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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on November 28, 2012

Registration Number 333-176644

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



AMENDMENT NO. 5
TO

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



ILFC Holdings, Inc.
(Exact name of registrant as specified in its charter)



Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  7539
(Primary Standard Industrial
Classification Code Number)
  45-3060262
(I.R.S. Employer
Identification Number)



10250 Constellation Boulevard, Suite 3400
Los Angeles, California 90067
(310) 788-1999
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

Elias Habayeb
Senior Vice President & Chief Financial Officer
10250 Constellation Boulevard, Suite 3400
Los Angeles, California 90067
(310) 788-1999
(Name, address, including zip code, and telephone number, including area code, of agent for service)



With copies to:

John-Paul Motley, Esq.
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Telephone: (213) 430-6100
Fax: (213) 430-6407

 

James J. Clark, Esq.
William J. Miller, Esq.
Cahill Gordon & Reindel
LLP
80 Pine Street
New York, New York 10005-1702
Telephone: (212) 701-3000
Fax: (212) 269-5420

         Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

         Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filed, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
TITLE OF EACH CLASS OF SECURITIES
TO BE REGISTERED

  PROPOSED MAXIMUM AGGREGATE
OFFERING PRICE(1)(2)

  AMOUNT OF REGISTRATION FEE(3)
 

Common Stock, $0.01 par value per share

  $100,000,000   $11,610

 

(1)
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)
Includes shares that the underwriters have the option to purchase to cover over-allotments, if any.

(3)
Previously paid.



         The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where any such offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED NOVEMBER 28, 2012

PRELIMINARY PROSPECTUS

                        Shares

GRAPHIC

ILFC Holdings, Inc.

COMMON STOCK

$            per share



        This is the initial public offering of shares of our common stock. Prior to this offering, no public market existed for our common stock. We are a newly formed holding company which, prior to the consummation of this offering, will own 100% of the outstanding shares of common stock of International Lease Finance Corporation, a California corporation. AIG Capital Corporation, the selling stockholder, and a subsidiary of American International Group, Inc., is offering all                         shares of common stock offered hereby, and we will not receive any of the proceeds from this offering. We currently expect the initial public offering price to be between $            and $            per share of common stock.

        The underwriters have the option to purchase up to                         additional shares of our common stock from the selling stockholder at the initial public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments, if any.

        We have applied to have our common stock listed on the New York Stock Exchange under the symbol "ILFC." The listing is subject to the approval of our application.



        Investing in our common stock involves risks. See "Risk Factors" beginning on page 12.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 
  Per Share   Total  

Initial public offering price

  $     $    

Underwriting discount

  $     $    

Proceeds to the selling stockholder (before expenses)

  $     $    

        The underwriters expect to deliver the shares of our common stock on or about                  , 2012 through the book-entry facilities of The Depository Trust Company.



Citigroup   J.P. Morgan   Morgan Stanley

                        , 2012


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        We are responsible for the information contained in this prospectus. We have not authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.




TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

Risk Factors

  12

Forward-Looking Statements

  37

Industry and Market Data

  37

Use of Proceeds

  38

Dividend Policy

  39

Financial Statements

  40

Capitalization

  41

Selected Historical Consolidated Financial Information

  43

Management's Discussion and Analysis of Financial Condition and Results of Operations

  45

Corporate Reorganization

  84

Aircraft Leasing Industry

  86

Business

  103

Management

  121

Executive Compensation

  131

Transactions with Related Parties

  171

Principal and Selling Stockholders

  177

Description of Capital Stock

  180

Shares Eligible for Future Sale

  189

Material U.S. Federal Tax Considerations to Non-U.S. Holders

  191

Underwriting

  196

Legal Matters

  202

Experts

  202

Where You Can Find More Information

  202

Index to Financial Statements

  F-1

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under "Risk Factors" and the consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. After effectiveness of the registration statement of which this prospectus is a part and prior to the consummation of this offering, ILFC Holdings, Inc., a Delaware corporation, will become the direct parent company of International Lease Finance Corporation, a California corporation. Unless otherwise noted or indicated by the context, the term "Holdings" refers to ILFC Holdings, Inc., "ILFC" refers to International Lease Finance Corporation, and "we," "us" and "our" refer to ILFC and its consolidated subsidiaries prior to the Reorganization (as defined below) and Holdings and its consolidated subsidiaries upon and after the Reorganization. Please refer to "Corporate Reorganization" for a more thorough discussion of the Reorganization.

Our Company

        We are the world's largest independent aircraft lessor measured by number of owned aircraft. Our portfolio consists of over 1,000 owned or managed aircraft, comprised of 918 owned and 84 managed aircraft. We also have commitments to purchase 229 new high-demand, fuel-efficient aircraft, including four through sale-leaseback transactions, and rights to purchase an additional 50 such aircraft. We have approximately 200 customers in more than 80 countries. We are an independent aircraft lessor because we are not affiliated with any airframe or engine manufacturer. This independence provides us with purchasing flexibility to acquire aircraft or engine models regardless of the manufacturer. We believe size and global scale provide distinct competitive advantages that, among other things, help us obtain favorable delivery dates and terms from manufacturers and access capital from a variety of sources with competitive pricing and terms. In addition, our strong customer and manufacturer relationships permit us to quickly identify opportunities to re-market aircraft as leases mature and to influence new aircraft designs. For the year ended December 31, 2011 and the nine months ended September 30, 2012, we had total revenues of $4.5 billion and $3.4 billion, respectively.

        Our portfolio includes a diverse and strategic mix of aircraft designed to meet our customers' needs and maximize our opportunities to generate revenue and grow our profitability. Our diversified fleet of owned aircraft is comprised of 72% narrowbody (single-aisle) aircraft and 28% widebody (twin-aisle) aircraft as measured by aircraft count, with 53% representing Airbus models and 47% representing Boeing models. 76% of our owned aircraft are models that are currently in-production by airframe manufacturers. The weighted average age of our owned aircraft, weighted by the net book value of such aircraft, was 8.1 years at September 30, 2012. We have a higher percentage of widebody aircraft compared to most other lessors, which provides us with a competitive advantage due to generally longer lease terms, higher lease rates, higher probability of lease extensions and, we believe, better credit quality of lessees, as compared to narrowbody aircraft. Our competitive advantage will be enhanced as we take delivery of next generation widebody aircraft. In addition, the aircraft we have on order or have rights to purchase are among the most modern, fuel-efficient models. We have the largest order position for the Boeing 787 and the largest order position among aircraft leasing companies for the Airbus A320neo family and Airbus A350s, according to reports currently available on the Airbus and Boeing websites and the ICF SH&E, Inc. report set forth under "Aircraft Leasing Industry." We believe our size and scale allow us to compete more effectively for multi-aircraft transactions, including large sale-leaseback transactions. During 2011, we entered into sale-leaseback transactions for 26 new aircraft to be delivered through 2013, two of which were delivered to us during 2011 and 20 of which have been delivered to us during 2012.

        We lease aircraft to airlines operating in every major geographic region, including emerging and high-growth markets in Asia, Latin America, the Middle East and Eastern Europe. Among our largest lessees are AeroMexico, Air France, China Southern Airlines, Emirates and Virgin Atlantic Airways.

 

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We predominantly enter into net operating leases that require the lessee to pay all operating expenses, normal maintenance and overhaul expenses, insurance premiums and taxes. The leases relating to our owned aircraft have terms of up to 15 years and the weighted average lease term remaining on our current leases, weighted by the net book value of our owned aircraft, was 4.1 years as of September 30, 2012. Our leases are generally payable in U.S. dollars with lease rates fixed for the term of the lease, providing us with a stable and predictable source of revenues. We believe our broad customer base and market presence enable us to identify opportunities to re-market aircraft before leases mature, contributing to an average aircraft on-lease percentage of approximately 99% over the last five years.

        In addition to our primary business of owning and leasing aircraft, we provide fleet management services for 84 aircraft for a management fee. We also provide in-house part-out, engine leasing and engine exchange capabilities through our subsidiary AeroTurbine, Inc., a provider of certified aircraft engines, airframes, engine parts and supply chain solutions, allowing us to maximize the value of our aircraft and engines across their complete life cycle and offer an integrated value proposition to our airline customers as they transition out aging aircraft.

        We began operations in 1973 as a pioneer in the aircraft leasing industry and have nearly 40 years of operating history. We have demonstrated strong and sustainable financial performance through most airline industry cycles in the past 30 years. Our prominent leadership position within the aircraft leasing industry has resulted in a premier brand name which provides us access to a variety of funding sources and helps us attract and retain customers and employees. We operate our business principally from offices in Los Angeles, Miami, Amsterdam, Beijing, Dublin, Seattle and Singapore.

Aircraft Leasing Industry

        ICF SH&E, Inc., or SH&E, an international air transport consulting firm, has summarized their views of the key trends and outlook for the aircraft leasing industry in a report dated November 19, 2012, set forth under "Aircraft Leasing Industry." The information set forth below is derived from such report. We believe these trends and outlook complement our competitive strengths and will support our business strategies. These trends include:

        Demand for air transport.    The demand for passenger and cargo air transport is closely tied to economic activity and has exhibited strong and sustained growth of 1.5 times the long-term global GDP growth rate over the last 40 years. Long-term air travel demand is expected to remain strong as global economies and populations continue to grow, particularly in emerging markets. The Airline Monitor's July 2012 forecast projects a 4.9% average annual growth rate in passenger traffic between 2011 and 2031.

        Growth of the global commercial aircraft fleet.    The size of the global commercial aircraft fleet is expected to approximately double over the next two decades as new aircraft are delivered to meet the demands of continued traffic growth and older aircraft are replaced. Demand growth is expected to be driven by high rates of economic growth, increasing propensity to travel in emerging markets, liberalization of air service and the stimulation of increased traffic from growing low cost carriers. Demand for replacement aircraft, meanwhile, is expected to be driven by the relative operating economics of newer generation aircraft, technological advancements, retirement of older aircraft and the conversion of passenger aircraft to freighters. Boeing forecasts that the total market for new aircraft will be 34,000 units from 2012-2031, 58.5% for growth and 41.5% for replacement.

        Introduction of next generation aircraft.    Airbus and Boeing plan to bring to market new, modern, fuel-efficient aircraft models as older, less fuel-efficient aircraft in the global commercial aircraft fleet are replaced. These new aircraft include the re-engined Airbus A320neo and Boeing 737 MAX narrowbody families of aircraft, as well as the Airbus A350 and Boeing 787 widebody families of aircraft, which are expected to offer fuel burn improvement over current in-production technologies of approximately 15% to 20%. The introduction of these new models combined with the long-term

 

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demand for aircraft has helped drive airframe and engine manufacturers' backlogs to an all-time high of approximately 9,500 units, representing approximately five to seven years of production.

        Growth of the aircraft leasing market.    Aircraft lessors continue to play a critical intermediary role between manufacturers and airlines. Airlines employ operating leasing for a variety of reasons, including low capital outlay requirements, fleet planning flexibility, delivery slot availability and residual value risk management. Manufacturers rely on aircraft lessors to provide an added distribution channel and an important alternative source of funding. As a result, the world's airlines have increasingly adopted operating leases for their aircraft financing and fleet management requirements. The percentage of the global active commercial aircraft fleet under operating lease has increased from 19.6% in 1996 to 40.3% in November 2012, representing a compounded annual growth rate of 8.5% compared to fleet growth of 3.4%. Continued growth and penetration of the global aircraft operating leasing industry is widely expected.

Competitive Strengths

        We believe our size, global scale, long operating history and premier brand provide us with the following competitive strengths that contribute significantly to our success and sustained profitability.

        Largest independent aircraft lessor with benefits of scale.    We believe the size of our portfolio and our scale provide us with important competitive advantages, including the ability to:

    enter into large, sophisticated and strategic aircraft transactions with our customers;

    obtain favorable delivery dates and terms from manufacturers;

    influence airframe manufacturers on a variety of matters including the design of aircraft;

    maintain a diversified aircraft portfolio, including a higher percentage of widebody aircraft in our fleet as compared to most other aircraft lessors;

    access multiple sources of capital with attractive pricing and terms; and

    diversify our customer base and geographic exposure.

        Long-standing and strategic customer relationships.    We have collaborative and strategic relationships with approximately 200 customers worldwide, many of which are long-standing. Our top ten customers have all been leasing aircraft from us for over a decade. We believe we are the largest aircraft lessor to many of our customers, which strengthens our position and access to senior management with these customers. We also gain valuable insight and knowledge of the airline industry and market trends from our customers, enabling us to better anticipate new opportunities and mitigate adverse trends. Our established customer relationships also allow us to secure large and strategic aircraft transactions, including sale-leaseback transactions, often for multiple aircraft, and to play an important role in our customers' fleet modernization initiatives.

        Attractive and diversified aircraft fleet.    Our diversified fleet of owned aircraft is comprised of 72% narrowbody (single-aisle) aircraft and 28% widebody (twin-aisle) aircraft as measured by aircraft count, with 53% representing Airbus models and 47% representing Boeing models. 76% of our owned aircraft are models that are currently in-production by airframe manufacturers. As our new aircraft orders are delivered, our fleet will gain more modern and fuel-efficient aircraft that are in high demand from airlines around the world. We own a large number of widebody aircraft, which benefits us due to generally longer lease terms, higher lease rates, higher probability of lease extensions and, we believe, better credit quality of lessees, as compared to narrowbody aircraft. We believe the large number and variety of widebody aircraft in our fleet uniquely positions us in emerging markets, particularly in Asia and the Middle East where, according to the 2012 Boeing Current Market Outlook report, airlines are expected to require a substantial number of additional widebody aircraft over the next 20 years.

 

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        Large and valuable aircraft delivery pipeline.    We have the largest number of next generation Airbus and Boeing aircraft ordered among lessors, according to SH&E's report, comprised of 100 Airbus A320neo family aircraft (plus rights to purchase an additional 50 units), 20 Airbus A350s and 74 Boeing 787s. In addition, we have commitments to purchase 35 current generation Boeing aircraft, comprised of 34 Boeing 737-800s and one Boeing 777-300ER. These new aircraft represent a significant leadership position in the highly anticipated Airbus A320neo family, Airbus A350 and Boeing 787 aircraft deliveries. We have the largest order position for the Boeing 787 and the largest order position among aircraft leasing companies for the Airbus A320neo family aircraft and the Airbus A350 according to reports currently available on the Boeing and Airbus websites and the SH&E report set forth under "Aircraft Leasing Industry." We will also be the first aircraft leasing company to offer the Airbus A320neo family aircraft for lease with initial deliveries scheduled for 2015. We believe these aircraft will provide significant value and strong returns on investment and that our prime delivery dates for so many highly coveted aircraft will provide us with a competitive advantage by strengthening our reputation and prominence with customers.

        Extensive airframe and engine manufacturer relationships.    We are one of the largest purchasers of airframes and engines. We are the largest customer of Airbus and the largest lessor customer of Boeing measured by deliveries of aircraft through 2011. Our relationships with Airbus and Boeing have spanned over 20 years and our senior management has direct experience working for airframe manufacturers. These extensive manufacturer relationships and the scale of our business enable us to place large orders with favorable terms and conditions, including pricing and delivery terms, and have allowed us to become the largest lessor purchaser of next generation aircraft, including the Airbus A320neo family aircraft, Airbus A350s and Boeing 787s.

        Strong liquidity position with significant access to diverse funding sources.    Since 2010, we have raised over $22 billion, including approximately $11.4 billion of unsecured debt, primarily through a combination of new loan and bond financings. We have significantly reduced our leverage, with our net debt to adjusted stockholders' equity ratio declining from 3.9-to-1.0 as of December 31, 2008 to 2.8-to-1.0 as of September 30, 2012, while increasing the weighted average life of our debt maturities from 4.3 years as of December 31, 2008 to 6.4 years as of September 30, 2012, which has allowed us to better align our debt maturities with our anticipated operating cash flows. After giving effect to the Reorganization, our net debt to adjusted stockholders' equity ratio would have been             -to-1.0 as of September 30, 2012. As of September 30, 2012, approximately 79% of our outstanding debt was fixed rate debt or floating rate debt swapped into fixed rate debt. Our significant number of unencumbered aircraft provides us with meaningful operational and capital structure flexibility. Our foreign exchange exposure is also limited with approximately 97% of our revenues denominated in U.S. dollars for the year ended December 31, 2011.

        Ability to maximize the value of aircraft and engines.    Our subsidiary AeroTurbine provides us with in-house part-out, engine leasing and engine exchange capabilities that allow us to maximize the value of our aircraft and engines across their complete life cycle. The ability to provide these services also distinguishes us with our airline customers by providing them with an integrated value proposition as they transition out aging aircraft. AeroTurbine has market insight and recurring customer relationships, which are strengths that can be leveraged for growth in the engine and parts business.

        Dedicated management team with extensive airline, manufacturer and leasing experience.    Our senior management team has an average of over 20 years of aviation and other relevant experience, including experience at ILFC and with airlines, airframe manufacturers and other lessors. We believe our senior management's reputation and relationships with lessees, manufacturers, buyers and financiers of aircraft are important elements to the success of our business.

 

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Business Strategies

        We believe the following strategies will enable us to continue to serve our airline customers, grow our customer base, manage our portfolio to optimize revenues and profitability and strengthen our position as the world's largest independent aircraft lessor.

        Continue to capitalize on our existing customer relationships.    We intend to continue to capitalize on our customer relationships to facilitate strategic and sophisticated fleet solutions, including lease placements, large multi-aircraft re-fleeting transactions, multi-party placement arrangements and sale-leaseback opportunities, and to quickly identify opportunities to re-market aircraft. Our customer relationships and market insight will influence our future aircraft purchases so that we can tailor orders and timing to the long-term needs of our customers. Our subsidiary AeroTurbine enables us to offer options to customers seeking solutions for transitioning out aging aircraft, further strengthening our relationships with them.

        Focus on high-growth and attractive markets.    We are focused on increasing our presence in emerging markets with high potential for passenger growth and other markets with significant demand for new aircraft. We already have a leading position in China based on the number of narrowbody and widebody aircraft operated in China, where approximately 176 of our owned aircraft are operated by Chinese carriers. We opened offices in Singapore and Beijing in 2012 to strengthen our position in Asia further. In August 2011, we opened an office in Amsterdam to be closer to our customers in Europe and address the emerging markets in the Middle East, Eastern Europe and Africa. In addition, we are pursuing growth in the North American market, particularly in the U.S., where we believe that the re-fleeting campaigns being undertaken by the major American carriers create attractive opportunities for us. We have recently appointed heads of marketing for each of the EMEA, Americas and Asia regions.

        Enhance our fleet with modern, fuel-efficient and strategically attractive aircraft.    We plan to continue to acquire modern, fuel-efficient aircraft. We are in regular discussions with airframe and engine manufacturers regarding aircraft programs and technology advances, availability of future delivery positions, pricing, and potential aircraft orders, and we believe that the scale of our business and access to capital markets will enable us to make large purchases of aircraft from manufacturers as needed. We are also pursuing other strategic aircraft acquisitions with earlier delivery dates through means such as sale-leaseback transactions with airlines and opportunistic purchases of new and used aircraft from airlines and financial investors. In 2011, we entered into sale-leaseback transactions to acquire 26 aircraft through 2013, 22 of which have already been delivered.

        Maintain a diverse aircraft fleet and lease portfolio to maximize revenue while minimizing risk.    We seek to further maximize revenue and minimize risks by maintaining the diversity of our owned aircraft fleet and lease portfolio across aircraft type, lease expiration, geography and customer. Diversification of our owned aircraft fleet minimizes the risk of changing customer preferences, while a diversified lease portfolio with staggered lease expirations reduces our exposure to industry fluctuations and the credit risk of individual customers. We also evaluate multiple strategies for our aging aircraft, including continued leasing of the aircraft, secondary market sales, utilizing aircraft for parts and engines and converting passenger aircraft to freighter aircraft, and we ultimately pursue the option that generates the highest value for each aircraft.

        Continue to access multiple funding sources to optimize our capital structure.    We have proven our capability to access a variety of funding sources, including unsecured debt, and intend to use the scale of our business and our existing relationships with financial institutions to continue accessing capital from diverse sources at competitive rates. Beginning in 2010, we have better aligned our debt maturities with our anticipated operating cash flows. We target to maintain sufficient liquidity, consisting of cash on hand, our revolving credit facility and operating cash flows, to repay our debt maturing over the next 24 months.

 

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Corporate Reorganization

        Holdings was incorporated in Delaware on August 22, 2011 and is a subsidiary of AIG Capital Corporation, or AIG Capital, which is a direct wholly owned subsidiary of American International Group, Inc., or AIG, solely for the purpose of the Reorganization (as defined below). As part of the Reorganization, ILFC, currently a direct subsidiary of AIG Capital, will become a direct subsidiary of Holdings. Holdings has not engaged in any activities other than those incidental to its formation, the Reorganization and this offering.

        AIG is a leading international insurance organization serving customers in more than 130 countries. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. Beginning in September 2008, liquidity issues resulted in AIG seeking and receiving governmental support. As a result of receiving this governmental support, the Department of the Treasury became AIG's majority shareholder. The Department of the Treasury has completed several public offerings of shares of AIG's common stock between May 2011 and September 2012, as a result of which the Department of the Treasury currently owns approximately 15.9% of AIG's common stock. Following completion of the September 2012 public offering of AIG's common stock, the Department of the Treasury ceased to own a majority of the outstanding shares of AIG common stock, and, consequently, AIG is regulated and subject to the examination, supervision and enforcement authority and reporting requirements of the Board of Governors of the Federal Reserve System (the "FRB") (as successor to the U.S. Office of Thrift Supervision ("OTS")) as a savings and loan holding company ("SLHC"). AIG has determined that ILFC is not one of its core businesses. This offering of our common stock is the first step in AIG's plan to monetize its interest in us.

        Holdings intends to enter into an exchange agreement with AIG Capital, pursuant to which AIG Capital will agree to transfer, subject to certain conditions, 100% of the outstanding common stock of ILFC to Holdings in exchange for the issuance by Holdings to AIG Capital of 50,000 shares of Series A Mandatorily Redeemable Preferred Stock (the "Series A Redeemable Preferred") and additional shares of Holdings' common stock. The Series A Redeemable Preferred must be redeemed on                        at a liquidation preference of $1,000 per share and will be entitled to cash dividends at a rate of                % of the liquidation preference. The Series A Redeemable Preferred will not be convertible into common stock and will have limited voting rights. See "Description of Capital Stock—Preferred Stock—Series A Mandatorily Redeemable Preferred Stock." The transfer of ILFC's common stock to Holdings will be subject to, and will become effective only upon, AIG Capital entering into one or more definitive agreements for the sale of more than 20% of Holdings' outstanding common stock, which we expect to be satisfied by the execution of the underwriting agreement related to this offering. As a result, the transfer of ILFC's common stock to Holdings from AIG Capital will occur after the effectiveness of the registration statement of which this prospectus is a part and prior to consummation of this offering.

        AIG has received a private letter ruling from the Internal Revenue Service, or IRS, that AIG Capital's transfer of ILFC's common stock to Holdings will qualify for an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, or the Code, provided that certain conditions are met. Among those conditions is that in the event AIG Capital does not sell more than 50% by value of its interest in us in this offering, AIG Capital must dispose of more than 50% by value of its interest in us within two years after the completion of this offering. The Section 338(h)(10) election will enable us to step-up the tax basis of our flight equipment and other assets and reduce our net deferred tax liability by $     billion. This prospectus assumes that all conditions to the Section 338(h)(10) tax election are satisfied.

        The anti-churning rules of Section 197 of the Code will prohibit us from amortizing any portion of any step-up in the basis of ILFC's assets that is attributable to certain intangibles (such as goodwill and going concern value) if AIG is deemed to be "related" to us. Our private letter ruling provides that

 

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AIG will not be deemed to be related to us as long as AIG reduces its ownership of our stock to 20% or less by vote and value (not including the Series A Redeemable Preferred) within three years of the completion of this offering. While AIG expects to reduce its ownership of our stock so as to avoid application of the anti-churning rules, and ultimately expects to dispose of all of our stock, AIG is not obligated to do so. See "Shares Eligible for Future Sale—Plans of Divestiture."

        Prior to the completion of this offering, we will enter into an intercompany agreement with AIG and AIG Capital, or the Intercompany Agreement, relating to registration rights, provision of financial and other information, transition services, compliance policies and procedures, and other matters, and a separate tax matters agreement with AIG and AIG Capital. See "Transactions with Related Parties—Transactions in Connection with this Offering—Intercompany Agreement with AIG and AIG Capital."

        We refer to the transfer of 100% of ILFC's common stock from AIG Capital to Holdings, and the transactions and agreements related to our separation from AIG as the "Reorganization." See "Corporate Reorganization" for a more complete discussion of the Reorganization.

Risks Associated with Our Business

        In executing our business strategy, we face significant risks and uncertainties, which are discussed in the section titled "Risk Factors," including:

    Our substantial level of indebtedness could adversely affect our ability to fund future needs of our business and to react to changes affecting our business and industry. As of September 30, 2012, we had approximately $24.2 billion in principal amount of indebtedness outstanding.

    We may not be able to obtain additional capital to finance our operations, including to purchase new and used flight equipment, to make progress payments during aircraft construction and to service or refinance our existing indebtedness.

    An increase in our cost of borrowing resulting from changes in interest rates could have a material and adverse impact on our net income, results of operations and cash flows.

    Risks adversely impacting the airline industry, including the global sovereign debt crisis and increases in fuel costs, could negatively impact our business because they increase the likelihood of lessee bankruptcies, lessee non-performance and an inability to lease our aircraft.

    We may be indirectly subject to many of the economic and political risks associated with emerging markets, which could adversely affect our financial results and growth prospects.

    Deterioration of the value of the aircraft in our fleet may result in impairment charges and fair value adjustments. We recorded impairment charges and fair value adjustments on aircraft of approximately $1.7 billion during each of the years ended December 31, 2011 and 2010. The impairment charges and fair value adjustments we recorded for those periods were the primary cause of our net losses of approximately $723.9 million and $495.7 million, respectively, during those periods.

    Upon consummation of this offering, AIG will continue to beneficially own a significant percentage of our stock. Although neither AIG nor any of its subsidiaries is a co-obligor or guarantor of our debt securities, changes in circumstances affecting AIG may impact us in ways we cannot predict. Additionally, we cannot accurately predict the effect that our separation from AIG will have on our business and profitability.

Corporate Information

        Holdings is incorporated in the State of Delaware and ILFC is incorporated in the State of California. Our principal offices are located at 10250 Constellation Blvd., Suite 3400, Los Angeles, California 90067. We also have regional offices in Amsterdam, Beijing, Dublin, Miami, Seattle and Singapore. The telephone number of our principal offices and our website address are (310) 788-1999 and www.ilfc.com, respectively. The information on our website is not part of, or incorporated by reference into, this prospectus.

 

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The Offering

Common stock offered by the selling stockholder in this offering

                                      shares

Common stock to be outstanding after this offering

 

                                    shares

Option to purchase additional shares

 

The selling stockholder has granted to the underwriters an option for a period of 30 days to purchase up to                        additional shares from it at the public offering price less underwriting discounts and commissions.

Dividend policy

 

We have no plans to declare or pay any cash or other dividends on our common stock for the foreseeable future. We currently intend to retain future earnings, if any, for use in the operation of our business and to fund future growth. However, we expect to re-evaluate our dividend policy on a regular basis following this offering and may determine to pay dividends in the future. The decision whether to pay dividends in the future will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements, including our indebtedness.

Use of proceeds

 

We will not receive any proceeds from the sale of the shares of common stock by the selling stockholder pursuant to this prospectus.

Proposed New York Stock Exchange symbol

 

"ILFC"

Risk factors

 

You should carefully read and consider the information set forth under "Risk Factors" and all other information included in this prospectus for a discussion of factors that you should consider before deciding to invest in shares of our common stock.

        Unless otherwise expressly stated or the context otherwise requires, all information contained in this prospectus assumes the Reorganization has been consummated.

        The total number of shares of common stock to be outstanding after this offering does not include        shares of our common stock reserved for future grant or issuance under our 2012 Performance Incentive Plan. Also, unless otherwise stated, information in this prospectus assumes no exercise of the underwriters' option to purchase additional shares.

 

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Summary Historical Consolidated Financial and Other Information

        The following table sets forth our summary historical consolidated financial information derived from ILFC's: (i) audited financial statements for the years ended December 31, 2011, 2010 and 2009, and as of December 31, 2011 and 2010, which are included elsewhere in this prospectus except for aircraft costs, which was previously included in selling, general and administrative expenses; (ii) audited financial statements as of December 31, 2009, which are not included in this prospectus; and (iii) unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2012 and 2011 and as of September 30, 2012, which are included elsewhere in this propectus. The historical financial information presented may not be indicative of our future performance. See "Financial Statements."

        This summary historical consolidated financial and other information should be read in conjunction with, and is qualified in its entirety by reference to, "Selected Historical Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and ILFC's consolidated financial statements and related notes included elsewhere in this prospectus.

 
  Nine Months Ended
September 30,
  Year Ended December 31,  
 
  2012   2011   2011   2010   2009  
 
  (Dollars in thousands, except per share amounts)
 

Statement of Operations Data:

                               

Revenues:

                               

Rental of flight equipment

  $ 3,320,711   $ 3,369,288   $ 4,454,405   $ 4,726,502   $ 4,928,253  

Flight equipment marketing and gain on aircraft sales

    25,176     6,640     14,348     10,637     12,966  

Interest and other

    81,848     41,270     57,910     61,741     55,973  
                       

    3,427,735     3,417,198     4,526,663     4,798,880     4,997,192  
                       

Expenses:

                               

Interest

    1,165,844     1,203,010     1,569,468     1,567,369     1,365,490  

Effect from derivatives, net of change in hedged items due to changes in foreign exchange rates

            9,808     47,787     (21,450 )

Depreciation of flight equipment

    1,440,502     1,375,745     1,864,735     1,963,175     1,968,981  

Aircraft impairment charges on flight equipment held for use

    102,662     1,521,881     1,567,180     1,110,427     50,884  

Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed of

    88,059     158,332     170,328     552,762     35,448  

Loss on extinguishment of debt

    22,934     61,093     61,093          

Flight equipment rent

    13,500     13,500     18,000     18,000     18,000  

Aircraft costs

    95,795     38,041     49,673     33,352     43,935  

Selling, general and administrative            

    191,604     115,715     188,433     179,428     152,740  

Other expenses

    33,159     48,407     61,924     91,216      
                       

    3,154,059     4,535,724     5,560,642     5,563,516     3,614,028  
                       

Income (loss) before income taxes

    273,676     (1,118,526 )   (1,033,979 )   (764,636 )   1,383,164  

Income tax (benefit) provision

    (65,990 )   (382,149 )   (310,078 )   (268,968 )   495,989  
                       

Net income (loss)

  $ 339,666   $ (736,377 ) $ (723,901 ) $ (495,668 ) $ 887,175  
                       

Pro forma net income (loss) per common share (basic)(1)

  $           $                
                             

Pro forma net income (loss) per common share (diluted)(1)

  $           $                
                             

Pro forma weighted average common shares outstanding (basic)(1)

                               
                             

Pro forma weighted average common shares outstanding (diluted)(1)

                               
                             

 

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  Nine Months Ended
September 30, 2012
   
   
   
 
 
  Year Ended December 31,  
 
  As Adjusted
for the
Reorganization
   
 
 
  Actual   2011   2010   2009  
 
  (Dollars in thousands)
 

Balance Sheet Data (end of period):

                               

Cash and cash equivalents, excluding restricted cash

  $ 2,646,211   $ 2,646,210   $ 1,975,009   $ 3,067,697   $ 336,911  

Flight equipment under operating leases, less accumulated depreciation

    34,932,343     34,932,343     35,502,288     38,515,379     44,091,783  

Total assets

    39,576,643     39,576,642     39,161,244     43,308,060     46,129,024  

Total debt, including current portion

          24,209,105     24,384,272     27,554,100     29,711,739  

Total stockholders' equity(2)

          7,865,437     7,531,869     8,225,007     8,655,089  

Cash Flows

                               

Net cash provided by operating activities

  $ 2,254,415   $ 2,254,415   $ 2,568,159   $ 3,213,796   $ 3,413,891  

Net cash (used in) provided by investing activities

    (1,331,854 )   (1,331,854 )   (281,198 )   1,779,852     (2,603,359 )

Net cash (used in) provided by financing activities

    (251,395 )   (251,396 )   (3,380,213 )   (2,260,949 )   (2,860,263 )

Other Financial Data:

                               

Net debt to adjusted stockholders' equity(3)

          2.8x     3.0x     3.0x     3.4x  

Other Data:

                               

Aircraft lease portfolio at period end:

                               

Owned

    918 (4)   918 (4)   930     933     993  

Managed

    84     84     87     97     99  

Subject to finance and sales-type leases

    15 (5)   15 (5)   7     4     11  

Aircraft sold or remarketed during the period

    1     1     14     59     9  

Purchase commitments

    240 (6)   240 (6)   260     115     120  

Weighted average age of fleet (in years)(7)

    8.1     8.1     7.7     7.2     6.4  

Average effective cost of borrowing(8)

    6.11 %   6.11 %   5.90 %   5.03 %   4.46 %

(1)
Pro forma net income (loss) per common share and pro forma weighted average common shares outstanding have been adjusted to reflect the number of shares of Holdings' common stock that will be outstanding after giving effect to the Reorganization.

(2)
Stockholders' equity, as adjusted for the Reorganization, reflects an increase of approximately $             billion as a result of indemnification from AIG contained in the tax matters agreement with respect to any federal income taxes recognized in connection with the Reorganization, the election under Section 338(h)(10) of the Code and the attendant step-up in basis of our assets to fair market value for federal income tax purposes based on an assumed initial public offering price of $            per share, which is the midpoint of the offering price range listed on the cover of this prospectus. Our net deferred tax liability as of September 30, 2012 would have been $             billion after giving effect to the Reorganization.

(3)
Net debt means our total debt, including current portion, less cash and cash equivalents, excluding restricted cash, as of the end of the corresponding period. Adjusted stockholders' equity means our total stockholders' equity less Market Auction Preferred Stock, or MAPS, and accumulated other comprehensive income (loss). Net debt and adjusted stockholders' equity are not defined under generally accepted accounting principles in the United States, or GAAP, and may not be comparable to similarly titled measures reported by other companies. We have presented this measure of financial leverage because it provides useful information to better evaluate our outstanding debt obligations and provides information aligned with our debt covenants. We are excluding the MAPS because it represents noncontrolling interests of Holdings that will not be included in stockholders' equity of Holdings because this equity is and will be owned by third parties rather than Holdings. Accumulated other comprehensive income (loss), which principally reflects changes in the market value of our cash flow hedges, has been excluded because it is excluded from stockholders' equity in determining compliance with our debt covenants. Total debt has been adjusted by cash and cash equivalents to better evaluate our financial condition and our future obligations that would not be readily satisfied by cash and cash equivalents on hand. Investors should consider net debt to adjusted stockholders' equity in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Our net debt to adjusted stockholders' equity presentation may be different from that presented by other companies.

 

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    The following table reconciles net debt to the most directly comparable GAAP measure, total debt:

 
  As of September 30, 2012    
   
   
 
 
  As of December 31,  
 
  As Adjusted
for the
Reorganization
   
 
 
  Actual   2011   2010   2009  
 
  (Dollars in thousands)
 

Total debt, including current portion

  $     $ 24,209,105   $ 24,384,272   $ 27,554,100   $ 29,711,739  

Less: Cash and cash equivalents, excluding restricted cash

    2,646,211     2,646,210     1,975,009     3,067,697     336,911  
                       

Net debt

  $     $ 21,562,895   $ 22,409,263   $ 24,486,403   $ 29,374,828  
                       

    The following table reconciles adjusted stockholders' equity to the most directly comparable GAAP measure, total stockholders' equity:

 
  As of September 30, 2012    
   
   
 
 
  As of December 31,  
 
  As Adjusted
for the
Reorganization
   
 
 
  Actual   2011   2010   2009  
 
  (Dollars in thousands)
 

Total stockholders' equity

  $     $ 7,865,437   $ 7,531,869   $ 8,225,007   $ 8,655,089  

Less: Market Auction Preferred Stock

        100,000     100,000     100,000     100,000  

Less: Noncontrolling interest

    100,000                  

Less: Accumulated other comprehensive loss

    (14,941 )   (14,941 )   (19,637 )   (58,944 )   (138,206 )
                       

Adjusted stockholders' equity

  $     $ 7,780,378   $ 7,451,506   $ 8,183,951   $ 8,703,295  
                       
(4)
As of November 15, 2012, there were 918 owned aircraft in our leased fleet.

(5)
As of November 15, 2012, 15 aircraft in our fleet were classified as finance and sales-type leases.

(6)
Includes purchase commitments for 233 new aircraft, four of which were subsequently delivered, and seven used aircraft at September 30, 2012.

(7)
Weighted by net book value as of the end of the applicable period.

(8)
Our average effective cost of borrowing reflects our composite interest rate, including any effect of interest rate swaps or other derivatives and including the effect of debt discounts.

 

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to invest in our common stock. If any of the following risks actually materializes, our business, financial condition and results of operations would suffer. The trading price of our common stock could decline as a result of any of these risks, and you might lose all or part of your investment in our common stock. You should read the section entitled "Forward-Looking Statements" immediately following these risk factors for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this prospectus.

Risks Related to Our Business

Our substantial level of indebtedness could adversely affect our ability to fund future needs of our business and to react to changes affecting our business and industry.

        The aircraft leasing business is capital intensive and we have a substantial amount of indebtedness, which requires significant interest and principal payments. As of September 30, 2012, we had approximately $24.2 billion in principal amount of indebtedness outstanding and the principal and interest payments on our outstanding indebtedness due during the remainder of 2012 and in 2013 totaled approximately $530 million and $5.4 billion, respectively (assuming the September 30, 2012 interest rates on our outstanding floating rate indebtedness remain unchanged). Because some of our debt bears variable rates of interest, our interest expense will fluctuate in the future.

        Our substantial level of indebtedness could have important consequences to our business, including the following:

    requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for other purposes, including acquiring new aircraft and exploring business opportunities;

    increasing our vulnerability to adverse economic and industry conditions;

    limiting our flexibility in planning for, or reacting to, changes in our business and industry; and

    limiting our ability to borrow additional funds or refinance our existing indebtedness.

        In addition, despite our current indebtedness levels, we expect to incur additional debt in the future to finance our operations, including purchasing aircraft and meeting our other contractual obligations. If we issue additional debt, our debt service obligations will increase. The more leveraged we become, the more we will be exposed to the risks described above.

We will need additional capital to finance our operations, including purchasing aircraft, servicing our existing indebtedness, including refinancing our indebtedness as it matures, and meeting our other contractual leasing commitments. We may not be able to obtain additional capital on favorable terms, or at all.

        We will require additional capital to purchase new and used flight equipment, make progress payments during aircraft construction and repay our maturing debt obligations. As of September 30, 2012, we had approximately $162 million and $4.0 billion of indebtedness maturing during the remainder of 2012 and in 2013, respectively. In addition, we currently have commitments to purchase 229 new aircraft and seven used aircraft for delivery through 2019 with aggregate estimated total remaining payments of approximately $17.4 billion. We also have purchase rights for an additional 50 Airbus A320neo family aircraft, provided we exercise those rights.

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        If we are unable to purchase aircraft as the commitments come due, we will be subject to several risks, including:

    forfeiting deposits and progress payments to manufacturers and having to pay certain significant costs related to these commitments such as actual damages and legal, accounting and financial advisory expenses;

    defaulting on our lease commitments, which could result in monetary damages and damage to our reputation and relationships with lessees and manufacturers;

    failing to realize the benefits of purchasing and leasing such aircraft; and

    risking reputational harm to our business, which would make it more difficult to purchase aircraft in the future on agreeable terms, if at all.

        Our ability to satisfy our obligations with respect to our future aircraft purchases and indebtedness will depend on, among other things, our future financial and operating performance and our ability to raise additional capital through our funding sources or through aircraft sales. Prevailing economic and market conditions, and financial, business and other factors, many of which are beyond our control, will affect our future operating performance and our ability to access the capital markets or seek potential aircraft sales. For example, changes to the Aircraft Sector Understanding in February 2011 may make financing for aircraft from the export-credit agencies more expensive. In addition, our ability to access debt markets and other financing sources depends, in part, on our credit ratings by the three major nationally recognized statistical rating organizations. For instance, from September 2008 through February 2010, ILFC experienced multiple downgrades in its credit ratings by these rating organizations. These credit rating downgrades, combined with externally generated volatility, limited ILFC's ability to access the debt markets in 2009 and early 2010 and resulted in unattractive funding costs.

        In addition to the impact of economic and market conditions on our ability to raise additional capital, we are subject to restrictions under ILFC's existing debt agreements. ILFC's bank credit facilities and indentures limit ILFC's ability to incur secured indebtedness. The most restrictive covenant in the bank credit facilities permits ILFC and its subsidiaries to incur secured indebtedness totaling up to 30% of its consolidated net tangible assets, as defined in the credit agreement, which limit totaled approximately $10.7 billion as of November 15, 2012. This limitation is subject to certain exceptions, including the ability to incur secured indebtedness to finance the purchase of aircraft. As of November 15, 2012, ILFC was able to incur an additional $7.8 billion of secured indebtedness under this covenant. ILFC's debt indentures also restrict ILFC and its subsidiaries from incurring secured indebtedness in excess of 12.5% of consolidated net tangible assets, as defined in the indentures. However, ILFC may obtain secured financing without regard to the 12.5% consolidated net tangible asset limit under its debt indentures by doing so through subsidiaries that qualify as non-restricted under the indentures.

        As a result of these limitations, we may be unable to generate sufficient cash flows from operations, or obtain additional capital in an amount sufficient to enable us to pay our indebtedness, make aircraft purchases or fund our other liquidity needs. If we are able to obtain additional capital, it may not be on terms favorable to us. If additional capital is raised through the issuance of equity securities, the interests of our then-current common stockholders would be diluted and newly issued equity securities may have rights, preferences or privileges senior to those of our common stock. Further, in evaluating potential aircraft sales, we must balance the need for funds with the long-term value of holding aircraft and long-term prospects for us. If we are unable to generate or borrow sufficient cash, we may be unable to meet our debt obligations and/or aircraft purchase commitments as they become due, which could limit our ability to obtain new, modern aircraft and compete in the aircraft leasing market.

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An increase in our cost of borrowing could have a material and adverse impact on our net income, results of operations and cash flows.

        Our cost of borrowing is impacted by fluctuations in interest rates. Our lease rates are generally fixed over the life of the lease. Changes, both increases and decreases, in our cost of borrowing due to changes in interest rates, directly impact our net income. The interest rates that we obtain on our debt financings are a result of several components, including credit spreads, swap spreads, duration and new issue premiums. These are all in addition to the underlying Treasury or LIBOR rates, as applicable. We manage interest rate volatility and uncertainty by maintaining a balance between fixed and floating rate debt, through derivative instruments and through varying debt maturities.

        Our average effective cost of borrowing increased from 5.90% to 6.11% from December 31, 2011 to September 30, 2012, reflecting higher interest rates on some of our new debt relative to the debt we were replacing. A 1% increase in our average effective cost of borrowing on our total outstanding debt at September 30, 2012, would have increased our interest expense by approximately $242 million annually, which would put downward pressure on our operating margins and could materially and adversely impact our cash generated from operations. Our average effective cost of borrowing reflects our composite interest rate, including any effect of interest rate swaps or other derivatives and including the effect of debt discounts.

The recent global sovereign debt crisis, particularly among European countries, has impacted the financial health of some of our lessees and could continue to have a broader impact on the airline industry in general, as well as result in higher borrowing costs and more limited availability of credit for us and our customers.

        Countries in Europe, including Greece, Italy, Portugal, Ireland, Spain and France, have had their debt downgraded by the major rating agencies and some of these countries are taking measures to avoid defaulting on their debt obligations, including by seeking emergency loans. For the nine months ended September 30, 2012 and the year ended December 31, 2011, we generated approximately 42% and 44%, respectively, of our total revenues from rental of flight equipment from European lessees. In addition, the United States' credit rating was downgraded for the first time in history by one of the three nationally recognized rating agencies in August 2011. If the credit ratings of these or other countries continue to decline, the cost of borrowing may increase across all markets and the availability of credit may become more limited. Many banks globally, particularly those in Europe, have principal exposure to sovereign debt. The downgrades of sovereign debt have put pressure on the banks' regulatory capital levels resulting in more limited lending. Accordingly, our composite interest rate could increase, which would have an adverse impact on our profitability and cash flow, or we may be unable to incur debt on favorable terms, or at all, in order to fund our future growth and refinance our maturing debt obligations. Further, the recent global sovereign debt crisis could result in lower consumer confidence, which could result in a recession and the loss of revenue for our lessees. This could impact their ability to make payments on their leases and could result in airlines ceasing operations, which could impact our business through early returns of aircraft, maintenance expenses, loss of revenue and potential aircraft impairment charges, which could have a material adverse effect on our financial results and growth prospects.

We have recently recognized an increase in the number of airlines that have ceased operations or filed for reorganization, and if this trend continues, it could have a significant impact on our operations.

        As a result of challenging global economic conditions, combined with significant volatility in oil prices, some airlines have been forced to cease operations or to reorganize. Since the beginning of 2011, 16 of our customers, including one with two separate operating certificates, have ceased operations or filed for bankruptcy, or its equivalent, and returned 63 aircraft to us. Ten of the customers that ceased operations were airlines operating in Europe: LLC "Avianova," Amsterdam Airlines, B.V., Astraeus Limited, Tor Air, Spanair, S.A., Malev Ltd., Mint Airways, Air Finland, Wind Jet S.p.A. and OLT Express Poland Sp. z o.o. Spanair and Malev operated 15 and 17 of our owned

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aircraft, respectively. In certain cases, we have a large number of aircraft with a single airline, which increases our exposure in the event the airline ceases operations or reorganizes. A severe recession in Europe, the inability to resolve the sovereign debt crisis and political uncertainty in the Middle East could result in additional failures of airlines and could materially affect our financial results. If this trend continues, it could have a material adverse effect on our financial results and growth prospects.

Our business model depends on the continual leasing and re-leasing of the aircraft in our fleet, and we may not be able to enter into leases on favorable terms, if at all.

        Our business model depends on the continual leasing and re-leasing of the aircraft in our fleet in order to generate sufficient revenues to finance our growth and operations, pay our debt service obligations and generate positive cash flows from operations. Because our leases are predominantly operating leases, only a portion of the aircraft's value is covered by revenues generated from the initial lease and we may not be able to realize the aircraft's residual value after expiration of the initial lease. We bear the risk of re-leasing or selling the aircraft in our fleet when our operating leases expire or when aircraft are returned to us prior to expiration of any lease. Our ability to lease, re-lease or sell our aircraft will depend on conditions in the airline industry and general market and competitive conditions at the time the operating leases are entered into and expire, including those risks discussed under "—In addition to increased fuel costs and the global sovereign debt crisis, other risks adversely impacting the airline industry in general could adversely impact our business because they increase the likelihood of lessee non-performance and an inability to lease our aircraft." In addition to factors linked to the aviation industry in general, other factors that may affect the market value and lease rates of our aircraft include (i) maintenance and operating history of the airframe and engines; (ii) the number of operators using the particular type of aircraft; and (iii) aircraft age.

Aircraft in our fleet that become obsolete will be more difficult to re-lease or sell, which could result in declining lease rates, impairment charges or losses related to aircraft asset value guarantees.

        Aircraft are long-lived assets requiring long lead times to develop and manufacture. Aircraft of a particular model and type tend to become obsolete and less in demand over time, as more advanced and efficient aircraft are manufactured. The life cycle of an aircraft can be shortened by world events, government regulation or customer preferences. For example, increases in fuel prices have resulted in an increased demand for newer fuel-efficient aircraft, such as the Airbus A320neo family and the Boeing 737 MAX narrowbody aircraft, which may potentially shorten the useful life of older aircraft, including older A320 family and 737 family aircraft presently in operation. Approximately 25% of our owned fleet is currently at least 12 years old. As aircraft in our fleet approach obsolescence, demand for those particular models and types will decrease which could result in declining lease rates and could have a material adverse effect on our financial condition and results of operations. In addition, if we dispose of an aircraft for a price that is less than the depreciated book value of the aircraft on our balance sheet, we will recognize impairments or fair value adjustments.

        Deterioration of aircraft values may also result in impairment charges or losses related to aircraft asset value guarantees. We recorded impairment charges and fair value adjustments on certain aircraft of approximately $190.7 million for the nine months ended September 30, and $1.7 billion for each of the years ended December 31, 2011 and 2010. The impairment charges in 2011 resulted from unfavorable airline industry trends affecting the residual values of certain aircraft types and management's expectations that certain aircraft will more likely than not be parted-out or otherwise disposed of in less than 25 years. The reduction in the expected holding period was made in connection with the addition of in-house part-out capabilities as a result of the acquisition of AeroTurbine. The impairment charges in 2010 were primarily due to the announcement of new technology in the marketplace and the sale of aircraft in that year. GAAP requires that we use undiscounted future cash flows in determining whether impairment charges are appropriate; accordingly, the fair value of our assets (using a discounted cash flow analysis) could be significantly less than their book value.

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        A recovery of the recent downturn of the airline industry may not be imminent and lower future lease rates and increased costs associated with repossessing and redeploying aircraft may have a negative impact on our operating results in the future, including causing future potential aircraft impairment charges.

The residual values of our aircraft are subject to a number of risks and uncertainties, including obsolescence risk, which could result in future impairment charges.

        The residual values of our aircraft are subject to a number of risks and uncertainties. Technological developments, macro-economic conditions, availability and cost of funding for aviation, and the overall health of the airline industry impact the residual values of our aircraft. If challenging economic conditions persist for extended periods, the residual values of our aircraft could be negatively impacted, which could result in future impairment charges.

Our relationship with AIG may affect our ability to operate and finance our business as we deem appropriate and changes with respect to AIG could negatively impact us.

        Upon consummation of this offering, AIG will continue to beneficially own a significant percentage of our stock. Although neither AIG nor any of its subsidiaries is a co-obligor or guarantor of our debt securities, circumstances affecting AIG may have an impact on us and we are not sure how further changes in circumstances related to AIG may impact us.

        Prior to the completion of this offering, we will enter into the Intercompany Agreement with AIG and AIG Capital for the purpose of setting forth various matters governing our relationship with AIG and to set forth certain transition services that AIG and its subsidiaries will provide to us following this offering. Under the Intercompany Agreement, we will be required to register for resale AIG Capital's shares of our common stock under the Securities Act. See "Transactions with Related Parties—Transactions in Connection with this Offering—Intercompany Agreement with AIG and AIG Capital."

The Department of the Treasury is a significant stockholder of AIG and may have interests inconsistent with those of our stockholders.

        The Department of the Treasury owns approximately 15.9% of the outstanding common stock of AIG, and the Department of the Treasury may continue to have significant influence over AIG, which in turn may continue to have significant influence over us, after the completion of this offering. The interests of the Department of the Treasury (as a government entity) may not be the same as those of our stockholders.

Conflicts of interest may arise between us and customers who utilize our fleet management services, which may adversely affect our business interests.

        Conflicts of interest may arise between us and third-party aircraft owners, financiers and operating lessors who hire us to perform fleet management services such as leasing, re-leasing, lease management and sales services. Our servicing contracts require that we act in good faith and not unreasonably discriminate against serviced aircraft in favor of our owned aircraft. Nevertheless, competing with our fleet management customers may result in strained relationships with these customers, which may adversely affect our business interests.

The agreements governing certain of our indebtedness contain restrictions and limitations that could significantly affect our ability to operate our business and compete effectively.

        The agreements governing certain of our indebtedness contain covenants that restrict, among other things, our ability to:

    incur debt;

    encumber our assets;

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    dispose of certain assets;

    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

    make equity or debt investments in other parties;

    enter into transactions with affiliates;

    designate our subsidiaries as non-restricted subsidiaries; and

    pay dividends and distributions.

        The agreements governing certain of our indebtedness also contain financial covenants, such as requirements that we comply with one or more of loan-to-value, minimum net worth and interest coverage ratios.

        Complying with such covenants may at times necessitate that we forgo other opportunities, such as using available cash to purchase new aircraft or promptly disposing of less profitable aircraft. Moreover, our failure to comply with any of these covenants would likely constitute a default under such facilities and could give rise to an acceleration of some, if not all, of our then outstanding indebtedness, which would have a material adverse effect on our business and our ability to continue as a going concern.

Increases in fuel costs could materially adversely affect our lessees and, by extension, the demand for our aircraft.

        Fuel costs represent a major expense to airlines and fuel prices fluctuate widely depending primarily on international market conditions, geopolitical and environmental events, regulatory changes and currency exchange rates. The ongoing unrest in Africa and the Middle East has generated uncertainty regarding the predictability of the world's future oil supply, which has led to significant near-term increases in fuel costs. If this unrest continues, fuel costs may continue to rise. Other events can also significantly affect fuel availability and prices, including natural disasters, decisions by the Organization of the Petroleum Exporting Countries regarding its members' oil output, and the increase in global demand for fuel from countries such as China.

        Higher cost of fuel will likely have a material adverse impact on airline profitability. Due to the competitive nature of the airline industry, airlines may not be able to pass on increases in fuel prices to their passengers by increasing fares. If airlines do increase fares, demand for air travel may be adversely affected. In addition, airlines may not be able to manage fuel cost risk by appropriately hedging their exposure to fuel price fluctuations. If fuel prices increase further, our lessees are likely to incur higher costs or experience reduced revenues. Consequently, these conditions may:

    affect our lessees' ability to make rental and other lease payments;

    result in lease restructurings and aircraft repossessions;

    increase our costs of maintaining and marketing aircraft;

    impair our ability to re-lease aircraft and other aviation assets or re-lease or otherwise sell our assets on a timely basis at favorable rates;

    reduce the sale proceeds received for aircraft or other aviation assets upon any disposition; or

    lower lease rates and potentially trigger impairments.

        Such effects could have a material adverse effect on our business, financial condition and results of operations.

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In addition to increased fuel costs and the global sovereign debt crisis, other risks adversely impacting the airline industry in general could adversely impact our business because they increase the likelihood of lessee non-performance and an inability to lease our aircraft.

        Our business depends on the financial strength of our airline customers and their ability to meet their payment obligations to us and if their ability materially decreases, it may negatively affect our business, financial condition, results of operations and cash flows.

        The risks affecting our airline customers are generally out of our control and impact our customers to varying degrees. As a result, we are indirectly impacted by all the risks facing airlines today. Their ability to compete effectively in the marketplace and manage these risks has a direct impact on us. In addition to increased fuel prices and availability discussed above, these risks include:

•       demand for air travel;

 

•       heavy reliance on automated systems;

•       competition between carriers;

 

•       geopolitical events;

•       labor costs and stoppages;

 

•       equity and borrowing capacity;

•       maintenance costs;

 

•       environmental concerns;

•       employee labor contracts;

 

•       government regulation;

•       air traffic control infrastructure constraints;

 

•       interest rates;

•       airport access;

 

•       airline capacity;

•       insurance costs and coverage;

 

•       natural disasters; and

•       security, terrorism and war, including increased passenger screening as a result thereof;

 

•       worldwide health concerns, such as outbreaks of H1N1, SARS and avian influenza.

        To the extent that our customers are affected by these or other risks, we may experience:

    lower demand for the aircraft in our fleet and an inability to immediately place new and used aircraft when they become available, resulting in lower market lease rates and lease margins, and payments for storage and maintenance;

    a higher incidence of lessee defaults and repossessions affecting net income due to maintenance, consulting and legal costs associated with the repossessions, as well as lost revenue for the time the aircraft are off lease and possibly lower lease rates from the new lessees;

    a higher incidence of lease restructurings for our troubled customers which reduces overall lease revenue;

    a loss if an aircraft is damaged or destroyed by an event specifically excluded from the insurance policy such as dirty bombs, bio-hazardous materials and electromagnetic pulsing; and

    additional aircraft impairment charges.

We may be indirectly subject to many of the economic and political risks associated with emerging markets, which could adversely affect our financial results and growth prospects.

        We derived approximately 47% of our revenues for the nine months ended September 30, 2012 from airlines in frontier and emerging market countries (as defined by Dow Jones & Company). Frontier and emerging market countries have less developed economies and infrastructure and are often more vulnerable to economic and geopolitical challenges and may experience significant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by government authorities. The occurrence of any of these events in markets served by our lessees and the resulting economic instability that may arise, particularly if

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combined with high fuel prices, could adversely affect the value of our aircraft subject to lease in such countries or the ability of our lessees that operate in these markets to meet their lease obligations. In addition, legal systems in emerging market countries may be less developed, which could make it more difficult for us to enforce our legal rights in such countries.

        Further, demand for aircraft is dependent on passenger and cargo traffic, which in turn is dependent on general business and economic conditions. As a result, weak or negative economic growth in emerging markets may have an indirect effect on the value of the assets that we acquire if airlines and other potential lessees are adversely affected. If the recent global economic downturn continues or worsens, our assets may decline in value, which could have an adverse effect on our results of operations or our financial condition. For these and other reasons, our financial results and growth prospects may be negatively impacted by adverse economic and political developments in emerging market countries.

Our aircraft may not at all times be adequately insured either as a result of lessees failing to maintain sufficient insurance during the course of a lease or insurers not being willing to cover certain risks.

        While an aircraft is on lease, we do not directly control its operation. Nevertheless, because we hold title, directly or indirectly, to such aircraft, we could be sued or held strictly liable for losses resulting from the operation of such aircraft, or may be held liable for those losses on other legal theories, in certain jurisdictions around the world, or claims may be made against us as the owner of an aircraft requiring us to expend resources in our defense. We require our lessees to obtain specified levels of insurance and indemnify us for, and insure against, liabilities arising out of their use and operation of our aircraft. Some lessees may fail to maintain adequate insurance coverage during a lease term, which, although in contravention of the lease terms, would necessitate our taking some corrective action such as terminating the lease or securing insurance for the aircraft, either of which could adversely affect our financial results.

        In addition, there are certain risks or liabilities that our lessees may face, for which insurers may be unwilling to provide coverage or the cost to obtain such coverage may be prohibitively expensive. For example, following the terrorist attacks of September 11, 2001, non-government aviation insurers significantly reduced the amount of insurance coverage available for claims resulting from acts of terrorism, war, dirty bombs, bio-hazardous materials, electromagnetic pulsing or similar events. Accordingly, our lessees' insurance or other coverage may not be sufficient to cover all claims that could or will be asserted against us arising from the operation of our aircraft by our lessees. Inadequate insurance coverage or default by lessees in fulfilling their indemnification or insurance obligations will reduce the proceeds that we receive if we are sued and are required to make payments to claimants, which could have a material adverse effect on our business, financial condition and results of operations.

The failure of our lessees to perform required maintenance on our aircraft could result in a diminution in the value of the aircraft, some of which could constitute collateral under our secured debt facilities, and could impair our ability to resell or repossess the aircraft.

        Under each of our leases, the lessee is primarily responsible for maintaining the aircraft and complying with all governmental requirements applicable to the lessee and to the aircraft, including operational, maintenance, registration requirements and airworthiness directives. A lessee's failure to perform required maintenance during the term of a lease could result in a diminution in the appraised or liquidation value of an aircraft, an inability to re-lease the aircraft at favorable rates, or at all, or a potential grounding of the aircraft, and could require us to incur maintenance and modification costs upon the expiration or earlier termination of the lease to restore the aircraft to an acceptable condition prior to sale or re-leasing or for further flight. Even if we perform maintenance or modification of the aircraft, the value of the aircraft may still deteriorate.

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If our lessees fail to discharge aircraft liens, we may be obligated to pay the aircraft liens and until they are discharged, the liens could impair our ability to repossess, re-lease or sell the aircraft.

        Our lessees are likely to incur aircraft liens that secure the payment of airport fees and taxes, customs duties and air navigation charges, and aircraft may also be subject to mechanics' liens. Although we anticipate that the financial obligations relating to these liens will be the responsibility of our lessees, if they fail to fulfill such obligations, the liens may attach to our aircraft and ultimately become our responsibility. In some jurisdictions, aircraft liens may give the holder thereof the right to detain or, in limited cases, sell or cause the forfeiture of the aircraft. Until they are discharged, these liens could impair our ability to repossess, re-lease or sell our aircraft.

There are a limited number of airframe and engine manufacturers and the failure of any manufacturer to meet its delivery obligations to us could adversely affect our financial results and growth prospects.

        The supply of aircraft we purchase and lease is dominated by two airframe manufacturers, Boeing and Airbus, and a limited number of engine manufacturers. As a result, we are dependent on these manufacturers' success in remaining financially stable, producing aircraft and related components that meet the airlines' demands, in both type and quantity, and fulfilling their contractual obligations to us. Should the manufacturers fail to respond appropriately to changes in the market environment or fail to fulfill their contractual obligations, we may experience:

    missed or late delivery of aircraft ordered by us and an inability to meet our contractual obligations to our customers, resulting in lost or delayed revenues, lower growth rates and strained customer relationships;

    an inability to acquire aircraft and related components on terms which will allow us to lease those aircraft to customers at a profit, resulting in lower growth rates or a contraction in our fleet;

    a marketplace with too many aircraft available, creating downward pressure on demand for the aircraft in our fleet and reduced market lease rates; and

    poor customer support from the manufacturers of aircraft and components resulting in reduced demand for a particular manufacturer's product, creating downward pressure on demand for those aircraft in our fleet and reduced market lease rates for those aircraft.

        There have been recent well-publicized delays by Boeing and Airbus in meeting stated deadlines in bringing new aircraft to market. Our purchase agreements with the manufacturers and the leases we have signed with our customers for future lease commitments are all subject to cancellation clauses related to delays in delivery dates. Any manufacturer delays for aircraft that we have committed to lease could strain our relations with our lessees and termination of such leases by the lessees could have a material adverse effect on our financial results.

Future acquisitions may require significant resources and result in unanticipated adverse consequences that could have a material adverse effect on our business, results of operations and financial condition.

        We may seek to grow by making acquisitions, like our acquisition of AeroTurbine. Future acquisitions may require us to make significant cash investments, issue stock or incur substantial debt, which could reduce our liquidity and access to financial markets. In addition, acquisitions may require significant management attention and divert management from our other operations. These capital, equity and managerial commitments may impair the operation of our business. In addition, if the due diligence of the operations of any acquired business performed by us or by third parties on our behalf is inadequate or flawed, or if we later discover unforeseen financial or business liabilities, an acquired business may not perform as expected. Acquisitions could also have a negative impact on our results of operations if we subsequently determine that goodwill or other acquired assets are impaired, resulting in an impairment charge in a future period. Additionally, if we fail to successfully integrate an acquired

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business or we are unable to realize the intended benefits from an acquisition, our existing business, revenue and operating results could be adversely affected.

The continued success of our business will depend, in part, on our ability to acquire strategically attractive aircraft and enter into profitable leases upon the acquisition of such aircraft. If we are unable to successfully execute on our acquisition strategy, our financial results and growth prospects could be materially and adversely affected.

        The success of our business depends, in part, on our ability to acquire strategically attractive aircraft and enter into profitable leases upon the acquisition of such aircraft. We currently have commitments to purchase 229 new fuel-efficient aircraft, including four through sale-leaseback transactions with airlines. We have also agreed to purchase seven used aircraft from third parties. We are considering pursuing additional aircraft purchases from airlines and leasing them back to the airlines, but we may not be able to acquire such additional aircraft. We also may not be able to enter into profitable leases upon the acquisition of the new aircraft we purchase directly from the manufacturers. An acquisition of one or more aircraft may not be profitable to us and may not generate sufficient cash flow to justify those acquisitions. If we experience significant delays in the implementation of our business strategies, including delays in the acquisition and leasing of aircraft, our fleet management strategy and long-term results of operations could be adversely affected.

        In addition, our acquisition strategy exposes us to risks that could have a material adverse effect on our business, financial condition, results of operations and cash flow, including risks that we may:

    impair our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition of aircraft; or

    significantly increase our interest expense and financial leverage to the extent we incur additional debt to finance the acquisition of aircraft.

If we acquire a high concentration of a particular type of aircraft, our business and financial results could be adversely affected by changes in market demand or problems specific to that aircraft type.

        If we acquire a high concentration of a particular type of aircraft, our business and financial results could be adversely affected if the demand for that type of aircraft declines, if it is redesigned or replaced by its manufacturer or if that type of aircraft experiences design or technical problems. For instance, we have contracted to purchase 100 A320neo family narrowbody aircraft and have the right to purchase an additional 50 A320neo family aircraft. If this aircraft type or any other aircraft type of which we acquire a high concentration encounters technical or other problems, the value and lease rates of such aircraft will likely decline and we may be unable to lease such aircraft on favorable terms, if at all. A significant technical problem with a specific type of aircraft could result in the grounding of the aircraft. Any decrease in the value and lease rates of our aircraft may have a material adverse effect on our business and financial results.

Competition from other aircraft lessors or purchasers could adversely affect our financial results and growth prospects.

        The aircraft leasing industry is highly competitive. We may also encounter competition from other entities in the acquisition of aircraft such as airlines, financial institutions, aircraft brokers, public and private partnerships, investors and funds with more capital to invest in aircraft, and other aircraft leasing companies that we do not currently consider our major competitors.

        Competition for a leasing transaction is based principally upon lease rates, delivery dates, lease terms, reputation, management expertise, aircraft condition, specifications and configuration and the availability of the types of aircraft necessary to meet the needs of the customer. Some of our competitors may have greater operating and financial resources and access to lower capital costs than we have. In addition, some competing aircraft lessors may have a lower overall cost of capital and may

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provide inducements to potential lessees that we cannot match. Competition in the purchase and sale of used aircraft is based principally on the availability of used aircraft, price, the terms of the lease to which an aircraft is subject and the creditworthiness of the lessee, if any. We may not always be able to compete successfully with our competitors and other entities, which could materially adversely affect our financial results and growth prospects.

The loss of key personnel could adversely affect our reputation and relationships with lessees, manufacturers, buyers and financiers of aircraft, which are a critical element to the success of our business.

        We believe our senior management's reputation and relationships with lessees, manufacturers, buyers and financiers of aircraft are an important element to the success of our business. Strong competition exists for qualified personnel with demonstrated ability both within and outside our industry. We had significant turnover in our senior management team during 2010 and 2011, resulting in a new chief executive officer, president, chief financial officer and general counsel. Additionally, ILFC appointed a new Executive Chairman in June 2012 who is ILFC's most senior executive officer. Only ILFC's Executive Chairman, Laurette T. Koellner, and our chief executive officer, Mr. Courpron, are currently covered by employment agreements. Furthermore, as an indirect wholly owned subsidiary of AIG, we have been subject to statutory compensation limits, which we refer to generally as the "TARP Standards," that restrict the structure and amounts of compensation that we may pay to any of our executive officers who are or become subject to the TARP Standards. We will continue to be subject to the TARP Standards following this offering until the time that AIG no longer owns at least 50% of our outstanding stock or repays 100% of the aggregate financial assistance it received under the Troubled Assets Relief Program, or TARP, whichever is earlier. The restrictions and limitations on compensation imposed on us under the TARP Standards may adversely affect our ability to attract new talent and retain and motivate our existing impacted employees. The inability to retain our key employees or attract and retain new talent could adversely impact our business and results of operation.

The future recognition of deferred tax liabilities accumulated during prior periods could have a negative impact on our future cash flows.

        It is typical in the aircraft leasing industry for companies that are continuously acquiring additional aircraft to incur significant tax depreciation, which offsets taxable income but creates a deferred tax liability on the aircraft leasing company's balance sheet. This deferred tax liability is attributable to the excess of the depreciation claimed for tax purposes over the depreciation claimed for financial statement purposes. As of September 30, 2012, we had a net deferred tax liability of approximately $4.1 billion, which primarily reflects accelerated depreciation claimed for tax purposes. Our net deferred tax liability as of September 30, 2012, adjusted to give effect to the election under Section 338(h)(10) of the Code in connection with the Reorganization described below and the attendant step-up in the basis of our assets for federal income tax purposes, is $             billion. The recognition of these deferred tax liabilities could have a negative impact on our cash flow in future periods.

If the Reorganization does not qualify for the election under Section 338(h)(10) of the Code, the anticipated benefits to us of a step-up in the basis of ILFC's assets for United States federal income tax purposes and the corresponding reduction of our net deferred tax liability will not be realized and our credit ratings may be negatively affected.

        The Reorganization is expected to qualify for the election under Section 338(h)(10) of the Code to be treated for United States federal income tax purposes as a purchase by us of the assets, rather than the stock, of ILFC, with the attendant step-up in the basis of such assets for United States federal income tax purposes. There can be no assurance, however, that the Reorganization will qualify for such treatment. If the Reorganization does not so qualify, the anticipated benefits to us, including the step-up in tax basis of ILFC's assets and the corresponding reduction of our net deferred tax liability,

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will not be realized. As a result, our income tax liability would be significantly greater than it would be if the Reorganization were to qualify for such treatment and our net deferred tax liability would not be reduced. Further, if the Reorganization does not qualify for such treatment, we may experience downgrades in our credit ratings, which could adversely affect our ability to issue debt and obtain new financings, or renew existing financings, and would increase the cost of such financings.

        AIG has received a private letter ruling from the IRS that the Reorganization will qualify for the election under Section 338(h)(10) of the Code. Although the private letter ruling relating to the qualification of the Reorganization for the election under Section 338(h)(10) of the Code generally will be binding on the IRS, the private letter ruling is based, in part, on certain assumptions and the accuracy of certain representations and statements as to factual matters made by AIG, as well as the undertaking by AIG to dispose of sufficient additional shares of our stock in future offerings and/or additional or alternative transactions within two years of this offering such that AIG will own less than 50% by value of our shares (taking into account certain constructive ownership rules) at the end of such two-year period. See "Shares Eligible for Future Sale—Plans of Divestiture." If any of the representations, statements, assumptions or undertakings by AIG on which the private letter ruling is based is, or becomes, inaccurate or incomplete in any material respect or is not otherwise satisfied, or the facts on which the private letter ruling is based differ materially from the facts at the time of the Reorganization, the private letter ruling could be invalidated.

Even if the Reorganization qualifies for the election under Section 338(h)(10) of the Code, the "anti-churning" rules of Section 197 of the Code may prohibit us from amortizing a portion of any resulting step-up in the basis of ILFC's intangible assets unless AIG's ownership of our stock is reduced to 20% or less by vote and value (not including the Series A Redeemable Preferred) within three years of the completion of this offering.

        The anti-churning rules of Section 197 of the Code will prohibit us from amortizing any portion of any step-up in the basis of ILFC's assets that is attributable to certain intangibles (such as goodwill and going concern value) if AIG is deemed to be "related" to us. Our private letter ruling provides that AIG will not be deemed to be related to us as long as AIG reduces its ownership of our stock to 20% or less by vote and value (not including the Series A Redeemable Preferred) within three years of the completion of this offering. While AIG expects to reduce its ownership of our stock so as to avoid application of the anti-churning rules, AIG is not obligated to do so and there is no assurance that AIG will do so. Any inability to amortize a portion of a step-up in the basis of ILFC's intangible assets could negatively impact our results.

We operate in multiple jurisdictions and may become subject to a wide range of income and other taxes.

        We operate in multiple jurisdictions and may become subject to a wide range of income and other taxes. If we are unable to execute our business in jurisdictions with favorable tax treatment, our operations may be subject to significant income and other taxes.

        Moreover, as our aircraft are operated by our lessees in multiple states and foreign jurisdictions, we may have nexus or taxable presence as a result of our aircraft landings in various states or foreign jurisdictions. Such landings may result in us being subject to various foreign, state and local taxes in such states or foreign jurisdictions.

We are subject to various risks and requirements associated with transacting business in foreign countries.

        Our international operations, including those of AeroTurbine, expose us to trade and economic sanctions and other restrictions imposed by the United States or other governments or organizations. See "Business—Government Regulation." The U.S. Departments of Justice, Commerce, State and Treasury and other federal agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act, or FCPA, and other federal statutes and

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regulations, including the International Traffic in Arms Regulations, or ITAR, and those established by the Office of Foreign Assets Control, or OFAC. Under these laws and regulations, the government may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries, and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions. A violation of these laws or regulations could adversely impact our business, operating results, and financial condition.

        We have in place training programs for our employees with respect to FCPA, OFAC, export controls and similar laws and regulations. There can be no assurance that our employees, consultants, sales agents, or associates will not engage in conduct for which we may be held responsible. Violations of the FCPA, OFAC and other export control regulations, and similar laws and regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

We are subject to various environmental laws and regulations that could have an adverse impact on our results of operations.

        Our operations, including AeroTurbine's operations, are subject to various federal, state and local environmental, health and safety laws and regulations in the United States, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of regulated materials, the remediation of contaminated sites, and the health and safety of our employees. A violation of these laws and regulations or permit conditions can result in substantial fines, permit revocation or other damages. Many of these laws could obligate us to investigate or clean-up contamination that may exist at our current facilities, or facilities that we formerly owned or operated, even if we did not cause the contamination. They could also impose liability on us for related natural resource damages or investigation and remediation of third party waste disposal sites where we have sent, or may send, waste. We may also be subject to claims for personal injury or property damages relating to any such contamination or non-compliance with other environmental requirements. We may not be in complete compliance with these laws, regulations or permits at all times. Also, new or more stringent standards in existing environmental laws may cause us to incur additional costs.

Regulations relating to climate change, noise restrictions, and greenhouse gas emissions may have a negative effect on the airline industry and our business and financial condition.

        Governmental regulations regarding aircraft and engine noise and emissions levels apply based on where the relevant aircraft is registered and operated. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with noise level standards. In addition to the current requirements, the United States and the International Civil Aviation Organization, or the ICAO, have adopted a new, more stringent set of standards for noise levels which applies to engines manufactured or certified on or after January 1, 2006. Currently, U.S. regulations would not require any phase-out of aircraft that meet the older standards applicable to engines manufactured or certified prior to January 1, 2006, but the European Union has established a framework for the imposition of operating limitations on aircraft that is not consistent with these new standards.

        More recently, the ICAO has been reviewing and analyzing certification noise levels for certain aircraft, and based on that analysis, is developing a range of increased stringency noise standard alternatives. This analysis will be considered at an ICAO meeting in 2013. In addition to more stringent noise restrictions, the United States and certain other jurisdictions regulate emissions of certain greenhouse gases, such as nitrogen oxide. These limits frequently apply only to engines manufactured after 1999; however, because aircraft engines are replaced from time to time in the usual course, it is likely that the number of engines subject to these requirements would increase over time. In addition, concerns over climate change could result in more stringent limitations on the operation of aircraft

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powered by older, noncompliant engines, as well as newer engines. For example, the United States recently adopted more stringent nitrogen oxide emission standards for newly manufactured aircraft engines starting in 2013 and an even more stringent emission standard for engines manufactured in 2014 or later; the European Union has incorporated aviation-related greenhouse gas emissions into the European Union's Emission Trading System beginning January 1, 2012, and the ICAO recently approved a resolution designed to cap greenhouse gas emissions from aircraft and committed to propose a greenhouse gas emission standard for aircraft engines by 2013.

        European countries generally have relatively strict environmental regulations that can restrict operational flexibility and decrease aircraft productivity. As noted, the European Parliament and the European Court of Justice included aviation in the European Union's Emissions Trading System starting January 1, 2012, and all of the emissions associated with international flights that land or take off within the European Union are now subject to the trading program, even those emissions that are emitted outside of the European Union. Although the European Union announced on November 12, 2012 that it intends to delay enforcement of the aviation portion of their Emission Trading System for such international flights in light of recent progress made by ICAO on international aviation emission regulation, the delay is expected to be for one year only to allow ICAO time to craft a regulation, and if ICAO fails to adopt regulations acceptable to the European Union, the European Union will enforce its aviation emissions trading program. This inclusion could possibly distort the European air transport market leading to higher ticket prices and ultimately a reduction in demand for air travel. Beginning in 2007, the United Kingdom doubled its air passenger duties to respond to the environmental costs of air travel. Similar measures may be implemented in other jurisdictions or by the ICAO due to environmental concerns. These increased costs could have a negative impact on the demand for air travel and, as a result, on our business and financial condition.

        In addition, noise and emission regulations could limit the economic life of our aircraft and engines, reduce their value, limit our ability to lease or sell the non-compliant aircraft and engines or, if engine modifications are necessary, require us to make significant additional investments in the aircraft and engines to make them compliant. Compliance with current or future regulations, taxes or duties imposed to deal with environmental concerns could cause lessees to incur higher costs and to generate lower net revenues, resulting in an adverse impact on their financial conditions. Consequently, such compliance may affect lessees' ability to make rental and other lease payments and reduce the value we receive for the aircraft upon any disposition, which could have an adverse effect on our business and financial condition.

Failure to obtain certain required licenses and approvals could negatively affect our ability to re-lease or sell aircraft, which would negatively affect our financial condition and results of operations.

        Lessees are subject to extensive regulation under the laws of the jurisdictions in which the aircraft are registered and operated. As a result, we expect that certain aspects of our leases will require licenses, consents or approvals, including consents from governmental or regulatory authorities for certain payments under our leases and for the import, export or deregistration of the aircraft. Subsequent changes in applicable law or administrative practice may increase such requirements and governmental consent, once given, could be withdrawn. Furthermore, consents needed in connection with the future re-leasing or sale of an aircraft may not be forthcoming. Any of these events could adversely affect our ability to re-lease or sell aircraft, which would negatively affect our financial condition and results of operations.

We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.

        We are a holding company with no material direct operations. Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries. As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our

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financial obligations. Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions. Under its current debt agreements, ILFC may pay dividends or make other payments to us of up to approximately $1.5 billion of its consolidated retained earnings and is restricted from using proceeds from asset sales to pay dividends to us. If the cash we receive from our subsidiaries pursuant to dividend and other payments is insufficient for us to fund any of our obligations, we may be required to raise cash through the incurrence of debt or the issuance of additional equity.

A cyber-attack that bypasses our information technology, or IT, security systems, causing an IT security breach, may lead to a material disruption of our IT systems and the loss of business information which may hinder our ability to conduct our business effectively and may result in lost revenues and additional costs.

        Parts of our business depend on the secure operation of our computer systems to manage, process, store, and transmit information associated with aircraft leasing. A cyber-attack could adversely impact our daily operations and lead to the loss of sensitive information, including our own proprietary information and that of our customers, suppliers and employees. Such losses could result in reputational harm, competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liability. While we devote substantial resources to maintaining adequate levels of cyber-security, our resources and technical sophistication may not be adequate to prevent all types of cyber-attacks.

The timing and amount in which we report our revenue and expenses may be significantly impacted by a proposed new standard for lease accounting.

        In August 2010, the Financial Accounting Standards Board, or FASB, and the International Accounting Standards Board, or IASB, issued an Exposure Draft that proposes substantial changes to existing lease accounting that will affect all lease arrangements. Subsequent meetings of the joint committee of the FASB and the IASB have made further changes to the proposed lease accounting.

        Under the current proposed accounting model, lessees will be required to record an asset representing the right-to-use the leased item for the lease term, or Right-of-Use Asset, and a liability to make lease payments. The Right-of-Use asset and liability incorporate the rights arising under the lease and are based on the lessee's assessment of expected payments to be made over the lease term. The proposed model requires measuring these amounts at the present value of the future expected payments. Lease expense would include the amortization of the Right-of-Use Asset and the recognition of interest expense based on the lessee's incremental borrowing rate (or the rate implicit in the lease, if known) on the repayment of the lease obligation.

        Under the current proposed accounting model, lessors will apply the receivable and residual method. This will require a lessor to derecognize its flight equipment into a receivable based upon the present value of lease payments under a lease and a residual value. Revenue recognized would be interest income based upon the effective interest rate implicit in the lease.

        The FASB and IASB intend to issue a revised exposure draft in 2013. The proposal does not include a proposed effective date; rather it is expected to be considered as part of the evaluation of the effective dates for the major projects currently undertaken by the FASB. The FASB and IASB continue to deliberate on the proposed accounting. Currently, management is unable to assess the impact the adoption of the new finalized lease standard will have on our financial statements. Although we believe the presentation of our financial statements, and those of our lessees, will likely change, we do not believe the accounting pronouncement will change the fundamental economic reasons for which the airlines lease aircraft. Therefore, we do not believe it will have a material impact on our business.

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Risks Related to Our Separation from AIG

Our separation from AIG could adversely affect our business and profitability.

        Until September 2008, although neither AIG nor any of its subsidiaries is a co-obligor or guarantor of ILFC's debt securities, ILFC benefitted from AIG's strong credit rating as it enabled ILFC to finance the purchase of its aircraft at rates that were likely cheaper than rates it would have been able to obtain if it was not a wholly owned subsidiary of AIG. Upon the consummation of this offering and our separation from AIG, we may not be able to obtain financing on terms as favorable as could be obtained as a wholly owned subsidiary of AIG. We cannot accurately predict the effect that our separation from AIG will have on our ability to access the debt markets on terms favorable to us.

        Further, following the consummation of this offering, certain services previously provided to us by AIG may have to be performed by third-party providers or us. We will enter into the Intercompany Agreement with AIG and AIG Capital prior to the completion of this offering, pursuant to which AIG and its subsidiaries will agree to provide us with certain transition services following this offering for a period of time. AIG and its subsidiaries could fail to meet their obligations under the Intercompany Agreement. If AIG and its subsidiaries cease to provide services under this agreement, we may have to obtain these services from third parties or hire additional personnel to perform these services. In addition, we may fail to identify and transition some services in an orderly manner or fail to perform such services internally or procure the performance of third parties for certain services previously provided by AIG.

        In preparation for our separation from AIG, we expect to establish new policies, procedures and operations and hire new employees to assist with our operations as a reorganized standalone entity. We plan to implement a corporate governance and risk management structure that is suitable for a standalone entity and allows us to maximize the benefits of the separation. However, we may not be able to correctly, or fully, implement this structure. The risks related to our separation from AIG could materialize at various times, including immediately upon the completion of this offering.

        After our separation, we may no longer be able to file tax returns on a combined or unitary basis with AIG in certain combined or unitary return states, resulting in higher state taxes on a standalone basis.

The terms of our arrangements with AIG may be more favorable than we will be able to obtain from an unaffiliated third party. We may be unable to replace the services AIG provides us in a timely manner or on comparable terms.

        Prior to the completion of this offering, we will enter into the Intercompany Agreement with AIG and AIG Capital that governs registration rights, provision of financial and other information, transition services, compliance policies and procedures, and other matters after this offering. Pursuant to the Intercompany Agreement, AIG and its subsidiaries will agree to provide us with a number of transition services after this offering. The Intercompany Agreement is intended to replace the cost-sharing agreements ILFC is currently a party to with AIG, which generally provide for the allocation of corporate costs based upon a proportional allocation of costs to all AIG subsidiaries. The Intercompany Agreement is also intended to replace our other arrangements pursuant to which we pay other subsidiaries of AIG fees related to management services provided for certain of our foreign subsidiaries and AIG pays certain expenses on our behalf.

        We will negotiate the Intercompany Agreement with AIG and AIG Capital in the context of a parent-subsidiary relationship. Although AIG will be contractually obligated to provide us with services during the term of the Intercompany Agreement, these services may not be sustained at the same level after the expiration of that agreement, or we may not be able to replace these services in a timely manner or on comparable terms. The Intercompany Agreement with AIG and AIG Capital also will

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govern the relationship between us and AIG after this offering. The Intercompany Agreement may contain terms and provisions that are more favorable to us than terms and provisions we might have obtained in arm's-length negotiations with unaffiliated third parties. When AIG and its subsidiaries cease to provide services pursuant to those arrangements, our costs of procuring those services from third parties may increase. See "Transactions with Related Parties—Intercompany Allocations and Fees with AIG and Its Subsidiaries" and "Transactions with Related Parties—Transactions in Connection with this Offering—Intercompany Agreement with AIG and AIG Capital."

Under the tax matters agreement, AIG will control certain tax returns and audits that can result in tax liability for us.

        Under the tax matters agreement, AIG will retain control over the preparation and filing, as well as the contests, audits and amendments or other changes of certain pre-offering federal income tax returns with respect to which we remain liable for taxes. In addition, determinations regarding the allocation to us of responsibility to pay taxes for pre-offering periods will be made by AIG in its reasonable discretion. Although the tax matters agreement provides that we will not be liable for taxes resulting from returns filed or matters settled by AIG without our consent if the return or settlement position is found to be unreasonable, taking into account both the liability that we incur and any non-Holdings tax benefit, it is possible that we will pay materially more taxes than we would have paid if we were permitted to control such matters.

We are potentially liable for U.S. income taxes of the entire AIG consolidated group for all taxable years in which we were a member of such group.

        From 1990 to the date of this offering, we were included in the consolidated U.S. federal income tax group of which AIG was the common parent, or the AIG Consolidated Group, and we did not file our own federal income tax returns. Under U.S. federal income tax laws, any entity that is a member of a consolidated group at any time during a taxable year is severally liable for the group's entire federal income tax liability for the entire taxable year. Thus, notwithstanding any contractual rights to be reimbursed or indemnified by AIG pursuant to the tax matters agreement, to the extent AIG or other members of the AIG Consolidated Group fail to make any federal income tax payments required of them by law in respect of taxable years for which we were a member of the AIG Consolidated Group, we would be liable for the shortfall. Similar principles apply for state and local income tax purposes in many states and localities.

Conflicts of interest may arise between us and AIG that could be resolved in a manner unfavorable to us.

        Questions relating to conflicts of interest may arise between us and AIG in a number of areas relating to our past and ongoing relationships. Following the consummation of this offering,        of our directors will be designated by AIG as long as AIG beneficially owns at least 20% of our common stock. Additionally, if six quarterly dividends, whether consecutive or not, have not been paid or we fail to redeem the outstanding Series A Redeemable Preferred on the date fixed for such purpose, the holders of the Series A Redeemable Preferred will have the right, voting separately as a class, to elect two members to our board of directors. The two directors initially designated by AIG are executive officers of AIG and another of our initial directors serves on AIG's board of directors. These directors and a number of our officers own substantial amounts of AIG stock and options to purchase AIG stock, and most of them participate in AIG pension plans. Ownership interests of our directors or officers in AIG shares, or service as a director or officer of both our company and AIG, could give rise to potential conflicts of interest when a director or officer is faced with a decision that could have different implications for the two companies.

        These potential conflicts could arise, for example, over matters such as the desirability of an acquisition opportunity, employee retention or recruiting, or our dividend policy. The policies relating

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to corporate opportunities and transactions with AIG set forth in our restated certificate of incorporation address potential conflicts of interest between our company, on the one hand, and AIG and its officers and directors who are directors of our company, on the other hand. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to these provisions of our restated certificate of incorporation. Although these provisions are designed to resolve conflicts between us and AIG fairly, conflicts may not be so resolved. The principles for resolving such potential conflicts of interest are described under "Description of Capital Stock—Provisions of Our Restated Certificate of Incorporation Relating to Corporate Opportunities and Transactions with AIG."

AIG and its directors and officers will have limited liability to us or you for breach of fiduciary duty.

        Our restated certificate of incorporation will provide that AIG will have no obligation to refrain from:

    engaging in the same, similar or related business activities or lines of business as we do;

    doing business with any of our clients, customers or vendors; or

    employing or otherwise engaging any of our officers or employees.

        Under our restated certificate of incorporation, neither AIG nor any officer or director of AIG, except as provided in our restated certificate of incorporation, will be liable to us or to our stockholders for breach of any fiduciary duty by reason of any of these activities. See "Description of Capital Stock—Provisions of Our Restated Certificate of Incorporation Relating to Corporate Opportunities and Transactions with AIG."

AIG is free to sell a controlling interest in us to a third party, and, if it does so, you may not realize any change-of-control premium on shares of our common stock, and we may become subject to the control of a presently unknown third party.

        Pursuant to Plans of Divestiture that AIG and AIG Capital will adopt in connection with this offering, AIG Capital intends to sell more than 50% by value of our stock, in the aggregate, within two years of this offering, and intends to dispose of at least 80% by vote and value of our stock (not including the Series A Redeemable Preferred), in the aggregate, within three years of this offering. AIG currently expects that AIG Capital will reduce its ownership interest in us through one or more additional public offerings of our stock and, possibly, through one or more privately negotiated sales of our stock, and ultimately expects to dispose of all of our stock, but it is not obligated to divest our shares in any particular manner. As such, AIG Capital could, among other things, sell a controlling interest in us to a third party following the expiration of its            -day lock-up period with the underwriters. We have agreed not to institute a stockholder rights plan that limits the ability of AIG, or any such transferee, from acquiring additional shares of our common stock. The ability of AIG to sell its shares of our common stock to a third party, with no requirement for a concurrent offer to be made to acquire all of the shares of our common stock that will be publicly traded hereafter, could prevent you from realizing any change-of-control premium on your shares of our common stock that may otherwise accrue to AIG, upon its private sale of our common stock. In addition, if AIG were to sell its equity interest in our company in a private transaction, we may become subject to the control of a presently unknown third party. The interests of any such third party may conflict with those of other stockholders.

Our historical financial information is not necessarily representative of the results we would have achieved as a standalone public company with listed equity and may not be a reliable indicator of our future results.

        The historical financial information included in this prospectus does not reflect the financial condition, results of operations or cash flows we would have achieved as a standalone company during

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the periods presented or those we will achieve in the future. This is primarily a result of the following factors:

    Our historical financial results reflect allocations of corporate expenses, including tax expenses, from AIG. Those allocations may be different from the comparable expenses we would have incurred had we operated as a standalone company;

    Our historical financial results reflect the fact that we were included in certain AIG unitary or combined state tax returns. As a standalone company, our state income taxes would have been higher;

    Significant changes may occur in our cost structure, financing and business operations as a result of our separation from AIG. These changes could result in increased costs associated with reduced economies of scale and costs for services currently provided by AIG;

    The need for additional personnel to perform services currently provided by AIG, and the legal, accounting, compliance and other costs associated with being a public company with listed equity;

    Our separation from AIG may have an adverse effect on our relationships with customers, regulators and government officials, which could result in reduced leases and sales, increased regulatory scrutiny and disruption to our business operations; and

    The separation may increase our cost of borrowing.

None of the Federal Reserve Bank of New York, or the FRBNY, Department of the Treasury, or any other department or agency of the U.S. government has given any guarantee, undertaking or assurance to provide any financial or other support to us at any time in the future.

        Given the previous actions of the FRBNY and the Department of the Treasury in connection with the liquidity issues of AIG and its subsidiaries, including ILFC, and the Department of the Treasury's ownership of approximately 15.9% of AIG's outstanding common stock and the possibility that AIG will remain a significant stockholder of us for some time after the completion of this offering, some investors may assume that the FRBNY or Department of the Treasury may provide support to us if we were to encounter financial or other difficulties in the future. Investors should be aware that none of the FRBNY, Department of the Treasury, nor any other department or agency of the U.S. government, nor any of their respective employees, representatives or agents has given any guarantee, undertaking or assurance (whether express or implied and whether or not the same is legally binding) to provide any financial or other support (whether in the form of debt, equity or otherwise) to us at any time in the future. Accordingly, investors should not assume that any such support would be provided by any such entities in those circumstances.

The Department of the Treasury, a significant stockholder of AIG, is a federal agency, and your ability to bring a claim against it under the U.S. securities laws or otherwise may be limited.

        The Department of the Treasury currently owns approximately 15.9% of the common stock of AIG. The doctrine of sovereign immunity provides that claims may not be brought against the United States of America or any agency or instrumentality thereof unless specifically permitted by act of Congress. Although Congress has enacted a number of statutes, including the Federal Tort Claims Act, or the FTCA, that permit various claims against the United States and agencies and instrumentalities thereof, those statutes impose limitations. In particular, while the FTCA permits various tort claims against the United States, it excludes claims for fraud or misrepresentation. At least one federal court, in a case involving a federal agency, has held that the United States may assert its sovereign immunity to claims brought under the federal securities laws. In addition, the Department of the Treasury and its officers, agents and employees are exempt from liability for any violation or alleged violation of the

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anti-fraud provisions of Section 10(b) of the Securities Exchange Act of 1934, or the Exchange Act, by virtue of Section 3(c) thereof. Thus, any attempt to assert a claim against the Department of the Treasury or any of its officers, agents or employees alleging a violation of the U.S. securities laws, including the Securities Act of 1933, or the Securities Act, and the Exchange Act, resulting from an alleged material misstatement in or material omission from this prospectus or the registration statement of which this prospectus is a part, or any other act or omission in connection with this offering, would likely be barred. Further, any attempt to assert a claim against the Department of the Treasury or any of its officers, agents or employees alleging any other complaint, including as a result of any future action by the Department of the Treasury as a significant stockholder of AIG, would also likely be barred under sovereign immunity unless specifically permitted by act of Congress.

If AIG continues to have significant influence over us after this offering, we may be subject to certain laws and regulations solely due to our relationship with AIG.

        As an indirect wholly owned subsidiary of AIG, we have been subject to the TARP Standards that restrict the structure and amounts of compensation that we may pay to any of our executive officers who are or become subject to the TARP Standards. We will continue to be subject to the TARP Standards following this offering until the time that AIG no longer owns at least 50% of our outstanding stock or repays 100% of the aggregate financial assistance it received under TARP, whichever is earlier. In addition, AIG is regulated by the FRB as an SLHC. Consequently, AIG is subject to the examination, enforcement and supervisory authority of the FRB and the FRB has the authority to impose capital requirements and operational restrictions on AIG and its subsidiaries, including us. If AIG continues to have significant influence over us after completion of this offering, we may also become subject to new and additional laws and government regulations regarding various aspects of our business in the future. These regulations could make it more difficult for us to compete with other companies that are not subject to similar regulations.

Risks Related to our Common Stock and this Offering

AIG will have significant influence over us and may not always exercise its influence in a way that benefits our public stockholders.

        Upon the completion of this offering, AIG will continue to beneficially own a significant percentage of our stock. Pursuant to Plans of Divestiture that AIG and AIG Capital will adopt in connection with this offering, AIG Capital intends to sell more than 50% by value of our stock, in the aggregate, within two years of this offering, and intends to dispose of at least 80% by vote and value of our stock (not including the Series A Redeemable Preferred), in the aggregate, within three years of this offering. AIG currently expects that AIG Capital will reduce its ownership interest in us through one or more additional public offerings of our stock and, possibly, through one or more privately negotiated sales of our stock, and ultimately expects to dispose of all of our stock, but it is not obligated to divest our shares in any particular manner. As long as AIG continues to beneficially own more than 50% of our outstanding voting stock, AIG generally will be able to determine the outcome of corporate actions requiring stockholder approval, including the election of the majority of the members of our board of directors. If AIG has the ability to control the election of the majority of the members of our board of directors, AIG will have the ability to vote on any transaction that requires the approval of our board of directors and stockholders, including the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets. Even after AIG reduces its beneficial ownership below 50% of our outstanding voting stock, it will likely still be able to assert significant influence over our board of directors and certain corporate actions.

        Because AIG's interests may differ from your interests, actions AIG takes as our controlling stockholder or as a significant stockholder may not be favorable to you. For example, the concentration

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of ownership held by AIG could delay, defer or prevent a change a control of us or impede a merger, takeover or other business combination which another stockholder may otherwise view favorably.

An active trading market for our common stock may not develop.

        Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The offering price for our common stock may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid in this offering.

The price and trading volume of our common stock may fluctuate significantly, and you could lose all or part of your investment.

        Even if an active trading market develops upon completion of this offering and listing of our common stock, the market price of our common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume of our common stock may fluctuate and cause significant price variations to occur. Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares of common stock. The market price for our common stock could fluctuate significantly for various reasons, including:

    our operating and financial performance and prospects;

    our quarterly or annual earnings or those of other companies in our industry;

    conditions that impact demand for our aircraft and services;

    the public's reaction to our press releases, other public announcements and filings with the SEC;

    changes in earnings estimates or recommendations by securities analysts who track our common stock;

    market and industry perception of our success, or lack thereof, in pursuing our growth strategy;

    strategic actions by us or our competitors, such as acquisitions or restructurings;

    changes in government regulations;

    changes in accounting standards, policies, guidance, interpretations or principles;

    arrival and departure of key personnel;

    the number of shares to be publicly traded after this offering;

    changes in our capital structure;

    sales of common stock by AIG, us or members of our management team;

    changes in AIG's business, lack of market confidence in AIG, the inability of AIG to meet its capital and liquidity requirements or other events that affect, or are perceived to affect, our business and operations; and

    changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war and responses to such events.

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        In addition, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in the aircraft leasing industry. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce our share price.

Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of shares of our common stock.

        Future sales or the availability for sale of substantial amounts of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through future sales of equity securities. Upon completion of this offering, we will have             shares of common stock outstanding. The shares sold in this offering will be freely tradable. All of the outstanding shares of common stock not sold in this offering will initially be held by AIG Capital and will be deemed "restricted securities," as that term is defined under Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if they have been registered or if they qualify for an exemption from registration, such as the exemption provided by Rule 144 under the Securities Act. We will be required to register the resale of our shares of common stock held by AIG Capital under the Securities Act pursuant to the Intercompany Agreement. Registration of these shares would result in the shares becoming freely tradable without restriction under the Securities Act immediately upon their sale. See "Transactions with Related Parties—Transactions in Connection with this Offering—Intercompany Agreement with AIG and AIG Capital."

        Pursuant to Plans of Divestiture that AIG and AIG Capital will adopt in connection with this offering, AIG Capital intends to sell more than 50% by value of our stock, in the aggregate, within two years of this offering, and intends to dispose of at least 80% by vote and value of our stock (not including the Series A Redeemable Preferred), in the aggregate, within three years of this offering. AIG currently expects that AIG Capital will reduce its ownership interest in us through one or more additional public offerings of our stock and, possibly, through one or more privately negotiated sales of our stock, and ultimately expects to dispose of all of our stock, but it is not obligated to divest our shares in any particular manner. Sales of a substantial number of shares of our common stock could adversely affect the market price of our common stock.

        We, our directors and executive officers, and AIG have agreed with the underwriters that, without the prior written consent of            , we and they will not, subject to certain exceptions and an 18-day extension, during the period ending        days after the date of this prospectus offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of directly or indirectly, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of shares of common stock or any securities convertible into or exercisable or exchangeable for common stock. The underwriters, in their sole discretion and at any time without notice, may release all or any portion of the shares of our common stock subject to the lock-up agreements.

        In addition, immediately following this offering, we intend to file a registration statement registering under the Securities Act the shares of common stock reserved for issuance in respect of incentive awards to our officers and certain of our employees. If any of these holders cause a large number of securities to be sold in the public market, the sales could reduce the trading price of our common stock. These sales also could impede our ability to raise future capital. See the information in the section "Shares Eligible for Future Sale" for a more detailed description of the shares that will be available for future sales upon completion of this offering.

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        We may also issue shares of common stock or other securities from time to time as consideration for future acquisitions and investments or for any other reason that our board of directors deems advisable. If any such acquisition or investment is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of common stock or other securities in connection with any such acquisitions and investments.

        We cannot predict the size of future issuances of our common stock or other securities or the effect, if any, that future issuances and sales of our common stock or other securities, including future sales by AIG, will have on the market price of our common stock.

Although ILFC already files periodic reports with the SEC pursuant to Section 13 of the Exchange Act, becoming a company with publicly traded common stock will increase our expenses and administrative burden.

        As a company with publicly traded common stock, we will incur legal, accounting and other expenses that we did not incur as a company without publicly traded common stock. In addition, our administrative staff will be required to perform additional tasks. For example, in anticipation of becoming a company with publicly traded common stock, we will need to create or revise the roles and duties of the committees of our board of directors and retain a transfer agent. After our common stock is publicly traded, we will also be required to hold an annual meeting for our stockholders, which will require us to expend resources to prepare, print and mail a proxy statement relating to the annual meeting.

        We also expect that being a company with publicly traded common stock will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee, and qualified executive officers.

Our certificate of incorporation and bylaws will contain provisions that could discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.

        Provisions of our restated certificate of incorporation and amended and restated bylaws that will be adopted by us prior to the effectiveness of the registration statement of which this prospectus forms a part may delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our directors. These provisions include:

    prohibiting cumulative voting in the election of directors;

    authorizing the issuance of "blank check" preferred stock without any need for action by stockholders;

    limiting the ability of our stockholders to call and bring business before special meetings;

    prohibiting stockholders to act by written consent unless AIG beneficially owns at least a majority of our common stock outstanding; and

    establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

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        Section 203 of the Delaware General Corporation Law, or Section 203, also may affect the ability of an "interested stockholder" to engage in certain business combinations, including mergers, consolidation or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an "interested stockholder." An "interested stockholder" is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation. Section 203, however, does not prohibit business combinations between AIG and us because AIG (through AIG Capital) obtained our shares before our shares were listed on a national securities exchange or held of record by more than 2,000 stockholders.

        Together, these charter and statutory provisions could make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our common stock. Furthermore, the existence of the foregoing provisions, as well as the significant amount of common stock that AIG may beneficially own following this offering, could limit the price that investors might be willing to pay in the future for shares of our common stock. These factors could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Our certificate of incorporation and bylaws will include provisions limiting voting by non-U.S. citizens.

        To comply with restrictions imposed by federal law on foreign ownership of U.S. registered aircraft, our restated certificate of incorporation and amended and restated bylaws that will be adopted by us prior to the effectiveness of the registration statement of which this prospectus forms a part restrict voting of shares of our common stock by non-U.S. citizens. The restrictions imposed by federal law currently require that no more than 25% of our stock be voted, directly or indirectly, by persons who are not U.S. citizens, and that our president and at least two-thirds of the members of our board of directors and other managing officers be U.S. citizens. Our restated certificate of incorporation and amended and restated bylaws will provide that, in the event that the aggregate foreign ownership of our outstanding common stock exceeds the foreign ownership restrictions imposed by federal law, the voting rights of those shares that exceed the foreign ownership restrictions will be suspended. Further, our restated certificate of incorporation provides that no shares may be voted by or at the direction of non-U.S. citizens unless such shares are registered on a separate stock record, which we refer to as the "foreign stock record." Our restated certificate of incorporation and amended and restated bylaws will further provide that no shares of our common stock will be registered on the foreign stock record if the amount so registered would exceed the foreign ownership restrictions imposed by federal law. If it is determined that the amount registered in the foreign stock record exceeds the foreign ownership restrictions imposed by federal law, shares will be removed from the foreign stock record in reverse chronological order based on the date of registration therein, until the number of shares registered therein does not exceed the foreign ownership restrictions imposed by federal law. See "Business—Government Regulation" and "Description of Capital Stock—Foreign Ownership Restrictions."

Our restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us.

        Our restated certificate of incorporation will provide that, unless we consent in writing to alternative forums, the Court of Chancery of the State of Delaware will be the exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us by our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the Delaware General Corporation Law or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. We may consent in writing to alternative forums. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to these provisions of our restated certificate of incorporation. This choice of

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forum provision in our restated certificate of incorporation may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us. See "Description of Capital Stock—Choice of Forum."

We currently do not intend to pay dividends on our common stock and, consequentially, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates.

        Following the completion of this offering, we do not anticipate paying any cash dividends on our common stock for the foreseeable future. Any decision to pay dividends on our common stock in the future will be at the discretion of our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business condition and covenants under any applicable contractual arrangements, including our indebtedness. Additionally, if dividends on the Series A Redeemable Preferred have not been paid when due, or declared and set aside for payment when due, no dividends may be paid on our common stock. Accordingly, if you purchase shares of our common stock in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock. See the sections entitled "Dividend Policy" and "Description of Capital Stock—Preferred Stock—Series A Mandatorily Redeemable Preferred Stock" for additional information.

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FORWARD-LOOKING STATEMENTS

        This prospectus contains statements that constitute forward-looking statements. Those statements appear in a number of places in this prospectus and include statements regarding, among other matters, the state of the airline industry, including expectations of SH&E regarding the industry, our access to the capital markets, our ability to restructure leases and repossess aircraft, the structure of our leases, regulatory matters pertaining to compliance with governmental regulations and other factors affecting our financial condition or results of operations. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and "should" and variations of these words and similar expressions, are used in many cases to identify these forward-looking statements. Any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to vary materially from our future results, performance or achievements, or those of our industry, expressed or implied in such forward-looking statements. Such factors include, among others, general industry, economic and business conditions, which will, among other things, affect demand for aircraft, availability and creditworthiness of current and prospective lessees, lease rates, availability and cost of financing and operating expenses, governmental actions and initiatives and environmental and safety requirements, as well as the factors discussed under "Risk Factors" in this prospectus. We do not intend, and undertake no obligation, to update any forward-looking information to reflect actual results or future events or circumstances.

        In addition, projections, assumptions and estimates of our future performance and the future performance of the industries in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.


INDUSTRY AND MARKET DATA

        Industry and market data used in this prospectus have been obtained from various industry sources and publications as well as from research reports, including, without limitation, data relating to the aircraft leasing industry provided by SH&E, an aviation consulting firm retained by us to provide aviation market and industry data for inclusion in this prospectus. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus. See "Forward-Looking Statements."

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USE OF PROCEEDS

        We will not receive any proceeds from the sale of shares in this offering. All of the net proceeds from the sale of the shares offered by this prospectus will be received by the selling stockholder.

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DIVIDEND POLICY

        We have no plans to declare or pay any cash or other dividends on our common stock for the foreseeable future. We currently intend to retain future earnings, if any, for use in the operation of our business and to fund future growth. However, we expect to reevaluate our dividend policy on a regular basis following this offering and may determine to pay dividends in the future. The decision whether to pay dividends in the future will be made by our board of directors in light of conditions then existing, including factors such as our results of operations, financial condition and requirements, business conditions and covenants under any applicable contractual arrangements, including our indebtedness.

        If dividends on the Series A Redeemable Preferred have not been paid when due, or declared and set aside for payment when due, no dividends may be paid on any common stock of Holdings. See "Description of Capital Stock—Preferred Stock—Series A Mandatorily Redeemable Preferred Stock."

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FINANCIAL STATEMENTS

        This prospectus includes the historical financial statements of ILFC, which will be acquired by Holdings, whose shares of common stock are being offered hereby by AIG Capital. Each of Holdings and ILFC is currently a wholly owned subsidiary of AIG Capital, which is a wholly owned subsidiary of AIG. After effectiveness of the registration statement of which this prospectus is a part and prior to the consummation of this offering, AIG Capital will transfer all of the common stock of ILFC to Holdings. ILFC will, therefore, become a wholly owned subsidiary of Holdings.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and total capitalization:

    on an actual basis as of September 30, 2012; and

    on an as adjusted basis giving effect to the Reorganization as if it had occurred on September 30, 2012.

        The information presented in the table below should be read in conjunction with "Selected Historical Consolidated Financial Information," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and ILFC's consolidated financial statements and notes thereto included elsewhere in this prospectus.

 
  As of September 30, 2012  
 
  Actual   As Adjusted
for the
Reorganization(1)
 
 
   
  (Dollars in thousands)
 
 
  (unaudited)                    
 

Cash and cash equivalents, excluding restricted cash

  $ 1,000   $ 2,646,211  
           

Long-term debt, including current portion:

             

Secured

             
 

Senior secured bonds

        3,900,000  
 

ECA financings

        1,982,649  
 

Bank debt

        2,014,234 (2)
 

Other secured financings

        1,450,000  
   

Less: Deferred debt discount

        (8,141 )

Unsecured

             
 

Bonds and medium-term notes

        13,910,064  
   

Less: Deferred debt discount

        (39,701 )

Subordinated debt

        1,000,000  

Mandatorily Redeemable Preferred Stock—Series A, $0.01 par value per share; none authorized and issued, actual; 50,000 shares authorized, issued, and outstanding, as adjusted

        50,000 (3)
           

Total long-term debt, including current portion

        24,209,105  
           

Stockholder's equity(4):

             
 

Common stock, $0.01 par value per share; 1,000,000,000 shares authorized, 100 shares issued and outstanding, actual; 1,000,000,000 shares authorized and                        shares issued and outstanding, as adjusted

    1       (5)
 

Additional paid-in capital

    999       (6)
 

Accumulated other comprehensive loss

        (14,941 )
 

Retained earnings

         
           

Total Holdings' stockholder's equity

    1,000        
 

Noncontrolling interest

        100,000 (7)
           

Total stockholder's equity

    1,000        
           

Total capitalization

  $ 1,000   $    
           

(1)
Except as otherwise noted, all as adjusted amounts reflect the amounts included in ILFC's financial statements included elsewhere in this prospectus, as a result of the transfer of all of ILFC's common stock to Holdings that will occur in connection with the Reorganization.

(2)
Of this amount, $279.2 million is non-recourse to ILFC. These secured financings were incurred by variable interest entities and consolidated into our financial statements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Debt Financings."

(3)
Reflects the issuance of Series A Mandatorily Redeemable Preferred Stock of Holdings to AIG Capital as part of the consideration in exchange for all of ILFC's common stock in connection with the Reorganization.

(4)
Includes Preferred Stock, $0.01 par value per share; 1,000,000,000 shares authorized and no shares issued and outstanding, actual; 100,000,000 shares authorized and 50,000 shares of Series A Mandatorily Redeemable Preferred Stock (classifed as liabilities above), issued and outstanding, as adjusted.

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(5)
Reflects the issuance of additional shares of Holdings' common stock to AIG Capital as part of the consideration in exchange for all of ILFC's common stock in connection with the Reorganization.

(6)
Reflects an increase of approximately $             billion as a result of indemnification from AIG contained in the tax matters agreement with respect to any federal income taxes recognized in connection with the Reorganization, the election under Section 338(h)(10) of the Code and the attendant step-up in basis of our assets to fair market value for federal income tax purposes based on an assumed initial public offering price of $            per share, which is the midpoint of the offering price range listed on the cover of this prospectus. Our net deferred tax liability as of September 30, 2012 would have been $             billion after giving effect to the Reorganization.

(7)
Represents outstanding Market Auction Preferred Stock of ILFC.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

        The following table sets forth our selected historical consolidated financial information derived from ILFC's: (i) financial statements for the years ended December 31, 2011, 2010 and 2009, and as of December 31, 2011 and 2010, included elsewhere in this prospectus except for aircraft costs, which was previously included in selling, general and administrative expenses; (ii) financial information for the years ended December 31, 2008 and 2007, and as of December 31, 2009, 2008 and 2007, which are not included in this prospectus; (iii) unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2012 and 2011, and as of September 30, 2012, which are included elsewhere in this prospectus; and (iv) unaudited condensed consolidated financial statements as of September 30, 2011, which are not included in this prospectus. The historical financial information presented may not be indicative of our future performance.

        The consolidated financial information of ILFC shown below reflects AIG Capital's reporting basis in ILFC's assets and liabilities, which was established at the time of AIG's acquisition of ILFC in 1990. For the years ended December 31, 2008 and 2007, and as of December 31, 2009, 2008 and 2007, it is not directly comparable to the historical financial statements and other information of ILFC that ILFC reported to the SEC on a standalone basis, because, prior to the financial statements and other financial information that were included in ILFC's Annual Report on Form 10-K for the year ended December 31, 2011, ILFC had not elected, for its standalone financial statements, to establish, or "push down," AIG's basis in its assets and liabilities. The differences relate to basis differences in flight equipment under operating leases affecting accumulated depreciation and related depreciation expense, aircraft impairment charges and fair value adjustments, deferred taxes and related tax provisions, and paid in capital and retained earnings.

        The following information is only a summary and should be read in conjunction with the sections entitled "Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and ILFC's financial statements and the corresponding notes included elsewhere in this prospectus.

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  Nine Months Ended
September 30,
  Year Ended December 31,  
 
  2012   2011   2011   2010   2009   2008   2007  
 
  (Dollars in thousands, except per share amounts)
 

Statement of Operations Data:

                                           

Revenues:

                                           
 

Rental of flight equipment

  $ 3,320,711   $ 3,369,288   $ 4,454,405   $ 4,726,502   $ 4,928,253   $ 4,678,856   $ 4,297,477  
 

Flight equipment marketing and gain on aircraft sales

    25,176     6,640     14,348     10,637     12,966     46,838     30,314  
 

Interest and other

    81,848     41,270     57,910     61,741     55,973     98,260     111,599  
                               

    3,427,735     3,417,198     4,526,663     4,798,880     4,997,192     4,823,954     4,439,390  
                               

Expenses:

                                           
 

Interest

    1,165,844     1,203,010     1,569,468     1,567,369     1,365,490     1,576,664     1,612,886  
 

Effect from derivatives, net of change in hedged items due to changes in foreign exchange rates

            9,808     47,787     (21,450 )   39,926     5,310  
 

Depreciation of flight equipment

    1,440,502     1,375,745     1,864,735     1,963,175     1,968,981     1,875,640     1,747,323  
 

Aircraft impairment charges on flight equipment held for use

    102,662     1,521,881     1,567,180     1,110,427     50,884          
 

Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed of

    88,059     158,332     170,328     552,762     35,448          
 

Loss on extinguishment of debt

    22,934     61,093     61,093                  
 

Flight equipment rent

    13,500     13,500     18,000     18,000     18,000     18,000     18,000  
 

Aircraft costs

    95,795     38,041     49,673     33,352     43,935     34,613     20,813  
 

Selling, general and administrative

    191,604     115,715     188,433     179,428     152,740     148,743     131,518  
 

Other expenses

    33,159     48,407     61,924     91,216         46,557      
                               

    3,154,059     4,535,724     5,560,642     5,563,516     3,614,028     3,740,143     3,535,850  
                               

Income (loss) before income taxes

    273,676     (1,118,526 )   (1,033,979 )   (764,636 )   1,383,164     1,083,811     903,540  

Income tax (benefit) provision

    (65,990 )   (382,149 )   (310,078 )   (268,968 )   495,989     387,766     306,364  
                               

Net income (loss)

  $ 339,666   $ (736,377 ) $ (723,901 ) $ (495,668 ) $ 887,175   $ 696,045   $ 597,176  
                               

Pro forma net income (loss) per share (basic)(1)

  $           $                            
                                         

Pro forma net income (loss) per share (diluted)(1)

  $           $                            
                                         

Pro forma weighted average common shares outstanding (basic)(1)

                                           
                                         

Pro forma weighted average common shares outstanding (diluted)(1)

                                           
                                         

Balance Sheet Data (end of period):

                                           
 

Cash and cash equivalents, excluding restricted cash

  $ 2,646,210   $ 881,991   $ 1,975,009   $ 3,067,697   $ 336,911   $ 2,385,948   $ 182,772  
 

Flight equipment under operating leases, less accumulated depreciation

    34,932,343     35,838,439     35,502,288     38,515,379     44,091,783     43,395,124     41,983,555  
 

Total assets

    39,576,642     38,041,365     39,161,244     43,308,060     46,129,024     47,490,499     45,016,485  
 

Total debt, including current portion

    24,209,105     23,401,451     24,384,272     27,554,100     29,711,739     32,476,668     30,451,279  
 

Stockholders' equity

    7,865,437     7,567,857     7,531,869     8,225,007     8,655,089     7,738,580     7,149,226  

(1)
Pro forma net income (loss) per share and pro forma weighted average common shares outstanding have been adjusted to reflect the number of shares of Holdings' common stock that will be outstanding after giving effect to the Reorganization.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion and analysis of our financial condition and results of operations include statements regarding the industry outlook and our expectations regarding the performance of our business. These non-historical statements in the discussion and analysis are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including the risks and uncertainties described in "Risk Factors." Our actual results may differ materially from those contained in or implied by any forward-looking statements. The discussion and analysis should be read together with "Risk Factors" and the other information included in this prospectus, including financial statements and their related notes.

Overview

        We are the world's largest independent aircraft lessor, measured by number of owned aircraft, with over 1,000 owned or managed aircraft. As of November 15, 2012, we owned 918 aircraft in our leased fleet and seven additional aircraft in AeroTurbine's leased fleet, with an aggregate net book value of approximately $34.9 billion. The weighted average age of our fleet, weighted by the net book value of our aircraft, is approximately 8.1 years. We had 15 additional aircraft in the fleet classified as finance and sales-type leases and provided fleet management services for 84 aircraft. Our fleet features popular aircraft types, including both narrowbody and widebody aircraft. In addition to our existing fleet, as of November 15, 2012, we had commitments to purchase 229 new aircraft for delivery through 2019, including four through sale-leaseback transactions. The new aircraft commitments are comprised of 100 Airbus A320neo family aircraft, 20 Airbus A350 aircraft, 74 Boeing 787 aircraft, 34 Boeing 737-800 aircraft and one Boeing 777-300ER aircraft. We also have the rights to purchase an additional 50 Airbus A320neo family aircraft. In addition, we have committed to purchase seven used aircraft from third parties. We intend to continue to complement our orders from aircraft manufacturers with strategic acquisitions of additional aircraft from third parties, which may include sale-leaseback transactions with airlines. We balance the benefits of holding and leasing our aircraft and selling or parting-out the aircraft depending on economics and opportunities.

        Our aircraft leases are predominantly "net" leases under which lessees are generally responsible for all operating expenses, which customarily include maintenance, fuel, crews, airport and navigation charges, taxes, licenses, aircraft registration and insurance premiums. We, however, generally contribute to the first major maintenance event a lessee incurs during the lease of a used aircraft and, if an aircraft is returned due to a lessee ceasing operations or failing to meet its obligations under a lease, we may incur costs to prepare the aircraft for re-lease. Our leases are for a fixed term, although in many cases the lessees have early termination rights or extension options. Our leases require all non-contingent payments to be made in advance and our leases are predominantly denominated in U.S. dollars. Our lessees are generally required to continue to make lease payments under all circumstances, including periods during which the aircraft is not in operation due to maintenance or grounding. We typically contract to re-lease aircraft before the end of the existing lease term. For aircraft returned before the end of the lease term due to exceptional circumstances, we have generally been able to re-lease the aircraft within two to six months of their return. The weighted average lease term remaining on our current leases, weighted by net book value of our aircraft, was 4.1 years as of September 30, 2012.

        In addition to our leasing activities, we provide fleet management services to investors or owners of aircraft portfolios for a management fee. We also provide in-house part-out, engine leasing and engine exchange capabilities through our subsidiary AeroTurbine, a provider of aircraft engines, airframes, engine parts and supply chain solutions. AeroTurbine allows us to maximize the value of our aircraft and engines across their complete life cycle and to offer an integrated value proposition to our airline customers as they transition out aging aircraft. At times we also sell aircraft from our leased

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aircraft fleet to other leasing companies, financial services companies, and airlines. We have also provided asset value guarantees and a limited number of loan guarantees to buyers of aircraft or to financial institutions for a fee.

        We operate our business on a global basis, deriving more than 90% of our revenues from airlines outside of the United States. As of September 30, 2012, we had 901 aircraft leased under operating leases to 177 customers in 77 countries, with no lessee accounting for more than 10% of lease revenue for the year ended December 31, 2011 or the nine months ended September 30, 2012. Our leased fleet at September 30, 2012, also included the following additional aircraft not subject to a signed lease agreement or a signed letter of intent: eight aircraft that are currently being remarketed for lease, five aircraft that were subsequently leased, and four aircraft that have been or will be parted-out or sold but did not meet the criteria for being classified as held for sale. We have 94 aircraft that are subject to leases expiring through 2013, 36 of which are not yet subject to a signed lease agreement or a signed letter of intent following the expiration of their current leases. If the current customers do not extend these leases, we will be required to find new customers for these aircraft. We also maintain relationships with 19 additional customers who operate aircraft we manage. Our results of operations are affected by a variety of factors, primarily:

    the number, type, age and condition of the aircraft we own;

    aviation industry market conditions, including events affecting air travel;

    the demand for our aircraft and the resulting lease rates we are able to obtain for our aircraft;

    the purchase price we pay for our aircraft;

    the number, types and sale prices of aircraft, or parts in the event of a part-out of an aircraft, we sell in a period;

    the ability of our lessee customers to meet their lease obligations and maintain our aircraft in airworthy and marketable condition;

    the utilization rate of our aircraft;

    changes in interest rates and credit spreads, which may affect our aircraft lease revenues and our interest rate on borrowings; and

    our expectations of future overhaul reimbursements and lessee maintenance contributions.

        Recent challenges in the global economy, including the European sovereign debt crisis, political uncertainty in the Middle East, and sustained higher fuel prices, have negatively impacted many airlines' profitability, cash flows and liquidity, and increased the probability that some airlines, including our customers, will cease operations or file for bankruptcy. During 2012, nine customers, including one with two separate operating certificates, have ceased operations or filed for bankruptcy, or its equivalent, and returned 54 aircraft to us. As of November 15, 2012, 37 of the 54 returned aircraft have been committed to lease, 13 aircraft have been, or are intended to be, parted-out or sold, and four aircraft are being remarketed for lease. Future events, including a prolonged recession, ongoing uncertainty regarding the European sovereign debt crisis, political unrest, continued weak consumer demand, high fuel prices, or restricted availability of credit to the aviation industry, could lead to the weakening or cessation of operations of additional airlines, which in turn would adversely affect our earnings and cash flows in the near term.

        Despite the current difficulties in the global economy, we are optimistic about the long-term future of air transportation and the growing role that the leasing industry and ILFC, in particular, will play in commercial air transport. At November 15, 2012, we had signed leases for all of our new aircraft deliveries through 2013. We have contracted with Airbus and Boeing to purchase new fuel-efficient aircraft with delivery dates through 2019. These aircraft are in high demand from our airline customers.

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In many cases, we have delivery positions for the most modern and fuel-efficient aircraft earlier than the airlines can obtain such aircraft from the manufacturers. At November 15, 2012 we had agreements to purchase four new aircraft from airlines through sale-leaseback transactions with scheduled delivery dates in 2013. We believe that, with respect to our used aircraft, we have the market reach, visibility and understanding to move our aircraft across jurisdictions to best deploy our aircraft with the world's airlines. We are focused on increasing our presence in frontier and emerging markets that have high potential for passenger growth and other markets that have significant demand for new aircraft. We have assembled a highly skilled and experienced management team and have secured sufficient liquidity to manage through expected market volatility. We have also demonstrated strong and sustainable financial performance through most airline industry cycles over the past 30 years. For these reasons, we believe that we are well positioned to manage the current cycle and over the long-term.

Our Revenues

        Our revenues consist primarily of rental of flight equipment, flight equipment marketing and gain on aircraft sales and interest and other income.

    Rental of Flight Equipment

        Our leasing revenue is principally derived from airlines and companies associated with the airline industry. Our aircraft leases generally provide for the payment of a fixed, periodic amount of rent. In certain cases our leases provide for additional rental revenue based on usage. The usage may be calculated based on hourly usage or on the number of cycles operated. A cycle is defined as one take-off and landing. Under the provisions of many of our leases we also receive overhaul rentals based on the usage of the aircraft. Part of overhaul rentals received are deferred to cover major maintenance events. Lessees are generally responsible for maintenance and repairs, including major maintenance (overhauls) over the term of the lease. For certain airframe and engine overhauls, we reimburse the lessee for costs incurred up to, but not exceeding, related overhaul rentals that the lessee has paid to us. Additionally, in connection with a lease of a used aircraft, we generally agree to contribute to the first major maintenance event the lessee incurs during the lease. We recognize overhaul rental revenue net of estimated overhaul reimbursements, which are recorded as deferred overhaul rentals. During the nine months ended September 30, 2012 and the year ended December 31, 2011, we recognized net overhaul rental revenue of approximately $220.1 million and $199 million, respectively, from overhaul collections of $555.6 million and $734 million, respectively. At the time we make a reimbursement for maintenance events, we record the reimbursement against deferred overhaul rentals to the extent we have received overhaul rentals from such lessee, or against return condition deficiency deposits to the extent we have received such deposits from the prior lessee. We capitalize as lease incentives any amount of actual maintenance reimbursement we make in excess of deferred overhaul rentals and payments received from prior lessees for deficiencies in return conditions and amortize the lease incentives into Rental of flight equipment over the remaining life of the lease. For the nine months ended September 30, 2012 and the year ended December 31, 2011, we capitalized $50.7 million and $89.6 million, respectively, of which $26.1 million and $52.4 million, respectively, were for maintenance contributions. During the nine months ended September 30, 2012 and the year ended December 31, 2011, we amortized lease incentives into Rentals of flight equipment, primarily related to such contributions, aggregating $45.7 million and $63.4 million, respectively.

        The amount of lease revenue we recognize is primarily influenced by the following factors:

    the contracted lease rate, which is highly dependent on the age, condition and type of the leased equipment;

    the lessees' performance of their lease obligations;

    the usage of the aircraft during the period; and

    our expectations of future overhaul reimbursements.

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        In addition to aircraft or engine specific factors such as the type, condition and age of the asset, the lease rates for our leases may be determined in part by reference to specified interest rates at the time the aircraft is delivered to the customer. The factors described in the bullet points above are influenced by airline industry conditions, global and regional economic trends, airline market conditions, the supply and demand balance for the type of flight equipment we own and our ability to remarket flight equipment subject to expiring lease contracts under favorable economic terms.

        Because the terms of our leases are generally for multiple years and have staggered maturities, there are lags between changes in market conditions and their impact on our results, as contracts not yet reflecting current market lease rates remain in effect. Therefore, current market conditions and any potential effect they may have on our results may not be fully reflected in current results. Management monitors all lessees that are behind in lease payments, and assesses relevant operational and financial issues, in order to determine the amount of rental income to recognize for past due amounts. Lease payments are due in advance and we generally recognize rental income only to the extent we have received payments or hold security and other deposits.

    Flight Equipment Marketing and Gain on Aircraft Sales

        Our sales revenue is generated from the sale of our aircraft and engines and any gains on such sales are recorded in Flight equipment marketing and gain on aircraft sales. The price we receive for our aircraft and engines is largely dependent on the condition of the asset being sold, airline market conditions, funding availability to the buyer and the supply and demand balance for the type of asset we are selling. The timing of the closing of aircraft and engine sales is often uncertain, as a sale may be concluded swiftly or negotiations may extend over several weeks or months. As a result, even if sales are comparable over a long period of time, during any particular fiscal quarter or other reporting period we may close significantly more or fewer sale transactions than in other reporting periods. Accordingly, gain on aircraft sales recorded in one fiscal quarter or other reporting period may not be comparable to gain on aircraft sales in other periods. We also engage in the marketing of our flight equipment throughout the lease term, as well as the sale of third party owned flight equipment and other marketing services on a principal and commission basis.

    Interest and Other Income

        Our interest income is derived primarily from interest recognized on finance and sales-type leases and notes receivables issued by lessees in connection with lease restructurings, or in limited circumstances, issued by buyers of aircraft in connection with sales of aircraft. The amount of interest income we recognize in any period is influenced by the amount of principal balance of finance and sales-type leases and notes receivable we hold, effective interest rates, and adjustments to valuations or allowance for uncollectible notes receivables.

        Other income includes gross profit on sales from AeroTurbine of engines, airframes, parts and supplies and management fee revenue we generate through a variety of management services that we provide to non-consolidated aircraft securitization vehicles and joint ventures and third party owners of aircraft. Our management services may include leasing and remarketing services, cash management and treasury services, technical advisory services and accounting and administrative services depending on the needs of the aircraft owner. Income from AeroTurbine's engine, airframes, parts and supplies sales are included in Interest and other income, net of cost of sales. See Note F of Notes to Condensed, Consolidated Financial Statements in our condensed, consolidated financial statements for the nine months ended September 30, 2012 contained elsewhere in this prospectus. The cost of sales for AeroTurbine's sales consist of the net book value of the flight equipment and other inventory sold to third parties at the time of the sale. The price AeroTurbine receives for engines, airframes, parts and supplies is largely dependent on the condition of the asset being sold, airline market conditions and the supply and demand balance for the type of asset being sold. During the nine months ended

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September 30, 2012 and the year ended December 31, 2011, we designated nine aircraft and three aircraft, respectively, for part-out and transferred them to AeroTurbine. Over the next year, we plan to increase the number of aircraft designated for part-out and strengthen our capabilities to realize more value from our aircraft that are out of production or adversely affected by new technology developments. Additionally, AeroTurbine gives us access to parts and engines from their extensive selection of readily available inventory. Through November 15, 2012, we have transferred one additional aircraft to AeroTurbine for part-out.

Our Operating Expenses

        Our primary operating expenses consist of interest on debt, depreciation, aircraft impairment charges, selling, general and administrative expenses and other expenses.

    Interest Expense

        Our interest expense in any period is primarily affected by changes in interest rates and outstanding amounts of indebtedness. Since 2010, several of our refinancings have had relatively higher interest rates than the debt we replaced. We have also extended our debt maturities from a weighted average of 4.3 years as of December 31, 2008 to a weighted average of 6.4 years as of September 30, 2012. While our average effective cost of borrowing has increased since 2009, the decrease in our average debt outstanding due to our deleveraging efforts has offset those increases, and, as a result, our interest expense decreased for the nine months ended September 30, 2012, as compared to the same period in 2011. Our average effective cost of borrowing reflects our composite interest rate, including the effect of interest rate swaps or other derivatives and the effect of debt discounts.

        Our total debt outstanding at the end of each period and average effective cost of borrowing for the periods indicated were as follows:

CHART

    Effect from Derivatives

        We employ derivative products to manage our exposure to interest rate risks and foreign currency risks. We enter into derivative transactions only to hedge interest rate risk and currency risk and not to speculate on interest rates or currency fluctuations. These derivative products may include interest rate swap agreements, foreign currency swap agreements and interest rate cap agreements. Our management determines the fair values of our derivatives each quarter using a discounted cash flow

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model, which incorporates an assessment of the risk of non-performance by our swap counterparties or non-performance by us in the event we are in a liability position. The model uses various inputs including contractual terms, interest rate, credit spreads and volatility rates, as applicable.

    Depreciation

        We generally depreciate passenger aircraft using the straight-line method over a 25-year life from the date of manufacture to a 15% residual value. When a specific aircraft or an aircraft type is out-of-production, or impacted by new technology developments, management evaluates the aircraft type and depreciates the aircraft using the straight-line method over the estimated remaining holding period to an established residual value. See "Critical Accounting Policies and Estimates—Flight Equipment" below. Our depreciation expense is influenced by the adjusted carrying values of our flight equipment, the depreciable life and estimated residual value of the flight equipment. Adjusted carrying value is the original cost of our flight equipment, including capitalized interest during the construction phase, adjusted for subsequent capitalized improvements and impairments.

    Aircraft Impairment Charges and Fair Value Adjustments

        Management evaluates quarterly the need to perform a recoverability assessment of aircraft considering the requirements under GAAP and performs this assessment at least annually for all aircraft in our fleet. Recurring recoverability assessments are performed whenever events or changes in circumstances indicate that the carrying amount of our aircraft may not be recoverable, which may require us to change our assumptions related to future estimated cash flows. These events or changes in circumstances considered include potential sales and disposals, changes in contracted lease terms, changes in the status of an aircraft as leased, re-leased, or not subject to lease, repossessions of aircraft, changes in portfolio strategies, changes in demand for a particular aircraft type and changes in economic and market circumstances.

        We recorded significant impairment charges and fair value adjustments during the past two years. During each of the years ended December 31, 2011 and 2010, we recorded impairment charges and fair value adjustments on aircraft of approximately $1.7 billion, and during the nine months ended September 30, 2012, we recorded impairment charges and fair value adjustments of approximately $190.7 million. The impairment charges in 2011 resulted from unfavorable airline industry trends affecting the residual values of certain aircraft types and management's expectations that certain aircraft will more likely than not be parted-out or otherwise disposed of sooner than 25 years. The reduction in the expected holding period for those aircraft was made in connection with the addition of in-house part-out capabilities as a result of the acquisition of AeroTurbine. The impairment charges in 2010 were primarily due to the announcement of new technology in the marketplace and the sale of aircraft in that year. While we continue to manage our fleet by ordering new in-demand aircraft and optimize our returns on our existing aircraft either by follow-on leases, sales or part-outs, we may incur additional impairment charges in the future. Impairment charges may result from future deterioration in lease rates and residual values, which can be caused by new technological developments, further sustained increases in fuel costs, prolonged economic distress, and decisions to sell or part-out aircraft at amounts below net book value. The potential for impairment or fair value adjustments could be material to our results of operations for an individual period.

    Aircraft Costs

        Aircraft costs consist of maintenance and repossession-related expenses borne by us that are in excess of what a lessee has actually provided for. These expenses are typically incurred when aircraft are returned early, repossessed or otherwise off-lease. During the first nine months of 2012, aircraft costs have increased to $95.8 million from $38.0 million for the same period in 2011. This increase is primarily due to a higher number of aircraft that were repossessed from failed customers during the

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first nine months of 2012. While lessees are generally responsible for maintenance of the aircraft under the provisions of the lease, we may incur costs to prepare the aircraft for re-lease when aircraft are returned early or repossessed and are not in satisfactory condition to re-lease.

    Selling, General and Administrative Expenses

        Our principal selling, general and administrative expenses consist of expenses related to personnel expenses, including salaries, share-based compensation charges, employee benefits, professional and advisory costs and office and travel expenses. The level of our selling, general and administrative expenses is influenced primarily by the number of employees and the extent of transactions or ventures we pursue which require the assistance of outside professionals or advisors.

    Other Expenses

        Other expenses consist primarily of lease related charges, provision for losses on aircraft value guarantees, and provision for credit losses on notes receivable and net investment in finance and sales-type leases. Our lease related charges include the write-off of unamortized lease incentives and overhaul and straight-line lease adjustments that we incur when we sell an aircraft prior to the end of the lease.

        Our provision for losses on aircraft asset value guarantees consists of charges in the event of a shortfall between the fair market value and the guaranteed value of the aircraft we have guaranteed. Management compares the guaranteed value under all guarantees to the fair market value of the related aircraft on a quarterly basis to identify any such shortfall. At September 30, 2012, we had been called upon to perform under five aircraft asset value guarantees. At September 30, 2012, we also guaranteed the residual value of 14 aircraft under asset value guarantees that had not yet been exercised. These aircaft had an aggregate estimated purchase price of $369 million, and total reserves related to such guarantees were $44.6 million at September 30, 2012.

        Our provision for credit losses on notes receivable consists primarily of allowances we establish to reduce the carrying value of our notes receivable to estimated collectible levels. Management reviews all outstanding notes that are in arrears to determine whether we should reserve for, or write off any portion of, the notes receivable. In this process, management evaluates the collectability of each note and the value of the underlying collateral, if any, by assessing relevant operational and financial issues. As of September 30, 2012, notes receivable, net, were not material.

        Our provision for credit losses on finance and sales-type leases consists primarily of allowances we establish to reduce the carrying value of our net investment in these leases to estimated collectible levels. Management monitors the activities and financial health of customers and evaluates the impact certain events, such as customer bankruptcies, will have on lessee's abilities to perform under the contracted terms of the related leases. Management reviews all outstanding leases classified as finance and sales-type to determine appropriate classification of the related aircraft within our fleet, and whether we should reserve for any portion of our net investment.

        The primary factors affecting our other expenses are the sale of aircraft prior to the end of a lease, which may result in lease related costs, and lessee defaults, which may result in additional provisions for doubtful notes receivable.

Critical Accounting Policies and Estimates

        Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of

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contingent assets and liabilities. We evaluate our estimates, including those related to flight equipment, lease revenue, derivative financial instruments, fair value measurements, and income taxes, on a recurring basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. A summary of our critical accounting policies is presented in Note B of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus. We believe the following critical accounting policies could have a significant impact on our results of operations, financial condition and financial statement disclosures, and may require subjective and complex estimates and judgments.

    Flight Equipment

        Flight equipment under operating lease is our largest asset class, representing approximately 90% of our consolidated assets as of September 30, 2012 and December 31, 2011, 2010 and 2009.

        Depreciable Lives and Residual Values.    We depreciate passenger aircraft using the straight-line method generally over a 25-year life from the date of manufacture to a 15% residual value. Any change in the assumption of useful life or residual value changes the depreciation expense and could have a significant impact on our results or operations for any one period. When we change the useful lives or residual values of our aircraft, we adjust our depreciation rates on a prospective basis. Based on the annual full fleet assessment of aircraft performed in the third quarter of 2011, we identified 239 aircraft that were either aircraft out of production or impacted by new technology developments. Out of these 239 aircraft, we changed the estimated useful life of 140 aircraft. In addition, we changed the useful life of our ten freighter aircraft from 35 to 25 years. In the fourth quarter we began to depreciate these aircraft using the straight-line method over the estimated remaining revised useful lives, utilizing revised residual values, as applicable. We estimate that the increase in depreciation expense due to our changes to estimated useful life and residual values for these aircraft for the year ending December 31, 2012 will be approximately $24 million. Over time, our future depreciation is expected to decrease as these aircraft reach the end of their respective holding periods.

        Impairment Charges on Flight Equipment Held for Use.    Management evaluates quarterly the need to perform a recoverability assessment of held for use aircraft considering the requirements under GAAP and performs this assessment at least annually for all aircraft in our fleet. The undiscounted cash flows used in the recoverability assessment consist of cash flows from currently contracted leases, future projected lease cash flows, including contingent rentals and an estimated disposition value, as appropriate, for each aircraft. Management is active in the aircraft leasing industry and develops the assumptions used in the recoverability assessment.

        As part of our recurring recoverability assessment process, we update the critical and significant assumptions used in the recoverability assessment, including projected lease rates and terms, residual values, overhaul rental realization and aircraft holding periods. Management uses its judgment when determining the assumptions used in the recoverability analysis, taking into consideration historical data, current macro-economic trends and conditions, any changes in management's holding period intent for any aircraft and any events happening before our financial statements that management needs to consider, including subsequent lessee bankruptcies.

        In updating these critical and significant assumptions for 2011, we considered:

    Market Conditions:    We considered current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party sources. Factors taken into account included the impact of fuel price volatility and higher average fuel prices; the growing impact of

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      new technology aircraft (announcements, deliveries and order backlog) on current and future demand for mid-generation aircraft; the higher production rates sustained by manufacturers for more fuel-efficient newer generation aircraft during the recent economic downturn; the unfavorable impact of low rates of inflation on aircraft values; current market conditions and future industry outlook for future marketing of older mid-generation aircraft and aircraft that are out of production; and a decreasing number of lessees for older aircraft.

    Portfolio Management Strategy:    We took into account our new end-of-life management capabilities resulting from our acquisition of AeroTurbine, which we completed on October 7, 2011. The acquisition of AeroTurbine provides us with increased choices in managing the end-of-life of aircraft in our fleet and makes the part-out of an aircraft a more economically and commercially viable option by bringing the requisite capabilities in-house and eliminating the payment of commissions to third parties. While our overall business model has not changed, our expectation of how we may manage specific aircraft that are out of production, or specific aircraft that have been impacted by new technology developments, has changed due to the AeroTurbine acquisition. Parting-out aircraft also enables us to retain greater cash flows from an aircraft during the last cycle of its life by allowing us to eliminate certain maintenance costs and realize higher net overhaul revenues resulting in changes in cash flow assumptions.

    Subsequent Lessee Bankruptcies:    We considered subsequent events through the issuance of our financial statements in evaluating the recoverability of our fleet as of December 31, 2011. Specifically, four of our customers, including one with two separate operating certificates, declared bankruptcy or ceased operations subsequent to December 31, 2011. We took into account lessee non-performance, as well as management's expectation of whether to re-lease or part-out the aircraft, which changed the projected lease cash flows of the affected aircraft.

        Over the course of the year ended December 31, 2011, we utilized these updated assumptions while performing our recoverability assessments of aircraft in our fleet. The result of the analyses performed indicated that the book values of 100 aircraft were not fully recoverable and these aircraft were deemed impaired. Most of the aircraft reviewed were in the second half of their estimated 25-year useful life, and were aircraft that are out of production, or have been impacted by new technology developments. We recognized impairment charges of $1.6 billion on the 100 impaired aircraft for the year ended December 31, 2011. Of the $1.6 billion in impairment charges recognized, $43.9 million related to repossessions and early returns of aircraft that were leased to airlines that ceased operations subsequent to December 31, 2011.

        Sensitivity Analysis.    Aircraft impairment charges on flight equipment held for use aggregated $102.7 million for the nine months ended September 30, 2012. If estimated cash flows used in a hypothetical full fleet assessment as of September 30, 2012, were decreased by 10% or 20%, 13 additional aircraft with a net book value of $224.3 million or 54 additional aircraft with a net book value of $1.7 billion, respectively, would have been impaired and written down to their resulting respective fair values. In addition our lessees may face financial difficulties and return aircraft to us prior to the contractual lease expiry dates. As a result, our cash flow assumptions may change and future impairment charges may be required.

        Impairment Charges and Fair Value Adjustments on Flight Equipment Sold or to be Disposed of.    Management evaluates quarterly the need to perform recoverability assessments of all contemplated aircraft sale or disposal transactions considering the requirements under GAAP. The recoverability assessment is performed if events or changes in circumstances indicate that it is more likely than not that an aircraft will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Due to the significant uncertainties of potential sales transactions, management must use its judgment to evaluate whether a sale is more likely than not. The factors that management considers in its assessment include (i) the progress of the potential sales transactions through a review

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and evaluation of the sales related documents and other communications, including, but not limited to, letters of intent or sales agreements that have been negotiated or executed; (ii) our general or specific fleet strategies, liquidity requirements and other business needs and how those requirements bear on the likelihood of sale; and (iii) the evaluation of potential execution risks, including the source of potential purchaser funding and other execution risks. If the carrying value of the aircraft exceeds its estimated undiscounted cash flows, then an impairment charge or a fair value adjustment is recognized, depending on whether the aircraft meets the criteria for held for sale, in Selling, general and administrative, or if material, presented separately on our Consolidated Statements of Operations.

        The undiscounted cash flows in the more likely than not sales recoverability assessment will depend on the structure of the potential sale transaction and may consist of cash flows from currently contracted leases, including contingent rentals, and the estimated proceeds from sale. In the event that an aircraft does not meet the more likely than not sales recoverability assessment, it is re-measured to fair value, which in almost all of our potential sales transactions is based on the value of the sales transaction, resulting in an impairment charge or fair value adjustment. We recognize impairment charges and fair value adjustments and other costs of sales in Selling, general and administrative, or if material, present them separately on our Consolidated Statements of Operations.

        Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed of aggregated $88.0 million for the nine months ended September 30, 2012. We recorded impairment charges and fair value adjustments of (i) $43.0 million on nine aircraft we sold or deemed more likely than not to be sold, but that did not meet the criteria required to be classified as Flight equipment held for sale; (ii) $4.1 million on four aircraft classified as Flight equipment held for sale, aircraft sold or transferred from Flight equipment held for sale back to flight equipment under operating leases; and (iii) $40.9 million on 10 aircraft and 13 engines intended to be or designated for part-out.

        Flight Equipment Held for Sale.    Management evaluates all contemplated aircraft sale transactions to determine whether all the required criteria have been met under GAAP to classify aircraft as Flight equipment held for sale. Management uses judgment in evaluating these criteria. Due to the significant uncertainties of potential sale transactions, the held for sale criteria generally will not be met unless the aircraft is subject to a signed sale agreement, or management has made a specific determination and obtained appropriate approvals to sell a particular aircraft or group of aircraft. Aircraft classified as Flight equipment held for sale are recognized at the lower of their carrying amount or estimated fair value less estimated costs to sell. At the time aircraft are sold, or classified as Flight equipment held for sale, the cost and accumulated depreciation are removed from the related accounts.

    Lease Revenue

        We lease flight equipment principally under operating leases and recognize rental revenue ratably over the life of the lease. The difference between the rental revenue recognized and the cash received under the provisions of our leases is included in Lease receivables and other assets on our Consolidated Balance Sheets. Past-due rental revenue is recognized on the basis of management's assessment of collectability. Management monitors all lessees that are behind in lease payments and discusses relevant lessee operational and financial issues to determine the amount of rental revenue to recognize for past due amounts. Our customers make lease payments in advance and we generally recognize rental revenue only to the extent we have received payments or hold security deposits.

        Overhaul Rentals.    Under the provisions of our leases, lessees are generally responsible for maintenance and repairs, including major maintenance (overhauls) over the term of the lease. Under the provisions of many of our leases, we receive overhaul rentals based on the usage of the aircraft. The usage is calculated based on the number of hours or cycles operated. A cycle is defined as one take-off and landing. The usage is typically reported monthly by the lessee. For certain airframe and engine overhauls, we reimburse the lessee for costs incurred up to, but not exceeding, the overhaul rentals that the lessee has paid to us.

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        We recognize overhaul rental revenue net of estimated overhaul reimbursements, which are recorded as deferred overhaul rentals. We estimate expected overhaul reimbursements during the life of the lease, which requires significant judgment. Management determines the reasonableness of the estimated future overhaul reimbursement rate considering quantitative and qualitative information including: (i) changes in historical pay-out rates from period to period; (ii) trends in reimbursements made; (iii) trends in the historical pay-out rates for expired leases; (iv) future estimates of pay-out rates on leases scheduled to expire in the near term; (v) changes in our business model or portfolio strategies; and (vi) other factors affecting the future pay-out rates that may occur from time to time. Changes in the expected overhaul reimbursement estimate result in an adjustment to the cumulative deferred overhaul rental balance sheet amount, which is recognized in current period results. If overhaul reimbursements are different than our estimates, or if estimates of future reimbursements change, there could be a material impact on our results of operations in a given period.

        Additionally, in connection with a lease of a used aircraft, we also generally agree to contribute to the first major maintenance event the lessee incurs during the lease. At the time we make a reimbursement for maintenance events, we record the reimbursement against deferred overhaul rentals to the extent we have received overhaul rentals from such lessee, or against return condition deficiency deposits to the extent we have received such deposits from the prior lessee. We capitalize as lease incentives any amount of actual maintenance reimbursement we make in excess of deferred overhaul rentals and payments received from prior lessees for deficiencies in return conditions and amortize the lease incentives into Rental of flight equipment over the remaining life of the lease. We capitalized lease incentives of $50.7 million, $89.6 million and $55.4 million, which included such maintenance contributions, for the nine months ended September 30, 2012 and the years ended December 31, 2011 and 2010, respectively. During the nine months ended September 30, 2012 and the years ended December 31, 2011 and 2010, we amortized lease incentives into Rentals of flight equipment aggregating $45.7 million, $63.4 million, and $47.8 million, respectively.

    Derivative Financial Instruments

        We employ a variety of derivative instruments to manage our exposure to interest rate and foreign currency risks. Derivatives are recognized at their fair values on our consolidated balance sheets. Management determines the fair values of our derivatives each quarter using a discounted cash flow model, which incorporates an assessment of the risk of non-performance by our swap counterparties. The model uses various inputs including contractual terms, interest rate, credit spreads and volatility rates, as applicable. When hedge accounting treatment is achieved for a derivative, the changes in fair value related to the effective portion of the hedge is recognized in other comprehensive income or in current period earnings, depending on the designation of the derivative as a cash flow hedge or a fair value hedge. The ineffective portion of the hedge is recognized in income. At the time the derivative is designated as a hedge, we select a method of effectiveness assessment, which we must use for the life of the hedge. We use the "hypothetical derivative method" for all of our hedges when we assess effectiveness. This method involves establishing a hypothetical derivative that mirrors the hedged item, but has a zero-value at the hedge designation date. The cumulative change in fair value of the actual hedge derivative instrument is compared to the cumulative change in the fair value of the hypothetical derivative. The difference between these two amounts is the calculated ineffectiveness and is recognized in current period earnings.

    Fair Value Measurements

        Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We measure the fair values of our derivatives on a recurring basis. We use a valuation model that includes a variety of observable inputs, including contractual terms, interest rate curves, foreign exchange rates, yield

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curves, credit curves, measures of volatility, and correlations of such inputs to determine the fair value. Valuation adjustments may be made in the determination of fair value. These adjustments include amounts to reflect counterparty credit quality and liquidity risk, and are as follows:

    Credit Valuation Adjustment, or CVA.  The CVA adjusts the valuation of derivatives to account for nonperformance risk of our counterparty with respect to all net derivative assets positions. The CVA also accounts for our own credit risk, in the fair value measurement of all net derivative liabilities positions, when appropriate.

    Market Valuation Adjustment, or MVA.  The MVA adjusts the valuation of derivatives to reflect the fact that we are an "end-user" of derivative products. As such the valuation is adjusted to take into account the bid-offer spread (the liquidity risk).

        We measure the fair value of aircraft, including aircraft residual value guarantees, on a non-recurring basis, when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of our aircraft may not be recoverable. We principally use the income approach to measure the fair value of our aircraft. The income approach is based on the present value of contractual lease cash flows, projected future lease cash flows, including contingent rental cash flows, where appropriate, which extend to the end of the aircraft's economic life in its highest and best use configuration, as well as a disposition value based on expectations of market participants. The cash flows used in the fair value estimate are generally consistent with those used in the recurring recoverability assessment for aircraft held for use and are subject to the same management judgment. See "—Flight Equipment—Impairment Charges on Flight Equipment Held for Use" above for further discussion.

    Income Taxes

        Prior to this offering, ILFC was included in the consolidated federal income tax return of AIG as well as certain state tax returns where AIG filed on a combined/unitary basis. ILFC's provision for federal income taxes was calculated on a separate return basis, adjusted to give recognition to the effects of net operating losses, foreign tax credits and other tax benefits to the extent ILFC estimated that they would be realizable in AIG's consolidated federal income tax return. Under ILFC's tax sharing agreement with AIG, ILFC settled its current tax liability as if ILFC and its subsidiaries were each a separate standalone taxpayer. Thus, AIG credited ILFC to the extent its net operating losses, foreign tax credits and other tax benefits (calculated on a separate return basis) were used in AIG's consolidated tax return and charged ILFC to the extent of its tax liability (calculated on a separate return basis). To the extent the benefit of a net operating loss was not utilized in AIG's consolidated federal income tax return, AIG agreed to reimburse ILFC upon the expiration of the loss carryforward period as long as ILFC was still included in AIG's consolidated federal income tax return and the benefit would have been utilized if ILFC had filed a separate consolidated federal income tax return. ILFC's provision for state income taxes includes California, in which ILFC has filed with AIG using the unitary apportionment factors, and certain other states, in which ILFC has filed separate tax returns.

        After consummation of this offering, we expect to be no longer affiliated with AIG for federal income tax purposes. As a result, we will no longer be included in the consolidated federal income tax return of AIG and instead will file our own federal income tax returns. In addition, depending on the amount of our stock sold by AIG Capital, we may no longer be included in certain combined or unitary state tax returns of AIG, and may have to file our own tax returns in such states. Prior to, and in connection with, completion of this offering, ILFC's existing tax sharing agreement will be terminated, and we will enter into a tax matters agreement with AIG and AIG Capital governing our tax liability for pre- and post-separation periods and other tax-related matters. See "Transactions with Related Parties—Tax Matters Agreement with AIG and AIG Capital."

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        The Reorganization has been structured to qualify for the election under Section 338(h)(10) of the Code to be treated for United States federal income tax purposes as a purchase by us of the assets, rather than the stock, of ILFC, with the attendant step-up in basis of such assets for United States federal income tax purposes. As a result of such election, our existing federal income tax attributes, such as net operating losses and foreign tax credits, will remain with the AIG consolidated group and will no longer be available to us. The new aggregate basis of the assets of ILFC will be determined based on the value of the consideration received by AIG Capital in exchange for all of ILFC's common stock in connection with the Reorganization, grossed up by the amount of any liabilities assumed by us in connection with the Reorganization.

        ILFC has calculated and, after consummation of this offering Holdings will continue to calculate, its provision for income taxes using the asset and liability method. This method considers the future tax consequences of temporary differences between the financial reporting and the tax basis of assets measured using currently enacted tax rates. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates has been, and will continue to be, recognized in income in the period that includes the enactment date.

        We have recognized, and will continue to recognize, an uncertain tax benefit only to the extent that it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

Results of Operations

    Nine Months Ended September 30, 2012 Versus 2011

        Flight Equipment:    During the nine months ended September 30, 2012, we had the following activity related to flight equipment in our leased fleet:

 
  Number of
Aircraft
 

Flight equipment in our leased fleet at December 31, 2011

    930  

Aircraft reclassified from Net investment in finance and sales-type leases

    2  

Aircraft reclassified to Net investment in finance and sales-type leases

    (11 )

Aircraft purchases

    26  

Aircraft sold from our leased fleet

    (9 )

Aircraft designated for part-out

    (13 )

Aircraft transferred from Flight equipment held for use to Flight equipment held for sale

    (7 )
       

Flight equipment in our leased fleet at September 30, 2012(a)

    918  
       

(a)
Includes 17 aircraft not subject to a signed lease agreement or a signed letter of intent, five of which were subsequently leased, four of which have been or will be disposed of but did not meet the criteria for being classified as held for sale, and eight of which we are remarketing. Also excludes seven aircraft owned by AeroTurbine.

        Income before Income Taxes:    Our income before income taxes increased by approximately $1,392.2 million for the nine months ended September 30, 2012, as compared to the same period in 2011, primarily due to a $1,489.5 million decrease in aircraft impairment charges and fair value adjustments. Our income before income taxes for the 2012 period also increased due to (i) a $38.2 million decrease in losses on extinguishment of debt; (ii) a $37.2 million decrease in interest expense; (iii) a $36.1 million increase from revenue, net of cost of sales, contributed by AeroTurbine,

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which we acquired in October 2011; (iv) an $18.5 million increase in revenue from flight equipment marketing and gain on aircraft sales; and (v) a $15.2 million decrease in other expenses. These increases were partially offset by (i) a $75.9 million increase in selling, general, and administrative expenses; (ii) a $64.8 million increase in depreciation expense; (iii) a $57.8 million increase in aircraft costs; and (iv) a $48.6 million decrease in rental revenue. See below for a more detailed discussion of the effects of each item affecting income for the nine months ended September 30, 2012, as compared to the same period in 2011.

        Rental of Flight Equipment:    Revenues from rentals of flight equipment decreased slightly to $3,320.7 million for the nine months ended September 30, 2012 from $3,369.3 million for the same period in 2011. The average number of aircraft we owned during the period ended September 30, 2012, decreased to 924 compared to 934 for the period ended September 30, 2011. Revenues from rentals of flight equipment recognized for the nine months ended September 30, 2012, decreased slightly as compared to the same period in 2011 due to (i) a $139.4 million decrease due to lower lease rates on aircraft in our fleet during both periods that were re-leased or had lease rates change between the two periods; (ii) a $51.8 million decrease related to a higher number of aircraft in transition between lessees; and (iii) a $25.6 million decrease related to aircraft in service during the nine months ended September 30, 2011, and sold prior to September 30, 2012. These decreases in revenue were partly offset by (i) a $64.8 million increase in lease revenue earned by AeroTurbine, which we did not acquire until October 7, 2011; (ii) a $56.3 million increase from new aircraft added to our fleet after September 30, 2011, and from aircraft in our fleet as of September 30, 2011, that earned revenue for a greater number of days during the nine months ended September 30, 2012, than during the same period in 2011; and (iii) a $47.1 million increase from net overhaul rentals recognized.

        At September 30, 2012, four customers operating ten aircraft were 60 days or more past due on non-contingent rents aggregating $22.9 million relating to some of those aircraft, $22.2 million of which relates to one customer. Of this amount, we recognized $7.5 million in rental income through September 30, 2012. In comparison, at September 30, 2011, ten customers operating 25 aircraft were 60 days or more past due on minimum lease payments aggregating $11.6 million relating to some of those aircraft, $10.8 million of which we recognized in rental income through September 30, 2011. Additionally, at December 31, 2011, 14 customers operating 52 aircraft were 60 days or more past due on minimum lease payments aggregating $13.8 million relating to some of those aircraft, $13.0 million of which we recognized in rental income through December 31, 2011. We have refined our disclosures related to delinquencies to more closely align our disclosures with how management monitors significant delinquencies.

        Flight Equipment Marketing and Gain on Aircraft Sales:    Flight equipment marketing and gain on aircraft sales increased by $18.5 million for the nine months ended September 30, 2012, as compared to the same period in 2011, primarily due to gains recorded on 12 aircraft sold, seven of which were sold under sales-type leases during the nine months ended September 30, 2012 as compared to gains recorded on sales of aircraft parts for the same period in 2011.

        Interest and Other Revenue:    Interest and other revenue increased to $81.8 million for the nine months ended September 30, 2012, compared to $41.3 million for the same period in 2011 due to (i) a $36.1 million increase in revenue recognized by AeroTurbine, net of cost of sales, from the sale of engines, airframes, parts and supplies; and (ii) a $4.4 million increase due to early termination fees and security deposit forfeitures.

        Interest Expense:    Interest expense remained relatively constant at $1,165.8 million for the nine months ended September 30, 2012, compared to $1,203.0 million for the same period in 2011.

        During the nine months ended September 30, 2012, we prepaid in full $456.9 million outstanding under our secured credit facility dated October 13, 2006 and $750 million outstanding under one of our

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secured term loans, and we refinanced our $550 million secured term loan at a lower interest rate. In connection with these prepayments and refinancing, we recognized losses aggregating $22.9 million from the write off of unamortized deferred financing costs and deferred debt discount. See Note K of Notes to Condensed, Consolidated Financial Statements.

        Depreciation:    Depreciation of flight equipment increased 4.7% to $1,440.5 million for the nine months ended September 30, 2012, compared to $1,375.7 million for the same period in 2011, due to changes in the estimated useful lives and residual values of certain aircraft types in the third quarter of 2011 and $26.7 million of depreciation expense recorded by AeroTurbine, which we did not acquire until October 7, 2011.

        Aircraft Impairment Charges on Flight Equipment Held for Use: Aircraft impairment charges on flight equipment held for use decreased to $102.7 million relating to ten aircraft for the nine months ended September 30, 2012, as compared to $1,521.9 million relating to 95 aircraft recorded for the same period in 2011. The 2011 impairment charges were primarily due to changes in the holding period and residual values of certain out-of-production aircraft or aircraft impacted by new technology developments, resulting from our analysis of then-current macro-economic factors and our acquisition of AeroTurbine when performing our 2011 annual recoverability assessment. See Note H of Notes to Condensed, Consolidated Financial Statements.

        Aircraft Impairment Charges and Fair Value Adjustments on Flight Equipment Sold or to be Disposed of:    During the nine months ended September 30, 2012 and 2011 we recorded the following aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed of:

 
  Nine Months  
 
  September 30, 2012   September 30, 2011  
 
  Aircraft
Impaired
or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
  Aircraft
Impaired
or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
 
 
  (Dollars in millions)
 

Loss/(Gain)

                         

Impairment charges and fair value adjustments on aircraft likely to be sold or sold (including sales-type leases)

    9 (a) $ 43.0     16   $ 159.5  

Fair value adjustments on held for sale aircraft sold or transferred from held for sale back to flight equipment under operating leases(b)

    4     4.1     10     (3.7 )

Impairment charges on aircraft intended to be or designated for part-out

    10     40.9 (c)   1     2.5  
                   

Total Impairment charges and fair value adjustments on flight equipment sold or to be disposed of

    23   $ 88.0 (c)   27   $ 158.3  
                   

(a)
Excludes one aircraft that was impaired in prior quarters, but for which an additional charge was recorded in the current period for aircraft intended to be or designated for part-out.

(b)
Included in these amounts are net fair value credit adjustments related to aircraft previously held for sale, but which no longer meet such criteria and were subsequently reclassified to Flight equipment under operating leases. Also included in these amounts are fair value credit adjustments for sales price adjustments related to aircraft that were previously held for sale and sold during the periods presented.

(c)
Includes charges relating to 13 engines for the nine months ended September 30, 2012.

        Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed of decreased to $88.0 million for the nine months ended September 30, 2012, compared to $158.3 million for the same period in 2011. The decrease was primarily due to seven fewer aircraft sold

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or identified as likely to be sold at September 30, 2012, resulting in lower impairment charges, as compared to the same period in 2011. This decrease was partially offset by impairment charges on ten aircraft intended to be or designated for part-out during the nine months ended September 30, 2012, as compared to one aircraft for the same period in 2011. During the nine months ended September 30, 2012, we recorded impairment charges and fair value adjustments on a total of 23 aircraft and 13 engines that were sold or to be disposed of, compared to 27 such aircraft during the nine months ended September 30, 2012. See Note I of Notes to Condensed, Consolidated Financial Statements.

        Aircraft Costs:    Aircraft costs increased to $95.8 million for the nine months ended September 30, 2012, compared to $38.0 million for the same period in 2011 primarily due to a higher number of aircraft that were repossessed from failed customers.

        Selling, General and Administrative Expenses:    Selling, general and administrative expenses increased to $191.6 million for the nine months ended September 30, 2012, compared to $115.7 million for the same period in 2011 due to (i) a $38.8 million increase due to expenses incurred by AeroTurbine, which we did not acquire until October 7, 2011; (ii) a $33.3 million increase in salaries and employee related expenses due to an increase in share-based compensation resulting from a significant improvement in AIG's stock price, an increase in employee headcount and an out of period credit adjustment of $8.3 million in 2011 relating to pension expenses covering employee services from 1996 to 2010, with no such credit recorded in the nine months ended September 30, 2012; and (iii) a $4.7 million increase in bank fees and financing costs related to the modification of one of our debt facilities. These increases were partially offset by minor fluctuations aggregating a decrease of $0.8 million.

        Other Expenses:    Other expenses of $33.2 million for the nine months ended September 30, 2012 consisted of (i) $31.3 million of charges relating to reserves recorded on three aircraft asset value guarantees; (ii) $1.4 million of aggregated lease charges; and (iii) $0.5 million from the effect of derivatives. Other expenses of $48.4 million for the nine months ended September 30, 2011 consisted of (i) $21.9 million from an allowance recorded of three notes receivable; (ii) $20.0 million of contract cancellation costs; and (iii) $9.6 million from the effect from derivatives, of which $6.5 million relates to losses recorded on matured swaps partially offset by $3.1 million of aggregated lease related income, net of lease charges.

        Provision for Income Taxes:    Our effective tax rate for the nine months ended September 30, 2012, decreased to (24.1)% from 34.2% for the same period in 2011. Our effective tax rate was significantly impacted by a net adjustment of $162.6 million as a result of adjustments in the tax basis of certain flight equipment. The adjustment related to depreciation deductions allocable to tax-exempt foreign trade income and was made as a result of a recent court decision which ruled in favor of a taxpayer. See Note C of Notes to Condensed, Consolidated Financial Statements. In addition, our effective tax rate continues to be impacted by minor permanent items and interest accrued on uncertain tax positions and IRS audit adjustments. Our reserve for uncertain tax positions increased by $453.2 million for the nine months ended September 30, 2012, the benefits of which, if realized, would have a significant impact on our effective tax rate.

        Other Comprehensive Income:    Other comprehensive income decreased to $4.7 million for the nine months ended September 30, 2012, compared to $35.7 million for the same period in 2011, primarily due to a decrease in the aggregate notional value of derivatives as a result of foreign exchange swaps that matured in 2011, which impacted the aggregate change in market values on derivatives designated as cash flow hedges.

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    Year Ended December 31, 2011 Versus 2010

        Flight Equipment.    During the year ended December 31, 2011, we had the following activity related to Flight equipment under operating leases:

 
  Number of
Aircraft
 

Flight equipment under operating leases at December 31, 2010

    933  

Aircraft reclassified to Net investment in finance and sales-type leases

    (2 )

Aircraft purchases

    8  

Aircraft sold from Flight equipment under operating leases

    (7 )

Aircraft designated for part-out

    (3 )

Aircraft designated for part-out and subsequently transferred to Investment in finance leases

    (1 )

Aircraft transferred from Flight equipment held for use to Flight equipment held for sale

    (1 )

Aircraft transferred from Flight equipment held for sale to Flight equipment held for use

    3  
       

Flight equipment under operating leases at December 31, 2011(a)

    930  
       

(a)
Excludes nine aircraft owned and leased by AeroTurbine.

        Income before Income Taxes:    Our loss before income taxes increased by approximately $269.3 million for the year ended December 31, 2011, as compared to the same period in 2010, primarily due to an approximate 5.8% decrease in rental revenue because of lower lease rates on aircraft in our fleet that were re-leased, an increase in aircraft impairment charges, reduced net overhaul revenue recognized and a decrease in the number of aircraft in our fleet. Further, we recognized a $61.1 million loss on extinguishment of debt in 2011 as a result of the tender offers we completed in June 2011. The increase in loss before income taxes was partially offset by a $98.4 million decrease in depreciation expense and a $1.8 million increase in net revenue from the results of AeroTurbine. See below for a more detailed discussion of the effects of each item affecting income for the year ended December 31, 2011, as compared to the same period in 2010.

        Rental of Flight Equipment:    Revenues from rentals of flight equipment decreased 5.8% to $4,454.4 million for the year ended December 31, 2011, from $4,726.5 million for the same period in 2010. The average number of aircraft we owned during the year ended December 31, 2011, decreased to 932 compared to 963 for the year ended December 31, 2010, primarily due to aircraft sales. Revenues from rentals of flight equipment recognized for the year ended December 31, 2011, decreased as compared to the same period in 2010 due to (i) a $107.8 million decrease related to aircraft in service during the year ended December 31, 2010, and sold prior to December 31, 2011; (ii) a $103.1 million decrease due to lower lease rates on aircraft in our fleet during both periods, that were re-leased or had lease rates change between the two periods; (iii) a $71.5 million decrease in net overhaul rentals recognized as a result of an increase in expected overhaul related reimbursements; and (iv) a $15.7 million decrease related to more aircraft in transition between lessees primarily resulting from repossessions of aircraft. These decreases in revenue were partly offset by increases aggregating $26.0 million related to lease activity from AeroTurbine and the addition of eight new aircraft to our fleet after December 31, 2010, and aircraft in our fleet as of December 31, 2010 that earned revenue for a greater number of days during the year ended December 31, 2011, than during the same period in 2010.

        At December 31, 2011, 22 customers operating 76 aircraft were past due on two or more lease payments aggregating $44.6 million relating to some of those aircraft. Of this amount, we recognized

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$39.0 million in rental income through December 31, 2011. In comparison, at December 31, 2010, eight customers operating 22 aircraft were past due on two or more lease payments aggregating $11.1 million of lease payments relating to some of those aircraft, $10.1 million of which we recognized in rental income through December 31, 2010. We generally recognize rental revenue only to the extent we have received payment or hold security deposits.

        In addition, six of our customers ceased operations during 2011: (i) P.T. Mandala Airlines, which operated two of our owned aircraft, ceased operations on January 13, 2011; (ii) Kuwait National Airways (K.S.C.), trading as Wataniya Airways, which operated one of our owned aircraft, ceased operations on March 16, 2011; (iii) LLC "Avianova," which operated two of our owned aircraft, ceased operations on October 10, 2011, and our leases with Avianova were terminated in September in anticipation of such; (iv) Amsterdam Airlines B.V., which operated one of our owned aircraft, ceased operations on October 31, 2011; (v) Astraeus Limited, which operated two of our owned aircraft, ceased operations on November 22, 2011; and (vi) Tor Air, which operated one of our owned aircraft, ceased operations on December 20, 2011.

        At December 31, 2011, three aircraft in our fleet were not subject to a signed lease agreement or a signed letter of intent, including two aircraft previously operated by the aforementioned customers who had ceased operations or filed for bankruptcy. Two of these three aircraft have been transferred to AeroTurbine for part-out and the remaining aircraft has been leased to another customer. As of November 15, 2012, we had leased the remaining seven aircraft operated by our customers who ceased operations during 2011.

        American Airlines filed for protection under Chapter 11 of the United States Bankruptcy law on November 29, 2011 and as of November 15, 2012, American Airlines operates 15 of our owned aircraft. American Airlines' entry into each lease transaction with us has been authorized by the bankruptcy court.

        Flight Equipment Marketing and Gain on Aircraft Sales:    Flight equipment marketing and gain on aircraft sales increased by $3.7 million for the year ended December 31, 2011, as compared to the same period in 2010, primarily due to an increase in sales of aircraft parts.

        Interest and Other Income:    Interest and other income decreased to $57.9 million for the year ended December 31, 2011, compared to $61.7 million for 2010 due to (i) a decrease in interest and dividend income of $10.5 million mainly attributable to repayment of our notes receivable; (ii) a $10.4 million decrease in other income recorded due to proceeds related to the loss of two aircraft during the year ended December 31, 2010, with no such proceeds received in the year ended December 31, 2011; and (iii) other minor changes aggregating a decrease of $2.6 million. These decreases were partially offset by (i) $10.0 million of other income related to the cancellation of aircraft under order (see Note H of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus) and (ii) a $9.7 million increase due to AeroTurbine revenue, net of cost of sales, from the sale of engines, aircraft and aircraft parts since the acquisition of AeroTurbine on October 7, 2011 (see Note H of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus).

        Interest Expense:    Interest expense remained relatively constant at $1,569.5 million for the year ended December 31, 2011, compared to $1,567.4 million for 2010. Our average effective cost of borrowing increased 0.87%, which was partially offset by a decrease in average debt outstanding (excluding the effect of debt discount and foreign exchange adjustments) to $26.0 billion during the year ended December 31, 2011, compared to $28.7 billion during the same period in 2010.

        Effect from Derivatives, Net of Change in Hedged Items Due to Changes in Foreign Exchange Rates:    We recorded derivative-related charges aggregating $9.8 million for the year ended December 31, 2011,

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compared to $47.8 million for 2010. The decrease is primarily due to: (i)  a $27.9 million decrease in losses recorded for ineffectiveness of derivatives designated as cash flow hedges as a result of three foreign currency hedges that matured in 2010 and 2011 and (ii) an $8.9 million decrease in losses relating to matured swaps recorded during the year ended December 31, 2011, as compared to the same period in 2010. See Note U of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus.

        Depreciation:    Depreciation of flight equipment decreased 5.0% to $1,864.7 million for the year ended December 31, 2011, compared to $1,963.2 million for the same period in 2010, due to a combination of sales of aircraft and a reduction in the aggregate net book value of our fleet resulting from impairment charges and fair value adjustments.

        Aircraft Impairment Charges on Flight Equipment Held for Use:    During the years ended December 31, 2011 and 2010, respectively, we recorded the following aircraft impairment charges and fair value adjustments on flight equipment held for use:

 
  Year Ended  
 
  December 31, 2011   December 31, 2010  
 
  Aircraft
Impaired
or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
  Aircraft
Impaired
or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
 
 
  (Dollars in millions)
 

Impairment charges due to Airbus' announcement of its neo aircraft

      $     61   $ 602.3  

Impairment charges on aircraft due to recurring assessments

    97 (a)   1,523.3     21     508.1  

Impairment charges on aircraft under lease with customers that ceased operations

    3 (b)   43.9     0      
                   

Total Impairment charges on flight equipment held for use

    100   $ 1,567.2     82   $ 1,110.4  
                   

(a)
Includes impairments on one aircraft owned by our AeroTurbine subsidiary.

(b)
Number of aircraft does not include two aircraft upon which impairment charges had been recorded earlier in 2011.

        Aircraft impairment charges on flight equipment held for use increased to $1,567.2 million for the year ended December 31, 2011, as compared to $1,110.4 million recorded for 2010, primarily due to changes in the holding period and residual values of certain out of production aircraft, or aircraft impacted by new technology developments, resulting from our analysis of current macro-economic factors and our acquisition of AeroTurbine when performing our 2011 annual recoverability assessment. See "—Critical Accounting Policies and Estimates—Flight Equipment."

        Between December 31, 2011 and March 7, 2012, four of our customers, including one with two separate operating certificates, declared bankruptcy or ceased operations or its equivalent. As a result, we performed a revised analysis of the recoverability of all aircraft that were under lease with these customers, and determined that the book value of three additional aircraft was not fully recoverable. We recorded impairment charges of $43.9 million to record these three aircraft at their fair market value. See Note W of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus. Additionally, we recorded impairment charges of $7.9 million related to recurring recoverability assessments during the year.

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        Aircraft Impairment Charges and Fair Value Adjustments on Flight Equipment Sold or to Be Disposed:    During the years ended December 31, 2011 and 2010, respectively, we recorded the following aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed:

 
  Year Ended  
 
  December 31, 2011   December 31, 2010  
 
  Aircraft
Impaired
Or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
  Aircraft
Impaired
Or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
 
 
  (Dollars in millions)
 

Loss/(Gain)

                         

Impairment charges and fair value adjustments on aircraft likely to be sold or sold

    17   $ 163.1     15   $ 155.1  

Fair value adjustments on held for sale aircraft sold or transferred from held for sale back to flight equipment under operating leases(a)

    10     (3.7 )   60     372.1  

Impairment charges on aircraft designated for part-out

    3     10.9     2     25.6  
                   

Total Impairment charges and fair value adjustments on flight equipment sold or to be disposed

    30   $ 170.3     77   $ 552.8  
                   

(a)
Included in these amounts are net positive fair value adjustments related to aircraft previously held for sale, but which no longer met such criteria and were subsequently reclassified to Flight equipment under operating leases. Also included in these amounts are net positive fair value adjustments related to sales price adjustments for aircraft that were previously held for sale and sold during periods presented.

        Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed decreased to $170.3 million for the year ended December 31, 2011, compared to $552.8 million for 2010. The decrease was primarily due to fewer aircraft sold or identified as likely to be sold at December 31, 2011, as compared to the same period in 2010. During the year ended December 31, 2011, we recorded impairment charges and fair value adjustments on 30 aircraft, compared to 77 aircraft during the year ended December 31, 2010. See Note G of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus.

        Loss on Extinguishment of Debt:     During the year ended December 31, 2011, we issued unsecured senior notes and used a portion of the proceeds from these notes in cash tender offers to repurchase existing outstanding notes, incurring a loss of $61.1 million from the early extinguishment of debt. See Note K of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus.

        Selling, General and Administrative Expenses:    Selling, general and administrative expenses increased to $238.1 million for the year ended December 31, 2011, compared to $212.8 million for 2010 due to (i) a $23.7 million increase in professional costs relating primarily to the acquisition of AeroTurbine on October 7, 2011 (See Note C of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus) and cost incurred by us in preparation for this offering; (ii) a $16.3 million increase in aircraft related costs to support the aging aircraft in our fleet; and (iii) a $4.4 million increase due to charges relating to asset value guarantee reserves. These increases were partially offset by (i) a $17.7 million decrease in salaries and employee related expenses due to an out-of-period charge

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recognized during 2010 related to pension expenses covering employee services from 1996 to 2010 and (ii) other minor fluctuations aggregating a decrease of $1.4 million.

        Other Expenses:    Other expenses for the year ended December 31, 2011, consisted of:

    $20.0 million of contract cancellation costs. We eliminated the economic effect of the $20 million expense by negotiating with our manufacturer vendors to recover these costs. The recovery was in two payments. One of these payments is related to a 2007 agreement with one manufacturer for us to extend our evaluation period of aircraft under order. This payment was contingent upon our cancelling of the aircraft order and was not contingent on placing any new order with the manufacturer. As a result of the cancellation of that aircraft order in March 2011, we recorded the related payment receivable of $10.0 million in Interest and other income in the Consolidated Statements of Operations for the year ended December 31, 2011. The second payment of $10.0 million is related to an agreement with another manufacturer, which among other contractual items includes a provision to reimburse us for the remaining costs associated with the March 2011 order cancellation. The reimbursement payment will be recognized as a reduction of the cost basis of future aircraft deliveries, as we determined the payment is connected with the purchase of such aircraft.

    $21.9 million of aggregate reserves recorded on three notes receivable.

    $23.0 million of aggregate reserves recorded on two finance and sales-type leases.

        The charges were partially offset by $3.0 million of lease related income, net of lease charges.

        Other expenses for the year ended December 31, 2010, consisted of $91.2 million of aggregated lease related costs we expensed as a result of agreements to sell leased aircraft to third parties.

        Provision for Income Taxes:    Our effective tax rate for the year ended December 31, 2011, is a tax benefit of 30.0% as compared to a tax benefit of 35.2% for 2010. The decrease in tax benefit is primarily due to an increase in state taxes, an out-of-period adjustment related to the forfeiture of share-based deferred compensation awards, various other permanent items, and interest accrued on uncertain tax positions and IRS audit adjustments. Our reserve for uncertain tax positions increased by $31.2 million for the year ended December 31, 2011, the benefits of which, if realized, would have a significant impact on our effective tax rate.

        Other Comprehensive Income:    Other comprehensive income decreased to $39.3 million for the year ended December 31, 2011, compared to $79.3 million for the same period in 2010. This decrease was primarily due to maturities of swaps and changes in the market values on derivatives qualifying for and designated as cash flow hedges.

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Year Ended December 31, 2010 Versus 2009

        Flight Equipment.    During the year ended December 31, 2010, we had the following activity related to Flight equipment under operating leases:

 
  Number of
Aircraft
 

Flight equipment under operating leases at December 31, 2009

    993  

Aircraft reclassified to Net investment in finance and sales-type leases

    (2 )

Aircraft purchases

    5  

Aircraft sold from Flight equipment under operating leases

    (6 )

Aircraft designated for part-out

    (2 )

Aircraft transferred from Flight equipment held for use to Flight equipment held for sale(a)

    (60 )

Aircraft reclassified from Net investment in finance and sales-type leases

    7  

Total loss

    (2 )
       

Flight equipment under operating leases at December 31, 2010

    933  
       

(a)
As of December 31, 2010, 51 of these aircraft were sold to third parties.

        Income before Income Taxes.    Our income before income taxes decreased approximately $2.1 billion for the year ended December 31, 2010 as compared to the same period in 2009, primarily due to the following: (i) impairment charges and fair value adjustments and other lease related charges on aircraft we sold or agreed to sell during 2010 to generate liquidity to repay maturing debt obligations or as part of our ongoing fleet strategy; (ii) impairment charges related to our fleet held for use; and (iii) an increase in our cost of borrowing.

        Rental of Flight Equipment.    Revenues from net rentals of flight equipment decreased 4.1% to $4,726.5 million for the year ended December 31, 2010, from $4,928.3 million for the year ended December 31, 2009. The average number of aircraft in our fleet decreased to 963 for the year ended December 31, 2010, compared to 974 for the year ended December 31, 2009. Revenues from net rentals of flight equipment decreased (i) $206.8 million due to a decrease related to aircraft in service during the year ended December 31, 2009, and either transferred to Flight equipment held for sale or sold prior to December 31, 2010; (ii) $25.6 million due to a decrease in overhaul rentals recognized as a result of an increase in actual and expected overhaul related expenses partly offset by an increase in the number of leases with overhaul provisions; (iii) $63.9 million due to a decrease in lease rates on aircraft in our fleet during both periods, that were re-leased or had lease rate changes between the two periods; and (iv) $13.1 million due to lost revenue relating to aircraft in transition between lessees, primarily resulting from repossessions of aircraft from airlines. These revenue decreases were partially offset by a $107.6 million increase due to the addition of new aircraft to our fleet after December 31, 2009, and aircraft in our fleet as of December 31, 2009 that earned revenue for a greater number of days during the year ended December 31, 2010 than during the year ended December 31, 2009.

        At December 31, 2010, eight customers operating 22 aircraft were two or more months past due on $11.1 million of lease payments related to some of those aircraft. Of this amount, we recognized $10.1 million in rental income through December 31, 2010. In comparison, at December 31, 2009, 12 customers operating 25 aircraft were two or more months past due on $31.9 million of lease payments relating to some of those aircraft.

        In addition, four of our customers filed for bankruptcy protection or ceased operations during 2010: (i) Skyservice Airlines Inc., operating one of our owned aircraft, ceased operations on March 31, 2010; (ii) Mexicana de Aviación, operating 12 of our owned aircraft, of which eight were leased from us

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and four were subleased from another one of our customers, filed for bankruptcy protection on August 2, 2010; (iii) Viking Airlines AB, operating one of our owned aircraft, ceased operations on October 15, 2010; and (iv) Eurocypria Airlines Limited, operating five of our owned aircraft, ceased operations on November 4, 2010. All aircraft in our fleet were subject to signed lease agreements or signed letters of intent at December 31, 2010.

        Flight Equipment Marketing and Gain on Aircraft Sales.    As part of our fleet strategy and to raise liquidity in 2010, we sold or agreed to sell 77 aircraft during the year ended December 31, 2010, two of which were accounted for as sales-type leases. For these aircraft, we recorded any impairments or adjustments to fair value in Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed. See below for variance analysis of impairment charges and fair value adjustments on flight equipment sold or to be disposed. In comparison, we sold nine aircraft during the same period in 2009, three of which were accounted for as a sales-type lease. Three of these nine transactions resulted in gains and are recorded in Flight equipment marketing and gain on aircraft sales. The impairment charges and fair value adjustments recorded on the remaining six aircraft are recorded in Aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed.

        Interest and Other Income.    Interest and other income increased to $61.7 million for the year ended December 31, 2010, compared to $56.0 million for the year ended December 31, 2009, due to (i) a $7.6 million increase in interest income related to our Notes receivable and Net investment in finance and sales-type leases; (ii) a $7.2 million increase in proceeds received related to total loss of aircraft; (iii) a $1.9 million increase in security deposits forfeitures related to nonperformance by customers; and (iv) other minor increases aggregating $4.1 million. The increases were partially offset by (i) a $7.8 million decrease in foreign exchange gains and (ii) a $7.3 million decrease in revenues from variable interest entities, or VIEs, which we consolidated into our 2009 statement of operations and deconsolidated on January 1, 2010. See "—Variable Interest Entities" below for further discussion.

        Interest Expense.    Interest expense increased to $1,567.4 million for the year ended December 31, 2010, compared to $1,365.5 million for the year ended December 31, 2009, as a result of a 0.58% increase in our average effective cost of borrowing, partially offset by a decrease in average outstanding debt (excluding the effect of debt discount and foreign exchange adjustments) to $28.7 billion for the year ended December 31, 2010, compared to $31.1 billion for the year ended December 31, 2009.

        Effect from Derivatives, Net of Change in Hedged Items Due to Changes in Foreign Exchange Rates.    The effect from derivatives, net of change in hedged items due to changes in foreign exchange rates was a loss of $47.8 million and income of $21.5 million for the years ended December 31, 2010 and 2009, respectively, primarily due to ineffectiveness recorded on our derivative instruments designated as cash flow hedges. The income effect for the year ended December 31, 2010, also includes $15.4 million of losses on matured derivative contracts compared to gains on matured swaps of $9.7 million for the year ended December 31, 2009. If hedge accounting treatment is not applied during the entire life of the derivative, or the hedge is not perfectly effective for some part of its life, a gain or loss will be realized at the maturity of the swap. See Note U of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus.

        Depreciation.    Depreciation of flight equipment decreased to $1,963.2 million for the year ended December 31, 2010 compared to $1,969.0 million for the year ended December 31, 2009 due to a decrease in the cost of our fleet to $51.4 billion at December 31, 2010 from $58.0 billion at December 31, 2009. The cost of our fleet held for use was reduced by impairment charges recorded during the year and by aircraft being transferred from Flight equipment under operating leases to Flight equipment held for sale, and impairment charges resulting from our recurring recoverability analyses. See below for the variance analysis of impairment charges taken.

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        Aircraft Impairment Charges on Flight Equipment Held For Use.    Aircraft impairment charges on flight equipment held for use increased to $1,110.4 million for the year ended December 31, 2010, from $50.9 million for the year ended December 31, 2009. On December 1, 2010, Airbus announced new fuel-efficient engine options for its narrowbody neo aircraft with expected deliveries starting in 2016. At December 31, 2010, we had identified 78 narrowbody aircraft in our fleet that may be negatively impacted by the introduction of the Airbus A320neo family aircraft, including Boeing 737-300/400/500/600, Airbus A320-200 aircraft with first generation engines and the Airbus A321-100. As part of our ongoing fleet assessment, we performed a recoverability analysis on those aircraft, using revised cash flow assumptions. Based on this recoverability analysis, 61 of these 78 aircraft were deemed impaired and we recorded impairment charges of approximately $602.3 million for the year ended December 31, 2010.

        In addition to these charges, we recorded an additional $508.1 million impairment charges on 21 aircraft in our fleet as a result of our recurring recoverability analyses performed during the year. As of December 31, 2010, we had 13 passenger configured 747-400s and 11 A321-100s in our fleet. Management's estimate of the future lease rates for these aircraft types declined significantly in the third quarter of 2010. The decline in expected lease rates for the 747-400s was due to a number of unfavorable trends, including lower overall demand, as airlines replace their 747-400s with more efficient newer generation widebody aircraft. As a result, the current global supply of 747-400 aircraft that are for sale, or idle, has increased. It is expected that these unfavorable trends will persist. The decline in A321-100 lease rates is primarily due to continued and accelerated decrease in demand for this aircraft type, which is attributable to its age and limited mission application. As a result of the decline in expected future lease rates, seven 747-400s, five A321-100s, and nine other aircraft in our fleet held for use were deemed impaired when we performed our recoverability assessments of the entire fleet we held for use during 2010. As a result, we recorded impairment charges aggregating $508.1 million to write these aircraft down to their respective fair values. The estimated undiscounted cash flows on the remaining six 747-400's and six A321-100's supported the current carrying value of these aircraft. During the year ended December 31, 2009, we recorded impairment charges aggregating $50.9 million relating to three aircraft in our fleet held for use. See Note F of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus.

        Aircraft Impairment Charges and Fair Value Adjustments on Flight Equipment Sold or to Be Disposed.    During the years ended December 31, 2010 and 2009, we recorded the following aircraft impairment charges and fair value adjustments on flight equipment sold or to be disposed:

 
  Year Ended  
 
  December 31, 2010   December 31, 2009  
 
  Aircraft
Impaired
Or
Adjusted
  Impairment
Charges and
Fair Value
Adjustments
  Aircraft
Impaired
  Impairment
Charges and
Fair Value
Adjustments
 
 
  (Dollars in millions)
 

Loss/(Gain)

                         

Impairment charges and fair value adjustments on aircraft likely to be sold or sold

    15   $ 155.1     5   $ 24.9  

Fair value adjustments on held for sale aircraft sold or transferred from held for sale back to flight equipment under operating leases

    60     372.1     2     10.5  

Impairment charges on aircraft designated for part-out

    2     25.6          
                   

Total Impairment charges and fair value adjustments on flight equipment on flight equipment sold or to be disposed

    77   $ 552.8     7   $ 35.4  
                   

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        We recorded impairment charges and fair value adjustments on flight equipment sold or to be disposed in the amount of $552.8 million for the year ended December 31, 2010, compared to charges of $35.4 million for the year ended December 31, 2009. During the year ended December 31, 2010, we recorded impairment charges and fair value adjustments aggregating $397.7 million related to aircraft that were either transferred to Flight equipment held for sale or designated for part-out. In addition, we recorded $155.1 million in impairment charges and fair value adjustments relating to aircraft that were deemed likely to be sold or sold. The charges for the year ended December 31, 2009, related to impairment charges and fair value adjustments on seven aircraft.

        Selling, General and Administrative Expenses.    Selling, general and administrative expenses increased to $212.8 million for the year ended December 31, 2010, compared to $196.7 million for the year ended December 31, 2009, due to (i) $20.7 million higher pension expenses including out of period adjustments aggregating $20.2 million related to pension expenses covering employee services from 1996 to 2010 and not previously recorded; (ii) a $19.5 million increase in write-offs of notes receivable; and (iii) a $3.5 million increase in impairment charges related to spare parts inventory. These increases were partially offset by (i) a $14.5 million decrease in expenses from VIEs, which we consolidated into our 2009 statement of operations and deconsolidated January 1, 2010 as a result of our adoption of new guidance; (ii) a $10.6 million decrease in aircraft operating expenses stemming from a reduction in expenses realized related to repossessions of aircraft; and (iii) other minor changes aggregating a decrease of $2.5 million.

        Other Expenses.    Other expenses for the year ended December 31, 2010 of $91.2 million stem from lease related costs that were expensed as a result of agreements to sell aircraft that were still under lease to third parties. There were no such comparable expenses for the year ended December 31, 2009.

        Provision for Income Taxes.    Our effective tax rate for the year ended December 31, 2010, is a tax benefit of 35.2%, as compared with a tax expense of 35.8% for the year ended December 31, 2009. Our effective tax rate continues to be impacted by minor permanent items and interest accrued on uncertain tax positions and IRS audit adjustments. Our reserve for uncertain tax positions increased by $59.5 million, the benefits of which, if realized, would have a significant impact on our effective tax rate.

        Other Comprehensive Income.    Accumulated other comprehensive loss was $58.9 million and $138.2 million at December 31, 2010 and 2009, respectively. Fluctuations in Accumulated other comprehensive income are primarily due to changes in market values of cash flow hedges. See Note U of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 contained elsewhere in this prospectus.

Liquidity

        We generally fund our operations, including aircraft purchases, through available cash balances, internally generated funds, including aircraft sales, and debt financings. We borrow funds to purchase new and used aircraft, make progress payments during aircraft construction and pay off maturing debt obligations. We borrow both on a secured and unsecured basis from various sources, including public debt markets, commercial banks and institutional loan markets. Our liquidity management strategy is to align our future debt maturities more closely with future operating cash flows. As a result of a variety of liquidity initiatives, we have extended our debt maturities from a weighted average of 4.3 years as of December 31, 2008 to a weighted average of 6.4 years as of September 30, 2012.

        ILFC generated cash flows from operations of approximately $2.3 billion for the nine months ended September 30, 2012, and raised $4.0 billion of gross proceeds from debt financings consisting of $2.25 billion of unsecured notes and $1.75 billion of secured financings. ILFC primarily used these proceeds to: (i) finance aircraft purchases; (ii) prepay in full all amounts outstanding under its

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$750 million secured term loan entered into in 2010 that was scheduled to mature in 2015; (iii) prepay the remaining amount of $456.9 million outstanding under its secured credit facility dated October 13, 2006 and terminate the facility; and (iv) refinance its $550 million secured term loan entered into in 2010 at a lower interest rate. ILFC plans to use the remaining proceeds for general corporate purposes, including aircraft purchases and the repayment of maturing debt. ILFC also increased the maximum aggregate amount available under AeroTurbine's credit facility to $430.0 million. On October 9, 2012, ILFC entered into a new unsecured $2.3 billion revolving credit facility that matures in October 2015, and terminated its previous $2.0 billion revolving credit facility. See "—Debt Financings" for additional details.

        ILFC had approximately $2.6 billion in cash and cash equivalents available for use in its operations at September 30, 2012. ILFC also had $371.1 million of cash restricted from use in its operations, but which it can use to satisfy certain obligations under its operating leases and to pay principal and interest on its 2004 ECA facility. At November 15, 2012, ILFC had the full $2.3 billion available to it under its revolving credit facility and approximately $170.0 million of the $430.0 million was available under AeroTurbine's credit facility. ILFC also has the ability to potentially increase the AeroTurbine credit facility by an additional $70 million either by adding new lenders or allowing existing lenders to increase their commitments if they choose to do so.

        ILFC's bank credit facilities and indentures limit ILFC's ability to incur secured indebtedness. The most restrictive covenant in ILFC's bank credit facilities permits ILFC and its subsidiaries to incur secured indebtedness totaling up to 30% of ILFC's consolidated net tangible assets, as defined in the credit agreement, which limit currently totals approximately $10.7 billion. This limitation is subject to certain exceptions, including the ability to incur secured indebtedness to finance the purchase of aircraft. As of November 15, 2012, ILFC was able to incur an additional $7.8 billion of secured indebtedness under this covenant. ILFC's debt indentures also restrict ILFC and its subsidiaries from incurring secured indebtedness in excess of 12.5% of ILFC's consolidated net tangible assets, as defined in the indentures. However, ILFC may obtain secured financing without regard to the 12.5% consolidated net tangible asset limit under ILFC's indentures by doing so through subsidiaries that qualify as non-restricted under such indentures.

        In addition to addressing our liquidity needs through debt financings, we may also pursue potential aircraft sales or, for some of our older aircraft that are out-of-production, part-outs. During the nine months ended September 30, 2012, we sold nine aircraft and four engines, two of which were owned by AeroTurbine, for approximately $237.1 million in aggregate gross proceeds and during the year ended December 31, 2011, we sold 14 aircraft and one engine for approximately $296 million in aggregate gross proceeds, in connection with our ongoing fleet management strategy. As of November 15, 2012, we had sold ten additional aircraft and we anticipate additional aircraft sales during the remainder of the year. In evaluating potential sales or part-outs of aircraft, we balance maximization of cash today with the long-term value of holding aircraft.

        We believe the sources of liquidity mentioned above, together with our cash generated from operations, will be sufficient to operate our business and repay our debt maturities for at least the next twelve months.

Debt Financings

        We borrow funds on both a secured and unsecured basis from various sources, including public debt markets, commercial banks and institutional loan markets. During the nine months ended September 30, 2012, ILFC (i) entered into a new $900 million senior secured term loan through a non-restricted subsidiary; (ii) issued $750 million of 4.875% notes due 2015, $750 million of 5.875% notes due 2019 and $750 million of 5.875% notes due 2022 under its shelf registration statement; (iii) entered into a $203 million term loan to finance aircraft; (iv) increased the aggregate amount

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available under AeroTurbine's credit facility by $95 million for a maximum aggregate available amount of $430 million; (v) prepaid the remaining $456.9 million outstanding under its secured credit facility scheduled to mature in October 2012 and terminated that facility; (vi) prepaid its $750 million secured term loan scheduled to mature in 2015; and (vii) refinanced its $550 million secured term loan, as further discussed below. ILFC also entered into a new $2.3 billion revolving credit facility in October 2012 and terminated its previous $2.0 billion revolving credit facility.

        Our debt financing was comprised of the following:

 
  September 30, 2012   December 31, 2011  
 
  (Dollars in thousands)
 

Secured

             
 

Senior secured bonds

  $ 3,900,000   $ 3,900,000  
 

ECA financings

    1,982,649     2,335,147  
 

Secured bank debt(a)

    2,014,234     2,246,936  
 

Institutional secured term loans

    1,450,000     1,300,000  
   

Less: Deferred debt discount

    (8,141 )   (17,452 )
           

    9,338,742     9,764,631  

Unsecured

             
 

Bonds and Medium-Term Notes

    13,910,064     13,658,769  
   

Less: Deferred debt discount

    (39,701 )   (39,128 )
           

    13,870,363     13,619,641  
           

Total Senior Debt Financings

    23,209,105     23,384,272  
 

Subordinated Debt

    1,000,000     1,000,000  
           

  $ 24,209,105   $ 24,384,272  
           

Selected interest rates and ratios which include the economic effect of derivative instruments:

             
   

Effective cost of borrowing

    6.13 %   6.11 %
   

Percentage of total debt at fixed rates

    78.66 %   76.08 %
   

Effective cost of borrowing on fixed rate debt

    6.79 %   6.49 %
   

Bank prime rate

    3.25 %   3.25 %

(a)
Of this amount, $279.2 million (2012) and $97.0 million (2011) is non-recourse to ILFC. These secured financings were incurred by VIEs and consolidated into our condensed, consolidated financial statements.

        For some of our secured debt financings, we created direct and indirect wholly owned subsidiaries for the purpose of purchasing and holding title to aircraft, and we pledged the equity of those subsidiaries as collateral. These subsidiaries have been designated as non-restricted subsidiaries under ILFC's indentures and meet the definition of a VIE. We have determined that we are the primary beneficiary of such VIEs and, accordingly, we consolidate such entities into our consolidated financial statements. See Note S of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 and Note N of Notes to Condensed, Consolidated Financial Statements in our condensed, consolidated financial statements for the nine months ended September 30, 2012, contained elsewhere in this prospectus for more information on VIEs.

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        The following table presents information regarding the collateral pledged for our secured debt:

 
  As of September 30, 2012  
 
  Secured Debt
Outstanding
  Net Book
Value
  Number of
Aircraft
 
 
  (Dollars in thousands)
   
 

Senior Secured Bonds

  $ 3,900,000   $ 6,559,515     174  

ECA Financings

    1,982,649     5,399,268     119  

Secured Bank Debt(a)

    2,014,234     2,958,706 (a)   63 (a)

Institutional Secured Term Loans

    1,450,000     2,852,834     97  
               

Total

  $ 9,346,883   $ 17,770,323     453  
               

(a)
Amounts represent net book value and number of aircraft securing ILFC secured bank term debt and do not include the book value or number of AeroTurbine assets securing the AeroTurbine revolving credit agreement, under which $266.0 million is included in the total Debt outstanding. ILFC guarantees the AeroTurbine revolving credit agreement on an unsecured basis.

        Our debt agreements contain various affirmative and restrictive covenants, as described in greater detail below. As of September 30, 2012, we were in compliance with the covenants in our debt agreements.

Senior Secured Bonds

        On August 20, 2010, ILFC issued $3.9 billion of senior secured notes, with $1.35 billion maturing in September 2014 and bearing interest of 6.5%, $1.275 billion maturing in September 2016 and bearing interest of 6.75%, and $1.275 billion maturing in September 2018 and bearing interest of 7.125%. The notes are secured by a designated pool of aircraft, initially consisting of 174 aircraft and their equipment and related leases, and cash collateral when required. In addition, two of ILFC's subsidiaries, which either own or hold leases of aircraft included in the pool securing the notes, have guaranteed the notes. ILFC can redeem the notes at any time prior to their maturity, provided ILFC gives notice between 30 to 60 days prior to the intended redemption date and subject to a penalty of the greater of 1% of the outstanding principal amount and a "make-whole" premium. There is no sinking fund for the notes.

        The indenture and the aircraft mortgage and security agreement governing the senior secured notes contain customary covenants that, among other things, restrict ILFC's and its restricted subsidiaries' ability to: (i) create liens; (ii) sell, transfer or otherwise dispose of the assets serving as collateral for the senior secured notes; (iii) declare or pay dividends or acquire or retire shares of ILFC's capital stock; (iv) designate restricted subsidiaries as non-restricted subsidiaries or designate non-restricted subsidiaries; and (v) make investments in or transfer assets to non-restricted subsidiaries. The indenture also restricts ILFC's and the subsidiary guarantors' ability to consolidate, merge, sell or otherwise dispose of all, or substantially all, of their assets.

        The indenture also provides for customary events of default, including but not limited to, the failure to pay scheduled principal and interest payments on the notes, the failure to comply with covenants and agreements specified in the indenture, the acceleration of certain other indebtedness resulting from non-payment of that indebtedness, and certain events of insolvency. If any event of default occurs, any amount then outstanding under the senior secured notes may immediately become due and payable.

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ECA Financings

        ILFC entered into ECA facility agreements in 1999 and 2004 through certain direct and indirect wholly owned subsidiaries that have been designated as non-restricted subsidiaries under ILFC's indentures. The 1999 and 2004 ECA facilities were used to fund purchases of Airbus aircraft through 2001 and June 2010, respectively. New financings are no longer available to ILFC under either ECA facility.

        As of September 30, 2012, approximately $2.0 billion was outstanding under the 2004 ECA facility and no loans were outstanding under the 1999 ECA facility. The interest rates on the loans outstanding under the 2004 ECA facility are either fixed or based on LIBOR and ranged from 0.67% to 4.71% at September 30, 2012. The net book value of the aircraft purchased under the 2004 ECA facility was $4.1 billion at September 30, 2012. The loans are guaranteed by various European ECAs. ILFC collateralized the debt with pledges of the shares of wholly owned subsidiaries that hold title to the aircraft financed under the facilities. The 2004 ECA facility contains customary events of default and restrictive covenants, including a covenant to maintain a minimum consolidated tangible net worth.

        Because of ILFC's current long-term debt ratings, the 2004 ECA facility requires it to segregate security deposits, overhaul rentals and rental payments received under the leases related to the aircraft funded under the 2004 ECA facility (segregated rental payments are used to make scheduled principal and interest payments on the outstanding debt). The segregated funds are deposited into separate accounts pledged to and controlled by the security trustee of the 2004 ECA facility. At September 30, 2012, and December 31, 2011, respectively, ILFC had segregated security deposits, overhaul rentals and rental payments aggregating $369.4 million and $414.8 million related to aircraft funded under the 2004 ECA facility. The segregated amounts fluctuate with changes in security deposits, overhaul rentals, rental payments and principal and interest payments related to the aircraft funded under the 2004 ECA facility. In addition, if a default resulting in an acceleration of the obligations under the 2004 ECA facility were to occur, pursuant to the cross-collateralization agreement described below, ILFC would have to segregate lease payments, overhaul rentals and security deposits received after such acceleration event occurred from the leases relating to all the aircraft funded under the 1999 ECA facility, even though those aircraft are no longer subject to a loan at September 30, 2012.

        In addition, ILFC must register the existing individual mortgages on certain aircraft funded under both the 1999 and 2004 ECA facilities in the local jurisdictions in which the respective aircraft are registered. The mortgages are only required to be filed with respect to aircraft that have outstanding loan balances or otherwise as agreed in connection with the cross-collateralization agreement described below.

        We have cross-collateralized the 1999 ECA facility with the 2004 ECA facility. As part of such cross-collateralization, ILFC (i) guarantees the obligations under the 2004 ECA facility through its subsidiary established to finance Airbus aircraft under the 1999 ECA facility; (ii) granted mortgages over certain aircraft financed under the 1999 ECA facility and security interests over other collateral related to the aircraft financed under the 1999 ECA facility to secure the guaranty obligation; (iii) has to maintain a loan-to-value ratio (aggregating the aircraft from the 1999 ECA facility and the 2004 ECA facility) of no more than 50%, in order to release liens (including the liens incurred under the cross-collateralization agreement) on any aircraft financed under the 1999 or 2004 ECA facilities or other assets related to the aircraft; and (iv) agreed to apply proceeds generated from certain disposals of aircraft to obligations under the 2004 ECA facility.

        The cross-collateralization agreement also includes additional restrictive covenants relating to the 2004 ECA facility, restricting ILFC from (i) paying dividends on its capital stock with the proceeds of asset sales and (ii) selling or transferring aircraft with an aggregate net book value exceeding a certain disposition amount, which is currently approximately $9.8 billion. The disposition amount will be reduced by approximately $91.4 million at the end of each calendar quarter during the remainder of

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the effective period. The covenants are in effect until December 31, 2012. A breach of these restrictive covenants would result in a termination event for the ten loans funded subsequent to the date of the agreement and would make those loans, which aggregated $246.2 million at September 30, 2012, due in full at the time of such a termination event.

Secured Bank Debt

        2006 Credit Facility.    ILFC had a credit facility, dated October 13, 2006, as amended, under which the original maximum amount available was $2.5 billion. The interest on the secured loans was based on LIBOR plus a margin of 2.15%, plus facility fees of 0.2% on the outstanding balance. On February 23, 2012, ILFC prepaid the total remaining outstanding amount under this facility of $456.9 million and terminated the facility. In connection with this prepayment, we recognized losses aggregating $3.2 million from the write off of unamortized deferred financing costs and deferred debt discount.

        2011 Secured Term Loan.    On March 30, 2011, one of ILFC's non-restricted subsidiaries entered into a secured term loan agreement with lender commitments in the amount of approximately $1.3 billion, which was subsequently increased to approximately $1.5 billion. The loan matures on March 30, 2018, and scheduled principal payments commenced in June 2012. The loan bears interest at LIBOR plus a margin of 2.75%, or, if applicable, a base rate plus a margin of 1.75%. The obligations of the subsidiary borrower are guaranteed on an unsecured basis by ILFC and on a secured basis by certain wholly owned subsidiaries of the subsidiary borrower. The security granted initially included a portfolio of 54 aircraft, together with attached leases and all related equipment, with an average appraised base market value, as defined in the loan agreement, of approximately $2.4 billion as of January 1, 2011, and the equity interests in certain special purpose entities, or SPEs, that own the pledged aircraft and related equipment and leases. The $2.4 billion was equal to an initial loan-to-value ratio of approximately 65%. The proceeds of the loan were made available to the subsidiary borrower as aircraft were transferred to the SPEs, at an advance rate equal to 65% of the initial appraised value of the aircraft transferred to the SPEs. The full $1.5 billion has been advanced to the subsidiary borrower under the agreement.

        The subsidiary borrower is required to maintain compliance with a maximum loan-to-value ratio, which declines over time, as set forth in the term loan agreement. If the subsidiary borrower does not maintain compliance with the maximum loan-to-value ratio, it will be required to prepay portions of the outstanding loans, deposit an amount in the cash collateral account or transfer additional aircraft to the SPEs, subject to certain concentration criteria, so that the ratio is equal to or less than the maximum loan-to-value ratio.

        The subsidiary borrower can voluntarily prepay the loan at any time, subject to a 1% prepayment penalty before March 30, 2013. The loan facility contains customary covenants and events of default, including covenants that limit the ability of the subsidiary borrower and its subsidiaries to incur additional indebtedness and create liens, and covenants that limit the ability of ILFC, the subsidiary borrower and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets and enter into transactions with affiliates.

        AeroTurbine Revolving Credit Agreement.    AeroTurbine has a credit facility that expires on December 9, 2015 and after the most recent amendment on February 23, 2012, provides for a maximum aggregate available amount of $430 million, subject to availability under a borrowing base calculated based on AeroTurbine's aircraft assets and accounts receivable. AeroTurbine has the option to increase the aggregate amount available under the facility by an additional $70 million, either by adding new lenders or allowing existing lenders to increase their commitments if they choose to do so. Borrowings under the facility bear interest determined, with certain exceptions, based on LIBOR plus a margin of 3.0%. AeroTurbine's obligations under the facility are guaranteed by ILFC on an unsecured basis and by AeroTurbine's subsidiaries (subject to certain exclusions) and are secured by substantially

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all of the assets of AeroTurbine and the subsidiary guarantors. The credit agreement contains customary events of default and covenants, including certain financial covenants. Additionally, the credit agreement imposes limitations on AeroTurbine's ability to pay dividends to us (other than dividends payable solely in common stock). As of September 30, 2012, AeroTurbine had $266.0 million outstanding under the facility.

        Secured Commercial Bank Financings.    In May 2009, ILFC provided $39.0 million of subordinated financing to a non-restricted subsidiary. The entity used these funds and an additional $106.0 million borrowed from third parties to purchase an aircraft, which it leases to an airline. The $106.0 million loan has two tranches, both secured by the aircraft and related lease receivable. The first tranche is $82.0 million, fully amortizes over the lease term, and is non-recourse to ILFC. The second tranche is $24.0 million, partially amortizes over the lease term, and is guaranteed by ILFC. Both tranches mature in May 2018 with interest rates based on LIBOR. At September 30, 2012, the interest rates on the $82.0 million and $24.0 million tranches were 3.381% and 5.081%, respectively. The entity entered into two interest rate cap agreements to economically hedge the related LIBOR interest rate risk in excess of 4.00%. At September 30, 2012, $69.0 million was outstanding under the two tranches and the net book value of the aircraft was $128.3 million.

        In June 2009, ILFC borrowed $55.4 million through a non-restricted subsidiary, which owns one aircraft leased to an airline. Approximately half of the original loan amortizes over five years and the remaining $27.5 million is due in 2014. The loan is non-recourse to ILFC and is secured by the aircraft and the lease receivables. The interest rate on the loan is fixed at 6.58%. At September 30, 2012, $35.7 million was outstanding and the net book value of the aircraft was $85.2 million.

        In March 2012, one of ILFC's indirect non-restricted subsidiaries entered into a $203 million term loan facility that was used to finance seven Boeing 737-800s. The principal of each senior loan issued under the facility will partially amortize over six years, with the remaining principal payable at the maturity date. At September 30, 2012, the average interest rate on the loans was 4.73%. The loans are non-recourse to ILFC except under limited circumstances and are secured by the purchased aircraft and lease receivables. The subsidiary borrower can voluntarily prepay the loans at any time subject to a 2% prepayment fee prior to March 30, 2014 and a 1% prepayment fee between March 30, 2014 and March 30, 2015.

        The subsidiary borrower is prohibited under the agreement from: (i) incurring additional debt; (ii) incurring additional capital expenditures; (iii) hiring employees; and (iv) negatively pledging the assets securing the facility.

Institutional Secured Term Loans

        In 2010, ILFC entered into the following term loans, both of which were repaid or refinanced in 2012:

    $750 million term loan agreement secured by 43 aircraft and all related equipment and leases, with an initial loan-to-value ratio of approximately 56%. The loan had an original maturity date of March 17, 2015, and bore interest at LIBOR plus a margin of 4.75% with a LIBOR floor of 2.0%. On March 23, 2012, ILFC repaid the loan in full. In connection with the prepayment of this loan, we recognized losses aggregating $17.7 million from the write off of unamortized deferred financing costs and deferred debt discount.

    $550 million term loan agreement entered into through a non-restricted subsidiary. The obligations of the subsidiary borrower were guaranteed on an unsecured basis by ILFC and on a secured basis by certain non-restricted subsidiaries of ILFC that held title to 37 aircraft, with an initial loan-to-value ratio of approximately 57%. The loan had an original maturity date of March 17, 2016, and bore interest at LIBOR plus a margin of 5.0% with a LIBOR floor of 2.0%. On April 12, 2012, ILFC refinanced the loan with a new $550 million secured term loan, as further discussed below.

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In 2012, ILFC entered into the following term loans:

    $900 Million Secured Term Loan.    On February 23, 2012, one of ILFC's indirect, wholly owned subsidiaries entered into a secured term loan agreement in the amount of $900 million. The loan matures on June 30, 2017, and bears interest at LIBOR plus a margin of 4.0% with a 1.0% LIBOR floor, or, if applicable, a base rate plus a margin of 3.0%. The obligations of the subsidiary borrower are guaranteed on an unsecured basis by ILFC and on a secured basis by certain wholly owned subsidiaries of the subsidiary borrower. The security granted includes the equity interests in certain SPEs of the subsidiary borrower that have been designated as non-restricted under ILFC's indentures and that hold title to 62 aircraft and all related equipment and leases with an average appraised base market value, as defined in the loan agreement, of approximately $1.66 billion as of December 31, 2011. The $1.66 billion equals an initial loan-to-value ratio of approximately 54%. The principal of the loan is payable in full at maturity with no scheduled amortization. We can voluntarily prepay the loan at any time, subject to a 1.0% prepayment penalty prior to February 23, 2013.

    $550 Million Secured Term Loan.    On April 12, 2012, one of ILFC's indirect, wholly owned subsidiaries entered into a secured term loan agreement in the amount of $550 million. The loan matures on April 12, 2016, and bears interest at LIBOR plus a margin of 3.75% with a 1.0% LIBOR floor. The obligations of the subsidiary borrower are guaranteed on an unsecured basis by ILFC and on a secured basis by certain wholly owned subsidiaries of the subsidiary borrower. The security granted includes the equity interests in certain SPEs of the subsidiary borrower that have been designated as non-restricted under ILFC's indentures and that hold title to 36 aircraft and all related equipment and leases with an average initial appraised base market value, as defined in the loan agreement, of approximately $1.0 billion. The $1.0 billion equals an initial loan-to-value ratio of approximately 55%. The principal of the loan is payable in full at maturity with no scheduled amortization. We can voluntarily prepay the loan at any time, subject to a 1% prepayment penalty prior to April 12, 2013. We used the proceeds from this loan to prepay in full the $550 million secured term loan that was scheduled to mature on March 17, 2016. In connection with this refinancing of our $550 million secured term loan, 92% of the transaction was accounted for as a modification of the 2010 secured term loan and ILFC recorded $4.7 million of the arrangement fee in Selling, general and administrative expense and $2.0 million as early extinguishment of debt.

        These loans each require a loan-to-value ratio of no more than 63%. If either subsidiary borrower does not maintain compliance with the maximum loan-to-value ratio, it will be required to prepay portions of the outstanding loans, deposit an amount in the cash collateral account or transfer additional aircraft to SPEs, subject to certain concentration criteria, so that the ratio is equal to or less than the maximum loan-to-value ratio.

        The loans contain customary covenants and events of default, including covenants that limit the ability of the subsidiary borrowers and their subsidiaries to incur additional indebtedness and create liens, and covenants that limit the ability of ILFC, the subsidiary borrowers and their subsidiaries to consolidate, merge or dispose of all or substantially all of their assets and enter into transactions with affiliates.

Unsecured Bonds and Medium-Term Notes

        Shelf Registration Statement:    ILFC has an effective shelf registration statement filed with the SEC. As a result of ILFC's well-known seasoned issuer, or WKSI, status, ILFC has an unlimited amount of debt securities registered for sale under the shelf registration statement.

        ILFC has issued unsecured notes with an aggregate principal amount outstanding of $11.2 billion under its current and previous shelf registration statements, including $750 million of 4.875% notes due

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2015 and $750 million of 5.875% notes due 2019, each issued in March 2012, and $750 million of 5.875% notes due 2022, issued in August 2012. ILFC received aggregate net proceeds of approximately $2.22 billion from these notes issuances after deducting underwriting discounts and commissions and fees. ILFC used part of the net proceeds from the March issuances to prepay its $750 million secured term loan due March 17, 2015 and the remainder will be used for general corporate purposes, including the repayment of existing indebtedness and the purchase of aircraft. The debt securities outstanding under ILFC's shelf registration statements mature through 2022 and bear interest rates that range from 4.875% to 8.875%.

        Other Senior Notes.    On March 22, 2010 and April 6, 2010, ILFC issued a combined $1.25 billion aggregate principal amount of 8.625% senior notes due September 15, 2015, and $1.5 billion aggregate principal amount of 8.750% senior notes due March 15, 2017, pursuant to an indenture dated as of March 22, 2010. The notes are due in full on their scheduled maturity dates. The notes are not subject to redemption prior to their stated maturity and there are no sinking fund requirements.

        The indenture governing the notes contains customary covenants that, among other things, restrict ILFC's, and its restricted subsidiaries', ability to (i) incur liens on assets; (ii) declare or pay dividends or acquire or retire shares of ILFC's capital stock during certain events of default; (iii) designate restricted subsidiaries as non-restricted subsidiaries or designate non-restricted subsidiaries; (iv) make investments in or transfer assets to non-restricted subsidiaries; and (v) consolidate, merge, sell, or otherwise dispose of all or substantially all of ILFC's assets.

        The indenture also provides for customary events of default, including but not limited to, the failure to pay scheduled principal and interest payments on the notes, the failure to comply with covenants and agreements specified in the indenture, the acceleration of certain other indebtedness resulting from non-payment of that indebtedness, and certain events of insolvency. If any event of default occurs, any amount then outstanding under the senior notes may immediately become due and payable.

Unsecured Revolving Credit Agreement

        2012 Credit Facility:    On October 9, 2012, ILFC entered into a $2.3 billion three-year unsecured revolving credit facility with a group of 10 banks. Concurrently, ILFC terminated its existing revolving credit agreement originally scheduled to expire in January 2014. ILFC's new revolving credit facility provides for interest rates based on either a base rate or LIBOR plus a margin, currently 2.25%, determined by reference to ILFC's ratio of consolidated indebtedness to shareholders' equity. The credit agreement contains customary events of default and restrictive covenants that, among other things, limit ILFC's ability to incur liens and transfer or sell assets. The credit agreement also contains financial covenants that require ILFC to maintain a minimum interest coverage ratio and a maximum ratio of consolidated indebtedness to shareholders' equity. As of September 30, 2012 and November 15, 2012, ILFC had not drawn on its revolving credit facility.

Subordinated Debt

        In December 2005, ILFC issued two tranches of subordinated debt totaling $1.0 billion. Both tranches mature on December 21, 2065. The $400 million tranche has a call option date of December 21, 2015. ILFC can call the $600 million tranche at any time. The interest rate on the $600 million tranche is a floating rate with a credit spread of 1.55% plus the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury; and (iii) 30-year constant maturity treasury. The interest rate resets quarterly and at September 30, 2012, the interest rate was 4.52%. The $400 million tranche has a fixed interest rate of 6.25% until the 2015 call option date, and if ILFC does not exercise the call option, the interest rate will change to a floating rate, reset quarterly, based on the initial credit spread of 1.80% plus the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury;

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and (iii) 30-year constant maturity treasury. If ILFC chooses to redeem the $600 million tranche, ILFC must pay 100% of the principal amount of the bonds being redeemed, plus any accrued and unpaid interest to the redemption date. If ILFC chooses to redeem only a portion of the outstanding bonds, at least $50 million principal amount of the bonds must remain outstanding.

Derivatives

        We employ derivative products to manage our exposure to interest rate risks and foreign currency risks. We enter into derivative transactions only to economically hedge interest rate risk and currency risk and not to speculate on interest rates or currency fluctuations. These derivative products include interest rate swap agreements, foreign currency swap agreements and interest rate cap agreements. At September 30, 2012, our derivative portfolio consisted of interest rate swaps and caps. All of our interest rate swap agreements were designated as and accounted for as cash flow hedges and we had not designated our interest rate cap agreements as hedges.

        When interest rate and foreign currency swaps are effective as cash flow hedges, they offset the variability of expected future cash flows, both economically and for financial reporting purposes. We have historically used such instruments to effectively mitigate foreign currency and interest rate risks. The effect of our ability to apply hedge accounting for the swap agreements is that changes in their fair values are recorded in OCI instead of in earnings for each reporting period. As a result, reported net income will not be directly influenced by changes in interest rates and currency rates.

        The counterparty to our interest rate swaps at September 30, 2012, is AIG Markets, Inc., a wholly owned subsidiary of AIG. The swap agreements are subject to a bilateral security agreement and a master netting agreement, which would allow the netting of derivative assets and liabilities in the case of default under any one contract. Failure of the counterparty to perform under the derivative contracts would not have a material impact on our results of operations and cash flows, as we were in a net liability position at September 30, 2012. The counterparty to our interest rate cap agreements is an independent third party with whom we do not have a master netting agreement.

Credit Ratings

        Because of ILFC's current long-term debt ratings, the 2004 ECA facility imposes the following restrictions: (i) ILFC must segregate all security deposits, overhaul rentals and rental payments related to the aircraft financed under the 2004 ECA facility into separate accounts controlled by the security trustee (segregated rental payments are used to make scheduled principal and interest payments on the outstanding debt) and (ii) ILFC must file individual mortgages on the aircraft funded under both the 1999 and 2004 ECA facilities in the local jurisdictions in which the respective aircraft are registered.

        While a ratings downgrade does not result in a default under any of our debt agreements, it could adversely affect our ability to issue debt and obtain new financings, or renew existing financings, and it would increase the cost of such financings.

        The following table summarizes ILFC's current ratings by Fitch, Moody's and S&P, the nationally recognized rating agencies:

    Unsecured Debt Ratings

Rating Agency   Long-term Debt   Corporate Rating   Outlook   Date of Last
Ratings Action
Fitch   BB     BB     Stable   November 4, 2011
Moody's   Ba3     Ba3     Stable   June 15, 2012
S&P   BBB-   BBB-   Stable   November 9, 2011

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    Secured Debt Ratings

Rating Agency   $900 Million
2012 Term Loan
  $550 Million
2012 Term Loan
  $3.9 Billion Senior
Secured Notes
Fitch   BB   BB   BBB-
Moody's   Ba2   Ba2   Ba2
S&P   BBB-   BBB-   BBB-

        These credit ratings are the current opinions of the rating agencies and ILFC's current BBB- rating by S&P takes into consideration its ownership by AIG. As such, they may be changed, suspended or withdrawn at any time by the rating agencies as a result of various circumstances including changes in, or unavailability of, information.

Existing Commitments

        The following table summarizes our contractual obligations at September 30, 2012:

 
  Commitments Due by Fiscal Year  
 
  Total   2012   2013   2014   2015   2016   Thereafter  
 
  (Dollars in thousands)
 

Unsecured bonds and medium-term notes

  $ 13,910,064   $ 39,317   $ 3,421,225   $ 1,039,502   $ 2,010,020   $ 1,000,000   $ 6,400,000  

Senior secured bonds

    3,900,000             1,350,000         1,275,000     1,275,000  

Secured bank loans(a)

    2,014,234     46,176     185,876     207,472     448,022     183,702     942,986  

ECA financings

    1,982,649     76,462     428,960     423,862     335,794     258,325     459,246  

Other secured financings

    1,450,000                     550,000     900,000  

Subordinated debt

    1,000,000                         1,000,000  

Estimated interest payments including the effect of derivative instruments(b)

    8,725,017     366,920     1,373,010     1,168,786     1,005,844     809,965     4,000,492  

Operating leases(c)(d)

    74,658     4,175     17,382     17,604     12,884     3,112     19,501  

Pension obligations(e)

    8,624     1,378     1,401     1,432     1,471     1,471     1,471  

Commitments under ILFC aircraft purchase agreements(f)(g)

    17,694,688     248,604     1,451,820     1,619,102     2,527,998     3,141,324     8,705,840  

Commitments under AeroTurbine flight equipment purchase agreements

    13,998     13,998                      
                               

Total

  $ 50,773,932   $ 797,030   $ 6,879,674   $ 5,827,760   $ 6,342,033   $ 7,222,899   $ 23,704,536  
                               

(a)
Includes $266.0 million outstanding under AeroTurbine's revolving credit facility.

(b)
Estimated interest payments for floating rate debt included in this table are based on rates at September 30, 2012. Estimated interest payments include the estimated impact of our interest rate swap agreements. For floating rate debt that has been swapped into fixed rate debt, the estimated interest payments reflect the swapped fixed rate.

(c)
Excludes fully defeased aircraft sale-leaseback transactions.

(d)
Minimum rentals have not been reduced by minimum sublease rentals of $3.9 million receivable in the future under non-cancellable subleases.

(e)
Our pension obligations are part of intercompany expenses, which AIG allocates to ILFC on an annual basis. The amount is an estimate of such allocation. The column "2012" consists of total estimated allocations for 2012 and the column "Thereafter" consists of the 2017 estimated allocation. The amount allocated has not been material to date.

(f)
Includes sale-leaseback transactions in 2012 and 2013 and commitments to purchase nine new spare engines. In addition, we have been called upon to perform under five asset value guarantees in 2012, and we may purchase the aircraft under the guarantees. The value of the five aircraft are included in 2013 and two additional used aircraft that we have committed to purchase are included in 2012.

(g)
Excludes amounts related to our purchase rights for 50 aircraft which we have not yet exercised.

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Contingent Commitments

        From time to time, we participate with airlines, banks and other financial institutions in the financing of aircraft by providing asset value guarantees, put options or loan guarantees collateralized by aircraft. As a result, if we are called upon to fulfill our obligations, we have recourse to the value of the underlying aircraft. The table below reflects our potential payments for these contingent obligations, without any offset for the projected value of the aircraft.

 
  Contingency Expiration by Fiscal Year  
 
  Total   2012   2013   2014   2015   2016   Thereafter  
 
  (Dollars in thousands)
 

Asset Value Guarantees

  $ 379,130   $ 48,565   $   $   $ 157,132   $   $ 173,433  

        The table above does not include contingent payments for $453.2 million of uncertain tax liabilities, consisting primarily of ETI benefits, and any effect of our net tax liabilities as we are unable to reasonably estimate the timing of the liability in individual years beyond 12 months due to uncertainties in the timing of the effective settlement of the tax positions. The future cash flows to these tax liabilities are uncertain and we are unable to make reasonable estimates of the outflows.

Variable Interest Entities

        Our leasing and financing activities require us to use many forms of SPEs to achieve our business objectives and we have participated to varying degrees in the design and formation of these SPEs. A majority of these entities are wholly owned; we are the primary or only variable interest holder, we are the only decision maker and we guarantee all the activities of the entities. However, these entities meet the definition of a VIE because they do not have sufficient equity to operate without our subordinated financial support in the form of intercompany notes and loans which serve as equity. We have a variable interest in other entities in which we have determined that we are the primary beneficiary, because we control and manage all aspects of the entities, including directing the activities that most significantly affect these entities' economic performance, and we absorb the majority of the risks and rewards of these entities. We consolidate these entities into our consolidated financial statements and the related aircraft are included in Flight equipment under operating leases and the related borrowings are included in Secured debt financings on our Consolidated Balance Sheets.

        We have variable interests in one entity, in which we have determined we are not the primary beneficiary because we do not have the power to direct the activities that most significantly affect this entity's economic performance. We previously sold one aircraft to the entity and the variable interests include debt financings and preferential equity interests. The individual financing agreements are cross-collateralized by the aircraft. We have a credit facility with this entity under which we have $6.5 million outstanding at September 30, 2012. We are fully reserved for the $6.5 million loss exposure we have related to this entity. We do not believe that we will have any further liquidity obligations to this entity.

Off-Balance-Sheet Arrangements

        We have not established any unconsolidated entities for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We have, however, from time to time established subsidiaries, entered into joint ventures or created other partnership arrangements or trusts with the limited purpose of leasing aircraft or facilitating borrowing arrangements. See Note S of Notes to Consolidated Financial Statements in our consolidated financial statements for the year ended December 31, 2011 and Note N of Notes to Condensed, Consolidated Financial Statements in our condensed, consolidated financial statements for the nine months ended September 30, 2012 contained elsewhere in this prospectus for more information regarding our involvement with VIEs.

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Recent Accounting Pronouncements

        Common Fair Value Measurements and Disclosure Requirements in GAAP and IFRS.    In May 2011, the FASB issued an accounting standard update that amends certain aspects of the fair value measurement guidance in GAAP, primarily to achieve the FASB's objective of a converged definition of fair value and substantially converged measurement and disclosure guidance with IFRS. Consequently, as of January 1, 2012, when the new standard became effective, GAAP and IFRS are consistent with certain exceptions.

        The new standard's fair value guidance applies to all companies that measure assets, liabilities, or instruments classified in shareholders' equity at fair value or provide fair value disclosures for items not recorded at fair value. While many of the amendments to GAAP did not significantly affect our current practice, the guidance clarifies how a principal market is determined, addresses the fair value measurement of financial instruments with offsetting market or counterparty credit risks and the concept of valuation premise (i.e., in-use or in exchange) and highest and best use, extends the prohibition on blockage factors to all three levels of the fair value hierarchy, and requires additional disclosures.

        We adopted the standard on January 1, 2012, when it became effective. The adoption had no impact on our financial condition, results of operations or cash flows, but affected our fair value disclosures. See Note O and Note Q of Notes to Condensed, Consolidated Financial Statements in our condensed, consolidated financial statements for the nine months ended September 30, 2012 contained elsewhere in this prospectus.

        Presentation of Comprehensive Income.    In June 2011, the FASB issued an accounting standard update that requires the presentation of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components, followed consecutively by a second statement that presents total other comprehensive income and its components. This presentation was effective January 1, 2012, and required retrospective application. The adoption of this standard had no effect on our condensed, consolidated financial statements because we already use the two-statement approach to present comprehensive income.

        Testing of Goodwill for Impairment.    In September 2011, the FASB issued an accounting standard that amends the approach to testing goodwill for impairment. The new standard simplifies how entities test goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative, two-step goodwill impairment test. The new standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We will adopt the new standard in conjunction with our annual goodwill impairment test to be performed for the year ended December 31, 2012. The adoption of the new standard will not have a material effect on our consolidated financial condition, results of operations or cash flows.

        Intangibles—Goodwill and Other.    In July 2012, the FASB issued an accounting standard that allows a company the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, therefore necessitating the performance of a quantitative impairment test. A company is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the company determines it is more likely than not the asset is impaired. The new standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. We will adopt the new standard in conjunction with our annual goodwill impairment test to be performed for

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the year ended December 31, 2012. The adoption of the new standard will not have a material effect on our consolidated financial condition, results of operations or cash flows.

Quantitative and Qualitative Disclosure about Market Risk

        Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.

    Interest Rate Risk

        Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive to many factors, including the U.S. government's monetary and tax policies, global economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our floating rate debt obligations, which are based on interest rate indices such as LIBOR. Increases in the interest rate index would reduce our pre-tax income by increasing the cost of our debt, if we were not able to proportionally increase our lease rates.

        We mitigate our floating interest rate risk by entering into interest rate swap contracts as appropriate. After taking our swap agreements into consideration, which in effect have fixed the interest rates of the hedged debt, our floating rate debt comprised approximately 21.3% of our total outstanding debt obligations, or approximately $5.2 billion in aggregate principal amount, at September 30, 2012.

        The fair market value of our interest rate swaps is affected by changes in interest rates, the credit risk of us and our counterparties to the swaps, and the liquidity of those instruments. We determine the fair value of our derivative instruments using a discounted cash flow model, which incorporates an assessment of the risk of non-performance by our swap counterparties. The model uses various inputs including contractual terms, interest rate, credit spreads and volatility rates, as applicable. We record the effective part of the changes in fair value of derivative instruments designated as cash flow hedges in Other comprehensive income.

        The following discussion about the potential effects of changes in interest rates on our outstanding debt obligations is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our results of operation and cash flows. This sensitivity analysis is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts. Although the following results of our sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential impact on our debt obligations. It does not include a variety of other potential impacts that a change in interest rates could have on our business.

        Assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a hypothetical 100 basis-point increase or decrease in our variable interest rates would have increased or decreased our interest expense, and accordingly our cash flows, by approximately $52 million on an annualized basis. The same hypothetical 100 basis-point increase or decrease in interest rates on our total outstanding debt obligations, including fixed and floating rate debt, would have increased or decreased our interest expense, and accordingly our cash flows, by approximately $242 million on an annualized basis.

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    Foreign Currency Exchange Risk

        Our functional currency is U.S. dollars. All of our aircraft purchase agreements are negotiated in U.S. dollars, we currently receive substantially all of our revenue in U.S. dollars and we pay substantially all of our expenses in U.S. dollars. We currently have a limited number of leases denominated in foreign currencies, maintain part of our cash in foreign currencies, and incur some of our expenses in foreign currencies, primarily the Euro. A decrease in the U.S. dollar in relation to foreign currencies increases our expenses paid in foreign currencies and an increase in the U.S dollar in relation to foreign currencies decreases our lease revenue received from foreign currency denominated leases. Because we currently receive most of our revenues in U.S. dollars and pay most of our expenses in U.S. dollars, a change in foreign exchange rates would not have a material impact on our results of operations or cash flows. We do not have any restrictions or repatriation issues associated with our foreign cash accounts.

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CORPORATE REORGANIZATION

Purpose of Reorganization

        ILFC was founded in 1973 and remained an independent company until it was acquired by AIG in 1990. Prior to the Reorganization, all of ILFC's outstanding common stock was held by AIG Capital Corporation, or AIG Capital, which is a direct wholly owned subsidiary of AIG. AIG is a leading international insurance organization serving customers in more than 130 countries. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. While a wholly owned subsidiary of AIG, ILFC maintained its independently recognized brand name, operated outside of AIG's core insurance operations and remained focused on its aircraft leasing business. Beginning in September 2008, liquidity issues resulted in AIG seeking and receiving governmental support through a credit facility from the Federal Reserve Bank of New York, or the FRBNY Credit Facility, and TARP funding from the United States Department of the Treasury, or the Department of the Treasury. In January 2011, AIG was recapitalized and the FRBNY Credit Facility was repaid and terminated through a series of transactions that resulted in the Department of the Treasury becoming AIG's majority shareholder. The Department of the Treasury has since completed several public offerings of shares of AIG's common stock between May 2011 and September 2012, as a result of which the Department of the Treasury's percentage ownership of AIG's outstanding common stock has been reduced to approximately 15.9%. Following completion of the September 2012 public offering of AIG's common stock, the Department of the Treasury ceased to own a majority of the outstanding shares of AIG common stock, and, consequently, AIG is regulated and subject to the examination, supervision and enforcement authority and reporting requirements of the FRB as an SLHC. The Department of the Treasury also previously held preferred interests in certain AIG special purpose vehicles, but AIG has paid down all of such preferred interests. AIG has determined that ILFC is not one of its core businesses and this offering of our common stock is the first step in AIG's plan to monetize its interest in us. For more information regarding AIG's plans to monetize its interest in us, see "Shares Eligible for Future Sale—Plans of Divestiture."

        We believe our independence from AIG will provide us with a number of benefits, by allowing us to:

    execute a strategy for our aircraft leasing business independent from AIG's overall corporate strategy;

    obtain direct access to equity capital markets;

    use our stock for selective acquisitions; and

    align employee incentive plans more closely with the performance of our company, although until AIG sells more than 50% of our outstanding stock or repays 100% of the aggregate financial assistance it received under TARP, whichever is earlier, certain of our executive officers may be or become subject to statutory compensation limits under the TARP Standards, which may result in these officers continuing to have a portion of their compensation tied to the performance of AIG.

Reorganization Steps

        Holdings was incorporated in Delaware on August 22, 2011 solely for the purpose of the Reorganization and this offering. Holdings is a subsidiary of AIG Capital and has not engaged in any activities other than those incidental to its formation, the Reorganization and this offering. Holdings will have only nominal assets and no liabilities prior to AIG Capital's transfer of ILFC's common stock to Holdings.

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        Holdings intends to enter into an exchange agreement with AIG Capital, pursuant to which AIG Capital will agree to transfer, subject to certain conditions, 100% of the outstanding common stock of ILFC to Holdings in exchange for the issuance by Holdings to AIG Capital of the Series A Redeemable Preferred and additional shares of Holdings' common stock. The Series A Redeemable Preferred must be redeemed on                        at a liquidation preference of $1,000 per share and will be entitled to cash dividends at a rate of                        % of the liquidation preference. The Series A Redeemable Preferred will not be convertible into common stock and will have limited voting rights. See "Description of Capital Stock—Preferred Stock—Series A Mandatorily Redeemable Preferred Stock." The transfer of ILFC's common stock to Holdings will be subject to, and will become effective only upon, AIG Capital entering into one or more definitive agreements for the sale of more than 20% of Holdings' outstanding common stock, which we expect to be satisfied by the execution of the underwriting agreement related to this offering. As a result, the transfer of ILFC's common stock to Holdings from AIG Capital will occur after the effectiveness of the registration statement of which this prospectus is a part and prior to consummation of this offering. After the transfer of ILFC's common stock to Holdings, ILFC will become a direct subsidiary of Holdings.

        AIG has received a private letter ruling from the IRS that AIG Capital's transfer of ILFC's common stock to Holdings will qualify for an election under Section 338(h)(10) of the Code, provided that certain conditions are met. Among those conditions is that in the event AIG Capital does not sell more than 50% by value of its interest in us in this offering, AIG Capital must dispose of more than 50% by value of its interest in us within two years after the completion of this offering. The Section 338(h)(10) election will enable us to step-up the tax basis of our flight equipment and other assets and reduce our net deferred tax liability by $         billion.

        The anti-churning rules of Section 197 of the Code will prohibit us from amortizing any portion of any step-up in the basis of ILFC's assets that is attributable to certain intangibles (such as goodwill and going concern value) if AIG is deemed to be "related" to us. Our private letter ruling provides that AIG will not be deemed to be related to us as long as AIG reduces its ownership of our stock to 20% or less by vote and value (not including the Series A Redeemable Preferred) within three years of the completion of this offering. While AIG expects to reduce its ownership of our stock so as to avoid application of the anti-churning rules, and ultimately expects to dispose of all of our stock, AIG is not obligated to do so. See "Shares Eligible for Future Sale—Plans of Divestiture."

        Prior to the completion of this offering, we will enter into the Intercompany Agreement with AIG and AIG Capital relating to registration rights, provision of financial and other information, transition services, compliance policies and procedures and other matters, and a separate tax matters agreement with AIG and AIG Capital. See "Transactions with Related Parties—Transactions in Connection with this Offering."

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AIRCRAFT LEASING INDUSTRY

Introduction

        The information and data contained in this prospectus relating to the aircraft leasing industry has been provided in a report dated November 19, 2012 by ICF SH&E, Inc., or SH&E, an international air transport consulting firm, relied upon as an expert. See "Experts." SH&E has advised us that this information is drawn from its database and other sources and that some information in SH&E's database is derived from estimates or subjective judgments, so the information in the databases of other aircraft data collection agencies may differ from the information in SH&E's database. The historical and projected information in this prospectus relating to the aircraft leasing industry that is not attributed to a specific source is derived from SH&E's internal analyses, estimates and subjective judgments.

Air Transport Industry Overview

        Demand for aircraft is derived from the demand for passenger and cargo air transport which is closely tied to economic activity and has grown at 1.5 times the long-term global GDP growth rate over the last 40 years.

        Over that period, the demand for air transport has exhibited strong and sustained growth, but has been interrupted on occasion by exogenous shocks. Global passenger traffic, measured by Revenue Passenger Miles, or RPMs, a measure of passenger demand representing each mile each paying passenger is carried, increased 180% from 1990-2011, an average rate of 5.0% per year, reaching over 3,200 billion RPMs. Traffic capacity, measured by Available Seat Miles, or ASMs, a measure of capacity representing each mile each seat is carried whether the seat is occupied or not, grew at an average rate of 4.3% per year for the same period, to approximately 4,200 billion ASMs in 2011, according to The Airline Monitor's July 2012 report. Transitory shocks and economic cycles have impacted the airline industry, but over the longer term, air traffic demand, and consequently aircraft demand, has increased.


Indexed Historical World Traffic (RPMs) and Indexed Global GDP Growth, 1970 = 100

GRAPHIC


Source: ICAO; The Airline Monitor, July 2012; International Monetary Fund ("IMF"), World Economic Outlook, October 2012.

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        Despite the recent stall in the global economic recovery and increase in downside risks to the economy which may impact the aviation market, long-term air travel demand is expected to remain healthy as global economies and populations continue to grow, particularly in emerging markets.

        Published forecasts anticipate 20-year average growth in air traffic, both passenger and cargo, to be around 5% per annum. The Airline Monitor's July 2012 forecast projects 5.1% average annual growth in passenger traffic between 2011 and 2021, and 4.7% average annual growth rate between 2021 and 2031, for a 20-year average annual growth rate of 4.9%. The Airbus 2012 Global Market Forecast predicts that passenger RPMs will grow at an average of 4.7% between 2011 and 2031, while the Boeing 2012 Commercial Market Outlook projects 5.0% average annual RPM growth between 2011 and 2031. Global air cargo volumes are expected to grow slightly more rapidly than passenger demand, with Boeing projecting a 5.2% increase in Revenue Tonne Miles, or RTMs, between 2011 and 2031.

Current Fleet

        The distribution of the commercial jet aircraft fleet includes narrowbody, widebody, and regional jet aircraft. The fleet can be analyzed by dividing it among four broad generational subsets:

    "Old-generation" reflects jet aircraft predominantly produced in the 1960s and 1970s. Given their high fuel, maintenance, and flight crew costs, the relatively few active old-generation aircraft still in service can be expected to be retired in the near term.

    "Mid-generation" includes aircraft that saw peak production in the 1980s and early 1990s. This group, which includes the 737 Classic, 747-400, 757, 767, A300, A310, A340, MD-11, and MD-80 will increasingly be removed from their primary application/operators, but will continue to maintain a presence among secondary passenger operators or following conversion to freighter aircraft.

    "New-generation" includes current production aircraft types such as the Airbus A318, A319, A320, and A321, collectively the A320 family, and the A330. Boeing's new-generation aircraft include the Boeing 737-600, 737-700, 737-800, 737-900, and 737-900ER, collectively the 737NG family, and the 777 series. These types are available as new deliveries both from the manufacturers and lessors, and from the used aircraft market. They are expected to form the core of future passenger airline fleets and help meet demand for new production freighters for at least the next decade.

    "Next generation" includes the re-engined narrowbody aircraft such as the launched Airbus A320neo and Boeing 737 MAX aircraft families, expected to offer fuel burn improvement on the order of 15% compared to New-generation aircraft. In addition, this category includes the Bombardier CSeries and Comac C919 narrowbody families, and Airbus A350 and Boeing 787

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      widebody families, which are expected to offer fuel burn improvement on the order of 20% relative to New-generation aircraft.

Next Generation Aircraft Types  
Aircraft Type
  Engine Type(s)   Status   Planned Entry
into Service
 

Narrowbody

               
 

Airbus A320neo

  P&W PW1100G,
CFMI LEAP-1A
  Launched     2015  
 

Boeing 737 MAX

  CFMI LEAP-1B   Launched     2017  
 

Bombardier CSeries

  P&W PW1500G   Launched     2014  
 

Comac C919

  CFMI LEAP-1C   Launched     2016  

Widebody

               
 

Boeing 787

  GE GEnx-1B,
Rolls-Royce Trent 1000
  Launched     2011  
 

Airbus A350 XWB

  Rolls-Royce Trent XWB   Launched     2014  

Sources: ICF SH&E, OEM announcements.

        The fleet can also be divided between those that are in active service and those that are parked.

    "Parked" aircraft refers to those that are in storage, temporarily or permanently. Aircraft are often parked when the revenue production opportunities aren't sufficient to cover the costs of operating the aircraft. Approximately 2,200 Western-built commercial jet aircraft were in storage as of September 2012. The majority of these are unlikely to re-enter operational service given high fuel prices and better economics of newer aircraft.

        According to information from Flightglobal's ACAS fleet database, the average age of the active global aircraft fleet as of September 2012 is 11.0 years.

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Commercial Aircraft Fleet by Generation, Region, and Age, September 2012

GRAPHIC


Note: Fleet includes narrowbody, widebody, and regional jets in commercial service. Excludes Russian-manufactured aircraft.

Source: Flightglobal ACAS, September 2012

        Though North America remains the largest region by fleet size, growth has shifted to Asia / Pacific, enabling the region to approach Europe in terms of fleet size.

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1996 – September 2012 World Active Commercial Aircraft Fleet Development

GRAPHIC


Note: includes narrowbody, widebody, and regional jets in commercial service. Excludes Russian-manufactured aircraft.

Source: Flightglobal ACAS, September 2012

Aircraft Demand

        Demand for new aircraft is derived from traffic growth and replacement of older equipment. Historically, demand for growth has been driven by economic growth and market maturity, market liberalization and the adoption of new business models. Aircraft replacement is related to the relative operating economics of old and new aircraft, technological improvements and the demand for conversions of passenger aircraft to freighters. Boeing forecasts the total market for new jet aircraft to be 34,000 units from 2012-2031, 58.5% for growth and 41.5% for replacement.


Projected Commercial Aircraft Fleet Growth

GRAPHIC


Note: Airbus forecast includes passenger aircraft of more than 100 seats; Boeing forecast includes passenger and freighter jet aircraft.

Source: Airbus Global Market Forecast, 2012; Boeing Market Outlook, 2012

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        The size of the global commercial aircraft fleet is expected to approximately double over the next two decades, according to the largest manufacturers. The chart above compares the global aircraft fleet forecasts of Airbus and Boeing. Airbus forecasts growth to 32,551 total passenger aircraft above 100 seats by 2031. Boeing predicts that the world fleet of jet aircraft, including those in passenger and freighter configurations, will reach 39,780 aircraft in 2031, of which the vast majority—36,580— will be mainline passenger jets (those with more than 90 seats).

        The relative balance of growth and replacement demand differs between regions.


Boeing Forecast Aircraft Deliveries by Region, 2012 – 2031

GRAPHIC


Source: Boeing Current Market Outlook, 2012 – 2031

        In the Asia-Pacific region, 74% of the total aircraft demand forecasted is expected to be for growth. Relatively fast economic growth combined with the recent emergence of low-cost carriers, or LCCs, and early efforts at market liberalization are the principal drivers. Traffic growth in the Asia-Pacific region, driven largely by China, is expected to outpace economic growth by a factor of 1.4 times.

        Approximately half of European aircraft demand will be derived from the replacement of aging fleets and approximately half will be driven by growth. While the major Western European flag carriers have not grown materially, LCCs, scheduled charter airlines, and other airlines in Eastern Europe have grown sufficiently to allow total intra-Europe capacity to grow by more than 4.5% per year over the last five years.

        Aircraft demand from North American carriers will largely be derived from the need to replace their existing fleets, which are among the oldest in the world. Aircraft demand due to traffic growth will be an important but smaller driver than replacement. With fully liberalized markets within and between the U.S. and Canada, and high LCC market penetration rates, many U.S. major airlines have turned toward international expansion as a growth opportunity. Overall, growth in traffic demand is expected to be in line with GDP growth.

        Growth aircraft demand comprises 87% of South America's demand for new jet aircraft through 2031, driven by market liberalization, above-average economic growth, and the continued expansion of the LCC model.

        Several Middle Eastern countries have invested significantly in their flag carriers during the past decade. Abu Dhabi, Qatar and Oman all started new network carriers. Dubai has invested billions of dollars in new aircraft, a new airport and aviation-related businesses to support its flag carrier. A number of new LCCs have started service in the region as bilateral agreements have been liberalized.

        Africa is the smallest market for new jet aircraft at just 45 new deliveries per year over the twenty year forecast period. African markets remain very tightly regulated, and the LCC business model has not yet taken hold. While traffic growth rates are expected to be greater than in Europe, North America or the C.I.S. region, current traffic levels are very low.

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Drivers of Aircraft Demand for Growth and Replacement

Growth Drivers

        The world fleet is expected to grow steadily as airlines continue to develop service offerings to accommodate the world's rapidly growing demand for air travel. Key elements that are currently driving growth in demand for both new and used aircraft include:

    High rates of economic growth and increasing propensity to travel in emerging markets

    Liberalization of air service between and within countries

    Stimulation of traffic from growing LCCs offering lower fares

        Economic Growth.    Economic growth in a region generally has a strong impact on the increase in demand for air service. While in aggregate this is true, the degree to which air service grows in relation to GDP is not consistent throughout the world. Typically, in developing countries, air service grows at a much higher rate than GDP. Historic experience in North America shows that air traffic growth in a developed country with a mature air service market is less responsive to GDP than in a developing country. Boeing's worldwide forecast for the ratio of air traffic demand (as measured by RPMs) growth to GDP growth over the next 20 years is approximately 1.6, albeit with regional variation.

Boeing Forecast of Regional Traffic and GDP Growth Rates 2012-2031  
Region
  GDP Growth (CAGR)   Traffic Growth (CAGR)  

South America

    4.1 %   6.6 %

Asia-Pacific

    4.6 %   6.4 %

Middle East

    3.9 %   6.4 %

Africa

    4.4 %   5.6 %

Europe

    1.9 %   4.1 %

C.I.S. 

    3.4 %   4.7 %

North America

    2.6 %   2.8 %

World

    3.2 %   5.0 %

Source: Boeing Market Outlook 2012-2031

        Market Liberalization.    Historically, the amount of international service on a given route was negotiated on a bilateral basis between two countries, which then distributed the rights to airlines. The "Open Skies" movement, initiated in the 1970s, has slowly but successfully removed many such restrictions. The main effect of market liberalization on air travel comes from the opening of routes to new competition and lower fares. For example, for intra-EU liberalization between 1992 and 2000, the number of routes with more than two carriers increased 256% and discount economy fares declined 34% in real terms, according to the European Union and the European Civil Aviation Conference. Many countries are entering into new "Open Skies" air service agreements that will further liberalize international air travel and continue to create opportunities for new flights, new routes, and new operators. In addition to international liberalization, domestic deregulation in many countries has created a substantial increase in demand for narrowbody equipment.

        Low-Cost Carriers.    The increasing presence of LCCs across the world has and will continue to drive aircraft demand by creating new markets and stimulating traffic demand with low fares. A large number of low-cost or low-fare carriers currently operate in the U.S., accounting for approximately 28% of U.S. seat departures, according to November 2012 schedules published by OAG. The LCC sector of the market has become more prevalent, with service available from low-cost carriers on most major routes, with relatively little difference in fares. Although much of their early growth was in the

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U.S., LCCs have grown in all world markets, particularly Europe, where intra-regional LCC penetration overtook the U.S. level in 2007.

        Historically, the LCC business model has focused on flying narrowbody aircraft on "short-haul" flights, with average stage lengths on the order of 500-1,000 miles. In recent years, however, long-haul LCCs have been established or announced as subsidiaries of major Asia Pacific carriers, with widebody aircraft operating average stage lengths of 3,000-5,000 miles.

    Replacement Drivers

        The requirement to replace older aircraft that are retired or converted to freighter configuration forms a substantial driver of aircraft demand, particularly in large mature regions. Replacement demand is driven by a number of factors including:

    Relative operating economics, reliability, and environmental considerations

    Technological advancement, including the introduction of new aircraft and engines

    Aircraft reaching their economic useful lives, driving retirement demand

    Freighter conversion demand, driving replacement demand of passenger aircraft

        Relative Operating Economics.    Increased fuel prices widen the operating cost differential between new-generation and old-generation aircraft. Expectations that fuel prices will remain elevated or increase further have spurred plans for accelerated fleet replacement, particularly for the oldest aircraft in the fleet.


Evolution of Fuel Cost Share of Total Expenses

GRAPHIC


Source: IATA Financial Forecast, September 2012

        The use of new technology aircraft can make a significant difference in total fuel consumption. Newer A320 family aircraft, for example, can burn on the order of 30% less per hour than Mid-generation MD-80 aircraft on similar sector lengths, although the ownership costs are higher.

        An additional economic consideration factored into aircraft selection decisions is the growing international movement toward regulating and reducing levels of greenhouse gas emissions. Such regulations are expected to accelerate the retirement of older, less fuel-efficient aircraft.

        Technological Advancement.    While incremental upgrades to existing technology can lengthen aircraft production runs, aircraft replacement is also driven by technological advancement. Aircraft manufacturers must balance the development and introduction of new technology with existing resource constraints, current product line considerations, and the residual value implications for owners of existing aircraft. At the present time, incumbent manufacturers have engaged on an unprecedented plan to bring to market improved narrowbody and widebody aircraft.

        Retirement Demand.    Airlines make fleet decisions based on a variety of economic and strategic factors. If carriers are able to execute on their fleet replacement plans, and if there is no demand for additional use of a surplus aircraft by another operator, the aircraft will be retired. According to

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Flightglobal's ACAS fleet database, the annual share of the global fleet that has been retired has fluctuated between 1.5% and 2.2% over the past decade. However, many Old-generation and Mid-generation aircraft more than 15-20 years old that are reported as parked should, for practical purposes, be considered retired.

        Freighter Conversion Demand.    Another source of replacement demand is the conversion of existing passenger aircraft to freighter configurations. Most aircraft entering the freighter market do so by conversion as Mid-generation aircraft, rather than new production. Because freighters typically fly fewer hours per day and operate on more flexible schedules than passenger aircraft, older aircraft that cannot be utilized profitably for passenger service can continue to provide value as freighters. Airbus and Boeing have similar expectations for freighter conversion demand over the next two decades—average rates of 90 and 91 per year respectively.

Aircraft Supply

        Expansion of aircraft supply is determined by the number of new aircraft the manufacturers are able to deliver, as well as by the reactivation of viable parked aircraft. Passenger aircraft outflow is driven by fleet retirements and freighter conversions, as described above.

        Order backlogs are currently back to pre-recession levels. Higher deliveries are projected in the following years, reaching all-time high levels. At the same time, poor relative operating economics of aging fleets in an elevated fuel price environment has increased retirement activity.

        Following three years of record orders from 2005-2007, and many orders in 2008, 2009 was weak as the global economy slowed and airlines struggled to profitably utilize existing fleets. After the downturn, 2010 marked the beginning of a recovery, and the rebound continued into 2011. For the full year 2011, Airbus received 1,608 gross (1,419 net) orders and Boeing received 921 gross (805 net) orders. Through October 31, 2012, Airbus received 460 gross (403 net) orders. Through November 13, 2012, Boeing has received 1,154 gross (1,056 net) orders. The backlog is at an all-time unit high of approximately 9,500 units and as a percentage of the extant fleet it surpassed the recent 2008 peak, reaching 47.8% as of September 2012.


Commercial Aircraft Order Backlog as Percentage of Active Fleet, 2001 - September 2012

         GRAPHIC


Source: Flightglobal ACAS, September 2012.

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Manufacturer Production & Backlog

        During the most recent industry up-cycle, production increases by Airbus and Boeing were not implemented on certain production lines, despite very high backlogs, due in part to some intentional overselling from 2005-2007. This control of supply increased the order horizon, which aided the manufacturers in maintaining relatively stable production in the 2009-2010 downturn.

Narrowbody Aircraft

        Both Airbus and Boeing have announced increased narrowbody production rates. Airbus plans to increase A320 family production to 42 aircraft per month by the fourth quarter of 2012, and Boeing plans to increase 737NG production to 42 per month in the first half of 2014. While both were investigating the feasibility of even greater production rates, Airbus recently announced it has decided to not increase production beyond 42 per month.

        With the current announced production rates, Boeing and Airbus have nearly six to seven years of backlog for their respective narrowbody aircraft families. While there is likely to be some overselling and some delivery dates are available sooner, manufacturers are largely sold out for the next few years.

        Through October 31, 2012, Boeing has secured 878 737 MAX orders. The Airbus A320neo has secured 1,078 firm orders from operators plus an additional 381 firm orders from lessors according to Flightglobal's ACAS September 2012 fleet database.

Airbus and Boeing Current Narrowbody Backlog Analysis  
Aircraft Family
  Current Backlog   Current Backlog
Years of Production
 

Airbus A320/A320neo

    3,379     7.0  

Boeing 737NG/MAX

    2,762     5.6  

Note: Considers current and announced future production rate changes.

Source: Flightglobal ACAS, September 2012; ICF SH&E Analysis

Widebody Aircraft

        Demand for efficient widebody lift is strong, and Boeing announced an increase in its 777 production rate to 8.3 per month in October 2012. Additionally, Boeing will increase its 747 production rate from 1.5 to 2 per month by mid-2013 and plans to produce the 787 aircraft at 10 per month by 2013 and 14 per month by the end of 2014. Airbus exceeded its 2011 A380 delivery forecast of 25, delivering 26 aircraft, and announced a production increase of its A330 series aircraft to 10 per month from the second quarter of 2013, a 25% increase on the current output.

        While many widebody families have in excess of five years of backlog at announced production rates, the number of widebody aircraft to be delivered in the next few years will significantly increase to

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levels not previously experienced. There is limited near-term availability of delivery dates from the aircraft manufacturers, particularly for new aircraft types.

Airbus and Boeing Current Widebody Backlog Analysis  
Aircraft Family
  Current Backlog   Current Backlog
Years of Production
 

Medium Widebody

             
 

Airbus A330/A340

    325     3.0  
 

Airbus A350

    558     6.3  
 

Boeing 767

    72     6.0  
 

Boeing 777

    338     3.4  
 

Boeing 787

    822     5.6  

Large Widebody

             
 

Airbus A380

    174     7.3  
 

Boeing 747

    82     3.6  

Notes: Considers current and announced future production rate changes. Assumes 787 production rates of 4/month in 2012, 8/month in 2013, 12/month in 2014, and 14/month thereafter. All other rates from OEM announcements except A350 from The Airline Monitor, July 2012.

Source: Flightglobal ACAS, September 2012; The Airline Monitor July 2012; ICF SH&E Analysis

Aircraft Financing and Leasing Markets

        Few airlines have the internal cash available to self-finance acquisitions of new or used aircraft, and most airlines seek financing from a variety of sources, including traditional bank debt, export credit guarantees, tax leases, capital markets, and operating leases.

        An aircraft operating lease is a lease wherein the lessor retains ownership of the aircraft and where the aircraft will be returned to the lessor at the end of the lease; it is currently off-balance sheet for the lessee. Aircraft operating leasing has evolved over the last 40 years to become highly sophisticated and attractive to airlines, in effect becoming a source of capital that carriers utilize along with debt and equity to finance their equipment acquisitions.

        Airlines are attracted to operating leasing for a variety of reasons, including low capital outlay requirements, fleet planning flexibility, delivery date availability and residual value risk avoidance. Larger lessors have the scale to provide airlines with effective fleet and asset management solutions involving the addition and/or removal of multiple aircraft. Furthermore, operating leases are often preferred by start-up carriers because they lower the capital costs for market entry.

        Aircraft lessors have an intermediary role attractive to both OEMs and airlines. They provide an added distribution channel and an important alternative source of funding. Commanding a sizeable position in the order books of both Airbus and Boeing, lessors also provide important insights to the OEMs in terms of future demand and related order book structure.

        Over the past 20 years, the world's airlines have increasingly turned to operating leases for their aircraft financing requirements: the percentage of the global active commercial aircraft fleet under operating lease by non-airline affiliated entities has increased from 19.6% in 1996 to 40.3% in November 2012, a compounded annual growth rate of 8.5%, compared to fleet growth of 3.4%.

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Evolution of Operating Lease Penetration, 1996-November 2012

GRAPHIC


Note: Active fleet includes narrowbody, widebody, and regional jets in commercial service. Excludes Russian-manufactured aircraft.

Source: Ascend, November 2012; ICF SH&E Analysis

        Continued growth of the aircraft operating leasing industry is widely expected, driven in part by demand from airlines for attractive aircraft financing and the anticipated decline in the attractiveness and availability of debt from the export-credit agencies as a result of the 2011 changes to the Aircraft Sector Understanding, or ASU.

        Over the last decade, much of the commercial bank debt supporting aircraft financing, for both airlines and leasing companies, has come from European banks. Recent concern about banking losses among European banks has reduced the funding availability from many traditionally large aircraft lenders. Lending from Asian banks now appears to be increasing to meet demand.

        At the same time, the size of the new aircraft financing market is expected to increase substantially in the next few years as a result of higher narrowbody production rates and entry into service ("EIS") of new widebody aircraft, as shown below.


New Commercial Aircraft Market Size, 2011 – 2013 (Dollars in Billions)

GRAPHIC


Source: Boeing

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        As of September 2012, aircraft lessors held about 18% of the total aircraft order backlog, as measured by units. Airlines have historically looked to aircraft lessors as an important source of capital, and a significant number of the 82% of the aircraft on backlog ordered by operators are expected to become owned by operating lessors via sale-leaseback transactions and outright acquisitions from airlines.

        There are sufficient indicators to suggest that operating lease penetration can be reasonably expected to continue over the next five years, and if such trend does actually continue, the operating lease penetration would increase to approximately 45%.

        Operating lease penetration has been highest amongst narrowbody aircraft because of asset liquidity, and start-up/LCC preference for these aircraft. Many lessors have historically preferred narrowbody aircraft due to the relatively lower price point, the lower cost of transitioning aircraft between lessees and the relative ease in financing narrowbody aircraft. As a result, many smaller lessors have minimized exposure to widebody aircraft.

        Certain New-generation widebody aircraft enjoy relatively high liquidity and operating lessor penetration. According to Flightglobal's ACAS fleet database, for example, approximately 48% of the Airbus A330 family aircraft were subject to operating lease as of September 2012. The backlogs for the Next generation medium widebody Airbus A350 XWB and Boeing 787 aircraft families suggests high liquidity and, in conjunction with designs intended to reduce transition costs between lessees, the aircraft will be attractive to aircraft operating lessors and airlines alike.


Operating Lessor Penetration and Fleet Growth Outlook by Region

GRAPHIC


Note: Active fleet includes narrowbody, widebody, and regional jets in commercial service. Excludes Russian-manufactured aircraft.

Source: Ascend, November 2012, ICF SH&E Analysis
Boeing Current Market Outlook 2012, ICF SH&E Analysis

        Today, the leading operating lessors have a truly global reach. South America has long had the highest proportion of operating leasing, with approximately 55% of the fleet on operating lease, driven by more limited access to other sources of low-cost capital by carriers in the region.

        Europe has experienced a very large increase in operating lease penetration to 50% today, as a result of a large number of LCCs entering service and growth from less-capitalized airlines in Eastern Europe and the CIS. Even major network flag carriers have found the operating lease product attractive—it is estimated that more than 50% of Air France's aircraft fleet is on operating lease.

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        Strong growth in the fleet of aircraft operated by carriers in the Asia/Pacific region will form the foundation for growth of the operating lease in the region, compounded by further increases beyond today's 42% operating lease penetration rate.

        The overall operating lease penetration rate in North America is lower than in other world regions, at 29%, primarily as a result of the access to other financing sources such as the capital markets. U.S. majors and low-cost carriers are expected to continue utilizing operating leases for future financing requirements, as evidenced by recent sale-leaseback transactions by U.S. carriers.

Operating Lease Industry—Competitive Landscape

        The life cycle of an aircraft creates an approximate 25-year investment horizon characterized by varying risks and rewards over time. This dynamism allows the leasing market to be segmented as lessors look to meet varying strategic objectives by finding market niches and areas of competitive advantage.

        Some lessors focus almost entirely on acquisition of new equipment directly from the manufacturers and frequently sell assets after five to seven years; while others focus primarily on purchasing used equipment at depreciated levels.

        Still other lessors purchase new or used aircraft (with or without leases attached, or via sale-leasebacks) and manage them throughout the aircraft life cycle, including acquiring specialist companies with capabilities to extract maximum value from aircraft approaching their end-of-life by parting-out the airframe, leasing the engines until they require major maintenance, and then parting-out the engines.

        While nearly all lessors have considerable narrowbody portfolios, a number of lessors do own widebody aircraft, and a few lessors have portfolios that include regional jets and turboprops. While some leasing companies focus entirely on passenger aircraft, a number of others specialize in freighter aircraft, leasing new production freighters or facilitating conversion by investing in appropriate passenger aircraft candidates. While many of the largest lessors acquire and sell aircraft in a variety of ways and participate in several leasing market segments, most have a core thesis regarding the optimal point for entry/exit during the course of an aircraft life cycle and the airline business cycle.

        The table below presents fleet statistics for the largest 20 operating lessors as measured by owned units. Based on fleet information from Flightglobal's ACAS fleet database as of September 2012,

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ICF SH&E estimates that the largest 20 lessors own assets having an aggregate current market value of approximately $132 billion.

Largest Operating Lessors as Measured by Owned Fleet  
Lessor
  Total Fleet   Narrowbody   Widebody   Regional Jet  

GE Capital Aviation Services

    1,320     912     159     249  

International Lease Finance Corporation

    918     661     257      

CIT Aerospace

    285     229     49     7  

Aviation Capital Group

    249     238     11      

AWAS

    233     179     51     3  

Boeing Capital Corporation

    214     198     16      

AerCap

    215     178     36     1  

SMBC Aviation Capital

    211     196     1     14  

BOC Aviation

    172     149     19     4  

Macquarie Airfinance

    134     125     5     4  

Aircastle

    118     82     36      

FLY Leasing

    110     104     6      

Air Lease Corporation

    96     59     18     19  

BBAM

    87     81     6      

MC Aviation Partners

    83     66     17      

Hong Kong Aviation Capital

    71     46     19     6  

Avolon

    73     63     5     5  

ORIX Aviation

    54     47     6     1  

Pembroke Group

    62     46     16      

Jackson Square Aviation

    51     45     6      

Source: Flightglobal ACAS, September 2012; ILFC November 2012

        There have been a number of recent developments among participants in the operating leasing industry. Two new lessors have entered the market backed by private equity with a focus on providing capital to airlines via sale-leaseback transactions. Another new lessor backed by private and public equity has grown through sale-leasebacks, acquisitions of aircraft from other lessors, and new orders.

        A number of companies in the emerging markets of Asia-Pacific and the Middle East have recently expanded into aircraft operating leasing. In China, for example, one lessor recently made headlines as the first Chinese lessor to place a direct order with an Original Equipment Manufacturer, or OEM, for a purchase of 42 Airbus A320 family aircraft. Not all lessors have been successful, however, and the financial crisis significantly curtailed the expansion plans of more than one lessor located in emerging markets, resulting in the cancellation of more than 100 aircraft previously ordered.

        Consolidation has also occurred in the industry with the 2009 merger of two public aircraft lessors, and in August 2011, the announced sale of a lessor's portfolio of 49 aircraft to another lessor. In addition, the owner of a large lessor with more than 200 aircraft announced its sale to an Asian bank in January 2012 for approximately $7.3 billion. Further, the sale of one of the new lessors referenced above focused on sale-leasebacks to a prominent equipment leasing company headquartered in Japan was recently announced.

        Despite this recent market activity, the leasing market remains fragmented and a large difference continues to exist between the portfolio sizes of the largest lessors and the other lessors. By way of

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example, the two largest lessors as measured by owned units, own more aircraft than the next 11 lessors combined.

Airbus and Boeing Narrowbody and Widebody Backlogs of Largest Operating Lessors  
 
  New Generation   Next Generation    
 
Lessor
  Narrowbody   Widebody   Subtotal   Narrowbody   Widebody   Subtotal   Total  

GE Capital Aviation Services

    101     25     126     135     2     137     263  

Air Lease Corporation

    109     8     117     111     12     123     240  

International Lease Finance Corporation

    31     0     31     100     94     194     225  

CIT Aerospace

    56     15     71     50     15     65     136  

Aviation Capital Group

    95     0     95     30     5     35     130  

ALAFCO

    0     0     0     105     20     125     125  

AWAS

    77     0     77     0     2     2     79  

SMBC Aviation Capital

    75     0     75     0     0     0     75  

BOC Aviation

    34     9     43     0     0     0     43  

Avolon

    26     0     26     15     0     15     41  

AerCap

    14     6     20     0     0     0     20  

BBAM

    12     0     12     0     0     0     12  

Note: Backlogs presented in this table include aircraft orders made directly from manufacturers, but exclude aircraft acquired pursuant to sale-leaseback transactions.

Source: Airbus, October 31, 2012; Boeing, November 6, 2012; ILFC, November 2012

        Although new order activity fell off substantially in 2008 and 2009 as demand for aircraft declined and lessors sought to preserve cash, the number of lessor orders has rebounded since 2010. Today, the lessor backlog as a percentage of the total backlog is low relative to its historic peak (18% today compared to 43% in 2001), but lessors are expected to continue expanding market share through sale-leasebacks of new deliveries and used aircraft in the years ahead.

Aircraft Value & Lease Rates

        Aircraft generally depreciate over time as they age and experience the wear and tear of operation. Eventually, an aircraft will reach the end of its useful life (historically on the order of 25 years unless extended by cargo conversion) and will retain a marginal value that represents the market worth of its various components and material.

        Values for new aircraft are to a limited extent determined by the aircraft manufacturers' published list prices—since competition between Airbus, Boeing, and McDonnell-Douglas intensified several decades ago, manufacturers have increasingly sold their aircraft at substantial discounts to the list price.

        From a fundamentally economic standpoint, the value of the aircraft should be equal to the net present value of the operating profit that the asset can generate over its economic life. In practice, the value of an aircraft to the operator is influenced by many factors that ultimately determine the purchase price and/or lease rate the carrier is willing to pay, including:

    Revenue generating capacity (passenger and freight payload)

    Range and operating economics (fuel burn, maintenance costs, landing and handling costs, flight and cabin crewing costs, insurance, etc.)

    Expected economic life and spot-market supply and demand (a function of the number of same-model and competing aircraft available, industry growth demand, etc.)

Various market participants take differing views as to the future economics of given aircraft types, and market values do not always behave rationally. Secondary factors that impact aircraft value include fleet

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commonality for flight crews, tooling and spare parts, aircraft liquidity and acceptance by operating lessors, support from the manufacturer, and the environmental efficiency of the aircraft.

        Throughout the industry cycle, aircraft market values rise above and drop below aircraft Base Values, the appraiser's opinion of the underlying economic value of an asset in an open, unrestricted and stable market environment with a reasonable balance of supply and demand, assuming full considerations of its highest and best use. Given the relatively more liquid market of operating leasing (compared to aircraft trading), aircraft operating lease rates generally represent market-clearing prices that reflect current supply and demand. Lease rates depend on the aircraft type, aircraft age, aircraft specification, type of lease, interest rates, tax liabilities, lease term, value of the aircraft at lease inception, the forecasted residual value of the aircraft at lease termination, and the credit quality of the lessee.

        Although lease rates are closely correlated to global economic conditions, rates for a particular constant-age aircraft generally hold relatively steady in nominal terms for an extended period. Once replacement technology aircraft are firmly established in the market, some five to ten years after EIS, values and lease rates of the replaced aircraft decline. Exogenous shocks and industry downturns also accelerate the decline in values and lease rates of the replaced aircraft. However, because aircraft operating leases are usually contractual at fixed monthly lease rates for many years, aircraft lessors are frequently insulated from short-term swings in market lease rates throughout the industry cycle.

        During the air transport demand downturn of 2002-2003 and the more recent down cycle of 2008-2010, lessors showed considerable pricing flexibility and often entered into short-term leases at reduced rates in order to keep assets deployed. Following the rapid decline in values and lease rates for most aircraft types during 2002-2004, used aircraft trading prices and rentals for most aircraft types stabilized in 2005 and generally gained upward momentum during 2006-2007, although many Old- and Mid-generation aircraft did not recover much of the value lost.

        After declining in the most recent down cycle of 2008-2010, values and lease rates for most modern aircraft have now stabilized, although substantive increases in values and lease rates have not yet been observed.

        Certain events, such as airline restructurings and bankruptcies can result in pressure on values and lease rates for affected aircraft types. Global or regional economic downturns can have broader impacts on the relative supply and demand balance of aircraft, and therefore values and lease rates as well. Nonetheless, absent deterioration in economic growth, stabilization and improvement in many New-generation aircraft values and lease rates is generally expected over the next several years.

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BUSINESS

Our Company

        We are the world's largest independent aircraft lessor measured by number of owned aircraft. Our portfolio consists of over 1,000 owned or managed aircraft, comprised of 918 owned and 84 managed aircraft. We also have commitments to purchase 229 new high-demand, fuel-efficient aircraft, including four through sale-leaseback transactions, and rights to purchase an additional 50 such aircraft. We have approximately 200 customers in more than 80 countries. We are an independent aircraft lessor because we are not affiliated with any airframe or engine manufacturer. This independence provides us with purchasing flexibility to acquire aircraft or engine models regardless of the manufacturer. We believe size and global scale provide distinct competitive advantages that, among other things, help us obtain favorable delivery dates and terms from manufacturers and access capital from a variety of sources with competitive pricing and terms. In addition, our strong customer and manufacturer relationships permit us to quickly identify opportunities to re-market aircraft as leases mature and to influence new aircraft designs. For the year ended December 31, 2011 and the nine months ended September 30, 2012, we had total revenues of $4.5 billion and $3.4 billion, respectively.

        Our portfolio includes a diverse and strategic mix of aircraft designed to meet our customers' needs and maximize our opportunities to generate revenue and grow our profitability. As of November 15, 2012, we owned 918 aircraft in our leased fleet and seven additional aircraft in AeroTurbine's leased fleet, had 15 additional aircraft in our fleet classified as finance and sales-type leases, and provided fleet management services for 84 aircraft. Our leased fleet includes 10 aircraft that we have decided to part-out or sell. Our diversified fleet of owned aircraft is comprised of 72% narrowbody (single-aisle) aircraft and 28% widebody (twin-aisle) aircraft as measured by aircraft count, with 53% representing Airbus models and 47% representing Boeing models. 76% of our owned aircraft are models that are currently in-production by airframe manufacturers. The weighted average age of our owned aircraft, weighted by the net book value of such aircraft, was 8.1 years at September 30, 2012. We have a higher percentage of widebody aircraft compared to most other lessors, which provides us with a competitive advantage due to generally longer lease terms, higher lease rates, higher probability of lease extensions and, we believe, better credit quality of lessees, as compared to narrowbody aircraft. Fewer lessors compete in this portion of the market due to the higher cost of widebody aircraft, which can create increased concentration risks for smaller lessors. Our competitive advantage will be enhanced as we take delivery of next generation widebody aircraft. In addition, the aircraft we have on order or have rights to purchase are among the most modern, fuel-efficient models. We have the largest order position for the Boeing 787 and the largest order position among aircraft leasing companies for the Airbus A320neo family and Airbus A350s, according to reports currently available on the Airbus and Boeing websites and the SH&E report set forth under "Aircraft Leasing Industry." We believe our size and scale allow us to compete more effectively for multi-aircraft transactions, including large sale-leaseback transactions. During 2011, we entered into sale-leaseback transactions for 26 new aircraft to be delivered through 2013, two of which were delivered to us during 2011 and 20 of which have been delivered to us during 2012.

        We lease aircraft to airlines operating in every major geographic region, including emerging and high-growth markets in Asia, Latin America, the Middle East and Eastern Europe. Among our largest lessees are AeroMexico, Air France, China Southern Airlines, Emirates and Virgin Atlantic Airways. We predominantly enter into net operating leases that require the lessee to pay all operating expenses, normal maintenance and overhaul expenses, insurance premiums and taxes. The leases relating to our owned aircraft have terms of up to 15 years and the weighted average lease term remaining on our current leases, weighted by the net book value of our owned aircraft, was 4.1 years as of September 30, 2012. Our leases are generally payable in U.S. dollars with lease rates fixed for the term of the lease, providing us with a stable and predictable source of revenues. We believe our broad customer base and

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market presence enable us to identify opportunities to re-market aircraft before leases mature, contributing to an average aircraft on-lease percentage of approximately 99% over the last five years.

        In addition to our primary business of owning and leasing aircraft, we provide fleet management services for 84 aircraft for a management fee. We also provide in-house part-out, engine leasing and engine exchange capabilities through our subsidiary AeroTurbine, a provider of certified aircraft engines, airframes, engine parts and supply chain solutions, allowing us to maximize the value of our aircraft and engines across their complete life cycle and offer an integrated value proposition to our airline customers as they transition out aging aircraft. At times, we sell aircraft from our leased aircraft fleet to other leasing companies, financial services companies and airlines. We have also provided asset value guarantees and a limited number of loan guarantees to buyers of aircraft or to financial institutions for a fee.

        We began operations in 1973 as a pioneer in the aircraft leasing industry and have nearly 40 years of operating history. We believe our industry leading scale, global customer network and diversified aircraft portfolio have enabled us to prudently and profitably manage the risks of owning and leasing aircraft. We have demonstrated strong and sustainable financial performance through most airline industry cycles in the past 30 years. Our prominent leadership position within the aircraft leasing industry has resulted in a premier brand name which provides us access to a variety of funding sources and helps us attract and retain customers and employees. We operate our business principally from offices in Los Angeles, Miami, Amsterdam, Beijing, Dublin, Seattle and Singapore. Our offices are strategically located to provide us with proximity to our current customers, potential customers and airframe and engine manufacturers.

Competitive Strengths

        We believe our size, global scale, long operating history and premier brand provide us with the following competitive strengths that contribute significantly to our success and sustained profitability.

        Largest independent aircraft lessor with benefits of scale.    We are the world's largest independent aircraft lessor with a portfolio of over 1,000 owned or managed aircraft and approximately 200 customers in more than 80 countries. We believe the size of our portfolio and our scale provide us with important competitive advantages, including the ability to:

    enter into large, sophisticated and strategic aircraft transactions with our customers;

    obtain favorable delivery dates and terms from manufacturers;

    influence airframe manufacturers on a variety of matters including the design of aircraft;

    maintain a diversified aircraft portfolio, including a higher percentage of widebody aircraft in our fleet as compared to most other aircraft lessors;

    access multiple sources of capital with attractive pricing and terms; and

    diversify our customer base and geographic exposure.

        Long-standing and strategic customer relationships.    We have collaborative and strategic relationships, many of which are long-standing, with approximately 200 customers worldwide, including scheduled, charter and freighter airlines and low-cost carriers. Our top ten customers have all been leasing aircraft from us for over a decade. We believe we are the largest aircraft lessor to many of our customers, which strengthens our position and access to senior management with these customers. Our close customer relationships and market knowledge enable us to identify opportunities to re-market aircraft before leases mature, contributing to an average aircraft on-lease percentage of approximately 99% over the last five years. We also gain valuable insight and knowledge of the airline industry and market trends from our customers, enabling us to better anticipate new opportunities and mitigate

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adverse trends. Our established customer relationships also allow us to secure large and strategic aircraft transactions, including sale-leaseback transactions, often for multiple aircraft, and to play an important role in our customers' fleet modernization initiatives. Our large and diverse customer base helps minimize our risks relating to regional economic conditions.

        Attractive and diversified aircraft fleet.    Our diversified fleet of owned aircraft is comprised of 72% narrowbody (single-aisle) aircraft and 28% widebody (twin-aisle) aircraft as measured by aircraft count, with 53% representing Airbus models and 47% representing Boeing models. 76% of our owned aircraft are models that are currently in-production by airframe manufacturers. The weighted average age of our owned aircraft, weighted by the net book value of such aircraft, was 8.1 years at September 30, 2012. As our new aircraft orders are delivered, our fleet will gain more modern and fuel-efficient aircraft that are in high demand from airlines around the world. We own a large number of widebody aircraft, which benefits us due to generally longer lease terms, higher lease rates, higher probability of lease extensions and, we believe, better credit quality of lessees, as compared to narrowbody aircraft. We believe the large number and variety of widebody aircraft in our fleet uniquely positions us in emerging markets, particularly in Asia and the Middle East where, according to the 2012 Boeing Current Market Outlook report, airlines are expected to require a substantial number of additional widebody aircraft over the next 20 years.

        Large and valuable aircraft delivery pipeline.    We have the largest number of next generation Airbus and Boeing aircraft ordered among lessors, according to SH&E's report, comprised of 100 Airbus A320neo family aircraft (plus rights to purchase an additional 50 units), 20 Airbus A350s and 74 Boeing 787s. In addition, we have commitments to purchase 35 current generation Boeing aircraft, comprised of 34 Boeing 737-800s and one Boeing 777-300ER. We believe we have developed this order book by capitalizing on our scale and strong relationships with airframe and engine manufacturers and our airline customers. These new aircraft will provide us with significant fleet growth in high demand, fuel-efficient aircraft over the next decade and represent a significant leadership position in the highly anticipated Airbus A320neo family, Airbus A350 and Boeing 787 aircraft deliveries. We have the largest order position for the Boeing 787 and the largest order position among aircraft leasing companies for the Airbus A320neo family aircraft and the Airbus A350 according to reports currently available on the Boeing and Airbus websites and the SH&E report set forth under "Aircraft Leasing Industry." We will also be the first aircraft leasing company to offer the Airbus A320neo family aircraft for lease with 75 A320neos and 25 A321neos on order with initial deliveries scheduled for 2015. We believe these aircraft will provide significant value and strong returns on investment and that our prime delivery dates for so many highly coveted aircraft will provide us with a competitive advantage by strengthening our reputation and prominence with customers.

        Extensive airframe and engine manufacturer relationships.    We are the largest customer of Airbus and the largest lessor customer of Boeing measured by deliveries of aircraft through 2011. We believe we are one of the largest purchasers of engines from CFM International, GE Aviation, International Aero Engines, Pratt & Whitney and Rolls-Royce. Our relationships with Airbus and Boeing have spanned over 20 years and our senior management has direct experience working for airframe manufacturers. These extensive manufacturer relationships and the scale of our business enable us to place large orders with favorable terms and conditions, including pricing and delivery terms, and have allowed us to become the largest lessor purchaser of next generation aircraft, including the Airbus A320neo family aircraft, Airbus A350s and Boeing 787s. Our independence from airframe and engine manufacturers allows us to focus on providing the best products with the most market appeal regardless of manufacturer.

        Strong liquidity position with significant access to diverse funding sources.    Our scale and operating history provide us with access to significant amounts of funding, including unsecured debt, from various sources on competitive terms. Since 2010, we have raised over $22 billion, including approximately

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$11.4 billion of unsecured debt, primarily through a combination of new loan and bond financings. As of September 30, 2012, we had a cash balance of approximately $2.6 billion and we have an additional $2.3 billion available under our revolving credit facility. We have significantly reduced our leverage, with our net debt to adjusted stockholders' equity ratio declining from 3.9-to-1.0 as of December 31, 2008 to 2.8-to-1.0 as of September 30, 2012, while increasing the weighted average life of our debt maturities from 4.3 years as of December 31, 2008 to 6.4 years as of September 30, 2012, which has allowed us to better align our debt maturities with our anticipated operating cash flows. After giving effect to the Reorganization, our net debt to adjusted stockholders' equity ratio would have been    -to-1.0 as of September 30, 2012. We also have relatively low exposure to interest rate risk because approximately 79% of our outstanding debt as of September 30, 2012, was fixed rate debt or floating rate debt swapped into fixed rate debt. Our broad access to secured and unsecured capital allows us to obtain competitive financing rates and terms. Our significant number of unencumbered aircraft provides us with meaningful operational and capital structure flexibility. Our financial flexibility together with our broad access to capital also provides us with the ability to take advantage of new business opportunities such as aircraft acquisitions. Our foreign exchange exposure is also limited with approximately 97% of our revenues denominated in U.S. dollars for the year ended December 31, 2011.

        Ability to maximize the value of aircraft and engines.    Our subsidiary AeroTurbine provides us with in-house part-out, engine leasing and engine exchange capabilities that allow us to maximize the value of our aircraft and engines across their complete life cycle. The ability to provide these services also distinguishes us with our airline customers by providing them with an integrated value proposition as they transition out aging aircraft. AeroTurbine has market insight and recurring customer relationships, which are strengths that can be leveraged for growth in the engine and parts business.

        Dedicated management team with extensive airline, manufacturer and leasing experience.    Our senior management team has an average of over 20 years of aviation and other relevant experience, including experience at ILFC and with airlines, airframe manufacturers and other lessors. Our management team has a proven track record of success in all aspects of leasing including financing, lease structuring, strategic planning, risk diversification, fleet restructuring and aircraft purchasing. We believe our senior management's reputation and relationships with lessees, manufacturers, buyers and financiers of aircraft are important elements to the success of our business.

Business Strategies

        We believe the following strategies will enable us to continue to serve our airline customers, grow our customer base, manage our portfolio to optimize revenues and profitability and strengthen our position as the world's largest independent aircraft lessor.

        Continue to capitalize on our existing customer relationships.    We believe that we have strong customer relationships as a result of our nearly 40-year operating history. We intend to continue to capitalize on our customer relationships to facilitate strategic and sophisticated fleet solutions, including lease placements, large multi-aircraft re-fleeting transactions, multi-party placement arrangements and sale-leaseback opportunities, and to quickly identify opportunities to re-market aircraft. Our customer relationships and market insight will influence our future aircraft purchases so that we can tailor orders and timing to the long-term needs of our customers. Our subsidiary AeroTurbine enables us to offer options to customers seeking solutions for transitioning out aging aircraft, further strengthening our relationships with them.

        Focus on high-growth and attractive markets.    We are focused on increasing our presence in emerging markets with high potential for passenger growth and other markets with significant demand for new aircraft, including North American airlines undertaking re-fleeting campaigns. SH&E expects passenger air travel to experience strong growth in emerging markets such as Asia, Latin America, and

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the Middle East through 2031, and we intend to capitalize on the increased demand for aircraft that will result from this growth. We already have a leading position in China based on the number of narrowbody and widebody aircraft operated in China, where approximately 176 of our owned aircraft are operated by Chinese carriers. We opened offices in Singapore and Beijing in 2012 to strengthen our position in Asia further. In August 2011, we opened an office in Amsterdam to be closer to our customers in Europe and address the emerging markets in the Middle East, Eastern Europe and Africa. We believe these new offices will help us gain new customers in these regions in need of aircraft. In addition, we are pursuing growth in the North American market, particularly in the U.S., where we believe that the re-fleeting campaigns being undertaken by the major American carriers create an opportunity to increase our market presence and further diversify our geographic mix. We have recently appointed heads of marketing for each of the EMEA, Americas and Asia regions.

        Enhance our fleet with modern, fuel-efficient and strategically attractive aircraft.    We plan to continue to acquire modern, fuel-efficient aircraft that will allow us to maintain a high rate of lease placements on attractive terms. We have commitments with manufacturers to purchase 225 new aircraft scheduled for delivery through 2019, comprised of 100 Airbus A320neo family aircraft, 20 Airbus A350s, 74 Boeing 787s and 31 Boeing 737-800s, and have rights to purchase an additional 50 Airbus A320neo family aircraft. We are in regular discussions with airframe and engine manufacturers regarding aircraft programs and technology advances, availability of future delivery positions, pricing, and potential aircraft orders, and we believe that the scale of our business and access to capital markets will enable us to make large purchases of aircraft from manufacturers as needed. We are also pursuing other strategic aircraft acquisitions with earlier delivery dates through means such as sale-leaseback transactions with airlines and opportunistic purchases of new and used aircraft from airlines and financial investors. In 2011, we entered into sale-leaseback transactions to acquire 26 aircraft through 2013, 22 of which have already been delivered, while our manufacturer deliveries begin to increase starting in 2014.

        Maintain a diverse aircraft fleet and lease portfolio to maximize revenue while minimizing risk.    We seek to further maximize revenue and minimize risks by maintaining the diversity of our owned aircraft fleet and lease portfolio across aircraft type, lease expiration, geography and customer. We plan to maintain a variety of flight equipment to provide a strategic mix and balance designed to meet our customers' needs. Diversification of our owned aircraft fleet minimizes the risk of changing customer preferences, while a diversified lease portfolio with staggered lease expirations reduces our exposure to industry fluctuations and the credit risk of individual customers. We have a dedicated team of professionals who will continue to monitor the credit quality of our lessees. We also evaluate multiple strategies for our aging aircraft, including continued leasing of the aircraft, secondary market sales, utilizing aircraft for parts and engines and converting passenger aircraft to freighter aircraft, and we ultimately pursue the option that generates the highest value for each aircraft.

        Continue to access multiple funding sources to optimize our capital structure.    We have proven our capability to access a variety of funding sources, including unsecured debt, and intend to use the scale of our business and our existing relationships with financial institutions to continue accessing capital from diverse sources at competitive rates. As a result of our liquidity initiatives beginning in 2010, we have extended our debt maturities from a weighted average of 4.3 years as of December 31, 2008 to a weighted average of 6.4 years as of September 30, 2012, which has allowed us to better align our debt maturities with our anticipated operating cash flows. We target to maintain sufficient liquidity, consisting of cash on hand, our revolving credit facility and operating cash flows, to repay our debt maturing over the next 24 months. We seek to leverage our broad access to diverse sources of capital to pursue aircraft acquisition opportunities, including sale-leaseback transactions.

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Aircraft Portfolio

        As of November 15, 2012, we owned 918 aircraft in our leased fleet and had 15 additional aircraft in our fleet classified as finance and sales-type leases. Our owned fleet is comprised of 72% narrowbody (single-aisle) aircraft and 28% widebody (twin-aisle) aircraft, with 53% representing Airbus models and 47% representing Boeing models. At September 30, 2012, the weighted average age of the aircraft in our fleet, weighted by the net book value of our aircraft, was 8.1 years, approximately 75% of the aircraft in our fleet were less than 12 years old and 76% of our owned aircraft were models that are currently in-production by airframe manufacturers.

        The following table provides details on our operating lease portfolio by aircraft type, including the scheduled lease expirations (for the minimum noncancelable period which does not include contracted unexercised lease extension options) by aircraft type, as of September 30, 2012:

Aircraft Tvpe
  2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   2022   2024   2025   2026   Total  

737-300/400/500

    2     8     9     1     3     4     1                                               28  

737-600/700/800

    2     15     23     29     41     43     21     10     5     1     4     9     3     2     208  

747-400

          2     3     6     1                                                           12  

757-200

    2     6     17     9     9     5     4                                               52  

767-200

                1                                                                       1  

767-300

          10     11     13     6     6     3                                               49  

777-200

          2     6     3     5     11     10                                               37  

777-300

          1     4     2           7     9     8           1