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Aircraft Portfolio

6 Months Ended

Nov. 30, 2011

Note 12 —Aircraft Portfolio

Within our Aviation Supply Chain segment, we own commercial aircraft with joint venture partners as well as aircraft that are wholly-owned. These aircraft are available for lease or sale to commercial air carriers.

Aircraft Owned through Joint Ventures

As of November 30, 2011, the Company had ownership interests in 20 aircraft with joint venture partners. As of November 30, 2011, our equity investment in the 20 aircraft owned with joint venture partners was approximately $36,228 and is included in Investment in joint ventures on the condensed consolidated balance sheet. Our aircraft joint ventures represent investments in limited liability companies that are accounted for under the equity method of accounting. Our membership interest in each of these limited liability companies is 50% and the primary business of these companies is the acquisition, ownership, lease and disposition of certain commercial aircraft. Aircraft are purchased with cash contributions by the members of the companies and debt financing provided to the limited liability companies on a limited recourse basis. Under the terms of servicing agreements with certain of the limited liability companies, we provide administrative services and technical advisory services, including aircraft evaluations, oversight and logistical support of the maintenance process and records management. We also provide remarketing services with respect to the divestiture of aircraft by the limited liability companies. For the six-month periods ended November 30, 2011 and 2010, we were paid $366 and $452, respectively, for such services. The income tax benefit or expense related to the operations of the ventures is recorded by the member companies.

Distributions from joint ventures are classified as operating or investing activities in the condensed consolidated statements of cash flows based upon an evaluation of the specific facts and circumstances of each distribution.

Summarized financial information for these limited liability companies is as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2011		2010		2011		2010
Sales	$	11,984	$	25,589	$	21,474	$	37,855
Income before provision for income taxes	592		5,248		1,179		5,502

	November 30,		May 31,
	2011		2011
Balance sheet information:
Assets	$	177,356	$	219,810
Debt	93,305		127,037
Members’ capital	80,112		89,375

Wholly-Owned Aircraft

In addition to the aircraft owned with joint venture partners, we own three aircraft for our own account that are considered wholly-owned. Our investment in the three wholly-owned aircraft, after consideration of financing, is comprised of the following components:

	November 30,			May 31,
	2011			2011
Gross carrying value	$	27,432		$	44,586
Debt	(15,966		)	(14,072		)
Capital lease obligation	—			(6,716		)
Net AAR investment	$	11,466		$	23,798

Information relating to aircraft type, year of manufacture, lessee, lease expiration date and expected disposition upon lease expiration for the 20 aircraft owned with joint venture partners and three wholly-owned aircraft is as follows:

Aircraft Owned through Joint Ventures

		Year		Lease Expiration	Post-Lease
Quantity	Aircraft Type	Manufactured	Lessee	Date (FY)	Disposition
2	767-300	1991	United Airlines	2016 and 2017	Re-lease
3	737-400	1992-1993	Available	—	Sale
15	737-400	1992-1997	Malaysia Airlines	Various(1)	Sale/Re-lease
20

(1) 7 aircraft in 2012; 4 aircraft in 2013 and 4 aircraft in 2014

Wholly-Owned Aircraft

		Year		Lease Expiration	Post-Lease
Quantity	Aircraft Type	Manufactured	Lessee	Date (FY)	Disposition
1	MD83	1989	Meridiana	2012	Disassemble
1	737-300	1997	Small Planet Airlines	2015	Re-lease
1	A320	1997	Donbassaero Airlines	2017	Re-lease
3