Q4 2021 Air Lease Corp Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Air lease fourth quarter 2021 earnings Conference call.

At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session to.

To ask a question during the session you will need to press star one on your telephone if you require any further assistance. Please press star zero. It is now my pleasure to introduce head of Investor Relations Mary Liz Depalma.

Good afternoon, everyone and welcome to Air lease Corporation's fourth quarter and year end 2021 earnings call. This is Mary Liz Depalma and I'm joined this afternoon by Steve Harvey Our executive Chairman, John <unk>, Our Chief Executive Officer, and President and Greg Willis, Our executive Vice President and Chief Financial Officer.

Earlier today, we published our fourth quarter and year end 2021 resolve a copy of our earnings release is available on the investors section of our website at Www Dot Air lease Corp. Dot Com. This conference call is being webcast and recorded today Thursday February 19 2022.

The webcast will be available for replay on our website at this time all participants to this call are in listen only mode. Before we begin. Please note that certain statements in this conference call, including certain answers to your questions are forward looking statements within the meaning of the private Securities Litigation Reform Act. This include without.

<unk> statements regarding our future operations and performance revenues operating expenses stock based compensation expense and other income and expense items. These statements and any projections as to the companys future performance represent management's estimates for future results and speak only as of today February 17th 2000.

22. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the securities and Exchange Commission for a more detailed description of risk factors that may affect our results are.

Air Lease Corporation assumes no obligation to update any forward looking statements or information in light of new information or future events. In addition, certain financial measures we may be using during the call such as adjusted net income before income taxes, adjusted diluting diluted earnings per share before income taxes and adjusted pre tax return on equity are non-GAAP measures.

Scripture of our reasons for utilizing these non-GAAP measures as well as our definition of them and the reconciliation to corresponding GAAP measures can be found in the earnings release and 10-K, we issued today. This release can be found in both the investors and press section of our website at Www Dot Air lease Corp, Dot Com as a reminder, unauthorized.

According of this conference call is not permitted I would now like to turn the call over to our CEO and President John Cougar.

Thanks, Mary Liz and good afternoon, everyone and thank you for joining us.

I am pleased to report a strong fourth quarter for Air lease Corporation.

Our EPS for the fourth quarter of $1.64 per share rose, 32% year over year, and we generated $597 million in total revenue during the quarter up 22% relative to the fourth quarter of last year driving our total full year full year revenues to approximately $2 1 billion.

Both our fourth quarter and full year revenues marked the highest and air lease history.

Our revenues were driven by the growth of our fleet as well as an increase in cash collections and renewed aircraft sales activity.

Purchased 53, new aircraft in 2021 and aircraft investments totaled $3 6 billion with $1 2 billion occurring in the fourth quarter.

As a result of these deliveries the net book value of our fleet grew 12, 4% year over year and our operating cash flow was up 26, 3% for the full year 2021 benefiting from this fleet growth and rising cash collections, which improved in the fourth quarter to 99.

3% up from 94% in the third quarter.

And as a testament to our young modern fuel efficient fleet. We ended the fourth quarter with a lease utilization rate of 99, 8%.

As you see we resumed our aircraft sales activity during the fourth quarter looked.

Looking forward as is normal during the course of our sales program. We're looking to execute further aircraft sales primarily in the second half of 2022 targeting approximately $750 million in sales for the year, but dependent on our actual level of deliveries from Boeing and Airbus.

More on that later.

Based on these results and the results of our third quarter, we believe that the second half of 2021 marked the inflection point in pandemic recovery of the global airline industry.

Demand for new single aisle aircraft from our order book is accelerating with diminishing supply and future availability from both Airbus and Boeing.

Our order book is 99% placed through 2023.

Reflecting this demand you've seen our announced recent large scale placements with Iga in Italy, with Malaysia Airlines and others with more larger scale placements soon to be announced.

The strong freight and cargo markets are also lending support, particularly to wide body passenger aircraft, which are increasingly being used and relied upon for their freight carrying capability.

Higher oil prices are causing a renewed focus on operating efficiency replacement of older less fuel efficient aircraft and meeting environmental sustainability goals.

The overall increased demand coupled with rising interest rates and inflation.

We're providing the catalyst for a rising lease rate environment and we're seeing this in the marketplace.

<unk> airline balance sheets are still strained and in recovery mode further driving lease demand.

With all this in mind as you saw late this fall, we finalized an order with Airbus to purchase 116 aircraft, including 25% to <unk> 59, <unk> hundred 21, <unk> 20, <unk> hundred 21, new <unk> five <unk> hundred 39, hundreds and for the first time seven <unk> hundred 50 freighters.

I am proud to say that this order marks the largest individual order for new aircraft in our company's history.

And today I am happy to announce that we are adding 50 additional Boeing 730, 789 aircraft to our order book for delivery in 2024 through 2026 of which many have already been placed.

Now. These 50 aircraft consist of 32 additional Max aircraft plus the conversion of three 787 order positions into 18 37 Max positions. So in summary, we are adding 50, Boeing 730, 789 aircraft in our order book and reducing our 787 orders by three <unk>.

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By these order additions we believe ALC now has the largest combined order book, specifically with Boeing and Airbus of any lessor.

ELC has no orders with other manufacturers.

With our highly variable order book, we are of course watchful of OEM supply chain stress and any other production constraints that may impact our forward deliveries over the next several years.

We are no stranger to notifications of delivery delays from both Airbus and Boeing.

We continue to experience several month delays from Airbus Most specifically on the <unk> hundred 21 anywhere.

And from Boeing there remains a high degree of uncertainty about resumption of 787 customer deliveries. So for example, although you see in the commitments section of our 10-K that we have 10 Boeing 707 aircraft contracted for delivery in 2022 at.

At this juncture, we forecast taking delivery of only one 7%.

Now this could change and hopefully improve but it's our best estimate today as.

As Boeing has reminded the world the resumption of 787 customer deliveries is ultimately determined by the FAA and no timeframe has been given for that.

So looking forward to the remainder of 2022, although we are contractually committed to take delivery of 85 aircraft.

For the reasons I've, just outlined that number will likely be lower.

Such that we believe aircraft investments are more likely to range from approximately three 5% to $4 5 billion in 2022.

Now in the first quarter, we expect about $650 million of aircraft investments.

As we've done in prior years, we will be looking for additional attractive aircraft investments in the secondary market or through strategic sale leaseback transaction, where we can simultaneously couple direct placement of our order book aircraft as you saw us do successfully in 2021.

To take advantage of these opportunities we continue to have a strong liquidity position of $7 9 billion.

And enjoy ongoing access to the investment grade capital markets and.

In 2021 alone we issued $3 7 billion of notes with a weighted average interest rate of 1% to 7%.

Since the beginning of 2020, when the pandemic began we've raised over $9 billion in the capital markets in our composite cost of funds at the end of 2021 was $2, 79%, which is the lowest in our company's history.

As we enter a rising interest rate environment, we expect that our strong balance sheet and credit metrics will allow us to continue funding our competitive rates as compared to our customer base. We also continue to have interest rate escalators in our leases, which provide for adjustment of the timely delivery of the aircraft to reflect the interest rate environment. We're in at the top.

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Although the airline industry is on the road to bad debt recovery and by our actions you'll see our overwhelming confidence in the future at the same time, we are mindful that full recovery of the global airline industry will not happen until we see accelerated international travel recovery.

In that context, and as we've said before Asia lags in this regard.

But we're starting to see the beginning of recovery in Asia recently in countries like Vietnam have resumed international destinations as well as relaxing COVID-19 restrictions.

India and Thailand are following suit in Australia, and New Zealand are also reducing restrictions.

There has been little change in this regard however, with respect to China.

Overall, the airline industry is recovering but remains under pressure and we continue to see certain airlines in distressed condition, where restructurings may still take place.

I would remind everyone. However that this is the nature of the airline industry with or without COVID-19, our job is really no different and that is to be disciplined to make the best credit decisions possible and place our bets with airlines. We believe are in the best position looking forward.

Further looking geographically of course political tensions between Russia, and Ukraine has been at the news forefront.

We continue to monitor the situation, but ALC has only small exposure to both Ukraine, and Russia totaling under 5% of our fleet net book value as of the end of the year and we enjoy good cooperation with our airline customers in those countries.

In summary Air lease Corporation was started as a clean sheet of paper in 2010 and since day, one our strategy has been placing new aircraft from our order book on long term leases to a diversified group of airline customers around the world.

This focus has been critical to the strength of our platform to date and has proven its worth through good times and as we've experienced the COVID-19 pandemic were difficult times as well.

As our industry continues its path of recovery with an intense focus on sustainability.

Confident that the experience in global relationships of our team coupled with our offering the most technologically advanced and environmentally friendly airliners obtainable will continue to set us apart.

Further highlighting the basis of our confidence I'll now turn the call over to Steve Harvey for additional commentary and announcement of the share repurchase program just authorized by our board Steve.

Yes.

Thank you John .

Great I wanted to commend our entire air lease team.

The results that were achieved in the last quarter of last year and also for the full year 2021.

This was a very challenging year.

But I think since the inception of air lease.

Our entire management team and support staff has taken tremendous pride in being a long term partner to the commercial airline industry.

That commitment is truly tested during difficult times and.

And everyone at ALC has stepped up to the plate and the past two years.

As we and the broader aviation community have worked to get.

Incidents recovery phase.

Our team takes an individualized approach to all of our customer decisions and accommodation.

Which is the right long term decision for our business.

This last quarter of 2021.

Evidence of that.

Long after we have move past COVID-19.

Those airline customers, we helped during a time of stress.

Will experience growth and a recovery in passenger demand.

And we will look to modernize and grow their fleets and air lease will be there to assist them with our aircraft and our professional expertise.

As the Delta Omnicom variance has shown us.

We cannot control each phase of this recovery, but we are moving in the right direction.

2021 was evidence of that with continued improvement in passenger traffic with a few bumps along the road.

But if we focus on the latest data from IATA specifically.

Specifically on the domestic traffic side.

Story is very clear and obvious.

We'll have the desire to travel by air.

<unk> reported that passenger traffic was up 80%.

In the month of December 2021.

Relative to the prior year.

As we all know travel restrictions domestically.

Have been much less.

Then internationally.

But even as the international side.

<unk> continued to have restrictions, we have reasons to be optimistic with December traffic levels significantly improved over the prior year.

And this improvement is despite omnicom.

While this varian has slightly elongated the recovery of passenger traffic.

Its impact on it has been relatively minor compared to the initial onset of COVID-19 earlier in the pandemic, particularly in the first.

Three quarters of 2020.

With more than one sorry with more than 10 4 billion doses of the vaccine.

Already administered across 184 countries.

We are hopeful.

That continued distribution of vaccine.

In other medical breakthroughs.

Become a tailwind for reopening of travel routes and lessening of restrictions as.

As we progress in the year 2022.

In fact, despite magic mandate testing protocols and other requirements.

People have adapted and adjusted their routines to get back in the air.

We believe that this trend will continue to accelerate.

In 2022.

Meeting with and speaking to airlines globally I can tell you that we are now past the inflection point.

And you can see that with airlines in various regions of the world.

Posturing in making large fleet planning decisions.

Just in the past few months <unk> signed large transactions with Iga in Italy, the successor to Alitalia for the placement of 31, new Airbus aircraft.

Which spirit Airlines in Florida for 15, New Airbus <unk> hundred 20, <unk> hundred 21 Neo aircraft.

And as you saw with our announcement a few days ago 25, New Boeing 737, Max aircraft with the Malaysia Aviation group.

Which is the owner of Malaysian Airlines.

All of these are long term leases.

And every one of these placement is unique as our team customize our fleet planning solutions with.

But the goal is that these airline customers.

And they are focused on fleet modernization and having more efficient aircraft in their fleet.

And as John mentioned, you will see added announcements from us in the near future about further large new aircraft lease placements from our order book.

In addition to future placements.

This quarter, we've continued deliveries of both narrow bodies and wide body aircrafts.

Give you examples of the regional diversification of our deliveries in Asia, Despite slow international growth in passenger traffic.

We did deliver a new AC 21, new LR aircraft to Peach Aviation in Japan, which is an affiliate of all Nippon Airways.

200, <unk> hundred 21 Neo aircraft.

China Airlines in Taiwan, and they will lease six in total.

One additional <unk> hundred 21, Neo LR aircraft the tissue on aircrafts.

Alright, just one on your lines in Chengdu, China.

And one additional <unk> hundred 21, new LR to Arizona.

We also delivered another AC 21 neo start in your lines in India.

In the United States, we delivered four new Boeing 787 Dash nine aircrafts.

So a good customer Alaska Airlines as.

As part of a larger fleet placement with them that was announced in the latter part of 2020.

In Europe , we delivered one new <unk> hundred 51000.

Wide body aircrafts, Eric Lee.

In Paris, and one new <unk> hundred 51000 with tragedy as well as another new <unk> hundred 51000.

To Virgin Atlantic Airways.

Airlines have not shied away from taking delivery of new aircrafts and making decisions today.

They know will be necessary for their future success.

We feel the same way, which is why as you heard briefly from John We felt the recently announced orders with Airbus and Boeing where necessary and appropriate for the long term success of our platform and corporate strategy.

In addition to John's remarks, I want to briefly comment.

On our entry into the freighter market.

This is a market we have been looking at for some time it.

It was strong as we entered the pandemic, but.

But the dynamics, resulting from COVID-19.

Have accelerated those trends.

Fueled in large part by the continued growth on a global scale of E Commerce.

Which we view as being strong for the foreseeable and long term future.

E Commerce provides a stabilizing factor that.

That was missing in the more volatile interstate marketplace in prior decades.

And continued bottleneck container shipping ports globally also as vitalize the air cargo demand.

And we do not really see the situation the BD.

So we felt it was time to make a move into this marketplace by speaking to our philosophy.

Of ordering the most technologically advanced and the most fuel efficient aircrafts.

With the new <unk> hundred 50 trader.

You recently see our decision validated by growing order book of airline customers.

The <unk> hundred 50 freighter program, including Singapore Airlines.

In France.

<unk> and CGM Air cargo group in Europe .

As many of you are aware we were the launch customer of the <unk> hundred 21, LR as well as the <unk> hundred 21 XLR.

And those aircrafts have proven to be extremely successful.

With our broad spectrum of airline customers.

Our goal is to always ensure order book comprises of the most desired aircraft types.

As we emerge from this pandemic and as such we are pleased to be a launch customer of the <unk> hundred 50 freighter.

We've also been pleased with developments with the 737, Max in terms of performance and reliability.

Since resumption of deliveries.

Our airline customers have been giving us good reports.

As such it should be no surprise that lease rates on 780 Sevens are recovering.

And the forward demand profile is robust.

We believe that any passengers stigma is largely dissipated.

And confidence is return that a pilot community.

Deliveries of our new Max orders spanned across $2024 25 and 26.

And this is a period that I would like to point out that Airbus is now virtually sold out.

On the single aisle Neo program.

So we believe that air lease is in an excellent position.

To be able to offer both Boeing and Airbus single aisle solutions from our order book.

And those critical years.

Head.

As the airline industry recovery accelerates strongly.

Our forward Max lease programs are not dependent on placements in Russia, where certification is still outstanding.

<unk> in China.

When China's it with an objective needs incorporation for airlines to fly the Max.

Finally.

Our exciting <unk> to 'twenty program and placements are doing extremely well and progressing.

Which is why at the end of last year as part of our Airbus ordered we exercised our option for 25 additional 8% to 20.

This brings us up to 76 firm orders from <unk> to 'twenty family.

We're seeing growing momentum in replacing aging 737 seven hundreds.

<unk> hundred 19, and large sized regional aircraft with more fuel efficient and capital efficient $8 20.

To date, our placements have resulted in four new airline customers for the 8% to 20 program.

And this is certainly an area that differentiates ALC from other.

The lessors in the eyes of the AOS.

Simply put air lease is a market leader and aircraft types, bringing.

Bringing new airline customers to both Airbus and Boeing So our fleet planning and leasing platform in many cases, our lease placements lead to further direct orders.

That aircraft side by the airlines to the Oems.

This is the very reason that ALC enjoy status and attractive high volume pricing with Airbus and Boeing.

We don't just buy aircraft.

Find and bring new customers to each aircraft type in our order book of new aircrafts.

As our recent orders indicate we're still.

Doing investing in new aircraft on long term leases.

Is providing the highest possible return to our shareholders over the long term.

However, we also view alc's own stock valuation is an attractive element of our overall capital allocation strategy.

As such today I'm happy to advise.

And in addition to declaring our 37th consecutive quarterly common stock dividend.

Our board of directors has authorized another share repurchase program.

This site for $150 million.

To begin effective immediately.

Through September 32022.

I'd like to point out that this is a 50% increase so the $1 million $100 million share repurchase program, our board authorized last year, which expired at the end of December and.

And we are pleased to have this new program available to us.

And with that good news I'd like to turn the call over to our CFO Greg Willis.

To provide more details and color on our financial results for the fourth quarter and for the full year 2021.

Thank you, Steve and good afternoon, everyone.

For the fourth quarter of 2021, ALC generated record revenues of $597 million up 22% as compared to the fourth quarter 2020.

This was comprised of $563 million of rental revenues and $34 million of aircraft sales trading and other activities. The increase in our rental revenues was primarily driven by the growth of our fleet the.

The effects of improved cash collections from our lessees.

$24 million of aircraft sales. In addition, this quarter, we had approximately $30 million of end of lease revenue.

<unk> from our successful transition to five aircraft.

Overall, we have witnessed an improving environment with our lessees as a result, we have seen a notable rise in our cash collection rate to 99%.

With cash basis recoveries, increasing to $12 million and restructuring is decreasing to $24 million.

At the end of the fourth quarter, approximately 6% of our fleet by night book value was accounted for on a cash basis.

It is down from 10, 6% at the end of the third quarter How's.

However, our outstanding deferral balances did increase to $203 million, primarily due to the positive resolution, we have reached with Vietnam Airlines.

I would like to highlight that the majority of our outstanding deferrals will be repaid within the next two years.

Moving to expenses.

<unk> expense increased year over year, primarily due to the rise in our average debt balances drew.

Driven by the growth of our fleet.

Partially offset by a decline in our composite cost of funds.

Our composite rate decreased to $2, 79% as of year end from $3, one 3% in the prior year.

Depreciation continues to track the growth of our fleet, while SG&A rose over the course of 2021 as we return to a more normalized level of operating expenses as compared to prior years SGS.

SG&A was particularly elevated in the quarter as a result of increased business.

This activity and expenses related to aircraft transitions.

Finally, I want to touch on our financing activities, which remains a competitive advantage for ALC just given the strength of our balance sheet. In addition to achieving record low composite cost of funds. We kicked off 2022 with another hallmark transaction raising $1 5 billion in senior unsecured notes with a weighted average interest rate of two five.

Percent, which is inside our composite cost of funds.

The 10 year tranche of this transaction marked our lowest coupon for a 10 year issuance at 287, 5% in our history.

This transaction takes care of all of our remaining maturities for 2022, putting us in a very strong position as we face a rising interest rate environment with 90%, 95% of our debt being fixed rate.

We also increased the capacity of our revolving credit facility by approximately $300 million to $6 8 billion and we will continue to maintain elevated levels of liquidity until the broader aviation market fully recovers.

As you've heard from us in the past, we will remain firmly dedicated to maintaining an investment grade balance sheet utilizing unsecured debt as our primary form of financing and we have approximately 26 billion in unencumbered assets at quarter end, which served us well throughout the pandemic.

We ended the period with a debt to equity ratio of two four times on a GAAP basis, which is which net of cash on the balance sheet is approximately two three times.

Finally, as a follow on to Steve's comments I would like to emphasize that we spent a lot of time internally focusing on capital allocation with the goal of maximizing shareholder value overall as such we are highly confident that the balance that we've struck between ordering additional modern fuel efficient aircraft, coupled with our share with our share repurchase program and continued quarterly.

Dividends will drive shareholder value for many years to come.

And with that I'll turn the call back over to Mary Liz for the question and answer session. Thank you. Greg. This concludes excuse me.

Management's commentary and remarks for the question and answer session. We ask each participant to limit their time to one question and one follow up now I'd like to hand, the call over to the operator to open the lines for Q&A session.

Andrew.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

To withdraw your question press the pound key.

Sure.

Our first question comes from the line of Jamie Baker with JP Morgan.

Yes.

Oh, Hey, good afternoon, everybody, so Steve <unk> John .

First question, Mark and I were discussing this looming narrow bodies shortage, which.

It is fairly well chronicled at this point I'm not sure if I'd call. It a consensus among your investors just yet, but I think we are.

We're moving in that direction, but when you look at the wide body market. What you are hearing from customers seeing with the Oems Youre comments on cargo.

How would you which sets the possibility.

That we might see starts talking about a meaningful wide bodies shortage in the next two to four years or do you think that your owners really shouldnt be thinking about that and we should just focus on the narrow body side.

Well, Jamie one of the things that investors should remember.

Look at the number of <unk>.

147, MD Elevens <unk> hundred 40.

And some of the oldest triple seven and <unk> hundred 30, <unk> that have been retired.

There is there is probably around 300 wide body aircrafts.

That is sort of disappear very quietly since 2019, so if you add up the cumulative capacity.

Of those aircrafts.

The total widebody fees actually shrunk.

And then to couple that with the fact that Boeing is not delivering any 780 sevens haven't delivered <unk> 77.

The spring of last year.

There is a momentum going forward toward equilibrium in the wide body space.

That is heavily dependent on.

And at least a modest recovery in international travel in the international business travel, what we're beginning to see green shoots, particularly in Europe , and the Middle East Latin America, where I just came back from a trip in Asia.

John highlighted so.

Look it's not going to be a speedy recovery as the single aisle aircrafts.

We are seeing a strong momentum to replace the oldest.

Wide body aircrafts that are reaching 20% to 25 years of age you to convert them to cargo.

Or.

Simply retired them and in addition, we've seen a lot of 767.

Being converted to creators in fact, I think there is about four.

Conversion lines in the world converting 767 300 yards to freighters. So all of those ingredients that really helped.

For a steady path toward recovery of the wide body market.

Jamie.

This really illustrates the basis of a philosophy, we've had <unk> heard several lessors over the course of the pandemic panicking about wide bodies.

Several have said I'm not getting any more reliable anymore, we're done blah blah blah blah, but that's just.

That always seem to us is just too much of a knee jerk reaction clearly clearly the portal needed widebody aircraft. It is the way that most international traffic over any reasonable distance is covered so there's just no way that wide bodies are dead or theyre not good investments.

A question of which wide bodies, you pick going forward and what you have in your fleet. So we've never ever even thought about banning the wide body space for the reasons.

Especially now that Steve has outlined and I do think that that's a key differentiator for <unk> Air lease now at the time at the current time of course, we are emphasizing narrow bodies. The vast majority of the order, we did with Airbus and Boeing and all the Boeing or.

All narrow bodies and that's great we move with the times, we move with current demand.

Boras picture you could you should never dismiss wide bodies.

Okay.

Jay need that.

Other items, changing but I think the investors need to think about and that is that the.

The fuel consumption of the wide body aircraft is significantly higher than the single aisle aircrafts.

But with the rising oil prices.

What we're seeing is that airlines are trying to sort of optimize their scheduling around the most fuel efficient aircraft.

Such as the <unk> hundred 39, hundreds for example at Delta and other carriers.

<unk> hundred 50 901000.

787 nine.

Ken.

And so we're seeing a greater understanding of the operating cost profile of these aircrafts.

And these newer technology wide bodies that tends to be kind of in the smaller medium sized wide body segment.

Are extremely attractive in this high fuel cost environment.

Thanks for that gentlemen, and just a quick follow up.

A question about appraisers.

Im sure you don't.

Been a lot of time or lose much time.

Much sleep thinking about value.

Some of your investors do and some analysts may have.

Steve.

The.

The appraiser community.

I guess over shocked on the downside for values and lease rates relative to what you're seeing.

We have a gas as to when that turn in more value might be.

For some owners.

These are metrics that but modest.

Jamie I'll offer one active on that and that is this generally speaking we find that the appraisers.

Not criticize them because they only go on historical data than they do on transactions that have been done but generally speaking the appraisers are usually similar somewhere between six and 12 months behind where the actual real time marketplace. As some are more aggressive some are less aggressive.

But clearly it's the data flow lags in the appraiser community.

Against real time transactions that we're seeing in the marketplace.

That's really helpful. Thank you very much both of you take care, even better I guess.

Two weeks.

Okay I will see you soon.

Thank you and our next question comes from the line of Catherine O'brien with Goldman Sachs.

Yes.

Hey, good afternoon, everyone.

So let me just start off following on the discussion on wide bodies.

The comment on wide body lease rates in the press release benefiting from from freighter shrank was encouraging.

I know your origin eighth re 50 freighters, but do you think the dynamics in the freight market are sustainable enough, where you'd look to increase your fleet exposure to freighters Marine Lee going forward or was that really just a comment meant more to highlight that cargo demand helps increase the value of wide bodies overall, including your passenger my body.

Well, we have not had any freighter aircrafts or dedicated freighter aircrafts in our fleet.

Since the inception of air lease so.

The order for the <unk> hundred 50 freighter is really our first.

Venture into the all cargo market. We are also planning to convert some of our <unk> hundred 30 aircraft into freighters.

Either a full freighters or small package freighters.

Between 2023 and 2027.

But relative to our total size of the balance sheet.

Our immersion to the freight market is really a very tiny.

Segment of our total assets.

Not a major shift.

A departure from our fleet strategy.

But we are talking to a lot of very.

<unk> freight carriers and combination airlines that both create and passengers that are extremely interested in <unk> hundred 50 trade it.

And I think to the main point of your question, we did not make this move without feeling very convinced.

That the freight marketplace has really fundamentally changed with the advent of E Commerce, and we say that is sustainable for as far as you can see in the future. It's really provided a lot of stability.

To that marketplace and so.

We are also in that process looked at.

The ancillary question, which.

<unk> has additional aircraft are reabsorbed and taken onto the airline's fleet, and especially especially as more wide body aircraft start flying again.

That deteriorate or decrease the overall appetite for freight and cargo.

And we've come to the answer no. We feel there is plenty of demand for dedicated freighters as evidenced by our <unk> hundred 50 freighters will make further aircraft freighter decision on the new aircraft side to see how time unfolds, Steve indicates our plans to convert some of our <unk> hundred <unk>.

But it's a new market for us, but it's a market we have jumped into <unk>.

On a pretty rigorous study of the capacity in the marketplace what happens when the current aircraft return in larger fold to international flying and we still think well and above then there is good demand profiles for the foreseeable future.

That's totally makes sense I mean, my mom, who didn't know how to reply to an email before COVID-19 now is ordering on Amazon every day.

Sure.

For my second question.

Just one for Greg just given where rates are today and higher spreads have trended over the last 18 months switches.

In a favorable direction of course should we expect to see our composite cost of funds continue to come down even in a rising rate environment.

Or maybe that's a little too rosy and then just any further refinancing opportunities coming or just the January issuance take care of that for the foreseeable future.

I think theres a couple of things to think about it I think the first you start with is the fact that we have 95% of our debt being fixed so it's very difficult to move our overall debt books, which is now closing in on 2000 17 billion. So it's hard to move the needle from that perspective, we will of course issue more debt this year.

We continue to take aircrafts into our portfolio that we've committed to buy but I think we're pretty I mean, it's hard to say where rates go in they do feel like theyre going higher but I think we have a significant amount of liquidity to allow us to access the market at appropriate windows are the most advantageous windows that present themselves to us.

So it's hard to say how much it will move it higher rates are going higher but I do feel that lease rates are going to go up a lot higher than what our composite cost of funds will go up and I think that'll help us into the future.

Yes, one other point on that is is that we have some debt maturities in the next two years.

Where the interest rate embedded in those bonds is higher than our composite rate today.

So every time, we can pay off the bonds.

That's more expensive than our average we're actually helping.

The company's balance sheet and reducing the.

The overall portfolio interest expense.

Okay, great Yeah, that's kind of where my head was going and maybe I'll just sneak one really quick one I wanted to clarify on your 787 comments, you said you're expecting to take delivery just one versus the 10 committed is that because youre unsure when Brian we will be able to deliver.

Did I hear you say something about customers are exercising the right to cancel them.

Okay.

If boeing ability or lack of ability.

That's the issue of the customers.

My remark in my remarks, it was very clear this is up to the FAA when deliveries can resume.

Theres just great uncertainty about that.

And so we have just made our best guests, it's not based upon cancellations. It's based on what we think is most likely to happen I want to say on that regard, we don't really have any better view on this than anyone else. So we're not projecting anything and as I also said that we hope it actually improves it'd be great for us if it did.

But just our reading of the situation now and the uncertainty that is there with the FAA recently of course, it was determined that it will not be giving Boeing.

Authority for.

For certification on the aircraft and the FAA is going to supervise that we don't know if that might mean additional time involved for example, so this is just our best guess.

Okay, great very clear so on to make sure I have that right.

Next question.

And our next question comes from the line of Vincent <unk> with Stephens.

Hey, Thanks for taking my question and Great results on your rental revenue performance this quarter.

Just wondering if you could maybe talk about as your new aircraft being delivered sort of what sort of lease rates, we can expect and.

Off of the fourth quarter and my approximately correct jumping.

Jumping off point is.

The $564 million less.

$12 million cash accounting recoveries are sort of all the way to think about it. Thank you.

So Greg why don't you take the last part of that question first so the jumping off point, maybe you could clarify that a little bit.

Have cash basis recoveries of $12 million, which is up I think from last quarter, we had about 5% so that was incremental above and beyond the normal.

Accrual basis accounting that we would have had for those individual airlines that helps.

Is there something more to your question in that.

Yes, definitely so the $5 64, just your I guess you had a cash accounting for last quarter, what was it about $40 million. So I should just add incremental film on top of that so maybe exceed it on a run rate basis.

Yes, that's a fair point.

I think its collections.

$12 million was was collectible or would have been booked in prior quarters that they've got caught up this period.

And on your lease rate question Vincent as you know, we don't we don't really comment specifically dollar wise or otherwise on lease rates in particular, but I can only say that in several of our aircraft types led primarily by the <unk> hundred 21, Neo and the XLR are they all are the lease rates are at now or in some cases slightly above what they were pre COVID-19 .

So we are returning to pre COVID-19 lease rate levels.

On the 320 21 Neo series of 737, Max is getting very close.

The <unk> hundred Twenty's as well.

And so I think.

We are very.

This has been very encouraging for us to see so suffice to say the short answer is they're at they're very close to or in some cases above pre pandemic levels.

We're also when I'm talking to airlines.

Recognize that.

Interest rates are going north south.

If there are alternatives to purchase an aircraft and get their own financing.

Those costs will rise and so.

Introducing high capital cost assets.

Not going to be as favorable for them either so leasing becomes a very very attractive alternatives.

Purchasing aircraft directly.

Getting traditional financing.

Okay that makes sense. Thank you for that color and then second quick follow ups. So nice to see the share repurchase authorization increase for this year. Just wondering if you can remind us how youre thinking about.

Executing on that share repurchase program versus other things such as of course, the aircraft deliveries and other opportunities to use the capital. Thank you.

Vince This is Greg I mean, we typically don't provide color at what levels, we buy the stock but.

We we spent a lot of time thinking about that and the board has authorized us to go out there and repurchase $150 million $150 million worth of stock over the next six months.

Through September 30, so.

We're going to make sure we.

Our best to buy.

By that at appropriate levels for four and creating shareholder value through it.

Okay, great. Thanks, so much.

Thank you.

Next question comes from the line of Helane Baker with Cowen.

I'm sorry.

Got it okay. Thanks.

Thanks, Operator, hi, everybody and thank you for the time.

Thank Steve or John you mentioned that Airbus is sold out and we know that to be the case right between on the narrow body aircraft between now and I think 2027.

Hi.

How are you doing I guess is the right word.

Convincing customers to switch from an Airbus too maybe to a Boeing if they need that lift in the short term. So let me let me just jump in on that I want to make sure. There's no misunderstanding. We now have positioned ourselves to have both the Airbus and Boeing prop.

From our order book available in those few years timeframe, we're not relying on the Max order that we just made to fill in what Airbus cannot provide we just simply point out as an ancillary comment Airbus is sold out and I think what youre going to be seeing shortly as Boeing getting very quick.

We sold out as well so our position is we have the advantage of having a good order book of both types to offer so as to our customers.

We continue to guide, where we think the best fleet decision is for them, it's not necessarily causing them to move from Ada B or b. The a we take a look at we made or May make our best judgments and we offer our opinions to our customers and we now have both are mentioning of Airbus being.

Sold out.

It's simply a statement of fact, but the reason we mentioned that as we have both we have both Airbus and Boeing in this timeframe.

Okay. That's very helpful. Thank you for clarifying that I appreciate it and then.

I asked you. This question last time too.

But I feel like in the last six months things have changed with respect.

The electric vehicle market it seems to be getting more acceptance there seem to be more Eric airlines going direct to the manufacturers and ordering them.

So has your thoughts changed on those aircrafts since the last time, we talked when I know a lot of these are ground replacement rather than real aircraft replacement, but how are you thinking about that at all now if at all.

Historically, we are not in the two to four passenger aircraft.

Leasing that's not.

Segment of the market that we're involved in.

We are closely following the technology and the.

Product development of a number of these.

Aircraft and helicopters, but.

We have to just be patient and watch this evolve.

And understand the asset values and the long term demand for these aircraft.

And the pace of technological change.

These small electric claims will be very quick.

So we don't want to be playing around with prototypes when two or three years later, there may be significant advances in technology and.

Operating economics so.

I think youre going to see early being very much.

Cautious in this segment.

But if we determine that there is a viable business opportunity that makes sense to complement what we already do well suddenly.

Get our feet wet, but right now I'd.

I'd say, we're more of a spectator than in a direct investor.

Yes that makes sense a fast follower.

Hi.

Okay, that's fine and those were my questions. Thank you.

You.

See you soon.

Yes.

Thank you and our next question comes from the line of Hillary kick in D&O with Deutsche Bank.

Hi, Thanks for taking my question.

Lastly, frontier and spirit.

And as you mentioned you had the full opening 21, Neil if I you have the group pace.

It's dependent on merger had closed on that lease agreement at all and I guess just on high level.

Would you say that airline.

A positive for the lessors or a negative for the lessor, perhaps given that.

So the company following the merger.

Online could perhaps have more than that thank you.

Got that.

And we will.

So all of that.

Okay.

Frontier and spirit.

So the air lease.

We have <unk> hundred 20, <unk> hundred 21 aircrafts at frontier.

We're adding 50, new aircraft and <unk> hundred 20 ones.

At Spirit, Niels and $5 820 deals so.

We have very close relationship with both of these airlines they are very similar business.

Strategy.

And their route networks will complement each other.

They have virtually identical aircraft types other than the engine, where there are some differences.

So operationally it will be quite straightforward to integrate those airlines.

The key question is the Justice Department.

And whether there's going to be.

Negative.

Headwinds from the administration CT further consolidation of the industry.

And that's really going to be the key issue but.

Just looking at it as a clean sheet merger.

We don't really see a huge set of obstacles or impact on the lessors.

Yes, I would just add to your question the answer is no our leases or not.

Risk score nothing will fall through because of this merger, but let me just point out that mergers and consolidations within the airline industry are nothing new and over time, they really have had little to no effect on our business. So I'll just give you an example from years ago.

KLM and air France, they emerge.

They were big customers of ours that are old company before emerged and they are big customers of ALC today after they emerged.

And I can't cite many other examples so mergers don't necessarily changed the landscape in our view in many ways.

Merger to the extent that it creates a healthier overall airline a more profitable airline a bigger airline is better for us from a credit profile certainly larger airlines.

As their credit profile enhances enjoy the best lease terms, but historically as I look back I can't really say that our merger.

Has in anyway detrimental our lease position.

I mean, another domestic airlines and other domestic airline acquisition was Alaska buying Virgin America.

And Virgin America had primarily an Airbus <unk> hundred 20 fleet in Alaska, That's primarily 787 fleets so that combination.

Resulted in Alaska rationalizing their fleet.

And gave us an opportunity to take out 10, <unk> hundred <unk> out of Alaska that were formerly Virgin Atlantic aircraft replaced all of those tenant Allegiant.

And at the same time did a 13 aircraft new deal with Alaska.

787 dash nine so.

Mergers and acquisitions frequently create opportunities for us.

To optimize the surviving airlines.

As well as give us raw material to do new transactions.

Great. Thanks.

Yes.

And then I guess my second question I know you said that yes go ahead to Russia.

Small is under 5%, but I guess more broadly for the leasing sector is Russia.

Hey, Nathan.

As a full turn less and comfortable.

Do you have that I guess from what you've seen in the past.

Russian Airlines could potentially also be sanctioned as well and if thats the case, whether they be prevented from multiple variables Beaumont cool and then just.

Kevin.

Okay.

Alright, guys. Thanks, a lot.

So let me just talk with us.

Yes, let me just offer first of all just as a matter of record are aircraft that are on lease and Russia. None of them are Russian registered Theyre all registered in other jurisdictions.

And so that is that is helpful and should we need to go take some aircraft out that is a very helpful fact as to sanctions or everything else like that it's really too early to tell.

What may happen.

The carriers that we leased to over there for example, like a seven they're very strong.

Carriers and so it's just too hard to speculate on what sanctions may happen, but just suffice it to say that if we had to remove aircraft. The fact that they are not registered in that country. A jurisdiction is helpful.

In addition, we do not leased aircraft in Russia to any government owned carrier.

So any airlines that are owned by the Central States.

By the Kremlin, we do not lead to for example, Aeroflot we will see.

And <unk>, which is the low class up we do not lease aircrafts.

To those airlines that are owned by the Russian government.

Okay got it that's helpful. Thank you so much.

Thank you.

Showing no further questions.

That I will turn the call back over to head of Investor Relations Mary Liz Depalma for any closing remarks.

Thank you everyone for your time participating on our call today, we will look forward to speaking with you again, when we report first quarter results Andrew. Thank you so much and please disconnect your line.

Yes.

This concludes today's conference call. Thank you for participating and you may now disconnect.

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Yes.

Okay.

Yes.

Yes.

Okay.

Yes.

Please go ahead.

Okay.

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Ladies and gentlemen, thank you for standing by and welcome to the Air lease fourth quarter 2021 earnings Conference call.

At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.

To ask a question. During this session you will need to press star one on your telephone if you require any further assistance. Please press star zero. It is now my pleasure to introduce head of Investor Relations Mary Liz Depalma.

Good afternoon, everyone and welcome to Air lease Corporation's fourth quarter and year end 2021 earnings call. This is Mary Liz Depalma and I'm joined this afternoon by Steve Harvey Our executive Chairman, John <unk>, Our Chief Executive Officer, and President and Greg Willis, Our executive Vice President and Chief Financial Officer.

Earlier today, we published our fourth quarter and year end 2021 results a copy of our earnings release is available on the investors section of our website at Www Dot Air lease Corp. Dot Com. This conference call is being webcast and recorded today Thursday February 17th 2022.

The webcast will be available for replay on our website at this time all participants to this call are in listen only mode. Before we begin. Please note that certain statements in this conference call, including certain answers to your questions are forward looking statements within the meaning of the private Securities Litigation Reform Act. This includes without limit.

Patient statements regarding our future operations and performance revenues operating expenses stock based compensation expense and other income and expense items. These statements and any projections as to the companys future performance represent management's estimates for future results and speak only as of today February 17th 2000.

22 these.

These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the securities and Exchange Commission for a more detailed description of risk factors that may affect our results.

Air Lease Corporation assumes no obligation to update any forward looking statements or information in light of new information or future events. In addition, certain financial measures we may be using during the call such as adjusted net income before income taxes adjusted diluted diluted earnings per share before income taxes and adjusted pre tax return on equity are non-GAAP measures.

Description of our reasons for utilizing these non-GAAP measures as well as our definition of them and the reconciliation to corresponding GAAP measures can be found in the earnings release and 10-K, we issued today. This release can be found in both the investors and press section of our website at Www Dot Air lease Corp, Dot Com as a reminder, unauthorized.

A recording of this conference call is not permitted I would now like to turn the call over to our CEO and President John Cougar.

Thanks, Mary Liz and good afternoon, everyone and thank you for joining us.

I am pleased to report a strong fourth quarter for Air lease Corporation.

Our EPS for the fourth quarter of $1 54 per share rose, 32% year over year, and we generated $597 million in total revenue during the quarter up 22% relative to the fourth quarter of last year driving our total full year full year revenues to approximately $2 1 billion.

Both our fourth quarter and full year revenues marked the highest and air lease history.

Our revenues were driven by the growth of our fleet as well as an increase in cash collections and renewed aircraft sales activity.

We purchased 53, new aircraft in 2021 and aircraft investments totaled $3 6 billion with $1 2 billion occurring in the fourth quarter.

As a result of these deliveries the net book value of our fleet grew 12, 4% year over year and our operating cash flow was up 26, 3% for the full year 2021 benefiting from this fleet growth and rising cash collections, which improved in the fourth quarter to 99.

3% up from 94% in the third quarter.

And as a testament to our young modern fuel efficient fleet. We ended the fourth quarter was a lease utilization rate of 99, 8%.

As you see we resumed our aircraft sales activity during the fourth quarter.

Looking forward as is normal during the course of our sales program. We're looking to execute further aircraft sales primarily in the second half of 2022 targeting approximately $750 million in sales for the year, but dependent on our actual level of deliveries from Boeing and Airbus.

More on that later.

Based on these results and the results of our third quarter, we believe that the second half of 2021 marked the inflection point in pandemic recovery of the global airline industry.

Demand for new single aisle aircraft from our order book is accelerating with diminishing supply and future availability from both Airbus and Boeing.

Our order book is 99% placed through 2023.

Reflecting this demand <unk> seen our announced recent large scale placements with Iga in Italy, with Malaysia Airlines and others with more larger scale placements soon to be announced.

The strong freight and cargo markets are also lending support, particularly to widebody passenger aircraft, which are increasingly being used and relied upon for their freight carrying capability.

Higher oil prices are causing a renewed focus on operating efficiency replacement of older less fuel efficient aircrafts and meeting environmental sustainability goals.

The overall increased demand coupled with rising interest rates and inflation.

We're providing the catalyst for a rising lease rate environment and we're seeing this in the marketplace.

Airline balance sheets are still strained and in recovery mode further driving lease demand.

With all this in mind as you saw late this fall, we finalized an order with Airbus to purchase 116 aircraft, including 25% to <unk> 59, <unk> hundred 21 <unk>.

20, <unk> hundred 21, new <unk> five <unk> hundred 39, hundreds and for the first time, 7% <unk> hundred 50 freighters.

I am proud to say that this order marks the largest individual order for new aircraft in our company's history.

And today I am happy to announce that we are adding 50 additional Boeing 730, 789 aircraft to our order book for delivery in 2024 through 2026 of which many have already been placed.

Now. These 50 aircraft consist of 32 additional Max aircraft plus the conversion of three 787 order positions into 18 37 Max positions. So in summary, we're adding 50 Boeing 730, 789 aircraft to our order book and reducing our 787 orders by three <unk>.

<unk> bye.

By these order additions we believe ALC now has the largest combined order book, specifically with Boeing and Airbus of any lessor.

<unk> has no orders with other manufacturers.

With our highly valuable order book, we are of course watchful of OEM supply chain stress in any other production constraints that may impact our forward deliveries over the next several years.

We are no stranger to notifications of delivery delays from both Airbus and Boeing.

We continue to experience several month delays from Airbus Most specifically on the <unk> hundred 20 <unk>.

And from Boeing there remains a high degree of uncertainty about resumption of 787 customer deliveries. So for example, although you see in the commitments section of our 10-K that we have 10 Boeing 707 aircraft contracted for delivery in 2022 at.

At this juncture, we forecast taking delivery of only one 7%.

Now this could change and hopefully improve but it's our best estimate today as.

As Boeing has reminded the world the resumption of 787 customer deliveries is ultimately determined by the FAA and no timeframe has been given for that.

So looking forward to the remainder of 2022, although we are contractually committed to take delivery of <unk> 85 aircraft.

For the reasons I've, just outlined that number will likely be lower such that we believe aircraft investments are more likely to range from approximately three five to $4 5 billion in 2022.

Now in the first quarter, we expect about $650 million of aircraft investments.

As we've done in prior years, we will be looking for additional attractive aircraft investments in the secondary market or through strategic sale leaseback transaction, where we can simultaneously couple direct placement of our order book aircraft as you saw us do successfully in 2021.

To take advantage of these opportunities we continue to have a strong liquidity position of $7 9 billion.

And enjoy ongoing access to the investment grade capital markets and.

In 2021 alone we issued $3 7 billion of notes with a weighted average interest rate of 127%.

Since the beginning of 2020, when the pandemic began we've raised over $9 billion in the capital markets in our composite cost of funds at the end of 2021 was $2, 79%, which is the lowest in our company's history.

As we enter a rising interest rate environment, we expect that our strong balance sheet and credit metrics will allow us to continue funding our competitive rates as compared to our customer base.

We also continue to have interest rate escalators in our leases, which provide for adjustment at the time of delivery of the aircraft to reflect the interest rate environment. We're in at the time.

Although the airline industry is on the road to bad debt recovery and by our actions you'll see our overwhelming confidence in the future at the same time, we are mindful that full recovery of the global airline industry will not happen until we see accelerated international travel recovery.

In that context, and as we've said before Asia lags in this regard.

But we're starting to see the beginning of recovery in Asia recently countries like Vietnam have resumed international destinations as well as relaxing Covid restrictions, India and Thailand are following suit and Australia and New Zealand are also reducing restrictions.

There has been little change in this regard however, with respect to China.

Overall, the airline industry is recovering but remains under pressure and we continue to see certain airlines in distressed condition, where restructurings may still take place.

I would remind everyone. However that this is the nature of the airline industry with or without COVID-19.

Our job is really no different and that is to be disciplined to make the best credit decisions possible and place our bets with airlines. We believe are in the best position looking forward.

Further looking geographically of course political tensions between Russia, and Ukraine has been at the news forefront.

We continue to monitor the situation, but ALC has only small exposure to both Ukraine, and Russia totaling under 5% of our fleet net book value as of the end of the year and we enjoy good cooperation with our airline customers in those countries.

In summary Air lease Corporation was started as a clean sheet of paper in 2010 and since day, one our strategy has been placing new aircraft from our order book on long term leases to a diversified group of airline customers around the world.

This focus has been critical to the strength of our platform to date and has proven its worth through good times and as we've experienced the COVID-19 pandemic were difficult times as well.

As our industry continues its path to recovery with an intense focus on sustainability, we're confident that the experience in global relationships of our team coupled with our offering the most technologically advanced and environmentally friendly airliners obtainable will continue to set us apart.

Further highlighting the basis of our confidence I'll now turn the call over to Steve Harvey for additional commentary and announcement of the share repurchase program just authorized by our board Steve.

Yes.

Thank you John .

Great I wanted to commend our entire air lease team.

The results that were achieved in the last quarter of last year and also for the full year 2021.

This was a very challenging year.

But I think since the inception of air lease.

Our entire management team and support staff has taken tremendous pride in being a long term partner to the commercial airline industry.

That commitment is truly tested during difficult times and.

And everyone at ALC has stepped up to the plate and the past two years.

As we and the broader aviation community have worked to get.

Incidence recovery phase.

Our team takes an individualized approach to all of our customer decisions and accommodation.

Which is the right long term decision for our business.

And this last quarter of 2021 is evidence of that.

Long after we have move past COVID-19.

Those airline customers, we help during a time of stress.

All experienced growth and recovery in passenger demand.

And we will look to modernize and grow their fleets and air lease will be there to assist them with our aircraft.

In our professional expertise.

As the Delta in Omnicom variance has shown us.

We cannot control each phase of this recovery, but we are moving in the right direction.

2021 was evidence of that with continued improvement in passenger traffic.

With a few bumps along the road.

But if we focus on the latest data from IATA specifically.

Specifically on the domestic traffic side.

Story is very clear and obvious.

People have the desire to travel by air.

<unk> reported that passenger traffic was up 80%.

In the month of December 2021.

Relative to the prior year.

As we all know travel restrictions domestically.

We have been much less.

Internationally.

But even as the international side.

<unk> continued to have restrictions, we have reasons to be optimistic with December traffic levels significantly improved over the prior year.

And this improvement is despite omnicom.

While this is varian has slightly elongated the recovery of passenger traffic.

Impacts on it has been relatively minor compared to the initial onset of COVID-19 earlier in the pandemic, particularly in the first.

Three quarters of 2020.

With more than one that's alright with more than 10 4 billion doses of the vaccine.

Already administered across 184 countries.

We are hopeful that.

That continued distribution of vaccine.

In other medical breakthroughs.

Become a tailwind for reopening of travel routes and lessening of restrictions as.

As we progressed in the year 2022.

In fact, despite matched mandate testing protocols and other requirements.

People have adapted and adjusted their routines to get back in the air.

We believe that this trend will continue to accelerate.

In 2022.

Meeting with and speaking to airlines globally I can tell you that we are now past the inflection point.

And you can see that with airlines in various regions of the world.

<unk> and making large fleet planning decisions.

Just in the past few months <unk> signed large transactions with Iga in Italy.

Success with Alitalia for the placement of 31, new Airbus aircraft.

With Spirit Airlines in Florida for 15, New Airbus <unk> hundred 20, and <unk> hundred 21 Neo aircrafts.

And as you saw with our announcement a few days ago 25, New Boeing 737, Max aircraft with the Malaysia Aviation group.

Which is the owner of Malaysian Airlines.

All of these are long term leases.

And every one of these placements as unique as our team customize our fleet planning solutions with.

So the goal is that these airline customers.

And they are focused on fleet modernization and having more efficient aircraft in their fleet.

And as John mentioned, you will see added announcements from us in the near future about further large new aircraft lease placements from our order book.

In addition to future placements.

This quarter, we've continued deliveries of both narrow bodies and wide body aircrafts.

Give you examples of the regional diversification of our deliveries in Asia. Despite.

Despite slow international growth in passenger traffic.

We did deliver and new AC 21, new LR aircraft.

P J aviation in Japan, which is an affiliate of all Nippon Airways.

200, <unk> hundred 21 Neo aircraft.

China Airlines in Taiwan, and they will lease six in total.

One additional <unk> hundred 21, Neil LR aircraft official on aircrafts I am sorry, I just wanted to airlines in Chengdu China.

And one additional <unk> hundred 21, new LR to Arizona.

We also delivered another <unk> hundred 21 Neo to historic Airlines in India.

In the United States, we delivered four new Boeing 787 Dash nine aircrafts.

So our good customer Alaska Airlines.

As part of a larger fleet placement with them that was announced in the latter part of 2020.

In Europe , we delivered one new AC 51000, widebody aircrafts Eric lead.

In Paris, and one new <unk> hundred 51000 with tranche B as.

As well as another new <unk> hundred 51002, Virgin Atlantic Airways.

Airlines have not shied away from taking delivery of new aircrafts and making decisions today.

Which they know will be necessary for their future success.

We feel the same way, which is why as you heard briefly from John We felt the recently announced orders with Airbus and Boeing where necessary and appropriate for the long term success of our platform and corporate strategy.

In addition to John's remarks, I want to briefly comment on.

On our entry into the freighter market.

This is a market we have been looking at for some time.

It was strong as we entered the pandemic.

But the dynamics, resulting from COVID-19.

Have accelerated those trends.

Fueled in large part by the continued growth on a global scale of E Commerce.

Which we view as being strong for the foreseeable and long term future.

E Commerce provides a stabilizing factor.

That was missing in the more volatile interstate marketplace in prior decades.

And continued bottleneck at container shipping ports globally also as vitalize the air cargo demand.

And we do not really see the situation the beating.

So we felt it was time to make a move into this marketplace by speaking to our philosophy.

Of ordering the most technologically advanced and the most fuel efficient aircraft.

With the new <unk> hundred 50 trader.

<unk> recently seen our decision validated by growing order book of airline customers.

The <unk> hundred 50 freighter program, including Singapore Airlines.

In France.

<unk> and CTF Air cargo group in Europe .

As many of you are aware we were the launch customer of the <unk> hundred 21, LR as well as the <unk> hundred 21 XLR.

And those aircrafts have proven to be extremely successful.

With our broad spectrum of airline customers.

Our goal is to always ensure order book comprises of the most desired aircraft types.

As we emerge from this pandemic and as such were pleased to be a launch customer of the <unk> hundred 50 freighter.

We've also been pleased with developments with the 787, Max in terms of performance and reliability.

Since resumption of deliveries.

Our airline customers have been giving us good reports.

As such it should be no surprise that lease rates on 780 Sevens are recovering.

And the forward demand profile is robust.

We believe that any passengers stigma is largely dissipated.

And confidence has returned to the pilot community.

Deliveries of our new Max orders spanned across 'twenty 'twenty four 'twenty five 'twenty six.

And this is a period that I would like to point out that Airbus is now virtually sold out.

On the single aisle Neo program.

So we believe that air lease is an excellent position.

To be able to offer both Boeing and Airbus single aisle solutions from our order book in.

In those critical years ahead.

As the airline industry recovery accelerate strongly.

Our forward Max lease programs are not dependent on placement in Russia.

Certification is still outstanding.

<unk> in China.

When China's air with an objective needs incorporation for airlines to fly the Max.

Finally.

Our exciting <unk> to 'twenty program and placements are doing extremely well and progressing.

Which is why at the end of last year as part of our Airbus Order, we exercised our option for 25 additional 8% to 20.

This brings us up to 76 firm orders for eight to 20 family.

We're seeing growing momentum in replacing aging 737 seven hundreds.

<unk> hundred 19, and large sized regional aircraft with more fuel efficient and capital efficient 820.

To date, our placements have resulted in four new airline customers for the 8% to 20 program.

And this is certainly an area that differentiates ALC from other lessors in the eyes of the Oems.

Simply put air lease is a market leader and aircraft types.

Bringing new airline customers to both Airbus and Boeing.

Our fleet planning and leasing platform in many cases, our lease placement needs to further direct orders of that aircraft side by the airlines to the Oems.

This is the very reason that ALC enjoy status and attractive high volume pricing with Airbus and Boeing.

We don't just buy aircraft.

We find and bring new customers to each aircraft type in our order book of new aircrafts.

As our recent orders indicate we're still.

Viewing investing in new aircraft on long term leases.

That's providing the highest possible return to our shareholders over the long term.

However, we also view alc's own stock valuation is an attractive element of our overall capital allocation strategy.

As such today I'm happy to advise that.

And in addition to declaring our 37th consecutive quarterly common stock dividend.

Our board of directors has authorized another share repurchase program.

This time for $150 million.

To begin effective immediately.

Through September 32022.

I'd like to point out that this is a 50% increase to the $1 million $100 million share repurchase program, our board authorized last year, which expired at the end of December and.

And we are pleased to have this new program available to us.

And with that good news I'd like to turn the call over to our CFO Greg Willis.

To provide more details and color on our financial results for the fourth quarter and for the full year 2021.

Thank you, Steve and good afternoon, everyone for the fourth quarter of 2021, ALC generated record revenues of $597 million up 22% as compared to the fourth quarter 2020.

This was comprised of $563 million of rental revenues and $34 million of aircraft sales trading and other activities. The increase in our rental revenues was primarily driven by the growth of our fleet the.

The effects of improved cash collections from our lessees.

$24 million of aircraft sales. In addition, this quarter.

We had approximately $30 million of end of lease revenue.

<unk> from the successful transition of five aircraft.

Overall, we have witnessed an improving environment with our lessees as a result, we have seen a notable rise in our cash collection rate to 99%.

With cash basis recoveries, increasing to $12 million and restructuring is decreasing to $24 million.

At the end of the fourth quarter, approximately 6% of our fleet by net book value was accounted for on a cash basis that is down from 10, 6% at the end of the third quarter. However.

However, our outstanding deferral balances did increase to $203 million, primarily due to the positive resolution, we have reached with Vietnam Airlines.

I would like to highlight that the majority of our outstanding deferrals will be repaid within the next two years.

Moving to expenses.

<unk> expense increased year over year, primarily due to the rise in our average debt balances due.

Driven by the growth of our fleet.

Partially offset by a decline in our composite cost of funds.

Our composite rate decreased to $2, 79% as of year end from $3, one 3% in the prior year.

Depreciation continues to track the growth of our fleet, while SG&A rose over the course of 2021 as we return to a more normalized level of operating expenses as compared to prior years SGS.

SG&A was particularly elevated in the quarter as a result of increased business that business activity and expenses related to aircraft transitions.

Finally, I wanted to touch on our financing activities, which remains a competitive advantage for ALC is given the strength of our balance sheet. In addition to achieving record low composite cost of funds, we kicked off 2022 with another hallmark transaction.

Raising $1 5 billion in senior unsecured notes with a weighted average interest rate of two 5%, which is inside our composite cost of funds. The 10 year tranche of this transaction marked our lowest coupon for a 10 year issuance at 287, 5% in our history.

This transaction takes care of all of our remaining maturities for 2022.

Putting us in a very strong position as we face a rising interest rate environment with 90%, 95% of our debt being fixed rate.

We also increased the capacity of our revolving credit facility by approximately $300 million to $6 8 billion.

And we will continue to maintain elevated levels of liquidity until the broader aviation market slowly recovers.

You have heard from us in the past, we will remain firmly dedicated to maintaining an investment grade balance sheet utilizing unsecured debt as our primary form of financing and we have approximately 26 billion in unencumbered assets at quarter end, which served us well throughout the pandemic.

We ended the period with a debt to equity ratio of two four times on a GAAP basis, which is which net of cash on the balance sheet is approximately two three times.

As a follow on to Steve's comments I would like to emphasize that we spent a lot of time internally focusing on capital allocation with the goal of maximizing shareholder value overall as such we are highly confident that the balance that we've struck between ordering additional modern fuel efficient aircraft, coupled with our share with our share repurchase program.

<unk> continued quarterly dividends will drive shareholder value for many years to come.

And with that I'll turn the call back over to Mary Liz for the question and answer session. Thank you Greg This concludes.

Management's commentary and remarks for the question and answer session. We ask each participant to limit the time to one question and one follow up now I'd like to hand, the call over to the operator to open the lines for the Q&A session.

Sure.

Thank you <unk>.

Reminder, to ask a question you will need to press star one on your telephone.

To withdraw your question press the pound key.

Our first question comes from the line of Jamie Baker with JP Morgan.

Okay.

Oh, Hey, good afternoon everybody.

So Steve Andrew John .

First question, Mark and I were discussing this looming narrow bodies shortage, which.

It's fairly well chronicled at this point I'm not sure if I'd call. It a consensus among your investors just yet, but I think we are.

We're moving in that direction, but when you look at the wide body market, what youre hearing from customers seeing with the Oems Youre comments on cargo.

How would you would set.

The ability.

That we might see starts talking about a meaningful wide bodies shortage in the next two to four years or do you think that your owners really shouldnt be thinking about that and we should just focus on the narrow body side.

Well, Jamie one of the things that investors should remember.

Let's look at the number of <unk>.

740 Sevens MD 11, <unk> hundred 40.

And some of the oldest triple seven and <unk> hundred 30 <unk> been retired.

There is there is probably around 300 wide body aircrafts.

That is sort of disappear very quietly since 2019, so if you add up the cumulative capacity.

Of those aircrafts.

The total widebody fees actually shrunk.

And then to couple that with the fact that Boeing is not delivering any 780 Sevens haven't delivered 90 780 sevens.

As the spring of last year.

There is a momentum going forward towards equilibrium in the wide body space.

That is heavily dependent.

On at least a modest recovery in international travel in the international business travel, what we're beginning to see green shoots, particularly in Europe , and the Middle East Latin America, where I just came back from a trip in Asia.

I think Jon highlighted so look it's not going to be a speedy recovery as the single aisle aircrafts.

We are seeing a strong momentum to replace the oldest.

Wide body aircrafts that are reaching 20% to 25 years of age you to convert them to cargo.

Or.

Simply retired them and in addition, we've seen a lot of 767 being converted to creators in fact, I think there's about four.

Conversion lines in the World converted 767 300 yards to freighters. So all of those ingredients have really helped.

For a steady path toward recovery of the wide body market.

Jamie.

This really illustrates the basis of a philosophy, we've had <unk> heard several lessors over the course of the pandemic panicking about wide bodies.

Several have said I'm not going to do anymore liability anymore, we're done blah blah blah blah, but that's just.

That always seem to us is just too much of a knee jerk reaction clearly clearly the world needed wide body aircraft. It is the way that most international traffic over any reasonable distance is covered so there's just no way that wide bodies are dead or theyre not good investments.

A question of which wide bodies, you pick going forward and what you have in your fleet. So we've never ever even thought about banning the widebody space for the reasons.

Especially now that Steve has outlined and I do think that that's a key differentiator for <unk> Air lease now is the time at the current time of course, we are emphasizing narrow bodies. The vast majority of the order, we did with Airbus and Boeing and all of Boeing.

All narrow bodies and that's great we move with the times, we move with current demand.

Boras picture you could you should never dismiss wide bodies.

Okay.

Jamie that one other item change, but I think the investors need to think about and that is that.

The fuel consumption of the widebody aircrafts is significantly higher than the single aisle aircraft.

So with the rising oil prices.

What we're seeing is that airlines are trying to sort of optimize their scheduling around the most fuel efficient aircraft.

Such as the <unk> hundred 39, hundreds for example at Delta and other carriers <unk> hundred 50 901000.

787 nine.

And.

And so we're seeing a greater understanding of the operating cost profile of these aircrafts.

And these newer technology wide bodies that tends to be kind of in the smaller medium sized wide body segment.

Are extremely attractive in this high fuel cost environment.

Thanks for that gentlemen, and just a quick follow up.

A question about appraisers.

Im sure you don't.

A lot of time or lose much time.

Much sleep thinking about appraised value.

Some of your investors do.

Some analysts may have.

How much do you think.

That <unk>.

The appraiser community.

I guess over shocked on the down side for values and lease rates relative to what you're seeing.

Do you have a gas as to when that turn in their values might be.

Some owners.

These are metrics that what matters.

Jamie I'll offer we've talked about.

And that is this generally speaking we find that the appraisers.

I'm not criticizing them because they only go on historical data than they do on transactions that have been done but generally speaking.

The appraisers are usually similar somewhere between six and 12 months behind where the actual real time marketplace. As some are more aggressive some are less aggressive.

But clearly it's the data flow lags in the appraiser community.

Against real time transactions that we're seeing in the marketplace.

Yes.

That's really helpful. Thank you very much both of you take care of it I guess you don't see in a few weeks.

Okay I will see you soon.

Thank you and our next question comes from the line of Catherine O'brien with Goldman Sachs.

Hey, good afternoon, everyone.

So let me just start off following on the discussion on wide bodies I thought the comment on wide body lease rates in the press release benefiting from freighter shrank was encouraging.

I know your origin as 350 freighters, but do you think the dynamics in the freight market are sustainable enough, where you'd look to increase your fleet exposure to freighters more meaningfully going forward or was that really just a comment meant more to highlight that cargo demand helps increase the value of wide bodies overall, including your passenger wide bodies.

Well, we have not had any freighter aircrafts for dedicated freighter aircrafts in our fleet.

Since the inception of early so.

The order for the <unk> hundred 50 freighter is really our first.

Venture into the all cargo market.

We are also planning to convert some of our <unk> hundred 30 aircrafts into freighters.

Either a full freighters or as small package freighters.

Between 2023 and 2027.

But relative to our total size of the balance sheet.

Our immersion to the freight market is really a very tiny.

Segment of our total assets.

Not a major shift or departure from our fleet strategy.

But we are talking to a lot of very sophisticated freight carriers and combination airlines that both Kate spade and passengers that are extremely interested in <unk> hundred 50 trade it.

And I think to the main point of your question, we did not make this move without feeling very convinced.

Is that the freight marketplace has really fundamentally changed with the advent of E Commerce, and we say that as sustainable for as far as you can see in the future. It's really provided a lot of stability.

To that marketplace and so.

We are also in that process looked at.

The ancillary question.

<unk> has additional aircraft are reabsorbed and taken onto the airline's fleet, and especially especially as more wide body aircraft start flying again does that deteriorate or decrease the overall appetite for freight and cargo.

And we've come to the answer no we feel there's plenty of demand for dedicated freighters as evidenced by our <unk> hundred 50 freighters will make further aircraft freighter decision on the new aircraft side to see how time unfolds, Steve indicates our plans to convert some of our <unk> hundred <unk>.

But it's a new market for us, but it's a market we have jumped into.

Based on a pretty rigorous study of the capacity in the marketplace what happens when the current aircraft return in larger fold to international flying and we still think well and above then.

There's good demand profiles for the foreseeable future.

Totally makes sense I mean, my mom, who didn't know how to reply to an email before COVID-19 now is ordering on Amazon every day.

Sure.

For my second question.

One for Greg just given where rates are today and higher spreads have trended over the last 18 months, which is in a favorable direction of course should we expect to see our composite cost of funds continue to come down even in a rising rates environment.

Or maybe that's a little too rosy and then just any further refinancing opportunities coming or just the January issuance take care of that for every single feature.

Yes, I think Theres a couple of things to think about it I think the first you start with is the fact that we have 95% of our debt being fixed so it's very difficult to move our overall debt book, which is now closing in on $17 billion. So it's hard to move the needle from that perspective, we will of course issue more debt this year.

As we continue to take aircrafts into our portfolio that we've committed to buy but I think we're pretty I mean, it's hard to say where rates go as they do feel like theyre going higher but I think we have a significant amount of liquidity to allow us to access the market at appropriate windows are the most advantageous when does that present themselves to us so it's hard to.

Say, how much it will move it higher rates are going higher but I do feel that lease rates are going to go up a lot higher than what our composite cost of funds will go up and I think that will help us in the future.

Yes, one other point on that is is that we have some debt maturities in the next two years.

The interest rate embedded in those bonds is higher than our composite rate today.

So every time, we can pay off the bonds.

It's more expensive than our average we're actually helping.

The company's balance sheet and reducing the.

The overall portfolio interest expense.

Okay, great Yeah, that's kind of where my head was going with that maybe I'll just sneak one really quick one I just want to clarify on your 707 comments, you said you're expecting to take delivery just one versus the Teng committed is that because youre unsure when Brian we will be able to deliver.

Did I hear you say something about customers are exercising their right to cancer.

No no.

No.

Boeing ability or lack of ability.

That's the issue of the customers.

And my remark in my remarks, clearly it was very clear this is up to the FAA when deliveries can resume.

Theres just great uncertainty about that.

And so we have just made our best guests, it's not based upon cancellations. It's based on what we think is most likely to happen.

Wanted to say on that regard, we don't really have any better view on this than anyone else. So we're not projecting anything and as I also said that we hope it actually improves it'd be great for us if it did.

But just our reading of the situation now and the uncertainty that is there with the FAA recently of course it was the FAA determined that it will not be giving Boeing.

<unk> 34.

For certification on the aircraft and the FAA is going to supervise that we don't know what that might mean additional time involved for example, so this is just our best guess.

Okay, great very clear thanks, sure I have that right.

Next question.

And our next question comes from the line of Vincent <unk> with Stephens.

Hey, Thanks for taking my question and Great results on your rental revenue performance this quarter.

Just wondering if you could maybe talk about as your new aircraft, that's being delivered sort of what sort of lease rates, we can expect and.

Also the fourth quarter and my approximately correct.

Jumping off point is.

The $564 million less.

$12 million cash accounting recoveries are sort of all the way to think about it.

So Greg why don't you take the last part of that question first so the jumping off point that maybe you could clarify that a little bit. We had we did have cash basis recoveries of $12 million, which is up I think from last quarter. We had about 5% so that was incremental above and beyond the normal.

Accrual basis accounting that we would've had for those individual airlines.

Helps.

Is there something more to your question on that Vincent.

Yes, definitely so the 564 just your I guess you had a cash accounting last quarter, what was it about $40 million. So I should just add incremental film on top of that so maybe exclude that on a run rate basis.

Yeah.

Yes, that's a fair point.

I think its collections.

$1 million was was collectible or would've been booked in prior quarters that they got caught up this period.

And on your lease rate question Vincent as you know, we don't we don't really comment specifically dollar wise or otherwise on lease rates in particular, but I can only say that in several of our aircraft types led primarily by the <unk> hundred 21, Neo and <unk> are the lease rates are at now or in some cases slightly above what they were pre COVID-19 .

So we are returning to pre COVID-19 lease rate levels.

On the 320 21 Neo series of 737, Max is getting very close.

The <unk> hundred Twenty's as well.

And so I think.

We're very.

This has been very encouraging for us to see so suffice to say the short answer is they're at very close to or in some cases above pre pandemic levels.

We're also when I'm talking to airlines.

Recognize that.

Interest rates are going north south.

If there are alternatives to purchase an aircraft and get their own financing.

Those costs will arrive and so.

Introducing high capital cost assets.

Not going to be a favorable to them either so leasing becomes a very very attractive alternatives.

And youll have directly.

Getting traditional financing.

Okay that makes sense. Thank you for that color and then second quick follow up so nice to see the share repurchase authorization increase for this year. Just wondering if you can remind us how youre thinking about.

Executing on that share repurchase program versus other things such as of course, the aircraft delivery some other opportunities to use the capital. Thank you.

Vincent this is Greg.

Typically don't provide color at what levels, we buy the stock but.

We we spent a lot of time thinking about that and the board has authorized us to go out there and repurchase of $150 million $150 million worth of stock over the next six months through September 30. So.

We're going to make sure we do our best.

By that at appropriate levels for <unk>, and creating shareholder value through it.

Okay, great. Thanks very much.

Thank you and our next question comes from the line of Helane Baker with Cowen.

Im sorry.

That's okay.

Thanks, Operator, hi, everybody and thank you for the time.

I think Steve or John you mentioned that Airbus is sold out and we know that to be the case right between.

Aero body aircraft between now and I think 2027.

Hi.

How are you doing I guess is the right word convincing customers to switch from an Airbus two maybe two out of Boeing if they need that lift in the short term. So let me let me just jump in on that I want to make sure that as numerous understanding we now have.

Positioned ourselves to have both the.

Airbus and Boeing product from our order book available in those few years timeframe, we're not relying on the Max order that we just made to fill in what Airbus cannot provide we just simply point out as an ancillary comment Airbus is sold out and I think what youre going to be seeing shortly.

<unk> is Boeing getting very quickly sold out as well. So our position is we have the advantage of having a good order book of both types to offer.

As to our customers.

We continue to guide, where we think the best fleet decision is for them, it's not necessarily causing them to move from <unk> to a we take a look and we made or may make our best judgments and we offer our opinions to our customers and we now have both are mentioning of Airbus.

Being sold out.

It's simply a statement of fact, but the reason we mentioned that as we have both we have both Airbus and Boeing in this timeframe.

Okay. That's that's very helpful. Thank you for clarifying that I appreciate it and then I think I asked you. This question last time too.

But I feel like in the last six months things have changed with respect to that.

Electric vehicle market it seems to be getting more acceptance there seem to be more.

Airlines going direct to the manufacturers and ordering them.

So has your thought changed on those aircrafts since the last time, we talked when I know a lot of these are ground replacement rather than real aircraft replacement, but how are you thinking about that at all now if at all.

So if we were not in the two to four passenger aircraft.

Leasing that's not.

Segment of the market that we're involved in.

We are closely following the technology.

Product development of a number of these.

Aircraft and helicopters.

We have to just be patient and watch this evolve.

And understand the asset values and the long term demand for these aircraft.

And the pace of technological change.

These small electric planes will be very quick.

So we don't want to be playing around with prototypes when two or three years later, there may be significant advances in technology.

Operating economics so.

I think youre going to see early being very much.

Cautious in this segment.

But if we determine that there is a viable business opportunity that makes sense to complement what we already do well suddenly.

Get our feet wet, but right now I'd.

I'd say, we're more of a spectator than in a direct investor.

Yes that makes sense a fast follower.

Hi.

Okay. That's fine those were my questions. Thank you.

You.

See you soon.

Thank you.

Our next question comes from the line of Hillary.

Though with Deutsche Bank.

Hi, Thanks for taking my question.

Lastly, frontier and spirit in North America.

And James you had the pull opening 21 years that you have the group pace.

Got it.

Pending merger has any impact on that lease agreement at all and I guess just on high level in general would you say that airline.

Positive for the lessors or a negative for the last say, perhaps what's driving that.

We'll.

They got comfortable following the merger.

Perhaps you don't have one thank you Dan.

Got that.

Sorry about that.

We'd love to get your thought okay, well frontier and spirit are customers of air lease.

We have <unk> hundred 20, <unk> hundred 21 aircrafts with frontier.

We're adding 50, new aircrafts in 'twenty one.

Niels and $5 <unk> hundred 20 deals so.

We have a very close relationship with both of these airlines there.

Similar business.

Strategy.

And their route networks will complement each other.

They had virtually identical aircraft types other than the engine.

There are some differences so operationally it will be quite straightforward to integrate those airlines.

The question is the Justice department, and whether theres going to be.

Negative.

Headwinds from the administration CT further consolidation of the industry.

And thats really going to be the key issue but.

Just looking at it as a clean sheet merger.

We don't really see a huge set of obstacles or impact on the lessors.

Yes, I would just add to your question the answer is no our leases or not.

At risk score nothing will fall through because of this merger, but let me just point out that mergers and consolidations within the airline industry are nothing new and over time, they really have had little to no effect on.

Our business I'll, just give you an example from years ago.

KLM and air France, they emerge.

They were big customers of ours that are old company before they emerged and they are big customers of ALC today after they emerged.

And I can cite many other examples so mergers don't necessarily change the landscape in our view in many ways.

Our merger to the extent that it creates a healthier overall airline a more profitable airline a bigger airline is better for us from a credit profile certainly larger airlines.

As their credit profile enhances enjoy the best lease terms, but historically as I look back I can't really say that a merger.

As in any way detrimental our lease position.

I mean, another domestic airlines and other domestic airline acquisition was Alaska buying Virgin America and.

And Virgin America had primarily an Airbus <unk> hundred 20 fleet.

In Alaska at primarily 787 fleet so that combination.

Resulted in Alaska rationalizing our fleet.

And gave us an opportunity to take out 10, <unk> hundred <unk> out of Alaska that were formerly Virgin Atlantic aircraft replaced all those tenant Allegiant.

And at the same time did a 13 aircraft new deal with Alaska.

For 787 Dash nine so.

Mergers and acquisitions frequently create opportunities for us.

To optimize the surviving airlines.

As well as give us raw material to do new transactions.

Okay, great. Thanks.

Hi, Dan.

And then I guess my question question I know you said that your exposure to Russia.

While it's under 5%, but I guess more broadly for the leasing sector is Russia.

And Dave Mccoll.

Those are placed on lesson comfortable.

Is that I guess on what you've seen in the past that Russian airlines could potentially also be sanctioned as well is that the case will they be prevented from multiple available comment cool and then just.

Okay.

Thanks, Bob.

Well, let me just start there.

Yes, let me just offer a first of all just as a matter of record are aircraft that are on lease and Russia. None of them are Russian registered Theyre all registered in other jurisdictions.

And so that.

That is helpful.

Should we need to go take some aircraft out that is a very helpful fact as to sanctions or everything else like that it's really too early to tell what may happen.

The carriers that we leased to over there for example, like a seven they are very strong.

Carriers and so it's just too hard to speculate on what sanctions may happen, but just suffice to say that if we had to remove aircraft. The fact that theyre not registered in that country a jurisdiction is helpful.

In addition, we do not leased aircraft in Russia any government carrier.

So any airlines that are owned by the central state.

By the Kremlin, we do not lead to for example, Aeroflot we will see.

And pull better which is the low cost we do not lease aircrafts.

So those airlines that are owned by the Russian government.

Okay got it that's helpful. Thank you so much.

Thank you.

Showing no further questions so with that I'll turn the call back over to head of Investor Relations Mary Liz Depalma for any closing remarks.

Thank you everyone for your time participating on our call today, we will look forward to speaking with you again when we report first quarter was up Andrew. Thank you. So much and please disconnect your line.

Yes.

This concludes today's conference call. Thank you for participating and you may now disconnect.