Airline Economics Growth Frontiers Dublin

Transcription

1 Challenges Ahead Airline Economics Growth Frontiers Dublin Steven F. Udvar-Házy Executive Chairman January 22, 2018

2 Forward Looking Statements & Non-GAAP Measures Statements in this presentation that are not historical facts are hereby identified as forward-looking statements, including any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance that are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as anticipate, believes, can, could, may, predicts, potential, should, will, estimate, plans, projects, continuing, ongoing, expects, intends and similar words or phrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. We wish to caution you that our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors, including the following: our inability to make acquisitions of, or lease, aircraft on favorable terms; our inability to sell aircraft on favorable terms; our inability to obtain additional financing on favorable terms, if required, to complete the acquisition of sufficient aircraft as currently contemplated or to fund the operations and growth of our business; our inability to effectively oversee our managed fleet our inability to obtain refinancing prior to the time our debt matures; impaired financial condition and liquidity of our lessees; deterioration of economic conditions in the commercial aviation industry generally; increased maintenance, operating or other expenses or changes in the timing thereof; changes in the regulatory environment; and potential natural disasters and terrorist attacks and the amount of our insurance coverage, if any, relating thereto. We also refer you to the documents the Company files from time to time with the Securities and Exchange Commission ( SEC ), specifically the Company s Annual Report on Form 10-K for the year ended December 31, 2016, which contains and identifies important factors that could cause the actual results for the Company on a consolidated basis to differ materially from expectations and any subsequent documents the Company files with the SEC. All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. If any such risks or uncertainties develop, our business, results of operation and financial condition could be adversely affected. The Company has an effective registration statement (including a prospectus) with the SEC. Before you invest in any offering of the Company s securities, you should read the prospectus in that registration statement and other documents the Company has filed with the SEC for more complete information about the Company and any such offering. You may obtain copies of the Company s most recent Annual Report on Form 10-K and the other documents it files with the SEC for free by visiting EDGAR on the SEC website at Alternatively, the Company will arrange to send such information if you request it by contacting Air Lease Corporation, General Counsel and Secretary, 2000 Avenue of the Stars, Suite 1000N, Los Angeles, California (310) In addition to financial results prepared in accordance with U.S. generally accepted accounting principles, or GAAP, this presentation contains certain non-gaap financial measures. Management believes that in addition to using GAAP results in evaluating our business, it can also be useful to measure results using certain non-gaap financial measures. Investors and potential investors are encouraged to review the reconciliation of non-gaap financial measures with their most direct comparable GAAP financial results set forth in the Appendix section. 2

3 Potential challenges ahead Macro Volatility Aircraft Leasing Competition Availability of Capital Potential Challenges Ahead Evolving Airline Landscape Shift to New Generation Aircraft Production Rates 3

4 Today s market: clear for takeoff Global economic growth Passenger growth continuing Aircraft demand strong Access to financing Today s Market +5.2% % 2014 Global passenger growth, rpk % +7.5% 2017E +7.3% % 2016 Source: IATA Fact Sheet Industry Statistics, December 2017; Percentages for system-wide global commercial airlines 4

5 Periods of turbulence Historical global airline profitability as reported by IATA $50 $40 $30 Net profit ($ billion) $20 $10 $0 ($10) ($20) ($30) E 2018F Airline profitability driven by passenger traffic and low oil prices Source: IATA Fact Sheet Industry Statistics, December

6 Key market drivers Factors contributing to healthy demand for air travel $160 $140 $120 $100 $80 $60 $40 $20 Oil 1 Interest Rates 2 $0 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18! Warning 8% 7% 6% 5% 4% 3% 2% 1% Helped rejuvenate airline balance sheets 0% '00 '02 '04 '06 '08 '10 '12 '14 '16 ' USD Strength 3 Passenger Travel 4 60 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 Source: 1 Bloomberg as of 1/10/18, ICE Brent/$BBL; 2 Bloomberg as of 1/10/18, 10 year UST; 3 Bloomberg as of 1/10/18, DXY Index; 4 World Bank World Development Indicators as of 12/22/ Passengers carried (billion) Global Population CAGR: 1.49% CAGR: 5.37% '75 '80 '85 '90 '95 '00 '05 '10 '15 6

7 Evolving airline landscape Emergence of LCC/ULCC carriers Illustrative example of low cost airlines launched since Source: Logos reflect the low cost airline or its parent/associated company

8 Evolving airline landscape Evaluating the impact of LCC/ULCC carriers LCC/ULCC driving fares lower Resulting in unprecedented affordability Average round-trip ticket price Worldwide passenger traffic is up As LCC/ULCC take share from legacy carriers Sched. Passenger numbers (bn) Market Share, Western Europe (%) E Source: Top left and top right charts: The Wall Street Journal article: How Budget Carriers Transformed the Airline Industry, August 2017, 2 Bottom left chart: IATA Fact Sheet Industry Statistics December 2017, 3 Bottom right chart: Financial Times article: European airlines face more cuts and consolidation, October

9 Production rates Aggressive ordering and aspirational backlogs Example of significant OEM orders from LCC/ULCC carriers Driving expected increased production rates Boeing/Airbus orders Planned Annual Production Regional Jet Single Aisle Twin Aisle Are these orders/production rates sustainable? 9 Source: 1 Boeing and Airbus; Includes Boeing unfilled orders through 12/31/17 and Airbus orders net deliveries as of 12/31/2017, 2 JPMorgan research December 2017, based on Flight Ascend analysis of announced production rates

10 Availability of capital Abundant liquidity today what about tomorrow? Wide variety of financing choices currently available Leasing Companies Capital Markets Commercial Banks Export Credit Agencies Alternative Asset Managers Tax Equity Insurance Airframe & Engine Manufacturers New Sources of Funding Significant financing requirements to support industry fleet growth will require these capital sources Funding needed ($ billions) $200 $150 $100 $50 $0 $83 >$800 billion of capital needed over next five years $92 $56 $61 $69 $74 $76 10 Source: Boeing Capital, Current Aircraft Finance Market Outlook Assumes lessor fleet ownership remains at ~40% $103 $111 $ F 2019F 2020F 2021F 2022F Lessor share to support industry fleet growth 1 Funding needed from other sources Other sources: >$500bn Lessors 1 : $335bn

11 Shift to new generation aircraft Technology risk is present in old and new generation aircraft - Obsolescence - Fuel economy - Maintenance - Residual values - Customer experience Old Generation New Generation - Technical issues - Delivery delays - Airline adoption - Production scale/availability 11

12 Know your counterparty ALC is a long-term partner for the airline industry Scale Visibility Stability $43 billion Total assets owned and on order 659 Total aircraft owned, managed and on order 91% Order book placed through Contracted & committed $23 billion 2019 fleet rentals 1 High level of capitalization and significant liquidity Highest rated standalone aircraft lessor (S&P: BBB / Fitch: BBB / Kroll: A-) Note: Values and information included above as of September 30, 2017 unless noted otherwise 1 Includes $9.6 billion of contracted minimum future rentals on our existing fleet and $13.7 billion committed rentals on our order book 12

13 Questions?