Q4 2023 Air Lease Corp Earnings Call

Greg: Good afternoon. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Air Lease Corporation Q4 earnings conference call. All lines have been placed on mute to prevent any background noise.

Good afternoon. My name is Greg and I will be your conference operator today at this time I would like to welcome everyone to the Air Lease Corporation Q4 earnings Conference call.

All lines have been placed on mute to prevent any background noise. After.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, simply press star one again.

Speaker Change: After the Speakers' remarks, there will be a question and answer session. If you'd like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw your question simply press Star one again.

Jason Arnold: I will now turn the call over to Mr. Jason Arnold, Head of Investor Relations. Mr. Arnold, you may begin your comments. Thanks, Greg, and good afternoon, everyone, and welcome to Air Lease Corporation's fourth quarter and full year 2023 earnings call. I'm joined today by Steve Hasee, our Executive Chairman, John Plueger, 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 full year 2023 results. A copy of our earnings release is available on the investors section of our website at www.airleascorp.com. This conference call is being webcast and recorded today, Thursday, February 15, 2024, and the webcast will be available for replay on our website. At this time, all participants to this call are in listen-only mode.

I will now turn the call over to Mr. Jason Arnold head of Investor Relations. Mr. Arnold You May begin your conference.

Jason Arnold: Thanks, Greg and good afternoon, everyone and welcome to Air lease Corporation's fourth quarter and full year 2023 earnings call I'm joined today by Steve <unk>, 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 full year 2000.

Jason Arnold: 'twenty three results a copy of our earnings release is available on the investors section of our website at Www Dot Air lease Corp Dot com.

Jason Arnold: Conference call is being webcast and recorded today Thursday February 15th 2024, and the webcast will be available for replay on our website at this time all participants to this call are in listen only mode.

Jason Arnold: 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 aircraft and engine delivery delays and manufacturing defects, our aircraft sales pipeline, and our future operations and performance. These statements and any projections as to our future performance represent management's current estimates and speak only as of today. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations.

Jason Arnold: Where 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 aircraft and engine delivery delays and manufacturing defects.

Jason Arnold: Craft sales pipeline and our future operations and performance.

Jason Arnold: These statements and any projections as to our future performance represent management's current estimates and speak only as of today's date.

Jason Arnold: 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.

Jason Arnold: 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, we may discuss certain financial measures, such as adjusted net income before taxes, adjusted diluted earnings per share before income taxes, and adjusted pre-tax return on equity, which are non-GAAP measures.

Jason Arnold: Air Lease Corporation assumes no obligation 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 taxes adjusted diluted earnings per share before income taxes, and adjusted pre tax return on equity which are non-GAAP measures.

Jason Arnold: 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 10-K that we issued today. This release can also be found in the Investors section and Press section of our website at airleasecorp.com. As a reminder, unauthorized recording of this conference call is not permitted. I'll now turn the call over to our Chief Executive Officer and President, John Plueger. Thanks very much, Jason.

Jason Arnold: Script, one 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 10-K that we issued today. This release can also be found in the investors section and press section of our website at Air lease Corp. Dot Com as a reminder, unauthorized recording of this.

Jason Arnold: Conference call is not permitted I'll now turn the call over to our Chief Executive Officer, and President John <unk>.

John: Thanks, very much Jason good afternoon, everyone and thank you for joining us on our call today.

John L. Plueger: Good afternoon, everyone, and thank you for joining us on our call today. I'm pleased to report that during the fourth quarter, ALC generated record quarterly revenues of $717 million, up approximately 19% relative to the same quarter last year, and we achieved $1.89 in diluted earnings per share, up 56% from last year's fourth quarter. Revenue for the full year of $2.7 billion was also an ALC record. A strong continued expansion of our fleet, increased sales activity at healthy gains, and higher end of lease revenue were the primary drivers of the upside to revenue as compared to the prior year quarter. During the fourth quarter, we purchased 22 new aircraft from our order book, adding approximately $1.2 billion in flight equipment to our balance sheet, while we sold eight aircraft, totaling approximately $440 million in sales proceeds.

John: I am pleased to report that during the fourth quarter ALC generated record quarterly revenues of $717 million.

John: Up approximately 19% relative to the same quarter last year, and we achieved a $1 89 in diluted earnings per share up 56% from last year's fourth quarter.

John: Revenue for the full year of $2 $7 billion was also an ALC record.

Strong continued expansion of our fleet increased sales activity at healthy gains and higher end of lease revenue were the primary drivers of upside to revenue as compared to the prior year quarter.

John: During the fourth quarter, we purchased 22, new aircraft from our order book, adding approximately $1 $2 billion in flight equipment to our balance sheet, while we sold eight aircraft totaling approximately $440 million in sales proceeds.

John L. Plueger: The utilization rate on our fleet remains very strong at 99.9% for the full year 2023. In addition to revenue expansion during the fourth quarter, we also benefited from approximately $67 million in net from the insurance settlement we received on four aircraft seized in Russia in the prior year, plus the equity interest in our managed fleet. We continue to vigorously pursue further insurance settlements, as well as our insurance claims and litigation. But given these are largely legal matters, there's not a lot of extra color we can add on this topic.

John: The utilization rate on our fleet remains very strong at 99, 9% for the full year 2023.

John: In addition to revenue expansion during the fourth quarter. We also benefited from approximately $667 million net from the insurance settlement. We received four aircrafts sees in Russia in the prior year plus the equity interest in our managed fleet.

John: We continue to vigorously pursue further insurance settlements as well as our insurance claims and litigation, but given these are largely legal matters, there's not a lot of extra color. We can add on this topic.

John L. Plueger: I will note that we believe strongly in the validity of our claims and continue to pursue all available options for recovery. Global air traffic continues to gain altitude, and there are no signs on the horizon of volumes weakening dramatically. Steve will expand upon this in his remarks.

John: I will note that we believe strongly in the validity of our claims and continue to pursue all available options for recovery.

Global Air traffic continues to gain altitude and there are no signs on the horizon of volumes weakening dramatically.

John: Steve will expand upon this in his remarks, we're also seeing in recent months a rebound in the cargo and air freight markets, owing largely to cargo ship traffic risk time delays and concerns from the middle East.

John L. Plueger: We're also seeing in recent months a rebound in the cargo and air freight markets owing largely to cargo ship traffic risk, time delays, and concerns from the Middle East. We believe that this uptick in air freight trends will continue given the geopolitical realities in the Middle East. This bodes well for our order of seven A350 freighter aircraft, as does further and impending additional orders for the A350 freighter from airlines such as Cathay Pacific. Demand for fuel-efficient aircraft, meanwhile, continues to be very strong across both new and used aircraft. At present, we are 100% placed on our forward orders through 2025, and we have placed 65% of our entire order book.

John: We believe that this uptick in airfreight trend will continue given geopolitical realities in the middle East This bodes well for our order of 700, <unk> hundred 50 freighter aircrafts as does further and impending additional orders for the <unk> hundred 50 freighter from airlines such as Cathay Pacific.

John: Demand for fuel efficient aircraft. Meanwhile continues to be very strong across both new and used aircraft.

John: At present, we are 100% placed in our forward orders through 2025, and we placed 65% of our into our order book.

John L. Plueger: Given Boeing and Airbus are practically sold out through the end of this decade, and that we have $22 billion in deliveries pending through 2028, which will likely slip into 2029 as well, we are being patient with additional order book placements to further bolster the upward trend in lease rates you've heard us regularly highlighting. These delivery slots hold immense value, and we're very cognizant of the position of strength we're in. As to our current fleet, we are taking advantage of the market lease rate increases on our lease extensions, although we do not have a high number of lease expirations or extensions this year. However, we are still experiencing a very high rate of lease extensions as most airlines are anxious to keep their aircraft given the short supply of aircraft.

John: Given Boeing and Airbus are practically sold out through the end of this decade and that we have $22 billion through deliveries pending through 2028, which will likely slip into 2029 as well we are being patient with additional order book placements to further bolster the upward trend in lease rates, you've heard us regularly high highlighting these.

John: These delivery slots hold immense value and we're very cognizant of the position of strength we are in.

John: As to our current fleet, we are taking advantage of the market lease rate increases on our lease extensions. Although we do not have a high number of lease explorations or extensions this year.

John: We are still experiencing a very high rate of lease extensions as most airlines are anxious to keep their aircraft given the short supply of aircraft.

John L. Plueger: Used wide-body lease rates, including A330-200 and A330-300 and Boeing 777-300ERs, are accelerating from the supply-demand imbalance, with single-aisle 737-800s and A320 and A321 CEOs reaping the highest premiums for prior-generation aircraft in the used aircraft marketplace. During the fourth quarter, our $1.2 billion of deliveries came in higher as compared to our expectations for the quarter, and for the full year, deliveries came in at $4.6 billion.

John: Used widebody lease rates, including <unk> hundred 3200, and 300 and Boeing Triple 703, <unk> are accelerating some of the supply demand imbalance with single aisle 737, eight hundreds and <unk> hundred 20, and $3 21, Ceos reaping the highest premiums for prior generation aircraft and the used aircraft marketplace.

During the fourth quarter, our $1 2 billion of deliveries came in higher as compared to our expectations for the quarter and for the full year deliveries came in at $4 6 billion.

John: As you May recall third quarter deliveries were lighter than expected. So some of the pick up in the fourth quarter came from those delivering while others that we thought might push into 2025 were brought forward into December.

John L. Plueger: As you may recall, third-quarter deliveries were lighter than expected, so some of the pickup in the fourth quarter came from those that delivered, while others that we thought might push into 2025 were brought forward into December. Looking forward, the supply of new commercial aircraft remains highly constrained, both by the supply chain as well as aircraft and engine production quality issues. Delivery volumes have improved over the past couple of years following the pandemic, but challenges persist around the pace of improvement and the ability of both Boeing and Airbus to ramp up and achieve production goals. The recent action by the FAA to limit Boeing's maximum production rate is the main reason why we at ALC are forecasting a relatively wide range in our 2024 new aircraft investments of between $4.5 to $5.5 billion.

John: Looking forward the supply of new commercial aircraft remains highly constrained both by the supply chain as well as aircraft and engine production quality issues.

John: Delivery volumes have improved over the past couple of years following the pandemic, but challenges persist around the pace of improvement in the ability of both Boeing and Airbus to ramp up and achieve production goals.

John: The recent action by the FAA to limit Boeing's Max production rate as a main reason why we at ALC are forecasting a relatively wide range in our 2024, new aircraft investments of between four five to $5 5 billion prior.

Prior year history also provides some uncertainty on our total Airbus deliveries for 2024.

John: We expect around $1 billion of those deliveries to occur in the first quarter of 2024.

John: That said I do think it's important to point out that at the low end of the range deliveries would provide significant fleet growth representing approximately 17% of Alc's 2023 year end fleet, which would be even higher after aircraft sales and depreciation are taken into account.

John L. Plueger: Prior years' history also provides some uncertainty on our total Airbus deliveries for 2024, but we expect around a billion dollars of those deliveries to occur in the first quarter of 2024. That said, I do think it's important to point out that at the low end of the range, deliveries would provide significant fleet growth, representing approximately 17% of ALC's 2023 year-end fleet, which would be even higher after aircraft sales and depreciation are taken into account. We are continuing to see lease rates catch up with interest rates in the marketplace.

John: We are continuing to see lease rates catch up with interest rates in the marketplace.

John: As to the impact on lease yields let me remind you that the increase in lease rates. We are seeing a new placements will primarily benefit our results in subsequent years as our new aircraft placements generally occur two years prior to delivery.

Our aircraft sales activity remained healthy in the fourth quarter and we continue to see strong sales demand for our aircraft.

John L. Plueger: As to the impact on lease yields, let me remind you that the increase in lease rates we are seeing on new placements will primarily benefit our results in subsequent years, as our new aircraft placements generally occur two years prior to delivery. Our aircraft sales activity remained healthy in the fourth quarter, and we continue to see strong sales demand for our aircraft. Important to highlight in our business is the fact that the earnings cycle on every aircraft is not complete until it's sold. So earning a healthy gain on exit is a critical part of the investment cycle as well and bolsters our profit margins and return on equity. Healthy gains also demonstrate the value of our strategy of purchasing aircraft at the best possible prices from the OEM.

John: Porting to highlight in our business is the fact that the earnings cycle. On every aircraft is not complete until it's sold so earning a healthy gain on eggs is a critical part of the investment cycle as well and bolsters, our profit margins and return on equity.

John: Healthy gains also demonstrate the value of our strategy of purchasing aircraft at the best possible prices from the Oems.

John: ALC sales pipeline totals $1 5 billion as of today inclusive of roughly $600 million of aircraft classified as held for sale and 900 million subject to letters of intent.

John: As for 2024 sales expectations. We currently anticipate approximately $1 billion of half of aircraft sales.

John: As a reminder, the sales proceeds from letter of intent to deal closure. It takes time and is dependent on a number of factors outside of our control. So sales volumes tend to be lumpy in any given quarter as a result.

John L. Plueger: ALC's sales pipeline totals $1.5 billion as of today, inclusive of roughly $600 million of aircraft classified as held for sale and $900 million subject to letters of intent. As for 2024 sales expectations, we currently anticipate approximately a billion and a half of aircraft sales. As a reminder, the sales proceeds from letter of intent to deal closure takes time and is dependent on a number of factors outside of our control, so sales volumes tend to be lumpy in any given quarter as a result.

John: Based on sales activity. So far this quarter, we would expect closing around $200 million in sales for the first quarter of 2024.

John: Now switching gears to a different topic there has been much publicity and commentary on the recent Alaska 737, nine Max incident, along with Boeing quality control and regulatory oversight.

John: Let me just say that ALC has a believer and supporter of the 737, Max and of the Boeing company.

John L. Plueger: Based on sales activity so far this quarter, we would expect to close around $200 million in sales for the first quarter of 2024. Now switching gears to a different topic, there has been much publicity and commentary on the recent Alaska 737 9MAX incident, along with Boeing quality control and regulatory oversight. Let me just say that ALC is a believer and supporter of the 737 MAX and of the Boeing Company. We are keenly aware of Boeing's intense 24-7 efforts to rectify and address quality controls, enhance safety measures, and restore confidence to the flying public, their customers worldwide, and the regulators. We fully believe that Boeing will be successful in these efforts and will be a better company for it. The 737 MAX is a core component of global airline fleets and will remain so. We do not believe that the MAX residual value is diminished whatsoever.

John: We are keenly aware of boeing's intense $24 seven efforts to rectify and address quality controls enhanced safety measures and restore confidence of the flying public their customers worldwide and the regulators.

John: We fully believe that Boeing will be successful in these efforts and will it be a better company for it.

John: The 737, Max is a core component of global airline fleets and will remain so.

John: We do not believe that the Max residual value is diminished whatsoever. We continue to see very strong lease demand for the Max as well as high demand from buyers for the Max.

John: We're also encouraged by Airbus his perspective on the Alaska nine Max matter with <unk> for a recently commenting that it quote makes us very humble and quote.

John: It is a strong reminder, to all Oems and suppliers to always put quality and safety <unk> never at the expense of production rate or economic goals.

John L. Plueger: We continue to see very strong lease demand for the MAX as well as high demand from buyers for the MAX. We're also encouraged by Airbus' perspective on the Alaska 9MAX matter, with Guillaume Fauré recently commenting that it makes us very humble. end quote It is a strong reminder to all OEMs and suppliers to always put quality and safety first, never at the expense of production rate or economic goals. We all want our aircraft on time, but without any compromise on quality. Quality and safety must take precedence over all other considerations.

John: We all want our aircraft on time, but without compromise on quality quality and safety must take precedence over all other considerations.

John: So while extremely unfortunate we believe the Alaska Dash nine Max incident serves as a reminder to all the Oems and their related supply chains as to what is most important.

John: In closing, let me just summarized at the dynamic of strong aircraft demand constrained supply and Apple fleet growth is a robust and prevailing tailwind for our business here at air lease.

John: And we see these factors offering continued support for aircraft values and lease rates for the foreseeable future as such we see a strong flight path ahead for our business.

John L. Plueger: So while extremely unfortunate, we believe the Alaska-9MAX incident serves as a reminder to all OEMs and their related supply chains as to what is most important. In closing, let me just summarize that the dynamic of strong aircraft demand, constrained supply, and ample fleet growth is a robust and prevailing tailwind for our business here at Air Lease. And we see these factors offering continued support for aircraft values and lease rates for the foreseeable future. As such, we see a strong flight path ahead for our business. Now I'll turn the call over to Steve Hosie, who will add some additional commentary. Okay, Steve?

John: Now I will turn the call over to Steve Harvey, who will add some additional commentary Steve.

Steven F. Udvar: Thank you John and thank you to all of you listening in on the air lease call today.

Steven F. Udvar: Like to begin by congratulating.

From deep in my heart the air lease team on achieving several key records and.

Steven F. Udvar: Including the highest revenue and sales proceeds.

Steven F. Udvar: As well as exceeding $30 billion in assets for the first time in our history.

Steven F. Udvar: We have certainly come a long way from our start in 2010.

Steve Hosie: Thank you, John, and thank you to all of you listening in on the Air Lease call today. I'd like to begin by congratulating, from deep in my heart, the Air Lease team on achieving several key records, including the highest revenue and sales proceeds, as well as exceeding $30 billion in assets for the first time in our history. We've certainly come a long way from our start in 2010, when we had aspirations but no aircraft and only a handful of employees. ALC was built from our collective vision that airlines would require the newest technology, fuel-efficient commercial aircraft for lease, and that these aircraft would be needed well ahead of any availability from the OEM. Right now, we're observing both of these trends in a position that has rarely been so positively skewed in our favor.

Steven F. Udvar: When we had aspirations, but no aircraft in only a handful of employees.

Steven F. Udvar: ALC was built from our collective vision that airlines will required the newest technology fuel efficient commercial aircraft for lease.

Steven F. Udvar: And that these aircraft will be needed well ahead of any availability from the Oems.

Steven F. Udvar: Right now we're observing both of these trends and our position.

Steven F. Udvar: That has rarely been so positive there'll be skewed in our favor.

Steven F. Udvar: Airlines are immense need for the highest demand new aircraft and both Boeing and Airbus are practically sold out.

Steven F. Udvar: Through the end of this decade.

Steven F. Udvar: Our volume discount pricing on our fleet and order book was achieved well before the recent spike in industry orders.

Steve Hosie: Airlines are in immense need of the highest demand new aircraft, and both Boeing and Airbus are practically sold out through the end of this decade. Our volume discount pricing on our fleet and order book was achieved well before the recent spike in industry orders, and pricing gives us a tremendous advantage that few others possess.

Steven F. Udvar: And pricing and gives us a tremendous advantage that few others possess.

Steven F. Udvar: These factors also continued to support positive upside to lease rates and aircraft values in our fleet.

Steven F. Udvar: Global airline traffic volumes remained very robust.

Steven F. Udvar: Full year 2023, IATA traffic figures released earlier this month.

Steve Hosie: These factors also continue to support positive upside to lease rates and aircraft values in our fleet. Global airline traffic volumes remain very robust. Full year 2023, I added, traffic figures released earlier this month continue to show very strong expansion, with total volumes rising 37% year over year. Domestic traffic was up 30%.

Steven F. Udvar: Continue to show.

Steven F. Udvar: Very strong expansion with.

Steven F. Udvar: With total volumes rising 37% year over year.

Steven F. Udvar: Domestic traffic was up 30%.

Steven F. Udvar: And for example, domestic China in particular, a significant 147% versus the prior year.

Steven F. Udvar: And most markets rose a very healthy pace in.

Steven F. Udvar: In fact global domestic traffic hit all new Hi, Ty highs in December with.

Steve Hosie: For example, Chinese domestic traffic, in particular, was up a significant 147% versus the prior year, and most markets rose at a very healthy pace. In fact, global domestic traffic hit all new highs in December, with several markets like the U.S., India, Australia, and Brazil achieving mid to high single-digit year over year growth rates in the month.

Steven F. Udvar: With several markets like the U S, India, Australia, and Brazil at.

Steven F. Udvar: Achieving mid to high single digit year over year growth rates in the month.

Steven F. Udvar: Total international volume, Meanwhile, rose as substantial 42% for the year.

Steven F. Udvar: With all major markets rising at double digit growth rates relative to 2022.

Steve Hosie: Total international volume meanwhile rose a substantial 42% for the year, with all major markets rising at double-digit growth rates relative to 2022. Similar to domestic traffic, the biggest gainers were in the Asia-Pacific region again, which rose more than 100% year over year in international travel in that region. And there's a continuation of the resumption of normalized international traffic patterns; in Asia, Widebody Aircraft Demand has really picked up pace, as a result of economic strength in Asia, as well as growing international demand globally. We continue to foresee strong growth in the Asian market ahead, particularly opportunities in the Asia to North America and Asia to Europe routes. But we also see strong continued expansion in a number of other markets as well; major traffic flows such as North America to Europe and North America to South America, for example, continue to expand significantly. Many domestic markets worldwide also exhibit strength and further growth momentum. Passenger load factors also continue to climb, coming in at 82% in the latest month, as reported by IATA.

Steven F. Udvar: Similar to domestic traffic the biggest gainers were in the Asia Pacific region again.

Steven F. Udvar: Which rose more than 100% year over year and international travel in that region.

Steven F. Udvar: And there is a continuation of.

Steven F. Udvar: Resumption of normalized international traffic patterns in Asia.

Steven F. Udvar: <unk> body aircraft demand has really picked up pace.

Steven F. Udvar: As a result of economic strength in Asia, as well as growing international demand globally.

Steven F. Udvar: We continue to foresee strong growth in the Asia market ahead.

Steven F. Udvar: Particularly opportunities in the Asia to North America and.

Steven F. Udvar: In Asia to Europe routes, but we also see strong continued expansion in a number of other markets as well.

Steven F. Udvar: Major traffic flows such as North America to Europe.

Steven F. Udvar: In North America to South America for example continue to expand significantly.

Steven F. Udvar: Many domestic markets worldwide also illustrate strength and further growth momentum.

Steven F. Udvar: <unk> load factors also continued to climb coming in at 82% in the latest month as reported by Ida Ida.

Steve Hosie: And in a number of markets, it's already exceeding these levels. This is putting pressure on airlines to find additional aircraft capacity to satisfy robust air travel demands. And we would anticipate load factors to go up even higher in the year ahead, given the limited supply of commercial aircraft and OEM delivery constraints. IATA is expecting industry load factors to reach 83% in 2024, which is in line with record highs, but a number of markets are either already well above their highs or are expected to meaningfully exceed these industry average levels, and these could certainly go higher.

Steven F. Udvar: And in a number of markets.

Steven F. Udvar: Already exceeding these levels.

Steven F. Udvar: This is putting pressure on the airlines to find additional aircraft capacity to.

Steven F. Udvar: To satisfy robust air travel demand.

Steven F. Udvar: And we would anticipate load factors to go up even higher in the year ahead.

Steven F. Udvar: Given the limited supply of commercial aircraft and OEM delivery constraints.

Steven F. Udvar: <unk> is expecting industry load factors to reach 83% in 2024.

Which is in line with record highs, but a number of markets are either already well above their highs or are expected to meaningfully exceed these industry average levels.

Steven F. Udvar: And these could certainly go higher.

Steve Hosie: Continuation of this trend would further increase the need for more new commercial aircraft. Airline health, meanwhile, continues to improve overall, with airline industry revenues expected for the first time to hit a record of a trillion dollars in 2024. Strong traffic volumes and yields have also been a key to this expansion over the last few years. Profitability of the industry is expected to achieve $25 billion or so in 2024.

Steven F. Udvar: Continuation of this trend.

Steven F. Udvar: With further increase the need for more new commercial aircraft.

Steven F. Udvar: Airline health Meanwhile continues to improve overall.

The airline industry revenues expected for the first time to hit a.

Steven F. Udvar: A record of a trillion dollars in 2024.

Steven F. Udvar: Strong traffic volumes and yields have also been a key to this expansion over the last few years.

Steven F. Udvar: Profitability of the industry is expected to achieve $25 billion or so in 2024.

Steve Hosie: We recently had extensive conversations with many of our airline customers while in Europe over the past few weeks. Each of them echoed the view that operating conditions are attractive overall, and all of these airlines were asking us for more aircraft. On the credit front, we selectively avoided doing business with some of the larger airlines that went bankrupt over the last year, including GOLA in Brazil, GO FIRST in India, and Viva Air in Colombia.

Steven F. Udvar: We recently had extensive conversations with many of our airline customers while in Europe over the past few weeks.

Steven F. Udvar: Each of them have echoed the view that operating conditions are attractive overall in all of these airlines were asking us for more aircraft.

Steven F. Udvar: On the credit front, we selectively avoided doing business with some of the larger airlines that went bankrupt over the last year.

Steven F. Udvar: Including Golar, Brazil go first in India.

Steven F. Udvar: And Viva Air in Colombia in.

Steve Hosie: In addition to being selective with our customers, I would like to remind you that our fleet is very geographically diverse, with 119 customers in 62 countries at the end of 2023, with about a 1% average exposure position for customers. Hence, our conservative portfolio management strategy further reduces risk to any individual airline.

Steven F. Udvar: In addition to being selective with our customers I.

Steven F. Udvar: I would like to remind you that our fleet is very geographically diverse.

Steven F. Udvar: With 119 customers in 62 countries at the end of 2023 with about a 1% average exposure position per customer.

Steven F. Udvar: So our conservative portfolio management strategy further reduces risk to any individual airline.

Steve Hosie: We also maintain significant cash security deposits, and Maintenance Reserves, which adds added insulation from customers that could run into challenges. You can see this on our balance sheet, at around $1.5 billion at year end. This is a meaningfully large number, almost 6% of the net carrying value of our fleet. These funds are paid into Air Lease by our airline customers for our benefit, and they effectively reduce our net interest expense and provide us meaningful credit protection. Returning to ALC's fourth quarter results, we delivered 22 new aircraft from our quarter book during the period, consisting primarily of narrow-body aircraft along with two Airbus wide-body. We delivered six A220 aircraft in the quarter. Five were delivered to ITA Airways in Italy, and one A220-300 was delivered to a growing airline in Southeastern Europe.

Steven F. Udvar: We also maintained significant cash security deposits and maintenance reserves.

Steven F. Udvar: As added installation from customers that could run into challenges.

Steven F. Udvar: You can see this in our balance sheet and around $1 $5 billion at year end.

Steven F. Udvar: This is a meaningfully large number almost 6% of the net carrying value of our fleet.

These funds are paid into air lease by our airline customers So our benefit.

Steven F. Udvar: And effectively reduce our net interest expense and provide us meaningful credit protection.

Steven F. Udvar: Returning to Alc's fourth quarter results, we delivered 22, new aircraft from our quarter book during the period.

Steven F. Udvar: Consisting primarily of narrow body aircraft, along with two Airbus wide bodies.

Steven F. Udvar: We delivered six 8% to 20 aircraft in the quarter.

Steven F. Udvar: Five or deliver to ITE Airways in Italy.

Steven F. Udvar: And one 800 2300 was delivered to a growing airline in south Eastern Europe.

Steve Hosie: We continue to see the A220 gaining traction globally with both new and existing customers, given its attractive economics and fuel efficiency. We delivered one A320-200neo aircraft to Sata based in the Azores, as well as eight A321-200NEOs, two going to ITA, joining the five A220 deliveries I just mentioned. Two to Tlatelame Airlines, the largest airline in Latin America.

Steven F. Udvar: We continue to see the 8% to 20, gaining traction globally with both new and existing customers given its attractive economics and fuel efficiency.

Steven F. Udvar: We delivered $1 <unk> hundred 20, that's 200, new aircrafts the startup based in the Azores as.

Steven F. Udvar: As well as <unk> eight <unk> hundred 21, 200 meals to go into IPA, joining the five 8% to 20 deliveries I just mentioned.

Steven F. Udvar: Two to Latam Airlines, the largest airline in Latin America.

Steve Hosie: And the first two deliveries of eight total A321s will be delivered to that airline. In addition... We also delivered one A321-200neo to each Air Astana, based in Central Asia, Sky Airline, based in Chile, and Sunclass Airlines in Denmark, as well as the first Airbus A321neo to Transavia in the Netherlands. On the Boeing side, we delivered five new 737s during the quarter, including two 737-H for Malaysia Airlines and 1-737-9E for Aeromexico, Alaska Airlines, and Corendon in the Netherlands. Lastly, we delivered two new A330-900neo widebodies, one to ITA and one to Sunclass Airlines in Scandinavia, joining their narrow-body sistership, which were delivered in the quarter that I just highlighted. Lastly, I would like to emphasize a point from John's section on the value of our fleet and forward order book.

Steven F. Udvar: In the first two deliveries of eight totaled <unk> hundred 20 ones will be delivering to that airline.

Steven F. Udvar: In addition.

Steven F. Udvar: We also delivered $1 <unk> hundred 21, 200 neo two each.

Steven F. Udvar: Based in Central Asia Sky airline based in Chile, and Sunglass Airlines in Denmark.

Steven F. Udvar: As well as the first Airbus <unk> hundred 21, neo to Trans Avia in the Netherlands.

Steven F. Udvar: On the Boeing side, we delivered five new 730 sevens during the quarter.

Steven F. Udvar: Including two 737 dash eights, the Malaysia airline.

Steven F. Udvar: And one 737 dash nine each the aeromexico, Alaska Airlines and core and then in Netherlands.

Steven F. Udvar: Lastly, we delivered two new <unk> hundred 30, <unk> 900 neo wide bodies.

Steven F. Udvar: <unk> it.

Steven F. Udvar: And wanted to some class airlines in Scandinavia, joining their narrow body sister ships, which were delivered in the quarter that I just highlighted.

Lastly, I would like to emphasize a point from John's section on the value of our fleet and forward order book.

Steve Hosie: Simply looking at our consistent gains on aircraft sales, it is clear that there is significant value embedded in the aircraft in our fleet as compared to the depreciated cost basis held in our book. With all that said, I'll now turn the call over to our CFO, Greg Willis, for his more detailed comments on our financial performance in 2023. Thank you, Steve. And good afternoon, everyone.

Steven F. Udvar: Simply looking at our consistent gains on aircraft sales.

Steven F. Udvar: It is clear that there is significant value embedded in the aircraft in our fleet.

Steven F. Udvar: As compared to the depreciated cost basis held on our books.

With all that said I'll now turn the call over to our CFO, Greg Willis for his more detailed comments on our financial performance in 2023.

Gregory B. Willis: Thank you, Steve and good afternoon, everyone. During the fourth quarter of 2023 air lease generated revenues of $717 million, which is comprised of approximately $644 million of rental revenues and $73 million from aircraft sales trading and other activities.

Gregory B. Willis: During the fourth quarter of 2023, Air Lease generated revenues of $717 million, which was comprised of approximately $644 million of rental revenues and $73 million from aircraft sales, trading, and other activities. The increase in our total revenues was driven by the growth of our fleet, $59 million in gains recognized from our sales activities, and $60 million in end-of-lease revenue stemming from the return of seven areas. Let me remind you that the earnings model in aircraft leasing includes not only the base rental payments that we recognize on a straight-line basis over the life of the lease but also includes the earnings that we generate from end-of-lease payments and maintenance reserves, as well as the gains that we record from the ultimate sale of the aircraft. These additional income streams serve to enhance the overall earnings profile of the business. Sales proceeds for the fourth quarter totaled approximately $440 million from the sale of eight aircraft.

Gregory B. Willis: The increase in our total revenues was driven by the growth of our fleet $59 million in gains recognized from our sales activities and $60 million and end of lease revenue stemming from the return of seven aircraft.

Gregory B. Willis: Let me remind you that the earnings model and aircraft leasing includes not only the base rental payments that we recognized on a straight line basis over the life of the lease but also includes the earnings that we generate from Italy as payments and maintenance reserves as well as the gains that we're that we record from the ultimate sale of the aircraft.

Gregory B. Willis: These additional income stream served to enhance the overall earnings profile of the business.

Gregory B. Willis: Sales proceeds for the fourth quarter totaled approximately $440 million from the sale of eight aircraft as I. Just mentioned these sales generated $59 million in gains representing a 14% premium to our carrying value.

Gregory B. Willis: As I just mentioned, these sales generated $59 million in gains, representing a 14% premium to our carrying value, which was higher than our long-term average of 8 to 10 percent, further demonstrating the strength of the market and the underlying value of the aircraft that we have in our fleet. I do want to point out that our gain on sale margins will vary somewhat quarter to quarter based on aircraft sold and market conditions. It's also worth highlighting that we have a robust aircraft sales pipeline aggregating $1.5 billion for future aircraft sales at accrued evaluation. This pipeline not only further reinforces the underlying value of our existing fleet but also provides a meaningful addition to our liquidity position and is a catalyst to help us reduce our financial leverage, which I will discuss later in my remarks. Moving on to expenses, interest expense increased by $35 million and was driven by a 70 basis point increase in our composite cost of funds to 3.77%, along with an increase in our debt balance.

Gregory B. Willis: Which was higher than our long term average of 8% to 10% further demonstrating the strength of the market and the underlying value of the aircraft that we have in our fleet.

Gregory B. Willis: I do want to point out that our gain on sale margins will vary somewhat quarter to quarter based on aircraft sold and market conditions.

Gregory B. Willis: Also worth highlighting that we have a robust aircraft sales pipeline aggregating $1 5 billion for future aircraft sales at accretive valuations.

Gregory B. Willis: This pipeline not only further reinforces the underlying value of our existing fleet, but also provides a meaningful addition to our liquidity position and is a catalyst to help us reduce our financial leverage which I will discuss later in my remarks.

Gregory B. Willis: Moving onto expenses interest expense increased by $35 million and was driven by a 70 basis point increase in our composite cost of funds to 377% along with an increase in our debt balance we have significantly benefited from our largely fixed rate capital structure, which has helped to moderate the effects of the current interest rate environment.

Gregory B. Willis: We have significantly benefited from our largely fixed-rate capital structure, which has helped to moderate the effects of the current interest rate environment. You should know that we ended the year with 85% of our debt at fixed rates. Depreciation expense continues to track the growth of our fleet. With regard to SG&A, our ratio of expenses to revenue remained in line with the prior year, and on an absolute basis, it increased along with the expansion of our leasing activity.

Gregory B. Willis: You should note that we ended the year with 85% of our debt balance debt at fixed rates dipped.

Gregory B. Willis: Depreciation expense continues to track the growth of our fleet with regards to SG&A our ratio of expenses to revenue remained in line with the prior year and on an absolute basis, they increased along with the expansion of our leasing activities.

Gregory B. Willis: It is also important to note that we disclosed in our 8K filing in December that we recorded $67 million from a Russian insurance recovery as a benefit against our Russian write-off line item in our income statement. This recovery, along with our aircraft sales activities, was helpful, along with our financial leverage, to help us reduce our financial leverage. All of these activities, along with the quality of our fleet, helped us to generate strong financial results in the fourth quarter and for the year ended 2023, which ultimately has resulted in the continued expansion of our adjusted pre-tax return on equity since 2021. Our cash flow from operations for the full year 2023 rose 26% relative to 2022, benefiting from our continued strong airline customer cash collection.

Gregory B. Willis: It is also important to note that we disclosed in our 8-K filing in December we recorded $67 million from a Russian insurance recovery as a benefit against our Russian write off line item in our income statement. This recovery was helpful. Along with our aircraft sales activities to help us reduce our financial leverage all of these activities along with the quality of our fleet helped us to generate strong.

Gregory B. Willis: <unk> financial results in the fourth quarter and for the year ended 2023, which ultimately has resulted in the continued expansion of our adjusted pre tax return on equity since 2021.

Gregory B. Willis: Our cash flow from operations for the full year 2023 rose, 26% relative to 2022 benefiting from our continued strong airline customer cash collections. These healthy cash collections further our ability to reduce our debt balance and fund aircraft deliveries.

Gregory B. Willis: These healthy cash collections further our ability to reach our debt balance and fund aircraft delivery. Transitioning to our financing activities, we raised $3.6 billion in committed debt financing during 2023. Much of this financing was completed in the bank market, which provides us with a substantial amount of flexibility as compared to the bond market.

Gregory B. Willis: Transitioning to our financing activities, we raised $3 6 billion in committed debt financings. During 2023 much of this financing was completed in the bank market, which provides us with a substantial amount of flexibility as compared to the bond market. We did return to the bond market in the fourth quarter, when we raised $500 million in Canadian dollars at churning in 2020.

Gregory B. Willis: We did return to the bond market in the fourth quarter when we raised $500 million in Canadian dollars, maturing in 2028 at a rate of 5.9%, inclusive of the effect of our currency swap. Then, in early January, we returned to the U.S. bond market and raised an additional $500 million in U.S. dollars, maturing in 2029 at 5.1%, marking our lowest coupon in approximately two years. We are highly focused on maintaining our strong investment-grade balance sheet, utilizing unsecured debt as our primary source of financing, maintaining a high ratio of fixed-rate funding, and utilizing a conservative amount of leverage and targeting a debt-to-equity ratio of 2.5 times. Our liquidity position remains strong at $6.8 billion at the end of the fourth quarter, and our unencumbered asset base of $29 billion is a source of strength on Our debt-to-equity ratio at the end of the third quarter was roughly 2.68 times on a gap basis, which net cash on the balance sheet was approximately 2.61 times.

Gregory B. Willis: At a stated at a rate of five 9% inclusive of the effect of our currency swaps.

Gregory B. Willis: Then in early January we returned to the U S bond market and raised an additional 500 million.

Gregory B. Willis: In U S dollars maturing in 2029 at five 1%, marking our lowest coupon in approximately two years.

Gregory B. Willis: We are highly focused on maintaining our strong investment grade balance sheet utilizing unsecured debt as our primary source of financing maintaining a high ratio of fixed rate funding and utilizing a conservative amount of leverage and targeting a debt to equity ratio of two five times.

Gregory B. Willis: Our liquidity position remains strong at $6 8 billion at the end of the fourth quarter and our unencumbered asset base of 29 billion as a sort of source of strength on our balance sheet.

Gregory B. Willis: Our debt to equity ratio at the end of the third quarter was roughly two six to eight times on a GAAP basis, which net of cash on the balance sheet is approximately $2 six one times as I mentioned previously we continue to utilize the proceeds from aircraft sales and restaurant coverage to pay down debt and to help us reach our long term target that.

Gregory B. Willis: Debt to equity of two five times over the medium term.

Gregory B. Willis: Echoing the key observation observations made by Steve and John we feel very positive about the positioning of our businesses in the current environment and we believe our fleet and order book of the newest highest in demand commercial aircraft remain a key strategic advantage. We continue to foresee these high demand assets.

Gregory B. Willis: As I mentioned previously, we continue to utilize proceeds from aircraft sales and Russian recoveries to pay down debt and to help us reach our long-term target debt-to-equity of 2.5 times over the medium term. Echoing the key observations made by Steve and John, we feel very positive about the positioning of our business in the current environment, and we believe our fleet and order book of the newest and highest-in-demand commercial aircraft remain a key strategic advantage. We continue to foresee these high-demand assets and the market supply-demand imbalances as enhancing our performance in the years ahead. With that, I'll turn the call back over to Jason for the question-and-answer session of the call. Thanks very much, Greg. This concludes our commentary and remarks. For the question-and-answer session, we ask that each participant limit their time to one question and one follow-up.

Gregory B. Willis: And the market supply demand imbalances as enhancing our performance in the years ahead with that I'll turn the call back over to Jason for the question and answer session of the call.

Jason Arnold: Thanks, very much Greg. This concludes our commentary and remarks for the question and answer session. We ask that each participant limit their time to one question and one follow up operator. Please open the line for Q&A session.

Operator: Thanks, Jason and at this time I would like to remind everyone again to ask a question press star and the number one on your telephone keypad, what's again star one.

Operator: And it looks like our first question today comes from the line of Catherine O'brien with Goldman Sachs. Catherine. Please go ahead.

Catherine O'brien: Hey, good afternoon, everyone. Thanks for the time.

Catherine O'brien: Totally understand that quarter to quarter.

Catherine O'brien: We should expect that gain on sale.

Catherine O'brien: <unk> of course, but.

Catherine O'brien: We had a solid gain this quarter up from last quarter with everything thats going on with the Max and GTS shall we expect supply to remain tight or maybe even get tighter as we move through this year and should that translate to.

Jason Arnold: Operator, please open the line for the Q&A session. Thanks, Jason. And at this time, I would like to remind everyone again to ask a question: press star and the number one on your telephone keypad. Once again, star one. It looks like our first question today comes from the line of Katherine O'Brien with Goldman Sachs. Katherine, please go ahead.

Catherine O'brien: Potentially.

Speaker Change: Keeping that gain on sale higher than the historical average just just any color there on both spine demand side and thoughts on the game that air lease could get enjoying that of RBC for helpful. Thanks. Thanks, Katie the answer is yes, we do believe that the supply remains and will remain constrained.

Katherine O'Brien: Hey, good afternoon everyone. Thanks for the time. Totally understand that quarter-to-quarter, you know, we should expect that gain on sale to bounce around, of course, but we had a solid gain this quarter up from last quarter. With everything that's going on with the MAX and GTF, you know, should we expect supply to remain tight or maybe even get tighter as we move through this year, and should that translate to, you know, potentially keeping that gain on sale higher than the historical average, Thanks, Katie.

Speaker Change: As to the impact on forward sales gain I really can't comment too much we have got a robust pipeline of 1 billion and a half.

Speaker Change: All these things are taken into consideration, but I think there's no question in our mind that the supply will remain constrained for every airplane that we have for sale. We have multiple buyers. So it's been a very dynamic market.

Speaker Change: And it's led to a high level of liquidity in the secondhand market for aircraft.

Speaker Change: And air lease, having a high quality fleet will continue to enjoy.

Speaker Change: Significant gains when we dispose of these assets.

Speaker Change: Okay. That's great and then I was just hoping to get some more color on the returned aircraft and then and the end of lease revenue.

John L. Plueger: The answer is yes, we do believe that supply will remain constrained. As to the impact on forward sales gains, I really can't comment too much. We've got a robust pipeline of a billion and a half.

Speaker Change: Not sure if you can share this obviously with your line and what type of aircraft would be helpful. And then just how should we think about the turnaround on getting those aircraft back out the door.

John L. Plueger: All these things are taken into consideration, but I think there's no question in our minds that the supply will remain constrained. For every airplane that we have for sale, we have multiple buyers, so it's been a very dynamic market, and it's led to a high level of liquidity in the secondhand market for aircraft, which Air Lease, having a high quality fleet, will continue to enjoy. Significant gains when we dispose of these assets. Okay, that's great. And then I was just hoping to get some more color on the returned aircraft and the end-of-lease revenue. Not sure if you can share this, but obviously, which airline and what type of aircraft would be helpful.

Speaker Change: You just spoke to you I'm sure there's plenty of interest.

Speaker Change: And taking those aircrafts out of your hands, but whats MRO capacity like Thats still pretty tight just in terms of the timeline to get reconfiguration work Don welcome back to the question you have.

Speaker Change: <unk> is really two parts yes.

Don: <unk> explained the first part.

Don: We have two types of leases.

Don: Many of our leases the airline pays a monthly overhaul maintenance reserve.

Don: For the usage of engines airframe components landing gear and so forth.

Don: So theres, a monthly cash inflow over and above the rental.

Don: And then we have some leases.

Don: That compensation comes at the end of the lease.

Don: So it's kind of a catch up.

Don: And so some of these transactions that you referred to.

John L. Plueger: And then just how should we think about the turnaround on getting those aircraft back out the door? As you just spoke to, I'm sure there's plenty of interest in taking those aircraft off your hands, but what's the MRO capacity like? Is that still pretty tight, just in terms of the timeline to get reconfiguration work done to get them back out the door? Your question really has two parts. Yeah. Let me explain the first part.

Don: We're simply where the leases had come to an end.

Don: Or where we agreed by mutual agreement with the airlines to recover the aircraft.

Don: And then we were able to.

Don: <unk> additional funds keep all the security deposits and in effect get the present benefit of the maintenance reserves.

Don: Net accrued during the life of the lease.

Don: And then the second question MRO capacity is very tight.

Speaker Change: So we try to keep those transitions to an absolute minimum.

John L. Plueger: We have two types of lease. In many of our leases, the airline pays a monthly overhaul maintenance reserve for the usage of engines, airframe, components, landing gear, and so forth. So there's a monthly cash inflow over and above the rent, and then we have some leases where that compensation comes at the end of the lease. This is kind of a catch-up.

Speaker Change: And we try to lay off those expenses on the next airline rather than having to use alc's resources.

Speaker Change: Let me just add Gary that where we do have an exploration in my prepared remarks I highlighted the fact that we have a very high rate of lease extension.

Speaker Change: And that continues to be the case, there's not all that many of this year.

Speaker Change: But.

John L. Plueger: And so some of these transactions that you refer to, simply where the leases had come to an end, or where we agreed by mutual agreement with the airline to recover the aircraft, and then we were able to obtain additional funds, keep all the security deposits, and, in effect, get the present benefit of the maintenance reserves that accrued during the life of the... And then the second question: MRO capacity is very tight. So we try to keep those transitions to an absolute minimum. And we try to lay off those expenses on the next airline rather than have... Please use ALC's resources.

Speaker Change: We have.

Speaker Change: Our historical averages.

Speaker Change: 75% of our leases first run leases get extended I don't know what the current percentages today, but I would strongly imagine, it's well north of 90% 95%.

Speaker Change: And just by way of example, one of the aircraft that was in this category was an <unk> hundred 21.

Speaker Change: And the new lease that we signed with another airline.

Speaker Change: As a follow on is paying us a higher rental rate than the original lease.

Speaker Change: And the other aircrafts being a 737 800, we had the same phenomenon with a new lease.

John L. Plueger: Let me just add, Katie, that where we do have an expiration, in my prepared remarks, I highlighted the fact that we have a very high rate of lease extension, and that continues to be the case. There are not all that many this year, but we have, you know, our historical average is, you know, 75% of our leases, first-run leases get extended. I don't know what the current percentage is today, but I would strongly imagine it's well north of 90 to 95%.

Speaker Change: Have higher lease rates than at least that just expired.

Speaker Change: That's great, Yes, I guess I was assuming those maybe where early returns but.

Speaker Change: And factoring in maybe some of that was just coming to their natural end. That's all super helpful. Thanks for the time thank.

Speaker Change: Thank you Katie.

Speaker Change: Thanks Katie.

Speaker Change: And our next question comes from the line of Jamie Baker with Jpmorgan, Jamie. Please go ahead.

Jamie N. Baker: Hey, good afternoon everybody.

Jamie N. Baker: <unk> for Greg.

On Russia, if you look at what you initially wrote off not what the insurance claim once but what you wrote off where are we in terms of aggregate recovery.

John L. Plueger: And just by way of example, one of the aircraft that were in this category was an A321, and the new lease that we signed with another airline, as a follow-on, is paying us a higher rental rate than the original lease, and the other aircraft, being a 737-800, we had the same phenomenon with a new lease, had higher lease rates than the lease that just expired. That's great. Yeah, I guess I was assuming those maybe were early returns, but I wasn't factoring in maybe some of that was just coming to a natural end. That was all super helpful.

Jamie N. Baker: <unk> hundred 67 million disclosed in the fourth quarter I mean, if you were to express recovering as a percentage of book, we're hearing around $65.70 on the dollar elsewhere, just wondering if the air lease.

Jamie N. Baker: Metric is consistent with that.

Jamie N. Baker: To date, we've recovered about 10% to 12% of our $800 million charge that we took.

Jamie N. Baker: Last year.

Speaker Change: I can't really comment about what the market is for our claims in the marketplace and ultimately we're kind of limited about how much we can actually talk about.

Katherine O'Brien: Thanks. Thanks, Katie. And our next question comes from the line of Jamie Baker with J.P. Morgan. Jamie, please go ahead. Hey, good afternoon, everybody.

Speaker Change: Our recovery efforts on the call.

Speaker Change: Great.

Speaker Change: Well that's helpful and then second if I.

Jamie N. Baker: First one probably for Greg on Russia. You know, if you look at what you initially wrote off, not what the insurance claim was, but what you wrote off, where are we in terms of aggregate recovery, inclusive of the 67 million disclosed in the fourth quarter? I mean, if you were to express recovery as a percentage of book, you know, we're hearing around 65, 70 cents on the dollar elsewhere. Just wondering if the air lease metric is consistent with that. I think to date we've recovered about 10-12% of our $800 million that we took out last year.

Speaker Change: If I back out sale proceeds and the end of life revenue it looks like we see yields are.

Speaker Change: Uninspiring so.

Speaker Change: At or near the lowest levels since 2021, which seems a little inconsistent with how buildup everybody unions.

Speaker Change: In aircraft leasing.

Speaker Change: So what Mark and I were wondering are lease extensions to blame for this is that whats potentially leading upside on the table relative to how strong market rates reportedly are now I think it's really being driven by as you sell off older airplanes. They typically at the highest point.

Gregory B. Willis: I can't really comment about what the market is for claims in the marketplace, and ultimately, we're kind of limited about how much we can actually talk about a recovery effort on the. OK. Well, that's helpful. And then second, if I back out sale proceeds in the end-of-life revenue, it looks like lease yields are, Uninspiring. So, you know, at or near the lowest level since 2021, which seems, I don't know, a little inconsistent with how bulled up everybody is on aircraft leasing. So Mark and I were wondering, are lease extensions to blame for this?

Speaker Change: Their yield and they are in our lifecycle and as you layer on younger airplanes. They start off at their lowest in and as they age the yield goes up I think that is putting.

Speaker Change: Probably the main driver awareness, because you're right as John mentioned in his prepared remarks, we are seeing lease rates and really start to get going.

Speaker Change: And let me just add that as I stated in my prepared remarks, our lease placements are roughly two years ahead of the actual deliveries sure. So when you see this strengthening over the last year you can just assume that what we're delivering for example, this year, whereas larger leases that we struck in 'twenty one early 'twenty two.

Speaker Change: Understood. Thanks for the color John Thanks, Greg.

Gregory B. Willis: Is that potentially leading the upside on the table relative to how strong market rates reportedly are? No, I think it's really being driven by, as you sell off older airplanes, they typically are at the highest point of their yield in their life cycle. And as you layer on younger airplanes, they start off at their lowest, and then as they age, their yield goes up.

Speaker Change: Yes.

Speaker Change: Alright, Thank you Jamie.

Speaker Change: And our next question comes from the line of Hillary <unk> with Deutsche Bank Hillary. Please go ahead.

Hillary: Hi, Thanks for taking my question.

In the past you used to break out China separately in Europe.

Hillary: It looks like this time around you combined with Asia.

Gregory B. Willis: I think that is probably the main driver where it is because you're right. As John mentioned in his prepared remarks, we are seeing lease rates really start to get going. And let me just add that, as I stated in my prepared remarks, our lease placements are roughly two years ahead of the actual deliveries. So when you see this strengthening over the last year, you can just assume that what we're delivering, for example, this year was larger leases that we struck in 21 and early 22. I understand. Thanks for the call, John. Thanks, Craig. All right, thank you, Jamie. And our next question comes from the line of Hilary Cacanando with Deutsche Bank. Hilary, please go ahead.

Hillary: Could you just go over what the exposure to China like in the fourth quarter and.

Hillary: Continuing to reduce exposure to the country.

Speaker Change: Yes, we consolidated the reason because our exposure to China had gone down significantly below 10% I think it was below 7% actually and that's disclosed in the details of the 10-K I know that that just hit the wire at one o'clock Pacific time so.

Speaker Change: It doesn't surprise me that you weren't able to find the detail there, but that's the main reason.

Speaker Change: Okay got it. Thank you it's driver Okay got it.

Speaker Change: And then <unk>.

Speaker Change: Obviously, you said that the extension made was about 90% type mark yet.

Hilary Cacanando: Hi, thanks for taking my question. In the past, you used to break out China separately in your best release. It looks like this time around you combined it with Asia. Could you just go over what your exposure to China was in the fourth quarter and if you're continuing to reduce your exposure to the country? Thank you. Yeah, we consolidated the reason because our exposure to China had gone down significantly below 10%. I think it was below 7% actually, and that's disclosed in the details of the 10K. And I know that it just hit the wire at one o'clock Pacific time. It doesn't surprise me that you weren't able to find the details there, but that's the main reason.

Speaker Change: Does that increase at all.

Speaker Change: The recent quarter and are you seeing any differences between datacenters with narrow body.

Speaker Change: Wide bodies, and then just in terms of economics.

Speaker Change: You're better off if the airlines.

Speaker Change: You don't have to incur marketing costs or are you better off.

Speaker Change: You might get those aircrafts and maybe potentially get higher rates just given the current market.

Speaker Change: The rates of lease extension have not soften they continue to remain.

Speaker Change: Very strong well north of 90% I don't I don't have the specific calculation in front of me believe that's pretty accurate lease rates and the extensions are going up for single aisle and twin aisle aircrafts.

And.

Speaker Change: On that level I wish we had more of them coming up this year.

But we're seeing a nice appreciation in lease rates, Steve gave some specific examples in an answer to a previous question.

John L. Plueger: Okay, got it. Thank you. And then, you know, previously you said that the extension rate was, you know, about 90%. Given the tight market, has that increased at all in the recent quarter? And are you seeing any differences between the extension rate for narrow bodies versus the wide bodies?

Speaker Change: That we've experienced were a few in a few cases, we've had leases extend either extend at higher rates or to a new lessee at higher rates than the original than the original leases.

Speaker Change: Okay, and then just I guess in terms of economics are you better off Nicole.

John L. Plueger: And then just in terms of economics, you know, are you better off if the airlines extend and, you know, you don't have to incur remarketing costs? Or are you better off, you know, if you remarket those aircraft and maybe potentially get, you know, higher rates just given the tight market? Yeah, extension. The rates of lease extension have not softened. They continue to remain very strong, well north of 90%. I don't have the specific calculation in front of me.

Speaker Change: Does extend because you don't have to.

Speaker Change: The marketing costs.

Speaker Change: They get better rates, we might get done.

Nicole: That's a good question and it's very much a case by case basis. We do look at that question on every single extension versus.

Nicole: Transferring to another carrier so that that is very much a part of the calculus.

Speaker Change: Okay got it thank you so much.

Speaker Change: Sure.

Speaker Change: Alright, Thanks Hillary.

Terry MA: And one more reminder, if you'd like to ask a question again star one on your Touchtone phone once again star one on your telephone keypad and our next question comes from the line of Terry MA with Barclays. Terry. Please go ahead.

John L. Plueger: I believe that's pretty accurate. Lease rates in the extensions are going up for single-aisle and twin-aisle aircraft. And, you know, on that level, I wish we had more of them coming this year.

Terry MA: Hi, Thanks, Good afternoon sticking the 10-K, you called out 20 to return aircraft this year.

Terry MA: Any color you can give on how many of those have actually transitioned versus aircrafts that are waiting the transition.

John L. Plueger: But we're seeing a nice appreciation in lease rates. Steve gave some specific examples in answer to a previous question that we've experienced where, in a few cases, we've had leases extend, either extend at higher rates or to a new lessee at higher rates than the original leases. Thank you. Okay, and then just in terms of economics, are you better off if they just extend because you don't have to incur the remarketing costs, or could you get better rates if you remarket them? That's a good question, and it's very much a case-by-case basis. We do look at that question on every single extension versus transferring to another carrier so that is very much a part of the calculation. Thank you so much.

Speaker Change: Terry what I'd do it what I'd point, you to is our utilization.

Terry MA: Utilization percentage and that's at 99, 9% and a vast I mean, almost all of our airplanes are subject to lease. The current moment I think a lot of these were regular returns. So we had a customer lined up to take the airplane at the at the return check so its a pretty seamless operation.

Terry MA: Got it so even the seven aircrafts that are that were returned this quarter. This should be earning rental revenue in Q1.

Terry MA: Yes.

Speaker Change: Okay got it that's helpful. And then you mentioned lease rates on new deliveries are higher is there any color you can give even ballpark how much higher to lease rates on 2024 deliveries in 'twenty five deliveries are.

John L. Plueger: Sure. All right, thanks, Hillary. And one more reminder, if you'd like to ask a question, again, press one on your touchtone phone, once again, press one on your telephone keypad. And our next question comes from the line of Terry Ma with Barclays. Terry, please go ahead. Hi, thanks. Good afternoon.

Speaker Change: Relative to what's on book today.

Speaker Change: You can do is you can look at there's a lot of appraisal data out there that has shown a whats going on with lease rates.

Speaker Change: Okay, I'm, a little hesitant directing you to the appraisal data because they typically lag the market by six to 12 months, but David very.

Speaker Change: Vocal in their views on what's happening with lease rates and you can see some very significant 10% to 15% increases in lease rates over the last period of time. While also please be reminded that many of our leases that we wrote in 'twenty, one 'twenty two have interest rate adjusters.

Terry MA: Thinking of 10K, you called out 22 returned aircraft this year. Any color you can give on how many of those have actually transitioned versus those that are waiting to transition? What I would point you to is our utilization percentage, and that's at 99.9%, and almost all of our airplanes are subject to lease at the current moment. I think a lot of these were regular returns, so we had a customer lined up to take the airplane at the return check, so it's a pretty seamless operation.

Speaker Change: So when the aircraft delivers we look at the five year treasury or seven year treasury or some benchmark.

Speaker Change: And then the lease as adjusted not only for the.

Speaker Change: Escalation from the manufacturer of also for the prevalent interest rates.

Speaker Change: At the time of delivery so based on the current interest rate situation.

Gregory B. Willis: Got it. So even the seven aircraft that were returned this quarter, they should be earning rental revenue in Q1. Okay, got it. That's helpful.

Speaker Change: You can mathematically derived debt.

Speaker Change: Aircraft delivering today.

Speaker Change: Alright at a higher lease rates than they were 12 to 18 months ago.

Speaker Change: Got it thank you.

Gregory B. Willis: And then you mentioned lease rates on new deliveries are higher. Is there any color you can give even a ballpark how much higher the lease rates on 2024 deliveries and 25 deliveries are relative to what's on book today? You know what you can do is you can look at, um, there's a lot of appraisal data out there that has shown what's going on with lease rates.

Speaker Change: Okay. Thank you Terry.

Speaker Change: And our next question comes from the line of Ron Epstein with Bank of America. Ron. Please go ahead.

Yeah, Hey, good evening guys.

Ron Epstein: Hey, Rob Hey, Rob Hey roster.

Ron Epstein: Quick ones. If I can you mentioned this a little bit in the prepared remarks before but.

Ron Epstein: How long do you think it's going to take until the Max gets back to some sort of regular rate of cadence.

Gregory B. Willis: I'm a little hesitant to direct you to the appraisal data because they typically lag the market by 6 to 12 months, but they've been very vocal in their views on what's happening with lease rates, and you can see some very significant 10 to 15 percent increases in lease rates over the last few years. Also, please be reminded that many of our leases that we wrote in 21-22 had interest rate adjusters. So when the aircraft delivers... We look at the five-year treasury or seven-year treasury or some benchmark. And then the lease is adjusted, not only for the Escalation from the manufacturer but also for the prevalent interest rates. To learn more, visit www.youtube.com. You can mathematically derive that craft delivering today are at a higher lease rate than they were 12-18 months ago. Got it. Thank you.

Ron Epstein: Meaning.

Ron Epstein: And I guess this was asked in a sense before and how long do you think the supply and demand imbalance is going to be in the narrow body market right I mean, it could be years and years.

Ron Epstein: Thinking about this wrong.

Speaker Change: No Youre right I mean, the supply demand imbalance, we do believe will go on for years.

Speaker Change: And you know Boeing is delivering Max's today. The only question is is how many production rate increases and at what pace, they will be able to increase that rate.

Speaker Change: As has been publicized the FAA has put a limit on that rate until it is more satisfied.

Speaker Change: So.

Speaker Change: We really can't judge Ron win that.

Speaker Change: That's anybody's guess as to when that restriction on production rate might be lifted, but Boeing is delivering max's we're taking delivery of Max's.

Speaker Change: That the single aisle shortage is going to be going on for quite some time.

Speaker Change: Ron one other point.

Speaker Change: The lease rates were seeing for new Max eights.

Gregory B. Willis: Okay, thank you, Terry. And our next question comes from the line of Ron Epstein with Bank of America. Ron, please go ahead.

Speaker Change: New <unk> hundred 20, <unk> are almost neck and neck.

Speaker Change: We're really not seeing a.

Ron Epstein: Yeah, hey, good evening, guys. Hey Ron, a couple quick ones if I can, and you mentioned this a little bit in the prepared remarks before, but how long do you think it's going to take until the Max gets back to some sort of regular rate of cadence? Meaning, you know, and I guess this was asked in a sense before, I mean, how long do you think the supply and demand imbalance is going to be in the narrowbody market, right? I mean, it could be years, been years, right?

Speaker Change: A worst lease rate environment for a new vaccine versus an <unk> hundred 20 now.

Speaker Change: Obviously, the <unk> hundred 21 has a different a different animal.

Speaker Change: And then the 737 Max is between the Dash eight and the <unk> hundred 21 rates.

Speaker Change: But the dash eight rates for new <unk>.

Speaker Change: 730, Sevens and <unk> hundred 20 meals there.

Speaker Change: We're almost at the same level.

Got it that was actually my next question. So thank you for that.

Speaker Change: And then I don't know if I read your mind, Yeah, you did quite successfully so that was a good one so the next question to follow on from that would be yes. This is going to last for a long time does this open the aperture for more <unk> hundred Twenty's out there are more <unk> hundred <unk> hundred 95.

John L. Plueger: Yes or No, you're right. I mean, the supply-demand avalanche will go on for years. And, you know, Boeing is delivering MAXs today. The only question is how many production rate increases and at what pace they'll be able to increase that rate. As it's been publicized, the FAA has put a limit on that rate until it is more satisfied. It's, you know, so we really can't judge, Ron, when that... It's anybody's guess as to when that restriction on production rate might be lifted, but Boeing is delivering the Maxes. We're taking delivery of the Maxes.

Speaker Change: Theres some lift available there and the more near term.

Speaker Change: Yes, I think I think it does.

Speaker Change: We are successful in our 220 placements.

Speaker Change: And at the same time, we are watching.

Speaker Change: Lynn.

Speaker Change: How the engine improvements are weaving into the geared turbofan the <unk>.

Speaker Change: <unk> Hunter the powers those airplanes. So I think yes. There is some acceleration on both of those aircraft types, yes, Rod just to give you. An example, if I look back in the last say year and a half on our 820 placements.

John L. Plueger: But the single aisle shortage is going to be going on for quite some time. Ron, one other point, the lease rates we're seeing for new maxi... and new A320neos are almost neck and neck. We're really not seeing a...

Speaker Change: For example in Europe.

Speaker Change: Replacing <unk> hundred 19, <unk> hundred <unk>.

John L. Plueger: The worst lease rate environment for a NEWMAX 8 versus an A320. Now, obviously, the HV-21 is a different animal. And then the 737 max is between the Dash 8 and the 8321 rate. But the Dash 8 rates for new 737s and 8320NEOs are almost at the same level. Got it, got it.

737, seven hundreds.

Speaker Change: So they are replacing aircraft in that 130 to 180 seat size.

Speaker Change: In some cases, they are replacing larger aircraft.

Speaker Change: Got it.

Speaker Change: For example in replacing some of their older <unk> hundred <unk> Ceos.

With <unk>, we have a deal in the Czech Republic.

Ron Epstein: That was actually my next question, so thank you for that. I know, I read your mind. Yeah, you did.

Speaker Change: All of their <unk> hundred <unk> are being replaced by 8% to <unk>.

Speaker Change: In Bulgaria.

Speaker Change: We have 78% to 20 is replacing a combination of <unk> hundred 19, <unk> hundred <unk>. So.

Ron Epstein: It was quite successful. It was a good choice. So the next question, the follow-on from that would be, if this is going to last for a long time, does this open the aperture for more A220s out there or more E2-195s, meaning there's some lift available there in the more near-term? Yes, I think it does. You know, we have been successful in our 220 placements. And at the same time, we're watching when and how the engine improvements are weaving into the gear turbofan, the Pratt 1500 that powers those airplanes. So I think, yeah, there is some acceleration on both those aircraft types.

Speaker Change: The airplane is really catching on and.

Speaker Change: With the recent orders from Lufthansa.

Speaker Change: You've got really now a very strong customer base.

Speaker Change: Here with Delta Jetblue Air Canada.

Speaker Change: In North America, the airplane is catching on.

Speaker Change: It is production constrained.

Speaker Change: Would you.

Speaker Change: And would you be supportive of a 200 2500 kind of mythical stretch of the airplane what kind of engines are you going to put on it.

Speaker Change: You tell me.

Speaker Change: Okay.

Speaker Change: I think Ron at this point in time.

John L. Plueger: Yeah, Ron, just to give you an example, if I look back on the last, say, year and a half on our A220 placement. For example, in Europe, they are replacing A319s, A320s, and 737-700-...

Speaker Change: We're not overly optimistic or.

Or favoring an 800 2500, we think.

Speaker Change: We think that the production of the.

800, 2100, 300, and the continued maturation of the engine on that airplane.

Speaker Change: Is sufficient for most markets these days.

Speaker Change: There's one or two airlines that would like it but frankly I think.

John L. Plueger: So they're replacing aircraft in that, you know, 130 to 180 seat size. In some cases, they're replacing larger... Like at ITA, for example, they're replacing some of their older A320 CEOs with A220s. We have a deal in the Czech Republic. Well, all their AC-20s are being replaced by A220s in Bulgaria. We have seven 8-2-20s replacing a combination of 8-3-19s and 8

Speaker Change: With all the strain in production rate pressure that Airbus has under its still got to deliver and certify the <unk> hundred 50 freighter.

Speaker Change: And.

Speaker Change: And the XLR. These are two big certification program, let's not put another pressure.

On the development or the supply chain that could.

Speaker Change: That could take away time and attention or quality from Airbus and Rod also if you look at the infrastructure and mobile and a Montreal.

Ron Epstein: The airplane is really catching on, and with the recent orders from Lufthansa, we've got a really strong customer base here with Delta, JetBlue, Air Canada. In North America, you know, the airplane is catching on. But it is a production constraint; would you be supportive of a 220-500, you know, the kind of mythical stretch of the airplane? What kind of engines are you going to put on it?

Speaker Change: I just don't see that Airbus can build 30 40 50 of these a month it just doesn't.

Okay appear to be achievable.

Speaker Change: With what's in place.

Speaker Change: Currently.

Speaker Change: Got it got it okay well. Thank you very much guys. Thanks. Thanks.

Speaker Change: Thanks, Ron.

Speaker Change: Thanks, Ron.

Speaker Change: All right. Our next question comes from the line of Katie O'brien again with Goldman Sachs. Katy. Please go ahead.

Katie O'brien: Hi, again, thanks, so much for the follow up.

John L. Plueger: Ha, ha, ha. I think, Ron, at this point in time, we're not overly optimistic or favoring an A220-500. We think that the production of the A220-100 and A220-300 and the continued maturation of the engine on that airplane is sufficient for most markets these days. There are one or two airlines that would like it, but frankly, I think with all the strain and production rate pressure that Airbus is under, it's still got to deliver and certify the A350 freighter and the XLR. These are two big certification programs.

Katie O'brien: This concludes today's some puts and takes the other questions and headwind on that spread.

Katie O'brien: You can the market really nicely in January with the unsecured deal.

Katie O'brien: We do have some sub 1% maturities I think rolling off this year. So I'm guessing we'll continue to see the average cost that move higher and then on the rental side of the equation you. As you noted most of most of the aircraft for taking delivery of this year would have leases written in 2021 2022, when we weren't quite yet and this really strong period or speaking to our lease rates.

Katie O'brien: What I'm getting at.

Katie O'brien: Follow that we should expect to see net spread perhaps perhaps compress a little bit before the tailwind as the current lease rate environment drive expansion in 'twenty five 'twenty six.

John L. Plueger: Let's not put another pressure on the development or the supply chain that could take away time and attention or quality from Airbus. And, Ron, also, if you look at the infrastructure in Mobile and in Montreal, I just don't see that Airbus could build, you know, 30, 40, 50 of these a month. It just doesn't... appear to be achievable with what's in place currently.

Speaker Change: Any high level thoughts there would be super helpful. Thanks, again for your time.

Speaker Change: I think it's really hard to say right now, especially given what's going on with <unk>.

Speaker Change: And where interest rates are going to go I think it's really hard to predict.

Speaker Change: We do have pretty good visibility of what's coming on the.

Speaker Change: The lease rate side, but we've.

Ron Epstein: Got it, got it. Yeah. Well, thank you very much, guys. Thanks, Ron. All right, our next question comes from the line of Katie O'Brien again with Goldman Sachs. Katie, please go ahead.

Speaker Change: We've really shied away from giving guidance on what direction are lease spread is going to go.

Speaker Change: And we do have what about $19 billion book of.

Speaker Change: Fixed rate liabilities already.

Speaker Change: And those are not going to change too much so even if we issue another yes.

Katie O'brien: Oh, hi again. Thanks so much for the follow-up. I just was listening to some takes and takes on the other questions and had one on that spread.

Speaker Change: $500 million or 700 million bond.

Speaker Change: In the fours low fives, it's not going to change the overall dynamics of our balance sheet.

Gregory B. Willis: You know, you timed the market really nicely in January with that unsecured deal, but you do have some sub-1% maturities, I think, rolling off this year. So I'm guessing we'll continue to see the average cost of debt move higher. And on the rental side of the equation, you know, as you noted, most of the aircraft we're taking delivery of this year would have leases written in, you know, 2021, 2022, when we weren't quite yet in this really strong period we're speaking to on lease rates. You know, so I guess what I'm getting at is, should we expect to see net spread perhaps compress a little bit before the tailwind of the current lease Just any high-level thoughts there would be super helpful.

Kt year estimation of how many fed rate cuts there will be before the end of the year.

Speaker Change: It is probably much better than ours, all I can say is going into the end of 'twenty. Three is clear that the market had priced in probably too many too aggressive of a fed rate cuts, but we do expect in this year. So again your guess is as good as ours.

Speaker Change: Yes ill leave that to the people smarter than me and the macro department here, but okay. Thanks for the color. Thanks guys. Okay.

Speaker Change: Hi, Katy.

Speaker Change: And our next question comes from the line of Stephen Trent with Citi. Steven. Please go ahead.

Stephen Trent: Hey, good afternoon, everybody and thanks very much for taking my question.

Stephen Trent: Most of mine have been answered, but I was really curious about.

Gregory B. Willis: Thanks again for the time. I think it's really hard to say right now, especially given what's going on with the Fed and where interest rates are going to go. I think it's really hard to predict.

Stephen Trent: Your aircraft procurement I mean, not just for you guys, but for the industry broadly.

Stephen Trent: Would you say for instance that.

Stephen Trent: Lessors could start leaning more on obtaining playing through.

Gregory B. Willis: We do have pretty good visibility of what's coming on the lease rate side, but we've really shied away from giving guidance on what direction our lease spread is going. And we do have, what, about a $19 billion book of fixed rate liabilities already. And those are not going to change too much, so even if we issue another $500 million or $700 million bond, you know, in the fours or low fives, it's not gonna change the overall dynamics of our balance.

Stephen Trent: A little more of a sale leaseback activity versus what's previously been the case.

Stephen Trent: Or is that not.

Stephen Trent: Not so relevant for you guys because.

Stephen Trent: You already have such strong order books.

Stephen Trent: From the Oems.

Stephen Trent: I was wondering what you see is the.

Stephen Trent: The opportunity for the space.

Gregory B. Willis: Katie, your estimation of how many Fed rate cuts there will be before the end of the year is probably much better than ours. All I can say is going into the end of 2023, it's clear that the market had priced in probably too many, too aggressive Fed rate cuts, but we do expect them this year. So again, your guess is as good as ours. Yeah, I'll leave that to the people smarter than me in the macro department here, but okay.

Speaker Change: As you procure aircrafts. Thank you. Thanks, Yes, our business model has always been and will remain primarily as an order book driven lesser of a very large order book that will go out through 29. So we are not large players and never have been in the sale leaseback marketplace I don't see in terms of the broad distribution. It has.

Speaker Change: Those who don't have order books by definition will have to do sale leasebacks, but it's never been a huge part of our business except for we.

Katie O'brien: Thanks for the caller. Thanks, guys. Hi, Katie.

Jason Arnold: And our next question comes from the line of Stephen Trent with Citi. Stephen, please go ahead. Hey, good afternoon, everybody. And thanks very much for taking my question. Most of mine have been answered.

Speaker Change: We do participate indirectly in some of the managed vehicles that we run for other investors.

Speaker Change: In some cases, a sale leaseback marketplace presents certain opportunities for them classically the returns and the lease rates on the sale leaseback part of the business has been lower than them.

Stephen Trent: But I was really curious about, you know, your aircraft procurement. I mean, not just for you guys, but for the industry broadly. Would you say, for instance, that lessors could start leaning more on obtaining planes through a little more sale leaseback activity versus what's previously been the case? Or is that, you know, not so relevant for you guys?

Speaker Change: On the order book part of the business. So we guided a little bit towards our managed vehicles, but we will always remain primarily new aircraft order book lessor.

Speaker Change: And we believe that that business strategy results in a lower acquisition cost of aircraft.

John L. Plueger: Because, you know, you already have such strong order books from the OEMs. I just was wondering what you see as the opportunity for space as you procure aircraft. Thank you. Yeah, our business model has always been and will remain primarily as an order book driven lessor. We have a very large order book that will go out through 29. But we are not large players and have never been in the sale-leaseback marketplace.

Speaker Change: Then when you step into an airlines order with a markup to do a sale leaseback.

Speaker Change: So we believe we have significant capital cost advantage.

Speaker Change: And the acquisition of these portfolios directly from the Oems rather than.

Speaker Change: Through a third party.

Speaker Change: Great makes sense and thanks very much for the color.

Speaker Change: Sure.

John L. Plueger: I don't see, in terms of the broad distribution, those who don't have order books, by definition, will have to do sale-leasebacks. But it's never been a huge part of our business, except that we do participate indirectly in some of the managed vehicles that we run for other investors. In some cases, the sale-leaseback marketplace presents certain opportunities for them. However, classically, the returns and the lease rates on the sale-leaseback part of the business have been lower than on the order book part of the business.

Speaker Change: Alright, Thank you Stephen and our final question today comes from Doug <unk> with Deutsche Bank. Please go ahead.

Doug: Yes, thanks, very much for taking a question from the fixed income side of the balance sheet.

Doug: A question on the order book there is an interesting split in the market among large thoughtful lessors as to whether you should lineup at the tent at the air show to place orders or whether it's okay to place orders extending over the horizon past 2030, I'm wondering where you come down on that given that your order.

John L. Plueger: So we have guided a little bit towards our managed vehicles, but we will always remain primarily a new aircraft order book lessor. And we believe that that business strategy results in a lower acquisition cost of aircraft than when you step into an airline's order with a markup to do a sale lease back. So we believe we have a significant capital cost advantage.

Doug: Our commitment.

Doug: And towards 2028 2029.

Speaker Change: Yes, we don't believe that joining this order frenzy is really a good strategy for us.

Speaker Change: If you truly believe that.

Stephen Trent: It's all for the development of our company, to contribute so we can keep growing to a third party. Great, makes sense, and thanks very much for the color. Sure. All right. Thank you, Steven. And our final question today comes from Doug Runthew with Deutsche Bank. Doug, please go ahead.

Speaker Change: Every one of those orders that have been placed in the last two years are going to get delivered on time and to the very airlines.

Speaker Change: Institutions that have ordered it.

Speaker Change: Then our strategy is probably flawed, but we don't believe that those hundreds of aircraft will wind up exactly where they were intended they'll always be pockets of opportunity.

Doug Runthew: Yes, thanks very much for taking a question from the fixed income side of the balance sheet. A question on the order book: there's an interesting split in the market among large thoughtful lessors as to whether you should line up at the tent at the air show to place orders, or whether it's okay to place orders extending over the horizon past 2030. I'm wondering where you come down on that given that your order book commitment ends in 2028-2029. Yeah, we don't believe that joining this order frenzy is really a good strategy for us. If you truly believe that every one of those orders that have been placed in the last two years are going to get delivered on time and to the very airlines that need them, institutions that have ordered them, then our strategy is probably flawed, but we don't believe that those hundreds of aircraft will wind up exactly where they were intended. There will always be pockets of opportunity. There will be airlines that will not be able to honor their obligations.

Speaker Change: There'll be airlines that will not be able to honor their obligations.

Speaker Change: So we think we can supplement our backlog.

As and when needed.

Speaker Change: To cover that period, 2028 and 29.

Speaker Change: We're in really good shape over the next four and a half years.

Speaker Change: So.

Speaker Change: We're less worried about.

Speaker Change: New aircraft in 2030.

Speaker Change: Great. Thank you very much for that color and a quick follow up a little more granular you have quite a few triple seven 300 yards coming off lease in the next two to three years.

Speaker Change: Have you engaged in placement talks with that does it look like there'll be extended or is there potentially going to be a need to reposition us to new operators.

Speaker Change: Those are going to be extended for the very most part Doug there is we're well underway on several.

Speaker Change: With several large carriers in that process. We have pulled every one of our triple 703 entity our lessees.

Speaker Change: Doug and not a single one has expressed any interest in returning them.

John L. Plueger: So we think we can supplement our backlog as and when needed to cover that period of 2028 and 2029. We're in really good shape over the next four and a half years. So, we're less worried about... New aircraft in 2030. Great, thank you very much for that color and a quick follow-up that was a little more granular. You have quite a few 777-300ERs coming off lease in the next two to three years. Have you engaged in placement talks with them about that? Does it look like there'll be an extension? Or is there potentially going to be a need to reposition those to new operators?

Doug: Wow, that's a terrific news.

Doug: Whether we extended for three years or five years or eight years and at what rate. That's the variable it's not it's not an if question. It's at what rate are we extending and for what term.

Speaker Change: Terrific. Thank you for sharing that color.

Speaker Change: Okay, so you're going to Austin.

Speaker Change: Alright, Thank you Doug.

Speaker Change: And that concludes our question and answer session today and with that Mr. Arnold I will turn the call back over to you.

Arnold: Thanks, everyone for your time participating in our fourth quarter call. We look forward to speaking you again in May Greg. Please disconnect. The line. Thanks for your assistance.

John L. Plueger: Yeah, those are going to be extended for the very most part, Doug. We're well underway with several large carriers in that process. We have pulled every one of our 777-300ER lessees. Doug, and not a single one has expressed any interest in returning. Wow, that's terrific news, whether we extend them for three years or five years or eight years and at what rate that's the variable; it's not a it's not an if. The question is at what rate are we extending them and for what term?

Gregory B. Willis: Thank you. This concludes today's call you may now disconnect have a great day everyone.

Gregory B. Willis: Okay.

Gregory B. Willis: [music].

Gregory B. Willis: Sure.

Gregory B. Willis: [music].

John L. Plueger: Terrific. Thank you for sharing that color, and we'll see you at ISTEP. Okay, see you there. See you in Austin.

Doug Runthew: All right, thank you, Doug. And that concludes our question and answer session today, and with that, Mr. Arnold, I will turn the call back over to you. Thank you everyone for your time participating in our fourth quarter call. We look forward to speaking to you again in May. Greg, please disconnect the line. Thanks for your assistance.

Gregory B. Willis: Okay.

Gregory B. Willis: [music].

Jason Arnold: Thank you. This concludes today's call. You may now disconnect. Have a great day, everyone. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??

Gregory B. Willis: Yes.