Yahoo Finance Air Lease Corp (AL) (Q1 2024) Earnings Call Transcript Highlights: Robust Growth Amidst Market ...
Revenue: $663 million in Q1 2024, driven by fleet growth and higher sales activity.
Diluted Earnings Per Share (EPS): $0.87 in Q1 2024.
Fleet Additions: 14 new aircraft added, totaling approximately $900 million in flight equipment.
Aircraft Sales: 5 aircraft sold, generating approximately $240 million in sales proceeds.
Utilization Rate: Remained strong at 100%.
Passenger Traffic Volume: Increased by approximately 14% year-over-year.
Order Book: 100% of forward orders placed through 2025, with significant delivery positions through 2028.
Lease Extensions: Strong market enabling beneficial lease rate extensions.
Expected Full Year 2024 Deliveries: Estimated at $4.5 billion to $5.5 billion, with anticipated midpoint at approximately $5.1 billion.
Q2 2024 Aircraft Delivery Expectations: Around $1.5 billion worth of new aircraft deliveries.
Sales Pipeline: Robust at about $1.4 billion, with expected $500 million in aircraft sales to close in Q2 2024.
Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Air Lease Corp (NYSE:AL) reported a strong demand for fuel-efficient commercial aircraft, with all forward orders placed through 2025.
The company's fleet utilization rate remains exceptionally strong at 100%, indicating efficient management and deployment of assets.
Air Lease Corp (NYSE:AL) has a robust sales pipeline valued at approximately $1.4 billion, demonstrating potential for significant revenue from aircraft sales.
The company benefits from a young fleet with an average age of 4.7 years, which is attractive in the leasing market for its efficiency and lower maintenance costs.
Air Lease Corp (NYSE:AL) has not recorded any impairment charges since its inception, highlighting strong asset management and valuation.
Negative Points
Air Lease Corp (NYSE:AL) experienced lower end-of-lease revenue and higher operating expenses which impacted the financial results for the quarter.
Ongoing supply chain constraints are affecting new commercial aircraft deliveries, particularly impacting Boeing and Airbus, which could delay future revenue.
The company faces increased interest expenses, which rose by approximately $30 million year-over-year due to higher composite cost of funds.
Delivery delays from manufacturers are a persistent issue, with all aircraft delivered in the quarter being late, which could affect operational planning and customer satisfaction.
The inversion of the yield curve is creating a drag on financial results, which is currently increasing financing costs contrary to typical benefits.
Q & A Highlights
Q: Have you given any thought to increasing the size of the order book? A: Steven F. Udvar-Hazy, Executive Chairman of the Board, Air Lease Corporation, responded that they have a substantial order book already, valued at over $21 billion with deliveries planned through the first quarter of 2029. He highlighted that the orders placed during the pandemic were at favorable prices and delivery dates, which cannot be replicated today. He also mentioned that they do not feel compelled to place large-scale orders currently due to the ongoing order frenzy in the industry.
Q: Are there any other indices that you're looking to get into? A: Gregory B. Willis, Executive VP & CFO, Air Lease Corporation, mentioned that while they would like to be included in as many indices as possible, there isn't much they can do as a company other than express interest. He noted the advantages of being a U.S. domiciled public company, which makes them eligible for several S&P indices.
Q: Could you discuss the lag between the increase in lease rates and interest rates? A: Gregory B. Willis explained that their profit margins are expected to remain around current levels for the remainder of the year, influenced by the delivery of airplanes and the execution of their sales pipeline. He noted that changes in interest rate policy could also impact profitability.
Q: For the most recent lease signed, how do the lease rates compare to those from two years ago? A: Steven F. Udvar-Hazy noted that the lease rates for a recent agreement are approximately 14% to 15% higher than those signed in late 2022 for identical aircraft. He emphasized that this increase would contribute positively to their lease rate factor (LRF) once the aircraft are delivered.
Q: What is the status of potential insurance proceeds from aircraft trapped in Eastern Europe? A: Steven F. Udvar-Hazy explained the two-pronged insurance approach: primary insurance carried by the airline and a secondary layer by Air Lease. He mentioned ongoing negotiations and legal actions to recover claims, with court cases starting soon in Europe.
Q: How has the reaction been to the A330 freighter, given that you are on the launch? A: Steven F. Udvar-Hazy reported strong demand for the A330 freighter, with several orders already placed by major airlines. He also mentioned a delay in the program due to Airbus deciding to enlarge the cargo door, affecting the certification timeline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
