Organized transcript of call or AL conference conference presentations 14-Feb-20 9:30 pm GMT

Los Angeles Feb 17, 2020 (Thomson StreetEvents) – Transcript organized call or presentation earnings conference Air Lease Corps Friday, February 14, 2020 at 9:30:00 pm GMT

* Gregory B. Willis

* John L. Plueger

* Steven F. Udvar-Házy

* Abdulrahman S. Tambal

* Helane R. Becker

Ladies and gentlemen, I thank you for standing in your position, and welcome you to the Air Lease Earnings Quarter Fourth Earnings Conference 2019. (Operator Instructions) Indicate that today’s conference is being recorded. (Operator Instructions) I would now like to give the conference to the speaker today, Mary Liz DePalma, Head of Investor Relations. Please proceed, please.

Hello, everyone, and welcome to Fourth and End of Year Call 2019 Air Lease Corporation. This is Mary Liz DePalna, and Steve Hazy, our Executive Chairman, who joined this evening; John Plueger, our Chief Executive Officer and the President; and Greg Willis, Executive Vice President and Chief Financial Officer.

Earlier today, we published our fourth quarter and end of 2019 results and a copy of our earnings release is available on the Investors section of our website at www.airleasecorp.com. This conference call is being broadcast and recorded today, Friday, February 14, 2020, and the webcast will be available for playback on our website. (Operator Instructions)

Before we start, please note that certain statements in this conference call, including certain answers to your questions, are forwarded within the meaning of the Private Law Reform Act. This includes, without limitation, statements about our operations and future performance, revenues, operating costs, stock-based compensation costs and other items of income and costs.

These statements and any future projections of the company’s performance reflect management estimates for future results and speak only today, February 14, 2020. These estimates relate to risks and uncertainties that have occurred. actual results could be different from expectations.

Please refer to our filings with the Securities and Exchange Commission for a more detailed description of the risk factors that may affect our results. The Air Lease Corporation accepts no obligation to update any forward-looking statements or information in the light of this new information or future events. In addition, certain financial measures we use during the call such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes and a default equity adjustment result are non-GAAP measures. Our reasons for using these non-GAAP measures and our definition and reconciliation with corresponding GAAP measures are outlined in the earnings release and 10-K which we issue today. This release can be found in the investor and press section of our website at www.airleasecorp.com. Unauthorized recording of this conference call is not permitted. I would now like to call our CEO and President John Plueger.

—————————————————- ——————————

John L. Plueger, Corporation Lease Air – Chief Executive Officer, President & Director [3]

—————————————————- ——————————

Well, thanks, Mary Liz. Good afternoon, everyone, and I thank you for being with us. I really want to start my mother [Celeste] Happy happy Valentine’s Day. Therefore, I am pleased to report that Air Lease enjoyed a quarter and another successful year in 2019, recording diluted earnings per share for the fourth quarter of $ 1.42, up 14.5% year on year. And $ 5.09 for the full year, an increase of 10.7% year on year, all through our continued organic growth.

Our portfolio metrics remained strong and consistent as our business achieved a pretax profit margin of 36.5% and a 14.3% pretax return on common equity. ALC income exceeded $ 2 billion at the end of the year for the first time, up 20% over 2018, while our 2019 aircraft investments were the largest in ALC history, almost $ 5 billion despite the institution MAX and ongoing delivery delays. $ 825 million of these aircraft investments were made in the fourth quarter as we purchased 12 aircraft.

Accordingly, at year end, our balance sheet grew to $ 21.7 billion, up 17% from 2018. In line with expectations, we sold $ 1 billion to aircraft in 2019, and the majority of these sales were achieved. in the second half of the year as planned, due to the delays in our new aircraft deliveries. In the fourth quarter, we generated sales proceeds of $ 585 million, selling 11 aircraft into the Thunderbolt III transaction and the other aircraft to 8 aircraft to other buyers.

ALC now stands with 788 owned, managed and ordered aircraft. In December, we signed the final purchase agreements for the order we announced in the Paris Air Show for 102 aircraft, including A220s, which Airbus has now purchased the rest of Bombardier’s interest. Also launch the XLR A321 and order incremental A320neos. We see all these orders as important to our growth and the overall contribution to the environmental sustainability of the airline industry.

With these orders, 89% of our order book has been placed, including the MAX on long-term leases, 2 years on and a significant amount of visibility forwarding over $ 29 billion in total committed rentals.

Finally, and in fact, in 2019, we continued to achieve success in the debt capital markets, rising to over $ 4 billion in capital. This includes over $ 3 billion in unsecured senior notes, including our first Canadian dollar bond measure and expanding our bank facilities. The 2018 ALC has completed over $ 6 billion in liquidity.

This month is the tenth year in business. All I can say is that we exceeded our initial expectations when we started Air Lease. I want to take a break and take a heartfelt moment to thank especially our ALC team and the Board of Directors, our customers, investors, financiers, airframe and engine manufacturers, our suppliers and our management business partners for their unprecedented support. faith in what we do.

Looking back over the last 10 years, I will only do this as a very good start. Our machines are fully embedded, and we look forward to another decade that is more successful.

So let’s look forward to a little by beginning with some topics I know. Firstly, the coronary virus and its influence. See, I will not swear words, rather than the obvious human impact, it has been particularly difficult for our airline customers from China and Asia to fly flight and dramatic fall in traffic. I will not tell you facts and figures because there are many sources for that information. Yes, we got requests for assistance from some leasing. And as usual, we work with our customers as needed. For example, we are offering outright cash purchase offers and offering sale lease transactions, which will provide cash for our customers and make a positive contribution to ALC growth this year. In addition, the purchase of selected aircraft can assist our MAX customer struggling to get a summer lift against a definite MAX delivery timing.

We will also be making some temporary lease payment deferrals as in these cases. However, as we see things today, we do not see that this will have a significant overall impact on our financial performance in 2020 or beyond. We have a very strong and healthy balance sheet. And through that balance sheet, we can and will help our airline customers.

We expect global passenger traffic growth to be affected for 2020, and perhaps even negative growth. Let us also remember that Boeing MAX’s negative impact on traffic growth, which will happen to at least one year without any delivery into the global market. The airline industry and its leasing partners, including our management team for many years, have experienced pandemic pandemic disturbances with varying degrees of intensity, and passenger traffic is constantly recovering. We believe that this time will continue.

This belief is strongly reflected in the hundreds of conversations we have had in the past month with our airline customers in Asia and around the world. While the current coronavirus has had a major and immediate impact, the airline industry has a long-term view of its overall fleet growth plans. The cessation of MAX production and Airbus production delays results in a shortage of aircraft in the market for the long-term view. Let me be clear that the vast majority of our MAX customers still need these aircraft. And as Airbus said clearly in their recent call for earnings, there is no ability to replace or replenish MAX with a single Airbus corridor in the coming years.

Outside the MAX, our new aircraft deliveries, to date, follow our customers worldwide, including our customers in Asia. Yesterday, for example, we launched Boeing facilities in Charleston, South Carolina, Boeing 787-10 new to EVA Airways based in Taipei. And a few weeks before that, from Airbus, we brought Vietnam Airlines a new A321neo.

For MAX deliveries, we are confident in Boeing and FAA leadership, and we see light now at the end of the tunnel. However, we believe that it may take about 2 years for over 400 MAX parked around the world to eventually return to service. In using our best estimates, we believe we will make 4 new MAX aircraft deliveries in 2020. I hope this is too conservative as we have built 27 aircraft, but not delivered to our customers. The 15 MAX aircraft we have delivered to our customers before receiving MAX fleet.

Please remember that there are many features that need to come together for MAX deliveries to start again on the FAA’s green light. For example, the airline’s own training schedule, technical issues, including return to service from state maintenance maintenance, new software uploaded and tested on each aircraft, commercial lifecycle discussion regarding calendar time or [likelihood] of components on long-parked aircraft; approval of airworthiness of foreign certification authorities; cancellation of the delegation by the FAA authorities to Boeing engineers to issue an airworthiness certificate, which FAA inspectors will now do as each aircraft delivers and this may take longer, as we do not know the level of experience of these inspectors . Debates delivered on late compensation. A seasonal lift requires a big impact on small operators, especially if they lose the coming summer season. And in the near-term, the impact of coronavirus, which may affect, as a practical matter, allow certain countries to obtain visas to travel to accept the delivery.

Overall, ALC added over half of our MAX book aircraft with 20 airlines in 18 countries and there is much to work out for the delivery process. I would like none of our MAX placement to airlines in China to date.

Despite all the challenges, we expect 2020 to be another strong year for ALCs. As you will see in our 10-K, we expect to deliver 46 aircraft from our orders book in 2020, including only 4 MAX aircraft. We hope that we and Boeing can improve the number of MAX we do this year. In addition, these 46 aircraft do not include any incremental aircraft purchases such as the sale leases, we are offering to assist some of our customers from China and Asia or other favorable aircraft acquisitions.

On the aircraft sales side, we have a strong demand from the different base of buyers for our aircraft. Due to the strong market reception of our TBTT transactions in the fourth quarter of 2019, we will seek to continue to build on this platform in 2020. Greg will comment further on the amount and time and timetable for prediction of aircraft sales, as well as the timing of next quarter and 2020 aircraft delivery.

Finally, I thank all those who listen to this call for the thoughtful questions and opinions you have raised in previous earnings calls, which I expect today. Many of you have been following us since our company was founded, and we value your views. With that, let me call Steve Hazy for more comments. Steve?

—————————————————- ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [4]

—————————————————- ——————————

Thank you, John, for an excellent overview of Air Lease Corporation. As John pointed out, from one day of the founding of our company, our goal is to have an independent, independent investment grade with an excellent fleet of long-term leases to achieve profitable organic growth. It is with the hard work and dedication of this team that we can grow ALC in 10 years to be $ 50 billion in size and scale. In the past year, we delivered our new 300th aircraft. With 362 and the most fuel efficient aircraft scheduled to be delivered between 2020 and 2024, Air Lease has the opportunity to double over twice the size of our fleet over the next 5 years.

The ALC order book is a huge asset, and is still true today. Currently, there are over 6,000 A320 family aircraft in backlog of Airbus and over 4,000 737 aircraft in Boeing backlog. This represents the best case for more than 5 years waiting and production period for each type of aircraft.

On the whole body, there is a healthy long-term dynamic with approximately 1,400 aircraft on order between the 787s, a new A330neos and A350 aircraft. And later, A220 aircraft has more than 500 aircraft in the backlog, which will replace A319 place, larger regional jets and 737 classics.

Each of these aircraft will be critical to replacing older, less efficient aircraft, including more than 3,000 jets over 20 years of age in the next 5 years. And our book ordered flat with great emphasis on the A321neo, the A320neo, the Boeing 737s and the Boeing 787-9s and -10s are most desirable along with the A350 Air350 and A330neos, Air Lease is in good condition to meet growth and needs. future replacement of our airline client.

Over the past few years, the airline industry has been criticized more for its contribution to environmental pollution. Let me remind everyone that today only about 2% of CO2 emissions are drawn by humans. Every year since 1990, Aviation has improved fuel efficiency improvement by 2.2%, that is 3x of cars and net 9x trucks. So, in fact, we have improved, but we need to find better ways to make progress. More fuel efficient aircraft are a key step in improving the carbon footprint of the airline industry.

The IAG group, which regulates British Airways, recently announced a target of a 10% reduction in CO2 per passenger passenger by 2025, primarily through investment in 142 new aircraft over the next 5 years. There are also advertisements from people such as JetBlue, easyJet, SAS and others, and this is only a real-time example of the airline industry’s goals to be more environmentally sustainable.

We believe that the airlines industry does not get more scrutiny. With booked aircraft anywhere from 15% to 30% more fuel efficient than the predecessors, ALCs will help our customers modernize their fleet airlines and respond actively to this important issue. Despite the huge progress in environmental efficiencies that is primarily attributable to new engine technology, we believe that there is still a need for further improvement across all engine manufacturers to bring the initial pains associated with this new technology, which will continue. interfered with putting reliability in a negative way. We look at ourselves and our airline customers on the airframes and the OEMs machines to speed up improvement in this regard.

Speaking about the most recent type of aircraft, as an important factual reminder, the Air Lease team took the 100th Boeing 787 Dreamliner who ordered and bought an ALC directly from Boeing at ALC and our previous leasing enterprise. This achievement of 100th Boeing 787 Dreamliner is incompatible and reflects our commitment to providing airlines worldwide with the most modern and modern aircraft.

Moving to the geopolitical face. We continue to monitor trade talks. Both Boeing and Airbus have set significant percentages of their orders to be delivered by airlines in the US, Europe and Asia. We are in global business. And ultimately, an economy will lose more than any tariffs imposed on aircraft or on fundamental issues created by political unity. We are optimistic and optimistic that these trade issues will be resolved wisely so that the growth of our industry or the regional economies served by our airline customers is not affected by politics. Air transport is critical to global commerce and our responsibility is to create an outlet for wind trees in this area.

Over the past decade, we have an ALC customer base with 106 different airline customers in 59 different countries at the end of 2019. Some of the new customers we have added are names we have known for years and others are newer or airline starters new, where we spent time and resources with the company’s senior levels, advising them.

Our staff continue to travel the world to maintain our client base, while expanding our customer list to include new names, which are shaping the airlines’ landscape. As John pointed out, some of our customers are dealing with issues that were not present a few months ago, and they will meet their leasehold partners for guidance and help.

For years, we have had questions about lessor competitions, and it is similar that our commitment to our customers and the commitment of various aircraft lessors is being tested and will be very clear to our airline clients. We are confident that the health of our business, our strong balance sheet and our excellent airline relationships and the strength of our seasonal management team will enable us to help our airline customers by re-controversy and finding new opportunities once again. distinguish between the Air Lease and succeed. In addition, I call our Chief Executive Officer, Greg Willis, to provide an update on the Air Lease’s financial and financial metrics for the second – sorry, for the fourth quarter of 2019.

—————————————————- ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [5]

—————————————————- ——————————

Thank you, Steve, and a good evening, everyone. As mentioned earlier, we recorded strong results for the fourth and full 2019 years, reporting diluted earnings per share of $ 1.42 and $ 5.09, respectively. We achieved a default result of 15.4% on common equity, and a default margin of 39% adjusted, reflecting the strength and stability embedded in our business model. And our main metrics in relation to portfolio yield and lease term remain stable and reach an age adjusted basis.

For the fourth quarter of 2019, the ALC income generated the total, around $ 549 million, up 22% compared to Q4 2018. $ 504 million of rental income and $ 44 million of aircraft sales, trading activities and other activities.

The activity of our fleet included 11 new aircraft and 1 aircraft purchase on the secondary market, representing $ 825 million for aircraft investments as well as 19 aircraft sold for total receipts of $ 585 million. Included in aircraft sales, trade and other activities are $ 33 million of sales gains and about $ 6 million in management fees.

Turning costs. The total cost of interest increased year on year on the continued growth of the fleet, although it was partly offset by the reduction in our composite cost of funds. Our composite interest rate fell to 3.34% in 2019 compared to 3.46% in the previous year.

On the financing side of the business, our prevailing interest rates have decreased, because we have timely access to the global capital markets to lock up long-term, low-cost funding, which I will cover more detail at present.

Our percentage of fixed rate funding remains substantial at around 88%, in line with our conservative approach to interest rate risk management. Depreciation continues to track the growth of our fleet, while SG&A accounted for approximately 5.7% of total income compared to 5.8% of total income in the fourth quarter of last year. We expect our revenue growth to continue over the period of our A&E growth. We run an extremely effective organization with just 117 employees, now serving $ 21.7 billion in total assets as we see this efficiency driving the value of significant shareholders well in the future.

Looking forward to 2020, we expect to deliver 46 aircraft, representing around $ 4.1 billion in aircraft investment. As John pointed out, we have greatly reduced our expectations for aircraft investment for MAX deliveries for 2020, looking at us, even if the mid-year outcome on services has been achieved, Boeing may take our t aircraft on order.

For a quarterly mix, as of today, we expect $ 600 million in R1, $ 1.6 million aircraft investments in Q2, $ 600 million in R3 and $ 1.3 billion in Q4. In addition, we expect that these deliveries in the first quarter of 2020 are weighted towards the end of the quarter. And it is worth noting that, even with the MAX review expectations, 2020 is expected to be our second biggest dollar value in aircraft investment in our history.

We will continue to evaluate aircraft sales opportunities and are currently looking to sell $ 1 billion of aircraft in 2020, with most of this volume occurring in the second, third and fourth quarters of the year. , with relatively limited sales and gains on sale in R1.

Sales activity will remain focused on our managed vehicles which we will continue to sell to third parties, also buyers. As John mentioned, and as discussed on our call, our Thunderbolt III portfolio transfers are going on nicely. And we expect to move the remaining 8 aircraft to the new structure over the rest of Q1 and Q2 in 2020. Including this $ 116 million economic value we are expecting to achieve over the rest of Q1 and Q2. In the lifetime of this deal, we expect to move these aircraft to become – this will result in the addition of the DES as well as reducing the average age of our fleet.

As a reminder, these aircraft are no longer recurring rent or depreciation as they are held for sale, and gains are recognized when the transfer of the aircraft in this TBTT III entity has been completed.

Moving to the funding side of the business. As always, we continue to evaluate and seek out the most cost-effective funding for ALCs. In the fourth quarter, we completed our first international issue through the Canadian bond market, raising a 400 million CAD by a 2.625% coupon maturing in 2024, which we fully exchanged for US dollars at a rate of 2.535%.

The appeal by Canadian investors was strong in this issue, and we hope to have achieved a new market and investor base. In addition, in January, we used the attractive conditions of the US capital market, and issued $ 750 million in senior notes at a coupon of 2.3% maturing in 2025 as well as $ 650 million in senior notes, coupon. 3% matures 2030. These issues represent the lowest coupon issue for similar maturities in ALC history and are favorable to our view of the cost of our funds in 2020.

We maintained a significant liquidity position of $ 6.3 billion at year end. The only significant remaining maturity this year is a $ 400 million bond, with a coupon of 4.75%, maturing in March. And we have already pre-funded this maturity at a much lower rate.

We completed the year just below our 2.5x debt target at 2.4x equity. However, as a reminder, our debt-to-equity ratio will change regularly above and below this level based on the timing of aircraft investments and sales. We remain committed to our funding strategies for fixed rate debt of 80%, unsecured debt 90%, and again, the year using 3 investment grade ratings, each with a stable outlook.

Finally, I want to highlight the fact that our business model is very simple and simple. We bought young aircraft, which were in high demand with volume discounts and put them on long leases on attractive economic terms and then sold them to a significant run-off of economic life ahead of them, all maintaining financial leverage and retained risk metrics.

Over the history of our business, we have tracked this approach, including the sale of premium value carrying aircraft. This section is very important not only because it adds incremental income to our business, but the sales also aim to create the success of our strategy by demonstrating our ability to buy an aircraft right. Generating attractive returns along the way, and on average, 8% to 10% gains on the strength of our model sales as well as the substantial embedded value of our fleet, order book and leases. With that, I will return the call to Mary Liz for the question and answer session.

—————————————————- ——————————

Mary Liz DePalma, Air Lease Corporation – Assistant Vice President IR [6]

—————————————————- ——————————

Thank you, Greg. Críochnaíonn sé seo ráitis na bainistíochta. Anois ba mhaith liom an glao a thabhairt ar ais chuig an oibreoir chun an líne a oscailt don seisiún ceisteanna agus ceisteanna.

============================================ =================== ====================

Ceisteanna agus Freagraí

————————————————– ——————————

Oibreoir [1]

————————————————– ——————————

(Treoracha Oibreora) Tagann ár gcéad cheist ó Vincent Caintic le Stephens.

————————————————– ——————————

Vincent Albert Caintic, Stephens Inc., Rannán Taighde – MD & Anailísí Sinsearach Airgeadais Airgeadais [2]

————————————————– ——————————

Is iad na hóráidí tuillimh na bronntanais is fearr le Valentine, mar sin tabhair buíochas duit as sin. An chéad cheist. Má cuimhin liom i gceart, bhí roinnt athlonnú punainne sa cheathrú ráithe a d’fhéadfadh na rátaí léasa nó ioncam ar a laghad a thiomáint níos ísle ná mar is gnách. Má tá sé sin fíor, díreach ag smaoineamh ar cad é an t-ioncam léasa ráta rátaithe a bheadh ​​gan an t-athlonnú? Agus ansin má tá tú ag súil go dtí 2020, an bhfuil aon rud ar cheart dúinn a bheith ar an eolas faoi a spreagfadh luaineacht rátaí cíosa?

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – VP Feidhmiúcháin & CFO [3]

————————————————– ——————————

Is féidir. Ciallaíonn mé go ndearna muid ár n-aerárthaí Thomas Cook a athshuíomh. Rinneadh na léasanna ar an margadh. Agus is féidir leat toradh an-chobhsaí a fheiceáil a raibh ar ár gcumas a bhaint amach ar fud an domhain – le roinnt blianta anuas. Mar sin, ní raibh aon tionchar seachtrach ar na huimhreacha. Thóg muid a lán den bhagáiste slándála i ndeireadh Q3, ach bhí na torthaí féin an-chobhsaí.

————————————————– ——————————

Vincent Albert Caintic, Stephens Inc., Rannán Taighde – MD & Anailísí Sinsearach Airgeadais Airgeadais [4]

————————————————– ——————————

Ceart go leor. Great. Agus ansin sa dara háit, mar sin is cosúil go mbeidh 2020 ina bliain luaineach maidir le hacmhainn aerárthaí. Mar sin ba chúis le cuid de na saincheisteanna ar tharraing tú aird orthu ró-chumas agus ansin tá daoine eile cosúil leis an moill MAX a chruthaíonn easpa soláthair. Díreach – an bhfuil tú ag féachaint ar a lán gníomhaíochtaí athshuímh gar-théarma mar thoradh air seo go léir? Agus tuairim ar bith maidir leis an tionchar, tionchar geilleagrach an Léasa Aeir go heacnamaíoch?

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Cathaoirleach Feidhmiúcháin an Bhoird [5]

————————————————– ——————————

Ní fheicimid aon athshealbhú aerárthaí sa todhchaí intuartha. Is iad an chuid is mó dár gcustaiméirí aerlíne na hÁise na hiompróirí líonra domhanda móra seanbhunaithe. Tá go leor acu faoi úinéireacht an stáit. Tá a lán acmhainní airgeadais agus athléimneacht acu. Agus tá margadh na hEorpa cobhsaithe. Tá ganntanas aerárthaigh ag cruthú ganntanas aerárthaigh aon-ais Airbus agus an cás MAX go déanach. Tá níos mó ná dosaen aerlínte Eorpacha ag lorg liosta láithreach A320, A321 agus 737s. Mar sin i dtírdhreach na hEorpa, feicimid ganntanas aerárthaí, go háirithe aerárthaí aon-aisle. Agus i Meiriceá Thuaidh, leanaimid de thuilleamh maith láidir a fheiceáil, praghsanna breosla níos ísle, a chabhróidh le hiompróirí Mheiriceá Thuaidh ar a gcorrlaigh. Agus táimid ag féachaint ar na torthaí a chobhsú nó, i gcásanna áirithe, tháinig feabhas beag orthu i 2020. Mar sin má fhéachaimid ar Mheiriceá Thuaidh agus ar an Eoraip. Ceapaim go bhfuilimid i riocht an-mhaith. Agus san Áise, creidimid gur féidir lenár gcustaiméirí seasamh gearrthéarmach na staide víreas a sheasamh.

————————————————– ——————————

Oibreoir [6]

————————————————– ——————————

Tagann ár gcéad cheist eile ó Catherine O’Brien le Goldman Sachs.

————————————————– ——————————

Catherine Maureen O’Brien, Goldman Sachs Group Inc., Rannán Taighde – Equity Analyst [7]

————————————————– ——————————

Mar sin is mór agam an dath ar fad a thug tú ar an staid choróinvíreas atá ag athrú. Agus ní raibh ach ceist agam ar an iarratas ar chúnamh a fhaigheann tú. Tá mé díreach ag smaoineamh, conas a imríonn sé sin amach de ghnáth? An bhfuil sé seo de ghnáth 1 nó 2 mhí d’íocaíochtaí cíosa iarchurtha. Agus ansin, is dóigh liom, díreach ag do iarchuideachta, aon samplaí de cé chomh tapa agus a bhíonn aerlíne, mar gheall ar fhaoiseamh íocaíochta léasa de ghnáth, ag filleadh ar sceideal? Is mór agam an dath.

————————————————– ——————————

John L. Plueger, Corporation Lease Air – Príomhoifigeach Feidhmiúcháin, Uachtarán & Stiúrthóir [8]

————————————————– ——————————

Is féidir. Sure. Mar is féidir leat a shamhlú, arís, tá aerlínte ag stopadh ag eitilt. Tá níos lú airgid ag teacht isteach iontu. Is dóigh liom gur tharraing Steve aird ar an bhfíric go bhfuil ár n-aerlínte, go háirithe sa tSín, na haerlínte is láidre ann. Agus é sin ráite, tá roinnt iompróirí tánaisteacha agus treasacha a dteastaíonn airgead uathu, agus mar sin thairg muid chun aerárthaí a cheannach go hiomlán. Tá idirbhearta léasa díola curtha ar fáil againn. Ach ar aon dul leis sin, tá roinnt iarrtha ag iarchur roinnt íocaíochtaí léasa 1- go 2 mhí, agus is dócha go bhfreastalóimid air sin. Is é seo an rud atá déanta againn freisin – rinne tú tagairt dár gcuideachta roimhe seo. Agus cé go raibh am SARS ann chomh maith. Ná déan dearmad, bhíomar i do chónaí trí 911 freisin, rud a bhí an-mhór agus a bhfuil an pobal taistil domhanda ann a bhí míshásta a bheith ag eitilt ar feadh 3 go 4 mhí, ach, ar deireadh, bhí téarnamh ann. Mar sin, ar go leor bealaí, níl mé á íoslaghdú, ach ar go leor bealaí, is cás an-chosúil é anseo. Agus is dóigh liom go ndearna mé iarracht béim a chur ar an dearcadh fadtéarmach atá ag na haerlínte fós i mo ráitis ullmhaithe. Mar sin, go hachomair, i roinnt cásanna, beidh muid ag cabhrú le hairgead a sholáthar trínár gclár comhardaithe agus ag ceannach aerárthaí, i gcásanna áirithe, beimid in ann cuid de na híocaíochta léasa a iarchur go páirteach nó i roinnt cásanna. De ghnáth, bailímid sin thar an gcuid eile de théarmaí léasaithe nó fad léasaithe na n-aerárthaí seo. Tá roinnt rudaí eile ann ar féidir linn a bheith ag magadh orthu. Ach is dóigh liom gurb é seo an pointe atá againn cheana. Tá uirlisí agus teicnící againn atá cruthaithe go maith chun déileáil lenár gcustaiméirí. And I think the important thing for us to do is recognize this as a time to differentiate ourselves for our customers by helping them. That was the biggest tailwind for the start of Air Lease. Everybody that came to us in that first year said, “Hey, remember when you guys helped us here or there.” And I constantly emphasize that to our team. So certainly difficult times. But in the big picture, we’ve seen this before. We have plenty of tools and big balance sheet capacity to help with it.

————————————————– ——————————

Catherine Maureen O’Brien, Goldman Sachs Group Inc., Research Division – Equity Analyst [9]

————————————————– ——————————

I appreciate that. Maybe one quick follow-up to that, John. And then a separate question. So the quick follow-up would be, given the lack of narrow-body supply right now in the market, do you already have line of sight on some carriers who will be more than happy to take any aircraft that you buyback from those Chinese carriers off your hand?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [10]

————————————————– ——————————

Yes. Sure. As Steve indicated, we’ve got about a dozen carriers in Europe that probably feel that they will not have their summer season made because of the MAX, even if we have a May or June, green light by the FAA. EASA still has to give their green light. Foreign authorities do. And so yes, we have a dozen airline operators just in Europe alone that are asking us for aircraft. So that’s why I said in my prepared remarks, not only will this help our own growth in 2020, but it will help our airline customers, particularly in Europe, get through the summer season that they’ve already booked. And now for the second summer in a row, will likely not have their MAX lift.

————————————————– ——————————

Catherine Maureen O’Brien, Goldman Sachs Group Inc., Research Division – Equity Analyst [11]

————————————————– ——————————

Ceart go leor. Understood. And then maybe just on the managed vehicles. In the past, you’ve talked about one of the benefits of these managed vehicles being that, you can continue your relationship with the airline customer, which you just noted the importance of that. And so — but like while still managing your fleet concentration. So has your managed fleet continued to grow? How has maintaining these relationships helped you most? Is it all about having more consistent dialogue with airlines and just being their fleet needs or something else I’m not thinking of?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [12]

————————————————– ——————————

Yes. Sure. It all comes down to our global depth and reach across the customer market base. The more touch points, the more depth we have in that, the better it is. And the more tools we have to help our airline customers. So it’s been a huge positive win for us, and that’s why we want to continue on this management business track. We can do so much more by controlling more aircraft. We don’t always have to have those aircraft, primarily on our balance sheet, and that’s the beauty of the management business.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [13]

————————————————– ——————————

One more comment. The airlines that — our customers, when we sell them the aircraft, generally, the airlines prefer that we continue the management of those assets rather than having a new party, in many cases, they don’t have any relationship with that other lessors. So overwhelmingly, we’re seeing airlines express a preference for the continuation of Air Lease being into the — in the relationship on those aircraft.

————————————————– ——————————

Oibreoir [14]

————————————————– ——————————

Our next question comes from Helane Becker with Cowen.

————————————————– ——————————

Helane R. Becker, Cowen and Company, LLC, Research Division – MD & Senior Research Analyst [15]

————————————————– ——————————

Just an accounting question, Greg. These receivables, as you help your customers, will that — I mean, the help you give your customers will show up in aircraft receivables. Is that correct? Is that how we can monitor this going forward?

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [16]

————————————————– ——————————

Not necessarily. A lot of the — if there’s rent deferrals they will get — the straight-line amounts will get — it depends — it actually depends on which solution and the method in which we provide the help. But very rarely does it wind up increasing the receivable balance.

————————————————– ——————————

Helane R. Becker, Cowen and Company, LLC, Research Division – MD & Senior Research Analyst [17]

————————————————– ——————————

Ceart go leor. That’s actually very good to know. The other thing I wanted to ask is, I know we’ve all gone through this before and I’ve done some work in this area. In China, 10,000 — 10 million people rather traveled outbound in the year 2000 and 162 million people traveled outbound in 2018. And they were 16% of — or they’re 16% of global economy now versus 4% during the SARS time. Are you concerned that these numbers are so much bigger now that the recovery time will be more than just sort of back half of the year?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [18]

————————————————– ——————————

Look, I think it’s a possibility. It’s one of the reasons that I commented in my prepared remarks that we envision this could very well be a year with 0 to negative passenger growth rate for some of these same reasons you talk about. So let’s say that it does take a little bit longer, that’s certainly true. But I think the bigger point to impress upon you here is that over the longer term, and whether it’s near or medium term, the airline traffic does recover. Steve commented in his prepared remarks about the vital essence of air transportation and global commerce and human connectivity. So it may be a bit longer this time, kind of hard to speculate. The severity does seem worse. But again, we’ve always taken a long-term view on our business, and we think that’s the case now.

————————————————– ——————————

Helane R. Becker, Cowen and Company, LLC, Research Division – MD & Senior Research Analyst [19]

————————————————– ——————————

Ceart go leor. That’s really helpful. The only other thing I had was, on one of the last conference calls this year, we talked about the fact that, and you pointed out, Steve, that China and Asia were going to be declining or certainly China a declining portion of your investment and U.S. and North America would increase. And I see that happened actually year-over-year ’19 versus ’18. So how are you thinking about getting — where are you thinking about China and sort of Canada — or U.S. and Canada, North America going to in the — as a percentage of the fleet?

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [20]

————————————————– ——————————

Look, as John said, China will continue to grow once we get out of this short-term sort of aberration. But I think long before the medical crisis that arose in the last 60 days. We had already programmed our fleet portfolio composition to have China, Mainland China, be right around 15% to 16%. So kind of in a rough way, 1/6 of our fleet would be dedicated to China. And then a significant part of that 1/6 will operate in long-haul international operations, with A350s, 787s and so forth. So of the 15%, a portion of that will operate domestic and regional services in China and Southeast and Northeast Asia, and a large part of the investment we have in China with the airlines. Our wide-body aircraft that will operate to North America, Europe, Australia and some of the larger regional airports in Japan, Singapore and so forth. So does that make sense?

————————————————– ——————————

Helane R. Becker, Cowen and Company, LLC, Research Division – MD & Senior Research Analyst [21]

————————————————– ——————————

Yes.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [22]

————————————————– ——————————

Even if we further divide the 15% into various components of what those airplanes are really doing.

————————————————– ——————————

Oibreoir [23]

————————————————– ——————————

Our next question comes from Koosh Patel with Deutsche Bank.

————————————————– ——————————

Koosh Rohit Patel, Deutsche Bank AG, Research Division – Research Associate [24]

————————————————– ——————————

Just as I look at the order book for 2020, you have a healthy mix of new tech aircraft from both the major OEMs delivering this year. So just as we think about some of the various production issues that each of the OEMs have been experiencing over the past couple of years, could you help us get a better sense of what percentage of the $4.1 billion in CapEx that you’re expecting to deliver might be at risk of getting pushed into next year? And if you don’t have a specific figure, maybe you could just talk to us about what some of the biggest areas you perceive to be of concern?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [25]

————————————————– ——————————

Sure. Look, let’s just separate now for this purpose, Airbus and Boeing. We — let’s start on the Airbus side, and you’re really talking about most of the single aisles here, the A321neos, specifically. We already have been experiencing 3 to 5 months delivery delays all throughout ’18 and ’19. So if you will, some of the aircraft we’re taking delivery in the first quarter of this year already should have been delivered last year in the same way some of the aircraft that were in the third or the fourth quarter scheduled for 2020 originally, for our contract agreements will slide out. So in effect, we’ve already had a slide. So the bottom line is we don’t anticipate on the Airbus side, on a net-net basis, any significant variance. Now that could change. Recently, there has been some developments further issues on the Pratt & Whitney geared turbofan, which may cause Pratt & Whitney to divert a bit more of their production into support the fleet of the aircraft that are in service as opposed to go into production. That remains to be seen, but that is a possibility.

And of course, we’ve already commented on the MAX. We believe we’ll take 4 this year. We hope that it will be more. We’d welcome to have more, but it’s a big process to work out with our customers. So I think the bottom line is, I think that $4.1 million (sic) [$4.1 billion] appears today to be pretty solid. And we’ve already been living with these delays for a while. So certainly, if there’s a major impact to that in the next quarter or so, we’ll let you know. Airbus is currently running about 5 to 6 months late on their A321neos. I think that’s been well documented by other airlines and lessors as well. So — but I guess, if there — if there is good news here, it’s that this has been going on for several years now. So the spillover effect has been happening.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [26]

————————————————– ——————————

I think in the next earnings call in May, I think we’ll have a better sense on where Boeing is headed on the certification of the airplane. And also, we’ll see how Airbus is performing, particularly in Hamburg on the A321neo. But as John said, it’s conceivable that we may have 1 or 2 A321s that may slide into ’21. It could also be that since those aircraft are follow-on configurations, they’re not the first of that tied to an airline. Airbus could very well meet these objectives. The biggest question mark and the unknown is really the 737. Because currently, we’re conservatively planning 4 aircraft but it could be as many as 20 aircraft and everything in between. So we really have very little visibility until we have the regulatory revalidation both from the FAA, EASA, the European authorities and also the Chinese, Canadian and Russian authorities.

————————————————– ——————————

Oibreoir [27]

————————————————– ——————————

Our next question comes from Jamie Baker with JPMorgan.

————————————————– ——————————

Abdulrahman S. Tambal, JP Morgan Chase & Co, Research Division – Analyst [28]

————————————————– ——————————

This is Abdul on for Jamie and Mark. My first question is, aircraft likes to talk about how new their technology is and how old their current or older technology is. So is that the right way to think about it? And is that the right way to think about ALC’s portfolio strategy as well?

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [29]

————————————————– ——————————

I think we have a very simple and demonstrated strategy for managing residual value risk, right? We have young airplanes that we bought at attractive prices. We put them on long-term lease, and we hold them for the first 1/3 of their useful life. And we have a demonstrated track record of executing sales dispositions to people that enjoy the 2/3 of the life that’s remaining. So to me, it’s a very simple strategy. It’s easy to understand, and it’s proven, and that’s how we manage our residual value risk.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [30]

————————————————– ——————————

But to say that a 5-year old 737-800 is somehow — should be classified in a different category. When you look at today’s fuel prices, if you look at the maintenance cost of the aircraft and compare it to the MAX, the cash operating cost differentials are very, very small.

————————————————– ——————————

Abdulrahman S. Tambal, JP Morgan Chase & Co, Research Division – Analyst [31]

————————————————– ——————————

Got it. Ceart go leor. And my next question is. How feasible is it to take the aircraft out of China and move into Europe as you kind of mentioned before? How quickly can this be done given the need to reconfigure the claims? And for example, if you take the plane out in March, could you have it ready within June?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [32]

————————————————– ——————————

Yes. We already are, in fact, very close to taking delivery of two 737-800s, for example, out of China that we already have placed in Europe. And so if you’re talking about like, I don’t know, like travel or something. I mean, no, that is happening and there’s no impediments to that. The airlines are gearing up for it. So those types of operations are still going on. Aircraft movements are still taking place. So we really don’t see any…

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [33]

————————————————– ——————————

I think his question is geared at the ease that we can do the sale leaseback to help our customers with the coronavirus and in that situation the customers are very willing (inaudible) facilitate that process.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [34]

————————————————– ——————————

And keep in mind that we have leases already with these airlines. We have leases on aircraft that we leased them. So the documentation already exists for the majority of the paperwork involved. All we have to do is insert the aircraft involved and the new commercial terms for all of the legal and regulatory insurance issues are already agreed between the airline and us.

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [35]

————————————————– ——————————

If you’re a smaller or medium-sized airliner in China, Asia and you need cash, and we’re about to write you or wire transfer a big check, you can bet your bottom dollar that transaction will happen expeditiously.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [36]

————————————————– ——————————

And by the way, that could take 2 forms. We have discussed with airlines in China that we’re ready and willing to purchase, for example, A320 category, A321, 737-800. We would consider purchasing an aircraft and taking it out of China and leasing it to one of our customers in Europe. We can also consider a sale leaseback structure, where we buy the aircraft, create liquidity for the airline and lease that airplane back to the Chinese carrier or an Asian carrier for 3 or 4 years. So those are different scenarios that we’re happy to discuss with our customers.

————————————————– ——————————

Oibreoir [37]

————————————————– ——————————

Our next question comes from Moshe Orenbuch with Crédit Suisse.

————————————————– ——————————

Moshe Ari Orenbuch, Crédit Suisse AG, Research Division – MD and Equity Research Analyst [38]

————————————————– ——————————

Happy 10th anniversary to everyone. I was hoping that — most of my questions actually have been asked and answered, but while you were doing your prepared remarks, AerCap announced that they actually had done some rescheduling to defer deliveries of MAXs with Boeing. Are there opportunities to create additional value for Air Lease and its customers through this process that you’re working on that you could share with us?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [39]

————————————————– ——————————

Yes. Look, as you can imagine, these discussions have been ongoing for months. And we’re always orienting it out towards an outcome to have a win-win-win, where we can help Boeing in some of these circumstances and taking aircraft earlier. We are more than open. If we can help in other situations where there’s critical delivery needs and maybe we have an unplaced position and we don’t have that many left, but if we have an unplaced position or we have a customer who says, you know what, if I can’t get this MAX by September, October, I don’t want it until April, we’ll give that position up to Boeing to satisfy our bigger needs. So this is really part of a very large framework and fabric and puzzle where all parties work together in good faith. I do believe that we’ll be able to get some advantageous either positions or opportunistic aircraft buys where they be from Boeing or other. But that’s what we do. I mean, this is how we can move quickly. This is what we offer. So I’m pretty confident that we’ll be — it’ll be a net positive for us.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [40]

————————————————– ——————————

Yes. We have daily consultations with going leadership. We are up there frequently, in Seattle, Chicago, to make sure that both sides understand where we’re headed. And we’re working this on a customer-by-customer basis. So we’re very sensitive to our individual airline requirements on the 737-8 and the 737-9s that have already been built or will be built shortly after production resumes.

————————————————– ——————————

Moshe Ari Orenbuch, Crédit Suisse AG, Research Division – MD and Equity Research Analyst [41]

————————————————– ——————————

Got it. My follow-up question for Greg. I mean, you talked about the fact that you’re basically able to finance at the lowest level you’ve seen. So how much debt kind of gets repriced? Or how much will be issued during 2020 to kind of take advantage of that? And what percentage of the total? And how much lower do you think the cost will be than your average?

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [42]

————————————————– ——————————

I guess, the way I look at it, we did $1.4 billion in January. We typically do between $3 billion and $4 billion in financing a year. A lot of that is weighed with how much we wind up-selling to because of another source of financing. And a lot of that is also dependent upon where interest rates are. Right now, when the rates are the way they are, we typically load up on liquidity and lock in long-term financing. So it’s kind of hard to guide where we expect our composite cost of funds to go. But given the rate environment right now, we feel pretty happy that we were able to lock up our lowest 5-year coupon as well as our lowest 10-year coupon in January.

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [43]

————————————————– ——————————

I would just add one other comment that we are mindful that this is an election year. And so the majority of our financing will be concluded and done well before we get into the end of the year and any election jitters in the marketplace, et cetera, et cetera. We’ve already well thought that out.

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [44]

————————————————– ——————————

And one other thing to add to is, as I mentioned in the prepared remarks, we’re about to pay off a $400 million issuance that we did 7 years ago. That carries a coupon of 4.75%. And that’s well north in 200 basis points where we’re currently borrowing today. So I think that bodes well for our future composite cost of funds.

————————————————– ——————————

Oibreoir [45]

————————————————– ——————————

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

————————————————– ——————————

Kristine Tan Liwag, BofA Merrill Lynch, Research Division – VP [46]

————————————————– ——————————

Steve, in your prepared remarks, you highlighted that aviation is only 2% of man-made emissions globally. Do you think that focus on carbon emissions in aviation is a fad or a long-term trend?

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [47]

————————————————– ——————————

No. This is a very important trend, both in Europe and North America, particularly. And we are talking to IATA to make sure that the airline community has a singular voice because I think most people on the street are not really aware of the percentage of contribution that aviation makes to the CO2 emissions. So I think there has to be more education. I think people have to understand that in the last 30, 40 years, commercial aircraft have become quieter and have been able to improve tremendously in the area of emissions and fuel consumption. I don’t think the general public is as well informed. And both the airline community, the manufacturers and IATA and other groups need to communicate this to the general public. And also to the politicians and policymakers that are so focused on this issue.

The other thing, Kristine, is air traffic control. And what really frustrates me and John, because we’re pilots, is every time we fly to Europe, we’re putting the holding patterns. We fly a 300-mile leg between 2 cities but we actually wind up flying 500 miles. And so you have all these politicians making a lot of noise about airlines are polluting the earth. But they can’t get a united skies air traffic control system together in Europe, which would save hundreds and hundreds of millions of gallons of fuel and cut down on pollution and healthy environment. And just in that area alone, there could be significant gains made with very little investment. So instead of really killing the airlines, these politicians and leaders should look in their own backyard and see how incompetent they’ve been to modernize ATC systems in Europe.

————————————————– ——————————

Kristine Tan Liwag, BofA Merrill Lynch, Research Division – VP [48]

————————————————– ——————————

That seems to be the logical path. But I guess, what we’ve seen in the industry sometimes as they focus on other things. What seems to be something of focus would be what you’ve highlighted, which is newer aircraft that are more fuel efficient, also have lower emissions. So if they wanted to take the easy way out, it could be something focusing on those assets. Do you think that — yes, and you’re right, you mentioned you have a very ESG-friendly portfolio because you have a newer fleet. So if you’re an airline and you can’t really change politicians’ minds, but you want to make sure that you have a ESG-friendly fleet. One way to do it would be to focus on newer technology. If this continues to be the long-term trend and this is not the hard cap of fixing ATCs. What do you think happens to the average service life of an airplane. Does that get shorter?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [49]

————————————————– ——————————

No. This is John. Look, we’ve had other — environment is a big buzzword today. But 10 years ago or 15, we called it fuel, fuel efficiency. There’s other factors that drive the technology development of aircraft. And I think the fact of the matter is this is not a short year 1 or 2 or 3 or 5, 10-year phenomenon. Technology progresses, aircraft improve. In this case, we’re focusing and emphasizing on the environmental friendly aspects of the newest technology aircraft. But there’s absolutely no forces, despite this focus, the airline transportation network, a number of fleet globally now 28,000 aircraft, simply too large to be replaced in any short-term period. And therefore, the need for those aircraft continues. So we absolutely see no drive at all for a shorter aircraft life.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [50]

————————————————– ——————————

Kristine, 25, 30 years ago, noise was a huge thing. And the international regulators went from what they call Stage 2 aircraft to Stage 3. And everybody said, the Stage 2 aircraft are going to be obsolete. They’ll never go 25 years. What really happened? Boeing and Douglas, which were the 2 main manufacturers of those aircraft, came up with hush kits. And all of a sudden, Stage 2 aircraft became Stage 3 aircraft. So this notion we hear every few years that aircraft lives maybe are going to get shorter. We don’t believe in that.

And secondly, a lot of airplane types are cargo conversion candidates. We see that today with the older 737-800s, the A321ceo,is now becoming an intensive program for cargo conversion to replace 757 freighters. We see it on 767s. I think Boeing and several other organizations are working on 777 passenger aircraft to be converted to freighters. So those conversions will actually extend the useful life of these aircraft up to 30 to 35 years. So I don’t believe the environmental concerns will diminish the useful lives of aircraft. Plus, there’s parts of the world where this issue is not really front and center with the local politicians.

————————————————– ——————————

Oibreoir [51]

————————————————– ——————————

Our next question comes from Ross Harvey with Davy.

————————————————– ——————————

Ross Harvey, Davy, Research Division – Transport, Distribution and Logistics Analyst [52]

————————————————– ——————————

I have two. Firstly, compared to your 10-Q in November, you expect 34 less deliveries in 2020. In terms of the quantum, how much of that gap do you think could be filled with the sale leaseback and aircraft purchase offers you’ve made to your customers that you mentioned earlier in the call?

Secondly, of the $1 billion of sales, as Greg mentioned for 2020, how do you think that might split between sales and to manage platforms and sales and to independent third parties?

————————————————– ——————————

Gregory B. Willis, Air Lease Corporation – Executive VP & CFO [53]

————————————————– ——————————

I think it’s too soon to comment in terms of the split. I think it’s important that we have access to multiple channels to sell airplanes. I think it’s also too soon to comment in terms of the scale and the amount or the volume of sale leaseback transactions we will do to help out our customers but we have a substantial amount of cushion in our balance sheet right now. We’re at — we are below our debt-to-equity target, but it will be a very facts-and-circumstances approach to figure out how we help our customers on a case-by-case basis.

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [54]

————————————————– ——————————

Yes. Please bear in mind that it’s only in the last 5 or 6 working days that the dialogue with our Asian customers has become more intense to discuss their particular circumstances. And so we’re very early in that process of discussing with airlines what exactly are the optimal solutions to give them this short-term support, whether it’s through acquisition of aircraft, that we take away, sale leasebacks or deferrals of some short-term rents or applying other security deposits that we have for some assistance. This is in the very early stages of formulation.

I can add maybe to help where you’re going in terms of the split on aircraft sales with managed vehicles. If you look back, historically 2019, 2018, generally speaking, it’s been — about half of the aircraft sales have gone to managed vehicles, give or take, I don’t know, a few percent over the last several years, and that’s historically what we’ve done.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [55]

————————————————– ——————————

And one more thing, at the back end of the year, as we get into the third and fourth quarter, when we have more clear visibility on the Boeing and Airbus delivery situation, we can make adjustments to our aircraft sales at the back end of the year and maintain our debt-to-equity ratio and make the necessary fine-tuning for the full scale 2020. It’s too early as we sit here today to comment on what we’ll have to do at the back end of the year to make those adjustments.

————————————————– ——————————

Ross Harvey, Davy, Research Division – Transport, Distribution and Logistics Analyst [56]

————————————————– ——————————

That’s very helpful. As a follow-up, could I just ask, you’ve exceeded, obviously, your own original expectations at your 10th anniversary. And I might guess that the competitive landscape is also quite different to what you might have anticipated with a lot of new entrants, some interesting M&A. Do you have expectations you can set out in terms of the overall leasing space and the competitive landscape that you see in the coming years?

————————————————– ——————————

John L. Plueger, Air Lease Corporation – CEO, President & Director [57]

————————————————– ——————————

Well, actually, believe it or not, when we started Air Lease, we knew very, very well that we would be going into more competitive. We started at a time where the airline was — where the industry was starting from stress, the financial crisis in 2008, 2009. Some parent companies went out of business or were close to going out of business. So we knew going in that we would face an increasing competition. We had already seen back then and envisioned cheaper cattle coming in from Asia, China and Japan. So the truth is, that’s pretty much been borne out and we set our business objectives and did our plans accordingly.

I do think, as Steve alluded to, as the — as we have some stress now in Asia. Look, stress does one thing, it tends to separate the men from the boys. The long-term players from those that were just in for a shorter time. I do think that there will be some shake out there. And maybe we can take advantage of that. It’s hard to define right now. But in times of stress, the people that entered the business with ease, during times of capital of plenty and et cetera, et cetera, tend to get their mettle tested, and we’ve seen this before as well.

————————————————– ——————————

Steven F. Udvar-Házy, Air Lease Corporation – Executive Chairman of the Board [58]

————————————————– ——————————

And keep in mind that the total airline industry has grown more than 50% in that 10-year period, both in terms of traffic and number of aircraft being utilized. So the pie has gotten bigger. Yes, there’s more players in the space, but the overall size of the industry has grown.

And secondly, what’s really important, and it gets very little attention recently, is if we look at the period up to 2010, the export credit agencies, like the Export-Import Bank and the European ECAs were significant financiers or guarantors of financing of new aircraft for the airlines. Whereas in the last 5 years, it’s probably been less than 1% of the financing has come from export credit agencies. And the lessors have played a big role in displacing the financing that was traditionally done by the export credit agencies.

————————————————– ——————————

Oibreoir [59]

————————————————– ——————————

I’m not showing any further questions at this time. I would now like to turn the call back over to Mary Liz DePalma for any closing remarks.

————————————————– ——————————

Mary Liz DePalma, Air Lease Corporation – Assistant VP of IR [60]

————————————————– ——————————

Ceart go leor. Thank you, everyone. That is all for our call today. We will look forward to speaking with you again after the conclusion of the first quarter. Juwel, thank you, and you can now disconnect the lines.

————————————————– ——————————

Oibreoir [61]

————————————————– ——————————

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.

Share:

Share on facebook
Facebook
Share on twitter
Twitter
Share on pinterest
Pinterest
Share on linkedin
LinkedIn

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

On Key

Related Posts