Air Lease

Air Lease CorporationAmey DargudeRahul GohilShruti ShahVanditha Mysore RavindranathYujiang (Walter) ChenSource: http://airleasecorp.com/Nov 17, 2015

AgendaCurrent HoldingCompany and Business OverviewMacroeconomic OverviewComparable ValuationTechnical AnalysisDCF ValuationRecommendationOur Current HoldingTicker: ALExchange Listed: NYSEBought: 400 shares at $22.32Current Price: $32.71Return: $4156 (46.55%)Percentage of portfolio = 3.008%Source: Yahoo Finance, https://www.business.illinois.edu/finance/rcmp/Research.aspx?Cat=Portfolio Company OverviewFounded on February 2010Based out of Los Angeles, CaliforniaNo. of Offices 2- LA & Dublin (Ireland)IPO 19th April, 2011 (Raised estimated $965.6 mm)Founder, Chairman & CEO - Steven F. Udvar-HazyFounded ILFSNumber of Employees 65 (Full time)

Source: http://airleasecorp.com/about/, Yahoo Finance, WikipediaBusiness ModelSource: 10-k 2014, Page 4, 5Purchase new aircraftsAir LeaseSell Aircrafts to third partiesLease aircrafts to airlinesFleet Management ServicesLease Term & Average Age as of Sep 30, 2015 (End of quarter 3)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.5Business OverviewSource: 10-k 2014, and 10-Q Nov 2015Current Fleet SizeOwned = 235Managed = 26Customers 77 airlines across 46 countriesSuppliers Boeing, Airbus, Embraer, ATRFleet size (Owned & Managed) as of Sep 30, 2015 (End of quarter 3)6Business OverviewWeighted average lease term 7.3 yearsAverage age of the fleet 3.5 years

Source: 10-k 2014, Page 4, 5Lease Term & Average Age as of Sep 30, 2015 (End of quarter 3)7Key Statistics about Air LeaseSource: 10-Q 3rd Quarter 2015Announced purchase schedule of 387 aircrafts to be delivered until 2024 from Boeing, Airbus & ATRSigned lease agreements for 119 aircraftsPurchase price = $30.7 billionOne of the largest customers of Boeing & AirbusBoeing 737 family Worlds best selling aircraft (83)Airbus A320 - Currently the world's best selling jet airliner & 2nd best in history (39)

Management PhilosophyFocus on emerging markets Experiencing increased demand for passenger airline travelMature markets North America & Western EuropeReplace aging aircraft with new, modern technology & more fuel efficient aircraftsFewer financing alternatives in emerging marketsCommand relatively higher lease rates compared to those in mature marketsDiversify leases & lessees by geography, lease term, aircraft age & typeStrategy to own an aircraft during the first third of its expected 25 year useful lifeSource: 10-k 2014, page 4Emerging Markets - Asia, Latin America, Middle East Mature Markets - Replacement opportunities replace aging aircraft with new, modern technology & fuel efficient jet aircraft

9Air Lease StrategyHighly in demand, widely distributed, modern technology, fuel efficient

Strategically target the replacement of aging aircraft with modern technology aircraft

Supplement order pipeline with opportunistic purchases of aircraft in the secondary market

For new aircraft deliveries, source many components separately

Often times able to achieve lower pricing

Allows airlines to avoid financial risk

Fleet flexibility enables airlines to more effectively operate and compete in their respective markets

Enter into a lease agreement 18 to 36 months in advance of the delivery of a new aircraft

Sign a follow-on lease 6 to 12 months ahead of the scheduled expiry of the initial lease term

Air LeaseAircraft Acquisition StrategyAircraft Leasing StrategySource: 10-k 2014 page 7, 8Air Lease acquisition strategyComponents include seats, safety equipment, avionics, galleys, cabin finishes, engines.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.With this purchasing strategy, we are able to meet specific customer configuration requirements and lower the total acquisition cost of the aircraft.

Air lease leasing Financial risk associated with these capital intensive assets which have an expected 25 year useful life

10Industry & Macroeconomic ReviewOver the past 30 years, the aviation industry has grown at 5 percent annuallyIndustry traffic grew at 6% in 2014To carry this additional traffic, New aircrafts - 4 to 4.5% of the installed fleet, approx. 900 airplanesReplacement Requirement - 2 to 3 %, approx. 500 airplanesThe two largest fleet domiciles, Europe and North AmericaSource: Boeing (Traffic and market outlook)

http://www.boeing.com/commercial/market/long-term-market/traffic-and-market-outlook/Over the past 30 years, the aviation industry has experienced recessions, oil-price shocks, near pandemics, wars, and security threats, yet traffic has continued to grow on average at 5 percent annually. Since fleet replacement is largely less optional than fleet growth, it provides a solid, stable base for long-term demand for new airplanes. With a solid foundation of economic development, increased trade, and increasing efficiency, annual airplane demand is projected to increase 35 to 40 percent over the next decade.Industry traffic grew approximately 6% in 2014 fourth consecutive year of growth at or above 5%.To carry this additional traffic, approximately 900 additional airplanes, 4 to 4.5 percent of the installed fleet, were needed.Annual industry replacement requirements in 2014 numbered approximately 2 to 3 percent of the installed fleet, or approximately 500 airplanes.

11GDP is a strong indicator for the Current Market OutlookGDP to grow at 3.1 percent over the next 20 years

Industry net profit doubled to US$20 billion in 2014 over 2013

Airlines continue to focus on reducing costs and boosting revenues

Over the past decade, the airline industry has achieved 7% CAGR

Fuel averages 25 percent of airline cost

Oil prices are expected to remain below $70 per barrel until 2018

Source: Boeing (Traffic and market outlook, Business and Market Environment), Airbus

Industry & Macroeconomic Reviewhttp://www.boeing.com/commercial/market/long-term-market/business-and-market-environment/Strong demand, efficiency initiatives, and falling oil prices in the fourth quarter helped airlines nearly double industry net profit to US$20 billion in 2014 over 2013.Airline financials are expected to continue on this trend as airlines continue to focus on reducing costs and boosting revenues. On the cost side, the sharp decline in oil prices is a significant near-term tailwind, with fuel averaging 25 percent of airline cost structures.

12Risk FactorsSWOT AnalysisBuyers Bargaining Power (Low)

Large customer base and only few top companies lead 95% of the marketThreat of new entrants (Low)

Huge capital investmentRequires expertise and customer relationStringent government regulationsSupplier Bargaining Power (High)

Very few big suppliers in the industry

Rivalry among existing competitors (Moderate)Industry leader but competition from other leasing companies & brokersFragmented market and internationalizedSimilar product and less differentiationThreat from substitutes (Low)

Only big airline companies can own aircraftsMany small players in the industry, hence prefer leasingPorters Five ForcesAir lease CompetitorsBusiness ModelFleet SizeInternational presence

Source: 10K ReportValuation Comparable Analysis

Financials Ratio Analysis10-K Reports (2011 2014)18Financials Ratio Analysis10-K Report (2011-2014)

Financials Ratio Analysis10-K Reports (2011 2014)

Technical Analysis

Source: Yahoo FinanceAssumptions (in 000)

Discounted Cash Flow Valuation

23RecommendationSELL 200 shares at Market PriceThank YouQ & A