Ladies and gentlemen thank you for standing by. And welcome to the Air Lease Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce head of Investor Relations, Mary Liz DePalma.

Good afternoon everyone and welcome to Air Lease Corporation’s fourth quarter and year end 2021 earnings call. This is Mary Liz DePalma and I’m joined this afternoon by Steven Házy, our Executive Chairman; John Plueger, our Chief Executive Officer and President; and Greg Willis, our Executive Vice President and Chief Financial Officer. Earlier today, we published our fourth quarter and year end 2021 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, February 17, 20212, and the webcast will be available for replay on our website. At this time, all participants on this call are in listen-only mode. 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 speak only as of today, February 17, 2022. These estimates involve risks and uncertainties that could cause actual results to differ materially from these 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 new information or future events. In addition, certain financial measures we may 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-Q we issued today. This release can be found in both the Investors and Press section of our website at www.airleasecorp.com. As a reminder 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.

Thanks, Mary Liz. And good afternoon, everyone, and thank you for joining us. I’m pleased to report a strong fourth quarter for Air Lease Corporation. Our EPS for the fourth quarter of $1.64 per share rose 32% year-over-year and we generated $597 million in total revenue during the quarter, up 22% relative to the fourth quarter of last year, driving our total full year revenues to approximately $2.1 billion. Both our fourth quarter and full year revenues marked the highest in Air Lease history. Our revenues were driven by the growth of our fleet, as well as an increase in cash collections and renewed aircraft sales activity. We purchased 53 new aircraft in 2021 and aircraft investments totaled $3.6 billion with $1.2 billion occurring in the fourth quarter. As a result of these deliveries, the net book value of our fleet grew 12.4% year-over-year and our operating cash flow was up 26.3% for the full year 2021 benefiting from this fleet growth and rising cash collections, which improved in the fourth quarter to 99.3%, up from 94% in the third quarter. And as a testament to our young modern fuel efficient fleet, we ended the fourth quarter with a lease utilization rate of 99.8%. As you see we resumed our aircraft sales activity during the fourth quarter. Looking forward, as is normal during the course of our sales program we’re looking to execute further aircraft sales primarily in the second half of 2022 targeting approximately $750 million in sales for the year, but dependent on our actual level of deliveries from Boeing and Airbus. More on that later. Based on these results, and the results of our third quarter, we believe that the second half of 2021 marked the inflection point in pandemic recovery of the global airline industry. Demand…

Thank you, Steve and good afternoon, everyone. For the fourth quarter of 2021, ALC generated record revenues of $597 million, up 22% as compared to the fourth quarter 2020. This was comprised of $563 million of rental revenues, and $34 million of aircraft sales, trading and other activities. The increase in our rental revenues was primarily driven by the growth of our fleet, the effects of improved cash collections from our lessees, and 24 million of aircraft sales. In addition, this quarter we had approximately $30 million of end lease revenue, resulting from the successful transition to five aircraft. Overall, we have witnessed an improving environment with our lessees. As a result, we have seen a notable rise in our cash collection rate to 99%, with cash basis recoveries increasing to $12 million and restructuring decreasing to $24 million. At the end of the fourth quarter, approximately 6% of our fleet by net book value was accounted for on a cash basis. That is down from 10.6% at the end of the third quarter. However, our outstanding deferral balances did increase to $203 million, primarily due to the positive resolution we have reached with Vietnam Airlines. I would like to highlight that a majority of our outstanding deferrals will be repaid within the next two years. Moving to expenses. Interest expense increased year-over-year primarily due to the rise in our average debt balances driven by the growth of our fleet partially offset by a decline in our composite cost of funds. Our composite rate decreased at 2.79% as of year end from 3.13% in the prior year. Depreciation continues to track the growth of our fleet, while SG&A rose over the course of 2021 as we return to a more normalized level of operating expenses as compared to prior years.…

Thank you, Greg. This concludes management’s commentary and remarks. For the question-and-answer session we ask each participants limit the time to one question and one follow up. Now I’d like to hand the call over to the operator to open the lines for the Q&A session. Andrew?

Thank you. [Operator Instructions] Our first question comes from the line of Jamie Baker with JPMorgan.

Hi, good afternoon, everybody. So, Steve and/or John, first question. So Mark and I were discussing this looming narrow body shortage which I think is fairly well chronicled at this point. Not sure if I call it a consensus among your investors just yet, but I think we’re moving in that direction. But when you look at the wide bodied market, what you’re hearing from customers, seeing with the OEMs, your comments on cargo. I mean, how would you assess the possibility that we might soon start talking about a meaningful, wide bodied shortage in the next two to four years? Or do you think that your owners really shouldn’t be thinking about that, and we should just focus on narrow body side? Steven Házy: Well, Jamie, one of the things that investors should remember, is look at the number of A380s, 747s, MD11s, A340s and some of the 777 and A330s that have been retired. There’s probably around 300 wide body aircraft that has sort of disappeared very quietly since 2019. So if you add up the cumulative capacity of those aircraft, the total wide body sees actually shrunk. And then to couple that with the fact that Boeing is not delivering any 787s, haven’t delivered any 787s since the spring of last year, there is a momentum going forward toward equilibrium in a wide body space. But that is heavily dependent on at least a modest recovery in international travel and international business travel. But we’re beginning to see green shoots, particularly in Europe, in the Middle East, Latin America, where I just came back from a trip and Asia that I think John highlighted. So look, it’s not going to be a speedy recovery as the single AL aircraft. But we are seeing a strong momentum to replace the oldest, wide buddy aircrafts that are reaching 20 to 25 years of age, either convert them to cargo, or simply retired them. And in addition, we seen a lot of 767 being converted to freighters. In fact, I think there’s not four conversion lines in the world converting 767 300 yards to freighters. So all of those ingredients that really helped forge a steady path forward recovery of the wide body market.

Jamie this really illustrates the basis of a philosophy of had you’ve heard several lessors over the course of the pandemic panicking over the wide bodies, several have said and I’m not getting any more reliable anymore, and we’re done blah, blah, blah, blah. That’s just that, that always seemed to us as just too much of a knee jerk reaction clearly, the portal needs wide body aircraft. It is the way that most international traffic over any reasonable distance is covered. So there’s just no way that wide bodies are dead, or they’re not good investments. It’s just a question of which wide bodies you pick going forward and what you have in your fleet. So we’ve never ever even thought about abandoning the wide body space for the reasons, especially now that Steve has outlined. And I do think that that’s a key differentiator for at least Air Lease. Now the time, the current time of course, we are emphasizing narrow bodies. The vast majority of the order we hit with Airbus and Boeing and all of Boeing were all narrow bodies. And that’s great. We move with the times we move with current demand. For a wide picture, you should never dismiss wide bodies. Steven Házy: One other item Jamie that I think the investors need to think about and that is that the fuel consumption of the wide body aircraft is significantly higher than the single aisle aircraft. So with the rising oil prices, what we’re seeing is that airlines are trying to sort of optimize their scheduling around the most fuel efficient aircraft, such as the A3 3900s, for example, that Delta and other carriers A350 901-1000, 787 9 and that tends and so we’re seeing a greater understanding of the operating cost profile of these aircraft and these newer technology wide bodies that tend to be kind of in a smaller medium size wide body segments are extremely attractive in this high fuel cost environment.

Thanks for that gentleman. And just a quick follow up and it’s a question about appraisers and I’m sure you don’t spend a lot of time or lose much time or much sleep thinking about appraised value. But some of your investors do and some analysts may, how much do you think that the appraiser community has, I guess overshot on the downside for values and lease rates relative to what you’re seeing and do you have a guess as to when that turn in their values might be because for some owners these are metrics that matter.

Jamie, I’ll offer one fact on that. And that is this generally speaking, we find that the appraisers not criticizing them because they only go on historical data, they look they do on transactions that have been done, but generally speaking, the appraisers are usually somewhere between 6 and 12 months behind where the actual real time marketplace is. Some are more aggressive, some are less aggressive. But clearly it’s the data flow lags in the appraiser community against real time transactions that we’re seeing in the marketplace.

That’s really helpful. Thanks very much. Both you take care and I guess see you in a few weeks.

Thank you. And our next question comes from the line of Catherine O’Brien with Goldman Sachs. Catherine O’Brien: Hi, good afternoon, everyone. So I might just start off following on the discussion on wide bodies. I thought the comment on wide body lease rates in the press release benefiting from freighter strength was encouraging. I know you ordered some A350 freighters but do you think that dynamics in the freight market are sustainable enough where you’d look to increase your fleet exposure to freighters more meaningfully going forward? Or was that really as a comment meant more to highlight that cargo demand helps increase the value of wide bodies overall, including your passenger wide body?

Well, we have not had any freighter aircraft or dedicated freighter aircraft in our fleet since the inception of Air Lease. So the order for the A350 freighter is really our first venture into the all cargo market. We are also planning to convert some of our A350 aircraft into freighters either as full freighters or as small package freighters between 2023, and 2027. But relative to our total size and balance sheet, our emergence to the freight market is really a very tiny segment of our total assets. So it’s not a major shift or departure from our fleet strategy. But we are talking to a lot of very sophisticated freight carriers and combination airlines that both carry freight and passengers that are extremely interested in A350 freighters. Steven Házy: And Katie I think to the main point of your question, we did not make this move without feeling very convinced that the freight marketplace has really fundamentally changed with the advent of e-commerce and we say that as sustainable for as far as you can see in the future. It’s really provided a lot of stability to that marketplace. And so we’ve also in that process looked at the ancillary question which is, as additional aircraft are reabsorbed and taken onto the airlines fleet, and especially as more wide body aircraft start flying again does that deteriorate or decrease the overall appetite for freight and cargo? And we’ve come to the answer no We feel there’s plenty of demand for dedicated freighters, as evidenced by A350 freighters will make further aircraft freighter decisions on the new aircraft side to see how time unfolds. Steve indicates our plants convert some A330s. But it’s a new market for us. But it’s a market we have jumped into based on a pretty rigorous study of the capacity in the marketplace what happens when the current aircraft return in larger fold to international flying and we still think well and above then there’s a good demand profiles for the foreseeable future. Catherine O’Brien: That totally makes sense. I mean, my mom who didn’t know how to reply to an email before COVID. Now is ordering on Amazon every day. So here you there. For my second question is for Greg just give him where rates are today and hires grades have trended over the last 18 months which is in a favorable direction of course, should we expect to see your composite costs of the funds continue to come down even in a rising rate environment or maybe that’s a little too rosy and then just any further refinancing opportunities coming or just a January issuance take care of that for the foreseeable future? Thanks.

I think there’s a couple things to think about. I think the first you start with is the fact that we have 95% of our debt being fixed. So it’s very difficult to move our overall debt books, which is now closing in on $17 billion. So it’s hard to move the needle from that perspective, we will do, of course, issue more debt this year, as we continue to take aircraft into our portfolio that we’ve committed to buy. But I think we’re pretty, I mean, it’s hard to say where rates go, but they do feel like they’re going higher. But I think we have a significant amount of liquidity to allow us to access the market at appropriate windows or the most advantageous windows that present themselves to us. So it’s hard to say how much they’ll move at higher, rates are going higher. But I do feel that lease rates are going to go a lot higher than what our composite cost of funds will go up. And I think that’ll help us in the future.

Yes, one other point on that is that we have some debt maturities in the next two years where the interest rate embedded in those bonds is higher than our composite rate to-date. So every time we can pay off the bond, that’s more expensive than our average, we’re actually helping the company’s balance sheet and reducing the overall portfolio interest expense. Catherine O’Brien: Okay, great. Yes, that’s kind of where my head was going. If I might be able to speak one really quick one. I want to clarify in your 787 comments. You said you’re expecting to take delivery, just one versus the 10 committed? Is that because you’re unsure when Boeing will be able to deliver? Or did I hear you say something about customers are exercising their right to cancel given the --?

No. Those are going ability or lack of ability. In my remarks, Katie, it was very clear, this is up to the FAA when deliveries can resume. And there’s just great uncertainty about that. And so we have just made our best guess. It’s not based upon cancellations. It’s based on what we think is most likely to happen. I want to say on that regard, we don’t really have any better view on this than anyone else. So we’re not projecting anything. And I also said that we hope it actually improves. It would be great for us if it did, but just our reading of the situation now and the uncertainty that is there with the FAA recently, of course, it was the FAA determined that it will not be giving Boeing authority for certification on the aircraft. And the FAA is going to supervise that. We don’t know if that might mean, additional time involved, for example. So this is just our best guess. Catherine O’Brien: Great, very clear. So I’m sure I had that right.

Thank you. And our next question comes from the line of Vincent Caintic with Stephens.

Hi, thanks for taking my question. Great results on your rental revenue performance this quarter. Just wondering if you could maybe talk about as your new aircraft is being delivered, sort of lease rates we can expect? And off of the fourth quarter in my approximately correct I think was the jumping off point as the 564 million less the 12 million cash accounting, recoveries are sort of the way to think about it. Thank you.

So Greg why don’t you take the last part of the question first?

So the jumping off point, maybe you could clarify that a little bit. We had we did have cash basis recoveries of $12 million, which is up I think, from last quarter, we had about 5, so that was incremental above and beyond the normal accrual basis accounting that we would have had for those individual airlines. Does that helps? Is there something more to your question than that?

Yes, I’m guessing so the 564 I guess he had a cash accounting of last quarter of what was it about 40 million. So I should just add incremental film on top of that, so maybe exclude that on run rate basis?

Yes. That’s a fair point. I mean, I think it’s collections that $12 million was collectable or would have been booked in prior quarters that they got caught up this period.

And on your lease rate question, Vincent. As you know, we don’t really comment specifically dollar wise or otherwise on lease rates in particular, but I can always only say that in several of our aircraft types, led primarily by the A321 NEO and the XLR and LR lease rates are at now or in some cases slightly above what they were pre-COVID. So we are returning to pre-COVID lease rate levels on the 320 21 NEO series, the 737 Max. Max is getting very close, the A220s as well. And so I think we’re very, this has been very encouraging for us to see. So suffice to say the short end is where they’re at, they are very close to in some cases above pre-pandemic levels. Steven Házy: We are also when talking to airlines, they recognize that interest rates are going north, not south. So it’s their alternatives to purchasing aircraft and get their own financing. Those costs will rise. And so the the introducing high capital cost assets is not going to be as favorable for them either. So leasing becomes a very, very attractive alternative to purchasing aircraft directly and getting traditional financing.

Okay, that makes sense. Thank you for that color. And then a second quick follow up. So nice to see the share repurchase authorization increase for this year. Just wondering if you can remind us how you’re thinking about executing on that share repurchase program versus other things such as, of course, the aircraft deliveries and other opportunities to use the capital. Thank you.

Right. This is Greg, I mean, we typically don’t provide color at what levels we bought the stock. But we spent a lot of time thinking about that. And the board has authorized us to go out there and repurchase $150 million worth of stock over the next six months through September 30. So we are going to make sure we do our best to buy the appropriate levels for increasing shareholder value through it.

Okay, great. Thanks very much.

Thank you. And your next question comes from the line of Helane Becker with Cowen. Becker I am sorry.

That’s okay. Thanks operator. Hi, everybody. I’m thank you for the time. I think Steve or John, you mentioned that Airbus is sold out. And we know that to be the case between on the narrow body aircraft between now and I think 2027. How are you doing, I guess is the right word convincing customers to switch from an Airbus to maybe to a Boeing if they need that lift in the short term.

So Haley, let me just jump in on that I want to make sure there’s no misunderstanding. We now have positioned ourselves to have both the Airbus and Boeing products from our order book available in those few years timeframe. We’re not relying on the Max order that we just made to fill in what Airbus cannot provide. We just simply point out as an ancillary comment, Airbus is sold out. And I think what you’re going to be seeing shortly is Boeing getting very quickly sold out as well. So our position is, we have the advantage of having a good order book of both types to offer. So as to our customers, we continue to guide where we think the best fleet decision is for them. It’s not necessarily causing them to move from A to B or B to A. we take a look and we make our best judgments and we offer our opinions to our customers and we now have both. Our mentioning of Airbus being sold out, is simply a statement of fact. But the reason we mentioned that is we have both. We have both Airbus and Boeing in this timeframe.

Okay, that’s very helpful. Thank you for clarifying that. I appreciate it. And I think I asked you this question last time too that I feel like in the last six months, things have changed with respect to the electric vehicle market. It seems to be getting more acceptance. There seem to be more airlines going direct to the manufacturers in ordering them. So has your thought changed on those aircraft since the last time we talked when I mean, I know a lot of these are ground replacement, rather than real aircraft replacement. But how are you thinking about that at all now, if at all.

Well historically, we are not in a two to four passenger aircraft leasing. That’s not the segment of the market that we are involved in. We are closely following the technology and the product developments of a number of these aircraft and helicopters, but we have to just be patient and watch this evolve and understand the asset values and the long term demand for these aircrafts and the pace of technological change in these small electric planes will be very quick. So we don’t want to be playing around with prototypes when two or three years later there may be significant advances in technology and operating economics. So I think you’re going to see Air Lease being very much cautious in this segment. But if we determine that there’s a viable business opportunity that make sense to complement what we already do, we will certainly get our feet wet. But right now, I’d say we’re more of a spectator than a direct investor.

Yes that makes sense. A fast follower. Okay, that’s fine. Those are my questions. Thank you all.

Thank you. And your next question comes from the line of Hillary Cacanando with Deutsche Bank.

Hi, thanks for taking my questions. So last week Frontier and Spirit announced the merger and as you mentioned, you have the A321neos that you have agreed to place with Spirits. Could the pending merger has any impact on that lease agreement at all and I guess just on high level, in general would you say that airline mergers are a positive for the lessors or a negative for the lessor perhaps just given that as a bigger company following a merger the airline could perhaps have more leverage against the lessor than get better rates and stuff like that. And we’d love to get your thoughts. Thank you.

Well, Frontier and Spirit are customers of Air Lease. We have A320s and A321 aircraft at Frontier. And we’re adding 15 new aircraft 10, A1321s neos, 5 A320 neos. So we have a very close relationship with both of these airlines. They have very similar business strategy and their route networks will complement each other. They have virtually identical aircraft types other than the engines where there are some differences. So operationally, it will be quite straightforward to integrate those airlines. The key question is the justice department and whether there’s going to be negative headwinds from the administration for further consolidation of the industry. And that’s really going to be the key issue. But just looking at it as a clean sheet merger, we don’t really see a huge set of obstacles or impact on the lessors. Steven Házy: I would just add to your question, the answer is no. Our leases are not at risk, or nothing will fall through because of this merger. But let me just point out that mergers and consolidations within the airline industry are nothing new. And over time, they really have had little to no effect on our business. I’ll just give you an example from years ago KLM and Air France, they merged. They were big customers of ours, our old company before they emerged. And they are big customers of ALC today after they merged and I can cite many other examples. So mergers don’t necessarily change the landscape in our view. In many ways, a merger to the extent that it creates a healthier overall airline and more profitable airline, a bigger airline is better for us from a credit profile. Certainly larger airlines as their credit profile enhances enjoy the best lease terms. But historically they look back I can’t really say that a merger has in any way detrimental or least positioned.

I mean another domestic airline acquisition was Alaska buying Virgin America. And Virgin America had primarily an Airbus A320 fleet and Alaska has primarily a 737 fleet. So that combination resulted in Alaska rationalizing their fleet, and gave us an opportunity to take out 10, A320s out of Alaska, that were formerly Virgin Atlantic aircraft. We placed all those Senate Allegiant and at the same time did a 13 aircraft new deal with Alaska for 737-9. So mergers and acquisitions frequently create opportunities for us to optimize the surviving airline as well as give us raw material to do new transactions.

Make sense. Thank you for the answer. And then I guess my second question, I know you said that your exposure to Russia is very small, it’s under 5%. But I guess more broadly for the leasing sector if Russia was, if Russia invades Ukraine, and sanctions are placed on Russian companies. Is it your view that I guess from what you’ve seen in the past that Russian airlines could potentially also be sanctioned as well and if that’s the case there will they be prevented from making these payments to you guys and just with leasing, overall to competitors as well. What’s your thought on what you are seeing?

Yes. Let me just offer first of all, just as a matter of record, our aircraft that are on lease in Russia, none of them are Russian registered, they’re all registered in other jurisdictions. And so that is helpful and should the need to go take some aircraft out, that is a very helpful fact. As to sanctions or everything else like that. It’s really too early to tell what may happen. The carriers that we leased to over there, for example, like F7, they’re very strong carriers. And so, it’s just too hard to speculate on what sanctions may happen. But just suffice to say that if we had to remove aircraft, the fact that they’re not registered in that country of jurisdiction is helpful. Steven Házy: In addition, we do not lease aircraft in Russia to any government owned carrier. So any airlines that are owned by the Central State, by the Kremlin, we do not lease to, for example, Aeroflot and Pobeda, which is a low cost, we do not lease the aircraft to those airlines that are owned by the Russian government.

Got it. That’s helpful. Thank you so much.

Thank you. I’m showing no further questions. So with that, I’ll turn the call back over to head of Investor Relations, Mary Liz DePalma for any closing remarks.

Thank you, everyone for your time participating on our call today. We’ll look forward to speaking with you again when we report first quarter results. Andrew, thank you so much, and please disconnect the line.

This concludes today’s conference call. Thank you for participating and you may now disconnect.