Air Lease Corporation (AL) Q4 2022 Earnings Call Transcript

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Air Lease Corporation (NYSE:AL) Q4 2022 Earnings Conference Call February 16, 2023 4:30 PM ET

Company Participants

Jason Arnold - Head of Investor Relations

John Plueger - President and Chief Executive Officer

Steve Hazy - Executive Chairman

Greg Willis - Executive Vice President and Chief Financial Officer

Conference Call Participants

Hillary Cacanando - Deutsche Bank

Moshe Orenbuch - Credit Suisse

Helane Becker - Cowen and Company

Jamie Baker - JPMorgan

Ron Epstein - Bank of America


Good afternoon. My sanction is Regina, and I will beryllium your convention usability today. At this time, I would for illustration to invited everyone to nan Air Lease Corporation Q4 Earnings Conference Call. All lines person been placed connected shut up to forestall immoderate inheritance noise. After nan speakers' remarks, location will beryllium a question-and-answer session. [Operator Instructions]

I would now move nan telephone complete to Mr. Jason Arnold, Head of Investor Relations. Mr. Arnold, you whitethorn begin.

Jason Arnold

Thank you, Regina and bully afternoon, everyone, and invited to Air Lease Corporation's 4th fourth and full-year 2022 net call. This is Jason Arnold, and I'm joined this day by Steve Hazy, our Executive Chairman; John Plueger, our Chief Executive Officer and President; and Greg Willis, our Executive Vice President and Chief Financial Officer.

Earlier today, we published our 4th fourth and full-year 2022 results. A transcript of our net merchandise is disposable connected nan Investors conception of our website astatine This convention telephone is being webcast and recorded today, Thursday, February 16, 2023, and nan webcast will beryllium disposable for replay connected our website. At this clip each participants to this telephone are successful listen-only mode.

Before we begin, please statement that definite statements successful this convention call, including definite answers to your questions are forward-looking statements wrong nan meaning of nan Private Securities Litigation Reform Act. This includes, without limitation, statements regarding nan authorities of nan hose industry, including nan effect of rising liking rates and inflation, nan effect of sanctions imposed connected Russia and craft transportation delays, our early operations and performance, revenues, operating expenses, stock-based compensation disbursal and different income and disbursal lines.

These statements and immoderate projections arsenic to our early capacity correspond management's estimates for early results and speak only arsenic of today, February 16, 2023. These estimates impact risks and uncertainties that could origin existent results to disagree materially from expectations. Please mention to our filings pinch nan Securities and Exchange Commission for a much elaborate explanation of consequence factors that whitethorn impact our results.

Air Lease Corporation assumes nary responsibility to update our forward-looking statements aliases accusation successful ray of caller accusation aliases early events. In addition, we whitethorn talk definite financial measures specified arsenic adjusted nett income earlier income taxes, adjusted diluted net per stock earlier income taxes and adjusted pretax return connected equity, which are non-GAAP measures. A explanation of our reasons for utilizing these non-GAAP measures arsenic good arsenic our meaning of them and nan reconciliation to corresponding GAAP measures tin beryllium recovered successful nan net merchandise and 10-Q we issued today. This merchandise tin beryllium recovered successful some nan Investors and Press conception of our website astatine As a reminder, unauthorized signaling of this convention telephone is not permitted.

I would for illustration to move nan telephone now complete to our Chief Executive Officer and President, John Plueger.

John Plueger

Well, convey you, Jason, and bully day each and convey you for joining america today. I'm happy to study that we generated $602 cardinal successful full gross during nan 4th quarter, a grounds level for ALC, while our 4th fourth diluted EPS was $1.21 per share.

Fourth 4th capacity benefited chiefly from nan maturation of our fleet, an uptick successful sales, trading and different income on pinch nan betterment of our 1 737 MAX from Russia. This was partially offset by higher liking disbursal and higher security and different operating expenses. We purchased 16 caller craft during nan quarter, adding astir $1 cardinal of formation instrumentality to our equilibrium expanse and sold 5 aircraft. Our utilization complaint remains robust astatine 99.6% for full-year 2022, which is simply a testament to nan precocious request and inferior of nan caller commercialized craft successful our fleet.

As of today, 90% of our deliveries done 2024 are placed. Airlines are locking successful our remaining 2024 and ‘25 deliveries astatine an accelerating pace. And this scarcity has been a important driver of nan lease complaint upside we've seen connected galore of these aircraft. The gait of our wide assemblage lease placement has besides continued to accelerate. In fact, retired of our full bid book, ALC now has only 3 remaining rider wide bodies Boeing 787s near to spot successful mid-2025.

New craft deliveries successful nan 4th fourth were again somewhat lower-than-expected arsenic a merchandise of ongoing transportation delays from some Boeing and Airbus, which you've heard america speak astir complete nan past 2 years. Boeing and Airbus person some conscionable precocious announced hiring campaigns for tens of thousands of caller accumulation labor though intelligibly getting these caller unit hired and trained will return time. We stay skeptical that Airbus and Boeing will meet their aspirational accumulation complaint goals complete nan adjacent 2 to 3 years. In fact, today, Airbus announced a hold from 2025 to 2026 successful reaching its azygous lipid accumulation complaint extremity of 75 craft per month.

And yesterday, Boeing advised astatine a convention of continuing parts and proviso concatenation challenges hampering its accumulation goals. As for our outlook for 2023 clearly, it's going to stay fluid fixed nan business pinch nan manufacturers. As of today, we expect to person astir $45 cardinal of craft deliveries successful 2023 pinch astir $1.3 cardinal dollars of deliveries expected during nan first quarter. We will update you further connected this outlook arsenic nan twelvemonth progresses.

Now turning to craft sales, we closed connected 5 craft generating gains of astir $28 cardinal successful nan 4th quarter. As we look guardant to full-year 2023 income activity, we expect to waste betwixt $1 cardinal to $2 cardinal of craft arsenic nan income marketplace is patient moreover pinch higher liking rates. The logic for nan wide scope is continued uncertainty astir nan timing of caller craft deliveries.

After respective years of constrained income activity owed to nan MAX grounding, nan pandemic, Boeing 787 transportation cessation for good complete a year, we're returning to a much robust level of income activity arsenic nan normal people of business. This allows america to harvest gains connected sales, arsenic good arsenic to negociate our fleet age, size and creation and yet to show nan worth of our fleet.

Looking guardant complete nan foreseeable future, we judge Air Lease's proven business exemplary is peculiarly good suited to use from nan station pandemic era owed chiefly to nan 5 pursuing fundamentals: First, rider postulation maturation successful hose yields; Airline postulation continues to grow astatine a brisk gait successful astir each marketplace globally; International postulation successful peculiar has travel backmost powerfully successful 2022, and this looks to proceed successful 2023 pinch China relaxing traveler restrictions past month. Furthermore, nan airlines are enjoying a patient output situation which appears to beryllium holding up nicely successful nan look of macroeconomic challenges specified arsenic inflation, power costs and liking rates. Fundamental aerial postulation maturation and output will proceed to thrust craft demand.

Second, continued OEM transportation delays and inability to meet accumulation complaint targets is limiting nan caller craft proviso to nan marketplace. This is starring much airlines to widen their leases successful today's escalating lease complaint situation to support postulation maturation and to service arsenic a hedge against caller craft transportation delays. Certification of caller craft types is besides delay, specified arsenic connected nan 737 and 710 MAX, nan Boeing 777X and nan Airbus A321XLR.

Third, grounds orders specified arsenic we've conscionable seen this week pinch Air India connected nan heels of ample orders from United Airlines and others person exasperated nan deficiency of caller craft transportation positions good into nan future, making ALCs disposable transportation positions much valuable. ALC presently has transportation positions retired done 2028.

Fourth, astir hose equilibrium sheets stay constrained successful nan financial betterment from nan COVID pandemic particularly successful position of nan higher liking complaint environment. As such, leasing remains a sought-after system to get aircraft. ALC pinch a beardown equilibrium expanse and BBB finance people ratings has a important backing costs advantage complete astir of its hose customers and leasing competitors arsenic well.

Fifth and finally, biology sustainability grows much important pinch each passing time adding further unit connected airlines to renew their fleets, pinch nan youngest, astir technologically precocious and environmentally friends craft obtainable. That is ALCs business model, delivering precisely those caller craft from our bid book, nan largest mixed Airbus and Boeing bid book successful nan leasing industry.

A mobility galore of you person been asking is, is this accrued craft request situation pinch rising liking rates successful this environment? Or lease rates wide accelerate arsenic accelerated arsenic liking rates? The short reply connected an wide ground is not yet. However, moreover successful precocious request environment, it takes clip for nan marketplace to drawback up to a quickly escalating liking rates and this has ever been nan lawsuit historically.

There is simply a lag, and I punctual you that we person a ample existing fleet pinch a weighted mean remaining lease word of 7.1 years. However, I will opportunity that nan wide summation successful lease rates that we person been witnessing is connected way pinch our expectations and looking forward, we consciousness bully astir marketplace lease rates catching up pinch liking rates complete time.

So pinch that, fto maine now move this telephone complete to Steve Hazy, who will connection much commentary connected ALC's positioning and accomplishments, Steve?

Steve Hazy

Thank you, John. And thanks, everyone. First of all, I'd for illustration to congratulate our Air Lease squad connected achieving grounds quarterly revenues successful 4th fourth of 2022, arsenic good arsenic grounds yearly revenues for nan full-year of 2022. We're looking to guardant further occurrence and breaking much institution records up connected nan heels of astir 400 further caller craft group to present to Air Lease complete nan adjacent 4 aliases 5 years.

I'd besides for illustration to constituent retired that our Board has conscionable declared a $0.20 per stock communal banal dividend distribution for nan quarter, again demonstrating nan continued optimism and assurance that we person successful our business looking forward.

As John mentioned, we're excited to spot rider postulation volumes proceed to grow astatine a brisk gait globally. The latest IATA postulation numbers released successful early February to exemplify robust full postulation up much than 60% year-over-year during 2022, important spot remains focused successful nan world markets, which are up arsenic overmuch arsenic 153% year-over-year arsenic volumes proceed to retrieve from nan pandemic.

Domestic postulation besides roseate nicely arsenic good successful spite of nan galore starts and stops successful China's home marketplace that resulted from lockdowns and recreation restrictions. China represents astir 7% of nan world home postulation volumes, truthful it's a testament of spot that nan remainder of nan home markets astir nan world were capable to much than flooded that resistance from China.

In fact, each of nan remaining home marketplace expanded astatine beardown double-digit percent rates, successful immoderate cases precocious double-digit and moreover 1 triple-digit percent year-over-year summation for illustration pinch nan Australian home market. International spot meantime was highly costly pinch astir experiencing triple-digit percent increases arsenic compared to a twelvemonth prior.

Asia-Pacific again, remains a constituent of important spot rising complete 360% year-over-year successful 2022 fixed persistent recreation constraints still successful spot successful galore of nan markets up until precocious past year. Both home and world markets are now approaching parity pinch 2019 postulation levels and respective markets are very apt to scope and transcend those levels this year.

While 2019 postulation represents a useful measurement for comparison, we do deliberation it's very important to constituent retired that this is not nan extremity crippled measurement of success. We spot postulation levels achieving 2019 levels and proceeding meaningfully higher for galore years to travel fixed nan durable quality desire and request to recreation by air. As would beryllium expected pinch nan beardown basal manufacture backdrop, we stay very progressive successful placing our bid book positions pinch hose customers each complete nan world.

We announced respective very ample placements during nan fall, including 19 craft placement pinch Condor successful Germany; six craft placement pinch LOT successful Poland; nan placement of 5 A321XLR variance pinch LATAM successful Chile; and successful nan past fewer months we besides announced a placement of 3 caller 787-9 pinch Air Astana nan National Carrier of Kazakhstan, which will present to nan hose successful 2025 and ‘26. These craft will beryllium captious to grow nan world marketplace opportunities for Air Astana, which will use meaningfully from nan added scope and ratio provided by nan 787-9.

In January, we announced a placement of six caller Airbus A220 craft pinch Croatia airlines successful Europe. These A220s are expected to present from our bid book opening successful 2024 to 2025 and correspond a important modernization displacement for that hose arsenic it moves distant from operating older A319s and A320s. In this case, nan A220 gives nan hose much capacity and ratio some connected existing routes and added scope to grow early routes arsenic well. These placements I've conscionable highlighted correspond only a fistful of our activity arsenic galore are not 4 cardinal ounce successful a property merchandise astatine this time.

In position of observations crossed each of our caller woody activity, I tin opportunity that successful summation to providing our hose customers pinch nan astir advanced, substance businesslike and ecologically friends craft to further their operations. We're besides continuing to spot a bolstering of lease rates owed to nan beardown marketplace request for commercialized aircraft.

During nan 4th fourth of 2022, we delivered 16 craft to our customers pinch OEM delays yet pushing immoderate craft into nan first 4th of this year. Deliveries during nan 4th fourth included 2 much A220 300 deliveries to ITA nan emblem bearer of Italy, pursuing our 2 first deliveries of nan A220 from our bid book to that aforesaid bearer successful nan 3rd quarter. We delivered 5 A321 craft chiefly nan LR agelong scope version to respective hose customers, including Air Astana and Sichuan Airlines, while we delivered six caller Boeing 737-8 and 737-9 craft to Air Mexico, Alaska Airlines, and LOT Polish Airlines among others.

On nan wide-body side, we besides had respective deliveries, including 2 Airbus A330 900s that were delivered to Virgin Atlantic Airways and 1 787-9 Air Premia successful Korea. This 787 was really nan first we received from Boeing pursuing astir a twelvemonth and a half agelong transportation hiatus. One statement I would for illustration to make connected this uptake of liking rates complete nan past twelvemonth is that while ALC's costs of costs roseate arsenic well, nan summation was comparatively humble fixed that astir 90% of our indebtedness financing is astatine fixed rates of interest. As a reminder, maintaining a minimum of 80% of our indebtedness astatine a fixed complaint of liking has been a cardinal strategical tenet of Air Lease ever since our very start.

Many leasing companies though are much reliant upon floating complaint slope loans aliases different person less financing options and person seen a meaningful uptick successful their costs of funds. As a merchandise of this accrued costs of superior for galore reasons, we expect a very debased lease complaint factors that immoderate person been consenting to connection airlines successful nan past. We'll now spell by nan wayside and is -- arsenic it is nary longer economically feasible for them to connection specified debased lease rates.

While nan quality of our bid book strategy has ever been much insulated from nan very fierce lease rates inherent successful nan waste leaseback transactions, we do judge nan result reduced proviso of inexpensive lease financing alternatives will displacement much lease request toward lessors for illustration ourselves pinch finance people ratings and beardown entree to charismatic backing sources from galore sources.

I'd for illustration to adjacent by saying that we judge we position Air Lease very successfully, to capitalize connected nan acceleration of aerial postulation request witnessed astatine present, which is fueling nan beardown hose request for caller commercialized aircraft.

Now I'd for illustration to move nan telephone complete to our CFO, Greg Willis to supply further commentary and colour connected our financial capacity successful 2022.

Greg Willis

Thanks very much, Steve, and bully afternoon, everyone. In nan 4th fourth of 2022, ALC generated grounds revenues of $602 million, this was comprised of astir $561 cardinal of rental revenues and $40 cardinal of craft income trading and different revenues.

The summation successful full revenues was chiefly driven by nan maturation of our fleet and a important simplification successful rate ground losses and nan effect of COVID era related lease restructurings. Furthermore, we do not expect that these items to beryllium a meaningful facet arsenic we move guardant into 2023.

Moving connected to expenses, nan liking disbursal statement roseate 16% year-over-year, this was owed to an summation successful our mean indebtedness balances, arsenic good arsenic an uptick successful our composite costs of costs from 2.79% successful nan anterior twelvemonth to 3.07% this year.

I would for illustration to echo Steve's commentary surrounding nan benefits of having 91% of our business of our indebtedness astatine a fixed rate, which continues to meaningfully offset nan effect of higher liking rates connected our financial results.

Depreciation continues to way nan size of our fleet, while SG&A roseate arsenic business activities person accrued complete nan people of nan past year, on pinch an uptick successful definite different operating expenses including nan summation successful security premiums that we've highlighted successful nan past, arsenic good arsenic craft modulation related expenses. Additionally, John mentioned that we did admit an disbursal reversal of $31 cardinal fixed nan betterment of our 737 MAX from Russia successful October.

As discussed past quarter, we recorded nan craft connected our equilibrium expanse astatine adjacent worth taking into relationship nan existent attraction information of nan aircrafts pinch a corresponding reversal of nan write-off statement point connected our income statement.

As mentioned past quarter, nan return of this craft was highly idiosyncratic, I will repetition that we do not expect nan return of immoderate different of our craft which are detained successful Russia.

As a last remark connected our ‘22 -- 2022 financials, I would for illustration to constituent retired that nan description of our adjusted pretax return connected equity, which excludes nan effect of nan Russia fleet write-off, arsenic good arsenic nan consequent betterment of our 737 MAX Aircraft. Despite nan trailing effects of nan pandemic complete nan first half of nan twelvemonth and mixed pinch a comparatively humble income programme passim 2022, we are pleased to spot an betterment successful this capacity metric.

Moving connected to financing, pinch a mostly fixed complaint equilibrium expanse and a beardown finance people ratings, we stay conservatively positioned for movements successful liking rates complete nan intermediate term. As discussed successful nan past, shaper escalations and our liking complaint escalators connected guardant craft deliveries thief offset immoderate of nan effect from rising liking rates.

As Steve highlighted, 1 affirmative result of rising liking rates is nan low-cost financing alternatives that are little disposable to our hose customers, which should further bolster lease rates and lease demand, arsenic good arsenic create a larger quality betwixt america and our little rated competitors.

We stay dedicated to maintaining an finance people equilibrium expanse utilizing unsecured indebtedness arsenic our superior shape of financing, maintaining a precocious ratio of fixed complaint funding, and utilizing a blimpish magnitude of leverage pinch a target debt-to-equity ratio of 2.5 times.

Our debt-to-equity ratio astatine nan extremity of nan 4th fourth was 2.8 times connected a GAAP basis, which nett of rate connected nan equilibrium expanse is astir 2.69 times. Our leverage remains modestly supra our target pursuing our Russia fleet write-off earlier this year, we expect to inclination backmost towards our semipermanent target arsenic craft income volumes summation this twelvemonth and OEM transportation delays continue.

During nan past fewer months, we returned nan indebtedness superior markets pinch 2 abstracted five-year issuances, $700 cardinal of Senior Unsecured Notes astatine 5.85% that closed successful December 2022 and $700 cardinal Senior Unsecured Notes astatine 5.3% that closed successful January of this year. We are besides closing $400 cardinal metallic positive 140 unsecured word indebtedness installation pinch a last maturity successful 2027. At nan extremity of nan year, we had a beardown equilibrium expanse supported by a important liquidity position of $6.9 cardinal and a ample unencumbered plus guidelines of $27 billion.

To conclude, we stay very optimistic astir nan early of our business and we judge our strategy has proven itself highly durable done nan challenges of nan past respective years. We look guardant to much meaningful resumption of our income programme during 2023, which should adhd to nan margins and nan return connected equity for our business.

We besides look guardant to receiving astir 400 caller craft from our bid book group to present complete nan adjacent 4 to 5 years, providing a clear pathway of maturation successful nan years to come. The embedded worth of our bid book has only accrued nan readiness of brand-new craft slots from nan OEMs, which continues to dwindle, which further provides america pinch an irreplaceable root of very charismatic fleet worth -- fleet maturation and semipermanent return potential.

And pinch that, I'll move nan telephone backmost complete to Jason for nan question-and-answer convention of nan call.

Jason Arnold

Thank you, Greg. This concludes managements commentary and remarks for nan question-and-answer convention we inquire each subordinate to limit their clip to 1 mobility and 1 follow-up.

Regina, tin you please unfastened nan statement for nan Q&A session.

Question-and-Answer Session


[Operator Instructions] Our first mobility will travel from nan statement of Hillary Cacanando pinch Deutsche Bank. Please spell ahead.

Hillary Cacanando

Hi, acknowledgment for taking my question. You mentioned earlier that location is simply a lag betwixt nan summation successful liking rates and nan expanding B3. Why would conscionable opportunity that lag is, you know, you said for illustration six months, 9 months, if you could supply a small much colour that would beryllium great? Thank you.

John Plueger

Yes. Hi, it's John. I'll return that. So it's really difficult to put a timeline connected it. We lived done this successful galore different anterior periods having now doing this for 36 immoderate overseas years, truthful I don't for illustration to put a timeline connected it and we'll conscionable person to see, successful particular, correct now I deliberation we've been emphasizing nan proviso request dynamics, which is really providing a booster to lease rate. So I hesitate astatine this constituent successful clip to put a timeline connected it. Historically, it is really ranged, but we are assured complete clip that we're going to get lease complaint escalation that will overmuch much intimately lucifer wherever nan liking rates person gone.

Hillary Cacanando

Got it. And past conscionable different question. I was conscionable looking astatine your vulnerability to different geographic regions. And it looks for illustration your vulnerability to China is 11.4%, down from 12.8% past year. I was conscionable wondering, is that benignant of for illustration portion of your strategy for illustration possibly to possibly trim your -- for illustration possibly trim nan geopolitical consequence associated pinch nan region? Or is it conscionable happened to autumn that way?

John Plueger

Steve? Yes, Steve, do you want to remark connected that?

Steve Hazy

Yes. Yes, happy to remark connected that. Look, we're continuously evaluating our geographic vulnerability and our governmental consequence vulnerability successful different parts of nan world. And I deliberation astatine this time, we're seeing tremendous maturation opportunities successful nan Americas, some successful North and South America, successful Europe, Southeast Asia and North Asia. So arsenic you said, China has go a little percentile successful our wide fleet composition. And that inclination will beryllium expected to proceed into 2024 and 2025 arsenic we person a very constricted number of caller craft going to China.

To springiness you an example, this year, we only person 2 craft going into Mainland China, 2 A321neos retired of astir 70 to 80 caller deliveries. So we expect that percent to support declining astatine a complaint that will get america beneath 10% astir apt by nan extremity of this year.

Hillary Cacanando

Got it. And you haven't seen immoderate changes since nan reopening, possibly much liking from Chinese airlines, immoderate notable changes since nan reopening?

Steve Hazy

Well, nan reopenings person been very benignant of unpredictable. It's been benignant of connected and off. And besides nan home business has already been supplied by a batch of aircraft. There was a batch of planes sitting connected nan ground. For example, there's astir 90 737 MAXs that person already been delivered to Chinese airlines that are not successful existent operation. And truthful I deliberation nan Chinese airlines person capable capacity to woody pinch their postulation requirements successful nan adjacent 9 to 12 months. And past we'll spot what happens beyond that.

Hillary Cacanando

Got it. Got it. Okay, convey you. Thanks for your time.


Your adjacent mobility comes from nan statement of Moshe Orenbuch pinch Credit Suisse. Please spell ahead.

Moshe Orenbuch

Great, thanks. Is location a measurement to benignant of size nan use that you get from nan stronger lease rates arsenic nan airlines are renewing aliases extending leases? Is that -- because I deliberation that's an important part. We've ever known that your caller leases will person escalators to return attraction of liking rates, but is location a measurement to size that?

John Plueger

Greg, do you want to talk astir that?

Greg Willis

Sure. I mean, we've been experiencing a batch of request connected nan caller craft successful our portfolio, arsenic good arsenic nan hold that we've been entering into. And again, arsenic we mentioned earlier successful nan past, complete 90% of our leases presently are being extended astatine rates that we're very comfortable with.

In position of wide metrics, we person a difficult clip giving you ranges arsenic to wherever we deliberation lease rates are going, but they decidedly person been catching -- I mean catching up to what we've seen hap successful liking rates. I don't know, John aliases Steve, do you want to adhd further color?

John Plueger

Well, we don't person a formulaic metric, Moshe, arsenic Greg indicates. And I deliberation 1 of nan compounding effects location is that we, for example, presume that we're going to spot craft arsenic they travel crossed lease to a assortment of different carriers. And overmuch to our pleasure, nan existent lessees are stepping up to summation those lease rates to widen those leases.

Now successful immoderate cases, there's an increase. But successful immoderate cases, leases struck successful anterior periods aliases anterior years person a fixed lease complaint for nan extension. And truthful that move is changing. So it's really difficult for america to springiness benignant of a quantitative outlook, because nan bottommost statement is everyone wants these airplanes now, and that's good. And conscionable cognize that wherever we tin summation those rates, we are, but immoderate of nan extensions are already astatine fixed rates. So that's why I opportunity it's conscionable going to return time. It makes it very difficult for america to springiness you a quantitative grip connected that.

Moshe Orenbuch

Got it, okay. Maybe arsenic a follow-up, nan remark that you had made astir $1 cardinal to $2 cardinal of craft income based upon deliveries, I mean, is it conscionable arsenic elemental arsenic if you get -- if you're only astatine nan $4 billion, you'll do nan $2 billion? Or I mean, it seems for illustration location could beryllium immoderate prefunding to nan grade of your superior base, peculiarly fixed nan truth that craft prices are truthful strong. So really do you deliberation astir those two?

John Plueger

Yes, we person a beautiful bully pipeline already of craft income going into this year. They return clip to close. So to immoderate extent, what you opportunity is true. It will dangle connected our appraisal of really deliveries are looking for nan remainder of nan year. And fixed nan truth that peculiarly connected craft sold that are connected lease to Chinese airplanes, those return -- craft return a agelong clip to transfer. So we will beryllium making much decisions arsenic we get into benignant of nan mediate of nan 2nd 4th arsenic to nan timing expectations, really overmuch much we want to support going versus what Airbus and Boeing -- pinch what grade of assurance we person Airbus and Boeing delivering for nan remainder of nan year.

So that's why we're saying it's connected an ongoing basis, and it's connected a valuation basis. And there's conscionable a batch of different factors, including, again, really agelong does it return to adjacent these sales, and do we really deliberation we're going to get these airplanes. We conscionable request a small much seasoning to beryllium capable to springiness a small tighter range.

Greg Willis

And Moshe, conscionable to add, we're sitting connected a important magnitude of liquidity, $6.9 billion. And we person very fewer remaining maturities to refi this year, only astir about $1.25 cardinal successful nan enslaved market. So that gives america a batch of elasticity arsenic to nan level of income and really overmuch we're going to raise successful nan enslaved market.

I will opportunity that we're watching nan OEMs very intimately successful their expertise to meet their transportation commitments because there's been a batch of talk retired location astir nan challenges that they're facing and their expertise to make their commitments to us.

Moshe Orenbuch

Got it. Thanks very much.


Your adjacent mobility will travel from nan statement of Helane Becker pinch Cowen. Please spell ahead.

Helane Becker

Thanks very much, operator. Hi, everybody So my mobility is pinch respect to your capital-raising decisions for this year. How should we deliberation astir -- yes, really should we deliberation astir what your intentions are?

Greg Willis

Yes, I deliberation we've said we're going to raise $3 cardinal to $4 billion. A batch of it is going to dangle connected really overmuch we bargain and really overmuch we waste arsenic we conscionable went done pinch Moshe. But giving nan comparatively ray magnitude of refinancing that we request to do and a beardown level of liquidity that we have, we person a batch of flexibility.

Again, we do thin to entree markets erstwhile -- astatine opportune times. So erstwhile we deliberation we deed a bully model to thrust worth to our shareholders, but I deliberation we said successful nan K and we've said before, astir apt $3 cardinal to $4 billion. And really, that's going to hinge connected really overmuch we really get from nan OEMs. And whether aliases not it comes successful nan slope market, whether aliases not comes successful nan enslaved market, whether it comes successful overseas dominated -- I mean, overseas issuances, we're chiefly looking successful nan unsecured space.

Helane Becker

Okay. And past I conscionable person a constituent of clarification, Greg. On nan Russian fleet worth wherever it says it's $771.5 million, does that see nan $31 cardinal of recovery? Or does that exclude?

Greg Willis

No, it's nett of it. Originally, nan write-off was $802 million, which included our vulnerability successful nan guidance vehicles arsenic well. But erstwhile we took backmost nan MAX and we put it connected nan books astatine $31 million, that's nan nett number you're seeing rotation done nan income statement.

Helane Becker

Okay, that’s very helpful. Thank you.

Greg Willis

No problem. Thank you.


Your adjacent mobility comes from nan statement of Jamie Baker pinch JPMorgan. Please spell ahead.

Jamie Baker

Hey, bully afternoon, everybody. Got to admit, I'm funny arsenic to whose car accelerating, we heard successful nan background. In immoderate event, connected nan taxable of lease hold requests, John, you called that retired successful nan merchandise and successful your prepared remarks. What's nan approximate long that astir existing customers are asking for?

I'm conscionable wondering from nan hose side, really overmuch longer your customers are pushing to clasp connected to aircraft? And besides what you said astir lease hold connection astatine predetermined economics, are you obligated to assistance extensions to customers wherever that connection exists? It wasn't clear to maine if you could move down an hold petition successful nan illustration that you antecedently gave.

John Plueger

Sure, alteration -- if I had to put an average, our lease extensions are astir 3 years connected average, they vary. We've had immoderate arsenic short arsenic one, immoderate arsenic agelong arsenic seven. So that varies, number one. Number two, if there's a prefixed option, pricing action that nan hose truthful agelong arsenic they're not successful default and truthful agelong arsenic they're existent without -- if they workout that action and a predefined complaint was fixed successful that option, yes, we person to grant it.

However, I will opportunity that options are not often exercised needfully by themselves. Oftentimes, they are -- they travel up successful nan discourse of further deals pinch ALC. It's a instrumentality that we have. And truthful I would conscionable opportunity that often times, you can't look astatine an action connected a azygous aircraft. Oftentimes, we're talking astir caller craft aliases expanding nan fleet aliases doing different things. And successful that context, we mightiness show an airline, well, you person an action present that which complaint is excessively debased for us. And truthful if you want to spell connected and adhd a fewer different craft present and there, we request a small spot of a amended deal.

I don't know, Steve, do you person thing other to adhd connected that?

Steve Hazy

Yes. I think, Jamie, there's really a comparatively mini percent of our leases person fixed complaint hold options.

Jamie Baker


Steve Hazy

But arsenic John mentioned, we mostly developed cocktail that includes caller airplanes coupled pinch nan hold of existing craft and redesign nan lease complaint floor plan connected that aircraft.

Jamie Baker

Okay. Understood. Appreciate that clarity. And second, and this 1 mightiness benignant of beryllium from near field, but this EU directive, 2008-101-EC, are you guys acquainted pinch it? Basically, location was an article that Mark and I saw regarding Norwegians -- aliases not Norwegians failure, flyers failure, fundamentally suggesting that lessors are responsible for immoderate unpaid emanation costs obligations. Is that thing we request to ponder? The article piqued our interest. And if it's not thing connected your radar, nary problem.

John Plueger

The short reply is not really connected our radar, because we person been advised that nan state of Norway specifically has nary existent laws to enforce that EU guidance.

Jamie Baker

Okay. Very straightforward. Thank you, gentlemen. Appreciate it.

Steve Hazy

And by nan way, nan acceleration you heard, Jamie, was nan lease complaint accelerating to higher levels…


Your adjacent mobility will travel from nan statement of Ron Epstein pinch Bank of America. Please spell ahead.

Ron Epstein

Hey, bully afternoon, guys. I'm conscionable curious, why didn't your rental formation instrumentality number really spell up? I mean, it went down, but your fleet is bigger. And what was successful nan number past twelvemonth that made it bigger than this twelvemonth pinch a larger fleet? Maybe you could clear that up.

Greg Willis

Ron, there's a mates of things going on, right? I mean, you person immoderate of nan holdover effects from nan COVID era lease restructurings, arsenic good arsenic nan effects of nan Russia situation, right? We had a fleet of astir 20 airplanes that weren't -- that are still stuck successful Russia that aren't capable to make gross correct now.

John Plueger

Yes. It's really 21 airplanes. We sewage 1 back, and that 1 backmost we're getting, we're still preparing for use. So that -- taking retired 21 airplanes from your net is significant.

Steve Hazy

Yes, nan craft we sold, which don't make rent gross immoderate longer but gave america a profit connected nan disposition.

Ron Epstein

Got it. All right. So nan remainder are still nether your fleet count? You cognize they're not -- they're conscionable sitting location doing thing for you.

Greg Willis

They're not successful nan fleet count, because they've been written off, but they were contributing past twelvemonth and not contributing this year.

Ron Epstein

Got it. Okay. That makes sense. And past not to benignant of hit a dormant horse, but I'm conscionable trying to get a sense. I mean, potentially, really upside down are you guys fixed nan lease complaint rise, right? I mean, I thought that was thing we didn't person to interest about, that you'd beryllium beautiful long matched connected leases and debt, right? I mean, wherever did I get that wrong?

John Plueger

Well, fto maine reply that, Ron. I don't deliberation we're upside down. I deliberation we've heard immoderate commentary, well, liking rates person doubled. Have your lease rates doubled? Well, no, lease rates person not rather doubled yet. It's going to return immoderate time. We're very happy pinch our backing and nan maturities of those fundings. We don't person immoderate immense towers. We are very happy pinch our backing successful statement going successful for each of our deliveries of 2023 pinch each nan sources that we person going forward. So I really would opportunity I don't deliberation we consciousness really to equilibrium successful anything.

Ron Epstein

Okay. Good. Great. Perfect. And past 1 past 1 if I may. I mean, your commentary astir nan aspirational transportation targets of nan OEs, really acold down you deliberation they really are? I mean, erstwhile we perceive to a batch of nan suppliers, nan suppliers are each complete nan place. Airbus benignant of -- they're behind. Boeing's behind. Things are slipping. If we were -- tin you springiness america a consciousness connected really you deliberation astir it? If I was moving an hose today, and I was expecting an airplane successful 12 months, I mean, realistically, what americium I getting today?

John Plueger

I'll springiness an answer, and past I'm going to move it complete to Steve besides to answer. Look, I deliberation our appraisal is benignant of what I hinted astatine successful our remarks. We deliberation we're facing nan proviso concatenation constraints for nan adjacent astatine slightest two, perchance 3 years. And I cognize that nan OEMs don't for illustration to -- I mean, it's a reliable thing. We want our airplanes, too. But there's conscionable truthful galore different factors, and nan proviso concatenation is truthful immense and labour problems. I mean, it's really been reliable to get labour backmost in.

And you've seen nan Boeing and Airbus hiring a batch more. It's conscionable really hard, Ron, to foretell that proviso chain. And nan different facet is galore of nan smaller suppliers who are connected fixed complaint contracts a mates of years agone and they are still connected fixed complaint contracts successful position of what they get for immoderate widget aliases portion they person shipped are now having to restart that accumulation successful a overmuch higher costs environment. And that's provided a financial strain. So -- and then, Steve, you mightiness want to remark connected nan motor broadside of things.

Steve Hazy

Yes. I mean, portion of nan proviso concatenation problem is nan motor business pinch CFM, nan LEAP engine, some connected nan 737 family and connected nan A320, A321 family. And past Pratt & Whitney connected nan GTF motor conscionable can't proviso capable to either Airbus Canada, nan 220s aliases to Airbus connected nan A320, A321s.

And to besides reply your mobility past year, we had delays connected immoderate craft that were for illustration 2 to 3 months, and we had delays on, for example, connected A321neo that was 9 months. So -- and we've had everything other successful between. I can't springiness you a mathematical average, but it's surely worse than 3 months, and it's not getting immoderate better.

Ron Epstein

Got it. Alright, great. Thank you very much.


There are nary further questions astatine this time. Mr. Arnold, I move nan telephone backmost complete to you.

Jason Arnold

Thanks, Regina, and convey you, everyone, for your clip participating successful our 4th fourth telephone today. We look guardant to speaking pinch you again erstwhile we study our first 4th results. Operator, please disconnect nan line, and convey you very much.


This concludes today's convention call. You whitethorn now disconnect.

Editor: Naga

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