AL - Earnings call transcript Q4 2018

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Operator

Good day ladies and gentlemen. And welcome to Air Lease’s Fourth Quarter 2018 Earnings Conference Call. At this time all lines are in a listen-only mode. Later there will be a question-and-answer session, and instructions will be given at that time. [Operator Instructions] And as a reminder, today’s call is being recorded for replay purposes. hand Investor over Relations. to DePalma, Mary like of Head now the to conference Liz I’d Please ahead. go

Mary Liz DePalma

copy of Thank you. call. Hello, website. this Corporation’s Investors XXXX, This Liz fourth XX, everyone. and afternoon our call And this welcome and DePalma of our session. website the At end recorded earnings our conference Officer release participants to XXXX will of www.airleasecorp.com. Chairman; call, by At year Steve February is Thursday, and and available mode. Earlier Q&A our the Officer. XXXX Chief Executive are am Executive and listen-only fourth of and Willis, given all end and this published and earnings on year at quarter I today’s John This webcast today Hazy, conclusion conference A section Plueger, be Mary our instructions quarter our Greg time the is results. replay Financial webcast today President; call joined will being Air for is Lease the Chief in available Executive our be for President on we Vice

answers future performance, company’s for items. future statements operations that forward-looking and operating the filings stock-based differ and results expectations. future description to begin, that of we obligation note information assumes information risk expenses, or refer without and materially of management’s cause statements including forward-looking Securities results. future revenues, more Lease Commission and update as represent XXXX. estimates statements results These These affect a questions includes, our our Litigation speak only limitation, expense Reform to new as regarding or actual in this today may of estimates any to income factors performance Securities could statements our and no the Exchange light to involve compensation expense and events. projections Air other that Private of any the your Please detailed certain Corporation and please call, conference certain from statements within Before risks with the of to are in meaning Act. This XX, uncertainties February

financial will income addition, income diluted the earnings taxes, on equity call measures. adjusted In share taxes pretax we using as be measures such and return during before per certain before non-GAAP income are net adjusted adjusted

of Press I of be release both website now today. Plueger. found to description reasons and is Our our of in Investors utilizing at www.airleasecorp.com. can them the This would section well issued these our not to call conference President, GAAP turn the be reconciliation permitted. call recording over to and can measures, definition XX-K as of release earnings non-GAAP our in CEO and for as measures corresponding like our our John and found this Unauthorized

John Plueger

all Thanks, Mary and happy you I enjoyed for another Lease quarter Liz. Well, good you to afternoon report thank of Air us. to year. good that and am joining

$X.XX. share we quarter, the For diluted fourth per of recorded earnings

strong remained last Our quarter and revenues year’s XX% metrics portfolio consistent. and were fourth over up our

at of Our $XX.X balance end owned the to XXX sheet grew aircraft with billion year. the

and quarter two buyers. the aircraft, to Thunderbolt our five II, new and book third-party During sold Capital Blackbird of from took XX we order aircraft II one aircraft delivery two to

we aircraft half Airbus, first the One will continue slip which this are from scheduled experiencing anticipate did into book XXXX. we order quarter delays QX of as delivery fourth still our of year through

notes and Thunderbolt twin-aisle busy customer significant margin Air managed lease that II Boeing highlight was debt successful $X.XX, including XXX at For truly of single unsecured management our you, a a pre-tax year announced closing our aircraft per ALC for productive return midlife operating earnings markets new senior equity which of Farnborough pre-tax share year, It cash aircraft success full billion of of XXXX, and and the to aircraft diluted considerable on a order. highly unsecured we billion the we and platform. with now facilities course a XX.X%, XX.X% achieved Show, $X.XX order will our in expanding robust placements issuing on stands and base, $X the ever-expanding capital and with in from bank Steve and owned, flow.

order lease no of XXXX the change have long-term our We placed through forward with good pace to-date placements. on XX% in leases book of

placement As progress, have in with $XX a almost ALC committed continues our significant billion forward to result total of visibility rentals.

already foremost, for with ALC high of and we looking side Well, funded combination aircraft markets so with are sales. growth operating That XXXX and progress senior be prudent how XXXX far? will behind will funding long-term liquidity, XXXX be profitable which plan. cash of because delivering bank under lease markets a XX and are aircraft Greg is notes unsecured excited, made our debt the with first will a access contracts. on So and have expanding us, flow, year by including capital capital growth you further all the issuance, we our on review

strong. On sales demand the side, aircraft from buyers remains

we For of with significant buyers, a there, potential beginning of number the have reached to example, most out very met us. whom qualified since of

and and concentration. as summary, us we remain work the our sales we have Capital adjunct say they our not joint ongoing. that and ahead dependent as investment our financial to ratings. sales be allows quarter fire diversified it relates Furthermore, for avenue targets me arise to Thunderbolt II We capital suffice In such an is us any regards said diligent remind or also aircraft another ABS told that channels the without with that market. to you management us contemplating Blackbird provide Having will as grade in key and sacrifice let structure all you for venture provides financing on the achieved ongoing that customer were that, on of we to base last transaction growth of take be to individual advantage transactions and opportunistic of may

remains of global marketplace of growth overall global do Second, fueled economic demand passenger or We growth looking robust demand lease is replacement slowing continued that at and our the for aging impacting airline potential of by any aircraft. aircraft. see not XXXX, signs

made what market placements Remember the will China several players you have year remain We see our highly in lease our a has aircraft Yes, major as get and you rate you itself case versus now rational aircraft from just see rate for is metric leasing remember order progress the function this press what as our not and a releases. to lease economic continue from and competitors including the competitive still good on is years this is scale base lease versus the element and rate factor in lease a evolving lease rate advantage. see lease We key of the and believe Also large fulfillment cost gives our but been key our competitive order is is we the consistent. a you cost only a book transaction. key us that book being disciplined. metrics that

this change conditions economic aircraft important continue return we example For value disciplined may are remain total to and also the area. in in equation the of the and

entrants have sale-leaseback As and signs the we not now. new leasing from is slowing for market more China over-saturated we significant over believe showing really in a space we well predicted, seen any the year of

control and an not means the in sale-leaseback which positions new we our ALC order you that player remind me basis still short in book model that a market remain aircraft supply. overall the is Let on

on we XXXX, as further the remains seen insolvency have Third airline year for where and positive lease airline as Germania global filing. for will there exposure health failures our ALC example with this no be of no aircraft customers overall. had Yes, that with

to in continues history, to expansion forward. view and bankruptcies of business evolve airline model, their airliner cost ultra continue to their niche, large small determine landscape and cost back is almost see the carriers. primarily we with strength. Looking same The and low and every year Airlines low looking the that the need

Some risk task, practices key a brings in fail management to in ALC place. this prudent which has point. me

each placing with and built experience. a airline from on of views is aircraft constructed Our is decades specific how lease

delivered of run your aircraft, elsewhere. on in important aircraft modern Germany picking today were quality the problems have security into Brazil, rather primary risk which in industrial HR always is don’t we able we maintenance but get and We we airlines perfect, protect evolve no it the mitigating at but four in young Denmark Internet with and the lease our have as do the aircraft do Airways, there deposits widely business I earlier as several As distributed Jet we watchful remain headlines we areas. Norwegian reserves. risk as existing far none none we no averages to Fourth, most world. in stated have we as biggest Avianca mentioned before Where last year commitments such the

problems new and industrial generation stabilization of OEMs. recovery Airbus the overall rates technical production the Specifically, of engine

there and impact customers. We continue assessor prior continue engine to recently which gearbox and to have fan the Airbus other issues receive turbo in our been delay notices from some

these supply quite the your we are at aircraft that the with Egypt and issues absorption aircraft time or the all programs Airbus NMA for place to potential decisions products still new we evaluate rates. new evaluate Series we be production behind The for these the XLR Airbus. these of XXXX, new are industrial around aircraft marketplace about that to While and fully continues end made the size of getting saying types. the recovery Airbus arms continues of believe by both concerned as oil and ongoing that continue to AXXX and the the just to and requirements marketplace. and plan us. to now has merits ALC and these global C fronts across and Boeing global in does stated in these dynamic the Boeing potential remain and fall their market have short on Boeing XXX And by problems Fifth, work Airbus of bring in chain ALC program single There we key role we for programs, finally lower some on ramp-up specifically

decisions studying reached have We closely. no we yet, are but

team by here work thanking Lease Air of award-winning for many and at Let me XXXX. awards correct. for year is close award-winning received another our We best-in-class

well, partners, in for their As to continued investors Board venture customers financiers, a our our and of and special Corporation. joint suppliers, Directors, Air Lease belief thanks support

to Executive provide turn our now color. commentary Let to Hazy, Steve Steve? me over his Chairman, and this

Steve Hazy

John. Thanks,

as dedication I any was pleased the thank like differentiate extremely we are their all in you typical further professionalism that the as need trade run and volatility item went our for of questions all to these saw global concerns We team revenue various an fourth too satisfy I new ALC with the in XXXX air results needs interesting Lease growth full patient in factors for low and growth, with to difficulty. the were rise transport headlines. The Air We well driving some the and aircraft airlines and replacement the one do we Despite along airlines year rates not traffic headlines reported interest as on of you year The and passenger with grabbing to and up with industry. attention items prices, need tell oil of X.X% quarter air International kilometers saw important into for continued XXXX, XXXX continue industry-wide service worldwide. would in prevailed. XX%. which to the passenger

had about forecasting of X%. I in RPK a ahead, XXXX growth Looking

air the industry travel with fleet is continue become is regions who decades and strategically all in you middle someone for expansion As craft operations. plans growth in that been Lease I impressive Air expand as that this and five at look mass economies can the myriad a help transportation diligently room to working additional tell airline as of former further mature to and really world’s world has classes for our their has modernize customers their demonstrates grow. they to been

deliveries We few just over multiple last have achieved months. a the number of

widebody in Airport For example XXX-X first aircraft an first delivered neo TLP delivered our you on Taiwan. in to December go. XXXXXX two area We we the anyway aircraft

the which will first the Boeing the Max Air to operated to New by Globas SX narrowbody delivered Airlines. unit be AXXX we Airlines XXX Zealand For aircraft Neo first

take Airways success in came airline in specific The the Pacific being regions at a Max examples these the new to This to and the spring are in of first aircraft to making and airline types making South forefront XXX aircraft new few We Aer of them the the AXXXneo customers our so. the eight LR are delivering introducing in that just long operator or first the Airways Lingus. first to region. -X operator XXX Max aircraft of range Caribbean of Boeing doing Max premier we aircraft Max first pride the nine

Astana. LRS new LRs the Air The of AXXXnew first AXXX and four to of six to Arabia first

we AXXXnew leases Airline with signed LR Additionally, Scandinavian the first SAS three new System. just

service long-time two placements the end past aircraft XX placement At we important a new Airbus we the Over placements Indian India full both also have the narrowbody of written off meaningful in between Tata customer we announced airline and our months, as joint with and November very, not customers. a new this airlines. We and very Group to venture a about Singapore selective but have market. very remain India announced of in Estrada new

a in and circumstances, aircraft has to success year placement airline. is run which Airlines a IATA, domestic them to Air India’s of fourth domestic growth a role but As it the and Airlines with eight Vietnam ultimately first and carrier one the we support we will delivering helping their According to quality relationship the of us relationship in any an with them for rate quarter during positioning market what we will Lease. in full fastest well ALC we the spring Airlines. be will this Then financed feel Airlines row routes. Tata XXX-XX from important of and evaluate airline well Boeing of be for well many growing also the recorded integral international instrumental years Group fastest two-decade AXXXneo for Vietnam India successful has India This delivered airlines in Vietnam operating new with and the AXXXneo Asia. placements plans in that domestic both Indian will incredible XX that were of XX%. first to fleet as ahead design aircraft the Airlines expertise we footprints played to to regional come growth routes that Vietnam Singapore continue be the these for important opportunities almost January, as allow

peer in new coming more deliveries the four airline three weeks. XXXnew to half Portugal XXXX of AXXX have We first peer customers and with the starting in

the as you see our find airline diligently long-term our the team that believe effort. can to focus relentlessly we airlines credit with We on deals So quality. to continues work will succeed with right

macro very the think headlines, be factors I important it out many point create impact or to that whether it’s oil of exchange that movements. foreign and prices airline

it changing customers the can provide operating do For example, necessarily nor value lessor, directly change a support and to the of not aircraft impact environment. adjusted or performance the they we does our as profitability to

after As we extremely where we we and fact move economically when rates situation consequences. reserves negative security John could ourselves, stranger mentioned justifiable are no cash are unfolding deposits and earlier, protecting the failures vigilant, norm to is quickly airline that industry remain have We and year operate lease that we in adequately the feel year. with an

last during to years. our nine sizes credit say a repeat XXX As XXXX proud are of we that all in result, failures the zero taken born loss over I zero, ALC company despite airline was has since

Our of regions of large or deliveries industry’s no within total are XXXX. with X% there needed do one and aircraft can news $XX capital lease via the feel billion we of requirement transact is XXXX industry achieved $XXX order aircraft. book billion The airlines the our where through that modern we that represents success to fund long-term not between quite be only in on our roughly

testify differentiate selective stands less extremely especially -- the be periods. opportunistic over December in call airline I deploying financial among sale ALC’s on for been the the on out an coming should the Greg continue from customers the allow have to XXXX. players to opportunity have financing its update CFO, sale-leaseback which And We provide strategically. these aircraft to to who on ALC Willis competition, customers ended ALC market to capital in turn XX, the that, our placements that lessors will our to with activities the can and and quarter performance

Greg Willis

you, Thank Steve.

full results. As year quarter mentioned and great recorded earlier another we

our our driven by portfolio term portfolio and metrics of largely Our average in all results net age fleet, remaining remaining lease were growth yield our constant. key with

$XXX almost For and of activities. million sales year-over-year revenues up generated of $XX aircraft XXXX, including fourth million other XX% trading approximately quarter and rentals of of million, ALC the $XXX

the in As $XXX included John proceeds approximately million is and representing sales aircraft, new aircraft of on of $X training purchase noted, $XXX our other investment management fleet million $X aircraft activity XX and million of and included of million, of gains sales fees sales.

year-over-year, high rate XX expenses, which over the the our primarily primarily in due as the the to prevailing rise SG&A you attributable increased revenues, currently the to of compared Turning balances growth last only approximately expense X.X% a track interest XX% fleet average very revenues quarter of to increased composite our portfolio. over to see This months. our the continues that rise stands debt, which level year. interest basis and is maintaining debt last last X.X% XX for Despite depreciation in growth our year, drives at rates Year-over-year us our will fixed fourth of the fleet. in of points rate to of represented of

We servicing this shareholder that time revenue over efficiency in growth. see with will continue $XX.X we expect total assets our We the driving value highly billion future. efficient and outpace to a SG& run growth into our employees now XX organization A

of effective Reform. of tax result as the benefit We with continue rate corporate Tax Reform the XXXX from to ALC effects a XX.X Tax of ended tax the through reduction rate. of an

representing $X.X to investments. expect XXXX in approximately billion aircraft to forward XX we deliver aircraft Looking

billion QX, QX QX, As $X.X in million QX. of today we are in billion expecting in $X.X and in $XXX billion $X.X

quarter. deliveries second expect of weighted first the the quarterly in the the half We towards

$X click and for anticipate works aircraft six have the be quarters volume with ALC year. occurring Thunderbolt for to second, been gain which those XXXX transferred on throughout into aircraft, most based rental the expect the majority we second the opportunities of that sales item billion sale and we transferred Currently, gains the in to II and aggressive to Thunderbolt evaluate in selling to aircraft the as timing to to this how be on line the Reynolds accounted will of line. of remaining by continues currently third counting be transferred aircraft that we fourth quarter. therefore on remaining not of you II, continue approximately the will of end We yet have of the anticipate opposed

there finalized August. that overall economics to in is we last our change the back However deal no

financing medium-term evaluate to ALC the global business, out to early unsecured of efficient to the at as October market year at billion found strong quarter to program, extremely in Moving significant financing our raise our bank of to provides most raising side fourth X.XX%. be end. cost $X.X seek from always that in In position of February issuance markets access, the maintain flexibility we ultimately regards and million January completed receptive ALC additional to capital for us the we ALC. allowing the in liquidity timing $XXX a our senior and which notes

is convertible We As maturity on cap until target December X.X of of we our to year and which this XXXX. investments that debt fluctuate million the XXXX. to with a this level debt target returning our and at aircraft note remind to above sales. times bond anticipate in largely maturing timing regularly the of while times, ended We and is on $XXX I not our target and not X.X X, X.X our equity would equity to is based XXXX you January our below is next today result times below slightly

the strategies again fixed also and XX% debt ratings benefiting three outlook. our XX% all year committed stable financing We ended and with the investment grade debt of rate unsecured remain from to

the in now investments plan estimate billion cash strength XXXX, the operating billion cash $X between the the the we $X aircraft operating billion to As from to be of the contractual debt our our company fleet. in of of and a flow. remainder for that we now nature by review up flow balance and funded for coming will aircraft growth financing with our billion my highlight of the of financing, end assets, $X to is I’d and like sales of growth This for and activities which $X.X year driven and provides year-over-year heart Mary of concludes it Liz. to the I our which the the of in is the turn visibility results back will path clear XX% shareholders. highly This

Mary Liz DePalma

remarks. Thanks, Greg. includes management’s This

the open For the to the each allowed will I’d session to the Q&A question-and-answer one and one question follow-up. call line participant hand be to over the to session. like operator

Operator

Stephens. Instructions] Our you. Vincent first comes Thank Caintic from question with [Operator

now Your open. line is

Vincent Caintic

and good guys. afternoon, Thanks, Hi.

question Just first we going XXXX. are a as broad overview into

trends to Just expect in can versus that you you wondering if different, XXXX? are we looking to have you XXXX be highlight any anything what seen

John Plueger

more But a although, to that can doesn’t any are ‘XX in we that it make interest Well, you that saw I continued in hawkish, has see just think that overall of a prepared from mean price currency the be growth stable much stability well hard into I think a rate going airline with Fed XXXX. our customers. remarks, very of different. outlook. now a have I appear would the in that appear hopefully, volatility some stable there well lot to more nobody fuel that was see as comment are fluctuation changed. that and going remarks interest as as to and it’s rates, tone mid-year guarantees, that forecast We predict, more in more as we and the seems a bit marketplace see, had we Look our outlook, but rising the our was overall we spike in might acceptance to I again, XXXX,

aspects going be can fundamentally no we than different any tell that negative have what we to that’s outlined. or real So we have

Vincent Caintic

-- on lease And raised. wondering the Thank Fed rates. expand has just also that But what so And see you. rates rising point stopped Okay. interest from -- rates about then has Fed Great. you rate, a to if had think, the rates you I funds? I of a lease recent thoughts but spread, on read funds, the debt that then of cost good very into was and cost impact issuance, your the XXXX -- on to views expect any

Steve Hazy

have Well, the always a been leasing stable sector. as interest sector, work said, environment financial rising its Ultimately, rate on last several the forward look factors placements consistent our does we rate any pretty through have over lease and way months.

be expect is period at to There do We factors, that over longer but a rate. rates day true. end interest there lag. a always is time, Yes, of of lease follow the the competitive a

any So I don’t see change.

Greg Willis

on be as lot like the then windows And to financing those be of several position there take be you access side and we in our in activity business saw a will to do we can maintain capital recognize advantage to We to opportunistic. we January. where a

think I the accessed loan market which approximately $XXX million fourth we my the XXX, prepared mentioned unsecured in took I and at term as back LIBOR quarter, plus markets take looking see forward in a deal remarks, down are present opportunistic those they of going us. themselves. to fantastic us to and for looking those to think are remain And you going -- you when advantages windows was I

Vincent Caintic

Great. so much Thanks Okay. guys.

John Plueger

Vincent. Thanks

Operator

Thank you.

Moshe with Suisse. next comes Our from line Credit the of question Orenbuch

open. Your line now is

Moshe Orenbuch

Great. Thanks.

bit at about I perhaps, the other Just fleet, think higher but rate in XXXX, maybe carrying little of the a obviously, and what metrics you about a do the of it? mean to terms what of not you the CapEx going that finance that for to a would you Greg surprise, and terms in might age in it amount talk and how are that think just did level being the talk end out growth year your if related metrics? about of in being

Greg Willis

We change, I in remaining. change a we in age deliveries in or are our lease looking portfolio our our yield, Okay. meaningful pipeline. don’t our average mean that don’t metrics, a terms see see at lease portfolio of the basically our term

financing well. as will as target, also are and there down outlook the X to there X.X for up we around to that On our go have years. Clearly but the target no we keeping change is many of side we

Steve Hazy

to to what this want the The only Greg is thing new longer. add are is lease said aircraft I on year, terms that the delivering

Moshe Orenbuch

Okay.

Steve Hazy

they be And will on aircraft the selling.

Moshe Orenbuch

Yeah.

Steve Hazy

our are most but leases running selling we obviously shorter of slightly much some XX have So have remaining. are used terms, generally new terms shorter aircraft lease years, the

Moshe Orenbuch

Steve. for in of remedies? Got you about return the of talked it. Any Thanks, delays or the any into receive little of the XXXX. you Thanks about a for some kind benefits deliveries that bit John continuing had And might potential kind discussion

John Plueger

have Airbus Look and obviously with No. we we both relationships huge Boeing.

So comment on to and eyes, focus I of aircraft. just say we seen don’t actually significant you as in the had impacts any is have we might with focused where which we specifics we company remedies own that of first this very deployed our have what at course, would look two CapEx delays the on delays, we us past the have have. in

they I continuing. are think the are but year, last overall delays less than they still were

a with plug it’s I in would am that customers have great take of and because Lease, whole were minimizing it’s the customers, try we problems other own our I are of May form, can not deal, getting of our great amount the care time aircraft We is but them they to July that. relief I and until second June say share our not -- biggest they help we is biggest our aircraft deal our know of that schedule customers miss to to get to our gap. extent this how an impact be the own, aspect with put more do to customers. impact engine of and might them companies about spent the or book, in But our our from notices. Air that summer of Frankly that’s problems and season. in to working year focus business. to hate get more and going that’s our from where the a important leases fleet trying any past every have X or own we as now to because and finding job and still they And are to with other trying think manufacturers, fill even frankly they concerned able extending customers We leasing their deal to we it

just say So concern biggest in I our the of taking remains care exercise would customers.

Moshe Orenbuch

Okay. Thanks very much.

Operator

Thank you.

question next with from Point. Compass Our comes Valentine Scott

now is line open. Your

Scott Valentine

afternoon. you Thank and good

you it’s question, capital market, of Just been think pushing I guess lot John there. know a you about down follow-up market talked sale leaseback a returns I

about a that very the competitive commented still or coming capital a there? are bit, does little mean You it environment you market there’s deteriorating seeing into

John Plueger

lease the as of just some that’s don’t buck rates, now aggressive much be a parts in sale just achievable. and to most and people returns capital of deployed have and not think, their you I market, Frankly, Yeah. leaseback have the robust the right have make the decent people to interest on spooked able have

I track it’s and think year the think, as leaseback did not we last that that takes can course the transaction, closely market we are year much I we see nature we frothiness so know we as we say in every sale us or wrong just So, listen we don’t just its keep don’t. But for to and possible before.

sale-leaseback their site. have think I it make and have do the reached think I you on we decisions people and market bottoms

Greg Willis

Yeah.

the assumptions we things a in of leasebacks The lessors to of assumptions. that we on made discipline low kind issues, technical Scott, that upfront, reserves, exercise type that of also rates justify is that is saw found the mathematically return of values unrealistic lessors not did lease residual other the engage deposits conditions sale do just the on we many on what kind we don’t and lot leaseback and sale of like maintenance

Scott Valentine

into spilling have the do weaker see used you demand aircraft any impact Okay. And for market? over market sale aircraft secondary the that a then just does in follow-up, used on leaseback values,

John Plueger

not used the sale to correlate aircraft do It’s market. leaseback whatsoever. -- suite segments new are two The in different not a market

Greg Willis

Yeah.

think I you a the have market. sales seen activity of in lot used

So seeing that I are spill type don’t over. you think of

John Plueger

five years, those to we three saying, years, eight come XXXX ‘XX, off extensions and aircraft or years where are look or we even coming leases, What old more XX continued in years Scott, to us have years. XXXX a would that are like to of four airlines we is say, extend lease

a the from XXXX. prices that now, We highs bit have moderated seeing on especially of since oil are their that lot a in right going

Scott Valentine

All right. very Thanks much.

John Plueger

welcome. are You

Greg Willis

Thanks Scott.

Operator

Thank you.

Michael next Bank. Deutsche from comes question Our Linenberg with

now open. is line Your

Michael Linenberg

Steve. India and Cape one in here. like are thankfully looks are the Hey, of out? either we Town. the Cape I a curious you your on a play thoughts maybe we in Town past the lesson both I John with upfront learn I at look watching couple we look seeing a that been in looks in at Brazil it and like you just in about here of big are When from of it does here, but going just testing we pretty -- guess, and situations, carrier that involved it what’s is picture jurisdictions kind have currently guys there that picture limitations not and those think am And some takeaways

John Plueger

Air Look have I I we relied never that will at guess the word. comment only is proper Lease

these what other all say and mitigation. we effectiveness Town, purely see just its ever a can on We trappings all see in securitization have point on never for rely I legal our ever and of but the jurisdictions. do risk never And especially you is you relied Cape the

If your you you homework. are done having to haven’t rely Cape Town on down to

Michael Linenberg

Okay.

Steve Hazy

much John, is am voice I opinion My to it. stronger, going but

Michael Linenberg

guys X, three some of a the noise we some back compliant gradual then saw when regulations more Do I XXXX, few with have look, either mean am similar think mandatory the are Steve and you ‘XXs, But rules I just back see in. That’s having that maybe know now. is impact the aircraft I make who that paying footprints some to limitation participate payments, aircraft course, over as I there it’s in it January carbon or we -- and my to know of going we reason but stage kick carbon years? on a few these for kiosk do limitations basis, significant see that up become I and put of curious the where we just implementation you high years fine. into and XXXX, that voluntary second, believe start bringing airlines some we into am went late you think next kick XXXX the fact this to And John has you think a when I of -- the think and effect, values [ph], a back I obviously, weren’t with as impact now is, was it’s older XXXX. environmental noise of offset. people more on on see

Steve Hazy

most friendly Mike, our aircraft. into environmentally of our youngest I asset think, putting strategy validates it and the

is regulations it seen limits. have age where We

than be older is airplane an if years it say, XX can’t countries imported. old, Some

and on seen We taxation that airlines. trend will imposed think continue. have impact the fees We of European

ourselves way the other airlines aged the not regulations. in type differentiate the that aircraft that airplanes are is by impacted particular and best that then I contract of redeploy the the of world some those regions So yet middle to of cost think offer to

John Plueger

generation Mike the AXXX. in MAXs, generation latest next you I most have the other mind XXX, at of Keep one the look the thought. that the aircraft neos, if modern the the

next the delivered If even small sheer you fraction of and fleet. the small that volume just it aircraft at look is and fraction over global a those of are five still years, the to-date quality

only that that point aircraft of that my So something. is that saying in isn’t any

are the XXX-XXX the of current AXXX even the the lose wonderful and these XXX, example, CEO, It AXXX tremendous amount and -- take value bread are will current going XXX worldwide, of aircraft aircraft CEO time… overnight. not to butter For a

Michael Linenberg

Right.

John Plueger

a amount and re-up global aircraft types for fleet so new long the … the time. replenish of to

to used the despite going So cetera that off drop cliff. are the regulations reality values et are is aircraft not the

Steve Hazy

production will way that now, am I what airplanes no the there XX,XXX be next Embraer. the five western are math years There built jets seven I the are Boeing, simple. in seats over seeing XXX that than at is Airbus, almost is mean years and new Michael speaks to rates There XX,XXX jest build. is less

will or be to freighters. You converted airplanes have several retire thousand

constraints. said So regardless is process these long-term as this regulatory of a John

Michael Linenberg

Appreciate All gentlemen. it. right. Okay. Thanks,

Steve Hazy

Mike. Thanks,

Operator

Kristine Our Lynch. of Bank next America question Merrill with comes Liwag from

now is open. line Your

Kristine Liwag

shift book looks discuss a you provide the exposure it you seen XX%. net seeing more and your on in as quarter the Steve, you Can of what’s activity percent you like China are end color and and from away of the John past at here? value is at China the have driving can the few years the we that lowest

John Plueger

Yeah.

-- over There Kristine. was past China a our I business the five think is it’s clear has been building shift seven away. no years, years. pretty This years, six

in had China going a bigger. continued our our simply from have areas, overall placements is other and look year. But business in you That us replacements of growing in we this see China product success this great well. fleet We will growing, is are

the reaction else strategy. years mapped result we anything anticipated just was years Our to exactly it’s five and balance it. It’s growth overall years our world. of to plan in is $XX be occurring sheet six we trade in getting plan time our and our to or not and looking our tensions going like fleet is our always reducing is was total of that year billion it knee-jerk this going at a of planning bigger a four China that It rather to forward as placements be and was out excess to as plan always over

Steve Hazy

Yeah.

say include if will future. to probably Kong you the that So hover foreseeable China Macau, fleet, range will so XX% of XX% for you see and continue and between our one-sixth around and we Hong somewhere Kristine in

Kristine Liwag

lease at your do XXXX, you there, that look you That’s have does signed contracts now placements by growth? the helpful. with to then like And net uptick high of see by in region for XXXX, expect pretty the value your the when where book look you end what

John Plueger

that be for not overall speaking and have it’s current in is have China. for we going today. XX% is to about from tremendously Generally Asia Well, talked think be different percentage I it’s going we to our XX%, what of XX%

have been areas are and then north little quite a to normally. of and us have for have nicely East has to going fall going other Europe XX% to going are which growing you Middle the are you You all

going it’s value. be our our net tremendous So to not today distribution in from book a diversity

Steve Hazy

Yeah.

a and because points You decimal few small a will see in deliveries. of new probably Caribbean pick Latin up America

For three in we South America. MAXs Caribbean Cayman Airways just we deliveries more have announced Airlines and transactions have example, some other four we new at and to

there. increase little a see we So

than Europe not will think our grow average, end will deviate the I faster year. it John very but where at the again said fleet was it from probably of total much as

John Plueger

U.S. US one up The aircraft U.S. the points. have and a Reform, so in may Tax content Benoit our and the we you Yeah. placed few more think of see percentage

for if full we year aircraft first the whether operator. of in Reform Just by way of place -- reminder the if it Tax place going to in the the service allows Airbus one it cost it’s or amount U.S. take us we in year

are can -- that of on that going to little and that tax is stimulus So we the we not math and that us see but quantum can extra gives bit for do growth. a the effect U.S., a you huge

Steve Hazy

point I customer from moving out think thing one last maybe individual though to regions to concentrations.

is from customer think our standard point average risk concentration below I a X%.

incredibly an very we do factors. airline prudently security both with strong diversified running very are so and customers we So

Kristine Liwag

one like in last one, be I in And there U.S. helpful. particularly were widebody global looks coming the if in-service placement mid-XXXXs a and fleet squeeze then could the That’s it work could we doing some the on

for and been Now hasn’t industry think big and of player business to airlines with your play also -- get think be that U.S. the of avenues a area part you would there? many think do could factor be very you replacement in model do to to for the for happen widebody change Do in you has a you U.S., that to the what an think that for what you you you capital. U.S. have have growth to growth a

Steve Hazy

with order XXX-Xs United all lot XXX-XXs. year widebody has lot American last passenger know, AXXX of and are have -Xs or you been AXXX-XXXs fleet XXX major orders to Airbus. aircraft know significant as Delta has and operators you both American, -Xs. as of and a AXXX-XXXs of United, for to has Well, and as XXXs Boeing, a Delta which placed up there has XXXs. replace placed the coming,

think few United a XXX-XXXER. get I still more

the Lease widebody ‘XX. on XXXX, So for I Air think see don’t of side opportunities topped on pretty actually widebody carriers a the their in U.S. ‘XX, the domestics. have ‘XX, lot orders nicely up I for

that’s emphasis we the on of be where U.S. will years. I our AXXX, in like XXX the will would next business aircraft MAX focus U.S. think I our AXXXneos, main say in couple single-aisle

John Plueger

comment, right make little the I a I is I look if think a a largest now been and slow. at have think, Kristine aisle made forward, you widebodies I might global will have your twin conference picture that

the replaced, For ‘XX example of end will Boeing and it’s sales, huge XXX-XXXERs remaining there -- slow be from market that. etcetera. AXXXs and and is replaced oldest day timeframe aircraft through the no the in be the XXXx cetera has any in will the the replacement at youngest like ‘XX et been the a XXX-XXXERs But secret the where AXXX-XXXX,

will see mentioned. a So our in in pickup that growth of just as large I retirement widebody think do the the a types I just you period widebodies the reflection largest simply of

Steve Hazy

as is still see being the international segment like British There’s most XXX activity that and widebody we the Asia Qantas in Airways our so, John airlines as active. on says,

Kristine Liwag

Great. Thank you guys.

Steve Hazy

welcome. You are

John Plueger

welcome. are You

Operator

you. Thank

from comes with Jamie of question Baker next Our JPMorgan. the line

is open. line now Your

Nish Mani

traffic mean the production and rates is Hey. noted strong Good are relates pickup is there this. how with you it on demand I with Airbus think little some This balance roughly could you remains airline I side guys. you Boeing a the dynamics, XXXX have as and but in bit was on market to and afternoon, comes side the kind Mani a the that bankruptcies that is about your of kind and wondering of supply if shutdowns, that obviously, supply demand comment for Nish into how in did ‘XX? factor view Jamie.

John Plueger

We think, Well, etcetera. rational rational overall believe still the yes. duopoly is, the answer -- is in I

constrained fully it, the sometimes don’t we shop because find own the increasing and they them at just getting concerned et Board. of across very MROs, it, the our delays is booked tough. and and aspects, even very In are airline remain we is to all other our engines we -- do We do in and delays but very, are have with customers cetera, out in find work very they sometimes business getting the rates chain However, seats. we supply in

get or our have and deliveries, new in in the it, aircraft but we an some short supply programs replace they engine, because of notices component Sometimes delays etcetera. widget is or because not

telling a just watch just deliveries. I hear lot the is things echo concerned we and in ability their am because our and do with of OEMs think and I remain supreme confidence there and with you themselves know vulnerability I So we day that this. see every customers of to our

group, people monitor brakes are lose in So and everywhere, monitor technical we availability the our we to have what [ph], and people wheels, seats, our and when could availabilities the Seattle which for get aircraft ground the on and management aircraft, to in whole materials an avionics, tires, all A change and B. everywhere supplies going from of gallies we

So all it’s I’d say be thing disruption. could a single is, and pretty tight any one

that Airbus. in have seen We

for saying time review. dunk not this -- not as so slam it’s our in am So look long it’s say -- we I a

Steve Hazy

step Jet we people those Well, and and all The watching transform thing the that ordered. other they these backlog question and positions. have of those Air like options. The the from other VHF buyers airlines Airways into Norwegian absorb planes Lion into are of the orders Will others. and of is some is can quality

something that’s unfolds, of monitor and XXXX as we pretty production between equilibrium closely. see very So, demand. situation But very, we solid

Nish Mani

topic. both Thank on and Okay. That’s helpful. just one you a thorough up And guys. unrelated follow very very kind of slightly

business durations are color in between In and there the you in duration, on years. of point potentially pull this spoke words of models? traditional carriers more and on taking shifts lease how the provide think kind of as differently lower a lease basis hub again? push the about and carriers cost low treated rates are longer thanks nominal and lease of up kind could few at past this that any mentioned duration to kind you relative You Is cycle lease uptick other

John Plueger

example. give Airbus extended. regulators Part of reason. will small It able to Boeing not is from the you maintenance been have longer that that a the been get the I intervals financial a have duration and is

eight check going of the years nine the from XXX now to MAX On heavy first instead XXX, is a years.

airframe So have for heavy the same thing gone on the XXX, intervals the longer. AXXX, maintenance

the with time. many lease due to So the match in that’s point check airlines maintenance at that of want the

Nish Mani

characterize wouldn’t fair check either lease component? maintenance not is it then had take that changed, So be are view, the intervals to duration probably your they economic the not if in

John Plueger

intervals. the the a to secret say is Well, alluded longer other But that is, part I and We happy lower, the price an that it lessors that’s companies earlier lease I longer towards possible, obviously, like would leasing we component, the case to it’s always take most we lowest trade course, the that. I just of rate do duration you think resets no think of request significant always maintenance and airline’s that all a that’s and would day along are lease, get and all bias so would. been to

Greg Willis

aircraft. got We XX-year Yeah. some on widebody leases

John Plueger

aircraft new etcetera, period for growing I supply you long if forward look these think then the nothing think have are factors just need etcetera. that other here to but really a take for these to of really is and time you days thing growing a I adding and quickly. good versus the of are secure rate especially at It’s duration, period a away Securing operator, forward LCC expanding if ULCC, and aircraft just do you was again -- There intervals an all time you risk. production longer rates the chain you or

Greg Willis

have future. shows the confidence more they in It also

Nish Mani

Right.

John Plueger

eight-year to economics up maintenance XX-year was ties an leases and that intervals. signed airline doing just deal Europe XX-year in with We with we leases traditionally again both did the for a and it and in

Nish Mani

Okay. That makes sense.

always As it. the I much would appreciate so thank you for time. guys

John Plueger

Okay. Thanks.

Operator

you. Thank

Sullivan Our Seaport Josh from of the question line Global. comes with next

Your line is now open.

Josh Sullivan

Hey. Good afternoon.

John Plueger

Josh. Hi,

Josh Sullivan

the on for it design I ends it final guess at might middle up make aircraft and portfolio market whatever thoughts like? for what attractive looking point, this of other make attractive more would the the What less what characteristics your

Steve Hazy

Well XXXX. Boeing this I Dennis in Muilenburg look pushed sort of off to think decision said believe earnings I call their the NMA, have they

the my indicated is one a obviously some key case decisions many there’s I There the engine prepared key we question it’s As is Look, remarks all. Boeing. of made. in interest The aircraft. business the for

the available example between gap cover they side today, and XXX that it, at the the on when and and twin-aisle is products covered. for single-aisle AXXXneo products you look On LR an the the Airbus can’t XLRneo AXXXNeo and hand neo the the argument other possibly that you a

is always it’s said, So think equity. tell think nothing you early that what an it’s more too so economic tell. it’s just too there which look of early What really have I is to units potential many aircraft the and we price we it’s will is -- the than -- to how

Some ULCC people for have that said be the this the could first case. aircraft twin-aisle the market, maybe

are world lot well, the availability around of long On That’s mean the other as looking how hand, you at do it. carriers wait for a major a of I matter the it.

close So, choice drives still their at fact more very they today, than gone it’s cost very with price is and yet business mean, the I everything. forward hasn’t anything a everything doesn’t unknown. but of Boeing that there potential are partners still and drives studying available mean very, aircraft lot

Josh Sullivan

you Thunderbolt. are may on one before hurdles Thunderbolt at this point? other just at What then be And looking another Okay. launching

John Plueger

of going I various think the agencies, together. running and bankers right we with bit to of the the the these math time portfolio rating optimizing now pull take a to are traps deals constituencies,

we portfolio the right Air So to optimize Lease going values put are forward. for trying next we be are what’s to optimizing fully in and those

Steve Hazy

looking and have a great optimism. whole to with forward dedicated team But are that to we we doing

Josh Sullivan

Okay. Great. you. Thank

Steve Hazy

you. Thank

Operator

Thank you.

comes Stanley. Our Rajeev with from next question Morgan Lalwani

is now open. line Your

Jonathan Morales

would resolved? the gentlemen. you quarter modify if and was there delays you it last Rajeev. some would if wondering Hi, as to come It’s are I then delays the and to wondering provided you for Jonathan actually I in delivery largely back on was relates the those Boeing impact, color

Steve Hazy

Yeah.

John Plueger

Yeah. shape. Boeing we good I in think are

Steve Hazy

Yeah. good. Very

John Plueger

quantitative of give any the so, I days will Airbus us for day, you on weeks data or changes think, delays to by be…

Steve Hazy

year. point months in months simply last think I bit they are earlier make do to less are year that they still commented to I still they probably three we are this and But year that delays far think little think is were the than happening are on we average, -- now. That’s so said trying coming. I last less four I are true. But delays magnitude

their it’s in -- are don’t it. confidence getting manager, yet. We delay notices Airbus plan. through We We think they and just working industrial are we it’s still are do working over have just

Greg Willis

XXXX. where we Right. of you by we terms remarks we aircraft quarter And through in give dollar value in expect investment went prepared of throughout my

that’s you today. pretty have today, the and was deliveries a should but I change, we that So of good -- see we a as plan think where a see have good it as of base obviously,

John Plueger

are both delivery the The on both the we The -- on pretty running MAX generally that’s time. AXXX, a well is the have XXX on the working where with XXX AXXXneo on issues schedule, we AXXX Yeah. and and Airbus daily but biggest basis. AXXXneos are and

Jonathan Morales

Great. And factor? order on Thanks what’s aircraft additional the book then, enemies relates for play level a a and at high there. the just as the stance color adding it potential the current to

John Plueger

just of the in company, added and primarily is we of aircraft Boeing with that for part our ongoing -- look the and XXXX added we the Well, significant MAXs single-aisle day-to-day middle a business. on order

that’s under the current We can’t in study. much have terms still no plans no we of -- technology very new there’s -- aircraft

the So at at this aircraft premature to type just point comment other point. on it’s any NMA this or

Jonathan Morales

Thanks. Got it. fair. That’s

Operator

you. back for That final closing it in would question remarks. Thank to to our DePalma like I Ms. queue. was turn

Mary Liz DePalma

look can disconnect much. very and of it Thank you with Thank the after speaking everyone. today conclusion to the our forward That’s James Okay. first the again now you you, lines. you we call for quarter.

Operator

Thank you. that today’s Ladies gentlemen, conclude and conference. does

You day. now disconnect. may wonderful Have a

Air Lease (AL) 21 Feb 192018 Q4 Earnings call transcript