ALC profit falls on 88% collection rate | News | Airfinance Journal

ALC profit falls on 88% collection rate

Net profit of Air Lease fell 13%, to $501 million, in 2020 as the US lessor agreed some form of accomodation with most of its lessees.

Although the lessor is slowing its capital expenditure, in the fourth quarter ALC took delivery of 10 aircraft from its orderbook and purchased 14 aircraft in the secondary market, representing $1.1 billion of aircraft investments.

As of 31 December 2020, ALC owned 332 aircraft in its operating lease portfolio with a net book value of $20.4 billion, a weighted average age of 4.1 years and a weighted average lease term remaining of 6.9 years.

The lessor has placed 92% of its contracted orderbook positions on long-term leases for aircraft being delivered through the end of 2022 and 73% through the end of 2023.

ALC ended the year with $26.8 billion in committed minimum future rental payments, consisting of $13.6 billion in contracted minimum rental payments on the aircraft in its existing fleet and $13.2 billion in minimum future rental payments related to aircraft on order.

The Los Angeles-based company issued $4.5 billion of senior unsecured medium-term notes in 2020 with a weighted average interest rate of 2.93% and ended the year with total liquidity of $7.7 billion.

Last month, in January 2021, it added $750 million of senior unsecured medium-term notes due 2024 bearing interest at a fixed rate of 0.7%, which represents ALC's lowest interest rate on any of its senior unsecured medium-term notes.

ALC’s total revenues for the year ended 31 December 2020 decreased by 0.1% from 2019 to $2 billion.

“Despite the continued growth of our fleet, our revenues decreased due to a reduction in our aircraft sales, trading and other activity. Additionally, we were not able to recognize $49.4 million of rental revenue because collection was not reasonably assured for certain of our leases. Finally, we entered into lease restructurings, which typically included lease extensions, resulting in a decrease of approximately $49.2 million in revenue,” says ALC.

Net income available to common stockholders for the year ended 31 December 2020 was $501 million, compared with $575 million in 2019.

The US lessor ended the fourth quarter of 2020 with total debt financing, net of discounts and issuance costs, of $16.5 billion, resulting in a debt-to-equity ratio of 2.72:1.

ALC’s debt financing was comprised of unsecured debt of $16.4 billion; its fixed rate debt represented 93% of its debt portfolio as of 31 December.

Addressing the impact of the ongoing Covid-19 pandemic, ALC disclosed that as of 22 February 2021, most of its lessees had requested “some form of accommodation”.

ALC continues to evaluate such requests on a case-by-case basis and that the company has agreed to accommodations with approximately 61% of its lessees.

“Generally, these accommodations have been in the form of partial lease deferrals for payments due during 2020, typically with a short-term repayment period. The majority of the deferrals are to be repaid within 12 months, and in many cases, include lease extensions,” says ALC.

As of 22 February, total deferrals, net of repayments, were $144.3 million. To date, ALC has agreed to defer $240.4 million in lease payments, of which $96.1 million, or 40%, of the total deferrals have been repaid.

The lessor said that these deferrals had negatively impacted its cash flow provided by operating activities, but added that its net deferrals only represented approximately 1.9% of total available liquidity as of 31 December 2020.

ALC said that its collection rate for both the three and 12 months to 31 December was 88%, which it defines as the sum of cash collected from lease rentals and maintenance reserves, and includes cash recovered from outstanding receivables from previous periods, as a percentage of the total contracted receivables due for the period.

“We expect that our collection rate will remain under pressure because of the impact of COVID-19. Because collection was not reasonably assured with certain lessees, we did not recognize rental revenue of approximately $21.2 million and $49.4 million for the quarter and year ended December 31, 2020, respectively,” said ALC.

Aircraft on lease with these lessees represented approximately 7.8% of ALC's fleet by net book value as of 31 December.

The lessor will continue to slow its capital expenditure owing to various factors.

“While we have planned our capital expenditures for 2021 and beyond based on currently expected delivery schedules, given the current industry circumstances, our aircraft delivery schedule could continue to be subject to material changes. In any case, our capital expenditures will be significantly less than what we planned prior to the pandemic, which will slow our revenue growth, but will further improve our strong liquidity position,” said ALC.

It added: “Similar to 2020, we also anticipate reduced sales activity in 2021 compared to previous years, as a result of these delivery delays. Some transitions of the Company’s aircraft from one lessee to another lessee have been delayed. As a result of travel restrictions and other impacts from COVID-19, we expect some challenges when transitioning, acquiring or selling aircraft.”

Transaction SnapshotAir Lease Corporation | Bond issuance | 01-21 | $750m

Financial Close:
$750.00m USD
Full Details

Most Popular

Related Data