Sumisho Air Lease — Third Quarter 2026 Earnings Summary

Financial Performance

• Total revenues for the three months ended September 30, 2026, were $592.6 million, a decrease of 18.3% ($132.8 million) compared to $725.4 million in the prior-year period.
• Rental of flight equipment revenue was $556.7 million, down 18.2% from $680.9 million in the prior-year period.
• Gain on aircraft sales, trading, and other income was $36.0 million, down 19.1% from $44.5 million in the prior-year period.
• Operating expenses were $493.1 million, a decrease of 17.9% from $600.9 million in the prior-year period.
• Income before taxes was $126.8 million, a decrease of 31.5% from $185.0 million in the prior-year period.
• Net income attributable to common stockholders was $93.4 million, down 31.0% from $135.4 million in the prior-year period.
• Adjusted net income before income taxes was $123.1 million, down 14.8% from $144.5 million in the prior-year period.
• Pre-tax margin was 21.4%, down from 25.5% in the prior-year period.
• Adjusted pre-tax margin was 20.8%, up from 19.9% in the prior-year period.
• Recoveries of Russian fleet write-offs were $27.3 million, down 54.9% from $60.5 million in the prior-year period.
• Depreciation expense was reduced by $38.8 million due to revised aircraft depreciation estimates in the third quarter of 2026.
• Total assets were $29.9 billion as of September 30, 2026.
• Total debt financing, net of discounts and issuance costs, was $19.3 billion as of September 30, 2026, compared to $19.7 billion as of December 31, 2025.
• Composite cost of funds was 4.51% as of September 30, 2026, compared to 4.15% as of December 31, 2025.
• Total liquidity was $4.2 billion, comprised of $704.1 million in unrestricted cash and approximately $3.5 billion in undrawn balances under the unsecured revolving credit facility.

Guidance and Future Outlook

• Quarterly depreciation expense is expected to be approximately $192 million for the fourth quarter of 2026.
• The company noted that the merger resulted in the loss of an OEM orderbook, which may impact the ability to manage the aircraft portfolio and could increase re-leasing and residual value risk.

Business Segments and Product Lines

• The owned fleet consisted of 473 aircraft as of September 30, 2026, including 339 narrowbody and 134 widebody aircraft.
• The company managed 32 aircraft as of September 30, 2026.
• The weighted average fleet age was 5.0 years, and the weighted average remaining lease term was 6.8 years as of September 30, 2026.
• The customer base included 94 airlines across 51 countries.
• The company sold 15 aircraft during the quarter for $761.9 million in sales proceeds, resulting in $0.6 million in gains.
• The net book value of flight equipment subject to operating leases decreased to $23.7 billion as of September 30, 2026, from $29.5 billion as of September 30, 2025.
• Approximately $4.6 billion of aircraft assets were reclassified to flight equipment held for sale between April 8, 2026, and September 30, 2026.
• The sales pipeline included approximately $4.3 billion in flight equipment held for sale and $55.3 million in aircraft subject to letters of intent as of September 30, 2026.
• Regional concentration of flight equipment subject to operating leases as of September 30, 2026: Europe (39.4%), Asia Pacific (35.9%), Central/South America and Mexico (11.2%), U.S. and Canada (7.4%), and The Middle East and Africa (6.1%).

Market and Competitive Landscape

• The company operates in a globally diversified market with a customer base spanning 51 countries.
• The company faces competition from other aircraft lessors which may impact its ability to execute its long-term strategy.

Risks and Challenges

• Significant indebtedness requires a substantial portion of cash flows to be dedicated to debt service payments.
• Changes in borrowing costs or interest rate increases may adversely affect net income and competitiveness.
• The company may be unable to generate sufficient returns on aircraft investments.
• Failure to complete planned aircraft sales could affect net income and credit ratings.
• The loss of the OEM orderbook following the merger may increase re-leasing and residual value risks.
• Aircraft may become obsolete or experience a decline in customer demand, potentially leading to impairment charges.
• Lessees may fail to fulfill payment obligations or adequately insure aircraft.
• Potential conflicts of interest may arise from SMBC AC's role as the exclusive servicer of aircraft leased to non-U.S. airlines.
• Risks include epidemic diseases, natural disasters, terrorist attacks, and war or armed hostilities.

Management Commentary and Tone

• Management attributed the decrease in rental revenue primarily to a lower weighted average net book value of flight equipment subject to operating leases resulting from the sale of the orderbook and continued sales activity.
• The decrease in net income was driven by lower total revenues, increased servicing fees, and higher interest expense due to fair value adjustments and an increase in the composite cost of funds, partially offset by lower depreciation expense.
• Management noted that the application of acquisition accounting adjusted the carrying values of flight equipment to fair value as of the merger date.
• The company confirmed that as of November 5, 2026, there are no pending litigation matters related to the Russian Fleet write-off recorded in March 2022.

Other Key Points

• Sumisho Air Lease was acquired by Sumitomo Corporation, SMBC Aviation Capital, and investment vehicles affiliated with Apollo and Brookfield in April 2026.
• On April 8, 2026, SMBC AC acquired the rights to the outstanding orderbook for undelivered aircraft, and committed fleet rentals for such aircraft were transferred to SMBC AC.
• The company received $27.3 million in cash insurance proceeds in September 2026 from the settlement of insurance claims related to its former Russian fleet.
• The company reported a net benefit of $27.3 million from insurance claims associated with the former Russian fleet in the third quarter of 2026.
• Stock-based compensation expense was $26.3 million for the period from April 8 to September 30, 2026.
• Merger-related costs were $67.6 million for the period from April 8 to September 30, 2026.
• The company has no Class A or Class B common stock issued or outstanding as of September 30, 2026, following the merger structure.
• Preferred stock dividends were $13.8 million for the three months ended September 30, 2026.