Air Lease Q1 profit misses estimates on higher interest expenses

(Reuters) -Air Lease Corp said it is wrestling with delivery delays from planemakers Boeing and Airbus, after reporting a lower-than-expected quarterly profit on Monday as it made higher interest payments on funds borrowed to finance aircraft purchases.

Air Lease shares were down about 6% at $48.61 in after hours trading.

Aircraft lessors are benefitting from higher rental revenues as airlines hunt for aircraft amid a shortage of commercial jets due to supply problems, slumping production of Boeing’s 737 MAX and Pratt & Whitney GTF engine snags.

Even with strong demand, delivery problems are likely to persist, with the U.S. planemaker wrestling with a crisis stemming from a January mid-air door panel blowout.

“These imbalances are very likely to stay with us for at least three to four years in the future,” Steven Udvar-Hazy, executive chairman of Air Lease Corp., told analysts.

He said neither Boeing nor rival Airbus were able to deliver many of the new aircraft the company expected to take in early 2024. The aircraft they did deliver were all late, he added.

The company expects around $1.5 billion worth of new aircraft deliveries for the second quarter.

California-based Air Lease’s interest payments rose 19.8%, to $181.6 million in the first quarter, as the U.S. Federal Reserve kept interest rates high in a bid to tame inflation.

As a result, profit per share was 87 cents, below analysts’ average expectation of 91 cents, according to LSEG data.

Air Lease’s first-quarter revenue rose 4.3% to $663.3 million, but fell short of an expectation of $677.2 million.

CEO John Plueger said he was not trying to play down a recent report mentioning possible interest by Brazilian planemaker Embraer to produce a narrowbody jet that could compete with Boeing and Airbus. But any such plane would take years to certify and bring to market with the manufacturer facing many of the same supply chain problems, Plueger said.

“Just trying to put a little reality on it,” he told analysts.

Embraer has said it is focused on selling its current portfolio of recently developed products.

(Reporting by Abhijith Ganapavaram in Bengaluru, Allison Lampert in Montreal and Juby Babu in Mexico City; Editing by Pooja Desai and Stephen Coates)