Q1 2024 Air Lease Corp Earnings Call

[music].

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

Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today.

Speaker Change: At this time I would like to welcome everyone to the Air Lease Corporation first quarter earnings Conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session.

Abby: And after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 a second time. And I would now like to turn the call over to Mr. Jason Arnold, Head of Investor Relations. Mr. Arnold, you may begin.

Speaker Change: If you'd like to ask a question during that time simply press star followed by the number one on your telephone keypad.

Speaker Change: If you would like to withdraw your question Press Star one a second time.

Speaker Change: And I would now like to turn the call over to Mr. Jason <unk> head of Investor Relations. Mr. Arnold you may begin.

Jason Arnold: Thank you, Abby, and good afternoon, everyone. Welcome to Air Lease Corporation's first quarter 2024 earnings call. This is Jason Arnold. I'm joined today by Steve Haase, 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 first quarter 2024 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, Monday, May 6, 2024, and the webcast will be available for replay on our website. At this time, all participants in this call are in listen-only mode.

Jason Arnold: Thank you Abby and good afternoon, everyone welcome to Air lease Corporation's first quarter 2024 earnings call.

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. These include, without limitation, statements regarding the state of the airline industry, the impact of aircraft and engine delivery delays and manufacturing flaws, 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.

Jason Arnold: This is Jason Arnold 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.

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 SEC 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 Income Taxes, Adjusted Diluted Earnings Per Share Before Income Taxes, and Adjusted Pre-Tax Return on Equity, which are non-GAAP measures.

Jason Arnold: Earlier today, we published our first quarter 2024 results a copy of our earnings release is available on the investors section of our website at Www Dot Air lease Corp. Dot Com. This conference call is being webcast and recorded today Monday may six 2024, and the webcast will be available for replay on our website.

Jason Arnold: The description of our reasons for utilizing these non-GAAP measures as well as our definitions of them and the reconciliation to corresponding GAAP measures can be found in the earnings release in the 10-Q that we issued today. This release can be found in both the Investors section and the Press section of our website at www.airleascorp.com. As a reminder, unauthorized recording of this conference is not permitted. I'll now turn the call over to our Chief Executive Officer and President, John Plueger.

Jason Arnold: At this time all participants to this call are in listen only mode before.

John L. Plueger: Thank you, Jason. Good afternoon, and thank you, everyone, for joining us on our call today. During the first quarter, ALC generated revenues of $663 million and 87 cents in diluted earnings per share. Results this quarter benefited from continued growth in our fleet and higher sales activity versus the prior year. Though with the offset of lower end of lease revenue and higher operating expenses, which Greg will cover in more detail shortly. We purchased 14 new aircraft from our order book in the first quarter, adding approximately $900 million in flight equipment to our balance sheet, and we sold five aircraft, totaling approximately $240 million in sales proceeds.

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.

John L. Plueger: New aircraft deliveries came in modestly below our expectation, while sales were approximately in line. The Weighted Fleet Average remains young at 4.7 years, while the Weighted Average Lease Term Remaining stayed at 7 years. The utilization rate on our fleet, meanwhile, remains exceptionally strong at 100%. Passenger traffic volume is continuing to expand at a strong pace, up close to 14% year-over-year in total, which Steve will expand upon further in his remarks. Demand for fuel-efficient commercial aircraft, in turn, remains exceptionally robust.

Jason Arnold: Without limitation statements regarding the state of the airline industry the impact of aircraft and engine delivery delays in manufacturing flaws, 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's date. These <unk>.

John L. Plueger: At present, we are 100% placed in our forward orders to 2025, with 63% of our entire order book placed. Our $21 billion order book remains a key source of strength for us, given Boeing and Airbus have very few delivery positions available until the 2030s, while the vast majority of our positions are set to deliver through 2028. But with ongoing delivery delays, this will likely extend well through 2029. Our delivery slots, and those of a small handful of other lessors, are the only real option for airlines needing new aircraft within that time frame. So, as we've highlighted in the past, strengthening lease rates will benefit us in the coming periods.

John L. Plueger: We're also benefiting from the strong market with respect to our existing fleet through lease extension. Similar to 2023, we don't have that many scheduled lease expirations in 2024, though we do have a sizable uptick in 2005 and 2026 with around 50 scheduled lease expirations in each of those years. Practically all of our airline customers are eager to retain our aircraft for their operations given OEM delivery delays and other factors limiting availability of both new and used aircraft. As such, we believe lease rates on extensions will remain strong.

John L. Plueger: As for the view ahead, supply chain constraints on new commercial aircraft are clearly not going away anytime soon. Boeing production remains challenged on the 737 side with both supply chain and FAA production volume constraints. The 787 program is also seeing a slow path to gaining production momentum with ongoing supply chain challenges. Airbus, meanwhile, is also subject to the same impact from supply chain constraints as well as the ongoing and Pratt & Whitney issues impacting the A320 and A321neo families.

Jason Arnold: Estimates involve risks and uncertainties.

That could cause actual results to differ materially from expectations. Please refer to our filings with the FCC 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.

Jason Arnold: Certain financial measures such as adjusted net income before income taxes adjusted diluted earnings per share before income taxes, and adjusted pre tax return on equity, which are non-GAAP measures a description of our reasons for utilizing these non-GAAP measures as well as our definition of them and the reconciliation to corresponding GAAP measures.

Jason Arnold: Can be found in the earnings release and 10-Q that we issued today. This release can be found on both the investors section in the press section of our website at Www Dot Air lease Corp. Dot Com as a reminder, unauthorized recording of this conference is not permitted I'll now turn the call over to our Chief Executive Officer, and President John <unk> John.

John: Thank you Jason.

John: Good afternoon, and thank you everyone for joining us on our call today.

During the first quarter ALC generated revenues of $663 million and 87.

John: Diluted earnings per share results.

Our results this quarter benefited from continued growth of our fleet and higher sales activity versus the prior year, though with the offset of lower end of lease revenue and higher operating expenses, which Greg will cover in more detail shortly.

John: We purchased 14, new aircraft from our order book in the first quarter, adding approximately $900 million in polite equivalent to our balance sheet and we sold five aircraft totaling approximately $240 million in sales proceeds.

John: New aircraft deliveries came in modestly below our expectation while sales were approximately in line.

John: Weighted fleet average remains young at $4 seven years, while weighted average lease term remaining stated seven years the utilization rate on our fleet. Meanwhile, remains exceptionally strong at 100%.

Passenger traffic volume is continuing to expand at a strong pace up close to 14% year over year in total, which Steve will expand upon further in his remarks.

John: Demand for fuel efficient commercial aircraft in turn remains exceptionally robust at present, we are 100% placed in our forward orders for 2025 with 60, 63% of our entire order book placed.

John: Our $21 billion order book remains a key source of strength for us given Boeing and Airbus have very few delivery positions available until the 20 <unk>, while the vast majority of our positions are set to deliver through 2028, both ongoing added delivery delays this will likely extend well through 2000.

John: 29.

John: Our delivery slots and those with small handful of other lessors are the only real option for airlines needing new aircrafts within that timeframe.

John: So as we've highlighted in the past strengthening lease rates will benefit us in coming periods.

John: We're also benefiting from the strong market with respect to our existing fleet via lease extensions similar.

Similar to 2023, we don't have that many scheduled lease expirations. During 2024 that we do have a sizable uptick in 2005 and 2026 with around 50 scheduled lease expirations in each of those years Pratt.

John: Practically all of our airline customers are eager to retain our aircraft for their operations, given OEM delivery delays and other factors limiting availability for both new and used aircraft.

John: As such we believe lease rates on extensions will remains strong.

John: As for the view ahead supply chain constraints on new commercial aircraft are clearly not going away anytime soon.

John: Following production remains challenged on the 737 side with both supply chain and FAA production volume constraints. While the 787 program is also seeing a slow path to gaining production momentum with ongoing supply chain challenges.

Airbus. Meanwhile, is also subject to the same impact from supply chain constraints as well as the ongoing at Pratt and Whitney issues impacting the <unk> hundred 2021 Neo family.

John: We've said for some time the aircraft manufacturer supply chain challenges are not easily resolvable and we will take a number of years to finally overcome and our view here remains firmly intact.

John L. Plueger: We've said for some time that aircraft manufacturing supply chain challenges are not easily resolvable and will take a number of years to finally overcome, and our view here remains firmly intact. I do want to emphasize, though, that we believe that the manufacturers have been humbled by the ongoing challenges and that we firmly believe that the OEMs are focused on the importance of production quality and safety above all other factors.

John: I do want to emphasize though that we believe that the manufacturers have been humbled by the ongoing challenges and we firmly believe that the Oems are focused on the importance of production quality and safety above all other factors.

John L. Plueger: We continue to expect full-year 2024 deliveries to be in the range of about four and a half to five and a half billion. At this juncture, we anticipate deliveries at the mid-range of this range at approximately 5.1 billion given ongoing delays. However, the $4.2 billion in expected capex for the remainder of 2024 that we disclosed in our 10-Q could have further downside risk, particularly with respect to Boeing delivery.

We continue to expect full year 2024 deliveries to be in the range of about four 5% to $5 5 billion.

John: At this juncture, we anticipate deliveries at the mid range at the midpoint of this range at approximately $5 1 billion given ongoing delays.

However, the $4 2 billion in expected Capex for the remainder of 'twenty four that we disclosed in our 10-Q could have further downside risk, particularly with respect to Boeing deliveries.

John L. Plueger: As for the second quarter expectation, we anticipate around $1.5 billion worth of new aircraft delivery. I want to again highlight the fact that the volume of expected deliveries in 24 is still quite sizable relative to our $27 billion fleet. We continue to see strong sales demand for our aircraft, and sales activity for the first quarter was roughly in line with what we told you to expect. Our sales pipeline remains robust at about $1.4 billion, including roughly $670 million in flight equipment held for sale and $700 million of aircraft subject to letters of intent.

John: As for second quarter expectation, we anticipate around one 5 billion worth of new aircraft deliveries.

John: I want to again highlight the fact that the volume of expected deliveries in 'twenty four is still quite sizable relative to our $27 billion fleet.

John: We continue to see strong sales demand for our aircraft and sales activity for the first quarter was roughly in line with what we told you to expect.

John: Our sales pipeline remains robust at about $1 4 billion, including roughly $670 million in flight equipment held for sale and $700 million of aircrafts subject to letters of intent.

John L. Plueger: The closing timing of transactions tends to be somewhat lumpy based on factors outside of our control, but based on current indications, we would expect around $500 million in aircraft sales to close in the second quarter of 2024. Sales activity is a key part of our business model, given we target owning new aircraft only over the first third of their economic lives, and harvesting gains is a critical part of the economic returns on our aircraft investment, as well as enhancing the return on equity profile of our business. I'd like to close with a few reminders.

John: The closing timing of transactions tends to be somewhat lumpy based on factors outside of our control, but based on current indications, we would expect around $500 million and aircraft sales to close in the second quarter of 2024.

John: Sales activity is a key part of our business model, given we target owning new aircraft only over the first third of their economic lives and harvesting of gains as a critical part of the economic returns on our aircraft investments as well as enhancing the return on equity profile of our business.

Speaker Change: I would like to close with a few reminders.

John L. Plueger: We run Air Lease for the long term benefit of our shareholders, not focused on quarterly quarter variation. Our new aircraft order book model has consistently minimized asset risk and maximized asset value. Let me remind you, for example, that since our inception in 2010, Air Lease has not recorded any impairment charges to date. We also do not run our business on any single isolated metric, such as lease yields.

Speaker Change: We run air lease for the long term benefit of our shareholders not focused on quarter to quarter variations.

Speaker Change: Our new aircraft order book model has consistently minimized asset risk and maximize asset value.

Speaker Change: Let remind you for example that since our inception in 202010 air lease has not recorded any impairment charges to date.

Speaker Change: We also do not run our business on any single isolated metric such as lease yield the largest.

John L. Plueger: The largest impact on our lease yields is the new aircraft we take delivery of versus the older aircraft we sell, which are typically at higher yields. This is one reason why we give you an outlook each quarter as to expected new aircraft capital expenditures and our expected aircraft sales. During 2023 and 2024, we have relatively few lease extensions or transfers to different airline operators, so these have a very minor impact on our overall lease yields for those years.

Speaker Change: <unk> impact to our lease yields are the newer aircraft, we take delivery of versus the older aircraft, we sell which are typically at higher yields.

Speaker Change: This is one reason why we give you an outlook each quarter as to expected new aircraft capital expenditures and our expected aircraft sales.

Speaker Change: During 2023 and 24, we have relatively few lease extensions or transfers to different airline operators. So these have very minor impact on our overall lease yields for those years.

John L. Plueger: As we've highlighted before, we have an average lead time of about two years from when we sign a lease with an airline on one of our order books aircraft until delivery of that new aircraft. And so, our deliveries this year, and, in fact, any given year, reflect the environment that existed two years ago.

Speaker Change: As we've highlighted before we have an average lead time of about two years from when we sign a lease with an airline for one of our order book aircraft until delivery of that new aircraft. So our.

Speaker Change: <unk> this year and in fact, any given year reflect the environment that existed two years ago.

John L. Plueger: As a result, we currently expect our lease yield and net margins will remain around current levels for the remainder of 2024 and likely increase thereafter. At the same time, we expect our aircraft sales pipeline will continue to generate healthy gains. To conclude, we remain excited about our prospects ahead. Our order book is set to deliver significant fleet growth all at a time when aircraft demand is exceptionally strong. In fact, the commercial aircraft market is as tight as we've ever seen it in our history in this business. This plays directly into our favor, both because of the value of our existing fleet and future returns from our order book. I'll turn the call over now to Steve Haase, who will offer some additional comments.

Speaker Change: As a result, we currently expect our lease yield and net margins will remain around current levels for the remainder of 2024 and likely increase thereafter at.

Speaker Change: At the same time, we expect our aircraft sales pipeline will continue to harvest healthy gains.

Speaker Change: To conclude we remain excited about our prospects ahead. Our order book is set to deliver significant fleet growth all at a time when aircraft demand is exceptionally strong and.

Speaker Change: In fact, the commercial aircraft market is as tight as we've ever seen in our history in this business.

Speaker Change: This plays directly into our favor both by the value of existing fleet and future returns from our order book.

Speaker Change: I will turn the call over now to Steve Harvey who will offer some additional comments Steve.

Steven F. Udvar: Thank you very much, John. Just to expand on his closing comments. As most of you know, we have been in the aircraft leasing industry since the very beginning. So it should be pretty striking for you to hear us say that the current supply-demand imbalance is more strongly in our favor than we've ever seen before during our long careers. But this is the actual reality of the current environment.

Steven F. Udvar: Thank you very much John just to expand on his closing comments.

Steven F. Udvar: As most of you know we have been in the aircraft leasing industry since the very beginning.

Steven F. Udvar: So it should be pretty striking for you to hear.

Steven F. Udvar: For us to say that the current supply demand imbalance.

Steven F. Udvar: It's more strongly in our favor than we've ever seen before during our long careers.

Steven F. Udvar: But this is the actual reality of the current environment.

Steven F. Udvar: And we do not see a realistic way of changing this over the short to medium term, given the underlying trends in supply and demand. In fact, these imbalances are very likely to stay with us for at least three to four years in the future. Too little supply and super-high demand, with no means of resolution on the horizon, means persistent upward momentum for lease rates, and Aircraft Values for Industry. These are the basic forces of economics.

Steven F. Udvar: And we do not see a realistic way of changing over the short to medium term.

Steven F. Udvar: Given the underlying trends in supply and demand.

In fact these.

Steven F. Udvar: These imbalances are very likely to stay with us for at least three to four years in the future.

Steven F. Udvar: Two little supply and Super high demand with no means of resolution on the horizon means.

Steven F. Udvar: It means persistent upward momentum for lease rates and aircraft values for our industry.

Steven F. Udvar: These are the basic forces of economics.

Steven F. Udvar: As the owners of more than $27 billion of new technology commercial aircraft, and with another $21 billion, scheduled to deliver through early 2029. We're very positive about these business prospects at present and for the remaining years as a result of this ongoing favorable market dynamic. Airline traffic volume remains strong globally, with many markets setting new records for both revenue passenger traffic as well as High Load Factors, which is multiplying demand for new technology, fuel-efficient commercial aircraft like those in our fleet and in our order book.

Steven F. Udvar: As the owners of more than $27 billion of new technology commercial aircrafts.

Steven F. Udvar: And with another 21 billion.

Steven F. Udvar: <unk> to deliver through early 2029.

Steven F. Udvar: We're very positive about these business prospects at present.

And for the remaining years as a result of this ongoing favorable market dynamics.

Steven F. Udvar: Airline traffic volumes.

Steven F. Udvar: Maine's strong globally.

Steven F. Udvar: With many market setting new records for both revenue passenger traffic as well as high load factors, which is multiplying demand for new technology fuel efficient commercial aircrafts like those in our fleet and our order book.

Steven F. Udvar: IATA traffic figures released last week continue to illustrate solid expansion. Total international volume was up a robust 19% for the most recent months, with all major markets continuing to rise at double-digit percentage rates. Asia Pacific traffic remains the hottest overall international market, expanding at a dramatic 39% versus last year.

Steven F. Udvar: I add a traffic figures released last week continue to illustrate solid expansion.

Total international volume was up a robust 19% for the most recent months with all major markets continued to rise at a double digit percentage rates.

Steven F. Udvar: Asia Pacific traffic remains the hottest overall international market.

Steven F. Udvar: Expanding at a dramatic 39% versus last year.

Steven F. Udvar: We continue to expect Asia-Pacific growth to remain one of the strongest globally as travel momentum continues to build, particularly in the intra-Asia international markets, as well as in the Asia to North America and Asia to Europe international routes. International traffic outside of Asia is also very strong, with Latin America, North America, Europe, the North Atlantic, and the Middle East markets enjoying particularly robust expansion. Domestic traffic, meanwhile, was up a healthy 7%, and even China is showing increasing passenger volume. Load factors remain elevated and in many markets are achieving new historical records.

We continue to expect Asia Pacific growth to remain one of the strongest globally as travel momentum continues to build particularly in the intra Asia International markets.

Steven F. Udvar: As well as in the Asia, and North America, and Asia to Europe International routes.

Steven F. Udvar: International traffic outside of Asia is also very strong with Latin America, North America, Europe, the North Atlantic and the Middle East markets, enjoying particularly robust expansion.

Steven F. Udvar: Domestic traffic in the Meanwhile, was up a healthy 7%.

Steven F. Udvar: And even China is showing increasing passenger volumes.

Steven F. Udvar: Load factors remain elevated and in many markets are achieving new historical records.

Steven F. Udvar: We expect total average load factors to continue to expand from the low 80s, and that range given constrained commercial aircraft supply with many regions of the world experiencing significantly higher load factors, and some airlines actually setting new records. Airlines have also been enjoying revenue growth and margin expansion. And the IATA Outlook for Full Year Profitability suggests record performance is potentially achievable this year. Times are clearly good right now for most of the world's airlines.

Steven F. Udvar: We expect total average load factors to continue to expand from the low eighty's.

Steven F. Udvar: And that range given constrained commercial aircraft supply with many regions of the world experiencing significantly higher load factors.

Steven F. Udvar: And in some airlines actually setting new records.

Steven F. Udvar: Airlines have also been enjoying revenue growth and margin expansion.

Steven F. Udvar: And the IATA outlook for full year profitability suggests record performance is potentially achievable this year.

Steven F. Udvar: Times are clearly good right now for most of the worlds Airlines.

Steven F. Udvar: But it's important to point out that Air Lease's business model does not correlate to airline profitability or success. Airlines need aircraft to achieve route network goals in order to generate revenue and obtain profitable targets, not the other way around.

Steven F. Udvar: But it's important to point out that air Lease's business model does not correlate to airline profitability of success.

Steven F. Udvar: Airlines need aircraft to achieve route network goals in order to generate revenue and obtained profitable targets.

Steven F. Udvar: Not the other way round.

Steven F. Udvar: We provide airlines with the necessary flying assets for them to best achieve these objectives, by a brand new aircraft from our order book, with the lowest fuel burn available in the market and which are also typically aircraft types with the lowest operating expenses and the best dispatch reliability. However, lease payments are required to be made regardless of an airline's profitability. And I point out that leasing expense is rarely within the top five largest airline expense line items in their income statement, so keeping up with lease payments is typically not going to make or break an airline.

Steven F. Udvar: We provide airlines unnecessary flying assets for them to best achieve these objectives.

Via brand new aircraft from our order book with the lowest fuel burn available in the market and which are also typically aircraft types with the lowest operating expenses and the best dispatch reliability.

Steven F. Udvar: Lease payments are required to be made regardless of an airline's profitability and I'd point out that leasing expense is rarely within the top five largest airline expense line items.

Steven F. Udvar: In their income statement, so keeping up with lease payments is typically not going to make or break an airline.

Steven F. Udvar: From a risk management point of view, our fleet remains highly diversified with just 1% of the fleet book value exposure on average to any individual airline customer, and our significant security packages provide substantial insulation from any airlines that run into operating difficulties. Circling back to ALC's first quarter results, we delivered 14 new aircraft from our order book during the period. Including 13 narrow-body aircraft and one new wide-body aircraft. We will deliver two A220 aircraft in the quarter.

From a risk management point of view, our fleet remains highly diversified with just 1% of the fleet book value exposure on average to any individual airline customer.

Steven F. Udvar: And our significant security packages provide us substantial installation from any airlines at running two operating difficulties.

Steven F. Udvar: Circling back to Alc's first quarter results, we delivered 14, new aircraft from our order book during the period.

Steven F. Udvar: Including 13, narrow body aircraft and one new wide body aircraft we.

Steven F. Udvar: We delivered two 8% to 20 aircraft in the quarter, one <unk> hundred 20 delivery to ITE Airways, the national carrier of Italy, and one 8% to 20, <unk> 300 still growing airline in southeastern Europe.

Steven F. Udvar: One A220 delivery to ITA Airways, the national carrier of Italy, and one A220-300 to a growing airline in Southeastern Europe. We delivered one A320-200neo to SATA, operating out of the Azores, Portugal, as well as six A321neos in the quarter, including two deliveries to ITA, which were part of the nine aircraft placed with that airline. One to Transavia, based in the Netherlands, and one to a large and growing Central Asia-based airline, as well as two deliveries to North America.

Steven F. Udvar: We delivered one <unk> hundred 20 Dash 200, Neil to SaaS.

Steven F. Udvar: Operating out of Azores, Portugal, as well as <unk> six <unk> hundred 21, <unk> in the quarter, including two deliveries to ICA and part of the nine aircraft placed with that airline.

Steven F. Udvar: 102, Trans Avia based in Netherlands.

Steven F. Udvar: One to a large and growing central Asia based airline as.

Steven F. Udvar: As well as two deliveries in North America.

Steven F. Udvar: We delivered 4737-8 during the quarter, including one to Malaysia Airlines as part of our 25-737-8 package. [inaudible] and one to NEOS, the Italian airline based in Milan, as well as one to a Central European airline on the wide body side. We delivered one new Airbus A350-1000 widebody to Virgin Atlantic Airways, furthering That Airline's rebuild of its international capacity with new efficient wide-body aircraft following the retirement of its 747 fleet as well as its oldest A330.

Steven F. Udvar: We delivered $4 737 dash eights.

Steven F. Udvar: During the quarter, including one to Malaysia Airlines as part of our $25 787 Dash eight package, we placed with that aircraft one to aeromexico as part of a nine aircraft 737 dash eight and dash nine aircraft placement.

Steven F. Udvar: And one to Neil's Vitale, an airline based in Milan as well as one to a central European Airlines.

Steven F. Udvar: On the wide body side, we delivered one new Airbus <unk> hundred 50 Dash 1000 wide body to Virgin Atlantic Airways.

Steven F. Udvar: First lien debt airlines rebuilt.

Steven F. Udvar: All of its international capacity with new efficient wide body aircrafts. Following the retirement of the 747 fleet as well as its oldest <unk> hundred <unk>.

Steven F. Udvar: Our main frustration, as in previous quarters, is that, unfortunately, neither Airbus nor Boeing were able to deliver many of the new aircraft ALC had contracted for delivery in early 2004, and the aircraft that did deliver were all late. I repeat, the aircraft that did deliver were all late. In summary, airline demand for AirPath is solid. The supply of desirable jet planes is extremely tight, and Air Lease is positioned extremely well to take advantage of these market trends not just for the short term but, very likely, for many years in the future. I will now turn the call over to our CFO, Greg Willis, for his more detailed comments on our financial performance in Q1 of 2024.

Steven F. Udvar: Our main frustration as in previous quarters.

Steven F. Udvar: Is that unfortunately, neither Airbus nor Boeing we're able to deliver many of the new aircraft ALC at contracted for delivery in early 'twenty four.

Steven F. Udvar: And the aircraft that did deliver where all late.

Steven F. Udvar: I repeat the aircrafts that did deliver where all late.

Steven F. Udvar: In summary airline demand for aircrafts a solid <unk>.

Steven F. Udvar: The supply of desirable jet plant is extremely tight.

Steven F. Udvar: And air lease is positioned extremely well to take advantage of these market trends not just for the short term, but very likely for many years in the future.

Steven F. Udvar: I will now turn the call over to our CFO Greg Willis.

Gregory B. Willis: For his more detailed comments on our financial performance in Q1 of 2024.

Gregory B. Willis: Thank you, Steve, and good afternoon everyone. During the first quarter of 2024, Air Lease generated revenues of $663 million, which was comprised of approximately $614 million of rental revenues and $49 million from aircraft sales, trading, and other activities. The increase in our total revenues was driven by the growth of our fleet and gains recognized from our sales activity. However, as John noted, our year-over-year rental revenue comparison was impacted by the fact that end-of-lease revenue this quarter was substantially lower as compared to the $35 million recognized in the prior period.

Gregory B. Willis: Thank you, Steve and good afternoon, everyone. During the first quarter of 2020 for air lease generated revenues of $663 million, which was comprised of approximately $614 million of rental revenues and $49 million from aircraft sales trading and other activities.

Speaker Change: The increase in our total revenues was driven by the growth of our fleet and gains recognized from our sales activities.

Speaker Change: As John noted our year over year rental revenue comparison was impacted by the fact that end of lease revenue. This quarter was substantially lower as compared to the $35 million recognized in the prior period.

Gregory B. Willis: Similar to last quarter, I want to highlight the core nature of end-of-lease revenue for our business. And while it tends to fluctuate, these revenues are meaningful and are a recurring part of the returns generated by our business. Sales proceeds for the first quarter totaled approximately $240 million from the sale of five aircraft.

Speaker Change: Similar to last quarter I want to highlight the core nature of end of lease revenue to our business and while it tends to fluctuate. These revenues are meaningful and are a recurring part of the returns generated by our business.

Speaker Change: Sales proceeds for the first quarter totaled approximately $240 million from the sale of five aircraft. These sales generated $23 million in gains representing an 11% gain on sale margin.

Gregory B. Willis: These sales generated $23 million in gains, representing an 11% gain on sale margin, coming in again this quarter above our long-term average of 8% to 10%. However, gain on sale margin will vary somewhat from quarter to quarter based on aircraft sold and market conditions. Our 1.4 billion aircraft sales pipeline remains robust and contains healthy valuations on those aircraft. In addition to enhancing the return profile of our business, attractive gains also underscore the embedded value in our fleet, enhanced liquidity, and our means for us to reduce our financial leverage over time as well.

Coming in again this quarter above our long term average of 8% to 10%.

Speaker Change: And on sale margin will vary somewhat from quarter to quarter based on aircraft sold and market conditions.

Speaker Change: Our $1 4 billion in aircraft sales pipeline remains robust and contains healthy valuations on those aircraft. In addition to enhancing the return profile of our business attractive gains also underscored the embedded value in our fleet enhance liquidity and our means for us to reduce our financial leverage over time as well.

Gregory B. Willis: Moving on to expenses, interest expense rose by roughly $30 million year-over-year, driven up by a 61 basis point increase in our composite cost of funds to 4.03%, and it was a primary contributor to the uptake in operating expenses relative to last year.

Speaker Change: Moving onto expenses interest expense rose by roughly $30 million year over year, driven by a 61 basis point increase in our composite cost of funds to 4.0% to 3% and it was a primary contributor contributor to the uptick in operating expenses relative to last year.

Gregory B. Willis: We continue to significantly benefit from our largely fixed-rate capital structure, which has helped us to moderate the effects of the current interest rate environment, with 83% of our debt being at fixed rates. I do want to point out, though, that the inversion of the yield curve continues to create a drag on our results, as typically, the use of our revolving credit facility serves to reduce our composite cost of funds, while at present, it is serving to increase our yield.

Speaker Change: We continue to significantly benefit from our largely fixed rate capital structure, which has helped us to moderate the effects of the current interest rate environment with 80%, 83% of our debt being fixed rate.

Speaker Change: Do you want to point out that the inversion of the yield curve continues to create a drag on our results as typically the use of our revolving credit facility serves to reduce our composite cost of funds. While at present is serving to increase it we expect over time that the yield curve will normalize having a beneficial impact on our financing costs.

Gregory B. Willis: We expect that over time the yield curve will normalize, having a beneficial impact on our financing costs. Depreciation expense continues to track the growth of our fleet, while G&A, meanwhile, was flat relative to the prior year's quarter, while declining relative to that period as a percentage of revenue.

Speaker Change: Depreciation expense continues to track the growth of our fleet.

Speaker Change: SG&A. Meanwhile, was flat relative to the prior year's quarter, while declining relative to that period as a percentage of revenue.

Gregory B. Willis: Cash flow from operations rose approximately 7% in the first quarter relative to the prior year, benefiting from the fleet expansion and strong airline customer cash collections. Healthy continued cash collections further our ability to reduce our debt balances and fund aircraft delivery. Moving on to financing activities, during the quarter, we completed several capital market raises totaling $1.4 billion. In January, we raised $500 million in the U.S. bond market at a rate of 5.1%, maturing in 2029. We then raised 400 million in Canadian dollars at a rate of 5.95%, inclusive of cross-currency swaps maturing in 2028.

Speaker Change: Cash flow from operations rose approximately 7% in the first quarter relative to the prior year benefiting from the fleet expansion and strong airline customer cash collections.

Speaker Change: Healthy continued cash collections further our ability to reduce our debt balances and fund the aircraft deliveries.

Gregory B. Willis: And lastly, we completed our European bond issuance of 600 million euros at 5.44%, which again is inclusive of currency swaps, maturing in 2030. Our Canadian and European debt capital market activities further demonstrate the diversity of our funding base and sources of liquidity. We are particularly excited about our inaugural Euro bond deal having been the first lessor to reopen that market since 2005.

Moving on to financing activities during the quarter, we completed several capital market raises totaling $1 4 billion.

Speaker Change: In January we raised $500 million in the U S bond market at a rate of five 1% maturing in 2029, we then raised $400 million and Canadian dollars at a rate of 595% inclusive of cross currency swaps maturing in 2028.

Speaker Change: And lastly, we completed our European bond issuance of 600 million euros at 544%, which again is inclusive of currency swaps maturing in 2030.

Speaker Change: Our Canadian and European debt capital markets activities further demonstrate the diversify the diversity of our funding base and sources of liquidity.

Speaker Change: We are particularly excited about our <unk>.

Speaker Change: <unk> Europe bond deal, having been the first lessor to reopen that market since 2005.

Gregory B. Willis: Combining our recent USD, CAD, Euro, and Islamic financing transactions, we've effectively created a global funding platform for our business, offering significant market breadth and diversity. We are also very pleased by the recent upsize and extension of our revolving credit facility to $7.8 billion from $7.4 billion, which remains a key component of our funding story. We would like to thank the 52 banks in this facility, which is comprised of many long-term partners, as well as several new partners, for their continued support.

Speaker Change: Combining our recent USD CAD euro and Islamic financing transactions, we've effectively created a global funding platform for our business offering a significant market breadth and diversity. We are also very pleased by the recent upsize and extension of our revolving credit facility to $7 8 billion from $7 4 billion, which remains a key component.

Speaker Change: Our filings story.

Speaker Change: We would like to think that 52 banks in this facility, which is comprised of many long term partners as well as well as several new partners for their continued support.

Speaker Change: We remain very focused on maintaining our strong investment grade balance sheet utilizing unsecured debt as a 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, our liquidity position remains strong at six.

Gregory B. Willis: We remain very focused on maintaining our strong investment-grade balance sheet, utilizing unsecured debt as a 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 $6.5 billion at the end of the first 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 first quarter was 2.7 times on a gap basis, which net of cash on the balance sheet was approximately 2.6 times.

$5 billion at the end of the first quarter and our unencumbered asset base of 29 billion as a source of strength on our balance sheet.

Speaker Change: Our debt to equity ratio at the end of the first quarter was two seven times on a GAAP basis on a GAAP basis, which net of cash on the balance sheet is approximately two six times. We continue to utilize proceeds from aircraft sales to pay down debt and help us reach our long term debt to equity target over the medium term.

Gregory B. Willis: We continue to utilize proceeds from aircraft sales to pay down debt and help us reach our long-term debt-to-equity target over the medium term. Wrapping up, we remain very positive about our outlook for the future. The value of the fleet and order book remains a key source of strength for our business in the currently very robust operating environment. We expect strong lease rates and aircraft values to contribute to bolster our long-term performance, while sizable continued fleet expansion will also contribute to revenue expansion ahead.

Speaker Change: Wrapping up we remain very positive on our outlook for the future the value of the fleet and order book remains a key source of strength for our business.

In the currently very robust operating environment, we expect strong lease rates and aircraft values to continue.

Speaker Change: Contribute to bolster our long term performance, while sizable continued fleet expansion will also contribute to revenue expansion had finally I do want to note that today, we are renewing our shelf registration statement to be clear. There is a filing this filing is being made to replace our existing shelf expires tomorrow consistent with our historical practices. This registration statement.

Gregory B. Willis: Finally, I do want to note that today we are renewing our shelf registration statement. To be clear, this filing is being made to replace our existing shelf that expires tomorrow. Consistent with our historical practices, this registration statement will allow us to continue access to capital markets in an efficient manner. And with that, I'll turn the call back over to Jason for the question and answer session of the call. Thank you.

Speaker Change: Will allow us to continue to access the capital markets inefficient matter and with that I will turn the call back over to Jason for the question and answer session of the call.

Jason Arnold: Thank you, Greg. This concludes management's commentary and remarks. For the question and answer session, we ask each participant to limit their time to one question and one follow-up. Abby, please open the line for the Q&A session.

Jason Arnold: Thank you Greg. This concludes management's commentary remarks for the question and answer session. We ask each participant to limit their time to one question and one follow up.

Speaker Change: <unk>. Please open the line for the Q&A session.

Jason Arnold: Thank you.

Abby: Thank you. And at this time, I would like to remind everyone that in order to ask a question, press star and then the number one on your telephone keypad. And we will take our first question from Helane Becker with TD Cowan. Your line is open.

Jason Arnold: And at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Jason Arnold: And we will take our first question from Helane Becker with TD Cowen Your line is open.

Helane Renee Becker: Thank you very much, Operator. Hi, everybody. Thank you for your time. Have you given any thought to increasing the size of the order book?

Helane Renee Becker: Well. Thank you very much operator, hi, everybody. Thank you for the time.

Helane Renee Becker: Have you given any thought to increasing the size of the order book.

Jason Arnold: Steve, do you want to take that one?

Steve you want to take that one.

Steven F. Udvar: Yeah, Helane, nice to hear from you. We have a huge order book compared to most airlines and most lessors, that comprises over $21 billion of future deliveries between now and the first quarter of 2029. That's over 300 aircraft. So, I think we're in a very good position to generate further growth over the next four years. And I can tell you that the orders that we placed during the pandemic, particularly in 2000 and 2021 and in 2022, were placed at prices and with favorable delivery dates that could not be duplicated today. Because we placed those orders, an airline was actually more concerned about its long-term survival than ordering airplanes. Most of the leasing community was, of course, shell-shocked because of the effect of the pandemic.

Steven F. Udvar: Yes, Helane nice to hear from you.

Steven F. Udvar: A huge order book.

Steven F. Udvar: Compared to most airlines and most lessors that comprises of over $21 billion of future deliveries.

Steven F. Udvar: Between now and the first quarter of 2029.

Speaker Change: That's over 300 aircraft so.

Speaker Change: I think we're in a very good position.

Speaker Change: To generate further growth.

Over the next four years.

Speaker Change: And I can tell you.

Speaker Change: That the orders that we placed during the pandemic.

Speaker Change: Particularly in 2000, and the 2021 and in 2022.

Were placed at prices and with favorable delivery dates that cannot be duplicated today.

Speaker Change: Because we placed those orders.

Speaker Change: Airlines.

Speaker Change: We're actually more concerned about their long term survival than ordering airplanes.

Speaker Change: Most of the leasing community was of course shell shop, because of the effect of the pandemic.

Steven F. Udvar: But we knew that in the long term, the industry would recover, and we placed strategic orders at a time when we're able to negotiate excellent pricing, terms, and delivery dates. So at this point in time, with this order frenzy that has been going on since the late part of 2022-23 and continuing in the early part of this year, we do not feel compelled that we need to place large scale orders. In fact, Helane, we anticipate that in the next several years there could be airlines, and less SOARs, that may have to modify or alter their delivery and order backlog, which will give us a First Look at Opportunities to Add Incremental Aircraft if the economics are right. So I hope that answers your concern. Oh yeah.

Speaker Change: But we knew that in the long term the industry will recover.

Speaker Change: And we place strategic orders at a time, when we're able to negotiate excellent pricing terms and delivery dates.

Speaker Change: So at this point in time with this order frenzy that has been going on.

Speaker Change: Since the late part of 2022 23 and continuing in early part of this year we.

Speaker Change: We do not feel compelled that we need to place large scale orders in fact delayed we anticipate that in the next several years that could be airlines and lessors that may have to modify or altered their delivery and order backlog, which will give us a first.

Speaker Change: Look at opportunities to add incremental aircrafts, if the economics are right.

Speaker Change: So I hope that answers your concerns.

Helane Renee Becker: Oh yeah, I know. That's really helpful, Steve. Thank you.

Speaker Change: Yes, no that's really helpful. Steve Thank you.

Helane Renee Becker: My follow-up question is, you mentioned that we're seeing growth in China again. I noticed that as well in the recent IATA data. Were you surprised that, I think it was, China Southern or China Eastern ordered the COMAC aircraft?

Speaker Change: My follow up question.

Speaker Change: As you mentioned that you are seeing we are seeing growth in China again, I noticed that as well in the recent IATA data.

Speaker Change: Alright.

Speaker Change: Were you surprised that I think it was China southern China Eastern ordered the call naphtha aircrafts.

Speaker Change: Why they don't want to be surprised but go ahead John.

Jason Arnold: Why would you want to be a scribe? Go ahead, John.

John L. Plueger: That's right. No, not at all. I mean, that is what we have actually telescoped many times was the logical expectation that we had that Chinese-built aircraft such as COMAC would, in fact, be ordered by the major Chinese airline. So it was totally expected. Okay.

John: No not at all I mean that is what we have actually telescope. Many times was the logical expectation that we had the Chinese built aircrafts such as <unk> would be in fact be ordered by the major Chinese airlines. So it was totally expected.

Helane Renee Becker: Okay. Yeah, I guess. I don't know how to think about it, but okay. Thank you. Those were my questions.

John: Okay.

John: Yes.

Speaker Change: No no I don't know how to think about it that okay. Thank you for my questions.

Speaker Change: Sure.

Abby: And we will take our next question from Hillary Cacanando with Deutsche Bank. Your line is open.

And we will take our next question from Hillary <unk> with Deutsche Bank. Your line is open.

Hillary Cacanando: Hi, thanks for taking my question. So Air Lease was recently included in the, I guess it was, S&P 600 Small Cap Index. Are there any other indices that, you know, you're looking to get into? And, you know, if so, which ones?

Hillary: Hi, Thanks for taking my question.

Hillary: With me for me included.

Hillary: With S&P 600, small cap index.

Hillary: Are there any other indices that youre looking to get into and if so which one and what is the process that included an additional MLC.

Hillary Cacanando: And, you know, what is the process to be included in additionally?

Gregory B. Willis: Greg? Yeah, I mean, of course, we like to be included in as many indices as possible. However, there's not a whole lot one can do as an individual company other than to express interest in being included. But being a U.S. domiciled public company does have its advantages by being eligible for several of the S&P indices, but with that, I mean, right now, I don't think there's any more that are on the verge of being included, but we're very happy with being included in the S&P

Hillary: Greg Yes, I mean of course, we like to be included as May indices as possible. However, theres not a whole lot when can do as an individual company other than to express interest to be included but being a U S. Domicile public company does have it has its advantages by being eligible for.

Several of the S&P indices, but with that.

Hillary: Right now I don't think Theres any more that are on the verge of being included but we're very happy with being included in the S&P 600.

Hillary Cacanando: Okay, so nothing is in the pipeline for 2024. Nothing, nothing additional.

Hillary: Okay. So nothing nothing in the pipeline for 2024.

Speaker Change: Not that we're aware of.

Gregory B. Willis: Not that we're aware of for now. Okay.

Hillary Cacanando: And then, you know, in the past, you've discussed the lag between the increase in interest rates and the increase in lease rates and the increase in, you know, interest rates. You've mentioned that, you know, many times. Could you kind of discuss how that is set to look this year? Do you expect that gap to kind of close or, you know, get narrower this year? And should that, you know, and I guess if there is a cut by the Fed, should that gap close even faster, or could that even just close the gap this year?

Speaker Change: And then in the past.

Speaker Change: Got the lag between the increase in interest.

The increase of <unk> <unk> from.

Speaker Change: Interest rate.

Speaker Change: You've mentioned a couple of <unk>.

Speaker Change: Can you discuss how that is set to book this year.

Speaker Change: <unk> head of close.

Moreover, the CRM.

Speaker Change: And I guess it is.

Speaker Change: With that Scott Baxter will put that Greg.

Just closed the gap this year, yes.

Hillary Cacanando: Yeah, I think John made it clear in his prepared remarks that he said that our profit margins would be at around the level they currently are. Of course, that can change with changes in interest rate policy as well, but as a function of, and that's driven mainly by, the delivery of airplanes that we have in our pipeline, the timing of which is a little bit uncertain, as well as the timing of the conclusion or the execution of our sales pipeline.

Speaker Change: Yes, I think John made in his prepared remarks.

Speaker Change: So to hit our profit margins will be at around the level that it currently is that.

Speaker Change: Of course that can change with changes in interest rate policy as well, but as a function.

Speaker Change: It's driven mainly by the delivery of airplanes that we have in our pipeline the timing of which is a little bit uncertain as well as the timing of the.

Speaker Change: Conclusion, or the execution of our sales pipeline. So it's a little hard to have clear visibility, but we think given the current circumstances will probably be about this level of profitability and over the long term, we expect to benefit from all of those major macro points that we went through in the prepared remarks.

Hillary Cacanando: So it's a little hard to have clear visibility, but we think given the current circumstances, we'll probably be about this level of profitability. And over the long term, we expect to benefit from all those major macro points that we went through in the preparation.

Speaker Change: Okay got it if I could if I could just.

Speaker Change: A quick one more question.

Speaker Change: Share buybacks I know you've talked about your priority being paying down debt and I guess your leverage was two seven times when with you.

Speaker Change: Considering share buyback is that when you get to $2 five.

Speaker Change: Yes, I think we wanted to give me now we want to get back down to our target leverage ratio and have excess capital at that point in time, we will explore all options one of its one of which is very clearly stock buybacks.

Speaker Change: Let me just add let me just add at the highest company levels and board levels capital allocation, including stock buybacks as a subject to a very robust discussion all the time.

Speaker Change: Great. Thank you so much.

Thank you.

Hillary Cacanando: Okay, I got it. If I could just quickly ask one more question.

Hillary Cacanando: Just the share buyback, I know you talked about your priority being paying down debt, and I guess your leverage was 2.7 times. When would you start considering a share buyback? Is that when you get to 2.5, or would you... Yeah, I think we want to get back down to our target leverage ratio and have excess capital, and at that point in time, we'll explore all options, one of which is a very clearly stock buyback.

Speaker Change: And we will take our next question from Jamie Baker with Jpmorgan. Your line is open.

Gregory B. Willis: Let me just add that at the highest company levels and boarder levels, capital allocation, including stock buybacks, is subject to a very robust discussion all the time. Got it. Great. Thank you.

Jamie Nathaniel Baker: Yes, good afternoon everybody.

Similar question that we asked a competitor last week for the most recent lease you just signed.

Jamie Nathaniel Baker: John's opening comments won't hit the income statement for two years, let's call it.

How do those lease rates compare to the same aircraft type and vintage that you would have signed two years ago today, which presumably did hit the income statement in the first quarter.

Speaker Change: Close enough yes good.

Hillary Cacanando: Got it. Great. Thank you so much.

Speaker Change: Jamie.

We just signed a letter.

Jamie Nathaniel Baker: Letter of intent with a lease document to follow in the coming days.

Abby: And we will take our next question from Jamie Baker with J.P. Morgan. Your line is open.

Jamie Nathaniel Baker: With a European Airlines for two new generation Airbus aircraft.

Jamie Nathaniel Baker: Oh yeah, good afternoon, everybody. So a similar question that we asked a competitor last week about the most recent lease you just signed, okay, which, you know, per John's opening comments, won't hit the income statement for two years, let's call it that. How do those lease rates compare to the same aircraft type and vintage that you would have signed two years ago today, which presumably did hit the income statement in the first quarter, or, you know, close enough?

Jamie Nathaniel Baker: And I can tell you that the lease rates are approximately 14% to 15% higher.

Steven F. Udvar: Yeah, good question, Jamie. We just signed a letter of intent, with a lease document to follow in the coming days, with a European airline for two new generation Airbus aircraft. And I can tell you that the lease rates are approximately 14 to 15% higher than what we signed in the latter part of 2022 for identical aircraft types. So that's a significant increase.

And then what we signed in the latter part of 2022 four.

Jamie Nathaniel Baker: For identical aircraft types.

Jamie Nathaniel Baker: So that's a significant increase.

Steven F. Udvar: That's, you know, going to be something that we will enjoy for 12 years once those aircraft deliver. One of those aircraft, hopefully, will arrive in the fourth quarter of 2025. Assuming there's no further delays, and the second of those two new aircraft will deliver in Q1 of 2026. So when they do, they'll begin to impact our average LRS going forward. So that's the most recent example I can give you that happened in the last 15 days.

Jamie Nathaniel Baker: Thats.

Jamie Nathaniel Baker: Going to be something that we will enjoy for the 12 years.

Jamie Nathaniel Baker: Once those aircraft deliver.

Jamie Nathaniel Baker: One of those aircrafts hopefully will deliver in the fourth quarter of 2025.

Jamie Nathaniel Baker: Assuming there is no further delays in the second of those two new aircraft will deliver in Q1 of 2026.

Jamie Nathaniel Baker: So when they deliver they will begin to impact our average Srs.

Going forward.

Speaker Change: So that's that's the most recent example, I can give you that has occurred in the last 15 days excellent. Thank you for that and if you don't mind me, saying.

Speaker Change: Ample with like that.

Jamie Nathaniel Baker: That I think really do resonate with investors. So, I really appreciate the comment. A quick follow-up, though, you know, I appreciate what John said in his prepared remarks, also the response that Greg just gave, but, you know, on the net spread contracting, is there also, I don't know, maybe a power by the hour nuance, or maybe increased sales?

Speaker Change: I think really do resonate with investors. So I really appreciate the comment a quick follow up though I appreciate what John said in his prepared remarks also the response that Greg just gave but.

Speaker Change: On the net spread contracting is there also I don't know maybe a power by the hour nuance or maybe the increased sales.

Speaker Change: I don't want to beat a dead horse on this I know you touched on it.

Jamie Nathaniel Baker: I don't want to beat a dead horse on this. I know you touched on it. I guess Mark and I are just still a little bit surprised by the contraction. That's all.

Speaker Change: Mark and I are.

Speaker Change: Still a little bit surprised by the contraction that's all well.

John L. Plueger: Well, let me just add, Jamie, that Yeah, there was a little bit of contraction from the first quarter of last year, but there was actually about a tenth of a basis point increase from the fourth quarter of 2020. So look, you know, timing does change from quarter to quarter, the timing of the aircraft sales as well as when we take asset deliveries. The new aircraft we delivered today will enjoy an increasing lease rate margin over the projected eight years or so that we will own the aircraft.

Speaker Change: Well, let me just add Jamie that.

Yes, there was a little bit of contraction from the first quarter of last year, but there was actually about a 10th of a basis point increase from the fourth quarter of two.

Speaker Change: Yes.

Speaker Change: So look.

Speaker Change: No.

Speaker Change: Timing does change quarter to quarter.

Speaker Change: The timing of the aircraft sales as well as when we take asset deliveries the new aircraft craft, we delivered today will enjoy an increasing lease rate margin over the projected eight years or so that we will only aircraft why because as you know we lease the aircraft out at a fixed lease rate, but the aircrafts depreciate over time.

John L. Plueger: Why? Because, as you know, we lease the aircraft out at a fixed lease rate, but the aircraft depreciate over time, which is why when we sell these older aircraft, they tend to be at the higher end of our lease yields during our holding period time and when we first take them, until they're a little bit lower.

Speaker Change: Which is why when we sell these older aircrafts they tend to be at the higher end of our lease yields during our holding period of time and when we first take them until they are a little bit lower so I wouldn't I understand your thought and year on year on year continued.

John L. Plueger: So I wouldn't, I understand your thought and your continued kind of thinking about this, but I would encourage you again, it's not a quarter to quarter sort of analogy. Looking at pretty positive trends, you know, we've told you now our margins are probably going to stay about where they are through the end of 24 and then increase thereafter. That's about the best overall outlook we can give. Okay, perfect.

Speaker Change: Kind of thinking about this but I would encourage you again, it's not a quarter to quarter sort of analogy.

Speaker Change: Look at a pretty positive trends.

Speaker Change: <unk> told you know our margins are probably going to stay about where they are through the end of 'twenty four and then increase thereafter, that's about the best overall outlook, we can give.

Jamie Nathaniel Baker: Okay, perfect. I appreciate the added color. Thank you, gentlemen.

Okay perfect I appreciate the added color. Thank you gentlemen, thanks.

Speaker Change: Thanks, Jamie.

Abby: And we will take our next question from Stephen Trent with Citigroup. Your line is open.

Speaker Change: And we'll take our next question from Stephen Trent with Citigroup. Your line is open.

Stephen Trent: I guess a good afternoon, gentlemen, and thanks for taking my question. The first is if you could refresh my memory on where things stand with the potential insurance proceeds you could get from the aircraft trapped in Eastern Europe.

Stephen Trent: Hi, Yes, good afternoon, gentlemen, and thanks for taking my question.

Stephen Trent: First is if you could.

Stephen Trent: Refresh my memory on.

Stephen Trent: Where things stand with the potential insurance proceeds you could get from the aircrafts trapped.

Stephen Trent: Trapped in eastern Europe.

Stephen Trent: Steve you want to talk about that.

Stephen Trent: Steve, do you want to talk about that?

Steven F. Udvar: Yeah, so let me just explain how aircraft insurance works for these types of situations. So the primary insurance for these aircraft is carried by the airline itself. Okay, the airlines in Russia insured them through the Western markets, but there was a conduit, which is a Russian insurance company broker. Okay? But the insurance is spread among many, many underwriters that are primarily European. There are a few in Japan and in the U.S.

Steven F. Udvar: So let me just explain how the aircraft insurance works for these type of situations.

Steven F. Udvar: So the primary insurance for these aircraft is carried by the airline itself. Okay. The airlines in Russia ensure them through the western markets, but there was a conduit, which is a Russian insurance company broker, okay, but the insurance is spread among many many underwriters.

Steven F. Udvar: That are primarily European there was a few in Japan and in the U S. Okay. Then there's a second layer of insurance.

Steven F. Udvar: Okay, then there's a second layer of insurance which Air Lease procures for its entire fleet, which is to cover us in case the airline's coverage for some reason is either not valid or those carriers do not meet their obligations. So we're engaged in a two-pronged activity. One is to solidify an arrangement that has already happened with some of our aircraft through a designated Russian insurance company, which has been approved by the Russian government and also approved by OFAC here in the U.S. And then we're pursuing legal action against our carriers where we require this additional layer of insurance to cover all of our planes that were seized, and we're pursuing those activities.

Steven F. Udvar: <unk> air lease procured for its entire fleet.

Just to cover us in case the airlines coverage for some reason is even a valid or those carriers do not meet their obligations.

So we're engaged in a two pronged activity one is to solidify and arrangement that has already happened with some of our aircraft through a designated Russian insurance company, which has been approved by the Russian government and also approved by old fact here in the U S and then.

Steven F. Udvar: We're pursuing legal action against our carriers, where we are.

Steven F. Udvar: <unk> this additional layer of insurance to cover all of our planes that were seized.

Steven F. Udvar: And we're pursuing those activities. So there's ongoing negotiations. This court cases that are actually taking hold starting next month.

Steven F. Udvar: So there's ongoing negotiations. There's court cases that are actually taking place starting next month in Europe, so there's multiple actions to work very hard and diligently to recover our claims, and hopefully, if all goes well, in the coming quarters, we'll be able to report some progress on all of these fronts.

Stephen Trent: Okay, that's super helpful. I really appreciate it. And just one follow up, kind of a follow up to Helane's question.

Steven F. Udvar: In Europe.

Steven F. Udvar: So there is multiple actions.

Steven F. Udvar: <unk> worked very hard and diligently to recover our claims.

Steven F. Udvar: And hopefully if all goes well.

Steven F. Udvar: In the coming quarters, we will be able to report some progress on all of these fronts.

Speaker Change: Okay. That's super helpful. I really appreciate it.

Speaker Change: And just one follow up.

Speaker Change: Kind of a follow up to <unk> question.

Stephen Trent: You know, I saw on a sequential basis that your net exposure, geographically speaking, looks like it went up in Europe and it went up in North America and went down in some of the other markets. Am I reading too much into that? That's just kind of a short-term nuance. And you're still thinking, kind of, some of the Asian markets are places for long-term growth?

Speaker Change: I saw on a sequential basis it looks like your net exposure geographically speaking it looks like it went up.

Speaker Change: In Europe, and it went up in North America and went down.

Speaker Change: And some of the other markets.

Speaker Change: Am I reading too much into that that's just kind of a short term nuance and you're still thinking kind of.

Some of the Asian market.

Speaker Change: Places for long term growth.

Speaker Change: I'll take that one so no. This is just part of our natural plan.

John L. Plueger: I'll take that one. So, no, this is just part of our natural plan, you know, well before COVID. And, and, you know, when we were much earlier in our development, we had a very heavy exposure to China at one point was 22%. We did great leases there at the beginning phase of our company.

Speaker Change: Well before Covid and.

Speaker Change: When we were much earlier in our in our development, we had a very heavy exposure.

John L. Plueger: But they were a little bit disproportional. China, that percentage was disproportional for any country; it didn't really matter who it was. And so we gradually, as we grew our balance sheet, moderated our exposure a bit more to China and had been naturally going forward and renewing some leases there, taking some aircraft back. But now, we have moderated over the course of the past three to four years, such that China is now, we used to disclose China separately as an item, but now it is insignificant about, well, not insignificant, it's about 6%.

Into China at one point was 22%.

Speaker Change: We did great leases there.

Speaker Change: The beginning phase of our company, but they were a little bit disproportional, China that percentage was disproportional for any country didn't really matter, who it was and so we progressively as we grew our balance sheet.

Speaker Change: Moderated.

Speaker Change: Our exposure a little bit more into China and have been naturally going forward and.

Speaker Change: Renewing some leases there taking some aircraft back.

Speaker Change: But now have moderated over the course of the past three to four years such that China is now we used to disclose China separately as an item, but now it is.

Speaker Change: It is insignificant.

Speaker Change: It's again, it's about 6% so we didnt feel that warranted breakout.

John L. Plueger: So we didn't feel that warranted a breakout. In the meantime, our lease placement activity has been very robust in Europe, which has been a primary market for us for a long time. So I would just call it a natural evolution of nothing more than what we've been doing over the past three to four years.

Speaker Change: In the meantime, our lease placement activity has been very robust in.

Speaker Change: In Europe, which has been a primary market for us for a long time, so I would just call it a natural evolution.

Speaker Change: Nothing more than what we've been doing over the past three years to four years.

Steven F. Udvar: Just to add to John's comment... We have sold a number of aircraft that we have on lease to Chinese airlines and Chinese institutions that have an appetite for those assets. But what you don't see in our announcement is that we have a large number of new aircraft that will be delivered later this year and in 2025 that are destined to go to airlines in Asia, particularly in Southeast Asia, in places like Malaysia and Thailand, that are recovering in Vietnam, and these are airlines that are National Flag Carriers where traffic is recovering at a very rapid pace. A high double-digit rate. So while our exposure to China is coming down, we do have a lot of aircraft, new aircraft, both Boeing and Airbus, going into Asian markets, but not necessarily mainland China.

Speaker Change: Just to add to John's comments.

We have sold a number of aircraft that we have on lease to Chinese airlines to Chinese institutions.

Speaker Change: That have an appetite for those assets, but what you don't see in our release.

Speaker Change: Is that we have a large number of new aircraft.

Speaker Change: That will deliver later this year and in 2025 that are destined to go to airlines in Asia, particularly in Southeast Asia in places like Malaysia and Thailand.

Speaker Change: That are recovering and Vietnam and these are airlines that are national flag carriers.

Speaker Change: Where traffic is recovering at a very rapid pace.

Speaker Change: High double digit rates, so while our China exposure is coming down we do have a lot of aircraft new aircraft, both Boeing and Airbus going into Asia markets, but not necessarily mainland China, yes.

Steven F. Udvar: Yeah, let me just add to that. Korea, where we will start delivering; May will be our first of 10 new Boeing 787-10s going to Korean Airlines.

Speaker Change: Yes, let me just add to that Korea, where we will start delivering may will be our first of 10, new Boeing 787 dash tens going to Korean airlines.

Speaker Change: Very helpful.

Stephen Trent: Very helpful. I appreciate the time, gentlemen. Thank you.

Speaker Change: I appreciate the time gentlemen, thank you.

Abby: And we will take our final question from Ron Epstein with Bank of America. Your line is open.

Speaker Change: And we will take our final question from Ron Epstein with Bank of America. Your line is open.

Speaker Change: Okay.

Ronald Jay Epstein: Hey, good morning. Good evening. I guess it's not morning anymore.

Ronald Jay Epstein: Hey, Good morning, Hi, Roger Good evening address that morning anymore.

Ronald Jay Epstein: Yeah, so just getting back to this supply and demand shortage situation. You know, Steve saying all these airplanes are delivered late, so on and so forth. That kind of begs the question, I mean, do you think there's room for a Val as a third player now? I mean, it just seemed like if there was another company making airplanes right now, things wouldn't be late, like making big airplanes. I should say, yeah, but wrong.

Ronald Jay Epstein: Yeah, So just going back to this <unk>.

Ronald Jay Epstein: <unk> demand shortage situation.

Ronald Jay Epstein: Steve saying all these airplanes are delivered.

Ronald Jay Epstein: So on and so forth.

Ronald Jay Epstein: That kind of begs the question do you think Theres room for.

Ronald Jay Epstein: Valleys third player now.

Ronald Jay Epstein: It just seems like if there was another company in making airplanes right now.

Ronald Jay Epstein: It wouldn't be late.

Ronald Jay Epstein: Making bigger airplanes, I should say, yes, but ron.

Ronald Jay Epstein: Yeah, but Ron... Those manufacturers have to deal with the same supply chain. The same engine guys. Unknown Speaker The same companies that make avionics, the same companies that make hydraulic pumps, the same companies that make galleys and seagulls. So yes, if someone wants to build a new generation aircraft. We certainly will evaluate those products, but they're also going to be faced with the same supply chain issues that are faced not only on the commercial side by Boeing, Airbus, and Embraer but also by our military contractors, where you've seen an uptick in military aerospace and aircraft demand worldwide.

Those manufacturers.

Ronald Jay Epstein: It has to deal with the same supply chain.

Ronald Jay Epstein: The same engine guys the same comp.

Ronald Jay Epstein: Does that make avionics the same companies that make hydraulic pumps, the same companies that make galleys and seats.

So yes, if someone wants to build a new generation aircraft.

Ronald Jay Epstein: We certainly will evaluate those products.

Ronald Jay Epstein: But they're also going to be faced with the same supply chain issues.

Ronald Jay Epstein: That are faced not only on the commercial side by Boeing Airbus and Embraer, but also by our military contractors.

Ronald Jay Epstein: <unk> seen an uptick in military aerospace and aircraft demand worldwide.

Steven F. Udvar: But I guess what I'm getting at, Steve, is it's kind of like, you know, not every airplane company is getting mired down in FAA audits and FAA investigations, like seemingly on a monthly basis, right?

Ronald Jay Epstein: But I guess, what I'm getting that Steve is it's kind of like.

Ronald Jay Epstein: Not every airplane companies getting mired down an FAA audits and FAA investigations seemingly on a monthly basis right. So I don't know.

Steven F. Udvar: That's fair.

Steven F. Udvar: Yeah, but Airbus... is really late as well. In fact, I can just give you some small examples.

Steven F. Udvar: Yes, but Airbus is is really been late as well.

Steven F. Udvar: In fact, I can just give you some small examples I was looking at this over the weekend.

Steven F. Udvar: I was looking at this over the weekend, and I went back to the summer of 2023. And I said, how many aircraft that we thought at that time would deliver in Q1 of 24 did not deliver? So we actually had 14 actual deliveries that took place, and we had 12 aircraft that I thought nine months ago would not deliver. They include, for example, an Airbus A350-900 that was supposed to deliver in March, but we have it on lease, under contract to Air France, and it will now be delivered in July.

Steven F. Udvar: So I went back to the summer of 2023.

Steven F. Udvar: And I said, how many aircrafts that we thought at that time would deliver in Q1 of 'twenty four did not deliver.

Steven F. Udvar: So we actually had 14 actual deliveries took place.

Steven F. Udvar: And we have 12 aircraft.

Steven F. Udvar: I saw it nine months ago would deliver did not deliver.

Steven F. Udvar: They include for example, an Airbus <unk> hundred 5900.

Steven F. Udvar: That was supposed to deliver in March and we havent on lease contract for Air France.

Steven F. Udvar: Now we will deliver in July.

Steven F. Udvar: So it was a plane that was supposed to deliver in Q1, but it will now deliver in Q3. We have four 787s that we're supposed to deliver to four different airlines in Q1. This is nine months ago. That was the outlook. None of them delivered.

Steven F. Udvar: So it was a plane that was supposed to OIBDA in Q1, you will now deliver in Q3.

Steven F. Udvar: We have 4787 that were supposed to deliver to four different airlines. In Q1. This is nine months ago that was the outlook none of them delivered.

Steven F. Udvar: We have <unk> hundred 21 deals that didn't deliver in Q1 that slipped into Q2.

Steven F. Udvar: We have A321neos that didn't deliver in Q1 that slipped into Q2. Same thing with A330NEOs. We have A220s that relate. We have 4737s that should have delivered in Q1 that will now deliver in Q2 and Q3. It's not a Boeing FAA regulatory issue. It's, it's, it's an industry one.

Steven F. Udvar: Same thing with <unk> hundred 30 deals.

We have 800 twenty's that relate.

Steven F. Udvar: <unk> thousand 730 Sevens.

Steven F. Udvar: That should have delivered in Q1 that will now delivered in Q2 and Q3, so it's not a Boeing FAA regulatory issue. It's it's an industry wide phenomenon Ron.

John L. Plueger: Ron, this is John. Let me just add one other comment. The two most important words in your question were when you said another airplane that could be delivering right away. There is no right away. So any new manufacturer. And you're probably hinting at Embraer, as it was reported this past week, they're looking at doing something like this, but any new manufacturer, I mean, it's going to take years, Ron. The Certification and Delivery of New Aircraft, because any new aircraft will be subject to the heightened regulatory scrutiny we're seeing today, both from the FAA and EASA.

Steven F. Udvar: Ron interesting John Let me just add one other comment.

Ronald Jay Epstein: The two most important words and your question.

Ronald Jay Epstein: When you said another airplane that could be delivering right away there is no right away.

Ronald Jay Epstein: So any new manufacturer.

Ronald Jay Epstein: And Youre, probably hinting at Embraer as it was reported this past week. They are looking at doing something like this but any new manufacturer, it's going to take years, Ron for the certification and delivery of new aircraft, because any new aircraft will be subject to the heightened regulatory scrutiny.

Ronald Jay Epstein: We're seeing today, both from the FAA and <unk>. So the real key question, even if it were even if it happens is just going to take some time on that's going to take a fair amount of time. This is not even a two to three year thing. This is this is this is a well beyond 2030.

John L. Plueger: So the real key question, even if it happens, is it's going to take some time. It's going to take a fair amount of time. This is not even a two to three year thing. This is well beyond 2030, I think, a time scale, if at all. So not trying to poo-poo it, just trying to put a little reality on it for the supply chain factors Steve commented on, but just the reality of the time it takes to develop and certify a new aircraft. Even if you're not plagued with current production or supply chain challenges or regulatory oversight problems, this is a formidable time.

Ronald Jay Epstein: I think timescale if at all so.

Ronald Jay Epstein: Trying to <unk>, just trying to put a little reality on it.

Ronald Jay Epstein: For the for the supply chain factors Steve.

Ronald Jay Epstein: Commented on but just the reality of the time it takes to develop and certify new aircraft, even if youre not plagued with current production at our <unk>.

Ronald Jay Epstein: <unk> Jane challenges of regulatory oversight problem is a formidable time.

Steven F. Udvar: And the other thing, Ron, is you're very knowledgeable about aircraft and OEMs and issues with any new product. Whether it's going to come out from Boeing or Airbus or China or Brazil or some super wealthy investor that thinks this is the future, it is going to require a new engine. I don't see any new aircraft that are breakthrough improvements in economics and operating efficiency will have the current generation. So, when do you think the first new technology engine will be certified and available to power such a new airframe? And I agree with John, we're probably looking at 2030 or beyond.

Speaker Change: And the other thing Ron.

Speaker Change: We're very knowledgeable about aircraft and Oems and issues any new products, whether it's going to come out from Boeing or Airbus or China, or Brazil, or some super wealthy investor thinks this is the future.

Speaker Change: It's going to require a new engine.

Speaker Change: I don't see any new aircrafts that are breakthrough improvements in economics, and operating efficiency will have current generation engines.

Speaker Change: When do you think the first new technology engine will be certified and available to power such a new airframe.

Speaker Change: And I agree with John we're probably looking at 2030 or beyond.

Ronald Jay Epstein: How has the reaction been to the A350 freighter given that you guys are doing the launch on it?

Speaker Change: Interesting interesting and then maybe changing gears to I guess a little more.

Speaker Change: A more simple question.

Speaker Change: How has the reaction been to.

Speaker Change: The $3 50, a trader given.

Speaker Change: You guys launched owner.

Steven F. Udvar: There's been strong demand, I mean, there's been a number of orders. Cathay Pacific, Air France, KLM will replace... 747s and a couple of cases in 777 freighters. Starlux in Taiwan, which is already an A350 operator, also ordered one. I know there's a number of transactions that have not yet been announced by Airbus. I'm, in fact, meeting with a major cargo airline this week to discuss a possible order for an A350 freighter.

Speaker Change: Additionally, strong demand I mean, theres been a number of orders.

Speaker Change: Cathay Pacific Air, France, KLM will replace.

Speaker Change: 747, and a couple of cases in 777 freighters.

Speaker Change: Start off in.

Speaker Change: In Taiwan.

Speaker Change: Which is already on <unk> hundred 50, operator.

Speaker Change: Also ordered it I know, there's a number of transactions.

That have not yet been announced by Airbus.

Speaker Change: I am in fact meeting with a major cargo airline this week.

Speaker Change: To discuss a possible placement of <unk> hundred 50 freighter the issue that caused us right now on that.

Steven F. Udvar: The issue that haunts us right now on that is that Airbus made a decision last year to make the cargo door on the A350 larger than what was originally designed, and it's a larger door, both in terms of width and height. And we believe, based on the information we've gotten from Airbus, that the program will be delayed because of the certification of this new configuration for the cargo door and its effect on the fuselage, the flooring, and the structure of the Airbus.

Speaker Change: That Airbus made a decision last year to.

Speaker Change: To make the cargo door on the <unk> hundred 50 larger than what was originally designed.

Speaker Change: And it's a larger door, both in terms of width and height.

Speaker Change: And the 777 ex freighter.

Speaker Change: And we believe based on the information we've gotten from Airbus that the program will be delayed.

Speaker Change: Cost of the certification of this new.

Speaker Change: Configuration on the cargo door and its effect on the on the.

Speaker Change: On the fuselage and the flooring in the structure.

Speaker Change: Of the airframe.

Speaker Change: Got it got it interesting well thanks, guys I appreciate it thanks, Ron Thanks, Ron.

Ronald Jay Epstein: Got it. Got it. Interesting.

Ronald Jay Epstein: Well, thanks, guys. I appreciate it. Thanks, Ron.

Jason Arnold: And, with no further questions at this time, I will now turn the call back to Mr. Arnold for his closing remarks.

Speaker Change: And with no further questions at this time I will now turn the call back to Mr. Amit for closing remarks.

Jason Arnold: Thank you everyone for participating in our first quarter call, and we look forward to speaking with you again next quarter. Operator, thanks for your assistance, and please disconnect the line.

Amit: Thank you everyone for participating in our first quarter call and we look forward to speaking with you again next quarter operator, thanks for your assistance and please disconnect your line.

Operator: Thank you, and ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.

Amit: Yes.

Amit: Thank you and ladies and gentlemen, this concludes today's call and we thank you for your participation you may now disconnect.

Amit: Yeah.

Amit: [music].

Yes.

Amit: Okay.

Amit: [music].

Amit: Yes.

Amit: [music].

Amit: Okay.

Amit: [music].

Amit: Yes.

Amit: Sure.

Amit: [music].