Air Lease Corporation

time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. And I would now like to turn the call over to Mr. Jason Arnold, head of investor relations. Mr. Arnold, you may begin.

Thank you, Abby, and good afternoon, everyone. Welcome to Air Lease Corporation's first quarter 2024 earnings call. This is Jason Arnold. I'm joined today by Steve Haase, our Executive Chairman, John Pflueger, our Chief Executive Officer and President, and Greg Willis, our Executive Vice President and Chief Financial Officer. Earlier today, we published our first quarter 2024 results. A copy of our earnings release is available on our Investors section of our website at www.airleasecorp.com. This conference call is being webcast and recorded today, Monday, May 6, 2024, and the webcast will be available for replay on our website. At this time, all participants to this call are in listen-only mode. Before we begin, please note that certain statements in this conference call, including certain answers to your questions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes, without limitation, statements regarding the state of the airline industry, the impact of aircraft and engine delivery delays and manufacturing flaws, our aircraft sales pipeline, and our future operations and performance. These statements and any projections as to our future performance represent management's current estimates and speak only as of today's date. These estimates involve risks and certainties that could cause actual results to differ materially from expectations. Please refer to our filings with the SEC for a more detailed description of risk factors that may affect our results. Air Lease Corporation assumes no obligation to update any forward-looking statements or information in light of new information or future events. In addition, we may discuss certain financial measures such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes, and adjusted pre-tax return on equity, which are non-GAAP measures. A description of our reasons for utilizing these non-GAAP measures as well as our definitions of them and the reconciliation to corresponding GAAP measures can be found in the earnings release in 10-Q that we issued today. This release can be found on both the investors section and the press section of our website at www.airleascorp.com. As a reminder, unauthorized recording of this conference is not permitted. I'll now turn the call over to our Chief Executive Officer and President, John Pflueger. John.

Thank you, Jason. Good afternoon and thank you everyone for joining us on our call today. During the first quarter, ALC generated revenues of $663 million and 87 cents in diluted earnings per share. Results this quarter benefited from continued growth of our fleet and higher sales activity versus the prior year, though with the offset of lower end of lease revenue and higher operating expenses, which Greg will cover in more detail shortly. We purchased 14 new aircraft from our order book in the first quarter, adding approximately $900 million in flight equipment to our balance sheet. And we sold five aircraft, totaling approximately $240 million in sales proceeds. New aircraft deliveries came in modestly below our expectation, while sales were approximately in line. Weighted fleet average remains young at 4.7 years, while weighted average lease term remaining stayed at seven years. The utilization rate on our fleet, meanwhile, remains exceptionally strong at 100%. Passenger traffic volume is continuing to expand at a strong pace, up close to 14% year-over-year in total, which Steve will expand upon further in his remarks. Demand for fuel-efficient commercial aircraft in turn remains exceptionally robust. At present, we are 100% placed in our forward orders to 2025, with 63% of our entire order book placed. Our $21 billion order book remains a key source of strength for us, given Boeing and Airbus have very few delivery positions available until the 2030s, while the vast majority of our positions are set to deliver through 2028, but with ongoing added delivery delays, this will likely extend well through 2029. Our delivery slots and those of a small handful of other lessors are the only real option for airlines needing new aircraft within that timeframe. So, as we've highlighted in the past, strengthening lease rates will benefit us in coming periods. We're also benefiting from the strong market with respect to our existing fleet via lease extensions. Similar to 2023, we don't have that many scheduled lease expirations during 2024, though we do have a sizable uptick in 2005 and 2026 with around 50 scheduled lease expirations in each of those years. Practically all of our airline customers are eager to retain our aircraft for their operations given OEM delivery delays and other factors limiting availability of both new and used aircraft. As such, we believe lease rates on extensions will remain strong. As for the view ahead, supply chain constraints on new commercial aircraft are clearly not going away anytime soon. Boeing production remains challenged on the 737 side with both supply chain and FAA production volume constraints, while the 787 program is also seeing a slow path to gaining production momentum with ongoing supply chain challenges. Airbus, meanwhile, is also subject to the same impact from supply chain constraints as well as the ongoing and Pratt & Whitney issues impacting the A320 and 21neo family. We've said for some time that aircraft manufacturing supply chain challenges are not easily resolvable and will take a number of years to finally overcome, and our view here remains firmly intact. I do want to emphasize, though, that we believe that the manufacturers have been humbled by the ongoing challenges and that we firmly believe that the OEMs are focused on the importance of production quality and safety above all other factors. We continue to expect full-year 2024 deliveries to be in the range of about $4.5 to $5.5 billion. At this juncture, we anticipate deliveries at the mid-range, at the midpoint of this range, at approximately $5.1 billion given ongoing delays. However, the $4.2 billion in expected capex for the remainder of 24 that we disclosed in our 10-Q could have further downside risk, particularly with respect to Boeing deliveries. As for second quarter expectation, we anticipate around $1.5 billion worth of new aircraft deliveries. I want to again highlight the fact that the volume of expected deliveries in 24 is still quite sizable relative to our $27 billion fleet. We continue to see strong sales demand for our aircraft and sales activity for the first quarter was roughly in line with what we told you to expect. Our sales pipeline remains robust at about 1.4 billion, including roughly 670 million in flight equipment held for sale and 700 million of aircraft subject to letters of intent. The closing timing of transactions tends to be somewhat lumpy based on factors outside of our control. But based on current indications, we would expect around $500 million in aircraft sales to close in the second quarter of 2024. Sales activity is a key part of our business model, given we target owning new aircraft only over the first third of their economic lives, and harvesting of gains is a critical part of the economic returns on our aircraft investments, as well as enhancing the return on equity profile of our business. I'd like to close with a few reminders. We run AIRLIS for the long-term benefit of our shareholders, not focused on quarter-to-quarter variations. Our new aircraft order book model has consistently minimized asset risk and maximized asset value. Let me remind you, for example, that since our inception in 2010, AIRLIS has not recorded any impairment charges to date. We also do not run our business on any single isolated metric, such as lease yield. The largest impact to our lease yields are the new aircraft we take delivery of versus the older aircraft we sell, which are typically at higher yields. This is one reason why we give you an outlook each quarter as to expected new aircraft capital expenditures and our expected aircraft sales. During 2023 and 24, we have relatively few lease extensions or transfers to different airline operators. So these have very minor impact on our overall lease yields for those years. As we've highlighted before, we have an average lead time of about two years from when we sign a lease with an airline from one of our order book aircraft until delivery of that new aircraft. So our deliveries this year, and in fact, any given year, reflect the environment that existed two years ago. As a result, we currently expect our lease yield and net margins will remain around current levels for the remainder of 2024 and likely increase thereafter. At the same time, we expect our aircraft sales pipeline will continue to harvest healthy gains. To conclude, we remain excited about our prospects ahead. Our order book is set to deliver significant fleet growth all at a time when aircraft demand is exceptionally strong. In fact, the commercial aircraft market is as tight as we've ever seen it in our history in this business. This plays directly into our favor, both by the value of existing fleet and future returns from our order book. I'll turn the call over now to Steve Haase, who will offer some additional comments. Steve?