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AL

AIR LEASE CORP (AL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue was $731.7M, up 9.7% YoY, and above S&P Global consensus ($710.4M), driven by fleet growth and $20M end‑of‑lease revenue; GAAP diluted EPS printed $3.33 due to $344M Russia insurance recoveries, while adjusted pre‑tax EPS was $1.40 . Revenue consensus beat; normalized EPS appears below consensus (see Estimates Context).*
  • Aircraft demand and lease rates remained robust; portfolio yield rose, order book placements are 100% through 2026 and largely placed for 2027; sales pipeline expanded to $1.4B with high gain margins .
  • Management expects an additional ~$60M net insurance benefit in Q3 2025 and guided to the upper end of $3.0B–$3.5B FY25 delivery outlook; ~$600M deliveries and ~$300M aircraft sales targeted for Q3 .
  • Capital flexibility improved (debt-to-equity back at target; ~$7.9B liquidity; 97% unsecured debt); A350F order cancellation freed >$1B forward capex, and buybacks are under evaluation, setting up potential capital return catalysts .

What Went Well and What Went Wrong

What Went Well

  • “Strong quarter bolstered by new aircraft deliveries, healthy gains on sales, increasing portfolio yield, and significant Russia insurance recoveries” (CEO) .
  • Placement strength: orderbook 100% placed through 2026, ~87% for 2027; lease extensions at higher rates support yield trajectory .
  • Aircraft sales margins strong (~16% gain on sale margin in Q2), and pipeline healthy at $1.4B above historical margin averages .

What Went Wrong

  • Aircraft sales volumes below internal expectations due to closing timing (4 aircraft sold; $126M proceeds vs higher volumes prior period), reducing gains YoY .
  • Interest expense rose ~$19M YoY on higher composite cost of funds (4.28% vs 3.99%+) and debt balances; adjusted pre‑tax ROE trended lower YoY .
  • End‑of‑lease revenues elevated in Q2 ($20M) but management does not expect significant amounts for the rest of 2025 as leases extend; Q3 end‑of‑lease will likely be modest .

Financial Results

Revenue, EPS, Margins vs prior periods and estimates

MetricQ4 2024Q1 2025Q2 2025
Revenues ($M)$712.9 $738.3 $731.7
Diluted EPS (GAAP)$0.83 $3.26 $3.33
Adjusted Diluted EPS before income taxes ($)$1.34 $1.51 $1.40
Pre‑tax margin (%)19.6% 63.9% 66.5%
Adjusted pre‑tax margin (%)21.1% 23.0% 21.5%
Revenue Consensus ($M)$703.2*$708.0*$710.4*
Primary EPS Consensus Mean ($)$0.74*$1.66*$1.98*
Primary EPS Actual (S&P, normalized) ($)$1.34*$1.19*$1.09*

Note: Consensus/actual normalized EPS and consensus revenue are S&P Global values.*

Segment/line‑item breakdown

Revenue Components ($M)Q4 2024Q1 2025Q2 2025
Lease rentals$638.9 $647.7 $647.7
Maintenance rentals & other receipts—$31.0 $31.0
Total rental of flight equipment$638.9 $678.7 $678.7
Gain on aircraft sales, trading & other income$74.0 $93.0 $53.0
Total revenues$712.9 $738.3 $731.7

KPIs and Balance Sheet/Financing

KPIQ4 2024Q1 2025Q2 2025
Owned fleet (units)489 487 495
Net book value of fleet ($B)$28.2 $28.6 $29.1
Wtd‑avg age (years)4.6 4.7 4.8
Wtd‑avg remaining lease term (years)7.2 7.2 7.2
Committed rentals ($B)$29.5 $29.2 $28.8
Liquidity ($B)$8.1 $7.4 $7.9
Debt financing, net ($B)$20.21 $19.89 $20.32
% fixed‑rate debt79.0% 77.6% 76.7%
Composite cost of funds4.14% 4.26% 4.28%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY aircraft deliveries ($)FY 2025~$3.0B–$3.5B (prior narrative) Likely upper end of $3.0B–$3.5B Raised bias to upper end
Aircraft deliveries ($)Q3 2025—~$600M New specificity
Aircraft sales ($)FY 2025~$1.5B ~$1.5B (maintained) Maintained
Aircraft sales ($)Q3 2025—~$300M New specificity
Russia insurance recoveries (net)Q3 2025—~+$60M expected New
Orderbook placementsThrough 2026100% placed 100% placed (reaffirmed) Maintained
Orderbook placements2027~89% placed ~87% placed Slightly lowered (mix/timing)
Dividend per shareQ4 pay date$0.22 (ongoing) $0.22; payable Oct 8, 2025; record Sep 3, 2025 Maintained; dates set
Forward CapEx2027–2028—A350F order cancelled, frees >$1B forward CapEx Reduced CapEx

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Aircraft demand and supply constraintsAnticipated shortages to persist; rising lease rates/values Demand robust; constraints persist “for several years” Positive momentum sustained
Portfolio yield trajectoryExpected to rise as COVID‑era leases roll off Reiterated 150–200 bps improvement; tracking guidance Upward trend
Lease extensionsRate extensions above original rates; long terms Extensions higher; 4–6 years typical; widebodies lengthening Strengthening
Aircraft sales pipeline/margins$741M pipeline; gains strong $1.4B pipeline; ~16% gain margins Larger pipeline; high margins
Capital allocation/buybacksDebt-to-equity at target unlocks options Buybacks attractive; focus on meaningful deployment while preserving IG ratings Increasing flexibility
OEM production stabilityDelays/slots tight Boeing meeting recent outlook; Airbus single‑aisle at higher rate; residual risk acknowledged Stabilizing, cautious
Tariffs/macroMonitoring tariff risks US‑EU “zero for zero” on commercial aircraft; supportive macro, lower fuel Risk abated for passenger aircraft

Management Commentary

  • “We had a strong quarter bolstered by our new aircraft deliveries, healthy gains on sales, increasing portfolio yield, and significant Russia insurance recoveries.” — John L. Plueger, CEO .
  • “We recognized a net benefit from insurance settlements of $344,000,000… and expect to recognize an additional $60,000,000 net benefit in the third quarter.” — CEO .
  • “Our order book is 100% placed through 2026 with only a modest number of placements remaining for 2027.” — CEO .
  • “Our gain on sale margin for the quarter was high at approximately 16%, reflecting continued strong aircraft demand in the secondary market.” — CFO .
  • “The cancellation [A350F] frees up more than $1,000,000,000 in forward CapEx commitments… we are very disciplined buyers of aircraft.” — CEO .
  • “Our debt to equity ratio declined to just below 2.5x target… anticipate having more financial and capital flexibility over the next several years.” — CFO .

Q&A Highlights

  • Lease yields: Management reaffirmed 150–200 bps improvement guidance tied to roll‑offs and extensions; updates deferred but trajectory intact .
  • Capital return: Buybacks viewed as attractive; will ensure any deployment is “meaningful” while maintaining strong balance sheet and ratings .
  • End‑of‑lease revenue: Expect 2025 levels to be modest due to high extension activity; 2026 likely similar barring changes .
  • Sale‑leasebacks: Competitive market likely to return lower leases vs order book; open to selective SLB tied to airline orders .
  • OEM stability: Boeing delivery outlook largely on track; Airbus at higher single‑aisle rate with some residual risk; overall stabilization .
  • Russia litigation: Additional ~$60M in Q3 expected; ongoing London litigation; limited commentary due to constraints .

Estimates Context

  • Q2 2025 revenue beat consensus: $731.7M actual vs $710.4M consensus; Q1 also beat ($738.3M vs $708.0M) .*
  • EPS optics mixed: GAAP diluted EPS of $3.33 reflects $344M insurance recoveries; normalized Primary EPS (S&P) was $1.09 vs $1.98 consensus — a miss; Q1 normalized actual $1.19 vs $1.66 consensus — miss.* Management’s adjusted pre‑tax EPS ($1.40) is not directly comparable to S&P’s after‑tax normalized EPS, but directionally supports the normalized miss narrative .*
  • Implications: Street may lift revenue estimates on stronger lease rates/placements and deliveries bias to upper end, while normalized EPS estimates may temper near‑term on higher interest expense and lower expected end‑of‑lease revenue; GAAP EPS will remain sensitive to further insurance recoveries .*

Actual vs Consensus (S&P Global)

MetricQ4 2024Q1 2025Q2 2025
Revenues ($M) Actual$712.9 $738.3 $731.7
Revenues ($M) Consensus$703.2*$708.0*$710.4*
Primary EPS Actual (normalized) ($)$1.34*$1.19*$1.09*
Primary EPS Consensus Mean ($)$0.74*$1.66*$1.98*

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Revenue beat underpinned by fleet growth and pricing power; lease rate and extension dynamics point to continued yield expansion into 2026–2027 .
  • Normalized EPS missed Street despite GAAP optics; focus modeling on after‑tax normalized earnings, excluding insurance recoveries, and higher interest cost backdrop .*
  • Near‑term catalysts: $60M additional Russia insurance benefit in Q3; Q3 deliveries ($600M) and ~$300M sales; potential buyback/return of capital as leverage and liquidity improve .
  • Sales pipeline sturdy ($1.4B) with high gain margins; expect ~$1.5B sales in 2025 and similar pace in coming years — supportive of capital generation without materially harming portfolio yield .
  • Capex flexibility improved with A350F cancellation (> $1B freed), providing optionality amid cautious stance on new aircraft pricing .
  • Watch funding costs: composite cost of funds edged to 4.28%; fixed‑rate mix ~77%; any curve normalization benefits term issuance, but near‑term interest expense remains a headwind .
  • Macro/tariffs risk eased in passenger aircraft (US‑EU “zero for zero”), and lower fuel supports airline profitability; widebody extensions lengthening — positive for rates/duration .