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AL

AIR LEASE CORP (AL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $712.9M and diluted EPS was $0.83; revenue rose sequentially vs Q3 and Q2, but EPS was down sharply year over year due to higher interest expense and a one-time benefit in Q4 2023 not repeating .
  • Lease extensions at higher rates and robust gains on aircraft sales continued, with Q4 gains of $65M on $544M proceeds and CFO citing roughly 14% gain-on-sale margin; management highlighted the highest delivery yield in over 4 years in Q4, and a strengthening widebody demand backdrop, an upside surprise vs historical norms for second leases .
  • 2025 outlook: deliveries of $3.0–$3.5B (about $0.8B in Q1), debt funding needs of ~$2B including refinancing, and leverage targeted to 2.5x by year-end; adjusted margins expected to be roughly around 2024 levels given elevated rates .
  • Liquidity improved to $8.1B and composite cost of funds edged down to 4.14% (from 4.21% in Q3), aided by a new $966.5M term loan and a $2.0B commercial paper program that is ~80 bps cheaper than the revolver, providing a funding cost tailwind .

What Went Well and What Went Wrong

What Went Well

  • Strong commercial momentum: 18 deliveries ($1.3B investments), 14 aircraft sold ($544M proceeds), record full-year revenues and fleet NBV; Q4 delivery yields were the highest in >4 years, signaling pricing power as supply remains tight .
  • Lease economics inflecting: 23 single-aisle lease extensions in Q4 at higher rates than initial terms; six 777-300ER extensions YTD 2025 at rates above appraiser marks, highlighting strengthening widebody demand and valuation tailwinds .
  • Funding and liquidity: Year-end liquidity of $8.1B; new $966.5M unsecured term loan at SOFR + 1.125% and a $2.0B CP program expected to reduce borrowing costs vs the revolver by ~80 bps, diversifying funding channels .

What Went Wrong

  • Year-over-year EPS and margins: Diluted EPS fell to $0.83 from $1.89 and pre-tax margin to 19.6% from 37.2% due to higher interest expense and the absence of a ~$67M Russia insurance recovery recognized in Q4 2023 .
  • End-of-lease revenue dropped: CFO cited ~$6M in end-of-lease revenue in Q4 vs ~$60M in the prior year, as higher extensions reduced returns/transactions; near-term top-line impact despite longer-term asset economics benefit .
  • Rate headwinds persist: Composite cost of funds was 4.14% at year-end; management expects 2025 adjusted margins around 2024 levels given elevated rates, delaying margin normalization despite lease yield grind higher .

Financial Results

Quarterly Trend (sequential comparison)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$667.3 $690.2 $712.9
Diluted EPS ($USD)$0.81 $0.82 $0.83
Pre-tax margin (%)19.1% 18.9% 19.6%
Adjusted pre-tax margin (%)20.6% 20.3% 21.1%

Year-over-Year (Q4)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$716.6 $712.9
Diluted EPS ($USD)$1.89 $0.83
Net income attributable to common ($USD Millions)$210.6 $92.5
Pre-tax margin (%)37.2% 19.6%
Adjusted pre-tax margin (%)29.8% 21.1%

Revenue Mix (by quarter)

MetricQ2 2024Q3 2024Q4 2024
Rental of flight equipment ($USD Millions)$609.505 $625.180 $638.941
Aircraft sales, trading & other ($USD Millions)$57.783 $64.984 $73.954
Gains on aircraft sales ($USD Millions)$40 $42 $65

KPIs

KPIQ2 2024Q3 2024Q4 2024
Deliveries (units)13 20 18
Aircraft investments ($USD Billions)$0.94 $1.90 $1.30
Aircraft sales (units)11 9 14
Sales proceeds ($USD Millions)$530 $340 $540
Total liquidity ($USD Billions)$8.2 $7.5 $8.1
Composite cost of funds (%)3.99% 4.21% 4.14%
Fixed-rate debt (% of total)88.34% 81.05% 79.00%
Owned fleet (units)474 485 489
Aircraft on order (units)307 287 269
Total committed rentals ($USD Billions)$30.0 $29.7 $29.5

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
New aircraft deliveries (CapEx)FY 2025N/A$3.0–$3.5B; ~$0.8B in Q1 2025 Introduced
Debt fundingFY 2025N/A~$2.0B, incl. refinancing 2025 maturities Introduced
Aircraft sales proceedsFY 2025Recent outlook ~$1.5B (directional) ~$1.5B; ~$400M expected in Q1 2025 Maintained
Leverage (Debt/Equity) targetFY 2025Long-term target ~2.5x Expect ~2.5x by end-2025 Timeline specified
Adjusted marginsFY 2025N/AAround 2024 levels (rate headwinds) Maintained cautious
Dividend per shareQ1 2025$0.22 approved Nov 6, 2024 $0.22 approved Feb 11, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4)Trend
OEM supply chain and deliveriesOngoing delays impacting Q2; Boeing strike referenced at Q3, slower ramp expected Q4 deliveries better than expected on OEM year-end push; watch Boeing production challenges Slightly improved near term; constraints persist
Lease rates and extensionsHigh extension activity reduced end-of-lease revenue in Q3 Extensions at higher rates than initial terms; widebodies flat/higher Strengthening
Interest rates and yield curveFed cuts supportive; composite cost up YoY; benefit from terming out floating debt (Q3) Composite 4.14% (down vs Q3); margins likely ~2024 in 2025 Modest tailwind; margin pressure persists
Widebody demandGeneral demand strong (Q3) Surging widebody demand; 777-300ER and A330 extensions; 777X delays constrain supply Accelerating
Capital allocationTargeting deleveraging medium term (Q3) Focus on debt reduction; buyback considered upon reaching 2.5x Progressing toward flexibility
China exposureLong-standing reduction strategy; limited Q3 specifics ~Half of 2024 aircraft sales were China leases; margins impacted by selling high-yield China leases De-risking; near-term margin drag
Tariffs/macroGeneral macro comments (Q3) Tariffs impact borne by lessees; complex supply chain origin implications Monitoring policy risk

Management Commentary

  • “ALC generated record revenues in 2024…we expect lease rates and aircraft valuations to rise…aircraft shortages are anticipated to persist for several years.” — John L. Plueger & Steven F. Udvar-Házy .
  • “Our Q4 new aircraft deliveries represented the highest delivery yield in a quarter in over 4 years.” — CEO John Plueger .
  • “Lease extension rates exceeding initial new aircraft lease rates is truly exceptional…we are seeing marked improvement.” — Executive Chairman Steven Udvar‑Hazy .
  • “For 2025, we expect $3B–$3.5B of new aircraft deliveries…debt funding of approximately $2B…we expect to be at our 2.5:1 debt-to-equity ratio by the end of 2025.” — CEO John Plueger .
  • “We launched a $2B commercial paper program…CP rates…~80 bps lower than our revolver.” — CFO Greg Willis .

Q&A Highlights

  • ROE trajectory: Management targets mid-teen adjusted pretax ROEs in 2–3 years, dependent on lease rates and interest rates .
  • Leverage and capital return: Focus on deleveraging to 2.5x; board may consider buybacks once target achieved, contingent on share price/value .
  • Margin outlook: Spread margins likely similar to 2024 in 2025; lease yield grind higher takes time to flow through .
  • End-of-lease revenue cadence: Q4 saw ~$6M vs ~$60M in prior year; lower end-of-lease revenue expected given high extension rates; sequential uplift to rental yields through 2025 .
  • Industry structure: Tariffs borne by lessees; third OEM could help long-term but faces engine/reliability and certification hurdles; widebody supply likely constrained for years .

Estimates Context

  • S&P Global consensus (EPS and revenue) for Q4 2024 could not be retrieved due to system limits at this time; as a result, we cannot assess beat/miss vs Wall Street estimates here [GetEstimates error].
  • We recommend revisiting when access is restored to compare actual $712.9M revenue and $0.83 diluted EPS to consensus and update implied revisions trajectory .

Key Takeaways for Investors

  • Lease rate power is inflecting: Extensions at higher rates than initial terms and the highest Q4 delivery yield in >4 years point to improving asset economics; expect a steady lease yield grind higher across 2025–2026 as COVID-era low-yield leases roll off .
  • Widebody valuation tailwind: Extensions on 777-300ERs and strengthening demand for A330s/A350s suggest multi-year support for widebody rates/values, a historically lagging segment now turning into a driver .
  • Funding costs moderating at the margin: Composite cost of funds fell to 4.14% vs Q3, and the $2B CP program plus $966.5M term loan diversify access and lower short-term costs; nonetheless, management guides 2025 adjusted margins roughly flat vs 2024 .
  • Deleveraging then flexibility: Path to ~2.5x debt/equity by end-2025 is a near-term priority; once achieved, the board may consider buybacks, M&A structures, or incremental aircraft purchases based on relative value .
  • Top-line resilience with mix shift: Rental revenue softness from lower end-of-lease effects is offset by strong sales gains ($65M Q4, ~$1.5B 2025 sales outlook), supporting realized embedded fleet value .
  • Watch OEM/engine constraints and Boeing execution: Q4 deliveries benefited from year-end OEM push, but management cautions supply constraints and potential Boeing production challenges could affect 2025 cadence; the thesis relies on persistent aircraft shortages .
  • Dividend stability: Quarterly dividend maintained at $0.22 per share; leverage path and earnings trajectory will inform capital return decisions later in 2025 .

Appendix: Additional References

  • Balance sheet, income statement, cash flow, portfolio metrics and regional mix (Q4): see press release and 8-K exhibits for detailed tables .
  • Prior quarters press releases and transcripts: Q3 2024 ; Q2 2024 .