Air Lease Corporation ends Q4 2023 with 56% net income increase

Air Lease Corporation (ALC) has reported a 56.1% net income increase in the fourth quarter of 2023, up from $134.9 million in the fourth quarter of 2022 to $210.6 million in 2023. Figures also showed a 19.1% increase in revenue for Q4 2023 to $601.6 million. Adjusted diluted earnings per share (EPS) were up to $1.89 in the same period. ALC's EPS was 81% above TD Cowen's estimate of $1.05 and 68% above the consensus of $1.12. TD Cowen analysts gave ALC an outperform rating and, in TD Cowen's insight report, stated: ""The shares continue to trade a large discount. We would be buyers here."" “In addition to revenue expansion during the fourth quarter, we also benefited from approximately $67 million net from the insurance settlement we received on four aircraft seized in Russia in the prior year, plus the equity interest in our managed fleet,” said ALC CEO and president John Plueger in an earnings call. ALC also recovered a net $30.9 million in the fourth quarter from its Russian fleet claims. Plueger added that the company is continuing to “vigorously pursue further insurance settlements” but was unable to give additional information regarding this due to it being “a largely legal matter.” The company took delivery of 22 aircraft from its order book in the fourth quarter, which represents around $1.2 billion in aircraft investments. It sold eight aircraft in the fourth quarter, equalling approximately $440 million in sales. The company ended the year with 463 aircraft in its owned fleet and over $30bn in total assets. Full year revenue was up 15.9% in 2023 year-on-year (YoY) to $2.69bn with 2022 revenue being $2.31bn. Full year net income was down from $711.6 million in 2022 to $572.9 million in 2023. Diluted earnings per share were at $5.14 for the full year. ALC executive chairman of the board Steven Udvar-Hazy said: “Our volume discount pricing on our fleet and orderbook was achieved well before the recent spike in industry orders and pricing, and gives us a tremendous advantage that few others possess.” He added that this positively supported the company’s lease rates and aircraft values. Udvar-Hazy also commented that “lease rates in the extensions are going up for single aisle” aircraft with Plueger stating that the shortage of single-aisle aircraft would remain “for quite some time.” “Based on the current interest rate situation, you can mathematically derive that aircraft delivering today are at a higher lease rate than they were 12, 18 months ago,” noted Udvar-Hazy. With the MAX production restrictions and GTF engine issues, Plueger said that ALC does “believe that the supply will remain constrained” but could not give a firm estimate on the impact on sales for 2024. Udvar-Hazy also added that MRO capacity “is very tight.” Positive traffic volumes and yields have played a vital role in the company’s expansion. “Global air traffic continues to gain altitude,” said Plueger, “and there are no signs on the horizon of volumes weakening dramatically.” The company has $1.5bn of aircraft in its sales pipeline for 2024, including $605 million in flight equipment held for sale and $892 million of aircraft subject to letters of intent. It also anticipates full year deliveries to be between $4.5bn and $5.5bn.