If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At ~~May 4,~~August 3, 2022, there were ~~110,858,351~~110,892,097 shares of Air Lease Corporation’s Class A common stock outstanding.

Note About Forward-Looking Statements

Air Lease Corporation and Subsidiaries

Form 10-Q

For the Quarterly Period Ended ~~March 31,~~June 30, 2022

TABLE OF CONTENTS

Page

PART I—FINANCIAL INFORMATION

Item 1

Financial Statements

Consolidated Balance Sheets—~~March 31,~~June 30, 2022 and December 31, 2021 (unaudited)

Consolidated Statements of Operations and Other Comprehensive Income/(Loss)—Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021 (unaudited)

Consolidated Statement of Shareholders’ Equity—Three and Six Months Ended ~~March 31,~~June 30, 2022 and 2021 (unaudited)

Consolidated Statements of Cash Flows—~~Three~~Six Months Ended ~~March 31,~~June 30, 2022 and 2021 (unaudited)

Notes to Consolidated Financial Statements (unaudited)

910

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1820

Item 3

Quantitative and Qualitative Disclosures About Market Risk

3439

Item 4

Controls and Procedures

3540

PART II—OTHER INFORMATION

Unregistered Sales of Equity Securities and Use of Proceeds

3740

Item 3

Defaults Upon Senior Securities

3741

Item 4

Mine Safety Disclosures

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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-Q and include statements regarding, among other matters, the state of the airline industry, including the impact of Russia’s invasion of Ukraine and the impact of sanctions imposed on Russia, our access to the capital markets, the impact of lease deferrals and other accommodations, aircraft delivery delays and other factors affecting our financial condition or results of operations. Words such as “can,” “could,” “may,” “predicts,” “potential,” “will,” “projects,” “continuing,” “ongoing,” “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:

• our inability to obtain additional capital on favorable terms, or at all, to acquire aircraft, service our debt obligations and refinance maturing debt obligations;

• increases in our cost of borrowing or changes in interest rates;

• our inability to generate sufficient returns on our aircraft investments through strategic acquisition and profitable leasing;

• the failure of an aircraft or engine ~~manufacturers~~manufacturer to meet its delivery obligations to us, including or as a result of technical or other difficulties with aircraft before or after delivery;

• the extent to which the Russian invasion of Ukraine and the impact of sanctions imposed by the United States, European Union, United Kingdom and ~~other countries~~others affect our business, including our efforts to pursue insurance claims to recover losses related to aircraft that remain in ~~Russia;~~Russia, the exclusion of Russia, Ukraine and Belarus from the insurance policies that we separately purchase for our owned fleet, and the ability of our lessees to comply with their obligations to maintain insurance policies that cover their operations;

• the extent to which the COVID-19 pandemic impacts our business;

• obsolescence of, or changes in overall demand for, our aircraft;

• changes in the value of, and lease rates for, our aircraft, including as a result of aircraft oversupply, manufacturer production levels, our lessees’ failure to maintain our aircraft, rising inflation, appreciation of the U.S. Dollar, and other factors outside of our control;

• impaired financial condition and liquidity of our lessees, including due to lessee defaults and reorganizations, bankruptcies or similar proceedings;

• increased competition from other aircraft lessors;

• the failure by our lessees to adequately insure our aircraft or fulfill their contractual indemnity obligations to us;

• increased tariffs and other restrictions on trade;

• changes in the regulatory environment, including changes in tax laws and environmental regulations;

• other events affecting our business or the business of our lessees and aircraft manufacturers or their suppliers that are beyond our or their control, such as the threat or realization of epidemic diseases, natural disasters, terrorist attacks, war or armed hostilities between countries or non-state actors; and

• any additional factors discussed under “Part I — Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021, “Part II — Item 1A. Risk Factors,” in ~~this~~our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and other SEC filings, including future SEC filings.

All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations. You are therefore cautioned not to place undue reliance on such statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not intend and undertake no obligation to update any forward-looking information to reflect actual results or events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Air Lease Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
		(unaudited)					(unaudited)
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,490,765	$	1,086,500	Cash and cash equivalents	$	1,012,779	$	1,086,500
Restricted cash	Restricted cash	21,291		21,792		Restricted cash	21,069		21,792
Flight equipment subject to operating leases	Flight equipment subject to operating leases	26,552,246		27,101,808		Flight equipment subject to operating leases	27,969,301		27,101,808
Less accumulated depreciation	Less accumulated depreciation	(4,267,934)		(4,202,804)		Less accumulated depreciation	(4,501,559)		(4,202,804)
		22,284,312		22,899,004			23,467,742		22,899,004
Deposits on flight equipment purchases	Deposits on flight equipment purchases	1,626,874		1,508,892		Deposits on flight equipment purchases	1,618,687		1,508,892
Other assets	Other assets	1,451,607		1,452,534		Other assets	1,526,180		1,452,534
Total assets	Total assets	$	26,874,849	$	26,968,722	Total assets	$	27,646,457	$	26,968,722
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Accrued interest and other payables	Accrued interest and other payables	$	544,280	$	611,757	Accrued interest and other payables	$	628,526	$	611,757
Debt financing, net of discounts and issuance costs	Debt financing, net of discounts and issuance costs	17,824,725		17,022,480		Debt financing, net of discounts and issuance costs	18,336,075		17,022,480
Security deposits and maintenance reserves on flight equipment leases	Security deposits and maintenance reserves on flight equipment leases	1,120,234		1,173,831		Security deposits and maintenance reserves on flight equipment leases	1,186,442		1,173,831
Rentals received in advance	Rentals received in advance	135,642		138,816		Rentals received in advance	147,127		138,816
Deferred tax liability	Deferred tax liability	880,383		1,013,270		Deferred tax liability	908,653		1,013,270
Total liabilities	Total liabilities	$	20,505,264	$	19,960,154	Total liabilities	$	21,206,823	$	19,960,154
Shareholders’ Equity	Shareholders’ Equity					Shareholders’ Equity
Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 10,600,000 (aggregate liquidation preference of $850,000) shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		$	106	$	106
Class A common stock, $0.01 par value; 500,000,000 shares authorized; 111,317,259 and 113,987,154 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		1,113		1,140
Class B non-voting common stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding		—		—
Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 10,600,000 (aggregate liquidation preference of $850,000) shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 10,600,000 (aggregate liquidation preference of $850,000) shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	$	106	$	106
Class A common stock, $0.01 par value; 500,000,000 shares authorized; 110,892,097 and 113,987,154 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively						Class A common stock, $0.01 par value; 500,000,000 shares authorized; 110,892,097 and 113,987,154 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	1,109		1,140
Class B Non-Voting common stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding						Class B Non-Voting common stock, $0.01 par value; authorized 10,000,000 shares; no shares issued or outstanding	—		—
Paid-in capital	Paid-in capital	3,259,105		3,399,245		Paid-in capital	3,244,282		3,399,245
Retained earnings	Retained earnings	3,109,331		3,609,885		Retained earnings	3,194,672		3,609,885
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(70)		(1,808)		Accumulated other comprehensive loss	(535)		(1,808)
Total shareholders’ equity	Total shareholders’ equity	$	6,369,585	$	7,008,568	Total shareholders’ equity	$	6,439,634	$	7,008,568
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	26,874,849	$	26,968,722	Total liabilities and shareholders’ equity	$	27,646,457	$	26,968,722

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME/(LOSS)

(In thousands, except share and per share amounts)


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
		(unaudited)						(unaudited)
Revenues	Revenues						Revenues
Rental of flight equipment	Rental of flight equipment	$	566,554	$	468,095		Rental of flight equipment	$	545,271	$	452,044	$	1,111,825	$	920,139
Aircraft sales, trading and other	Aircraft sales, trading and other	30,107		6,732			Aircraft sales, trading and other	12,425		39,833		42,533		46,565
Total revenues	Total revenues	596,661		474,827			Total revenues	557,696		491,877		1,154,358		966,704

Expenses	Expenses						Expenses
Interest	Interest	117,277		117,986			Interest	118,997		113,598		236,274		231,584
Amortization of debt discounts and issuance costs	Amortization of debt discounts and issuance costs	13,198		12,025			Amortization of debt discounts and issuance costs	13,413		12,513		26,610		24,538
Interest expense	Interest expense	130,475		130,011			Interest expense	132,410		126,111		262,884		256,122
Depreciation of flight equipment	Depreciation of flight equipment	235,308		208,965			Depreciation of flight equipment	235,284		217,817		470,591		426,782
Write-off of Russian fleet	Write-off of Russian fleet	802,352		—			Write-off of Russian fleet	—		—		802,352		—
Selling, general and administrative	Selling, general and administrative	32,762		26,914			Selling, general and administrative	38,512		26,687		71,277		53,601
Stock-based compensation		(2,523)		5,408
Stock-based compensation expense							Stock-based compensation expense	6,558		6,700		4,035		12,108
Total expenses	Total expenses	1,198,374		371,298			Total expenses	412,764		377,315		1,611,139		748,613
(Loss)/income before taxes		(601,713)		103,529
Income tax benefit/(expense)		132,720		(19,437)
Net (loss)/income		$	(468,993)	$	84,092
Income/(loss) before taxes							Income/(loss) before taxes	144,932		114,562		(456,781)		218,091
Income tax (expense)/benefit							Income tax (expense)/benefit	(28,655)		(21,140)		104,065		(40,577)
Net income/(loss)							Net income/(loss)	$	116,277	$	93,422	$	(352,716)	$	177,514
Preferred stock dividends	Preferred stock dividends	(10,425)		(3,844)			Preferred stock dividends	(10,425)		(7,835)		(20,850)		(11,679)
Net (loss)/income attributable to common stockholders		$	(479,418)	$	80,248
Net income/(loss) attributable to common stockholders							Net income/(loss) attributable to common stockholders	$	105,852	$	85,587	$	(373,566)	$	165,835

Other comprehensive income/(loss):
Other comprehensive (loss)/income:							Other comprehensive (loss)/income:
Foreign currency translation adjustment	Foreign currency translation adjustment	(3,019)		(3,807)			Foreign currency translation adjustment	$	9,349	$	(4,265)	$	6,330	$	(8,072)
Change in fair value of hedged transactions	Change in fair value of hedged transactions	5,230		2,221			Change in fair value of hedged transactions	(9,941)		3,976		(4,712)		6,197
Total tax (expense)/benefit on other comprehensive income/loss	Total tax (expense)/benefit on other comprehensive income/loss	(473)		339			Total tax (expense)/benefit on other comprehensive income/loss	127		62		(346)		401
Other comprehensive income/(loss), net of tax		1,738		(1,247)
Total comprehensive (loss)/income attributable for common stockholders		$	(477,680)	$	79,001
Other comprehensive (loss)/income, net of tax							Other comprehensive (loss)/income, net of tax	(465)		(227)		1,272		(1,474)
Total comprehensive income/(loss) attributable for common stockholders							Total comprehensive income/(loss) attributable for common stockholders	$	105,387	$	85,360	$	(372,294)	$	164,361

(Loss)/Earnings per share of common stock:
Earnings/(loss) per share of common stock:							Earnings/(loss) per share of common stock:
Basic	Basic	$	(4.21)	$	0.70		Basic	$	0.95	$	0.75	$	(3.32)	$	1.45
Diluted	Diluted	$	(4.21)	$	0.70		Diluted	$	0.95	$	0.75	$	(3.32)	$	1.45
Weighted-average shares outstanding	Weighted-average shares outstanding						Weighted-average shares outstanding
Basic	Basic	113,894,867		113,958,403			Basic	110,868,040		114,133,135		112,373,092		114,046,252
Diluted	Diluted	113,894,867		114,237,109			Diluted	111,043,836		114,377,965		112,373,092		114,373,576

Dividends declared per share of common stock		$	0.185	$	0.16
Dividends declared							Dividends declared	$	0.185	$	0.16	$	0.37	$	0.32

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)


		Preferred Stock		Class A Common Stock			Class B Non-Voting Common Stock							Accumulated Other Comprehensive Income/(Loss)							Preferred Stock							Class A Common Stock					Class B Non‑Voting Common Stock											Accumulated Other Comprehensive Income/(Loss)
(unaudited)	(unaudited)		Shares	Amount		Shares	Amount		Shares	Amount		Paid-in Capital				Retained Earnings						Total		(unaudited)		Shares		Amount			Shares		Amount			Shares		Amount			Paid‑in Capital					Accumulated Other Comprehensive Income/(Loss)				Total
Balance at December 31, 2021	Balance at December 31, 2021		10,600,000	$	106	113,987,154	$	1,140	—	$	—	$	3,399,245	$	3,609,885		$	(1,808)				$	7,008,568	Balance at December 31, 2021		10,600,000		$	106		113,987,154		$	1,140		—		$	—		$	3,399,245						$	3,609,885				$	7,008,568

Issuance of common stock upon vesting of restricted stock units	Issuance of common stock upon vesting of restricted stock units		—	—		477,656	5		—	—		(3)		—			—					2		Issuance of common stock upon vesting of restricted stock units		—		—			477,656		5			—		—			(3)			—				—			2
Common stock repurchased	Common stock repurchased		—	—		(2,959,458)	(30)		—	—		(129,519)		—			—					(129,549)		Common stock repurchased		—		—			(2,959,458)		(30)			—		—			(129,519)			—				—			(129,549)
Stock-based compensation			—	—		—	—		—	—		(2,523)		—			—					(2,523)
Stock-based compensation expense																			Stock-based compensation expense	—					—		—			—		—			—		(2,523)			—			—				(2,523)
Cash dividends (declared $0.185 per share of Class A common stock)	Cash dividends (declared $0.185 per share of Class A common stock)		—	—		—	—		—	—		—		(21,136)			—					(21,136)		Cash dividends (declared $0.185 per share of Class A common stock)		—		—			—		—			—		—			—			(21,136)				—			(21,136)
Cash dividends (declared on preferred stock)	Cash dividends (declared on preferred stock)		—	—		—	—		—	—		—		(10,425)			—					(10,425)		Cash dividends (declared on preferred stock)		—		—			—		—			—		—			—			(10,425)				—			(10,425)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax	Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax		—	—		—	—		—	—		—		—			1,738					1,738		Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax		—		—			—		—			—		—			—			—				1,738			1,738
Tax withholdings on stock based compensation			—	—		(188,093)	(2)		—	—		(8,095)		—			—					(8,097)
Tax withholdings on stock-based compensation																			Tax withholdings on stock-based compensation	—					—		(188,093)			(2)		—			—		(8,095)			—			—				(8,097)
Net loss	Net loss		—	—		—	—		—	—		—		(468,993)			—					(468,993)		Net loss		—		—			—		—			—		—			—			(468,993)				—			(468,993)
Balance at March 31, 2022	Balance at March 31, 2022		10,600,000	$	106	111,317,259	$	1,113	—	$	—	$	3,259,105	$	3,109,331		$	(70)				$	6,369,585	Balance at March 31, 2022		10,600,000		$	106		111,317,259		$	1,113		—		$	—		$	3,259,105		$	3,109,331			$	(70)		$	6,369,585
Issuance of common stock upon vesting of restricted stock units																			Issuance of common stock upon vesting of restricted stock units	—					—		59,603			—		—			—		—			—			—				—
Common stock repurchased																			Common stock repurchased	—					—		(461,416)			(4)		—			—		(20,450)			—			—				(20,454)
Stock-based compensation expense																			Stock-based compensation expense	—					—		—			—		—			—		6,558			—			—				6,558
Cash dividends (declared $0.185 per share of Class A common stock)																			Cash dividends (declared $0.185 per share of Class A common stock)	—					—		—			—		—			—		—			(20,511)			—				(20,511)
Cash dividends (declared on preferred stock)																			Cash dividends (declared on preferred stock)	—					—		—			—		—			—		—			(10,425)			—				(10,425)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax																			Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax	—					—		—			—		—			—		—			—			(465)				(465)
Tax withholdings on stock-based compensation																			Tax withholdings on stock-based compensation	—					—		(23,349)			—		—			—		(931)			—			—				(931)
Net income																			Net income	—					—		—			—		—			—		—			116,277			—				116,277
Balance at June 30, 2022																			Balance at June 30, 2022	10,600,000					$	106	110,892,097			$	1,109	—			$	—	$	3,244,282		$	3,194,672		$	(535)			$	6,439,634

Preferred Stock Class A
Common Stock Class B Non-Voting
Common Stock Accumulated
Other
Comprehensive
Income/(Loss)
(unaudited) Shares Amount Shares Amount Shares Amount Paid-in
Capital Retained
Earnings Total
Balance at December 31, 2020 10,000,000 $ 100 113,852,896 $ 1,139 — $ — $ 2,793,178 $ 3,277,599 $ 325 $ 6,072,341
Issuance of preferred stock 300,000 3 — — — — 295,446 — — 295,449
Issuance of common stock upon exercise of options and vesting of restricted stock units — — 425,232 4 — — 1,437 — — 1,441
Stock-based compensation — — — — — — 5,408 — — 5,408
Cash dividends (declared $0.16 per share of Class A common stock) — — — — — — — (18,259) — (18,259)
Cash dividends (declared on preferred stock) — — — — — — — (3,844) — (3,844)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax — — — — — — — — (1,247) (1,247)
Tax withholdings on stock based compensation — — (157,266) (2) — — (7,167) — — (7,169)
Net income — — — — — — — 84,092 — 84,092
Balance at March 31, 2021 10,300,000 $ 103 114,120,862 $ 1,141 — $ — $ 3,088,302 $ 3,339,588 $ (922) $ 6,428,212

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share and per share amounts)


	Preferred Stock			Class A Common Stock			Class B Non‑Voting Common Stock							Accumulated Other Comprehensive Income/(Loss)
(unaudited)	Shares	Amount		Shares	Amount		Shares	Amount		Paid‑in Capital		Retained Earnings				Total
Balance at December 31, 2020	10,000,000	$	100	113,852,896	$	1,139	—	$	—	$	2,793,178	$	3,277,599	$	325	$	6,072,341
Issuance of preferred stock	300,000	3		—	—		—	—		295,446		—		—		295,449
Issuance of common stock upon exercise of options and vesting of restricted stock units	—	—		425,232	4		—	—		1,437		—		—		1,441
Stock-based compensation expense	—	—		—	—		—	—		5,408		—		—		5,408
Cash dividends (declared $0.16 per share of Class A common stock)	—	—		—	—		—	—		—		(18,259)		—		(18,259)
Cash dividends (declared on preferred stock)	—	—		—	—		—	—		—		(3,844)		—		(3,844)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax	—	—		—	—		—	—		—		—		(1,247)		(1,247)
Tax withholdings on stock-based compensation	—	—		(157,266)	(2)		—	—		(7,167)		—		—		(7,169)
Net income	—	—		—	—		—	—		—		84,092		—		84,092
Balance at March 31, 2021	10,300,000	$	103	114,120,862	$	1,141	—	$	—	$	3,088,302	$	3,339,588	$	(922)	$	6,428,212
Issuance of preferred stock	—	—		—	—		—	—		(19)		—		—		(19)
Issuance of common stock upon exercise of options and vesting of restricted stock units	—	—		25,956	—		—	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		—	—		6,700		—		—		6,700
Cash dividends (declared $0.16 per share of Class A common stock)	—	—		—	—		—	—		—		(18,263)		—		(18,263)
Cash dividends (declared on preferred stock)	—	—		—	—		—	—		—		(7,835)		—		(7,835)
Change in foreign currency translation adjustment and in fair value of hedged transactions, net of tax	—	—		—	—		—	—		—		—		(227)		(227)
Tax withholdings on stock-based compensation	—	—		(5,715)	—		—	—		(275)		—		—		(275)
Net income	—	—		—	—		—	—		—		93,422		—		93,422
Balance at June 30, 2021	10,300,000	$	103	114,141,103	$	1,141	—	$	—	$	3,094,708	$	3,406,912	$	(1,149)	$	6,501,715

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
		(unaudited)					(unaudited)
Operating Activities	Operating Activities					Operating Activities
Net (loss)/income	Net (loss)/income	$	(468,993)	$	84,092	Net (loss)/income	$	(352,716)	$	177,514
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:						Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Depreciation of flight equipment	Depreciation of flight equipment	235,308		208,965		Depreciation of flight equipment	470,591		426,782
Write-off of Russian fleet	Write-off of Russian fleet	802,352		—		Write-off of Russian fleet	802,352		—
Stock-based compensation		(2,523)		5,408
Stock-based compensation expense						Stock-based compensation expense	4,035		12,108
Deferred taxes	Deferred taxes	(133,360)		18,577		Deferred taxes	(104,963)		38,985
Amortization of debt discounts and issuance costs		13,198		12,025
Amortization of discounts and debt issuance costs						Amortization of discounts and debt issuance costs	26,610		24,538
Amortization of prepaid lease costs	Amortization of prepaid lease costs	13,193		10,790		Amortization of prepaid lease costs	23,355		22,267
Gain on aircraft sales, trading and other activity	Gain on aircraft sales, trading and other activity	(66,791)		(99)		Gain on aircraft sales, trading and other activity	(71,753)		(1,245)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Other assets	Other assets	(74,560)		(35,323)		Other assets	(147,685)		(96,234)
Accrued interest and other payables	Accrued interest and other payables	(64,068)		(59,914)		Accrued interest and other payables	26,590		4,751
Rentals received in advance	Rentals received in advance	938		(10,231)		Rentals received in advance	12,423		(6,801)
Net cash provided by operating activities	Net cash provided by operating activities	254,694		234,290		Net cash provided by operating activities	688,839		602,665
Investing Activities	Investing Activities					Investing Activities
Acquisition of flight equipment under operating lease	Acquisition of flight equipment under operating lease	(395,402)		(404,379)		Acquisition of flight equipment under operating lease	(1,569,310)		(1,098,174)
Payments for deposits on flight equipment purchases	Payments for deposits on flight equipment purchases	(172,943)		(103,382)		Payments for deposits on flight equipment purchases	(345,643)		(202,938)
Proceeds from aircraft sales, trading and other activity	Proceeds from aircraft sales, trading and other activity	750		—		Proceeds from aircraft sales, trading and other activity	1,166		2,042
Acquisition of aircraft furnishings, equipment and other assets	Acquisition of aircraft furnishings, equipment and other assets	(52,974)		(41,923)		Acquisition of aircraft furnishings, equipment and other assets	(106,655)		(102,303)
Net cash used in investing activities	Net cash used in investing activities	(620,569)		(549,684)		Net cash used in investing activities	(2,020,442)		(1,401,373)
Financing Activities	Financing Activities					Financing Activities
Issuance of common stock upon exercise of options	Issuance of common stock upon exercise of options	—		1,441		Issuance of common stock upon exercise of options	—		1,439
Cash dividends paid on Class A common stock	Cash dividends paid on Class A common stock	(21,088)		(18,216)		Cash dividends paid on Class A common stock	(42,223)		(36,475)
Common shares repurchased	Common shares repurchased	(97,644)		—		Common shares repurchased	(150,000)		—
Net proceeds from preferred stock issuance	Net proceeds from preferred stock issuance	—		295,449		Net proceeds from preferred stock issuance	—		295,428
Cash dividends paid on preferred stock	Cash dividends paid on preferred stock	(10,425)		(3,844)		Cash dividends paid on preferred stock	(20,850)		(11,679)
Tax withholdings on stock-based compensation	Tax withholdings on stock-based compensation	(8,095)		(7,169)		Tax withholdings on stock-based compensation	(9,027)		(7,442)

Net change in unsecured revolving facilities						Net change in unsecured revolving facilities	520,000		—
Proceeds from debt financings	Proceeds from debt financings	1,497,615		791,645		Proceeds from debt financings	1,497,615		2,574,089
Payments in reduction of debt financings	Payments in reduction of debt financings	(708,847)		(1,157,577)		Payments in reduction of debt financings	(718,687)		(2,576,841)
Debt issuance costs	Debt issuance costs	(2,740)		(1,335)		Debt issuance costs	(5,613)		(7,937)
Security deposits and maintenance reserve receipts	Security deposits and maintenance reserve receipts	125,727		21,278		Security deposits and maintenance reserve receipts	198,763		67,289
Security deposits and maintenance reserve disbursements	Security deposits and maintenance reserve disbursements	(4,864)		(11,852)		Security deposits and maintenance reserve disbursements	(12,819)		(24,170)
Net cash provided / (used) by financing activities		769,639		(90,180)
Net increase / (decrease) in cash		403,764		(405,574)
Net cash provided by financing activities						Net cash provided by financing activities	1,257,159		273,701
Net decrease in cash						Net decrease in cash	(74,444)		(525,007)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	1,108,292		1,757,767		Cash, cash equivalents and restricted cash at beginning of period	1,108,292		1,757,767
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	1,512,056	$	1,352,193	Cash, cash equivalents and restricted cash at end of period	$	1,033,848	$	1,232,760
Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information					Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest, including capitalized interest of $9,365 and $13,543 at March 31, 2022 and 2021, respectively		$	179,026	$	177,685
Cash paid during the period for interest, including capitalized interest of $19,127 and $26,116 at June 30, 2022 and 2021, respectively						Cash paid during the period for interest, including capitalized interest of $19,127 and $26,116 at June 30, 2022 and 2021, respectively	$	254,349	$	262,949
Cash paid for income taxes	Cash paid for income taxes	$	3,446	$	1,101	Cash paid for income taxes	$	3,557	$	2,491
Supplemental Disclosure of Noncash Activities	Supplemental Disclosure of Noncash Activities					Supplemental Disclosure of Noncash Activities
Buyer furnished equipment, capitalized interest and deposits on flight equipment purchases applied to acquisition of flight equipment	Buyer furnished equipment, capitalized interest and deposits on flight equipment purchases applied to acquisition of flight equipment	$	85,791	$	176,618	Buyer furnished equipment, capitalized interest and deposits on flight equipment purchases applied to acquisition of flight equipment	$	343,794	$	449,486
Cash dividends declared on Class A common stock, not yet paid		$	21,136	$	18,259
Cash dividends declared, not yet paid						Cash dividends declared, not yet paid	$	20,511	$	18,263

(See Notes to Consolidated Financial Statements)

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Company Background and Overview

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. The Company is principally engaged in purchasing the most modern, fuel-efficient, new technology commercial jet aircraft directly from aircraft manufacturers, such as The Boeing Company (“Boeing”) and Airbus S.A.S. (“Airbus”). The Company leases these aircraft to airlines throughout the world with the intention to generate attractive returns on equity. As of ~~March 31,~~June 30, 2022, the Company owned ~~370~~392 aircraft, managed 8789 aircraft and had ~~451~~430 aircraft on order with aircraft manufacturers. In addition to its leasing activities, the Company sells aircraft from its fleet to third parties, including other leasing companies, financial services companies, airlines and other investors. The Company also provides fleet management services to investors and owners of aircraft portfolios for a management fee.

Note 2. Basis of Preparation and Critical Accounting Policies

The Company consolidates financial statements of all entities in which the Company has a controlling financial interest, including the accounts of any Variable Interest Entity in which the Company has a controlling financial interest and for which it is the primary beneficiary. All material intercompany balances are eliminated in consolidation. The accompanying Consolidated Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

The accompanying unaudited Consolidated Financial Statements include all adjustments, consisting only of normal, recurring adjustments, which are in the opinion of management necessary to present fairly the Company’s financial position, results of operations and cash flows at ~~March 31,~~June 30, 2022, and for all periods presented. The results of operations for the three and six months ended ~~March 31,~~June 30, 2022 are not necessarily indicative of the operating results expected for the year ending December 31, 2022. These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Reclassifications

Certain reclassifications have been made in the prior year’s consolidated financial statements to conform to the classifications in 2022.

Note 3. Debt Financing

The Company’s consolidated debt as of ~~March 31,~~June 30, 2022 and December 31, 2021 is summarized below:

March 31, 2022 December 31, 2021
(in thousands)
Unsecured
Senior notes $ 17,695,077 $ 16,892,058
Term financings 195,275 167,000
Total unsecured debt financing 17,890,352 17,059,058
Secured
Term financings 123,452 126,660
Export credit financing 16,637 18,301
Total secured debt financing 140,089 144,961
Total debt financing 18,030,441 17,204,019
Less: Debt discounts and issuance costs (205,716) (181,539)
Debt financing, net of discounts and issuance costs $ 17,824,725 $ 17,022,480


	June 30, 2022		December 31, 2021
	(in thousands)
Unsecured
Senior notes	$	17,685,728	$	16,892,058
Term financings	190,325		167,000
Revolving credit facility	520,000		—
Total unsecured debt financing	18,396,053		17,059,058
Secured
Term financings	120,226		126,660
Export credit financing	14,973		18,301
Total secured debt financing	135,199		144,961

Total debt financing	18,531,252		17,204,019
Less: Debt discounts and issuance costs	(195,177)		(181,539)
Debt financing, net of discounts and issuance costs	$	18,336,075	$	17,022,480

910

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Senior unsecured notes (including Medium-Term Note Program)

As of ~~March 31,~~June 30, 2022, the Company had $17.7 billion in senior unsecured notes outstanding. As of December 31, 2021, the Company had $16.9 billion in senior unsecured notes outstanding.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company issued $1.5 billion in aggregate principal amount of senior unsecured notes comprised of (i) $750.0 million in aggregate principal amount of 2.20% Medium-Term Notes due 2027, and (ii) $750.0 million in aggregate principal amount of 2.875% Medium-Term Notes due 2032.

Unsecured revolving credit facility

As of ~~March 31,~~June 30, 2022, ~~and~~the Company had $520.0 million outstanding under its unsecured revolving credit facility (the “Revolving Credit Facility”). As of December 31, 2021, the Company did not have any amounts outstanding under its ~~unsecured revolving credit facility (the “Revolving~~Revolving Credit ~~Facility”).~~Facility. Borrowings under the Revolving Credit Facility are used to finance the Company’s working capital needs in the ordinary course of business and for other general corporate purposes.

In April 2022, the Company amended and extended its Revolving Credit Facility through an amendment that, among other things, extended the final maturity date from May 5, 2025 to May 5, 2026, increased the total revolving commitments to approximately $7.0 billion as of May 5, 2022 and replaced LIBOR with Term SOFR as the benchmark interest rate and made certain conforming changes related thereto. As of ~~March 31,~~June 30, 2022, borrowings under the Revolving Credit Facility accrued interest at ~~LIBOR~~Adjusted Term SOFR (as defined in the Revolving Credit Facility) plus a margin of 1.05% per year. The Company is required to pay a facility fee of 0.20% per year in respect of total commitments under the Revolving Credit Facility. Interest rate and facility fees are subject to increases or decreases based on declines or improvements in the credit ratings for the Company’s debt.

In ~~April~~June 2022, the Company ~~amended~~increased the aggregate facility capacity by an additional $122.5 million and ~~extended its Revolving Credit Facility through an amendment that, among other things,~~also extended the ~~final~~ maturity ~~date from May 5, 2025~~of $125.0 million in commitments to May 5, ~~2026 and, after giving effect to $65.0 million in commitments that matured on May 5,~~2026. As of August 4, 2022, ~~increased~~ the Company had total revolving commitments toof approximately ~~$7.0 billion as of May 5, 2022. As of May 5, 2022, lenders~~$7.1 billion. Lenders held revolving commitments totaling approximately ~~$6.5~~$6.7 billion that mature on May 5, 2026, commitments totaling ~~$132.5~~$32.5 million that mature on May 5, 2025 and commitments totaling ~~$400.0~~$375.0 million that mature on May 5, 2023. The amended Revolving Credit Facility also replaced LIBOR with Term SOFR as the benchmark interest rate and made certain conforming changes related thereto. As a result of the amendment, borrowings under the amended Revolving Credit Facility accrue interest at the Adjusted Term SOFR (as defined in the Revolving Credit Facility), plus a margin of 1.05% per year subject to increases or decreases based on declines or improvements in the credit ratings for the Company’s debt.

Other debt financings

From time to time, the Company enters into other debt financings such as unsecured term financings and secured term financings, including export credit. As of ~~March 31,~~June 30, 2022, the outstanding balance on other debt financings was ~~$335.4~~$325.5 million and the Company had pledged 3 aircraft as collateral with a net book value of ~~$219.7~~$217.1 million. As of December 31, 2021, the outstanding balance on other debt financings was $312.0 million and the Company had pledged 3 aircraft as collateral with a net book value of $222.2 million.

Maturities

Maturities of debt outstanding as of ~~March 31,~~June 30, 2022 are as follows:


		(in thousands)			(in thousands)
Years ending December 31,	Years ending December 31,			Years ending December 31,
2022	2022	$	1,376,451	2022	$	1,291,611
2023	2023	2,538,951		2023	2,566,329
2024	2024	2,894,628		2024	2,885,280
2025	2025	2,327,389		2025	2,404,761
2026	2026	3,472,845		2026	3,963,094
Thereafter	Thereafter	5,420,177		Thereafter	5,420,177
Total	Total	$	18,030,441	Total	$	18,531,252

1011

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Flight equipment subject to operating lease

The following table summarizes the activities for the Company’s flight equipment subject to operating lease for the ~~three~~six months ended ~~March 31,~~June 30, 2022:


	(in thousands)
Net book value as of December 31, 2021	$	22,899,004
Additions	~~490,888~~1,936,337
Depreciation	~~(235,308)~~(470,591)
Transfers to net investments in sales-type leases	~~(79,255)~~(105,991)
Write-off of Russian fleet	(791,017)
Net book value as of ~~March 31,~~June 30, 2022	$	~~22,284,312~~23,467,742

Accumulated depreciation as of ~~March 31,~~June 30, 2022	$	~~(4,267,934)~~(4,501,559)

Write-off of Russian fleet

In response to the sanctions against certain industry sectors and parties in Russia, in March 2022, the Company terminated all of its leasing activities in Russia, including 24 aircraft in its owned fleet. As of ~~May 5,~~August 4, 2022, 21 aircraft previously included in the Company’s owned fleet remain in Russia. ~~Most of the~~The operators of these aircraft have continued to fly most of the aircraft notwithstanding the termination of leasing activities and ~~our~~the Company’s repeated demands for the return of ~~our~~its assets. While the Company maintains title to the aircraft, the Company has determined that it is unlikely it will regain possession of the aircraft that have not been returned and that remain in Russia. As such, d~~uring~~during the three months ended March 31, 2022, the Company recognized a loss from asset write-offs of its interests in owned aircraft that remain in Russia, totaling approximately $791.0 million. The Company did not have any losses from asset write-offs for the three months ended June 30, 2022. The 21 aircraft that remain in Russia ~~have been~~were removed from the Company’s owned fleet ~~count. The~~count as of March 31, 2022. In June 2022, the Company ~~is vigorously pursuing~~submitted insurance claims to its insurers to recover its losses relating to these ~~aircraft.~~aircraft and is vigorously pursuing all available insurance claims. Collection, timing and amounts of any insurance recoveries is ~~uncertain.~~uncertain at this time.

~~Table of Contents~~

~~Air Lease Corporation and Subsidiaries~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 5. Commitments and Contingencies

Aircraft Acquisition

During the quarter ended March 31, 2022, the Company increased its committed orderbook by entering into agreements with Boeing to purchase 50 aircraft, which includes the conversion of 3 787-9 aircraft to 18 737 MAX aircraft. In addition, the Company canceled 5 aircraft in its orderbook that were slated for delivery in Russia. As of ~~March 31,~~June 30, 2022, the Company had commitments to purchase ~~451~~430 aircraft from Boeing and Airbus for delivery through 2028, with an estimated aggregate commitment of ~~$28.8~~$27.6 billion.

The table is subject to change based on Airbus and Boeing delivery delays. As noted below, the Company expects delivery delays for some aircraft ~~deliveries~~ in its orderbook. The Company remains in discussions with Boeing and Airbus to determine the extent and duration of delivery delays; however, the Company is not yet able to determine the full impact of ~~the delivery~~these delays.

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Estimated Delivery Years
Aircraft Type 2022 2023 2024 2025 2026 Thereafter Total
Airbus A220-100/300 4 17 23 20 12 — 76
Airbus A320/321neo(1)
24 24 26 23 32 64 193
Airbus A330-900neo 7 6 4 — — — 17
Airbus A350-900/1000 3 3 3 — — — 9
Airbus A350F — — — — 2 5 7
Boeing 737-8/9 MAX 25 31 35 18 16 — 125
Boeing 787-9/10 3 7 8 6 — — 24
Total(2)
66 88 99 67 62 69 451
(1) The Company’s Airbus A320/321neo aircraft orders include 27 long-range variants and 49 extra long-range variants.
(2) The table above reflects Airbus and Boeing aircraft delivery delays based on contractual documentation.


	Estimated Delivery Years
Aircraft Type	2022	2023	2024	2025	2026	Thereafter	Total
Airbus A220-100/300	4	16	24	20	12	—	76
Airbus A320/321neo(1)	17	23	23	24	35	64	186
Airbus A330-900neo	6	6	4	—	—	—	16
Airbus A350-900/1000	1	3	3	—	—	—	7
Airbus A350F	—	—	—	—	2	5	7
Boeing 737-8/9 MAX	14	31	34	19	16	—	114
Boeing 787-9/10	3	7	8	6	—	—	24
Total(2)	45	86	96	69	65	69	430


(1) The Company’s Airbus A320/321neo aircraft orders include 26 long-range variants and 49 extra long-range variants.
(2) The table above reflects Airbus and Boeing aircraft delivery delays based on contractual documentation.

Pursuant to ~~our~~the Company’s purchase agreements with Boeing and Airbus, ~~we agree~~the Company agrees to contractual delivery dates for each aircraft ordered. These dates can change for a variety of reasons, however for the last several years, manufacturing delays have significantly ~~delayed~~impacted the planned purchases of ~~our~~the Company’s aircraft on order with Boeing and Airbus. The Company is currently experiencing delivery delays with both Boeing and Airbus aircraft. However, the most significant delivery delays ~~are with~~pertain to the Company’s aircraft orders for Boeing 787 aircraft.

During 2020, Boeing began to experience manufacturing issues on its 787 aircraft, which resulted in significant aircraft delivery delays. Boeing ~~has~~ halted 787 deliveries in May 2021 and has not indicated when they will resume. ~~Accordingly, we have~~The Company has not ~~taken delivery of~~received any 787s since the halting of the deliveries by Boeing. It is the Company’s understanding that, in July 2022, the FAA approved Boeing’s plan to inspect and repair 787 aircraft, which will allow deliveries to resume. However, the pace and the timing of deliveries of the aircraft for the remainder of this year and potentially beyond still remains uncertain.

The aircraft purchase commitments discussed above could also be impacted by ~~lease~~ cancellations. ~~The Company's leases typically provide that the Company and the airline customer each have a cancellation right related to certain aircraft delivery delays.~~ The Company’s purchase agreements with Boeing and Airbus ~~also~~ generally provide ~~that~~each of the Company and the ~~manufacturer each have~~manufacturers with cancellation rights ~~that typically parallel the Company’s cancellation rights in its leases. The Company’s leases and its purchase agreements with Boeing and Airbus generally provide~~ for ~~cancellation rights~~delivery delays starting at one year after the original contractual delivery date, regardless of cause. In addition, the Company’s lease agreements generally provide each of the Company and the lessee with cancellation rights related to certain aircraft delivery delays that typically parallel the cancellation rights in the Company’s purchase agreements.

Commitments for the acquisition of these aircraft, calculated at an estimated aggregate purchase price (including adjustments for anticipated inflation) of approximately $27.6 billion as of June 30, 2022, are as follows:


Years ending December 31,
2022	$	3,082,573
2023	6,057,223
2024	6,223,538
2025	4,186,938
2026	3,641,767
Thereafter	4,433,109
Total	$	27,625,148

The Company has made non-refundable deposits on flight equipment purchases of $1.6 billion and $1.5 billion as of June 30, 2022 and December 31, 2021, respectively. If the Company is unable to satisfy its purchase commitments, the Company may be forced to forfeit its deposits and may also be exposed to breach of contract claims by its lessees as well as the manufacturers.

1213

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(in thousands)
Years ending December 31,
2022 $ 4,446,438
2023 6,049,551
2024 6,400,067
2025 4,006,352
2026 3,491,754
Thereafter 4,450,903
Total $ 28,845,065

The Company has made non-refundable deposits on the aircraft for which the Company has commitments to purchase of $1.6 billion and $1.5 billion as of March 31, 2022 and December 31, 2021, respectively, which are subject to manufacturer performance commitments. If the Company is unable to satisfy its purchase commitments, the Company may be forced to forfeit its deposits. Further, the Company would be exposed to breach of contract claims by its lessees and manufacturers.

Note 6. Rental Income

~~At March 31,~~As of June 30, 2022, minimum future rentals on non-cancellable operating leases of flight equipment in the Company’s owned fleet, which have been delivered as of ~~March 31,~~June 30, 2022 are as follows:


		(in thousands)
Years ending December 31,	Years ending December 31,			Years ending December 31,
2022 (excluding the three months ended March 31, 2022)		$	1,547,862
2022 (excluding the six months ended June 30, 2022)				2022 (excluding the six months ended June 30, 2022)	$	1,089,192
2023	2023	1,952,007		2023	2,093,379
2024	2024	1,826,854		2024	1,970,231
2025	2025	1,678,155		2025	1,823,512
2026	2026	1,485,049		2026	1,630,714
Thereafter	Thereafter	5,605,989		Thereafter	6,359,325
Total	Total	$	14,095,916	Total	$	14,966,353

Note 7. Earnings/(Loss)~~/Earnings~~ Per Share

Basic earnings/(loss)~~/earnings~~ per share is computed by dividing net income/(loss) ~~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 2 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 ~~March 31,~~June 30, 2022, the Company did not have any Class B non-voting common stock outstanding.

Diluted 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. Since the Company was in a loss position for the ~~three~~six months ended ~~March 31,~~June 30, 2022, diluted net loss per share is the same as basic net loss per share for the period as the inclusion of all potential common shares outstanding would have been anti-dilutive. For the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company excluded ~~249,781~~301,279 potentially dilutive securities, whose effect would have been anti-dilutive, from the computation of diluted earnings per share. For the three months ended ~~March 31,~~June 30, 2022, the Company did not exclude any potentially dilutive securities, whose effect would have been anti-dilutive, from the computation of diluted earnings per share. For the three and six months ended June 30, 2021, the Company did not exclude any potentially dilutive securities, whose effect would have been anti-dilutive, from the computation of diluted earnings per share. The Company excluded ~~1,046,967~~978,036 and 1,085,311 shares related to restricted stock units for which the performance metric had yet to be achieved as of June 30, 2022 and 2021, respectively.

1314

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~shares related to restricted stock units for which the performance metric had yet to be achieved as of March 31, 2022 and 2021, respectively.~~

The following table sets forth the reconciliation of basic and diluted earnings/(loss)~~/earnings~~ per share:

Three Months Ended
March 31,
2022 2021
(in thousands, except share and per share)
Basic (loss)/earnings per share:
Numerator
Net (loss)/income $ (468,993) $ 84,092
Preferred stock dividends (10,425) (3,844)
Net (loss)/income attributable to common stockholders $ (479,418) $ 80,248
Denominator
Weighted-average common shares outstanding 113,894,867 113,958,403
Basic (loss)/earnings per share $ (4.21) $ 0.70
Diluted (loss)/earnings per share:
Numerator
Net (loss)/income $ (468,993) $ 84,092
Preferred stock dividends (10,425) (3,844)
Net (loss)/income attributable to common stockholders $ (479,418) $ 80,248
Denominator
Number of shares used in basic computation 113,894,867 113,958,403
Weighted-average effect of dilutive securities — 278,706
Number of shares used in per share computation 113,894,867 114,237,109
Diluted (loss)/earnings per share $ (4.21) $ 0.70


	Three Months Ended June 30,				Six Months Ended June 30,

	2022		2021		2022		2021
	(in thousands, except share and per share)
Basic earnings/(loss) per share:
Numerator
Net income/(loss)	$	116,277	$	93,422	$	(352,716)	$	177,514
Preferred stock dividends	(10,425)		(7,835)		(20,850)		(11,679)
Net income/(loss) attributable to common stockholders	$	105,852	$	85,587	$	(373,566)	$	165,835
Denominator
Weighted-average shares outstanding	110,868,040		114,133,135		112,373,092		114,046,252
Basic earnings/(loss) per share	$	0.95	$	0.75	$	(3.32)	$	1.45
Diluted earnings/(loss) per share:
Numerator
Net income/(loss)	$	116,277	$	93,422	$	(352,716)	$	177,514
Preferred stock dividends	(10,425)		(7,835)		(20,850)		(11,679)
Net income/(loss) attributable to common stockholders	$	105,852	$	85,587	$	(373,566)	$	165,835
Denominator
Number of shares used in basic computation	110,868,040		114,133,135		112,373,092		114,046,252
Weighted-average effect of dilutive securities	175,796		244,830		—		327,324
Number of shares used in per share computation	111,043,836		114,377,965		112,373,092		114,373,576
Diluted earnings/(loss) per share	$	0.95	$	0.75	$	(3.32)	$	1.45

Note 8. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring and Non-recurring Basis

The Company has a cross-currency swap related to its Canadian dollar Medium-Term Notes which were issued in December 2019. The fair value of the swap as a foreign currency exchange derivative is categorized as a Level 2 measurement in the fair value hierarchy and is measured on a recurring basis. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the estimated fair value of the foreign currency exchange derivative asset was ~~$19.4~~$9.4 million and $14.1 million, respectively.

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 ~~March 31,~~June 30, 2022 was ~~$17.5~~$17.2 billion compared to a book value of ~~$18.0~~$18.5 billion. The estimated fair value of debt financing as of December 31, 2021 was $17.6 billion compared to a book value of $17.2 billion.

The following financial instruments are not measured at fair value on the Company’s Consolidated Balance Sheets at ~~March 31,~~June 30, 2022, but require disclosure of their fair values: cash and cash equivalents and restricted cash. The estimated fair value of such instruments at ~~March 31,~~June 30, 2022 and December 31, 2021 approximates their carrying value as reported on the Consolidated Balance Sheets. The fair value of all these instruments would be categorized as Level 1 in the fair value hierarchy.

1415

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9. Shareholders’ Equity

The Company was authorized to issue 500,000,000 shares of Class A common stock, $0.01 par value, at ~~March 31,~~June 30, 2022 and December 31, 2021. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had ~~111,317,259~~110,892,097 and 113,987,154 Class A common shares issued and outstanding, respectively. The Company was authorized to issue 10,000,000 shares of Class B common stock, $0.01 par value at ~~March 31,~~June 30, 2022 and December 31, 2021. The Company did not have any shares of Class B non-voting common stock, $0.01 par value, issued or outstanding as of ~~March 31,~~June 30, 2022 or December 31, 2021.

The Company was authorized to issue 50,000,000 shares of preferred stock, $0.01 par value, at ~~March 31,~~June 30, 2022 and December 31, 2021. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the Company had 10.0 million shares of 6.15% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), $0.01 par value, issued and outstanding with an aggregate liquidation preference of $250.0 million ($25.00 per share), 300,000 shares of 4.65% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), $0.01 par value, issued and outstanding with an aggregate liquidation preference of $300.0 million ($1,000 per share) and 300,000 shares of 4.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”), $0.01 par value, issued and outstanding with an aggregate liquidation preference of $300.0 million ($1,000 per share).

The following table summarizes the Company’s preferred stock issued and outstanding as of ~~March 31,~~June 30, 2022 (in thousands, except for share amounts and percentages):


		Shares Issued and Outstanding as of March 31, 2022	Carrying Value as of March 31, 2022		Issue Date	Dividend Rate in Effect at March 31, 2022		Next dividend rate reset date	Dividend rate after reset date
											Shares Issued and Outstanding as of June 30, 2022	Carrying Value as of June 30, 2022		Issue Date	Dividend Rate in Effect at June 30, 2022		Next dividend rate reset date	Dividend rate after reset date
Series A	Series A	10,000,000	$	250,000	March 5, 2019	6.150	%	March 15, 2024	3M LIBOR plus 3.65%	Series A	10,000,000	$	250,000	March 5, 2019	6.150	%	March 15, 2024	3M LIBOR plus 3.65%

Series B	Series B	300,000	300,000		March 2, 2021	4.650	%	June 15, 2026	5 Yr U.S. Treasury plus 4.076%	Series B	300,000	300,000		March 2, 2021	4.650	%	June 15, 2026	5 Yr U.S. Treasury plus 4.076%

Series C	Series C	300,000	300,000		October 13, 2021	4.125	%	December 15, 2026	5 Yr U.S. Treasury plus 3.149%	Series C	300,000	300,000		October 13, 2021	4.125	%	December 15, 2026	5 Yr U.S. Treasury plus 3.149%
Total Preferred Stock	Total Preferred Stock	10,600,000	$	850,000						Total Preferred Stock	10,600,000	$	850,000

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company repurchased ~~2,959,458~~3,420,874 shares of its Class A common stock under its previously announced stock repurchase program at an average purchase price of ~~$43.77~~$43.85 per ~~share.~~

~~In April 2022, the Company repurchased an additional~~share, of which 461,416 shares of its Class A common stock ~~under~~were repurchased during the ~~Company’s stock repurchase plan~~three months ended June 30, 2022 at an average purchase price of $44.33 per share. Such repurchases completed the repurchase of the entire $150.0 million of outstanding shares authorized under the Company’s stock repurchase ~~plan.~~program. The ~~plan terminated~~Company completed the share repurchase program in April ~~2022 upon completion of such repurchase.~~2022.

Note 10. 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 ~~March 31,~~June 30, 2022, the number of stock options (“Stock Options”) and restricted stock units (“RSUs”) authorized under the 2014 Plan is approximately ~~4,199,596.~~4,216,707. The Company has issued RSUs with 4 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, time based RSUs that vest ratably over a time period of three years and RSUs that cliff vest at the end of a one or two year period.

As of ~~March 31,~~June 30, 2022, the Company had no outstanding Stock Options and no0 unrecognized compensation costs related to outstanding Stock Options. For the three and six months ended ~~March 31,~~June 30, 2022 and 2021, there were no0 stock-based compensation expenses related to Stock Options. ~~For the three months ended March 31, 2022, the Company recorded a net reversal of previously recognized stock based compensation of $2.5 million.~~

The Company recorded ~~$5.4~~$6.6 million and $6.7 million of stock-based compensation expense related to RSUs for the three months ended March 31, 2021. The decrease in stock-based compensation relates to reductions in the underlying vesting estimates of certain book value RSUs as the performance criteria is no longer being considered probable of being achieved.

June 30, 2022 and 2021, respectively.

1516

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company recorded $4.0 million and $12.1 million of stock-based compensation expense related to RSUs for the six months ended June 30, 2022 and 2021, respectively. The decrease in stock-based compensation relates to reductions in the underlying vesting estimates of certain book value RSUs as the performance criteria are no longer considered probable of being achieved.

Restricted Stock Units

Compensation cost for RSUs 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 RSUs that vest based on the attainment of Total Shareholder Return (“TSR”) goals 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 ~~three~~six months ended ~~March 31,~~June 30, 2022, the Company granted ~~629,903~~652,016 RSUs of which ~~137,729~~110,237 are TSR RSUs and 220,437 are book value RSUs. The following table summarizes the activities for the Company’s unvested RSUs for the ~~three~~six months ended ~~March 31,~~June 30, 2022:


		Unvested Restricted Stock Units				Unvested Restricted Stock Units
		Number of Shares	Weighted-Average Grant-Date Fair Value			Number of Shares	Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2021	Unvested at December 31, 2021	1,571,415	$	43.88	Unvested at December 31, 2021	1,571,415	$	43.88
Granted	Granted	629,903	$	48.06	Granted	652,016	$	47.24
Vested	Vested	(471,867)	$	42.23	Vested	(542,060)	$	42.50
Forfeited/canceled	Forfeited/canceled	(146,306)	$	40.03	Forfeited/canceled	(162,177)	$	40.51
Unvested at March 31, 2022		1,583,145	$	46.11
Expected to vest after March 31, 2022		1,399,784	$	46.74
Unvested at June 30, 2022					Unvested at June 30, 2022	1,519,194	$	45.88
Expected to vest after June 30, 2022					Expected to vest after June 30, 2022	1,317,556	$	46.52

As of ~~March 31,~~June 30, 2022, there was ~~$47.5~~$40.3 million of unrecognized compensation ~~cost~~expense related to unvested stock-based payments granted to employees. Total unrecognized compensation ~~cost~~expense will be recognized over a weighted-average remaining period of ~~2.34~~2.10 years.

Note 11. Aircraft Under Management

As of ~~March 31,~~June 30, 2022, the Company managed 8789 aircraft across 3 aircraft management platforms. The Company managed 48 aircraft through its Thunderbolt platform, 3435 aircraft through the Blackbird investment funds and 56 on behalf of other financial institutions.

The Company managed 3435 aircraft on behalf of third-party investors, through 2 investment funds, Blackbird I and Blackbird II. These funds invest in commercial jet aircraft and lease them to airlines throughout the world. The Company provides management services to these funds for a fee. As of ~~March 31,~~June 30, 2022, the Company's non-controlling interests in each fund were 9.5% and are accounted for under the equity method of accounting. The Company’s investments in these funds aggregated ~~$62.4~~$64.2 million and $73.2 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, and are included in Other assets on the Consolidated Balance Sheets.

Additionally, the Company continues to manage aircraft that it sells through its Thunderbolt platform. The Thunderbolt platform facilitates the sale of mid-life aircraft to investors while allowing the Company to continue the management of these aircraft for a fee. As of ~~March 31,~~June 30, 2022, the Company managed 48 aircraft across 3 separate transactions. The Company has non-controlling interests in 2 of these entities of approximately 5.0%, which are accounted for under the cost method of accounting. The Company’s total investment in aircraft sold through its Thunderbolt platform was $8.8 million and $9.3 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively and is included in Other assets on the Consolidated Balance Sheets.

~~Table~~ During the three months ended June 30, 2022, the Company did not recognize any asset write-offs related to its investments in the managed platforms. The 6 aircraft that remain in Russia were removed from the Company’s managed fleet count as of ~~Contents~~

Air Lease Corporation and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In response to the sanctions against certain industry sectors and parties in Russia, in March 2022 the Company terminated all of its leasing activities in ~~Russia, including 8~~Russia. NaN leases for aircraft ~~from its~~in the Company’s managed ~~fleet.~~fleet were also terminated. As of ~~May 5,~~August 4, 2022, 6 aircraft previously included in the Company’s managed fleet remain in Russia. While the ~~Company~~applicable managed platform maintains title to the aircraft, the Company has determined that it is unlikely itthey will regain possession of the aircraft that have not been returned and that remain in Russia. As a result, during the three months ended March 31, 2022, the Company recognized asset write-offs of $11.4 million related to its investments in the managed platforms that own such aircraft.

~~Air Lease Corporation and Subsidiaries~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

March 31, 2022.

Note 12. Net Investment in Sales-type Leases

As of ~~March 31,~~June 30, 2022, the Company had 45 A320-200 aircraft on lease to an airline with terms that meet the criteria of being classified as a sales-type lease.

Net investment in sales-type leases was included in Other assets in the Company’s Consolidated Balance Sheets based on the present value of fixed payments under the contract and the residual value of the underlying asset, discounted at the rate implicit in the lease. The Company’s investment in sales-type leases consisted of the following (in thousands):


	~~March 31,~~June 30, 2022
Future minimum lease payments to be received	$	~~98,810~~121,360
Estimated residual values of leased flight equipment	~~36,675~~45,844
Less: Unearned income	~~(22,782)~~(26,113)
Net Investment in Sales-type Leases	$	~~112,703~~141,091

As of ~~March 31,~~June 30, 2022, future minimum lease payments to be received on sales-type leases were as follows:


		(in thousands)			(in thousands)
Years ending December 31,	Years ending December 31,			Years ending December 31,
2022 (excluding the three months ended March 31, 2022)		$	6,970
2022 (excluding the six months ended June 30, 2022)				2022 (excluding the six months ended June 30, 2022)	$	6,150
2023	2023	9,840		2023	12,300
2024	2024	9,840		2024	12,300
2025	2025	9,840		2025	12,300
2026	2026	9,840		2026	12,300
Thereafter	Thereafter	52,480		Thereafter	66,010
Total	Total	$	98,810	Total	$	121,360

Note 13. Flight Equipment Held for Sale

As of June 30, 2022, the Company had 6 aircraft, with a carrying value of $220.9 million, which were held for sale and included in Flight equipment subject to operating leases on the Consolidated Balance Sheets. The Company expects the sale of all 6 aircraft to be completed in 2022. The Company ceases recognition of depreciation expense once an aircraft is classified as held for sale. As of December 31, 2021, the Company did not have any flight equipment classified as held for sale.

Note ~~13.~~14. Subsequent Events

On ~~May 4,~~August 3, 2022, the Company’s board of directors approved quarterly dividends for the Company’s Class A common stock and Series A, B and C Preferred Stock. The following table summarizes the details of the dividends that were declared:

Title of each class

Cash dividend per share

Record Date

Payment Date

Class A Common Stock

0.185

~~June 7,~~September 12, 2022

~~July 8,~~October 7, 2022

Series A Preferred Stock

0.384375

~~May~~August 31, 2022

~~June~~September 15, 2022

Series B Preferred Stock

11.625

~~May~~August 31, 2022

~~June~~September 15, 2022

Series C Preferred Stock

10.3125

~~May~~August 31, 2022

~~June~~September 15, 2022

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our Consolidated Financial Statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Overview

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 the most modern, fuel-efficient new technology commercial jet 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 fleet to third-parties, including other leasing companies, financial services companies, airlines and other investors. 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 gains from aircraft sales and our management fees.

~~First~~Second Quarter Overview

As of ~~March 31,~~June 30, 2022, the net book value of our fleet was ~~$22.3~~$23.5 billion, compared to $22.9 billion as of December 31, 2021. During the three months ended ~~March 31,~~June 30, 2022, we purchased and took delivery of ~~eight~~21 aircraft from our new order pipeline and one new incremental aircraft, ~~from the secondary market and wrote-off the net book value of 21 aircraft that remain in Russia,~~ ending the period with a total of ~~370~~392 aircraft in our owned aircraft portfolio. The weighted average age of our fleet was ~~4.5~~4.4 years and the weighted average lease term remaining was ~~7.0~~7.1 years as of ~~March 31,~~June 30, 2022. Our managed fleet was 8789 aircraft as of ~~March 31,~~June 30, 2022 as compared to a managed fleet of 92 aircraft as of December 31, 2021. We have a globally diversified customer base comprised of ~~114~~116 airlines in 6062 countries as of ~~March 31,~~June 30, 2022. As of ~~May 5,~~August 4, 2022, all aircraft in our fleet, except for ~~three~~one aircraft, were subject to lease agreements or letters of intent.

During the quarter ended March 31, 2022, we increased our committed orderbook by entering into agreements with Boeing to purchase 50 aircraft, which includes the conversion of three 787-9 aircraft to 18 737 MAX aircraft. In addition, we canceled five aircraft in our orderbook that were slated for delivery in Russia. As of ~~March 31,~~June 30, 2022, we had commitments to purchase ~~451~~430 aircraft from Boeing and Airbus for delivery through 2028, with an estimated aggregate commitment of ~~$28.8~~$27.6 billion.

We have placed approximately ~~97%~~99% of our committed orderbook on long-term leases for aircraft delivering through the end of 2023 and have placed ~~52%~~58% of our entire orderbook. We ended the ~~first~~second quarter of 2022 with ~~$29.5~~$31.3 billion in committed minimum future rental payments, consisting of ~~$14.1~~$15.0 billion in contracted minimum rental payments on the aircraft in our existing fleet and ~~$15.4~~$16.3 billion in minimum future rental payments related to aircraft which will deliver between 2022 through ~~2026.~~2027.

We typically finance the purchase of aircraft and our business with available cash balances, internally generated funds, including through aircraft sales, preferred stock issuances, and debt financings. During the three months ended March 31, 2022, we issued $750.0 million in aggregate principal amount of 2.20% Medium-Term Notes due 2027, and $750.0 million in aggregate principal amount of 2.875% Medium-Term Notes due 2032. In addition, weWe ended the ~~first~~second quarter of 2022 with an aggregate borrowing capacity under our revolving credit facility of ~~$6.8~~$6.6 billion and total liquidity of ~~$8.3~~$7.6 billion. As of ~~March 31,~~June 30, 2022, we had total debt outstanding of ~~$18.0~~$18.5 billion, of which ~~95.1%~~92.4% was at a fixed rate and ~~99.2%~~99.3% was unsecured. As of ~~March 31,~~June 30, 2022, our composite cost of funds raised through debt financings was ~~2.77%~~2.81%.

Our total revenues for the quarter ended ~~March 31,~~June 30, 2022 increased by ~~25.7%~~13.4% to ~~$596.7~~$557.7 million, compared to the quarter ended ~~March 31,~~June 30, 2021. The increase in total revenues was primarily driven by the continued growth in our fleet ~~significantly lower cash basis and lease restructuring losses~~ and the recognition of ~~approximately $59.6~~cash basis revenue of $8.7 million as compared to $41.6 million of cash basis losses in ~~security deposits and maintenance reserve income resulting~~three months ended June 30, 2021. This increase was partially offset by the loss of rental revenue from the termination of our leasing activities in Russia ~~as required~~during the first quarter of 2022 and lower aircraft sales, trading and other revenue. Lower aircraft sales, trading and other revenue was driven by ~~government sanctions.~~$34.0 million in revenue recognized in the prior year related to the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings.

During the ~~first~~second quarter of 2022, the industry continued to recover from the impact of COVID-19. As of ~~March 31,~~June 30, 2022, we had ~~$190.4~~$182.1 million in outstanding deferred rentals due to the impact of the COVID-19 pandemic as compared to $203.2 million as of December 31, 2021. Our collection rate ~~and our lease utilization rate~~ for the three and six months ended ~~March 31,~~June 30, 2022 were ~~96.9%~~94.7% and

~~99.5%~~ 96.0%, respectively. Our collection rate is defined as the sum of cash collected from lease rentals and maintenance reserves, including cash recovered from outstanding receivables from previous periods, as a percentage of the total contracted receivables due during the period and is calculated after giving effect to lease deferral arrangements made as of ~~March 31,~~June 30, 2022. ~~The calculation of our collection~~Our lease utilization rate ~~includes cash received and due from lease rentals and maintenance reserves~~ for the ~~21 aircraft previously included in our owned fleet that remain in Russia through the date we terminated leasing activities.~~three and six

months ended June 30, 2022 were 99.6% and 99.7%, respectively. Lease utilization rate is calculated based on the number of days each aircraft ~~including the 21 aircraft previously included in our owned fleet that remain in Russia as of March 31, 2022,~~ was subject to a lease or letter of intent during the period, weighted by the net book value of the aircraft.

During the three months ended ~~March 31,~~June 30, 2022, we recorded a net ~~loss~~income attributable to shareholders of ~~$479.4~~$105.9 million, or ~~$4.21~~$0.95 per diluted share, as compared to net income attributable to shareholders of ~~$80.2~~$85.6 million, or ~~$0.70~~$0.75 per diluted share, in the prior period. ~~Despite~~The increase in our net income attributable to shareholders is primarily due to the continued growth of our fleet ~~our net income attributable to shareholders decreased due to~~and the ~~write-off of our interests~~increase in ~~our owned and managed fleet that remain in Russia, totaling approximately $802.4 million for the quarter ended March 31, 2022.~~revenues as discussed above.

~~After excluding the effects of the write-off and certain other adjustments described below, we~~We recorded adjusted net income before income taxes for the three months ended ~~March 31,~~June 30, 2022 of ~~$200.9~~$154.5 million or ~~$1.76~~$1.39 per diluted share. This increased by approximately ~~71.6%~~22.7% over the prior period results of ~~$117.1~~$125.9 million or ~~$1.03~~$1.10 per diluted share for the three months ended ~~March 31,~~June 30, 2021. This was due to the continued growth of our fleet and the increase in revenues as discussed above. Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”). See “Results of Operations” below for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and a reconciliation of these measures to net income attributable to common stockholders.

Impact of Russia-Ukraine Conflict

In connection with the ongoing conflict between Russia and Ukraine, the United States, European Union, United Kingdom and others have imposed, and may continue to impose, economic sanctions and export controls against certain industry sectors and parties in Russia. These sanctions include closures of airspace for aircraft operated by Russian controlled entities, bans on the leasing or sale of aircraft to Russian controlled entities, bans on the export and re-export of aircraft and aircraft components to Russian controlled entities or for use in Russia, and corresponding prohibitions on providing technical assistance, brokering services, insurance and reinsurance, as well as financing or financial assistance.

In response to the sanctions, in March 2022 we terminated all of our leasing activities in Russia, consisting of 24 aircraft in our owned fleet, eight aircraft in our managed fleet and the leasing activity relating to 29 aircraft that have not yet delivered from our orderbook, for which ~~many~~the majority have been subsequently placed. WeIn the first quarter of 2022, we also canceled five aircraft in our orderbook that were slated for delivery in Russia. Prior to the Russia-Ukraine conflict, we did not have any aircraft on lease in Belarus and had one aircraft on lease in Ukraine, which is currently located outside of Ukraine. During the quarter, we recognized approximately $59.6 million in security deposits and maintenance reserve income resulting from the termination of our leasing activities in Russia. As of ~~May 5,~~August 4, 2022, 21 aircraft previously included in our owned fleet and six aircraft previously included in our managed fleet ~~were not returned and~~still remain in Russia. ~~Most of the~~The operators of these aircraft have continued to fly ~~the~~most of these aircraft notwithstanding the termination of leasing activities and ~~our~~ repeated demands for the return of ~~our~~the assets. The 21 aircraft previously included in our owned fleet ~~represented 3.4% of our fleet by net book value as of March 31, 2022 and~~ provided approximately $18.0 million per quarter in rental revenue. ~~In addition, our~~Our future revenues and cash flows have been impacted by the termination of our leasing activities of the aircraft in ~~Russia, which we have reflected in the table presented in Note 6 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.~~Russia.

While we or the applicable managed platform maintain title to the aircraft, we determined that it is unlikely we or they will regain possession of the aircraft that have not been returned and that remain in Russia. As a result, we recorded a write-off of our interests in our owned and managed aircraft that remain in Russia, totaling approximately $802.4 million for the ~~quarter~~three months ended March 31, 2022. The 21 aircraft that remain in Russia ~~have been~~were removed from our owned fleet ~~count~~ as of March 31, 2022. ~~Our lessees are primarily structured as triple net leases, whereby the lessee is responsible for all operating costs, including insurance. We~~In June 2022, we submitted insurance claims to our insurers to recover our losses relating to these aircraft and are vigorously pursuing all available insurance claims. In addition, we intend to pursue all available legal claims ~~to recover losses relating~~related to our aircraft that remain in ~~Russia. Collection,~~Russia, but the timing and ~~amounts~~amount of any recoveries under any insurance ~~recoveries is currently uncertain.~~or legal claims are uncertain at this time. During the second quarter of 2022, we renewed our insurance policies which resulted in an annualized premium increase of approximately $16.0 million. These policies apply worldwide with exclusions for Russia, Ukraine and Belarus. Our leases require our lessees to carry comprehensive liability insurance and aircraft all-risk insurance. As a result, lessees operating in Russia, Ukraine or Belarus are required to have insurance covering those regions or they are not permitted under the terms of their lease to operate in such countries.

For more information regarding the risks we face relating to the Russia-Ukraine conflict, see “Part II — Item 1A. Risk Factors,” in ~~this~~our Quarterly Report on Form ~~10-Q.~~10-Q for the quarter ended March 31, 2022.

1921

Our Fleet

References throughout this Quarterly Report on Form 10-Q to “our fleet” refer to the aircraft included in flight equipment subject to operating leases and do not include aircraft in our managed fleet or aircraft classified as net investments in sales-type leases unless the context indicates otherwise. Portfolio metrics of our fleet as of ~~March 31,~~June 30, 2022 and December 31, 2021 are as follows:


		March 31, 2022			December 31, 2021				June 30, 2022			December 31, 2021
Net book value of flight equipment subject to operating lease	Net book value of flight equipment subject to operating lease	$	22.3	billion	$	22.9	billion	Net book value of flight equipment subject to operating lease	$	23.5	billion	$	22.9	billion
Weighted-average fleet age(1)	Weighted-average fleet age(1)	4.5 years			4.4 years			Weighted-average fleet age(1)	4.4 years			4.4 years
Weighted-average remaining lease term(1)	Weighted-average remaining lease term(1)	7.0 years			7.2 years			Weighted-average remaining lease term(1)	7.1 years			7.2 years

Owned fleet	Owned fleet	370			382			Owned fleet	392			382
Managed fleet	Managed fleet	87			92			Managed fleet	89			92
Aircraft on order	Aircraft on order	451			431			Aircraft on order	430			431

Total	Total	908			905			Total	911			905

Current fleet contracted rentals	Current fleet contracted rentals	$	14.1	billion	$	14.8	billion	Current fleet contracted rentals	$	15.0	billion	$	14.8	billion
Committed fleet rentals	Committed fleet rentals	$	15.4	billion	$	16.1	billion	Committed fleet rentals	$	16.3	billion	$	16.1	billion
Total committed rentals	Total committed rentals	$	29.5	billion	$	30.9	billion	Total committed rentals	$	31.3	billion	$	30.9	billion

(1) Weighted-average fleet age and remaining lease term calculated based on net book value of our flight equipment subject to operating lease.	(1) Weighted-average fleet age and remaining lease term calculated based on net book value of our flight equipment subject to operating lease.							(1) Weighted-average fleet age and remaining lease term calculated based on net book value of our flight equipment subject to operating lease.

The following table sets forth the net book value and percentage of the net book value of our flight equipment subject to operating leases in the indicated regions based on each airline’s principal place of business as of ~~March 31,~~June 30, 2022 and December 31, 2021:


		March 31, 2022				December 31, 2021					June 30, 2022				December 31, 2021
Region	Region	Net Book Value		% of Total		Net Book Value		% of Total		Region	Net Book Value		% of Total		Net Book Value		% of Total
		(in thousands, except percentages)									(in thousands, except percentages)
Europe	Europe	$	6,746,925	30.2	%	$	7,439,993	32.5	%	Europe	$	7,339,480	31.3	%	$	7,439,993	32.5	%
Asia (excluding China)	Asia (excluding China)	6,109,545		27.4	%	5,952,981		26.0	%	Asia (excluding China)	6,609,314		28.2	%	5,952,981		26.0	%
China	China	2,902,867		13.0	%	2,934,224		12.8	%	China	2,871,509		12.2	%	2,934,224		12.8	%
The Middle East and Africa	The Middle East and Africa	2,422,660		10.9	%	2,447,919		10.7	%	The Middle East and Africa	2,359,738		10.1	%	2,447,919		10.7	%
Central America, South America, and Mexico										Central America, South America, and Mexico	1,724,076		7.3	%	1,566,133		6.8	%
U.S. and Canada	U.S. and Canada	1,596,215		7.2	%	1,638,450		7.2	%	U.S. and Canada	1,662,953		7.1	%	1,638,450		7.2	%
Central America, South America, and Mexico		1,596,112		7.2	%	1,566,133		6.8	%
Pacific, Australia, and New Zealand	Pacific, Australia, and New Zealand	909,988		4.1	%	919,304		4.0	%	Pacific, Australia, and New Zealand	900,672		3.8	%	919,304		4.0	%
Total	Total	$	22,284,312	100.0	%	$	22,899,004	100.0	%	Total	$	23,467,742	100.0	%	$	22,899,004	100.0	%

2022

The following table sets forth the number of aircraft in our owned fleet by aircraft type as of ~~March 31,~~June 30, 2022 and December 31, 2021:


		March 31, 2022			December 31, 2021				June 30, 2022			December 31, 2021
Aircraft type	Aircraft type	Number of Aircraft	% of Total		Number of Aircraft	% of Total		Aircraft type	Number of Aircraft	% of Total		Number of Aircraft	% of Total
Airbus A319-100	Airbus A319-100	1	0.3	%	1	0.3	%	Airbus A319-100	1	0.3	%	1	0.3	%
Airbus A320-200	Airbus A320-200	28	7.5	%	31	8.1	%	Airbus A320-200	28	7.1	%	31	8.1	%
Airbus A320-200neo	Airbus A320-200neo	24	6.5	%	23	6.0	%	Airbus A320-200neo	26	6.6	%	23	6.0	%
Airbus A321-200	Airbus A321-200	24	6.5	%	26	6.8	%	Airbus A321-200	24	6.1	%	26	6.8	%
Airbus A321-200neo	Airbus A321-200neo	64	17.3	%	69	18.1	%	Airbus A321-200neo	70	17.9	%	69	18.1	%
Airbus A330-200	Airbus A330-200	13	3.4	%	13	3.4	%	Airbus A330-200	13	3.3	%	13	3.4	%
Airbus A330-300	Airbus A330-300	5	1.4	%	8	2.1	%	Airbus A330-300	5	1.3	%	8	2.1	%
Airbus A330-900neo	Airbus A330-900neo	10	2.7	%	9	2.4	%	Airbus A330-900neo	11	2.8	%	9	2.4	%
Airbus A350-900	Airbus A350-900	12	3.2	%	12	3.1	%	Airbus A350-900	13	3.3	%	12	3.1	%
Airbus A350-1000	Airbus A350-1000	5	1.4	%	5	1.3	%	Airbus A350-1000	6	1.5	%	5	1.3	%
Boeing 737-700	Boeing 737-700	4	1.1	%	4	1.0	%	Boeing 737-700	4	1.0	%	4	1.0	%
Boeing 737-800	Boeing 737-800	84	22.7	%	88	23.0	%	Boeing 737-800	84	21.4	%	88	23.0	%
Boeing 737-8 MAX	Boeing 737-8 MAX	30	8.1	%	28	7.3	%	Boeing 737-8 MAX	39	9.9	%	28	7.3	%
Boeing 737-9 MAX	Boeing 737-9 MAX	8	2.2	%	7	1.8	%	Boeing 737-9 MAX	10	2.7	%	7	1.8	%
Boeing 777-200ER	Boeing 777-200ER	1	0.3	%	1	0.3	%	Boeing 777-200ER	1	0.3	%	1	0.3	%
Boeing 777-300ER	Boeing 777-300ER	24	6.5	%	24	6.3	%	Boeing 777-300ER	24	6.1	%	24	6.3	%
Boeing 787-9	Boeing 787-9	26	7.0	%	26	6.8	%	Boeing 787-9	26	6.6	%	26	6.8	%
Boeing 787-10	Boeing 787-10	6	1.6	%	6	1.6	%	Boeing 787-10	6	1.5	%	6	1.6	%
Embraer E190	Embraer E190	1	0.3	%	1	0.3	%	Embraer E190	1	0.3	%	1	0.3	%
Total(1)	Total(1)	370	100.0	%	382	100.0	%	Total(1)	392	100.0	%	382	100.0	%

(1) As of June 30, 2022, we had six aircraft classified as flight equipment held for sale. As of December 31, 2021, we did not have any flight equipment classified as held for sale.								(1) As of June 30, 2022, we had six aircraft classified as flight equipment held for sale. As of December 31, 2021, we did not have any flight equipment classified as held for sale.

As of ~~March 31,~~June 30, 2022, we had contractual commitments to acquire a total of ~~451~~430 new aircraft, with an estimated aggregate purchase price (including adjustments for anticipated inflation) of ~~$28.8~~$27.6 billion, for delivery through 2028 as follows:


		Estimated Delivery Years								Estimated Delivery Years
Aircraft Type	Aircraft Type	2022	2023	2024	2025	2026	Thereafter	Total	Aircraft Type	2022	2023	2024	2025	2026	Thereafter	Total
Airbus A220-100/300	Airbus A220-100/300	4	17	23	20	12	—	76	Airbus A220-100/300	4	16	24	20	12	—	76
Airbus A320/321neo(1)	Airbus A320/321neo(1)	24	24	26	23	32	64	193	Airbus A320/321neo(1)	17	23	23	24	35	64	186
Airbus A330-900neo	Airbus A330-900neo	7	6	4	—	—	—	17	Airbus A330-900neo	6	6	4	—	—	—	16
Airbus A350-900/1000	Airbus A350-900/1000	3	3	3	—	—	—	9	Airbus A350-900/1000	1	3	3	—	—	—	7
Airbus A350F	Airbus A350F	—	—	—	—	2	5	7	Airbus A350F	—	—	—	—	2	5	7
Boeing 737-8/9 MAX	Boeing 737-8/9 MAX	25	31	35	18	16	—	125	Boeing 737-8/9 MAX	14	31	34	19	16	—	114
Boeing 787-9/10	Boeing 787-9/10	3	7	8	6	—	—	24	Boeing 787-9/10	3	7	8	6	—	—	24
Total(2)	Total(2)	66	88	99	67	62	69	451	Total(2)	45	86	96	69	65	69	430

(1) Our Airbus A320/321neo aircraft orders include 27 long-range variants and 49 extra long-range variants.
(1) The Company’s Airbus A320/321neo aircraft orders include 26 long-range variants and 49 extra long-range variants.									(1) The Company’s Airbus A320/321neo aircraft orders include 26 long-range variants and 49 extra long-range variants.
(2) The table above reflects Airbus and Boeing aircraft delivery delays based on contractual documentation.	(2) The table above reflects Airbus and Boeing aircraft delivery delays based on contractual documentation.								(2) The table above reflects Airbus and Boeing aircraft delivery delays based on contractual documentation.

2123

Aircraft Delivery Delays

Pursuant to our purchase agreements with Boeing and Airbus, we agree to contractual delivery dates for each aircraft ordered. These dates can change for a variety of reasons, however for the last several years, manufacturing delays have significantly ~~delayed~~impacted the planned purchases of our aircraft on order with Boeing and Airbus. We are currently experiencing delivery delays with both Boeing and Airbus aircraft. However, the most significant delivery delays ~~are with~~pertain to our aircraft orders for Boeing 787 aircraft.

During 2020, Boeing began to experience manufacturing issues on its 787 aircraft, which resulted in significant aircraft delivery delays. Boeing ~~has~~ halted 787 deliveries in May 2021 and has not indicated when they will resume. ~~Accordingly, we~~We have not ~~taken delivery of~~received any 787s since the halting of the deliveries by Boeing. It is our understanding that, in July 2022, the FAA approved Boeing’s plan to inspect and repair 787 aircraft, which will allow deliveries to resume. However, the pace and the timing of deliveries of the aircraft for the remainder of this year and potentially beyond still remains uncertain.

Our leases typically provide that we and our airline customer each have a cancellation right related to certain aircraft delivery delays. Our purchase agreements with Boeing and Airbus also generally provide that we and the manufacturer each have cancellation rights that typically parallel our cancellation rights in our leases. Our leases and our purchase agreements with Boeing and Airbus generally provide ~~for~~each of us and the manufacturers with cancellation rights for delivery delays starting at one year after the original contractual delivery date, regardless of cause. In addition, our lease agreements generally provide each of us and the lessees with cancellation rights related to certain aircraft delivery delays that typically parallel the cancellation rights in our purchase agreements.

We believe that the majority of our 787 aircraft deliveries in our orderbook will be delayed, ~~more than 12 months,~~ which ~~would~~could give us, our airline customers and Boeing the right to cancel these aircraft commitments. ~~We are working with Boeing~~

As a result of continued manufacturing delays as discussed above, our aircraft delivery schedule could continue to be subject to material changes and ~~the respective airlines to find commercial solutions to prevent cancellation rights from being exercised and ultimately, to take~~ delivery ~~of these aircraft. However, as noted above, during the quarter ended March 31, 2022, we elected to cancel five aircraft in our orderbook that were slated for delivery in Russia.~~delays could extend beyond 2022.

The following table, which is subject to change based on Airbus and Boeing delivery delays, shows the number of new aircraft scheduled to be delivered as of ~~March 31,~~June 30, 2022, along with the lease placements of such aircraft as of ~~May 5,~~August 4, 2022. As noted above, we expect delivery delays for all aircraft deliveries in our orderbook. We remain in discussions with Boeing and Airbus to determine the extent and duration of delivery delays, but we are not yet able to determine the full impact of ~~the delivery~~these delays.


Delivery Year	Delivery Year	Number Leased	Number of Aircraft	% Leased		Delivery Year	Number Leased	Number of Aircraft	% Leased
2022	2022	65	66	98.5	%	2022	45	45	100.0	%
2023	2023	85	88	96.6	%	2023	85	86	98.8	%
2024	2024	59	99	59.6	%	2024	58	96	60.4	%
2025	2025	25	67	37.3	%	2025	35	69	50.7	%
2026	2026	2	62	3.2	%	2026	16	65	24.6	%
Thereafter	Thereafter	—	69	—	%	Thereafter	9	69	13.0	%
Total	Total	236	451			Total	248	430

Aircraft Industry and Sources of Revenues

Our revenues are principally derived from operating leases with airlines throughout the world. As of ~~March 31,~~June 30, 2022, we had a globally diversified customer base of ~~114~~116 airlines in 6062 different countries, with over 95% of our business 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.

Performance of the commercial airline industry is linked to global economic health and development. Despite the disruption caused to the commercial airline industry by the COVID-19 pandemic since early 2020, global air travel continues to recover and has accelerated in ~~a number of~~most markets. The International Air Transport Association (“IATA”) reported that passenger traffic was up 76% in the month of ~~March~~June 2022 relative to the same month in the prior year, asbenefiting from a significant acceleration in international traffic and strong continued expansion of domestic traffic ~~continued to improve~~ in most markets and the international traffic recovery accelerated in markets where travel restrictions were relaxed. Domestic markets have experienced faster recovery than international markets given generally more relaxed travel restrictions. Global domestic passenger traffic in March 2022 improved 12% relative to the prior year, and was 23% lower than the same month in 2019.markets. International traffic in ~~March~~June of 2022 rose ~~285%~~230% relative to the prior year, though it remains ~~52%~~35% lower than the same month in 2019. ~~We believe COVID-19 vaccination~~Global domestic passenger traffic in June 2022 rose 5% relative to the prior year, with all major markets rising except China domestic given residual impact of COVID-related travel constraints, and

2224

was 19% lower than the same month in 2019. According to IATA, several international routes are now exceeding 2019 traffic levels or are expected to exceed those levels near-term, several other domestic markets are quickly approaching 2019 levels. China domestic traffic is also recently showing signs of stabilization. We believe COVID-19 vaccination progress, therapeutic treatments and the easing of travel restrictions will continue to support the recovery of air passenger traffic and the commercial airline industry.

~~As of March 31, 2022, approximately 74% of the net book value of our fleet~~Currently, we are leased to flag carriers or airlines that have some form of governmental ownership; however, this does not guarantee our ability to collect contractual rent payments. We believe that having a large portion of the net book value of our fleet on lease with flag carriers or airlines with some form of governmental ownership, coupled with the overall quality of our aircraft and security deposits and maintenance reserves under our leases will help mitigate our customer default risk.

Impacts from the COVID-19 pandemic, including border restrictions and other travel limitations, initially reduced demand for certain aircraft in our fleet resulting in weakened lease rates, most particularly on widebody aircraft. However, starting in the second half of 2021, we experiencedexperiencing increased demand for our aircraft as global air traffic recovers from the pandemic. We believe supply chain challenges will further exacerbate what was already shaping up to be a shortage of commercial aircraft. The ~~overall~~ increased demand ~~coupled~~for our aircraft, when combined with rising interest rates and inflation, ~~are~~is providing ~~catalysts~~a catalyst for a rising lease ~~rate environment and we continue to see this in marketplace.~~rates. Lease rates can be influenced by several factors including impacts of ~~epidemic diseases,~~ changes in the competitive landscape of the aircraft leasing industry, supply chain disruptions, evolving international trade matters, epidemic diseases and geopolitical events ~~and aircraft delivery delays~~ and therefore, are difficult to project or forecast.

As a result of continued manufacturing delays as discussed above in “Our Fleet,” our aircraft delivery schedule could continue to be subject to material changes and delivery delays could extend beyond 2022.

~~Global economic conditions are also impacting the aircraft leasing industry. Fuel costs have increased significantly in 2022 compared to pandemic lows and interest rates are also increasing.~~ Our airline customers are facing higher operating costs as a result of rising fuel costs, interest rates and inflation, ongoing labor shortages and disputes, as well as delays and cancellations caused by the global air traffic control system and airports, although the magnitude of underlying pre-pandemic demand returning and still-to-return to the market is offering a strong counterbalance to these increased costs. Many of these customers are also ~~currently experiencing wage negotiations and/or pilot shortages, which may increase~~exposed to currency risk related to the appreciation of the U.S. dollar because they earn revenues in their ~~operating costs. Also, as noted above, the Russia-Ukraine conflict has impacted global macroeconomic conditions. While these events have not impacted our lessees’ ability to make~~local currencies while a significant portion of their liabilities and expenses are denominated in U.S. dollars, including their lease payments to ~~date, if~~us. If our ~~lessees~~airline customers are not able to effectively manage ~~increased~~their operating costs and currency risk, it could impact our financial results and cash flows.

We continue to expect more airline reorganizations, liquidations, or other forms of bankruptcies, which may include some of our aircraft customers and result in the early return of aircraft or changes in our lease terms. As of the date of this filing, we had eight aircraft across three airlines which were subject to various forms of insolvency proceedings.

We believe the aircraft leasing industry has remained resilient over time across a variety of global economic conditions and remain optimistic about the long-term fundamentals of our business. We expect the aviation industry to continue to recover from the impact of COVID-19. As a result of the COVID-19 pandemic, some airlines have accelerated their plans to retire older, less fuel-efficient aircraft that have higher operating and maintenance costs in the current environment. We anticipate that airlines will continue to accelerate the retirement of these types of aircraft, particularly if fuel prices remain elevated, ultimately increasing demand for newer aircraft over time. We also anticipate that when airlines need to add new aircraft to their fleet, they will increasingly elect to lease aircraft instead of purchasing aircraft to reduce capital requirements and manage other operating expenses, and that we will benefit from that trend. We expect a number of these trends to continue in 2022 and beyond.

Liquidity and Capital Resources

Overview

We ended the ~~first~~second quarter of 2022 with available liquidity of ~~$8.3~~$7.6 billion which is comprised of unrestricted cash of ~~$1.5~~$1.0 billion and undrawn balances under our unsecured revolving credit facility of ~~$6.8~~$6.6 billion. We finance the purchase of aircraft and our business operations using available cash balances, internally generated funds, including through aircraft sales and trading activity, and an array of financing products. We aim to maintain investment-grade credit metrics and focus our debt financing strategy on funding our business on an unsecured basis with primarily fixed-rate debt from public bond offerings. Unsecured financing provides us with operational flexibility when selling or transitioning aircraft from one airline to another. We also have the ability to seek debt financing secured by our assets, as well as financings supported through the Export-Import Bank of the United States and other export credit agencies for future aircraft deliveries. We have also issued preferred stock with a total aggregate stated value of $850.0 million. Our access to a variety of financing alternatives including unsecured public bonds, private capital, bank debt, secured financings and preferred stock issuances serves as a key advantage in managing our liquidity. Aircraft delivery delays as a product of manufacturer delays are expected to further reduce our aircraft investment and debt financing needs for the next six to twelve months and potentially beyond.

We have a balanced approach to capital allocation based on the following priorities, ranked in order of importance: first, investing in modern, in-demand aircraft to profitably grow our core aircraft leasing business while maintaining strong fleet metrics and

creating sustainable long-term shareholder value; second, maintaining our investment grade balance sheet utilizing unsecured debt as our primary form of financing; and finally, in lockstep with the aforementioned priorities, returning excess cash to shareholders through our dividend policy as well as regular evaluation of share repurchases, as appropriate.

We ended the ~~first~~second quarter of 2022 with total debt outstanding of ~~$18.0~~$18.5 billion compared to $17.2 billion as of December 31, 2021. Our unsecured debt outstanding increased to ~~$17.9~~$18.4 billion as of ~~March 31,~~June 30, 2022 from $17.1 billion as of December 31, 2021. Our unsecured debt as a percentage of total debt was 99.3% and 99.2% as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

Material Cash Sources and Requirements

We believe that we have sufficient liquidity from available cash balances, cash generated from ongoing operations, available borrowings under our unsecured revolving credit facility and general ability to access the capital markets for opportunistic public bond offerings to satisfy the operating requirements of our business through at least the next 12 months. Our long-term debt financing strategy is focused on continuing to raise unsecured debt in the global bank and investment grade capital markets. Our material cash sources include:

•Unrestricted cash: We ended the ~~first~~second quarter of 2022 with $~~1.5~~1.0 billion in unrestricted cash.

•Lease cash flows: We ended the ~~first~~second quarter of 2022 with ~~$29.5~~$31.3 billion in committed minimum future rental payments comprised of ~~$14.1~~$15.0 billion in contracted minimum rental payments on the aircraft in our existing fleet and ~~$15.4~~$16.3 billion in minimum future rental payments related to aircraft which will deliver between 2022 through ~~2026.~~2027. These rental payments are a primary driver of our short and long-term operating-cash-flow. As of ~~March 31,~~June 30, 2022, our minimum future rentals on non-cancellable operating leases for the ~~remainder of 2022~~next 12 months was ~~$1.5~~$2.2 billion. For further detail on our minimum future rentals for the remainder of 2022 and thereafter, see “Notes to Consolidated Financial Statements” under “Item 1. Financial Statements” in this Quarterly Report on Form 10-Q.

•Unsecured revolving credit facility: As of ~~May 5,~~August 4, 2022, our ~~$7.0~~$7.1 billion revolving credit facility is syndicated across 5253 financial institutions from various regions of the world, diversifying our reliance on any individual lending institution. The final maturity for the facility is May ~~2026, although we expect to refinance this facility in advance of this date.~~2026. The facility contains standard investment grade covenants and does not condition our ability to borrow on the lack of a material adverse effect to us or the general economy.

•Senior unsecured bonds: We are a frequent issuer in the investment grade capital markets, opportunistically issuing unsecured bonds, primarily through our Medium-Term Note Program at attractive cost of funds. In 2022, we have issued $1.5 billion of Medium-Term Notes with a weighted average interest rate of 2.54% and we expect to have continued access to the investment grade bond market in the ~~future.~~future, although we anticipate interest rates for issuances in the near term will increase from those available in recent years.

•Aircraft sales: Proceeds from the sale of aircraft help supplement our liquidity position. ~~Although we have scaled back our aircraft sales activity in recent years, assuming aircraft deliveries continue to improve, we~~We are targeting to sell ~~approximately~~up to $750.0 million in aircraft for ~~2022. We did not sell~~2022, subject to any ~~aircraft in~~further significant delivery delays we might experience during the ~~first quarter~~second half of ~~2022.~~this year.

•Other sources: In addition to the above, we generate liquidity through other sources of debt financing (including unsecured and secured bank term loans), issuances of preferred stock and cash received from security deposits and maintenance ~~reserves.~~reserves from our lease agreements.

Our material cash requirements are primarily for the purchase of aircraft and debt service payments, along with our general operating expenses. The amount of our cash requirements depends on a variety of factors, including, the ability of aircraft manufacturers to meet their contractual delivery obligations to us, the ability of our lessees to meet their contractual obligations with us, the timing of aircraft sales from our fleet, the timing and amount of our debt service obligations, potential acquisitions, and the general economic environment in which we operate.

While we have experienced a low interest rate environment for many years, substantial improvement in the labor markets, higher inflation and geopolitical events have led to an increase in borrowing rates. We expect short-term interest rates to continue to rise. A higher interest rate environment may adversely affect our businesses through increased borrowing costs, although this impact may be offset in whole or in part if increased interest rates lead to an increase in leasing activity by our airline customers.

Our material cash requirements as of ~~March 31,~~June 30, 2022, are as follows:


		2022		2023		2024		2025		2026		Thereafter		Total			2022		2023		2024		2025		2026		Thereafter		Total
Long-term debt obligations	Long-term debt obligations	$	1,376,451	$	2,538,951	$	2,894,628	$	2,327,389	$	3,472,845	$	5,420,177	$	18,030,441	Long-term debt obligations	$	1,291,611	$	2,566,329	$	2,885,280	$	2,404,761	$	3,963,094	$	5,420,177	$	18,531,252
Interest payments on debt outstanding(1)	Interest payments on debt outstanding(1)	330,037		469,760		394,183		322,512		225,599		432,631		2,174,722		Interest payments on debt outstanding(1)	265,327		488,339		412,246		339,308		235,360		432,636		2,173,216
Purchase commitments~~(3)~~(2)	Purchase commitments~~(3)~~(2)	4,446,438		6,049,551		6,400,067		4,006,352		3,491,754		4,450,903		28,845,065		Purchase commitments~~(3)~~(2)	3,082,573		6,057,223		6,223,538		4,186,938		3,641,767		4,433,109		27,625,148
Total	Total	$	6,152,926	$	9,058,262	$	9,688,878	$	6,656,253	$	7,190,198	$	10,303,711	$	49,050,228	Total	$	4,639,511	$	9,111,891	$	9,521,064	$	6,931,007	$	7,840,221	$	10,285,922	$	48,329,616

(1) Future interest payments on floating rate debt are estimated using floating rates in effect at March 31, 2022.
(2) Purchase commitments reflect future Boeing and Airbus aircraft deliveries based on information currently available to us based on contractual documentation. Purchase commitments include only the costs of aircraft in our committed orderbook and do not include costs of aircraft that we have the right to purchase through memorandums of understanding or letters of intent.
(3) Due to the expected aircraft delivery delays, we expect approximately $1.1 billion of our purchase commitments will be subject to cancellation, at our option, by the time of delivery.
(1) Future interest payments on floating rate debt are estimated using floating rates in effect at June 30, 2022.																(1) Future interest payments on floating rate debt are estimated using floating rates in effect at June 30, 2022.
(2) Purchase commitments reflect future Boeing and Airbus aircraft deliveries based on information currently available to us based on contractual documentation.																(2) Purchase commitments reflect future Boeing and Airbus aircraft deliveries based on information currently available to us based on contractual documentation.

The above table does not include any tax payments we may pay nor any dividends we may pay on our preferred stock or common stock. Based on our expected cash sources and requirements for the remainder of 2022, we believe that we have sufficient liquidity to meet our cash requirements for aircraft deliveries and debt service obligations. We expect that we will continue to access the capital markets for public bond offerings ~~in 2022 to meet our cash requirements for aircraft deliveries and debt service obligations.~~over the next 12 months.

While we have planned our aircraft investments for the remainder of 2022 and beyond based on currently expected delivery schedules, given the current industry circumstances, our aircraft delivery schedule could continue to be subject to material changes. In any case, our aircraft investments will be less than what we planned prior to the pandemic, which will slow our revenue growth, but will further improve our strong liquidity position.

The actual delivery dates of the aircraft in our commitments table and expected time for payment of such aircraft may differ from our estimates and could be further impacted by the pace at which Boeing and Airbus can deliver aircraft, among other factors. We expect to make approximately $3.5 billion to $4.5 billion in aircraft investments in 2022, which reflects a high degree of uncertainty around the Boeing 787 program as well as other potential production delays.

As of ~~March 31,~~June 30, 2022, we were in compliance in all material respects with the covenants contained in our debt agreements. 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 costs of certain financings. Our liquidity plans are subject to a number of risks and uncertainties, including those described in our Annual Report on Form 10-K for the year ended December 31, 2021, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and ~~in this Quarterly Report.~~other SEC filings.

Cash Flows

Our cash flows provided by operating activities increased by ~~8.7%~~14.3% or ~~$20.4~~$86.2 million, to ~~$254.7~~$688.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to ~~$234.3~~$602.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. Our cash flow provided by operating activities during the ~~three~~six months ended ~~March 31,~~June 30, 2022 increased due to the continued growth of our fleet and an increase in our cash collections as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021. Our cash flow used in investing activities was ~~$620.6 million~~$2.0 billion for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and ~~$549.7 million~~$1.4 billion for the ~~three~~six months ended ~~March 31,~~June 30, 2021, which resulted primarily from the purchase of aircraft. Our cash flow provided by financing activities was ~~$769.6~~$1.3 billion for the six months ended June 30, 2022 as compared to $273.7 million for the ~~three~~six months ended ~~March 31, 2022, which resulted~~June 30, 2021. The increase is primarily ~~from~~due to the issuance of ~~senior unsecured notes, which were used~~debt, net of debt repayments, related in part to ~~acquire aircraft investments. Our cash flow used in financing activities was $90.2 million for~~ the ~~three months ended March 31, 2021, which resulted primarily from the repayment~~acquisition of ~~outstanding debt partially offset by the issuance of unsecured notes and the issuance of our Series B preferred stock in connection with acquiring~~ aircraft investments.

2527

Debt

Our debt financing ~~was comprised of the following~~ at ~~March 31,~~June 30, 2022 and December 31, ~~2021:~~2021 is summarized below:


		March 31, 2022			December 31, 2021				June 30, 2022			December 31, 2021
		( in thousands, except percentages)							( in thousands, except percentages)
Unsecured	Unsecured							Unsecured
Senior notes	Senior notes	$	17,695,077		$	16,892,058		Senior notes	$	17,685,728		$	16,892,058
Term financings	Term financings	195,275			167,000			Term financings	190,325			167,000

Revolving credit facility								Revolving credit facility	520,000			—
Total unsecured debt financing	Total unsecured debt financing	17,890,352			17,059,058			Total unsecured debt financing	18,396,053			17,059,058
Secured	Secured							Secured
Term financings	Term financings	123,452			126,660			Term financings	120,226			126,660
Export credit financing	Export credit financing	16,637			18,301			Export credit financing	14,973			18,301
Total secured debt financing	Total secured debt financing	140,089			144,961			Total secured debt financing	135,199			144,961

Total debt financing	Total debt financing	18,030,441			17,204,019			Total debt financing	18,531,252			17,204,019
Less: Debt discounts and issuance costs	Less: Debt discounts and issuance costs	(205,716)			(181,539)			Less: Debt discounts and issuance costs	(195,177)			(181,539)
Debt financing, net of discounts and issuance costs	Debt financing, net of discounts and issuance costs	$	17,824,725		$	17,022,480		Debt financing, net of discounts and issuance costs	$	18,336,075		$	17,022,480
Selected interest rates and ratios:	Selected interest rates and ratios:							Selected interest rates and ratios:
Composite interest rate(1)	Composite interest rate(1)	2.77		%	2.79		%	Composite interest rate(1)	2.81		%	2.79		%
Composite interest rate on fixed-rate debt(1)	Composite interest rate on fixed-rate debt(1)	2.85		%	2.90		%	Composite interest rate on fixed-rate debt(1)	2.85		%	2.90		%
Percentage of total debt at a fixed-rate	Percentage of total debt at a fixed-rate	95.1		%	94.8		%	Percentage of total debt at a fixed-rate	92.4		%	94.8		%

(1) This rate does not include the effect of upfront fees, facility fees, undrawn fees or amortization of debt discounts and issuance costs.	(1) This rate does not include the effect of upfront fees, facility fees, undrawn fees or amortization of debt discounts and issuance costs.							(1) This rate does not include the effect of upfront fees, facility fees, undrawn fees or amortization of debt discounts and issuance costs.

Senior unsecured notes (including Medium-Term Note Program)

As of ~~March 31,~~June 30, 2022, we had $17.7 billion in senior unsecured notes outstanding. As of December 31, 2021, we had $16.9 billion in senior unsecured notes outstanding.

During the ~~three~~six months ended ~~March 31,~~June 30, 2022, we issued ~~approximately~~ $1.5 billion in aggregate principal amount of senior unsecured notes comprised of (i) $750.0 million in aggregate principal amount of 2.20% Medium-Term Notes due 2027, and (ii) $750.0 million in aggregate principal amount of 2.875% Medium-Term Notes due 2032.

For more information regarding our senior unsecured notes outstanding, see Note 2 of Notes to Consolidated Financial Statements included in Part III, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2021.

Unsecured revolving credit facility

As of ~~March 31,~~June 30, 2022, ~~and~~we had $520.0 million outstanding under our unsecured revolving credit facility (the “Revolving Credit Facility”). As of December 31, 2021, we did not have any amounts outstanding under our ~~unsecured revolving credit facility (the “Revolving Credit Facility”).~~

As of March 31, 2022, borrowings under the Revolving Credit Facility accrued interest at LIBOR plus a margin of 1.05% per year. We are required to pay a facility fee of 0.20% per year in respect of total commitments under the Revolving Credit Facility. ~~Interest rate and facility fees are subject to increases or decreases based on declines or improvements in the credit ratings for the Company’s debt.~~ Borrowings under the Revolving Credit Facility are used to finance our working capital needs in the ordinary course of business and for other general corporate purposes.

In April 2022, we amended and extended our Revolving Credit Facility through an amendment that, among other things, extended the final maturity date from May 5, 2025 to May 5, 2026, ~~and, after giving effect to $65.0 million in commitments that~~

~~matured on May 5, 2022,~~ increased the total revolving commitments to approximately $7.0 billion as of May 5, ~~2022. As of May 5,~~ 2022 ~~lenders held revolving commitments totaling approximately $6.5 billion that mature on May 5, 2026, commitments totaling $132.5 million that mature on May 5, 2025~~ and ~~commitments totaling $400.0 million that mature on May 5, 2023. The amended Revolving Credit Facility also~~ replaced LIBOR with Term SOFR as the benchmark interest rate and made certain conforming changes related thereto. As ~~a result~~ of ~~the amendment,~~June 30, 2022, borrowings under the ~~amended~~ Revolving Credit Facility ~~accrue~~accrued interest at Adjusted Term SOFR (as defined in the Revolving Credit Facility), plus a margin of 1.05% per year. We are required to pay a facility fee of 0.20% per year

in respect of total commitments under the Revolving Credit Facility. Interest rate and facility fees are subject to increases or decreases based on declines or improvements in the credit ratings for our debt.

In June 2022, we increased the ~~Company’s debt.~~aggregate facility capacity by an additional $122.5 million and also extended the maturity of $125.0 million in commitments to May 5, 2026. As of August 4, 2022, we had total revolving commitments of approximately $7.1 billion. Lenders held revolving commitments totaling approximately $6.7 billion that mature on May 5, 2026, commitments totaling $32.5 million that mature on May 5, 2025 and commitments totaling $375.0 million that mature on May 5, 2023.

The Revolving Credit Facility provides for certain covenants, including covenants that limit our subsidiaries’ ability to incur, create, or assume certain unsecured indebtedness, ~~in an aggregate amount over $100.0 million,~~ and our subsidiaries’ abilities to engage in certain mergers, consolidations, and asset sales. The Revolving Credit Facility also requires us to comply with certain financial maintenance covenants including minimum consolidated shareholders’ equity, minimum consolidated unencumbered assets, and an interest coverage test. In addition, the Revolving Credit Facility contains customary events of default. In the case of an event of default, the lenders may terminate the commitments under the Revolving Credit Facility and require immediate repayment of all outstanding borrowings.

Other ~~Debt Financings~~debt financings

From time to time, we enter into other debt financings such as unsecured term financings and secured term financings, including export credit. As of ~~March 31,~~June 30, 2022, the outstanding balance on other debt financings was ~~$335.4~~$325.5 million and we had pledged three aircraft as collateral with a net book value of ~~$219.7~~$217.1 million. As of December 31, 2021, the outstanding balance on other debt financings was $312.0 million and we had pledged three aircraft as collateral with a net book value of $222.2 million.

Preferred equity

The following table summarizes our preferred stock issued and outstanding as of ~~March 31,~~June 30, 2022 (in thousands, except for share amounts and percentages):


		Shares Issued and Outstanding as of March 31, 2022	Carrying Value as of March 31, 2022		Issue Date	Dividend Rate in Effect at March 31, 2022		Next dividend rate reset date	Dividend rate after reset date
											Shares Issued and Outstanding as of June 30, 2022	Carrying Value as of June 30, 2022		Issue Date	Dividend Rate in Effect at June 30, 2022		Next dividend rate reset date	Dividend rate after reset date
Series A	Series A	10,000,000	$	250,000	March 5, 2019	6.150	%	March 15, 2024	3M LIBOR plus 3.65%	Series A	10,000,000	$	250,000	March 5, 2019	6.150	%	March 15, 2024	3M LIBOR plus 3.65%

Series B	Series B	300,000	300,000		March 2, 2021	4.650	%	June 15, 2026	5 Yr U.S. Treasury plus 4.076%	Series B	300,000	300,000		March 2, 2021	4.650	%	June 15, 2026	5 Yr U.S. Treasury plus 4.076%

Series C	Series C	300,000	300,000		October 13, 2021	4.125	%	December 15, 2026	5 Yr U.S. Treasury plus 3.149%	Series C	300,000	300,000		October 13, 2021	4.125	%	December 15, 2026	5 Yr U.S. Treasury plus 3.149%
Total Preferred Stock	Total Preferred Stock	10,600,000	$	850,000						Total Preferred Stock	10,600,000	$	850,000

For more information regarding our preferred stock issued and outstanding, see Note 4 of Notes to Consolidated Financial Statements included in Part III, Item 15 of our Annual Report on Form 10-K for the year ended December 31, 2021.

The following table summarizes the cash dividends that we paid during the ~~three~~six months ended ~~March 31,~~June 30, 2022 on our outstanding Series A, Series B and Series C Preferred Stock:

~~Payment Date~~



Title of each class	March 15, 2022	June 15, 2022
	(in thousands)
Series A Preferred Stock	$3,844	$3,844
Series B Preferred Stock	$3,487	$3,487
Series C Preferred Stock	$3,094	$3,094

~~Title of each class~~

~~March 15, 2022~~

~~(in thousands)~~

~~Series A Preferred Stock~~

~~$3,844~~

~~Series B Preferred Stock~~

~~$3,487~~

~~Series C Preferred Stock~~

~~$3,094~~

2729

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 or trusts for the purpose of leasing aircraft or facilitating borrowing arrangements which are consolidated.

We have non-controlling interests in two investment funds in which we own 9.5% of the equity of each fund. We account for our interest in these funds under the equity method of accounting due to our level of influence and involvement in the funds. Also, we manage aircraft that we have sold through our Thunderbolt platform. In connection with the sale of ~~these~~certain aircraft portfolios through our Thunderbolt platform, we hold non-controlling interests of approximately 5.0% in two entities. These investments are accounted for under the cost method of accounting.

Impact of LIBOR Transition

On March 5, 2021, the Chief Executive of the U.K. Financial Conduct Authority, which regulates LIBOR, publicly announced that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021, and that publication of certain tenors of U.S. dollar LIBOR (including overnight and one, three, six and 12 months) will permanently cease after June 30, 2023. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”). SOFR is different from LIBOR in that it is a backward-looking secured rate rather than a forward-looking unsecured rate. For cash products and loans, the ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.

As of ~~March 31,~~June 30, 2022, we had approximately ~~$0.9~~$0.8 billion of floating rate debt outstanding that used either one or three-month LIBOR as the applicable reference rate to calculate the interest on such debt, of which ~~$80.5~~$155.5 million is set to mature after June 30, 2023. Additionally, our perpetual Series A Preferred Stock is set to accrue dividends at a floating rate determined by reference to three-month LIBOR, if available, beginning March 15, 2024. While all of our agreements governing LIBOR-linked debt obligations and Series A Preferred Stock obligations that are set to mature after June 30, 2023 contain LIBOR transition fallback provisions, the lack of a standard market practice and inconsistency in fallback provisions in recent years is reflected across the agreements governing our floating rate debt and Series A Preferred Stock. For our Series A Preferred Stock, if we determine there is no such alternative reference rate as of March 15, 2024, then we must select an independent financial advisor to determine a substitute rate for LIBOR, and if an independent financial advisor cannot determine an alternative reference rate, the dividend rate, business day convention and manner of calculating dividends applicable during the fixed-rate period of the Series A Preferred Stock will be in effect.

In April 2022, we amended and extended our Revolving Credit Facility through an amendment that, among other things, replaced LIBOR with Term SOFR as the benchmark interest rate. After that amendment, borrowings under the amended Revolving Credit Facility accrue interest at Adjusted Term SOFR (as defined in the Revolving Credit Facility), plus a margin of 1.05% per year subject to increases or decreases based on declines or improvements in the credit ratings for our debt.

The implementation of a substitute reference rate for the calculation of interest rates under our LIBOR linked debt and Series A Preferred Stock obligations may cause us to incur expenses in effecting the transition and may result in disputes with our lenders or holders of Series A Preferred Stock over the appropriateness or comparability to LIBOR of the substitute reference rate selected. However, we do not expect the LIBOR transition impact will have a material effect on our financial results based on our anticipated LIBOR linked outstanding debt and Series A Preferred Stock at June 30, 2023.

If the rate used to calculate interest on our outstanding floating rate debt that as of ~~March 31,~~June 30, 2022, used LIBOR and our Series A Preferred Stock were to increase by 1.0% either as a result of an increase in LIBOR or the result of the use of an alternative reference rate determined under the fallback provisions in the applicable ~~debt agreement~~financial instrument when LIBOR is discontinued, we would expect to incur additional interest expense and preferred dividends of ~~$8.9~~$8.4 million and $2.5 million, respectively on such indebtedness and our Series A Preferred Stock as of ~~March 31,~~June 30, 2022 on an annualized basis.

2830

Credit Ratings

In ~~March~~June 2022, ~~Kroll Bond~~Fitch Ratings reaffirmed our ~~issuer and long term~~corporate rating, long-term debt ~~ratings and upgraded our outlook from negative to stable. In April 2022, Standard and Poor’s reaffirmed our issuer and long term debt ratings~~credit rating and outlook. Our investment-grade corporate and long-term debt credit ratings help us to lower our cost of funds and broaden our access to attractively priced capital. The following table summarizes our current credit ratings:

Rating Agency

Long-term Debt

Corporate Rating

Outlook

Date of Last Ratings Action

Kroll Bond Ratings

A-

Stable

March 25, 2022

Standard and Poor's

BBB

Stable

April 21, 2022

Fitch Ratings

BBB

Stable

~~July 1, 2021~~June 28, 2022

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.

2931

Results of Operations

The following table presents our historical operating results for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 (in thousands, except per share amounts and percentages):


		Three Months Ended March 31,							Three Months Ended June 30,					Six Months Ended June 30,
		2022			2021						2022			2021			2022			2021
		(unaudited)						(unaudited)
Revenues	Revenues									Revenues
Rental of flight equipment	Rental of flight equipment	$	566,554		$	468,095				Rental of flight equipment	$	545,271		$	452,044		$	1,111,825		$	920,139
Aircraft sales, trading and other	Aircraft sales, trading and other	30,107			6,732					Aircraft sales, trading and other	12,425			39,833			42,533			46,565
Total revenues	Total revenues	596,661			474,827					Total revenues	557,696			491,877			1,154,358			966,704

Expenses	Expenses									Expenses
Interest	Interest	117,277			117,986					Interest	118,997			113,598			236,274			231,584
Amortization of debt discounts and issuance costs	Amortization of debt discounts and issuance costs	13,198			12,025					Amortization of debt discounts and issuance costs	13,413			12,513			26,610			24,538
Interest expense	Interest expense	130,475			130,011					Interest expense	132,410			126,111			262,884			256,122
Depreciation of flight equipment	Depreciation of flight equipment	235,308			208,965					Depreciation of flight equipment	235,284			217,817			470,591			426,782
Write-off of Russian fleet	Write-off of Russian fleet	802,352			—					Write-off of Russian fleet	—			—			802,352			—
Selling, general and administrative	Selling, general and administrative	32,762			26,914					Selling, general and administrative	38,512			26,687			71,277			53,601
Stock-based compensation		(2,523)			5,408
Stock-based compensation expense										Stock-based compensation expense	6,558			6,700			4,035			12,108
Total expenses	Total expenses	1,198,374			371,298					Total expenses	412,764			377,315			1,611,139			748,613
(Loss)/income before taxes		(601,713)			103,529
Income tax benefit/(expense)		132,720			(19,437)
Net (loss)/income		$	(468,993)		$	84,092
Income/(loss) before taxes										Income/(loss) before taxes	144,932			114,562			(456,781)			218,091
Income tax (expense)/benefit										Income tax (expense)/benefit	(28,655)			(21,140)			104,065			(40,577)
Net income/(loss)										Net income/(loss)	$	116,277		$	93,422		$	(352,716)		$	177,514
Preferred stock dividends	Preferred stock dividends	(10,425)			(3,844)					Preferred stock dividends	(10,425)			(7,835)			(20,850)			(11,679)
Net (loss)/income attributable to common stockholders		$	(479,418)		$	80,248
Net income/(loss) attributable to common stockholders										Net income/(loss) attributable to common stockholders	$	105,852		$	85,587		$	(373,566)		$	165,835

(Loss)/earnings per share of common stock
Earnings/(Loss) per share of common stock:										Earnings/(Loss) per share of common stock:
Basic	Basic	$	(4.21)		$	0.70				Basic	$	0.95		$	0.75		$	(3.32)		$	1.45
Diluted	Diluted	$	(4.21)		$	0.70				Diluted	$	0.95		$	0.75		$	(3.32)		$	1.45

Other financial data	Other financial data									Other financial data
Pre-tax margin	Pre-tax margin	(100.8)		%	21.8		%			Pre-tax margin	26.0		%	23.3		%	(39.6)		%	22.6		%
Pre-tax return on common equity (trailing twelve months)	Pre-tax return on common equity (trailing twelve months)	(3.5)		%	9.9		%			Pre-tax return on common equity (trailing twelve months)	(3.0)		%	8.5		%	(3.0)		%	8.5		%
Adjusted net income before income taxes(1)	Adjusted net income before income taxes(1)	$	200,889		$	117,118				Adjusted net income before income taxes(1)	$	154,478		$	125,940		$	355,366		$	243,058
Adjusted diluted earnings per share before income taxes(1)	Adjusted diluted earnings per share before income taxes(1)	$	1.76		$	1.03				Adjusted diluted earnings per share before income taxes(1)	$	1.39		$	1.10		$	3.15		$	2.13
Adjusted pre-tax margin(1)	Adjusted pre-tax margin(1)	33.7		%	24.7		%			Adjusted pre-tax margin(1)	27.7		%	25.6		%	30.8		%	25.1		%
Adjusted pre-tax return on common equity (trailing twelve months)(1)	Adjusted pre-tax return on common equity (trailing twelve months)(1)	11.8		%	11.0		%			Adjusted pre-tax return on common equity (trailing twelve months)(1)	12.2		%	9.6		%	12.2		%	9.6		%

(1)Adjusted net income before income taxes (defined as net ~~income available~~income/(loss) attributable to common stockholders excluding the effects of certain non-cash items, one-time or non-recurring items, such as write-offs of our Russian fleet, that are not expected to continue in the future and certain other items), adjusted pre-tax margin (defined as adjusted net income before income taxes divided by total revenues), adjusted diluted earnings per share before income taxes (defined as adjusted net income before income taxes divided by the weighted average diluted common shares outstanding) and adjusted pre-tax return on common equity (defined as adjusted net income before income taxes divided by average common shareholders’ equity) are measures of operating performance that are not defined by GAAP and should not be considered as an alternative to net ~~income available~~income/(loss) attributable to common stockholders, pre-tax margin, ~~earnings~~earnings/(loss) per share, diluted ~~earnings~~

earnings/(loss) per share and pre-tax return on common equity, or any other performance measures derived in accordance with GAAP. Adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common

equity 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 before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity 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 before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity, 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 before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity do not reflect our cash expenditures or changes in our cash requirements for our working capital needs. In addition, our calculation of adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity may differ from the adjusted net income before income taxes, adjusted pre-tax margin, adjusted diluted earnings per share before income taxes and adjusted pre-tax return on common equity, or analogous calculations of other companies in our industry, limiting their usefulness as a comparative measure.

The following table shows the ~~calculation~~reconciliation of the numerator for adjusted pre-tax profit margin (in thousands, except percentages):
Three Months Ended
March 31,
2022 2021
(unaudited)
Reconciliation of the numerator for adjusted pre-tax margin (net (loss)/income attributable to common stockholders to adjusted net income before income taxes):
Net (loss)/income attributable to common stockholders $ (479,418) $ 80,248
Amortization of debt discounts and issuance costs 13,198 12,025
Write-off of Russian fleet 802,352 —
Stock-based compensation (2,523) 5,408
Provision for income taxes (132,720) 19,437
Adjusted net income before income taxes $ 200,889 $ 117,118
Denominator for adjusted pre-tax margin:
Total revenues $ 596,661 $ 474,827
Adjusted pre-tax margin(a)
33.7 % 24.7 %
(a) Adjusted pre-tax margin is adjusted net income before income taxes divided by total revenues


	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(unaudited)
Reconciliation of the numerator for adjusted pre-tax margin (net income/(loss) attributable to common stockholders to adjusted net income before income taxes):
Net income/(loss) attributable to common stockholders	$	105,852		$	85,587		$	(373,566)		$	165,835
Amortization of debt discounts and issuance costs	13,413			12,513			26,610			24,538
Write-off of Russian fleet	—			—			802,352			—
Stock-based compensation expense	6,558			6,700			4,035			12,108
Income tax expense/(benefit)	28,655			21,140			(104,065)			40,577
Adjusted net income before income taxes	$	154,478		$	125,940		$	355,366		$	243,058

Denominator for adjusted pre-tax margin:
Total revenues	$	557,696		$	491,877		$	1,154,358		$	966,704
Adjusted pre-tax margin(a)	27.7		%	25.6		%	30.8		%	25.1		%


(a) Adjusted pre-tax margin is adjusted net income before income taxes divided by total revenues

3133

The following table shows the ~~calculation~~reconciliation of the numerator for adjusted diluted earnings per share before income taxes (in thousands, except share and per share amounts):


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021					2022		2021		2022		2021
		(unaudited)				(unaudited)
Reconciliation of the numerator for adjusted diluted earnings per share (net (loss)/income attributable to common stockholders to adjusted net income before income taxes):
Net (loss)/income attributable to common stockholders		$	(479,418)	$	80,248
Reconciliation of the numerator for adjusted diluted earnings per share (net income/(loss) attributable to common stockholders to adjusted net income before income taxes):								Reconciliation of the numerator for adjusted diluted earnings per share (net income/(loss) attributable to common stockholders to adjusted net income before income taxes):
Net income/(loss) attributable to common stockholders								Net income/(loss) attributable to common stockholders	$	105,852	$	85,587	$	(373,566)	$	165,835
Amortization of debt discounts and issuance costs	Amortization of debt discounts and issuance costs	13,198		12,025				Amortization of debt discounts and issuance costs	13,413		12,513		26,610		24,538
Write-off of Russian fleet	Write-off of Russian fleet	802,352		—				Write-off of Russian fleet	—		—		802,352		—
Stock-based compensation		(2,523)		5,408

Provision for income taxes		(132,720)		19,437
Stock-based compensation expense								Stock-based compensation expense	6,558		6,700		4,035		12,108
Income tax expense/(benefit)								Income tax expense/(benefit)	28,655		21,140		(104,065)		40,577
Adjusted net income before income taxes	Adjusted net income before income taxes	$	200,889	$	117,118			Adjusted net income before income taxes	$	154,478	$	125,940	$	355,366	$	243,058

Denominator for adjusted diluted earnings per share:	Denominator for adjusted diluted earnings per share:							Denominator for adjusted diluted earnings per share:
Weighted-average diluted common shares outstanding	Weighted-average diluted common shares outstanding	113,894,867		114,237,109				Weighted-average diluted common shares outstanding	111,043,836		114,377,965		112,373,092		114,373,576
Potentially dilutive securities, whose effect would have been anti-dilutive	Potentially dilutive securities, whose effect would have been anti-dilutive	249,781		—				Potentially dilutive securities, whose effect would have been anti-dilutive	—		—		301,279		—
Adjusted weighted-average diluted common shares outstanding	Adjusted weighted-average diluted common shares outstanding	114,144,648		114,237,109				Adjusted weighted-average diluted common shares outstanding	111,043,836		114,377,965		112,674,371		114,373,576
Adjusted diluted earnings per share before income taxes(b)	Adjusted diluted earnings per share before income taxes(b)	$	1.76	$	1.03			Adjusted diluted earnings per share before income taxes(b)	$	1.39	$	1.10	$	3.15	$	2.13

(b) Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes divided by weighted-average diluted common shares outstanding
(b) Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes divided by adjusted weighted-average diluted common shares outstanding								(b) Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes divided by adjusted weighted-average diluted common shares outstanding

The following table shows the ~~calculation~~reconciliation of pre-tax return on common equity to adjusted pre-tax return on common equity (in thousands, except percentages):

Trailing Twelve Months
March 31,
2022 2021
(unaudited)
Reconciliation of the numerator for adjusted pre-tax return on common equity (net (loss)/income attributable to common stockholders to adjusted net income before income taxes):
Net (loss)/income attributable to common stockholders $ (151,507) $ 447,830
Amortization of debt discounts and issuance costs 51,793 44,522
Write-off of Russian fleet 802,352 —
Stock-based compensation 18,585 18,607
Provision for income taxes (47,773) 115,330
Adjusted net income before income taxes $ 673,450 $ 626,289
Denominator for adjusted pre-tax return on common equity:
Common shareholders’ equity as of beginning of the period $ 5,878,212 $ 5,486,369
Common shareholders’ equity as of end of the period $ 5,519,585 $ 5,878,212
Average common shareholders’ equity $ 5,698,899 $ 5,682,291
Adjusted pre-tax return on common equity(c)
11.8 % 11.0 %
(c) Adjusted pre-tax return on common equity is adjusted net income before income taxes divided by average common shareholders’ equity


	Trailing Twelve Months June 30,
	2022			2021
	(unaudited)
Reconciliation of the numerator for adjusted pre-tax return on common equity (net (loss)/income attributable to common stockholders to adjusted net income before income taxes):
Net (loss)/income attributable to common stockholders	$	(131,242)		$	389,636
Amortization of debt discounts and issuance costs	52,693			46,802
Write-off of Russian fleet	802,352			—
Stock-based compensation expense	18,443			21,415
Income tax (benefit)/expense	(40,258)			100,165
Adjusted net income before income taxes	$	701,988		$	558,018

Reconciliation of denominator for pre-tax return on common equity to adjusted pre-tax return on common equity:
Common shareholders' equity as of beginning of the period	$	5,951,715		$	5,619,801
Common shareholders' equity as of end of the period	$	5,589,634		$	5,951,715
Average common shareholders' equity	$	5,770,675		$	5,785,758

Adjusted pre-tax return on common equity(c)	12.2		%	9.6		%


(c) Adjusted pre-tax return on common equity is adjusted net income before income taxes divided by average common shareholders’ equity

3235

Three months ended ~~March 31,~~June 30, 2022, compared to the three months ended ~~March 31,~~June 30, 2021

Rental revenue

During the three months ended ~~March 31,~~June 30, 2022, we recorded ~~$566.6~~$545.3 million in rental revenue, which included overhaul revenue, net of amortization expense related to initial direct costs of ~~$39.7~~$2.4 million, as compared to ~~$468.1~~$452.0 million, which included amortization expense related to initial direct costs, net of overhaul revenue of ~~$2.4~~$9.9 million for the three months ended ~~March 31,~~June 30, 2021. Our owned fleet increased to ~~370~~392 aircraft with a net book value of ~~$22.3~~$23.5 billion as of ~~March 31,~~June 30, 2022 from ~~342~~354 aircraft with a net book value of ~~$20.8~~$21.5 billion as of ~~March 31,~~June 30, 2021. The increase in ~~total~~rental revenues was primarily driven by the growth in our fleet ~~significantly lower cash basis and lease restructuring losses,~~ and the recognition of ~~approximately $41.7~~cash basis revenue of $8.7 million as compared to $41.6 million of cash basis losses in ~~end~~the three months ended June 30, 2021. This increase was partially offset by the loss of ~~lease revenue resulting~~revenues from the termination of our leasing activities in ~~Russia. Finally,~~Russia during the three months ended March 31, 2022, our cash basis and lease restructuring losses were $10.6 million in the aggregate, as compared to $85.7 million in the aggregate for the three months ended March 31, 2021.first quarter of 2022.

Aircraft sales, trading and other revenue

Aircraft sales, trading and other revenue totaled ~~$30.1~~$12.4 million for the three months ended ~~March 31,~~June 30, 2022 compared to ~~$6.7~~$39.8 million for the three months ended ~~March 31,~~June 30, 2021. ~~For~~The decrease in our aircraft sales, trading and other revenue is primarily attributable to $34.0 million in revenue recognized from the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings during the quarter ended June 30, 2021. We did not sell any aircraft during the three months ended ~~March 31,~~June 30, 2022 we recorded $17.9 million in forfeiture of security deposit income from the termination of our leasing activities in Russia. In addition, we recorded $4.4 million in gains from three sales-type lease transactions during the first quarter of 2022. For the three months ended March 31, 2021, we did not have any forfeiture of security deposit income.and June 30, 2021.

Interest expense

Interest expense totaled ~~$130.5~~$132.4 million for the three months ended ~~March 31,~~June 30, 2022 compared to ~~$130.0~~$126.1 million for the three months ended ~~March 31,~~June 30, 2021. Our interest expense ~~remained flat despite the~~increased due to an increase in our average debt balance, which was offset by a decline in our composite cost of ~~funds. As we expect~~funds as compared to ~~enter into a~~the prior year. Due to the rising interest rate environment, ~~accordingly,~~ we expect our interest expense will increase as our average debt balance outstanding and our composite cost of funds ~~increases~~each increase in the future.

Depreciation expense

We recorded $235.3 million in depreciation expense of flight equipment for the three months ended ~~March 31,~~June 30, 2022 compared to ~~$209.0~~$217.8 million for the three months ended ~~March 31,~~June 30, 2021. The increase in depreciation expense for the three months ended ~~March 31,~~June 30, 2022, compared to the three months ended ~~March 31,~~June 30, 2021, is primarily attributable to the growth of our fleet during the last twelve months. We expect our depreciation expense to increase as we continue to add aircraft to our fleet.

Selling, general and administrative expenses

We recorded selling, general and administrative expenses of $38.5 million for the three months ended June 30, 2022 compared to $26.7 million for the three months ended June 30, 2021. The increase in selling, general and administrative expenses was primarily due to the increase in business activity, increased expenses related to insurance premiums and the transition of aircraft. During the three months ended June 30, 2022, we renewed our insurance which resulted in an annualized increase in our insurance premiums of approximately $16.0 million that we anticipate will increase our selling, general and administrative expenses in future periods. We expect an increase in operating costs due to higher inflation, increased insurance premiums, and certain geopolitical events, such as the Russia-Ukraine conflict. Selling, general and administrative expenses as a percentage of total revenue increased to 6.9% for the three months ended June 30, 2022 compared to 5.4% for the three months ended June 30, 2021.

Taxes

Our effective tax rate for the quarter increased to 19.8% from 18.5% in the prior year. The effective tax rate increased due to changes in permanent items.

Net income attributable to common stockholders

For the three months ended June 30, 2022, we reported consolidated net income attributable to common stockholders of $105.9 million, or $0.95 per diluted share, compared to a consolidated net income attributable to common stockholders of $85.6 million, or $0.75 per diluted share, for the three months ended June 30, 2021. Our net income attributable to common stockholders and diluted earnings per share increased due to the continued growth of our fleet, partially offset by the loss of revenues from the termination of our leasing activities in Russia and the $34.0 million recognized from the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings during the quarter ended June 30, 2021.

Adjusted net income before income taxes

For the three months ended June 30, 2022, we recorded adjusted net income before income taxes of $154.5 million, or $1.39 per adjusted diluted share, compared to an adjusted net income before income taxes of $125.9 million, or $1.10 per adjusted diluted share, for the three months ended June 30, 2021. Our adjusted net income before income taxes and adjusted diluted earnings per share before income taxes increased for the three months ended June 30, 2022 as compared to 2021, primarily due to the continued growth of our fleet and the increase in revenues as discussed above.

Adjusted net income before income taxes and adjusted diluted earnings per share before income taxes are measures of financial and operational performance that are not defined by GAAP. See Note 1 under the “Results of Operations” table above for a discussion of adjusted net income before income taxes and adjusted diluted earnings per share before income taxes as non-GAAP measures and reconciliation of these measures to net income available to common stockholders.

Six months ended June 30, 2022, compared to the six months ended June 30, 2021

Rental revenue

During the six months ended June 30, 2022, we recorded $1.1 billion in rental revenue, which included overhaul revenue, net of amortization expense related to initial direct costs of $42.1 million, as compared to $920.1 million, which included amortization expense related to initial direct costs, net of overhaul revenue of $12.3 million for the six months ended June 30, 2021. Our owned fleet increased to 392 aircraft with a net book value of $23.5 billion as of June 30, 2022 from 354 aircraft with a net book value of $21.5 billion as of June 30, 2021. The increase in rental revenues was primarily driven by the growth in our fleet and the recognition of cash basis revenue of $5.6 million as compared to $90.3 million of cash basis losses in the six months ended June 30, 2021. This increase was partially offset by the loss of revenues from the termination of our leasing activities in Russia during the first quarter of 2022.

Aircraft sales, trading and other revenue

Aircraft sales, trading and other revenue totaled $42.5 million for the six months ended June 30, 2022 compared to $46.6 million for the six months ended June 30, 2021. During the six months ended June 30, 2022, we had approximately $17.9 million in forfeiture of security deposit income from the termination of our leasing activities in Russia and $7.2 million in gains from four sales-type lease transactions in the current year period. Despite the revenue items discussed above, Aircraft sales, trading and other revenue decreased due to $34.0 million in revenue recognized from the sale to a third party of certain unsecured claims related to Aeromexico’s insolvency proceedings during the six months ended June 30, 2021. We did not sell any aircraft during the six months ended June 30, 2022 and June 30, 2021.

Interest expense

Interest expense totaled $262.9 million for the six months ended June 30, 2022 compared to $256.1 million for the six months ended June 30, 2021. Our interest expense increased due to the increase in our average debt balance, which was offset by a decline in our composite cost of funds as compared to the prior year. Due to the rising interest rate environment, we expect our interest expense will increase as our average debt balance outstanding and our composite cost of funds each increase in the future.

Depreciation expense

We recorded $470.6 million in depreciation expense of flight equipment for the six months ended June 30, 2022 compared to $426.8 million for the six months ended June 30, 2021. The increase in depreciation expense for the six months ended June 30, 2022, compared to the six months ended June 30, 2021, is primarily attributable to the growth of our fleet during the last twelve months. We expect our depreciation expense to increase as we continue to add aircraft to our fleet.

Write-off of Russian fleet

As further described above under “Impact of Russia-Ukraine Conflict”, in response to the sanctions against certain industry sectors and parties in Russia, in March 2022 we terminated all of our leasing activities in Russia, including 24 aircraft in our owned fleet and eight aircraft in our managed fleet. As of ~~May 5,~~August 4, 2022, 21 aircraft in our owned fleet and six aircraft in our managed fleet remain in Russia. ~~Most of the~~The operators of these aircraft have continued to fly most of the aircraft notwithstanding the termination of leasing activities and our repeated demands for the return of ~~our~~the assets. While we or the applicable managed platform maintain title to the 21 aircraft, we determined that it is unlikely we or they will regain possession of the aircraft that have not been returned and that remain in Russia. As such, d~~uring~~during the ~~three~~six months ended ~~March 31,~~June 30, 2022, we recorded a write-off of our interests in our owned and managed fleet that remain in Russia, totaling approximately $802.4 million. We are vigorously pursuing insurance claims to recover losses related to these aircraft. Collection, timing and amounts of any insurance recoveries is currently uncertain; however, once we determine that collectability is probable, we will record insurance recoveries at that time. We did not ~~record~~have any losses from asset write-offs ~~during~~for the three months ended ~~March 31, 2021.~~June 30, 2022. In June 2022, we submitted insurance claims to our insurers to recover our losses relating to these aircraft and are vigorously pursuing all available insurance claims.

Stock-based compensation

We recorded ~~a net reversal of~~ stock-based compensation expense of ~~$2.5~~$4.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to stock-based compensation expense of ~~$5.4~~$12.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The decrease in stock-based compensation relates to reductions in the underlying vesting estimates of certain book value RSUs as the performance criteria isare no longer ~~being~~ considered probable of being achieved.

Selling, general and administrative expenses

We recorded selling, general and administrative expenses of ~~$32.8~~$71.3 million for the ~~three~~six months ended ~~March 31,~~June 30, 2022 compared to ~~$26.9~~$53.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. The increase in selling, general and administrative expenses was primarily due to the increase in business activity, ~~and~~ increased expenses related to insurance premiums and the transition of aircraft. During the six months ended June 30, 2022, we renewed our insurance which resulted in an annualized increase in our insurance premiums of approximately $16.0 million that we anticipate will increase our selling, general and administrative expenses in future periods. We expect an increase in operating costs due to higher inflation, increased insurance premiums, and certain geopolitical events, such as the Russia-Ukraine conflict. Selling, general and administrative ~~expense~~expenses as a percentage of total revenue ~~decreased~~increased to 6.2% for the six months ended June 30, 2022 compared to 5.5% for the ~~three~~six months ended ~~March 31, 2022 compared to 5.7% for the three months ended March 31,~~June 30, 2021.

Taxes

For the ~~three~~six months ended ~~March 31,~~June 30, 2022 and ~~March 31,~~June 30, 2021, we reported an effective tax rate exclusive of any discrete items of ~~19.3%~~19.8% and ~~18.8%~~18.6%, respectively. Due ~~primarily~~ to discrete items related to the write-off of our Russian fleet, we reported an overall effective tax rate of ~~22.1%~~22.8% for the ~~three~~six months ended ~~March 31,~~June 30, 2022.

Net income/(loss)~~/income~~ attributable to common stockholders

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, we reported ~~consolidated~~a net loss attributable to common stockholders of ~~$479.4~~$373.6 million, or loss of ~~$4.21~~$3.32 per diluted share, compared to a ~~consolidated~~ net income attributable to common stockholders of ~~$80.2~~$165.8 million, or ~~$0.70~~$1.45 per diluted share, for the ~~three~~six months ended ~~March 31,~~June 30, 2021. Despite the growth of our fleet, our net income attributable to common stockholders and diluted earnings per share decreased due to the impact of the write-off of our Russian fleet.

Adjusted net income before income taxes

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, we recorded adjusted net income before income taxes of ~~$200.9~~$355.4 million, or ~~$1.76~~$3.15 per adjusted diluted share, compared to an adjusted net income before income taxes of ~~$117.1~~$243.1 million, or ~~$1.03~~$2.13 per adjusted diluted share, for the ~~three months~~six ended ~~March 31,~~June 30, 2021. Our adjusted net income before income taxes and adjusted diluted earnings per share before income taxes increased for the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to 2021, primarily due to the continued growth of our fleet and the increase in revenues as discussed above.

Critical Accounting Estimates

Our critical accounting estimates reflecting management’s estimates and judgments are described in our Annual Report on Form 10-K for the year ended December 31, 2021. We have reviewed recently adopted accounting pronouncements and determined that the adoption of such pronouncements is not expected to have a material impact, if any, on our Consolidated Financial Statements. Accordingly, there have been no material changes to critical accounting estimates in the ~~three~~six months ended ~~March 31,~~June 30, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in the 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.~~leases. While our floating-rate debt balances have ~~continued to decrease~~decreased in recent years, we do have some exposure to changing interest rates as a result of our floating-rate debt. As of ~~March 31,~~June 30, 2022 and December 31, 2021, we had ~~$892.9 million~~$1.4 billion and $895.4 million in floating-rate debt outstanding, respectively. Additionally, we have outstanding preferred stock with an aggregate stated amount of $850.0 million that currently pays dividends at a fixed rate, but will alternate to paying dividends based on a floating rate or

be reset to a new fixed rate based on the then-applicable floating rate, after five years from initial issuance. If interest rates increase, as they have been throughout 2022, we would be obligated to make higher interest payments to our lenders, and eventually, higher dividend payments to the holders of our preferred stock. 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 was to increase by 1.0%, we would expect to incur additional interest expense on our existing indebtedness of approximately ~~$8.9~~$14.1 million and $9.0 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively, each on an annualized basis, which would put downward pressure on our operating margins.

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

We attempt 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. Approximately 0.3% and 0.5% of our lease revenues were denominated in foreign currency as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. 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.

In December 2019, we issued C$400.0 million in aggregate principal amount of 2.625% notes due 2024. We effectively hedged our foreign currency exposure on this transaction through a cross-currency swap that converts the borrowing rate to a fixed 2.535% U.S. dollar denominated rate. See Note 8 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the fair value of the swap.

ITEM 4. 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 (“SEC”), 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 recognizes 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 ~~March 31,~~June 30, 2022. Based on that evaluation, our Certifying Officers have concluded that our disclosure controls and procedures were effective at ~~March 31,~~June 30, 2022.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~March 31,~~June 30, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. 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 1A. RISK FACTORS

~~Other than stated below, there~~There have been no material changes in our risk factors from those discussed under “Part I—Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~

~~The Russian invasion of Ukraine~~2021 and the impact of sanctions imposed by the United States, European Union, United Kingdom and others has adversely affected our business and financial condition, results and cash flows through our termination of our leasing activities in Russia and our inability to repossess and therefore re-lease aircraft and may continue to have an impact on our business, including through increased fuel costs that may impact our lessee’s financial condition.

In connection with the ongoing conflict between Russia and Ukraine, the United States, European Union, United Kingdom and others have imposed, and may continue to impose, economic sanctions and export controls against certain industry sectors and parties in Russia. These sanctions include closures of airspace for aircraft operated by Russian airlines, bans on the leasing or sale of aircraft to Russian controlled entities, bans on the export and re-export of aircraft and aircraft components to Russian controlled entities or for use in Russia, and corresponding prohibitions on providing technical assistance, brokering services, insurance and reinsurance, as well as financing or financial assistance.

~~In response to the sanctions, in March 2022 we terminated all of our leasing activities in Russia, consisting of 24 aircraft~~under “Part II—Item 1A. Risk Factors,” in our owned fleet, eight aircraft in our managed fleet and the leasing activity relating to 29 aircraft that have not yet delivered from our orderbook for which many have been subsequently placed. We also canceled five aircraft in our orderbook that were slated for delivery in Russia. As of May 5, 2022, 21 aircraft previously included in our owned fleet and six aircraft previously included in our managed fleet were not returned and remain in Russia. Most of the operators of these aircraft have continued to fly the aircraft notwithstanding the termination of leasing activities and our repeated demands for the return of our assets. The 21 aircraft previously included in our owned fleet represented 3.4% of our fleet by net book value as of March 31, 2022. In addition, our future revenues and cash flows have been impacted by the termination of our leasing activities of the aircraft in Russia, which we have reflected in the table presented in Note 6 to our consolidated financial statements included in this Quarterly Report on Form 10-Q. Our future revenues and cash flows may also be negatively impacted to the extent we cannot successfully re-lease the aircraft in our orderbook that were slated for placement with Russian airlines prior to their anticipated delivery dates on similar terms. It is also possible that overall lease rates could be temporarily reduced as a result of increased aircraft supply as lessors attempt to re-lease aircraft previously scheduled for delivery to Russia.

~~While we maintain title to the aircraft, we~~ ~~determined that it is unlikely we will regain possession of the aircraft that have not been returned and that remain in Russia. As a result,~~ ~~we recorded a write-off of our interests in our owned and managed aircraft that remain in Russia, totaling approximately $802.4 million~~10-Q for the quarter ended March 31, 2022. Our lessees are primarily structured as triple net leases, whereby the lessee is responsible for all operating costs, including insurance. We are vigorously pursuing insurance claims to recover losses relating to our aircraft that remain in Russia. Collection, timing and amounts of any insurance recoveries is currently uncertain.

Prior to the Russia-Ukraine conflict, we did not have any aircraft on lease in Belarus and had one aircraft on lease in Ukraine, which is currently located outside of Ukraine. The Russia-Ukraine conflict has also impacted global macroeconomic conditions, including causing increases in fuel prices which may continue. Similarly, the Russia-Ukraine conflict has additionally created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions of the global supply chain. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate as a result of the conflict, it may make any debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. We cannot predict any future impacts that may occur as a result of the Russia-Ukraine conflict, including further sanctions, embargoes, regional instability, geopolitical shifts, the inability to obtain insurance coverage consistent with historical policies, or changes in fuel costs, interest rates, foreign currency, inflation, or other operating costs, such as increased insurance costs, manufacturing costs and raw materials costs. These factors could cause our lessees

to incur higher costs and to generate lower revenues which could adversely affect their ability to make lease payments. In addition, lease default levels will likely increase over time if economic conditions deteriorate.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On February 15, 2022, our Board of Directors authorized us to repurchase up to $150.0 million of outstanding shares of our Class A common stock (the “2022 Repurchase Program”). Repurchases under the 2022 Repurchase Program, which expired in April 2022 upon the repurchase of shares up to the authorized amount, could be made through open market purchases, privately negotiated transactions, tender offers, block purchases, structured or derivative transactions such as puts, calls, options, forwards, collars, accelerated share repurchase transactions (with or without collars), other equity contracts, or other methods of acquiring shares, in each case subject to market conditions and at such times as shall be permitted by applicable securities laws and determined by

management. Repurchases under the 2022 Repurchase Program could also be made pursuant to a plan adopted under Rule 10b5-1 promulgated under the Exchange Act. ~~The 2022 Repurchase Program could be modified, discontinued or suspended at any time.~~

The following table provides information about our purchases of our Class A common stock during the three months ended ~~March 31,~~June 30, 2022:

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs (in thousands)
January 1-31, 2022 — $ — — $ 150,000
February 1-28, 2022 27,618 44.71 27,618 $ 148,765
March 1-31, 2022 2,931,840 43.76 2,931,840 $ 20,454
Total January 1, 2022 - March 31, 2022 2,959,458 $ 43.77 2,959,458


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs (in thousands)
April 1-30, 2022	461,416	$	44.33	461,416	$	—
May 1-31, 2022	—	—		—	$	—
June 1-30, 2022	—	—		—	$	—
Total April 1, 2022 - June 30, 2022	461,416	$	44.33	461,416

~~In April 2022, we repurchased an additional 461,416 shares of our Class A common stock under the~~The 2022 Repurchase Program ~~at an average price of $44.33 per share. Such repurchases completed the repurchase~~terminated in April 2022 upon completion of the entire $150.0 million of outstanding shares authorized under the 2022 Repurchase Program. ~~The 2022 Repurchase Program terminated in April 2022 upon completion of such repurchases.~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date
3.1	Restated Certificate of Incorporation of Air Lease Corporation	S-1	333-171734	3.1	January 14, 2011

3.2	Fourth Amended and Restated Bylaws of Air Lease Corporation	8-K	001-35121	3.1	March 27, 2018

3.3	Certificate of Designations with respect to the 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, of Air Lease Corporation, dated March 4, 2019, filed with the Secretary of State of Delaware and effective on March 4, 2019.	8-A	001-35121	3.2	March 4, 2019

3.4	Certificate of Designations with respect to the 4.650% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B, dated February 26, 2021, filed with the Secretary of State of Delaware and effective on February 26, 2021.	8-K	001-35121	3.1	March 2, 2021

3.5	Certificate of Designations with respect to the 4.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series C, dated October 11, 2021, filed with the Secretary of State of Delaware and effective on October 11, 2021.	8-K	001-35121	3.1	October 13, 2021

4.1	Description of Capital Stock	10-Q	001-35121	4.1	November 4, 2021

Seventh Amendment and Extension Agreement, dated April 26, 2022, 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 party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.

Incorporated by Reference

Exhibit Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

10.1

8-K

001-35121

10.1

April 27, 2022

10.2

Lender Extension Supplement, dated June 3, 2022, 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.

Filed herewith

10.3

New Lender Supplement, dated June 27 , 2022, 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.

Filed herewith

10.4†

Amendment No. 37 to A320 NEO Family Purchase Agreement, dated June 16, 2022, by and between Air Lease Corporation and Airbus S.A.S.

Filed herewith

10.5

Severance and Release Agreement, dated April 21, 2022, by and between Air Lease Corporation and Jie Chen.

Filed herewith

31.1

Certification of the P rincipal Execu tive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

31.2

Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.1

Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished herewith

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Furnished herewith

101.INS

XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation Linkbase

101.DEF

XBRL Taxonomy Extension Definition Linkbase

101.LAB

XBRL Taxonomy Extension Label Linkbase

101.PRE

XBRL Taxonomy Extension Presentation Linkbase

104

The cover page from Air Lease Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL and contained in Exhibit 101

†

The Company has omitted portions of the referenced exhibit pursuant to Item 601(b) of Regulation S-K because it (a) is not material and (b) is the type of information that the Company both customarily and actually treats as private and confidential.

~~ITEM 6. EXHIBITS~~
Incorporated by Reference
Exhibit Number Exhibit Description Form File No. Exhibit Filing Date
3.1
Restated Certificate of Incorporation of Air Lease Corporation
S-1 333-171734 3.1 January 14, 2011
3.2
Fourth Amended and Restated Bylaws of Air Lease Corporation
8-K 001-35121 3.1 March 27, 2018
3.3
Certificate of Designations with respect to the 6.150% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series A, of Air Lease Corporation, dated March 4, 2019, filed with the Secretary of State of Delaware and effective on March 4, 2019.
8-A 001-35121 3.2 March 4, 2019
3.4
Certificate of Designations with respect to the 4.650% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series B, dated February 26, 2021, filed with the Secretary of State of Delaware and effective on February 26, 2021.
8-K 001-35121 3.1 March 2, 2021
3.5
Certificate of Designations with respect to the 4.125% Fixed-Rate Reset Non-Cumulative Perpetual Preferred Stock, Series C, dated October 11, 2021, filed with the Secretary of State of Delaware and effective on October 11, 2021.
8-K 001-35121 3.1 October 13, 2021
4.1
Description of Capital Stock
10-Q 001-35121 4.1 November 4, 2021
10.1†
Amendment No. 2 to Agreement, dated January 11, 2022, between Airbus S.A.S. and Air Lease Corporation
Filed herewith
10.2†
Amendment No. 5 to the A220 Purchase Agreement, dated March 25, 2022, by and between Air Lease Corporation and Airbus Canada Limited Partnership.
Filed herewith
10.3†
Amendment No. 6 to Agreement, dated January 31, 2022, between Airbus S.A.S. and Air Lease Corporation
Filed herewith
10.4†
Amendment No. 6 to the Agreement, dated March 25, 2022 , between Air Lease Corporation and Airbus S.A.S.
Filed herewith
10.5†
Amendment No. 18 to the A350XWB Family Purchase Agreement, dated January 11, 2022, by and between Air Lease Corporation and Airbus S.A.S.
Filed herewith
10.6†
Amendment No. 3 5 to A320 NEO Family Purchase Agreement, dated February 3, 2022 , by and between Air Lease Corporation and Airbus S.A.S.
Filed herewith
10.7†
Amendment No. 3 6 to A320 NEO Family Purchase Agreement, dated March 25 , 2022, by and between Air Lease Corporation and Airbus S.A.S.
Filed herewith
10.8†
Supplemental Agreement No. 16 to Purchase Agreement No. PA-03659, dated February 16, 2022, by and between Air Lease Corporation and The Boeing Company
Filed herewith
10.9†
Supplemental Agreement No. 30 to Purchase Agreement No. PA-03791, dated February 16, 2022, by and between Air Lease Corporation and The Boeing Company
Filed herewith
10.10
Supplemental Agreement No. 3 1 to Purchase Agreement No. PA-03791, dated March 31, 2022 , by and between Air Lease Corporation and The Boeing Company
Filed herewith

Incorporated by Reference
Exhibit Number Exhibit Description Form File No. Exhibit Filing Date
10.11
Seventh Amendment and Extension Agreement, dated April 26, 2022, 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 party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.
8-K 001-35121 10.1 April 27, 2022

31.1
Certification of the Principal Exec utive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
31.2
Certification of the Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
32.1
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
Furnished herewith
32.2
Certification of the Chief Financial Officer P ursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
Furnished herewith
101.INS XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
104 The cover page from Air Lease Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL and contained in Exhibit 101
† The Company has omitted portions of the referenced exhibit pursuant to Item 601(b) of Regulation S-K because it (a) is not material and (b) is the type of information that the Company both customarily and actually treats as private and confidential.