Air Lease (AL) - 2024 Q4 - Annual Report

Financial Performance - Net income attributable to common stockholders for the year ended December 31, 2024, was $372.1 million, a decrease of 35.1% from$ 572.9 million in 2023[23]. - Adjusted net income before income taxes for the year ended December 31, 2024, was $574.2 million, down 21.8% from$ 733.6 million in 2023[24]. - As of December 31, 2024, the company's total consolidated indebtedness was approximately $20.2 billion, with interest payments of approximately$ 794.3 million for the year[80]. - The composite cost of funds increased from 3.77% at December 31, 2023, to 4.14% at December 31, 2024, due to elevated interest rates[86]. - The company incurred a $5.6 million loss during the year ended December 31, 2024, due to currency fluctuations on unhedged foreign currency investments[325]. Fleet and Operations - The net book value of the fleet increased by 7.4% to$ 28.2 billion as of December 31, 2024, compared to $26.2 billion as of December 31, 2023[32]. - Passenger traffic volume increased by 10% in 2024, with international traffic rising by 14% and domestic traffic by 6%[26]. - The company aims to acquire modern, fuel-efficient aircraft, focusing on replacing aging fleets and opportunistic purchases in the secondary market[37]. - The company maintains a portfolio of young modern aircraft and primarily orders new planes directly from manufacturers, selling them when they near the end of the first third of their expected 25-year useful life[52]. - As of December 31, 2024, the company had a managed fleet of 60 aircraft, expanding its customer base through fleet management services[53]. Market Conditions and Competition - The aircraft leasing industry is highly competitive, with competition based on delivery dates, lease rates, and aircraft condition[65]. - The company expects continued demand for aircraft leasing due to the need for airlines to replace aging aircraft and ongoing delivery delays from manufacturers[27]. - Lease rates on new agreements and extensions increased, with the highest delivery lease yield in over four years reported in Q4 2024[29]. - The company is exposed to risks from lessee defaults, with expectations of increased defaults and bankruptcies in the airline industry[113]. - Increased competition from other aircraft lessors may impact the company's ability to execute its long-term strategy[120]. Risks and Challenges - The Boeing labor strike in late 2024 is expected to impact aircraft deliveries and the broader aviation supply chain[28]. - The company faces risks related to its capital requirements and debt financings, which may adversely affect its business operations[80]. - The company may incur significant costs in repossessing aircraft, including legal fees and potential delays in obtaining possession[118]. - The company is subject to extensive government regulations regarding aircraft registration, operation, and maintenance, impacting its leasing operations[66]. - The company may face challenges in ensuring that lessees maintain adequate insurance coverage, which could result in increased costs and liabilities[127]. Economic and External Factors - High inflation rates may negatively impact the value of leases and increase operational costs, affecting financial results[106]. - Macroeconomic events, such as the COVID-19 pandemic, have historically disrupted air travel and adversely affected the company's financial condition[136]. - The company is exposed to risks from natural disasters, particularly given its principal office location in Los Angeles[137]. - The airline industry is subject to evolving environmental regulations that may increase costs for lessees and impact their ability to make lease payments[151]. - Changes in fuel costs could negatively affect lessees' operating results, impacting their ability to meet lease obligations[147]. Customer and Revenue Concentration - The average customer concentration is approximately 1.0% of the fleet net book value, indicating a highly diversified customer base[36]. - As of December 31, 2024, the company had concentrated customer exposure with top five lessees, with 7.8% and 2.5% of aircraft by net book value leased to customers in Taiwan and China, respectively[109]. - More than 95% of the company's revenues for the year ended December 31, 2024, were derived from customers outside the U.S., with most lease payments denominated in U.S. dollars[148]. Debt and Financing - The company finances aircraft purchases with available cash, operating lease cash flows, and debt financing, focusing on maintaining investment-grade credit metrics[54]. - The company had$ 16.1 billion of fixed rate debt and $4.3 billion of floating rate debt outstanding as of December 31, 2024[85]. - If the composite interest rate on outstanding floating-rate debt increases by 1.0%, the company expects to incur additional annual interest expense of approximately$ 42.8 million in 2024[323]. - Approximately 6.1% of the company's debt obligations were denominated in foreign currency as of December 31, 2024, with effective hedging in place[326]. Management and Workforce - As of December 31, 2024, the company had 165 full-time employees, with 39% being multicultural and 52% female[73]. - The company is committed to pay equity and regularly reviews compensation practices for all employees[73]. - The company relies on its senior management team, and the loss of key officers could negatively impact its business[128].