Investor Update Thunderbolt II and Beyond
September 2018
Forward Looking Statements & Non-GAAP Measures
Statements in this presentation that are not historical facts are hereby identified as “forward-looking statements,” including any statements about our expectations, beliefs, plans,predictions, forecasts, objectives, assumptions or future events or performance. These statements are often, but not always, made through the use of words or phrases such as“anticipate,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words orphrases. Accordingly, these statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties that could cause actual results to differmaterially from those expressed in them. We wish to caution you that our actual results could differ materially from those anticipated in such forward-looking statements as a result ofseveral factors, including the following:
• our inability to make acquisitions of, or lease, aircraft on favorable terms;• our inability to sell aircraft on favorable terms or predict the timing of such sales;• our inability to obtain additional financing on favorable terms, if required, to complete the acquisition of sufficient aircraft as currently contemplated or to fund the
operations and growth of our business;
• our inability to effectively oversee our managed fleet;• our inability to obtain refinancing prior to the time our debt matures;• impaired financial condition and liquidity of our lessees;• deterioration of economic conditions in the commercial aviation industry generally;• increased maintenance, operating or other expenses or changes in the timing thereof;• changes in the regulatory environment including tariffs and other restrictions on trade;• unanticipated impacts of the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), including as a result of changes in assumptions we make in our interpretation of the
Tax Reform Act, guidance related to application of the Tax Reform Act that may be issued in the future, and actions that we may take as a result of our expected impactof the Tax Reform Act;
• potential natural disasters and terrorist attacks and the amount of our insurance coverage, if any, relating thereto.We also refer you to the documents the Company files from time to time with the Securities and Exchange Commission (“SEC”), specifically the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017, which contains and identifies important factors that could cause the actual results for the Company on a consolidated basis to differmaterially from expectations and any subsequent documents the Company files with the SEC. All forward-looking statements are necessarily only estimates of future results, and therecan be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Further, anyforward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstancesafter the date on which the statement is made or to reflect the occurrence of unanticipated events. If any such risks or uncertainties develop, our business, results of operation andfinancial condition could be adversely affected.
The Company has an effective registration statement (including a prospectus) on file with the SEC. Before you invest in any offering of the Company’s securities, you should readthe prospectus in that registration statement and other documents the Company has filed with the SEC for more complete information about the Company and any such offering. Youmay obtain copies of the Company’s most recent Annual Report on Form 10-K and the other documents it files with the SEC for free by visiting EDGAR on the SEC website atwww.sec.gov. Alternatively, the Company will arrange to send such information if you request it by contacting Air Lease Corporation, General Counsel and Secretary, 2000 Avenue ofthe Stars, Suite 1000N, Los Angeles, California 90067, (310) 553-0555.
In addition to financial results prepared in accordance with U.S. generally accepted accounting principles, or GAAP, this presentation contains certain non-GAAP financialmeasures. Management believes that in addition to using GAAP results in evaluating our business, it can also be useful to measure results using certain non-GAAP financial measures.Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results set forth in theAppendix section.
Agenda
3
Welcome
ALC Overview
Thunderbolt Platform
ALC Valuation Implications
ALC Overview
$17.3 billion Total Assets
Data as of June 30, 2018 unless otherwise noted; 711 aircraft owned, managed and on order includes 30 737-8 MAX aircraft and three 787-9 aircraft pursuant to an Agreement entered into in August 2018; $25 billion total committed future rentals includes $11.3 billion in contracted minimum rental payments on the aircraft in our existing fleet and $13.7 billion in minimum future rental payments related to aircraft which will deliver between 2018 and 2022; (1) Based on projected fleet net book value; (2) TTM as of June 30, 2018. Adjusted Pre-Tax ROE is a non-GAAP financial measure. See appendix for reconciliation to most directly comparable GAAP measure.
Air Lease Snapshot
711Aircraft owned, managed & on order
87%Orderbook placed through 2020
$25 billionTotal committed future rentals
16.7%Adjusted pre-tax return on equity2
Fleet size expected to double in five years1
Scale
Visibility
Growth
Returns
5
Track Record of Strong Growth & Profitability
61CAGR is the compounded annual growth rate calculated for the twelve month periods from December 31, 2012 to December 31, 2017.2TTM as of June 30, 2018. Adjusted Pre-Tax ROE is a non-GAAP financial measure. See appendix for reconciliation to most directly comparable GAAP measure.
Revenue ($mm) Shareholders’ Equity ($mm)
16.7% Adjusted Pre-
Tax ROE2
18.3% 5-year CAGR1
ALC has been consistently delivering strong results to its shareholders
Assets ($bn)
16.5%5-year CAGR1
$7.3
$9.2
$10.7
$12.4
$14.0
$15.6
2012 2013 2014 2015 2016 2017
$656
$859
$1,050
$1,223
$1,419$1,516
2012 2013 2014 2015 2016 2017
$2,333$2,523
$2,772$3,020
$3,382
$4,127
2012 2013 2014 2015 2016 2017
ALC Aircraft LeasingPeers
S&P 500
18.3%
13.5%
5.8%
ALC Aircraft LeasingPeers
S&P 500
5.8%
8.2%
15.6%
ALC Aircraft LeasingPeers
S&P 500
39.2%
22.1%
15.7%
Superior Performance to Peers and the S&P 500
Source: Bloomberg & public filings. Aircraft leasing peers calculated as the average of AYR, AER & FLY.1Pre-tax margin is calculated as pre-tax income divided by revenue for the twelve months ended June 30, 2018.2For the twelve months ended June 30, 2018.3CAGR is compounded annual growth rate calculated for the twelve month periods from December 31, 2012 to December 31, 2017.
Pre-Tax Margin1 SG&A / Revenue2
Profitability Efficiency Growth
ALC has generated results in excess of peers as well as the S&P 500
5-Year Revenue CAGR3
Aircraft Leasing Peers
Aircraft Leasing Peers
Aircraft Leasing Peers
7
Management Business Expands Investable Universe
Aircraft Age
Years 0 - 8 Years 8 - 20 Years 20+
Ownership
“Young Aircraft, Long Leases, Low Leverage”
$25 Billion Committed Rentals1
Management
“Customer Retention; Maintain Risk Profile”
Platform Extension and Management Fees
8
Ownership remains focused on young aircraft with an asset-light strategy in the mid-life space1Committed rentals as of June 30, 2018. Includes $11.3 billion in contracted minimum rental payments on the aircraft in our existing fleet and $13.7 billion in minimum future rental payments related to aircraft which will deliver between 2018 and 2022.
9
What Does TBOLT II Mean for ALC?
• We have made enhancements to the TBOLT platform, specifically designed to broaden the investor base for mid-life aircraft
• We believe we have created a replicable structure that allows for sustainable demand from investors
Increased Liquidity
• Absent other circumstances, ALC anticipates selling the majority of its aircraft as they age under sequential offerings through the TBOLT platform
• This allows us to retain valuable customer relationships
Optimizing Sales
• By unlocking the value of the cash-flows associated with our profitable leases, we believe this will lead to better returns for our shareholders
• Additionally, through the management of aircraft in the TBOLT platform, our goal is to create enhanced economics through increased management fees
Return Benefits
• The TBOLT platform is another tool that ALC has at its discretion to help manage residual value risk, to maintain ALC’s young fleet age, and its conservative balance sheet
Risk Management
Tool
• We believe based on the above factors, ALC should warrant a higher valuation and further differentiate us from our peers
Valuation Implications
Thunderbolt II Strategy
Top 5 aircraft lessor by owned and managed fleet (by number of aircraft) – $14.9 bn owned fleet of 271 aircraft, with 391 aircraft on
order1
Strong balance sheet, investment grade rated, and a young, largely unencumbered fleet
Corporate rating of BBB/BBB/A- (S&P/Fitch/Kroll)
Attractive order book benefitting from bulk pricing
Strong relationships across airline industry
Significant experience managing mid-life aircraft, which are critical for global airline operations
11
Overview of ALC’s Management Platform
Joint venture with Napier Park; Blackbird Capital I launched in November 2014 and Blackbird Capital II launched in August 2017
Accommodates incremental airline demand yet manages capacity constraints
Credit-positive tool to manage leverage, concentrations, and portfolio age and an incremental funding source for ALC through stable long-term partners (blue chip insurance companies and pension funds)
12-year term of certain Blackbird notes allows for long dated management of aircraft assets and earnings power
ALC’s mid-life strategy
Organizational initiative by ALC to partner with 3rd party capital providers and grow the management business while enhancing investment grade metrics
Allows ALC to maintain airline relationships and continue to act as servicer
Programmatic issuance expected as aircraft age naturally in ALC’s owned fleet
Managed vehicles are a strategic priority for ALC to help realize further shareholder value
1 As of June 30, 2018. Includes firm commitments to purchase 33 aircraft from Boeing pursuant to an Agreement entered into in August 2018.
12
Strategic Fit of the Thunderbolt Program
ALC Core Customers Use Young Mid-Life Aircraft
ALC’s core lessee base relies on mid-life aircraft to support operations
Aircraft between 8 and 20 years represent 30%1,2 of the in service fleets of the TBOLT II lessees below
The TBOLT program is an initiative to help ALC provide further aircraft alternatives to its client base while maintaining its investment grade balance sheet metrics (aircraft age, leverage)
TBOLT II Lessees Exemplify The Strategic Importance of the TBOLT Platform2
TBOLT helps ALC to expand its offerings to core fleet customers to the mid-life segment
ALC Managed Fleet Airlines’ Overall Fleets
Lessee Mid-Life # Mid-Life %Young-Life and
End of Life Aircraft
Young-Life and End of Life Aircraft
%Total Mid-Life # Mid-Life %
Young-Life and End of Life Aircraft
Young-Life and End of Life Aircraft
%Total
Air China 0 0% 13 100% 13 123 30% 289 70% 412China Eastern 0 0% 12 100% 12 91 18% 401 82% 492
Ethiopian 0 0% 2 100% 2 10 11% 78 89% 88
Interjet 2 100% 0 0% 2 26 33% 54 68% 80
S7 0 0% 5 100% 5 46 71% 19 29% 65
SpiceJet 3 60% 2 40% 5 23 39% 36 61% 59
Thomas Cook 0 0% 8 100% 8 35 58% 18 42% 53
Tiger Airways 0 0% 5 100% 5 12 18% 14 82% 26
Vueling 1 14% 6 86% 7 44 40% 65 60% 109
Total 6 10% 53 90% 59 410 30% 974 70% 1384
TBOLT II allows ALC to retain its customers and longstanding relationships
1 Source: Obtained from Ascend Flight Global for ‘in service aircraft’ only as of March 30, 2018.2 Computed as of each respective year end; Age of aircraft calculated as difference between 2018 and build year. Percentages are based on number of aircraft
13
Liquidity of TBOLT Portfolio Assets is Consistent with ALC Aircraft Strategy
The broad installed operator base of ALC / TBOLT’s aircraft assets is the basis of its liquidity
TBOLT’s aircraft asset concentrations are consistent with ALC’s overall strategy and capitalize on the large operator bases
Operators1 351 488 129
# Total In Service1 7,277 7,396 1,263
ALC Owned and on Order2
236(3) 276 49
6 12TBOLT I 1
11(4) 6TBOLT II 1
TBOLT I and II feature liquid aircraft types, consistent with ALC’s fleet management strategy
TBOLT II continues ALC’s aircraft strategy of only investing in liquid aircraft types1 Source: Obtained from Ascend Flight Global for ‘in service’ aircraft only as of February 20182 As of June 30, 2018; 276 figures for Boeing 737 aircraft includes firm commitments to purchase 30 737-8 MAX aircraft from Boeing pursuant to an Agreement entered into in August 2018.3 Includes all variants of Airbus A319, A320 and A3214 Includes all variants of Airbus A320 and A321
14
Asset Consideration: Young vs. Mid-Life Portfolios
BBIRD I1 TBOLT I2 TBOLT II3
Aircraft TypeIn Demand
Narrowbody & Widebody4In Demand Narrowbody / Some Widebody
AirlineCustomer
Same ALC customers
W.A. Aircraft Age
3.3 Years 12.5 Years 8.0 Years
W.A. Remaining Lease Term
7.3 Years 3.4 Years 4.7 Years
Lease Yield5 ~11% - 12% ~12% - 15%
Cash SecurityDeposits
Uniform Underwriting Standards
Maintenance Reserve Payers
Uniform Underwriting Standards
Mid-life aircraft assets are characterized by shorter lease terms, as well as higher yields and substantially greater maintenance reserves provided by airline customers
1 As of September 30, 20162 As of February 28, 20173 As of April 30, 20184 BBIRD I portfolio included one regional aircraft5 Age-adjusted yield based on ALC’s average portfolio lease yield and 3.4% annual depreciation. Through June 30, 2018, ALC’s core rental revenues have averaged 11.5% since 2011, calculated as rental of flight equipment, excluding overhaul revenue and amortization of initial direct costs, divided by average net book value. ALC’s portfolio age has had a weighted average age below 3.9 years since 2011.
15
Historical Aircraft ABS Transaction Volume
Aircraft & Engine Asset Backed Issuances
Source: Bank of America
~$20 bn ~$14 bn ~$25 bn
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
YTD
New
Issu
ance
($ b
n)
Improving, but Challenging Structure and Collateral
• Low incentives to refinance at expected final payment date, with step-ups of only 50 bps• Senior debt rating reliant on monoline guarantees• Structures with 1-4 tranches, with shorter WALS (~5 yrs)• Collateral still >20% outdated aircraft• Single-A LTV still ~75%, but lower all-in LTVs (~80%)• Variable amortization schedule remains
16
Evolution of Aviation ABS
1.0Pre 9/11 Deals
2.0Post 9/11 to Financial Crisis
Post 2008Financial Crisis v1.0
3.0Post Financial Crisis (2012 to Present)
Complicated Structures, Weak Collateral
• Out-of-favor aircraft models comprised the majority of these pools• Complicated transaction structures composed of up to 9 different
fixed and floating rates• All-in LTVs up to 95.5%, with single-A LTVs up to ~75%• Variable amortization rates based on aggressive depreciation
assumptions• WALs >10 yrs for some tranches• Imperfect hedges between fixed assets and floating rate debt further
hampered performance
Aircraft ABS is shifting from an esoteric asset class to a “flow” product
Streamlined Structures with Top-tier Collateral
• Substantially all highly liquid aircraft for collateral• Simple 2-3 tranche structures, fixed rate issuance• Predictable straight-line principal amortization, with step-ups of 200 bps
incentivizing refinancing• Look-forward maintenance and security deposit reserves• Single-A LTVs at ~65%, with all-in LTVs ~76% for TBOLT II
Simplifying the Debt Structure
First post-crisis AA note featured in aviation ABS
Straight-line principal amortization for the debt notes
Fully pledged security deposits
Maintenance look forward
200bps step-up at expected final payment date
DSCR and utilization triggers
105% repayment of debt upon dispositions, subject to certain conditions
Early prepayment penalties
ALC-Serviced ABS Issuances
BBIRD TBOLT I TBOLT II
Alignment of Interest with 3rd Party Equity
To achieve economic alignment with investors, ALC receives an incentive fee after clearing certain performance hurdles
A substantial portion of ALC’s economics in the transaction is based on successful re-leasing and sales
Standard senior servicing fees
Equity Structure Evolution
Introduction of Aircraft Portfolio Shares to allow wider equity participation
Equal and enhanced disclosure to debt and equity participants
Robust upfront and ongoing investor reporting
Flexible tax structure
17
18
Thunderbolt II Overview
Investor-Friendly Format for Equity
Participation
1
Enhanced Information
Disclosure and Model Access
2Liquidity and Flexible
Tax Structure
5
Low Leverage and Portfolio
Characteristics Provide Strong On-Going Cash Flow
4
Debt Structure Promotes Alignment
and Provides Flexibility to Manage
Portfolio
3Investor Friendly
Governance Structure
6
144A/ Reg S cleared through DTC and freely tradable to facilitate greater liquidity
Ability to participate in smaller minimum denominations, leading to more diversified investor participation
Improved disclosure, taking lessons from public company governance, access to portfolio information, and functional cash flow model to create greater transparency and facilitate increased secondary trading
Global Aircraft Portfolio Shares (GAPS) investors expected to benefit from enhanced liquidity
ALC has a history of developing capital markets programs and growing liquidity
PFIC tax structure facilitates off-shore ownership
Expected high recurring cash yield to equity while actively de-levering the structure
Ability to invest in equity with strong alignment to manager due to incentive fee structure and ALC’s 5.0% ownership of APS
Ability to opportunistically sell certain percentage of aircraft in first 4 years without a make-whole, no make-whole after year 4
Certificated Aircraft Portfolio Shares (CAPS) holder, ITE Management L.P., holds a board seat, working closely with the portfolio manager ALC
Other 2 of 3 total TBOLT II board seats are independent
The governance structure, together with the incentive fee, align the interests of all parties
We believe that transaction structuring is key to a successful, replicable platform
19
Global Aircraft Portfolio Shares OverviewInvestor-Friendly Format for Equity Participation
The structure includes an equity class guided by the same principals of liquidity, alignment, simplicity, and transparency asthe TBOLT II debt
Thunderbolt II APS Limited (“the Company”) issued 490 APS
available for purchase by investors (the Company holds leasing
residuals via e-note)
CAPS: 10% of equity shares offered in the Company
GAPS: 90% of equity shares offered in the Company
5.0% of APS will be purchased by ALC
Issuance was less than 500 shares to facilitate a Private
Company Offering
CAPS investor performs legal diligence on lease agreements
CAPS investor performs technical diligence on each aircraft
CAPS investor reviews credit profile of initial lessees
Equity: 490 Total APS (Aircraft Portfolio Shares)
441 Global Aircraft Portfolio Shares (GAPS)
49 Certificated Aircraft Portfolio Shares (CAPS)
GAPS CAPS
Share Form DTC registered Physical Delivery
Offering Format 144A/ Reg S Section 4(a)(2)
Ability to Exit Investment
No restrictionsShares can only be transferred with the
consent of ALC
Governance No board selection rights 1 board director
Voting Rights No Yes
Exchange Listing Cayman N/A
Investor Base Expected to be diverse ITE Management L.P.
Diligence
Upfront information set and ongoing reporting with aligned equity holders and transaction
agents
Conducts initial legal and technical due diligence
GAPS offered through DTC in 144A and Reg S form to facilitate liquidity of shares
A smaller GAPS minimum denomination allows for investors to customize equity participation
20
TBOLT II Investor ModelModel Functionality – Inputs Screen
The model incorporates the capability to flexibly analyze cash flows, sensitivities, and returns generated by the investment
Users can toggle any of the following starred assumptions (*), as well as debt pricing, to evaluate returns
Investors can also view the economics of the incentive fee to ALC to demonstrate alignment
Allows user to toggle between lease rates and sales proceeds based on Ascend or the average of 3 appraisers
Threshold over benchmark whereby ALC would begin to earn-out (Incentive Case)
Servicing fees paid in the debt / equity waterfall
Incentive Fee: % of proceeds above benchmark that is shared
CAPS Equity Economics
Allows user to select a maintenance forecast prepared by ICF (“Issuer” toggle) or input their own
Allows user to tailor inflation rate in model to own assumptions
Allows user to apply discounts and premiums to lease rates, both current and upon re-lease, as well as adjust AOG (aircraft on ground)
Allows user to apply discounts and premiums to disposition proceeds from the Appraisal Case
Allows user to adjust portfolio disposition timing, either at the portfolio or aircraft by aircraft level
*
*
*
**
***
AssumptionsSelect Appraisal Case Avg of 3 Appraisals
Benchmark Definition (ASCEND + Additional X%) X% of Ascend Renewal Lease 6% X% of Ascend Residuals 6%
ALC Servicing Fee % of Rents (top of waterfall) 3.00% % of Rents (Incentive - Equity Waterfall) 1.00%
ALC Economics Lease Upside 50% Disposition Upside 50%
Board Equity Board Equity Contribution (% of E-Note) 10.0% Board Equity Fee ($MM) per Annum 0.20 Board Equity Purchase Price (%) 98.5%
Maintenance Forecast ICF_Mgmt
Collateral Value SensitivityForecast Inflation (Renewal Lease Rates + Residual Values) 2.00%
Lease Rate Sensitivity (All Aircraft)Lease Revenue Premium / (Discount) 0.0% -Apply Lease Rate Premium/(Discount) to Renewal Only
Residual Value Sensitivity (Entire Portfolio)Residual Value Premium / (Discount) 6.50%
.Aircraft Disposition Strategy (entire portfolio sale single date, ARD or later) Sell/Refi at ARD+Portfolio Sale/Refi Date Sep-25
Transaction Enhancements Cash Flow Summary ($MM) ($MM) %
Maintenance Support Account 5.0 Current Lease 303.5 35.2%Security Deposit Reserve Account 13.8 Renewal Lease 147.8 17.2%Expense Reserve Account 0.5 Dispositions 410.1 47.6%Mezz Note Reserve Account 0.0 Total 861.5 100.0%Liquidity Facility 14.5Total Transaction Enhancements 33.8 ALC Value Disc Rate ($MM)
Servicing Fee 17.0% 13.1Upside (Lease and Disp) 17.0% 28.9
Purchase Price IRR SensitivityPurchase Price/IRR Board Equity (CAPS) Liquid Equity (GAPS) ALC Economics $MM
Senior Note Proceeds 450.010.4 94.9 Sub Notes 0.0
IRR 19.48% 17.00% Board Equity (CAPS) 10.4Liquid Equity (GAPS) 94.9Total Debt + E-Note Proceeds 555.2
Cash on Cash Board Equity (CAPS) Non Board Equity (GAPS)Transaction Year ($MM) Annual Cumul / Avg ($MM) Annual Cumul / Avg
1 2.5 23.8% 23.8% 20.2 21.3% 21.3%2 1.0 9.3% 16.5% 6.9 7.2% 14.3%3 1.0 9.2% 14.1% 6.8 7.2% 11.9%4 2.6 24.7% 16.7% 21.3 22.4% 14.5%5 1.7 16.7% 16.7% 13.8 14.6% 14.5%6 0.9 8.2% 15.3% 5.9 6.2% 13.1%7 15.2 146.3% 34.0% 134.9 142.2% 31.6%8 0.3 3.3% 30.2% 2.9 3.1% 28.0%
105.4Purchase Price ($MM)(sum of T4 + U4)
21
TBOLT II Investor ModelOutputs – Model Results (Pricing Case)
The model provided allows for investors to see key investment metrics for different assumptions
Model is expected to produce robust descriptive outputs such as sources of cash flow, IRRs, cash on cash returns, and granular monthly cash flows
Model outputs are fully transparent and disclose the economic impact to the holders of debt, CAPS, GAPS, and ALC as Servicer
Robust annual cash on cash returns in the Pricing Case
Thunderbolt II valuation was driven by cash-flow analysis
A320-200, 43%
B737-800, 27%
A321-200, 15%
A330-200, 12%
B737-700, 3%
Overview of Thunderbolt II
22
Class Size ($mm) Rating (F/K) LTV WAL3 Maturity3 Spread Yield CouponClass A 375.0 A / A 65.1% 5.3 yrs 7.1 yrs 1.30% 4.183% 4.147%Class B 75.0 BBB / BBB 78.2% 5.3 yrs 7.1 yrs 2.24% 5.125% 5.071%Total Debt 450.0 1.46% 4.340% 4.301%
Total Equity 105.2 17.0% IRR4
Proceeds from Deal 555.2
Total Consideration 594.7
Fleet size 18 aircraftWtd. avg fleet age 8.0 yearsWtd. avg remaining lease term 4.7 yearsDiversification 16 lessees / 15 countriesInitial appraised value $575.7 million2
Lease rate factor 1.01%
Portfolio Summary1
Class A Debt Class B Debt Equity (GAPS)Subscription Level 2.7x oversubscribed 4.1x oversubscribed 6.7x oversubscribedTotal # of Investors (Orders) 22 investors 11 investors 23 investorsFinal # of Investors (Allocations) 21 investors 6 investors 20 investors
Final Capital Structure
Investor Analysis
(1) Data as of April 30, 2018, unless otherwise noted.(2) As of March 31, 2018, including maintenance adjustment by IBA, Collateral Verifications and Acumen(3) Based on the Pricing Case (4) For GAPS only
Key Improvements and Differentiators in TBOLT II
Equity Structure Liquidity
Equity investment structured as a tradeable security
Disclosure Enhanced transparency and disclosure in the form of a user-friendly investor model detailing out portfolio information, cash flows, maintenance, appraisals
Reporting Robust upfront and ongoing investor reporting: 1) monthly reports 2) Bloomberg, 3) Intex, 4) DealVector (cash flow model)
Governance Board comprised of one equity director, and two independent directors. All decisions require unanimous board consent
Alignment of Interest Earn-out structure that incentivizes ALC to outperform on re-leasing and aircraft sales. ALC will earn 50% over 106% of the Ascend benchmark for both leases and aircraft sales
ALC 5% ownership of the equity
Flexible Tax Structure Structure set up as a PFIC, which does not require tracking of onshore and offshore ownership. No tax related restrictions on equity ownership
1
2
3
4
5
6
23
Transaction structuring was important factor in successful, replicable platform
TBOLT 2018-A Series A secondary trading spreads tightened by 21 bps from pricing in 5 days
The BBIRD and TBOLT Class A yields have tightened significantly on the secondary trading markets between (~100 and ~140 basis points respectively)
Since their respective closings, ALC’s TBOLT and BBIRD offerings have been highly liquid names in aircraft financing thanks to strong investor participation and strong support from ALC’s core bank group
TBOLT 2018’s new tradable equity product, GAPS, has traded 12 shares in the past month
Out of 30 aircraft financing transactions surveyed, ALC’s TBOLT and BBIRD platforms had the highest investor bases, with 40, 43, and 41 initial purchasers for BBIRD I, TBOLT I, and TBOLT II, respectively
Secondary Trading Since Pricing1, 2 Secondary Trading Volumes1, 2
Aircraft ABS 3.0 Trading Summary (# of Trades)1, 2 Investor Participation3
0
50
100
150
200
250
O-16 D-16 F-17 M-17 M-17 J-17 A-17 O-17 D-17 J-18 M-18 M-18 J-18 A-18
Spread (bps)
TBOLT 2017 BBIRD 2016 TBOLT 2018
$99, 53%$7, 43%
$7, 4%
TBOLT 2017 (Total: $185mm)
Series A Series B Series C
$35, 18%
$104, 54%
$54, 28%
BBIRD 2016 (Total: $192 mm)
Series AA Series A Series B
0123456789
1-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44
Num
ber o
f Dea
ls
Number of Unique Investors
Investor Participation in Aircraft ABS Debt Transactions3
0
10
20
30
40
50
60
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
2017 2018
AASET BBAIR BBIRD BBIRD CLAST DCAL DHAL EAFL ECAF EGLE KDAC LAFL
LIFT MAPSL METAL MRLN RPRO SAPA SHNTN SJETS SPRTE TBOLT WAAV WESTF
After pricing on July 19, 2018 TBOLT 2018-A trading was 12% of the month’s trading by volume
ALC’s 3 aircraft financings comprise >15% of trades by deal count since June 2015
$2, 18%
$4, 49%
$3, 33%
TBOLT 2018 (Total: $8mm)
Series A Series B Series G
Liquidity and Secondary Market ActivityALC Spreads have Tightened with Trading
1 Trades gathered from FINRA ABS TRACE platform and Bloomberg as of August 31, 2018; yields and spreads are estimated2 Nothing contained herein shall be relied upon as a promise or representation as to the future performance of TBOLT 2018-1, TBOLT 2017-1, BBIRD 2016-1, or any current or future aircraft finance transactions involving ALC3 Chart includes: WEST 2018-A, TBOLT 2018-A, CLAS 2018-1, MAPS 2018-1, AASET 2018-1, WAVE 2017-1, METAL 2017-1, TBOLT 2017-1, WEST 2017-A, SJETS 2017-1, AASET 2017-1, CLAS 2017-1, FALCON 2017-1, LAFL 2016-1, AASET 2016-2, BBIRD 2016-1, CLAS 2016-1, HAIL 2016-1, AASET 2016-1, CLAS 2015-1, SHNTN 2015-1, ECAF 2015-1, DCAL 2015-1, ATLAS 2014-1, EGLE 2014-1, AASET 2014-1, CLAS 2014-1, RISE 2014-1, EAFL 2013-1, AABS 2013-1
24
The 18-aircraft Thunderbolt II transaction generated an implied pre-tax IRR of 16.6% over an average holding period of 5.9 years through the transaction’s closing date of August 1, 2018
Thunderbolt II Illustrative Economics
Year
AircraftAcquisition
(equitycontribution)
Rental Revenue
Interest Expense
Debt Repayment
SG&A Expense
Gross Sales Proceeds
Net Cash
2010 (50.8) 6.6 (1.4) (1.8) (0.4) (47.8)
2011 (35.7) 25.1 (4.8) (7.0) (1.5) (23.8)
2012 (48.1) 48.4 (11.8) (13.0) (2.9) (27.5)
2013 (40.3) 54.8 (12.1) (14.7) (3.3) (15.6)
2014 (13.9) 67.0 (14.9) (17.8) (4.0) 16.4
2015 0.0 67.3 (14.7) (18.4) (4.0) 30.2
2016 (8.2) 67.5 (13.8) (18.9) (4.1) 22.4
2017 (7.8) 68.5 (12.9) (19.7) (4.1) 24.0
2018 0.0 40.6 (7.6) (401.0) (2.4) 594.7 224.2
IRR: 16.6%(in $ millions)
Note: Interest expense based on composite interest rate for the relevant year. Debt repayment calculated to maintain ALC’s target 2.5x debt to equity ratio. SG&A expense equal to 6% of rental revenues.
25
ALC generated an implied pre-tax IRR of 16.6% on the Thunderbolt II fleet
$594.7
$512.4 $569.2 $580.7
$417.3
Total TBOLT IISales Proceeds
IBA CollateralVerifcations
Acumen Ascend(at closing)
TBOLT II sales proceeds represent a 2 - 16% premium over appraised value and a 42% premium over Ascend’s value
Appraised Market Values1 ($ mm)
+2%Consideration
over Appraised: +42%+4%+16%
1Half life current market values as of March 31, 2018 for IBA, Collateral Verifications, and AcumenHalf life current market values as of July 20, 2018 for Ascend
TBOLT II Sales Proceeds vs. Appraised Values
26
Thunderbolt II highlights the significant imbedded value of ALC’s fleet vs. appraiser valuations
Total TBOLT II Consideration
Thunderbolt II Fee Economics to ALC
$52.3mm
$24.5mm
$83.2mm
$160.0mm
Value of Aircraft & Cash-Flows
Servicing Fees
Maximum Earnout
Total
0 – 3 Months Post Close
Monthly Over Life of Transaction
At Sale of AssetTotal Expected Value to ALC Shareholders
27
Thunderbolt II expected to result in $160 million in revenues and gains for ALC shareholders
1
2
1 Expected gains on sale of aircraft are spread between gain on sale and aircraft rental revenue. See slide 28.2 Earn-out will be based on re-leasing and sales of aircraft.
Gain on Sale Accounting for ALC
28
~20.9mm
~31.4mm
Total Expected Gain: $52.3mm1 Thunderbolt II Sale Process:
Transaction settled on August 1, 2018Upon settlement, ALC placed the aircraft in the TBOLT II portfolio into a held-for-sale account at which point depreciation stops accumulating (in-line with accounting rules)During the transfer process, ALC continues to collect rent from the airlines which is recorded as rental revenueThis rental revenue offsets the economic gain until the point at which the aircraft is actually soldAt final sale, ALC records the remaining economic gain through the aircraft sales and trading line-item on the income statement
Under current accounting guidelines, ALC’s gain on TBOLT II is spread across both rental revenue and gain on sale
~60% Gain on Sale
~40% Rental Revenue
1 Expected gains on sale of aircraft are spread between gain on sale and aircraft rental revenue.
TBOLT II Takeaways
The TBOLT II transaction demonstrates the embedded value of ALC’s mid-life aircraft assets
The TBOLT II transaction was valued on the lease and sale cash flow generation of the portfolio
ALC Valuation Methodology
Not only does ALC buy assets well, we generate meaningful value by putting in place long-dated lease contracts
The TBOLT II transaction valued mid-life aircraft assets on the NPV of cash flows
A similar methodology can be applied to the contracted cash flows of ALC’s on balance sheet fleet
Moreover, ALC’s orderbook assets subject to committed future leases also have a contracted cash flow stream tied to them, whereby value can be determined with a similar NPV approach
ALC Valuation Methodology: Lessons Learned from TBOLT II
29
ALC Valuation Implications
ALC Continues to Unlock Value for ALC Shareholders
Aircraft Value GrowthLease
Cash-Flow Streams
Management Business
Thunderbolt II economics continue to highlight the value of lease rental cash-flow streams, supporting our belief in the tremendous amount of value already on ALC’s balance sheet not
incorporated in ALC’s public equity valuation
Management Team
Strong Returns and Profitability
31
Compelling Opportunity to Realize Value through Growth of Highly Visible Cash Flow Streams
Existing Fleet Orderbook
$11.3bnContracted
Rentals
$13.7bnCommitted
Rentals
271 Aircraft
391 Aircraft$25bn of
Cash Flow
The success of the TBOLT platform further substantiates the value of ALC’s future cash flows
Data as of June 30, 2018, unless otherwise noted; 391 aircraft in orderbook includes 33 Boeing aircraft purchased on firm commitment pursuant to an Agreement entered into in August 2018. 32
Expansion of TBOLT Platform Provides for a Differentiated Valuation Profile
Asset based valuations have been widely used to value aircraft lessors. There is substantial value in ALC’s current / future earnings which, we believe, is not captured in these metrics
Thunderbolt Platform highlighted the value of these cash-flows and created a replicable avenue to mitigateasset risk for our mid-life aircraft
We believe the expansion of the TBOLT platform will result in a differentiated valuation profile relative to ALC’s peers, with increased shareholder value created by:
Reducing residual value risk Increasing liquidity in the secondary market for mid-life aircraft Growing our fee based income stream
Asset Based Valuation
Earnings Valuation
Thunderbolt II Helps to Realize Value of Lease Cash-Flows
33
Conclusion
34
Increased Shareholder
Value
Risk Reduction in Mid-Life
Space
Larger Investable Universe
Strong Returns & Growth Profile
We believe this expansion further differentiates us from peers and unlocks long-term value for our shareholders
ALC’s Expanded Management PlatformALC Today +
Appendix
Appendix Non-GAAP reconciliations
1Adjusted margin before income taxes is adjusted net income before income taxes divided by total revenues, excluding insurance recoveries2 Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes plus assumed conversions divided by weighted average diluted shares outstanding.
(in thousands, except share and per share data) 2018 2017 2017 2016 2015 2014 2013
Reconciliation of net income to adjusted net incomebefore income taxes:
Net income 115,211$ 100,925$ 756,152$ 374,925$ 253,391$ 255,998$ 190,411$
Amortization of debt discounts and issuance costs 8,010 6,437 29,454 30,942 30,507 27,772 23,627
Stock-based compensation 4,885 5,304 19,804 16,941 17,022 16,048 21,614
Settlement - - - - 72,000 - -
Insurance recovery on settlement - (950) (950) (5,250) (4,500) - -
Provision for income taxes 32,198 54,944 (146,622) 205,313 139,562 138,778 103,031
Adjusted net income before income taxes 160,304$ 166,660$ 657,838$ 622,871$ 507,982$ 438,596$ 338,683$
Assumed conversion of convertible senior notes 1,735 1,431 5,842 5,780 5,806 5,811 5,783
Adjusted net income before income taxes plus assumed conversions 162,039$ 168,091$ 663,680$ 628,651$ 513,788$ 444,407$ 344,466$
Reconciliation of denominator of adjusted margin before income taxes:
Total revenues 397,814$ 380,957$ 1,516,380$ 1,419,055$ 1,222,840$ 1,050,493$ 858,675$
Insurance recovery on settlement -$ (950)$ (950)$ (5,250)$ (4,500)$ -$ -$
Total revenues, excluding insurance recovery on settlement 397,814$ 380,007$ 1,515,430$ 1,413,805$ 1,218,340$ 1,050,493$ 858,675$
Adjusted margin before income taxes1 40.3% 43.9% 43.4% 44.1% 41.7% 41.8% 39.4%
Weighted-average diluted shares outstanding 112,424,582 111,564,483 111,657,564 110,798,727 110,628,865 110,192,771 108,963,550
Adjusted diluted earnings per share before income taxes2 1.44$ 1.51$ 5.94$ 5.67$ 4.64$ 4.03$ 3.16$
Year Ended December 31,Three Months Ended June 30,
36
Sheet1
Air Lease Corporation and Subsidiaries
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share amounts)
Three Months Ended June 30,Year Ended December 31,
(in thousands, except share and per share data)2018201720172016201520142013
Reconciliation of net income to adjusted net incomebefore income taxes:
Net income$ 115,211$ 100,925$ 756,152$ 374,925$ 253,391$ 255,998$ 190,411
Amortization of debt discounts and issuance costs8,0106,43729,45430,94230,50727,77223,627
Stock-based compensation4,8855,30419,80416,94117,02216,04821,614
Settlement----72,000--
Insurance recovery on settlement-(950)(950)(5,250)(4,500)--
Provision for income taxes32,19854,944(146,622)205,313139,562138,778103,031
Adjusted net income before income taxes$ 160,304$ 166,660$ 657,838$ 622,871$ 507,982$ 438,596$ 338,683
Adjusted net income (LTM)$ 160,304$ 166,660$ 657,838$ 622,871$ 507,982$ 438,596$ 338,683
Assumed conversion of convertible senior notes1,7351,4315,8425,7805,8065,8115,783
Adjusted net income before income taxes plus assumed conversions$ 162,039$ 168,091$ 663,680$ 628,651$ 513,788$ 444,407$ 344,466
Reconciliation of denominator of adjusted margin before income taxes:
Total revenues$ 397,814$ 380,957$ 1,516,380$ 1,419,055$ 1,222,840$ 1,050,493$ 858,675
Insurance recovery on settlement$ - 0$ (950)$ (950)$ (5,250)$ (4,500)$ - 0$ - 0
Total revenues, excluding insurance recovery on settlement$ 397,814$ 380,007$ 1,515,430$ 1,413,805$ 1,218,340$ 1,050,493$ 858,675
Adjusted margin before income taxes140.3%43.9%43.4%44.1%41.7%41.8%39.4%
Weighted-average diluted shares outstanding112,424,582111,564,483111,657,564110,798,727110,628,865110,192,771108,963,550
Adjusted diluted earnings per share before income taxes2$ 1.44$ 1.51$ 5.94$ 5.67$ 4.64$ 4.03$ 3.16
Beginning shareholders' equity$ 2,785,184$ 2,772,062$ 2,523,434$ 2,332,621ERROR:#REF!
Ending shareholders' equity$ 3,104,403$ 3,019,912$ 2,772,062$ 2,523,434$ 2,332,621
Average shareholders' equity$ 2,944,794$ 2,895,987$ 2,647,748$ 2,428,028ERROR:#REF!
Adjusted net income return on average equity (LTM)22.3%21.5%19.2%18.1%ERROR:#REF!
40%44%43%44%42%42%39%
Sheet2
Sheet3
Appendix Non-GAAP reconciliations
1Adjusted return on equity before income taxes is adjusted net income before income taxes divided by average shareholders’ equity.
(in thousands, except percentage data) June 30, 2018 June 30, 2017 2017 2016 2015 2014 2013
Reconciliation of net income to adjusted net incomebefore income taxes:
Net income 796,152$ 376,126$ 756,152$ 374,925$ 253,391$ 255,998$ 190,411$
Amortization of debt discounts and issuance costs 30,057 31,822 29,454 30,942 30,507 27,772 23,627
Stock-based compensation 19,044 18,278 19,804 16,941 17,022 16,048 21,614
Settlement - - - - 72,000 - -
Insurance recovery on settlement - (950) (950) (5,250) (4,500) - -
Provision for income taxes (187,641) 207,597 (146,622) 205,313 139,562 138,778 103,031
Adjusted net income before income taxes 657,612$ 632,873$ 657,838$ 622,871$ 507,982$ 438,596$ 338,683$
Reconciliation of denominator of adjusted return on equity before income taxes:
Beginning shareholders' equity 3,558,204$ 3,195,529$ 3,382,187$ 3,019,912$ 2,772,062$ 2,523,434$ 2,332,621$
Ending shareholders' equity 4,337,842$ 3,558,204$ 4,127,442$ 3,382,187$ 3,019,912$ 2,772,062$ 2,523,434$
Average shareholders' equity 3,948,023$ 3,376,867$ 3,754,815$ 3,201,050$ 2,895,987$ 2,647,748$ 2,428,028$
Adjusted return on equity before income taxes1 16.7% 18.7% 17.5% 19.5% 17.5% 16.6% 13.9%
Year Ended December 31,LTM
37
Sheet1
Air Lease Corporation and Subsidiaries
QUARTERLY CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share amounts)
LTMYear Ended December 31,
(in thousands, except percentage data)June 30, 2018June 30, 2017201720162015201420132012
Reconciliation of net income to adjusted net incomebefore income taxes:
Net income$ 796,152$ 376,126$ 756,152$ 374,925$ 253,391$ 255,998$ 190,411$ 131,919
Amortization of debt discounts and issuance costs30,05731,82229,45430,94230,50727,77223,62716,994
Stock-based compensation19,04418,27819,80416,94117,02216,04821,61431,688
Settlement----72,000---
Insurance recovery on settlement-(950)(950)(5,250)(4,500)---
Provision for income taxes(187,641)207,597(146,622)205,313139,562138,778103,03172,054
Adjusted net income before income taxes$ 657,612$ 632,873$ 657,838$ 622,871$ 507,982$ 438,596$ 338,683$ 252,655
Reconciliation of denominator of adjusted return on equity before income taxes:
Beginning shareholders' equity$ 3,558,204$ 3,195,529$ 3,382,187$ 3,019,912$ 2,772,062$ 2,523,434$ 2,332,621$ 2,176,283
Ending shareholders' equity$ 4,337,842$ 3,558,204$ 4,127,442$ 3,382,187$ 3,019,912$ 2,772,062$ 2,523,434$ 2,332,621
Average shareholders' equity$ 3,948,023$ 3,376,867$ 3,754,815$ 3,201,050$ 2,895,987$ 2,647,748$ 2,428,028$ 2,254,452
Adjusted return on equity before income taxes116.7%18.7%17.5%19.5%17.5%16.6%13.9%11.2%
Sheet2
Sheet3
AppendixCash Flow Coverage Calculations
($ in billions) June 30, 2018
Net Book Value of Aircraft A 14,864$
Minimum Future Lease Rentals from Operating Leases B 11,261$
Residual Exposure A - B 3,603$
Shareholders Equity C 4,338$
Residual Value Risk (A-B) / C 0.83x
Total Debt D 10,962$
Contracted Cash Flows / Debt B / D 103%
38
Sheet1
($ in billions)June 30, 2018
Net Book Value of AircraftA$ 14,864
Minimum Future Lease Rentals from Operating LeasesB$ 11,261
Residual ExposureA - B$ 3,603
Shareholders EquityC$ 4,338
Residual Value Risk(A-B) / C0.83x
Total DebtD$ 10,962
Contracted Cash Flows / DebtB / D103%
Sheet2
Sheet3
Appendix
Calculation of Pre-tax ROE
39
(in thousands, except share and per share data) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017
Net Income $115,211 $110,651 $471,102 $99,188Income tax expense (benefit) $32,198 $30,668 ($305,438) $54,931Income before taxes $147,409 $141,319 $165,664 $154,119Pre-tax income (TTM ended June 30, 2018) $608,511
Beginning shareholders' equity (June 30, 2017) 3,558,204Ending shareholders' equity (June 30, 2018) 4,337,842Average shareholders' equity 3,948,023
Pre-tax income return on average equity (TTM ended June 30, 2018) 15.4%
Three months ended
Sheet1
Jun-18Mar-18Dec-17Sep-17
Revenues
Rental of flight equipment…………………………………………………………….$ 393,479$ 377,862$ 378,481$ 359,487
Aircraft sales, trading and other……………………………………………………………….4,3353,34719,99017,278
Total revenues………………………………………………………………………..397,814381,209398,471376,765
Expenses
Interest……………………………………………………………………………………………………………..73,45268,94364,32663,514
Amortization of discounts and deferred debt issue costs……………………………………………………………………………………………………………..8,0108,0227,0666,959
Extinguishment of debt……………………………………………………………………………………………………………..----
Amortization of convertible debt discounts----
Interest expense……………………………………………………………………………………………………………..81,46276,96571,39270,473
Depreciation of flight equipment……………………………………………………………………………………………………………..142,600136,134130,400127,553
Selling, general and administrative……………………………………………………………………………………………………………..21,45823,35925,64619,262
Stock-based compensation……………………………………………………………………………………………………………..4,8853,4325,3695,358
Total expenses……………………………………………………………………………………………………………..250,405239,890232,807222,646
Net Income$ 115,211$ 110,651$ 471,102$ 99,188
Income tax expense (32,198)(30,668)305,438(54,931)
Income before taxes147,409141,319165,664154,119
Beginning shareholders' equity (TTM)3,558,2043,459,2323,382,1873,288,289
Ending shareholders' equity (TTM)4,337,8424,226,6234,127,4423,655,583
Average shareholders' equity (TTM)3,948,0233,842,9283,754,8153,471,936
Net income (TTM)$ 796,152$ 781,866$ 756,152$ 382,038
Pre-tax income (TTM)$ 608,511$ 616,971$ 609,530$ 593,269
Pre-tax income return on average equity (TTM)15.4%16.1%16.2%17.1%
Sheet2
Three months ended
(in thousands, except share and per share data)June 30, 2018March 31, 2018December 31, 2017September 30, 2017
Net Income$115,211$110,651$471,102$99,188
Income tax expense (benefit)$32,198$30,668($305,438)$54,931
Income before taxes$147,409$141,319$165,664$154,119
Pre-tax income (TTM ended June 30, 2018)$608,511
Beginning shareholders' equity (June 30, 2017)3,558,204
Ending shareholders' equity (June 30, 2018)4,337,842
Average shareholders' equity 3,948,023
Pre-tax income return on average equity (TTM ended June 30, 2018)15.4%
Investor Update �Thunderbolt II and BeyondForward Looking Statements & Non-GAAP MeasuresAgendaALC OverviewAir Lease SnapshotTrack Record of Strong Growth & ProfitabilitySuperior Performance to Peers and the S&P 500Management Business Expands Investable UniverseWhat Does TBOLT II Mean for ALC?Thunderbolt II StrategyOverview of ALC’s Management PlatformStrategic Fit of the Thunderbolt Program �Liquidity of TBOLT Portfolio Assets is Consistent with ALC Aircraft Strategy�Asset Consideration: Young vs. Mid-Life PortfoliosHistorical Aircraft ABS Transaction VolumeEvolution of Aviation ABSALC-Serviced ABS IssuancesThunderbolt II OverviewGlobal Aircraft Portfolio Shares Overview�Investor-Friendly Format for Equity ParticipationTBOLT II Investor Model�Model Functionality – Inputs ScreenTBOLT II Investor Model�Outputs – Model Results (Pricing Case)Overview of Thunderbolt IIKey Improvements and Differentiators in TBOLT IILiquidity and Secondary Market Activity�ALC Spreads have Tightened with TradingThunderbolt II Illustrative EconomicsTBOLT II Sales Proceeds vs. Appraised ValuesThunderbolt II Fee Economics to ALCGain on Sale Accounting for ALCALC Valuation Methodology: Lessons Learned from TBOLT IIALC Valuation ImplicationsALC Continues to Unlock Value for ALC ShareholdersCompelling Opportunity to Realize Value through Growth of Highly Visible Cash Flow StreamsExpansion of TBOLT Platform Provides for a Differentiated Valuation ProfileConclusionAppendixAppendix �Non-GAAP reconciliationsAppendix �Non-GAAP reconciliationsAppendix�Cash Flow Coverage CalculationsAppendix