- Earnings call transcript Q3 2022

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Operator

Good afternoon. My name is Paula, and I will be your conference operator today. At this time, I would like to welcome everyone to the Air Lease Corporation's Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. now turn would to call I Mr. Instructions] like the to over [Operator of Relations. Arnold, Investor Jason Head Mr. Arnold, begin you may your conference.

Jason Arnold

XXXX and our Jason earnings Thanks, welcome Paula. Hazy, published section at earnings being all our in participants Executive today, This our the conference XXXX our website. quarter John by Greg Willis, Officer will Thursday, copy to is release call webcast available listen-only and Earlier I'm this President is our mode. call. to is the we today, Chief Air Lease Executive be Executive results. of this Good Corporation's Chief our of third At Steve afternoon, A afternoon Officer. for November Arnold, this third available on and and on are everyone, X, webcast call www.airleasecorp.com. and Financial Plueger, time Investors and and recorded joined Chairman; quarter website Vice President; XXXX, our This replay

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

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

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

John Plueger

of passenger quarter, of the from primarily QX. was $X.XX Well, flight and revenues wrote total purchased everyone, off XX thanks, of period joining the Russian up our ALC lower restructuring diluted we offset from approximately Jason. thank Performance per in our year, the generated the adding same the during new growth $XXX loss partially today. equipment million you relative aircraft to quarter Domestic revenue of environment relaxation EPS benefiting X% that XX air of momentum you strong impact recovery, benefited aircraft last rate third the to and further have further to year-to-date, on quarter, impact, update in demand We date. the the earnings us improve demand of globally, with pleased the continued in in remains $XXX for Good continues report for XX.X%. from it. while international one aircrafts the afternoon, fleet from traffic robust, markets share. during quarter aircraft significantly sold our travel aircraft, which I'm sales by and has and third We million commercial offset ended of shortly. utilization operating that strong with travel a and been the than I'll benefiting has more lease The the ALC and particularly to restrictions macroeconomic snapback but headwinds previously geopolitical constrained

a accelerated. now pace and continues consisting AXXX-XXXX demand all to a for orders and aircraft. of of placed process. placements campaigns its X The of XXX-XX through with our passenger to place As of also widebodies well-publicized left result, widebody and widebody XXXX number remaining in ALC aircraft has strengthen global large-scale lease AXXXneo profitably only with has AXXX-XXX

both not through see We positions AXXXs meanwhile very do XXXX. to delay delivery production meaningfully we with rates Narrow-body Boeing and and this limited book XXXX increase demand although remains expect delivery through XXXs order from Airbus the high beyond. situation remaining our improving on and

sold out through As and more are the AXXX aircraft OEMs, narrowbody XXXX. less Boeing family or XXX

and further you've our are book of lease you've releases, seen press positions. rate lessors dwindling and of our opportunities are been the available placements those following as And benefiting remaining book which airlines AXXX only order accelerate, order environment. finding is So number those accelerating from increasingly aircraft placements our other in if

We XXXX. of ahead of through placed So XXXX through of in today, placement our see as placed XX% delivery deliveries XXXX and positions a of and twin-aisle for pace XXXX. deliveries placed in remaining for with XX% XX% rapid our are deliveries our our about single

up. rate margins just have remains It's we it for Deliveries been what in a takes from see the increased interest the XXX diminishing on I product Delays typical narrowbodies factors, aircraft time Boeing we've of times than both several to lease increases, many aircraft performance. of this While were expected. Airbus, to experiencing. you Airbus lower rate months this delivery with from supply all are and to escalation highlighted quarter sector, delays ongoing leasing would and financial our that rate lease which remind you and rate MAXs way make their we combined drive continuing of competition robust, lease factors year. of on

been first XXXX. of number October, We to more built deliveries the XXXs. already delivering revenue still a some that that continue that inventory they checks aircraft report further for to update also to of our very this extend we chain expect of quarter, quarter I for highlighted our total receive to OEM took to be guided range. yet do of a $X.X delivered. and quarter, We'll than XXXs course, our April aircraft have us time midpoint We're of This XXX on the investments happy maintenance supply XXX awaiting We as reflects remind and more in we roughly of approximately previously as air for delivery to aircraft of delays. take every has roughly subject, widebody timely delivery next one it through deliveries outlook of expect billion couple want to of an Boeing certification year, you and Boeing of indeed to the have years. have challenges works resumed since the billion early fourth to those will you each the now last $X that for aircraft still XXXX aircraft next expectations. and investment make XXXs Airbus

aircraft in only closed date pleased although sales this On built year. are the we to sale one pipeline front, we've by aircraft sales we of QX, the

XXX aircraft we concentrates enjoy those of quarter, for normally of a than ALC reminder, and lease for activity, past product has earnings sales the Also, would the XXX may the delays as delivery the fleet several years the in aircraft have aircraft sales impact revenue a our meaningfully the majority program delaying and our growth investment year. pandemic impacting so been fourth on it MAX grounding, lower As plans. our the been

the to million has and previous expecting we're year. for we more and $XXX out which bids completion of next are from for approximately had XXXX of a would of activity bit with activity, on is that sales regular our we encouraged another been we forward previously strong XXXX aircraft. we're during expected, ultimate to first receiving aircraft than sales that now aircraft taking close I to we add the demand XXXX. of to had total into pipeline – The by longer that why $XXX looking expect we're also the close we timing sales half sales in million in pushed expectations healthy So agreement

aircraft and since it we value expect the aircraft Lastly, detained idiosyncratic we in we our folks this Boeing one had returned on, to in update grounding event onto of We that's our corresponding quarter. XXXX, come herein subject. income was with early want the Russia. Russia. any detained I fair MAX of in fourth not this And benefit return our in be aircraft do in to Russia from to a October. The other statement see the in on and that to is the anticipate the MAX to in XXX-X resulted at on able one have of that highly us return back be aircraft clear do storage that all we'll comment the

call point, this turn and to additional at this So Steve let me over for color – commentary. now Hazy Steve?

Steve Hazy

Thanks very John. much,

XXX Airbus remaining fleet all, aircraft crossed XXX forward of I'd commercial total our to at quarter to to that have that September, the we the ending of like new opportunity congratulate order aircraft. look point aircraft with the team mark we First this and XXXX. Boeing a third through I year out jet ALC this on on the take achievement, want owned to of the and receiving XXX in

of in strong over Domestic up actually globally. levels. up of focused passenger as with first tracked rose it’s the we as figures. are was meanwhile worldwide passenger out from up XX% year. International large levels As and which XX% most improves year-over-year. following in The continue up domestic XXX% expand the to see that XXXX Brazil, Regionally rose meaningfully zero approximately policy. market than in was XX% in to continue with are globally. well. dramatic to China to Asia international XX% point total recover with prior to the up volumes year-over-year encouraged domestic recovery the volumes John prior versus revenue which though that released year-over-year. remains ITA remained markets year strength traffic Pacific many to Significant the approximately markets traffic COVID XXXX XXX% are exceed challenges was by within pandemic, But witnessed Domestic traffic which XXX% also the XX% October Japan, very significantly the volumes traffic latest traffic on impact IATA mentioned, its was noteworthy more even India numbers Asia most volumes

expect we and nine the profit travel I that first speak improving behind XX.X% margin has still of around room Global an traffic to momentum this the In strength and overall for from view fact, this in improvement ahead irreplaceable, versus reopen an post to of that first environment. in coming to interaction. robust has to traffic international XXXX important travel and this levels, have XX% market continues particularly the although to ahead. still microeconomic of expect year of in weighed and trends for recovery we further adversity showing these XXXX, general improvement South volumes months continue highly pandemic headwinds like become and the air we durable the the and down of and is as human fact American participation strength would ALC’s in pretax again, the is market as international of mention also XX.X% months. our routes given increased In expand highlight further course in XXXX. months nine in the that to This geopolitical demand in encouraging XXXX component market in the face particularly not

sizeable European XX and with fleet of backlog of customers. ALC two book operating will its demand we announced have modernize XX placing the AXXX consisting a Condor’s back placement very recently competitive positions AXXXneos order August. been with of new Germany in AXXXneos in market. Condor effectiveness aircraft fleet stance further in and This in We late family and in aiding Our our remain both and high active existing placement

placement Canada opportunities significantly three delivering network. the as with growing four additional one Air range aircraft We boost XXXX significant will of offering option. transatlantic in enhance their of with and product on addition Transat we airlines also offering efficiency AXXXXLR These announced in in and markets In September, the Boeing, aircraft long and doubling two new XLRs six HiSky, aircraft which XXXX XXXX. aircraft these with of LR placement XXX-X with beginning in Airlines of a Aircraft we utilize fleet We and Eastern announced network. aircraft European LOT’s expanding the will aircraft with airline early modernizing and number AXXXneo have LOT in the the Polish play

beginning in airline benefits, deliver aircraft which North milestone aircraft with and America’s operational Chile. to Airlines and significant to is We These also will we’ll group placed as XXXX XLR South the longer AXXX as LATAM, operations its see airline America. LATAM XLRs these new a particularly five haul in offering transaction efficiency in international largest

quarters. somewhat Just of airline delays lease the This busy, The during and quarter to and in third quite three do in ITA fourth Aeroitalia, two could current of demand Deliveries deliveries placement pushed forward we placement, of activity aircraft lighter is lease placement Boeing this both coming placing customers every days sampling these and was to Italy. were than increase ago XXX-X been carrier from book of announce not We this given Boeing into in may turn sample flag is new we’ve XX some will QX reflects but we two airline number the high at Airbus. the help fact very early that our Airline year. Italian as the clearly our rates announced XXXX. in first Italy. slip aircraft low the the quarter aircraft third aircraft originally deliveries which our a environment. startup Northern Deliveries expected new quarter, the the fourth the keeping AXXX-XXX based be included delivered of into in affected These a production order we quarter in cost just individual with

family AXXX Volaris airline second Qanot to to Sharq three and largest in in two We Uzbekistan. [ph] including one also the aircraft Mexico, deliver there

Corendon in Turkey. SCAT two In Flyr XXX-Xs to addition in each in Boeing XXX-X one to Norway and and to Kazakhstan one

new We also largest Aerolineas Argentina’s in the XXX-X flat airline another delivered carrier Argentina.

one XXX-X In long-term to on to new Alaska lease addition brand Airlines.

Sunclass Taiwan in in this while body Starlux of first wide Denmark our received side, the two Copenhagen, past AXXX-XXX. AXXX-XXX headquartered On received quarter, their

in Board Directors XXth relative quarter the consecutive our authorized per stock founding has I’m payment of to X% increase an Lastly, common XXth the pleased ALC an to to $X.XX and representing share, that announce our dividend our of dividend quarterly increase per the and financial performance. payable since and on dividend to be the Greg XX, and now, remarks to periods. prior And provide more new dividend This January shareholders to over payout higher XXXX. in I’d will the our call Willis, to turn on like CFO, beginning detail color our our increase

Greg Willis

Thank of third lower and million, the quarter of and X% good other the increase in revenues lease The and was prior ALC higher year. generated much sales our $XXX sales. of rental revenues the fleet, driven XXXX, In you activities. afternoon, Steve, very revenues of growth million everyone. primarily losses comprised million up $XXX by approximately to was as compared rental aircraft of aircraft COVID-related of restructuring $XX trading in This

Russian in this fleet year. offset However, leasing by earlier from this the our a of termination revenue activities partially of was resulting the Russia loss rental from

expense It while rates interest the point rose to increase by expenses, the an debt average operating is over line that driven out noteworthy significantly interest in our balances. year. prevailing rose to past market on Moving X% have year-over-year

quarter credit of in including three during at increased up with our Our as along million as of fractionally approximately composite X.XX% our by the with last movements earnings the increase fixed continues interest investment capital. aircraft SG&A us rose to rate funding to expenses. Depreciation increased our the broad X related deep the grade and strong operating the funding rate to of fleet, points call also debt following our basis ratings nature due end our an only growth over as term pandemic, track of for of addition the XX% We some a to to we rates third positioned compared last in X.XX% our business strategy. well with along intermediate provides activities our which to transition premiums us and the year while fixed have rate, in insurance and uptick expenses, just ended discussed access

well. As and which rate from an helps escalators ratio on We maintaining past, X.X rate our risk. approach to rates to balance of quarter financing, approximately this us on sheet dedicated grade ratio sheet times is the a margins equity of and GAAP from Altogether, of deliveries as funding remain rising forward times. targeting balance primary unsecured our high debt form utilizing net cash ended fixed profit debt debt the a third interest of interest aircraft a rate X.X protect a interest We ratio times. basis, equity on to maintaining with discussed of as the in our insulate our help investment X.XX

Our leverage earlier right this our remains somewhat off year. fleet following target above our Russia

to increase continue and trend back expect aircraft long-term experience we as to manufacturer towards target our We our sales delays. volumes

our remains asset As growth our of look will over session more liquidity for via fleet significant strong billion. our both we X.X and had the base which with to positioned billion of our the future ahead, that, well position ALC in We of a back our further XX our boost we very call $XX embedded business order I’ll support quarter embedded order by turn and the to Jason balance sheet our to We end, unencumbered regular the question-and-answer that for and forward activity forward book. believe significant sales billion in large With financial of illustrate call. current the book. believe value performance returning

Jason Arnold

and remarks. Thank you, Greg. commentary This concludes management’s

their to are this Q&A one ask session, question time constrained one and each the afternoon. to we we participant time limit For that follow-up

anyone with the Q&A to. the our we’ll best can can’t session. at the call open to we please line answer p.m. up our follow do now you be and ending we’ll Operator, and for X:XX So questions promptly get

Operator

Deutsche Cacanando Bank. first question comes Instructions] [Operator from Your of Hillary

Hillary Cacanando

taking question. Hi. my for Thank you

where the that, to down? against rate rate component hedge put a really guess, of has it some fixed guess, wanted put gone Thank interest just sense at more to sense to on – quarter against that last always point, get you in hedge hedge component, like just, on. make a And make natural it terms you. you rate to had going that XX%, fixed So a around you've volatility? I high to XX%. had I was at and a why had never hedge down some But interest color would point, I would

Greg Willis

We is revolving typically Hillary, floating Greg. which billion on this about $X size and is in rate. facility our that's utilization credit target XX%

down we that rate ratio as So continue little will to draw bit. revolver that on down fixed come a

Our for long funding our actually above anticipate target our as now long-term We is doing I think and rate that that of those target. we're as don't fixed above meaningfully any short-term hedgings XX% fixed rate line on target. we're draws significantly right

Hillary Cacanando

Okay. schedule? I And a your you. back, it Got Is then Thank time function your kind guess if you sales just not, OEM it. from OEM, you and So you you works. drives like of sales the sell of how What if then And that assets? the go more can deliveries on scale get said on activity. out activity?

Greg Willis

given It's be typically position, intends delays definitely from regular for that by more I the and but the move past, experienced and we've sales a our going driven program to it been to the forward. significant continue balance, in OEMs, activity as restarted debt-to-equity we elevated right? our it forward mean, that we've has

Hillary Cacanando

you. very Got It's it. got Okay, Thanks. helpful. Thank it.

Operator

next Your Baker, Jamie question JPMorgan. from comes

Jamie Baker

good Hi, everybody. afternoon

resources wondering also are words? apparently the I AerCap and a new Mark Steve, Is or you that witnessing? it an spare to that's manufacturers a is forward? John have which are the availability, made engine guess, asked prioritize aircraft that delivery Is diverting cadence you real that guys from point away morning impact I I something was other being this also are going for in on so, thing if going And to deliveries. assume So

Steve Hazy

Hi, – Jamie. It's yes. it Yes, is.

John Plueger

yes, yes, answer short is The yes.

Jamie Baker

Okay. I'll take it.

here but and of that actually point, XXX data of context widebody below remarks, on of potential being John's some stored shortage. availability builds and kind is stored this Another the XXXneos a prepared

narrowbody the the how pending credit should finally strong both are would cognizant But equity describe be of – the think how I you widebody shortage. and strong the markets we shortage?

Steve Hazy

countries the in be process. it's as back gradual nicely. And than think age. things are of beginning seen of what carriers, gain growing Korea, to but direct traffic But will airlines business. One, like very, still a year, more to is results up momentum have international next not widebody I Asia oldest very crawling demand two very now China, to an replacing long-haul we and the by things. It's aircrafts restrictions. Taiwan, those seeing earthquake, Singapore, Asia, liberalize We've for other on remember, seeing normalcy, middle their international orders well more we're those hitting expect recovery are the we travel their and is Southeast Japan, see from are we some XX pretty but international regions years XX caught successful of more that to

John Plueger

things publicly Jamie, are I in would published have there’s production both many momentum, the when United that also significant rate in hinted I give Air these why Airlines which is add, expect to are Saudi kind which are XX aircraft my true, published, widebodies aircraft. that twin-aisle numbers. campaigns, I'll adds and AXXX. increases, current for Boeing XX I seek Airbus Arabia we very These XX XXX remarks, they’re widebody been particularly something campaign if you also component, prepared to about, really at there not of out – and and are upcoming aircraft, it’s reportedly stated India XXX as very, which twin-aisle, up the several, then just written there’s And usually to further unfolding. to

Steve Hazy

of terms new it’s years quantity Yes, Airbus have, them XXX, of XXXX, almost aircraft, pending and Jamie, of production of AXXXneo that three the you AXXX. and accumulate Boeing the in if campaigns

XX%, take these at if entirely two to XX% going looking described. you of success years So production a ratio, almost even orders we’re John bulk only that

Jamie Baker

it. that. Take Thank much Mark you and on a I perspective That’s care. appreciate very good gentlemen,

Steve Hazy

Thanks.

John Plueger

Thanks.

Operator

Moshe of from of Suisse. line next a Orenbuch Your comes question Credit

Moshe Orenbuch

but second received guess third that Greg, talk talk little year-over-year, you progression you cash just rental there could a how about, was Could I quarterly, quarter. I’m X like that of in slightly rental million that hoping down I Great, interest of the bit about in not guess kind basis there notice Q revenues you the to was said quarterly thanks. did some should quarter about And in the about the in deliveries revenues? wasn’t been what QX. the I means talk QX staging the that that and received quarter. interest we QX? had in think and And fourth for second of

Greg Willis

Hi, Moshe.

strip I little think had little bit cash was noise But in payments, the trouble there $XXX of mean, to do million Yield QX. quarter some of more pickup, blip you there our those was quarter But of yield, a a relatively really last small a as this revenue and is especially you that to accounting. to that was lessees. roughly bit this quite loss the little flat I if items with a quantum the out. reiterate it a a I’d timing quarter. a in cash of did like on with basis typically we QX noted, cause has of

right starting I is to which we’re So in good. think head the direction,

is but looking right, you’re there not we’re COVID-related think it about talking – to there matters. in hard and a was some blip again we’re what some collections, road on our going team I to catch the We’re on But position working up. was forward

be as be [ph] of quarter. to ability of waited. roll with CapEx December? it’s lot the as about and of the billion Moshe, But how chatted the already well. the question we deliver to engines to to manufacturers expect happen There’s a think, timing about through of having the will questions in terms I the But deliveries, seen $X.X OEM’s In significant what’s would in big the and going most issues stuff back is I

Steve Hazy

surge to just last of October, their payments make add of some that the airlines in the that quite collections I a had week in of to failed September. in cash we want

thing few have at catch later some $X million like days in XX, these of artificial million, guys an So cutoff million, it’s since we of September $X a paid almost because ups. $X the

it’s not but cash of snapshot, a a it’s activity. in overall collection variance the So indicative

Moshe Orenbuch

Steve. Thanks,

Operator

America. line Your from Perez comes of the next Bank of question of Mora Mariana

Mariana Perez Mora

Good afternoon.

in my market. is So question body the wide end

So is – to as and during get like a be now ramp up picking in bodies? that narrow into supply as quickly demand are lessons the the take challenging given account learned to could better that pricing within demand from production, you bodies narrow that up able and

John Plueger

that’s I the supply mean Yes. definition kind of of constraint.

So and as overall good is available. We’ve our placement. an placed I supply a bodies having have our upward mentioned, constraint wide we supply less of on impact less that and number

So absolutely.

Mariana Perez Mora

today compare leased they pandemic if how’d And you today constraints, were to given rates to and pre compare? leased rates, supply this rates interest

John Plueger

math if say in getting to in were they excessive very types. much XXXX. of up aisles Well, aisles the close would not it’s to Obviously, kind are by are parity of couple a cases variation where single the stronger, on the I parity, in but twin aircraft And are coming much better.

Steve Hazy

a But entered XXXX wide deliveries were of contracts in single keep into in actually mind lot out the body prior our to pandemic. and that we even that

Mariana Perez Mora

Thank Perfect. makes sense. That you.

Steve Hazy

Thank you.

John Plueger

you Thank

Operator

at time. Mr. this turn will I’ll questions further call the you. back over [Operator be Instructions] to no Arnold, There

Jason Arnold

everyone quarter thank call third and participating I Paula, today. Thanks, to and lines. Operator, we the when you fourth in thank results. time our for speaking please quarter look your report again with disconnect forward you you

Air Lease (AL) 3 Nov 222022 Q3 Earnings call transcript