(AL – NYSE) Brian Mulvihill December 11, 2012

 Portfolio Overview  Relevant Stock Market Prospects  Macroeconomic Review  Company Overview  Financial Analysis  Financial Projections  Valuation  Recommendation

2013 could see continued weakness in global markets due to 3 main areas: 1) Eurozone Crisis 2) United States Fiscal Cliff 3) Slowing GDP growth in BRICs

NAICS code: (Commercial Air Transportation Rental and Leasing) The industry consists of 5 key players including Air Lease, AerCap Holdings, Aircastle LTD, FLY Leasing Limited and AIG’s former subsidiary International Lease Finance Corp. (ILF) ILF was purchased by a consortium of Chinese buyers on Monday for an implied transaction value of $5.3 bln The Chinese firms bring lending relationships in China to ILF Growth in industry is driven by airlines based in emerging markets, particularly the BRICs

Source: Yahoo! Finance

Air Lease Corporation (AL) is an aircraft leasing company launched in February 2010 by aviation pioneer Steven F. Udvar-Házy Engaged in leveraged purchases of commercial aircraft which the company, in turn, leases to airlines around the world to generate attractive returns Today, AL is the leader in its industry with the world’s youngest, most fuel-efficient aircraft operating lease portfolio

StrengthsWeaknesses 1. Top management in the industry (CEO helped create the industry in the 1970’s) 2.Low-cost of financing coupled with youngest and most fuel-efficient fleet 1.Profitability is tied greatly to the interest rate environment OpportunitiesThreats 1.Key relationships with industry leaders (Airbus and Boeing) 2. Companies in emerging markets are in need of leased aircraft 1.Lawsuit from ILF seeking damages for CEO’s actions prior to founding AL 2.Emergence of Asian financial backers in industry that bring key relationships in region

Premier global customer base of airlines that is extremely diverse Source: Q’s

Make chart based off 10-K Source: Q’s Chart depicts AL’s fleet of 142 aircraft as of Q.

AL ended Q with 142 aircraft compared with 102 aircraft as of December 31, 2011 Company’s weighted average age of the fleet is 3.4 years compared to 3.6 years as of December 31, 2011 Company is committed to purchasing an additional 291 new and used aircraft through 2017 Source: Q’s

Current portfolio expected to increase by almost 50% by FYE Source: Q’s

AL benefits from high margins and an industry-leading revenue growth rate.

Investors can expect a continual improvement in both ratios as net income continues to grow as the shareholders’ equity account and asset base has ballooned as a result of the IPO.

Equity cash flow for specialty finance firms is equivalent is to the free cash flow for discounted cash flow analysis.

Discount rate used in equity method is heavily weighted towards the implied discount rate by the market.

It’s important to create a sensitivity table in order to analyze the two biggest drivers of the model, which is the discount rate and growth rate of shareholders’ equity.

AL trades at a premium on P/B due to higher growth rates and margins. This is a trend that many analysts think will continue. Historically, the P/B multiple for the industry has been as high as 2.00x.

Interest rate risk as a result of ~$2 billion in outstanding floating-rate debt that are a result of being a smaller stand-alone company AIG’s subsidiary International Lease Finance Corporation’s (ILF) lawsuit concerning current CEO’s actions prior to departure from ILF Source: 10-K

Leading industry in growth and margins Most fuel-efficient fleet in the world Benefiting from favorable interest rate environment as the composite cost of funds is 3.97% Deserves premium in price to book multiples as analysts expect book value to increase by 7% in 2013

Buy 400 shares at market price of ~$22 ($9,084) Equity Method Valuation Range: $25-$29 Difficultly determining value based on comps