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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 001-35121
AIR LEASE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware |
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27-1840403 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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2000 Avenue of the Stars, |
Suite 1000N |
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90067 |
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Los Angeles, |
California |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code:
(310) 553-0555
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Class A Common Stock |
AL |
New York Stock Exchange |
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6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred
Stock, Series A |
AL PRA |
New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act:
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
At November 2, 2022, there were 110,892,097 shares of Air
Lease Corporation’s Class A common stock outstanding.
Air Lease Corporation and Subsidiaries
Form 10-Q
For the Quarterly Period Ended September 30, 2022
TABLE OF CONTENTS
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q and other publicly available
documents may contain or incorporate statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements appear
in a number of places in this Form 10-Q and include statements
regarding, among other matters, the state of the airline industry,
including the impact of Russia’s invasion of Ukraine and the impact
of sanctions imposed on Russia, our access to the capital markets,
the impact of lease deferrals and other accommodations, aircraft
delivery delays and other factors affecting our financial condition
or results of operations. Words such as “can,” “could,” “may,”
“predicts,” “potential,” “will,” “projects,” “continuing,”
“ongoing,” “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates” and “should,” and variations of
these words and similar expressions, are used in many cases to
identify these forward-looking statements. Any such forward-looking
statements are not guarantees of future performance and involve
risks, uncertainties, and other factors that may cause our actual
results, performance or achievements, or industry results to vary
materially from our future results, performance or achievements, or
those of our industry, expressed or implied in such forward-looking
statements. Such factors include, among others:
•our
inability to obtain additional capital on favorable terms, or at
all, to acquire aircraft, service our debt obligations and
refinance maturing debt obligations;
•increases
in our cost of borrowing or changes in interest rates;
•our
inability to generate sufficient returns on our aircraft
investments through strategic acquisition and profitable
leasing;
•the
failure of an aircraft or engine manufacturer to meet its delivery
obligations to us, including or as a result of technical or other
difficulties with aircraft before or after delivery;
•the
extent to which the Russian invasion of Ukraine and the impact of
sanctions imposed by the United States, European Union, United
Kingdom and others affect our business, including our efforts to
pursue insurance claims to recover losses related to aircraft
detained in Russia, the exclusion of Russia, Ukraine and Belarus
from the insurance policies that we separately purchase for our
owned fleet, and the ability of our lessees to comply with their
obligations to maintain insurance policies that cover their
operations;
•the
extent to which the COVID-19 pandemic impacts our
business;
•obsolescence
of, or changes in overall demand for, our aircraft;
•changes
in the value of, and lease rates for, our aircraft, including as a
result of aircraft oversupply, manufacturer production levels, our
lessees’ failure to maintain our aircraft, rising inflation,
appreciation of the U.S. Dollar, and other factors outside of our
control;
•impaired
financial condition and liquidity of our lessees, including due to
lessee defaults and reorganizations, bankruptcies or similar
proceedings;
•increased
competition from other aircraft lessors;
•the
failure by our lessees to adequately insure our aircraft or fulfill
their contractual indemnity obligations to us;
•increased
tariffs and other restrictions on trade;
•changes
in the regulatory environment, including changes in tax laws and
environmental regulations;
•other
events affecting our business or the business of our lessees and
aircraft manufacturers or their suppliers that are beyond our or
their control, such as the threat or realization of epidemic
diseases, natural disasters, terrorist attacks, war or armed
hostilities between countries or non-state actors; and
•any
additional factors discussed under “Part I — Item 1A. Risk
Factors,” in our Annual Report on Form 10-K for the year ended
December 31, 2021, “Part II — Item 1A. Risk Factors,” in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2022
and other SEC filings, including future SEC filings.
All forward-looking statements are necessarily only estimates of
future results, and there can be no assurance that actual results
will not differ materially from expectations. You are therefore
cautioned not to place undue reliance on such statements. Any
forward-looking statement speaks only as of the date on which it is
made, and we do not intend and undertake no obligation to update
any forward-looking information to reflect actual results or events
or circumstances after the date on which the statement is made or
to reflect the occurrence of unanticipated events.
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
Air Lease Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
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September 30, 2022 |
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December 31, 2021 |
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(unaudited) |
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Assets |
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Cash and cash equivalents |
$ |
1,101,844 |
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$ |
1,086,500 |
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Restricted cash |
15,124 |
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21,792 |
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Flight equipment subject to operating leases |
28,656,269 |
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27,101,808 |
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Less accumulated depreciation |
(4,727,410) |
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(4,202,804) |
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23,928,859 |
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22,899,004 |
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Deposits on flight equipment purchases |
1,493,041 |
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1,508,892 |
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Other assets |
1,685,103 |
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1,452,534 |
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Total assets |
$ |
28,223,971 |
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|
$ |
26,968,722 |
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
Accrued interest and other payables |
$ |
604,327 |
|
|
$ |
611,757 |
|
|
Debt financing, net of discounts and issuance costs |
18,769,057 |
|
|
17,022,480 |
|
|
Security deposits and maintenance reserves on flight equipment
leases |
1,235,704 |
|
|
1,173,831 |
|
|
Rentals received in advance |
149,923 |
|
|
138,816 |
|
|
Deferred tax liability |
936,526 |
|
|
1,013,270 |
|
|
Total liabilities |
$ |
21,695,537 |
|
|
$ |
19,960,154 |
|
|
Shareholders’ Equity |
|
|
|
|
Preferred Stock, $0.01 par value; 50,000,000 shares authorized;
10,600,000 (aggregate liquidation preference of $850,000) shares
issued and outstanding at September 30, 2022 and
December 31, 2021, respectively
|
$ |
106 |
|
|
$ |
106 |
|
|
Class A common stock, $0.01 par value; 500,000,000 shares
authorized; 110,892,097 and 113,987,154 shares issued and
outstanding at September 30, 2022 and December 31,
2021, respectively
|
1,109 |
|
|
1,140 |
|
|
Class B Non-Voting common stock, $0.01 par value; authorized
10,000,000 shares; no shares issued or
outstanding
|
— |
|
|
— |
|
|
Paid-in capital |
3,250,169 |
|
|
3,399,245 |
|
|
Retained earnings |
3,274,113 |
|
|
3,609,885 |
|
|
Accumulated other comprehensive loss |
2,937 |
|
|
(1,808) |
|
|
Total shareholders’ equity |
$ |
6,528,434 |
|
|
$ |
7,008,568 |
|
|
Total liabilities and shareholders’ equity |
$ |
28,223,971 |
|
|
$ |
26,968,722 |
|
(See Notes to Consolidated Financial Statements)
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE
INCOME/(LOSS)
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(unaudited) |
|
Revenues |
|
|
|
|
|
|
|
|
Rental of flight equipment |
$ |
541,397 |
|
|
$ |
519,535 |
|
|
$ |
1,653,223 |
|
|
$ |
1,439,674 |
|
|
Aircraft sales, trading and
other |
19,937 |
|
|
4,974 |
|
|
62,469 |
|
|
51,539 |
|
|
Total revenues |
561,334 |
|
|
524,509 |
|
|
1,715,692 |
|
|
1,491,213 |
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Interest |
122,348 |
|
|
114,659 |
|
|
358,621 |
|
|
346,244 |
|
|
Amortization of debt discounts and issuance costs |
13,162 |
|
|
12,571 |
|
|
39,772 |
|
|
37,109 |
|
|
Interest expense |
135,510 |
|
|
127,230 |
|
|
398,393 |
|
|
383,353 |
|
|
Depreciation of flight equipment |
242,503 |
|
|
224,960 |
|
|
713,095 |
|
|
651,742 |
|
|
Write-off of Russian fleet |
— |
|
|
— |
|
|
802,352 |
|
|
— |
|
|
Selling, general and administrative |
39,718 |
|
|
31,082 |
|
|
110,993 |
|
|
84,682 |
|
|
Stock-based compensation expense |
5,764 |
|
|
6,692 |
|
|
9,799 |
|
|
18,800 |
|
|
Total expenses |
423,495 |
|
|
389,964 |
|
|
2,034,632 |
|
|
1,138,577 |
|
|
Income/(loss) before taxes |
137,839 |
|
|
134,545 |
|
|
(318,940) |
|
|
352,636 |
|
|
Income tax (expense)/benefit |
(27,458) |
|
|
(27,208) |
|
|
76,606 |
|
|
(67,785) |
|
|
Net income/(loss) |
$ |
110,381 |
|
|
$ |
107,337 |
|
|
$ |
(242,334) |
|
|
$ |
284,851 |
|
|
Preferred stock dividends |
(10,425) |
|
|
(7,331) |
|
|
(31,275) |
|
|
(19,010) |
|
|
Net income/(loss) attributable to common stockholders |
$ |
99,956 |
|
|
$ |
100,006 |
|
|
$ |
(273,609) |
|
|
$ |
265,841 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss): |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
$ |
21,481 |
|
|
$ |
7,129 |
|
|
$ |
27,811 |
|
|
$ |
(943) |
|
|
Change in fair value of hedged transactions |
(17,063) |
|
|
(7,874) |
|
|
(21,774) |
|
|
(1,677) |
|
|
Total tax (expense)/benefit on other comprehensive
income/loss |
(946) |
|
|
159 |
|
|
(1,292) |
|
|
560 |
|
|
Other comprehensive income/(loss), net of tax |
3,472 |
|
|
(586) |
|
|
4,745 |
|
|
(2,060) |
|
|
Total comprehensive income/(loss) attributable for common
stockholders |
$ |
103,428 |
|
|
$ |
99,420 |
|
|
$ |
(268,864) |
|
|
$ |
263,781 |
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share of common stock: |
|
|
|
|
|
|
|
|
Basic |
$ |
0.90 |
|
|
$ |
0.88 |
|
|
$ |
(2.45) |
|
|
$ |
2.33 |
|
|
Diluted |
$ |
0.90 |
|
|
$ |
0.87 |
|
|
$ |
(2.45) |
|
|
$ |
2.32 |
|
|
Weighted-average shares outstanding |
|
|
|
|
|
|
|
|
Basic |
110,892,097 |
|
|
114,122,512 |
|
|
111,874,002 |
|
|
114,071,951 |
|
|
Diluted |
111,090,133 |
|
|
114,381,621 |
|
|
111,874,002 |
|
|
114,415,169 |
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock |
$ |
0.185 |
|
|
$ |
0.16 |
|
|
$ |
0.555 |
|
|
$ |
0.48 |
|
(See Notes to Consolidated Financial Statements)
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
Class A
Common Stock |
|
Class B Non‑Voting
Common Stock |
|
|
|
|
|
Accumulated Other
Comprehensive Income/(Loss) |
|
|
|
(unaudited) |
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Paid‑in
Capital |
|
Retained
Earnings |
|
|
Total |
|
Balance at December 31, 2021 |
10,600,000 |
|
|
$ |
106 |
|
|
113,987,154 |
|
|
$ |
1,140 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,399,245 |
|
|
$ |
3,609,885 |
|
|
$ |
(1,808) |
|
|
$ |
7,008,568 |
|
|
Issuance of common stock upon vesting of restricted stock
units |
— |
|
|
— |
|
|
477,656 |
|
|
5 |
|
|
— |
|
|
— |
|
|
(3) |
|
|
— |
|
|
— |
|
|
2 |
|
|
Common stock repurchased |
— |
|
|
— |
|
|
(2,959,458) |
|
|
(30) |
|
|
— |
|
|
— |
|
|
(129,519) |
|
|
— |
|
|
— |
|
|
(129,549) |
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,523) |
|
|
— |
|
|
— |
|
|
(2,523) |
|
|
Cash dividends (declared $0.185 per share of Class A common
stock)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(21,136) |
|
|
— |
|
|
(21,136) |
|
|
Cash dividends (declared on preferred stock) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,425) |
|
|
— |
|
|
(10,425) |
|
|
Change in foreign currency translation adjustment and in fair value
of hedged transactions, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,738 |
|
|
1,738 |
|
|
Tax withholdings on stock-based compensation |
— |
|
|
— |
|
|
(188,093) |
|
|
(2) |
|
|
— |
|
|
— |
|
|
(8,095) |
|
|
— |
|
|
— |
|
|
(8,097) |
|
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(468,993) |
|
|
— |
|
|
(468,993) |
|
|
Balance at March 31, 2022 |
10,600,000 |
|
|
$ |
106 |
|
|
111,317,259 |
|
|
$ |
1,113 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,259,105 |
|
|
$ |
3,109,331 |
|
|
$ |
(70) |
|
|
$ |
6,369,585 |
|
|
Issuance of common stock upon vesting of restricted stock
units |
— |
|
|
— |
|
|
59,603 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Common stock repurchased |
— |
|
|
— |
|
|
(461,416) |
|
|
(4) |
|
|
— |
|
|
— |
|
|
(20,450) |
|
|
— |
|
|
— |
|
|
(20,454) |
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,558 |
|
|
— |
|
|
— |
|
|
6,558 |
|
|
Cash dividends (declared $0.185 per share of Class A common
stock)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(20,511) |
|
|
— |
|
|
(20,511) |
|
|
Cash dividends (declared on preferred stock) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,425) |
|
|
— |
|
|
(10,425) |
|
|
Change in foreign currency translation adjustment and in fair value
of hedged transactions, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(465) |
|
|
(465) |
|
|
Tax withholdings on stock-based compensation |
— |
|
|
— |
|
|
(23,349) |
|
|
— |
|
|
— |
|
|
— |
|
|
(931) |
|
|
— |
|
|
— |
|
|
(931) |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
116,277 |
|
|
— |
|
|
116,277 |
|
|
Balance at June 30, 2022 |
10,600,000 |
|
|
$ |
106 |
|
|
110,892,097 |
|
|
$ |
1,109 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,244,282 |
|
|
$ |
3,194,672 |
|
|
$ |
(535) |
|
|
$ |
6,439,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,764 |
|
|
— |
|
|
— |
|
|
5,764 |
|
|
Cash dividends (declared 0.185 per share of Class A common
stock)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(20,515) |
|
|
— |
|
|
(20,515) |
|
|
Cash dividends (declared on preferred stock) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,425) |
|
|
— |
|
|
(10,425) |
|
|
Change in foreign currency translation adjustment and in fair value
of hedged transactions, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
3,472 |
|
|
3,472 |
|
|
Tax withholdings on stock-based compensation |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
123 |
|
|
— |
|
|
— |
|
|
123 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
110,381 |
|
|
— |
|
|
110,381 |
|
|
Balance at September 30, 2022 |
10,600,000 |
|
|
$ |
106 |
|
|
110,892,097 |
|
|
$ |
1,109 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,250,169 |
|
|
$ |
3,274,113 |
|
|
$ |
2,937 |
|
|
$ |
6,528,434 |
|
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
Class A
Common Stock |
|
Class B Non‑Voting
Common Stock |
|
|
|
|
|
Accumulated Other
Comprehensive Income/(Loss) |
|
|
|
(unaudited) |
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Paid‑in
Capital |
|
Retained
Earnings |
|
|
Total |
|
Balance at December 31, 2020 |
10,000,000 |
|
|
$ |
100 |
|
|
113,852,896 |
|
|
$ |
1,139 |
|
|
— |
|
|
$ |
— |
|
|
$ |
2,793,178 |
|
|
$ |
3,277,599 |
|
|
$ |
325 |
|
|
$ |
6,072,341 |
|
|
Issuance of preferred stock |
300,000 |
|
|
3 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
295,446 |
|
|
— |
|
|
— |
|
|
295,449 |
|
|
Issuance of common stock upon exercise of options and vesting of
restricted stock units |
— |
|
|
— |
|
|
425,232 |
|
|
4 |
|
|
— |
|
|
— |
|
|
1,437 |
|
|
— |
|
|
— |
|
|
1,441 |
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,408 |
|
|
— |
|
|
— |
|
|
5,408 |
|
|
Cash dividends (declared $0.16 per share of Class A common
stock)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,259) |
|
|
— |
|
|
(18,259) |
|
|
Cash dividends (declared on preferred stock) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,844) |
|
|
— |
|
|
(3,844) |
|
|
Change in foreign currency translation adjustment and in fair value
of hedged transactions, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,247) |
|
|
(1,247) |
|
|
Tax withholdings on stock-based compensation |
— |
|
|
— |
|
|
(157,266) |
|
|
(2) |
|
|
— |
|
|
— |
|
|
(7,167) |
|
|
— |
|
|
— |
|
|
(7,169) |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
84,092 |
|
|
— |
|
|
84,092 |
|
|
Balance at March 31, 2021 |
10,300,000 |
|
|
$ |
103 |
|
|
114,120,862 |
|
|
$ |
1,141 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,088,302 |
|
|
$ |
3,339,588 |
|
|
$ |
(922) |
|
|
$ |
6,428,212 |
|
|
Issuance of preferred stock |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(19) |
|
|
— |
|
|
— |
|
|
(19) |
|
|
Issuance of common stock upon vesting of restricted stock
units |
— |
|
|
— |
|
|
25,956 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,700 |
|
|
— |
|
|
— |
|
|
6,700 |
|
|
Cash dividends (declared $0.16 per share of Class A common
stock)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,263) |
|
|
— |
|
|
(18,263) |
|
|
Cash dividends (declared on preferred stock) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,835) |
|
|
— |
|
|
(7,835) |
|
|
Change in foreign currency translation adjustment and in fair value
of hedged transactions, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(227) |
|
|
(227) |
|
|
Tax withholdings on stock-based compensation |
— |
|
|
— |
|
|
(5,715) |
|
|
— |
|
|
— |
|
|
— |
|
|
(275) |
|
|
— |
|
|
— |
|
|
(275) |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
93,422 |
|
|
— |
|
|
93,422 |
|
|
Balance at June 30, 2021 |
10,300,000 |
|
|
$ |
103 |
|
|
114,141,103 |
|
|
$ |
1,141 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,094,708 |
|
|
$ |
3,406,912 |
|
|
$ |
(1,149) |
|
|
$ |
6,501,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,692 |
|
|
— |
|
|
— |
|
|
6,692 |
|
|
Common stock repurchased |
— |
|
|
— |
|
|
(153,949) |
|
|
(1) |
|
|
— |
|
|
— |
|
|
(5,780) |
|
|
— |
|
|
— |
|
|
(5,781) |
|
|
Cash dividends (declared $0.16 per share of Class A common
stock)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,263) |
|
|
— |
|
|
(18,263) |
|
|
Cash dividends (declared on preferred stock) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,331) |
|
|
— |
|
|
(7,331) |
|
|
Change in foreign currency translation adjustment and in fair value
of hedged transactions, net of tax |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(586) |
|
|
(586) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
107,337 |
|
|
— |
|
|
107,337 |
|
|
Balance at September 30, 2021 |
10,300,000 |
|
|
$ |
103 |
|
|
113,987,154 |
|
|
$ |
1,140 |
|
|
— |
|
|
$ |
— |
|
|
$ |
3,095,620 |
|
|
$ |
3,488,655 |
|
|
$ |
(1,735) |
|
|
$ |
6,583,783 |
|
(See Notes to Consolidated Financial Statements)
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
2022 |
|
2021 |
|
(unaudited) |
|
Operating Activities |
|
|
|
|
Net (loss)/income |
$ |
(242,334) |
|
|
$ |
284,851 |
|
|
Adjustments to reconcile net (loss)/income to net cash provided by
operating activities: |
|
|
|
|
Depreciation of flight equipment |
713,095 |
|
|
651,742 |
|
|
Write-off of Russian fleet |
802,352 |
|
|
— |
|
|
Stock-based compensation expense |
9,799 |
|
|
18,800 |
|
|
Deferred taxes |
(78,035) |
|
|
64,931 |
|
|
Amortization of discounts and debt issuance costs |
39,772 |
|
|
37,109 |
|
|
Amortization of prepaid lease costs |
34,734 |
|
|
33,603 |
|
|
Gain on aircraft sales, trading and other activity |
(85,616) |
|
|
(1,184) |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Other assets |
(243,109) |
|
|
(148,982) |
|
|
Accrued interest and other payables |
(8,354) |
|
|
(7,283) |
|
|
Rentals received in advance |
16,259 |
|
|
(4,199) |
|
|
Net cash provided by operating activities |
958,563 |
|
|
929,388 |
|
|
Investing Activities |
|
|
|
|
Acquisition of flight equipment under operating lease |
(2,166,317) |
|
|
(1,670,203) |
|
|
Payments for deposits on flight equipment purchases |
(428,424) |
|
|
(303,856) |
|
|
Proceeds from aircraft sales, trading and other
activity |
42,043 |
|
|
2,042 |
|
|
Acquisition of aircraft furnishings, equipment and other
assets |
(162,897) |
|
|
(178,359) |
|
|
Net cash used in investing activities |
(2,715,595) |
|
|
(2,150,376) |
|
|
Financing Activities |
|
|
|
|
Issuance of common stock upon exercise of options |
— |
|
|
1,438 |
|
|
Cash dividends paid on Class A common stock |
(62,738) |
|
|
(54,737) |
|
|
Common shares repurchased |
(150,000) |
|
|
(5,780) |
|
|
Net proceeds from preferred stock issuance |
— |
|
|
295,428 |
|
|
Cash dividends paid on preferred stock |
(31,275) |
|
|
(19,010) |
|
|
Tax withholdings on stock-based compensation |
(8,903) |
|
|
(7,441) |
|
|
Net change in unsecured revolving facilities |
1,570,000 |
|
|
— |
|
|
Proceeds from debt financings |
1,497,615 |
|
|
3,655,830 |
|
|
Payments in reduction of debt financings |
(1,327,146) |
|
|
(2,585,652) |
|
|
Debt issuance costs |
(5,855) |
|
|
(9,688) |
|
|
Security deposits and maintenance reserve receipts |
308,637 |
|
|
112,155 |
|
|
Security deposits and maintenance reserve disbursements |
(24,627) |
|
|
(25,654) |
|
|
Net cash provided by financing activities |
1,765,708 |
|
|
1,356,889 |
|
|
Net decrease in cash |
8,676 |
|
|
135,901 |
|
|
Cash, cash equivalents and restricted cash at beginning of
period |
1,108,292 |
|
|
1,757,767 |
|
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
1,116,968 |
|
|
$ |
1,893,668 |
|
|
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
Cash paid during the period for interest, including capitalized
interest of $29,335 and $38,265 at September 30, 2022 and
2021, respectively
|
$ |
442,461 |
|
|
$ |
428,349 |
|
|
Cash paid for income taxes |
$ |
5,808 |
|
|
$ |
2,739 |
|
|
Supplemental Disclosure of Noncash Activities |
|
|
|
|
Buyer furnished equipment, capitalized interest and deposits on
flight equipment purchases applied to acquisition of flight
equipment |
$ |
596,021 |
|
|
$ |
663,072 |
|
|
Cash dividends declared on common stock, not yet paid |
$ |
20,515 |
|
|
$ |
18,263 |
|
(See Notes to Consolidated Financial Statements)
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Company Background and
Overview
Air Lease Corporation (the “Company”, “ALC”, “we”, “our” or “us”)
is a leading aircraft leasing company that was founded by aircraft
leasing industry pioneer, Steven F. Udvar-Házy. The Company is
principally engaged in purchasing the most modern, fuel-efficient,
new technology commercial jet aircraft directly from aircraft
manufacturers, such as The Boeing Company (“Boeing”) and Airbus
S.A.S. (“Airbus”). The Company leases these aircraft to airlines
throughout the world with the intention to generate attractive
returns on equity. As of September 30, 2022, the Company owned
405 aircraft, managed 87 aircraft and had 412 aircraft on order
with aircraft manufacturers. In addition to its leasing activities,
the Company sells aircraft from its fleet to third parties,
including other leasing companies, financial services companies,
airlines and other investors. The Company also provides fleet
management services to investors and owners of aircraft portfolios
for a management fee.
Note 2. Basis of Preparation and Critical
Accounting Policies
The Company consolidates financial statements of all entities in
which the Company has a controlling financial interest, including
the accounts of any Variable Interest Entity in which the Company
has a controlling financial interest and for which it is the
primary beneficiary. All material intercompany balances are
eliminated in consolidation. The accompanying Consolidated
Financial Statements have been prepared in accordance with
Generally Accepted Accounting Principles in the United States of
America (“GAAP”) for interim financial information and in
accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial
statements.
The accompanying unaudited Consolidated Financial Statements
include all adjustments, consisting only of normal, recurring
adjustments, which are in the opinion of management necessary to
present fairly the Company’s financial position, results of
operations and cash flows at September 30, 2022, and for all
periods presented. The results of operations for the three and nine
months ended September 30, 2022 are not necessarily indicative
of the operating results expected for the year ending
December 31, 2022. These financial statements and related
notes should be read in conjunction with the Consolidated Financial
Statements and related notes included in the Company’s Annual
Report on Form 10-K for the year ended December 31,
2021.
Note 3. Debt Financing
The Company’s consolidated debt as of September 30, 2022 and
December 31, 2021 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
(in thousands) |
|
Unsecured |
|
|
|
|
Senior notes |
$ |
17,064,248 |
|
|
$ |
16,892,058 |
|
|
Term financings |
186,775 |
|
|
167,000 |
|
|
Revolving credit facility |
1,570,000 |
|
|
— |
|
|
Total unsecured
debt financing |
18,821,023 |
|
|
17,059,058 |
|
|
Secured |
|
|
|
|
Term financings |
116,981 |
|
|
126,660 |
|
|
Export credit financing |
13,309 |
|
|
18,301 |
|
|
Total secured debt
financing |
130,290 |
|
|
144,961 |
|
|
|
|
|
|
|
Total debt financing |
18,951,313 |
|
|
17,204,019 |
|
|
Less: Debt discounts and issuance costs |
(182,256) |
|
|
(181,539) |
|
|
Debt financing, net of discounts and issuance costs |
$ |
18,769,057 |
|
|
$ |
17,022,480 |
|
Senior unsecured notes (including Medium-Term Note
Program)
As of September 30, 2022, the Company had $17.1 billion
in senior unsecured notes outstanding. As of December 31,
2021, the Company had $16.9 billion in senior unsecured notes
outstanding.
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the nine months ended September 30, 2022, the Company
issued $1.5 billion in aggregate principal amount of senior
unsecured notes comprised of (i) $750.0 million in aggregate
principal amount of 2.20% Medium-Term Notes due 2027, and (ii)
$750.0 million in aggregate principal amount of 2.875%
Medium-Term Notes due 2032.
Unsecured revolving credit facility
As of September 30, 2022, the Company had $1.6 billion
outstanding under its unsecured revolving credit facility (the
“Revolving Credit Facility”). As of December 31, 2021, the
Company did not have any amounts outstanding under its Revolving
Credit Facility. Borrowings under the Revolving Credit Facility are
used to finance the Company’s working capital needs in the ordinary
course of business and for other general corporate
purposes.
In April 2022, the Company amended and extended its Revolving
Credit Facility through an amendment that, among other things,
extended the final maturity date from May 5, 2025 to May 5, 2026,
increased the total revolving commitments to approximately
$7.0 billion as of May 5, 2022 and replaced LIBOR with Term
SOFR as the benchmark interest rate and made certain conforming
changes related thereto. As of September 30, 2022, borrowings
under the Revolving Credit Facility accrued interest at Adjusted
Term SOFR (as defined in the Revolving Credit Facility) plus a
margin of 1.05% per year. The Company is required to pay a facility
fee of 0.20% per year in respect of total commitments under the
Revolving Credit Facility. Interest rate and facility fees are
subject to increases or decreases based on declines or improvements
in the credit ratings for the Company’s debt.
In June 2022, the Company increased the aggregate facility capacity
by an additional $122.5 million and also extended the maturity
of $125.0 million in commitments to May 5, 2026. As of
November 3, 2022, the Company had total revolving commitments
of approximately $7.1 billion. Lenders held revolving
commitments totaling approximately $6.7 billion that mature on
May 5, 2026, commitments totaling $32.5 million that mature on
May 5, 2025 and commitments totaling $375.0 million that
mature on May 5, 2023.
Other debt financings
From time to time, the Company enters into other debt financings
such as unsecured term financings and secured term financings,
including export credit. As of September 30, 2022, the
outstanding balance on other debt financings was
$317.1 million and the Company had pledged three aircraft as
collateral with a net book value of $214.6 million. As of
December 31, 2021, the outstanding balance on other debt
financings was $312.0 million and the Company had pledged
three aircraft as collateral with a net book value of $222.2
million.
Maturities
Maturities of debt outstanding as of September 30, 2022 are as
follows:
|
|
|
|
|
|
|
(in thousands) |
|
Years ending December 31, |
|
|
2022 |
$ |
683,152 |
|
|
2023 |
2,621,611 |
|
|
2024 |
2,863,800 |
|
|
2025 |
2,409,553 |
|
|
2026 |
4,953,021 |
|
|
Thereafter |
5,420,176 |
|
|
Total |
$ |
18,951,313 |
|
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4. Flight equipment subject to
operating lease
The following table summarizes the activities for the Company’s
flight equipment subject to operating lease for the nine months
ended September 30, 2022:
|
|
|
|
|
|
|
(in thousands) |
|
Net book value as of December 31, 2021 |
$ |
22,899,004 |
|
|
Purchase of aircraft |
2,784,350 |
|
|
Depreciation |
(713,095) |
|
|
Sale of aircraft and transfers to net investments in sales-type
leases |
(250,383) |
|
|
Write-off of Russian fleet |
(791,017) |
|
|
Net book value as of September 30, 2022 |
$ |
23,928,859 |
|
|
|
|
|
Accumulated depreciation as of September 30, 2022 |
$ |
(4,727,410) |
|
Write-off of Russian fleet
In response to the sanctions against certain industry sectors and
parties in Russia, in March 2022, the Company terminated all of its
leasing activities in Russia. While the Company maintains title to
the aircraft, the Company determined that it is unlikely it will
regain possession of the aircraft detained in Russia. As such,
during the three months ended March 31, 2022, the Company
recognized a loss from asset write-offs of its interests in owned
aircraft detained in Russia, totaling approximately
$791.0 million.
In October 2022, one Boeing 737-8 MAX aircraft that was detained in
Russia was returned to the Company. The returned 737-8 MAX was not
operating and had been in storage in Russia since the 737 MAX
grounding. In the fourth quarter of 2022, the Company will record
the aircraft in its owned fleet at fair value with a corresponding
offset to the write-off line item in the income statement. At this
time, the Company does not anticipate the return of any other
aircraft detained in Russia.
As of November 3, 2022, 20 aircraft previously included in the
Company’s owned fleet are still detained in Russia. The operators
of these aircraft have continued to fly most of the aircraft
notwithstanding the termination of leasing activities and the
Company’s ongoing demands for the return of its assets. In June
2022, the Company submitted insurance claims to its insurers to
recover its losses relating to the aircraft detained in Russia and
is vigorously pursuing all available insurance claims. Collection,
timing and amounts of any insurance recoveries remains uncertain at
this time.
Note 5. Commitments and
Contingencies
Aircraft Acquisition
As of September 30, 2022, the Company had commitments to
purchase 412 aircraft from Boeing and Airbus for delivery through
2028, with an estimated aggregate commitment of
$26.2 billion.
The table is subject to change based on Airbus and Boeing delivery
delays. As noted below, the Company expects delivery delays for
some aircraft in its orderbook. The Company remains in discussions
with Boeing and Airbus to determine the extent and duration of
delivery delays; however, the Company is not yet able to determine
the full impact of these delays.
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Delivery Years |
|
|
|
Aircraft Type |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
Thereafter |
|
Total |
|
Airbus A220-100/300 |
|
4 |
|
|
13 |
|
|
25 |
|
|
20 |
|
|
12 |
|
|
— |
|
|
74 |
|
|
Airbus A320/321neo(1)
|
|
14 |
|
|
22 |
|
|
24 |
|
|
24 |
|
|
35 |
|
|
64 |
|
|
183 |
|
|
Airbus A330-900neo |
|
3 |
|
|
6 |
|
|
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
13 |
|
|
Airbus A350-900/1000 |
|
1 |
|
|
3 |
|
|
3 |
|
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
|
Airbus A350F |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
5 |
|
|
7 |
|
|
Boeing 737-8/9 MAX |
|
11 |
|
|
29 |
|
|
33 |
|
|
19 |
|
|
16 |
|
|
— |
|
|
108 |
|
|
Boeing 787-9/10 |
|
1 |
|
|
5 |
|
|
4 |
|
|
10 |
|
|
— |
|
|
— |
|
|
20 |
|
|
Total(2)
|
|
34 |
|
|
78 |
|
|
93 |
|
|
73 |
|
|
65 |
|
|
69 |
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company’s Airbus A320/321neo aircraft orders include 26
long-range variants and 49 extra long-range variants.
|
|
(2) The table above reflects Airbus and Boeing aircraft delivery
delays based on contractual documentation. |
Pursuant to the Company’s purchase agreements with Boeing and
Airbus, the Company agrees to contractual delivery dates for each
aircraft ordered. These dates can change for a variety of reasons,
however for the last several years, manufacturing delays have
significantly impacted the planned purchases of the Company’s
aircraft on order with Boeing and Airbus. The Company is currently
experiencing delivery delays with both Boeing and Airbus
aircraft.
The aircraft purchase commitments discussed above could also be
impacted by cancellations. The Company’s purchase agreements with
Boeing and Airbus generally provide each of the Company and the
manufacturers with cancellation rights for delivery delays starting
at one year after the original contractual delivery date,
regardless of cause. In addition, the Company’s lease agreements
generally provide each of the Company and the lessee with
cancellation rights related to certain aircraft delivery delays
that typically parallel the cancellation rights in the Company’s
purchase agreements.
Commitments for the acquisition of these aircraft, calculated at an
estimated aggregate purchase price (including adjustments for
anticipated inflation) of approximately $26.2 billion as of
September 30, 2022, are as follows:
|
|
|
|
|
|
|
Years ending December 31, |
|
|
2022 |
$ |
2,230,839 |
|
|
2023 |
5,385,941 |
|
|
2024 |
5,877,320 |
|
|
2025 |
4,606,225 |
|
|
2026 |
3,683,009 |
|
|
Thereafter |
4,419,134 |
|
|
Total |
$ |
26,202,468 |
|
The Company has made non-refundable deposits on flight equipment
purchases of $1.5 billion as of September 30, 2022 and
December 31, 2021, which are subject to manufacturer
performance commitments. If the Company is unable to satisfy its
purchase commitments, the Company may be forced to forfeit its
deposits and may also be exposed to breach of contract claims by
its lessees as well as the manufacturers.
Note 6. Rental Income
As of September 30, 2022, minimum future rentals on
non-cancellable operating leases of flight equipment in the
Company’s owned fleet, which have been delivered as of
September 30, 2022 are as follows:
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
Years ending December 31, |
|
|
2022 (excluding the nine months ended September 30,
2022)
|
$ |
552,722 |
|
|
2023 |
2,169,168 |
|
|
2024 |
2,050,201 |
|
|
2025 |
1,905,764 |
|
|
2026 |
1,704,843 |
|
|
Thereafter |
6,713,920 |
|
|
Total |
$ |
15,096,618 |
|
Note 7. Earnings/(Loss) Per Share
Basic earnings/(loss) per share is computed by dividing net
income/(loss) by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into
common stock; however, potential common equivalent shares are
excluded if the effect of including these shares would be
anti-dilutive. The Company’s two classes of common stock,
Class A and Class B non-voting, have equal rights to
dividends and income, and therefore, basic and diluted earnings per
share are the same for each class of common stock. As of
September 30, 2022, the Company did not have any Class B
non-voting common stock
outstanding.
Diluted earnings per share takes into account the potential
conversion of stock options, restricted stock units, and warrants
using the treasury stock method and convertible notes using the
if-converted method. Since the Company was in a loss position for
the nine months ended September 30, 2022, diluted net loss per
share is the same as basic net loss per share for the period as the
inclusion of all potential common shares outstanding would have
been anti-dilutive. For the nine months ended September 30,
2022, the Company excluded 329,947 potentially dilutive securities,
whose effect would have been anti-dilutive, from the computation of
diluted earnings per share. For the three months ended
September 30, 2022, the Company did not exclude any
potentially dilutive securities, whose effect would have been
anti-dilutive, from the computation of diluted earnings per share.
For the three and nine months ended September 30, 2021, the
Company did not exclude any potentially dilutive securities, whose
effect would have been anti-dilutive, from the computation of
diluted earnings per share. The Company excluded 976,509 and
1,083,635 shares related to restricted stock units for which the
performance metric had yet to be achieved as of September 30,
2022 and 2021, respectively.
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table sets forth the reconciliation of basic and
diluted earnings/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands, except share and per share) |
|
Basic earnings/(loss) per share: |
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
Net income/(loss) |
$ |
110,381 |
|
|
$ |
107,337 |
|
|
$ |
(242,334) |
|
|
$ |
284,851 |
|
|
Preferred stock dividends |
(10,425) |
|
|
(7,331) |
|
|
(31,275) |
|
|
(19,010) |
|
|
Net income/(loss) attributable to common stockholders |
$ |
99,956 |
|
|
$ |
100,006 |
|
|
$ |
(273,609) |
|
|
$ |
265,841 |
|
|
Denominator |
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
110,892,097 |
|
|
114,122,512 |
|
|
111,874,002 |
|
|
114,071,951 |
|
|
Basic earnings/(loss) per share |
$ |
0.90 |
|
|
$ |
0.88 |
|
|
$ |
(2.45) |
|
|
$ |
2.33 |
|
|
Diluted earnings/(loss) per share: |
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
Net income/(loss) |
$ |
110,381 |
|
|
$ |
107,337 |
|
|
$ |
(242,334) |
|
|
$ |
284,851 |
|
|
Preferred stock dividends |
(10,425) |
|
|
(7,331) |
|
|
(31,275) |
|
|
(19,010) |
|
|
Net income/(loss) attributable to common stockholders |
$ |
99,956 |
|
|
$ |
100,006 |
|
|
$ |
(273,609) |
|
|
$ |
265,841 |
|
|
Denominator |
|
|
|
|
|
|
|
|
Number of shares used in basic computation |
110,892,097 |
|
114,122,512 |
|
111,874,002 |
|
114,071,951 |
|
Weighted-average effect of dilutive securities |
198,036 |
|
|
259,109 |
|
— |
|
343,218 |
|
Number of shares used in per share computation |
111,090,133 |
|
|
114,381,621 |
|
|
111,874,002 |
|
|
114,415,169 |
|
|
Diluted earnings/(loss) per share |
$ |
0.90 |
|
|
$ |
0.87 |
|
|
$ |
(2.45) |
|
|
$ |
2.32 |
|
Note 8. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring and
Non-recurring Basis
The Company has a cross-currency swap related to its Canadian
dollar Medium-Term Notes which were issued in December 2019. The
fair value of the swap as a foreign currency exchange derivative is
categorized as a Level 2 measurement in the fair value hierarchy
and is measured on a recurring basis. As of September 30,
2022, the estimated fair value of the foreign currency exchange
derivative liability was $7.6 million. As of December 31,
2021, the estimated fair value of the foreign currency exchange
derivative asset was $14.1 million.
Financial Instruments Not Measured at Fair Values
The fair value of debt financing is estimated based on the quoted
market prices for the same or similar issues, or on the current
rates offered to the Company for debt of the same remaining
maturities, which would be categorized as a Level 2 measurement in
the fair value hierarchy. The estimated fair value of debt
financing as of September 30, 2022, was $17.2 billion compared
to a book value of $19.0 billion. The estimated fair value of debt
financing as of December 31, 2021 was $17.6 billion compared
to a book value of $17.2 billion.
The following financial instruments are not measured at fair value
on the Company’s Consolidated Balance Sheets at September 30,
2022, but require disclosure of their fair values: cash and cash
equivalents and restricted cash. The estimated fair value of such
instruments at September 30, 2022 and December 31, 2021
approximates their carrying value as reported on the Consolidated
Balance Sheets. The fair value of all these instruments would be
categorized as Level 1 in the fair value hierarchy.
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 9. Shareholders’ Equity
The Company was authorized to issue 500,000,000 shares of Class A
common stock, $0.01 par value, at September 30, 2022 and
December 31, 2021. As of September 30, 2022 and
December 31, 2021, the Company had 110,892,097 and 113,987,154
Class A common shares issued and outstanding, respectively. The
Company was authorized to issue 10,000,000 shares of Class B common
stock, $0.01 par value at September 30, 2022 and
December 31, 2021. The Company did not have any shares of
Class B non-voting common stock, $0.01 par value, issued or
outstanding as of September 30, 2022 or December 31,
2021.
During the nine months ended September 30, 2022, the Company
repurchased 3,420,874 shares of its Class A common stock under its
previously announced stock repurchase program at an average
purchase price of $43.85 per share. Such repurchases completed the
repurchase of the entire $150.0 million of outstanding shares
authorized under the Company’s stock repurchase program. The
Company completed the share repurchase program in April
2022.
The Company was authorized to issue 50,000,000 shares of preferred
stock, $0.01 par value, at September 30, 2022 and
December 31, 2021. As of September 30, 2022 and
December 31, 2021, the Company had 10.0 million shares of
6.15% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock,
Series A (the “Series A Preferred Stock”), $0.01 par value, issued
and outstanding with an aggregate liquidation preference of $250.0
million ($25.00 per share), 300,000 shares of 4.65% Fixed-Rate
Reset Non-Cumulative Perpetual Preferred Stock, Series B (the
“Series B Preferred Stock”), $0.01 par value, issued and
outstanding with an aggregate liquidation preference of $300.0
million ($1,000 per share) and 300,000 shares of 4.125% Fixed-Rate
Reset Non-Cumulative Perpetual Preferred Stock, Series C (the
“Series C Preferred Stock”), $0.01 par value, issued and
outstanding with an aggregate liquidation preference of $300.0
million ($1,000 per share).
The following table summarizes the Company’s preferred stock issued
and outstanding as of September 30, 2022 (in thousands, except
for share amounts and percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued and Outstanding as of September 30, 2022 |
|
|
|
Carrying Value
as of September 30, 2022 |
|
Issue Date |
|
Dividend Rate in Effect at September 30, 2022 |
|
Next dividend rate reset date |
|
Dividend rate after reset date |
|
Series A |
10,000,000 |
|
|
|
|
$ |
250,000 |
|
|
March 5, 2019 |
|
6.150 |
% |
|
March 15, 2024 |
|
3M LIBOR plus 3.65%
|
|
Series B |
300,000 |
|
|
|
|
300,000 |
|
|
March 2, 2021 |
|
4.650 |
% |
|
June 15, 2026 |
|
5 Yr U.S. Treasury plus 4.076%
|
|
Series C |
300,000 |
|
|
|
|
300,000 |
|
|
October 13, 2021 |
|
4.125 |
% |
|
December 15, 2026 |
|
5 Yr U.S. Treasury plus 3.149%
|
|
Total |
10,600,000 |
|
|
|
|
$ |
850,000 |
|
|
|
|
|
|
|
|
|
Note 10. Stock-based
Compensation
On May 7, 2014, the stockholders of the Company approved the Air
Lease Corporation 2014 Equity Incentive Plan (the “2014 Plan”).
Upon approval of the 2014 Plan, no new awards may be granted under
the Amended and Restated 2010 Equity Incentive Plan (the “2010
Plan”). As of September 30, 2022, the number of stock options
(“Stock Options”) and restricted stock units (“RSUs”) authorized
under the 2014 Plan is approximately 4,220,763. The Company has
issued RSUs with four different vesting criteria: those RSUs that
vest based on the attainment of book-value goals, those RSUs that
vest based on the attainment of Total Shareholder Return (“TSR”)
goals, time based RSUs that vest ratably over a time period of
three years and RSUs that cliff vest at the end of a
one or two year period.
As of September 30, 2022, the Company had no outstanding Stock
Options and no unrecognized compensation costs related to
outstanding Stock Options. For the three and nine months ended
September 30, 2022 and 2021, there were no stock-based
compensation expenses related to Stock Options.
The Company recorded $5.8 million and $6.7 million of stock-based
compensation expense related to RSUs for the three months ended
September 30, 2022 and 2021, respectively.
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company recorded $9.8 million and $18.8 million of stock-based
compensation expense related to RSUs for the nine months ended
September 30, 2022 and 2021, respectively. The decrease in
stock-based compensation relates to reductions in the underlying
vesting estimates of certain book value RSUs as the performance
criteria are no longer considered probable of being
achieved.
Restricted Stock Units
Compensation cost for RSUs is measured at the grant date based on
fair value and recognized over the vesting period. The fair value
of book value and time based RSUs is determined based on the
closing market price of the Company’s Class A common stock on
the date of grant, while the fair value of RSUs that vest based on
the attainment of Total Shareholder Return (“TSR”) goals is
determined at the grant date using a Monte Carlo simulation model.
Included in the Monte Carlo simulation model were certain
assumptions regarding a number of highly complex and subjective
variables, such as expected volatility, risk-free interest rate and
expected dividends. To appropriately value the award, the risk-free
interest rate is estimated for the time period from the valuation
date until the vesting date and the historical volatilities were
estimated based on a historical timeframe equal to the time from
the valuation date until the end date of the performance
period.
During the nine months ended September 30, 2022, the Company
granted 652,016 RSUs of which 110,237 are TSR RSUs and 220,437 are
book value RSUs. The following table summarizes the activities for
the Company’s unvested RSUs for the nine months ended
September 30, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Restricted Stock Units |
|
|
Number of
Shares |
|
Weighted-Average
Grant-Date
Fair Value |
|
Unvested at December 31, 2021
|
|
1,571,415 |
|
|
$ |
43.88 |
|
|
Granted |
|
652,016 |
|
|
$ |
47.24 |
|
|
Vested |
|
(542,060) |
|
|
$ |
42.50 |
|
|
Forfeited/canceled |
|
(166,233) |
|
|
$ |
40.47 |
|
|
Unvested at September 30, 2022
|
|
1,515,138 |
|
|
$ |
45.90 |
|
|
Expected to vest after September 30, 2022
|
|
1,314,519 |
|
|
$ |
46.53 |
|
As of September 30, 2022, there was $34.4 million of
unrecognized compensation expense related to unvested stock-based
payments granted to employees. Total unrecognized compensation
expense will be recognized over a weighted-average remaining period
of 1.90 years.
Note 11. Aircraft Under Management
As of September 30, 2022, the Company managed 87 aircraft
across three aircraft management platforms. The Company managed 47
aircraft through its Thunderbolt platform, 35 aircraft through the
Blackbird investment funds and five on behalf of a financial
institution.
As of September 30, 2022, the Company managed 35 aircraft on behalf
of third-party investors through two investment funds, Blackbird I
and Blackbird II. These funds invest in commercial jet aircraft and
lease them to airlines throughout the world. The Company provides
management services to these funds for a fee. As of
September 30, 2022, the Company's non-controlling interests in
each fund were 9.5% and are accounted for under the equity method
of accounting. The Company’s investments in these funds aggregated
$64.1 million and $73.2 million as of September 30,
2022 and December 31, 2021, respectively, and are included in
Other assets on the Consolidated Balance Sheets.
Additionally, the Company continues to manage aircraft that it
sells through its Thunderbolt platform. The Thunderbolt platform
facilitates the sale of mid-life aircraft to investors while
allowing the Company to continue the management of these aircraft
for a fee. As of September 30, 2022, the Company managed 47
aircraft across three separate transactions. The Company has
non-controlling interests in two of these entities of approximately
5.0%, which are accounted for under the cost method of accounting.
The Company’s total investment in aircraft sold through its
Thunderbolt platform was $8.8 million and $9.3 million as
of September 30, 2022 and December 31, 2021, respectively
and is included in Other assets on the Consolidated Balance
Sheets.
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In response to the sanctions against certain industry sectors and
parties in Russia, in March 2022 the Company terminated all of its
leasing activities in Russia. Eight leases for aircraft in the
Company’s managed fleet were also terminated. As of
November 3, 2022, six aircraft previously included in the
Company’s managed fleet are detained in Russia. While the
applicable managed platform maintains title to the aircraft, the
Company has determined that it is unlikely that the Company or they
will regain possession of the aircraft detained in Russia. As a
result, during the three months ended March 31, 2022, the Company
recognized asset write-offs of $11.4 million related to its
investments in the managed platforms that own such aircraft. During
the three months ended June 30, 2022 and September 30, 2022,
the Company did not recognize any asset write-offs related to its
investments in the managed platforms. The six aircraft detained in
Russia were removed from the Company’s managed fleet count as of
March 31, 2022.
Note 12. Net Investment in Sales-type Leases
As of September 30, 2022, the Company had nine A320-200
aircraft on lease to an airline with terms that meet the criteria
of being classified as a sales-type lease.
Net investment in sales-type leases
was included in Other assets in the Company’s Consolidated Balance
Sheets based on the present value of fixed payments under the
contract and the residual value of the underlying asset, discounted
at the rate implicit in the lease. The Company’s investment in
sales-type leases consisted of the following (in
thousands):
|
|
|
|
|
|
|
September 30, 2022 |
|
Future minimum lease payments to be received |
$ |
217,300 |
|
|
Estimated residual values of leased flight equipment |
82,520 |
|
|
Less: Unearned income |
(43,263) |
|
|
Net Investment in Sales-type Leases |
$ |
256,557 |
|
As of September 30, 2022, future minimum lease payments to be
received on sales-type leases were as follows:
|
|
|
|
|
|
|
(in thousands) |
| Years
ending December 31, |
|
|
2022 (excluding the nine months ended September 30,
2022)
|
$ |
5,125 |
|
|
2023 |
22,140 |
|
|
2024 |
22,140 |
|
|
2025 |
22,140 |
|
|
2026 |
22,140 |
|
|
Thereafter |
123,615 |
|
|
Total |
$ |
217,300 |
|
Note 13. Flight Equipment Held for Sale
As of September 30, 2022, the Company had four aircraft, with
a carrying value of $146.3 million, which were held for sale
and included in Flight equipment subject to operating leases on the
Consolidated Balance Sheets. During the three months ended
September 30, 2022, the Company completed the sale of one aircraft
from its held for sale portfolio. The Company expects the sale of
all four aircraft to be completed by the end of the first quarter
of 2023. The Company ceases recognition of depreciation expense
once an aircraft is classified as held for sale. As of
December 31, 2021, the Company did not have any flight
equipment classified as held for sale.
Note 14. Subsequent Events
In October 2022, one Boeing 737-8 MAX aircraft that was detained in
Russia was returned to the Company. See Note 4 “Flight equipment
subject to operating lease” for more information.
On November 2, 2022, the Company’s board of directors approved
quarterly dividends for the Company’s Class A common stock and
Series A, B and C Preferred Stock. The following table summarizes
the details of the dividends that were declared:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of each class |
|
Cash dividend per share |
|
Record Date |
|
Payment Date |
|
Class A Common Stock |
|
$ |
0.20 |
|
|
December 16, 2022 |
|
January 10, 2023 |
|
Series A Preferred Stock |
|
$ |
0.384375 |
|
|
November 30, 2022 |
|
December 15, 2022 |
|
Series B Preferred Stock |
|
$ |
11.625 |
|
|
November 30, 2022 |
|
December 15, 2022 |
|
Series C Preferred Stock |
|
$ |
10.3125 |
|
|
November 30, 2022 |
|
December 15, 2022 |
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition
and results of operations should be read together with our
Consolidated Financial Statements and related notes included in
Part I, Item 1 of this Quarterly Report on
Form 10-Q.
Overview
Air Lease Corporation (the “Company”, “ALC”, “we”, “our” or “us”)
is a leading aircraft leasing company that was founded by aircraft
leasing industry pioneer, Steven F. Udvar-Házy. We are principally
engaged in purchasing the most modern, fuel-efficient new
technology commercial jet aircraft directly from aircraft
manufacturers, such as The Boeing Company (“Boeing”) and Airbus
S.A.S. (“Airbus”), and leasing those aircraft to airlines
throughout the world with the intention to generate attractive
returns on equity. In addition to our leasing activities, we sell
aircraft from our fleet to third-parties, including other leasing
companies, financial services companies, airlines and other
investors. We also provide fleet management services to investors
and owners of aircraft portfolios for a management fee. Our
operating performance is driven by the growth of our fleet, the
terms of our leases, the interest rates on our debt, and the
aggregate amount of our indebtedness, supplemented by gains from
aircraft sales and our management fees.
Third Quarter Overview
As of September 30, 2022, the net book value of our fleet was
$23.9 billion, compared to $22.9 billion as of
December 31, 2021. During the three months ended
September 30, 2022, we purchased and took delivery of 14
aircraft from our new order pipeline and sold one aircraft, ending
the period with a total of 405 aircraft in our owned aircraft
portfolio. The weighted average age of our fleet was 4.5 years and
the weighted average lease term remaining was 7.0 years as of
September 30, 2022. We had a managed fleet of 87 aircraft as
of September 30, 2022 as compared to a managed fleet of 92
aircraft as of December 31, 2021. We have a globally
diversified customer base comprised of 115 airlines in 61 countries
as of September 30, 2022. As of November 3, 2022, all
aircraft in our fleet, except for two aircraft, were subject to
lease agreements or letters of intent.
As of September 30, 2022, we had commitments to purchase 412
aircraft from Boeing and Airbus for delivery through 2028, with an
estimated aggregate commitment of $26.2 billion. We have
placed approximately 99% of our committed orderbook on long-term
leases for aircraft delivering through the end of 2023 and have
placed 58% of our entire orderbook. We ended the third quarter of
2022 with $30.9 billion in committed minimum future rental
payments, consisting of $15.1 billion in contracted minimum
rental payments on the aircraft in our existing fleet and
$15.8 billion in minimum future rental payments related to
aircraft which will deliver between 2022 through 2027.
We typically finance the purchase of aircraft and our business with
available cash balances, internally generated funds, including
through aircraft sales, preferred stock issuances, and debt
financings. We ended the third quarter of 2022 with an aggregate
borrowing capacity under our revolving credit facility of
$5.6 billion and total liquidity of $6.7 billion. As of
September 30, 2022, we had total debt outstanding of
$19.0 billion, of which 87.0% was at a fixed rate and 99.3%
was unsecured. As of September 30, 2022, our composite cost of
funds raised through debt financings was 2.85%.
Our total revenues for the quarter ended September 30, 2022
increased by 7.0% to $561.3 million, compared to the quarter
ended September 30, 2021. The increase in total revenues was
primarily driven by the continued growth in our fleet,
significantly lower lease restructuring losses and higher aircraft
sales, trading and other revenue, offset by the loss of rental
revenue from the termination of our leasing activities in Russia
and cash basis accounting. During the quarter, we did not recognize
$6.2 million in revenue due to cash basis accounting as compared to
$5.4 million in cash basis revenue recognized during the three
months ended September 30, 2021. The increase in aircraft sales,
trading and other revenue was primarily due to $11.6 million in
gains from the sale of one aircraft and four sales-type lease
transactions for the three months ended September 30,
2022.
During the third quarter of 2022, the industry continued to recover
from the impact of COVID-19. As of September 30, 2022, we had
$163.1 million in outstanding deferred rentals due to the
impact of the COVID-19 pandemic as compared to $203.2 million
as of December 31, 2021. Our collection rate for the three and
nine months ended September 30, 2022 was 92% and 95%,
respectively. Our collection rate is defined as the sum of cash
collected from lease rentals and maintenance reserves, including
cash recovered from outstanding receivables from previous periods,
as a percentage of the total contracted receivables due during the
period and is calculated after giving effect to lease deferral
arrangements made as of September 30, 2022. Our lease
utilization rate for the three and
nine months ended September 30, 2022 was 99.7%. Lease
utilization rate is calculated based on the number of days each
aircraft was subject to a lease or letter of intent during the
period, weighted by the net book value of the
aircraft.
During the three months ended September 30, 2022, we recorded
net income attributable to shareholders of $100.0 million, or $0.90
per diluted share, as compared to net income attributable to
shareholders of $100.0 million, or $0.87 per diluted share,
for the three months ended September 30, 2021. We recorded adjusted
net income before income taxes for the three months ended
September 30, 2022 of $146.3 million or $1.32 per diluted
share. This decreased by approximately 0.1% over the prior period
results of $146.5 million or $1.28 per diluted share for the
three months ended September 30, 2021. Net income attributable
to common stockholders and adjusted net income before income taxes
remained in-line with the prior year period, primarily due to
increases in interest, depreciation and selling, general and
administrative expenses which partially offset the revenue
increases discussed above.
Adjusted net income before income taxes and adjusted diluted
earnings per share before income taxes are measures of financial
and operational performance that are not defined by U.S. Generally
Accepted Accounting Principles (“GAAP”). See “Results of
Operations” below for a discussion of adjusted net income before
income taxes and adjusted diluted earnings per share before income
taxes as non-GAAP measures and a reconciliation of these measures
to net income attributable to common stockholders.
Impact of Russia-Ukraine Conflict
In connection with the ongoing conflict between Russia and Ukraine,
the United States, European Union, United Kingdom and others have
imposed, and may continue to impose, economic sanctions and export
controls against certain industry sectors and parties in Russia.
These sanctions include closures of airspace for aircraft operated
by Russian controlled entities, bans on the leasing or sale of
aircraft to Russian controlled entities, bans on the export and
re-export of aircraft and aircraft components to Russian controlled
entities or for use in Russia, and corresponding prohibitions on
providing technical assistance, brokering services, insurance and
reinsurance, as well as financing or financial
assistance.
In response to the sanctions, in March 2022 we terminated all of
our leasing activities in Russia, consisting of 24 aircraft in our
owned fleet, eight aircraft in our managed fleet and the leasing
activity relating to 29 aircraft that have not yet delivered from
our orderbook, for which the majority have been subsequently
placed. In the first quarter of 2022, we also canceled five
aircraft in our orderbook that were slated for delivery in
Russia.
While we or the applicable managed platform maintain title to the
aircraft, we determined that it is unlikely we or they will regain
possession of the aircraft that are detained in Russia. As a
result, we recorded a write-off of our interests in our owned and
managed aircraft that are detained in Russia, totaling
approximately $802.4 million for the three months ended March
31, 2022. The 21 aircraft that remained in Russia were removed from
our fleet as of March 31, 2022. In June 2022, we submitted
insurance claims to our insurers to recover our losses relating to
aircraft detained in Russia and during the third quarter of 2022,
we continued to vigorously pursue all available insurance claims.
In addition, we intend to pursue all available legal claims related
to our aircraft that are detained in Russia, but the timing and
amount of any recoveries under any insurance or legal claims
remains uncertain at this time.
During the second quarter of 2022, we renewed our insurance
policies which resulted in an annualized premium increase of
approximately $16.0 million. These policies apply worldwide
with exclusions for Russia, Ukraine and Belarus. Our leases require
our lessees to carry comprehensive liability insurance and aircraft
all-risk insurance. As a result, lessees operating in Russia,
Ukraine or Belarus are required to have insurance covering those
regions or they are not permitted under the terms of their lease to
operate in such countries.
In October 2022, one Boeing 737-8 MAX aircraft that was detained in
Russia was returned to us. The returned 737-8 MAX was not operating
and had been in storage in Russia since the 737 MAX grounding. In
the fourth quarter of 2022, we will record the aircraft in our
owned fleet at fair value with a corresponding offset to the
write-off line item in our income statement. We do not currently
anticipate the return of any other aircraft that are detained in
Russia.
As of November 3, 2022, 20 aircraft previously included in our
owned fleet and six aircraft previously included in our managed
fleet are still detained in Russia. The operators of these aircraft
have continued to fly most of these aircraft notwithstanding the
termination of leasing activities and ongoing demands for the
return of the assets. The 20 aircraft that are detained in Russia
and the one aircraft that was returned provided approximately $18.0
million per quarter in rental revenue. Our future revenues and cash
flows will be impacted by the termination of our leasing activities
of the aircraft in Russia.
For more information regarding the risks we face relating to the
Russia-Ukraine conflict, see “Part II — Item 1A. Risk Factors,” in
our Quarterly Report on Form 10-Q for the quarter ended March 31,
2022.
Our Fleet
References throughout this Quarterly Report on Form 10-Q to “our
fleet” refer to the aircraft included in flight equipment subject
to operating leases and do not include aircraft in our managed
fleet or aircraft classified as net investments in sales-type
leases unless the context indicates otherwise. Portfolio metrics of
our fleet as of September 30, 2022 and December 31, 2021
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Net book value of flight equipment subject to operating
lease
|
$ |
23.9 |
billion |
|
$ |
22.9 |
billion |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fleet age(1)
|
4.5 years |
|
4.4 years |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term(1)
|
7.0 years |
|
7.2 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned fleet |
405 |
|
382 |
|
|
|
|
|
|
|
|
|
|
|
|
Managed fleet |
87 |
|
92 |
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft on order |
412 |
|
431 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
904 |
|
905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current fleet contracted rentals
|
$ |
15.1 |
billion |
|
$ |
14.8 |
billion |
|
|
|
|
|
|
|
|
|
|
|
|
Committed fleet rentals
|
$ |
15.8 |
billion |
|
$ |
16.1 |
billion |
|
|
|
|
|
|
|
|
|
|
|
|
Total committed rentals
|
$ |
30.9 |
billion |
|
$ |
30.9 |
billion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Weighted-average fleet age and remaining lease term calculated
based on net book value of our flight equipment subject to
operating lease.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth the net book value and percentage of
the net book value of our flight equipment subject to operating
leases in the indicated regions based on each airline’s principal
place of business as of September 30, 2022 and
December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Region |
Net Book
Value |
|
% of Total |
|
Net Book
Value |
|
% of Total |
|
(in thousands, except percentages) |
|
Europe |
$ |
7,643,913 |
|
|
31.9 |
% |
|
$ |
7,439,993 |
|
|
32.5 |
% |
|
Asia (excluding China) |
6,861,162 |
|
|
28.7 |
% |
|
5,952,981 |
|
|
26.0 |
% |
|
China |
2,840,151 |
|
|
11.9 |
% |
|
2,934,224 |
|
|
12.8 |
% |
|
The Middle East and Africa |
2,277,419 |
|
|
9.5 |
% |
|
2,447,919 |
|
|
10.7 |
% |
|
Central America, South America, and Mexico |
1,862,807 |
|
|
7.8 |
% |
|
1,566,133 |
|
|
6.8 |
% |
|
U.S. and Canada |
1,552,050 |
|
|
6.5 |
% |
|
1,638,450 |
|
|
7.2 |
% |
|
Pacific, Australia, and New Zealand |
891,357 |
|
|
3.7 |
% |
|
919,304 |
|
|
4.0 |
% |
|
Total |
$ |
23,928,859 |
|
|
100.0 |
% |
|
$ |
22,899,004 |
|
|
100.0 |
% |
The following table sets forth the number of aircraft in our owned
fleet by aircraft type as of September 30, 2022 and
December 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
Aircraft type |
|
Number of
Aircraft |
|
% of Total |
|
Number of
Aircraft |
|
% of Total |
|
Airbus A220-300 |
|
2 |
|
|
0.5 |
% |
|
— |
|
|
— |
% |
|
Airbus A319-100 |
|
1 |
|
|
0.2 |
% |
|
1 |
|
|
0.3 |
% |
|
Airbus A320-200 |
|
28 |
|
|
6.9 |
% |
|
31 |
|
|
8.1 |
% |
|
Airbus A320-200neo |
|
26 |
|
|
6.4 |
% |
|
23 |
|
|
6.0 |
% |
|
Airbus A321-200 |
|
24 |
|
|
5.9 |
% |
|
26 |
|
|
6.8 |
% |
|
Airbus A321-200neo |
|
73 |
|
|
18.0 |
% |
|
69 |
|
|
18.1 |
% |
|
Airbus A330-200 |
|
13 |
|
|
3.2 |
% |
|
13 |
|
|
3.4 |
% |
|
Airbus A330-300 |
|
5 |
|
|
1.2 |
% |
|
8 |
|
|
2.1 |
% |
|
Airbus A330-900neo |
|
14 |
|
|
3.5 |
% |
|
9 |
|
|
2.4 |
% |
|
Airbus A350-900 |
|
13 |
|
|
3.3 |
% |
|
12 |
|
|
3.1 |
% |
|
Airbus A350-1000 |
|
6 |
|
|
1.5 |
% |
|
5 |
|
|
1.3 |
% |
|
Boeing 737-700 |
|
4 |
|
|
1.0 |
% |
|
4 |
|
|
1.0 |
% |
|
Boeing 737-800 |
|
83 |
|
|
20.5 |
% |
|
88 |
|
|
23.0 |
% |
|
Boeing 737-8 MAX |
|
44 |
|
|
10.9 |
% |
|
28 |
|
|
7.3 |
% |
|
Boeing 737-9 MAX |
|
11 |
|
|
2.8 |
% |
|
7 |
|
|
1.8 |
% |
|
Boeing 777-200ER |
|
1 |
|
|
0.2 |
% |
|
1 |
|
|
0.3 |
% |
|
Boeing 777-300ER |
|
24 |
|
|
5.9 |
% |
|
24 |
|
|
6.3 |
% |
|
Boeing 787-9 |
|
26 |
|
|
6.4 |
% |
|
26 |
|
|
6.8 |
% |
|
Boeing 787-10 |
|
6 |
|
|
1.5 |
% |
|
6 |
|
|
1.6 |
% |
|
Embraer E190 |
|
1 |
|
|
0.2 |
% |
|
1 |
|
|
0.3 |
% |
|
Total
(1)
|
|
405 |
|
|
100.0 |
% |
|
382 |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
(1) As of September 30, 2022, we had four aircraft classified
as flight equipment held for sale. As of December 31, 2021, we
did not have any flight equipment classified as held for
sale.
|
As of September 30, 2022, we had contractual commitments to
acquire a total of 412 new aircraft, with an estimated aggregate
purchase price (including adjustments for anticipated inflation) of
$26.2 billion, for delivery through 2028 as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Delivery Years |
|
|
|
Aircraft Type |
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
Thereafter |
|
Total |
|
Airbus A220-100/300 |
|
4 |
|
|
13 |
|
|
25 |
|
|
20 |
|
|
12 |
|
|
— |
|
|
74 |
|
|
Airbus A320/321neo(1)
|
|
14 |
|
|
22 |
|
|
24 |
|
|
24 |
|
|
35 |
|
|
64 |
|
|
183 |
|
|
Airbus A330-900neo |
|
3 |
|
|
6 |
|
|
4 |
|
|
— |
|
|
— |
|
|
— |
|
|
13 |
|
|
Airbus A350-900/1000 |
|
1 |
|
|
3 |
|
|
3 |
|
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
|
Airbus A350F |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2 |
|
|
5 |
|
|
7 |
|
|
Boeing 737-8/9 MAX |
|
11 |
|
|
29 |
|
|
33 |
|
|
19 |
|
|
16 |
|
|
— |
|
|
108 |
|
|
Boeing 787-9/10 |
|
1 |
|
|
5 |
|
|
4 |
|
|
10 |
|
|
— |
|
|
— |
|
|
20 |
|
|
Total(2)
|
|
34 |
|
|
78 |
|
|
93 |
|
|
73 |
|
|
65 |
|
|
69 |
|
|
412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Our Airbus A320/321neo aircraft orders include 26 long-range
variants and 49 extra long-range variants. |
|
(2) The table above reflects Airbus and Boeing aircraft delivery
delays based on contractual documentation. |
Aircraft Delivery Delays
Pursuant to our purchase agreements with Boeing and Airbus, we
agree to contractual delivery dates for each aircraft ordered.
These dates can change for a variety of reasons, however for the
last several years, manufacturing delays have significantly
impacted the planned purchases of our aircraft on order with Boeing
and Airbus. We are currently experiencing delivery delays with both
Boeing and Airbus aircraft.
Our purchase agreements with Boeing and Airbus generally provide
each of us and the manufacturers with cancellation rights for
delivery delays starting at one year after the original contractual
delivery date, regardless of cause. In addition, our lease
agreements generally provide each of us and the lessees with
cancellation rights related to certain aircraft delivery delays
that typically parallel the cancellation rights in our purchase
agreements.
As a result of continued manufacturing delays as discussed above,
our aircraft delivery schedule could continue to be subject to
material changes and delivery delays could extend beyond
2022.
The following table, which is subject to change based on Airbus and
Boeing delivery delays, shows the number of new aircraft scheduled
to be delivered as of September 30, 2022, along with the lease
placements of such aircraft as of November 3, 2022. As noted
above, we expect delivery delays for all aircraft deliveries in our
orderbook. Although we expect both Boeing and Airbus to increase
production rates meaningfully on 787s and A350s, we do not
currently see this improving the delivery delay situation through
2023. We remain in discussions with Boeing and Airbus to determine
the extent and duration of delivery delays, but we are not yet able
to determine the full impact of these delays.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delivery Year |
Number
Leased |
|
Number of
Aircraft |
|
% Leased |
|
2022 |
34 |
|
34 |
|
|
100.0 |
% |
|
2023 |
77 |
|
78 |
|
|
98.7 |
% |
|
2024 |
63 |
|
93 |
|
|
67.7 |
% |
|
2025 |
41 |
|
73 |
|
|
56.2 |
% |
|
2026 |
15 |
|
65 |
|
|
23.1 |
% |
|
Thereafter |
10 |
|
69 |
|
|
14.5 |
% |
|
Total |
240 |
|
412 |
|
|
|
|
|
|
|
|
Aircraft Industry and Sources of Revenues
Our revenues are principally derived from operating leases with
airlines throughout the world. As of September 30, 2022, we
had a globally diversified customer base of 115 airlines in 61
different countries, with over 95% of our business revenues from
airlines domiciled outside of the U.S., and we anticipate that most
of our revenues in the future will be generated from foreign
customers.
Performance of the commercial airline industry is linked to global
economic health and development. Despite the disruption caused to
the commercial airline industry by the COVID-19 pandemic since
early 2020, global air travel continues to recover and has
accelerated in most markets. The International Air Transport
Association (“IATA”) reported that passenger traffic was up 68% in
the month of August 2022 relative to the same month in the prior
year, benefiting from a significant acceleration in international
traffic and strong continued expansion of domestic traffic in most
markets. International traffic in August of 2022 rose 116% relative
to the prior year, though it remains 33% lower than the same month
in 2019. Global domestic passenger traffic in August 2022 rose 27%
relative to the prior year, and was 15% lower than the same month
in 2019. According to IATA, several international routes are now
exceeding 2019 traffic levels or are expected to exceed those
levels near-term and several domestic markets are quickly
approaching 2019 levels. We believe COVID-19 vaccination,
therapeutic treatments and the easing of travel restrictions will
continue to support the recovery of air passenger traffic and the
commercial airline industry.
Currently, we are experiencing increased demand for our aircraft as
global air traffic recovers from the pandemic. We believe supply
chain challenges will further exacerbate what was already shaping
up to be a shortage of commercial aircraft. For example, engine
manufacturer delays have impacted and may continue to impact the
ability of Boeing and Airbus to meet their contractual delivery
obligations to us. The increased demand for our aircraft, when
combined with rising interest rates and inflation, is serving
to
increase lease rates. Lease rates can be influenced by several
factors including impacts of changes in the competitive landscape
of the aircraft leasing industry, supply chain disruptions,
evolving international trade matters, epidemic diseases and
geopolitical events and therefore, are difficult to project or
forecast.
Our airline customers are facing higher operating costs as a result
of rising fuel costs, interest rates and inflation, ongoing labor
shortages and disputes, as well as delays and cancellations caused
by the global air traffic control system and airports, although the
magnitude of underlying pre-pandemic demand returning to the market
is offering a strong counterbalance to these increased costs. Many
of these customers are also exposed to currency risk related to the
appreciation of the U.S. dollar because they earn revenues in their
local currencies while a significant portion of their liabilities
and expenses are denominated in U.S. dollars, including their lease
payments to us. If our airline customers are not able to
effectively manage their operating costs and currency risk, it
could impact our financial results and cash flows.
We continue to expect more airline reorganizations, liquidations,
or other forms of bankruptcies, which may include some of our
aircraft customers and result in the early return of aircraft or
changes in our lease terms. As of the date of this filing, we had
six aircraft across two airlines which were subject to various
forms of insolvency proceedings.
We believe the aircraft leasing industry has remained resilient
over time across a variety of global economic conditions and remain
optimistic about the long-term fundamentals of our business. We
expect the aviation industry to continue to recover from the impact
of COVID-19.
Liquidity and Capital Resources
Overview
We ended the third quarter of 2022 with available liquidity of
$6.7 billion which is comprised of unrestricted cash of $1.1
billion and undrawn balances under our unsecured revolving credit
facility of $5.6 billion. We finance the purchase of aircraft
and our business operations using available cash balances,
internally generated funds, including through aircraft sales and
trading activity, and an array of financing products. We aim to
maintain investment-grade credit metrics and focus our debt
financing strategy on funding our business on an unsecured basis
with primarily fixed-rate debt from public bond offerings.
Unsecured financing provides us with operational flexibility when
selling or transitioning aircraft from one airline to another. We
also have the ability to seek debt financing secured by our assets,
as well as financings supported through the Export-Import Bank of
the United States and other export credit agencies
for future aircraft deliveries.
We have also issued preferred stock with a total aggregate stated
value of $850.0 million. Our access to a variety of financing
alternatives including unsecured public bonds, private capital,
bank debt, secured financings and preferred stock issuances serves
as a key advantage in managing our liquidity. Aircraft delivery
delays as a product of manufacturer delays are expected to further
reduce our aircraft investment and debt financing needs for the
next six to twelve months and potentially beyond.
We have a balanced approach to capital allocation based on the
following priorities, ranked in order of importance: first,
investing in modern, in-demand aircraft to profitably grow our core
aircraft leasing business while maintaining strong fleet metrics
and creating sustainable long-term shareholder value; second,
maintaining our investment grade balance sheet utilizing unsecured
debt as our primary form of financing; and finally, in lockstep
with the aforementioned priorities, returning excess cash to
shareholders through our dividend policy as well as regular
evaluation of share repurchases, as appropriate.
We ended the third quarter of 2022 with total debt outstanding of
$19.0 billion,of which 87.0% was at a fixed rate and 99.3% was
unsecured. As of September 30, 2022, our composite cost of
funds raised through debt financings was 2.85%.
Material Cash Sources and Requirements
We believe that we have sufficient liquidity from available cash
balances, cash generated from ongoing operations, available
borrowings under our unsecured revolving credit facility and
general ability to access the capital markets for opportunistic
public bond offerings to satisfy the operating requirements of our
business through at least the next 12 months. Our long-term debt
financing strategy is focused on continuing to raise unsecured debt
in the global bank and investment grade capital markets. Our
material cash sources include:
•Unrestricted
cash:
We ended the third quarter of 2022 with
$1.1 billion in unrestricted cash.
•Lease
cash flows:
We ended the third quarter of 2022 with $30.9 billion in committed
minimum future rental payments comprised of $15.1 billion in
contracted minimum rental payments on the aircraft in our existing
fleet and $15.8 billion in minimum future rental payments related
to aircraft which will deliver between 2022 through 2027. These
rental payments are a primary driver of our short and long-term
operating-cash-flow. As of September 30, 2022, our minimum
future rentals on non-cancellable operating leases for the next 12
months was $2.2 billion. For further detail on our minimum
future rentals for the remainder of 2022 and thereafter, see “Notes
to Consolidated Financial Statements” under “Item 1. Financial
Statements” in this Quarterly Report on Form 10-Q.
•Unsecured
revolving credit facility:
As of November 3, 2022, our $7.1 billion revolving credit
facility is syndicated across 53 financial institutions from
various regions of the world, diversifying our reliance on any
individual lending institution. The final maturity for the facility
is May 2026. The facility contains standard investment grade
covenants and does not condition our ability to borrow on the lack
of a material adverse effect on us or the general economy. As of
September 30, 2022, we had $1.6 billion outstanding under our
unsecured revolving credit facility.
•Senior
unsecured bonds:
We are a frequent issuer in the investment grade capital markets,
opportunistically issuing unsecured bonds, primarily through our
Medium-Term Note Program at attractive cost of funds. In 2022, we
have issued $1.5 billion of Medium-Term Notes with a weighted
average interest rate of 2.54% and we expect to have continued
access to the investment grade bond market in the future, although
we anticipate interest rates for issuances in the near term will
increase from those available in recent years.
•Aircraft
sales:
Proceeds from the sale of aircraft help supplement our liquidity
position. We expect to sell approximately $150.0 million in
aircraft for 2022 and we have a pipeline of aircraft sales totaling
approximately $700.0 million that we expect to close during the
first half of 2023, and have seen robust demand in the secondary
market to support this aircraft sales program.
•Other
sources:
In addition to the above, we generate liquidity through other
sources of debt financing (including unsecured and secured bank
term loans), issuances of preferred stock and cash received from
security deposits and maintenance reserves from our lease
agreements.
Our material cash requirements are primarily for the purchase of
aircraft and debt service payments, along with our general
operating expenses. The amount of our cash requirements depends on
a variety of factors, including, the ability of aircraft
manufacturers to meet their contractual delivery obligations to us,
the ability of our lessees to meet their contractual obligations
with us, the timing of aircraft sales from our fleet, the timing
and amount of our debt service obligations, potential aircraft
acquisitions, and the general economic environment in which we
operate.
While we have experienced a low interest rate environment for many
years, increased global inflation has led to an increase in
borrowing rates. We expect interest rates to continue to rise for
the remainder of 2022 as a result of restrictive monetary policy in
the US as well as other global markets. A higher interest rate
environment may adversely affect our businesses through increased
borrowing costs, although this impact may be offset in whole or in
part by a corresponding increase in our lease rates on new leases
and overall demand for lease product from our airline customers.
Historically there has been a lag between a rise in interest rates
and a corresponding increase in lease rates, the degree to which
has yet to be seen in the current environment.
Our material cash requirements as of September 30, 2022, are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
Thereafter |
|
Total |
|
Long-term debt obligations |
|
$ |
683,152 |
|
|
$ |
2,621,611 |
|
|
$ |
2,863,800 |
|
|
$ |
2,409,553 |
|
|
$ |
4,953,021 |
|
|
$ |
5,420,176 |
|
|
$ |
18,951,313 |
|
|
Interest payments on debt outstanding(1)
|
|
96,490 |
|
|
540,487 |
|
|
463,136 |
|
|
389,470 |
|
|
252,319 |
|
|
432,636 |
|
|
2,174,538 |
|
|
Purchase commitments(2)
|
|
2,230,839 |
|
|
5,385,941 |
|
|
5,877,320 |
|
|
4,606,225 |
|
|
3,683,009 |
|
|
4,419,134 |
|
|
26,202,468 |
|
|
Total |
|
$ |
3,010,481 |
|
|
$ |
8,548,039 |
|
|
$ |
9,204,256 |
|
|
$ |
7,405,248 |
|
|
$ |
8,888,349 |
|
|
$ |
10,271,946 |
|
|
$ |
47,328,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Future interest payments on floating rate debt are estimated
using floating rates in effect at September 30,
2022.
|
|
(2) Purchase commitments reflect future Boeing and Airbus aircraft
deliveries based on information currently available to us based on
contractual documentation. |
The above table does not include any tax payments we may pay nor
any dividends we may pay on our preferred stock or common stock.
Based on our expected cash sources and requirements for the
remainder of 2022, we believe that we have sufficient liquidity to
meet our cash requirements for aircraft deliveries and debt service
obligations. We expect that we will continue to opportunistically
access the capital markets for public bond offerings, borrow under
our unsecured revolving credit facility and borrow under unsecured
and secured bank term loans over the next 12 months.
The actual delivery dates of the aircraft in our commitments table
and expected time for payment of such aircraft may differ from our
estimates and could be further impacted by the pace at which Boeing
and Airbus can deliver aircraft, among other factors. As a result,
the timing of our purchase commitments shown in the table above may
not reflect when the aircraft investments are eventually made. For
2022, we expect to make approximately $4.0 billion in aircraft
investments with roughly $1.2 billion of aircraft investments
expected in the fourth quarter.
As of September 30, 2022, we were in compliance in all
material respects with the covenants contained in our debt
agreements. While a ratings downgrade would not result in a default
under any of our debt agreements, it could adversely affect our
ability to issue debt and obtain new financings, or renew existing
financings, and it would increase the costs of certain financings.
Our liquidity plans are subject to a number of risks and
uncertainties, including those described in our Annual Report on
Form 10-K for the year ended December 31, 2021, our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2022 and other
SEC filings.
Cash Flows
Our cash flows provided by operating activities increased by 3.1%
or $29.2 million, to $958.6 million for the nine months
ended September 30, 2022 as compared to $929.4 million
for the nine months ended September 30, 2021. Our cash flow
provided by operating activities during the nine months ended
September 30, 2022 increased due to the continued growth of
our fleet and an increase in our cash collections as compared to
the nine months ended September 30, 2021. Our cash flow used
in investing activities was $2.7 billion for the nine months
ended September 30, 2022 and $2.2 billion for the nine
months ended September 30, 2021, which resulted primarily from
the purchase of aircraft. Our cash flow provided by financing
activities was $1.8 billion for the nine months ended
September 30, 2022 as compared to $1.4 billion for the
nine months ended September 30, 2021. The increase is
primarily due to the issuance of debt, net of debt repayments,
related in part to the acquisition of aircraft
investments.
Debt
Our debt financing at September 30, 2022 and December 31,
2021 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
( in thousands, except percentages) |
|
Unsecured |
|
|
|
|
Senior notes |
$ |
17,064,248 |
|
|
$ |
16,892,058 |
|
|
Term financings |
186,775 |
|
|
167,000 |
|
|
Revolving credit facility |
1,570,000 |
|
|
— |
|
|
Total unsecured
debt financing |
18,821,023 |
|
|
17,059,058 |
|
|
Secured |
|
|
|
|
Term financings |
116,981 |
|
|
126,660 |
|
|
Export credit financing |
13,309 |
|
|
18,301 |
|
|
Total secured debt
financing |
130,290 |
|
|
144,961 |
|
|
|
|
|
|
|
Total debt financing |
18,951,313 |
|
|
17,204,019 |
|
|
Less: Debt discounts and issuance costs |
(182,256) |
|
|
(181,539) |
|
|
Debt financing, net of discounts and issuance costs |
$ |
18,769,057 |
|
|
$ |
17,022,480 |
|
|
Selected interest rates and ratios: |
|
|
|
|
Composite interest rate(1)
|
2.85 |
% |
|
2.79 |
% |
|
Composite interest rate on fixed-rate debt(1)
|
2.86 |
% |
|
2.90 |
% |
|
Percentage of total debt at a fixed-rate |
87.0 |
% |
|
94.8 |
% |
|
|
|
|
|
|
|
|
|
|
(1) This rate does not include the effect of upfront fees, facility
fees, undrawn fees or amortization of debt discounts and issuance
costs.
|
Senior unsecured notes (including Medium-Term Note
Program)
As of September 30, 2022, we had $17.1 billion in senior
unsecured notes outstanding. As of December 31, 2021, we had
$16.9 billion in senior unsecured notes
outstanding.
During the nine months ended September 30, 2022, we issued
$1.5 billion in aggregate principal amount of senior unsecured
notes comprised of (i) $750.0 million in aggregate principal
amount of 2.20% Medium-Term Notes due 2027, and (ii)
$750.0 million in aggregate principal amount of 2.875%
Medium-Term Notes due 2032.
For more information regarding our senior unsecured notes
outstanding, see Note 2 of Notes to Consolidated Financial
Statements included in Part III, Item 15 of our Annual Report on
Form 10-K for the year ended December 31, 2021.
Unsecured revolving credit facility
As of September 30, 2022, we had $1.6 billion outstanding
under our unsecured revolving credit facility (the “Revolving
Credit Facility”). As of December 31, 2021, we did not have
any amounts outstanding under our Revolving Credit Facility.
Borrowings under the Revolving Credit Facility are used to finance
our working capital needs in the ordinary course of business and
for other general corporate purposes.
In April 2022, we amended and extended our Revolving Credit
Facility through an amendment that, among other things, extended
the final maturity date from May 5, 2025 to May 5, 2026, increased
the total revolving commitments to approximately $7.0 billion
as of May 5, 2022 and replaced LIBOR with Term SOFR as the
benchmark interest rate and made certain conforming changes related
thereto. As of September 30, 2022, borrowings under the
Revolving Credit Facility accrued interest at Adjusted Term SOFR
(as defined in the Revolving Credit Facility), plus a margin of
1.05% per year. We are required to pay a facility fee of
0.20%
per year in respect of total commitments under the Revolving Credit
Facility. Interest rate and facility fees are subject to increases
or decreases based on declines or improvements in the credit
ratings for our debt.
In June 2022, we increased the aggregate facility capacity by an
additional $122.5 million and also extended the maturity of
$125.0 million in commitments to May 5, 2026. As of
November 3, 2022, we had total revolving commitments of
approximately $7.1 billion. Lenders held revolving commitments
totaling approximately $6.7 billion that mature on May 5,
2026, commitments totaling $32.5 million that mature on May 5,
2025 and commitments totaling $375.0 million that mature on
May 5, 2023.
The Revolving Credit Facility provides for certain covenants,
including covenants that limit our subsidiaries’ ability to incur,
create, or assume certain unsecured indebtedness, and our
subsidiaries’ abilities to engage in certain mergers,
consolidations, and asset sales. The Revolving Credit Facility also
requires us to comply with certain financial maintenance covenants
including minimum consolidated shareholders’ equity, minimum
consolidated unencumbered assets, and an interest coverage test. In
addition, the Revolving Credit Facility contains customary events
of default. In the case of an event of default, the lenders may
terminate the commitments under the Revolving Credit Facility and
require immediate repayment of all outstanding
borrowings.
Other debt financings
From time to time, we enter into other debt financings such as
unsecured term financings and secured term financings, including
export credit. As of September 30, 2022, the outstanding
balance on other debt financings was $317.1 million and we had
pledged three aircraft as collateral with a net book value of
$214.6 million. As of December 31, 2021, the outstanding
balance on other debt financings was $312.0 million and we had
pledged three aircraft as collateral with a net book value of
$222.2 million.
Preferred equity
The following table summarizes our preferred stock issued and
outstanding as of September 30, 2022 (in thousands, except for
share amounts and percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares Issued and Outstanding as of September 30, 2022 |
|
|
|
Carrying Value
as of September 30, 2022 |
|
Issue Date |
|
Dividend Rate in Effect at September 30, 2022 |
|
Next dividend rate reset date |
|
Dividend rate after reset date |
|
Series A |
10,000,000 |
|
|
|
|
$ |
250,000 |
|
|
March 5, 2019 |
|
6.150 |
% |
|
March 15, 2024 |
|
3M LIBOR plus 3.65% |
|
Series B |
300,000 |
|
|
|
|
300,000 |
|
|
March 2, 2021 |
|
4.650 |
% |
|
June 15, 2026 |
|
5 Yr U.S. Treasury plus 4.076% |
|
Series C |
300,000 |
|
|
|
|
300,000 |
|
|
October 13, 2021 |
|
4.125 |
% |
|
December 15, 2026 |
|
5 Yr U.S. Treasury plus 3.149% |
|
Total |
10,600,000 |
|
|
|
|
$ |
850,000 |
|
|
|
|
|
|
|
|
|
For more information regarding our preferred stock issued and
outstanding, see Note 4 of Notes to Consolidated Financial
Statements included in Part III, Item 15 of our Annual Report on
Form 10-K for the year ended December 31, 2021.
The following table summarizes the quarterly cash dividends that we
paid during the nine months ended September 30, 2022 on our
outstanding Series A, Series B and Series C Preferred
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Title of each class |
|
March 15, 2022 |
|
June 15, 2022 |
|
September 15, 2022 |
|
|
|
|
|
(in thousands) |
|
|
|
Series A Preferred Stock |
|
$3,844 |
|
$3,844 |
|
$3,843 |
|
|
|
Series B Preferred Stock |
|
$3,487 |
|
$3,487 |
|
$3,488 |
|
|
|
Series C Preferred Stock |
|
$3,094 |
|
$3,094 |
|
$3,094 |
|
|
Off‑balance Sheet Arrangements
We have not established any unconsolidated entities for the purpose
of facilitating off-balance sheet arrangements or for other
contractually narrow or limited purposes. We have, however, from
time to time established subsidiaries or trusts for the purpose of
leasing aircraft or facilitating borrowing arrangements which are
consolidated.
We have non-controlling interests in two investment funds in which
we own 9.5% of the equity of each fund. We account for our interest
in these funds under the equity method of accounting due to our
level of influence and involvement in the funds. Also, we manage
aircraft that we have sold through our Thunderbolt platform. In
connection with the sale of certain aircraft portfolios through our
Thunderbolt platform, we hold non-controlling interests of
approximately 5.0% in two entities. These investments are accounted
for under the cost method of accounting.
Impact of LIBOR Transition
On March 5, 2021, the Chief Executive of the U.K. Financial Conduct
Authority, which regulates LIBOR, publicly announced that no new
contracts using U.S. dollar LIBOR should be entered into after
December 31, 2021, and that publication of certain tenors of U.S.
dollar LIBOR (including overnight and one, three, six and 12
months) will permanently cease after June 30, 2023. In the United
States, efforts to identify a set of alternative U.S. dollar
reference interest rates are ongoing, and the Alternative Reference
Rate Committee (“ARRC”) has recommended the use of a Secured
Overnight Funding Rate (“SOFR”). SOFR is different from LIBOR in
that it is a backward-looking secured rate rather than a
forward-looking unsecured rate. For cash products and loans, the
ARRC has also recommended Term SOFR, which is a forward-looking
SOFR based on SOFR futures and may in part reduce differences
between SOFR and LIBOR.
As of
September 30, 2022,
we had approximately $0.8 billion
of floating rate debt outstanding that used either one or
three-month LIBOR as the applicable reference rate to calculate the
interest on such debt, of which $155.5 million is set to
mature after June 30, 2023. Additionally, our perpetual Series A
Preferred Stock is set to accrue dividends at a floating rate
determined by reference to three-month LIBOR, if available,
beginning March 15, 2024. While all of our agreements governing
LIBOR-linked debt obligations and Series A Preferred Stock
obligations that are set to mature after June 30, 2023 contain
LIBOR transition fallback provisions, the lack of a standard market
practice and inconsistency in fallback provisions in recent years
is reflected across the agreements governing our floating rate debt
and Series A Preferred Stock. For our Series A Preferred Stock, if
we determine there is no such alternative reference rate as of
March 15, 2024, then we must select an independent financial
advisor to determine a substitute rate for LIBOR, and if an
independent financial advisor cannot determine an alternative
reference rate, the dividend rate, business day convention and
manner of calculating dividends applicable during the fixed-rate
period of the Series A Preferred Stock will be in
effect.
In April 2022, we amended and extended our Revolving Credit
Facility through an amendment that, among other things, replaced
LIBOR with Term SOFR as the benchmark interest rate. After that
amendment, borrowings under the amended Revolving Credit Facility
accrue interest at Adjusted Term SOFR (as defined in the Revolving
Credit Facility), plus a margin of 1.05% per year subject to
increases or decreases based on declines or improvements in the
credit ratings for our debt.
The implementation of a substitute reference rate for the
calculation of interest rates under our LIBOR linked debt and
Series A Preferred Stock obligations may cause us to incur expenses
in effecting the transition and may result in disputes with our
lenders or holders of Series A Preferred Stock over the
appropriateness or comparability to LIBOR of the substitute
reference rate selected. However, we do not expect the LIBOR
transition impact will have a material effect on our financial
results based on our anticipated LIBOR linked outstanding debt and
Series A Preferred Stock at June 30, 2023.
If the rate used to calculate interest on our outstanding floating
rate debt that as of September 30, 2022, used LIBOR and our
Series A Preferred Stock were to increase by 1.0% either as a
result of an increase in LIBOR or the result of the use of an
alternative reference rate determined under the fallback provisions
in the applicable financial instrument when LIBOR is discontinued,
we would expect to incur additional interest expense and preferred
dividends of $8.4 million and $2.5 million, respectively
on such indebtedness and our Series A Preferred Stock as of
September 30, 2022 on an annualized basis.
Credit Ratings
In June 2022, Fitch Ratings reaffirmed our corporate rating,
long-term debt credit rating and outlook. Our investment-grade
corporate and long-term debt credit ratings help us to lower our
cost of funds and broaden our access to attractively priced
capital. The following table summarizes our current credit
ratings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating Agency |
|
Long-term Debt |
|
Corporate Rating |
|
Outlook |
|
Date of Last Ratings Action |
|
Kroll Bond Ratings
|
A- |
|
A- |
|
Stable |
|
March 25, 2022 |
|
Standard and Poor's
|
BBB |
|
BBB |
|
Stable |
|
April 21, 2022 |
|
Fitch Ratings
|
BBB |
|
BBB |
|
Stable |
|
June 28, 2022 |
While a ratings downgrade would not result in a default under any
of our debt agreements, it could adversely affect our ability to
issue debt and obtain new financings, or renew existing financings,
and it would increase the cost of our financings.
Results of Operations
The following table presents our historical operating results for
the three and nine months ended September 30, 2022 and 2021
(in thousands, except per share amounts and percentages):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
(unaudited) |
|
Revenues |
|
|
|
|
|
|
|
|
|
Rental of flight equipment |
|
$ |
541,397 |
|
$ |
519,535 |
|
$ |
1,653,223 |
|
$ |
1,439,674 |
|
Aircraft sales, trading and other |
|
19,937 |
|
4,974 |
|
62,469 |
|
51,539 |
|
Total revenues |
|
561,334 |
|
524,509 |
|
1,715,692 |
|
1,491,213 |
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
Interest |
|
122,348 |
|
114,659 |
|
358,621 |
|
346,244 |
|
Amortization of debt discounts and issuance costs |
|
13,162 |
|
12,571 |
|
|