Q3 2023 Air Lease Corp Earnings Call
Good afternoon, My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to the Air Lease Corporation third quarter 2023 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time.
Simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question again press the star one.
I'll now turn the call over to Mr. Jason Arnold head of Investor Relations. Mr. Arnold You May begin your conference.
Thank you, Rob and good morning, everyone and welcome to Air lease Corporation's third quarter 2023 earnings call. This is Jason Arnold I'm joined by Steve Hazy, Our executive Chairman, John <unk>, Our Chief Executive Officer, and President and Greg Willis, Our executive Vice President and Chief Financial Officer.
Earlier. This morning, we published our third quarter 2023 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 Monday November six 2023, and the webcast will be available for replay on our website at this time all part.
<unk> 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 limitation statements regarding the state of the airline industry.
The impact of rising interest rates and inflation the impact of sanctions imposed on Russia. The impact there would be Israel Thomas conflict, the impact of the aircraft and engine delivery delays and manufacturing defects, our aircraft sales pipeline and our future operations and performance revenues operating expenses stock based compensation.
Spence and other income and expense items. These statements and any predictions as to our future performance represent management's estimates for future results and speak only as of today November six 2023.
Estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the SEC for more detailed description of risk factors that may affect our results.
Or at least corporation assumes no obligations to update any forward looking statements or information in light of new information or future events. In addition, we may discuss certain financial measures such as adjusted net income before income taxes.
Adjusted diluted earnings per share before income taxes, and adjusted pre tax return on equity, which are non-GAAP measures a 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 our earnings release and in the 10-Q that we issue.
Today. This release can be found both in the investors and press section of our website at Www Dot Air lease Corp. Dot Com as a reminder, unauthorized recording of this conference call is not permitted I would now like to turn the call over to our Chief Executive Officer, and President John <unk> John.
Well, thanks, Jason Good morning, everyone and thank you for joining us on our call today.
I am happy to report that during the third quarter ALC generated quarterly revenues of $659 million.
Up approximately 18% relative to the same quarter last year.
We also earned a $1 10 earnings per share up 22% from last year's third quarter.
Strong continued expansion of our fleet and higher sales activity as compared to the prior year were the primary drivers of upside to our results.
During the third quarter, we purchased eight new aircraft from our order book, adding approximately $450 million in flight equipment to our balance sheet, while we sold eight aircraft totaling approximately $350 million in sales proceeds.
The utilization rate on our fleet remains very strong at 99, 9% during the third quarter.
At present, we are 100% placed on our forward orders through 2025, and we placed 67% of our entire order book.
Airline customer demand for new and fuel efficient commercial aircraft remains exceptionally strong and is only being exempt exacerbated by OEM challenges, including Rpx's announcement in September an impact due to the Pratt <unk> Whitney geared turbofan engines, which I do want to comment on for a moment here.
As mentioned last quarter Pratt Whitney 1100, G engines that power a significant number of the GTS powered <unk> hundred 20, <unk> 321 deals have been found to have a powder metal coatings law.
RPX now believes that a greater number of these engines will need to be removed and inspected on an accelerated basis, which ultimately will lead to a significant number of <unk> hundred 20, Neo and <unk> hundred 21 Neo aircraft on the ground over the next several years.
So what does this all mean for air lease.
As highlighted last quarter more aircraft on the ground for longer will create significant operational challenges for airlines will further congest MRO facilities and boost demand for alternative aircraft and spare engines.
We also believe that the circumstance will likely make for additional Airbus narrow body delivery delays, if new production engines and as new production engines are redirected to support aircraft in their fleet versus new aircraft production.
So clearly a challenging circumstance for the industry and our airline customers.
As a reminder, while we do try to ensure that our customers receive help from track our leases are triple net and lease payments remain the obligation of our lessees, whether the aircraft is flying or not.
On the other side of the coin I think it is important to note that further reductions to the availability of commercial aircrafts certainly creates even more scarcity value for Alc's fleet and our order book delivery positions.
This in turn is already driving a further strengthening of lease rates on aircraft values and significantly bolstering lease extensions at higher rates.
Alc's 23 billion forward order book of aircraft extends out from the present through 2029 inclusive of OEM delivery delay expectations, leaving us in a position of significant strength in the current environment for our remaining unplaced aircraft.
We're being very thoughtful about placing these remaining positions in order to maximize lease rates and therefore returns on these valuable new aircraft delivery positions.
Secondary market demand continues to be very strong and our sales activity continued at a healthy pace in the third quarter.
We're pleased by the gain on sale margins, we're realizing on these aircraft.
Alc's pipeline of aircraft for sales stands at a solid $1 $8 billion as of today and that includes around $700 million of aircraft classified as held for sale and another $1 $1 billion subject to letters of intent.
We now anticipate approximately $500 million of aircraft.
Sales to close in the fourth quarter, which means that we expect to hit the midpoint of our full year sales target range of <unk> in 2023 at $1 5 billion.
We will update you on our expectations for 2024 sales at our next earnings call in February.
So while the rate of increases in lease rates still lags interest rates our aircraft values are benefiting from supply demand dynamics it.
It's important to emphasize that lease rates should not be looked at in isolation.
The earnings cycle on every aircraft is not complete until it's sold and our aircraft sales are benefiting from the ryzen aircraft values.
So the view must be taken of the total picture to include aircraft valuations and sales.
Moving on to deliveries, we guided newer aircraft deliveries to be approximately $7 million to $800 million for the third quarter.
And actual deliveries came in lighter at about $450 million given continued OEM delays.
And the Big picture there is no change to our outlook for aircraft delivery delays to persist for years to come which we've discussed many times before on our calls in the past.
As for expectations for fourth quarter deliveries at present, we anticipate approximately $900 million to $1 1 billion of aircraft deliveries representing a total of about four 3% to $4 5 billion of deliveries for the full year of 2023.
While delays are clearly disappointing to us as large customers of Boeing and Airbus as well as disappointing to our airline partners, who are facing fleet planning decisions on timely deliveries I would note that the scale of deliveries. We have received has still contributed to a healthy fleet expansion over the past year.
I'd like to conclude a few final comments on the current operating environment.
As of the current conflict in the Middle East ALC has two aircraft on lease in Israel, two Boeing 780 Sevens leased a L L.
As you May know the government of Israel has stepped in to provide the insurance on those aircrafts.
Most of the non Israel based airlines have discontinued flying to Israel.
We continue to monitor this reason very closely with all of our airline lessees.
Second globally air traffic demand continues to expand at a brisk pace with volumes up 25% to 30% relative to the prior year and expanding at an even faster pace in many key markets.
Steve will comment further on demand in his section, but we see no major signs of macroeconomic cross wins impacting aircraft demand from the airline industry.
We remain watchful, but we feel that some traveling soft travel softening in discounting of airfares in the fourth quarter and in next year's first quarter as by announced as announced by a few U S and European Lcc's may reflect a return to more normal seasonal fluctuation.
And in contrast to some of the softening of demand comments over the past several business days, both southwest Airlines in the USA and Lufthansa in Germany reports strong demand for this holiday season in the fourth quarter.
Third our fleet continues to benefit from high airline demand and market supply constraints, we've always viewed our fleet as having significantly more value than whats on our balance sheet, but we see this is especially true in the current operating environment as can be seen in the gains we are recognizing on aircraft sales.
Finally, with over $23 billion of high demand Airbus and Boeing aircraft and our forward order book, we have a long runway of growth ahead on our $26 billion fleet.
Our order book aircraft were purchased with attractive volume discounts and in many cases, we'll launch customer pricing at times and market demand for commercial aircraft was far less robust than it is at present.
Airlines have limited access to the newest technology and lowest emissions aircraft over the next four to five years other than from ourselves in a limited number of lessors afford orders over this period.
So we remain very positive in our outlook in our business and positioning for the future.
I'd like to turn the call over to <unk> now to Steve Harvey, who will provide some additional industry and ALC commentary, Steve. Thank you very much John.
The fundamentals of our business remains strong and the value of our forward order book focused strategy has only increased over time.
The earliest delivery slots for new narrow bodies are now extending into the 20 <unk> and.
In wide bodies are also quickly being snapped up as well as international traffic volumes.
Have rebounded sharply over the past year, or so, giving air lease and tremendous advantage relative to others in the industry.
Aircrafts lease rates and values are strengthening.
And momentum appears likely to continue given aircraft shortages.
As a product of these positive trends in reflection of our earnings performance over the past year.
Last Friday, our board of directors approved an increase to our quarterly dividend distribution of 5% to 21 per share for quarter.
As John touched upon a moment ago airline traffic volumes remained very robust.
IATA traffic figures released in October continued to show continued strong expansion.
With total volumes rising 28% year over year.
Domestic traffic is up 25%.
With domestic China, and India volumes also rising at double digit percentage rates, while other major region expand at strong single digit percentage rates or higher.
International volumes. Meanwhile, are also strong rising approximately 30% year over year and in some in the individual markets they experiencing exceptional growth.
The Asia Pacific Region. For example, international traffic has nearly doubled relative to the prior year.
That market continues to see significant international traffic recovery.
Although there's certainly room for more improvement in the major Asia to Europe, and Asia to North America markets.
While North America, Europe, and Central America Caribbean to Europe.
Routes continue to remain the strongest major segments of the international market.
The Middle East Latin America, and Africa major international markets.
We're also witnessing high rates of traffic growth.
We see continued expansion of international traffic in Asia.
And globally is further supporting wide body aircraft demand in the coming years.
Passenger load factors. Meanwhile, our very strong approaching.
Approaching in many cases were exceeding historical highs witness four or five years ago.
Currently at 85% in the latest month of October as reported by Adder.
And with the expectation of around 81%.
For the full year 2023.
Given limited commercial aircraft availability, we believe that it is likely that load factors only continue to rise from here.
Benefiting airlines yields.
So the cost of creating potential headaches and challenges for airline network operations and planning.
This is particularly at risk for airlines operating older fleets with reduced dispatch reliability.
Illustrating yet another reason why young aircraft.
Advantageous in the current environment.
The industry has been largely one way robust recovery path since pandemic restrictions are eased in the past two years.
Those restrictions are obscured normal airline industry seasonality trends.
Airlines.
So experienced very clear seasonal demand with stronger volumes in the summer holiday months.
Weaker traffic in the winter months, so we're not surprised to see some level of seasonal normalization, especially.
Especially in the northern Hemisphere.
Conversations with many of our airline customers also reflect these trends.
Especially in the markets that have seen the greatest rebound in traffic over the last three or four years.
Yes.
So we see recent market immediate concerns as overlooking normal business trends and continue to view long term drivers of global traffic growth remaining in place.
Additionally, as a reminder, our pleased very geographically diverse with 117 airline customers in 63 different countries at the end of the third quarter.
So most of our airline customers are not observing.
The slowdown in traffic levels at the present time.
Circling back to air lease is third quarter results as.
As John mentioned, we delivered eight new aircrafts during the period, consisting of seven narrow body aircraft and one new wide body aircrafts.
We delivered two 820 <unk> 300 aircrafts.
One was delivered to <unk> Airways, the national carrier of Italy.
And one of the 31 aircrafts, we signed a lease with <unk>.
That will deliver through 2025.
The other 8% to 20 was delivered to Bulgaria air the flag carrier of that country, which is based in the city of Sofia.
We continue to see broadening of the operator base globally of the 8% to 20.
Given its attractive operating economics and fuel burn savings.
We also delivered two new <unk> hundred 21 deals this past quarter.
<unk> in Mexico, and Polaris is the largest domestic airline by passenger volume in Mexico.
In September the FAA return, Mexico to category, one status, which should benefit Polaris and its competitors in the international expansion efforts to and from Mexico.
Alc's narrow body order book focus is concentrated very heavily on the <unk> hundred 21, Neo which offers a superior combination of capacity range and fuel efficiency.
We also had $3 737, Max deliveries during the quarter two of which went to court and Airlines group as part of our placement of nine aircraft to that airline.
<unk> three operating airlines units in the Netherlands, Malta and Turkey.
The other 737, new aircraft was delivered to Norwegian.
Scandinavia second largest airlines.
All three of the 787 aircrafts are delivering significantly improved operational efficiency to these airline customers.
Our single wide body delivery in the third quarter wasn't new <unk> hundred 30, <unk> 900, Neo which was also delivered to ITE Airways as part of the same large lease transaction mentioned a moment ago.
Offering the airline improved technology efficiency and customer experience.
Intercontinental Route network.
In closing.
We continue to see the operating environment as being highly advantageous to us at this time.
<unk> fleet of high demand commercial aircraft not only stands to benefit from the shortages that we foresee persisting for several years ahead.
<unk> order book strategy continues to provide us the newest and most efficient aircraft at.
At attractive prices with delivery positions well ahead of those available at present from the manufacturers and commanding high lease rates.
Now I'll turn the call over to our CFO, Greg Willis for his comments on our financial performance.
Thank you, Steve and good morning, everyone.
During the third quarter of 2023 air lease generated revenues of $659 million. This was comprised of approximately $604 million of rental revenues and $55 million from aircraft sales trading and other activities.
The increase in total revenues was primarily driven by the growth of our fleet along with increased sales activity.
As John highlighted earlier, we sold roughly $350 million and aircraft during the third quarter and recognized $44 million and gains from the sale of eight aircraft and one finance lease transaction.
We are pleased by our healthy gain on sales this quarter and with the size of our $1 8 billion dollar sales pipeline.
As our fleet was built organically, we have no purchase accounting adjustments or have we taken any impairments that would magnify our gain on sale margin.
Our gain on sale margin will vary from quarter to quarter based on aircraft sold and market conditions.
Clearly strong gain margins imply significant embedded value not reflected in the carrying value.
Fleet on our balance sheet today move.
Moving onto expenses interest expense increased primarily due to the uptick in our composite cost of funds from three point of 7% to $3 six 7% at the end of the third quarter prevailing interest rates are serving to increase our interest expense.
So we do continue to benefit from 85% of our debt being at fixed rates depreciation expense continues to track the size of our fleet, while SG&A rose as our business activities and leasing expenses have increased over the course of the past year our.
Our cash flows from operations year to date rose, 34% relative to the prior year benefiting from our continued strong airline customer cash collection efforts.
Moving on to financing, our largely fixed rate balance sheet and strong investment grade credit ratings continue to help offset the impact from elevated borrowing costs, we remain steadfast in maintaining our strong investment grade balance sheet utilizing unsecured debt as our main source of financing maintaining a high ratio of fixed rate funding and utilizing <unk>.
Service amount of leverage and training our target debt to equity ratio of two five times.
Our debt to equity ratio at the end of the third quarter was $2 six to eight times on a GAAP basis, which net of cash on the balance sheet is approximately $2 six one times declining relative to the prior quarter given aircraft sales and lower deliveries.
Our leverage remains modestly above our target following our Russian fleet write off last year, we continue to expect leverage to trend toward our long term target as we sell aircrafts and given that current OEM delivery delays our balance sheet remains solid supported by our strong liquidity position of $6 6 billion and our unencumbered asset base of <unk>.
One 8 billion as at the end of the third quarter.
We plan to remain opportunistic on the financing front, leveraging our large liquidity base, which provides us with the flexibility to access the financing markets as to raise attractively priced debt capital.
In conclusion, the combination of our continued fleet drove growth.
Growth constrained commercial aircraft supply improving lease yields an attractive aircraft sales market tends trends 10, excuse me trends continue to bolster our business outlook, which we also expect to benefit our profit margins and ROE overtime with that I will turn the call back over to Jason for the question and answer session of the call.
Thanks, Greg. This concludes the management team's commentary remarks for the question and answer session. We ask that each participant limit their time to one question and one follow up Rob can you. Please open the line for Q&A.
Certainly at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad and.
And your first question comes from the line of Catherine O'brien from <unk>.
My apologies from Hillary.
My apologies again, Catherine O'brien, just jump back into the queue. Your line is open.
I'm, sorry about that I know everybody would raise my head yet so I appreciate that.
Good morning, everyone. How are you.
Hi, Catherine how are you.
Thanks.
A couple on the sales pipeline, a little bit of a multi partner hope you'll allow it.
You spoke to GTS already driving increases in lease rates on aircraft values should we expect to see the impact of that on the fourth quarter sales margin or is that more something we'll see over the course of the next year or so.
And then I guess, who are the buyers on the other side of these contracts.
Financial buyers Airlines and then lastly, the multipart one you've expressed some frustration with the length of time has been taking the closed sales recently you already gave us guidance on the fourth quarter, but how should we big picture think about the timing of that $1 8 billion total held for sale under LOI is that something that could close in the next year.
Months are all that take longer I appreciate all the time.
Yes.
Well. Thanks for the question first of all this is progressive over the course of I would say the next.
Probably eight to 12 months.
We will continue to add sales product for us going forward and in terms of shortages in the values with respect to the Pratt Whitney power plants.
This is just a general phenomenon that is increasing is one element.
A general increasing demand environment, and therefore, a general increasing asset <unk> environment. So we're realizing the benefits of these on an ongoing basis in the first quarter second <unk>.
Fourth quarter of this year, we anticipate and progressively through next year, It's I would say it's on a very.
It's on a regular very regular straight line scaling basis.
And I guess cater to your question about the buyers were selling mainly to other leasing companies.
And then in terms of the cadence of sales, we're looking to do as.
And as best possible at a nice steady stream of aircraft sales or in a quarter to have a nice.
That impact to the financials.
Got it totally makes sense.
My follow up here you didn't have any aircraft with aeroflot for the events in Ukraine.
Couple of articles out there knowing that from private airlines nails will be approaching and drove insurance settlements with the lessors.
Any comments, there or should we keep in mind, why aeroflot might be a special case.
I appreciate all the color.
Yes, we're working the problem.
Right, along with our customers and Russia, which were all private airlines, we're working with the insurance companies.
We're working with the U S and Russian authorities.
On the generic guidelines.
<unk> within the sanction regulations and that's all I can say at this time.
Understood. Thanks again.
Your next question comes from the line of Hillary kicking Ando from Deutsche Bank. Your line is open.
Hi, Thanks for taking my question.
So with $1 $8 billion in your sales pipeline.
Okay.
I was wondering how you are thinking about you have high Boston, Okay Stefan.
Thank you.
Tom.
Sure Luke capital allocation, including share buybacks is always a really big consideration for us keep in mind that we are still trying to lower our debt equity ratio to the target of two five to one.
That's important for our investment grade ratings and that we have always said is sacrosanct. So given all of those elements.
We are prioritizing, reducing our debt equity ratio down to our guidance level one.
Okay got it.
And then you've spoken about the extension may be very high in the current environment.
I kind of understand that dynamic.
Is it more profitable to the extender currently.
DSO or would it be more profitable.
So Mike I'd add to our new pilots given the high demand.
For our program.
Yes, I mean, I think the cases both.
Most of the time most of our airlines want to keep their aircraft. So as the lease terms expiring, especially in this demand environment. They are protecting their lift they are worried about their own delivery delays and so we are seeing a strong rate of lease extensions at higher rates and at the same time a few aircraft. We have available we are enjoying.
Placement at I would say meaningfully higher significantly higher lease rates.
So so so.
Please.
Thanks very much.
Well, what you're saying.
Whether you attended or you might get it thank.
Could you guys.
Similarly.
Well I would say most of the time, it's usually easier to extend the lease with the current operator.
In some cases in a number of cases, we deeply lease extension.
Options, but for the most part those options are determined at the time of extension and so.
Most of the airlines are looking to protect.
Their equipment and for airlines that have no more extension options or the leases are just expiring with nothing further which is probably the majority of the case.
We enter into dialogues and we extend those leases at much more reflective of the current market higher lease rates.
Okay got it and I guess, you don't have to spend like marketing.
Mike.
Alright, Thats all part of the <unk>.
As part of the beauty and the ease of expanding with our current customers. There is no change in configuration and Theres nothing.
Got it thank you so much.
Yes.
Your next question comes from the line of Helane Becker from TD Cowen Your line is open.
Thanks, very much operator, hi, everybody and thank you for the time I have exactly two questions. The first question.
Is what's your expectation for deliveries midway through the quarter I know you said, what your contractor to get but how many of how much of that you think will actually be delivered.
And it's really hard to tell because.
Both manufacturers are working hard.
To cram in as many deliveries as they can in November and December.
To get close to what they targeted at.
And pronounce to Wall Street.
Our feeling at the moment Alain is that neither.
Of the two big players will reached.
Are the deliveries that they forecast.
And for two reasons one.
You are well aware of the 737 Max issues.
Where they have to rework certain part of the structure.
And then the Fas to sign off on each aircraft and then 780 Sevens are just delayed in Charleston.
And then on the Airbus side.
The situation with engine suppliers, particularly Pratt Whitney.
Is not enabling Airbus to meet their fourth quarter targets.
And of course, a lot of engines are being diverted a spare engines to keep airlines fly.
So we're a little bit more cautious than others on the fourth quarter deliveries and Thats why we have done our best in my remarks, I guided that we're expecting a range of maybe 900 to about $1 1 billion of aircraft for the fourth quarter and that would yield about for the entire year for 3% to four.
$5 billion.
But for the reasons, Steve indicated this could be this could be off.
Let me just point out something to all of you for listening in.
Whether we get an aircraft in say early December or middle of January as almost no financial impact on our company because on a 12 year lease.
We're still going to get the same cash flows.
Particularly in 2024 25 and onwards so.
Missing a delivery at the end of the year as minimal impact on air lease.
Missing the delivery in the first half of the year is a much greater impact because it reduces the number of rental months for the remainder of the year. So.
While it's upsetting to us.
I don't believe that.
Some aircraft that will slide into early January of 'twenty, four will really affect our financial performance.
That's really helpful. Thank you and then my other question is I don't think you have any freighters and that all of a sudden among leasing companies became very popular for whatever reason and I'm wondering how you think about that how you think about the freighter market.
Well clearly the cargo markets will soften a little bit as <unk>.
What's to be expected with the large <unk>.
Return to capacity of the passenger airliners.
Post COVID-19 and the strong recovery we've seen.
So.
This is sort of a normal fluctuation that we say, having said that we only have one freighter aircrafts airplanes today partial freighter commercial freighter conversion <unk> the cargo door. So.
For us we really it doesn't really have much of an impact on us today.
Okay. Thank you very much.
Welcome.
Your next question comes from the line of Jamie Baker from Jpmorgan. Your line is open.
Hey, this is James on for Jamie Thanks for taking my questions.
Just starting off on the <unk>.
There has been pressure in the ultra low cost carrier business model.
Just wanted to hear your thoughts if you.
You're also seeing that or if that would impact your decision to do business with an airline.
That is an ultra low cost carrier.
No I tried to cover that in my opening remarks, James the bottom line is no. We don't have any concerns from the airlines or the world answers softening aircraft demand I gave you. A contrast between a few <unk> in Europe and the U S over the past month or two reporting some softening and yet in the last several days.
As southwest and Lufthansa have reported very strong bookings earnings so.
If nothing else we in our gut tells US. This is just a return to normal seasonal demand and we don't make aircraft placements decisions for 2026 2027.
Results for a few weeks or a month of an airline because while they are we may report some softness and some reservations, maybe they'll have a record Thanksgiving and then everything changes.
I think the media tends to be very trigger happy and we tried to look at more of the long term trends of each airline customer.
Okay.
Got it that makes sense.
Thats It for me thanks.
Okay.
Okay.
Your next question comes from the line of Vincent <unk> from Stephens. Your line is open.
Hey, good morning, Thanks for taking my questions I have two of them. So I'll just ask them. Both the first one on the dynamic between.
Aircraft deliveries and aircraft sales so it's nice to see the large.
Aircraft sale pipeline of that $1 8 billion. So thats, even at the high end of the year of 2023 guidance of the 1% to $2 billion.
And I think historically there.
The pipeline of sales have been tied with purchases that you had some strong sales activity and strong delivery activity. So I'm just curious if.
Maybe we're talking about these delivery delays, but maybe the outlook is better or how youre thinking about that dynamic between the two and then just a second question. If you can update us on how youre thinking about.
Lease rates versus your cost of funds I know the cost of funds have been going up but so have the lease rates and if you can just talk about that thank you.
Thanks, Vince and I will take the first one.
Look I think you have to realize going back during COVID-19 pandemic, we significantly slowed down aircraft sales in fact, we virtually stopped them.
So we've now returned to a more normalized pace and we've been deliver dealing with delivery delays now for a number of years.
So in the Big picture given those delays those are kind of normalized out and as Steve mentioned in an answer to an earlier question. If we have a delay of a delivery in the fourth quarter into the first quarter doesn't really impact us.
We have now returned based upon robust aircraft values to a normalcy of aircraft sales. So our goal is to consider delivering it to <unk>.
Delivering a fairly normal pace quarter to quarter Jorge for aircraft sales. So I would just say in the Grand scheme of thing those those two things are sort of evened out.
Okay.
Yes.
And then second question was with regards to lease rates catching up with interest rates.
Quarter to quarter Thats been all kinds of publications out there about what.
The market is seeing in terms of lease rate increases some.
Sure.
Forms of Reflate repeating reporting that lease rates have gone up north of 20% and we're continuing to see our lease rates go up so as we continue to deliver our order book there should be upward pressure on our lease margins again, thats being balanced with aircraft that are being sold.
Okay, great very helpful. Thanks, very much.
Thank you.
Your next question comes from the line of Stephen Trent from Citi. Your line is open.
Yes, good morning, gentlemen, and thanks, Thanks, very much for taking my questions.
I was curious in terms of Europe.
Your product suite.
Sure.
To what extent you would consider.
Leaning.
More heavily are exploring and doing more engine leasing.
<unk> versus <unk>.
Butter aircraft leasing.
I think right now our core business is to focus on commercial passenger traffic and leasing I don't I don't see us going too far into the engine leasing space or helicopters or other forms of transportation leasing I think our expertise is in passenger jet aircraft.
And the reality today is spare engines are really scarce to come by.
And so building a platform in the middle of.
Some turmoil in the aircraft engine engine world globally.
It's not something that's.
On the table right now.
Really appreciate it and I'm guessing.
I propose that answer.
That an acquisition on that side of the fence is also something youre not really contemplating at the moment.
Well the other thing is.
If we bought 100 engines today.
The financial impact on air lease would be minimal that would be like two wide body aircrafts. So.
Going heavily into engine acquisitions would not meaningfully move the needle.
In terms of revenues.
Roe's margins.
Sure.
And as Greg said, we would have to add staff and experts in that in that segment of the business. So we.
We've looked at this we do have some selected engines that we are going to be leasing the airlines, but it's not a real strong focal point of our business. This others that have the expertise and the infrastructure.
And facilities.
To deal with engine leasing.
Okay very clear I appreciate the time and thank you.
Thanks, David.
And we have reached the end of our question and answer session. Mr. Arnold I turn the call back over to you.
Thanks, very much Rob and thank you all for participating in our third quarter earnings call. We look forward to speaking with you again, when we report the fourth quarter results. Operator. Please disconnect the line.
This concludes today's conference call you may now disconnect.
[music].
Okay.
[music].
Okay.