##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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FORM 10-K

ANNUAL REPORT




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(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,
2001

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 0-11350


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.)
|                                                               
|1999 Avenue of the Stars, Los Angeles,
	California              |  | 90067                                
|(Address of principal executive
	offices)                       |  | (Zip Code)                           

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

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

NONE


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

NONE


(Title of class)


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

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

As of March 12, 2001, there were
35,818,122 shares of Common Stock, no par value,
outstanding.

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



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TABLE OF CONTENTS



|             |                                                                                              |  |  |  |  |  |  | 
|------------ | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I      
|             | Item 1.Business                                                                             
|             | Item 2.Properties                                                                           
|             | Item 3.Legal Proceedings                                                                    
|PART II     
|             | Item 5.Market for Registrants Common Equity and Related Stockholder Matters                
|             | Item 6.Selected Financial Data                                                              
|             | Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations
|             | Item 7A.Quantitative and Qualitative Disclosures About Market Risk                          
|             | Item 8.Financial Statements and Supplementary Data                                          
|             | Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART IV     
|             | Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K                     
|SIGNATURES  
|EXHIBIT 4.6 
|EXHIBIT 10.2
|EXHIBIT 10.5
|EXHIBIT 12  
|EXHIBIT 23  



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##### Table of Contents



INTERNATIONAL LEASE FINANCE
CORPORATION

2001 FORM 10-K ANNUAL REPORT



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TABLE OF CONTENTS

|          |  |                                                                                        |  |      |    | 
|--------- |  | -------------------------------------------------------------------------------------- |  | ---- | -- | 
|          |  |                                                                                        |  | Page
|          |  |                                                                                        |  |     
|PART I   
|Item  1.  |  | Business                                                                               |  |      | 1  | 
|Item  2.  |  | Properties                                                                             |  |      | 7  | 
|Item  3.  |  | Legal Proceedings                                                                      |  |      | 9  | 
|PART II  
|Item  5.  |  | Market for Registrants Common Equity and
	Related Stockholder Matters                 |  |      | 9  | 
|Item  6.  |  | Selected Financial Data                                                                |  |      | 10 | 
|Item  7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 11 | 
|Item  7A. |  | Quantitative and Qualitative Disclosures About
	Market Risk                            |  |      | 17 | 
|Item  8.  |  | Financial Statements and Supplementary Data                                            |  |      | 18 | 
|Item  9.  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |      | 18 | 
|PART IV  
|Item 14.  |  | Exhibits, Financial Statement Schedules and
	Reports on Form 8-K                       |  |      | 19 | 



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PART I






Item 1. Business


General

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

As of December 31, 2001, the Companys
lease portfolio consisted of 461 aircraft under operating
lease and four aircraft under finance lease. Additionally, the
Company had 10 aircraft available for lease and provided fleet
management services for 33 aircraft. See
Item 2. Properties  Flight
Equipment. At December 31, 2001, the Company had
committed to purchase 551 aircraft deliverable through 2010
at an estimated aggregate purchase price of $32.1 billion,
of which the Company currently anticipates taking delivery of 84
aircraft in 2002 with an estimated aggregate purchase price of
$4.9 billion. It also had options to purchase an additional
49 aircraft deliverable through 2008 at an estimated
aggregate purchase price of $3.0 billion. See
Item 2. Properties  Commitments.

The Company maintains the mix of flight equipment
to meet its customers needs and to minimize the time that
its aircraft are not leased to customers by purchasing those
models of new and used aircraft which it believes will have the
greatest airline demand and operational longevity.

The Company purchases, and finances the purchase
of, aircraft on terms intended to permit the Company to lease or
sell such aircraft at a profit. The Company typically finances
the purchase of aircraft with borrowed funds and internally
generated cash flow. The Company accesses the capital markets
for such funds at times and on terms and conditions it considers
appropriate. The Company may, but does not necessarily, engage
in financing transactions for specific aircraft. The Company
relies significantly on short- and medium-term financing, and
thereby attempts to manage interest rate exposure. To date, the
Company has been able to purchase aircraft on terms which have
permitted it to lease the aircraft at a profit and has not
experienced any difficulty in obtaining financing.

The Companys aircraft are usually leased on
terms under which the Company does not fully recover the
acquisition cost of such aircraft. Thus, at the termination of a
lease, the Company bears the risk of selling or re-leasing the
aircraft on terms which will cover its remaining cost.

The airline industry is cyclical, economically
sensitive and highly competitive. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations. The Companys revenue and
income may be affected by political or economic instability
abroad, changes in national policy, competitive pressures on
certain air carriers, fuel shortages, labor stoppages,
recessions, and other political or economic events adversely
affecting world or regional trading markets or impacting a
particular customer. The Companys continued success is
partly dependent on managements ability in the future to
develop customer relationships for leasing, sales, remarketing
and management services with those airlines and other customers
best able to maintain their economic viability and survive in a
deregulated environment.

The Company is incorporated in the State of
California and its principal executive offices are located at
1999 Avenue of the Stars, Los Angeles, California 90067.
The Companys telephone and telecopier numbers are
(310) 788-1999 and (310) 788-1990, respectively. The
Company is an indirect wholly owned subsidiary of American
International Group, Inc. (AIG). AIG is a holding
company which through its subsidiaries is primarily engaged in a
broad range of insurance and insurance-related activities,
financial services, retirement savings and asset management in
the United States and abroad. The Common Stock of AIG is listed
on, among others, the New York Stock Exchange.

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Aircraft Leasing

The initial term of the Companys current
leases range in length from one year to 15 years. See
Item 2. Properties  Flight Equipment
for information regarding scheduled lease terminations. Most of
the Companys leases are operating leases under which the
Company does not fully recover its aircraft cost and retains the
benefit and assumes the risk of the residual value of the
aircraft. The Company on occasion also enters into finance and
sales-type leases where the full cost of the aircraft is
substantially recovered over the term of the lease. At
December 31, 2001, four of the Companys leases were
accounted for as finance leases. The aircraft under operating
leases are included as assets on the Companys balance
sheet and depreciation is charged to income over the estimated
useful lives of the aircraft. In accordance with generally
accepted accounting principles, rentals are reported ratably as
revenue over the lease term as they are earned. The Company
attempts to maintain a mix of short-and medium-term leases to
balance the benefits and risks associated with different lease
terms and changing market conditions. Varying lease terms
mitigate the effects of changes in prevailing market conditions
at the time aircraft become eligible for re-lease or sale and
the uncertainty associated with the estimated residual value of
the aircraft at the end of the lease term.

All leases are on a net basis with
the lessee responsible for all operating expenses, which
customarily include fuel, crews, airport and navigation charges,
taxes, licenses, registration and insurance. Normal maintenance
and repairs, airframe and engine overhauls, and compliance with
return conditions of flight equipment on lease are provided by
and paid for by the lessee. Under the provisions of some leases,
for certain airframe and engine overhauls, the lessee is
reimbursed by the Company for costs incurred up to but not
exceeding related hourly rentals paid to the Company by the
lessee. Such rentals are included in the caption Rental of
flight equipment on the Companys Consolidated Statement of
Income. The Company provides a charge to operations for such
reimbursements based on the estimated reimbursements during the
life of the lease, which amount is included in Provision for
overhauls on the Companys Consolidated Statement of
Income. The lessee is responsible for compliance with all
applicable laws and regulations with respect to the aircraft.
The Company requires its lessees to comply with the most
restrictive standards of either the Federal Aviation
Administration (the FAA) or its foreign equivalent.
The Company makes periodic inspections of the condition of its
leased aircraft. Generally, the Company requires a deposit which
is security for the condition of the aircraft upon return to the
Company, the rental payments by the lessee and the performance
of other obligations by the lessee under the lease. In addition,
the leases contain extensive provisions regarding the remedies
and rights of the Company in the event of a default thereunder
by the lessee and specific provisions regarding the condition of
the aircraft upon redelivery to the Company. The lessee is
required to continue to make lease payments under all
circumstances, including periods during which the aircraft is
not in operation due to maintenance or grounding.

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

Flight Equipment Marketing

The Company also may dispose of its leased
aircraft at or before the expiration of their leases. The buyers
include the aircrafts lessee, another aircraft operator or
a third party lessor. Any gain or loss on disposition of leased
aircraft is included in the caption Flight equipment marketing.

From time to time, the Company also engages in
transactions to buy aircraft for resale. In other cases, the
Company assists its customers in acquiring or disposing of
aircraft through consulting services and procurement of
financing from third parties.

In addition to its leasing and sales operations,
the Company is engaged, from time to time, as an agent for
airlines in the disposition of their surplus aircraft. The
Company generally acts as an agent under an exclusive
remarketing contract whereby it agrees to sell aircraft on a
best efforts basis within a fixed time period. These
activities generally augment the Companys primary
activities and also serve to promote relationships with
prospective sellers and buyers of aircraft.

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The Company plans to continue its remarketing
services on a selective basis involving specific situations
where these activities will not conflict or compete with, but
rather will be complementary to, its leasing and selling
activities.

Fleet Management Services

The Company provides fleet management services to
third party operating lessors who are unable or unwilling to
perform this service as part of their own operation. The Company
typically provides the same services that it performs for its
own fleet. Specifically, the Company provides leasing,
re-leasing and sales services on behalf of the lessor for which
the Company receives a fee.

Financing/Source of Funds

The Company purchases new aircraft directly from
manufacturers and used aircraft from airlines and other owners.
The Company finances the purchase price of flight equipment from
internally generated funds, secured and unsecured commercial
bank financings and the issuance of commercial paper, public and
private debt and preferred stock. See Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations.

Customers

At December 31, 2001, the Company had contracts
to lease aircraft, and manage aircraft leased, to the following
airlines: (domestic) Alaska Airlines, American Airlines,
American Trans Air, America West, Continental Airlines, Frontier
Airlines, Hawaiian Airlines, Jet Blue Airways, National
Airlines, North American Airlines, Southwest Airlines, Sun
Country Airlines and World Airways; (foreign) Aer Lingus, Aeris,
Aero Continente, Aeroflot, Aero Lloyd Flugreisen, Aeromexico,
Aerosvit, Air 2000, Air Anatolia, Air Asia, Air Atlanta
Icelandic, Air Canada, Air Europa (Air España SPA), Air
Europe SpA, Air France, Air India, Air Jamaica, Air Liberte, Air
Macau, Air Madagascar, Air Malta, Air Mauritius, Air New
Zealand, Air One, Air Seychelles, Air Tahiti NUI, Air Transat,
Air Vanuatu, Alitalia, Ansett Australia, Asiana Airlines,
Austrian Airlines, Avianca, Balair, Braathens S.A.F.E.,
Britannia Airways, British Airways, British Midland Airways,
Blue Panorama, BWIA, Canadian Airlines, Cathay Pacific, China
Airlines, China Eastern Airlines, China Hainan Airlines, China
Northwest, China Southern Airlines, China Xinjiang, Cyprus
Airways, Easy Jet, El Al Israel Airlines, Emirates,
Estonian Air, Eurocypria, Eurofly, Finnair, Flash Airlines,
Garuda Indonesia, GB Airways, Hapag-Lloyd Flug, Hong Kong Dragon
Airlines (Dragonair), Iberia, Icelandair, JMC Airlines, KLM
Royal Dutch Airlines, Lineas Aereas Privadas Argentinas, S.A.
(LAPA), Lithuanian, Lloyd Aero Boliviano (LAB), Línea
Aérea Nacional Chile, Lotus Air, LTU
Luftransport-Unternehmen, Lufthansa, Malev, Mandarin Airlines,
Martinair Holland, Meridiana, Mexicana, Middle East Airlines
Airliban, Olympic Airways, Oman Aviation, Pegasus, Polynesian
Airlines, QANTAS, Region Air, Rio Sul, Royal Jordanian, Sabre
Airways, Sahara India Airlines, Shanghai, Shenzhen, Sichuan
Airlines, Skymark, Skyservice Airlines, Spanair, Star Airlines,
Sterling European, Swissair, TACV Cabo Verde, TAP Air Portugal,
Turk Hava Yollari (THY), Transavia, Varig, VG Airlines, Vietnam
Airlines, Virgin Atlantic Airways, Virgin Blue, Volare, Wuhan
Airlines, Xiamen Airlines and Yemenia. No single customer
accounted for more than 10% of total revenues in any of the last
three years.

Revenues include rentals of flight equipment to
foreign airlines of $2,173,778,000 (2001), $2,026,017,000 (2000)
and $1,842,126,000 (1999) comprising 87.9%, 88.0% and 88.5%,
respectively, of total rentals of flight equipment. See Note J
of Notes to Consolidated Financial Statements.

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

|                                     |  |                        |           |      |  |        |       |   |  |        |           |   |  |  |       |   |  |   |           |  |  |  |       |  
|------------------------------------ |  | ---------------------- | --------- | ---- |  | ------ | ----- | - |  | ------ | --------- | - |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                                     |  |                        |           |      |  |       
|                                     |  | 2001                   |           | 2000 |  | 1999  
|                                     |  |                        |           |      |  |       
|                                     |  | Amount                 |           | %    |  | Amount |       | % |  | Amount |           | %
|                                     |  |                        |           |      |  |        |       |   |  |        |           |  
|                                     |  |                       
|                                     |  | (Dollars in thousands)
|Europe                               |  | $                      | 1,159,540 |      |  |        | 46.9  | % |  | $      | 1,054,783 |   |  |  | 45.8  | % |  | $ | 946,335   |  |  |  | 45.5  | %
|Asia/Pacific                         |  |                        | 552,853   |      |  |        | 22.3  |   |  |        | 462,426   |   |  |  | 20.1  |   |  |   | 421,337   |  |  |  | 20.3  |  
|United States and Canada             |  |                        | 455,680   |      |  |        | 18.4  |   |  |        | 437,745   |   |  |  | 19.0  |   |  |   | 389,593   |  |  |  | 18.7  |  
|Central and South America and Mexico |  |                        | 199,026   |      |  |        | 8.0   |   |  |        | 229,438   |   |  |  | 10.0  |   |  |   | 201,405   |  |  |  | 9.7   |  
|Africa and the Middle East           |  |                        | 106,685   |      |  |        | 4.4   |   |  |        | 117,048   |   |  |  | 5.1   |   |  |   | 121,885   |  |  |  | 5.8   |  
|                                     |  |                        |           |      |  |        |       |   |  |        |           |   |  |  |       |   |  |   |           |  |  |  |       |  
|                                     |  | $                      | 2,473,784 |      |  |        | 100.0 | % |  | $      | 2,301,440 |   |  |  | 100.0 | % |  | $ | 2,080,555 |  |  |  | 100.0 | %
|                                     |  |                        |           |      |  |        |       |   |  |        |           |   |  |  |       |   |  |   |           |  |  |  |       |  

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

|                                        |           |                        |         |        |  |        |      |   |  |        |         |        |  |  |      |   |  |   |         |        |  |  |      |   | 
|--------------------------------------- | --------- | ---------------------- | ------- | ------ |  | ------ | ---- | - |  | ------ | ------- | ------ |  |  | ---- | - |  | - | ------- | ------ |  |  | ---- | - | 
|                                        |           |                        |         |        |  |       
|                                        |           | 2001                   |         | 2000   |  | 1999  
|                                        |           |                        |         |        |  |       
|                                        |           | Amount                 |         | %      |  | Amount |      | % |  | Amount |         | %     
|                                        |           |                        |         |        |  |        |      |   |  |        |         |       
|                                        |           |                       
|                                        |           | (Dollars in thousands)
|United States                           |           | $                      | 300,006 |        |  |        | 12.1 | % |  | $      | 275,423 |        |  |  | 12.0 | % |  | $ | 238,429 |        |  |  | 11.5 | %
|United Kingdom                          |           |                        | 283,090 |        |  |        | 11.4 |   |  |        | 276,340 |        |  |  | 12.0 |   |  |   | 292,278 |        |  |  | 14.0 |  
|China (including Macau and
	Hong Kong)* |           |                        | 265,871 |        |  |        | 10.8 |   |  |        | 251,372 |        |  |  | 10.9 |   |  |   | 255,922 |        |  |  | 12.3 |  
|                                        | * Macau   |                        |         | 34,149 |  |        |      |   |  |        |         | 33,504 |  |  |      |   |  |   |         | 36,128 |  |  |      |   | 
|                                        | Hong Kong |                        |         | 92,117 |  |        |      |   |  |        |         | 77,364 |  |  |      |   |  |   |         | 84,787 |  |  |      |   | 

Many foreign countries have currency and exchange
laws regulating the international transfer of currencies. The
Company attempts to minimize its currency and exchange risks by
negotiating most of its aircraft leases and all of its sales
transactions in U.S. dollars, and all guarantees obtained
to support various lease agreements are denominated for payment
in the same currency as the lease. The Company requires, as a
condition to any foreign transaction, that the lessee or
purchaser in a foreign country first obtain, if required,
written approval of the appropriate government agency, finance
ministry or central bank for the remittance of all funds
contractually owed to the Company in U.S. dollars. Some of the
Companys leases are negotiated in Euros to meet the needs
of a growing number of airlines. As the Euro to U.S. Dollar
exchange rate fluctuates, airlines interest in entering
into Euro denominated lease agreements will change. Once an
airline and the Company agree to the rental payment currency, it
remains for the term of the lease. Euro denominated leases are
primarily used as a hedge against Euro denominated debt
obligations of the Company. As a result, the Company currently
has sufficient Euro inflows from leases and currency swaps to
meet its Euro denominated debt obligations. Foreign currency
risk has, to date, been immaterial to the Company.

The Company has restructured leases with both
foreign and domestic lessees. Such restructurings have involved
the voluntary termination of leases prior to lease expiration,
the replacement of leased aircraft with smaller, less expensive
leased aircraft, the arrangement of subleases from the primary
lessee to another airline and the rescheduling of lease
payments. In some situations where the Company repossesses an
aircraft, it may decide to export the aircraft from the
lessees jurisdiction. In the majority of these situations,
the Company obtains the lessees cooperation and the return
and export of the aircraft is immediate. In some situations,
however, the lessees have not cooperated in returning aircraft,
in which case the Company has had to take legal action in the
appropriate jurisdictions which has delayed the ultimate return
and export of the aircraft. In addition, in connection with the
repossession of an aircraft, the Company may be required to pay
outstanding mechanics, airport and other operating liens
on the repossessed aircraft, which could include charges
relating to other aircraft operated by the lessee.

The Companys revenues and income may be
affected by political or economic instability abroad, changes in
national policy, competitive pressures on certain air carriers,
fuel shortages, labor stoppages,

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recessions and other political or economic events
adversely affecting world or regional trading markets or
impacting a particular customer.


As a result of the September 11, 2001
terrorist attacks on the United States and the general slowdown
of the United States economy both before and after the attacks,
many United States and international commercial air carriers are
experiencing a reduction in passenger traffic and an actual or
potential increase in costs, including insurance premiums and
security costs. In addition, many United States and
international commercial air carriers announced reductions in
their long-term schedules and initiated cost reduction programs.
The Company can give no assurance that these and other factors
affecting the airline industry will not adversely affect its
business.

Competition

The leasing and sale of jet aircraft is highly
competitive. Aircraft manufacturers and the airlines sell new
and used jet aircraft. Furthermore, the Company faces
competition in leasing aircraft from aircraft manufacturers,
banks, financial institutions and other leasing companies. There
is also competition with respect to its remarketing activities
from many sources, including, but not limited to, aircraft
brokers.

Government Regulation

The FAA and the U.S. Departments of
Transportation and State exercise regulatory authority over air
transportation in the United States.

The U.S. Departments of Transportation and State,
in general, have jurisdiction over the economic regulation of
air transportation, including the negotiation with foreign
governments of the rights of U.S. carriers to fly to other
countries and the rights of foreign carriers to fly to and
within the United States.

The FAA has regulatory jurisdiction over the
maintenance and operation of U.S. air carriers, the operation of
aircraft in the United States by foreign carriers and the
registration of aircraft in the United States. The FAA can
suspend or revoke the authority of U.S. air carriers or their
licensed personnel and can similarly revoke the authority of
foreign air carriers to operate within the United States for
failure to comply with FAA regulations. The FAA can also ground
aircraft if their airworthiness is in question.

In every foreign country, similar government
agencies regulate the countrys air carriers, the
operations of foreign airlines in the country and the
registration of aircraft. Like the FAA, the civil aviation
authority in a foreign country can suspend or revoke the
operating authority of an airline and ground aircraft for safety
reasons.

Since the Company does not itself operate its
aircraft for public transportation of passengers and property,
the Company is not directly subject to the regulatory
jurisdiction of the U.S. Departments of Transportation and State
or their counterpart organizations in foreign countries.

The Companys relationship with the FAA
consists of the registration with the FAA of those aircraft
which are leased by the Company to U.S. carriers and to a number
of foreign carriers where, by agreement, the aircraft are to be
registered in the United States. In limited circumstances, the
Company also obtains from the FAA, or its designated
representatives, a U.S. Certificate of Airworthiness for a
particular aircraft or a ferry flight permit.

The Companys involvement with the civil
aviation authorities of foreign jurisdictions consists largely
of requests to register and deregister the Companys
aircraft on lease to carriers in those countries.

The Company also works with U.S. Customs with
respect to the import and export of the Companys aircraft
into and from the United States for maintenance or lease.

Employees

The Company is in a capital intensive rather than
a labor intensive business. As of December 31, 2001, the
Company had 115 full-time employees, which it considered
adequate for its business operations. The Company will expand
its management and administrative personnel, as necessary, to
meet future growth. None of the Companys employees is
covered by a collective bargaining agreement and the Company
believes

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that it has maintained excellent employee
relations. The Company provides certain employee benefits,
including retirement plans and health, life, disability and
accident insurance.


Insurance

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

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

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

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

The Company also maintains other insurance
covering the specific needs of its business operations.
Insurance policies are generally placed or reinsured through AIG
subsidiaries, with costs allocated back to the Company. The
Company believes that its insurance is adequate both as to
coverage and amount.

Forward-Looking Statements

This annual report on Form 10-K contains or
incorporates statements that constitute forward-looking
statements. Those statements appear in a number of places in
this Form 10-K and include statements regarding, among
other matters, the Companys growth and acquisition
opportunities, the Companys acquisition strategy,
regulatory matters pertaining to compliance with governmental
regulations and other factors affecting the Companys
financial condition or results of operations. Words such as
expects, anticipates,
intends, plans, believes,
seeks, estimates, and should
and variations of these words and similar expressions, are used
in many cases to identify these forward-looking statements. Any
such forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and other factors
that may cause actual results, performance or achievements of
the Company or industry results to vary materially from the
Companys future results, performance or achievements, or
those of the industry, expressed or implied in such
forward-looking statements. Such factors include, among others,
general industry economic and business conditions, which will,
among other things, affect demand for aircraft, availability and
creditworthiness of current and prospective lessees, lease
rates, availability and cost of financing and operating

6



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##### Table of Contents



expenses, governmental actions and initiatives
and environmental and safety requirements. The Company will not
update any forward-looking information to reflect actual results
or changes in the factors affecting the forward-looking
information.





Item 2. Properties

Flight Equipment

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

At December 31, 2001, all of the
Companys fleet was Stage III compliant, meaning that the
aircraft hold or are capable of holding a noise certificate
issued under Chapter 3 of Volume 1, Part II of
Annex 16 of the Chicago Convention or have been shown to
comply with the Stage III noise levels set out in
Section 36.5 of Appendix C of Part 36 of the
Federal Aviation Regulations of the United States. At
December 31, 2001, the average age of the Companys
aircraft was 4.59 years.

The following table shows the scheduled lease
terminations (for the minimum noncancelable period) by aircraft
type for the Companys operating lease portfolio at
December 31, 2001:

|                |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |     | 
|--------------- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ----- |  |  | -- |  |  |  | -- |  |  |  | -- |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | --- | 
|Aircraft Type   |  | 2002 |    | 2003 |  | 2004 |    | 2005 |  | 2006 |    | 2007 |  | 2008 |    | 2009 |  | 2010 |    | 2011 |  | 2012 |    | 2013 |  | 2014 |    | 2015 |  | 2016 |    | Total
|                |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      
|737-300/400/500 |  |      | 9  |      |  |      | 26 |      |  |      | 11 |      |  |      | 14 |      |  |      | 12 |      |  |      | 4  |      |  |      | 1  |      |  |      | 2  |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 79  | 
|737-700/800     |  |      |    |      |  |      |    |      |  |      |    |      |  |      | 5  |      |  |      | 6  |      |  |      | 5  |      |  |      | 7  |      |  |      |    |       |  |  | 7  |  |  |  | 13 |  |  |  | 1  |  |  |  |   |  |  |  | 1 |  |  |  |   |  |  |  | 6 |  |  |  | 51  | 
|757-200         |  |      | 3  |      |  |      | 9  |      |  |      | 6  |      |  |      | 10 |      |  |      | 7  |      |  |      | 15 |      |  |      | 4  |      |  |      |    |       |  |  | 2  |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 56  | 
|767-200         |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      |    |      |  |      | 2  |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 3   | 
|767-300         |  |      | 3  |      |  |      | 13 |      |  |      | 12 |      |  |      | 9  |      |  |      | 2  |      |  |      | 4  |      |  |      | 3  |      |  |      | 4  |       |  |  |    |  |  |  |    |  |  |  | 1  |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 51  | 
|777-200         |  |      |    |      |  |      |    |      |  |      | 4  |      |  |      | 2  |      |  |      | 3  |      |  |      |    |      |  |      | 2  |      |  |      | 2  |       |  |  |    |  |  |  | 2  |  |  |  | 2  |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 17  | 
|777-300         |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      | 1  |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 2   | 
|747-300         |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      | 1  |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 2   | 
|747-400         |  |      | 3  |      |  |      | 2  |      |  |      | 1  |      |  |      | 2  |      |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      | 2  |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 11  | 
|MD-83           |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 1   | 
|DC10-30         |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      | 2  |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 2   | 
|MD-11           |  |      |    |      |  |      |    |      |  |      |    |      |  |      | 3  |      |  |      | 3  |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 6   | 
|A300-600R       |  |      |    |      |  |      | 2  |      |  |      |    |      |  |      | 2  |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 4   | 
|A310-300        |  |      | 2  |      |  |      | 1  |      |  |      | 1  |      |  |      | 1  |      |  |      | 1  |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 6   | 
|A319            |  |      |    |      |  |      | 2  |      |  |      |    |      |  |      | 9  |      |  |      | 7  |      |  |      | 1  |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  | 3  |  |  |  |    |  |  |  |   |  |  |  | 2 |  |  |  | 1 |  |  |  |   |  |  |  | 25  | 
|A320            |  |      | 3  |      |  |      | 17 |      |  |      | 8  |      |  |      | 7  |      |  |      | 13 |      |  |      |    |      |  |      |    |      |  |      | 4  |       |  |  |    |  |  |  |    |  |  |  | 4  |  |  |  | 5 |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 61  | 
|A321            |  |      | 1  |      |  |      | 9  |      |  |      | 8  |      |  |      | 2  |      |  |      | 5  |      |  |      | 6  |      |  |      | 5  |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 36  | 
|A330-200        |  |      |    |      |  |      | 3  |      |  |      | 1  |      |  |      |    |      |  |      | 1  |      |  |      | 4  |      |  |      | 2  |      |  |      | 4  |       |  |  | 2  |  |  |  | 1  |  |  |  | 4  |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 22  | 
|A330-300        |  |      | 2  |      |  |      | 4  |      |  |      | 1  |      |  |      | 1  |      |  |      | 1  |      |  |      |    |      |  |      | 1  |      |  |      | 1  |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 11  | 
|A340            |  |      |    |      |  |      | 5  |      |  |      | 2  |      |  |      | 1  |      |  |      | 2  |      |  |      | 2  |      |  |      |    |      |  |      | 1  |       |  |  | 2  |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  | 15  | 
|                |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |  |  |  |    |  |  |  |    |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |   |  |  |  |     | 
|Total           |  |      | 26 |      |  |      | 93 |      |  |      | 58 |      |  |      | 69 |      |  |      | 65 |      |  |      | 42 |      |  |      | 29 |      |  |      | 20 |       |  |  | 13 |  |  |  | 19 |  |  |  | 12 |  |  |  | 5 |  |  |  | 3 |  |  |  | 1 |  |  |  | 6 |  |  |  | 461 | 




This schedule includes 18 aircraft leased by
the Company and subleased to others and excludes ten aircraft
which were not subject to lease at December 31, 2001, seven
of which were leased at March 20, 2002.

7



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##### Table of Contents



Commitments

At December 31, 2001, the Company had
committed to purchase the following aircraft at an estimated
aggregate purchase price (including adjustment for anticipated
inflation) of approximately $32.1 billion for delivery as
shown:

|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  |     |     | 
|------------------ | ----- | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ---- |  | ---- | -- | ----- |  |  | -- | -- |  |  | -- | -- |  |  | -- | -- |  |  | - | - |  |  | --- | --- | 
|Aircraft Type      |       | 2002 |    | 2003 |  | 2004 |    | 2005 |  | 2006 |    | 2007 |  | 2008 |    | 2009 |  | 2010 |    | Total
|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      
|737-400            |       |      | 2  |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 2   |    
|737-600/700/800(a) |       |      | 26 |      |  |      | 20 |      |  |      | 26 |      |  |      | 28 |      |  |      | 23 |       |  |  | 23 |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 146 |    
|757-200            |       |      | 2  |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 2   |    
|767-300            |       |      | 2  |      |  |      |    |      |  |      |    |      |  |      | 1  |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 3   |    
|777-200            |       |      | 4  |      |  |      | 3  |      |  |      | 4  |      |  |      | 5  |      |  |      | 5  |       |  |  | 4  |    |  |  | 3  |    |  |  | 3  |    |  |  |   |   |  |  | 31  |    
|777-300            |       |      | 3  |      |  |      | 3  |      |  |      | 2  |      |  |      | 2  |      |  |      | 2  |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 12  |    
|747-400            |       |      | 2  |      |  |      | 2  |      |  |      |    |      |  |      | 1  |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 5   |    
|A310-200/300       |       |      | 2  |      |  |      | 4  |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 6   |    
|A318-100           |       |      |    |      |  |      |    |      |  |      | 3  |      |  |      | 6  |      |  |      | 6  |       |  |  | 5  |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 20  |    
|A319-100           |       |      | 9  |      |  |      | 11 |      |  |      | 17 |      |  |      | 14 |      |  |      | 10 |       |  |  | 12 |    |  |  | 10 |    |  |  | 6  |    |  |  |   |   |  |  | 89  |    
|A320-200           |       |      | 12 |      |  |      | 17 |      |  |      | 13 |      |  |      | 10 |      |  |      | 14 |       |  |  | 14 |    |  |  | 20 |    |  |  | 10 |    |  |  |   |   |  |  | 110 |    
|A321-200           |       |      | 5  |      |  |      | 6  |      |  |      | 6  |      |  |      | 7  |      |  |      | 6  |       |  |  | 7  |    |  |  | 9  |    |  |  | 5  |    |  |  |   |   |  |  | 51  |    
|A330-200           |       |      | 13 |      |  |      | 7  |      |  |      | 5  |      |  |      | 7  |      |  |      | 8  |       |  |  | 7  |    |  |  | 8  |    |  |  |    |    |  |  |   |   |  |  | 55  |    
|A340-500/600(a)    |       |      | 2  |      |  |      | 2  |      |  |      |    |      |  |      | 3  |      |  |      | 3  |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  | 10  |    
|A380-100           |       |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      | 1  |       |  |  | 1  |    |  |  | 2  |    |  |  | 3  |    |  |  | 2 |   |  |  | 9   |    
|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  |     |    
|                   | Total |      |    | 84   |  |      |    | 75   |  |      |    | 76   |  |      |    | 84   |  |      |    | 78    |  |  |    | 73 |  |  |    | 52 |  |  |    | 27 |  |  |   | 2 |  |  |     | 551 | 
|                   |       |      |    |      |  |      |    |      |  |      |    |      |  |      |    |      |  |      |    |       |  |  |    |    |  |  |    |    |  |  |    |    |  |  |   |   |  |  |     |    






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

At December 31, 2001, the Company had
options to purchase the following aircraft at an estimated
aggregate purchase price (including adjustment for anticipated
inflation) of approximately $3.0 billion for delivery as
shown:

|                |       |      |  |      |  |      |   |      |  |      |   |      |  |      |   |      |  |      |   |       |  |  |   |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  |    |    | 
|--------------- | ----- | ---- |  | ---- |  | ---- | - | ---- |  | ---- | - | ---- |  | ---- | - | ---- |  | ---- | - | ----- |  |  | - | -- |  |  | - | - |  |  |  | - |  |  |  | - |  |  | -- | -- | 
|Aircraft Type   |       | 2002 |  | 2003 |  | 2004 |   | 2005 |  | 2006 |   | 2007 |  | 2008 |   | 2009 |  | 2010 |   | Total
|                |       |      |  |      |  |      |   |      |  |      |   |      |  |      |   |      |  |      |   |      
|737-600/700/800 |       |      |  |      |  |      | 3 |      |  |      | 1 |      |  |      | 1 |      |  |      | 2 |       |  |  | 3 |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  | 10 |   
|777-200/300     |       |      |  |      |  |      |   |      |  |      | 2 |      |  |      | 1 |      |  |      | 1 |       |  |  | 2 |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  | 6  |   
|A319-100        |       |      |  |      |  |      | 1 |      |  |      | 1 |      |  |      | 2 |      |  |      | 1 |       |  |  |   |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  | 5  |   
|A320-200        |       |      |  |      |  |      | 1 |      |  |      | 2 |      |  |      | 3 |      |  |      | 2 |       |  |  | 2 |    |  |  | 1 |   |  |  |  |   |  |  |  |   |  |  | 11 |   
|A321-200        |       |      |  |      |  |      |   |      |  |      | 2 |      |  |      | 1 |      |  |      | 2 |       |  |  | 1 |    |  |  | 1 |   |  |  |  |   |  |  |  |   |  |  | 7  |   
|A330-200        |       |      |  |      |  |      |   |      |  |      | 2 |      |  |      | 2 |      |  |      | 1 |       |  |  | 1 |    |  |  | 1 |   |  |  |  |   |  |  |  |   |  |  | 7  |   
|A340-500/600    |       |      |  |      |  |      |   |      |  |      | 2 |      |  |      |   |      |  |      |   |       |  |  |   |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  | 2  |   
|A380-100        |       |      |  |      |  |      |   |      |  |      |   |      |  |      |   |      |  |      |   |       |  |  | 1 |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  | 1  |   
|                |       |      |  |      |  |      |   |      |  |      |   |      |  |      |   |      |  |      |   |       |  |  |   |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  |    |   
|                | Total |      |  | 0    |  |      |   | 5    |  |      |   | 12   |  |      |   | 10   |  |      |   | 9     |  |  |   | 10 |  |  |   | 3 |  |  |  | 0 |  |  |  | 0 |  |  |    | 49 | 
|                |       |      |  |      |  |      |   |      |  |      |   |      |  |      |   |      |  |      |   |       |  |  |   |    |  |  |   |   |  |  |  |   |  |  |  |   |  |  |    |   

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

The aircraft listed above are being purchased
pursuant to master agreements with each of The Boeing Company
(Boeing) and AVSA, S.A.R.L., the sales subsidiary of
Airbus Industrie (Airbus). These agreements
establish the pricing formulas (which include certain price
adjustments based upon inflation and other factors) and various
other terms with respect to the purchase of aircraft. Under
certain circumstances, the Company has the right to alter the
mix of aircraft type ultimately acquired. As of
December 31, 2001, the

8



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##### Table of Contents



Company had made non-refundable deposits
(exclusive of capitalized interest) with respect to the aircraft
which the Company has committed to purchase of approximately
$724,000,000 and $468,000,000 with Boeing and Airbus,
respectively.


As of March 20, 2002, the Company had
entered into contracts for the lease of all of the
84 aircraft to be delivered in 2002, 65 of the
75 aircraft to be delivered in 2003, 20 of the
76 aircraft to be delivered in 2004, 7 of the
84 aircraft to be delivered in 2005 and 0 of the
232 aircraft to be delivered subsequent to 2005. The
Company will need to find customers for aircraft presently on
order and not subject to contract and any new aircraft ordered
and will need to arrange financing for portions of the purchase
price of such equipment. Although the Company has been
successful to date in placing its new aircraft on lease and has
obtained adequate financing in the past, there can be no
assurance as to the future continued availability of lessees or
of sufficient amounts of financing on terms acceptable to the
Company.

Facilities

The Companys principal offices are located
at 1999 Avenue of the Stars, Los Angeles, California.
The Company occupies space under leases which expire in 2005. As
of December 31, 2001, the Company occupied approximately
54,000 square feet of office space. The leases provide for
annual rentals of approximately $3,000,000, and the rental
payments thereunder are subject to certain indexed escalation
provisions. The Company signed a lease for approximately 127,000
square feet of office space at 10270 Constellation Avenue, Los
Angeles, California starting in 2004. The lease provides for
average annual rent of approximately $9,000,000.




Item 3. Legal Proceedings

The Company is not a party to any significant
legal proceedings.




PART II




Item 5. Market for Registrants Common
Equity and Related Stockholder Matters

The Company is indirectly wholly owned by AIG and
the Companys common stock is not listed on any national
exchange or traded in any established market. During the years
ended December 31, 2001, 2000 and 1999, the Company paid
cash dividends to its parent company of $83,500,000,
$206,000,000, and $69,500,000, respectively. It is the intent of
the Company to pay its parent company an annual dividend of at
least 7% of net income subject to the dividend preference of any
preferred stock outstanding. Under the most restrictive
provisions of the Companys borrowing arrangements,
consolidated retained earnings at December 31, 2001 in the
amount of $989,898,000 were unrestricted as to the payment of
dividends.

9



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##### Table of Contents






Item 6. Selected Financial
Data

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

|                                                                           |  |                               |            |      |  |      |            |      |  |      |            |  |  |   |            |  |  |   |            | 
|-------------------------------------------------------------------------- |  | ----------------------------- | ---------- | ---- |  | ---- | ---------- | ---- |  | ---- | ---------- |  |  | - | ---------- |  |  | - | ---------- | 
|                                                                           |  |                              
|                                                                           |  | Years Ended December 31,     
|                                                                           |  |                              
|                                                                           |  | 2001                          |            | 2000 |  | 1999 |            | 1998 |  | 1997
|                                                                           |  |                               |            |      |  |      |            |      |  |     
|                                                                           |  |                              
|                                                                           |  | (Dollar amounts in thousands)
|Operating Data:                                                            |  |                               |            |      |  |      |            |      |  |      |            |  |  |   |            |  |  |   |            | 
|Rentals of flight equipment                                                |  | $                             | 2,473,784  |      |  | $    | 2,301,440  |      |  | $    | 2,080,555  |  |  | $ | 1,853,983  |  |  | $ | 1,732,667  | 
|Flight equipment marketing                                                 |  |                               | 62,883     |      |  |      | 99,716     |      |  |      | 147,216    |  |  |   | 118,183    |  |  |   | 176,005    | 
|Interest and other income                                                  |  |                               | 80,046     |      |  |      | 77,589     |      |  |      | 72,317     |  |  |   | 73,500     |  |  |   | 49,335     | 
|Total revenues                                                             |  |                               | 2,616,713  |      |  |      | 2,478,745  |      |  |      | 2,300,088  |  |  |   | 2,045,666  |  |  |   | 1,958,007  | 
|Expenses                                                                   |  |                               | 1,862,994  |      |  |      | 1,772,552  |      |  |      | 1,596,683  |  |  |   | 1,483,392  |  |  |   | 1,431,848  | 
|Income before income taxes and cumulative effect
	of accounting change     |  |                               | 753,719    |      |  |      | 706,193    |      |  |      | 703,405    |  |  |   | 562,274    |  |  |   | 526,159    | 
|Net income                                                                 |  |                               | 507,866    |      |  |      | 468,901    |      |  |      | 453,447    |  |  |   | 369,352    |  |  |   | 338,684    | 
|Ratio of Earnings to Fixed Charges and
	Preferred Stock Dividends(1):      |  |                               | 1.75x      |      |  |      | 1.68x      |      |  |      | 1.75x      |  |  |   | 1.60x      |  |  |   | 1.58x      | 
|Balance Sheet Data:                                                        |  |                               |            |      |  |      |            |      |  |      |            |  |  |   |            |  |  |   |            | 
|Flight equipment under operating leases (net of
	accumulated depreciation) |  | $                             | 20,983,197 |      |  | $    | 17,878,389 |      |  | $    | 16,096,053 |  |  | $ | 14,872,430 |  |  | $ | 12,792,531 | 
|Net investment in finance and sales-type leases                            |  |                               | 142,013    |      |  |      | 114,062    |      |  |      | 56,555     |  |  |   | 89,904     |  |  |   | 98,026     | 
|Total assets                                                               |  |                               | 23,167,290 |      |  |      | 19,701,478 |      |  |      | 17,507,124 |  |  |   | 16,379,632 |  |  |   | 14,551,954 | 
|Total debt                                                                 |  |                               | 15,920,025 |      |  |      | 13,421,526 |      |  |      | 11,861,796 |  |  |   | 11,184,010 |  |  |   | 9,954,362  | 
|Shareholders equity                                                       |  |                               | 3,963,675  |      |  |      | 3,463,779  |      |  |      | 3,210,192  |  |  |   | 2,844,375  |  |  |   | 2,517,188  | 
|Other Data:                                                                |  |                               |            |      |  |      |            |      |  |      |            |  |  |   |            |  |  |   |            | 
|Aircraft owned at period end(2)                                            |  |                               | 453        |      |  |      | 383        |      |  |      | 338        |  |  |   | 329        |  |  |   | 299        | 
|Aircraft sold or remarketed during the period                              |  |                               | 7          |      |  |      | 20         |      |  |      | 51         |  |  |   | 31         |  |  |   | 57         | 



---

(1) See Exhibit 12.

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

10



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

Industry Condition

The Company receives its revenue principally from
airlines and companies associated with the airline industry. The
airline industry is cyclical, economically sensitive and highly
competitive. Airlines and related companies may be affected by
political or economic instability abroad, changes in national
policy, competitive pressures on certain air carriers, fuel
shortages, labor stoppages, insurance cost, recessions, and
other political or economic events adversely affecting world or
regional trading markets. As such, the Companys revenues
and income will be affected by its customers ability to
react to and cope with the competitive environment in which they
operate. While worsening economic conditions have not materially
affected the Companys earnings to date, revenues and
earnings could deteriorate in the future as a result of
continuing weak global economic conditions.

From time to time, certain of the Companys
customers have experienced economic difficulties resulting in
the Companys participation in customer restructurings.
Such restructurings have involved the voluntary early
termination of leases and the rescheduling of payments. In
addition, in certain circumstances, the Company has been
required to repossess aircraft.

As a result of the September 11, 2001
terrorist attacks on the United States and the general slowdown
of the United States economy both before and after the attacks,
many United States and international commercial air carriers
have announced reductions in their long-term schedules and have
initiated cost reduction programs. On January 10, 2001, one
of the Companys customers, TWA, filed for protection under
Chapter 11 of the United States Bankruptcy Code. American
Airlines acquired substantially all of the assets and leases of
TWA, including the leases of 16 aircraft owned by the
Company. Three of the Companys customers,
Canada 3000, Swissair and Sabena, became insolvent in the
fourth quarter of 2001 and have ceased operations or will cease
operations. As of March 20, 2002, the Company had placed 30
of the 32 aircraft leased to these customers. In the first
quarter of 2002, one of the Companys customers,
Sun Country, filed for protection under Chapter 11 of
the United States Bankruptcy Code. As of March 20, 2002,
the Company had placed all of the 5 aircraft previously
leased to Sun Country. Further, the Company has experienced
an increase in its number of customer restructurings. Load
factors (% of seats filled, distance weighted) are approaching
prior year levels, but ticket pricing remains weak. As a result,
airlines still face significant economic challenges. The
long-term effects of the September 11, 2001 attacks on the
Companys business and revenues are unknown. The potential
for future terrorist attacks, the national and international
responses to terrorist attacks, and other acts of war have
created many economic and political uncertainties, which could
adversely affect the Companys business and revenues in the
short and long-term in ways that cannot presently be predicted.

Critical Accounting Policies and
Estimates

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

The Company believes the following critical
accounting policies affect significant judgments and estimates
used in the preparation of the consolidated financial statements.

Lease Revenue: The
Company, as lessor, leases flight equipment principally under
operating leases and reports income over the life of the lease
as rentals become receivable under the provisions of the lease,
except

11



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##### Table of Contents



when the lease has varying payments in which case
the revenue is recorded under the straight-line method over the
noncancelable term of the lease.


Flight Equipment
Marketing: The Company markets flight
equipment and recognizes this revenue when the equipment is sold
and the risk of ownership of the equipment is passed to the new
owner.

Flight Equipment:
Flight equipment is stated at cost. Purchases, major additions,
capitalized interest and modifications are capitalized. Normal
maintenance and repairs and airframe and engine overhauls are
paid for by the lessee. Generally, aircraft are depreciated
using the straight-line method over a 25 year life from the date
of manufacture to a 15% residual value. At the time assets are
retired or sold, the cost and accumulated depreciation are
removed from the related accounts and the difference, net of
proceeds, is recorded as a gain or loss. The Company regularly
reviews the carrying value, residual value and useful life of
its flight equipment based on current and future revenue
generating capacity. At such times, the Company may reduce the
carrying value, residual value or useful life of specific
aircraft.

Capitalized
Interest: The Company borrows funds to
finance progress payments for the construction of flight
equipment ordered. The Company estimates the interest incurred
on such borrowings. This amount is capitalized and included in
the cost of the equipment.

Provision for
Overhauls: Under the provisions of
many leases, for certain airframe and engine overhauls, the
lessee is reimbursed for costs incurred up to, but not
exceeding, related hourly rentals paid to the Company by the
lessee. The Company maintains reserves for the estimated
reimbursements during the life of the lease. The reserve is
adjusted based on hourly rentals received and historical and
projected reimbursement rates.

Financial Condition

The Company borrows funds to purchase flight
equipment (see Item 2. Properties 
Commitments), including funds for progress payments during
the construction phase, principally on an unsecured basis from
various sources. As of December 31, 2001, the Company had
committed to purchase 551 aircraft from Boeing and Airbus at an
estimated aggregate purchase price of approximately $32.1
billion for delivery through 2010 and options to purchase 49
additional aircraft at an estimated aggregate purchase price of
approximately $3.0 billion. The Company currently expects to
fund expenditures for capital requirements as well as liquidity
needs from a combination of available cash balances, internally
generated funds and financing arrangements. At December 31,
2001, 2000 and 1999, the Companys debt financing and
capital lease obligations were comprised of the following:

|                                                 |                                                           |                        |           |            |  |      |           |            |  |   |           |            | 
|------------------------------------------------ | --------------------------------------------------------- | ---------------------- | --------- | ---------- |  | ---- | --------- | ---------- |  | - | --------- | ---------- | 
|                                                 |                                                           | 2001                   |           | 2000       |  | 1999
|                                                 |                                                           |                        |           |            |  |     
|                                                 |                                                           |                       
|                                                 |                                                           | (Dollars in thousands)
|Public term debt with single maturities          |                                                           | $                      | 4,704,201 |            |  | $    | 3,456,675 |            |  | $ | 3,721,330 |           
|Public medium-term notes with varying maturities |                                                           |                        | 4,809,000 |            |  |      | 3,175,000 |            |  |   | 3,225,500 |           
|Capital lease obligations                        |                                                           |                        | 365,289   |            |  |      | 463,362   |            |  |   | 669,576   |           
|Bank term debt                                   |                                                           |                        | 2,368,968 |            |  |      | 2,072,562 |            |  |   | 1,295,038 |           
|                                                 |                                                           |                        |           |            |  |      |           |            |  |   |           |           
|                                                 | Total term debt, bank debt and
	capital lease obligations |                        |           | 12,247,458 |  |      |           | 9,167,599  |  |   |           | 8,911,444  | 
|Derivatives                                      |                                                           |                        | 185,859   |            |  |      |          |            |  |   |          |           
|Commercial paper                                 |                                                           |                        | 3,501,865 |            |  |      | 4,288,681 |            |  |   | 2,978,353 |           
|Less: Deferred debt discount                     |                                                           |                        | (15,157   | )          |  |      | (34,754   | )          |  |   | (28,001   | )         
|                                                 |                                                           |                        |           |            |  |      |           |            |  |   |           |           
|                                                 | Debt financing and capital lease obligations              |                        | $         | 15,920,025 |  |      | $         | 13,421,526 |  |   | $         | 11,861,796 | 
|                                                 |                                                           |                        |           |            |  |      |           |            |  |   |           |           
|Composite interest rate                          |                                                           |                        | 5.07%     |            |  |      | 6.37%     |            |  |   | 6.14%     |           
|Percentage of total debt at fixed rate           |                                                           |                        | 78.81%    |            |  |      | 68.65%    |            |  |   | 69.28%    |           
|Composite interest rate on fixed debt            |                                                           |                        | 5.78%     |            |  |      | 6.20%     |            |  |   | 6.06%     |           
|Bank prime rate                                  |                                                           |                        | 4.75%     |            |  |      | 9.50%     |            |  |   | 8.50%     |           

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Public Debt

The interest on substantially all of the public
debt (exclusive of the commercial paper) is fixed for the term
of the note.

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

|                                                                                                 |  |                 |       |                   |  |                |       |     |  |   |       |    
|------------------------------------------------------------------------------------------------ |  | --------------- | ----- | ----------------- |  | -------------- | ----- | --- |  | - | ----- | ---
|                                                                                                 |  | Maximum         |       | Sold(a)           |  | Sold(a)       
|                                                                                                 |  | Offering        |       | December 31, 2001 |  | March 15, 2002
|                                                                                                 |  |                 |       |                   |  |               
|                                                                                                 |  |                
|                                                                                                 |  | ($ in millions)
|Registration statement dated May 10, 2001
	(including $2.0 billion Medium-Term Note program)     |  | $               | 4,000 |                   |  | $              | 3,100 |     |  | $ | 4,000 |    
|Registration statement dated January 28,
	2002 (including $1.0 billion Medium-Term Note program) |  |                 | 4,000 |                   |  |                |      |     |  | $ | 1,000 |    
|Euro Medium-Term Note Programme dated June 2001                                                  |  |                 | 2,000 |                   |  |                | 771   | (b) |  |   | 771   | (b)






|    |                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------
|(a) | Includes amounts outstanding under Medium-Term
	Note programs implemented under each of the registration
	statements.
|   
|(b) | The Company has hedged the foreign currency risk
	of the notes through operating lease payments or derivatives.      

Capital Lease Obligations

The Company has Export Credit Lease financings
which provide ten year, amortizing loans in the form of capital
lease obligations. The interest rate on 62.5% of the original
financing available is 6.55% and the interest rate on 22.5% of
the original financing available is fixed at rates varying
between 6.18% and 6.89%. These two tranches are guaranteed by
various European Export Credit Agencies. The remaining 15% of
the original financing available provides for LIBOR based
pricing. This 15% tranche was prepaid in 2000. The remaining
debt matures through 2005.

Bank Term Debt

In January 1999, the Company entered into an
Export Credit Facility, up to a maximum of $4.3 billion,
for approximately 75 aircraft to be delivered from 1999
through 2001. The Company had the right, but was not required,
to use the facility to fund 85% of each aircrafts purchase
price. This facility is guaranteed by various European Export
Credit Agencies. The interest rate varies from 5.753% to 5.898%
on the 75 aircraft depending on the delivery date of the
aircraft. The Company financed 62 aircraft with
$2.8 billion under this facility.

Commercial Paper

The Company currently has a $4.8 billion
Commercial Paper Program. Under this program, the Company may
borrow in minimum increments of $100,000 for a period from one
day to 270 days. It is the Companys intention to sell
commercial paper not to exceed one and a half times the
aggregate amount of the backup facilities available. The
weighted average interest rate of the Companys Commercial
Paper Program was 4.10%, 6.41% and 5.32% at December 31,
2001, 2000 and 1999, respectively. At December 31, the
composite commercial paper interest rate was 2.24% (2001), 6.63%
(2000) and 5.87% (1999).

Bank Commitments

As of December 31, 2001, the Company had
committed revolving loans and lines of credit with
46 commercial banks aggregating $3.2 billion. These
revolving loans and lines of credit principally provide for
interest rates that vary according to the pricing option in
effect at the time of borrowing. Pricing options

13



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##### Table of Contents



include prime, a range from .20% over LIBOR to
..35% over LIBOR based upon utilization, or a rate determined by
a competitive bid process with the banks. The revolving loans
and lines of credit are subject to facility fees of up to .08%
of amounts available. In January 2002, the Company replaced
$3.05 billion of committed loans and lines of credits with
new facilities from a total of 18 banks, totaling
$2.55 billion. The revolving loans and lines of credit now
total $2.7 billion and provide for pricing options
including prime and a spread from .25% to .35% over LIBOR, based
upon utilization. In addition, the facilities are subject to
facility fees of up to .10% of amounts available. Such financing
is used primarily as backup for the Companys Commercial
Paper program. The Company is in negotiations to expand its
backup facilities.


Other

In 1995, 1996 and 1997, the Company, through
subsidiaries, entered into sale-leaseback transactions providing
proceeds to the Company in the amounts of $413.0 million,
$507.6 million and $601.9 million, respectively, each
relating to seven aircraft. The transactions resulted in the
sale and leaseback of these aircraft under one year operating
leases, each with six one year extension options for a total of
seven years for each aircraft. The Company has not recorded any
gains related to the transactions. The Company has the option to
either buy back the aircraft or redeliver the aircraft for a fee
to the lessor at the end of any lease period. The lease rates
equate to fixed principal amortization and floating interest
payments based on LIBOR or commercial paper pricing. As of
March 15, 2002, the Company had repurchased three aircraft
which were sold to third parties. If the Company decides not to
negotiate extensions of the one year operating lease options as
they terminate in December 2002 and September 2003 and 2004, it
will be required to borrow additional funds to terminate the
transactions and reacquire the assets. The estimated remaining
minimum lease payments (exclusive of the interest component of
rent) and buy-back amounts, assuming the contractual end of the
transactions are $303,974 (2002), $390,810 (2003) and $462,391
(2004). The Company did not have any other relationships with
unconsolidated entities or financial partnerships, such as
entities often referred to as structured finance or special
purpose entities, which would have been established for the
purpose of facilitating off-balance sheet arrangements or for
other contractually narrow or limited purposes. The Company may,
however, from time to time enter into joint ventures or other
partnership arrangements with the limited purpose to lease
aircraft.

In the normal course of business, the Company
employs a variety of derivative products to manage its exposure
to interest rates and the resulting impact of changes in
interest rates on earnings, with the objective to lower its
overall borrowing cost and to maintain its optimal mix of
variable and fixed rate interest obligations. The Company only
enters into derivative transactions to hedge interest rate risk
and currency risk and not to speculate on interest rates or
currency fluctuations. These derivative products include
interest rate swap agreements, currency swap agreements, and
interest rate floors.

The counterparty to the Companys derivative
instruments is AIG Financial Products Corp. (AIGFP),
a related party with the highest ratings, who enters into
identical transactions with independent third parties on an
arms length basis. The derivatives are subject to a
bilateral security agreement which, in certain circumstances,
may allow one party to the agreement to require the second party
to the agreement to establish a cash collateral account. It is
managements belief that any failure of the instruments or
counterparty to perform under the derivative contracts would
have an immaterial impact on the Companys financial
condition and results of operations.

The Company is in compliance with all covenants
or other requirements set forth in its credit agreements.
Further, the Company does not have any rating downgrade triggers
that would accelerate the maturity dates of its debt. However, a
downgrade in the Companys credit rating could adversely
affect the Companys ability to borrow on, renew existing,
or obtain access to new financing arrangements and would
increase the cost of such financing arrangements. For example, a
downgrade in credit rating could preclude the Company from
issuing commercial paper under its current program. Should this
occur the Company would seek alternative sources of funding,
including issuance of bonds under its existing shelf
registration. In addition, the Company has the ability, at its
option, to draw upon its revolving loans and lines of credit
facilities.

14



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The Company received $400.0 million from AIG
for the issuance of Series A Preferred Stock and
repurchased $250.0 million of its Market Auction Preferred
Stock during the year ended December 31, 2001. AIG has no
obligation to contribute additional equity to the Company.

The following summarizes the Companys
contractual obligations at December 31, 2001, and the
possible effect of such obligations on the Companys
liquidity and cash flows in future periods.

Existing Commitments (Exclusive of
Interest)

|                                                      |  |                           |  |             |  |            |  |            |  |            |  |            |  |            
|----------------------------------------------------- |  | ------------------------- |  | ----------- |  | ---------- |  | ---------- |  | ---------- |  | ---------- |  | -----------
|                                                      |  |                          
|                                                      |  | Commitments Due by Period
|                                                      |  |                          
|                                                      |  | Total                     |  | 2002        |  | 2003       |  | 2004       |  | 2005       |  | 2006       |  | Thereafter 
|                                                      |  |                           |  |             |  |            |  |            |  |            |  |            |  |            
|                                                      |  |                          
|                                                      |  | (Dollars in thousands)   
|Medium Term and Long Term Debt                        |  | $11,974,297               |  | $2,930,554  |  | $3,005,674 |  | $3,176,623 |  | $579,174   |  | $1,234,174 |  | $1,048,098 
|Capital Lease Obligations                             |  | 365,289                   |  | 104,667     |  | 111,745    |  | 105,194    |  | 43,683     |  |           |  |           
|Commercial Paper                                      |  | 3,501,865                 |  | 3,501,865   |  |           |  |           |  |           |  |           |  |           
|Operating Leases                                      |  | 131,024                   |  | 3,150       |  | 3,276      |  | 11,257     |  | 11,404     |  | 8,491      |  | 93,446     
|Operating Leases under Sales-Lease-Back
	Transactions |  | 1,157,175                 |  | 303,974     |  | 390,810    |  | 462,391    |  |           |  |           |  |           
|Purchase Commitments                                  |  | 32,091,900                |  | 4,893,200   |  | 3,784,600  |  | 3,898,700  |  | 4,832,100  |  | 4,734,200  |  | 9,949,100  
|                                                      |  |                           |  |             |  |            |  |            |  |            |  |            |  |            
|Total                                                 |  | $49,221,550               |  | $11,737,410 |  | $7,296,105 |  | $7,654,165 |  | $5,466,361 |  | $5,976,865 |  | $11,090,644
|                                                      |  |                           |  |             |  |            |  |            |  |            |  |            |  |            

Contingent Commitments

|                                 |  |                                  |  |         |  |          |  |          |  |          |  |          |  |            |         | 
|-------------------------------- |  | -------------------------------- |  | ------- |  | -------- |  | -------- |  | -------- |  | -------- |  | ---------- | ------- | 
|                                 |  |                                 
|                                 |  | Contingency expiration by period
|                                 |  |                                 
|                                 |  | Total                            |  | 2002    |  | 2003     |  | 2004     |  | 2005     |  | 2006     |  | Thereafter
|                                 |  |                                  |  |         |  |          |  |          |  |          |  |          |  |           
|                                 |  |                                 
|                                 |  | (Dollars in thousands)          
|Purchase Options on New Aircraft |  | $2,956,400                       |  |        |  | $187,800 |  | $697,300 |  | $621,600 |  | $555,900 |  | $          | 893,800 | 
|Put Options(1)                   |  | 567,394                          |  |        |  | 231,614  |  | 67,422   |  | 256,658  |  |         |  |            | 11,700  | 
|Asset Value Guarantees(1)        |  | 204,898                          |  | $68,895 |  | 63,000   |  | 4,726    |  | 11,041   |  | 14,492   |  |            | 42,744  | 
|Loan Guarantees(1)               |  | 58,836                           |  | 5,000   |  | 27,303   |  | 12,463   |  | 3,000    |  | 6,000    |  |            | 5,070   | 
|Lines of Credit                  |  | 10,000                           |  | 10,000  |  |         |  |         |  |         |  |         |  |            |        | 
|                                 |  |                                  |  |         |  |          |  |          |  |          |  |          |  |            |         | 
|Total                            |  | $3,797,528                       |  | $83,895 |  | $509,717 |  | $781,911 |  | $892,299 |  | $576,392 |  | $          | 953,314 | 
|                                 |  |                                  |  |         |  |          |  |          |  |          |  |          |  |            |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a complement to the Companys leasing
	operation, it participates with banks, airlines and other
	financial institutions in assisting in financing aircraft by
	providing asset guarantees, put options, or loan guarantees
	collateralized by aircraft. As a result, should the Company be
	called upon to fulfill its obligations, the Company would have
	recourse to the value of the underlying aircraft.

Results of Operations

The increase in revenues from rentals of flight
equipment from $2,080.6 million in 1999 to
$2,301.4 million in 2000 and $2,473.8 million in 2001 is
due to the increase in the number of aircraft available for
operating lease from 357 in 1999 to 402 in 2000 to 471 in 2001.
The increase is also attributable to the increase in the cost of
the fleet, which includes aircraft subject to sale-leaseback
transactions from which rental income is earned, from $19.7
billion in 1999 and $22.0 billion in 2000 to $25.8 billion
in 2001.

In addition to its leasing operations, the
Company engages in the marketing of flight equipment at the end
of, or during, the lease term, as well as the sales of flight
equipment on a principal and commission basis. Revenue from such
flight equipment marketing decreased from $147.2 million in
1999 to $99.7 million in 2000 and $62.9 million in
2001 as a result of the type and the number of the flight
equipment marketed in each

15



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##### Table of Contents



period which decreased from 51 aircraft in
1999 to 20 in 2000 and 7 in 2001. In addition, the Company sold
13 engines (1999), 7 engines (2000) and 5 engines
(2001).


Interest expense increased from
$686.8 million in 1999 to $773.5 million in 2000 and
$792.6 million in 2001, as a result of an increase in debt
outstanding, to finance aircraft acquisitions, excluding the
effect of debt discount of $11.9 billion in 1999,
$13.5 billion in 2000 and $15.9 billion in 2001,
offset in part by lower composite borrowing rates during 1999
and 2001. The Companys composite borrowing rate fluctuated
as follows:

ILFC Composite Interest Rates and Prime
Rate

(INTERNATIONAL LEASE GRAPH)

(INTERNATIONAL LEASE GRAPH)

|       |  |               |      |                 |  |            |      |  |  |  |      | 
|------ |  | ------------- | ---- | --------------- |  | ---------- | ---- |  |  |  | ---- | 
|       |  | Composite-All |      | Composite-Fixed |  | Prime Rate
|       |  |               |      |                 |  |           
|Dec-98 |  |               | 6.03 |                 |  |            | 6.41 |  |  |  | 7.75 | 
|Mar-99 |  |               | 5.90 |                 |  |            | 6.25 |  |  |  | 7.75 | 
|Jun-99 |  |               | 5.85 |                 |  |            | 6.17 |  |  |  | 7.75 | 
|Sep-99 |  |               | 6.03 |                 |  |            | 6.03 |  |  |  | 8.25 | 
|Dec-99 |  |               | 6.14 |                 |  |            | 6.06 |  |  |  | 8.50 | 
|Mar-00 |  |               | 6.12 |                 |  |            | 6.00 |  |  |  | 9.00 | 
|Jun-00 |  |               | 6.33 |                 |  |            | 6.13 |  |  |  | 9.50 | 
|Sep-00 |  |               | 6.38 |                 |  |            | 6.15 |  |  |  | 9.50 | 
|Dec-00 |  |               | 6.37 |                 |  |            | 6.20 |  |  |  | 9.50 | 
|Mar-01 |  |               | 5.92 |                 |  |            | 6.13 |  |  |  | 8.00 | 
|Jun-01 |  |               | 5.49 |                 |  |            | 5.93 |  |  |  | 6.75 | 
|Sep-01 |  |               | 5.21 |                 |  |            | 5.88 |  |  |  | 6.00 | 
|Dec-01 |  |               | 5.07 |                 |  |            | 5.78 |  |  |  | 4.75 | 



The Company adopted SFAS 133 on
January 1, 2001 (see notes to the financial statements).
The transition adjustment in the amount of $15.2 million is
accounted for as the cumulative affect of an accounting change.
Interest expense for the year ended December 31, 2001
includes a $0.6 million credit related to the application
of SFAS 133.

Depreciation of flight equipment increased from
$637.3 million in 1999 to $705.7 million in 2000 and
$802.8 million in 2001 due to the increased cost of the
fleet. The cost of flight equipment (which excludes aircraft
subject to sale-leaseback) during the same periods increased
from $18.2 billion at December 31, 1999 to
$20.5 billion in 2000 to $24.4 billion in 2001.

Provisions for overhauls increased from $94.5
million in 1999 to $104.5 million in 2000 due to an
increase in the number of aircraft and aggregate number of hours
flown on which the Company collects overhaul revenue and
decreased to $94.4 million in 2001 due to the effect of
favorable payout factors realized. A decrease or increase in the
number of aircraft may result in a corresponding change in the
aggregate number of hours flown, for which overhaul reserves are
provided.

Flight equipment rent increased from
$130.0 million in 1999, to $141.0 million in 2000 and
decreased to $108.0 million in 2001 due to a change in the
lease rates resulting from changes in interest rates, affecting
the floating rate component of the lease rates. The interest
effect is partially offset or enhanced by annual principal
amortization. The Company, through subsidiaries, has entered
into sale-leaseback transactions relating to

16



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21 aircraft. As of March 15, 2002, the
Company had repurchased three of the aircraft, previously
subject to sale-lease back transactions, which were then sold to
third parties.


Selling, general and administrative expenses
remained relatively constant from 1999 to 2000, but increased
from $47.9 million in 2000 to $65.2 million in 2001 primarily
due to an increase in costs related to the reconfiguration and
re-delivery of aircraft from one lessee to another.

The effective tax rate fluctuated from 35.5% in
1999 to 33.6% in 2000, to 34.6% in 2001 as a result of the
effect of state taxes, foreign taxes and benefits related to the
Companys foreign sales corporation.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Standards
No. 142, Goodwill and Other Intangible
Assets,(SFAS 142) which addresses the accounting
for goodwill and other intangible assets after an acquisition.
This statement requires that goodwill and intangible assets with
indefinite lives no longer be amortized, but must be reviewed
for impairment at least annually. The statement is effective for
financial years beginning after December 15, 2001 (January,
2002 for the Company).

In June 2001, the FASB issued Financial
Accounting Standards No. 143, Accounting for Asset
Retirement Obligations (SFAS 143) which addresses
financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement requires that
the fair value of a liability for asset retirement obligations
be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. This statement is
effective for financial statements issued for fiscal years
beginning after June 15, 2002 (January 1, 2003 for the
Company).

In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets(SFAS 144), which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets.
This statement supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of and the accounting and
reporting provisions of APB Opinion No. 30, Reporting
the Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions for the
Disposal of a Segment of a Business. SFAS 144 is
effective for all fiscal quarters of all fiscal years beginning
after December 15, 2001 and interim periods within those
fiscal years (January 1, 2002 for the Company).

The Company does not expect a significant impact
from adopting SFAS 142, SFAS 143 and SFAS 144 on
its results of operations, financial conditions or cash flows.




Item 7A. Quantitative and Qualitative
Disclosures About Market Risk

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

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

The Company is exposed to market risk and the
risk of loss of fair value resulting from adverse fluctuations
in interest rates and foreign exchange prices. As of
December 31, 2001, 2000 and 1999, the Company statistically
measured the loss of fair value through the application of a VaR
model. In this analysis the net fair value of the Company was
determined using financial instrument assets. This included tax
adjusted future flight equipment lease revenues, aircraft
residual values at maturity of the lease contracts and financial

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##### Table of Contents



instrument liabilities, which included future
servicing of current debt. The impact of current derivative
positions was also taken into account.


The Company calculated the VaR with respect to
the net fair value by using historical scenarios. This
methodology entails re-pricing all assets and liabilities under
explicit changes in market rates within a specific historical
time period. In this case, the most recent two and three years
of historical information for interest rates and foreign
exchange rates were used to construct the historical scenarios
at December 31, 1999, 2000 and 2001 respectively. For each
scenario, each financial instrument is re-priced. Scenario
values for the Company are then calculated by netting the values
of all the underlying assets and liabilities. The final VaR
number represents the maximum adverse deviation in fair market
value incurred by these scenarios with 95% confidence (i.e. only
5% of historical scenarios show losses greater than the VaR
figure). A one month holding period is assumed in computing the
VaR figure. As December 31, the VaR for the Company with
respect to its fair value was $50 million (1999),
$11 million (2000) and $10 million (2001).




Item 8. Financial Statements and
Supplementary Data

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






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

None.

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##### Table of Contents






PART IV






Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K


(a)(1) and (2): Financial Statements and
Financial Statement Schedule: The response to this portion of
Item 14 is submitted as a separate section of this report
beginning on page 15.

(a)(3) and (c): Exhibits: The response to this
portion of Item 14 is submitted as a separate section of
this report beginning on page 15.

(b) Reports on Form 8-K: Current Report on
Form 8-K:

Form 8-K, event date October 2, 2001
(Item 7)

Form 8-K, event date October 3, 2001
(Item 7)

Form 8-K, event date October 12, 2001
(Item 7)

Form 8-K, event date November 14, 2001
(Item 7)

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

FORM 10-K

Items 8, 14(a), and 14(c)


INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND
SCHEDULE

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

|                                   |                                                                                          |      |    |    | 
|---------------------------------- | ---------------------------------------------------------------------------------------- | ---- | -- | -- | 
|                                   |                                                                                          | Page
|                                   |                                                                                          |     
|Report of Independent Accountants  |                                                                                          |      | 22 |   
|Consolidated Financial Statements: |                                                                                          |      |    |   
|                                   | Balance Sheets at December 31, 2001 and 2000                                             |      |    | 23 | 
|                                   | Statements of Income for the years ended
	December 31, 2001, 2000 and 1999               |      |    | 24 | 
|                                   | Statements of Shareholders Equity for the
	years ended December 31, 2001, 2000 and 1999 |      |    | 25 | 
|                                   | Statements of Cash Flows for the years ended
	December 31, 2001, 2000 and 1999           |      |    | 26 | 
|                                   | Notes to Consolidated Financial Statements                                               |      |    | 28 | 

The following financial statement schedule of the
Company and its subsidiaries is included in Item 14(a)(2):

|                |    |             |  |                                   |  |  |    | 
|--------------- | -- | ----------- |  | --------------------------------- |  |  | -- | 
|Schedule Number |    | Description |  | Page                             
|                |    |             |  |                                  
|                | II |             |  | Valuation and Qualifying Accounts |  |  | 44 | 

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

The following exhibits of the Company and its
subsidiaries are included in Item 14(c):

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

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##### Table of Contents



|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|------- | ---- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|Number  |      | Description
|        |      |            
|        | 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 10K 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 10Q 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 10Q for the quarter ended
        September 30, 2000 and incorporated herein by reference).                                                                                                               
|        | 4.5  |             |  | Indenture dated as of November 1, 2000,
        between the Company and the Bank of New York, as Trustee (filed
        as an exhibit to Registration No. 33-49566 and incorporated
        herein by reference).                                                                                                                                                                                           
|        | 4.6  |             |  | The Company agrees to furnish to the Commission
        upon request a copy of each instrument with respect to issues of
        long-term debt of the Company and its subsidiaries, the
        authorized principal amount of which does not exceed 10% of the
        consolidated assets of the Company and its subsidiaries.                                                                           
|        | 10.1 |             |  | Revolving Credit Agreement, dated as of
        January 17, 1997, among the Company, Citicorp USA, Inc as
        successor to Union Bank of Switzerland, New York Branch, and the
        other banks listed therein providing up to $1,250,000,000 (five
        year facility) (filed as an exhibit to Form 10-K for the
        year ended March 31, 1996 and incorporated herein by
        reference).
|        | 10.2 |             |  | Amendment to Revolving Credit Agreement, dated as
        of January 17, 2002 among the Company, Citicorp USA, Inc.,
        and the other banks listed therein providing up to
        $1,000,000,000 (three year facility).                                                                                                                                                                               
|        | 10.3 |             |  | Revolving Credit Agreement, dated as of November
        17, 1999 among the Company, Citicorp USA, Inc. and other banks
        listed therein (364 day facility) (filed as an exhibit to Form
        10-K for the year ended December 31, 1999 and incorporated
        herein by reference).                                                                                                             
|        | 10.4 |             |  | Amendment to Revolving Credit Agreement, dated as
        of November 15, 2000, among the Company, Citicorp USA,
        Inc., and the other banks listed therein providing up to
        $1,800,000,000 (364 day facility). (filed as an exhibit to
        Form 10-K for the year ended December 31, 2000 and
        incorporated herein by reference).                                                  
|        | 10.5 |             |  | Second amendment to Revolving Credit Agreement,
        dated as of January 17, 2002, among the Company, Citicorp
        USA Inc., and the other banks listed therein providing up to
        $1,500,000,000 (364 day facility).                                                                                                                                                                           
|        | 10.6 |             |  | Aircraft Facility Agreement, dated as of
        January 19, 1999, among the Company, Halifax PLC and the
        other banks listed therein providing up to $4,327,260,000 for
        the financing of approximately seventy-five Airbus aircraft
        (filed as an exhibit to Form 10-K for the year ended
        December 31, 1998 and incorporated herein by reference).                           
|        | 10.7 |             |  | Boeing Purchase Agreement No. 2241 and
        related letter agreements, all dated July 30, 1999, between
        the Company and the Boeing Company (filed as an exhibit to
        Form 10-Q for the quarter ended September 30, 1999)
        (confidential treatment granted).                                                                                                                         
|        | 10.8 |             |  | Supplemental Agreement #5, dated
        December 29, 2000, to the Boeing Purchase Agreement
        No. 2241 between the Company and the Boeing Company (filed
        as an exhibit to Form 10-K for the year ended
        December 31, 2000 and incorporated herein by reference).
        (confidential treatment granted).                                                                            
|        | 12   |             |  | Computation of Ratio of Earnings to Fixed Charges
        and Preferred Stock Dividends.                                                                                                                                                                                                                                                                                                                    
|        | 23   |             |  | Consent of PricewaterhouseCoopers LLP, dated
        March 22, 2002.                                                                                                                                                                                                                                                                                                                                        

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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To The Shareholders and Board of Directors

International Lease Finance Corporation


Los Angeles, California


In our opinion, the consolidated financial
statements listed in the accompanying index appearing under
Items 14(a)(1) and (2) on page 19 present fairly, in
all material respects, the financial position of International
Lease Finance Corporation and its subsidiaries (the
Company) at December 31, 2001 and
December 31, 2000, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
accompanying index presents fairly, in all material respects,
the information set forth therein when read in conjunction with
the related consolidated financial statements. These financial
statements and the financial statement schedule are the
responsibility of the Companys management; our
responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our
audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

As discussed in Note L to the consolidated
financial statements, on January 1, 2001, the Company
adopted Statement of Financial Accounting Standards No. 133
Accounting for Certain Derivative Instruments and Certain
Hedging Activities.

PricewaterhouseCoopers LLP

Los Angeles, California


February 15, 2002


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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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


ASSETS

|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |           | 
|------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------ | ---------- | --------- | - | - | ---------- | --------- | 
|                                                                                                 |                                                                                                                                                                                                     |             
|                                                                                                 |                                                                                                                                                                                                     | December 31,
|                                                                                                 |                                                                                                                                                                                                     |             
|                                                                                                 |                                                                                                                                                                                                     | 2001         |            | 2000     
|                                                                                                 |                                                                                                                                                                                                     |              |            |          
|Cash, including interest bearing accounts of
	$78,295 (2001) and $130,576 (2000)                 |                                                                                                                                                                                                     | $            | 79,383     |           |   | $ | 134,653    |          
|Current income taxes                                                                             |                                                                                                                                                                                                     |              | 173,280    |           |   |   | 58,990     |          
|Notes receivable                                                                                 |                                                                                                                                                                                                     |              | 252,264    |           |   |   | 296,063    |          
|Net investment in finance leases                                                                 |                                                                                                                                                                                                     |              | 142,013    |           |   |   | 114,062    |          
|Flight equipment under operating leases                                                          |                                                                                                                                                                                                     |              | 24,400,217 |           |   |   | 20,534,304 |          
|                                                                                                 | Less accumulated depreciation                                                                                                                                                                       |              |            | 3,417,020 |   |   |            | 2,655,915 | 
|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|                                                                                                 |                                                                                                                                                                                                     |              | 20,983,197 |           |   |   | 17,878,389 |          
|Deposits on flight equipment purchases                                                           |                                                                                                                                                                                                     |              | 1,321,699  |           |   |   | 1,058,182  |          
|Accrued interest, other receivables and other
	assets                                            |                                                                                                                                                                                                     |              | 130,471    |           |   |   | 93,719     |          
|Investments                                                                                      |                                                                                                                                                                                                     |              | 56,236     |           |   |   | 45,086     |          
|Deferred debt issue costs  less accumulated
	amortization of
	$59,056 (2001) and $60,613 (2000) |                                                                                                                                                                                                     |              | 28,747     |           |   |   | 22,334     |          
|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|                                                                                                 |                                                                                                                                                                                                     | $            | 23,167,290 |           |   | $ | 19,701,478 |          
|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|LIABILITIES AND SHAREHOLDERS EQUITY                                                            
|                                                                                                
|Accrued interest and other payables                                                              |                                                                                                                                                                                                     | $            | 265,107    |           |   | $ | 249,179    |          
|Debt financing, net of deferred debt discount
	of
	$15,157 (2001) and $34,754 (2000)             |                                                                                                                                                                                                     |              | 15,554,736 |           |   |   | 12,958,164 |          
|Capital lease obligations                                                                        |                                                                                                                                                                                                     |              | 365,289    |           |   |   | 463,362    |          
|Security and other deposits on flight equipment                                                  |                                                                                                                                                                                                     |              | 966,213    |           |   |   | 905,414    |          
|Rentals received in advance                                                                      |                                                                                                                                                                                                     |              | 114,874    |           |   |   | 129,152    |          
|Deferred income taxes                                                                            |                                                                                                                                                                                                     |              | 1,937,396  |           |   |   | 1,532,428  |          
|Commitments and contingencies  Note K                                                           |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|                                                                                                
|SHAREHOLDERS EQUITY                                                                             |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|                                                                                                 | Preferred stock  no par value; 20,000,000
	authorized shares: Series A Preferred Stock; $10,000,000
	per share liquidation value; 40 shares issued and
	outstanding                                |              |            | 400,000   |   |   |            |          | 
|                                                                                                 | Market Auction Preferred Stock, $100,000 per
	share liquidation value; Series A, B and E (2001) and
	Series A, B, C, D, E, F, G and H (2000), each series having
	500 shares issued and outstanding |              |            | 150,000   |   |   |            | 400,000   | 
|                                                                                                 | Common stock  no par value; 100,000,000
	authorized shares, 35,818,122 shares (2000 and 1999) issued and
	outstanding                                                                              |              |            | 3,582     |   |   |            | 3,582     | 
|                                                                                                 | Paid-in capital                                                                                                                                                                                     |              |            | 579,955   |   |   |            | 579,955   | 
|                                                                                                 | Accumulated other comprehensive income (loss)                                                                                                                                                       |              |            | (50,629   | ) |   |            | 9,256     | 
|                                                                                                 | Retained earnings                                                                                                                                                                                   |              |            | 2,880,767 |   |   |            | 2,470,986 | 
|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|                                                                                                 |                                                                                                                                                                                                     |              | 3,963,675  |           |   |   | 3,463,779  |          
|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |          
|                                                                                                 |                                                                                                                                                                                                     | $            | 23,167,290 |           |   | $ | 19,701,478 |          
|                                                                                                 |                                                                                                                                                                                                     |              |            |           |   |   |            |          

See accompanying notes.

23



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands)


|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |           |         | 
|---------------------------------------------------- | ----------------------------------- | ---------------------------------------------------------------------- | --------- | --------- | ------- | ---- | --------- | --------- | ------- |  | --------- | --------- | ------- | 
|                                                     |                                     |                                                                       
|                                                     |                                     | Years Ended December 31,                                              
|                                                     |                                     |                                                                       
|                                                     |                                     | 2001                                                                   |           | 2000      |         | 1999
|                                                     |                                     |                                                                        |           |           |         |     
|REVENUES:                                            |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     | Rental of flight equipment          |                                                                        | $         | 2,473,784 |         |      | $         | 2,301,440 |         |  | $         | 2,080,555 |        
|                                                     | Flight equipment marketing          |                                                                        |           | 62,883    |         |      |           | 99,716    |         |  |           | 147,216   |        
|                                                     | Interest and other                  |                                                                        |           | 80,046    |         |      |           | 77,589    |         |  |           | 72,317    |        
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     |                                     |                                                                        | 2,616,713 |           |         |      | 2,478,745 |           |         |  | 2,300,088 |          
|EXPENSES:                                            |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     | Interest                            |                                                                        |           | 792,611   |         |      |           | 773,539   |         |  |           | 686,767   |        
|                                                     | Depreciation of flight equipment    |                                                                        |           | 802,850   |         |      |           | 705,715   |         |  |           | 637,256   |        
|                                                     | Provision for overhauls             |                                                                        |           | 94,383    |         |      |           | 104,486   |         |  |           | 94,535    |        
|                                                     | Flight equipment rent               |                                                                        |           | 107,992   |         |      |           | 140,956   |         |  |           | 130,026   |        
|                                                     | Selling, general and administrative |                                                                        |           | 65,158    |         |      |           | 47,856    |         |  |           | 48,099    |        
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     |                                     |                                                                        | 1,862,994 |           |         |      | 1,772,552 |           |         |  | 1,596,683 |          
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     |                                     | INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT
	OF ACCOUNTING CHANGE |           |           | 753,719 |      |           |           | 706,193 |  |           |           | 703,405 | 
|Provision for income taxes                           |                                     |                                                                        | 261,044   |           |         |      | 237,292   |           |         |  | 249,958   |          
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     |                                     | INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
	CHANGE                  |           |           | 492,675 |      |           |           | 468,901 |  |           |           | 453,447 | 
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|Cumulative effect of accounting change (net of
	tax) |                                     |                                                                        | 15,191    |           |         |      |          |           |         |  |          |          
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          
|                                                     | NET INCOME                          |                                                                        | $         | 507,866   |         |      | $         | 468,901   |         |  | $         | 453,447   |        
|                                                     |                                     |                                                                        |           |           |         |      |           |           |         |  |           |          

See accompanying notes.

24



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

(Dollars in thousands, except share
amounts)


|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |          |         |  
|---------------------------- | ----------------------------- | ----------------------------------------------------------------- | ----- | --------------- | - | ------------ | ------- | -------- | - | ----------- | -- | ------ |  | ------- | ------- | ------------- |  | ---------- |  | ----- | ----- |  |  | - | ------- |  |  | - | ------- | - | ------- | - | --------- | -------- | - | - | --------- | -------- | ------- | -
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |           
|                             |                               | Market Auction                                                    |       |                 |   |              |         |          |   |             |    |        |  |        
|                             |                               | Preferred Stock                                                   |       | Preferred Stock |   | Common Stock |         |          |   | Accumulated |    |        |  |        
|                             |                               |                                                                   |       |                 |   |              |         |          |   | Other       |    |        |  |        
|                             |                               | Number of                                                         |       |                 |   | Number of    |         |          |   | Number of   |    |        |  | Paid-in |         | Comprehensive |  | Retained   |  |      
|                             |                               | Shares                                                            |       | Amount          |   | Shares       |         | Amount   |   | Shares      |    | Amount |  | Capital |         | Income (Loss) |  | Earnings   |  | Total
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |      
|Balance at December 31, 1998 |                               |                                                                   | 4,000 |                 |   | $            | 400,000 |          |   |             |    |        |  |         |         |               |  | 35,818,122 |  | $     | 3,582 |  |  | $ | 579,955 |  |  |   |         |   |         | $ | 1,860,838 |          |   | $ | 2,844,375 |         
|                             | Common stock dividends to AIG |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | (69,500  | ) |   |           | (69,500  | )      
|                             | Preferred stock dividends     |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | (18,130  | ) |   |           | (18,130  | )      
|                             | Net income                    |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | 453,447  |   |   |           | 453,447  |        
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|Balance at December 31, 1999 |                               |                                                                   | 4,000 |                 |   | $            | 400,000 |          |   |             |    |        |  |         |         |               |  | 35,818,122 |  | $     | 3,582 |  |  | $ | 579,955 |  |  |   |         |   |         | $ | 2,226,655 |          |   | $ | 3,210,192 |         
|                             | Common stock dividends to AIG |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | (206,000 | ) |   |           | (206,000 | )      
|                             | Preferred stock dividends     |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | (18,570  | ) |   |           | (18,570  | )      
|Comprehensive Income:        |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|                             | Net income                    |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | 468,901  |   |   |           | 468,901  |        
|                             | Other comprehensive income:   |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |          |        
|                             |                               | Foreign currency translation adjustment (net of
	tax of $5,399)   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         | $ | 9,256   |   |           |          |   |   |           |          | 9,256   |  
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|Comprehensive Income         |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   | $ | 478,157   |         
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|Balance at December 31, 2000 |                               |                                                                   | 4,000 |                 |   | $            | 400,000 |          |   |             |    |        |  |         |         |               |  | 35,818,122 |  | $     | 3,582 |  |  | $ | 579,955 |  |  | $ | 9,256   |   |         | $ | 2,470,986 |          |   | $ | 3,463,779 |         
|                             | Repurchase of preferred stock |                                                                   |       | (2,500          | ) |              |         | (250,000 | ) |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           | (250,000 | )      
|                             | Issuance of preferred stock   |                                                                   |       |                 |   |              |         |          |   |             |    | 40     |  |         | $       | 400,000       |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           | 400,000  |        
|                             | Common stock dividends to AIG |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | (83,500  | ) |   |           | (83,500  | )      
|                             | Preferred stock dividends     |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | (14,624  | ) |   |           | (14,624  | )      
|                             | Liquidation of subsidiary     |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | 39       |   |   |           | 39       |        
|Comprehensive Income:        |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|                             | Net income                    |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           | 507,866  |   |   |           | 507,866  |        
|                             | Other comprehensive income:   |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |          |        
|                             |                               | Foreign currency translation adjustment (net of
	tax of $3,734)   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   | 7,706   |   |           |          |   |   |           |          | 7,706   |  
|                             |                               | Cash flow derivative transactions (net of tax of
	$(25,371))      |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   | (47,118 | ) |           |          |   |   |           |          | (47,118 | )
|                             |                               | Cumulative effect of accounting change (net of
	tax of $(11,024)) |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   | (20,473 | ) |           |          |   |   |           |          | (20,473 | )
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|Comprehensive Income         |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   | $ | 447,981   |         
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         
|Balance at December 31, 2001 |                               |                                                                   | 1,500 |                 |   | $            | 150,000 |          |   |             | 40 |        |  | $       | 400,000 |               |  | 35,818,122 |  | $     | 3,582 |  |  | $ | 579,955 |  |  | $ | (50,629 | ) |         | $ | 2,880,767 |          |   | $ | 3,963,675 |         
|                             |                               |                                                                   |       |                 |   |              |         |          |   |             |    |        |  |         |         |               |  |            |  |       |       |  |  |   |         |  |  |   |         |   |         |   |           |          |   |   |           |         

See accompanying notes.

25



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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,                                         
|                                          |                                                                                    |                                                                  
|                                          |                                                                                    | 2001                                                              |            | 2000       |          | 1999
|                                          |                                                                                    |                                                                   |            |            |          |     
|OPERATING ACTIVITIES:                     |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|                                          | Net income                                                                         |                                                                   | $          | 507,866    |          |      | $          | 468,901    |         |   | $          | 453,447    |        
|                                          | Adjustments to reconcile net income to net cash
	provided by operating activities: |                                                                   |            |            |          |      |            |            |         |   |            |            |        
|                                          |                                                                                    | Depreciation of flight equipment                                  |            |            | 802,850  |      |            |            | 705,715 |   |            |            | 637,256 |  
|                                          |                                                                                    | Deferred income taxes                                             |            |            | 437,629  |      |            |            | 298,944 |   |            |            | 95,398  |  
|                                          |                                                                                    | Foreign exchange adjustment of Euro denominated
	debt             |            |            | (76,193  | )    |            |            |        |   |            |            |        |  
|                                          |                                                                                    | Change in derivative instruments                                  |            |            | 91,201   |      |            |            |        |   |            |            |        |  
|                                          |                                                                                    | Amortization of deferred debt issue costs                         |            |            | 19,597   |      |            |            | 9,762   |   |            |            | 8,260   |  
|                                          |                                                                                    | Gain on sale of flight equipment included in
	amount financed     |            |            |         |      |            |            |        |   |            |            | (7,631  | )
|                                          |                                                                                    | Increase in notes receivable                                      |            |            | (37,286  | )    |            |            | (76,237 | ) |            |            | (67,867 | )
|                                          |                                                                                    | Equity in net (income) loss of affiliates                         |            |            | (702     | )    |            |            | 2,827   |   |            |            | 705     |  
|                                          |                                                                                    | Change in unamortized debt discount                               |            |            | (1,557   | )    |            |            | (6,753  | ) |            |            | (13,148 | )
|                                          | Changes in operating assets and liabilities:                                       |                                                                   |            |            |          |      |            |            |         |   |            |            |        
|                                          |                                                                                    | Increase in accrued interest, other receivables
	and other assets |            |            | (35,921  | )    |            |            | (15,894 | ) |            |            | (21,521 | )
|                                          |                                                                                    | Increase (decrease) in accrued interest and other
	payables       |            |            | 15,929   |      |            |            | (36,025 | ) |            |            | 45,887  |  
|                                          |                                                                                    | (Increase) decrease in current income taxes
	receivable           |            |            | (114,290 | )    |            |            | (73,360 | ) |            |            | 30,377  |  
|                                          |                                                                                    | (Decrease) increase in rentals received in advance                |            |            | (14,278  | )    |            |            | 18,717  |   |            |            | (9,247  | )
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|Net cash provided by operating activities |                                                                                    |                                                                   | 1,594,845  |            |          |      | 1,296,597  |            |         |   | 1,151,916  |           
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|INVESTING ACTIVITIES:                     |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|                                          | Acquisition of flight equipment for operating
	leases                              |                                                                   |            | (4,109,812 | )        |      |            | (2,990,287 | )       |   |            | (3,446,630 | )      
|                                          | Acquisition of flight equipment for finance leases                                 |                                                                   |            | (39,207    | )        |      |            | (81,770    | )       |   |            |           |        
|                                          | (Increase) decrease in deposits and progress
	payments                             |                                                                   |            | (263,517   | )        |      |            | (209,452   | )       |   |            | 57,466     |        
|                                          | Proceeds from disposal of flight
	equipment  net of gain                          |                                                                   |            | 208,917    |          |      |            | 543,665    |         |   |            | 1,486,893  |        
|                                          | Advances on notes receivable                                                       |                                                                   |            |           |          |      |            | (20,702    | )       |   |            |           |        
|                                          | Collections on notes receivable                                                    |                                                                   |            | 66,441     |          |      |            | 52,884     |         |   |            | 248,713    |        
|                                          | Collections on finance and sales-type leases (net
	of income amortized)            |                                                                   |            | 7,764      |          |      |            | 5,533      |         |   |            | 33,350     |        
|                                          | Decrease (increase) in investments                                                 |                                                                   |            | 298        |          |      |            | (42,286    | )       |   |            |           |        
|                                          | Dividends from unconsolidated subsidiaries                                         |                                                                   |            | 626        |          |      |            | 440        |         |   |            | 5,000      |        
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|Net cash used in investing activities     |                                                                                    |                                                                   | (4,128,490 | )          |          |      | (2,741,975 | )          |         |   | (1,615,208 | )         
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|FINANCING ACTIVITIES:                     |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|                                          | Issuance of preferred stock                                                        |                                                                   |            | 400,000    |          |      |            |           |         |   |            |           |        
|                                          | Repurchase of preferred stock                                                      |                                                                   |            | (250,000   | )        |      |            |           |         |   |            |           |        
|                                          | Proceeds from debt financing                                                       |                                                                   |            | 11,083,922 |          |      |            | 8,979,201  |         |   |            | 6,855,019  |        
|                                          | Payments in reduction of debt financing and
	capital lease obligations             |                                                                   |            | (8,713,405 | )        |      |            | (7,398,063 | )       |   |            | (6,164,085 | )      
|                                          | Debt issue costs                                                                   |                                                                   |            | (4,856     | )        |      |            | (3,747     | )       |   |            | (7,107     | )      
|                                          | Payment of common and preferred dividends                                          |                                                                   |            | (98,085    | )        |      |            | (224,570   | )       |   |            | (87,630    | )      
|                                          | Increase (decrease) in customer deposits                                           |                                                                   |            | 60,799     |          |      |            | 104,101    |         |   |            | (62,519    | )      
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|Net cash provided by financing activities |                                                                                    |                                                                   | 2,478,375  |            |          |      | 1,456,922  |            |         |   | 533,678    |           
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|Net (decrease) increase in cash           |                                                                                    |                                                                   | (55,270    | )          |          |      | 11,544     |            |         |   | 70,386     |           
|Cash at beginning of year                 |                                                                                    |                                                                   | 134,653    |            |          |      | 123,109    |            |         |   | 52,723     |           
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|                                          |                                                                                    | Cash at end of year                                               |            | $          | 79,383   |      |            | $          | 134,653 |   |            | $          | 123,109 |  
|                                          |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           
|(Table continued on next page)            |                                                                                    |                                                                   |            |            |          |      |            |            |         |   |            |           

26



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)


(Dollars in thousands)


|                                                                                                                                                                            |                                           |                                                                                        |  |      |         |      |  |   |         |  |  |   |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | -------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- |  |  | - | ------- | 
|                                                                                                                                                                            |                                           |                                                                                       
|                                                                                                                                                                            |                                           | Years Ended December 31,                                                              
|                                                                                                                                                                            |                                           |                                                                                       
|                                                                                                                                                                            |                                           | 2001                                                                                   |  | 2000 |         | 1999
|                                                                                                                                                                            |                                           |                                                                                        |  |      |         |     
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                                                                           |                                           |                                                                                        |  |      |         |      |  |   |         |  |  |  
|                                                                                                                                                                            | Cash paid (received) during the year for: |                                                                                        |  |      |         |      |  |   |         |  |  |   |        
|                                                                                                                                                                            |                                           | Interest (net of amount capitalized $58,845
	(2001), $50,019 (2000) and $45,235 (1999) |  | $    | 747,006 |      |  | $ | 720,966 |  |  | $ | 649,975 | 
|                                                                                                                                                                            |                                           | Income taxes, net                                                                      |  |      | (54,115 | )    |  |   | 11,709  |  |  |   | 124,183 | 
|                                                                                                                                                                           
|                                                                                                                                                                            | 2001                                      |                                                                                        |  |      |         |      |  |   |         |  |  |   |        
|One aircraft was received in exchange for notes
	receivable in the amount of $18,136 and one aircraft with a net
	book value of $11,372 was contributed to a joint venture.
|                                                                                                                                                                            | 2000                                      |                                                                                        |  |      |         |      |  |   |         |  |  |   |        
|Two aircraft were received in exchange for notes
	receivable and other assets in the amount of $41,429.                                                                    
|                                                                                                                                                                            | 1999                                      |                                                                                        |  |      |         |      |  |   |         |  |  |   |        
|Notes in the amount of $110,940 were received as
	partial payment in exchange for flight equipment sold with a
	book value of $103,308.                                    

See accompanying notes.

27



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands)


Note A  Summary of Significant
Accounting Policies

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

Parent
Company:International Lease
Finance Corporation (the Company) is an indirect
wholly owned subsidiary of American International Group, Inc.
(AIG). AIG is a holding company which through its
subsidiaries is primarily engaged in a broad range of insurance
and insurance-related activities, financial services, retirement
savings and assets management in the United States and abroad.

Principles of
Consolidation:The accompanying
consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Investments of less
than 20% in other entities are carried at cost. Investments of
between 20% and 50% in other entities are carried under the
equity method. All significant intercompany balances and
transactions have been eliminated in consolidation.

Intercompany
Allocations:The Company is party
to cost sharing agreements with AIG. Generally, these agreements
provide for the allocation of costs upon either a specific
identification basis or a proportional cost allocation basis.
The charges aggregated $1,001 (2001) $1,213 (2000) and $2,896
(1999).

Rentals:The
Company, as lessor, leases flight equipment principally under
operating leases. Accordingly, income is reported over the life
of the lease as rentals become receivable under the provisions
of the lease or, in the case of leases with varying payments,
under the straight-line method over the noncancelable term of
the lease. In certain cases, leases provide for additional
rentals based on usage.

Flight Equipment
Marketing:The Company is a
marketer of flight equipment. Marketing revenues include all
revenues from such operations consisting of net gains on sales
of flight equipment and commissions. The Company recognizes
marketing revenue when flight equipment is sold and the risk of
ownership of the equipment is passed.

Cash:Cash
includes cash on hand, time deposits and cash held in trust for
Internal Revenue Code Section 1031 exchanges.

Flight
Equipment:Flight equipment is
stated at cost. Major additions and modifications are
capitalized. Normal maintenance and repairs; airframe and engine
overhauls; and compliance with return conditions of flight
equipment on lease are provided by and paid for by the lessee.
Under the provisions of many leases, for certain airframe and
engine overhauls, the lessee is reimbursed for costs incurred up
to, but not exceeding, related hourly rentals paid to the
Company by the lessee. Such rentals are included in the caption
Rental of Flight Equipment. The Company provides a charge to
operations for such reimbursements based on the estimated
reimbursements during the life of the lease, which amount is
included in overhaul reserves.

Generally, aircraft, including aircraft acquired
under capital leases, are depreciated using the straight-line
method over a 25 year life from the date of manufacture to a 15%
residual value.

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

The Company regularly reviews its flight
equipment to determine that its carrying value is not impaired.

28



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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)


Capitalized
Interest:The Company borrows
certain funds to finance progress payments for the construction
of flight equipment ordered. The interest incurred on such
borrowings is capitalized and included in the cost of the
equipment.

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

Financial
Instruments:In the normal course
of business, the Company utilizes derivative financial
instruments to manage its exposure to interest rate risks and
foreign currency risks. All derivatives are recognized on the
balance sheet at their fair value. On the date that the Company
enters into a derivative contract, it designates the derivative
as (1) a hedge of (a) the fair value of a recognized
asset or liability or (b) an unrecognized firm commitment
(a fair value hedge); (2) a hedge of (a) a
forecasted transaction or (b) the variability of cash flows
that are to be received or paid in connection with a recognized
asset or liability (a cash flow hedge); or
(3) a foreign-currency fair value or cash flow hedge (a
foreign currency hedge). Changes in the fair value
of a derivative that is highly effective as and that is
designated and qualifies as a fair-value hedge, along with
changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk, are recorded in
current-period earnings. Changes in the fair value of a
derivative that is highly effective as and that is designated
and qualifies as a cash flow hedge, to the extent that the hedge
is effective, are recorded in accumulated other comprehensive
income, until earnings are affected by the variability of cash
flows of the hedged transaction (e.g. until periodic settlements
of the variable-rate asset or liability are recorded in
earnings). Any hedge ineffectiveness (which represents the
amount by which the changes in the fair value of the derivative
exceed the variability in the cash flows of the forecasted
transaction) is recorded in current-period earnings. Changes in
the fair value of a derivative that is highly effective as and
that is designated and qualifies as a foreign currency hedge are
recorded in either current-period earnings or other accumulated
comprehensive income, depending on whether the hedging
relationship satisfies the criteria for a fair value or cash
flow hedge. Changes in the fair value of derivative financial
instruments that did not qualify for hedge treatment under
SFAS 133 are reported in current-period earnings.

The Company formally documents all relationships
between hedging instruments and hedged items, as well as risk
management objectives and strategies for undertaking various
hedge transactions. This includes linking all derivatives that
are designated as fair value, cash flow, or foreign currency
hedges to (1) specific assets or liabilities on the balance
sheet or (2) specific firm commitments or forecasted
transactions. The Company also assesses (both at the
hedges inception and on an ongoing basis) whether the
derivatives that are used in hedging transactions have been
highly effective in offsetting changes in the fair value or cash
flow of hedged items and whether those derivatives may be
expected to remain highly effective in future periods. When it
is determined that a derivative is not (or has ceased to be)
highly effective as a hedge, the Company will discontinue hedge
accounting prospectively, as discussed below.

The Company will discontinue hedge accounting
prospectively when (1) it determines that the derivative is
no longer effective in offsetting changes in the fair value or
cash flows of a hedged item; (2) the derivative expires or
is sold, terminated, or exercised; (3) it is no longer
probable that the forecasted transaction will occur; (4) a
hedged firm commitment no longer meets the definition of a firm
commitment; or (5) management determines that designating
the derivative as a hedging instrument is no longer appropriate.

When hedge accounting is discontinued due to the
Companys determination that the derivative no longer
qualifies as an effective fair value hedge, the Company will
continue to carry the derivative on the balance sheet at its
fair value, but cease to adjust the hedged liability for changes
in fair value. When the Company discontinues hedge accounting
because it is no longer probable that the forecasted transaction
will occur in the originally expected period, the gain or loss
on the derivative remains in accumulated other comprehensive

29



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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)


income and is reclassified into earnings when the
forecasted transaction affects earnings. However, if it is
probable that a forecasted transaction will not occur by the end
of the originally specified time period or within an additional
two-month period of time thereafter, the gains and losses that
were accumulated in accumulated other comprehensive income will
be recognized immediately in earnings. In all situations in
which hedge accounting is discontinued and the derivative
remains outstanding, the Company will carry the derivative at
its fair value on the balance sheet, recognizing changes in the
fair value in current-period earnings.

Other Comprehensive Income (Loss):The Company reports comprehensive
income in accordance with SFAS No. 130, Reporting
Comprehensive Income. The Companys other
comprehensive income reported in shareholders equity as
Accumulated Other Comprehensive Income (Loss) consists of assets
and liabilities denominated in a foreign currency, translated
into US dollars using the current exchange rate and the gains
and losses associated with changes in fair value of derivatives
designated as cash flow hedges in accordance with SFAS 133.

Income
Taxes:The Company and its U.S.
subsidiaries are included in the consolidated federal income tax
return and the combined California unitary tax return of AIG.
The provision for income taxes is calculated on a separate
return basis. Income tax payments are made pursuant to a tax
payment allocation agreement whereby AIG credits or charges the
Company for the corresponding increase or decrease (not to
exceed the separate return basis calculation) in AIGs
current taxes resulting from the inclusion of the Company in
AIGs consolidated tax return. Intercompany payments are
made when such taxes are due or tax benefits are realized by
AIG. Current income taxes on the Consolidated Balance Sheet
represent amounts receivable from AIG under the agreement.

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

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

Reclassifications:Certain
amounts have been reclassified in the 1999 and 2000 financial
statements to conform to the Companys 2001 presentation.

New Accounting
Pronouncements:The Company will
adopt Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets(SFAS 142), Financial Accounting Standards
No. 143, Accounting for Asset Retirement
Obligations(SFAS 143), and Financial Accounting
Standards No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets(SFAS 144) for
the fiscal year ended December 31, 2002. SFAS 142
requires that goodwill and intangible assets with indefinite
lives no longer be amortized but must be reviewed for impairment
at least annually. SFAS 143 requires the fair value of a
liability for asset retirement obligations be recognized in the
period incurred if a reasonable estimate of fair value can be
made. SFAS 144 provides guidance for accounting for
impairment or disposal of long-lived assets. The Company does
not expect a significant impact from adopting these statements
on its results of operations, financial position, or cash flows.

30



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note B  Notes Receivable

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

|                                                                        |               |      |         |         |  |   |         |         | 
|----------------------------------------------------------------------- | ------------- | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                                                        |               | 2001 |         | 2000   
|                                                                        |               |      |         |        
|Fixed rate notes receivable due in varying
	installments to 2011:       |               |      |         |         |  |   |         |        
|                                                                        | 0% to 5.99%   |      | $       | 43,870  |  |   |         |        | 
|                                                                        | 6% to 7.99%   |      |         | 139,299 |  |   | $       | 199,028 | 
|                                                                        | 8% to 9.99%   |      |         | 53,509  |  |   |         | 50,387  | 
|                                                                        | 10% to 12.99% |      |         | 4,618   |  |   |         | 2,240   | 
|                                                                        | 13% to 15%    |      |         |        |  |   |         | 5,763   | 
|LIBOR plus 1.1% to LIBOR plus 1.5% due in varying
	installments to 2002 |               |      | 10,968  |         |  |   | 38,645  |        
|                                                                        |               |      |         |         |  |   |         |        
|                                                                        |               | $    | 252,264 |         |  | $ | 296,063 |        
|                                                                        |               |      |         |         |  |   |         |        

Included above, the Company had notes receivable
of $59,230 (2001) and $57,615 (2000) representing restructured
lease payments.

At December 31, 2001, the minimum future notes
receivable payments to be received are as follows:

|           |  |   |         |  |  |  |  | 
|---------- |  | - | ------- |  |  |  |  | 
|2002       |  | $ | 70,431  |  |  |  |  | 
|2003       |  |   | 66,636  |  |  |  |  | 
|2004       |  |   | 29,200  |  |  |  |  | 
|2005       |  |   | 18,176  |  |  |  |  | 
|2006       |  |   | 15,057  |  |  |  |  | 
|Thereafter |  |   | 52,764  |  |  |  |  | 
|           |  |   |         |  |  |  |  | 
|           |  | $ | 252,264 |  |  |  |  | 
|           |  |   |         |  |  |  |  | 

In 1998 and prior years, the Company sold notes
receivable with certain limited recourse provisions to a related
party of the Company. The notes sold in 1998 aggregated $68,694
and were sold at face value including accrued interest. The
Company continues to collect payments on the notes, transfers
the payments to the related party and receives a servicing fee.
The Company recorded no gain or loss on the sale. The Company
recorded servicing fee income of $0 (2001), $25 (2000) and $50
(1999) related to the notes sold. The notes had matured at
December 31, 2001. During 2000, the Company repurchased one
note sold in 1998. The note was not repurchased under the
recourse provisions.

Note C  Net Investment in Finance
Leases

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

|                                                      |  |      |          |      |  |   |         |  
|----------------------------------------------------- |  | ---- | -------- | ---- |  | - | ------- | -
|                                                      |  | 2001 |          | 2000
|                                                      |  |      |          |     
|Total lease payments to be received                   |  | $    | 205,011  |      |  | $ | 164,771 |  
|Estimated residual values of leased flight
	equipment |  |      | 49,045   |      |  |   | 34,214  |  
|Less: Unearned income                                 |  |      | (112,043 | )    |  |   | (84,923 | )
|                                                      |  |      |          |      |  |   |         |  
|Net investment in finance and sales-type leases       |  | $    | 142,013  |      |  | $ | 114,062 |  
|                                                      |  |      |          |      |  |   |         |  

31



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note C  Net Investment in Finance
Leases (Continued)


Minimum future lease payments to be received on
finance leases at December 31, 2001 are as follows:

|                                            |  |   |         |  |  |  |  | 
|------------------------------------------- |  | - | ------- |  |  |  |  | 
|2002                                        |  | $ | 11,166  |  |  |  |  | 
|2003                                        |  |   | 15,353  |  |  |  |  | 
|2004                                        |  |   | 15,356  |  |  |  |  | 
|2005                                        |  |   | 14,556  |  |  |  |  | 
|2006                                        |  |   | 15,879  |  |  |  |  | 
|Thereafter                                  |  |   | 132,701 |  |  |  |  | 
|                                            |  |   |         |  |  |  |  | 
|Total minimum lease payments to be received |  | $ | 205,011 |  |  |  |  | 
|                                            |  |   |         |  |  |  |  | 

Note D  Investments

Investments consist of the following:

|               |                       |         |  |        |   |         |        |        |  |  |  |      |   |   |        |        | 
|-------------- | --------------------- | ------- |  | ------ | - | ------- | ------ | ------ |  |  |  | ---- | - | - | ------ | ------ | 
|               |                       |         |  |       
|               |                       | 2001    |  | 2000  
|               |                       |         |  |       
|               |                       | Percent |  |        |   | Percent |        |       
|               |                       | Owned   |  | Amount |   | Owned   |        | Amount
|               |                       |         |  |        |   |         |        |       
|Cost method:   |                       |         |  |        |   |         |        |        |  |  |  |      |   |   |        |       
|               | Air New Zealand(a)    |         |  | .9     | % |         | $      | 6,986  |  |  |  | .9   | % |   | $      | 6,986  | 
|               | American Trans Air(a) |         |  |        |   |         |        | 30,000 |  |  |  |      |   |   |        | 30,000 | 
|               | Others                |         |  |        |   |         |        | 1,832  |  |  |  |      |   |   |        | 2,158  | 
|Equity method: |                       |         |  |        |   |         |        |        |  |  |  |      |   |   |        |       
|               | 21937, LLC(b)         |         |  | 99     | % |         |        | 10,782 |  |  |  |      |   |   |        |       | 
|               | ILTU Ireland(c)       |         |  | 50     | % |         |        | 6,517  |  |  |  | 50.0 | % |   |        | 5,826  | 
|               | Others                |         |  |        |   |         |        | 119    |  |  |  |      |   |   |        | 116    | 
|               |                       |         |  |        |   |         |        |        |  |  |  |      |   |   |        |       
|               |                       |         |  |        |   | $       | 56,236 |        |  |  |  |      |   | $ | 45,086 |       
|               |                       |         |  |        |   |         |        |        |  |  |  |      |   |   |        |       






|    |                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In 2000, the Company invested $6,986 in common
	stock of Air New Zealand and $30,000 in American Trans Air
	(ATA) non-voting preferred stock.                                                                                                                                        
|   
|(b) | In 2001, the Company contributed an aircraft with
	a net book value of $11,372 for a 99% interest in 21937, LLC, a
	joint venture that leases the aircraft to a third party. This
	investment is not consolidated due to the Companys lack of
	effective control in the joint venture.
|   
|(c) | In 2000, the Company invested $5,000 for a 50%
	interest in ILTU Ireland (ILTU), an Irish
	corporation. ILTU presently owns one Boeing 767-300 on lease to
	an airline. The Company has guaranteed a loan from a related
	party to ILTU (see Note K).                                

32



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note E  Debt Financing and Capital
Lease Obligations

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

|                                                 |  |      |            |      |  |   |            |  
|------------------------------------------------ |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                 |  | 2001 |            | 2000
|                                                 |  |      |            |     
|Commercial Paper                                 |  | $    | 3,501,865  |      |  | $ | 4,288,681  |  
|Public Term Debt with Single Maturities          |  |      | 4,704,201  |      |  |   | 3,456,675  |  
|Public Medium-Term Notes with Varying Maturities |  |      | 4,809,000  |      |  |   | 3,175,000  |  
|Bank Term Debt                                   |  |      | 2,368,968  |      |  |   | 2,072,562  |  
|Capital Lease Obligations                        |  |      | 365,289    |      |  |   | 463,362    |  
|Less: Deferred Debt Discount                     |  |      | (15,157    | )    |  |   | (34,754    | )
|Derivatives                                      |  |      | 185,859    |      |  |   |            |  
|                                                 |  |      |            |      |  |   |            |  
|                                                 |  | $    | 15,920,025 |      |  | $ | 13,421,526 |  
|                                                 |  |      |            |      |  |   |            |  

The interest on substantially all of the public
debt (exclusive of the commercial paper) is fixed for the term
of the note.

Commercial
Paper

The Company has a $4.8 billion Commercial
Paper Program. Under this program, the Company may borrow in
minimum increments of $100 for a period from one day to 270
days. The weighted average interest rate of the Companys
Commercial Paper Program was 4.10% and 6.41% at
December 31, 2001 and 2000 respectively. At
December 31, 2001 and 2000 the composite commercial paper
rate was 2.24% and 6.63% respectively.

Bank
Commitments

As of December 31, 2001, the Company had
committed revolving loans and lines of credit with
46 commercial banks aggregating $3.2 billion. These
revolving loans and lines of credit principally provide for
interest rates that vary according to the pricing option in
effect at the time of borrowing. Pricing options include prime,
a range from .20% over LIBOR to .35% over LIBOR based upon
utilization, or a rate determined by a competitive bid process
with the banks. The revolving loans and lines of credit are
subject to facility fees of up to .08% of amounts available.
Such financing is used primarily as backup for the
Companys Commercial Paper program. The Company had not
drawn any funds under its committed revolving loans and lines of
credit at December 31, 2001 and 2000, respectively.

Public
Debt

As of December 31, 2001 the Company had an
effective shelf registration statement with respect to
$4.0 billion in debt securities, under which
$1.2 billion of notes were sold through December 31,
2001. Additionally, a $2.0 billion Medium-Term Note program
was implemented under the shelf registration statement, under
which $1.9 billion was sold through December 31, 2001.

33



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




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


Public
Term Debt

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

|                                                                     |  |          |  |      |           |      |  |   |           | 
|-------------------------------------------------------------------- |  | -------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                                                     |  | Initial  |  |      |           |     
|                                                                     |  | Term     |  | 2001 |           | 2000
|                                                                     |  |          |  |      |           |     
|Floating Rate Notes due February 1, 2001 (swapped
	to 6.53%)         |  | 4 years  |  |      |           |      |  | $ | 100,000   | 
|8 7/8% Notes due April 15, 2001                                      |  | 10 years |  |      |           |      |  |   | 150,000   | 
|5 7/8% Notes due January 15, 2001                                    |  | 3 years  |  |      |           |      |  |   | 200,000   | 
|6 7/8% Notes due May 1, 2001                                         |  | 4 years  |  |      |           |      |  |   | 100,000   | 
|5.95% Notes due June 1, 2001                                         |  | 3 years  |  |      |           |      |  |   | 100,000   | 
|6 1/2% Notes due July 1, 2001                                        |  | 4 years  |  |      |           |      |  |   | 100,000   | 
|5 7/8% Notes due July 1, 2001                                        |  | 3 years  |  |      |           |      |  |   | 125,000   | 
|6 3/8% Notes due August 1, 2001                                      |  | 4 years  |  |      |           |      |  |   | 100,000   | 
|6 1/2% Notes due October 15, 2001                                    |  | 5 years  |  |      |           |      |  |   | 100,000   | 
|6 3/8% Notes due February 15, 2002                                   |  | 5 years  |  | $    | 100,000   |      |  |   | 100,000   | 
|5.90% Notes due April 15, 2002                                       |  | 4 years  |  |      | 100,000   |      |  |   | 100,000   | 
|5 5/8% Notes due April 15, 2002                                      |  | 3 years  |  |      | 100,000   |      |  |   | 100,000   | 
|5 5/8% Notes due May 1, 2002                                         |  | 3 years  |  |      | 175,000   |      |  |   | 175,000   | 
|6.00% Notes due May 15, 2002                                         |  | 4 years  |  |      | 100,000   |      |  |   | 100,000   | 
|6 3/8% Notes due August 1, 2002                                      |  | 5 years  |  |      | 100,000   |      |  |   | 100,000   | 
|6.75% Notes due October 1, 2002                                      |  | 2 years  |  |      | 150,000   |      |  |   | 150,000   | 
|5 3/4% Notes due January 15, 2003                                    |  | 5 years  |  |      | 100,000   |      |  |   | 100,000   | 
|Floating Rate Notes due February 2, 2003 (swapped
	to 5.515%)        |  | 2 years  |  |      | 250,000   |      |  |   |          | 
|4.75% Notes due June 2, 2003                                         |  | 2 years  |  |      | 250,000   |      |  |   |          | 
|6.00% Notes due June 15, 2003                                        |  | 5 years  |  |      | 100,000   |      |  |   | 100,000   | 
|6.75% Notes due November 3, 2003                                     |  | 3 years  |  |      | 250,000   |      |  |   | 250,000   | 
|Floating Rate Notes due February 13, 2004
	(swapped to 5.586%)       |  | 3 years  |  |      | 300,000   |      |  |   |          | 
|Floating Rate Notes due April 1, 2004 (swapped to
	5.48%)            |  | 3 years  |  |      | 250,000   |      |  |   |          | 
|5.25% Notes due May 3, 2004                                          |  | 3 years  |  |      | 200,000   |      |  |   |          | 
|5 1/8% Notes due August 1, 2004                                      |  | 3 years  |  |      | 300,000   |      |  |   |          | 
|Floating Rate Notes due October 18, 2004 (swapped
	to 3.315%)        |  | 3 years  |  |      | 150,000   |      |  |   |          | 
|8 3/8% Notes due December 15, 2004                                   |  | 10 years |  |      | 100,000   |      |  |   | 100,000   | 
|Floating Rate Notes due June 3, 2002
	(swapped to 7.195%)            |  | 2 years  |  |      | 250,000   |      |  |   | 250,000   | 
|5.75% Notes due October 15, 2006                                     |  | 5 years  |  |      | 700,000   |      |  |   |          | 
|Euro Denominated Medium Term Notes:                                  |  |          |  |      |           |      |  |   |           | 
|3.625% Notes due July 1, 2002 (swapped to
	US$ at 5.80%)             |  | 3 years  |  |      | 181,006   |      |  |   | 207,880   | 
|4.125% Notes due July 12, 2004 (partially
	swapped to US$ at 6.375%) |  | 5 years  |  |      | 498,195   |      |  |   | 548,795   | 
|                                                                     |  |          |  |      |           |      |  |   |           | 
|                                                                     |  |          |  | $    | 4,704,201 |      |  | $ | 3,456,675 | 
|                                                                     |  |          |  |      |           |      |  |   |           | 

The Company has a Euro Medium-Term Note Program
for $2.0 billion, under which $771 million
(750 million)
in Notes were sold through December 31, 2001. The Company
has hedged the notes through operating lease payments or through
swaps to transfer the currency exposure to third parties. The
Company translates the debt into US dollars using current
exchange rates.

Public
Medium-Term Notes

At December 31, 2001 the Companys
Medium-Term Notes bear interest at rates varying between 4.40%
and 8.35%, with maturities from 2002 through 2007. The
Medium-Term Notes provide for a single principal payment at the
maturity of the respective note and cannot be redeemed by the
Company prior to maturity.

34



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




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


Bank
Term Debt

In January 1999, the Company entered into an
Export Credit Facility for up to a maximum of $4.3 billion,
for approximately 75 aircraft to be delivered from 1999 through
2001. The Company had the right, but was not required, to use
the facility to fund 85% of each aircrafts purchase price.
This facility is guaranteed by various European Export Credit
Agencies. The interest rate varies from 5.753% to 5.898%
depending on the delivery date of the aircraft. At
December 31, 2001 the Company had financed 62 aircraft
and had $2.4 billion outstanding debt under this facility.

See Note L  Financial Instruments.

Capital
Lease Obligations

The Companys capital lease obligations
provide 10 year, fully amortizing debt in three interest rate
tranches. The first 62.5% of the original debt is at a fixed
rate of 6.55%. The second 22.5% of the original debt is at fixed
rates varying between 6.18% and 6.89%. These two tranches are
guaranteed by various European Export Credit Agencies. The
remaining 15% of the original debt is at a floating LIBOR based
rate. The LIBOR based tranche was prepaid in 2000. The remaining
debt matures through 2005. The flight equipment associated with
the obligations, and included in flight equipment under
operating leases in the balance sheet, had a net book value of
$931,296 (2001) and $1,006,271 (2000).

The following is a schedule by years of future
minimum lease payments under capitalized leases together with
the present value of the net minimum lease payments as of
December 31, 2001:

|                                            |  |   |         | 
|------------------------------------------- |  | - | ------- | 
|2002                                        |  | $ | 127,256 | 
|2003                                        |  |   | 127,256 | 
|2004                                        |  |   | 113,179 | 
|2005                                        |  |   | 45,136  | 
|                                            |  |   |         | 
|Total minimum lease payments                |  |   | 412,827 | 
|Less amount representing interest           |  |   | 47,538  | 
|                                            |  |   |         | 
|Present value of net minimum lease payments |  | $ | 365,289 | 
|                                            |  |   |         | 

Maturities of debt financing and capital lease
obligations (excluding commercial paper, derivatives, deferred
debt discount and foreign currency translation adjustment in the
amount of $92,129) at December 31, 2001 are as follows:

|           |  |   |            | 
|---------- |  | - | ---------- | 
|2002       |  | $ | 3,035,221  | 
|2003       |  |   | 3,117,419  | 
|2004       |  |   | 3,281,817  | 
|2005       |  |   | 622,857    | 
|2006       |  |   | 1,234,174  | 
|Thereafter |  |   | 1,048,098  | 
|           |  |   |            | 
|           |  | $ | 12,339,586 | 
|           |  |   |            | 

Under the most restrictive provisions of the
related borrowings, consolidated retained earnings at
December 31, 2001, in the amount of $989,898, are
unrestricted as to payment of dividends based on consolidated
tangible net worth requirements.

35



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




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


The Company has entered into various debt and
derivative transactions with AIGFP, a related party. The Company
executed $1,456,000 and $1,418,200 notional amount of derivative
instruments with the related party during 2001 and 2000,
respectively.

Note F  Shareholders
Equity

Preferred
Stock

The Board of Directors is authorized to issue up
to 20,000,000 shares of preferred stock that may be issued
in one or more series and with such stated value and terms as
may be determined by the Board of Directors.

Series
A Preferred Stock

In December 2001, the Company issued
40 shares of Series A preferred shares with a
liquidation value of $10 million per share. AIG, as holder
of Series A Preferred Stock, is entitled to quarterly
dividends at a rate of 5% per annum. Series A Preferred Stock is
nonconvertible, and is redeemable at the Companys option.

Market
Auction Preferred Stock

The Market Auction Preferred Stock (MAPS) have a
liquidation value of $100 thousand per share and are not
convertible. The dividend rate, other than the initial rate, for
each dividend period for each series is reset approximately
every 7 weeks (49 days) on the basis of orders placed
in an auction. The Company repurchased Series C, D, F, G
and H for the liquidation value in the fourth quarter of 2001,
no gain or loss was recognized. During the year the Company
extended the Series A to 5 years at a dividend rate of
5.90%. At December 31, 2001, the dividend rates for Series
B and E ranged from 3.20% to 3.25%.

Other
Comprehensive Income

The Other Comprehensive Income consists of fair
market value adjustments of cash flow derivative instruments and
foreign currency translation of liabilities denominated in a
foreign currency. The debt was translated into US dollars using
the current exchange rate. The cash flow derivatives were
adjusted using market values obtained from a related party
broker-dealer.

Note G  Rental Income

Minimum future rentals on non-cancelable
operating leases and subleases of flight equipment which have
been delivered at December 31, 2001 are as follows:

|           |  |   |           | 
|---------- |  | - | --------- | 
|Year Ended |  |  
|           |  |  
|2002       |  | $ | 1,977,269 | 
|2003       |  |   | 1,639,285 | 
|2004       |  |   | 1,342,125 | 
|2005       |  |   | 1,040,410 | 
|2006       |  |   | 754,939   | 
|Thereafter |  |   | 1,801,629 | 
|           |  |   |           | 
|           |  | $ | 8,555,657 | 
|           |  |   |           | 

36



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note G  Rental Income
(Continued)

Additional rentals earned by the Company based on
the lessees usage aggregated $235,099 (2001), $222,579
(2000), and $202,976 (1999). Flight equipment is leased, under
operating leases, with remaining terms ranging from one to 14
years.

Note H  Flight Equipment
Rent

During 1995, 1996 and 1997, the Company entered
into sale-leaseback transactions providing proceeds to the
Company in the amounts of $412,626, $507,600 and $601,860,
respectively, relating to seven aircraft for each transaction.
The transactions resulted in the sale and leaseback of these
aircraft under one-year operating leases, each with six one-year
extension options. The existing one-year leases mature on
December 22, 2002, September 20, 2002 and
September 12, 2002, respectively. One aircraft was
repurchased in each of 1997, 1999 and 2001 and sold to third
parties. The lease rates equate to fixed principal amortization
and floating interest payments based on LIBOR or commercial
paper pricing.

Minimum future rental expense for 2002 is $58,982
at December 31, 2001.

Note I  Income Taxes

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

|             |            |      |          |          |   |      |         |         |   |   |         |         | 
|------------ | ---------- | ---- | -------- | -------- | - | ---- | ------- | ------- | - | - | ------- | ------- | 
|             |            | 2001 |          | 2000     |   | 1999
|             |            |      |          |          |   |     
|Current:     |            |      |          |          |   |      |         |         |   |   |         |        
|             | Federal(a) |      | $        | (154,680 | ) |      | $       | (49,989 | ) |   | $       | 141,585 | 
|             | State      |      |          | (13,683  | ) |      |         | (10,871 | ) |   |         | 12,013  | 
|             | Foreign    |      |          | (43      | ) |      |         | (791    | ) |   |         | 961     | 
|             |            |      |          |          |   |      |         |         |   |   |         |        
|             |            |      | (168,406 | )        |   |      | (61,651 | )       |   |   | 154,559 |        
|Deferred(b): |            |      |          |          |   |      |         |         |   |   |         |        
|             | Federal    |      |          | 400,320  |   |      |         | 278,614 |   |   |         | 87,865  | 
|             | State      |      |          | 29,130   |   |      |         | 20,329  |   |   |         | 7,534   | 
|             |            |      |          |          |   |      |         |         |   |   |         |        
|             |            |      | 429,450  |          |   |      | 298,943 |         |   |   | 95,399  |        
|             |            |      |          |          |   |      |         |         |   |   |         |        
|             |            | $    | 261,044  |          |   | $    | 237,292 |         |   | $ | 249,958 |        
|             |            |      |          |          |   |      |         |         |   |   |         |        




|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Including U.S. tax on foreign income                                                                                                                                                              
|   
|(b) | Deferred taxes were also provided (charged) to
	other comprehensive income of $(32,661) (2001) and $5,399
	(2000), respectively, and for cumulative effect of accounting
	change of $8,180 (2001).

37



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note I  Income Taxes
(Continued)


The provision for deferred income taxes is
comprised of the following temporary differences:

|                                                                                        |  |      |         |      |  |      |         |   |  |   |        |  
|--------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------ | -
|                                                                                        |  | 2001 |         | 2000 |  | 1999
|                                                                                        |  |      |         |      |  |     
|Accelerated depreciation on flight equipment                                            |  | $    | 423,846 |      |  | $    | 294,334 |   |  | $ | 72,577 |  
|Excess of state income taxes not currently
	deductible
	for Federal income tax purposes |  |      | (5,164  | )    |  |      | (3,045  | ) |  |   | (6,213 | )
|Tax versus book lease differences                                                       |  |      | 11,745  |      |  |      | 22,416  |   |  |   | 17,721 |  
|Provision for overhauls                                                                 |  |      | 4,594   |      |  |      | (6,871  | ) |  |   | 6,394  |  
|Rentals received in advance                                                             |  |      | 4,503   |      |  |      | (5,186  | ) |  |   | 4,027  |  
|Derivatives                                                                             |  |      | (5,675  | )    |  |      |        |   |  |   |       |  
|Straight line rents                                                                     |  |      | (1,227  | )    |  |      | (459    | ) |  |   | 3,542  |  
|Other                                                                                   |  |      | (3,172  | )    |  |      | (2,246  | ) |  |   | (2,649 | )
|                                                                                        |  |      |         |      |  |      |         |   |  |   |        |  
|                                                                                        |  | $    | 429,450 |      |  | $    | 298,943 |   |  | $ | 95,399 |  
|                                                                                        |  |      |         |      |  |      |         |   |  |   |        |  

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

|                                                                                        |  |      |           |      |  |   |           |   |  |  |  | 
|--------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | - |  |  |  | 
|                                                                                        |  | 2001 |           | 2000 |  |  
|                                                                                        |  |      |           |      |  |  
|Accelerated depreciation on flight equipment                                            |  | $    | 1,927,970 |      |  | $ | 1,504,124 |   |  |  |  | 
|Excess of state income taxes not currently
	deductible
	for Federal income tax purposes |  |      | (39,852   | )    |  |   | (34,688   | ) |  |  |  | 
|Tax versus book lease differences                                                       |  |      | 161,688   |      |  |   | 149,943   |   |  |  |  | 
|Provision for overhauls                                                                 |  |      | (53,145   | )    |  |   | (57,739   | ) |  |  |  | 
|Rentals received in advance                                                             |  |      | (47,939   | )    |  |   | (52,442   | ) |  |  |  | 
|Straight line rents                                                                     |  |      | 17,871    |      |  |   | 19,098    |   |  |  |  | 
|Derivatives                                                                             |  |      | 2,505     |      |  |   |          |   |  |  |  | 
|Other comprehensive income                                                              |  |      | (27,262   | )    |  |   | 5,399     |   |  |  |  | 
|Other                                                                                   |  |      | (4,440    | )    |  |   | (1,267    | ) |  |  |  | 
|                                                                                        |  |      |           |      |  |   |           |   |  |  |  | 
|                                                                                        |  | $    | 1,937,396 |      |  | $ | 1,532,428 |   |  |  |  | 
|                                                                                        |  |      |           |      |  |   |           |   |  |  |  | 

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

|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                              |  | 2001 |         | 2000 |  | 1999
|                                                              |  |      |         |      |  |     
|Computed expected provision based upon a federal
	rate of 35% |  | $    | 263,802 |      |  | $    | 247,168 |   |  | $ | 246,192 |  
|State income taxes, net of Federal income taxes               |  |      | 10,041  |      |  |      | 6,148   |   |  |   | 12,706  |  
|Foreign sales corporation benefit                             |  |      | (6,590  | )    |  |      | (13,499 | ) |  |   | (10,041 | )
|Foreign taxes(a)                                              |  |      | (6,080  | )    |  |      | (3,997  | ) |  |   | 586     |  
|Other                                                         |  |      | (129    | )    |  |      | 1,472   |   |  |   | 515     |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  
|                                                              |  | $    | 261,044 |      |  | $    | 237,292 |   |  | $ | 249,958 |  
|                                                              |  |      |         |      |  |      |         |   |  |   |         |  



---

| |     |                                                                              
| | --- | -----------------------------------------------------------------------------
| | (a) | Includes realized Canadian tax credit in 2001 for
	taxes paid in prior years.

The Company entered into flight equipment sales
transactions designated to meet the requirement for a like kind
exchange of assets under Section 1031 of the Internal
Revenue Code. At December 31, $0 (2001) and $50,400 (2000)
was held in trust, under control of the Company, for such
exchanges.

38



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)


Note J  Other Information

Concentration
of Credit Risk

The Company leases and sells aircraft to airlines
and others throughout the world. All of the lease receivables
and the majority of notes receivable are from entities located
throughout the world. The Company generally obtains deposits on
leases and obtains collateral in flight equipment on notes
receivable. The Company has no single customer which accounts
for 10% or more of revenues.

Segment
Information

The Company operates within one industry: the
leasing, sales and management of flight equipment.

Revenues include rentals of flight equipment to
foreign airlines of $2,173,778 (2001), $2,026,017 (2000) and
$1,842,126 (1999).

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

|                                  |  |        |           |      |  |        |       |   |  |        |           |   |  |  |       |   |  |   |           |  |  |  |       |  
|--------------------------------- |  | ------ | --------- | ---- |  | ------ | ----- | - |  | ------ | --------- | - |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                                  |  |        |           |      |  |       
|                                  |  | 2001   |           | 2000 |  | 1999  
|                                  |  |        |           |      |  |       
|                                  |  | Amount |           | %    |  | Amount |       | % |  | Amount |           | %
|                                  |  |        |           |      |  |        |       |   |  |        |           |  
|Europe                            |  | $      | 1,159,540 |      |  |        | 46.9  | % |  | $      | 1,054,783 |   |  |  | 45.8  | % |  | $ | 946,335   |  |  |  | 45.5  | %
|Asia/Pacific                      |  |        | 552,853   |      |  |        | 22.3  |   |  |        | 462,426   |   |  |  | 20.1  |   |  |   | 421,337   |  |  |  | 20.3  |  
|United States and Canada          |  |        | 455,680   |      |  |        | 18.4  |   |  |        | 437,745   |   |  |  | 19.0  |   |  |   | 389,593   |  |  |  | 18.7  |  
|Central, South America and Mexico |  |        | 199,026   |      |  |        | 8.0   |   |  |        | 229,438   |   |  |  | 10.0  |   |  |   | 201,405   |  |  |  | 9.7   |  
|Africa and the Middle East        |  |        | 106,685   |      |  |        | 4.4   |   |  |        | 117,048   |   |  |  | 5.1   |   |  |   | 121,885   |  |  |  | 5.8   |  
|                                  |  |        |           |      |  |        |       |   |  |        |           |   |  |  |       |   |  |   |           |  |  |  |       |  
|                                  |  | $      | 2,473,784 |      |  |        | 100.0 | % |  | $      | 2,301,440 |   |  |  | 100.0 | % |  | $ | 2,080,555 |  |  |  | 100.0 | %
|                                  |  |        |           |      |  |        |       |   |  |        |           |   |  |  |       |   |  |   |           |  |  |  |       |  

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

|                                        |           |        |         |        |  |        |      |   |  |        |         |        |  |  |      |   |  |   |         |        |  |  |      |   | 
|--------------------------------------- | --------- | ------ | ------- | ------ |  | ------ | ---- | - |  | ------ | ------- | ------ |  |  | ---- | - |  | - | ------- | ------ |  |  | ---- | - | 
|                                        |           |        |         |        |  |       
|                                        |           | 2001   |         | 2000   |  | 1999  
|                                        |           |        |         |        |  |       
|                                        |           | Amount |         | %      |  | Amount |      | % |  | Amount |         | %     
|                                        |           |        |         |        |  |        |      |   |  |        |         |       
|United States                           |           | $      | 300,006 |        |  |        | 12.1 | % |  | $      | 275,423 |        |  |  | 12.0 | % |  | $ | 238,429 |        |  |  | 11.5 | %
|United Kingdom                          |           |        | 283,090 |        |  |        | 11.4 |   |  |        | 276,340 |        |  |  | 12.0 |   |  |   | 292,278 |        |  |  | 14.0 |  
|China (including Macau and
	Hong Kong)* |           |        | 265,871 |        |  |        | 10.8 |   |  |        | 251,372 |        |  |  | 10.9 |   |  |   | 255,922 |        |  |  | 12.3 |  
|                                        | * Macau   |        |         | 34,149 |  |        |      |   |  |        |         | 33,504 |  |  |      |   |  |   |         | 36,128 |  |  |      |   | 
|                                        | Hong Kong |        |         | 92,117 |  |        |      |   |  |        |         | 77,364 |  |  |      |   |  |   |         | 84,787 |  |  |      |   | 

Currency
Risk

The Company attempts to minimize its currency and
exchange risks by negotiating most of its aircraft leases in US
dollars. Some of the Companys leases, however, are
negotiated in Euros to meet the needs of a growing number of
airlines. These Euro denominated leases are primarily used as a
hedge against Euro denominated debt obligations of the Company.
The Companys foreign currency gain (loss) has not been
material to the Companys consolidated financial statements
to date.

39



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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note J  Other Information
(Continued)


Employee
Benefit Plans

The Companys employees participate in
various benefit plans sponsored by AIG, including a
noncontributory qualified defined benefit retirement plan,
various stock option and purchase plans and a voluntary savings
plan (401(k) plan).

AIGs U.S. plans do not separately identify
projected benefit obligations and plan assets attributable to
employees of participating affiliates. AIGs projected
benefit obligations exceeded the plan assets at
December 31, 2001 by $159,276.

Note K  Commitments and
Contingencies

Aircraft
Orders

At December 31, 2001, the Company had committed
to purchase 551 aircraft deliverable from 2002 through 2010
at an estimated aggregate purchase price (including adjustment
for anticipated inflation) of approximately $32.1 billion.

The Company also had options to purchase an
additional 49 aircraft deliverable through 2008 at an
estimated aggregate purchase price of $3.0 billion.

Most of these purchase commitments and options
are based upon master agreements with each of The Boeing Company
(Boeing) and AVSA, S.A.R.L., the sales subsidiary of
Airbus Industrie (Airbus).

The Boeing aircraft (models 737, 747, 757, 767
and 777), and the Airbus aircraft (models A318, A319, A320,
A321, A330, A340 and A380) are being purchased pursuant to
agreements executed by the Company and Boeing or Airbus. These
agreements establish the pricing formulas (which include certain
price adjustments based upon inflation and other factors) and
various other terms with respect to the purchase of aircraft.
Under certain circumstances, the Company has the right to alter
the mix of aircraft type ultimately acquired. As of December 31,
2001, the Company had made non-refundable deposits (exclusive of
capitalized interest) on the aircraft which the Company has
committed to purchase of approximately $724,012 and $468,178
with Boeing and Airbus, respectively.

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

Asset
Value Guarantees

The Company has guaranteed a portion of the
residual value of 50 aircraft to financial institutions.
These guarantees expire at various dates through 2014 and
generally provide for the Company to pay the difference between
the fair market value of the aircraft and the guaranteed value
up to certain specified amounts, or, at the option of the
Company, purchase the aircraft for the guaranteed value. At
December 31, 2001 and 2000, the maximum exposure if the
Company were to pay under such guarantees was $772,292 (of which
$567,394 represents the total purchase option price of 19
aircraft) and $706,200 (of which $684,139 represents the total
purchase option price of 20 aircraft), respectively.

Other
Guarantees

The Company has guaranteed certain obligations
for entities in which it has an investment. At December 31,
2001 and 2000, the Company guaranteed ten loans collateralized
by aircraft aggregating $58,836 and $87,913, respectively.

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note K  Commitments and
Contingencies (Continued)


Leases

The Company has operating leases for office space
extending through 2014. In 2001, the Company signed a lease for
additional office space with rents commencing in 2004. Rent
expense was $3,221, $1,967, and $1,603 for the years ended 2001,
2000 and 1999 respectively. Commitments for minimum rentals
under the noncancelable leases at the end of 2001 are as follows:

|           |  |   |         | 
|---------- |  | - | ------- | 
|2002       |  | $ | 3,150   | 
|2003       |  |   | 3,276   | 
|2004       |  |   | 11,257  | 
|2005       |  |   | 11,404  | 
|2006       |  |   | 8,490   | 
|Thereafter |  |   | 93,447  | 
|           |  |   |         | 
|Total      |  | $ | 131,024 | 
|           |  |   |         | 

Note L  Financial Instruments

In the normal course of business, the Company
employs a variety of derivative transactions with the objective
of lowering its overall borrowing cost and maintaining its
optimal mix of variable and fixed rate interest obligations.
These derivative products include interest rate swap agreements,
currency swap agreements, swaptions and interest rate floors.
The Company only enters into derivative transactions to hedge
interest rate and currency risk and not to speculate on interest
rates or currency fluctuation.

The Company adopted Statement of Financial
Accounting Standards No. 133  Accounting for
Certain Derivative Instruments and Certain Hedging
Activities, as amended by Statement of Financial Accounting
Standards No. 138 and related implementation guidance
(SFAS 133) on January 1, 2001. All
derivatives are recognized on the balance sheet at their fair
value and the change in fair value is recorded in operating
income or other comprehensive income depending on the
designation of the hedging instrument. (See
Note A  Summary of Significant Accounting
Policies, Financial instruments).

Credit risk exposure arises from the potential
that the counterparty may not perform under these derivative
transactions. The Companys counterparty for all of its
derivatives is AIGFP, a related party with the highest ratings,
who has swapped the transactions with independent third parties.
The Company has executed $1,456,000 and $1,418,200 notional
amount of derivative instruments with the related party during
2001 and 2000, respectively. The Company currently does not
require, nor is it required by, its counterparty to provide
collateral for its positions with the Company although it can in
certain circumstances.

It is managements belief that any failure
of a counterparty to perform under the agreement with respect to
these transactions would have an immaterial effect on the
Companys results of operations, financial condition and
liquidity.

The following methods and assumptions were used
by the Company in estimating its fair value disclosures for
financial instruments:



| |                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and cash
	equivalents:The carrying value
	reported in the balance sheet for cash and cash equivalents
	approximates its fair value.                                                                            
|
| | Notes receivable:The fair values for notes receivable are estimated using
	discounted cash flow analyses, using interest rates currently
	being offered for similar loans to borrowers with similar credit
	ratings.

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note L  Financial Instruments
(Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Investments:It was
	not practicable to determine the fair value of most of the
	Companys investments in the common and preferred stocks of
	other companies because of the lack of a quoted market price and
	the inability to determine fair value without incurring
	excessive costs due to their short maturities. The carrying
	amount of these investments at December 31, 2001 represents
	the original cost or original cost plus the Companys share
	of earnings of the investment. For investments held by the
	Company that had a quoted market price at December 31,
	2001, the Company used such quoted market price in determining
	the fair value of such investments.
|
| | Debt financing:The
	carrying value of the Companys commercial paper and term
	debt maturing within one year approximates its fair value. The
	fair value of the Companys long-term debt is estimated
	using discounted cash flow analyses, based on the Companys
	spread to U.S. Treasury bonds for similar debt at year-end.                                                                                                                                                                                                                                                                                                                                                      
|
| | Guarantees:It is
	not practical to determine the fair value of the Companys
	guarantees. The Company regularly reviews the underlying values
	of the collateral aircraft, to determine its exposure under
	these guarantees. As of December 31, 2001, the
	Companys exposure was not material.                                                                                                                                                                                                                                                                                                                                                                                      

The carrying amounts and fair values of the
Companys financial instruments at December 31, 2001
and 2000 are as follows:

|                          |  |                   |             |                   |  |                   |             |                   |  |   |             |   |  |   |             |  
|------------------------- |  | ----------------- | ----------- | ----------------- |  | ----------------- | ----------- | ----------------- |  | - | ----------- | - |  | - | ----------- | -
|                          |  |                   |             |                  
|                          |  | 2001              |             | 2000             
|                          |  |                   |             |                  
|                          |  | Carrying          |             |                   |  | Carrying          |             |                  
|                          |  | Amount of         |             | Fair Value of     |  | Amount of         |             | Fair Value of    
|                          |  | Asset (Liability) |             | Asset (Liability) |  | Asset (Liability) |             | Asset (Liability)
|                          |  |                   |             |                   |  |                   |             |                  
|Cash and cash equivalents |  | $                 | 79,383      |                   |  | $                 | 79,383      |                   |  | $ | 134,653     |   |  | $ | 134,653     |  
|Notes receivable          |  |                   | 252,264     |                   |  |                   | 264,791     |                   |  |   | 296,063     |   |  |   | 238,839     |  
|Investments               |  |                   | 56,236      |                   |  |                   | 49,654      |                   |  |   | 45,624      |   |  |   | 45,624      |  
|Debt financing            |  |                   | (15,920,025 | )                 |  |                   | (15,985,887 | )                 |  |   | (13,421,526 | ) |  |   | (13,363,957 | )

Derivatives

The Company adopted Statement of Financial
Accounting Standards No. 133  Accounting for
Certain Derivative Instruments and Certain Hedging
Activities, as amended by Statement of Financial Accounting
Standards No. 138 and related implementation guidance
(SFAS 133) on January 1, 2001. The Company
uses derivatives to manage exposures to interest rate and
foreign currency risks. The Company recorded $1.0 million
of hedge ineffectiveness in interest expense related to cross
currency fair value hedges, for the year ended December 31,
2001. Hedge ineffectiveness related to cash flow hedges for the
period was immaterial to the Company. In accordance with the
transition provision of SFAS 133, the Company recorded the
following cumulative effect adjustments in earnings as of
January 1, 2001, net of taxes:

|                                                                 |                                                   |   |        |         |  
|---------------------------------------------------------------- | ------------------------------------------------- | - | ------ | ------- | -
|Related to non-hedging instruments:                              |                                                   |   |        |        
|                                                                 | Fair value of non-hedging instruments             |   | $      | 2,805   |  
|Related to previous designated fair value hedging
	relationships |                                                   |   |        |        
|                                                                 | Fair value of hedging instruments                 |   |        | (13,954 | )
|                                                                 | Offsetting changes in fair value of hedged items  |   |        | 13,954  |  
|                                                                 | Previously deferred hedging gains and losses, net |   |        | 12,386  |  
|                                                                 |                                                   |   |        |        
|Total cumulative effect on earnings, net of tax                  |                                                   | $ | 15,191 |        
|                                                                 |                                                   |   |        |        

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(Dollars in thousands)




Note L  Financial Instruments
(Continued)


In addition, the Company recorded the following
net-of-tax cumulative effect adjustments in other comprehensive
income as of January 1, 2001:

|                                                                          |                                             |   |         |         |  
|------------------------------------------------------------------------- | ------------------------------------------- | - | ------- | ------- | -
|Related to previously designated cash flow
	hedging relationships:        |                                             |   |         |        
|                                                                          | Fair value of hedging instruments           |   | $       | (45,927 | )
|                                                                          | Previously defined hedging gains and losses |   |         | 25,454  |  
|                                                                          |                                             |   |         |        
|Total cumulative effect on other comprehensive
	income (loss), net of tax |                                             | $ | (20,473 | )      
|                                                                          |                                             |   |         |        

During the twelve months ended December 31,
2001, the Company recorded the following in earnings in
accordance with SFAS 133:

|                                                                 |                                                  |   |     |        |  
|---------------------------------------------------------------- | ------------------------------------------------ | - | --- | ------ | -
|Related to non-hedging instruments:                              |                                                  |   |     |       
|                                                                 | Fair value of non-hedging instruments            |   | $   | 1,943  |  
|Related to previous designated fair value hedging
	relationships |                                                  |   |     |       
|                                                                 | Fair value of hedging instruments                |   |     | (6,366 | )
|                                                                 | Offsetting changes in fair value of hedged items |   |     | 5,406  |  
|                                                                 |                                                  |   |     |       
|Total cumulative effect on earnings                              |                                                  | $ | 983 |       
|                                                                 |                                                  |   |     |       

At December 31, 2001, the Companys
accumulated other comprehensive income (loss) consisted of the
following:

|                                                                     |  |   |         |  
|-------------------------------------------------------------------- |  | - | ------- | -
|Cumulative foreign currency translation gain
	adjustment, net of tax |  | $ | 42,416  |  
|                                                                     |  |   |         |  
|Cumulative cash from hedge loss adjustment, net
	of tax              |  | $ | (93,045 | )
|                                                                     |  |   |         |  

During the twelve months ended December 31,
2001, $33,230 (net) was reclassified from accumulated other
comprehensive income to interest expense under cash flow hedge
accounting in connection with the Companys program to
convert debt from floating to fixed rates. The Company expects
that within the next twelve months it will reclassify as
earnings $88,783 of the balance recorded plus quarterly cash
flow hedge adjustments to accumulated other comprehensive income.

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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND
SUBSIDIARIES

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

|                             |  |                        |         |            |  |                 |         |             |  |               |  |  |  |   |         |  |  |   |         | 
|---------------------------- |  | ---------------------- | ------- | ---------- |  | --------------- | ------- | ----------- |  | ------------- |  |  |  | - | ------- |  |  | - | ------- | 
|                             |  |                        |         |            |  |                 |         |            
|COL. A                       |  | COL. B                 |         | COL. C     |  | COL. D          |         | COL. E     
|                             |  |                        |         |            |  |                 |         |            
|                             |  |                        |         |            |  |                 |         |            
|                             |  |                        |         | ADDITIONS  |  |                 |         |            
|                             |  | Balance at             |         | Charged to |  | Charged to      |         |             |  |              
|                             |  | Beginning of           |         | Costs and  |  | Other Accounts |         | Deductions |  | Balance at   
|Description                  |  | Period                 |         | Expenses   |  | Describe        |         | Describe(a) |  | End of Period
|                             |  |                        |         |            |  |                 |         |             |  |              
|                             |  |                       
|                             |  | (Dollars in thousands)
|Reserve for overhaul:        |  |                        |         |            |  |                 |         |             |  |               |  |  |  |   |         |  |  |   |         | 
|Year ended December 31, 2001 |  | $                      | 154,865 |            |  | $               | 94,383  |             |  |               |  |  |  | $ | 106,533 |  |  | $ | 142,715 | 
|Year ended December 31, 2000 |  | $                      | 136,451 |            |  | $               | 104,486 |             |  |               |  |  |  | $ | 86,072  |  |  | $ | 154,865 | 
|Year ended December 31, 1999 |  | $                      | 152,764 |            |  | $               | 94,535  |             |  |               |  |  |  | $ | 110,848 |  |  | $ | 136,451 | 



---



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

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##### Table of Contents






SIGNATURES

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

Dated: March 26, 2002



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



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

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

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

|                                              |  |                                                                        |  |               
|--------------------------------------------- |  | ---------------------------------------------------------------------- |  | --------------
|Signature                                     |  | Title                                                                  |  | Date          
|                                              |  |                                                                        |  |               
|/s/ LESLIE L. GONDA Leslie L. Gonda           |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ STEVEN F. UDVAR-HAZY Steven F. Udvar-Hazy |  | Chief Executive Officer and Director                                   |  | March 26, 2002
|                                             
|/s/ JOHN L. PLUEGERJohn L. Plueger            |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ LOUIS L. GONDA Louis L. Gonda             |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ M. R. GREENBERG M. R. Greenberg           |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ EDWARD E. MATTHEWS Edward E. Matthews     |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ WILLIAM N. DOOLEY William N. Dooley       |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ HOWARD I. SMITH Howard I. Smith           |  | Director                                                               |  | March 26, 2002
|                                             
|/s/ ALAN H. LUND Alan H. Lund                 |  | Director, Chief Financial Officer and Chief
        Accounting Officer |  | March 26, 2002

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

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

46