Air Lease Corporation (AL)

Q2 2011 Earnings Conference Call

August 11, 2011 4:30 PM ET

Executives

Ryan McKenna – Director, Strategic Planning and IR

Steven Udvar-Hazy – Chairman and Chief Executive Officer

John Plueger - President and Chief Operating Officer

James Clarke - Chief Financial Officer

Analysts

Gregory Lewis – Credit Suisse

Jason Arnold – RBC Capital Markets

Mark Streeter - JPMorgan

Gary Liebowitz – Wells Fargo Securities

Arren Cyganovich – Evercore

Gary Chase - Barclays Capital

Presentation

Operator

Good day ladies and gentlemen, and welcome to the second quarter 2011 Air Lease Corporation earnings conference call. My name is Shanel [Ph] and I’ll be your operator for today. At this time, all participants are in listen-only mode, later we will conduct a question-and-answer (Operator Instructions). As a reminder this conference is being recorded for replay purposes.

I will now like to turn the conference over to Mr. Ryan McKenna, Director, Strategic Planning and Investor Relations. Please proceed.

Ryan McKenna

Thank you very much. Good afternoon everyone and welcome to Air Lease Corporation second quarter 2011 earnings call. This is Ryan McKenna, Director, Strategic Planning and Investor Relations. I’m joined this afternoon by Steve Hazy, our Chairman and Chief Executive Officer; John Plueger, our President and Chief Operating Officer; and Jim Clarke, our Chief Financial Officer.

Earlier today, we published our second quarter results for fiscal year 2011. A copy of our earnings release is available on Investor Section of our website at www.airleasecorp.com. This conference call is being webcast and recorded today Thursday August 11, 2011 with an audio replay will be available on our website.

At this time, all participants to this call are in listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session.

Before we begin, please note that certain statements in this conference call including answers to your questions are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including without limitation, statements regarding our future operations and performance, revenues, operating expenses, other income and expense and stock-based compensation expense. These statements and any projections as to the company's future performance represent management’s estimates of future results and speak only as of today, August 11, 2011.

These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the Securities and Exchange Commission for a more detailed description of the 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, certain financial measures we will use during this call, such as adjusted EBITDA and adjusted net income are non-GAAP measures and have been adjusted to exclude charges relating to discounts on certain convertible notes and stock-based compensation expense among other charges.

A description of our reasons for utilizing these non-GAAP measures, as well as our definition of them and a reconciliation to corresponding GAAP measures, can be found in the earnings release we issued today. This release can be found on the investor's section of our website at www.airleasecorp.com. Unauthorized recording of this conference call is not permitted.

With that out of the way, I would like to turn the call over to our Chairman and Chief Executive, Steve Hazy.

Steven Udvar-Hazy

Thanks, Ryan. Good afternoon and thank you for joining us today. I’m pleased to report that for the three months ended June 30, 2011, Air Lease Corporation recorded pre-tax income of $10.9 million and net income of $7 million, resulting in a $0.08 per share earnings on a diluted basis.

Adjusted EBITDA was $62.8 million and our adjusted net income totaled $19.5 million for the second quarter of 2011. Our cash flow from operations for the quarter was $48.5 million. This is our fifth full quarter in business and now our second consecutive quarter of increasing profitability. As we continue our growth trajectory, our Q2 results reflect a 121% increase in pre-tax earnings compared with Q1 2011. When comparing to the first six months of this year to the prior year, we moved from a pre-tax loss in our start-up phase in 2010 to a pre-tax profit of $15.8 million in 2011.

Recent macroeconomic concerns and the aftermath of the S&P downgrade of the U.S. long-term credit rating have resulted in a significant amount of market turmoil. But market turmoil is nothing new to aircraft leasing, nor to ILFC’s management team. The aircraft leasing sector as a whole has historically demonstrated resilience during such market conditions.

Specifically, prior to starting ALC, our management team generated consistent and steady financial performance in the aircraft leasing business even as the broader airline industry had been challenged. We profitability managed through numerous industry cycles and worldwide developments, such as the Gulf War in the early 1990s, the so-called, Asian financial crisis in the late 1990s, September 11, 2001 and its aftermath, which provided the single largest financial shock to-date to the global air transportation system, the global recession that began in 2007, resulting in the collapse of Lehman Brothers, AIG and the financial market turmoil in the fall of 2008.

Our management team has navigated through rough waters many, many times and based on our experience, we believe turbulent times provide additional opportunities for us to make the case for aircraft leasing even more compelling to the world's airlines. Air Lease is well capitalized with a very strong balance sheet and is positioned to profit in this marketplace.

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