2009-2010 Guide to Financing and Investing in Aircraft, Engines and Airlines

THE 2009-2010 GUIDE TOFINANCING & INVESTING IN

AIRCRAFT, ENGINES & AIRLINES

FINANCING IN A HARD MARKETENGINE LEASING GETS STICKYCONSOLIDATION - REGULATION, CARTELS& COMPETITIONTROUBLED TIMES FOR AIRCRAFTMANUFACTURERS?PLUS:FULL AIRCRAFT TRANSACTIONS LIST JUNE 2008 - JUNE 2009

2009-2010 Issue

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Financing in a hard market . . . . . . . . . . . . . . . . . . . . . .4

Engine leasing in a sticky climate . . . . . . . . . . . . . . . .8

Airline consolidation faces close anti-trust scrutiny 18

Consolidation for better regulation . . . . . . . . . . . . . .20

Competition, cartels and consolidation . . . . . . . . . . .26

Investing in CFM engines . . . . . . . . . . . . . . . . . . . . . .30

Silver lining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

Fleeting thoughts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

Lessor focus: Bavaria . . . . . . . . . . . . . . . . . . . . . . . . .54

Developing the US Aviation industry . . . . . . . . . . . . . .58

Lessors riding out the storm . . . . . . . . . . . . . . . . . . . .64

Lessor focus: AWAS . . . . . . . . . . . . . . . . . . . . . . . . . . .70

Recovering aircraft from a defaulting lessee . . . . . .74

Lessor focus: Babcock & Brown Air . . . . . . . . . . . . . .78

Operating lease update: Independent power . . . . . . .82

Brain drain hits african airline industry . . . . . . . . . . .88

Lessor focus: AERCAP . . . . . . . . . . . . . . . . . . . . . . . . .92

2008: an aircraft financing odyessy . . . . . . . . . . . . . .98

What’s on order: troubled times foraircraft manufacturers . . . . . . . . . . . . . . . . . . . . . . . .100

Manufacturing liquidity . . . . . . . . . . . . . . . . . . . . . . .108

Movements in the European blacklist . . . . . . . . . . .112

The ten commandments . . . . . . . . . . . . . . . . . . . . . .116

State aid developments in the transport sector . . .118

Islamic finance: plugging the liquidity gap . . . . . . .124

Aircraft transactions: June 2008 - June 2009 . . . . .127

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MANAGING DIRECTORPhilip Tozer-Pennington: [email protected]

Tel: +44 (0) 207 579 4840

EDITORJason Holland: [email protected]

Tel:+44 (0) 207 579 4849

LEAD CONTRIBUTOR

Christian J Kjelgaard: [email protected]

Tel: +1 001 212 924 3829

JOURNALIST

Mary-Anne Baldwin: [email protected]

Tel: +44 (0) 207 579 4843

SPECIAL CORRESPONDENTSAfrica: Kaleyesus Bekele

PRODUCTIONPhil Hine: Production Manager, [email protected]: +44 (0) 207 579 4852Kalven Davis: [email protected]:+44 (0) 207 579 4851

DISPLAY ADVERTISINGPhilip Tozer-Pennington: [email protected]

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AIRLINE FLEET MANAGEMENT(ISSN 1757-8833) – Online: 1757-8841) (USPS 022-324)is published bi-monthly.Subscription records are maintained atUBM Aviation Industry Press, Ltd.2nd Floor, Ludgate House, 245 Blackfriars Road,London, SE1 9UY, UK.

UK annual subscription cost is £150.Overseas annual subscription cost is £170 or $300

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FinGuide 2009 TOC New:FIN GUIDE TOC 4/6/09 12:56 Page 2

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4 � Guide to Financing & Investing in Aircraft & Engines

Financing & Investing inAircraft & Engines

Philip Tozer-Pennington looks at aviation financing thus far during 2009.

THERE IS NO SIMPLE LIST OF BANKS CURRENTLY CONDUCTING BUSINESS thatcan be drafted and shown today; if we were to do this then wewould not give a true picture of the current market at all.Instead we should ask which independent banks are the mostactive in the market at this time? DVB, as one example, has closed $600m of deals over the pastfour months for airlines as diverse as American, Philippine, andKorean. DVB also has a further $600m of transactions currentlyin the pipeline. Many other banks such as Calyon, StandardChartered and BNP say that they have deals in the pipeline, butyou need to look through any deals that are posted in this mar-ket with care and ask – are these deal amounts actual dollars atrisk? I have singled out DVB because its deals show real dollars atrisk. They are not ECA-backed like many of the other deals thatare being flagged-up from banks where the residual risk is wellunder the posted amount. So when asking which banks are inthe market doing business you first need to consider what youmean by doing business, but it is clear that all banks have gone– or are going – back to basics in their approach.

How has the credit crunch affected theavailability of aviation finance?There are two main impacts of the credit crunch on aviationfinance: it has caused a de-leveraging race amongst the finan-cial institutions. Even if you do not discriminate against aviationfinance versus any other class of business, the banks arerequired by the regulators and compelled by the deteriorationof their capital structure to reduce their assets – this is of coursede-leveraging.

More specific to aviation finance though is the fact that it is stillnot seen as being a strategic activity within many banks.Therefore, when they are pushed to de-leverage and when theyhave to make some choices they will most likely choose to sup-port their regular domestic strategic customers as opposed tosomething that can be seen as a little bit more exotic or evendangerous, such as aircraft finance.So there are a number of institutions around the globe, whereaviation finance was not at the top of the list, that have pulledout of the aviation market as one of their first strategic movesafter the collapse of Lehman Brothers in September 2008.There is now another factor: a mostly untold story, mainly withEurope, where governments are taking strategic stakes in thecapital structure of banks. They are then asking those institu-tions to support/put their country before going abroad forexotic transactions.

So what does this mean? Strictly speaking, for French, German, Dutch and UK banks, itmeans that they are not permitted to finance a Boeing aircraftfor an Asian carrier. The expectation is that a European bankwill support Airbus first and second their own country. The overall tightening of the credit markets has reduced aircraftfinancing liquidity and increased risk spreads. However, withsignificant reductions in LIBOR, all in all funding costs are still atvery attractive terms. In line with general global de-leveraging,advance rates on aircraft deals have been reduced by five to tenper cent.

FINANCING IN A HARDMARKET

Summing up the past 18 months in the banking sector!

Editorial main:FIN2009 2/6/09 14:31 Page 4

5Guide to Financing & Investing in Aircraft & Engines �

Pre-delivery financing has returned to a much more limitedavailability than we have seen in the pre 2004-2007, high liq-uidity, era. Overall, while there is less aircraft finance liquidityand the risk premiums are higher, the aircraft portfolios havecontinued to perform, especially when compared to most otherasset classes. Another indicator is that Calyon has seen a surgein customers approaching it, even though it is well known thatthis bank is far from being the cheapest option on the market.Customers have realised that the “shopping around” optionhas disappeared for the moment and currently you have to takewhat you can get.

From 30 banks operating in the sector during the first quarterof 2008, we are now down to about 11 banks actually doingdeals with three additional banks ready to move back into thesector, we are told. Of this number, five (in all) banks would fallinto the category of known aviation finance house.

Are finance terms and conditions becoming more rigorous andtherefore excluding certain airline operators, when this wouldnot have done previously?

Increasingly, there is now a move towards quality and bankswant to see this with a good mix of credit/asset with a conser-vative structure. This does mean that second tier and classic air-craft are no longer attractive.

We are in a world with tighter aircraft finance liquidity - we aretherefore in the lender market. This means lenders can be veryselective in what aircraft and what credits they will fund. Sincethe majority of current deliveries are 737 NG / A320 family and777 aircraft (on the larger side) their customers are clearly in amore advantageous position because these aircraft families areasset gold standards in their respective classes.

As for financier’s focusing on stronger credits, this clearly isexpanding the need for Export Credit for the remaining carri-ers. With some 80 per cent of Boeing backlog eligible for ExIM,this creates an important safety valve for airlines who have dif-ficulty attracting the limited commercial financing currently onoffer.

There is no doubt that airlines with a C-credit type situation arefinding it near-on impossible to find finance. The current pre-vailing banking policy excludes many airlines, operators andlessors, along with some of the aircraft which are not new, clas-sics are virtually a no go area for all at this time. So many air-lines, lessors and classes of asset are on the black list wherethey would not have been pre-2008.

However, some very good assets are coming onto the marketthat are priced very attractively, but they are still not able tofind financing. There is particular stress in the market at thistime for those seeking to refinance 747-400s. The market isvery rigorous at the moment in terms of leverage, repayment,asset, and price. Most, if not all, banks are not interested inclassics and do not think that anyone in their right mind willfinance classics at this time.

That being said, one bank (DVB) financed a deal just last monthfor four 737-400s at a very good price. On the engine side weare looking at the value in just the same manner, what are theengines, where will they be used and what the outlook is for aparticular type. Banks are able to cherry-pick deals at will andthis will not change in the foreseeable future. It is not becausethe banks want to be awkward but because the volatility of air-

craft values means that banks must ask for more equity andmost of the airlines and lessors understand this.

Does this mean that such airlines will have to seek other fund-ing, or will they have to resort to leasing as the only meansavailable?

In normal circumstances the lessor would play the role of lenderof last resort for those too weak to be able to attract financing,but the credit crunch has affected lessors just the same aseveryone else. So in this market an airline that cannot findfinancing on a given aircraft is very unlikely, in most circum-stances, to obtain finance through a lessor on sale and lease.Export credit and sale and lease back options are still availablewe must remember. Leasing will continue to play an importantrole, but Export Credit will become/is the market maker.

How will OEM-backed finance institutionssatisfy the ongoing debt requirement?The manufacturers are working very hard on this at themoment. There is no doubt that seven or so months ago bothAirbus and Boeing were still in a state of denial. Banks weretalking to the two big manufacturers about credit crunch andfunding gap worries etc, but the manufacturers did not seem tosee the problem, or at least if they did, then they were not will-ing to talk about it to the banks.

Since the turn of the year, however, both Airbus and Boeinghave been working very hard indeed with banks and clients towork on solutions wherever possible. The OEMs suffer a generallimitation which is something familiar to Boeing, but not somuch to Airbus; this is the sole recognition problem, which ispure accounting. For example, on the sales recognition side, ifyou put a significant amount of money aside to finance yourown client to buy your own aircraft it might be that you cannotrecognise the sale. This in turn has a detrimental impact on allthe ratios of the manufacturer such as revenue and turnoveretc, for that reason the contribution by Boeing and Airbus tothe finance of their clients will have to be limited; there is noquestion of this.

So what can the OEMs do? OEMs are trying to team-up with banks and propose some kindof structure where they absorb the junior trench with the banksdoing the senior. This is generally seen as the best way to go ina bad market at this time, it is a win-win situation because froma senior leverage perspective it is probably a very good deal,and it is fair to say that the presence of Boeing or Airbus as thejunior in any kind of financing is giving an extra layer of pro-tection besides the number of dollars which are ahead of youas senior lender.

So to make a long story short there is limitation because thereis an accounting rule which prevents them from pouring largeamounts of cash into their clients. The big manufacturers allunderstand this as do the banks. So the OEMs have movedfrom denial to a partnership with the banks that in effect meanswe shall see junior/senior arrangements as being the way for-ward in this market.

Boeing Capital and its counterparts here within the EU are confi-dent that they will be able to satisfy the debt requirement during2009 and into 2010. While the manufacturers anticipate havingto directly fund a number of aircraft in 2009 (having not fundedany in the last several years), they believe the overall volumerequirement will be less than what we saw post 9/11. Boeing




Capital, for example, were financing about $3bn per year forthree years post 9/11 and at that time they did not have the depthof infrastructure, or indeed the balance sheet, that they havetoday, moreover they were financing aircraft such as the 757 andthe 767 which are coming towards the end of the lifecycle. Now, as mentioned before, Boeing Capital find that they arefinancing 737NGs and 777s – Gold standard aircraft. Even thenBoeing Capital state clearly that the level of funding requiredfrom them is nowhere near what was required post 9/11. SoBoeing is upbeat.

How will export credit agencies react?These agencies need to double their support from 2008 levels.They are open to capital market funding. All the major ECAshave said that they are prepared to nearly double their supportlevels relative to 2008. In the end the export credit agencies have been given the taskof supporting the sale of their national manufacturers and innormal circumstances they contribute five six or seven billionper year but, talking with Bob Morin and hearing what hisEuropean counterparts have to say it is clear that we could beabove the ten billion dollar mark this year for each of theexport credit agencies. That is above ten billion for each, whichis a significant move. The challenge for these agencies is great, not due to theamounts of money that we are talking about, but because thedifferent authorities are pouring billions upon billions into thesystem. But it is a challenge for these agencies on the actual exe-cution because these teams are small and they need to apply forthe normal due diligence, credit analysis, etc. So is it a realistictarget for these agencies to move from six or seven billion dollarsof funding to ten billion? Or even twelve? In terms of work forceand resources I think it is a very big challenge for them.

Will there be a reduction in new aircraftdeliveries as a result of a shortage of credit?These are difficult markets, of that there can be no doubt. Weknow that aircraft demand is correlated against global eco-nomic conditions as global GDP has contracted, so aircraftdemand has fallen in line. This said the first half of 2008 saw amazing performance by theaviation industry, the global economy was falling, oil was at$147 a barrel and yet aircraft were still being ordered at recordlevels – so what does this mean for the industry going forward?We are yet to find out, but it is generally agreed by many of thebanks that 2010, not 2009, will be the year when the manu-facturers’ orders books come under serious stress. Therefore2010 is the year seen as being the worst for cancellations.Many operators are going to simply say “sorry but I cannot takedelivery of this aircraft”. For many it will not be a question of “I can try to defer for oneyear, two years or three years”, or simply “I can try to restructurethe agreement”. There will be no options for many. We alreadyhave one case as an example – that of Lauda Air where they sim-ply said “here is my deposit, I do not care that it is lost, I simplycannot take delivery of this aircraft”. We will see more of this! So the answer is yes, some orders will continue to disappeardue to lack of funding which in turn will reduce the financingrequests coming in for orders. The cycle has a way to run yet.Boeing Capital, for its part, does not believe capital availabilitywill be the determining factor of their production rates. Trafficand market demand will be the driving force in shaping thedelivery skyline. Boeing Captial has chosen to try and keep outof the funding gap debate, instead they have tried to under-stand for themselves if there is a risk of significant capitalrequirement that is not being addressed, and their conclusionis that they do not see that being the case today. They are,

however, carrying out a top down and bottom up analysis ofeach aircraft that is on order. The company maintains that avail-ability of financing will not drive aircraft delivery rates. BoeingCapital’s European counterparts declined to comment on this. So are there any additional problems on the horizon that weneed to consider when talking about airlines seeking finance?It is becoming clear that the European Union Emissions TradingScheme will affect the very core building blocks of aviationfinance:1. Airline Business models 2. Aircraft valuesThese will undoubtedly be affected by any “green regulation”.The aviation working group has handed the EU a critique of theETS and its shortcomings. The regional solution that is the ETSwill affect all airlines but it is the EU fleet lean issue whichcauses the most concern. A simple summary of fleet lean can be thus: if an airline leasesand operates an aircraft and then gets into debt and goes bustthen any aircraft operated (not owned, by that airline can beseized. Then any costs owed to Eurocontrol or an airport oper-ator can be set against seized aircraft. But the most dramatic part of this legislation is hidden in thedetail, as always: if an airline goes bust with debts and otherbanks and lessors manage to take back possession of theirassets by getting their aircraft out, but you do not, then alldebts of the airline will be set against your aircraft, effectivelywiping out the value of the asset. This process obviously has thesame overall impact on the engine lessor as it does with theowner of any asset. The overall effect of this legislation will bethat only airlines with strong balance sheets, liquidity and goodbusiness plans will be able to obtain finance. But more importantly, this means that lessors will have to takea second look at all assets currently out on lease, and ask ‘is theoperator and therefore the asset, secure?’ Future lease agree-ments will have to be far more stringent and sale and leasebackmay not be a viable option any longer, as this is usually a lastresort liquidity boost for an operator. Investors and asset owners beware – the EU will become a veryhigh risk zone, with some banks likening risk factors to manyAfrican countries. Investors in aviation are lobbying the EU fora u-turn on this legislation, or at the very least transparencyfrom Eurocontrol and the like so that investors will be able tosee which operators are behind on their payments. As it is, thefleet lean legislation is one of the most barbaric legal imple-mentation issues ever for the aviation industry. The bottom line:airlines within the EU will be a higher risk and therefore financ-ing will be more expensive or non existent for some airlines.

Finally: The message from the banks that have pulledback from the aviation sector?

“We will be back…………………..”

“Or will they?”

We hope that you enjoy the 2009/2010 Guide to Financing &Investing in Aircraft & Engines and wish you all the very bestfor the months ahead.


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Engines have been costed above their intrinsic value and the price of new engines and short-term leaseagreements are on the up. Demand has kept engine lessors comfortable – for now – but with airlinebankruptcies, fleet and route cuts, and order postponements and cancellations on the increase, the needfor engines is dwindling. Mary-Anne Baldwin looks at how this is affecting the engine leasing market.



AN INCREASING NUMBER OF ENGINES ARE HITTING THE mar-ket and threatening to flood demand and so engine les-sorshave a number of sticky issues they must tackle in order topreserve good ground in an increasingly shaky market.

The parting out of a stored aircraft and the sale of its work-ing components is one such issue – since the engines are themost valuable components of the aircraft, it is these thatowners have the greatest desire to sell off. “On an old air-craft like a 737-200, “90 per cent of the value is in theengine… and you don’t even bother to overhaul them,” saysAlain Maestracci, vice president of business development forBCIO Aircraft Leasing.

Much of an engine lessor’s profit comes from leasing spareswhich sit unused, as back-ups, in hangars. “It’s quite com-mon for them [airlines]… to [already] have two or threeengines sitting in the hangar that they do own outright,”says Joseph O’Brien VP of sales for Engine Lease FinanceCorporation: “As aircraft parting-out makes engines morereadily available for outright purchase at low prices, airlinesare increasingly likely to pick up bargains from other carriersand aircraft owners instead of leasing; the trend is thereforelikely to hit engine lessors’ revenue hard.”

Another trend likely to drown lessor profits is lower inter-est rates, which in the UK have fallen to as little as1.5 per cent and in the USA as low as zero. Airline bank-ruptcies form yet another factor causing lease rates to fluc-

tuate. If more and more struggling airlines fall by the way-side, a surplus of engines will hit the market – potentiallypushing supply in excess of demand.

Yet despite the expectation that bankruptcies will con-tinue, many of those occurring during 2008 were due tohigh oil prices – a phenomenon which diminished in impor-tance as oil prices fell. Oil prices now appear likely to stayfairly low for a while. Also, while airlines are still strugglingfinancially, they are becoming better-equipped to dealwith a spike in fuel costs in the long term – benefiting froma more efficient worldwide fleet, better contingency plan-ning and remedies such as passenger fuel surcharges. Interms of oil it seems the road ahead will be far less rocky –at least for those that have been wise enough to stayahead of the curve on fuel hedging.

It is hard to predict how great the future supply of usedengines may be and with no registry currently in existence,the number of engines on the market can only be guessed at.According to Maestracci, 15 of the largest aircraft lessors con-trol 4,800 aircraft – representing at least 10,000 engines onthe market. Pascal Picano, senior VP of sales and marketingat GA Telesis, estimates there to be 59 operators of the CFM56-5A and 10,022 engines in operation. The General ElectricCF6-80C2B, meanwhile, has an estimated 104 operators and2,330 engines in operation; while the IAE V2500 has 108operators with 2,826 engines in use. The PW 4056 has 35operators, using 924 engines.

ENGINE LEASING INA STICKY CLIMATE




Views are split over the effectiveness and safety of engines withcomponents manufactured by Parts Manufacturer Approval(PMA) suppliers. The Federal Aviation Administration (FAA)actively seeks to assure airlines that engines equipped with PMAparts are just as safe and effective as those with just OEM parts,but while on an official level PMA-equipped engines have thesame worth and capabilities, market belief will continue to rateengines with only OEM parts as having better value.

An online poll conducted recently by AFM (see page 44 to 46)shows that while the majority of people polled view PMAengines as being as effective as OEM engines, almost the samenumber perceived the PMA engine to be of lower market worth.Of those surveyed, 54 per cent viewed PMA parts as not being atall detrimental to an engine. However, 31 per cent said the inclu-sion of PMA parts has a negative effect on an engine’s perform-ance, and 56 per cent said their inclusion reduces the value of anengine.

But it is likely that PMA parts will rise in popularity during the cur-rent economic climate. PMA parts became more popular duringthe post-9/11 recession because they are generally less expen-sive. However, additional PMA part-related maintenance con-cerns and attributed costs mean that airlines with large aircraftfleets are still reluctant to acquire aircraft with PMA parts if theirfleets have a majority of OEM-only engines.

Lessors must look to their market to see what aspects of an engineare most desirable and indeed which engines best hold these traits.AFM’s poll findings reflect current demand for each engine typecurrently on the market. We ranked 20 engine types on four char-acteristics. The CFM56-7B powering the 737NG family was themost popular engine polled, receiving the highest votes for opera-tional success, investment potential and value for money. TheEngine Alliance GP700 for the A380F was perceived to be themost fuel-efficient engine. Of those poorly rated, the PW6000 forthe A318 was ranked the least favourite in terms of operationalsuccess; the JT8D 727 was deemed to carry the lowest return oninvestment; the Rolls-Royce Trent 500 powering the A340-500 andA340-600 was considered to be the least value for money; and theJT8D engine was rated the least fuel-efficient on the market.

Some believe the market can contain an increase in engines.Sonny Stern, director of sales for the Americas at MTUMaintenance, argues that the number of spare engines is deplet-ing, with today’s fleet of narrowbody and widebody aircraftbeing supported by about 15 per cent of spare engine coverage.However, he predicts that by 2025 there will be only 9 per centcoverage. Stern also predicts that limited capital will lower out-right ownership of spare engines by airlines from the current 50per cent level to 25 per cent. This will create a surge in the rateof engine leasing, he says.

If Stern is right, the current dearth of spare engines will meanthose freed up by aircraft groundings in the short term will stillbe in demand. But, unlike previous downturns, the current crisisis affecting the airline industry on a global scale: Few areas arelikely to remain financially secure and able to benefit from theavailability of aircraft and engines. A limited number of aviationgrowth areas throughout the globe could mean that a surplus indiscarded engines is less likely to be absorbed by the market.

What’s in a name: understanding market per-ceptionAnother difficulty engine lessors must conquer is the perceivedextra value of some engines over others. While engines them-selves hold high values in comparison with all other aircraft com-ponents and indeed aircraft themselves, there remains someapprehension as to certain engine types and lessors must stayawake to perceptions of engine types when looking to acquireand lease them.


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FPA_check:AFM 13/5/09 10:20 Page 3



AFM Engine Leasing Poll1. OPERATIONAL SUCCESS

Most 6 5 4 3 2 LeastCFM56-7B 737 NG 36% 45% 9% 0% 9% 0% 0%GP 7000 A380/F 20% 10% 20% 30% 0% 10% 10%RB211-535 757 20% 0% 0% 30% 0% 20% 30%CFM56-3C 737 Classics 17% 33% 17% 8% 17% 8% 0%V2500-A5 A320 11% 11% 11% 22% 22% 11% 11%V2500-A1 A320 11% 0% 11% 22% 22% 11% 22%CFM56-5B A320 10% 40% 40% 0% 10% 0% 0%IAE V2500 A320s 10% 0% 20% 30% 20% 0% 20%RR Trent 700 A330s 10% 0% 20% 20% 20% 10% 20%JT8D 727s 10% 0% 10% 30% 0% 10% 40%CF6-80 747-400s; 767s 8% 46% 8% 23% 8% 8% 0%CF5-80C2 A300s 0% 36% 9% 18% 9% 18% 9%CF6-80E1 A330s 0% 30% 20% 20% 0% 20% 10%PW200 757 0% 22% 22% 11% 11% 11% 22%CFM56-5C4 0% 20% 20% 30% 20% 10% 0%CF6-50 747-200; -300 0% 10% 30% 0% 30% 20% 10%PW4000 A330s 0% 10% 20% 20% 10% 30% 10%RR Trent 900 A380/F 0% 10% 10% 20% 10% 20% 30%PW6000 A320s 0% 0% 10% 30% 0% 0% 60%RR Trent 500 A340s 0% 0% 9% 27% 0% 27% 36%

2. INVESTMENT POTENTIALMost 6 5 4 3 2 Least

CFM56-7B 737 NG 55% 18% 18% 0% 9% 0% 0%CFM56-5B A320 27% 45% 18% 0% 9% 0% 0%GP 7000 A380/F 20% 10% 20% 20% 10% 0% 20%V2500-A5 A320 10% 20% 10% 20% 10% 10% 20%IAE V2500 A320s 10% 10% 10% 30% 20% 0% 20%PW4000 A330s 10% 0% 20% 20% 20% 10% 30%RR Trent 700 A330s 10% 0% 20% 20% 10% 10% 20%V2500-A1 A320 10% 0% 10% 10% 20% 10% 40%CF5-80C2 A300s 9% 18% 9% 9% 18% 27% 9%PW200 757 9% 9% 18% 0% 18% 9% 36%CF6-80 747-400s; 767s 8% 33% 17% 8% 8% 17% 8%CF6-80 E1 A330s 0% 20% 20% 20% 10% 10% 20%RB211-535 757 0% 20% 0% 0% 40% 10% 30%CFM56-3C 737 Classics 0% 18% 18% 27% 27% 9% 0%RR Trent 900 A380/F 0% 11% 11% 11% 11% 33% 22%CFM56-5C4 0% 10% 60% 10% 10% 10% 0%CF6-50 747-200; -300 0% 10% 10% 0% 20% 20% 40%JT8D 727s 0% 0% 11% 0% 0% 22% 67%PW6000 A320s 0% 0% 0% 30% 0% 30% 40%RR Trent 500 A340s 0% 0% 0% 10% 20% 40% 30%

3. VALUE FOR MONEYMost 6 5 4 3 2 Least

CFM56-7B 737 NG 50% 20% 10% 20% 0% 0% 0%CFM56-5B A320 33% 22% 22% 22% 0% 0% 0%GP 7000 A380/F 22% 22% 0% 44% 0% 0% 11%CFM56-5C4 11% 11% 56% 0% 11% 11% 0%CF6-80 E1 A330s 11% 11% 11% 33% 11% 11% 11%V2500-A5 A320 11% 11% 11% 33% 11% 0% 22%CF5-80C2 A300s 11% 11% 11% 22% 22% 22% 0%IAE V2500 A320s 11% 11% 11% 11% 33% 0% 22%CF6-50 747-200; -300 11% 0% 11% 0% 11% 56% 11%V2500-A1 A320 11% 0% 0% 22% 11% 11% 44%PW200 757 10% 0% 20% 10% 10% 10% 40%CF6-80 747-400s; 767s 9% 27% 18% 18% 9% 9% 9%CFM56-3C 737 Classics 9% 9% 36% 36% 9% 0% 0%PW6000 A320s 0% 22% 0% 0% 11% 11% 56%RR Trent 700 A330s 0% 11% 11% 22% 22% 0% 33%PW4000 A330s 0% 11% 11% 22% 11% 11% 33%RR Trent 900 A380/F 0% 0% 22% 22% 11% 0% 44%RB211-535 757 0% 0% 22% 11% 11% 22% 33%JT8D 727s 0% 0% 11% 0% 22% 11% 56%RR Trent 500 A340s 0% 0% 0% 22% 11% 11% 56%

4. FUEL EFFICIENCYMost 6 5 4 3 2 Least

GP 7000 A380/F 38% 25% 12% 25% 0% 0% 0%CFM56-7B 737 NG 25% 50% 25% 0% 0% 0% 0%CFM56-5B A320 25% 25% 38% 12% 0% 0% 0%PW6000 A320s 14% 29% 0% 14% 0% 14% 29%V2500-A5 A320 12% 25% 0% 38% 0% 12% 12%CF6-80 E1 A330s 12% 12% 25% 0% 12% 25% 12%IAE V2500 A320s 12% 12% 12% 50% 0% 0% 12%PW200 757 12% 12% 0% 0% 38% 0% 38%CF5-80C2 A300s 12% 0% 25% 25% 25% 12% 0%PW4000 A330s 12% 0% 12% 12% 12% 25% 25%CF6-80 747-400s; 767s 11% 33% 11% 0% 0% 33% 11%CFM56-5C4 0% 25% 38% 38% 0% 0% 0%RR Trent 700 A330s 0% 12% 12% 25% 25% 0% 25%RR Trent 900 A380/F 0% 12% 12% 25% 12% 0% 38%V2500-A1 A320 0% 12% 12% 12% 12% 12% 38%CF6-50 747-200; -300 0% 12% 0% 12% 12% 38% 25%RR Trent 500 A340s 0% 12% 0% 0% 50% 0% 38%CFM56-3C 737 Classics 0% 0% 62% 12% 25% 0% 0%RB211-535 757 0% 0% 29% 0% 14% 14% 43%JT8D 727s 0% 0% 12% 0% 0% 25% 62%


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AFM Engine Leasing Poll 5. To what extent do you see the inclusion of PMA parts as being detrimental to an engine?

Detrimental 31%Undecided 15%Not detrimental 54%

6. To what extent do you think that the inclusion of PMA parts within an engine reduces the value of the whole?

Very much 54%Undecided 23%Very little 23%

The leasing gameWhile at present the outlook is gloomy for engine lessors, thepost-9/11 recession did much to guide and teach airlines howbest to manage their operations and to tackle the effects oflower demand. It is just unfortunate that the period between thetwo recessionary periods was not long enough for many airlinesto secure firm financial footing and recoup on equity. Yet in thissense engine lessors are better-equipped than their aircraft-lessorcounterparts. The perceived length of an engine’s working life isgreater than that of an aircraft, so engine lessors have less con-cern over asset depreciation and tend to focus less on the returnof equity than do aircraft lessors.

Despite UK Prime Minister Gordon Brown’s recent referral to theeconomic crisis as a full-on “depression”, some retain a sense ofoptimism – not just hoping, but believing, that the economy willpick up this year. IATA has predicted that industry losses for 2009will amount to $2.5bn – just half of those it has estimated for2008.

While lessors have shown a willingness to support their cus-tomers during these tight times, it is likely they will have todevelop their understanding natures somewhat further to allowfor short term deferrals on payments, restructured payment pat-terns and liaison for unsecured loans.

According to Stern, during 2008, operating leases covered 76 percent of the leased aircraft market, while finance leases took only24 per cent of an estimated 9,300 to 9,500 active leased com-mercial aircraft worldwide. Operating leasing has gained a lot ofground since 2000, when operating leasing took 51 per cent ofthe market and finance leasing took 49 per cent. In 2008, theoverall proportion of leased aircraft, at approximately 49 percent, was nearly the same as the proportion of those held underoutright ownership, at 51 per cent.

Aircraft leasing is about keeping the aircraft in use as much aspossible. Most operating leases are for a minimum of three yearsand the average is five to seven years, though they can sometimesstretch to 12 years and even longer periods. However, in today’smarket it is likely that airlines will have more sway in acquiring theoperating leases better suited to them and will be better able tospecify the lease periods they actually wish.

Despite the weakened market, engine leasing is profitable. On aRolls-Royce RB.211-535E4, short-term lease rates often reach$4,000 per day with additional charges of $300 per hour plus $200per cycle, says Maestracci. Leasing two CFM56- 3C1s may cost youmore than the lease on a 737-300 to put them in, he says.

Bridging the funding gapJohn McMahon, executive VP of sales at Genesis, views a lack oftrust between banks as the primary reason for the funding crisis.“We are in a very strange time frame right now – the system is fro-zen,” he says. “The system is looking for a new outlet.” McMahonbelieves that although banks won’t lend to each other at present, acentralised bank will launch the “flow” of cash, kick-starting a new“system” whereby banks start lending to each other once again.

Tony Diaz, executive vice president at CIT Aerospace, says: “Thegovernments around the world are pumping literally hundreds ofbillions of dollars into the system and it’s not coming out the otherside. It’s because the banks are hoarding that money. I don’t knowwhether its distrust or dishonesty, I think it’s just there’s a lack of liq-uidity and a real fear and concern over what’s the next issue.”


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CIT, of course, wishes to fill that gap; its application to become abank is explained by Diaz. “Our plan is to move to become a bankholding company. The reason for that is that the funding modelfor not just the aerospace business but all business – 75 to 80 percent through commercial paper – doesn’t work any more,” hesays. “We’re looking at more of a deposit-based funding model,not unlike what Morgan Stanley had done, Goldman Sachs andothers.”

ELFC’s O’Brien notes: “When we see a $100m or $150m trans-action it’s quite common for us to bid on it and then keep half andmove half into other ventures. Those ventures cannot get the lend-ing now – so it’s turned our strategy upside down. So the questionfor us is; do we grow our portfolio while the opportunity is there onsales or leasebacks when it’s hard to find purchasing sources?”O’Brien says of the increasing threat of lessee defaults: “We arevery worried about it, but we have been very fortunate with it sofar. The default rate for us has been relatively low: There aremaybe four or five accounts that we have issues with; there areonly one or two that are in a liquidation or bankruptcy typemode. That’s two out of 57 customers, so we’ve been very fortu-nate.” But, he says, “As we write more of this business, it is onlynatural that some of them will have credit problems.”AddsO’Brien: “What we’re finding now is that we’re getting fullreserves on deals – I think a lot of lessors will tell you ‘We willnever write them without reserves,’ but the fact is, they do …When you’re leasing an engine you’ve got an asset and a rentalstream. We look at the rental stream as the risk, not the asset. Wewon’t do a deal with you unless you do [give a reserve], becauseit’s just incremental exposure.”

O’Brien continues: “The sale and lease-back market is probablytriple or quadruple what it was a year ago. We’ll probably end updoing about 20 transactions this year. For us it’ll be over $300m,which is significant for an engine lessor... We’re typically doing$8m-$10m per engine.”

Bruno Castolla, senior vice president at Shannon Engine Supportoffers his perspective: “We support airlines all over the planet.There are a few operators with whom we would have difficultiesto enter into agreement with, generally because they would havefinancial or technical issues, but we would try to work aroundthis ...Our lessees need us more than ever during a downturn andwe should ...make sure that they survive and keep their opera-tions running. We need to understand what their problems areand that their business is sustainable. If that is the case, we do ourmaximum to work with them and restructure deals in a satisfac-tory way for both parties.”

O’Brien is less optimistic, believing that “a quarter or third of the[global] orderbook will go away. I think lessors and airlines haveover estimated. There was a frenzy of ‘Oh, I can’t get an orderposition because there was so much competition,’ but the pen-dulum has swung back the other way.”

While an increasing number of engines is coming into a dimin-ishing market, lessors will take a direct hit to their orderbooks.Some of course, will take a lighter hit than others, but all musttake on board the philosophies of damage limitation, stayingmindful of the many pitfalls surrounding them if they are to pro-tect themselves.





AIRLINE MERGERS AND ACQUISITIONS MUST, HOWEVER,receive approval from antitrust regulators before they areallowed to proceed. In most cases, airline mergers are reviewedby the European Commission. National competition authoritieswill be competent where the merger does not have a communitydimension, as was the case in the acquisition of GB Airways byeasyJet.

In cases where the merging parties are competitors, theEuropean Commission will only grant clearance and allow themerger to proceed in exchange for acceptable remedies.Remedies are usually required on routes wherethe transaction leads to monopoly or signifi-cantly reduces competition. Typically, this is thecase where the merged entity will have a high share of passen-gers transported or of slots available on these routes.Commitments normally take the form of slot releases. For exam-ple, Iberia had to release a certain amount of slots on identifiedroutes in order to acquire both Vueling and Clickair.

The aim in requiring such a commitment is mainly to facilitatethe entry of new competitors and to maintain competitive pres-sure on the newly merged, expanded airline. However, theEuropean Commission will carefully assess whether the remediesoffered are adequate to address the competition concerns iden-tified. The European Commission recently rejected commitmentsthat were proposed by Lufthansa in the course of its proposedacquisition of SN Brussels Airlines, on the ground that thesewere insufficient to alleviate competitive concerns.

The European airline industry is undergoing a new wave of consolidation, as is illustrated by recent trans-actions such as Iberia’s acquisition of Vueling and Clickair, as well as Lufthansa’s proposed acquisition ofSN Brussels Airlines.

In particular, the European Commission fears that the mergerwould lead to a monopoly situation on a number of routesbetween Brussels and Germany. The Commission has nowopened an in-depth investigation into the take-over and will onlygive the go-ahead if Lufthansa is able to come up with revisedcommitments. Observers will be watching developments in thiscase closely as this may set a precedent for how remedies will beassessed in the future.

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check_FPA:ATEM 5/12/08 08:29 Page 3



The European Commission has released a set of proposals aimed at reforming existing regulation onEuropean aviation liberalisation. Kay Vasey, a solicitor at law firm Field Fisher Waterhouse, assessesindustry reaction to the Commission’s new ideas.

THE CURRENT FRAMEWORK FOR AVIATION LIBERALISATION INthe EU was established by Regulations (EEC) No. 2407/92,2408/92 and 2409/92 – commonly referred to as the ‘ThirdPackage’. Since the introduction of the Third Package, air trans-port in the EU has experienced unprecedented levels of expan-sion and over the past decade, the market has been transformed.One or two of the inefficient national monopolies have beenswept away and the EU has seen the emergence of low-cost air-lines largely following the model developed over many years inthe US by Southwest Airlines.

The Third PackageThe Third Package contained three major legislative measures.First, it harmonised the requirements to be satisfied by any airlinewishing to obtain an operating licence in an EU member state.Second, from April 1997 airlines holding an EU operating licencewere able to operate freely anywhere within the EU. Finally, EUairlines were given freedom to set their own fares subject to thepower of Member States to regulate excessively high fares detri-mental to users and to halt any downward spiral that could jeop-ardise the financial balance of all carriers.

Why is reform needed?While it is true that the Third Package has been successful inmany respects in transforming the EU aviation industry, EU trans-port ministers argue that the industry still suffers from problemsstemming out of divergent application and interpretation of theprovisions of the package. Accordingly, the EuropeanCommission undertook a public consultation prior to preparingits proposal (EEC) 2006/0130 (COD) for further reform in whichthree main areas of concern were highlighted:

• Inconsistent application of rules leading to distortions of com-petition;

• Competition distortions affecting market efficiency due to theabsence of a level playing field; and

• Passengers suffering due to lack of price transparency or todiscriminatory practices on the basis of place of residence.

What reforms are being proposed?After extensive consultation with the industry, the EuropeanCommission published its proposals for further reforms, coveringa wide variety of areas including:

CONSOLIDATION FORBETTER REGULATION



1. Reinforcement of the requirements for the grant andrevocation of operating licences. The Commission’s proposals highlight that some Member Statesare less stringent than they should be when assessing the finan-cial health of airlines, and make a link between the financialhealth of an airline and its exposure to safety risks, arguing thatpoor or failing financial health of an airline not only poses athreat to customers’ money in the event of bankruptcy, but alsoto their safety. The proposed reforms require Member States toreinforce the supervision of operating licences and to suspendor revoke licences if the requirements of the applicable regula-tions are not, or cease to be, met. In addition, it is proposed thatpower is conferred on the Commission to revoke operatinglicences where a Member State fails to do so and that nationalaviation authorities shall be able to issue a ‘temporary licence’pending financial reorganisation of an airline. The Commissionalso outlines future plans for the European Aviation SafetyAgency to take on a role as a licensing body responsible for airoperators’ certificates and air crew licences.

2. Strengthening the requirements for leasing aircraft. The Commission notes that there are divergent applications ofrules and practice in relation to the leasing, particularly wet leas-ing, of aircraft between different Member States. Concern hasbeen expressed that safety assessments of aircraft that EU oper-ators are proposing to wet lease in from third (non-EU) countriesare not pursued with the same rigour in all Member States.Article 13 of the proposed reforms would impose upon nationalaviation authorities a much greater obligation to ensure that ECsafety requirements and standards are met in relation to anynon-EU wet-leased aircraft. It also places a six month limit onthe duration of a lease from third countries, which will only beallowed in exceptional circumstances and renewable only oncein a second non-consecutive period of up to six months.

3. Clarification of the rules surrounding public service obli-gations (PSOs). A PSO is a permitted and subsidised monopoly to run a particu-lar service for the benefit of the public. An example of such aroute would be services to the Scottish highlands and islands.Such routes are clearly important to local communities andwould be unlikely to be run in a completely free market. The pro-posed reforms seek to simplify rules surrounding PSOs and thusattract more tenders for such routes.

4. Removal of inconsistencies between the intra-EU avia-tion market and services to third countries. The Commission is also proposing that any remaining restric-tions existing in bilateral agreements between Member Statesbe lifted and that access by airlines of third countries to theintra-Community market should be managed in a coherentmanner through negotiations at Community level. What thismeans is that non-Community air carriers would not be permit-ted to exercise traffic rights, combine air services or enter intocodeshare arrangements in respect of intra-Community routesexcept where permission is granted by an agreement concludedby the Community with a third country.

5. Clarification of rules applicable to traffic distributionbetween airports. The proposals would require that traffic distribution rules inrespect of airports serving the same city should respect the prin-ciples of proportionality and transparency. This is intended toprevent discrimination between carriers in relation to access toairports.

6. Promotion of price transparency for passengers. An important element of the proposed reforms relates to airlinepricing transparency which has been a source of considerable fric-tion, particularly in the UK, for some time now. In order to removethe uncertainties that have permeated the market, and to avoidpotential distortions of competition, airlines should no longer beable to exclude taxes, charges or other fees from their advertisedfares. In other words, the advertised fares should be fully inclusive.In addition, the Commission has suggested proposals to eliminatepricing differentials dependent upon the customer, country of resi-dence or travel agent’s place of establishment

Airline viewThe International Air Carrier Association (IACA) members arestrongly opposed to the idea of a ‘temporary licence’, whichcould be given to airlines that are in financial difficulty. Theybelieve this would most likely compound the airline’s problems byhighlighting its difficulties with the consequent significant risk ofmajor loss of customer and investor/financier confidence.

The airlines are supportive of the proposals relating to safety,especially the recommendation that more stringent financialchecks should be applied to airlines when considering their oper-ating licence applications or renewals.

They are also largely in favour of ensuring licensing and safetystandards are standardised across the Member States. There isalso notable support for the idea of a single European licensingand safety body and the potential for EASA to take over this role. In relation to wet-leasing, the airlines emphasise the importance ofwet-leasing to their business. Again, they would like to see theinterpretation of wet-leasing rules standardised across the EU.Whilst they believe that the proposed six-month lease period is notunreasonable, and argue that the current guidelines (normally notmore than a traffic season) are sufficient, they feel that there shouldbe some flexibility in the rules for exceptional circumstances. Forexample, where the lease is to cover a replacement aircraft follow-ing a serious aircraft incident and it is likely that the recovery of theoriginal aircraft will take longer than six months.

Unsurprisingly, all airlines are strongly in favour of determining theirown fares and fees without outside interference, be it from nationalbodies or the Commission itself. British Airways has commented:

“Firstly, the marketplace is the best way to set fares, free fromgovernments, and secondly, if there is to be regulatory interven-tion on fares, it must be done on a European wide basis and notjust by a single member state. There is no need whatsoever forintervention when adequate competition exists as on routes fromLondon to Europe.”


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From the opposite end of the airline spectrum Ryanair has saidthat it, “is greatly concerned by the Commission’s comments onthe issue of reviewing air carrier’s calculating of their fares. Theemphasis appears to be on “abnormally low or non-existent(“free” tickets)”. The connotation is that there is somethingwrong with offering very low or “free” fares (i.e., all the passen-ger pays are the taxes). These fares are far from being non-exis-tent as consumers are well aware”.

Many of the air carriers have expressed concern about the risk ofdistortion of competition that could arise from excessive use ofPSOs. Several respondents would like PSOs to be restricted to theroutes that are absolutely vital for the regions served. In contrastto the majority of airlines, Ryanair was also critical of the conceptof PSOs, arguing they were often used by governments to givesubsidies to national airlines.

AirportsThe airports surveyed were particularly interested in the impactof the proposals regarding traffic distribution and the removal ofobstacles to bilateral agreements with third countries.

Some, such as Shannon Airport (and connected entities ShannonDevelopment and Shannon and District Chamber of Commerce),were concerned about the potential impact an ‘Open Skies’transatlantic flight policy would have on the region, and sug-gested that, “the impact that this would have on balancedregional development within Ireland would certainly lead toheavier concentration on traffic into Dublin and to the east coastat the expense of Shannon Airport and the West of Ireland”.

RegulatorsAmongst the regulators who responded to the consultation werethe Joint Aviation Authority (JAA) and the UK’s Civil AviationAuthority (CAA) who had differing reactions to the Commission’sproposals. The JAA felt that the tightening up of procedures regard-ing an airline’s financial standing would be a positive step to ensure

that safety standards are not compromised by failing financial condi-tions; contrastingly the CAA believed that instable financial standingautomatically equates to sub-standard safety provisions. The CAAalso saw the idea of a temporary license as irrelevant:

“From a safety regulation perspective, it is the CAA’s view that“tightening up” should not be necessary. In reality, if the requi-site safety standards are not being met, the National Authorityresponsible should take appropriate AOC action. Effective safetychecking should occur regardless of the conventional or tempo-rary nature of the licence.”

In addition, the CAA noted that such a licence could also bedamaging because it would deter investors from keeping fundsin the airline and lead to a loss in public confidence, thus speed-ing up an airline’s demise.

However, both the CAA and JAA agreed that the ability for EUairlines to wet-lease aircraft is an important ingredient in the suc-cessful operation of an airline. They support proposals that wouldmake the process easier, but the CAA in particular was not infavour of wet leases for periods longer than six months becauseof safety concerns (arising from the confusion of who is respon-sible for maintenance: regulators in the country of registration orcountry of operation).

ConclusionsDespite some misgivings, the second reading of the proposedreforms was completed on 9 July, 2008, and the Commission’sfinal decision and signature is expected in the autumn. It wasalmost inevitable that the proposed reforms would not meet withuniversal approval from all elements of the European aviationindustry. However, they will be a useful step forward in bringing agreater degree of clarity and certainty to important areas of avia-tion regulation and will certainly help to level the playing fieldacross the EU for airlines and customers alike. Whilst the intentionof the Commission’s proposed reforms has a sound basis, only timewill tell whether the new measures will achieve their goal.


check_FPA:AFNM57 15/9/08 11:29 Page 3



THE DEEPENING CRISIS IN THE AVIATION INDUSTRY IS BEINGheralded by many as the most severe since the age of mass airtransport began in the 1970s. IATA has forecast that the globalairline industry will experience $5.2bn in losses this year, andcontinue to operate at a loss of $4.1bn in 2009. A string of air-line failures in the usually stronger summer months has sig-nalled that the winter months look likely to see more carriers goout of business. Although oil prices have fallen back from thehighs of more than $140 per barrel during the summer months,the airline industry is still in the eye of the ‘perfect storm’, hav-ing to endure much higher than budgeted fuel costs whilstdemand falls. First, the credit crunch applies its tourniquet andnow the threatened global recession begins to bite. InSeptember, CEO of British Airways, Willie Walsh, described agloomy outlook:

“We are in the worst trading environment the industry has everfaced and must take action to offset the combined effects of thecontinuing global economic downturn, weakened consumerconfidence and high fuel prices… We have already seen 30 or soairlines go bust this year and it would be fair to expect a similarnumber of casualties worldwide over the next three to fourmonths.”

In this environment, airlines will look at many ways of trying toensure their survival, varying from reducing costs whilst trying tomaintain revenue, market stimulation by means of special low-fare offerings – a particular favourite of the low-cost carriers – tothe more radical solution of consolidation to achieve therequired cost savings and synergies perceived to be needed forsurvival. The pressures upon airlines in such desperate circum-stances also foster collaboration which can be lawful, but whichcan also lead to unlawful collusion, with extremely costly conse-quences.

Collaboration and consolidationIn September the director general of IATA, Giovanni Bisignani,said that “consolidation is a must, and probably this emergencysituation is a good opportunity for governments to understandthat we need the freedom to run our business as a normal busi-ness. Governments must understand that the flags on the tails ofthe planes are killing an industry.” IATA is calling for a further

relaxation of foreign ownership rules and an increase in the num-ber of open skies agreements. The extent of recent collaborations and consolidations in theairline sector is highlighted by the flow charts accompanyingthis article, which identify key regulatory interventions by theEU/UK and US authorities since 2000. These largely reflectthe development by groups of traditional legacy carriers ofthree ‘super alliances’: Star Alliance; oneworld; and SkyTeam.These alliances are intended to enhance the ability of mem-bers to offer integrated services across the globe, while at thesame time reducing their costs through joint purchasing andmarketing. Low-cost carriers do not participate in thesealliances because their business model is a simple point-to-point one that does not need the benefits the alliances offer.

The SkyTeam grouping is led by Air France/KLM and DeltaAirlines. The merger of the latter, announced earlier this year,with Northwest (also an existing member of SkyTeam) has beencleared in the EU because it will “not significantly impede effec-tive competition in the European Economic Area or any substan-tial part of it”. The merger will create the world’s largest airline,with the overlaps in Delta and Northwest’s activities occurringmainly in the US. Nonetheless, the current economic climate islikely to impact upon anti-trust enforcement and the US author-ities will probably grant anti-trust immunity rather than blockingthe deal and facing the risk of either Delta, Northwest, or both,failing.

Air France and KLM, also previously members of SkyTeam,merged in 2005. Following that merger, Christine Ourmiere, UKManager of Air France-KLM, said: “Air France and KLM are con-solidating their relationship with Northwest and Delta, moving toa four-way joint venture, so consolidation is not only an interest-ing story, it’s a reality in the world in order to reduce cost, bestronger, and bring more synergies to optimise your margin.” Sheadded, “You take a risk in being the first to move in this directionbut we have seen the industry moving in this direction for the lastfour years.”

Within the oneworld alliance, it is proposed that members BritishAirways and Iberia merge. The consideration of that proposedmerger by EC and US competition and anti-trust authorities is

COMPETITION, CARTELSAND CONSOLIDATION

John Cassels and Kay Vasey of Field Fisher Waterhouse take a whistlestop tour of anti-trust rulings in aviation.



also likely to be influenced by the current economic circum-stances. The need for consolidation in Europe amongst its legacyairlines has been recognised for some time now. Quite apartfrom the Air France/KLM merger, Lufthansa has in the fairlyrecent past acquired control of Swiss and is about to acquire con-trol of Brussels Airlines, both transactions that either have or areexpected to receive the requisite regulatory approvals. And eventoday there is speculation about either Lufthansa, Air France/KLMor even British Airways taking a stake in a “rescue” of the woe-ful Alitalia.

In addition to the proposed British Airways/Iberia merger,those two airlines together with their oneworld partner,American Airlines, have applied for anti-trust immu-nity/approval for a range of proposed joint activities of thekind approved for Air France/KLM and Delta/Northwest withSkyTeam, and Lufthansa/United and others within StarAlliance. The prospects for BA/American/Iberia of obtainingclearance and immunity for their proposals does seem to beappreciably better now than on the two previous occasionswhen BA/American sought immunity. That is a consequence ofthe current economic situation as well as the greater freedomscreated by the EU/US Open Skies Agreement of 30 March,2008. However, there will still be stout and vocal oppositionfrom competitors. For example, Delta has declared itself on aprospective waiting list for London Heathrow slots in the eventof approval of the British Airways-Iberia-American Airlinesdeal. Richard Anderson, CEO, noted that Delta is opposed tothe proposal unless regulators require the re-distribution of asignificant number of slots to other competitors at one of theworld’s busiest airports. Similarly, Sir Richard Branson, chair-man of Virgin Atlantic Airways, has written to the two US pres-idential candidates to warn that the proposed alliance would“damage competition on trans-Atlantic routes and result insignificant job losses”, adding that it was “very dangerous” tobelieve that consolidation was the best response in the currentweak economic climate. He was, however, later reported tohave stated that he sees “considerable logic” in Virgin Atlanticmerging with bmi, to create a “formidable competitor” toBritish Airways, although he confirmed there had not been anyformal merger discussions with bmi.

Whilst anti-trust authorities on both sides of the Atlantic assesstransactions with reference to their competitive impact – and thecompetitive impact of airline mergers is assessed by reference tothe impact on specific routes – the wider economic difficultieswithin which the SkyTeam and oneworld deals are being pursuedis important and relevant context. Consolidations in the bankingsector that would only a few months ago have been unthinkableare clear testament to the importance and relevance of economiccontext and political will in merger control.

Why then did the Commission block Ryanair’s proposed acquisi-tion of Aer Lingus? That deal would have brought together twoairlines that currently compete vigorously on routes to and fromIreland and which constitute the main competitive constraint oneach other on those routes. The merged entity would haveaccounted for 80 per cent of all intra-European traffic to andfrom Dublin; it would have a monopoly on 22 of the 35 routeson which Aer Lingus and Ryanair currently compete; and itwould have market share of over 60 per cent on remainingroutes to and from Ireland. Remedies offered by Ryanair wereinsufficient to alleviate the Commission’s concerns. Despite thefailure of the takeover, Ryanair remains bullish about itsprospects. Chief financial officer Howard Millar stated recently:“With the situation in Italy of Air One and Alitalia, and lookingat the series of mergers going on right across Europe, we don’t

see why Ryanair/Aer Lingus can’t go ahead.” For now, the low-cost airline is adopting a wait-and-see approach “because thereis a lot of consolidation coming and that may force the EU tochange its position”. Ryanair’s CEO, Michael O’Leary, declaredin July that the airline currently has no need to merge withanother carrier, boldly adding that it would be one of only fivemain airlines left in Europe following the expected industry con-solidation.

Although Ryanair’s expectation is that “the EuropeanCommission will rubber-stamp approval of these mergers”,Neelie Kroes, the EU Competition Commissioner, has said: “At atime of consolidation in the European airline sector, theCommission must make sure that consumers have a competitivechoice of airline services.”

The European Commission also has concerns about the pro-posed takeover of Martinair by KLM and has opened an in-depth investigation into the deal. The Commission has until 22January, 2009, to take a final decision on whether allowing theconsolidation of the two main scheduled airlines operating pas-senger services to various long-haul destinations out ofAmsterdam would significantly impede effective competition inthe EU. Preliminary market investigations have shown that therewould be a substantial reduction in competition on thoseroutes.

Some airline operators have indicated in the current market con-ditions that they are not so keen on merging. Only one monthafter commencing merger talks in August, Thomas Cook pulledout of discussions with TUI Travel and Lufthansa about a mergerof its charter airline Condor with TUIfly and Germanwings, citinga lack of “financial upside” for the merged businesses given themarket conditions and difficult considerations including owner-ship structure, branding and conditions for TUIfly pilots. ThomasCook remains confident that Condor will continue to flourish asa standalone airline whilst TUI Travel has said it is continuing toexplore alternatives for its German airline operation and willupdate the market in due course.

CartelsCollaborations have also brought much unwelcome attention tosome airlines where such collaboration is found to havebreached prohibitions on price fixing arrangements. BritishAirways and Virgin have been embroiled in ongoing regulatoryinvestigations on both sides of the Atlantic into the fixing of fuelsurcharges and air cargo price-fixing arrangements. Such investi-gations can give rise to very significant financial liabilities: deal-ing with the investigations is extremely resource intensive andprivate actions for damages will almost inevitably follow both inthe US and EU where unlawful collusion has been found oradmitted.

The futureFurther significant consolidation amongst airlines is inevitable.The shape of that consolidation will be determined in large partby the European Commission and the US Department ofTransportation. The current economic crisis will most likelyforce a radical restructure, which will hopefully result in astronger and more resilient global airline industry. But, opera-tors must ensure that their collaborations do not fall foul ofrules against illicit cartels. Friendships and relationships acrossthe industry require clear legal boundaries within which toflourish and should not be approached lightly, especially intimes of crisis.




Key EU/UK Regulatory Interventions since 2000Parties / Deal Outcome

bmi—Lufthansa—SAS Notified 2000 Cleared until 2006 on condition of: surrender / release of slots and

Joint venture covering flights to / Cleared 2001 ground facilities at Frankfurt. from London Heathrow / Stansted andManchester from EU destinations.

Air France—Alitalia Notified 2001 Cleared until 2007 on condition of:surrender / release of 42 pairs of slots

Airlines take 2 per cent stakes in each other Cleared 2004 on certain routes; requirements and code share on routes between relating to FFP / interlining with newFrance and Italy. entrants; elimination of exclusivity

provision restricting parties from entering into arrangements with other airlines.

British Airways—American Airlines Notified 2001 Conditional upon US—UK open skies (oneworld) agreement.

Investigation closedCodeshare, schedule and fair 2002 after US DOTs dismissal co-ordination on 9 routes between US and London.

bmi—United Airlines Notified 2000 Cleared until 2010 subject to lifting of(Star Alliance) restriction preventing bmi from flying

to US from London Heathrow.Alliance expansion agreement: route and schedule Cleared 2001co-ordination; integrated marketing, advertising (by OFT)and distribution network; co-branding; increased codesharing and co-ordinated pricing; revenue sharing; integrated cargo services; sharing of airport facilities.

British Airways—Iberia—GB Airways Notified 2002 Cleared until 2009 on condition of:surrender / release of slots and ground

Co-ordination and integration of commercial Cleared 2003 facilities on routes between London and and marketing strategies, distribution methods Spain; restrictions on increasing and practices worldwide including codesharing, frequencies /capacity / slots on certain price co-ordination, common network routes; requirements relating to FFP planning, and revenue and profit sharing. / interlining with new entrants.

British Airways—SN Brussels Airlines Notified 2002 Cleared until 2008 on condition ofCo-operation on all routes, particularly between surrender of slots and ground facilities London and Brussels on pricing, scheduling and capacity. Cleared 2003 at Brussels National Airport for a new

entrant on Brussels—Manchester route.

Air France—KLM Notified 2003 Cleared subject to conditions:

Concentration Cleared 2004 surrender of slots at Amsterdam or Paris to allow new entry on certain routes.

Lufthansa—Swissair Notified 2005 Cleared subject to conditions:

Concentration Cleared 2005 surrender of slots at numerous Swiss, German and Scandinavian airports to allow new entry on certain routes.

Ryanair—Aer Lingus Notified 2006 Transaction would have significantly impeded effective competition in common

Concentration Blocked 2007 market as a result of the creation of adominant position for Ryanair and AerLingus on 35 routes from and to Dublin, Shannon and Cork.

Delta Airlines—Northwest Notified 2008

Concentration Cleared 2008

British Airways—Iberia—American Airlines EU investigation(oneworld) launched August 2008

Co-ordinate prices, capacity, schedules and routes between EU and US, Mexico and Canada.



Key US Regulatory Interventions since 2000 (involving EU airlines)Parties / Deal Outcome

United Airlines—Austrian Airlines—Lauda Air Submission 2000 Cleared subject to conditions: prior approval—Lufthansa required to operate under common brand(Star Alliance) Immunity granted 2001 subsequent agreements to be filed with DoT; Codeshare on international services. must withdraw from IATA coordination

on specific routes; reporting requirements.

British Airways—American Airlines Submission 2001 Conditional upon US—UK open skies(oneworld) agreement.Codeshare, schedule and fair coordination on 9 Parties’ notice to routes between US and London. dismiss granted.

Delta Airlines—Air France—Alitalia— Submission 2001 Cleared for initial 5 years subject toCzech Air (SkyTeam) conditions: prior approval required toCo-ordination of international services. Immunity granted 2002 operate under common brand; subsequent

agreements to be filed with DoT; must withdraw from IATA coordination on specific routes; exclusion of pricing, inventory, yield management and pooling of revenues on particular routes; exclusion of CRS activities as owners / marketers; reporting requirement.

United Airlines—Austrian Airlines—bmi— Submission 2001 Cleared for initial 5 years subject to conditions:Lauda Air—Lufthansa—SAS prior approval required to operate under(Star Alliance) Immunity granted 2002 common brand; subsequent agreements Co-ordination of international services. to be filed with DoT; must withdraw from

IATA coordination on certain routes; participation of bmi subject to US-UK open skies agreement; prices, inventory and yield management excluded.

Delta Airlines—Air France—Alitalia—Czech Air— Submission 2002 Cleared until 2007 subject to same conditionsKorean Air (SkyTeam) as Delta Airlines—Air France—Alitalia—Codesharing and frequent flyer reciprocity on all Immunity granted 2002 Czech Air deal.international services

American Airlines—Finnair Submission 2002 Cleared for initial 5 year period subjectto conditions: prior approval required to

Codeshare, joint scheduling and pricing on all Immunity granted 2002 operate under common brand; subsequent international services. agreements to be filed and must withdraw

from IATA tariff co-ordination on certain routes.

American Airlines—Swissair Submission 2002 Cleared for 5 year period subject to Codeshare, joint schedules, fares, joint marketing for all conditions but partnership ended in 2005international services. Immunity granted 2002 when Lufthansa acquired Swissair.

American Airlines—SN Brussels Airlines Submission 2003 Cleared for 5 year subject to conditions: prior approval if operating under common

Codeshare, co-ordinate sales, marketing, prices, Immunity granted 2004 brand; file any subsequent agreements withyield management, routes for all international services. DoT; withdrawal from IATA tariff co-ordination

on certain routes; reporting requirements.

United Airlines—Austrian—bmi—LOT Polish Air—Lufthansa— Submission 2004 Cleared for 5 year subject to conditions: SAS—Swissair—TAP prior approval if operating under common(Star Alliance) Immunity granted 2007 brand; file any subsequent agreements withLOT, TAP and Swissair joining existing Alliance. DoT; withdrawal from IATA tariff co-ordination

on certain routes; reporting requirements; United Airlines—Air Canada participation of bmi subject to US-UK open

skies agreement.

Delta Airlines—Northwest—Air France—Alitalia—Czech Air Submission 2007 Cleared for 5 year subject to conditions: —KLM (SkyTeam) prior approval if operating under commonCo-ordinate on pricing, scheduling, distribution and information Immunity granted 2008 brand; file any subsequent agreements with systems, pool costs and revenues on transatlantic routes. DoT; withdrawal from IATA tariff co-ordination

on certain routes; reporting requirements.

Delta Airlines—Northwest Submission 2008Merger

British Airways—Iberia—American Airlines (oneworld) Submission 2008Co-ordinate prices, capacity, schedules and routes between EU and US, Mexico and Canada.




SINCE CFM INTERNATIONAL CAME INTO BEING NEARLY 35 YEARS AGO, cus-tomers from every corner of the globe have taken delivery ofnearly 20,000 CFM56 engines for installation on mainly Boeingand Airbus narrowbodied airliners. This incredible statisticemphasises the fact that every three seconds a CFM-poweredaircraft takes off on yet another flight, somewhere around theworld.

Airline investors and financiers – not to mention the banks andmore recently a wider variety of peripheral financial institutions– love the fact that CFM engines are essentially simple to ownand operate with an enviable despatch reliability rating of99.97% and an unequalled ‘time on wing’ before maintenanceis required. Indeed, something like 80 per cent of the -5B and -7B fleets still have to make their first shop visit.

Cost effective; rugged; reliable; environmentally friendly; con-stantly improved; fuel efficient; popular with pilots and trav-ellers…these are all descriptors that are music to the ears of themen and women wielding an airline’s cheque book at the timeof purchase. The residual value is an important element of an engine’s over-all lifecycle. This is one major reason why CFM launched the

TRUEngine programme in mid-2008 to help the industry moreaccurately to appraise used CFM56 engines and to enhance theresale value of these assets. As a result, the programme hasbeen very well received by airlines, lessors, and appraisersworldwide.

To date, more than 2,250 engines in service with Aer Lingus,AirAsia, Continental Airlines, KLM Royal Dutch Airlines,Malaysia Airlines, and Southwest Airlines, have already beengranted TRUEngine status. In addition, several more extensivefleets of engines are currently being evaluated, and morenames will be added to this list in the coming months.

"The industry asked CFM for better ways to determine thevalue of engines as they are redistributed in aircraft fleets," saysEric Bachelet, president and CEO of CFM International. "TheTRUEngine programme allows the industry to evaluate usedCFM56 engines more easily by serial number, based on datacurrently not widely accessible."

The TRUEngine status is available for all CFM56 engines meetingthe criteria. Once an engine is qualified, the serial number ofthat engine is entered into a searchable Web-based database.

INVESTING IN CFM ENGINES

Since CFM International came into being nearly 35 years ago, customers from every corner of the globe havetaken delivery of nearly 20,000 CFM56 engines for installation on mainly Boeing and Airbus narrowbodied airlin-ers. This incredible statistic emphasises the fact that every three seconds a CFM-powered aircraft takes off onyet another flight, somewhere around the world.



To qualify for TRUEngine status, the engine configuration,engine overhaul practices, spare parts and repairs used to serv-ice the engine must be consistent with CFM requirements forthat engine model. In addition, all maintenance must complywith CFM-issued engine manuals and other maintenance rec-ommendations. The qualification data is obtained through acombination of fleet operational and maintenance records.

Commercial jet engines are typically in service for more than 25years and change ownership at least once in their operationallife. An individual engine's configuration, material content,maintenance history - and supportability - impact overall valueas it changes ownership.

The TRUEngine designation also facilitates CFM's ability to pro-vide technical support. Jet engines contain multiple, complexsystems whose interactions must be carefully controlled. CFM'sengine support is built on technical expertise for genuineCFM56 parts and configurations, as well as data gained fromthe vast operational history of the global CFM56 engine popu-lation.

So TRUEngine status means higher residual values, enhancedreliability and the peace of mind brought by knowing that onlyoriginal manufacturer specified parts have been used duringon-wing or routine shop maintenance.

Taking a different approachAlthough CFM doesn’t disclose any figures other than the pub-lished and publicised ‘list price’, discounts are purely on thebasis of order quantity, rather than being a huge incentive tobuy - often followed by exorbitant maintenance and spare partspackages.

At a recent conference in New York, a speaker from CFMexplained that rather than offer huge incentive discounts, CFM

and its 50/50 parent companies (GE and Snecma) would ratherinvest in developing even better products and in new, cutting-edge technology like TAPS (twin-annular pre-swirl) combustors,3-D aerodynamics in the compressor and turbine modules, andadvanced 3-D woven RTM (resin transfer moulding) fan bladetechnology. All these will feature on CFM’s all-new LEAP-Xengine that it slated for a full engine demo test in 2012 andpotential certification by 2016.

The CFM56 engine in all its forms is particularly strong in theUSA, Europe, CIS and Asia and this results in excellent repre-sentation across the segmentation of the engine. And demandremains strong even in this period of ‘credit crunch’ and globalfinancial meltdown.

Stéphane Garson, CFM’s GM product marketing in Europe, saysthat the vast majority of current orders have held strongalthough he concedes that the next batch of orders may bemore difficult to establish. “Most of the engines we make aredelivered directly to the airframers,” he explains, “so we maywell see some effect due to the international downturn in over-all traffic. It’s possible that deliveries and also the aftermarketcould suffer – but already we’re starting to see some clues thatthe downturn could have bottomed-out. “CFM has a different business model. We look at a lifecyclecost of our engines over 15 to 20 years and invest both in ourfuture and the future profitability of our customers. Our ‘AAA’rating by the International Bureau of Aviation is important tous, too – and our customers tell us that it’s important to themas well.”

With deliveries solid for 2009 – albeit with some questionmarks still looming over 2010 – the future for CFMInternational and its engine is far from standing still. GE andSnecma have invested heavily over the years in developingtechnology that has helped CFM’s customers to buy and fly the




most reliable and cost-effective engines in the history of avia-tion.

New engines, new upgradesWith oil prices in a near constant state of flux, jet fuel remainsone of the largest contributors to airline operating costs. CFM’ssizeable investment has provided technology that is helping tolessen that burden.

Since 1996 alone, the company has introduced three newengine models (CFM56-5C/P, CFM56-5B Tech Insertion andCFM56-7B Tech Insertion).

On average, these engines have provided a one per centimprovement in fuel consumption, as well as improving aircraftNOx and carbon emissions, while improving time on wing.

Tech Insertion, which is now the production configuration forCFM56-7B and CFM56-5B engines, had a highly successfulentry into service in 2007 on both the 737 and A320 families.

To date, approximately 2,300 CFM56-5B and –7B Tech Insertionengines have been delivered to nearly 200 customers aroundthe globe. Through May 2009, this fleet has logged a com-bined total of more than six million flight hours and 3.5 millionflight cycles without a single engine-related event.

Over the engine's life cycle, CFM56 Tech Insertion could provideoperators up to one per cent better specific fuel consumption,which translates to better fuel burn and with longer time onwing through an equivalent 15 - 20° C additional exhaust gastemperature margin; and between 5 and 15 per cent lowermaintenance costs (depending on the thrust rating) throughenhanced durability.

The engine also meets the new International Civil AviationOrganisation (ICAO) Committee of Aviation EnvironmentalProtection standards (CAEP /6) that took effect in early 2008.

These benefits are achieved through improvements to the high-pressure compressor, the combustor, and the high- and low-pressure turbines. At the same time as CFM was developing new engine lines, thecompany was also introducing new technology upgrade pro-grammes (CFM56-3 Advanced Upgrade; CFM56-5C/P; CFM56-5B/-7B Tech Insertion).

Again, these programmes have provided an average of a oneper cent improvement in fuel consumption.

To date, more than 25 per cent of the CFM56-3 fleet has incor-porated the Advanced Upgrade. For 20-aircraft fleet, thispackage can save operators more than 700,000 gallons of fueland nearly 7,000 metric tons of carbon emissions annually.

CFM completed certification of the advanced CFM56 TechInsertion compressor upgrade kit, technology that will also pro-vide operators of mature CFM56-7B and CFM56-5B engineswith up to one per cent lower fuel consumption along withlower maintenance costs.

For a 20-aircraft fleet, Tech Insertion could save as much as275,000 gallons of fuel per year. This lower fuel consumptionwould also reduce carbon emissions by 2,600 metric tons peryear.

This technology also provides longer time on wing and lowermaintenance costs while meeting the new International CivilAviation Organisation (ICAO) Committee of AviationEnvironmental Protection standards.



In addition to the compressor kit, CFM also offers a full TechInsertion core upgrade, as well as high- and low-pressure tur-bine hardware, for the more than 7,250 CFM56-5B andCFM56-7B engines that were delivered prior to the productionshift in 2007. The emissions benefit can only be realised byincorporating the full Tech Insertion core upgrade (compressor,combustor, turbine).

The new hardware is installed during a regular shop visit. High-pressure turbine hardware has been available since July 2007and incorporation has grown steadily. In 2008, approximately80 per cent of the spare parts orders for CFM56-5B & -7Bengines were the Tech Insertion hardware.

By refitting just 20 aircraft with Tech Insertion engines, airlineshave been able to budget for savings of around $786,000 inannual fuel costs (based on jet fuel at $4 a gallon) compared tothe base CFM56-5B or -7B models.As well as this huge benefit, CFM56 Tech Insertion engines arereducing customers’ maintenance costs by around 12 per centthanks to its longer-life components and extended time on-wing.

Indeed, if CFM had never produced its -7B Tech Insertionengine, airlines flying 737s would have consumed an extra1.8bn gallons of fuel and released around 17m more tons ofCO2 into the atmosphere at an additional cost of more than$4bn! A sobering thought…

Most recently, in April 2009, CFM launched the new CFM56-7BE engine enhancement programme, scheduled to enter air-line service in mid-2011 to coincide with BoeingNext-Generation 737 airframe improvements.The CFM56-7BE-powered Next-Generation 737 enhanced air-plane/engine combination will provide a two per cent improve-

ment in fuel consumption, which, in turn, equates to a two percent reduction in carbon emissions. Additionally, the enhanced-7B will provide up to four per cent lower maintenance costs,depending on the thrust rating.

Again, CFM is using advanced computer codes and three-dimensional design techniques to improve airfoils in the high-and low-pressure turbines to improve engine performance. Inaddition, CFM is improving engine cooling techniques andreducing parts count to achieve lower maintenance costs.

The first engine is schedule to begin ground testing inSeptember of this year. In early 2010, the –7BE configurationwill begin flight tests at GE Aviation facilities in Victorville,California, paving the way for engine certification in the thirdquarter. Flight tests on the Next-Generation 737 are plannedfor later in 2010, followed by aircraft certification and entryinto service in mid-2011

For a 20-aircraft fleet, Tech Insertion could save asmuch as 275,000 gallons of fuel per year. This lowerfuel consumption would also reduce carbon emissionsby 2,600 metric tons per year.

“

”


AF59DPScheck:dps AF59 8/6/09 08:19 Page 2

NEVER MIND 20:20 OUR VISION GOES BEYOND 20:40.

A visionary partnership was formed in the 1970’s. GE and Snecma created CFM International*. With eyes clearly focused on tomorrow, that highly successful partnership has now been extended through 2040. We look forward to the future. To setting industry-leading reductions in fuel burn and emissions. To delivering the next-generation engine for narrow-body aircraft. Be far-sighted. Visit www.cfm56.com/agreement now.

*CFM, CFM56 and the CFM logo are all trademarks of CFM International, a 50/50 joint company of Snecma and General Electric Co.

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AF59DPScheck:dps AF59 8/6/09 08:19 Page 3



SILVER LINING

REELING LIKE A PUNCH-DRUNK BOXER FROM A ONE-TWO-THREEcombination of soaring fuel prices, the onset of the deepestworld recession since the 1930s, and then a precipitous drop inthe price of oil that mocked their fuel hedges, many of theworld’s leading airlines were as pleased to see the back of 2008as a losing fighter would be to leave the ring after being knockedout in a prize bout.

But while the world’s economic woes only deepened during thefirst quarter of 2009, making the chances of a quick comebackless likely for most airlines, the fundamental supply-and-demandrelationship between global economic performance and the priceof crude oil should give hope in what otherwise is set to be a badyear for the air transport industry.

Jet fuel prices are volatile, depending in any given market on day-to-day factors such as climatic temperatures, natural disasters,accidents affecting refineries and pipelines, the short-term pro-portions of refinery capacity allocated to different distillate fuelsand – most important of all – the global political situation as itaffects major oil-producing countries. However, analysts’ fore-casts for crude oil prices throughout 2009 are fairly tightlygrouped into a range of $40 to $60 per barrel, according toVaughn Cordle, CEO of Virginia-based consulting firmAirlineForecasts.

Forecast range“We cover a lot of [forecasting] organisations, around 70,” saysCordle. “What’s reasonable is a range of $40 running up tomaybe $60 as we see more fiscal stimulus [in the USA], averag-ing out to maybe $50 this year and $60 next year.” Meanwhile,he says, the “crack spread” for jet fuel is likely to fall as much as25 per cent from its unprecedented 2008 peak of $24-$25 to aslow as $18.

The crack spread is the additional price that oil companies chargeto refine jet fuel from crude oil. From day to day, and location tolocation, it largely depends on how much of a refinery “run” isdedicated to jet-fuel production rather than to other distillate

fuels competing for the portion of the refinery’s fractionatingcapacity not given over to gasoline. Other fuels such as heatingoil and diesel compete with jet fuel for fractionating capacity andusually they are demanded in much greater quantities than is jet.

John Heimlich, chief economist for the Air Transport Associationof America, is largely in accord with Cordle’s view. “I think whatwe saw last year was a tremendous amount of volatility withregard to the fuel-price side” of the airline economic picture, saysHeimlich, who held off throughout the first quarter from makinghis usual annual economic forecast for the US airline industrybecause of the huge uncertainties now dominating the globaleconomy. “It now looks like there is a reasonable amount of sta-bility with regard to price; the volatility has shifted to demand,”he says, with every week bringing a new round of bad economicnews from all over the world.

Softening demandThe softening industrial demand for oil in the US and othereconomies should bolster analysts’ forecasts that oil should stayrelatively inexpensive this year. In January, Deutsche Bank’s chiefenergy economist Adam Sieminski reduced his forecast for theaverage 2009 price for West Texas Intermediate (WTI) crude by$2.50 to $45. Sieminski forecast an average price per barrel of$45 in the first quarter of the year, $50 in the second quarter,$45 in the third quarter and $40 in the last three months of theyear. “I think in part the US, especially at Cushing (a big USpipeline hub), is awash in inventory,” says Heimlich.

In Sieminski’s opinion, however, prices will strengthen going for-ward. Looking ahead to 2010, Sieminski forecast an averageannual WTI price of $55 per barrel; and pushed his forecast aver-age price up to $80 for 2011.

How does this outlook square with other informed views? Quitewell, it seems. By mid-February, Stephen Depow, an investmentadviser specialising in fuel contracts for Wellington West Capitalin Fredericton, New Brunswick, felt the precipitous fall that hadseen crude oil prices decline from a peak of $147 per barrel in

Caught out badly on their fuel-price hedging positions by a 75 per cent-plus fall in oil prices in less than sixmonths as the world recession hit, many of the world’s major airlines posted steep losses for the last threemonths of 2008. As global economic clouds continue to darken in 2009, however, the one silver lining for air-lines is that fuel prices should remain far below their mid-2008 peak. Chris Kjelgaard reports.



mid-2008 to just $35 in less than six months was reaching a floor.Prices should start to climb as excess inventories at oil supplyhubs such as Cushing, Oklahoma (a major settlement point forWTI on the New York Mercantile Exchange), gradually stop build-ing and start being drawn instead, says Depow.

Oil prices bottoming out“There are lots of little things in trading that can change thingson any one day, but in general the market appears to be forminga bottom,” Depow told Airline Fleet Management on February20. The crude-oil production cuts announced by the members ofOPEC (the Organisation of Petroleum-Exporting Countries) “areworking their way through”; and, meanwhile, “a lot of [oil-extraction] projects are being held back” because recent low oilprices have not made it worthwhile for the developers to sanc-tion the investment required.

“Last week there was a slight draw for the first time [in months]and once we get a few weeks of inventories not building, eventhough there is still an excess of oil on the market, at least thingswill come under control,” Depow stated. “From there, the cutsshould have worked their way through by summer and in generalthere should be higher demand for the whole spectrum of distil-lates – except heating oil. In the second half and into 2010,because of the low price, demand should start to make a come-back.”

Meanwhile, says Depow, if the oil price starts looking like it hasbottomed out and is on its way up, “It is likely that fund flowswill increase towards energies” trading after having moved heav-ily away from oil into gold in late 2008. A return into oil “empha-sises the move” upward, he says.

So what does this mean for the price of jet fuel? Recall that theprice of crude oil is only one of the two main components of thedistillate’s price: the crack spread is also very important. A thirdfactor must also be taken into account: the taxes that state andnational governments levy on fuel purchases.

Crack spreads and jet fuel pricesWhile in late January jet-fuel crack spreads in the USA “were stillbouncing up and down in the low 20s, consistent with 2008, intheory they should soften this year as more and more refinerycapacity comes online outside the US,” says Heimlich.

“There will be pressure for US crack spreads as refiners continueto respond to weak gasoline margins, which will cut refineryruns,” he adds. “By default this reduces everything else as wellas gasoline. I would think [2009 crack spreads] will end up in thelow teens rather than the low 20s. That’s still three to four timesmore than the historical average of $5, and jet fuel is still moreexpensive than gas and diesel. Jet fuel is the most expensivetransportation fuel.”

Add the taxes that airlines pay on every barrel of fuel purchasedto the crack spread and the basic price of crude oil, and the per-barrel price paid in 2009 by US (and other international) airlinesshould largely be within a range of $60 to $85 – for the US air-lines, “probably a 62 to 64 per cent reduction in the jet fuel cost”compared with 2008, says Cordle. This assumes there is no majorinternational crisis, and on a regional scale does not take intoaccount the effects of potential supply disruptions such as arefinery fire.

Owen Geach, commercial director of Surrey-based aviation con-

sulting firm IBA Group, states: “I can’t see in the current climatethat governments are going to be keen to see oil prices increase.I think there will be governmental pressure on OPEC to keepprices down.” Even at today’s low oil prices though “a numberof airlines are trying to keep their heads above water”.

Fuel-price factors internationallyInternationally, other factors will affect the basic prices that air-lines in different areas of the world pay for their fuel in 2009. Animportant factor for non-US airlines is foreign exchange rates.Since oil is priced in US dollars, the recent strengthening of thedollar against various other major currencies has helped correct acompetitive disadvantage under which the US airlines havelaboured for several years.

“It doesn’t help our bills per se – there’s no change in the cost offuel,” says Heimlich. “It just reduces our competitive disadvantageregarding Asian and Latin American carriers. What changes istheir cost of fuel. The competitive advantage, which used to be 50to 60 per cent at times last year and could be $50 a barrel, hasabated greatly – though there is obviously still a gap.”

For US airlines, he says: “The hope is that we can increase our non-dollar-denominated revenues, where we would have an advan-tage, repatriate in dollars and this then translates into an effectivefare increase without having to do a fare increase. But it’s a toughenvironment in which to increase our non-US point of sale.”

Another factor is that WTI is only one of two major crude-oilbenchmark price measures, the other being Brent. Recently sup-ply factors saw the prices of Brent and WTI move in oppositedirections – while the price of WTI was trending down to what hasappeared to be a bottoming, the price of Brent was moving up.

The longer termHowever, this is not important in the longer term, says aviationeconomist Adam Pilarski, senior vice president of Virginia-basedconsulting firm Avitas. “Oil prices are international in dollars, sosome people benefit from a cheaper dollar – but, overall, oilprices have very high volatilities,” he says. “So unless one [pricebenchmark] goes to $25 and the other to $150, it’s unimportant.In the short term, if they move in different directions, it doesn’tmean anything. There can be big regional differences, such as[Hurricane] Katrina and a fire in a refinery in Rotterdam.Individual benchmarks may depend on different things.”

Adds Pilarski: “In aviation we are more concerned about the longterm. In 2008, when prices became super-high, fuel became thelargest expense for aviation. In the 1980s, when we had the pre-vious high numbers, that was not the case – labour was still thehighest. This is the other thing that is important. You can arguewith labour – you can’t argue with oil. If you’re in deep trouble,you can go back to labour. You can’t go back to the oil compa-nies and say ‘we in aviation have problems’. You can only buy ornot buy.”

The meteoric rise of oil prices last year actually did the world’s air-lines a service, says Pilarski: “Luckily for the airline industry, highoil prices happened before the economic meltdown. The firsteight or nine months of the year were not good; the last three orfour were a disaster. There were highly negative [traffic] numbers,not related to oil but related to the economy. But the airlines hadalready started parking planes – not because they could sense theeconomy slowing, but because of high oil prices.”This was particularly true for airlines in the US, notes Heimlich.




“Because of the domestic weakness last year and currencyexchange rates, and the disproportionate toll this took on the USairlines, I think we are a little better prepared than our non-UScompetitors for 2009 – but only 2009,” he says. “But there arestill significant issues for 2010 and beyond. I think we have takenour lumps a little bit earlier than others. Other international mar-kets lagged the US a bit in deteriorating.”

The post-recessionary periodAfter 2009 – when for the first time in recent memory IATAexpects the US airlines to lead all of the world’s carriers in termsof profitability, simply because as the first to encounter problemsthey cut capacity and costs before all other airlines did – the abil-ity of the global airline industry to withstand higher oil pricescould once again quickly become a significant concern as thedeveloped world looks to emerge from recession.

While Pilarksi believes that Saudi Arabia and other leading OPECnations are “interested in oil prices being fairly high, but not highenough so there are real incentives to find alternatives, and sofrom a pure economic point of view there is no justification for$100-and-above oil prices,” these nations may not represent theprime fuel-price threat to airlines in the immediate post-reces-sionary period.

“Politically a faction in the oil industry is very much interested inshort-term high oil prices,” says Pilarski. “Unconventional lead-ers” such as Russia’s Vladimir Putin, Iran’s MahmoudAhmadinejad and Venezuela’s Hugo Chavez “are all spendinglarge amounts of money to buy popularity, and because of thisthere is a chance when we get out of the recession that oil pricesmay go to a higher level than is justified – for instance, to $70 abarrel”. He states: “I actually believe the recession will be with usa year and, when it stops, oil prices will go up to $70.” At suchprices for crude, jet fuel could easily reach $100 per barrel, forc-ing carriers to maintain restrictions on capacity and continuing tomake life difficult for airlines and aircraft manufacturers alike.

No reason to see mid-2008 levels againBut while stressing that any major political trouble – particularlyin Saudi Arabia or another Middle East nation – could have severerepercussions for oil prices, Pilarski believes that, all things beingequal, there is no reason oil should shoot up again to the levelsseen in mid-2008.

“I totally disagree with the long-term view of some analysts thatoil prices will go to $150 to $300,” he says. “The best solutionfor high oil prices is high oil prices. If oil prices stay very high forthe longer term, we’ll come up with alternatives. At $100 a bar-rel there are plenty of alternatives and plenty of money to go intoit.” Additionally, he believes, oil-demand arguments based onChina’s former double-digit-percentage annual growth rate arespurious. “These are Looney Tunes. Even when China’s economywas growing 10 per cent for the average product, oil demandwas only going up five per cent,” he comments.

What is certain, says Pilarski, is that “we in aviation will probablybe one of the last users of oil”. He concludes: “We try things inaviation because there is a lot of abuse [from anti-aviation envi-ronmentalists] right now, especially in Europe and particularly inEngland. But, in the long term, if cars move away from oil therewill be a lot less demand – and there will be less of an economicincentive for aviation to find alternatives.” So oil prices are likelyto remain of the most acute interest to all airlines for the imagi-nable future.

Airlines and fuel-price hedgingTO HELP MANAGE THEIR EXPOSURE TO UPWARD MOVEMENTS IN FUEL PRICES,such as the unprecedented price movement the air transport industry experi-enced in the first half of 2008, many airlines engage in fuel-price hedging activ-ities. They do so both in order to make their fuel costs more predictable forfinancial and commercial planning purposes and also to attempt to pay prices fortheir fuel that are lower than spot-market prices.

However, hedging by an airline represents a bet on oil-price movement againstother insider parties that are often better informed on price trends than the air-line itself – particularly when it hedges on a short-term basis in reaction to anupward price movement in an attempt to keep its fuel cost down – and largeaccounting losses can result. Many airlines that carried out short-term, reactivehedging – known as ‘tactical hedging’ – in the second half of 2008, when oilprices fell dramatically over a short period, found their efforts lost them a lot ofmoney.

However, some airlines – Lufthansa is a good example – carry out planned, strate-gic hedging programmes on a rolling basis, every month building up their hedg-ing gradually for each forward month to a time horizon that might be, say, 18months to two years out for each month. That way, the airline is hedged sub-stantially in the near future, but less so at the long-term horizon, when priceuncertainty is likely to be much higher.

The process of hedging involves a variety of financial risk-management tech-niques and financial derivative products such as call and put options.Combinations of such techniques and derivatives can create financial risk-man-agement instruments and programmes of such Byzantine complexity, and bear-ing such implications for cash and balance-sheet management, that a specialisedarea of accounting (known as hedge accounting) has evolved to cover compa-nies’ hedging activities. In the US, Special Federal Accounting Standard (SFAS)133 was crafted specifically to direct in detail the manner in which companiesshould account for their hedging activities.

Because jet fuel is a specialised commodity that is produced in relatively low-quantities compared with other distillate fuels, options and futures contracts onjet fuel itself are not traded in commodities exchanges or in the over-the-countermarket (though jet fuel swap contracts are available). However, the distillate fuelheating oil has a high correlation with jet fuel and is traded as the base futurecontract for all distillate fuels, so airline hedging programmes make use of bothheating-oil and crude-oil futures and options to help manage their risks on fuelprice itself.

Large airlines that are particularly big users of jet fuel also use privately negoti-ated ‘differential contracts’ with counter-parties to help match the differencebetween the price of a physical barrel of jet fuel on a given date and the per-barrel heating-oil or crude-oil futures prices the airlines use as the basis of theirfuel-price hedging programmes.


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Basis: The difference between the spot price and the futures priceof a commodity. The associated term ‘basis risk’ is the risk to ahedger arising from uncertainty about the basis at a future time.

Call Option: An option that gives the buyer the right, but doesnot confer the obligation, to purchase (“go long’’) the underlyingfutures contract at the strike price on or before the expirationdate. The seller of a call option is, however, obligated to sell theunderlying futures contract at the strike price if the buyer choosesto exercise its purchase option. Also known as a cap.

Cap: See Call Option.

Ceiling: On selling a call option, the maximum price that a com-pany will receive for the fuel volume under contract.

Collar: A portfolio of two options with the same underlying riskfactor and expiration date: a long call with a higher strike priceand a short put with a lower strike price. For airlines, this estab-lishes maximum and minimum prices for all the fuel volumes con-tracted under the options.

Collateral: The cash amount a buyer must post to cover fuelhedge losses at current prices. As hedges settle, collateral isreturned to cover cash-settled losses.

Cost of Carry: For physical commodities such as oil and fuel, thecost of storage space, insurance, and finance charges incurred byholding the commodity.

Differentials: Price differences between classes, grades, anddelivery locations of various stocks of the same commodity.

Differential Contract: In the US, any airline hedging its jet fuelprice with a futures instrument on the NYMEX also has a basis riskwith which to contend. Bulk pipeline sales or cargo volumes of jetfuel in the US trade at a differential to the base heating oil con-tract. So a differential to that price is negotiated for the physicalbarrel. If the airline chooses to hedge, it must have a programmeto buy futures contracts and another to buy the jet fuel differen-tial to those futures.

Floor: When a company buys a put option – that is, the option tosell fuel at an agreed price to a counter-party at an agreed date –this establishes a minimum price that the buyer will receive for thefuel volumes under contract. This is known as the floor.

Forward Contract: A private, cash-market agreement between abuyer and seller to exchange (buy or sell) an underlying instru-ment for a fixed forward price at a specific, future delivery date.In contrast to futures contracts, forward contracts are not stan-dardised and not transferable.

Forward Curve: In the context of oil or fuel price, the price atwhich traders will actually buy and sell oil or fuel today for deliv-ery at some point in the future. The forward curve is not a fore-cast of oil or fuel prices. The forward curve is ‘backwardated’when traders are prepared to pay more for prompt delivery of oilor fuel than they are for delivery in the future. The forward curveis ‘in contango’ when traders pay more for oil or fuel loading inthe future than for delivery of the commodity within 2-3 weeks.

Forward Price: The delivery price in a forward contract thatcauses the contract to be worth zero.

Futures Contract: A legally binding contract traded on a futuresexchange to buy or sell a commodity or financial instrumentsometime in the future. Futures contracts are standardisedaccording to the quality, quantity, and delivery time and location.On its last trading day a futures contract settles into a forwardcontract.

Hedging: A programme of trading of financial derivative instru-ments designed to reduce risk. In practice, this means offsetting theprice risk inherent in any cash market position by taking an equalbut opposite position in the futures market. Hedgers use the futuresmarkets to protect their businesses from adverse price changes. Inthe case of jet fuel-price hedging, hedging involves trading of con-tracts and options based on crude oil and/or heating oil as well asjet fuel itself, because option instruments for jet fuel are not tradedon exchanges or over the counter.

Ineffectiveness of a Hedge: To the extent that a fuel derivativeinstrument’s estimated fair value changes from one period toanother and this value differs from the estimated price of theassociated jet fuel to be purchased, both on a cumulative and ona period-to-period basis, ineffectiveness of the fuel hedge canresult, as defined by the relevant hedge-accounting regulationand measured by defined financial tests. This can result in theimmediate recording of non-cash charges or income to representthe change in the fair value of the derivative (a process known as‘marking to market’), even though it may not expire or settle untila future period. If a derivative contract ceases to qualify for hedgeaccounting, the change in the fair value of the derivative instru-ment is recorded every period in the income statement in theperiod of the change.

Initial Margin: Also known as ‘Original Margin’. The minimumrequired value on deposit in an account to establish a new futuresor options position, or to add to an existing position. Initial mar-gin amount levels differ by contract.

In-the-Money-Option: An option with intrinsic value is said tobe “in the money”. A call option is in the money if its strike priceis below the current price of the underlying futures contract. Aput option is in the money if its strike price is above the currentprice of the underlying futures contract.

Maintenance Margin: The minimum value required in anaccount in order to continue to hold a position. The maintenancemargin is typically less than the initial margin, and differs by con-tract.

Margin Call: A call from a clearing-house to a clearing member,or from a brokerage firm to a customer when the balance in themargin account falls below the maintenance margin level.

Market Risk: The risk of loss from being on the wrong side of abet about a market move.

Marking to Market: The practice of revaluing an instrument toreflect the current values of the relevant market variables. Whenperforming hedge accounting, airlines estimate fair values for

FUEL-PRICE HEDGING: A Glossary of Terms



financial derivative instruments and forward jet fuel prices priorto the time that the instruments settle and the time that jet fuelis purchased and consumed. Estimating the fair values of deriva-tives and forward prices for jet fuel results in changes to their val-ues from period to period and will determine how they areaccounted for under the relevant hedge-accounting regulation(in the US, this is SFAS 133).

Option: A contract giving the holder the right, but not confer-ring the obligation, to buy (a call option) or sell (a put option) afutures contract in a given commodity at a specified price at anytime between now and the expiration of the option contract.

Option Premium: The price of an option. The sum of moneythat the option buyer pays and the option seller receives for therights granted by the option.

Option Spread: The simultaneous purchase and sale of one ormore options contracts, futures, and/or cash positions.

Out-of-the-Money Option: An option with no intrinsic value,i.e., a call whose strike price is above the current futures price ora put whose strike price is below the current futures price, is saidto be “out of the money”. But since prices can change with timeand price volatility, an out-of-the-money option can become “inthe money”.

Put Option: An option to sell a commodity, security, or futurescontract at a specified price at any time between now and theexpiration of the option contract. With put options, the termi-nology can be confusing: a company that buys a put option actu-ally buys the right to sell the underlying asset within a givenperiod for a given strike price. A company that sells a put optionis selling the obligation to buy the underlying asset within a givenperiod for a given strike price.

Settle (or Settlement Price): The last price paid for a commod-ity on any trading day. The exchange clearing-house determinesa firm’s net gains or losses, margin requirements, and the nextday’s price limits, based on each futures and options contract set-tlement price.

Spot Price: The cash market price of a product for immediatedelivery. However, a spot contract price is often agreed in the for-ward month – that is, the month before delivery.

Spread Option: An option where the payoff is dependent on thedifference between two market variables.

Strike Price: The price at which the buyer may purchase or sellthe underlying futures contract upon the exercise of an option.(Recall that the buyer of a put option has the right to sell the con-tract at the strike price at the exercise date).

Strategic Hedging: A long-term, rolling, consistent hedgingprogramme designed to shield a company from adverse marketimpacts and to make its fuel costs more predictable for planningpurposes. Airlines that employ strategic hedging, such asLufthansa, typically build up their hedges in monthly incrementson a rolling basis from a set period as far in advance as two years.

Swap: The exchange of a sequence of cash flows that derivefrom two different financial instruments. When an airline uses aswap contract for fuel-price hedging, it and a counter-party agreeto the airline purchasing an agreed amount of jet fuel over agiven period of time for a given fixed amount. If the airline’sactual cost in the market for the agreed amount of fuel over thatperiod is higher than the contracted fixed price, the counter-partymust pay the airline the difference. If the airline’s actual cost isless than the contracted fixed price, it must reimburse thecounter-party.

Tactical Hedging: Fuel-price hedging carried out on a short-termbasis and entered into because of volatility in the market.Essentially, tactical hedging is a company’s bet against a counter-party that it knows the price of oil or fuel at a future date betterthan the counter-party does – an assumption that many airlinesfound to their cost was unwarranted during the latter half of2008.

Zero-Cost Collar: Also known as a “costless collar” or “zero-premium collar”. When a company buys a call option to protectthe maximum price it pays for oil or fuel within a given period, itcan finance the cost (or premium) needed to buy the call by sell-ing a put option at a lower strike price – that is, it sells the obli-gation to buy fuel within the same period for a set price. Likeother two-way collars, the zero-cost collar establishes a minimumprice and a maximum price at which the company will buy thefuel volume under contract within the contracted period.

2-Way Collar: A combination of a sold call option and a pur-chased put option. The purchased put establishes a minimumprice (the “floor”) and the sold call establishes a maximum price(the “ceiling”) that a company will receive for the fuel volumesunder contract.

3-Way Collar: A combination of options: a sold call, a purchasedput and a sold put. The purchased put and sold put establish afloating minimum price (the “floating floor”) and the sold callestablishes a maximum price (the “ceiling”) that a company willreceive for the fuel volumes under contract.

4-Way Collar: A 4-way collar is a combination of options: a soldcall, a purchased call, a purchased put and a sold put. The pur-chased put and sold put establish a floating minimum price (the“floating floor”) and the purchased call and sold call establish afloating maximum price (the “floating ceiling”) that a companywill receive for the fuel volumes under contract.




US AIRLINE FUEL PRICE HEDGE POSITIONSUAL Corporation1Q fuel price, and fuel price hedge positions and collateral for 2009

(i) % of expected mainline and consolidated consumption represents the notionalamount of purchased calls in the hedge structures. Certain 3-way collars and col-lars included in the table above have sold puts with twice the notional amount ofthe purchased calls. The % in parentheses represent the notional amount of soldputs in these hedge structures.

The table right outlines theCompany’s estimated collat-eral provisions at variouscrude oil prices, based onthe hedge portfolio as ofJanuary 16, 2009.

For example, using the table above, at an illustrative $35 per barrel the Company’s required collateral provision to its derivative coun-terparties would be approximately $780 million.

The company estimates the following fuel prices for the first quarter based on the closing forward curve on January 16.

Mainline Fuel Price (Price per Gallon) 1

1 Based on the January 16 closing forward price2 Includes only the hedge gains/losses that are accounted for in the fuel expense line

In addition to the impact of fuel hedges on fuel expense, a portion of the company’s total fuel hedge impact is recorded as a non-operating expense. The company estimates that $81 million in cash fuel hedging losses and $69 million in non-cash, net mark-to-mar-ket fuel hedging gains will be recorded in non-operating income / expense for the first quarter based on January 16 closing forwardcurve prices.

The company estimates it will have the following amounts posted as fuel hedge collateral at each quarter end:Based on Jan. 16 closing forward crude oil prices.

The table below details the Company’s hedge positions as of January 16, 2009.

HedgingInstrument

% of ExpectedConsolidatedConsumption(i)

% of ExpectedMainlineConsumption(i)

Average Price WherePayment ObligationsStop

Average Price WherePayment ObligationsBegin

Average Price WhereProtection Begins

Average Price WhereProtection Ends

(ii) Call position average includes the following two groupings of positions: 9%of consolidated consumption with protection beginning at $106 per barrel; and9% of consolidated consumption beginning at $50 per barrel.

(iii) Call position average includes the following two groupings of positions: 5%of consolidated consumption with protection beginning at $106 per barrel; and7% of consolidated consumption beginning at $53 per barrel.

Price of Crude Oil, in Dollars per Barrel Approximate Change in Cash Collateral For Each$5 per Barrel Change in the Price of Crude Oil

Three Months Ending March 31, 2009

Projected Fuel Hedge Collateral Balance at Each Quarter End

1st Quarter 2009Calls 18% 21% N/A N/A $77 bbl (ii) N/ACollars 9% (10%) 11% (12%) N/A $109 bbl $118 bbl N/A3-Way Collars 25% (29%) 30% (35%) N/A $104 bbl $118 bbl $143 bbl4-Way Collars 2% 2% $63 bbl $78 bbl $95 bbl $135 bbl

1st Quarter 2009 Total 54% 64% N/A $104 bbl $104 bbl N/A

1st Quarter 2009Purchased Puts to CapDownside Purchased Puts 35% 42% $57

Full Year 2009Calls 12% 14% N/A N/A $76 bbl (iii) N/ACollars 5% (6%) 6% (7%) N/A $111 bbl $123 bbl N/A3-Way Collars 18% (22%) 22% (26%) N/A $102 bbl $117 bbl $147 bbl4-Way Collars 1% 2% $63 bbl $78 bbl $95 bbl $135 bblFull Year 2009 Total 36% 44% N/A $103 bbl $104 bbl N/AFull Year 2009 PurchasedPuts to Cap DownsidePurchased Puts 17% 20% $54

Above $105 No Collateral RequiredAt or Above $85, but Below $105 $45 millionAt or Above $25, but Below $85 $60 millionBelow $25 $40 million

Jan. 19, 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2009$780M $615M $315M $110M $25M

Mainline Fuel price including taxes and excluding impact of hedges $1.73Mainline Fuel price including taxes and cash net gains or losses on settled hedges 2 $2.22Mainline Fuel price including taxes, cash net gains or losses on settled hedges,and impact of non-cash, net mark-to-market gains or losses on settled and unsettled hedges 2 $1.83



AMR Corporation

Fuel Expense and HedgingWhile the cost of jet fuel remains volatile, AMR is planning for anaverage system price of $2.04 per gallon in the first quarter of 2009and $2.06 per gallon for all of 2009. AMR has 45 percent of its antic-ipated first quarter 2009 fuel consumption hedged at an average capof $2.58 per gallon of jet fuel equivalent ($93 per barrel crude equiv-

Alaska Air Group (as of January 29, 2009)

Future Fuel Hedge Positions

Continental Airlines

Fuel Hedges – As of January 26, 2009As of January 26, 2009, the Company’s pro-jected consolidated fuel requirements werehedged as follows, excluding recently termi-nated contracts with Lehman Brothers:

Based on the forward curve for WTI as ofJanuary 26, 2009, the Company estimatesthat all of its fuel hedges (including the impactof residual unrecognized loss on the fuelhedges with Lehman Brothers) would result ina net increase in fuel expense of $0.33 pergallon in the first quarter 2009 and $0.25 pergallon for the full year 2009. For the un-hedged portion of its consolidated fuelrequirements (excluding the effect of fuelhedges with Lehman Brothers) the Companyis assuming an average cost of jet fuel (includ-ing fuel taxes) of $1.70 for the first quarterand $1.92 for the full year 2009.

The Company has no fuel hedge contractsbeyond 2009.

As of January 26, 2009 the Company had$187 million of cash collateral posted with itsfuel hedge counterparties.

*All of our 2008, 2010 and 2011 positions and the majority of our 2009 positions are call options, which are designed to effectively cap our cost of the crude oil com-ponent of our jet fuel purchases. With call options, we benefit from a decline in crude oil prices, as there is no downward exposure other than the premiums we payto enter into the contracts.

Maximum Price

% of ExpectedConsumption

Weighted AveragePrice (per gallon)

% of ExpectedConsumption

Weighted AveragePrice (per gallon)

Minimum Price

Approximate % of Expected Fuel Requirements Approximate Crude Oil Price per BarrelFirst Quarter 2009 50% $81Second Quarter 2009 50% $71Third Quarter 2009 50% $76Fourth Quarter 2009 50% $76Full Year 2009 50% $76

First Quarter 2010 42% $60Second Quarter 2010 34% $70Third Quarter 2010 29% $67Fourth Quarter 2010 24% $78Full Year 2010 33% $67

First Quarter 2011 17% $91Second Quarter 2011 15% $73Third Quarter 2011 11% $74Full Year 2011 11% $80

Fuel Requirements (Gallons) 2009 Estimate1st Qtr. Full Year

Mainline 337 Million 1,417 MillionRegional 73 Million 297 MillionMainline Fuel Price per Gallon (including fuel taxes and impact of hedges) $1.99 $2.13

First Quarter 2009WTI crude oil call options 26% $2.54 N/A N/AWTI crude oil swaps 20% 1.09 20% $1.09WTI crude oil collars 11% 3.32 11% 2.39Total 57% 31%

Second Quarter 2009WTI crude oil collars 34% $3.48 34% $2.61Total 34% 34%

Third Quarter 2009WTI crude oil swaps 5% $1.31 5% $1.31WTI crude oil collars 10% 3.21 10% 2.40Total 15% 15%

Fourth Quarter 2009WTI crude oil swaps 5% $1.36 5% $1.36Total 5% 5%

Full Year 2009WTI crude oil call options 6% $2.54 N/A N/AWTI crude oil swaps 7% 1.17 7% $1.17WTI crude oil collars 14% 3.40 14% 2.53Total 27% 21%

alent), with 42 percent subject to an average floor of $1.97 per gal-lon of jet fuel equivalent ($68 per barrel crude equivalent). AMR has35 percent of its anticipated full-year consumption hedged at an aver-age cap of $2.59 per gallon of jet fuel equivalent ($94 per barrelcrude equivalent), with 32 percent subject to an average floor of$1.94 per gallon of jet fuel equivalent ($67 per barrel crude equiva-lent). As of Jan. 16, the average 2009 market forward price of crudeoil was more than $51 per barrel. Consolidated consumption for thefirst quarter is expected to be 677 million gallons of jet fuel.




Operating Non-Operating TotalNon-cash, out-of-period loss $91 $10 $101Loss (gain) on settled contracts $507 (1) $506Total net losses $598 $9 $607

2009 2010 2011 2012 2013 TotalFuel derivative obligations $246 $239 $236 $146 $125 $992

Delta Air Lines (including Northwest Airlines)Fuel Price and Related HedgesDuring the December 2008 quarter, Delta hedged 58% of its fuel consumption, resulting in an average fuel price of $2.90 per gal-lon.8 Included in the fuel price is $507 million in fuel hedge losses in the fourth quarter.

The table below represents the fuel hedges Delta had in place as of Jan. 23, 2009 (see Note A for additional information about Delta’sfuel hedges):

Note A:The tables below represent additional information about fuel hedges Delta had in place as of Jan. 23, 2009:

Southwest AirlinesThe Company has utilized financial derivative instruments for bothshort-term and long-term time frames, and typically utilizes a mixtureof purchased call options, collar structures, and fixed price swapagreements in its portfolio. In recent years, as fuel prices have risen,the Company has held fuel derivative positions that have resulted insignificant gains recognized in earnings. However, as of December 31,2008, the Company held a net position of fuel derivative instrumentsthat effectively represented a hedge of approximately 10 percent of itsanticipated jet fuel purchases for the years from 2009 through 2013.Prior to fourth quarter 2008, the Company had held fuel derivativeinstruments for a much larger portion of its anticipated fuel purchasesfor these years; however, due to the recent precipitous decline in fuelprices, the Company significantly reduced its hedge in order to mini-mize fuel hedging losses related to further oil price declines and to

The total net fair value of outstanding financial derivative instrumentsrelated to the Company’s jet fuel market price risk at December 31,2008, was a net liability of $992 million. The current portion of thesefinancial derivative instruments, or $246 million, is classified as a com-ponent of “Accrued liabilities” in the Consolidated Balance Sheet. Thelong-term portion of these financial derivative instruments, or $746 mil-lion, is included in “Other deferred liabilities.”

Upon proper qualification, the Company endeavors to account for its

Three Months EndedDec. 31, 2008 ($M)

minimize the potential for the Company to provide additional cash col-lateral deposits to counterparties. The Company accomplished thisreduced hedge by entering into additional derivative contracts – basi-cally by selling zero-cost collars and fixed-price swap derivatives. Thisstrategy enables the Company to participate in further price declinesvia the sold derivatives, which should materially offset further declinesin value of the Company’s previously purchased derivatives. If pricesrise, the Company no longer has the protection it had in place prior toreducing its hedge.

The Company had estimated obligations at December 31, 2008,related to its fuel derivative positions for the years 2009 through 2013(based on the contractual settlement date of those derivative instru-ments). Although the fair value of these positions can fluctuate signif-icantly based on forward market prices for crude oil, heating oil, andunleaded gasoline, the following table displays these estimated obli-gations as of December 31, 2008 (in millions):

2009Legacy Positions: Q1 Q2 Q3 Q4Call 6% 6% 18% 15%Collar 40% 33% 3% -Swap 9% - - -Total 55% 39% 21% 15%

Avg. crude call cap $90 $90 $82 $86Avg. crude collar cap $122 $122 $127 $-Avg. crude collar floor $108 $108 $118 $-

Recent Positions:Call 1% 5% 12% 4%Swap 24% 41% 22% 13%Total 25% 46% 34% 17%

Avg. crude cap $45 $55 $59 $61

Total hedge percent 80% 85% 55% 32%

Avg. Jet Fuel Equivalent* Fuel Price/Gal.*Percent Hedged Cap Floor (at today’s fwd. curve)

Q1 2009 80% $2.81 $2.43 $2.34Q2 2009 85% $2.45 $2.09 $2.17Q3 2009 55% $2.19 $1.22 $2.10Q4 2009 32% $2.24 $1.05 $2.00* Includes tax and transportation costs of approximately $0.17/gallon.

fuel derivative instruments as cash flow hedges, as defined in Statementof Financial Accounting Standards No. 133, Accounting for DerivativeInstruments and Hedging Activities, as amended (SFAS 133). Under SFAS133, all derivatives designated as hedges that meet certain requirementsare granted special hedge accounting treatment. Generally, utilizing thespecial hedge accounting, all periodic changes in fair value of the deriv-atives designated as hedges that are considered to be effective, asdefined, are recorded in “Accumulated other comprehensive income(loss)” until the underlying jet fuel is consumed.



~16.6 ~18.1 ~18.9 ~16.9 ~70.5

1+5% to +7% +1% to +3% +1% to +3% +3% to +5% +2% to +4%

~310 ~340 ~345 ~325 ~1,325

2.35 to 2.40 2.17 to 2.22 1.96 to 2.01 1.83 to 1.88 2.07 to 2.12

~260 ~282 ~296 ~267 ~1,105

38% 24% 10% — 18%

3.32 to 3.52 3.52 to 3.72 3.44 to 3.64 — 3.41 to 3.61

3.41 to 3.61 3.65 to 3.85 3.57 to 3.77 — 3.52 to 3.72

121.87 to 130.27 136.29 to 144.69 131.91 to 140.31 — 128.39 to 136.79

~1.58 ~1.62 ~1.71 ~1.77 ~1.67

0.71 0.49 0.19 — 0.34

US Airways

January 2008 to February 2009 (Spot prices of Kerosene type jet fuel)

Mainline Guidance 1Q09E 2Q09E 3Q09E 4Q09E FY09E

AvAvailable Seat Miles (ASMs) (bil)

C- CASM ex fuel, special items &profit sharing (YOY % change)

CaCargo / Other Revenues ($ mil)

FuFuel Price (incl hedges and taxes)($/gal)

FuFuel Gallons Consumed (mil)

PePercent Hedged

W Weighted Avg. Heating Oil CollarRange ($/gal)

W Weighted Avg. Jet Fuel Equivalent(incl, transport, and refining margin)($/gal)

W Weighted Avg. Estimated CrudeOil Equivalent ($/bbl)

EsEstimated Jet Fuel PriceAssumption (unhedged, incltransport) (($/gal)

ImImpact of Fuel Hedges(Gains)/Losses ($/gal)

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Month

cent

s pe

r ga

llon

Amsterdam-Rotterdam-Antwerp (ARA) Singapore New York Harbor U.S. Gulf Coast Los Angeles

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

263.83 280.84 312.90 342.48 395.15 396.21 403.74 341.73 310.42 236.58 193.42 143.18 143.56 127.44

253.07 264.32 299.02 330.43 377.84 392.49 396.39 327.37 286.89 213.71 179.60 139.53 141.71 125.66

266.59 276.85 326.47 355.55 378.13 392.21 397.09 330.79 329.54 243.39 195.23 147.41 153.89 130.61

260.47 272.82 312.45 336.46 373.76 387.82 388.63 327.06 337.49 231.47 187.96 137.51 146.92 125.94

260.35 276.70 318.00 337.94 383.82 395.59 387.42 326.03 294.25 222.29 184.47 137.46 144.34 130.57




Airline

AIR BERLIN

AIR FRANCE-KLM

AIR NEW ZEALAND

ALASKA AIR GROUP

AMR CORPORATION

BRITISH AIRWAYS

CONTINENTAL AIRLINES

DELTA AIR LINES (INCL.NORTHWEST AIRLINES)

Date of Info

27 Nov, 2008

6 Feb, 2009

22 Jan, 2009

25 Feb, 2009

25 Feb, 2009

6 Feb, 2009

26 Jan, 2009

22 Jan, 2009

Position

In Q1 2009, Air Berlin was 78% hedged at$1,000-$1,100/tonne; in Q2, 59% at approx$1,000/tonne; in Q3, 37% at approx$1,000/tonne; in Q4, 6% hedged at $1,000-$1,200/tonne.

Hedged 43% for FY2009-10 (ending 31 March10), giving final purchase price of $67/bbl of jetfuel. Hedged 18% for FY2010-11, giving finalpurchase price of $72/bbl. Hedged 21% for2011-12, giving final price of $72/bbl.

In second half of FY2009 (ending 31 March2009), Air NZ was approx 72% hedged withaverage effective floor of $85.10/bbl of WTIcrude. First half of FY2010 is approx 20%hedged with average ceiling of $68.47 andaverage floor of $45.20 per barrel of WTI.

AAG is 50% hedged for 2009 at an approxi-mate crude oil price per barrel of $76. It is 33%hedged for 2010 at an approx price of $70 andis 11% hedged for 2011 at an approx price of$80.

35% of 2009 consumption hedged at averagecap of $2.59/gal of jet fuel equivalent ($94/bblof crude oil equivalent, with 32% subject toaverage floor of $1.94/gal of jet fuel equivalent($67/bbl of crude oil equivalent).

For FY2009-10, 50% hedged with average floorat crude oil price of approx $84/bbl

For full year 2009, 27% of expected consump-tion hedged in max weighted average pricerange of $2.54 to $3.40/gal. Also 21% hedgedat minimum weighted average price range of$1.17 to $2.53/gal. Max price hedge includes6% WTI crude call options at ave. $2.54/gal; 7%WTI swaps at ave. $1.17/gal; and 14% WTI col-lars at ave. $3.40/gal. Min price hedge includes7% WTI swaps at ave. $1.17/gal and 14% WTIcollars at ave. $2.53/gal.

In 1Q09, Delta hedged 80% of expected con-sumption at an average jet fuel equivalent capof $2.81/gal to floor of $2.43/gal. At the then-forward curve, fuel price was $2.34/gal, includ-ing tax and transportation costs of approx$0.17/gal.

Remarks

On 27 Nov, 2008, Air Berlin said it was “using cur-rent market situation to further strengthen its hedg-ing position for 2009”, and would procure“additional fuel options with cost limiting effects(volume Ø +4% for 2009)”.

Air France-KLM was carrying out no new hedging as of October 2008. It unwound a portion of itshedging contracts after December. Group said that,overall, its exposure to fuel-price volatility washalved.

At 22 Jan prices, average Singapore Jet fuel pricewould be $88/bbl for second half of Air NZ’s FY2009, compared with average of $123 infirst half.

Quarterly hedge levels as of 25 Feb 2009: 1Q09,50% at approx crude oil price per barrel of $81;2Q09, 50% at $71; 3Q09, 50% at $76; 4Q09, 50% at $76; 1Q10, 42% at $68; 2Q10, 34% at$68; 3Q10, 29% at $67;' 4Q10, 24% at $78; 1Q11, 17% at $91; 2Q11, 15% at $73; 3Q11,11% at $74; 4Q11, unhedged.

AMR is planning for an average system price of$2.04/gal in 1Q 2009 and $2.06/gal for full year. Ithad 45% of expected 1Q consumption hedged ataverage cap of $2.58/gal of jet fuel equivalent($93/bbl of crude oil equivalent), with 42% subjectto average floor of $1.97/gal ($68/bbl crude equiva-lent).

At a fuel price of $60/bbl and $:£ exchange rate of$1.50, BA expects FY2009-10 fuel bill would be£2.75bn, £250m-£300m less than FY2008-09.

In 1Q09, Continental hedged 57% of expected con-sumption at max weighted average price rangeof $2.54-$3.32/gal, and hedged 31% in min pricerange of $1.09-$2.39/gal. In 2Q09, it has hedged34% at max price of $3.48/gal and hedged 34% atmin price of $2.61/gal. In 3Q09, CO has hedged15% in max price range of $1.31-$3.21/gal andhedged 15% in min price range of $1.31-$2.40/gal.In 4Q09, CO hedged 5% at max price of $1.36/galand hedged 5% at min price of $1.36/gal.

In 2Q09, Delta’s expected fuel consumption is 85%hedged at an average jet fuel equivalent cap of$2.45/gal and a floor of $2.09/gal, at a $2.17 for-ward price/gal. In 3Q09, DL is hedged 55% at cap of$2.19/gal and floor of $1.22/gal, at forward price of$2.10. In 4Q09, DL is hedged 32% at cap of$2.24/gal and floor of $1.05/gal, at $2.00/gal for-ward price as of Jan 23, 2009.



Airline

EASYJET

LUFTHANSA

RYANAIR

SINGAPORE AIRLINES

SOUTHWEST AIRLINES

UAL CORPORATION

US AIRWAYS

Date of Info

20 Feb, 2009

2 Feb, 2009

10 Feb, 2009

2 Feb, 2009

16 Jan, 2009

29 Jan, 2009

Position

For the year to 30 Sep 2009, easyjet is 73%hedged at $1,094/tonne. For the year to 30Sep, 2010, it is 27% hedged at $926/tonne.In first half of FY2009, easyJet’s estimatedfuel cost per tonne is $1,040.

Lufthansa applies rule-based strategic hedgingwith a time horizon of 24 months, mapping theaverage of crude oil prices over time. LH hedges5% of planned consumption per month inBrent collars up to a hedging level of 85% andwith a lead time of 24 months. As a result theforward six months are hedged to about 85%.

In FY2010, starting 1 April 2009, Ryanair is75% hedged on fuel price in 1Q at $660/tonne;in 2Q, 75% hedged at $650/tonne; in 3Q, 50% hedged at $660/tonne; 4Q, unhedged.

For the period 1 January to 31 March 2009,44% of SIA Group fuel requirements, orapproximately 3.7 million barrels, were hedgedat an average jet fuel price of $131/bbl.

“As of December 31, 2008, the Company helda net position of fuel derivative instrumentsthat effectively represented a hedge of approxi-mately 10% of its anticipated jet fuel purchasesfor the years from 2009 through 2013.”Statement was made in Southwest’s10-K annual results filing to SEC.

36% of consolidated and 44% of mainline con-sumption. Average price where payment obliga-tions begin is $103/bbl and average price whereprice protection begins is $104/bbl. In 2009,17% of consolidated consumption is also sub-ject to puts with payment obligations ending at$54.

For 2009, US Airways is 18% hedged atweighted average heating oil collar range of$3.41-$3.61/gal. Weighted average jet fuelequivalent, incl. transport and refining margin,is $3.52-3.72/gal. Crude oil equivalent is$128.39-$136.79/bbl.

Remarks

Each $10/tonne movement in fuel price impactseasyJet's full-year unhedged fuel cost by $4.6m.EasyJet's average effective fuel cost per tonne was$948 for FY2008 ($840 average in first half and$1,031 in second half).

Lufthansa's annual fuel consumption is some 8.3mtonnes, generating more than 17% of group operat-ing expenses. Its hedges are predominantly for crudeoil, supplemented by contracts for the price differen-tial between kerosene and crude. Lufthansa usesstandard instruments such as forward contracts andoptions. For FY08, LH’s hedging level was only 72%,due to loss of contracts with Lehman Brothers. LHdecided not to enter contracts for the remaining13% because of the favourable oil-market conditionsit encountered towards the end of FY08.

Ryanair’s fuel price/tonne in FY 09 (ended 31 March2009): 1Q, $1,170; 2Q, $1,320; 3Q, $1,170; 4Q,unhedged.

SIA’s fuel-hedging gains for the first nine months ofFY2008-09 (ending 31 March 2009) were $191 mil-lion.

As of 31 Dec, 2008, Southwest’s cash collateral obli-gations for fuel derivatives for the years 2009-2013totalled $992m (based on the contractual settlementdates of those derivatives). Obligations for 2009 were$246m, for 2010, $239m; for 2011, $236m; for2012, $146m; and for 2013; $125m.

UAL uses a combination of calls, puts, collars, 3-waycollars and 4-way collars to hedge. In Q1, 54% ofconsolidated consumption was hedged at $104/bbland 35% was subject to puts with payment obliga-tions ending at $57. With crude at $45/bbl, UAL’sposted cash collateral requirement in 2009 would beapprox $660m; at $35/bbl, it would be $780m. In1Q, UAL’s mainline fuel price including all taxes, andgains and losses on settled and unsettled hedges was$1.83/gal.

For 1Q09, 38% hedged at $3.32-$3.52/gal weightedaverage heating oil collar range ($3.41-$3.61/galweighted average jet fuel equivalent incl. transportand refining margin). 2Q09, 24% hedged atweighted average jet fuel equivalent of $3.65 to$3.85/gal. 3Q09, 10% hedged at WAJF equivalent of$3.57-$3.77/gal. 4Q09, unhedged.




Most major US airlines are facing difficult decisions about how and when to renew their fleets, among theoldest in the world. In 2009 the US majors are expected to be the most profitable carriers in the world forthe first time in many years, but they are cutting capacity as fast as they can as they see traffic melt away.Chris Kjelgaard looks at the prospects for US re-fleeting.

FLEETING THOUGHTS

recently conducted by AirlineForecasts led CEO VaughnCordle to the conclusion that the nation’s airline industry willbreak even and possibly post a $2bn-$3bn combined operat-ing profit this year. IATA, meanwhile, forecasts that the USairlines – most of which are IATA members – will achieve a$3.6bn operating surplus in 2009. Airline equity analyst JamieBaker, of JP Morgan, wrote recently that if fuel cost $70 abarrel on average in 2009 the US airlines should be able torecord a $9.2bn operating profit.

If achieved, this would be their biggest-ever annual sur-plus, notes aviation economist Adam Pilarski, senior vicepresident of Avitas – adding that if Baker’s forecast is ontarget, and if the jet-fuel price stays below $70 a barrel, asit was in early 2009, then the US airline industry wouldstand to better even the $9.2bn figure that Baker foresaw.

The tantalising possibility of fleet renewalAs a result, the major US airlines might hypothetically findthemselves in a position to consider a move that most haveput off throughout the long, dark financial years that fol-lowed the 9/11, 2001 terrorist attacks and the simultaneousUS recession: embarking upon large-scale renewal of theirfleets. Once global pioneers in working with manufacturersto specify and order the latest-technology commercial air-

IT HAS BEEN MANY YEARS SINCE THE MAJOR US AIRLINES,as a group, have led the world’s air transport industry interms of profitability, but that is exactly what is expectedto happen in 2009. Beset in the space of months by soaringfuel prices – which pushed airfares to levels fewer andfewer people could afford – and the onset of their nation’sworst recession since the Great Depression of the 1930s,the US majors had little choice but to slash capacity almostovernight in order to survive.

But, having felt the effects of the global economic melt-down before airlines in other parts of the world, the big UScarriers are now better positioned to benefit from the late-2008 plummet in oil and fuel prices than most of the airtransport industry. Although consulting firm Boyd GroupInternational’s baseline 2009 forecast for US airportenplanements expects passenger numbers to drop by someseven per cent to around 700 million, and AirlineForecastssees US airline revenues falling off by 10 per cent, or $12bn,the expected $25bn reduction in the US carriers’ combinedfuel bill compared with 2008 should see them at leastbreak even and possibly do much better than that.

Forecasts of US airline profitability in 2009 differ quite widely.An in-depth analysis of US macro-economic conditions



craft, the US airlines have seen their status slip as a result oftheir financial travails throughout the last decade to theignominious point where the average age of the US fleetwas in 2008 the oldest of any in a world region. This wasexemplified by the 35-year average age of the 75 McDonnellDouglas DC-9s in the then-Northwest Airlines fleet (71 ofwhich remain in service); the elderly 747-200F freightersoperated by the same carrier; the huge numbers of 15-to-25-year-old 737-300s, 737-400s, 737-500s and MD-80s foundthroughout the majors’ fleets; and the sizeable chunks ofmainline domestic capacity accounted for by older 767-200sand 757s.

So, with the exception of some of the fast-growing, low-cost airlines – whose fleets were almost new – and somegrowth capacity acquired in recent years by the biggermajors (particularly Continental), by 2008 it seemed therewere compelling reasons for the US airline industry to con-sider re-fleeting en masse. And, at one point in mid-year, asfuel prices soared to unprecedented levels, a large-scale re-fleeting seemed imminent despite the US airlines’ lack ofcreditworthiness. Across the board, the major US carriersfound there was a compelling need to ground older air-craft simply because of the fuel costs they represented.“Fuel [price], which was a very strong motive for replace-

ment orders, did express itself in at least one order,” saysCraig Jenks, president of New York consulting firmAirline/Aircraft Projects. “American substantially broughtforward its order for 737-800s. Clearly the financial com-munity was begging them to do so,” to begin replacing the300-plus MD-80s in its domestic fleet. By the end of 2008,American had grounded 43 MD-80s, according to UK avia-tion consultancy IBA Group.

737 Classics being eliminated from US fleetsAt the same time as American started replacing its MD-80s,other US majors began grounding their fleets of older 737s.“We’re on the path to total elimination of 737 Classics”from the US fleet, says Jenks. “Continental, United and USAirways are all exiting the 737 Classic – all of them drivenby the fuel situation.”

There are two notable exceptions to the trend – SouthwestAirlines and Alaska Airlines. Southwest has a large fleet of737-300s and a smaller fleet of 737-500s, but isn’t intendingin the short term to ground most of them. “Southwest hada different fuel price from the others” in 2008, notes Jenks:The airline’s consistent profitability throughout the yearsallowed it to hedge in advance much of its 2008 fuel con-sumption at prices far below the mid-year peak, where other,




less-fortunate or less-savvy competitors hadn’t. Alaska Airlines,which shed its once-considerable fleet of MD-80s throughout thetough years the US industry experienced from 2002 to 2007 in asuccessful effort to remain financially stable, is gradually shrink-ing its 737-400 fleet, but plans to still be operating 23 of the typeat the end of 2010.

But a combination of factors quickly acted to stifle any thoughtsof mass fleet renewal among the US airlines in 2008. When fuelprices dropped as precipitously as they had risen, and as theeffects of the US bad-home-mortgage financial crisis began tomake themselves felt throughout the national (and then theglobal) economy, the whole fleet-renewal equation changed forthe airlines. No longer was replacement of fuel-inefficient aircrafttheir prime consideration – capacity reductions extending foryears became their immediate goal.

Now, for instance, rather than ordering new aircraft for fleetrenewal, Delta and American are looking to prolong the lives oftheir MD-88 and 757 fleets respectively, says Owen Geach, com-mercial director of IBA Group. “Personally, I would be surprised ifwe saw a significant order from a US major in the next 12months,” he says. “They’re scaling down rather than growing.”

Capacity cuts now serving a different function“The cuts that were driven by fuel prices are now serving a dif-ferent function,” says Jenks. “The cutbacks became driven by thedownturn. The big difference is that the replacement motive ismuch weaker. The urgency of the fuel motive is not there anymore. What we really have is, for the first time ever in the US air-line industry, a consensus – not only among the majors but alsothe low-cost carriers – that capacity restraint is a good thing. Ithas become almost a dogma. For the first time ever, everyone isputting profitability before market share.” He says the only realexception is Allegiant Airlines, a niche low-fare airline which spe-cialises in serving secondary airports at southern-US sunspot des-tinations from tertiary airports at smaller US cities, using agrowing fleet of cheaply acquired MD-80s.

The US majors’ mass groundings in 2008 resulted in a 9.6 percent year-on-year decline in domestic capacity by January,

according to data compiled by ATW Online. All of the big six net-work airlines cut mainline domestic capacity by double-digit per-centages, with Northwest – now part of Delta – and Unitedleading the way with 17.9 and 12.5 per cent cuts respectively.For about a year, from the time the US recession is now known tohave actually begun in late 2007, through the mid-2008 frenzy ofhigh oil prices until the wheels came off the global economic jug-gernaut in the last three months of the year, the US majors founda higher-yielding alternative use for some of their surplus domes-tic capacity: redeploying suitable aircraft – particularly 757-200sand newer 737s – into short-to-medium-haul international mar-kets.

Continental, American and Delta all dedicated substantial num-bers of 757s and 737s to international routes, finding the 757 anexcellent aircraft for start-up and secondary transatlantic routesand the 737-700, 737-800 and 737-900 (in Continental’s case)useful for serving destinations in the Caribbean, Central Americaand northern Latin America. American Airlines used the opportu-nity presented by a slackening in domestic demand to beginreplacing its 33 ageing A300-600R widebodies with smaller 737-800s as the core aircraft on its extensive network of US-Caribbeanroutes.

Softening international traffic However, with the global economic meltdown has come thegrowing fear that international traffic is softening, particularly inthe high-fare premium-class cabins that represent the main com-mercial driving force on most long-haul international routes. Notonly is this a concern for US airlines that have switched capacityfrom domestic into international markets (for instance, it mayhave influenced American to replace older 767-200s on domesticroutes with 767-300ERs from its international network), but it isalso a worry to those US carriers which still have widebody ordersoutstanding from pre-downturn days.

Continental still has two new 777-200ERs due for delivery in 2010,which Jenks says are targeted for its Newark-Shanghai route.(While Continental also has 25 787-8s and 787-9s on order, theirdelivery dates – already postponed because of Boeing’s widely pub-licised 787 supply-chain teething troubles – are far-enough away inthe future that they are of little concern in the current global eco-nomic crisis. Similarly, while American signed a purchase agree-ment with Boeing in October for up to 100 787-9s in a deal thatis contingent on the airline obtaining approval from its pilots to flythe type, the first aircraft isn’t due for delivery (under Boeing’s lat-est revised delivery schedule) until the second half of 2013, nearlyfive years away. The last of 42 initial aircraft wouldn’t be delivereduntil 2018, and the last of 58 additional aircraft for whichAmerican obtained purchase rights wouldn’t be delivered until2020.

Of nearer-term concern are the widebody orders placed by thenewly combined Delta and Northwest. By the end of 2010 Deltais due to take delivery of eight 777-200LRs, which Jenks sayswere originally to be allocated to Delta’s planned new Atlanta-Mumbai route and other non-stop routes from Atlanta to China.However, the increasing competitive threat posed by the market-share-driven Gulf carriers – particularly in winning economy pas-sengers who find the Gulf airports an easier and quicker way toconnect to a multitude of Indian destinations rather than negoti-ating the difficult connections at India’s main gateway airportsMumbai and Delhi – “may be having an impact on Indianroutes,” says Jenks. This, and the slowing of China-US trade andChina’s manufacturing-driven economy, could potentially affectDelta’s appetite for 777-200LRs.


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Northwest’s 787s in doubtMeanwhile, as the US launch customer for the 787, Northwestbrought to its merger with Delta an outstanding order for 18early-delivery 787-8s, including three of the first five production787s. Northwest specifically ordered its 787s for the Detroit-Shanghai route and other USA-China markets, so “range wasrather important in that order,” notes Jenks. However, as a resultof zero-fuel weight problems caused by a design need tostrengthen the 787-8’s centre wingbox, Boeing admitted thatearly 787-8s would have a substantial range shortfall.

This made them unsuitable for the missions planned byNorthwest, and after the Delta-Northwest merger took place,Delta was quick to say publicly that it was considering droppingthe 787 order in favour of more 777-200LRs. Now, however,with a possible lessening of Delta’s interest in obtaining addi-tional 777-200LRs, “it has gone very quiet,” says Jenks.

In some cases, airlines looking to reduce capacity have beenable to negotiate sale/leaseback transactions to manage thedownsizing of their fleets efficiently. This is particularly true of air-lines wanting to reduce their 757 fleets, because FedEx has iden-tified the highly capable 757 as the aircraft it wants as thereplacement for its elderly 727 freighters, and investors arehappy to buy 757s with stub leases attached for near-term con-version to freighters. Wayzata Investments recently bought 15757s from UAL in such a deal, and on behalf of Citicorp JetTrading and Leasing bought 10 Northwest 757s with the samepurpose in mind.

Financing and leasing new deliveriesAirlines taking delivery of new jets this year and next have beenable to finance most of their deliveries – Continental, for instance,in an enhanced equipment trust certificate (EETC) deal arrangedbefore 2008 and others (such as American and US Airways) withbank financing backstopped by financing from Boeing or Airbus.

However, any US airline that might be contemplating a majorfleet renewal order will have to deal with aircraft financing andleasing markets that are uncertain at best, says Phil Seymour, IBAGroup managing director. “GECAS and other leasing companiesall potentially are facing issues, and ILFC has a major issue withits parent company,” he says. “We’ve got the perfect storm inaviation. The aviation financing sector, the leasing companiesand the airlines are all scratching their heads to find ways offinancing aircraft deliveries.”

IBA Group’s Geach adds: “BOC is looking to buy companies andis occupied with the [Chinese] domestic fleet. GECAS is offload-ing aircraft to dilute its regional fleet and lessee concerns. If youlook at previous cycles, ILFC has stepped in, but in the past itcould borrow money at attractive rates.” That is just the tip of theiceberg for ILFC, facing the possibility of its bank term lendingcovenants turning round and biting it with substantially increasedinterest rates if ILFC loses its double-A credit rating, he says. Someanalysts have even suggested ILFC, which has orders for 90 air-craft outstanding, could be the fifth or sixth most likely candidatefor an order cancellation.

Export credit agencies’ role crucial“The role of the export credit agencies is going to be crucial inthis, but what will it be?” asks Geach. “They’re really going tohave their work cut out to finance the existing orderbook,”

US MAJOR AIRLINES’ NEW DELIVERIESIN 2009 AND 2010With the notable exception of United, which has absolutely no aircraft on orderat all and by the end of 2009 will have grounded its entire fleet of 94 737-300sand 737-500s, as well as its six-oldest remaining 747-400s, every major US airlinehas some new aircraft due for delivery in the 2009-2010 period because of ordersplaced with manufacturers and lessors before the momentous events of 2008.

AirTran Airways is scheduled to take four more 737-700s this year (though twohave already been sold to a foreign airline) and 55 in all by 2016. Alaska Airlineshas 17 more 737-800s due by the end of 2010, though with eight 737-400s andseven 737-700s leaving its fleet the net result to its mainline fleet will be an addi-tion of only two aircraft. American is taking no fewer than 76 new 737-800s by2011 to replace grounded MD-80s and A300-600Rs on a one-for-one basis, toproduce a net reduction in capacity.

In addition to its two 2010 777-200ERs, Continental is adding 24 737-800s and737-900s by the end of 2010, with most of them due to replace 737-300s and 737-500s. (Continental is installing blended winglets on at least some of its remain-ing 737 Classics, but this is to enhance their resale value.) The Houston-basedairline has also agreed to lease four more 757-300s, and is pioneering a blendedwinglet installation and certification programme for the model so that (report-edly) it can operate the 757-300 on transatlantic routes.

The combined Delta-Northwest has outstanding orders for five 737-700s, 30 737-800s, five A319s, two A320s and 10 CRJ900s, in addition to the eight 777-200LRsand 18 787-8s the world’s largest airline is carrying in its orderbook. However,not all of these aircraft are due for delivery by the end of 2010. JetBlue Airways,meanwhile, will receive three new A320s and eight Embraer 190s this year (twoof which have been sold, though the sale of two others fell through due to con-ditions in the credit markets) and three of each type in 2010. JetBlue has out-standing orders for another 52 A320s and 59 Embraer 190s, though from 2007onwards the airline began deferring deliveries of many of its aircraft to as lateas 2016.

Similarly, while as of January Southwest had orders for 104 737-700s and optionson another 62 outstanding through 2018, the low-cost leader is only adding 13in 2009 and will actually reduce the size of its fleet overall by two aircraft thisyear to 535 737s by retiring or returning to lessors a total of 15 737 Classics. USAirways is taking 18 new A321s and five new A330-300s in 2009, but is reducingthe size of its fleet by four aircraft to 350 by retiring/returning eight 737-300s,four A320s and 15 757s.



though with national treasuries “underpinning what they do”there is some likelihood that the ECAs will be able to step up tothe mark to make sure financing deals on many new deliverieswill get completed.

That said, the US airlines can’t look to Ex-Im Bank to finance theirBoeing aircraft. Commercially, “in Europe we’re probably downto half a dozen banks” that are willing – or able – to finance air-craft deals, says Geach. “Citicorp in the US historically has beenactive, and there are pockets of lenders in the Middle East. In theUS, it’s probably down to the historic financiers of much of thefinancing requirements of the US airlines – the pension funds.”(One factor that could boost pension-fund interest in aircraft-based asset financing is the steep tumble in the Dow JonesIndustrial Index since its peak in October 2007, the fall exceed-ing 50 per cent by early March.)

For airlines that haven’t already closed them, EETC structuresaren’t likely to prove the answer in the near term, says Geach.“EETC structures came under a lot of criticism. With these struc-tures, appraisers had their arms twisted and a number of themhave unravelled, so it’s unlikely we’ll see a flurry of activity” anytime soon.

“I don’t think the [problem of] confidence in the general economyand the lack of confidence in financiers is going to be solvedovernight,” says Seymour. “We are seeing new entrants [to theaviation finance market] – we’ve had banks we had never heard oftwo years ago asking what the aviation market is all about – butthere are fewer competitors in the financing sector now.”

A bail-out for the 747-8?However, Seymour thinks it is conceivable that a major US fleetrenewal order could come in an unexpected way – and for anunexpected aircraft; the 747-8 passenger jet.

“Boeing executives are under severe pressure to get some ofthose aircraft ordered,” says Seymour. “I would imagine they’reputting all sorts of incentives on the table – including the enginemanufacturer [GE, for the GEnx powerplant that is the soleengine choice for the 747-8]. I think Boeing needs to see a sub-stantial order in the next year – otherwise, we may well see thatprogramme being put on hold.”

While the idea of an order for the 747-8 from a major US airlineis not immediately obvious, the chances of such a deal – involv-ing United or Delta-Northwest, perhaps – are all the more likely“when you look at the other equipment coming in on transpa-cific routes”, in Seymour’s view – “if you look at more and moreA380s coming in these routes, and gaining significant accept-ance, particularly in the premium cabin.”

Seymour believes it possible that, just as the US government hasdone in standing behind its automobile manufacturers, the federalgovernment and the banks will be “looking at the aviation sectorand the value [it represents] to their country – and in the same waythe US supported the motor industry, Boeing and GE will say,‘Support us’,” by providing financial assistance for US airlines “toorder some decent aircraft”. The US’s recent record of trade pro-tectionism argues that this could happen, he believes.

An unlikely scenario? Perhaps. Otherwise, however, Seymourthinks the chances of a US airline coming up for a major fleetreplacement order soon are slim, despite the opportunities theymight have to find aircraft at attractive prices if big holes startappearing in the Airbus and Boeing orderbooks. “Let’s say I don’t

think a replacement programme is in the top 10 of any US airlineexecutive’s ‘to do’ list” right now, he says.Jenks has a similar view. Despite the ability of US airlines to takeadvantage of any holes in Boeing and Airbus delivery slots, hesays: “There’s the old rule of thumb, that you need one year of

US airline passenger jet fleet – one year changeMar-08 Mar-09 Change

Boeing 737 (NG) 773 806 33

Bombardier (Canadair) CRJ 678 648 -30

Boeing 757 548 515 -33

Boeing 737 (CFMI) 545 419 -126

Embraer ERJ-145 498 485 -13

Boeing (McDonnell-Douglas) MD-80 477 430 -47

Airbus A320 375 378 3

Airbus A319 302 279 -23

Boeing 767 271 267 -4

Bombardier (Canadair) CRJ700 214 212 -2

Boeing 777 128 130 2

Boeing 717 123 110 -13

Bombardier (Canadair) CRJ900 94 131 37

Boeing (McDonnell-Douglas) DC-9 94 70 -24

Embraer ERJ-135 86 38 -48

Embraer 170 76 76 0

Embraer ERJ-140 74 74 0

Boeing 747 48 45 -3

Embraer 190 46 60 14

Embraer 175 44 90 46

Airbus A330 41 41 0

Airbus A300 34 22 -12

Airbus A321 32 36 4

Boeing 737 (JT8D) 24 12 -12

Boeing 727 18 2 -16

Boeing (McDonnell-Douglas) DC-10 17 17 0

Boeing (McDonnell-Douglas) MD-90 16 16 0

Fairchild/Dornier 328JET 16 4 -12

Airbus A318 11 11 0

Boeing (McDonnell-Douglas) MD-11 4 4 0

TOTALS 5707 5428 -279

Source: Ascend




“We always have to go a special route,” says Karsten Sensen, CEO and managing director of BavariaInternational Aircraft Leasing. Mary-Anne Baldwin talks to Sensen about the unique nature of his company.

BAVARIA INTERNATIONAL AIRCRAFT LEASING IS ONE OF THEleading independent aircraft leasing companies. The companyfirst operated as Bavaria Fluggesellschaft in 1958 and in 1969entrepreneur Josef Schörghuber bought Bavaria, later merging itwith the charter carrier Germanair in 1974. The company thentraded under the title Bavaria Germanair until 1977, when it soldits airline operation to German airline Hapag-Lloyd. Now its pri-mary business is arranging operating leases, which range in termfrom three to eight years. The company also provides financeleases of eight to 12 years, and becomes involved in sale-and-leaseback transactions.

Headquartered in Munich, Germany, Bavaria has a portfolio of 30jet aircraft, which includes 737-300s, 737-700s, 737-800s, 717-200s, A320s and Bombardier single-aisle jet aircraft. Its aircraftare leased to clients in Australia, Europe, Brazil, China, GreatBritain, Germany, Hungary, India, Italy, Mexico, Portugal, Russia,Spain, Turkey, and the USA.

Q: How do you distinguish yourself against other aircraftlessors in terms of your services and ethos?The difference is we are purely private and we would like to keepour independence as much as possible… that means we do notrely on third-party funding. Of course, we have to refinance ouraircraft in a very conventional way via banks, but not via any kindof investment companies whatsoever.

As we are private this limits our resources for investment. We donot have unlimited funding, so we must be very careful what weare doing. So far our gross is not comparable with a lot of publicleasing companies, but we think we have a very sound growthand a very sound financial background.

We are not really following the mainstream – we try to make ourdecisions when not everyone is holding aircraft. We did not orderin the last three years when everybody wanted to get aircraft andit was very difficult to negotiate. We ordered our aircraft at the

end of the last downturn – of course, by the end of 9/11 – andwe got the aircraft in the wonderful upturn of the past threeyears. Fortunately we won’t get any aircraft this year. But maybe,at the end of this year or the beginning of next year, when wefeel we are at the bottom [of the downturn] but there are signsthe aviation industry will improve, we will place orders. So we area little bit more anti-cyclic in our strategy.

If you look at our history – we started doing business in 1980 andI’ve been with the company since 1990 – we’ve been through acouple of ups and downs in aviation, and I think it proves that thisconcept is not a bad one… There are very few leasing companiesthat have survived over such a long time. And what’s the reason?The reason is, in many cases the business case was focused onhigh leverage and if you try to get the highest leverage, you willtake the highest risk if something goes wrong – for instance,the unexpected repossession of an aircraft. We don’t have thefunding to bridge this situation… so that’s what we try to avoid.Of course the resulting business case is, in many cases, not as opti-mised as with highly leveraged companies, but we are limited.

Q: Will you be taking advantage of the falling price of air-craft or any of the parked aircraft currently available?Even if you get a low-priced aircraft now, you have to place it andit’s always difficult to raise rentals. So we do not want things tobe complicated [at present] with the situation where we have anasset that we have to market. It is not our strategy [to buy up cur-rently low-priced aircraft], but it is also not our strategy to cherry-pick. Our strategy is that we place purchase orders for aircraft;these aircraft have our specification, our definition. And ourspecification and definition is that we will be able to place theseaircraft all over the world.

We place orders when we think ‘now is the right time’… we dothis all on speculation, and then we market the aircraft about oneyear before delivery. The advantage is that we have each aircraftspecified in a way that we can place it to China, [or] we can placeit to Europe. If you do a cherry-picking you’ll have aircraft sittingall over the place, even if they’re new. Even if [an aircraft is] spec-ified for an airline but is good for operation by another airline,that doesn’t necessarily give you the optimum opportunity tohave it operated by an airline somewhere else.

Q: What is your market and how active are you in carvingout a specific market segment?Because we are small and we cannot provide direct competitionwith big lessors who are buying many more aircraft from manymore countries and probably getting a much better price, wealways have to go a special route. Our focus is second-tier carri-ers – if an airline says ‘we need to lease two aircraft this year’[instead of requesting a larger order] then this is for us.

We also play in markets where other lessors are much more reluc-tant. The first airplane we placed [in Russia] was in 1993 – I thinkwe were one of the first [to do so]. We placed the first Boeing air-craft into Russia. Also, in terms of new aircraft, we tried to getstrategic positions, so although we were very small, we were thefirst leasing company to get the new-generation Boeing 737 andplace them in Russia, and this was a success story. We did this inIndia, and we placed the first new aircraft in China in 1993 also.

LESSOR FOCUS:

BAVARIA



And even though the 717 was not a success story, for us it was.We got these aircraft in 1999 and 2000 and placed them inAustralia to a small company which has now been purchased byQantas. We will have Qantas as our 717 lessee for another nineyears, until the year 2018, when the aircraft are 18 years old.

Q: Which aircraft are you looking to build into your port-folio next?These days, we are thinking very seriously about the [Bombardier]CSeries. It might be the right aircraft for us; we are not quite sureright now, but it’s of great interest. Geared-fan engine technol-ogy is a very good compromise and I think the next-generationaircraft may go this way. It is very difficult to achieve these fuelburn and emissions advantages on bigger engines, so it might bea good intermediate step. So we are following this up and if wethink the time is good we will make the strategic decision to bein the front row. The Mitsubishi Regional Jet is quite exotic; it maybe a good aircraft for us but there’s not the technology yet.

Q: What strategies and concepts will you hold close duringthe current downturn?We feel quite good about our remaining customers. Of course,we don’t have a crystal ball. But our customers are well settled intheir areas, they have good infrastructures, they are long-termexisting customers, so we feel quite comfortable with them. Ofcourse, this is not the first crisis we’ve managed. We consider ourlessees as business partners. If we are convinced their concept isfine, their strategy is fine, but they have to overcome one, two,maybe three difficult years… in the past we were very much will-ing to find advanced solutions rather than declare default andget aircraft back. We are used to this down-and-up rhythm andwe always try to find solutions. The present situation is so unique we really haven’t anything else




BAVARIA’S AIRCRAFT FOR LEASE / SALE

Boeing 737-700 * SN 34401 A/C TT (Hours) 5400 A/C TC (Cycles) 2700Engine Type CFM56-7B22 MTOW (lbs) 149,900Year of Manufacture 1/669 Stage 3Availability Immediately Config. Pax, 149Comments EASA certified Aircraft for Lease/Sale

Boeing 737-700 * SN 34402 A/C TT (Hours) 4300 A/C TC (Cycles) 2550Engine Type CFM56-7B22 MTOW (lbs) 149900Year of Manufacture 2/803 Stage 3Availability Immediately Config. Pax, 149Comments EASA certified Aircraft for Lease/Sale

Boeing 737-300 * SN 24212A/C TT (Hours) 42950 A/C TC (Cycles) 30500Engine Type CFM 56-3B2 MTOW (lbs) 138500Year of Manufacture 1988 Stage 3Availability immediately Aircraft for Sale

Boeing 737-300 * SN 24211*A/C TT (Hours) 46350 A/C TC (Cycles) 25674Engine Type CFM56-3B2 MTOW (lbs) 138500Year of Manufacture 1988 Stage 3Availability immediately Aircraft for Sale for part out without engines

Boeing 737-300 * SN 24214*A/C TT (Hours) 45694 A/C TC (Cycles) 24530Engine Type CFM56-3B2 MTOW (lbs) 138500Year of Manufacture 1989 Stage 3Availability immediately Aircraft for Sale for part out without engines

to compare it with, but any downturn has an end and then youhave a recovery stage. If you look into the past – although [pastrecessions] aren’t comparable – I think, and I’m not the only onesaying this, that we will overcome this current situation over thenext two years. During this period of time, it will be very difficult ifyou get aircraft and have to lease them. It will be very difficult ifyour lessee’s contract expires. But fortunately all our contracts aremuch longer, so we should be able to overcome this quite easily.

The most difficult thing is that – with all the assistance the USgovernment [and] the European governments are giving to theclientele, supporting their financings – the fact is that if a com-pany needs all this assistance to get funding together, you’restarting on a very weak basis. I do believe that a lot of companiesgetting aircraft on this very weak basis will have problems overthe next one or two years. Then you have big disasters. You havebig aircraft with high financing [costs] and to get this cured is areal challenge.


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The US airline business probably distils all the ills afflicting the aviation industry as a whole at present. Oldaircraft, exorbitant fuel prices and a slack economy present a glum picture. Yet there is hope, writes PeterMorris, chief economist at Ascend.

YEARS AGO AND LOST IN THE WILDS OF IRELAND, I MET Afarmer from whom I asked directions. “Limerick?” he said. “If Iwere you I wouldn’t start from here.” I think the US aviationindustry appreciates what he meant. More than three decadesafter facing the turmoil of deregulation, the resulting explosionof competition, and being dragged to the edge of a financialabyss in 2002-4, it has downsized, streamlined and squeezed toreturn to profit. No sooner had this seemingly impossible featbeen achieved, when along came a tidal wave of fuel priceincreases combined with a weak economy, threatening to swampmost of the airline industry.

Without doubt, given a choice, the US airline industry would not‘start from here’. Faced with high and increasing levels of debt, lowcash reserves, aged fleets, a softening customer demand and anunenviable record for capital destruction, anywhere would be bet-ter than here.

Yet this is the only choice – to find a path when there appears tobe no road back or ahead, and no way to stand still. Just whatare the options?

Taking the long viewDespite the current level of crisis, it is worth a reassuring look atthe long-term fundamentals. Air travel is a critically importantresource for the US economy, responsible for over $1,200bn ofdirect or indirect output, and around nine per cent of US jobs.Airlines and aviation suppliers that survive the current problemswill be well placed to improve their businesses in the future.Domestic and international air networks provide massive andcontinuing competitive advantage for the US economy againstother global competitors such as India and China.

While recent US aviation market growth has slowed in the light ofboth price increases and the deterioration of the travel experience,the US will remain for the next decade and beyond by far thebiggest world aviation market. Future market growth will con-tinue, driven by GDP growth. So what characteristics will ensurelong-term survival of airline suppliers to meet this market need?

DEVELOPING THE USAVIATION INDUSTRY



First, the successesWhatever the criticisms of the US Chapter 11 option, it has pro-vided an umbrella for several of the majors to reinvent their busi-nesses over the 2002-5 period. As a result of restructuringmeasures taken while under this protection, costs have beenslashed, productivity increased and overall profitability restored.This success inevitably came at a price, both for staff who foundtheir terms and conditions significantly eroded; the travellingpublic, who found falling service levels, fuller planes and risingfares; and shareholders, who found much of their investmentdestroyed. Passenger load factors on board many of the airlinemajors climbed to reach an average of 82 per cent in 2007 – anastonishing 10 points higher than the apparent ‘peak’ load fac-tor levels of 2000.The system has never operated so efficiently,although the challenge now is how a system that has beensqueezed to the limit over the last five years can accommodatethe further challenge of fuel prices doubling within a year.

The unanswered issuesDespite the industry’s success in developing its survival skills, anumber of key underlying issues have still not been resolved bythe recent return to overall profitability of most US airlines. Theseinclude: regulatory framework and political interference; fleetage; and consolidation. These issues seem set to dog the indus-try until they are addressed.

Airline deregulation opened up a new world of competition fordomestic airlines in the US, but did not end the close interest ofUS legislators in air transport. The US airline share ownership lim-its effectively block any overseas capital interest, and do a veryeffective job in delaying the start up of new US-based initiativessuch as Virgin America. While various arguments from job pro-tection to home security issues are advanced to support the cur-rent legislation, it does effectively prevent a desperately neededflow of capital to revitalise the industry. As US investors look atthe startling record of capital destruction by the industry, there isunsurprisingly a reluctance to make the same mistake again.

A capital inflow is particularly needed to renew the US majors’fleets, which have become among the oldest in the world. It isestimated that the capital replacement cost for the US fleet overthe next 10 years is $110bn. With Northwest, Delta, Americanhaving around 50 per cent of their fleets over 15 years old, USAirways 40 per cent and United around 35 per cent, fleetrenewal to reduce fuel costs has become an imperative. A NWDC9 consumes twice as much fuel per seat as a modern nar-rowbody, and no amount of write-down on the original assetappears to work at these fuel prices. On transatlantic services,for example, airlines with the older fleet can be paying over$15m more p.a. than their competitor for fuel in the same pas-senger markets. While the low-cost airline model is often basedon the latest fleet technology, the majors will find themselvesincreasingly competing with higher costs, older aircraft andhigher customer prices. This is not a formula for success. Whileit is admittedly unlikely that there would be a huge rush ofpotential investors if the US were to open up its aviation marketsto broader competition on both the domestic and internationalfront, the sheer size and scale of this market would always belikely to attract investors. These could range from the strongeralliance partners such as Lufthansa, Air France/KLM and BritishAirways, to the more ambitious and aspirational global playerssuch as Emirates, Aeroflot or Air China. From a customer pointof view the increased diversity would seem to be only a goodthing, and for investors it would bring the reassurance of glob-ally backed expert players that would be in the business for thelong haul. Even for employment it seems that there would befew negatives, since domestic US services will always need USemployees. However, investors will be cautious and it is highlylikely that the relentless reduction in real airline fares seen in thepast three decades will start to tail off, since both the real costsof fuel and capital will now reflect the markets.

The long and winding road: US airlines must find a way aheadwhen there is no way back and no way to stand still

With 50 per cent of Northwest, Delta and American Airlinesfleets over 15 years old, a capital inflow is needed to renewthe US majors’ fleets






The subject of airline consolidation has come up repeatedly –some view it as the only option. While the idea of achievingeconomies of scale through airline merger is theoretically attrac-tive, the reality seems quite the opposite. Merging two financiallydesperate airlines seems more likely to create a third desperateairline than it is a surging new business model for the industry.The previous decades are littered with the case stories of US air-line consolidations that failed or were ineffective. How themerger of Delta and NW fleets to create a new behemoth withover 450 aircraft over 15 years old will create efficiencies is cer-tainly not clear to us. A major stumbling block will always bestaff acceptance, and time and again the internal effort requiredon such matters has usually undermined a great proportion ofthe benefits that might have been achieved. It seems that thechallenges on this front, combined with lukewarm signals fromlegislators have put such mergers on the back burner for now.However, in the case of Continental Airlines there may be anexception that is well placed to negotiate from a position ofstrength, and thus makes it an interesting consolidation target

Choosing the right tacticsA common call among the US Airlines has been that there is ‘toomuch capacity’. With the US airline industry headed for a lossthis year if fuel prices continue at current levels, it is tempting toagree. However, a more appropriate comment might be thatthere is ‘not enough capacity at the right price’ for the market.Despite years of cost cutting and rationalisation the US majorshave unit costs per available seat mile (ASM) in the range 13c-16c in 2008. In contrast Jetblue and Southwest show operatingcosts in the range of 9c per ASM – more than a third lower, evenwith higher fuel prices. In relative terms this gives them a signif-icant market advantage, which is further reinforced by the effi-ciency of their fleets and overall business models.

The market problems for the US majors are highlighted in the USMajors Domestic Markets graph. Revenues have fallen since apeak in 2000, and passenger numbers are about the same levelas in 1988. There has been a significant jump in load factors asthe airlines have had to do ‘more with less’. At the same timeSouthwest and other low-cost airlines have managed to increasetheir business profitably on a lower cost base.

New World: volume growth vs profitablegrowthThe global airline industry has achieved growth of around twicethe rate of GDP through the simple expedient of economies ofscale: greater efficiency, fuller planes and lower prices.Meanwhile, key input costs such as fuel and aircraft costs fell inreal terms, and customer appetite for increased aviation servicesgrew significantly. The US market has been the first to experienceall these elements from deregulation through to market maturity,and perhaps supplies some indicators to the watching world asto what could be in store for the aviation industry overall. In thenew US world of stagnating GDP and traffic growth rates and apartial decoupling of traffic growth from GDP, two routes to air-line success seem possible. The first is through the low-costmodel, which is likely to continue its expansion through the sim-ple expedient of having the lowest price. For those airlines withhigher costs the new focus will have to be on ‘shrinking in toprofitability’, a tactic employed successfully by British Airways inmany sectors in recent years. The result will be that routes andflights that lose money will increasingly be dropped; clearly, withprojections of capacity reductions of around 10 per cent for sum-mer 2008, this is already becoming a reality.

The further sting in the tail of the fuel price for many majors isthat the economics of the regional jet aircraft used by many ofthem to provide hub feed is now very much under threat. Evenwith the latest regional jets operating costs per seat have risendramatically, and some stark choices are going to have to bemade as to whether to cut service or revert to ATR operation.This is a further factor that will weaken the hub-and-spokemodel, but could also potentially drive a renegotiation of scopeclauses with pilots. Desperate times will call for desperate meas-ures.

So, if we had to sum up the various factors, what would we say?

Apart from safety and security oversight, it is surely time for thelegislators to stop interfering in the airline sector, either directlyor indirectly.

The fuel price crisis focuses more than ever on the right businessmodel for markets, and the need to restore profitability again

Fleet replacement is a problem that will not go away, and a life-cycle costing of options reinforces this.

Finally, the industry needs to plan for the worst, since thatappears to be what has constantly surprised it in the past. But inevery market there are winners and losers, and choosing theright business model for the right market is key.

350

300

250

200

150

100

50

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

US Majors Domestic Markets, 1980-2008

PaxRPMASM

Revenue

Source: ATA: Excludes Southwest and Express carriers

Chapter 11 provided a way for several of the majors to rein-vent their businesses over the 2002-5 period


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check_FPA:AFM_58 12/11/08 16:21 Page 3



SINCE 2007, WHEN THE REALITIES OF AN ALTERED GLOBAL eco-nomic climate began to transpire, airlines worldwide have beenfaced with the prospect of cancelling or delaying deliveries ofnew aircraft or sub-leasing aircraft to other carriers. At the sametime, lessors have played a dominant role in acquiring new air-craft directly from manufacturers and through sale-and-lease-back transactions as well as purchasing second-hand aircraftfrom carriers and other leasing companies.

The operating lease market is growing, according to JohnMcMahon, chief executive officer of Ireland-based Genesis Lease.“Many airlines do not have the balance sheet strength to supportthe large-scale acquisition of aircraft but they can use cashflowsfrom operating the aircraft to support a lease. In addition,lenders may feel more comfortable lending to a lessor with adiversified portfolio of airline customers and the capability toremarket the aircraft – should it be necessary – rather than directto a single airline. Aircraft leasing is part of a broader trendtowards the separation of the ownership of high capital valueassets from operation of these assets.”

AerCap Holdings is equally upbeat about business going for-ward. “The proportion of the global fleet under operating leasehas increased from 17 per cent in 1990 to 30 per cent in 2006.The industry believes that operating leases will continue tobecome more popular and that 40 per cent and more of theglobal fleet will be subject to operating leases over the course ofthe next 10 years,” according to Frauke Oberdieck, a spokesper-son at the Netherlands-based lessor.

Lessor significanceAircraft leasing companies can be roughly divided into three cate-gories. The first category includes lessors with strong corporateparents, such as Aviation Capital Group (ACG), a wholly ownedsubsidiary of Pacific Life Corporation, parent company of PacificLife Insurance; Aviation Lease and Finance Co (Alafco), majorityowned by regional powerhouse Kuwait Finance House; BOCAviation (formerly Singapore Aircraft Leasing Enterprise or SALE),now a unit of Bank of China; Dubai Capital, the aircraft leasingarm of Dubai Aerospace Enterprise (DAE); GE Commercial AviationServices (Gecas), a unit of worldwide conglomerate GE; andInternational Lease Finance Corporation, the leasing subsidiary ofinsurance giant American International Group (AIG).

The second category includes listed companies, such as AerCap,Aircastle, Genesis Lease and soon-to-be-listed AWAS.

The third category includes a plethora of small aircraft lessors.‘First-tier’ lessors continue to be big business for aircraft manu-facturers, especially Airbus and Boeing, as these companies buildup fleets to satisfy increasing global demand for aircraft.

In early January, DAE confirmed a $10.9bn order for 100 Boeingaircraft comprising narrowbody and widebody aircraft, firmingup a November 2007 letter of intent (LOI). DAE also penned amemorandum of understanding (MOU) in November 2007 withAirbus for 100 aircraft, including narrowbody and widebodytypes. Rumours are that DAE may place another order within 18months for about 50 A330 and 777 aircraft.

LESSORS RIDINGOUT THE STORM

If there is a single beneficiary of the perfect storm that includes record jet fuel prices, fallout fromthe sub-prime mortgage debacle, slowdown in the world economy and delays in deliveries of new,fuel-efficient Airbus and Boeing aircraft, it is the aircraft leasing sector. Whether this is a short-term phenomenon or a long-term trend is yet to be seen. But a quick look at the order books of bothAirbus and Boeing indicates that aircraft lessors are bullish on the prospects of the operating leasemarket. Jim Smith reports.



DAE entered the aircraft leasing arena in November 2007 withthe simultaneous announcement of the acquisition of eightA330-200 aircraft from Emirates under a sale-and-leasebackscheme, and the acquisition from Gecas of a total of 20 aircraft,comprising 737 and A320 aircraft.

In Asia, meanwhile, BOC Aviation plans to triple the size of itsfleet to 300 aircraft over the next five years, taking advantage ofsale-and-leaseback opportunities that would allow the lessor toacquire aircraft without being captive to the long lead times fornew orders precipitated by bulging manufacturer order books.Estimates are that Chinese airlines will take delivery of 800 aircraftover the next five years, with sale-and-leaseback transactionsexpected to account for about 20 per cent of that total.

In the ‘second-tier’, lessor AWAS placed a firm order in Januaryfor 75 A320-family aircraft with 25 options, after placing a firmorder in December 2007 for 31 737 aircraft with 19 options.AWAS also ordered six A330-300 aircraft in March 2008.

Finding financeThe top-tier of lessors benefits from the ease with which it canraise capital to fund aircraft acquisitions. A banker with a largeEuropean bank active in financing aircraft lessors and who askedto remain anonymous tells AF&NM: “I see no major capital-rais-ing issues with the first category of lessors. We continue to dobusiness with some lessors in the second category, provided thata deal is well-diversified and well-secured.

“However, we believe that growth among lessors in the secondcategory is limited by a lack of access to equity markets for thetime being. For category three lessors, you have to be careful.While some of these lessors have decent aircraft portfolios, oth-ers have portfolios overloaded with 737 Classics, the values ofwhich will drop substantially.

“All lessors will have to pay higher margins than in the past;there are no more AAA-rated monoline-wrapped deals with verylow margins. This will reflect the increased airline risk and assetrisk,” the banker adds.

There is little doubt that the business is a good bet for lessors,lessees, and the banks that provide the former with finance.“Operating lessors are a key sector for a number of banks,including DVB Bank,” says Bert van Leeuwen, managing directorand head of aviation industry research at DVB. “We have seenthe market share of operating leases increase over time and itwould appear to the casual observer this takes away market vol-ume from the banks. However, many of the operating lessorsneed bank financing themselves for their aircraft acquisitions, sothe majority of the market share taken by the operating lessorsis actually coming back to the banks.

“In many cases the involvement of an operating lessor createsanother layer of comfort for the banks as operating lessors willbe well equipped to manage and remarket the aircraft in case ofa default by the lessee. However, it is important that the lessorhas a well-diversified portfolio to prevent being dragged downby the default of one or two lessees. In some cases banks haveacquired operating lessors themselves, providing them with acaptive funding source. DVB deliberately has not taken this stepand does not have its own operating lessor to prevent potentialcompetition between the bank and an important client group[the lessors]. DVB Group, however, via its Deucalion connection,frequently teams up with operating lessors to invest equity innew transactions,” van Leeuwen continues.

“Operating lessors are approximately one-third of the aviationportfolio of HSH Nordbank,” according to Mathis Shinnick,global head of transportation at HSH Nordbank. “They are veryimportant to our business. Their approach to asset managementand financing requirements fits with our business model verywell. It is important to note that operating lessors have perfecteda very comprehensive asset management capability that is notonly efficient for airlines but also for the financial markets,” headds.

Sale & leasebackAside from the outright leasing of aircraft to operators, sale-and-leaseback transactions can also be mutually beneficial to lessors,lessees and banks active in the market.

“The sale-and-leaseback market is driven by several factors,”says van Leeuwen. “First, some airlines want to free up liquidity.Second, in the past two to three years, investors, private equity,hedge funds and new and expanding lessors were outbiddingeach other for the privilege of adding aircraft to their portfolio.We believe in many cases that buyers were overpaying for theseaircraft. Third, for airlines the sale-and-leaseback structure is anexcellent instrument to transfer the asset risk in vulnerable assettypes to ‘less educated’ investors. Airlines looking to acquirenext-generation fuel-efficient aircraft should have taken advan-tage of the overheated investor climate by selling less-efficientequipment whilst still having the benefit of operating theseolder aircraft until new technology is delivered,” he states.“As an example, 737 Classics were very popular in the sale-and-leaseback market. With announced fleet reductions, severalhundred of these gas guzzlers may soon end up in the Arizonadesert, with severe negative implications for the asset values.However, sale-and-leasebacks are also an excellent instrumentfor financing new-technology aircraft. Airlines benefit fromplacing large orders for new aircraft through significant volumediscounts. The sale-and-leaseback instrument allows the airlineto mix and match leased and owned aircraft. In addition, manyinvestors are willing to pay a premium price for these aircraft [onlease] allowing the airline to generate liquidity or even book asignificant profit,” van Leeuwen adds.

Tied in: financial constraints are forcing airlines to lease aircraftinstead of buying




“Sale-and-leasebacks provide a second round of opportunity tofinance the lessor that has acquired the aircraft. During the lasttwo to three years, we have observed several lessors and otherinvestors willing to pay huge premiums for aircraft with leasesattached – including even leases to second-tier airlines. It remainsto be seen during the downturn we are now confronted withwhether these premium prices will prove to have been justified,”concludes van Leeuwen.

HSH Nordbank also sees the sale-and-leaseback market as animportant part of the bank’s air finance business. Shinnick states:“The growth of the number of aircraft under ownership by oper-ating lessors – and thus the resulting growth in sale-and-lease-backs – has provided good opportunities for structuring andarranging financing.

“I see sale-and-leasebacks into large diversified pools of aircraftowned and managed by an operating lessor as a very efficientway to get capital from the financial markets. Combined with air-craft management capabilities, sale-and-leasebacks that result instronger operating lessors will, therefore, continue to play amajor role in the efficient availability of aircraft to airlines regard-less of fuel price issues. Therefore, I see the operating lessor mar-ket continuing to grow.”

The sale-and-leaseback market tends to gain momentum duringtimes when airlines take delivery of aircraft in an environment ofcash preservation and tight banking conditions. It will alwaysform part of the growth strategy of lessors, such as AerCap. Asfor the A380, A350 and 787, “it is too early to say,” commentsOberdieck at AerCap.

China’s leasing ambitionsOne indication that the aircraft leasing market is robust is thenumber of companies and funds entering the sector, with Asiaand the Middle East tipped as prime venues for these ventures.In 2007 Industrial and Commercial Bank of China (ICBC) estab-lished a leasing company that invests in big ticket assets, includ-ing aircraft and ships. The leasing company was solely funded byICBC with a registered capital on $300m. China Merchants Bankwas also green-lighted by the country’s regulator last year toestablish a big-ticket leasing business, also with $300m in regis-tered capital. Other banks in China plan forays into the aircraftfinance sector

Beijing-based aircraft lessor Dragon Aviation was formed inOctober 2006, a venture of China Aviation Supplies Import &Export Group Corporation (CASGC); AerCap, which will managethe aircraft; and French bank Calyon, a major player in the avia-tion finance sector. The lessor will initially focus on narrowbodyaircraft with a focus on the People’s Republic of China market.

China Development Bank recently entered the aircraft leasingmarket through the acquisition of a 95 per cent stake inShenzhen Financial Leasing. Other shareholders include HNA(Hainan Airlines) Group and Xi’an Aircraft Industry. Registeredcapital of the new company is $1.1bn.

The new players should find a willing market on their doorstep.China Southern Airlines, for example, recently approved sale-and-leaseback contracts for five A321-200s with Chinese leasingcompanies, following completion of three similar leasebacks in2007. The carrier has transferred purchase rights on three A321-200s to China Aircraft Leasing (HK). Similarly, CSA has transferred the purchase rights of two A321-

First-tier lessors continue to be big business for Boeing and Airbus


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200s to Shenzhen Financial Leasing and will enter into long-termleases. The three leaseback arrangements completed for A321-200s in 2007 were with the same leasing companies. CSA is alsoworking with Shenzhen Financial Leasing for the sale/leasebackof six A330 aircraft.

Middle East and beyondThe Middle East, awash with oil money, has the potential tobecome a major centre for aircraft leasing. Although the few leasing companies domiciled in the MiddleEast do benefit from generous and supportive governments andvery deep sources of equity, what the region arguably needs totake it to another level is a more active local banking market andfully functioning capital markets.

While there is considerable liquidity in the Gulf Co-operationCouncil (GCC) region, many question whether there is sufficientimpetus from bankers in the region to get into aircraft finance,bearing in mind the Middle East’s preference for real estate andthe bond markets. But there has been some movement in thisdirection – particularly as the region hosts a large number ofequity investors.

Established in 2007 as a joint venture between Bahrain-basedUnited International Bank and Muzon Partner, aircraft lessorFalak Investments, a company related to Switzerland-basedNovus Aviation, plans to expand aircraft leasing activities. NovusAviation is the asset and aircraft lease manager of FalakInvestments and is already a familiar name in the aircraft financemarket. Almost 10 years ago, Novus established the MuzunInternational Aviation Fund (MIAF), which has subsequently beencompletely sold out.

Falak Investments was established with 11 aircraft, valued atabout $400m. The company recently signed a letter of intent(LOI) to acquire five additional aircraft, including A320-family,737NG, 747-400 and ERJ-145 aircraft.

In 2008, Australian banking group Investec entered the aircraftleasing business with the launch of Investec Global Aircraft Fundand A$73m ($68m) in initial capital. Seed investors include threelarge industry superannuation funds: Auscoals Superannuation,Seafarers Retirement Fund (SRF) and the Stevedoring EmployeesRetirement Fund (SERF).

Impact of new playersThere appears to be room in the aircraft leasing business for thenew entrants.

“Aircraft are mobile assets that can be operated in any part ofthe world. Aircraft leasing is a truly global business and newentrants should always be taken seriously irrespective of whetherthey start off with a particular regional focus. I do not believethey adversely affect the business. On the contrary, generallyspeaking, they act as a new source of capital for the industryfrom sources that might not otherwise participate in aircraftfinancing,” says McMahon at Genesis Lease.

“The last few years have seen record orders from the world’s air-lines. In common with previous industry cycles, it looks as if theseaircraft will be delivered in times that are far more challengingthan when they were ordered. While I expect that some deliver-ies will be deferred, airlines will be looking to lessors like Genesisto support many of the deliveries through sale-and-leasebacks.Since we have not placed speculative orders ourselves, part ofour fleet build-up strategy is to support airlines in this way andbelieve there will be plenty of opportunities to do so.

“A successful lessor might have a geographically and customer-diversified portfolio of the right aircraft. In Genesis’ view the rightaircraft are latest-generation aircraft that are less than 10 yearsold and that have large operator bases,” adds McMahon.

According to van Leeuwen, observation of the global lessor pop-ulation indicates that “after the consolidation wave we haveseen over the last two to three years, some of the lessors con-trolled by financial institutions may now – partly – be up for saleas corporate parents need the liquidity for their core business.This may result in a reduction in the number of traditional west-ern lessors. On the other hand we see new initiatives comingfrom Asia and the Middle East to set up new lessors. In addition,some airlines with surplus aircraft or order positions may take ini-tiatives to become ‘quasi-lessors’ themselves”.

“We believe these startups are to be taken seriously, as they havedetermined financial backing and the aim to build global fran-chises over time,” says Oberdieck.

It would appear that leasing companies will continue to be amajor force in providing operators with a significant share of air-craft, at least over the short- and medium term. What remains tobe seen is to what extent lessors will provide the industry withnew-technology aircraft, either outright or through sale-and-leasebacks.

The number of aircraft supplied by lessors could diminish if theprice of fuel decreases and stabilises, and operators return toprofitability, taking aircraft assets on balance sheet to benefitfrom depreciation.

However, if reports from trade associations and industry analystsprove to be true, fuel prices are expected to remain high. Airlinesare also parking existing aircraft and may elect to take those air-craft out of mothballs if an upturn materialises. Some existingoperators are teetering on the edge of bankruptcy and consoli-dation is expected to swallow up other carriers, decreasingdemand for all but new-technology aircraft.

A safe bet: lessors have stayed strong and can therefore raise funds with relative ease



Generic Mkt Value Current Grand AvgManager (Variant/BuildYear In Service Stored Total On Order Total Lol Option Option Lol Age Operators

Aircraft Lessors — Top 50 ranking list

1 GECAS 40414.5 1762 58 1820 206 2026 19 64 23 9 257

2 ILFC 39155.7 994 33 1027 159 1186 2 2 0 6 204

3 CIT Aerospace 7040.1 235 5 240 114 354 0 0 0 7 111

4 Babcock & Brown Aircraft Management LLC 6906.3 263 14 277 20 297 0 0 0 10 90

5 RBS Aviation Capital 6608.6 205 2 207 11 218 0 0 0 3 66

6 AWAS 6001.1 221 2 223 138 361 0 44 0 11.4 96

7 Aviation Capital Group 4829.7 200 9 209 108 317 0 0 0 10 102

8 AerCap 4692.5 205 16 221 85 306 0 0 0 12 87

9 Aircastle Advisor LLC 3965 131 5 136 15 151 0 0 0 12 68

10 Boeing Capital Corp 3960.2 241 23 264 0 264 0 0 0 11 58

11 ORIX Aviation Systems Ltd 3250 110 0 110 0 110 0 0 0 10 37

12 BOC Aviation 3163.8 85 0 85 73 158 10 12 10 3 37

13 Macquarie AirFinance 3032.4 112 8 120 1 121 0 0 0 11 54

14 Allco Finance Group 2750.5 66 0 66 0 66 0 0 0 4 14

15 Global Aviation Asset Management Pty Ltd 1636.5 51 0 51 0 51 0 0 0 6 27

16 Sumisho Aircraft Asset Management BV 1572.5 45 2 47 0 47 0 0 0 6 18

17 Pembroke Group 1416.8 68 5 73 0 73 0 0 0 9 23

18 Dubai Aerospace Enterprise (DAE) 1380.9 27 0 27 100 127 100 0 0 3 12

19 Sky Holding LLC 1093.2 71 19 90 0 90 0 0 0 19 44

20 Volito Aviation AB 858.5 48 2 50 0 50 0 0 0 13 27

21 BAE SYSTEMS Regional Aircraft Asset Mgmt 846.6 159 53 212 0 212 0 0 0 15 42

22 BCI Aircraft Leasing Inc 734.4 43 4 47 0 47 0 0 0 17 14

23 Q Aviation LLC 672 25 1 26 0 26 0 0 0 12 8

24 Waha Leasing 575.5 21 2 23 0 23 0 0 0 10 14

25 AAR Aircraft Sales & Leasing 492.6 41 0 41 0 41 0 0 0 16 14

26 Mitsui Bussan Aerospace Corp 488.1 26 0 26 0 26 0 0 0 9 11

27 GOAL German Operating Aircraft Leasing 452.67 33 2 35 1 36 0 0 0 8 12

28 FGL Aircraft Ireland Ltd 432.3 24 0 24 0 24 0 0 0 11 10

29 Bavaria International Aircraft Leasing GmbH 427.9 18 2 20 0 20 0 6 0 9 10

30 SkyWorks Leasing LLC 364.4 31 4 35 0 35 0 0 0 18 5

31 Safair Lease Finance 335 22 0 22 0 22 0 0 0 12 6

32 Vx Capital Partners 333.9 33 9 42 0 42 0 0 0 22 5

33 Saab Aircraft Leasing Inc 331.44 132 21 153 0 153 0 0 0 13 24

34 Aircraft Leasing & Management 319.9 22 3 25 0 25 0 0 0 8 5

35 World Star Aviation 297.2 42 8 50 0 50 0 0 0 21 25

36 Apollo Aviation Group 270.6 27 6 33 0 33 0 0 0 19 9

37 Airfleet Credit Corp 242.5 17 4 21 0 21 0 0 0 15 4

38 Nordic Aviation Contractor A/S 223.1 50 9 59 0 59 0 0 0 19 25

39 First Greenwich Kahala Ltd 207 20 0 20 0 20 0 0 0 13 9

40 Aergo Capital Ltd 182.3 52 12 64 0 64 0 0 0 23 18

41 Tiger Aircraft Trading Inc 174.2 9 13 22 0 22 0 0 0 18 3

42 Magellan Air 137.9 19 4 23 0 23 0 0 0 14 12

43 Automatic LLC 128.1 13 8 21 0 21 0 0 0 21 6

44 JetFleet Management Corp 98.9 36 2 38 0 38 0 0 0 19 17

45 Aircraft Financing and Trading BV 93.85 28 1 29 0 29 0 0 0 16 11

46 Avmax International Aircraft Leasing Inc 84.5 13 9 22 0 22 0 0 0 15 10

47 Compass Capital Corp 63.5 5 17 22 0 22 0 0 0 22 8

48 Jetran International Ltd 32.7 7 18 25 0 25 0 0 0 25 9

49 Global Aviation Leasing 7.7 4 16 20 0 20 0 0 0 34 5

50 Aviatechnologia Leasing N/A 16 4 20 0 20 0 0 0 20 9

1 x 737-300 with CFM56-3B2 engines. Available for sale from March 2009.MSN:23774 - YOM:1987

1 x 737-400 with CFM56-3C1 engines. Available for sale from January 2009.MSN: 24124 - YOM: 1989

2 x A320-200 with IAE V2527-A5 engines. Available for sale or lease from April 2009and May 2009. MSN 425 – 453 – YOM: 1993 – 1994 respectively.

1 x A320-200 with IAE V2527E-A5 engines. Available to lease from October 2008. YOM:2002 – MSN: 1676

1 x 737-300 with CFM56-3B2 engines. Available for lease from March 2009. YOM:1990

1 x 737-400 with CFM56-3C1 engines. Available for lease from January 2009.YOM: 1998

CIT

ORIX

Company Commercial Jet Aircraft for Sale or Lease Phone Email/Web Contact

(353) 1 656 1012 [email protected] Brian Connolly

+353 1 670 0633 paul.o’[email protected] Paul O’Dwyer




REPORTING ON THE AVIATION INDUSTRY HAS BEEN A depress-ing task of late: capacity is being slashed in many markets;employees are being jettisoned by the thousand; and airlinesseem to be going under on a weekly basis. Therefore it’s alwaysa welcome respite to talk to the lessors who, despite the doomand gloom, retain a cautious optimism.

Franklin Pray, CEO of Ireland-based AWAS, epitomises this (CFOsat hard-up carriers, look away now): “We’re in the fortunateposition to have secured financing for virtually all of our acquisi-tions over the next year to year and a half. And we have no sig-nificant refinancings due in the foreseeable future so it puts us ina comfortable position.” And no mean feat that is, too: AWAShas 136 aircraft on order with Airbus and Boeing, the first ofwhich should be delivered in 2010.

AWAS todayEstablished in 1985, AWAS has undergone significant changes inrecent times, most notably through the purchase of Pegasus inJune 2007. Though Pray describes the amalgamation of the newcompany into AWAS as “somewhat chaotic”, he feels “it ulti-mately translated into probably the most successful year forAWAS in its 23-year history”.

Yet Pegasus did not represent the only change. Two months afterits acquisition AWAS moved into new offices in Ireland, wherepreviously it didn’t have a presence. At the same time Prayreplaced almost the entire senior management team at the com-pany and now AWAS has added new areas to its business suchas risk management, and portfolio management and training.

Leasing, though, remains AWAS’ core competence. The companyhas a portfolio of 319 aircraft flying with 96 customers in 46countries. Combined with its total order backlog, AWAS countsitself as the third-largest lessor by fleet size and the biggest inde-pendent lessor. It is 100 per cent owned by the private equitygroup Terra Firma.

Acquisition strategy“Underlying everything is basically a major strategic repositioningof the business,” says Pray. This relates to what he terms “the fivepillars of growth”. The first of these has already been noted – thepurchase of new aircraft from Airbus and Boeing. In this respectAWAS, traditionally a Boeing-orientated lessor, has greater com-mitments with Airbus as it seeks to balance its portfolio betweenthe two manufacturers.

The second and third pillars that Pray wishes to base AWAS’growth on are new aircraft sale-leasebacks and used aircraft sale-leasebacks. The former is a relatively visible and thus predictablebusiness; it is easy to see what Airbus and Boeing have comingdown the assembly line and where it is destined. With used air-craft deals are harder to come by, being according to Pray “rela-tionship-driven”, though they do offer higher yields.

Lessor trading is a field AWAS continues to be active in, dealingeither with lessors, such as ILFC, looking to book trading gains or,increasingly, with distressed sellers grasping for quick capital. “CIT[Aerospace] falls into that category unfortunately these days,”says Pray.

Finally, and perhaps most significantly in the current climate, Praytargets expansion through mergers and acquisitions. “There’ll beadditional consolidation on the aircraft leasing side and we thinkof ourselves as a consolidator rather than a consolidatee.”

Crucial to AWAS’ purchase of new aircraft has been timing. Thecompany firmed up its orders with Boeing and Airbus in the sum-mer of 2007, ahead of competitors like GECAS, DAE, ACG andILFC. Even so, Pray had feared that AWA might still have come tothe table too late: “It was part of our strategic plan but we justdidn’t think we were going to get there with respect to pricingwith Boeing and Airbus since they had actually quite successful2006s. So what actually has happened is they looked at their les-sor backlog and whereas it’s been traditionally in the 30 per cent

LESSOR FOCUS:

AWAS

Just settled into its new Dublin offices, AWAS has almost completed full integration of Pegasus Aviationinto its business. While some other large lessors are yet to make heavy commitments, AWAS locked in itsorder stream mid-2007, ensuring early deliveries to meet strong forecasted airline demand. Alex Derber investigates a company focused on strategic development.



range, it was below 20 per cent on a forward basis. I think bothof them looked at lessors as lower-risk propositions than air-lines.”

That leasing companies comprised such a low percentage ofOEM backlog had much to do with a lack of orders from heavy-weights ILFC and GECAS, particularly in the narrowbody arena.That has since been redressed: GECAS ordered over 50 737s atthe end of 2007 and ILFC has recently made it known that is con-sidering a 300-plus aircraft order for Boeing and Airbus narrow-bodies.

Such a heavyweight order from ILFC would obviously grant sig-nificant leverage for manufacturer discounts, but while Praybelieves ILFC “are probably the smartest people in the business”,he does think that “from a pricing and availability of slots per-spective they are a year late”. He qualifies this, however: “In myopinion the value of a successful leasing platform is in makingmoney throughout the cycle and that’s what differentiatesstronger players like ILFC, GECAS, Babcock, Aercap, RBS, ACG,CIT and of course AWAS from the pure market timers. There ismoney to be made in various areas of this business at variouspoints in the cycle.”

The next narrowbodyOne of the great risks in ordering single-aisle aircraft today andreceiving the 2015-outwards delivery positions that go with them,is that Boeing and Airbus’ narrowbody replacements should arriveonly a few years later, thereby depressing values of older-genera-tion types; the operative word being, of course, ‘should’.

“We looked at this rather heavily,” says Pray. “If you look backthree years ago there was talk about a near-term replacement ofthe 737NG aircraft and the current generation A320s in the2012 timeframe. I think that’s sort of what has caused lessors totake a little bit of a step back in terms of making commitmentstoo far out.”

As is generally acknowledged, the crucial factor in when we seenew aircraft is engine technology. “One of the major reasonswhy we felt comfortable ordering aircraft out to 2014, to a verylimited extent out to 2015, is engine technology and our visibil-ity in terms of where that stands right now,” says Pray. Currentvisibility suggests that the next decade should see the progres-sive introduction of Pratt & Whitney’s geared turbofan, newlarge-diameter conventional turbofans, and then, possibly, theopen rotor. “It’s sort of a cat-and-mouse game because whoeverwill go to market first, whether it’s a geared turbofan or anadvanced turbofan, could potentially be usurped by the com-petitor through the competitor simply waiting for another twoto three years until the next technology comes out. So you havean instantaneously obsolete product. So it’s a very interesting sit-uation that we have right now on the 737/A320 replacementside and, needless to say, whoever moves first might end upbeing the loser.”

For now, Airbus and Boeing are pumping out A320s and 737s atrecord rates, a strategy Pray feels could be misguided. “I thinkthey’re both too high on the narrowbody side. They’re runninginto production constraints to increase them which tells me thatthere’s less likelihood that they will further increase them.Overall, the key here is that they need to be careful about wherethey are and what concerns us is that the production rates theyhave today are probably not sustainable over the long term.” AWAS client base and targeted growth

Though AWAS is averse to releasing figures on the percentage

of aircraft on order it has placed, Pray confirms that every air-craft to be received until 2010 has a lessee based either on anLoI or a firm contract. AWAS was to be among the first toreceive the 787, in 2010, though programme delays havepushed that out to 2012, a setback Pray appears unconcernedabout.

Thirty-five per cent of AWAS’ in-service fleet currently operatesin Europe; 30 per cent in Asia; 20 per cent in the US; and 11 percent in South America. Unsurprisingly, AWAS intends to shrinkits North American commitments and redeploy aircraft to Asia,primarily. By 2009, exposure in that region should grow to 40per cent of the fleet, while AWAS also targets growth in SouthAmerica, from 11 to 15 per cent. The number of AWAS aircraftin Europe should hold steady, though as the total fleet growsproportional exposure in the region will fall.

Conspicuous by its absence from AWAS’ stated plans is theRussia and CIS region, an oversight Pray sheepishly admits to:“We have a great interest in Russia. We didn’t want to outline tothe world what our plans are with respect to that specific area ofthe world since that’s an area that will take up a lot of thedemand that would traditionally have gone to Europe. It’s justnot something we want to point attention to as we feel theopportunities there are rather big.”

The company is certainly not alone in spotting potential in theregion, though many also believe that too many airlines havesprung up in Russia and the CIS than the market can likely sus-tain. On this Pray comments: “There are some very well-run air-lines there now, some very impressive airlines. There’ll be someweaker players and some fallout so it’s ultimately about makingsure you’re betting on the right ones.”

Coping with the downturnAs noted above, AWAS has had little difficulty securing financingdespite the economic climate. In fact, the company has raisedapproximately $1.4bn since September 2007, an achievementPray puts down to “lenders still being positive about the plat-form, the assets and the industry”. He lends further evidence forthis: “We’ve refinanced a loan facility that we acquired as part ofPegasus, we’ve financed on a forward basis six A330s that we

Source: Jan 2008 AWAS analysis. Owned Aircraft NBVs Only




purchased from Airbus and that we’re leasing to Singapore air-lines. We’ve also just completed a loan facility with a club ofbanks for the aircraft we’re acquiring from ILFC – so we’ve seenthe market be open for us.”

Currently, AWAS bases all of its financings on bank debt. “It’s notthe cheapest way of financing yourself but it provides you withthe biggest flexibility. For example, it’s easy to sell aircraft. It’s notthat easy to do that in a securitisation and if you look at the peo-ple who have financed themselves in securitisations, none ofthem have focused on the trading side of the business,” com-ments Pray.

Going forward, Pray sees aircraft buyers increasingly availingthemselves of export credit, especially if the economic situationworsens. Reflecting the thoughts of most in the industry, he alsothinks that “the times where you were able to raise large facili-ties at attractive pricing that were subject to syndication – that isprobably going to be pretty soft for the foreseeable future”.

Record oil prices have seen demand surge for more fuel-efficientaircraft types at the expense of older equipment, a fact noted byPray. He also points to higher default rates and repossessions,usually a precursor of a softening market. Not that this hasaffected AWAS, however: “We’ve been able to in virtually all ofour repossession cases redeploy the aircraft instantaneously andat higher lease rates. In essence, that’s what I look at as the valuethat our platform brings to the table.”

The weak dollar has impacted AWAS’ business to some extent asits overheads are in euros, whereas leasing revenues are dollar-based. The flipside, says Pray, is that airlines can enjoy lower reallease rates, mitigating to an extent the deleterious effects of highfuel prices.

Overall, though, limited supply and excess demand dictates thatlease rates will remain strong this year. “We’re still leasing usedaircraft at rates that are on average up 10 per cent on the previ-ous rentals,” says Pray. This applies primarily to new aircraft, butrates have also held firm on the 767-300ER and A330-300, adevelopment that caught the industry somewhat unawares: “Ithink a general surprise has been the resilience of demand for theA330, specifically the A330-300, and another surprise is the leaserates for the 767-300ER placements. It is in one way to do withdelays to the 787 programme, but also the fact that from an air-craft capacity perspective it is actually a very good airplane andwhat we’re seeing is a lot of airlines stepping up into long-hauloperation looking at 767-size aircraft as sort of an intermediatestep before they contract for new aircraft,” comments Pray.

On new widebody aircraft AWAS is locking in lease terms inexcess of 10 years; used widebodies are being contracted for fiveto seven years. New narrowbodies are being rented for betweenseven and 10 years; used models for between four and sevenyears, depending on the vintage.

The extent to which the airline industry will be able to supportlong lease terms and high rental prices is a matter of somedebate. It is tempting to suggest that the leasing business is suf-ficiently decoupled from the airline cycle to immunise it from thelatter’s ailments. Pray, however, doesn’t agree: “If you look at theaircraft leasing business from a pure asset-value perspective, thebottom end of the spectrum will soften significantly and I thinkoverall lease rates will go down as well.

“So, as much as we think this industry is decoupled from the air-line business it is in a lot of ways in lock step to what happens tothe underlying airline customers. It’s tough to say what will hap-pen but in as much as our customers become financially weakerthat will have a negative effect on the aircraft leasing industry aswell – maybe not so much from lower lease rates, but from theassociated costs of default. Because if you look at bankruptcies,where you usually don’t get hit is on the lease rate side; whereyou get hit is extended aircraft-on-ground time and on mainte-nance expenses necessary for the redeployment of the asset toanother customer.”

Lessor independence and consolidationDespite strong demand for aircraft continuing into 2008 – and inall probability through 2010 as well – the leasing market remainsunsettled. The credit crunch has exposed major frailties at thebig, publicly traded companies that own businesses like ILFC, andCIT Aerospace and RBS Aviation Capital, and the leasing divisionsare nervous. The president of ILFC has voiced the possibility ofsplitting from parent AIG and becoming an independent, publiclytraded lessor and others may follow suit.

Source: Ascend/AWAS Analysis June 2008

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Overall, limited supply and excessdemand dictates that lease rates willremain strong this year. “We’re stillleasing used aircraft at rates that areon average up 10 per cent on the pre-vious rentals. This applies primarily tonew aircraft, but rates have also heldfirm on the 767-300ER and A330-300,a development that caught the indus-try somewhat unawares.

“

”

“I would hate to be in Steve Hazy’s shoes given everything that’sgoing on with his parent company right now,“ says Pray. “He’sbeen able to build a fantastic business that is sort of almost at themercy of its parent company – but it’s not alone... From our per-spective I’m actually quite happy to be owned by private equitytoday because, you know, they really don’t care. They arefocused on maximising shareholder value and the return to theirinvestors and that generates a very different behaviour than onethat is motivated by public scrutiny.”

That said, there has been some speculation that Terra Firma willdivest itself of AWAS. After all, the private equity firm specialisesin restructuring businesses like AWAS, changing their strategic,and generating significant value from an exit. Yet Pray is reason-ably confident that the group will hold onto AWAS for the timebeing: “Terra Firma are usually fairly long-term investors so Iwould be surprised if there would be a near-term exit by TerraFirma from this business. I think they like the way the business isrunning and I think they like the way we can still continue togrow the company and grow their capital – but I would neverrule anything out.”

While AWAS continues to enjoy Terra Firma’s strong backing,most expect there to be some thinning out in the leasing indus-try this year as some of the smaller lessors, private equity firmsand hedge funds exit the business. Pray agrees that thinning outwill occur: “I’ve predicted this for quite some time and we’vebeen part of that process last year. The fact is that in difficulttimes the strong players will get stronger and the weak playerswill get absorbed. We’re already seeing some of the weaker play-ers running into difficulties with commitments and some havealready been put up for sale by their shareholders.

“We see ourselves as a consolidator in this market and I thinkwhat you need is a scaleable platform and access to capital andfinancing, and with AWAS we have all three of these elements. Iwouldn’t be surprised if we played a part in the continued con-solidation in the industry this year.”

So, it appears that several other companies this year will followPegasus under the AWAS umbrella. Though Pray won’t divulgeany details, he summarises his thoughts thus: “On consolidationI’d like to go back to what Warren Buffet said: ‘Not until the tidegoes out will you see who’s been swimming naked all this time.’And I think we’ll see some shake-out among the lessors alongthose lines.”

Source: May 2008 AWAS Analysis




WHAT ARE THE RIGHTS OF A DEFAULTING LESSEE UNDER AN air-craft lease? The simple answer is that it probably has none sinceas a result of its default it has effectively extinguished its right topossess the leased equipment under the terms of the lease. Butthere may be traps for the unwary in unknown jurisdictions,where a UK lessee may have fallen into the hands of an adminis-trator.

The lease conceptThe lease contract is used by aircraft owners that are often “pro-fessional” lessors such as GECAS, ILFC, CIT, ACG (and many oth-ers) and banks that require a sound legal structure within whichthey can provide secured finance.

English law recognises the concept of the lease as being a con-tract that sets out the basis upon which a bailment is governed.The essential element of a chattel lease is the bailment of leasedgoods, in other words the delivery of possession of these goodsby the bailor to the bailee, for the use of the bailee, in exchangefor the payment of a rent. A bailment of this kind will have theeffect of conferring a possessory right, but will confer no propri-etary interest on the bailee as against the owner of the bailedgoods. The bailee, whilst in possession under the terms of thebailment, is the master of the goods, has the right to their quietenjoyment and the corresponding duty to the bailor to protectthe goods, but that is where it ends.

The possessory right of the bailee will, for the term of the bail-ment, rank ahead of the bailor’s own right of possession of thegoods, but leaves the bailor’s title to the goods undisturbed. Thelessee’s right as bailee of the goods is limited to the possessionand use of the goods. This will be the case even where the baileeis entitled to dispose of the goods, for example where it is enti-tled to grant a sub-lease over the leased goods but the rights ofthe sub-lessee under the sub-lease will always be limited to therights of the lessee under the head lease. If the bailment containsan option for the bailee to purchase the goods, that option canonly be exercised after the formal termination of the bailmentitself and with it, the termination of its status as bailee. Enforcement of Rights

So much for the conceptual basis of the lease contract. Now, howdoes the aircraft lessor or mortgagor enforce its rights against the

lessee under the lease? The obligations of the lessee will includea number of covenants governing its use of the aircraft includingits operation, insurance, registration, maintenance and so forthand, of course, the payment of the rentals and the reserves. Thecondition of the aircraft at the start of the lease is carefully doc-umented and serves as a benchmark for its redelivery at the endof the lease. Any divergence from the benchmark will give rise tothe obligation to make adjustment payments, sometimesreferred to as “upsy downsies” because these adjustments canrepresent credits as well as debits on the lessee’s account. Theobjective of a well-drafted lease is to set a high standard for theoperation of the aircraft and to ensure that all obligations relat-ing to its possession and operation fall to the lessee. The corre-sponding obligations of the owner or lessor are limited toensuring that the lessee will have the quiet enjoyment of theequipment.

Whilst the lessee’s covenants under a lease are complex, thelessor’s remedies in the event of a default by the lessee are gen-erally pretty straightforward. It can enforce the terms of the leaseor terminate it altogether. All leases will provide for the right ofthe lessor to repossess the aircraft in the event of a breach by thelessee of his obligations.

Oliver Ross, associate with UK law firm Hill Dickinson, specialises in the acquisition and financing of cor-porate jets and commercial aircraft. He explains how a commercial aircraft lessor can enforce its rights inthe event of default.

RECOVERING AIRCRAFTFROM A DEFAULTINGLESSEE



Carrying out the repossession is essentially a practical matter andthere may be a number of practical difficulties. Lessors have oftenfound that their aircraft have been operated by lessees usingengines taken off other aircraft not belonging to them. This isnot unusual since many leases provide for engine sharing orengine pooling between operators and such practices are verywidespread. Finding the original engines, however, can beextremely difficult. If they are sitting unused in the store they canbe re-installed on the aircraft, however things are not always assimple as that. They may have been placed on other aircraft;these may have been sold together with the incorrect enginesand it may require months of careful detective work to trackthem down. There is no central database for the recording ofengines and the aircraft on which they are installed. In the mean-time the repossessed aircraft has to be fitted with spare enginesbefore it can be moved which may give rise to substantial costs.

Another difficulty is the disappearance of aircraft and enginemaintenance records. Lessors have often been able to repossessthe aircraft but have not been able to find the maintenancerecords. This is a major problem and also gives rise to significantcosts since the records have to be re-constituted before the air-craft can re-enter commercial operation. This may require the

performance of a comprehensive overhaul of the entire aircraftand substantially all of its components. The wise lessor will insureagainst such a loss of records, particularly where the aircraft isoperated in locations where there is no system available for auto-mated record keeping. Difficulties may arise if the leased aircrafthas been hidden away in an inaccessible part of the world, but inmost cases commercial aircraft are easy to identify and easy tofind. The operating environment of even comparatively smallcommercial aircraft makes it impossible to use them without ref-erence to their transponder call signs and registration marks.

Once the aircraft has been tracked down the lessor’s technical

Where the property concerned is an aircraft that hasbeen arrested for unpaid parking charges owed to anairport and is therefore subject of a lien, the adminis-trator may be entitled to “dispose” of it.

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”




Once the aircraft has been tracked down the lessor’s technicalrepresentative will arrange for appropriate flight crew and simplyfly the aircraft back. The typical lease agreement will include anumber of “self help” provisions that will entitle the lessor toenter the premises of the lessee in order to repossess the aircraft,demand that the lessee’s pilots redeliver the aircraft to a pre-scribed location, deregister the aircraft and re-register it else-where and so forth. In short, the physical act of repossession isnot, generally speaking, a problem. Following repossession, thelessor is entitled to sue the defaulting lessee for damages inrespect of any divergence in the condition of the aircraft from thebenchmark established at the beginning of the lease.

Cape Town ConventionThere is potentially a difficulty in repossessing an aircraft thatis located in a jurisdiction whose laws do not favour the repos-session of an aircraft by its owner or secured creditor irrespectiveof the law that governs the lease itself. The jurisdictional uncer-tainty was substantially diminished by the uniform conflict of lawsconvention – the Convention on the International Rights inAircraft 1948. This was hampered, however, by its reference inpriority to the laws of the relevant states of registry which pro-vided widely differing approaches to security rights. This robbedthe Geneva Convention of its uniform character and did not pro-vide much comfort to the banks called upon to finance aircraft indeveloping countries.

The Convention on International Interests in Mobile Equipmentand the accompanying Protocol to the Convention on MattersSpecific to Aircraft Equipment, otherwise known as the CapeTown Convention (“the Convention”), purports to be a uniformcode and entered into force in March 2006. It supersedes the1948 Geneva Convention and its principal objectives are to cre-ate an ‘international interest’ that will be recognised as a matterof law in the Contracting States, to provide default remedies tocreditors and to establish an international electronic register oftitle for aircraft and engines. Regrettably, the Convention has onlybeen ratified by Ethiopia, Kenya, Nigeria, Panama, Saudi Arabia,Senegal, South Africa and the United States, but it is hoped thatthis list will grow.

Lessors have often been able to repossess the aircraftbut have not been able to find the maintenance records.This is a major problem and also gives rise to significantcosts since the records have to be re-constituted beforethe aircraft can re-enter commercial operation.

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As we stand today, therefore, there is no effective internationalstandard or process by which security can be enforced or thatremedies can be sought on a uniform basis in all jurisdictions. Thelessor can require the lessee to sign a lease providing the desiredremedies, and can require the lessee to register the aircraft in ajurisdiction that applies laws that will favour the enforcement ofthose remedies, but there will always be a question mark overthe enforcement of these provisions if the aircraft is located ordetained in another jurisdiction whose laws do not favour thelessor or security holder.

Insolvency of the lesseeWhat happens when a lessor leases an aircraft to a lessee thatsubsequently goes into administration? On the face of it the les-sor might think that, as owner of the aircraft, it would be able toask for its aircraft to be returned in the usual way and the admin-istrator would immediately comply with the request. This wouldbe an entirely reasonable assumption, but, in the circumstancesof a UK insolvency, one that may be quite wrong.

The Insolvency Act 1986 (as substantially amended by theEnterprise Act 2002) gives the administrator the power to takecustody or control of all the property of the company in admin-istration and to do anything necessary or expedient for the man-agement of the affairs of the company. It provides for the sale byan administrator of the company of any property of the companythat is subject to a security as if that security did not exist. Thepublished intentions of the Enterprise Act were to provide admin-istrators with the freedom to replace the company on a com-mercial footing without the wholesale dispersion of thecompany’s assets by disenchanted chargees. Potentially this mayhave a direct impact on the rights of ownership of lessors (andindeed mortgagees) of aircraft.

There is one surprising consequence of this legislation. Where theproperty concerned is an aircraft that has been arrested forunpaid parking charges owed to an airport and is therefore sub-ject of a lien, the administrator may be entitled (with the leave ofthe court) to “dispose” of it. The issue is whether the aircraft sat-isfies the definition of “property”. This expression is still definedin s.436 of the 1986 Act in the very broadest terms and, it seems,is intended to apply to any kind of property whatsoever. The issuewas tested in the Paramount Airways Case, (Bristol Airport vPowdrill [1990] Ch 744) in which an aircraft subleased by IrishAerospace Leasing to a charter operator called ParamountAirways was detained by Bristol Airport for unpaid landing feesand fuel charges amounting to some £1.2m.

It was argued that the aircraft leased to the company belongedto the lessor and that it did not constitute the company’s prop-erty. The company’s rights in respect of the aircraft, the argumentwent on, were purely possessory and arose with reference onlyto the leasing contract. However, the definition of “property”includes “…money, goods, things in action, land and everydescription of property wherever situated and also obligationsand every description of interest, whether present or future orvested or contingent, arising out of, or incidental to, property”.The Court of Appeal considered that it was “…hard to think ofa wider definition of property”. On this basis it held that “theinterests of Paramount under a lease of the aircraft is plainlyproperty” within the definition set out in the Insolvency Act andthe administrator was entitled to dispose of it.

The courts will, therefore, support the view that there is a formof proprietary interest that may vest in the lessee of an aircraftnotwithstanding the conceptual limitations of the rights that arecapable of being transferred on a bailment. Such rights will enti-

tle the administrator to sell the aircraft as if it belonged to the les-see. Accordingly, it is a wise practitioner who will include in hislease contracts such language as will oblige the insolvent lessee– in the event that the administrator obtains a court order autho-rising it to dispose of a leased aircraft and it is sold – to immedi-ately pay an amount equal to such proceeds of sale to the lessor.

For the most part recovery of an aircraft from a defaulting lesseeis straightforward provided that the governing law of the leaseis of the kind that provides for satisfactory self-help and thelaw of the state of registration is sympathetic to the ownersand creditors involved. Beware, however, the powers of adminis-trators and lien holders in the UK such as airports, as well asinternational organisations such as Eurocontrol, and their abilityto set aside the customary protection of owners and securedcreditors in the event of insolvency of the lessee.

There is potentially a difficulty in repossessing an air-craft that is located in a jurisdiction whose laws do notfavour the repossession of an aircraft by its owner orsecured creditor irrespective of the law that governs thelease itself.

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INTERNATIONAL INVESTMENT AND ASSET MANAGEMENT GROUPBabcock & Brown made its first foray into the aircraft leasingmarket in 1986. Since then its aircraft management group –Babcock & Brown Aircraft Management (BBAM) – has originatedover 300 aircraft with a total purchase price of over $8bn.

IPONowadays, however, BBAM focuses on management services.Babcock & Brown Air (B&B Air) took on the role of acquiring air-craft after it was formed in May 2007. A year later it had grownits portfolio to 62 aircraft, but much else had happened inbetween.

In September 2007 B&B Air listed on the New York StockExchange under the trading symbol FLY. The road to the IPOactually began six years earlier in the post-9/11 environmentwhen BBAM started buying aircraft in a bank debt/privateequity-funded facility called Jet-i. Intended always to be a tem-porary structure, the facility developed into the high-dividendmodel that became B&B Air. With this type of model becomingincreasingly popular on the NYSE, as exemplified by companiessuch as Aircastle and Genesis, it was decided to list B&B Air.Colm Barrington, CEO of B&B Air, explains that decision a littlefurther: “Basically, BBAM was a company that didn’t have hugeresources in terms of capital and the New York Stock Exchangepresents significant opportunities for raising capital, and this didappear to be a very good model to allow BBAM to expand its air-craft leasing activities.”

To achieve this, B&B Air put together an aircraft acquisition facil-ity of $1.2bn, seed capital for which was provided by part of theproceeds from the IPO. The new company’s first 47 aircraft,worth $1.45bn, were funded by an $850m securitisation and$600m in equity.

Building on 2007By August 2008 B&B Air had increased its portfolio to 64 aircraft.As mentioned, though, a far greater part of the lessor’s portfoliogrowth was accomplished in the previous year, a period whenB&B Air “had a very successful response to our operating leasingactivities”, according to John Lynch, director of BBAM. “Airlineswere very actively increasing their fleet sizes and that resulted inhigh demand for aircraft and good lease rates right across theboard in most regions of the world. Overall, I think 2007 was avery successful year for BBAM,” he continues.

The question is whether airline woe in 2008 will feed through tothe leasing business. Most lessors, however, remain confident,and Lynch is no exception: “We’re still seeing demand for thenewer-generation fuel-efficient aircraft that make up a significantproportion of our fleet and demand for those airplanes is obvi-ously driven by the fuel price increase over the year. And I’m surethat’s going to continue right through to the end of this year andearly into 2009.”

Business has also stayed healthy for BBAM, which now managesalmost 300 aircraft – including those on B&B Air’s books – andhas become the fourth-largest lease manager in the world. Ofparticular importance this year has been the Japanese operatinglease (JOL) due to strong demand for the product from theJapanese market. Barrington comments that the division is wellplaced to take advantage of this, as “the JOL... has been the coreof BBAM’s activities over the years”.

Both Lynch and Barrington believe that lease rates will stay strongthis year with some exceptions. Older types, such as DC9s andMD-80s, “are dead” according to Barrington and the 737 Classicmarket is going “a little soft”. On the other hand, modern nar-rowbodies should continue to command strong or even

LESSOR FOCUS:

BABCOCK & BROWN AIR

Eschewing “quasi-speculative” orders with the manufacturers, B&B Air, trading with other lessors and theairlines, commits to aircraft as they deliver. But this is not all that sets it apart from many other leasingcompanies: B&B Air split from its parent in 2007 to become an independent publicly-traded company. AFMdiscovers the impact this has had on its business.

Name Mkt Cap Div & Yield 52 wk High 52 wk LowB&B Air $376.56M 2.00 (17.99) $23.90 $8.60



increased factors and these aircraft constitute the bulk of theB&B Air fleet. The average lease term for the lessor is 5.6 years.

Lynch points to “some stress in the widebody market”, but alsoremarks that B&B Air has little presence in that arena – only fouraircraft. However, one type that is in high demand in the wide-body sector is the A330. This is in part due to delays to the 787programme, and while B&B Air has only one A330 in its portfo-lio, it has still benefited from Boeing’s hiccups. “Where the 787delays have been positive for us have been in the 757 releasing.Our Ethiopian leases are I think almost certainly as a result of thedelays in the 787,” says Barrington.

Oil and creditThe high cost of jet fuel is possibly a double-edged sword: whileit can be crippling for the airlines, it does force them to startoperating modern aircraft. But a lack of available financing dur-ing the credit crunch often means they must rent rather than buy,which benefits lessors with the right portfolio.

B&B Air has been stocking up on young, fuel-efficient narrow-bodies over the last few years and that strategy is paying off, asLynch describes: “We see this oil price spike as increasingdemand for that type of aircraft from airlines around the world –that is definitely our experience. So I think in a sense, certainlywith B&B Air, we’re able to take advantage of the change in themarket place with regard to the demand for fuel-efficient air-planes.”The average fleet age at B&B Air is 6.3 years.

The credit crunch can also prove advantageous for lessors. Andthough it has the potential to wreck portfolio expansion plans,this hasn’t been the case at B&B Air, as Barrington explains:“we’ve put together enough financing to carry Babcock & BrownAir through to 2009 in terms of acquisitions. Since we launchedthe company in October last year we’ve increased the portfoliofrom 47 to 64 aircraft, spending about $700m in doing that. Wehave in our credit facility something like $500m remaining whichwe will be using to fund our growth into 2009.”

Nonetheless, deteriorating market conditions have promptedcaution in one respect: because of mounting cash pressureamong the airlines, B&B Air knows that any deal it finds todaycould well be bettered a few months down the line. “So we’regrowing now only if we find very good deals,” says Barrington.

“Another factor which is caused by the credit crunch is that airlinesare probably turning to operating leasing much more than theywould have done in the couple of years leading into 2007/8,”remarks Lynch. In his view, operating leasing has become a signif-icant source of financing for the airlines as they struggle to fundoutright purchases from the OEMs. The net result is a revenueboost for both B&B Air and BBAM: more rentals for the former andmore management contracts for the latter.

Though the credit crunch and record oil prices may sometimesbenefit lessors, the deleterious effect on their airline customersshould not be ignored. Many expect defaults to rise this year andnext as higher costs push carriers into the red. Despite this,Barrington claims that B&B Air hasn’t been unduly affected bydefaults as yet. With the exception of US airline ATA, whichreturned four aircraft, “we haven’t had any defaults and ourcredit profile at the moment is fine”, he says. “Obviously, theATA situation was a bad one, but we got the aircraft back veryquickly and we’ve already re-leased two of them to EthiopianAirlines on a long-term lease, and we’re in discussions with vari-ous other parties now either to sell or release the other two.

“So, our experience has been good. Obviously, everybody’s con-cerned because you read in the magazines that airlines are hav-ing problems and some of the second-quarter results beingpublished are pretty bad. But airlines on the other hand havehad a pretty good few years and, anyway, in the operating leas-ing business you do expect to have defaults from time to time.If you’ve got good enough aircraft and there are pockets ofdemand in the world, you move those aircraft there and we’vefound very strong pockets of demand in Eastern Europe andRussia.”

GEOGRAPHIC DIVERSITY35 Lesseses(3)

MODERN FLEET6.2 Years Average Age

NorthAmerica 18%

Europe 7%

Europe 37%

Asia 24%

Asia 2%

Africa 3%

Latin & S.America 9%

(3) Based upon percent of the appraised value ofaircraft and geographic location of lessees. Doesnot include remaining two B757s that are off-lease.

(1) The B737 Classic and the B757 count eachinclude one freighter.(2) One A330, one B747, one B767 and one B777

DEVELOPED DEVELOPING

A320 Family 29

B737 Next Generation 16

B737 Classic(1) 3

B757(1) 12

Wide Body(2) 4

Total 64

% Narrowbody 94%




CIS countries and Russia have proved fertile ground for lessors inrecent years. This has been helped by a number of factors, oneof which was a moratorium on import taxes on widebody air-craft. “That boosted demand for certain types of aircraft and alsohelped the narrowbody fleet as well,” says Lynch. The BBAMdirector also forecasts significant growth in demand for Western-manufactured equipment as Soviet-era types reach the end oftheir service lives: “The last year of significant production ofRussian equipment was around 1991, 17 years ago, so you’regetting very close to a pinch point now for the Russians andother countries in the CIS between fuel and retirement of oldSoviet equipment.” That aside, there is also the remarkable eco-nomic growth experienced in Russia over the last few years toadd to lessor optimism.

B&B Air and others should, however, be wary of diving too deepinto Russia. The country is dogged by overcapacity and a glut ofairlines is predicted to go belly up in the next 12 months. In addi-tion, AirUnion, the country’s original airline alliance, had to can-cel scores of flights in August 2008 due to unpaid fuel bills andonly resumed service after a government bail-out.

We’ve put together enough financing to carry Babcock &Brown Air through to 2009 in terms of acquisitions.Since we launched the company in October last yearwe’ve increased the portfolio from 47 to 64 aircraft,spending about $700m in doing that.

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Portfolio strategyWith one exception, B&B Air does not order aircraft from themanufacturers. Part of the reason is that the cashflow-orientatedcompany doesn’t feel it appropriate to commit public money tofuture orders. “We do not want to commit our cashflow tofuture orders and sort of quasi-speculative orders,” saysBarrington.

For its own acquisitions, B&B Air concentrates on popular, fuel-efficient, modern narrowbody types, though it will take wide-bodies, too, if it spots a good deal. As noted, the companydoesn’t order from the OEMs, but buys from lessors and airlinesand is strongly engaged in the sale-leaseback market. Its operat-ing leasing customers are spread over 19 countries between 34airlines. The company has 20 per cent of its portfolio in NorthAmerica; 45 per cent in Europe; 25 per cent in Asia; and 10 percent in South America.

Since its IPO in September 2007, B&B Air has grown its portfo-lio by $700m and its annualised rentals by 49 per cent, andthough that growth will slow, the company hopes to continueadding to its portfolio over the coming months. Expansion willultimately support the high-dividend model of B&B Air, whichhas paid out a 50 cent dividend in every quarter since it wasformed. Barrington explains: “We’re hoping that because of theliquidity crunch there may be more good deals coming up... togrow the portfolio so that we can increase the cashflow in thecompany, which will support more long-term debt when we refi-nance out of the aircraft acquisition facility and will potentiallyallow us to go on paying very attractive dividends.”

Whether B&B Air’s model proves a tempting target for consoli-dation in the aircraft leasing market will be interesting to note.For now, Barrington only comments, “We’re always open to anynew deals but we haven’t any firm plans – no”.

B&B AIR’S FLEET GROWTHCONTRACTED ANNUALIZEDRENTALS (millions)

47

64

36% 49%

$153

$228

SEPT 2007 SEPT 2008 SEPT 2007 SEPT 2008


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“THIS IS THE BEST YEAR WE’VE EVER HAD,” SAYS CHARLES WILLIS,head of Willis Lease Finance (WLF). That’s certainly not a state-ment that will be repeated often this year by CEOs around theworld, but it won’t surprise too many in the aircraft and engineleasing industries. Jon Sharp, CEO of Engine Lease Finance (ELF),is similarly upbeat: “This will be our second-best year ever.”

Willis attributes his company’s success to a prescient portfoliostrategy implemented in 2006 when WLF opted to invest $700mover the following five years in the ubiquitous CFM56-7B. “Weget those at the rate of about two a month and there’s a hugedemand for those engines,” he says. The spiralling price of oilhas indeed forced many airlines to order modern airframes withfuel-efficient powerplants such as the -7B, but other factors areat work, too. Willis highlights a “bow-wave” of 737NGs due forscheduled engine maintenance, driving up demand for the spareengines that leasing companies can supply so effectively.

Increasing cost pressures can also benefit lessors, as Willisdescribes: “When airlines are stressed and they need to repairengines they may not have the money to do it and as a resultthey defer maintenance on engines and lease engines until theircash flow improves.”

Sale and leasebackThough none within the leasing industry care to revel in the dis-comfort of airline customers during the economic downturn, oper-ator pain can mean lessor gain – in the short term. The obviousmanifestation of this is the rise of sale-and-leaseback deals as air-lines grasp for liquidity. Sharp reports a rise in demand for thesekinds of transactions in 2008: “Airlines embark upon cash-conser-vation and cash-raising exercises.” He expects the trend to con-tinue.

Sharp also believes the downturn has served as a wake-up call toairlines over-confident about the residual value prospects of theirengine assets: “Over the last few years some have thoughtthere’s no such thing as residual value risk because these thingswould keep on going up. Well they don’t, and what’s happeningnow is proof of that.” Happy to take advantage of the deals onoffer from airlines spooked into offloading their assets, ELF hasmerrily grown its portfolio. “We’re not going to panic into sell-ing the thing because we don’t have to,” adds Sharp.

Alex Derber talks to the heads of two of the world’s leading non-OEM affiliated engine lessors to discoverhow they are faring in an increasingly hostile operating climate for airlines.

OPERATING LEASING UPDATE:INDEPENDENT POWER



Interestingly, Willis hasn’t seen a rise a rise in sale-and-leasebackdeals, a feature of the market that stays fairly consistent in hisopinion. However, part of the explanation for this could WLF’slow involvement in the sale-and-leaseback market. Willisexplains why: “Sale-leasebacks are historically not very econom-ical to the lessor because, effectively, a lessor is buying a return.In other words, they are paying a higher price than the engine’sprobably worth in the beginning in order to get a higher currentreturn. The problem is when you do that at the end of the leaseyou’re usually upside down in the value of the engine.”

Lease factors and termsAs with aircraft, lease rates for engines have remained strong in2008, with some softening for older equipment. That doesn’tmean, according to Willis, that the airline and engine leasingbusinesses operate in tandem: “When airlines have overcapacitythe one thing that they don’t need is more airplanes, but the onething that they do need is engines to keep their remaining air-planes flying and we saw that ’02, ’03 and ’04. It was very inter-esting because those were some of the best years we’ve had –basically, people didn’t need the surplus airplanes but they did-n’t have the money to repair their engines so they came andleased ours. Our business is somewhat counter-cyclical.”

ELF reports that through the whole of 2007 it never had morethan one engine off lease at a time. Encouragingly, the re-leas-ing trend seems to have continued into 2008, a year in whichELF has 39 engines requiring remarketing, though Sharp fears itcould become more of a struggle in the coming months. “There-market for engines will become very floppy indeed so we willbe sitting with engines on our books that are not earningmoney, they’ll be sitting in a warehouse somewhere. That isgoing to happen, but we do budget for that,” he says.

The sale-and-leaseback market, meanwhile, remains extremelycompetitive. Sharp feels there are too many players and that,combined with falling interest rates, has put pressure on leasefactors. Reasons that, perhaps, partly explain Willis LeaseFinance’s reticence to develop its leaseback business.

WLF has 60 per cent of its portfolio on long-term leases and therest on shorter terms, generally three months to a year. Long-term contracts tend to cover about 10 years. Sharp reports leaseterms of seven to 12 years for 90 per cent of his company’sengines, whether they be for wide- or narrowbodies.

Which engine?As many would expect, fuel efficiency is key in the engine leas-ing market, and successful lessors ensure they have the mostmodern types in their portfolios, as Sharp confirms: “We cer-tainly perceive that airlines are desperate to get out of the older-type engines and so they should. Our exposure to older enginesis less than one per cent by portfolio value as we’ve been veryparticular at modulating our business and rolling over our port-folio as the years have gone past.”

Nonetheless, other factors are at play than just efficiency. Forinstance, Sharp mentions “a long-predicted fallout” in theCFM56-5C4 market that hasn’t materialised because of delays tothe 787 programme. As a result, demand for the A340 – and theCFM56-5C4 – has been steady.

In fact, all CFM56 types appear to have remained good earnersfor the lessors. Apart from these, Willis names the V2500, theCF6-80 and RB211-35 as popular engines.




There is, however, one potential blot on the CFM copybook: theCFM56-3, which powers 737 Classic models. “We have someCFM56-3s although we’ve sold quite a few,” says Sharp.“They’re going to continue flying for some time yet so we’re notworried about them, but there probably is a softening of themarket for that sort of engine type because there are so manyairplanes being parked.”

Willis is confident that 737 Classics will transition to service inother parts of the world, most likely developing countries. Thelikelihood of the ageing airframes and engines accumulatingPMA parts, though, will increase; a fact that lessens their appealto lessors such as WLF, as Willis explains: “PMA parts are inter-esting because not all countries allow PMA parts in their airlines’engines. Our engines go all over the world so I can’t have PMAparts in engines that might be restricted in going into certaincountries. I don’t have any particular problem with them, butuntil they are 100 per cent accepted around the world it doesn’tmake sense for our company to do that.”

Competing with the OEMsWhile some independent lessors bemoan the fact that OEM-affil-iated lessors tend to bundle total care maintenance packageswith lease deals, most accept that it makes sound business sense. Accordingly, some independent lessors have invested intheir own engine tear-down capabilities, a move that puts themin competition with the OEM’s own services. Willis questions therationale: “If you tear down engines I don’t think you get a lotof cooperation and I think you end up with a very questionablevalue to your company. Some of the people on the tear-downside are also on the aircraft leasing side and you have to askyourself: is it really a pure play or are the values of the businessthey’re in really solid?”

WLF doesn’t tear down engines, but faces off against the man-ufacturers in other ways. For a start, it was the first independentto offer lease pools, which it has now established in NorthAmerica, China and Europe. The latter is its newest and smallestpool, but in the US such luminaries as Southwest, Delta andAmerican Airlines all partake in the Willis pool. In China, almostevery airline that operates the CFM56-7B has signed up. Williscomments: “I think lease pools are going to be more importantas time goes on as people don’t need to spend the money onbuying engines; they can use ours or their own.”

Of course, lessors compete directly with the OEM’s own leasingarms, such as GECAS and Rolls-Royce & Partners Finance. “Ourprimary competitor is General Electric – that’s really our onlycompetitor,” Willis says. “I happen to like competing againstthe OEM because I think they are far more disciplined thansome of the other potential competitors in our marketplace,”he continues.

At ELF Sharp comments, “Manufacturers are taking advantageof the huge order positions they had in 2006/2007 and they’vejust stuck a lot of money on the list price”. This isn’t all badnews, though. As purchase price influences lease rate – somehave described rentals of new engines as more akin to financingthan operating leasing deals – ELF had booked $100m more ofnew growth by August 2008 than in the whole of 2007.

AE3007

CF34

GE90

CF6-80

CFM56-3

CFM56-5

CFM56-7

JT8D-200

PW4000

RB211

Trent

V2500-A1

V2500-A5

Africa

Asia Pacific

Central & SouthAmerica

IndianSubcontinent

Middle East

North America

Western Europe

ELF Portfolio Distributionby engine type

ELF PortfolioDistribution by region


Powerturbine mod:ATEM 17/2/09 08:09 Page 3



Thinning market and defaultWhile the credit crunch is hitting airlines hard, most lessors appearsafe. As Sharp succinctly puts it: “I don’t think that whatever non-sense is going on has quite filtered through to where we are atpresent.” In fact, most lessors on both the aircraft and engine sidehave their credit and refinancing facilities in place already.

Despite this, many feel that inexperienced players will exit themarket this year and next. Willis agrees: “I think probably someof the private equity and some of the hedge funds will get outbecause they don’t know what they’re doing.”

Though such exits will dampen competition, they also reduce thenumber of available partners for the syndication deals that inde-pendent lessors specialise in. These transactions involve sales bya lessor to an SPV of assets on lease, with both parties providingequity/debt and sharing income.

We certainly perceive that airlines are desperate to getout of the older-type engines and so they should. Ourexposure to older engines is less than one per cent byportfolio value as we’ve been very particular at modulat-ing our business and rolling over our portfolio as theyears have gone past.

“

”

Regional 3% A340 8%

MD80 3%

Other 9%

ENGINE PORTFOLIO BYAIRCRAFT SERVED

2007 REVENUES BYGEOGRAPHIC REGION

B757 4%

Willis Lease Finance

A330/A300

6%

A32028%

B767/MD11 3%

B737Classic 7%

B767/B747 7%

737NG 22%

UnitedStates

16%

Mexico7%

South America13%

Asia24%

Mid-East& Africa

6%

Europe34%



ELF has pioneered syndications, but while Sharp shares Willis’view that certain players will leave the market, he is confident itwon’t jeopardise business: “We have developed a network offour syndication partners who exist in different parts of theglobe and who represent different ends of the financial spec-trum, from private equity players to banks, trading corporationsand leasing companies. And we’re fairly comfortable that if oneof those gets into difficulty and decides it’s not the year to investthen the others will still be there and hence the very deliberatestrategy we embarked upon over the last four years to developthose collaborators.”

A very real threat to lessors during economic downturn isdefault. Airline bankruptcies have risen in 2008 and Sharp pre-dicts difficulties to filter through. “I do expect to see peoplestruggling with their payments and I do expect that we will haveto go and either work things through with some customers orwe are going to have to go and repossess. So I do think there willbe some fallout in the industry and if that hasn’t already hit theengine lessors it’s going to.”

In contrast, Willis is reasonably optimistic: “I can tell you whatwe’ve seen in the past, and ’02, ’03 and ’04 was arguably theworst period in aviation history. I can’t see how people think it’sgoing to get worse than that. It was horrible and our business didjust fine.”

Yet more evidence that operating lessors will continue to operateoutside the rules of the airline cycle.




BRAIN DRAINHITS AFRICANAIRLINEINDUSTRY

THE FAST-GROWING CARRIERS IN THE MIDDLE EAST AND ASIAare making huge investments in fleet acquisition and otherexpansion projects and are looking for additional human capital.Africa is one of the regions that recently became a good sourceof skilled professionals for these airlines. Mega-carriers such asEmirates, Gulf Air, Qatar and Singapore are recruiting qualifiedprofessionals from African airlines, particularly from those withinternationally recognised training academies.

Ethiopian Airlines is one of the African carriers hardest hit by thebrain drain. The professionals that first drew the attention ofMiddle East carriers were flight crew and in the past few yearsEthiopian has lost scores of seasoned pilots. In 2005 more than20 senior pilots left Ethiopian in search of better pay.

Carriers in the Middle East offer a monthly salary of $10,000 dol-lars tax-free. In addition, they offer residential houses and carsfor pilots, and pay school fees for the pilots’ children.

Attracted by these irresistible offers scores of senior Ethiopianpilots have joined companies in the Middle East and Asia.Ethiopian CEO, Girma Wake, asserts that these companies areacquiring a large number of aircraft and they need pilots who flythem. “Our pilots are qualified and they have admirable skillbecause our pilot training school is one of the best in Africa. Thatis why all eyes are on them,” Wake says.

Established in 1962, the Ethiopian pilot training school has grad-uated 788 pilots, of whom 495 are Ethiopians while the remain-ing 293 are from 36 other countries, most of them in Africa.Ethiopian Airlines has about 4,700 employees and 260 are pilots.

Halting the flowAlarmed by the flock of pilots going to the Middle East and Asia,management at Ethiopian implemented salary adjustments. Thecompany increased pilot salaries by up to 100 per cent, but eventhis did little to slow the exodus. Ethiopian’s pilots are now paida maximum of $2,000 per month.

The management now refuses to grant release to pilots. Anypilot who wants to be released from employment at the airline,must pay $26,000 to the company. Ethiopian claims that itspends the stated amount to train a pilot during the two-yeartraining programme in the school. “Denying a release is not asolution” says an Ethiopian captain who declined to be named.“They should pay at least 50 per cent of what we are offered inthe Middle East,” he adds.

Because of the inadequate number of Ethiopian pilots manage-ment is now forced to hire foreign pilots. Currently, there are tenforeign pilots from Eastern Europe, South America and Africa whowork for Ethiopian. Five of them are Ghanaians who used to workfor now-defunct Ghana International Airlines. Ethiopian is alsorecruiting technicians from the Ethiopian Air force.

The revival of the global aviation industry since the post-9/11 downturn has increased the demand forskilled manpower significantly. In particular, industry growth registered in the Middle East and Asia inrecent years has contributed to an increasing demand for pilots, aircraft maintenance technicians, engi-neers and other aviation professionals. As Kaleyesus Bekele reports, this demand is drawing talent awayfrom other parts of the world.



academy, which comprises the aviation maintenance technicianschool, pilot training school, school of marketing and finance,aviation recurrent training centre, cabin crew training centre andhuman resources development unit. The aviation academyrecently purchased 14 modern Cessna training aircraft valued at$6m. The academy has also built additional classrooms, dormito-ries, lounges and other facilities. In the near future Ethiopian willacquire 737 and 787 simulators. At present, it has 757 and 767simulators.

.

In October 2007 Ethiopian signed a three-year technical cooper-ation agreement with Lufthansa Technical Training (LTT) andGerman Technical Cooperation, an aid organisation. In the com-ing three years, Ethiopian will cooperate with LTT, GTZ and twolocal technical colleges in a training project for aircraft techni-cians in Ethiopia. The cooperation is organised as a public-pri-vate-partnership (PPP). Kinfe Kahssaye, VP strategic business unitof Ethiopian, says: “In the coming three years, successful imple-mentation of the PPP project will enable the Ethiopian aviationacademy to increase maintenance training capacity by threefoldper year, while improving the quality of training to a world-classstandard.”

Airlines affectedOther African airlines bemoan the talent loss. Some of the carri-ers who lost their professionals to the Middle Eastern and Asiancompanies have reached a point where they are unable to provideregular services. Air Botswana is one of them. A notice put up byAir Botswana some time ago read: “Air Botswana apologises sin-cerely to passengers who are affected by the current disruption toits services. This temporary situation is caused by factors related toflight crew. In common with many airlines in Africa and else-where, Air Botswana has experienced a loss of pilots, whose skillshave been recruited by carriers in the Middle East and Asia wherethe civil aviation industry is growing rapidly.”

This has resulted in a diminished capacity to maintain a fulltimetable for service, necessitating a rescheduling of some ofsome flights.

Christian Folly-Kossi, secretary general of AFRAA comments:“Airlines from the Gulf States and Asia are luring away pilots,engineers and cabin crew who have been trained by African air-lines with promises of better pay.” Folly-Kossi suggests thatAfrican aviation officials must use their political and diplomaticpower to stop the poaching that threatens African airlines.

AFRAA has called for a code of conduct to regulate a cripplingflow of pilots from African airlines to richer and more establishedones elsewhere, and others agree. “The brain drain in Africa isalarming,” says Nick Fadugba, CEO of African Aviation Services.“Cash-rich foreign airlines, especially those in the Middle East,have poached some of the best African pilots. The impact of thison African aviation is negative,” Fadugba says.

Cash-rich foreign airlines, especiallythose in the Middle East, havepoached some of the best Africanpilots. The impact of this on Africanaviation is negative.- Nick Fadugba, CEO of African Aviation Services

“

”

“Our company is growing at a rate of more than 20 per cent. Aswe are increasing the number of our fleet, we need more pilots.To meet the growing demand we have to train more pilots. Butuntil we have enough, we will continue to recruit foreign pilots,”says Wake. Since the launch of a fleet modernisation programmein 2003, Ethiopian purchased 11 767 and 737 aircraft. InFebruary 2005, the national flag carrier placed a firm order for787 aircraft.

In the 2006-2007 fiscal year more than 70 aircraft technicians,80 ticket agents and 130 flight attendants left Ethiopian. Most ofthe technicians left for Middle Eastern companies. In September2007 20 technicians who resigned from Ethiopian joined MROprovider GAMCO. GAMCO, Emirates and others advertisevacancy announcements frequently.

Wake says: “We pay a maximum of $500 to a senior technician.The Middle Eastern companies pay more than $3,000 and it isexempted from income tax. They also offer side benefits. We cannot afford to pay as much as they do.”

Enviable trainingThe aviation maintenance technician school of Ethiopian hasgraduated 2,258 technicians since its inception in February 1967.Among the total graduates of the centre 1,537 are Ethiopiansand the rest are nationals of 48 other countries, mainly in Africaand the Middle East. The aviation academy, recognized by ICAOand the African Airlines Associations (AFRAA) has been selectedby the African Civil Aviation Commission (AFCAC) as the trainingcentre for English-speaking African countries. At the moment,Ethiopian has about 500 licensed technicians.

“First they started to poach our captains who have long years ofexperience with thousands of flight hours. When we made salaryadjustments to our captains they started to poach our co-pilotsand mechanics,” Wake says. He adds: “We try our level best tomake our professionals happy and to retain them. However, wecan’t completely stop the brain drain. The solution is to increasethe number of professionals that we train.”

Accordingly, Ethiopian is upgrading the capacity of its aviation




Girma Wake points out that professionals are not going only tothe Middle East. “The much-talked-about region is the MiddleEast. But we are also losing our professionals to America. Manyof our employees leave to the US through the Diversity VisaLottery every year,” he observes.

Kenya Airways (KQ), Air Mauritius and South African Airways areamong the African continental carriers that are losing their highlytrained professionals. KQ’s CEO, Titus Naikuni, says that the air-line has lost some of its pilots, engineers and cabin crew toMiddle East-based airlines that also fly into Kenya and some ofthe routes dominated by KQ. Naikuni claims Kenyan pilots andengineers were highly sought after because of the quality oftraining they received.

KQ has already addressed the problem by establishing an avia-tion training centre. Naikuni believes the training centre will helpthe carrier recruit and train aviation professionals such as pilots,engineers and in-flight attendants for its needs and for other air-lines. The airline used to send its pilots to South Africa for train-ing before the establishment of the centre. In the next two yearsKQ will focus on the training of its core staff ahead of the arrivalof nine 787 aircraft that the airline has ordered. But manage-ment of KQ also spots a business opportunity. “Why can’t webecome the factory for producing people for export? Why can’twe create an industry suitable for manufacturing [skilled] man-power for export?” Naikuni asks.

Landover Aviation Services CEO, Captain Edward Boyi, sharesNaikuni’s view. “As nations from other continents poach andemploy skilled personnel including pilots and engineers fromAfrica, Africa should become a workshop for aviation profes-sionals for the world.”

He argues there are benefits of this to Africa, one of which is thatAfricans plying their trade overseas can contribute to incomegrowth of their families back home.

GrowthPresently, the airline industry in Africa employs 470,000 peopleand contributes some $11.3bn to the continent’s GDP. Accordingto ICAO, the number of passengers flying in the continent in2005 was 38 million; projected growth for 2006 and 2007 is 6.9and 6.3 per cent respectively. For the coming years, the growthrate of the industry in Africa is estimated at around six per cent,

right behind that of Asia and the Middle East. According toAirbus forecasts, African airlines require 640 aircraft in the next20 years, which could cost $60bn. Airbus forecasts a growth rateof 5.4 per cent for Africa’s commercial air transport sector overthe next 20 years.

Worldwide growth in the sector is predicted at 4.8 per cent.African industry growth, according to Airbus, is driven by solideconomic growth, increasing trade ties and an influx of touristsfrom Europe, China, the Middle East and North America, and asurge in inter-Africa traffic. A number of African carriers, amongothers, South Afriacan Airways, Ethiopian Airlines, KenyaAirways, EgyptAir RoyalAir Maroc and Air Seycheles are under-going fleet modernisation programmes.

The aviation authorities have realised that the dearth of skilledpersonnel in the airline industry in Africa is worsened by the exo-dus of highly trained aviation professionals. At the 1997 AfricanAir Transport Development Fourm, it was noted that inadequatetraining combined with brain drain was a major threat to thedevelopment of air transport in the continent. The forum recom-mended the removal of regional, physical or other barriers todeployment of personnel among African states as instrumental tobetter developing and managing human resources.

Some industry expects believe that the lack of skilled personnelis one of the contributing factors to the high air accident rate inAfrica. Skip Nelson, President of Alaska-based navigationexperts ADS-B Technologies, says lack of certified mechanicsand well-trained pilots is one of the major problems in ensuringsafe air transport service. Accounting for a mere three per centof global air traffic, Africa has a disproportionately large num-ber of accidents. These account for 25 per cent of global aircraftaccidents.

The newly established continental body, the African civil aviationagency (ACAA) hopes to improve the region’s safety record bystandardising and overseeing the licensing, training and inspec-tion of aviation staff and equipment. Mwangi Makamau, chiefexecutive of ACAA, says if the agency can ensure that aviatorsare certified and paid according to international standards, theywill be able to help ensure air travel in Africa is deemed safe.“This will not only bring down accident rates but also ensure thatbetter-trained staff are not siphoned off to other parts of theworld,” he observes.


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Aero Engine 09 Full Page revision:ATE&M 98 2/6/09 13:50 Page 1



FOUNDED IN 1995, AMSTERDAM, HOLLAND-BASED AERCAP hasprogressed from a few initial Fokker transactions to become one oflargest aircraft lessors in the world, with 158 aircraft in its portfo-lio and 320 aircraft either owned, managed or on order by it.

At present AerCap’s fleet is 89 per cent narrowbody dominated.Describing the company’s purchase strategy, AerCap chief execu-tive Klaus Heinemann says: “When it comes to acquisitions welook to proven aircraft types that are in production. We buypreferably new from the manufacturer. In 2009 and 2010 we’llsee the peaking of our deliveries that were ordered in 2005 and2006. Our focus is on the A320 family of aircraft and on theA330 family.” AerCap currently has 62 A320-family aircraft onorder and 30 A330s.

Despite its narrowbody focus, AerCap, like many lessors, has noplans to enter the 100-seat market, in which half a dozen coun-tries now boast aircraft programmes. Heinemann explains why:“Basically, it’s a market where you are competing with the man-ufacturer when it comes to providing financing solutions to theairlines, and, more importantly, you don’t have the same userbase that you have on the mainstream airliners, i.e. the A320, the737NG, and that’s very important to operating lessors like our-selves.”

An established user base isn’t always important, though, asAerCap demonstrated at the 2008 Farnborough Air Show whenit announced that it would become the launch customer for theA320/321 passenger-to-freighter conversion, with an order forup to 30 freighters. The aircraft will come from AerCap’s portfo-lio and will be converted at EADS EFW in Dresden. Meanwhile, aparallel conversion line will be set up by Russia’s Irkut, part ofUAC, a 50-50 partner in the A320 P2F programme. First deliveryis expected in 2012.

Eighty per cent of AerCap’s new orders have already been placed,with the remaining 20 per cent due to be delivered from late2010 through 2012, meaning marketing on them will only beginin earnest later next year.

Both geographically and by airline, AerCap splits its customerbase fairly evenly. The big markets of Europe, Asia and theAmericas each contain similar numbers of customers, while

Russia, Middle East and Africa account for about 10 per cent ofthe lessor’s clients. Europe, however, is the strongest territory,generating almost 40 per cent of lease revenue for the company.

EnginesUnusually for an aircraft lessor, AerCap also operates an engineleasing business. In 2006 it bought engine-leasing, trading, MROand part sales specialist AeroTurbine, having secured $346mfrom French bank Calyon to part-fiannce the acquisition andgrow that company. The AerCap portfolio now stands at morethan 80 engines.

With both aircraft and engine leasing on its CV, not to mention a new aircraft programme, AerCap isestablishing a reputation as one of the world’s most forward-thinking lessors. AFM assesses the com-pany’s strategy in an industry accustoming itself to a new economic reality.

LESSOR FOCUS:AERCAP



As well as providing traditional operating leases with terms typi-cally between five and 10 years, AerCap also engages in the spotlease market, renting out equipment for much shorter periods.Heinemann call this “an important distinguishing factor to tradi-tional players in the engine lease market in that we play bothsides of the market – the long market and the short market”.

In mid-October, 2008, AerCap elected to shut down its enginemaintenance facility in Miami, Florida, with the loss of 50 jobs.Heinemann declines to say whether the decision was longplanned or motivated by cost pressures in light of economicdownturn, but comments: “The MRO side of our engine leasebusiness was purely internal and not for third parties. It clearlywas a business that was of such small scale that you could antic-ipate some efficiency in closing that and doing it externallyinstead.”

IPOSince November 2006 AerCap has been listed on the New YorkStock Exchange. Heinemann describes this as “the largest singlemilestone” for the company in the last few years. “AerCap nowhas an equity position of approaching $1.1bn which is a millionmiles from where the equity position was when the companyentered into the last recession post-9/11,” he continues.

Since the IPO the company has seen revenues and profitsincrease. The former grew 40 per cent to just under $1.2bn from2006 to 2007, while the latter increased almost 25 per cent insame period, with a 2007 profit of $211m.

At the time of writing, AerCap’s third-quarter results had still notbeen published. Nonetheless, some conclusions about thelessor’s 2008 performance can be drawn from its Q2 results.Second-quarter 2008 net income was $69m, compared with$34m for the same period in 2007. Sales revenue was also up, asthe company completed sales of 10 aircraft, two engines andparts. It appears, therefore, that despite the general malaiseafflicting aviation in 2008, AerCap is on track to surpass its per-formance in 2007, which was itself a record year.

Coping in a struggling industryThough oil prices have declined markedly since the summer of2008, IATA has retained its forecast of a $5.2bn loss for theworld’s airlines in 2008, due to the prospect of recession in mostmajor economies.

Yet, despite airline losses, most lessors have thrived in 2008. Ofcourse, there are those such as ILFC that are affected by the illsof their parent institutions, but, by and large, lease rates anddemand have stayed strong.This has led some in the industry to suggest that the leasing

North America/Caribbean

Latin America

Africa/Middle East

Europe

Asia/Pacific28% of H1 2008lease revenues

2% of H1 2008lease revenues



AerCap Locations

AerCap Overview

Total assets $5.2Bnat June 30, 2008

Contracted orders $5.2Bn

Total assets $10.4Bnincluding purchasecommitments

314 Aircraft76 Engines112 Customersin 48 Countries




cycle is sufficiently decoupled from the airline cycle to shieldlessors from airline woe. Heinemann doesn’t agree: “If you lookat the second half of 2008 and 2009: for most lessors, likeAerCap, from a placement perspective, these years were closedand contracted out somewhere last year or earlier this year. Fromthat perspective we are only confronted with placement situa-tions in 2009 if there is a default that requires us to remarketsomething. So, there is no decoupling, but there is a significanttiming difference between what happens in the airline market atthis moment and the impact it would have on the leasing mar-ket.”

Obviously, airline bankruptcies do have a direct, immediateimpact on lessors. AerCap, fortunately, has so far emerged rela-tively unscathed from the slew of liquidations this year. “We havehad defaults in the second quarter and in the third quarter,” con-cedes Heinemann. “This, to a degree, is normal procedure forlessors. Could it be that the level of defaults increases somewhatas we go through the winter season? I think, yes, that is a possi-bility. But, to date, we have been able to stay clear of some of thebigger defaults we have seen in the market over the last ninemonths.”

Yet, despite the dire finances of many airlines around the world,lease rates for modern, in-production aircraft have held firm. “Onthose we see very little downward movement,” says Heinemann.The market for older equipment, however, is softening, withHeinemann pointing to declining rentals on 737 Classics, 767sand MD-80s. Such aircraft form less than five per cent ofAerCap’s portfolio.

Falling lease factors for older, less fuel-efficient aircraft have, ofcourse, been driven by rising fuel prices. These, however, haveplummeted since the summer highs of $147 a barrel, and atthe start of November 2008 hovered around $60 a barrel.“Clearly, this is a double-edged sword,” says Heinemann.“Lessors who are predominantly exposed to the most modern,fuel-efficient aircraft enjoy the benefit of the extreme acceler-ation of the retirement of older, inefficient aircraft that the fuelprice of $100 per barrel and more implied. On the other hand,those fuel prices impaired substantially the performance ofmany airlines. We now have a reversal of that where the fuelprice makes certain older aircraft more economical again.”

Current AerCap Holdings NV ownership

55.5%

8.9%

35.6%

Cerberus

Management

Publically held

November 2006 - Initial public offeringAugust 2007 - Secondary offerinng





Liquidity crisisBy the end of the first half of 2008 AerCap had closed a $1bn air-craft securitisation through Aircraft Lease Securitisation II for 30A320s. It had also closed a $100m engine acquisition facility andincreased committed pre-delivery payment funding for forwardpurchase commitments by $338m. Securing these financings hasprepared the company well for late 2008 and the full-year 2009,periods when funding will be more challenging and expensive toarrange. Heinemann comments: “Our funding requirements fordeliveries during the current liquidity crunch do not exist becausethese are funding facilities that we contracted last year, and in thefirst and second quarter of this year.”

Airbus A300 Freighter 1 0.8% - - - 1

Airbus A319 15 12.6% - 14 - 29

Airbus A320 58 35.7% 13 48 1 120

Airbus A321 19 16.0% 1 - - 20

Airbus A330 5 5.0% - 30 - 35

Airbus A340 - 0.0% 1 - - 1

Boeing 737 NG 18 16.6% 30 - 3 51

Boeing 737 Classic 16 3.9% - - 2 18

Boeing 757 11 4.2% 2 - - 14

Boeing 767 4 3.4% 3 - - 6

Fokker 100 - 0.0% 1 - - 1

MD 11 Freighter 1 0.9% 1 - - 2

MD-82 6 0.5% 2 - - 10

MD-83 4 0.4% 4 - - 6

Total 158 100.0% 58 92 6 314

No. of

a/c owned

% Net book

value at

31 December

No. of

aircraft

No. of

aircraft

on order

No. of a/c

under Purchase

contract and

letter of intent

Total

Owned,

Managed &

Ordered a/c

Owned Portfolio Managed Portfolio

Aircraft portolio as of June 30, 2008

source: AerCap

Strong revenue and earnings growth

Revenues Net Income

1200

1000

800

600

400

200

02004 2005 2006 2007 2004 2005 2006 2007

$391

$493

$814

$1,177

200

150

100

50

0

$28

$106

$171

$211

(1)

Notes(1) Excludes pre-tax impairment charges of $134.7m in 2004(2) 2006 and 2007 net income adjusted for refinancing charges, mark to market interest rate capsand share-based compensation in 2006 and 2007

(US$M)

Others may not fare so well. JP Morgan has predicted a $10bn-$20bn aircraft financing gap in 2009 and Heinemann believessome orders could be at risk. “I do believe that in the near term,i.e. in the next six months, until we go into the summer season2009, there will be situations where both manufacturers willhave to be very imaginative to deliver aircraft because of the lackof appropriate funding for those who intend to take delivery. Iassume both Boeing and Airbus will use their balance sheets toa significant extent to facilitate deliveries during this situation,”he says.

Both Boeing and Airbus have now scrapped plans to increaseproduction over the next 18 months. In addition, the two-month Boeing engineer and machinist strike that began inSeptember will also help to keep excess capacity out of the mar-ket in the near term. But does Heinemann think the two man-ufacturers should go further in light of the financial difficultiesfacing many airlines? “If Airbus would have to consider curtail-ment of production rather than non-increase of production as apreventative measure it’s a little early to say,” he responds. “Butif it should come to significantly higher pressure, both manu-facturers will have to take a look at their existing production lev-els.”

Of course, it’s not only airlines that are feeling the pinch. Giantlessors such as ILFC have seen their parent institutions pul-verised in the economic downturn and questions over their liq-uidity in the latter half of 2009 remain. Could the leasingindustry see some big names fall by the wayside in the monthsto come? “It’s difficult to say,” Heinemann replies. “But even inChina you see signs of weakness. Certainly, if I look at Australia,which supports Allco, Macquarie and Babcock & Brown, they’renot exactly in the strongest shape either. Dubai, one will have tosee, but I think Dubai is for the first time confronted with thefact that funding reality matters to them as well, even if they arein the Middle East. So, I think the stresses on the lessor sidecaused by parental issues are not over.”


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Phone rings…Dave (Friendly, business-like): Hello Hal, this is Dave. How are you?Hal (Soothing, friendly): Good evening Dave. Everything’s runningsmoothly. And you?

Dave: Fine Hal. I’m returning your call…Hal (Interrupts): Thank you, Dave, but it is nothing serious.

Dave: Right, well, shoot then.Hal: Sorry about this, I know it’s a bit silly, but it’s about the aircraftthat is due for delivery next week.

Dave: Yes, what about it?Hal: Well, Dave, everything is going extremely well, but haveyou followed the news recently?

Dave (Slightly nervous): Yes, of course I have. We are tryingto deal daily with current fuel costs, a decrease in load factorsand negotiations with manufacturers to try and slow downthe pace of deliveries for the coming months and into next year…Hal (Interrupts): I didn’t mean that, Dave.

Dave: (Takes a deep breath and attempts to continue): …Hal: I meant the financial markets, Dave. Have you seenwhat has happened to the financial markets? Thebanking industry?

Dave: Well, yes, Hal – of course I have. I read the papers,I watch the news.

Hal: That’s good, Dave, you see there are some extremelyodd things about the financial markets right now,

Dave: Odd?Hal: Yes, Dave, I don’t think there is any question about it– it can only be attributable to human error. This sort ofthing has cropped up before and it has always been dueto human error.

Dave: But what does that have to do with my aircraft to bedelivered next week?Hal: Well, Dave: we cannot maintain the margin.

Dave (Stunned silence): … (And then sarcastically): Oh yeah? What did you have in mind then? Hal: We need to cover our funding costs, Dave. We need to raisethe margin by 250 bps.

Dave (Gulps and coughs, clears his throat): …Hal: I’m sorry, Dave. However, I am sure you understand.

Dave: Are you joking? This is insane!Hal: It is puzzling, Dave, I don’t think I’ve ever seen anything quitelike this before.

Dave: You’re damn right, Hal! No way! Why such a huge increase?Hal: I’m sorry, Dave, I don’t have enough information.

Dave (Spluttering): You can’t just do that! You have a commitment,you signed a term sheet, the documentation... You’re committed!

2008: AN AIRCRAFTFINANCING ODYSSEY



Hal: It’s the MAC, Dave, the MAC clause. We can do it becauseof the MAC clause. I’m sorry, Dave.Dave: The MAC? It’s a MAC? Hal: We picked it up in Clause 22.3.5, Dave.

Dave (Panicked): But you can’t invoke a MAC, we’re one ofyour most important customers, Hal! Hal (Smoothly): Yes, you are, Dave. That’s why we areincreasing the margin by 250 bps.

Dave (Furious): You’ve got to be kidding! You’re trying tomake me believe that you are raising the margin by 250 bps foryour best customer – what do you do to the others?Hal: We closed the door on them, Dave. They are out in space.You were part of a very small list we chose to keep here withus, Dave.

Dave (Hysterical): You mean we’re one of the privileged ones?We should be grateful? You’ve just marked the end of ourrelationship! We’ll never come to you for business again! Doyou understand that?Hal (Soothing): Look, Dave, I can see you are upset. May Isuggest that you sit down, retrieve your stress medication andthink things over.

Dave: ...Hal: Dave, I am doing this to keep you inside here with us. Butif you are going to get upset, I will have to close the doors onyou as well. Do you understand, Dave?Dave: Close the doors on me? On us? Jupiter? I’m the onewho is closing the door on you!

Hal: I’m sorry to hear that, Dave. But I understand. It’s OK.

Dave (Perplexed): What do you mean?

Hal: It’s OK, Dave. The door is closed now. You are in space:no air, no financing. It is in clause 22.3.5 Dave.Dave: No financing? Closed doors? Out in space?

Hal: I’m sorry, Dave.Dave: Open the doors, Hal, please!

Hal: I can’t do that, Dave.Dave (Sobbing): Hal…open the doors... please!

Hal (Calmly): I know you and Frank were planning to changebank, Dave, and I am afraid that is something I cannot allowto happen. Dave: I was overreacting, Hal. Really, just overreacting – yougot to believe me!

(Silence)

Hal: Is the margin change acceptable now, Dave?Dave (Utterly resigned): Yes, Hal.

Hal: Are we friends again, Dave?Dave: Yes, Hal.

Hal: There is one more thing, Dave.Dave: Yes?

Hal: I think you should thank me, Dave.Dave: Thank you, Hal.

Hal: You are welcome, Dave, I feel much better now, I really do.

(long silence)

Hal: Dave? Would you like to play a game of chess?I play very well.

Protagonists

Dave: CFO of Jupiter Airlines.

Frank: Dave’s boss

Hal: Head of aircraft finance at MonolithBrothers International Bank.




WHILE MANUFACTURERS ACROSS THE INDUSTRY DECLARE Astate of health for their orderbooks, the tumultuous economicclimate, recent high oil prices, and declining demand make for adubious reception. Airbus alone has received 119 aircraft cancel-lations this year and more are expected across the board.

Boeing received 633 net orders for the year through to 28October, 2008 and has made a total of 325 deliveries. Airbusmeanwhile received a net total of 737 orders through to 30September, 2008 and has delivered 349 aircraft. Going by thesefigures the industry is on firm ground, yet there is much more toconsider.

Keeping track of the ‘developing’ world fleet is perhaps moreabout watching it diminish. Specialist consultancy on aviationinformation Ascend, recently disclosed findings which predict animminent cut of over 1,000 aircraft from the world’s fleet. Theprediction is based on the downsizing of airlines, the closure ofstruggling carriers, fleet retirement and the coming wintermonths. “Some of them will be parked, some will find new oper-ators, some may be retired permanently but we don’t know howmany of each,” Chris Seymour, head of market analysis forAscend, says.

From the 1,083 losses predicted, the analysts expect to see 15per cent go from Europe and nine per cent from Asia. “Threequarters of the total are coming out of the US market,” explainsSeymour. “They have had big losses and are cutting back on theirdomestic capacity, particularly cutting aircraft, routes, person-nel.”

The total number of seats diminished as a result of the cuts willbe 120,019, a significant number that is reflective of the trou-bling fall in passenger demand. Of the aircraft cut, 119 will bewidebody, 589 narrowbody and 86 turboprops. The 737-300 isthe favourite to go, with 121 being stripped from the worldfleet. There will also be 93 MD-80s and 90 737-500s cut, accord-ing to Ascend.

The retirement of these old aircraft signals a need for airlines toplace orders for modern replacements. With recent high oilprices, airlines will see marked savings on fuel consumption andcosts. “The oil price, in a way, is helping us,” says LaurentRouaud, Airbus’s VP of market forecasts and research. “Theprices going up and down are pushing airlines to purchase andreplace aircraft equipment… For these reasons the demand foraircraft into 2009 is strong.” He goes on to explain that: “theeconomics work well for airlines” as for example, updating a737-400 with an A320 could save as much as $1.5bn a year onfuel costs per aircraft. “Overall I think there is an alarming casefor airlines to replace their equipment today,” he affirms.

It is no surprise to see a depletion of the world’s fleet in line withthe decline in passenger demand, lack of financing and recenthigh oil prices; every company has been affected by the troubledstate of the market. One such company is the Russian airline S7.The carrier has announced it will ground its 27 Tu-154s and eightIl-86s, saying it will phase out its Russian-built aircraft because oflow passenger demand. For an airline to face severe hardship insummer months is a cause of major disquiet – and a forewarn-ing of even greater hardship during winter. Before passenger

The aviation industry is often seen to reflect the financial climate as a whole. In this time of economic crisiswhat can one see in the tea leaves that are aircraft manufacturer’s orderbooks? Mary-Anne Baldwinreports on the orders and deliveries of 2008.

WHAT’S ON ORDER:TROUBLED TIMESFOR AIRCRAFT MANUFACTURERS?



demand drops off further, S7, among many others, has wiselydecided to cut part of its fleet. The airline, Russia’s secondbiggest by passenger numbers, will make an estimated saving of50 per cent on maintenance costs with the move.

But this downscale has not blinkered S7 from foresight; it has stillplaced an order with Airbus for 25 new A320s. Although thecarrier is not expecting delivery until 2014, the investment willmean continued savings on future maintenance costs, alongwith fuel emissions and any attributed taxes.

While Seymour predicts that most of the 1,000 odd aircraft cutwill be because airlines want to update fleets, this is notexpected of the US. “Only about 10 per cent of commercialbacklog in dollar terms is with US Airlines” Jim McNerney,Boeing’s chairman, president and CEO said during the company’sthird quarter conference. As a result of the financial downturn,the US is one of the industry’s least secure markets – there arefears that even those minimal orders placed may be retracted asthe country’s aviation sector faces further hardship.

Heads turned recently when American Airlines announced it hadstruck a deal to update its fleet with 100 new 787 Dreamliners.While 58 787s are held only as an option to purchase between2015 and 2020, the carrier has put in an order for 42 of the air-craft, with delivery expected during 2012 and 2018. America isthe hardest hit by the downturn and for a US carrier to investheavily at this time is a surprise to many. Yet the fruition of theorder is questionable as the airline is currently in dispute with itspilots’ union and it is feared it may cancel at least some of the42 aircraft ordered, if agreement with the union is not met.

India is the other major area for concern. Boeing has recentlybeen adamant the fiscal slowdown will not affect its sales inIndia, saying the ‘firm’ orders placed by Indian carriers will see itthrough; Boeing alone has a projected demand of 1,001 aircraftfrom India within the next 20 years, a collective 300 aircraft aredue to be delivered within the country over the next five years.

Yet India’s airlines are crippled by a harsh economic environment,unworkably high taxation, and falling passenger demand.Kingfisher is a case in point – having sold three of its orders withAirbus for A340-500s to Nigerian Arik Air, it has also put backorders with Boeing. Likewise, Jet has postponed its orders by at

Kingfisher's A340-500 aircraft, similar to those sold to Arik Air




least a year, yet has said it will cancel none. Some airlines havereceived large government backing while others have gone tothe wall. Those that continue to exist are likely to pull theirorders, either through lack of investment or diminished demand.

Financial freezeUnfortunately for manufacturers this lack of investment stretchesacross the industry. Jose Abramovicim, head of aviation atCalyon, the corporate and investment bank, has predicted adeficit of $25bn in credit funding for the industry during 2009.The forecast, announced at this year’s European ISTAT confer-ence, is an ominous portent; aircraft manufacturers should bewary.

Many airlines may wish to update their fleet with cost and fuelefficient aircraft in a bid to tackle fluctuating and recently crip-pling oil prices, yet numerous airlines have been unable to sourcefinancing from already over-stretched banks and wary lessors.For small or struggling airlines the desire to see long-term costsavings is, in this present environment, unlikely to be met. Theseairlines will have to delay orders and some may find it hard to ful-fill payment obligations for existing orders.

As Ascend’s Seymour asks: “Where is the financing coming fromfor these 8,000 odd aircraft on order?” It is a critical time forboth carriers and manufacturers, with the estimates at two-thirdsof the current orderbooks due in the next five years.

Industry analysts have envisaged there will by next year be asmany as 200 whitetails – new aircraft with no buyers and theiroriginal owners unable to source funding. Concerned over futurenon-payment, banks and lessors are holding back on lending andare expected to continue doing so, creating a deficit too large tosupport the continued purchase of aircraft.

“The debt market is dead,” Bill Cumberlidge, director of aviationasset finance at Allco Finance Group said at a Hong Kong con-ference this month. “Nobody is getting out of this alive.” IndeedAllco itself outsourced its operations on 4 November, 2008 afteradmitting it may default on debt. If Cumberlidge andAbramovici’s predicted $25bn deficit is correct, scores of aircraftwill be stranded, most likely parked in the desert – unused andunpaid for.

El Al Airlines has recently pulled from a deal to sell a 767-200after the buyer was unable to secure bank financing, El Al toldthe Tel Aviv Stock exchange in a statement. The Israeli airline hadwanted to replace its 767 jets with newer, more efficient 787s.Earlier this year, El Al ordered four 777-200ERs in a deal worth$540m. While Boeing is no doubt staying optimistic about hold-ing onto the deal, others watch and wait for it to add to analready growing list of cancellations.

Airbus’ fear-inducing 119 cancellations do much to support theconcern over whitetails and a depleting world fleet. The cancel-lations have knocked the manufacturer’s orders down from 794to 675, with 71 aircraft cut this month alone – including 65 can-celled A319s which had been ordered by the now defunct low-cost carrier, Skybus.

Industry analysts have envisaged there will by next yearbe as many as 200 whitetails – new aircraft with no buy-ers and their original owners unable to source funding.Concerned over future non-payment, banks and lessorsare holding back on lending and are expected to con-tinue doing so, creating a deficit too large to support thecontinued purchase of aircraft.

“

”


check_FPA:ATEM93 4/4/08 09:01 Page 3



Ascend has noted a rise in small airlines placing orders on the backof sale leases with lessors, payment of which will be taken on deliv-ery – a system the company expects to see more of in the future.Seymour acknowledges that airlines can not themselves afford toinvest in new aircraft; “You’d expect lessors to take a bigger slice ofthe business. Lessors themselves have a backlog of about 1,300 andthey’ve placed about 350 of those so far,” he says.

Airbus’ Rouaud agrees: “Lessors, typically in the past were order-ing 25 per cent of all orders and I think their share over the lastfew years has been 10 per cent… I think there is an opportunitynow for them to bring back that market share to 20-25 percent.”

While the lessors share of the backlog has been declining – withorders coming predominantly from the airlines, there has instead,say the analysts, been a rise in lessor purchases of existing ordersfor new aircraft, originally made by airlines. The sale is often alast resort for the carrier who, unable to source financing for fullpayment, is forced to sell the order and will later be forced –unless it’s restricted financing dramatically changes – to lease theaircraft back from the lessor.

Whatever strategy is used, it seems lessors will be asserting amore dominant role in the market. Manufacturers stand resolutethat they too will face only manageable troubles as a result of thefinancial downturn, as Boeings Jim McNerney states; “Virtuallyall lending sources have tightened up. Having said that, there isstill aircraft financing available on a selective basis, and we haveno current evidence that says our backlog won’t be financed overthe next five quarters or so”.

Tracking market demand Despite the financial crisis, there are growth areas in the industry.Europe and North America is where Ascend’s Seymour believeswe’ll see the slowest growth, with a market driven by replacementrather than expansion. Asia-Pacific and to a lesser extent LatinAmerica are likely to see the highest growth rates.

Airbus’ Rouaud agrees; “In terms of passenger demand for thenext few years, the strongest places are the North American coun-tries. They represent 30 per cent of all the orders for airplanes,where they were before representing five to ten per cent.”

“[In] longer terms, we’re beginning to see strong growth inChina,” says Boeing’s director of marketing Andrew Magil, esti-mating around a 10 per cent growth rate. “[Its] not strong,” hepoints out, “but growth none the less.”

Among Airbus’ biggest customers this year are CASGC with anorder of 110 A320s; AWAS with an order of 75 for the samemodel; DAE Capital with orders of 70 A320s and 30 A350-1000and Aviation Capital Group which has requested 23 of the man-ufacturer’s A320s aircraft. Irish TAM Linhas Aereas has placed atotal order of 46 aircraft, including three A319s; nine A320s;eight A321s; four A330-200s; 12 A350-800s and 10 A350-900s.

Airbus has received 445 orders for the A320 family; 133 for theA330 family; 138 for the A350 family and three for the A380.

Airbus’ Total Orders and Deliveries to Date

All Families Worldwide

Total orders

Total Deliveries

A300/A310

816

816

A320

6,253

3,652

A330/A340/A350

1,852

931

A380

192

9

Total

9,113

5,408

Boeing’s Total Orders and Deliveries to Date

All Families Worldwide

Total orders

Total Deliveries

737

8,156

5,857

747

1,524

1,409

767

1,035

967

777

1,096

739

787

895

0

Total

12, 706

8,972


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check_FPA:AFNM54 27/3/08 11:22 Page 3



rent aircraft. As a result, they are now thinking about anotherbusiness model with the CSeries’ high-density interior.”

“We are also forecasting greater interest from airlines in emerg-ing markets such as India, China, Africa, Latin America, Russiaand the CIS,” says Poutissou. “We’re in constant discussions withpotential customers.”

Poutissou affirms that Bombardier’s orderbook is strong; “Forcommercial aircraft, in the short term, many customers havecommitted financing so we do not anticipate a short-termimpact. Many banks and lessors are in a wait-and-see mode, asmany stakeholders are right now. It is too early to anticipatetrends.”

Boeing and Airbus too, have too been stoical about currentdemand, each stating clearly that they feel they are in a secureposition. Meanwhile company spokespeople have been to somedegree, guarded about cancellations and suspended orders, omi-nously so; one can’t help noting the prudence in not publicisingone’s struggles.

Yet even with understandable concern, orderbooks are healthyand manufacturers’ figures, for now, look good. “In light of theconditions we’ve seen, we’re seeing very strong demand for newairplanes,” says Boeing’s Magil. “From our perspective we have avery strong backlog; we are in a very good position right now,”he asserts before going on to say: “During the last big downturnin 2001, our backlog was about 1,400 and we are at about3,700 today.”

And even the worst predictions for manufacturers are less direthan many may expect. So far, concurs Seymour: “The manufac-turers have not been impacted too much… I think there have

The airframer has delivered a total of 349 aircraft this year. Thisincludes 204 of the A320 family, 51 of the A330 family and sevenof the A340 family and the same number of A380s.

Irish airline Lionair has placed the most orders with Boeing,requesting 56 of the 737 aircraft. FlyDubai has ordered 50 of thesame aircraft and Air China has placed an order for 30. EthiadAirways, another of Boeings top-ranking customers this year,ordered 45 aircraft, 10 777s and 35 787s. In 2008 Boeingreceived orders for 480 737 aircraft, 78 787s, 52 777s, 20 767sand three 747s. Of the 325 aircraft delivered during the yearthrough to September 2008, Boeing supplied: 254 737 aircraft;50 777s; 13 747s and eight 767s.

In terms of which models we should expect to see more of,Rouaud envisages: a “tendency to go towards bigger airplanes,”reaching full capacity while; “concentrating on their core routes[and] core hubs because they can drive their costs down.” As aresult, “you will see more A320s, more A321s,” and more A350sas a replacement of 767s.

“We have decided to go a little bit higher in capacity than our com-petitor, now we see that our customers are interested in slightlybigger aircraft in every segment of the market. It’s true for theA320, A350 – replacing the 767s – and its going to be really truefor higher capacity airplanes like the 737 to the A380,” he clarifies.

Conflictingly, Philippe Poutissou, Bombardier’s VP of marketingcommercial aircraft, sees a trend towards use of light aircraft:“We anticipate keen interest in all our aircraft as airlines attemptto ‘right-size’ their fleets,” he says. “Low-fare carriers for exam-ple, have told us that they are challenged to stimulate trafficthrough lower fares and thus are having difficulty filling their cur-

Boeing and Airbus too, have too been stoical about currentdemand, each stating clearly that they feel they are in asecure position. Meanwhile company spokespeople havebeen to some degree, guarded about cancellations andsuspended orders, ominously so; one can’t help noting theprudence in not publicising one’s struggles.

“

”

Orders and Deliveries, 2008

Manufacturer Orders Deliveries Cancellations

Airbus 794 391 119

Boeing 637 330 2

Bombardier 69 51 N/A

Embraer 118 205 N/A



Boeing has lost at least a hefty $100m each day since the strikesbegan on 6 September 2008, analysts have estimated. The strikeshave meant yet further delay to the 787 – now 15 months latefor its original roll-out date. At the time of writing Boeing wasproducing reports to clarify the extent of delays to its orders – anaccount critical to many airlines awaiting aircraft.

The company had been producing some 40 aircraft each monthbefore the stalemate. It couldn’t have come at a worse time forBoeing, who had been working on an orderbook with recordhighs of 3,725 aircraft. Magil has admitted; “We are still having ahard time meeting that demand from a production perspective.”

Yet, says McNerney: “Despite our challenges during the quarter,we continued to take new orders. Our backlog grew to a newrecord of $349bn, up seven per cent year-to-date. Commercialairplanes backlog of $276bn – increased eight per cent year-to-date.” He also said: “Obviously, the work stoppage will have animpact on the schedule for all our commercial programmes.”

Additional troubles came from supplier ‘challenges’ for galleys onsome of Boeing’s widebody commercial aircraft, however themanufacturer believes it will see this issue resolved shortly:“Before the strike started, between five to 10 deliveries of Boeingwidebody commercial aircraft were at risk of slipping out of thirdquarter because of this galley issue… [we] expect that once thestrike is completed, our galley supplier will be able to support therevised aircraft production schedule,” McNerney said.

“Our revenue of $15.3bn was down seven per cent from theprior year due to the strike and the galley shortages... Thoseissues reduced third quarter deliveries by about 35 airplanes,” headded at the conference.

With Boeing workers now back in action and an end to galleyshortages expected, Boeing is on its way to join Airbus in meetingthe demand for new aircraft. Whether this demand continues inlight of the industry and furthermore the world’s financial crisis,remains to be seen. All we can do is watch and wait.

been just under 100 deferrals... We’ve not seen very many can-cellations yet, which is something you might expect to see.”

Production: delays and developmentsMeanwhile, the opening of Airbus’ new Chinese productionplant last September, did much to bolster the company’s claimthat levels of demand meant the manufacturer would be rela-tively unaffected by the economic slowdown.

The new assembly line, which is in the Chinese port of Tianjin,and is a copy of the company’s plant in Hamburg, Germany,brings an inherent belief in a high number of orders and a pro-duction rate that’s increasing.

The move will, no doubt, allow Airbus to take a larger share ofthe growing Asian market, sticking a flag in what was until now,Boeing’s turf. It’s a key step in staying competitive with Boeinghas strong trade in China, but no plants outside the US.

Although a bold move under the shadow of global financial melt-down, Airbus knows it can prosper from the relative security ofChina’s strong domestic market growth. The plant, Airbus’s firstoutside Europe, was built mainly to supply Chinese orders – some2,800 aircraft over the next two decades, Airbus says. the regionis a total of 11.6 per cent of global demand.

The company has said its goal is to produce four aircraft permonth by 2011, and all seems on track for that. The first aircraftto be completed at the plant will be an A320. Built for SichuanAirlines, delivery is expected in the middle of next year.

For its rival Boeing though, production has slowed considerably,being in fact stagnant for 58 days after talks could not resolve theimpasse between members of the National Association ofMachinists (IAM) and Boeing officials over subcontracted work.

An A320 like those to be built at Airbus's Tianjin plant




IN NORMAL CIRCUMSTANCES, THE FACT THAT THE PRICE OF JETfuel had more than halved in the latter half of 2008 would because for celebration. As everyone is aware, however, normalityis dead: free market principles are in question; stockmarketshave collapsed; once-august financial institutions have beennationalised; recession is ahead; and credit flows have dried up.While oil constituted airlines’ greatest challenge in 2008, liquid-ity is set to be their principle bugbear in 2009.

Banks are now generally understood to have shut up shop untilthe New Year. Nonetheless, when they do start lending again –to each other and the wider world – it will likely be at LIBOR plustriple-digit basis points. The implications for the aviation industryare serious: José Abramovici, global head of aviation group atFrench bank Calyon, has predicted that new delivery financingplus refinancing requirements for 2009 will total $70bn. Hewarns that banks and export credit agencies (ECAs) will only pro-vide $45bn of this, leaving a $25bn gap that others will have toaddress. JP Morgan estimates a funding gap of $10bn-$20bn in2009.

When cracks do begin to appear, they will probably initially do soin the US, where banks have been most severely affected by thedownturn. Bertrand Grabowski, board member at European

bank DVB, says: “If there is a funding gap, that gap will be seenfirst with the US airlines because the US market is devastated cur-rently, and there’s not much visibility on the future of the US air-lines. I know a lot of banks that are simply saying, ‘No US Airlinewhatever the LTV, whatever the aircraft, whatever the airline’. SoI believe that the manufacturer will have to use its chequebookand most significantly that will be to assist the US airlines.”

ExposureWhile most accept that Airbus and Boeing will be forced to thefinancing table, it is tough to estimate the extent of the supportthat customers will require. Over the two years following 9/11,the two manufacturers put around $2.5bn each on their books –only a fifth of what Abramovici reckons will be necessary.

Abramovici, however, could well have over-estimated the scale ofthe problem. Grabowski says: “The value of new deliveries asscheduled is roughly $50bn for next year, and he [Abramovici]believes that on top of that $50bn you will have approximately$20bn of refinancing of the existing fleet... As far as the $20bnis concerned, I’m not sure that we can say there’s an absoluteneed of $20bn because if the funding crisis continues there are alot of transactions that will never take place.” Instead, Grabowski believes the refinancing requirement, and

As the world’s media struggles to find new words for turbulence, the aviation industry looks aheadglumly to 2009. Analysts are queuing up to predict a gargantuan financing gap in that year, a gap that nei-ther banks nor export credit will be able to bridge. But do manufacturers share that view and, if so, howwill they respond? AFM reports.

MANUFACTURINGLIQUIDITY

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0

2002 2003 2004 2005 2006 2007 2008

376$26B

281$20B

285$19B

290$19B

394$25B

441$29B

487$33B

U.S. Dollars (in millions)

Manufacturer

Cash/Other

Public debt/capital markets

Bank debt

Export credit

Leasingcompanies



likely financing shortfall, will amount to $10bn-$15bn – still ahuge amount, as James Cottle, managing director of AirbusFinancial Services, confirms: “That’s even bigger than what we’rethinking. If it’s at that level then we will have a problem, I think.But I guess they’re the banks, and the banks know that they’renot lending and maybe that is the case.”

At Boeing, however, Kostya Zolotusky, vice-president capital mar-kets development, is more circumspect. He believes the bankers“have underestimated delivery financing to be done by regionalbanks and the surge capacity of Ex-Im”.

In a November conference call Jim McNerney, Boeing chairmanand chief executive, told investors and media that Boeing wouldprobably need to finance some deliveries in 2009. Nonetheless,he didn’t appear too concerned about Boeing’s potential expo-sure, saying that the company had “pretty good visibility” onfinancing for the next five quarters. He predicts that 40 per centof required funding will come from non-US banks, 20 per centfrom lessors and 20 per cent from Ex-Im bank. Boeing currentlyhas $9.5bn of backstop financing commitments through to2020. Airbus’s exposure, in contrast, is down at 1988 levels.

Zolotusky confesses to being uncertain about Boeing’s potentialfinancing commitment, or about whether it will exceed post-9/11levels. He comments: “After 9/11 we were funding for a coupleof years in the range of $2.5bn, plus or minus a little bit per year,and that certainly didn’t put any excessive pressure on us to raiseor fund or structure those deals. We could certainly do some-thing like that in the current environment. We don’t think itwould be required to that extent, but we’re certainly well pre-pared in terms of the liquidity the Boeing company has, and interms of Boeing Capital specifically.”

The Financial Times has estimated that Airbus financing supportcould reach $2.6bn in 2009, more than doubling its exposurefrom the beginning of 2008. Whether that figure will rise furtheris unclear. James Cottle, managing director, Airbus FinancialServices, admits that “it’s very difficult to say now what thedemand will be on us. There’s been no sort of Tsunami-type situ-ation where loads of people are coming to talk to us aboutfinancing their aircraft.”

If that Tsunami does materialise, Airbus is ready to respond,affirms Cottle. “We’ll do whatever it takes but we do rely onother people’s money and we do look for senior exposure. We’reprepared to consider looking at junior pieces, which requires ustaking real risk, but not putting a lot of dollars out there, whereasthe banks would be putting the dollars out, but it would be verywell protected.”

Export credit“Ex-Im will do a little under $5bn this year... So they have roomfor a few extra billion without stretching their position, but theyprobably could go even more with a little stretch,” saysZolotusky, referring to his previously noted belief in the “surgecapacity” of the US export credit agency. Grabowski points outthat “the current portfolio of US Ex-Im is $25bn, which is alreadyquite significant”. Nevertheless, he does agree that Ex-Im expo-sure will have to grow.

IATA chief Giovanni Bisignani has said that Ex-Im will not financemore than 20 per cent of new deliveries in 2009. Others dis-agree. “Export credit was usually around 15-20 per cent. I wouldsee them above the 20 per cent,” says Grabowski. Zolotusky,meanwhile, points out that export credit commitments have hitthe mid to upper 20s in percentage terms during times of crisis,

so 2009 could well see a return to those levels. Airbus would like-wise see ECA cover rising to match the requirements of its cus-tomers in a time of difficult access to the commercial financialmarkets.

Once a degree of confidence returns to the market banks shouldstart gravitating again towards export credit funding. The TEDspread – the difference between US treasury and LIBOR rates – isnow hovering around 350 basis points. Once banks added theirown mark-ups, this means they could take on a treasury-type riskat around 400 basis points above treasuries – “a very lucrativeform of arbitrage”, according to Zolotusky.

Alternative sources of financingWhile much was initially made of the capacity of Asianeconomies to pull the West through the current economic crisis,it rapidly became apparent that the malaise had spread globally.Japan’s stockmarket has hit 26-year lows and China’s growth hasfallen below 10 per cent for the first time in five years.

Thus it is scarcely credible that Chinese, Japanese or even MiddleEastern banks will provide the global aviation industry with liq-uidity in 2009. Cottle agrees: “I think if they’ve got any sensethey will try and stick to what they know best first and then grad-ually expand. We haven’t really seen them in this market yet. Itwouldn’t really be in character for them to come out and takeopportunities at this time.”Where such banks could play a role is in supporting local deliver-ies, as Zolotusky explains: “The Chinese banks during this last

If there is a funding gap, that gap will be seen first withthe US airlines because the US market is devastatedcurrently, and there’s not much visibility on the future ofthe US airlines.

“

”




cycle have financed practically every delivery going into China;Middle Eastern banks have been very active in supporting localdeliveries. Then when you take as a group all of these banks likeNational Bank of Egypt, Bank of Morocco – they’ve been doingone-off deals for local deliveries which on aggregate represent asignificant amount of capital.”

Help from the wider banking market will stem predominantlyfrom Europe, Zolotusky believes, while “US capital markets willeventually break loose of the logjam because the money is there,it’s just sitting in treasuries”. Once market confidence is restored,he says, financing will again open up for aviation as aircraft con-tinue to perform “phenomenally well” as an asset class.

Lessors will also be expected to shoulder some of the burden.“I’m not sure the banks will be gung-ho on pre-delivery paymentfinancing like they were, but then the operating lessors maycome into their own on things like that if they can get the liq-uidity. There’s been some disintermediation in that the operatinglessors are seen as a buffer,” says Cottle. Whether that bufferholds will, as Cottle remarks, depend on liquidity, and that is apotential banana skin given the precarious balance sheets ofsome lessors’ parent institutions.

Differing approachesHow Boeing and Airbus do end up addressing the financing ques-tion will tie in with the philosophies of their customer financedepartments. “They [Boeing Capital] may have come round moreto embracing the way we [Airbus] do things, but I like to thinkthat we were the pioneers to some extent,” ventures Cottle. “Wehave never sought to grow this business – we don’t go out mar-keting looking for assets to put on our books. Once it’s on thebooks our market then is looking at the secondary buyers of air-craft risk and we then sell down to the market as much as we caneither through a repackaging or through a direct sale.”

There is clearly little love lost between the two sides. Zolotuskydescribes Airbus Financial Services as “a conundrum wrapped in ariddle and buried deep inside EADS’ balance sheet”. On the otherhand, he says, “Boeing Capital Corporation is a transparent busi-ness with all the relevant SEC fillings. All of our positions result ina very clear and visible profit or loss. If we do sub-market deals tosupport sales, they will be well understood by the market.”

Either way, expect the riddles or transparency to come to the forein 2009, when Airbus and Boeing could very well see levels ofcustomer support rise to unprecedented levels.

I think if they’ve got any sense they will try and stick towhat they know best first and then gradually expand. Wehaven’t really seen them in this market yet. It wouldn’treally be in character for them to come out and takeopportunities at this time.

“

”China’s growth has fallen below 10 per cent for the first timein five years


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Since the European Commission published its first airline blacklist on 22 March 2006, there have been afurther seven to date. Paul Phillips at Stephenson Harwood law firm provides insight into the two mostrecent updates this year, examines the European Aviation Security Authority’s new powers to ban indi-vidual airlines from operating in the EU and explains that blacklisting does not have to be permanent.

MOVEMENTS INTHE EUROPEANBLACKLIST

The EU blacklistOn 22 March 2006, the European Commission published a black-list of airlines banned from flying in and out of the EuropeanUnion, including Norway and Switzerland, under EC Regulation2111/2005. It named and shamed 93 separate airlines that werebanned from operating into and out of the EU for falling short ofinternational safety standards. The list itself is based on deficien-cies found in aircraft during ramp inspections at European air-ports carried out under the EU Safety Assessment of ForeignAircraft (SAFA) scheme, and safety audit data made available bythe International Civil Aviation Organisation (ICAO) and IATAOperational Safety Audits (IOSA).

In the more recent updates of the blacklist, the EuropeanCommission and more specifically, its Air Safety Committee haslooked very closely at national safety oversight authorities tocheck whether they are exercising adequate safety oversight overthe operations of carriers registered with them.

The blacklist itself is split into two parts: Annex A lists air carrierssubject to a total ban either individually or by blanket ban of aparticular country; and Annex B lists air carrriers subject to oper-ational restrictions within the EU. The original intention under thelegislation was for the blacklist to be updated at least every threemonths, although the review process can be brought forward bymember states and provisional measures can be adopted in casesof emergency.

The purpose of the blacklist is a pre-emptive one, focusing onprevention rather than cure. The naming-and-shaming of airlinesis a strong incentive for both individual airlines and their nationaloversight authorities to take preventative measures to ensurethat they are complying with international flight safety standardsand to rectify any shortcomings immediately in order to avoid theblacklist.

THE LATEST UPDATES

Update no:7The seventh update, published on 11 April 2008, imposed a banon all operations of Ukranian airline, Ukraine Cargo Airways, andbanned all operations of the Congolese carrier Hewa BoraAirways, which had been previously allowed to operate a singleaircraft under a special arrangement. Also all carriers fromEquatorial Guinea, Indonesia, the Kyrgyz Republic, Liberia, SierraLeone, Swaziland and the Democratic Republic of Congo werebanned, in addition to nine individual carriers.

Ukraine Cargo Airways is the third Ukrainian airline to be bannedsince the blacklist was created, previous ones being Volare andUkrainian Mediterranean Airline, and the European Commissionis clearly sending a strong signal to the Ukranian safety oversightauthorities to strengthen enforcement and vigilance of safetystandards.



The blanket ban on Hewa Bora’s operations means that all carri-ers licensed in the Democratic Republic of Congo are nowbanned from flying into the EU. Just days after the ban on allHewa Bora’s operations, a DC-9 operated by them crashed whileattempting to take off from the airport at Goma, DRC, reportedlyblowing a tyre and suffering engine failure. The DC-9 skiddedthrough the airport fence, coming to rest in a crowded marketplace where it burst into flames – killing over 40 people and injur-ing over 145.

No carriers were removed from the seventh update list, notwith-standing representations made by Indonesian airline, Garuda,and the Iranian Carrier, Mahan Air, to the Commission and AirSafety Committee. They found that although Garudahad made progress in the implementation of corrective measures,this was still not sufficient, and the oversight authorities inIndonesia had still not demonstrated that they had completedtheir corrective actions, so none of the 51 Indonesian carriers,including Garuda, would be withdrawn from the EU blacklist.

Jacques Barrot, European Commission Vice President in charge oftransport said: “The conclusion is clear: those States or airlines which fail to actdecisively to resolve their safety deficiencies will be placed on thelist. Our objective is not only to identify safety issues, but toresolve them. The Commission will continue tirelessly in its dia-logue with states, their civil aviation authorities, and their airlines,to ensure that they attain acceptable levels of air safety on a sus-tainable basis.”

Update no:8In the eighth update of the EU blacklist, published on 24 July2008, the European Commission removed the operating banover Mahan Airlines, the Iranian carrier, following completion ofremedial measures, and their onsite inspection in Iran, butimposed a broad ban on all carriers from Gabon, except GabonAirlines and Afrijet, following “worrying results” from theInternational Civil Aviation Organisation (ICAO) audit report onthe country. The two Gabonese carriers, Gabon Airlines andAfrijet, which are already flying in the EU, are allowed to con-tinue their services, but are not allowed to expand operations.The Commission stopped short of imposing a full ban on all car-riers in Gabon in recognition of “prompt and drastic efforts”being made by the Government of Gabon, including the emer-gency adoption of a new aviation code for the country.

The Commission maintained the ban on all operations of UkraineCargo Airways, fired another warning at the Ukrainian safetyoversight authorities, and heard representations from threeIndonesian airlines, Garuda, Mandala, and Air Fast, and theIndonesian civil aviation authorities. The Air Safety Committeeand the Commission decided that the Indonesian authoritieshave still not developed an adequate oversight programme forany of the carriers under their regulatory control, and determinedthat the safety deficiencies identified by ICAO and theCommission had still not been assessed by ICAO.

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The Commission also looked very closely at Cambodia and thePhilippines, and indicated that if corrective measures are notimplemented by the civil aviation authorities of both countries,carriers from both these countries may face restrictions or evenfull bans on flying into the EU.

Banning foreign airlines – European AviationSafety AgencyIn a further initiative to ensure adequate safety standards, in April2008, the European Parliament and the Commission conferredauthority on the European Aviation Safety Agency (EASA) to banindividual airlines from operating in Europe.

In 2009, all foreign airlines operating into the EU will have to passa new EASA safety audit. The safety audit and the authorityvested in EASA to impose bans on individual airlines, which willtake effect in 2009, does not replace the EU blacklist or the SAFA(Safety Assessment of Foreign Aircraft) programme of rampinspections, but complements them both. According to EASA’sexecutive director Patrick Goudou, “Both the EU blacklist and theSAFA programme are essentially reactive programmes, whichrecognise bad practice then act to correct it or to exclude non-compliant aircraft. The EASA safety audit is a pro-active measureand has parallels with the US Federal Aviation Administration’s(FAA) international aviation safety assessment programme, inwhich the FAA grades a state on the ability of its national avia-tion authority to effectively discharge its safety oversight role.”

Aviation safety – Spanair MD-82 crash investi-gationIt would be wrong not to comment on the fateful crash on20 August of the SAS-owned Spanair MD-82 during departurefrom Madrid airport, which resulted in the death of 154 of its172 occupants. Spanish investigators have not confirmed areport from the Wall Street Journal, citing preliminary analysis offlight data and cockpit voice recorder information which suggeststhat both engines on the aircraft were functioning properly, butthat the flaps had not been extended and that the cockpit alarmdid not activate to alert the crew. Just before take-off the aircrafthad undergone rectification of a technical problem affecting anexternal temperature probe, but investigators have yet to clarifywhether this had any effect on subsequent events.

Although rumours circulated linking the crash to the effects ofSpanair’s announcement in July of its intention to ground 15 air-craft, axe 900 full time jobs and cut 20% of its network inresponse to crippling fuel prices, a Spanair representative deniedthese cutbacks had any impact and stated that although areplacement aircraft was made available, a switch of aircraft wasdeemed unnecessary, and likely only to delay the flight.

LIST OF CARRIERS SUBJECT TO A BAN WICAO airline designa-tion number

Name of the legal entity of the air carrier as indicatedon its AOC (and its trading name, if different).

AIR KORYO KOR

AIR WEST AWZ

ARIANA AFGHAN AIRLINES AFG

BLUE WING AIRLINES BWI

HEWA BORA ALX

MAHAN AIR IRM

SILVERBACK CARGO FREIGHTERS VRB

TAAG ANGOLA AIRLINES DTA

UKRAINE CARGO AIRWAYS UKS

UKRAINIAN MEDITERRANEAN AIRLINES UKM

VOLARE AVIATION ENTREPRISE VRE

† Air carriers listed could be permitted to exercise traffic rights by using wet-leased aircraft of an air carrier which is not subject to an operating ban, provided that the relevant safetystandards are complied with. List updated 11 November 2008.

LIST OF CARRIERS SUBJECT TO A BAN W



N WITHIN THE EU†

State of the Operator

Democratic People’s Republic of Korea

Sudan

Afghanistan

Surinam

Democratic Republic of Congo

Islamic Republic of Iran

Rwanda

Angola

Ukraine

Ukraine

Ukraine

N WITHIN THE EU†

Although it would be improper to comment while the investiga-tion is ongoing, it is worthwhile pointing out that certain aviationindustry commentators have raised the issue of compromise ofaviation safety in the context of the Denied Boarding Regulationprovisions, where airlines are sometimes faced with a difficultdecision when presented with balancing the gravity of an osten-sibly minor technical fault in an aircraft, against heavy financialpenalties that may follow from delay or cancellation of a flight fortechnical reasons.

The Madrid crash is thought to be Spain’s worst crash in over 20years, and comes nearly three years after the last major Europeanair crash, when the Helios Airways flight from Cyprus to Praguecrashed near Athens with 121 people on board. The two previ-ous largest European crashes were both in 2001 – the RussianTupolev 154 aircraft collision with a Boeing 757 transport planeover Southern Germany with 71 fatalities, and the SAS passen-ger aircraft collision with a small aircraft in heavy fog on the run-way at Linate airport in Milan, killing 118 people. The othermajor European crash of the decade was the Air FranceConcorde crash which came down shortly after take-off fromParis in 2000, with 113 fatalities.

There is no doubt that the blacklist has reduced the amount ofdisasters of this kind in Europe, however, it is ultimately theresponsibility of the airlines themselves to ensure that they adhereto the strict safety standards in order to ensure the safety of theaircraft and all on board. Unfortunately, this will sometimes be atthe expense of long delays and the associated costs.

How can airlines be removed from the black-list?Several airlines have been removed from the European blacklist,including Phuket Air, DAS Air Cargo/Dairo Air Services, Buraq Air,Blue Wing Airlines and PIA.

All of these airlines have had to complete the implementation ofa corrective action plan, and their oversight authorise have hadto produce evidence that they in turn have verified the measurestaken by the airlines, so as to avoid the same problems recurringin the future.

The process for removal from the blacklist can be a lengthy one,given that the corrective action plan and the remedial measuresrequired to comply with the international safety standards cantake some time to implement. Once all the corrective measureshave been completed by the airline, they have to appear beforethe European Air Safety Committee, often at a full plenary hear-ing, with air safety representatives from every European memberstate present, to give evidence that all safety deficiencies that ledto the original blacklisting have been rectified, and that a safetyprogramme is in place going forward that ensures they will com-ply with international safety standards in the future.

Does the blacklist work?The European blacklist has been a positive piece of legislation and“naming and shaming” appears to have the desired effect. Somenational civil aviation authorities have adopted preventative meas-ures unilaterally, following consultations with the EuropeanCommission, such as the Russian Federation and Bulgaria.

The blacklist has kept the incidence of crashes in Europe down,and has undoubtedly helped to maintain Europe’s good aviationsafety record compared with the rest of the world. Many believethat the European blacklist has directly contributed to the reduc-tion in the global crash toll figures since 2007. The global figuresfor commercial aviation crashes in 2007 show a marked dropagainst previous years, with an all-time low of 23 fatal accidentsand 597 casualties, comparing favourably to annual averages forthe decade 1998 – 2007 of 34.5 fatal accidents and 846 fatali-ties a year. A recent spate of airplane crashes has meant thatthere were 25 fatal accidents in 2008, up by 5 from 2007.However, the number of fatalities was down by 191 since 2007according to IATA figures.

Paul Phillips is head of aviation regulatory disputes and risk atinternational law firm, Stephenson Harwood. The firm acted forBuraq Air, the first airline to be removed from the EU blacklist,and has since advised on the removal of Blue Wing Airlines andis actively acting for seven other carriers.

Both the EU blacklist and the SAFA programme areessentially reactive programmes, which recognise badpractice then act to correct it…the EASA safety audit is apro-active measure and has parallels with the USFederal Aviation Administration’s (FAA) international avi-ation safety assessment programme.

“

”




cocaine for a backstage pass when Steve was under the spot-light. Ultimately, one glorious day, I was interviewed in theFlyfinance Journal and my modest church was nominated twiceas ‘Airfinance Bank of the Year’ by Katerine’s Transport Financefor the Sylvania-based Lease we did on two paragliders. It costsme tens of thousands of dollars in “sponsorship”, but you knowhow those things work, and we paid our dues with a smile …

In short, I was doing all the right things. My Book was growingnicely, and on the Investment side, I could always find an incomingnew friend, warmly welcomed, ready to buy at a premium what-ever piece of metal I had bought six months earlier. I was a HappyAirfinance Banker and I was beautifully surfing straight intoNirvana under warm sunshine from the south of France on thewave of the Supercycle from the Pacific Northwest.

Then, almost a decade into the new Supercentury, thingschanged, and I found myself a civil servant overnight. This was atough call for a once-loyal follower of the Free Market, like all ofus, having spent the last ten years spitting on the many evils ofthe beast called the Government and burning incense sticks dailyto the gods of ‘Free Market’ enterprise …

When my unit was closed, last month, having lost my faith andmy illusions, I decided to retire and write my last contribution asthe Anonymous Banker. As a footnote, I guess that with so fewof us left, anonymity will hardly be protected any more ...

For the young and bright apprentices who will come after me, Iwill leave my Ten Commandments with you, hoping that perhapsyou will slam the brakes on rather than speed up when about tohit the brick wall, as we have all done.

WHEN I WAS YOUNG, LAST CENTURY, I SACRIFICED MY MONEYand my youth to go to the best schools, because I had one desire:I desperately wanted to understand that deepest of all mysteries– “The Economy”.

My masters taught me how to compare Meynard with Karl, andhow Adam will inspire Benjamin, or rather the opposite; I can’trecall. They also taught me how I should feel enlightened andinspired after reading the work of the many Prophets – whichmere mortals see only as boring analysts’ reports and researchmemos. I was devouring the words of many of the Great: If itcame from Hamlet Bank, or Silverman, or J.H. Boreman, then itmust be more than true – it is what The Market said, and TheMarket is always right, oh stupid one!

In my later life, I applied to become an acolyte of the Airfinancesect. I was accepted, and joined a crowd of bigots that read a lotof what the Industry was producing, especially if it was thick andcomplicated. I had a bright future: The two Big Brothers inToulouse and Seattle were telling me that by 2390 there wouldbe a need for more aircraft than bicycles, to carry more people toever-more distant destinations. This was hardly believable on firstreading, but loyally I conceded.

I was spending a significant amount on fees for the privilege tobe shepherded in New York, in Dublin and in Geneva, and to

catch a glimpse of the U2-like rock stars of our Industry at eachISTAT concert. In my devotion to my Faith I went to the

extreme: I slept with the very mature receptionistof this Hilton in Prague to have a seat on

the first row when Adam wasspeaking and I traded



1. You shall rubbish Research Reports, especially those on India,and especially if they are telling you that tomorrow will be betterthan today. All those Prophets are only good for predicting thepast.

2. There is no Supercycle without a Supercollapse and aSuperdownturn.

3. When there is more than a 20 per cent increase year-to-year inthe attendance at the Dublin, New York and Geneva Gatherings,sell your portfolio immediately, let go of your staff and retire inVermont. (Equally, when you have not done so at the time it ishappening, it is too late ...)

4. When the two Big Brothers are telling you “This is a recordyear,” cut your commitments by half, push down your LTV by asolid 20 per cent and do the only rational thing you can do: Pray!

5. When you see the Retirement Fund of the Nebraska Firemenbecoming an Investor in an Aviation Fund arranged by a WallStreet Prophet, sell your portfolio.

6. When your Board Member, reading the FT Weekend edition,comes in on a Monday morning and says to you, ‘’ Why don’t wedo a little more in Aviation?’’, move to shipping.

7. When a “Reputable Firm” is telling you that the price ofoil will go to $200 a barrel, prepare actively for a levelof $40 a barrel. The opposite applies as well.

THE TEN COMMANDMENTS

8. When you are welcomed to a Panel at one of the threeGatherings named above and you have not had to spend any feeson sponsorship, increase your margin by at least 100bp. You willstill be doing good business and clients will flock to your doorstep.

9. When you see one of your Fund competitors launching a newconsumer-friendly Close End Fund with a return boosted by a lit-tle inflation (just 2%, mate!) on future values of aircraft, sell allthat you have invested in the industry.

10. When you can find two Airlines, ranking high in terms ofbook orders at each of the Big Brothers, that have a current bookorder valued at either more than 15x their current gross revenuefor one or 20x their net income for the other, remember Newtonand Darwin: Short the stocks of the Big Brothers, and moveaway from the impact point.

And finally, here are the last words from theAnonymous Banker to all you youngApprentices: No regrets and goodluck, you will have fun!




STATE AID DEVELOPMENTSIN THE TRANSPORT SECTOR– A MOVING TARGET

STATE AID ONCE SEEMED TO BE AN OUTDATED CONCEPT OF INDUSTRIAL POLICY

dealing with “old economy” industries - national subsidies forshipyards, farming, and the like. The “credit crunch” and theensuing financial crisis have required governments to act, oftenwith great speed, to rescue or 'bail out' ailing financial institu-tions or even the wider financial services sector. This has beenachieved with quite considerable flexing of the State aid rules,normally applied so rigidly.

Despite large amounts of aid granted to the financial services sec-tor, the spotlight is also on other more traditional industries, suchas the transport sector. The European Commission (the“Commission”) has issued some interesting decisions recently onState aid in the transport sector and it appears from recent devel-opments that the Commission is willing to give sympathetic con-sideration to aid applications, particularly in the maritimeindustry.

However, the transport sector will likely find itself in a differentposition from the financial services sector. Whereas bankingmight be seen to be at the ‘financial eye of the storm’, the sameis not quite true for transport, albeit the industry has significantpolitical and economic clout. The question therefore arises: ifbanks can be beneficiaries of a more flexible application of theState aid rules, what are the implications for other arguablystrategic industries, such as transport?

This briefing gives an overview of some recent policy develop-ments including a brief introduction to the concept of State aidand the Commission’s evolving practice, followed by some of themost recent developments in State aid in the transport sector.These decisions demonstrate a broadly favourable attitude on thepart of the Commission to some recently-notified supportschemes, covering a broad variety of schemes in the aviation,maritime and intermodal sectors.

THE CONCEPT OF STATE AIDThe basic rule on State aid is that any aid granted by a MemberState of the EU which distorts (or has the potential to distort)competition by favouring certain companies or sectors will beunlawful, unless it is notified to the Commission and is declaredcompatible with the common market.

State aid rules apply to organisations involved in economic activ-ity (so-called “undertakings”). The organisation does not have tobe profit-making if the activity is one which has commercial com-petitors. The same entity may be an undertaking for some of its

activities but not for others. For example, a university might be anundertaking for its publishing activities or for letting accommo-dation to tourists in the holidays, but it may not be an undertak-ing for its undergraduate teaching activities.

There are 5 criteria or questions which need to be considered toestablish whether a measure constitutes State aid. Where all 5criteria are met, State aid is involved and the State aid rulesapply.

1. Is the measure granted by the State or through Stateresources?

2. Does the measure confer an economic advantage to anundertaking?

3. Is the measure selective, favouring certain undertakings?4. Does the measure distort or have the potential to distort

competition?5. Does the aid affect trade between Member States?

State aid will only be considered as compatible with the commonmarket if it meets the conditions for an exemption as set out inArticle 87(3) EC. Over time, the prohibition of State aid has beenmodified and the Commission has issued a number of frame-works, guidance and block exemptions under which State aidmay be lawfully granted.

Who needs to be concerned about State aid?State aid issues can be relevant to companies operating in thetransport sector from a number of perspectives:

� Recipients: A company wishing to receive State aid shouldascertain whether the proposed subsidy requires prior notifi-cation. If so, it should ensure that the notification is full andcomplete so that the Commission’s authorisation is incon-testable. If you find that your company is required to repayState aid, you will need to develop strategies in the contextof administrative and court proceedings to help secure theaid you have received.

� Competitors: You may feel disadvantaged by State aidgranted to a competitor and want to consider filing anaction before the national courts and lodging a complaintwith the Commission to investigate whether aid has beenunlawfully granted.

� Investors and purchasers: In the context of a M&A trans-action you may need to assess whether State aid has beengranted to the target. Should the company you wish to pur-chase have been granted subsidies, there is a risk that you

John Pheasant and Suzanna Rab1, partner and counsel in the Anti-trust practice at Hogan & Hartson LLP,London, examine State Aid rules & developments across the transport sector.



may be “buying” problems along with it, such as claims forrepayment or obligations to comply with commitmentsmade as a condition of granting aid in the past.

Sector specific considerationsThere are also sector-specific provisions on how State aid shouldbe administered. In the transport sector these include:

AviationGuidelines for aid to the air transport sector were set down in theearly 1990s, but are still in place.2

There is a more recent set of guidelines, adopted in 2005, whichdeal with the financing of airports and start-up aid to airlinesdeparting from regional airports.3

MaritimeFor maritime services, there are specific guidelines setting outhow State aid should be treated.4 The guidelines are intended tocontribute to the promotion of new services in the field of shortsea shipping and to support the development of the maritimeindustry in line with the Commission’s objectives in this area.There is also specific guidance for State aid in the shipbuildingindustry,5 covering issues such as tonnage tax schemes. In 2008,the Commission extended the life of the shipbuilding State aidguidelines for another three years, to December 2011.6

IntermodalWhen it comes to intermodal transport, the Commission tends totake a positive view of any efforts by Member States to promotethis form of transport. While there are no purely intermodal-spe-cific guidelines or regulations in place, the Commission hasadopted initiatives and memos such as those aimed at the pro-motion of integrated freight transport, which cover State aidrelated issues.7

While there is a smorgasbord of different State aid rules andguidelines applying to the transport sector, the overall message isthe same: the Commission will look at any State aid notificationson a case-by-case basis and will take time to assess carefully howany aid can be seen as compatible with the objectives of the law,before issuing a final decision.

The Commission’s response to the economic crisisThe Commission has historically applied the State aid rulesstrictly. The financial crisis has caused Governments to act speed-ily and with unprecedented schemes to support failing industries,including State-backed rescue packages for the banking industry.In view of the exceptional circumstances arising from the currentcrisis, the Commission has taken the step of adopting guidelinesunder which State aid will be considered exempt as it is beingused to address a “serious disturbance in the economy”. This isenabling some extraordinary State aid measures to be granted byMember States to their financial institutions. The Commissionhas shown flexibility in its application of the procedural rules,even approving some schemes in less than 24 hours.

The measures have largely been focused on the financial servicessector, although the Commission has also issued guidance on aidto the “Real Economy”, which allows Member States to grant aidto other sectors, within limits.8

The Real Economy Communication sets out the following Stateaid measures as being compatible with the objective of address-ing the disturbance to the economy:� aid in the form of a cash grant of up to E5000,000 per

undertaking for companies facing a sudden shortage orunavailability of credit;

� state guarantees for loans at a reduced premium to encour-age access to finance;

� aid in the form of interest rate reductions;� aid for the production of green products (aimed largely at

the automotive industry); and� aid to promote risk capital by increasing the thresholds in the

Commission’s Risk Capital Guidelines (from E1.5m toE2.5m).

One of the UK measures, interest rate subsidies, provides directsupport to the automotive industry on the condition that manu-facturers invest in ÒgreenÓ products and processes.




All in all, the existence of such measures is encouraging as anindication of the Commission flexing, within limits, its traditionalapproach to the application of the State aid rules.

There follows a summary of recent cases involving State aid in thetransport sector.

AVIATION

Rescue aid for Austrian Airlines approvedThe Commission, on January 19. 2009, announced its approvalof State rescue aid for Austrian Airlines, to be given in the formof a guarantee of a loan facility.

In the type of aid scheme that will now be familiar to manyMember States, the Austrian government granted AustrianAirlines aid in the form of a loan facility worth around E200m.The CommissionÕs approval only extends to the short-termmeasure that is intended to tackle liquidity problems encounteredby Austrian Airlines as a result of the ongoing financial crisis. TheCommission noted in its approval that the aim of the rescue aidbeing offered by Austria was clearly to keep the company afloatuntil the Commission issues a decision on the separate questionof whether the privatisation of the airline involves State aid.

The Commission’s decision in this case might demonstrate the sortof approach that can be expected of the Commission in the currentfinancial climate: giving its approval to rescue packages by nationalgovernments, but only on a short-term basis. The Commission ismaking it clear in this, and other decisions, that it still expects to seea satisfactory restructuring plan put in place in order to justify anymajor injection of cash into a “failing” company.

Privatisation plan for Olympic Airlines and OlympicAirways Services approvedOn March 10, 2009, the Commission approved a privatisationplan by the Greek authorities to sell certain assets of OlympicAirlines and Olympic Airways Services. Both entities are the sub-jects of adverse Commission decisions finding that aid given tothem previously was unlawfully received and should be recov-ered.

The Greek government originally intended to conduct an openpublic tender process and the Commission had approved thisscheme as it seemed likely that this would facilitate the recoveryof the unlawfully granted aid. The use of a public tender processwould open up the sale to the widest possible range of biddersand, therefore, increase the chances of obtaining a better pricefor the assets. However, due to adverse financial conditions, allof the bids received in the original tender process fell short of theminimum value of the assets that was established by an inde-pendent valuation.

The Greek government therefore notified the Commission of amodified privatisation plan, whereby it would proceed with adirect sale of the assets of the companies. The Commission hasgiven its approval to the modified plans of the Greek authorities,noting that it is obliged under the State aid rules to work withMember States to overcome unforeseen difficulties that mayarise in the execution of decisions requiring the recovery of Stateaid. This decision shows evidence of some pragmatism on thepart of the Commission: it is prepared to accept that there maybe a variety of ways that Member States can go about imple-menting a Commission order for the repayment of unlawful aid.

John Pheasant Suzanne Rab



MARITIME

Court finds Commission error in calculation ofexcess aid received by German shipyardOn March 10, 2009, the European Court of First Instance (“CFI”)handed down a judgment annulling a Commission decision thathad required the repayment of excess State aid granted by theGerman government to the Kvaerner Warnow Werft (“KWW”)shipyard in Germany.

The CFI found that the Commission had made an error in its cal-culation of the total amount of aid received by KWW. TheCommission, in trying to assess whether KWW had received toomuch aid from the German government, calculated that KWWhad received an excess of aid amounting to around DEM63m.9

While the Commission had previously approved the aid schemebeing used in relation to KWW, it had specified that aid given tocover contract losses was subject to a ceiling. This was based ona certain percentage of the total amount of contract lossesincurred by KWW. In its previous approvals of the KWW aidscheme, the Commission had differentiated between aid given tocover contract losses (subject to the ceiling) and aid that waslinked to competition (to be given in the event that KWW did notreceive shipbuilding aid). Competition aid was intended to com-pensate shipbuilding yards that were in competition with yardsfrom countries where more shipbuilding aid was provided. Theapplicants in this case argued that competition aid was intendedto enable all shipyards in the Community to remain competitivewith Asian shipyards who received subsidies likely to distort com-petition.

According to the CFI, the Commission made a manifest error byincluding the competition aid in its calculation of excess aidreceived by KWW. An accounting report compiled by KWWnoted clearly that the DEM63m received in aid was received as

compensation for competition aid not received and there was noevidence to suggest that the money was intended to cover con-tract losses. The CFI therefore annulled the Commission’s deci-sion that KWW should repay the aid received.

Such cases before the European courts demonstrate that theCommission is far from immune from making errors in its proce-dures and investigations. Moreover, such cases are a starkreminder that beneficiaries of State support should pay carefulattention to the Commission’s conduct of a review or investiga-tion so that they can spot any mistakes at an early stage and con-sider whether there is scope for challenge.

Modifications to Dutch tonnage tax aid schemegain Commission approvalThe Commission gave its approval on March 10, 2009 to pro-posed changes by the Dutch Government to a tonnage taxscheme that originally gained Commission approval in 1996. TheDutch government plans to lower the tax base for large vesselsthat exceed 50,000 net tonnes and also intends to introduce areduction in the tonnage tax base by 75 per cent as regards shipmanagement companies. The Dutch government argued thatsuch a reduction will help to offset the lack of incentives for shipmanagement companies to develop their activities. Until now,they have had to pay a much higher percentage of their profitsas tonnage tax than ship owners.

The Commission concluded that the proposed changes to thescheme are compatible with the common market as they do notamount to the Dutch Government offering incentives and subsi-dies that would confer an unfair advantage to Dutch shipping atthe expense of other EU Member States, and therefore distortcompetition. The Commission also concluded that the proposedchanges contribute to the interests supported by theCommunity’s wider maritime policy.




Court of First Instance rules against Commissiondecision in Italian shipping aid caseThe CFI handed down its judgment on March 4, 2009 in theTirrenia di Navigazione State aid cases. It found that that theCommission had made a serious error in deciding that aid givento the Tirrenia Group companies was incompatible with the com-mon market and should be recovered. The CFI ruled that theCommission did not provide sufficient reasoning for its decisionand the Court therefore annulled the Commission’s decision.The aid in question had been given to Adriatica (a member of theTirrenia Group) for the Brindisi/Corfu/Igoumenitsa/Patras routebetween 1992 and 1994. The Tirrenia Group argued before theCFI that the Commission had failed to take into account, in itsassessment of the aid, that the subsidies in question constitutedexisting aid that had been already notified to the Commission,and which had their roots in laws dating from 1936 and 1953.The Commission had, in its decision, regarded the aid in questionas new aid.

The CFI agreed with the submissions of the applicants that theCommission had failed to provide sufficient reasoning for reachingits decision. While the applicants had made these submissionsdirectly to the Commission in the course of its investigation of theaid, the Commission had apparently failed to take these argumentsinto account. Accordingly, the CFI annulled the Commission’s deci-sion that had ordered the recovery of the aid in question.

The Court was clear in its judgment that the Commission hadsimply failed to provide an adequate explanation for arriving atits conclusion. It is to be hoped that this sort of case will push theCommission towards taking a more reasoned approach to itsscrutiny of State aid cases.

INTERMODAL

Commission approval of aid scheme for Germancombined transport The Commission announced on March 10, 2009 that it hasdecided under the State aid rules to approve a notification ofState aid to be given in support of a combined transport schemein Germany. As a part of the aid scheme, money will be given forthe construction and extension of combined transport terminals.Loading equipment for transhipment purposes will also be sup-ported through subsidies.

The stated intention of the German federal government in adopt-ing this type of aid scheme is to increase capacity at terminals andto foster the combined transport of German and transit traffic.The aid scheme will be valid until December 2011, with a budgetof E115m given annually.

Commission approval given to aid scheme for inter-modal transport in AntwerpOn February 11, 2009, the Commission approved aid granted bythe Flemish region of Belgium for the construction of an inter-modal terminal in Antwerp (involving road and rail) to be used forcontinental containers.

The Belgian government had noted in its submissions to theCommission that the Flemish region suffers from road congestionproblems, particularly around the port area of Antwerp. The con-



struction of an intermodal terminal will increase the port’s capac-ity to handle continental containers by 28 per cent.The Commission concluded that the aid scheme will contributeto the development of the intermodal transport sector throughthe promotion of a shift away from the congested road networkin areas where there are very high levels of traffic.

Broader issues on the State aid transporthorizonThe developments above give only a flavour of recent develop-ments in the application of State aid in the transport sector.Politics also have a role to play. Not every EU Member State hasa large transport industry and the importance of particular trans-port sectors differs across Member States. The Commission willcertainly not want to be seen to be supporting failing or flailingnational industries where that would or may distort competition- or be accused of succumbing to the pressures of vested inter-ests.

The traditional focus of State aid in the transport sector has, upto now, been usually on the operation of the transport networkand infrastructure. However, Member States have already offeredsupport to other related industries, including the automotivemanufacturing industry. Some proposals have been controversial.For example, the French government’s plans for the French carindustry have been criticised as too protectionist. While theCommission has been keen to extol the virtues of its EU-wide rolein relation to State aid and has put itself forward as the guardianof a level playing field, it has recognised that desperate times callfor a more flexible approach. This is illustrated by theCommission’s suggestion of a new partnership with industry,trade unions and Member States in the context of the “CARS21” process to accompany the common crisis response.10

CONCLUSIONThese are all developments of the last few months which, whentaken together, suggest a trend towards a more flexible applica-tion of the State aid rules in a wider range of industries. TheCommission faces a challenge between, on the one hand, a needfor pragmatism while, on the other hand, maintaining that it willbe “business as usual” as far as any threats to competition arepresented.

The answer to resolving what appear, at first sight, to be con-flicting goals lies in the way a particular measure may qualify asState aid and, if so, whether it may be exempted within the over-all policy framework. There remains a certain element of “learn-ing and doing”. This certainly seems borne out by recentexperience and the issuance of guidance on almost a weeklybasis. This is a process and a debate which is continuing, giventhe wide range of measures being used by the Member Statesand being approved by the Commission.

Notes1. The authors would like to thank David Cardwell for his assis-

tance and comments in the preparation of this article.2. Application of Articles 92 and 93 EC to State aid in the avi-

ation sector, Official Journal C-350, 1994, page 5.3. Community guidelines on financing of airports and start-up

aid to airlines departing from regional airports, OfficialJournal, C-312, December 2005, page 1.

4. Community guidelines on State aid to Maritime Transport,Official Journal, C-013, 17 January 2004, 3-12.

5. Framework to State aid on Shipbuilding, Official Journal C-317, 30 December 2003, 11-14.

6. European Commission press release IP/08/1097, Brussels, 3July 2008.

7. Note, for example, the communication from the Commissionon the EU’s freight transport agenda. Boosting the efficiency,integration and sustainability of freight transport in Europe,Brussels, 2007.

8. Temporary framework for State aid measures to supportaccess to finance in the current financial and economic crisis, Brussels, 17 December 2008.

9. The aid was originally granted in 1993 hence the use ofDeutschemarks.

10. European Commission press release IP/09/318, Brussels, 25February 2009. CARS 21 (Competitive AutomativeRegulatory System for the 21st Century) is a group of indus-try stakeholders created in 2005 to generate recommenda-tions for improvement of the worldwide competitiveness ofthe European automotive industry.

'We need to be flexible on procedures... The temporaryand targeted aid measures in the EU address the newmarket failures in the provision of credit using our exist-ing principles. Flexibility does not mean throwing out therules.’Neelie Kroes, The Road to Recovery, speech to OECDCompetition Committee, Paris, February 17 2009

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With the world economy in turmoil and the consequent lack of liquidity in debt and capital markets, Islamicfinance has been touted as an alternative source of funds for the aviation industry. For the past three years,Islamic finance has been the fastest growing area in banking. It is well suited to asset finance and hasadapted to provide a real alternative to conventional financing structures, building upon the religious andlegal principles which are at its foundations.

A principled approach to financingISLAM IS NOT JUST CONCERNED WITH THE RELATIONSHIPbetween God and man but is a system of beliefs governing allaspects of life, including trade and commerce. At its core,Islamic finance is not just concerned with a prohibition oninterest but aims to promote transparency, morality and fairdealing in business. The principles on which Shari’ah compli-ant financing is based include:

• No unfair exploitation - Any return on money employedshould be linked with the profits of the enterprise.

• No speculation - Speculation or gambling is prohibited.

• Assumption of some risk by the financier - There can be noguarantee of a fixed return.

• No uncertainty - There must be full disclosure by both par-ties to a transaction. Any transaction where the subject mat-ter, price or both are not determined and fixed in advancemay not be permitted under Shari’ah law.

• Promotion of trade and enterprise for the benefit of thecommunity - Money is viewed as a means of exchange bywhich wealth is generated for the benefit of the community.It should not be treated as a commodity in its own right.

• No prohibited investments - Investments in businessesinvolving certain products such as pork, alcohol or armamentsare prohibited.

An Islamic financial institution will usually employ a Shari’ahscholar or Shari’ah board of scholars to advise on the devel-opment of transaction structures and to rule on the compli-ance of transactions with Shari’ah principles.

ISLAMIC FINANCE –PLUGGING THELIQUIDITY GAP?This article sets out to explain the basic principles governing Islamic finance, to illustrate some of the issues which are specific toShari’ah compliant aviation transactions and to analyse the prospects for Islamic finance as a means of plugging the liquidity gap.

Transactions_directory_Beta:Transactions Beta 2/6/09 16:13 Page 124


An alternative view of leasingMost Shari’ah compliant aircraft finance transactions are struc-tured using an Ijara. This is a form of lease pursuant to which theowner of the aircraft transfers the legal right to use and deriveprofit from the aircraft to another person for an agreed periodand agreed rent. An Ijara can be combined with sale and pur-chase undertakings between lessor to lessee to create a productakin to a finance lease (an Ijara wa iqtina).

Nonetheless an Ijara is different from a conventional lease. Therequirements of Shari’ah challenge the traditional allocation ofrisk and responsibility between lessor and lessee in an aircraftlease transaction. For example, in an Ijara as the ownership ofthe aircraft is not transferred, the liabilities of the ownership ofthe aircraft remain with the lessor. As a consequence, in an air-craft Ijara it is usually the lessor rather than the lessee who isexpressed to remain responsible for the performance of majormaintenance and structural repair and for obtaining hull insur-ance. Similarly, if the aircraft suffers a total loss then no furtherrent is due from the lessee. Certain scholars take the view thatrent should also cease where an aircraft suffers damage notamounting to a total loss if the aircraft is taken out of service asa result.

An Ijara needs to abide by the principles of certainty. It is some-times argued by scholars that the Ijara contract should beentered into on the actual delivery date of the aircraft and cannot be signed in advance with delivery subject to the fulfilment

of conditions precedent. The term of the Ijara needs to be certain.Whilst rent can be determined by a formula, the basis of the cal-culation should be clearly established. Confirmation of theamount of rent due is sometimes required in a notice from thelessor to the lessee which the lessee is then entitled to accept orreject.

An Ijara also needs to abide by the principle of fairness. For exam-ple, events of default are often limited to circumstances withinthe direct control of the airline (such as non payment). Other cir-cumstances such as illegality events or material adverse changesin market conditions may give a right for the lessor to require thelessee to purchase the aircraft but are not of themselves events ofdefault. Some scholars also take the view that indemnities shouldreflect an allocation of fault rather than an allocation of risk.

Combination with conventional debtTransactions can be structured in a manner which combines con-ventional debt with Islamic debt or equity. Security over the air-craft may be granted to guard against wrong doing and breachof contract. Care needs to be taken to ensure that the proceedsof security are not used to fund interest payments under a con-ventional loan. Furthermore, whilst equity is generally subordi-nate to debt in conventional financing structures, the concept ofsubordination is often problematic in Shari’ah compliant transac-tions. This is again an issue which needs to be considered care-fully with the scholars when devising the structure.

Whilst the number of aviation transactions employing Islamic




finance has steadily increased in recent years, some differencesdo remain between scholars as to the application of the princi-ples of Shari’ah to aircraft finance and leasing deals. The fact thata particular structure has been employed on a previous transac-tion does not necessarily mean that it will be acceptable onfuture deals. On a practical level it is necessary to consult thescholar advising on a transaction at an early stage and to keepthem informed and involved throughout the transaction. Goingforward it is hoped that Islamic jurisprudence will continue todevelop a greater consensus as to the parameters within whichaviation finance and leasing transactions can be structured.

Reflecting commercial realityAlthough in some circumstances Shari’ah principles may appearto conflict with conventional notions of risk allocation between afinancier or lessor and a lessee, it is important that Shari’ah com-pliant transaction documentation does reflect commercial reality.For example, it would be rare that a lessor had sufficient mainte-nance and insurance capability to support the commercial oper-ation of an aircraft. Techniques have therefore developed toensure that, whilst the documentation conforms to the principlesof Shari’ah, it recognises that the airline will maintain and insurethe aircraft in practice. This has led to accusations that Islamicfinance represents form over substance; however, this is unfair.

Form matters in Islamic finance just as it does in a number ofmore conventional financing structures. It is a positive feature ofIslamic finance that, to the extent possible, care is taken to try toaccommodate the commercial objectives of the parties in a man-ner which promotes Shari’ah principles.

A solution to the liquidity gap?The ability of Islamic finance to fill the liquidity gap in the currentmarket should not be overstated. It generally remains an expen-sive source of funds and the term of the financing typically fallsshort of the 10 to 12 year loan terms available from conventionallenders. Islamic banks and investors are not wholly immune fromthe effects of the downturn in the world economy and the recentlow oil price has reduced the amount of petrodollars available forinvestment in Shari’ah compliant products.

Nonetheless, the ideas at the heart of Islamic finance seemappropriate in the current climate as a means of promotinggreater market confidence. Islamic finance will undoubtedly con-tinue to provide a source of funds for aviation, particularly in theGCC region, and indirectly the core principles on which it isbased may influence longer term thinking on the development ofbanking and finance beyond the sector.



Aircraft transactions — 02 June 2008 to 16 June 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks

02-Jun-08 41064 BAE SYSTEMS (Jetstream) Jetstream 41 N326UE Corporate Flight Mgmt Corporate Flight Mgmt Purchased - parked02-Jun-08 41064 BAE SYSTEMS (Jetstream) Jetstream 41 N326UE HL Aviation LLC HL Aviation LLC Purchased - parked02-Jun-08 49937 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N983JJ Comtran Int/l Inc Comtran Int/l Inc Purchased - parked02-Jun-08 29924 Boeing 737 (NG) 800 Wingl. EI-CSI CIT Leasing Corp CIT Aerospace Purchased - parked02-Jun-08 21880 Boeing 767 200 (P&W) HS- Skystar Airways Skystar Airways Purchased - parked02-Jun-08 UC-13 Hawker Beechcraft 1900 C-1 N413CM Aerologistics II LLC Aerologistics II LLC Purchased02-Jun-08 UC-131 Hawker Beechcraft 1900 C-1 N420CM Aerologistics III LLC Aerologistics III LLC Purchased02-Jun-08 UC-173 Hawker Beechcraft 1900 C-1 N412CM Aerologistics I LLC Aerologistics I LLC Purchased03-Jun-08 958 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N958AE Corporate Flight Mgmt Corporate Flight Mgmt Purchased - parked03-Jun-08 958 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N958AE Jetstream Sales LLC Jetstream Sales LLC Purchased - parked03-Jun-08 964 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N964AE Corporate Flight Mgmt Corporate Flight Mgmt Purchased - parked03-Jun-08 964 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N964AE Jetstream Sales LLC Jetstream Sales LLC Purchased - parked03-Jun-08 26700 Boeing 737 (CFMI) 500 LY-AWG Aviation Assets Mgmt Aviation Assets Mgmt Purchased03-Jun-08 17000227 Embraer 170 LR VH-ZHD VBNC9 Pty Ltd Virgin Blue Airlines P. - sale & l.-back on del.03-Jun-08 14500966 Embraer ERJ-135 Legacy 600 N966JS Pebuny LLC Pebuny LLC Purchased03-Jun-08 14501021 Embraer ERJ-135 Legacy 600 N915LX Poseidon Management SA Poseidon Management SA Purchased03-Jun-08 14501048 Embraer ERJ-135 Legacy 600 G-IRSH Legemb Ltd Jet Options Ltd P. - sale & l.-back on del.04-Jun-08 49952 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N995AC Undis. Bank / Broker / Lessor AerCap Purchased - parked04-Jun-08 22197 Boeing 757 200 (RR) N811AD L-3 Capital LLC L-3 Capital LLC Purchased - parked05-Jun-08 3050 Airbus A320 230 (IAE) EI-EAN Nollaig Aviation Leasing Ltd IndiGo Airlines P. - subj. to exist. lease05-Jun-08 47346 Boeing (McDonnell-Douglas) DC-9 31 (St3 Hsk) N9337 GA Telesis LLC GA Telesis LLC Purchased - parked05-Jun-08 24550 Boeing 737 (CFMI) 400 N245DT Nordic Av. Contractor A/S Nordic Av. Contractor A/S Purchased - parked05-Jun-08 208 Bombardier (de Havilland) Dash 8 100 VH-QQJ Skytrans Airlines Skytrans Airlines Purchased05-Jun-08 17000224 Embraer 175 LR N135HQ PM Ltd Republic Airlines P. - sale & l.-back on del05-Jun-08 17000224 Embraer 175 LR N135HQ Republic Airlines Republic Airlines P. off l/fin. term comp05-Jun-08 DC-824B Fairchild (Swearingen) Metro 23 N471Z Aircraft Consultants Inc Aircraft Consultants Inc Purchased05-Jun-08 3205 Fairchild/Dornier 328JET N451FJ Ultimate Leasing Ultimate Leasing Purchased - parked05-Jun-08 20306 Fokker 50 High Perfor. VH-FKW Aircraft Leasing No.3 Pty Ltd Alliance Airlines Purchased - parked06-Jun-08 21904 Boeing 727 200 Adv. (St3 Hsk) CP- Unconf. Bolivian Airline Unconf. Bolivian Airline Purchased - parked06-Jun-08 20496 Boeing 737 (JT8D) 200C (St3 Hsk) N2409N Air North Air North Purchased - parked06-Jun-08 24315 Boeing 747 400BCF (GE) N73713 Kalitta Air Kalitta Air Purchased - parked06-Jun-08 7307 Bombardier (Canadair) CRJ Regional Jet 200ER N636BR GA Telesis CRJ MSN 7307 LLC GA Telesis LLC P. - sale & lease-back - prkd06-Jun-08 7308 Bombardier (Canadair) CRJ Regional Jet 200ER N637BR GA Telesis CRJ MSN 7308 LLC GA Telesis LLC P. - sale & lease-back - prkd06-Jun-08 7340 Bombardier (Canadair) CRJ Regional Jet 200ER N640BR GA Telesis CRJ MSN 7340 LLC GA Telesis LLC P. - sale & lease-back - prkd06-Jun-08 7349 Bombardier (Canadair) CRJ Regional Jet 200ER N641BR GA Telesis CRJ MSN 7349 LLC GA Telesis LLC P. - sale & lease-back - prkd06-Jun-08 BC-768B Fairchild (Swearingen) Metro III N768ML Aircraft Consultants Inc Merlin Airways P. - subject to existing lease06-Jun-08 BC-781B Fairchild (Swearingen) Metro III N781ML Aircraft Consultants Inc Merlin Airways P. - subject to existing lease06-Jun-08 BC-783B Fairchild (Swearingen) Metro III N783ML Aircraft Consultants Inc Merlin Airways P. - subject to existing lease06-Jun-08 UE-388 Hawker Beechcraft 1900 D VH-EAS Air New Zealand Neville Evans Purchased - parked07-Jun-08 793 ATR ATR 72 500 VT-JCM Aircraft Int/l Renting Jet Airways P. - sale & lease-back on del.09-Jun-08 3508 Airbus A320 210 (CFM) XA-XII Macquarie AirFinance Interjet P. - sale & lease-back on del.09-Jun-08 3510 Airbus A320 230 (IAE) N499TA Sundew Leasing Ltd TACA Int/l Airlines P. - sale to S.P.C. by lessor on del.09-Jun-08 32407 Boeing 737 (NG) 700 N160CK Global Aircraft Leasing Inc Global A/c Leasing Partners Purchased - parked09-Jun-08 402 Bombardier (de Havilland) DHC-6 Twin Otter 300 N204SA Kevin McCole Kevin McCole Purchased09-Jun-08 19000179 Embraer 190 AR N292JB PM Ltd JetBlue Airways P. - sale & lease-back on del.09-Jun-08 19000179 Embraer 190 AR N292JB JetBlue Airways JetBlue Airways P. off l./fin. term comp.10-Jun-08 184 Airbus A330 300 (GE) RP-C3331 Philippine Airlines Philippine Airlines P. off l./ fin. term comp.10-Jun-08 41055 BAE SYSTEMS (Jetstream) Jetstream 41 N316UE Corporate Flight Mgmt Corporate Flight Mgmt Purchased - parked10-Jun-08 41055 BAE SYSTEMS (Jetstream) Jetstream 41 N316UE Jet Finance Group LLC Jet Finance Group LLC Purchased - parked10-Jun-08 23700 Boeing 737 (CFMI) 300 N514AU AeroTurbine Inc AeroTurbine Inc Purchased - parked10-Jun-08 120253 Embraer EMB-120 Brasilia HA-FAN BASe BASe Purchased11-Jun-08 3514 Airbus A320 210 (CFM) XA-JCV Macquarie AirFinance Interjet P. - sale & lease-back on del.11-Jun-08 41075 BAE SYSTEMS (Jetstream) Jetstream 41 G-CEYV Pireaus Bank Pireaus Bank Purchased - parked11-Jun-08 23456 Boeing 737 (CFMI) 300 N17326 Undis. Bank / Broker / Lessor Continental Airlines P. - sale & lease-back11-Jun-08 4069 Bombardier (de Havilland) Dash 8 400 RP-C3033 Philippine Airlines Philippine Airlines Purchased11-Jun-08 20303 Fokker 50 High Performance VH-FKV Aircraft Leasing No.3 Pty Ltd Alliance Airlines Purchased - parked11-Jun-08 UE-308 Hawker Beechcraft 1900 D PK- Unconf. Indonesian Operator Unconf. Indonesian Optr Purchased12-Jun-08 53018 Boeing (McDonnell-Douglas) MD-80 83 (MDC) 5N-SAI DANA Airlines DANA Airlines P. off l./fin. term comp.12-Jun-08 21450 Boeing 727 200 Adv. (St3 Hsk) N674MG Champion Air Champion Air P. off l/fin. term comp. prkd12-Jun-08 22020 Boeing 727 200 Adv. (St3 Hsk) N681CA Liberty Air Inc Liberty Air Inc Purchased - parked12-Jun-08 22020 Boeing 727 200 Adv. (St3 Hsk) N681CA Paxair LLC Paxair LLC Purchased - parked12-Jun-08 22553 Boeing 727 200 Adv. (St3 Hsk) N675MG Champion Air Champion Air P. off l/fin. term comp. prkd12-Jun-08 22554 Boeing 727 200 Adv. (St3 Hsk) N676MG Champion Air Champion Air P. off l/fin. term comp. prkd12-Jun-08 22555 Boeing 727 200 Adv. (St3 Hsk) N678MG Champion Air Champion Air P. off l/fin. term comp. prkd12-Jun-08 22557 Boeing 727 200 Adv. (St3 Hsk) N679MG Champion Air Champion Air P. off l/fin. term comp. prkd12-Jun-08 22574 Boeing 727 200 Adv. (St3 Hsk) N696CA Liberty Air Inc Liberty Air Inc Purchased - parked12-Jun-08 22574 Boeing 727 200 Adv. (St3 Hsk) N696CA Paxair LLC Paxair LLC Purchased - parked12-Jun-08 23052 Boeing 727 200 Adv. (St3 Hsk) N697CA Liberty Air Inc Liberty Air Inc Purchased - parked12-Jun-08 23052 Boeing 727 200 Adv. (St3 Hsk) N697CA Paxair LLC Paxair LLC Purchased - parked12-Jun-08 23718 Boeing 737 (CFMI) 300 OY-JTC Nordic Aviation Contractor A/S Nordic Aviation Contractor A/S Purchased - parked12-Jun-08 29265 Boeing 737 (CFMI) 300 LN-KHC Norwegian Air Shuttle Norwegian Air Shuttle Purchased - parked12-Jun-08 22813 Boeing 757 200 (P&W) N606DL Gecas Asset Mgmt Svcs Gecas Asset Mgmt Svcs Purchased - parked12-Jun-08 600 Bombardier (de Havilland) DHC-6 Twin Otter 300 C-GIED Provincial Airlines Provincial Airlines Purchased12-Jun-08 19000183 Embraer 190 AR N961UW PM Ltd US Airways P. - sale & lease-back on del.12-Jun-08 19000183 Embraer 190 AR N961UW US Airways US Airways P. off l./fin. term comp.12-Jun-08 19000187 Embraer 190 AR VH-ZPE VBNC9 Pty Ltd Virgin Blue Airlines P. sale & lease-back on del.12-Jun-08 14501021 Embraer ERJ-135 Legacy 600 N915LX Pheebe limited Poseidon Management SA P. - subject to existing lease13-Jun-08 23934 Boeing 737 (CFMI) 300 N589US Gecas Asset Management Svcs Gecas Asset Mgmt Svcs Purchased - parked13-Jun-08 22808 Boeing 757 200 (P&W) N601DL Gecas Asset Management Svcs Gecas Asset Mgmt Svcs Purchased - parked13-Jun-08 3202 Fairchild/Dornier 328JET N359SK Ultimate Jetcharters Inc Ultimate Jetcharters Inc Purchased - parked15-Jun-08 2932 Airbus A320 210 (CFM) EI-DSB Undis. Bank / Broker / Lessor Air One P. - subject to existing lease15-Jun-08 2995 Airbus A320 210 (CFM) EI-DSC Undis. Bank / Broker / Lessor Air One P. - subject to existing lease15-Jun-08 3076 Airbus A320 210 (CFM) EI-DSD Undis. Bank / Broker / Lessor Air One P. - subject to existing lease15-Jun-08 3079 Airbus A320 210 (CFM) EI-DSE Undis. Bank / Broker / Lessor Air One P. - subject to existing lease15-Jun-08 23137 Boeing 747 300 Combi (GE) HS-UTK JT Power LLC Orient Thai Airlines P. - subject to existing lease15-Jun-08 27134 Boeing 747 400 (P&W) EC-KSM Pullmantur Air Pullmantur Air Purchased - parked15-Jun-08 7187 Bombardier (Canadair) CRJ Regional Jet 200ER C-GEXM Avmax Int/l Aircraft Leasing Inc Corporate Express P. - subject to existing lease15-Jun-08 10149 Fokker F.27 100 N32180 Aerospace Trust Mgmt LLC Trustee Aerospace Trust Mgmt LLC Tr. Purchased - parked16-Jun-08 25898 Boeing 757 200 (RR) N7273 Contrails Capital Inc Contrails Capital Inc Purchased - parked




16-Jun-08 145230 Embraer ERJ-145 MP EC-KSS Lagun Air Lagun Air Purchased17-Jun-08 198 Airbus A330 300 (GE) RP-C3336 Philippine Airlines Philippine Airlines P. off l/fin. term comp17-Jun-08 831 Bombardier (de Havilland) DHC-6 Twin Otter 300 5N- Unconf. Nigerian Operator Unconf. Nigerian Operator Purchased - parked17-Jun-08 52 CASA 212 100 YV Unconf. Venezuelan Corp. Operator Unconf. Venezuelan Corp. Purchased - parked18-Jun-08 27616 Boeing 767 300ER (GE) N364LF Aircraft SPC-8 ILFC Purchased - parked18-Jun-08 7192 Bombardier (Canadair) CRJ Regional Jet 200ER N623BR Sky Swallows Sky Swallows Purchased - parked19-Jun-08 1591 Airbus A320 230 (IAE) N528JB VGS Aircraft Holding (Ireland) Ltd Volito Aviation AB Purchased - parked19-Jun-08 46093 Boeing (McDonnell-Douglas) DC-8 63C (St3 Hsk) 9G- Unconf. Ghanaian Airline Unconf. Ghanaian Airline Purchased - parked19-Jun-08 3169 Fairchild/Dornier 328JET N328DP Comfort Line Ltd Comfort Line Ltd Purchased - parked20-Jun-08 3560 Airbus A319 110 (CFM) D-AHIK AWAS Hamburg Int/l P. - sale & lease-back on del.20-Jun-08 806 ATR ATR 72 500 F-OIQV Girasol SNC Air Tahiti P. - sale & lease-back on del.20-Jun-08 541 Bombardier (de Havilland) Dash 8 200 C-FSQT Avmax Int/l Aircraft Leasing Inc Avmax Int/l A/c Leasing Inc Purchased - parked0-Jun-08 UE-113 Hawker Beechcraft 1900 D HK- Aerolet SEARCA Colombia Purchased - parked20-Jun-08 UE-406 Hawker Beechcraft 1900 D N832CA Hill Air Executive Inc Hill Air Executive Inc Purchased21-Jun-08 29925 Boeing 737 (NG) 800 Wingl. EI-CSJ CIT Leasing Corp CIT Aerospace Purchased - parked22-Jun-08 494 Airbus A310 300 (GE) CS-TEJ GA Telesis LLC GA Telesis LLC Purchased - parked22-Jun-08 494 Airbus A310 300 (GE) CS-TEJ OMNI Aviacao & Tecnologia OMNI Aviacao & Tecnologia Purchased - parked22-Jun-08 966 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP YV Transmandu - T. A. Manduca Transmandu - T. A. Manduca Purchased22-Jun-08 20917 Boeing 737 (JT8D) 200C Adv. (St3 Hsk) N834AL Aloha Air Cargo Aloha Air Cargo Purchased23-Jun-08 27985 Boeing 737 (NG) 800 Wingl. HA-LKD AerCap Travel Service Hungary P. - subject to existing lease23-Jun-08 27986 Boeing 737 (NG) 800 Wingl. D-AHFM AerCap TUIfly P. - subject to existing lease23-Jun-08 27987 Boeing 737 (NG) 800 Wingl. D-AHFO AerCap TUIfly P. - subject to existing lease23-Jun-08 27988 Boeing 737 (NG) 800 Wingl. D-AHFP AerCap TUIfly P. - subject to existing lease23-Jun-08 27990 Boeing 737 (NG) 800 Wingl. CN-RPE AerCap Jet4You P. - subject to existing lease23-Jun-08 27991 Boeing 737 (NG) 800 Wingl. HA-LKC AerCap Travel Service Hungary P. - subject to existing lease23-Jun-08 28623 Boeing 737 (NG) 800 Wingl. D-AHFS AerCap TUIfly P. - subject to existing lease23-Jun-08 30593 Boeing 737 (NG) 800 Wingl. D-AHFR AerCap TUIfly P. - sale & lease-back23-Jun-08 32904 Boeing 737 (NG) 800 Wingl. SE-DZV AerCap TUIFly Nordic AB P. - subject to existing lease23-Jun-08 34688 Boeing 737 (NG) 800 Wingl. D-ATUG AerCap TUIfly P. - sale & lease-back23-Jun-08 34689 Boeing 737 (NG) 800 Wingl. D-ATUH AerCap TUIfly P. - sale & lease-back23-Jun-08 26963 Boeing 757 200 (RR) G-BYAD AerCap Thomsonfly P. - sale & lease-back23-Jun-08 26964 Boeing 757 200 (RR) G-BYAE AerCap Thomsonfly P. - sale & lease-back23-Jun-08 26966 Boeing 757 200 (RR) G-BYAH AerCap Thomsonfly P. - sale & lease-back23-Jun-08 26967 Boeing 757 200 (RR) G-BYAI AerCap Thomsonfly P. - sale & lease-back23-Jun-08 27235 Boeing 757 200 (RR) G-BYAO AerCap Thomsonfly P. - subject to existing lease23-Jun-08 27236 Boeing 757 200 (RR) G-BYAP AerCap Thomsonfly P. - sale & lease-back23-Jun-08 29137 Boeing 767 300ER (GE) G-OBYG AerCap Thomsonfly P. - sale & lease-back23-Jun-08 29138 Boeing 767 300ER (GE) G-OBYI AerCap Thomsonfly P. - sale & lease-back24-Jun-08 AC-715 Fairchild (Swearingen) Metro III N115GS Coast Aviation Credit LLC Coast Aviation Credit LLC Purchased - parked25-Jun-08 23077 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) YA- Pamir Airways Pamir Airways Purchased25-Jun-08 35250 Boeing 777 300ER (GE) C-FRAM BOC Aviation Air Canada P. - sale & lease-back on del.25-Jun-08 334 Bombardier (de Havilland) DHC-6 Twin Otter 300 N344CS Fayard Enterprises LLC Fayard Enterprises LLC Purchased - parked26-Jun-08 2046 BAE SYSTEMS (HS) ATP G-BTZG West Air Sweden West Air Sweden Purchased - parked26-Jun-08 2047 BAE SYSTEMS (HS) ATP G-BTZH West Air Sweden West Air Sweden Purchased - parked26-Jun-08 2050 BAE SYSTEMS (HS) ATP G-BTZK West Air Sweden West Air Sweden Purchased - parked26-Jun-08 53207 Boeing (McDonnell-Douglas) MD-80 87 EC-KSF AeroFan AeroFan Purchased27-Jun-08 10 Airbus A380 840 (RR) 9V-SKE Doric Asset Finance Ltd Singapore Airlines P. - sale & lease-back on del.27-Jun-08 35708 Boeing 737 (NG) 800 Wingl. LN-RRG SAS SAS Purchased27-Jun-08 35708 Boeing 737 (NG) 800 Wingl. EC- Sumisho Aircraft Asset Mgmt BV Sumisho A/c Asset Mgmt BV Purchased01-Jul-08 120250 Embraer EMB-120 Brasilia ER N250YV Northstar Aviation Svcs Inc Northstar Aviation Svcs Inc Purchased01-Jul-08 120289 Embraer EMB-120 Brasilia ER N289YV Northstar Aviation Svcs Inc Northstar Aviation Svcs Inc Purchased01-Jul-08 200 Airbus A330 300 (GE) RP-C3337 Philippine Airlines Philippine Airlines P. off l./fin. term comp.01-Jul-08 120289 Embraer EMB-120 Brasilia ER N289YV N652CT LLC N652CT LLC Purchased01-Jul-08 24773 Boeing 737 (CFMI) 400 N742VA Vision 737-400 Trust Vision Airlines P. - subject to existing lease02-Jul-08 3538 Airbus A320 230 (IAE) N680TA Sundrops Leasing Limited TACA Int/l Airlines P. - sale & lease-back on del.02-Jul-08 120205 Embraer EMB-120 Brasilia N205CA Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked02-Jul-08 365 Bombardier (de Havilland) Dash 8 300 VH-XFZ Skippers Aviation Skippers Aviation Purchased02-Jul-08 22492 Boeing 727 200 Adv. (St3 Hsk) N685CA CSDS Aircraft Sales & Leasing CSDS A/c Sales & Leasing Purchased - parked02-Jul-08 727 BAE SYSTEMS (Jetstream) Jetstream 31 C-GKGM Gordon Peariso Gordon Peariso Purchased - parked02-Jul-08 962 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N962AE Corporate Flight Management Corporate Flight Mgmt Purchased - parked02-Jul-08 962 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N962AE Jetstream Sales LLC Jetstream Sales LLC Purchased - parked02-Jul-08 963 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N963AE Jetstream Sales LLC Jetstream Sales LLC Purchased - parked02-Jul-08 498 Bombardier (de Havilland) Dash 8 200 N354PH Win Win Svcs LLC Horizon Air P. - subject to existing lease02-Jul-08 963 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N963AE Corporate Flight Management Corporate Flight Mgmt Purchased - parked03-Jul-08 119 Bombardier (de Havilland) DHC-6 Twin Otter 200 N323SJ Desert Sand Aircraft Leasing Co Inc Desert Sand A/c Leasing Co Inc Purchased - parked03-Jul-08 305 Bombardier (de Havilland) Dash 8 300 V2-LFW Avmax Int/l Aircraft Leasing Inc Avmax Int/l A/c Leasing Inc Purchased - parked03-Jul-08 149 Bombardier (de Havilland) DHC-6 Twin Otter 200 N469TS Desert Sand Aircraft Leasing Co Inc Desert Sand A/c Leasing Purchased - parked03-Jul-08 UE-101 Hawker Beechcraft 1900 D 5Y- Unconf. Kenyan Operator Unconf. Kenyan Operator Purchased03-Jul-08 24039 Boeing 767 300ER (GE) N358AA General Electric Company American Airlines P. off l./fin. term comp.03-Jul-08 23980 Boeing 737 (CFMI) 400 N239DT Nordic Aviation Contractor A/S Nordic Aviation Contr. A/S Purchased - parked03-Jul-08 24039 Boeing 767 300ER (GE) N358AA NAS Investments 9 LLC American Airlines P. - subject to existing lease03-Jul-08 41057 BAE SYSTEMS (Jetstream) Jetstream 41 HK-4568X Easyfly Easyfly Purchased04-Jul-08 4071 Bombardier (de Havilland) Dash 8 400 RP-C3031 Philippine Airlines Philippine Airlines Purchased05-Jul-08 11470 Fokker 100 HL7777 Korstar Airlines Korstar Airlines Purchased - parked07-Jul-08 129 Airbus A340 310 (CFM) B-2380 ICBC Financial Leasing Co China Eastern Airlines P. - sale & lease-back07-Jul-08 196 Airbus A340 310 (CFM) RP-C3434 Philippine Airlines Philippine Airlines P. off l./fin. term comp.07-Jul-08 182 Airbus A340 310 (CFM) B-2384 ICBC Financial Leasing Co China Eastern Airlines P. - sale & lease-back07-Jul-08 4070 Bombardier (de Havilland) Dash 8 400 RP-C3032 Philippine Airlines Philippine Airlines Purchased - parked07-Jul-08 161 Airbus A340 310 (CFM) B-2383 ICBC Financial Leasing Co China Eastern Airlines P. - sale & lease-back08-Jul-08 23122 Boeing 737 (JT8D) 200C Advanced C-GANV Air North Air North Purchased - parked08-Jul-08 AC-655B Fairchild (Swearingen) Metro III N2691W CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 BC-779B Fairchild (Swearingen) Metro III N779BC CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 DC-820B Fairchild (Swearingen) Metro 23 N820DC CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 AC-508 Fairchild (Swearingen) Metro III N508FA CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 3543 Airbus A320 230 (IAE) VT-DNT Amentum Capital Ltd. Deccan P. - sale & lease-back on del.08-Jul-08 E2030 BAE SYSTEMS (HS) 146 200 TN-AIC Mouritzen Family Trust Allegiance Air Purchased08-Jul-08 UE-56 Hawker Beechcraft 1900 D N85341 MIW Aerospace Inc MIW Aerospace Inc Purchased - parked08-Jul-08 DC-882B Fairchild (Swearingen) Metro 23 N882DC CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 BC-787B Fairchild (Swearingen) Metro III N787KL CBG LLC Key Lime Air P. - subject to existing lease

Aircraft transactions — 16 June 2008 to 08 July 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



08-Jul-08 30322 Boeing 747 400 (GE) N322SG Undis. Bank / Broker / Lessor SonAir P. - subj. to exist. lease - pkd08-Jul-08 AC-542 Fairchild (Swearingen) Metro III N542FA CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 AC-765 Fairchild (Swearingen) Metro III N765FA CBG LLC Key Lime Air P. - subject to existing lease08-Jul-08 30322 Boeing 747 400 (GE) N322SG SonAir SonAir Purchased - parked09-Jul-08 145039 Embraer ERJ-145 EU UR-DNK Dniproavia Dniproavia Purchased - parked09-Jul-08 544 Bombardier (de Havilland) Dash 8 300 8Q-IAO Island Aviation Svcs Island Aviation Svcs Purchased09-Jul-08 277 Bombardier (de Havilland) Dash 8 100 C-FDWO Northstar Avlease Ltd Northstar Trading Ltd P. - subj. to exist. lease - pkd09-Jul-08 33027 Boeing 737 (NG) 800 Wingl. PR-GIE Frederick Aviation Ltd GOL Linhas Aereas P. - subject to existing lease09-Jul-08 14500972 Embraer ERJ-135 Legacy 600 A6-PJE Prestige Jet Prestige Jet Purchased10-Jul-08 7990 Bombardier (Canadair) CRJ Regional Jet 200LR UR-RUS ISD Avia ISD Avia Purchased10-Jul-08 UE-400 Hawker Beechcraft 1900 D N835CA Wells Fargo Bank Northwest NA Wells Fargo Bank N. NA Purchased10-Jul-08 2040 BAE SYSTEMS (HS) ATP SE-MAK European Turboprop Mgmt AB West Air Sweden P. - sale & lease-back - prkd10-Jul-08 935 Airbus A330 340 (RR) B-6111 CDB Leasing Company China Southern Airlines P. sale & lease-back on del.10-Jul-08 343 ATR ATR 42 300 PT-MFJ Nordic Aviation Contractor A/S Pantanal P. - subject to existing lease10-Jul-08 513 ATR ATR 42 500 PJ-XLN Nordic Aviation Contractor A/S Dutch Antilles Express P. - subject to existing lease10-Jul-08 3586 Airbus A319 110 (CFM) D-ABGL Eagle Aircraft Leasing Ltd airberlin P. sale & lease-back on del.10-Jul-08 376 ATR ATR 42 300 PT-MFM Nordic Aviation Contractor A/S Pantanal P. - subject to existing lease10-Jul-08 90 ATR ATR 42 300 PJ-SLH Nordic Aviation Contractor A/S Dutch Antilles Express P. - subject to existing lease10-Jul-08 378 ATR ATR 42 300 PJ-XLM Nordic Aviation Contractor A/S Dutch Antilles Express P. - subject to existing lease10-Jul-08 21450 Boeing 727 200 Adv. (St3 Hsk) N674MG Universal Asset Management Inc Universal Asset Mgmt Inc Purchased - parked10-Jul-08 23107 Boeing 767 200ERM (P&W) ET-AIF Pipeline Investments Pipeline Investments Purchased - parked10-Jul-08 UE-397 Hawker Beechcraft 1900 D N837CA AVN Air LLC AVN Air LLC Purchased10-Jul-08 19806 Boeing 727 100F (St3 Hsk) N727YK Flightstar Trading LLC Flightstar Trading LLC Purchased - parked10-Jul-08 30735 Boeing 757 200 (RR) LY-SKJ Aurela Aurela Purchased - parked11-Jul-08 49789 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N789BV Global Aircraft Solutions Inc Global A/c Leasing Partners Purchased - parked11-Jul-08 30195 Boeing 737 (NG) 800 LN-RPM SAS SAS P. off lease/fin. term comp.11-Jul-08 35142 Boeing 737 (NG) 800 Wingl. OO-JBG Undis. Bank / Broker / Lessor JetAir Fly P. sale & lease-back on del.13-Jul-08 UK-2 Boeing (McDonnell-Douglas) C-17 A ZZ172 Royal Air Force Royal Air Force P. off lease/fin. term comp.14-Jul-08 11 Saab 340 A Cargo S5- Bridges Worldwide Bridges Worldwide Purchased - parked14-Jul-08 886 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP C-GQJT Pascan Aviation Pascan Aviation Purchased14-Jul-08 4206 Bombardier (de Havilland) Dash 8 400 G-ECOD Rand Merchant Bank Flybe P. sale & lease-back on del.14-Jul-08 35630 Boeing 737 (NG) 800 Wingl. JA737R SC Air 737R Ltd Skymark Airlines P. - sale to S.P.C. by lessor on del.14-Jul-08 UE-193 Hawker Beechcraft 1900 D N69548 Jet Management Ltd Jet Management Ltd Purchased14-Jul-08 877 BAE SYSTEMS (Jetstream) Jetstream 31 Super C-FKQA Pascan Aviation Pascan Aviation Purchased - parked14-Jul-08 145600 Embraer ERJ-135 LR 03-Jan-07 Brazilian Air Force Brazilian Air Force Purchased14-Jul-08 UE-193 Hawker Beechcraft 1900 D N69548 Rangeflyers Inc Rangeflyers Inc Purchased14-Jul-08 120036 Embraer EMB-120 Brasilia VQ- Unconf. Turks & Caicos Airline Unconf. Turks & Caicos Airl Purchased - parked15-Jul-08 27424 Boeing 737 (CFMI) 500 G-GFFE Jet Trading And Leasing LLC British Airways P. - subject to existing lease15-Jul-08 289 Bombardier (de Havilland) Dash 8 100 OE-HWG Austrojet Austrojet P. off lease/fin. term comp.15-Jul-08 E3202 BAE SYSTEMS (HS) 146 300 G-JEBF Aircraft Traders Belgium SA Aircraft Traders Belgium SAPurchased - parked15-Jul-08 749 BAE SYSTEMS (Jetstream) Jetstream 31 G-NOSS Highland Airways Highland Airways Purchased - parked15-Jul-08 24036 Boeing 767 300ER (GE) N355AA General Electric Company American Airlines P. off lease/fin. term comp.15-Jul-08 261 ATR ATR 42 300 C-FCIJ Aviation Inventory Resources Inc Aviation Inv. Resources Inc Purchased - parked15-Jul-08 24036 Boeing 767 300ER (GE) N355AA NAS Investments 9 LLC American Airlines P. - subject to existing lease15-Jul-08 23676 Boeing 747 200B Combi (GE) F-WQAJ Mahan Air Mahan Air Purchased - parked15-Jul-08 3560 Airbus A319 110 (CFM) D-AHIK Amentum Capital Ltd. Hamburg Int/l P. - subject to existing lease15-Jul-08 25767 Boeing 737 (CFMI) 500 HL7232 Guggenheim Aviation Partners Asiana Airlines P. - subject to existing lease15-Jul-08 440 Airbus A320 230 (IAE) PT-MZN GMT Global Republic Aviation TAM Linhas Aereas P. - subject to existing lease15-Jul-08 3533 Airbus A319 110 (CFM) D-AHIJ Amentum Capital Ltd. Hamburg Int/l P. - subject to existing lease15-Jul-08 UE-62 Hawker Beechcraft 1900 D 5Y-BVG Aircraft Africa Contracts Co. Pty Ltd Executive Turbine Kenya Purchased15-Jul-08 24855 Boeing 747 400 (RR) ZK-NBT Global Knafaim Leasing Ltd Air New Zealand P. - sale & lease-back15-Jul-08 53209 Boeing (McDonnell-Douglas) MD-80 87 EC-FFA Tiger Aircraft Trading Inc Iberia P. - sale & lease-back - prkd15-Jul-08 375 Airbus A320 210 (CFM) A9C-ED Guggenheim Aviation Partners Gulf Air P. - subject to existing lease15-Jul-08 22354 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) JY-JRA Royal Falcon Air Royal Falcon Air Purchased - parked15-Jul-08 740 BAE SYSTEMS (Jetstream) Jetstream 31 G-FARA Highland Airways Highland Airways Purchased - parked15-Jul-08 E3209 BAE SYSTEMS (HS) 146 300 G-JEBG Aircraft Traders Belgium SA Aircraft Traders Belgium SAPurchased - parked15-Jul-08 189 Airbus A330 300 (GE) RP-C3335 Philippine Airlines Philippine Airlines P. off lease/fin. term comp.15-Jul-08 335 Airbus A320 230 (IAE) PT-MZQ GMT Global Republic Aviation TAM Linhas Aereas P. - subject to existing lease15-Jul-08 25605 Boeing 747 400 (RR) ZK-NBU Global Knafaim Leasing Ltd Air New Zealand P. - sale & lease-back15-Jul-08 250 Airbus A320 230 (IAE) PT-MZO GMT Global Republic Aviation TAM Linhas Aereas P. - subject to existing lease15-Jul-08 145137 Embraer ERJ-145 ER 30-Nov-06 Brazilian Air Force Brazilian Air Force Purchased - parked15-Jul-08 23798 Boeing 737 (CFMI) 300 PP-VTB Ram Air Sales Inc Ram Air Sales Inc Purchased - parked15-Jul-08 334 Airbus A320 230 (IAE) PT-MZR GMT Global Republic Aviation TAM Linhas Aereas P. - subject to existing lease15-Jul-08 53197 Boeing (McDonnell-Douglas) MD-80 88 EC-FJE Tiger Aircraft Trading Inc Tiger Aircraft Trading Inc Purchased - parked15-Jul-08 4023 Bombardier (de Havilland) Dash 8 400 LN-RDH SAS SAS P. off lse/fin. term comp. - prkd15-Jul-08 325 Airbus A320 210 (CFM) A9C-EB Guggenheim Aviation Partners Gulf Air P. - subject to existing lease16-Jul-08 32807 Boeing 737 (NG) BBJ1 N8767 Unconf. American Operator Unconf. American Operator Purchased16-Jul-08 29263 Boeing 747 400 (GE) N263SG Undis. Bank / Broker / Lessor SonAir Purchased - parked16-Jul-08 30195 Boeing 737 (NG) 800 LN-RPM Banc of America Leasing Ireland Co Ltd SAS P. - sale & lease-back16-Jul-08 49392 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N392AP C&C Engines Corp C&C Engines Corp Purchased - parked16-Jul-08 30470 Boeing 737 (NG) 800 LN-RPN Banc of America Leasing Ireland Co Ltd SAS P. - sale & lease-back16-Jul-08 3547 Airbus A320 230 (IAE) VH-VQD Wombat 3547 Leasing Pty Ltd Jetstar P. sale & lease-back on del.17-Jul-08 22122 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) CC-CTF Aviation Administration Ltd Aviation Administration LtdPurchased - parked17-Jul-08 120265 Embraer EMB-120 Brasilia N285AS Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked17-Jul-08 120236 Embraer EMB-120 Brasilia ER N283AS Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked17-Jul-08 34622 Boeing 737 (NG) BBJ1 M-URUS Ingram Svcs Limited Silver Arrows P. - sale & lease-back17-Jul-08 19000191 Embraer 190 AR N963UW US Airways US Airways P. off lease/fin. term comp.17-Jul-08 937 Airbus A330 340 (RR) B-6112 CDB Leasing Company China Southern Airlines P. sale & lease-back on del.17-Jul-08 19000191 Embraer 190 AR N963UW PM Ltd US Airways P. sale & lease-back on del.17-Jul-08 19000193 Embraer 190 AR VH-ZPF VBNC9 Pty Ltd Virgin Blue Airlines P. sale & lease-back on del.17-Jul-08 3556 Airbus A320 230 (IAE) CC-CQP Loica Leasing Ltd LAN Airlines P. sale & lease-back on del.17-Jul-08 120231 Embraer EMB-120 Brasilia ER N280AS Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked18-Jul-08 24330 Boeing 757 200 (RR) N933FD FedEx FedEx Purchased - parked18-Jul-08 84 Saab 340 A Cargo N163PW Worldwide Aircraft Svcs Inc Worldwide Aircraft Svcs IncPurchased - parked18-Jul-08 41076 BAE SYSTEMS (Jetstream) Jetstream 41 G-CEYW Pireaus Bank Pireaus Bank Purchased - parked18-Jul-08 49843 Boeing (McDonnell-Douglas) MD-80 87 EC-KRV Pronair Pronair Purchased18-Jul-08 84 Saab 340 A Cargo N163PW IBC Airways IBC Airways Purchased - parked21-Jul-08 3541 Airbus A320 230 (IAE) VT-INU Allco Leasing (IGO No.2) Ltd IndiGo Airlines P. sale & lease-back on del.21-Jul-08 UE-85 Hawker Beechcraft 1900 D ZS-SER National Airways Corporation National Airways Corp. Purchased

Aircraft transactions — 08 July 2008 to 21 July 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




21-Jul-08 23544 Boeing 737 (CFMI) 300 PH-BDI Mountain Capital Partners LLC Mountain Cap. Partns. LLC Purchased - parked21-Jul-08 3167 Fairchild/Dornier 328JET N367SK Livemercial Aviation Holding LLC Livemercial Av. Holding LLCPurchased - parked21-Jul-08 DC-819B Fairchild (Swearingen) Metro 23 N819SK Rapid Aviation Inc American Jet P. - subject to existing lease22-Jul-08 UE-265 Hawker Beechcraft 1900 D ZS-SET National Airways Corporation National Airways Corp. Purchased22-Jul-08 E3327 BAE SYSTEMS (Avro) RJ Avroliner RJ100 OO-DWE Undis. Bank / Broker / Lessor Brussels Airlines P. - subject to existing lease22-Jul-08 E3324 BAE SYSTEMS (Avro) RJ Avroliner RJ100 OO-DWD Undis. Bank / Broker / Lessor Brussels Airlines P. - subject to existing lease22-Jul-08 UE-39 Hawker Beechcraft 1900 D ZS-OLY Solenta Aviation Solenta Aviation Purchased22-Jul-08 3012 Fairchild/Dornier 328 100 N334PH Aerosyncro Aerosyncro Purchased - parked22-Jul-08 E3322 BAE SYSTEMS (Avro) RJ Avroliner RJ100 OO-DWC Undis. Bank / Broker / Lessor Brussels Airlines P. - subject to existing lease22-Jul-08 UE-200 Hawker Beechcraft 1900 D ZS-OYE Solenta Aviation Solenta Aviation Purchased23-Jul-08 105 Bombardier (de Havilland) Dash 8 100 C-FOVR Regional 1 Airlines Regional 1 Airlines Purchased23-Jul-08 23063 Boeing 737 (CFMI) 300 N667SW AeroTurbine Inc AeroTurbine Inc Purchased - parked23-Jul-08 28282 Boeing 747 400D (GE) N483YR Avion Aircraft Trading HF Avion Aircraft Trading HF Purchased - parked23-Jul-08 UE-28 Hawker Beechcraft 1900 D ZS-NAC Solenta Aviation Solenta Aviation Purchased23-Jul-08 UE-117 Hawker Beechcraft 1900 D ZS-OYC Solenta Aviation Solenta Aviation Purchased23-Jul-08 145042 Embraer ERJ-145 EU UR-DNL Dniproavia Dniproavia Purchased - parked23-Jul-08 47466 Boeing (McDonnell-Douglas) DC-9 32 ZS-MRJ Global Aviation Investments (Pty) Ltd Global Av. Invest. (Pty) Ltd Purchased - parked23-Jul-08 19000195 Embraer 190 AR VH-ZPG VBNC9 Pty Ltd Virgin Blue Airlines P. sale & lease-back on del.24-Jul-08 25249 Boeing 737 (CFMI) 500 Z3-AAH MAT - Macedonian Airlines MAT - Macedonian Airlines Purchased24-Jul-08 17000234 Embraer 175 LR N138HQ Republic Airlines Republic Airlines P. off lease/fin. term comp.24-Jul-08 145325 Embraer ERJ-145 EP UR-DNI Dniproavia Dniproavia Purchased24-Jul-08 3585 Airbus A318 120 (P&W) CC-CZJ Loica Leasing Ltd LAN Airlines P. sale & lease-back on del.24-Jul-08 17000234 Embraer 175 LR N138HQ PM Ltd Republic Airlines P. sale & lease-back on del.24-Jul-08 456 Airbus A330 240 (RR) G-OJMC Radar Aviation Ltd Thomas Cook Airlines P. - subject to existing lease24-Jul-08 3562 Airbus A320 230 (IAE) LZ-WZB General Electric Capital Corp Wizz Air Bulgaria P. sale & lease-back on del.25-Jul-08 1353 Airbus A320 230 (IAE) N464TA Air Mart Capital LLC Air Mart Capital LLC Purchased25-Jul-08 29228 Boeing 767 300ER (GE) CC-CZT Condor Leasing LLC LAN Airlines P. - sale & lease-back25-Jul-08 29229 Boeing 767 300ER (GE) CC-CZU Eagle Leasing LLC LAN Airlines P. - sale & lease-back25-Jul-08 UE-16 Hawker Beechcraft 1900 D HA-FAM Farnair Hungary Farnair Hungary Purchased25-Jul-08 3563 Airbus A320 210 (CFM) EI-DSU Aircraft Purchase Comp. No. 10 Ltd Air One P. sale & lease-back on del.25-Jul-08 AT-004 Fairchild (Swearingen) Metro Merlin IV N94CE CIS Holdings NV Inc CIS Holdings NV Inc Purchased25-Jul-08 29227 Boeing 767 300ER (GE) CC-CZW Condor Leasing LLC LAN Airlines P. - sale & lease-back25-Jul-08 22135 Boeing 737 (JT8D) 200 Adv. CC-CRQ Aviation Administration Ltd Aviation Administration Ltd Purchased - parked25-Jul-08 201 ATR ATR 72 200 PK-YRY Trigana Air Trigana Air Purchased25-Jul-08 29644 Boeing 737 (NG) 800 TC-SKH Babcock & Brown Air Ltd Sky Airlines Securitized27-Jul-08 32318 Boeing 777 200ER (RR) 9V-SRN Pembroke Group Singapore Airlines P. - sale & lease-back28-Jul-08 14501058 Embraer ERJ-135 Legacy 600 N89FE FE Aircraft Leasing Corp FirstEnergy Solutions Corp P. sale & lease-back on del.28-Jul-08 UE-193 Hawker Beechcraft 1900 D D2- SonAir SonAir Purchased - parked28-Jul-08 22815 Boeing 757 200 (P&W) N608DA Undis. Bank / Broker / Lessor Delta Air Lines P. - sale & lease-back28-Jul-08 837 Bombardier (de Havilland) DHC-6 Twin Otter 300 C-GJDI Irving Air Service Inc Irving Air Service Inc Purchased28-Jul-08 22812 Boeing 757 200 (P&W) N605DL Delta Air Lines Delta Air Lines P. off lease/fin. term comp.29-Jul-08 22820 Boeing 757 200 (P&W) N613DL Undis. Bank / Broker / Lessor Delta Air Lines P. - sale & lease-back29-Jul-08 22814 Boeing 757 200 (P&W) N607DL Delta Air Lines Delta Air Lines P. off lse/fin. term comp. prkd29-Jul-08 3237 Airbus A320 210 (CFM) EC-KJD Babcock & Brown Air Ltd Clickair Securitized29-Jul-08 23124 Boeing 737 (JT8D) 200C Adv. (St3 Hsk) N840AL Esperanza Aviatn - Msn 23124 LLC Esp. Avn - Msn 23124 LLC Purchased - parked30-Jul-08 49932 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N887GA Allegiant Air Allegiant Air Purchased30-Jul-08 176 Airbus A340 310 (CFM) RP-C3431 Philippine Airlines Philippine Airlines P. off lease/ fin. term comp.30-Jul-08 324 Bombardier (de Havilland) Dash 8 100 C-FSQY Regional 1 Airlines Regional 1 Airlines Purchased30-Jul-08 28495 Boeing 767 300ER (GE) N495AN AWMS I AWAS Purchased - parked30-Jul-08 4212 Bombardier (de Havilland) Dash 8 400 G-ECOE Rand Merchant Bank Flybe P. sale & lease-back on del.31-Jul-08 3589 Airbus A319 110 (CFM) D-AHIL Lloyd Air Portfolio II Hamburg Int/l P. sale & lease-back on del.31-Jul-08 938 Airbus A340 310 (CFM) OH-LQE Finnair Aircraft Finance Ltd Finnair P. sale & lease-back on del.31-Jul-08 22822 Boeing 757 200 (P&W) N615DL Undis. Bank / Broker / Lessor Delta Air Lines P. - sale & lease-back31-Jul-08 34958 Boeing 737 (NG) 800 Wingl. VT-SGD Babcock & Brown Aircraft Mgmt LLC Babcock & Brown A/c Mgmt Purchased31-Jul-08 36604 Boeing 737 (NG) 800 Wingl. ZK-PBK VBNC9 Pty Ltd Pacific Blue Airlines P. sale & lease-back on del.31-Jul-08 496 Bombardier (de Havilland) Dash 8 200 N353PH Win Win Svcs LLC Horizon Air P. - subject to existing lease31-Jul-08 23861 Boeing 737 (CFMI) 300 N526AU Gecas Asset Management Svcs Gecas Asset Mgmt Svcs Purchased - parked31-Jul-08 19000199 Embraer 190 AR VH-ZPH VBNC9 Pty Ltd Virgin Blue Airlines P. sale & lease-back on del.31-Jul-08 AT-004 Fairchild (Swearingen) Metro Merlin IV N94CE Elite Air Svcs Inc Elite Air Svcs Inc Purchased31-Jul-08 22819 Boeing 757 200 (P&W) N612DL Delta Air Lines Delta Air Lines P. off lease/fin. term comp.01-Aug-08 961 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N961AE Corporate Flight Management Corporate Flight Mgmt Purchased - parked01-Aug-08 UE-318 Hawker Beechcraft 1900 D ZS-OYK Solenta Aviation Solenta Aviation Purchased01-Aug-08 959 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N959AE Jetstream Sales LLC Jetstream Sales LLC Purchased - parked01-Aug-08 961 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N961AE Jetstream Sales LLC Jetstream Sales LLC Purchased - parked01-Aug-08 14501045 Embraer ERJ-135 Legacy 600 G-CFJA Undis. Bank / Broker / Lessor TAG Aviation (UK) Ltd Purchased01-Aug-08 783 BAE SYSTEMS (Jetstream) Jetstream 31 C-GPSN Integra Air Integra Air Purchased01-Aug-08 26205 Boeing 767 300ER (P&W) CS-TLQ EuroAtlantic Airways EuroAtlantic Airways P. off lease/fin. term comp.01-Aug-08 UK-3 Boeing (McDonnell-Douglas) C-17 A ZZ173 Royal Air Force Royal Air Force P. off lease/fin. term comp.01-Aug-08 UE-273 Hawker Beechcraft 1900 D ZS-OYJ Solenta Aviation Solenta Aviation Purchased01-Aug-08 959 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N959AE Corporate Flight Management Corporate Flight Mgmt Purchased - parked04-Aug-08 41063 BAE SYSTEMS (Jetstream) Jetstream 41 N325UE Jet Finance Group LLC Jet Finance Group LLC Purchased - parked04-Aug-08 649 Airbus A319 110 (CFM) VP-BIU VL649 Limited Rossiya - Russian Airlines P. - subj. to exist. lease - pkd04-Aug-08 11491 Fokker 100 G-CFDD Eskglen Shipping Company Eskglen Shipping Company Purchased - parked04-Aug-08 11498 Fokker 100 G-CFBU Eskglen Shipping Company Eskglen Shipping Company Purchased - parked04-Aug-08 41063 BAE SYSTEMS (Jetstream) Jetstream 41 N325UE Corporate Flight Management Corporate Flight Mgmt Purchased - parked04-Aug-08 3037 Fairchild/Dornier 328 100 PK- Unconf. Indonesian Operator Unconf. Indonesian Oper. Purchased05-Aug-08 756 BAE SYSTEMS (Jetstream) Jetstream 31 C-GPSO Integra Air Integra Air Purchased05-Aug-08 945 Airbus A330 200 (GE) VH-EBK Macquarie Managed Investments Ltd Qantas P. sale & lease-back on del.05-Aug-08 19000197 Embraer 190 AR N964UW PM Ltd US Airways P. sale & lease-back on del.05-Aug-08 19000197 Embraer 190 AR N964UW US Airways US Airways P. off lease/fin. term comp.05-Aug-08 27145 Boeing 757 200 (RR) N930UW FedEx FedEx Purchased - parked05-Aug-08 270 Saab 340 B N284DC Lambert Leasing Inc Lambert Leasing Inc Purchased - parked06-Aug-08 22818 Boeing 757 200 (P&W) N611DL Delta Air Lines Delta Air Lines P. off lease/fin. term comp.06-Aug-08 24293 Boeing 757 200 (RR) N293AW FedEx FedEx Purchased - parked06-Aug-08 3597 Airbus A320 210 (CFM) VT-WAG RBS Aviation Capital Go Air P. sale & lease-back on del.06-Aug-08 22821 Boeing 757 200 (P&W) N614DL Undis. Bank / Broker / Lessor Delta Air Lines P. - sale & lease-back06-Aug-08 145320 Embraer ERJ-145 MP SE-RIA Aircraft Solutions Lux 1 Sarl City Airline P. - subject to existing lease06-Aug-08 49931 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N886GA Allegiant Air Allegiant Air P. off lease/fin. term comp.07-Aug-08 19000198 Embraer 190 AR N965UW US Airways US Airways P. off lease/fin. term comp.

Aircraft transactions — 21 July 2008 to 07 August 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



07-Aug-08 3206 Fairchild/Dornier 328JET N328EF 328 Support Svcs GmbH 328 Support Svcs GmbH Purchased - parked07-Aug-08 E3122 BAE SYSTEMS (HS) 146 300 ZS-SBL Kingfield Boeinginvestment Executive Turbine Air Charter P. - sale & lease-back - prkd07-Aug-08 24626 Boeing 757 200 (P&W) N505UA United Airlines United Airlines P. off lease/fin. term comp.07-Aug-08 17000235 Embraer 175 LR N201JQ Shuttle America Shuttle America P. off lease/fin. term comp.07-Aug-08 19000198 Embraer 190 AR N965UW PM Ltd US Airways P. - sale & lease-back on del07-Aug-08 20037 Boeing 727 200F (M) (St3 Hsk) PR-MTK TAF Linhas Aereas TAF Linhas Aereas Purchased07-Aug-08 17000235 Embraer 175 LR N201JQ PM Ltd Shuttle America P. - sale & lease-back on del08-Aug-08 11373 Fokker 100 VH-FNU Capital Lse Austral. Portf. One Pty Ltd Avation Plc Purchased - parked08-Aug-08 46915 Boeing (McDonnell-Douglas) DC-10 30 N705TZ World Airways World Airways Purchased - parked08-Aug-08 46581 Boeing (McDonnell-Douglas) DC-10 30 N224NW World Airways World Airways Purchased - parked08-Aug-08 23086 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N314DA Jet Midwest Jet Midwest Purchased - parked08-Aug-08 19000202 Embraer 190 AR VH-ZPI VBNC9 Pty Ltd Virgin Blue Airlines P. - sale & lease-back on del08-Aug-08 3206 Fairchild/Dornier 328JET OE-HRJ Welcome Air Welcome Air Purchased - parked08-Aug-08 23075 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N303DL Jet Midwest Jet Midwest Purchased - parked08-Aug-08 868 BAE SYSTEMS (Jetstream) Jetstream 31 Super VH-OTA Aeropelican Air Svcs Aeropelican Air Svcs Purchased - parked08-Aug-08 46580 Boeing (McDonnell-Douglas) DC-10 30 N223NW World Airways World Airways Purchased - parked08-Aug-08 UE-379 Hawker Beechcraft 1900 D HB-AEM Zimex Business Aviation Ltd Zimex Aviation Purchased08-Aug-08 47185 Boeing (McDonnell-Douglas) DC-9 31 (St3 Hsk) N924RW GA Telesis LLC GA Telesis LLC Purchased - parked08-Aug-08 46582 Boeing (McDonnell-Douglas) DC-10 30 N706TZ World Airways World Airways Purchased - parked08-Aug-08 46912 Boeing (McDonnell-Douglas) DC-10 30 N702TZ World Airways World Airways Purchased - parked11-Aug-08 3019 Fairchild/Dornier 328 100 N328DC Braun Racing LLC Braun Racing LLC Purchased11-Aug-08 DC-812B Fairchild (Swearingen) Metro 23 N812LD Aircraft Consultants Inc Aircraft Consultants Inc Purchased11-Aug-08 3019 Fairchild/Dornier 328 100 N328DC Spitfire Aviation Parts Inc Spitfire Aviation Parts Inc Purchased11-Aug-08 36721 Boeing 737 (NG) 700 N349AT Bank of America NA Bank of America NA Purchased - parked11-Aug-08 E2098 BAE SYSTEMS (HS) 146 200 VH-JJT IAP Group Australia Pty Ltd IAP Group Australia Pty Ltd Purchased - parked11-Aug-08 1494 Airbus A319 110 (CFM) N320NP The Silver Wing II Ltd Silverwing Purchased - parked12-Aug-08 954 BAE SYSTEMS (Jetstream) Jetstream 31 Super N342TE Quassar USA Inc Quassar USA Inc Purchased - parked12-Aug-08 371 Bombardier (de Havilland) DHC-6 Twin Otter 300 C-FCPV NT Air NT Air Purchased12-Aug-08 15182 Bombardier (Canadair) CRJ900 Regional Jet 900ER NextGen C-GSUA Suncor Energy Inc Suncor Energy Oil Sands Ltd Del. - pur. of used/demo. a/c12-Aug-08 86 Bombardier (de Havilland) Dash 8 100 N150RN EP Aviation LLC EP Aviation LLC Purchased13-Aug-08 3577 Airbus A320 230 (IAE) N681TA Undis. Bank / Broker / Lessor TACA Int/l Airlines P. - sale & lease-back on del13-Aug-08 UE-406 Hawker Beechcraft 1900 D TT-ABB Government of Chad Government of Chad Purchased13-Aug-08 23935 Boeing 737 (CFMI) 300 N590US Gecas Asset Management Svcs Gecas Asset Mgmt Svcs Purchased - parked13-Aug-08 24044 Boeing 767 300ER (GE) N363AA NAS Investments 9 LLC American Airlines P. off lse/fin. term comp.13-Aug-08 936 BAE SYSTEMS (Jetstream) Jetstream 31 Super N936AE Corporate Flight Management Corporate Flight Mgmt Purchased - parked14-Aug-08 23389 Boeing 747 200SF (P&W) JA8169 JALUX Inc JALUX Inc Purchased - parked14-Aug-08 11391 Fokker 100 VH-FSW F100 Pty Ltd Skywest Airlines (Australia) Purchased - parked14-Aug-08 23389 Boeing 747 200SF (P&W) N798SA Southern Air Southern Air Purchased - parked14-Aug-08 11373 Fokker 100 VH-FNU F100 Pty Ltd Skywest Airlines (Australia) Purchased - parked15-Aug-08 391 Airbus A300 600 (GE) D-AIAI GA Telesis LLC GA Telesis LLC Purchased - parked15-Aug-08 120141 Embraer EMB-120 Brasilia N261AS Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked15-Aug-08 23172 Boeing 737 (JT8D) 200 Adv. TN- Trans Air Congo Trans Air Congo Purchased - parked15-Aug-08 110036 Embraer EMB-110 Bandeirante PR-EAP State Govt of Mato Grosso do Sul St. Govt of Mato Grosso do Sul Purchased15-Aug-08 120226 Embraer EMB-120 Brasilia ER N282AS Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked15-Aug-08 22642 Boeing 727 200F (M) Adv. (St3 Hsk) VH-VLH Heavylift Cargo Airlines Heavylift Cargo Airlines Purchased - parked15-Aug-08 693 Airbus A310 320 (P&W) VT-AIO Kaveri Leasing Ltd Veling Ltd Purchased - parked15-Aug-08 34959 Boeing 737 (NG) 800 Wingl. TC-JHH Babcock & Brown Aircraft Mgmt LLC Babcock & Brown AM Purchased15-Aug-08 533 Bombardier (de Havilland) Dash 8 300 OE-HBC Corporate Jet Realisations Ltd Corporate Jet Realisations Ltd Purchased - parked15-Aug-08 4023 Bombardier (de Havilland) Dash 8 400 RP-C3036 Philippine Airlines Philippine Airlines Purchased - parked15-Aug-08 20259 Fokker 50 OY-PAA Nordic Aviation Contractor A/S Nordic Avtn Contractor A/SPurchased - parked15-Aug-08 684 Airbus A310 320 (P&W) VT-AIN Nilgiri Hills Leasing Ltd Veling Ltd Purchased - parked15-Aug-08 23234 Boeing 737 (CFMI) 300 HS-AAN Spirit Leasing Thai AirAsia P. - subject to existing lease15-Aug-08 26205 Boeing 767 300ER (P&W) 11-Sep-02 Chilean Air Force Chilean Air Force Purchased - parked15-Aug-08 20995 Boeing 727 200F (M) Adv. (St3 Hsk) N854AA Flightstar Trading LLC Flightstar Trading LLC Purchased - parked18-Aug-08 DC-824B Fairchild (Swearingen) Metro 23 CP-2527 AeroCon AeroCon Purchased18-Aug-08 45921 Boeing (McDonnell-Douglas) DC-8 62C (St3 Hsk) 3X-GEP Transair Cargo Svcs Transair Cargo Svcs Purchased - parked19-Aug-08 49704 Boeing (McDonnell-Douglas) MD-80 82 (MDC) YA- Kam Air Kam Air Purchased - parked19-Aug-08 382 Saab 340 B VH-ZLO Rex - Regional Express Rex - Regional Express Purchased - parked19-Aug-08 301 Saab 340 B VH-UYN Macair Airlines Macair Airlines Purchased - parked20-Aug-08 23933 Boeing 737 (CFMI) 300 N588US AeroTurbine Inc AeroTurbine Inc Purchased - parked20-Aug-08 36720 Boeing 737 (NG) 700 N348AT The Fifth Third Leasing Co The Fifth Third Leasing Co Purchased - parked20-Aug-08 24291 Boeing 757 200 (RR) N917FD FedEx FedEx Purchased - parked20-Aug-08 27760 Boeing 767 300ERF (GE) N307UP UPS Airlines UPS Airlines P. off lse/fin. term comp.20-Aug-08 AC-682 Fairchild (Swearingen) Metro III N921BC Sierra West Airlines Sierra West Airlines Purchased21-Aug-08 305 Bombardier (de Havilland) Dash 8 300 C-FIDL Hawkair Hawkair Purchased21-Aug-08 24031 Boeing 737 (JT8D) 200 Adv. N810AL Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked21-Aug-08 14501057 Embraer ERJ-135 Legacy 600 N702SV Cerretani Aviation Group LLC Cerretani Aviation Grp LLC Purchased21-Aug-08 25544 Boeing 747 400 (RR) VH-OJO TJT Leasing Pty Ltd Qantas P. - subject to existing lease21-Aug-08 14501057 Embraer ERJ-135 Legacy 600 N702SV Bell Aviation Inc Bell Aviation Inc Purchased21-Aug-08 8133 Fairchild/Dornier 228 200 C-FYEV Summit Air Charters Summit Air Charters Purchased21-Aug-08 24031 Boeing 737 (JT8D) 200 Adv. N810AL Aviation Technologies Inc Aviation Technologies Inc Purchased - parked21-Aug-08 14501057 Embraer ERJ-135 Legacy 600 N702SV The Air Group Inc The Air Group Inc Purchased21-Aug-08 501 General Dynamics (Convair) 580 VH-PAL Pionair Australia Pionair Australia Purchased21-Aug-08 260 Bombardier (de Havilland) DHC-6 Twin Otter 300 C-FVEG Osprey Wings Osprey Wings Purchased21-Aug-08 4216 Bombardier (de Havilland) Dash 8 400 G-ECOF HEH AM Beteiligungs Gmbh & Co KG Flybe P. - sale & lease-back on del21-Aug-08 192 Bombardier (de Havilland) Dash 8 300 N3554T Regional One Inc Regional One Inc Purchased - parked22-Aug-08 19252 Boeing 727 100 (St3 Hsk) C5- Royal Air Royal Air Purchased - parked22-Aug-08 2836 Airbus A319 110 (CFM) N948FR AFS Investments 59 LLC Frontier Airlines P. - sale & lease-back22-Aug-08 265 Bombardier (de Havilland) Dash 8 100 N308RD EP Aviation LLC EP Aviation LLC Purchased24-Aug-08 UK-4 Boeing (McDonnell-Douglas) C-17 A ZZ174 Royal Air Force Royal Air Force P. off lease/fin. term comp.25-Aug-08 DC-869B Fairchild (Swearingen) Metro 23 VH-MYI Aviation Svcs of Australia Pty Ltd Macair Airlines P. - subject to existing lease25-Aug-08 348 Saab 340 B VH-UYH Aero South Pacific Pty Ltd Macair Airlines P. - subject to existing lease25-Aug-08 346 Bombardier (de Havilland) Dash 8 100 VH-TQU Skippers Aviation Skippers Aviation Purchased - parked25-Aug-08 TC-376 Fairchild (Swearingen) Metro II XA- Unconf. Mexican Operator Unconf. Mexican Operator Purchased25-Aug-08 46949 Boeing (McDonnell-Douglas) DC-10 30F (M) N949PL PICL Aviation VI LLC Aerolease Int/l Inc Purchased - parked25-Aug-08 11497 Fokker 100 PH-AFO Aircraft Financing & Trading BV A/c Financing & Trading BV Purchased - parked25-Aug-08 33920 Boeing 737 (NG) 700 Wingl. N268AT NewAir & Tours NewAir & Tours Purchased - parked26-Aug-08 381 Bombardier (de Havilland) DHC-6 Twin Otter 300 F- Unconf. French Operator Unconf. French Operator Purchased26-Aug-08 3581 Airbus A320 230 (IAE) N682TA Undis. Bank / Broker / Lessor TACA Int/l Airlines P. - sale & lease-back on del

Aircraft transactions — 07 August 2008 to 26 August 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




26-Aug-08 3037 Fairchild/Dornier 328 100 N425JS Unconf. American Operator Unconf. American Operator Purchased27-Aug-08 306 Bombardier (de Havilland) Dash 8 100 VH-TQW Skippers Aviation Skippers Aviation Purchased - parked27-Aug-08 27617 Boeing 767 300ER (GE) N151LF Idec Flyer LLC ILFC Purchased - parked27-Aug-08 120250 Embraer EMB-120 Brasilia ER PR-MDP Unconf. Brazillian Operator Unconf. Brazillian Operator Purchased27-Aug-08 23459 Boeing 737 (CFMI) 300 N17329 Continental Airlines Continental Airlines P. off lse/fin. term comp.28-Aug-08 23460 Boeing 737 (CFMI) 300 N70330 Continental Airlines Continental Airlines P. off lse/fin. term comp.28-Aug-08 943 Airbus A330 220 (P&W) EC-KUO Amentum Capital Ltd. Air Comet P. - sale & lease-back on del28-Aug-08 19000204 Embraer 195 LR G-FBEM SkyClass 52 GmbH & Co KG Flybe P. - sale & lease-back on del28-Aug-08 345 Bombardier (de Havilland) Dash 8 100 C-GXCN Avmax Int/l Aircraft Leasing Inc Avmax Int/l A/c Leasing Inc Purchased - parked29-Aug-08 21613 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N835AL Skybus LLC Skybus LLC Purchased - parked01-Sep-08 711 BAE SYSTEMS (Jetstream) Jetstream 31 G-OJSA Diamond Air Charter Diamond Air Charter Purchased - parked01-Sep-08 120313 Embraer EMB-120 Brasilia ER 12-Jul-05 Brazilian Air Force Brazilian Air Force Purchased02-Sep-08 24548 Boeing 737 (CFMI) 400 N426US US Airways US Airways P. off lse/fin. term comp.04-Sep-08 557 Bombardier (de Havilland) DHC-6 Twin Otter 300 C- Unconf. Canadian Operator Unconf. Canadian Opr Purchased04-Sep-08 1560 Airbus A319 110 (CFM) N903FR VTB-Leasing VTB-Leasing Purchased - parked09-Sep-08 12 CASA CN-235 10 N1269J EP Aviation LLC EP Aviation LLC Purchased09-Sep-08 4 Saab 2000 YR-SBD Nordic Aviation Contractor A/S Carpatair P. - subject to existing lease09-Sep-08 7 CASA CN-235 10 N2696S EP Aviation LLC EP Aviation LLC Purchased09-Sep-08 18 Saab 2000 YR-SBJ Nordic Aviation Contractor A/S Carpatair P. - subject to existing lease09-Sep-08 22 Saab 2000 ER-SFB Nordic Aviation Contractor A/S Moldavian Airlines P. - subject to existing lease09-Sep-08 26 Saab 2000 YR-SBB Nordic Aviation Contractor A/S Carpatair P. - subject to existing lease09-Sep-08 33 Saab 2000 YR-SBK Nordic Aviation Contractor A/S Carpatair P. - subject to existing lease09-Sep-08 39 Saab 2000 HB-IZW Nordic Aviation Contractor A/S Swiss P. - subject to existing lease09-Sep-08 262 CASA 212 200 N969BW EP Aviation LLC EP Aviation LLC Purchased10-Sep-08 810 BAE SYSTEMS (Jetstream) Jetstream 31 Super HI- MAS S.A MAS S.A Purchased10-Sep-08 388 ATR ATR 42 300 9N-AIM Buddha Air Buddha Air Purchased10-Sep-08 403 ATR ATR 42 300 9N-AIN Buddha Air Buddha Air Purchased12-Sep-08 24331 Boeing 757 200 (RR) N934FD FedEx FedEx Purchased - parked12-Sep-08 268 ATR ATR 42 300 XY- Undis. Bank / Broker / Lessor Air Mandalay P. - subject to existing lease12-Sep-08 23830 Boeing 737 (CFMI) 300 PR-WJK Webjet Webjet Purchased12-Sep-08 28468 Boeing 747 400 (RR) N3508M VL28468 Ltd VTB-Leasing Purchased - parked12-Sep-08 509 Airbus A300 600R (GE) N18066 General Electric Company American Airlines P. - subject to existing lease12-Sep-08 509 Airbus A300 600R (GE) N18066 AFS Investments I Inc American Airlines P. - subject to existing lease12-Sep-08 UB-36 Hawker Beechcraft 1900 C N319BH Corporate Air Corporate Air P. off lse/fin. term comp.15-Sep-08 120147 Embraer EMB-120 Brasilia PT-SLD Passaredo Transportes Aereos Passaredo Transportes AereosPurchased15-Sep-08 62 Bombardier (de Havilland) Dash 8 100 5Y-VVN Blue Bird Aviation Blue Bird Aviation Purchased - parked15-Sep-08 349 Bombardier (de Havilland) Dash 8 100 5Y-VVS Blue Bird Aviation Blue Bird Aviation Purchased - parked15-Sep-08 7622 Bombardier (Canadair) CRJ Regional Jet 200ER EC-IDC GA Finance Svcs BV Air Nostrum P. - subject to existing lease15-Sep-08 20254 Boeing 737 (JT8D) 200QC 9Q- GTRA Airways GTRA Airways Purchased - parked15-Sep-08 22577 Boeing 737 (JT8D) 200QC Adv (St3 Hsk) N730AS BCI Aloha 2006-1LLC BCI Aircraft Leasing Inc P. - subj to exist lease - pkd15-Sep-08 2403 Airbus A320 230 (IAE) A6-DLM Amiri Flight Amiri Flight Purchased15-Sep-08 1711 Airbus A321 230 (IAE) G-MEDG Deucalion Capital IV bmi P. - subject to existing lease15-Sep-08 533 Bombardier (de Havilland) Dash 8 300 C-FWFH Avmax Group Inc Avmax Int/l A/c Leasing Inc Purchased - parked15-Sep-08 176 ATR ATR 42 300 LY-DOT Danu Oro Transportas Danu Oro Transportas P. off lse/fin. term comp.15-Sep-08 3733 Bombardier (Shorts) 360 300 G-BOEG ACL Aircraft Trading Ltd HD Air Ltd P. - subject to existing lease15-Sep-08 23541 Boeing 737 (CFMI) 300 PH-BDE Mountain Capital Partners LLC Mountain Capital Partners LLC Purchased - parked15-Sep-08 712 Airbus A330 300 (GE) VH-QPJ QF Boc 2008-2 Pty Limited Qantas P. - subject to existing lease15-Sep-08 36711 Boeing 767 300ER (GE) CC-CXF Cisne Leasing Ltd LAN Airlines P. - sale & lease-back on del15-Sep-08 46543 Boeing (McDonnell-Douglas) DC-10 30ER S2-ACS Biman Bangladesh Airlines Biman Bangladesh Airlines P. off lse/fin. term comp. - prkd15-Sep-08 27134 Boeing 747 400BCF (P&W) B-KAH Cathay Pacific Cathay Pacific Purchased - parked15-Sep-08 10530 Fokker F.27 500CRF 5X-FFD Fly540 Fly540 Purchased - parked15-Sep-08 10531 Fokker F.27 500CRF 5X-FFN Fly540 Fly540 Purchased - parked15-Sep-08 49482 Boeing (McDonnell-Douglas) MD-80 82 (MDC) 5N-BKI Afrijet Afrijet Purchased - parked15-Sep-08 226 Saab 340 B XA-TJR Erik Thun AB Erik Thun AB Purchased - parked15-Sep-08 3221 Avcraft 328JET Envoy 3 VP-CJD Motor Racing Developments Corp Easy Aviation Purchased15-Sep-08 19000129 Embraer 190 LR XA-BAC Aldus Portfolio Leasing Ltd Aeromexico Connect P. - subject to existing lease15-Sep-08 19000121 Embraer 190 LR XA-AAC Aldus Portfolio Leasing Ltd Aeromexico Connect P. - subject to existing lease15-Sep-08 110258 Embraer EMB-110 Bandeirante P1 PT-TAW Taxi Aereo Weiss Taxi Aereo Weiss Purchased15-Sep-08 E2233 BAE SYSTEMS (Avro) RJ Avroliner RJ85 OY-RCE E2233 Leasing ApS Atlantic Airways (Faroe Islands) P. - sale & lease-back16-Sep-08 362 Bombardier (de Havilland) Dash 8 100 5Y-VVT Blue Bird Aviation Blue Bird Aviation Purchased - parked16-Sep-08 204 Bombardier (de Havilland) Dash 8 100 5Y-VVR Blue Bird Aviation Blue Bird Aviation Purchased - parked16-Sep-08 471 Airbus A300 600R (GE) N14061 AFS Investments I Inc American Airlines P. - subj. to exist. lease - pkd16-Sep-08 UE-183 Hawker Beechcraft 1900 D N48544 Skyline Enterprise Corp Skyline Enterprise Corp Purchased - parked17-Sep-08 41081 BAE SYSTEMS (Jetstream) Jetstream 41 N564HK Corporate Flight Management Corporate Flight Mgmt Purchased - parked17-Sep-08 4126 Alenia C-27J Spartan N359PL Global Military Systems LLC Global Military Systems LLC Purchased17-Sep-08 4129 Alenia C-27J Spartan N359TA L-3 Communications Interg. Systems L-3 Comms. Interg. Systems Purchased - parked17-Sep-08 71 Bombardier (de Havilland) DHC-6 Twin Otter 100 C-GGLE South Nahanni Airways South Nahanni Airways Purchased17-Sep-08 887 Airbus A330 200 (GE) VH-EBG Macquarie Managed Investments Ltd Qantas P. - sale & lease-back17-Sep-08 1827 Airbus A320 230 (IAE) N546JB VGS Investments One Ltd Volito Aviation AB Purchased - parked17-Sep-08 257 ATR ATR 42 300 OY-PCE Nordic Aviation Capital Nordic Aviation Capital Purchased - parked17-Sep-08 213 ATR ATR 42 300 OY-PCD Nordic Aviation Capital Nordic Aviation Capital Purchased - parked17-Sep-08 29264 Boeing 737 (CFMI) 300 LN-KHB Norwegian Air Shuttle Norwegian Air Shuttle Purchased - parked17-Sep-08 4011 Bombardier (de Havilland) Dash 8 400 LN-RDL SAS SAS P. off lse/fin. term comp. - pkd17-Sep-08 561 ATR ATR 42 500 XA-TKJ Nordic Aviation Capital Aeromar Airlines P. - sale & lease-back17-Sep-08 564 ATR ATR 42 500 XA-TLN Nordic Aviation Capital Aeromar Airlines P. - sale & lease-back17-Sep-08 35092 Boeing 737 (NG) 800 Wingl. G-XLAK MCAP Europe Ltd MC Aircraft Management Purchased - parked17-Sep-08 UB-17 Hawker Beechcraft 1900 C N192GA Republic Bank Alpine Air Express P. - subject to existing lease17-Sep-08 UB-7 Hawker Beechcraft 1900 C N127BA Republic Bank Alpine Air Express P. - subject to existing lease17-Sep-08 UB-16 Hawker Beechcraft 1900 C N197GA Republic Bank Alpine Air Express P. - subject to existing lease17-Sep-08 AT-032 Fairchild (Swearingen) Metro Merlin IVA N90NH Charter Express Inc Charter Express Inc Purchased18-Sep-08 704 BAE SYSTEMS (Jetstream) Jetstream 31 C-GCCN Aviation Starlink Inc Aviation Starlink Inc Purchased18-Sep-08 120188 Embraer EMB-120 Brasilia N266AS Worldwide Aircraft Svcs Inc Worldwide Aircraft Svcs IncPurchased - parked18-Sep-08 30214 Boeing 777 200ER (P&W) N208UA Bakersvalley Partners Corp Bakersvalley Partners Corp Purchased - parked18-Sep-08 30214 Boeing 777 200ER (P&W) N208UA Larafort Aircraft Leasing Ltd Larafort Aircraft Leasing Ltd Purchased - parked18-Sep-08 7426 Bombardier (Canadair) CRJ Regional Jet 200LR N651BR Trust N693BR Mesa Airlines P. off lse/fin. term comp.18-Sep-08 49703 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N958U Jetran Int/l Ltd Jetran Int/l Ltd Purchased - parked18-Sep-08 14 Airbus A380 840 (RR) VH-OQA QF Boc 2008-1 Pty Limited Qantas P. - sale & lease-back on del18-Sep-08 19000206 Embraer 190 AR N966UW PM Ltd US Airways P. - sale & lease-back on del18-Sep-08 19000206 Embraer 190 AR N966UW US Airways US Airways P. off lse/fin. term comp.

Aircraft transactions — 26 August 2008 to 18 September 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



18-Sep-08 226 Saab 340 B N285DC Lambert Leasing Inc Saab Aircraft Leasing Inc Purchased - parked18-Sep-08 17000243 Embraer 175 LR N204JQ PM Ltd Shuttle America P. - sale & lease-back on del18-Sep-08 17000243 Embraer 175 LR N204JQ Shuttle America Shuttle America P. off lse/fin. term comp.19-Sep-08 41073 BAE SYSTEMS (Jetstream) Jetstream 41 HK-4584X Easyfly Easyfly Purchased - parked19-Sep-08 3168 Fairchild/Dornier 328JET N328BC Int/l Bank of Commerce Int/l Bank of Commerce Purchased19-Sep-08 10149 Fokker F.27 100 9M- Unconf. Malaysian Operator Unconf. Malaysian Operator Purchased - parked19-Sep-08 7235 Bombardier (Canadair) CRJ Regional Jet 100ER N708CA Bombardier Svcs Corp Bombardier Svcs Corp Purchased - parked19-Sep-08 22441 Boeing 727 200F (M) Adv. (St3 Hsk) N936PG Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked19-Sep-08 14501057 Embraer ERJ-135 Legacy 600 VP-CMM Al Mojil Aviation Al Mojil Aviation Purchased - parked22-Sep-08 10 CASA CN-235 10 N982BW EP Aviation LLC EP Aviation LLC Purchased - parked22-Sep-08 3037 Fairchild/Dornier 328 100 PK-TXL Express Air Express Air Purchased22-Sep-08 167 CASA 212 200 N467CS Fayard Enterprises LLC Carolina Sky Sports P. - sale & lease-back22-Sep-08 8071 Fairchild/Dornier 228 200 C-FPSH Summit Air Charters Summit Air Charters Purchased22-Sep-08 22492 Boeing 727 200 Adv. (St3 Hsk) CP- Lloyd Aereo Boliviano Lloyd Aereo Boliviano Purchased - parked22-Sep-08 415 ATR ATR 42 300 PK-KSE Kalstar Kalstar Purchased23-Sep-08 20259 Fokker 50 OY-PAA Largus Aviation AB Largus Aviation AB Purchased - parked23-Sep-08 79 Bombardier (de Havilland) DHC-6 Twin Otter 100 N1022S Fayard Enterprises LLC Carolina Sky Sports P. - sale & lease-back23-Sep-08 27 Bombardier (de Havilland) DHC-6 Twin Otter 100 N227CS Fayard Enterprises LLC Carolina Sky Sports Purchased23-Sep-08 291 CASA 212 200 N497CA Fayard Enterprises LLC Carolina Sky Sports P. - sale & lease-back23-Sep-08 195 CASA 212 200 N495CS Fayard Enterprises LLC Carolina Sky Sports P. - sale & lease-back23-Sep-08 DC-812B Fairchild (Swearingen) Metro 23 YV Unconf. Venezuelan Operator Unconf. Venezuelan Opr Purchased23-Sep-08 3618 Airbus A320 230 (IAE) VT-INV Allco Leasing (IGO No.2) Ltd IndiGo Airlines P. - sale & lease-back on del23-Sep-08 47811 Boeing (McDonnell-Douglas) DC-10 30F (M) N323FE ORBIS ORBIS Purchased - parked23-Sep-08 25703 Boeing 747 400 (P&W) N703AC Aircraft MSN 25703 LLC Aircastle Advisor LLC Purchased - parked23-Sep-08 19000211 Embraer 190 AR N967UW PM Ltd US Airways P. - sale & lease-back on del23-Sep-08 19000211 Embraer 190 AR N967UW US Airways US Airways P. off lse/fin. term comp.23-Sep-08 100 Airbus A300 B4-200F (GE) N510TA Skylease II Inc Air Macau P. - subject to existing lease23-Sep-08 271 Airbus A300 B4-200F (GE) N505TA Sky Lease I Inc Air Macau P. - subject to existing lease23-Sep-08 207 Airbus A300 B4-200F (GE) N506TA Sky Lease I Inc TradeWinds Airlines P. - subject to existing lease23-Sep-08 211 Airbus A300 B4-200F (GE) N821SC Sky Lease I Inc TradeWinds Airlines P. - subject to existing lease23-Sep-08 53 Airbus A300 B4-200F (GE) N501TR Sky Lease I Inc TradeWinds Airlines P. - subject to existing lease23-Sep-08 216 Airbus A300 B4-200F (GE) N504TA Sky Lease I Inc TradeWinds Airlines P. - sale & lease-back24-Sep-08 E2044 BAE SYSTEMS (HS) 146 200 ZS- Mouritzen Family Trust Allegiance Air Purchased24-Sep-08 7392 Bombardier (Canadair) CRJ Regional Jet 200LR N646BR Trust N693BR Trust N693BR Purchased - parked24-Sep-08 954 Airbus A330 340 (RR) B-6500 CDB Leasing Company China Southern Airlines P. - sale & lease-back on del24-Sep-08 14500982 Embraer ERJ-135 Legacy 600 P4-PAM Constellation Air A V V Petrov Air Ltd Purchased25-Sep-08 4129 Alenia C-27J Spartan N359TA JCA Joint Procurement Office JCA Jnt Procurement Office Del. pkd - pur. of usd/ demo. a/c25-Sep-08 21535 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N54SW Magnum Airdynamics Magnum Airdynamics Purchased - parked25-Sep-08 22506 Boeing 747 200SF (GE) N795SA Southern Air Southern Air Purchased - parked25-Sep-08 23585 Boeing 737 (CFMI) 300 N14347 Continental Airlines Continental Airlines P. off lse/fin. term comp.25-Sep-08 UE-403 Hawker Beechcraft 1900 D N857CA Unconf. American Operator Unconf. American Operator Purchased - parked25-Sep-08 17000248 Embraer 175 LR N958WH PM Ltd Shuttle America P. - sale & lease-back on del25-Sep-08 17000248 Embraer 175 LR N958WH Shuttle America Shuttle America P. off lse/fin. term comp.25-Sep-08 1606 BAE SYSTEMS (HS) 748 Srs 2 N MK Airlines MK Airlines Purchased - parked25-Sep-08 1603 BAE SYSTEMS (HS) 748 Srs 2 N MK Airlines MK Airlines Purchased - parked26-Sep-08 3647 Airbus A319 110 (CFM) N647AV AVSA Leasing 2 Avianca P. - sale & lease-back on del26-Sep-08 E2039 BAE SYSTEMS (HS) 146 200 ZS- Mouritzen Family Trust Allegiance Air Purchased - parked26-Sep-08 20627 Boeing 727 200F (M) Adv. (S3 Hsk) 5N- Associated Aviation Associated Aviation Purchased - parked26-Sep-08 20838 Boeing 727 200F (M) Adv. (S3 Hsk) N196AJ Zengeneh A. Cons. Inc Z. A. Consulting Inc Purchased - parked26-Sep-08 483 Airbus A310 300 (GE) C-GTSW Air Transat Air Transat Purchased - parked26-Sep-08 34152 Boeing 737 (NG) 800 Wingl. C-GJWS Undis. Bank / Broker / Lessor WestJet P. - subject to existing lease26-Sep-08 49702 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N957U African Holding Co of America Inc Af. Hldg Co of America Inc Purchased - parked26-Sep-08 30772 Boeing 737 (NG) BBJ1 N315TS Tudor-Saliba Corp Tudor-Saliba Corp P. off lse/fin. term comp.26-Sep-08 19000113 Embraer 190 LR F-HBLD Aldus Portfolio Leasing Ltd Regional P. - subject to existing lease27-Sep-08 19 Saab 2000 08-019 Pakistan Air Force Pakistan Air Force Purchased - parked27-Sep-08 374 Airbus A340 310 (CFM) 4R-ADF ETA Ascon Star Group SriLankan Airlines P. - subject to existing lease29-Sep-08 574 Airbus A320 210 (CFM) HB-IJH Undis. Bank / Broker / Lessor Swiss P. - subject to existing lease29-Sep-08 28288 Boeing 737 (NG) 600 LN-RRO SAS Struktur Skand Kommanditbolag SAS P. - subject to existing lease29-Sep-08 28311 Boeing 737 (NG) 600 LN-RRP SAS Struktur Skand Kommanditbolag SAS P. - subject to existing lease29-Sep-08 28309 Boeing 737 (NG) 600 LN-RRR SAS Struktur Skand Kommanditbolag SAS P. - subject to existing lease29-Sep-08 28315 Boeing 737 (NG) 700 LN-RNN SAS Struktur Skand Kommanditbolag SAS P. - subject to existing lease29-Sep-08 30192 Boeing 737 (NG) 700 LN-RPJ SAS SAS P. off lse/fin. term comp.29-Sep-08 TC-383 Fairchild (Swearingen) Metro II VH-SSV BES Operations Pty Ltd Skypac Aviation Pty Ltd P. - subject to existing lease29-Sep-08 929 BAE SYSTEMS (Jetstream) Jetstream 31 Super C-GINL 1300119 Alberta Ltd 1300119 Alberta Ltd Purchased30-Sep-08 29029 Boeing 777 200 (P&W) JA705A ANA - All Nippon Airways ANA - All Nippon Airways P. off lse/fin. term comp.30-Sep-08 23548 Boeing 747 200B (P&W) 5N-DKB Kabo Air Kabo Air Purchased - parked30-Sep-08 24736 Boeing 767 200ER (GE) JY-JAI Jordan Aviation Jordan Aviation Purchased - parked30-Sep-08 26938 Boeing 777 200ER (P&W) N786UA E.L.F. Leasing One LLC United Airlines P. - sale & lease-back30-Sep-08 23145 Boeing 767 200PC (GE) N795AX 767 Aircraft One LLC ABX Air P. - sale & lease-back30-Sep-08 826 Airbus A320 230 (IAE) N445UA E.L.F. Leasing One LLC Ted P. - subject to existing lease30-Sep-08 1538 Airbus A320 230 (IAE) N479UA E.L.F. Leasing One LLC Ted P. - sale & lease-back30-Sep-08 948 Airbus A330 240 (RR) N948AC ACG Acquisition (Cayman) 948 Ltd Avianca P. - sale & lease-back on del30-Sep-08 25002 Boeing 737 (CFMI) 500 N902UA AAR Aircraft Sales & Leasing AAR Aircraft Sales & Leasing Purchased - parked30-Sep-08 30826 Boeing 737 (NG) 800 Wingl. EI-ECD Airspeed Ireland Leasing 18 Ltd RBS Aviation Capital P. - subj. to exist. lease - pkd01-Oct-08 804 Airbus A319 130 (IAE) N808UA E.L.F. Leasing One LLC United Airlines P. - subject to existing lease01-Oct-08 1573 Airbus A319 130 (IAE) N843UA E.L.F. Leasing One LLC United Airlines P. - sale & lease-back01-Oct-08 22086 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) C6-BGK Avcorp Int/l Inc Avcorp Int/l Inc Purchased - parked01-Oct-08 613 Airbus A320 230 (IAE) N435UA E.L.F. Leasing One LLC United Airlines P. - sale & lease-back01-Oct-08 1891 Airbus A320 230 (IAE) N550JB VGS Blue Limited Volito Aviation AB Purchased - parked01-Oct-08 19000218 Embraer 190 AR VH-ZPK VBNC9 Pty Ltd Virgin Blue Airlines P. - sale & lease-back on del01-Oct-08 17000255 Embraer 170 LR VH-ZHF VBNC9 Pty Ltd Virgin Blue Airlines P. - sale & lease-back on del02-Oct-08 759 Airbus A319 130 (IAE) N804UA E.L.F. Leasing One LLC United Airlines P. - subject to existing lease02-Oct-08 798 Airbus A319 130 (IAE) N807UA E.L.F. Leasing One LLC United Airlines P. - subject to existing lease02-Oct-08 164 Bombardier (de Havilland) DHC-6 Twin Otter 200 VH-XFM Southern Cross Aircraft Eng. Svcs Southern Cross A/c Eng. Svcs Purchased - parked02-Oct-08 30232 Boeing 757 200 (RR) SX-RFA GainJet Aviation S.A. GainJet Aviation S.A. Purchased - parked02-Oct-08 949 Airbus A330 220 (P&W) PT-MVO TMF Interlease Aviation II TAM Linhas Aereas P. - sale & lease-back on del02-Oct-08 DC-888B Fairchild (Swearingen) Metro 23 N332AJ PC Air Charter Inc PC Air Charter Inc Purchased - parked02-Oct-08 834 Airbus A320 230 (IAE) N446UA E.L.F. Leasing One LLC Ted P. - subject to existing lease02-Oct-08 23704 Boeing 737 (CFMI) 300 N518AU GECAS Asset Management Svcs GECAS Asset Mgmt Svcs Purchased - parked

Aircraft transactions — 18 September 2008 to 02 October 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




02-Oct-08 28273 Boeing 777 300 (P&W) JA753A ANA - All Nippon Airways ANA - All Nippon Airways P. off lse/fin. term comp.03-Oct-08 21991 Boeing 747 200B (P&W) N633US N633US LLC N633US LLC Purchased - parked03-Oct-08 110 ATR ATR 42 300 YV LTA - Linea Turistica Aereotuy CA LTA - Linea Turistica Aer. CA Purchased03-Oct-08 206 ATR ATR 42 300 YV LTA - Linea Turistica Aereotuy CA LTA - Linea Turistica Aer. CA Purchased03-Oct-08 145728 Embraer ERJ-135 LR N202CP LuxAviation Inc LuxAviation Inc Purchased03-Oct-08 145726 Embraer ERJ-135 LR N201CP LuxAviation Inc LuxAviation Inc Purchased03-Oct-08 145728 Embraer ERJ-135 LR N202CP Luxos Corp Luxos Corp Purchased03-Oct-08 145726 Embraer ERJ-135 LR N201CP Luxos Corp Luxos Corp Purchased03-Oct-08 965 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N965AE J & E Aircraft Co J & E Aircraft Co Purchased - parked06-Oct-08 197 Gulfstream Aerospace Gulfstream I N520JG MK Airlines MK Airlines Purchased - parked06-Oct-08 120202 Embraer EMB-120 Brasilia N268AS Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked06-Oct-08 22371 Boeing 737 (JT8D) 200 Adv. ZS-SGE Star Air Cargo Star Air Cargo Purchased - parked06-Oct-08 23154 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N823AL Skybus LLC Skybus LLC Purchased - parked06-Oct-08 309 ATR ATR 72 210 N308AE AMR Leasing Corp Executive Airlines P. off lse/fin. term comp.06-Oct-08 23800 Boeing 737 (CFMI) 300 N253DV Mirage Aviation Ltd Mirage Aviation Ltd Purchased - parked06-Oct-08 45874 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N929AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back06-Oct-08 47074 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N937AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47325 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N949AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47403 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N924AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47528 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N943AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47147 Boeing (McDonnell-Douglas) DC-9 32CF (St3 Hsk) N905AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back06-Oct-08 47427 Boeing (McDonnell-Douglas) DC-9 32LWF (St3 Hsk) N903AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back06-Oct-08 47201 Boeing (McDonnell-Douglas) DC-9 32PC (M) (St3 Hsk) N939AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47258 Boeing (McDonnell-Douglas) DC-9 32PC (M) (St3 Hsk) N984AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47392 Boeing (McDonnell-Douglas) DC-9 32PC (M) (St3 Hsk) N928AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47273 Boeing (McDonnell-Douglas) DC-9 32PC (M) (St3 Hsk) N981AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 47413 Boeing (McDonnell-Douglas) DC-9 33F (St3 Hsk) N935AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back06-Oct-08 47291 Boeing (McDonnell-Douglas) DC-9 33F (St3 Hsk) N933AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back06-Oct-08 47462 Boeing (McDonnell-Douglas) DC-9 33RC (St3 Hsk) N934AX DHL Network Operations (USA) Inc ABX Air P. - sale & lse-back - parked06-Oct-08 25005 Boeing 737 (CFMI) 500 N905UA AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked06-Oct-08 34480 Boeing 737 (NG) 700 Wingl. C-GBEJ Enerjet Enerjet Purchased - parked06-Oct-08 AT-464 Fairchild (Swearingen) Metro Merlin IVC YV Intermaki Corp Intermaki Corp Purchased07-Oct-08 23045 Boeing 737 (JT8D) 200 Adv. N824AL Air Carrier Accessory Service Air Carrier Accessory Service Purchased - parked07-Oct-08 4036 Bombardier (de Havilland) Dash 8 400 LN-RDO SAS SAS P. off lse/fin. term comp. - pkd08-Oct-08 3663 Airbus A319 130 (IAE) CC-CYE Loica Leasing Ltd LAN Airlines P. - sale & lease-back on del08-Oct-08 UE-263 Hawker Beechcraft 1900 D ZS-SGH National Airways Corporation National Airways Corporation Purchased08-Oct-08 120054 Embraer EMB-120 Brasilia ER VH-NIF Network Aviation Australia Network Aviation Australia P. off lse/fin. term comp.09-Oct-08 2045 BAE SYSTEMS (HS) ATP SE-MAL European Turboprop Management AB NEX Time Jet AB P. - subj. to exist. lease - pkd09-Oct-08 3671 Airbus A319 130 (IAE) CC-CYF Loica Leasing Ltd LAN Airlines P. - sale & lease-back on del09-Oct-08 469 ATR ATR 72 210 XY- Phoenix Aircraft Leasing PTE Ltd Air Mandalay P. - subject to existing lease09-Oct-08 3624 Airbus A320 230 (IAE) XA-VOM Amentum Capital Ltd. Volaris P. - sale & lease-back on del09-Oct-08 24633 Boeing 737 (CFMI) 300 YV2557 Conviasa Conviasa Purchased09-Oct-08 348 ATR ATR 42 300 PK-KSI Kalstar Kalstar Purchased09-Oct-08 4212 Bombardier (de Havilland) Dash 8 400 LN-WDV Fly 108 Ltd Wideroe P. - subject to existing lease09-Oct-08 49278 Boeing (McDonnell-Douglas) MD-80 82 (MDC) UR-WRE Wind Rose Aviation Company Wind Rose Aviation Comp. P. off lse/fin. term comp.09-Oct-08 19000216 Embraer 190 AR N968UW US Airways US Airways P. off lse/fin. term comp.09-Oct-08 19000216 Embraer 190 AR N968UW PM Ltd US Airways P. - sale & lease-back on del10-Oct-08 3635 Airbus A318 120 (P&W) CC-CZR Loica Leasing Ltd LAN Airlines P. - sale & lease-back on del10-Oct-08 829 ATR ATR 72 500 F-OIQT Coviro 4 SAS Air Tahiti P. - sale & lease-back on del13-Oct-08 41067 BAE SYSTEMS (Jetstream) Jetstream 41 HK-4585X Easyfly Easyfly Purchased - parked14-Oct-08 49907 Boeing (McDonnell-Douglas) MD-80 81 JA8296 JALUX Inc JALUX Inc Purchased - parked14-Oct-08 49907 Boeing (McDonnell-Douglas) MD-80 81 N228RF Tiger Aircraft Trading Inc Tiger Aircraft Trading Inc Purchased - parked14-Oct-08 49787 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N110HM AFS Investments 52 LLC American Airlines P. - subject to existing lease14-Oct-08 13383 Boeing (McDonnell-Douglas) DC-3 BT-67 C-GJKB Kenn Borek Air Kenn Borek Air Purchased14-Oct-08 145237 Embraer ERJ-145 EP UR- Dniproavia Dniproavia Purchased - parked15-Oct-08 20126 Fokker 50 YL-BAU Largus Aviation AB airBaltic P. - subject to existing lease15-Oct-08 20149 Fokker 50 YL-BAR Largus Aviation AB airBaltic P. - subject to existing lease15-Oct-08 20148 Fokker 50 YL-BAW Largus Aviation AB airBaltic P. - subject to existing lease15-Oct-08 24419 Boeing 757 200 (P&W) N657DL Undis. Bank / Broker / Lessor Delta Air Lines P. - subject to existing lease15-Oct-08 23208 Boeing 757 200 (P&W) N520US Northwest Airlines Northwest Airlines P. off lse/fin. term comp.15-Oct-08 22972 Boeing 767 200 (P&W) 4X-EAA TransGlobal Airways TransGlobal Airways Purchased15-Oct-08 20220 Boeing 737 (JT8D) 200QC 9Q-CGJ GTRA Airways GTRA Airways Purchased - parked15-Oct-08 3648 Airbus A320 210 (CFM) PK-AXC Doric Select Indonesia AirAsia P. - sale & lease-back on del15-Oct-08 338 Airbus A320 230 (IAE) EI-DRG GA Telesis LLC MyAir P. - subject to existing lease15-Oct-08 23303 Boeing 737 (CFMI) 300 YA-HSB Safi Airways Safi Airways Purchased - parked15-Oct-08 23302 Boeing 737 (CFMI) 300 YA-SFL Safi Airways Safi Airways Purchased - parked15-Oct-08 24018 Boeing 747 300 (P&W) HS-UTS Orient Thai Airlines Orient Thai Airlines Purchased - parked15-Oct-08 549 ATR ATR 42 500 OY-RTH Phoenix Aircraft Leasing PTE Ltd Phoenix A/c Leasing PTE Ltd Purchased - parked15-Oct-08 53212 Boeing (McDonnell-Douglas) MD-80 87 EC-FHD Tiger Aircraft Trading Inc Tiger Aircraft Trading Inc Purchased - parked15-Oct-08 49887 Boeing (McDonnell-Douglas) MD-80 88 N956DL SVMF 15 LLC Delta Air Lines P. - subject to existing lease15-Oct-08 188 Saab 340 B OK-CCO Central Connect Airlines Central Connect Airlines Purchased - parked15-Oct-08 230 Saab 340 B OK-CCN Central Connect Airlines Central Connect Airlines Purchased - parked15-Oct-08 853 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP VH-OAB De Bruin Aviation Pty Limited De Bruin Air Pty Limited Purchased - parked15-Oct-08 851 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP VH-OAE De Bruin Aviation Pty Limited De Bruin Air Pty Limited Purchased - parked15-Oct-08 859 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP VH-OAM De Bruin Aviation Pty Limited De Bruin Air Pty Limited Purchased - parked16-Oct-08 151 Bombardier (de Havilland) Dash 8 100 VH-XFU Skippers Aviation Skippers Aviation P. off lse/fin. term comp.16-Oct-08 52 Bombardier (de Havilland) Dash 8 100 VH-XFT Skippers Aviation Skippers Aviation P. off lse/fin. term comp.16-Oct-08 164 Bombardier (de Havilland) DHC-6 Twin Otter 200 VH-XFM Fortescue Metals Group Fortescue Metals Group Purchased - parked16-Oct-08 22531 Boeing 737 (JT8D) 200 Adv. N103AG Aergo Capital Ltd Aergo Capital Ltd Purchased - parked16-Oct-08 DC-884B Fairchild (Swearingen) Metro 23 VH-WBQ Skippers Aviation Skippers Aviation P. off lse/fin. term comp.16-Oct-08 646 Airbus A310 300F (GE) TC-LER Kuzu Airlines Cargo Kuzu Airlines Cargo Purchased16-Oct-08 34195 Boeing 737 (NG) 800 Wingl. VH-VZA QF BNP 2008-1 Pty Ltd Qantas P. - sale & lease-back16-Oct-08 34197 Boeing 737 (NG) 800 Wingl. VH-VZC QF BNP 2008-1 Pty Ltd Qantas P. - sale & lease-back on del16-Oct-08 34198 Boeing 737 (NG) 800 Wingl. VH-VZD QF BNP 2008-1 Pty Ltd Qantas P. - sale & lease-back on del16-Oct-08 34199 Boeing 737 (NG) 800 Wingl. VH-VZE QF BNP 2008-1 Pty Ltd Qantas P. - sale & lease-back on del16-Oct-08 34196 Boeing 737 (NG) 800 Wingl. VH-VZB QF BNP 2008-1 Pty Ltd Qantas P. - sale & lease-back on del16-Oct-08 49980 Boeing (McDonnell-Douglas) MD-80 88 N961DL Undis. Bank / Broker / Lessor Delta Air Lines P. - subject to existing lease16-Oct-08 49979 Boeing (McDonnell-Douglas) MD-80 88 N960DL Undis. Bank / Broker / Lessor Delta Air Lines P. - subject to existing lease16-Oct-08 49976 Boeing (McDonnell-Douglas) MD-80 88 N957DL Undis. Bank / Broker / Lessor Delta Air Lines P. - subject to existing lease

Aircraft transactions — 02 October 2008 to 16 October 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



16-Oct-08 293 Saab 340 B VH-ORX Rex - Regional Express Rex - Regional Express P. off lse/fin. term comp..16-Oct-08 303 Saab 340 B VH-PRX Rex - Regional Express Rex - Regional Express P. off lse/fin. term comp.16-Oct-08 290 Saab 340 B VH-KRX Rex - Regional Express Rex - Regional Express P. off lse/fin. term comp.16-Oct-08 291 Saab 340 B VH-NRX Rex - Regional Express Rex - Regional Express P. off lse/fin. term comp.16-Oct-08 UE-91 Hawker Beechcraft 1900 D ZS-SEM Awesome Flight Logistics (Pty) Ltd Awesome Flight Svcs Purchased - parked16-Oct-08 120045 Embraer EMB-120 Brasilia ER VH-XUA Skippers Aviation Skippers Aviation P. off lse/fin. term comp.16-Oct-08 19000213 Embraer 195 LR G-FBEN SkyClass 52 GmbH & Co KG Flybe P. - sale & lease-back on del17-Oct-08 23225 Boeing 737 (JT8D) 200 Adv. N836AL Pro Flight Int/l INC Pro Flight Int/l INC Purchased - parked17-Oct-08 557 Bombardier (de Havilland) DHC-6 Twin Otter 300 C-FWVV BBS Aircraft Inc BBS Aircraft Inc Purchased - parked17-Oct-08 4220 Bombardier (de Havilland) Dash 8 400 G-ECOG HEH Avn Newcastle Beteiligungs Gmbh Flybe P. - sale & lease-back on del17-Oct-08 28282 Boeing 747 400D (GE) N483YR Undis. Bank / Broker / Lessor Undis. Bank / Broker / LessorPurchased - parked17-Oct-08 825 ATR ATR 72 500 VT-JCN Constellation Aircraft Leasing Ltd Jet Airways P. - sale & lease-back on del17-Oct-08 53016 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N968AS DANA Airlines DANA Airlines Purchased - parked17-Oct-08 49978 Boeing (McDonnell-Douglas) MD-80 88 N959DL SVMF 21 LLC Delta Air Lines P. - subject to existing lease17-Oct-08 49885 Boeing (McDonnell-Douglas) MD-80 88 N954DL SVMF 13 LLC Delta Air Lines P. - subject to existing lease17-Oct-08 7351 Bombardier (Canadair) CRJ Regional Jet Challenger 800 N387AA Aero Toy Store LLC Aero Toy Store LLC Purchased17-Oct-08 7351 Bombardier (Canadair) CRJ Regional Jet Challenger 800 VP-BCI Global 9017 Ltd Global 9017 Ltd Purchased17-Oct-08 UE-399 Hawker Beechcraft 1900 D N854CA Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked17-Oct-08 UE-401 Hawker Beechcraft 1900 D N840CA Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked17-Oct-08 UE-405 Hawker Beechcraft 1900 D N856CA Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked19-Oct-08 7428 Bombardier (Canadair) CRJ Regional Jet 200ER N403CA Comair Comair P. off lse/fin. term comp.19-Oct-08 7420 Bombardier (Canadair) CRJ Regional Jet 200ER N821CA Comair Comair P. off lse/fin. term comp.20-Oct-08 E2092 BAE SYSTEMS (HS) 146 200 N SkyQuest Int/l LLC SkyQuest Int/l LLC Purchased - parked20-Oct-08 E2092 BAE SYSTEMS (HS) 146 200 C-FBAE Tronosjet Maintenance Inc Tronosjet Maintenance Inc Purchased - parked20-Oct-08 807 Airbus A320 210 (CFM) N355NW Northwest Airlines Northwest Airlines P. off lse/fin. term comp.20-Oct-08 549 ATR ATR 42 500 N366FM CSI Aviation Svcs CSI Aviation Svcs Purchased - parked20-Oct-08 49886 Boeing (McDonnell-Douglas) MD-80 88 N955DL SVMF 14 LLC Delta Air Lines P. - subject to existing lease21-Oct-08 459 General Dynamics (Convair) 580 (SCD) XA- Unconf. Mexican Operator Unconf. Mexican Operator Purchased - parked21-Oct-08 E2079 BAE SYSTEMS (HS) 146 200 G-MIMA Queenco Leisure Ltd Queenco Leisure Ltd Purchased - parked21-Oct-08 E3209 BAE SYSTEMS (HS) 146 300 G-JEBG Royal Bank of Scotland plc Royal Bank of Scotland plc Purchased - parked21-Oct-08 E3202 BAE SYSTEMS (HS) 146 300 G-JEBF Royal Bank of Scotland plc Royal Bank of Scotland plc Purchased - parked21-Oct-08 958 Airbus A330 340 (RR) B-6502 CDB Leasing Company China Southern Airlines P. - sale & lease-back on del21-Oct-08 UE-99 Hawker Beechcraft 1900 D N99YV Skyline Enterprise Corp Skyline Enterprise Corp Purchased - parked22-Oct-08 3013 Bombardier (Shorts) 330 200 N330SB Corporate Air Corporate Air P. off lse/fin. term comp.22-Oct-08 562 Airbus A320 210 (CFM) HB-IJF Undis. Bank / Broker / Lessor Swiss P. - subject to existing lease22-Oct-08 DC-851B Fairchild (Swearingen) Metro 23 VH-HWR A.B.G.O. Pty Ltd Sharp Aviation Pty Ltd P. - subject to existing lease22-Oct-08 49273 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N276AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49300 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N288AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49272 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N275AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49292 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N269AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49297 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N285AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49298 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N286AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49167 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N216AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49172 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N221AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49174 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N224AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49175 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N225AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49161 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N210AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 49155 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N205AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked22-Oct-08 AC-731 Fairchild (Swearingen) Metro III N2728G CBG LLC Key Lime Air P. - subject to existing lease23-Oct-08 3137 Fairchild/Dornier 328JET N328BH BR Dojet 3137 LLC et al BR Dojet 3137 LLC et al Purchased - parked23-Oct-08 3137 Fairchild/Dornier 328JET N328BH Trident Aviation Svcs Trident Aviation Svcs Purchased - parked23-Oct-08 22490 Boeing 727 200 Adv. (St3 Hsk) N683CA CSDS Aircraft Sales & Leasing CSDS A/c Sales & Leasing Purchased - parked23-Oct-08 22021 Boeing 727 200 Adv. (St3 Hsk) N686CA CSDS Aircraft Sales & Leasing CSDS A/c Sales & Leasing Purchased - parked23-Oct-08 22924 Boeing 727 200F RE Advanced N358PZ FedEx FedEx P. off lse/fin. term comp. - pkd23-Oct-08 22934 Boeing 727 200F RE Advanced N3588W FedEx FedEx P. off lse/fin. term comp. - pkd23-Oct-08 792 ATR ATR 72 500 OH-ATJ Undis. Bank / Broker / Lessor FinnComm Airlines P. - sale & lease-back on del24-Oct-08 4221 Bombardier (de Havilland) Dash 8 400 G-ECOH HEH Aviation Liverpool Beteiligungs Flybe P. - sale & lease-back on del24-Oct-08 549 ATR ATR 42 500 N366FM US Department of Justice US Department of Justice Purchased - parked24-Oct-08 120281 Embraer EMB-120 Brasilia ER N215SW N215SW LLC SkyWest Airlines P. - sale & lease-back25-Oct-08 590 ATR ATR 72 500 F-OHJT Blue Lane Sybille Lts Blue Lane Sybille Lts Purchased - parked26-Oct-08 26551 Boeing 747 400 (P&W) 4X-ELE El Al El Al Purchased - parked27-Oct-08 11558 Fokker 70 PH-KZW KLM cityhopper KLM cityhopper Purchased - parked27-Oct-08 22134 Boeing 737 (JT8D) 200 Adv. N234AG Aergo Capital Ltd Aergo Capital Ltd Purchased - parked27-Oct-08 22121 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N212AG Aergo Leasing 115 Ltd Aergo Capital Ltd Purchased - parked27-Oct-08 1300 Airbus A320 230 (IAE) N461TA Air Mart Capital LLC Air Mart Capital LLC Purchased - parked27-Oct-08 28649 Boeing 737 (NG) 600 N649MT US Air Force US Air Force Purchased - parked27-Oct-08 19000220 Embraer 190 AR VH-ZPL VBNC9 Pty Ltd Virgin Blue Airlines P. - sale & lease-back on del27-Oct-08 10004 Bombardier (Canadair) CRJ700 Regional JetChallenger 870 N1RL Indianapolis Motor Speedway LLC Indycar Aviation LLC P. - subject to existing lease27-Oct-08 10004 Bombardier (Canadair) CRJ700 Regional JetChallenger 870 N1RL Brickyard Investments Inc Indycar Aviation LLC P. - subject to existing lease27-Oct-08 10004 Bombardier (Canadair) CRJ700 Regional JetChallenger 870 N1RL Indianapolis Motor Speedway LLC Indycar Aviation LLC P. - subject to existing lease27-Oct-08 10004 Bombardier (Canadair) CRJ700 Regional JetChallenger 870 N1RL Indycar Aviation LLC Indycar Aviation LLC P. off lse/fin. term comp.28-Oct-08 324 Bombardier (de Havilland) Dash 8 100 C-GECN Air North Air North Purchased28-Oct-08 26272 Boeing 757 200 (P&W) N805AM Unconf. Corporate Operator Unconf. Corporate Operator Purchased - parked28-Oct-08 53039 Boeing (McDonnell-Douglas) MD-80 87 N826TH Grandmax Group Ltd Grandmax Group Ltd P. off lse/fin. term comp. - pkd28-Oct-08 67 Saab 340 A N712MG Western Air Western Air Purchased - parked28-Oct-08 67 Saab 340 A N712MG Avtran LLC Western Air P. - sale & lse-back - parked28-Oct-08 977 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP SE-LXD Largus Aviation AB Largus Aviation AB Purchased - parked29-Oct-08 7163 Bombardier (Canadair) CRJ Regional Jet 100ER C-FWPO Flying Colours Corp Flying Colours Corp Purchased - parked29-Oct-08 500 Bombardier (de Havilland) Dash 8 200 N355PH Win Win Svcs LLC Win Win Svcs LLC Purchased - parked29-Oct-08 24757 Boeing 767 200ER (GE) JY-JAG Jordan Aviation Jordan Aviation Purchased - parked29-Oct-08 145728 Embraer ERJ-135 LR N135SZ United Aviation United Aviation Purchased30-Oct-08 2023 BAE SYSTEMS (HS) ATP SE-LLO European Turboprop Management AB West Air Sweden P. off lse/fin. term comp. - pkd30-Oct-08 502 Bombardier (de Havilland) Dash 8 200 N356PH Win Win Svcs LLC Win Win Svcs LLC Purchased - parked30-Oct-08 476 Bombardier (de Havilland) DHC-6 Twin Otter 300 N476R Gum Air Gum Air Purchased - parked30-Oct-08 476 Bombardier (de Havilland) DHC-6 Twin Otter 300 N476R SNJ Resources Inc Gum Air P. - sale & lse-back - parked30-Oct-08 30240 Boeing 737 (NG) 700 N240CL Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked30-Oct-08 28387 Boeing 737 (NG) 800 EC-HJQ Undis. Bank / Broker / Lessor Air Europa P. - subject to existing lease30-Oct-08 20103 Fokker 50 Bulk Freighter SE-LJV Undis. Bank / Broker / Lessor Amapola Flyg AB Purchased - parked30-Oct-08 7351 Bombardier (Canadair) CRJ Regional Jet Challenger 800 N387AA Asia Aviation Holding Ltd Asia Aviation Holding Ltd Purchased

Aircraft transactions — 16 October 2008 to 30 October 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




31-Oct-08 41079 BAE SYSTEMS (Jetstream) Jetstream 41 HK-4596X Easyfly Easyfly Purchased - parked31-Oct-08 27732 Boeing 777 200 (RR) HS-TJG Thai Airways Int/l Thai Airways Int/l P. off lse/fin. term comp.31-Oct-08 3664 Airbus A320 210 (CFM) N664AV AVSA Leasing 3 Avianca P. - sale & lease-back on del31-Oct-08 1026 Airbus A320 210 (CFM) HB-IHZ Swiss Edelweiss Air P. - subject to existing lease31-Oct-08 947 Airbus A320 210 (CFM) HB-IHY Swiss Edelweiss Air P. - subject to existing lease31-Oct-08 942 Airbus A320 210 (CFM) HB-IHX Swiss Edelweiss Air P. - subject to existing lease31-Oct-08 23774 Boeing 737 (CFMI) 300 G-CFOD CIT Capital Aviation (UK) Ltd CIT Aerospace Purchased - parked31-Oct-08 28272 Boeing 777 300 (P&W) JA751A ANA - All Nippon Airways ANA - All Nippon Airways P. off lse/fin. term comp.31-Oct-08 145642 Embraer ERJ-135 Legacy 600 N642AG Fifth Third Leasing Co Swift Air P. - subject to existing lease31-Oct-08 19000172 Embraer 195 LR 4X-EMA Arkia Arkia Purchased03-Nov-08 715 Bombardier (de Havilland) DHC-6 Twin Otter300 F-OIQP Air Moorea Air Moorea Purchased - parked03-Nov-08 UE-183 Hawker Beechcraft 1900 D HK- Aerolet Aerolet Purchased - parked03-Nov-08 UE-396 Hawker Beechcraft 1900 D VH-XDY Peter Collins Holdings (Pty) Ltd West Wing Aviation (Pty) LtdPurchased - parked04-Nov-08 24017 Boeing 757 200 (RR) N913FD FedEx FedEx Purchased - parked04-Nov-08 23225 Boeing 737 (JT8D) 200 Adv. YV Sundance Air (Venezuela) Sundance Air (Venezuela) Purchased - parked04-Nov-08 25898 Boeing 757 200SF (RR) VT- European Air Transport Blue Dart Aviation Purchased - parked04-Nov-08 451 Bombardier (de Havilland) DHC-6 Twin Otter 300 C-FTSU Alberta Central Airways Alberta Central Airways Purchased04-Nov-08 22547 Boeing 747 SP (P&W) N4508H NASA NASA Purchased - parked05-Nov-08 7457 Bombardier (Canadair) CRJ Regional Jet 200LR N655BR Trust N693BR Trust N693BR Purchased - parked05-Nov-08 7454 Bombardier (Canadair) CRJ Regional Jet 200LR N654BR Trust N693BR Trust N693BR Purchased - parked06-Nov-08 3668 Airbus A320 230 (IAE) VH-VQC Wombat 3668 Leasing Pty Ltd Jetstar P. - sale & lease-back on del06-Nov-08 48116 Boeing (McDonnell-Douglas) DC-9 31 (St3 Hsk) N367MN Orion Airlines LLC Orion Airlines LLC Purchased - parked06-Nov-08 48117 Boeing (McDonnell-Douglas) DC-9 31 (St3 Hsk) N367LN Orion Airlines LLC Orion Airlines LLC Purchased - parked06-Nov-08 48132 Boeing (McDonnell-Douglas) DC-9 32 (St3 Hsk) N367RN Orion Airlines LLC Orion Airlines LLC Purchased - parked06-Nov-08 48133 Boeing (McDonnell-Douglas) DC-9 32 (St3 Hsk) N367PN Orion Airlines LLC Orion Airlines LLC Purchased - parked06-Nov-08 49264 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N14810 Global Aircraft Solutions Inc Global A/c Leasing PartnersPurchased - parked06-Nov-08 1038 Lockheed L-188 Electra AF N344HA Zia Turbopower Inc Zia Turbopower Inc Purchased - parked06-Nov-08 1053 Lockheed L-188 Electra AF N343HA Zia Turbopower Inc Zia Turbopower Inc Purchased - parked06-Nov-08 1043 Lockheed L-188 Electra AF N346HA Zia Turbopower Inc Zia Turbopower Inc Purchased - parked06-Nov-08 33046 Boeing (McDonnell-Douglas) DC-3 BT-67 N707BA US Department of State US Department of State Purchased06-Nov-08 1133 Lockheed L-188 Electra CF N290F Zia Turbopower Inc Zia Turbopower Inc Purchased - parked06-Nov-08 1084 Lockheed L-188 Electra CF N282F Zia Turbopower Inc Zia Turbopower Inc Purchased - parked06-Nov-08 1109 Lockheed L-188 Electra CF N340HA Zia Turbopower Inc Zia Turbopower Inc Purchased - parked06-Nov-08 1146 Lockheed L-188 Electra CF N286F Zia Turbopower Inc Zia Turbopower Inc Purchased - parked07-Nov-08 3691 Airbus A319 110 (CFM) N691AV AVSA Leasing 4 Avianca P. - sale & lease-back on del07-Nov-08 1743 Airbus A319 110 (CFM) N907FR VTB-Leasing VTB-Leasing Purchased - parked07-Nov-08 1868 Airbus A320 230 (IAE) CS-TFY Volito Aviation AB Volito Aviation AB Purchased - parked07-Nov-08 23774 Boeing 737 (CFMI) 300 N473CT CIT Leasing Corp CIT Aerospace Purchased - parked07-Nov-08 634 Bombardier (de Havilland) DHC-6 Twin Otter300 N933DR Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased07-Nov-08 555 Airbus A300 620R (P&W) N750FD FedEx FedEx Purchased - parked10-Nov-08 24444 Boeing 737 (CFMI) 400 VH-TJS Qantas Qantas P. off lse/fin. term comp.10-Nov-08 760 Airbus A300 600 Freighter (GE) N661FE Undis. Bank / Broker / Lessor FedEx P. - subject to existing lease10-Nov-08 145290 Embraer ERJ-145 EP UR-DNO Dniproavia Dniproavia Purchased - parked10-Nov-08 E2307 BAE SYSTEMS (Avro) RJ Avroliner RJ85 EI-RJY Cityjet Cityjet Purchased - parked11-Nov-08 23902 Boeing 767 200ER (GE) N250AY Aircraft Solutions 27108/27109 LLC US Airways P. - subject to existing lease11-Nov-08 23901 Boeing 767 200ER (GE) N249AU Aircraft Solutions 27108/27109 LLC US Airways P. - subject to existing lease11-Nov-08 26847 Boeing 767 200ER (GE) N256AY Aircraft Solutions 27108/27109 LLC US Airways P. - subject to existing lease11-Nov-08 23900 Boeing 767 200ER (GE) N248AY Aircraft Solutions 27108/27109 LLC US Airways P. - subject to existing lease12-Nov-08 22128 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N128AG Aergo Capital Ltd Aergo Capital Ltd Purchased - parked12-Nov-08 23968 Boeing 747 300 (P&W) 5N-DBM Max Air (Nigeria) Max Air (Nigeria) Purchased12-Nov-08 964 Airbus A330 340 (RR) B-6501 CDB Leasing Company China Southern Airlines P. - sale & lease-back on del12-Nov-08 27725 Boeing 747 400 (GE) HS-TGX Thai Airways Int/l Thai Airways Int/l P. off lse/fin. term comp.12-Nov-08 145663 Embraer ERJ-135 LR N831RP Undis. Bank / Broker / Lessor Chautauqua Airlines P. - sale & lease-back13-Nov-08 47570 Boeing (McDonnell-Douglas) DC-9 32 N367UD Orion Airlines LLC Orion Airlines LLC Purchased - parked13-Nov-08 688 Airbus A300 620R (P&W) N746FD FedEx FedEx Purchased - parked14-Nov-08 26638 Boeing 747 400 (RR) N7716Q Aircraft Financial Leasing Ltd VTB-Leasing Purchased - parked14-Nov-08 25360 Boeing 737 (CFMI) 300 N103VR Universal Asset Management Inc Universal Asset Mgmt Inc Purchased - parked15-Nov-08 19821 Boeing 707 320C (Stage 2 Hks) EX-120 Unconf. Kyrgyzstan Airline Unconf. Kyrgyzstan Airline Purchased15-Nov-08 29599 Boeing 737 (NG) 900 Wingl. PH-BXO Aruba Leasing Ltd KLM Royal Dutch Airlines P. - subject to existing lease15-Nov-08 33695 Boeing 747 400ERF (GE) PH-CKB Dun Laoghaire Ltd KLM Royal Dutch Airlines P. - subject to existing lease15-Nov-08 29132 Boeing 737 (NG) 800 Wingl. PH-BXB Wing Leasing Int/l Co Ltd KLM Royal Dutch Airlines P. - subject to existing lease15-Nov-08 33602 Boeing 737 (NG) 800 Wingl. EI-DPA ORIX Aviation Systems Ltd Ryanair P. - subject to existing lease15-Nov-08 26879 Boeing 747 400 (P&W) EP-MNC Undis. Bank / Broker / Lessor Blue Airways P. - subject to existing lease15-Nov-08 23480 Boeing 747 300 Combi (GE) EP-MNE Undis. Bank / Broker / Lessor Mahan Air P. - subject to existing lease15-Nov-08 24201 Boeing 747 400 Combi (GE) PH-BFE Blue Yonder XII BV KLM Royal Dutch Airlines P. - subject to existing lease15-Nov-08 24383 Boeing 747 400 (P&W) EP-MNA Undis. Bank / Broker / Lessor Blue Airways P. - subject to existing lease15-Nov-08 24201 Boeing 747 400 Combi (GE) PH-BFE KLM Royal Dutch Airlines KLM Royal Dutch Airlines P. off lse/fin. term comp.15-Nov-08 24202 Boeing 747 400 Combi (GE) PH-BFF KLM Royal Dutch Airlines KLM Royal Dutch Airlines P. off lse/fin. term comp.15-Nov-08 33696 Boeing 747 400ERF (GE) PH-CKC Ballsbridge Ltd KLM Royal Dutch Airlines P. - sale & lease-back15-Nov-08 24202 Boeing 747 400 Combi (GE) PH-BFF Blue Yonder XIII BV KLM Royal Dutch Airlines P. - sale & lease-back15-Nov-08 33713 Boeing 777 200ER (GE) PH-BQD Osprey Ltd KLM Royal Dutch Airlines P. - sale & lease-back15-Nov-08 35671 Boeing 777 300ER (GE) PH-BVA Yamasa Co Ltd KLM Royal Dutch Airlines P. - sale & lease-back15-Nov-08 23075 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N303DL Magnum Airdynamics Magnum Airdynamics Purchased - parked15-Nov-08 3575 Airbus A321 230 (IAE) G-TTII Monarch Airlines Monarch Airlines Purchased - parked15-Nov-08 24363 Boeing 747 400 (P&W) EP-MNB Undis. Bank / Broker / Lessor Blue Airways P. - subject to existing lease15-Nov-08 33641 Boeing 737 (NG) 800 Wingl. EI-DPS ORIX Aviation Systems Ltd Ryanair P. - subject to existing lease15-Nov-08 3546 Airbus A321 230 (IAE) G-TTIH Monarch Airlines Monarch Airlines Purchased - parked15-Nov-08 14500997 Embraer ERJ-135 Legacy 600 27-Jan-07 Brazilian Air Force Brazilian Air Force Del. - pur. of usd/demo a/c. 17-Nov-08 3704 Airbus A319 110 (CFM) D-ABGR Deucalion Capital II airberlin P. - subject to existing lease17-Nov-08 45907 Boeing (McDonnell-Douglas) DC-8 71F (M) N707UP Fossco Inc Fossco Inc Purchased - parked17-Nov-08 24673 Boeing 737 (CFMI) 300 N398UA Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked17-Nov-08 49908 Boeing (McDonnell-Douglas) MD-80 81 N908RF Tiger Aircraft Trading Inc Tiger Aircraft Trading Inc Purchased - parked17-Nov-08 49908 Boeing (McDonnell-Douglas) MD-80 81 JA8297 JALUX Inc JALUX Inc Purchased - parked18-Nov-08 14501020 Embraer ERJ-135 Legacy 600 PK-RJO Premiair Premiair Purchased18-Nov-08 22531 Boeing 737 (JT8D) 200 Adv. ZS-GCU Safair Operations Pty Ltd Safair P. - subj. to exist. lease - pkd19-Nov-08 963 Airbus A330 240 (RR) VP-BLX Waha Fleet Leasing 1 Limited Aeroflot Russian Airlines P. - subject to existing lease19-Nov-08 53044 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N835NK Undis. Bank / Broker / Lessor Polaris Holding Company Purchased - parked19-Nov-08 48512 Boeing (McDonnell-Douglas) MD-11 Passenger (GE) N512SU Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked20-Nov-08 3708 Airbus A321 210 (CFM) D-ABCA Hannover Leasing 189 Flight Invest 47 airberlin P. - sale & lease-back on del

Aircraft transactions — 31 October 2008 to 20 November 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



20-Nov-08 8053 Bombardier (Canadair) CRJ Regional Jet Challenger 850 P4-GJL Olpon Aviation A V V Silver Arrows Purchased20-Nov-08 24712 Boeing 737 (CFMI) 300 YV Conviasa Conviasa Purchased20-Nov-08 21704 Boeing 747 200B (P&W) N622US Evergreen Trade Inc Evergreen Trade Inc Purchased - parked20-Nov-08 25280 Boeing 767 300ER (P&W) N202AC Brassbox Ltd Aircastle Advisor LLC Purchased - parked20-Nov-08 32778 Boeing 737 (NG) 800 Wingl. VQ-BBR Atlant Soyuz Airlines Atlant Soyuz Airlines Purchased - parked20-Nov-08 23703 Boeing 737 (CFMI) 300 N517AU GECAS Asset Management Svcs GECAS Asset Mgmt Svcs Purchased - parked20-Nov-08 47517 Boeing (McDonnell-Douglas) DC-9 31 (St3 Hsk) N908H Evergreen Trade Inc Evergreen Trade Inc Purchased - parked20-Nov-08 45790 Boeing (McDonnell-Douglas) DC-9 32 (St3 Hsk) N982US Evergreen Trade Inc Evergreen Trade Inc Purchased - parked20-Nov-08 47432 Boeing (McDonnell-Douglas) DC-9 32 (St3 Hsk) N610NW Evergreen Trade Inc Evergreen Trade Inc Purchased - parked20-Nov-08 47436 Boeing (McDonnell-Douglas) DC-9 32 (St3 Hsk) N612NW Evergreen Trade Inc Evergreen Trade Inc Purchased - parked21-Nov-08 21613 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) N835AL Aerospace Trading LLC Aerospace Trading LLC Purchased - parked21-Nov-08 32779 Boeing 737 (NG) 800 Wingl. VQ-BBS Atlant Soyuz Airlines Atlant Soyuz Airlines Purchased - parked24-Nov-08 24753 Boeing 767 300ER (GE) N753SJ Baxter Aviation Ltd Baxter Aviation Ltd Purchased - parked24-Nov-08 2141 Airbus A320 230 (IAE) RP-C8897 Zest Airways Zest Airways Purchased - parked25-Nov-08 967 Airbus A330 240 (RR) N967CG ACG Acquisition (Cayman) 967 Ltd Avianca P. - sale & lease-back on del25-Nov-08 41 Airbus A320 210 (CFM) N305US AeroTurbine Inc AeroTurbine Inc Purchased - parked26-Nov-08 3156 Fairchild/Dornier 328JET N406FJ Ultimate Jetcharters Inc Ultimate Jetcharters Inc P. off lse/fin. term comp.26-Nov-08 49952 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N995AC Air Transport Acquisition Corp Air Transport Acquis. Corp Purchased - parked26-Nov-08 E2079 BAE SYSTEMS (HS) 146 200 G-MIMA Casino Rodos Casino Rodos Purchased - parked26-Nov-08 3699 Airbus A320 210 (CFM) VP-BME Waha Fleet Leasing 2 Limited Aeroflot Russian Airlines P. - subject to existing lease28-Nov-08 28302 Boeing 737 (NG) 600 HL7781 Eastarjet Eastarjet Purchased28-Nov-08 27036 Boeing 777 200 (P&W) JA706A ANA - All Nippon Airways ANA - All Nippon Airways P. off lse/fin. term comp.28-Nov-08 3651 Airbus A319 110 (CFM) EC-KUB RBS Aviation Capital Iberia P. - subj. to exist. lease - pkd01-Dec-08 145676 Embraer ERJ-135 LR N832RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked01-Dec-08 23549 Boeing 747 200B (P&W) 5N-JRM Kabo Air Kabo Air Purchased - parked01-Dec-08 22147 Boeing 727 200 Adv. (St3 Hsk) N295AS Airlease Int/l Inc Airlease Int/l Inc Purchased - parked01-Dec-08 23293 Boeing 757 200 (RR) N936FD FedEx FedEx Purchased - parked01-Dec-08 21348 Boeing 727 200 Adv. (St3 Hsk) N293AS Airlease Int/l Inc Airlease Int/l Inc Purchased - parked02-Dec-08 E2096 BAE SYSTEMS (HS) 146 200 TN- Mouritzen Family Trust Allegiance Air Purchased - parked03-Dec-08 24623 Boeing 757 200 (P&W) N502UA East Shore Aircraft LLC United Airlines P. - subject to existing lease03-Dec-08 29791 Boeing 737 (NG) BBJ1 P4-KSA Unconf. Saudi Operator Arabasco P. - subject to existing lease03-Dec-08 24763 Boeing 757 200 (P&W) N509UA East Shore Aircraft LLC United Airlines P. - sale & lease-back03-Dec-08 25019 Boeing 757 200 (P&W) N529UA East Shore Aircraft LLC United Airlines P. - sale & lease-back03-Dec-08 25018 Boeing 757 200 (P&W) N528UA East Shore Aircraft LLC United Airlines P. - sale & lease-back03-Dec-08 25130 Boeing 757 200 (P&W) N535UA East Shore Aircraft LLC United Airlines P. - sale & lease-back03-Dec-08 27321 Boeing 737 (CFMI) 500 N33608 BLF Ltd BLF Ltd Purchased - parked04-Dec-08 3727 Airbus A319 110 (CFM) PR-MYB Deucalion Aviation Funds TAM Linhas Aereas P. - subject to existing lease04-Dec-08 24625 Boeing 757 200 (P&W) N504UA East Shore Aircraft LLC United Airlines P. - subject to existing lease04-Dec-08 24839 Boeing 757 200 (P&W) N514UA East Shore Aircraft LLC United Airlines P. - sale & lease-back04-Dec-08 35789 Boeing 737 (NG) 700 Wingl. N317AT MENA Investments MENA Investments Purchased - parked04-Dec-08 33935 Boeing 737 (NG) 700 Wingl. N331AT MENA Investments MENA Investments Purchased - parked05-Dec-08 19000231 Embraer 190 LR VH-SXO AFS Investments 67-F Inc SkyAirWorld Pur. - sale to S.P.C. by lessor on del05-Dec-08 28394 Boeing 777 300 (P&W) JA8942 Japan Airlines Corporation Japan Airlines Int/l P. off lse/fin. term comp.05-Dec-08 24994 Boeing 757 200 (P&W) N526UA East Shore Aircraft LLC United Airlines P. - sale & lease-back05-Dec-08 25367 Boeing 757 200 Wingl. (P&W) N546UA East Shore Aircraft LLC United Airlines P. - sale & lease-back05-Dec-08 24890 Boeing 757 200 (P&W) N520UA East Shore Aircraft LLC United Airlines P. - sale & lease-back05-Dec-08 24931 Boeing 757 200 (P&W) N522UA East Shore Aircraft LLC United Airlines P. - sale & lease-back05-Dec-08 27742 Boeing 767 300ERF (GE) N314UP CC&E I LLC UPS Airlines P. off lse/fin. term comp.05-Dec-08 145687 Embraer ERJ-135 LR N833RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked05-Dec-08 49419 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N419MT AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked05-Dec-08 49515 Boeing (McDonnell-Douglas) MD-80 82 (SAIC) N515HC AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked05-Dec-08 1863 Airbus A319 110 (CFM) N913FR Bakersvalley Partners Corp Bakersvalley Partners Corp Purchased - parked05-Dec-08 1876 Airbus A319 110 (CFM) N916FR Bakersvalley Partners Corp Bakersvalley Partners Corp Purchased - parked05-Dec-08 1876 Airbus A319 110 (CFM) N916FR VL1876 Limited VTB-Leasing Purchased - parked05-Dec-08 1863 Airbus A319 110 (CFM) N913FR VL1863 Limited VTB-Leasing Purchased - parked05-Dec-08 27331 Boeing 737 (CFMI) 500 Wingl. N16618 BLF Ltd BLF Ltd Purchased - parked05-Dec-08 49511 Boeing (McDonnell-Douglas) MD-80 82 (SAIC) N511JZ AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked05-Dec-08 49513 Boeing (McDonnell-Douglas) MD-80 82 (SAIC) N513HC AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked08-Dec-08 14501038 Embraer ERJ-135 Legacy 600 D-AKAT UniCredit Global Leasing Export GmbH KamAvia Handels Gmbh P. - subject to existing lease08-Dec-08 3715 Airbus A320 210 (CFM) PK-AXE Doric Asset Finance & Verwaltungs Indonesia AirAsia P. - sale & lease-back on del08-Dec-08 24860 Boeing 757 200 (P&W) N516UA East Shore Aircraft LLC United Airlines P. - sale & lease-back08-Dec-08 26690 Boeing 757 200 (P&W) N576UA East Shore Aircraft LLC United Airlines P. - sale & lease-back08-Dec-08 22814 Boeing 757 200 (P&W) N607DL AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked08-Dec-08 3137 Fairchild/Dornier 328JET N328BH Dornier 3137 Operating LLC Dornier 3137 Operating LLC Purchased - parked08-Dec-08 28271 Boeing 737 (CFMI) 400SF N211BF Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked08-Dec-08 34 Airbus A320 210 (CFM) N303US AeroTurbine Inc AeroTurbine Inc Purchased - parked08-Dec-08 2723 Airbus A319 130 (IAE) EI-ECY ILFC Ireland Ltd Wind Jet Purchased - parked08-Dec-08 2698 Airbus A319 130 (IAE) EI-ECX ILFC Ireland Ltd ILFC Purchased - parked08-Dec-08 28650 Boeing 737 (NG) 600 N628SR US Air Force US Air Force Purchased - parked08-Dec-08 28334 Boeing 737 (CFMI) 400SF N212BF Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked08-Dec-08 14501038 Embraer ERJ-135 Legacy 600 D-AKAT Kamaz Inc KamAvia Handels Gmbh P. - subject to existing lease09-Dec-08 24627 Boeing 757 200 (P&W) N506UA East Shore Aircraft LLC United Airlines P. - subject to existing lease09-Dec-08 1230 Lockheed L-1011 TriStar 100 N194AT Luis Feliu Tajik Air P. - subject to existing lease09-Dec-08 24871 Boeing 757 200 Wingl. (P&W) N518UA East Shore Aircraft LLC United Airlines P. - sale & lease-back09-Dec-08 E3191 BAE SYSTEMS (HS) 146 300 5A-DKQ Air Libya Air Libya Purchased - parked09-Dec-08 24673 Boeing 737 (CFMI) 300 N398UA Magnolia Investments Magnolia Investments Purchased - parked10-Dec-08 49838 Boeing (McDonnell-Douglas) MD-80 87 5X-UGC Air Uganda Air Uganda Purchased10-Dec-08 28461 Boeing 737 (CFMI) 500 JA8595 NBB Ptarmigan ANK - Air Nippon P. - subject to existing lease10-Dec-08 19000238 Embraer 190 LR XA-IAC Jetscape Inc Aeromexico Connect P. - sale & lease-back on del10-Dec-08 19000234 Embraer 190 LR XA-FAC Jetscape Inc Aeromexico Connect P. - sale & lease-back on del10-Dec-08 29428 Boeing 757 200 Wingl. (RR) N678AN American Airlines American Airlines P. off lse/fin. term comp.10-Dec-08 28307 Boeing 737 (NG) 600 LN-RPF SAS Struktur Gˆta Kommanditbolag SAS P. - sale & lease-back10-Dec-08 30192 Boeing 737 (NG) 700 LN-RPJ SAS Struktur Gˆta Kommanditbolag SAS P. - sale & lease-back10-Dec-08 22818 Boeing 757 200 (P&W) N611DL AAR Parts Trading Inc AAR Parts Trading Inc Purchased - parked10-Dec-08 22020 Boeing 727 200 Adv. (St3 Hsk) N681CA Contrails Capital Inc Contrails Capital Inc Purchased - parked10-Dec-08 29926 Boeing 737 (NG) 800 Wingl. EI-CSM CIT Aerospace Int/l CIT Aerospace Purchased - parked10-Dec-08 27320 Boeing 737 (CFMI) 500 Wingl. N16607 BLF Ltd BLF Ltd Purchased - parked11-Dec-08 145608 Embraer ERJ-135 LR 2561 Brazilian Air Force Brazilian Air Force Purchased11-Dec-08 965 Airbus A330 320 (P&W) F-OONE SNC Arawak 2008 Air Caraibes P. - sale & lease-back on del

Aircraft transactions — 20 November 2008 to 11 December 2008Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




11-Dec-08 23406 Boeing 737 (CFMI) 300 N672SW Aviation Capital Group Aviation Capital Group Purchased - parked11-Dec-08 23406 Boeing 737 (CFMI) 300 N672SW Volvo Aero Svcs Corp Volvo Aero Svcs Corp Purchased - parked11-Dec-08 28927 Boeing 737 (CFMI) 500 N14667 Verulamium Finance Ltd VTB-Leasing Purchased - parked11-Dec-08 45936 Boeing (McDonnell-Douglas) DC-8 73CF N836UP Fossco Inc Fossco Inc Purchased - parked12-Dec-08 29233 Boeing 737 (NG) BBJ1 5R-MRP Government of Madagascar Government of Madagascar Purchased12-Dec-08 976 Airbus A330 200 (GE) VH-EBL CBA Air Pty Ltd Qantas P. - sale & lease-back on del12-Dec-08 27743 Boeing 767 300ERF (GE) N315UP CC&E I LLC UPS Airlines P. off lse/fin. term comp.12-Dec-08 49966 Boeing (McDonnell-Douglas) MD-80 83 (MDC) G-FLTK Safair Lease Finance Safair Lease Finance Purchased - parked12-Dec-08 258 Airbus A320 210 (CFM) 9A-CTF GOAL German Operating A/c Leasing Croatia Airlines P. - subject to existing lease14-Dec-08 53462 Boeing (McDonnell-Douglas) MD-90 30 HB-JIF SAS Struktur Gˆta Kommanditbolag Hello P. - subject to existing lease14-Dec-08 53461 Boeing (McDonnell-Douglas) MD-90 30 HB-JIE SAS Struktur Gˆta Kommanditbolag Hello P. - subject to existing lease14-Dec-08 53460 Boeing (McDonnell-Douglas) MD-90 30 HB-JID SAS Struktur Gˆta Kommanditbolag Hello P. - subject to existing lease15-Dec-08 14500978 Embraer ERJ-135 Legacy 600 A6-MAZ Empire Aviation Group FZCO Empire Aviation Grp FZCO Purchased15-Dec-08 24608 Boeing 757 200 Wingl. (RR) N650AA Undis. Bank / Broker / Lessor American Airlines P. - subject to existing lease15-Dec-08 24610 Boeing 757 200 Wingl. (RR) N652AA Undis. Bank / Broker / Lessor American Airlines P. - subject to existing lease15-Dec-08 637 Airbus A330 300 (GE) A7-AEB Waha Leasing Qatar Airways P. - subject to existing lease15-Dec-08 15 Airbus A380 840 (RR) VH-OQB QF Boc 2008-1 Pty Limited Qantas P. - sale & lease-back on del15-Dec-08 7136 Bombardier (Canadair) CRJ Regional Jet Challenger 800 HB-IDJ Kalong Investments Limited TAG Aviation P. - subject to existing lease15-Dec-08 14500916 Embraer ERJ-135 Legacy 600 OE-IRK Jetalliance Flugbetriebs Jetalliance Flugbetriebs P. off lse/fin. term comp.15-Dec-08 23413 Boeing 747 300 Combi (GE) EP-MND Undis. Bank / Broker / Lessor Mahan Air P. - subject to existing lease15-Dec-08 32780 Boeing 737 (NG) 800 Wingl. VQ-BCM Atlant Soyuz Airlines Atlant Soyuz Airlines Purchased - parked15-Dec-08 22932 Boeing 727 200F RE Advanced N416JC MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked15-Dec-08 33018 Boeing 737 (NG) 800 Wingl. EI-EDL CIT Aerospace Int/l CIT Aerospace Purchased - parked15-Dec-08 23584 Boeing 737 (CFMI) 300 N14346 Continental Airlines Continental Airlines P. off lse/fin. term comp. - pkd15-Dec-08 23585 Boeing 737 (CFMI) 300 N14347 Continental Airlines Continental Airlines P. off lse/fin. term comp. - pkd15-Dec-08 46162 Boeing (McDonnell-Douglas) DC-8 62AF (St3 Hsk) 9G-AED Air Charter Express Air Charter Express Purchased16-Dec-08 145678 Embraer ERJ-135 Legacy 600 N494TG Admiralty Air LLC TAG Aviation USA P. - subject to existing lease16-Dec-08 37704 Boeing 777 300ER (GE) A6-ECL Doric Asset Fin. & Verwaltungs GmbH Emirates Airline P. - sale & lease-back on del16-Dec-08 E2090 BAE SYSTEMS (HS) 146 200 ZS- Mouritzen Family Trust Allegiance Air Purchased - parked17-Dec-08 776 Airbus A300 600R ST Beluga (GE) F-GSTD Airbus Airbus Transport Int/l P. - subject to existing lease17-Dec-08 15207 Bombardier (Canadair) CRJ900 Regional Jet900LR NextGen S5-AAN GOAL V. mbH & Co Projekt Nr33 Adria Airways P. - sale & lease-back on del17-Dec-08 15063 Bombardier (Canadair) CRJ900 Regional Jet900ER C-FXCE World Wide Aircraft Ferrying Ltd World Wide A/c Ferrying Ltd Purchased - parked17-Dec-08 15064 Bombardier (Canadair) CRJ900 Regional Jet900ER C-FXCK World Wide Aircraft Ferrying Ltd World Wide A/c Ferrying Ltd Purchased - parked17-Dec-08 15065 Bombardier (Canadair) CRJ900 Regional Jet900ER C-FXCL World Wide Aircraft Ferrying Ltd World Wide A/c Ferrying Ltd Purchased - parked18-Dec-08 15195 Bombardier (Canadair) CRJ900 Regional Jet900ER NextGen N195PQ Pinnacle Airlines Pinnacle Airlines Del. - pur. of usd/demo a/c.18-Dec-08 22371 Boeing 737 (JT8D) 200 Adv. N371AL AL22371 LLC AL22371 LLC Purchased - parked18-Dec-08 2147 Airbus A320 230 (IAE) N582JB Zest Airways Zest Airways Purchased - parked18-Dec-08 28928 Boeing 737 (CFMI) 500 N14668 Transaero Transaero Purchased - parked18-Dec-08 28928 Boeing 737 (CFMI) 500 N14668 Continental Airlines Purchasing Svcs LLC Continental Airlines Pur. Svcs Purchased - parked18-Dec-08 7283 Bombardier (Canadair) CRJ Regional Jet 200LR C-FXLH Bombardier Inc Bombardier Inc Purchased - parked18-Dec-08 23951 Boeing 737 (CFMI) 300 G-JMCL Atlantic Airlines Atlantic Airlines Purchased - parked18-Dec-08 23520 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) ZS-SHL Star Air Cargo Star Air Cargo Purchased - parked18-Dec-08 23951 Boeing 737 (CFMI) 300 G-JMCL Undis. Bank / Broker / Lessor Atlantic Airlines P. - sale & lse-back - parked18-Dec-08 14501029 Embraer ERJ-135 Legacy 600 S5-ALA Linxair Business Airlines Linxair Business Airlines Del. - pur. of usd/demo a/c.19-Dec-08 14501042 Embraer ERJ-135 Legacy 600 SE-DJG SFS Holding AB EFS European Flight ServiceP. - sale & lease-back on del19-Dec-08 940 Airbus A330 200 (GE) VH-EBJ Macquarie AirFinance Qantas P. - sale & lease-back on del19-Dec-08 19483 Boeing 727 200F (M) (St3 Hsk) N6808 Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked19-Dec-08 20184 Boeing 727 200F (M) (St3 Hsk) N6831 Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked19-Dec-08 20635 Boeing 727 200F (M) Adv. (S3 H) N77780 Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked19-Dec-08 21085 Boeing 727 200F (M) Adv. (S3 H) N858AA Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked19-Dec-08 20040 Boeing 727 200F (M) (St3 Hsk) N90AX Stewart Industries Int/l LLC Stewart Industries Int/l LLC Purchased - parked19-Dec-08 23774 Boeing 737 (CFMI) 300 N473CT Tag Aviation (Stansted) Ltd Tag Aviation (Stansted) Ltd Purchased - parked19-Dec-08 23936 Boeing 737 (CFMI) 300 N591US GECAS Asset Management Svcs GECAS Asset Mgmt Svcs Purchased - parked19-Dec-08 25113 Boeing 737 (CFMI) 400 N782AS Eden Irish Aircraft Leasing Ltd AerCap P. - subj. to exist. lease - pkd19-Dec-08 1873 Airbus A320 210 (CFM) F-GKXD NBB Finch Co. Ltd Air France P. - subject to existing lease20-Dec-08 35143 Boeing 737 (NG) 800 Wingl. D-AHLK Undis. Bank / Broker / Lessor TUIfly P. - sale & lease-back on del22-Dec-08 47003 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N946AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back22-Dec-08 47004 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N947AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back22-Dec-08 47072 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N906AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back22-Dec-08 47203 Boeing (McDonnell-Douglas) DC-9 31PC (M) (St3 Hsk) N907AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back22-Dec-08 47148 Boeing (McDonnell-Douglas) DC-9 32CF (St3 Hsk) N909AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back22-Dec-08 47497 Boeing (McDonnell-Douglas) DC-9 41PC (M) (St3 Hsk) N971AX DHL Network Operations (USA) Inc ABX Air P. - sale & lease-back22-Dec-08 19421 Boeing 737 (JT8D) 200 (St3 Hsk) N205AU Freeman Leasing LLC Freeman Leasing LLC Purchased - parked22-Dec-08 21992 Boeing 747 SP (P&W) N747A Fry’s Electronics Inc Fry’s Electronics Inc Purchased23-Dec-08 35587 Boeing 777 200LR (GE) A6-EWH Amentum Capital Ltd. Emirates Airline P. - sale & lease-back on del23-Dec-08 3741 Airbus A320 230 (IAE) UR-WUB General Electric Capital Corp Wizz Air Ukraine P. - sale & lease-back on del23-Dec-08 32457 Boeing 737 (NG) 700 Wingl. N903WN BOC Aviation Southwest Airlines P. - sale & lease-back23-Dec-08 36617 Boeing 737 (NG) 700 Wingl. N905WN BOC Aviation Southwest Airlines P. - sale & lease-back23-Dec-08 36623 Boeing 737 (NG) 700 Wingl. N916WN BOC Aviation Southwest Airlines P. - sale & lease-back23-Dec-08 36626 Boeing 737 (NG) 700 Wingl. N921WN BOC Aviation Southwest Airlines P. - sale & lease-back23-Dec-08 29843 Boeing 737 (NG) 700 Wingl. N918WN BOC Aviation Southwest Airlines P. - sale & lease-back23-Dec-08 40 Airbus A320 210 (CFM) N304US AeroTurbine Inc AeroTurbine Inc Purchased - parked23-Dec-08 145315 Embraer ERJ-145 EP UR-DNQ Dniproavia Dniproavia Purchased - parked23-Dec-08 31 Airbus A320 210 (CFM) N301US AeroTurbine Inc AeroTurbine Inc Purchased - parked24-Dec-08 34961 Boeing 737 (NG) 900ER VT-SGD Lucydell Ltd SpiceJet P. - sale & lease-back on del24-Dec-08 956 Airbus A330 200 (GE) VT-JWQ Injet 330 A/c Leasing Company Ltd - 2Jet Airways P. - sale & lease-back on del24-Dec-08 23406 Boeing 737 (CFMI) 300 N672SW Pinnacle Aircraft Parts Inc Pinnacle Aircraft Parts Inc Purchased - parked27-Dec-08 22 Airbus A380 840 (RR) VH-OQC QF ECA 2008-2 Pty Limited Qantas P. - sale & lease-back on del29-Dec-08 24674 Boeing 737 (CFMI) 300 N399UA Global Jet Ltd Global Jet Ltd Purchased - parked30-Dec-08 29638 Boeing 737 (NG) 800 4X-EKF Aviation Capital Group Aviation Capital Group Purchased30-Dec-08 46088 Boeing (McDonnell-Douglas) DC-8 63CF (St3 Hsk) N865F National Airlines National Airlines P. off lse/fin. term comp.30-Dec-08 46145 Boeing (McDonnell-Douglas) DC-8 63CF (St3 Hsk) N921R National Airlines National Airlines P. off lse/fin. term comp.31-Dec-08 22507 Boeing 747 200SF (GE) N516MC Atlas Air Polar Air Cargo P. - subject to existing lease31-Dec-08 E2111 BAE SYSTEMS (HS) 146 200 N446MA Minden Air Minden Air Purchased - parked31-Dec-08 21644 Boeing 747 200SF (GE) N508MC Atlas Air Polar Air Cargo P. off lse/fin. term comp. - pkd02-Jan-09 28154 Boeing 767 300ER (GE) VH-OGQ Qantas Qantas P. off lse/fin. term comp.02-Jan-09 28152 Boeing 737 (CFMI) 400 VH-TJZ Qantas Qantas P. off lse/fin. term comp.02-Jan-09 24485 Boeing 767 300ER (GE) N181AQ Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked02-Jan-09 24495 Boeing 767 300ER (GE) N182AQ Undis. Bank / Broker / Lessor Undis. Bank / Broker / LessorPurchased - parked

Aircraft transactions — 11 December 2008 to 02 January 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



05-Jan-09 53245 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N411NV Allegiant Air Allegiant Air Purchased - parked06-Jan-09 49419 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N419MT MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked06-Jan-09 49513 Boeing (McDonnell-Douglas) MD-80 82 (SAIC) N513HC MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked06-Jan-09 49511 Boeing (McDonnell-Douglas) MD-80 82 (SAIC) N511JZ MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked06-Jan-09 49515 Boeing (McDonnell-Douglas) MD-80 82 (SAIC) N515HC MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked06-Jan-09 34205 Boeing 767 400ER (GE) A9C-HMH Government of Bahrain Bahrain Royal Flight Del. - pur. of usd/demo a/c.07-Jan-09 686 Airbus A319 130 (IAE) N801UA E.L.F. Leasing Two LLC United Airlines P. - subject to existing lease07-Jan-09 592 Airbus A320 230 (IAE) N434UA E.L.F. Leasing Two LLC United Airlines P. - sale & lease-back07-Jan-09 824 Airbus A320 230 (IAE) N444UA E.L.F. Leasing Two LLC United Airlines P. - sale & lease-back07-Jan-09 47707 Boeing (McDonnell-Douglas) DC-9 34CF S9- Aircraft Traders Belgium SA Aircraft Traders Belgium SA Purchased - parked07-Jan-09 E3145 BAE SYSTEMS (HS) 146 300 N616AW Air Tahoma INC Air Tahoma INC Purchased - parked07-Jan-09 24160 Boeing 747 300 Combi (GE) VT-EPX GA Telesis LLC GA Telesis LLC Purchased - parked08-Jan-09 748 Airbus A319 130 (IAE) N803UA E.L.F. Leasing Two LLC United Airlines P. - subject to existing lease08-Jan-09 690 Airbus A319 130 (IAE) N802UA E.L.F. Leasing Two LLC United Airlines P. - subject to existing lease08-Jan-09 36629 Boeing 737 (NG) 700 Wingl. N926WN BOC Aviation Southwest Airlines P. - sale & lease-back on del08-Jan-09 36630 Boeing 737 (NG) 700 Wingl. N925WN BOC Aviation Southwest Airlines P. - sale & lease-back on del08-Jan-09 36616 Boeing 737 (NG) 700 Wingl. N904WN BOC Aviation Southwest Airlines P. - sale & lease-back08-Jan-09 36627 Boeing 737 (NG) 700 Wingl. N923WN BOC Aviation Southwest Airlines P. - sale & lease-back08-Jan-09 32461 Boeing 737 (NG) 700 Wingl. N922WN BOC Aviation Southwest Airlines P. - sale & lease-back08-Jan-09 589 Airbus A320 230 (IAE) N433UA E.L.F. Leasing Two LLC United Airlines P. - sale & lease-back08-Jan-09 E2023 BAE SYSTEMS (HS) 146 200 FAB-102 Bolivian Air Force Bolivian Air Force Purchased - parked08-Jan-09 23193 Boeing 757 200 (P&W) N504US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23199 Boeing 757 200 (P&W) N511US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23195 Boeing 757 200 (P&W) N506US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23194 Boeing 757 200 (P&W) N505US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23197 Boeing 757 200 (P&W) N508US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23200 Boeing 757 200 (P&W) N512US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23201 Boeing 757 200 (P&W) N513US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23202 Boeing 757 200 (P&W) N514US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23203 Boeing 757 200 (P&W) N515US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 23198 Boeing 757 200 (P&W) N509US Citicorp North America Inc Jet Trading And Leasing LLC Purchased - parked08-Jan-09 27199 Boeing 757 200 (RR) N933UW FedEx FedEx Purchased - parked09-Jan-09 14500851 Embraer ERJ-135 Legacy 600 M-DSCL Unconf. Isle of Man Corp. Operator Unconf. Isle of Man C. Op. Purchased09-Jan-09 34960 Boeing 737 (NG) 800 Wingl. N960BB Fendell Ltd Babcock & Brown A/c Mgmt LLC Purchased09-Jan-09 788 Airbus A319 130 (IAE) N806UA E.L.F. Leasing Two LLC United Airlines P. - subject to existing lease09-Jan-09 783 Airbus A319 130 (IAE) N805UA E.L.F. Leasing Two LLC United Airlines P. - subject to existing lease09-Jan-09 638 Airbus A320 230 (IAE) N436UA E.L.F. Leasing Two LLC United Airlines P. - sale & lease-back09-Jan-09 533 Airbus A300 620RF (M) (P&W) N103MT TES Parts Limited TES Parts Limited Purchased - parked09-Jan-09 35 Airbus A320 230 (IAE) 5B-DAU Aircraft Solutions A320 LLC Universal Asset Mgmt Inc Purchased - parked12-Jan-09 2440 Airbus A319 CJ (CFM) CS-TFU OMNI Aviacao & Tecnologia White Purchased - parked12-Jan-09 3734 Airbus A320 230 (IAE) VH-VNH RBS Aviation Capital Tiger Airways Australia P. - sale & lse-back on del - pkd13-Jan-09 21252 Boeing 747 200SF (GE) N506MC Atlas Air Atlas Air P. off lse/fin. term comp.13-Jan-09 28750 Boeing 757 200 (P&W) N597UA United Airlines United Airlines P. off lse/fin. term comp.14-Jan-09 145696 Embraer ERJ-135 LR N834RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked14-Jan-09 E2314 BAE SYSTEMS (Avro) RJ Avroliner RJ85 ZS-ASX Airlink - SA Airlink Airlink - SA Airlink Purchased - parked15-Jan-09 430 Airbus A340 310 (CFM) OY-KBI SL Canopy Ltd SAS P. - subject to existing lease15-Jan-09 1619 Airbus A321 230 (IAE) OY-KBL Emerald 3 Co. Ltd SAS P. - subject to existing lease15-Jan-09 29589 Boeing 757 200 (RR) N679AN American Airlines American Airlines P. off lse/fin. term comp.15-Jan-09 53297 Boeing (McDonnell-Douglas) MD-80 81 JA8552 Grandmax Group Ltd Grandmax Group Ltd Purchased - parked15-Jan-09 26241 Boeing 757 200 (RR) EC-ISY Privilege Style Privilege Style P. off lse/fin. term comp.15-Jan-09 26557 Boeing 747 400 (P&W) B-HKX Cathay Pacific Cathay Pacific Purchased - parked15-Jan-09 567 Airbus A310 300 (GE) EX-35003 Kyrgyz Trans Avia Kyrgyz Trans Avia Purchased - parked15-Jan-09 11541 Fokker 70 PH-KZT KLM cityhopper KLM cityhopper Purchased - parked15-Jan-09 620 Airbus A310 300 (GE) EX-35004 Kyrgyz Trans Avia Kyrgyz Trans Avia Purchased - parked15-Jan-09 49844 Boeing (McDonnell-Douglas) MD-80 83 (MDC) UR-CHR Khors Air Khors Air Purchased - parked15-Jan-09 49572 Boeing (McDonnell-Douglas) MD-80 83 (MDC) UR-CHS Khors Air Khors Air Purchased - parked15-Jan-09 29927 Boeing 737 (NG) 800 Wingl. EI-CSN CIT Aerospace Int/l CIT Aerospace Purchased - parked15-Jan-09 1807 Airbus A321 230 (IAE) OY-KBF SL Topaz Ltd SAS P. - subject to existing lease15-Jan-09 25194 Boeing 767 300ER (GE) N39367 Undis. Bank / Broker / Lessor American Airlines P. - subject to existing lease15-Jan-09 25198 Boeing 767 300ER (GE) N371AA Undis. Bank / Broker / Lessor American Airlines P. - subject to existing lease15-Jan-09 25305 Boeing 737 (CFMI) 400 ZS-OTF Lexshell 799 Investments (Pty) Ltd Kulula P. - subject to existing lease16-Jan-09 E2097 BAE SYSTEMS (HS) 146 200 VH-YAD Jet Acceptance Corp National Jet Systems P. - subject to existing lease16-Jan-09 23138 Boeing 747 200F (SCD) (GE) N758SA Air Mobility Inc Southern Air P. - subject to existing lease16-Jan-09 E2107 BAE SYSTEMS (HS) 146 200 VH-YAE Jet Acceptance Corp National Jet Systems P. - subject to existing lease16-Jan-09 22678 Boeing 747 200F (SCD) (GE) N751SA Air Mobility Inc Ethiopian Airlines P. - subject to existing lease16-Jan-09 38 Airbus A320 230 (IAE) 5B-DAW Aircraft Solutions A320 LLC Cyprus Airways P. - sale & lease-back16-Jan-09 37 Airbus A320 230 (IAE) 5B-DAV Aircraft Solutions A320 LLC Cyprus Airways P. - sale & lease-back16-Jan-09 11498 Fokker 100 5N-HIR IRS Airlines IRS Airlines Purchased - parked16-Jan-09 19000241 Embraer 190 AR N840JE JAG VI LLC Jetscape Inc Purchased - parked16-Jan-09 24752 Boeing 767 300ER (GE) N752SJ Baxter Aviation Ltd Baxter Aviation Ltd Purchased - parked16-Jan-09 21458 Boeing 727 200 Adv. (St3 Hsk) 5N- Associated Aviation Associated Aviation Purchased - parked16-Jan-09 25058 Boeing 767 200ER (GE) N152AT AeroTurbine Inc AeroTurbine Inc Purchased - parked19-Jan-09 E2097 BAE SYSTEMS (HS) 146 200 VH-YAD BAE Systems Management Svcs Ltd National Jet Systems P. - subject to existing lease19-Jan-09 E2107 BAE SYSTEMS (HS) 146 200 VH-YAE BAE Systems Management Svcs Ltd National Jet Systems P. - subject to existing lease19-Jan-09 E2107 BAE SYSTEMS (HS) 146 200 VH-YAE National Jet Systems National Jet Systems P. off lse/fin. term comp.19-Jan-09 E2097 BAE SYSTEMS (HS) 146 200 VH-YAD National Jet Systems National Jet Systems P. off lse/fin. term comp.19-Jan-09 7299 Bombardier (Canadair) CRJ Regional Jet 200LR C-FWWU Voyageur Airways Voyageur Airways Purchased - parked20-Jan-09 145715 Embraer ERJ-135 LR N837RP ECC Leasing Co Ltd ECC Leasing Co Ltd Purchased - parked20-Jan-09 22506 Boeing 747 200SF (GE) N795SA Air Mobility Inc Southern Air P. - sale & lse-back - parked21-Jan-09 3743 Airbus A320 230 (IAE) VH-VQB Wombat V Leasing Pty Ltd Jetstar P. - sale & lease-back on del21-Jan-09 53297 Boeing (McDonnell-Douglas) MD-80 81 N821TH Richard Trudell Inc Richard Trudell Inc Purchased - parked21-Jan-09 25139 Boeing 767 200ER (GE) N178AT AeroTurbine Inc AeroTurbine Inc Purchased - parked21-Jan-09 11047 Fokker F.28 1000 TU-PAB Unconf. Airline Ivory Coast Unconf. Airline Ivory Coast Purchased - parked21-Jan-09 E3145 BAE SYSTEMS (HS) 146 300 N616AW HR Aviation LLC HR Aviation LLC Purchased - parked21-Jan-09 19000242 Embraer 190 AR N841JS JAG VII LLC Jetscape Inc Purchased - parked22-Jan-09 3770 Airbus A319 130 (IAE) CC-CYI Patagon Leasing Limited LAN Airlines P. - sale & lease-back on del22-Jan-09 28751 Boeing 757 200 (P&W) N598UA United Airlines United Airlines P. off lse/fin. term comp.22-Jan-09 28751 Boeing 757 200 (P&W) N598UA Aircraft N598UA Trust United Airlines P. - sale & lease-back22-Jan-09 28640 Boeing 737 (NG) 700 Wingl. N740AL Arik Air Arik Air Purchased - parked

Aircraft transactions — 05 January 2009 to 22 January 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




22-Jan-09 28641 Boeing 737 (NG) 700 Wingl. N741AL Arik Air Arik Air Purchased - parked22-Jan-09 345 Airbus A320 210 (CFM) VP-CBZ Airtex Enterprises Ltd Airtex Enterprises Ltd Purchased - parked23-Jan-09 37360 Boeing 737 (NG) 800 Wingl. VT- Babcock & Brown Aircraft Mgmt LLC Babcock & Brown Purchased23-Jan-09 7763 Bombardier (Canadair) CRJ Regional Jet 200LR N492CA Undis. Bank / Broker / Lessor Unconf. Corporate Operator P. - subj. to exist. lease - pkd26-Jan-09 24031 Boeing 737 (JT8D) 200 Adv. N810AL Unconf. Venezuelan Operator Unconf. Venezuelan Opr Purchased - parked27-Jan-09 21790 Boeing 737 (JT8D) 200 Adv. ZS-SIT Safair Operations Pty Ltd Safair P. - subject to existing lease27-Jan-09 3772 Airbus A319 130 (IAE) CC-CYJ Patagon Leasing Limited LAN Airlines P. - sale & lease-back on del27-Jan-09 E3157 BAE SYSTEMS (HS) 146 300 D- WDL WDL Purchased - parked27-Jan-09 22751 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) ZS-IJA Inter Air South Africa Inter Air South Africa Purchased - parked28-Jan-09 7004 Bombardier (Canadair) CRJ Regional Jet 200LR C-FYFS Avionco Canada Ltd Avionco Canada Ltd Purchased - parked28-Jan-09 49827 Boeing (McDonnell-Douglas) MD-80 87 ZS-TRK 1Time 1Time Purchased - parked28-Jan-09 49829 Boeing (McDonnell-Douglas) MD-80 87 ZS-TRJ 1Time 1Time Purchased - parked28-Jan-09 25193 Boeing 767 300ER (GE) N366AA Undis. Bank / Broker / Lessor American Airlines P. - subject to existing lease29-Jan-09 21380 Boeing 747 200SF (GE) N740SA Air Mobility Inc Southern Air P. - subject to existing lease29-Jan-09 21576 Boeing 747 200F (SCD) (GE) N754SA Air Mobility Inc Southern Air P. - subject to existing lease29-Jan-09 7187 Bombardier (Canadair) CRJ Regional Jet 200ER C-GEXM Avmax Int/l Aircraft Leasing Inc Corporate Jet Air P. - subject to existing lease29-Jan-09 48758 Boeing (McDonnell-Douglas) MD-11 ER (GE) ET-AML Ethiopian Airlines Ethiopian Airlines Purchased - parked29-Jan-09 25840 Boeing 737 (CFMI) 400 ZS-OTG Lexshell 779 Investments (PTY) Comair - Comm. Airways P. - subject to existing lease29-Jan-09 21255 Boeing 747 200F (SCD) (GE) N752SA Air Mobility Inc Southern Air P. - subject to existing lease30-Jan-09 145644 Embraer ERJ-135 Legacy 600 HB-JED Diamair SA Diamair SA P. off lse/fin. term comp.30-Jan-09 22140 Boeing 737 (JT8D) 200 Adv. ZS-OMG KAL Aviation KAL Aviation Purchased - parked30-Jan-09 23006 Boeing 737 (JT8D) 200 Adv. ZS-OVE KAL Aviation KAL Aviation Purchased - parked30-Jan-09 23008 Boeing 737 (JT8D) 200 Adv. ZS-OVF KAL Aviation KAL Aviation Purchased - parked30-Jan-09 15064 Bombardier (Canadair) CRJ900 Regional Jet900ER N564ES Bombardier Capital Inc Bombardier Capital Inc Purchased - parked30-Jan-09 15065 Bombardier (Canadair) CRJ900 Regional Jet900ER N565ES Bombardier Capital Inc Bombardier Capital Inc Purchased - parked30-Jan-09 21800 Boeing 737 (JT8D) 200 Adv. (St3 Hsk) ZS-OVG KAL Aviation KAL Aviation Purchased - parked30-Jan-09 22857 Boeing 737 (JT8D) 200 Adv. ZS-OOD KAL Aviation KAL Aviation Purchased - parked30-Jan-09 3637 Airbus A321 230 (IAE) TC-JMH Turkish Airlines (THY) Turkish Airlines (THY) Purchased - parked30-Jan-09 22856 Boeing 737 (JT8D) 200 Adv. ZS-OOC KAL Aviation KAL Aviation Purchased - parked30-Jan-09 3673 Airbus A321 230 (IAE) TC-JMI Turkish Airlines (THY) Turkish Airlines (THY) Purchased - parked30-Jan-09 22634 Boeing 737 (JT8D) 200 Adv. ZS-OIV KAL Aviation KAL Aviation Purchased - parked02-Feb-09 22932 Boeing 727 200F RE Advanced N416JC Vortex Aviation Capital Vortex Aviation Capital Purchased - parked02-Feb-09 21832 Boeing 747 200SF (GE) N761SA Air Mobility Inc Southern Air P. - subject to existing lease03-Feb-09 36852 Boeing 737 (NG) BBJ1 HL Unconf. Korean Corporate Operator Unconf. Korean Corp. Opr. Purchased - parked03-Feb-09 22780 Boeing 757 200 (RR) G-MONB FedEx FedEx Purchased - parked06-Feb-09 27709 Boeing 737 (CFMI) 300 Wingl. N636WN Undis. Bank / Broker / Lessor Southwest Airlines P. - subject to existing lease06-Feb-09 120270 Embraer EMB-120 Brasilia ER N270YV Wachovia Financial Svcs Inc DBA SkyWest Airlines P. - subject to existing lease06-Feb-09 8124 Fairchild/Dornier 228 18-Jul-00 5Y- Unconf. Kenyan Operator Unconf. Kenyan Operator Purchased - parked09-Feb-09 625 Airbus A300 620R (P&W) N751FD FedEx FedEx Purchased - parked09-Feb-09 110354 Embraer EMB-110 Bandeirante P1 TG- Aereo Ruta Maya Aereo Ruta Maya Purchased - parked09-Feb-09 110348 Embraer EMB-110 Bandeirante P1 TG- Aereo Ruta Maya Aereo Ruta Maya Purchased - parked09-Feb-09 120304 Embraer EMB-120 Brasilia ER N227SW Pimegal Consultants Ltd Pimegal Consultants Ltd Purchased - parked09-Feb-09 AC-665 Fairchild (Swearingen) Metro III VH-OZN Wingaway Air Wingaway Air Purchased09-Feb-09 UC-72 Hawker Beechcraft 1900 C-1 N15503 Frontier Alaska Aviation Trust Hageland Aviation Svcs P. - subject to existing lease09-Feb-09 UC-24 Hawker Beechcraft 1900 C-1 N1553C Frontier Alaska Aviation Trust Hageland Aviation Svcs P. - subject to existing lease09-Feb-09 UC-154 Hawker Beechcraft 1900 C-1 N404GV Frontier Alaska Aviation Trust Hageland Aviation Svcs P. - subject to existing lease09-Feb-09 UC-83 Hawker Beechcraft 1900 C-1 N575A Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease09-Feb-09 UC-99 Hawker Beechcraft 1900 C-1 N575F Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease09-Feb-09 UC-155 Hawker Beechcraft 1900 C-1 N575G Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease09-Feb-09 UC-160 Hawker Beechcraft 1900 C-1 N575Q Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease09-Feb-09 UC-93 Hawker Beechcraft 1900 C-1 N575U Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease09-Feb-09 UC-149 Hawker Beechcraft 1900 C-1 N575X Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease09-Feb-09 UC-162 Hawker Beechcraft 1900 C-1 N575Y Frontier Alaska Aviation Trust Frontier Flying Service P. - subject to existing lease10-Feb-09 3778 Airbus A320 210 (CFM) VQ-BAX AerVenture Leasing 1 Ltd Aeroflot Russian Airlines P. - sale & lease-back on del10-Feb-09 22371 Boeing 737 (JT8D) 200 Adv. ZS-SGE Star Air Cargo Star Air Cargo Purchased - parked10-Feb-09 25280 Boeing 767 300ER (P&W) N202AC Renalia Inc Aircastle Advisor LLC Purchased - parked10-Feb-09 120304 Embraer EMB-120 Brasilia ER N227SW Region Avia Region Avia Purchased - parked11-Feb-09 91 Airbus A320 230 (IAE) N634AW AeroTurbine Inc AeroTurbine Inc Purchased - parked11-Feb-09 866 BAE SYSTEMS (Jetstream) Jetstream 31 Super XA- Unconf. Mexican Operator Unconf. Mexican Operator Purchased - parked11-Feb-09 27708 Boeing 737 (CFMI) 300 Wingl. N635SW Undis. Bank / Broker / Lessor Southwest Airlines P. - subject to existing lease11-Feb-09 190 Bombardier (de Havilland) DHC-6 Twin Otter 18-Jul-00 N190KM Kevin McCole Kevin McCole Purchased11-Feb-09 UE-82 Hawker Beechcraft 1900 D HK- Leasing Horizonte Leasing Horizonte Purchased - parked13-Feb-09 U-75 Hawker Beechcraft 99 99 N Unconf. American Operator Unconf. American Operator Purchased - parked14-Feb-09 3160 Fairchild/Dornier 328JET N328CR SC Toyo Motor Leasing IFN S.A SC Toyo Motor Ls. IFN S.A Purchased - parked15-Feb-09 345 Airbus A320 210 (CFM) EP-IED Iran Air Iran Air Purchased - parked15-Feb-09 857 Airbus A320 230 (IAE) EP-MHJ Iran Air Iran Air Purchased - parked15-Feb-09 575 Airbus A320 230 (IAE) EP-MHN Iran Air Iran Air Purchased - parked15-Feb-09 53459 Boeing (McDonnell-Douglas) MD-90 30-Jan-00 OH-BLC SAS Struktur Gˆta Kommanditbolag Blue 1 P. - subject to existing lease15-Feb-09 53544 Boeing (McDonnell-Douglas) MD-90 30-Jan-00 OH-BLD SAS Struktur Gˆta Kommanditbolag Blue 1 P. - subject to existing lease15-Feb-09 53457 Boeing (McDonnell-Douglas) MD-90 30-Jan-00 OH-BLE SAS Struktur Gˆta Kommanditbolag Blue 1 P. - subject to existing lease15-Feb-09 53543 Boeing (McDonnell-Douglas) MD-90 30-Jan-00 OH-BLF SAS Struktur Gˆta Kommanditbolag Blue 1 P. - subject to existing lease15-Feb-09 53458 Boeing (McDonnell-Douglas) MD-90 30-Jan-00 OH-BLU SAS Struktur Gˆta Kommanditbolag Blue 1 P. - subject to existing lease15-Feb-09 25079 Boeing 737 (CFMI) 26-Oct-00 5N-BMB Chanchangi Airlines Chanchangi Airlines Purchased - parked15-Feb-09 25089 Boeing 737 (CFMI) 26-Oct-00 5N-BMC Chanchangi Airlines Chanchangi Airlines Purchased - parked15-Feb-09 145002 Embraer ERJ-145 LR PR- Policia Federal Brazil Policia Federal Brazil Purchased - parked16-Feb-09 7159 Bombardier (Canadair) CRJ Regional Jet 100ER P4- Verseil Jet AVV Verseil Jet AVV Purchased - parked17-Feb-09 3790 Airbus A319 110 (CFM) N790MX Whitney Ireland Leasing Ltd Mexicana Pur. - sale to S.P.C. by less. on del.17-Feb-09 3032 Fairchild/Dornier 328 09-Apr-00 PK- Aero Nusantara Indonesia (ANI) Aero Nusantara Indon. (ANI) Purchased - parked18-Feb-09 49777 Boeing (McDonnell-Douglas) MD-80 87 (MDC) (St4 rdy) VP-CTF AMAC Aerospace AMAC Aerospace Purchased - parked18-Feb-09 22327 Boeing 767 200ER (GE) N327AA Undis. Bank / Broker / Lessor American Airlines P. - subject to existing lease18-Feb-09 145724 Embraer ERJ-135 LR N839RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked19-Feb-09 34 Airbus A320 210 (CFM) N303US GECAS Asset Management Svcs GECAS Asset Mgmt Svcs Purchased - parked19-Feb-09 733 BAE SYSTEMS (Jetstream) Jetstream 31 C-FREQ Starlink Aviation Starlink Aviation Purchased19-Feb-09 39043 Boeing 737 (NG) 800 Wingl. N512AS BOC Aviation (USA) Corp Alaska Airlines P. - sale & lease-back19-Feb-09 35192 Boeing 737 (NG) 800 Wingl. N513AS BOC Aviation (USA) Corp Alaska Airlines P. - sale & lease-back on del19-Feb-09 39044 Boeing 737 (NG) 800 Wingl. N516AS BOC Aviation (USA) Corp Alaska Airlines P. - sale & lease-back on del19-Feb-09 28652 Boeing 737 (NG) 600 N645DM US Air Force US Air Force Purchased - parked19-Feb-09 647 Bombardier (de Havilland) DHC-6 Twin Otter 300 N300WH CAAMS LLC CAAMS LLC Purchased20-Feb-09 3783 Airbus A320 230 (IAE) VH-VQA Wombat VI Leasing Pty Ltd Jetstar P. - sale & lease-back on del

Aircraft transactions — 22 January 2009 to 20 February 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



20-Feb-09 169 Airbus A340 310 (CFM) HB-JMK Austrian Airlines Lse and Fin. Co. Ltd Swiss P. - sale & lease-back20-Feb-09 28271 Boeing 737 (CFMI) 400SF N211BF Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked20-Feb-09 145167 Embraer ERJ-145 EU G-EMBK Aircraft Solution Lux II Sarl Universal Asset Mgmt Inc P. - subj. to exist. lease - pkd23-Feb-09 49413 Boeing (McDonnell-Douglas) MD-80 27-Mar-00 N399NV Allegiant Air Allegiant Air Purchased - parked23-Feb-09 14500841 Embraer ERJ-135 Legacy 600 D-ARIF Unconf. German Operator Unconf. German Operator Purchased24-Feb-09 24367 Boeing 757 200 (RR) N914FD FedEx FedEx Purchased - parked24-Feb-09 22780 Boeing 757 200 (RR) N935FD FedEx FedEx Purchased - parked24-Feb-09 22225 Boeing 767 200SF (GE) N748AX 767 Aircraft One LLC ABX Air P. - sale & lease-back24-Feb-09 722 Bombardier (de Havilland) DHC-6 Twin Otter 26-Oct-00 C-FWKO Kenn Borek Air Kenn Borek Air Purchased - parked25-Feb-09 3546 Airbus A321 230 (IAE) G-OZBT Monarch Airlines Monarch Airlines Purchased - parked25-Feb-09 21695 Boeing 727 200F (M) Adv. (S3 Hk) HP-1653CTH Alvar Enterprises Alvar Enterprises Purchased25-Feb-09 35690 Boeing 737 (NG) 800 Wingl. N506AS Undis. Bank / Broker / Lessor Alaska Airlines P. - sale & lease-back25-Feb-09 35190 Boeing 737 (NG) 800 Wingl. N592AS Undis. Bank / Broker / Lessor Alaska Airlines P. - sale & lease-back26-Feb-09 3575 Airbus A321 230 (IAE) G-TTII Monarch Airlines Monarch Airlines Purchased - parked26-Feb-09 UE-288 Hawker Beechcraft 1900 D HB-AEN Swiss Air Force Swiss Air Force P. off lse/fin. term comp.03-Mar-09 24496 Boeing 767 300ER (GE) N183AQ Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked03-Mar-09 3176 Fairchild/Dornier 328JET UR-AER Aerostar Aerostar Purchased04-Mar-09 3822 Airbus A319 110 (CFM) VT-SCO Indian Orange Limited Air India P. - sale & lease-back on del04-Mar-09 23592 Boeing 737 (CFMI) 300 N76354 Continental Airlines Continental Airlines P. off lse/fin term comp. - pkd04-Mar-09 35346 Boeing 737 (NG) 800 Winglets JA317J DIA Waltz Ltd Japan Airlines International P. - sale & lease-back on del04-Mar-09 7454 Bombardier (Canadair) CRJ Regional Jet 200LR VQ-BBV Rusline Rusline Purchased - parked04-Mar-09 7454 Bombardier (Canadair) CRJ Regional Jet 200LR VQ-BBV Worldwide Aircraft Ferrying Ltd Rusline P. - sale & lease-back - pkd05-Mar-09 E2024 BAE SYSTEMS (HS) 146 200 G-FLTB Wicklow Hill Tronos Plc Purchased - parked05-Mar-09 E3205 BAE SYSTEMS (HS) 146 300 G-FLTC E3205 Trading Ltd Tronos Plc Purchased - parked05-Mar-09 964 BAE SYSTEMS (Jetstream) Jetstream 31 Super EP N964AE J & E Aircraft Co J & E Aircraft Co Purchased - parked05-Mar-09 49230 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N950U MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked05-Mar-09 49230 Boeing (McDonnell-Douglas) MD-80 82 (MDC) N950U VCG Aviation Services LLC VCG Aviation Services LLC Purchased - parked05-Mar-09 28271 Boeing 737 (CFMI) 400SF B-2892 China Southern Airlines China Postal Airlines Purchased - parked05-Mar-09 1066 Lockheed L-1011 TriStar 50 N700TS Ashrock Metals Ashrock Metals Purchased - parked06-Mar-09 26 A.S.T.A. (GAF) Nomad N22B N5190Y North London Parachute Centre N. London Parachute Centre P. off lse/fin term comp.06-Mar-09 28036 Boeing 737 (CFMI) 300 Winglets N620SW Undis. Bank / Broker / Lessor Southwest Airlines P. - subject to existing lease06-Mar-09 27703 Boeing 737 (CFMI) 300 Winglets N628SW Undis. Bank / Broker / Lessor Southwest Airlines P. - subject to existing lease06-Mar-09 23593 Boeing 737 (CFMI) 300 N76355 Continental Airlines Continental Airlines P. off lse/fin term comp.06-Mar-09 DC-902B Fairchild (Swearingen) Metro 23 N902WB Bay Aeroservices Inc Bay Aeroservices Inc Purchased - parked06-Mar-09 20307 Fokker 50 OY-PCJ Nordic Aviation Capital Nordic Aviation Capital Purchased - parked09-Mar-09 120320 Embraer EMB-120 Brasilia ER N293SW Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked10-Mar-09 E3336 BAE SYSTEMS (Avro) RJ Avroliner RJ100 OO-DWG Undis. Bank / Broker / Lessor Brussels Airlines P. - subject to existing lease10-Mar-09 563 Bombardier (de Havilland) Dash 8 300 D2-EWT Government of Angola Government of Angola Purchased10-Mar-09 1140 Lockheed L-188 Electra PF C- Uncon. Canadian Operator Uncon. Canadian Operator Purchased - parked11-Mar-09 304 ATR ATR 42 300 VH-AVV Asia Pacicfic Aero pty Asia Pacicfic Aero pty Purchased - parked11-Mar-09 45926 Boeing (McDonnell-Douglas) DC-8 63C (St3 Hshkits) N781AL Executive Air Services Inc Executive Air Services Inc Purchased - parked11-Mar-09 47733 Boeing (McDonnell-Douglas) DC-9 51 N682RW National City Bank Olympia Aviation/

Detroit RedWings/Detroit Tigers Pur. - sale & lease-back

11-Mar-09 35347 Boeing 737 (NG) 800 Winglets JA318J SL Seagull Ltd Japan Airlines It/l P. - sale & lease-back on del11-Mar-09 19000249 Embraer 190 AR N298JB JetBlue Airways JetBlue Airways P. off lse/fin term comp.11-Mar-09 19000249 Embraer 190 AR N298JB PM Ltd JetBlue Airways P. - sale & lease-back on del11-Mar-09 212 Saab 340 B N685PA Turbo Lease LLC Penair Pur. - sale & lease-back12-Mar-09 30830 Boeing 737 (NG) 700 Winglets N742AL Arik Air Arik Air Purchased - parked12-Mar-09 35254 Boeing 777 300ER (GE) C-FITU General Electric Capital Corp Air Canada Pur. - sale & lease-back12-Mar-09 177 CASA CN-235 300 N383EC Turbo Flite Aviation LLC Turbo Flite Aviation LLC Purchased - parked12-Mar-09 182 CASA CN-235 300 N768KD Atlanta Air Capital Leasing LLC Atlanta Air Cap. Leasing LLC Purchased - parked12-Mar-09 176 CASA CN-235 300 N835CE Turbo Flite Aviation LLC Turbo Flite Aviation LLC Purchased - parked12-Mar-09 120188 Embraer EMB-120 Brasilia N266AS Triangle Aviation RDD LLC Triangle Aviation RDD LLC Purchased - parked12-Mar-09 360 Saab 340 B VH-UYE Westpac Banking Corp Westpac Banking Corp Purchased - parked13-Mar-09 UB-39 Hawker Beechcraft 1900 C C-FJTF Fowler Financial Holdings Inc Fowler Financial Holdings Inc Purchased - parked15-Mar-09 299 Airbus A300 B4-200FF (GE) EP-MDA Iran Air Iran Air Purchased15-Mar-09 2054 Airbus A320 210 (CFM) EK-32054 Vertir Airlines Vertir Airlines Purchased - parked15-Mar-09 2054 Airbus A320 210 (CFM) EK-32054 Revenue Enterprises Ltd Revenue Enterprises Ltd Purchased - parked15-Mar-09 312 Airbus A320 210 (CFM) EP- Iran Air Iran Air Purchased - parked15-Mar-09 303 Airbus A320 210 (CFM) EP-IEE Iran Air Iran Air Purchased - parked15-Mar-09 855 ATR ATR 72 500 F-OMRU Coviro 5 SAS Air Austral P. - sale & lease-back on del15-Mar-09 49569 Boeing (McDonnell-Douglas) MD-80 83 (MDC) UR-BXN Khors Air Khors Air Purchased - parked15-Mar-09 49937 Boeing (McDonnell-Douglas) MD-80 83 (MDC) (S4 ready) YR-HBA Medallion Air Medallion Air Purchased - parked15-Mar-09 23516 Boeing 737 (JT8D) 200 Ad (S3 Hshkits) EX-25004 Eastok Avia Kyrghyzstan Airlines P. off lse/fin term comp.15-Mar-09 29929 Boeing 737 (NG) 800 Winglets EI-CSP CIT Aerospace International CIT Aerospace Purchased - parked15-Mar-09 29933 Boeing 737 (NG) 800 Winglets EI-CST CIT Aerospace International CIT Aerospace Purchased - parked15-Mar-09 487 Bombardier (de Havilland) Dash 8 300 9Y-WIT Caribbean Airlines Caribbean Airlines P. off lse/fin term comp.15-Mar-09 239 Bombardier (de Havilland) Dash 8 100 LN-WIP AeroCentury (Msn239) Trust Wideroe P. - subject to existing lease15-Mar-09 145014 Embraer ERJ-145 EP CS-TPG Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back15-Mar-09 145017 Embraer ERJ-145 EP CS-TPH Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back15-Mar-09 145031 Embraer ERJ-145 EP CS-TPI Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back15-Mar-09 145036 Embraer ERJ-145 EP CS-TPJ Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back15-Mar-09 145041 Embraer ERJ-145 EP CS-TPK Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back15-Mar-09 145051 Embraer ERJ-145 EP CS-TPL Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back15-Mar-09 145095 Embraer ERJ-145 EP CS-TPM Banco Comercial Portugues PGA - Portugalia Airlines Pur. - sale & lease-back16-Mar-09 24240 Boeing 737 (CFMI) 300 N336UA United Airlines United Airlines P. off lse/fin term comp. - pkd16-Mar-09 24240 Boeing 737 (CFMI) 300 N336UA Pacific Airfinance 2 LLC Pacific Airfinance 2 LLC Purchased - parked16-Mar-09 24240 Boeing 737 (CFMI) 300 N336UA Qwest Air Parts Inc Qwest Air Parts Inc Purchased - parked16-Mar-09 24253 Boeing 737 (CFMI) 300 N349UA Pacific Airfinance 2 LLC Pacific Airfinance 2 LLC Purchased - parked16-Mar-09 24253 Boeing 737 (CFMI) 300 N349UA United Airlines United Airlines P. off lse/fin term comp. - pkd16-Mar-09 28282 Boeing 747 400SF (GE) N483YR Yangtze River Express Yangtze River Express P. off lse/fin term comp. - pkd16-Mar-09 37548 Boeing 767 300ER (GE) JA621J JS Aviation Co Ltd Japan Airlines International P. - sale & lease-back on del16-Mar-09 19000257 Embraer 190 AR N304JB JetBlue Airways JetBlue Airways P. off lse/fin term comp.16-Mar-09 19000257 Embraer 190 AR N304JB PM Ltd JetBlue Airways P. - sale & lease-back on del16-Mar-09 145620 Embraer ERJ-135 LR N844RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked16-Mar-09 UE-197 Hawker Beechcraft 1900 D F-GLNE Fleet Management Airways SA French Ministry of the Interior P. - subject to existing lease17-Mar-09 21247 Boeing 727 200F (M) Advanced ZS-IAC Safair Operations Pty Ltd Imperial Air Cargo P. - subject to existing lease

Aircraft transactions — 20 February 2009 to 17 March 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




17-Mar-09 UE-196 Hawker Beechcraft 1900 D F-GLND Fleet Management Airways SA Twin Jet P. - subject to existing lease17-Mar-09 UE-348 Hawker Beechcraft 1900 D F-GTKJ Fleet Management Airways SA Twin Jet P. - subject to existing lease18-Mar-09 3829 Airbus A320 230 (IAE) SX-DVX General Electric Capital Corp Aegean Airlines P. - sale & lease-back on del18-Mar-09 3827 Airbus A320 210 (CFM) VT-WAJ Celestial ECA Trading 2 Limited Go Air P. - sale & lease-back on del18-Mar-09 27424 Boeing 737 (CFMI) 500 G-GFFE Pineapple Ltd Pineapple Ltd Purchased - parked18-Mar-09 23252 Boeing 737 (CFMI) 300 N674AA GA Telesis LLC GA Telesis LLC Purchased - parked18-Mar-09 423 Bombardier (de Havilland) Dash 8 300 C-GUAI Air Inuit Air Inuit Purchased18-Mar-09 145725 Embraer ERJ-135 LR N840RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked18-Mar-09 UE-319 Hawker Beechcraft 1900 D ZS-SHA National Airways Corporation National Airways Corp. Purchased - parked18-Mar-09 UE-323 Hawker Beechcraft 1900 D ZS-SHB National Airways Corporation National Airways Corp. Purchased - parked19-Mar-09 28303 Boeing 737 (NG) 600 SU-MWC Midwest Airlines (Egypt) Midwest Airlines (Egypt) Purchased - parked19-Mar-09 4013 Bombardier (de Havilland) Dash 8 400 LN-RDA SAS Struktur Skand Kommanditbolag SAS P. - subj. to exist. lease - pkd19-Mar-09 4018 Bombardier (de Havilland) Dash 8 400 LN-RDB SAS Struktur Skand Kommanditbolag SAS P. - subj. to exist. lease - pkd19-Mar-09 4012 Bombardier (de Havilland) Dash 8 400 LN-RDP SAS Struktur Skand Kommanditbolag SAS P. - subj. to exist. lease - pkd19-Mar-09 11543 Fokker 70 PH-KZU KLM cityhopper KLM cityhopper Purchased - parked19-Mar-09 1230 Lockheed L-1011 TriStar 100 N194AT Fadia Musleh Barq Aviation P. - subj. to exist. lease - pkd20-Mar-09 2968 Airbus A320 210 (CFM) HB-IOS Air Berlin 3. LeaseLux S.a.r.l. airberlin Pur. - sale & lease-back20-Mar-09 24242 Boeing 737 (CFMI) 300 N338UA Pacific Airfinance 2 LLC Pacific Airfinance 2 LLC Purchased - parked20-Mar-09 24638 Boeing 737 (CFMI) 300 N373UA Pacific Airfinance 2 LLC Pacific Airfinance 2 LLC Purchased - parked20-Mar-09 28037 Boeing 737 (CFMI) 300 Winglets N621SW Undis. Bank / Broker / Lessor Southwest Airlines P. - subject to existing lease20-Mar-09 22428 Boeing 747 200SF (GE) F-GCBD Avico UK and Ireland Ltd Avico UK and Ireland Ltd Purchased - parked23-Mar-09 49392 Boeing (McDonnell-Douglas) MD-80 83 (MDC) N392AP Air One LLC Air One LLC Purchased - parked23-Mar-09 22476 Boeing 727 200F (M) A (S3 Hshk)HK- Lineas Aereas Suramericanas Lineas Aereas Suramericanas Purchased23-Mar-09 22973 Boeing 767 200 (P&W) N570JH Purple Wing Co Ltd Purple Wing Co Ltd Purchased - parked23-Mar-09 7739 Bombardier (Canadair) CRJ Regional Jet 200ER N677SA Trust N693BR Trust N693BR Purchased - parked24-Mar-09 24242 Boeing 737 (CFMI) 300 N338UA Qwest Air Parts Inc Qwest Air Parts Inc Purchased - parked25-Mar-09 29568 Boeing 737 (NG) 800 Winglets N979AN AFS Investments 48 LLC American Airlines P. - sale & lease-back on del25-Mar-09 10350 Fokker F.27 600 N702FE Executive Jet Support Ltd Executive Jet Support Ltd Purchased - parked25-Mar-09 10350 Fokker F.27 600 N702FE 19th Hole Corp 19th Hole Corp Purchased - parked25-Mar-09 10420 Fokker F.27 600 N703FE Executive Jet Support Ltd Executive Jet Support Ltd Purchased - parked25-Mar-09 10420 Fokker F.27 600 N703FE 19th Hole Corp 19th Hole Corp Purchased - parked25-Mar-09 10615 Fokker F.27 500RF N713FE Executive Jet Support Ltd Executive Jet Support Ltd Purchased - parked25-Mar-09 10615 Fokker F.27 500RF N713FE 19th Hole Corp 19th Hole Corp Purchased - parked25-Mar-09 10385 Fokker F.27 600 N729FE Executive Jet Support Ltd Executive Jet Support Ltd Purchased - parked25-Mar-09 10385 Fokker F.27 600 N729FE 19th Hole Corp 19th Hole Corp Purchased - parked25-Mar-09 10349 Fokker F.27 600 N742FE Executive Jet Support Ltd Executive Jet Support Ltd Purchased - parked25-Mar-09 10349 Fokker F.27 600 N742FE 19th Hole Corp 19th Hole Corp Purchased - parked26-Mar-09 994 Airbus A330 300 (GE) OH-LTM Finnair Aircraft Finance Ltd Finnair P. - sale & lease-back on del26-Mar-09 1559 BAE SYSTEMS (HS) 748 Srs 1 G- Uncon. British Operator Uncon. British Operator Purchased - parked26-Mar-09 47233 Boeing (McDonnell-Douglas) DC-9 32 (St3 Hushkits) N608NW Clipper Aviation Services Clipper Aviation Services Purchased - parked27-Mar-09 2991 Airbus A320 210 (CFM) HB-IOT Air Berlin 3. LeaseLux S.a.r.l. airberlin Pur. - sale & lease-back27-Mar-09 997 Airbus A330 340 (RR) 9V-STD Olympian Aviation Singapore Airlines Pur. - sale to S.P.C. by less. on del27-Mar-09 24209 Boeing 737 (CFMI) 300SF 5N-BMA Axiom Air Axiom Air Purchased - parked27-Mar-09 27476 Boeing 767 300ER (GE) JA98AD All Nippon Airways Trading Earth Ltd Air Do P. - subject to existing lease27-Mar-09 150 CASA 212 100 J5-GZZ Uncon. Guinea Bissau Operator Uncon. Guinea Bissau Op. Purchased - parked27-Mar-09 19000267 Embraer 190 LR OH-LKO Finnair Aircraft Finance Ltd Finnair P. - sale & lease-back on del27-Mar-09 DC-886B Fairchild (Swearingen) Metro 23 VH-HVH Westpac Banking Corp Hardy Aviation P. - subject to existing lease27-Mar-09 AC-667 Fairchild (Swearingen) Metro III VH-TGD Westpac Banking Corp Hardy Aviation Pur. - sale & lease-back28-Mar-09 22641 Boeing 727 200F (M) Ad (St3 Hshk) VH-VLI CSDS Aircraft Sales & Leasing JetEx P. - sale & lease-back - pkd30-Mar-09 24241 Boeing 737 (CFMI) 300 N337UA Aircraft Solutions 737-300 LLC Universal Asset Mgmt Inc Purchased - parked30-Mar-09 29890 Boeing 737 (NG) 600 N824SR US Air Force US Air Force Purchased - parked30-Mar-09 35590 Boeing 777 200LR (GE) A6-EWJ Pembroke Group Emirates Airline P. - sale & lease-back on del30-Mar-09 19000259 Embraer 190 AR N982TA JAG IX LLC TACA International Airlines Pur. - sale to S.P.C. by less. on del30-Mar-09 19000265 Embraer 190 AR N983TA JAG X LLC TACA International Airlines P. - sale & lease-back on del30-Mar-09 1229 Lockheed L-1011 TriStar 500 N163AT Fadia Musleh Barq Aviation P. - sale & lease-back - pkd30-Mar-09 1229 Lockheed L-1011 TriStar 500 N163AT Barq Aviation Barq Aviation Purchased - parked31-Mar-09 3604 Airbus A319 110 (CFM) HB-IOX Air Berlin 7 LeaseLux S.a.r.l. airberlin Pur. - sale & lease-back31-Mar-09 1134 Airbus A320 210 (CFM) N112US BNY Capital Funding LLC US Airways Pur. - sale & lease-back31-Mar-09 40 Airbus A320 210 (CFM) N304US GECAS Asset Management Services GECAS Asset Mgmt Svcs Purchased - parked31-Mar-09 E3181 BAE SYSTEMS (HS) 146 300 OB- Star Peru Star Peru Purchased31-Mar-09 30740 Boeing 737 (NG) 700 N737KA NAS Investments 1 Inc GECAS Purchased - parked31-Mar-09 33203 Boeing 737 (NG) 800 Winglets N980AN AFS Investments 48 LLC American Airlines P. - sale & lease-back on del31-Mar-09 25280 Boeing 767 300ER (P&W) UR-DNM Dniproavia Dniproavia Purchased31-Mar-09 8081 Bombardier (Canadair) CRJ Regional Jet Challenger 850 D-ATRI Chopper Dynamix Inc DC Aviation P. - sale & lease-back on del - pkd31-Mar-09 15063 Bombardier (Canadair) CRJ900 Regional Jet900ER C-FXCE Bombardier Inc Bombardier Inc Purchased - parked01-Apr-09 53298 Boeing (McDonnell-Douglas) MD-80 81 N822TH Grandmax Group Ltd Grandmax Group Ltd Purchased - parked01-Apr-09 53298 Boeing (McDonnell-Douglas) MD-80 81 N822TH Richard Trudell Inc Grandmax Group Ltd P. - sale & lease-back - pkd01-Apr-09 522 Bombardier (de Havilland) Dash 8 200 C-GRGK Regional 1 Airlines Regional 1 Airlines Purchased01-Apr-09 533 Bombardier (de Havilland) Dash 8 300 RA-67251 SAT Airlines SAT Airlines Purchased - parked01-Apr-09 533 Bombardier (de Havilland) Dash 8 300 RA-67251 Jione Financial Co Ltd SAT Airlines P. - sale & lease-back - pkd01-Apr-09 145737 Embraer ERJ-135 LR N841RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked01-Apr-09 20257 Fokker 50 OY-PCI Nordic Aviation Capital Nordic Aviation Capital Purchased - parked02-Apr-09 1344 Airbus A319 110 (CFM) F-GRHP Air France Air France P. off lse/fin term comp.02-Apr-09 2837 Airbus A319 CJ (CFM) VT-IAH Global Jet Aircraft Leasing Co. Ltd Reliance Industries P. - subject to existing lease02-Apr-09 1806 Airbus A320 210 (CFM) N203FR CIT Leasing Corp CIT Aerospace Purchased - parked02-Apr-09 22932 Boeing 727 200F RE Advanced 9Q- Ban Air Cargo Ban Air Cargo Purchased02-Apr-09 120203 Embraer EMB-120 Brasilia ER VH-ANN Westpac Banking Corp AirNorth P. - subject to existing lease02-Apr-09 DC-840B Fairchild (Swearingen) Metro 23 VH-ANY Westpac Banking Corp AirNorth P. - subject to existing lease03-Apr-09 1531 Airbus A321 210 (CFM) N181UW US Airways US Airways P. off lse/fin term comp.03-Apr-09 1932 Airbus A321 210 (CFM) OY-VKC Macquarie AirFinance Thomas Cook Airlines Scand. P. - subject to existing lease03-Apr-09 1960 Airbus A321 210 (CFM) OY-VKD Macquarie AirFinance Thomas Cook Airlines Scand. P. - subject to existing lease03-Apr-09 29682 Boeing 737 (NG) 800 N Babcock & Brown Aircraft Mgmt LLC Babcock & Brown AM LLC Purchased03-Apr-09 28617 Boeing 737 (NG) 800 Winglets SE-RHS OH Aircraft I-15 LLC Viking Airlines P. - subj. to exist. lease - pkd04-Apr-09 UE-78 Hawker Beechcraft 1900 D ZS- Specialized Aircraft Services Inc Specialized Aircraft Svcs IncPurchased - parked07-Apr-09 35148 Boeing 737 (NG) 800 Winglets OO-JAQ Macquarie AirFinance JetAir Fly P. - sale & lease-back on del07-Apr-09 7704 Bombardier (Canadair) CRJ Regional Jet 200LR C-FYJV Avmax Group Inc Avmax Int/l Aircraft Leas. Inc Purchased - parked07-Apr-09 7470 Bombardier (Canadair) CRJ Regional Jet 200LR C-FYKX Avmax Group Inc Avmax Int/l Aircraft Leas. Inc Purchased - parked07-Apr-09 20254 Fokker 50 PH-KXN Mass Holding NV Mass Jet Lease BV Purchased - parked08-Apr-09 1006 Airbus A330 340 (RR) 9V-STE Picollo Aviation Singapore Airlines Pur. - sale to S.P.C. by less. on del

Aircraft transactions — 17 March 2009 to 08 April 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks



08-Apr-09 899 BAE SYSTEMS (Jetstream) Jetstream 31 Super N484UE American King Air Services Inc American King Air Svcs Inc Purchased - parked08-Apr-09 47257 Boeing (McDonnell-Douglas) DC-9 32PC (M) (S3 Hshks) N983AX DHL Network Ops (USA) Inc ABX Air P. - sale & lease-back - pkd08-Apr-09 49405 Boeing (McDonnell-Douglas) MD-80 87 N205AM Allegiant Air Allegiant Air Purchased - parked08-Apr-09 23571 Boeing 737 (CFMI) 300 N69333 Continental Airlines Continental Airlines P. off lse/fin term comp.08-Apr-09 23020 Boeing 767 200PC (GE) N787AX 767 Aircraft One LLC Cargo Aircraft Management Inc Purchased - parked08-Apr-09 7690 Bombardier (Canadair) CRJ Regional Jet 200LR C-FYKT Avmax Group Inc Avmax Int/l A/c Leasing Inc Purchased - parked08-Apr-09 44 Bombardier (de Havilland) Dash 7 N702GG US Army US Army Purchased - parked08-Apr-09 17000280 Embraer 170 AR VH-ANV JAG VIII LLC AirNorth P. - sale & lease-back on del08-Apr-09 156 Saab 340 A SE-ISE Erik Thun AB NEX Time Jet AB P. - subject to existing lease09-Apr-09 3852 Airbus A320 210 (CFM) F-HBII Zidragon Aviation Leasing Limited Aigle Azur P. - sale & lease-back on del09-Apr-09 29647 Boeing 737 (NG) 800 N Aviation Capital Group Aviation Capital Group Purchased09-Apr-09 35106 Boeing 737 (NG) 800 Winglets VT-JBE MCAP Europe Ltd Jet Airways P. - subject to existing lease09-Apr-09 7652 Bombardier (Canadair) CRJ Regional Jet 200ER N679SA Trust N693BR Trust N693BR Purchased - parked09-Apr-09 15063 Bombardier (Canadair) CRJ900 RJ 900ER N563ES Bombardier Capital Inc Bombardier Capital Inc Purchased - parked09-Apr-09 391 Bombardier (de Havilland) DHC-6 Twin Otter 300 OB- Uncon. Peruvian Operator Uncon. Peruvian Operator Purchased09-Apr-09 UE-284 Hawker Beechcraft 1900 D VT-KDA Reliance Commercial Dealers Reliance Transport & Travel LTD P. - subject to existing lease09-Apr-09 233 Saab 340 B N233CJ S3B Leasing LLC Fairbrook Leasing Inc P. - subj. to exist. lease - pkd09-Apr-09 233 Saab 340 B N233CJ Turbo Lease LLC Fairbrook Leasing Inc P. - subj. to exist. lease - pkd09-Apr-09 252 Saab 340 B N252CJ S3B Leasing LLC Fairbrook Leasing Inc P. - subj. to exist. lease - pkd09-Apr-09 252 Saab 340 B N252CJ Turbo Lease LLC Fairbrook Leasing Inc P. - subj. to exist. lease - pkd10-Apr-09 36636 Boeing 737 (NG) 700 Winglets N930WN BOC Aviation (USA) Corp Southwest Airlines P. - sale & lease-back on del10-Apr-09 36637 Boeing 737 (NG) 700 Winglets N931WN BOC Aviation (USA) Corp Southwest Airlines P. - sale & lease-back on del10-Apr-09 36639 Boeing 737 (NG) 700 Winglets N932WN BOC Aviation (USA) Corp Southwest Airlines P. - sale & lease-back on del14-Apr-09 695 Airbus A330 300 (GE) VH-QPH QF Caylon 2009-2 Pty Limited Qantas Pur. - sale & lease-back14-Apr-09 E2066 BAE SYSTEMS (HS) 146 200 G-CCJP Star Peru Star Peru Purchased - parked14-Apr-09 49907 Boeing (McDonnell-Douglas) MD-80 81 YV LASER LASER Purchased - parked14-Apr-09 21455 Boeing 727 200F (M) Ad (R St3 Sys) C-GKFJ Kelowna Flightcraft Kelowna Flightcraft Purchased14-Apr-09 29934 Boeing 737 (NG) 800 Winglets EI-CSV CIT Aerospace International CIT Aerospace Purchased - parked14-Apr-09 35147 Boeing 737 (NG) 800 Winglets G-FDZS Babcock & Brown A/c Mgmt LLC Thomson Airways P. - sale & lease-back on del14-Apr-09 27198 Boeing 757 200 (RR) N907FD FedEx FedEx Purchased - parked14-Apr-09 7467 Bombardier (Canadair) CRJ Regional Jet 200LR C-FYKZ Avmax Group Inc Avmax Int/l A/c Leasing Inc Purchased - parked14-Apr-09 4238 Bombardier (de Havilland) Dash 8 400 VH-QOP QF Dash 8 Leasing No 4 Pty Ltd Sunstate Airlines P. - sale & lease-back on del14-Apr-09 4241 Bombardier (de Havilland) Dash 8 400 VH-QOR QF Dash 8 Leasing No 4 Pty Ltd Sunstate Airlines P. - sale & lease-back on del14-Apr-09 169 Gulfstream Aerospace Gulfstream I N200AE Berry GP Inc Berry GP Inc Purchased15-Apr-09 309 Airbus A310 200 (GE) N409AT Qwest Air Parts Inc Qwest Air Parts Inc Purchased - parked15-Apr-09 3833 Airbus A320 210 (CFM) CN-NMB Air Arabia Air Arabia Maroc Purchased - parked15-Apr-09 2054 Airbus A320 210 (CFM) EP- Iran Air Iran Air Purchased - parked15-Apr-09 1736 BAE SYSTEMS (HS) 748 Srs 2B (SCD) 9G-MKV MK Airlines MK Airlines P. off lse/fin term comp.15-Apr-09 35348 Boeing 737 (NG) 800 Winglets JA319J SMFL Aircraft Capital Japan Co Ltd Japan Airlines International P. - sale & lease-back on del15-Apr-09 24018 Boeing 747 300 (P&W) 5N-MBB Max Air (Nigeria) Max Air (Nigeria) Purchased - parked15-Apr-09 11509 Fokker 100 EP-OPI Iranian Air Transport Iranian Air Transport Purchased - parked15-Apr-09 11509 Fokker 100 F-GLIR Aircraft Financing and Trading BV Aircraft Financing/Trading BV Purchased - parked16-Apr-09 41055 BAE SYSTEMS (Jetstream) Jetstream 41 9N-AIO Agni Air Agni Air Purchased - parked17-Apr-09 49585 Boeing (McDonnell-Douglas) MD-80 87 N214AM Allegiant Air Allegiant Air Purchased - parked17-Apr-09 35485 Boeing 737 (NG) 800 Winglets 4X-EKH El Al El Al Purchased17-Apr-09 35146 Boeing 737 (NG) 800 Winglets PH-TFC Babcock & Brown Aircraft Mgmt LLC Arkefly P. - sale & lease-back on del17-Apr-09 36337 Boeing 737 (NG) 800 Winglets VT-AYA Four Lions Aircraft LLC Air India Express P. - sale & lease-back on del17-Apr-09 21787 Boeing 747 200F (SCD) (GE) N753SA Air Mobility Inc Ethiopian Airlines P. - subject to existing lease17-Apr-09 27619 Boeing 767 300ER (P&W) N281LF ILFC Ireland Ltd ILFC Purchased - parked17-Apr-09 19000272 Embraer 190 AR N306JB JetBlue Airways JetBlue Airways P. off lse/fin term comp.17-Apr-09 19000272 Embraer 190 AR N306JB PM Ltd JetBlue Airways P. - sale & lease-back on del17-Apr-09 120150 Embraer EMB-120 Brasilia N789TX Undis. Bank / Broker / Lessor Air Minas P. - sale & lease-back - pkd17-Apr-09 283 Saab 340 B VH-UYI Westpac Banking Corporation Westpac Banking Corp. Purchased - parked20-Apr-09 1404 Airbus A319 110 (CFM) F-GRHQ Air France Air France P. off lse/fin term comp.20-Apr-09 257 Airbus A320 230 (IAE) VT-EVP GMT Aircraft Leasing 12 LLC Air India P. - subject to existing lease20-Apr-09 327 Airbus A320 230 (IAE) VT-EVQ GMT Aircraft Leasing 12 LLC Air India P. - subject to existing lease20-Apr-09 336 Airbus A320 230 (IAE) VT-EVR GMT Aircraft Leasing 12 LLC Air India P. - subject to existing lease20-Apr-09 658 ATR ATR 72 500 D-ANFG ATR Contact Air P. - subject to existing lease20-Apr-09 660 ATR ATR 72 500 D-ANFH ATR Contact Air P. - subject to existing lease20-Apr-09 662 ATR ATR 72 500 D-ANFI ATR Contact Air P. - subject to existing lease20-Apr-09 664 ATR ATR 72 500 D-ANFJ ATR Contact Air P. - subject to existing lease20-Apr-09 666 ATR ATR 72 500 D-ANFK ATR Contact Air P. - subj. to exist. lease - pkd20-Apr-09 668 ATR ATR 72 500 D-ANFL ATR Contact Air P. - subject to existing lease20-Apr-09 28676 Boeing 777 200ER (P&W) F-ORUN Air Austral Air Austral P. off lse/fin term comp.20-Apr-09 7 Saab 2000 SE-LXH Swedish Aircraft Holdings AB Saab Aircraft Leasing AB P. off lse/fin term comp. - pkd20-Apr-09 217 Saab 340 B N217JJ Lambert Leasing Inc Saab Aircraft Leasing Inc Purchased - parked20-Apr-09 217 Saab 340 B XA-TKL Erik Thun AB Erik Thun AB Purchased - parked21-Apr-09 1972 Airbus A321 210 (CFM) OY-VKT Rain VIII LLC Thomas Cook Airlines Scand. P. - subject to existing lease21-Apr-09 862 ATR ATR 72 500 F-OIQR Anna B Snc Air Tahiti P. - sale & lease-back on del21-Apr-09 29930 Boeing 737 (NG) 800 Winglets EI-CSQ CIT Aerospace International CIT Aerospace Purchased - parked21-Apr-09 35640 Boeing 737 (NG) 800 Winglets N358MT Celestial Aviation Trading 14 Ltd GECAS Pur. - sale to S.P.C. by less. on del - pkd22-Apr-09 247 Airbus A320 230 (IAE) VT-EVO GMT Aircraft Leasing 12 LLC Air India P. - subject to existing lease22-Apr-09 29936 Boeing 737 (NG) 800 Winglets EI-CTA Germic Avn Safety & Regulatory Cons Germic Avn Safety & Reg. C. Purchased - parked22-Apr-09 29937 Boeing 737 (NG) 800 Winglets EI-CTB Germic Avn Safety & Regulatory Cons Germic Avn Safety & Reg. C. Purchased - parked22-Apr-09 7186 Bombardier (Canadair) CRJ Regional Jet 200ER C-GEXI Avmax Int/l Aircraft Leasing Inc Corporate Jet Air Pur. - sale & lease-back23-Apr-09 23377 Boeing 737 (CFMI) 300 N233MQ Engage Aviation LLC Engage Aviation LLC Purchased - parked23-Apr-09 24063 Boeing 747 400 (P&W) PK-LHF Lion Air Lion Air Purchased - parked23-Apr-09 24065 Boeing 747 400 (P&W) PK-LHG Lion Air Lion Air Purchased - parked23-Apr-09 22191 Boeing 757 200 (RR) N144DC L-3 Capital LLC L-3 Capital LLC Purchased23-Apr-09 205 Bombardier (de Havilland) Dash 8 100 C-FLAD Regional 1 Airlines Regional 1 Airlines Purchased23-Apr-09 117 Bombardier (de Havilland) Dash 8 100 C-GZKH Provincial Airlines Provincial Airlines Purchased23-Apr-09 145551 Embraer ERJ-135 LR N845RP Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked23-Apr-09 8100 Fairchild/Dornier 228 200 PJ-DVA Divi Divi Air Divi Divi Air Purchased24-Apr-09 3877 Airbus A320 230 (IAE) HA-LPU General Electric Capital Corp Wizz Air P. - sale & lease-back on del24-Apr-09 1007 Airbus A330 300 (GE) OH-LTN Finnair Aircraft Finance Ltd Finnair P. - sale & lease-back on del24-Apr-09 E2048 BAE SYSTEMS (HS) 146 200 G-FLTA Westall Ltd Westall Ltd Purchased - parked24-Apr-09 E2047 BAE SYSTEMS (HS) 146 200 G-OZRH Calder Ltd Calder Ltd Purchased - parked24-Apr-09 49790 Boeing (McDonnell-Douglas) MD-80 83 (MDC) G-FLTL Bajoran Ltd Bajoran Ltd Purchased - parked24-Apr-09 31067 Boeing 737 (NG) 800 Winglets N982AN AFS Investments 48 LLC American Airlines P. - sale & lease-back on del

Aircraft transactions — 08 April 2009 to 24 April 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks




27-Apr-09 41053 BAE SYSTEMS (Jetstream) Jetstream 41 N153KM Kirland 41053 LLC Kirland Aviation LLC P. - sale & lease-back - pkd27-Apr-09 41053 BAE SYSTEMS (Jetstream) Jetstream 41 N153KM Kirland Aviation LLC Kirland Aviation LLC Purchased - parked27-Apr-09 145597 Embraer ERJ-145 LR N559MD General Electric Capital Corp GECAS P. - subj. to exist. lease - pkd27-Apr-09 145607 Embraer ERJ-145 LR N607MD General Electric Capital Corp GECAS P. - subj. to exist. lease - pkd28-Apr-09 1920 Airbus A320 210 (CFM) B-6573 Spring Airlines Spring Airlines Purchased28-Apr-09 41052 BAE SYSTEMS (Jetstream) Jetstream 41 ZS- Uncon. South African Operator MCC Aviation (Pty) Ltd Purchased - parked28-Apr-09 22071 Boeing 737 (JT8D) 200 Ad (St3 Hshk) 9Q- Lignes Aeriennes Congolaises Lignes Aeriennes Congolaises Purchased28-Apr-09 32965 Boeing 777 200LRF (GE) F-GUOB BOC Aviation Air France P. - sale & lease-back on del29-Apr-09 3869 Airbus A321 230 (IAE) N570TA Airlease Twenty Nine Ltd TACA International Airlines P. - sale & lease-back on del29-Apr-09 1010 Airbus A330 340 (RR) 9V-STF Ad Astra Aviation Singapore Airlines Pur. - sale to S.P.C. by less. on del29-Apr-09 1009 Airbus A330 240 (RR) N968AV Aircol 5 Avianca P. - sale & lease-back on del29-Apr-09 150 Airbus A340 310 (CFM) HB-JMJ Bernina Aircraft Leasing Inc Swiss P. - subject to existing lease29-Apr-09 154 Airbus A340 310 (CFM) HB-JMM Bernina Aircraft Leasing Inc Swiss P. - subject to existing lease29-Apr-09 32966 Boeing 777 200LRF (GE) F-GUOC BOC Aviation Air France P. - sale & lease-back on del30-Apr-09 85 Airbus A300 B4-200F (GE) N363DH DHL Express (USA) Inc Astar Air Cargo P. - subject to existing lease30-Apr-09 141 Airbus A300 B4-200F (GE) N364DH DHL Express (USA) Inc Astar Air Cargo P. - subject to existing lease30-Apr-09 149 Airbus A300 B4-200F (GE) N365DH DHL Express (USA) Inc Astar Air Cargo P. - subject to existing lease30-Apr-09 249 Airbus A300 B4-200F (GE) N366DH DHL Express (USA) Inc Astar Air Cargo P. - subject to existing lease30-Apr-09 265 Airbus A300 B4-200F (GE) N367DH DHL Express (USA) Inc Astar Air Cargo P. - subject to existing lease30-Apr-09 1305 Airbus A319 110 (CFM) EI-DFA VGS Investments One Ltd Meridiana P. - subject to existing lease30-Apr-09 131 Airbus A340 310 (CFM) B-2381 Bank of Communications Fin. Leas. Co Ltd China Eastern Airlines Pur. - sale & lease-back30-Apr-09 141 Airbus A340 310 (CFM) B-2382 Bank of Communications Fin. Leas. Co Ltd China Eastern Airlines Pur. - sale & lease-back30-Apr-09 24252 Boeing 737 (CFMI) 300 N348UA Aircraft Solutions 737-300 LLC Universal Asset Mgmt Inc Purchased - parked30-Apr-09 29680 Boeing 737 (NG) 800 Winglets N Babcock & Brown A/c Mgmt LLC Babcock & Brown A.M LLC Purchased30-Apr-09 26270 Boeing 757 200 (P&W) N592BC BCC Equipment Leasing Corp Boeing Capital Corp Purchased - parked30-Apr-09 25131 Boeing 757 200 (P&W) N594BC BCC Equipment Leasing Corp Boeing Capital Corp Purchased - parked30-Apr-09 23216 Boeing 767 300 (P&W) N767NG JALUX Inc JALUX Inc Purchased - parked30-Apr-09 23216 Boeing 767 300 (P&W) N767NG GA Telesis LLC GA Telesis LLC Purchased - parked30-Apr-09 24157 Boeing 767 200ER (P&W) N983JM Jet Midwest Jet Midwest Purchased - parked30-Apr-09 35588 Boeing 777 300ER (GE) A6-ECQ DS-Rendite-Fonds Flugz IX GmbH & C Emirates Airline P. - sale & lease-back on del30-Apr-09 24 Bombardier (de Havilland) Dash 8 100 C-FZCC CHC Global Ops Canada (2008) CHC Global Ops Canada Purchased - parked01-May-09 3139 Airbus A319 110 (CFM) LZ-AOA B H Air B H Air Purchased - parked01-May-09 3188 Airbus A319 110 (CFM) LZ-AOB B H Air B H Air Purchased - parked01-May-09 34323 Boeing 737 (NG) 700 Winglets VH-VBY VB 700 2009 Pty Ltd Virgin Blue Airlines Pur. - sale & lease-back01-May-09 34322 Boeing 737 (NG) 700 Winglets VH-VBZ VB 700 2009 Pty Ltd Virgin Blue Airlines Pur. - sale & lease-back01-May-09 7426 Bombardier (Canadair) CRJ Regional Jet 200LR VP- Uncon. Corporate Operator Uncon. Corporate Opr. Purchased - parked01-May-09 697 Bombardier (de Havilland) DHC-6 Twin Otter 300 Vista Liner N178GC Cortez Fisher LLC Grand Canyon Airlines Pur. - sale & lease-back04-May-09 23091 Boeing 737 (JT8D) 200 A (St3 Hshk) N319DL MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased04-May-09 23103 Boeing 737 (JT8D) 200 A (St3 Hshk) N331DL MidAmerican Aerospace Ltd MidAmerican Aerospace Ltd Purchased - parked04-May-09 22197 Boeing 757 200 (RR) N811AD Megalith Group Megalith Group Purchased - parked05-May-09 22928 Boeing 727 200F RE Advanced HK- Lineas Aereas Suramericanas Lineas Aereas Suramericanas Purchased - parked06-May-09 3859 Airbus A320 210 (CFM) F-GKXT Skylease MSN 3859 Limited Air France Pur. - sale to S.P.C. by less. on del06-May-09 3884 Airbus A321 210 (CFM) F-GTAV Whitney Leasing Ltd Air France Pur. - sale to S.P.C. by less. on del06-May-09 E3387 BAE SYSTEMS (Avro) RJ Avroliner RJ100 A6-AAB Presidential Flight Presidential Flight Purchased - parked06-May-09 E2299 BAE SYSTEMS (Avro) RJ Avroliner RJ85 G- BAE SYSTEMS (Operations) Ltd BAE SYSTEMS Rgn A/c A. M Purchased - parked06-May-09 23919 Boeing 747 200F (SCD) (GE) N783SA Air Mobility Inc Southern Air Pur. - sale & lease-back06-May-09 24157 Boeing 767 200ER (P&W) FAC- Colombian Air Force Colombian Air Force Purchased - parked06-May-09 414 Bombardier (de Havilland) DHC-6 Twin Otter 300 VQ-T Air Turks & Caicos (2003) Air Turks & Caicos (2003) Purchased07-May-09 32897 Boeing (McDonnell-Douglas) DC-3 C-47TP N146RD IAL Corp Dodson Aviation Inc Pur. - sale & lease-back07-May-09 23672 Boeing 737 (CFMI) 300 N311UA VPAF LLC VPAF LLC Purchased - parked07-May-09 19000109 Embraer 190 Lineage 1000 A6-ARK Aamer Abdul Jalil Al Fahim Prestige Jet Del. - pur. of usd/demo a/c07-May-09 3169 Fairchild/Dornier 328JET UR-DAV Aerostar Aerostar Purchased08-May-09 409 ATR ATR 42 300 9N-AIT Buddha Air Buddha Air Purchased08-May-09 22927 Boeing 727 200F RE Advanced HK- Lineas Aereas Suramericanas Lineas Aereas Suramericanas Purchased - parked08-May-09 267 Saab 340 B N366PX Compass Air IX Corp Compass Capital Corp P. - sale & lease-back - pkd11-May-09 1415 Airbus A319 110 (CFM) F-GRHR Air France Air France P. off lse/fin term comp.11-May-09 5225 Lockheed Hercules L-100-30 Derco Aerospace Derco Aerospace Purchased - parked12-May-09 564 Bombardier (de Havilland) Dash 8 300 C-FYRO Field Aviation Company Inc Field Aviation Company IncPurchased - parked12-May-09 3141 Fairchild/Dornier 328JET D- 328 Support Services GmbH 328 Support Services GmbH Purchased - parked12-May-09 3120 Fairchild/Dornier 328JET D- 328 Support Services GmbH 328 Support Services GmbH Purchased - parked13-May-09 1012 Airbus A330 340 (RR) 9V-STG Sunshine Aviation Singapore Airlines Pur. - sale to S.P.C. by less. on del13-May-09 33938 Boeing 737 (NG) 700 N357AT Aerolineas Argentinas Aerolineas Argentinas Purchased14-May-09 3899 Airbus A321 230 (IAE) VH-VWX CIT Aerospace International Jetstar P. - sale & lease-back on del15-May-09 22020 Boeing 727 200 A (St3 Hshk) D2- Uncon. Angolan Operator Uncon. Angolan Operator Purchased15-May-09 20262 Fokker 50 PH-KXX Mass Holding NV Mass Jet Lease BV Purchased - parked15-May-09 UE-93 Hawker Beechcraft 1900 D HK- Aerolet Aerolet Purchased18-May-09 899 BAE SYSTEMS (Jetstream) Jetstream 31 Super 6V- Senegal Air Senegal Air Purchased18-May-09 32897 Boeing (McDonnell-Douglas) DC-3 C-47TP N146RD Lee County Mosquito Control Dist Lee County Mosquito Ctrl Dist Purchased18-May-09 24729 Boeing 767 300ER (P&W) N767NF Undis. Bank / Broker / Lessor Undis. Bank / Broker / Lessor Purchased - parked19-May-09 E1104 BAE SYSTEMS (HS) 146 100 VH-NJE Regional One Inc Regional One Inc Purchased - parked19-May-09 24 Bombardier (de Havilland) Dash 8 100 N1000 Dynamic AvLease Inc Dynamic AvLease Inc Purchased19-May-09 AC-713B Fairchild (Swearingen) Metro III C-FJKK Carson Air Ltd Carson Air Ltd Purchased19-May-09 10372 Fokker F.27 500 5Y Uncon. Kenyan Operator Uncon. Kenyan Operator Purchased - parked20-May-09 49908 Boeing (McDonnell-Douglas) MD-80 81 YV LASER LASER Purchased - parked20-May-09 35486 Boeing 737 (NG) 800 Winglets 4X-EKJ El Al El Al Purchased20-May-09 3661 Bombardier (Shorts) 360 N Engage Aviation LLC Engage Aviation LLC Purchased - parked20-May-09 3686 Bombardier (Shorts) 360 Advanced N Engage Aviation LLC Engage Aviation LLC Purchased - parked20-May-09 3715 Bombardier (Shorts) 360 Advanced N Engage Aviation LLC Engage Aviation LLC Purchased - parked20-May-09 3712 Bombardier (Shorts) 360 Advanced N Engage Aviation LLC Engage Aviation LLC Purchased - parked20-May-09 3608 Bombardier (Shorts) 360 N Engage Aviation LLC Engage Aviation LLC Purchased - parked21-May-09 662 Bombardier (de Havilland) Dash 8 300 N806MR USAF USAF Purchased21-May-09 3733 Bombardier (Shorts) 360 300 N569FU Aacme LLC Engage Aviation LLC Purchased - parked21-May-09 3038 Fairchild/Dornier 328 100 PK- Aero Nusantara Indonesia (ANI) Aero Nusantara Indonesia Purchased - parked

Aircraft transactions — 27 April 2009 to 21 May 2009Contract Owner Operator Event Date S/N A/C Model Variant Reg No Name Name Remarks


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