Air Lease Corporation (NYSE:AL) Honglin Diao Jeffrey Joe Nicolas Villarreal Daza February 23, 2017

Agenda Snapshot Macroeconomic and Industry Analysis Business Analysis Financial Analysis Firm Valuation Recommendation

Air Lease Snapshot Air Lease (AL) Headquarters – Los Angeles, CA Current Price $39.57 (February 15, 2017) IPO Price $26.50 (April 19, 2011) Offer amount $803M P/E 11.64x 52 weeks high $40.20 We own 300 shares, Gain: +78% since our purchase of 400 shares on 12-18- 2012 at $22.32 (sold 100 at $29.80 on 10-25-2016) Air Lease VS S&P 500 cumulative return It underperforms in 2016, however, it right now go back and now the present price is extremely close to the 52 weeks high at 40.2 Although it underperform the S&P 500 in 201its return is decent in the past 5 years. However, it yearly return is lower than other air leasing companies

Airline Industry is Growing Air leasing is a sector of airline industry The estimated return of investment return in air leasing is 5% per year1 Airline industry growth is strongly correlated to world economy growth Emerging market shows outperformance in aircraft demand APAC China Source: IATA Source: Ascend Flightglobal Forcast More middle class who desire to pay for their flights In fact 36 air leasing companies have their headquarters in Asia to Passenger almost double in the past 15 years China is a large market. However, as its growth slow down, this factor might shadow the fast growth in demand. Source: World Banks

Average price of different types of plane Strong Demand For Air Leasing Number of future aircraft needed Increasing demand for new planes and replacement of old planes Better to rent than to hold, operation leasing expense is 3.8% of overall revenues and plane prices increase by 2% per year More cash and resources can be assigned to marketing and expansion The ratio of operating leasing aircrafts to total aircrafts is expected to be nearly 53% in 2025 In 2016, around 7,900 planes are owned by air lessors Source: Boeing, current market look 2016-2035 Source: IATA Average price of different types of plane (Million) 2012 2013 2014 2015 2016 % change per year Boeing 737-700 74.8 76 78.3 80* 80.6 1.6% Boeing 737-800 89.1 90.5 93.3 95* 96 1.5% Boeing 777-300ER 315 320.2 330 335* 339.6 Airbus A319-100 88.8 92 94.4 97.5 98.5 2.2% Airbus A320-200 96.7 100.2 102.8 106.2 107.3 Airbus A330-200 208.6 216.1 221.7 229 231.5 Average 1.9% * Estimate price Operating leasing Operating leasing Source: Boeing & Airbus Source: Flightglobal Fleet Analyzer

Competitors In Air Leasing 70 158 Source: Flightglobal Fleet Analyzer Moody’s S&P Fitch BOC Aviation NA A- Aercap Ba2 BB+ Aircastle Air Lease BBB AWAS Ba3 Avolon ACG BBB- By December 2015, 158 operating lessors managed commercial aircraft with 100 seats and more Merger transactions occur among air leasing companies in order to acquire larger market share Air leasing is highly dependent on external financing such as loans P85 20 Avalon CIT with 10 Billion, 2013, Macquarie Group Limited (ASX; MQG; ADR: MQBKY) announced today that a Macquarie Bank Limited subsidiary has entered into an agreement to acquire an aircraft operating lease portfolio from AWAS Aviation Capital Limited.  More competitors join the game. By December 2015, 158 operating lessors manage commercial aircrafts with 100 seats and more Air leasing companies usually own the aircrafts less than 8 years and then replace with new ones Source: Moody’s, Standard &Poor’s, Fitch

Market Risk Interest rate risk Fuel price risk Business cycle risk Average debt to assets ratio in air leasing industry is about 60-70% Slight changes in interest rate will add extra burden and reduce profit margin Interest rate has been relatively low since 2008 and it has been rising since 2015 Oil expense is about 6.8% of overall revenues If oil prices go down, airline companies will prefer not to replace the old and less fuel efficient planes, leading to less demand for air leasing Air leasing companies gain revenues from the increasing demand of aircraft rental Number of new aircraft purchased decreases as the economy slows down Change in interest rate Change in oil prices Oil price and debt Oil although decreasing price will increase the demand, but airline companies has stronger incentives to store old planes Source: FRED Source: WTI Crude Oil Source: IATA

Company Analysis

Management Overview Steven Udvar-Házy, Executive Chairman John Plueger, CEO and President

Business Model BUY LEASE Boeing and Airbus Air Lease Corporation Airlines Worldwide BUY LEASE SELL Own new aircraft for 1/3 of 25 year useful life Negotiate long-term lease from order book Enter lease agreement 18-36 months in advance 3.7 years of weighted average fleet age 6.9 years of weighted average remaining lease term Airlines Worldwide

Growth of Aircraft Fleet Air Lease Aircraft Growth of Aircraft Fleet 2017 2018 2019 2020 >2020 Total Airbus 320/A321-200 1 - Airbus 320/321neo 14 17 27 26 55 139 Airbus 330-800/900neo 5 10 25 Airbus 350-900/1000 2 4 8 24 Boeing 737-800 9 Boeing 737-8/9MAX 11 19 30 56 118 Boeing 777-300ER Boeing 787-9/10 7 6 20 44 34 60 75 149 362 Source: Air Lease 2016 3Q financial report

Air Lease Suppliers

Air Lease Customers Market allocation Source: Air Lease 2016 3Q financial report

Air Lease Competitors AER Dublin, Ireland Market cap 8.66B Owns 1,109 aircraft, serves 200 lessees in 80 countries, manages 141 aircraft Leasing and sales of aircraft, also provides aircraft services and engine leasing AYR Stamford, CT Market cap 1.94B Owns 206 aircraft, serves 71 lessees in 36 countries Leasing and sales of aircraft, also provides aircraft maintenance and financing FLY Dun Laoghaire, Ireland Market cap 459.5M Owns 80 aircraft, serves 44 lessees in 28 countries Leasing and sales of aircraft

Bargaining power of suppliers Bargaining power of buyers Porter’s Five Forces Analysis Suppliers are more concentrated Main suppliers are Airbus and Boeing Limited annual production of aircraft Suppliers may receive government benefits Requires large capital costs Strict regulatory environment High operating costs Experienced management required Bargaining power of suppliers High Threat of new entrants Low Competitive Rivalry High Threat of substitutes Low Bargaining power of buyers Moderate Industry concentrated Growing demand for aircraft leasing Customers are able to switch companies Competitors may receive tax benefits No real substitute for jet aircraft Increasing reliance on air travel More airlines using leasing Emerging markets utilize leasing Buyers are less concentrated Buyers can purchase new or used Advanced orders required Buyers may receive tax benefits

SWOT Analysis Strengths Experienced executive management Investment grade credit rating Excellent aircraft placement rate Customer diversification Weaknesses High leverage ratio Dependence on new aircraft demand Requires ordering aircraft in advance Long-term planning involves risk Opportunities Booming growth in emerging market Increasing leased aircraft growth rate Increasing growth in middle class Tighter environmental regulation Threats Competition within the industry Exposure to debt liquidity risk Interest rate volatility Business cycle volatility

Financial Analysis

It’s a Capital-Intensive Business Airplanes life expectancy: 25 Years Air Lease sells the plane in a bundle (plane + lease) after 8 years Lease contracts are negotiated 18-36 months prior to acquisition of a new plane Operating leases Triple net leases (operation, insurance and maintenance)

Leverage Means Risk Exposure   2011A 2013A 2015A 2016P 2017P 2018P 2019P 2020P 2021P Fleet 102 193 240 279 310 348 392 438 450 Breakeven Point 59 116 139 152 159 187 218 250 256 Breakeven Point (% of fleet) 58% 60% 55% 52% 54% 56% 57% Leased Fleet 96 183 228 265 295 331 372 416 427 Degree of operational leverage 1.62 1.55 1.53 1.50 1.47 1.52 Degree of financial leverage 2.17 1.73 1.90 1.49 1.40 1.44 1.48 Degree of total leverage (DTL) 3.52 2.68 2.92 2.24 2.06 2.16 2.26 2.33 2.32

ROE/ROIIC May Not Meet Expectations DUPONT Analysis (2016) 64% 67% 63% 10% 419% 11.5% X X X X = Interest Burden EBIT Margin Asset Turnover Tax Burden Leverage ROE

AL is a Commitment to Long Term Value 2016P 2017P 2021P Current ratio 0.73x 0.10x 0.06x 0.04x Acid ratio Gearing 50.4% 62.5% 63.3% 63.5% Int. Coverage 3.12x 3.16x 3.50x 2.89x EBIT Margin 53.4% 62.8% 63.1% 61.1% Net Margin 15.8% 27.2% 29.1% 25.8% ROE 2.5% 11.5% 14.1% 12.7% Both liquidity and investment needs have been supplied by debt (LT debt or WK debt) High profit margins don’t translate into excess cash, as the company is investing heavily in asset acquisition Given the management’s investment plan, we don’t expect to see positive cash flows for the upcoming 4 years

We Believe Markets Will Mean-Reverse Historic Triple BBB Yields 6.5 5.7 4.8 Scenario 1: Long-Term Mean Reversion Scenario 2: Recent History S&P P/E Ratio: 24.6x Dow Trans P/E Ratio: 19.2x Market Implied Cost of Equity 6.7 – 7.7% Historic S&P Return 10% Kd 6.3% Kd 4.7% Ke 14.0% Ke 12.7%

Three Different Valuation Approaches DCF Over 100% CAPEX for growth 70% debt financing 5% revenue CAGR Current Price: $40 Target One-Year Price: $36 Capital Gains: -9% Dividend Yield: 0.8% 2016 2017 2018 EBITDA 1,362 1,762 2,080 EV/EBITDA 9.6x 8.1x 7.2x Price Per Share 38 36 35 EPS 3.6 5.0 5.6 P/E 10.7x 7.3x 40 41 DCF $33 Residual Income $34 EV/EBITDA $36 P/E $40 Target 2017 Price

Scenarios: Markets Will Mean-Reverse? Target one year price Current price

Our Recommendation: To Sell 300 shares @ market price

We Recommend Selling at Market Price High degree of leverage (2.5x) High gearing (>60% debt to assets) Capital-intensive business Long-term value Intensive financing risk We believe market is going to mean-reverse Strong experienced management Stable industry and growing sector Young company investing to grow Excellent lease placement rate (>95%) Operational risk-free Best credit rating when compared to peers 87% -5%