AIR LEASE CORP - Quarter Report: 2024 March (Form 10-Q)

(See Notes to Consolidated Financial Statements)

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Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)

Preferred Stock

Class A
Common Stock

Class B Non‑Voting
Common Stock

Accumulated Other
Comprehensive Income/(Loss)

(unaudited)

Amount

Paid‑in
Capital

Retained
Earnings

Total

Balance at December 31, 2023

Issuance of common stock upon vesting of restricted stock units

—

Stock-based compensation expense

—

Cash dividends (declared $ per share of Class A common stock)

—

()

—

()

Cash dividends (declared on preferred stock)

—

()

—

()

Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax

—

()

Tax withholdings on stock based-compensation

—

()

—

()

—

()

Net income

—

Balance at March 31, 2024

Preferred Stock

Class A
Common Stock

Class B Non‑Voting
Common Stock

Accumulated Other
Comprehensive Income/(Loss)

(unaudited)

Amount

Paid‑in
Capital

Retained
Earnings

Total

Balance at December 31, 2022

Issuance of common stock upon vesting of restricted stock units

—

Stock-based compensation expense

—

Cash dividends (declared $ per share of Class A common stock)

—

()

—

()

Cash dividends (declared on preferred stock)

—

()

—

()

Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax

—

()

Tax withholdings on stock based-compensation

—

()

—

()

—

()

Net income

—

Balance at March 31, 2023

(1) 3M Term SOFR includes a credit spread adjustment of %.

(2) The Series A Preferred Stock has a redemption price of $ per share, plus any declared and unpaid dividends to, but excluding, the redemption date without accumulation of any undeclared dividends. The Series B Preferred Stock and Series C Preferred Stock each have a redemption price of $ per share, plus any declared and unpaid dividends to, but excluding, the redemption date without accumulation of any undeclared dividends.

(3) Dividends on preferred stock are discretionary and non-cumulative. When declared, dividends on the Series A Preferred Stock are reset quarterly and payable quarterly in arrears and dividends on the Series B Preferred Stock and Series C Preferred Stock are reset every five years and payable quarterly in arrears.

Note 11.

. The Company has issued restricted stock units (“RSUs”) with different vesting criteria: those RSUs that vest based on the attainment of book-value goals, those RSUs that vest based on the attainment of Total Shareholder Return (“TSR”) goals, time based RSUs that vest ratably over a time period of and RSUs that cliff vest at the end of a one or two year period.

The Company recorded $ million and $ million of stock-based compensation expense related to RSUs for the three months ended March 31, 2024 and 2023, respectively.

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Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

RSUs of which are TSR RSUs and are book value RSUs. $ Granted $

Vested (1)

()$ Forfeited/canceled()$

Unvested at March 31, 2024

Expected to vest after March 31, 2024

(1) During the three months ended March 31, 2024, performance based RSUs and time-based RSUs vested.

As of March 31, 2024, there was $ million of unrecognized compensation expense related to unvested stock-based payments granted to employees. Total unrecognized compensation expense will be recognized over a weighted-average remaining period of years.

Note 12.

aircraft across aircraft management platforms. The Company managed aircraft through its Thunderbolt platform and aircraft through the Blackbird investment funds.

As of March 31, 2024, the Company managed aircraft on behalf of third-party investors through investment funds, Blackbird I and Blackbird II. These funds invest in commercial jet aircraft and lease them to airlines throughout the world. The Company provides management services to these funds for a fee. As of March 31, 2024, the Company's non-controlling interests in each fund were % and are accounted for under the equity method of accounting. The Company’s investments in these funds aggregated $ million and $ million as of March 31, 2024 and December 31, 2023, respectively, and are included in Other assets on the Consolidated Balance Sheets.

Additionally, the Company continues to manage aircraft that it sells through its Thunderbolt platform. The Thunderbolt platform facilitates the sale of mid-life aircraft to investors while allowing the Company to continue the management of these aircraft for a fee. As of March 31, 2024, the Company managed aircraft across separate transactions. The Company has non-controlling interests in of these entities of approximately %, which are accounted for under the cost method of accounting. The Company’s total investment in aircraft sold through its Thunderbolt platform was $ million as of each of March 31, 2024 and December 31, 2023 and is included in Other assets on the Consolidated Balance Sheets.

As of May 6, 2024, aircraft in the Company’s managed fleet remain in Russia. While the respective managed platform maintains title to the aircraft, the Company has determined that it is unlikely it will regain possession of the aircraft that have not been returned and that remain in Russia.

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Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

aircraft. As servicer of Thunderbolt I, the Company is facilitating the sale and transfer of the aircraft. During the three months ended March 31, 2024, Thunderbolt I completed the sale of of the aircraft.

Note 13.

aircraft and aircraft in its owned fleet, respectively.

Net investment in sales-type leases are included in Other assets in the Company’s Consolidated Balance Sheets based on the present value of fixed payments under the contract and the residual value of the underlying asset, discounted at the rate implicit in the lease.

$ Estimated residual values of leased flight equipment Less: Unearned income()()Net Investment in Sales-type Leases$ $

2025 2026 2027 2028 Thereafter Total$

Note 14.

June 4, 2024July 8, 2024Series A Preferred Stock$ May 31, 2024June 15, 2024Series B Preferred Stock$ May 31, 2024June 15, 2024Series C Preferred Stock$ May 31, 2024June 15, 2024

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

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

Overview

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

First Quarter Overview

During the three months ended March 31, 2024, we purchased 14 new aircraft from Airbus and Boeing and sold five aircraft. We ended the first quarter with a total of 472 aircraft in our owned fleet. The net book value of our fleet1 grew by 1.2% to $26.5 billion as of March 31, 2024 compared to $26.2 billion as of December 31, 2023. The weighted average age of our fleet was 4.7 years and the weighted average lease term remaining was 7.0 years as of March 31, 2024. Our managed fleet was comprised of 73 aircraft as of March 31, 2024 compared to 78 aircraft as of December 31, 2023. We have a globally diversified customer base comprised of 120 airlines in 62 countries as of March 31, 2024. We continued to maintain a strong lease utilization rate of 100.0% for the three months ended March 31, 2024.

As of March 31, 2024, we had commitments to purchase 320 aircraft from Airbus and Boeing for delivery through 2029, with an estimated aggregate commitment of $20.9 billion. We have placed 100% of our committed orderbook on long-term leases for aircraft delivering through the end of 2025 and have placed 63% of our entire orderbook. We ended the first quarter of 2024 with $30.6 billion in committed minimum future rental payments, consisting of $16.6 billion in contracted minimum rental payments on the aircraft in our existing fleet and $14.0 billion in minimum future rental payments related to aircraft which will deliver between 2024 through 2028.

We finance the purchase of aircraft and our business with our available cash balances and internally generated funds, which includes cash flows from our leases, as well as aircraft sales and debt financing activities. Our debt financing strategy is focused on raising unsecured debt in the global bank and debt capital markets, with limited utilization of government guaranteed export credit or other forms of secured financing. We ended the first quarter of 2024 with an aggregate borrowing capacity under our unsecured revolving credit facility of approximately $6.0 billion and total liquidity of $6.5 billion. As of March 31, 2024, we had total debt outstanding of $19.7 billion, of which 83.3% was at a fixed rate and 98.5% was unsecured, and in the aggregate, our composite cost of funds was 4.03%.

Our total revenues for the quarter ended March 31, 2024 increased by 4.3% to $663.3 million, compared to the quarter ended March 31, 2023. The increase in total revenues was primarily driven by the continued growth of our fleet and an increase in sales activity, partially offset by a decrease in end of lease revenue. During the three months ended March 31, 2024, we recognized $23.0 million in gains from the sale of five aircraft and $12.7 million in end of lease revenue from the return of two aircraft. During the first quarter of 2023, we recognized $8.8 million from the sale of two aircraft and $34.7 million in end of lease revenue from the return of 10 aircraft.

During the three months ended March 31, 2024, we recorded net income attributable to common stockholders of $97.4 million, or $0.87 per diluted share, as compared to net income attributable to common stockholders of $118.3 million, or $1.06 per diluted share, for the three months ended March 31, 2023. The decrease from the prior year period is primarily due to higher interest expense driven by the increase in our composite cost of funds, partially offset by the increase in revenues discussed above.

1 References throughout this Quarterly Report on Form 10-Q to “our fleet” refer to the aircraft included in flight equipment subject to operating leases and do not include aircraft in our managed fleet, flight equipment held for sale or aircraft classified as net investments in sales-type leases unless the context indicates otherwise.

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Our adjusted net income before income taxes2 excludes the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue in the future and certain other items. For the three months ended March 31, 2024, we recorded adjusted net income before income taxes of $146.3 million, or $1.31 per adjusted diluted share, compared to an adjusted net income before income taxes of $166.8 million, or $1.50 per adjusted diluted share, for the three months ended March 31, 2023. Adjusted net income before income taxes decreased primarily due to higher interest expense driven by the increase in our composite cost of funds, partially offset by the increase in revenues discussed above.

Our Fleet

We continue to own one of the youngest fleets among aircraft lessors, including some of the most fuel-efficient commercial jet aircraft available. Our fleet, based on net book value, increased by 1.2%, to $26.5 billion as of March 31, 2024, compared to $26.2 billion as of December 31, 2023. During the three months ended March 31, 2024, we purchased 14 new aircraft from Airbus and Boeing and sold five aircraft. We ended the period with a total of 472 aircraft in our owned fleet. As of March 31, 2024, the weighted average fleet age and weighted average remaining lease term of our fleet were 4.7 years and 7.0 years, respectively. We also managed 73 aircraft as of March 31, 2024.

Our portfolio metrics as of March 31, 2024 and December 31, 2023 are as follows:


	March 31, 2024			December 31, 2023
Net book value of flight equipment subject to operating lease	$	26.5	billion	$	26.2	billion
Weighted-average fleet age(1)	4.7 years			4.6 years
Weighted-average remaining lease term(1)	7.0 years			7.0 years

Owned fleet(2)	472			463
Managed fleet	73			78
Aircraft on order	320			334
Total	865			875

Current fleet contracted rentals	$	16.6	billion	$	16.4	billion
Committed fleet rentals	$	14.0	billion	$	14.6	billion
Total committed rentals	$	30.6	billion	$	31.0	billion


(1) Weighted-average fleet age and remaining lease term calculated based on net book value of our flight equipment subject to operating lease.
(2) As of March 31, 2024 and December 31, 2023, our owned fleet count included 17 and 14 aircraft classified as flight equipment held for sale and 13 and 12 aircraft classified as net investments in sales-type leases, respectively, which are all included in Other assets on the Consolidated Balance Sheet.

(1) 3M Term SOFR includes a credit spread adjustment of 0.10%(2) The Series A Preferred Stock has a redemption price of $25.00 per share, plus any declared and unpaid dividends to, but excluding, the redemption date without accumulation of any undeclared dividends. The Series B Preferred Stock and Series C Preferred Stock each have a redemption price of $1,000.00 per share, plus any declared and unpaid dividends to, but excluding, the redemption date without accumulation of any undeclared dividends.(3) Dividends on preferred stock are discretionary and non-cumulative. When declared, dividends on the Series A Preferred Stock are reset quarterly and payable quarterly in arrears and dividends on the Series B Preferred Stock and Series C Preferred Stock are reset every five years and payable quarterly in arrears.

For more information regarding our preferred stock issued and outstanding, see Note 5 of Notes to Consolidated Financial Statements included in Part III, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2023.

The following table summarizes the quarterly cash dividends that we paid during the three months ended March 31, 2024 on our outstanding Series A, Series B and Series C Preferred Stock (in thousands):


						Payment Date
Title of each class						March 15, 2024
Series A Preferred Stock						$3,844
Series B Preferred Stock						$3,487
Series C Preferred Stock						$3,094

† The Company has omitted portions of the referenced exhibit pursuant to Item 601(b) of Regulation S-K because it (a) is not material and (b) would be competitively harmful if publicly disclosed.

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SIGNATURES

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


			AIR LEASE CORPORATION

May 6, 2024			/s/ John L. Plueger
			John L. Plueger
			Chief Executive Officer and President
			(Principal Executive Officer)

May 6, 2024			/s/ Gregory B. Willis
			Gregory B. Willis
			Executive Vice President and Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

AIR LEASE CORP - Quarter Report: 2024 March (Form 10-Q)

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