Equity Based Compensation

6 Months Ended

Jun. 30, 2011

Equity Based Compensation [Abstract]

Equity Based Compensation

7.	Equity Based Compensation
	In accordance with the Amended and Restated Air Lease Corporation 2010 Equity Incentive Plan (the “Plan”), the maximum number of shares of Common Stock that may be issued under the Plan, including in settlement of Stock Options (“Stock Options”) and Restricted Stock Units (“RSUs”), is approximately 8,193,088 shares as of June 30, 2011. From inception of the Plan through June 30, 2011, the Company had granted 3,375,908 Stock Options and 3,457,964 RSUs.
	The Company recorded $11.8 million and $2.3 million of stock-based compensation expense for the three months ended June 30, 2011 and 2010, respectively. Stock-based compensation expense for the six months ended June 30, 2011 and the period from inception to June 30, 2010, totaled $22.7 million and $2.3 million, respectively.

a.	Stock Options
	The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The fair value of stock-based payment awards on the date of grant is determined by an option-pricing model using a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, a risk-free interest rate and expected dividends.
	Estimated volatility of the Company’s common stock for new grants is determined by using historical volatility of the Company’s peer group. Due to our limited operating history, there is no historical exercise data to provide a reasonable basis which the Company can use to estimate expected terms. Accordingly, the Company uses the “simplified method” as permitted under Staff Accounting Bulletin No. 110. The risk-free interest rate used in the option valuation model is derived from U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an assumed dividend yield of zero in the option valuation model. In accordance with ASC Topic 718, Compensation —Stock Compensation, the Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The average assumptions used to value stock-based payments are as follows:

							For the six			For the period
	For the three months ended						months ended			from Inception to
	June 30,						June 30,			June 30,
	2011			2010			2011			2010
Dividend yield	None			None			None			None
Expected term	5.9 years			6.0 years			5.9 years			6.0 years
Risk-free interest rate		2.4	%		2.5	%		2.4	%		2.5	%
Volatility		50.2	%		55.1	%		50.2	%		55.1	%
Forfeiture rate		0.0	%		0.0	%		0.0	%		0.0	%

A summary of Stock Option activity in accordance with the Plan as of June 30, 2011 and 2010, and changes for the six-month period and the period from inception then ended follows:

					Remaining		Aggregate
			Exercise		concractual term		intrinsic value
	Shares		price		(in years)		(in thousands)
Options outstanding at inception		—
Granted		2,450,000	$	20.00		9.9
Exercised		—
Cancelled		—
Options outstanding at June 30, 2010		2,450,000	$	20.00		9.9
Options exercisable at June 30, 2010		—
Options outstanding at January 1, 2011		3,225,908	$	20.00		9.5	$	1,612
Granted		150,000		28.80		9.8
Exercised		—
Cancelled		—
Options outstanding at June 30, 2011		3,375,908	$	20.39		9.0	$	13,839
Options exercisable at June 30, 2011		1,125,292	$	20.00		9.0	$	4,828

	The Company recorded $3.0 million and $0.6 million of stock-based compensation expense related to employee Stock Options for the three months ended June 30, 2011 and 2010, respectively. Stock-based compensation expense related to employee Stock Options for the six months ended June 30, 2011 and the period from inception to June 30, 2010, totaled $5.8 million and $0.6 million, respectively.
b.	Restricted Stock Unit Plan
	The following is a summary of activity relating to RSUs:

						For the six			For the period
	For the three months ended					months ended			from Inception to
	June 30,					June 30,			June 30,
	2011			2010		2011			2010
Beginning restricted stock units		3,225,907			—		3,225,907			—
Shares awarded		232,057			2,450,000		232,057			2,450,000
Shares vested		(843,975	)		—		(843,975	)		—
Shares forfeited		—			—		—			—
Ending restricted stock units		2,613,989			2,450,000		2,613,989			2,450,000

At June 30, 2011, the outstanding RSUs are expected to vest as follows: 2012—895,477; 2013—874,530; 2014—843,982. The Company recorded $8.7 million and $1.7 million of stock-based compensation expense related to RSUs for the three months ended June 30, 2011 and 2010, respectively. Stock-based compensation expense related to RSUs for the six months ended June 30, 2011 and the period from inception to June 30, 2010, totaled $16.9 million and $1.7 million, respectively.

As of June 30, 2011, there was $59.4 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock-based payments granted to employees. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures and is expected to be recognized over a weighted average remaining period of 2.6 years.