Air Lease Corporation (ALC) is on-track for its target of reaching $20bln of assets this year, having grown its portfolio of owned and managed airliners in 2018 by 18.3% to $15.7bln. Continued strong demand for new aircraft gives ALC confidence that its 2019 targets will be met, the lessor said on February 21 at the presentation of its 2018 results.
“Air Lease once again continued its steady growth in 2018 with 336 owned and managed aircraft as of year-end, a 14% increase over 2017. Our order book now stands at 91% placed through 2020, and we continue to see strong demand for our modern, fuel efficiënt aircraft driven by replacement needs and passenger traffic trends,” said Steven F. Udvar-Házy,
executive chairman of the board.
ALC had a strong Q4 2018, with $450m in revenues resulting in full-year revenues of $1.7bln, up 10.8% from the previous year. Pre-tax return on equity to investors was 14.3%.
The Los Angeles-based company ended the year with $25.7 billion in committed minimum future rental payments, consisting of $11.8 billion in contracted minimum rental payments on its existing fleet and $13.9 billion in minimum future rental payments related to aircraft on order. Without the benefit of the one-off Tax Reform Act, net income decreased by 70.6% to $138mln.
As said, ALC’s fleet grew to 336: 275 owned and 61 managed. This compares to 294 the previous year, including 244 owned and 50 managed.
While reducing its Airbus A320ceo fleet by 5 to 35, the lessor grew the A321 fleet by 5 ceo’s and 9 neo’s. Without production issues on the A321 line, this could have been more. ALC also received its first A330-900 plus 4 A350-900s.
Boeing delivered 12 MAX 8s and 7 787-9s, but ALC reduced its 737-800 fleet by 4 aircraft.
Average fleet age is 3.8 years. Aircraft are leased for on average 6.8 years. Most aircraft (29.9%) are on lease in Europe, 24.5% in Asia and 17% in China.
422 aircraft on firm order and option
That ALC will grow its assets this year, is obvious when seeing the order book. This grew by net 4 aircraft to 372 firm, but including 45 new purchase options for MAX 8s counts for 422 aircraft. All but one Embraer E190 are Airbus and Boeing. All 372 on firm order should be delivered by late 2023, except for 5 MAX scheduled for after that. Delivery stands at 78 this year and 83 in 2020, with 2023 a ‘quiet’ year with just 53 scheduled deliveries.
This year deliveries include 25 A320/A321neo’s, although they are likely to be back-loaded again as Airbus will need until HY2 to get issues on the A321 sorted out and prepare for a ramp-up to 60 a month. Even if Airbus succeeds, ALC anticipates more delays which haven’t been included in its delivery schedule. The lessor has the right to cancel orders if delays increase and potential airlines cancel leasing contracts themselves.
Based on current delivery plans, ALC expects 40 A320/321neo’s in 2020, with a steady pattern emerging around 22-25 from 2021. Until late 2023 ALC takes delivery of 137 of the type, including 57 A321LRs.
On the twin-aisle front, there are 9 A330neo’s up for delivery this year, but this drops to 2 next year before climbing to 6 again in 2022. In all, 24 should be delivered until 2024. As for the A350, a total of 18 will join the lessor until 2024, with 4 this year. ALC has 5 A350-1000s on option.
ALC’s Steven Udvar-Hazy (centre) jokes with Boeing’s Kevin McAllister when announcing orders and commitments for 78 aircraft at last year’s Farnborough Air Show. ALC’s John Plueger is on the right. (Richard Schuurman)
As for Boeing, the Renton facilities should delivery 154 MAX 7s, 8s and 9s to ALC until 2024: 28 this year and the next, 34 per year after that and 25 in 2023. The 787 fleet should grow by 39 until 2024, with 12 as the highest number this year and so far none in 2023.
Of aircraft to be delivered this year, 100% has been placed with airlines, 83.1% of those for delivery in 2020 (83), including 59 binding lease contracts. For 2021 29.3% of 75 has been placed.
By succesfully issuing another $700mln of secured notes by January ($2.95bln in total in 2018), Air Lease Corporation is confident it is able to attract the capital needed for its growth strategy to continue.