		—	—		—	—		—		—		(18,259)		—		(18,259)
Preferred dividends (declared on Series A preferred stock)	—		—	—		—	—		—		—		(3,844)		—		(3,844)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax	—		—	—		—	—		—		—		—		(1,247)		(1,247)
Tax withholdings on stock based compensation	—		—	(157,266)		(2)	—		—		(7,167)		—		—		(7,169)
Net income	—		—	—		—	—		—		—		84,092		—		84,092
Balance at March 31, 2021	10,300,000	$	103	114,120,862	$	1,141	—	$	—	$	3,088,302	$	3,339,588	$	(922)	$	6,428,212


							Class B Non-							Accumulated																	Accumulated
				Class A			Voting							Other							Class A			Class B Non-Voting							Other
	Preferred Stock			Common Stock			Common Stock			Paid-in		Retained		Comprehensive				Preferred Stock			Common Stock			Common Stock			Paid-in		Retained		Comprehensive
(unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Capital		Earnings		Income		Total		Shares	Amount		Shares	Amount		Shares	Amount		Capital		Earnings		(Loss)/Income		Total
Balance at December 31, 2018	—	$	—	110,949,850	$	1,110	—	$	—	$	2,474,238	$	2,331,552	$	—	$	4,806,900
Balance at December 31, 2019																		10,000,000	$	100	113,350,267	$	1,134	—	$	—	$	2,777,601	$	2,846,106	$	(1,397)	$	5,623,544
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	263,218		2	—		—		439		—		—		441	—		—	480,978		4	—		—		2,021		—				2,025
Issuance of preferred stock	10,000,000		100	—		—	—		—		242,141		—		—		242,241
Stock-based compensation	—		—	—		—	—		—		4,174		—		—		4,174	—		—	—		—	—		—		4,429		—		—		4,429
Cash dividends (declared $0.13 per share of Class A common stock)	—		—	—		—	—		—		—		(14,445)		—		(14,445)
Cash dividends (declared 0.15 per share of Class A common stock)																		—		—	—		—	—		—		—		(17,045)		—		(17,045)
Preferred dividends (declared on Series A preferred stock)																		—		—	—		—	—		—		—		(3,844)		—		(3,844)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax																		—		—	—		—	—		—		—		—		(1,478)		(1,478)
Tax withholding related to vesting of restricted stock units and exercise of stock options	—		—	(94,899)		(1)	—		—		(3,587)		—		—		(3,588)	—		—	(191,334)		(2)	—		—		(8,411)		—		—		(8,413)
Net income	—		—	—		—	—		—		—		138,094		—		138,094	—		—	—		—	—		—		—		137,151		—		137,151
Balance at March 31, 2019	10,000,000	$	100	111,118,169	$	1,111	—	$	—	$	2,717,405	$	2,455,201	$	—	$	5,173,817
Issuance of common stock upon vesting of restricted stock units and upon exercise of options	—		—	547,957		6	—		—		10,791		—		—		10,797
Issuance of preferred stock	—		—	—		—	—		—		(111)		—		—		(111)
Dividends declared on preferred stock	—		—	—		—	—		—		—		(4,271)		—		(4,271)
Stock-based compensation	—		—	—		—	—		—		5,863		—		—		5,863
Cash dividends (declared $0.13 per share of Class A common stock)	—		—	—		—	—		—		—		(14,516)		—		(14,516)
Net income	—		—	—		—	—		—		—		128,305		—		128,305
Balance at June 30, 2019	10,000,000	$	100	111,666,126	$	1,117	—	$	—	$	2,733,948	$	2,564,719	$	—	$	5,299,884
Balance at March 31, 2020																		10,000,000	$	100	113,639,911	$	1,136	—	$	—	$	2,775,640	$	2,962,368	$	(2,875)	$	5,736,369

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Six Months Ended

June 30,

2020

2019

(unaudited)
Operating Activities

Net income

$
284,776

$
266,399
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation of flight equipment

382,915

331,160
Stock-based compensation

8,321

10,037
Deferred taxes

68,773

69,081
Amortization of debt discounts and issuance costs

20,761

17,252
Amortization of prepaid lease costs

21,210

14,851
Gain on aircraft sales, trading and other activity

(24,642)

(14,924)
Changes in operating assets and liabilities:

Other assets

(265,775)

(127,442)
Accrued interest and other payables

(16,256)

85,218
Rentals received in advance

(11,741)

4,616
Net cash provided by operating activities

468,342

656,248
Investing Activities

Acquisition of flight equipment under operating lease

(550,034)

(1,962,211)
Payments for deposits on flight equipment purchases

(399,028)

(448,653)
Proceeds from aircraft sales, trading and other activity

134,609

249,764
Acquisition of aircraft furnishings, equipment and other assets

(88,110)

(175,926)
Net cash used in investing activities

(902,563)

(2,337,026)
Financing Activities

Issuance of common stock upon exercise of options

4,526

11,236
Cash dividends paid on Class A common stock

(34,049)

(28,866)
Preferred dividends paid

(7,687)

(4,271)
Tax withholdings on stock-based compensation

(8,611)

(3,587)
Net change in unsecured revolving facility

(20,000)

199,000
Proceeds from debt financings

2,386,061

2,032,137
Payments in reduction of debt financings

(1,295,549)

(920,723)
Net proceeds from preferred stock issuance

—

242,130
Debt issuance costs

(4,219)

(7,327)
Security deposits and maintenance reserve receipts

72,852

142,685
Security deposits and maintenance reserve disbursements

(55,174)

(16,532)
Net cash provided by financing activities

1,038,150

1,645,882
Net increase/(decrease) in cash

603,929

(34,896)
Cash, cash equivalents and restricted cash at beginning of period

338,061

322,998
Cash, cash equivalents and restricted cash at end of period

$
941,990

$
288,102
Supplemental Disclosure of Cash Flow Information

Cash paid during the period for interest, including capitalized interest of $26,185 and $31,602 at June 30, 2020 and 2019, respectively

$
229,801

$
210,808
Cash paid for income taxes

$
2,372

$
3,291
Supplemental Disclosure of Noncash Activities

Buyer furnished equipment, capitalized interest and deposits on flight equipment purchases applied to acquisition of flight equipment

$
201,623

$
711,432
Cash dividends declared on common stock, not yet paid

$
17,066

$
14,516


	Three Months Ended
	March 31,
	2021		2020

	(unaudited)
Operating Activities
Net income	$	84,092	$	137,151
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of flight equipment		208,965		188,895
Stock-based compensation		5,408		4,429
Deferred taxes		18,577		33,302
Amortization of debt discounts and issuance costs		12,025		10,528
Amortization of prepaid lease costs		10,790		10,454
Loss / (gain) on aircraft sales, trading and other activity		1,825		(5,554)
Changes in operating assets and liabilities:
Other assets		(37,247)		(88,411)
Accrued interest and other payables		(59,914)		(47,858)
Rentals received in advance		(10,231)		(8,913)
Net cash provided by operating activities		234,290		234,023
Investing Activities
Acquisition of flight equipment under operating lease		(404,379)		(511,232)
Payments for deposits on flight equipment purchases		(103,382)		(174,589)
Proceeds from aircraft sales, trading and other activity		—		65,070
Acquisition of aircraft furnishings, equipment and other assets		(41,923)		(51,576)
Net cash used in investing activities		(549,684)		(672,327)
Financing Activities
Issuance of common stock upon exercise of options		1,441		2,025
Cash dividends paid on Class A common stock		(18,216)		(17,003)
Net proceeds from preferred stock issuance		295,449		—
Preferred dividends paid		(3,844)		(3,844)
Tax withholdings on stock-based compensation		(7,169)		(8,413)
Net change in unsecured revolving facility		—		495,000
Proceeds from debt financings		791,645		1,449,873
Payments in reduction of debt financings		(1,157,577)		(1,093,268)
Debt issuance costs		(1,335)		(2,902)
Security deposits and maintenance reserve receipts		21,278		50,083
Security deposits and maintenance reserve disbursements		(11,852)		(17,927)
Net cash (used)/provided by financing activities		(90,180)		853,624
Net (decrease)/increase in cash		(405,574)		415,320
Cash, cash equivalents and restricted cash at beginning of period		1,757,767		338,061
Cash, cash equivalents and restricted cash at end of period	$	1,352,193	$	753,381
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest, including capitalized interest of $13,543 and $13,261 at March 31, 2021 and 2020, respectively	$	177,685	$	141,060
Cash paid for income taxes	$	1,101	$	2,149
Supplemental Disclosure of Noncash Activities
Buyer furnished equipment, capitalized interest and deposits on flight equipment purchases applied to acquisition of flight equipment	$	176,618	$	191,318
Cash dividends declared on Class A common stock, not yet paid	$	18,259	$	17,046

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Company Background and Overview

Air Lease Corporation (the “Company”, “ALC”, “we”, “our” or “us”) is a leading aircraft leasing company that was founded by aircraft leasing industry pioneer, Steven F. Udvar-Házy. The Company is principally engaged in purchasing new commercial jet ~~transport~~ aircraft directly from manufacturers, such as The Boeing Company (“Boeing”) and Airbus S.A.S (“Airbus”). The Company leases these aircraft to airlines throughout the world with the intention to generate attractive returns on equity. As of ~~June 30, 2020,~~March 31, 2021, the Company owned a fleet of ~~301~~342 aircraft in its operating lease portfolio, managed 8183 aircraft and had ~~393~~349 aircraft on order with aircraft ~~manufacturers.~~manufacturers and 25 aircraft purchase options. In addition to its leasing activities, the Company sells aircraft from its operating lease portfolio to third parties, including other leasing companies, financial services companies, airlines and other investors. The Company also provides fleet management services to investors and owners of aircraft portfolios for a management fee.

Note 2. Basis of Preparation and Critical Accounting Policies

The Company consolidates financial statements of all entities in which the Company has a controlling financial interest, including the accounts of any Variable Interest Entity in which the Company has a controlling financial interest and for which it is the primary beneficiary. All material intercompany balances are eliminated in consolidation. The accompanying Consolidated Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

The accompanying unaudited Consolidated Financial Statements include all adjustments, consisting only of normal, recurring adjustments, which are in the opinion of management necessary to present fairly the Company’s financial position, results of operations and cash flows at ~~June 30, 2020,~~March 31, 2021, and for all periods presented. The results of operations for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the operating results expected for the year ending December 31, ~~2020.~~2021. These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Note 3. Debt Financing

The Company’s consolidated debt as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 (dollars in~~2020 is summarized below (in thousands):


	June 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
Unsecured
Senior notes	$	13,509,411	$	12,357,811	$	15,287,351	$	15,583,544
Term financings		972,625		883,050		808,250		811,550
Revolving credit facility		—		20,000
Total unsecured debt financing		14,482,036		13,260,861		16,095,601		16,395,094
Secured
Term financings		298,552		428,824		223,418		276,032
Export credit financing		28,283		31,610		23,292		24,955
Total secured debt financing		326,835		460,434		246,710		300,987

Total debt financing		14,808,871		13,721,295		16,342,311		16,696,081
Less: Debt discounts and issuance costs		(169,826)		(142,429)		(175,407)		(177,743)
Debt financing, net of discounts and issuance costs	$	14,639,045	$	13,578,866	$	16,166,904	$	16,518,338

~~The Company’s secured obligations as of June 30, 2020 and December 31, 2019 are summarized below (dollars in thousands):~~

June 30,

December 31,

2020

2019
Nonrecourse

$
—

$
128,460
Recourse

326,835

331,974
Total secured debt financing

$
326,835

$
460,434
Number of aircraft pledged as collateral

12

15
Net book value of aircraft pledged as collateral

$
644,458

$
890,693

Senior unsecured notes (including Medium-Term Note Program)

As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~$13.5~~$15.3 billion in senior unsecured notes outstanding. As of December 31, ~~2019,~~2020, the Company had ~~$12.4~~$15.6 billion in senior unsecured notes outstanding.

~~During the six months ended June 30, 2020,~~In January 2021, the Company issued ~~approximately $2.3 billion in aggregate principal amount of Medium-Term Notes comprised of (i)~~ $750.0 ~~million due 2025 at a fixed rate of 2.30%, (ii) $650.0 million due 2030 at a fixed rate of 3.00% and (iii) $850.0 million due 2025 at a fixed rate of 3.375%.~~

~~During the quarter ended June 30, 2020, the Company repurchased $185.2~~ million in aggregate principal amount of ~~Floating Rate~~0.70% Medium-Term Notes due ~~2021. The open market debt repurchases resulted in a gain of $13.6~~ ~~million and is included in Aircraft sales, trading and other revenue in the Company’s Consolidated Income Statements.~~2024.

Unsecured revolving credit facility

The Company has an unsecured revolving credit facility (the “Revolving Credit Facility”). As of ~~June 30,~~March 31, 2021 and December 31, 2020, the Company did not have any amounts outstanding under its ~~unsecured revolving credit facility. The total amount outstanding under the Company’s unsecured revolving credit facility was $20.0 million as of December 31, 2019.~~Revolving Credit Facility.

~~The Company has an unsecured revolving credit facility with JPMorgan Chase Bank, N.A. as agent (the “Revolving Credit Facility”).~~ During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company increased the aggregate capacity of ~~the~~its Revolving Credit Facility by ~~$250.0~~$200.0 million. On May 5, 2020, commitments totaling $92.7 million of the Revolving Credit Facility matured. Lenders hold revolving commitments totaling approximately $5.5 billion that mature on May 5, 2023, commitments totaling $245.0 million that mature on May 5, 2022 and commitments totaling $5.0 million that mature on May 5, 2021. As of ~~June 30, 2020,~~March 31, 2021, the aggregate capacity of the Revolving Credit Facility was approximately ~~$6.0~~$6.2 billion.

~~As of June 30, 2020, borrowings~~Borrowings under the Revolving Credit Facility ~~will generally bear~~accrue interest at either (a) LIBOR plus a margin of 1.05% per year or (b) an alternative base rate plus a margin of 0.05% per year, subject, in each case, to increases or decreases based on declines or improvements in the credit ratings for the Company’s debt. The Company is required to pay a facility fee of 0.20% per year (also subject to increases or decreases based on declines or improvements in the credit ratings for the Company’s debt) in respect of total commitments under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility are used to finance the Company’s working capital needs in the ordinary course of business and for other general corporate purposes.

In April 2021, the Company amended and extended its Revolving Credit Facility pursuant to which, among other things, extended the final maturity date from May 5, 2023 to May 5, 2025 and increased the total revolving commitments to approximately $6.4 billion as of May 6, 2021, representing an increase of 6.7% from December 31, 2020. As of May 6, 2021, lenders held revolving commitments totaling approximately $5.7 billion that mature on May 5, 2025, commitments totaling $575.0 million that mature on May 5, 2023 and commitments totaling $105.0 million that mature on May 5, 2022. The amended Revolving Credit Facility also added benchmark replacement language with respect to LIBOR based on Alternative Reference Rates Committee LIBOR fallback language and amended certain financial maintenance covenants, including removing the maximum consolidated leverage ratio covenant, increasing the required level for minimum consolidated shareholders equity and removing the mechanism for suspending the minimum interest coverage ratio if certain debt ratings are met.

Secured debt financing

~~In June 2020,~~As of March 31, 2021, the Company entered into an amendment to its secured warehouse facility to extend the final maturity to June 2021. The facility will continue to bear a floating interest rate of LIBOR plus 2.00%. As part of the amendment, the credit facility was converted to full recourse against the Company and excess cash collateral was released. The outstanding balance on the Company’s secured debt financings, including its secured warehouse facility and its export credit financing, was ~~$103.1~~$246.7 million and ~~$128.5~~ ~~million~~it had pledged 10 aircraft as collateral with a net book value of ~~June 30, 2020 and December 31, 2019, respectively.~~

$493.2 million. As of ~~June 30,~~December 31, 2020, the outstanding balance on the Company’s secured debt financings, including its secured warehouse facility and its export credit financing, was ~~$326.8~~$301.0 million and it had pledged 12 aircraft as collateral with a net book value of ~~$644.5~~$628.7 million. As of March 31, 2021 and December 31, ~~2019, the outstanding balance on~~2020, all of the Company’s secured ~~debt~~obligations are recourse in nature.

109

~~financings, including its secured warehouse facility and its export credit financing, was $460.4 million and it had pledged 15 aircraft as collateral with a net book value of $890.7 million.~~

Maturities

Maturities of debt outstanding as of ~~June 30, 2020~~March 31, 2021 are as follows (in thousands):


Years ending December 31,
2020	$	295,789
2021		1,948,697	$	806,903
2022		2,730,561		2,763,882
2023		2,502,123		2,490,951
2024		1,544,791		2,293,665
2025				2,313,889
Thereafter		5,786,910		5,673,021
Total	$	14,808,871	$	16,342,311

Note 4. Commitments and Contingencies

As of ~~June 30, 2020,~~March 31, 2021, the Company had commitments to acquire a total of ~~393~~349 new aircraft for delivery through ~~2026~~2027 as follows:


	Estimated Delivery Years							Estimated Delivery Years
Aircraft Type	2020	2021	2022	2023	2024	Thereafter	Total	2021	2022	2023	2024	2025	Thereafter	Total
Airbus A220-300⁽¹⁾	—	—	3	14	11	22	50	—	3	10	15	12	10	50
Airbus A320/321neo⁽²⁾	14	22	23	25	32	37	153	25	23	22	26	19	20	135
Airbus A330-900neo	—	3	7	5	—	—	15	3	7	4	—	—	—	14
Airbus A350-900/1000	3	4	3	4	5	1	20	4	3	4	5	1	—	17
Boeing 737-7/8/9 MAX	2	24	23	42	30	—	121	19	22	24	27	8	—	100
Boeing 787-9/10	8	6	8	10	2	—	34	13	8	7	5	—	—	33
Total	27	59	67	100	80	60	393	64	66	71	78	40	30	349

(1)	In addition to the Company’s commitments, as of ~~June 30, 2020,~~March 31, 2021, the Company had options to acquire up to 25 Airbus A220 aircraft. If exercised, deliveries of these aircraft are scheduled to commence in 2023 and continue through 2028.

(2)	The Company’s Airbus A320/321neo aircraft orders include 4736 long-range variants and 29 extra long-range variants.

Pursuant to the Company's purchase agreements with Boeing and Airbus for new aircraft, the Company and each manufacturer agree to contractual delivery dates for each aircraft ordered. These dates can change for a variety of reasons, and in the last several years manufacturing delays have significantly impacted the Company’s actual delivery dates. ~~For several years, the~~The Company has experienced delivery delays for certain of its Airbus orderbook aircraft, ~~primarily~~including the ~~A321neo~~A320neo family aircraft and ~~to a lesser extent,~~the A330neo aircraft. The worldwide grounding of the Boeing 737 MAX aircraft (“737 MAX”) ~~began on~~beginning in March ~~10,~~ 2019 ~~and remains~~has also resulted in ~~effect. As a result, Boeing temporarily halted production and~~material delivery delays of ~~all 737 MAX aircraft. While production of the 737 MAX has now resumed, deliveries remain on hold.~~those aircraft from our orderbook. The Federal Aviation Administration (“FAA”) ~~has begun flight testing for recertification~~and the European Union Aviation Safety Agency (“EASA”) lifted their grounding order on November 18, 2020 and January 27, 2021, respectively. Although many additional countries and regulatory entities have approved return to service of the aircraft, the 737 ~~MAX. Lifting of the grounding is subject to the approval of the FAA, as well as~~MAX still remains grounded in a number of ~~other global regulatory authorities, and~~jurisdictions. Deliveries resumed for markets where the ~~Company is unable~~aircraft had been approved to ~~speculate as~~return to service until April 2021, when ~~this may occur. Even after the grounding is lifted, Boeing’s ability to deliver~~a specific group of 737 MAX aircraft ~~may be~~were removed from service due to an electrical power system issue unrelated to the previous grounding order. On April 28, 2021, the FAA issued a new airworthiness directive detailing the modifications required before the impacted asaircraft can return to service. Boeing expects the required modifications to take a ~~result~~few days per aircraft and has halted deliveries of ~~the COVID-19 pandemic. The Company is currently in discussions with Boeing regarding the mitigation of possible damages resulting from the grounding of, and the delivery delays associated with the~~ 737 MAX aircraft ~~that~~until the ~~Company owns or~~airworthiness directive has ~~on order, which could result in changes~~been complied with, though the timeline to ~~the commitment table.~~return to service remains uncertain at this time.

The ongoing COVID-19 pandemic has also caused delivery delays of aircraft in ~~the Company’s orderbook and is expected to continue to cause delays of aircraft delivery.~~our orderbook. As discussed in further detail in Note ~~12,~~11, “Impact of COVID-19 Pandemic,” the COVID-19 pandemic has resulted in numerous travel restrictions and business shutdowns or other operating limitations, including the temporary closure of final aircraft assembly facilities for each of Boeing and Airbus. In the second quarter of 2020, Boeing and Airbus resumed production at these facilities. As a result of the temporary closures of the Boeing and Airbus facilities, most of our expected aircraft deliveries were delayed during the second quarter. Given the dynamic nature of the ongoing COVID-19 pandemic, the Company is in ongoing discussions with

Boeing and Airbus to determine the impact and duration of delivery delays. However, the Company is not yet able to determine the impact of the delivery delays, and as such, the delivery dates listed above could materially change.limitations.

The aircraft purchase commitments discussed above also could be impacted by lease ~~cancellation.~~cancellations. The Company's leases typically provide that the Company and the airline customer each have a cancellation right related to certain aircraft delivery delays. The Company’s purchase agreements with Boeing and Airbus also generally provide that the Company and the manufacturer each have cancellation rights that typically ~~are~~ parallel ~~with~~ the Company’s cancellation rights in

its leases. The Company’s leases and its purchase agreements with Boeing and Airbus ~~typically~~generally provide for cancellation rights starting at one year after the original contractual delivery date, regardless of cause. ~~During~~As of May 6, 2021, the ~~quarter ended June 30, 2020, a small number of our customers~~Company has canceled ~~a total of 5 737 MAX leases with us and we have subsequently exercised our right to cancel our purchase of the related~~its orders for 22 737 MAX aircraft with Boeing.

~~Commitments~~The Company has commitments for the acquisition of ~~these~~349 aircraft for delivery through 2027, calculated at an estimated aggregate purchase price (including adjustments for anticipated inflation) of approximately ~~$26.2~~$23.3 billion at ~~June 30, 2020,~~March 31, 2021, which are due as follows (in thousands):


Years ending December 31,
2020	$	2,025,283
2021		4,564,159	$	5,203,345
2022		5,712,095		5,274,025
2023		6,534,093		4,856,491
2024		4,508,101		4,624,159
2025				1,973,066
Thereafter		2,840,517		1,341,255
Total	$	26,184,248	$	23,272,341

The Company has made non-refundable deposits on the aircraft for which the Company has commitments to purchase of approximately $1.8 ~~billion and $1.6~~ billion as of ~~June 30, 2020~~each of March 31, 2021 and December 31, ~~2019, respectively,~~2020, which are subject to manufacturer performance commitments. If the Company is unable to satisfy its purchase commitments, the Company may be forced to forfeit its deposits. Further, the Company would be exposed to breach of contract claims by its lessees and manufacturers.

Note 5. Rental Income

At ~~June 30, 2020,~~March 31, 2021, minimum future rentals on non-cancellable operating leases of flight equipment in the Company’s fleet are as follows (in thousands):


Years ending December 31,
2020 (excluding the six months ended June 30, 2020)	$	1,004,553
2021		1,967,330
2021 (excluding the three months ended March 31, 2021)			$	1,489,687
2022		1,855,971		1,873,920
2023		1,658,402		1,723,465
2024		1,521,604		1,616,901
2025				1,472,252
Thereafter		5,747,767		5,204,134
Total	$	13,755,627	$	13,380,359

Note 6. Earnings Per Share

Basic ~~net~~ earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock; however, potential common equivalent shares are excluded if the effect of including these shares would be anti-dilutive. The Company’s 2 classes of common stock, Class A and Class B Non-Voting, have equal rights to dividends and income, and therefore, basic and diluted earnings per share are the same for each class of common stock. As of ~~June 30, 2020,~~March 31, 2021, the Company did not have any Class B Non-Voting common stock outstanding.

Diluted ~~net~~ earnings per share takes into account the potential conversion of stock options, restricted stock units, and warrants using the treasury stock method and convertible notes using the if-converted method. For the three months ended March 31, 2021, the Company did not exclude any potentially dilutive securities, whose effect would have been anti-dilutive, from the computation of diluted earnings per share. The Company excluded 1,085,311 and 990,100 shares related to restricted stock units for which the performance metric had yet to be achieved as of March 31, 2021 and 2020, respectively.

1211

ended June 30, 2020, the Company excluded 120,000 potentially dilutive securities, whose effect would have been anti-dilutive from the computation of diluted earnings per share. For the six months ended June 30, 2020, the Company did not exclude any potentially dilutive securities, whose effect would have been anti-dilutive, from the computation of diluted earnings per share. The Company excluded 1,032,305 and 976,613 shares related to restricted stock units for which the performance metric had yet to be achieved as of June 30, 2020 and 2019, respectively.

The following table sets forth the reconciliation of basic and diluted ~~net~~ earnings per share (in thousands, except share and per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Basic earnings per share:
Numerator
Net income	$	147,625	$	128,305	$	284,776	$	266,399	$	84,092	$	137,151
Preferred stock dividends		(3,844)		(4,271)		(7,688)		(4,271)		(3,844)		(3,844)
Net income available to common stockholders	$	143,781	$	124,034	$	277,088	$	262,128	$	80,248	$	133,307
Denominator
Weighted-average common shares outstanding		113,690,839		111,371,790		113,581,392		111,196,011		113,958,403		113,471,945
Basic earnings per share	$	1.26	$	1.11	$	2.44	$	2.36	$	0.70	$	1.17
Diluted earnings per share:
Numerator
Net income	$	147,625	$	128,305	$	284,776	$	266,399	$	84,092	$	137,151
Preferred stock dividends		(3,844)		(4,271)		(7,688)		(4,271)		(3,844)		(3,844)
Net income available to common stockholders	$	143,781	$	124,034	$	277,088	$	262,128	$	80,248	$	133,307
Denominator
Number of shares used in basic computation		113,690,839		111,371,790		113,581,392		111,196,011		113,958,403		113,471,945
Weighted-average effect of dilutive securities		82,288		1,435,233		259,537		1,402,612		278,706		313,083
Number of shares used in per share computation		113,773,127		112,807,023		113,840,929		112,598,623		114,237,109		113,785,028
Diluted earnings per share	$	1.26	$	1.10	$	2.43	$	2.33	$	0.70	$	1.17

Note 7. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring and Non-recurring Basis

The Company has a cross-currency swap related to its Canadian dollar Medium-Term Notes which was issued in December 2019. The fair value of the swap as a foreign currency exchange derivative is categorized as a Level 2 measurement in the fair value hierarchy and is measured on a recurring basis. As of ~~June 30, 2020, the estimated fair value of the foreign currency exchange derivative liability was $9.0 million. As of December~~March 31, ~~2019,~~2021, the estimated fair value of the foreign currency exchange derivative asset was ~~$5.4~~$16.7 million. As of December 31, 2020, the estimated fair value of the foreign currency exchange derivative asset was $14.4 million.

Financial Instruments Not Measured at Fair Values

The fair value of debt financing is estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities, which would be categorized as a Level 2 measurement in the fair value hierarchy. The estimated fair value ~~and book value~~ of debt financing as of ~~June 30, 2020~~March 31, 2021 was approximately ~~$14.8~~$16.9 billion compared to a book value of $16.3 billion. The estimated fair value of debt financing as of December 31, ~~2019~~2020 was ~~$14.1~~$17.6 billion compared to a book value of ~~$13.7~~$16.7 billion.

The following financial instruments are not measured at fair value on the Company’s Consolidated Balance Sheets at ~~June 30, 2020,~~March 31, 2021, but require disclosure of their fair values: cash and cash equivalents and restricted cash. The estimated fair value of such instruments at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 approximates their carrying value as reported on the Consolidated Balance Sheets. The fair value of all these instruments would be categorized as Level 1 in the fair value hierarchy.

Note 8. Shareholders’ Equity

The Company was authorized to issue 500,000,000 shares of Class A common stock, $0.01 par value, at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had ~~113,777,723~~114,120,862 and ~~113,350,267~~113,852,896 Class A common shares issued and outstanding, respectively. The Company did not have any shares of Class B non-voting common stock, $0.01 par value, issued or outstanding as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The Company was authorized to issue 50,000,000 shares of preferred stock, $0.01 par value, at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. As of ~~June 30, 2020 and December~~March 31, ~~2019,~~2021, the Company had 10,000,000 shares of ~~preferred stock~~ 6.15% Fixed-to-Floating Rate Non-

Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) issued and outstanding with an aggregate liquidation preference of $250.0 million ($25.00 per share) and 300,000 shares of 4.65% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”) with an aggregate liquidation preference of $300.0 million ($1,000 per share). As of December 31, 2020, the Company had 10,000,000 shares of Series A Preferred Stock issued and outstanding with an aggregate liquidation preference of $250.0 million.

On March 2, 2021, the Company issued 300,000 shares of Series B Preferred Stock, $0.01 par value, with a liquidation preference of $1,000 ~~million.~~per share. The Company will pay dividends on the Series B Preferred Stock only when, as and if declared by the board of directors. Dividends will accrue, on a non-cumulative basis, on the stated amount of $1,000 per share at a rate per annum equal to: (i) 4.65% through June 15, 2026, and payable quarterly in arrears beginning on June 15, 2021, and (ii) the Five-year U.S. Treasury Rate as of the applicable reset dividend determination date plus a spread of 4.076% per reset period from June 15, 2026 and reset every five years and payable quarterly in arrears.

The Company may redeem shares of the Series B Preferred Stock at its option, in whole or in part, from time to time, on any dividend payment date on June 15, 2026, for cash at a redemption price equal to $1,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. The Company may also redeem shares of the Series B Preferred Stock at the Company’s option under certain other limited conditions. The Series B Preferred Stock ranks on a parity with the Series A Preferred Stock.

The following table summarizes the Company’s preferred stock issued and outstanding as of March 31, 2021 (in thousands, except for share and per share amounts and percentages):

Shares Issued

Dividend

and

Liquidation

Rate in

Outstanding

Preference as

Effect at

as of March

of March 31,

March 31,

Next dividend

Dividend rate after reset

31, 2021

2021

Issue Date

2021

rate reset date

date

Fixed-to-floating-rate:

Series A

10,000,000

250,000

March 5, 2019

6.150

March 15, 2024

3M LIBOR plus 3.65%

Fixed-rate reset:

Series B

300,000

March 2, 2021

4.650

June 15, 2026

US5Y + 4.076%

Total Preferred Stock

10,300,000

550,000

Note 9. Stock-based Compensation

On May 7, 2014, the stockholders of the Company approved the Air Lease Corporation 2014 Equity Incentive Plan (the “2014 Plan”). Upon approval of the 2014 Plan, 0 new awards may be granted under the Amended and Restated 2010 Equity Incentive Plan (the “2010 Plan”). As of ~~June 30, 2020,~~March 31, 2021, the number of stock options (“Stock Options”) and restricted stock units (“RSUs”) authorized under the 2014 Plan is approximately 4,860,701. Stock Options are generally granted for a term of 10 years and vest ratably over a three-year period. The Company has issued RSUs with 4 different vesting criteria: those RSUs that vest based on the attainment of book value goals, those RSUs that vest based on the attainment of Total Shareholder Return (“TSR”) goals, time based RSUs that vest ratably over a time period of three years and RSUs that cliff-vest at the end of a ~~one~~ or two year period. The Company has 2 types of book value RSUs; those that vest ratably over a three-year period if the performance condition has been met, and those that vest at the end of a three-year period if the performance condition has been met. For the book value RSUs that cliff-vest at the end of a three-year period, the number of shares that will ultimately vest will range from 0% to 200% of the RSUs initially granted depending on the percentage change in the Company’s book value per share at the end of the vesting period. At each reporting period, the Company reassesses the probability of the performance condition being achieved and a stock-based compensation expense is recognized based upon management’s assessment. Book value RSUs for which the performance metric has not been met are forfeited. The TSR RSUs vest at the end of a three-year period. The number of TSR RSUs that will ultimately vest is based upon the percentile ranking of the Company’s TSR among a peer group. The number of shares that will ultimately vest will range from 0% to 200% of the RSUs initially granted depending on the extent to which the TSR metric is achieved.4,505,773.

The Company recorded ~~$3.9~~$5.4 million and ~~$5.9~~$4.4 million of stock-based compensation expense for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. The Company recorded $8.3 million and $10.0 million of stock-based compensation expense for the six months ended June 30, 2020 and 2019,~~ respectively.

Stock Options

A summary of stock option activity for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 follows:


				Remaining	Aggregate					Remaining	Aggregate
		Exercise		Contractual Term	Intrinsic Value			Exercise		Contractual Term	Intrinsic Value
	Shares	Price		(in years)	(in thousands)⁽¹⁾		Shares	Price		(in years)	(in thousands)⁽¹⁾
Balance at December 31, 2019	364,153	$	22.90	0.75	$	8,965
Balance at December 31, 2020							50,000	$	28.80	0.32	$	781
Granted	—	$	—	—	$	—	—	$	—	—	$	—
Exercised	(242,801)	$	20.00		$	3,069	(50,000)	$	28.80	—	$	993
Forfeited/canceled	—	$	—	—	$	—	—	$	—	—	$	—
Balance at June 30, 2020	121,352	$	28.70	0.81	$	71
Vested and exercisable as of June 30, 2020	121,352	$	28.70	0.81	$	71
Balance at March 31, 2021							—	$	—	—	$	—

(1)	The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of the Company’s Class A common stock as of the respective date.

All of the Company’s outstanding employee stock options had fully vested as of June 30, 2013. As of June 30, 2020 there were 0 unrecognized compensation costs related to outstanding stock options. For the three and six months ended June 30, 2020 and 2019 there were 0 stock-based compensation expenses related to Stock Options.

1413

~~The following table summarizes additional information regarding~~As of March 31, 2021, there were 0 unrecognized compensation costs related to outstanding ~~exercisable~~stock options. For the three months ended March 31, 2021 and ~~vested stock options at June 30, 2020:~~2020, there were 0 stock-based compensation expenses related to Stock Options.

Stock Options Exercisable

and Vested

Weighted-

Average

Number of

Remaining Life
Range of exercise prices

Shares

(in years)
$20.00

1,352

0.11
$28.80

120,000

0.82
$20.00 - $28.80

121,352

0.81

Restricted Stock Units

Compensation cost for stock awards is measured at the grant date based on fair value and recognized over the vesting period. The fair value of book value and time based RSUs is determined based on the closing market price of the Company’s Class A common stock on the date of grant, while the fair value of ~~TSR~~ RSUs that vest based on the attainment of Total Shareholder Return (“TSR”) goals is determined at the grant date using a Monte Carlo simulation model. Included in the Monte Carlo simulation model were certain assumptions regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and expected dividends. To appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the vesting date and the historical volatilities were estimated based on a historical timeframe equal to the time from the valuation date until the end date of the performance period.

During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Company granted ~~670,621~~577,736 RSUs of which ~~133,699~~116,599 are TSR RSUs. The following table summarizes the activities for the Company’s unvested RSUs for the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:


	Unvested Restricted Stock Units			Unvested Restricted Stock Units
		Weighted-Average			Weighted-Average
	Number of	Grant-Date		Number of	Grant-Date
	Shares	Fair Value		Shares	Fair Value
Unvested at December 31, 2019	1,254,904	$	43.62
Unvested at December 31, 2020				1,466,060	$	42.03
Granted	670,621	$	42.20	577,736	$	47.67
Vested	(406,067)	$	46.96	(375,180)	$	43.85
Forfeited/canceled	(49,407)	$	43.97	(65,373)	$	49.89
Unvested at June 30, 2020	1,470,051	$	42.04
Expected to vest after June 30, 2020	1,505,285	$	42.01
Unvested at March 31, 2021				1,603,243	$	43.31
Expected to vest after March 31, 2021				1,472,863	$	43.58

As of ~~June 30, 2020,~~March 31, 2021, there was ~~$37.2~~$42.2 million of unrecognized compensation cost related to unvested stock-based payments granted to employees. Total unrecognized compensation cost will be recognized over a weighted-average remaining period of ~~2.0~~2.28 years.

Note 10. Aircraft Under Management

As of ~~June 30, 2020,~~March 31, 2021, the Company managed 8183 aircraft across 3 aircraft management platforms. The Company managed 51 aircraft through three separate entities under its Thunderbolt platform, 2628 aircraft through the Blackbird investment funds and 4 on behalf of a financial institution.

The Company managed 2628 aircraft on behalf of third-party investors, through 2 investment funds, Blackbird Capital I, LLC and Blackbird ~~II.~~Capital II, LLC (“Blackbird II”). These funds invest in commercial aircraft and lease them to airlines throughout the world. The Company provides management services to these funds for a fee. As of ~~June 30, 2020,~~March 31, 2021, the Company's non-controlling interests in each fund isare 9.5% and are accounted for under the equity method of accounting. The Company’s investment in these funds aggregated ~~$49.8~~$52.7 million and ~~$46.5~~$52.6 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, and is included in Other assets on the Consolidated Balance Sheets. The Company continues to source aircraft investment opportunities for Blackbird II. As of ~~June 30, 2020,~~March 31, 2021, Blackbird II has remaining equity capital commitments to acquire up to approximately $1.0 billion in aircraft assets, for which the Company has committed to fund up to $29.1 million related to these potential investments.

Additionally, the Company continues to manage aircraft that it sells through its Thunderbolt platform. As of ~~June 30, 2020,~~March 31, 2021, the Company managed 51 aircraft through its Thunderbolt platform ~~sold~~ across 3 separate transactions. The Company has non-controlling interests in 2 of these entities of approximately 5.0%, which are accounted for under the cost method of accounting. ~~During the three months ended June 30, 2020, the Company completed the sale of 3 aircraft from its operating lease portfolio through its Thunderbolt platform.~~ The Company’s total investment in aircraft sold through its Thunderbolt platform was $9.3 million ~~and $9.9 million~~ as of ~~June 30, 2020~~each of March 31, 2021 and December 31, ~~2019, respectively~~2020 and is included in Other assets on the Consolidated Balance Sheets.

~~Note 11. Flight Equipment Held for Sale~~14

As of June 30, 2020, the Company had 1 aircraft, with a carrying value of $29.7 million, which was classified as held for sale and included in Other assets on the Consolidated Balance Sheets. This aircraft was subsequently sold through the Company’s Thunderbolt platform in July 2020. As of December 31, 2019, the Company had 8 aircraft classified as held for sale, with a carrying value of $249.6 million.

Note ~~12.~~11. Impact of COVID-19 Pandemic

~~On January 30, 2020, the spread of~~In response to the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization (the “WHO”). On March 11, 2020, WHO characterized the COVID-19 outbreak as a pandemic. The COVID-19 pandemic, ~~has resulted in governmental authorities~~governments around the world ~~implementing~~have implemented numerous measures to try to contain the virus, ~~such as~~including travel bans and restrictions, border closures, quarantines, shelter-in-place or total lock-down orders and business limitations and shutdowns (subject to exceptions for certain essential operations and businesses). Although some of these measures have since been lifted or scaled back, a recent resurgence of COVID-19 in certain parts of the world, including the United States, has resulted in the re-imposition of certain restrictions and may lead to other restrictions being implemented again in response to efforts to reduce the spread of COVID-19.restrictions. These measures, coupled with a significant decrease in ~~consumer~~ spending on travel as a result of COVID-19, have materially impacted airline traffic and operations throughout the world, including the ~~Company’s~~Company's airline customers. It is unclear how long these restrictions will remain in place and they may remain in place in some form for an extended period of time. Aircraft manufacturers and suppliers also have been impacted, including causing the temporary closure of Boeing and Airbus’ final assembly facilities and also closures of various facilities across their supply chain. In the second quarter of 2020, Boeing and Airbus resumed production at these facilities. As the virus spread globally during the second quarter of 2020, its impact on the global economy increased significantly, resulting in a rapid decline in global air travel that accelerated through the second quarter of 2020.

While domestic and regional airline traffic have improved ~~over~~from the ~~last several months,~~lows in 2020, air travel demand remains challenged, especially in the international and business ~~air~~ travel ~~demand~~segments of the market. Beginning in the fourth quarter of 2020, several COVID-19 vaccines were approved for use in a number of countries. The United States Centers for Disease Control and Prevention recently issued new guidance reducing travel restrictions for vaccinated travelers, though global health agencies such as the World Health Organization, among others, have yet to issue formal guidance, and travel restrictions remain ~~challenged.~~in place in many parts of the world.

~~The impact of COVID-19 on airlines, including the Company’s airline customers, accelerated in the second quarter of 2020.~~ Since the pandemic began in the first quarter of 2020, the Company has received requests from ~~most of~~ its customers for accommodations such as ~~deferral~~deferrals of lease payments or other lease concessions. ~~The Company evaluates such requests on~~On a case-by-case basis, ~~and~~the Company has ~~worked out accommodation arrangements~~agreed to accommodations with approximately ~~59%~~63% of its ~~lessees, generally~~lessees. Generally, these accommodations have been in the form of partial lease deferrals for payments that were due ~~in the first and second quarter of~~during 2020, typically with a ~~short-term~~short repayment ~~period, with~~period. The majority of these deferrals are to be repaid within 12 months from the date the deferrals were granted, and in many cases, include lease extensions. While the majority of the accommodations are in the form of lease deferrals, ~~repaid over the next 12 months. In many cases,~~we have also entered into some lease restructurings, which typically included lease extensions, ~~were also negotiated as part~~resulting in a decrease of $37.0 million in revenue for the ~~deferral accommodations.~~three months ended March 31, 2021. The Company remains in active discussions with its airline customers and may continue to provide ~~accommodation arrangements~~accommodations on a case-by-case basis.

While lease deferrals may delay the ~~Company’s~~Company's receipt of cash, the Company generally recognizes the lease revenue during the period even if a deferral is provided to the lessee, unless it determines collection is not reasonably assured. The Company monitors all lessees with past due lease payments and discusses relevant operational and financial issues facing those lessees in order to determine an appropriate course of action. In addition, if collection is not reasonably assured, the Company will not recognize rental income for amounts due under ~~our~~the Company’s lease contracts and will recognize revenue for such lessees on a cash basis. The Company did not recognize rental revenue of $48.7 million for the three months ended March 31, 2021 because lease receivables exceeded the lease security package held and collection was not reasonably assured for certain lessees. Aircraft on lease with these lessees represented approximately 15.3% of our fleet by net book value as of March 31, 2021.

~~Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its business, results of operations and financial condition for the foreseeable future.~~

Note ~~13.~~12. Subsequent Events

On ~~August~~May 5, ~~2020,~~2021, the Company’s board of directors approved a quarterly ~~cash dividend of $0.15 per share on its outstanding~~dividends for the Company’s Class A common stock, Series A Preferred Stock and Series B Preferred stock. The ~~dividend will be paid~~following table summarizes the details of the dividends that were declared:


Title of each class	Cash dividend per share		Record Date	Payment Date
Class A Common Stock	$	0.16	June 8, 2021	July 9, 2021
Series A Preferred Stock	$	0.384375	May 31, 2021	June 15, 2021
Series B Preferred Stock	$	13.304167	May 31, 2021	June 15, 2021

In addition, the Company’s board of directors also approved a six-month extension on ~~October 9, 2020~~the Company’s share repurchase program, which authorized repurchase of up to ~~holders of record~~$100.0 million of the Company’s Class A common stock as of September 11, 2020. The Company’s board of directors also approved a cash dividend of $0.384375 per share on its outstanding Series A Preferred Stock, which will be paid on September 15, 2020 to holders of record of the Company’s Series A Preferred Stock as of Augustthrough December 31, ~~2020.~~2021.

1715

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated Financial Statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Overview

Air Lease Corporation (the “Company”, “ALC”, “we”, “our” or “us”) is a leading aircraft leasing company that was founded by aircraft leasing industry pioneer, Steven F. Udvar-Házy. We are principally engaged in purchasing new commercial jet ~~transport~~ aircraft directly from aircraft manufacturers, such as The Boeing Company (“Boeing”) and Airbus S.A.S. (“Airbus”), and leasing those aircraft to airlines throughout the world with the intention to generate attractive returns on equity. In addition to our leasing activities, we sell aircraft from our operating lease portfolio to third-parties, including other leasing companies, financial services companies, airlines and other investors. We also provide fleet management services to investors and owners of aircraft portfolios for a management fee. Our operating performance is driven by the growth of our ~~owned~~ fleet, the terms of our leases, the interest rates on our debt, and the aggregate amount of our indebtedness, supplemented by the gains from ~~our~~ aircraft sales ~~trading and other activities~~ and our management fees.

Impact of the COVID-19 Pandemic

~~On January 30, 2020, the spread of~~In response to the COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization (“WHO”). On March 11, 2020, WHO characterized the COVID-19 outbreak as a pandemic. The COVID-19 pandemic, ~~has resulted in governmental authorities~~governments around the world ~~implementing~~have implemented numerous measures to try to contain the virus, ~~such~~including travel restrictions. These measures, coupled with a significant decrease in spending on travel as travel bans and restrictions, border closures, quarantines, shelter-in-place or total lock-down orders and business limitations and shutdowns (subject to exceptions for certain essential operations and businesses). Although some of these measures have since been lifted or scaled back, a ~~recent resurgence~~result of COVID-19, ~~in certain parts of~~have materially impacted airline traffic and operations throughout the world, including ~~the United States, has resulted in the re-imposition of certain restrictions and may lead to other restrictions being implemented again in response to efforts to reduce the spread of COVID-19.~~our airline customers. It is unclear how long and to what extent these ~~restrictions~~measures will remain in place and they may remain in place in some form for an extended period of time. These measures, coupled with a decrease in consumer spending on travel as a result of COVID-19, have materially impacted airline traffic and operations throughout the world, including for our airline customers. Aircraft manufacturers and suppliers also have been impacted, including causing the temporary closure of Boeing and Airbus’ final assembly facilities and also closures of various facilities across their supply chain. In the second quarter of 2020, Boeing and Airbus resumed production in these facilities.

As the virus spread globally, ~~during the second quarter of 2020,~~ its impact on the global economy increased significantly, resulting in a rapid decline in global air ~~travel that accelerated through the second quarter of 2020.~~travel. While domestic and regional airline traffic have improved ~~over~~from the ~~last several months,~~lows in 2020, air travel demand remains significantly challenged, especially in the international and business ~~air~~ travel ~~demand~~segments of the market. Beginning in the fourth quarter of 2020, several COVID-19 vaccines were approved for use in a number of countries. The United States Centers for Disease Control and Prevention (the “CDC”) recently issued new guidance reducing travel restrictions for vaccinated travelers, though global health agencies such as the World Health Organization (the “WHO”) among others have yet to issue formal guidance, and travel restrictions remain ~~challenged.~~

~~The~~in place in many parts of the world. While widespread vaccination could reduce the impact of COVID-19 on ~~airlines, including our~~the commercial airline ~~customers, accelerated~~industry, it is difficult to predict the pace of vaccinations and how long it will take the industry to recover.

We believe the long-term recovery of air travel worldwide will occur in phases and vary by region. While air travel in many countries and regions continues to be curtailed by rising cases of the virus and travel restrictions, there is evidence of strong air travel recovery in certain locations. For instance, in the ~~second quarter~~United States where vaccination rates are rising and travel restrictions are easing, there has been a significant improvement in domestic travel. In addition, many countries are working on ways to further enable air travel despite the virus. For instance, in certain European countries, borders have been reopened to those fully vaccinated or those who can provide a negative test result with rapid testing prior to entry. Australia and New Zealand recently opened a quarantine-free travel bubble allowing passengers to move quarantine-free between both countries, subject to certain conditions. And finally, many countries are exploring ways to digitally certify proof of ~~2020.~~ COVID-19 vaccination or negative test results for purposes of travel. We anticipate that the return of air travel domestically and internationally will be further driven by rising vaccination rates, easing travel restrictions and by the efforts of countries working independently and collectively in developing new ways to reduce travel restrictions.

Since the pandemic began in the first quarter of 2020, we have received requests from our customers for accommodations such as ~~deferral~~deferrals of lease payments or other lease concessions. ~~As of August 6, 2020, most of our lessees have requested some form of rental relief. We evaluate such requests on~~On a case-by-case basis, ~~and~~we have ~~worked out accommodation arrangements~~agreed to accommodations with approximately ~~59%~~63% of our ~~lessees, generally~~lessees. Generally, these accommodations have been in the form of partial lease deferrals for payments that were due ~~in the first and second quarter of~~during 2020, typically with a ~~short-term~~short repayment ~~period, with the~~period. The majority of these deferrals are to be repaid within 12 months from the date the deferrals ~~repaid over the next 12 months. In~~were granted, and in many cases, include lease ~~extensions were also negotiated as part~~extensions. As of ~~the deferral accommodations. Through August~~May 6, ~~2020,~~2021, our total deferrals, net of repayments, was $131.0 million. To date, we have agreed to defer ~~approximately $189.9~~$242.6 million in lease payments, of which ~~represents~~$111.6 million or 46% of the total deferral amount has been repaid.

While these lease deferrals negatively impacted our cash flow provided by operating activities, our net deferrals represented approximately 3%1.7% of our total available liquidity as of ~~June 30, 2020. These~~March 31, 2021. While the majority of the accommodations are in the form of lease deferrals, ~~resulted in a decrease in~~we have also entered into some lease restructurings, which typically included lease extensions. These restructurings decreased our ~~cash flow provided~~total revenue by ~~operating activities~~$37.0 million for the ~~second quarter.~~three months ended March 31, 2021. We remain in active discussions with our airline customers and ~~expect to~~may continue to provide ~~accommodation arrangements~~accommodations on a case-by-case basis.

Our collection rate ~~during~~for the ~~second quarter of 2020 and the month of July 2020~~three months ended March 31, 2021 was ~~91% and 89%, respectively,~~84% compared to ~~90% during~~88% for the ~~first quarter~~three months ended December 31, 2020. We expect that our collection rate will remain under pressure due to the impact of ~~2020.~~COVID-19. Collection rate is defined as the sum of cash collected from lease

rentals and maintenance reserves, and includes cash recovered from outstanding receivables from previous periods, as a percentage of the total contracted receivables due for the period. The collection rate is calculated after giving effect to lease deferral arrangements made as of ~~August 6,~~March 31, 2021. In addition, we did not recognize rental revenue of $48.7 million for the three months ended March 31, 2021 because lease receivables exceeded the lease security package held and collection was not reasonably assured for certain lessees, compared to $21.2 million for the three months ended December 31, 2020. Aircraft on lease with these lessees represented approximately 15.3% of our fleet by net book value as of March 31, 2021 as compared to 7.8% as of December 31, 2020. The increase in rental revenue not recognized for the first quarter was primarily driven by a few customers with whom we are working towards resolution. The severity and the length of the impact of the COVID-19 pandemic on air travel and the adverse impact of the pandemic on our airline customers continues to be uncertain and could intensify. As a result, we could experience increased requests for lease deferrals or restructurings, a continuing decline in our collection rate and additional lease revenue that will not be recognized in future quarters because collection will not be reasonably assured for certain lessees.

Our lease utilization rate for the ~~second quarter of 2020~~quarters ended March 31, 2021 and ~~for the month of July~~December 31, 2020 was 99.6% ~~compared to 99.7% for the first quarter of 2020.~~and 99.8%, respectively. The lease utilization rate is calculated based on the number of days each aircraft was subject to a lease or letter of intent during the period, weighted by the net book value of the aircraft. It is possible that our collection rate or lease utilization rate could further decline in the near future as a result of accommodation arrangements we have made or could make in the future, including providing additional lease concessions to airline customers already receiving a concession or if our airline customers do not make their lease payments even absent lease concessions.

~~Depending on the~~The severity and longevity of the COVID-19 pandemic ~~and the related efforts taken to reduce its spread, some of~~on our ~~lessees have, and may~~airline customers could result in ~~the future continue to,~~a decline in our lease utilization rate if our lessees return aircraft to us before the return date in their lease agreement or experience insolvency or initiate bankruptcy or similar proceedings that result in aircraft being returned to us. If this occurs, we may not be able to reposition the aircraft with other airlines as quickly as we have historically been able to do orand we may incur increased costs in repositioning such aircraft. ~~As a result,~~A decline in our ~~revenues~~lease utilization rate would adversely impact our financial results, including our revenue and ~~collection rates would decline.~~profitability.

In addition, as of June 30, 2020, we had commitments to purchase 393 aircraft from Airbus and Boeing for delivery through 2026, and we had placed approximately 90% of our committed order book on long-term leases for aircraft delivering through 2022. The impact of the COVID-19 pandemic on airlines could result in the cancellation of leases that we have in place for our committed orderbook or a decline in the number of aircraft in our order book that we can place into leases prior to their delivery. If we are not able to place aircraft from our orderbook into leases prior to delivery, it may cause downward pressure on our lease rates or require us to sell aircraft in our fleet sooner than anticipated.

~~During the second quarter, our employees continue to work remotely, and due~~Due to travel restrictions and business limitations and shutdowns, ~~some transitions of our aircraft from one lessee to another lessee have been delayed. As a result of travel restrictions,~~ we expect ~~some~~continuing challenges when transitioning, acquiring or selling ~~aircraft. Some planned~~ aircraft sales have also been delayed or terminated as a result of business limitations and shutdowns. We expect these disruptions to continue and they could worsen. We also expect that demand for used aircraft will decline induring the near-term and that we will sell fewer used aircraft in 2020 than we initially planned to sell, and it is unclear what demand for used aircraft will be in 2021. The decline in demand for used aircraft may also result in impairment charges to the aircraft in our fleet.COVID-19 pandemic.

We have ~~also~~ experienced aircraft delivery delays related to COVID-19. While the commitment table in Note 4, “Commitments and Contingencies” above and the discussion of “Our Fleet” below ~~reflects~~reflect our current delivery expectations, we are in ongoing discussions with Boeing and Airbus to determine the extent and duration of delivery delays. The delays could result in a cancellation of leases for those aircraft. ~~Pursuant to contractual provisions, a small number~~As of ~~our customers canceled a total of five 737 MAX leases with us and~~March 31, 2021, we have ~~subsequently exercised~~canceled our ~~right to cancel our purchase of such~~orders for 22 737 MAX aircraft with Boeing. ~~Given~~While we have planned our capital expenditures for the ~~dynamic nature~~remainder of 2021 and beyond based on currently expected delivery schedules, given the ~~ongoing COVID-19~~current industry circumstances, our aircraft delivery schedule could continue to be subject to material changes. In any case, our capital expenditures will be less than what we planned prior to the pandemic, ~~we are not yet able to determine the full impact of the delivery delays, and~~which will slow our revenue growth, but will further improve our strong liquidity position.

Although we expect ~~such delivery dates could materially change, and as a result,~~ our ~~future growth~~aircraft sales activity to increase in 2021 compared to 2020, we do not anticipate that aircraft sales activity will ~~be negatively impacted.~~return to pre-pandemic levels during 2021. However, if demand for used aircraft declines, we may decide to sell fewer aircraft than currently anticipated.

COVID-19 has also ~~continued to cause~~caused disruption in the financial ~~markets and has caused volatility and uncertainty in the bond market.~~markets. We finance the purchase of aircraft and our business with available cash balances, internally generated funds, including through aircraft sales and trading activity, and debt financings. As of ~~June 30, 2020,~~March 31, 2021, we had an undrawn balance of ~~$6.0~~$6.2 billion under our ~~Revolving~~unsecured revolving credit facility (the “Revolving Credit ~~Facility (as defined below)~~Facility”). WeDuring the COVID-19 pandemic, we have continued to ~~have~~ access to the unsecured debt capital markets issuing ~~$850.0 million~~approximately $3.8 billion in aggregate principal ~~amount of~~ Medium-Term Notes with a weighted average interest rate of 2.6%. In addition, we issued 300,000 shares of 4.65% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”) for $300.0 million in ~~June 2020 and~~proceeds. If desired, we

believe we ~~will continue to~~ have access to other financing alternatives, such ~~markets. We could also seek to enter into more~~as secured debt financings, including financings supported through the Export-Import Bank of the United States or other export credit agencies (“ECAs”) to fund future aircraft deliveries from our orderbook. Our liquidity is discussed below in more detail under “Liquidity and Capital Resources.”

~~While~~We expect our business, results of operations and financial condition will continue to be negatively impacted in the near term, and the pandemic could have a larger impact on our results of operations in 2021 than during the prior year. In addition, given the dynamic nature of this situation, we cannot ~~currently~~ reasonably estimate the ~~extent to which~~continued impacts of the COVID-19 pandemic ~~and measures taken to contain its spread will ultimately impact~~on our business, weresults of operations and financial condition for the foreseeable future.

We believe, however, that the airline industry will eventually recover and aircraft travel will return to historical levels over the long term. WeSee “Aircraft Industry and Sources of Revenues” below. Further, we believe we are well positioned to offer solutions for airlines,

because we can offer the ability to lease younger, more fuel-efficient aircraft at a time when airlines will be focused on reducing capital requirements and managing costs.

As the COVID-19 pandemic and efforts to mitigate its spread continue, we expect our business, results of operations and financial condition will continue to be negatively impacted, and could have a larger impact on our results of operations for the third quarter and remainder of this year than has been reflected in our first and second quarter results for 2020. Depending on the severity and longevity of the COVID-19 pandemic, the related efforts taken to reduce its spread, including the recent resurgence of COVID-19 in certain parts of the world, including the United States, and any future resurgences of the virus, the COVID-19 pandemic could have a material, adverse impact on our future revenue growth, liquidity and cash flow. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of the COVID-19 pandemic on our business, results of operations and financial condition for the foreseeable future.

~~Second~~First Quarter Overview

During the three months ended ~~June 30, 2020,~~March 31, 2021, we purchased and took delivery of ~~one~~10 aircraft from our new order pipeline ~~and sold four aircraft~~ ending the period with a total of ~~301~~342 aircraft in our operating lease portfolio with a net book value of ~~$19.1~~$20.8 billion. The weighted average lease term remaining on our operating lease portfolio was ~~7.0~~6.9 years and the weighted average age of our fleet was ~~3.9~~4.3 years as of ~~June 30, 2020.~~March 31, 2021. Our fleet grew by ~~2.2%~~1.9% based on net book value of ~~$19.1~~$20.8 billion as of ~~June 30, 2020,~~March 31, 2021, compared to ~~$18.7~~$20.4 billion as of December 31, ~~2019.~~2020. In addition, we had a managed fleet of 8183 aircraft as of ~~June 30, 2020,~~March 31, 2021, compared to a managed fleet of 8381 aircraft as of December 31, ~~2019.~~2020. We ~~had~~have a globally diversified customer base comprised of ~~106~~113 airlines in ~~61 countries.~~59 countries as of March 31, 2021. As of ~~August~~May 6, ~~2020,~~2021, all ~~aircraft, except for two~~ aircraft in our operating lease portfolio, except for two aircraft, were subject to letters of intent or lease agreements.

As of ~~June 30, 2020,~~March 31, 2021, we had commitments to purchase ~~393~~349 aircraft from Airbus and Boeing for delivery through ~~2026,~~2027, with an estimated aggregate commitment of ~~$26.2~~$23.3 billion. We ended the ~~second~~first quarter of ~~2020~~2021 with ~~$28.2~~$26.8 billion in committed minimum future rental payments and placed approximately ~~90%~~95% of our committed ~~order book~~orderbook on long-term leases for aircraft delivering through ~~2022.~~2022 and 80% through the end of 2023. This includes ~~$13.8~~$13.4 billion in contracted minimum rental payments on the aircraft in our existing fleet and ~~$14.4~~$13.4 billion in minimum future rental payments related to aircraft which will be delivered during the remainder of ~~2020~~2021 through ~~2024.~~2025.

During the three months ended June 30, 2020, we sold a total of four aircraft resulting in proceeds of approximately $87.0 million. As of June 30, 2020, we had one remaining aircraft classified as held for sale and subsequently completed the sale of this aircraft in July 2020. As of June 30, 2020 the aircraft was classified as held for sale and included in Other assets on our Consolidated Balance Sheets.

~~During the three months ended June 30, 2020,~~March 31, 2021, we issued ~~$850.0~~$750.0 million in Medium-Term Notes due ~~2025~~2024 bearing interest at a fixed rate of 3.375% and repurchased $185.2 million in aggregate principal amount of Floating Rate Medium-Term Notes due 2021. The open market debt repurchases resulted in a gain of $13.6 million and is included in aircraft sales, trading and other revenue in our Consolidated Income Statements.0.70%. In addition, we ended the ~~second~~first quarter of ~~2020~~2021 with an aggregate borrowing capacity under ~~the~~our Revolving Credit Facility of ~~$6.0~~$6.2 billion and total liquidity of ~~$6.9~~$7.5 billion. Also, in March 2021, we issued 300,000 shares of 4.65% Fixed-Rate Reset Non-Cumulative Perpetual Series B Preferred Stock, $0.01 par value for $300.0 million in proceeds. We ended the ~~second~~first quarter of ~~2020~~2021 with total debt outstanding of ~~$14.8~~$16.3 billion, of which ~~90.8%~~93.2% was at a fixed rate and ~~97.8% of which~~98.5% was unsecured. Our composite cost of funds decreased to ~~3.15%~~3.02% as of ~~June 30, 2020 as~~March 31, 2021 compared to ~~3.34%~~3.13% as of December 31, ~~2019.~~2020.

Our total revenues for the quarter ended ~~June 30, 2020 increased~~March 31, 2021 decreased by ~~10.6%~~7.1% to ~~$521.3~~$474.8 million, compared to the quarter ended ~~June 30, 2019. This increase was principally driven by~~March 31, 2020. Despite the continued growth of our ~~fleet.~~fleet, our revenues decreased in the first three months of 2021 compared to the first three months of 2020 as a result of the full quarter impact of the COVID-19 pandemic, which only partially impacted the first three months of 2020 when the pandemic began. During the three months ended March 31, 2021, we were not able to recognize $48.7 million of rental revenue because lease receivables exceeded the lease security package held and collection was not reasonably assured for certain leases. In addition, we entered into lease restructurings, which typically included lease extensions, that resulted in a decrease of approximately $37.0 million in revenue for the quarter ended March 31, 2021. Our net income available to common stockholders for the quarter ended ~~June 30, 2020~~March 31, 2021 was ~~$143.8~~$80.2 million compared to ~~$124.0~~$133.3 million for the quarter ended ~~June 30, 2019.~~March 31, 2020. Our diluted earnings per share for the quarter ended ~~June 30, 2020~~March 31, 2021 was ~~$1.26~~$0.70 compared to ~~$1.10~~$1.17 for the quarter ended ~~June 30, 2019.~~March 31, 2020. The ~~increase~~decrease in net income available to common stockholders in the ~~second~~first quarter of ~~2020~~2021 as compared to ~~2019~~2020 was primarily due to the ~~continued~~decrease in rental revenues as discussed above and an increase in depreciation and interest expense from the growth of our fleet, partially offset by a decrease in selling, general and ~~an increase in our aircraft sales, trading and other activity.~~administrative expenses.

Our adjusted net income before income taxes excludes the effects of certain non-cash items, one-time or non-recurring items, that are not expected to continue in the future and certain other items. Our adjusted net income before

income taxes for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~$194.2~~$117.1 million or ~~$1.71~~$1.03 per diluted share, compared to ~~$170.8~~$182.8 million or ~~$1.51~~$1.61 per diluted share for the three months ended ~~June 30, 2019. The increase~~March 31, 2020. As discussed above, the decrease in our adjusted net income before income taxes was ~~primarily due to~~principally driven by the ~~continued growth of our fleet~~decrease in revenues and an increase in ~~our aircraft sales,~~

~~trading~~depreciation and ~~other activity. Our adjusted pre-tax profit margin for the three months ended June 30, 2020 was 37.3% compared to 36.2% for the three months ended June 30, 2019.~~interest expense. Adjusted net income before income taxes, adjusted pre-tax profit margin and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”). See Note 1 under the “Results of Operations” table for a discussion of adjusted net income before income taxes, adjusted pre-tax profit margin and adjusted diluted earnings per share before income taxes as non-GAAP measures and reconciliation of these measures to net income available to common stockholders.

Our Fleet

Portfolio metrics of our fleet as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are as follows:

June 30, 2020

December 31, 2019
Aggregate fleet net book value

$
19.1 billion

$
18.7 billion
Weighted-average fleet age⁽¹⁾

3.9 years

3.5 years
Weighted-average remaining lease term⁽¹⁾

7.0 years

7.2 years

Owned fleet⁽²⁾

301

292
Managed fleet⁽²⁾

81

83
Aircraft on order

393

413
Aircraft purchase options⁽³⁾

25

70
Total

800

858

Current fleet contracted rentals

$
13.8 billion

$
14.1 billion
Committed fleet rentals

$
14.4 billion

$
15.0 billion
Total committed rentals

$
28.2 billion

$
29.1 billion


	March 31, 2021		December 31, 2020

Aggregate fleet net book value	$	20.8 billion	$	20.4 billion
Weighted-average fleet age⁽¹⁾		4.3 years		4.1 years
Weighted-average remaining lease term⁽¹⁾		6.9 years		6.9 years

Owned fleet		342		332
Managed fleet		83		81
Aircraft on order		349		361
Aircraft purchase options⁽²⁾		25		25
Total		799		799

Current fleet contracted rentals	$	13.4 billion	$	13.6 billion
Committed fleet rentals	$	13.4 billion	$	13.2 billion
Total committed rentals	$	26.8 billion	$	26.8 billion

(1)	Weighted-average fleet age and remaining lease term calculated based on net book ~~value.~~value of our operating lease portfolio.

(2)

As of ~~June 30, 2020~~March 31, 2021 and December 31, 2019, we had one and eight aircraft, respectively, classified as flight equipment held for sale which are included in Other assets on the Consolidated Balance Sheet. All of these aircraft are excluded from the owned fleet count and included in our managed fleet count.

~~(3)~~

~~As of June 30,~~ 2020, we had options to acquire ~~up to 25 Airbus A220 aircraft. As of December 31, 2019, we had options to acquire up to 45 Boeing 737-8 MAX aircraft, that have since expired without being exercised, and~~ up to 25 Airbus A220 aircraft.

The following table sets forth the net book value and percentage of the net book value of our flight equipment subject to operating lease in the indicated regions based on each airline’s principal place of business as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019 (in thousands, except percentages):~~2020:

June 30, 2020

December 31, 2019

Net Book

Net Book

Region

Value

% of Total

Value

% of Total

Europe

$
5,748,878

30.1
%
$
5,438,775

29.0
%
Asia (excluding China)

5,242,239

27.4
%

4,985,525

26.7
%
China

2,824,687

14.8
%

2,930,752

15.7
%
The Middle East and Africa

2,285,462

12.0
%

2,242,215

12.0
%
Central America, South America and Mexico

1,095,786

5.7
%

1,116,814

6.0
%
Pacific, Australia and New Zealand

975,190

5.1
%

993,858

5.3
%
U.S. and Canada

935,831

4.9
%

996,398

5.3
%
Total

$
19,108,073

100.0
%
$
18,704,337

100.0
%


	March 31, 2021				December 31, 2020
	Net Book				Net Book
Region	Value		% of Total		Value		% of Total

	(in thousands, except percentages)
Europe	$	6,678,600	32.1	%	$	6,413,557	31.4	%
Asia (excluding China)		5,627,021	27.1	%		5,513,498	27.1	%
China		2,737,471	13.2	%		2,766,543	13.5	%
The Middle East and Africa		2,332,400	11.2	%		2,356,418	11.6	%
U.S. and Canada		1,364,817	6.6	%		1,298,974	6.4	%
Central America, South America, and Mexico		1,086,398	5.2	%		1,074,792	5.3	%
Pacific, Australia, and New Zealand		947,252	4.6	%		956,568	4.7	%
Total	$	20,773,959	100.0	%	$	20,380,350	100.0	%

2119

The following table sets forth the number of aircraft we owned by aircraft type as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

June 30, 2020

December 31, 2019

Number of

Number of

Aircraft type

Aircraft

% of Total

Aircraft

% of Total

Airbus A319-100

1

0.3
%
1

0.3
%
Airbus A320-200

21

7.0
%
21

7.2
%
Airbus A320-200neo

16

5.3
%
13

4.5
%
Airbus A321-200

28

9.3
%
28

9.6
%
Airbus A321-200neo

39

13.0
%
35

12.0
%
Airbus A330-200

13

4.3
%
12

4.1
%
Airbus A330-300

8

2.7
%
7

2.4
%
Airbus A330-900neo

7

2.3
%
7

2.4
%
Airbus A350-900

10

3.3
%
10

3.4
%
Boeing 737-700

4

1.3
%
4

1.4
%
Boeing 737-800

84

28.0
%
85

29.1
%
Boeing 737-8 MAX

15

5.0
%
15

5.1
%
Boeing 767-300ER

—

—
%
1

0.3
%
Boeing 777-200ER

1

0.3
%
1

0.3
%
Boeing 777-300ER

24

8.0
%
24

8.2
%
Boeing 787-9

23

7.6
%
23

8.0
%
Boeing 787-10

6

2.0
%
4

1.4
%
Embraer E190

1

0.3
%
1

0.3
%
Total

301

100.0
%
292

100.0
%


	March 31, 2021			December 31, 2020
	Number of			Number of
Aircraft type	Aircraft	% of Total		Aircraft	% of Total
Airbus A319-100	1	0.3	%	1	0.3	%
Airbus A320-200	31	9.1	%	31	9.4	%
Airbus A320-200neo	20	5.8	%	19	5.7	%
Airbus A321-200	28	8.2	%	28	8.4	%
Airbus A321-200neo	53	15.5	%	49	14.8	%
Airbus A330-200	13	3.8	%	13	3.9	%
Airbus A330-300	8	2.3	%	8	2.4	%
Airbus A330-900neo	8	2.3	%	8	2.4	%
Airbus A350-900	11	3.2	%	11	3.3	%
Airbus A350-1000	2	0.6	%	2	0.6	%
Boeing 737-700	4	1.2	%	4	1.2	%
Boeing 737-800	88	25.7	%	88	26.5	%
Boeing 737-8 MAX	19	5.6	%	15	4.5	%
Boeing 777-200ER	1	0.3	%	1	0.3	%
Boeing 777-300ER	24	7.0	%	24	7.2	%
Boeing 787-9	24	7.0	%	23	7.0	%
Boeing 787-10	6	1.8	%	6	1.8	%
Embraer E190	1	0.3	%	1	0.3	%
Total	342	100.0	%	332	100.0	%

As of ~~June 30, 2020,~~March 31, 2021, we had commitments to acquire a total of ~~393~~349 new aircraft for delivery through ~~2026~~2027 as follows:

Estimated Delivery Years
Aircraft Type

2020

2021

2022

2023

2024

Thereafter

Total
Airbus A220-300⁽¹⁾

—

—

3

14

11

22

50
Airbus A320/321neo⁽²⁾

14

22

23

25

32

37

153
Airbus A330-900neo

—

3

7

5

—

—

15
Airbus A350-900/1000

3

4

3

4

5

1

20
Boeing 737-7/8/9 MAX

2

24

23

42

30

—

121
Boeing 787-9/10

8

6

8

10

2

—

34
Total

27

59

67

100

80

60

393


	Estimated Delivery Years
Aircraft Type	2021	2022	2023	2024	2025	Thereafter	Total
Airbus A220-300⁽¹⁾	—	3	10	15	12	10	50
Airbus A320/321neo⁽²⁾	25	23	22	26	19	20	135
Airbus A330-900neo	3	7	4	—	—	—	14
Airbus A350-900/1000	4	3	4	5	1	—	17
Boeing 737-7/8/9 MAX	19	22	24	27	8	—	100
Boeing 787-9/10	13	8	7	5	—	—	33
Total	64	66	71	78	40	30	349

(1)	In addition to our commitments, as of ~~June 30, 2020,~~March 31, 2021, we had options to acquire up to 25 Airbus A220 aircraft. If exercised, deliveries of these aircraft are scheduled to commence in 2023 and continue through 2028.

(2)	Our Airbus A320/321neo aircraft orders include 4736 long-range variants and 29 extra long-range variants.

Aircraft Delivery Delays

Pursuant to our purchase agreements with Boeing and Airbus for new aircraft, we and each manufacturer agree to contractual delivery dates for each aircraft ordered. These dates can change for a variety of reasons, and in the last several years manufacturing delays have significantly impacted our actual delivery dates. ~~For several years,~~

The worldwide grounding of the 737 MAX beginning in March 2019 has resulted in material delivery delays of those aircraft from our orderbook. The FAA and EASA lifted their grounding order on November 18, 2020 and January 27, 2021, respectively. However, the 737 MAX still remains grounded in a number of jurisdictions. The grounding of the aircraft has caused airlines to adjust flight schedules, cancel flights, or keep older aircraft in service longer. We are unable to speculate as to when the grounding of the 737 MAX in the remaining countries and jurisdictions will be lifted.

In addition to the grounding issue noted above, in April 2021, a specific group of 737 MAX aircraft were removed from service due to an electrical power system issue unrelated to the previous grounding order. On April 28, 2021, the FAA issued a new airworthiness directive detailing the modifications required before the impacted aircraft can return to

service. Boeing expects the required modifications to take a few days per aircraft and has halted deliveries of 737 MAX aircraft until the airworthiness directive has been complied with, though the timeline to return to service remains uncertain at this time.

As of March 31, 2021, we owned and leased 19 737 MAX aircraft and we had 100 737 MAX aircraft on order. With respect to the 737 MAX aircraft we own and lease, our airline customers are obligated to continue to make payments under the lease, irrespective of any difficulties in which the lessees may encounter, including an aircraft fleet grounding. However, the lease payments for some of our 737 MAX airline customers are in arrears.

During the fourth quarter of 2020, Boeing identified manufacturing defects on its 787 aircraft. As a result, Boeing suspended deliveries of 787 aircraft between October 2020 and March 2021. Boeing has resumed the 787 aircraft deliveries, though it is not yet clear when all of our delayed aircraft will be delivered. As such, we are not yet able to determine the impact of delivery delays from these manufacturing defects.

As a result of the aforementioned items occurring with both the 737 MAX and 787 aircraft, as of May 6, 2021, we anticipate that Boeing may continue to experience challenges in delivering these aircraft resulting in delivery delays on both the 737 MAX and 787 throughout the remainder of 2021 and delivery delays could potentially extend well into 2022 and beyond.

We have also experienced delivery delays for certain of our Airbus orderbook aircraft, ~~primarily~~including the ~~A321neo~~A320neo family aircraft and, to a lesser extent, the A330neo aircraft. ~~The worldwide grounding~~Airbus has advised us to continue to expect several months of ~~the Boeing 737 MAX~~delivery delays relating to such aircraft (“737 MAX”) began on March 10, 2019, and remains in effect. As a result, Boeing temporarily halted production and delivery of all 737 MAX aircraft. While production of the 737 MAX has now resumed in the second quarter, deliveries remain on hold. The Federal Aviation Administration (“FAA”) has begun flight testing for recertification of the 737 MAX. Lifting of the grounding is subject to the approval of the FAA, as well as a number of other global regulatory authorities, and we are unable to speculate as to when this may occur. Even after the grounding is lifted, Boeing’s abilityscheduled to deliver ~~737 MAX aircraft may be~~through 2022. These delays also have impacted asairline operations and the profitably of certain airlines.

As a result of the ~~COVID-19 pandemic. We are currently in discussions with Boeing regarding the mitigation of possible damages resulting from the grounding of,~~manufacturing delays and the ~~delivery~~ delays ~~associated with the 737 MAX aircraft that we own or have on order, which could result in changes~~related to the ~~commitment table.~~

~~The ongoing~~ COVID-19 pandemic, ~~has caused delivery delays of aircraft in our orderbook and is expected to continue to cause delays of aircraft deliveries. As~~ discussed in further detail above in “Impact of COVID-19 Pandemic,” the pandemic has resulted in numerous travel restrictions and business shutdowns or other operating limitations, including the temporary closure of final aircraft assembly facilities for each of Boeing and Airbus. In the second quarter of 2020, Boeing and Airbus resumed production in these facilities.

~~As a result of the temporary closures of the Boeing and Airbus facilities, most~~many of our ~~expected~~ aircraft deliveries ~~were delayed during the second quarter. Given the dynamic nature of the ongoing COVID-19 pandemic, we~~have been delayed. We are in ongoing discussions with Boeing and Airbus to determine the impact and duration of delivery delays. However, we are not yet able to determine the impact of the delivery delays, and as such, ~~the~~our expected delivery dates ~~listed above~~ could materially change. While we have planned our capital expenditures for the remainder of 2021 and beyond based on currently expected delivery schedules, given the current industry circumstances, our aircraft delivery schedule could continue to be subject to material changes.

~~The aircraft purchase commitments discussed above also could be impacted by~~We expect that if the grounding of the 737 MAX continues in certain countries and jurisdictions for an extended time, or if there are significant 737 MAX delivery delays in counties and jurisdictions where the grounding has been lifted, more of our customers may seek to cancel their lease ~~cancellation.~~contracts for the 737 MAX with us. Our leases typically provide that we and our airline customer each have a cancellation right related to certain aircraft delivery delays. Our purchase agreements with Boeing and Airbus also generally provide that ~~the Company~~we and the manufacturer each have cancellation rights that typically ~~are~~ parallel ~~with~~ our cancellation rights in our leases. Our leases and our purchase agreements with Boeing and Airbus generally provide for cancellation rights starting at one year after the original contractual delivery date, regardless of cause. ~~Pursuant to contractual provisions, a small number~~As of ~~our customers canceled a total of five 737 MAX leases with us and~~May 6, 2021, we have ~~subsequently exercised~~canceled our ~~right to cancel our purchase of the related~~orders for 22 737 MAX aircraft with Boeing. We believe that the majority of our 737 MAX aircraft and some of our 787 aircraft deliveries in our orderbook will be delayed more than 12 ~~months.~~months, which would give us, our airline customers and Boeing the right to cancel these aircraft commitments. It is unclear at this point if we will cancel more of our 737 MAX delivery positions with Boeing or attempt to find replacement lessees. We are currently in discussions with Boeing regarding the mitigation of damages resulting from the grounding of and the delivery delays associated with the 737 MAX aircraft that we own and have on order.

The following table, which is subject to change based on Airbus and Boeing delivery delays, shows the number of new aircraft scheduled to be delivered as of ~~June 30, 2020.~~March 31, 2021 along with the lease placements of such aircraft as of May 6, 2021. As noted above, we expect delivery delays for all aircraft deliveries in our ~~orderbook, including Boeing 737 MAX delivery delays after the grounding of such aircraft is lifted.~~orderbook. We remain in discussions

with Boeing and Airbus to determine the extent and duration of delivery delays, but given the dynamic nature of the ongoing COVID-19 pandemic, we are not yet able to determine the full impact of the delivery delays.

Number of

Number


Delivery Year

Aircraft

Leased

% Leased

2020

27

27

100.0
%
2021

59

57

96.6
%
2022

67

53

79.1
%
2023

100

33

33.0
%
2024

80

11

13.8
%
Thereafter

60

—

—
%
Total

393

181


	Number of	Number
Delivery Year	Aircraft	Leased	% Leased
2021	64	64	100.0	%
2022	66	59	89.4	%
2023	71	37	52.1	%
2024	78	16	20.5	%
2025	40	4	10.0	%
Thereafter	30	—	—	%
Total	349	180

Aircraft Industry and Sources of Revenues

Our revenues are principally derived from operating leases with scheduled and charter airlines throughout the world. As of ~~June 30, 2020,~~March 31, 2021, we ~~have~~had a globally diversified customer base comprised of ~~106~~113 airlines in 6159 different countries, with over 95% of our business revenues from airlines domiciled outside of the U.S., and we anticipate that most of our revenues in the future will be generated from foreign customers.

Performance of the commercial airline industry is linked to global economic health and development, which may be negatively impacted by economic disruption, macroeconomic conditions and geopolitical and policy risks, among other factors. COVID-19 has caused significant disruption to the commercial airline industry resulting in a ~~meaningful~~significant decline in air travel, ~~demand and subsequent flight cancellations,~~ negatively impacting airlines, aircraft manufacturers, and other related businesses. The International Air Transport Association (“IATA”) reported that passenger traffic fell ~~58.4%~~26% year-over-year for the first ~~six~~three months of ~~2020~~2021, and ~~86.5% year-over-year~~fell 67% for the month of ~~June 2020,~~March 2021 compared to the month of March 2019, primarily due to COVID-19. As a result, IATA expects airline passenger volumes to fall 55% in 2020 as compared to 2019, before recovering an estimated 62% from the predicted 2020 levels in 2021, albeit with 2021 passenger volumes still below peak levels achieved in 2019. While domestic and regional airline traffic have improved ~~over~~since the ~~last several months,~~industry low in April 2020, passenger traffic remains challenged, especially with respect to international and business air travel ~~demand~~demand. Beginning in the fourth quarter of 2020, several COVID-19 vaccines had been approved for use in a number of countries. The CDC recently issued new guidance reducing travel restrictions for vaccinated travelers, though global health agencies such as the WHO, among others, have yet to issue formal guidance, and travel restrictions remain ~~challenged.~~in place in many parts of the world. While widespread vaccination could reduce the impact of COVID-19 on the commercial airline industry, we cannot predict the pace of vaccinations or how long it will take the industry to recover.

We expect ~~a significant increase in financial difficulties for~~ our airline customers to continue to experience financial difficulties through ~~the remainder of 2020~~2021 and potentially longer, ~~including the need~~which could result in additional requests for lease ~~deferrals or other lease concessions,~~accommodations, requests to return aircraft early orand lease defaults. We also expect ~~increased~~more airline reorganizations, liquidations, or other forms of bankruptcies, which may include our aircraft customers and result in the early return of aircraft or changes in our lease terms. As of the date of this filing, we had 1113 aircraft across ~~three~~four airlines which were subject to various forms of insolvency proceedings.

Approximately ~~75%~~73% of the net book value of our fleet are leased to flag carriers or airlines that have some form of governmental ownership; however, this does not guarantee our ability to collect contractual rent payments. We believe that having a large portion of the net book value of our fleet on lease with flag carriers or airlines with some form of governmental ownership, coupled with the overall quality of our aircraft and security deposits and maintenance reserves under our leases will help mitigate our customer default risk.

We expect the aviation industry to recover over time from the impact of COVID-19, and in the long-term we remain optimistic. While we believe some aircraft lessors may consolidate or cease operations as a result of the pandemic, we believe the aircraft leasing industry has remained resilient over time across a variety of global economic conditions and remain optimistic about the long-term fundamentals of our business. As a result of the COVID-19 pandemic, some airlines have accelerated their plans to retire older, less fuel-efficient aircraft that have higher maintenance costs in the current environment, and we anticipate that airlines will continue to accelerate the retirement of this type of aircraft, ultimately increasing demand for newer aircraft over time. We also anticipate that when airlines need to add new aircraft to their fleet, they will increasingly elect to lease aircraft instead of purchasing aircraft to reduce capital requirements and manage other operating expenses, and that we will benefit from that trend. AWe expect a number of these trends ~~have already begun during~~to continue in the ~~last several months and we continue to closely monitor market impact from the pandemic.~~remainder of 2021.

We and airlines around the world have continued to experience delivery delays from Boeing and Airbus ~~from which we~~and have ~~393 aircraft on order as of June 30, 2020,~~been impacted by the 737 MAX grounding, as discussed above in “Our Fleet.” ~~The Airbus~~Aircraft manufacturer delays and the 737 MAX grounding have impacted the growth of our company as well as the growth of our airline customers, passenger growth and airline profitability and we expect this to continue. As a result of continued ~~production~~manufacturing delays and the impact of COVID-19, ~~we expect~~our aircraft ~~deliveries~~delivery schedule could continue to be ~~lower than previously anticipated for 2020~~subject to material changes and delivery delays could potentially extend well into ~~2021~~2022 and beyond. Although we expect our aircraft sales activity to increase in 2021 compared to 2020, we do not anticipate that aircraft sales activity will return to pre-pandemic levels during 2021.

~~The worldwide~~As a result of various impacts of COVID-19 including border restrictions and other travel limitations particularly on long-haul intercontinental travel, we have seen further reduced demand for certain widebody aircraft in our fleet. Due to the grounding of the 737 MAX ~~began on March 10, 2019,~~ and ~~remains in effect. As~~other narrow body delivery delays, our fleet currently has a ~~result, Boeing temporarily halted production and delivery~~greater concentration of all 737 MAX aircraft. While production of the 737 MAX has now resumed, deliveries remain on hold. Since March of 2019, airlines affected by this grounding have had to adjust flight schedules or cancel flights, back fillwidebody aircraft with other aircraft types or keep older aircraft in service longer. These operational changes and the uncertainty of when the 737 MAX aircraft will return to service and when Boeing will resume deliveries have impacted the profitability of certain airlines. The FAA has begun flight testing for recertification of the 737 MAX. Lifting of the grounding is subject to the approval of the FAA, as well as a number of other global regulatory authorities, andthan we ~~are unable to speculate as to when this may occur. Even after the grounding is lifted, Boeing’s ability to deliver 737 MAX aircraft may be impacted as a result of the COVID-19 pandemic.~~typically target.

As of June 30, 2020, we owned and leased 15 737 MAX aircraft and we had 121 737 MAX aircraft on order. Because of the uncertainty on the duration of the grounding, we have curtailed our leasing of our MAX orderbook aircraft. With respect to the 15 737 MAX aircraft we own and lease, our airline customers are obligated to continue to make payments under the lease, irrespective of any difficulties in which the lessees may encounter, including an aircraft fleet grounding. Some of our airline customers for these 15 737 MAX aircraft lease payments are in arrears.

We expect that if the grounding continues for an extended time, or if there are significant 737 MAX delivery delays even after the grounding is lifted as a result of the impact of the COVID-19 pandemic, more of our customers may seek to cancel their lease contracts with us. As of June 30, 2020, a small number of our customers canceled a total of five 737 MAX leases with us and we have subsequently exercised our right to cancel our purchase of the related 737 MAX aircraft with Boeing. It is unclear at this point if we will cancel more of our 737 MAX delivery positions with Boeing or attempt to find replacement lessees. We are currently in discussions with Boeing regarding the mitigation of possible damages resulting from the grounding of and the delivery delays associated with the 737 MAX aircraft that we own and have on order.

For several years, Airbus has also had delivery delays for certain of its aircraft, primarily the A321neo aircraft and, to a lesser extent, A330neo aircraft. Those delays are continuing and have worsened. Airbus has told us to continue to expect several months of delivery delays relating to such aircraft scheduled to deliver through 2022. These delays also have impacted airline operations and the profitably of certain airlines.

~~Further as it relates to Airbus aircraft, in~~In October 2019, the ~~Office of the~~ U.S. ~~Trade Representative announced~~government imposed a 10% tariff on new aircraft imported from Europe, including Airbus aircraft. ~~The~~In March 2020, the tariff was raised to 15%. Effective November 10, 2020, the European Union (“E.U.”) imposed a 15% tariff on new aircraft imported into the E.U. from the U.S. ~~government has recently made statements and taken certain actions that have led to, and may lead to, further changes to~~, including Boeing aircraft. In March 2021, the U.S. and international trade policies, including recently imposed tariffs affecting certain products exported by a number of U.S. trading partners, such as Europe and China. In response, many U.S. trading partners, including Europe and China, have imposed or proposed new or higherthe E.U. agreed to temporarily suspend all retaliatory tariffs on ~~U.S. products. We~~exports through July 2021, in order to negotiate a trade settlement. Our leases are primarily structured as triple net leases, whereby the lessee is responsible for all operating costs including taxes, insurance, aircraft maintenance and the costs associated with the importation of the aircraft. However, we are currently monitoring the impact of ~~this announcement~~U.S. trade policies on our future Airbus deliveries to U.S. ~~customers.~~ customers, and our Boeing deliveries to customers in the E.U and future demand for our orderbook aircraft.

We cannot predict what further actions may ultimately be taken with respect to tariffs or trade relations between the U.S. and U.S. trading partners. Accordingly, it is difficult to predict exactly how, and to what extent, such actions may impact our business, or the business of our lessees or aircraft manufacturers. Any unfavorable government policies on international trade, such as capital controls or tariffs, may affect the demand for aircraft, increase the cost of aircraft components, further delay production, impact the competitive position of certain aircraft manufacturers or prevent aircraft manufacturers from being able to sell aircraft in certain countries. ~~Our leases are primarily structured as triple net leases, whereby the lessee is responsible for all operating costs including taxes, insurance, and aircraft maintenance.~~

Given the impact of COVID-19 on our industry, it is unclear at this time how competition within the aircraft leasing industry will evolve or change in the coming months and what the corresponding impact on lease rates will be as a result of the change in the competitive landscape, COVID-19, trade matters, the aircraft delays from Airbus and Boeing or other items.

Liquidity and Capital Resources

Overview

We finance the purchase of aircraft and our business with available cash balances, internally generated funds, including through aircraft sales and trading activity, and an array of ~~debt~~ financing products. We have structured ourselves with the goal to maintain investment-grade credit metrics and our debt financing strategy has focused on funding our business on an unsecured basis with primarily fixed-rate debt. Unsecured financing provides us with operational flexibility when selling or transitioning aircraft from one airline to another and also reduces structural subordination in our capital structure. We also have the ability to seek debt financing secured by our assets, as well as financings supported through the Export-Import Bank of the United States and other export credit agencies for future aircraft deliveries. Our access to a variety of financing alternatives including unsecured public bonds, private capital, bank debt, preferred stock and secured markets ~~serves as~~provides us with a key advantage in managing our liquidity. ~~Additionally, we only have approximately $295.8 million in debt maturities for the remainder of 2020, which serves to limit our near-term financing needs.~~ Aircraft delivery delays as a product of the COVID-19 pandemic, ~~and~~ the 737 MAX grounding and other manufacturer delays are expected to further reduce our ~~debt financing needs this year~~capital requirements for the next six to twelve months and potentially beyond. We continue to monitor COVID-19 and its impact on our overall liquidity position and outlook.

We ended the ~~second~~first quarter of ~~2020~~2021 with total debt outstanding, net of discounts and issuance costs, of ~~$14.6~~$16.2 billion compared to ~~$13.6~~$16.5 billion as of December 31, ~~2019.~~2020. Our unsecured debt ~~increased~~decreased to ~~$14.5~~$16.1 billion as of ~~June 30, 2020~~March 31, 2021 from ~~$13.3~~$16.4 billion as of December 31, ~~2019.~~2020. Our unsecured debt as a percentage of total debt increased to ~~97.8%~~98.5% as of ~~June 30, 2020~~March 31, 2021 from ~~96.6%~~98.2% as of December 31, ~~2019.~~2020.

Our cash flows provided by operating activities ~~decreased~~increased by ~~28.6%~~0.1% or ~~$187.9~~$0.3 million, to ~~$468.3~~$234.3 million for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 as compared to ~~$656.2~~$234.0 million for the ~~six~~three months ended ~~June 30, 2019. The~~March 31, 2020. Despite the decrease in our net income, our cash flow provided by operating activities iswas slightly higher primarily due to an increase in ~~deferred lease payments~~our cash collections during the ~~quarter~~three months ended March 31, 2021, as ~~a result of~~compared to the ~~COVID-19 pandemic.~~three months ended March 31, 2020. Our cash flow used in investing activities was ~~$902.6~~$549.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021, which resulted primarily from the purchase of aircraft. Our cash flow used in investing activities was $672.3 million for the three months ended March 31, 2020, which resulted primarily from the purchase of aircraft, partially offset by proceeds from our sales and trading activity. Our cash flow ~~provided by~~used in financing activities was ~~$1.0 billion~~$90.2 million for the ~~six~~three months ended ~~June 30,~~March 31, 2021, which resulted primarily from the repayment of outstanding debt partially offset by the issuance of unsecured notes and the issuance of our Series B preferred stock. Our cash flow used in financing activities was $853.6 million for the three months ended March 31, 2020, which resulted primarily from the issuance of unsecured notes partially offset by the repayment of outstanding debt. ~~We expect the~~The continued impact of COVID-19, including as a result of rent deferrals and other lease concessions made or that

we may make in the future to our customers, ~~will~~could continue to have a negative impact on cash flow from operating activities.

We ended the ~~second~~first quarter of ~~2020~~2021 with available liquidity of ~~$6.9~~$7.5 billion which is comprised of unrestricted cash of ~~$926.4 million~~$1.3 billion and an available borrowing capacity under our Revolving Credit Facility of ~~$6.0~~$6.2 billion. Our Revolving Credit Facility does not condition our ability to borrow on the lack of a material adverse effect to us or the general economy. ~~We believe that we have sufficient liquidity to satisfy the operating requirements of our business through at least next 12 months.~~ A key component of the ongoing liquidity available to us is our Revolving Credit Facility, for which the substantial majority of the commitments mature in ~~2023. Our~~2025. As of May 6, 2021, our Revolving Credit Facility is syndicated across 4950 financial institutions from around various regions of the world, diversifying our reliance on any individual lending institution. We continue to utilize our Revolving Credit Facility in the normal course of business.

We have a balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, investing in modern, in-demand aircraft to profitably grow our core aircraft leasing business while maintaining strong fleet metrics and creating sustainable long-term shareholder value; second, maintaining our investment grade balance sheet utilizing unsecured debt as our primary form of financing; and finally, in lockstep with the aforementioned priorities, returning excess cash to shareholders through our dividend policy as well as regular evaluation of share repurchases, as appropriate.

The ultimate impact the COVID-19 pandemic may have on our business, results of operations and financial condition over the next 12 months is currently uncertain and will depend on certain developments, including, among others, the impact of the COVID-19 pandemic on our airline customers and the magnitude and duration of the pandemic. We currently believe that our cash on hand, current debt arrangements and general ability to access the capital markets will be sufficient to finance our operations and fund our debt service requirements and capital expenditures, including aircraft acquisition over the next 12 months. We also have the ability to seek debt financing secured by our assets, as well as financings supported through the Export-Import Bank of the United States and other export credit agencies, or ECAs for future aircraft deliveries.

As of ~~June 30, 2020,~~March 31, 2021, we were in compliance in all material respects with the covenants contained in our debt agreements. AWhile a ratings downgrade ~~will~~would not result in a default under any of our debt agreements, ~~but~~ it could adversely affect our ability to issue debt and obtain new financings, or renew existing financings, and it would increase the costs of certain financings. Our liquidity plans are subject to a number of risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, ~~2019, and in our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2020.

Debt

Our debt financing was comprised of the following at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 (in thousands, except percentages):

June 30, 2020

December 31, 2019

Unsecured

Senior notes

$
13,509,411

$
12,357,811

Term financings

972,625

883,050

Revolving credit facility

—

20,000

Total unsecured debt financing

14,482,036

13,260,861

Secured

Term financings

298,552

428,824

Export credit financing

28,283

31,610

Total secured debt financing

326,835

460,434

Total debt financing

14,808,871

13,721,295

Less: Debt discounts and issuance costs

(169,826)

(142,429)

Debt financing, net of discounts and issuance costs

$
14,639,045

$
13,578,866

Selected interest rates and ratios:

Composite interest rate⁽¹⁾

3.15
%

3.34
%
Composite interest rate on fixed-rate debt⁽¹⁾

3.31
%

3.39
%
Percentage of total debt at fixed-rate

90.84
%

88.40
%


	March 31, 2021			December 31, 2020
Unsecured
Senior notes	$	15,287,351		$	15,583,544
Term financings		808,250			811,550
Total unsecured debt financing		16,095,601			16,395,094
Secured
Term financings		223,418			276,032
Export credit financing		23,292			24,955
Total secured debt financing		246,710			300,987

Total debt financing		16,342,311			16,696,081
Less: Debt discounts and issuance costs		(175,407)			(177,743)
Debt financing, net of discounts and issuance costs	$	16,166,904		$	16,518,338
Selected interest rates and ratios:
Composite interest rate⁽¹⁾		3.02	%		3.13	%
Composite interest rate on fixed-rate debt⁽¹⁾		3.15	%		3.26	%
Percentage of total debt at a fixed-rate		93.19	%		93.02	%

(1)	This rate does not include the effect of upfront fees, facility fees, undrawn fees or amortization of debt discounts and issuance costs.

Senior unsecured notes (including Medium-Term Note Program)

As of ~~June 30, 2020,~~March 31, 2021, we had ~~$13.5~~$15.3 billion in senior unsecured notes outstanding. As of December 31, ~~2019,~~2020, we had ~~$12.4~~$15.6 billion in senior unsecured notes outstanding.

~~During the six months ended June 30, 2020,~~In January 2021, we issued ~~$2.3 billion in aggregate principal amount of Medium-Term Notes comprised of (i)~~ $750.0 ~~million due 2025 at a fixed rate of 2.30%, (ii) $650.0 million due 2030 at a fixed rate of 3.00% and (iii) $850.0 million due 2025 at a fixed rate of 3.375%.~~

~~During the quarter ended June 30, 2020, we repurchased $185.2~~ million in aggregate principal amount of ~~Floating Rate~~0.70% Medium-Term Notes due ~~2021. The open market debt repurchases resulted in a gain of $13.6 million and is included in Aircraft sales, trading and other revenue in our Consolidated Income Statements.~~2024.

Unsecured revolving credit facility

As of ~~June 30,~~March 31, 2021 and December 31, 2020, we did not have any amounts outstanding under ~~the~~our Revolving Credit Facility. ~~The total amount outstanding under~~

During the three months ended March 31, 2021, the Company increased the aggregate capacity of its Revolving Credit Facility by $200.0 million. As of March 31, 2021, the aggregate capacity of the Revolving Credit Facility was ~~$20.0 million as of December 31, 2019.~~approximately $6.2 billion.

We have an unsecured revolving credit facility with JPMorgan Chase Bank, N.A., as agent (the “Revolving Credit Facility”). During the six months ended June 30, 2020, we increased the aggregate capacity of our unsecured revolving credit facility by $250.0 million. On May 5, 2020, commitments totaling $92.7 million of our committed unsecured revolving credit facility matured. As of June 30, 2020, the aggregate capacity of our committed unsecured revolving credit facility was approximately $6.0 billion. Lenders hold revolving commitments totaling approximately $5.5 billion that mature on May 5, 2023, commitments totaling $245.0 million that mature on May 5, 2022 and commitments totaling $5.0 million that mature on May 5, 2021.

~~As of June 30, 2020, borrowings~~Borrowings under our ~~committed unsecured revolving credit facility will generally bear~~Revolving Credit Facility accrue interest at either (a) LIBOR plus a margin of 1.05% per year or (b) an alternative base rate plus a margin of 0.05% per year, subject, in each case, to increases or decreases based on declines or improvements in the credit ratings for our debt. We are required to pay a facility fee of 0.20% per year (also subject to increases or decreases based on declines or improvements in the credit ratings for our debt) in respect of total commitments under our ~~unsecured revolving credit facility.~~Revolving Credit Facility. Borrowings under our ~~committed unsecured revolving credit facility~~Revolving Credit Facility are used to finance our working capital needs in the ordinary course of business and for other general corporate purposes.

In April 2021, we amended and extended our Revolving Credit Facility pursuant to which, among other things, extended the final maturity date from May 5, 2023 to May 5, 2025 and increased the total revolving commitments to approximately $6.4 billion as of May 6, 2021, representing an increase of 6.7% from December 31, 2020. As of May 6, 2021, lenders held revolving commitments totaling approximately $5.7 billion that mature on May 5, 2025, commitments totaling $575.0 million that mature on May 5, 2023 and commitments totaling $105.0 million that mature on May 5, 2022. The amended Revolving Credit Facility also added benchmark replacement language with respect to LIBOR based on Alternative Reference Rates Committee LIBOR fallback language and amended certain financial maintenance covenants, including removing the maximum consolidated leverage ratio covenant, increasing the required

level for minimum consolidated shareholders equity and removing the mechanism for suspending the minimum interest coverage ratio if certain debt ratings are met.

Secured debt financing

~~In June 2020, we entered into an amendment to our secured warehouse facility to extend~~As of March 31, 2021, the final maturity to June 2021. The facility will continue to bear a floating interest rate of LIBOR plus 2.00%. As part of the amendment, the credit facility was converted to full recourse against us and excess cash collateral was released. The outstanding balance on our secured debt financings, including our secured warehouse facility and our export credit financing, was ~~$103.1~~$246.7 million and ~~$128.5 million~~we had pledged 10 aircraft as collateral with a net book value of ~~June 30, 2020 and December 31, 2019, respectively.~~

$493.2 million. As of ~~June 30,~~December 31, 2020, the outstanding balance on our secured debt financings, including our secured warehouse facility and our export credit financing, was ~~$326.8~~$301.0 million and we had pledged 12 aircraft as collateral with a net book value of ~~$644.5~~$628.7 million. As of December 31, 2019, the outstanding balance on our secured debt financings, including our secured warehouse facility and our export credit financing, was $460.4 million and we had pledged 15 aircraft as collateral with a net book value of $890.7 million.

Preferred equity

On March 5, 2019, we issued 10,000,000 shares of ~~6.150%~~6.15% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), $0.01 par value, with a liquidation preference of $25.00 per share. We will pay dividends on the Series A Preferred Stock only when, as and if declared by the board of directors. Dividends will accrue, on a non-cumulative basis, on the stated amount of $25.00 per share at a rate per annum equal to: (i) ~~6.150%~~6.15% during the first five years and payable quarterly in arrears beginning on June 15, 2019, and (ii) three-month LIBOR plus a spread of 3.650% per annum from March 15, 2024, reset quarterly and payable quarterly in arrears beginning on June 15, 2024.

We may redeem shares of the Series A Preferred Stock at our option, in whole or in part, from time to time, on or after March 15, 2024, for cash at a redemption price equal to $25.00 per share, plus any declared and unpaid dividends to, but excluding, the redemption date, without accumulation of any undeclared dividends. We may also redeem shares of the Series A Preferred Stock at our option under certain other limited conditions.

On ~~May 6, 2020,~~March 2, 2021, we issued 300,000 shares of 4.65% Fixed-Rate Reset Non-Cumulative Perpetual Series B Preferred Stock, $0.01 par value, with a liquidation preference of $1,000 per share. We will pay dividends on the preferred stock only when, as and if declared by the board of directors. Dividends will accrue, on a non-cumulative basis, on the stated amount of $1,000 per share at a rate per annum equal to: (i) 4.65% through June 15, 2026, and payable quarterly in arrears beginning on June 15, 2021, and (ii) the Five-year U.S. Treasury Rate as of the applicable reset dividend determination date plus a spread of 4.076% per reset period from June 15, 2026 and reset every five years and payable quarterly in arrears.

We may redeem shares of the Series B Preferred Stock at its option, in whole or in part, from time to time, on or after June 15, 2026, for cash at a redemption price equal to $1,000 per share, plus any declared and unpaid dividends, without accumulation of any undeclared dividends. We may also redeem shares of the Series B Preferred Stock at our option under certain other limited conditions. The Series B Preferred Stock ranks on a parity with the Series A Preferred Stock.

On February 19, 2021, our board of directors ~~also~~ approved a cash dividend of $0.384375 per share on our outstanding Series A Preferred Stock, which was paid on ~~June~~March 15, ~~2020~~2021 to holders of record of our Series A Preferred Stock as of February 28, 2021. On May ~~31, 2020.~~

~~On August~~ 5, ~~2020,~~2021, our board of directors ~~also~~ approved a cash dividend of $0.384375 per share on our outstanding Series A Preferred Stock, which will be paid on ~~September~~June 15, ~~2020~~2021 to holders of record of our Series A Preferred Stock as of ~~August~~May 31, ~~2020.~~2021. Additionally, on May 5, 2021, our board of directors approved a cash dividend of $13.304167 per share on our outstanding Series B Preferred Stock, which will be paid on June 15, 2021 to holders of record of our Series B Preferred Stock as of May 31, 2021.

Potential Impact of LIBOR Transition

As of ~~June 30, 2020,~~March 31, 2021, we had approximately ~~$1.4~~$1.1 billion of floating rate debt outstanding that used LIBOR as the applicable reference rate to calculate the interest on such debt. Additionally, our Series A Preferred Stock will in the future accrue dividends at a floating rate determined by reference to LIBOR, if available. The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. ~~That announcement indicates~~However, for U.S dollar LIBOR, it appears that the relevant date may be deferred to June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S. dollar

LIBOR. Despite this potential deferral, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot and will not be guaranteed after ~~2021.~~June 30, 2023. Moreover, it is possible that U.S. LIBOR will be discontinued or modified prior to ~~2021.~~June 30, 2023. The U.S. Federal Reserve and the Bank of England have begun publishing a Secured Overnight Funding Rate and a reformed Sterling Overnight Index Average, respectively, which are ~~currently~~ intended to serve as alternative reference rates to LIBOR. At this time, however, it is not possible to predict the establishment of any market-accepted alternative reference rates or any other reforms to LIBOR and the effect of any such changes.

Furthermore, ~~due to the uncertainty surrounding the discontinuation of LIBOR and the effects resulting therefrom, financial market participants have yet to establish standard~~while fallback provisions governing the calculation of floating rate interest and dividends in the event LIBOR is ~~unavailable.~~unavailable have recently been established by the Alternative Reference Rate Committee, these provisions are not reflected in many agreements. The lack of a market practice and inconsistency in fallback provisions is reflected across our floating rate debt and Series A Preferred Stock and the discontinuation of LIBOR could lead to unexpected outcomes that may vary between our various debt and equity securities that reference LIBOR to determine the rate in which interest or dividends, as applicable, accrue. For example, if LIBOR is discontinued, the ~~various~~ fallback provisions contained in our credit facility, outstanding floating rate ~~debt agreements~~notes and the certificate of designations applicable to our Series A Preferred Stock are not the same among the various instruments and could lead to such debt or preferred stock bearing interest or paying dividends, as applicable, at, among other things, a rate of interest equal to the interest rate last in effect for which LIBOR was determinable, a floating rate determined in reference to a predetermined fallback reference rate or an alternative reference rate to be agreed upon by the parties to such agreement or that has been selected by the central bank, reserve bank, monetary authority or any similar institution, and a rate of interest representative of the cost to applicable lenders of funding their participation in the debt.

If the rate used to calculate interest on our outstanding floating rate debt that currently uses LIBOR and our Series A Preferred Stock were to increase by 1.0% either as a result of an increase in LIBOR or the result of the use of an alternative reference rate determined under the fallback provisions in the applicable debt if LIBOR is discontinued, we would expect to incur additional interest expense on such indebtedness as of ~~June 30, 2020~~March 31, 2021 of approximately ~~$13.6~~$11.1 million on an annualized basis. Further, if LIBOR is discontinued and there is no acceptable alternative reference rate, some of our floating rate debt, including certain senior unsecured notes issued under our Medium-Term Note Program, and our Series A Preferred Stock may effectively become fixed rate debt. As a result, the cost of this debt and equity would increase to us if and as interest rates decreased.

While we do not expect the potential impact of any LIBOR transition to have a material effect on our financial results based on our currently outstanding floating rate debt and equity, uncertainty as to the nature of potential changes to LIBOR, fallback provisions, alternative reference rates or other reforms could adversely impact our interest expense on our floating rate debt that currently uses LIBOR as the applicable reference rate and our Series A Preferred Stock. In addition, any alternative reference rates to LIBOR may result in interest or dividend payments that do not correlate over time with the payments that would have been made on our indebtedness or Series A Preferred Stock, respectively, if LIBOR was available in its current form. Further, the discontinuance or modification of LIBOR and uncertainty of an alternative reference rate may result in the increase in the cost of future indebtedness, which could have a material adverse effect on

our financial condition, cash flow and results of operations. We intend to closely monitor the financial markets and the use of fallback provisions and alternative reference rates in ~~2020 in~~ anticipation of the discontinuance or modification of LIBOR by ~~the end of 2021.~~June 30, 2023.

Credit ~~ratings~~Ratings

In April 2021, Standard and Poor’s reaffirmed our long-term debt and corporate rating and upgraded our outlook to Stable. The following table summarizes our current credit ratings:


Rating Agency	Long-term Debt	Corporate Rating	Outlook	Date of Last Ratings Action
Kroll Bond Ratings	A-	A-	Negative	March ~~26, 2020~~25, 2021
Standard and Poor's	BBB	BBB	~~Negative~~Stable	April ~~10, 2020~~7, 2021
Fitch Ratings	BBB	BBB	Negative	July 9, 2020

While a ratings downgrade would not result in a default under any of our debt agreements, it could adversely affect our ability to issue debt and obtain new financings, or renew existing financings, and it would increase the cost of our financings.

Results of Operations

The following table presents our historical operating results for the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands, except per share amounts and percentages):

Three Months Ended June 30,

Six Months Ended June 30,


2020

2019

2020

2019


(unaudited)

Revenues

Rental of flight equipment

$
497,869

$
463,870

$
994,556

$
919,609

Aircraft sales, trading and other

23,480

7,525

38,180

17,837

Total revenues

521,349

471,395

1,032,736

937,446

Expenses

Interest

102,693

96,824

210,234

186,044

Amortization of debt discounts and issuance costs

10,233

8,712

20,761

17,252

Interest expense

112,926

105,536

230,995

203,296

Depreciation of flight equipment

194,020

171,689

382,915

331,160

Selling, general and administrative

26,581

27,771

54,903

57,473

Stock-based compensation

3,892

5,863

8,321

10,037

Total expenses

337,419

310,859

677,134

601,966

Income before taxes

183,930

160,536

355,602

335,480

Income tax expense

(36,305)

(32,231)

(70,826)

(69,081)

Net income

$
147,625

$
128,305

$
284,776

$
266,399

Preferred stock dividends

(3,844)

(4,271)

(7,688)

(4,271)

Net income available to common stockholders

$
143,781

$
124,034

$
277,088

$
262,128

Earnings per share of common stock

Basic

$
1.26

$
1.11

$
2.44

$
2.36

Diluted

$
1.26

$
1.10

$
2.43

$
2.33

Other financial data

Pre-tax profit margin

35.3
%

34.1
%

34.4
%

35.8
%

Adjusted net income before income taxes⁽¹⁾

$
194,211

$
170,840

$
376,996

$
358,498

Adjusted pre-tax profit margin⁽¹⁾

37.3
%

36.2
%

36.5
%

38.2
%

Adjusted diluted earnings per share before income taxes⁽¹⁾

$
1.71

$
1.51

$
3.31

$
3.18

Pre-tax return on common equity (trailing twelve months)

13.9
%

14.6
%

13.9
%

14.6
%

Adjusted pre-tax return on common equity (trailing twelve months)⁽¹⁾

15.0
%

15.7
%

15.0
%

15.7
%


	Three Months Ended March 31,
	2021			2020

	(unaudited)
Revenues
Rental of flight equipment	$	468,095		$	496,687
Aircraft sales, trading and other		6,732			14,700
Total revenues		474,827			511,387
Expenses
Interest		117,986			107,541
Amortization of debt discounts and issuance costs		12,025			10,528
Interest expense		130,011			118,069
Depreciation of flight equipment		208,965			188,895
Selling, general and administrative		26,914			28,322
Stock-based compensation		5,408			4,429
Total expenses		371,298			339,715
Income before taxes		103,529			171,672
Income tax expense		(19,437)			(34,521)
Net income	$	84,092		$	137,151
Preferred stock dividends		(3,844)			(3,844)
Net income available to common stockholders	$	80,248		$	133,307

Earnings per share of common stock
Basic	$	0.70		$	1.17
Diluted	$	0.70		$	1.17

Other financial data
Pre-tax profit margin		21.8	%		33.6	%
Adjusted net income before income taxes⁽¹⁾	$	117,118		$	182,785
Adjusted pre-tax profit margin⁽¹⁾		24.7	%		35.7	%
Adjusted diluted earnings per share before income taxes⁽¹⁾	$	1.03		$	1.61
Pre-tax return on common equity (trailing twelve months)		9.9	%		13.8	%
Adjusted pre-tax return on common equity (trailing twelve months)⁽¹⁾		11.0	%		14.9	%

(1)

Adjusted net income before income taxes (defined as net income available to common stockholders excluding the effects of certain non-cash items, one-time or non-recurring items, that are not expected to continue in the future and certain other items), adjusted pre-tax profit margin (defined as adjusted net income before income taxes divided by total revenues), adjusted diluted earnings per share before income taxes (defined as adjusted net income before income taxes divided by the weighted average diluted common shares outstanding) and adjusted pre-tax return on common equity (defined as adjusted net income before income taxes divided by average common shareholders’ equity) are measures of operating performance that are not defined by GAAP and should not be considered as an alternative to net income available to common stockholders, pre-tax profit margin, earnings per share, diluted earnings per share and pre-tax return on common equity, or any other performance measures derived in accordance with GAAP. Adjusted net income before income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity are presented as supplemental disclosure because management believes they provide useful information on our earnings from ongoing operations.

Management and our board of directors use adjusted net income before income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity to assess our consolidated financial and operating performance. Management believes these measures are helpful in evaluating the operating performance of our ongoing operations and identifying trends in our performance, because they remove the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue in the future and certain other items from our operating results. Adjusted net income before income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity, however, should not be considered in isolation or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Adjusted net income before income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity do not reflect our cash expenditures or changes in our cash requirements for our working capital needs. In addition, our calculation of adjusted net income before income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity may differ from the adjusted net income before income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity, or analogous calculations of other companies in our industry, limiting their usefulness as a comparative measure.

The following ~~tables show~~table shows the reconciliation of ~~net income available to common stockholders to adjusted net income before income taxes and~~the numerator for adjusted pre-tax profit margin (in thousands, except percentages):

Three Months Ended

Six Months Ended

June 30,

June 30,


2020

2019

2020

2019

(unaudited)

Reconciliation of net income available to common stockholders to adjusted net income before income taxes and adjusted pre-tax profit margin:

Net income available to common stockholders

$
143,781

$
124,034

$
277,088

$
262,128

Amortization of debt discounts and issuance costs

10,233

8,712

20,761

17,252

Stock-based compensation

3,892

5,863

8,321

10,037

Provision for income taxes

36,305

32,231

70,826

69,081

Adjusted net income before income taxes

$
194,211

$
170,840

$
376,996

$
358,498

Total revenues

$
521,349

$
471,395

$
1,032,736

$
937,446

Adjusted pre-tax profit margin⁽¹⁾

37.3
%

36.2
%

36.5
%

38.2
%


	Three Months Ended
	March 31,
	2021			2020

	(unaudited)
Reconciliation of the numerator for adjusted pre-tax profit margin (net income available to common stockholders to adjusted net income before income taxes):
Net income available to common stockholders	$	80,248		$	133,307
Amortization of debt discounts and issuance costs		12,025			10,528
Stock-based compensation		5,408			4,429
Provision for income taxes		19,437			34,521
Adjusted net income before income taxes	$	117,118		$	182,785
Denominator for adjusted pre-tax profit margin:
Total revenues	$	474,827		$	511,387
Adjusted pre-tax profit margin^(a)		24.7	%		35.7	%

~~(1)~~(a)

Adjusted pre-tax profit margin is adjusted net income before income taxes divided by total revenues

The following table shows the reconciliation of ~~net income available to common stockholders to~~the numerator for adjusted diluted earnings per share before income taxes (in thousands, except share and per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,


2020

2019

2020

2019

(unaudited)


Reconciliation of net income available to common stockholders to adjusted diluted earnings per share before income taxes:

Net income available to common stockholders

$
143,781

$
124,034

$
277,088

$
262,128

Amortization of debt discounts and issuance costs

10,233

8,712

20,761

17,252

Stock-based compensation

3,892

5,863

8,321

10,037

Provision for income taxes

36,305

32,231

70,826

69,081

Adjusted net income before income taxes

$
194,211

$
170,840

$
376,996

$
358,498

Weighted-average diluted common shares outstanding

113,773,127

112,807,023

113,840,929

112,598,623

Adjusted diluted earnings per share before income taxes

$
1.71

$
1.51

$
3.31

$
3.18


	Three Months Ended March 31,
	2021		2020

	(unaudited)
Reconciliation of the numerator for adjusted diluted earnings per share (net income available to common stockholders to adjusted net income before income taxes):
Net income available to common stockholders	$	80,248	$	133,307
Amortization of debt discounts and issuance costs		12,025		10,528
Stock-based compensation		5,408		4,429
Provision for income taxes		19,437		34,521
Adjusted net income before income taxes	$	117,118	$	182,785
Denominator for adjusted diluted earnings per share:
Weighted-average diluted common shares outstanding		114,237,109		113,785,028
Adjusted diluted earnings per share before income taxes^(b)	$	1.03	$	1.61

(b)	Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes divided by weighted-average diluted common shares outstanding

The following table shows the reconciliation of ~~net income available to~~pre-tax return on common ~~stockholders~~equity to adjusted pre-tax return on common equity (in thousands, except percentages):

Trailing Twelve Months June 30,


2020

2019


(unaudited)

Reconciliation of net income available to common stockholders to adjusted pre-tax return on common equity:





Net income available to common stockholders

$
590,123

$
547,101

Amortization of debt discounts and issuance costs

40,200

33,926

Stock-based compensation

19,029

19,198

Provision for income taxes

150,309

135,518

Adjusted net income before income taxes

$
799,661

$
735,743

Common shareholders’ equity as of beginning of the period

$
5,049,884

$
4,337,842

Common shareholders’ equity as of end of the period

$
5,619,801

$
5,049,884

Average common shareholders’ equity

$
5,334,843

$
4,693,863

Adjusted pre-tax return on common equity

15.0
%

15.7
%


	Trailing Twelve Months
	March 31,
	2021			2020

	(unaudited)
Reconciliation of numerator for pre-tax return on common equity to adjusted pre-tax return on common equity:
Net income available to common stockholders	$	447,830		$	570,376
Amortization of debt discounts and issuance costs		44,522			38,679
Stock-based compensation		18,607			21,000
Provision for income taxes		115,330			146,235
Adjusted net income before income taxes	$	626,289		$	776,290

Reconciliation of denominator for pre-tax return on common equity to adjusted pre-tax return on common equity:
Common shareholders' equity as of beginning of the period	$	5,486,369		$	4,923,817
Common shareholders' equity as of end of the period	$	5,878,212		$	5,486,369
Average common shareholders' equity	$	5,682,291		$	5,205,093

Adjusted pre-tax return on common equity^(c)		11.0	%		14.9	%

(c)	Adjusted pre-tax return on common equity is adjusted net income before income taxes divided by average common shareholders’ equity

Three months ended ~~June 30, 2020,~~March 31, 2021, compared to the three months ended ~~June 30, 2019~~March 31, 2020

Rental revenue

As of ~~June 30, 2020,~~March 31, 2021, we owned ~~301~~342 aircraft with a net book value of ~~$19.1~~$20.8 billion and recorded ~~$497.9~~$468.1 million in rental revenue for the quarter then ended, which included ~~$8.1~~$2.4 million in amortization expense related to initial direct costs, ~~which is~~ net of overhaul revenue. In the prior year, as of ~~June 30, 2019,~~March 31, 2020, we owned ~~297~~300 aircraft with a net book value of ~~$17.8~~$19.2 billion and recorded ~~$463.9~~$496.7 million in rental revenue for the quarter ended ~~June 30, 2019,~~March 31, 2020, which included ~~$2.1~~$5.5 million in amortization expense related to initial direct costs, ~~which is~~ net of overhaul revenue. ~~This increase~~Despite the growth in our fleet, our rental revenue for the quarter ended March 31, 2021 decreased as compared to the prior year due to $48.7 million of rental revenue we were not able to recognize because lease receivables exceeded the lease security package held and collection was ~~principally driven by the continued growth~~not reasonably assured for certain of our leases. Aircraft on lease with these lessees represented approximately 15.3% of our fleet by net book value as ~~compared to prior year.~~of March 31, 2021. In addition, we entered into lease restructurings, which typically included lease extensions, that resulted in a decrease of approximately $37.0 million in revenue for the quarter ended March 31, 2021.

Aircraft sales, trading and other revenue

Aircraft sales, trading and other revenue totaled ~~$23.5~~$6.7 million for the three months ended ~~June 30, 2020 compared to $7.5~~March 31, 2021. Aircraft sales, trading and other revenue totaled $14.7 million for the three months ended ~~June 30, 2019. During the quarter ended June 30,~~March 31, 2020, ~~we recorded $4.9~~of which $1.6 million in gains ~~from~~was related to the sale of ~~four~~three aircraft from our held for sale portfolio and ~~$13.6~~$5.9 million in other revenue ~~related to~~from the ~~repurchase~~forfeiture of ~~$185.2 million in aggregate principal of our Floating Rate Medium-Term Notes due 2021. During the quarter ended June 30,~~

2019, we did not sell any aircraft from our operating lease portfolio. As noted above, we expect the COVID-19 pandemic to have an adverse impact on demand for used aircraft and that we will sell fewer used aircraft in 2020 than we initially planned to sell and it is unclear what demand for used aircraft will be in 2021.security deposits.

Interest expense

Interest expense totaled ~~$112.9~~$130.0 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$105.5~~$118.1 million for the three months ended ~~June 30, 2019.~~March 31, 2020. The increase was primarily due to an increase in our aggregate debt balance driven by the growth of our fleet and the increase in our liquidity position, partially offset by a decrease in our composite interest rate. We ended the quarter with $7.5 billion in available liquidity. We expect that our interest expense will increase as our average debt balance outstanding continues to increase. Interest expense will also be impacted by changes in our composite cost of funds.

Depreciation expense

We recorded ~~$194.0~~$209.0 million in depreciation expense of flight equipment for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$171.7~~$188.9 million for the three months ended ~~June 30, 2019.~~March 31, 2020. The increase in depreciation expense for the three months ended ~~June 30, 2020,~~March 31, 2021, compared to the three months ended ~~June 30, 2019,~~March 31, 2020, is primarily attributable to the acquisition of additional aircraft in our operating fleet during the last twelve months.

Selling, general and administrative expenses

We recorded selling, general and administrative expenses of ~~$26.6~~$26.9 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$27.8~~$28.3 million for the three months ended ~~June 30, 2019.~~March 31, 2020. Selling, general and administrative expense as a percentage of total revenue ~~decreased~~increased to ~~5.1%~~5.7% for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~5.9%~~5.5% for the three months ended ~~June 30, 2019. As we continue to add new aircraft to our portfolio, we expect over the long-term, selling, general and administrative expense to decrease as a percentage of our revenue.~~March 31, 2020.

Taxes

The effective tax rate was ~~19.7%~~18.8% and 20.1% for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Changes in the tax rate were primarily driven by variances in permanent items.

Net income available to common stockholders

For the three months ended ~~June 30, 2020,~~March 31, 2021, we reported consolidated net income available to common stockholders of ~~$143.8~~$80.2 million, or ~~$1.26~~$0.70 per diluted share, compared to a consolidated net income available to common stockholders of ~~$124.0~~$133.3 million, or ~~$1.10~~$1.17 per diluted share, for the three months ended ~~June 30, 2019. Net income available to common stockholders increased in the second quarter of 2020 as compared to 2019, primarily due to~~March 31, 2020. Despite the continued growth of our fleet, our net income available to common stockholders decreased for the first quarter of 2021 as compared to the first quarter of 2020, due to the decrease in our revenues as described above and an increase in depreciation and interest expense from the growth of our ~~aircraft sales, trading~~fleet, partially offset by a decrease in selling, general and ~~other activity.~~administrative expenses.

Adjusted net income before income taxes

For the three months ended ~~June 30, 2020,~~March 31, 2021, we recorded adjusted net income before income taxes of ~~$194.2~~$117.1 million, or ~~$1.71~~$1.03 per diluted share, compared to an adjusted net income before income taxes of ~~$170.8~~$182.8 million, or ~~$1.51~~$1.61 per diluted share, for the three months ended ~~June 30, 2019. Our adjusted net income before income taxes increased primarily due to the continued growth of our fleet and an increase in our aircraft sales, trading and other activity.~~

March 31, 2020. Adjusted net income before income taxes ~~and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by GAAP. See Note 1 under~~decreased for the ~~“Results of Operations” table above for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes~~first quarter 2021 as ~~non-GAAP measures and reconciliation of these measures to net income available to common stockholders.~~

~~Six months ended June 30, 2020,~~ compared to the ~~six months ended June 30, 2019~~

~~Rental revenue~~

~~As of June 30,~~first quarter 2020, we owned 301 aircraft with a net book value of $19.1 billion and recorded $994.6 million in rental revenue for the six months then ended, $13.7 million in amortization expense related to initial direct costs, which is net of overhaul revenue. In the prior year, as of June 30, 2019, we owned 297 aircraft with a net book value of $17.8 billion and recorded $919.6 million in rental revenue for the six months then ended, which included overhaul revenue, net of amortization expense related to initial direct costs, of $15.9 million. This increase was principally driven by the continued growth of our fleet as compared to prior year.

~~Aircraft sales, trading and other revenue~~

Aircraft sales, trading and other revenue totaled $38.2 million for the six months ended June 30, 2020 compared to $17.8 million for the six months ended June 30, 2019. During the six months ended June 30, 2020, we recorded $6.5 million in gains from the sale of seven aircraft from our operating lease portfolio, $6.5 million in other revenue from the forfeiture of security deposits and $13.6 million in other revenue related to the repurchase of $185.2 million in aggregate principal of our Floating Rate Medium-Term Notes due 2021. During the six months ended June 30, 2019, we recorded $1.6 million in gains from the sale of six aircraft from our operating lease portfolio.

~~Interest expense~~

~~Interest expense totaled $231.0 million for the six months ended June 30, 2020 compared to $203.3 million for the six months ended June 30, 2019. The increase was primarily~~ due to ~~an increase in our aggregate debt balance, partially offset by~~ the decrease in our ~~composite interest rate. We expect that our interest expense will increase~~revenues as ~~our average debt balance outstanding continues to increase. Interest expense will also be impacted by changes in our composite cost of funds.~~

~~Depreciation expense~~

~~We recorded $382.9 million in depreciation expense of flight equipment for the six months ended June 30, 2020 compared to $331.2 million for the six months ended June 30, 2019. The~~described above and an increase in depreciation and interest expense ~~for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, is primarily attributable to the acquisition of additional aircraft during the last twelve months.~~

~~Selling, general and administrative expenses~~

~~We recorded~~partially offset by a decrease in selling, general and administrative expenses of $54.9 million for the six months ended June 30, 2020 compared to $57.5 million for the six months ended June 30, 2019. Selling, general and administrative expense as a percentage of total revenue decreased to 5.3% for the six months ended June 30, 2020 compared to 6.1% for the six months ended June 30, 2019. As we continue to add new aircraft to our portfolio, we expect over the long-term, selling, general and administrative expense to decrease as a percentage of our revenue.

~~Taxes~~

~~The effective tax rate was 19.9% and 20.6% for the six months ended June 30, 2020 and 2019, respectively. Changes in the tax rate were primarily driven by variances in permanent items.~~

~~Net income available to common stockholders~~

For the six months ended June 30, 2020, we reported consolidated net income available to common stockholders of $277.1 million, or $2.43 diluted share, compared to a consolidated net income available to common stockholders of $262.1 million, or $2.33 per diluted share, for the six months ended June 30, 2019. Net income available to common stockholders increased for the six months ended June 30, 2020 as compared to 2019, primarily due to the continued growth of our fleet and an increase in our aircraft sales, trading and other activity.

~~Adjusted net income before income taxes~~

For the six months ended June 30, 2020, we recorded adjusted net income before income taxes of $377.0 million, or $3.31 per diluted share, compared to an adjusted net income before income taxes of $358.5 million, or $3.18 per diluted share, for the six months ended June 30, 2019. Our adjusted net income before income taxes increased for the six months ended June 30, 2020 as compared to 2019, primarily due to the continued growth of our fleet and an increase in our aircraft sales, trading and other activity.expenses.

Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by GAAP. See Note 1 under the “Results of Operations” table above for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and reconciliation of these measures to net income available to common stockholders.

Contractual Obligations

Our contractual obligations as of ~~June 30, 2020,~~March 31, 2021, are as follows (in thousands):

2020

2021

2022

2023

2024

Thereafter

Total
Long-term debt obligations

$
295,789

$
1,948,697

$
2,730,561

$
2,502,123

$
1,544,791

$
5,786,910

$
14,808,871
Interest payments on debt outstanding⁽¹⁾

226,015

444,082

387,406

315,782

238,608

475,014

2,086,907
Purchase commitments⁽²⁾

2,025,283

4,564,159

5,712,095

6,534,093

4,508,101

2,840,517

26,184,248
Operating leases

3,461

7,062

6,509

6,391

4,548

33,058

61,029
Total

$
2,550,548

$
6,694,000

$
8,836,571

$
9,358,389

$
6,296,048

$
9,135,499

$
43,141,055


	2021		2022		2023		2024		2025		Thereafter		Total
Long-term debt obligations	$	806,903	$	2,763,882	$	2,490,951	$	2,293,665	$	2,313,889	$	5,673,021	$	16,342,311
Interest payments on debt outstanding⁽¹⁾		326,590		442,558		380,071		305,003		238,274		438,962		2,131,458
Purchase commitments^{(2) (3)}		5,203,345		5,274,025		4,856,491		4,624,159		1,973,066		1,341,255		23,272,341
Operating leases		5,733		6,654		6,471		4,630		7,622		25,559		56,669
Total	$	6,342,571	$	8,487,119	$	7,733,984	$	7,227,457	$	4,532,851	$	7,478,797	$	41,802,779

~~(1)Future interest payments on floating rate debt are estimated using floating rates in effect at June 30, 2020.~~

(1)	Future interest payments on floating rate debt are estimated using floating rates in effect at March 31, 2021.

(2)

Purchase commitments reflect our estimate of future Boeing and Airbus aircraft deliveries based on information currently available to us. The actual delivery dates of such aircraft and expected time for payment of such aircraft may differ from our estimates and could be further impacted by ongoing COVID-19 pandemic and the pace at which Boeing can deliver aircraft following the lifting of the 737 MAX grounding, among other

~~(2)~~Purchase commitments reflect our estimate of future Boeing and Airbus aircraft deliveries based on information currently available to us. The actual delivery dates of such aircraft and expected time for payment of such aircraft may differ from our estimates and could be further impacted by ongoing COVID-19 pandemic and the length of the 737 MAX grounding and the pace at which Boeing can deliver aircraft following the lifting of the 737 MAX grounding, among other factors. Purchase commitments include only the costs of aircraft in our committed order book and do not include costs of aircraft that we have the option to purchase or have the right to purchase through memorandums of understanding or letters of intent.

factors. Purchase commitments include only the costs of aircraft in our committed orderbook and do not include costs of aircraft that we have the option to purchase or have the right to purchase through memorandums of understanding or letters of intent.

(3)	Due to the expected aircraft delivery delays, we expect approximately $4.9 billion of our purchase commitments will be subject to cancellation, at our option, by the time of delivery.

The above table does not include any dividends we may pay on our ~~Series A Preferred Stock~~preferred stock or common stock.

Off-Balance Sheet Arrangements

We have not established any unconsolidated entities for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We have, however, from time to time established subsidiaries and created partnership arrangements or trusts for the purpose of leasing aircraft or facilitating borrowing arrangements, all of which are consolidated.

We have non-controlling interests in two investment funds in which we own 9.5% of the equity of each fund. We account for our interest in these funds under the equity method of accounting due to our level of influence and involvement in the funds. Also, we manage aircraft that we have sold through our Thunderbolt platform. In connection with the sale of these aircraft portfolios through our Thunderbolt platform, we hold non-controlling interests of approximately 5.0% in two entities. These investments are accounted for under the cost method of accounting.

Critical Accounting Policies

Our critical accounting policies reflecting management’s estimates and judgments are described in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. We have reviewed recently adopted accounting pronouncements and determined that the adoption of such pronouncements is not expected to have a material impact, if

any, on our Consolidated Financial Statements. Accordingly, there have been no material changes to critical accounting policies in the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.

Interest Rate Risk

The nature of our business exposes us to market risk arising from changes in interest rates. Changes, both increases and decreases, in our cost of borrowing, as reflected in our composite interest rate, directly impact our net income. Our lease rental stream is generally fixed over the life of our leases, whereas we have used floating-rate debt to finance a significant portion of our aircraft acquisitions. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had ~~$1.4~~$1.1 billion and ~~$1.6~~$1.2 billion in floating-rate debt outstanding, respectively. If interest rates increase, we would be obligated to make higher interest payments to our lenders. If we incur significant fixed-rate debt in the future, increased interest rates prevailing in the market at the time of the incurrence of such debt would also increase our interest expense. If our composite interest rate were to increase by 1.0%, we would expect to incur additional interest expense on our existing indebtedness of approximately ~~$13.6~~$11.1 million and ~~$15.9~~$11.7 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, each on an annualized basis, which would put downward pressure on our operating margins. Further, as of ~~June 30, 2020, 90.8%~~March 31, 2021, 93.2% of our total debt incurred interest at a fixed rate.

We also have interest rate risk on our forward lease placements. This is caused by us setting a fixed lease rate in advance of the delivery date of an aircraft. The delivery date is when a majority of the financing for an aircraft is arranged. We partially mitigate the risk of an increasing interest rate environment between the lease signing date and the delivery date of the aircraft by having interest rate adjusters in a majority of our forward lease contracts which would adjust the final lease rate upward if certain benchmark interest rates are higher at the time of delivery of the aircraft than at the lease signing date.

Foreign Exchange Rate Risk

We attempt to minimize currency and exchange risks by entering into aircraft purchase agreements and a majority of lease agreements and debt agreements with U.S. dollars as the designated payment currency. Thus, most of our revenue and expenses are denominated in U.S. dollars. Approximately ~~0.8%~~0.5% and ~~0.7%~~0.6% of our lease revenues were denominated in foreign currency as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. As our principal currency is the U.S. dollar, fluctuations in the U.S. dollar as compared to other major currencies should not have a significant impact on our future operating results.

In December 2019, we issued C$400.0 million in aggregate principal amount of 2.625% notes due 2024. We effectively hedged our foreign currency exposure on this transaction through a cross-currency swap that converts the borrowing rate to a fixed 2.535% U.S. dollar denominated rate. See Note 7 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the fair value of the swap.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”), and such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer (collectively, the “Certifying Officers”), as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the

desired control objectives as the Company’s controls are designed to do, and management necessarily was required to apply its judgment in evaluating the risk related to controls and procedures.

We have evaluated, under the supervision and with the participation of management, including the Certifying Officers, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of ~~June 30, 2020.~~March 31, 2021. Based on that evaluation, our Certifying Officers have concluded that our disclosure controls and procedures were effective at ~~June 30, 2020.~~March 31, 2021.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2020~~March 31, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation and claims incidental to the conduct of our business in the ordinary course. Our industry is also subject to scrutiny by government regulators, which could result in enforcement proceedings or litigation related to regulatory compliance matters. We are not presently a party to any enforcement proceedings or litigation related to regulatory compliance matters or material legal proceedings. We maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards.

ITEM 1A. RISK FACTORS

There have been no material changes in our risk factors from those discussed under “Part I—Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2019 and in “Part II—Item 1A. Risk Factors,” in our Quarterly Report on Form 10-Q for the quarter ended March 31,~~ 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit
Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

3.1

Restated Certificate of Incorporation of Air Lease Corporation

S-1

333-171734

3.1

January 14, 2011

3.2

Fourth Amended and Restated Bylaws of Air Lease Corporation.

8-K

001-35121

3.1

March 27, 2018

3.3

Certificate of Designations with respect to the 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, of Air Lease Corporation, dated March 4, 2019, filed with the Secretary of State of Delaware and effective on March 4, 2019.

8-A

001-35121

3.2

March 4, 2019

4.1

Description of Capital Stock

10-K

001-35121

4.1

February 14, 2020

10.1

Seventh Amendment to Amended and Restated Warehouse Loan Agreement, dated as of June 19, 2020, among ALC Warehouse Borrower, LLC, as Borrower, the Lenders from time to time party hereto, and Commonwealth Bank of Australia, New York Branch, as Agent

Filed herewith

10.2†

Amendment No. 14 to the A350XWB Family Purchase Agreement, dated June 30, 2020, by and between Air Lease Corporation and Airbus S.A.S.

Filed herewith

10.3†

Amendment No. 1 to Agreement, dated June 14, 2020, between Airbus S.A.S. and Air Lease Corporation

Filed herewith

10.4†

Amendment No. 10 to the A330-900 NEO Purchase Agreement, dated June 14, 2020, between Air Lease Corporation and Airbus S.A.S.

Filed herewith

10.5†

Amendment No. 26 to A320 NEO Family Purchase Agreement, dated April 7, 2020, by and between Air Lease Corporation and Airbus S.A.S.

Filed herewith

31.1

Certification of the Chief Executive Officer and President Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

31.2

Certification of the Executive Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.1

Certification of the Chief Executive Officer and President Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

Furnished herewith


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date

3.1	Restated Certificate of Incorporation of Air Lease Corporation	S-1	333-171734	3.1	January 14, 2011

3.2	Fourth Amended and Restated Bylaws of Air Lease Corporation	8-K	001-35121	3.1	March 27, 2018

3.3	Certificate of Designations with respect to the 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, of Air Lease Corporation, dated March 4, 2019, filed with the Secretary of State of Delaware and effective on March 4, 2019.	8-A	001-35121	3.2	March 4, 2019

3.4	Certificate of Designations with respect to the 4.650% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B, dated February 26, 2021, filed with the Secretary of State of Delaware and effective on February 26, 2021.	8-K	001-35121	3.1	March 2, 2021

4.1	Description of Capital Stock				Filed herewith

10.1	New Lender Supplement, dated February 2, 2021, to the Second Amended and Restated Credit Agreement, dated as of May 5, 2014, among Air Lease Corporation, as Borrower, the several lenders from time to time parties thereto, and JP Morgan Chase Bank, N.A., as Administrative Agent.	10-K	001-35121	10.31	February 22, 2021

10.2	Sixth Amendment and Extension Agreement, dated April 29, 2021, to the Second Amended and Restated Credit Agreement, dated as of May 5, 2014 among Air Lease Corporation, as Borrower, the several lenders from time to time parties thereto, and JP Morgan Chase Bank, N.A., as Administrative Agent.	8-K	001-35121	10.1	April 30, 2021

31.1	Certification of the Chief Executive Officer and President Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				Filed herewith

31.2	Certification of the Executive Vice President and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				Filed herewith

32.1	Certification of the Chief Executive Officer and President Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).				Furnished herewith

32.2	Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).				Furnished herewith

3735


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date

~~32.2~~	Certification of the Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).				~~Furnished herewith~~

101.INS	XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

104	The cover page from Air Lease Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL and contained in Exhibit 101

†~~Portions of the referenced exhibit have been omitted pursuant to Item 601(b) of Regulation S-K because it (i) is not material and (ii) would be competitively harmful if publicly disclosed.~~

3836

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AIR LEASE CORPORATION

~~August~~May 6, ~~2020~~2021	/s/ John L. Plueger
	John L. Plueger
	Chief Executive Officer and President
	(Principal Executive Officer)

~~August~~May 6, ~~2020~~2021	/s/ Gregory B. Willis
	Gregory B. Willis
	Executive Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

3937



	Stock Options Exercisable
	and Vested
		Weighted-
		Average
	Number of	Remaining Life
Range of exercise prices	Shares	(in years)
$20.00	1,352	0.11
$28.80	120,000	0.82
$20.00 - $28.80	121,352	0.81


	Trailing Twelve Months June 30,
	2020			2019

	(unaudited)
Reconciliation of net income available to common stockholders to adjusted pre-tax return on common equity:
Net income available to common stockholders	$	590,123		$	547,101
Amortization of debt discounts and issuance costs		40,200			33,926
Stock-based compensation		19,029			19,198
Provision for income taxes		150,309			135,518
Adjusted net income before income taxes	$	799,661		$	735,743

Common shareholders’ equity as of beginning of the period	$	5,049,884		$	4,337,842
Common shareholders’ equity as of end of the period	$	5,619,801		$	5,049,884
Average common shareholders’ equity	$	5,334,843		$	4,693,863

Adjusted pre-tax return on common equity		15.0	%		15.7	%