Air Lease reports Q3 results amid positive outlook

Air Lease Corporation reported its 3rd quarter 2023 results this morning. The results were positive, with Q3 revenues increasing year-over-year by 17.5% to $659.4 million. Net Q3 profit of $1.10 per share is up 22.2% over the same period in 2022. The company purchased 8 new aircraft in the quarter, and sold 8 aircraft during the quarter, achieving stronger values as residuals continue to rise. CEO John Plueger reported that the company’s utilization rate is above 99% and that the company has 100% of its new orders placed through 2025. ALC has already placed 87% of their full order book, which extends out to 2029. Demand is currently strong, with the supply-demand balance impacted by OEM quality issues and lower-than-expected production rates. Air Lease believes that neither Airbus nor Boeing will meet their 2023 delivery targets and that OEM issues will persist for several years. [caption id="attachment_78863" align="aligncenter" width="640"] photo: Airbus[/caption] Airbus will be impacted by the problems with the PW1100G GTF engines, with the issues resulting in challenges for airlines with MRO requirements for those engines. If some of the new engine production is allocated to airline customers rather than the OEMs, that may result in delays in OEM ramp-ups and delivery delays. On the Boeing side, the issues with the MAX fuselages and continuing 787 issues have also delayed timely deliveries. With demand exceeding supply, residual values for existing aircraft are rising, and that is translating to higher lease rates. Those higher rates are typically renegotiated at the end of a lease term, and lease renewals at more attractive rates have occurred in 2023 and are expected to continue in 2024 and beyond. ALC provided guidance of $700-$800 million in new deliveries for the 4th quarter, after anticipating $900 million to $1.1 billion. While delays are disappointing, ALC expects to still have a healthy fleet expansion. Early delivery slots are a key advantage Steve Udvar-Hazy indicated that the fundamentals of ALC's business remain strong. Early delivery slots provide the company with a key market advantage. The momentum of strengthening lease rates is expected to continue. Traffic growth has been significant in multiple markets across the world, and international volumes are up 30% year to year as the Asia Pacific market recovers. With the limited availability of new aircraft, load factors have risen globally to a current 85% level according to IATA, and should average 81% for the year. Load factors are expected to continue to rise, which is problematic for airlines with older fleets with lower dispatch reliability. ALC sees trends beginning to return to the historic patterns of seasonality, particularly in more mature markets as pent-up demand for travel returns to normalcy. The long-term drivers for travel demand remain in place, with a strong international recovery. With a diverse set of 117 customers in 63 countries, ALC is enjoying both domestic and international rebounds in travel and has aircraft available sooner than what OEMs can offer. The Bottom Line: With increasing demand and lease rates rising, the positive 3rd quarter results that beat expectations and a positive industry outlook, ALC is well positioned to continue its strong financial performance.

No results