Air Lease Amey Dargude Cindy Anggraini Kun (Katy) Chen Madina Yunussova Tanvi Rotkar April 7, 2016

Agenda Current Holding Company Overview Macro-Economic Analysis Financial Anaysis Projection and Valuation Recommendation

Current Holding Ticker: AL US Equity Exchange Listed: NYSE As per April 1, 2016: Initial: 400 Current Price: $32.02 Portion: 9% of Portfolio Return: 43.46%

Company Overview

“An aircraft leasing company that provides airlines worldwide with operating leases on new aircraft” Year Founded 2010 Headquarters Los Angeles, CA Employees 74 Major Competitors AerCap Holdings N.V, Aircastle LTD, Fly leasing Liited Market Cap $3.29 billion TTM P/E Primary Industry Rental and Leasing services TTM EPS 2.34 Profit margin 20.72% (2015) 2010 Los Angeles, CA 74 Rental and Leasing services AerCap Holdings N.V, Aircastle LTD, Fly leasing Limited 2010 Los Angeles, CA 74 Rental and Leasing services

Business Model Purchase new commercial aircrafts from aircraft manufactures

Company Profile OWNED FLEET 240 Aircraft +13% vs MANAGED FLEET 29 Aircraft +71% vs ASSET UTILIZATION 100% CONTRACTED RENTS $20.9 billion +23% vs Diversified customer base of 200 airlines in 70 countries Source: 10-k

Clients Diversity Client coverage: Worldwide Europe (32%), China (23%), Asia (ex. China, 19%), and Others (26%) Source: 10-K

Revenue Breakdown Majority of Revenue: Rental of flight equipment Aircraft sales Source: 10-k

Key Characteristics Fleet comprised of high demand, technologically advanced aircraft fleet with an average age of 3.6 years Long remaining lease term of 7.2 years across fleet Place aircraft months prior to delivery and currently are 84% placed through 2018 Signed lease agreements for 120 aircrafts with 46 customers in 35 countries

SWOT Analysis Strengths -Long term leases and short fleet cycle - Widely diversified customer base - Skilled management and small number of employees Weaknesses -Small number of suppliers -Currently not involved in interest rate hedging activities Opportunities -Small number of companies with the same business model -Expected strong demand from emerging market Threat -Oil price, and interest rate fluctuation -Government regulations -Technology changes in airplane SWOT Analysis

Management Strategies Management strategy Invests in the Most Liquid, in demand, widely distributed, modern types of aircrafts Focus on markets that are experiencing increased demand for passenger airline travel Careful management and diversification of leases by geography, lease term, and aircraft age and type Seeks to hold an aircraft for the first 1/3 of its useful life to maximize residual values and minimize obsolescence risk Developing strong relationship with manufacturer/suppli er Leases require all payments in US dollars and protect the company from all currency risks Source: 10-K

Macro-Economic Analysis

Air lease has big portion of its revenue from emerging market, and Europe. Source: Boeing, 10-k Revenue Breakdown, 2015 Air Lease

Macro Outlook Per capita disposable income has effect on consumption of people for travelling Demand for air travel will grow in the future. System traffic in revenue passenger miles (RPMs) is projected to increase by 2.6% a year between 2016 and (Domestic 2.1% and International 3.5%) Source: IBIS World, Boeing

Macro Outlook (Cont.) Aircraft industry depends on oil prices performance Air lease has a lot portion of debts to finance its revenue. Source: IBIS World

Aircraft Leasing Industry The commercial aircraft leasing industry is in the growth stage Profit margin is expected to be 28.5% in 2016 Source: IBIS World

5-Porter Analysis Rivalry among Competitors Power of Suppliers Barriers to Entry Power of Buyers Threat of Substitutes High Large Initial Investment High Service and upkeep Costs Regulations from Federal Aviation Administration Moderate The trend is increasing Compete on availability, type, condition of aircraft and lease rates High Concentrated big suppliers Low Large customer base Low Only big airline companies can own aircrafts Many small players in the industry, hence prefer leasing

Financial Analysis

Financial Ratios Source: 10-K, Group Calculation

Dupont Analysis: ROE Dupont Analysis ROE3.1%5.9%7.8%9.7%8.7% Tax burden (NI/Pretax Income) x Interest burden (Pretax income/EBIT) x Operating margin(EBIT/Sales)41.7%53.6%56.6%58.6%53.9% x Asset turnover (Sales/asset) x Leverage (Asset/Equity) Source: 10-K, Group Calculation

Greenblatt Ratios GREENBLATT RATIO EBIT/Tangible Assets4.8%6.7%7.0%7.4%8.7% Year end price ($) Shares outstanding (thousands) 100, , , ,580 Debt ($thousand) 1,757,390 3,493,766 5,119,025 6,283,840 7,315,584 Enterprise Value ($ thousands) 4,144,987 5,669,566 8,301,306 9,796,840 10,487,358 EBIT/Enterprise Value3.4%6.2%5.9%6.3%8.0% Source: 10-K, Group Calculation

Projection & Valuation

Projection: Income Statement

Projection: IS (Table) Projected Forward P/E = 9.58 Yahoo Finance Forward P/E = 8.34 Current P/E = 13.27

Valuation: Cost of Equity

Valuation: DDM

Valuation: Residual Income

Valuation: Competitors Source: 10-K, CapitalIQ

Valuation: Competitors (Cont.) Incorporated in 2007 Fly Leasing Limited engages in purchasing commercial aircraft under multi-year contracts to a group of airlines worldwide. Incorporated in 2004 Aircastle Limited, through its subsidiaries, acquires, leases, and sells commercial jet aircraft to airlines. Source: 10-K, CapitalIQ

Valuation: Comparable Source: 10-K, CapitalIQ

Valuation: Technical SMA 20 and SMA 200 almost crossed but need more confirmation

Recommendation

HOLD Comps $26.90 Residual $32.99 DDM $31.64 Current $31.09 Yunussova

Thank You!

APPENDIX Using the same P/E multiple as per the latest date for the next 5 years, we’ve got upward trend in the share price. CAGR = 17.45%