Air Lease Corp (AL)

Q3 2011 Earnings Call

November 10, 2011 4:30 pm ET


Ryan McKenna – Director, Strategic Planning and Investor Relations

Steven F. Udvar-Hazy – Chairman and Chief Executive Officer

John L. Plueger – President and Chief Operating Officer

James C. Clarke – Senior Vice President and Chief Financial Officer


Gregory Lewis – Credit Suisse

Jason Arnold – RBC Capital Markets

Michael Linenberg – Deutsche Bank

Gary Liebowitz – Wells Fargo Securities

Scott Valentin – FBR Capital Markets & Co.

Mark Streeter – JPMorgan



Good day ladies and gentlemen, and welcome to the Third Quarter 2011 Air Lease Corp Earnings Conference Call. My name is Derick, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

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

Ryan McKenna

Good afternoon, everyone, and welcome to Air Lease Corporation’s third quarter 2011 earnings call. This is Ryan McKenna, Director of 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 third quarter results for fiscal year 2011. A copy of our earnings release is available on Investor Section of our website at This conference call is being webcast and recorded today Thursday, November 10, 2011 and 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, November 10, 2011.

These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the SEC 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 in both the investors and press section of our website at Unauthorized recording of this conference call is not permitted.

I’d now like to turn the call over to our Chairman and Chief Executive Officer, Steve Hazy.

Steven F. Udvar-Hazy

Thanks, Ryan. Good afternoon and thank you for joining us today. I’m pleased to report that for the three months ended on September 30, 2011, Air Lease Corporation recorded pre-tax income of $28.3 million and net income of $18.3 million, resulting in an $0.18 earnings per share on a diluted basis for the third quarter of 2011.

Our cash flow from operations for this period was $83.1 million. This is our sixth full quarter in business, and now our third consecutive quarter of increasing profitability. Our Q3 results reflect a 160% increase in both pre-tax earnings and after-tax earnings compared with Q2 of 2011. While cargo and freight markets demand has been soft, the worldwide passenger sector of the airline business has held up very well despite macroeconomic uncertainties. As I stated during our last quarterly earnings call and in our view two industry fundamentals are playing out amidst the backdrop of macroeconomic uncertainty.

First, we believe the demand for new aircraft is outstripping supply; and second, we believe that we have entered a period where global economic factors will drive most airlines toward leasing solutions in greater numbers. We have seen evidence of these drivers in the third quarter, and anticipate that these trends will continue well into 2012.

We see high demand for new fuel-efficient aircrafts as evidenced by the order books for Boeing, Airbus, Embraer and ATR, which are effectively sold out for the next several years. In addition, the sales campaign for the Airbus A320NEO and the Boeing 737 MAX have further limited aircraft supply with unprecedented forward lead times on new orders.

In an environment where airlines are unable obtain new aircraft from the manufactures now, and likely for many years to come, we believe that most airlines look to us in our pipeline of new aircraft as an important source of lift. We do not see signs of airlines throttling back on their demand for new aircraft, and Air Lease Corporation has established itself as one of the leaders in aircraft industry with 233 new aircraft of order over the next decade.

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