Ladies and gentlemen, thank you for standing by. And welcome to Air Lease’s Fourth Quarter 2019 Earning Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference to your speaker today, Mary Liz DePalma, Head of Investor Relations. Please go ahead, ma’am.

Hello everyone, and welcome to Air Lease Corporation’s fourth quarter and year-end 2019 earnings call. This is Mary Liz DePalma, and I’m joined this afternoon by Steve Házy, our Executive Chairman; John Plueger, our Chief Executive Officer and President; and Greg Willis, Executive Vice President and Chief Financial Officer. Earlier today, we published our fourth quarter and year end 2019 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, Friday, February 14, 2020, and the webcast will be available for replay on our website. At this time, all participants to this call are in listen-only mode. At the conclusion of today’s conference call, instructions will be given for the question-and-answer session. Before we begin, please note that certain statements in this conference call, including certain answers to your questions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. This includes, without limitation, statements regarding our future operations and performance, revenues, operating expenses, stock-based compensation expense, and other income and expense items. These statements and any projections as to the company’s future performance represent management’s estimates for future results and speaks only as of today, February 14, 2020. 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 risk factors that may affect our results. Air Lease Corporation assumes no obligation to update any forward-looking statements or information in light of this new information or future events. In addition, certain financial measures we’ll be using during the call such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes, and adjusted pretax return on equity are non-GAAP measures. A description of our reasons for utilizing these non-GAAP measures, as well as our definition of them and the reconciliation to corresponding GAAP measures can be found in the earnings release and 10-K we issued today. This release can be found in both the Investors and Press section of our website at www.airleasecorp.com. Unauthorized recording of this conference call is not permitted. I would now like to turn the call over to our CEO and President, John Plueger.

Well thanks, Mary Liz, and good afternoon everyone, and thank you for joining us. I’d like to actually begin by wishing my wife Celeste a happy Valentine’s Day. So, I’m pleased to report that Air Lease enjoyed another successful quarter and year in 2019 recording diluted earnings per share for the fourth quarter of $1.42 up 14.5% year-over-year and $5.09 for the full-year, up 10.7% year-over-year, all through our continued organic growth. Our portfolio metrics remains strong and consistent and our business achieved a pre-tax profit margin of 36.5% and a 14.2% pre-tax return on common equity. ALC’s revenues surpassed $2 billion at year-end for the first time, up 20% over 2018 and our aircraft investments in 2019 were the largest in ALC’s history totaling almost $5 billion despite the MAX grounding and continued delivery delays. 825 million of these aircraft investments were made in the fourth quarter as we purchased 12 aircrafts. Accordingly at year-end, our balance sheet grew to $21.7 billion, up 17% from 2018. Consistent with expectations we sold $1 billion of aircraft in 2019 with most of these sales achieved during the second half of the year as planned given the delays on our new aircraft deliveries. In the fourth quarter, we generated sales proceeds of $585 million selling 11 aircrafts into the Thunderbolt III transaction and the remaining aircraft to other – 8 aircraft to other buyers. ALC now stands with 788 aircraft owned, managed, an on order. In December, we signed the final purchase agreements for the order we announced at the Paris Air Show for 102 aircraft, including A220s for which Airbus has now purchased the remainder of Bombardier’s interest. Also launching the A321 XLR and ordering incremental A321neos. We view all of these orders as important for our growth and for the…

Thank you, Steve, and good afternoon everybody. As mentioned earlier, we recorded strong results for the fourth quarter and the full year 2019, reporting dilutive earnings per share of $1.42 and $5.09, respectively. We realized of 15.4% adjusted pre-tax return on common equity and a 39% adjusted pre-tax margin, reflecting the embedded strength and stability in our business model and our key metrics of portfolio yield and lease term remaining stable and in-line on age-adjusted basis. For the fourth quarter of 2019, ALC generated record total revenues of approximately 549 million, up 22%, as compared to Q4 2018 and were comprised of 504 million of rental revenues and 44 million of aircraft of sales trading and other activities. Our fleet activity included the purchase of 11 new aircraft and one aircraft in secondary market, representing 825 million of aircraft investments, as well as the sale of 19 aircrafts for total proceeds of 585 million. Included in aircraft sales trading and other activities is 33 million of gains on sales and approximately 6 million in management fees. Turning to expenses, total interest expense increased year-over-year on continued fleet growth though partially offset by the decline in our composite cost of funds. Our composite interest rate declined to 3.34% in 2019 versus 3.46% in the prior year. On the financing side of the business, we have benefited from a decline in prevailing interest rates as we have opportunistically accessed the global capital markets to lock in long-term low cost financing, which I’ll cover in more detail momentarily. Our percentage of fixed rate funding remains substantial at approximately 88%, consistent with our conservative approach towards interest rate risk management. Depreciation continues to attract the growth of our fleet, while SG&A represented approximately 5.7% of total revenues, as compared to 5.8% of total revenues…

Thank you, Greg. This concludes management's remarks. Now, I’d like to hand the call back over to the operator to open the line for the Q&A session.

Thank you. [Operator Instructions] Our first question comes from Vincent Caintic with Stephens. Your line is now open.

Thanks and good afternoon and earnings beats are the best Valentine’s Day gift so thank you for that. First question, if I remember correctly there were some portfolio repositioning’s in the fourth quarter that might have driven the lease rates or lease revenues lower than normal. If that’s true just wondering what the run rate lease income would have been without the repositioning and if you’re looking forward into 2020 is there anything we should also be aware of that would drive rental rate volatility?

Yes. I mean we repositioned our Thomas Cook aircraft, the leases were done at markets and you can see a very stable yield that we’ve been able to achieve all throughout over the last several years. So, there hasn't been an outwardly outside impact on the numbers. We took a lot of the security baggage in the end of Q3, but the results themselves were very stable.

Okay, great. And then secondly, so 2020 seems like it’s going to be a volatile year in terms of aircraft capacity. So, some of the issues you highlighted causing over capacity and then you have others like the MAX delays causing lack of supply. Just, are you seeing a lot of near term repositioning activity as a result of all of this and any view on the impact, the near term impact of the second half? Thank you.

Yes. We don’t see any aircraft repossessions in the foreseeable future. Most of our Asian airline customers are the large well-established global network carriers. Many of them are state-owned. They have a lot of financial resources and resilience and the European market has stabilized. The late deliveries of Airbus single-aisle aircraft and the MAX situation is actually creating a shortage of aircraft. We have more than a dozen European airlines looking for immediate lift of A320, A321’s and 737’s. So, in the European landscape, we actually see a shortage of aircraft, particularly single-aisle aircraft. And in North America we continue to see good robust earnings, lower fuel prices which will help the North American carriers on their margins and we’re seeing yields stabilize or in some cases actually improve slightly in 2020. So, if you look at North America and Europe, I think we’re in a very good position and Asia we believe that our customers can withstand the short-term impact of this virus situation.

Okay, great. Thank you very much.

Thank you. Our next question comes from Catherine O'Brien with Goldman Sachs. Your line is now open.

Good afternoon everyone. Thanks so much for the time. So, I really appreciate all the color you guys gave just on the evolving coronavirus situation, and I just had a question on the request for assistance you’re receiving. I’m just wondering how does that usually play out? Is this typically one or two months of deferred rent payments? And then I guess at your former company, any examples of how quickly an airline, given some sort of lease payment relief typically gets back on schedule, really appreciate any color? Thanks.

Yes, sure. As you can imagine, again airlines have stopped flying, they have less cash coming in and I think Steve highlighted the fact that our airlines, particularly in China are the strongest airlines there. That being said, there are some secondary and tertiary carriers that need cash, and so we’ve offered to buy aircraft outright, we’ve offered to do sale lease back transaction, but in the line with that several have asked for a one-month to two-month deferral of some lease payments and we will probably accommodate that. This is what we’ve done also, you know you’ve referenced our prior company, and although that was a time of SARS as well, don't forget we also lived through 9/11, which was a really big shock, and you have the global travelling public that actually were hesitant to fly for 3 months to 4 months, but there was ultimately a recovery. So, in many ways I'm not minimizing it, but in many ways it’s a very similar situation here and I think, I try to emphasize in my prepared remarks the long-term outlook, which the airline still have. So, in summary, in some cases we’re going to help provide cash through our balance sheet and buying aircraft. In some cases, we will allow partial or some deferment of a few months of lease payment. We normally collect that over the remainder of the leasing terms or the leasing duration of these aircraft. There is a few other things that we can juggle around, but I think the point here is, we've gone through this before. We have tools and techniques that are well proven to deal with our customers. And I think the important thing for us to do is recognize this as a time to differentiate ourselves for our customers by helping them. That was the biggest tailwind for the start of Air Lease. Everybody that came to us in that first year said, hey, remember when you guys helped us here or there. And I constantly emphasize that to our team. So, certainly difficult times, but in the big picture we’ve seen this before, we have plenty of tools and big balance sheet capacity to help with it.

Thanks, I appreciate that. Maybe one quick follow-up to that John and then a separate question, so, the quick follow-up would be, given the lack of narrowbody supplier right now in the market, do you already have line of sight on some carriers who would be more than happy to take any aircraft that you buy back from those Chinese carriers off your hand?

Yes, absolutely. As Steve indicated, we got about a dozen carriers in Europe that probably feel that they will not have their summer season made because of the MAX even if we have a May or a June green light by the FAA, and we also still have to give a green light, foreign authorities doing so, so yes we have a dozen airline operators just in Europe alone that are asking us for aircraft. So, that’s why I said in my prepared remarks, not only will this help our own growth in 2020, but it will help our airline customers, particularly in Europe get through the summer season that they’ve already booked and now for the second summer in a row, we will likely not have their MAX lift.

Okay, understood. Okay. And then maybe just on the managed vehicles. In the past you talked about one of the benefits of these managed vehicles being, you can continue your relationship with the airline customer, which you just noted the importance of that, and so – but like while still managing your fleet concentration, so has your managed fleet continued to grow, how has maintaining these relationships help you most? Is it all about having more consistent dialogue with airlines and just being their fleet needs or something else I'm not thinking of? Thanks, appreciate the time.

Sure. It all comes down to our global depth and reach across the customer market base. The more touch points the more depth we have in that, the better it is, and the more tools we have to help our airline customers. So, it’s been a huge positive win for us and that’s why I want to continue on this management business track. We can do so much more by controlling more aircraft. We don't always have to have those aircraft primarily on our balance sheet and that’s the beauty of the management business. Steve Házy: One more comment, the airlines that are our customers, when we sell an aircraft, generally the airlines prefer that we continue the management of those assets rather than having a new party in many cases they don't have any relationships with that other lessor. So, overwhelmingly, we’re seeing airlines express a preference for the continuation of Air Lease being in a relationship on those aircrafts.

That makes lot of sense. Thanks and a happy Valentine's Day everyone.

Thank you. Steve Házy: Thanks. Same to you.

Thank you. Our next question comes from Helane Becker with Cowen. Your line is now open.

Hello. Thank you very much operator. I appreciate the time. Hi, everybody, thank you. Just, an accounting question, Greg. These receivables as you help your customers, I mean, the help you give your customers will show off in aircraft receivables is that correct, is that how we can monitor this going forward?

Not necessarily a lot of the – if there is rental deferrals it will get the straight-line amounts look at – it actually depends on which solution and the method in which we provide the help, but very rarely does it wind out increasing the receivable balance.

Okay. That’s actually very good to know. The other thing I wanted to ask is, you know, we've all gone through this before and I have done some work in this area, in China, 10 million people rather travelled outbound in the 2000 and 162 million people travelled outbound in 2018, and they were 16% of global economy now versus 4% during the SARS time. So, are you concerned that, you know these numbers are so much bigger now that the recovery time will be more than just sort of back half of the year?

Look I think it’s a possibility, it’s one of the reasons I commented in my prepared remarks that we envision this could very well be a year with zero to negative passenger growth rate for some of the same reason you talked about. So, let’s say that does take a little bit longer. That’s certainly true, but I think the bigger point to impress upon you here is that over the longer-term and whether it’s near or medium-term the airline traffic does recover. Steve commented in his prepared remarks about the vital essence of air transportation and global commerce and human connectivity. So, it may be a bit longer this time, kind of hard to speculate the severity does seem worse, but again, we’ve always taken the long-term view on our business and we think that’s the case now.

Okay. That’s really helpful. Thanks, John. The only other thing I had was, on one of the last conference calls this year, we talked about the fact that and you pointed out Steve that China and Asia were going to be your declining or certainly China declining portion of your investment and U.S. and North America would increase and I see that happened actually year-over-year 2019 versus 2018. So, how are you thinking about getting, you know where are you thinking about China and sort of Canada – or U.S. and Canada, North America going to in as a percentage of the fleet. Steve Házy: Look, as John said, China will continue to grow once we get out of this short-term sort of aberration, but I think long before the medical crisis that arose in the last 60 days, we had already programmed our fleet portfolio composition to have China, Mainland China be right around 15% to 16%. So, kind of in a rough way one-sixth of our fleet would be dedicated to China and then a significant part of that one-sixth will operate in long haul international operations. You know, with A350s, 787's and so forth. So, of the 15%, a portion of that will operate domestic and regional services in China and Southeast and Northeast Asia, and a large part of the investment we have in China with the airlines are wide body aircraft's that will operate in North America, Europe, Australia and some of the larger regional airports in Japan, Singapore, and so forth. So, does that make sense? You even have [indiscernible] 15% into various components of what those airplanes are really doing.

Got you. That’s hugely helpful. Thanks Steve. Okay. Thanks everybody. Have a nice evening. Steve Házy: Thank you.

Thank you. Our next question comes from Koosh Patel of Deutsche Bank. Your line is now open.

Hi, good afternoon guys. Just as I look at the order book for 2020, you have a healthy mix of new tech aircraft from both the major OEMs delivering this year, so just as we think about some of the various production issues that each of the OEMs have been experiencing over the past couple of years, could you help us get a better sense of what percentage of the 4.1 billion in CapEx that you’re expecting to deliver might be at risk of getting pushed into next year and if you don't have a specific figure, maybe you could just talk to us about what some of the biggest areas you perceive to be of concern?

Sure. Look, let’s just separate now for this purpose Airbus and Boeing. We, let’s start on the Airbus side and we’re really talking about most of the single aisles here, the A321neo specifically. We already have been experiencing 3 months to 5 months delivery delays all throughout 2018 and 2019. So, if you will some of the aircraft we’re taking delivery in the first quarter this year already should have been delivered last year and the same way some of the aircraft that we’re in the third quarter of fourth quarter scheduled for 2020 originally per our contract agreements will slide out. So, in effect, we’ve already had a slide. So, the bottom line is, we don’t anticipate on the Airbus side on a net-net basis and a significant variance. Now that could change. Recently there has been some developments further issues on the Pratt & Whitney geared turbofan, which may cause Pratt & Whitney to divert a bit more of their production into support the fleet of the aircraft that are in service as opposed to going to production, that remains to be seen, but that is a possibility. And of course we’ve already commented on the MAX. We believe we’ll take four this year, we hope it will be more, we welcome to have more, but it’s a big process to work out with our customers. So, I think the bottom line is, I think the 4.1 million appears today to be pretty solid, and we’ve already been living with the delays for a while. So, certainly if there is a major impact to that in the next quarter or so, we’ll let you know. Airbus is currently running about 5 months to 6 months late on their A321neo's. I think that’s been well documented by other airlines and less stores as well, but I guess if there is good news here it’s that this has been going on for several years now. So, the spillover effect has been happening. Steve Házy: I think in the next earnings call in May, I think we’ll have a better sense on where Boeing is headed on the certification of the Airplane and also we’ll see how Airbus is performing, particularly in Hamburg on the A321neo, but as John said, it’s conceivable that we may have one or two A321’s that may slide into [21], it could also be that since those aircraft's are follow-on configurations, they’re not the first of that type to an airline. Airbus could well meet these objectives. The biggest question mark and the unknown is really the 777, because currently we’re conservatively planning four aircraft's, but it could be as many as 20 aircraft's and everything in between. So, we really have very little visibility until we have the regulatory revalidation both from the FAA, EASA the European authorities and also the Chinese, Canadian, and Russian authorities.

Got it. Thanks a lot guys.

Thank you. Our next question comes from Jamie Baker with JPMorgan. Your line is now open.

Hi. This is Abdul on for Jamie and Mark. My first question is, aircraft likes to talk about how new their technology is and how old their current or older technology is. So, is that the right way to think about it? And is that the right way to think about ALC's portfolio strategy as well?

I think we have a very simple and demonstrated strategy for managing residual value risk. We have young airplanes that we bought at attractive prices, we put them on long-term lease, and we hold them for the first [indiscernible] life and we have a demonstrated track record of executing sales dispositions to people that enjoy the two-thirds of the life that’s remaining. So, to me, it’s a very simple strategy, it’s easy to understand and it’s proven. And that’s how we manage our residual value risk. Steve Házy: But to say that a five-year-old 737, 800 is somehow should be classified in a different category. You know, when you look at today's fuel prices, you look at the maintenance cost of the aircraft and compare to the MAX, the cash operating cost differentials are very, very small.

Got it. Okay. And my next question is, how feasible is it to take the aircraft out of China and move into Europe as you kind of mentioned before? How quickly can this be done given the need to reconfigure the planes? And for example, if you take the plane out in March, could you have it ready within June? Steve Házy: Yes. We already are in – very close to taking delivery of two 737 800s for example out of China that we already have placed in Europe, and so if you’re talking about like, I don’t know like travel or something – I mean no, that is happening and there’s no impediments to that. The airlines are gearing up for it. So, those types of operations are still going on. Aircraft movements are still taking place. So, we really don’t see any…

I think this question is geared at the ease that we can do the sale lease backed up our customers with the coronavirus and in that situation the customers are very willing to facilitate that process. Steve Házy: And keep in mind that we have leases already with these airlines. We have leases on aircraft's that we lease them. So, the documentation already exists for the majority of the paperwork involved. All we have to do is insert the aircraft involved and the new commercial terms, but all of the legal and regulatory insurance issues are already agreed between the airline and us.

If you're a small or medium size airline or China Asia and you need cash, and we are about to write you or wire transfer big check, you can bet your bottom dollar that transaction will happen expeditiously.

Got it. Thank you very much.

And by the way that could take two forms. We have discussed with airlines in China that we’re ready and willing to purchase for example A320 category, A321 737 800. We would consider purchasing an aircraft and taking it out of China and leasing it to one of our customers in Europe. We can also consider a sale leaseback structure, while we buy the aircraft create liquidity for the airline, and lease that airplane back to the Chinese carrier or Asian carrier for three or four years. So, those are different scenarios that we’re happy to discuss with our customers.

Understood. Thank you.

Thank you. Our next question comes from Moshe Orenbuch with Credit Suisse. Your line is now open.

Thanks. And in addition to Happy Valentine’s Day, I guess Happy 10th Anniversary to everyone.

Thank you very much.

I was hoping that – most of my questions actually have been asked and answered, but while you're doing your prepared remarks Aircraft announced that they actually have done some rescheduling to defer deliveries of MAXs with Boeing. Are opportunities to create additional value for Air Lease and its customers through this process that you’re working on that you could share with us?

Look. As you could imagine, these discussions have been ongoing for months. And we’re always orienting in and outdoors and outcome to have a win, win, win. Where we can help Boeing in some of the circumstances and take an aircraft earlier, we’re more than open. If we can help in other situations where there’s critical delivery needs and maybe we have an unplaced position. We don't have that many left, but if we have an unplaced position or we have a customer who says, you know what, if I can’t get this MAX by September, October, I don't want until April. We’ll give that position up to Boeing to satisfy our bigger needs. So, this is really part of a very large framework and fabric and puzzle where all parties work together a big good phase. I do believe that we’ll be able to get some advantageous either positions or opportunistic aircraft buys where they would be from Boeing or other, but that’s just what we do. I mean this is how we can move quickly, this is what we offer. So, I’m pretty confident that we’ll be able to be a net – it will be a net positive for us. Steve Házy: Yes. We have daily consultations with Boeing leadership. We are up there frequently in Seattle, Chicago to make sure that both sides understand where we’re headed and we’re working just on a customer-by-customer basis. So, we're very sensitive to our individual airline requirements on the 737-8 and the 737-9 that have already been built or will be built shortly after production resumes.

Got it. And my follow-up question for Greg, I mean you talked about the fact that you're basically able to finance at the lowest level you’ve seen, so how much that kind of gets re-priced or how much will be issued during 2020 to kind of take advantage of that or what percentage of the total and how much lower do you think the cost will be than your average?

I guess the way I look at it, we did [1.04 billion] in January. We typically do between $3 billion and $4 million in financing a year. A lot of that is weighed with how much we’ve lined up selling to, because there’s another source of financing. And a lot of that’s also depended upon where interest rates are. Right now when the rates are the way they are, we typically slowed up on liquidity and lock in long-term financing. So, it’s kind of hard to guide where we expect our composite cost of funds to go, but given the rate environment right now we still are pretty happy that we were able to walk up our lowest five-year coupon, as well as our lowest 10-year coupon in January.

I will just add one other comment that we are – that [indiscernible] and so the majority of our financing will be concluded and done well before we get into the end of the year and any elections jitters in the marketplace et cetera, et cetera. We’ve already well thought that out. Steve Házy: And one other thing to add to is, as I mentioned in the prepared remarks we’re about to pay off a $400 million issuance that we did seven years ago. It carries a coupon up 4.75% and that’s well north in 200 basis points where we’re currently borrowing today. So, I think that bodes well for our future composite cost of the fund.

Got it. Thanks a lot. Steve Házy: No problem.

Thank you. Our next question comes from Kristine Liwag with Bank of America. Your line is now open.

Good afternoon guys. Steve, in your prepared remarks, you highlighted that aviation is only 2% of man-made emissions globally, do you think that focus on carbon emissions and aviation is a fad for a long-term trend? Steve Házy: No. This is a very important trend both in Europe and North America, particularly and we are talking to IATA to make sure that the airline community has a singular voice because I think most people on the Streets are not really aware of the percentage of contribution that aviation makes to the CO2 emissions. So, I think there has to be more education. I think people have to understand that in the last 30, 40 years our commercial aircraft have become quieter and have been able to improve tremendously in the area of emissions and fuel consumption. I don't think the general public is well informed and both the airline community, the manufacturers, and IATA and other groups need to communicate this to the general public, and also to the politicians, and policymakers that are so focused on this issue. And the other thing Kristine is air traffic control. What really frustrates me and John because we’re pilots is every time we fly to Europe, we’re put into holding pattern. We fly a 300 mile lag between two cities, but we actually wind up flying 500 miles. And so you have all these politicians making a lot of noise about airlines are polluting the earth, but they can't get a united skies air traffic control system together in Europe, which would save hundreds and hundreds of millions of gallons of fuel and cut down on pollution and help the environment. And just in that area alone there could be significant gains made with very little investment. So, instead of ridiculing the airline's these politicians and leaders should look in their own backyard and see how incompetent they have been to modernize ATC systems in Europe.

That seems to be the logical path, but I guess what we’ve seen in the industry sometimes is they focus on other things what seems to be something of focus would be what you’ve highlighted, which is newer aircraft that are more fuel efficient, also have lower emission. So, if they wanted to take the easy wave out, it could be something focusing on those assets. Do you think that you have mentioned you have a very USC friendly portfolio because you have a New York fleet, so if you’re an airline and you can't really change politicians minds, but you want to make sure that you have a ESG-friendly suite, one way to do it would be to focus on newer technology. If this continues to be the long-term trend and this is not the hard cap of fixing ATCs. What do you think happens to the average service life of an airplane? Does that get shorter?

No. This is John. Look, we’ve had other – environment is a big buzzword today, but 10 years ago or 15, we called it fuel, fuel efficiency, there’s other factors that drive the technology development of aircraft and I think the fact of the matter is, this is not a short-year one or two or three or five, 10 year phenomenon. Technology progresses, aircraft improves. In this case, we’re focusing and emphasizing on the environmental friendly aspects of the newest technology aircraft, but there is absolutely no forces despite this focus. The airline transportation network and number of our fleet globally now 28,000 aircraft is simply too large to be replaced in any short-term period and therefore the need for those aircraft continues. So, we absolutely see no drive at all for a shorter aircraft life. Steve Házy: 15, 25, 30 years ago, noise was a huge thing, and that the international regulators went from what they called stage II aircraft to stage III and everybody said, the stage II aircraft are going to be obsolete they will never go 25 years. What really happened? Boeing and Douglas, which were the two main manufacturers of those aircraft, came up with hush kits. And all of a sudden, stage II aircraft became stage III aircraft. So, this notion we hear every few years that aircraft lives may be are going to get shorter, we don't believe in that. And secondly, a lot of airplane types are cargo conversion candidates. We see that today with the oldest 737 800s, the A321ceo is now becoming an intensive program for cargo conversion to replace 757 freighters. We see it on 767s, I think Boeing and several other organizations are working on 777 passenger aircraft to be converted to freighters. So, those conversions will actually extend the useful life of these aircraft out to 3 to 35 years. So, I don't believe the environmental concerns will diminish the useful lives of aircraft, plus this parts of the world where this issue is not really front and centre with the local politicians.

Clear. Well, thank you for the color.

Thanks Kristine.

Thank you. Our next question comes from Ross Harvey with Davy. Your line is now open.

Thanks and thanks for taking my questions. I have two. Firstly, compared to your 10-Q in November, you expect 34 less deliveries in 2020. In terms of the quantum for much of that gap do you think could be filled with the sale leaseback on aircraft purchase offers you have made with your customers that you mentioned earlier on the call? Secondly, of the 1 billion of sales as Greg mentioned for 2020, how do you think that might split between sales onto managed platforms, sales onto independent third parties? Steve Házy: I think it’s too soon to comment on in terms of the split, I think it’s important that we have access to multiple channels to sell airplanes. I think it’s also too soon to comment in terms of the scale and the amount of the volume of sale leaseback transactions we will do to help out our customers, but we have a substantial amount of cushion in our balance sheet right now, we are below our debt to equity target, but it will be a very facts and circumstances approach to figure out how we hope our customers on a case-by-case basis.

Please bear in mind that it’s only in the last five or six working days that the dialogue with our Asian customers has become more intense to discuss their particular circumstances and so we’re very early in that process of discussing with airlines what exactly are the optimal solutions to give them this short-term support whether it’s through acquisition of aircraft that we take away sale leasebacks or deferrals of some short-term rents or applying other security deposits that we have toward some assistance. This is in the very early stages of formulation. Steve Házy: I can add maybe to help where you're going in terms of the split on aircraft sales we have managed vehicles. If you look back, historically 2019, 2018 generally speaking it’s been about half of the aircraft. Sales have gone up to managed vehicles give or take a few percent over the last several years and that’s historically what we’ve done.

And one more thing, at the back end of the year as we get into the third and fourth quarter when we have more clear visibility on the Boeing and Airbus delivery situation we can make adjustments to our aircraft sales at the back end of the year and maintain our debt-to-equity ratio and make the necessary fine tuning for the full scale 2020. It’s too early as we sit here today to comment on what we will have to do at the back end of the year to make those adjustments.

That's very helpful. As a follow-up, can I just ask, you’ve exceeded obviously your own original expectations at your 10th anniversary and I might guess that the competitive landscape is also quite different to what you might have anticipated, but of new entrants and some interesting M&A, do you have expectations you consider in terms of the overall leasing space on the competitive landscape such as in the coming years?

Well actually, believe it or not, when we started Air Lease we knew very, very well that we would be going into more competitive. We start at a time where the airline was, where the industry was starting from stress. The financial crisis in 2008, 2009 some parent companies went out of business or were close to going out of business. So, we knew going in that we would face an increasing competition. We had already seen back then and envisioned cheaper capital coming in from Asia, China, and Japan. So, the truth is, that’s pretty much been borne out and we set our business objectives and did our plans accordingly. I don't think Steve alluded to, as we have some stress now in Asia, looks stress does one thing, it tends to separate the men's from the boys. The long-term players from those that were just in for a shorter-time and I do think that there will be some shake out there and maybe we can take advantage with that. It’s hard to define right now, but in times of stress the people that enter the business with ease during times of capital were plenty and et cetera, et cetera tend to get their mettle tested and we’ve seen this before as well.

Keep in mind that the total airline industry has grown more than 50% in that 10-year period, both in terms of traffic and number of aircraft being utilized. So, the pie has got bigger, yes there’s more players in the space, but the overall size of the industry has grown. And secondly, what’s really important and it gets very little attention recently is, if we look at period up to 2010, the export credit agencies like the export import bank and the European ECAs were significant financiers or guarantors of financing, while newer crafts with airlines. Whereas in the last five years, it’s probably been less than 1% of the financing has come from export credit agencies and the less source have played a big role in displacing the financing that was traditionally done by the export credit agencies.

That’s very, very helpful. Thank you very much.

Thank you.

Thank you. I am not showing any further questions at this time. I would now like to turn the call back over to Mary Liz DePalma for any closing remarks.

Okay. Thank you everyone. That is all for our call today. We will look forward to speaking with you again after the conclusion of the first quarter. Juwel, thank you and you can now disconnect the line.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.