ALC 2Q profit jumps to $28.2m on firm lease demand

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Air Lease Corporation (ALC) improved its second quarter net income to $28.2 million from $7 million a year earlier on the back of "stable lease demand" for new aircraft.

Revenue more than doubled to $158.2 million for the three months to 30 June, the lessor said in a second quarter earnings statement.

In the second quarter ALC deployed more than $950 million in capital to grow its fleet to 137 aircraft from 114 at March 31. The lessor also announced it had placed 18 new aircraft with China Southern Airlines and 13 with Air China.

"For our second quarter 2012 and year-to-date results, I'm pleased to announce continuing successive record results in the execution of our growth plan. During the second quarter ALC saw stable lease demand for our new aircraft positions despite financial headlines regarding Europe and potential slowing in China," said Steven Udvar-Házy, chairman and chief executive officer of ALC. "Our lease placements continue to be in line with our expectations and we are nearing full placement of our new aircraft deliveries through 2015."

Udvar-Hazy also indicates lease terms have been "trending longer" up to 12 years on both widebody and single aisle aircraft, which "locks in strong future rental revenue."

During the quarter, ALC made further progress in placing aircraft. As of 30 June, it entered into contracts for the lease of all 15 aircraft delivering in 2012, for 28 out of 30 new aircraft delivering in 2013, and for 26 out of 27 new aircraft delivering in 2014. ALC also inked contract for eight out of 26 new aircraft delivering in 2015, for one of 24 new aircraft delivering in 2017, and for seven out of 31 new aircraft delivering in 2018.

ALC also "successfully removed" its single Airbus A320 from Kingfisher during the quarter "without incurring a credit loss and that aircraft has been re-leased," according to John Plueger, president and chief operating officer of ALC.

Cheaper funds

During the second quarter, ALC lowered its composite cost of funds to 3.84% at 30 June compared with 4.05% as of 31 March. The lessor entered into additional debt facilities aggregating $885.6 million, which included its $853 million syndicated unsecured revolving credit facility and additional unsecured term facilities aggregating $32.6 million.

ALC ended the quarter with total unsecured debt outstanding of $2.2 billion. Unsecured debt as a percentage of total debt increased to 55.1% as of 30 June from 31.7% as of 31 December.

"We ended the second quarter of 2012 with a conservative balance sheet with low leverage and ample available liquidity of $1.2 billion. As part of our 2012 financing strategy we will continue to focus on financing the Company on an unsecured basis," says Udvar-Házy.

ALC's lending group comprised 30 banks across six lending facilities at quarter end.