Los Angeles-based Air Lease (ALC) collected 86% of its operating lease receivables for the three months ended 30 September.
“In spite of the difficulties facing the airline industry, ALC produced a solid quarter in terms of operating results, aircraft placements and lease collections. We are working closely with our airline customers around the world and our major suppliers to get through this period of industry stress,” chief executive John Plueger said on an investor call.
In the third quarter, ALC posted revenues of $494 million, down 7% year on year, and an attributable net income of $117 million, down 23%.
For the first nine months, the lessor’s revenues were $1.53 billion, up 3.9% year-on-year, but attributable net income decreased 5% to $394 million.
In the three months to 30 September ALC took delivery of seven aircraft from its orderbook, representing approximately $600 million in aircraft investments.
As of 30 September the lessor owned 308 aircraft in its operating lease portfolio with a net book value of $19.5 billion, a weighted average age of four years and a weighted average lease term remaining of 6.9 years.
ALC has placed 90% of its orderbook on long-term leases for aircraft delivering through 2022.
The California lessor ended the third quarter with $27.2 billion in committed minimum future rental payments, consisting of $13.4 billion in contracted minimum rental payments on the aircraft in its existing fleet and $13.8 billion in contracted minimum future rental payments related to aircraft on order.
ALC said most lessees had requested some form of lease payment adjustment.
“We evaluate such requests on a case-by-case basis and have agreed to accommodations with approximately 58% of our lessees. Generally, these accommodations have been in the form of partial lease deferrals for payments due during the first three quarters of 2020, typically with a short-term repayment period. The majority of the deferrals are to be repaid within 12 months from the date the deferrals were granted, and in many cases, include lease extensions,” ALC said.
“Through November 9, 2020, we have agreed to defer approximately $201.5 million in lease payments, of which $59.8 million or 30% of the total deferrals have been repaid. These lease deferrals have negatively impacted our cash flow provided by operating activities but only represented approximately 3% of our total available liquidity as of September 30, 2020,” the US lessor added.
ALC confirms that its collection rate for the three and nine months ended 30 September was 86% and 89%, respectively.
The firm said it “did not recognize rental revenue of $25.3 million during the quarter because collection was not reasonably assured with certain lessees. Aircraft on lease with these lessees represented approximately 6.6% of our fleet by net book value”.
ALC recently issued $700 million of medium-term notes due 2026 bearing interest at a fixed rate of 2.875%, and on 5 November its board of directors authorised a share repurchase programme of up to $100 million of class A common stock that expires on 15 June, 2021.
Also in the third quarter, ALC slashed its Boeing 737 Max orderbook by another 14 aircraft in the third quarter “in line with our contractual rights to do so”, Plueger said.
The US lessor’s 737 Max backlog stands at 107 Max units following the latest cancellations.