Air Lease reported that Q2/20 revenues of $521 million increased 10.6% and that it sold four aircraft during the quarter resulting in approximately $87 million in sales proceeds.
Second Quarter 2020 Results
$521 million for the three months ended June 30, 2020, an increase of 10.6%
$1 billion for the six months ended June 30, 2020, an increase of 10.2%
Diluted earnings per share
$1.26 for the three months ended June 30, 2020, an increase of 14.5%
$2.43 for the six months ended June 30, 2020, an increase of 4.3%
Adjusted diluted earnings per share before income taxes
$1.71 for the three months ended June 30, 2020, an increase of 13.2%
$3.31 for the six months ended June 30, 2020, an increase of 4.1%
Pre-tax profit margin of 35.3% for the three months ended June 30, 2020 compared with 34.1% for the same period in 2019
Adjusted pre-tax profit margin of 37.3% for the three months ended June 30, 2020, compared with 36.2% for the same period in 2019
Return on common equity
Pre-tax return on common equity of 13.9% for the trailing 12 months ended June 30, 2020, compared with 14.6% for the trailing 12 months ended June 30, 2019
Adjusted pre-tax return on common equity of 15% for the trailing 12 months ended June 30, 2020, compared with 15.7% for the 12 twelve months ended June 30, 2019
“Our second quarter results, including revenue, EPS, collection rate and aircraft utilization, were healthy in the face of an extremely tough environment for global airlines due to the COVID-19 pandemic,” John L. Plueger, CEO and president of Air Lease, said. “Financial stress is driving airlines to leasing and right-sizing their fleets by eliminating older, less efficient aircraft and accelerating environmental sustainability goals with young, technologically advanced aircraft, which is the profile of ALC’s orderbook, fleet and business model.”
Second Quarter 2020 Highlights
As of June 30, 2020, Air Lease owned 301 aircraft in its operating lease portfolio with a net book value of $19.1 billion, a weighted average age of 3.9 years and a weighted average lease term remaining of seven years.
Air Lease sold four aircraft during the quarter, resulting in approximately $87 million in sales proceeds.
Air Lease placed 90% of its orderbook on long-term leases for aircraft delivering through 2022.
Air Lease ended the quarter with a 91% collection rate for its operating lease portfolio and a 99.6% lease utilization rate.
Air Lease ended the quarter with $28.2 billion in committed minimum future rental payments consisting of $13.8 billion in contracted minimum rental payments on the aircraft in its existing fleet and $14.4 billion in contracted minimum future rental payments related to aircraft on order.
Air Lease issued $850 million in aggregate principal amount of medium-term notes due 2025 bearing interest at a fixed rate of 3.375%.
Air Lease declared a quarterly cash dividend of $0.15 per share of its outstanding Class A common stock on Aug. 5. The dividend will be paid on Oct. 9, 2020 to holders of record of Air Lease’s Class A common stock as of Sept. 11, 2020.
Impact of COVID-19
The global pandemic resulting from the coronavirus disrupted some of Air Lease’s operations and the operations of lessees, aircraft manufacturers and suppliers. The COVID-19 pandemic has resulted in governmental authorities around the world implementing numerous measures to try to contain the virus. Although some of these measures have since been lifted or scaled back, a recent resurgence of COVID-19 in certain parts of the world, including the United States, resulted in the re-imposition of certain restrictions and may lead to other restrictions being implemented again in response to efforts to reduce the spread of COVID-19. It is unclear how long these measures will remain in place, and they may remain in place in some form for an extended period of time. Accordingly, Air Lease has experienced the following impacts to its business:
As of Aug. 6, most of the company’s lessees had requested some form of accommodation. Air Lease has worked out accommodation arrangements with approximately 59% of its lessees, generally in the form of partial lease deferrals for payments due during Q1/20 and Q2/20, typically with a short-term repayment period, with the majority of the deferrals repaid over the next 12 months. In many cases, lease extensions also were negotiated as part of the deferral accommodations. Through Aug. 6, Air Lease has agreed to defer approximately $189.9 million in lease payments, which have negatively impacted the company’s cash flow provided by operating activities and represented approximately 3% of its total available liquidity as of June 30.
Air Lease’s collection rate for Q2/20 was 91% compared with 90% for Q1/20. In July, Air Lease’s collection rate for the month was 89%. The company expects its collection rate will remain under pressure while air travel is reduced or restricted in a number of countries. However, it does not anticipate that this will have a material impact on its liquidity position.
Air Lease’s lease utilization rate for the three months ended June 30, 2020 and the month of July 2020 was 99.6% compared with 99.7% for the three months ended March 31, 2020.
While Air Lease estimated its capital expenditures for the remainder of 2020 and beyond, given the current industry circumstances, its aircraft delivery schedule could be subject to material changes. Such capital expenditures will be less than what Air Lease previously communicated.
Due to reduced capital expenditures in aircraft investments, coupled with current industry conditions, Air Lease is minimizing aircraft sales for the remainder of the year.
Some transitions of the company’s aircraft from one lessee to another lessee have been delayed. As a result of travel restrictions, Air Lease expects some challenges when transitioning, acquiring or selling aircraft.
COVID-19 has caused disruption in the financial markets and has caused volatility and uncertainty in the bond market, but Air Lease accessed the unsecured bond market in Q2/20 and believes that it will continue to have access to such unsecured debt markets. As a counter-balance, Air Lease maintains $6.9 billion in available liquidity.
“We continue to work tirelessly with our airline customers and the OEMs toward airline industry stabilization and recovery,” Steven F. Udvar-Házy, executive chairman of the board for Air Lease, said. “In China/Asia and Europe, which are our principal markets, we are seeing recovery trends domestically and regionally. The lowering of OEM production rates is helping to stabilize supply/demand, and we have a number of new aircraft lease deals in process to help meet the restructuring and modernization of the fleets of our airline customers.”
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