Breaking Down Air Lease Corporation (AL) Financial Health: Key Insights for Investors

You're looking at Air Lease Corporation (AL) because the aircraft leasing space is booming, but you need to know if the company's financial structure can support its aggressive fleet expansion and navigate a major merger. The numbers from the 2025 fiscal year tell a story of powerful growth, but also of strategic pivots: for the nine months ended September 30, 2025, the company reported a massive net income of over $907.46 million, a significant jump that was partially fueled by crucial insurance claim settlements. This performance is critical, especially when you consider their fleet's net book value has reached $29.5 billion, underscoring the sheer scale of their asset base. The big question now is how Air Lease will integrate the $7.4 billion merger agreement with Sumisho Air Lease Corporation Designated Activity Company while managing the near-term risk of manufacturer delivery delays-a real headwind when 80% of their 2025 deliveries are Boeing aircraft. We're past the easy money of the post-pandemic recovery; now it's about execution and capital discipline.

Revenue Analysis

You're looking for a clear picture of Air Lease Corporation (AL)'s revenue engine, and the good news is the core business is solid, but you have to watch the smaller, more volatile streams. For the trailing twelve months (TTM) ending September 30, 2025, Air Lease Corporation generated approximately $2.91 billion in total revenue, marking a respectable year-over-year growth rate of about 6.24%.

The company's revenue is not a 50/50 split; it's overwhelmingly driven by the predictable, long-term nature of aircraft leasing. This is the bedrock of their business model, and it continues to expand. In the third quarter of 2025 alone, total revenue reached $725.4 million, a 5.1% increase from the same period last year.

Here's the quick math on where that money is coming from, based on the Q3 2025 results:

• Rental of Flight Equipment: This is the giant. It contributed $681 million to Q3 revenue, representing roughly 93.9% of the total.
• Aircraft Sales, Trading, and Other Income: This segment brought in the remaining $44 million, or about 6.1% of the total.

The rental segment is defintely the one to anchor your investment thesis on. It saw a healthy 9% increase in Q3 2025 compared to Q3 2024, primarily because the fleet is growing and the lease yield-the effective interest rate on the leases-is rising. They ended Q3 2025 with an owned fleet of 503 aircraft, which is a significant asset base to generate that recurring income.

The biggest change in the revenue mix is the volatility in the smaller segment. While the rental revenue is steady, the 'Aircraft Sales, Trading, and Other' line is a swing factor. It was down 32% in Q3 2025 to $44 million due to lower sales activity, but earlier in the year, in Q1 2025, it had actually surged by 90% year-over-year to $93 million due to increased sales activity. This tells you that while aircraft sales provide nice, lumpy gains, they aren't a reliable quarter-to-quarter growth driver like the core leasing business. You need to look past the quarterly noise here.

For a deeper dive into the valuation models, including the DCF analysis, you can read the full post: Breaking Down Air Lease Corporation (AL) Financial Health: Key Insights for Investors.

To summarize the segment performance and growth trends for the first three quarters of 2025, here is a quick comparison:

The key takeaway is that Air Lease Corporation is executing its core strategy: grow the fleet, increase the lease yield, and generate more rental income. The sales and trading part is just opportunistic icing on the cake, not the main course. The stability of a 7.2-year weighted average remaining lease term as of Q3 2025 further locks in that future rental revenue.

Profitability Metrics

You're looking for a clear picture of Air Lease Corporation (AL)'s bottom line, and the 2025 numbers show a dramatic, but complex, surge in profitability. The headline figure for the trailing twelve months (TTM) as of late 2025 is a Net Profit Margin of 33.2%, which is a massive jump from the prior year's 17.9%. That jump is not from daily operations, though-it's heavily influenced by a one-off $727.2 million insurance gain tied to the Russia fleet write-off.

To be fair, the underlying business is still performing well. The TTM Operating Margin, which strips out that non-recurring income and interest expense, stood at 44.69% as of October 2025, and the Latest Twelve Months (LTM) Gross Profit Margin is a solid 58.7%. You need to look past the one-time windfall to see the real operational trend. That's the quick math.

Operational Efficiency and Gross Margin Trends

Air Lease Corporation's operational efficiency, which you can see best in the Gross Profit Margin, remains consistently strong. The LTM Gross Profit Margin of 58.7% shows the company's core leasing business-the rental revenue minus the depreciation and maintenance of the aircraft-is highly effective.

The trend here is stability, which is a good sign in a volatile industry. Management expects margins for 2025 to remain flat, but forecasts improvement over time as higher lease yields from new contracts and extensions start to roll in. Still, the cost side is a headwind; the composite cost of funds, which is a key expense for a leasing company, rose from 4.14% in 2024. This rise in interest expense is what pressures the Operating and Net Profit margins, even with strong rental revenue.

• Maintain Gross Margin: Core leasing revenue is strong.
• Watch Interest Expense: Higher cost of funds is the main drag on profit.
• Expect Margin Normalization: The 33.2% net margin will shrink as the one-off gain fades.

Industry Comparison: Air Lease Corporation Outperformance

When you compare Air Lease Corporation's profitability ratios to the industry average, the company generally shows superior performance, highlighting its competitive edge. Even with the caveat of the non-recurring gain, the operational margins are notable. For context, here is a comparison using the most recent comprehensive industry averages available from 2023, which helps gauge the structural advantage.

The TTM Operating Margin of 44.69% is more than double the industry's 2023 average of 22.3%, which speaks volumes about Air Lease Corporation's cost management and premium fleet strategy. The young, fuel-efficient fleet allows them to command higher lease rates, which is defintely the key to that Gross Margin outperformance. For a deeper look at the company's full financial picture, you can check out Breaking Down Air Lease Corporation (AL) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

Air Lease Corporation (AL) is a capital-intensive business, and its financing strategy reflects that reality: the company leans heavily on debt to fund its massive aircraft fleet. The direct takeaway for you is that AL's leverage remains disciplined, with its primary Debt-to-Equity (D/E) ratio holding steady at a level that is right in line with its own target and the broader aircraft leasing industry standard.

As of the third quarter of 2025, Air Lease Corporation's total debt stood at approximately $20.2 Billion, a figure that includes both short-term and long-term obligations. Specifically, the balance sheet as of September 2025 showed Long-Term Debt and Capital Lease Obligations at around $18.687 Billion, with Short-Term Debt and Capital Lease Obligations at about $1.508 Billion. This structure is typical; lessors use long-term, fixed-rate debt to match the long-term, contracted cash flows from their aircraft leases.

The core measure of this financing strategy is the Debt-to-Equity ratio. For the quarter ending September 2025, AL's D/E ratio was approximately 2.42x. Here's the quick math: you take the total debt and divide it by the total stockholders' equity, which was about $8.341 Billion. That's a healthy balence.

• Aircraft lessors need high debt; it's how they buy planes.

The industry average for capital-heavy sectors like aircraft leasing often ranges between 2.0x and 2.5x, so AL's 2.42x is defintely within the acceptable range. The company itself targets a Net Debt-to-Equity ratio of approximately 2.5x, showing management is comfortable operating at this leverage level to maximize returns on equity.

To manage this debt load, Air Lease Corporation is a frequent issuer in the unsecured capital markets. The company's access to funding is strong, supported by its investment-grade credit ratings. As of September 2025, Kroll Bond Rating Agency (KBRA) affirmed AL's long-term issuer and senior unsecured debt rating at A-, with a short-term debt rating of K1 and a Stable Outlook. This high rating lowers their cost of funds, which is critical for a business that lives on the spread between its borrowing cost and its lease rates.

For instance, in the second quarter of 2025 alone, AL reported Long-Term Debt Issuances of $233.1 Million, demonstrating its ongoing, active management of the debt portfolio to fund new aircraft deliveries. This reliance on debt financing, rather than diluting shareholders through constant equity raises, is the preferred method for lessors to finance their growth and maintain their fleet's young age, a key competitive advantage. You can see how this strategy aligns with their broader corporate goals by reviewing their Mission Statement, Vision, & Core Values of Air Lease Corporation (AL).

What this estimate hides is the potential for residual value risk-the chance that the market value of the aircraft drops faster than expected-but the high proportion of unencumbered assets (aircraft not pledged as collateral) provides a strong backstop for their unsecured debt holders.

Liquidity and Solvency

Air Lease Corporation (AL) presents a classic aircraft leasing liquidity profile: low short-term ratios but a deep, strategic pool of long-term funding. Your takeaway should be that while the technical liquidity ratios appear weak, the company's access to capital and predictable cash flow from operations provide a strong, defensible position.

Assessing Air Lease Corporation (AL)'s Liquidity

The first glance at Air Lease Corporation (AL)'s short-term liquidity ratios for the 2025 fiscal year can be jarring if you're used to a manufacturing or retail balance sheet. The Current Ratio (Current Assets / Current Liabilities) is around 0.80, and the Quick Ratio (a more stringent test) sits at approximately 0.67 as of November 2025 TTM (Trailing Twelve Months). These figures are below the 1.0 benchmark, indicating that current liabilities exceed current assets, which technically points to a working capital deficit.

But here's the quick math on why this isn't a red flag for AL: their primary assets are aircraft, which are long-term, high-value, income-generating assets, not inventory meant for quick sale. The low ratios are structural for this business model. What matters more is their total liquidity and cash flow generation.

The real story is in the total available resources, which is where AL shines. As of June 30, 2025, Air Lease Corporation (AL) reported total liquidity of a substantial $7.9 billion. This figure includes unrestricted cash and available capacity under their committed unsecured revolving credit facility, which is the true measure of their ability to meet short-term obligations and fund new aircraft purchases. That's a huge buffer.

Cash Flow Statements Overview and Trends

Air Lease Corporation (AL)'s cash flow statement provides the clearest picture of its financial strength, driven by consistent rental payments. The trends are clear and positive across the board:

• Operating Cash Flow (CFO): This is the engine. Cash Flow from Operating Activities for the twelve months ending September 30, 2025, was a very strong $4.248 billion, representing a 2.35% increase year-over-year. This consistent, high-quality cash generation from long-term leases is the bedrock of their solvency.
• Investing Cash Flow (CFI): This is consistently a large cash outflow, as they are in a growth phase, buying new aircraft. For 2025, AL is targeting $3 billion to $3.5 billion in total aircraft deliveries. However, this outflow is strategically managed and partially offset by aircraft sales, with a target of selling approximately $1.5 billion in aircraft for the year. Plus, the cancellation of an order for seven A350 freighter aircraft freed up about $1 billion in capital expenditure, reducing the net cash used in investing.
• Financing Cash Flow (CFF): This is primarily driven by raising debt to fund the fleet expansion. Total debt financing, net of discounts, stood at $20.3 billion as of June 30, 2025. The trend is to maintain an investment-grade balance sheet by focusing on unsecured debt, which makes up about 97.4% of their total debt. The debt-to-equity ratio is high, around 2.47, but this is a deliberate strategy to finance long-life assets.

What this estimate hides is the potential for lease rate volatility, but the company's extensive forward-order book is largely pre-leased, providing excellent revenue visibility. You can see their strategic focus in their Mission Statement, Vision, & Core Values of Air Lease Corporation (AL).

Working Capital and Solvency Concerns

While the low Current Ratio is a non-issue in this sector, you still need to monitor the working capital trend. A sudden, unexpected drop in aircraft sales or a substantial increase in short-term debt without a corresponding increase in unrestricted cash could signal a problem. The current strength is the high percentage of unsecured debt and the massive revolving credit facility, which provides flexibility. The primary solvency risk is the composite cost of funds, which has been rising, putting pressure on net interest expense. This is a defintely a factor to watch.

Here is a snapshot of the key liquidity metrics:

Your next step: Portfolio Manager: Stress-test the 2026 cash flow model assuming a 15% drop in aircraft sales and a 50 basis point rise in the composite cost of funds by month-end.

Valuation Analysis

You are asking the right question: Is Air Lease Corporation (AL) overvalued or undervalued right now? My quick take is that the market is still pricing in a significant discount, suggesting Air Lease Corporation (AL) is currently undervalued compared to its tangible assets and earnings power for the 2025 fiscal year.

This isn't a simple 'buy' signal, but the core valuation multiples tell a compelling story about a company trading below its intrinsic worth. The key is understanding why the market is hesitant, which usually boils down to debt and interest rate risk in the aircraft leasing space. To be fair, this is a capital-intensive business, so debt is part of the model.

Here's the quick math on the 2025 trailing twelve months (TTM) metrics, which are what really matter for a value investor:

• Price-to-Earnings (P/E) Ratio: At approximately 7.41x, Air Lease Corporation (AL) is trading far below the S&P 500 average. This low P/E suggests the market is either expecting a major slowdown in earnings or simply mispricing the company's current profitability.
• Price-to-Book (P/B) Ratio: This is the most striking number. The P/B ratio is sitting at roughly 0.86x as of November 2025. This means you are essentially buying $1.00 of the company's net assets-mostly young, in-demand aircraft-for only 86 cents. That's a defintely attractive entry point.
• Enterprise Value-to-EBITDA (EV/EBITDA): The TTM EV/EBITDA stands at about 10.14x. While this is a more complex metric for a leasing company, it's a reasonable multiple that confirms the P/E and P/B ratios are not outliers.

Stock Performance and Analyst Consensus

The stock price trend over the last year shows a strong recovery, which is a good sign that the market is starting to recognize the value. The stock has climbed approximately 28.96% over the past 12 months, with the price near its 52-week high of $64.30. As of mid-November 2025, the stock is trading around $63.90.

The analyst community is generally positive, but not unanimously so, which is healthy. The consensus rating is a mix, often landing on a 'Moderate Buy' or 'Hold', based on a mix of ratings that includes five 'Buy' ratings, three 'Hold' ratings, and one 'Sell' rating from a group of nine firms. The average 12-month price target is in the range of $60.29 to $66.00, with some recent targets as high as $68.00. The current price is right in the middle of this range, so the upside hinges on the company's ability to execute on its forward delivery schedule and manage its financing costs.

Here is a snapshot of the key valuation data:

The dividend is a nice bonus, not the main reason to own Air Lease Corporation (AL). With an annual dividend of $0.88 per share and a yield of 1.38%, the payout ratio is only about 10.21%. This low payout ratio shows the company is retaining most of its earnings to fund its massive aircraft order book, which is exactly what a growth-oriented leasing company should be doing. That low payout makes the dividend extremely sustainable. If you want to dive deeper into who is actually buying and selling this stock, you should check out Exploring Air Lease Corporation (AL) Investor Profile: Who's Buying and Why?.

Risk Factors

You're looking at Air Lease Corporation (AL) and asking the right question: what could derail this growth engine? The direct takeaway is that while the demand side for aircraft leasing is strong, the company faces significant near-term headwinds from rising interest rates and persistent operational snags in the manufacturing supply chain.

Honestly, the biggest financial risk right now is the cost of money. As of June 30, 2025, Air Lease's composite cost of funds-the blended interest rate on its debt-had climbed to 4.28%. That increase directly eats into the net income, even as rental revenue rises. For a business with $20.3 billion in total debt financing, even a small rate hike is a huge expense. Plus, a high debt-to-equity ratio of 2.47 means they have less cushion to absorb further interest rate shocks.

Operational and Supply Chain Risks

The supply chain is still a mess, and that's an operational risk that impacts their fleet growth. Air Lease has a massive orderbook, but ongoing production issues at manufacturers like Boeing and Airbus mean aircraft delivery delays are a constant threat. This hinders their ability to grow their fleet's net book value, which was $29.5 billion as of September 30, 2025, and slows the deployment of capital into new, high-yield leases.

You also have to consider their core asset management strategy, which is to own an aircraft for roughly the first third of its 25-year useful life to maximize residual value. If delivery delays push back the start of that cycle, it compresses the high-value leasing period and increases the risk of aircraft obsolescence later on.

• Delivery delays compress high-value lease terms.
• Rising interest rates increase debt service costs.
• Geopolitical events threaten asset recovery and customer stability.

Geopolitical and Market Concentration Exposure

Geopolitical risk is not just theoretical for Air Lease; it's a realized loss. The seizure of aircraft in Russia following the conflict has already led to significant write-offs, though the company has been successful in mitigating some of that. For instance, in the third quarter of 2025 alone, they recorded a net benefit of approximately $60 million from the settlement of insurance claims related to their former Russian fleet.

Looking forward, the company has customer concentration exposure in regions like Asia Pacific, which accounts for a significant portion of their fleet's net book value. Economic or political instability in concentrated areas, such as Taiwan and China, could directly impact a lessee's ability to make payments, affecting the company's rental revenues and profitability.

Mitigation and Forward Action

The management team is defintely aware of these risks and their strategy is built around diversification and a young fleet. They mitigate financial risk by using long-term leases and staggering lease maturities, which helps smooth out revenue and re-leasing risk. On the operational side, they actively manage their portfolio by selling aircraft, expecting to sell approximately $1.5 billion in aircraft for the 2025 fiscal year. This sales activity is crucial for liquidity and managing the fleet's age.

Your next step is to drill down into the details of their customer base and see how much revenue is tied to the most exposed regions. For a deeper dive into the company's long-term vision, you can review their Mission Statement, Vision, & Core Values of Air Lease Corporation (AL).

Growth Opportunities

You want to know what's next for Air Lease Corporation (AL), and honestly, the near-term picture is now framed by one huge, recent event: the company is being acquired. On November 3, 2025, Air Lease Corporation entered into a definitive merger agreement to be acquired by Sumisho Air Lease Corporation in a deal valued at approximately $7.4 billion. This immediately shifts the focus from independent growth projections to the execution of that transaction and the strategic direction of the combined entity.

Still, the underlying business drivers that made Air Lease Corporation an attractive target haven't vanished. The core opportunity is the global demand for air travel, which drives the ongoing need for airlines to modernize their fleets. Air Lease Corporation capitalizes on this by maintaining a young, fuel-efficient fleet, which is a major competitive edge as environmental regulations like the EU's carbon allowance reductions intensify.

Here's the quick math on the 2025 performance that made this company so valuable:

To be fair, the Q3 revenue of $725.4 million fell slightly short of analyst estimates, but the EPS of $1.21 matched expectations. The strong performance earlier in the year, like the Q2 2025 revenue of $731.7 million and EPS of $1.40, defintely set the stage for the acquisition.

The company's strategic initiatives before the merger were all about locking in long-term, stable cash flows. They do this by ordering new aircraft-like the 269 aircraft on commitment for delivery through 2029, representing an estimated investment of US$17.1 billion-directly from manufacturers like Boeing and Airbus. This direct procurement gets them favorable pricing and delivery slots, which is crucial given the current limited aircraft supply.

The key growth drivers that will now benefit the acquiring entity are clear:

• Fleet Modernization: Offering newer, fuel-efficient jets cuts operating costs for airlines, making Air Lease Corporation's assets highly desirable.
• Emerging Market Expansion: Continued growth in global air travel, particularly in Asia and Europe, drives demand for their leases.
• Long-Term Contracts: The existing portfolio has an average remaining lease term of 7.2 years, guaranteeing predictable cash flows with US$29.5 billion in committed future rental payments as of 2024.

Plus, Air Lease Corporation has been actively managing its capital structure, aiming for a debt-to-equity ratio of 2.5:1 by the end of 2025, which shows a disciplined approach to funding its fleet expansion. This is a business built on precision, not speculation. If you want to dive deeper into who was buying before the merger news, check out Exploring Air Lease Corporation (AL) Investor Profile: Who's Buying and Why?