Investor Presentation 2017 Fourth Quarter and Full Year

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Jewel Welch
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1 Investor Presentation 2017 Fourth Quarter and Full Year

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. 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, 2017, 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 90067, (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

Executive summary ALC is one of the premier

customer base Positive long term industry

3 Executive summary ALC is one of the premier aircraft lessors in the marketplace One of the world s largest customers for new commercial jet aircraft Globally diversified customer base Positive long term industry fundamentals for growth and replacement of aging aircraft Strong funding profile and credit metrics Highest rated standalone aircraft lessor 3

Air Lease as of 12/31/2017 $15.6 billion Total assets $1.5 billion Total revenues 244 owned aircraft Weighted avg. age: 3.8 years Weighted avg. lease term remaining: 6.

4 Air Lease as of 12/31/2017 $15.6 billion Total assets $1.5 billion Total revenues 244 owned aircraft Weighted avg. age: 3.8 years Weighted avg. lease term remaining: 6.8 years 50 managed aircraft 368 aircraft on order 97% Order book placed through 2019 $23.4 billion Committed minimum future fleet rentals 1 $3.2 billion Available liquidity 2.35x Debt/Equity 17.5% Adjusted pre-tax ROE 2 Note: Information as of December 31, 2017 unless noted otherwise. 1 Includes $10.1 billion in contracted minimum rental payments on the aircraft in our existing fleet and $13.3 billion in minimum future rental payments related to aircraft which will deliver between 2018 and 2022, 2 Adjusted Return on Equity Before Income Taxes is calculated as the trailing twelve month Adjusted Net Income Before Income Taxes divided by average shareholders equity. Adjusted Return on Equity Before Income Taxes and Adjusted Net Income Before Income Taxes are non-gaap financial measures. See appendix for a reconciliation to its most directly comparable GAAP measure. 4

5 Industry Update Industry Update Air Lease Update Portfolio Detail Capital Structure Summary Appendix

5 billion for 2017E 6 Sources: 1 Passenger

per IATA as reported on February 1, 2018; 2

Deutsche Bank Markets Research as reported on

6 Airline productivity measures Passenger Traffic +7.6% 1 Load Factors 81.4% 1 Parked Fleet 3.4% 2 Airline Net Profits 3 $34.5 billion for 2017E 6 Sources: 1 Passenger Traffic and Load Factors for full year 2017 per IATA as reported on February 1, 2018; 2 Parked Fleet percentage as of October 2017 per Deutsche Bank Markets Research as reported on November 27, 2017 (Includes aircraft less than 20 years old); 3 Airline Profits per IATA as reported on December 5, 2017

7 Air Lease continues to benefit from three key tailwinds Growing levels of passenger traffic Airlines need to replace aging aircraft Increasing role of aircraft lessors 7

Passenger traffic increased worldwide in 2017 RPK growth 2017 vs. 2016 1 Total market +7.6% Africa +6.3% Europe +8.

2% Forecasted Passenger Volume CAGR by Major Region 2017-2022 2 North America 2.1% Europe 2.2% Latin America 5.

8 Passenger traffic increased worldwide in 2017 RPK growth 2017 vs Total market +7.6% Africa +6.3% Europe +8.2% Middle East +6.4% Asia Pacific +10.1% Latin America +7.0% North America +4.2% Forecasted Passenger Volume CAGR by Major Region North America 2.1% Europe 2.2% Latin America 5.5% Asia Pacific 5.9% Middle East 6.1% Africa 7.6% Source: 1 IATA Air Passenger Market Analysis of revenue passenger kilometers ( RPK ) as of December 2017; 2 Derived from IATA October 2017 Economic Report 8

9 Air travel has proven to be resilient RPKs (trillions) 8.0 Gulf Crisis Asian Crisis 9/11 SARS Financial Crisis Recessions 2 Financial crises Gulf wars 1 Oil shock 1 Near pandemic (SARS) 2x Trend 4.0 9/11 Attack x Source: ICAO data as of March

10 Replacement demand is also important In addition to industry growth, new aircraft will be needed to replace existing older, less efficient airplanes An airline s decision of whether or not to replace an aircraft is not solely based on age; it also includes aircraft flight hours and increased maintenance requirements, among other considerations For this reason, while aircraft have an expected useful life of 25 years, ALC targets aircraft for replacement starting at 8 years of age global Fleet fleet Retained Replacement Growth global fleet fleet 23,480 aircraft >40,000 aircraft needed over next 20 years for growth and replacement 5,920 aircraft within the existing fleet are retained 17,560 new aircraft needed to replace aircraft in existing fleet 23,470 new aircraft needed for growth 46,950 aircraft 10 Source: Boeing Current Market Outlook

Role of lessors is increasing More and more of the

10,290 leased 3,722 aircraft 6,037 aircraft 9,160

11 Role of lessors is increasing More and more of the world fleet is leased % 1.7% 14.7% 24.7% ~39% 17 leased 100 leased 1,343 leased 3,715 leased 10,290 leased 3,722 aircraft 6,037 aircraft 9,160 aircraft 15,032 aircraft 26,131 aircraft Why is this the case? Less cash & financing required Fleet flexibility Key delivery positions Eliminate residual value risk Source: Boeing; Data as of December 31,

12 Air Lease Update Industry Update Air Lease Update Portfolio Detail Capital Structure Summary Appendix

13 Consistent asset growth ($ in billions) Solid Balance Sheet growth has supported consistent revenue growth $9.2 $10.7 $12.4 $14.0 $ Owned Fleet Count:

14 Consistent unencumbered asset growth ($ in billions) We have focused on financing the business on an unsecured basis We have grown our unencumbered assets 1 to $14.1 billion, which we believes provides a solid foundation for our investment grade credit ratings $6.5 $8.6 $10.6 $12.3 $ Comprised of unrestricted cash plus unencumbered flight equipment (calculated as flight equipment subject to operating leases (net of accumulated depreciation) less net book value of aircraft pledged as collateral) plus deposits on flight equipment purchases plus certain other assets. 14

15 Consistent revenue growth ($ in millions) The expansion of our fleet has driven consistent revenue growth and cash generation Portfolio lease rates have remained consistent during this period $1,223 $1,419 $1,516 $1,050 $

16 Adjusted net income before income taxes 1 ($ in millions) Reinvesting our earnings has built shareholders equity and strengthened our high quality balance sheet $623 $658 $439 $508 $339 Adj. margin before income taxes 1,2 (%): Adj. return on equity before income taxes 1,3 (%): Adj. diluted EPS before income taxes 1,4 ($): Adjusted Net Income Before Income Taxes, Adjusted Margin Before Income Taxes, Adjusted Return on Equity Before Income Taxes and Adjusted Diluted Earnings Per Share Before Income Taxes are non-gaap financial measures. See appendix for reconciliations to their most directly comparable GAAP measures. 2 Adjusted Margin Before Income Taxes is Adjusted Net Income Before Income Taxes divided by Total Revenues, excluding insurance recoveries. 3 Adjusted Return on Equity Before Income Taxes is calculated as Adjusted Net Income Before Income Taxes divided by average shareholders equity. 4 Adjusted Diluted EPS Before Income Taxes is Adjusted Net Income Before Income Taxes plus assumed conversions divided by weighted average diluted shares outstanding. 16

ALC s portfolio metrics have remained constant 14% 14.0 Annualized Lease Yield 1 12% 10% 8% 6% 4% 2% 12.0 10.0 8.0 6.0 4.0 2.0 Weighted Average Portfolio Metrics (years) 0% 0.

17 ALC s portfolio metrics have remained constant 14% 14.0 Annualized Lease Yield 1 12% 10% 8% 6% 4% 2% Weighted Average Portfolio Metrics (years) 0% 0.0 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Annualized Lease Yield Avg. Age Avg. Lease Term Remaining Source: ALC company data; 1 Calculated as rental of flight equipment, excluding overhaul revenue and amortization of prepaid lease costs, divided by quarterly average net book value 17

18 Despite various macro events Timing of concern surrounding macro events since Time of market concern Concerns: 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q European debt crisis Increased competition New aircraft technology Rising interest rates Pandemics Low oil Production rates Wide body weakness China slowdown Brexit Production delays 1 Timing based on ALC management s estimates 18

19 Portfolio Detail Industry Update Air Lease Update Portfolio Detail Capital Structure Summary Appendix

20 Portfolio risk management Focus on young aircraft, holding an owned aircraft for the first 1/3 of its useful life Balanced asset mix Airframe manufacturers including Airbus and Boeing Engine manufacturers including General Electric, CFM, Pratt & Whitney, Rolls Royce, and International Aero Engines Twin-aisle and single-aisle aircraft Flexibility in purchase agreements with the aforementioned airframe manufacturers Diversified global customer base, with 91 airline customers across 55 countries as of December 31, 2017 Close monitoring of customer receivables to assure problems are proactively addressed Staggered and balanced lease maturities by year 20

Aircraft strategy Long term asset acquisition strategy

modern single- and twin-aisle commercial aircraft

& 737 MAX7/8/9 A330-900NEO (Launch Customer) 787-9/10

21 Aircraft strategy Long term asset acquisition strategy focused on the most in demand, widely distributed, modern single- and twin-aisle commercial aircraft A320/321/321LR/NEO (A321LRNEO Launch Customer) & 737 MAX7/8/9 A NEO (Launch Customer) 787-9/10 ( Launch Customer) A /1000 (A Launch Customer) 21

ALC invests in the most liquid aircraft types ALC s aircraft assets have a broad installed operator base The broad installed operator base of our aircraft assets are the basis of our asset liquidity

22 ALC invests in the most liquid aircraft types ALC s aircraft assets have a broad installed operator base The broad installed operator base of our aircraft assets are the basis of our asset liquidity The lengthy manufacturer backlog increases the value of ALC s order book Backlog 2 Total # In Operators 1 Service 1 1 A320 Family 737 Family A350 Family 787 Family ,277 7, * 1,284* 8.5 years 7.5 years 5.9 years 4.2 years A330 Family 129 1, years Source: 1 FlightGlobal as of February Airbus and Boeing published data on aircraft on order and average production rates as of December 31, Backlog calculated as aircraft on order divided by average production rate. *In service and on order. 22

23 Strength in manufacturer relationships ALC s management team has helped launch a number of aircraft types and associated engine designs ALC is able to drive cost advantages by negotiating with manufacturers for high quality products and competitive pricing 23

24 Geographic diversity ALC executive management maintains long standing relationships with over 200 airlines worldwide Relationships span 70 countries with limited exposure to any one airline Globally diverse placements mitigate financial and concentration risk 24

25 Fleet overview Fleet Metrics owned aircraft and 50 managed aircraft $13.3 billion aggregate fleet net book value 3.8 years weighted average fleet age years weighted average remaining lease term 2 $23.4 billion in committed minimum future rentals 3 Diversified customer base with 91 airlines in 55 countries Latin America, 7% Middle East and Africa, 11% Pacific, Australia, New Zealand, 3% Asia (ex. China), 22% Region 4 U.S. and Canada, 4% Europe, 32% China, 21% Manufacturers 5 Aircraft Size 5 Embraer, <1% Twin-Aisle, 23% Airbus, 42% Boeing, 58% Single-Aisle, 77% 1 As of December 31, 2017, except otherwise noted 2 Weighted average based on net book value of ALC s owned fleet 3 Includes $10.1 billion in contracted minimum rental payments on the aircraft in our existing fleet and $13.3 billion in minimum future rental payments related to aircraft which will deliver between 2018 and Shown by net book value as of December 31, 2017, may not total to 100% due to rounding 5 Shown by number of aircraft as of December 31, 2017, may not total to 100% due to rounding 25

Order book provides flexible growth and a strategic advantage We believe the order book is a source of value and provides visibility into the future and the opportunity to double our fleet size in 5

26 Order book provides flexible growth and a strategic advantage We believe the order book is a source of value and provides visibility into the future and the opportunity to double our fleet size in 5 years We believe our coveted delivery positions give us a competitive advantage with current and potential customers We can exercise flexibility with delivery position commitments and timing We typically place aircraft months prior to delivery and currently are 97% placed through 2019 Scheduled Aircraft Deliveries 1 Total Commitments Boeing 787-9/10 Boeing 737 Family Airbus A /1000 Airbus A330 Family Airbus A320 Family Thereafter 1 As of December 31,

27 Capital Structure Industry Update Air Lease Update Portfolio Detail Capital Structure Summary Appendix

28 Capital structure & financing strategy Capitalization December 31, 2017 Key Debt Portfolio Targets ($mm) % of capitalization Unrestricted cash $292 2% Total assets 15, % Unsecured debt Senior notes 8,020 58% Revolving credit facility 847 6% Term financings 204 1% Convertible senior notes 200 1% Total unsecured debt 9,271 67% Secured debt Term financings 484 4% Export credit financing % Total secured debt 529 4% Less: debt discount and issuance costs (101) Total debt 9,699 70% Shareholder's equity 4,127 30% Total capitalization $13, % Selected credit metrics Debt/Equity 2.35x Contracted Cash Flows/Debt 1 104% Residual Fleet Value/Equity x Secured Debt/Total Assets 1 3.4% Fixed Rate Debt/Debt 85.4% 80/20 Fixed to Floating debt ratio Balanced debt maturity profile Debt to Equity ratio of 2.5:1 90/10 Unsecured to Secured debt ratio 1 Calculated as: Contracted Minimum Rental Payments on aircraft in existing fleet divided by Debt, as of December 31, See appendix for calculation. 2 Calculated as: Flight equipment subject to operating leases (net of accumulated depreciation) minus contracted minimum rental payments on aircraft in our existing fleet divided by Equity, as of December 31, See appendix for calculation. 28

Air Lease credit highlights BBB Stable BBB Stable A- Stable Strong Asset Base Fleet comprised of young, in demand, technologically advanced aircraft with an average age of 3.

29 Air Lease credit highlights BBB Stable BBB Stable A- Stable Strong Asset Base Fleet comprised of young, in demand, technologically advanced aircraft with an average age of 3.8 years Long weighted average remaining lease term of 6.8 years across the fleet Diversified customer base of 91 airlines in 55 countries Minimal lease expirations over the next few years $10.1 billion contracted minimum future rental payments on our existing fleet $13.3 billion committed rentals on our order book, for a total of $23.4 billion committed cash flows Conservative Capital Structure Debt : Equity ratio of 2.35 : 1 Conservative debt maturity schedule 85.4% fixed rate debt Strong contracted cash flow coverage relative to debt outstanding at 104% 1 Low residual value risk relative to equity at 0.78x 2 Highly profitable with 43.4% adjusted margin before income taxes for fiscal Data as of December 31, 2017, unless otherwise noted 1 Calculated as: Contracted Minimum Rental Payments on aircraft in existing fleet divided by Debt, as of December 31, See appendix for calculation. 2 Calculated as: Flight equipment subject to operating leases (net of accumulated depreciation) minus contracted minimum rental payments on aircraft in our existing fleet divided by Equity, as of December 31, See appendix for calculation. 3 Adjusted margin before income taxes is calculated as adjusted net income before income taxes divided by total revenues, excluding insurance recoveries. Adjusted margin before income taxes is a non- GAAP financial measure. See appendix for reconciliation to its most directly comparable GAAP measure. 29

30 Summary Industry Update Air Lease Update Portfolio Detail Capital Structure Summary Appendix

31 Air Lease investment highlights Air Lease growth continues while maintaining a conservative capital structure and delivering strong returns to our shareholders Contracted Growth Strong ROE Conservative Capital 2 Structure We believe our order book is a source of value and provides visibility into the future and the opportunity to double the size of our fleet in 5 years We have substantial forward cash flow visibility through our lease placements We are 97% placed through 2019, and currently have $23.4 billion in committed rentals 1 We have minimal lease expiries through the next several years, further enhancing visibility We are focused on risk with no single customer greater than 10% of our revenue We expect further benefits from operating leverage as our fleet grows We expect to benefit through the refinancing of our remaining high yield debt with investment grade bonds We expect additional profits from the growth of our management business Substantial liquidity of $3.2 billion Low Debt/Equity target of 2.5x Large unencumbered asset base of $14.1 billion % fixed rate debt Investment grade ratings from three agencies 1 Placements and committed rentals as of December 31, Includes $10.1 billion in contracted minimum rental payments on the aircraft in our existing fleet and $13.3 billion in minimum future rental payments related to aircraft which will deliver between 2018 and Values as of December 31, Comprised of unrestricted cash plus unencumbered flight equipment (calculated as flight equipment subject to operating leases (net of accumulated depreciation) less net book value of aircraft pledged as collateral) plus deposits on flight equipment purchases plus certain other assets. 31

32 Appendix Industry Update Air Lease Update Portfolio Detail Capital Structure Summary Appendix

33 Appendix Non-GAAP reconciliations (in thousands, except share and per share data) Reconciliation of net income to adjusted net income before income taxes: Year Ended December 31, Net income $ 756,152 $ 374,925 $ 253,391 $ 255,998 $ 190,411 Amortization of debt discounts and issuance costs 29,454 30,942 30,507 27,772 23,627 Stock-based compensation 19,804 16,941 17,022 16,048 21,614 Settlement , Insurance recovery on settlement (950) (5,250) (4,500) - - Provision for income taxes (146,622) 205, , , ,031 Adjusted net income before income taxes $ 657,838 $ 622,871 $ 507,982 $ 438,596 $ 338,683 Assumed conversion of convertible senior notes 5,842 5,780 5,806 5,811 5,783 Adjusted net income before income taxes plus assumed conversions $ 663,680 $ 628,651 $ 513,788 $ 444,407 $ 344,466 Reconciliation of denominator of adjusted margin before income taxes: Total revenues $ 1,516,380 $ 1,419,055 $ 1,222,840 $ 1,050,493 $ 858,675 Insurance recovery on settlement $ (950) $ (5,250) $ (4,500) $ - $ - Total revenues, excluding insurance recovery on settlement $ 1,515,430 $ 1,413,805 $ 1,218,340 $ 1,050,493 $ 858,675 Adjusted margin before income taxes % 44.1% 41.7% 41.8% 39.4% Weighted-average diluted shares outstanding 111,657, ,798, ,628, ,192, ,963,550 Adjusted diluted earnings per share before income taxes 2 $ 5.94 $ 5.67 $ 4.64 $ 4.03 $ Adjusted margin before income taxes is adjusted net income before income taxes divided by total revenues, excluding insurance recoveries 2 Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes plus assumed conversions divided by weighted average diluted shares outstanding. 33

34 Appendix Non-GAAP reconciliations (in thousands, except percentage data) Reconciliation of net income to adjusted net income before income taxes: Year Ended December 31, Net income $ 756,152 $ 374,925 $ 253,391 $ 255,998 $ 190,411 Amortization of debt discounts and issuance costs 29,454 30,942 30,507 27,772 23,627 Stock-based compensation 19,804 16,941 17,022 16,048 21,614 Settlement , Insurance recovery on settlement (950) (5,250) (4,500) - - Provision for income taxes (146,622) 205, , , ,031 Adjusted net income before income taxes $ 657,838 $ 622,871 $ 507,982 $ 438,596 $ 338,683 Reconciliation of denominator of adjusted return on equity before income taxes: Beginning shareholders' equity $ 3,382,187 $ 3,019,912 $ 2,772,062 $ 2,523,434 $ 2,332,621 Ending shareholders' equity $ 4,127,442 $ 3,382,187 $ 3,019,912 $ 2,772,062 $ 2,523,434 Average shareholders' equity $ 3,754,815 $ 3,201,050 $ 2,895,987 $ 2,647,748 $ 2,428,028 Adjusted return on equity before income taxes % 19.5% 17.5% 16.6% 13.9% 1 Adjusted return on equity before income taxes is adjusted net income before income taxes divided by average shareholders equity. 34

35 Appendix Cash Flow Coverage Calculations ($ in billions) December 31, 2017 Net Book Value of Aircraft A $ 13,280 Minimum Future Lease Rentals from Operating Leases B $ 10,076 Residual Exposure A - B $ 3,205 Shareholders Equity C $ 4,127 Residual Value Risk (A-B) / C 0.78x Total Debt D $ 9,699 Contracted Cash Flows / Debt B / D 104% 35

Investor Presentation 2018 Fourth Quarter

Investor Presentation 2018 Fourth Quarter Forward Looking Statements & Non-GAAP Measures Statements in this presentation that are not historical facts are hereby identified as forward-looking statements,