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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-K/A

ANNUAL REPORT


(Amendment No. 3)




---

(Mark One)

|  |                                                     
|- | ----------------------------------------------------
|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31,
2004

OR



|  |                                                             
|- | ------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from _______________
to _______________

Commission file number 1-316161


INTERNATIONAL LEASE FINANCE
CORPORATION

(Exact name of registrant as specified in its
charter)


|                                                                                                                 |  |                                         
|---------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|California                                                                                                       |  | 22-3059110                              
|(State or other jurisdiction of
    incorporation or organization)                                               |  | (I.R.S. Employer
    Identification No.)
|                                                                                                                
|10250 Constellation Blvd., Suite 3400,
    Los Angeles, California
     (Address of principal executive offices) |  | 90067
    (Zip Code)                    

Registrants telephone number, including
area code: (310) 788-1999

Securities registered pursuant to Section
12(b) of the Act:

|                                |  |                                          
|------------------------------- |  | -----------------------------------------
|Title of each class             |  | Name of each exchange on which registered
|                                |  |                                          
|6.375% Notes due March 15, 2009 |  | New York Stock Exchange                  

Securities registered pursuant to Section
12(g) of the Act:

NONE


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days. YESxNOo

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.x

Indicate by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the
Act). YESoNOx

As of June 30, 2004 and February 28,
2005, there were 42,198,119 shares of Common Stock, no par
value, outstanding, all of which were held by
affiliates.

Registrant meets the conditions set forth in
General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure
format.



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Explanatory Note

This Form 10-K/A is being filed to reflect
the restatement of International Lease Finance
Corporations (the Company) previously issued
Consolidated Financial Statements. See Selected Financial
Data, Managements Discussion and Analysis of Financial
Condition and Results of Operations, Controls and
Procedures and the Consolidated Financial Statements,
including the Note B of Notes to Consolidated Financial
Statements, for the impact of the restatement on each year
presented.

This amendment to the Companys Annual
Report on Form 10-K for the fiscal year ended December 31,
2004 amends and restates only those items of the previously
filed Form 10-K which have been affected by the
restatement. In order to preserve the nature and character of
the disclosures set forth in such items as originally filed, no
attempt has been made in this amendment to modify or update such
disclosures except as required to reflect the effects of the
restatement. For additional information regarding the
restatement, see Note B of Notes to Consolidated
Financial Statements included in Part II, Item 8.

Financial numbers are presented in thousands of
U.S. dollars throughout this Form 10-K/A which may
result in rounding differences.



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TABLE OF CONTENTS



|             |                                                                                                                                |  |  |  |  |  |  | 
|------------ | ------------------------------------------------------------------------------------------------------------------------------ |  |  |  |  |  |  | 
|PART I      
|             | Item 1.Business                                                                                                               
|             | Item 2.Properties                                                                                                             
|PART II     
|             | Item 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (Restated)
|             | Item 6.Selected Financial Data                                                                                                
|             | Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations                                  
|             | Item 7A.Quantitative and Qualitative Disclosures About Market Risk                                                            
|             | Item 8.Financial Statements and Supplementary Data                                                                            
|             | Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                   
|             | Item 9A.Controls and Procedures                                                                                               
|PART IV     
|             | Item 15.Exhibits and Financial Statement Schedules                                                                            
|SIGNATURES  
|Exhibit 12  
|Exhibit 31.1
|Exhibit 31.2
|Exhibit 32.1



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INTERNATIONAL LEASE FINANCE
CORPORATION

2004 FORM 10-K/A ANNUAL REPORT



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TABLE OF CONTENTS

|            |  |                                                                                                                      |   |      |    | 
|----------- |  | -------------------------------------------------------------------------------------------------------------------- | - | ---- | -- | 
|            |  |                                                                                                                      |   | Page
|            |  |                                                                                                                      |   |     
|Restatement |  |                                                                                                                      | 1 |     
|PART I     
|Item  1.    |  | Business                                                                                                             |   |      | 6  | 
|Item  2.    |  | Properties                                                                                                           |   |      | 12 | 
|PART II    
|Item  5.    |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |   |      | 14 | 
|Item  6.    |  | Selected Financial Data                                                                                              |   |      | 15 | 
|Item  7.    |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations                            |   |      | 17 | 
|Item  7A.   |  | Quantitative and Qualitative Disclosures About
    Market Risk                                                       |   |      | 37 | 
|Item  8.    |  | Financial Statements and Supplementary Data                                                                          |   |      | 38 | 
|Item  9.    |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure                             |   |      | 38 | 
|Item  9A.   |  | Controls and Procedures                                                                                              |   |      | 38 | 
|PART IV    
|Item 15.    |  | Exhibits and Financial Statement Schedules                                                                           |   |      | 41 | 



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Restatement

The following information describes the
corrections in accounting for certain derivatives transactions
and foreign currency transactions and for certain payments from
aircraft and engine manufacturers, together with the effect on
International Lease Finance Corporations
(ILFC, the Company, our)
Consolidated Statement of Income and Consolidated Balance Sheet
accounts.

Derivative Instruments

ILFC enters into derivative instruments to hedge
interest rates and foreign currency risks. As part of the
previously announced restatement of the financial statements of
American International Group, Inc. (AIG),
ILFCs indirect parent corporation, AIG began an intensive
review of the books and records relating to a wide variety of
transactions entered into by AIG and its subsidiaries. During
the review of all hedge transactions, after ILFC had filed its
2004 Form 10-K and first quarter 2005 Form 10-Q,
deficiencies were identified related to ILFCs
documentation of hedge transactions and errors were identified
in the application of the proper accounting for derivative
related transactions under Statement of Financial Accounting
Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended
(SFAS 133). The review identified:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Documentation deficiencies related to portions of
    Euro denominated debt that ILFC had designated as a hedge
    against future operating lease payments receivable denominated
    in Euros. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.
|
| |  | Certain Euro denominated cash accounts associated
    with the aforementioned operating lease payments and certain
    foreign currency denominated debt required mark-to-spot
    treatment under Statement of Financial Accounting Standards
    No. 52, Foreign Currency Translation, which were not
    properly accounted for at the end of each quarter during the
    years 2004, 2003, 2002 and 2001.                                                                                  
|
| |  | Documentation deficiencies related to four
    commercial paper swaps where portions of ILFCs commercial
    paper program were swapped from floating into fixed interest
    rates. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.           
|
| |  | Minor errors under SFAS 133 with respect to
    derivative instruments related to the reclassification to income
    from Accumulated other comprehensive income. The corrections
    will also affect derivative assets and liabilities and accrued
    interest.                                                                                                                                                                                                                             

1



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##### Table of Contents



The accounting restatement for derivative
instruments had the following effect on ILFCs Consolidated
Statement of Income and Consolidated Balance Sheet accounts:

|                                   |                                             |                                     |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |   | 
|---------------------------------- | ------------------------------------------- | ----------------------------------- | - | ------- | - | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | - |  | - | - | 
|                                   |                                             |                                    
|                                   |                                             | For Years Ended and At December 31,
|                                   |                                             |                                    
|                                   |                                             | 2004                                |   | 2003    |   | 2002 |   | 2001    |   | 2000
|Increase (Decrease)                |                                             |                                     |   |         |   |      |   |         |   |     
|                                   |                                             |                                     |   |         |   |      |   |         |   |     
|                                   |                                             |                                    
|                                   |                                             | (Dollars in thousands)             
|Consolidated Statements of Income: |                                             |                                     |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |  
|                                   | Interest and other revenue                  |                                     | $ | (18,316 | ) |      | $ | (31,152 | ) |      | $ | (42,703 | ) |  | $ | 24,563  |   |  | $ |  | 
|                                   | Interest expense                            |                                     |   | (22,640 | ) |      |   | (24,619 | ) |      |   | 20,500  |   |  |   | 28,036  |   |  |   |  | 
|                                   | Selling, general and administrative expense |                                     |   | (3,986  | ) |      |   | (1,631  | ) |      |   | (1,992  | ) |  |   | (687    | ) |  |   |  | 
|                                   | Net income                                  |                                     |   | 5,374   |   |      |   | (3,170  | ) |      |   | (39,582 | ) |  |   | (8,681  | ) |  |   |  | 
|Consolidated Balance Sheets:       |                                             |                                     |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |  
|                                   | Cash                                        |                                     |   | (1,906  | ) |      |   | 11,461  |   |      |   | 5,646   |   |  |   | 5,217   |   |  |   |  | 
|                                   | Derivative assets                           |                                     |   | (19,306 | ) |      |   |        |   |      |   |        |   |  |   |        |   |  |   |  | 
|                                   | Accrued interest and other payables         |                                     |   |        |   |      |   |        |   |      |   | 2,320   |   |  |   | (19,760 | ) |  |   |  | 
|                                   | Foreign currency adjustment                 |                                     |   |        |   |      |   | 142,284 |   |      |   | (325    | ) |  |   | 11,026  |   |  |   |  | 
|                                   | Derivative liabilities                      |                                     |   |        |   |      |   |        |   |      |   |        |   |  |   | 33,276  |   |  |   |  | 
|                                   | Accumulated other comprehensive income      |                                     |   | 32,475  |   |      |   | (33,370 | ) |      |   | 50,849  |   |  |   | 4,829   |   |  |   |  | 

|                                   |                                             |                           |   |          |   |               |   |              |   |  |   |        |   |  |   |         |  
|---------------------------------- | ------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | ------ | - |  | - | ------- | -
|                                   |                                             |                          
|                                   |                                             | For Quarters Ended and At
|                                   |                                             |                          
|                                   |                                             | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                             | 2004                      |   | 2004     |   | 2004          |   | 2004        
|Increase (Decrease)                |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                          
|                                   |                                             | (Dollars in thousands)   
|Consolidated Statements of Income: |                                             |                           |   |          |   |               |   |              |   |  |   |        |   |  |   |        
|                                   | Interest and other revenue                  |                           | $ | 1,426    |   |               | $ | 905          |   |  | $ | (1,349 | ) |  | $ | (19,298 | )
|                                   | Interest expense                            |                           |   | (5,291   | ) |               |   | (7,685       | ) |  |   | (9,642 | ) |  |   | (22     | )
|                                   | Selling, general and administrative expense |                           |   | (665     | ) |               |   | (188         | ) |  |   | 4,713  |   |  |   | (7,846  | )
|                                   | Net income                                  |                           |   | 4,773    |   |               |   | 5,676        |   |  |   | 2,316  |   |  |   | (7,391  | )
|Consolidated Balance Sheets:       |                                             |                           |   |          |   |               |   |              |   |  |   |        |   |  |   |        
|                                   | Cash                                        |                           |   | 3,013    |   |               |   | 2,740        |   |  |   | 2,766  |   |  |   | (1,906  | )
|                                   | Derivative assets                           |                           |   | 31,623   |   |               |   | (32,176      | ) |  |   | (319   | ) |  |   | (19,306 | )
|                                   | Accrued interest and other payables         |                           |   |         |   |               |   |             |   |  |   |       |   |  |   |        |  
|                                   | Foreign currency adjustment                 |                           |   | (37,152  | ) |               |   | (13,076      | ) |  |   | (2     | ) |  |   |        |  
|                                   | Derivative liabilities                      |                           |   |         |   |               |   |             |   |  |   |       |   |  |   |        |  
|                                   | Accumulated other comprehensive income      |                           |   | 57,438   |   |               |   | 30,259       |   |  |   | 40,083 |   |  |   | 32,475  |  

2



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##### Table of Contents



|                                   |                                             |                           |   |          |   |               |   |              |   |  |   |         |   |  |   |         |  
|---------------------------------- | ------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | ------- | - |  | - | ------- | -
|                                   |                                             |                          
|                                   |                                             | For Quarters Ended and At
|                                   |                                             |                          
|                                   |                                             | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                             | 2003                      |   | 2003     |   | 2003          |   | 2003        
|Increase (Decrease)                |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                          
|                                   |                                             | (Dollars in thousands)   
|Consolidated Statements of Income: |                                             |                           |   |          |   |               |   |              |   |  |   |         |   |  |   |        
|                                   | Interest and other revenue                  |                           | $ | (8,142   | ) |               | $ | (10,494      | ) |  | $ | (2,010  | ) |  | $ | (10,506 | )
|                                   | Interest expense                            |                           |   | 2,617    |   |               |   | (9,082       | ) |  |   | (11,545 | ) |  |   | (6,609  | )
|                                   | Selling, general and administrative expense |                           |   | (736     | ) |               |   | (87          | ) |  |   | (363    | ) |  |   | (445    | )
|                                   | Net income                                  |                           |   | (6,481   | ) |               |   | (857         | ) |  |   | 6,400   |   |  |   | (2,232  | )
|Consolidated Balance Sheets:       |                                             |                           |   |          |   |               |   |              |   |  |   |         |   |  |   |        
|                                   | Cash                                        |                           |   | 7,260    |   |               |   | 6,454        |   |  |   | 7,476   |   |  |   | 11,461  |  
|                                   | Derivative assets                           |                           |   |         |   |               |   |             |   |  |   |        |   |  |   |        |  
|                                   | Accrued interest and other payables         |                           |   |         |   |               |   |             |   |  |   | 1,671   |   |  |   |        |  
|                                   | Foreign currency adjustment                 |                           |   | (325     | ) |               |   | (325         | ) |  |   | (325    | ) |  |   | 142,284 |  
|                                   | Derivative liabilities                      |                           |   |         |   |               |   |             |   |  |   |        |   |  |   |        |  
|                                   | Accumulated other comprehensive income      |                           |   | 59,923   |   |               |   | 60,260       |   |  |   | 53,405  |   |  |   | (33,370 | )

Though the economics of the hedge transactions
are not affected, the corrections will significantly increase
inter-period volatility due to the non-qualification of hedge
accounting treatment under SFAS 133. Thus, the effect on
Net income, Retained earnings and Shareholders equity will
differ from period to period.

Certain Payments from Aircraft and Engine
Manufacturers

In the course of ILFCs review of its
application of SFAS 133, ILFC, in consultation with its
independent registered public accountants, identified an error
in its accounting for certain payments received from aircraft
and engine manufacturers. Under arrangements with these
manufacturers, in certain circumstances the manufacturers
established notional accounts for the benefit of ILFC, to which
amounts were credited by the manufacturers in connection with
the purchase by and delivery to ILFC and the lease of aircraft.
Amounts credited to the notional accounts were used at
ILFCs direction to protect ILFC from certain events
including loss when airline customers of ILFC defaulted on lease
payment obligations, to provide lease subsidies and other
incentives to ILFC airline customers in connection with leases
of certain aircraft and to reduce ILFCs cost of aircraft
purchased.

Historically, ILFC recorded as revenues gross
lease receipts from customers who had received lease subsidies
from the notional accounts and amounts paid directly to ILFC
from the notional accounts in connection with lessee defaults.
Amounts recorded as revenue at the time they were disbursed to
ILFC or its lessees should have been recorded as a reduction of
the purchase price of the aircraft at the time of delivery.

3



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The accounting restatement for the
manufacturers payments had the following effect on
ILFCs Consolidated Statement of Income and Consolidated
Balance Sheet accounts:

|                                   |                                                          |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------------------------------------- | ----------------------------------- | - | -------- | - | ---- | - | -------- | - | ---- | - | -------- | - |  | - | -------- | - |  | - | -------- | -
|                                   |                                                          |                                    
|                                   |                                                          | For Years Ended and At December 31,
|                                   |                                                          |                                    
|                                   |                                                          | 2004                                |   | 2003     |   | 2002 |   | 2001     |   | 2000
|Increase (Decrease)                |                                                          |                                     |   |          |   |      |   |          |   |     
|                                   |                                                          |                                     |   |          |   |      |   |          |   |     
|                                   |                                                          |                                    
|                                   |                                                          | (Dollars in thousands)             
|Consolidated Statements of Income: |                                                          |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Rentals of flight equipment revenue                      |                                     | $ | (124,300 | ) |      | $ | (133,885 | ) |      | $ | (131,734 | ) |  | $ | (62,208  | ) |  | $ | (50,460  | )
|                                   | Flight equipment marketing revenue                       |                                     |   | 8,868    |   |      |   | (12,088  | ) |      |   | (17,862  | ) |  |   | (31,043  | ) |  |   | (25,219  | )
|                                   | Interest and other revenue                               |                                     |   | 248      |   |      |   | 543      |   |      |   | 2,641    |   |  |   | 4,200    |   |  |   | 4,749    |  
|                                   | Depreciation expense                                     |                                     |   | (45,175  | ) |      |   | (40,869  | ) |      |   | (36,329  | ) |  |   | (31,289  | ) |  |   | (25,526  | )
|                                   | Net income                                               |                                     |   | (45,272  | ) |      |   | (67,614  | ) |      |   | (71,536  | ) |  |   | (37,352  | ) |  |   | (29,360  | )
|Consolidated Balance Sheets:       |                                                          |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Accrued interest, other receivables and other
    assets |                                     |   | 80,238   |   |      |   | 48,358   |   |      |   | 103,281  |   |  |   | 159,888  |   |  |   | 147,806  |  
|                                   | Flight equipment under operating leases (net)            |                                     |   | (575,219 | ) |      |   | (473,329 | ) |      |   | (423,692 | ) |  |   | (369,673 | ) |  |   | (299,828 | )

|                                   |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                                                          |                          
|                                   |                                                          | For Quarters Ended and At
|                                   |                                                          |                          
|                                   |                                                          | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                                          | 2004                      |   | 2004     |   | 2004          |   | 2004        
|Increase (Decrease)                |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                          
|                                   |                                                          | (Dollars in thousands)   
|Consolidated Statements of Income: |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Rentals of flight equipment revenue                      |                           | $ | (24,978  | ) |               | $ | (33,125      | ) |  | $ | (33,502  | ) |  | $ | (32,695  | )
|                                   | Flight equipment marketing revenue                       |                           |   | 6,569    |   |               |   | 1,176        |   |  |   | (464     | ) |  |   | 1,587    |  
|                                   | Interest and other revenue                               |                           |   | 50       |   |               |   | 78           |   |  |   | 77       |   |  |   | 43       |  
|                                   | Depreciation expense                                     |                           |   | (10,829  | ) |               |   | (11,284      | ) |  |   | (11,316  | ) |  |   | (11,746  | )
|                                   | Net income                                               |                           |   | (4,869   | ) |               |   | (13,312      | ) |  |   | (14,598  | ) |  |   | (12,493  | )
|Consolidated Balance Sheets:       |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Accrued interest, other receivables and other
    assets |                           |   | 68,415   |   |               |   | 89,909       |   |  |   | 60,287   |   |  |   | 80,238   |  
|                                   | Flight equipment under operating leases (net)            |                           |   | (500,917 | ) |               |   | (543,410     | ) |  |   | (535,948 | ) |  |   | (575,219 | )

|                                   |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                                                          |                          
|                                   |                                                          | For Quarters Ended and At
|                                   |                                                          |                          
|                                   |                                                          | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                                          | 2003                      |   | 2003     |   | 2003          |   | 2003        
|Increase (Decrease)                |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                          
|                                   |                                                          | (Dollars in thousands)   
|Consolidated Statements of Income: |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Rentals of flight equipment revenue                      |                           | $ | (21,189  | ) |               | $ | (30,669      | ) |  | $ | (33,861  | ) |  | $ | (48,166  | )
|                                   | Flight equipment marketing revenue                       |                           |   |         |   |               |   | (11,262      | ) |  |   | (4,089   | ) |  |   | 3,263    |  
|                                   | Interest and other revenue                               |                           |   | 162      |   |               |   | 110          |   |  |   | 185      |   |  |   | 86       |  
|                                   | Depreciation expense                                     |                           |   | (9,572   | ) |               |   | (10,237      | ) |  |   | (10,500  | ) |  |   | (10,560  | )
|                                   | Net income                                               |                           |   | (7,407   | ) |               |   | (20,424      | ) |  |   | (17,631  | ) |  |   | (22,152  | )
|Consolidated Balance Sheets:       |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Accrued interest, other receivables and other
    assets |                           |   | 90,598   |   |               |   | 103,584      |   |  |   | 85,847   |   |  |   | 48,358   |  
|                                   | Flight equipment under operating leases (net)            |                           |   | (422,463 | ) |               |   | (467,034     | ) |  |   | (476,561 | ) |  |   | (473,329 | )

4



---



##### Table of Contents





| |                                    
| | -----------------------------------
| | Aggregate Effect of the Restatement

The restatement had the following aggregate
effect on ILFCs Consolidated Statement of Income and
Consolidated Balance Sheet accounts:

|                                   |                            |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------- | ----------------------------------- | - | -------- | - | ---- | - | -------- | - | ---- | - | -------- | - |  | - | -------- | - |  | - | -------- | -
|                                   |                            |                                    
|                                   |                            | For Years Ended and At December 31,
|                                   |                            |                                    
|                                   |                            | 2004                                |   | 2003     |   | 2002 |   | 2001     |   | 2000
|Increase (Decrease)                |                            |                                     |   |          |   |      |   |          |   |     
|                                   |                            |                                     |   |          |   |      |   |          |   |     
|                                   |                            |                                    
|                                   |                            | (Dollars in thousands)             
|Consolidated Statements of Income: |                            |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Revenue                    |                                     | $ | (133,500 | ) |      | $ | (176,582 | ) |      | $ | (189,658 | ) |  | $ | (64,488  | ) |  | $ | (70,930  | )
|                                   | Expense                    |                                     |   | (71,801  | ) |      |   | (67,119  | ) |      |   | (17,821  | ) |  |   | (3,940   | ) |  |   | (25,526  | )
|                                   | Net income(a)              |                                     |   | (39,898  | ) |      |   | (70,784  | ) |      |   | (111,118 | ) |  |   | (46,033  | ) |  |   | (29,360  | )
|Consolidated Balance Sheets:       |                            |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Total assets               |                                     |   | (529,208 | ) |      |   | (413,510 | ) |      |   | (327,502 | ) |  |   | (212,591 | ) |  |   | (158,562 | )
|                                   | Total liabilities          |                                     |   | (195,543 | ) |      |   | (53,895  | ) |      |   | (122,894 | ) |  |   | (78,716  | ) |  |   | (57,017  | )
|                                   | Total shareholders equity |                                     |   | (333,665 | ) |      |   | (359,615 | ) |      |   | (204,608 | ) |  |   | (133,875 | ) |  |   | (101,545 | )



---



|    |                                                                   
|--- | ------------------------------------------------------------------
|(a) | The effect on net income prior to the year 2000
    was $(68,945).

|                                   |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                            |                          
|                                   |                            | For Quarters Ended and At
|                                   |                            |                          
|                                   |                            | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                            | 2004                      |   | 2004     |   | 2004          |   | 2004        
|Increase (Decrease)                |                            |                           |   |          |   |               |   |             
|                                   |                            |                           |   |          |   |               |   |             
|                                   |                            |                          
|                                   |                            | (Dollars in thousands)   
|Consolidated Statements of Income: |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Revenue                    |                           | $ | (16,933  | ) |               | $ | (30,966      | ) |  | $ | (35,238  | ) |  | $ | (50,363  | )
|                                   | Expense                    |                           |   | (16,785  | ) |               |   | (19,157      | ) |  |   | (16,245  | ) |  |   | (19,614  | )
|                                   | Net income                 |                           |   | (96      | ) |               |   | (7,636       | ) |  |   | (12,282  | ) |  |   | (19,884  | )
|Consolidated Balance Sheets:       |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Total assets               |                           |   | (453,387 | ) |               |   | (482,937     | ) |  |   | (473,214 | ) |  |   | (529,208 | )
|                                   | Total liabilities          |                           |   | (184,487 | ) |               |   | (179,221     | ) |  |   | (167,040 | ) |  |   | (195,543 | )
|                                   | Total shareholders equity |                           |   | (268,900 | ) |               |   | (303,716     | ) |  |   | (306,174 | ) |  |   | (333,665 | )

|                                   |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                            |                          
|                                   |                            | For Quarters Ended and At
|                                   |                            |                          
|                                   |                            | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                            | 2003                      |   | 2003     |   | 2003          |   | 2003        
|Increase (Decrease)                |                            |                           |   |          |   |               |   |             
|                                   |                            |                           |   |          |   |               |   |             
|                                   |                            |                          
|                                   |                            | (Dollars in thousands)   
|Consolidated Statements of Income: |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Revenue                    |                           | $ | (29,169  | ) |               | $ | (52,315      | ) |  | $ | (39,775  | ) |  | $ | (55,323  | )
|                                   | Expense                    |                           |   | (7,691   | ) |               |   | (19,406      | ) |  |   | (22,408  | ) |  |   | (17,614  | )
|                                   | Net income                 |                           |   | (13,888  | ) |               |   | (21,281      | ) |  |   | (11,231  | ) |  |   | (24,384  | )
|Consolidated Balance Sheets:       |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Total assets               |                           |   | (340,659 | ) |               |   | (376,526     | ) |  |   | (406,605 | ) |  |   | (413,510 | )
|                                   | Total liabilities          |                           |   | (129,116 | ) |               |   | (141,805     | ) |  |   | (151,347 | ) |  |   | (53,895  | )
|                                   | Total shareholders equity |                           |   | (211,543 | ) |               |   | (234,721     | ) |  |   | (255,258 | ) |  |   | (359,615 | )

ILFCs aggregate cash flows were unaffected.
ILFC continues to be in compliance with its debt covenants after
the restatement.



| |                     
| | --------------------
| | Capital Contribution

AIG and its subsidiaries made a capital
contribution of approximately $400 million on
August 11, 2005, to offset the reduction in our
shareholders equity resulting from the restatement.

5



---



##### Table of Contents






PART I






Item 1. Business


General

International Lease Finance Corporation (the
Company, management, we,
our, us) primarily acquires new
commercial jet aircraft from The Boeing Company, or Boeing, and
AVSA, S.A.R.L., the sales subsidiary of Airbus Industries, or
Airbus and leases these aircraft to airlines throughout the
world. In addition to our leasing activity, we regularly sell
aircraft from our leased aircraft fleet to other leasing
companies, financial services companies, investors, and
airlines. In some cases we provide fleet management services to
companies with aircraft portfolios for a management fee. We also
remarket and sell aircraft owned by others for a fee. In terms
of the number and value of transactions concluded, we are a
major owner-lessor of commercial jet aircraft.

As of December 31, 2004, we owned 667 jet
aircraft and had nine aircraft in the fleet that were classified
as finance leases. Additionally, we provided fleet management
services for 101 jet aircraft. See
Item 2. Properties  Flight
Equipment. At December 31, 2004, we had committed to
purchase 371 new and used aircraft deliverable through 2010
at an estimated aggregate purchase price of $21.6 billion,
of which we currently anticipate taking delivery of 97 new
aircraft in 2005 with an estimated aggregate purchase price of
$5.6 billion. We also had options to purchase an additional
six new aircraft deliverable through 2007 at an estimated
aggregate purchase price of $361.4 million. The recorded
basis of aircraft may be adjusted upon delivery to reflect
notional credits given by the manufacturers in connection with
the leasing of aircraft as discussed in the Restatement
above. See Item 2. Properties 
Commitments.

We maintain a mix of flight equipment to meet our
customers needs and to minimize the time that our aircraft
are not leased to customers by purchasing those models of new
and used aircraft which we believe will have the greatest
airline demand and operational longevity.

We typically finance the purchase of aircraft
with borrowed funds and internally generated cash flows.
Management accesses the capital markets for funds at times and
on terms and conditions considered appropriate. We may, but do
not usually, engage in financing transactions for specific
aircraft. We rely significantly on short- and medium-term
financing, and thereby attempt to more closely match the lease
terms of our aircraft. To date, we have been able to purchase
aircraft on terms which have permitted us to lease our aircraft
portfolio at a profit and have been able to obtain the necessary
funding from the capital and bank markets.

The airline industry is cyclical, economically
sensitive and highly competitive. See Item 7.
Managements Discussion and Analysis of Financial
Condition and Results of Operations. Our continued
success in the future is partly dependent on managements
ability to develop customer relationships for leasing, sales,
remarketing and management services with airlines and other
customers best able to maintain their economic viability and
survive in the competitive environment in which they operate.

The Company is incorporated in the State of
California and its principal offices are located at 10250
Constellation Blvd., Suite 3400, Los Angeles, California 90067.
Our telephone number, telecopier number and website address are
(310) 788-1999, (310) 788-1990, and www.ilfc.com,
respectively. We make available our SEC EDGAR filings, free of
charge, on our website or by written request to us. The
information on our website is not part of or incorporated by
reference into this report.

We are an indirect wholly owned subsidiary of
American International Group, Inc. (AIG). AIG is a
holding company which through its subsidiaries is engaged in a
broad range of insurance and insurance-related activities in the
United States and abroad. AIGs primary activities include
both general and life insurance operations. Other significant
activities include financial services and retirement savings and
asset management. The common stock of AIG is listed on, among
others, the New York Stock Exchange.

6



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##### Table of Contents



Aircraft Leasing

We lease most of our aircraft under operating
leases. The cost of the aircraft is not fully recovered over the
term of the initial lease, and we retain the benefit as well as
assume the risk of the residual value of the aircraft. In
accordance with generally accepted accounting principles,
rentals are reported ratably as revenue over the lease term, as
they are earned. The aircraft under operating leases are
included as Flight equipment on our Consolidated
Balance Sheets and are depreciated to an estimated salvage value
over the estimated useful lives of the aircraft. On occasion we
enter into finance and sales-type leases where the full cost of
the aircraft is substantially recovered over the term of the
lease. With respect to these leases, we record lease payments
received as a reduction in the net investment in the
finance/sales-type leases and record the interest income using
an interest rate implicit in the lease. The aircraft under
finance and sales-type leases are recorded on our Consolidated
Balance Sheets in Net investment in finance leases.
At December 31, 2004, we accounted for 667 aircraft as
operating leases and nine aircraft as finance leases.

The initial term of our current leases range in
length from one year to 17 years. See Item 2.
Properties  Flight Equipment for
information regarding scheduled lease terminations. We attempt
to maintain a mix of short-, medium- and long-term leases to
balance the benefits and risks associated with different lease
terms and changing market conditions. Varying lease terms help
to mitigate the effects of changes in prevailing market
conditions at the time aircraft become eligible for re-lease or
are sold and the uncertainty associated with the estimated
residual value of the aircraft at the end of the lease term.

All leases are on a net basis with
the lessee responsible for all operating expenses, which
customarily include fuel, crews, airport and navigation charges,
taxes, licenses, registration and insurance. In addition, the
lessee is responsible for normal maintenance and repairs,
airframe and engine overhauls, and compliance with return
conditions of flight equipment on lease. Under the provisions of
many leases, for certain airframe and engine overhauls, we
reimburse the lessee for costs incurred up to but not exceeding
related hourly rentals the lessee has paid to us. Such rentals
are included in the caption Rental of flight
equipment in the Companys Consolidated Statements of
Income. We provide a charge to operations based on the estimated
reimbursements during the life of the lease. This amount is
included in Provision for overhauls in our
Consolidated Statements of Income. We may, in connection with
the lease of a used aircraft, agree to contribute to the cost of
certain major overhauls or modifications depending on the
condition of the aircraft at delivery. These costs are generally
recovered during the lease term.

The lessee is responsible for compliance with all
applicable laws and regulations with respect to the aircraft. We
require our lessees to comply with the standards of either the
United States Federal Aviation Administration (the
FAA) or its foreign equivalent. We periodically
inspect our leased aircraft. Generally, we require a deposit as
security for the lessees performance of obligations under
the lease and the condition of the aircraft upon return. In
addition, the leases contain extensive provisions regarding our
remedies and rights in the event of a default by the lessee and
specific provisions regarding the condition of the aircraft upon
return of the aircraft. The lessee is required to continue to
make lease payments under all circumstances, including periods
during which the aircraft is not in operation due to maintenance
or grounding.

Some foreign countries have currency and exchange
laws regulating the international transfer of currencies. When
necessary we require, as a condition to any foreign transaction,
that the lessee or purchaser in a foreign country obtain the
necessary approvals of the appropriate government agency,
finance ministry or central bank for the remittance of all funds
contractually owed in U.S. Dollars. We attempt to minimize
our currency and exchange risks by negotiating most of our
aircraft leases and all of our sales transactions in
U.S. Dollars. All guarantees obtained to support various
lease agreements are denominated for payment in the same
currency as the lease.

To meet the needs of a growing number of
airlines, some of our leases are negotiated in Euros. As the
Euro to U.S. Dollar exchange rate fluctuates, airlines
interest in entering into Euro denominated lease agreements will
change. Once we agree to the rental payment currency with an
airline, the negotiated currency remains for the term of the
lease. The economic risk arising from foreign currency has, to
date, been immaterial to us. We are, however exposed to currency
risk on future lease payments denominated in Euros.

7



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##### Table of Contents



Management obtains and reviews relevant business
materials from all prospective lessees and purchasers before
entering into a lease or extending credit. Under certain
circumstances, the lessee may be required to obtain guarantees
or other financial support from an acceptable financial
institution or other third parties.

During the life of the lease, situations may
arise whereby we will have to restructure leases with our
lessees. Historically, restructurings have involved the
voluntary termination of leases prior to lease expiration, the
arrangement of subleases from the primary lessee to another
airline and the rescheduling of lease payments and extention of
the lease terms. In many situations where we repossess an
aircraft, we export the aircraft from the lessees
jurisdiction. In the majority of these situations, we have
obtained the lessees cooperation and the return and export
of the aircraft was immediate. In some situations, however, the
lessees have not fully cooperated in returning aircraft. In
those cases we have had to take legal action in the appropriate
jurisdictions. This process has delayed the ultimate return and
export of the aircraft. In addition, in connection with the
repossession of an aircraft, we may be required to pay
outstanding mechanics, airport, navigation and other
operating liens on the repossessed aircraft. These charges could
include charges relating to other aircraft that we do not own
but were operated by the lessee.

Flight Equipment Marketing

We may dispose of our leased aircraft at or
before the expiration of their leases. The buyers of our
aircraft include the aircrafts lessee, another aircraft
operator, financial institutions, private investors and third
party lessors. From time to time, we engage in transactions to
buy aircraft for resale. In other cases, we assist our customers
in acquiring or disposing of aircraft by providing consulting
services and procurement of financing from third parties. Any
gain or loss on disposition of leased aircraft is included in
the caption Flight equipment marketing in our
Consolidated Statements of Income. In 2003 and early 2004, we
sold aircraft into securitization trusts which were primarily
funded and owned by other subsidiaries of AIG and are
consolidated by AIG. The transactions were structured as
securitizations. The gains, net of expense, are included in
Flight equipment marketing 
Securitization in our Consolidated Statements of Income.
See Item 7. Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Results of Operationsfor more
information on these transactions.

From time to time, we are engaged as an agent for
airlines and various financial institutions in the disposition
of their surplus aircraft on a fee basis. We generally act as an
agent under an exclusive remarketing contract whereby we agree
to sell aircraft on a commercially reasonable basis within a
fixed time period. These activities generally augment our
primary activities and also serve to promote relationships with
prospective sellers and buyers of aircraft. We may, from time to
time, participate with banks, other financial institutions and
airlines to assist in financing aircraft purchased by others and
by providing asset guarantees, put options, or loan guarantees
collateralized by aircraft on a fee-basis.

We plan to continue to engage in providing
marketing services to third parties on a selective basis
involving specific situations where these activities will not
conflict nor compete with, but rather will complement, our
leasing and selling activities.

Fleet Management Services

We provide fleet management services to third
party operating lessors who are unable or unwilling to perform
this service as part of their own operation. We typically
provide the same services that we perform for our own fleet on a
non-discriminatory basis. Specifically, we provide leasing,
re-leasing and sales services on behalf of the lessor for which
we charge a fee. In connection with the sales of aircraft to the
trusts discussed above, we were retained to provide fleet
management services for the aircraft sold for which we receive
fees from the trusts. The fees for fleet management services are
included in Interest and other in our Consolidated
Statements of Income.

Financing/Source of Funds

We purchase new aircraft directly from
manufacturers and used aircraft from airlines and other owners.
The purchase price of flight equipment is financed using
internally generated funds, secured and unsecured

8



---



##### Table of Contents



commercial bank financings and the issuance of
commercial paper and public and private debt. See
Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations.


Customers

At December 31, 2004, 2003 and 2002, we leased
aircraft to customers in the following regions:

|                                     |  |                     |     |      |  |              |      |   |  |              |     |   |  |  |      |   |  |  |     |  |  |  |      |  
|------------------------------------ |  | ------------------- | --- | ---- |  | ------------ | ---- | - |  | ------------ | --- | - |  |  | ---- | - |  |  | --- |  |  |  | ---- | -
|                                     |  |                    
|                                     |  | Customers by Region
|                                     |  |                     |     |      |  |             
|                                     |  | 2004                |     | 2003 |  | 2002        
|                                     |  |                     |     |      |  |             
|                                     |  | Number              |     |      |  | Number       |      |   |  | Number       |     |  
|Region                               |  | of Customers        |     | %    |  | of Customers |      | % |  | of Customers |     | %
|                                     |  |                     |     |      |  |              |      |   |  |              |     |  
|Europe                               |  |                     | 66  |      |  |              | 47.2 | % |  |              | 65  |   |  |  | 47.1 | % |  |  | 66  |  |  |  | 47.5 | %
|Asia and the Pacific                 |  |                     | 31  |      |  |              | 22.1 |   |  |              | 32  |   |  |  | 23.1 |   |  |  | 31  |  |  |  | 22.3 |  
|United States and Canada             |  |                     | 19  |      |  |              | 13.6 |   |  |              | 20  |   |  |  | 14.5 |   |  |  | 17  |  |  |  | 12.2 |  
|Central and South America and Mexico |  |                     | 10  |      |  |              | 7.1  |   |  |              | 11  |   |  |  | 8.0  |   |  |  | 14  |  |  |  | 10.1 |  
|Africa and Middle East               |  |                     | 14  |      |  |              | 10.0 |   |  |              | 10  |   |  |  | 7.3  |   |  |  | 11  |  |  |  | 7.9  |  
|                                     |  |                     |     |      |  |              |      |   |  |              |     |   |  |  |      |   |  |  |     |  |  |  |      |  
|                                     |  |                     | 140 |      |  |              | 100  | % |  |              | 138 |   |  |  | 100  | % |  |  | 139 |  |  |  | 100  | %
|                                     |  |                     |     |      |  |              |      |   |  |              |     |   |  |  |      |   |  |  |     |  |  |  |      |  

During 2004, we had one customer that accounted
for 10% or more of total Rental of flight equipment revenue, Air
France ($309.5 million or 10.5%).

Revenues include rentals of flight equipment to
foreign airlines of $2,662,182,000 (2004), $2,497,085,000
(2003), and $2,192,228,000 (2002), comprising 90.0%, 89.0%, and
86.1%, respectively, of total Rentals of flight equipment
revenue. See Note K of Notes to Consolidated Financial
Statements. Lease revenues from the rental of flight
equipment have been reduced by payments received directly by us
or by our customers from the notional accounts established by
the aircraft and engine manufacturers.

The following table sets forth the dollar amount
and percentage of total rental revenues attributable to the
indicated geographic areas based on each airlines
principal place of business for the years indicated:

|                                     |  |                        |           |                 |  |                 |      |   |  |        |           |   |  |  |      |   |  |   |           |  |  |  |      |  
|------------------------------------ |  | ---------------------- | --------- | --------------- |  | --------------- | ---- | - |  | ------ | --------- | - |  |  | ---- | - |  | - | --------- |  |  |  | ---- | -
|                                     |  |                        |           |                 |  |                
|                                     |  | 2004 (Restated)        |           | 2003 (Restated) |  | 2002 (Restated)
|                                     |  |                        |           |                 |  |                
|                                     |  | Amount                 |           | %               |  | Amount          |      | % |  | Amount |           | %
|                                     |  |                        |           |                 |  |                 |      |   |  |        |           |  
|                                     |  |                       
|                                     |  | (Dollars in thousands)
|Europe                               |  | $                      | 1,432,441 |                 |  |                 | 48.5 | % |  | $      | 1,315,851 |   |  |  | 46.9 | % |  | $ | 1,147,461 |  |  |  | 45.1 | %
|Asia and the Pacific                 |  |                        | 689,201   |                 |  |                 | 23.3 |   |  |        | 661,956   |   |  |  | 23.6 |   |  |   | 586,183   |  |  |  | 23.0 |  
|United States and Canada             |  |                        | 382,090   |                 |  |                 | 12.9 |   |  |        | 424,457   |   |  |  | 15.0 |   |  |   | 461,762   |  |  |  | 18.1 |  
|Central and South America and Mexico |  |                        | 208,622   |                 |  |                 | 7.1  |   |  |        | 221,067   |   |  |  | 7.9  |   |  |   | 199,746   |  |  |  | 7.9  |  
|Africa and the Middle East           |  |                        | 243,170   |                 |  |                 | 8.2  |   |  |        | 183,880   |   |  |  | 6.6  |   |  |   | 150,990   |  |  |  | 5.9  |  
|                                     |  |                        |           |                 |  |                 |      |   |  |        |           |   |  |  |      |   |  |   |           |  |  |  |      |  
|                                     |  | $                      | 2,955,524 |                 |  |                 | 100  | % |  | $      | 2,807,211 |   |  |  | 100  | % |  | $ | 2,546,142 |  |  |  | 100  | %
|                                     |  |                        |           |                 |  |                 |      |   |  |        |           |   |  |  |      |   |  |   |           |  |  |  |      |  

The following table sets forth revenue
attributable to individual countries representing at least 10%
of total revenue based on each airlines principal place of
business for the years indicated:

|               |  |                        |         |                 |  |                 |      |   |  |        |         |   |  |  |      |   |  |   |         |  |  |  |      |  
|-------------- |  | ---------------------- | ------- | --------------- |  | --------------- | ---- | - |  | ------ | ------- | - |  |  | ---- | - |  | - | ------- |  |  |  | ---- | -
|               |  |                        |         |                 |  |                
|               |  | 2004 (Restated)        |         | 2003 (Restated) |  | 2002 (Restated)
|               |  |                        |         |                 |  |                
|               |  | Amount                 |         | %               |  | Amount          |      | % |  | Amount |         | %
|               |  |                        |         |                 |  |                 |      |   |  |        |         |  
|               |  |                       
|               |  | (Dollars in thousands)
|France         |  | $                      | 351,394 |                 |  |                 | 11.9 | % |  | $      | 326,010 |   |  |  | 11.6 | % |  | $ |        |  |  |  |     | %
|China          |  |                        | 357,512 |                 |  |                 | 12.1 |   |  |        | 308,204 |   |  |  | 11.0 |   |  |   | 278,464 |  |  |  | 10.9 |  
|United States  |  |                        |        |                 |  |                 |     |   |  |        | 310,126 |   |  |  | 11.0 |   |  |   | 354,912 |  |  |  | 13.9 |  
|United Kingdom |  |                        |        |                 |  |                 |     |   |  |        |        |   |  |  |     |   |  |   | 272,339 |  |  |  | 10.7 |  

Competition

The leasing, remarketing and sale of jet aircraft
is highly competitive. We face competition from aircraft
manufacturers, banks, financial institutions, other leasing
companies, aircraft brokers and airlines. Competi-

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tion for a leasing transaction is based on a
number of factors including delivery dates, lease rates, term of
lease, other lease provisions, aircraft condition and the
availability in the market place of the types of aircraft to
meet the needs of the customer. We believe we are a strong
competitor in all of these areas. However, recent overcapacity
in selected types of aircraft in the market place has increased
competition from other entities leasing aircraft which has
caused downward pressure on lease rates and lease revenue and,
possibly, aircraft values. As the overcapacity is absorbed in
the market place, we expect this trend to rebound. In fact, the
overcapacity of certain aircraft types has been absorbed in the
market place, and we now see higher lease rates on newly signed
leases on those aircraft types.


Government Regulation

The U.S. Department of State
(DOS) and the U.S. Department of Transportation
(DOT), including the FAA, an agency of the DOT,
exercise regulatory authority over air transportation in the
United States.

The DOS and DOT, in general, have jurisdiction
over the economic regulation of air transportation, including
the negotiation with foreign governments of the rights of
U.S. carriers to fly to other countries and the rights of
foreign carriers to fly to and within the United States. We are
not directly subject to the regulatory jurisdiction of the DOS
and DOT or their counterpart organizations in foreign countries
related to the operation of aircraft for public transportation
of passengers and property.

Our relationship with the FAA consists of the
registration with the FAA of those aircraft which we have leased
to U.S. carriers and to a number of foreign carriers where,
by agreement, the aircraft are to be registered in the United
States. When an aircraft is not on lease, we may obtain from the
FAA, or its designated representatives, a U.S. Certificate
of Airworthiness or a ferry flight permit for the particular
aircraft.

Our involvement with the civil aviation
authorities of foreign jurisdictions consists largely of
requests to register and deregister our aircraft on those
countries registries.

The U.S. Department of Commerce (DOC)
exercises regulatory authority over exports. We are subject to
the regulatory authority of the DOS and DOC as it relates to the
export of aircraft for lease and sale to foreign entities and
the export of parts to be installed on our aircraft. These
Departments have, in some cases, required us to obtain export
licenses for parts exported to foreign countries.

The Patriot Act of 2001 gave the Secretary of
State and the Secretary of Treasury the authority to
(a) designate individuals and organizations as terrorists
and terrorist supporters and to freeze their U.S. assets and
(b) prohibit financial transactions with U.S. persons,
including U.S. individuals, entities and charitable
organizations. We comply with the provisions of this Act and we
closely monitor our activities with foreign entities.

A bureau of the U.S. Department Homeland
Security, U.S. Customs and Border Protection, enforces
regulations related to the import of our aircraft into the
United States for maintenance or lease and the importation of
parts for installation on our aircraft. We monitor our imports
for compliance with U.S. Customs regulations.

Employees

We operate in a capital intensive rather than a
labor intensive business. As of December 31, 2004, we had
151 full-time employees, which we considered adequate for
our business operations. Management and administrative personnel
will expand, as necessary, to meet our future growth needs. None
of our employees is covered by a collective bargaining agreement
and we believe that we maintain excellent employee relations. We
provide certain employee benefits including retirement, health,
life, disability and accident insurance plans, some of which are
established and maintained by our parent, AIG.

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Insurance

Our lessees are required to carry those types of
insurance which are customary in the air transportation
industry, including comprehensive liability insurance and
aircraft hull insurance. In general, we are an additional
insured on liability policies carried by the lessees. We obtain
certificates of insurance from the lessees insurance
brokers. All certificates of insurance contain a breach of
warranty endorsement so that our interests are not prejudiced by
any act or omission of the operator-lessee.

Insurance premiums are paid by the lessee, with
coverage acknowledged by the broker or carrier. The territorial
coverage is, in each case, suitable for the lessees area
of operations. The certificates of insurance contain, among
other provisions, a no co-insurance clause and a
provision prohibiting cancellation or material change without at
least 30 days advance written notice to the insurance
broker, who is obligated to give us prompt notice. Hull/war
insurance policies customarily provide seven days advance
written notice for cancellation and may be subject to lesser
notice under certain market conditions. Furthermore, the
insurance is primary and not contributory, and all insurance
carriers are required to waive rights of subrogation against us.

The stipulated loss value schedule under aircraft
hull insurance policies is on an agreed value basis acceptable
to us and usually exceeds the book value of the aircraft. In
cases where we believe that the agreed value stated in the lease
is not sufficient, we purchase additional Total Loss Only
coverage for the deficiency. Aircraft hull policies contain
standard clauses covering aircraft engines. The lessee is
required to pay all deductibles. Furthermore, the aircraft hull
policies contain full war risk endorsements, including, but not
limited to, confiscation (where available), seizure, hijacking
and similar forms of retention or terrorist acts. Lease
agreements generally require liability limits to be in U.S.
Dollars, which are shown on the certificate of insurance.

The comprehensive liability insurance listed on
certificates of insurance include provisions for bodily injury,
property damage, passenger liability, cargo liability and such
other provisions reasonably necessary in commercial passenger
and cargo airline operations. Such certificates of insurance
list combined comprehensive single liability limits of not less
than $250 million. As a result of the terrorist attacks on
September 11, 2001, the insurance market unilaterally
imposed a sublimit on each operators policy for third
party war risk liability in the amount of $50 million. We
require each lessee to purchase higher limits of third party war
risk liability or obtain an indemnity from their government.
Additionally, we purchase contingent liability insurance and
contingent hull insurance on all aircraft in our fleet.

We also maintain other insurance covering the
specific needs of our business operations. Insurance policies
are generally placed or reinsured through AIG subsidiaries. AIG
charges us directly for these insurance costs. We believe that
our insurance is adequate both as to coverage and amount.

Forward-Looking Statements

This annual report on Form 10-K contains or
incorporates statements that constitute forward-looking
statements. Those statements appear in a number of places in
this Form 10-K and include statements regarding, among
other matters, the state of the airline industry, our access to
the capital markets, our ability to restructure leases and
repossess aircraft, the structure of our leases, regulatory
matters pertaining to compliance with governmental regulations
and other factors affecting our financial condition or results
of operations. Words such as expects,
anticipates, intends, plans,
believes, seeks, estimates,
and should and variations of these words and similar
expressions, are used in many cases to identify these
forward-looking statements. Any such forward-looking statements
are not guarantees of future performance and involve risks,
uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to
vary materially from our future results, performance or
achievements, or those of the industry, expressed or implied in
such forward-looking statements. Such factors include, among
others, general industry economic and business conditions, which
will, among other things, affect demand for aircraft,
availability and creditworthiness of current and prospective
lessees, lease rates, availability and cost of financing and
operating expenses, governmental actions and initiatives and
environmental and safety requirements. We will not update any
forward-looking information to reflect actual results or changes
in the factors affecting the forward-looking information.

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Item 2. Properties

Flight Equipment

Management frequently reviews opportunities to
acquire suitable commercial jet aircraft based not only on
market demand and customer airline requirements, but also on our
fleet portfolio mix criteria and leasing strategies. Before
committing to purchase specific aircraft, management takes into
consideration factors such as estimates of future values,
potential for remarketing, trends in supply and demand for the
particular type, make and model of aircraft and engines, and
anticipated obsolescence. As a result, certain types and
vintages of aircraft do not necessarily fit the profile for
inclusion in our portfolio of aircraft owned and used in our
leasing operations.

At December 31, 2004, all of our fleet was
Stage III compliant. This means that the aircraft hold or are
capable of holding a noise certificate issued under
Chapter 3 of Volume 1, Part II of Annex 16
of the Chicago Convention or have been shown to comply with the
Stage III noise levels set out in Section 36.5 of
Appendix C of Part 36 of the Federal Aviation
Regulations of the United States. At December 31, 2004, the
average age of aircraft in our fleet was 5.41 years.

The following table shows the scheduled lease
terminations (for the minimum noncancelable period) by aircraft
type for our operating lease portfolio at December 31, 2004:

|                     |  |      |    |      |  |      |     |      |  |      |    |      |  |      |     |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |     | 
|-------------------- |  | ---- | -- | ---- |  | ---- | --- | ---- |  | ---- | -- | ---- |  | ---- | --- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ----- |  |  | -- |  |  |  | - |  |  |  | -- |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | --- | 
|Aircraft Type        |  | 2005 |    | 2006 |  | 2007 |     | 2008 |  | 2009 |    | 2010 |  | 2011 |     | 2012 |  | 2013 |    | 2014 |  | 2015 |    | 2016 |  | 2017 |    | 2018 |  | 2019 |    | 2020 |  | 2021 |    | Total
|                     |  |      |    |      |  |      |     |      |  |      |    |      |  |      |     |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      
|737-300/
    400/500 |  |      | 6  |      |  |      | 13  |      |  |      | 9  |      |  |      | 15  |      |  |      | 6  |      |  |      | 1  |      |  |      |    |      |  |      | 4  |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 54  | 
|737-600/
    700/800 |  |      | 1  |      |  |      | 16  |      |  |      | 16 |      |  |      | 12  |      |  |      | 4  |      |  |      | 13 |      |  |      | 29 |      |  |      | 18 |      |  |      | 2  |       |  |  |    |  |  |  |   |  |  |  | 1  |  |  |  |   |  |  |  | 9 |  |  |  | 2 |  |  |  | 2 |  |  |  | 1 |  |  |  | 126 | 
|757-200              |  |      | 6  |      |  |      | 15  |      |  |      | 17 |      |  |      | 7   |      |  |      | 11 |      |  |      | 2  |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  | 1 |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 59  | 
|767-200              |  |      |    |      |  |      |     |      |  |      |    |      |  |      | 1   |      |  |      |    |      |  |      | 2  |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 3   | 
|767-300              |  |      | 3  |      |  |      | 10  |      |  |      | 14 |      |  |      | 14  |      |  |      | 4  |      |  |      | 1  |      |  |      |    |      |  |      | 5  |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 51  | 
|777-200              |  |      | 2  |      |  |      | 2   |      |  |      | 5  |      |  |      | 3   |      |  |      | 1  |      |  |      |    |      |  |      | 5  |      |  |      | 7  |      |  |      | 3  |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 28  | 
|777-300              |  |      |    |      |  |      |     |      |  |      |    |      |  |      | 1   |      |  |      |    |      |  |      | 5  |      |  |      | 4  |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 10  | 
|747-300              |  |      | 1  |      |  |      | 1   |      |  |      |    |      |  |      |     |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 2   | 
|747-400              |  |      | 1  |      |  |      | 1   |      |  |      | 1  |      |  |      | 5   |      |  |      | 7  |      |  |      |    |      |  |      | 1  |      |  |      |    |      |  |      |    |       |  |  | 1  |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 17  | 
|MD-82/83             |  |      | 1  |      |  |      | 4   |      |  |      | 7  |      |  |      |     |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 12  | 
|DC10-30              |  |      |    |      |  |      |     |      |  |      |    |      |  |      | 2   |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 2   | 
|MD-11                |  |      |    |      |  |      | 3   |      |  |      | 2  |      |  |      | 3   |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 8   | 
|A300-600R            |  |      | 2  |      |  |      | 1   |      |  |      | 2  |      |  |      | 1   |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 6   | 
|A310                 |  |      | 3  |      |  |      | 1   |      |  |      | 1  |      |  |      | 2   |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 7   | 
|A319                 |  |      | 1  |      |  |      | 4   |      |  |      | 4  |      |  |      | 12  |      |  |      | 9  |      |  |      | 3  |      |  |      |    |      |  |      | 4  |      |  |      | 9  |       |  |  | 6  |  |  |  | 1 |  |  |  | 6  |  |  |  | 1 |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 60  | 
|A320                 |  |      | 5  |      |  |      | 19  |      |  |      | 2  |      |  |      | 12  |      |  |      | 15 |      |  |      | 4  |      |  |      | 7  |      |  |      | 7  |      |  |      | 9  |       |  |  | 3  |  |  |  | 1 |  |  |  | 6  |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 90  | 
|A321                 |  |      | 2  |      |  |      | 16  |      |  |      | 4  |      |  |      | 5   |      |  |      | 13 |      |  |      | 6  |      |  |      |    |      |  |      |    |      |  |      | 3  |       |  |  | 2  |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 51  | 
|A330-200             |  |      |    |      |  |      | 6   |      |  |      | 2  |      |  |      | 9   |      |  |      | 11 |      |  |      | 6  |      |  |      | 1  |      |  |      | 4  |      |  |      | 6  |       |  |  | 2  |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 47  | 
|A330-300             |  |      | 2  |      |  |      | 5   |      |  |      | 1  |      |  |      | 3   |      |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 12  | 
|A340-300             |  |      | 2  |      |  |      | 7   |      |  |      | 3  |      |  |      | 1   |      |  |      | 2  |      |  |      |    |      |  |      |    |      |  |      | 2  |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 17  | 
|A340-600             |  |      |    |      |  |      |     |      |  |      | 2  |      |  |      | 1   |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      | 1  |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 4   | 
|                     |  |      |    |      |  |      |     |      |  |      |    |      |  |      |     |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |   |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |     | 
|Total                |  |      | 38 |      |  |      | 124 |      |  |      | 92 |      |  |      | 109 |      |  |      | 83 |      |  |      | 43 |      |  |      | 48 |      |  |      | 51 |      |  |      | 33 |       |  |  | 14 |  |  |  | 3 |  |  |  | 13 |  |  |  | 1 |  |  |  | 9 |  |  |  | 2 |  |  |  | 2 |  |  |  | 1 |  |  |  | 666 | 




This schedule excludes one aircraft which was not
subject to lease at December 31, 2004, but was subsequently
leased. As of February 28, 2005, leases covering 26 of the
38 aircraft with lease expiration dates in 2005 had been
extended or leased to other customers.

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Commitments

At December 31, 2004, we had committed to
purchase the following new aircraft at an estimated aggregate
purchase price (including adjustment for anticipated inflation)
of approximately $21.3 billion for delivery as shown below.
The recorded basis of aircraft may be adjusted upon delivery to
reflect notional credits given by the manufacturers in
connection with the leasing of aircraft.

|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |       |    |    |  |  |    |    |  |  |   |   |  |  |    |     | 
|------------------ | ----- | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ----- | -- | -- |  |  | -- | -- |  |  | - | - |  |  | -- | --- | 
|Aircraft Type      |       | 2005 |    | 2006 |  | 2007 |    | 2008 |  | 2009 |    | 2010 |  | Total
|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |      
|737-600/700/800(a) |       |      | 23 |      |  |      | 21 |      |  |      | 25 |      |  |       |    |    |  |  |    |    |  |  |   |   |  |  | 69 |    
|777-200ER          |       |      | 5  |      |  |      | 7  |      |  |      |    |      |  |       |    |    |  |  |    |    |  |  |   |   |  |  | 12 |    
|777-300ER          |       |      | 7  |      |  |      | 4  |      |  |      | 5  |      |  |       |    |    |  |  |    |    |  |  |   |   |  |  | 16 |    
|A319-100(a)        |       |      | 28 |      |  |      | 28 |      |  |      | 14 |      |  |       | 13 |    |  |  | 7  |    |  |  |   |   |  |  | 90 |    
|A320-200(a)        |       |      | 19 |      |  |      | 20 |      |  |      | 19 |      |  |       | 22 |    |  |  | 10 |    |  |  |   |   |  |  | 90 |    
|A321-200(a)        |       |      | 3  |      |  |      | 2  |      |  |      | 6  |      |  |       | 11 |    |  |  | 5  |    |  |  |   |   |  |  | 27 |    
|A330-200/300(a)    |       |      | 7  |      |  |      | 8  |      |  |      | 8  |      |  |       | 8  |    |  |  |    |    |  |  |   |   |  |  | 31 |    
|A340-600           |       |      | 5  |      |  |      | 3  |      |  |      | 1  |      |  |       | 2  |    |  |  |    |    |  |  |   |   |  |  | 11 |    
|A380-800           |       |      |    |      |  |      |    |      |  |      | 1  |      |  |       | 3  |    |  |  | 3  |    |  |  | 2 |   |  |  | 9  |    
|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |       |    |    |  |  |    |    |  |  |   |   |  |  |    |    
|                   | Total |      |    | 97   |  |      |    | 93   |  |      |    | 79   |  |       |    | 59 |  |  |    | 25 |  |  |   | 2 |  |  |    | 355 | 
|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |       |    |    |  |  |    |    |  |  |   |   |  |  |    |    






|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(a) | We have the right to designate the size of the
    aircraft within the specific model type at specific dates prior
    to contractual delivery.

At December 31, 2004, we had committed to
purchase the following used aircraft at an estimated aggregate
purchase price of approximately $302.3 million:

|              |       |      |   |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  |   |    | 
|------------- | ----- | ---- | - | ---- |  | ---- | - | ---- |  | ---- |  | ---- |  | ----- |  | - |  |  |  | - |  |  |  | - |  |  | - | -- | 
|Aircraft Type |       | 2005 |   | 2006 |  | 2007 |   | 2008 |  | 2009 |  | 2010 |  | Total
|              |       |      |   |      |  |      |   |      |  |      |  |      |  |      
|A319-100      |       |      | 1 |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 1 |   
|737-300/400   |       |      | 4 |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 4 |   
|757-200ER     |       |      | 7 |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 7 |   
|767-300ER     |       |      | 2 |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 2 |   
|747-400       |       |      |   |      |  |      | 2 |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 2 |   
|              |       |      |   |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  |   |   
|              | Total |      |   | 14   |  |      |   | 2    |  |      |  | 0    |  |       |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |   | 16 | 
|              |       |      |   |      |  |      |   |      |  |      |  |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  |   |   

At December 31, 2004, we had options to
purchase the following new aircraft at an estimated aggregate
purchase price (including adjustment for anticipated inflation)
of approximately $361.4 million for delivery as shown
below. The recorded basis of aircraft may be adjusted upon
delivery to reflect notional credits given by the manufacturers
in connection with the leasing of aircraft.

|               |       |      |  |      |  |      |   |      |  |      |   |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  |   |   | 
|-------------- | ----- | ---- |  | ---- |  | ---- | - | ---- |  | ---- | - | ---- |  | ----- |  | - |  |  |  | - |  |  |  | - |  |  | - | - | 
|Aircraft Type  |       | 2005 |  | 2006 |  | 2007 |   | 2008 |  | 2009 |   | 2010 |  | Total
|               |       |      |  |      |  |      |   |      |  |      |   |      |  |      
|737-700/800(a) |       |      |  |      |  |      | 2 |      |  |      | 3 |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 5 |  
|A380-800       |       |      |  |      |  |      |   |      |  |      | 1 |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  | 1 |  
|               |       |      |  |      |  |      |   |      |  |      |   |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  |   |  
|               | Total |      |  | 0    |  |      |   | 2    |  |      |   | 4    |  |       |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |   | 6 | 
|               |       |      |  |      |  |      |   |      |  |      |   |      |  |       |  |   |  |  |  |   |  |  |  |   |  |  |   |  






|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(a) | We have the right to designate the size of the
    aircraft within the specific model type at specific dates prior
    to contractual delivery.

We anticipate that a significant portion of the
aggregate purchase price will be funded by incurring additional
debt. The exact amount of the indebtedness to be incurred will
depend, in part, upon the actual purchase price of the aircraft,
which can vary due to a number of factors, including inflation.
See Item 7. Managements Discussion and
Analysis of Financial Condition and Results of
Operations.

The new aircraft listed above are being purchased
pursuant to master agreements with each of Boeing and Airbus.
These agreements establish the pricing formulas (which include
certain price adjustments based upon inflation and other
factors) and various other terms with respect to the purchase of
aircraft. Under certain circumstances, we have the right to
alter the mix of aircraft type ultimately acquired. As of
December 31,

13



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2004, we had made non-refundable deposits
(exclusive of capitalized interest) with respect to the aircraft
which we have committed to purchase of approximately
$464 million with Boeing and $616 million with Airbus.


Under arrangements with manufacturers, in certain
circumstances the manufacturers establish notional accounts for
the benefit of ILFC, to which amounts are credited by the
manufacturers in connection with the purchase by and delivery to
ILFC and the lease of aircraft. Amounts credited to the notional
accounts are used at ILFCs direction to protect ILFC from
certain events including loss when airline customers of ILFC
default on lease payment obligations, to provide lease subsidies
and other incentives to ILFC airline customers in connection
with leases of certain aircraft and to reduce ILFCs cost
of aircraft purchased.

As of February 28, 2005, the Company had
entered into contracts for the lease of new aircraft scheduled
to be delivered through 2010 as follows:

|              |  |           |    |        |  |          |    |  |  |  |     |  
|------------- |  | --------- | -- | ------ |  | -------- | -- |  |  |  | --- | -
|              |  | Number of |    | Number |  |         
|Delivery Year |  | Aircraft  |    | Leased |  | % Leased
|              |  |           |    |        |  |         
|2005          |  |           | 97 |        |  |          | 97 |  |  |  | 100 | %
|2006          |  |           | 93 |        |  |          | 72 |  |  |  | 77  | %
|2007          |  |           | 79 |        |  |          | 24 |  |  |  | 30  | %
|2008          |  |           | 59 |        |  |          | 5  |  |  |  | 8   | %
|Thereafter    |  |           | 27 |        |  |          | 0  |  |  |  | 0   | %

We will need to find customers for aircraft
presently on order and not subject to contract and any new
aircraft ordered, and we will need to arrange financing for
portions of the purchase price of such equipment. Although we
have been successful to date in placing new aircraft on lease
and have been able to obtain adequate financing in the past,
there can be no assurance as to the future continued
availability of lessees or of sufficient amounts of financing on
acceptable terms.

Facilities

Our principal offices are located at 10250
Constellation Blvd., Suite 3400, Los Angeles,
California. We occupy space under a lease which expires in 2015.
As of February 28, 2005, we occupy approximately
127,000 square feet of office space. The lease provides for
annual rentals of approximately $9 million, and the rental
payments thereunder are subject to certain indexed escalation
provisions.




PART II






|        |                                                                                                                                
|------- | -------------------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities (Restated)

The Company is an indirect wholly owned
subsidiary of AIG and the Companys common stock is not
listed on any national exchange or traded in any established
market. We paid cash dividends to our parent company of
$35.5 million (2004), $49.0 million (2003) and
$26.0 million (2002). It is our intention to pay our parent
company an annual dividend of at least 7% of net income subject
to the dividend preference of any preferred stock outstanding.
Under the most restrictive provisions of our borrowing
arrangements, consolidated retained earnings at
December 31, 2004 in the amount of approximately
$1.3 billion were unrestricted as to the payment of
dividends.

AIG and its subsidiaries made a capital
contribution on August 11, 2005 of approximately
$400 million, to offset the reduction in our
shareholders equity resulting from the restatement.

14



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##### Table of Contents






Item 6. Selected Financial
Data

As more fully described in the Explanatory
Note and in Note B of the Notes to Consolidated
Financial Statements, the Company is restating its financial
statements and other financial information for the years ended
December 31, 2004, 2003, 2002, 2001 and 2000.

The following table summarizes selected
consolidated financial data and certain operating information of
the Company. The selected consolidated financial data should be
read in conjunction with the Consolidated Financial Statements
and notes thereto and Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Form 10-K.

|                                                                              |                          |                               |            |            |  |            |            |            |  |            |            |     |  |   |            |     |  |   |            |     | 
|----------------------------------------------------------------------------- | ------------------------ | ----------------------------- | ---------- | ---------- |  | ---------- | ---------- | ---------- |  | ---------- | ---------- | --- |  | - | ---------- | --- |  | - | ---------- | --- | 
|                                                                              |                          |                              
|                                                                              |                          | Years Ended December 31,     
|                                                                              |                          |                              
|                                                                              |                          | 2004                          |            | 2003       |  | 2002       |            | 2001       |  | 2000      
|                                                                              |                          | (Restated)                    |            | (Restated) |  | (Restated) |            | (Restated) |  | (Restated)
|                                                                              |                          |                               |            |            |  |            |            |            |  |           
|                                                                              |                          |                              
|                                                                              |                          | (Dollar amounts in thousands)
|Operating Data:                                                               |                          |                               |            |            |  |            |            |            |  |            |            |     |  |   |            |     |  |   |            |    
|Rentals of flight equipment                                                   |                          | $                             | 2,955,524  |            |  | $          | 2,807,211  |            |  | $          | 2,546,142  |     |  | $ | 2,411,576  |     |  | $ | 2,250,980  |    
|Flight equipment marketing                                                    |                          |                               | 77,664     |            |  |            | 28,988     |            |  |            | 48,454     |     |  |   | 31,840     |     |  |   | 74,497     |    
|Flight equipment marketing 
    securitization                               |                          |                               | 32,854     |            |  |            | 23,245     |            |  |            |           |     |  |   |           |     |  |   |           |    
|Interest and other income                                                     |                          |                               | 93,844     |            |  |            | 17,907     |            |  |            | 64,655     |     |  |   | 108,809    |     |  |   | 82,338     |    
|Total revenues                                                                |                          |                               | 3,159,886  |            |  |            | 2,877,351  |            |  |            | 2,659,251  |     |  |   | 2,552,225  |     |  |   | 2,407,815  |    
|Expenses                                                                      |                          |                               | 2,491,779  |            |  |            | 2,236,545  |            |  |            | 2,037,784  |     |  |   | 1,859,054  |     |  |   | 1,747,026  |    
|Income before income taxes and cumulative effect
    of accounting change     |                          |                               | 668,107    |            |  |            | 640,806    |            |  |            | 621,467    |     |  |   | 693,171    |     |  |   | 660,789    |    
|Net income                                                                    |                          |                               | 462,006    |            |  |            | 435,481    |            |  |            | 417,406    |     |  |   | 471,058    |     |  |   | 441,529    |    
|Lease margin(a)(b)                                                            |                          |                               | 18.22%     |            |  |            | 20.32%     |            |  |            | 19.96%     |     |  |   | 22.91%     |     |  |   | 22.39%     |    
|Operating margin(b)(c)                                                        |                          |                               | 21.14%     |            |  |            | 22.27%     |            |  |            | 23.37%     |     |  |   | 27.16%     |     |  |   | 27.44%     |    
|Ratio of Earnings to Fixed Charges and
    Preferred Stock Dividends(d):      |                          |                               | 1.62x      |            |  |            | 1.58x      |            |  |            | 1.55x      |     |  |   | 1.65x      |     |  |   | 1.63x      |    
|Balance Sheet Data:                                                           |                          |                               |            |            |  |            |            |            |  |            |            |     |  |   |            |     |  |   |            |    
|Flight equipment under operating leases (net of
    accumulated depreciation) |                          | $                             | 30,505,422 |            |  | $          | 28,190,689 |            |  | $          | 24,864,055 |     |  | $ | 20,613,524 |     |  | $ | 17,578,561 |    
|Net investment in finance and sales-type leases                               |                          |                               | 307,466    |            |  |            | 303,373    |            |  |            | 150,611    |     |  |   | 142,013    |     |  |   | 114,062    |    
|Total assets                                                                  |                          |                               | 34,007,900 |            |  |            | 31,291,562 |            |  |            | 27,148,615 |     |  |   | 22,940,830 |     |  |   | 19,541,609 |    
|Total debt                                                                    |                          |                               | 23,175,596 |            |  |            | 21,852,743 |            |  |            | 18,977,268 |     |  |   | 15,826,296 |     |  |   | 13,436,181 |    
|Shareholders equity                                                          |                          |                               | 5,329,937  |            |  |            | 4,856,504  |            |  |            | 4,414,071  |     |  |   | 3,889,916  |     |  |   | 3,413,125  |    
|Other Data:                                                                   |                          |                               |            |            |  |            |            |            |  |            |            |     |  |   |            |     |  |   |            |    
|Aircraft lease portfolio at period end(e):                                    |                          |                               |            |            |  |            |            |            |  |            |            |     |  |   |            |     |  |   |            |    
|                                                                              | Owned                    |                               |            | 667        |  |            |            | 611        |  |            |            | 543 |  |   |            | 453 |  |   |            | 383 | 
|                                                                              | Leased in                |                               |            |           |  |            |            |           |  |            |            | 13  |  |   |            | 18  |  |   |            | 19  | 
|                                                                              | Subject to finance lease |                               |            | 9          |  |            |            | 9          |  |            |            | 5   |  |   |            | 4   |  |   |            | 3   | 
|Aircraft sold or remarketed during the period                                 |                          |                               | 49         |            |  |            | 39         |            |  |            | 8          |     |  |   | 7          |     |  |   | 20         |    

See notes on following page

15



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##### Table of Contents





---



|    |                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Rentals of flight equipment less
    Expenses, adjusted for expenses related to variable
    interest entities and a charge related to a Customer bankruptcy
    (2004), divided by Rentals of flight equipment. See
    Item 7, Managements Discussion and Analysis
    of Financial Condition and Results of Operations.



|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Includes the unrealized gain (loss) attributable
    to economic hedges not qualifying for hedge accounting treatment
    under SFAS 133, including the related foreign exchange
    gains and losses, as discussed in Restatement. This will
    increase the inter-period volatility in the operating and lease
    margin percentages.



|    |                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------
|(c) | Income before income taxes and cumulative
    effect of accounting change divided by Total
    revenues.

(d) See Exhibit 12.

(e) See Item 2.
Properties  Flight Equipment.

16



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##### Table of Contents






Item 7. Managements Discussion
and Analysis of Financial Condition and Results of
Operations

Restatement

The following information describes the
corrections in accounting for certain derivatives transactions
and foreign currency transactions and for certain payments from
aircraft and engine manufacturers, together with the effect on
International Lease Finance Corporations (the
Company, management, we,
our, us) Consolidated Statement of
Income and Consolidated Balance Sheet accounts.

Derivative Instruments

ILFC enters into derivative instruments to hedge
interest rates and foreign currency risks. As part of the
previously announced restatement of the financial statements of
American International Group, Inc. (AIG),
ILFCs indirect parent corporation, AIG began an intensive
review of the books and records relating to a wide variety of
transactions entered into by AIG and its subsidiaries. During
the review of all hedge transactions, after ILFC had filed its
2004 Form 10-K and first quarter 2005 Form 10-Q,
deficiencies were identified related to ILFCs
documentation of hedge transactions and errors were identified
in the application of the proper accounting for derivative
related transactions under Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended
(SFAS 133). The review identified:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Documentation deficiencies related to portions of
    Euro denominated debt that ILFC had designated as a hedge
    against future operating lease payments receivable denominated
    in Euros. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.
|
| |  | Certain Euro denominated cash accounts associated
    with the aforementioned operating lease payments and certain
    foreign currency denominated debt required mark-to-spot
    treatment under Statement of Financial Accounting Standards
    No. 52, Foreign Currency Translation, which were not
    properly accounted for at the end of each quarter during the
    years 2004, 2003, 2002 and 2001.                                                                                  
|
| |  | Documentation deficiencies related to four
    commercial paper swaps where portions of ILFCs commercial
    paper program were swapped from floating into fixed interest
    rates. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.           
|
| |  | Minor errors under SFAS 133 with respect to
    derivative instruments related to the reclassification to income
    from Accumulated other comprehensive income. The corrections
    will also affect derivative assets and liabilities and accrued
    interest.                                                                                                                                                                                                                             

17



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The accounting restatement for derivative
instruments had the following effect on certain of ILFCs
Consolidated Statement of Income and Consolidated Balance Sheet
accounts:

|                                   |                                             |                                     |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |   | 
|---------------------------------- | ------------------------------------------- | ----------------------------------- | - | ------- | - | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | - |  | - | - | 
|                                   |                                             |                                    
|                                   |                                             | For Years Ended and At December 31,
|                                   |                                             |                                    
|                                   |                                             | 2004                                |   | 2003    |   | 2002 |   | 2001    |   | 2000
|Increase (Decrease)                |                                             |                                     |   |         |   |      |   |         |   |     
|                                   |                                             |                                     |   |         |   |      |   |         |   |     
|                                   |                                             |                                    
|                                   |                                             | (Dollars in thousands)             
|Consolidated Statements of Income: |                                             |                                     |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |  
|                                   | Interest and other revenue                  |                                     | $ | (18,316 | ) |      | $ | (31,152 | ) |      | $ | (42,703 | ) |  | $ | 24,563  |   |  | $ |  | 
|                                   | Interest expense                            |                                     |   | (22,640 | ) |      |   | (24,619 | ) |      |   | 20,500  |   |  |   | 28,036  |   |  |   |  | 
|                                   | Selling, general and administrative expense |                                     |   | (3,986  | ) |      |   | (1,631  | ) |      |   | (1,992  | ) |  |   | (687    | ) |  |   |  | 
|                                   | Net income                                  |                                     |   | 5,374   |   |      |   | (3,170  | ) |      |   | (39,582 | ) |  |   | (8,681  | ) |  |   |  | 
|Consolidated Balance Sheets:       |                                             |                                     |   |         |   |      |   |         |   |      |   |         |   |  |   |         |   |  |   |  
|                                   | Cash                                        |                                     |   | (1,906  | ) |      |   | 11,461  |   |      |   | 5,646   |   |  |   | 5,217   |   |  |   |  | 
|                                   | Derivative assets                           |                                     |   | (19,306 | ) |      |   |        |   |      |   |        |   |  |   |        |   |  |   |  | 
|                                   | Accrued interest and other payables         |                                     |   |        |   |      |   |        |   |      |   | 2,320   |   |  |   | (19,760 | ) |  |   |  | 
|                                   | Foreign currency adjustment                 |                                     |   |        |   |      |   | 142,284 |   |      |   | (325    | ) |  |   | 11,026  |   |  |   |  | 
|                                   | Derivative liabilities                      |                                     |   |        |   |      |   |        |   |      |   |        |   |  |   | 33,276  |   |  |   |  | 
|                                   | Accumulated other comprehensive income      |                                     |   | 32,475  |   |      |   | (33,370 | ) |      |   | 50,849  |   |  |   | 4,829   |   |  |   |  | 

|                                   |                                             |                           |   |          |   |               |   |              |   |  |   |        |   |  |   |         |  
|---------------------------------- | ------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | ------ | - |  | - | ------- | -
|                                   |                                             |                          
|                                   |                                             | For Quarters Ended and At
|                                   |                                             |                          
|                                   |                                             | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                             | 2004                      |   | 2004     |   | 2004          |   | 2004        
|Increase (Decrease)                |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                          
|                                   |                                             | (Dollars in thousands)   
|Consolidated Statements of Income: |                                             |                           |   |          |   |               |   |              |   |  |   |        |   |  |   |        
|                                   | Interest and other revenue                  |                           | $ | 1,426    |   |               | $ | 905          |   |  | $ | (1,349 | ) |  | $ | (19,298 | )
|                                   | Interest expense                            |                           |   | (5,291   | ) |               |   | (7,685       | ) |  |   | (9,642 | ) |  |   | (22     | )
|                                   | Selling, general and administrative expense |                           |   | (665     | ) |               |   | (188         | ) |  |   | 4,713  |   |  |   | (7,846  | )
|                                   | Net income                                  |                           |   | 4,773    |   |               |   | 5,676        |   |  |   | 2,316  |   |  |   | (7,391  | )
|Consolidated Balance Sheets:       |                                             |                           |   |          |   |               |   |              |   |  |   |        |   |  |   |        
|                                   | Cash                                        |                           |   | 3,013    |   |               |   | 2,740        |   |  |   | 2,766  |   |  |   | (1,906  | )
|                                   | Derivative assets                           |                           |   | 31,623   |   |               |   | (32,176      | ) |  |   | (319   | ) |  |   | (19,306 | )
|                                   | Accrued interest and other payables         |                           |   |         |   |               |   |             |   |  |   |       |   |  |   |        |  
|                                   | Foreign currency adjustment                 |                           |   | (37,152  | ) |               |   | (13,076      | ) |  |   | (2     | ) |  |   |        |  
|                                   | Derivative liabilities                      |                           |   |         |   |               |   |             |   |  |   |       |   |  |   |        |  
|                                   | Accumulated other comprehensive income      |                           |   | 57,438   |   |               |   | 30,259       |   |  |   | 40,083 |   |  |   | 32,475  |  

18



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##### Table of Contents



|                                   |                                             |                           |   |          |   |               |   |              |   |  |   |         |   |  |   |         |  
|---------------------------------- | ------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | ------- | - |  | - | ------- | -
|                                   |                                             |                          
|                                   |                                             | For Quarters Ended and At
|                                   |                                             |                          
|                                   |                                             | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                             | 2003                      |   | 2003     |   | 2003          |   | 2003        
|Increase (Decrease)                |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                           |   |          |   |               |   |             
|                                   |                                             |                          
|                                   |                                             | (Dollars in thousands)   
|Consolidated Statements of Income: |                                             |                           |   |          |   |               |   |              |   |  |   |         |   |  |   |        
|                                   | Interest and other revenue                  |                           | $ | (8,142   | ) |               | $ | (10,494      | ) |  | $ | (2,010  | ) |  | $ | (10,506 | )
|                                   | Interest expense                            |                           |   | 2,617    |   |               |   | (9,082       | ) |  |   | (11,545 | ) |  |   | (6,609  | )
|                                   | Selling, general and administrative expense |                           |   | (736     | ) |               |   | (87          | ) |  |   | (363    | ) |  |   | (445    | )
|                                   | Net income                                  |                           |   | (6,481   | ) |               |   | (857         | ) |  |   | 6,400   |   |  |   | (2,232  | )
|Consolidated Balance Sheets:       |                                             |                           |   |          |   |               |   |              |   |  |   |         |   |  |   |        
|                                   | Cash                                        |                           |   | 7,260    |   |               |   | 6,454        |   |  |   | 7,476   |   |  |   | 11,461  |  
|                                   | Derivative assets                           |                           |   |         |   |               |   |             |   |  |   |        |   |  |   |        |  
|                                   | Accrued interest and other payables         |                           |   |         |   |               |   |             |   |  |   | 1,671   |   |  |   |        |  
|                                   | Foreign currency adjustment                 |                           |   | (325     | ) |               |   | (325         | ) |  |   | (325    | ) |  |   | 142,284 |  
|                                   | Derivative liabilities                      |                           |   |         |   |               |   |             |   |  |   |        |   |  |   |        |  
|                                   | Accumulated other comprehensive income      |                           |   | 59,923   |   |               |   | 60,260       |   |  |   | 53,405  |   |  |   | (33,370 | )

Though the economics of the hedge transactions
are not affected, the corrections will significantly increase
inter-period volatility due to the non-qualification of hedge
accounting treatment under SFAS 133. Thus, the effect on
Net income, Retained earnings and Shareholders equity will
differ from period to period.

Certain Payments from Aircraft and Engine
Manufacturers

In the course of ILFCs review of its
application of SFAS 133, ILFC, in consultation with its
independent registered public accountants, identified an error
in its accounting for certain payments received from aircraft
and engine manufacturers. Under arrangements with these
manufacturers, in certain circumstances the manufacturers
established notional accounts for the benefit of ILFC, to which
amounts were credited by the manufacturers in connection with
the purchase by and delivery to ILFC and the lease of aircraft.
Amounts credited to the notional accounts were used at
ILFCs direction to protect ILFC from certain events
including loss when airline customers of ILFC defaulted on lease
payment obligations, to provide lease subsidies and other
incentives to ILFC airline customers in connection with leases
of certain aircraft and to reduce ILFCs cost of aircraft
purchased.

Historically, ILFC recorded as revenues gross
lease receipts from customers who had received lease subsidies
from the notional accounts and amounts paid directly to ILFC
from the notional accounts in connection with lessee defaults.
Amounts recorded as revenue at the time they were disbursed to
ILFC or its lessees should have been recorded as a reduction of
the purchase price of the aircraft at the time of delivery.

19



---



##### Table of Contents



The accounting restatement for the
manufacturers payments had the following effect on
ILFCs Consolidated Statement of Income and Consolidated
Balance Sheet accounts:

|                                   |                                                          |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------------------------------------- | ----------------------------------- | - | -------- | - | ---- | - | -------- | - | ---- | - | -------- | - |  | - | -------- | - |  | - | -------- | -
|                                   |                                                          |                                    
|                                   |                                                          | For Years Ended and At December 31,
|                                   |                                                          |                                    
|                                   |                                                          | 2004                                |   | 2003     |   | 2002 |   | 2001     |   | 2000
|Increase (Decrease)                |                                                          |                                     |   |          |   |      |   |          |   |     
|                                   |                                                          |                                     |   |          |   |      |   |          |   |     
|                                   |                                                          |                                    
|                                   |                                                          | (Dollars in thousands)             
|Consolidated Statements of Income: |                                                          |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Rentals of flight equipment revenue                      |                                     | $ | (124,300 | ) |      | $ | (133,885 | ) |      | $ | (131,734 | ) |  | $ | (62,208  | ) |  | $ | (50,460  | )
|                                   | Flight equipment marketing revenue                       |                                     |   | 8,868    |   |      |   | (12,088  | ) |      |   | (17,862  | ) |  |   | (31,043  | ) |  |   | (25,219  | )
|                                   | Interest and other revenue                               |                                     |   | 248      |   |      |   | 543      |   |      |   | 2,641    |   |  |   | 4,200    |   |  |   | 4,749    |  
|                                   | Depreciation expense                                     |                                     |   | (45,175  | ) |      |   | (40,869  | ) |      |   | (36,329  | ) |  |   | (31,289  | ) |  |   | (25,526  | )
|                                   | Net income                                               |                                     |   | (45,272  | ) |      |   | (67,614  | ) |      |   | (71,536  | ) |  |   | (37,352  | ) |  |   | (29,360  | )
|Consolidated Balance Sheets:       |                                                          |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Accrued interest, other receivables and other
    assets |                                     |   | 80,238   |   |      |   | 48,358   |   |      |   | 103,281  |   |  |   | 159,888  |   |  |   | 147,806  |  
|                                   | Flight equipment under operating leases (net)            |                                     |   | (575,219 | ) |      |   | (473,329 | ) |      |   | (423,692 | ) |  |   | (369,673 | ) |  |   | (299,828 | )

|                                   |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                                                          |                          
|                                   |                                                          | For Quarters Ended and At
|                                   |                                                          |                          
|                                   |                                                          | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                                          | 2004                      |   | 2004     |   | 2004          |   | 2004        
|Increase (Decrease)                |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                          
|                                   |                                                          | (Dollars in thousands)   
|Consolidated Statements of Income: |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Rentals of flight equipment revenue                      |                           | $ | (24,978  | ) |               | $ | (33,125      | ) |  | $ | (33,502  | ) |  | $ | (32,695  | )
|                                   | Flight equipment marketing revenue                       |                           |   | 6,569    |   |               |   | 1,176        |   |  |   | (464     | ) |  |   | 1,587    |  
|                                   | Interest and other revenue                               |                           |   | 50       |   |               |   | 78           |   |  |   | 77       |   |  |   | 43       |  
|                                   | Depreciation expense                                     |                           |   | (10,829  | ) |               |   | (11,284      | ) |  |   | (11,316  | ) |  |   | (11,746  | )
|                                   | Net income                                               |                           |   | (4,869   | ) |               |   | (13,312      | ) |  |   | (14,598  | ) |  |   | (12,943  | )
|Consolidated Balance Sheets:       |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Accrued interest, other receivables and other
    assets |                           |   | 68,415   |   |               |   | 89,909       |   |  |   | 60,287   |   |  |   | 80,238   |  
|                                   | Flight equipment under operating leases (net)            |                           |   | (500,917 | ) |               |   | (543,410     | ) |  |   | (535,948 | ) |  |   | (575,219 | )

|                                   |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------------------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                                                          |                          
|                                   |                                                          | For Quarters Ended and At
|                                   |                                                          |                          
|                                   |                                                          | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                                                          | 2003                      |   | 2003     |   | 2003          |   | 2003        
|Increase (Decrease)                |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                           |   |          |   |               |   |             
|                                   |                                                          |                          
|                                   |                                                          | (Dollars in thousands)   
|Consolidated Statements of Income: |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Rentals of flight equipment revenue                      |                           | $ | (21,189  | ) |               | $ | (30,669      | ) |  | $ | (33,861  | ) |  | $ | (48,166  | )
|                                   | Flight equipment marketing revenue                       |                           |   |         |   |               |   | (11,262      | ) |  |   | (4,089   | ) |  |   | 3,263    |  
|                                   | Interest and other revenue                               |                           |   | 162      |   |               |   | 110          |   |  |   | 185      |   |  |   | 86       |  
|                                   | Depreciation expense                                     |                           |   | (9,572   | ) |               |   | (10,237      | ) |  |   | (10,500  | ) |  |   | (10,560  | )
|                                   | Net income                                               |                           |   | (7,407   | ) |               |   | (20,424      | ) |  |   | (17,631  | ) |  |   | (22,152  | )
|Consolidated Balance Sheets:       |                                                          |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Accrued interest, other receivables and other
    assets |                           |   | 90,598   |   |               |   | 103,584      |   |  |   | 85,847   |   |  |   | 48,358   |  
|                                   | Flight equipment under operating leases (net)            |                           |   | (422,463 | ) |               |   | (467,034     | ) |  |   | (476,561 | ) |  |   | (473,329 | )

20



---



##### Table of Contents





| |                                    
| | -----------------------------------
| | Aggregate Effect of the Restatement

The restatement had the following aggregate
effect on ILFCs Consolidated Statement of Income and
Consolidated Balance Sheet accounts:

|                                   |                            |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------- | ----------------------------------- | - | -------- | - | ---- | - | -------- | - | ---- | - | -------- | - |  | - | -------- | - |  | - | -------- | -
|                                   |                            |                                    
|                                   |                            | For Years Ended and At December 31,
|                                   |                            |                                    
|                                   |                            | 2004                                |   | 2003     |   | 2002 |   | 2001     |   | 2000
|Increase (Decrease)                |                            |                                     |   |          |   |      |   |          |   |     
|                                   |                            |                                     |   |          |   |      |   |          |   |     
|                                   |                            |                                    
|                                   |                            | (Dollars in thousands)             
|Consolidated Statements of Income: |                            |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Revenue                    |                                     | $ | (133,500 | ) |      | $ | (176,582 | ) |      | $ | (189,658 | ) |  | $ | (64,488  | ) |  | $ | (70,930  | )
|                                   | Expense                    |                                     |   | (71,801  | ) |      |   | (67,119  | ) |      |   | (17,821  | ) |  |   | (3,940   | ) |  |   | (25,526  | )
|                                   | Net income(a)              |                                     |   | (39,898  | ) |      |   | (70,784  | ) |      |   | (111,118 | ) |  |   | (46,033  | ) |  |   | (29,360  | )
|Consolidated Balance Sheets:       |                            |                                     |   |          |   |      |   |          |   |      |   |          |   |  |   |          |   |  |   |         
|                                   | Total assets               |                                     |   | (529,208 | ) |      |   | (413,510 | ) |      |   | (327,502 | ) |  |   | (212,591 | ) |  |   | (158,562 | )
|                                   | Total liabilities          |                                     |   | (195,543 | ) |      |   | (53,895  | ) |      |   | (122,894 | ) |  |   | (78,716  | ) |  |   | (57,017  | )
|                                   | Total shareholders equity |                                     |   | (333,665 | ) |      |   | (359,615 | ) |      |   | (204,608 | ) |  |   | (133,875 | ) |  |   | (101,545 | )



---



|    |                                                                   
|--- | ------------------------------------------------------------------
|(a) | The effect on net income prior to the year 2000
    was $(68,945).

|                                   |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                            |                          
|                                   |                            | For Quarters Ended and At
|                                   |                            |                          
|                                   |                            | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                            | 2004                      |   | 2004     |   | 2004          |   | 2004        
|Increase (Decrease)                |                            |                           |   |          |   |               |   |             
|                                   |                            |                           |   |          |   |               |   |             
|                                   |                            |                          
|                                   |                            | (Dollars in thousands)   
|Consolidated Statements of Income: |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Revenue                    |                           | $ | (16,933  | ) |               | $ | (30,966      | ) |  | $ | (35,238  | ) |  | $ | (50,363  | )
|                                   | Expense                    |                           |   | (16,785  | ) |               |   | (19,157      | ) |  |   | (16,245  | ) |  |   | (19,614  | )
|                                   | Net income                 |                           |   | (96      | ) |               |   | (7,636       | ) |  |   | (12,282  | ) |  |   | (19,884  | )
|Consolidated Balance Sheets:       |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Total assets               |                           |   | (453,387 | ) |               |   | (482,937     | ) |  |   | (473,214 | ) |  |   | (529,208 | )
|                                   | Total liabilities          |                           |   | (184,487 | ) |               |   | (179,221     | ) |  |   | (167,040 | ) |  |   | (195,543 | )
|                                   | Total shareholders equity |                           |   | (268,900 | ) |               |   | (303,716     | ) |  |   | (306,174 | ) |  |   | (333,665 | )

|                                   |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |          |  
|---------------------------------- | -------------------------- | ------------------------- | - | -------- | - | ------------- | - | ------------ | - |  | - | -------- | - |  | - | -------- | -
|                                   |                            |                          
|                                   |                            | For Quarters Ended and At
|                                   |                            |                          
|                                   |                            | March 31,                 |   | June 30, |   | September 30, |   | December 31,
|                                   |                            | 2003                      |   | 2003     |   | 2003          |   | 2003        
|Increase (Decrease)                |                            |                           |   |          |   |               |   |             
|                                   |                            |                           |   |          |   |               |   |             
|                                   |                            |                          
|                                   |                            | (Dollars in thousands)   
|Consolidated Statements of Income: |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Revenue                    |                           | $ | (29,169  | ) |               | $ | (52,315      | ) |  | $ | (39,775  | ) |  | $ | (55,323  | )
|                                   | Expense                    |                           |   | (7,691   | ) |               |   | (19,406      | ) |  |   | (22,408  | ) |  |   | (17,614  | )
|                                   | Net income                 |                           |   | (13,888  | ) |               |   | (21,281      | ) |  |   | (11,231  | ) |  |   | (24,384  | )
|Consolidated Balance Sheets:       |                            |                           |   |          |   |               |   |              |   |  |   |          |   |  |   |         
|                                   | Total assets               |                           |   | (340,659 | ) |               |   | (376,526     | ) |  |   | (406,605 | ) |  |   | (413,510 | )
|                                   | Total liabilities          |                           |   | (129,116 | ) |               |   | (141,805     | ) |  |   | (151,347 | ) |  |   | (53,895  | )
|                                   | Total shareholders equity |                           |   | (211,543 | ) |               |   | (234,721     | ) |  |   | (255,258 | ) |  |   | (359,615 | )

ILFCs aggregate cash flows were unaffected.
ILFC continues to be in compliance with its debt covenants after
the restatement.



| |                      
| | ---------------------
| | Capital Contributions

AIG and its subsidiaries made a capital
contribution of approximately $400 million on
August 11, 2005, to offset the reduction in our
shareholders equity resulting from the restatement.

21



---



##### Table of Contents



As more fully described in the Explanatory
Note, Restatement and in Note B of Notes to
Consolidated Financial Statements, the Company is restating
its Consolidated Financial Statements for the years ended
December 31, 2004, 2003 and 2002 and other financial
information for these years and 2001 and 2000.

Managements Discussion and Analysis of
Financial Condition and Results of Operations presented below
reflects certain restatements to our operating results for the
years ended December 31, 2004, 2003 and 2002.

Overview

ILFC primarily acquires new jet transport
aircraft from Boeing and Airbus and leases these aircraft to
airlines throughout the world. In addition to our leasing
activity, we sell aircraft from our leased aircraft fleet to
other leasing companies, financial services companies and
airlines. In some cases, we provide fleet management services to
companies with aircraft portfolios for a management fee. We have
also provided asset value guarantees and loan guarantees to
buyers of aircraft or to financial institutions for a fee. We
also remarket and sell aircraft owned or managed by others for a
fee.

As of December 31, 2004, we owned 667
aircraft, had nine aircraft in the fleet that were classified as
finance leases, and provided fleet management services for 101
aircraft. We have contracted with Airbus and Boeing to buy
355 new aircraft for delivery through 2010 with an
estimated purchase price of $21.3 billion, 97 of which will
deliver during 2005. The recorded basis of aircraft may be
adjusted to reflect notional credits given by the manufacturers
to support the leasing of aircraft, as discussed in
Restatement above.

Our primary source of revenue is from operating
leases. One measure of profitability we use is a ratio called
Lease Margin, (see Item 7. Managements
Discussion and Analysis  Non-GAAP Financial
Measures). The airline industry is cyclical in nature
and lease margins have generally lowered since the terrorist
attacks of September 11, 2001 due to a surplus of aircraft
in the marketplace, airline bankruptcies, higher incidents of
lease restructurings with troubled airlines, repossessions of
aircraft, depressed airline revenue yields, terrorism, and
worldwide health concerns (such as SARS). However, since late
2003, airline passenger and cargo traffic worldwide has
exhibited measured growth and, despite rising fuel prices which
significantly impacted the airline industry during 2004, overall
airline industry trends in 2004 showed continued improvement,
particularly outside the United States. As a result, during 2004
we saw an increase in demand for newer, modern, fuel efficient
aircraft that comprise the bulk of our fleet, and an overall
strengthening of lease rates. Although lease rates strengthened
during 2004, there is a lag between changes in market conditions
and their impact on our results, as contracts signed during
times of lower lease rates are still in effect, including a
number of new aircraft that delivered in 2004 and some that are
scheduled for delivery in 2005. Therefore, the improvement in
the airline industry has yet to be completely reflected in our
financial performance. Moreover, increasing interest rates,
along with other risk factors may impact our future results (see
Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations 
Risk Factors Affecting International Lease Finance
Corporation).

During 2004, we derived 90.1% of our revenues
from airlines outside of the United States, as compared with
89.0% in 2003 and 86.1% in 2002. A key factor in our success has
been a concentrated effort to maximize our lease placements in
regions that are strengthening, such as in Asia, Europe and the
Middle East, and to minimize placements in regions that are
under stress, such as the United States. Although our thirteen
B737-800 aircraft leases with ATA were affirmed in its
bankruptcy proceeding with no changes or detriment in lease
economics, we did experience a loss of approximately
$53.9 million in connection with our equity holdings and
guarantees, that we held as part of the lease transactions. See
Notes E and L of Notes to Consolidated Financial
Statements. We have no aircraft on lease to United Airlines,
US Airways, Delta, or Northwest Airlines.

We believe we are well positioned in the current
industry environment with 100% placement of our 2005 deliveries
of new aircraft as of December 31, 2004, and placement of
77% of our 2006 new aircraft deliveries as of February 23,
2005. During 2004, we sold 15 aircraft from our lease
portfolio to repeat buyers of our aircraft as well as to two new
buyers of multiple aircraft deals, and we have experienced
during 2004 an increasing level of interest from third party
investors and debt providers regarding the purchase of aircraft
from our fleet.

22



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##### Table of Contents



Risk Factors Affecting International Lease
Finance Corporation

Our business is subject to numerous risks and
uncertainties, as described below and in the section titled
Item 7A. Quantitative and Qualitative Disclosures
about Market Risk.

Overall Airline Industry Risk

We operate as a supplier and financier to
airlines. The risks affecting our airline customers are
generally out of our control and impact our customers to varying
degrees. As a result, we are indirectly impacted by all the
risks facing airlines today. Our ability to succeed is dependent
on the financial strength of our customers and their ability to
compete effectively in the market place and manage these risks
has a direct impact on us. These risks include:



| |   |                                               
| | - | ----------------------------------------------
| |  | Demand for air travel                         
|
| |  | Competition between carriers                  
|
| |  | Fuel prices and availability                  
|
| |  | Labor costs and stoppages                     
|
| |  | Maintenance costs                             
|
| |  | Employee labor contracts                      
|
| |  | Air traffic control infrastructure constraints
|
| |  | Airport access                                
|
| |  | Insurance costs                               
|
| |  | Security, terrorism and war                   
|
| |  | Worldwide health concerns                     
|
| |  | Equity and borrowing capacity                 
|
| |  | Environmental concerns                        
|
| |  | Government regulation                         
|
| |  | Interest rates                                
|
| |  | Overcapacity                                  

To the extent that our customers are affected by
these risk factors, we may experience:



| |   |                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a downward pressure on demand for the aircraft in
    our fleet and reduced market lease rates and lease margins;                                                                                                                                                                                                                      
|
| |  | a higher incident of lessee defaults, lease
    restructurings and repossessions resulting in lower lease
    margins due to maintenance, consulting and legal costs
    associated with the repossession, as well as lost revenue for
    the time the aircraft are off lease and possibly lower lease
    rates from the new lessees;
|
| |  | a higher incident of situations where we engage
    in restructuring lease rates for our troubled customers which
    reduces overall lease margins; and                                                                                                                                                                               
|
| |  | an inability to immediately place new and used
    aircraft when they become available through our purchase
    commitments and regular lease terminations on commercially
    accepted terms, resulting in lower lease margins due to aircraft
    not earning revenue and resulting in storage, insurance and
    maintenance costs. 

Manufacturer Risks

The supply of jet transport aircraft, which we
purchase and lease, is dominated by two airframe manufacturers,
Boeing and Airbus, and a limited number of engine manufacturers.
As a result, we are dependent on the manufacturers success
in remaining financially stable, producing aircraft and related
components which meet the airlines demands, both in type
and quantity and fulfilling their contractual obligations to us.
Further, competition between the manufacturers for market share
is escalating and may cause instances of deep discounting for
certain aircraft types and may negatively impact our competitive
pricing. We have attempted to mitigate these risks, to the
extent possible, by maintaining good relationships with all the
manufacturers and monitoring their financial stability and
production plans. Should the

23



---



##### Table of Contents



manufacturers fail to respond appropriately to
changes in the market environment or fail to fulfill their
contractual obligations, we may experience:




| |   |                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | missed or late delivery of aircraft ordered by us
    and an inability to meet our contractual obligations to our
    customers, resulting in lost or delayed revenues, lower growth
    rates and strained customer relationships;                                                         
|
| |  | an inability to acquire aircraft and related
    components on terms which will allow us to lease those aircraft
    to customers at a profit, resulting in lower growth rates or a
    contraction in our fleet;                                                                           
|
| |  | a market place with too many aircraft available,
    creating a downward pressure on demand for the aircraft in our
    fleet and reduced market lease rates;                                                                                                                               
|
| |  | poor customer support from the manufacturers of
    aircraft and components resulting in a reduced demand for a
    particular manufacturers product, creating a downward
    pressure on demand for those aircraft in our fleet and reduced
    market lease rates for those aircraft; and
|
| |  | reduction in our competitiveness due to deep
    discounting by the manufacturers, which may lead to reduced
    market lease rates and may impact our ability to remarket or
    sell some of the aircraft in our fleet.                                                                   

Borrowing Risks

Liquidity
We are heavily dependent on our ability to borrow the necessary
funds to finance the purchase of aircraft and to have sufficient
funds to repay our existing debt obligations. Our liquidity is
dependent on having continued access to debt markets and
maintaining our credit ratings. We manage this risk by
maintaining access to many debt markets throughout the world.
With insufficient liquidity we could potentially experience:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an inability to acquire aircraft, for which we
    have signed contracts, resulting in lower growth, lost revenue
    and strained manufacturer and customer relationships; and                                    
|
| |  | an inability to meet our debt maturities as they
    become due, resulting in payment defaults, non-compliance with
    debt covenants, reduced credit ratings and an inability to
    access certain debt markets.

Interest Rate
Risks We are impacted by
fluctuations in interest rates. Our lease rates are generally
fixed. Changes, both increases and decreases, in our cost of
borrowing, as reflected in our composite interest rate, directly
impact our lease margin. We manage the interest rate volatility
and uncertainty by maintaining a balance between fixed and
floating rate debt, through derivative instruments and through
matching debt maturities with lease maturities.

Other Risks

Residual
Value We bear the risk of
re-leasing or selling the aircraft in our fleet that are subject
to operating leases at the end of their lease terms. If demand
for aircraft decreases, our average fleet age may increase
because of an inability to sell, and market lease rates may
decrease. Should this condition continue for an extended period,
it could affect the market value of aircraft in our fleet and
may result in impairment charges in accordance with
SFAS No. 144 Accounting for the Impairment or
Disposal of Long-lived Assets (SFAS 144).
See Item 7. Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Critical Accounting Polices and
Estimates  Flight Equipment.

Obsolescence
Risk Aircraft are
long-lived assets requiring long lead times to develop and
manufacture. As a result, aircraft of a particular model and
type tend to become obsolete and less in demand over time, when
newer more advanced and efficient aircraft are manufactured.
This life cycle, however, can be shortened by world events,
government regulation or customer preferences. We manage this
risk by purchasing and maintaining a mix of flight equipment
which we feel will meet our customers long-term needs, and
will have the greatest airline demand and operational longevity.
As aircraft in our fleet approach obsolescence, demand

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for that particular model and type will decrease.
This may result in lease margins compressing or may result in
impairment charges in accordance with SFAS 144.


Key
Personnel Our future
success is dependent upon, among other things, the retention of
our executive management team. There can be no assurance that we
will be able to retain our executive officers and other key
employees. The loss of the services of any of our executive
officers or key employees could disrupt our operations.

Foreign currency exchange rate
risk We negotiate some of
our leases in Euros to meet the demands of a growing number of
airlines. If the Euro exchange rate to the U.S. dollar
deteriorates, as it did during 2004, we will record less lease
revenue on those leases.

Industry Condition

Our sources of revenue are principally from
scheduled and charter airlines and companies associated with the
airline industry. Our revenues and results of operation are
therefore affected by how our customers cope with the economic
environment in which airlines operate. The airline industry is
cyclical, economically sensitive and highly competitive.
Airlines and related companies may be affected by political or
economic instability, terrorist activities, changes in national
policy, competitive pressures on certain air carriers, fuel
prices and shortages, labor stoppages, insurance cost,
recessions, and other political or economic events adversely
affecting world or regional trading markets. Our revenues and
income will be affected by our customers ability to react
to and cope with the volatile competitive environment in which
they operate as well as our own competitive environment.

Airline passenger and cargo traffic worldwide has
exhibited measured growth since late 2003. If such traffic
growth can be sustained, it should benefit the economic recovery
of the commercial airlines industry. Recent market trends
indicate a modest increase in lease rates for the most desirable
Airbus and Boeing twin-engine single aisle and wide body
aircraft for placements in late 2004 and beyond. However, lower
lease rates will continue to affect our revenue until leases
negotiated during the economic downturn have terminated and are
renewed at higher rental levels.

Over 23% of our revenue is generated from
customers based in Asia and the Pacific region, and we have
numerous other customers who operate flights to and from those
areas. Travel between Asia and the rest of the world was
negatively impacted by the outbreak of SARS. Many airlines in
Asia and those traveling to Asia curtailed flights in response
to the reluctance of people to travel to Asia during the first
six months of 2003. Travel to Asia has, however, more than
recovered since the World Health Organization lifted warnings
against visits to SARS affected countries in the second quarter
of 2003. Any new outbreak of SARS could again negatively impact
travel between Asia and the rest of the world.

From time to time, some of our customers have
experienced economic difficulties resulting in our participation
in customer restructurings. Such restructurings have involved
the voluntary early termination of leases, the replacement of
leased aircraft with smaller, less expensive leased aircraft,
the arrangement of subleases from the primary lessee to another
airline and the rescheduling of payments. In addition, in
certain circumstances, we have repossessed aircraft.

During 2004, two of our customers, ATA
(13 owned and two managed aircraft) and Aloha Airlines (one
owned aircraft) filed for protection under Chapter 11 of
the United States Bankruptcy Code and four of our customers,
Volare (four owned aircraft), Air Polonia (one owned and one
managed aircraft), Air Holland (one owned and one managed
aircraft) and V-Bird (three owned aircraft), filed for
protection under the bankruptcy laws of their respective
countries. ATA and Aloha Airlines are still operating and the
16 aircraft remained on lease to ATA and Aloha Airlines at
December 31, 2004. All of the aircraft previously leased to
Volare, Air Polonia, Air Holland and V-Bird were placed on lease
with other airlines.

We experienced a decrease in lease margin during
2004 and 2003 due to the factors mentioned above. Management
believes that this trend will likely continue until improvements
of economic conditions and stabilization of the global political
environment can be reflected in lease rates received from our
lessees.

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On October 16, 2003, Boeing announced that
it had decided to complete production of the 757 jetliner
in late 2004. At December 31, 2004, we owned 59 757s,
all of which were on lease to airlines. As a result, management
reviewed and reduced the residual values on the Boeing 757
aircraft type to an internally established value to more
appropriately reflect managements expectations of future
values. The change in estimate was recorded prospectively,
commencing January 1, 2004 and had an immaterial effect on
our financial position and results of operations. We believe
that the market place had already reflected this event in market
lease rates and market values for these aircraft prior to the
announcement, and we have considered the event in our most
recent impairment analysis. The analysis did not result in an
impairment charge.

We have received tax benefits under the Foreign
Sales Corporation (FSC) law and its successor
regime, the Extraterritorial Income Act (ETI).
In October 2004, Congress passed a bill, the American Jobs
Creation Act of 2004, repealing the corporate export tax
benefits under the ETI, after the World Trade Organization ruled
the export subsidies were illegal. Under the Act, ETI export tax
benefits for corporations would be phased out in 2005 and 2006
and cease to exist for the year 2007. As a result, we expect our
effective tax rate to rise over the next two years to a rate
consistent with the expected statutory rate.

Critical Accounting Policies and
Estimates

Managements discussion and analysis of our
financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial
statements requires management to make estimates and judgments
that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to revenue, depreciation,
overhaul reserves, and contingencies. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. The results
form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions and conditions.

We believe the following are our critical
accounting policies, some of which require significant judgments
and estimates, used in the preparation of the consolidated
financial statements.

Lease Revenue: As
lessor, we lease flight equipment principally under operating
leases and report rental income ratably over the life of the
lease. The difference between the rental income recorded and the
cash received under the provisions of the lease is included in
Accrued interest, other receivables and other assets
on our Consolidated Balance Sheets. Past-due rentals are
recognized on the basis of managements assessment of
collectibility. In certain cases, leases provide for additional
rentals based on usage. The usage may be calculated based on
hourly usage or on the number of cycles operated, depending on
the lease contract. A cycle is defined as one take-off and
landing. The usage is typically reported monthly by the lessee.
Rentals received, but unearned under the lease agreements, are
recorded in Rentals received in advance on our
Consolidated Balance Sheets until earned. Lease revenues from
the rental of flight equipment have been reduced by payments
received directly by us or by our customers from the aircraft
and engine manufacturers.

Costs related to reconfiguration of aircraft
cabins and other lessee specific modifications are capitalized
and amortized over the life of the lease.

Flight Equipment
Marketing: We market flight equipment
and recognize gains and losses when leased equipment is sold and
the risk of ownership of the equipment is passed to the new
owner. We also engage in marketing aircraft on behalf of
independent third parties. We recognize revenue for these
transactions when services are rendered and an obligation to pay
exists in accordance with the contract. The portion of sales
proceeds as a result of payments made to buyers directly by the
aircraft manufacturers are not included in marketing revenue but
are recorded as a reduction to the overall basis of the flight
equipment.

Flight Equipment:
Flight equipment under operating leases is stated at cost.
Purchases, major additions and modifications and capitalized
interest are capitalized. Normal maintenance and repairs,
airframe and engine overhauls and compliance with return
conditions of flight equipment returned from lease are provided

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for and paid for by the lessee. Generally,
aircraft, including aircraft acquired under capital leases, are
depreciated using the straight line method over a 25 year
life from the date of manufacture to a 15% residual value.
Because of the significant cost of aircraft carried in
Flight equipment under operating leases in our
Consolidated Balance Sheets, any change in the assumption of
useful life or residual values for all aircraft could have a
significant impact on our results of operations.


Under arrangements with the manufacturers, in
certain circumstances the manufacturers establish notional
accounts for the benefit of ILFC, to which amounts are credited
by them in connection with the purchase by and delivery to ILFC
and the lease of aircraft. Amounts credited to the notional
accounts are used at ILFCs direction to protect ILFC from
certain events including loss when airline customers of ILFC
default on lease payment obligations, to provide lease subsidies
and other incentives to ILFC airline customers in connection
with leases of certain aircraft and to reduce ILFCs cost
of aircraft purchased. The amounts credited to the notional
accounts are recorded as a reduction to the basis of aircraft
purchased.

Out of production aircraft types are depreciated
using the straight line method over a 25 year life from the
date of manufacture to an established residual value for each
aircraft type. In 2003, we changed the residual value on out of
production aircraft to reflect changes in future economic values
of these aircraft. The resulting change in depreciation did not
have a material effect on our results of operations.

At the time assets are retired or sold, the cost
and accumulated depreciation are removed from the related
accounts and the difference, net of proceeds, is recorded as a
gain or loss.

Management is very active in the airline industry
and reviews issues affecting our fleet on a quarterly basis,
including events and circumstances that may affect impairment of
aircraft values (e.g. residual value, useful life and current
and future revenue generating capacity). Management evaluates
aircraft in the fleet, as necessary, based on these events and
circumstances in accordance with SFAS 144. SFAS 144
requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. These
evaluations for impairment are significantly impacted by
estimates of future revenues and other factors which involve
some amount of uncertainty. Recoverability of assets is measured
by comparing the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the
asset. Estimated cash flows consist of current contractual lease
rates, future projected lease rates and estimated scrap values
for each aircraft. The factors considered in estimating the
undiscounted cash flows may change in future periods due to
changes in contracted lease rates, economic conditions,
technology, airline demand for a particular aircraft type and
many of the risk factors discussed in Item 7.
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Risk Factors
Affecting International Lease Finance Corporation. We
have, to date, not recorded any impairment charges related to
aircraft.

Capitalized
Interest: We borrow funds to finance
progress payments for the construction of flight equipment
ordered. We capitalize interest incurred on such borrowings.
This amount is calculated using our composite borrowing rate
(see Item 7. Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Financial Condition) and is
included in the cost of the flight equipment. Any change in our
composite borrowing rate will change the amount capitalized.

Provision for
Overhauls: Under the provisions of
many leases, we receive overhaul rentals based on the usage of
the aircraft. For certain airframe and engine overhauls, the
lessee is reimbursed for costs incurred up to, but not
exceeding, related overhaul rentals paid by the lessee for usage
of the aircraft.

Overhaul rentals are included under the caption
Rental of flight equipment in our Consolidated
Statements of Income. We provide a charge to operations for
estimated future reimbursements at the time the overhaul rentals
are paid by the lessee. The charge is based on overhaul rentals
received and the estimated reimbursements during the life of the
lease. The historical payout rate is subject to significant
fluctuations. Using its judgment, management periodically
evaluates the appropriateness of the reserve for these
reimbursements and its reimbursement rate, and then adjusts the
provision for overhauls accordingly. This evaluation requires
significant judgment. If the reimbursements are materially
different than our estimates, there will be a material impact on
our results of operations.

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Legal Proceedings

In connection with the January 3, 2004 crash
of our 737-300 aircraft on lease to Flash Airlines in Egypt, 55
lawsuits have been filed by the families of 120 of the 148
victims on the flight against the Company, The Boeing Company,
Honeywell International Inc. (and, in one case, Parker-Hannifin
Corporation) in the United States District Court for the Central
District of California. We believe the Company is adequately
covered in these cases by the liability insurance policies
carried by Flash Airlines and has substantial procedural and
substantive defenses to the actions. We do not believe the
outcome of these lawsuits will have a material effect on our
liquidity, financial condition or results of operations.

Between December 2001 and March 2003, we
restructured the ownership of aircraft in certain lease
transactions in Australia. Prior to entering into the
transactions, we obtained opinions from Queens Counsel in
Australia so that the restructuring transactions would be
executed in accordance with the goods and services tax
(GST) laws of Australia. The Australian Tax Office
(ATO) is currently investigating the GST aspects of
these transactions. In September 2004, we filed a Summons in the
Supreme Court of New South Wales seeking declaratory relief
affirming our positions on the technical GST aspects of the
restructurings. In December 2004, the ATO issued a draft
Compliance Audit Report (CAR) which is contrary to
our position and we have responded to the draft CAR at length.
The ATO has not yet issued an assessment. Management believes
that there are substantial arguments in support of our position.
Due to the uncertainties related to the investigation, and the
outcome of the request for declaratory relief, no amounts have
been accrued related to this contingency. GST credits of up to
AUD 70 million, (approximately USD$55 million) have been taken
through December 31, 2004. In general, assessments imposed from
the ATO may include interest and penalties.

Financial Condition

We borrow funds to purchase new and used flight
equipment (see Item 2. Properties 
Commitments), including funds for progress payments
during the construction phase, and to pay existing debt
obligations as they mature. These funds are borrowed principally
on an unsecured basis from various sources. During 2004, we
borrowed $4.3 billion (excluding commercial paper) and
$2.4 billion was provided by operating activities to meet
our needs. As of December 31, 2004, we had committed to
purchase 355 new aircraft from Boeing and Airbus at an estimated
aggregate purchase price of approximately $21.3 billion for
delivery through 2010, of which we currently anticipate taking
delivery of 97 aircraft in 2005 with an estimated aggregate
purchase price of $5.6 billion. We also hold options to
purchase six additional new aircraft deliverable through 2007 at
an estimated aggregate purchase price of approximately
$361.4 million. The recorded basis of aircraft may be
adjusted to reflect notional credits given by the manufacturers
to support the leasing of aircraft. In addition, we had
committed to purchase 16 used aircraft at an estimated purchase
price of $302.3 million. We currently expect to fund
expenditures for capital requirements as well as liquidity needs
from a combination of available

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cash balances, internally generated funds and
financing arrangements. At December 31, 2004, 2003 and
2002, our debt financing and capital lease obligations were
comprised of the following:


|                                                 |                      |                        |            |            |  |      |            |            |  |   |           |            | 
|------------------------------------------------ | -------------------- | ---------------------- | ---------- | ---------- |  | ---- | ---------- | ---------- |  | - | --------- | ---------- | 
|                                                 |                      | 2004                   |            | 2003       |  | 2002
|                                                 |                      |                        |            |            |  |     
|                                                 |                      |                       
|                                                 |                      | (Dollars in thousands)
|Public term debt with single maturities          |                      | $                      | 11,544,575 |            |  | $    | 10,663,275 |            |  | $ | 7,475,775 |           
|Public medium-term notes with varying maturities |                      |                        | 5,972,171  |            |  |      | 5,960,236  |            |  |   | 4,969,500 |           
|Capital lease obligations                        |                      |                        | 39,580     |            |  |      | 143,254    |            |  |   | 260,623   |           
|Synthetic lease obligations                      |                      |                        |           |            |  |      | 464,222    |            |  |   |          |           
|Bank term debt                                   |                      |                        | 2,973,525  |            |  |      | 3,070,120  |            |  |   | 2,084,793 |           
|                                                 |                      |                        |            |            |  |      |            |            |  |   |           |           
|                                                 | Subtotal             |                        |            | 20,529,851 |  |      |            | 20,301,107 |  |   |           | 14,790,691 | 
|Commercial paper                                 |                      |                        | 2,675,247  |            |  |      | 1,575,957  |            |  |   | 4,218,504 |           
|Less: Deferred debt discount                     |                      |                        | (29,502    | )          |  |      | (24,321    | )          |  |   | (31,928   | )         
|                                                 |                      |                        |            |            |  |      |            |            |  |   |           |           
|                                                 | Total debt financing |                        | $          | 23,175,596 |  |      | $          | 21,852,743 |  |   | $         | 18,977,267 | 
|                                                 |                      |                        |            |            |  |      |            |            |  |   |           |           
|Composite interest rate                          |                      |                        | 4.34%      |            |  |      | 4.53%      |            |  |   | 4.73%     |           
|Percentage of total debt at fixed rate           |                      |                        | 66.21%     |            |  |      | 77.07%     |            |  |   | 76.67%    |           
|Composite interest rate on fixed debt            |                      |                        | 5.07%      |            |  |      | 5.29%      |            |  |   | 5.69%     |           
|Bank prime rate                                  |                      |                        | 5.25%      |            |  |      | 4.00%      |            |  |   | 4.25%     |           

The above amounts represent our anticipated
settlement of our outstanding debt obligations. Certain
adjustments required to present currently outstanding debt
obligations according to financial accounting standards have
been recorded and presented separately on the face of the
Consolidated Balance Sheets. These include adjustments related
to foreign currency and interest rate hedging activities.
Composite interest rates and percentage of total debt at fixed
rate reflect the effect of derivative instruments.

Public Debt

The Company has the ability to borrow under
various public debt financing arrangements as follows:

|                                                                                                                                                           |  |                       |       |                   |  |                   |       |  |  |   |       | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------- | ----- | ----------------- |  | ----------------- | ----- |  |  | - | ----- | 
|                                                                                                                                                           |  | Maximum               |       | Sold as of        |  | Sold as of       
|                                                                                                                                                           |  | Offering              |       | December 31, 2004 |  | February 28, 2005
|                                                                                                                                                           |  |                       |       |                   |  |                  
|                                                                                                                                                           |  |                      
|                                                                                                                                                           |  | (Dollars in millions)
|Registration statement dated December 20,
    2002 (including $2.88 billion Medium-Term Note program and
    $1.0 billion Retail Medium-Term Note Program) |  | $                     | 6,080 | (a)               |  | $                 | 5,593 |  |  | $ | 5,607 | 
|Registration statement dated December 28,
    2004 (including $2.0 billion Medium-Term Note program)                                                       |  |                       | 7,045 | (b)               |  |                   |      |  |  |   | 500   | 
|Euro Medium-Term Note Programme dated May
    2004(c)(d)                                                                                                   |  |                       | 7,000 |                   |  |                   | 4,475 |  |  |   | 4,475 | 






|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes $1.08 billion, which was
    incorporated into the registration statement from a prior
    registration statement, increasing the maximum offering from
    $5.0 billion to $6.08 billion.  
|   
|(b) | Includes $2.045 billion, which was
    incorporated into the registration statement from a prior
    registration statement, increasing the maximum offering from
    $5.0 billion to $7.045 billion.
|   
|(c) | We have hedged the foreign currency risk of the
    notes through operating lease payments or derivatives.                                                                                           
|   
|(d) | This is a perpetual program. As a bond issue
    matures, the principal amount of that bond becomes available for
    new issuances under the program.                                               

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Capital Lease Obligations

We have Export Credit Lease financings which
provide ten year, amortizing loans in the form of capital lease
obligations. The interest rate on 62.5% of the original financed
amount is 6.55% and the interest rate on 22.5% of the original
financed amount is fixed at rates varying between 6.18% and
6.89%. These two tranches are guaranteed by various European
Export Credit agencies. We prepaid the remaining 15% of the
original financed amount. The remaining outstanding debt matures
through 2005. The flight equipment associated with the
obligations and included in Flight equipment under
operating leases on the Consolidated Balance Sheets, had a
net book value of $500.0 million at December 31, 2004.

Synthetic Lease Obligations

In 1995, 1996 and 1997, through subsidiaries, we
entered into sale-leaseback transactions providing us proceeds
in the amounts of $413.0 million, $507.6 million and
$601.9 million, respectively, each relating to seven
aircraft. The transactions resulted in the sale and leaseback of
these aircraft under one year operating leases, each with six
one-year extension options for a total of seven years for each
aircraft. We did not record any gains related to the
transactions. We had the option to either buy back the aircraft
or redeliver the aircraft for a fee to the lessor at the end of
any lease period. The lease rates equated to fixed principal
amortization and floating interest payments based on LIBOR or
commercial paper pricing. Three aircraft were repurchased before
the lease termination and sold to third parties. The remaining
18 aircraft were repurchased when the leases expired in
December 2002 and September 2003 and 2004.

Bank Term Debt

In January 1999, we entered into an Export Credit
Facility, for up to a maximum of $4.3 billion, to finance
approximately 75 aircraft delivered through 2001. We used
the facility to fund 85% of each aircrafts purchase price.
The facility is guaranteed by various European Export Credit
agencies. We financed 62 aircraft using $2.8 billion
under this facility over ten years with interest rates from
5.753% to 5.898%. The debt is collateralized by a pledge of the
shares of a subsidiary of ours which holds title to the aircraft
financed under the facility. At December 31, 2004,
$1.5 billion was outstanding under this facility.

During 2003, we borrowed $1.3 billion under
various bank financings. The financings mature through 2009. One
tranche of one of the loans totaling $410 million was
funded in Japanese Yen and swapped to U.S. dollars. The
interest rates are LIBOR based with spreads ranging from .375%
to 1.625% at December 31, 2004.

In May 2004, we entered into an Export Credit
Facility for up to a maximum of $2.64 billion, to finance
Airbus aircraft to be delivered in 2004 and 2005. The facility
will be used to fund 85% of each aircrafts purchase price.
This facility becomes available as the various European Export
Credit agencies provide their guarantees for aircraft based on a
six-month forward-looking calendar. The financing is for a
ten-year fully amortizing loan per aircraft at an interest rate
determined through a bid process. We have collateralized the
debt by a pledge of the shares of a subsidiary which holds title
to the aircraft financed under this facility. As of
December 31, 2004, four aircraft were financed under this
facility. At December 31, 2004, $201.6 million was
outstanding under this facility.

In March 2004, an indirect subsidiary of ILFC
entered into an agreement providing for an 18-month commitment
for a $500 million revolving loan which backs up the
subsidiarys $1.0 billion secured note facility to
purchase new aircraft from Boeing and Airbus. We guarantee the
subsidiarys obligations under the credit facility and the
secured note facility. A condition precedent to the borrowing of
funds under the credit facility is the inability of the
subsidiary to sell notes under the secured note facility on
acceptable terms. The subsidiary had not drawn on the credit
facility or issued any notes under the secured note facility as
of December 31, 2004.

In August 2004, we received a commitment for an
Ex-Im Bank comprehensive guarantee in the amount of
$1.68 billion to support the financing of up to 30 new
Boeing aircraft. The delivery period initially extends from
September 1, 2004 through August 31, 2005. We have
extended the delivery period to February 28, 2006 and we
may extend it further to August 31, 2006. As of
December 31, 2004, we had not financed any aircraft under
this facility.

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Commercial Paper

We currently have a $4.8 billion Commercial
Paper Program. Under this program, we may borrow in minimum
increments of $100,000 for periods from one day to
270 days. It is our intention to sell commercial paper only
to a maximum amount of 75% of the total amount of the backup
facilities available (see Bank Commitments). The weighted
average interest rate of the outstanding commercial paper was
2.34%, 1.07% and 1.46%, at December 31, 2004, 2003, and
2002, respectively.

Bank Commitments

As of December 31, 2004, we had committed
revolving credit agreements with 30 banks aggregating
$6.0 billion including a $2.0 billion five-year
tranche that expires in October of 2009 and a $4.0 billion
364-day tranche that expires in October of 2005, with a one-year
term out option. These revolving loans and lines of credit
provide for interest rates that vary according to the pricing
option in effect at the time of borrowing. Pricing options
include prime, a range from .25% over LIBOR to .45% over LIBOR
based upon utilization, or a rate determined by a competitive
bid process with the banks. The revolving loans and lines of
credit are subject to facility fees of up to .10% of amounts
available. This financing is used as backup for our maturing
debt and other obligations. We expect to replace or extend these
credit agreements on or prior to their expiration dates. At
December 31, 2004, we had not drawn on our revolving loans
and lines of credit.

Other Variable Interest Entities

We have sold aircraft to entities owned by third
parties and have from time to time issued asset value guarantees
or loan guarantees related to the aircraft sold. We have
determined that ten such entities, each owning one aircraft, are
Variable Interest Entities (VIEs) in which we are
the primary beneficiary. In accordance with Financial Accounting
Standards Board Interpretations (FIN) No. 46R,
Consolidation of Variable Interest Entities
(FIN46R), we consolidated these entities commencing
December 31, 2003. As a result of the consolidation, assets
increased by $57.1 million and liabilities increased by
$68.1 million. In addition, we recorded an after-tax charge
of $11.0 million as a cumulative effect of an accounting
change for 2003. In addition, an after-tax gain in the amount of
$2.4 million related to sale-lease-back transactions was
recorded as a cumulative effect of an accounting change for
2003. See Note F of Notes to Consolidated Financial
Statements. At December 31, 2004, assets in the amount
of $152.4 million and liabilities in the amount of
$70.9 million were included in our Consolidated Balance
Sheets and losses in the amount of $4.1 million are
included in our Consolidated Statements of Income.

The assets and liabilities of these entities are
presented separately on our Consolidated Balance Sheets. We do
not control or own the assets, nor are we directly obligated for
the liabilities of these entities.

We have not established any other unconsolidated
entities for the purpose of facilitating off-balance sheet
arrangements or for other contractually narrow or limited
purposes. We have, however, from time to time established
subsidiaries, entered into joint ventures or created other
partnership arrangements with the limited purpose of leasing
aircraft or facilitating borrowing arrangements.

Derivatives

In the normal course of business, we employ a
variety of derivative products to manage our exposure to
interest rates and foreign exchange rates and the resulting
impact of changes in interest rates and foreign exchange rates
on earnings, with the objective to minimize foreign currency
risk, lower our overall borrowing cost and maintain an optimal
mix of variable and fixed rate interest obligations. We enter
into derivative transactions only to economically hedge interest
rate risk and currency risk and not to speculate on interest
rates or currency fluctuations. These derivative products
include interest rate swap agreements, currency swap agreements,
and interest rate floors. At December 31, 2004, we had
foreign exchange economic hedges which had ceased to be
effective under SFAS 133. We entered into these derivatives
to hedge the foreign currency exposure of our Euro denominated
and Yen denominated floating rate debt. The debt was swapped
into U.S. Dollars and LIBOR based interest rates and
qualified as fair value hedges at inception. Credits in the
amount of $381.6 million was recorded for the year ended
December 31, 2004 in interest expense. The amount

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was offset by a $374.9 million foreign
currency adjustment of the related debt. Our foreign exchange
exposure is eliminated through these hedges, but the difference
in interest rate curves have caused some ineffectiveness
according to the guidelines under FAS 133. Further, we had
commercial paper swaps that lacked proper documentation related
to ineffectiveness calculation and the identification of the
hedged commercial paper pool, as defined by SFAS 133. The
accumulated mark to market gains for the commercial paper swaps
reported in income for the year ended December 31, 2004 was
$13.3 million.


As discussed in Restatement, we are
restating financial statements and other financial information
for the years 2004, 2003, and 2002 and our financial information
for the years 2001 and 2000 and for each of the quarters in the
years 2004 and 2003 with respect to the accounting for certain
derivative transactions and foreign currency transactions.

The errors identified related to the accounting
for certain derivative instruments used in meeting our objective
of managing foreign currency exchange rate and interest rate
risks. When interest rate and foreign currency swaps are
effective as accounting hedges under the technical requirements
of SFAS 133, they offset the variability of expected future
cash flows or changes in the fair values of assets and
liabilities, both economically and for financial reporting
purposes. ILFC has historically used such instruments to
effectively mitigate foreign currency and interest rate risks.
The effect of our inability to apply hedge accounting for the
swaps requiring restatement is that changes in their fair values
must be recorded in earnings each reporting period. As a result,
reported net income will be directly influenced by changes in
interest rates and currency rates.

The table in Restatement shows the effect
of the accounting restatement related to the commercial paper
interest rate swaps and portions of Euro denominated debt that
we had designated as a hedge against future operating lease
payments receivable denominated in Euros and Euro denominated
cash balances related to the lease revenue received, on our
previously reported earnings for the years 2001 through 2004,
and each of the quarters for the years 2003 and 2004. Aggregate
cash flows were unaffected by the restatement.

The counterparty to our derivative instruments is
AIG Financial Products Corp. (AIGFP), a related
party. The derivatives are subject to a bilateral security
agreement which, in certain circumstances, may allow one party
to the agreement to require the second party to the agreement to
provide collateral. Failure of the instruments or counterparty
to perform under the derivative contracts will have a material
impact on our results of operations.

Common and Preferred Stock

During the year ended December 31, 2002, we
repurchased $50.0 million of our Market Auction Preferred
Stock, cancelled $400.0 million of our Series A
Preferred Stock and issued 3,951,398 shares of our common
stock for the value of the cancelled Series A Preferred
Stock and 2,428,599 shares of our common stock for
$250 million. AIG has no obligation to contribute
additional equity.

Market Liquidity Risks

We are in compliance with all covenants or other
requirements set forth in our credit agreements. Further, we do
not have any rating downgrade triggers that would automatically
accelerate the maturity dates of our debt. However, a downgrade
in our credit rating could adversely affect our ability to
borrow on, renew existing, or obtain access to new financing
arrangements and would increase the cost of such financing
arrangements. For example, a downgrade in credit rating could
preclude us from issuing commercial paper under our current
program.

Turmoil in the airline industry and continued
political unrest in the Middle East have led to increased
uncertainty in the debt markets in which we borrow funds. While
we have been able to borrow the funds necessary to finance
operations in the current market environment, additional turmoil
in the airline industry or political environment could limit our
ability to borrow funds from our current funding sources. Should
this occur, we would seek alternative sources of funding,
including securitizations and manufacturers financings,
drawings upon our revolving loans and lines of credit facilities
or seek additional short term borrowings. If we were unable to
obtain sufficient funding, we would negotiate with manufacturers
to defer deliveries of certain aircraft.

32



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The following summarizes our contractual
obligations at December 31, 2004.

Existing Commitments (Exclusive of
Interest)

|                               |  |                         |            |      |  |      |            |      |  |      |           |      |  |            |           |  |  |   |           |  |  |   |           |  |  |   |           | 
|------------------------------ |  | ----------------------- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | --------- | ---- |  | ---------- | --------- |  |  | - | --------- |  |  | - | --------- |  |  | - | --------- | 
|                               |  |                        
|                               |  | Commitments Due by Year
|                               |  |                        
|                               |  | Total                   |            | 2005 |  | 2006 |            | 2007 |  | 2008 |           | 2009 |  | Thereafter
|                               |  |                         |            |      |  |      |            |      |  |      |           |      |  |           
|                               |  |                        
|                               |  | (Dollars in thousands) 
|Medium Term and Long Term Debt |  | $                       | 20,490,271 |      |  | $    | 3,769,022  |      |  | $    | 3,680,568 |      |  | $          | 3,575,952 |  |  | $ | 3,764,930 |  |  | $ | 3,666,965 |  |  | $ | 2,032,834 | 
|Capital Lease Obligations      |  |                         | 39,580     |      |  |      | 39,580     |      |  |      |          |      |  |            |          |  |  |   |          |  |  |   |          |  |  |   |          | 
|Commercial Paper               |  |                         | 2,675,247  |      |  |      | 2,675,247  |      |  |      |          |      |  |            |          |  |  |   |          |  |  |   |          |  |  |   |          | 
|Operating Leases               |  |                         | 107,126    |      |  |      | 8,326      |      |  |      | 8,655     |      |  |            | 8,978     |  |  |   | 9,331     |  |  |   | 9,628     |  |  |   | 62,208    | 
|Purchase Commitments(b)        |  |                         | 21,586,600 |      |  |      | 5,838,400  |      |  |      | 5,487,200 |      |  |            | 4,645,000 |  |  |   | 3,696,100 |  |  |   | 1,552,700 |  |  |   | 367,200   | 
|                               |  |                         |            |      |  |      |            |      |  |      |           |      |  |            |           |  |  |   |           |  |  |   |           |  |  |   |           | 
|Total                          |  | $                       | 44,898,824 |      |  | $    | 12,330,575 |      |  | $    | 9,176,423 |      |  | $          | 8,229,930 |  |  | $ | 7,470,361 |  |  | $ | 5,229,293 |  |  | $ | 2,462,242 | 
|                               |  |                         |            |      |  |      |            |      |  |      |           |      |  |            |           |  |  |   |           |  |  |   |           |  |  |   |           | 

Contingent Commitments

|                                    |  |                                |           |      |  |      |         |      |  |      |         |      |  |            |         |  |  |   |        |  |  |   |   |  |  |   |         | 
|----------------------------------- |  | ------------------------------ | --------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---------- | ------- |  |  | - | ------ |  |  | - | - |  |  | - | ------- | 
|                                    |  |                               
|                                    |  | Contingency Expiration by Year
|                                    |  |                               
|                                    |  | Total                          |           | 2005 |  | 2006 |         | 2007 |  | 2008 |         | 2009 |  | Thereafter
|                                    |  |                                |           |      |  |      |         |      |  |      |         |      |  |           
|                                    |  |                               
|                                    |  | (Dollars in thousands)        
|Purchase Options on New Aircraft(b) |  | $                              | 361,400   |      |  | $    |        |      |  | $    | 81,400  |      |  | $          | 280,000 |  |  | $ |       |  |  | $ |  |  |  | $ |        | 
|Put Options(a)                      |  |                                | 491,778   |      |  |      | 233,728 |      |  |      |        |      |  |            |        |  |  |   |       |  |  |   |  |  |  |   | 258,050 | 
|Asset Value Guarantees(a)           |  |                                | 87,540    |      |  |      | 5,226   |      |  |      | 11,247  |      |  |            | 17,831  |  |  |   | 10,492 |  |  |   |   |  |  |   | 42,744  | 
|Loan Guarantees(a)                  |  |                                | 145,108   |      |  |      | 18,786  |      |  |      | 79,082  |      |  |            |        |  |  |   |       |  |  |   |  |  |  |   | 47,240  | 
|Lines of Credit                     |  |                                | 50,000    |      |  |      |        |      |  |      |         |      |  |            |         |  |  |   |        |  |  |   |   |  |  |   | 50,000  | 
|                                    |  |                                |           |      |  |      |         |      |  |      |         |      |  |            |         |  |  |   |        |  |  |   |   |  |  |   |         | 
|Total                               |  | $                              | 1,135,826 |      |  | $    | 257,740 |      |  | $    | 171,729 |      |  | $          | 297,831 |  |  | $ | 10,492 |  |  | $ |  |  |  | $ | 398,034 | 
|                                    |  |                                |           |      |  |      |         |      |  |      |         |      |  |            |         |  |  |   |        |  |  |   |   |  |  |   |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | From time to time we participate with banks,
    airlines and other financial institutions to assist in financing
    aircraft acquired by others by providing asset guarantees, put
    options or loan guarantees collateralized by aircraft. As a
    result, should we be called upon to fulfill our obligations, we
    would have recourse to the value of the underlying aircraft. To
    the extent that the value of the underlying aircraft is less
    than the guarantee, we would record a contingent loss. At
    December 31, 2004, we recorded a $5.6 million
    contingent loss related to certain put options. Guarantees
    entered into after December 31, 2002, are recorded at fair
    value in accordance with FIN No. 45 Guarantors
    Accounting and Disclosure Requirements for Guarantees, Including
    Indirect Guarantees at Indebtedness of Others. See
    Note A of Notes to Consolidated Financial Statements.
|   
|(b) | The recorded basis of aircraft may be adjusted
    upon delivery to reflect notional credits given by the
    manufacturers in connection with the leasing of aircraft.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Non-GAAP Financial Measures

Lease Margin

Lease Margin is defined as Rental of flight
equipment less total expenses, adjusted for VIE expenses related
to Other Variable Interest Entities, divided by Rental of
flight equipment. In 2004, Lease Margin is also adjusted for a
charge we took related to a customers bankruptcy filing.
Lease Margin is a measure by which we isolate and evaluate the
overall profitability of our contractual leasing operations,
which constitute our primary revenue generating activity.
Beginning in 2003, coinciding with the adoption of FIN 46R
and to more accurately portray the trend of our core leasing
operations, we adjust total expenses in the calculation of Lease
Margin by excluding VIE expenses. Related VIE revenues are
included in Interest and other and are by definition excluded
from the calculation of Lease Margin. VIE revenues and expenses
are recorded in our 2004 and 2003 net income as a result of our
adoption of FIN 46R beginning December 31, 2003. The
most

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directly comparable GAAP financial measure is
Profit Margin. The following is a reconciliation of Profit
Margin to Lease Margin:


|                                                |  |                       |         |            |  |            |         |            |  |            |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------- |  | --------------------- | ------- | ---------- |  | ---------- | ------- | ---------- |  | ---------- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                |  | 2004                  |         | 2003       |  | 2002       |         | 2001       |  | 2000      
|                                                |  | (Restated)            |         | (Restated) |  | (Restated) |         | (Restated) |  | (Restated)
|                                                |  |                       |         |            |  |            |         |            |  |           
|                                                |  |                      
|                                                |  | (Dollars in millions)
|Total revenues (A)                              |  | $                     | 3,159.9 |            |  | $          | 2,877.4 |            |  | $          | 2,659.3 |   |  | $ | 2,552.2 |   |  | $ | 2,407.8 |  
|Flight equipment marketing                      |  |                       | (77.7   | )          |  |            | (29.0   | )          |  |            | (48.5   | ) |  |   | (31.8   | ) |  |   | (74.5   | )
|Flight equipment marketing 
    securitization |  |                       | (32.9   | )          |  |            | (23.2   | )          |  |            |        |   |  |   |        |   |  |   |        |  
|Interest and other                              |  |                       | (93.8   | )          |  |            | (17.9   | )          |  |            | (64.7   | ) |  |   | (108.8  | ) |  |   | (82.3   | )
|                                                |  |                       |         |            |  |            |         |            |  |            |         |   |  |   |         |   |  |   |         |  
|Rentals (B)                                     |  |                       | 2,955.5 |            |  |            | 2,807.3 |            |  |            | 2,546.1 |   |  |   | 2,411.6 |   |  |   | 2,251.0 |  
|                                                |  |                       |         |            |  |            |         |            |  |            |         |   |  |   |         |   |  |   |         |  
|Total expenses (C)                              |  |                       | 2,491.8 |            |  |            | 2,236.5 |            |  |            | 2,037.8 |   |  |   | 1,859.1 |   |  |   | 1,747.0 |  
|VIE expenses                                    |  |                       | (20.8   | )          |  |            | 0.4     |            |  |            |        |   |  |   |        |   |  |   |        |  
|Customer bankruptcy charge                      |  |                       | (53.9   | )          |  |            |        |            |  |            |        |   |  |   |        |   |  |   |        |  
|                                                |  |                       |         |            |  |            |         |            |  |            |         |   |  |   |         |   |  |   |         |  
|Adjusted total expenses (D)                     |  |                       | 2,417.1 |            |  |            | 2,236.9 |            |  |            | 2,037.8 |   |  |   | 1,859.1 |   |  |   | 1,747.0 |  
|                                                |  |                       |         |            |  |            |         |            |  |            |         |   |  |   |         |   |  |   |         |  
|Profit Margin (A)-(C)=(E)                       |  | $                     | 668.1   |            |  | $          | 640.9   |            |  | $          | 621.5   |   |  | $ | 693.1   |   |  | $ | 660.8   |  
|Lease Margin (B)-(D)=(F)                        |  | $                     | 538.4   |            |  | $          | 570.4   |            |  | $          | 508.3   |   |  | $ | 552.5   |   |  | $ | 504.0   |  
|Profit Margin % (E) divided by (A)              |  |                       | 21.14   | %          |  |            | 22.27   | %          |  |            | 23.37   | % |  |   | 27.16   | % |  |   | 27.44   | %
|Lease Margin % (F) divided by (B)               |  |                       | 18.22   | %          |  |            | 20.32   | %          |  |            | 19.96   | % |  |   | 22.91   | % |  |   | 22.39   | %

Lease Margin for the periods decreased to 18.2%
in 2004 compared to 20.3% in 2003 and 20.0% in 2002. Lease rates
and interest rates on borrowings are the two components used to
determine Lease Margin that are subject to the most uncertainty
and are the principal causes for the fluctuations in the Lease
Margin. Lease rates are impacted by the current interest rate
market as operating leases are a form of financing. Lease rates
are also impacted by demand for a particular aircraft type to
fit the airlines requirements for capacity and efficiency
compounded by the availability of those aircraft in the market
place.

Our Lease Margin was favorably impacted by our
ability to take advantage of the downward trend in interest
rates during 2003 and manage our composite interest rate during
the 2004 increasing interest rate environment. These interest
rate benefits were offset by decreasing lease rates on aircraft
returned and redelivered at lower lease rates than previously
earned. Idle and excess aircraft of carriers and other
competitors in the market place have increased competition for
the lease of aircraft. We expect that this downward pressure on
lease rates will continue to impact Lease Margin as the effects
of restructurings, repossessions and re-leases are realized in
lease rates. Further, we expect that the Lease Margin could
experience further downward pressure as interest rates climb. We
experienced low Lease Margins in 199495, which resulted
from the lingering impacts on lease rates from leases negotiated
around the time of the Gulf War in 199192, compounded by a
high interest rate environment and higher leverage. Due to the
varying terms of our leases and borrowings, the effects of
events and circumstances which cause changes in lease rates and
interest rates in the current market place may not fully
materialize in our results of operations for three to five years.

The profit and lease margin percentages in the
table above include the unrealized gain (loss) attributable to
economic hedges not qualifying for hedge accounting treatment
under SFAS 133, including the related foreign exchange
gains and losses, as discussed in Restatement. This will
increase the inter-period volatility in the profit and lease
margin percentages.

Results of Operations (restated)

The cost of the leased fleet, from which rental
income was earned, increased to $36.6 billion in 2004 from
$33.4 billion in 2003 and $30.2 billion in 2002 (2002
included aircraft subject to sale-leaseback transactions).
Revenues from the rentals of flight equipment increased 5.3% to
$2,955.5 million in 2004 from $2,807.2 million in 2003
and 10.3% in 2003 from $2,546.1 million in 2002 due to an
increase in the number of aircraft

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available for operating lease (667 at
December 31, 2004 compared to 609 and 556 at
December 31, 2003 and 2002, respectively). The increases
were partially offset by an increase in the number of aircraft
being reconfigured and redelivered and therefore not earning
revenues for some part of the year. One aircraft in our fleet
was not subject to a signed lease agreement or a signed letter
of intent at December 31, 2004. Revenues in 2004 compared
to 2003 and 2002 were negatively impacted by lower lease rates
and restructured rents, as a result of the slowdown and turmoil
in the airline industry. Lease margin for the period decreased
to 18.2% in 2004 compared to 20.3% and 20.0% for the same
periods in 2003 and 2002, respectively. Profit margin decreased
to 21.1% in 2004 compared to 22.3% and 23.4% for the same period
in 2003 and 2002, respectively. Management expects the factors
described in Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Industry Conditions to continue
to negatively impact revenues in 2005, even as we see increases
in lease rates going forward, as some airlines continue to
experience difficulties and improving trends in lease rates will
take time to be completely reflected in our lease revenues.


In addition to our leasing operations, we engage
in the marketing of flight equipment throughout the lease term,
as well as the sales of third party owned flight equipment on a
principal and commission basis. Revenue from flight equipment
marketing, including securitizations, was $110.5 million in
2004 compared to $52.2 million in 2003 and
$48.5 million in 2002. The increases were principally due
to the different types and the number of the flight equipment
marketed in each period, offset by a downturn in the market for
flight equipment during 2003. We sold 15 aircraft in 2004
compared to two aircraft during 2003, and eight in 2002. In
addition, we sold ten engines during 2004, compared to six
engines during 2003 and seven engines during 2002.
Commissions received from third parties were $17.5 million
(2004), $30.4 million (2003) and $33.8 million (2002).

In 2003, we sold 37 aircraft to a trust and
in 2004 we sold 34 aircraft to another trust, both of which
are included in the consolidated financial statements of AIG
(see Note O of Notes to Consolidated Financial
Statements.) The gains on the transactions, net of expenses,
are included in the caption Flight equipment
marketing  securitization.

Interest and other revenue increased to
$93.8 million in 2004 compared to $17.9 million in
2003 due to the following increases: bankruptcy and other
settlements in the amount of $23.5 million; foreign
exchange gains in the amount of $13.2 million; management
fees collected in the amount of $8.7 million; interest and
dividend income in the amount of $8.0 million. The decrease
in Interest and other revenue to $17.9 million in 2003
compared to $64.7 million in 2002 is primarily due to a
decrease in forfeitures of security deposits and contract
termination fees resulting from nonperformance by customers and
manufacturers in the amount of $42.2 million in 2002.

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Interest expense increased to $942.5 million
in 2004 from $920.0 million in 2003 and $866.9 million
in 2002, primarily as a result of an increase in average debt
outstanding to finance aircraft acquisitions. Average debt
increased to $22.5 billion in 2004, from $20.3 billion
in 2003 and $17.4 billion in 2002 (excluding the effect of
debt discount and foreign exchange adjustments). This increase
was partially offset by a decrease in the average composite
borrowing rate to 4.3% in 2004 from 4.8% in 2003 and 4.9% in
2002. Our composite borrowing rate fluctuated as follows:

ILFC Composite Interest Rates and Prime
Rates

LOGO

|       |  |                     |      |                       |  |            |      |  |  |  |      | 
|------ |  | ------------------- | ---- | --------------------- |  | ---------- | ---- |  |  |  | ---- | 
|       |  |                     |      | Composite--Fixed-Rate |  |           
|       |  | Composite--All Debt |      | Debt                  |  | Prime Rate
|       |  |                     |      |                       |  |           
|Dec-00 |  |                     | 6.37 |                       |  |            | 6.20 |  |  |  | 9.50 | 
|Mar-01 |  |                     | 5.92 |                       |  |            | 6.13 |  |  |  | 8.00 | 
|Jun-01 |  |                     | 5.49 |                       |  |            | 5.93 |  |  |  | 6.75 | 
|Sep-01 |  |                     | 5.21 |                       |  |            | 5.88 |  |  |  | 6.00 | 
|Dec-01 |  |                     | 5.07 |                       |  |            | 5.78 |  |  |  | 4.75 | 
|Mar-02 |  |                     | 4.93 |                       |  |            | 5.77 |  |  |  | 4.75 | 
|Jun-02 |  |                     | 5.03 |                       |  |            | 5.76 |  |  |  | 4.75 | 
|Sep-02 |  |                     | 4.95 |                       |  |            | 5.74 |  |  |  | 4.75 | 
|Dec-02 |  |                     | 4.73 |                       |  |            | 5.69 |  |  |  | 4.25 | 
|Mar-03 |  |                     | 4.57 |                       |  |            | 5.58 |  |  |  | 4.25 | 
|Jun-03 |  |                     | 4.51 |                       |  |            | 5.47 |  |  |  | 4.00 | 
|Sep-03 |  |                     | 4.63 |                       |  |            | 5.38 |  |  |  | 4.00 | 
|Dec-03 |  |                     | 4.46 |                       |  |            | 5.29 |  |  |  | 4.00 | 
|Mar-04 |  |                     | 4.34 |                       |  |            | 5.19 |  |  |  | 4.00 | 
|Jun-04 |  |                     | 4.15 |                       |  |            | 5.11 |  |  |  | 4.25 | 
|Sep-04 |  |                     | 4.20 |                       |  |            | 5.08 |  |  |  | 4.75 | 
|Dec-04 |  |                     | 4.34 |                       |  |            | 5.07 |  |  |  | 5.25 | 



We account for derivatives under SFAS
No. 133 Accounting for Derivatives and Hedging
Activities, as amended (see Note M of Notes to
Consolidated Financial Statements). Interest expense for the
years ended December 31, 2004, 2003 and 2002 includes a
benefit of $6.0 million, a loss of $29.7 million and a
benefit of $15.2 million, respectively, related to hedging
activities. The effect of the restatement described in
Note B of Notes to Consolidated Financial Statements
was to decrease interest expense by $22.6 million,
$24.6 million and increase interest expense by
$20.5 million for the years ended December 31, 2004,
2003 and 2002, respectively.

Depreciation of flight equipment increased to
$1,214.0 million in 2004 from $1,083.9 million at
December 31, 2003 and $917.9 million in 2002 due to an
increase in the depreciable base of the fleet. The depreciable
base of flight equipment during the same periods increased to
$36.6 billion at December 31, 2004 from
$33.4 billion at December 31, 2003 and
$29.1 billion at December 31, 2002.

Provisions for overhauls increased to
$164.3 million in 2004 from $112.6 million in 2003 and
$90.7 million in 2002 due to an increase in the aggregate
number of hours flown on which we collect overhaul revenue and
against which the provision is computed.

In prior periods we entered into sale-leaseback
transactions. Flight equipment rent related to these
transactions decreased to $43.3 million in 2003, from
$75.4 million in 2002 due to the maturing of two
sale-leaseback transactions, one in December 2002 and one in
September 2003. In addition, principal reductions, and a change
in the lease rates resulting from changes in interest rates,
affecting the floating rate component of the lease rates
contributed to the reduction. Through a subsidiary, we had
sale-leaseback transactions relating to seven aircraft as
of December 31, 2003. At December 31, 2003 we
consolidated the entity in accordance with FIN 46, and
ceased to record rent expense starting January 1, 2004.
Instead the payments were applied to

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interest and to pay down principal of recorded
obligations of $464.2 million. As of September 30,
2004 the related leases expired and we repurchased the seven
aircraft.


In connection with a global aircraft lease
transaction entered into in 2000 for a total of
14 aircraft, we acquired certain securities and assumed
certain obligations of ATA. On October 26, 2004, ATA filed
for bankruptcy protection and we recorded impairment losses in
the amount of $28.9 million on our investment in ATA
non-voting preferred stock and a $25.0 million charge for
the assumed liabilities. The liability is in the form of a
derivative contract, to which we became a counterparty. Future
net payments made and received will be recorded in income and
the derivative will be reported in the Consolidated Balance
Sheet at fair value. We do not have any other material
investments in airlines. See Note E of Notes to
Consolidated Financial Statements.

Selling, general and administrative expenses were
$117.0 million in 2004 compared to $76.8 million in
2003 and $86.9 million in 2002. The increase in 2004
compared to 2003 is primarily due to expenses of VIEs in the
amount of $20.8 and higher operational expenses in the amount of
$14.8 million. The decrease in 2003 compared to 2002 is
primarily due to a decrease in costs related to repossessions
and re-delivery of aircraft from one lessee to another.

The effective tax rate was 30.8 in 2004, 30.7 in
2003 and 32.8 in 2002. Our effective tax rate fluctuates
primarily as a result of the effect of benefits available from
state taxes, foreign taxes and benefits related to the Foreign
Sales Corporation (FSC) and Extraterritorial Income
Exclusion (ETI) provisions of the Internal Revenue
Code. We expect our effective tax rate to rise over the next two
years to a rate consistent with the expected
statutory rate as a result of Congress passing the American Jobs
Creation Act in October 2004, which repeals the corporate export
tax benefits. Under the Act, ETI export tax benefits for
corporations would be phased out in 2005 and 2006 and cease to
exist for the year 2007.

In 2002 and 2003 we participated in certain tax
planning activities with our parent, AIG and related entities,
which provided certain tax and other benefits to the AIG
consolidated group. As a result of our participation in these
activities, AIG shared a portion of the tax benefits of these
activities attributable to us, which aggregated
$245 million. We are required to repay those tax benefits
to AIG in 2007 and 2009. The liability is recorded in Tax
benefit sharing payable to AIG in the Consolidated
Balance Sheet.

We performed impairment reviews of all aircraft
in our fleet as of June 30, 2004 and 2003, in accordance
with SFAS 144. No impairments have been recognized related
to aircraft, as the existing service potential of the aircraft
in our portfolio has not been diminished. Further, we have been
able to re-lease the aircraft without diminution in lease rates
to an extent that would warrant an impairment write down.

Accumulated other comprehensive income (loss) was
$22.8 million in 2004 compared to $(27.9) million in
2003 and $(87.8) million in 2002 primarily due to changes
in the market values of cash flow hedges and marketable
securities. See Note M of Notes to the Consolidated
Financial Statements.

New Accounting Pronouncements

We did not adopt any new accounting
pronouncements for the year ended December 31, 2004. See
Note A of Notes to Consolidated Financial Statements.




Item 7A. Quantitative and Qualitative
Disclosures About Market Risk

Measuring potential losses in fair values has
recently become the focus of risk management efforts by many
companies. Such measurements are performed through the
application of various statistical techniques. One such
technique is Value at Risk (VaR), a summary statistical measure
that uses historical interest rates and foreign currency
exchange rates which estimates the volatility and correlation of
these rates and prices to calculate the maximum loss that could
occur over a defined period of time given a certain probability.

We believe that statistical models alone do not
provide a reliable method of monitoring and controlling market
risk. While VaR models are relatively sophisticated, the
quantitative market risk information generated is limited by the
assumptions and parameters established in creating the related
models. Therefore, such models are tools and do not substitute
for the experience or judgment of senior management.

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We are exposed to market risk and the risk of
loss of fair value and possible liquidity strain resulting from
adverse fluctuations in interest rates and foreign exchange
prices. We statistically measure the loss of fair value through
the application of a VaR model on a quarterly basis. In this
analysis the net fair value of our operations is determined
using the financial instrument assets and other assets and
liabilities. This includes tax adjusted future flight equipment
lease revenues and financial instrument liabilities, which
includes future servicing of current debt. The impact of current
derivative positions is also taken into account.

We calculate the VaR with respect to the net fair
value by using the historical simulation methodology. This
methodology entails re-pricing all assets and liabilities under
explicit changes in market rates within a specific historical
time period. In this case, the most recent three years of
historical information for interest rates and foreign exchange
rates were used to construct the historical scenarios at
December 31, 2004 and 2003. For each scenario, each
financial instrument is re-priced. Scenario values for our
operations are then calculated by netting the values of all the
underlying assets and liabilities. The final VaR number
represents the maximum adverse deviation in fair market value
incurred by these scenarios with 95% confidence (i.e. only 5% of
historical scenarios show losses greater than the VaR figure). A
one month holding period is assumed in computing the VaR figure.
The following table presents the average, high and low VaRs for
our operations with respect to its fair value as of
December 31, 2004 and 2003, respectively:

ILFC Market Risk

|              |  |                       |      |                   |  |     |      |         |  |      |      |     |  |   |      |  |  |   |      |  |  |   |     | 
|------------- |  | --------------------- | ---- | ----------------- |  | --- | ---- | ------- |  | ---- | ---- | --- |  | - | ---- |  |  | - | ---- |  |  | - | --- | 
|              |  |                       |      |                  
|              |  | December 31, 2004     |      | December 31, 2003
|              |  |                       |      |                  
|              |  | Average               |      | High              |  | Low |      | Average |  | High |      | Low
|              |  |                       |      |                   |  |     |      |         |  |      |      |    
|              |  |                      
|              |  | (Dollars in millions)
|Combined      |  | $                     | 69.6 |                   |  | $   | 86.3 |         |  | $    | 34.6 |     |  | $ | 37.7 |  |  | $ | 78.1 |  |  | $ | 7.8 | 
|Interest Rate |  |                       | 69.7 |                   |  |     | 86.4 |         |  |      | 35.0 |     |  |   | 37.8 |  |  |   | 78.1 |  |  |   | 7.8 | 
|Currency      |  |                       | 0.3  |                   |  |     | 0.5  |         |  |      | 0.2  |     |  |   | 0.8  |  |  |   | 1.3  |  |  |   | 0.2 | 




Item 8. Financial Statements and
Supplementary Data

The response to this Item is submitted as a
separate section of this report.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.




Item 9A. Controls and
Procedures

(A) Effect of Restatement on Controls and
Procedures

Derivative Instruments

ILFC enters into derivative instruments to hedge
interest rates and foreign currency risks. As part of the
previously announced restatement of the financial statements of
American International Group, Inc. (AIG),
ILFCs indirect parent corporation, AIG began an intensive
review of the books and records relating to a wide variety of
transactions entered into by AIG and its subsidiaries. During
the review of all hedge transactions, after ILFC had filed its
2004 Form 10-K and first quarter 2005 Form 10-Q,
deficiencies were identified related to ILFCs
documentation of hedge transactions and errors were identified
in the application of the proper accounting for derivative
related transactions under Statement of Financial Accounting
Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended
(SFAS 133) and No. 52, Foreign
Currency Translation, as amended
(SFAS 52). The review identified:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Documentation deficiencies related to portions of
    Euro denominated debt that ILFC had designated as a hedge
    against future operating lease payments receivable denominated
    in Euros. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.
|
| |  | Certain Euro denominated cash accounts associated
    with the aforementioned operating lease payments and certain
    foreign currency denominated debt required mark-to-spot
    treatment under SFAS 52 which were not properly accounted
    for at the end of each quarter during the years 2004, 2003, 2002
    and 2001.                                                                                                                                                                

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Documentation deficiencies related to four
    commercial paper swaps where portions of ILFCs commercial
    paper program were swapped from floating into fixed interest
    rates. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.
|
| |  | Minor errors under SFAS 133 with respect to
    derivative instruments related to the reclassification to income
    from accumulated other comprehensive income. The corrections
    will also affect derivative assets and liabilities and accrued
    interest.                                                                                                                                                                                                                  

Certain Payments from Aircraft and Engine
Manufacturers

In the course of ILFCs review of its
application of SFAS 133, ILFC, in consultation with its
independent registered public accountants, identified an error
in its accounting for certain payments received from aircraft
and engine manufacturers. Under arrangements with these
manufacturers, in certain circumstances the manufacturers
established notional accounts for the benefit of ILFC, to which
amounts were credited by the manufacturers in connection with
the purchase by and delivery to ILFC and the lease of aircraft.
Amounts credited to the notional accounts were used at
ILFCs direction to protect ILFC from certain events
including loss when airline customers of ILFC defaulted on lease
payment obligations, to provide lease subsidies and other
incentives to ILFC airline customers in connection with leases
of certain aircraft and to reduce ILFCs cost of aircraft
purchased.

Historically, ILFC recorded as revenues gross
lease receipts from customers who had received lease subsidies
from the notional accounts and amounts paid directly to ILFC
from the notional accounts in connection with lessee defaults.
Amounts recorded as revenue at the time they were disbursed to
ILFC or its lessees should have been recorded as a reduction of
the purchase price of the aircraft at the time of delivery.

(B) Evaluation of Disclosure Controls and
Procedures

We maintain disclosure controls and procedures
that are designed to ensure that information required to be
disclosed in our filings under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the
periods specified in the rules and forms of the Securities and
Exchange Commission. Such information is accumulated and
communicated to our management, including the Chairman of the
Board and Chief Executive Officer and the Vice Chairman, Chief
Financial Officer and Chief Accounting Officer (collectively the
Certifying Officers), as appropriate, to allow
timely decisions regarding required disclosure. Our management,
including the Certifying Officers, recognizes that any set of
controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the
desired control objectives.

We had previously performed an evaluation of the
effectiveness of our disclosure controls and procedures as of
December 31, 2004 and concluded that our disclosure
controls and procedures were effective at the reasonable
assurance level as of that date. As a result of the restatement,
under the direction of our Chief Executive Officer and Chief
Financial Officer, we reevaluated our disclosure controls and
procedures and have concluded that our disclosure controls and
procedures were ineffective at the reasonable assurance level as
of December 31, 2004 and for the periods covered by the
restatement due to the existence of the material weaknesses
described below. A material weakness is a control deficiency, or
combination of control deficiencies, that results in more than a
remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected.
We identified the following material weaknesses in our internal
control over financial reporting:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company did not maintain effective controls
    over the valuation and presentation and disclosure of derivative
    transactions entered into prior to the existence of
    SFAS 133. Specifically, we did not maintain adequate
    documentation regarding the effectiveness of certain derivative
    transactions used to hedge interest rate and foreign currency
    exchange rate risk. This control deficiency resulted in the
    restatement of our consolidated financial statements for the
    years 2004, 2003, 2002, 2001 and 2000 and the quarters of 2004
    and 2003. Additionally, this control deficiency could result in
    a misstatement to the financial statement line items (Derivative
    assets, Derivative liabilities, Accumulated other comprehensive
    income and Interest expense) that would cause a material
    misstatement to the annual

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | or interim financial statements. Accordingly,
    management concluded this control deficiency constitutes a
    material weakness.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The Company did not maintain effective controls
    over the valuation and presentation and disclosure of certain
    payments received from manufacturers. This control deficiency
    resulted in the restatement of our consolidated financial
    statements for the years 2004, 2003, 2002, 2001 and 2000 and the
    quarters of 2004 and 2003. Additionally, this control deficiency
    could result in a misstatement to the revenue accounts that
    would cause a material misstatement to the annual or interim
    financial statements. Accordingly, management concluded this
    control deficiency constitutes a material weakness.

As a result of these material weaknesses,
management, including the Certifying Officers, concluded that
our disclosure controls and procedures were not effective at the
reasonable assurance level as of December 31, 2004 and at
the end of the earlier periods covered by the restatement.

Variable Interest Entities

Our consolidated financial statements for the
period ended December 31, 2004, include assets in the
amount of $152.4 million, liabilities in the amount of
$70.9 million and a net loss of $4.1 million related
to Variable Interest Entities (VIEs). Our assessment
of disclosure controls and procedures, as described above,
includes the Variable Interest Entities. Each of the VIEs has a
discrete number of assets and we, as lender and guarantor to the
VIEs, have been provided sufficient information to conclude that
our procedures with respect to these VIEs are effective in
providing reasonable assurance that the information required to
be disclosed by us relating to these entities is reconciled,
processed, summarized and reported within the periods specified
by the Securities and Exchange Commission. However, management
has been unable to assess the effectiveness of internal control
over financial reporting at those entities, due to our inability
to dictate or modify the controls of those entities, or to
assess those controls.

(C) Changes in Internal Control Over
Financial Reporting

There were no changes during the fiscal quarter
ended on December 31, 2004 that materially affected, or are
reasonably likely to materially affect, our internal control
over financial reporting.

(D) Remediation of Material Weaknesses in
Internal Control Over Financial Reporting

As of the date of this filing, we have begun to
remediate the material weaknesses in our internal control over
financial reporting with respect to accounting for derivative
instruments and the accounting for certain payments from
aircraft and engine manufacturers discussed above. The
remediation actions include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Improving training, education, accounting reviews
    and adding additional staff as necessary, all designed to ensure
    that all relevant personnel involved in derivatives transactions
    understand and apply hedge accounting in compliance with
    SFAS 133.                                                                                                                                                              
|
| |  | Improving training, education, accounting reviews
    and adding additional staff as necessary, all designed to ensure
    that all relevant personnel involved in the purchase of aircraft
    and engines from the manufacturers have available all
    information relevant to the purchases and understand the
    appropriate accounting treatment for the funds received from the
    manufacturers and the lease of aircraft.

The process and control improvements described
above in this Item 9A are the only changes in our internal
control over financial reporting during the period covered by
this report that would have a material effect on our internal
control over financial reporting. We will continue to assess our
controls and procedures and will take any further actions that
we deem necessary.

We believe that our Consolidated Financial
Statements fairly present, in all material respects, our
financial condition results of operations and cash flows as of,
and for, the periods presented and that this Annual Report on
Form 10-K, as amended, contains no material inaccuracies or
omissions of material fact and contains the information required
to be included in accordance with the Exchange Act.

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PART IV






Item 15. Exhibits and Financial
Statement Schedules


(a)(1) and (2): Financial Statements and
Financial Statement Schedule: The response to this portion of
Item 15 is submitted as a separate section of this report.

(a)(3) and (b): Exhibits: The response to this
portion of Item 15 is submitted as a separate section of
this report.

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

FORM 10-K/A

Items 8, 15(a), and 15(b)


INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND
SCHEDULE

The following consolidated financial statements
of the Company and its subsidiaries required to be included in
Item 8 are listed below:

|                                                            |                                                                                             |      |    |    | 
|----------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---- | -- | -- | 
|                                                            |                                                                                             | Page
|                                                            |                                                                                             |     
|Report of Independent Registered Public
    Accounting Firm |                                                                                             |      | 45 |   
|Consolidated Financial Statements (as restated):            |                                                                                             |      |    |   
|                                                            | Balance Sheets at December 31, 2004 and 2003                                                |      |    | 46 | 
|                                                            | Statements of Income for the years ended
    December 31, 2004, 2003 and 2002               |      |    | 47 | 
|                                                            | Statements of Shareholders Equity for the
    years ended December 31, 2004, 2003 and 2002 |      |    | 48 | 
|                                                            | Statements of Cash Flows for the years ended
    December 31, 2004, 2003 and 2002           |      |    | 49 | 
|                                                            | Notes to Consolidated Financial Statements                                                  |      |    | 51 | 

The following financial statement schedule of the
Company and its subsidiaries is included in Item 15(a)(2):

|                |    |             |  |                                   |  |  |    | 
|--------------- | -- | ----------- |  | --------------------------------- |  |  | -- | 
|Schedule Number |    | Description |  | Page                             
|                |    |             |  |                                  
|                | II |             |  | Valuation and Qualifying Accounts |  |  | 76 | 

All other financial statements and schedules not
listed have been omitted since the required information is
included in the consolidated financial statements or the notes
thereto, or is not applicable or required.

The following exhibits of the Company and its
subsidiaries are included in Item 15(b):

|        |      |             |  |                                                                                                                                                                                                                                  
|------- | ---- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 3.1  |             |  | Restated Articles of Incorporation of the
    Company, as amended through December 9, 1992, filed
    November 3, 1993 (filed as an exhibit to Registration
    Statement No. 33-50913 and incorporated herein by
    reference).
|        | 3.2  |             |  | Certificate of Determination of Preferences of
    Series A Market Auction Preferred Stock (filed
    December 9, 1992 as an exhibit to Registration Statement
    No. 33-54294 and incorporated herein by reference).           
|        | 3.3  |             |  | Certificate of Determination of Preferences of
    Series B Market Auction Preferred Stock (filed
    December 9, 1992 as an exhibit to Registration Statement
    33-54294 and incorporated herein by reference).               
|        | 3.4  |             |  | Certificate of Determination of Preferences of
    Series C Market Auction Preferred Stock (filed as an
    exhibit to Form 10-K for the year ended December 31,
    1994 and incorporated herein by reference).                 
|        | 3.5  |             |  | Certificate of Determination of Preferences of
    Series D Market Auction Preferred Stock (filed as an
    exhibit to Form 10-K for the year ended December 31,
    1994 and incorporated herein by reference).                 
|        | 3.6  |             |  | Certificate of Determination of Preferences of
    Series E Market Auction Preferred Stock (filed as an
    exhibit to Form 10-K for the year ended December 31,
    1994 and incorporated herein by reference).                 
|        | 3.7  |             |  | Certificate of Determination of Preferences of
    Series F Market Auction Preferred Stock (filed as an
    exhibit to Form 10-K for the year ended December 31,
    1994 and incorporated herein by reference).                 
|        | 3.8  |             |  | Certificate of Determination of Preferences of
    Series G Market Auction Preferred Stock (filed as an
    exhibit to Form 10-K for the year ended December 31,
    1995 and incorporated herein by reference).                 
|        | 3.9  |             |  | Certificate of Determination of Preferences of
    Series H Market Auction Preferred Stock (filed as an
    exhibit to Form 10-K for the year ended December 31,
    1995 and incorporated herein by reference).                 
|        | 3.10 |             |  | Certificate of Determination of Preferences of
    Preferred Stock of the Company (filed as an exhibit to
    Form 10-K for the year ended December 31, 2001 and
    incorporated herein by reference).                          
|        | 3.11 |             |  | By-Laws of the Company, including amendment
    thereto dated August 31, 1990 (filed as an exhibit to
    Registration Statement No. 33-37600 and incorporated herein
    by reference).                                         

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|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                            
|------- | ---- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 3.12 |             |  | Unanimous Written Consent of Sole Stockholder of
    the Company, dated January 2, 2002, amending the By-Laws of
    the Company (filed as an exhibit to Form 10-Q for the
    quarter ended June 30, 2003 and incorporated herein by
    reference).                                                                                                                                      
|        | 4.1  |             |  | Indenture dated as of November 1, 1991, between
    the Company and U.S. Bank Trust National Association (successor
    to Continental Bank, National Association), as Trustee (filed as
    an exhibit to Registration Statement No. 33-43698 and
    incorporated herein by reference).                                                                                                  
|        | 4.2  |             |  | First supplemental indenture, dated as of
    November 1, 2000, to the Indenture between the Company and
    U.S. Bank Trust National Association (filed as an exhibit to
    Form 10-K for the year ended December 31, 2000 and
    incorporated herein by reference).                                                                                                                    
|        | 4.3  |             |  | Second supplemental indenture, dated as of
    February 28, 2001, to the Indenture between the Company and
    U.S. Bank Trust National Association. (filed as an exhibit
    to Form 10-Q for the quarter ended March 31, 2001 and
    incorporated herein by reference).                                                                                                                 
|        | 4.4  |             |  | Third supplemental indenture, dated as of
    September 26, 2001, to the Indenture between the Company
    and U.S. Bank Trust National Association. (filed as an
    exhibit to Form 10-Q for the quarter ended
    September 30, 2000 and incorporated herein by reference).                                                                                                             
|        | 4.5  |             |  | Indenture dated as of November 1, 2000,
    between the Company and the Bank of New York, as Trustee (filed
    as an exhibit to Registration No. 33-49566 and incorporated
    herein by reference).                                                                                                                                                                                      
|        | 4.6  |             |  | The Company agrees to furnish to the Commission
    upon request a copy of each instrument with respect to issues of
    long-term debt of the Company and its subsidiaries, the
    authorized principal amount of which does not exceed 10% of the
    consolidated assets of the Company and its subsidiaries.                                                                          
|        | 4.7  |             |  | First supplemental indenture, dated as of
    August 16, 2002 to the indenture between the Company and
    the Bank of New York (filed as Exhibit 4.2 to Registration
    Statement No. 333-100340 and incorporated herein by
    reference).                                                                                                                                              
|        | 4.8  |             |  | Fourth supplemental indenture, dated as of
    November 6, 2002, to the indenture between the Company and
    U.S. Bank National Association (filed as an exhibit to
    Form 10-K for the year ended December 31, 2002 and
    incorporated herein by reference).                                                                                                                         
|        | 4.9  |             |  | Fifth supplemental indenture, dated as of
    December 27, 2002, to the indenture between the Company and
    U.S. Bank National Association (filed as an exhibit to
    Form 10-K for the year ended December 31, 2002 and
    incorporated herein by reference).                                                                                                                         
|        | 4.10 |             |  | Sixth Supplemental Indenture, dated as of
    June 2, 2003, to the indenture between the Company and
    U.S. Bank National Association (filed as an exhibit to
    Form 10-Q for the quarter ended September 30, 2003 and
    incorporated herein by reference).                                                                                                                          
|        | 4.11 |             |  | Trust Indenture, dated as of March 8, 2004
    between ILFC Rhino II LLC, as issuer and Deutsche Bank Trust
    Company Americas, as indenture trustee (filed as an exhibit to
    Form 10-Q for the quarter ended March 31, 2004 and
    incorporated herein by reference).                                                                                                               
|        | 4.12 |             |  | Agency Agreement (amended and restated), dated as
    of May 28, 2004, between the Company, Citibank, N.A., and
    Dexia Banque Internationale A Luxembourg, Societe Anonyme (filed
    as an exhibit to Form 10-Q for the quarter ended
    June 30, 2004 and incorporated herein by reference).                                                                                         
|        | 10.1 |             |  | Aircraft Facility Agreement, dated as of
    January 19, 1999, among the Company, Halifax PLC and the
    other banks listed therein providing up to $4,327,260,000 for
    the financing of approximately seventy-five Airbus aircraft
    (filed as an exhibit to Form 10-K for the year ended
    December 31, 1998 and incorporated herein by reference).                              
|        | 10.2 |             |  | Revolving Credit Agreement, dated as of
    March 8, 2004, among ILFC Rhino II LLC, Citicorp North
    America Inc., in its individual capacity and as administrative
    agent, and the other financial institutions listed therein
    providing up to $500,000,000 (filed as an exhibit to
    Form 10-Q for the quarter ended March 31, 2004 and
    incorporated herein by reference).
|        | 10.3 |             |  | Guaranty, dated as of March 8, 2004, by the
    Company, as guarantor, in favor of Citicorp North America Inc.,
    as guarantied party (filed as an exhibit to Form 10-Q for
    the quarter ended March 31, 2004 and incorporated herein by
    reference).                                                                                                                              

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|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- | ---- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 10.4 |             |  | Security Trust Agreement, dated as of
    March 8, 2004, among ILFC Rhino I LLC, ILFC Rhino II LLC
    and the additional grantors named therein, as grantors, the
    Company, as servicer, Deutsche Bank Trust Company Americas, as
    indenture trustee, Citicorp North America Inc., as security
    trustee and credit facility agent, and Citibank N.A., as the
    operating bank (filed as an exhibit to Form 10-Q for the
    quarter ended March 31, 2004 and incorporated herein by
    reference).
|        | 10.5 |             |  | Aircraft Facility Agreement, dated as of
    May 18, 2004, among Whitney Leasing Limited, as borrower,
    the Company, as guarantor and the Bank of Scotland and the other
    banks listed therein providing up to $2,643,550,000 (plus
    related premiums) for the financing of aircraft (filed as an
    exhibit to Form 10-Q for the quarter ended June 30,
    2004 and incorporated herein by reference).                                                                                             
|        | 10.6 |             |  | $4,000,000,000 364-Day Revolving Credit
    Agreement, dated as of October 15, 2004, among the Company,
    CitiCorp USA, Inc., as Administrative Agent, and the other
    financial institutions listed therein (filed as an exhibit to
    Form 10-K for the year ended December 31, 2004 and
    incorporated herein by reference).                                                                                                                                                                         
|        | 10.7 |             |  | $2,000,000,000 Five-Year Revolving Credit
    Agreement, dated as of October 15, 2004, among the Company,
    CitiCorp USA, Inc., as Administrative Agent, and the other
    financial institutions listed therein (filed as an exhibit to
    Form 10-K for the year ended December 31, 2004 and
    incorporated herein by reference).                                                                                                                                                                       
|        | 12   |             |  | Computation of Ratio of Earnings to Fixed Charges
    and Preferred Stock Dividends (restated).                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 31.1 |             |  | Rule 13a-14(a)/15d-14(a) Certification of
    Chairman of the Board and Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 31.2 |             |  | Rule 13a-14(a)/15d-14(a) Certification of
    Vice Chairman, Chief Financial Officer and Chief Accounting
    Officer.                                                                                                                                                                                                                                                                                                                                                                                         
|        | 32.1 |             |  | Certification under 18 U.S.C., Section 1350.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To The Shareholders and Board of Directors

International Lease Finance Corporation


Los Angeles, California:


In our opinion, the accompanying consolidated
financial statements listed in the accompanying index appearing
under Item 15(a)(1) and (2) present fairly, in all
material respects, the financial position of International Lease
Finance Corporation and its subsidiaries (the
Company) at December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 2004, in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These financial statements
and the financial statement schedule are the responsibility of
the Companys management; our responsibility is to express
an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits
of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.

As discussed in Note A, on December 31,
2003, the Company adopted Financial Accounting Standards Board
Interpretation No. 46R Consolidation of Variable
Interest Entities.

As described in Note B, the consolidated
financial statements have been restated as of December 31,
2004 and 2003 and for each of the three years in the period
ended December 31, 2004.

PricewaterhouseCoopers LLP

Los Angeles, California


March 4, 2005, except for


the effects of the restatement


as disclosed in Note B, and Note Q,


as to which date is August 15, 2005.


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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per
share amounts)


|                                                                                                                                                                   |                               |                            |            |            |           |   |            |           |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------------- | -------------------------- | ---------- | ---------- | --------- | - | ---------- | --------- | --------- | 
|                                                                                                                                                                   |                               |                           
|                                                                                                                                                                   |                               | December 31,              
|                                                                                                                                                                   |                               |                           
|                                                                                                                                                                   |                               | 2004                       |            | 2003      
|                                                                                                                                                                   |                               | (Restated)                 |            | (Restated)
|                                                                                                                                                                   |                               |                            |            |           
|ASSETS                                                                                                                                                            
|Cash, including interest bearing accounts of
    $97,682 (2004) and $98,249 (2003)                                                                                 |                               | $                          | 99,747     |            |           | $ | 102,241    |          
|Current income taxes                                                                                                                                               |                               |                            | 6,507      |            |           |   |           |          
|Notes receivable                                                                                                                                                   |                               |                            | 212,273    |            |           |   | 146,707    |          
|Net investment in finance leases                                                                                                                                   |                               |                            | 307,466    |            |           |   | 303,373    |          
|Flight equipment under operating leases                                                                                                                            |                               |                            | 36,580,296 |            |           |   | 33,379,645 |          
|                                                                                                                                                                   | Less accumulated depreciation |                            |            | 6,074,874  |           |   |            | 5,188,956 |          
|                                                                                                                                                                   |                               |                            |            |            |           |   |            |          
|                                                                                                                                                                   |                               |                            | 30,505,422 |            |           |   | 28,190,689 |          
|Deposits on flight equipment purchases                                                                                                                             |                               |                            | 1,250,168  |            |           |   | 1,255,074  |          
|Accrued interest, other receivables and other
    assets                                                                                                           |                               |                            | 199,653    |            |           |   | 281,483    |          
|Derivative assets                                                                                                                                                  |                               |                            | 1,191,602  |            |           |   | 746,013    |          
|Investments                                                                                                                                                        |                               |                            | 22,979     |            |           |   | 49,636     |          
|Variable interest entities assets                                                                                                                                  |                               |                            | 152,417    |            |           |   | 164,481    |          
|Deferred debt issue costs  less accumulated
    amortization of
    $77,112 (2004) and $63,847 (2003)                                                             |                               |                            | 59,666     |            |           |   | 51,865     |          
|                                                                                                                                                                   |                               |                            |            |            |           |   |            |          
|                                                                                                                                                                   |                               | $                          | 34,007,900 |            |           | $ | 31,291,562 |          
|                                                                                                                                                                   |                               |                            |            |            |           |   |            |          
|LIABILITIES                                                                                                                                                       
|Accrued interest and other payables                                                                                                                                |                               | $                          | 264,276    |            |           | $ | 243,989    |          
|Current income taxes                                                                                                                                               |                               |                            |           |            |           |   | 17,967     |          
|Tax benefit sharing payable to AIG                                                                                                                                 |                               |                            | 245,000    |            |           |   |           |          
|Debt financing, net of deferred debt discount
    of
    $29,502 (2004) and $24,321 (2003)                                                                         |                               |                            | 23,136,016 |            |           |   | 21,245,267 |          
|Foreign currency adjustment                                                                                                                                        |                               |                            | 1,215,809  |            |           |   | 839,718    |          
|Derivative liabilities                                                                                                                                             |                               |                            | 38,810     |            |           |   | 57,187     |          
|Capital lease obligations                                                                                                                                          |                               |                            | 39,580     |            |           |   | 143,254    |          
|Synthetic lease obligations                                                                                                                                        |                               |                            |           |            |           |   | 464,222    |          
|Security and other deposits on flight equipment                                                                                                                    |                               |                            | 876,590    |            |           |   | 843,914    |          
|Rentals received in advance                                                                                                                                        |                               |                            | 160,878    |            |           |   | 146,871    |          
|Deferred income taxes                                                                                                                                              |                               |                            | 2,630,118  |            |           |   | 2,353,458  |          
|Variable interest entities liabilities                                                                                                                             |                               |                            | 70,886     |            |           |   | 79,211     |          
|Commitments and contingencies  Note L                                                                                                                             |                               |                            |            |            |           |   |            |          
|SHAREHOLDERS EQUITY                                                                                                                                              
|Market Auction Preferred Stock, $100,000 per
    share liquidation value; Series A and B (2004 and 2003),
    each series having 500 shares issued and outstanding |                               |                            | 100,000    |            |           |   | 100,000    |          
|Common stock  no par value; 100,000,000
    authorized shares, 42,198,119 shares (2004 and 2003) issued and
    outstanding                                       |                               |                            | 653,582    |            |           |   | 653,582    |          
|Paid-in capital                                                                                                                                                    |                               |                            | 579,955    |            |           |   | 579,955    |          
|Accumulated other comprehensive income (loss)                                                                                                                      |                               |                            | 22,825     |            |           |   | (27,928    | )        
|Retained earnings                                                                                                                                                  |                               |                            | 3,973,575  |            |           |   | 3,550,895  |          
|                                                                                                                                                                   |                               |                            |            |            |           |   |            |          
|                                                                                                                                                                   |                               | Total shareholders equity |            |            | 5,329,937 |   |            |           | 4,856,504 | 
|                                                                                                                                                                   |                               |                            |            |            |           |   |            |          
|                                                                                                                                                                   |                               | $                          | 34,007,900 |            |           | $ | 31,291,562 |          
|                                                                                                                                                                   |                               |                            |            |            |           |   |            |          

See accompanying notes.

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands)


|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |           |         | 
|--------- | ------------------------------------------------------- | ------------------------------------------------------------------------- | --------- | ---------- | ------- | ---------- | --------- | --------- | ------- |  | --------- | --------- | ------- | 
|          |                                                         |                                                                          
|          |                                                         | Years Ended December 31,                                                 
|          |                                                         |                                                                          
|          |                                                         | 2004                                                                      |           | 2003       |         | 2002      
|          |                                                         | (Restated)                                                                |           | (Restated) |         | (Restated)
|          |                                                         |                                                                           |           |            |         |           
|REVENUES: |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          | Rental of flight equipment                              |                                                                           | $         | 2,955,524  |         |            | $         | 2,807,211 |         |  | $         | 2,546,142 |        
|          | Flight equipment marketing                              |                                                                           |           | 77,664     |         |            |           | 28,988    |         |  |           | 48,454    |        
|          | Flight equipment marketing 
    securitization         |                                                                           |           | 32,854     |         |            |           | 23,245    |         |  |           |          |        
|          | Interest and other                                      |                                                                           |           | 93,844     |         |            |           | 17,907    |         |  |           | 64,655    |        
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          |                                                         |                                                                           | 3,159,886 |            |         |            | 2,877,351 |           |         |  | 2,659,251 |          
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|EXPENSES: |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          | Interest                                                |                                                                           |           | 942,527    |         |            |           | 919,961   |         |  |           | 866,853   |        
|          | Depreciation of flight equipment                        |                                                                           |           | 1,214,048  |         |            |           | 1,083,909 |         |  |           | 917,917   |        
|          | Provision for overhauls                                 |                                                                           |           | 164,322    |         |            |           | 112,581   |         |  |           | 90,763    |        
|          | Flight equipment rent                                   |                                                                           |           |           |         |            |           | 43,314    |         |  |           | 75,372    |        
|          | Losses related to customer bankruptcy                   |                                                                           |           | 53,926     |         |            |           |          |         |  |           |          |        
|          | Selling, general and administrative                     |                                                                           |           | 116,956    |         |            |           | 76,780    |         |  |           | 86,879    |        
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          |                                                         |                                                                           | 2,491,779 |            |         |            | 2,236,545 |           |         |  | 2,037,784 |          
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          |                                                         | INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
    OF ACCOUNTING CHANGE |           |            | 668,107 |            |           |           | 640,806 |  |           |           | 621,467 | 
|          | Provision for income taxes                              |                                                                           |           | 206,101    |         |            |           | 196,683   |         |  |           | 204,061   |        
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          |                                                         | INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
    CHANGE                  |           |            | 462,006 |            |           |           | 444,123 |  |           |           | 417,406 | 
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          | Cumulative effect of accounting change (net of
    tax) |                                                                           |           |           |         |            |           | (8,642    | )       |  |           |          |        
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          
|          |                                                         | NET INCOME                                                                |           | $          | 462,006 |            |           | $         | 435,481 |  |           | $         | 417,406 | 
|          |                                                         |                                                                           |           |            |         |            |           |           |         |  |           |          

See accompanying notes.

47



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

(Dollars in thousands)


|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |          |         |  
|------------------------------------------------------ | ------------------------------- | ------------------------------------------------------------------------------------------- | ----- | --------------- | - | ------------ | ------- | ------- | - | ------------- | -- | -------- | - | ------- | ------- | ------------- | - | ---------- | --------- | ---------- | ------- | ------- |  | - | ------- |  |  | - | ------- | - | ------- | - | --------- | ------- | - | - | --------- | -------- | ------- | -
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |           
|                                                       |                                 | Market Auction                                                                              |       |                 |   |              |         |         |   | Accumulated   |    |          |   |        
|                                                       |                                 | Preferred Stock                                                                             |       | Preferred Stock |   | Common Stock |         |         |   | Other         |    |          |   |        
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   | Comprehensive |    | Retained |   |        
|                                                       |                                 | Number of                                                                                   |       |                 |   | Number of    |         |         |   | Number of     |    |          |   | Paid-in |         | Income (Loss) |   | Earnings   |           | Total     
|                                                       |                                 | Shares                                                                                      |       | Amount          |   | Shares       |         | Amount  |   | Shares        |    | Amount   |   | Capital |         | (Restated)    |   | (Restated) |           | (Restated)
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |           
|Balance at December 31, 2001 (Previously
    reported) |                                 |                                                                                             | 1,500 |                 |   | $            | 150,000 |         |   |               | 40 |          |   | $       | 400,000 |               |   | 35,818,122 |           | $          | 3,582   |         |  | $ | 579,955 |  |  | $ | (50,629 | ) |         | $ | 2,940,883 |         |   | $ | 4,023,791 |         
|Restatement (see Note B)                               |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   | 10,464  |   |         |   | (144,339  | )       |   |   | (133,875  | )       
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Balance at December 31, 2001 (Restated)                |                                 |                                                                                             | 1,500 |                 |   | $            | 150,000 |         |   |               | 40 |          |   |         | 400,000 |               |   | 35,818,122 |           |            | 3,582   |         |  | $ | 579,955 |  |  |   | (40,165 | ) |         |   | 2,796,544 |         |   |   | 3,889,916 |         
|                                                       | Repurchase of preferred stock   |                                                                                             |       | (500            | ) |              |         | (50,000 | ) |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           | (50,000  | )      
|                                                       | Cancellation of preferred stock |                                                                                             |       |                 |   |              |         |         |   |               |    | (40      | ) |         |         | (400,000      | ) |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           | (400,000 | )      
|                                                       | Issuance of common stock        |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            | 6,379,997 |            |         | 650,000 |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           | 650,000  |        
|                                                       | Common stock dividends          |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | (26,000 | ) |   |           | (26,000  | )      
|                                                       | Preferred stock dividends       |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | (19,645 | ) |   |           | (19,645  | )      
|Comprehensive Income:                                  |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|                                                       | Net income                      |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | 417,406 |   |   |           | 417,406  |        
|                                                       | Other comprehensive income:     |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |          |        
|                                                       |                                 | Cash flow derivative transactions (net of tax of
    $(25,634))                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   | (47,606 | ) |           |         |   |   |           |          | (47,606 | )
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Comprehensive Income                                   |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   | 369,800   |         
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Balance at December 31, 2002 (Restated)                |                                 |                                                                                             | 1,000 |                 |   |              | 100,000 |         |   |               |   |          |   |         |        |               |   | 42,198,119 |           |            | 653,582 |         |  |   | 579,955 |  |  |   | (87,771 | ) |         |   | 3,168,305 |         |   |   | 4,414,071 |         
|                                                       | Common stock dividends          |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | (49,000 | ) |   |           | (49,000  | )      
|                                                       | Preferred stock dividends       |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | (3,891  | ) |   |           | (3,891   | )      
|Comprehensive Income:                                  |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|                                                       | Net income                      |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | 435,481 |   |   |           | 435,481  |        
|                                                       | Other comprehensive income:     |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |          |        
|                                                       |                                 | Cash flow derivative transactions (net of tax of
    $32,223)                               |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   | 59,843  |   |           |         |   |   |           |          | 59,843  |  
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Comprehensive Income                                   |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   | 495,324   |         
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Balance at December 31, 2003 (Restated)                |                                 |                                                                                             | 1,000 |                 |   |              | 100,000 |         |   |               |   |          |   |         |        |               |   | 42,198,119 |           |            | 653,582 |         |  |   | 579,955 |  |  |   | (27,928 | ) |         |   | 3,550,895 |         |   |   | 4,856,504 |         
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|                                                       | Common stock dividends          |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | (35,500 | ) |   |           | (35,500  | )      
|                                                       | Preferred stock dividends       |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | (3,826  | ) |   |           | (3,826   | )      
|Comprehensive Income:                                  |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|                                                       | Net income                      |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           | 462,006 |   |   |           | 462,006  |        
|                                                       | Other comprehensive income:     |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |          |        
|                                                       |                                 | Cash flow derivative transactions (net of tax of
    $25,786)                               |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   | 47,887  |   |           |         |   |   |           |          | 47,887  |  
|                                                       |                                 | Change in unrealized appreciation securities
    available- for-sale (net of tax of $1,543) |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   | 2,866   |   |           |         |   |   |           |          | 2,866   |  
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Comprehensive Income                                   |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   | 512,759   |         
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         
|Balance at December 31, 2004 (Restated)                |                                 |                                                                                             | 1,000 |                 |   | $            | 100,000 |         |   |               |   |          |   | $       |        |               |   | 42,198,119 |           | $          | 653,582 |         |  | $ | 579,955 |  |  | $ | 22,825  |   |         | $ | 3,973,575 |         |   | $ | 5,329,937 |         
|                                                       |                                 |                                                                                             |       |                 |   |              |         |         |   |               |    |          |   |         |         |               |   |            |           |            |         |         |  |   |         |  |  |   |         |   |         |   |           |         |   |   |           |         

See accompanying notes.

48



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(Dollars in thousands)


|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |            |         |  
|----------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------- | ---------- | --------- | ---------- | ---------- | ---------- | --------- | - | ---------- | ---------- | ------- | -
|                                          |                                                                                       |                                                                                
|                                          |                                                                                       | Years Ended December 31,                                                       
|                                          |                                                                                       |                                                                                
|                                          |                                                                                       | 2004                                                                            |            | 2003       |           | 2002      
|                                          |                                                                                       | (Restated)                                                                      |            | (Restated) |           | (Restated)
|                                          |                                                                                       |                                                                                 |            |            |           |           
|OPERATING ACTIVITIES:                     |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|                                          | Net income                                                                            |                                                                                 | $          | 462,006    |           |            | $          | 435,481    |           |   | $          | 417,406    |        
|                                          | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                 |            |            |           |            |            |            |           |   |            |            |        
|                                          |                                                                                       | Depreciation of flight equipment                                                |            |            | 1,214,048 |            |            |            | 1,083,909 |   |            |            | 917,917 |  
|                                          |                                                                                       | Deferred income taxes                                                           |            |            | 249,331   |            |            |            | 195,813   |   |            |            | 368,851 |  
|                                          |                                                                                       | Change in derivative instruments                                                |            |            | (201,571  | )          |            |            | (167,699  | ) |            |            | (9,247  | )
|                                          |                                                                                       | Foreign currency adjustment of non-US$
    denominated debt                     |            |            | 162,342   |            |            |            | 180,645   |   |            |            | 70,840  |  
|                                          |                                                                                       | Amortization of deferred debt issue costs                                       |            |            | 26,162    |            |            |            | 36,645    |   |            |            | 15,709  |  
|                                          |                                                                                       | Losses related to customer bankruptcy                                           |            |            | 53,926    |            |            |            |          |   |            |            |        |  
|                                          |                                                                                       | Other, including foreign exchange gains (losses)
    on Euro denominated cash   |            |            | (20,767   | )          |            |            | (6,992    | ) |            |            | 49      |  
|                                          | Changes in operating assets and liabilities:                                          |                                                                                 |            |            |           |            |            |            |           |   |            |            |        
|                                          |                                                                                       | (Increase) decrease in notes receivable                                         |            |            | (32,104   | )          |            |            | 47,713    |   |            |            | (52,236 | )
|                                          |                                                                                       | Change in unamortized debt discount                                             |            |            | (5,181    | )          |            |            | 7,607     |   |            |            | (23,020 | )
|                                          |                                                                                       | Decrease (increase) in accrued interest, other
    receivables and other assets |            |            | 253,852   |            |            |            | (40,987   | ) |            |            | 115,976 |  
|                                          |                                                                                       | (Decrease) increase in accrued interest and other
    payables                  |            |            | 11,961    |            |            |            | 104,317   |   |            |            | (6,443  | )
|                                          |                                                                                       | Decrease (increase) in current income taxes                                     |            |            | (24,474   | )          |            |            | 184,260   |   |            |            | (14,904 | )
|                                          |                                                                                       | Increase in tax benefit sharing payable to AIG                                  |            |            | 245,000   |            |            |            |          |   |            |            |        |  
|                                          |                                                                                       | Increase in rentals received in advance                                         |            |            | 14,007    |            |            |            | 17,627    |   |            |            | 14,370  |  
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|Net cash provided by operating activities |                                                                                       |                                                                                 | 2,408,538  |            |           |            | 2,078,339  |            |           |   | 1,815,268  |           
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|INVESTING ACTIVITIES:                     |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|                                          | Acquisition of flight equipment for operating
    leases                              |                                                                                 |            | (5,007,201 | )         |            |            | (5,053,712 | )         |   |            | (5,420,761 | )      
|                                          | Acquisition of flight equipment for finance leases                                    |                                                                                 |            | (43,247    | )         |            |            | (165,202   | )         |   |            | (12,886    | )      
|                                          | Decrease (increase) in deposits and progress
    payments                             |                                                                                 |            | 4,906      |           |            |            | (97,210    | )         |   |            | 163,835    |        
|                                          | Proceeds from disposal of flight
    equipment  net of gain                          |                                                                                 |            | 1,355,422  |           |            |            | 953,897    |           |   |            | 173,152    |        
|                                          | Advance on notes receivable                                                           |                                                                                 |            | (80,750    | )         |            |            | (30,198    | )         |   |            |           |        
|                                          | Collections on notes receivable                                                       |                                                                                 |            | 46,793     |           |            |            | 42,570     |           |   |            | 57,547     |        
|                                          | Collections on finance and sales-type leases (net
    of income amortized)            |                                                                                 |            | 14,393     |           |            |            | 13,670     |           |   |            | 8,540      |        
|                                          | Other                                                                                 |                                                                                 |            | 1,188      |           |            |            | 1,432      |           |   |            | 916        |        
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|Net cash used in investing activities     |                                                                                       |                                                                                 | (3,708,496 | )          |           |            | (4,334,753 | )          |           |   | (5,029,657 | )         
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|FINANCING ACTIVITIES:                     |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|                                          | Issuance of common stock                                                              |                                                                                 |            |           |           |            |            |           |           |   |            | 250,000    |        
|                                          | Repurchase of preferred stock                                                         |                                                                                 |            |           |           |            |            |           |           |   |            | (50,000    | )      
|                                          | Net change in commercial paper                                                        |                                                                                 |            | 1,099,290  |           |            |            | (2,642,547 | )         |   |            | 716,639    |        
|                                          | Proceeds from debt financing                                                          |                                                                                 |            | 4,311,742  |           |            |            | 8,654,736  |           |   |            | 5,736,325  |        
|                                          | Payments in reduction of debt financing and
    capital lease obligations             |                                                                                 |            | (4,082,998 | )         |            |            | (3,608,543 | )         |   |            | (3,285,221 | )      
|                                          | Debt issue costs                                                                      |                                                                                 |            | (33,964    | )         |            |            | (52,939    | )         |   |            | (16,284    | )      
|                                          | Payment of common and preferred dividends                                             |                                                                                 |            | (39,326    | )         |            |            | (52,892    | )         |   |            | (45,645    | )      
|                                          | Increase (decrease) in customer deposits                                              |                                                                                 |            | 32,676     |           |            |            | (20,139    | )         |   |            | (102,160   | )      
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|Net cash provided by financing activities |                                                                                       |                                                                                 | 1,287,420  |            |           |            | 2,277,676  |            |           |   | 3,203,654  |           
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|Effect of exchange rate changes on cash   |                                                                                       |                                                                                 | 10,044     |            |           |            | 9,284      |            |           |   | (2,170     | )         
|Net increase (decrease) in cash           |                                                                                       |                                                                                 | (12,538    | )          |           |            | 21,262     |            |           |   | (10,735    | )         
|Cash at beginning of year                 |                                                                                       |                                                                                 | 102,241    |            |           |            | 71,695     |            |           |   | 84,600     |           
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|                                          |                                                                                       | Cash at end of year                                                             |            | $          | 99,747    |            |            | $          | 102,241   |   |            | $          | 71,695  |  
|                                          |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           
|(Table continued on next page)            |                                                                                       |                                                                                 |            |            |           |            |            |            |           |   |            |           

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)

(Dollars in thousands)


|                                                                                                                                                                                                                                                                                               |                                           |                                                                                            |  |            |          |            |  |   |          |   |  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------------------------------------------------ |  | ---------- | -------- | ---------- |  | - | -------- | - |  | - | -------- | -
|                                                                                                                                                                                                                                                                                               |                                           |                                                                                           
|                                                                                                                                                                                                                                                                                               |                                           | Years Ended December 31,                                                                  
|                                                                                                                                                                                                                                                                                               |                                           |                                                                                           
|                                                                                                                                                                                                                                                                                               |                                           | 2004                                                                                       |  | 2003       |          | 2002      
|                                                                                                                                                                                                                                                                                               |                                           | (Restated)                                                                                 |  | (Restated) |          | (Restated)
|                                                                                                                                                                                                                                                                                               |                                           |                                                                                            |  |            |          |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                                                                                                                                                                                              |                                           |                                                                                            |  |            |          |            |  |   |          |   |  |  
|                                                                                                                                                                                                                                                                                               | Cash paid (received) during the year for: |                                                                                            |  |            |          |            |  |   |          |   |  |   |         
|                                                                                                                                                                                                                                                                                               |                                           | Interest (net of amount capitalized $48,390
    (2004), $49,679 (2003) and $58,274 (2002)) |  | $          | 945,991  |            |  | $ | 926,274  |   |  | $ | 827,280  |  
|                                                                                                                                                                                                                                                                                               |                                           | Income taxes, net                                                                          |  |            | (263,757 | )          |  |   | (189,690 | ) |  |   | (149,885 | )
|                                                                                                                                                                                                                                                                                               | 2004:                                     |                                                                                            |  |            |          |            |  |   |          |   |  |   |         
|One aircraft was received for investment in
    finance leases and notes receivables in the amount of $23,456.                                                                                                                                                                                
|Notes in the amount of $2,700 were received as
    partial payment in exchange for flight equipment sold with a net
    book value of $30,000.                                                                                                                                                
|A note in the amount of $4,500 was used towards a
    purchase of an aircraft.                                                                                                                                                                                                                
|Certain payments from aircraft and engine
    manufacturers in the amount of $147,065 reduced the basis of
    Flight equipment for operating leases and increased Accrued
    interest, other receivables and other assets.                                                                  
|                                                                                                                                                                                                                                                                                               | 2003:                                     |                                                                                            |  |            |          |            |  |   |          |   |  |   |         
|Progress payments in the amount of $6,700 were
    exchanged for an aircraft with net book value at $4,043.                                                                                                                                                                                   
|Flight equipment increased in the amount of
    $462,705 and synthetic lease obligations increased in the amount
    of $464,222 as a result of consolidation of sale-leaseback
    transaction related to seven aircraft in connection with the
    Companys adoption of FIN 46R.           
|Variable interest entity assets in the amount of
    $164,481 and liabilities in the amount of $79,211 were received
    in exchange for notes receivables in the amount of $82,493 and
    preferred stock in the amount of $11,706 in connection with the
    Companys adoption of FIN 46R.
|Variable interest entity assets in the amount of
    $13,731 were received as partial payment in exchange for flight
    equipment with a net book value of $14,043.                                                                                                                          
|One aircraft was received in exchange for notes
    receivable in the amount of $28,715 and preferred stock in the
    amount of $2,202.                                                                                                                                                      
|Notes in the amount of $72,281 were received as
    partial payment for flight equipment sold with a net book value
    of $75,630.                                                                                                                                                           
|Certain payments from aircraft and engine
    manufacturers in the amount of $90,506 reduced the basis of
    Flight equipment for operating leases and increased Accrued
    interest, other receivables and other assets.                                                                   
|                                                                                                                                                                                                                                                                                               | 2002:                                     |                                                                                            |  |            |          |            |  |   |          |   |  |   |         
|Preferred stock was received in exchange for
    notes receivable in the amount of $14,019.                                                                                                                                                                                                   
|Notes in the amount of $28,775 were received as
    partial payment in exchange for flight equipment sold with a net
    book value of $46,242.                                                                                                                                               
|One aircraft was received in exchange for notes
    receivable in the amount of $10,968.                                                                                                                                                                                                      
|Pursuant to an agreement with the holder, the
    Company cancelled the outstanding shares of Series A
    Preferred Stock and issued 3,951,398 shares of common stock.                                                                                                                       
|Certain payments from aircraft and engine
    manufacturers in the amount of $90,349 reduced the basis of
    Flight equipment for operating leases and increased Accrued
    interest, other receivables and other assets.                                                                   

See accompanying notes.

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands)


Note A  Summary of Significant
Accounting Policies

Organization:International
Lease Finance Corporation (the Company,
ILFC, management, we,
our, us) is primarily engaged in the
acquisition of new commercial jet aircraft and the leasing of
those aircraft to airlines throughout the world. In addition to
our leasing activity, we regularly sell aircraft from our leased
aircraft fleet and aircraft owned by others to third party
lessors and airlines and in some cases provide fleet management
services to these buyers. In terms of the number and value of
transactions concluded, we are a major owner-lessor of
commercial jet aircraft.

Parent
Company:International Lease
Finance Corporation is an indirect wholly owned subsidiary of
American International Group, Inc. (AIG). AIG is a
holding company which through its subsidiaries is primarily
engaged in a broad range of insurance and insurance-related
activities in the United States and abroad. AIGs primary
activities include both general and life insurance and
retirement services operations. Other significant activities
include financial services and asset management.

Principles of
Consolidation:The accompanying
consolidated financial statements include our accounts and our
wholly owned subsidiaries and certain variable interest
entities, for which we are the primary beneficiary. Investments
of less than 20% in other entities are carried at cost.
Investments of between 20% and 50% in other entities are carried
under the equity method. All significant intercompany balances
and transactions have been eliminated in consolidation.

Intercompany Allocations and
Fees:We are party to cost
sharing agreements with AIG. Generally, these agreements provide
for the allocation of corporate costs based upon a proportional
allocation of costs to all subsidiaries. These charges
aggregated $3,029 (2004), $1,458 (2003) and $1,198 (2002) and
include, but are not limited to pension costs, certain senior
management compensation, and costs of various corporate
services. We also pay AIG a fee related to management services
provided for certain of our foreign subsidiaries. The fees
aggregated $550 (2004), $542 (2003) and $387 (2002). We earned
management fees from two trusts consolidated by AIG for the
management of aircraft we have sold to the trusts. These
management fees aggregated $10,200 (2004) and $1,300 (2003).
Accrued interest, other receivables and other assets included
$1,600 (2004) related to the management of those aircraft and
$69,149 (2003) related to two aircraft that were not novated at
December 31, 2003.

Lease
Revenue:We, as lessor, lease
flight equipment principally under operating leases and report
rental income ratably over the life of the lease. The difference
between the rental income recorded and the cash received under
the provisions of the lease is included in Accrued
interest, other receivables, and other assets on the
Consolidated Balance Sheets. Past-due rentals are recognized on
the basis of managements assessment of collectibility. In
certain cases, leases provide for additional rentals based on
usage. The usage may be calculated based on hourly usage or on
the number of cycles operated, depending on the lease contract.
A cycle is defined as one take-off and landing. The lessee
typically reports the usage to us monthly.

Lease revenues from the rental of flight
equipment have been reduced by payments received directly by us
or by our customers from the notional accounts established by
the aircraft and engine manufacturers.

Rentals received, but unearned under the lease
agreements are recorded in Rentals received in
advance on the Consolidated Balance Sheets until earned.

Costs related to reconfiguration of the aircraft
cabin and other lessee specific modifications are capitalized as
pre-paid lease cost and amortized over the life of the lease.

Flight Equipment
Marketing:We market flight
equipment both on our behalf and on behalf of independent third
parties. Marketing revenues include all revenues from such
operations consisting of net gains on sales of flight equipment
and commissions. We recognize gains on sales when flight
equipment is sold and the risk of ownership of the equipment is
passed to the new owner. The portion of sales proceeds as a

51



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note A  Summary of Significant
Accounting Policies (Continued)


result of payments made to buyers directly by the
aircraft manufacturers are not included in marketing revenue but
are recorded as a reduction to the overall basis of the flight
equipment.

Provision for
Overhauls:Under the provisions
of many leases, we receive overhaul rentals based on the usage
of the aircraft. For certain airframe and engine overhauls, we
reimburse the lessee for costs incurred up to, but not
exceeding, related overhaul rentals that the lessee has paid to
us for usage of the aircraft.

Overhaul rentals are included under the caption
Rental of flight equipment in the Consolidated
Statements of Income. We provide a charge to operations for
reimbursements at the time the lessee pays the overhaul rentals
based on overhaul rentals received and the estimated
reimbursements during the life of the lease. Management
periodically evaluates the reserve for these reimbursements and
the reimbursement rate, and adjusts the provision for overhauls
accordingly.

Cash:Cash
includes cash on hand and time deposits. Cash balances held in
euros are marked to spot at the balance sheet date. Foreign
currency transaction gains or losses are recognized in the
period incurred and are included in Interest and
other or Selling, general and administrative
on the Consolidated Statements of Income.

Flight
Equipment:Flight equipment under
operating leases is stated at cost. Purchases, major additions
and modifications and capitalized interest are capitalized. The
lessee provides and pays for normal maintenance and repairs,
airframe and engine overhauls, and compliance with return
conditions of flight equipment on lease.

We generally depreciate aircraft, including
aircraft acquired under capital leases, using the straight-line
method over a 25 year life from the date of manufacture to a 15%
residual value. When an aircraft is out of production management
evaluates the aircraft types and depreciates the aircraft using
the straight line method over a 25 year life from the date
of manufacture to an established residual value for each
aircraft type.

Under arrangements with manufacturers, in certain
circumstances the manufacturers establish notional accounts for
the benefit of ILFC, to which amounts are credited by them in
connection with the purchase by and delivery to ILFC and the
lease of aircraft. The amounts credited to the notional accounts
are recorded as a reduction to the basis of aircraft purchased
and charged to other assets.

At the time assets are retired or sold the cost
and accumulated depreciation are removed from the related
accounts and the difference, net of proceeds, is recorded as a
gain or loss.

Management is very active in the airline industry
and remains current on issues affecting our fleet, including
events and circumstances that may affect impairment of aircraft
values (e.g. residual values, useful life, current and future
revenue generating capacity). Management evaluates aircraft in
the fleet, as necessary, based on these events and circumstances
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS 144). SFAS 144 requires that
long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets is
measured by comparing the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the
asset. These evaluations for impairment are significantly
impacted by estimates of future revenues and other factors which
involve some amount of uncertainty.

Capitalized
Interest:We borrow funds to
finance progress payments for the construction of flight
equipment ordered. We capitalize interest incurred on such
borrowings. This amount is calculated using our composite
borrowing rate and is included in the cost of the flight
equipment.

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note A  Summary of Significant
Accounting Policies (Continued)

Deferred Debt Issue
Costs:We incur debt issue costs
in connection with debt financing. Those costs are deferred and
amortized over the life of the debt using the interest method
and charged to interest expense.

Derivative Financial
Instruments:In the normal course
of business, we utilize derivative financial instruments to
manage our exposure to interest rate risks and foreign currency
risks. We account for derivatives in accordance with SFAS
No. 133 Accounting for Derivative instruments and
Hedging Activities, as amended
(SFAS 133). All derivatives are recognized on
the balance sheet at their fair value. On the date that we enter
into a derivative contract, we designate the derivative as
(1) a hedge of (a) the fair value of a recognized
asset or liability or (b) an unrecognized firm commitment
(a fair value hedge); (2) a hedge of (a) a
forecasted transaction or (b) the variability of cash flows
that are to be received or paid in connection with a recognized
asset or liability (a cash flow hedge); or
(3) a foreign-currency fair value or cash flow hedge (a
foreign currency hedge). Changes in the fair value
of a derivative that is highly effective and that is designated
and qualifies as a fair-value hedge, along with changes in the
fair value of the hedged asset or liability that are
attributable to the hedged risk, are recorded in current-period
earnings. Changes in the fair value of a derivative that is
highly effective and that is designated and qualifies as a cash
flow hedge, to the extent that the hedge is effective, are
recorded in accumulated other comprehensive income, until
earnings are affected by the variability of cash flows of the
hedged transaction (e.g. until periodic settlements of the
variable-rate asset or liability are recorded in earnings). Any
hedge ineffectiveness (which represents the amount by which the
change in the fair value of the derivative exceeds the
variability in the cash flows of the forecasted transaction) is
recorded in current-period earnings. Changes in the fair value
of a derivative that is highly effective and that is designated
and qualifies as a foreign currency hedge are recorded in either
current-period earnings or other accumulated comprehensive
income, depending on whether the hedging relationship satisfies
the criteria for a fair value or cash flow hedge, respectively.
Changes in the fair value of derivative financial instruments
that did not qualify for hedge treatment under SFAS 133 are
reported in current-period earnings. See Note
B  Restatement for a discussion of the
restatement related to derivative instruments.

We formally document all relationships between
hedging instruments and hedged items, as well as risk management
objectives and strategies for undertaking various hedge
transactions. This includes linking all derivatives that are
designated as fair value, cash flow, or foreign currency hedges
to specific assets or liabilities on the balance sheet. We also
assess (both at the hedges inception and on an ongoing
basis) whether the derivatives that are used in hedging
transactions have been highly effective in offsetting changes in
the fair value or cash flow of hedged items and whether those
derivatives may be expected to remain highly effective in future
periods. When it is determined that a derivative is not (or has
ceased to be) highly effective as a hedge, we discontinue hedge
accounting prospectively, as discussed below.

We discontinue hedge accounting prospectively
when (1) we determine that the derivative is no longer
effective in offsetting changes in the fair value or cash flows
of a hedged item; (2) the derivative expires or is sold,
terminated, or exercised; or (3) management determines that
designating the derivative as a hedging instrument is no longer
appropriate.

In all situations in which hedge accounting is
discontinued and the derivative remains outstanding, we carry
the derivative at its fair value on the balance sheet,
recognizing changes in the fair value in current-period earnings.

Marketable
Securities:We classify our
investments in marketable securities as
available-for-sale in accordance with the provisions
of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities
(SFAS 115). Available-for-sale securities are
carried at fair value with the unrealized gain or

53



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note A  Summary of Significant
Accounting Policies (Continued)


loss, net of tax, reported in other comprehensive
income. Unrealized losses considered to be
other-than-temporary are recognized currently in
earnings.

Variable Interest
Entities:We consolidate variable
interest entities in accordance with Financial Accounting
Standards Board (FASB) Interpretation
(FIN) No. 46R, Consolidation of Variable
Interest Entities (FIN 46R). The variable
interest entities that we consolidate consist of ten entities,
to which we have sold aircraft and we have determined we are the
primary beneficiary. The entities are owned by third parties and
we provided financing or guaranteed third party financing to
those entities. Each of the entities owns one aircraft each. The
financing agreements are collateralized by the aircraft. Assets
in the amount of $152.4 million (2004) and
$164.5 million (2003) and liabilities in the amount of
$70.9 million (2004) and $79.2 million (2003) are
included in our Consolidated Balance Sheets and losses (gains)
in the amounts of $4.1 million (2004), ($0.1) million
(2003) and $0 (2002) are included in our Consolidated
Statements of Income. At December 31, 2003, when we adopted
FIN 46R, we recorded an $11.0 million after-tax charge
as a cumulative effect of an accounting charge related to these
entities. In addition, the adoption of FIN 46R required us
to consolidated synthetic lease transactions related to seven
aircraft. We recorded flight equipment of $462.7 million,
synthetic lease obligation of $464.2 million, a net
decrease in other liabilities of $3.9 million and an
after-tax gain of $2.4 million as a cumulative effect of an
accounting change in 2003 related to the synthetic lease
transactions. At December 31, 2004 these transactions had
expired and we had bought back the seven aircraft.

Other Comprehensive Income (Loss):We report comprehensive income or loss
in accordance with SFAS No. 130, Reporting
Comprehensive Income. Our other comprehensive income
(loss) reported in shareholders equity as Accumulated
other comprehensive income (loss) consists of gains and losses
associated with changes in fair value of derivatives designated
as cash flow hedges in accordance with SFAS 133 and
unrealized gains on marketable securities classified as
available-for-sale.

Guarantees:We
account for guarantees in accordance with FIN No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, including Indirect Guarantees of Indebtedness of
Others. The fair value of guarantees entered into after
December 31, 2002 are included in Accrued interest
and other payables on the 2004 and 2003 Consolidated
Balance Sheets.

Income
Taxes:The Company and its U.S.
subsidiaries are included in the consolidated federal income tax
return of AIG. The provision for federal income taxes is
calculated, generally on a separate return basis adjusted to
give recognition to the effects of net operating losses, foreign
tax credits and the benefit of the Foreign Sales Corporation
(FSC) and Extraterritorial Income Exclusion
(ETI) provisions of the Internal Revenue Code to the
extent they are currently realizable in AIGs consolidated
return. Income tax payments are made pursuant to a tax payment
allocation agreement whereby AIG credits or charges us for the
corresponding increase or decrease (not to exceed the separate
return basis calculation) in AIGs current taxes resulting
from our inclusion in AIGs consolidated tax return.
Intercompany payments are made when such taxes are due or tax
benefits are realized by AIG.

The Company and its U.S. subsidiaries are
included in the combined state unitary tax returns of AIG,
including California. We also file separate returns in certain
other states, as required. The provision for state income taxes
is calculated, generally on a separate return basis giving
effect to the AIG unitary rate and credits and charges allocated
to us by AIG, based upon the combined filings and the resultant
current tax payable.

The deferred tax liability is determined based on
the difference between the financial statement and tax basis of
assets and liabilities and is measured at the enacted tax rates
that will be in effect when these differences reverse. Deferred
tax expense is determined by the change in the liability for
deferred taxes

54



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note A  Summary of Significant
Accounting Policies (Continued)

(Liability Method). Current income
taxes on the balance sheet principally represent amounts
receivable or payable from/to AIG under the tax sharing
agreements.

Use of
Estimates:The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Reclassifications:Certain
amounts have been reclassified in the 2003 and 2002 financial
statements to conform to our 2004 presentation.

New Accounting
Pronouncement:In December 2004, the
FASB issued SFAS No. 123R Share-Based Payment
(SFAS 123R). This standard is a revision of
SFAS No. 123 Accounting for Stock-Based
Compensation and supersedes Accounting Principles Board
Opinion No. 25 Accounting for Stock Issued to
Employees, and its related implementation guidance.
SFAS 123R requires all share-based payments to employees,
including grants of employee stock options to be recognized in
the financial statements based on their fair values. The cost
will be recognized over the period during which an employee is
required to provide service in exchange for the options.
SFAS 123R, is effective for nonpublic entities the first
interim or annual reporting period that begins after
December 15, 2005. We participate in AIGs,
share-based payment programs. SFAS 123R is effective for
the quarter beginning July 1, 2005 for AIG and they will
allocate our share of the calculated costs to us. We estimate
the impact on our Consolidated Statement of Income for the year
ending December 31, 2005 to be $896.

Note B  Restatement

The following information describes the
corrections in accounting for certain derivatives transactions
and foreign currency transactions and for certain payments from
aircraft and engine manufacturers, together with the effect on
the Companys consolidated financial statements.

Derivative Instruments

ILFC enters into derivative instruments to hedge
interest rates and foreign currency risks. As part of the
previously announced restatement of the financial statements of
American International Group, Inc. (AIG),
ILFCs indirect parent corporation, AIG began an intensive
review of the books and records relating to a wide variety of
transactions entered into by AIG and its subsidiaries. During
the review of all hedge transactions, after ILFC had filed its
2004 Form 10-K and first quarter 2005 Form 10-Q,
deficiencies were identified related to ILFCs
documentation of hedge transactions and errors were identified
in the application of the proper accounting for derivative
related transactions under SFAS 133. The review identified:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Documentation deficiencies related to portions of
    Euro denominated debt that ILFC had designated as a hedge
    against future operating lease payments receivable denominated
    in Euros. The review revealed that the documentation related to
    these hedges was insufficient to meet the documentation criteria
    under SFAS 133 and it was concluded that ILFC could not
    apply hedge accounting to the transactions. The economics of the
    transactions are not affected.
|
| |  | Certain Euro denominated cash accounts associated
    with the aforementioned operating lease payments and certain
    foreign currency denominated debt required mark-to-spot
    treatment under SFAS No. 52, Foreign Currency
    Translation, which were not properly accounted for at the
    end of each quarter during the years 2004, 2003, 2002 and 2001.                                                                                                                           
|
| |  | Documentation deficiencies related to four
    commercial paper swaps where portions of ILFCs commercial
    paper program were swapped from floating into fixed interest
    rates. The review revealed                                                                                                                                                                                                                                                                                      

55



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




| |  |                                     
| |  | ------------------------------------
| |  | Note B  Restatement
    (Continued)

that the documentation related to these hedges
was insufficient to meet the documentation criteria under
SFAS 133 and it was concluded that ILFC could not apply
hedge accounting to the transactions. The economics of the
transactions are not affected.



| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Minor errors under SFAS 133 with respect to
    derivative instruments related to the reclassification to income
    from Accumulated other comprehensive income. The corrections
    will also affect derivative assets and liabilities and accrued
    interest.

Though the economics of the hedge transactions
are not affected, the corrections will significantly increase
inter-period volatility due to the non-qualification of hedge
accounting treatment under SFAS 133. Thus, the effect on
Net income, Retained earnings and Shareholders equity will
differ from period to period.

Certain Payments from Aircraft and Engine
Manufacturers

In the course of ILFCs review of its
application of SFAS 133, ILFC identified an error in its
accounting for certain payments received from aircraft and
engine manufacturers. Under arrangements with these
manufacturers, in certain circumstances the manufacturers
established notional accounts for the benefit of ILFC, to which
amounts were credited by the manufacturers in connection with
the purchase by and delivery to ILFC and the lease of aircraft.
Amounts credited to the notional accounts were used at
ILFCs direction to protect ILFC from certain events
including loss when airline customers of ILFC defaulted on lease
payment obligations, to provide lease subsidies and other
incentives to ILFC airline customers in connection with leases
of certain aircraft and to reduce ILFCs cost of aircraft
purchased.

Historically, ILFC recorded as revenues gross
lease receipts from customers who had received lease subsidies
from the notional accounts and amounts paid directly to ILFC
from the notional accounts in connection with lessee defaults.
Amounts recorded as revenue at the time they were disbursed to
ILFC or its lessees should have been recorded as a reduction of
the purchase price of the aircraft at the time of delivery.

56



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note B  Restatement
(Continued)


The restatement had the following effect on the
Companys consolidated balance sheets as of
December 31, 2004 and 2003 and consolidated statements of
income for the years ended December 31, 2004, 2003 and 2002.

|                                   |                                                          |          |   |            |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |           |  |  |   |           | 
|---------------------------------- | -------------------------------------------------------- | -------- | - | ---------- | - | -------- | - | ---------- | - | -------- | - | ---------- | - |  | - | ---------- | - |  | - | --------- |  |  | - | --------- | 
|                                   |                                                          |          |   |            |   |         
|                                   |                                                          | 2004     |   | 2003       |   | 2002    
|                                   |                                                          |          |   |            |   |         
|                                   |                                                          | As       |   | As         |   | As       |   | As         |   | As       |   | As        
|                                   |                                                          | Reported |   | Restated   |   | Reported |   | Restated   |   | Reported |   | Restated  
|                                   |                                                          |          |   |            |   |          |   |            |   |          |   |           
|Consolidated balance sheets:       |                                                          |          |   |            |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |           |  |  |   |          
|                                   | Cash                                                     |          | $ | 101,653    |   |          | $ | 99,747     |   |          | $ | 90,780     |   |  | $ | 102,241    |   |  |   |           |  |  |   |           | 
|                                   | Current income taxes receivable                          |          |   | 19,522     |   |          |   | 6,507      |   |          |   |            |   |  |   |            |   |  |   |           |  |  |   |           | 
|                                   | Flight equipment under operating leases                  |          |   | 37,380,712 |   |          |   | 36,580,296 |   |          |   | 34,034,724 |   |  |   | 33,379,645 |   |  |   |           |  |  |   |           | 
|                                   | Accumulated depreciation                                 |          |   | (6,300,071 | ) |          |   | (6,074,874 | ) |          |   | (5,370,706 | ) |  |   | (5,188,956 | ) |  |   |           |  |  |   |           | 
|                                   | Accrued interest, other receivables and other
    assets |          |   | 119,415    |   |          |   | 199,653    |   |          |   | 233,125    |   |  |   | 281,483    |   |  |   |           |  |  |   |           | 
|                                   | Derivative assets                                        |          |   | 1,210,908  |   |          |   | 1,191,602  |   |          |   |            |   |  |   |            |   |  |   |           |  |  |   |           | 
|                                   | Total assets                                             |          |   | 34,537,108 |   |          |   | 34,007,900 |   |          |   | 31,705,072 |   |  |   | 31,291,562 |   |  |   |           |  |  |   |           | 
|                                   | Current income taxes payable                             |          |   |            |   |          |   |            |   |          |   | 5,038      |   |  |   | 17,967     |   |  |   |           |  |  |   |           | 
|                                   | Foreign currency adjustment                              |          |   |            |   |          |   |            |   |          |   | 697,435    |   |  |   | 839,718    |   |  |   |           |  |  |   |           | 
|                                   | Deferred income taxes                                    |          |   | 2,825,661  |   |          |   | 2,630,118  |   |          |   | 2,562,568  |   |  |   | 2,353,458  |   |  |   |           |  |  |   |           | 
|                                   | Accumulated other comprehensive income (loss)            |          |   | (9,650     | ) |          |   | 22,825     |   |          |   | 5,442      |   |  |   | (27,928    | ) |  |   |           |  |  |   |           | 
|                                   | Retained earnings                                        |          |   | 4,339,715  |   |          |   | 3,973,575  |   |          |   | 3,877,137  |   |  |   | 3,550,895  |   |  |   |           |  |  |   |           | 
|                                   | Total shareholders equity                               |          |   | 5,663,602  |   |          |   | 5,329,937  |   |          |   | 5,216,116  |   |  |   | 4,856,504  |   |  |   |           |  |  |   |           | 
|                                  
|Consolidated statements of income: |                                                          |          |   |            |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |           |  |  |   |          
|                                   | Rental of flight equipment                               |          |   | 3,079,825  |   |          |   | 2,955,524  |   |          |   | 2,941,096  |   |  |   | 2,807,211  |   |  | $ | 2,677,876 |  |  | $ | 2,546,142 | 
|                                   | Flight equipment marketing                               |          |   | 76,356     |   |          |   | 77,664     |   |          |   | 46,435     |   |  |   | 28,988     |   |  |   | 66,315    |  |  |   | 48,454    | 
|                                   | Flight equipment marketing 
    securitization          |          |   | 25,295     |   |          |   | 32,854     |   |          |   | 17,886     |   |  |   | 23,245     |   |  |   |           |  |  |   |           | 
|                                   | Interest and other                                       |          |   | 111,910    |   |          |   | 93,844     |   |          |   | 48,516     |   |  |   | 17,907     |   |  |   | 104,718   |  |  |   | 64,655    | 
|                                   | Total revenues                                           |          |   | 3,293,386  |   |          |   | 3,159,886  |   |          |   | 3,053,933  |   |  |   | 2,877,351  |   |  |   | 2,848,909 |  |  |   | 2,659,251 | 
|                                   | Interest expense                                         |          |   | 965,167    |   |          |   | 942,527    |   |          |   | 944,580    |   |  |   | 919,961    |   |  |   | 846,353   |  |  |   | 866,853   | 
|                                   | Depreciation of flight equipment                         |          |   | 1,259,223  |   |          |   | 1,214,048  |   |          |   | 1,124,778  |   |  |   | 1,083,909  |   |  |   | 954,246   |  |  |   | 917,917   | 
|                                   | Selling, general and administrative                      |          |   | 120,942    |   |          |   | 116,956    |   |          |   | 78,412     |   |  |   | 76,780     |   |  |   | 88,872    |  |  |   | 86,879    | 
|                                   | Total expenses                                           |          |   | 2,563,580  |   |          |   | 2,491,779  |   |          |   | 2,303,665  |   |  |   | 2,236,545  |   |  |   | 2,055,606 |  |  |   | 2,037,784 | 
|                                   | Income before income taxes                               |          |   | 729,806    |   |          |   | 668,107    |   |          |   | 750,268    |   |  |   | 640,806    |   |  |   | 793,303   |  |  |   | 621,467   | 
|                                   | Provision for income taxes                               |          |   | 227,902    |   |          |   | 206,101    |   |          |   | 235,361    |   |  |   | 196,683    |   |  |   | 264,779   |  |  |   | 204,061   | 
|                                   | Net income (a)                                           |          |   | 501,904    |   |          |   | 462,006    |   |          |   | 506,265    |   |  |   | 435,481    |   |  |   | 528,524   |  |  |   | 417,406   | 



---



|    |  |                                                                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The increase (decrease) in net income for the
    years ended December 31, 2004, 2003 and 2002 as a result of
    the restatement for the derivative instruments was $5,374,
    $(3,170) and $(39,582), respectively, and for the
    manufacturers payments was $(45,272), $(67,614) and
    $(71,536), respectively.

ILFCs total operating, investing and
financing cash flows were unaffected by the restatement, except
for the mark-to-spot treatment of certain Euro denominated cash
accounts, as previously mentioned.

57



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note C  Notes Receivable

Notes receivable are primarily from the sale of
and collateralized by flight equipment and are summarized as
follows:

|                                                                     |             |      |         |         |  |   |         |        | 
|-------------------------------------------------------------------- | ----------- | ---- | ------- | ------- |  | - | ------- | ------ | 
|                                                                     |             | 2004 |         | 2003   
|                                                                     |             |      |         |        
|Fixed rate notes receivable due in varying
    installments to 2025: |             |      |         |         |  |   |         |       
|                                                                     | Below 6.00% |      | $       | 150,927 |  |   | $       | 74,490 | 
|                                                                     | 6% to 7.99% |      |         | 25,092  |  |   |         | 30,522 | 
|                                                                     | 8% to 9.99% |      |         | 36,254  |  |   |         | 41,695 | 
|                                                                     |             |      |         |         |  |   |         |       
|                                                                     |             | $    | 212,273 |         |  | $ | 146,707 |       
|                                                                     |             |      |         |         |  |   |         |       

Included above are notes receivable of $33,643
(2004) and $31,582 (2003) representing restructured lease
payments.

At December 31, 2004, the minimum future payments
on notes receivable are as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 31,721  | 
|2006       |  |   | 21,706  | 
|2007       |  |   | 83,590  | 
|2008       |  |   | 21,415  | 
|2009       |  |   | 8,244   | 
|Thereafter |  |   | 45,597  | 
|           |  |   |         | 
|           |  | $ | 212,273 | 
|           |  |   |         | 

Note D  Net Investment in Finance
Leases

The following lists the components of the net
investment in finance leases:

|                                                                        |  |      |          |      |  |   |          |  
|----------------------------------------------------------------------- |  | ---- | -------- | ---- |  | - | -------- | -
|                                                                        |  | 2004 |          | 2003
|                                                                        |  |      |          |     
|Total lease payments to be received                                     |  | $    | 406,112  |      |  | $ | 425,920  |  
|Estimated residual values of leased flight
    equipment (unguaranteed) |  |      | 132,558  |      |  |   | 115,259  |  
|Less: Unearned income                                                   |  |      | (231,204 | )    |  |   | (237,806 | )
|                                                                        |  |      |          |      |  |   |          |  
|Net investment in finance leases                                        |  | $    | 307,466  |      |  | $ | 303,373  |  
|                                                                        |  |      |          |      |  |   |          |  

At December 31, 2004, minimum future lease
payments on finance leases are as follows:

|                                            |  |   |         | 
|------------------------------------------- |  | - | ------- | 
|2005                                        |  | $ | 31,904  | 
|2006                                        |  |   | 31,904  | 
|2007                                        |  |   | 31,904  | 
|2008                                        |  |   | 31,904  | 
|2009                                        |  |   | 31,904  | 
|Thereafter                                  |  |   | 246,592 | 
|                                            |  |   |         | 
|Total minimum lease payments to be received |  | $ | 406,112 | 
|                                            |  |   |         | 

58



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note E  Investments

Investments consist of the following:

|                                    |                                                                             |      |        |       |   |   |        |        | 
|----------------------------------- | --------------------------------------------------------------------------- | ---- | ------ | ----- | - | - | ------ | ------ | 
|                                    |                                                                             | 2004 |        | 2003 
|                                    |                                                                             |      |        |      
|Available-for-sale securities:      |                                                                             |      |        |       |   |   |        |       
|                                    | Cost basis of marketable securities                                         |      | $      | 4,814 |   |   | $      | 4,975  | 
|                                    | Gross unrealized gains                                                      |      |        | 4,409 |   |   |        |       | 
|                                    | Gross unrealized losses                                                     |      |        |      |   |   |        |       | 
|                                    |                                                                             |      |        |       |   |   |        |       
|                                    | Fair Value                                                                  |      |        | 9,223 |   |   |        | 4,975  | 
|Cost and equity method investments: |                                                                             |      |        |       |   |   |        |       
|                                    | ATA Airlines                                                                |      |        | 1,100 |   |   |        | 30,000 | 
|                                    | 21937, LLC                                                                  |      |        | 7,500 |   |   |        | 8,689  | 
|                                    | ILTU Ireland                                                                |      |        | 5,169 |   |   |        | 5,957  | 
|                                    | Other investments, at cost including negative
    equity investment in VIEs |      |        | (13   | ) |   |        | 15     | 
|                                    |                                                                             |      |        |       |   |   |        |       
|                                    |                                                                             | $    | 22,979 |       |   | $ | 49,636 |       
|                                    |                                                                             |      |        |       |   |   |        |       

Marketable Securities

Available
for Sale Securities:

Our investments in marketable securities are
classified as available-for-sale. These investments are stated
at fair value with any unrealized holding gains or losses, net
of tax, included in Other comprehensive income (loss) until
realized. Unrealized losses are charged against net income when
a decline in value is determined to be other than temporary. The
determination that a security has incurred an other-than
temporary decline in value and the amount of any loss
recognition requires managements judgement and continual
review of our investments. We recorded $661 (2004), $0 (2003)
and $4,807 (2002) of charges for other-than-temporary declines.

Other Equity Investments

Cost
Method:

We recorded impairment losses of $28,900 in our
investment in ATA Airlines (ATA) non-voting
preferred stock after ATA filed for bankruptcy on
October 26, 2004 to reduce the carrying value to an
estimated realizable value. The securities are not publicly
traded and were carried at cost until the impairment was
recorded.

Equity
Method:

In 2001, we contributed an aircraft with a net
book value of $11,372 for a 99% interest in 21937, LLC, a joint
venture that leases the aircraft to a third party. This
investment is not consolidated due to our lack of effective
control in the joint venture.

In 2000, we invested $5,000 for a 50% interest in
ILTU Ireland (ILTU), an Irish corporation. ILTU
presently owns one Boeing 767-300 on lease to an airline.
We have guaranteed a loan from a related party to ILTU (See
Note L  Commitments and Contingencies).

59



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note F  Debt Financing and Capital
Lease Obligations

Debt financing and capital lease obligations are
comprised of the following:

|                                                 |  |      |            |      |  |   |            |  
|------------------------------------------------ |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                 |  | 2004 |            | 2003
|                                                 |  |      |            |     
|Commercial Paper                                 |  | $    | 2,675,247  |      |  | $ | 1,575,957  |  
|Public Term Debt with Single Maturities          |  |      | 11,544,575 |      |  |   | 10,663,275 |  
|Public Medium-Term Notes with Varying Maturities |  |      | 5,972,171  |      |  |   | 5,960,236  |  
|Bank Term Debt                                   |  |      | 2,973,525  |      |  |   | 3,070,120  |  
|Capital Lease Obligations                        |  |      | 39,580     |      |  |   | 143,254    |  
|Synthetic Lease Obligations                      |  |      |           |      |  |   | 464,222    |  
|Less: Deferred Debt Discount                     |  |      | (29,502    | )    |  |   | (24,321    | )
|                                                 |  |      |            |      |  |   |            |  
|                                                 |  | $    | 23,175,596 |      |  | $ | 21,852,743 |  
|                                                 |  |      |            |      |  |   |            |  

The above amounts represent the anticipated
settlement of our outstanding debt obligations. Certain
adjustments required to present currently outstanding debt
obligations have been recorded and presented separately on the
face of the balance sheet, including adjustments related to
foreign currency and interest rate hedging activities.

Commercial
Paper

We have a $4.8 billion Commercial Paper
Program. Under this program, we may borrow in minimum increments
of $100 thousand for a period from one day to 270 days. The
weighted average interest rate of our outstanding commercial
paper was 2.34%, 1.07% and 1.46% at December 31, 2004, 2003
and 2002, respectively.

Bank
Commitments

As of December 31, 2004, we had committed
revolving credit agreements with 30 banks aggregating
$6.0 billion, including a $2.0 billion five-year
tranche that expires in October of 2009 and a $4.0 billion
364-day tranche that expires in October of 2005, with a one-year
term out option. These revolving loans and lines of credit
principally provide for interest rates that vary according to
the pricing option in effect at the time of borrowing. Pricing
options include prime, a range from .25% over LIBOR to .45% over
LIBOR based upon utilization, or a rate determined by a
competitive bid process with the banks. The revolving loans and
lines of credit are subject to facility fees of up to .10% of
amounts available. These facilities are used primarily as backup
for maturing debt and other obligations. We expect to replace or
extend these credit agreements on or prior to their expiration
dates. We had not drawn any funds under our committed revolving
loans and lines of credit at December 31, 2004 and 2003,
respectively.

60



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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note F  Debt Financing and Capital
Lease Obligations (Continued)


Public
Debt

As of December 31, 2004, we had two effective
U.S. shelf registration statements and a Euro Note Programme:

|                                                                                                                                                           |  |          |           |                   |  |   |           | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | --------- | ----------------- |  | - | --------- | 
|                                                                                                                                                           |  | Maximum  |           | Sold as of       
|                                                                                                                                                           |  | Offering |           | December 31, 2004
|                                                                                                                                                           |  |          |           |                  
|Registration statement dated December 20,
    2002 (including $2.88 billion Medium-Term Note program and
    $1.0 billion Retail Medium-Term Note Program) |  | $        | 6,080,000 | (a)               |  | $ | 5,593,000 | 
|Registration statement dated December 28,
    2004 (including $2.0 billion Medium-Term Note program)                                                       |  |          | 7,045,000 | (b)               |  |   |          | 
|Euro Medium-Term Note Programme dated May
    2004(c)(d)                                                                                                   |  |          | 7,000,000 |                   |  |   | 4,475,000 | 






|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes $1.08 billion, which was
    incorporated into the registration statement from a prior
    registration statement, increasing the maximum offering from
    $5.0 billion to $6.08 billion.  
|   
|(b) | Includes $2.045 billion, which was
    incorporated into the registration statement from a prior
    registration statement, increasing the maximum offering from
    $5.0 billion to $7.045 billion.
|   
|(c) | We have hedged the foreign currency risk of the
    notes through operating lease payments or derivatives.                                                                                           
|   
|(d) | This is a perpetual program. As a bond issue
    matures, the principal amount of that bond becomes available for
    new issuances under the program.                                               

61



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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note F  Debt Financing and Capital
Lease Obligations (Continued)


Public
Term Debt with Single Maturities

We have issued the following Notes which provide
for a single principal payment at maturity and cannot be
redeemed prior to maturity:

|                                                                               |  |           |  |      |            |      |  |   |            | 
|------------------------------------------------------------------------------ |  | --------- |  | ---- | ---------- | ---- |  | - | ---------- | 
|                                                                               |  | Initial   |  |      |            |     
|                                                                               |  | Term      |  | 2004 |            | 2003
|                                                                               |  |           |  |      |            |     
|Floating Rate Notes due February 13, 2004
    (swapped to 5.586%)              |  | 3 years   |  |      |            |      |  | $ | 300,000    | 
|Floating Rate Notes due April 1, 2004 (swapped to
    5.48%)                   |  | 3 years   |  |      |            |      |  |   | 250,000    | 
|5.25% Notes due May 3, 2004                                                    |  | 3 years   |  |      |            |      |  |   | 200,000    | 
|5 1/8% Notes due August 1, 2004                                                |  | 3 years   |  |      |            |      |  |   | 300,000    | 
|Floating Rate Notes due October 18, 2004 (swapped
    to 3.315%)               |  | 3 years   |  |      |            |      |  |   | 150,000    | 
|8 3/8% Notes due December 15, 2004                                             |  | 10 years  |  |      |            |      |  |   | 100,000    | 
|Floating Rate Notes due January 13, 2005                                       |  | 2 years   |  | $    | 625,000    |      |  |   | 625,000    | 
|4.375% Notes due December 15, 2005                                             |  | 3 years   |  |      | 160,000    |      |  |   | 160,000    | 
|2.95% Notes due May 23, 2006                                                   |  | 3 years   |  |      | 325,000    |      |  |   | 325,000    | 
|5.75% Notes due October 15, 2006                                               |  | 5 years   |  |      | 700,000    |      |  |   | 700,000    | 
|5.75% Notes due February 15, 2007                                              |  | 5 years   |  |      | 500,000    |      |  |   | 500,000    | 
|5.625% Notes due June 1, 2007                                                  |  | 5 years   |  |      | 900,000    |      |  |   | 900,000    | 
|3.75% Notes due Aug 1, 2007                                                    |  | 4 years   |  |      | 250,000    |      |  |   | 250,000    | 
|5.491% Notes due November 30, 2007                                             |  | 5 years   |  |      | 110,000    |      |  |   | 110,000    | 
|4.75% Notes due February 15, 2008                                              |  | 5 years   |  |      | 250,000    |      |  |   | 250,000    | 
|4.50% Notes due May 1, 2008                                                    |  | 5 years   |  |      | 400,000    |      |  |   | 400,000    | 
|4.35% Notes due September 15, 2008                                             |  | 5 years   |  |      | 400,000    |      |  |   | 400,000    | 
|6 3/8% Notes due March 15, 2009                                                |  | 7 years   |  |      | 750,000    |      |  |   | 750,000    | 
|3.50% Notes due April 1, 2009                                                  |  | 5 years   |  |      | 600,000    |      |  |   |            | 
|4.75% Notes due July 1, 2009                                                   |  | 5 years   |  |      | 500,000    |      |  |   |            | 
|5.875% Notes due May 13, 2013                                                  |  | 10 years  |  |      | 600,000    |      |  |   | 600,000    | 
|Foreign Currency Denominated Medium Term Notes:                                |  |           |  |      |            |      |  |   |            | 
|4.125% Euro Notes due July 12, 2004
    (partially swapped to US$ at 6.375%)   |  | 5 years   |  |      |            |      |  |   | 563,450    | 
|4.00% Euro Notes due April 25, 2005 (swapped
    to US$ at 5.4714%)            |  | 3 years   |  |      | 666,375    |      |  |   | 666,375    | 
|Floating Rate Euro Notes due June 26, 2006
    (swapped to US$)                |  | 3 years   |  |      | 702,600    |      |  |   | 702,600    | 
|6.00% Euro Notes due October 24, 2007
    (partially swapped to US$ at 6.398%) |  | 5 years   |  |      | 444,250    |      |  |   | 444,250    | 
|4.125% Euro Notes due October 9, 2008
    (swapped to US$ at 4.225%)           |  | 5 years   |  |      | 584,900    |      |  |   | 584,900    | 
|Floating Rate Euro Notes due November 12,
    2008 (swapped to US$)            |  | 5.5 years |  |      | 912,750    |      |  |   |            | 
|6.625% Sterling Notes due December 7, 2009
    (swapped to US$ at 6.9326%)     |  | 7 years   |  |      | 431,700    |      |  |   | 431,700    | 
|Floating Rate Euro Notes due July 6, 2010
    (swapped to US$)                 |  | 6 years   |  |      | 732,000    |      |  |   |            | 
|                                                                               |  |           |  |      |            |      |  |   |            | 
|                                                                               |  |           |  | $    | 11,544,575 |      |  | $ | 10,663,275 | 
|                                                                               |  |           |  |      |            |      |  |   |            | 

We have a Euro Medium-Term Note Program for
$7.0 billion, under which $4.475 billion
(3.7 billion
and £300 million) in notes were outstanding at
December 31, 2004. The program is perpetual. As a bond
issue matures, the principal amount of that bond becomes
available for new issuances under the program. We have
eliminated the currency exposure arising from the notes by
either hedging the notes through swaps or through the offset
provided by operating lease payments denominated in Euros. We
translate the debt into U.S. Dollars using current exchange
rates. The foreign exchange adjustment for the foreign currency
denominated notes was $1,215,809 (2004) and $697,435 (2003).

62



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note F  Debt Financing and Capital
Lease Obligations (Continued)


Public
Medium-Term Notes with Varying Maturities

At December 31, 2004 our Medium-Term Notes
bear interest at rates varying between 2.25% and 8.26%, with
maturities from 2005 through 2011. The Medium-Term Notes provide
for a single principal payment at the maturity of the respective
note and cannot be redeemed prior to maturity.

Bank
Term Debt

In January 1999, we entered into an Export Credit
Facility for up to a maximum of $4.3 billion, for up to 75
aircraft to be delivered from 1999 through 2001. We had the
right, but were not required, to use the facility to fund 85% of
each aircrafts purchase price. This facility is guaranteed
by various European Export Credit Agencies. The interest rates
varies from 5.753% to 5.898% depending on the delivery date of
the aircraft. At December 31, 2004, we had financed
62 aircraft using $2.8 billion and had
$1.5 billion outstanding debt under this facility. We have
collateralized the debt by a pledge of the shares of a
subsidiary which holds title to the aircraft financed under this
facility. The flight equipment associated with the obligations,
included in Flight equipment under operating leases
on the Consolidated Balance Sheets, had a net book value of
$2.9 billion (2004) and $3.0 billion (2003).

During 2003, we entered into various bank
financings for a total funded amount of $1.3 billion. The
financings mature through 2009. One tranche of one of the loans
totaling $410 million was funded in Japanese yen and
swapped to U.S. Dollars. The interest rates are LIBOR based
with spreads ranging from 0.375% to 1.625% at December 31,
2004.

In May 2004, we entered into an Export Credit
Facility for up to a maximum of $2.64 billion, for Airbus
aircraft to be delivered in 2004 and 2005. The facility will be
used to fund 85% of each aircrafts purchase price. This
facility becomes available as the various European Export Credit
Agencies provide their guarantees for aircraft based on a
six-month forward-looking calendar. The financing is for a
ten-year fully amortizing loan per aircraft at an interest rate
determined through a bid process. We have collateralized the
debt by a pledge of the shares of a subsidiary which holds title
to the aircraft financed under this facility. At
December 31, 2004, $201.6 million was outstanding
under this facility.

Capital
Lease Obligations

Our capital lease obligations provide 10 year,
fully amortizing debt in two interest rate tranches. The first
62.5% of the original debt is at a fixed rate of 6.55%. The
second 22.5% of the original debt is at fixed rates varying
between 6.18% and 6.89%. These two tranches are guaranteed by
various European Export Credit Agencies. We prepaid the
remaining 15% of the original financed amount. The remaining
outstanding debt matures through 2005. The flight equipment
associated with the obligations, and included in Flight
equipment under operating leases on the Consolidated
Balance Sheets, had a net book value of $507,270 (2004) and
$824,436 (2003).

The following is a schedule by years of future
minimum lease payments under capitalized leases together with
the present value of the net minimum lease payments as of
December 31, 2004:

|                                            |  |   |        |  
|------------------------------------------- |  | - | ------ | -
|2005                                        |  | $ | 40,896 |  
|                                            |  |   |        |  
|Total minimum lease payments                |  |   | 40,896 |  
|Less amount representing interest           |  |   | (1,316 | )
|                                            |  |   |        |  
|Present value of net minimum lease payments |  | $ | 39,580 |  
|                                            |  |   |        |  

63



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note F  Debt Financing and Capital
Lease Obligations (Continued)


Synthetic
Lease Obligations

In 1997, through a subsidiary, we had entered
into sale-leaseback transactions providing us proceeds in the
amount of $601.9 million relating to seven aircraft. The
transactions resulted in the sale and leaseback of these
aircraft under one year operating leases with six one year
extension options for a total of seven years for each aircraft.
We have not recorded any gains related to the transactions. We
had the option to either buy back the aircraft or redeliver the
aircraft for a fee to the lessor at the end of any lease period.
The lease rates equated to fixed principal amortization and
floating interest payments based on LIBOR or commercial paper
pricing. We consolidated the transaction at December 31,
2003 in accordance with FIN 46R and amortized the principal
portion of the debt with the lease payments during 2004. At
December 31, 2004 all leases had expired and we had bought
back the remaining seven aircraft.

Maturities of debt financing and capital lease
obligations (excluding commercial paper and deferred debt
discount) at December 31, 2004 are as follows:

|           |  |   |            | 
|---------- |  | - | ---------- | 
|2005       |  | $ | 3,808,602  | 
|2006       |  |   | 3,680,568  | 
|2007       |  |   | 3,575,952  | 
|2008       |  |   | 3,764,930  | 
|2009       |  |   | 3,666,965  | 
|Thereafter |  |   | 2,032,834  | 
|           |  |   |            | 
|           |  | $ | 20,529,851 | 
|           |  |   |            | 

Other

Under the most restrictive provisions of the
related borrowings, consolidated retained earnings at
December 31, 2004, in the amount of $1.6 billion, are
unrestricted as to payment of dividends based on consolidated
tangible net worth requirements.

We have entered into various debt and derivative
transactions with AIG Financial Products Corporation
(AIGFP), a related party. We executed $1,780,582 and
$1,897,500 notional amount of derivative instruments with AIGFP
during 2004 and 2003, respectively. See Note M  Derivative
Financial Instruments. Also, see Note B 
Restatement for a discussion of the derivatives instruments
restatement.

Note G  Shareholders
Equity

Preferred
Stock

Our certificate of incorporation, as amended,
provides for up to 20,000,000 shares of preferred stock
that may be issued in one or more series and with such stated
value and terms as may be determined by the Board of Directors.

Series
A Preferred Stock

In December 2001, we issued 40 shares of
Series A preferred shares with a liquidation value of
$10 million per share. AIG, as holder of the Series A
Preferred Stock, was entitled to quarterly dividends at a rate
of 5% per annum. The Series A Preferred Stock was
nonconvertible, and was redeemable at our option. In
September 2002, pursuant to an agreement with the holder,
we cancelled the outstanding shares of Series A preferred
shares. We issued 3,951,398 shares of Common Stock for the value
of the cancelled Series A preferred shares.

64



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note G  Shareholders Equity
(Continued)


Market
Auction Preferred Stock

The Market Auction Preferred Stock
(MAPS) have a liquidation value of $100 thousand per
share and are not convertible. The dividend rate, other than the
initial rate, for each dividend period for each series is reset
approximately every 7 weeks (49 days) on the basis of
orders placed in an auction. We repurchased Series C, D, F,
G and H of the MAPS in the fourth quarter of 2001 and
Series E in the first and second quarters of 2002. We paid
the liquidation values for the shares and no gain or loss was
recognized. During 2001 we extended the Series A MAPS to
5 years at a dividend rate of 5.90%. At December 31,
2004, the dividend rate for Series B MAPS was 1.87%.

Common
Stock

On September 24, 2002, we issued 3,951,398
shares of Common Stock to AIG in exchange for the value of the
cancelled Series A preferred shares. On December 4,
2002, the Company issued and sold 2,428,599 shares of Common
Stock to AIG for proceeds of $250,000.

Other
Comprehensive Income

Other Comprehensive Income consists of fair value
adjustments of cash flow derivative instruments and unrealized
gains on marketable securities classified as
available-for-sale. The cash flow derivatives were
adjusted using market values obtained from a related party
broker-dealer. The marketable securities were adjusted using
quoted market prices.

Note H  Rental Income

Minimum future rentals on non-cancelable
operating leases and subleases of flight equipment which have
been delivered at December 31, 2004 are shown below. This
does not include the rentals to be received from lessees as a
result of payments made to them directly by the aircraft
manufacturers.

|           |  |            |            | 
|---------- |  | ---------- | ---------- | 
|Year Ended |  | (Restated)
|           |  |           
|2005       |  | $          | 2,684,178  | 
|2006       |  |            | 2,361,805  | 
|2007       |  |            | 1,984,552  | 
|2008       |  |            | 1,586,708  | 
|2009       |  |            | 1,227,518  | 
|Thereafter |  |            | 2,910,166  | 
|           |  |            |            | 
|           |  | $          | 12,754,927 | 
|           |  |            |            | 

Additional rentals we earned based on the
lessees usage aggregated $360,997 (2004), $289,405 (2003),
and $249,503 (2002). Flight equipment is leased, under operating
leases, with remaining terms ranging from one to 17 years.

Note I  Flight Equipment Rent and
Off Balance Sheet Arrangements

During 1995, 1996 and 1997, through subsidiaries,
we entered into sale-leaseback transactions providing proceeds
to us in the amounts of $412,626, $507,600 and $601,860,
respectively, each relating to seven aircraft. The transactions
resulted in the sale and leaseback of these aircraft under
one-year operating leases, each with six one-year extension
options for a total of seven years for each aircraft. We
repurchased three aircraft before the lease terminated, which
were sold to third parties, and repurchased the remaining
eighteen

65



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note I  Flight Equipment Rent and
Off Balance Sheet Arrangements (Continued)

aircraft when the leases expired in December
2002 and September 2003 and 2004. The lease rates equated to
fixed principal amortization and floating interest payments
based on LIBOR or commercial paper pricing. We adopted
FIN 46 during the financial year ended December 31,
2003 and determined that the entity related to the remaining
sale-leaseback transaction was a VIE in which we were a primary
beneficiary as defined by FIN 46R. As a result, we
consolidated the remaining entity at December 31, 2003 and
ceased to record rental expense, recorded flight equipment of
$462.7 million, synthetic lease obligations in the amount
of $464.2 million, a net decrease in other liabilities of
$3.9 million and an after tax gain of $2.4 million as
a cumulative effect of accounting change.

Note J  Income Taxes
(Restated)

The provision (benefit) for income taxes is
comprised of the following:

|             |            |            |         |            |   |            |         |         |   |   |          |          |  
|------------ | ---------- | ---------- | ------- | ---------- | - | ---------- | ------- | ------- | - | - | -------- | -------- | -
|             |            | 2004       |         | 2003       |   | 2002      
|             |            | (Restated) |         | (Restated) |   | (Restated)
|             |            |            |         |            |   |           
|Current:     |            |            |         |            |   |            |         |         |   |   |          |         
|             | Federal(a) |            | $       | (43,912    | ) |            | $       | (5,521  | ) |   | $        | (164,428 | )
|             | State      |            |         | 7          |   |            |         | 746     |   |   |          | (1,506   | )
|             | Foreign    |            |         | 675        |   |            |         | 993     |   |   |          | 1,145    |  
|             |            |            |         |            |   |            |         |         |   |   |          |         
|             |            |            | (43,230 | )          |   |            | (3,782  | )       |   |   | (164,789 | )       
|Deferred(b): |            |            |         |            |   |            |         |         |   |   |          |         
|             | Federal    |            |         | 244,212    |   |            |         | 196,276 |   |   |          | 361,919  |  
|             | State(c)   |            |         | 5,119      |   |            |         | 4,189   |   |   |          | 6,931    |  
|             |            |            |         |            |   |            |         |         |   |   |          |         
|             |            |            | 249,331 |            |   |            | 200,465 |         |   |   | 368,850  |         
|             |            |            |         |            |   |            |         |         |   |   |          |         
|             |            | $          | 206,101 |            |   | $          | 196,683 |         |   | $ | 204,061  |         
|             |            |            |         |            |   |            |         |         |   |   |          |         




|    |                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Including U.S. tax on foreign income                                                                                                                                                                           
|   
|(b) | Deferred taxes were also provided (charged) to
    other comprehensive income of $(27,329) (2004), $(32,223) (2003)
    and $25,634 (2002) and for cumulative effect of accounting
    change of $4,653 (2003).
|   
|(c) | Includes charge of $564 (2004) for revaluation of
    state deferred taxes as a result of a change in our California
    apportionment factor.                                                                 

66



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note J  Income Taxes (Restated)
(Continued)


The deferred tax liability consists of the
following deferred tax liabilities (assets):

|                                                                                              |  |            |           |            |  |   |           |  
|--------------------------------------------------------------------------------------------- |  | ---------- | --------- | ---------- |  | - | --------- | -
|                                                                                              |  | 2004       |           | 2003      
|                                                                                              |  | (Restated) |           | (Restated)
|                                                                                              |  |            |           |           
|Accelerated depreciation on flight equipment                                                  |  | $          | 2,765,975 |            |  | $ | 2,472,000 |  
|Excess of state income taxes not currently
    deductible
    for Federal income tax purposes |  |            | (12,114   | )          |  |   | (10,260   | )
|Indirect payments from manufacturers                                                          |  |            | 8,207     |            |  |   | 35,890    |  
|Provision for overhauls                                                                       |  |            | (24,097   | )          |  |   | (24,464   | )
|Capitalized overhauls                                                                         |  |            | (32,360   | )          |  |   | (33,779   | )
|Rentals received in advance                                                                   |  |            | (61,931   | )          |  |   | (56,775   | )
|Straight line rents                                                                           |  |            | 20,486    |            |  |   | 23,306    |  
|Investments                                                                                   |  |            | (6,965    | )          |  |   | 46        |  
|Derivatives                                                                                   |  |            | (21,518   | )          |  |   | (24,469   | )
|Other comprehensive income/loss                                                               |  |            | 12,291    |            |  |   | (15,039   | )
|Other                                                                                         |  |            | (17,856   | )          |  |   | (12,998   | )
|                                                                                              |  |            |           |            |  |   |           |  
|                                                                                              |  | $          | 2,630,118 |            |  | $ | 2,353,458 |  
|                                                                                              |  |            |           |            |  |   |           |  

A reconciliation of the computed expected total
provision for income taxes to the amount recorded is as follows:

|                                                                  |  |            |         |            |  |            |         |   |  |   |         |  
|----------------------------------------------------------------- |  | ---------- | ------- | ---------- |  | ---------- | ------- | - |  | - | ------- | -
|                                                                  |  | 2004       |         | 2003       |  | 2002      
|                                                                  |  | (Restated) |         | (Restated) |  | (Restated)
|                                                                  |  |            |         |            |  |           
|Computed expected provision based upon a federal
    rate of 35%  |  | $          | 233,838 |            |  | $          | 224,282 |   |  | $ | 217,513 |  
|State income taxes, net of Federal income taxes                   |  |            | 3,332   |            |  |            | 3,208   |   |  |   | 3,526   |  
|Foreign sales corporation and extraterritorial
    income benefit |  |            | (30,979 | )          |  |            | (29,598 | ) |  |   | (18,517 | )
|Foreign taxes(a)                                                  |  |            | 721     |            |  |            | (1,242  | ) |  |   | 2,564   |  
|Other                                                             |  |            | (811    | )          |  |            | 33      |   |  |   | (1,025  | )
|                                                                  |  |            |         |            |  |            |         |   |  |   |         |  
|                                                                  |  | $          | 206,101 |            |  | $          | 196,683 |   |  | $ | 204,061 |  
|                                                                  |  |            |         |            |  |            |         |   |  |   |         |  




| |     |                                                                                 
| | --- | --------------------------------------------------------------------------------
| | (a) | Includes realized foreign tax credits in 2003 for
    taxes paid in prior years.

During 2002, we settled an open audit issue with
the Internal Revenue Service which required us to capitalize for
tax purposes certain overhaul reimbursements made between 1991
and 2001. The adjustment had no impact on the total provision
but required us to establish a current tax liability and a
corresponding deferred tax asset of $25,663 in 2002. This amount
is reflected in our 2002 current and deferred provision.

Federal tax benefits provided by the
Extraterritorial Income Exclusion (ETI) and the
Foreign Sales Corporation (FSC) will not be
available after 2006. In October 2004, Congress passed the
American Jobs Creation Act of 2004, repealing the corporate
export tax benefits under the ETI, after the World Trade
Organization ruled the export subsidies were illegal. Under the
act, ETI export tax benefits for corporations would be phased
out in 2005 and 2006 and cease to exist for the year 2007.
Therefore, we expect our effective tax rate to rise over the
next two years to a rate more consistent with the
expected statutory rate as these benefits are phased
out.

In 2002 and 2003 we participated in certain tax
planning activities with our parent, AIG and related entities,
which provided certain tax and other benefits to the
AIG consolidated group. As a result of our participation in
these activities, AIG shared a portion of the tax benefits of
these activities attributable to us

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note J  Income Taxes (Restated)
(Continued)


which aggregated $245 million. We are
required to repay these tax benefits to AIG in 2007 and 2009.
The liability is recorded in Tax benefit sharing payable
to AIG in the Consolidated Balance Sheet.

Note K  Other Information
(Restated)

Concentration
of Credit Risk

We lease and sell aircraft to airlines and others
throughout the world. The lease receivables and notes receivable
are from entities located throughout the world. We generally
obtain deposits on leases and obtain collateral in flight
equipment on notes receivable. We have one customer, Air France
($309,500 or 10.5%), which accounted for 10% or more of Rental
of flight equipment revenue during 2004.

Segment
Information

We operate within one industry: the leasing,
sales and management of flight equipment.

Revenues include rentals of flight equipment to
foreign airlines of $2,662,182 (2004), $2,497,085 (2003) and
$2,192,228 (2002). Lease revenues from the rental of flight
equipment have been reduced by payments received directly by us
or by our customers from the aircraft and engine manufacturers.

The following table sets forth the dollar amount
and percentage of total rental revenues attributable to the
indicated geographic areas based on each airlines
principal place of business for the years indicated:

|                                  |  |            |           |            |  |            |      |   |  |        |           |   |  |  |      |   |  |   |           |  |  |  |      |  
|--------------------------------- |  | ---------- | --------- | ---------- |  | ---------- | ---- | - |  | ------ | --------- | - |  |  | ---- | - |  | - | --------- |  |  |  | ---- | -
|                                  |  |            |           |            |  |           
|                                  |  | 2004       |           | 2003       |  | 2002      
|                                  |  | (Restated) |           | (Restated) |  | (Restated)
|                                  |  |            |           |            |  |           
|                                  |  | Amount     |           | %          |  | Amount     |      | % |  | Amount |           | %
|                                  |  |            |           |            |  |            |      |   |  |        |           |  
|Europe                            |  | $          | 1,432,441 |            |  |            | 48.5 | % |  | $      | 1,315,851 |   |  |  | 46.9 | % |  | $ | 1,147,461 |  |  |  | 45.1 | %
|Asia/Pacific                      |  |            | 689,201   |            |  |            | 23.3 |   |  |        | 661,956   |   |  |  | 23.6 |   |  |   | 586,183   |  |  |  | 23.0 |  
|United States and Canada          |  |            | 382,090   |            |  |            | 12.9 |   |  |        | 424,457   |   |  |  | 15.0 |   |  |   | 461,762   |  |  |  | 18.1 |  
|Central, South America and Mexico |  |            | 208,622   |            |  |            | 7.1  |   |  |        | 221,067   |   |  |  | 7.9  |   |  |   | 199,746   |  |  |  | 7.9  |  
|Africa and the Middle East        |  |            | 243,170   |            |  |            | 8.2  |   |  |        | 183,880   |   |  |  | 6.6  |   |  |   | 150,990   |  |  |  | 5.9  |  
|                                  |  |            |           |            |  |            |      |   |  |        |           |   |  |  |      |   |  |   |           |  |  |  |      |  
|                                  |  | $          | 2,955,524 |            |  |            | 100  | % |  | $      | 2,807,211 |   |  |  | 100  | % |  | $ | 2,546,142 |  |  |  | 100  | %
|                                  |  |            |           |            |  |            |      |   |  |        |           |   |  |  |      |   |  |   |           |  |  |  |      |  

The following table sets forth revenue
attributable to individual countries representing at least 10%
of total revenue based on each airlines principal place of
business for the years indicated:

|               |  |            |         |            |  |            |      |   |  |        |         |   |  |  |      |   |  |   |         |  |  |  |      |  
|-------------- |  | ---------- | ------- | ---------- |  | ---------- | ---- | - |  | ------ | ------- | - |  |  | ---- | - |  | - | ------- |  |  |  | ---- | -
|               |  |            |         |            |  |           
|               |  | 2004       |         | 2003       |  | 2002      
|               |  | (Restated) |         | (Restated) |  | (Restated)
|               |  |            |         |            |  |           
|               |  | Amount     |         | %          |  | Amount     |      | % |  | Amount |         | %
|               |  |            |         |            |  |            |      |   |  |        |         |  
|France         |  | $          | 351,394 |            |  |            | 11.9 | % |  | $      | 326,010 |   |  |  | 11.6 | % |  | $ |        |  |  |  |     | %
|China          |  |            | 357,512 |            |  |            | 12.1 |   |  |        | 308,204 |   |  |  | 11.0 |   |  |   | 278,464 |  |  |  | 10.9 |  
|United States  |  |            |        |            |  |            |     |   |  |        | 310,126 |   |  |  | 11.0 |   |  |   | 354,912 |  |  |  | 13.9 |  
|United Kingdom |  |            |        |            |  |            |     |   |  |        |        |   |  |  |     |   |  |   | 272,339 |  |  |  | 10.7 |  

Currency
Risk

We attempt to minimize our currency and exchange
risks by negotiating most of our aircraft leases in
U.S. Dollars. Some of our leases, however, are negotiated
in Euros to meet the needs of a growing number of airlines.
These Euro denominated leases are partly used as an economic
hedge against $40.0 million of our Euro denominated debt
obligations. We bear the risk of receiving less U.S. Dollar
rental revenue and incurring

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note K  Other Information
(Restated) (Continued)


future currency losses on cash held in Euros if
the value of the Euro deteriorates against the U.S. dollar.
Foreign currency translation gain (loss) has not been material
to our consolidated financial statements to date.

Employee
Benefit Plans

Our employees participate in various benefit
plans sponsored by AIG, including a noncontributory qualified
defined benefit retirement plan, various stock option and
purchase plans and a voluntary savings plan (401(k) plan).
Charges in the amounts $1,394 (2004), $305 (2003), $0 (2002) for
our allocated cost of the retirement plan are included in
Selling, general and administrative on our
Consolidated Statements of Income.

AIGs US plans do not separately
identify projected benefit obligations and plan assets
attributable to employees of participating affiliates.
AIGs projected benefit obligations exceeded the plan
assets at December 31, 2004 by $503.0 million.

Note L  Commitments and
Contingencies

Aircraft
Orders

At December 31, 2004, we had committed to
purchase 371 new and used aircraft scheduled to deliver
from 2005 through 2010 at an estimated aggregate purchase price
(including adjustment for anticipated inflation) of
approximately $21.6 billion. We also had options to
purchase an additional 6 new aircraft deliverable through
2007 at an estimated aggregate purchase price of
$361.4 million. Most of these purchase commitments and
options to purchase new aircraft are based upon master
agreements with each of The Boeing Company (Boeing)
and AVSA, S.A.R.L., the sales subsidiary of Airbus Industrie
(Airbus). The recorded basis of aircraft may be
adjusted upon delivery to reflect notional credits given by the
manufacturers in connection with the leasing of aircraft.

The Boeing aircraft (models 737, 747 and 777),
and the Airbus aircraft (models A318, A319, A320, A321, A330,
A340 and A380) are being purchased pursuant to agreements
executed by us and Boeing or Airbus. These agreements establish
the pricing formulas (which include certain price adjustments
based upon inflation and other factors) and various other terms
with respect to the purchase of aircraft. Under certain
circumstances, we have the right to alter the mix of aircraft
type ultimately acquired. As of December 31, 2004, we had made
non-refundable deposits (exclusive of capitalized interest) on
the aircraft which we have committed to purchase of
approximately $464,000 and $616,000 with Boeing and Airbus,
respectively.

Management anticipates that a significant portion
of the aggregate purchase price will be funded by incurring
additional debt. The exact amount of the indebtedness to be
incurred will depend upon the actual purchase price of the
aircraft, which can vary due to a number of factors, including
inflation, and the percentage of the purchase price of the
aircraft which must be financed.

Asset
Value Guarantees

We have guaranteed a portion of the residual
value of 21 aircraft to financial institutions. These
guarantees expire at various dates through 2013 and generally
provide for us to pay the difference between the fair market
value of the aircraft and the guaranteed value up to certain
specified amounts, or, at our option, purchase the aircraft for
the guaranteed value. At December 31, 2004, the maximum
exposure if we were to pay under such guarantees was $87,540. In
addition, we have written put options for 15 aircraft in
the amount of $491,778. Management regularly reviews the
underlying values of the collateral aircraft, to determine the
exposure under these guarantees and options. At
December 31, 2004, we recorded a $5.6 million loss
contingency related to certain put options. We have adopted
FIN 45 for guarantees entered into after

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note L  Commitments and
Contingencies (Continued)


December 31, 2002. Guarantees in the amounts
of $5,507 (2004), $4,156 (2003) are included in Accrued
interest and other liabilities on our Consolidated Balance
Sheets.

Other
Guarantees

We have guaranteed certain obligations for
entities in which we have an investment. We had guaranteed loans
at December 31, 2004, all but one collateralized by
aircraft, aggregating $145,108. As a result of our adoption of
FIN 46, we consolidate the entities with loan guarantees
collateralized by aircraft. Assets in the amount of $152,417
(2004) and $164,481 (2003) and liabilities in the amount of
$70,886 (2004) and $79,211 (2003) related to these entities are
included in our Consolidated Balance Sheets.

We had guaranteed obligations to ATA in
connection with a global aircraft lease transaction entered into
in 2000 for a total of 14 aircraft. In 2004, we recorded a
charge to income in the amount of $25,026 related to the
guarantee after ATA filed for bankruptcy on October 26,
2004. The liability is in the form of a derivative to which we
became a counterparty. Future net payments made/received will be
recorded in income and the derivative will be reported in our
Consolidated Balance Sheets at fair value.

Stand
by Lines of Credit

We have extended unsecured lines of credit to two
entities in the amount of $60,000. At December 31, 2004 one
of the entities had drawn $10,000 on its unsecured line of
credit. The amount is included in Notes receivable
on our Consolidated Balance Sheets.

Leases

We have operating leases for office space and
office equipment extending through 2015. Rent expense was
$13,216 (2004) $3,575 (2003), and $3,475 (2002). Commitments for
minimum rentals under the noncancelable leases at the end of
2004 are as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2005       |  | $ | 8,326   | 
|2006       |  |   | 8,655   | 
|2007       |  |   | 8,978   | 
|2008       |  |   | 9,331   | 
|2009       |  |   | 9,628   | 
|Thereafter |  |   | 62,208  | 
|           |  |   |         | 
|Total      |  | $ | 107,126 | 
|           |  |   |         | 

During 2004, we abandoned office space and
incurred a charge in the amount of $2,343 net of $2,144 sublet
income. This charge is included in Selling, general and
administrative on our Consolidated Statements of Income.
At December 2004 an unamortized liability in the amount of
$1,648 remained. The Company recognized $1,480 in sublease
rental income for the abandoned office space in 2004.

Between December 2001 and March 2003, we
restructured the ownership of aircraft in certain lease
transactions in Australia. Prior to entering into the
transactions, we obtained opinions from Queens Counsel in
Australia so that the restructuring transactions would be
executed in accordance with the goods and services tax
(GST) laws of Australia. The Australian Tax Office
(ATO) is currently investigating the GST aspects of
these transactions. In September 2004, we filed a Summons in the
Supreme Court of New South Wales seeking declaratory relief
affirming our positions on the technical GST aspects of the
restructurings. In December 2004, the ATO issued a draft
Compliance Audit Report (CAR) which is contrary to
our position and we have responded to the draft CAR at length.
The ATO has not issued an assessment. Management

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note L  Commitments and
Contingencies (Continued)


believes that there are substantial arguments in
support of our position. Due to the uncertainties related to the
investigation and the outcome of the request for declaratory
relief, no amounts have been accrued related to this
contingency. GST credits of up to AUD 70 million,
(approximately US$55 million) have been taken through
December 31, 2004. In general, assessments imposed from the
ATO may include interest and penalties.

Note M  Derivative Financial Instruments
(Restated)

In the normal course of business, we employ a
variety of derivative transactions with the objective of
lowering our overall borrowing cost, maintaining an optimal mix
of variable and fixed rate interest obligations and managing our
foreign currency exchange rate risk. These derivative products
include interest rate and currency swap agreements and interest
rate floors. We enter into derivative transactions only to
economically hedge interest rate and currency risk and not to
speculate on interest rates or currency fluctuation.

All derivatives are recognized on the balance
sheet at their fair value and the change in fair value is
recorded in operating income or accumulated other comprehensive
income depending on the designation of the hedging instrument.
Where hedge accounting is not achieved pursuant to
SFAS 133, the change in fair value of the derivative is
recorded in operating income.

We recorded hedge ineffectiveness in interest
expense related to cross currency fair value hedges in the
amount of $(1,097) (2004), $(700) (2003) and $1,000 (2002) and
related to cash flow hedges in the amount of $515 (2004), $0
(2003) and $0 (2002). During 2004, four fair value hedges fell
outside of the effectiveness range as defined by SFAS 133.
The Company recorded $(6,706) in interest expense related to
these instruments.

During the twelve months ended December 31,
2004, 2003 and 2002, the Company recorded the following in
earnings in accordance with SFAS 133:

|                                                                                             |                                                  |            |          |            |  |            |         |          |   |   |        |         |  
|-------------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------- | -------- | ---------- |  | ---------- | ------- | -------- | - | - | ------ | ------- | -
|                                                                                             |                                                  | 2004       |          | 2003       |  | 2002      
|                                                                                             |                                                  | (Restated) |          | (Restated) |  | (Restated)
|                                                                                             |                                                  |            |          |            |  |           
|Related to non-hedging instruments:                                                          |                                                  |            |          |            |  |            |         |          |   |   |        |        
|                                                                                             | Fair value of non-hedging instruments            |            | $        | 12,201     |  |            | $       | (29,020  | ) |   | $      | 14,257  |  
|Fair value of previously designated fair value
    hedging relationships no longer effective |                                                  |            | (381,572 | )          |  |            |         |          |   |   |        |        
|Offsetting changes in fair value of the
    previously designated hedged item                |                                                  |            | 374,866  |            |  |            |         |          |   |   |        |        
|Related to previous designated hedging
    relationships:                                    |                                                  |            |          |            |  |            |         |          |   |   |        |        
|                                                                                             | Fair value of hedging instruments                |            |          |           |  |            |         | 152,969  |   |   |        | (18,133 | )
|                                                                                             | Offsetting changes in fair value of hedged items |            |          |            |  |            |         | (153,685 | ) |   |        | 19,093  |  
|                                                                                             | Ineffectiveness of cash flow hedges              |            |          | 515        |  |            |         |         |   |   |        |        |  
|                                                                                             |                                                  |            |          |            |  |            |         |          |   |   |        |        
|Total effect on earnings                                                                     |                                                  | $          | 6,010    |            |  | $          | (29,736 | )        |   | $ | 15,217 |        
|                                                                                             |                                                  |            |          |            |  |            |         |          |   |   |        |        

At December 31, 2004, 2003 and 2002, the
Companys accumulated other comprehensive income (loss)
consisted of the following:

|                                                           |  |            |        |            |  |            |         |   |  |   |         |  
|---------------------------------------------------------- |  | ---------- | ------ | ---------- |  | ---------- | ------- | - |  | - | ------- | -
|                                                           |  | 2004       |        | 2003       |  | 2002      
|                                                           |  | (Restated) |        | (Restated) |  | (Restated)
|                                                           |  |            |        |            |  |           
|Cumulative cash flow hedge loss adjustment, net
    of tax |  | $          | 19,959 |            |  | $          | (27,928 | ) |  | $ | (87,771 | )
|Mark to market of securities held for sale, net
    of tax |  |            | 2,866  |            |  |            |        |   |  |   |        |  
|                                                           |  |            |        |            |  |            |         |   |  |   |         |  
|Total accumulated other comprehensive income
    (loss)    |  | $          | 22,825 |            |  | $          | (27,928 | ) |  | $ | (87,771 | )
|                                                           |  |            |        |            |  |            |         |   |  |   |         |  

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note M  Derivative Financial
Instruments (Restated) (Continued)


During the twelve months ended December 31,
2004, $29.9 million (net) was reclassified from accumulated
other comprehensive income to interest expense when interest was
paid or received on the Companys cash flow hedges. The
Company estimates that within the next twelve months it will
amortize into earnings $8.8 million of the pre-tax balance
in accumulated other comprehensive income (loss) under cash flow
hedge accounting in connection with the Companys program
to convert debt from floating to fixed rates.

Credit risk exposure arises from the potential
that the counterparty may not perform under these derivative
transactions. The counterparty for all of our derivatives is
AIGFP, a related party with the highest ratings available from
the credit rating agencies. The derivatives are subject to a
bilateral security agreement which, in certain circumstances,
may allow one party to the agreement to require the second party
to the agreement to provide collateral. We executed $1,780,582
and $1,897,500 notional amount of derivative instruments with
AIGFP during 2004 and 2003, respectively.

Failure of AIGFP to perform under the agreement
with respect to these transactions would have a material effect
on our results of operations.

Note N  Fair Value
Disclosures

We used the following methods and assumptions in
estimating our fair value disclosures for financial instruments:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and cash
    equivalents:The carrying value
    reported on the balance sheet for cash and cash equivalents
    approximates its fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | Notes receivable:The fair values for notes receivable are estimated using
    discounted cash flow analyses, using interest rates currently
    being offered for similar loans to borrowers with similar credit
    ratings, except for floating rate notes where carrying value
    approximates fair market value.                                                                                                                                                                                                                                                                                                                                                                                  
|
| | Investments:It was
    not practicable to determine the fair value of the investments
    that we account for under the cost or equity method because of
    the lack of a quoted market price and their relative
    immateriality to our financial statements. The carrying amount
    of these investments at December 31, 2004 represents the
    original cost or original cost plus our share of earnings of the
    investment. For investments in marketable securities we used a
    quoted market price in determining the fair value.                                                                                                                                                       
|
| | Debt financing:The
    carrying value of our commercial paper, floating rate term debt
    and term debt maturing within one year approximates its fair
    value. The fair value of our long-term debt is estimated using
    discounted cash flow analyses, based on our spread to
    U.S. Treasury bonds for similar debt at year-end.                                                                                                                                                                                                                                                                                                                                                             
|
| | Derivatives:Fair
    values were based on the use of valuation models that utilize
    among other things, current interest, foreign exchange and
    volatility rates, as applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Guarantees:As of
    December 31, 2004, our maximum commitment under the
    guarantees was $87,540. It is not practical to determine the
    fair value of such guarantees. Management regularly reviews the
    underlying values of the collateral aircraft, to determine the
    exposure under these guarantees. At December 31, 2004, we
    had not recorded any liabilities related to these guarantees, as
    the market values of the aircraft equaled or exceeded the
    guaranteed value. We have adopted FIN 45 for guarantees
    entered into after December 31, 2002. Guarantees are
    included in Accrued interest and other liabilities
    on our Consolidated Balance Sheets.

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note N  Fair Value Disclosures
(Continued)




| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | The carrying amounts and fair values of the
    Companys financial instruments at December 31, 2004
    and 2003 are as follows:

|                                                                                                                                                             |  |                   |             |                   |  |                   |             |                   |  |   |             |   |  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ----------- | ----------------- |  | ----------------- | ----------- | ----------------- |  | - | ----------- | - |  | - | ----------- | -
|                                                                                                                                                             |  |                   |             |                  
|                                                                                                                                                             |  | 2004 (Restated)   |             | 2003 (Restated)  
|                                                                                                                                                             |  |                   |             |                  
|                                                                                                                                                             |  | Carrying          |             |                   |  | Carrying          |             |                  
|                                                                                                                                                             |  | Amount of         |             | Fair Value of     |  | Amount of         |             | Fair Value of    
|                                                                                                                                                             |  | Asset (Liability) |             | Asset (Liability) |  | Asset (Liability) |             | Asset (Liability)
|                                                                                                                                                             |  |                   |             |                   |  |                   |             |                  
|Cash and cash equivalents                                                                                                                                    |  | $                 | 99,747      |                   |  | $                 | 99,747      |                   |  | $ | 102,241     |   |  | $ | 102,241     |  
|Notes receivable                                                                                                                                             |  |                   | 212,273     |                   |  |                   | 211,692     |                   |  |   | 146,707     |   |  |   | 150,011     |  
|Investments                                                                                                                                                  |  |                   | 22,979      |                   |  |                   | 22,979      |                   |  |   | 49,636      |   |  |   | 50,266      |  
|Debt financing (including foreign currency
    adjustment, synthetic lease obligations (2003) and capital lease
    obligations and excluding debt discount) |  |                   | (24,420,907 | )                 |  |                   | (24,750,855 | )                 |  |   | (22,716,782 | ) |  |   | (23,302,677 | )
|Derivative assets                                                                                                                                            |  |                   | 1,191,602   |                   |  |                   | 1,191,602   |                   |  |   | 746,013     |   |  |   | 746,013     |  
|Derivative liabilities                                                                                                                                       |  |                   | 38,810      |                   |  |                   | 38,810      |                   |  |   | 57,187      |   |  |   | 57,187      |  
|Guarantees                                                                                                                                                   |  |                   | 5,507       |                   |  |                   | 5,507       |                   |  |   | 4,156       |   |  |   | 4,156       |  

Note O  Flight Equipment
Marketing  Securitization (Restated)

We sold 37 aircraft to a trust during the third
quarter of 2003 for approximately $1.0 billion. Accrued
interest, other receivables and other assets includes $69,149
(2003) related to the transaction. The trust is primarily funded
and owned by other subsidiaries of AIG and is consolidated by
AIG. We do not consolidate the trust, nor do we consolidate the
subsidiary. The transaction was structured similar to a
securitization, in which the trust acquired the aircraft based
on values assigned by independent appraisers. Further, an
unaffiliated third party acted as capital market advisor and
initial purchaser of the notes of the securitization.

On January 14, 2004, we sold
34 aircraft to a different trust for approximately
$1.0 billion. The 2004 transaction is structured similarly
to the 2003 transaction, and the trust is consolidated by AIG.

We recorded gains, net of expenses, in the
amounts of $32,854 (2004) and $23,245 (2003) related to the
transactions. The gains are included in Flight equipment
marketing  securitization in our Consolidated
Statements of Income. We continue to manage the aircraft sold to
the trusts for a fee. At December 31, we recorded
management fees in the amounts of $10,209 (2004) and $1,291
(2003) in income related to management services provided to the
trusts and $1.6 million (2004) and 0 (2003) accounts
receivable related to the management of those aircraft is
included in Accrued interest, other receivables and other
assets on our Consolidated Balance Sheet.

Note P  Quarterly Financial
Information (Unaudited)

ILFC has set forth below selected quarterly
financial data for the years ended December 31, 2004 and
2003. This data has been restated from amounts previously
reported on Form 10-Q for the applicable periods. See
Note B  Restatement for a description of the
adjustments. The following quarterly financial information

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note P  Quarterly Financial
Information (Unaudited) (Continued)


for each of the three months ended and at
March 31, June 30, September 30, 2004 and 2003
and for the three months ended December 31, 2004 and 2003
is unaudited.

|                                   |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   |         |   |  |   |         |  
|---------------------------------- | -------------------------------------------------------- | -------------- | - | ------------- | - | ------------------ | - | ----------------- | - | -------- | - | ---------- | - | -------- | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ------- | - |  | - | ------- | -
|                                   |                                                          |                |   |               |   |                    |   |                  
|                                   |                                                          | March 31, 2004 |   | June 30, 2004 |   | September 30, 2004 |   | December 31, 2004
|                                   |                                                          |                |   |               |   |                    |   |                  
|                                   |                                                          | As             |   | As            |   | As                 |   | As                |   | As       |   | As         |   | As       |   | As        
|                                   |                                                          | Reported       |   | Restated      |   | Reported           |   | Restated          |   | Reported |   | Restated   |   | Reported |   | Restated  
|                                   |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |           
|Consolidated balance sheets:       |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   |         |   |  |   |        
|                                  
|                                   | Cash                                                     |                | $ | 153,338       |   |                    | $ | 156,351           |   |          | $ | 220,758    |   |          | $ | 223,498    |   |  | $ | 85,534     |   |  | $ | 88,300     |   |  |   |         |   |  |   |         |  
|                                   | Flight equipment under operating leases                  |                |   | 34,648,226    |   |                    |   | 33,955,679        |   |          |   | 36,185,565 |   |          |   | 35,439,433 |   |  |   | 36,529,818 |   |  |   | 35,780,004 |   |  |   |         |   |  |   |         |  
|                                   | Accumulated depreciation                                 |                |   | (5,402,502    | ) |                    |   | (5,210,872        | ) |          |   | (5,698,565 | ) |          |   | (5,495,843 | ) |  |   | (6,016,356 | ) |  |   | (5,802,490 | ) |  |   |         |   |  |   |         |  
|                                   | Accrued interest, other receivables and other
    assets |                |   | 464,259       |   |                    |   | 540,399           |   |          |   | 278,901    |   |          |   | 368,810    |   |  |   | 231,803    |   |  |   | 292,092    |   |  |   |         |   |  |   |         |  
|                                   | Derivative assets                                        |                |   | 707,446       |   |                    |   | 675,823           |   |          |   | 730,341    |   |          |   | 698,165    |   |  |   | 669,779    |   |  |   | 669,460    |   |  |   |         |   |  |   |         |  
|                                   | Total assets                                             |                |   | 32,430,662    |   |                    |   | 31,977,275        |   |          |   | 33,580,507 |   |          |   | 33,097,570 |   |  |   | 33,536,430 |   |  |   | 33,063,218 |   |  |   |         |   |  |   |         |  
|                                   | Current income taxes payable                             |                |   | 79,501        |   |                    |   | 92,447            |   |          |   | 38,930     |   |          |   | 51,904     |   |  |   | 7,442      |   |  |   | 20,443     |   |  |   |         |   |  |   |         |  
|                                   | Foreign currency adjustment                              |                |   | 823,451       |   |                    |   | 786,299           |   |          |   | 725,688    |   |          |   | 712,610    |   |  |   | 696,127    |   |  |   | 696,127    |   |  |   |         |   |  |   |         |  
|                                   | Deferred income taxes                                    |                |   | 2,495,128     |   |                    |   | 2,334,845         |   |          |   | 2,623,225  |   |          |   | 2,444,106  |   |  |   | 2,717,120  |   |  |   | 2,537,081  |   |  |   |         |   |  |   |         |  
|                                   | Accumulated other comprehensive income (loss)            |                |   | (93,020       | ) |                    |   | (35,582           | ) |          |   | (34,025    | ) |          |   | (3,766     | ) |  |   | (45,702    | ) |  |   | (5,619     | ) |  |   |         |   |  |   |         |  
|                                   | Retained earnings                                        |                |   | 3,997,877     |   |                    |   | 3,671,539         |   |          |   | 4,115,361  |   |          |   | 3,781,386  |   |  |   | 4,245,023  |   |  |   | 3,898,766  |   |  |   |         |   |  |   |         |  
|                                   | Total shareholders equity                               |                |   | 5,238,394     |   |                    |   | 4,969,494         |   |          |   | 5,414,873  |   |          |   | 5,111,157  |   |  |   | 5,532,858  |   |  |   | 5,226,684  |   |  |   |         |   |  |   |         |  
|                                  
|Consolidated statements of income: |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   |         |   |  |   |        
|                                  
|                                   | Rental of flight equipment                               |                |   | 722,938       |   |                    |   | 697,960           |   |          |   | 766,520    |   |          |   | 733,395    |   |  |   | 795,123    |   |  |   | 761,621    |   |  | $ | 795,244 |   |  | $ | 762,548 |  
|                                   | Flight equipment marketing                               |                |   | 9,742         |   |                    |   | 7,804             |   |          |   | 26,213     |   |          |   | 27,389     |   |  |   | 7,481      |   |  |   | 7,016      |   |  |   | 32,920  |   |  |   | 35,455  |  
|                                   | Flight equipment marketing 
    securitization          |                |   | 25,610        |   |                    |   | 34,117            |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   | (315    | ) |  |   | (1,263  | )
|                                   | Interest and other                                       |                |   | 21,538        |   |                    |   | 23,014            |   |          |   | 17,757     |   |          |   | 18,740     |   |  |   | 39,062     |   |  |   | 37,790     |   |  |   | 33,553  |   |  |   | 14,300  |  
|                                   | Total revenues                                           |                |   | 779,828       |   |                    |   | 762,895           |   |          |   | 810,490    |   |          |   | 779,524    |   |  |   | 841,666    |   |  |   | 806,427    |   |  |   | 861,402 |   |  |   | 811,040 |  
|                                   | Interest expense                                         |                |   | 233,801       |   |                    |   | 228,509           |   |          |   | 243,600    |   |          |   | 235,915    |   |  |   | 242,444    |   |  |   | 232,802    |   |  |   | 245,322 |   |  |   | 245,300 |  
|                                   | Depreciation of flight equipment                         |                |   | 295,609       |   |                    |   | 284,780           |   |          |   | 313,400    |   |          |   | 302,116    |   |  |   | 322,504    |   |  |   | 311,188    |   |  |   | 327,710 |   |  |   | 315,964 |  
|                                   | Selling, general and administrative                      |                |   | 25,624        |   |                    |   | 24,960            |   |          |   | 30,489     |   |          |   | 30,302     |   |  |   | 26,412     |   |  |   | 31,124     |   |  |   | 38,417  |   |  |   | 30,570  |  
|                                   | Total expenses                                           |                |   | 589,936       |   |                    |   | 573,151           |   |          |   | 625,063    |   |          |   | 605,907    |   |  |   | 634,677    |   |  |   | 618,431    |   |  |   | 713,904 |   |  |   | 694,289 |  
|                                   | Income before income taxes                               |                |   | 189,892       |   |                    |   | 189,744           |   |          |   | 185,427    |   |          |   | 173,617    |   |  |   | 206,989    |   |  |   | 187,996    |   |  |   | 147,498 |   |  |   | 116,751 |  
|                                   | Provision for income taxes                               |                |   | 60,688        |   |                    |   | 60,636            |   |          |   | 59,053     |   |          |   | 54,880     |   |  |   | 67,321     |   |  |   | 60,610     |   |  |   | 40,840  |   |  |   | 29,975  |  
|                                   | Net income                                               |                |   | 129,204       |   |                    |   | 129,108           |   |          |   | 126,374    |   |          |   | 118,737    |   |  |   | 139,668    |   |  |   | 127,386    |   |  |   | 106,658 |   |  |   | 86,776  |  

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note P  Quarterly Financial
Information (Unaudited) (Continued)


|                                   |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   |         |   |  |   |         |  
|---------------------------------- | -------------------------------------------------------- | -------------- | - | ------------- | - | ------------------ | - | ----------------- | - | -------- | - | ---------- | - | -------- | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ------- | - |  | - | ------- | -
|                                   |                                                          |                |   |               |   |                    |   |                  
|                                   |                                                          | March 31, 2003 |   | June 30, 2003 |   | September 30, 2003 |   | December 31, 2003
|                                   |                                                          |                |   |               |   |                    |   |                  
|                                   |                                                          | As             |   | As            |   | As                 |   | As                |   | As       |   | As         |   | As       |   | As        
|                                   |                                                          | Reported       |   | Restated      |   | Reported           |   | Restated          |   | Reported |   | Restated   |   | Reported |   | Restated  
|                                   |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |           
|Consolidated balance sheets:       |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   |         |   |  |   |        
|                                   | Cash                                                     |                | $ | 86,665        |   |                    | $ | 93,925            |   |          | $ | 57,138     |   |          | $ | 63,592     |   |  | $ | 159,683    |   |  | $ | 167,159    |   |  |   |         |   |  |   |         |  
|                                   | Current income taxes receivable                          |                |   | 252,268       |   |                    |   | 236,214           |   |          |   | 123,855    |   |          |   | 104,325    |   |  |   | 61,190     |   |  |   | 37,823     |   |  |   |         |   |  |   |         |  
|                                   | Flight equipment under operating leases                  |                |   | 31,376,024    |   |                    |   | 30,802,592        |   |          |   | 33,204,057 |   |          |   | 32,575,816 |   |  |   | 32,894,656 |   |  |   | 32,246,596 |   |  |   |         |   |  |   |         |  
|                                   | Accumulated depreciation                                 |                |   | (4,607,555    | ) |                    |   | (4,456,586        | ) |          |   | (4,886,676 | ) |          |   | (4,725,469 | ) |  |   | (4,987,488 | ) |  |   | (4,815,989 | ) |  |   |         |   |  |   |         |  
|                                   | Accrued interest, other receivables and other
    assets |                |   | 166,491       |   |                    |   | 257,089           |   |          |   | 223,588    |   |          |   | 327,172    |   |  |   | 183,141    |   |  |   | 268,988    |   |  |   |         |   |  |   |         |  
|                                   | Total assets                                             |                |   | 29,249,882    |   |                    |   | 28,909,223        |   |          |   | 30,813,253 |   |          |   | 30,436,727 |   |  |   | 30,578,722 |   |  |   | 30,172,117 |   |  |   |         |   |  |   |         |  
|                                   | Accrued interest and other payables                      |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   | 368,318    |   |  |   | 369,989    |   |  |   |         |   |  |   |         |  
|                                   | Foreign currency adjustment                              |                |   | 330,040       |   |                    |   | 329,715           |   |          |   | 434,590    |   |          |   | 434,265    |   |  |   | 502,128    |   |  |   | 501,803    |   |  |   |         |   |  |   |         |  
|                                   | Deferred income taxes                                    |                |   | 2,389,900     |   |                    |   | 2,261,109         |   |          |   | 2,522,369  |   |          |   | 2,380,889  |   |  |   | 2,532,713  |   |  |   | 2,380,020  |   |  |   |         |   |  |   |         |  
|                                   | Accumulated other comprehensive income (loss)            |                |   | (119,044      | ) |                    |   | (59,121           | ) |          |   | (107,729   | ) |          |   | (47,469    | ) |  |   | (93,290    | ) |  |   | (39,885    | ) |  |   |         |   |  |   |         |  
|                                   | Retained earnings                                        |                |   | 3,522,044     |   |                    |   | 3,250,578         |   |          |   | 3,632,956  |   |          |   | 3,337,975  |   |  |   | 3,762,817  |   |  |   | 3,454,154  |   |  |   |         |   |  |   |         |  
|                                   | Total shareholders equity                               |                |   | 4,736,537     |   |                    |   | 4,524,994         |   |          |   | 4,858,764  |   |          |   | 4,624,043  |   |  |   | 5,003,064  |   |  |   | 4,747,806  |   |  |   |         |   |  |   |         |  
|Consolidated statements of income: |                                                          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   |         |   |  |   |        
|                                   | Rental of flight equipment                               |                |   | 701,495       |   |                    |   | 680,307           |   |          |   | 741,945    |   |          |   | 711,276    |   |  |   | 753,551    |   |  |   | 719,690    |   |  | $ | 744,105 |   |  | $ | 695,938 |  
|                                   | Flight equipment marketing                               |                |   |               |   |                    |   |                   |   |          |   | 6,957      |   |          |   | (4,305     | ) |  |   | 33,437     |   |  |   | 29,349     |   |  |   | (1,909  | ) |  |   | (4,006  | )
|                                   | Flight equipment marketing 
    securitization          |                |   |               |   |                    |   |                   |   |          |   |            |   |          |   |            |   |  |   |            |   |  |   |            |   |  |   | 17,886  |   |  |   | 23,245  |  
|                                   | Interest and other                                       |                |   | 12,899        |   |                    |   | 4,919             |   |          |   | 15,507     |   |          |   | 5,123      |   |  |   | 9,167      |   |  |   | 7,341      |   |  |   | 10,943  |   |  |   | 524     |  
|                                   | Total revenues                                           |                |   | 722,344       |   |                    |   | 693,176           |   |          |   | 764,409    |   |          |   | 712,094    |   |  |   | 796,155    |   |  |   | 756,380    |   |  |   | 771,025 |   |  |   | 715,701 |  
|                                   | Interest expense                                         |                |   | 219,110       |   |                    |   | 221,727           |   |          |   | 236,989    |   |          |   | 227,907    |   |  |   | 233,041    |   |  |   | 221,496    |   |  |   | 255,440 |   |  |   | 248,831 |  
|                                   | Depreciation of flight equipment                         |                |   | 264,147       |   |                    |   | 254,575           |   |          |   | 282,094    |   |          |   | 271,856    |   |  |   | 295,591    |   |  |   | 285,091    |   |  |   | 282,946 |   |  |   | 272,387 |  
|                                   | Selling, general and administrative                      |                |   | 20,577        |   |                    |   | 19,841            |   |          |   | 19,284     |   |          |   | 19,198     |   |  |   | 21,032     |   |  |   | 20,670     |   |  |   | 17,519  |   |  |   | 17,071  |  
|                                   | Total expenses                                           |                |   | 545,539       |   |                    |   | 537,848           |   |          |   | 578,059    |   |          |   | 558,653    |   |  |   | 591,659    |   |  |   | 569,252    |   |  |   | 588,408 |   |  |   | 570,792 |  
|                                   | Income before income taxes                               |                |   | 176,805       |   |                    |   | 155,328           |   |          |   | 186,350    |   |          |   | 153,441    |   |  |   | 204,496    |   |  |   | 187,128    |   |  |   | 182,617 |   |  |   | 144,909 |  
|                                   | Provision for income taxes                               |                |   | 57,504        |   |                    |   | 49,915            |   |          |   | 63,402     |   |          |   | 51,773     |   |  |   | 64,765     |   |  |   | 58,628     |   |  |   | 49,690  |   |  |   | 36,367  |  
|                                   | Net income                                               |                |   | 119,301       |   |                    |   | 105,413           |   |          |   | 122,948    |   |          |   | 101,668    |   |  |   | 139,731    |   |  |   | 128,500    |   |  |   | 124,285 |   |  |   | 99,900  |  

Note Q  Subsequent Event

On August 11, 2005, ILFC sold
3,069,604 shares of common stock to an existing shareholder
for approximately $400 million.

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INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

|                             |  |                        |         |            |  |            |         |              |  |               |  |  |  |   |         |  |  |   |         | 
|---------------------------- |  | ---------------------- | ------- | ---------- |  | ---------- | ------- | ------------ |  | ------------- |  |  |  | - | ------- |  |  | - | ------- | 
|                             |  |                        |         |            |  |            |         |             
|COL. A                       |  | COL. B                 |         | COL. C     |  | COL. D     |         | COL. E      
|                             |  |                        |         |            |  |            |         |             
|                             |  |                        |         |            |  |            |         |             
|                             |  |                        |         | ADDITIONS  |  |            |         |             
|                             |  |                        |         |            |  | Charged to |         |              |  |              
|                             |  | Balance at             |         | Charged to |  | Other      |         |              |  |              
|                             |  | Beginning of           |         | Costs and  |  | Accounts  |         | Deductions  |  | Balance at   
|Description                  |  | Period                 |         | Expenses   |  | Describe   |         | Describe(a)  |  | End of Period
|                             |  |                        |         |            |  |            |         |              |  |              
|                             |  |                       
|                             |  | (Dollars in thousands)
|Reserve for overhaul:        |  |                        |         |            |  |            |         |              |  |               |  |  |  |   |         |  |  |   |         | 
|Year ended December 31, 2004 |  | $                      | 68,900  |            |  | $          | 164,322 |              |  |               |  |  |  | $ | 165,373 |  |  | $ | 67,849  | 
|Year ended December 31, 2003 |  | $                      | 118,244 |            |  | $          | 112,581 |              |  |               |  |  |  | $ | 161,925 |  |  | $ | 68,900  | 
|Year ended December 31, 2002 |  | $                      | 142,715 |            |  | $          | 90,763  |              |  |               |  |  |  | $ | 115,234 |  |  | $ | 118,244 | 



---



|    |                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------
|(a) | Reimbursements to lessees for overhauls performed
    and amounts transferred to buyers for aircraft sold.

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SIGNATURES

Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Dated: August 15, 2005



| |                                        
| | ---------------------------------------
| | INTERNATIONAL LEASE FINANCE CORPORATION



| |    |                         
| | -- | ------------------------
| | By | /s/ STEVEN F. UDVAR-HAZY

| |                          
| | -------------------------
| |                          
| | Steven F. Udvar-Hazy     
| | Chairman of the Board and
| | Chief Executive Officer  

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the date indicated.

|                                              |  |                                                                                   |  |                
|--------------------------------------------- |  | --------------------------------------------------------------------------------- |  | ---------------
|Signature                                     |  | Title                                                                             |  | Date           
|                                              |  |                                                                                   |  |                
|                                             
|/s/ STEVEN F. UDVAR-HAZY Steven F. Udvar-Hazy |  | Chairman of the Board and Chief Executive Officer                                 |  | August 15, 2005
|                                             
|/s/ LESLIE L. GONDALeslie L. Gonda            |  | Director, Chairman of the Executive Committee                                     |  | August 15, 2005
|                                             
|/s/ JOHN L. PLUEGERJohn L. Plueger            |  | Director, President and Chief Operating Officer                                   |  | August 15, 2005
|                                             
|/s/ LOUIS L. GONDALouis L. Gonda              |  | Director                                                                          |  | August 15, 2005
|                                             
|/s/ MARTIN J. SULLIVAN Martin J. Sullivan     |  | Director                                                                          |  | August 15, 2005
|                                             
|Donald Kanak                                  |  | Director                                                                          |  |                
|                                             
|/s/ WILLIAM N. DOOLEY William N. Dooley       |  | Director                                                                          |  | August 15, 2005
|                                             
|/s/ STEVEN J. BENSINGER Steven J. Bensinger   |  | Director                                                                          |  | August 15, 2005
|                                             
|/s/ ALAN H. LUND Alan H. Lund                 |  | Director, Vice Chairman, Chief Financial
    Officer and Chief Accounting Officer |  | August 15, 2005

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SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE ACT BY
REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.

Since the Registrant is an indirect wholly owned
subsidiary of AIG, no annual report to security holders or proxy
statement, form of proxy or other proxy soliciting materials has
been sent to security holders since January 1, 1990.

78