Air Lease Earnings Call Insights: Added Aircraft, Placements

On Monday, Air Lease Corp (NYSE:AL) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Added Aircraft

John Godyn – Morgan Stanley: I just want to ask a little bit about the pipeline for opportunistic growth transactions. If you could just give us or remind us of what are the key characteristics you’re looking for in opportunistic growth and specifically are there any deals that could move the earnings needle in 2012 or are these more longer dated than that?

Steven F. Udvar-Hazy – Chairman and CEO: Well originally we had 45 aircraft, new aircraft in our delivery pipeline for 2012. A few months ago we moved a January 2013 Embraer 190 into October of this year because we have leased that aircraft to one of our customers, and since the close of the first quarter, we’ve acquired two incremental aircraft that were not in our business plan. One, is a 777-300ER and one is Boeing 737-800. So, those two aircraft incrementally will add more than $10 million of revenue for the balance of this year. In addition, we are negotiating for a number of additional aircraft that fall into our portfolio criteria for deliveries in the second and third quarter of 2012, so if we’re able to complete those transactions, and I can’t give you assurance that we will, but at the moment, we’re on track to do that. Those will improve the revenue profile at the tail end of the second quarter and for the third and fourth quarters of 2012, and obviously those aircraft will have lease rate factors that are approximately the same as our existing portfolio. Therefore, they will be accretive to our earnings for the balance of the year.

John Godyn – Morgan Stanley: Just to follow-up, when we think about the economics of the aircraft that you sort of already have under contract for lease in 2013, 2014, can you just talk about how the economics compared to your current ROE and is mid to high teens the right pre-tax ROE that we should be kind of thinking about three to five years down the line?

Steven F. Udvar-Hazy – Chairman and CEO: Well, even though you are allowed one question, we’ll make an exception.

John Godyn – Morgan Stanley: And a follow-up.

Steven F. Udvar-Hazy – Chairman and CEO: I can tell you that the aircraft that we’ve added so far in the first 4.5 months of this year are exhibiting lease rate characteristics on our investment that are similar to the aircraft we acquired last year. But I think in terms of ROE and lease rate factors virtually all of the aircraft that we’re taking delivery of in 2012 fall into that same band.

Placements

Jamie Baker – JPMorgan: When I look at these aircraft placements between now and 2015, it looks like in the past 90 days you haven’t logged any additional placements. I’m wondering if this is by design, or if there’s any pushback from airlines? You cite robust demand for the remaining aircrafts. I’m just wondering if the lack of incremental placements since Q4 is potentially inconsistent with some of your prepared remarks?

Steven F. Udvar-Hazy – Chairman and CEO: Not at all. We have a number of transactions where we are awaiting final government approvals and other corporate approvals to be able to publicize those, and we’ll make that information available at the appropriate time.

John L. Plueger – President and COO: This is John Plueger. Let me just also add that don’t forget that we are already 80% placed through 2015. So we have by definition much less aircraft to place than we did even three or six months ago.

Jamie Baker – JPMorgan: Yeah, sure, I don’t question that. I was just kind of looking at the incremental change over the last three months or so. For my allotted follow-up, it’s been reported that you’ve placed or I guess you’re close to placing a 737 MAX order. First, is that accurate? And second, Steve any thoughts on the recent changes in specs, the new winglets and so forth?

Steven F. Udvar-Hazy – Chairman and CEO: Well we’ve had a parade of Boeing executives and engineers and experts down here for the last several months. We are working with both Boeing and Airbus on a regular basis to define the configuration performance and specifications for their new aircraft designs. I really can’t comment on negotiations that are ongoing, but obviously the media has access to information that we don’t have. But to amplify what John said, we are leased out completely for this year. There’s only couple of airplanes for 2013 and those are two ATR 72s that are about to be leased out and finalized. So, we really don’t have anything of substance for 2015 and 2016, and currently our management team is already working on some of the long lead time placements.