Air Lease Corporation
2015 Annual Report
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2000 Avenue of the Stars, Suite 1000N
Los Angeles, CA 90067 USA
www.airleasecorp.com
$1.22
$1.05
$4.64
$4.03
$0.86
$0.66
$0.34
$3.16
$2.40
$1.46
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Total Revenue
(In Billions)
Earnings Per Share
(Adjusted Diluted EPS)
Corporate Information
To Our Fellow Stockholders
Transfer Agent
American Stock Transfer & Trust Company, LLC
Corporate Headquarters
Air Lease Corporation
6201 15th Avenue
Brooklyn, NY 11219
877.833.6643
www.amstock.com
Independent Registered Public
Accounting Firm
KPMG LLP
550 South Hope Street, Suite 1500
Los Angeles, CA 90071
213.972.4000
2000 Avenue of the Stars, Suite 1000N
Los Angeles, California 90067
310.553.0555
Stock Exchange Listing
New York Stock Exchange (Symbol: AL)
www.kpmg.com
Overall, we are proud of ALC’s business performance in 2015. We generated record
revenues of $1.2 billion and record adjusted earnings per share of $4.64. Over the last
five years we have grown revenues at a compounded annual growth rate of 38% and
in November 2015 we announced the third increase of our dividend to $0.20 per share
per annum.
Our lease placements were strong across our entire portfolio and particularly for our
widebody aircraft. With a few exceptions, our global airline customers are in the best
financial shape they have ever been in and are enjoying record passenger traffic and
earnings. These are stable, positive trends that we see continuing. Our aircraft sales
were equally robust and profitable in 2015, and we concluded a milestone agreement to
sell our fleet of 25 young ATR turboprop aircraft to Nordic Aviation Capital. We continued
to build the Blackbird Capital I fleet and our overall management business, which grew
Form 10-K and Other Reports
to 29 jets. We lowered our overall funding costs, increased our liquidity, received a
Stockholders may receive a copy of the 2015 Form
positive ratings outlook from Standard & Poors, and had record revenues, cash flow and
7:30 AM Pacific Time
adjusted earnings.
Century Plaza Towers
Annual Meeting
May 4, 2016
Exchange Commission, without charge by writing to:
10-K and other reports we file with the Securities and
Air Lease Corporation is a leading aircraft leasing company based in Los Angeles, California. ALC and its team of dedicated
and experienced professionals are principally engaged in purchasing new commercial aircraft delivering from its direct orders
with Boeing and Airbus, and leasing them to its airline customers worldwide through customized aircraft leasing and financial
solutions. The mission of ALC is to work with these airlines to modernize and grow their fleets, consult with manufacturers
as they develop the next generation of fuel-efficient and environmentally friendly aircraft, and continue to explore strategic
business solutions for our clients to support their growth and success. Beyond lease expertise, ALC offers route and schedule
analysis, fleet optimization and planning, aircraft and engine purchasing consulting, aircraft procurement services, aircraft
financing support, aircraft investment analysis and recommendations, and can act as global servicer and manager for aircraft
lease portfolios.
2029 Century Park East
Air Lease Corporation
Los Angeles, California 90067
Los Angeles, California 90067
Concourse Level, Conference Room A
2000 Avenue of the Stars, Suite 1000N
Or by email to: investors@airleasecorp.com
We have not seen meaningful evidence that global economic concerns and aviation
industry risks have had a negative impact on our business. While the strengthening dollar
is a headwind in some regions, lower fuel prices remain a huge net positive for the airline
industry. Questions about widebody aircraft values and excess supply have so far proven
to be mostly noise. China, and more broadly Asia, remain strong aircraft marketplaces
and we believe that this will continue for the foreseeable future. Certainly there are areas
of softness in the world, primarily in Brazil and Russia, where our total exposure is very
small. Recently, we removed two single aisle aircraft from airlines in Russia, and placed
them profitably elsewhere, and we also sold aircraft that were on lease in Brazil. That’s
the beauty of mobile assets.
Forward-Looking Statements
This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995, including statements about the future of our business. Such statements are based on current expectations
and projections about our future results, prospects and opportunities and are not guarantees of future performance. Such
statements will not be updated unless required by law. Actual results and performance may differ materially from those
expressed or forecasted in forward-looking statements due to a number of factors, including those discussed in our filings
with the Securities and Exchange Commission.
Please visit www.airleasecorp.com to view
or download a PDF of this annual report.
We see much more discipline today on the part of airlines as to capacity and fi nancial
management, along with the manufacturers as they make critical decisions on forward
production rates and supply chain management. A healthy competitive balance between
Airbus and Boeing is a key focus for us and for the industry. We are working closely
with Boeing and Airbus on new product development designs as well as optimizing
derivatives of existing models. The tradeoff is always between fi lling a product gap versus
product fragmentation. And, for competitive balance, we believe that continuation of
U.S. Export Import Bank fi nancing guaranty programs are important to airlines as long
as the European ECA’s continue to offer that alternative. These programs globally need
continued reform with an ultimate view towards an equal and fair playing fi eld.
We face some increased competition in our business, but we believe our results, today
and in the future, will continue to demonstrate that we are well positioned to deal with this
competition. We have continued to innovate new solutions and structures for our airline
customers that create opportunities for ALC to maintain attractive lease margins. Periods
of elevated competition are nothing new to our management team, and most of the lessor
competition is in the sale-leaseback segment of the business where ALC is not an active
participant due to lower lease yields.
After decades in this business, we know that there are always concerns and risks across
a variety of fronts. But we believe our business model and philosophies, honed and tested
from years of experience, reduce those risks and will continue to yield industry leading
results. Yet we are never content and we continue to pursue operating strategies and
explore new opportunities that we believe will enhance total shareholder return.
We take this opportunity to thank our talented employees, our airline partners, our suppliers
and the fi nanciers, all of whom continue to contribute to ALC’s outstanding success and
growth. We also thank our stockholders for their continued support of ALC.
Respectfully,
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:95)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
(cid:134)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
For the transition period from to
Commission File Number 001-35121
AIR LEASE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2000 Avenue of the Stars, Suite 1000N
Los Angeles, California
(Address of principal executive offices)
27-1840403
(I.R.S. Employer
Identification No.)
90067
(Zip Code)
(Registrant’s telephone number, including area code): (310) 553-0555
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Class A Common Stock
Name of each exchange
on which registered
New York
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:95) No (cid:134)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes (cid:134) No (cid:95)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes (cid:95) No (cid:134)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes (cid:95) No (cid:134)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
One):
Large accelerated filer (cid:95)
Smaller reporting company (cid:134)
Accelerated filer (cid:134)
Non-accelerated filer (cid:134)
(Do not check if a
smaller reporting company)
Steven F. Udvar-Házy
John L. Plueger
Chairman & Chief Executive Offi cer
President & Chief Operating Offi cer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act). Yes (cid:134) No (cid:95)
The aggregate market value of registrant’s voting stock held by non-affiliates was approximately $3.2 billion on June 30, 2015, based upon the
last reported sales price on the New York Stock Exchange. As of February 24, 2016, there were 102,582,669 shares of Class A common stock
outstanding.
Designated portions of the Proxy Statement relating to registrant’s 2016 Annual Meeting of Shareholders have been incorporated by reference
DOCUMENTS INCORPORATED BY REFERENCE
into Part III of this report
Form 10-K
For the Fiscal Year Ended December 31, 2015
INDEX
TABLE OF CONTENTS
PART I.
Item 1.
Business ...........................................................................................................................................
Item 1A. Risk Factors .....................................................................................................................................
Item 1B. Unresolved Staff Comments ............................................................................................................
Properties .........................................................................................................................................
Item 2.
Legal Proceedings ............................................................................................................................
Item 3.
Item 4. Mine Safety Disclosures ..................................................................................................................
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ..............................................................................................................................
Item 6.
Selected Financial Data ...................................................................................................................
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ...........
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .........................................................
Financial Statements and Supplementary Data ................................................................................
Item 8.
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure .........
Item 9A. Controls and Procedures ..................................................................................................................
Item 9B. Other Information ............................................................................................................................
PART III
Item 10. Directors, Executive Officers and Corporate Governance ...............................................................
Item 11. Executive Compensation .................................................................................................................
Security Ownership of Certain Beneficial Owners and Management Related Stockholder Matters
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence .................................
Item 14.
Principal Accounting Fees and Services ..........................................................................................
PART IV
Item 15. Exhibits, Financial Statement Schedules .........................................................................................
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K and other publicly available documents may contain or incorporate
statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements appear in a number of places in this Form 10-K and include statements regarding, among
other matters, the state of the airline industry, our access to the capital markets, our ability to restructure leases and
repossess aircraft, the structure of our leases, regulatory matters pertaining to compliance with governmental regulations
and other factors affecting our financial condition or results of operations. Words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “seeks,” “estimates” and “should,” and variations of these words and similar expressions,
are used in many cases to identify these forward-looking statements. Any such forward-looking statements are not
guarantees of future performance and involve risks, uncertainties and other factors that may cause our actual results,
performance or achievements, or industry results to vary materially from our future results, performance or
achievements, or those of our industry, expressed or implied in such forward-looking statements. Such factors include,
among others, general commercial aviation industry, economic and business conditions, which will, among other things,
affect demand for aircraft, availability and creditworthiness of current and prospective lessees, lease rates, availability
and cost of financing and operating expenses, governmental actions and initiatives, and environmental and safety
requirements, as well as the factors discussed under “Item 1A. Risk Factors,” in this Annual Report on Form 10-K. We
do not intend and undertake no obligation to update any forward-looking information to reflect actual results or future
events or circumstances.
2
3
ITEM 1. BUSINESS
Overview
PART I
Air Lease Corporation (the “Company”, “ALC”, “we”, “our” or “us”), is a leading aircraft leasing company that
was founded by aircraft leasing industry pioneer, Steven F. Udvar-Házy. We are principally engaged in purchasing new
commercial jet transport aircraft directly from aircraft manufacturers, such as The Boeing Company (“Boeing”) and
Airbus S.A.S. (“Airbus”), and leasing those aircraft to airlines throughout the world with the intention to generate
attractive returns on equity. In addition to our leasing activities, we sell aircraft from our operating lease portfolio to
third parties, including other leasing companies, financial services companies and airlines. We also provide fleet
management services to investors and owners of aircraft portfolios for a management fee. Our operating performance is
driven by the growth of our fleet, the terms of our leases, the interest rates on our debt, and the aggregate amount of our
indebtedness, supplemented by the gains from our aircraft sales and trading activities and our management fees.
We currently have relationships with over 200 airlines across 70 countries. We operate our business on a global
basis, providing aircraft to airline customers in every major geographical region, including markets such as Asia, the
Pacific Rim, Latin America, the Middle East, Europe, Africa and North America. Many of these markets are
experiencing increased demand for passenger airline travel and have lower market saturation than more mature markets
such as the United States and Western Europe. We expect that these markets will also present significant replacement
opportunities in upcoming years as many airlines look to replace aging aircraft with new, modern technology, fuel
efficient jet aircraft. An important focus of our strategy is meeting the needs of this replacement market. Airlines in some
of these markets have fewer financing alternatives, enabling us to command relatively higher lease rates compared to
those in more mature markets.
We mitigate the risks of owning and leasing aircraft through careful management and diversification of our
leases and lessees by geography, lease term, and aircraft age and type. We believe that diversification of our operating
lease portfolio reduces the risks associated with individual lessee defaults and adverse geopolitical and regional
economic events. We mitigate the risks associated with cyclical variations in the airline industry by managing customer
concentrations and lease maturities in our operating lease portfolio to minimize periods of concentrated lease
expirations. In order to maximize residual values and minimize the risk of obsolescence, our strategy is to own an
aircraft during the first third of its expected 25 year useful life.
During the year ended December 31, 2015, we purchased and took delivery of 51 aircraft and sold 24 aircraft,
ending the year with a total of 240 owned aircraft, all of which were leased, with a net book value of $10.8 billion.
During 2015, we increased our managed fleet by 12 aircraft, ending the year with 29 aircraft in our managed fleet
portfolio. We leased and managed aircraft to a globally diversified customer base comprised of 90 airlines in 50
countries. As of December 31, 2015, the weighted average lease term remaining of our operating lease portfolio was 7.2
years and the weighted average age of our fleet was 3.6 years.
During 2015, we entered into definitive agreements and amendments to existing agreements with Airbus and
Boeing to purchase 70 additional aircraft. From Airbus, we agreed to purchase 25 A330neo aircraft, 30 A321neo LR
aircraft, three A350-900 aircraft, two A320-200 aircraft, one A330-200 aircraft and one A321-200 aircraft. From
Boeing, we agreed to purchase eight additional 737-8MAX aircraft. Deliveries of the aircraft are scheduled to
commence in 2016 and continue through 2023. As of December 31, 2015, we had, in the aggregate, 389 aircraft on order
with Boeing and Airbus for delivery through 2023, with an estimated aggregate purchase price of $30.7 billion, making
us one of the world's largest customers for new commercial jet aircraft.
During 2015, we signed lease agreements, letters of intent, and lease extension agreements for 120 aircraft with
46 customers across 35 countries. As a result, the minimum future rental payments that our airline customers have
committed to us have increased to $20.9 billion from $16.5 billion in the prior year. This includes $8.9 billion in
contracted minimum rental payments on the 240 aircraft in our existing fleet and $12.0 billion in minimum future rental
payments on the 127 aircraft that we have ordered from the manufacturers which will deliver between 2016 and 2021.
In 2015, total revenues increased by 16.4% to $1.22 billion, compared to 2014. This is comprised of rental
revenues on our operating lease portfolio of $1.17 billion and aircraft sales, trading and other revenue of $48.3 million.
During the year ended December 31, 2015, we sold 24 aircraft for proceeds of $784.7 million, recording gains on aircraft
sales and trading activity of $33.9 million. During the year ended December 31, 2014, we sold 22 aircraft, a corporate
aircraft and received insurance proceeds in excess of the book value relating to the loss of an aircraft, for proceeds of
$668.3 million, recording gains on aircraft sales and trading activity of $55.8 million. In addition, in December 2015, we
entered into an agreement to sell our fleet of 25 ATR turboprop aircraft, comprised of 20 delivered aircraft and five
undelivered aircraft, to Nordic Aviation Capital A/S ("NAC"). As of December 31, 2015, one aircraft had been
transferred to NAC and the remaining 19 delivered aircraft were held for sale. We expect the sale of the 19 aircraft held
for sale and the five undelivered aircraft to be completed in 2016.
We finance the purchase of aircraft and our business with available cash balances, internally generated funds,
including aircraft sales and trading activities, and debt financings. Our debt financing strategy is focused on raising
unsecured debt in the global bank and debt capital markets, with a limited utilization of export credit or secured
financing. In 2015, we issued $1.1 billion senior unsecured notes with an average interest rate of 3.14%, with maturities
ranging from 2018 to 2022. In 2015, we increased our unsecured revolving credit facility capacity to $2.8 billion,
representing a 32.4% increase from 2014 and extended the final maturity to May 5, 2019. We ended 2015 with total debt
outstanding of $7.7 billion, of which 78.7% was at a fixed rate and 88.4% of which was unsecured, with a composite
cost of funds of 3.59%.
On April 22, 2015, the Company entered into a settlement agreement with American International Group, Inc.
("AIG") and ILFC ("ILFC") and ILFC’s parent, AerCap Holdings N.V., to settle all ongoing litigation as set forth in
Note 14: Litigation, in the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report
on Form 10-K. In connection with the settlement, we recorded an expense of $72.0 million, before taxes for the year
ended December 31, 2015. In December 2015, we received $4.5 million in insurance recoveries related to this matter,
which are included in aircraft sales, trading and other revenue in our Consolidated Statement of Income.
Excluding the effects of certain non-cash items, one-time or non-recurring items that are not expected to
continue in the future and certain other items including the litigation expense, net of recoveries, we generated adjusted
net income of $508.0 million for the year ended December 31, 2015 compared to $438.6 million for the year ended
December 31, 2014, an increase of $69.4 million or 15.8%. Adjusted diluted earnings per share increased to $4.64 for
the year ended December 31, 2015, compared to $4.03 for the year ended December 31, 2014. Adjusted net income and
adjusted diluted earnings per share are measures of financial and operational performance that are not defined by GAAP.
See Note 2 in “Item 6. Selected Financial Data” of this Annual Report on Form 10-K for a discussion of adjusted net
income and adjusted diluted earnings per share as non-GAAP measures and reconciliation of these measures to net
income.
Operations to Date
Current Fleet
As of December 31, 2015, we owned 240 aircraft, comprised of 181 single-aisle narrowbody jet aircraft, 40
twin-aisle widebody jet aircraft and 19 turboprop aircraft, with a weighted average age of 3.6 years. As of December 31,
2014, we owned 213 aircraft, comprised of 163 single-aisle narrowbody jet aircraft, 32 twin-aisle widebody jet aircraft
and 18 turboprop aircraft, with a weighted average age of 3.5 years. In addition, we also managed 29 jet aircraft for third
party owners on a fee basis as of December 31, 2015 compared to 17 jet aircraft as of December 31, 2014.
4
5
Geographic Diversification
At December 31, 2015, 2014 and 2013, we owned and managed leased aircraft to customers in the following
regions:
Over 95% of our aircraft are operated internationally. The following table sets forth the dollar amount and
percentage of our rental of flight equipment revenues attributable to the respective geographical regions based on each
airline’s principal place of business:
Region
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Year Ended
December 31, 2013
Amount of
Amount of
Amount of
Rental
Revenue
Rental
% of Total Revenue
Rental
% of Total Revenue
% of Total
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . $
China . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding China) . . . . . . . . . . . . . .
Central America, South America and
(dollars in thousands)
380,295
265,450
223,284
32.4 % $ 337,349
22.6 % 218,625
190,389
19.0 %
34.0 % $ 300,761
22.1 % 129,772
169,700
19.2 %
36.0 %
15.5 %
20.3 %
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . .
The Middle East and Africa . . . . . . . . . .
U.S. and Canada . . . . . . . . . . . . . . . . . . .
Pacific, Australia, New Zealand . . . . . . .
114,672
90,416
54,294
46,133
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,174,544
9.8 % 111,583
47,958
7.7 %
55,007
4.6 %
30,330
3.9 %
100.0 % $ 991,241
11.3 % 107,857
55,624
57,366
15,436
100.0 % $ 836,516
4.9 %
5.4 %
3.1 %
12.9 %
6.6 %
6.9 %
1.8 %
100.0 %
The following table sets forth the regional concentration of our flight equipment subject to operating lease
based on net book value as of December 31, 2015 and 2014:
Region
December 31, 2015
December 31, 2014
Net Book
Value
% of Total
Net Book
Value
% of Total
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding China) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central America, South America and Mexico . . . . . . . . . . . . .
U.S. and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pacific, Australia, New Zealand . . . . . . . . . . . . . . . . . . . . . . . . .
3,238,323
2,444,370
2,313,477
1,023,715
923,352
446,839
423,399
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,813,475
(dollars in thousands)
30.0 % $ 2,953,232
22.6 % 2,348,784
21.4 % 1,489,739
498,896
778,991
412,532
471,630
100.0 % $ 8,953,804
9.5 %
8.5 %
4.1 %
3.9 %
33.0 %
26.2 %
16.7 %
5.6 %
8.7 %
4.6 %
5.2 %
100.0 %
Region
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding China) . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and Canada . . . . . . . . . . . . . . . . . . . . . .
Central America, South America and Mexico .
The Middle East and Africa . . . . . . . . . . . . .
Pacific, Australia, New Zealand . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2015
December 31, 2014
December 31, 2013
Number of
Customers(1)
Number of
Number of
% of Total Customers(1)
% of Total Customers(1)
27
19
12
11
11
8
2
90
30.0 %
21.1 %
13.4 %
12.2 %
12.2 %
8.9 %
2.2 %
100.0 %
24
18
11
8
10
7
2
80
30.0 %
22.5 %
13.8 %
10.0 %
12.5 %
8.8 %
2.4 %
100.0 %
% of Total
26.6 %
21.5 %
15.2 %
10.1 %
15.2 %
8.9 %
2.5 %
100.0 %
21
17
12
8
12
7
2
79
(1) A customer is an airline with its own operating certificate.
For the years ended December 31, 2015, 2014 and 2013, China was the only individual country that represented
at least 10% of our rental revenue based on each airline's principal place of business. In 2015, 2014 and 2013, no
individual airline represented at least 10% of our rental revenue.
Aircraft Acquisition Strategy
We seek to acquire the most highly in demand and widely distributed, modern technology, fuel efficient
narrowbody and widebody commercial jet transport aircraft. Our strategy is to order new aircraft directly from the
manufacturers. When placing new aircraft orders with the manufacturers, we strategically target the replacement of
aging aircraft with modern technology aircraft. Additionally, we look to supplement our order pipeline with
opportunistic purchases of aircraft in the secondary market and participate in sale-leaseback transactions with airlines.
Prior to ordering aircraft, we evaluate the market for specific types of aircraft. We consider the overall demand
for the aircraft type in the marketplace based on our deep knowledge of the aviation industry and our customer
relationships. It is important to assess the airplane’s economic viability, the operating performance characteristics,
engine variant options, intended utilization by our customers, and which aircraft types it will replace or compete with in
the global market. Additionally, we study the effects of global airline passenger traffic growth in order to determine the
likely demand for our new aircraft.
For new aircraft deliveries, we source many components separately, which include seats, safety equipment,
avionics, galleys, cabin finishes, engines and other equipment. Often times we are able to achieve lower pricing through
direct bulk purchase contracts with the component manufacturers than would be achievable if the airframe manufacturers
sourced the components for the airplane. Manufacturers such as Boeing and Airbus install this buyer furnished
equipment in our aircraft during the final assembly process at their facilities. With this purchasing strategy, we are able
to meet specific customer configuration requirements and lower the total acquisition cost of the aircraft.
Aircraft Leasing Strategy
The airline industry is a complex industry with constantly evolving competition, code shares (where two or
more airlines share the same flight), alliances and passenger traffic patterns. This requires frequent updating and
flexibility within an airline’s fleet. The operating lease allows airlines to effectively adapt and manage their fleets
through varying market conditions without bearing the full financial risk associated with these capital intensive assets
which have an expected useful life of 25 years. This fleet flexibility enables airlines to more effectively operate and
compete in their respective markets. We work closely with our airline customers throughout the world to help optimize
their long-term aircraft fleet strategies.
6
7
We work to mitigate the risks associated with owning and leasing aircraft and cyclical variations in the airline
industry through careful management of our fleet, including managing customer concentrations by geography and
region, entering into long term leases, staggering lease maturities, balancing aircraft type exposures, and maintaining a
young fleet age. We believe that diversification of our operating lease portfolio reduces the risks associated with
individual customer defaults and the impact of adverse geopolitical and regional economic events. In order to maximize
residual values and minimize the risk of obsolescence, our strategy is generally to own an aircraft for approximately the
first third of its expected 25 year useful life.
Our management team identifies prospective airline customers based upon industry knowledge and
long-standing relationships. Prior to leasing an aircraft, we evaluate the competitive positioning of the airline, the
strength and quality of the management team, and the financial performance of the airline. Management obtains and
reviews relevant business materials from all prospective customers before entering into a lease agreement. Under certain
circumstances, the customer may be required to obtain guarantees or other financial support from a sovereign entity or a
financial institution. We work closely with our existing customers and potential lessees to develop customized lease
structures that address their specific needs. We typically enter into a lease agreement 18 to 36 months in advance of the
delivery of a new aircraft from our order book. Once the aircraft has been delivered and operated by the airline, we look
to remarket the aircraft and sign a follow-on lease six to 12 months ahead of the scheduled expiry of the initial lease
term. Our leases typically contain the following key provisions:
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our leases are primarily structured as operating leases, whereby we retain the residual rights to the aircraft;
our leases are triple net leases, whereby the lessee is responsible for all operating costs including taxes,
insurance, and aircraft maintenance;
our leases typically require all payments be made in U.S. dollars;
our leases are typically for fixed rates and terms;
our leases typically require cash security deposits and maintenance reserve payments; and
our leases contain provisions which require payment whether or not the aircraft is operated, irrespective of
the circumstances.
The lessee is responsible for compliance with applicable laws and regulations with respect to the aircraft. We
require our lessees to comply with the standards of either the U.S. Federal Aviation Administration (“FAA”) or its
equivalent in foreign jurisdictions. As a function of these laws and the provisions in our lease contracts, the lessees are
responsible to perform all maintenance of the aircraft and return the aircraft and its components in a specified return
condition. Generally, we receive a cash deposit and maintenance reserves as security for the lessee’s performance of
obligations under the lease and the condition of the aircraft upon return. In addition, most leases contain extensive
provisions regarding our remedies and rights in the event of a default by a lessee. The lessee generally is required to
continue to make lease payments under all circumstances, including periods during which the aircraft is not in operation
due to maintenance or grounding.
Some foreign countries have currency and exchange laws regulating the international transfer of currencies.
When necessary, we may require, as a condition to any foreign transaction, that the lessee or purchaser in a foreign
country obtain the necessary approvals of the appropriate government agency, finance ministry or central bank for the
remittance of all funds contractually owed in U.S. dollars. We attempt to minimize our currency and exchange risks by
negotiating the designated payment currency in our leases to be U.S. dollars. To meet the needs of certain of our airline
customers, we have agreed to accept certain of our lease payments in a foreign currency. After we agree to the rental
payment currency with an airline, the negotiated currency typically remains for the term of the lease. We may enter into
contracts to mitigate our foreign currency risk, but we expect that the economic risk arising from foreign currency
denominated leases will be insignificant to us.
We may, in connection with the lease of used aircraft, agree to contribute specific additional amounts to the cost
of certain first major maintenance events or modifications, which usually reflect the usage of the aircraft prior to the
commencement of the lease, and which are typically covered by the prior operator’s usage fees. We may be obligated
under the leases to make reimbursements of maintenance reserves previously received to lessees for expenses incurred
for certain planned major maintenance. We also, on occasion, may contribute towards aircraft modifications and recover
any such costs over the life of the lease.
Monitoring
During the lease term, we closely follow the operating and financial performance of our lessees. We maintain a
high level of communication with the lessee and frequently evaluate the state of the market in which the lessee operates,
including the impact of changes in passenger air travel and preferences, emerging competition, new government
regulations, regional catastrophes and other unforeseen shocks that are relevant to the airline’s market. This enables us to
identify lessees that may be experiencing operating and financial difficulties. This identification assists us in assessing
the lessee’s ability to fulfill its obligations under the lease. This monitoring also identifies candidates, where appropriate,
to restructure the lease prior to the lessee’s insolvency or the initiation of bankruptcy or similar proceedings. Once an
insolvency or bankruptcy occurs we typically have less control over, and would most likely incur greater costs in
connection with, the restructuring of the lease or the repossession of the aircraft.
During the life of the lease, situations may lead us to restructure leases with our lessees. When we repossess an
aircraft leased in a foreign country, we generally expect to export the aircraft from the lessee’s jurisdiction. In some very
limited situations, the lessees may not fully cooperate in returning the aircraft. In those cases, we will take appropriate
legal action, a process that could ultimately delay the return and export of the aircraft. In addition, in connection with the
repossession of an aircraft, we may be required to pay outstanding mechanics’ liens, airport charges, and navigation fees
and other amounts secured by liens on the repossessed aircraft. These charges could relate to other aircraft that we do not
own but were operated by the lessee.
Remarketing
Our lease agreements are generally structured to require lessees to notify us nine to 12 months in advance of the
lease’s expiration if a lessee desires to renew or extend the lease. Requiring lessees to provide us with such advance
notice provides our management team with an extended period of time to consider a broad set of alternatives with
respect to the aircraft, including assessing general market and competitive conditions and preparing to remarket or sell
the aircraft. If a lessee fails to provide us with notice, the lease will automatically expire at the end of the term, and the
lessee will be required to return the aircraft pursuant to the conditions in the lease. Our leases contain detailed provisions
regarding the required condition of the aircraft and its components upon redelivery at the end of the lease term.
Aircraft Sales & Trading Strategy
Our strategy is to maintain a portfolio of young aircraft with a widely diversified customer base. In order to
achieve this profile, we primarily order new planes directly from the manufacturers, place them on long term leases, and
sell the aircraft when they near the end of the first third of their expected 25 year economic useful lives. We typically sell
aircraft that are currently operated by an airline with multiple years of lease term remaining on the contract, in order to
achieve the maximum disposition value of the aircraft. Buyers of the aircraft may include leasing companies, financial
institutions and airlines. We also buy and sell aircraft on an opportunistic basis for trading profits. In the past two years
ending December 31, 2015, we sold 46 aircraft. Additionally, we may provide management services to buyers of our
aircraft asset for a fee.
Aircraft Management Strategy
We supplement our core business model by providing fleet management services to third party investors and
owners of aircraft portfolios for a management fee. This allows us to better serve our airline customers and expand our
existing airline customer base by providing additional leasing opportunities beyond our own aircraft portfolio, new order
pipeline and customer or regional concentration limits.
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Financing Strategy
We finance the purchase of aircraft and our business with available cash balances, internally generated funds,
including aircraft sales and trading activity, and debt financings. We have structured the Company to have investment
grade credit metrics and our debt financing strategy has focused on funding our business on an unsecured basis.
Unsecured financing provides us with operational flexibility when selling or transitioning aircraft from one airline to
another. We may, to a limited extent, utilize export credit or secured financing in support of our new aircraft deliveries.
Insurance
We require our lessees to carry those types of insurance that are customary in the air transportation industry,
including comprehensive liability insurance, aircraft all-risk hull insurance and war-risk insurance covering risks such as
hijacking, terrorism (but excluding coverage for weapons of mass destruction and nuclear events), confiscation,
expropriation, seizure and nationalization. We generally require a certificate of insurance from the lessee’s insurance
broker prior to delivery of an aircraft. Generally, all certificates of insurance contain a breach of warranty endorsement
so that our interests are not prejudiced by any act or omission of the lessee. Lease agreements generally require hull and
liability limits to be in U.S. dollars, which are shown on the certificate of insurance.
Insurance premiums are to be paid by the lessee, with coverage acknowledged by the broker or carrier. The
territorial coverage, in each case, should be suitable for the lessee’s area of operations. We generally require that the
certificates of insurance contain, among other provisions, a provision prohibiting cancellation or material change without
at least 30 days’ advance written notice to the insurance broker (who would be obligated to give us prompt notice),
except in the case of hull war insurance policies, which customarily only provide seven days’ advance written notice for
cancellation and may be subject to shorter notice under certain market conditions. Furthermore, the insurance is primary
and not contributory, and we require that all insurance carriers be required to waive rights of subrogation against us.
The stipulated loss value schedule under aircraft hull insurance policies is on an agreed-value basis acceptable
to us and usually exceeds the book value of the aircraft. In cases where we believe that the agreed value stated in the
lease is not sufficient, we make arrangements to cover such deficiency, which would include the purchase of additional
“Total Loss Only” coverage for the deficiency.
We cannot assure investors that our lessees will be adequately insured against all risks, that lessees will at all
times comply with their obligations to maintain insurance, that any particular claim will be paid, or that lessees will be
able to obtain adequate insurance coverage at commercially reasonable rates in the future.
Competition
The leasing, remarketing and sale of aircraft is highly competitive. We are one of the largest aircraft lessors
operating on a global scale. We face competition from aircraft manufacturers, banks, financial institutions, other leasing
companies, aircraft brokers and airlines. Some of our competitors may have greater operating and financial resources
and access to lower capital costs than we have. Competition for leasing transactions is based on a number of factors,
including delivery dates, lease rates, lease terms, other lease provisions, aircraft condition and the availability in the
marketplace of the types of aircraft required to meet the needs of airline customers. Competition in the purchase and sale
of used aircraft is based principally on the availability of used aircraft, price, the terms of the lease to which an aircraft is
subject and the creditworthiness of the lessee, if any.
Government Regulation
The air transportation industry is highly regulated. We do not operate commercial aircraft, and thus may not be
directly subject to many industry laws and regulations, such as regulations of the U.S. Department of State (the “DOS”),
the U.S. Department of Transportation, or their counterpart organizations in foreign countries regarding the operation of
aircraft for public transportation of passengers and property. As discussed below, however, we are subject to government
regulation in a number of respects. In addition, our lessees are subject to extensive regulation under the laws of the
jurisdictions in which they are registered or operate. These laws govern, among other things, the registration, operation,
maintenance and condition of the aircraft.
We are required to register our aircraft with an aviation authority mutually agreed upon with our lessee. Each
aircraft registered to fly must have a Certificate of Airworthiness, which is a certificate demonstrating the aircraft’s
compliance with applicable government rules and regulations and that the aircraft is considered airworthy. Each airline
we lease to must have a valid operation certificate to operate our aircraft. Our lessees are obligated to maintain the
Certificates of Airworthiness for the aircraft they lease.
Aircraft hull policies generally contain standard clauses covering aircraft engines. The lessee is required to pay
Our involvement with the civil aviation authorities of foreign jurisdictions consists largely of requests to
all deductibles. Furthermore, the hull war policies generally contain full war risk endorsements, including, but not
limited to, confiscation (where available), seizure, hijacking and similar forms of retention or terrorist acts.
register and deregister our aircraft on those countries’ registries.
The comprehensive liability insurance listed on certificates of insurance generally include provisions for bodily
injury, property damage, passenger liability, cargo liability and such other provisions reasonably necessary in
commercial passenger and cargo airline operations. We expect that such certificates of insurance list combined
comprehensive single liability limits of not less than $500.0 million for Airbus and Boeing aircraft and $200.0 million
for Embraer S.A. (“Embraer”) and Avions de Transport Régional ("ATR") aircraft. As a standard in the industry, airline
operator’s policies contain a sublimit for third party war risk liability generally in the amount of at least $150.0 million.
We require each lessee to purchase higher limits of third party war risk liability or obtain an indemnity from its
respective government.
In late 2005, the international aviation insurance market unilaterally introduced exclusions for physical damage
to aircraft hulls caused by dirty bombs, bio-hazardous materials and electromagnetic pulsing. Exclusions for the same
type of perils could be introduced into liability policies.
Separately, we purchase contingent liability insurance and contingent hull insurance on all aircraft in our fleet
and maintain other insurance covering the specific needs of our business operations. We believe our insurance is
adequate both as to coverages and amounts.
We are also subject to the regulatory authority of the DOS and the U.S. Department of Commerce (the “DOC”)
to the extent such authority relates to the export of aircraft for lease and sale to foreign entities and the export of parts to
be installed on our aircraft. We may be required to obtain export licenses for parts installed in aircraft exported to foreign
countries. The DOC and the U.S. Department of the Treasury (through its Office of Foreign Assets Control, or "OFAC")
impose restrictions on the operation of U.S. -made goods, such as aircraft and engines, in sanctioned countries, as well as
on the ability of U.S. companies to conduct business with entities in those countries. The U.S. Patriot Act of 2001 (the
“Patriot Act”) prohibits financial transactions by U.S. persons, including U.S. individuals, entities and charitable
organizations, with individuals and organizations designated as terrorists and terrorist supporters by the U.S. Secretary of
State or the U.S. Secretary of the Treasury. The U.S. Customs and Border Protection, a law enforcement agency of the
U.S. Department of Homeland Security, enforces regulations related to the import of aircraft into the United States for
maintenance or lease and the importation of parts into the U.S. for installation.
Jurisdictions in which aircraft are registered as well as jurisdictions in which they operate may impose
regulations relating to noise and emission standards. In addition, most countries’ aviation laws require aircraft to be
maintained under an approved maintenance program with defined procedures and intervals for inspection, maintenance
and repair. To the extent that aircraft are not subject to a lease or a lessee is not in compliance, we are required to comply
with such requirements, possibly at our own expense.
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Employees
Executive Officers of the Company
As of December 31, 2015, we had 74 full-time employees. On average, our senior management team has
approximately 25 years of experience in the commercial aviation industry. None of our employees are represented by a
union or collective bargaining agreements.
Set forth below is certain information concerning each of our executive officers as of February 25, 2016,
including his/her age, current position with the Company and business experience during the past five years.
Company Position
Prior Positions
Access to Our Information
We file annual, quarterly, current reports, proxy statements and other information with the Securities and
Exchange Commission (the “SEC”). We make our public SEC filings available, at no cost, through our website at
www.airleasecorp.com as soon as reasonably practicable after the report is electronically filed with, or furnished to, the
SEC. The information contained on or connected to our website is not incorporated by reference into this Annual Report
on Form 10-K and should not be considered part of this or any other report filed with the SEC. We will also provide
these reports in electronic or paper format free of charge upon written request made to Investor Relations at
2000 Avenue of the Stars, Suite 1000N, Los Angeles, California 90067. Our SEC filings are also available free of charge
on the SEC’s website at www.sec.gov. The public may also read and copy any document we file with the SEC at the
SEC’s public reference room located at 100 F Street NE, Washington, DC 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference room.
Corporate Information
Air Lease Corporation incorporated in Delaware and launched in February 2010. Our website is
www.airleasecorp.com. We may post information that is important to investors on our website. Information included or
referred to on, or otherwise accessible through, our website is not intended to form a part of or be incorporated by
reference into this report.
Name
Steven F. Udvar-Házy . .
Age
70
John L. Plueger . . . . . . .
61
Carol H. Forsyte . . . . . .
53
Chairman and Chief Executive
Officer (since February 2010)
President, Chief Operating
Officer and Director (since March
2010)
Executive Vice President,
General Counsel, Corporate
Secretary and Chief Compliance
Officer (since September 2012)
Marc H. Baer . . . . . . . . .
Jie Chen . . . . . . . . . . . . .
Alex A. Khatibi . . . . . . .
Kishore Korde . . . . . . . .
Grant A. Levy . . . . . . . .
Gregory B. Willis . . . . .
51
52
55
42
53
37
John D. Poerschke . . . . .
54
Executive Vice President,
Marketing (since April 2010)
Executive Vice President and
Managing Director of Asia (since
August 2010)
Executive Vice President (since
April 2010)
Executive Vice President,
Marketing (since May 2015)
Executive Vice President (since
April 2010)
Senior Vice President and Chief
Financial Officer (since March
2012)
Senior Vice President of Aircraft
Procurement and Specifications
(since March 2010)
Corporate Vice President Law of Motorola
Mobility LLC*, July 2012-September 14,
2012
Corporate Vice President and Secretary of
Motorola Mobility Inc., January 2011-July
2012
Senior Vice President, Marketing of ALC,
2010-May 2015
Vice President, Finance, and Chief Accounting
Officer of ALC, March 2010-March 2012
* Motorola Mobility LLC, Motorola Mobility, Inc., and Motorola Inc. are manufacturers of communication
equipment.
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ITEM 1A. RISK FACTORS
The following important risk factors, and those risk factors described elsewhere in this report or in our other
filings with the Securities and Exchange Commission, could cause our actual results to differ materially from those
stated in forward-looking statements contained in this document and elsewhere. These risks are not presented in
order of importance or probability of occurrence. Further, the risks described below are not the only risks that we
face. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also
impair our business operations. Any of these risks may have a material adverse effect on our business, reputation,
financial condition, results of operations, profitability, cash flows or liquidity.
Risks Relating to Our Business
We cannot assure you that we will be able to enter into profitable leases for any aircraft acquired, which failure to do
so would negatively affect our financial condition, cash flow and results of operations.
We cannot assure you that we will be able to enter into profitable leases upon the acquisition of the aircraft we
purchase in the future. You must rely upon our management team’s judgment and ability to evaluate the ability of
lessees and other counterparties to perform their obligations to us and to negotiate transaction documents. We cannot
assure you that our management team will be able to perform such functions in a manner that will achieve our
investment objectives, which would negatively affect our financial condition, cash flow and results of operations.
Our business model depends on the continual leasing and remarketing of our aircraft, and we may not be able to do
so on favorable terms, which would negatively affect our financial condition, cash flow and results of operations.
Our business model depends on the continual leasing and remarketing of our aircraft in order to generate
sufficient revenues to finance our growth and operations, pay our debt service obligations and generate cash flows from
operations. Our ability to lease and remarket our aircraft will depend on general market and competitive conditions at the
time the initial leases are entered into and expire. If we are not able to lease or remarket an aircraft or to do so on
favorable terms, we may be required to attempt to sell the aircraft to provide funds for our debt service obligations or
operating expenses. Our ability to lease, remarket or sell the aircraft on favorable terms or without significant off-lease
time and costs could be negatively affected by depressed conditions in the aviation industry, airline bankruptcies, the
effects of terrorism, war, natural disasters and/or epidemic diseases on airline passenger traffic trends, declines in the
values of aircraft, and various other general market and competitive conditions and factors which are outside of our
control. If we are unable to lease and remarket our aircraft, on favorable terms, our financial condition, cash flow and
results of operations would be negatively affected.
Our success depends in large part on our ability to obtain capital on favorable terms to finance our growth through
the purchase of aircraft and to repay our outstanding debt obligations as they mature. If we are not be able to obtain
capital on terms acceptable to us, or at all, it would significantly impact our ability compete effectively in the
commercial aircraft leasing market and would negatively affect our financial condition, cash flow and results of
operations.
Growing our fleet will require substantial additional capital. Accordingly, we will need to obtain additional
financing, which may not be available to us on favorable terms or at all. Further, we must continue to have access to the
capital markets and other sources of financing in order to repay our outstanding obligations as they mature. Our access
to sources of financing will depend upon a number of factors over which we have limited control, including:
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general market conditions;
the market’s view of the quality of our assets;
the market’s perception of our growth potential;
interest rate fluctuations;
our current and potential future earnings and cash distributions; and
the market price of our Class A common stock.
Weaknesses in the capital and credit markets could negatively affect our ability to obtain financing or could
increase the costs of financing. For instance, during the most recent financial crisis, many companies experienced
downward pressure on their share prices and had limited or no access to the credit markets, often without regard to their
underlying financial strength. If financial market disruption and volatility were to occur again, we cannot assure you that
we will be able to access capital, which could negatively affect our financial condition and results of operations.
In addition, if there are new regulatory capital requirements imposed on our private lenders, they may be
required to limit, or increase the cost of, financing they provide to us. In general, this could potentially increase our
financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.
If we are unable to raise additional funds or obtain capital on terms acceptable to us, we may not be able to
satisfy funding requirements should we have any aircraft acquisition commitments then in place. If we are unable to
satisfy our purchase commitments, we may be forced to forfeit our deposits. Further, we would be exposed to potential
breach of contract claims by our lessees and manufacturers. These risks may also be increased by the volatility and
disruption in the capital and credit markets. Depending on market conditions at the time, we may have to rely more
heavily on additional equity issuances, which may be dilutive to our stockholders, or on less efficient forms of debt
financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our
operations, future business opportunities and other purposes. Further, because our charter permits the issuance of
preferred stock, if our board of directors approves the issuance of preferred stock in a future financing transaction, such
preferred stockholders may have rights, preferences or privileges senior to existing stockholders, and you will not have
the ability to approve such a transaction. These risks would negatively affect our financial condition, cash flow and
results of operations.
Incurring significant costs resulting from lease defaults could negatively affect our financial condition, cash flow and
results of operations.
If we are required to repossess an aircraft after a lessee default, we may incur significant costs. Those costs
likely would include legal and other expenses associated with court or other governmental proceedings particularly if the
lessee is contesting the proceedings or is in bankruptcy. In addition, during any such proceedings the relevant aircraft
would likely not be generating revenue. We could also incur substantial maintenance, refurbishment or repair costs if a
defaulting lessee fails to pay such costs and where such maintenance, refurbishment or repairs are necessary to put the
aircraft in suitable condition for remarketing or sale. We may also incur storage costs associated with any aircraft that we
repossess and are unable to place immediately with another lessee. It may also be necessary to pay off liens, taxes and
other governmental charges on the aircraft to obtain clear possession and to remarket the aircraft effectively, including,
in some cases, liens that the lessor might have incurred in connection with the operation of its other aircraft. We could
also incur other costs in connection with the physical possession of the aircraft.
We may suffer other negative consequences as a result of a lessee default, the related termination of the lease
and the repossession of the related aircraft. It is likely that our rights upon a lessee default will vary significantly
depending upon the jurisdiction and the applicable law, including the need to obtain a court order for repossession of the
aircraft and/or consents for deregistration or export of the aircraft. We anticipate that when a defaulting lessee is in
bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply. Certain
jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a
third party, or entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or
performing all or some of the obligations under the relevant lease. In addition, certain of our lessees are owned, in whole
or in part, by government-related entities, which could complicate our efforts to repossess our aircraft in that lessee’s
domicile. Accordingly, we may be delayed in, or prevented from, enforcing certain of our rights under a lease and in
remarketing the affected aircraft.
If we repossess an aircraft, we may not necessarily be able to export or deregister and profitably redeploy the
aircraft. For instance, where a lessee or other operator flies only domestic routes in the jurisdiction in which the aircraft
is registered, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to
resist deregistration. We may also incur significant costs in retrieving or recreating aircraft records required for
registration of the aircraft, and in obtaining the Certificate of Airworthiness for an aircraft. If, upon a lessee default, we
incur significant costs in connection with repossessing our aircraft, are delayed in repossessing our aircraft or are unable
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to obtain possession of our aircraft as a result of lessee defaults, our financial condition, cash flow and results of
operations would be negatively affected.
If our lessees fail to discharge aircraft liens, we may be obligated to pay the aircraft liens, which would negatively
affect our financial condition, cash flow and results of operations.
In the normal course of their business, our lessees are likely to incur aircraft liens that secure the payment of
airport fees and taxes, customs duties, air navigation charges, including charges imposed by Eurocontrol, the European
Organization for the Safety of Air Navigation, landing charges, salvage or other liens that may attach to our aircraft.
These liens may secure substantial sums that may, in certain jurisdictions or for certain types of liens, particularly liens
on entire fleets of aircraft, exceed the value of the particular aircraft to which the liens have attached. Aircraft may also
be subject to mechanics’ liens as a result of routine maintenance performed by third parties on behalf of our lessees.
Although we anticipate that the financial obligations relating to these liens are the responsibility of our lessees, if they
fail to fulfill such obligations, the liens may attach to our aircraft and ultimately become our responsibility. In some
jurisdictions, aircraft liens may give the holder thereof the right to detain or, in limited cases, sell or cause the forfeiture
of the aircraft.
Until they are discharged, these liens could impair our ability to repossess, remarket or sell our aircraft. Our
lessees may not comply with the anticipated obligations under their leases to discharge aircraft liens arising during the
terms of the leases. If they do not, we may find it necessary to pay the claims secured by such aircraft liens in order to
repossess the aircraft. Such payments would negatively affect our financial condition, cash flow and results of
operations.
If our lessees fail to perform as expected and we decide to restructure or reschedule our leases, the restructuring and
rescheduling would likely result in less favorable leases, which would negatively affect our financial condition, cash
flow and results of operations.
A lessee’s ability to perform its obligations under its lease will depend primarily on the lessee’s financial
condition and cash flow, which may be affected by factors outside our control, including:
competition;
passenger and air cargo rates;
passenger and air cargo demand;
geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases and natural
disasters;
increases in operating costs, including the price and availability of jet fuel and labor costs;
labor difficulties, including pilot shortages;
•
•
•
•
•
•
•
•
may not be able to satisfy their financial and other obligations under their leases. A delayed, missed or reduced rental
payment from a lessee would decrease our revenues and cash flow. If we, in the exercise of our remedies under a lease,
repossess an aircraft, we may not be able to remarket the aircraft promptly or at favorable rates.
It is likely that restructurings and/or repossessions with some of our lessees will occur in the future. The terms
and conditions of possible lease restructurings or reschedulings may result in a significant reduction of lease revenue,
which may negatively affect our financial results and growth prospects. If any request for payment restructuring or
rescheduling is made and granted, reduced or deferred rental payments may be payable over all or some part of the
remaining term of the lease. The terms of any revised payment schedules may be unfavorable and such payments may
not be made. Our default levels would likely increase over time if economic conditions deteriorate. If lessees of a
significant number of our aircraft defaulted on their leases, it would negatively affect our financial condition, cash flow
and results of operations.
Failure to obtain certain required licenses and approvals could negatively affect our ability to remarket or sell
aircraft, which would negatively affect our financial condition, cash flow and results of operations.
Airlines are subject to extensive regulation under the laws of the jurisdictions in which they are registered and
in which they operate. As a result, we expect that certain aspects of our leases will require licenses, consents or
approvals, including consents from governmental or regulatory authorities for certain payments under our leases and for
the import, export or deregistration of the aircraft. Subsequent changes in applicable law or administrative practice may
increase such requirements and governmental consent, once given, could be withdrawn. Furthermore, consents needed in
connection with the future remarketing or sale of an aircraft may not be forthcoming. Any of these events could
negatively affect our ability to remarket or sell aircraft, which would negatively affect our financial condition, cash flow
and results of operations.
Our aircraft require routine maintenance, and if they are not properly maintained, their value may decline and we
may not be able to lease or remarket such aircraft at favorable rates, if at all, which would negatively affect our
financial condition, cash flow and results of operations.
We may be exposed to increased maintenance costs for our aircraft associated with a lessee’s failure to properly
maintain the aircraft or pay supplemental maintenance rent. If an aircraft is not properly maintained, its market value
may decline, which would result in lower revenues from its lease or sale. We enter into leases pursuant to which the
lessees are primarily responsible for many obligations, which include maintaining the aircraft and complying with all
governmental requirements applicable to the lessee and the aircraft, including operational, maintenance, government
agency oversight, registration requirements and airworthiness directives. Failure of a lessee to perform required
maintenance during the term of a lease could result in a decrease in value of an aircraft, an inability to remarket an
aircraft at favorable rates, if at all, or a potential grounding of an aircraft. Maintenance failures by a lessee would also
likely require us to incur maintenance and modification costs upon the termination of the applicable lease, which could
be substantial, to restore the aircraft to an acceptable condition prior to remarketing or sale. Any failure by our lessees to
meet their obligations to perform required scheduled maintenance or our inability to maintain our aircraft would
negatively affect our financial condition, cash flow and results of operations.
economic conditions and currency fluctuations in the countries and regions in which the lessee operates;
and
If we experience abnormally high maintenance or obsolescence issues with any of our aircraft or aircraft that we
acquire, it would negatively affect our financial condition, cash flow and results of operations.
governmental regulation and associated fees affecting the air transportation business.
Many of our airline customers do not have investment grade credit profiles. We anticipate that some of our
lessees will experience a weakened financial condition or suffer liquidity problems. This could lead to a lessee
experiencing difficulties in performing under the terms of our lease agreement. This could result in the lessee seeking
relief under some of the terms of our lease agreement, or it could result in us electing to repossess the aircraft.
Any future downturns in the airline industry could greatly exacerbate the weakened financial condition of some
of these lessees and further increase the risk of delayed, missed or reduced rental payments. We may not correctly assess
the credit risk of a lessee, or may not charge lease rates which correctly reflect the related risks, and as a result, lessees
Aircraft are long-lived assets, requiring long lead times to develop and manufacture, with particular types and
models becoming obsolete or less in demand over time when newer, more advanced aircraft are manufactured. Our
existing fleet, as well as the aircraft that we have ordered, have exposure to obsolescence, particularly if unanticipated
events occur which shorten the life cycle of such aircraft types. These events include but are not limited to government
regulation or changes in our airline customers’ preferences. These events may shorten the life cycle for aircraft types in
our fleet and, accordingly, may negatively impact lease rates, trigger impairment charges, increase depreciation expense
or result in losses related to aircraft asset value guarantees, if we provide such guarantees.
Further, variable expenses like fuel, crew size or aging aircraft corrosion control or modification programs and
airworthiness directives could make the operation of older aircraft more costly to our lessees and may result in increased
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lessee defaults. We may also incur some of these increased maintenance expenses and regulatory costs upon acquisition
or remarketing of our aircraft. Any of these expenses or costs would negatively affect our financial condition, cash flow
and results of operations.
From time to time, the aircraft industry has experienced periods of oversupply during which lease rates and aircraft
values have declined, and any future oversupply could negatively affect our financial condition, cash flow and results
of operations.
If we acquire a high concentration of a particular model of aircraft, our financial condition, cash flow and results of
operations would be negatively affected by changes in market demand or problems specific to that aircraft model.
If we acquire a high concentration of a particular model of aircraft, our business and financial results could be
negatively affected if the market demand for that model of aircraft declines, if it is redesigned or replaced by its
manufacturer or if this type of aircraft experiences design or technical problems. If we acquire a high concentration of a
particular aircraft model and such model encounters technical or other problems, the value and lease rates of such
aircraft will likely decline, and we may be unable to lease such aircraft on favorable terms, if at all. A significant
technical problem with a specific type of aircraft could result in the grounding of the aircraft. Any decrease in the value
and lease rates of our aircraft would negatively affect our financial condition, cash flow and results of operations.
The introduction of superior aircraft technology or a new line of aircraft, in particular more fuel efficient aircraft,
could cause the aircraft that we own to become outdated or obsolete or oversupplied and therefore less desirable,
which would negatively affect our financial condition, cash flow and results of operations.
As manufacturers introduce technological innovations and new types of aircraft, some of the aircraft in our fleet
could become less desirable to potential lessees. In particular, the introduction recently of more fuel efficient aircraft
have made some older models less attractive and more difficult to lease. Technological innovations, increased fuel
efficiency and new models may increase the rate of obsolescence of existing aircraft faster than currently anticipated by
our management. New aircraft manufacturers could emerge to produce aircraft that compete with the aircraft we own.
The introduction of new technologies or introduction of a new type of aircraft, in particular more fuel efficient models,
may negatively affect the value of the aircraft in our fleet.
In addition, the imposition of increased regulation regarding stringent noise or emissions restrictions may make
some of our aircraft less desirable and accordingly less valuable in the marketplace. The development of new aircraft and
engine options could decrease the desirability of certain aircraft in our fleet and/or aircraft that we have ordered. This
could, in turn, reduce both future residual values and lease rates for certain types of aircraft in our portfolio. Any of these
risks may negatively affect our ability to lease or sell our aircraft on favorable terms, if at all, which would negatively
affect our financial condition, cash flow and results of operations.
We are indirectly subject to many of the economic and political risks associated with emerging markets, including
China, which could negatively affect our financial condition, cash flow and results of operations.
Our business strategy emphasizes leasing aircraft to lessees outside of the United States, including to airlines in
emerging market countries. Emerging market countries have less developed economies and infrastructure and are often
more vulnerable to economic and geopolitical challenges and may experience significant fluctuations in gross domestic
product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization
and expropriation of private assets and the imposition of taxes or other charges by government authorities. The
occurrence of any of these events in markets served by our lessees and the resulting economic instability that may arise,
particularly if combined with high fuel prices, could negatively affect the value of our aircraft subject to lease in such
countries, or the ability of our lessees, which operate in these markets, to meet their lease obligations. As a result, lessees
that operate in emerging market countries may be more likely to default than lessees that operate in developed countries.
In addition, legal systems in emerging market countries may be less developed, which could make it more difficult for us
to enforce our legal rights in such countries.
Further, demand for aircraft is dependent on passenger and cargo traffic, which in turn is dependent on general
business and economic conditions. As a result, weak or negative economic growth in emerging markets may have an
indirect effect on the value of the assets that we acquire if airlines and other potential lessees are negatively affected.
Economic downturns can affect the values of the assets we purchase, which may have a negative effect on our financial
condition, cash flow and results of operation.
Historically, the aircraft leasing business has experienced periods of aircraft oversupply. The oversupply of a
specific type of aircraft is likely to depress the lease rates for and the value of that type of aircraft, including upon sale.
The supply and demand for aircraft is affected by various cyclical and non-cyclical factors that are outside of our
control, including:
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passenger and air cargo demand;
fuel costs and general economic conditions;
geopolitical events, including war, prolonged armed conflict and acts of terrorism;
outbreaks of communicable diseases and natural disasters;
governmental regulation;
interest rates;
the availability of credit;
airline restructurings and bankruptcies;
airline fleet planning that reduces capacity or changes the type of aircraft in demand;
• manufacturer production levels and technological innovation;
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discounting by manufacturers on aircraft types nearing end of production;
• manufacturers merging or exiting the industry or ceasing to produce aircraft types;
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retirement and obsolescence of aircraft models;
reintroduction into service of aircraft previously in storage; and
airport and air traffic control infrastructure constraints.
In addition, operating lessors may be sold or merged with other entities. For example, in 2014 two of our
competitors merged to create a larger competitor for us. These types of transactions may call for a reduction in the fleet
of the new entity, which could increase supply levels of used and older aircraft in the market.
Any of these factors may produce sharp and prolonged decreases in aircraft lease rates and values. They may
have a negative effect on our ability to lease or remarket the aircraft in our fleet or in our order book. Any of these
factors could negatively affect our financial condition, cash flow and results of operations.
The value of the aircraft we acquire and the market rates for leases could decline, which would have a negative effect
on our financial condition, cash flow and results of operations.
Aircraft values and market rates for leases have from time to time experienced sharp decreases due to a number
of factors including, but not limited to, decreases in passenger and air cargo demand, increases in fuel costs, government
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regulation and increases in interest rates. Operating leases place the risk of realization of residual values on aircraft
lessors because only a portion of the equipment’s value is covered by contractual cash flows at lease inception. In
addition to factors linked to the aviation industry generally, many other factors may affect the value of the aircraft that
we acquire and market rates for leases, including:
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the particular maintenance, operating history and documentary records of the aircraft;
the number of operators using that type of aircraft;
aircraft age;
the regulatory authority under which the aircraft is operated;
any renegotiation of an existing lease on less favorable terms;
the negotiability of clear title free from mechanics’ liens and encumbrances;
any regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or
re-leased;
compatibility of aircraft configurations or specifications with other aircraft owned by operators of that type;
comparative value based on newly manufactured competitive aircraft; and
the availability of spare parts.
Any decrease in the value of aircraft that we acquire and market rates for leases, which may result from the
above factors or other unanticipated factors, would have a negative effect on our financial condition, cash flow and
results of operations.
Competition from other aircraft lessors with greater resources or a lower cost of capital than ours could negatively
affect our financial condition, cash flow and results of operations.
The aircraft leasing industry is highly competitive. Our competitors may have greater resources or a lower cost
of capital than ours; accordingly, they may be able to compete more effectively in one or more of the markets we
conduct business in.
In addition, we may encounter competition from other entities in the acquisition of aircraft such as:
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airlines;
financial institutions;
aircraft brokers;
public and private partnerships, investors and funds with more capital to invest in aircraft; and
other aircraft leasing companies that we do not currently consider our major competitors.
Competition for a leasing transaction is based principally upon lease rates, delivery dates, lease terms,
reputation, management expertise, aircraft condition, specifications and configuration and the availability of the types of
aircraft necessary to meet the needs of the customer. Competition in the purchase and sale of aircraft is based principally
on the availability of the aircraft, the price, and where applicable the terms of the lease to which an aircraft is subject and
the creditworthiness of the lessee. We will not always be able to compete successfully with our competitors, which could
negatively affect our financial condition, cash flow and results of operations.
The failure of any manufacturer to meet its delivery obligations to us would negatively affect our cash flow and
results of operations.
The supply of commercial aircraft is dominated by a few airframe manufacturers and a limited number of
engine manufacturers. As a result, we are dependent on the success of these manufacturers in remaining financially
stable, producing products and related components which meet the airlines’ demands and fulfilling any contractual
obligations they may have to us.
Should the manufacturers fail to respond appropriately to changes in the market environment or fail to fulfill
any contractual obligations they might have to us, we may experience:
• missed or late delivery of aircraft and a potential inability to meet our contractual obligations owed to
any of our then lessees, resulting in potential lost or delayed revenues, lower growth rates and strained
customer relationships;
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an inability to acquire aircraft and related components on terms which will allow us to lease those
aircraft to airline customers at a profit, resulting in lower growth rates or a contraction in our aircraft
fleet;
a market environment with too many aircraft available, potentially creating downward pressure on
demand for the anticipated aircraft in our fleet and reduced market lease rates and sale prices; or
a reduction in our competitiveness due to deep discounting by the manufacturers, which may lead to
reduced market lease rates and aircraft values and may affect our ability to remarket or sell at a profit,
or at all, some of the aircraft in our fleet.
There have been recent well-publicized delays by airframe manufacturers in meeting stated deadlines in
bringing new aircraft to market. If there are manufacturing delays for aircraft for which we have made future lease
commitments, some or all of our affected lessees could elect to terminate their lease arrangements with respect to such
delayed aircraft. Any such termination could strain our relations with those lessees going forward and would negatively
affect our cash flow and results of operations.
Aircraft have limited economic useful lives and depreciate over time, which would negatively affect our financial
condition, cash flow and results of operations.
We depreciate our aircraft for accounting purposes on a straight line basis to the aircraft’s residual value over its
estimated useful life. If reduced demand for an aircraft causes a decline in its projected lease rates, or if we dispose of
the aircraft for a price that is less than its depreciated book value of the aircraft on our balance sheet, then we will
recognize a loss on the sale of the aircraft or potentially record an impairment charge. For this reason, our financial
condition, cash flow and results of operations would be negatively affected.
Failure to close our aircraft acquisition commitments could negatively affect our financial condition, cash flow and
results of operations.
As of December 31, 2015, we had entered into binding purchase commitments to acquire a total of 389 new
aircraft for delivery through 2023. If we are unable to maintain our financing sources or find new sources of financing or
if the various conditions to our existing commitments are not satisfied, we may be unable to close the purchase of some
or all of the aircraft which we have commitments to acquire. If our aircraft acquisition commitments are not closed for
these or other reasons, we will be subject to several risks, including the following:
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forfeiting deposits and progress payments and having to pay and expense certain significant costs relating
to these commitments, such as actual damages, and legal, accounting and financial advisory expenses, not
realizing any of the benefits of completing the transactions and damage to our reputation and relationship
with aircraft manufacturers;
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defaulting on our lease commitments, which could result in monetary damages and damage to our
reputation and relationships with lessees; and
An unexpected increase in our borrowing costs would negatively affect our financial condition, cash flow and results
of operations.
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failing to capitalize on other aircraft acquisition opportunities that were not pursued due to our
management’s focus on these commitments.
If we determine that the capital we require to satisfy these commitments may not be available to us, either at all
or on terms we deem attractive, we may eliminate or reduce any dividend program that may be in place at that time in
order to preserve capital to apply to these commitments. These risks would negatively affect our financial condition,
cash flow and results of operations.
Our credit facilities may limit our operational flexibility, our ability to effectively compete and our ability to grow our
business as currently planned, which would negatively affect our financial condition, cash flow and results of
operations.
Our credit facilities contain financial and non-financial covenants, such as requirements that we comply with
one or more of the following covenants: maximum debt-to-equity ratios, dividend restrictions, minimum net worth and
interest coverage ratios, change of control provisions, and prohibitions against our disposing of our aircraft or other
aviation assets without a lender’s prior consent. Complying with such covenants may at times necessitate that we forego
other opportunities, such as using available cash to grow our aircraft fleet or promptly disposing of less profitable
aircraft or other aviation assets. Moreover, our failure to comply with any of these covenants would likely constitute a
default under such facilities and could give rise to an acceleration of some, if not all, of our then outstanding
indebtedness, which would have a negative effect on our business and our ability to continue as a going concern.
In addition, we cannot assure you that our business will generate cash flow from operations in an amount
sufficient to enable us to service our debt and grow our operations as planned. We cannot assure you that we will be able
to refinance any of our debt on favorable terms, if at all. In addition, we cannot assure you that in the future we will be
able to access long-term financing or credit support on attractive terms, if at all, or qualify for guarantees, or obtain
attractive terms for such guarantees, from the export credit agencies. Any inability to generate sufficient cash flow,
maintain our existing fleet and facilities, or access long-term financing or credit support would negatively affect our
financial condition, cash flow and results of operations.
Negative changes in our credit ratings may limit our ability to obtain financing or increase our borrowing costs
which would negatively affect our financial condition, cash flow and results of operations.
We are currently subject to periodic review by independent credit rating agencies Standard and Poor’s (“S&P”)
and Kroll Bond Ratings (“Kroll”), each of which currently maintains investment grade credit ratings with respect to us
and certain of our debt securities, and we may become subject to periodic review by other independent credit rating
agencies in the future. An increase in the level of our outstanding indebtedness, or other events that could have a
negative impact on our business, properties, financial condition, results of operations or prospects, may cause S&P or
Kroll, or, in the future, other rating agencies, to downgrade or withdraw the credit rating with respect to us or our debt
securities, which could negatively impact our ability to secure financing and increase our borrowing costs.
We cannot assure you that these credit ratings will remain in effect for any given period of time or that a rating
will not be lowered, suspended or withdrawn entirely by the applicable rating agency, if, in such rating agency’s sole
judgment, circumstances so warrant. Ratings are not a recommendation to buy, sell or hold any security. Each agency’s
rating should be evaluated independently of any other agency’s rating. Actual or anticipated changes or downgrades in
our credit ratings, including any announcement that our ratings are under further review for a downgrade, could increase
our corporate borrowing costs and limit our access to the capital markets which would negatively affect our financial
condition, cash flow and results of operations.
We finance many of the aircraft in our fleet through a combination of short- and long-term debt financings. As
these debt financings mature, we may have to refinance these existing commitments by entering into new financings,
which could result in higher borrowing costs, or repay them by using cash on hand or cash from the sale of our assets.
Moreover, an increase in interest rates under the various debt financing facilities we have in place would have a negative
effect on our earnings and could make our aircraft leasing contracts unprofitable.
A limited percentage of our debt financings bear interest at a floating rate, such that our interest expense would
vary with changes in the applicable reference rate. As a result, our inability to sufficiently protect ourselves from
changes in our cost of borrowing, as reflected in our composite interest rate, may have a direct, negative impact on our
net income. Our lease rental stream is generally fixed over the life of our leases, whereas we have used floating rate debt
to finance a significant portion of our aircraft acquisitions. As of December 31, 2015, we had $1.7 billion in floating rate
debt. If interest rates increase, we would be obligated to make higher interest payments to the lenders of our floating-rate
debt. If we incur significant fixed rate debt in the future, increased interest rates prevailing in the market at the time of
the incurrence of such debt would also increase our interest expense. If our composite interest rate were to increase by
1.0%, we would expect to incur additional interest expense on our existing indebtedness as of December 31, 2015, of
approximately $16.6 million on an annualized basis, which would negatively affect our financial condition, cash flow
and results of operations.
The interest rates that we obtain on our debt financings have several components, including credit spreads,
swap spreads, duration, and new issue premiums. These are all incremental to the underlying risk-free rates, as
applicable. Volatility in our perceived risk of default or in a market sector’s risk of default will negatively impact our
cost of funds.
We currently are not involved in any interest rate hedging activities, but we are contemplating engaging in
hedging activities in the future. Any such hedging activities will require us to incur additional costs, and there can be no
assurance that we will be able to successfully protect ourselves from any or all negative interest rate fluctuations at a
reasonable cost.
Our substantial indebtedness incurred to acquire our aircraft requires significant debt service payments which would
negatively affect our financial condition, cash flow and results of operations.
We and our subsidiaries have a significant amount of indebtedness. As of December 31, 2015, our total
consolidated indebtedness, net of discounts and issuance costs, was approximately $7.7 billion. Furthermore, we expect
this amount to grow as we acquire more aircraft. Our level of debt could have important consequences, including the
following:
• making it more difficult for us to satisfy our payment obligations with respect to our debt;
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limiting our ability to obtain additional financing to fund the acquisition of aircraft or for other corporate
requirements;
requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other
purposes, thereby reducing the amount of cash flows available for dividends, aircraft acquisitions and other
general corporate purposes;
increasing our vulnerability to general negative economic and industry conditions;
exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under
our various credit facilities, are at variable rates of interest;
limiting our flexibility in planning for and reacting to changes in the aircraft industry;
placing us at a disadvantage compared to other competitors; and
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increasing our cost of borrowing.
In addition, certain agreements governing our existing indebtedness contain financial maintenance covenants
that require us to satisfy certain ratios and maintain minimum net worth, and other restrictive covenants that limit our
ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants
could result in an event of default which, if not cured or waived, may result in the acceleration of some or all our debt,
which would negatively affect our financial condition, cash flow and results of operations.
Creditors of any subsidiaries we form for purposes of financing will have priority over our stockholders in the event
of a distribution of such subsidiaries’ assets.
Some of the aircraft we acquire are held in special-purpose, bankruptcy-remote subsidiaries of our Company.
Liens on those assets will be held by a collateral agent for the benefit of the lenders under the respective facility. In
addition, funds generated from the lease of aircraft generally are applied first to amounts due to lenders, with certain
exceptions. Creditors of our subsidiaries will have priority over us and our stockholders in any distribution of any such
subsidiaries’ assets in a liquidation, reorganization or otherwise.
Defaults by one or more of our significant airline customers would negatively affect our financial condition, cash
flow and results of operations.
The airline industry is cyclical, economically sensitive and highly competitive. Our lessees are affected by fuel
prices and shortages, political or economic instability, terrorist activities, changes in national policy, competitive
pressures, labor actions, pilot shortages, insurance costs, recessions, health concerns, and other political or economic
events negatively affecting the world or regional trading markets. Our lessees’ abilities to react to and cope with the
volatile competitive environment in which they operate, as well as our own competitive environment, will likely affect
our revenues and income. The loss of one or more of our significant airline customers or their inability to make operating
lease payments due to financial difficulties, bankruptcy or otherwise could have a material negative effect on our cash
flow and earnings. This, in turn, could result in a breach of the covenants contained in any of our long-term debt
facilities, possibly resulting in accelerated amortization or defaults and would negatively affect our financial condition,
cash flow and results of operations.
The recent appreciation of the U.S. dollar could negatively impact many of our lessees’ ability to honor the terms of
their leases and could therefore materially adversely affect our business, financial condition and results of
operations.
Many of our lessees are exposed to currency risk due to the fact that they earn revenues in their local currencies
while a significant portion of their liabilities and expenses are denominated in U.S. dollars, including their lease
payments to us, as well as fuel, debt service, and other expenses. For the year ended December 31, 2015, less than 5%
of our revenues were derived from customers who have their principal place of business in the U.S. While we attempt to
minimize our currency and exchange risks by negotiating the designated payment currency in our leases to be U.S.
dollars, the ability of our lessees to make lease payments to us in U.S. dollars may be adversely impacted in the event of
an appreciating U.S. dollar, like we have experienced over the last year.
Our lessees may not be able to increase their revenues sufficiently to offset the impact of exchange rates on
their lease payments and other expenses denominated in U.S. dollars. This is particularly true for non-U.S. airlines
whose operations are primarily domestic. Currency volatility, particularly as witnessed recently in other emerging
market countries, could impact the ability of some of our customers to meet their contractual obligations in a timely
manner. Shifts in foreign exchange rates can be significant, are difficult to predict, and can occur quickly.
Certain of our subsidiaries may be restricted in their ability to make distributions to us which would negatively affect
our financial condition and cash flow.
The subsidiaries that hold our aircraft are legally distinct from us, and some of these subsidiaries are restricted
from paying dividends or otherwise making funds available to us pursuant to agreements governing our indebtedness.
Some of our principal debt facilities have financial covenants. If we are unable to comply with these covenants, then the
amounts outstanding under these facilities may become immediately due and payable, cash generated by our subsidiaries
affected by these facilities may be unavailable to us and/or we may be unable to draw additional amounts under these
facilities. The events that could cause some of our subsidiaries not to be in compliance with their loan agreements, such
as a lessee default, may be beyond our control, but they nevertheless could have a substantial negative impact on the
amount of our cash flow available to fund working capital, make capital expenditures and satisfy other cash needs. For
these reasons our financial condition and cash flow would be negatively affected. For a description of the operating and
financial restrictions in our debt facilities, see the section titled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources.”
Our aircraft may not at all times be adequately insured either as a result of lessees failing to maintain sufficient
insurance during the course of a lease or insurers not being willing to cover certain risks which would negatively
affect our financial condition, cash flow and results of operations.
We do not directly control the operation of any aircraft we acquire. Nevertheless, because we hold title, directly
or indirectly, to such aircraft, we could be sued or held strictly liable for losses resulting from the operation of such
aircraft, or may be held liable for those losses on other legal theories, in certain jurisdictions around the world, or claims
may be made against us as the owner of an aircraft requiring us to expend resources in our defense. We require our
lessees to obtain specified levels of insurance and indemnify us for, and insure against, liabilities arising out of their use
and operation of the aircraft. Some lessees may fail to maintain adequate insurance coverage during a lease term, which,
although in contravention of the lease terms, would necessitate our taking some corrective action such as terminating the
lease or securing insurance for the aircraft, either of which could negatively affect our financial results.
In addition, there are certain risks or liabilities that our lessees may face, for which insurers may be unwilling to
provide coverage or the cost to obtain such coverage may be prohibitively expensive. For example, following the
terrorist attacks of September 11, 2001, non-government aviation insurers significantly reduced the amount of insurance
coverage available for claims resulting from acts of terrorism, war, dirty bombs, bio-hazardous materials,
electromagnetic pulsing or similar events. Accordingly, we anticipate that our lessees’ insurance or other coverage may
not be sufficient to cover all claims that could or will be asserted against us arising from the operation of our aircraft by
our lessees. Inadequate insurance coverage or default by lessees in fulfilling their indemnification or insurance
obligations will reduce the proceeds that would be received by us in the event that we are sued and are required to make
payments to claimants, which would negatively affect our financial condition, cash flow and results of operations.
The death, incapacity or departure of key officers could harm our business and negatively affect our financial
condition, cash flow and results of operations.
We believe our senior management’s reputation and relationships with lessees, manufacturers, buyers and
financiers of aircraft are a critical element to the success of our business. We depend on the diligence, skill and network
of business contacts of our management team. We believe there are only a limited number of available qualified
executives in the aircraft industry, and we therefore have encountered, and will likely continue to encounter, intense
competition for qualified employees from other companies in our industry. Our future success will depend, to a
significant extent, upon the continued service of our senior management personnel, particularly: Mr. Udvar-Házy, our
founder, Chairman and Chief Executive Officer; Mr. Plueger, our President and Chief Operating Officer; and our other
senior officers, each of whose services are critical to the success of our business strategies. We only have employment
agreements with Messrs. Udvar-Házy and Plueger and have no intention at this time to enter into employment
agreements with any of our other senior officers. The employment agreements with Messrs. Udvar-Házy and Plueger
are scheduled to expire in 2016. If we were to lose the services of any of the members of our senior management team, it
could negatively affect our financial condition, cash flow and results of operations.
Conflicts of interest may arise between us and clients who will utilize our fleet management services, which could
negatively affect our business interests, cash flow and results of operations.
Conflicts of interest may arise between us and third-party aircraft owners, financiers and operating lessors who
hire us to perform fleet management services such as leasing, re-leasing, lease management and sales services. These
conflicts may arise because services we anticipate providing for these clients are also services we will provide for our
own fleet, including the placement of aircraft with lessees. We expect our fleet management services agreements will
provide that we will use our reasonable commercial efforts in providing services, but, to the extent that we are in
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competition with the client for leasing opportunities, we will give priority to our own fleet. Nevertheless, despite these
contractual waivers, competing with our fleet management clients in practice may result in strained relationships with
them, which could negatively affect our business interests, cash flow and results of operations.
We may on occasion enter into strategic ventures with the intent that we would serve as the manager of such strategic
ventures; however, entering into strategic relationships poses risks in that we most likely would not have complete
control over the enterprise, and our financial condition, cash flow and results of operations could be negatively
affected if we encounter disputes, deadlock or other conflicts of interest with our strategic partners.
In addition to our Blackbird Capital I, LLC joint venture discussed in Note 12 of Notes to Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K, for which we own a non-
controlling interest, we may on occasion enter into strategic ventures with third parties to take advantage of favorable
financing opportunities or tax benefits, to share capital and/or operating risk, and/or to earn fleet management fees.
Although we anticipate that we would serve as the manager of any such strategic ventures, it has been our management’s
experience that most strategic venture agreements will provide the non-managing strategic partner certain veto rights
over various significant actions, including the right to remove us as the manager under certain circumstances. If we were
to be removed as the manager from a strategic venture that generates significant management fees, our financial results
and growth prospects could be materially and negatively affected. In addition, if we were unable to resolve a dispute
with a significant strategic partner that retains material managerial veto rights, we might reach an impasse that could
require us to dissolve the strategic venture at a time and in a manner that could result in our losing some or all of our
original investment in the strategic venture, which could have a negative effect on our financial condition, cash flow and
results of operations.
Our business and earnings are affected by general business, financial market and economic conditions throughout
the world, which could have a negative effect on our financial condition, cash flow and results of operations.
Our business and earnings are affected by general business, financial market and economic conditions
throughout the world. As an aircraft leasing business with exposure to emerging markets, we are particularly exposed to
downturns in these emerging markets. A recession or worsening of economic conditions, particularly if combined with
high fuel prices, may have a material negative effect on the ability of our lessees to meet their financial and other
obligations under our operating leases, which, if our lessees default on their obligations to us, could have a material
negative effect on our cash flow and results of operations. General business and economic conditions that could affect us
include the level and volatility of short-term and long-term interest rates, inflation, employment levels, bankruptcies,
demand for passenger and cargo air travel, volatility in both debt and equity capital markets, liquidity of the global
financial markets, the availability and cost of credit, investor confidence and the strength of the global economy and the
local economies in which we operate. For these reasons our financial condition, cash flow and results of operations could
be negatively affected.
Additional terrorist attacks or the fear of such attacks, even if not made directly on the airline industry, could
negatively affect lessees and the airline industry, which would negatively affect our cash flow and results of
operations.
As a result of the September 11, 2001 terrorist attacks in the United States and subsequent terrorist attacks
abroad, notably in the Middle East, Southeast Asia and Europe, increased security restrictions were implemented on air
travel, costs for aircraft insurance and security measures increased, passenger and cargo demand for air travel decreased,
and operators faced, and to a certain extent, continue to face, increased difficulties in acquiring war risk and other
insurance at reasonable costs. The September 11, 2001 terrorist attacks resulted in substantial flight disruption costs
caused by the temporary grounding of the U.S. airline industry’s fleet and prohibition of all flights in and out of the U.S.
by the FAA, significantly increased security costs and associated passenger inconvenience, increased insurance costs,
substantially higher ticket refunds and significantly decreased traffic.
Additional terrorist attacks, even if not made directly on the airline industry, or the fear of or any precautions
taken in anticipation of such attacks (including elevated national threat warnings or selective cancellation or reduction of
flights), could materially negatively affect lessees and the airline industry. Conflict in the Middle East and additional
international hostilities, including heightened terrorist activity, could also have a material negative impact on our lessees’
financial condition, liquidity and results of operations. Lessees’ financial resources might not be sufficient to absorb the
negative effects of any further terrorist attacks or other international hostilities involving the United States or U.S.
interests, which could result in significant decreases in aircraft leasing transactions and would negatively affect our cash
flow and results of operations.
Increases in fuel costs could materially negatively affect our lessees and by extension the demand for our aircraft
which would negatively affect our financial condition, cash flow and results of operations.
Fuel costs represent a major expense to airlines, and fuel prices fluctuate widely depending primarily on
international market conditions, geopolitical and environmental events, regulatory changes (including those related to
greenhouse gas emissions) and currency exchange rates. If airlines are unable to increase ticket prices to offset fuel price
increases, their cash flows will suffer. Political unrest in the Middle East and North Africa has historically generated
uncertainty regarding the predictability of the world’s future oil supply, which has led to significant increases in fuel
costs. Fuel costs may rise in the future. Other events can also significantly affect fuel availability and prices, including
natural disasters, decisions by the Organization of the Petroleum Exporting Countries regarding their members’ oil
output, and the increase in global demand for fuel from countries such as China.
High fuel costs would likely have a material negative impact on airline profitability. Due to the competitive
nature of the airline industry, airlines may not be able to pass on increases in fuel prices to their passengers by increasing
fares. If airlines are successful in increasing fares, demand for air travel may be negatively affected. In addition, airlines
may not be able to manage fuel cost risk by appropriately hedging their exposure to fuel price fluctuations. If fuel price
increases, they are likely to cause our lessees to incur higher costs. Consequently, these conditions may:
•
•
•
•
•
affect our lessees’ ability to make rental and other lease payments;
result in lease restructurings and aircraft repossessions;
increase our costs of maintaining and marketing aircraft;
impair our ability to remarket aircraft or otherwise sell our aircraft on a timely basis at favorable rates; or
reduce the sale proceeds received in the event of an aircraft sale.
Such effects would materially negatively affect demand for our aircraft, which would negatively affect our
financial condition, cash flow and results of operations.
A deterioration in the financial condition of the airline industry would have a negative impact on our ability to lease
our aircraft which would negatively affect our financial condition, cash flow and results of operations.
The financial condition of the airline industry is of particular importance to us because our aircraft are primarily
leased to passenger airlines and we plan to continue to lease our aircraft to passenger airlines. Our ability to achieve our
primary business objectives will depend on the financial condition and growth of the airline industry. The risks affecting
airlines are generally out of our control, but because these risks have a significant impact on our intended airline
customers, they will affect us as well. We may experience:
•
•
downward pressure on demand for our aircraft and reduced market lease rates and lease margins;
a higher incidence of lessee defaults, lease restructurings, repossessions and airline bankruptcies and
restructurings, resulting in lower lease margins due to maintenance and legal costs associated with
repossession, as well as lost revenue for the time our aircraft are off lease and possibly lower lease rates
from our new lessees; and
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•
an inability to lease aircraft on commercially acceptable terms, resulting in lower lease margins due to
aircraft not earning revenue and resulting in storage, insurance and maintenance costs.
For these reasons our financial condition, cash flow and results of operations would be negatively affected.
SARS, H1N1, Ebola, the Zika virus and other epidemic diseases may hinder airline travel and reduce the demand for
aircraft which would negatively affect our financial condition, cash flow and results of operations.
The outbreak of severe acute respiratory syndrome (“SARS”) materially negatively affected passenger demand
for air travel in 2003. In addition, since 2003, there have been several outbreaks of avian influenza, or the bird flu,
beginning in Asia and, eventually, spreading to certain parts of Africa and Europe. Additional outbreaks of SARS, bird
flu, swine flu, the Zika virus, Ebola or other pandemic diseases, or the fear of such events, could provoke responses,
including government-imposed travel restrictions, which could negatively affect passenger demand for air travel and the
financial condition of the aviation industry. The consequences of these events may reduce the demand for aircraft and/or
impair our lessees’ ability to satisfy their lease payment obligations to us, which in turn would negatively affect our
financial condition, cash flow and results of operations.
Natural disasters and other natural phenomena may disrupt air travel and reduce the demand for aircraft which
would negatively affect our financial condition, cash flow and results of operations.
Air travel can be disrupted, sometimes severely, by the occurrence of natural disasters and other natural
phenomena. A natural disaster could cause disruption to air travel and could result in a reduced demand for aircraft
and/or impair our lessees’ ability to satisfy their lease payment obligations to us, which in turn would negatively affect
our financial condition, cash flow and results of operations.
The effects of various environmental regulations may negatively affect the airline industry, which may in turn cause
lessees to default on their lease payment obligations to us which would negatively affect our financial condition, cash
flow and results of operations.
Governmental regulations regarding aircraft and engine noise and emissions levels apply based on where the
relevant aircraft is registered and operated. For example, jurisdictions throughout the world have adopted noise
regulations which require all aircraft to comply with noise level standards. In addition to the current requirements, the
United States and the International Civil Aviation Organization (the “ICAO”), have specific standards for noise levels
which applies to engines manufactured or certified on or after January 1, 2006. Currently, U.S. regulations would not
require any phase- out of aircraft that qualify with the older standards applicable to engines manufactured or certified
prior to January 1, 2006, but the European Union has established a framework for the imposition of operating limitations
on aircraft that do not comply with the new standards and incorporated aviation- related emissions into the European
Union’s Emission Trading Scheme beginning in 2013. These regulations could limit the economic life of the aircraft and
engines, reduce their value, limit our ability to lease or sell the non- compliant aircraft and engines or, if engine
modifications are permitted, require us to make significant additional investments in the aircraft and engines to make
them compliant.
In addition to more stringent noise restrictions, the United States and other jurisdictions are beginning to impose
more stringent limits on nitrogen oxide, carbon monoxide and carbon dioxide emissions from engines, consistent with
current ICAO standards. These limits generally apply only to engines manufactured after 1999. Because aircraft engines
are replaced from time to time in the normal course, it is likely that the number of such engines would increase over
time. The ICAO is expected to develop a global scheme based on market-based measures to limit CO2 emissions from
international aviation by 2016 to be implemented by 2020. Concerns over global warming could result in more stringent
limitations on the operation of aircraft powered by older, non-compliant engines, as well as newer engines.
European countries generally have relatively strict environmental regulations that can restrict operational
flexibility and decrease aircraft productivity. The European Parliament has confirmed that aviation is to be included in
the European Union’s Emissions Trading Scheme starting in 2012, and that all of the emissions associated with
international flights that land or take off within the European Union will be subject to the trading program, even those
emissions that are emitted outside of the European Union but exempted emissions from that portion of such flights that
are outside of the European Union zone through 2016 when the ICAO is expected to establish new global measures. The
United Kingdom doubled its air passenger duties, effective February 1, 2007, in recognition of the environmental costs
of air travel. Similar measures may be implemented in other jurisdictions as a result of environmental concerns.
These regulations could limit the economic life of the aircraft and engines, reduce their value, limit our ability
to lease or sell the compliant aircraft and engines or, if engine modifications are permitted, require us to make significant
additional investments in the aircraft and engines to make them compliant, which would negatively affect our financial
condition, cash flow and results of operations. Further, compliance with current or future regulations, taxes or duties
imposed to deal with environmental concerns could cause lessees to incur higher costs and to generate lower net
revenues, resulting in a negative impact on their financial conditions. Consequently, such compliance may affect lessees’
ability to make rental and other lease payments and reduce the value we receive for the aircraft upon any disposition,
which would negatively affect our financial condition, cash flow and results of operations.
We operate in multiple jurisdictions and may become subject to a wide range of income and other taxes which would
negatively affect our cash flow and results of operations.
We operate in multiple jurisdictions and may become subject to a wide range of income and other taxes. If we
are unable to execute our business in jurisdictions with favorable tax treatment, our operations may be subject to
significant income and other taxes.
Moreover, as our aircraft are operated by our lessees in multiple states and foreign jurisdictions, we may have
nexus or taxable presence as a result of our aircraft landings in various states or foreign jurisdictions. Such landings may
result in us being subject to various foreign, state and local taxes in such states or foreign jurisdictions. For these reasons
our cash flow and results of operations would be negatively affected.
We are subject to various risks and requirements associated with transacting business in foreign countries which
would negatively affect our cash flow and results of operations.
Our international operations expose us to trade and economic sanctions and other restrictions imposed by the
United States or other governments or organizations. The U.S. Departments of Justice, Commerce, State and Treasury
and other foreign agencies and authorities have a broad range of civil and criminal penalties they may seek to impose
against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt
Practices Act (“FCPA”) and other federal statutes and regulations, including the International Traffic in Arms
Regulations and those established by OFAC. Under these laws and regulations, the government may require export
licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned
countries, and modifications to compliance programs, which may increase compliance costs, and may subject us to fines,
penalties and other sanctions. A violation of these laws or regulations could negatively impact our business, operating
results, and financial condition.
We have in place training programs for our employees with respect to FCPA, OFAC, export controls and
similar laws and regulations. There can be no assurance that our employees, consultants, sales agents, or associates will
not engage in unlawful conduct for which we may be held responsible. Violations of the FCPA, OFAC and other export
control regulations, and similar laws and regulations may result in severe criminal or civil sanctions, and we may be
subject to other liabilities, which could negatively affect our cash flow and results of operations.
A cyber-attack that bypasses our information technology, or IT, security systems, causing an IT security breach, may
lead to a material disruption of our IT systems and the loss of business information which may hinder our ability to
conduct our business effectively and may result in lost revenues and additional costs.
Parts of our business depend on the secure operation of our computer systems to manage, process, store, and
transmit information associated with aircraft leasing. We have, from time to time, experienced threats to our data and
systems, including malware and computer virus attacks. A cyber-attack could adversely impact our daily operations and
lead to the loss of sensitive information, including our own proprietary information and that of our customers, suppliers
and employees. Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory
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enforcement actions, lost revenues, additional costs and liability. While we devote substantial resources to maintaining
adequate levels of cyber-security, our resources and technical sophistication may not be adequate to prevent all types of
cyber- attacks.
Material damage to, or interruptions in, our information systems as a result of external factors, staffing shortages
and difficulties in updating our existing software or developing or implementing new software could have a material
adverse effect on our business or results of operations.
We depend largely upon our information technology systems in the conduct of all aspects of our operations.
Such systems are subject to damage or interruption from power outages, computer and telecommunications failures,
computer viruses, security breaches, fire and natural disasters. Damage or interruption to our information systems may
require a significant investment to fix or replace them, and we may suffer interruptions in our operations in the interim.
Potential problems and interruptions associated with the implementation of new or upgraded systems and technology or
with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
Any material interruptions or failures in our information systems may have a material adverse effect on our business or
results of operations.
Our financial reporting for lease revenue may be impacted by a proposed new model for lease accounting.
We anticipate the Financial Accounting Standards Board (“FASB”) will issue Accounting Standards
Codification (“ASC”) 842 (“ASC 842”), “Leases” which will replace the existing guidance in ASC 840, Leases, in early
2016. The standard the FASB plans to issue would require lessees to recognize most leases on their balance sheets as
lease liabilities with corresponding right-of-use assets. Lessor accounting for operating leases would remain
substantially unchanged. We anticipate that the standard will be effective for public entities beginning after December
15, 2018. Based on the original Leases re-exposure draft and the FASB’s tentative decisions, we believe the standard
will not have a material impact on our consolidated financial statements. We do not believe that the adoption of the
standard will significantly impact our existing or potential lessees' economic decisions to lease aircraft.
Risks Related to Our Class A Common Stock
The price of our Class A common stock historically has been volatile. This volatility may negatively affect the price of
our Class A common stock.
The Company’s stock continues to experience substantial price volatility. This volatility may negatively affect
the price of our Class A common stock at any point in time. Our stock price is likely to continue to be volatile and
subject to significant price and volume fluctuations in response to market and other factors, including:
•
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•
•
•
•
•
announcements concerning our competitors, the airline industry or the economy in general;
announcements concerning the availability of the type of aircraft we own;
general and industry-specific economic conditions;
changes in the price of aircraft fuel;
changes in financial estimates or recommendations by securities analysts or failure to meet analysts’
performance expectations;
additions or departures of key members of management;
any increased indebtedness we may incur in the future;
speculation or reports by the press or investment community with respect to us or our industry in general;
•
•
•
announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic
partnerships, joint ventures or capital commitments;
changes or proposed changes in laws or regulations affecting the airline industry or enforcement of these
laws and regulations, or announcements relating to these matters; and
general market, political and economic conditions, including any such conditions and local conditions in
the markets in which our lessees are located.
Broad market and industry factors may decrease the market price of our Class A common stock, regardless of
our actual operating performance. The stock market in general has from time to time experienced extreme price and
volume fluctuations, including periods of sharp decline. In addition, in the past, following periods of volatility in the
overall market and the market price of a company’s securities, securities class action litigation has often been instituted
against these companies. Such litigation, if instituted against us, could result in substantial costs and a diversion of our
management’s attention and resources.
Provisions in Delaware law and our restated certificate of incorporation and amended and restated bylaws may
inhibit a takeover of us, which could cause the market price of our Class A common stock to decline and could
entrench management.
Our restated certificate of incorporation and amended and restated bylaws contain provisions that may
discourage unsolicited takeover proposals that stockholders may consider to be in their best interests, including the
ability of our board of directors to designate the terms of and issue new series of preferred stock, a prohibition on our
stockholders from calling special meetings of the stockholders, and advance notice requirements for stockholder
proposals and director nominations. In addition, Section 203 of the Delaware General Corporation Law, which we have
not opted out of, prohibits a public Delaware corporation from engaging in certain business combinations with an
“interested stockholder” (as defined in such section) for a period of three years following the time that such stockholder
became an interested stockholder without the prior consent of our board of directors. The effect of Section 203 of the
Delaware General Corporation Law, as well as these charter and bylaws provisions, may make the removal of
management more difficult. It may also impede a merger, takeover or other business combination or discourage a
potential acquirer from making a tender offer for our Class A common stock, which, under certain circumstances, could
reduce the market price of our Class A common stock.
Future offerings of debt or equity securities by us may adversely affect the market price of our Class A common stock.
In the future, we may attempt to obtain financing or to further increase our capital resources by issuing
additional shares of Class A common stock or offering debt or additional equity securities, including commercial paper,
medium-term notes, senior or subordinated notes or preferred shares. Issuing additional shares of Class A common stock
or other additional equity offerings may dilute the economic and voting rights of our existing stockholders or reduce the
market price of our Class A common stock, or both. Upon liquidation, holders of such debt securities and preferred
shares, if issued, and lenders with respect to other borrowings, would receive a distribution of our available assets prior
to the holders of our Class A common stock. Preferred shares, if issued, could have a preference with respect to
liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to
the holders of our Class A common stock. Because our decision to issue securities in any future offering will depend on
market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of
our future offerings. Thus, holders of our Class A common stock bear the risk of our future offerings reducing the
market price of our Class A common stock and diluting their share holdings in us.
We may not be able to pay or maintain dividends, or we may choose not to pay dividends, and the failure to pay or
maintain dividends may negatively affect our share price.
Current dividends may not be indicative of the amount of any future quarterly dividends. Our ability to pay,
maintain or increase cash dividends to our shareholders is subject to the discretion of our Board of Directors and will
depend on many factors, including our ability to comply with covenants in our financing documents that limit our ability
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to pay dividends and make certain other restricted payments to shareholders; the difficulty we may experience in raising
and the cost of additional capital and our ability to finance our aircraft acquisition commitments; our ability to re-finance
our long-term financings before excess cash flows are no longer made available to us to pay dividends and for other
purposes; our ability to negotiate and enforce favorable lease rates and other contractual terms; the level of demand for
our aircraft; the economic condition of the commercial aviation industry generally; the financial condition and liquidity
of our lessees; unexpected or increased expenses; the level and timing of capital expenditures, principal repayments and
other capital needs; the value of our aircraft portfolio; our compliance with loan to value, interest rate coverage and other
financial tests in our financings; our results of operations, financial condition and liquidity; general business conditions;
restrictions imposed by our debt agreements; legal restrictions on the payment of dividends; and other factors that our
Board of Directors deems relevant. Some of these factors are beyond our control, and a change in any such factor could
affect our ability to pay dividends on our common stock. In the future we may not choose to pay dividends or may not be
able to pay dividends, maintain our current level of dividends, or increase them over time. The failure to maintain or pay
dividends may negatively affect our share price.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Flight Equipment
As of December 31, 2015, our operating lease portfolio consisted of 240 aircraft, comprised of 181 single-aisle
narrowbody jet aircraft, 40 twin-aisle widebody jet aircraft and 19 turboprop aircraft, with a weighted average age of
3.6 years.
below. The recorded basis of aircraft may be adjusted upon delivery to reflect changes in budgeted buyer furnished
equipment required by a specific airline customer.
Aircraft Type
Airbus A320/321-200(1) . . . . . . . . . . . . . . . . . . .
3 — — — —
Airbus A320/321neo(2) . . . . . . . . . . . . . . . . . . . .
1 14 17 27 26
1 — — — —
Airbus A330-200 . . . . . . . . . . . . . . . . . . . . . . . . .
5
5
Airbus A330-800/900neo . . . . . . . . . . . . . . . . . . — —
2
Airbus A350-900 . . . . . . . . . . . . . . . . . . . . . . . . . —
8
2
9 — — —
Boeing 737-800 . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Boeing 737-8/9 MAX . . . . . . . . . . . . . . . . . . . . . — —
8 18 32
2 — — —
Boeing 777-300ER . . . . . . . . . . . . . . . . . . . . . . .
6
3
Boeing 787-9/10 . . . . . . . . . . . . . . . . . . . . . . . . .
6
3
7
5 — — — —
ATR 72-600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 30 39 59 77
2016 2017 2018 2019 2020 Thereafter Total
—
3
55 140
1
—
25
10
23
9
26
—
54 112
8
—
46
20
5
—
148 389
5
2
7
(1) All of our Airbus A320/321-200 aircraft, scheduled to be delivered in 2016, will be equipped with sharklets.
(2) Our Airbus A320/321neo aircraft orders include 30 long-range variants.
As of December 31, 2015, the Company had a non-binding commitment to acquire up to five A350-1000
aircraft. Deliveries of these aircraft are scheduled to commence in 2023 and continue through 2024.
Our new aircraft are being purchased pursuant to binding purchase agreements with each of Airbus and Boeing.
These agreements establish pricing formulas (which include certain price adjustments based upon inflation and other
factors) and various other terms with respect to the purchase of aircraft. Under certain circumstances, we have the right
to alter the mix of aircraft types that we ultimately acquire.
The following table shows the scheduled lease terminations (for the minimum non-cancellable period which
does not include contracted unexercised lease extension options) of our operating lease portfolio as of December 31,
2015, updated through February 25, 2016:
New Lease Placements
2016 2017 2018 2019 2020 Thereafter Total
Aircraft Type
1 — —
1
Airbus A319-100 . . . . . . . . . . . . . . . . . . . . . . . . . —
9
4
1
2
2
Airbus A320-200 . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
1
1
Airbus A321-200 . . . . . . . . . . . . . . . . . . . . . . . . .
1
2
Airbus A330-200 . . . . . . . . . . . . . . . . . . . . . . . . . —
4
1 —
1
Airbus A330-300 . . . . . . . . . . . . . . . . . . . . . . . . . — — — —
2
Boeing 737-700 . . . . . . . . . . . . . . . . . . . . . . . . . .
3 —
1 —
1
Boeing 737-800 . . . . . . . . . . . . . . . . . . . . . . . . . .
5 10 10
4
1 — — — —
Boeing 767-300ER . . . . . . . . . . . . . . . . . . . . . . .
1
Boeing 777-200ER . . . . . . . . . . . . . . . . . . . . . . . — — — —
Boeing 777-300ER . . . . . . . . . . . . . . . . . . . . . . . —
1 — — —
Embraer E175 . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — —
6 10
Embraer E190 . . . . . . . . . . . . . . . . . . . . . . . . . . . —
1 —
5
4
ATR 42/72-600 . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
6 11 10 32 39
3
1
39
21
26
21
16
9
5
4
8
2
79
49
1
—
1
—
17
16
5
5
21
4
19
10
142 240
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments
As of December 31, 2015, we had committed to purchase the following new aircraft at an estimated aggregate
purchase price (including adjustment for anticipated inflation) of approximately $30.7 billion for delivery as shown
Our current lease placements are progressing well and are in line with our expectations. As of February 25,
2016, we had entered into contracts for the lease of new aircraft scheduled to be delivered through 2023 as follows:
Delivery Year
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Number
Aircraft
Leased
36
30
39
59
77
148
389
% Leased
94.4 %
96.7 %
61.5 %
39.0 %
18.2 %
2.0 %
34
29
24
23
14
3
127
Our lease commitments for 34 of the 36 aircraft to be delivered in 2016 are comprised of 32 binding leases and
two non-binding letters of intent. Our lease commitments for the 29 of the 30 aircraft to be delivered in 2017 are
comprised of 26 binding leases and three non-binding letters of intent. Our lease commitments for 24 of the 39 aircraft to
be delivered in 2018 are comprised of 22 binding leases and two non-binding letters of intent. Our lease commitments
for 23 of the 59 aircraft to be delivered in 2019 are comprised of 22 binding leases and one non-binding letter of intent.
Our lease commitments for 14 of the 77 aircraft to be delivered in 2020 are comprised of nine binding leases and five
non-binding letters of intent. Finally, our lease commitments for three of the 148 aircraft to be delivered after 2020 is
comprised of one binding lease and two non-binding letters of intent. While our management’s historical experience is
that non-binding letters of intent for aircraft leases generally lead to binding contracts, we are not certain that we will
ultimately execute binding agreements for all or any of the letters of intent. While we actively seek lease placements for
the aircraft that are scheduled to be delivered through 2023, in making our lease placement decisions, we also take into
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consideration the anticipated growth in the aircraft leasing market and anticipated improvements in lease rates, which
could lead us to determine that entering into particular lease arrangements at a later date would be more beneficial to us.
PART II
Facilities
We lease our principal executive office at 2000 Avenue of the Stars, Suite 1000N, Los Angeles, California
90067. We also lease offices at 3rd Floor, Kilmore House, Park Lane, Spencer Dock, Dublin 1, Ireland. We do not own
any real estate. We believe our current facilities are adequate for our current needs and for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may be involved in litigation and claims incidental to the conduct of our business in the
ordinary course. Our industry is also subject to scrutiny by government regulators, which could result in enforcement
proceedings or litigation related to regulatory compliance matters. We are not presently a party to any enforcement
proceedings or litigation related to regulatory compliance matters or material legal proceedings. We maintain insurance
policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our
business, historical experience and industry standards.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A common stock has been quoted on the New York Stock Exchange (the “NYSE”) under the symbol
“AL” since April 19, 2011. Prior to that time, there was no public market for our stock. As of December 31, 2015, there
were 102,582,669 shares of Class A common stock outstanding held by approximately 199 holders of record.
On February 24, 2016 the closing price of our Class A common stock was $28.50 per share as reported by the
NYSE. The table below sets forth for the indicated periods the high and low sales prices for our Class A common stock
as reported on the NYSE.
Low
Fiscal Year 2015 Quarters Ended:
March 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39.65 $ 33.01
June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40.21 $ 33.90
September 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37.13 $ 29.83
December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34.94 $ 30.68
High
Fiscal Year 2014 Quarters Ended:
March 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
June 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
September 30, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
High
Low
$ 37.69 $ 30.27
$ 42.44 $ 34.68
$ 38.88 $ 32.50
$ 38.74 $ 31.06
Dividends
The following table sets forth the dividends declared for the years ended December 31, 2015, 2014 and 2013:
Dividends declared per share . . . . . . . . . .
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
0.11
$
Year Ended
0.13
0.17
$
$
While the Board of Directors paid a quarterly cash dividend in 2015 and currently expects to continue paying a
quarterly cash dividend of $0.05 per share for the foreseeable future, the cash dividend policy can be changed at any
time at the discretion of the Board of Directors.
34
35
Stock Authorized for Issuance Under Equity Compensation Plans
Company Purchases of Stock
Set forth below is certain information about the Class A common stock authorized for issuance under the
The Company did not purchase any shares of its Class A common stock during 2015.
Company’s equity compensation plan.
Number of securities to be Weighted-average exercise
issued upon exercise of
outstanding options,
warrants and rights
(a)
price of outstanding
options, warrants and
rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
3,577,283
$
—
3,577,283
$
20.37
—
20.37
6,437,196
—
6,437,196
Plan Category
Equity compensation plans approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation plans not approved by
security holders . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Graph
The graph below compares the cumulative return since April 19, 2011 of the Company’s Class A common
stock, the S&P Midcap 400 Index, the Russell 2000 Index and a customized peer group. The peer group consists of three
companies: Aircastle Limited (NYSE: AYR), AerCap Holdings NV (NYSE: AER) and FLY Leasing Limited (NYSE:
FLY). The peer group investment is weighted by market capitalization as of April 19, 2011, and is adjusted monthly. An
investment of $100, with reinvestment of all dividends, is assumed to have been made in our Class A common stock, in
the peer group and in the S&P Midcap 400 Index and in the Russell 2000 Index on April 19, 2011, and the relative
performance of each is tracked through December 31, 2015. The stock price performance shown in the graph is not
necessarily indicative of future stock price performance.
Comparison of 56 Month Cumulative Total Return
Assumes Initial Investment of $100
December 31, 2015
ITEM 6. SELECTED FINANCIAL DATA
You should read the following selected consolidated financial data in conjunction with “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements
and the related notes appearing in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on
Form 10-K.
Year Ended
December 31,
2015
Year Ended
December 31,
2014
Year Ended
December 31,
2013
(in thousands, except share data)
Year Ended
December 31,
2012
Year Ended
December 31,
2011
Operating data:
Rentals of flight equipment . . . . . $
Aircraft sales, trading and other(1)
Total revenues . . . . . . . . . . . . . .
Expenses(1) . . . . . . . . . . . . . . . . .
Income before taxes . . . . . . . . .
Income tax expense . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . $
1,174,544 $
48,296
1,222,840
829,887
392,953
(139,562)
253,391 $
991,241 $
59,252
1,050,493
655,717
394,776
(138,778)
255,998 $
836,516 $
22,159
858,675
565,233
293,442
(103,031)
190,411 $
645,853 $
9,893
655,746
451,773
203,973
(72,054)
131,919 $
332,719
4,022
336,741
253,900
82,841
(29,609)
53,232
Adjusted net income(2) . . . . . . . . . $
507,982 $
438,596 $
338,683 $
252,655 $
131,664
Net income per share:
Basic . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . $
Adjusted diluted earnings per
share(2) . . . . . . . . . . . . . . . . . . . . $
Cash dividends declared per share: $
Weighted average shares
outstanding:
2.47 $
2.34 $
2.51 $
2.38 $
1.88 $
1.80 $
1.31 $
1.28 $
4.64 $
4.03 $
3.16 $
2.40 $
0.17 $
0.13 $
0.11 $
— $
0.59
0.59
1.46
—
Basic . . . . . . . . . . . . . . . . . . . . . . .
102,547,774
102,142,828
101,529,137
100,991,871
89,592,945
Diluted . . . . . . . . . . . . . . . . . . . . . .
110,628,865
110,192,771
108,963,550
107,656,463
90,416,346
$310
$260
$210
$160
$110
$60
4/19/2011
6/30/2011
9/30/2011
12/31/2011
3/31/2012
6/30/2012
9/30/2012
12/31/2012
3/31/2013
6/30/2013
9/30/2013
12/31/2013
3/31/2014
6/30/2014
9/30/2014
12/31/2014
3/31/2015
6/30/2015
9/30/2015
12/31/2015
Air Lease Corporation
S&P Midcap 400 Index
Russell 2000 Index
Peer Group
17MAR201620251886
Cash flow data:
Net cash flows provided by (used in):
Operating activities . . . . . . . . . . . . $
Investing activities . . . . . . . . . . . .
Financing activities . . . . . . . . . . . .
839,795 $
769,018 $
654,213 $
491,029 $
(2,152,801)
1,186,862
(1,805,657)
1,049,285
(2,185,894)
1,571,765
(2,344,924)
1,802,179
267,166
(2,977,156)
2,662,974
36
37
2015
2014
As of December 31,
2013
2012
2011
(in thousands, except share and aircraft data)
The following table shows the reconciliation of net income to adjusted diluted earnings per share (in thousands,
except share and per share amounts):
Reconciliation of net income to
adjusted diluted earnings per
share: . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of debt discounts and
issuance costs . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . .
Insurance recovery on settlement . . . . .
Provision for income taxes . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . $
Assumed conversion of convertible
2015
2014
Year Ended
December 31,
2013
(unaudited)
2012
2011
253,391 $
255,998 $
190,411 $
131,919 $
53,232
30,507
17,022
72,000
(4,500)
139,562
507,982 $
27,772
16,048
—
—
138,778
438,596 $
23,627
21,614
—
—
103,031
338,683 $
16,994
31,688
—
—
72,054
252,655 $
9,481
39,342
—
—
29,609
131,664
senior notes . . . . . . . . . . . . . . . . . . . . .
5,806
5,811
5,783
5,627
560
Adjusted net income plus assumed
conversions . . . . . . . . . . . . . . . . . . . . . $
513,788 $
444,407 $
344,466 $
258,282 $
132,224
Weighted-average diluted shares
outstanding . . . . . . . . . . . . . . . . . . . . .
Adjusted diluted earnings per share . . $
110,628,865
110,192,771
108,963,550
107,656,463
4.64 $
4.03 $
3.16 $
2.40 $
90,416,346
1.46
Balance sheet data:
Flight equipment subject to operating leases
(net of accumulated depreciation) . . . . . . . $ 10,813,475 $ 8,953,804 $ 7,613,135 $ 6,251,863 $ 4,237,416
5,116,984
2,555,190
2,940,701
2,176,283
12,355,098
7,712,421
9,335,186
3,019,912
10,691,180
6,630,758
7,919,118
2,772,062
7,279,405
4,310,513
4,946,784
2,332,621
9,242,355
5,763,068
6,718,921
2,523,434
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ equity . . . . . . . . . . . . . . . . . . .
Other operating data:
Aircraft lease portfolio at period end:
Owned . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Managed . . . . . . . . . . . . . . . . . . . . . . . . . .
240
29
213
17
193
4
155
4
102
2
(1) Expenses for the year ended December 31, 2015 included settlement expense of $72.0 million. Other income for
the year ended December 31, 2015 included income recovery on a settlement of $4.5 million.
(2) Adjusted net income (defined as net income excluding the effects of certain non-cash items, one-time or non-
recurring items, such as settlement expense, that are not expected to continue in the future and certain other items),
and adjusted diluted earnings per share (defined as net income excluding the effects of certain non-cash items, one-
time or non-recurring items, such as settlement expense, that are not expected to continue in the future and certain
other items divided by the weighted average diluted common shares outstanding) are measures of operating
performance that are not defined by GAAP and should not be considered as an alternative to net income, earnings
per share, and diluted earnings per share, or any other performance measures derived in accordance with GAAP.
Adjusted net income and adjusted diluted earnings per share, are presented as supplemental disclosure because
management believes they provide useful information on our earnings from ongoing operations.
Management and our board of directors use adjusted net income and adjusted diluted earnings per share to assess
our consolidated financial and operating performance. Management believes these measures are helpful in
evaluating the operating performance of our ongoing operations and identifying trends in our performance, because
they remove the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue
in the future and certain other items from our operating results. Adjusted net income and adjusted diluted earnings
per share, however, should not be considered in isolation or as a substitute for analysis of our operating results or
cash flows as reported under GAAP. Adjusted net income and adjusted diluted earnings per share do not reflect our
cash expenditures or changes in or cash requirements for our working capital needs. In addition, our calculation of
adjusted net income and adjusted diluted earnings per share may differ from the adjusted net income and adjusted
diluted earnings per share or analogous calculations of other companies in our industry, limiting their usefulness as a
comparative measure.
The following tables show the reconciliation of net income to adjusted net income (in thousands):
Reconciliation of net income to adjusted net income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discounts and issuance costs . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance recovery on settlement . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2012
2015
Year Ended
December 31,
2013
(unaudited)
$ 253,391 $ 255,998 $ 190,411 $ 131,919 $ 53,232
9,481
23,627
30,507
39,342
21,614
17,022
—
—
72,000
—
—
(4,500)
139,562
29,609
103,031
$ 507,982 $ 438,596 $ 338,683 $ 252,655 $ 131,664
27,772
16,048
—
—
138,778
16,994
31,688
—
—
72,054
2011
38
39
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
outstanding of $7.7 billion, of which 78.7% was at a fixed rate and 88.4% of which was unsecured, with a composite
cost of funds of 3.59%.
Overview
Air Lease Corporation is a leading aircraft leasing company that was founded by aircraft leasing industry
pioneer, Steven F. Udvar-Házy. We are principally engaged in purchasing new commercial jet transport aircraft directly
from aircraft manufacturers, such as Boeing and Airbus, and leasing those aircraft to airlines throughout the world. In
addition to our leasing activities, we sell aircraft from our operating lease portfolio to third parties, including other
leasing companies, financial services companies and airlines. We also provide fleet management services to investors
and owners of aircraft portfolios for a management fee. Our operating performance is driven by the growth of our fleet,
the terms of our leases, the interest rates on our debt, and the aggregate amount of our indebtedness, supplemented by the
gains of our aircraft sales and trading activities and our management fees.
Our fleet, based on net book value, increased by $1.8 billion or 20.8%, to $10.8 billion as of December 31,
2015 compared to $9.0 billion as of December 31, 2014. As of December 31, 2015, we owned 240 aircraft in our fleet,
all of which were leased, and we had an additional 389 aircraft on order with Boeing, Airbus and ATR. Our portfolio of
240 aircraft as of December 31, 2015 was comprised of 181 single-aisle narrowbody jet aircraft, 40 twin-aisle widebody
jet aircraft and 19 turboprop aircraft, with a weighted average age of 3.6 years. We ended 2014 with 213 aircraft,
comprised of 163 single-aisle jet aircraft, 32 twin-aisle widebody aircraft and 18 turboprop aircraft, with a weighted
average age of 3.5 years.
On April 22, 2015, the Company entered into a settlement agreement with AIG, ILFC, and ILFC’s parent,
AerCap Holdings N.V., to settle all ongoing litigation as set forth in Note 14: Litigation, in the Notes to Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. In connection with the settlement,
we recorded an expense of $72.0 million, before taxes for the year ended December 31, 2015. In December 2015, we
received $4.5 million in insurance recoveries related to this matter, which are included in aircraft sales, trading and other
revenue in our Consolidated Statement of Income.
Excluding the effects of certain non-cash items, one-time or non-recurring items that are not expected to
continue in the future and certain other items including the litigation expense, net of recoveries, we generated adjusted
net income of $508.0 million for the year ended December 31, 2015 compared to $438.6 million for the year ended
December 31, 2014, an increase of $69.4 million or 15.8%. Adjusted diluted earnings per share increased to $4.64 for
the year ended December 31, 2015, compared to $4.03 for the year ended December 31, 2014. Adjusted net income and
adjusted diluted earnings per share are measures of financial and operational performance that are not defined by GAAP.
See Note 2 in “Item 6. Selected Financial Data” of this Annual Report on Form 10-K for a discussion of adjusted net
income and adjusted diluted earnings per share as non-GAAP measures and reconciliation of these measures to net
income.
Our Fleet
During 2015, we signed lease agreements, letters of intent, and lease extension agreements for 120 aircraft with
46 customers across 35 countries. As a result, the minimum future rental payments that our airline customers have
committed to us have increased to $20.9 billion from $16.5 billion in the prior year. This includes $8.9 billion in
contracted minimum rental payments on the 240 aircraft in our existing fleet and $12.0 billion in minimum future rental
payments on the 127 aircraft that we have ordered from the manufacturers which will deliver between 2016 and 2021.
We have continued to build one of the world’s youngest operating lease portfolios, comprised of the currently
most fuel-efficient commercial jet transport aircraft. During the year ended December 31, 2015, we took delivery of 51
aircraft from our new order pipeline and sold 24 aircraft ending the year with a total of 240 aircraft. Our weighted
average fleet age and weighted average remaining lease term as of December 31, 2015 were 3.6 years and 7.2 years,
respectively. We also managed 29 aircraft as of December 31, 2015.
During 2015, we entered into definitive agreements and amendments to existing agreements with Airbus and
Boeing to purchase 70 additional aircraft. From Airbus, we agreed to purchase 25 A330neo aircraft, 30 A321neo LR
aircraft, three A350-900 aircraft, two A320-200 aircraft, one A330-200 aircraft and one A321-200 aircraft. From
Boeing, we agreed to purchase eight additional 737-8MAX aircraft. Deliveries of the aircraft are scheduled to
commence in 2016 and continue through 2023. As of December 31, 2015, we had, in the aggregate, 389 aircraft on order
with Boeing, Airbus and ATR for delivery through 2023, with an estimated aggregate purchase price of $30.7 billion,
making us one of the world's largest customers for new commercial jet aircraft.
In 2015, total revenues increased by 16.4% to $1.22 billion, compared to 2014. Our total revenues were
comprised of rental revenues on our operating lease portfolio of $1.17 billion and aircraft sales, trading and other
revenue of $48.3 million. During the year ended December 31, 2015, we sold 24 aircraft for proceeds of $784.7 million
recording gains on aircraft sales and trading activity of $33.9 million. During the year ended December 31, 2014, we
sold 22 aircraft, a corporate aircraft and received insurance proceeds in excess of the book value relating to the loss of an
aircraft for proceeds of $668.3 million, recording gains on aircraft sales and trading activity of $55.8 million. In addition,
in December 2015, we entered into an agreement to sell our fleet of 25 ATR turboprop aircraft, comprised of 20
delivered aircraft and five undelivered aircraft, to NAC. As of December 31, 2015, one aircraft had been transferred to
NAC and the remaining 19 delivered aircraft were held for sale. We expect the sale of the 19 aircraft held for sale and
the five undelivered aircraft to be completed in 2016.
We finance the purchase of aircraft and our business with available cash balances, internally generated funds,
including aircraft sales and trading activities, and debt financings. Our debt financing strategy is focused on raising
unsecured debt in the global bank and debt capital markets, with a limited utilization of export credit or secured
financing. In 2015, we issued $1.1 billion senior unsecured notes with an average interest rate of 3.14%, with maturities
ranging from 2018 to 2022. In 2015, we increased our unsecured revolving credit facility capacity to $2.8 billion,
representing a 32.4% increase from 2014 and extended the final maturity to May 5, 2019. We ended 2015 with total debt
Portfolio metrics of our fleet as of December 31, 2015 and 2014 are as follows:
Fleet size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Managed fleet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Order book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
240
29
389
213
17
364
December 31, 2015 December 31, 2014
Weighted average fleet age(1) . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average remaining lease term(1) . . . . . . . . . . . . . .
Aggregate net book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3.6 years
7.2 years
10.8 billion $
3.5 years
7.3 years
9.0 billion
Current fleet contracted rentals . . . . . . . . . . . . . . . . . . . . . . . $
Committed fleet rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total committed rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7.5 billion
8.9 billion $
12.0 billion $
9.0 billion
20.9 billion $ 16.5 billion
(1) Weighted-average fleet age and remaining lease term calculated based on net book value.
40
41
The following table sets forth the net book value and percentage of the net book value of our flight equipment
subject to operating lease in the indicated regions as of December 31, 2015 and 2014:
As of December 31, 2015, we had contracted to buy 389 new aircraft for delivery through 2023, with an
estimated aggregate purchase price (including adjustments for inflation) of $30.7 billion, for delivery as follows:
Region
December 31, 2015
December 31, 2014
Net Book
Value
% of Total
Net Book
Value
% of Total
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding China) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central America, South America and Mexico . . . . . . . . . . . .
U.S. and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pacific, Australia, New Zealand . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,238,323
2,444,370
2,313,477
1,023,715
923,352
446,839
423,399
$ 10,813,475
(dollars in thousands)
30.0 % $ 2,953,232
22.6 % 2,348,784
1,489,739
21.4 %
498,896
778,991
412,532
471,630
100.0 % $ 8,953,804
9.5 %
8.5 %
4.1 %
3.9 %
33.0 %
26.2 %
16.7 %
5.6 %
8.7 %
4.6 %
5.2 %
100.0 %
2016 2017 2018 2019 2020 Thereafter Total
Aircraft Type
Airbus A320/321-200(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3 — — — —
Airbus A320/321neo(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
17
1
1 — — — —
Airbus A330-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
5
Airbus A330-800/900neo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
2
Airbus A350-900 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
8
2
9 — — —
17
Boeing 737-800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 737-8/9 MAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —
32
2 — — —
Boeing 777-300ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
3
Boeing 787-9/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
3
7
5 — — — —
ATR 72-600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
39
36
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
2
59
30
27
14
18
8
7
—
3
55 140
1
—
25
10
23
9
26
—
54 112
8
—
46
20
5
—
148 389
The following table sets forth the number of aircraft we leased by aircraft type as of December 31, 2015 and
2014:
(1)
(2)
All of our Airbus A320/321-200 aircraft, scheduled to deliver in 2016, will be equipped with sharklets.
Our Airbus A320/321neo aircraft orders include 30 long-range variants.
Aircraft type
Airbus A319-100 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A320-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A321-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A330-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A330-300 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 737-700 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 737-800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 767-300ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 777-200ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 777-300ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Embraer E175 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Embraer E190 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ATR 42/72-600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) All ATR aircraft were held for sale as of December 31, 2015.
December 31, 2015
December 31, 2014
Number of
Number of
Aircraft(1) % of Total
3
39
26
16
5
8
79
1
1
17
5
21
19
240
1.3 %
16.3 %
10.9 %
6.7 %
2.1 %
3.3 %
32.9 %
0.4 %
0.4 %
7.1 %
2.1 %
8.7 %
7.8 %
100.0 %
Aircraft % of Total
2.3 %
18.3 %
9.4 %
7.5 %
2.3 %
3.8 %
28.6 %
0.5 %
0.5 %
4.2 %
3.3 %
10.8 %
8.5 %
100.0 %
5
39
20
16
5
8
61
1
1
9
7
23
18
213
Our lease placements are progressing in line with expectations. As of December 31, 2015, we have entered into
contracts for the lease of new aircraft scheduled to be delivered as follows:
Delivery Year
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of Number
Aircraft
Leased
36
30
39
59
77
148
389
% Leased
94.4 %
96.7 %
61.5 %
39.0 %
18.2 %
2.0 %
34
29
24
23
14
3
127
As of December 31, 2015, the Company had a non-binding commitment to acquire up to five A350-1000
aircraft. Deliveries of these aircraft are scheduled to commence in 2023 and continue through 2024.
Aircraft Industry and Sources of Revenues
Our revenues are principally derived from operating leases with scheduled and charter airlines. In the last four
years, we derived more than 95% of our revenues from airlines domiciled outside of the U.S., and we anticipate that
most of our revenues in the future will be generated from foreign customers.
Demand for air travel has consistently grown in terms of both the passenger traffic and number of aircraft in
service. According to the International Air Transport Association (“IATA”), global passenger traffic demand has grown
6.5% in 2015 over the prior year. In 2014, global passenger traffic demand grew 5.9% compared to 2013, which was in
line with the annual growth rate over the past 30 years. The number of aircraft in service also has grown steadily and the
number of leased aircraft in the global fleet has increased. The long-term outlook for aircraft demand remains robust due
to increased passenger traffic and the need to replace aging aircraft.
The success of the commercial airline industry is linked to the strength of global economic development, which
may be negatively impacted by macroeconomic conditions, geopolitical and policy risks. While the airline industry is
cyclical, the leasing industry has remained resilient over time.
Despite industry cyclicality and economic stresses, we remain optimistic about the long-term growth prospects
for air transportation. We see a growing demand for aircraft leasing in the broader industry and a role for us in helping
airlines modernize their fleets to support the growth of the airline industry. Further, as the total number of aircraft in use
42
43
globally increases, annual deliveries of new aircraft continue to increase, and new aircraft represent a more consistent
percentage of the aircraft in use each year, we expect aircraft cycles to be less volatile.
Debt
Liquidity and Capital Resources
Overview
We finance the purchase of aircraft and our business with available cash balances, internally generated funds,
including aircraft sales and trading activity, and debt financings. From our inception in 2010, we have structured the
Company to be an investment grade company and our debt financing strategy has focused on funding our business on an
unsecured basis. Unsecured financing provides us with operational flexibility when selling or transitioning aircraft from
one airline to another. We may, to a limited extent, utilize export credit financing in support of our new aircraft
deliveries.
In 2013, we received a corporate credit rating of A- with a stable outlook from Kroll, followed by a second
investment grade corporate credit rating of BBB- with a stable outlook from S&P. Kroll recently reconfirmed our credit
rating and outlook in December 2015, while S&P reconfirmed our credit rating and revised its outlook on ALC from
stable to positive in October 2015. Our investment grade credit ratings helped us to further lower our cost of funds and
broadened our access to attractively priced capital. Our long-term debt financing strategy will be focused on continuing
to raise unsecured debt in the global bank and investment grade capital markets.
During the year ended December 31, 2015, we incurred additional debt financing and capacity aggregating $1.9
billion, which included $1.1 billion in senior unsecured notes, the addition of $680.0 million in capacity to our unsecured
revolving credit facility which now totals $2.8 billion and additional debt facilities aggregating $145.5 million. We
ended 2015 with total debt outstanding, net of discounts and issuance costs, of $7.7 billion compared to $6.6 billion in
2014. We ended 2015 with total unsecured debt outstanding of $6.9 billion compared to $5.5 billion in 2014, increasing
our unsecured debt as a percentage of total debt to 88.4% as of December 31, 2015 compared to 82.4% as of December
31, 2014. Our fixed rate debt as a percentage of total debt increased to 78.7% as of December 31, 2015 from 75.3% as of
December 31, 2014.
We increased our cash flows from operations by 9.2% or $70.8 million to $839.8 million in 2015 as compared
to $769.0 million in 2014. Our cash flows from operations increased primarily because of the lease of additional aircraft.
Our cash flows from operations and aircraft sales, trading and other activities contributed significantly to our liquidity
position. Our cash flow used in investing activities was $2.2 billion for the year ended December 31, 2015, which
resulted primarily from the purchase of aircraft partially offset by gains on the sale of aircraft. Our cash flow provided
by financing activities was $1.2 billion for the year ended December 31, 2015, which resulted primarily from the net
proceeds received from the issuance of our unsecured notes in January 2015 and August 2015.
We ended 2015 with available liquidity of $2.6 billion which is comprised of unrestricted cash of $156.7
million and undrawn balances under our warehouse facility and unsecured revolving credit facility of $2.4 billion. We
believe that we have sufficient liquidity to satisfy the operating requirements of our business through the next twelve
months.
Our financing plan for 2016 is focused on funding the purchase of aircraft and our business with available cash
balances, internally generated funds, including aircraft sales and trading activities, and debt financings. Our debt
financing plan will remain focused on continuing to raise unsecured debt in the global bank and investment grade capital
markets. In addition, we may utilize, to a limited extent, export credit financing in support of our new aircraft deliveries.
Our liquidity plans are subject to a number of risks and uncertainties, including those described in “Item 1A.
Risk Factors” of this Annual Report on Form 10-K.
Our debt financing was comprised of the following at December 31, 2015 and 2014:
Unsecured
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total unsecured debt financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Secured
Term financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehouse facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Export credit financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total secured debt financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2015 December 31, 2014
(dollars in thousands)
$
$
5,677,769
720,000
292,788
200,000
6,890,557
477,231
372,423
58,229
907,883
4,579,194
569,000
196,146
200,000
5,544,340
636,411
484,513
64,884
1,185,808
Total debt financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Debt discounts and issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt financing, net of discounts and issuance costs. . . . . . . . . . . . . . . . . .
$
7,798,440
(86,019)
7,712,421
$
6,730,148
(99,390)
6,630,758
Selected interest rates and ratios:
Composite interest rate(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Composite interest rate on fixed rate debt(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of total debt at fixed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.59 %
4.04 %
78.70 %
3.64 %
4.22 %
75.26 %
(1) This rate does not include the effect of upfront fees, undrawn fees or issuance cost amortization.
Senior unsecured notes
We issued $1.1 billion in aggregate principal amount of senior unsecured notes during 2015, comprised of
$600.0 million in aggregate principal amount of 3.75% notes due 2022 and $500.0 million in aggregate principal amount
of 2.625% notes due 2018.
As of December 31, 2015, we had $5.7 billion in aggregate principal amount of senior unsecured notes
outstanding with remaining terms ranging from 0.1 to 8.7 years and bearing interest at fixed rates ranging from 2.125%
to 7.375%. As of December 31, 2014, we had $4.6 billion in aggregate principal amount of senior unsecured notes
outstanding bearing interest at fixed rates ranging from 2.125% to 7.375%.
Registered notes. We have approximately $5.4 billion in aggregate principal amount of senior unsecured notes
that we have registered with the SEC. All of our registered notes may be redeemed in part or in full at any time and
from time to time prior to maturity at specified redemption prices. Our registered notes also require us to offer to
purchase all of the notes at a purchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid
interest if a change of control repurchase event (as defined in the applicable indenture or supplemental indenture) occurs.
Of the $5.4 billion in aggregate principal amount of registered notes, we have approximately $3.3 billion in
aggregate principal amount of registered notes that were issued during or after November 2013. Each of the indentures
governing these registered notes requires us to comply with certain covenants, including restrictions on our ability to (i)
incur liens on assets and (ii) merge, consolidate or transfer all or substantially all of our assets.
For the approximately $2.1 billion in aggregate principal amount of registered notes that were issued prior to
November 2013, each of the indentures governing those registered notes contain financial maintenance covenants
relating to our consolidated net worth, consolidated unencumbered assets and interest coverage, and other additional
covenants that, among other things, (i) limit our ability and the ability of our subsidiaries to pay dividends on or
purchase certain equity interests, prepay subordinated obligations, alter their lines of business and engage in affiliate
transactions; (ii) limit the ability of our subsidiaries to incur unsecured indebtedness; and (iii) limit our ability and the
ability of each note guarantor subsidiary, if any, to consolidate, merge or sell all or substantially all of its assets. The
44
45
covenants contained in all of the indentures governing our registered notes are subject to a number of important
exceptions and qualifications set forth in the applicable indenture, including, with respect to the indentures governing
our registered notes issued before November 2013, the suspension of the financial maintenance covenant relating to
interest coverage and the covenant that limits our payment of dividends on or purchases of certain equity interests and
prepayments of subordinated indebtedness when such registered notes are rated investment grade (as defined in the
applicable indenture). We believe that we were in compliance with all covenants contained in the indentures governing
our registered notes as of December 31, 2015.
The indentures governing our registered notes also provide for customary events of default. If any event of
default occurs, any amount then outstanding under the relevant indentures may immediately become due and payable.
These events are default are subject to a number of important exceptions and qualifications set forth in the indentures.
Unregistered notes. We have approximately $320.7 million in aggregate principal amount of senior unsecured
notes that we have not registered with the SEC and that are governed by various purchase agreements. Our unregistered
notes, like our registered notes, may be redeemed in part or in full at any time and from time to time prior to maturity at
specified redemption prices. Our unregistered notes also require us to offer to purchase all of the notes at a purchase
price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest if a change of control (as
defined in the applicable purchase agreement) occurs.
The purchase agreements governing our unregistered notes contain financial maintenance covenants relating to
our consolidated net worth, consolidated unencumbered assets, interest coverage and consolidated leverage ratio. In
addition, the purchase agreements contain covenants that, among other things, (i) limit our ability and the ability of our
subsidiaries to pay dividends on or purchase certain equity interests, prepay subordinated obligations, alter their lines of
business and engage in affiliate transactions; (ii) limit the ability of our subsidiaries to incur unsecured indebtedness; and
(iii) limit our ability and the ability of each note guarantor subsidiary, if any, to consolidate, merge or sell all or
substantially all of its assets. These covenants are subject to a number of important exceptions and qualifications set
forth in the applicable purchase agreement, including, with respect to the purchase agreement governing certain tranches
of unregistered notes, the suspension of the financial maintenance covenant relating to interest coverage and the
covenant that limits our ability to pay dividends on or purchase certain equity interests and prepay subordinated
indebtedness when the unregistered notes governed by such purchase agreement are rated investment grade (as defined
in the applicable purchase agreement). We believe that we were in compliance with all covenants contained in the
purchase agreements governing our unregistered notes as of December 31, 2015.
The purchase agreements also provide for customary events of default. If any event of default occurs, any
amount then outstanding under the relevant purchase agreement may immediately become due and payable. These
events are default are subject to a number of important exceptions and qualifications set forth in the purchase
agreements.
Unsecured revolving credit facility
We have a senior unsecured revolving credit facility governed by a second amended and restated credit
agreement, dated May 5, 2014, with JP Morgan Chase Bank, N.A., as administrative agent, and the lenders from time to
time party thereto. The unsecured revolving credit facility currently provides us with financing capacity of up to $2.8
billion subject to the terms and conditions set forth therein. Lenders hold revolving commitments totaling $2.6 billion
that mature on May 5, 2019, and lenders hold revolving commitments totaling $175.0 million that mature on May 5,
2018. The unsecured revolving credit facility contains an uncommitted accordion feature under which its aggregate
principal amount can be increased to $3.0 billion under certain circumstances.
Borrowings under the unsecured revolving credit facility will generally (and as of December 31, 2015 did) bear
interest at either (a) LIBOR plus a margin of 1.25% per year or (b) an alternative base rate plus a margin of 0.25% per
year, subject to reductions based on improvements in the credit ratings for our debt or increases based on declines in the
credit ratings for our debt. We are required to pay a facility fee of 25 basis points per year (also subject to reductions
based on improvements in the credit ratings for our debt or increases based on declines in the credit ratings for our debt)
in respect of total commitments under the unsecured revolving credit facility. Borrowings under the unsecured revolving
credit facility are used to finance our working capital needs in the ordinary course of business and for other general
corporate purposes.
The total amount outstanding under our unsecured revolving credit facility was $720.0 million and $569.0
million as of December 31, 2015 and December 31, 2014, respectively.
The unsecured revolving credit facility provides for certain covenants, including covenants that limit our
subsidiaries’ ability to incur, create or assume certain unsecured indebtedness, and our subsidiaries’ ability to declare or
make certain dividends and distributions and to engage in certain mergers, consolidations and asset sales. The unsecured
revolving credit facility also requires us to comply with certain financial maintenance covenants (measured at the end of
each fiscal quarter) including a maximum consolidated leverage ratio, minimum consolidated shareholders’ equity and
minimum consolidated unencumbered assets, as well as an interest coverage test that will be suspended when the
unsecured revolving credit facility or certain of our other indebtedness is rated investment grade (as defined in the
unsecured revolving credit facility). We believe we were in compliance with all covenants contained in our unsecured
revolving credit facility as of December 31, 2015. In addition, the unsecured revolving credit facility contains customary
events of default. In the case of an event of default, the lenders may terminate the commitments under the unsecured
revolving credit facility and require immediate repayment of all outstanding borrowings and the cash collateralization of
all outstanding letters of credit. Such termination and acceleration will occur automatically in the event of certain
bankruptcy events. These provisions are subject to a number of important exceptions and qualifications set forth in the
credit agreement governing the unsecured revolving credit facility.
Unsecured term financings
From time to time, we enter into unsecured term facilities. During 2015, we entered into six additional
unsecured term facilities aggregating $145.5 million with terms ranging from one to five years and with five facilities
bearing interest at a fixed rate of 3.00% per annum and one facility bearing interest at a floating rate of LIBOR plus
1.00%. The outstanding balance on our unsecured term facilities as of December 31, 2015 was $292.8 million with
interest rates ranging from 2.85% to 4.05% and LIBOR plus 1.00% to LIBOR plus 1.25%. As of December 31, 2015, the
remaining maturities of all unsecured term facilities ranged from approximately 0.2 years to approximately 4.9 years.
As of December 31, 2014, the outstanding balance on our unsecured term facilities was $196.1 million.
Convertible senior notes
In November 2011, we issued $200.0 million in aggregate principal amount of 3.875% convertible senior notes
due 2018 in an offering exempt from registration under the Securities Act. The convertible notes are senior unsecured
obligations of the Company and bear interest at a rate of 3.875% per annum, payable in arrears on June 1 and December
1 of each year. The convertible notes are convertible at the option of the holder into shares of our Class A common stock
at a price of $29.86 per share.
Secured term financings
We fund some aircraft purchases through secured term financings. Our various consolidated entities will
borrow through secured bank facilities to purchase an aircraft. The aircraft are then leased by our entities to airlines. We
may guarantee the obligations of the entities under the loan agreements. The loans may be secured by a pledge of the
shares of the entities, the aircraft, the lease receivables, security deposits, maintenance reserves or a combination thereof.
Included in our secured term financings is a prior warehouse facility that we refinanced into a secured term loan in
March 2014.
The secured term facilities contain customary covenants for financings of these types, including covenants that
limit the borrowers’ actions to those of special purpose entities engaged in the ownership and leasing of a particular
aircraft and restrict their ability to incur, create or assume certain indebtedness, to incur or assume certain liens, to
purchase, hold or acquire certain investments, to declare or make certain dividends and distributions and to engage in
certain mergers, consolidations and asset sales. The secured term facilities also contain limitations on the Company’s
ability to transfer the equity interests of such subsidiaries or to incur, create or assume liens on such equity interests or
the collateral securing such secured term facilities. Certain of the facilities require us to comply with certain financial
maintenance covenants. In addition, the secured term facilities contain customary events of default for such financings.
46
47
In the case of an event of default, the lenders may require immediate repayment of all outstanding loans. Such
termination and acceleration will occur automatically in the event of certain bankruptcy events. These provisions are
subject to a number of important exceptions and qualifications set forth in the loan agreements governing the secured
term facilities. We believe we were in compliance with the covenants contained in our secured term facilities as of
December 31, 2015.
As of December 31, 2015, the outstanding balance on our secured term facilities was $477.2 million and we had
pledged 15 aircraft as collateral with a net book value of $933.4 million. The outstanding balance under our secured term
facilities as of December 31, 2015 was comprised of $75.1 million fixed rate debt and $402.1 million floating rate debt,
with interest rates ranging from 4.28% to 5.36% and LIBOR plus 1.15% to LIBOR plus 2.99%, respectively. As of
December 31, 2015, the remaining maturities of all secured term facilities ranged from approximately 0.1 years to
approximately 7.5 years.
As of December 31, 2014, the outstanding balance on our secured term facilities was $636.4 million and we had
pledged 18 aircraft as collateral with a net book value of $1.1 billion. The outstanding balance under our secured term
facilities as of December 31, 2014 was comprised of $104.7 million fixed rate debt and $531.7 million floating rate debt,
with interest rates ranging from 4.28% to 5.36% and LIBOR plus 1.5% to LIBOR plus 3.0%, respectively.
Warehouse facility
We have a $750.0 million secured warehouse facility governed by an amended and restated warehouse loan
agreement dated as of June 21, 2013 (as amended, the “Warehouse Facility”) by and among one of our wholly owned
subsidiaries (the “Warehouse Borrower”) and Credit Suisse AG, New York Branch, as agent, and the lenders party
thereto. The Warehouse Facility contains an uncommitted accordion feature under which its aggregate principal amount
can be increased to $2.0 billion under certain circumstances. Drawn balances under the Warehouse Facility bear interest
at LIBOR plus 2.00%. Undrawn balances bear interest at a rate of 0.50%. The Warehouse Borrower is able to draw on
the Warehouse Facility during an availability period through June 2016 and the Warehouse Facility matures in June
2020. Borrowings under the Warehouse Facility are generally used by the Warehouse Borrower and certain of its
subsidiaries to finance directly or indirectly the purchase of aircraft, leases related thereto and improvements thereof.
The Company provides a limited guaranty of the obligations of Warehouse Borrower and its subsidiaries under
the Warehouse Facility. The obligations under the Warehouse Facility are secured by a pledge of the Warehouse
Borrower’s equity interests by the Company, by certain cash collateral and by substantially all of the personal property,
including aircrafts, of Warehouse Borrower and certain subsidiaries of Warehouse Borrower, subject to certain
exceptions.
The Warehouse Facility contains customary covenants, including covenants that limit the Warehouse
Borrower’s and its subsidiaries’ ability to incur, create or assume certain indebtedness, to incur or assume certain liens,
to purchase, hold or acquire certain investments, to declare or make certain dividends and distributions and to engage in
certain mergers, consolidations and asset sales. The Warehouse Facility also contains limitations on the Company’s
ability to guarantee the obligations of the Warehouse Borrower and its subsidiaries. In addition, the Warehouse Facility
contains customary events of default. In the case of an event of default, the lenders may terminate the availability period
under the Warehouse Facility and require immediate repayment of all outstanding loans. Such termination and
acceleration will occur automatically in the event of certain bankruptcy events. These provisions are subject to a number
of important exceptions and qualifications set forth in the loan agreement governing the Warehouse Facility. We believe
the Warehouse Borrower was in compliance with the covenants contained in the Warehouse Facility as of December 31,
2015.
As of December 31, 2015, the Warehouse Borrower had borrowed $372.4 million under the Warehouse Facility
and pledged 14 aircraft as collateral with a net book value of $577.6 million. As of December 31, 2014, the Warehouse
Borrower had borrowed $484.5 million under the Warehouse Facility and pledged 18 aircraft as collateral with a net
book value of $729.5 million.
Export credit financings
In March 2013, we issued $76.5 million in secured notes due 2024 guaranteed by the Export-Import Bank of
the United States. The notes mature on August 15, 2024 and bear interest at a rate of 1.617% per annum. We used the
proceeds of the offering to refinance a portion of the purchase price of two Boeing aircraft, which serve as collateral for
the notes, and the related premium charged by Export-Import Bank for its guarantee of the notes. As of December 31,
2015, we had $58.2 million in export credit financing outstanding.
Credit Ratings
The following table summarizes our current credit ratings:
Long-term Corporate
Rating Agency
Standard and Poor's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . BBB(cid:237) BBB(cid:237) Positive Outlook October 26, 2015
Stable Outlook December 7, 2015
Kroll Bond Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A(cid:237)
Rating
Outlook
A(cid:237)
Debt
Date of Last
Ratings Action
While a ratings downgrade would not result in a default under any of our debt agreements, it could adversely
affect our ability to issue debt and obtain new financings, or renew existing financings, and it would increase the cost of
our financings.
Results of Operations
Revenues
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
(in thousands, except per share amounts)
Year Ended
Rental of flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Aircraft sales, trading and other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,174,544 $
48,296
1,222,840
991,241 $
59,252
1,050,493
836,516
22,159
858,675
Expenses
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discounts and issuance costs . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
235,637
30,507
266,144
397,760
72,000
76,961
17,022
829,887
392,953
(139,562)
253,391 $
192,818
27,772
220,590
336,657
—
82,422
16,048
655,717
394,776
(138,778)
255,998 $
168,743
23,627
192,370
280,037
—
71,212
21,614
565,233
293,442
(103,031)
190,411
Other financial data
Adjusted net income(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Adjusted diluted earnings per share(1) . . . . . . . . . . . . . . . . . . . . . . . $
507,982 $
4.64 $
438,596 $
4.03 $
338,683
3.16
(1) Adjusted net income (defined as net income excluding the effects of certain non-cash items, one-time or non-
recurring items, such as settlement expense, net of recoveries, that are not expected to continue in the future and
certain other items), and adjusted diluted earnings per share (defined as net income excluding the effects of certain
non-cash items, one-time or non-recurring items, such as settlement expense, net of recoveries, that are not expected
to continue in the future and certain other items divided by the weighted average diluted common shares
outstanding) are measures of operating performance that are not defined by GAAP and should not be considered as
an alternative to net income, earnings per share, and diluted earnings per share, or any other performance measures
48
49
derived in accordance with GAAP. Adjusted net income and adjusted diluted earnings per share, are presented as
supplemental disclosure because management believes they provide useful information on our earnings from
ongoing operations.
2015 Compared to 2014
Rental revenue
Management and our board of directors use adjusted net income and adjusted diluted earnings per share to assess
our consolidated financial and operating performance. Management believes these measures are helpful in
evaluating the operating performance of our ongoing operations and identifying trends in our performance, because
they remove the effects of certain non-cash items, one-time or non-recurring items that are not expected to continue
in the future and certain other items from our operating results. Adjusted net income and adjusted diluted earnings
per share, however, should not be considered in isolation or as a substitute for analysis of our operating results or
cash flows as reported under GAAP. Adjusted net income and adjusted diluted earnings per share do not reflect our
cash expenditures or changes in or cash requirements for our working capital needs. In addition, our calculation of
adjusted net income and adjusted diluted earnings per share may differ from the adjusted net income and adjusted
diluted earnings per share or analogous calculations of other companies in our industry, limiting their usefulness as a
comparative measure.
The following tables show the reconciliation of net income to adjusted net income (in thousands):
Year Ended
December 31,
2014
2013
2015
Reconciliation of net income to adjusted net income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 253,391 $ 255,998 $ 190,411
23,627
Amortization of debt discounts and issuance costs . . . . . . . . . . . . . . . . . . . . .
21,614
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance recovery on settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
103,031
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 507,982 $ 438,596 $ 338,683
27,772
16,048
—
—
138,778
30,507
17,022
72,000
(4,500)
139,562
(unaudited)
The following table shows the reconciliation of net income to adjusted diluted earnings per share (in thousands,
except share and per share amounts):
Reconciliation of net income to adjusted diluted earnings per
share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of debt discounts and issuance costs . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance recovery on settlement . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Assumed conversion of convertible senior notes . . . . . . . . . . . . . .
Adjusted net income plus assumed conversions . . . . . . . . . . . . . . . $
Weighted-average diluted shares outstanding . . . . . . . . . . . . . . . . .
2015
253,391 $
30,507
17,022
72,000
(4,500)
139,562
507,982 $
5,806
513,788 $
Year Ended
December 31,
2014
(unaudited)
2013
255,998 $
27,772
16,048
—
—
138,778
438,596 $
5,811
444,407 $
190,411
23,627
21,614
—
—
103,031
338,683
5,783
344,466
108,963,550
3.16
Adjusted diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . $
4.64 $
4.03 $
110,628,865
110,192,771
As of December 31, 2015, we owned 240 aircraft at a total cost of $12.0 billion and recorded $1.2 billion in
rental revenue for the year then ended, which included overhaul revenue of $34.0 million. In the prior year, as of
December 31, 2014, we owned 213 aircraft at a total cost of $9.8 billion and recorded $991.2 million in rental revenue
for the year ended December 31, 2014, which included overhaul revenue of $25.2 million. The increase in rental revenue
was primarily due to the delivery of 51 additional aircraft, all of which were leased at the time of delivery, partially
offset by the sale of 24 aircraft from our operating lease portfolio. Due to the timing of aircraft deliveries and sales, the
full impact on rental revenue will be reflected in subsequent periods.
All of the aircraft in our fleet were leased as of December 31, 2015 and 2014.
Aircraft sales, trading and other revenue
Aircraft sales, trading and other revenue totaled $48.3 million for the year ended December 31, 2015 compared
to $59.3 million for the year ended December 31, 2014. During the year ended December 31, 2015, we sold 24 aircraft
from our operating lease portfolio recording gains on aircraft sales and trading activity of $33.9 million. In addition, we
received insurance proceeds of $4.5 million in connection with the litigation settlement discussed in Note 14 in the Notes
to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. During the year
ended December 31, 2014, we sold 16 aircraft from our operating lease portfolio and a corporate aircraft, received
insurance proceeds in excess of the book value relating to the insured loss of an aircraft in 2013 and traded six Boeing
737-300 aircraft recording gains on aircraft sales and trading activity of $55.8 million.
Interest expense
Interest expense totaled $266.1 million for the year ended December 31, 2015 compared to $220.6 million for
the year ended December 31, 2014. The change was primarily due to an increase in our average outstanding debt
balances, resulting in a $42.8 million increase in interest and a $2.7 million increase in amortization of our discounts and
deferred debt issue costs. We expect that our interest expense will increase as our average debt balance outstanding
continues to increase. Interest expense will also be impacted by changes in our composite cost of funds.
Depreciation expense
We recorded $397.8 million in depreciation expense of flight equipment for the year ended December 31, 2015
compared to $336.7 million for the year ended December 31, 2014. The increase in depreciation expense for 2015,
compared to 2014, was primarily attributable to the increase in fleet net of sales. The full impact on depreciation expense
for aircraft added during the year will be reflected in subsequent periods.
Selling, general and administrative expenses
We recorded selling, general and administrative expenses of $77.0 million for the year ended December 31,
2015 compared to $82.4 million for the year ended December 31, 2014. Selling, general and administrative expense as a
percentage of total revenue decreased to 6.3% for the year ended December 31, 2015 compared to 7.8% for the year
ended December 31, 2014. As we continue to add new aircraft to our portfolio, we expect over the long-term, selling,
general and administrative expense to decrease as a percentage of our revenue.
Stock-based compensation expense
Stock-based compensation expense totaled $17.0 million for the year ended December 31, 2015 compared to
$16.0 million for the year ended December 31, 2014. See Note 11 in the Notes to Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on stock-based compensation.
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Settlement expense
Interest expense
We recorded settlement expense of $72.0 million for the year ended December 31, 2015 as a result of the
Settlement Agreement entered into by and between the Company, certain executive officers and employees of the
Company, AIG, ILFC, and AerCap Holdings N.V., to settle all ongoing litigation as set forth in Note 14 in the Notes to
Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Taxes
Interest expense totaled $220.6 million for the year ended December 31, 2014 compared to $192.4 million for
the year ended December 31, 2013. The change was primarily due to an increase in our average outstanding debt
balances and our composite cost of funds, resulting in a $24.1 million increase in interest and a $4.1 million increase in
amortization of our discounts and deferred debt issue costs. We expect that our interest expense will increase as our
average debt balance outstanding continues to increase. Interest expense will also be impacted by changes in our
composite cost of funds.
The effective tax rate for the year ended December 31, 2015 was 35.5% compared to 35.2% for the year ended
Depreciation expense
December 31, 2014. The change in effective tax rate for the respective periods is due to the effect of changes in
permanent differences.
Net income
For the year ended December 31, 2015, we reported consolidated net income of $253.4 million, or $2.34 per
diluted share, compared to a consolidated net income of $256.0 million, or $2.38 per diluted share, for the year ended
December 31, 2014. The decrease in net income for 2015, compared to 2014, was primarily attributable to the settlement
expense recorded in 2015.
Adjusted net income
For the year ended December 31, 2015, we recorded adjusted net income of $508.0 million, or $4.64 per diluted
share, compared to an adjusted net income of $438.6 million, or $4.03 per diluted share, for the year ended December
31, 2014. The increase in adjusted net income for 2015, compared to 2014, was primarily attributable to the acquisition
and lease of additional aircraft.
Adjusted net income is a measure of financial and operational performance that is not defined by GAAP. See
Note 2 in “Item 6. Selected Financial Data” of this Annual Report on Form 10-K for a discussion of adjusted net income
as a non-GAAP measure and a reconciliation of this measure to net income.
2014 Compared to 2013
Rental revenue
As of December 31, 2014, we owned 213 aircraft at a total cost of $9.8 billion and recorded $991.2 million in
rental revenue for the year then ended, which included overhaul revenue of $25.2 million. In the prior year, as of
December 31, 2013, we owned 193 aircraft at a total cost of $8.2 billion and recorded $836.5 million in rental revenue
for the year ended December 31, 2013, which included overhaul revenue of $34.4 million. The increase in rental revenue
was primarily due to the delivery of 36 additional aircraft, all of which were leased at the time of delivery, partially
offset by the sale of 16 aircraft from our operating lease portfolio. Due to the timing of aircraft deliveries and sales, the
impact on rental revenue will be reflected in subsequent periods.
All of the aircraft in our fleet were leased as of December 31, 2014 and 2013.
Aircraft sales, trading and other revenue
Aircraft sales, trading and other revenue totaled $59.3 million for the year ended December 31, 2014 compared
to $22.2 million for the year ended December 31, 2013. During the year ended December 31, 2014, we sold 16 aircraft
from our operating lease portfolio and a corporate aircraft, received insurance proceeds in excess of the book value
relating to the loss of an aircraft in 2013 and traded six Boeing 737-300 aircraft, recording gains on aircraft sales and
trading activity of $55.8 million. During the year ended December 31, 2013, we sold one aircraft from our operating
lease portfolio and traded 11 737-300 aircraft, two spare engines and a corporate aircraft recording gains on aircraft sales
and trading activity of $18.9 million.
We recorded $336.7 million in depreciation expense of flight equipment for the year ended December 31, 2014
compared to $280.0 million for the year ended December 31, 2013. The increase in depreciation expense for 2014,
compared to 2013, was primarily attributable to the acquisition of 36 additional aircraft aggregating $2.2 billion. The full
impact on depreciation expense for aircraft added during the year will be reflected in subsequent periods.
Selling, general and administrative expenses
We recorded selling, general and administrative expenses of $82.4 million for the year ended December 31,
2014 compared to $71.2 million for the year ended December 31, 2013. Selling, general and administrative expense as a
percentage of total revenue decreased to 7.8% for the year ended December 31, 2014 compared to 8.3% for the year
ended December 31, 2013.
Stock-based compensation expense
Stock-based compensation expense totaled $16.0 million for the year ended December 31, 2014 compared to
$21.6 million for the year ended December 31, 2013. This decrease is primarily a result of the effects of the expense
recognition pattern related to our book-value RSUs, which is calculated based on a tranche by tranche vesting schedule.
Additionally, as of June 30, 2013, all of our outstanding employee stock options had fully vested, further contributing to
the decrease in stock-based compensation expense. See Note 11 in the Notes to Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on stock-based compensation.
Taxes
The effective tax rate for the years ended December 31, 2014 and 2013 was 35.2%.
Net income
For the year ended December 31, 2014, we reported consolidated net income of $256.0 million, or $2.38 per
diluted share, compared to a consolidated net income of $190.4 million, or $1.80 per diluted share, for the year ended
December 31, 2013. The increase in net income for 2014, compared to 2013, was primarily attributable to the acquisition
and lease of additional aircraft and an increase in aircraft sales, trading and other revenue.
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Contractual Obligations
Our contractual obligations as of December 31, 2015 are as follows:
2016
2017
2018
2019
2020
Thereafter
Total
(dollars in thousands)
Long-term debt
obligations . . . . . $
954,392 $
1,387,030 $
1,511,350 $
1,793,546 $
459,193 $
1,692,929 $
7,798,440
Interest payments on
debt outstanding(1)
274,798
217,316
172,453
114,745
75,540
134,671
989,523
Purchase
commitments . . .
Operating leases . .
2,595,741
2,557
2,412,281
2,619
3,497,475
2,926
4,642,136
3,232
6,139,015
3,111
11,431,283
9,750
30,717,931
24,195
Total . . . . . . . . $
3,827,488 $
4,019,246 $
5,184,204 $
6,553,659 $
6,676,859 $
13,268,633
$
39,530,089
(1)
Future interest payments on floating rate debt are estimated using floating rates in effect at December 31, 2015.
Off-balance Sheet Arrangements
We have not established any unconsolidated entities for the purpose of facilitating off-balance sheet
arrangements or for other contractually narrow or limited purposes. We have, however, from time to time established
subsidiaries and created partnership arrangements or trusts for the purpose of leasing aircraft or facilitating borrowing
arrangements all of which are consolidated. We have a 9.5% non-controlling interest in a joint venture that we do not
control and are not the primary beneficiary of but have significant influence over, therefore we account for our
investment in the joint venture under the equity method of accounting.
Critical Accounting Policies
We believe the following critical accounting policies can have a significant impact on our results of operations,
financial position and financial statement disclosures, and may require subjective and complex estimates and judgments.
Lease revenue
We lease flight equipment principally under operating leases and report rental income ratably over the life of
each lease. Rentals received, but unearned, under the lease agreements are recorded in “Rentals received in advance” on
our Consolidated Balance Sheet until earned. The difference between the rental income recorded and the cash received
under the provisions of the lease is included in “Lease receivables,” as a component of “Other assets” on our
Consolidated Balance Sheet. An allowance for doubtful accounts will be recognized for past-due rentals based on
management’s assessment of collectability. Our management team monitors all lessees with past due lease payments (if
any) and discusses relevant operational and financial issues facing those lessees with our marketing executives in order
to determine an appropriate allowance for doubtful accounts. In addition, if collection is not reasonably assured, we will
not recognize rental income for amounts due under our lease contracts and will recognize revenue for such lessees on a
cash basis. Should a lessee’s credit quality deteriorate, we may be required to record an allowance for doubtful accounts
and/or stop recognizing revenue until cash is received, both of which could have a material impact on our results of
operations and financial condition.
Our aircraft lease agreements typically contain provisions which require the lessee to make additional
contingent rental payments based on either the usage of the aircraft, measured on the basis of hours or cycles flown per
month (a cycle is one take-off and landing), or calendar-based time (“Maintenance Reserves”). These payments
represent contributions to the cost of major future maintenance events (“Qualifying Events”) associated with the aircraft
and typically cover major airframe structural checks, engine overhauls, the replacement of life limited parts contained in
each engine, landing gear overhauls and overhauls of the auxiliary power unit. These Maintenance Reserves are
generally collected monthly based on reports of usage by the lessee or collected as fixed monthly rates.
In accordance with our lease agreements, Maintenance Reserves are subject to reimbursement to the lessee
upon the occurrence of a Qualifying Event. The reimbursable amount is capped by the amount of Maintenance Reserves
payments received by the Company, net of previous reimbursements. The Company is only required to reimburse for
Qualifying Events during the lease term. The Company is not required to reimburse for routine maintenance or
additional maintenance costs incurred during a Qualifying Event. All amounts of Maintenance Reserves unclaimed by
the lessee at the end of the lease term are retained by the Company.
We record as rental revenue the portion of Maintenance Reserves that we are virtually certain we will not
reimburse to the lessee as a component of “Rental of flight equipment” in our Consolidated Statement of Income.
Maintenance Reserves which we may be required to reimburse to the lessee are reflected in our overhaul reserve
liability, as a component of “Security deposits and maintenance reserves on flight equipment leases” in our Consolidated
Balance Sheet.
Estimating when we are virtually certain that Maintenance Reserves payments will not be reimbursed requires
judgments to be made as to the timing and cost of future maintenance events. In order to determine virtual certainty with
respect to this contingency, our Technical Asset Management department analyzes the terms of the lease, utilizes
available cost estimates published by the equipment manufacturers, and thoroughly evaluates an airline’s Maintenance
Planning Document (“MPD”). The MPD describes the required inspections and the frequency of those inspections. Our
Technical Asset Management department utilizes this information, combined with their cumulative industry experience,
to determine when major Qualifying Events are expected to occur for each relevant component of the aircraft, and
translates this information into a determination of how much we will ultimately be required to reimburse to the lessee.
We record Maintenance Reserves revenue as the aircraft is operated when we determine that a Qualifying Event will
occur outside the non-cancellable lease term or after we have collected Maintenance Reserves equal to the amount that
we expect to reimburse to the lessee as the aircraft is operated.
Should such estimates be inaccurate, we may be required to reverse revenue previously recognized. In addition,
if we can no longer make accurate estimates with respect to a particular lease, we will stop recognizing any Maintenance
Reserves revenue until the end of such lease.
All of our lease agreements are triple net leases whereby the lessee is responsible for all taxes, insurance, and
aircraft maintenance. In the future, we may incur repair and maintenance expenses for off-lease aircraft. We recognize
repair and maintenance in our Consolidated Statements of Income for all such expenditures.
Lessee-specific modifications such as those related to modifications of the aircraft cabin are expected to be
capitalized as initial direct costs and amortized over the term of the lease into rental revenue in our Consolidated
Statements of Income.
Flight equipment
Flight equipment under operating lease is stated at cost less accumulated depreciation. Purchases, major
additions and modifications, and interest on deposits during the construction phase are capitalized. We generally
depreciate passenger aircraft on a straight-line basis over a 25-year life from the date of manufacture to a 15% residual
value. Changes in the assumption of useful lives or residual values for aircraft could have a significant impact on our
results of operations and financial condition. At the time flight equipment is retired or sold, the cost and accumulated
depreciation are removed from the related accounts and the difference, net of proceeds, is recorded as a gain or loss.
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55
Our management team evaluates on a quarterly basis the need to perform an impairment test whenever facts or
circumstances indicate a potential impairment has occurred. An assessment is performed whenever events or changes in
circumstances indicate that the carrying amount of an aircraft may not be recoverable. Recoverability of an aircraft’s
carrying amount is measured by comparing the carrying amount of the aircraft to future undiscounted net cash flows
expected to be generated by the aircraft. The undiscounted cash flows consist of cash flows from currently contracted
leases, future projected lease rates and estimated residual or scrap values for each aircraft. We develop assumptions used
in the recoverability analysis based on our knowledge of active lease contracts, current and future expectations of the
global demand for a particular aircraft type, and historical experience in the aircraft leasing market and aviation industry,
as well as information received from third-party industry sources. The factors considered in estimating the undiscounted
cash flows are affected by changes in future periods due to changes in contracted lease rates, economic conditions,
technology and airline demand for a particular aircraft type. In the event that an aircraft does not meet the recoverability
test, the aircraft will be recorded at fair value in accordance with our Fair Value Policy, resulting in an impairment
charge. Deterioration of future lease rates and the residual values of our aircraft could result in impairment charges
which could have a significant impact on our results of operations and financial condition. To date, we have not recorded
any impairment charges.
We record flight equipment at fair value if we determine the carrying value may not be recoverable. We
principally use the income approach to measure the fair value of aircraft. The income approach is based on the present
value of cash flows from contractual lease agreements and projected future lease payments, including contingent rentals,
net of expenses, which extend to the end of the aircraft’s economic life in its highest and best use configuration, as well
as a disposition value based on expectations of market participants. These valuations are considered Level 3 valuations,
as the valuations contain significant non-observable inputs.
Stock-based compensation
To compensate and incentivize our employees and directors, we grant stock-based compensation awards. To
date, we have granted stock options (“Stock Options”) and restricted stock units (“RSUs”). All share-based payment
awards granted have been equity classified awards. We account for Stock Options by estimating the grant date fair value
of the award as calculated by the Black-Scholes-Merton (“BSM”) option pricing model and amortizing that value on a
straight-line basis over the requisite service period less any anticipated forfeitures. The fair value of book-value and time
based RSUs are determined based on the closing market price of the Company’s Class A common stock on the date of
grant, while the fair value of Total Shareholder Return (“TSR”) RSUs is determined at the grant date using a Monte
Carlo simulation model. Included in the Monte Carlo simulation model are certain assumptions regarding a number of
highly complex and subjective variables, such as expected volatility, risk-free interest rate and expected dividends. To
appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the
vesting date and the historical volatilities are estimated based on a historical timeframe equal to the time from the
valuation date until the end date of the performance period. Due to our limited stock history since the completion of our
initial public offering on April 25, 2011, historical volatility was estimated based on all available information including
peer group volatility.
The estimation of the fair value of share-based awards requires considerable judgment. For future awards, we
will be required to continue to make such judgments, and while we intend to continue to use the approach discussed
above to make key estimates, there can be no assurance that changes in such estimates will not have a significant impact
to our results of operations in the future.
Income taxes
We use the asset and liability method of accounting for income taxes. Under the asset and liability method,
deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory
tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of
existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in the
period that includes the enactment date. We record a valuation allowance for deferred tax assets when the probability of
realization of the full value of the asset is less than 50%. Based on the timing of reversal of deferred tax liabilities, future
anticipated taxable income based on lease and debt arrangements in place at the balance sheet date and tax planning
strategies available to us, our management considers the deferred tax asset recoverable. Should events occur in the future
that make the likelihood of recovery of deferred tax assets less than 50%, a deferred tax valuation allowance will be
required that could have a significant impact on our results of operations and financial condition.
We recognize the impact of a tax position, if that position has a probability of greater than 50% that it would be
sustained on audit, based on the technical merits of the position. Recognized income tax positions are measured at the
largest amount that has a probability of more than 50% of being realized. Changes in recognition or measurement are
reflected in the period in which the change in judgment occurs. As our business develops, we may take tax positions that
have a probability of less than 50% of being sustained on audit which will require us to reserve for such positions. If
these tax positions are audited by a taxing authority, there can be no assurance that the ultimate resolution of such tax
positions will not result in further losses. Such losses could have a significant impact on our results of operations and
financial condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest
rates and foreign exchange rates. Changes in these factors could cause fluctuations in our results of operations and cash
flows. We are exposed to the market risks described below.
Interest Rate Risk
The nature of our business exposes us to market risk arising from changes in interest rates. Changes, both
increases and decreases, in our cost of borrowing, as reflected in our composite interest rate, directly impact our net
income. Our lease rental stream is generally fixed over the life of our leases, whereas we have used floating-rate debt to
finance a significant portion of our aircraft acquisitions. As of December 31, 2015 and 2014, we had $1.7 billion in
floating-rate debt. If interest rates increase, we would be obligated to make higher interest payments to our lenders. If we
incur significant fixed-rate debt in the future, increased interest rates prevailing in the market at the time of the
incurrence of such debt would also increase our interest expense. If our composite rate were to increase by 1.0%, we
would expect to incur additional interest expense on our existing indebtedness as of December 31, 2015 and December
31, 2014 of approximately $16.6 million and $16.7 million, each on an annualized basis, which would put downward
pressure on our operating margins. The decrease in additional interest expense the Company would incur is primarily
due to a decrease in the floating-rate debt outstanding as of December 31, 2015 compared to December 31, 2014.
We also have interest rate risk on our forward lease placements. This is caused by us setting a fixed lease rate in
advance of the delivery date of an aircraft. The delivery date is when a majority of the financing for an aircraft is
arranged. We partially mitigate the risk of an increasing interest rate environment between the lease signing date and the
delivery date of the aircraft, by having interest rate adjusters in a majority of our forward lease contracts which would
adjust the final lease rate upward if certain benchmark interest rates are higher at the time of delivery of the aircraft than
at the lease signing date.
Foreign Exchange Rate Risk
The Company attempts to minimize currency and exchange risks by entering into aircraft purchase agreements
and a majority of lease agreements and debt agreements with U.S. dollars as the designated payment currency. Thus,
most of our revenue and expenses are denominated in U.S. dollars. As of December 31, 2015 and 2014, 0.8% of our
lease revenues were denominated in Euros. As our principal currency is the U.S. dollar, fluctuations in the U.S. dollar as
compared to other major currencies should not have a significant impact on our future operating results.
56
57
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Air Lease Corporation
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Contents
The Board of Directors and Shareholders
Air Lease Corporation:
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements
Page
60
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
62
63
64
65
We have audited the accompanying consolidated balance sheets of Air Lease Corporation and subsidiaries as of
December 31, 2015 and 2014, and the related consolidated statements of income, shareholders’ equity and cash flows for
each of the years in the three-year period ended December 31, 2015. These consolidated financial statements are the
responsibility of Air Lease Corporation and subsidiaries’ management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Air Lease Corporation and subsidiaries as of December 31, 2015 and 2014, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Air Lease Corporation and subsidiaries’ internal control over financial reporting as of December 31,
2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2016 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Los Angeles, California
February 25, 2016
58
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Air Lease Corporation:
We have audited Air Lease Corporation and subsidiaries’ internal control over financial reporting as of
December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Air Lease Corporation and subsidiaries’
management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining
an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, Air Lease Corporation and subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Air Lease Corporation and subsidiaries as of December 31, 2015 and
2014, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the
three-year period ended December 31, 2015, and our report dated February 25, 2016 expressed an unqualified opinion
on those consolidated financial statements.
/s/ KPMG LLP
Los Angeles, California
February 25, 2016
Air Lease Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 2015 December 31, 2014
(in thousands, except share data)
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Flight equipment subject to operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Deposits on flight equipment purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
156,675 $
16,528
12,026,798
(1,213,323)
10,813,475
1,071,035
297,385
282,819
7,469
9,832,421
(878,617)
8,953,804
1,144,603
302,485
10,691,180
$ 12,355,098 $
Liabilities and Shareholders’ Equity
Accrued interest and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt financing, net of discounts and issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Security deposits and maintenance reserves on flight equipment leases . . . . . . . . . .
Rentals received in advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Shareholders’ Equity
Preferred Stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class A common stock, $0.01 par value; authorized 500,000,000 shares; issued
and outstanding 102,582,669 and 102,392,208 shares at December 31, 2015 and
December 31, 2014, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class B Non-Voting common stock, $0.01 par value; authorized 10,000,000
215,983 $
7,712,421
853,330
91,485
461,967
9,335,186 $
190,952
6,630,758
698,172
75,877
323,359
7,919,118
—
—
1,010
1,010
shares; no shares issued or outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2,227,376
791,526
$
3,019,912 $
$ 12,355,098 $
—
2,215,479
555,573
2,772,062
10,691,180
(See Notes to Consolidated Financial Statements)
60
61
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
(in thousands, except share data)
Year Ended
Rental of flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Aircraft sales, trading and other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,174,544 $
48,296
1,222,840
991,241 $
59,252
1,050,493
836,516
22,159
858,675
Expenses
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discounts and issuance costs . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation of flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
235,637
30,507
266,144
397,760
72,000
76,961
17,022
829,887
392,953
(139,562)
253,391 $
192,818
27,772
220,590
336,657
—
82,422
16,048
655,717
394,776
(138,778)
255,998 $
168,743
23,627
192,370
280,037
—
71,212
21,614
565,233
293,442
(103,031)
190,411
Net income per share of Class A and Class B common stock:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.47 $
2.34 $
2.51 $
2.38 $
1.88
1.80
Weighted-average shares outstanding
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,547,774
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,628,865
102,142,828
110,192,771
101,529,137
108,963,550
(See Notes to Consolidated Financial Statements)
Preferred Stock
Class A
Common Stock
Class B Non-Voting
Common Stock
Shares Amount
Shares
Amount
Shares
Amount
Paid-in
Capital
Retained
Earnings
Total
Balance at December 31, 2012 . . . — $
Issuance of common stock upon
(in thousands, except share and per share amounts)
—
99,417,998 $
991
1,829,339 $
18 $
2,198,501 $
133,111 $ 2,332,621
exercise of options and warrants
and vesting of restricted stock
units . . . . . . . . . . . . . . . . . . . . . .
Common stock exchanged . . . . . . .
Cash dividends declared ($0.105 per
share) . . . . . . . . . . . . . . . . . . . . .
Tax benefits from stock based
compensation arrangements . . . .
Tax withholdings on stock based
compensation . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . .
Net income . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . .
Issuance of common stock upon
exercise of options and vesting of
restricted stock units . . . . . . . . . .
Stock-based compensation expense
Cash dividends (declared $0.13 per
share) . . . . . . . . . . . . . . . . . . . . .
Tax benefits from stock based
compensation arrangements . . . .
Tax withholdings on stock based
compensation . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .
Balance at December 31, 2014 . . .
Issuance of common stock upon
exercise of options and vesting of
restricted stock units . . . . . . . . . .
Stock-based compensation expense
Cash dividends (declared $0.17 per
share) . . . . . . . . . . . . . . . . . . . . .
Tax withholdings on stock based
compensation . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .
Balance at December 31, 2015 . . .
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
— $
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
1,023,521
1,829,339
—
—
—
18
—
—
—
(448,182)
—
—
—
—
101,822,676 $ 1,009
1,028,654
—
—
—
1
—
—
—
—
—
—
(459,122)
—
—
—
102,392,208 $ 1,010
321,395
—
—
—
—
—
—
(1,829,339)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(18)
—
—
—
—
—
—
—
—
—
(10,663)
(10,663)
2,115
—
2,115
—
—
—
— $
(12,664)
21,614
—
2,209,566 $
(12,664)
—
21,614
—
190,411
190,411
312,859 $ 2,523,434
—
—
—
—
—
—
— $
—
—
—
943
16,048
—
—
944
16,048
—
(13,284)
(13,284)
7,011
(18,089)
—
2,215,479 $
7,011
(18,089)
—
255,998
255,998
555,573 $ 2,772,062
177
17,022
—
—
177
17,022
—
(17,438)
(17,438)
(130,934)
—
—
—
102,582,669 $ 1,010
—
—
— $
—
—
— $
(5,302)
—
2,227,376 $
(5,302)
—
253,391
253,391
791,526 $ 3,019,912
—
—
—
—
—
—
(See Notes to Consolidated Financial Statements)
62
63
Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquisition of flight equipment under operating lease . . . . . . . . . . . . . . . . . . .
Payments for deposits on flight equipment purchases . . . . . . . . . . . . . . . . . . .
Proceeds from aircraft sales, trading and other activity . . . . . . . . . . . . . . . . . .
Acquisition of furnishings, equipment and other assets . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,088,646)
(597,170)
752,747
(219,732)
(2,152,801)
(1,568,748)
(601,307)
603,849
(239,451)
(1,805,657)
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation of flight equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefits from stock-based compensation arrangements . . . . . . . . . . . . . . .
Amortization of discounts and debt issuance costs . . . . . . . . . . . . . . . . . . . . .
Gain on aircraft sales, trading and other activity . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued interest and other payables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rentals received in advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities
Financing Activities
Issuance of common stock upon exercise of options . . . . . . . . . . . . . . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax withholdings on stock-based compensation . . . . . . . . . . . . . . . . . . . . . . .
Tax benefits from stock-based compensation arrangements . . . . . . . . . . . . . . .
Net change in unsecured revolving facilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from debt financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments in reduction of debt financings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security deposits and maintenance reserve receipts . . . . . . . . . . . . . . . . . . . . .
Security deposits and maintenance reserve disbursements . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest, including capitalized interest of
$40,118, $42,775 and $32,659 at December 31, 2015, 2014 and 2013,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental Disclosure of Noncash Activities
Buyer furnished equipment, capitalized interest, deposits on flight equipment
purchases and seller financing applied to acquisition of flight equipment and
other assets applied to payments for deposits on flight equipment purchases . .
Cash dividends declared, not yet paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
(dollars in thousands)
Year Ended
$
253,391 $
255,998 $
190,411
397,760
17,022
138,608
—
30,507
(33,898)
4,162
16,635
15,608
839,795
336,657
16,048
137,107
(7,011)
27,772
(56,457)
(1,191)
45,738
14,357
769,018
60
(16,405)
(5,302)
—
151,000
1,232,384
(328,248)
(9,059)
(4,518)
218,380
(51,430)
1,186,862
(126,144)
282,819
156,675 $
944
(12,243)
(18,089)
7,011
(239,000)
1,663,120
(577,212)
79,839
(7,975)
185,639
(32,749)
1,049,285
12,646
270,173
282,819 $
280,037
21,614
102,636
(2,115)
23,627
(19,234)
(2,653)
39,507
20,383
654,213
(1,329,619)
(828,839)
97,748
(125,184)
(2,185,894)
—
(7,608)
(12,664)
2,115
388,000
1,608,854
(531,831)
18,999
(37,535)
172,662
(29,227)
1,571,765
40,084
230,089
270,173
259,968 $
211,345 $
188,464
944,469 $
5,129 $
756,286 $
4,096 $
459,432
3,055
(See Notes to Consolidated Financial Statements)
Note 1. Summary of significant accounting policies
Organization
Air Lease Corporation is a leading aircraft leasing company that was founded by aircraft leasing industry
pioneer, Steven F. Udvar-Házy. We are principally engaged in purchasing new commercial jet transport aircraft directly
from the manufacturers, such as Boeing and Airbus. We lease these aircraft to airlines throughout the world to generate
attractive returns on equity. As of December 31, 2015 we owned a fleet of 240 aircraft and had 389 aircraft on order with
the manufacturers. In addition to our leasing activities, we sell aircraft from our fleet to other leasing companies,
financial services companies and airlines. We also provide fleet management services to investors and owners of aircraft
portfolios for a management fee.
Principles of consolidation
The Company consolidates financial statements of all entities in which we have a controlling financial interest,
including the account of any Variable Interest Entity in which we have a controlling financial interest and for which we
are the primary beneficiary. All material intercompany balances are eliminated in consolidation.
Investments
Our investment in the Blackbird Capital I, LLC joint venture, where we own 9.5% of the equity of the venture,
is accounted for using the equity method of accounting due to our level of influence and involvement in the joint
venture. This investment is recorded at the amount invested plus or minus our 9.5% share of net income or loss, less any
distributions or return of capital received from the entity.
Rental of flight equipment
The Company leases flight equipment principally under operating leases and reports rental income ratably over
the life of each lease. Rentals received, but unearned, under the lease agreements are recorded in Rentals received in
advance on the Company’s Consolidated Balance Sheet until earned. The difference between the rental income recorded
and the cash received under the provisions of the lease is included in Lease receivables, as a component of Other assets
on the Company’s Consolidated Balance Sheet. An allowance for doubtful accounts will be recognized for past-due
rentals based on management’s assessment of collectability. Management monitors all lessees with past due lease
payments and discuss relevant operational and financial issues facing those lessees in order to determine an appropriate
allowance for doubtful accounts. In addition, if collection is not reasonably assured, the Company will not recognize
rental income for amounts due under the Company’s lease contracts and will recognize revenue for such lessees on a
cash basis. As of December 31, 2015 and 2014, the Company had no such allowance, and no leases were on a cash basis.
All of the Company’s lease agreements are triple net leases whereby the lessee is responsible for all taxes,
insurance, and aircraft maintenance. In the future, we may incur repair and maintenance expenses for off-lease aircraft.
We recognize repair and maintenance expense in our Consolidated Statements of Income for all such expenditures. In
many operating lease contracts, the lessee is obligated to make periodic payments, which are calculated with reference to
the utilization of the airframe, engines and other major life-limited components during the lease. In these leases, we will
make a payment to the lessee to compensate the lessee for the cost of the Qualifying Event incurred, up to the maximum
of the amount of Maintenance Reserves payments made by the lessee during the lease term, net of previous
reimbursements. These payments are made upon the lessee’s presentation of invoices evidencing the completion of such
Qualifying Event. The Company records as “Rental of flight equipment” revenue, the portion of Maintenance Reserves
that is virtually certain will not be reimbursed to the lessee. Maintenance Reserves payments which we may be required
to reimburse to the lessee are reflected in our overhaul reserve liability, as a component of “Security deposits and
overhaul reserves on flight equipment leases” in our Consolidated Balance Sheet.
64
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Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Lessee-specific modifications are capitalized as initial direct costs and amortized over the term of the lease into
rental revenue in our Consolidated Statements of Income.
Initial direct costs
The Company records as period costs those internal and other costs incurred in connection with identifying,
negotiating and delivering aircraft to the Company’s lessees. Amounts paid by us to lessees, or other parties, in
connection with the lease transactions are capitalized and amortized as a reduction to lease revenue over the lease term.
Cash and cash equivalents
The Company considers cash and cash equivalents to be cash on hand and highly liquid investments with
original maturity dates of 90 days or less.
Restricted cash
Restricted cash consists of pledged security deposits, maintenance reserves, and rental payments related to
secured aircraft financing arrangements.
Flight equipment
Flight equipment under operating lease is stated at cost less accumulated depreciation. Purchases, major
additions and modifications, and interest on deposits during the construction phase are capitalized. The Company
generally depreciates passenger aircraft on a straight-line basis over a 25-year life from the date of manufacture to a 15%
residual value. Changes in the assumption of useful lives or residual values for aircraft could have a significant impact
on the Company’s results of operations and financial condition.
for sale. Management uses judgment in evaluating these criteria. Due to the significant uncertainties of potential sale
transactions, the held for sale criteria generally will not be met unless the aircraft is subject to a signed sale agreement, or
management has made a specific determination and obtained appropriate approvals to sell a particular aircraft or group
of aircraft. Aircraft classified as flight equipment held for sale are recognized at the lower of their carrying amount or
estimated fair value less estimated costs to sell. At the time aircraft are classified as flight equipment held for sale,
depreciation expense is no longer recognized.
Capitalized interest
The Company may borrow funds to finance deposits on new flight equipment purchases. The Company
capitalizes interest expense on such borrowings. The capitalized amount is calculated using our composite borrowing
rate and is recorded as an increase to the cost of the flight equipment on our Consolidated Balance Sheet at the time of
purchase.
Fair value measurements
Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The Company measures the fair value of certain assets
on a non-recurring basis, principally our flight equipment, when GAAP requires the application of fair value, including
events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.
The Company records flight equipment at fair value when we determine the carrying value may not be
recoverable. The Company principally uses the income approach to measure the fair value of flight equipment. The
income approach is based on the present value of cash flows from contractual lease agreements and projected future
lease payments, including contingent rentals, net of expenses, which extend to the end of the aircraft’s economic life in
its highest and best use configuration, as well as a disposition value based on expectations of market participants. These
valuations are considered Level 3 valuations, as the valuations contain significant non-observable inputs.
At the time flight equipment is retired or sold, the cost and accumulated depreciation are removed from the
related accounts and the difference, net of proceeds, is recorded as a gain or loss in our Consolidated Statements of
Income.
Income taxes
Management evaluates on a quarterly basis the need to perform an impairment test whenever facts or
circumstances indicate a potential impairment has occurred. An assessment is performed whenever events or changes in
circumstances indicate that the carrying amount of an aircraft may not be recoverable. Recoverability of an aircraft’s
carrying amount is measured by comparing the carrying amount of the aircraft to future undiscounted net cash flows
expected to be generated by the aircraft. The undiscounted cash flows consist of cash flows from currently contracted
leases, future projected lease rates and estimated residual or scrap values for each aircraft. We develop assumptions used
in the recoverability analysis based on our knowledge of active lease contracts, current and future expectations of the
global demand for a particular aircraft type, and historical experience in the aircraft leasing market and aviation industry,
as well as information received from third-party industry sources. The factors considered in estimating the undiscounted
cash flows are affected by changes in future periods due to changes in contracted lease rates, economic conditions,
technology and airline demand for a particular aircraft type. In the event that an aircraft does not meet the recoverability
test, the aircraft will be recorded at fair value in accordance with the Company’s Fair Value Policy, resulting in an
impairment charge. Our Fair Value Policy is described below under “Fair Value Measurements”. As of December 31,
2015 and 2014, no impairment charges have been incurred to date.
Flight equipment held for sale
Management evaluates all contemplated aircraft sale transactions to determine whether all the required criteria
have been met under Generally Accepted Accounting Principles (“GAAP”) to classify aircraft as flight equipment held
The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability
method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted
statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in
the period that includes the enactment date. The Company records a valuation allowance for deferred tax assets when the
probability of realization of the full value of the asset is less than 50%. The Company recognizes the impact of a tax
position, if that position is more than 50% likely to be sustained on audit, based on the technical merits of the position.
Recognized income tax positions are measured at the largest amount that is greater than 50% likely to be realized.
Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
The Company recognizes interest and penalties for uncertain tax positions in income tax expense.
Deferred costs
The Company incurs debt issue costs in connection with debt financings. Those costs are deferred and
amortized over the life of the specific loan using the effective interest method and charged to interest expense. The
Company also incurs costs in connection with equity offerings. Such costs are deferred until the equity offering is
completed and either netted against the equity raised, or expensed if the equity offering is abandoned.
66
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Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-based compensation
Note 2. Debt financing
Stock-based compensation cost is measured at the grant date based on the fair value of the award. Stock-based
compensation expense includes an estimate for forfeitures and is recognized over the requisite service periods of the
awards on a straight-line basis.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could
differ from those estimates.
Recent accounting pronouncements
In February 2015, FASB issued Accounting Standards Update ("ASU") No. 2015-02 ("ASU 2015-02"),
"Consolidation (Topic 810): Amendments to the Consolidation Analysis", that amends the guidelines for determining
whether certain legal entities should be consolidated and reduces the number of consolidation models. This new standard
will be effective for interim and annual periods beginning on January 1, 2016. Early adoption is permitted. The
Company adopted the standard on its required effective date of January 1, 2016. The standard will not have a material
impact on our consolidated financial statements and related disclosures.
In April 2015, the FASB issued ASU No. 2015-03 ("ASU 2015-03"), "Interest-Imputation of Interest (Subtopic
835-30)", that amends the presentation for debt issuance costs. Upon adoption, such costs shall be presented on our
Consolidated Balance Sheet as a direct deduction from the carrying amount of the related debt liability and not as a
deferred charge presented in assets on our Consolidated Balance Sheet. This new standard will be effective for interim
and annual periods beginning on January 1, 2016, and is required to be retrospectively adopted. Early adoption is
permitted for financial statements that have not been previously issued.
The Company early adopted ASU 2015-03 as of March 31, 2015. The Consolidated Balance Sheet as of
December 31, 2014 has been adjusted to apply the change in accounting principle retrospectively. Debt issuance costs of
$83.6 million previously reported as assets on the Consolidated Balance Sheet as of December 31, 2014 have been
reclassified as a direct deduction from the carrying amount of the related debt liability.
The Company’s consolidated debt as of December 31, 2015 and 2014 is summarized below:
December 31, 2015 December 31, 2014
(dollars in thousands)
Unsecured
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total unsecured debt financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,677,769 $
720,000
292,788
200,000
6,890,557
Secured
Term financings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warehouse facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Export credit financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total secured debt financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
477,231
372,423
58,229
907,883
4,579,194
569,000
196,146
200,000
5,544,340
636,411
484,513
64,884
1,185,808
Total debt financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Debt discounts and issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt financing, net of discounts and issuance costs . . . . . . . . . . . . . . . . . . . . . .
$
7,798,440
(86,019)
7,712,421 $
6,730,148
(99,390)
6,630,758
At December 31, 2015, management of the Company believes it is in compliance in all material respects with
the covenants in its debt agreements, including its financial covenants concerning debt-to-equity, tangible net equity and
interest coverage ratios.
The Company’s secured obligations as of December 31, 2015 and 2014 are summarized below:
Nonrecourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Number of aircraft pledged as collateral . . . . . . . . . . . . . . . .
Net book value of aircraft pledged as collateral . . . . . . . . . . $
December 31, 2015 December 31, 2014
(dollars in thousands)
372,423 $
535,460
907,883 $
31
484,513
701,295
1,185,808
38
1,935,711
1,591,350 $
Senior unsecured notes
As of December 31, 2015, the Company had $5.7 billion in aggregate principal amount of senior unsecured
notes outstanding with remaining terms ranging from 0.1 to 8.7 years and bearing interest at fixed rates ranging from
2.125% to 7.375%. As of December 31, 2014, the Company had $4.6 billion in aggregate principal amount of senior
unsecured notes outstanding bearing interest at fixed rates ranging from 2.125% to 7.375%.
During the year ended December 31, 2015, the Company issued $1.1 billion in aggregate principal amount of
senior unsecured notes.
In January 2015, the Company issued $600.0 million in aggregate principal amount of senior unsecured notes
due 2022 that bear interest at a rate of 3.75%.
68
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Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In August 2015, the Company issued $500.0 million in aggregate principal amount of senior unsecured notes
due 2018 that bear interest at a rate of 2.625%.
Unsecured revolving credit facility
The total amount outstanding under the Company's unsecured revolving credit facility was $720.0 million and
$569.0 million as of December 31, 2015 and December 31, 2014, respectively.
In June 2015, the Company completed an amendment to its syndicated unsecured revolving credit facility that
increased the borrowing capacity to $2.7 billion and extended the final maturity to May 5, 2019 for certain commitments
under the facility. As a result of the transaction, lenders hold revolving commitments totaling $2.5 billion that mature on
May 5, 2019, and lenders held revolving commitments totaling $175.0 million that mature on May 5, 2018. The facility
continues to accrue interest at a rate of LIBOR plus 1.25% or an alternative base rate plus 0.25% on drawn balances and
includes a 0.25% facility fee, subject to reductions based on improvements in the Company's credit ratings. The
amendment also increased the uncommitted accordion feature of the facility, under which its aggregate principal amount
can be increased up to $3.0 billion under certain circumstances.
In September 2015, the Company entered into an agreement to increase the capacity of its syndicated unsecured
revolving facility by $90.0 million.
In November 2015, the Company entered into an agreement to increase the capacity of its syndicated unsecured
revolving facility by $30.0 million.
As of December 31, 2015, the maximum borrowing capacity of our syndicated unsecured revolving credit
facility is $2.8 billion.
Unsecured term financings
From time to time, the Company enters into unsecured term facilities. During 2015, the Company entered into
six additional unsecured term facilities aggregating $145.5 million with terms ranging from one to five years and with
five facilities bearing interest at a fixed rate of 3.00% per annum and one facility bearing interest at a floating rate of
LIBOR plus 1.00%. The outstanding balance on our unsecured term facilities as of December 31, 2015 was $292.8
million with interest rates ranging from 2.85% to 4.05% and LIBOR plus 1.00% to LIBOR plus 1.25%. As of December
31, 2015, the remaining maturities of all unsecured term facilities ranged from approximately 0.2 years to approximately
4.9 years. As of December 31, 2014, the outstanding balance on our unsecured term facilities was $196.1 million.
Convertible senior notes
In November 2011, the Company issued $200.0 million in aggregate principal amount of 3.875% convertible
senior notes due 2018 (the “Convertible Notes”) in an offering exempt from registration under the Securities Act. The
Convertible Notes were sold to Qualified Institutional Buyers in reliance upon Rule 144A under the Securities Act. The
Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.875% per annum,
payable semi-annually in arrears on June 1 and December 1 of each year, commencing on June 1, 2012. The
Convertible Notes are convertible at the option of the holder into shares of our Class A common stock at a price of
$29.86 per share.
Secured term financing
We fund some aircraft purchases through secured term financings. Our various consolidated entities will
borrow through secured bank facilities to purchase an aircraft. The aircraft are then leased by our entities to airlines. We
may guarantee the obligations of the entities under the loan agreements. The loans may be secured by a pledge of the
shares of the entities, the aircraft, the lease receivables, security deposits, maintenance reserves or a combination thereof.
As of December 31, 2015, the outstanding balance on our secured term facilities was $477.2 million and we had
pledged 15 aircraft as collateral with a net book value of $933.4 million. The outstanding balance under our secured term
facilities as of December 31, 2015 was comprised of $75.1 million fixed rate debt and $402.1 million floating rate debt,
with interest rates ranging from 4.28% to 5.36% and LIBOR plus 1.15% to LIBOR plus 2.99%, respectively. As of
December 31, 2015, the remaining maturities of all secured term facilities ranged from approximately 0.1 years to
approximately 7.5 years.
As of December 31, 2014, the outstanding balance on our secured term facilities was $636.4 million and we had
pledged 18 aircraft as collateral with a net book value of $1.1 billion. The outstanding balance under our secured term
facilities as of December 31, 2014 was comprised of $104.7 million fixed rate debt and $531.7 million floating rate debt,
with interest rates ranging from 4.28% to 5.36% and LIBOR plus 1.5% to LIBOR plus 3.0%, respectively.
Warehouse facility
As of December 31, 2015, the Company had borrowed $372.4 million under the 2010 Warehouse Facility and
pledged 14 aircraft as collateral with a net book value of $577.6 million. As of December 31, 2014, the Company had
borrowed $484.5 million under the 2010 Warehouse Facility and pledged 18 aircraft as collateral with a net book value
of $729.5 million.
Export credit financings
As of December 31, 2015, the Company had $58.2 million in export credit financing outstanding. As of
December 31, 2014, the Company had $64.9 million in export credit financing outstanding.
In March 2013, the Company issued $76.5 million in secured notes due 2024 guaranteed by the Ex-Im Bank.
The notes will mature on August 15, 2024 and will bear interest at a rate of 1.617% per annum. The Company used the
proceeds of the offering to refinance a portion of the purchase price of two Boeing 737-800 aircraft and the related
premium charged by Ex-Im Bank for its guarantee of the notes.
Maturities
Maturities of debt outstanding as of December 31, 2015 are as follows:
Years ending December 31,
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(dollars in thousands)
954,392
1,387,030
1,511,350
1,793,546
459,193
1,692,929
7,798,440
70
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Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 3. Interest expense
Note 5. Rental Income
The following table shows the components of interest for the years ended December 31, 2015, 2014 and 2013:
At December 31, 2015, minimum future rentals on non-cancellable operating leases of flight equipment in our
fleet, which have been delivered as of December 31, 2015, are as follows:
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
(dollars in thousands)
Year Ended
Interest on borrowings . . . . . . . . . . . . . . $
Less capitalized interest . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of discounts and deferred
issuance costs . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . $
275,755 $
(40,118)
235,637
235,593 $
(42,775)
192,818
201,402
(32,659)
168,743
30,507
266,144 $
27,772
220,590 $
23,627
192,370
Note 4. Shareholders’ equity
In 2010, the Company authorized 500,000,000 shares of Class A common stock, $0.01 par value per share, of
which 102,582,669 and 102,392,208 shares were issued and outstanding as of December 31, 2015 and 2014,
respectively. As of December 31, 2015 and 2014, the Company had authorized 10,000,000 shares of Class B
Non-Voting common stock, $0.01 par value per share, of which no shares were outstanding as of December 31, 2015
and 2014.
On June 4, 2010, the Company issued 482,625 warrants for the purchase of up to 482,625 shares of Class A
common stock to two institutional investors (the “Committed Investors”). The warrants have a seven-year term and an
exercise price of $20 per share. The Company used the BSM option pricing model to determine the fair value of
warrants. The fair value of warrants was calculated on the date of grant by an option-pricing model using a number of
complex and subjective variables. These variables include expected stock price volatility over the term of the warrant,
projected exercise behavior, a risk-free interest rate and expected dividends. The warrants had a fair value at the grant
date of $5.6 million. The warrants are classified as an equity instrument and the proceeds from the issuance of common
stock to the Committed Investors was split between the warrants and the stock based on fair value of the warrants and
recorded as an increase to Paid-in capital on the Consolidated Balance Sheet. On October 21, 2013, one of the
Committed Investors performed a cashless exercise of all of its 214,500 warrants, resulting in the issuance of 63,481
shares of Class A common stock. As of December 31, 2015, the Company had 268,125 warrants remaining outstanding.
As of December 31, 2015 and 2014 the Company had authorized 50,000,000 shares of preferred stock, $0.01
par value per share, of which no shares were issued or outstanding.
Years ending December 31,
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(dollars in thousands)
1,235,993
1,189,810
1,155,497
1,091,562
926,538
3,265,073
8,864,473
The Company earned $34.0 million, $25.2 million and $34.4 million in maintenance reserve revenue based on
our lessees’ usage of the aircraft for the years ended December 31, 2015, 2014 and 2013, respectively. The following
table shows the scheduled lease terminations (for the minimum non-cancellable period which does not include
contracted unexercised lease extension options) of our operating lease portfolio as of December 31, 2015, updated
through February 25, 2016:
Aircraft Type
1 — —
1
Airbus A319-100 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
9
4
1
2
2
Airbus A320-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
1
1
Airbus A321-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
2
Airbus A330-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
4
1 —
1
Airbus A330-300 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —
1 —
2
3 —
Boeing 737-700 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
5
4
1
10
Boeing 737-800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 — — — —
Boeing 767-300ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 777-200ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —
1
Boeing 777-300ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
1 — — —
Embraer E175 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — —
10
Embraer E190 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
1 —
5
ATR 42/72-600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
39
10
2016 2017 2018 2019 2020 Thereafter Total
3
39
26
16
5
8
79
1
1
17
5
21
19
240
1
21
21
9
4
2
49
—
—
16
5
4
10
142
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
4
32
11
6
72
73
Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 6. Concentration of risk
Geographical and credit risks
Over 95% of our aircraft are operated internationally. The following table sets forth the regional concentration
of our aircraft portfolio based on net book value as of December 31, 2015 and 2014:
Region
December 31, 2015
December 31, 2014
Net Book
Value(1)
% of Total
Net Book
Value
% of Total
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,238,323
2,444,370
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,313,477
Asia (excluding China) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,023,715
The Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . .
923,352
Central America, South America and Mexico . . . . . . . . . . . . .
446,839
U.S. and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
423,399
Pacific, Australia, New Zealand . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,813,475
(dollars in thousands)
30.0 % $ 2,953,232
22.6 % 2,348,784
1,489,739
21.4 %
498,896
9.5 %
778,991
8.5 %
412,532
4.1 %
471,630
3.9 %
100.0 % $ 8,953,804
33.0 %
26.2 %
16.7 %
5.6 %
8.7 %
4.6 %
5.2 %
100.0 %
(1)
Includes 19 aircraft held for sale.
The following table sets forth the dollar amount and percentage of our rental of flight equipment revenues
attributable to the indicated regions based on each airline’s principal place of business:
Region
Year Ended
December 31, 2015
Year Ended
December 31, 2014
Year Ended
December 31, 2013
Amount of
Amount of
Amount of
Rental
Revenue
% of Total
Rental
Revenue
% of Total
(dollars in thousands)
Rental
Revenue % of Total
Europe . . . . . . . . . . . . . . . . . . . . . . . . $
China . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding China) . . . . . . . . . . .
Central America, South America and
Mexico . . . . . . . . . . . . . . . . . . . . . .
The Middle East and Africa . . . . . . .
U.S. and Canada . . . . . . . . . . . . . . . .
Pacific, Australia, New Zealand . . . .
114,672
90,416
54,294
46,133
Total . . . . . . . . . . . . . . . . . . . . . . . $ 1,174,544
380,295
265,450
223,284
32.4 % $ 337,349
218,625
22.6 %
190,389
19.0 %
34.0 % $ 300,761
129,772
22.1 %
169,700
19.2 %
9.8 %
7.7 %
4.6 %
3.9 %
111,583
47,958
55,007
30,330
100.0 % $ 991,241
11.3 %
107,857
55,624
57,366
15,436
100.0 % $ 836,516
4.9 %
5.4 %
3.1 %
36.0 %
15.5 %
20.3 %
12.9 %
6.6 %
6.9 %
1.8 %
100.0 %
Based on our lease placements of future new aircraft deliveries, we anticipate that a growing percentage of our
aircraft will be located in the Asia, the Central America, South America and Mexico, and the Middle East and Africa
regions.
At December 31, 2015 and 2014, we owned and managed leased aircraft to customers in the following regions:
For the years ended December 31, 2015, 2014 and 2013, China was the only individual country that represented
Region
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia (excluding China) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. and Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central America, South America and Mexico . . . . . . . . . . . . . . .
The Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pacific, Australia, New Zealand . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) A customer is an airline with its own operating certificate.
December 31, 2015
December 31, 2014
Number of
Customers(1) % of Total
30.0 %
21.1 %
13.4 %
12.2 %
12.2 %
8.9 %
2.2 %
100.0 %
27
19
12
11
11
8
2
90
Number of
Customers(1) % of Total
30.0 %
22.5 %
13.8 %
10.0 %
12.5 %
8.8 %
2.4 %
100.0 %
24
18
11
8
10
7
2
80
at least 10% of our rental revenue based on each airline's principal place of business. In 2015, 2014 and 2013, no
individual airline represented at least 10% of our rental revenue.
Currency risk
The Company attempts to minimize currency and exchange risks by entering into aircraft purchase agreements
and a majority of lease agreements and debt agreements with U.S. dollars as the designated payment currency.
Note 7. Income Taxes
The provision for income taxes consists of the following:
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
(dollars in thousands)
Year Ended
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . $
State . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
— $
—
1,003
8,092 $
39
551
—
—
71
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . $
138,517
42
—
139,562 $
129,943
153
—
$
138,778
102,887
147
—
103,105
74
75
Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Differences between the provision for income taxes and income taxes at the statutory federal income tax rate
subject to examinations by the major tax jurisdictions for the 2011 tax year and forward.
are as follows:
Year Ended
December 31, 2015
Amount
Percent Amount
Percent Amount
Percent
Year Ended
December 31, 2014
Year Ended
December 31, 2013
Note 8. Commitments and Contingencies
Aircraft Acquisition
Income taxes at statutory federal rate . . . . . . . . . . . . $ 137,541
State income taxes, net of federal income tax effect
(dollars in thousands)
35.0 % $ 138,172
35.0 % $ 102,705
35.0 %
and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,021
0.5
606
0.2
400
$ 139,562
35.5 % $ 138,778
35.2 % $ 103,105
0.2
35.2 %
The Company’s net deferred tax assets (liabilities) are as follows:
As of December 31, 2015 As of December 31, 2014
(dollars in thousands)
Assets (Liabilities)
Equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rents received in advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Straight-line rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aircraft depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (liabilities) assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
21,420 $
23,306
32,107
3,317
9,142
7,369
(558,628)
(461,967) $
19,020
10,197
26,605
4,577
10,423
6,571
(400,752)
(323,359)
The Company has net operating loss carry forwards (NOLs) for federal income tax purposes of $66.1 million
and $29.1 million as of December 31, 2015 and 2014, respectively, which are available to offset future taxable income in
future periods and begin to expire in 2032. The Company has NOLs for state income tax purposes of $44.4 million as of
December 31, 2015 and no NOLs for state income tax purposes as of December 31, 2014. The Company generated
$37.0 million of NOLs for federal income tax purposes for the year ended December 31, 2015 and utilized $79.6 million
of NOLs for federal income tax purposes for the year ended December 31, 2014. The Company recognizes tax benefits
associated with stock based compensation directly to stockholders’ equity only when realized. Accordingly, deferred tax
assets are not recognized for net operating loss carry forwards resulting from windfall tax benefits. A windfall tax benefit
occurs when the actual tax benefit realized upon an employee’s disposition of a share based award exceeds the tax effect
of the cumulative book compensation charge associated with the award. The Company has suspended windfall tax
benefits of $1.3 million as of December 31, 2015 and no suspended windfall tax benefits as of December 31, 2014. As
of December 31, 2015, the Company has windfall tax benefits of $1.3 million, included in its U.S. net operating loss
carry forward, but not reflected in deferred tax assets. The Company uses a tax law ordering approach to determine if the
excess tax deductions associated compensation costs have reduced income taxes payable.
The Company has not recorded a deferred tax valuation allowance as of December 31, 2015 and 2014 as
realization of the deferred tax asset is considered more likely than not. In assessing the realizability of the deferred tax
assets management considered whether future taxable income will be sufficient during the periods in which those
temporary differences are deductible before NOLs expire. Management considers the scheduled reversal of deferred tax
liabilities, projected taxable income and tax planning strategies in making this assessment. Management anticipates the
timing differences on aircraft depreciation will reverse and be available for offsetting the reversal of deferred tax assets.
As of December 31, 2015 and 2014 the Company has not recorded any liability for unrecognized tax benefits.
The Company files income tax returns in the U.S. and various state and foreign jurisdictions. The Company is
As of December 31, 2015, we had commitments to acquire a total of 389 new aircraft for delivery through 2023
as follows:
Aircraft Type
Airbus A320/321-200(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A320/321neo(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A330-200 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airbus A330-800/900neo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 5
Airbus A350-900 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2
2
Boeing 737-800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 737-8/9 MAX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 8
Boeing 777-300ER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boeing 787-9/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ATR 72-600 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 2017 2018 2019 2020 Thereafter Total
3
140
1
25
23
— 26
112
54
8
—
46
20
5
—
389
148
3 — — — —
27 26
1
1 — — — —
5
8
9 — — —
18 32
2 — — —
6
3
6
3
7
5 — — — —
59 77
36
—
55
—
10
9
5
2
7
39
30
17
14
17
(1) All of our Airbus A320/321 200 aircraft, scheduled to be delivered in 2016, will be equipped with sharklets.
(2) Our Airbus A320/321neo aircraft orders include 30 long-range variants.
Commitments for the acquisition of these aircraft and other equipment at an estimated aggregate purchase price
(including adjustments for inflation) of approximately $30.7 billion as of December 31, 2015 are as follows:
Years ending December 31,
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(dollars in thousands)
2,595,741
2,412,281
3,497,475
4,642,136
6,139,015
11,431,283
30,717,931
$
As of December 31, 2015, the Company had a non-binding commitment to acquire up to five A350-1000
aircraft. Deliveries of these aircraft are scheduled to commence in 2023 and continue through 2024.
We have made non-refundable deposits on the aircraft for which we have commitments to purchase of
$1.1 billion as of December 31, 2015 and 2014, which are subject to manufacturer performance commitments. If we are
unable to satisfy our purchase commitments, we may be forced to forfeit our deposits. Further, we would be exposed to
breach of contract claims by our lessees and manufacturers.
Office Lease
The Company’s lease for office space provides for step rentals over the term of the lease. Those rentals are
considered in the evaluation of recording rent expense on a straight-line basis over the term of the lease. Tenant
improvement allowances received from the lessor are deferred and amortized in selling, general and administrative
expenses against rent expense. The Company recorded office lease expense (net of sublease income) of $2.0 million,
$1.8 million and $2.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.
76
77
Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Commitments for minimum rentals under the non-cancellable lease term at December 31, 2015 are as follows:
Years ending December 31,
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
(dollars in thousands)
2,557
2,619
2,926
3,232
3,111
9,750
24,195
$
Note 9. Net Earnings Per Share
Basic net earnings per share is computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted into common stock; however, potential common
equivalent shares are excluded if the effect of including these shares would be anti-dilutive. The Company’s two classes
of common stock, Class A and Class B Non-Voting, have equal rights to dividends and income, and therefore, basic and
diluted earnings per share are the same for each class of common stock. As of December 31, 2015, we did not have any
Class B Non-Voting common stock outstanding.
Diluted net earnings per share takes into account the potential conversion of stock options, restricted stock
units, and warrants using the treasury stock method and convertible notes using the if-converted method. For the years
ended December 31, 2015 and 2014, the Company did not exclude shares related to stock options which are potentially
dilutive securities from the computation of diluted earnings per share because including these shares would be dilutive.
For the year ended December 31, 2013, the Company excluded 150,000 shares related to stock options which are
potentially dilutive securities from the computation of diluted earnings per share because including these shares would
be anti-dilutive. In addition, the Company excluded 993,092, 969,225 and 1,569,005 shares related to restricted stock
units for which the performance metric had yet to be achieved as of December 31, 2015, 2014 and 2013, respectively.
The following table sets forth the reconciliation of basic and diluted net income per share:
Basic net income per share:
Numerator
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
253,391 $
255,998 $
190,411
Year Ended
Year Ended
December 31, 2015 December 31, 2014 December 31, 2013
(in thousands, except share and per share amounts)
Year Ended
Denominator
Weighted-average common shares outstanding. . . . . . . . . . . . .
102,547,774
102,142,828
101,529,137
1.88
2.51 $
Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted net income per share:
2.47 $
Numerator
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Assumed conversion of convertible senior notes . . . . . . . . . . .
Net income plus assumed conversions . . . . . . . . . . . . . . . . . . $
253,391 $
5,806
259,197 $
255,998 $
5,811
261,809 $
190,411
5,783
196,194
Denominator
Number of shares used in basic computation . . . . . . . . . . . . . . .
Weighted-average effect of dilutive securities . . . . . . . . . . . . .
Number of shares used in per share computation . . . . . . . . . .
102,547,774
8,081,091
110,628,865
102,142,828
8,049,943
110,192,771
Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2.34 $
2.38 $
101,529,137
7,434,413
108,963,550
1.80
Note 10. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring and Non-recurring Basis
The Company had no assets or liabilities which were measured at fair value on a recurring or non-recurring
basis as of December 31, 2015 or 2014.
Financial Instruments Not Measured at Fair Values
The fair value of debt financing is estimated based on the quoted market prices for the same or similar issues, or
on the current rates offered to the Company for debt of the same remaining maturities, which would be categorized as a
Level 2 measurement in the fair value hierarchy. The estimated fair value of debt financing as of December 31, 2015
was $7.9 billion compared to a book value of $7.8 billion. The estimated fair value of debt financing as of December 31,
2014 was $7.0 billion compared to a book value of $6.7 billion.
The following financial instruments are not measured at fair value on the Company’s consolidated balance
sheet at December 31, 2015, but require disclosure of their fair values: cash and cash equivalents and restricted cash. The
estimated fair value of such instruments at December 31, 2015 and 2014 approximates their carrying value as reported
on the consolidated balance sheet. The fair value of all these instruments would be categorized as Level 1 of the fair
value hierarchy.
Note 11. Stock-based Compensation
On May 7, 2014, the stockholders of the Company approved the Air Lease Corporation 2014 Equity Incentive
Plan (the “2014 Plan”). Upon approval of the 2014 Plan, no new awards may be granted under the Amended and
Restated 2010 Equity Incentive Plan (the “2010 Plan”). As of December 31, 2015, the number of stock options (“Stock
Options”) and restricted stock units (“RSUs”) authorized under the 2014 Plan is approximately 6,437,196, which
includes 1,437,196 shares which were previously reserved for issuance under the 2010 Plan. Stock Options are generally
granted for a term of 10 years and generally vest over a three year period. The Company has issued RSUs with three
different vesting criteria: those RSUs that vest based on the attainment of book-value goals, those RSUs that vest based
on the attainment of Total Shareholder Return (“TSR”) goals and time based RSUs that vest ratably over a time period
of three years. Book value RSUs generally vest ratably over three years, if the performance condition has been met.
Book value RSUs for which the performance metric has not been met are forfeited. The TSR RSUs vest at the end of a
three year period. The number of TSR RSUs that will ultimately vest is based upon the percentile ranking of the
Company’s TSR among a peer group. The number of shares that will ultimately vest will range from 0% to 200% of the
RSUs initially granted depending on the extent to which the TSR metric is achieved. For disclosure purposes, we have
assumed the TSR RSUs will ultimately vest at 100%. As of December 31, 2015, the Company had 993,092 unvested
RSUs outstanding of which 560,309 are TSR RSUs.
The Company recorded $17.0 million, $16.0 million and $21.6 million of stock-based compensation expense
for the years ended December 31, 2015, 2014 and 2013, respectively.
Stock Options
The Company uses the BSM option pricing model to determine the fair value of stock options. The fair value of
stock-based payment awards on the date of grant is determined by an option-pricing model using a number of complex
and subjective variables. These variables include expected stock price volatility over the term of the awards, a risk-free
interest rate and expected dividends.
78
79
Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Estimated volatility of the Company’s common stock for new grants is determined by using historical volatility
of the Company’s peer group. Due to our limited operating history at the time of grant, there was no historical exercise
data to provide a reasonable basis which the Company could use to estimate expected terms. Accordingly, the Company
used the “simplified method” as permitted under Staff Accounting Bulletin No. 110. The risk-free interest rate used in
the option valuation model was derived from U.S. Treasury zero-coupon issues with remaining terms similar to the
expected term on the options. In accordance with ASC Topic 718, Compensation—Stock Compensation, the Company
estimated forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ
from those estimates. During the years ended December 31, 2015, 2014 and 2013, the Company did not grant any Stock
Options.
A summary of stock option activity in accordance with the Company’s stock option plan for the year ended
December 31, 2015 follows:
The following table summarizes additional information regarding outstanding, exercisable and vested stock
options at December 31, 2015:
Options Outstanding
Weighted-
Average
Options Exercisable
and Vested
Weighted
Average
Number of
Remaining Life Number of
Remaining Life
Range of exercise prices
$20.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,159,158
150,000
$28.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$20.00 - $28.80 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,309,158
Shares
(in years)
Shares
(in years)
4.46 3,159,158
150,000
5.32
4.50 3,309,158
4.46
5.32
4.50
Remaining
Aggregate
Restricted Stock Units
Price
Shares
(in years)
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,358,408 $ 20.39
— —
(500) $ 20.00
(250) $ 20.00
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,357,658 $ 20.39
— —
(45,500) $ 20.00
— —
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,312,158 $ 20.40
—
(3,000) $ 20.00
— —
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,309,158 $ 20.40
Vested and exercisable as of December 31, 2015 . . . . . . . . . . . . 3,309,158 $ 20.40
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise Contractual Term Intrinsic Value
(in thousands)(1)
4,813
—
5
3
35,883
—
814
—
46,077
—
49
—
43,287
43,287
7.49 $
—
6.54 $
— $
6.49 $
—
— $
—
5.49 $
—
— $
—
4.50 $
4.50 $
—
(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and
the closing stock price of our Class A common stock as of the respective date.
As of December 31, 2015 and 2014, all of the Company’s outstanding employee stock options had fully vested
and there were no unrecognized compensation costs related to outstanding employee stock options. As a result, there was
no stock-based compensation expense related to Stock Options for the year ended December 31, 2015 and 2014.
Stock-based compensation expense related to employee stock options for the year ended December 31, 2013 totaled
$5.4 million.
Compensation cost for stock awards is measured at the grant date based on fair value and recognized over the
vesting period. The fair value of book value and time based RSUs is determined based on the closing market price of the
Company’s Class A common stock on the date of grant, while the fair value of TSR RSUs is determined at the grant date
using a Monte Carlo simulation model. Included in the Monte Carlo simulation model were certain assumptions
regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and
expected dividends. To appropriately value the award, the risk-free interest rate is estimated for the time period from the
valuation date until the vesting date and the historical volatilities were estimated based on a historical timeframe equal to
the time from the valuation date until the end date of the performance period.
During the year ended December 31, 2015, the Company granted 427,194 RSUs of which 181,350 are TSR
RSUs. The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2015:
Unvested Restricted Stock Units
Weighted(cid:16)
Average
Grant-Date
Fair Value
Number of Shares
Unvested at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited/canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unvested at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected to vest after December 31, 2015(1) . . . . . . . . . . . . . . . . . .
969,225 $ 33.51
427,194 $ 44.95
(315,315) $ 27.98
(88,012) $ 25.58
993,092 $ 41.62
980,707 $ 41.62
(1) RSUs expected to vest reflect an estimated forfeiture rate.
At December 31, 2015, the outstanding RSUs are expected to vest as follows: 2016—412,908; 2017—314,210;
and 2018—253,589. The Company recorded $17.0 million, $16.0 million and $16.2 million of stock-based
compensation expense related to RSUs for the years ended December 31, 2015, 2014 and 2013, respectively.
As of December 31, 2015 there was $14.3 million of unrecognized compensation cost, adjusted for estimated
forfeitures, related to unvested stock-based payments granted to employees. Total unrecognized compensation cost will
be adjusted for future changes in estimated forfeitures and is expected to be recognized over a weighted average
remaining period of 1.71 years.
80
81
Air Lease Corporation and Subsidiaries
Air Lease Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 15. Quarterly financial data (unaudited)
The following table presents our unaudited quarterly results of operations for the two-year period ended
December 31, 2015.
Mar 31,
2014
Jun 30,
2014
Sep 30,
2014
Dec 31,
Mar 31,
2014
2015
Jun 30,
2015
Sep 30,
2015
Dec 31,
2015
Quarter Ended
Revenues . . . . . .
Income before
taxes . . . . . . . . .
Net income . . . . .
Net income per
(in thousands, except per share data)
$ 246,285 $ 256,325 $ 261,939 $ 285,944 $ 278,315 $ 304,702 $ 313,126 $ 326,697
94,709
61,397
95,680
62,037
96,277
62,433
108,110
70,131
30,205
19,332
118,049
76,118
119,996
77,042
124,703
80,899
share:
Basic . . . . . . .
Diluted . . . . . .
$
$
0.60 $
0.57 $
0.61 $
0.58 $
0.61 $
0.58 $
0.68 $
0.65 $
0.19 $
0.19 $
0.74 $
0.70 $
0.75 $
0.71 $
0.79
0.74
The sum of quarterly earnings per share amounts may not equal the annual amount reported since per share
amounts are computed independently for each period presented.
Note 16. Subsequent events
On February 24, 2016, our board of directors approved a quarterly cash dividend of $0.05 per share on our
outstanding common stock. The dividend will be paid on April 5, 2016 to holders of record of our common stock as of
March 21, 2016.
Note 12. Investments
On November 4, 2014, a wholly owned subsidiary of the Company entered into an agreement with a co-
investment vehicle arranged by Napier Park to participate in a joint venture formed as a Delaware LLC - Blackbird
Capital I, LLC (“Blackbird”) for the purpose of investing in commercial aircraft and leasing them to airlines around the
globe. We will also provide management services to the joint venture for a fee based upon aircraft assets under
management. The Company’s non-controlling interest in Blackbird is 9.5% and it is accounted for as an investment
under the equity method of accounting. During the years ended December 31, 2015 and 2014, the Company recognized
$2.2 million and $9.0 million of gains on the sale of aircraft to Blackbird, respectively. As of December 31, 2015 and
2014, the amounts due from Blackbird to the Company were $710,000 and $454,000, respectively. The Company's
investment in Blackbird was $18.6 million and $10.1 million as of December 31, 2015 and December 31, 2014,
respectively and is included in other assets on the Consolidated Balance Sheet.
Note 13. Flight Equipment Held for Sale
In December 2015, we entered into an agreement to sell our fleet of 25 ATR turboprop aircraft, comprised of 20
delivered aircraft and five undelivered aircraft, to Nordic Aviation Capital A/S (“NAC”). As of December 31, 2015, one
aircraft had been transferred to NAC and the remaining 19 delivered aircraft, with a carrying value of $305.9 million,
were held for sale and included in flight equipment subject to operating leases on the Consolidated Balance Sheet. We
ceased recognition of depreciation expense on these aircraft. We expect the sale of the 19 aircraft held for sale and the
five undelivered aircraft to be completed in 2016. As of December 31, 2014, we did not have any aircraft classified as
flight equipment held for sale.
Note 14. Litigation
On April 24, 2012, the Company was named as a defendant in a complaint filed in Superior Court of the State
of California for the County of Los Angeles by AIG and ILFC (the “AIG/ILFC Complaint”). The complaint also named
as defendants certain executive officers and employees of the Company.
Among other things, the complaint, as amended, alleges breach of fiduciary duty, misappropriation of trade
secrets, the wrongful recruitment of ILFC employees, and the wrongful diversion of potential ILFC leasing
opportunities.
On August 15, 2013, the Company filed a cross-complaint against ILFC and AIG. The cross-complaint, as
amended, alleges breach of contract for the sale of goods in connection with an agreement entered into by AIG, acting
on behalf of ILFC, in January 2010 to sell 25 aircraft to the entity that became Air Lease Corporation.
The matters set forth in the AIG/ILFC Complaint are collectively referred to as the "litigation."
On April 22, 2015, the Company and certain executive officers and employees of the Company entered into a
settlement agreement and release ("the Settlement Agreement") with AIG, ILFC, and ILFC’s parent, AerCap Holdings
N.V., to settle all ongoing litigation. Pursuant to the terms of the Settlement Agreement, (i) all claims and counterclaims
asserted in the litigation were dismissed with prejudice, (ii) each of the parties to the litigation received full releases of
all claims and counterclaims asserted in the litigation, and (iii) the Company agreed to pay AIG the sum of $72.0
million. The Company recorded settlement expense of $72.0 million on the Consolidated Statement of Income for the
year ended December 31, 2015. The parties to the Settlement Agreement agreed that the settlement was intended solely
as a compromise of disputed claims, and that no party admits any wrongdoing or liability with respect to any matter
alleged in the litigation. On April 24, 2015, the parties filed a request for dismissal which was entered on April 29, 2015.
In December 2015, we received $4.5 million in insurance recoveries related to this matter, which are included in aircraft
sales, trading and other revenue in our Consolidated Statement of Income.
82
83
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
PART III
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be
disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the Securities and Exchange Commission, and such
information is accumulated and communicated to our management, including the Chief Executive Officer and Chief
Financial Officer (collectively, the “Certifying Officers”), as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, as the Company’s controls are designed to do, and management necessarily was required to
apply its judgment in evaluating the risk related to controls and procedures.
We have evaluated, under the supervision and with the participation of management, including the Certifying
Officers, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as amended, as of December 31, 2015. Based on that evaluation, our Certifying
Officers have concluded that our disclosure controls and procedures were effective at December 31, 2015.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers of the Company
Except as set forth below or as contained in Part I above, under “Executive Officers of the Company”, the other
information required by this item is incorporated by reference to the “Corporate Governance and Board Matters”, the
“Proposal 1: Election of Directors” and “Other Matters” sections of our Proxy Statement for the 2016 Annual Meeting of
Stockholders (the “2016 Proxy Statement”), which will be filed with the Securities and Exchange Commission no later
than April 30, 2016.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics for our directors, officers (including our principal
executive officer, principal financial officer and principal accounting officer) and employees. The Code of Business
Conduct and Ethics is available on our website at www.airleasecorp.com under the Investors tab.
Within the time period required by the Securities and Exchange Commission and the New York Stock
Exchange, we will post on our website at www.airleasecorp.com under the Investors tab any amendment to our Code of
Business Conduct and Ethics.
Corporate Governance Guidelines
Management’s Report on Internal Control Over Financial Reporting
We have adopted Corporate Governance Guidelines that are available on our website at www.airleasecorp.com
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s
management and Board of Directors regarding the preparation and fair presentation of published financial statements.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2015. In making this assessment, it used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013) . Based upon
its assessment, our management believes that, as of December 31, 2015, the Company’s internal control over financial
reporting is effective based on these criteria.
KPMG LLP, the independent registered public accounting firm that audited the consolidated financial
statements included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2015, which is included herein.
Changes in Internal Control Over Financial Reporting
under the Investors tab.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the “Corporate Governance and Board
Matters” and the “Executive Compensation” sections of the 2016 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the “Other Matters” section of the 2016
Proxy Statement, except for the information required by Item 201(d) of Regulation S-K, which is provided in Item 5 of
Part II above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
There were no changes in our internal control over financial reporting during the quarter ended December 31,
2015 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The information required by this item is incorporated by reference to the “Corporate Governance and Board
Matters” and the “Proposal 1: Election of Directors” sections of our 2016 Proxy Statement.
ITEM 9B. OTHER INFORMATION
None.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to the “Independent Auditor Fees and
Services” section of our 2016 Proxy Statement.
84
85
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
1.
Consolidated Financial Statements
The following documents are filed as part of this Annual Report on Form 10-K:
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements
Page
60
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
62
63
64
65
2.
Financial Statement Schedules
Financial statement schedules have been omitted as they are not required, not applicable, or the required
information is otherwise included in the consolidated financial statements or the notes thereto.
3.
Exhibits
Exhibit
Number
3.1
Exhibit Description
Restated Certificate of Incorporation of Air Lease
Corporation
Incorporated by Reference
Form
S-1
File No.
333-171734
Exhibit
3.1
Filing Date
January 14, 2011
3.2
Second Amended and Restated Bylaws of Air Lease
Corporation
10-K
001-35121
3.2
March 9, 2012
4.1
Form of Specimen Class A Common Stock Certificate S-1
333-171734
4.1
March 25, 2011
4.2
4.3
4.4
Registration Rights Agreement, dated as of June 4,
2010, between Air Lease Corporation and FBR Capital
Markets & Co., as the initial purchaser/placement agent
Senior Notes Indenture, dated as of March 16, 2012,
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee, (relating to
5.625% Senior Notes due 2017) ("March 2012
Indenture")
Supplemental Indenture, dated June 26, 2013, to the
March 2012 Indenture by and between Air Lease
Corporation and Deutsche Bank Trust Company
Americas, as Trustee, relating to 5.625% Senior Notes
due 2017
S-1
333-171734
4.2
January 14, 2011
8-K
001-35121
4.1
March 19, 2012
8-K
001-35121
4.2
June 26, 2013
Exhibit
Number
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
Exhibit Description
Senior Notes Indenture, dated as of September 26,
2012, between Air Lease Corporation and Deutsche
Bank Trust Company Americas, as Trustee (relating to
4.500% Senior Notes due 2016) ("September 2012
Indenture")
First Supplemental Indenture, dated as of October 3,
2012, to the September 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 4.5000%
Senior Notes due 2016)
Indenture, dated as of October 11, 2012, between Air
Lease Corporation and Deutsche Bank Trust Company
Americas, as trustee ("October 2012 Indenture")
First Supplemental Indenture, dated as of February 5,
2013, to the October 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 4.750 %
Senior Notes due 2020)
Second Supplemental Indenture, dated as of November
19, 2013, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating to
3.375% Senior Notes due 2019)
Third Supplemental Indenture, dated as of November
19, 2013, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating to an
eNotes Internet Auction Program)
Fourth Supplemental Indenture, dated as of March 11,
2014, to the October 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 3.875%
Senior Notes due 2021)
Fifth Supplemental Indenture, dated as of September
16, 2014, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating to
2.125% Senior Notes due 2018)
Incorporated by Reference
Form
8-K
File No.
001-35121
Exhibit
4.1
Filing Date
September 26,
2012
8-K
001-35121
4.2
October 3, 2012
S-3
333-184382
4.4
October 11, 2012
8-K
001-35121
4.2
February 5, 2013
8-K
001-35121
4.2
November 19,
2013
8-K
001-35121
4.2
January 23, 2014
8-K
001-35121
4.2
March 11, 2014
8-K
001-35121
4.2
September 16,
2014
86
87
Exhibit
Number
4.13
4.14
4.15
10.1
10.2
10.3
10.4
Exhibit Description
Sixth Supplemental Indenture, dated as of September
16, 2014, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating 4.250%
Senior Notes due 2024)
Seventh Supplemental Indenture, dated as of January
14, 2015, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating 3.750%
Senior Notes due 2022)
Eighth Supplemental Indenture, dated as of August 18,
2015, to the October 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 2.625%
Senior Notes due 2018).
Certain instruments defining the rights of holders of
long-term debt of Air Lease Corporation and all of its
subsidiaries for which consolidated or unconsolidated
financial statements are required to be filed are being
omitted pursuant to paragraph (b)(4)(iii)(A) of
Item 601 of Regulation S-K. Air Lease Corporation
agrees to furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.
Amended and Restated Warehouse Loan Agreement,
dated as of June 21, 2013, among ALC Warehouse
Borrower, LLC, as Borrower, the Lenders from time to
time party hereto, and Credit Suisse AG, New York
Branch, as Agent
Second Amendment to Amended and Restated
Warehouse Loan Agreement, dated as of July 23, 2014,
among ALC Warehouse Borrower, LLC, as Borrower,
the Lenders from time to time party hereto, and Credit
Suisse AG, New York Branch, as Agent
Amended and Restated Credit Agreement, dated as of
May 7, 2013, by and among Air Lease Corporation as
borrower, JP Morgan Chase Bank, N.A. as
administrative agent and several lenders from time to
time parties thereto
Second Amended and Restated Credit Agreement,
dated as of May 5, 2014, by and among Air Lease
Corporation, as borrower, the several lenders from time
to time parties thereto, and JPMorgan Chase Bank,
N.A. as Administrative Agent.
Incorporated by Reference
Form
8-K
File No.
001-35121
Exhibit
4.3
Filing Date
September 16,
2014
8-K
001-35121
4.2
January 14, 2015
8-K
001-35121
4.2
August 18, 2015
8-K
001-35121
10.1
June 24, 2013
8-K
001-35121
10.1
July 29, 2014
8-K
001-35121
10.1 May 13, 2013
10-Q
001-35121
10.5 May 8, 2014
Exhibit
Number
10.5
10.6
10.7
10.8
10.9
Exhibit Description
First Amendment, dated as of June 1, 2015, to the
Second Amended and Restated Credit Agreement,
dated as of May 5, 2014, among Air Lease
Corporation, as Borrower, the several lenders from
time to time parties thereto, and JP Morgan Chase
Bank, N.A. as Administrative Agent.
Extension Agreement, dated June 1, 2015, under the
Second Amended and Restated Credit Agreement,
dated as of May 5, 2014, among Air Lease
Corporation, [as Borrower,] the several banks and other
financial institutions or entities from time to time
parties thereto, and JP Morgan Chase Bank, N.A. as
Administrative Agent
New Lender Supplement, dated September 18, 2015, to
the Second Amended and Restated Credit Agreement,
among Air Lease Corporation, as Borrower, the several
lenders from time to time parties thereto, and
JPMorgan Chase Bank, N.A. as Administrative Agent.
New Lender Supplement, dated November 25, 2015, to
the Second Amended and Restated Credit Agreement,
among Air Lease Corporation, as Borrower, the several
lenders from time to time parties thereto, and
JPMorgan Chase Bank, N.A. as Administrative Agent.
Pledge and Security Agreement, dated as of May 26,
2010, among Air Lease Corporation, as Parent, ALC
Warehouse Borrower, LLC, as Borrower, the
subsidiaries of the Borrower from time to time party
hereto, Deutsche Bank Trust Company Americas, as
Collateral Agent, and Credit Suisse AG, New York
Branch, as Agent
Incorporated by Reference
Form
8-K
File No.
001-35121
Exhibit
10.1
Filing Date
June 2, 2015
8-K
001-35121
10.2
June 2, 2015
Filed herewith
Filed herewith
S-1
333-171734
10.2
January 14, 2011
10.10 Warrant No. 2 to purchase 268,125 shares of Common
S-1
333-171734
10.7
January 14, 2011
Stock, dated June 4, 2010
10.11† A330-200 Purchase Agreement, dated September 2,
S-1
333-171734
10.14 February 14, 2011
2010, by and between Air Lease Corporation and
Airbus S.A.S. ("A330-200 Purchase Agreement")
10.12† Amendment N° 1 to the A330-200 Purchase
S-1
333-171734
10.21 March 7, 2011
Agreement, dated December 1, 2010, by and between
Air Lease Corporation and Airbus S.A.S.
10.13† Amendment N° 2 to the A330-200 Purchase
S-1
333-171734
10.22 March 7, 2011
Agreement, dated January 6, 2011, by and between Air
Lease Corporation and Airbus S.A.S.
88
89
Exhibit
Incorporated by Reference
Number
10.14† Amendment N° 3 to the A330-200 Purchase
Exhibit Description
Form
S-1
File No.
333-171734
Exhibit
Filing Date
10.23 March 7, 2011
Exhibit
Number
10.25†
Agreement dated January 14, 2011, by and between Air
Lease Corporation and Airbus S.A.S.
10.15† Amendment N° 4 to the A330-200 Purchase
S-1
333-171734
10.24 March 7, 2011
Exhibit Description
Supplemental Agreement No. 2 to Purchase Agreement
No. PA-03659, dated September 13, 2013, by and
between Air Lease Corporation and The Boeing
Company
Incorporated by Reference
Form
10-Q
File No.
001-35121
Exhibit
10.3
Filing Date
November 7, 2013
10.16†
10.17†
Agreement, dated February 11, 2011, by and between
Air Lease Corporation and Airbus S.A.S.
Purchase Agreement Number PA-03524 dated as of
September 30, 2010, by and between Air Lease
Corporation and The Boeing Company ("Purchase
Agreement Number PA-03524")
Supplemental Agreement No. 1 to Purchase Agreement
Number PA-03524, dated as of June 30, 2011, by and
between Air Lease Corporation and The Boeing
Company
10.18† A320 Family Purchase Agreement, dated July 19,
2010, by and between Air Lease Corporation and
Airbus S.A.S. ("A320 Family Purchase Agreement").
S-1
333-171734
10.15 February 14, 2011
S-1
333-173817
10.32
July 28, 2011
S-1
333-171734
10.13 February 14, 2011
10.19† Amendment N° 1 to the A320 Family Purchase
S-1
333-171734
10.19 March 7, 2011
Agreement, dated December 1, 2010, by and between
Air Lease Corporation and Airbus S.A.S.
10.20† Amendment N° 2 to the A320 Family Purchase
S-1
333-171734
10.20 March 7, 2011
Agreement, dated December 1, 2010, by and between
Air Lease Corporation and Airbus S.A.S.
10.21† Aircraft Sale and Purchase Agreement, dated
November 5, 2010, by and among Air Lease
Corporation, the other purchasers listed in Schedule 1
thereto and the sellers listed in Schedule 1 thereto
S-1
333-171734
10.27 April 8, 2011
10.26†
Supplemental Agreement No. 3 to Purchase Agreement
No. PA-03659, dated July 11, 2014, by and between
Air Lease Corporation and The Boeing Company
10-Q
001-35121
10.2
November 6, 2014
10.27† A350XWB Family Purchase Agreement, dated
10-Q
001-35121
10.2 May 9, 2013
February 1, 2013, by and between Air Lease
Corporation and Airbus S.A.S. ("A350XWB Family
Purchase Agreement").
10.28† Amendment No. 1 to the A350XWB Family Purchase
Agreement, dated March 3, 2015, by and between Air
Lease Corporation and Airbus S.A.S.
10.29† Amendment No. 2 to the A350XWB Family Purchase
Agreement, dated March 3, 2015, by and between Air
Lease Corporation and Airbus S.A.S.
10.30† Amendment No. 3 to the A350XWB Family Purchase
Agreement, dated September 8, 2015, by and between
Air Lease Corporation and Airbus S.A.S.
10.31†
10.32†
Purchase Agreement No. PA-03791, dated July 3,
2012, by and between Air Lease Corporation and The
Boeing Company
Supplemental Agreement No. 2 to Purchase Agreement
No. 03791, dated September 13, 2013, by and between
Air Lease Corporation and The Boeing Company
10-Q
001-35121
10.2 May 7, 2015
10-Q
001-35121
10.3 May 7, 2015
10-Q
001-35121
10.1
November 5, 2015
10-Q
001-35121
10.1
November 7, 2013
10-Q
001-35121
10.2
November 7, 2013
10.22†
Purchase Agreement PA-03658, dated as of August 5,
2011, by and between Air Lease Corporation and The
Boeing Company ("Purchase Agreement PA-03658")
S-1
333-173817
10.33 August 12, 2011
10.33†
Supplemental Agreement No. 3 to Purchase Agreement
No. PA-03791, dated July 11, 2014, by and between
Air Lease Corporation and The Boeing Company
10-Q
001-35121
10.1
November 6, 2014
10.23†
Supplemental Agreement No. 5 to Purchase Agreement
No. PA-03658, dated February 27, 2013, by and
between Air Lease Corporation and The Boeing
Company
10.24†
Supplemental Agreement No. 7 to Purchase Agreement
No. PA-03658, dated July 9, 2014, by and between Air
Lease Corporation and The Boeing Company
10-Q
001-35121
10.1 May 9, 2013
10.34
A320 NEO Family Purchase Agreement, dated
May 10, 2012, by and between Air Lease Corporation
and Airbus S.A.S. (“A320 NEO Family Purchase
Agreement”).
10-Q
001-35121
10.2
August 9, 2012
10-Q
001-35121
10.3
November 6, 2014
10.35† Amendment No. 2 to A320 NEO Family Purchase
10-Q
001-35121
10.4
November 6, 2014
Agreement, dated July 14, 2014, by and between Air
Lease Corporation and Airbus S.A.S.
90
91
Exhibit
Incorporated by Reference
Number
10.36† Amendment No. 3 to A320 NEO Family Purchase
Exhibit Description
Form
10-Q
File No.
001-35121
Exhibit
10.5
Filing Date
November 6, 2014
Agreement, dated July 14, 2014, by and between Air
Lease Corporation and Airbus S.A.S.
10.37† Amendment No. 5 to the A320 NEO Family Purchase
Agreement, dated March 3, 2015, by and between Air
Lease Corporation and Airbus S.A.S.
10-Q
001-35121
10.4 May 7, 2015
10.38† A330-900 NEO Purchase Agreement, dated March 3,
10-Q
001-35121
10.1 May 7, 2015
2015, between Air Lease Corporation and Airbus
S.A.S.
10.39
Settlement Agreement and Release dated April 22,
2015, by and among Air Lease Corporation, American
International Group, Inc., International Lease Finance
Corporation and AerCap Holdings N.V. and other
parties named therein.
8-K
001-35121
10.1
April 23, 2015
10.40§ Amended and Restated Air Lease Corporation 2010
10-Q
001-35121
10.3 May 9, 2013
Equity Incentive Plan (effective as of June 4, 2010 and
amended as of February 15, 2011 and as further
amended as of February 26, 2013
10.41§
10.42§
10.43§
Form of Restricted Stock Unit Award Agreement under
the Amended and Restated Air Lease Corporation 2010
Equity Incentive Plan for awards beginning February
2014
Form of Restricted Stock Unit Award Agreement under
the Amended and Restated Air Lease Corporation 2010
Equity Incentive Plan
Form of Stock Option Award Agreement under the
Amended and Restated Air Lease Corporation 2010
Equity Incentive Plan
10-K
001-35121
10.2
February 27, 2014
S-1
333-171734
10.4
February 22, 2011
S-1
333-171734
10.5
February 22, 2011
10.45§ Air Lease Corporation 2013 Cash Bonus Plan
10-Q
001-35121
10.4 May 9, 2013
10.46§ Air Lease Corporation Amended and Restated Deferred
S-1
333-171734
10.17 February 22, 2011
Bonus Plan
10.47§ Air Lease Corporation Discretionary Cash Bonus Plan 10-Q
001-35121
10.1 May 8, 2014
10.48§ Air Lease Corporation 2014 Equity Incentive Plan
10-Q
001-35121
10.2 May 8, 2014
10.49§
Form of Grant Notice and Form of Restricted Stock
Units Agreement under the Air Lease Corporation
2014 Equity Incentive Plan
S-8
333-195755
4.5
May 7, 2014
Exhibit
Number
10.50§
10.51§
10.52§
Exhibit Description
Form of Grant Notice and Form of Restricted Stock
Units Agreement for Non-Employee Directors under
the Air Lease Corporation 2014 Equity Incentive Plan
Form of Grant Notice (Time-Based Vesting) and Form
of Restricted Stock Units Award Agreement (Time-
Based Vesting) under the Air Lease Corporation 2014
Equity Incentive Plan
Form of Grant Notice (Deferral)and Form of Restricted
Stock Units Award Agreement (Deferral) for Non-
Employee Directors under the Air Lease Corporation
2014 Equity Incentive Plan
10.53§
Employment Agreement, dated as of February 5, 2010,
by and between Air Lease Corporation and Steven F.
Udvar-Házy
10.54§ Amendment to Employment Agreement, dated as of
August 11, 2010, by and between Air Lease
Corporation and Steven F. Udvar-Házy
10.55§
10.56§
Second Amendment to Employment Agreement, dated
as of May 30, 2013, by and between Air Lease
Corporation and Steven F. Udvar-Házy
Employment Agreement, dated as of March 29, 2010,
by and between Air Lease Corporation and John L.
Plueger
10.57§ Amendment to Employment Agreement, dated as of
August 11, 2010, by and between Air Lease
Corporation and John L. Plueger
10.58§
Second Amendment to Employment Agreement, dated
as of May 30, 2013, by and between Air Lease
Corporation and John L. Plueger
Incorporated by Reference
Form
S-8
File No.
333-195755
Exhibit
4.6
Filing Date
May 7, 2014
10-K
001-35121
10.4
February 26, 2015
10-K
001-35121
10.4
February 26, 2015
S-1
333-171734
10.8
January 14, 2011
S-1
333-171734
10.9
January 14, 2011
8-K
001-35121
10.1 May 31, 2013
S-1
333-171734
10.10
January 14, 2011
S-1
333-171734
10.11
January 14, 2011
8-K
001-35121
10.2 May 31, 2013
10.59
Form of Indemnification Agreement with directors and
officers
S-1
333-171734
10.12 February 22, 2011
10.60§ Arrangement for directors' fees for non-employee
directors (description incorporated by reference to the
information under the caption "Director Compensation"
of Air Lease Corporation's Proxy Statement for the
2016 Annual Meeting of Stockholders to be held on
May 4, 2016
12.1
Computation of Ratio of Earnings to Fixed Charges
Filed herewith
92
93
Exhibit
Number
21.1
List of Subsidiaries of Air Lease Corporation
Exhibit Description
Form
File No.
Exhibit
23.1
Consent of Independent Registered Accounting Firm
Incorporated by Reference
SIGNATURES
Filing Date
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Furnished
herewith
Furnished
herewith
Filed herewith
Certification of the Chairman and Chief Executive
Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of the Senior Vice President and Chief
Financial Officer Pursuant to Section 302 of the
Sarbanes- Oxley Act of 2002
Certification of the Chairman and Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of the Senior Vice President and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
The following materials from Air Lease Corporation’s
Annual Report on Form 10-K for the year ended
December 31, 2014, formatted in eXtensible Business
Reporting Language (XBRL): (i) Consolidated
Statements of Operations, (ii) Consolidated Balance
Sheets, (iii) Consolidated Statements of Stockholders’
Equity, (iv) Consolidated Statements of Cash Flows,
and (v) Notes to Consolidated Financial Statements.
31.1
31.2
32.1
32.2
101
†
§
The Company has omitted confidential portions of the referenced exhibit and filed such confidential portions
separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under
Rule 406 promulgated under the Securities Act of 1933.
Management contract or compensatory plan or arrangement.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 25, 2016.
Air Lease Corporation
By:
/s/ Gregory B. Willis
Gregory B. Willis
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Steven F. Udvar-Házy
Steven F. Udvar-Házy
Chairman and Chief Executive Officer
February 25, 2016
(Principal Executive Officer)
/s/ John L. Plueger
John L. Plueger
/s/ Matthew J. Hart
Matthew J. Hart
/s/ Cheryl Gordon Krongard
Cheryl Gordon Krongard
/s/ Marshall O. Larsen
Marshall O. Larsen
/s/ Robert A. Milton
Robert A. Milton
/s/ Ian M. Saines
Ian M. Saines
/s/ Dr. Ronald D. Sugar
Dr. Ronald D. Sugar
President, Chief Operating Officer and
Director
February 25, 2016
Director
Director
Director
Director
Director
Director
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
February 25, 2016
94
95
EXHIBIT INDEX
Exhibit
Number
3.1
Exhibit Description
Restated Certificate of Incorporation of Air Lease
Corporation
Incorporated by Reference
Form
S-1
File No.
333-171734
Exhibit
3.1
Filing Date
January 14, 2011
3.2
Second Amended and Restated Bylaws of Air Lease
Corporation
10-K
001-35121
3.2
March 9, 2012
4.1
Form of Specimen Class A Common Stock Certificate S-1
333-171734
4.1
March 25, 2011
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Registration Rights Agreement, dated as of June 4,
2010, between Air Lease Corporation and FBR Capital
Markets & Co., as the initial purchaser/placement agent
Senior Notes Indenture, dated as of March 16, 2012,
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee, (relating to
5.625% Senior Notes due 2017) ("March 2012
Indenture")
Supplemental Indenture, dated June 26, 2013, to the
March 2012 Indenture by and between Air Lease
Corporation and Deutsche Bank Trust Company
Americas, as Trustee, relating to 5.625% Senior Notes
due 2017
Senior Notes Indenture, dated as of September 26,
2012, between Air Lease Corporation and Deutsche
Bank Trust Company Americas, as Trustee (relating to
4.500% Senior Notes due 2016) ("September 2012
Indenture")
First Supplemental Indenture, dated as of October 3,
2012, to the September 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 4.5000%
Senior Notes due 2016)
Indenture, dated as of October 11, 2012, between Air
Lease Corporation and Deutsche Bank Trust Company
Americas, as trustee ("October 2012 Indenture")
First Supplemental Indenture, dated as of February 5,
2013, to the October 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 4.750 %
Senior Notes due 2020)
S-1
333-171734
4.2
January 14, 2011
8-K
001-35121
4.1
March 19, 2012
8-K
001-35121
4.2
June 26, 2013
8-K
001-35121
4.1
September 26,
2012
8-K
001-35121
4.2
October 3, 2012
S-3
333-184382
4.4
October 11, 2012
8-K
001-35121
4.2
February 5, 2013
Exhibit
Number
4.9
4.10
4.11
4.12
4.13
4.14
4.15
Exhibit Description
Second Supplemental Indenture, dated as of November
19, 2013, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating to
3.375% Senior Notes due 2019)
Third Supplemental Indenture, dated as of November
19, 2013, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating to an
eNotes Internet Auction Program)
Fourth Supplemental Indenture, dated as of March 11,
2014, to the October 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 3.875%
Senior Notes due 2021)
Fifth Supplemental Indenture, dated as of September
16, 2014, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating to
2.125% Senior Notes due 2018)
Sixth Supplemental Indenture, dated as of September
16, 2014, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating 4.250%
Senior Notes due 2024)
Seventh Supplemental Indenture, dated as of January
14, 2015, to the October 2012 Indenture by and
between Air Lease Corporation and Deutsche Bank
Trust Company Americas, as Trustee (relating 3.750%
Senior Notes due 2022)
Eighth Supplemental Indenture, dated as of August 18,
2015, to the October 2012 Indenture by and between
Air Lease Corporation and Deutsche Bank Trust
Company Americas, as Trustee (relating to 2.625%
Senior Notes due 2018).
Incorporated by Reference
Form
8-K
File No.
001-35121
Exhibit
4.2
Filing Date
November 19,
2013
8-K
001-35121
4.2
January 23, 2014
8-K
001-35121
4.2
March 11, 2014
8-K
001-35121
4.2
September 16,
2014
8-K
001-35121
4.3
September 16,
2014
8-K
001-35121
4.2
January 14, 2015
8-K
001-35121
4.2
August 18, 2015
96
97
Exhibit
Number
Exhibit Description
Form
File No.
Exhibit
Filing Date
Incorporated by Reference
8-K
001-35121
10.1
June 24, 2013
8-K
001-35121
10.1
July 29, 2014
8-K
001-35121
10.1 May 13, 2013
Certain instruments defining the rights of holders of
long-term debt of Air Lease Corporation and all of its
subsidiaries for which consolidated or unconsolidated
financial statements are required to be filed are being
omitted pursuant to paragraph (b)(4)(iii)(A) of
Item 601 of Regulation S-K. Air Lease Corporation
agrees to furnish a copy of any such instrument to the
Securities and Exchange Commission upon request.
Amended and Restated Warehouse Loan Agreement,
dated as of June 21, 2013, among ALC Warehouse
Borrower, LLC, as Borrower, the Lenders from time to
time party hereto, and Credit Suisse AG, New York
Branch, as Agent
Second Amendment to Amended and Restated
Warehouse Loan Agreement, dated as of July 23, 2014,
among ALC Warehouse Borrower, LLC, as Borrower,
the Lenders from time to time party hereto, and Credit
Suisse AG, New York Branch, as Agent
Amended and Restated Credit Agreement, dated as of
May 7, 2013, by and among Air Lease Corporation as
borrower, JP Morgan Chase Bank, N.A. as
administrative agent and several lenders from time to
time parties thereto
Second Amended and Restated Credit Agreement,
dated as of May 5, 2014, by and among Air Lease
Corporation, as borrower, the several lenders from time
to time parties thereto, and JPMorgan Chase Bank,
N.A. as Administrative Agent.
First Amendment, dated as of June 1, 2015, to the
Second Amended and Restated Credit Agreement,
dated as of May 5, 2014, among Air Lease
Corporation, as Borrower, the several lenders from
time to time parties thereto, and JP Morgan Chase
Bank, N.A. as Administrative Agent.
Extension Agreement, dated June 1, 2015, under the
Second Amended and Restated Credit Agreement,
dated as of May 5, 2014, among Air Lease
Corporation, [as Borrower,] the several banks and other
financial institutions or entities from time to time
parties thereto, and JP Morgan Chase Bank, N.A. as
Administrative Agent
10.1
10.2
10.3
10.4
10.5
10.6
Exhibit
Number
10.7
10.8
10.9
Exhibit Description
New Lender Supplement, dated September 18, 2015, to
the Second Amended and Restated Credit Agreement,
among Air Lease Corporation, as Borrower, the several
lenders from time to time parties thereto, and
JPMorgan Chase Bank, N.A. as Administrative Agent.
New Lender Supplement, dated November 25, 2015, to
the Second Amended and Restated Credit Agreement,
among Air Lease Corporation, as Borrower, the several
lenders from time to time parties thereto, and
JPMorgan Chase Bank, N.A. as Administrative Agent.
Pledge and Security Agreement, dated as of May 26,
2010, among Air Lease Corporation, as Parent, ALC
Warehouse Borrower, LLC, as Borrower, the
subsidiaries of the Borrower from time to time party
hereto, Deutsche Bank Trust Company Americas, as
Collateral Agent, and Credit Suisse AG, New York
Branch, as Agent
Incorporated by Reference
Form
File No.
Exhibit
Filing Date
Filed herewith
Filed herewith
S-1
333-171734
10.2
January 14, 2011
10.10 Warrant No. 2 to purchase 268,125 shares of Common
S-1
333-171734
10.7
January 14, 2011
Stock, dated June 4, 2010
10.11† A330-200 Purchase Agreement, dated September 2,
S-1
333-171734
10.14 February 14, 2011
2010, by and between Air Lease Corporation and
Airbus S.A.S. ("A330-200 Purchase Agreement")
10-Q
001-35121
10.5 May 8, 2014
10.12† Amendment N° 1 to the A330-200 Purchase
S-1
333-171734
10.21 March 7, 2011
8-K
001-35121
10.1
June 2, 2015
8-K
001-35121
10.2
June 2, 2015
Agreement, dated December 1, 2010, by and between
Air Lease Corporation and Airbus S.A.S.
10.13† Amendment N° 2 to the A330-200 Purchase
S-1
333-171734
10.22 March 7, 2011
Agreement, dated January 6, 2011, by and between Air
Lease Corporation and Airbus S.A.S.
10.14† Amendment N° 3 to the A330-200 Purchase
S-1
333-171734
10.23 March 7, 2011
Agreement dated January 14, 2011, by and between Air
Lease Corporation and Airbus S.A.S.
10.15† Amendment N° 4 to the A330-200 Purchase
S-1
333-171734
10.24 March 7, 2011
Agreement, dated February 11, 2011, by and between
Air Lease Corporation and Airbus S.A.S.
10.16†
Purchase Agreement Number PA-03524 dated as of
September 30, 2010, by and between Air Lease
Corporation and The Boeing Company ("Purchase
Agreement Number PA-03524")
S-1
333-171734
10.15 February 14, 2011
98
99
Incorporated by Reference
Exhibit
Incorporated by Reference
Form
S-1
File No.
333-173817
Exhibit
10.32
Filing Date
July 28, 2011
Number
10.27† A350XWB Family Purchase Agreement, dated
Exhibit Description
Form
10-Q
File No.
001-35121
Exhibit
Filing Date
10.2 May 9, 2013
Exhibit
Number
10.17†
Exhibit Description
Supplemental Agreement No. 1 to Purchase Agreement
Number PA-03524, dated as of June 30, 2011, by and
between Air Lease Corporation and The Boeing
Company
10.18† A320 Family Purchase Agreement, dated July 19,
2010, by and between Air Lease Corporation and
Airbus S.A.S. ("A320 Family Purchase Agreement").
S-1
333-171734
10.13 February 14, 2011
10.19† Amendment N° 1 to the A320 Family Purchase
S-1
333-171734
10.19 March 7, 2011
Agreement, dated December 1, 2010, by and between
Air Lease Corporation and Airbus S.A.S.
10.20† Amendment N° 2 to the A320 Family Purchase
S-1
333-171734
10.20 March 7, 2011
Agreement, dated December 1, 2010, by and between
Air Lease Corporation and Airbus S.A.S.
10.21† Aircraft Sale and Purchase Agreement, dated
November 5, 2010, by and among Air Lease
Corporation, the other purchasers listed in Schedule 1
thereto and the sellers listed in Schedule 1 thereto
S-1
333-171734
10.27 April 8, 2011
10.22†
Purchase Agreement PA-03658, dated as of August 5,
2011, by and between Air Lease Corporation and The
Boeing Company ("Purchase Agreement PA-03658")
S-1
333-173817
10.33 August 12, 2011
10-Q
001-35121
10.1 May 9, 2013
10-Q
001-35121
10.3
November 6, 2014
10.23†
Supplemental Agreement No. 5 to Purchase Agreement
No. PA-03658, dated February 27, 2013, by and
between Air Lease Corporation and The Boeing
Company
10.24†
Supplemental Agreement No. 7 to Purchase Agreement
No. PA-03658, dated July 9, 2014, by and between Air
Lease Corporation and The Boeing Company
10.25†
Supplemental Agreement No. 2 to Purchase Agreement
No. PA-03659, dated September 13, 2013, by and
between Air Lease Corporation and The Boeing
Company
10.26†
Supplemental Agreement No. 3 to Purchase Agreement
No. PA-03659, dated July 11, 2014, by and between
Air Lease Corporation and The Boeing Company
February 1, 2013, by and between Air Lease
Corporation and Airbus S.A.S. ("A350XWB Family
Purchase Agreement").
10.28† Amendment No. 1 to the A350XWB Family Purchase
Agreement, dated March 3, 2015, by and between Air
Lease Corporation and Airbus S.A.S.
10.29† Amendment No. 2 to the A350XWB Family Purchase
Agreement, dated March 3, 2015, by and between Air
Lease Corporation and Airbus S.A.S.
10.30† Amendment No. 3 to the A350XWB Family Purchase
Agreement, dated September 8, 2015, by and between
Air Lease Corporation and Airbus S.A.S.
10.31†
10.32†
Purchase Agreement No. PA-03791, dated July 3,
2012, by and between Air Lease Corporation and The
Boeing Company
Supplemental Agreement No. 2 to Purchase Agreement
No. 03791, dated September 13, 2013, by and between
Air Lease Corporation and The Boeing Company
10-Q
001-35121
10.2 May 7, 2015
10-Q
001-35121
10.3 May 7, 2015
10-Q
001-35121
10.1
November 5, 2015
10-Q
001-35121
10.1
November 7, 2013
10-Q
001-35121
10.2
November 7, 2013
10.33†
Supplemental Agreement No. 3 to Purchase Agreement
No. PA-03791, dated July 11, 2014, by and between
Air Lease Corporation and The Boeing Company
10-Q
001-35121
10.1
November 6, 2014
10.34
A320 NEO Family Purchase Agreement, dated
May 10, 2012, by and between Air Lease Corporation
and Airbus S.A.S. (“A320 NEO Family Purchase
Agreement”).
10-Q
001-35121
10.2
August 9, 2012
10.35† Amendment No. 2 to A320 NEO Family Purchase
10-Q
001-35121
10.4
November 6, 2014
10-Q
001-35121
10.3
November 7, 2013
Agreement, dated July 14, 2014, by and between Air
Lease Corporation and Airbus S.A.S.
10-Q
001-35121
10.2
November 6, 2014
10.36† Amendment No. 3 to A320 NEO Family Purchase
10-Q
001-35121
10.5
November 6, 2014
Agreement, dated July 14, 2014, by and between Air
Lease Corporation and Airbus S.A.S.
10.37† Amendment No. 5 to the A320 NEO Family Purchase
Agreement, dated March 3, 2015, by and between Air
Lease Corporation and Airbus S.A.S.
10-Q
001-35121
10.4 May 7, 2015
10.38† A330-900 NEO Purchase Agreement, dated March 3,
10-Q
001-35121
10.1 May 7, 2015
2015, between Air Lease Corporation and Airbus
S.A.S.
100
101
Exhibit
Number
10.39
Exhibit Description
Settlement Agreement and Release dated April 22,
2015, by and among Air Lease Corporation, American
International Group, Inc., International Lease Finance
Corporation and AerCap Holdings N.V. and other
parties named therein.
Incorporated by Reference
Form
8-K
File No.
001-35121
Exhibit
10.1
Filing Date
April 23, 2015
Exhibit
Number
10.52§
Exhibit Description
Form of Grant Notice (Deferral)and Form of Restricted
Stock Units Award Agreement (Deferral) for Non-
Employee Directors under the Air Lease Corporation
2014 Equity Incentive Plan
Incorporated by Reference
Form
10-K
File No.
001-35121
Exhibit
10.4
Filing Date
February 26, 2015
10.40§ Amended and Restated Air Lease Corporation 2010
10-Q
001-35121
10.3 May 9, 2013
Equity Incentive Plan (effective as of June 4, 2010 and
amended as of February 15, 2011 and as further
amended as of February 26, 2013
10.41§
10.42§
10.43§
Form of Restricted Stock Unit Award Agreement under
the Amended and Restated Air Lease Corporation 2010
Equity Incentive Plan for awards beginning February
2014
Form of Restricted Stock Unit Award Agreement under
the Amended and Restated Air Lease Corporation 2010
Equity Incentive Plan
Form of Stock Option Award Agreement under the
Amended and Restated Air Lease Corporation 2010
Equity Incentive Plan
10-K
001-35121
10.2
February 27, 2014
S-1
333-171734
10.4
February 22, 2011
S-1
333-171734
10.5
February 22, 2011
10.45§ Air Lease Corporation 2013 Cash Bonus Plan
10-Q
001-35121
10.4 May 9, 2013
10.46§ Air Lease Corporation Amended and Restated Deferred
S-1
333-171734
10.17 February 22, 2011
Bonus Plan
10.47§ Air Lease Corporation Discretionary Cash Bonus Plan 10-Q
001-35121
10.1 May 8, 2014
10.48§ Air Lease Corporation 2014 Equity Incentive Plan
10-Q
001-35121
10.2 May 8, 2014
10.49§
Form of Grant Notice and Form of Restricted Stock
Units Agreement under the Air Lease Corporation
2014 Equity Incentive Plan
S-8
333-195755
4.5
May 7, 2014
10.53§
Employment Agreement, dated as of February 5, 2010,
by and between Air Lease Corporation and Steven F.
Udvar-Házy
10.54§ Amendment to Employment Agreement, dated as of
August 11, 2010, by and between Air Lease
Corporation and Steven F. Udvar-Házy
10.55§
10.56§
Second Amendment to Employment Agreement, dated
as of May 30, 2013, by and between Air Lease
Corporation and Steven F. Udvar-Házy
Employment Agreement, dated as of March 29, 2010,
by and between Air Lease Corporation and John L.
Plueger
10.57§ Amendment to Employment Agreement, dated as of
August 11, 2010, by and between Air Lease
Corporation and John L. Plueger
10.58§
Second Amendment to Employment Agreement, dated
as of May 30, 2013, by and between Air Lease
Corporation and John L. Plueger
S-1
333-171734
10.8
January 14, 2011
S-1
333-171734
10.9
January 14, 2011
8-K
001-35121
10.1 May 31, 2013
S-1
333-171734
10.10
January 14, 2011
S-1
333-171734
10.11
January 14, 2011
8-K
001-35121
10.2 May 31, 2013
10.59
Form of Indemnification Agreement with directors and
officers
S-1
333-171734
10.12 February 22, 2011
10.60§ Arrangement for directors' fees for non-employee
directors (description incorporated by reference to the
information under the caption "Director Compensation"
of Air Lease Corporation's Proxy Statement for the
2016 Annual Meeting of Stockholders to be held on
May 4, 2016
10.50§
Form of Grant Notice and Form of Restricted Stock
Units Agreement for Non-Employee Directors under
the Air Lease Corporation 2014 Equity Incentive Plan
10.51§
Form of Grant Notice (Time-Based Vesting) and Form
of Restricted Stock Units Award Agreement (Time-
Based Vesting) under the Air Lease Corporation 2014
Equity Incentive Plan
S-8
333-195755
4.6
May 7, 2014
12.1
Computation of Ratio of Earnings to Fixed Charges
Filed herewith
10-K
001-35121
10.4
February 26, 2015
21.1
23.1
31.1
List of Subsidiaries of Air Lease Corporation
Consent of Independent Registered Accounting Firm
Certification of the Chairman and Chief Executive
Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Filed herewith
Filed herewith
Filed herewith
102
103
Exhibit
Number
31.2
32.1
32.2
101
Incorporated by Reference
Exhibit Description
Form
File No.
Exhibit
Certification of the Senior Vice President and Chief
Financial Officer Pursuant to Section 302 of the
Sarbanes- Oxley Act of 2002
Certification of the Chairman and Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of the Senior Vice President and Chief
Financial Officer pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
The following materials from Air Lease Corporation’s
Annual Report on Form 10-K for the year ended
December 31, 2014, formatted in eXtensible Business
Reporting Language (XBRL): (i) Consolidated
Statements of Operations, (ii) Consolidated Balance
Sheets, (iii) Consolidated Statements of Stockholders’
Equity, (iv) Consolidated Statements of Cash Flows,
and (v) Notes to Consolidated Financial Statements.
Filing Date
Filed herewith
Furnished
herewith
Furnished
herewith
Filed herewith
†
§
The Company has omitted confidential portions of the referenced exhibit and filed such confidential portions
separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under
Rule 406 promulgated under the Securities Act of 1933.
Management contract or compensatory plan or arrangement.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Exhibit 12.1
(in thousands, except ratio)
Earnings:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add:
Provision for income taxes . . . . . . . . . . . . . . . . . . .
Fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less:
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings as adjusted (A) . . . . . . . . . . . . . . . . . . . .
Fixed charges
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . .
Interest factors of rents(1) . . . . . . . . . . . . . . . . . . . .
Fixed charges as adjusted (B) . . . . . . . . . . . . . . . .
Ratio of earnings to fixed charges ((A) divided by
(B)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Estimated to be 1/3 of rent expense.
Year Ended December 31,
2015
2014
2013
2012
2011
$ 253,391 $ 255,998 $ 190,411 $ 131,919 $
53,232
139,562
306,937
138,778
263,982
103,031
225,740
72,054
167,638
(40,118)
(42,775)
(32,659)
(19,388)
$ 659,772 $ 615,983 $ 486,523 $ 352,223 $
29,609
68,797
(10,390)
141,248
$ 266,144 $ 220,590 $ 192,370 $ 147,413 $
40,118
675
42,775
617
32,659
711
19,388
837
$ 306,937 $ 263,982 $ 225,740 $ 167,638 $
57,692
10,390
715
68,797
2.15
2.33
2.16
2.10
2.05
104
AIR LEASE CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Name of Company/Jurisdiction of Incorporation or Formation
Delaware
ALC Warehouse Borrower, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ireland
ALC Blarney Aircraft Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit 21.1
Percentage of
Voting Securities
Owned by the
Registrant or a
Subsidiary of
the Registrant
100
100
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
The Board of Directors
Air Lease Corporation:
We consent to the incorporation by reference in the Registration Statements (333-207308 and 333-185378) on
Form S-3 and (333-174708 and 333-195755) on Form S-8 of Air Lease Corporation of our reports dated February 25,
2016, with respect to the consolidated balance sheets of Air Lease Corporation and subsidiaries as of December 31, 2015
and 2014, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years
in the three-year period ended December 31, 2015, and the effectiveness of internal control over financial reporting as of
December 31, 2015, which reports appear in the December 31, 2015 Annual Report on Form 10-K of Air Lease
Corporation.
/s/ KPMG LLP
Los Angeles, California
February 25, 2016
CERTIFICATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF THE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
Exhibit 31.2
I, Steven F. Udvar-Házy, certify that:
I, Gregory B. Willis, certify that:
1.
2.
I have reviewed this Annual Report on Form 10-K of Air Lease Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 25, 2016
/s/ Steven F. Udvar-Házy
Steven F. Udvar-Házy
Chairman and Chief Executive Officer
(Principal Executive Officer)
1.
2.
I have reviewed this Annual Report on Form 10-K of Air Lease Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: February 25, 2016
/s/ Gregory B. Willis
Gregory B. Willis
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting
Officer)
Exhibit 32.1
Exhibit 32.2
CERTIFICATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER PURSUANT TO 18
U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION OF THE SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Air Lease Corporation (the “Company”) on Form 10-K for the year
ended December 31, 2015 (the “Report”), I, Steven F. Udvar-Házy, Chairman and Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
In connection with the Annual Report of Air Lease Corporation (the “Company”) on Form 10-K for the year
ended December 31, 2015 (the “Report”), I, Gregory B. Willis, Senior Vice President and Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(i)
(ii)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
(i)
(ii)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: February 25, 2016
Date: February 25, 2016
/s/ Steven F. Udvar-Házy
Steven F. Udvar-Házy
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ Gregory B. Willis
Gregory B. Willis
Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
LEADERSHIP TEAM
Executive Leadership
Technical Asset Management
Corporate Information
Transfer Agent
American Stock Transfer & Trust Company, LLC
Corporate Headquarters
Air Lease Corporation
Pierce Chang
Vice President
Eric Hoogenkamp
Vice President
Aircraft Procurement and Specification
$4.03
John Poerschke
Senior Vice President
$3.16
$4.64
Ozzie Chraibi
Vice President
$2.40
$1.46
Lance Pekala
Vice President
Commercial Contracts
6201 15th Avenue
Brooklyn, NY 11219
877.833.6643
www.amstock.com
Independent Registered Public
Accounting Firm
KPMG LLP
550 South Hope Street, Suite 1500
Los Angeles, CA 90071
213.972.4000
www.kpmg.com
2000 Avenue of the Stars, Suite 1000N
Los Angeles, California 90067
310.553.0555
Stock Exchange Listing
New York Stock Exchange (Symbol: AL)
Steven F. Udvar-H´azy
Chairman and Chief Executive Officer
John L. Plueger
President and Chief Operating Officer
$1.22
Marketing and Commercial Affairs
$1.05
Grant Levy
$0.86
Executive Vice President
$0.66
Alex A. Khatibi
Executive Vice President
$0.34
Marc Baer
Executive Vice President
Jie Chen
Executive Vice President
2012
2013
2011
2014
2015
Kishore Korde
Total Revenue
Executive Vice President
(In Billions)
Michael Bai
Vice President
Chi Yan
Vice President
Legal
Carol Forsyte
Executive Vice President, General Counsel,
Corporate Secretary, and Chief Compliance Officer
Robert C. McNitt, Jr.
Senior Vice President and Corporate Counsel
Toby MacCary
Senior Vice President and Corporate Counsel
Czar Vigil
Senior Vice President and Corporate Counsel
Jenny Van Le
Vice President and Corporate Counsel
Finance and Accounting
Gregory B. Willis
Senior Vice President and Chief Financial Officer
Sabrina Lemmens
Assistant Vice President and Controller
2012
2013
2014
2015
2011
Sara Evans
Vice President
Stephanie Brimmer
Assistant Vice President
Earnings Per Share
(Adjusted Diluted EPS)
Strategic Planning
Ryan McKenna
Vice President
Human Resources and Office Management
Courtney McKeown
Assistant Vice President
Board of Directors
Steven F. Udvar-H´azy
Chairman and Chief Executive Officer
John L. Plueger
President and Chief Operating Officer
Robert A. Milton
Lead Independent Director; Chairman, Governance
Committee; Audit Committee; Compensation Committee
Matthew J. Hart
Chairman, Audit Committee; Governance Committee
Ronald D. Sugar
Chairman, Compensation Committee; Governance
Committee
AJ Abedin
Treasurer
Air Lease Corporation is a leading aircraft leasing company based in Los Angeles, California. ALC and its team of dedicated
and experienced professionals are principally engaged in purchasing new commercial aircraft delivering from its direct orders
with Boeing and Airbus, and leasing them to its airline customers worldwide through customized aircraft leasing and financial
solutions. The mission of ALC is to work with these airlines to modernize and grow their fleets, consult with manufacturers
as they develop the next generation of fuel-efficient and environmentally friendly aircraft, and continue to explore strategic
business solutions for our clients to support their growth and success. Beyond lease expertise, ALC offers route and schedule
analysis, fleet optimization and planning, aircraft and engine purchasing consulting, aircraft procurement services, aircraft
financing support, aircraft investment analysis and recommendations, and can act as global servicer and manager for aircraft
lease portfolios.
Cheryl Gordon Krongard
Compensation Committee
Ian M. Saines
Audit Committee
Marshall O. Larsen
Governance Committee
Annual Meeting
May 4, 2016
7:30 AM Pacific Time
Century Plaza Towers
2029 Century Park East
Los Angeles, California 90067
Concourse Level, Conference Room A
Form 10-K and Other Reports
Stockholders may receive a copy of the 2015 Form
10-K and other reports we file with the Securities and
Exchange Commission, without charge by writing to:
Air Lease Corporation
2000 Avenue of the Stars, Suite 1000N
Los Angeles, California 90067
Or by email to: investors@airleasecorp.com
Please visit www.airleasecorp.com to view
or download a PDF of this annual report.
Forward-Looking Statements
This Annual Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform
Act of 1995, including statements about the future of our business. Such statements are based on current expectations
and projections about our future results, prospects and opportunities and are not guarantees of future performance. Such
statements will not be updated unless required by law. Actual results and performance may differ materially from those
expressed or forecasted in forward-looking statements due to a number of factors, including those discussed in our filings
with the Securities and Exchange Commission.
Air Lease Corporation
2015 Annual Report
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2000 Avenue of the Stars, Suite 1000N
Los Angeles, CA 90067 USA
www.airleasecorp.com