##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
    FORM 10-K
 ANNUAL REPORT
    (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, 2008
  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 001-31616
  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)       Title of each class

Name of each exchange on which registered6.625% Notes due November 15, 2013

New York Stock Exchange      x o
  o x
  x o
  Regulation S-K Form 10-K Form 10-K. x
  12b-2
 Large accelerated
    filer o

Accelerated
    filer oNon-accelerated
    filer x

Smaller reporting
    company o(Do not check if a smaller reporting company)   o x
    Form 10-K




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##### 






INTERNATIONAL
    LEASE FINANCE CORPORATION
  2008
    FORM 10-K
    ANNUAL REPORT
    TABLE OF CONTENTS
  PagePART IItem 1.

Business


1Item 1A.

Risk Factors


7Item 1B.

Unresolved Staff Comments


11Item 2.

Properties


12Item 3.

Legal Proceedings


14PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


15Item 6.

Selected Financial Data


15Item 7.

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


16Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


32Item 8.

Financial Statements and Supplementary Data


33Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


33Item 9A.

Controls and Procedures


33Item 9B.

Other Information


34PART IIIItem 14.

Principal Accountant Fees and Services


35PART IVItem 15.

Exhibits and Financial Statement Schedules


35EX-12EX-23EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART
    I Item
    1.  Business  General
    Properties  Flight
    Equipment Properties 
    Commitments.
    Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations  Consideration of ILFCs Ability to
    Continue as a Going Concern
    (310) 788-1999, (310) 788-1990,
 1




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##### Table of Contents



. Managements Discussion and Analysis
    of Financial Condition and Result of Operations  Our
    Relationship with AIG.
  Aircraft
    Leasing
    Properties  Flight
    Equipment
       2




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##### Table of Contents



. Management Discussion and Analysis of
    Financial Condition and Result of Operations 
    Overview  Aircraft Industry.
  Flight
    Equipment Marketing
        Fleet
    Management Services
   3




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##### Table of Contents



Financing/Source
    of Funds
  Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Consideration of
    ILFCs Ability to Continue as a Going Concern.
  Customers
    Customers by Region2008


2007


2006Number





Number





Numberof





of





ofRegion

Customers (a)


%


Customers (a)


%


Customers (a)


%Europe


84



48.3
%


82



48.0
%


75



47.8
%Asia and the Pacific


41



23.5



38



22.2



32



20.4The Middle East and Africa


19



10.9



16



9.4



18



11.5U.S. and Canada


17



9.8



25



14.6



23



14.6Central and South America and Mexico


13



7.5



10



5.8



9



5.7174



100
%


171



100
%


157



100
%    (a)
    A customer is an airline with its own operating certificate.  Notes to Consolidated Financial Statements
    2008


2007


2006Amount


%


Amount


%


Amount


%(Dollars in thousands)Europe

$
2,241,742



45.3
%

$
2,060,196



44.9
%

$
1,806,744



45.3
%Asia and the Pacific


1,432,252



29.0



1,229,141



26.8



1,011,655



25.4The Middle East and Africa


558,553



11.3



528,095



11.5



419,460



10.5U.S. and Canada


444,921



9.0



536,313



11.7



496,225



12.5Central and South America and Mexico


265,980



5.4



233,866



5.1



250,864



6.3$
4,943,448



100
%

$
4,587,611



100
%

$
3,984,948



100
%  4




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##### Table of Contents



2008


2007


2006Amount


%


Amount


%


Amount


%(Dollars in thousands)China

$
835,722



16.9
%

$
714,181



15.6
%

$
563,299



14.1
%France


515,165



10.4



448,538



9.8



425,964



10.7     Competition
    Government
    Regulation
              (i) (ii)
     5




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Employees
    Insurance
               6




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Code of
    Ethics and Conduct
  www.aigcorporate.com
  Forward-Looking
    Statements
  Form 10-K Form 10-K Risk
    Factors
 Item
    1A.  Risk Factors  Quantitative and Qualitative
    Disclosures About Market Risk
  Liquidity
    Risk
   7




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Borrowing
    Risks
  Credit Ratings Downgrade Risk
    Interest Rate Risk
    Relationship
    with AIG
  AIG as Our Parent Company
 8




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##### Table of Contents



Restrictive Covenants on Our Operations
  
    incur debt;
    encumber our assets;
    enter into sale-leaseback transactions;
    make equity or debt investments in other parties; and
    pay dividends and distributions.    Potential Divestiture of ILFC from AIG
  AIG as Our Counterparty of Derivatives
  AIG Going Concern Consideration
  Overall
    Airline Industry Risk
    
    Demand for air travel
    Competition between carriers
    Fuel prices and availability
    Labor costs and stoppages 9




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##### Table of Contents




    Maintenance costs
    Employee labor contracts
    Air traffic control infrastructure constraints
    Airport access
    Insurance costs and coverage
    Heavy reliance on automated systems
    Geopolitical events
    Security, terrorism and war
    Worldwide health concerns
    Equity and borrowing capacity
    Environmental concerns
    Government regulation
    Interest rates
    Overcapacity
    Natural disasters



    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 affecting net income 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 revenue;
    an inability to immediately place new and used aircraft when
    they become available through our purchase commitments and
    regular lease terminations on commercially acceptable terms,
    resulting in lower lease margins due to aircraft not earning
    revenue and resulting in payments for storage, insurance and
    maintenance; and
    a loss if our aircraft is damaged or destroyed by an event
    specifically excluded from the insurance policy such as dirty
    bombs, bio-hazardous materials and electromagnetic pulsing.  Lessee
    Performance Risk
  Overall Airline Industry Risk
    Airframe,
    Engine and Other Manufacturer Risks
    
    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; 10




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
    a marketplace with too many aircraft available, creating
    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 reduced demand for a particular
    manufacturers product, creating downward pressure on
    demand for those aircraft in our fleet and reduced market lease
    rates for those aircraft; 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 aircraft in our fleet.  Aircraft
    Related Risks
  Residual Value (i) (ii) (iii) Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Critical
    Accounting Policies and Estimates  Flight
    Equipment.
  Obsolescence Risk long-lived
  Other
    Risks
  Key Personnel
  Foreign Currency Risk
  Accounting Pronouncements
 Item
    1B.  Unresolved Staff Comments   11




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Item
    2.  Properties  Flight
    Equipment
        Aircraft Type

2009


2010


2011


2012


2013


2014


2015


2016


2017


2018


2019


2020


Total737-300/400/500


3



16



10



9



8



7



1



1



















55737-600/700/800


5



23



34



28



24



19



21



25



10



7











196757-200


3



13



10



14



8



8



5



2



















63767-200










1



1







1



























3767-300


2



6



11



11



6



6



7







1















50777-200






3



13



8



6



2







5



1















38777-300






2



3



1



1















8



10



6







31747-300


1



1











































2747-400


1



1



8



6



1































17MD-11










2







3



3



























8A300-600R/F






















2



2







1



1











6A310






5



1







1































7A319






8



6



14



17



23



13



13



15



7



9







125A320


4



18



18



20



21



32



10



21



3



5



4



4



160A321


3



14



15



5



8



16







12



5















78A330-200


1



9



7



11



11



8



3



2



3











2



57A330-300


3



4



7



3



4



2



3



3



















29A340-300






3



5



3



3



1



























15A340-600


















1



1



4



2



2



2



1







13Total


26



126



151



134



123



131



69



86



49



32



20



6



953     Commitments
   12




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##### Table of Contents



Aircraft Type

2009


2010


2011


2012


2013


2014


2015


2016


2017


2018


2019


Total737-700/800(a)


12







5



5































22777-300ER


4











































4787-8/9(a)














4



11



8



1



5



12



17



16



74A319-100(b)


8



1







































9A320-200(a)


11



3







































14A321-200(a)


9



1







































10A330-200/300(a)


5











































5A350XWB-800/900/1000(a)






















2



4



8



6











20A380-800(c)


















5



3



2



















10Total


49



5



5



9



16



13



7



13



18



17



16



168    (a)
    We have the right to designate the size of the aircraft within
    the specific model type at specific dates prior to contractual
    delivery.  (b)
    Subsequent to December 31, 2008, one A319-100 scheduled for
    delivery in 2009 has been delayed to 2011.  (c)
    Subject to cancellation option by no later than June 30,
    2010, which would reduce the total future purchase commitments.    non-refundable
    Number of


NumberDelivery Year

Aircraft


Leased


% Leased2009


49



49



100
%2010


5



5



100
%2011


5



0



0
%2012


9



4



44
%2013


16



11



69
%Thereafter


84



20



24
%     Facilities
   13




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##### Table of Contents



Item 3.
    Legal
    Proceedings  737-300
 14




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##### Table of Contents



PART II  Item
    5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities   Item 6. Selected
    Financial Data  Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations
  Years Ended December 31,2008


2007


2006


2005


2004(Dollar amounts in thousands)Operating Data:Rentals of flight equipment

$
4,943,448


$
4,587,611


$
3,984,948


$
3,482,210


$
2,955,524Flight equipment marketing


46,838



30,613



71,445



66,737



77,664Flight equipment marketing  securitization


















32,854Interest and other income


98,260



111,599



86,304



61,426



93,844Total revenues


5,088,546



4,729,823



4,142,697



3,610,373



3,159,886Expenses


3,993,825



3,814,938



3,426,590



2,936,190



2,491,779Income before income taxes


1,094,721



914,885



716,107



674,183



668,107Net income


703,125



604,366



499,267



438,349



462,006Ratio of Earnings to Fixed Charges and Preferred Stock
    Dividends(a):


1.66
x


1.52
x


1.43
x


1.50
x


1.62
xBalance Sheet Data:Flight equipment under operating leases (net of accumulated
    depreciation)

$
43,220,139


$
41,797,660


$
38,475,949


$
34,748,932


$
30,505,422Net investment in finance and
    sales-type
    leases


301,759



307,083



283,386



308,471



307,466Total assets


47,315,514



44,830,590



42,035,528



37,530,327



34,007,900Total debt(b)


32,476,668



30,451,279



28,860,242



26,104,165



23,175,596Shareholders equity


7,625,213



7,028,779



6,574,998



6,172,562



5,329,937Other Data:Aircraft lease portfolio at period end(c):Owned


955



900



824



746



667Subject to finance and sales-type leases


9



9



10



17



9Aircraft sold or remarketed during the period


11



9



21



29



49        (b)
    Includes subordinated debt, capital lease obligations and
    synthetic lease obligations when applicable and does not include
    foreign currency adjustment related to foreign currency
    denominated debt swapped into $US.  Properties 
    Flight Equipment.
 15




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Item
    7.  Managements Discussion and Analysis of
    Financial Condition and Results of Operations  Overview
    Our
    Fleet
      Debt
    Financing
  long-term short-term Liquidity
  Aircraft
    Industry
   16




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A/S
        Consideration
    of ILFCs Ability to Continue as a Going Concern
  Recent Events and Current Situation
    
    In September 2008, due to a decrease in liquidity in the short
    term commercial paper market and liquidity concerns with AIG
    that led to downgrades of our short-term debt rating, we became
    unable to issue commercial paper. This market remains
    unavailable to us and we cannot determine when it may be
    available to us again.
    Since September 2008, due to the challenges facing AIG and the
    turmoil in the credit markets, we have also been unable to issue
    unsecured public debt and we cannot determine when the unsecured
    public debt markets may be available to us again.
    AIG experienced liquidity issues and on September 22, 2008,
    entered into a credit facility and a guarantee and pledge
    agreement with the NY Fed. We do not guarantee AIGs
    obligations under the credit facility and none of our assets are
    pledged to secure AIGs obligations under the credit
    facility. We are, however, as a subsidiary of AIG, subject to
    the covenants under the facility. These covenants, among other
    things, restrict our ability to:  
    incur debt; 17




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##### Table of Contents




    encumber our assets;
    enter into sale-leaseback transactions;
    make equity or debt investments in other parties; and
    pay dividends and distributions.    
    Under our existing debt agreements we and our subsidiaries are
    permitted to enter into secured financings totaling up to 12.5%
    of consolidated net tangible assets, as defined in the debt
    agreements, currently approximately $5.0 billion.
    Furthermore, it may be possible, subject to receipt of any
    required consents under the NY Fed facility and our bank
    facilities and term loans, for us to obtain secured financing
    without regard to the 12.5% consolidated net tangible asset
    limit referred to above by doing so through subsidiaries that
    qualify as non-restricted subsidiaries under our public debt
    indentures. We and our subsidiaries are currently permitted to
    incur up to $4.0 billion of new secured indebtedness
    pursuant to a waiver letter agreement with the NY Fed. AIG will
    need to obtain the NY Feds consent for us and our
    subsidiaries to incur new secured indebtedness in excess of
    $4.0 billion. Because of the current credit markets and
    AIGs announced plans to sell us, we may not be able to
    obtain secured financing from third parties on favorable terms,
    if at all.
    To repay our contractual obligations as they come due over the
    next twelve months, we will need additional sources of financing
    in excess of the $4 billion, and we may need to seek
    additional funding from AIG, which funding would be subject to
    the consent of the NY Fed.
    We are currently being marketed for divestiture from AIG. If AIG
    sells 51% or more of our equity interests without our
    lenders consent, it would be an event of default under our
    bank term loans and revolving credit agreements and would allow
    our lenders to declare our debt immediately due and payable.
    Accordingly, any such sale of us by AIG would require
    consideration of these credit arrangements. In addition, an
    event of default or declaration of acceleration under our bank
    term loans and revolving credit agreements could also result in
    an event of default under our other debt agreements, including
    the indentures governing our public debt.  Managements
    Plans
      
    at December 31, 2008 we had approximately $800 million
    available for the financing of Airbus aircraft under our 2004
    ECA facility; we financed one aircraft in January, two aircraft
    in February and four aircraft in March, 2009, respectively,
    under this facility. However, as a result of the most recent
    downgrade of our long-term credit rating by Moodys to Baa2
    on March 17, 2009, we will need written consent from the
    agent of our 2004 ECA facility before we can fund future Airbus
    aircraft deliveries under the facility;
    we are currently seeking secured financings from banks and
    manufacturers. Under our existing debt agreements we and our
    subsidiaries are permitted to enter into secured financings
    totaling up to 12.5% of consolidated net tangible assets, as
    defined in the debt agreements, currently approximately
    $5.0 billion. Furthermore, it may be possible, subject to
    receipt of any required consents under the NY Fed facility and
    our bank facilities and term loans, for us to obtain secured
    financing without regard to the 12.5% consolidated net tangible
    asset limit referred to above by doing so through subsidiaries
    that qualify as non-restricted subsidiaries under our public
    debt indentures. We and our subsidiaries are currently permitted
    to incur up to $4.0 billion of new secured indebtedness
    pursuant to a waiver letter agreement with the NY Fed. AIG will
    need to obtain the NY Feds consent for us and our
    subsidiaries to incur new secured indebtedness in excess of
    $4.0 billion; and
    sales of aircraft. 18




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##### Table of Contents



Managements
    Assessment and Conclusion
    
    credit ratings downgrade risk which could further prevent us
    from accessing public debt markets and our 2004 ECA facility;
    potential divestiture of ILFC from AIG and the default
    provisions that could be triggered by a 51% change in ownership;
    financing requirements for future debt repayments and aircraft
    purchase commitments; and
    cash flows from operations, including potential non-performance
    of lessees and the mitigation of such impact on revenue due to
    repossession rights, security deposits and overhaul rentals.        Liquidity
    
    Commercial Paper: We had $4.6 billion in commercial
    paper outstanding and had access to borrow an additional
    $1.4 billion under our commercial paper program.
    Revolving Credit Agreement:We had $6.5 billion in
    revolving credit facilities, all of which was available to us. 19




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##### Table of Contents




    Public Debt: We had an automatic shelf registration
    statement effective with the Securities and Exchange Commission
    for the sale of an unlimited amount of debt securities. We had
    established two medium-term note programs under the registration
    statement. We had $900 million available under our retail
    note program and $3.3 billion available under our
    medium-term note program.
    Euro Medium-Term Note Programme: We had approximately
    $3.2 billion available.
    2004 ECA Facility: We had approximately $900 million
    available.  short-term long-term short-term
      Our
    Relationship with AIG
   20




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##### Table of Contents



AIG Loan
    from the NY Fed
  10-K
    AIG Going
    Concern Consideration
  Form 10-K Form 10-K
  Our
    Potential Sale by AIG
    Debt
    Financings
    Liquidity,
 21




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##### Table of Contents



December 31,


December 31,2008


2007(Dollars in thousands)Public bonds and medium-term notes

$
19,748,541


$
21,360,020Bank debt and other term debt


9,995,046



3,625,274Subordinated debt


1,000,000



1,000,000Total public debt, bank debt and subordinated debt


30,743,587



25,985,294Commercial paper


1,752,000



4,498,555Less: Deferred debt discount


(18,919
)


(32,570
)Total debt financing

$
32,476,668


$
30,451,279Selected interest rates and ratios which include the effect of
    derivative instruments:Composite interest rate.


4.51%



5.16%Percentage of total debt at fixed rate


63.89%



73.84%Composite interest rate on fixed debt


5.41%



5.17%Bank prime rate


3.25%



7.25%     Public
    Bonds and Medium-Term Notes
    Maximum


Issued as of


Issued as ofOffering


December 31, 2008


March 15, 2009(Dollars in millions)Registration statement dated August 16, 2006 (including
    $10.0 billion Medium-Term Note Program and
    $1.0 billion Retail Medium-Term Note Program)


Unlimited
(a)

$
6,927


$
6,927Euro Medium-Term Note Programme dated September 2008(b)(c)


7,000



2,334



2,334    (a)
    As a result of our Well Known Seasoned Issuer (WKSI)
    status, we have an unlimited amount of debt securities
    registered for sale.  (b)
    We have hedged the foreign currency risk of the notes through
    foreign currency swaps. 22




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##### Table of Contents



(c)
    This is a perpetual program. As a bond issue matures, the
    principal amount of that bond becomes available for new
    issuances under the program.  Bank
    Credit Facilities
  Revolving Credit Facilities:
  Export Credit Facilities:
        Term Loans:
 23




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##### Table of Contents



Subordinated
    Debt
  (i) (ii) 10-year (iii) 30-year
  Commercial
    Paper
    Management
    Discussion and Analysis of Financial Condition and Result of
    Operations  Liquidity
  Commercial
    Paper Funding Facility
    Notes to Consolidated Financial Statements.
  Derivatives
  Accounting for Derivative
    Instruments and Hedging Activities
     24




---



##### Table of Contents



Fair Value Measurements
  Credit
    Ratings
    Rating Agency

Short-Term Debt

Long-Term Debt

Credit Watch/Review

Date of Last ActionFitch

F1

A

Evolving

September 17, 2008Moodys

P-2

Baa2

Negative

March 17, 2009S&P

A-2

BBB+

Developing

January 21, 2009         Existing
    Commitments
  Commitments Due by YearTotal


2009


2010


2011


2012


2013


Thereafter(Dollars in thousands)Public, Bank and Term Debt

$
29,743,587


$
6,170,438


$
6,505,267


$
7,427,213


$
4,105,107


$
3,824,970


$
1,710,592Commercial Paper


1,752,000



1,752,000



















Subordinated Debt


1,000,000























1,000,000Interest Payments on Debt Outstanding(a)(b)


7,079,131



1,318,951



1,056,829



750,811



443,131



263,128



3,246,281Operating Leases(c)


81,770



10,470



11,515



11,958



12,439



12,938



22,450Pension Obligations(d)


8,999



1,346



1,405



1,463



1,526



1,595



1,664Tax Benefit Sharing Agreement Due to AIG


85,000



85,000



















Purchase Commitments


16,677,100



3,027,800



242,700



205,000



639,400



2,277,900



10,284,300Total

$
56,427,587


$
12,366,005


$
7,817,716


$
8,396,445


$
5,201,603


$
6,380,531


$
16,265,287  25




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##### Table of Contents



Contingent
    Commitments
  Contingency Expiration by YearTotal


2009


2010


2011


2012


2013


Thereafter(Dollars in thousands)Asset Value Guarantees(e)

$
560,726


$



$



$
27,841


$
78,950


$
96,003


$
357,932Lines of Credit


50,000







50,000















Total(f)

$
610,726


$



$
50,000


$
27,841


$
78,950


$
96,003


$
357,932    (a)
    Future interest payments on floating rate debt are estimated
    using floating interest rates in effect at December 31,
    2008.  (b)
    Includes the effect of interest rate and foreign currency
    derivative instruments.  (c)
    Excludes fully defeased aircraft sale-lease back transactions.
    Minimum rentals have not been reduced by minimum sublease
    rentals of $8,955 in the future under non-cancellable subleases.  (d)
    Our pension obligations are a part of intercompany expenses,
    which AIG allocates to us on an annual basis. The amount is an
    estimate of such allocation. The column Thereafter
    consists of the 2014 estimated allocation. The amount allocated
    has not been material to date.  (e)
    From time to time we participate with airlines, banks, and other
    financial institutions to assist in financing aircraft by
    providing asset value 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 loss. Guarantees entered into after December 31, 2002,
    are recorded at fair value in accordance with FASB
    Interpretation (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.  (f)
    Excluded from total contingent commitments are
    $121.5 million of unrecognized tax benefits, excluding
    interest and penalties. The future cash flows of these
    liabilities are uncertain and we are unable to make reasonable
    estimates of the outflows. Also see Note G of Notes to
    Consolidated Financial Statements.  Results
    of Operations
  2008
    Compared to 2007
  (i) (ii) (iii) (i) (ii) (iii) (iv)
   26




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##### Table of Contents



(i) (ii) (iii) (i) (ii)
  (i) (ii)
    ILFC
    Composite Interest Rates and Prime Rates
  
  Notes to
    Consolidated Financial Statements
   27




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##### Table of Contents



(i) (ii)
  (i) (ii)
  (i) Notes to the Consolidated Financial
    Statements (ii)
      Notes to the Consolidated Financial Statements
  Results
    of Operations
  2007
    Compared to 2006
  (i) (ii) (iii)
   28




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##### Table of Contents



(i) (ii) (iii)
  (i) (ii)
  Notes to Consolidated
    Financial Statements
      (i) (ii) (i) Notes to the Consolidated
    Financial Statements (ii)
    Notes to Consolidated Financial Statements.
    Notes to the
    Consolidated Financial Statements
  Critical
    Accounting Policies and Estimates
   29




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##### Table of Contents



Lease Revenue Past-due take-off
    Flight Equipment Marketing
  Provision for Overhauls
    Flight Equipment 25-year 25-year
   30




---



##### Table of Contents



Risk Factors
  Derivative Financial Instruments:
  Fair Value Measurements:
    Income Taxes: Accounting for Income Taxes and FASB
    Interpretation No. 48, Accounting for Uncertainty in
    Income Taxes.
 31




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##### Table of Contents



New
    Accounting Pronouncements
  Fair Value Measurements.
  157-1, Application of SFAS No. 13 and Other Accounting
    Pronouncements that Address Fair Value Measurements for Purposes
    of Lease Classification or Measurement Under
    Statement 13.
  FAS 157-3, Determining the Fair Value of a Financial Asset When
    the Market for That Asset Is Not Active.
  The Fair Value Option for Financial Assets and
    Financial Liabilities.
  Business Combinations
  Noncontrolling interest in Consolidated Financial
    Statements, an amendment of Accounting Research Bulletin
    No. 51.
  Disclosures about Derivative Instruments and Hedging
    Activities  an amendment of FASB Statement No.
    133.
  No. FIN 39-1, Amendment of FIN No. 39.
  The Hierarchy of Generally Accepted Accounting
    Principles.
  No. FAS 133-1 FIN 45-4, Disclosures about Credit Derivatives and Certain
    Guarantees: An amendment of FASB Statement No. 133 and FASB
    Interpretation No. 45.
  Disclosures by Public Entities
    (Enterprises) about Transfers of Financial Assets and Interests
    in Variable Interest Entities.
  99-20-1, Amendments to the Impairment Guidance of EITF Issue
    No. 99-20.
  Notes to
    Consolidated Financial Statements.
 Item
    7A. Quantitative and Qualitative Disclosures About
    Market Risk       32




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##### Table of Contents



re-pricing re-priced.
  ILFC
    Market Risk
  December 31, 2008


December 31, 2007Average


High


Low


Average


High


Low(Dollars in millions)Combined

$
53.2


$
96.2


$
36.1


$
70.0


$
102.3


$
38.5Interest Rate


53.7



97.6



36.5



69.9



102.2



38.8Currency


1.0



1.6



0.7



0.9



1.2



0.7    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  (A) Evaluation
    of Disclosure Controls and Procedures
    Rules 13a-15(e) 15d-15(e)
  (B) Managements
    Report on Internal Control over Financial Reporting
   33




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##### Table of Contents



Internal Control 
    Integrated Framework Internal Control  Integrated
    Framework
    Variable
    Interest Entities
    (C) Changes
    in Internal Control Over Financial Reporting
    Item
    9B. Other Information   34




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##### Table of Contents



PART
    III Item
    14.  Principal Accountant Fees and
    Services    2008


2007Audit Fees(a)

$
1,300,000


$
1,300,000Tax Fees(b)


412,000



398,890Total Fees

$
1,712,000


$
1,698,890      (a)
    
    Audit Fees consist of fees for professional services provided in
    connection with the audits of our financial statements, services
    rendered in connection with our registration statements filed
    with the Securities and Exchange Commission, the delivery of
    consents and the issuance of comfort letters. This also includes
    Sarbanes-Oxley Section 404 work performed at ILFC for
    AIGs 2008 and 2007 assessment.(b)
    
    Tax Fees consist of the aggregate fees for services rendered for
    tax compliance, tax planning and tax advice.   PART
    IV Item
    15.  Exhibits and Financial Statement
    Schedules     35




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##### Table of Contents



INTERNATIONAL
    LEASE FINANCE CORPORATION AND SUBSIDIARIES
  FORM 10-K
 Items 8, 15(a), and 15(b)
  INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
    PageReport of Independent Registered Public
    Accounting Firm


39Consolidated Financial Statements:Balance Sheets at December 31, 2008 and
    2007


40Statements of Income for the years ended
    December 31, 2008, 2007 and 2006


41Statements of Shareholders Equity for the
    years ended December 31, 2008, 2007 and 2006


42Statements of Cash Flows for the years ended
    December 31, 2008, 2007 and 2006


43Notes to Consolidated Financial Statements


45     Report of Independent Registered Public
    Accounting Firm on Financial Statements Schedule


77   Schedule Number


Description

PageII


Valuation
    and Qualifying Accounts


78       ExhibitNumber


Description3.1


Restated Articles of Incorporation of the Company (filed as an
    exhibit to Form 10-Q for the quarter ended September 30,
    2008 and incorporated herein by reference).3.2


Amended and Restated By-Laws of the Company (filed as an exhibit
    to Form 10-Q for the quarter ended September 30, 2008 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. 333-49566
    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). 36




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##### Table of Contents



ExhibitNumber


Description4.8


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


Seventh Supplemental Indenture, dated as of October 8,
    2004, to the indenture between the Company and U.S. Bank
    National Association (filed as an exhibit to
    Form 8-K
    dated October 14, 2004 and incorporated herein by
    reference).4.12


Eighth Supplemental Indenture, dated as of October 5, 2005,
    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, 2005 and incorporated
    herein by reference).4.13


Ninth Supplemental Indenture, dated as of October 5, 2006,
    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, 2007 and incorporated
    herein by reference).4.14


Tenth Supplemental Indenture, dated as of October 9, 2007,
    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, 2007 and incorporated
    herein by reference).4.15


Agency Agreement (Amended and Restated), dated
    September 15, 2006, by and among the Company, Citibank,
    N.A. and Dexia Banque Internationale à Luxembourg,
    société anonyme (filed as an exhibit to
    Form 8-K,
    event date September 20, 2006, and incorporated herein by
    reference).4.16


Supplemental Agency Agreement, dated September 7, 2007,
    among the Company, Citibank, N.A. and Dexia Banque
    Internationale à Luxembourg, société anonyme
    (filed as an exhibit to
    Form 8-K,
    event date September 7, 2007, and incorporated herein by
    reference).4.17


Supplemental Agency Agreement, dated September 5, 2008,
    among the Company, Citibank, N.A. and Dexia Banque
    Internationale à Luxembourg, société anonyme
    (filed as an exhibit to
    Form 8-K,
    event date September 8, 2008, and incorporated herein by
    reference).4.18


Indenture, dated as of August 1, 2006, between the Company
    and Deutsche Bank Trust Company Americas, as Trustee (filed
    as Exhibit 4.1 to Registration Statement
    No. 333-136681
    and incorporated herein by reference).10.1


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 $2,643,660,000 (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) and, as most recently amended, as of May 30,
    2006, to increase the size of the facility to $3,643,660,000,
    May 30, 2007, to extend the termination until May 2008, and
    May 29, 2008, to extend the termination until May 2009
    (filed as an exhibit to Form 10-Q for the quarter ended
    June 30, 2008 and incorporated herein by reference).10.2


$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).10.3


Amendment No. 1 to the $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 8-K,
    event date October 18, 2006, and incorporated herein by
    reference). 37




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##### Table of Contents



ExhibitNumber


Description10.4


$2,000,000,000 Five-Year Revolving Credit Agreement dated as of
    October 14, 2005, among the Company, CitiCorp USA, Inc
    as Administrative Agent, and the other financial institutions
    listed therein (filed as an exhibit to Form 8-K, event date
    October 14, 2005, and incorporated herein by reference).10.5


Amendment No. 1 to the $2,000,000,000 Five-Year Revolving
    Credit Agreement dated as of October 14, 2005, among the
    Company, CitiCorp USA, Inc., as Administrative Agent, and the
    other financial institutions listed therein (filed as an exhibit
    to
    Form 8-K,
    event date October 18, 2006, and incorporated herein by
    reference).10.6


$2,500,000,000
    Five-Year
    Revolving Credit Agreement, dated as of October 13, 2006,
    among the Company, CitiCorp USA, Inc., as Administrative Agent,
    and the other financial institutions listed therein (filed as an
    exhibit to
    Form 8-K
    event date October 18, 2006 and incorporated herein by
    reference).12


Computation of Ratio of Earnings to Fixed Charges and Preferred
    Stock Dividends.23


Consent of PricewaterhouseCoopers LLP.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.  38




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  To The
    Shareholders and Board of Directors
           39




---



##### Table of Contents



INTERNATIONAL
    LEASE FINANCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except share and per share
    amounts)
  December 31,2008


2007ASSETSCash, including interest bearing accounts of
    $2,382,068 (2008) and $171,609 (2007)

$
2,385,948


$
182,772Current income taxes






138,405Notes receivable, net of allowance


81,327



111,427Net investment in finance and sales-type leases


301,759



307,083Flight equipment under operating leases


55,372,328



52,174,479Less accumulated depreciation


12,152,189



10,376,81943,220,139



41,797,660Deposits on flight equipment purchases


568,549



794,239Lease receivables and other assets


478,944



428,836Derivative assets, net


88,203



863,719Variable interest entities assets


98,746



112,059Deferred debt issue costs  less accumulated amortization
    of
    $131,527 (2008) and $110,017 (2007)


91,899



94,390$
47,315,514


$
44,830,590LIABILITIES AND SHAREHOLDERS EQUITYAccrued interest and other payables

$
441,656


$
461,496Current income taxes


32,083



Tax benefit sharing payable to AIG


85,000



85,000Debt financing, net of deferred debt discount of
    $18,919 (2008) and $32,570 (2007)


31,476,668



29,451,279Subordinated debt


1,000,000



1,000,000Foreign currency adjustment related to foreign currency
    denominated debt


338,100



968,600Security deposits on aircraft, overhauls and other deposits


1,527,884



1,441,870Rentals received in advance


299,961



251,381Deferred income taxes


4,478,250



4,135,137Variable interest entities liabilities


10,699



7,048Commitments and contingencies  Note JSHAREHOLDERS EQUITYMarket Auction Preferred Stock, $100,000 per share liquidation
    value; Series A and  B, each series having 500 shares
    issued and outstanding


100,000



100,000Common stock  no par value; 100,000,000 authorized shares,
    45,267,723 shares issued and outstanding


1,053,582



1,053,582Paid-in capital


600,237



593,455Accumulated other comprehensive (loss) income


(168,065
)


(106,219
)Retained earnings


6,039,459



5,387,961Total shareholders equity


7,625,213



7,028,779$
47,315,514


$
44,830,590    40




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##### Table of Contents



INTERNATIONAL
    LEASE FINANCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands)
  Years Ended December 31,2008


2007


2006REVENUES:Rental of flight equipment

$
4,943,448


$
4,587,611


$
3,984,948Flight equipment marketing


46,838



30,613



71,445Interest and other


98,260



111,599



86,3045,088,546



4,729,823



4,142,697EXPENSES:Interest


1,576,664



1,612,886



1,469,650Effect from derivatives, net of change in hedged items due to
    changes in foreign exchange rates


39,926



5,310



(49,709
)Depreciation of flight equipment


1,864,730



1,736,277



1,570,296Provision for overhauls


264,592



290,134



249,181Flight equipment rent


18,000



18,000



18,968Selling, general and administrative


183,356



152,331



148,097Other expenses


46,557







20,1073,993,825



3,814,938



3,426,590INCOME BEFORE INCOME TAXES


1,094,721



914,885



716,107Provision for income taxes


391,596



310,519



216,840NET INCOME

$
703,125


$
604,366


$
499,267    41




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##### Table of Contents







INTERNATIONAL
    LEASE FINANCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS
    EQUITY
 (Dollars in thousands)
  Market Auction











AccumulatedPreferred Stock


Common Stock





OtherNumber





Number








Comprehensiveof





of





Paid-in


Income


RetainedShares


Amount


Shares


Amount


Capital


(Loss)


Earnings


TotalBalance at December 31, 2005


1,000


$
100,000



45,267,723


$
1,053,582


$
587,484


$
66,401


$
4,365,095


$
6,172,562Common stock dividends


























(32,000
)


(32,000
)Preferred stock dividends


























(5,421
)


(5,421
)Comprehensive income:Net income


























499,267



499,267Other comprehensive incomeCash flow derivative transactions (net of tax of ($33,858))






















(62,879
)






(62,879
)Change in unrealized appreciation securities available-for-sale
    (net of tax of ($433))






















(804
)






(804
)Comprehensive income






























435,584Other(a)


















4,273











4,273Balance at December 31, 2006


1,000



100,000



45,267,723



1,053,582



591,757



2,718



4,826,941



6,574,998Common stock dividends


























(38,000
)


(38,000
)Preferred stock dividends


























(5,346
)


(5,346
)Comprehensive Income:Net income


























604,366



604,366Other comprehensive income:Cash flow derivative transactions (net of tax of ($58,565))






















(108,762
)






(108,762
)Change in unrealized appreciation securities available-for-sale
    (net of tax of ($94))






















(175
)






(175
)Comprehensive income






























495,429Other(a)


















1,698











1,698Balance at December 31, 2007


1,000



100,000



45,267,723



1,053,582



593,455



(106,219
)


5,387,961



7,028,779Common stock dividends


























(46,400
)


(46,400
)Preferred stock dividends


























(5,227
)


(5,227
)Comprehensive Income:Net income


























703,125



703,125Other comprehensive income:Cash flow derivative transactions (net of tax of ($33,145))






















(61,555
)






(61,555
)Change in unrealized appreciation securities available-for-sale
    (net of tax of ($157))






















(291
)






(291
)Comprehensive income






























641,279Other(a)


















6,782











6,782Balance at December 31, 2008


1,000


$
100,000



45,267,723


$
1,053,582


$
600,237


$
(168,065
)

$
6,039,459


$
7,625,213     (a)
    We recorded $4,273 in Paid-in Capital during 2006, $1,698 during
    2007 and $6,782 during 2008 for compensation expenses, debt
    issue cost and other expenses paid by AIG on our behalf for
    which we were not required to pay.   42




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##### Table of Contents








INTERNATIONAL
    LEASE FINANCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
  Years Ended December 31,2008


2007


2006OPERATING ACTIVITIES:Net income

$
703,125


$
604,366


$
499,267Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation of flight equipment


1,864,730



1,736,277



1,570,296Deferred income taxes


376,416



446,655



711,129Change in fair value of derivative instruments


680,816



(292,426
)


(591,331
)Foreign currency adjustment of non-US$ denominated debt


(507,050
)


503,600



577,431Amortization of deferred debt issue costs


31,325



30,229



30,558Amortization of prepaid lease cost


51,108



52,624



12,866Write-off of notes receivable


46,557







20,275Other, including foreign exchange adjustments on foreign
    currency denominated cash


(28,274
)


(331
)


(29,389
)Changes in operating assets and liabilities:(Increase) decrease in lease receivables and other assets


(63,333
)


51,707



13,245Increase (decrease) in accrued interest and other payables


1,382



28,440



(2,323
)Decrease (increase) in current income taxes


170,488



309,938



(299,944
)Decrease in tax benefit sharing payable to AIG






(160,000
)


Increase in rentals received in advance


48,580



28,068



35,356Change in unamortized debt discount


13,651



4,322



5,777Net cash provided by operating activities


3,389,521



3,343,469



2,553,213INVESTING ACTIVITIES:Acquisition of flight equipment under operating leases


(3,236,848
)


(4,705,376
)


(5,268,130
)Payments for deposits and progress payments


(290,748
)


(485,234
)


(713,561
)Proceeds from disposal of flight equipment  net
    of gain


390,868



186,912



690,086Advances on notes receivable


(43,854
)






(48,616
)Collections on notes receivable


9,885



17,607



63,890Collections on finance and sales-type leases  net of
    income amortized


20,900



55,774



25,085Other






5,749



(12,464
)Net cash used in investing activities


(3,149,797
)


(4,924,568
)


(5,263,710
)FINANCING ACTIVITIES:Net change in commercial paper


(2,746,555
)


1,740,908



132,238Loan from AIG


1,671,268







Repayment of loan to AIG


(1,671,268
)






Proceeds from debt financing


9,389,394



3,783,374



6,406,169Payments in reduction of debt financing


(4,754,551
)


(4,146,181
)


(3,896,007
)Debt issue costs


(23,092
)


(23,702
)


(41,711
)Payment of common and preferred dividends


(55,887
)


(39,086
)


(37,421
)Increase in customer deposits


156,165



289,038



135,591Net cash provided by financing activities


1,965,474



1,604,351



2,698,859Net increase (decrease) in cash


2,205,198



23,252



(11,638
)Effect of exchange rate changes on cash


(2,022
)


2,400



10,798Cash at beginning of year


182,772



157,120



157,960Cash at end of year

$
2,385,948


$
182,772


$
157,120   (Table continued on following page)
 43




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##### Table of Contents



INTERNATIONAL
    LEASE FINANCE CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
   Years Ended December 31,2008


2007


2006SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION:Cash paid (received) during the year for:Interest, excluding interest capitalized of $26,597 (2008),
    $37,192 (2007) and $48,038 (2006)

$
1,548,492


$
1,606,049


$
1,370,472Income taxes, net


(155,305
)


(286,763
)


(194,346
)   2008:$462,065 of Deposits on flight equipment purchases was applied
    to Acquisition of flight equipment under operating leases.$53,898 was reclassified from Security deposits on aircraft,
    overhauls and other to Deposits on flight equipment purchases
    for concessions received from manufacturers.An aircraft previously accounted for as an operating lease was
    converted into a sales-type lease in the amount of $15,576.Deferred debt issue Cost and Paid-in capital were reduced by
    $5,742 for debt issue cost paid by AIG on our behalf, which we
    were not required to pay.2007:$640,981 of Deposits on flight equipment purchases was applied
    to Acquisition of flight equipment under operating leases.$127,458 was reclassed from Security and other deposits to
    Deposits on flight equipment for concessions received from
    manufacturers.An aircraft previously accounted for as an operating lease was
    converted into a sales-type lease in the amount of $74,426.Certain credits from aircraft and engine manufacturers in the
    amount of $41,680 reduced the basis of Flight equipment
    under operating leases and increased Lease receivables and other
    assets.$9,120 of Notes receivable and $5,529 of Lease receivable
    and other assets were exchanged for Flight equipment
    of $14,649.2006:$825,804 of Deposits on flight equipment purchases was applied
    to Acquisition of flight equipment under operating leases.$41,225 was reclassified from Security deposits on aircraft,
    overhauls and other to Deposits on flight equipment purchases
    for concessions received from manufacturers.Notes in the amount of $6,000 were received as partial payment
    for flight equipment sold with a net book value of $63,665.Certain credits from aircraft and engine manufacturers in the
    amount of $100,535 reduced the basis of Flight equipment under
    operating leases and increased Lease receivables and other
    assets.    44




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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:
  Parent Company:
  Consideration
    of ILFCs Ability to Continue as a Going Concern:
  Recent Events and Current Situation
  
    In September 2008, due to a decrease in liquidity in the short
    term commercial paper market and liquidity concerns with AIG
    that led to downgrades of our short-term debt rating, we became
    unable to issue commercial paper. This market remains
    unavailable to us and we cannot determine when it may be
    available to us again.
    Since September 2008, due to the challenges facing AIG and the
    turmoil in the credit markets, we have also been unable to issue
    unsecured public debt and we cannot determine when the unsecured
    public debt markets may be available to us again.
    AIG experienced liquidity issues and on September 22, 2008,
    entered into a credit facility and a guarantee and pledge
    agreement with the Federal Reserve Bank of New York (NY
    FED). We do not guarantee AIGs obligations under the
    credit facility and none of our assets are pledged to secure
    AIGs obligations under the credit facility. We are,
    however, as a subsidiary of AIG, subject to the covenants under
    the facility. These covenants, among other things, restrict our
    ability to:  
    incur debt;
    encumber our assets;
    enter into sale-leaseback transactions;
    make equity or debt investments in other parties; and
    pay dividends and distributions.    
    Under our existing debt agreements we and our subsidiaries are
    permitted to enter into secured financings totaling up to 12.5%
    of consolidated net tangible assets, as defined in the debt
    agreements, currently approximately $5.0 billion.
    Furthermore, it may be possible, subject to receipt of any
    required consents under the NY Fed facility and our bank
    facilities and term loans, for us to obtain secured financing
    without regard to the 12.5% consolidated net tangible asset
    limit referred to above by doing so through subsidiaries that
    qualify as non-restricted subsidiaries under our public debt
    indentures. We and our subsidiaries are 45




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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)
  currently permitted to incur up to $4.0 billion of new
    secured indebtedness pursuant to a waiver letter agreement with
    the NY Fed. AIG will need to obtain the NY Feds consent
    for us and our subsidiaries to incur new secured indebtedness in
    excess of $4.0 billion. Because of the current credit
    markets and AIGs announced plans to sell us, we may not be
    able to obtain secured financing from third parties on favorable
    terms, if at all.  
    To repay our contractual obligations as they come due over the
    next twelve months, we will need additional sources of financing
    in excess of the $4 billion, and we may need to seek
    additional funding from AIG, which funding would be subject to
    the consent of the NY Fed.
    We are currently being marketed for divestiture from AIG. If AIG
    sells 51% or more of our equity interests without our
    lenders consent, it would be an event of default under our
    bank term loans and revolving credit agreements and would allow
    our lenders to declare our debt immediately due and payable.
    Accordingly, any such sale of us by AIG would require
    consideration of these credit arrangements. In addition, an
    event of default or declaration of acceleration under our bank
    term loans and revolving credit agreements could also result in
    an event of default under our other debt agreements, including
    the indentures governing our public debt.  Managements Plans
    
    at December 31, 2008 we had approximately $800 million
    available for the financing of Airbus aircraft under our 2004
    Export Credit Agency (ECA) facility; we financed one
    aircraft in January, two aircraft in February and four aircraft
    in March, 2009, respectively, under this facility. However, as a
    result of the most recent downgrade of our long-term credit
    rating by Moodys to Baa2 on March 17, 2009, we will
    need written consent from the agent of our 2004 ECA facility
    before we can fund future Airbus aircraft deliveries under our
    2004 ECA facility;
    we are currently seeking secured financings from banks and
    manufacturers. Under our existing debt agreements we and our
    subsidiaries are permitted to enter into secured financings
    totaling up to 12.5% of consolidated net tangible assets, as
    defined in the debt agreements, currently approximately
    $5.0 billion. Furthermore, it may be possible, subject to
    receipt of any required consents under the NY Fed facility and
    our bank facilities and term loans, for us to obtain secured
    financing without regard to the 12.5% consolidated net tangible
    asset limit referred to above by doing so through subsidiaries
    that qualify as non-restricted subsidiaries under our public
    debt indentures. We and our subsidiaries are currently permitted
    to incur up to $4.0 billion of new secured indebtedness
    pursuant to a waiver letter agreement with the NY Fed. AIG will
    need to obtain the NY Feds consent for us to incur new
    secured indebtedness in excess of $4.0 billion; and
    sales of aircraft.     46




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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)
      Managements Assessment and
    Conclusion
  
    credit ratings downgrade risk which could further prevent us
    from accessing public debt markets and our 2004 ECA facility;
    potential divestiture of ILFC from AIG and the default
    provisions that could be triggered by a 51% change in ownership;
    financing requirements for future debt repayments and aircraft
    purchase commitments; and
    cash flows from operations, including potential non-performance
    of lessees and the mitigation of such impact on revenue due to
    repossession rights, security deposits and overhaul rentals.        Principles of Consolidation: Consolidation of
    Variable Interest Entities
  Variable Interest Entities: (i) (ii) (iii) (iv) (i) (ii) (iii) (iv) (v)
 47




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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)
  re-evaluation
  Intercompany Allocations and Fees: Shareholders Equity.
    December 31,Income Statement

2008


2007


2006(Dollars in thousands)Expense (income):Allocation of corporate costs from AIG

$
13,167


$
12,877


$
7,507Management fees paid to subsidiaries of AIG


839



726



643Management fees received


(9,808
)


(9,878
)


(9,678
)Interest expense on loan from AIG


6,825







   December 31,Balance Sheet

2008


2007(Dollars in thousands)Asset (liability):Taxes benefit sharing payable to AIG

$
(85,000
)

$
(85,000
)Accrued corporate costs payable to AIG


(6,092
)


(1,495
)Accrued dividend payable to AIG






(4,260
)Income taxes (payable) receivable to/from AIG


(32,083
)


138,405Net (payable) receivable for management fees and other


(3
)


(577
)   Derivative Financial Instruments
  Lease Revenue:
   48




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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)
      Initial Direct Costs: No. 88-1, Issues Relating to Accounting for Leases. Accounting for Leases.
  Flight Equipment Marketing:
  Provision for Overhauls:
    Cash: Subsequent Events. Debt Financing Subsequent Events
  Foreign Currency:
  Flight Equipment:
 49




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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)
  25-year 25-year
      Accounting for
    the Impairment or Disposal of Long-Lived Assets
  Capitalized Interest:
  Deferred Debt Issue Costs:
  Derivative Financial Instruments: Accounting for Derivative Instruments and Hedging
    Activities,
 50




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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)
    (i) (ii) (iii)
    Fair Value Measurements: Fair Value Measurements Fair
    Value Measurements
  Other Comprehensive Income (Loss): Reporting Comprehensive Income.
  Guarantees:
  Income Taxes:
 51




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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)
      Accounting for Income Taxes Accounting for Uncertainty in Income
    Taxes Accounting for Income Taxes Income Taxes
  Stock-based Compensation: Employee Benefit Plans
  Use of Estimates:
  Reclassifications:
  Recent Accounting Pronouncements:
  SFAS 157: Fair Value
    Measurements. Share-Based
    Payment.
 52




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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)
    FSP 157-1: 157-1, Application of FASB Statement No. 13 and Other
    Accounting Pronouncements That Address Fair Value Measurements
    for Purposes of Lease Classification or Measurement Under
    Statement 13, Accounting for
    Leases,
  FSP
    FAS 157-3: FAS 157-3, Determining the Fair Value of a Financial Asset When
    the Market for That Asset Is Not Active FAS 157-3). FAS 157-3 FAS 157-3
  SFAS 159: The Fair Value Option for
    Financial Assets and Financial Liabilities instrument-by-instrument
  SFAS 141(R): Business
    Combinations
  SFAS 160: Non-controlling Interests in
    Consolidated Financial Statements, an amendment of Accounting
    Research Bulletin No. 51
 53




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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)
    SFAS 161: Disclosures about Derivative
    Instruments and Hedging Activities  an amendment of
    FASB Statement No. 133 (i) (ii) (iii)
  FSP FIN
    39-1: No. FIN 39-1, Amendment of FIN No. 39 FIN 39-1). FIN 39-1 Offsetting of Amounts
    Related to Certain Contracts, FIN 39-1
  SFAS 162: The Hierarchy of Generally
    Accepted Accounting Principles
  FSP
    FAS 133-1
    and
    FIN 45-4: No. FAS 133-1 FIN 45-4, Disclosures about Credit Derivatives and Certain
    Guarantees: An amendment of FASB Statement No. 133 and FASB
    Interpretation No. 45 FAS 133-1 FIN 45-4). FAS 133-1 FIN 45-4 FAS 133-1 FIN 45-4 FAS 133-1 FIN 45-4 FAS 133-1 FIN 45-4 Note J  Commitments and Contingencies
  FSP
    FAS 140-4
    and FIN 46(R)-8: No. FAS 140-4 Disclosures by Public Entities
    (Enterprises) about Transfers of Financial Assets and Interests
    in Variable Interest Entities FAS 140-4 140-4 FAS 140-4 FIN 46(R)-8 See
    Note K  Variable Interest Entities
 54




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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)
  FSP
    EITF 99-20-1: EITF 99-20-1, Amendments to the Impairment Guidance of EITF Issue
    No. 99-20 EITF 99-20-1). EITF 99-20-1 No. 99-20, Recognition of Interest Income and Impairment on
    Purchased Beneficial Interests and Beneficial Interests That
    Continue to Be Held by a Transferor in Securitized Financial
    Assets, Accounting for Certain Investments in Debt and Equity
    Securities EITF 99-20-1
  Note
    B  Notes Receivable
    2008


2007Fixed rate notes with varying interest rates up to 10.3%

$
6,767


$
10,116LIBOR based notes with spreads ranging from .5% to 3.3%


74,560



101,311$
81,327


$
111,427     2009

$
16,0232010(a)


50,8592011


7192012


5152013


3,211Thereafter


10,000$
81,327     (a)
    Includes a balloon payment for a note related to a sale of
    flight equipment.    Note
    C  Net Investment in Finance and Sales-type
    Leases
    December 31,


December 31,2008


2007Total lease payments to be received

$
165,503


$
187,239Estimated residual values of leased flight equipment
    (unguaranteed)


195,737



190,737Less: Unearned income


(59,481
)


(70,893
)Net investment in finance and sales-type leases

$
301,759


$
307,083  55




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note C  Net Investment in Finance Leases
    (Continued)
    2009

$
30,7562010


29,0022011


29,0022012


28,6922013


21,162Thereafter


26,889Total minimum lease payments to be received

$
165,503   Note
    D  Debt Financing
    December 31,2008


2007Commercial Paper

$
1,752,000


$
4,498,555Public Bonds and Medium-Term Notes


19,748,541



21,360,020Bank Debt and Other Term Debt


9,995,046



3,625,274Subordinated Debt


1,000,000



1,000,000Less: Deferred Debt Discount


(18,919
)


(32,570
)$
32,476,668


$
30,451,279     Commercial
    Paper
      Commercial
    Paper Funding Facility
   56




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note D  Debt Financing (Continued)
    Subsequent Events
  Public
    Bonds and Medium-Term Notes
    Maximum


Issued as ofOffering


December 31, 2008Registration statement dated August 16, 2006 (including
    $10.0 billion Medium-Term Note Program and
    $1.0 billion Retail Medium-Term Note Program)


Unlimited
(a)

$
6,927,051Euro Medium-Term Note Programme dated September 2008(b)(c)


7,000,000



2,334,000    (a)
    As a result of our Well Known Seasoned Issuer (WKSI)
    status, we have an unlimited amount of debt securities
    registered for sale.  (b)
    This is a perpetual program. As a bond issue matures, the
    principal amount of that bond becomes available for new
    issuances under the program.  (c)
    We have hedged the foreign currency risk of the notes through
    foreign currency swaps.      Bank
    Credit Facilities
  Revolving Credit Facilities:
 57




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note D  Debt Financing (Continued)
    Export Credit Facilities:
        Term Loans:
 58




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note D  Debt Financing (Continued)
    Subordinated
    Debt
  (i) (ii) 10-year (iii) 30-year
  Existing
    Commitments
    2009

$
6,170,4382010


6,505,2672011


7,427,2132012


4,105,1072013


3,824,970Thereafter


2,710,592$
30,743,587   Credit
    Agreement with AIG Funding
    Other
    Note
    E  Shareholders Equity
  Market
    Auction Preferred Stock
   59




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note E  Shareholders Equity (Continued)
  Paid-in
    Capital
    Accumulated
    Other Comprehensive (Loss) Income
      2008


2007Cumulative unrealized (loss) gain related to cash flow hedges,
    net of tax of $90,497 (2008) and $57,352 (2007)

$
(168,065
)

$
(106,510
)Cumulative unrealized gain related to securities available for
    sale, net of tax of 91 (2007)






291Total accumulated other comprehensive (loss) income

$
(168,065
)

$
(106,219
)   Note
    F  Rental Income
    Year Ended2009

$
4,449,0012010


4,026,0022011


3,362,8342012


2,681,5572013


2,026,575Thereafter


4,046,859$
20,592,828    60




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note
    G  Income Taxes
    2008


2007


2006Current:Federal(a)

$
14,527


$
(145,650
)

$
(491,664
)State


(557
)


7,209



(3,472
)Foreign


1,210



2,305



84715,180



(136,136
)


(494,289
)Deferred(b):Federal


370,968



455,569



700,614State(c)


5,448



(8,914
)


10,515376,416



446,655



711,129$
391,596


$
310,519


$
216,840    (a)
    Including U.S. tax on foreign income.  (b)
    Deferred taxes were also provided (charged) to other
    comprehensive income of $33,302, $58,659, and $34,291 for the
    years ended December 31, 2008, 2007, and 2006, respectively.  (c)
    Includes a charge of $1,080 in 2008, a benefit of $12,854 in
    2007 and a charge of $1,275 in 2006 for revaluation of state
    deferred taxes as a result of a change in our California
    apportionment factor.    2008


2007Deferred Tax LiabilitiesAccelerated depreciation on flight equipment

$
4,951,176


$
4,442,225Straight line rents


39,565



26,512Derivatives


10,260



25,036Investments


894



Total Deferred Tax Liabilities

$
5,001,895


$
4,493,773Deferred Tax AssetsExcess of state income taxes not currently deductible

$
(14,709
)

$
(13,260
)Provision for overhauls


(148,139
)


(131,498
)Capitalized overhauls


(30,214
)


(26,492
)Rent received in advance


(80,233
)


(56,806
)Other comprehensive income


(90,497
)


(57,195
)Accruals and reserves


(55,545
)


(48,583
)Net operating loss carry forward(a)


(75,386
)


Other


(28,922
)


(24,802
)Total Deferred Tax Assets(b)

$
(523,645
)

$
(358,636
)Net Deferred Tax Liability

$
4,478,250


$
4,135,137     (a)
    Consists principally of tax attributes generated by us but not
    currently utilized by AIG in the consolidated tax return and
    carried forward to future years, net of reserve for uncertain
    tax positions and audit adjustments related to those net
    operating loss carryforwards. 61




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note G  Income Taxes (Continued)
   (b)
    In making our assessment of the realization of deferred tax
    assets including net operating loss carry forwards, we
    considered all available evidence, including
    (i) current and projected financial reporting
    results; (ii) the carry forward periods for all
    taxable losses; (iii)the projected amount, nature
    and timing of the realization of deferred tax liabilities;
    (iv) implications of our tax sharing agreement with
    AIG; and (v)tax planning strategies that would be
    implemented, if necessary, to accelerate taxable amounts.    2008


2007


2006Computed expected provision at 35%

$
383,152


$
320,210


$
250,638State income tax, net of Federal


3,179



(1,108
)


4,578FSC and ETI benefit










(46,744
)Foreign Taxes


97



1,062



849IRS Audit Adjustments(a)


2,863



1,709



6,502Other(b)


2,305



(11,354
)


1,017Provision for Income Taxes

$
391,596


$
310,519


$
216,840    (a)
    We are periodically advised of certain IRS and other adjustments
    identified in the U.S. Consolidated AIG tax return which are
    attributable to our operations. Under our tax sharing
    arrangement, we provide a charge or credit for the effect of the
    adjustments and the related interest in the period we are
    advised of such adjustments and interest.  (b)
    2007 consists of adjustments to prior year tax returns.       62




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note G  Income Taxes (Continued)
    Balance at January 1, 2007

$
38,381Additions based on tax positions related to 2007(a)


51,600Additions for tax positions of prior years


265Reductions for tax positions of prior years(b)


(12,688
)Settlements(c)


(13,782
)Balance at December 31, 2007

$
63,776Additions based on tax positions related to 2008(a)


50,980Additions for tax positions of prior years


10,502Reductions for tax positions of prior years(b)


(3,776
)Balance at December 31, 2008(d)

$
121,482    (a)
    Consists principally of FSC and ETI benefits.  (b)
    Items attributable to prior restatements submitted to the IRS as
    adjustments.  (c)
    Amounts paid to AIG related to the settlement of prior years
    audit adjustments for the years 1991 to 1996. In addition, we
    paid $10,158 in interest and penalties during 2007.  (d)
    $29,544 is recorded in current taxes and $91,938 is recorded in
    deferred taxes.      (i) (ii) (iii)
  Note
    H  Other Information
  Concentration
    of Credit Risk
   63




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note H  Other Information (Continued)
      Segment
    Information
    Geographical
    Concentration
      2008


2007


2006Amount


%


Amount


%


Amount


%Europe

$
2,241,742



45.3
%

$
2,060,196



44.9
%

$
1,806,744



45.3
%Asia/Pacific


1,432,252



29.0



1,229,141



26.8



1,011,655



25.4The Middle East and Africa


558,553



11.3



528,095



11.5



419,460



10.5U.S. and Canada


444,921



9.0



536,313



11.7



496,225



12.5Central, South America and Mexico


265,980



5.4



233,866



5.1



250,864



6.3$
4,943,448



100
%

$
4,587,611



100
%

$
3,984,948



100
%     2008


2007


2006Amount


%


Amount


%


Amount


%China

$
835,722



16.9
%

$
714,181



15.6
%

$
563,299



14.1
%France


515,165



10.4



448,538



9.8



425,964



10.7   Currency
    Risk
    Note I  Employee
    Benefit Plans
   64




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note I  Employee Benefit Plans
    (Continued)
  Pension
    Plans
      Stock-Based
    and Other Compensation Plans
  (i) (ii) (iii) 2005-2006 (iv) (v) (vi)
  Share-Based Payment,
  Note
    J  Commitments and Contingencies
  Aircraft
    Orders
        Guarantees
  Asset Value Guarantees:
 65




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note J  Commitments and Contingencies
    (Continued)
    Aircraft Loan Guarantees:
    Stand
    by Lines of Credit
    Leases
    2009

$
10,4702010


11,5152011


11,9582012


12,4392013


12,938Thereafter


22,450Total(a)

$
81,770     (a)
    
    Minimum rentals have not been reduced by minimum sublease
    rentals of $8,955 in the future under non-cancelable subleases.  Contingencies
  737-300
 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  Commitments and Contingencies
    (Continued)
      Note K 
    Variable
    Interest Entities    Accounting
    for Transfers and Servicing of Financial Assets and
    Extinguishments of Liabilities-a replacement of FASB Statement
    No. 125
  Entities where we are the Primary
    Beneficiary:
    Entities where we are not the Primary
    Beneficiary:
   67




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
   Note K 
    Variable
    Interest Entities (Continued)    Note L 
    Fair Value Measurements
    
    Defines fair value as the price that would be received to sell
    an asset or paid to transfer a liability in an orderly
    transaction between market participants at the measurement date
    and establishes a frame work for measuring fair value;
    Establishes a three-level hierarchy for fair value measurements
    based upon the transparency of inputs to the valuation of an
    asset or liability as of the measurement date; and
    Expands disclosures about instruments measured at fair value.  Fair
    Value Measurements on a Recurring Basis
      Derivative
    Contracts
  Derivative Financial
    Instruments
    
    Credit Valuation Adjustment (CVA)  The
    CVA adjusts the valuation of derivatives to account for
    nonperformance risk of our counterparty with respect to all net
    derivative assets positions.   68




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
   Note L 
    Fair Value Measurements (Continued)
  
    Market Valuation Adjustment (MVA)  The
    MVA adjusts the valuation of derivatives to reflect the fact
    that we are an end-user of derivative products. As
    such the valuation is adjusted to take into account the
    bid-offer spread (the liquidity risk), as we are not a dealer of
    derivative products. The MVA is accounted for as a decrease to
    the net derivative position with the corresponding increase or
    decrease reflected in OCI for derivatives designated as cash
    flow hedges.    Marketable
    Securities
    Fair
    Value Measurements on a Non-Recurring Basis
    
    Aircraft: We record aircraft at fair value when we
    determine the carrying value may not be recoverable, in
    accordance with SFAS No. 144, Accounting for
    the Impairment or Disposal of Long-Lived Assetsand
    other accounting pronouncements requiring remeasurements at fair
    value. The fair value is measured using an income approach based
    on the present value of cash flows from contractual lease
    agreements and projected future lease payments, including
    contingent rentals, net of expenses, which extend to the end of
    the aircrafts economic life in its highest and best use
    configuration, as well as a disposition value, based on
    expectations of market participants.
    Notes Receivable: We evaluate the fair value of our
    secured notes receivables using an income approach, which is
    based upon the present value of the expected cash flows of the
    underlying aircraft measured using the methodology described
    above. With regard to unsecured notes receivable, we also
    measure the fair value using an income approach based upon the
    net present value of expected cash flows of the underlying loan
    agreement.
    AVGs: We measure the fair value of AVGs in accordance
    with FIN No. 45, Guarantors Accounting
    and Disclosure Requirements for Guarantees, including Indirect
    Guarantees of Indebtedness of Others(FIN 45) as permitted under SFAS 157.
    In accordance with FIN 45, we measure the fair value of
    AVGs at the inception of the agreement based upon the proceeds
    received. Subsequent non-recurring fair value measurements are
    based upon the differential between the contractual strike price
    and the fair value of the underlying aircraft, measured using
    the methodology described above. 69




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
   Note L 
    Fair Value Measurements (Continued)
   Fair
    Value Hierarchy
    
    Level 1: Fair value measurements that are quoted
    prices (unadjusted) in active markets. Market price data
    generally is obtained from exchange markets. Our actively traded
    listed common stocks are measured at fair value on a recurring
    basis and classified as level 1 inputs.
    Level 2: Fair value measurements based on inputs
    other than quoted prices included in Level 1 that are
    observable for the asset or liability, either directly or
    indirectly. Level 2 inputs include quoted prices for similar
    assets and liabilities in active markets other than quoted
    prices that are observable for the asset or liability, such as
    interest rates and yield curves that are observable at commonly
    quoted intervals. Our derivative assets and liabilities are
    measured on a recurring basis and classified as level 2.
    Level 3: Fair value measurement based on valuation
    techniques that use significant inputs that are unobservable.
    These measurements include circumstances in which there is
    little, if any, market activity for the asset or liability. In
    certain cases, the inputs used to measure fair value may fall
    into different levels of the fair value hierarchy. In such
    cases, the level in the fair value hierarchy, within which the
    fair value measurement in its entirety falls, is determined
    based on the lowest level input that is significant to the fair
    value measurement in its entirety. Our assessment of the
    significance of a particular input to the fair value measurement
    in its entirety requires judgment. In making the assessment, we
    consider factors specific to the asset or liability. Assets and
    liabilities measured at fair value on a non-recurring basis and
    classified as level 3 include aircraft, notes receivable,
    net investment in finance leases, and AVGs.  Assets
    and Liabilities Measured at Fair Value on a Recurring
    Basis
    TotalCounterparty


December 31,Level 1


Level 2


Level 3


Netting (a)


2008(Dollars in thousands)Derivative assets

$



$
192,568
(b)

$



$
(104,365
)

$
88,203Derivative liabilities






(104,365
)






104,365



Total derivative assets, net

$



$
88,203


$



$



$
88,203     (a)
    
    As permitted under FIN 39,Offsetting Amounts
    Related to Certain Contracts, we have elected to
    offset derivative assets and derivative liabilities under our
    master netting agreement.(b)
    
    The balance includes CVA and MVA adjustments of $19,800. 70




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
   Note L 
    Fair Value Measurements (Continued)
     (Dollars in thousands)Derivatives:Total fair value at December 31, 2007

$
863,719Credit value and market value adjustment of fair value recorded
    in OCI


(13,485
)Total fair value at January 1, 2008

$
850,234Change in fair value subsequent to January 1, 2008:Effective portion recorded in OCI


(581,208
)Ineffective portion recorded in income


(18,518
)Credit value and market value adjustments recorded in OCI for
    the year ended December 31, 2008


(6,315
)Change in accrued interest


(10,430
)Swap maturity settlements


(123,450
)Loss on matured swaps


(22,110
)Total fair value at December 31, 2008

$
88,203   Assets
    and Liabilities Measured at Fair Value on a Non-recurring
    Basis
    Note M
     Derivative Financial Instruments
       Currency

2008


2007(in thousands)USD($)

$
1,215,309


$
1,360,105EUR()


1,600,000



2,850,000GBP(£)

£
300,000


£
300,000  71




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note M  Derivative Financial Instruments
    (Continued)
    Notional Amount(in thousands)USD


EUR


GPB2009

$







£
300,0002010


300,000



600,000



2011






1,000,000



2012










2013










Thereafter(a)


915,309







Total

$
1,215,309



1,600,000


£
300,000    (a)
    Notionals are amortizing. $915,309 is the notional at
    December 31, 2008.  Fair Value
    Measurements
  Cash flow
    hedge transactions recorded in other comprehensive (income)
    loss
  2008


2007


2006(Dollars in thousands)Effective portion of change in fair market value of
    derivatives(a)

$
581,208


$
(261,603
)

$
(215,041
)Credit value and market value adjustments


19,800







Amortization of balances of de-designated hedges and other
    adjustments


742



(36,929
)


23,708Foreign exchange component of cross currency swaps (charged)
    credited to income


(507,050
)


465,859



288,070Income tax effect


(33,145
)


(58,565
)


(33,858
)Total cash flow hedge transactions

$
61,555


$
108,762


$
62,879    (a)
    Includes losses realized on swaps that matured during 2008 and
    2007 that did not have hedge accounting treatment under SFAS
    133, or were not perfectly effective, for the entire term of the
    contracts. The amounts included are $22,110 in 2008 and $3,732
    in 2007. 72




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note M  Derivative Financial Instruments
    (Continued)
     2008


2007


2006(Income) lossChanges in fair value of derivative instruments with no hedge
    accounting treatment under SFAS 133

$



$
(17,546
)

$
(284,027
)Offsetting changes in fair value of foreign denominated debt
    related to contracts with no hedge accounting treatment under
    SFAS 133






33,572



247,264Changes in fair value of derivative instruments accounted for as
    fair value hedges










(47,731
)Offsetting changes in value of foreign denominated debt related
    to fair value hedges










47,288Ineffectiveness of cash flow hedges


18,518



(11,429
)


(8,534
)Amortization of Other Comprehensive Income and other adjustments
    related to derivative instruments de-designated from cash flow
    hedges(a)


21,408



713



(3,969
)Total effect on earnings related to derivative instruments and
    hedged items

$
39,926


$
5,310


$
(49,709
)    (a)
    Includes losses realized on swaps that matured during 2008, and
    2007 and did not have hedge accounting treatment under
    SFAS 133, or were not perfectly effective, for the entire
    term of the contracts. The amounts included are $22,110 in 2008
    and $3,732 in 2007.    2008


2007


2006Lease revenue

$
6,718


($
799
)

($
12,063
)     Offsetting Amounts Related to Certain
    Contracts, Fair Value Measurements
   73




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note
    N  Fair Value Disclosures of Financial
    Instruments
    Cash:
  Notes receivable:
  Debt Financing: long-term fixed-rate year-end.
  Derivatives:
  AVGs:
    2008


2007Carrying Amount


Fair Value


Carrying Amount


Fair Valueof Asset


of Asset


of Asset


of Asset(Liability)


(Liability)


(Liability)


(Liability)Cash

$
2,385,948


$
2,385,948


$
182,772


$
182,772Notes receivable


81,327



71,012



111,427



105,620Debt financing (including foreign currency adjustment and
    subordinated debt and excluding debt discount)


(32,833,687
)


(28,818,662
)


(31,452,449
)


(31,872,963
)Derivative assets, net


88,203



88,203



863,719



863,719AVGs


(12,778
)


(15,209
)


(11,258
)


(14,115
)   Note
    O  Flight Equipment Rent
   74




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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)
    QuarterFirst


Second


Third


Fourth


TotalYear Ended December 31, 2008Total Revenues

$
1,215,214


$
1,313,114


$
1,298,953


$
1,261,265


$
5,088,546Pre-tax Income(a)


231,985



332,210



349,266



181,260
(b)


1,094,721Net Income


149,502



214,063



224,606



114,954



703,125Year Ended December 31, 2007Total Revenues

$
1,090,677


$
1,157,269


$
1,255,507


$
1,226,370


$
4,729,823Pre-tax Income


187,498



194,557



274,568



258,262



914,885Net Income


119,160



125,377



184,419



175,410



604,366     (a)
    In the third quarter of 2008, we recorded an out-of-period
    adjustment which increased pretax income by $51.2 million.
    The out-of-period adjustment resulted from the adoption of
    SFAS 157 as of January 1, 2008. During the first and
    second quarters of 2008, we recorded charges to pre-tax income
    of $40.0 million and $11.2 million respectively for
    CVA and MVA on our cash flow hedges. In the third quarter, we
    concluded that the CVA and MVA on our cash flow hedges should
    have been recorded in Other comprehensive income
    (OCI) in accordance with SFAS No. 133. See
    Note L  Fair Value Measurementsfor more
    information on SFAS 157. The Board of Directors was
    informed of this out-of-period adjustment. We do not believe the
    effect of the out-of-period adjustment is material to any period
    affected.  (b)
    In the fourth quarter of 2008, we recorded the following:
    (i) charges aggregating $46,557 to writedown two
    secured notes to fair value and (ii) charges aggregating
    $51,414 related to put fees on maturing debt and losses on
    matured swaps.    Note
    Q  Subsequent Events
  Credit
    Rating Downgrade
      Export
    Credit Facilities
   75




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 (Dollars in thousands)
  Note Q  Subsequent Events (Continued)
    Loan from
    AIG Funding
    76




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    on
    Financial Statement Schedule  To the
    Shareholders and Board of Directors
    of International Lease Finance Corporation:
  Form 10-K Form 10-K.
      77




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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. EADDITIONSCharged toBalance at


Charged to


OtherBeginning of


Costs and


Accounts 


Deductions 


Balance atDescription

Period


Expenses


Describe


Describe(a)


End of Period(Dollars in thousands)Reserve for overhaul:Year ended December 31, 2008

$
372,324


$
264,592






$
217,587


$
419,329Year ended December 31, 2007


245,369



290,134







163,179



372,324Year ended December 31, 2006


142,053



249,181







145,865



245,369     (a)
    Reimbursements to lessees for overhauls performed and amounts
    transferred to buyers for aircraft sold. 78




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##### Table of Contents





SIGNATURES
      INTERNATIONAL LEASE FINANCE CORPORATION
  By
    /s/ALAN
    H. LUND        Signature

Title

Date/s/  STEVEN
    F. UDVAR-HAZYSteven
    F. Udvar-Hazy

Chairman of the Board and Chief Executive Officer
    (Principal Executive Officer)

March 24, 2009/s/  ALAN
    H. LUNDAlan
    H. Lund

Vice Chairman of the Board
    and Chief Financial Officer
    (Principal Financial Officer)

March 24, 2009/s/  LESLIE
    L. GONDALeslie
    L. Gonda

Director, Chairman of the Executive Committee

March 24, 2009/s/  JOHN
    L. PLUEGERJohn
    L. Plueger

Director, President and Chief Operating Officer

March 24, 2009/s/  LOUIS
    L. GONDALouis
    L. Gonda

Director

March 24, 2009/s/  RICHARD
    H. BOOTHRichard
    H. Booth

Director

March 24, 2009/s/  WILLIAM
    N. DOOLEYWilliam
    N. Dooley

Director

March 24, 2009/s/  ROBERT
    A. GENDERRobert
    A. Gender

Director

March 24, 2009/s/  ELIAS
    F. HABAYEBElias
    F. Habayeb

Director

March 24, 2009/s/  DAVID
    L. HERZOGDavid
    L. Herzog

Director

March 24, 2009/s/  ALAN
    M. PRYORAlan
    M. Pryor

Director

March 24, 2009/s/  KURT
    H. SCHWARZKurt
    H. Schwarz

Senior Vice President, Chief Accounting Officer and
    Controller
    (Principal Accounting Officer)

March 24, 2009  79




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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.
   80