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AL

AIR LEASE CORP (AL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $738.3M rose 11.3% YoY on stronger rental and aircraft sales; AL reported GAAP diluted EPS of $3.26 driven by a $332M insurance recovery, while adjusted pre-tax earnings per diluted share were $1.51 .
  • Against S&P Global consensus, revenue beat ($738.3M vs $708.0M*) while normalized “Primary EPS” missed (actual 1.185 vs consensus 1.662*), reflecting higher interest expense and retirement-related compensation; GAAP EPS is not comparable to normalized consensus due to one-time recoveries . Values retrieved from S&P Global.
  • Management reaffirmed 2025 deliveries of $3.0–$3.5B and expects ~$800M in Q2; ~ $1.5B in 2025 aircraft sales retained, with ~$300M targeted in Q2, and revolver upsized to $8.2B, enhancing capital flexibility and opening buyback/M&A optionality once leverage at 2.5x is sustained .
  • Strategic positives: lease rates and gains on sale remain healthy; fleet utilization at 100%; 82% of Russia write-off recovered to date; no aircraft scheduled for delivery into countries with reciprocal aircraft tariffs, with China exposure de minimis .

What Went Well and What Went Wrong

What Went Well

  • Strong revenue growth and gains on sale: Rental revenue grew ~5% YoY to $645M; aircraft sales/trading/other up 90% to $93M; gains on sale of $61M on 16 aircraft sold (~13% margin) .
  • Material insurance recoveries and leverage progress: Recognized $331.9M benefit from Russia insurance settlements in Q1; received an additional $226.7M in cash post quarter; management said this put AL at its target debt-to-equity, opening capital allocation options .
  • Demand/lease rate backdrop supportive: Management noted lease rates trending higher, robust extension activity, and healthy widebody demand; fleet utilization remains 100% .

Quote: “Lease rates continue to trend higher, while extension activity and forward placements continue to remain very robust.”

What Went Wrong

  • Normalized EPS below consensus despite GAAP boost: S&P “Primary EPS” actual 1.185 vs consensus 1.662*, impacted by higher interest expense (composite cost of funds rose to 4.26%) and retirement-related compensation . Values retrieved from S&P Global.
  • Interest expense headwinds: Interest expense increased ~$28M YoY with composite cost of funds up 23 bps to 4.26%; ~78% fixed-rate debt but rates remain elevated .
  • OEM/supply chain delays: Management received additional Airbus delay notifications impacting 2027–2028 A320/A321neo deliveries by ~1 year; lingering production constraints likely to persist 3–4 years .

Financial Results

Headline P&L vs prior periods and consensus

MetricQ1 2024 (older)Q4 2024Q1 2025 (newest)Q1 2025 ConsensusDelta vs Consensus
Revenue ($USD Millions)$663.3 $712.9 $738.3 $708.0*+$30.3 (beat)
GAAP Diluted EPS ($)$0.87 $0.83 $3.26 n/an/a
Primary EPS (S&P, normalized) ($)n/an/a1.185*1.662*-0.477 (miss)
Pre-tax Margin (%)20.4% 19.6% 63.9% n/an/a
Adjusted Pre-tax Margin (%)22.1% 21.1% 23.0% n/an/a

Values retrieved from S&P Global.

Revenue composition

Revenue ComponentQ1 2024Q4 2024Q1 2025
Rental of flight equipment ($USD Millions)$614.3 $638.9 $645.4
Aircraft sales, trading and other ($USD Millions)$49.0 $74.0 $92.9
Total Revenues ($USD Millions)$663.3 $712.9 $738.3

Expense highlights and one-time items

ItemQ1 2024Q1 2025
Interest expense ($USD Millions)$194.7 $222.6
Composite interest rate (%)4.14% (Dec-24) 4.26% (Mar-25)
Recoveries of Russian fleet write-off ($USD Millions)— (331.9)
SG&A ($USD Millions)$47.7 $59.3
Stock-based compensation ($USD Millions)$8.3 $17.6

Non-GAAP measures

MetricQ1 2024Q1 2025
Adjusted net income before income taxes ($USD Thousands)$146,287 $169,490
Adjusted diluted EPS before income taxes ($)$1.31 $1.51
Adjusted pre-tax margin (%)22.1% 23.0%

Note: Adjusted figures exclude non-cash and non-recurring items, including Russia-related write-offs/recoveries and retirement compensation; see reconciliations in the release .

KPIs and Fleet Metrics

KPIDec 31, 2024 (older)Mar 31, 2025 (newest)
Owned fleet (units)489 487
Managed fleet (units)60 57
Aircraft on order (units)269 260
Net book value of flight equipment ($B)$28.2 $28.6
Weighted avg fleet age (years)4.6 4.7
Weighted avg remaining lease term (years)7.2 7.2
Total committed rentals ($B)$29.5 $29.2
Current fleet contracted rentals ($B)$18.3 $18.9
Committed fleet rentals ($B)$11.2 $10.3

Debt and Liquidity

MetricDec 31, 2024Mar 31, 2025
Debt financing, net ($USD Millions)$20,210 $19,891
% fixed-rate debt79.0% 77.6%
Composite cost of funds (%)4.14% 4.26%
Total liquidity ($USD Billions)$8.1 $7.4
Revolver capacity ($USD Billions)$7.8 (pre) $8.2 (post)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Orderbook deliveries ($USD Billions)FY 2025$3.0–$3.5 $3.0–$3.5; ~$0.8 in Q2 Maintained (Q2 detail added)
Aircraft sales ($USD Billions)FY 2025~ $1.5 ~ $1.5; ~$0.3 in Q2 Maintained (Q2 detail updated)
Dividend per quarter ($)Q2 2025$0.22 $0.22 (payable Jul 9) Maintained
Revolving credit facility ($USD Billions)Ongoing$7.8 Increased to $8.2; maturity to May 2029 Raised/Extended
Leverage target (Debt/Equity)Ongoing2.5x long-term target 2.5x reaffirmed; reached in Q1 post recoveries Maintained (achieved)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Supply chain & OEM delaysBoeing strike impact; delivery normalization will take time Additional Airbus delays ~1 year on 2027–2028 A320/A321neo Ongoing constraints, extended timelines
Lease rates & extensionsExtensions at higher rates than initial terms; yields to grind up Continued higher lease rates; widebody extensions with notable step-ups Strengthening
Tariffs/macroNot highlighted in prior quarterNo deliveries to countries with reciprocal aircraft tariffs; airlines bear tariff responsibility; China exposure de minimis Managed exposure; limited direct impact
Widebody demandStrengthening; 6x 777-300ER extensions; above appraisal rates Widebody demand remains strong; European/Asian carriers reporting robust bookings Improving
Capital allocationDebt reduction to 2.5x; consider buybacks/M&A after At target leverage; evaluating organic/inorganic growth and buybacks/dividends Flexibility increased
Russia insurance recoveries2023 Q4 recovery noted; litigation ongoing $331.9M recognized; additional $226.7M cash post quarter; 82% recovered to date Positive progress
Interest rates & margin outlookMargins flattish; benefits from Fed cuts but lagged Composite cost of funds 4.26%; still elevated; margins guided stable Headwinds persist

Management Commentary

  • “We purchased 14 new aircraft from our order book… and sold 16 aircraft for $521 million in sales proceeds… Fleet utilization remains at 100%.”
  • “We’ve recently received additional delay notifications from Airbus, primarily impacting our 2027 and 2028 A320 and A321neo deliveries by about a year.”
  • “As of now, Air Lease has no aircraft delivering to countries where tariffs applicable to commercial aircraft exist or have been announced. We have no aircraft going to China… our total China exposure is now de minimis.”
  • “The significant insurance recoveries we have received to date puts us at our target debt-to-equity ratio… allows us to consider a wide range of capital allocation.”
  • CFO: “These sales generated $61 million in gains, representing roughly a 13% gain on sale margin… composite cost of funds to 4.26% at quarter end.”

Q&A Highlights

  • Lease extensions and rates: Recent Asia widebody extension examples saw ~50% higher rates versus COVID-era terms; broader widebody step-ups expected near term .
  • Capital allocation: Buybacks, dividends, organic/inorganic growth all “under consideration”; timing dependent on further insurance recoveries and market conditions .
  • Tariffs: Airlines bear tariff costs contractually; no current deliveries into tariff-imposing countries; some U.S. Airbus deliveries built domestically (Mobile, AL), avoiding import tariffs .
  • Leverage & revolver: 2.5x leverage target reaffirmed; revolver upsized to $8.2B with 52 banks, maturity 2029, providing flexibility for refinancing timing .
  • Profitability trajectory: Margins expected roughly flattish in 2025; ROE improvement tied to lease yield increases and potential easing in rates over 2–3 years .

Estimates Context

  • Revenue: Actual $738.3M vs consensus $708.0M* → beat of $30.3M (~4.3%). Drivers: rental revenue growth and higher aircraft sales/gains . Values retrieved from S&P Global.
  • EPS: S&P “Primary EPS” actual 1.185 vs consensus 1.662* → miss of 0.477. Reasons: higher interest expense from elevated cost of funds; retirement compensation; note that GAAP diluted EPS $3.26 includes $331.9M one-time insurance recoveries and is not comparable to normalized consensus . Values retrieved from S&P Global.
MetricQ1 2025 ConsensusQ1 2025 Actual (S&P)
Primary EPS ($)1.662*1.185*
Revenue ($USD Millions)708.0*738.282*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue beat driven by rental growth and stronger aircraft sales/gains; however normalized EPS missed consensus due to interest expense and one-time retirement costs, while GAAP EPS is boosted by insurance recoveries . Values retrieved from S&P Global.
  • Capital flexibility meaningfully improved: revolver upsized to $8.2B, leverage at target; management open to buybacks/M&A/organic expansion pending further recoveries—monitor capital return signals .
  • Demand backdrop favorable with rising lease rates and robust extension activity, especially widebodies; expect continued yield “grind up,” supporting gain-on-sale margins at upper end of historical range .
  • OEM delays and supply constraints remain the binding constraint; Airbus neo delays into 2027–2028 and multi-year shortfalls reinforce strong pricing power but may shift delivery timing .
  • Tariff exposure appears contained near term (no deliveries into reciprocal tariff countries; China exposure de minimis), reducing a key headline risk; contracts place tariff burden on airlines .
  • Interest rate environment still a headwind with composite cost of funds at 4.26%; expect margins roughly stable in 2025—rate easing and refinancing mix are key watch items .
  • Near-term trading implication: Potential positive sentiment on revenue beat and capital allocation optionality; medium-term thesis hinges on lease yield expansion and sustained gains on sale amid structurally tight aircraft supply .

Values retrieved from S&P Global.