Good day, ladies and gentlemen, and welcome to the Third Quarter 2014 Air Lease Corporation Earnings Conference Call. My name is Sara, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Ryan McKenna, Head of Strategic Planning and Investor Relations. Please proceed, sir.

Good afternoon, everyone, and welcome to Air Lease Corporation's Third Quarter 2014 Earnings Call. This is Ryan McKenna, Vice President. And I am joined this afternoon by Steve Hazy, our Chairman and Chief Executive Officer; John Plueger, our President and Chief Operating Officer; and Greg Willis, our Senior Vice President and Chief Financial Officer. Earlier today, we published our third quarter 2014 results. A copy of our earnings release is available on the investors section of our website, at www.airleasecorp.com. This conference call is being webcast and recorded today, Thursday, November 6, 2014, and the webcast will be available for replay on our website. [Operator Instructions] Before we begin, please note that certain statements in this conference call, including certain answers to your questions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including without limitation, statements regarding our future operations and performance, revenues, operating expenses, other income and expense and stock-based compensation expense. These statements and any projection as to the company's future performance represent management's estimates of future results and speak only as of today, November 6, 2014. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the Securities and Exchange Commission for a more detailed description of the Risk Factors that may affect our results. Air Lease Corporation assumes no obligation to update any forward-looking statements or information in light of new information or future events. Unauthorized recording of this conference call is not permitted. I would now like to turn the call over to our Chairman and Chief Executive Officer, Steve Hazy.

Thanks, Ryan. Good afternoon, and thank you for joining us today. I'm pleased to report that Air Lease generated $0.58 of diluted EPS in the third quarter of 2014 compared with $0.46 in the third quarter of 2013, which is an increase of 26%. Our total revenues for the third quarter of 2014 were $262 million versus $216 million in 2013, an increase of 21.3% over the prior year. ALC's pretax income in Q3 2014 was $96.3 million versus $74.9 million in the prior year, which is a 28.6% increase. We successfully increased the proportion of our fixed rate debt to 76.3% while maintaining a low overall deposit rate of 3.67%, which reflects the continued strengthening of our investment grade credit profile. The overall industry has remained healthy despite numerous macro headlines during the past few months. Passengers keep flying at record numbers and airlines are remaining disciplined on capacity growth. On Tuesday, the International Air Transport Association, IATA, reported very strong year-to-date RPK growth of 5.9% and available seat kilometer growth of 5.7% versus the first 9 months of 2013. Additionally, passenger load factors continue to track at its solid year-to-date levels of 80.3%. When coupled with the recent reduction in jet fuel prices, these facts help to create an environment suited for strong airline financial results. As you can see from another quarter of consistently strong performance from ALC, our business prospects are not linked to news headlines or the health of any single airline, but rather the overall demand environment for aircraft and our ability to profit from fleet movements. We continue to see strong demand for our new aircraft as well as healthy purchase bids for our used aircraft. As we have mentioned in our prior calls, Air Lease has been focused on supplementing our core…

Thanks, Steve. During the third quarter, we delivered 9 new aircraft from our order book and sold 4 aircraft from our fleet, ending the quarter with 212 aircraft owned in our portfolio. As you look forward to Q4, we have 9 aircraft scheduled for delivery, which is typically a lighter period of deliveries than in Q2 and Q3. We are 100% placed in 2014 and '15 and have now made more progress, placing over 65% of our 2016 aircraft deliveries. We remain right in the sweet spot of placing aircraft 18 to 36 months ahead of delivery, which gives us certainty that our aircraft have homes while still having inventory available for customers ahead of the extended backlogs of the manufacturers. We continue to see our airline customers in all regions of the world looking to modernize their current aircraft and create strategically fleet plans many years into the future. Oil price is certainly a factor into this thinking, but movements in the oil markets are difficult to predict. The most effective way to hedge against fuel price volatility is with the most fuel efficient and modern aircraft. Even as short-term market movements affect financial markets, our customers are taking long-term views on their needs over the next decade, which is helping demand remain very strong. Airbus and Boeing remained overcommitted, with backlogs of approximately 7 years’ worth of production at current and forecasted production rates and they remain overbooked in many months compared to their ability to produce. Airlines continue to turn to us to deliver new aircraft, which are unavailable directly from the manufacturers. With our firmly contracted pipeline and our investment grade credit profile, ALC is well positioned to thrive in a constantly involving landscape, and we believe our management record over decades proves this out. We…

Thanks, John. For the quarter, we achieved an industry-leading pretax profit margin of 37%, which generated diluted earnings per share of $0.58. In the third quarter, a significant portion of the capital expenditures occurred toward the end of the quarter, including 2 777-300ERs during -- delivering during the last 2 weeks of the quarter. Due to the timing of the delivery, these aircraft will not meaningfully effect rental revenue until the fourth quarter. On the financing side of the business. In September, ALC completed a $1 billion offering of senior unsecured notes. This transaction was another milestone for ALC as it included our first $500 million tenure issuance at 4.25%. With this transaction, we are continuing to lengthen the maturity profile of our debt in line with our financing strategy. Due to our strong credit profile, the volatility in rates and spreads that affected high-yield borrowers did not affect ALC's investment grade offering, which was significantly over subscribed and closed at industry-leading rates. I am very pleased to report that our low composite cost of funds of 3.67% has been achieved even as we have increased the fixed rate portion of our debt to 76%, lengthened the maturity profile and increased our unsecured debt percentage. The secured portion of our debt book has declined to 11% of total assets, representing 82% of our debt portfolio being unsecured. As we continue to execute our financing strategy, our investment grade credit metrics had continued to improve. The third quarter was our second heaviest quarter in terms of capital expenditures for the delivery of new aircraft and our debt-to-equity ratio ticked up modestly to 2.47:1. Our debt-to-equity ratio has quarterly cyclicality that matches our delivery stream but has no impact on our overall target ratio of 2.5:1. ALC is in a healthy financial position. Currently, we have $2.1 billion of liquidity which was supplemented by $571 million of operating cash flow during the first 9 months of the year, and sales proceeds in excess of $320 million resulting from the sale of 14 aircraft. This concludes my review of the results and financing activities of the company, and I'll now turn it back to Ryan.

Thanks, Greg. That concludes management's remarks. [Operator Instructions] And I'd like to hand the call back to the operator. Operator?

[Operator Instructions] Our first question here comes from John Godyn from Morgan Stanley.

I wanted to ask a couple of questions on Blackbird, which certainly seems like an exciting new opportunity. Steve, I'm not sure if you can elaborate on sort of the asset management fees or at least how they're structured. Do you participate in the upside, maybe sort of like a hedge fund or private equity vehicle might be structured? Or is it just percentage of AUM? Anything you can offer just to help us understand how this might impact the P&L over time would be helpful.

Right. But first of all, I would like to refer you to the detailed separate news release that we issued, which basically describes the structure of the transaction. But in essence, this will magnify the cash flows from our management business. They will also give us an opportunity to sell aircraft into this vehicle, so it will serve a double purpose of increasing our earnings and it will also be an outlet for additional aircraft into this entity. We will get a management fee based on the asset value of the aircraft and there are additional incentive fees based on the ultimate performance of the JV.

That's very helpful. And is there anything you can offer? And maybe I missed it in the release or if it was in there in terms of actually quantifying these fees, so that we can think about at $2 billion, what the P&L impact might be in 2016.

The P&L impact in 2016 will be positive. And it will depend on the number of units and the rate at which we add aircraft into this JV portfolio. But please understand that this is a private entity. We will have a minority interest in it, it will not be consolidated. And so the rate of which we add assets and the way we build up this portfolio will be the determinant on how quickly the management fees will ramp up.

John, we're not really getting any other forward guidance on structures or fees or how much or when. Good luck with the modeling, I understand your challenge.

Yes. I wish we could be more illustrative, but the goal is to basically build the portfolio of about $2 billion of aircraft based on a $500 million equity infusion, which is primarily coming from sophisticated institutional investors.

Fair enough. And if I could ask just 1 more on this. And I don't want to focus too much on the syntax, but it is called Blackbird Capital I LLC. Is this a template for future growth of this kind of revenue stream? Could we have Blackbird Capital II, III, so on and so forth? Is this the future?

Well, I think, the Blackbird is symbolic of ALC's leadership in the industry. The SR-71 Blackbird was the fastest land airplane built by humanity. It was able to fly from L.A. to New York in 1 hour. So Blackbird symbolizes the speed, the performance capability that this fund and, hopefully, following transactions that will come out of this. So the answer is, yes. This is -- there could be future Blackbird Capitals II and III, et cetera.

Our next question comes from Jason Arnold from RBC Capital Markets.

Just, I guess, I'll follow-up on that. I mean, I don't know if there's any thought process in terms of timeline. I know you probably don't want to give out a lot of details you even don't know necessarily yourselves, but could we get this ramped up to $2 billion, say, in 2 years' time or 3 years' time? Or is it shorter term, longer term? Any thoughts around that?

Jason, we'll just leave it to our comments and within the release. It's $2 billion by the end of 2016. The rate at which that's deployed or built up, be it based on a variety of factors. But at this time, we just can't give any more color on the timing or how quickly it could be accelerated. Suffice it to say, for the purpose of the venture and for our own purposes, the quicker we do it, the better. But we're going to do it prudently and with a view towards the return to the shareholders.

While we'll be adding assets into this enterprise every quarter.

For the next couple of years.

Super. I guess just another -- on another topic on, I think, you mentioned a little bit on this earlier, but a lot of industry talk about the decline in fuel prices, increasing demand for older aircraft, perhaps impacting demand for younger. It seems like this view might kind of overlook the simple fact that older aircraft have used up some of their value already, have higher maintenance expenses, et cetera. So I guess, if you could maybe expand your thoughts on that into the equation here.

Well. Older aircraft have a number of factors that affect its operating economics. Fuel is obviously a very large element in that, but there's also maintenance costs, there's reliability issues, performance issues and in many parts of the world, there's environmental issues which have to do with emissions, noise regulation and so on. So I don't think the short-term volatility in oil prices really impact the long-term view of airlines if they have to keep modernizing the airplane. So if an airline has a 25-year-old 747-400 that has a 100,000 flight hours on the fuselage already, I don't think they're going to defer replacing that aircraft, because oil prices have temporarily dipped.

Next question comes from Jamie Baker from JPMorgan. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Mark and I were wondering, first question on Blackbird, will Air Lease participate in any of the purchase negotiations that the JV undertakes for new aircraft. I realized you're selling aircraft into the venture, but will the JV itself benefit from the relationships that Steve and John have with the manufactures? And also, what sort of customer concentration limits were you hitting? Are you -- since you've called that out in the release, can you give some examples of that?

Well, first of all, Jamie, yes, Air Lease is involved and we're the managers of the overall transaction. So yes, of course, we're involved in the purchase of aircraft. And part, I think, of the attractiveness that the joint venture partners have to this venture is, in fact, we will bring all of our knowledge, experience, contacts, relationships manufactured to bare in this venture and to source aircraft. That was a key motivator for this. So that's quite easy. And in terms of concentration limits, as you know, we don't have any single customer that we're going to remain at below 10% of our assets or revenue rather. We're not really super close to that with any one party yet, but we can see perhaps coming up those limits in the future. And we didn't want to limit a capability that we have with a terrific customer who, any lessor in the planet, regardless of concentration limits, would do more with. But nevertheless, we're very focused on our investment grade credit rating and we're not going to blow any of those limits. So this gives us a fantastic tool to serve our additional customer needs. I mean, the bottom line is throughout all aspects of our business, we have more demand than supply. We like to be able to supply more to our airline customers than what we have available. And some of the limits have to do with possibly future limits we might be running up into in our credit profile. So this gives stability. Have the tool, deal with the same management team and a seamless transaction, a contingent source of capital to buy those aircraft to acquire them from any source and to continue ramping up our business. And since we're not consolidated, we only own 9.5%, we don't have the full impact of that on our balance -- we don't have any impact to our balance sheet and we just recorded it under the equity method. So also, it's a fantastic compliment, primarily to serve our customers more to advantage all that we've been able to achieve, to be able to have additional capital firepower but not to impact the fundamental tenants and disciplines that surround an investment grade company, which is our holy grail. Jamie N. Baker - JP Morgan Chase & Co, Research Division: Got it. And second question, again, relating back to fuel. And I know, John, that you tried to sort of head this off in your prepared remarks. And Steve, you just added some color in the previous question. But you did refer to fuel declines as temporary, temporary reductions in the price of fuel. What if fuel prices actually stay here, would you imagine that the portfolio would need to look any different 5 years from now than what the current plan is? I mean, have any customers even hinted that they might consider making revisions to their fleet needs if fuel stays here...

Jamie, this is Steve. I haven't talked to 1 airline that's either have contracted neos, MAXs or other new generation 787, A350s that has talked about deferring those or changing their game plans. I mean, a lot of these aircraft, older airplanes are getting up to 25, 30 years of age. So I think, everyone's planned to replace them. The rate at which they replace them is something we'll have to see. I mean, we've only had this trend I know of for a few months. Be a longer-term trend of how it all shapes, but it's way too early to make long-term predictions about where oil prices are going. If you look back historically, we've had lots of ups and downs, and airlines always need new airplanes.

Yes, Jamie, I would add. I think in my remarks, I specifically said that the oil prices do factor in the thinking, but the oil markets are hard to predict. And really, just the short-term market movements affect the financial markets, the main point that I made was that our customers are taking long-term views. So even if there was a long sustained depression in aircraft oil -- in fuel prices, we do not believe this is going to have a material impact on the need for new aircraft. I mean, if you want to take an extreme case, for example, look at Allegiant. Allegiant started out with a bit of MD-80s and yet, recently as yesterday, are acquiring A319s and also now are looking for A320s. Well, there's still plenty of MD-80s available on the world, if you just want to slap new engines on them. But the fact of the matter is, to Steve's point, don't forget that we have an industry-wide program dealing with aging aircraft that's called Corrosion Prevention & Control Programs, CPCP. And basically, this just means that at aircraft days, the frequency of interval of inspections and critical analysis, dye-penetrant inspections, structural x-ray, diffraction analysis, the things that take time, energy and money and cause dispatch delays do factor in the equation. So at the end of the day, was fuel still your largest expense on your P&L even if fuel prices went down, it's still going to be the major cost, why not continue to reduce fuel burn? And why not continue to enhance the dispatch reliability of your fleet? So we see no evidence in the market today, nor do we foresee it in the near- to medium-term future that kind of sustained low oil pricing will do nothing more than improve the financial performance of the airlines without significantly impacting the demand for new aircraft.

One more time, Jamie, on that same subject. The industry is becoming more competitive in terms of the customer product offering, particularly in the international scene, in our transcon markets in the U.S. So other things that airlines need to think about is the customer product in the cabin. And this is where the new airplanes obviously offer a whole new dimension in competitiveness for the airlines. And I think a lot of carriers are reluctant to spend millions and millions of dollars on an old 20-year-old aircraft. Or in many cases, they cannot even be brought up to the standards of their new airplanes that they're introducing. So this cabin service product is also another factor that will continue the path toward replacing the oldest airplanes.

Our next question comes from Moshe Orenbuch from Crédit Suisse. Moshe Orenbuch - Crédit Suisse AG, Research Division: How should we think about whether this process kind of is something where you're going to be able to add to your order book, satisfy from your existing order book? And kind of related, is how much of your business would you want at some point in the future, say, 5 years out, to be sourced from this type of management in JV as opposed to actually owning the aircraft?

Well, generally speaking, we don't know what things are going to look like in 10 years. Our order book is what it is. One issue and aspect is that the order book with a -- because backlogs are what they are. If we wanted to today, we wouldn't be able to get 15 more airplanes in 2017 or '16 or '18, because it's not there. So it's more along the lines of where do we see the prudent balance between growing our own portfolio. These customer exposure limits that we're talking about, keeping our debt equity ratio in line with the balance towards returning the return to the shareholders in the Blackbird Capital that they need and want, in which we are incentivized in our fee structure to provide it. So we don't have a blueprint that says 10% of our assets or 10% value of our assets going forward is more on an opportunistic transactional basis. We've already announced now that we're -- this Blackbird Capital I will be $2 billion through the end of '16, our current balance sheet, north of 10. So that's where we are today and where it goes in the future. It's not driven by our ratio, it's driven optimistic by transactions. And I just want to point out that this entity, this JV entity will not be entering into direct large-scale bulk purchase agreements with Boeing or Airbus. In other words, ALC continues to be the purchaser. To the extent of getting new aircraft involved, they're coming out of our pipeline. Moshe Orenbuch - Crédit Suisse AG, Research Division: Got it. Just in a slightly different direction. You talked a lot about the fact that you're still seeing great interest in kind of replacement aircraft. Any kind of shift regionally in where that's coming from? Or is it kind of a bit consistent over the last several months?

Really, it covers all regions. We're not seeing any particularly slowdowns. Right now, with the drop in the ruble, I would say there's some issues there in the Russian marketplace, because the dollar cost of either leasing or buying aircraft is going up for an airline that's collecting their revenues in the local currency. But other than that, other than Russia and Ukraine, we're not seeing any change in the dynamics of demand.

And let me add a comment on China. A lot of Wall Street headlines over the summer about China economy slowing and banking sectors strip, et cetera, we've got just as many active campaigns in China that we had a year ago. China is building more airports than any country in the world by a huge factor of magnitude and there's a very strong emphasis by the central government to continue to promote air travel. In fact, the government wants the 3 major airline groups: Air China, China Eastern, China Southern, to expand the percentage of foreign travelers that they carry coming in and out of China. Right now, the majority of foreign traffic going into and out of China is still done by foreign carriers. So a lot of general economic fluff about China and concerns. But all I'm saying is what we see in our business, what's coming in our door and the campaigns we're doing. We just see very little to no change.

Yes. Middle East is strong, Latin America is strong except for Venezuela, which is sort of like off the map for everybody right now. India has picked up since they've had a new leadership change. The economy seems to be doing better for the industry. Just talk about lowering the tax on jet fuel in India, which will help the airlines there aside from the lower oil prices. So I would say, across the board, Europe is doing much better than the media portrays. There's a lot of activity in Canada. So I think, overall, I would say, things are in a fairly healthy environment.

The next question comes from Vincent Caintic from Macquarie.

For the Blackbird joint venture just to, I guess, put it in a broad perspective. But would the economics on this be comparable to other JVs? Or how should we think about that? And I'm guessing that the fee should be at least much better than the 12 planes that you're already managing on your book.

Well, we -- thanks for the question. We're really not commenting on the attractiveness of the economics. I mean, obviously, the limited partners made their full decisions based upon an operating memorandum, but had a lot of detail on it. And it's -- we believe it's a compelling economic return and we think it's a unique structure. But again, it's a private vehicle, but we retain a 9.5% equity interest as well. So we think we've got the best of all worlds from Air Lease's point of view, and we think that we can return attractive -- and make attractive returns to the investor. I really don't know how to answer it other than to say that. We think it's a blueprint for future transactions that expand beyond Capital I. Ryan, you want anything else to add?

Me? No -- I mean, the only thing that we would say is that, yes, as John said, we think it's a unique structure in the marketplace and it supplements and takes the management business that the team has done for decades to the next level. And so we will grow it over time. As John said, opportunities present themselves in the marketplace. But it's very difficult to comment on sort of other people's structures, it's not really our job. We'll let our results, as you see them unfold over coming quarters, speak for themselves.

Yes. This transaction was custom designed to fit our strategy and our sort of game plan going forward. So it's quite different than anything else that's been done before.

Got it. And so when should we expect the fees to start coming online and hitting your P&L? Should that be fourth quarter or first quarter next year?

Our goal is to close some aircraft transitions into the structure before the end of this calendar year. But obviously, I mean, it's November 6, today. So I mean, the numbers that will be coming in between November 6 and December 31, this is going to build over time with prudent transactions that we see in the marketplace. So expect the ramp up over the next 2 years, as John and Steve both indicated, and our acquisition plans for the entity. But in 2015, you'll begin to see a more meaningful impact.

Exactly.

And outside of the JV, the aircraft you guys built up for delivery for 20 -- for fourth quarter '14, could you give us more specific timing within the quarter and when we should expect that impact? And then also how we should think about aircraft sales going forward and typical gains on the sales?

Yes. Most of the -- Vince, this Greg Willis. Most of the CapEx is scheduled for October, November. In terms of sales, we have some in the pipeline and we're working on them. But because -- I mean at the end of the day, the overall bid, as John mentioned in his remarks, that the bid for new -- or sale of these aircraft is very strong right now. So we're working to close some transactions. But beyond that, I don't know how much more color you want to add, Steve or John?

I think that's more with the revenue.

Yes, yes. I mean, I'd state clearly that CapEx is October, November.

Yes. In the third quarter, a lot of our CapEx was sort of back-end loaded. And as we indicated, 2 of our new 777-300ERs delivered at the back end of September. Whereas in this quarter, deliveries are more into the front end of the quarter. And you'll see, just the CapEx numbers are different. I mean, last quarter, it was close to 7 -- north of $700 million, I believe. And this quarter, it's only -- it's just around $500 million, and that's in the filings. So a smaller number this quarter so...

Yes. Visibility was wide by this quarter, the rest are narrow bodies.

Next question comes from Arren Cyganovich from Evercore ISI.

Not to ask too many questions on Blackbird, but the deliveries that you have coming on over the next couple of years, are you looking to be making incremental purchases for Blackbird so that you're not decreasing the ramp of your existing fleet expansion at Air Lease overall?

Yes. Absolutely the case.

That's what I was hoping for. All right. And the -- And then Greg, you mentioned the leverage was getting pretty high, close to your target. Can you -- I forgot, are there covenants related to the -- to your debt outstanding that you can't go above that? And how -- what kind of flexibility do you have to ensure that you're not going above your target range?

Yes. We have our target at 2.5:1 and we don't foresee ourselves exceeding that target. We have covenants at 3:1 debt to equity. And given that Q4 is relatively light in terms of CapEx, as we just talked about, $500 million, you'll probably see a modest deleveraging based upon the cash flows of the aircraft portfolio itself as well as some sales activity.

Yes, Arren, it's John. I just want to remind you and all the others that it's very much our goal to ramp up the maximum efficiency of our business. One of the ways is through increasing the debt equity. And we've actually were pretty much right on track where we're going to be. You're going to see some fluctuations just based upon the delivery cyclicality quarter-to-quarter. Second quarter is always our absolute heaviest delivery period for the year. So you're going to see us come closer to that 2.5 limit. And in other quarters, we're going to be probably off that. But we have now ramped to the point to being very, very efficient. And we are optimizing, I think, at our optimized capital structure as we have planned from the very beginning.

But our debt covenant 3:1, so we're not even close to that nor do we plan to approach that range whatsoever.

Right. I just wanted to make sure you had the flexibility which, clearly, you do.

The next question comes from Richa Talwar from Deutsche Bank.

So first, John, you touched upon this in your prepared remarks, but I was hoping you could elaborate. It seems like there's a strong view among the investment community that an appreciating dollar could have a negative impact on the aircraft leasing business, given that results in the aircraft assets becoming more expensive for non-U.S. airlines and also might negatively impact their financial health, since many of them have costs more tied to the currency than revenue. But there's also a view that a stronger dollar may increase the demand for aircraft, as investors seek out dollar-denominated asset as a good source of value. So hoping to hear your thoughts on this and if you're seeing any impact one way or the other from a volatile FX environment.

I'll give you a short answer. I understand the question. Let me give you a short -- the answer is, no, we're not really seeing any measurable, discernible impact on either side. Meaning, either more stress on paying lease rates that are dollar-denominated. That's why I indicated that we don't -- we haven't really seen any significant currency issues crop up from our customers. But nor on the buy side, the buyer craft in dollars, we don't really -- it's hard for us to point to any significant or any really meaningful data point that says that, that's going to make aircraft even more attractive. I mean, certainly from our perspective, a strengthening dollar is a great base to approach the market in terms of buying well-priced assets. But I think we all have to keep in mind that the airline industry has always been -- is and always has been dollar-denominated. So airlines are pretty good at looking at your -- at their currency, some of them hedge currency. But they have to -- when they buy an aircraft, they have to pay in dollars. When they lease an aircraft, they have to pay in dollars. Fuel is paid in dollars. So it's not such a big -- it's not like something that isn't -- that isn't well managed already than that isn't known. But we just don't see any strong movements on either side of that equation. I think the most important thing to us, yes, currency there, et cetera. But the most important factor that we all have to look at is the continued discipline of the airlines, the financial discipline of the airlines and most importantly, the capacity discipline of the airlines. And I think the airlines have done a much better job today than certainly at any time in the past, certainly more than 10 to 15 years ago. It's that financial and capacity discipline that we need to keep watching to make sure that it stays there. Because that really, at the end of the day, is the biggest determiner of the overall state of health of the airline industry.

And just to amplify what John said, airlines have become much more sophisticated in their revenue management tools. So in terms of adjusting fares almost on a daily basis and different buckets of fares, they can adapt the currency changes on ticket sales in a nondollar-denominated currency. So airlines are much more better equipped in terms of technology to adjust their revenue management.

Okay. And if I could just ask one more. The U.S. had plans and quantitated easing in the implication it had on interest rates long term. Those of you that low interest rates have been one of the factors compelling the strong demand for aircraft that we've seen in the last few years, so I was hoping to hear your thoughts on whether a reversal of that trend when -- means for your business once interest rates start to maybe escalate.

Well, to the extent that interest rates, in general, rise, the alternative cost for -- and the airline acquiring a plane or leasing a plane will also be affected. So if interest rates were to rise 50 basis points 18 months from now, an airline is looking to buying an aircraft, their financing cost will go up because of those market conditions. So interest rates and lease rates ultimately move in parallel. So we don't really see a negative impact on Air Lease, so long as those interest rate increases are measurable and relatively modest over a short period of time.

And in fact, I would add one more. If you look back in history. If and when and as interest rates rise, typically that is fuel demand for aircraft leasing. As the airlines want to be conservative on their balance sheets, they're not quite sure about that future, I think, if you go back, at least our experience over 30-plus years, is that when interest rates start rising, that's the very time that airlines seek to have aircraft leased, because they don't have to worry about financing, they don't have to worry about paying the PDP. So really, kind of a general simplicity of modeling our business, while there are exceptions, we have a very simple saying: in the good times, airlines need us for our delivery positions; in the bad times, they need us for our balance sheet, and both work.

Absolutely. And one other point to make is on the liability side of the equation. Our fixed floating ratio is 76% currently, our long-term target is still 70-30. So I think, we're very well positioned for a rising rate environment when it eventually comes.

Our next question comes from Michael Rudnick from AMI Group [ph].

Quick question for you on the dividend. I see that you've raised it up $0.01. That represents 33.3%, but it really only takes your yield from about 0.32% to 0.43%. What's the purpose of having a dividend with your stock or associated with your stock? What's your strategy there?

Well, let me explain. A lot of our investors are institutional holders, mutual funds and other pension funds and so on a global scale. We also have many sovereign wealth funds that are investors and of quite a number of these institutions, invest in companies that pay a dividend and some are restricted from investing in public shares of companies that do not pay dividend. So we feel that the universe of investors that can invest in early stock has been broadened by the fact that we pay a modest dividend. And based on our excellent profit performance, strong cash flows and overall growing profitability, the Board of Directors felt it was timely to increase our dividend to $0.16 a share per year from $0.12 a share.

Okay. Good, yes. I think a growing dividend is a positive thing, it just seems like it's relatively small. But I guess, it would still represent for you somewhere in the neighborhood of about $16.4 million of the cost to your shareholders.

Yes. Well worth having a much, much broadened shareholder base.

Yes, that represents a very, very small fraction of our overall cash flow. As Greg indicated in the first 9 months, I think we had $590 million of cash flow. So this dividend, because of our prudent cost controls that we've undertaken, is really not a significant negative in terms of our overall financial profile.

And we also keep in mind our investment grade ratings, given that we have a 10-year order book of approximately $30 billion.

Thanks, Michael, very much. And with that, conclude our remarks for the call today. Thank you, everyone, for your participation. And we look forward to speaking with you during the 10-K release.