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Aircraft Portfolio

3 Months Ended

Aug. 31, 2012

Note 11 —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 August 31, 2012 and May 31, 2012, we had ownership interests in 18 aircraft with joint venture partners. As of August 31, 2012 and May 31, 2012, our equity investment in aircraft owned with joint venture partners was approximately $41.3 million 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 three-month periods ended August 31, 2012 and 2011, we were paid $0.2 million and $0.2 million, 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
	August 31,
	2012		2011
Sales	$	8.8	$	9.5
Income before provision for income taxes	2.9		0.6

	August 31,		May 31,
	2012		2012
Balance sheet information:
Assets	$	164.8	$	169.6
Debt	71.2		75.6
Members’ capital	87.7		88.8

Wholly-Owned Aircraft

In addition to the aircraft owned with joint venture partners, we owned two aircraft at August 31, 2012 and at May 31, 2012, for our own account that are considered wholly-owned. Our investment in the two wholly-owned aircraft, after consideration of financing, is comprised of the following components:

	August 31,		May 31,
	2012		2012
Gross carrying value	$	23.9	$	25.2
Debt	—		(8.4		)
Net AAR investment	$	23.9	$	16.8

Information relating to aircraft type, year of manufacture, lessee, lease expiration date and expected disposition upon lease expiration for the 18 aircraft owned with joint venture partners and two wholly-owned aircraft is as follows:

Aircraft owned with joint venture partners

		Year		Lease Expiration	Post-Lease
Quantity	Aircraft Type	Manufactured	Lessee	Date (FY)	Disposition
2	767-300	1991	United Airlines	2016 and 2017	Re-lease
16	737-400	Various (1)	Malaysia Airlines	Various (2)	Sale/Re-lease
18

Wholly-owned aircraft

		Year		Lease Expiration	Post-Lease
Quantity	Aircraft Type	Manufactured	Lessee	Date (FY)	Disposition
1	737-300	1997	Small Planet Airlines	2015	Re-lease
1	A320	1997	Donbassaero Airlines	2017	Re-lease
2

(1) Five aircraft in 1992; eight aircraft in 1993; two aircraft in 1994; and one aircraft in 1997

(2) Twelve aircraft in 2013 and four aircraft in 2014. The joint venture partners entered into LOIs for the sale of 13 aircraft and an additional aircraft is under contract.