AL - Earnings call transcript Q2 2022

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Operator

Good afternoon, and welcome to the Air Lease Q2 2022 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Jason Arnold, Head of Investor Relations. Please go ahead.

Jason Arnold

welcome Lease and XXXX Second everyone, Call. Earnings afternoon, to Corporation's Air Quarter Good Arnold, joined Chief and Steve Jason Financial our is This I'm and President Executive President; Greg Chief John Executive and Vice Hazy, this Chairman; Plueger, Officer our Executive Officer. and Willis, our by afternoon quarter Earlier second XXXX we today, our results. published Investors website at our copy our release earnings of of is section A available on the www.airleasecorp.com. be and available webcast and replay recorded Thursday, the This webcast call XXXX, will website. is being our conference for August on today, X, Instructions]. [Operator

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

return be can GAAP net our in the taxes, our earnings measures equity, certain which and non-GAAP the we pretax both them as This A utilizing such diluted found per XX-Q income measures. reconciliation are Investors adjusted release to these today. section reasons taxes as may we earnings found measures our and addition, Press of measures financial definition before income be share for well issued of description non-GAAP in www.airleasecorp.com. and In as on of corresponding before and adjusted discuss our can at adjusted website release

unauthorized John the our conference call to Plueger. As turn an would permitted. call Executive to a now recording I reminder, Officer not of the President, and is over Chief like

John Plueger

Well, last diluted during total ALC and Jason. that in rose thank us EPS for our I'm million generated up everyone, Good afternoon, $X.XX year, you the while joining per year-over-year. of revenue today. to pleased $XXX period relative share quarter, thanks, XX% report XX%

revenue growth of quarter X.X pandemic. We recognition benefited billion equipment. the Second restructuring of purchased fleet, aircraft, impact the cash adding performance primarily stemming from basis and deployed our new from approximately the of XX reduced

cash up wide-body in the continues demand for been we're to lease extend which has in relative the operating now. traffic Our of volume, that We meanwhile, second quarter a aircraft Commercial the strengthen. from rate to flow demand seeing with prior market, last the relative roughly with year, cash benefiting ended into collections to time uptick to XX% second is narrowed XX.X%. quarter the addition of utilization year. the And some improved international strong

and AXXXneo, more order now the are we passenger includes fact, AXXX which placed the the In than XXX. widebody our freighter XX% book, on and

placements with of strong well deliveries lease 'XX our overall of environment of demand ahead reflect of -- XX% expectations. placement XXXX and XX% through XX% with deliveries places the our placements XXXX placements Our book order in our with

X have years and had placements farther LR out pre-COVID. bodies AXXXneo, Some forward as of XLR our we out the now narrow XXXX, such the through than including versions,

is a to We engines also on lending values. and of with and We're aircraft twin-aisle order were a concerns Air supply for of a added of online rates the Reasons lift also new aircraft, and book. higher which recent X to for at over AXXX this we used future well support of interest single- allocate to replacement added to for XXXneo lease against aircraft include aircraft constraints AXXXs. our customer hedge our to new escalating and quarter Show, delays Pratt and an of announced market our rates, deliveries we placed large guidance. such, lease pace expirations new both desire face a for exceeded aircraft order current a & advance this Farnborough pleased chain At additional delivery extensions lead that lease secure prices As seeing order Whitney as on aircraft in to Farnborough, shortages. higher

deliveries Boeing and quarter our exceed Our MAX deliveries, to to this Airbus happened XX AXXX AXXXneo X.

enjoying lease chain the not resulting by Boeing this, and Now the in is forward supply MAX saying of ratio you're labor delivery Airbus I'm continuing a good aware, escalating and prediction with that said issues, placements. that, recovery and for making experiencing as and the deliveries MAX future, on rather just deliveries are Having neo delays.

be as will next delayed exceeding what likely accelerate. So challenges already of will likely likely further this further the experience well. quarter, was to of years, demand despite shortage continue exacerbate, post-pandemic of we several to to months and up Supply shaping narrow-body MAXs we commercial on continues for -- a couple chain continued to extend Airbus delays also and which aircraft our guidance XXX as deliveries will be our deliveries

the approved On side, the it resumption delivery understanding has been Boeing plan. But [indiscernible]. XXX the widebody the has Boeing's that our primary is FAA

their in XXX the particularly that We're freeze will delivery traffic. add for the seems to fleets, of and to much pleased XXX the to and airline very sight inventory, retain we aircraft end time MAX an time therefore, acceleration clear finally accumulated are in to to take taking to very our year. deliver taking customers the it only there of this estimate eager our it's given be XXXs end one the Boeing of Now XXX the international delivery like by

in billion factors, for our all these XXXX, total expect consistent guidance. we deliveries to about $X.X Given continue with billion to of prior $X.X

billion We aircraft third in investments subject, manufacturer to expect delays. the course, of quarter, of $X.X

sales somewhat targeting this year fleet On are second half to billion the of any this lease further prioritize and experience up subject second core year, the aircraft front, delivery $XXX consistently we in to we during growth half earnings. of dispositions of the might as we significant delays

much macro recovery offsetting currents are color while as sizable but recovery insurers provide continue able Similar losses on these in a share I on additional last to Lastly, progress global many we and claims. building these Asia, fleet. you. to our beyond June this to insurance from in want traffic update on summarize on submitted with we're will the factors matter, remain our out vigorously I to meaningful there our you over pursue time. momentum to We quarter, a point of cross update our provide environment, that, efforts to claims brief not big our picture, in recover claims now and with to want is aircraft the further tailwinds that To Steve Russian continued strength do source a complicated will

let commentary. his me who will turn additional over Steve? to provide So now the Steve, call

Steven Udvar-Hazy

to second quarter very you for results. and our all on thanks for John, of you much, call Thank being this

continue out added traffic air We see encouraged with traffic to just globally improvement numbers are sizable show up to expand meaningfully. I June total XX% volumes very today traffic year-over-year. to continued

this percentage a increases, of significant the most are rising For seeing year, it's XXX% markets year-over-year. international that been the largest

base, segments. also China one international it to of XXX%, has the though XXXX. in continues traffic International recover relative the largest last the any the by traffic been most being traffic The June out gain posted of Pacific just of from a and pandemic laggard Domestic large primary year. Asia very slowest most margin a regions. XXX% a for low improvement to to improve off of major market

XXXX recently, the continue major travel quickly not would close curves even outliers, stabilize Canada, India been in are major Travel XXXX Although constrain their cities. also these restrictions but in or their point the very many to Australia, matching to certain Brazil, even becoming in to continues routes like traffic international I markets volumes. cases, domestic relaxed now levels. that are traffic markets particularly and U.S., China traffic norm. domestic domestic routes and some have fortunately trunk between exceed countries, on out some And

war Forward face to in bookings, earlier remain unfortunate elevated meanwhile, rising Ukraine. interest this of slowing continued to signs compared improvement as conditions year. the and has inflation, global macroeconomic rates, Traffic

profit challenges -- stronger dollar U.S. while not have airline there and rates as of global were global tailwinds. fuel the margins. macroeconomic these emerged interest They cost, rising supportive So are previously were traffic and

to recovery, still very, like spend system counterbalance the headwinds. effect minutes traffic is return has returning magnitude constraints. One the this of is ATC and The of demand airport those turned I'd offering Some very pre-pandemic few and underlying the air headwinds. a discussing of control market global into strong strong demand to side to a to

were air of new particularly expenses the headlines, point flight all but both we on is there's season meaningful basis. very ahead issues Clearly, At insufficient or in sitting placing this to experience, effectively of generated as rising traffic for not Looking Air ramp global also with pattern widely improvement themselves good what Hemisphere, happens been cancellations need by for traffic the we've delays but aircraft airlines and resulting engines how reminder to airports our fuel on costing during at disputes, or activity. capacity aircraft rapidly impacted summer Lease, recent back recovery existing emissions airline additional both of put air cancellations clearances in if millions travel-heavy volumes highly holding and destination. about This Northern low are dollars and burner. increasing low-hanging ignored new improve tens and in emissions a that priority. forced and modernization and these of of of many remain been in have much handle shortages targeting altitude here holds period passenger labor when the the airlines book news aircraft. reduced due labor are for operations, Europe, used airline an aircraft global aircraft have of is are in running a on and to traffic control the in order the return by time being cost systems airports by airlines meanwhile, these planning caused control a carbon of sufficiently traffic into departure of and in as volume, unprepared exponentially. Many immediate caused as active and efficient demand focus Airlines delays. a airport customers emissions, a for waiting can the aircraft this a fruit continue are clients a Politicians, and at have think with reduce rising during and to if delays inefficient Summer resolved profitability, airline and witnessed at routing well significant the first-time year labor Western

to X Airshow. our with addition new Airlines at lease TAAG we Angola In Farnborough placement announced the AXXXs the of that

placement John into the we LATAM, are book are AXXXneo private from further supply, aircraft to June, higher we reflective forward and new that book well South interest the our diminishing in Accordingly, forthcoming the order and order placement late future, America. lease increasing Further just placement of aircraft announced airline we Boeing in Uzbekistan. Airbus our aircraft are as stretching announced placements largest as demand are AXXXneo also the values. rates the lease of as week, for lease out rates largest We strengthening, strong announcements in in the aircraft mentioned. lease of this seeing new with quantity airline from Aircraft benefit significant as X And X

regional, Virgin the air not second Group backlog than Air of second flag up As strong and is the Corendon irreplaceable. our Air industry-leading XXX and Taiwan; $XX.X were Turkey, headquartered This aircraft In global, markets. flag delivered in carrier of Kazakhstan, XXX-XXXs for Argentina; and Atlantic quarter. Lease developed technology $XX to Airbus evidence a the expected Starlux need need the most Norwegian out AXXX not traffic post-pandemic and of deliveries we AXXX-XXXX India, family and took based took Starlux a is in my Boeing and travel of to it in Virgin of carrier strengthening and Aerolineas across billion order the is John only of Malta; book Argentinas, Vistara, Last benefit Corporation India, customers, aircraft continued is but in second Antalya, well Airlines; fact developing China With Airlines, both positioned the operating quarter, the but carrier in to flyer, airliners, comments, an joint including which Tata Oslo; growing least, of flag another and carrier a that worth of of is the IndiGo, environment an billion including from wide-body Airlines global our Caribbean Airbus deliveries clear from Airlines very which for To out specifically also new we quarter, X between environmentally-friendly airline a and the delivery a current X the fleet demand Airlines each Singapore and quarter. total, Tobago; is shortage our group mentioned, airline Atlantic of of of in aircraft advanced wrap Asia. in Trinidad the higher AXXX-XXX aircraft. venture largest operating businesses; which XX the Airlines, took this low-cost Netherlands managed Alaska to airline Astana, in of the X delivery

I to our Greg the call quarter. turn detail and our the Now Greg? second will CFO, results Willis, provide in over financial color on to more

Gregory Willis

of we These of was impact growth restructurings. revenue. termination partially along rental primarily $X.X quarter. from in benefits our everyone. second the Russia million It's to ALC reduced other up worth recognition and revenue, comprised the million The lease of fleet, prior revenue noting the leasing reduction period. rental activities offset quarter, from our This in a as were in In unable and generated the in that also by significantly Steve, trading $XX $XXX increase was and rental first driven year, revenues in $XX abates. cash the the good impact compared you, accounting. $XXX due revenues million, a improvement in Thank significant pandemic with the clearly basis the million revenues of million rental in XX% cash of the by sales, to last afternoon, recognize of of of as our second of here are It's to quarter basis revenue aircraft

that from Additionally, customers Overall, recorded flows. recall to improving Aeromexico we sale benefit million which our a in of benefited our the trends, our have passenger prior claim. which year, $XX airline will are traffic from from ultimately operating benefited the cash -- you continuing bankruptcy windfall ultimately has

improve providing our look environment the have accommodations a As -- to very to lease said we aircraft customers especially have before, limited order as very customers to from appetite new for our we have we as additional book. continue continues to our

a increase Moving on to expenses. average offset The interest expense line rose X% composite year-over-year, debt driven in by by funds. cost in our an decline of balances,

rate Our year. the quarter composite down the decreased as of the of second X.XX% prior from to in end X.XX%

uptick we with our Depreciation in pandemic, the first slightly our track the operating in As rates. the have John as only we current which aviation basis. $XX higher for on higher given program, a geopolitical of the the renewal do of result will and market events. expenses as market inflation, persist insurance a an of insurance increase rose rate some a is than the our interest increased market quarter composite an particular, expense, higher quarter, conditions, spite in business while to following operating these mentioned, was We our SG&A incur in meaningful increase it at of along expect growth in the annualized activities completed recent continues costs, end of the to fleet, of million

related though, to to we the Beyond aircraft impacted from transitions, Russia in was those quarter. factors, first recovered by aircraft related SG&A also the expenses primarily

year, the billion escalators from onetime of us interest provides delivery. quarter intermediate XXXX, which time over of amount from in most movements in customer works our relatively a us leaving with all also our profile $X.X credit the unsecured rate XXXX. lease lease the the fixed a of $X.X facility commitments. That, blended taking placements, January, final fund a which a Furthermore, approximately rate provides over which of we equation, This recall with to the of of combined to Earlier revolving credit liquidity our the us of negative supports the maturity ultimately strong a together with of the May with X with substantial at insulated advantage built notes billion this to side rising refinancing provides with help base, care insulate interest margins at over we term. debt us significant at funding financing rate in effect adjustment our term. us environment. senior our rates X.X%, our increased needs of will in upward for into our of rate long our XX% the raised On rate, you a well ended We

we to utilizing debt-to-equity a maintaining of primary sheet, ended basis, balance of investment-grade ratio an a debt targeting such, X.Xx. a the of and on as maintaining a X.XXx form second As unsecured high net of balance is X.XXx. ratio funding firmly the fixed sheet cash remain ratio with a dedicated on We which financing, approximately rate of GAAP quarter debt-to-equity

now target rush back is it let as somewhat quarter, trend resume write-off target to leverage above towards to we our aircraft expect our sales While the due we last activities.

over quarter of XX% of unsecured strength to our debt an the our unencumbered resulting of funding sheet. our As base total billion, financing end, balance in $XX contributing asset of exceeded

$X.X position the liquidity at as of quarter. end strong remains Our billion of very the

balance and and our of remains are very excited sheet about Our financial position business. future strong, we the

beyond this illustrated seeing As expand quarter, we pandemic. move performance our continue the to results are by we as

With forward the Jason book our to operating question-and-answer over from economies our the I'll that, over new base sales and of positive $XX deliveries a for further to in call bolster pursue. session our expect expense the time aircraft contribution billion We sales with order inherent our call. back from along efforts as turn performance,

Jason Arnold

commentary Instructions]. and This [Operator Thank concludes management's remarks. you, Greg.

operator over the open the the like the for to to Q&A Daniel? session. I'd hand Now line to call

Operator

[Operator Instructions].

first Helane The comes question from Cowen. of Becker

Helane Becker

two just So questions.

Are to and have close would question have do any guys, I And you is how space? air concerns that if The all? question restructuring, with I know. with China its to -- you heard have you is there at affect exposure or second point, don't first any SAS some And there that may China respect are them? at the

Steven Udvar-Hazy

plans Yes, no for there's China.

some time Air could in had XX,XXX are generally, have that the plans the of are level. above Taiwan, they airspace. communications conduct restrictions of exercises minor with from the of state We no There military close be Civil China. When CAAC, we're aware sea those close to Administration to feet time. There below

we're so And not China mean, hundreds do literally and seeing a day that not planes really issue. from China. I as that an go to and that overfly hundreds there's of

So restrictions navigation we're of great they not China any whatsoever. a area charges. also exorbitant aware charge revenue that because of It's overflight for in source

a somewhere to it's from, if for an profitable say, Southeast So Europe China. or to in business is the aircraft Asia Korea flying Chinese that's overfly

John Plueger

and It's youngest fleet. On yes, your part most at the X of desirable the Helane, we least LRs, part very question, with of second their have XXneo SAS. young AXXXneo

strong aircraft those much as to keep. target their highest priority We indications have they very that

we concerns So that don't really have too many bankruptcy. about

Steven Udvar-Hazy

Yes. was Asia, Singapore. China, their Denmark, Hong Helane, Bangkok, from wide-body Norway, The half across Sweden problem, Japan, to about main of Korea, that is SAS at operations Kong,

or they from from flying able their to nonoperational fleet So are is fact Asia. and half Basically, them. because wide-body of they're of not westbound going over Russia, the utilize from eastbound Scandinavia forbidden come that

proportion a and go very through transatlantic Trans-Asia stronger that wide-bodies Russia. So operation a total airlines the to SAS percentage have a to have widebody has lot traffic that dedicated other fleet, as are X high European their airlines of that of much of Finnair a their unlike

of across operate I Lease. AXXX leased the that is SAS except some the long-range Air only are the ALC. which AXXX thinner no X to from they routes have, And LRs AXXX that on is fleet. on of AXXX other X the their and comment have Atlantic They from they of reduce their all have have aircraft, the second focuses that, So major

Operator

comes question next Suisse. Orenbuch The Moshe Credit of from

Moshe Orenbuch

chain multiple way have comments other how be contracted. years could to before be it still given least some how kind years. of at in of deliveries Is than probably creating higher issues any in reduced the think John, a supply is -- take? the up deliveries there's there think about it some many I over your any they'll up? the to of that be words, delivery kind would delays previously -- that about point, catching sense could going you catching be Like period long and start at would until

John Plueger

that to I But well to engine limitations we on is Look, known. else. Moshe. think really a factor look in to think How equation. terms have is I And really more deliveries. hard forward dependent of anything But biggest it's complex broad that's answer engine delays far Thanks, is single-aisle say. leads deliveries that on delays very or the is delivery engine recovery than the

call, to in the think earnings go I Boeing's a David had month today XX Calhoun, said, last he engine. would if he

a And as so in years, the ago, put couple back engine there are that there a delivery look fleet. they out to years to new taken airplanes fleet, at that the were on which actually engines X.X takes is of support the shortfalls were taken ready and to were were we operating priority, things

have we happened that is CEOs we're yet. of driver. don't own That's met they in meet what any the know is watching. their we At I At happening extent That and the hardest think manufacturers what's limitation. requests. all is But of if So single they're their biggest the the to same past. time, the of that what working Farnborough, engine delivery with the the

don't an engine at to have primarily say the side. I supply answer, So look except

Moshe Orenbuch

and where debt about are with markets of think, as others that things you income to Are us? just thinking work? you're follow-up share And do next capital the obviously, XX be question, things Are months X there do kind Greg, execution you've to maybe you opportunities, in the that to couldn't that you some put can got could fixed going on there turbulent. side. tremendous the my

Gregory Willis

one the why fact a that's with want such windows market the liquidity, level the access right? high able to of reasons that We to we maintain time. start a I'll we think take of -- to be of advantage I Well, at

now, the I debt growth ways we're We'll to alternatives figure to raise to why the market give you look when I specific watching a at to can't think right do, carefully. we that's any fund also lot take those other our present So out reasons inexpensive but us of going maintain market of one to themselves. examples they of what liquidity of let we're windows and advantage

Operator

comes The Bank. Hillary from next of Cacanando Deutsche question

Hillary Cacanando

You be kind addressed of kind the of whole -- trying the and debt market. to optimistic.

little So the know drew coming revolving come expecting I funds But capital year instead during what to market of credit on market to think kind to I sometime in little you a of you the CapEx your noticed you the terms but talked you more on this could down assuming the that -- you've the of And strategy, that to rate kind facility go and the would this coming a you given bonds. year of market cost interest have requirement. just you're quarter up issue touched in market you'll if to environment? bit detail given it I'm of the over unsecured rising

Steven Udvar-Hazy

then the a bond banks of Asia, a possibility Yes. to the We're opportunities that Boeing met of And these Southeast delivery some carefully. collage in bring to et don't of Asian looking that now of progress aircraft. additional contracted recently reserves, And that rejig whole well in from of will have market. as if that end will particularly deposits, And our Because, a the our Airbus, the on regard from manufacturers, payments, a revolver. lease direct the which trip see programs from can to billion at the I on basis based loan sustained and dollars. of of payments lastly, these airlines number delays. with had forget both those payment we're $X cash at a We're And at over the know, between and year, with more cetera. looking going payments to bank through you cash surplus delays now very progress optimizing we're give looking we with facility at us OEMs, experiencing liquidity. we of we're pay term separate a look the

makes So going us financing among anything cost is And to the lowest the flow average lessors. we're that for having sense all and cash access strong. keeps us of

Gregory Willis

Steve, that. just to add to

side, shouldn't utilization. revolver. surprise on revolver it anybody XX% would X/X that typically and drop our We between target On the

pandemic, the little designed higher. used liquidity our that But very is facility. that During to we under maintained a drawn increasing even revolver, be

Steven Udvar-Hazy

enjoy ramp taking focus the we we lot at can year, the aircraft and as because the to second sold. business tried aircraft tail sales on our of in also aircraft And traditionally half, then aircraft the a on and up of selling rental we half end the in revenue the first those until they're

us that the we give up external that half, also to minimize amount additional financing liquidity that's second sales require. will going ramp in as we the So of

Hillary Cacanando

helpful. it. it. the Okay. then on Got a OEM. the Got And question mentioned have escalator, and That's you I

rate their supply there's costs. environment. reflect to have OEMs the know reflect that So higher escalator escalator an I higher I know interest to own the But

So like does reflect there higher is only does escalators to to escalator? aircraft related to escalator interest or OEMs, your your what reflect higher exercise -- costs? Or the OEM -- escalator happened interest only to rates,

Steven Udvar-Hazy

We both. have

John Plueger

as as adjusted both. well provision The is formula have as adjustments lease escalation interest We rate rate a manufacturers well. well-known

Steven Udvar-Hazy

are the on two there separate consequences final restate economic delivery. at So

Operator

next JPMorgan. of comes from Jamie The question Baker

Unidentified Analyst

on This is for James Jamie.

can the those, profile be the on region, color mentioned customers. you first-time of or Any prepared me. demographics one Just them? credit in you remarks, it whether share for scale of

Steven Udvar-Hazy

diversified. geographic America, Asia and particular Southeast Europe, Asia. in any geographically Western zone. through No, Central spread particular I There's concentration think Latin they're It's no quite

Operator

This turn conference back the question-and-answer Arnold for concludes to like over session. closing to Jason our I remarks. would

Jason Arnold

speaking for call you to second in third quarter our the you, everyone, today. time thank Operator, forward report you, when results. we your please Thank and We with participating look quarter disconnect again line.

Steven Udvar-Hazy

Now you complete Gun. Tog

Operator

conference concluded. you now today's for presentation. has attending The Thank

disconnect. You now may

Air Lease (AL) 5 Aug 222022 Q2 Earnings call transcript