Friday, 7 August 2020

Air Lease Corporation Announces Second Quarter 2020 Results

Air Lease Corporation announces financial results for the three and six months ended June 30, 2020. 

Second Quarter 2020 Results
 • Revenues: o $521 million for the three months ended June 30, 2020, an increase of 10.6% o $1.0 billion for the six months ended June 30, 2020, an increase of 10.2%

• Diluted earnings per share: o $1.26 for the three months ended June 30, 2020, an increase of 14.5% o $2.43 for the six months ended June 30, 2020, an increase of 4.3%

 • Adjusted diluted earnings per share before income taxes: o $1.71 for the three months ended June 30, 2020, an increase of 13.2% o $3.31 for the six months ended June 30, 2020, an increase of 4.1%

Steven F. Udvar-Házy, Executive Chairman of the Board Said: “We continue to work tirelessly with our airline customers and the OEMs toward airline industry stabilization and recovery. In China/Asia and Europe, which are our principal markets, we are seeing recovery trends domestically and regionally. The lowering of OEM production rates is helping to stabilize supply/demand, and we have a number of new aircraft lease deals in process to help meet the restructuring and modernization of the fleets of our airline customers,” 

John L. Plueger, Chief Executive Officer and President. "Our second quarter results, including revenue, EPS, collection rate, and aircraft utilization, were healthy in the face of an extremely tough environment for global airlines due to the COVID-19 pandemic. 

Financial stress is driving airlines to leasing and right-sizing their fleets by eliminating older, less efficient aircraft and accelerating environmental sustainability goals with young, technologically advanced aircraft, which is the profile of ALC’s orderbook, fleet, and business model,"

Second Quarter 2020 Highlights
• As of June 30, 2020, we owned 301 aircraft in our operating lease portfolio with a net book value of $19.1 billion, a weighted
average age of 3.9 years and a weighted average lease term remaining of 7.0 years.
• Sold four aircraft during the quarter resulting in approximately $87 million in sales proceeds.
• Placed 90% of our orderbook on long-term leases for aircraft delivering through 2022.
• Ended the quarter with a 91% collection rate(1) for our operating lease portfolio and a 99.6% Lease Utilization Rate(2).
• Ended the quarter with $28.2 billion in committed minimum future rental payments consisting of $13.8 billion in contracted
minimum rental payments on the aircraft in our existing fleet and $14.4 billion in contracted minimum future rental payments
related to aircraft on order.
• Issued $850.0 million in aggregate principal amount of Medium-Term Notes due 2025 bearing interest at a fixed rate of 3.375%.
• Declared a quarterly cash dividend of $0.15 per share of our outstanding Class A common stock on August 5, 2020. The
dividend will be paid on October 9, 2020 to holders of record of our Class A common stock as of September 11, 2020.

Impact of COVID-19
The global pandemic resulting from the coronavirus (“COVID-19”) has disrupted some of our operations, the operations of our lessees, aircraft manufacturers and suppliers. The COVID-19 pandemic has resulted in governmental authorities around the world implementing numerous measures to try to contain the virus. Although some of these measures have since been lifted or scaled back, a recent resurgence of COVID-19 in certain parts of the world, including the United States, has resulted in the re-imposition of certain restrictions and may lead to other restrictions being implemented again in response to efforts to reduce the spread of COVID-19. It is unclear how long these measures will remain in place, and they may remain in place in some form for an extended period of time. Accordingly, we have experienced the following impacts to our business:

• As of August 6, 2020, most of our lessees have requested some form of accommodation. Each has been dealt with on a caseby-case basis. We have worked out accommodation arrangements with approximately 59% of our lessees, generally in the form of partial lease deferrals for payments due during the first and second quarter of 2020, typically with a short-term repayment period, with the majority of the deferrals repaid over the next 12 months. In many cases, lease extensions were also negotiated as part of the deferral accommodations. Through August 6, 2020, we have agreed to defer approximately $189.9 million in lease payments, which have negatively impacted our cash flow provided by operating activities and represented approximately 3% of our total available liquidity as of June 30, 2020.

• Our collection rate for the second quarter of 2020 was 91% compared to 90% for the first quarter of 2020. In July of 2020, our collection rate for the month was 89%. We expect that our collection rate will remain under pressure while air travel is reduced or restricted in a number of countries. However, we do not anticipate that this will have a material impact on our liquidity position. 

• Our Lease Utilization Rate for the three months ended June 30, 2020 and the month of July 2020 was 99.6% compared to 99.7% for the three months ended March 31, 2020.

• While we have estimated our capital expenditures for the remainder of 2020 and beyond, given the current industry circumstances, our aircraft delivery schedule could be subject to material changes. In any case, such capital expenditures will be significantly less than what we previously communicated, which will slow down our revenue growth but will further increase our strong liquidity position.

• Due to reduced capital expenditures in aircraft investments, coupled with current industry conditions, we are minimizing aircraft sales for the remainder of the year.

• Some transitions of the Company’s aircraft from one lessee to another lessee have been delayed. As a result of travel restrictions, we expect some challenges when transitioning, acquiring or selling aircraft.

• COVID-19 has caused disruption in the financial markets and has caused volatility and uncertainty in the bond market, but we accessed the unsecured bond market in the second quarter of 2020 and believe that we will continue to have access to such unsecured debt markets. As a counter-balance, we maintain a significant liquidity position, with $6.9 billion in available liquidity. Given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our business, results of operations and financial condition for the foreseeable future

Flight Equipment Portfolio
Our owned fleet grew by 2.2% to a net book value of $19.1 billion as of June 30, 2020 compared to $18.7 billion as of December 31, 2019. As of June 30, 2020, our fleet was comprised of 301 aircraft in our operating lease portfolio, a weighted-average age and a weighted-average remaining lease term of 3.9 years and 7.0 years, respectively, and 81 managed aircraft. As of June 30, 2020, we had a globally diversified customer base of 106 airlines in 61 countries.

During the quarter ended June 30, 2020, we took delivery of one aircraft from our order book and sold four aircraft, ending the quarter with 301 owned aircraft in our operating lease portfolio. 

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