Air Lease Q2 2025 Earnings Report

Air Lease EPS Results

• Actual EPS: $1.40
• Consensus EPS: $1.33
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $1.23

Air Lease Revenue Results

• Actual Revenue: $731.70 million
• Expected Revenue: $723.35 million
• Beat/Miss: Beat by +$8.35 million
• YoY Revenue Growth: +9.70%

Air Lease Announcement Details

• Quarter: Q2 2025
• Date: 8/4/2025
• Time: After Market Closes
• Conference Call Date: Monday, August 4, 2025
• Conference Call Time: 4:30PM ET

Air Lease (NYSE:AL), an aircraft leasing company, engages in the purchase and leasing of commercial jet aircraft to airlines worldwide. It sells aircraft from its fleet to third parties, including other leasing companies, financial services companies, airlines, and other investors. The company provides fleet management services to investors and owners of aircraft portfolios. As of December 31, 2023, it owned a fleet of 463 aircraft, including 345 narrowbody aircraft and 118 widebody aircraft. Air Lease Corporation was incorporated in 2010 and is headquartered in Los Angeles, California.

Air Lease Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In 2Q25, Air Lease reported $732 million in revenue and $3.33 diluted EPS, driving record fleet net book value and book value per share of $65.53.
• Positive Sentiment: The company recognized a $344 million net benefit from Russia insurance settlements in Q2 and has recovered 104% of the initial fleet write-off, with an additional $60 million expected in Q3.
• Positive Sentiment: Fleet utilization remains at 100%, with $1.7 billion of deliveries year-to-date and the full-year delivery outlook trending toward the upper end of the $3–3.5 billion guidance range.
• Positive Sentiment: Air Lease’s aircraft sales pipeline stands at $1.4 billion with ~16% gain-on-sale margins; the company expects $1.5 billion in total sales for 2025 and $300 million in Q3.
• Neutral Sentiment: The firm canceled its order for seven A350 freighters—freeing over $1 billion in CapEx commitments—while remaining focused on disciplined aircraft acquisitions and balance sheet strength.

Presentation

[Operator]

Good afternoon. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Air Lease Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

We kindly ask that you limit your questions to one and one follow-up. I will now turn the call over to Mr. Jason Arnold, Head of Investor Relations. Mr. Arnold, you may begin the conference.

[Jason Arnold, VP - IR at Air Lease]

Thank you, Regina. Good afternoon, everyone, and welcome to Air Lease Corporation's second quarter twenty twenty five earnings call. This is Jason Arnold. I'm joined today by John Pugar, our Chief Executive Officer and President and Greg Willis, our Executive Vice President and Chief Financial Officer. Earlier today, we published our second quarter twenty twenty five results.

[Jason Arnold, VP - IR at Air Lease]

A copy of our earnings release is available on the Investors section of our website at ww.airleasecorp.com. This conference call is being webcast and recorded today, Monday, 08/04/2025, and the webcast will be available for replay on our website. At this time, all participants to 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 the state of the airline industry, the impact of aircraft and engine delivery delays, our aircraft sales pipeline and our future operations and performance.

[Jason Arnold, VP - IR at Air Lease]

These statements and any projections as to our future performance represent management's current estimates and speak only as of today's date. 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 new information or future events. In addition, we may discuss certain financial measures such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes and adjusted pre tax return on equity, which are non GAAP measures.

[Jason Arnold, VP - IR at Air Lease]

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 that we issued today. This release can be found in both Investors and Press section of our website at airleasecorp.com. Similar to prior quarters, given ongoing litigation, we won't be able to take any questions about our Russia fleet insurance claims. Lastly, as a reminder, unauthorized recording of this conference call is not permitted. I'll now turn the call over to our Chief Executive Officer and President, John Pluger. John?

[John Plueger, CEO, President & Director at Air Lease]

Thanks, Jason. Good afternoon, everyone, and thank you for joining us today. In the second quarter, Air Lease generated revenues of $732,000,000 and $3.33 in diluted earnings per share. Results benefited from our new aircraft deliveries, healthy gain on sales, increasing portfolio yield, end of lease revenue and another quarter of significant Russia insurance proceeds. Fleet net book value and book value per common share reached all time record levels in our company's history as of the end of the quarter.

[John Plueger, CEO, President & Director at Air Lease]

Expanding on our Russia insurance recoveries, we recognized a net benefit from insurance settlements of $344,000,000 during the second quarter and expect to recognize an additional $60,000,000 net benefit in the third quarter. To date, I'm very pleased to say that we recovered or have signed agreements to recover 104% of our initial Russia fleet write off. We purchased 12 new aircraft from our order book during the second quarter, adding approximately $890,000,000 in flight equipment to our balance sheet and sold four aircraft for $126,000,000 in sales proceeds. The weighted average of our fleet rose slightly quarter over quarter to four point eight years, while weighted average lease term remained unchanged at seven point two years. Fleet utilization remains 100%.

[John Plueger, CEO, President & Director at Air Lease]

As of midyear, we've delivered about $1,700,000,000 of aircraft out of our expected outlook for full year order book deliveries of roughly $3,000,000,000 to $3,500,000,000 At this point in time, we believe we are likely to hit the upper end of our full year expected range. We are anticipating around $600,000,000 of deliveries for the third quarter and we'll provide a fourth quarter twenty twenty five delivery outlook update for you on our next earnings call. Moving on to aircraft sales. Our intent is to continue the pace of aircraft sales to maximize available capital. To that end, our sales pipeline is sizable at 1,400,000,000 up relative to last quarter and all at an attractive gain on sale margins.

[John Plueger, CEO, President & Director at Air Lease]

We continue to expect around $1,500,000,000 of aircraft sales for 2025 in total and are projecting $300,000,000 of sales for the third quarter with a balance to close in 2025. This quarter's particular sales volume came in below our expectations due to the timing of anticipated closings falling outside the quarter. Our gain on sale margin for the quarter was high at approximately 16%, reflecting continued strong aircraft demand in the secondary market. Commercial aircraft demand remains robust and our order book placement activity reflects this strength. Lease rates in turn remain strong as well.

[John Plueger, CEO, President & Director at Air Lease]

Aircraft supply constraints continue to persist, perpetuating the strength in lease rates and aircraft values and are expected to remain this way for several years into the future as we've highlighted many times in the past. Our order book is 100% placed through 2026 with only a modest number of placements remaining for 2027. Lease extension activity also remains high with nearly all customers choosing to extend rather than let aircraft go to competitors or other airlines. And the lease rates we are garnering on these extensions are strong, higher than a year or even eight months ago, including recent wide body extensions of A330 and Boeing seven seventy seven aircraft in various regions. Looking at our order book, we did cancel our order for seven A350 freighter aircraft.

[John Plueger, CEO, President & Director at Air Lease]

We think the A350 freighter is a terrific freighter, but since we made that order in December 2021, we simply decided to stick with new passenger airliners versus venturing into new freighters. Contractually, the majority of our A350 freighter aircraft were more than a year late. This cancellation frees up more than $1,000,000,000 in forward CapEx commitments, making that capital available for other alternatives. On that note, regarding capital deployment, let me just say that we are very disciplined buyers of aircraft. And as we have shared in prior quarters, we still do not view pricing of new aircraft orders to be attractive.

[John Plueger, CEO, President & Director at Air Lease]

We are entirely focused on doing what's best for our shareholders, which includes both commitment to our long term stock performance and maintaining a strong balance sheet. We're pleased with our Russia insurance recoveries and liquidity position, including just now getting back to our leverage target. With our enhanced financial flexibility, we are carefully considering opportunities to return capital to shareholders. It's important to note that despite tariffs, geopolitical and macroeconomic uncertainties, conversations with our customers remain positive with some continued note of caution towards geopolitical uncertainty. On a positive note for the backdrop of airline operations, further declines in fuel prices have been very supportive of airline profitability as a whole and U.

[John Plueger, CEO, President & Director at Air Lease]

S. Dollar weakness has been supportive of the profitability of international airline carriers in particular. On Friday, the Lufthansa Group reported a 27% rise in second quarter adjusted operating profit due to low oil prices, strong U. S. Demand and robust performance of its cargo and MRO units.

[John Plueger, CEO, President & Director at Air Lease]

Similarly, last week, Air France KLM, our largest European customer group, reported an operating profit up 44% year on year due to strong yields and gains on its premium offering. Globally, passenger traffic continues to expand at a good pace overall of around 5% year to date according to the latest IATA data. Recent commentary from several U. S. Carriers reflect optimism that demand trends are reversing course to the positive in the second half of the year.

[John Plueger, CEO, President & Director at Air Lease]

As most of you know, about 90% of our airline customers are outside of North America. We were very pleased to see zero for zero tariffs on commercial aircraft and parts in The U. S. EU tariff agreement announced last week. The impact of a major or protracted U.

[John Plueger, CEO, President & Director at Air Lease]

EU tariff battle on the overall aerospace industry and supply chain could have had significant impact on manufacturers, airlines and their broader macroeconomic environment as well and would be particularly tough on a sector that has already dealt with plenty of disruptions over the past four or five years. So very good news that a negative outcome has been successfully averted, particularly given the scale of the aerospace industry within these two markets. We believe a clear precedent has now been set globally for exemption of commercial aircraft from high magnitude tariffs. I will also remind you that as part of our lease agreements, tariffs are the responsibility of our customers and that our purchase agreements with the OEMs limit their ability to increase prices by escalation caps. In conclusion, we continue to see bright skies ahead for our business.

[John Plueger, CEO, President & Director at Air Lease]

Portfolio yields on our fleet are set to trend higher primarily as a product of strong lease rates on new deliveries, strong extension rates and COVID restructuring maturities. We've received significant insurance proceeds as I've highlighted and fixed rate market financing rates have continued trending lower as the yield curve continues to slowly normalize. These tailwinds are all poised to propel us forward for years to come. I'll now turn the call over to our CFO, Greg Willis to offer more detail and color on our financial results. Greg?

[Gregory Willis, Executive VP & CFO at Air Lease]

Thank you, John, and good afternoon, everyone. During the second quarter, Air Lease generated total revenues of $732,000,000 up 9.7% over the prior period. This increase was driven by a 13.5% increase in our rental revenue driven by the growth of our fleet and increase in end of the lease revenue and our portfolio yield. As we have guided in the past, we continue to expect that our portfolio yield will remain on an upward trajectory due to the roll off of COVID era leases, the seasoning of our existing fleet and lease extensions despite the effects of selling aircraft at higher yields, which I'll address in more detail in a few minutes. In prior periods, we included maintenance revenue in the rental revenue line item.

[Gregory Willis, Executive VP & CFO at Air Lease]

However, going forward, we will now break out maintenance revenue as a separate line item on our income statement for increased clarity. Maintenance revenue in the quarter was up $16,000,000 driven by driven primarily by end of lease income received during the period. End of lease revenue is highly dependent upon the timing of returns. Given the current high demand environment that we are in, we do not expect to receive significant amounts of end of lease income in the remainder of 2025 as a vast majority of our leases are set to extend with the current operators. As a reminder, extending leases at market rates further enhances the value of our aircraft and we typically capture the value of end of lease income in the ultimate disposition of the aircraft.

[Gregory Willis, Executive VP & CFO at Air Lease]

Sales proceeds for the quarter totaled $126,000,000 from the sale of four aircraft. This compares to the prior period where we sold 11 aircraft totaling $530,000,000 in proceeds. Aircraft sales volumes were down this quarter due to the timing of aircraft sales. As we have said in the past, it is difficult to forecast when aircraft sales will ultimately close due to a host of airline customer legal and jurisdictional matters. However, these sales generated approximately $17,000,000 in gains, representing roughly a 16% gain on sale margin, which is at the top end of our performance in recent history.

[Gregory Willis, Executive VP & CFO at Air Lease]

Beyond gains on sales, we also benefited from an increase in our management fees and other income. Turning to our aircraft sales pipeline. It currently sits at $1,400,000,000 with healthy gain on sales margins above our historical average of 8% to 10%. It's also worth noting that the aircraft in our pipeline are carrying asset yields that are significantly lower than what existed in prior years. Therefore, this should help dampen the impact of aircraft sales on our portfolio yield trajectory.

[Gregory Willis, Executive VP & CFO at Air Lease]

This is driven by several factors including our basis in the which directly benefits from our disciplined approach to aircraft investment, the types of aircraft in our fleet and improvement in underlying credit quality of our customers as well as improvements in the interest rate environment for our buyers. Moving on to expenses. Interest expense rose by approximately $19,000,000 year over year driven by a 29 basis point year over year increase in our composite cost of funds to 4.28% at quarter end. However, relative to the end of the first quarter, our composite cost of funds rose only two basis points. Higher financing costs and debt balances were the primary contributors to the year over year increase in interest expense.

[Gregory Willis, Executive VP & CFO at Air Lease]

At the end of the second quarter, roughly 77 of our borrowings were at fixed rates versus floating inside our 80% target. We continue to benefit from our largely fixed rate financing structure, which has meaningfully moderated the impact of an elevated interest rate environment at the front end of the curve. Depreciation expense continues to track the growth of our fleet turning to SG and A and stock comp. We recognized the majority of our of the non recurring expenses related to Steve Ossie's retirement in the first quarter, resulting in meaningfully lower SG and A and stock comp expenses this quarter. I do want to point out that this quarter we previously as we previously mentioned, we have an additional $2,200,000 in stock based compensation expense related to Steve Steve Hodges' retirement, which is the last of these retirement related expenses.

[Gregory Willis, Executive VP & CFO at Air Lease]

SG and A as a percentage of revenue was flat as compared the first quarter, excluding the non recurring retirement expenses, and was flat as compared to the prior year's quarter at around 6.8% of revenue. We expect this number to trend lower over time as the fleet continues to expand and legal expenses related to our Russia fleet litigation wind down. As John noted earlier, we recognized a net benefit of $344,000,000 in Russia fleet insurance settlements in total representing approximately $2.43 per share in the quarter, which in addition to the operating results boosted our book value per share to $65.53 per share. Combined with legal settlements executed in the third quarter, our recovery of our initial Russia fleet write off stands at approximately 104%. Moving on to our financing activities.

[Gregory Willis, Executive VP & CFO at Air Lease]

As we highlighted last quarter, we believe that we are largely able to self fund our order book with expected operating cash flow and sales activity. Therefore, the primary financing needs remain are related to the refinancing of our existing debt. While the front end of the curve remains elevated, we have seen market financing rates improve measurably on term debt issuances within our typical targeted maturity range. We remain opportunistic in our approach to refinancing needs, so we will continue to monitor the capital markets for attractive entry points. We also maintain well positioned for further normalization of the yield curve.

[Gregory Willis, Executive VP & CFO at Air Lease]

We believe our patience has served us well. Our debt to equity ratio declined to just below 2.5 times target following the recognition of additional insurance settlements and our operating results this quarter. Anticipate having more financial and capital flexibility over the next several years. The cancellation of our A350 freighter order further reduces our capital needs for financing new aircraft deliveries in future periods. As always, our strong liquidity position of $7,900,000,000 $31,000,000,000 of unencumbered assets and $29,000,000,000 of contracted rentals continue to remain key pillars of financial strength for our business.

[Gregory Willis, Executive VP & CFO at Air Lease]

To wrap up, we are very excited about the tailwinds we foresee for our business at present, which we see as propelling us forward with EPS growth and rising profit margins and ROE ahead. With that, I'll turn the call back over to Jason for the question and answer session of the call.

[Jason Arnold, VP - IR at Air Lease]

Thanks, Greg. This concludes our prepared commentary and remarks. For the question and answer session, we ask each participant to limit their time to one question and one follow-up. Operator, please open the line for the Q and A session.

[Operator]

Our first question comes from the line of Terry Ma with Barclays. Please go ahead.

[Terry Ma, Senior Equity Research Analyst at Barclays]

Hey, thank you. Good afternoon. I just want to start out with lease expirations and maturities. You guys had quantified about $5,000,000,000 of lower yielding leases that are expected to expire in the next two years, and that should help kind of contribute to a 150 to 200 basis point improvement in yield. So I was just hoping maybe for mark to market of where you are in that process, how much of that 5,000,000,000 has kind of been extended or renewed?

[Terry Ma, Senior Equity Research Analyst at Barclays]

And kind of what the trajectory for lease yield is kind of going forward from here?

[Gregory Willis, Executive VP & CFO at Air Lease]

Sure, Terry. I'll take it. Right now, we're making we're tracking exactly along the same path that we have set forth back in q one when we put forward those those those numbers. I don't have an updated number of what percentage of the $5,000,000,000 roll off where we are currently. But I will say that our guidance of 150 to 200 basis point improvement is still valid.

[Gregory Willis, Executive VP & CFO at Air Lease]

In fact, actually with the change in dynamic of our sales pipeline coming in with lower yields on those assets is actually helping. But we're gonna hold off any further on updating guidance and further yield improvements at the current time.

[Terry Ma, Senior Equity Research Analyst at Barclays]

Got it. Okay. And then maybe just on capital allocation. You guys are now within your leverage target. You expect, some additional recoveries in the third quarter, and you also mentioned, the additional $1,000,000,000 capital kind of freed up from the freighter cancellation.

[Terry Ma, Senior Equity Research Analyst at Barclays]

Maybe just kind of talk about how you evaluate the relative attractiveness of kind of buybacks to your other kind of opportunities.

[John Plueger, CEO, President & Director at Air Lease]

Yes. Hi. This is John. I'll take that. Yes.

[John Plueger, CEO, President & Director at Air Lease]

Look, buybacks are a very attractive looking form of capital allocation, as we mentioned in the past. Our point about just reaching our debt to equity ratio is simply that we are building a very, very strong balance sheet with excess capital such that any capital moves or capital deployment we may make will be meaningful. At the same time, give us the ability to retain a very strong balance sheet with no threat at all to our rating our investment grade ratings.

[Operator]

Our next question will come from the line of Catherine O'Brien with Goldman Sachs. Please go ahead.

[Catherine O'Brien, Vice President at Goldman Sachs]

Hi. Good afternoon, everyone. Hi, Catherine. Hey. How are you?

[Catherine O'Brien, Vice President at Goldman Sachs]

So one of your peers recently was just noting that with deliveries picking up, airlines capital requirements would be too, and they expected there could be more deals that met their return threshold via sale leaseback channel. I guess, what what's your view on that, and and how does that figure into the capital allocation strategy? It it sounds like shareholder returns are still pretty high on the list, but just we kinda love, like, the punch list for what looks the most attractive to you guys now and and and thoughts on if there's more capital deployed to sell these back. Thanks.

[John Plueger, CEO, President & Director at Air Lease]

Sure. Sure. Look, the evolving landscape with with customers and and their perspective on order books are always there, and we always do consider that. However, as I mentioned in my remarks, continued strengthening of our available capital with a view towards our shareholders is equally, if not more so, attractive at this time. And so we continue to build capital on that basis.

[Catherine O'Brien, Vice President at Goldman Sachs]

That makes sense. And then maybe just on Russia, I know you're limited in what you can say, but I guess with the $60,000,000 settlement, is there more or less? Like, are you expecting you still need to go to court this fall? Or or it's like I guess, trying to get a sense of, like, what's still outstanding. Thanks so much.

[John Plueger, CEO, President & Director at Air Lease]

Thanks, Kate. It's John again. Listen, we I think we've indicated $60,000,000 for the third quarter, but we are still in litigation in London. And I'm just simply not able to comment further.

[Operator]

Okay. Got it. Our next question will come from the line of Moshe Orenbuch with TD Cowen. Please go ahead.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Great. Thanks. And I guess we'll go three for three talking a little bit about capital. Maybe just to frame the question slightly differently. Your returns are improving and they're expected to improve.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Sounds like they Greg, they could be improving a little faster even if the yield kind of steps up at a faster pace. Can you relate for us how you would think about like how much of the capital or like how much excess capital you could be generating and how to think about that in the context of kind of improving returns?

[Gregory Willis, Executive VP & CFO at Air Lease]

Yeah. I I don't think we can we're not prepared to give a number of how much excess capital we have over the next several years. I mean, very clearly, a lot of it's dependent upon, our sales activities, which currently are very strong. I think you're gonna wanna see us continue to execute upon our sales pipeline as well as source new additional sales around those levels to create more capital. But as a reminder, we just got back down to our debt to equity target.

[Gregory Willis, Executive VP & CFO at Air Lease]

And I think it just takes a little bit of time to build the capital to be in a position to evaluate what to do with that excess capital that that everybody's foreseeing us having.

[John Plueger, CEO, President & Director at Air Lease]

Well, so let me just reiterate one of my comments in that. One of the most important considerations when you're asking sort of directly about size is that whatever we do in capital deployment, it's meaningful, whether to shareholders or anything else. And at the same time, to be able to, as I said, retain a very strong balance sheet in in the view of our bondholders and the rating agencies. So just we're trying to exercise our best judgment, but anything we do is gonna be meaningful.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Yes. I certainly appreciate that. Maybe to kind of follow-up on the comments about aircraft sales. The sales this quarter were lighter, but you've got an expectation of that picking up. You did cancel some orders as well.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

And so like maybe just if you sort of could you outline for us how you're thinking about how much of the fleet you will put up for sale? Obviously, we know what your plans are for the back half of this year. But as you think about it in 2026, is there a way to kind of dimension that for us?

[Gregory Willis, Executive VP & CFO at Air Lease]

Yeah. I mean, we're targeting a billion and a half this year, and I think we're targeting about the same level for the next several years, which should create additional capital. And I will point out the a three fifty freighter cancellation mainly impacted '27 and '28 in terms of CapEx needs. So I think those all are coming together, and and we'll we'll continue to execute and and update you on on where we are from excess capital perspective.

[John Plueger, CEO, President & Director at Air Lease]

In other words, just keeping the same pace, Moshe, where we've been. We we're very comfortable with that. We think we can execute it from a sales perspective. And also bottom line, it just maximizes our opportunities. So we don't see accelerating sales beyond that.

[John Plueger, CEO, President & Director at Air Lease]

Circumstances could change, but I certainly don't see it. But at the same time, we love the building of capital from that level of sales. So just expect that to continue.

[Moshe Orenbuch, MD & Senior Analyst at TD Cowen]

Thanks very much.

[Operator]

Our next question comes from the line of Hilary Kakananda with Deutsche Bank. Please go ahead.

[Hillary Cacanando, Director - Equity Research at Deutsche Bank]

Hi, thank you so much. So you mentioned that you're not expecting much end of lease revenue this year due to higher extension rates. So in terms of modeling for next year, are you expecting end of lease revenues to kind of go down again next year, due to, like, higher extension rate? Or do you expect it to, like, reverse next year or or the year after? Like, how are you thinking about that?

[Gregory Willis, Executive VP & CFO at Air Lease]

I think you probably should expect the sort of the same level that you saw in '25 as in '26, assuming the environment still remains strong. I think that's probably a fair number, and and not every single lease will extend because maybe we don't wanna extend with the underlying carrier. In that case, we take the airplane back and and take end of lease income. So I I think it's a a bit of a balance, but I think probably what we've done this year is probably fair for next year.

[Hillary Cacanando, Director - Equity Research at Deutsche Bank]

Probably similar level? Okay. And then, I think last quarter, you mentioned that, you know, obviously, mentioned it again that the rates on the extensions were higher than the original rates. And then last quarter, you actually said there were some as much as 50% higher than the original rate. Are you still seeing, like, you know, high extension rates like that?

[Hillary Cacanando, Director - Equity Research at Deutsche Bank]

You know, are you still seeing that level? And then in terms of, like, the the length, are they, you know, five or six years, or are they are they much shorter?

[Gregory Willis, Executive VP & CFO at Air Lease]

The extension rates that we're doing, again, this quarter were higher than what they what the they previously carried. So we're still feeling very good about that, and that's why we're still feeling very good about our overall portfolio yield trajectory. The market remains really robust, especially as we take out a lot of these Coverdea leases.

[Hillary Cacanando, Director - Equity Research at Deutsche Bank]

And are they are they long in terms are they, like, five or six years in May?

[Gregory Willis, Executive VP & CFO at Air Lease]

Or Yeah.

[Gregory Willis, Executive VP & CFO at Air Lease]

They're they're they're they're your standard extensions from four to six years. Sometimes longer, sometimes shorter, but on average, they're in that that area.

[John Plueger, CEO, President & Director at Air Lease]

I would just add on

[John Plueger, CEO, President & Director at Air Lease]

What what what is good to see is that the wide body extensions are are pointing a little further to longer extensions in the four to five area range. That's pretty much a slam dunk for single vial, but the wide bodies are now at that longer extended term length as well.

[Hillary Cacanando, Director - Equity Research at Deutsche Bank]

That's great. Good to see. Helpful. Thank you very much.

[John Plueger, CEO, President & Director at Air Lease]

Okay.

[Operator]

Our next question comes from the line of Jamie Baker with JPMorgan. Please go ahead.

[Jamie Baker, U.S. Airlines & Aircraft Leasing Equity Analyst at J.P. Morgan]

Good afternoon, gentlemen. So just one question from us and I guess it sort of builds on Katie's question. She referenced the AerCap call. The topic of sale leasebacks came up. And obviously, there haven't been a ton of transactions in that space as of late and what recent deals have gotten done.

[Jamie Baker, U.S. Airlines & Aircraft Leasing Equity Analyst at J.P. Morgan]

It sounds like the economics are skewed more in favor of the airlines rather than the sponsoring lessors. So basically AerCap's view is that as OEM production rates increase, it could actually improve to strengthen economics. So that's the basis of our question. As production rates begin to rise, how do you I guess, how do you try to angulate the impact that, that will have on the sale leaseback market, the extension of current leases and your order book dynamics at Air Lease? Thanks.

[John Plueger, CEO, President & Director at Air Lease]

Well, I think the most important fundamental Jamie to consider is that even with production rate increases, even with those increases, which have not all been achieved by any certain, there is still a shortfall in supply for the next three to four years. And that assumes those production rate increases. So we do fully expect those production rate increases to go into effect. As to how it will impact the sale leaseback market, it remains a little unclear, but our litmus test really is very fundamental and hasn't changed. We know what we pay for aircraft.

[John Plueger, CEO, President & Director at Air Lease]

We know what we get for leases. We're happy to take a look at any sale leaseback opportunities. But I don't think, at least sitting here today, it's hard to see that there's going to be a material shift in that marketplace versus the order book marketplace. I think that sale leaseback marketplace will still tend to be overly competitive and will probably still return a lower lease. Having said that, we are completely open on that aspect as well.

[John Plueger, CEO, President & Director at Air Lease]

If we find a unique opportunity with an airline perhaps to do a sale leaseback on a certain percentage of its orders in connection with placing our orders, we're very happy to do that.

[Jamie Baker, U.S. Airlines & Aircraft Leasing Equity Analyst at J.P. Morgan]

Okay. That'll do it. Thanks a lot, John. Really appreciate it. Take care.

[Operator]

Our next question comes from the line of Ron Epstein with Bank of America. Please go ahead.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Hey, good afternoon, guys. Maybe just a quick one and then a quick follow-up. Are you starting to see reasonable production stability out of DOEs?

[John Plueger, CEO, President & Director at Air Lease]

Ron, it's John. Well, I would say yes in the following sense. November '24, we got our last forward our last delivery projection outlook from Boeing. I must say that they have lived up to that, and the quality has been good and high. Now clearly, they've not stepped to 42.

[John Plueger, CEO, President & Director at Air Lease]

I think that they have projected that for the end of the year. I think they will do so on that time frame if they are ready. But I also think that if they are not ready, they will not. Airbus, there has been no further slippage since February, March where we were notified quite much to our surprise of of another year's delivery of most of our single aisles going on in '26 and '27. There has been no change there either.

[John Plueger, CEO, President & Director at Air Lease]

But I would just remind you that Airbus today at its single wire production rate is at a much higher rate than Boeing. So just by that, I would say that there perhaps is still a bit more risk in the Airbus production rate. I could be wrong. This is just I'm just giving you my gut feel here. So that's the best way I can answer it.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Got it. Got it. And then maybe if we just sort of focus a little bit more on the quarter. And when we think about kind of the recovery here, understanding that there's a COVID error contracts pressured yields and they last for a while. But I think you guys guided for yields to trend higher over the course of the year, it does seem like we backtracked a little bit in the quarter.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

And is that just because some aircraft with some higher yields on them were sold? Or you know, how how should we think about that?

[Gregory Willis, Executive VP & CFO at Air Lease]

Ron, I think actually yields increased during the quarter. That that's the numbers we're seeing, and we're happy to share with you the details. But if you look at it on an average asset basis, they actually increased this quarter, and we expect them to continue to continue to track upward over the next several quarters.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Okay. Great. Alright. Yeah. Thank you. No problem.

[Operator]

Our next question is a follow-up from the line of Catherine O'Brien with Goldman Sachs. Please go ahead.

[Catherine O'Brien, Vice President at Goldman Sachs]

Hey, guys. Thanks for the extra time. Can you I just was wondering, so can you just give us an update on on demand from airline customers? Obviously, with the extension rate and some of the commentary, you made for some of the, you know, strong results of European carriers, in the prepared remarks, you know, sound sounds like it's business as usual. Was there basically no impact around the tariffs outside of maybe The US that you've seen over the last couple months?

[Catherine O'Brien, Vice President at Goldman Sachs]

I just I just guess I'd love to hear, like, how conversations about growth and taking new deliveries and demand for orders are sounding with the airlines versus where they were in January and April if there was a difference between January, April, and now. Thanks so much.

[John Plueger, CEO, President & Director at Air Lease]

That's Katie. Well, very clearly, I can say that as for the passenger commercial aircraft, there's really no change at all in, the positive momentum that we're seeing in in aircraft demand overall. In fact, you know, it's the same or or or perhaps even a little greater in certain aircraft types, such as the a three twenty one neo. Where I do think there has been an impact, though, from tariffs has been in the cargo markets. I think the freighter markets have had a little bit more fluctuation in this era that we're current the last, you know, several months in the tariff era, as I would call it.

[John Plueger, CEO, President & Director at Air Lease]

And that kind of remains to be seen. And for example, that was one of the things that that we thought about referencing our eight fifty freighter order. So I would say, again, there has been a little bit of tempering, but primarily it's been on the cargo side. Not that we're a huge provider of cargo aircraft, I need to be very clear. But our sense is there has been a little bit of caution on the cargo markets, but really not the passenger aircraft demand.

[Catherine O'Brien, Vice President at Goldman Sachs]

Got it. Really helpful. Thanks for the extra time. Sure.

[Operator]

And there are no further questions at this time. Mr. Arnold, I turn the call back over to you.

[Jason Arnold, VP - IR at Air Lease]

Thank you all for participating on our second quarter call. We look forward to speaking to you again next quarter. Regina, thank you very much for your help and please disconnect the line.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Jason Arnold, VP - IR
• John Plueger, CEO, President & Director
• Gregory Willis, Executive VP & CFO

Analysts

• Terry Ma, Senior Equity Research Analyst at Barclays
• Catherine O'Brien, Vice President at Goldman Sachs
• Moshe Orenbuch, MD & Senior Analyst at TD Cowen
• Hillary Cacanando, Director - Equity Research at Deutsche Bank
• Jamie Baker, U.S. Airlines & Aircraft Leasing Equity Analyst at J.P. Morgan
• Ronald Epstein, Senior Equity Analyst at Bank of America