##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 20-F
 (Mark One)
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 OR
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 001-33701
 FLY LEASING LIMITED
  Bermuda
 West Pier
Dun Laoghaire
County Dublin, Ireland
 Mina Kim, West Pier, Dun Laoghaire, County Dublin, Ireland
Telephone number: +353 1 231 1900, Facsimile number: +353 1 231 1901
 Securities registered or to be registered pursuant to Section 12(b) of the Act.
 Title of each class
    
    Name of each exchange on which registeredAmerican Depositary Shares
    
    New York Stock ExchangeCommon Shares, par value of $0.001 per share
    
    New York Stock Exchange*
 *
    
    Not for trading, but only in connection with the registration of American Depositary Shares
representing these shares, pursuant to the requirements of the Securities and Exchange
Commission. 
 
  
  o þ
  o þ
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
  U.S. GAAP þ
    
    International Financial Reporting Standards as issued
by the International Accounting Standards Board o
    
    Other o
  o o
  o þ




---



##### Table of Contents



PRELIMINARY NOTE
 This Annual Report should be read in conjunction with the consolidated financial statements and
accompanying notes included in this report.
 The consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States (GAAP) and are presented in U.S. Dollars. These
statements and discussion below contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are
not limited to, objectives, expectations and intentions and other statements contained in this
Annual Report that are not historical facts, as well as statements identified by words such as
expects, anticipates, intends, plans, believes, seeks, estimates, or words of similar
meaning. Such statements address future events and conditions concerning matters such as, but not
limited to, our earnings, cash flow, liquidity and capital resources, compliance with debt and
other restrictive covenants, interest rates and dividends These statements are based on current
beliefs or expectations and are inherently subject to significant uncertainties and changes in
circumstances, many of which are beyond our control. Actual results may differ materially from
these expectations due to changes in political, economic, business, competitive, market and
regulatory factors. We believe that these factors include, but are not limited to those described
under Item 3 Risk Factors and elsewhere in this Annual Report.
 Except to the extent required by applicable law or regulation, we undertake no obligation to update
these forward looking statements to reflect events, developments or circumstances after the date of
this document, a change in our views or expectations, or to reflect the occurrence of future
events.
 Unless the context requires otherwise, when used in this Annual Report, (1) the terms Fly,
Company, we, our and us refer to Fly Leasing Limited and its subsidiaries; (2) the term
B&B Air Funding refers to our subsidiary, Babcock & Brown Air Funding I Limited; (3) the term
B&B Air Acquisition refers to our subsidiary, Babcock & Brown Air Acquisition I Limited; (4) the
term B&B Air Cayman refers to our subsidiary, Babcock & Brown Air Finance (Cayman) Limited; (5)
the term B&B Air Cayman II refers to Babcock & Brown Air Finance II (Cayman) Limited, a
subsidiary of B&B Air Cayman; (6) the term Fly-BBAM refers to our subsidiary, Fly-BBAM Holdings,
Ltd.; (7) the term Fly Holdings refers to our subsidiary, Fly Aircraft Holdings One Limited; (8)
the term Fly Holdings Two refers to our subsidiary, Fly Aircraft Holdings Two Limited (9) all
references to our shares refer to our common shares held in the form of American Depositary Shares,
or ADSs; (10) the terms Predecessor and JET-i refer to JET-i Leasing LLC, the predecessor
company of Fly; (11) the terms B&B and Babcock & Brown refer to Babcock & Brown Limited, an
Australian company, and its subsidiaries; (12) the term BBAM LP refers to BBAM Limited
Partnership and its subsidiaries and affiliates; (13) the terms BBAM and Servicer refer to BBAM
Aircraft Management LLC and BBAM Aircraft Management (Europe) Limited, collectively; (14) the term
Manager refers to Fly Leasing Management Co. Limited, the Companys manager; and (15) the term
Initial Portfolio refers to our initial portfolio of 47 commercial jet aircraft acquired by our
subsidiary, B&B Air Funding.
 At the Annual General Meeting held on June 29, 2010, the Companys shareholders approved changing
the name of Babcock & Brown Air Limited to Fly Leasing Limited.
 Unless indicated otherwise, all percentages and weighted average characteristics of the aircraft in
our portfolio have been calculated using net book values as of December 31, 2010
  2




---



##### 



TABLE OF CONTENTS
 PagePART IItem 1. Identity of Directors, Senior Management and Advisers  Not Applicable
    
    4Item 2. Offer Statistics and Expected Timetable  Not Applicable
    
    4Item 3. Key Information
    
    4Item 4. Information on the Company
    
    26Item 4A. Unresolved Staff Comments  Not Applicable
    
    34Item 5. Operating and Financial Review and Prospects
    
    35Item 6. Directors, Senior Management and Employees
    
    54Item 7. Major Shareholders and Related Party Transactions
    
    58Item 8. Financial Information
    
    70Item 9. The Offer and Listing
    
    71Item 10. Additional Information
    
    71Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    79Item 12. Description of Securities Other Than Equity Securities
    
    80PART IIItem 13. Defaults, Dividend Arrearages and Delinquencies  Not Applicable
    
    81Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    81Item 15. Controls and Procedures
    
    81Item 16A. Audit Committee Financial Expert
    
    82Item 16B. Code of Ethics
    
    82Item 16C. Principal Accountant Fees and Services
    
    82Item 16D. Exemptions from the Listing Standards for Audit Committees  Not Applicable
    
    83Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    83Item 16F. Change in Registrants Certifying Accountant  Not Applicable
    
    83Item 16G. Corporate Governance
    
    83PART IIIItem 17. Financial Statements
    
    84Item 18. Financial Statements
    
    85Item 19. Exhibits
    
    119EX-8.1EX-12.1EX-12.2EX-13.1
   3




---



##### Table of Contents



PART I
 
 ITEM 1.
    
    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
  
 ITEM 2.
    
    OFFER STATISTICS AND EXPECTED TIMETABLE
  
 ITEM 3.
    
    KEY INFORMATION
      www.flyleasing.com
  4




---



##### Table of Contents



Selected Financial Data
  (Dollars in thousands, except share data)JET-i Leasing LLCFly Leasing Limited
    
    
    (Predecessor Company)For theperiod fromMay 3, 2007(incorporationdate) toFor the years ended December 31,
    
    
    December 31,
    
    
    For the years ended December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006Operating lease revenue
    
    $
    219,655
    
    
    $
    213,964
    
    
    $
    218,940
    
    
    $
    26,042
    
    
    $
    107,620
    
    
    $
    56,566Gain on sale of aircraft
    
    
    13,449
    
    
    
    
    
    
    
    11,437
    
    
    
    
    
    
    
    
    
    
    
    Gain on purchases of notes
payable and sale of option
to purchase notes payable
    
    
    12,501
    
    
    
    82,666
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    253,665
    
    
    
    307,535
    
    
    
    236,138
    
    
    
    33,334
    
    
    
    121,037
    
    
    
    61,349Total expenses
    
    
    190,791
    
    
    
    194,075
    
    
    
    181,146
    
    
    
    29,957
    
    
    
    135,867
    
    
    
    68,804Net income (loss)
    
    
    52,667
    
    
    
    89,093
    
    
    
    48,125
    
    
    
    2,345
    
    
    
    (15,296
    )
    
    
    (7,472
    )Earnings per share:Basic and diluted
    
    $
    1.86
    
    
    $
    2.89
    
    
    $
    1.44
    
    
    $
    0.19
    
    
    
    
    
    
    
    Pro forma
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.07
    
    
    
    
    
    
    
    Dividends declared and paid
per share
    
    $
    0.80
    
    
    $
    0.80
    
    
    $
    2.00
    
    
    
    
    
    
    
    
    
    
    
    
   (Dollars in thousands, except shares)JET-i Leasing LLCFly Leasing Limited
    
    
    (Predecessor Company)As of December 31,
    
    
    As of December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2007
    
    
    2006Balance sheet data:Total assets
    
    $
    1,978,224
    
    
    $
    2,024,132
    
    
    $
    2,086,174
    
    
    $
    1,589,226
    
    
    $
    5,249
    
    
    $
    1,010,875Total liabilities
    
    
    1,503,320
    
    
    
    1,539,608
    
    
    
    1,696,761
    
    
    
    1,098,724
    
    
    
    2,766
    
    
    
    983,175Total shareholders
equity/ members
capital
    
    
    474,904
    
    
    
    484,524
    
    
    
    389,413
    
    
    
    490,502
    
    
    
    2,483
    
    
    
    27,700Number of shares
    
    
    26,707,501
    
    
    
    30,279,948
    
    
    
    32,488,911
    
    
    
    33,603,450
    
    
    
    
    
    
    
    
  5




---



##### Table of Contents



Risk Factors
 The risks discussed below could materially and adversely affect our business, prospects, financial
condition, results of operations, cash flows, the trading price of our shares and our ability to
pay dividends. Additional risks and uncertainties not currently known to us or that we currently
deem to be immaterial may also materially and adversely affect our business, prospects, financial
condition, results of operations, cash flows and ability to pay dividends.
 Risks Related to Our Relationship with BBAM LP
 Our company is managed, and our aircraft portfolio is serviced, by BBAM LP, a new aircraft leasing
and management company with limited independent operating history, which was formed by the
management team of our Servicer.
    BBAM has conflicts of interest with us and their limited contractual or other duties will not
restrict them from favoring their own business interests to our detriment.
   6




---



##### Table of Contents



Even if we were to become dissatisfied with BBAM LPs performance, there are only limited
circumstances under which we are able to terminate our management and servicing agreements and we
may not terminate the servicing agreement for our Initial Portfolio without the prior written
consent of the policy provider.
  
    
    at least 75% of our independent directors and holders of 75% or more of all of our
outstanding common shares (measured by vote) determine by resolution that there has been
unsatisfactory performance by our Manager that is materially detrimental to us;
 
    
    our Manager materially breaches the management agreement and fails to remedy such breach
within 90 days of receiving written notice from us requiring it to do so, or such breach
results in liability to us and is attributable to our Managers gross negligence, fraud or
dishonesty, or willful misconduct in respect of the obligation to apply the standard of care;
 
    
    any license, permit or authorization held by the Manager which is necessary for it to perform
the services and duties under the management agreement is materially breached, suspended or
revoked, or otherwise made subject to conditions which, in the reasonable opinion of our board
of directors, would prevent the Manager from performing the services and the situation is not
remedied within 90 days;
 
    
    BBAM Aviation Services Limited or one of its affiliates ceases to hold (directly or
indirectly) more than 50% of the voting equity of, and economic interest in, the Manager;
 
    
    our Manager becomes subject to bankruptcy or insolvency proceedings that are not discharged
within 75 days, unless our Manager is withdrawn and replaced within 90 days of the initiation
of such bankruptcy or insolvency proceedings with an affiliate or associate of BBAM that is
able to make correctly the representations and warranties set out in the management agreement;
 
    
    our Manager voluntarily commences any proceeding or files any petition seeking bankruptcy,
insolvency, receivership or similar law, or makes a general assignment for the benefit of its
creditors, unless our Manager is withdrawn and replaced within 15 days with an affiliate or
associate of BBAM that is able to make correctly the representations and warranties set out in
the management agreement;
 
    
    an order is made for the winding up of our Manager, unless our Manager is withdrawn and
replaced within 15 days with an affiliate or associate of BBAM that is able to make correctly
the representations and warranties set out in the management agreement; and
 
    
    Steven Zissis ceases to be the President or Chief Executive Officer of BBAM LP at any time
prior to April 29, 2015 for any reason other than death or disability.
  7




---



##### Table of Contents




    
    Bankruptcy or insolvency of BBAM LP;
 
    
    BBAM LP ceases to own, directly or indirectly, at least 50% of the Servicer;
 
    
    Summit ceases to own, directly or indirectly, at least 33.33% of the partnership interests in
BBAM LP; provided that a sale that results in such ownership being at a level below 33.33%
shall not constitute a servicer termination event if the sale is to a publicly listed entity
or other person with a net worth of at least $100 million;
 
    
    Steven Zissis ceases to be the President or Chief Executive Officer of BBAM LP at any time
prior to April 29, 2015 for any reason other than death or disability; and
 
    
    50% or more of the Servicers key finance and legal team or technical and marketing team
cease to be employed by BBAM LP and are not replaced with employees with reasonably comparable
experience within 90 days.
  Our management and servicing agreements limit our remedies against BBAM LP for unsatisfactory
performance and provide certain termination rights to the policy provider.
   8




---



##### Table of Contents



BBAM may resign as Servicer under our servicing agreements under certain circumstances, which would
significantly impair our ability to re-lease or sell aircraft and service our leases.
  Risks Related to Our Business
 Our business is affected by general economic and financial conditions which could adversely affect
our results of operations.
  Changes in demand and supply of aircraft can depress lease rates and impact the value of our
aircraft portfolio.
  We will need additional capital to finance our growth, and we may not be able to obtain it on
acceptable terms, or at all, which may limit our ability to grow and compete in the aviation
market.
   9




---



##### Table of Contents



Our future growth and profitability will depend on our ability to acquire aircraft and other
aviation assets.
  
    
    impair our liquidity by using a significant portion of our available cash or borrowing
capacity to finance acquisitions and investments;
 
    
    significantly increase our interest expense and financial leverage to the extent we incur
additional debt to finance acquisitions and investments;
 
    
    incur or assume unanticipated liabilities, losses or costs associated with the aircraft or
other aviation assets that we acquire or investments we may make;
 
    
    incur other significant charges, including asset impairment or restructuring charges; or
 
    
    be unable to maintain our ability to pay regular dividends to our shareholders.
 If we experience abnormally high maintenance or obsolescence issues with any aircraft or aviation
assets that we acquire, our financial results and growth could be materially and adversely
affected.
    We may enter into strategic ventures which pose risks including a lack of complete control over the
enterprise, and our financial results and growth prospects may be adversely affected if we
encounter disputes, deadlocks or other conflicts of interest with our strategic partners.
   10




---



##### Table of Contents



We may not be able to pay or maintain dividends on our shares.
  
    
    lack of availability of cash to pay dividends due to changes in our operating cash flow,
capital expenditure requirements, working capital requirements and other cash needs;
 
    
    restrictions imposed by our financing arrangements, including under the Notes, our Aircraft
Acquisition Facility and any indebtedness incurred in the future to refinance our existing
debt or to expand our aircraft portfolio;
 
    
    our inability to make acquisitions of additional aircraft, other aviation assets or
investments that are accretive to cash flow;
 
    
    use of funds to make and finance acquisitions of aircraft, other aviation assets and
investments we may make;
 
    
    reduced levels of demand for, or value of, our aircraft;
 
    
    increased supply of aircraft;
 
    
    obsolescence of aircraft in our portfolio;
 
    
    lower lease rates on new aircraft and re-leased aircraft;
 
    
    delays in re-leasing our aircraft after the expiration or early termination of existing
leases;
 
    
    impaired financial condition and liquidity of our lessees;
 
    
    deterioration of economic conditions in the commercial aviation industry generally;
 
    
    poor performance by our Manager and BBAM LP and other service providers and our limited
rights to terminate them;
 
    
    unexpected or increased maintenance, operating or other expenses or changes in the timing
thereof;
 
    
    a decision by our board of directors to cease distributing a portion of our cash flow
available for distribution;
 
    
    changes in Irish tax law, the tax treaty between the United States and Ireland (the Irish
Treaty) or our ability to claim the benefits of such treaty;
 
    
    cash reserves which may be established by our board of directors; and
 
    
    restrictions under Bermuda law on the amount of dividends that we may pay.
 Risks Related to Our Indebtedness
 We have substantial indebtedness that imposes constraints on our operations and could adversely
affect our ability to pay dividends on our common shares.
   11




---



##### Table of Contents



We are subject to risks related to our indebtedness that may limit our operational flexibility and
our ability to pay dividends on our shares.
  
    
    all the aircraft and related leases in our portfolio secure debt obligations, the terms of
which restrict our ability to sell aircraft and require us to use proceeds from sales of
aircraft, in part, to repay amounts outstanding under those notes;
 
    
    we are required to dedicate a significant portion of our cash flow from operations to debt
service payments, thereby reducing the amount of our cash flow available to pay dividends,
fund working capital, make capital expenditures and satisfy other needs;
 
    
    restrictions on our subsidiaries ability to distribute excess cash flow to us under certain
circumstances;
 
    
    lessee, geographical and other concentration requirements limit our flexibility in leasing
our aircraft;
 
    
    requirements to obtain the consent of third parties including lenders, the financial guaranty
policy provider for the Securitization, whom we refer to as the policy provider, and rating
agency confirmations for certain actions; and
 
    
    restrictions on our subsidiaries ability to incur additional debt, create liens on assets,
sell assets, make freighter conversions and make certain investments or capital expenditures.
  We are a holding company and currently rely on our subsidiaries to provide us with funds necessary
to meet our financial obligations and pay dividends.
   12




---



##### Table of Contents



Our subsidiaries are subject to interest rate risk, which could impair their ability to make
distributions to us and our ability to pay dividends to you.
  Risks Relating to Our Aircraft Portfolio
 The variability of supply and demand for aircraft and other aviation assets could depress lease
rates and the value of our leased assets, which would have an adverse effect on our financial
results and growth prospects and on our ability to meet our debt obligations and pay dividends.
  
    
    passenger air travel and air cargo demand;
 
    
    increased supply due to the sale of aircraft portfolios;
 
    
    geopolitical and other events, including war, acts of terrorism, civil unrest, outbreaks of
epidemic diseases and natural disasters;
 
    
    operating costs, availability of jet fuel and general economic conditions affecting our
lessees operations;
 
    
    governmental regulation, which includes new airworthiness directives, statutory limits on age
of aircraft and restrictions in certain jurisdictions on the age of aircraft for import;
 
    
    interest rates;
 
    
    airline restructurings and bankruptcies;
 
    
    cancellations of orders for aircraft;
 
    
    delays in delivery by manufacturers;
 
    
    availability and cost of credit;
 
    
    manufacturer production levels and technological innovation;
 
    
    retirement and obsolescence of aircraft models;
 
    
    manufacturers merging or exiting the industry or ceasing to produce aircraft or engine types;
 
    
    accuracy of estimates relating to future supply and demand made by manufacturers and lessees;
 
    
    reintroduction into service of aircraft or engines previously in storage; and
 
    
    airport and air traffic control infrastructure constraints.
  13




---



##### Table of Contents



Factors that increase the risk of decline in aircraft value and achievable lease rates could have
an adverse effect on our financial results and growth prospects and on our ability to meet our debt
obligations and to pay dividends.
  
    
    the particular maintenance, damage and operating history of the airframes and engines;
 
    
    the number of operators using that type of aircraft or engine;
 
    
    whether an aircraft or other aviation asset is subject to a lease and, if so, whether the
lease terms are favorable to the lessor;
 
    
    the age of our aircraft and other aviation assets;
 
    
    airworthiness directives and service bulletins;
 
    
    aircraft noise and emission standards;
 
    
    any tax, customs, regulatory and other legal requirements that must be satisfied when an
aircraft is purchased, sold or re-leased;
 
    
    compatibility of our aircraft configurations or specifications with other aircraft owned by
operators of that type; and
 
    
    decreases in the creditworthiness of our lessees.
  Airbus has announced that it will have two new engine variants available for its A319/A320/A321
family of aircraft, which could decrease the value and lease rates of aircraft in our portfolio.
  The advent of superior aircraft technology could cause our existing aircraft portfolio to become
outdated and therefore less desirable, which could adversely affect our financial results and
growth prospects and our ability to compete in the marketplace.
   14




---



##### Table of Contents



Our operational costs will increase as our aircraft age, which may adversely affect the amounts
available to pay dividends.
  The concentration of aircraft types in our portfolio could harm our business and financial results
should any difficulties specific to these particular types of aircraft occur.
  We operate in a highly competitive market for investment opportunities in aircraft and other
aviation assets.
  
    
    airlines;
 
    
    aircraft manufacturers;
 
    
    financial institutions (including those seeking to dispose of repossessed aircraft at
distressed prices);
 
    
    aircraft brokers;
 
    
    special purpose vehicles formed for the purpose of acquiring, leasing and selling aircraft;
and
 
    
    public and private partnerships, investors and funds, including private equity and hedge
funds.
    15




---



##### Table of Contents



Depreciation expenses and impairment charges could have a material adverse effect on our financial
condition and results of operations.
   Aircraft liens could impair our ability to repossess, re-lease or resell the aircraft.
   We cannot assure you that all lessees will comply with the registration requirements in the
jurisdiction where they operate.
  Risks Relating to Our Leases
 We will need to re-lease or sell aircraft as leases expire to continue to generate sufficient funds
to meet our debt obligations, finance our growth and operations and pay dividends. We may not be
able to re-lease or sell aircraft on favorable terms, or at all.
   16




---



##### Table of Contents



We rely on our lessees continuing performance of their lease obligations.
  
    
    competition;
 
    
    fare levels;
 
    
    air cargo rates;
 
    
    passenger air travel and air cargo demand;
 
    
    geopolitical and other events, including war, acts of terrorism, civil unrest, outbreaks of
epidemic diseases and natural disasters;
 
    
    increases in operating costs, including the availability and cost of jet fuel and labor
costs;
 
    
    labor difficulties;
 
    
    economic conditions and currency fluctuations in the countries and regions in which the
lessee operates; and
 
    
    governmental regulation of, or affecting, the air transportation business.
   
    
    result in a grounding of the aircraft;
 
    
    cause us to incur costs in restoring the aircraft to an acceptable maintenance condition to
re-lease the aircraft;
 
    
    adversely affect lease terms in the re-lease of the aircraft; and
 
    
    adversely affect the value of the aircraft.
   17




---



##### Table of Contents



If our lessees encounter financial difficulties and we decide to restructure our leases with those
lessees, this could result in less favorable leases, significant reductions in our cash flows and
adversely affect our ability to meet our debt obligations and pay dividends on our shares.
  Lease defaults could result in significant expenses and loss of revenues.
    Our lessees failure to fund their maintenance requirements on our aircraft could significantly
harm our financial condition, results of operations and ability to pay dividends.
    18




---



##### Table of Contents



Failure to pay certain potential additional operating costs could result in the grounding of our
aircraft and prevent the re-lease, sale or other use of our aircraft, which would negatively affect
our business, financial condition and results of operations.
  
    
    the costs of casualty, liability, war and political risk insurance and the liability costs or
losses when insurance coverage has not been or cannot be obtained as required or is
insufficient in amount or scope;
 
    
    the costs of licensing, exporting or importing an aircraft, costs of storing and operating an
aircraft, airport taxes, customs duties, air navigation charges, landing fees and similar
governmental or quasi-governmental impositions; and
 
    
    penalties and costs associated with the failure of lessees to keep the aircraft registered
under all appropriate local requirements or obtain required governmental licenses, consents
and approvals.
  Our lessees may have inadequate insurance coverage or fail to fulfill their respective indemnity
obligations, which could result in us not being covered for claims asserted against us and may
negatively affect our business, financial condition and results of operations.
    Failure to obtain certain required licenses, consents and approvals could negatively affect our
ability to re-lease or sell aircraft, which would negatively affect our business, financial
condition and results of operations.
  Some of our leases provide the lessees with early termination options.
   19




---



##### Table of Contents



Risks associated with the concentration of our lessees in certain geographical regions could harm
our business.
  European concentration.Revenues from 18 lessees based in Europe accounted for 48% of our total
revenues in 2010. Of the 18 lessees, six are based in Eastern Europe. Commercial airlines in
Europe face, and can be expected to continue to face, increased competitive pressures, in part as
a result of the deregulation of the airline industry by the European Union and the development of
low-cost carriers. European countries generally have relatively strict environmental regulations
and traffic constraints that can restrict operational flexibility and decrease aircraft
productivity, which could significantly increase aircraft operating costs.
 Asian concentration.Revenues from six lessees based in Asia (including India) accounted for 20%
of our total revenues in 2010, and lease rental revenues from two lessees based in India
accounted for 11% of total revenues. There are significant obstacles to the Indian airline
industrys development, including poor aviation infrastructure, continuing losses from operations
due to overcapacity and other factors, continuing government control and regulation over the
industry. If this control and regulation persists or expands, the Indian airline industry likely
would experience a significant decrease in growth or restrictions on future growth.
 North American concentration.Revenues from four lessees based in North America accounted for 21%
of our total revenues in 2010. During the past 15 years a number of North American passenger
airlines filed Chapter 11 bankruptcy proceedings and several major U.S. airlines ceased
operations altogether. High labor costs, high fuel costs, the strength of labor unions in
collective bargaining negotiations, the war and prolonged conflict in Iraq and the September 11,
2001 terrorist attacks in the United States have imposed additional financial burdens on most
U.S. airlines.
 Mexico, South and Central American concentration.Revenues from two lessees based in Mexico,
South and Central America accounted for 9% of our total revenues in 2010. While lessees
throughout the world are affected by exchange rate fluctuations as a result of the mismatch of
U.S. dollar exposure between their operating expenses and revenues, airlines in Mexico, South and
Central America are particularly sensitive to this risk because of the history of currency
devaluations in this region. Any strengthening of the U.S. dollar against the local currency
could negatively impact the profitability of these airlines and their ability to meet their lease
obligations to us. These risks are exacerbated by the potential for Mexico, South and Central
American currencies to be devalued by governments as they have been periodically during the last
four decades.
 Middle East and Africa concentration.Revenues from two lessees based in the Middle East and
Africa accounted for 2% of our total revenues in 2010. Although we currently have limited
exposure to airlines based in the Middle East, continued and spreading civil unrest in the Middle
East and other regions of the world may negatively impact airlines and airline travel.
     20




---



##### Table of Contents



Risks Related to the Aviation Industry
 A decline in the financial condition of the airline industry would adversely impact our ability to
lease our aircraft and sustain our revenues.
  
    
    downward pressure on demand for our aircraft and reduced market lease rates and lease
margins;
 
    
    a higher incidence of lessee defaults, lease restructurings, repossessions and airline
bankruptcies and restructurings, resulting in lower lease margins due to maintenance and legal
and other costs associated with the repossession, as well as lost revenue for the time our
aircraft are off lease and possibly lower lease rates from our new lessees; and
 
    
    an inability to lease aircraft on commercially acceptable terms, resulting in lower lease
margins due to such aircraft not earning revenue and resulting in storage, insurance and
maintenance costs.
 Airline reorganizations could impair our lessees ability to comply with their lease payment
obligations to us.
  High fuel prices can adversely affect the profitability of the airline industry and our lessees
ability to meet their lease payment obligations to us.
  
    
    affect our lessees ability to make rental and other lease payments;
 
    
    result in lease restructurings and aircraft and engine repossessions;
 
    
    increase our costs of servicing and marketing aircraft;
 
    
    impair our ability to re-lease the aircraft and other aviation assets or re-lease or
otherwise dispose of the assets on a timely basis at favorable rates; and
 
    
    reduce the proceeds received for the aircraft or other aviation assets upon any disposition.
  21




---



##### Table of Contents



Government regulations could require substantial expenditures, reduce our profitability and limit
our growth.
    The effects of various environmental regulations may negatively affect the airline industry. This
may cause lessees to default on their lease payment obligations to us.
      22




---



##### Table of Contents



Additional terrorist attacks or the fear of such attacks or civil unrest, even if not made directly
on the airline industry, could negatively affect lessees and the airline industry.
   SARS, H1N1 and other epidemic diseases may hinder airline travel.
  Natural disasters and other natural phenomena may disrupt air travel.
  We depend on aircraft and engine manufacturers success in remaining financially stable and
producing aircraft.
   
    
    missed or late delivery of aircraft and a potential inability to meet our contractual
obligations owed to any of our then lessees, resulting in potential lost or delayed revenues,
lower growth rates and strained customer relationships;
 
    
    an inability to acquire aircraft and related components on terms which will allow us to lease
those aircraft to airline customers at a profit, resulting in lower growth rates or a
contraction in our aircraft fleet;
 
    
    a market environment with too many aircraft available, potentially creating downward pressure
on demand for the anticipated aircraft in our fleet and reduced market lease rates and sale
prices; or
 
    
    a reduction in our competitiveness due to deep discounting by the manufacturers, which may
lead to reduced market lease rates and aircraft values and may affect our ability to remarket
or sell some of the aircraft in our fleet at a profit or at all.
  23




---



##### Table of Contents



A new standard for lease accounting is expected to be announced in the future, but we are unable to
predict the impact of such a standard at this time.
        Risks Related to the Ownership of Our Shares
 We have anti-takeover provisions in our bye-laws and in some of our agreements that may discourage
a change of control.
  
    
    provisions that permit us to require any competitor of BBAM LP that acquires beneficial
ownership of more than 15% of our common shares either to tender for all of our remaining
common shares for no less than their fair market value, or sell such number of common shares
to us or to third parties as would reduce its beneficial ownership to less than 15%, in either
case within 90 days of our request to so tender or sell;
 
    
    provisions that reduce the vote of each common share held by a competitor of BBAM LP that
beneficially owns 15% or more, but less than 50%, of our common shares to three-tenths of one
vote per share on all matters upon which shareholders may vote;
  24




---



##### Table of Contents




    
    provisions that permit our board of directors to determine the powers, preferences and rights
of any preference shares we may issue and to issue any such preference shares without
shareholder approval;
 
    
    advance notice requirements by shareholders for director nominations and actions to be taken
at annual meetings; and
 
    
    no provision for cumulative voting in the election of directors, such that all the directors
standing for election may be elected by our shareholders by a plurality of votes cast at a
duly convened annual general meeting, the quorum for which is two or more persons present in
person or by proxy at the start of the meeting and representing in excess of 25% of all votes
attaching to all shares in issue entitling the holder to vote at the meeting.
   We are a Bermuda company that is managed and controlled in Ireland. It may be difficult for you to
enforce judgments against us or against our directors and executive officers.
   As a shareholder of our company, you may have greater difficulties in protecting your interests
than as a shareholder of a U.S. corporation.
   25




---



##### Table of Contents



Risks Related to Taxation
 If we generate ordinary earnings for U.S. federal income tax purposes, U.S. shareholders may be
required to include their pro rata share of these ordinary earnings in their gross income for U.S.
federal income tax purposes.
  We may face increased tax costs.
    The tax rate applicable to us would be higher than we expect if we were considered not to be
carrying on a trade in Ireland for the purposes of Irish law.
  
 ITEM 4.
    
    INFORMATION ON THE COMPANY
 www.flyleasing.com
  26




---



##### Table of Contents



Our Relationship with BBAM
        27




---



##### Table of Contents




    
    Bankruptcy or insolvency of BBAM LP;
 
    
    BBAM LP ceases to own, directly or indirectly, at least 50% of the Servicer;
 
    
    Summit ceases to own, directly or indirectly, at least 33.33% of the partnership
interests in BBAM LP; provided that a sale that results in such ownership being at a level
below 33.33% shall not constitute a servicer termination event if the sale is to a publicly
listed entity or other person with a net worth of at least $100 million;
 
    
    Steven Zissis ceases to be the President or Chief Executive Officer or equivalent
position of BBAM LP at any time prior to April 29, 2015 for any reason other than death or
disability; and
 
    
    50% or more of the Servicers key finance and legal team or technical and marketing team
cease to be employed by BBAM LP and are not replaced with employees with reasonably
comparable experience within 90 days.
    Our Aircraft Portfolio
    Date ofLessee Name
    
    Aircraft Type
    
    Airframe Type
    
    Manufacture1 Aeromexico
    
    B737-700
    
    Narrowbody
    
    20052 Aeromexico
    
    B737-700
    
    Narrowbody
    
    20053 Aigle Azur
    
    A320-200
    
    Narrowbody
    
    19984 ChangAn Airlines
    
    B737-800
    
    Narrowbody
    
    20065 Donavia
    
    B737-500
    
    Narrowbody
    
    19926 Donavia
    
    B737-500
    
    Narrowbody
    
    19927 Donbassaero
    
    A320-200
    
    Narrowbody
    
    19978 Donbassaero
    
    A320-200
    
    Narrowbody
    
    19979 easyJet
    
    A319-100
    
    Narrowbody
    
    200710 Ethiopian Airlines
    
    B757-200
    
    Narrowbody
    
    199711 Ethiopian Airlines
    
    B757-200
    
    Narrowbody
    
    199812 flydubai
    
    B737-800
    
    Narrowbody
    
    201013 Hainan Airlines
    
    A319-100
    
    Narrowbody
    
    200614 Icelandair
    
    B757-200
    
    Narrowbody
    
    200015 Icelandair
    
    B757-200
    
    Narrowbody
    
    200016 Icelandair
    
    B757-200SF (1)
    
    Narrowbody
    
    1990
  28




---



##### Table of Contents



Date ofLessee Name
    
    Aircraft Type
    
    Airframe Type
    
    Manufacture17 Jeju
    
    B737-800
    
    Narrowbody
    
    199918 Kingfisher Airlines
    
    A320-200
    
    Narrowbody
    
    200519 Kingfisher Airlines
    
    A320-200
    
    Narrowbody
    
    200620 KLM
    
    B777-200ER
    
    Widebody
    
    200421 LTU
    
    A330-200
    
    Widebody
    
    200122 Norwegian Air
    
    B737-800
    
    Narrowbody
    
    200123 Sky Airlines
    
    B737-800
    
    Narrowbody
    
    200724 SpiceJet
    
    B737-800
    
    Narrowbody
    
    200625 SpiceJet
    
    B737-800
    
    Narrowbody
    
    200626 SpiceJet
    
    B737-900ER
    
    Narrowbody
    
    200727 SpiceJet
    
    B737-900ER
    
    Narrowbody
    
    200828 Sunwing Airlines
    
    B737-800
    
    Narrowbody
    
    200629 Swiss
    
    A320-200
    
    Narrowbody
    
    199530 Swiss
    
    A320-200
    
    Narrowbody
    
    199531 Thomas Cook
    
    B757-200 (2)
    
    Narrowbody
    
    199932 Thomas Cook
    
    B757-200 (2)
    
    Narrowbody
    
    199933 Thomson Airways
    
    B757-200
    
    Narrowbody
    
    199934 Thomson Airways
    
    B757-200
    
    Narrowbody
    
    199935 Tiger Airways
    
    A320-200
    
    Narrowbody
    
    200636 Titan Airways
    
    B737-300QC (1)
    
    Narrowbody
    
    199137 Transavia Airlines
    
    B737-700
    
    Narrowbody
    
    200138 Travel Service Airlines
    
    B737-800
    
    Narrowbody
    
    199939 TUI
    
    B767-300ER
    
    Widebody
    
    199740 United Air Lines
    
    B747-400
    
    Widebody
    
    199341 US Airways
    
    A319-100
    
    Narrowbody
    
    200042 US Airways
    
    A319-100
    
    Narrowbody
    
    200043 US Airways
    
    A319-100
    
    Narrowbody
    
    200044 US Airways
    
    A319-100
    
    Narrowbody
    
    200045 Virgin America
    
    A320-200
    
    Narrowbody
    
    200646 Virgin America
    
    A320-200
    
    Narrowbody
    
    200647 Virgin America
    
    A320-200
    
    Narrowbody
    
    200748 Virgin America
    
    A319-100
    
    Narrowbody
    
    200849 Volaris Airlines
    
    A319-100
    
    Narrowbody
    
    199950 Volaris Airlines
    
    A319-100
    
    Narrowbody
    
    200051 Volaris Airlines
    
    A319-100
    
    Narrowbody
    
    200752 Vueling Airlines
    
    A320-200
    
    Narrowbody
    
    200753 Vueling Airlines
    
    A320-200
    
    Narrowbody
    
    200754 White Airways
    
    A320-200
    
    Narrowbody
    
    199555 Yakutia
    
    B757-200
    
    Narrowbody
    
    199656 Yakutia
    
    B757-200
    
    Narrowbody
    
    199857 Yes Airways
    
    A320-200 (3)
    
    Narrowbody
    
    199558 Yes Airways
    
    A320-200 (3)
    
    Narrowbody
    
    199559 Off-lease
    
    B737-800 (4)
    
    Narrowbody
    
    2000
 
 (1)
    
    Freighter.(2)
    
    Delivery of these aircraft occurred in January 2011.(3)
    
    Aircraft are committed and expected to be delivered in the first half of 2011.(4)
    
    We delivered this aircraft to Aeromexico in March 2011.  29




---



##### Table of Contents



Number ofAircraft Manufacturer
    
    Aircraft Type
    
    AircraftAirbus
    
    A319-100
    
    
    10A320-200
    
    
    16A330-200
    
    
    1Total
    
    
    27Boeing
    
    B737-300QC
    
    
    1B737-500
    
    
    2B737-700
    
    
    3B737-800
    
    
    10B737-900ER
    
    
    2B747-400
    
    
    1B757-200
    
    
    10B757-200SF
    
    
    1B767-300ER
    
    
    1B777-200ER
    
    
    1Total
    
    
    32Total
    
    
    
    
    59
   Number ofAirframe Type
    
    AircraftNarrow-body(1)
    
    
    55Wide-body
    
    
    4Total
    
    
    59
 
 (1)
    
    Includes two freighters. Our Markets
  Year ended December 31,2010
    
    
    2009
    
    
    2008Europe, Middle East and Africa:Germany
    
    $
    15,284
    
    
    
    7
    %
    
    $
    17,174
    
    
    
    8
    %
    
    $
    16,353
    
    
    
    7
    %The Netherlands
    
    
    16,367
    
    
    
    8
    %
    
    
    16,331
    
    
    
    8
    %
    
    
    13,990
    
    
    
    6
    %Russia
    
    
    12,719
    
    
    
    6
    %
    
    
    10,034
    
    
    
    5
    %
    
    
    3,748
    
    
    
    2
    %Spain
    
    
    8,213
    
    
    
    4
    %
    
    
    8,213
    
    
    
    4
    %
    
    
    7,630
    
    
    
    4
    %United Kingdom
    
    
    9,255
    
    
    
    4
    %
    
    
    9,624
    
    
    
    5
    %
    
    
    17,388
    
    
    
    8
    %Switzerland
    
    
    6,199
    
    
    
    3
    %
    
    
    8,423
    
    
    
    4
    %
    
    
    13,296
    
    
    
    6
    %Other
    
    
    41,232
    
    
    
    18
    %
    
    
    34,405
    
    
    
    15
    %
    
    
    30,789
    
    
    
    14
    %Europe, Middle East and Africa 
Total
    
    
    109,269
    
    
    
    50
    %
    
    
    104,204
    
    
    
    49
    %
    
    
    103,194
    
    
    
    47
    %Asia Pacific:India
    
    
    24,430
    
    
    
    11
    %
    
    
    27,451
    
    
    
    13
    %
    
    
    26,604
    
    
    
    12
    %China
    
    
    15,636
    
    
    
    7
    %
    
    
    16,391
    
    
    
    8
    %
    
    
    17,491
    
    
    
    8
    %
  30




---



##### Table of Contents



Year ended December 31,2010
    
    
    2009
    
    
    2008Other
    
    
    4,882
    
    
    
    2
    %
    
    
    3,017
    
    
    
    1
    %
    
    
    3,553
    
    
    
    2
    %Asia Pacific  Total
    
    
    44,948
    
    
    
    20
    %
    
    
    46,859
    
    
    
    22
    %
    
    
    47,648
    
    
    
    22
    %North America:United States
    
    
    41,725
    
    
    
    19
    %
    
    
    39,600
    
    
    
    19
    %
    
    
    39,180
    
    
    
    18
    %Other
    
    
    4,932
    
    
    
    2
    %
    
    
    5,009
    
    
    
    2
    %
    
    
    5,007
    
    
    
    2
    %North America  Total
    
    
    46,657
    
    
    
    21
    %
    
    
    44,609
    
    
    
    21
    %
    
    
    44,187
    
    
    
    20
    %Mexico, South and Central America:Mexico
    
    
    18,781
    
    
    
    9
    %
    
    
    18,292
    
    
    
    8
    %
    
    
    19,802
    
    
    
    9
    %Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,109
    
    
    
    2
    %Mexico, South and Central America
 Total
    
    
    18,781
    
    
    
    9
    %
    
    
    18,292
    
    
    
    8
    %
    
    
    23,911
    
    
    
    11
    %Total Operating Lease Revenue
    
    $
    219,655
    
    
    
    100
    %
    
    $
    213,964
    
    
    
    100
    %
    
    $
    218,940
    
    
    
    100
    %
 Our Leases
 Lease Terms
   Airframe TypeYear of Scheduled Lease Expiration
    
    Narrow(1)(2)
    
    
    Wide
    
    
    Total2011
    
    
    1
    
    
    
    
    
    
    
    12012
    
    
    5
    
    
    
    1
    
    
    
    62013
    
    
    6
    
    
    
    1
    
    
    
    72014
    
    
    5
    
    
    
    
    
    
    
    52015
    
    
    12
    
    
    
    1
    
    
    
    132016 (2)
    
    
    14
    
    
    
    1
    
    
    
    152017
    
    
    6
    
    
    
    
    
    
    
    62018
    
    
    5
    
    
    
    
    
    
    
    5Total
    
    
    54
    
    
    
    4
    
    
    
    58
 
 (1)
    
    Includes one freighter each in 2014 and 2015.(2)
    
    Includes four committed lease agreements executed as of December 31, 2010.    31




---



##### Table of Contents



Security Deposits and Letters of Credit.
 Maintenance Obligations.
  Compliance with Laws.
 General. :
 Lessee
    
    SublesseeIcelandair
    
    Air NiuginiWhite Airways
    
    White Transportes Aereos Ltda.
   32




---



##### Table of Contents



Lease Restructurings.
 Aircraft Repossessions.
 Lease Management and Remarketing
   Competition
 We operate in a highly competitive market for investment opportunities in aircraft and other
aviation assets
 Insurance
     33




---



##### Table of Contents



Government Regulation
 We cannot assure you that all lessees will comply
with the registration requirements in the jurisdiction where they operate.
 Government regulations could
require substantial expenditures, reduce our profitability and limit our growth.
 Properties
  
 ITEM 4A.
    
    UNRESOLVED STAFF COMMENTS
   34




---



##### Table of Contents



ITEM 5.
    
    OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our consolidated financial statements and related notes included
elsewhere in this Annual Report. The consolidated financial statements have been prepared in
accordance with U.S. GAAP and are presented in U.S. dollars. The discussion below contains
forward-looking statements that are based upon our current expectations and are subject to
uncertainty and changes in circumstances. Actual results may differ materially from these
expectations due to changes in global, regional or local political, economic, business,
competitive, market, regulatory and other factors, many of which are beyond our control. See
Preliminary note and Item 3 Risk factors.
 Overview
            35




---



##### Table of Contents



Market Conditions
  Critical Accounting Policies and Estimates
  Investment in BBAM LP
    36




---



##### Table of Contents



Flight Equipment Held for Operating Leases
  
    
    Flight equipment where original manufacturers prices are not relevant due to plane
modifications and conversions.
 
    
    Flight equipment which is out of production and may have a shorter useful life or lower
residual value due to obsolescence.
     Impairment of Flight Equipment
   Derivative Financial Instruments
    37




---



##### Table of Contents



Security Deposits
  Maintenance Payment Liability
      Revenue Recognition
   38




---



##### Table of Contents



Share-Based Compensation
  Taxes
   New Accounting Pronouncements
   Operating Results
  Consolidated Statements of Income of Fly for the years ended December 31, 2010 and 2009
 Year ended December 31,
    
    
    Increase/2010
    
    
    2009
    
    
    DecreaseRevenuesOperating lease revenue
    
    $
    219,655
    
    
    $
    213,964
    
    
    $
    5,691Equity earnings from BBAM LP
    
    
    2,901
    
    
    
    
    
    
    
    2,901Gain on sale of aircraft
    
    
    13,449
    
    
    
    
    
    
    
    13,449Gain on purchase of notes payable
    
    
    
    
    
    
    82,666
    
    
    
    (82,666
    )Gain on sale of option to purchase notes payable
    
    
    12,501
    
    
    
    
    
    
    
    12,501Lease termination settlement
    
    
    2,298
    
    
    
    8,307
    
    
    
    (6,009
    )Interest and other income
    
    
    2,861
    
    
    
    2,598
    
    
    
    263Total revenues
    
    
    253,665
    
    
    
    307,535
    
    
    
    (53,870
    )
  39




---



##### Table of Contents



Year ended December 31,
    
    
    Increase/2010
    
    
    2009
    
    
    DecreaseExpensesDepreciation
    
    
    84,032
    
    
    
    83,650
    
    
    
    382Interest expense
    
    
    75,748
    
    
    
    80,925
    
    
    
    (5,177
    )Selling, general and administrative
    
    
    25,413
    
    
    
    21,094
    
    
    
    4,319Debt purchase option amortization
    
    
    947
    
    
    
    6,053
    
    
    
    (5,106
    )Maintenance and other costs
    
    
    4,651
    
    
    
    2,353
    
    
    
    2,298Total expenses
    
    
    190,791
    
    
    
    194,075
    
    
    
    (3,284
    )Net income before provision for income taxes
    
    
    62,874
    
    
    
    113,460
    
    
    
    (50,586
    )Income tax provision
    
    
    10,207
    
    
    
    24,367
    
    
    
    (14,160
    )Net income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    (36,426
    )
             40




---



##### Table of Contents



Consolidated Statements of Income of Fly for the years ended December 31, 2009 and 2008
 Year ended December 31,
    
    
    Increase/2009
    
    
    2008
    
    
    DecreaseRevenuesOperating lease revenue
    
    $
    213,964
    
    
    $
    218,940
    
    
    $
    (4,976
    )Finance lease income
    
    
    
    
    
    
    2,446
    
    
    
    (2,446
    )Gain on purchase of notes payable
    
    
    82,666
    
    
    
    
    
    
    
    82,666Gain on sale of aircraft
    
    
    
    
    
    
    11,437
    
    
    
    (11,437
    )Lease termination settlement
    
    
    8,307
    
    
    
    
    
    
    
    8,307Interest and other income
    
    
    2,598
    
    
    
    3,315
    
    
    
    (717
    )Total revenues
    
    
    307,535
    
    
    
    236,138
    
    
    
    71,397ExpensesDepreciation
    
    
    83,650
    
    
    
    74,161
    
    
    
    9,489Interest expense
    
    
    80,925
    
    
    
    81,689
    
    
    
    (764
    )Selling, general and administrative
    
    
    21,094
    
    
    
    20,989
    
    
    
    105Debt purchase option amortization
    
    
    6,053
    
    
    
    
    
    
    
    6,053Maintenance and other costs
    
    
    2,353
    
    
    
    4,307
    
    
    
    (1,954
    )Total expenses
    
    
    194,075
    
    
    
    181,146
    
    
    
    12,929Net income before provision for income taxes
    
    
    113,460
    
    
    
    54,992
    
    
    
    58,468Income tax provision
    
    
    24,367
    
    
    
    6,867
    
    
    
    17,500Net income
    
    $
    89,093
    
    
    $
    48,125
    
    
    $
    40,968
   41




---



##### Table of Contents



42




---



##### Table of Contents



Liquidity and Capital Resources
  Cash Flows of Fly for the years ended December 31, 2010 and 2009
    Cash Flows of Fly for the years ended December 31, 2009 and 2008
     43




---



##### Table of Contents



Our Future Sources and Uses of Liquidity
           44




---



##### Table of Contents



Dividends and Share Repurchases.
 Dividends paidDividend payment date
    
    per share
    
    
    Total cash requirement2010:November 19, 2010
    
    $
    0.20
    
    
    $
    5.3 millionAugust 20, 2010
    
    $
    0.20
    
    
    $
    5.4 millionMay 20, 2010
    
    $
    0.20
    
    
    $
    5.7 millionFebruary 19, 2010
    
    $
    0.20
    
    
    $
    6.1 million2009:November 20, 2009
    
    $
    0.20
    
    
    $
    6.1 millionAugust 20, 2009
    
    $
    0.20
    
    
    $
    6.1 millionMay 20, 2009
    
    $
    0.20
    
    
    $
    6.1 millionFebruary 20, 2009
    
    $
    0.20
    
    
    $
    6.5 million2008:November 20, 2008
    
    $
    0.50
    
    
    $
    16.7 millionAugust 20, 2008
    
    $
    0.50
    
    
    $
    16.7 millionMay 20, 2008
    
    $
    0.50
    
    
    $
    16.8 millionFebruary 20, 2008
    
    $
    0.50
    
    
    $
    16.8 million
      Note Purchases.
  45




---



##### Table of Contents



Option Agreements.
 Maintenance Cash Flows.
    Financing
 Securitization
  Interest Rate.
 Payment Terms.
  46




---



##### Table of Contents



Available Cash.
   Redemption.
  Redemption Date
    
    PriceBefore April 14, 2011
    
    
    100.17
    %On or after April 14, 2011, but before October 14, 2011
    
    
    100.09
    %On or after October 14, 2011
    
    
    100.00
    %
 Collateral.
 Default and Remedies.
  47




---



##### Table of Contents



Certain Covenants.
 
    
    Aircraft Dispositions.The ability of B&B Air Funding to sell aircraft is limited under
the Securitization documentation. B&B Air Funding may sell up to ten aircraft without the
consent of the policy provider and additional aircraft with the consent of the policy
provider provided that such sales do not violate the concentration limits discussed below
and the price is above 107% of the face value of the notes allocated to such aircraft. B&B
Air Funding may also sell aircraft provided that (1) sales in any one year do not exceed 10%
of the initial average base value of all our aircraft as adjusted for depreciation as
provided in the indenture, (2) such sales do not violate the concentration limits, (3)
Moodys confirms its rating on the notes and (4) the policy provider consents.
 
    
    Concentration Limits.B&B Air Funding may only enter into a future lease (other than a
renewal, extension or restructuring of any lease) if, after entering into such future lease,
B&B Air Funding is in compliance with certain criteria in respect of limits based on, among
other things, the proportion of our portfolio leased to any single lessee, the regional
concentration of our lessees and the sovereign ratings of the countries in which our lessees
are located. B&B Air Funding will be permitted to vary from these limits if B&B Air Funding
receives a confirmation from Moodys that it will not lower, qualify or withdraw its ratings
on the notes as a result of such lease and the policy provider consents to such lease. These
limits may place limits on B&B Air Fundings ability (absent a third-party consent) to
re-lease the aircraft in our Initial Portfolio to certain customers at certain times, even
if to do so would provide the best risk-adjusted cash flow and would be within our risk
policies then in effect.
 
    
    Debt Service Coverage Ratio.From (and including) the monthly period beginning in July
2010 and continuing through July 2012, B&B Air Funding is required to maintain a debt
service coverage ratio of 1.80 to 1. In the event that such debt service coverage ratio is
not maintained for two consecutive months, all amounts on deposit in the collections account
will be applied towards the outstanding principal balance of the notes after the payment of
expenses, senior hedge payments and amounts due and owing to the policy provider and the
liquidity facility provider.
 
    
    Leases.When re-leasing any aircraft, B&B Air Funding must do so in accordance with
certain core lease provisions set forth in the Indenture. The core lease provisions include,
but are not limited to, maintenance, return conditions in respect of the aircraft, lease
termination events and prohibitions on the assignments of the leases. These core lease
provisions may not be amended without the consent of the policy provider.
 
    
    Additional Aircraft.B&B Air Funding is not permitted to acquire any aircraft other than
the aircraft in the Initial Portfolio unless certain conditions are satisfied, including
that the acquisition does not result in an event of default under the transaction documents
and does not result in a default under the applicable concentration limits. We have the
right to contribute additional aircraft from time to time to B&B Air Funding. In the event
that additional notes are issued to finance the acquisition of additional aircraft, B&B Air
Funding must obtain the prior written consent of the policy provider and liquidity facility
provider and a confirmation from the rating agencies rating the notes that they will not
lower, qualify or withdraw their ratings on the notes as a result of the acquisition.
Additional aircraft may include, among other things, aircraft, engines and entities with an
ownership or leasehold interest in aircraft or engines. Any additional notes issued will
rank pari passu in right of payment of principal and interest with B&B Air Fundings
outstanding notes. The acquisition of additional aircraft will also require the approval of
the directors of B&B Air Funding.
 
    
    Modification of Aircraft and Capital Expenditures.B&B Air Funding is generally not
permitted to make capital expenditures in respect of any optional improvement or
modification of an aircraft in the Initial Portfolio, including aircraft conversions from
passenger to cargo aircraft, or for the purpose of purchasing or otherwise acquiring any
engines or parts outside of the ordinary course of business. However, B&B Air Funding may
make capital expenditures in the ordinary course of business in connection with an existing
or new lease or the sale of an aircraft, and capital expenditures where: (1) conversions or
modifications are funded by capital contributions from us, (2) modification payments are
made and the aggregate net cash cost does not exceed 5% of the aggregate initial average
base value of the Initial Portfolio (other than modification payments funded, with capital
contributions from us) or (3) modification payments permitted under the servicing agreement
that do not require the express prior written approval of B&B Air Funding. Subject to
certain conditions set forth in the indenture, B&B Air Funding is also permitted to use
funds available to make scheduled principal payments on the Notes and amounts available for
distributions to us for the purpose of converting passenger aircraft in the Initial
Portfolio to freighter or mixed use configuration.
  48




---



##### Table of Contents




    
    Other Covenants.The Indenture contains other covenants customary for a securitization,
including covenants that restrict the investment and business activities of B&B Air Funding,
maintain the special purpose and bankruptcy remoteness characteristics of B&B Air Funding,
limit the amount and type of debt, guarantees or other indebtedness that can be assumed by
B&B Air Funding entities, restrict B&B Air Fundings ability to grant liens or other
encumbrances, require the maintenance of certain airline hull, liability, war risk and
repossession insurance and limit the ability of the members of B&B Air Funding to merge,
amalgamate, consolidate or transfer assets.
  
    
    Bankruptcy or insolvency of BBAM LP;
 
    
    BBAM LP ceases to own, directly or indirectly, at least 50% of the Servicer;
 
    
    Summit ceases to own, directly or indirectly, at least 33.33% of the partnership
interests in BBAM LP; provided that a sale that results in such ownership being at a level
below 33.33% shall not constitute a servicer termination event if the sale is to a publicly
listed entity or other person with a net worth of at least $100 million;
 
    
    Steven Zissis ceases to be the President or Chief Executive Officer or equivalent
position of BBAM LP at any time prior to April 29, 2015 for any reason other than death or
disability; and
 
    
    50% or more of the Servicers key finance and legal team or technical and marketing team
cease to be employed by BBAM LP and are not replaced with employees with reasonably
comparable experience within 90 days.
    Aircraft Acquisition Facility
  Availability.
  49




---



##### Table of Contents




    
    BBAM LP ceases to own 51% of the Servicer;
 
    
    Fly ceases to own at least 5% of BBAM LP;
 
    
    BBAM fails to deliver the audited financial statements of BBAM LP to Fly and to the agent
and lenders in the Aircraft Acquisition Facility within 120 days of fiscal year end or the
unaudited or audited financial statements for each quarterly period within 90 days, and in
each case such failure to deliver the required financial statements continues for 30 days
after written notice from the agent;
 
    
    Any BBAM LP annual or quarterly financial statement required to be delivered as described
above contains a going-concern or similar qualification;
 
    
    The insolvency of BBAM or any significant subsidiary of BBAM; and
 
    
    A BBAM default on recourse debt over $25 million.
  Principal Payments.
  Interest.
 Collateral.
  50




---



##### Table of Contents



Certain Covenants.
 
    
    Aircraft Dispositions.The ability of B&B Air Acquisition to sell aircraft is limited by
the terms of the Aircraft Acquisition Facility. Any sale after the end of the availability
period requires prior written consent of the agent and that B&B Air Acquisition must receive
a minimum cash sales price equal to at least the debt allocable to that aircraft plus
certain expenses.
 
    
    Concentration Limits.B&B Air Acquisition may only enter into a future lease if, after
entering into such future lease, B&B Air Acquisition is in compliance with certain criteria
in respect of limits based on, among other things, the proportion of our portfolio leased to
any single lessee, the regional concentration of our lessees and aircraft type and age
concentration limits. These limits may place limits on B&B Air Acquisitions ability (absent
lender consent) to re-lease their aircraft to certain customers at certain times, even if to
do so would provide the best risk-adjusted cash flow and would be within our risk policies
then in effect.
 
    
    Interest Coverage Ratio.B&B Air Acquisition is required to maintain a monthly interest
coverage ratio of at least 1.1 to 1, and a rolling three-month interest coverage ratio of at
least 1.25 to 1.
 
    
    Leases.When re-leasing any aircraft, B&B Air Acquisition must receive agent consent.
Follow-on leases must also be in accordance with certain provisions set forth in the
Aircraft Acquisition Facility. The requirements include, but are not limited to,
maintenance, insurance and minimum lease rental rates and conditions.
 
    
    Modification of Aircraft and Capital Expenditures.B&B Air Acquisition is generally not
permitted to make capital expenditures in respect of any optional improvement or
modification of an aircraft if the aggregate cost of such modifications and improvements
exceeds 7.5% of the aircraft value determined as of the date the aircraft was acquired,
without the prior written consent of the agent.
 
    
    Other Covenants.The Aircraft Acquisition Facility contains other customary covenants,
including covenants that restrict the investment and business activities of B&B Air
Acquisition, maintain the special purpose and bankruptcy remoteness characteristics of B&B
Air Acquisition, limit the amount and type of debt, guarantees or other indebtedness that
can be assumed by B&B Air Acquisition entities, restrict B&B Air Acquisitions ability to
grant liens or other encumbrances, require the maintenance of certain airline hull,
liability, war risk and repossession insurance and limit the ability of the members of B&B
Air Acquisition to merge, amalgamate, consolidate or transfer assets.
 Default and Remedies.
 
    
    interest or principal is not paid when due,
 
    
    failure to make certain other payments and such payments are not made within 20 business
days of receiving written notice,
 
    
    failure to maintain required insurance levels,
 
    
    failure to comply with certain other covenants and such noncompliance continuing for 20
business days after receipt of written notice,
 
    
    B&B Air Acquisition or any of its subsidiaries becoming the subject of insolvency
proceedings,
 
    
    certain early terminations of B&B Air Acquisitions swap agreements,
 
    
    failure to meet interest coverage ratios,
 
    
    Fly ceasing to own at least 5% of BBAM LP; and
 
    
    BBAM LP ceasing to hold at least 51% of the capital stock of BBAM.
   51




---



##### Table of Contents



Credit Facility
      Aircraft Note Payable
   Capital Expenditures
     Inflation
   52




---



##### Table of Contents



Foreign Currency Exchange Risk
  Research and Development, Patents and Licenses, etc.
  Off-Balance Sheet Arrangements
  Contractual Obligations
  2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    TotalPrincipal payments under the Notes(1)
    
    $
    8,456
    
    
    $
    30,926
    
    
    $
    63,352
    
    
    $
    67,494
    
    
    $
    71,420
    
    
    $
    355,123
    
    
    $
    596,771Interest payments under the Notes(2)
    
    
    5,513
    
    
    
    5,390
    
    
    
    4,896
    
    
    
    4,282
    
    
    
    3,638
    
    
    
    8,030
    
    
    
    31,749Principal payments under the Aircraft
Acquisition Facility(3)
    
    
    31,912
    
    
    
    154,244
    
    
    
    375,480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    561,636Interest payments under the Aircraft
Acquisition Facility(4)
    
    
    14,409
    
    
    
    13,642
    
    
    
    5,060
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,111Principal payments under the Credit Facility(5)
    
    
    36,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,283Interest payments under the Credit Facility(5)
    
    
    212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212Principal payments under the Aircraft note
payable(6)
    
    
    1,657
    
    
    
    1,783
    
    
    
    1,900
    
    
    
    2,025
    
    
    
    2,157
    
    
    
    20,478
    
    
    
    30,000Interest payments under the Aircraft note
payable(6)
    
    
    1,877
    
    
    
    1,767
    
    
    
    1,649
    
    
    
    1,524
    
    
    
    1,391
    
    
    
    3,223
    
    
    
    11,431Payments to BBAM and its affiliates under our
management agreement(7)(8)
    
    
    6,312
    
    
    
    6,312
    
    
    
    6,312
    
    
    
    6,312
    
    
    
    21,039
    
    
    
    
    
    
    
    46,287Payments to BBAM and its affiliates under our
administrative services and servicing
agreements for our Initial Portfolio(9)(10)
    
    
    4,824
    
    
    
    4,689
    
    
    
    4,200
    
    
    
    3,928
    
    
    
    3,662
    
    
    
    9,080
    
    
    
    30,383Payments to BBAM under our servicing
agreements for additional aircraft(11)(12)
    
    
    3,167
    
    
    
    3,143
    
    
    
    2,028
    
    
    
    155
    
    
    
    155
    
    
    
    453
    
    
    
    9,101Total
    
    $
    114,622
    
    
    $
    221,896
    
    
    $
    464,877
    
    
    $
    85,720
    
    
    $
    103,462
    
    
    $
    396,387
    
    
    $
    1,386,964
 
 (1)
    
    Prior to July 2010, there were no scheduled principal payments on the Notes. For each month
between July 2010 and August 2012, there are scheduled principal payments in fixed amounts of
approximately $1.0 million per month, in each case subject to satisfying certain debt service
coverage ratios and other covenants. Of this amount, approximately $0.2 million will be paid
to a subsidiary in respect of Notes that it purchased and continues to hold. Thereafter,
principal payments are not fixed in amount but rather are determined monthly based on revenues
collected and costs and other liabilities incurred prior to the relevant payment date. Amounts
are estimated based upon existing leases and current re-leasing assumptions. The final
maturity of the Notes is November 14, 2033.(2)
    
    Interest payments assume LIBOR remains at the current rate in effect at year end through the
term of the Notes and reflect amounts we expect to pay after giving effect to interest swaps
and amounts payable to our policy provider.  53




---



##### Table of Contents



(3)
    
    Commencing November 7, 2009, B&B Air Acquisition began making principal payments under its
Aircraft Acquisition Facility. Subject to an extension by the lenders as provided in the
agreement, all amounts outstanding on November 6, 2012 must be repaid in four quarterly
installments.(4)
    
    Interest payments assume LIBOR remains at the current rate through the term of the facility
and reflect amounts we expect to pay after giving effect to interest swaps.(5)
    
    There are no scheduled principal payments due during the term of the amended Credit Facility.
Interest is payable monthly and equal to the interest proceeds on the pledged Notes. The
amended Credit Facility is scheduled to mature on August 16, 2011 but provides the Company
with four 1-year extension options upon the payment of a fee at each extension date equal to
3.5% to 5.0% of the then-outstanding principal amount.(6)
    
    Commencing March 10, 2011, Fly Aircraft Holdings One Limited will begin making quarterly
principal and interest payments on its Aircraft note payable. The Aircraft note payable
matures on December 7, 2018.(7)
    
    Our management agreement provides that we pay to our Manager base and rent fees and a
management expense amount of $6.0 million annually, adjusted for increases in the consumer
price index (CPI). Base and rent fees paid to BBAM under our servicing agreements are
credited toward (and thereby reduce) such fees payable under our management agreement and the
amounts in the table assume that such credit reduces the base and rent fees payable under the
management agreement to $0. See Management Agreement.(8)
    
    The initial term of the Management Agreement with our Manager is for five years, with
automatic five year renewal periods. The agreement provides for an early termination fee,
which declines upon each renewal, during the first three five-year terms. The table assumes
termination of the agreement after the initial five year term and payment of the applicable
termination fee.(9)
    
    Our management agreement provides that we pay our Manager an administrative agency fee
initially equal to $750,000 per annum, adjusted for CPI increases, for each aircraft
securitization financing we complete.(10)
    
    Our servicing agreement for our Initial Portfolio provides that we will pay BBAM a base fee
of $150,000 per month, adjusted for CPI increases. We will also pay BBAM a rent fee equal to
1.0%, of the aggregate amount of basic rent actually collected for all or any part of a month
for any of their aircraft plus 1.0% of the aggregate amount of basic rent due for all or any
part of a month for any of our aircraft. Amounts in the table reflect the rent fee for
aircraft in B&B Air Fundings portfolio as of December 31, 2010.(11)
    
    The servicing agreement between BBAM and B&B Air Acquisition provides that B&B Air
Acquisition pays BBAM an administrative agency fee of $20,000 per month. B&B Air Acquisition
will also pay BBAM a rent fee equal to 3.5%, respectively, of the aggregate amount of basic
rent actually collected for all or any part of a month. Amounts in the table reflect the rent
fee for our aircraft as of December 31, 2010.(12)
    
    The servicing agreement between BBAM and Fly Holdings provides that Fly Holdings pays BBAM an
administrative agency fee of $1,000 per month. Fly Holdings will also pay BBAM a rent fee
equal to 3.5 of the aggregate amount of basic rent actually collected for all or any part of a
month. Amounts in the table reflect the rent fee for our aircraft as of December 31, 2010. 
 ITEM 6.
    
    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
  Name
    
    Age

    
    PositionColm Barrington
    
    
    65
    
    
    Chief Executive Officer and DirectorGary Dales
    
    
    55
    
    
    Chief Financial OfficerJoseph M. Donovan
    
    
    56
    
    
    Director and ChairmanErik G. Braathen
    
    
    55
    
    
    DirectorSean Donlon
    
    
    70
    
    
    DirectorJames Fantaci
    
    
    64
    
    
    DirectorRobert S. Tomczak
    
    
    49
    
    
    DirectorSusan M. Walton
    
    
    50
    
    
    DirectorSteven Zissis
    
    
    51
    
    
    Director
 Colm Barrington
  54




---



##### Table of Contents



Gary Dales
 Joseph M. Donovan
 Erik G. Braathen
 Sean Donlon
 James Fantaci
 Robert S. Tomczak
 Susan M. Walton
  55




---



##### Table of Contents



Steven Zissis
 Compensation of Directors
   Executive Compensation
     Board of Directors
   56




---



##### Table of Contents



Committees of the Board
  Audit Committee
  
    
    selecting independent auditors for approval by our shareholders;
 
    
    reviewing the scope of the audit to be conducted by our independent auditors, as well as the
results of their audit;
 
    
    approving audit and non-audit services provided to us by the independent auditors;
 
    
    reviewing the organization and scope of our internal system of audit, financial and
disclosure controls;
 
    
    overseeing internal controls and risk management;
 
    
    overseeing our financial reporting activities, including our annual report, and the
accounting standards and principles followed;
 
    
    reviewing and approving related-party transactions and preparing reports for the board of
directors on such related-party transactions; and
 
    
    conducting other reviews relating to compliance by our employees with our policies and
applicable laws.
 
    
    overseeing our internal audit function
  Compensation Committee
  Nominating and Corporate Governance Committee
   57




---



##### Table of Contents



Our Management
   Share Ownership
  
 ITEM 7.
    
    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
  Shares Beneficially OwnedName
    
    Number
    
    
    PercentThornburg Investment Management Inc. (1)
    
    
    2,228,513
    
    
    
    8.4
    %Neuberger Berman Group LLC (2)
    
    
    2,052,136
    
    
    
    7.7
    %
 
 (1)
    
    The information above and in this footnote is based on information taken from the Schedule
13G filed by Thornburg Investment Management Inc. with the SEC on January 24, 2011. Thornburg
Investment Management Inc. has sole voting power and sole dispositive power over 2,228,513
ADSs.(2)
    
    The information above and in this footnote is based on information taken from the Schedule
13G filed by Neuberger Berman Group LLC with the SEC on February 14, 2011. Neuberger Berman
Group LLC and Neuberger Berman LLC have sole voting power over 1,426,886 ADSs and shared
dispositive power over 2,052,136 ADSs.    Manager Shares
  Related Party Transactions
   58




---



##### Table of Contents



Management Agreement.
 MANAGEMENT AGREEMENT
 General
    Services
  Management and Administrative Services.
 
    
    managing our portfolio of aircraft and other aviation assets and the administration of our
cash balances;
 
    
    if requested by our board, making available a member of the core management team of our
Manager as our nominee on the board of directors of any of our subsidiaries (provided that
each such member must be agreed between us and our Manager);
 
    
    assisting with the implementation of our boards decisions;
 
    
    providing us suitably qualified and experienced persons to perform the management and
administrative services for us and our subsidiaries, including persons to be appointed by our
board to serve as our dedicated chief executive and chief financial officers (who shall remain
employees of, and be remunerated by, our Manager or an affiliate of our Manager while serving
in such capacities);
 
    
    performing or procuring the performance of all reasonable accounting, tax, corporate
secretarial, information technology, reporting and compliance services for us and our
subsidiaries, including the preparation and maintenance of our accounts and such financial
statements and other reports and filings as we are required to make with any governmental agency
(including the SEC) or stock exchange;
  59




---



##### Table of Contents




    
    supervising financial audits of us by an external auditor as required;
 
    
    managing our relations with our investors and the public, including:
 
    
    preparing our annual reports and any notices of meeting, papers, reports and agendas
relating to meetings of our shareholders; and
 
    
    assisting in the resolution of any complaints by or disputes with our investors and any
litigation involving us (other than litigation in which our interests are adverse to those
of our Manager or BBAM); and
 
    
    using commercially reasonable efforts to cause us to comply with all applicable laws.
 Origination and Disposition Services.
 
    
    sourcing opportunities relating to aircraft and other aviation assets, including using its
commercially reasonable efforts to notify us of potential aviation asset investment
opportunities that come to the attention of our Manager and which our Manager acting
reasonably believes may be of interest to us as investments;
 
    
    in relation to identified potential opportunities to purchase or sell aircraft and other
aviation assets, investigating, researching, evaluating, advising and making recommendations
on or facilitating such opportunities;
 
    
    with respect to prospective purchases and sales of aircraft and other aviation assets,
conducting negotiations with sellers and purchasers and their agents, representatives and
financial advisors; and
 
    
    otherwise providing advice and assistance to us in relation to the evaluation or pursuit of
aviation asset investment or disposition opportunities as we may reasonably request from time
to time.
  Ancillary Management and Administrative Services.
 
    
    the expansion of our Managers core management team with additional personnel as may be
required by developments or changes in the commercial aircraft leasing industry (whether
regulatory, economic or otherwise) or the compliance or reporting environment for publicly
listed companies in the United States (whether as a result of changes to securities laws or
regulations, listing requirements or accounting principles or otherwise); and
 
    
    making available individuals (other than members of our Managers core management team) as
our nominees on the boards of directors of any of our subsidiaries.
 Servicing
   60




---



##### Table of Contents



Competitors.
 Compliance With Our Strategy, Policy and Directions
   
    
    that matter has been the subject of a recommendation by our Manager; or
 
    
    the failure to make that decision, take that action or omit to take that action would breach
the fiduciary duties of our directors or any law.
  
    
    that matter has been the subject of a recommendation by our Manager; or
 
    
    the failure to make that decision, take that action or omit to take that action would breach
the fiduciary duties of our directors or any law.
   Appointment of Our Chief Executive Officer and Chief Financial Office r
  Restrictions and Duties
   61




---



##### Table of Contents



(1)
    
    carry out any transaction with an affiliate of our Manager on our behalf, it being understood
that BBAM has been appointed as the exclusive Servicer for our portfolio of aircraft, and that
our Manager may delegate the provision of all or any part of the services under the management
agreement to any person affiliated or associated with BBAM;
 (2)
    
    carry out any aviation asset investment or disposition transaction, or sequence of related
aviation asset investment or disposition transactions with the same person or group of persons
under common control, for us if the aggregate purchase price to be paid or the gross proceeds
to be received by us in connection therewith would exceed $200 million;
 (3)
    
    carry out any aviation asset investment or disposition transaction if the sum of all the
purchase prices to be paid or of all the gross proceeds to be received by us in connection
with all such transactions during any quarter would exceed $500 million;
 (4)
    
    appoint or retain any third-party service provider to assist our Manager in providing
management and administrative services if:
 
    
    the amount to be paid by our Manager and reimbursed by us or paid by us to the third
party with respect to any particular matter, or series of related matters, is reasonably
likely to exceed $1 million; or
 
    
    as a result of the appointment or retention, the amount to be paid by our Manager and
reimbursed by us or paid by us to all such third-party service providers appointed or
retained in any rolling 12-month period is reasonably likely to exceed $5 million;
 (5)
    
    appoint or retain any third-party service provider to assist our Manager in providing
ancillary management and administrative or the origination and disposition services if:
 
    
    the amount to be paid by our Manager and reimbursed by us or paid by us to the third
party with respect to any particular matter, or series of related matters, is reasonably
likely to exceed $1 million; or
 
    
    as a result of the appointment or retention, the amount to be paid by our Manager and
reimbursed by us or paid by us to all such third-party service providers appointed or
retained in any rolling 12-month period is reasonably likely to exceed $7.5 million; or
 (6)
    
    hold any cash or other assets of ours, provided that our Manager may cause our cash and other
assets to be held in our name or any custodian for us nominated or approved by us.
  Relationship of Management Agreement and Servicing Agreements
  Board Appointees
   62




---



##### Table of Contents



Fees and Expenses
  Management and Administrative Services
 Base and Rent Fees
 
    
    a base fee of $150,000 per month per subsidiary we establish for the purpose of entering into
an aircraft securitization financing, which will increase by 0.01% of the maintenance-adjusted
base value (at the time of acquisition) of each additional aircraft acquired beyond the
Initial Portfolio, in the case of B&B Air Funding, or beyond the initial portfolio of aircraft
financed with the proceeds of the applicable aircraft securitization financing (the amount of
the base fee will be subject to adjustment as set forth below under  Fees and Expenses 
Adjusting the Base Fees and Administrative Agency Fees); and
 
    
    a rent fee equal to 1.0% of the aggregate amount of basic rent due for all or any part of a
month for any of such aircraft plus 1.0% of the aggregate amount of basic rent actually paid
for all or any part of a month for any of such aircraft.
   Origination and Disposition Fees and Change of Control Fees.
     Administrative Agency Fees.
  63




---



##### Table of Contents



Adjusting the Base Fees and Administrative Agency Fees.
 Ancillary Management and Administrative Services.
  Credit for Servicing Fees Paid
  Break Fees
  Expenses of the Manager
  
    
    quarterly payments of $1.5 million, subject to an annual adjustment indexed to the consumer
price index applicable to the previous year, to our Manager to defray expenses.
 We refer to this foregoing amount as the management expense amount. The management expense
amount is subject to adjustment by notice from our Manager and the approval of the independent
directors on our board of directors.
 
    
    for all our costs paid for us by our Manager (other than remuneration and certain expenses in
relation to our Managers core management team and our Managers corporate overhead),
including the following items which are not covered by the management expense amount:
 
    
    directors fees for the directors on our board of directors and our subsidiaries,
 
    
    directors and officers insurance for our and our subsidiaries directors and officers,
 
    
    travel expenses of the directors (including flights, accommodation, taxis, entertainment
and meals while traveling) to attend any meeting of the board of our company,
 
    
    registration and listing fees in connection with the listing of our shares on the NYSE
and registering the shares under the Securities Act
  64




---



##### Table of Contents




    
    fees and expenses relating to any equity or debt financings we enter into in the future,
 
    
    fees and expenses of the depositary for our ADSs,
 
    
    costs and expenses related to insuring our aircraft and other aviation assets, including
all fees and expenses of insurance advisors and brokers,
 
    
    costs incurred in connection with organizing and hosting our annual meetings or other
general meetings of our company,
 
    
    costs of production and distribution of any of our security holder communications,
including notices of meetings, annual and other reports, press releases, and any prospectus,
disclosure statement, offering memorandum or other form of offering document,
 
    
    website development and maintenance,
 
    
    travel expenses of the core management team and other personnel of BBAM and its
affiliates (including flights, accommodation, taxis, entertainment and meals while
traveling) related to sourcing, negotiating and conducting transactions on our behalf and
attending any meeting of the board or our company,
 
    
    external legal counsel,
 
    
    fees of third party consultants, accounting firms and other professionals,
 
    
    external auditors fees, and
 
    
    internal auditors fees.
  
    
    for all taxes, costs, charges and expenses properly incurred by our Manager in connection
with
 
    
    the provision of ancillary management and administrative services,
 
    
    the engagement of professional advisors, attorneys, appraisers, specialist consultants
and other experts as requested by us from time to time; or which our Manager considers
reasonably necessary in providing the services and discharging its duties and other
functions under the management agreement, including, without limitation, the fees and
expenses of professional advisors relating to the purchase and sale of aircraft and other
aviation assets.
 Term and Termination
  
    
    terminated by either party upon twelve months written notice prior to termination, or
 
    
    the agreement was terminated earlier by us (see below).
   65




---



##### Table of Contents




    
    BBAM LP ceases to hold (directly or indirectly) more than 50% of the voting equity of, and
economic interest in our Manager;
 
    
    our Manager becomes subject to bankruptcy or insolvency proceedings that are not discharged
within 75 days, unless our Manager is withdrawn and replaced within 90 days of the initiation
of such bankruptcy or insolvency proceedings with an affiliate or associate of BBAM that is
able to make correctly the representations and warranties set out in the management agreement;
 
    
    at least 75% of our independent directors and holders of 75% or more of all of our
outstanding common shares (measured by vote) determine by resolution that there has been
unsatisfactory performance by our Manager that is materially detrimental to us;
 
    
    our Manager materially breaches the management agreement and fails to remedy such breach
within 90 days of receiving written notice from us requiring it to do so, or such breach
results in liability to us and is attributable to our Managers gross negligence, fraud or
dishonesty, or willful misconduct in respect of the obligation to apply the standard of care;
 
    
    any license, permit or authorization held by our Manager which is necessary for it to perform
the services and duties under the management agreement is materially breached, suspended or
revoked, or otherwise made subject to conditions which, in the reasonable opinion of our board
of directors, would prevent our Manager from performing the services and the situation is not
remedied within 90 days; or
 
    
    our Manager voluntarily commences or files any petition seeking bankruptcy, insolvency or
receivership relief; consents to the institution of, or fails to contest the filing of any
bankruptcy or insolvency filing; files an answer admitting the material allegations filed
against it in any such proceeding; or makes a general assignment for the benefit of its
creditors, unless our Manager is withdrawn and replaced within 15 days with an affiliate or
associate of BBAM that is able to make correctly the representations and warranties set out in
the management agreement.
 
    
    an order is made for the winding up of our Manager, unless our Manager is withdrawn and
replaced within 15 days with an affiliate or associate of BBAM that is able to make correctly
the representations and warranties set out in the management agreement.
 
    
    we may terminate the management agreement upon three months written notice if Steven Zissis
ceases to be the President or Chief Executive Officer or equivalent position of BBAM LP at any
time prior to April 29, 2015 for any reason other than his death or disability.
  
    
    we fail to make any payment due under the management agreement to our Manager within 15 days
after the same becomes due;
 
    
    we otherwise materially breach the management agreement and fail to remedy the breach within
90 days of receiving written notice from our Manager requiring us to do so;
 
    
    if the directors in office on the date hereof and any successor to any such director who was
nominated or selected by a majority of the current directors and our Manager appointed
directors, cease to constitute at least a majority of the board (excluding directors appointed
by our Manager pursuant to above). (See Board Appointees.)
   66




---



##### Table of Contents



Conflicts of Interest
  
    
    dealing or conducting business with us, our Manager, any affiliate or associate of BBAM
or any shareholder of ours;
 
    
    being interested in any contract or transaction with us, our Manager, any affiliate or
associate of BBAM or any shareholder of ours;
 
    
    acting in the same or similar capacity in relation to any other corporation or
enterprise;
 
    
    holding or dealing in any of our shares or other securities or interests therein; or
 
    
    co-investing with us.
 Acting in Interests of Shareholders
  Indemnification and Limitation of Liability
  Independent Advice
  SERVICING AGREEMENT BETWEEN B&B AIR FUNDING AND BBAM
  
    
    lease marketing and remarketing, including lease negotiation;
 
    
    collecting rental payments and other amounts due under leases, collecting maintenance
payments where applicable, lease compliance and enforcement and delivery and accepting
redelivery of aircraft under lease;
 
    
    implementing aircraft dispositions;
  67




---



##### Table of Contents




    
    monitoring the performance of maintenance obligations of lessees under the leases in a manner
consistent with the practices employed from time to time by BBAM with respect to aircraft
owned or managed by it;
 
    
    using commercially reasonable efforts to maintain compliance with certain of our obligations
in our financing agreements;
 
    
    procuring legal and other professional services with respect to the lease, sale or financing
of the aircraft, any amendment or modification of any lease, the enforcement of our rights
under any lease, disputes that arise as to any aircraft or for any other purpose that BBAM
reasonably determines is necessary in connection with the performance of its services;
 
    
    periodic reporting of operational information relating to the aircraft, including providing
certain reports to the policy provider; and
 
    
    certain aviation insurance related services.
  Term and Termination
  
    
    The Servicing Agreement may be terminated prior to its scheduled termination date in the case
of certain events, including BBAM LP ceasing to own at least 50% of the voting or economic
interest in our Servicer; or
 
    
    we cease to own at least 5% of BBAM LP.
   Servicing Fees
  
    
    a base fee of $150,000 per month, which will increase by 0.01% of the maintenance-adjusted
base value (at the time of acquisition) of each additional aircraft acquired into B&B Air
Funding that is not an aircraft in our Initial Portfolio; and
 
    
    a rent fee equal to 1.0% of the aggregate amount of basic rent due for all or any part of a
month for any of aircraft belonging to our Initial Portfolio, plus 1.0% of the aggregate
amount of basic rent actually paid for all or any part of a month for any of such aircraft.
    68




---



##### Table of Contents



SERVICING AGREEMENT BETWEEN B&B AIR ACQUISITION AND BBAM
  
    
    lease marketing and remarketing, including lease negotiation;
 
    
    collecting rental payments and other amounts due under leases, lease compliance and
enforcement and accepting delivery of aircraft under lease; and
 
    
    providing legal and accounting services, including preparing and providing reports as
required by the Aircraft Acquisition Facility and providing other services to cause B&B Air
Acquisition to comply with the Aircraft Acquisition Facility.
   
    
    An event of default under the Aircraft Acquisition Facility, including BBAM LP ceasing to
hold at least 50% of the our Servicer;
 
    
    Summit ceases to own, directly or indirectly, at least 33.33% of the partnership interests in
BBAM LP, except in instances that the sale of such partnership interests that results in such
ownership level to fall below 33.33% is to a publicly listed entity or any other person with a
net worth of at least $100.0 million;
 
    
    At any time prior to April 29, 2015, Steven Zissis ceases to be the President or Chief
Executive Officer or equivalent position of BBAM LP for any reason other than his death or
disability; and
 
    
    At any time during any one year period, such initial period commencing on April 29, 2015,
fifty percent or more of either the (i) Finance and Legal BBAM team or (ii) Technical and
Marketing BBAM team, as identified in the agreement, cease to employed by BBAM LP or its
applicable subsidiaries and BBAM LP or its applicable subsidiary does not hire employees or
contract for the services of persons having reasonably comparable experience in the aviation
industry to that of such persons being replaced within 90 days of the cessation of the
employment of each such person.
  ADMINISTRATIVE SERVICES AGREEMENT
  SERVICING AGREEMENT FOR ANY FUTURE ACQUISITIONS OF AIRCRAFT BY FLY
   69




---



##### Table of Contents



ITEM 8.
    
    FINANCIAL INFORMATION
 Consolidated statements and other financial information.
  Legal Proceedings
  Dividend
  Dividends paidDividend payment date
    
    per share
    
    
    Total cash requirement2010:November 19, 2010
    
    $
    0.20
    
    
    $
    5.3 millionAugust 20, 2010
    
    $
    0.20
    
    
    $
    5.4 millionMay 20, 2010
    
    $
    0.20
    
    
    $
    5.7 millionFebruary 19, 2010
    
    $
    0.20
    
    
    $
    6.1 million2009:November 20, 2009
    
    $
    0.20
    
    
    $
    6.1 millionAugust 20, 2009
    
    $
    0.20
    
    
    $
    6.1 millionMay 20, 2009
    
    $
    0.20
    
    
    $
    6.1 millionFebruary 20, 2009
    
    $
    0.20
    
    
    $
    6.5 million2008:November 20, 2008
    
    $
    0.50
    
    
    $
    16.7 millionAugust 20, 2008
    
    $
    0.50
    
    
    $
    16.7 millionMay 20, 2008
    
    $
    0.50
    
    
    $
    16.8 millionFebruary 20, 2008
    
    $
    0.50
    
    
    $
    16.8 million
      70




---



##### Table of Contents



ITEM 9.
    
    THE OFFER AND LISTING
   High
    
    
    Low2007
    
    $
    23.90
    
    
    $
    16.562008
    
    
    18.85
    
    
    
    4.702009
    
    
    10.29
    
    
    
    2.502010
    
    
    13.99
    
    
    
    8.76
  High
    
    
    Low2009:Quarter ending March 31, 2009
    
    $
    7.79
    
    
    $
    2.50Quarter ending June 30, 2009
    
    
    8.45
    
    
    
    4.11Quarter ending September 30, 2009
    
    
    10.29
    
    
    
    6.29Quarter ending December 31, 2009
    
    
    9.90
    
    
    
    7.952010:Quarter ending March 31, 2010
    
    
    10.94
    
    
    
    8.76Quarter ending June 30, 2010
    
    
    12.88
    
    
    
    9.94Quarter ending September 30, 2010
    
    
    13.20
    
    
    
    9.58Quarter ending December 31, 2010
    
    
    13.99
    
    
    
    12.48
  High
    
    
    Low2010:September 2010
    
    $
    13.20
    
    
    $
    11.01October 2010
    
    
    13.80
    
    
    
    12.48November 2010
    
    
    13.99
    
    
    
    12.58December 2010
    
    
    13.89
    
    
    
    13.032011:January 2011
    
    
    14.58
    
    
    
    13.19February 2011
    
    
    14.47
    
    
    
    13.00
 
 ITEM 10.
    
    ADDITIONAL INFORMATION
 Share Capital
  Memorandum and Articles of Association
   71




---



##### Table of Contents



Material Contracts
  1)
    
    Servicing Agreement, dated as of October 2, 2007, among Babcock & Brown Aircraft Management
LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Funding I
Limited and AMBAC Assurance Corporation. See Item 7 Related Party Transactions  Servicing
Agreement.
 2)
    
    Administrative Services Agreement, dated as of October 2, 2007, among Deutsche Bank Trust
Company Americas, AMBAC Assurance Corporation, Babcock & Brown Air Management Co. Limited and
Babcock & Brown Air Funding I Limited. See Item 7 Related Party Transactions 
Administrative Services Agreements.
 3)
    
    Trust Indenture, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, BNP
Paribas, AMBAC Assurance Corporation and Babcock & Brown Air Funding I Limited. See Item 5
Liquidity and Capital Resources  Financing  Securitization.
 4)
    
    Security Trust Agreement, dated as of October 2, 2007, between Deutsche Bank Trust Company
Americas, and Babcock & Brown Air Funding I Limited. See Item 5 Liquidity and Capital
Resources  Financing  Securitization.
 5)
    
    Aircraft Acquisition Facility, dated as of November 7, 2007 among Babcock & Brown Air
Acquisition I Limited, the Lenders from time to time party thereto and Credit Suisse, New York
Branch. See Item 5 Liquidity and Capital Resources  Financing  Aircraft Acquisition
Facility.
 6)
    
    Servicing and Administrative Services Agreement, dated as of November 7, 2007 among Babcock &
Brown Aircraft Management LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock &
Brown Air Acquisition I Limited and each Aircraft Subsidiary that becomes a party thereto. See
Item 7 Related Party Transactions  Servicing Agreement.
 7)
    
    Amended and Restated Management Agreement between Babcock & Brown Air Limited and Babcock &
Brown Air Management Co. Limited dated April 29, 2010. See Item 7 Related Party
Transactions  Management Agreement.
 8)
    
    Amendment No. 1 to Servicing Agreement among Babcock & Brown Aircraft Management LLC, Babcock
& Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Funding I Limited and AMBAC
Assurance Corporation dated April 29, 2010. See Item 7 Related Party Transactions 
Servicing Agreement.
 9)
    
    First Amendment to Servicing Agreement among Babcock & Brown Aircraft Management LLC, Babcock
& Brown Aircraft Management (Europe) Limited and Babcock & Brown Air Acquisition I Limited
dated as of April 29, 2010. See Item 7 Related Party Transactions  Servicing Agreement.
 10)
    
    Third Amendment to the Warehouse Loan Agreement among Babcock & Brown Air Acquisition I
Limited, the Designated Lenders party thereto and Credit Suisse, New York Branch dated as of
April 29, 2010. See Item 5 Liquidity and Capital Resources  Financing  Aircraft
Acquisition Facility.
 Documents On Display
 http://www.sec.gov www.flyleasing.com
  72




---



##### Table of Contents



Exchange Controls
   Taxation
 Irish Tax Considerations
    
    
    An Irish Holder is a holder of our shares that (1) beneficially owns our shares by virtue
of holding the related ADSs evidenced by the relevant American Depositary Receipt or ADR; (2)
in the case of individual holders, is resident or ordinarily resident in Ireland under Irish
taxation laws; and (3) in the case of a holder that is a company, is resident in Ireland under
Irish taxation laws and is not also a resident of any other country under any double taxation
agreement entered into by Ireland.
 
    
    A Non-Irish Holder is a holder of our shares that is not an Irish Holder and has never been
an Irish Holder.
 
    
    A US Holder is a holder of our shares that: (1) beneficially owns our shares by virtue of
holding the related ADSs evidenced by the relevant ADR; (2) is a resident of the United States
for the purposes of the Ireland/United States Double Taxation Convention; (3) in the case of
an individual holder, is not also resident or ordinarily resident in Ireland for Irish tax
purposes; (4) in the case of a corporate holder, is not resident in Ireland for Irish tax
purposes and is not ultimately controlled by persons resident in Ireland; and (5) is not
engaged in any trade or business and does not perform independent personal services through a
permanent establishment or fixed base in Ireland.
 
    
    Relevant Territory is defined as a country with which Ireland has a double tax treaty,
(which includes the United States), or a member state of the European Union other than
Ireland.
 Irish Dividend Withholding Tax
  Irish Holders.
  73




---



##### Table of Contents



Non-Irish Holders.
 
    
    who are ultimately controlled by persons resident in a Relevant Territory and who are not
ultimately controlled by persons not resident in a Relevant Territory; or
 
    
    who are resident in a Relevant Territory and not controlled by Irish residents; or
 
    
    whose principal class of shares or the principal class of shares of whose 75% or greater
parents are substantially and regularly traded on a recognized stock exchange in a Relevant
Territory; or which are wholly owned by two or more companies, each of whose principal class
of shares are substantially and regularly traded on a recognized stock exchange in a Relevant
Territory
  Income Tax
 Irish and Non-Irish Holders
 Irish Holders. i.e
  Non-Irish Holders.
 
    
    an individual resident in a Relevant Territory; or
 
    
    a corporation that is ultimately controlled by persons resident in a Relevant Territory;
or
 
    
    a corporation whose principal class of shares (or whose 75% or greater parents principal
class of shares) are substantially and regularly traded on a recognized stock exchange in a
Relevant Territory; or
 
    
    a corporation that is wholly owned by two or more corporations each of whose principal
class of shares is substantially and regularly traded on a recognized stock exchange in a
Relevant Territory; or
 
    
    otherwise entitled to an exemption from DWT.
  Taxation of Capital Gains
 Irish Holders.
  74




---



##### Table of Contents



Non-Irish Holders.
 Irish Capital Acquisitions Tax
   Irish Stamp Duty
  Taxation of the Fly Group
 Corporation Tax
  U.S. Federal Income Tax Considerations
   75




---



##### Table of Contents



Taxation of U.S. Holders of Shares
  Tax Consequences of Passive Foreign Investment Company (PFIC) Status.
   
    
    Excess distributions by us to a U.S. Holder would be taxed in a special way. Excess
distributions are amounts received by a U.S. Holder with respect to our shares in any
taxable year that exceed 125% of the average distributions received by such U.S. Holder from
us in the shorter of either the three previous years or such U.S. Holders holding period
for shares before the present taxable year. Excess distributions must be allocated ratably
to each day that a U.S. Holder has held our shares. A U.S. Holder must include amounts
allocated to the current taxable year in its gross income as ordinary income for that year.
A U.S. Holder must pay tax on amounts allocated to each prior taxable year in which we were
a PFIC at the highest rate in effect for that year on ordinary income and the tax is subject
to an interest charge at the rate applicable to deficiencies for income tax.
 
    
    The entire amount of gain realized by a U.S. Holder upon the sale or other disposition of
 shares will also be treated as an excess distribution and will be subject to tax as
described above.
 
    
    The tax basis in shares that were acquired from a decedent who was a U.S. Holder would
not receive a step-up to fair market value as of the date of the decedents death but would
instead be equal to the decedents basis, if lower than fair market value.
   76




---



##### Table of Contents



You should consult your tax advisor about the PFIC rules, including the advisability of making a
QEF election or mark-to-market election.
 Taxation of the Disposition of Shares.
 Information Reporting and Backup Withholding for U.S. Holders
   Information Reporting and Backup Withholding for Non-U. S. Holders
   Taxation of Fly and Our Subsidiaries
   77




---



##### Table of Contents



Bermuda Tax Considerations
   78




---



##### Table of Contents



ITEM 11.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
    Sensitivity Analysis
    Foreign Currency Exchange Risk
   79




---



##### Table of Contents



ITEM 12.
    
    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 American Depositary Shares
 Fees and Expenses
   Dividends and Other Distributions
   80




---



##### Table of Contents



PART II
 
 ITEM 13.
    
    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
  
 ITEM 14.
    
    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
  
 ITEM 15.
    
    CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
  (b) Managements Annual Report on Internal Control over Financial Reporting
   (c) Report of the Independent Registered Public Accounting Firm
 
     81




---



##### Table of Contents



(d) Changes in Internal Control over Financial Reporting
  
 ITEM 16A.
    
    AUDIT COMMITTEE FINANCIAL EXPERT
  
 ITEM 16B.
    
    CODE OF ETHICS
 www.flyleasing.com).
 
 ITEM 16C.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
   For the year ended December 31,2010
    
    
    2009Amount
    
    
    %
    
    
    Amount
    
    
    %Audit fees(1)
    
    $
    997
    
    
    
    92.8
    %
    
    $
    1,036
    
    
    
    95.0
    %Audit-related fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    All other fees
    
    
    77
    
    
    
    7.2
    %
    
    
    54
    
    
    
    5.0
    %Total
    
    $
    1,074
    
    
    
    100.0
    %
    
    $
    1,090
    
    
    
    100.0
    %
 
 (1)
    
    Audit fees include annual audit fees for Fly and its subsidiaries.  82




---



##### Table of Contents



ITEM 16D.
    
    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
  
 ITEM 16E.
    
    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 Issuer Purchases of Equity Securities
     Total Number ofShares
    
    
    Approximate DollarPurchased as Part
    
    
    ValueTotal
    
    
    Average
    
    
    of a
    
    
    of Shares that mayNumber
    
    
    Price
    
    
    Publicly
    
    
    yet beof Shares
    
    
    Paid Per
    
    
    Announced
    
    
    Purchased Under thePeriod
    
    Purchased
    
    
    Share
    
    
    Repurchased Plan
    
    
    Plans or ProgramsJuly 1-31, 2010 (1)
    
    
    1,411,264
    
    
    $
    10.50
    
    
    
    1,411,264
    
    
    $
    15.2 millionAugust 1-31, 2010
    
    
    9,100
    
    
    $
    11.10
    
    
    
    9,100
    
    
    $
    15.1 millionSeptember 1-30, 2010
    
    
    219,850
    
    
    $
    11.97
    
    
    
    219,850
    
    
    $
    12.4 millionOctober 1-31, 2010
    
    
    1,100
    
    
    $
    12.50
    
    
    
    1,100
    
    
    $
    12.4 million
 
 (1)
    
    Pursuant to a Securities Repurchase Agreement, we repurchased the remaining 1,411,264 shares
held by Babcock & Brown.  
 ITEM 16F.
    
    CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
  
 ITEM 16G.
    
    CORPORATE GOVERNANCE
   83




---



##### Table of Contents



PART III
 
 ITEM 17.
    
    FINANCIAL STATEMENTS
   84




---



##### Table of Contents



ITEM 18.
    
    FINANCIAL STATEMENTS
 INDEX
 PageReport of Independent Registered Public Accounting Firm
    
    
    86Consolidated Balance Sheets of Fly Leasing Limited as of December 31, 2010 and 2009
    
    
    87Consolidated Statements of Income of Fly Leasing Limited for the years ended December 31, 2010, 2009 and 2008
    
    
    88Consolidated Statements of Shareholders Equity of Fly Leasing Limited for the years ended December 31, 2008, 2009 and 2010
    
    
    89Consolidated Statements of Cash Flows of Fly Leasing Limited for the years ended December 31, 2010, 2009 and 2008
    
    
    90Notes to Consolidated Financial Statements
    
    
    92Schedule I  Condensed Financial Information of Parent
    
    
    116
  85




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
      
  86




---



##### Table of Contents



Fly Leasing Limited
 
  AS OF DECEMBER 31, 2010 AND 2009
(Dollar amounts in thousands, except par value data)
 December 31, 2010
    
    
    December 31, 2009AssetsCash and cash equivalents
    
    $
    164,107
    
    
    $
    95,972Restricted cash and cash equivalents
    
    
    164,935
    
    
    
    139,241Rent receivables
    
    
    995
    
    
    
    3,927Investment in BBAM LP
    
    
    9,655
    
    
    
    Flight equipment held for operating leases, net
    
    
    1,613,458
    
    
    
    1,748,988Deferred tax asset, net
    
    
    3,046
    
    
    
    10,465Fair market value of derivative asset
    
    
    2,226
    
    
    
    30Other assets, net
    
    
    19,802
    
    
    
    25,509Total assets
    
    
    1,978,224
    
    
    
    2,024,132LiabilitiesAccounts payable and accrued liabilities
    
    
    5,190
    
    
    
    5,780Rentals received in advance
    
    
    9,868
    
    
    
    9,656Payable to related parties
    
    
    1,539
    
    
    
    8,106Security deposits
    
    
    31,682
    
    
    
    34,425Maintenance payment liability
    
    
    135,019
    
    
    
    118,224Notes payable, net
    
    
    596,190
    
    
    
    657,649Borrowings under aircraft acquisition facility
    
    
    561,636
    
    
    
    594,566Credit facility
    
    
    36,283
    
    
    
    32,290Aircraft note payable
    
    
    30,000
    
    
    
    Fair market value of derivative liabilities
    
    
    82,436
    
    
    
    65,726Other liabilities
    
    
    13,477
    
    
    
    13,186Total liabilities
    
    
    1,503,320
    
    
    
    1,539,608Shareholders equityCommon shares, $0.001 par value; 499,999,900 shares authorized; 26,707,501 and
30,279,948 shares issued and outstanding at December 31, 2010 and 2009,
respectively
    
    
    27
    
    
    
    30Manager shares, $0.001 par value; 100 shares authorized, issued and outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    463,559
    
    
    
    490,818Retained earnings
    
    
    77,984
    
    
    
    47,844Accumulated other comprehensive loss, net
    
    
    (66,666
    )
    
    
    (54,168
    )Total shareholders equity
    
    
    474,904
    
    
    
    484,524Total liabilities and shareholders equity
    
    $
    1,978,224
    
    
    $
    2,024,132
   87




---



##### Table of Contents



Fly Leasing Limited
 
  FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Dollar amounts in thousands, except per share data)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008RevenuesOperating lease revenue
    
    $
    219,655
    
    
    $
    213,964
    
    
    $
    218,940Finance lease income
    
    
    
    
    
    
    
    
    
    
    2,446Equity earnings from BBAM LP
    
    
    2,901
    
    
    
    
    
    
    
    Gain on sale of aircraft
    
    
    13,449
    
    
    
    
    
    
    
    11,437Gain on purchases of notes payable
    
    
    
    
    
    
    82,666
    
    
    
    Gain on sale of option to purchase notes payable
    
    
    12,501
    
    
    
    
    
    
    
    Lease termination settlement
    
    
    2,298
    
    
    
    8,307
    
    
    
    Interest and other income
    
    
    2,861
    
    
    
    2,598
    
    
    
    3,315Total revenues
    
    
    253,665
    
    
    
    307,535
    
    
    
    236,138ExpensesDepreciation
    
    
    84,032
    
    
    
    83,650
    
    
    
    74,161Interest expense
    
    
    75,748
    
    
    
    80,925
    
    
    
    81,689Selling, general and administrative
    
    
    25,413
    
    
    
    21,094
    
    
    
    20,989Debt purchase option amortization
    
    
    947
    
    
    
    6,053
    
    
    
    Maintenance and other costs
    
    
    4,651
    
    
    
    2,353
    
    
    
    4,307Total expenses
    
    
    190,791
    
    
    
    194,075
    
    
    
    181,146Net income before provision for income taxes
    
    
    62,874
    
    
    
    113,460
    
    
    
    54,992Provision for income taxes
    
    
    10,207
    
    
    
    24,367
    
    
    
    6,867Net income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    48,125Weighted average number of shares:Basic
    
    
    28,264,227
    
    
    
    30,831,637
    
    
    
    33,524,074Diluted
    
    
    28,307,971
    
    
    
    30,831,637
    
    
    
    33,524,074Earnings per share:Basic and Diluted
    
    $
    1.86
    
    
    $
    2.89
    
    
    $
    1.44Dividends declared and paid per share
    
    $
    0.80
    
    
    $
    0.80
    
    
    $
    2.00
   88




---



##### Table of Contents



Fly Leasing Limited
 
  FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(Dollar amounts in thousands)
 Notes
    
    
    
    
    
    
    AccumulatedAdditional
    
    
    Receivable
    
    
    Retained
    
    
    Other
    
    
    Total
    
    
    TotalManager Shares
    
    
    Common Shares
    
    
    Paid-in
    
    
    for Common
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    (Deficit)
    
    
    Loss, net
    
    
    Equity
    
    
    Income (Loss)Balance January 1, 2008
    
    
    100
    
    
    $
    
    
    
    
    33,603,450
    
    
    $
    34
    
    
    $
    506,339
    
    
    $
    (1,827
    )
    
    $
    2,345
    
    
    $
    (16,389
    )
    
    $
    490,502Collections of notes
receivable for common shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,827
    
    
    
    
    
    
    
    
    
    
    
    1,827Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67,054
    )
    
    
    
    
    
    
    (67,054
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140Shares repurchased
    
    
    
    
    
    
    
    
    
    
    (1,114,539
    )
    
    
    (2
    )
    
    
    (6,597
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,599
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,125
    
    
    
    
    
    
    
    48,125
    
    
    $
    48,125Net change in the fair value
of derivatives, net of
deferred tax benefit of $11,075
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77,528
    )
    
    
    (77,528
    )
    
    
    (77,528
    )Comprehensive loss, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (29,403
    )Balance December 31, 2008
    
    
    100
    
    
    $
    
    
    
    
    32,488,911
    
    
    $
    32
    
    
    $
    499,882
    
    
    $
    
    
    
    $
    (16,584
    )
    
    $
    (93,917
    )
    
    $
    389,413Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,665
    )
    
    
    
    
    
    
    (24,665
    )Shares repurchased
    
    
    
    
    
    
    
    
    
    
    (2,208,963
    )
    
    
    (2
    )
    
    
    (9,064
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,066
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,093
    
    
    
    
    
    
    
    89,093
    
    
    $
    89,093Net change in the fair value of
derivatives, net of deferred
tax liability of $5,710
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,974
    
    
    
    39,974
    
    
    
    39,974Reclassified from
other comprehensive income
into earnings, net of deferred
tax of $32
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225
    )
    
    
    (225
    )
    
    
    (225
    )Comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    128,842Balance December 31, 2009
    
    
    100
    
    
    $
    
    
    
    
    30,279,948
    
    
    $
    30
    
    
    $
    490,818
    
    
    $
    
    
    
    $
    47,844
    
    
    $
    (54,168
    )
    
    $
    484,524Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,407
    )
    
    
    
    
    
    
    (22,407
    )Dividend equivalent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (120
    )Shares repurchased
    
    
    
    
    
    
    
    
    
    
    (3,652,579
    )
    
    
    (3
    )
    
    
    (35,484
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,487
    )Shares issued in connection
with vested share grants
    
    
    
    
    
    
    
    
    
    
    80,132
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,720Capital contribution from
Babcock & Brown
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,509
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,509Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,667
    
    
    
    
    
    
    
    52,667
    
    
    $
    52,667Net change in the fair value of
derivatives, net of deferred
tax liability of $1,840
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,885
    )
    
    
    (12,885
    )
    
    
    (12,885
    )Reclassified from
other comprehensive income
into earnings, net of
deferred tax of $38
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    387
    
    
    
    387Comprehensive income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    40,169Balance December 31, 2010
    
    
    100
    
    
    $
    
    
    
    
    26,707,501
    
    
    $
    27
    
    
    $
    463,559
    
    
    $
    
    
    
    $
    77,984
    
    
    $
    (66,666
    )
    
    $
    474,904
   89




---



##### Table of Contents



Fly Leasing Limited
 
  FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

(Dollar amounts in thousands)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Cash Flows from Operating ActivitiesNet Income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    48,125Adjustments to reconcile net income to net cash flows provided by operating
activities:Equity earnings from BBAM LP
    
    
    (2,901
    )
    
    
    
    
    
    
    Gain on purchases of notes payable
    
    
    
    
    
    
    (82,666
    )
    
    
    Gain on sale of option to purchase notes payable
    
    
    (12,501
    )
    
    
    
    
    
    
    Gain on sale of aircraft
    
    
    (13,449
    )
    
    
    
    
    
    
    (11,437
    )Depreciation
    
    
    84,032
    
    
    
    83,650
    
    
    
    74,161Amortization of debt issuance and extinguishment costs
    
    
    8,788
    
    
    
    7,251
    
    
    
    7,532Amortization of lease incentives
    
    
    5,095
    
    
    
    4,315
    
    
    
    2,333Amortization of debt purchase option
    
    
    947
    
    
    
    6,053
    
    
    
    Amortization of lease discounts/premiums and other items
    
    
    366
    
    
    
    (1,349
    )
    
    
    (1,910
    )Direct finance lease income
    
    
    
    
    
    
    
    
    
    
    (2,446
    )Share-based compensation
    
    
    3,720
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    9,069
    
    
    
    24,198
    
    
    
    7,054Unrealized gain on derivative instruments
    
    
    (303
    )
    
    
    (257
    )
    
    
    (156
    )Professional fees paid by Babcock & Brown
    
    
    2,180
    
    
    
    
    
    
    
    Maintenance payment liability relieved
    
    
    (14,197
    )
    
    
    
    
    
    
    (8,463
    )Proceeds from termination of cross currency coupon swap contract
    
    
    
    
    
    
    
    
    
    
    2,065Changes in operating assets and liabilities:Rent receivables
    
    
    (60
    )
    
    
    (829
    )
    
    
    (3,316
    )Other assets
    
    
    
    
    
    
    3,499
    
    
    
    (5,600
    )Payable to related parties
    
    
    (8,178
    )
    
    
    5,378
    
    
    
    430Accounts payable and accrued liabilities
    
    
    963
    
    
    
    (2,948
    )
    
    
    (1,973
    )Rentals received in advance
    
    
    212
    
    
    
    180
    
    
    
    1,801Other liabilities
    
    
    (1,225
    )
    
    
    2,801
    
    
    
    3,012Net cash flows provided by operating activities
    
    
    115,225
    
    
    
    138,369
    
    
    
    111,212Cash Flows from Investing ActivitiesInvestment in BBAM LP
    
    
    (8,750
    )
    
    
    
    
    
    
    Distributions from BBAM LP
    
    
    916
    
    
    
    
    
    
    
    Acquisition of aircraft comprising the Initial Portfolio
    
    
    
    
    
    
    
    
    
    
    (54,068
    )Purchase of flight equipment
    
    
    (41,659
    )
    
    
    
    
    
    
    (451,579
    )Proceeds from sale of aircraft
    
    
    100,911
    
    
    
    
    
    
    
    42,145Proceeds from direct finance lease
    
    
    
    
    
    
    
    
    
    
    2,700Lessor contribution to maintenance
    
    
    (4,068
    )
    
    
    (7,107
    )
    
    
    (9,964
    )Net cash flows provided by (used in) investing activities
    
    
    47,350
    
    
    
    (7,107
    )
    
    
    (470,766
    )Cash Flows from Financing ActivitiesRestricted cash and cash equivalents
    
    
    (25,694
    )
    
    
    (25,583
    )
    
    
    (1,037
    )Security deposits received
    
    
    5,186
    
    
    
    6,552
    
    
    
    8,931Security deposits returned
    
    
    (4,089
    )
    
    
    (6,741
    )
    
    
    (5,913
    )Maintenance payment liability receipts
    
    
    44,398
    
    
    
    38,208
    
    
    
    39,137Maintenance payment liability disbursements
    
    
    (6,143
    )
    
    
    (8,510
    )
    
    
    (7,687
    )Debt issuance costs
    
    
    (221
    )
    
    
    (204
    )
    
    
    (894
    )Option to purchase notes payable
    
    
    
    
    
    
    (7,000
    )
    
    
    Proceeds from sale of option to purchase notes payable
    
    
    12,501
    
    
    
    
    
    
    
    Proceeds from aircraft note payable
    
    
    29,548
    
    
    
    
    
    
    
    Proceeds from credit facility
    
    
    5,894
    
    
    
    30,837
    
    
    
    Proceeds from aircraft acquisition facility
    
    
    
    
    
    
    
    
    
    
    464,898Notes payable purchases
    
    
    
    
    
    
    (82,976
    )
    
    
    Repayment of notes payable
    
    
    (61,905
    )
    
    
    
    
    
    
    (24,908
    )Repayment of aircraft acquisition facility
    
    
    (32,930
    )
    
    
    (2,905
    )
    
    
    
  90




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008Repayment of credit facility
    
    
    (3,716
    )
    
    
    
    
    
    
    Proceeds from termination of interest rate swap contract
    
    
    745
    
    
    
    
    
    
    
    Collections of notes receivable for common shares
    
    
    
    
    
    
    
    
    
    
    1,827Shares repurchased
    
    
    (35,487
    )
    
    
    (9,066
    )
    
    
    (6,599
    )Dividends
    
    
    (22,407
    )
    
    
    (24,665
    )
    
    
    (67,054
    )Dividend equivalents
    
    
    (120
    )
    
    
    
    
    
    
    Net cash flows used in financing activities
    
    
    (94,440
    )
    
    
    (92,053
    )
    
    
    400,701Net increase in cash
    
    
    68,135
    
    
    
    39,209
    
    
    
    41,147Cash at beginning of period
    
    
    95,972
    
    
    
    56,763
    
    
    
    15,616Cash at end of period
    
    $
    164,107
    
    
    $
    95,972
    
    
    $
    56,763Supplemental Disclosure:Cash paid during the period for:Interest
    
    $
    65,688
    
    
    $
    73,420
    
    
    $
    72,936Taxes
    
    
    1,193
    
    
    
    32
    
    
    
    659Noncash Activities:Security deposits netted against end of lease payments
    
    
    2,280
    
    
    
    
    
    
    
    Maintenance payment liabilities and claims netted against end of lease payments
    
    
    436
    
    
    
    
    
    
    
    Rent received netted against sales price from sale of flight equipment
    
    
    319
    
    
    
    
    
    
    
    Security deposits netted against sales price from sale of flight equipment
    
    
    791
    
    
    
    
    
    
    
    (946
    )Maintenance payment liabilities and claims netted against sales price from
sale of flight equipment
    
    
    5,411
    
    
    
    
    
    
    
    Security deposits netted against purchase of flight equipment
    
    
    
    
    
    
    
    
    
    
    10,693Maintenance payment liabilities netted against purchase of flight equipment
    
    
    
    
    
    
    
    
    
    
    15,689Other liabilities netted against purchase of flight equipment
    
    
    
    
    
    
    
    
    
    
    2,267Security deposit applied to rent receivables
    
    
    769
    
    
    
    1,050
    
    
    
    Maintenance payment claim applied to rent receivables
    
    
    1,416
    
    
    
    
    
    
    
    Withholding taxes netted against distributions received from BBAM LP
    
    
    1,080
    
    
    
    
    
    
    
    Debt issuance costs netted with proceeds from aircraft note payable
    
    
    452
    
    
    
    
    
    
    
    Capital contribution from Babcock & Brown
    
    
    4,509
    
    
    
    
    
    
    
    Debt issuance costs netted with proceeds from credit facility
    
    
    1,815
    
    
    
    1,453
    
    
    
    
   91




---



##### Table of Contents



Fly Leasing Limited
 
 
 1. ORGANIZATION
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 BASIS OF PREPARATION
    92




---



##### Table of Contents



USE OF ESTIMATES
  RISKS AND UNCERTAINTIES
   
    
    The success of the Company is dependent on the performance of the commercial aviation
industry. A downturn in the industry could adversely impact the lessees ability to make
payments, increase the risk of unscheduled lease termination and depress lease rates and the
value of the Companys aircraft.
 
    
    The Company will require access to the capital markets to refinance its current portfolio
of aircraft and to grow its business through the acquisition of additional aircraft.
 
    
    Beginning November 2012, the Company is required to repay its outstanding borrowings
under the Aircraft Acquisition Facility in four quarterly installments. The Company intends
to refinance the Aircraft Acquisition Facility, but may not be able to do so on terms
acceptable to the Company. In addition, the Company is subject to risks associated with
movements in interest rates, which may impact the Companys obligations under its debt
facilities and its derivative contracts. The Company also bears the credit risks of its
counterparties in its derivative contracts.
 
    
    The Company relies and is depended upon an external servicer to manage its business and
service its aircraft portfolio.
 CASH AND CASH EQUIVALENTS
  RESTRICTED CASH AND CASH EQUIVALENTS
   RENT RECEIVABLES
   93




---



##### Table of Contents



INVESTMENT IN BBAM LP
   FLIGHT EQUIPMENT HELD FOR SALE
   FLIGHT EQUIPMENT HELD FOR OPERATING LEASES
  
    
    Flight equipment where original manufacturers prices are not relevant due to plane
modifications and conversions.
 
    
    Flight equipment which is out of production and may have a shorter useful life or lower
residual value due to obsolescence.
     94




---



##### Table of Contents



IMPAIRMENT OF FLIGHT EQUIPMENT
   DERIVATIVE FINANCIAL INSTRUMENTS
      95




---



##### Table of Contents



OTHER ASSETS
  SECURITY DEPOSITS
  MAINTENANCE PAYMENT LIABILITY
      REVENUE RECOGNITION
  SHARE-BASED COMPENSATION
   96




---



##### Table of Contents



TAXES
   NEW ACCOUNTING PRONOUNCEMENTS
   3. FLIGHT EQUIPMENT HELD FOR OPERATING LEASES
    December 31, 2010
    
    
    December 31, 2009(Dollars in thousands)Cost
    
    $
    1,847,899
    
    
    $
    1,912,825Accumulated depreciation
    
    
    (234,441
    )
    
    
    (163,837
    )Net Flight Equipment Held for Operating Leases
    
    $
    1,613,458
    
    
    $
    1,748,988
   97




---



##### Table of Contents



December 31, 2010
    
    
    December 31, 2009(Dollars in thousands)Europe, Middle East and Africa:Germany
    
    $
    94,247
    
    
    
    6
    %
    
    $
    130,674
    
    
    
    8
    %The Netherlands
    
    
    121,157
    
    
    
    8
    %
    
    
    126,636
    
    
    
    7
    %Russia
    
    
    48,992
    
    
    
    3
    %
    
    
    82,567
    
    
    
    5
    %Spain
    
    
    74,943
    
    
    
    5
    %
    
    
    77,791
    
    
    
    4
    %United Kingdom
    
    
    104,661
    
    
    
    7
    %
    
    
    72,569
    
    
    
    4
    %Other
    
    
    358,364
    
    
    
    21
    %
    
    
    334,338
    
    
    
    19
    %Europe, Middle East and Africa  Total
    
    
    802,364
    
    
    
    50
    %
    
    
    824,575
    
    
    
    47
    %Asia Pacific:India
    
    
    210,687
    
    
    
    13
    %
    
    
    254,141
    
    
    
    15
    %China
    
    
    66,060
    
    
    
    4
    %
    
    
    142,925
    
    
    
    8
    %Other
    
    
    63,460
    
    
    
    4
    %
    
    
    36,302
    
    
    
    2
    %Asia Pacific  Total
    
    
    340,207
    
    
    
    21
    %
    
    
    433,368
    
    
    
    25
    %North America:United States
    
    
    277,555
    
    
    
    17
    %
    
    
    302,756
    
    
    
    17
    %Other
    
    
    37,626
    
    
    
    3
    %
    
    
    39,115
    
    
    
    3
    %North America  Total
    
    
    315,181
    
    
    
    20
    %
    
    
    341,871
    
    
    
    20
    %Mexico, South and Central America:Mexico
    
    
    129,537
    
    
    
    8
    %
    
    
    149,174
    
    
    
    8
    %Mexico, South and Central America  Total
    
    
    129,537
    
    
    
    8
    %
    
    
    149,174
    
    
    
    8
    %Off-Lease  Total
    
    
    26,169
    
    
    
    1
    %
    
    
    
    
    
    
    Total Flight Equipment
    
    $
    1,613,458
    
    
    
    100
    %
    
    $
    1,748,988
    
    
    
    100
    %
   98




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Dollars in thousands)Europe, Middle East and Africa:Germany
    
    $
    15,284
    
    
    
    7
    %
    
    $
    17,174
    
    
    
    8
    %
    
    $
    16,353
    
    
    
    7
    %The Netherlands
    
    
    16,367
    
    
    
    8
    %
    
    
    16,331
    
    
    
    8
    %
    
    
    13,990
    
    
    
    6
    %Russia
    
    
    12,719
    
    
    
    6
    %
    
    
    10,034
    
    
    
    5
    %
    
    
    3,748
    
    
    
    2
    %Spain
    
    
    8,213
    
    
    
    4
    %
    
    
    8,213
    
    
    
    4
    %
    
    
    7,630
    
    
    
    4
    %United Kingdom
    
    
    9,255
    
    
    
    4
    %
    
    
    9,624
    
    
    
    5
    %
    
    
    17,388
    
    
    
    8
    %Switzerland
    
    
    6,199
    
    
    
    3
    %
    
    
    8,423
    
    
    
    4
    %
    
    
    13,296
    
    
    
    6
    %Other
    
    
    41,232
    
    
    
    18
    %
    
    
    34,405
    
    
    
    15
    %
    
    
    30,789
    
    
    
    14
    %Europe, Middle East and Africa 
Total
    
    
    109,269
    
    
    
    50
    %
    
    
    104,204
    
    
    
    49
    %
    
    
    103,194
    
    
    
    47
    %Asia Pacific:India
    
    
    24,430
    
    
    
    11
    %
    
    
    27,451
    
    
    
    13
    %
    
    
    26,604
    
    
    
    12
    %China
    
    
    15,636
    
    
    
    7
    %
    
    
    16,391
    
    
    
    8
    %
    
    
    17,491
    
    
    
    8
    %Other
    
    
    4,882
    
    
    
    2
    %
    
    
    3,017
    
    
    
    1
    %
    
    
    3,553
    
    
    
    2
    %Asia Pacific  Total
    
    
    44,948
    
    
    
    20
    %
    
    
    46,859
    
    
    
    22
    %
    
    
    47,648
    
    
    
    22
    %North America:United States
    
    
    41,725
    
    
    
    19
    %
    
    
    39,600
    
    
    
    19
    %
    
    
    39,180
    
    
    
    18
    %Other
    
    
    4,932
    
    
    
    2
    %
    
    
    5,009
    
    
    
    2
    %
    
    
    5,007
    
    
    
    2
    %North America  Total
    
    
    46,657
    
    
    
    21
    %
    
    
    44,609
    
    
    
    21
    %
    
    
    44,187
    
    
    
    20
    %Mexico, South and Central America:Mexico
    
    
    18,781
    
    
    
    9
    %
    
    
    18,292
    
    
    
    8
    %
    
    
    19,802
    
    
    
    9
    %Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,109
    
    
    
    2
    %Mexico, South and Central America
 Total
    
    
    18,781
    
    
    
    9
    %
    
    
    18,292
    
    
    
    8
    %
    
    
    23,911
    
    
    
    11
    %Total Operating Lease Revenue
    
    $
    219,655
    
    
    
    100
    %
    
    $
    213,964
    
    
    
    100
    %
    
    $
    218,940
    
    
    
    100
    %
        99




---



##### Table of Contents



Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    190,4122012
    
    
    182,9362013
    
    
    153,3692014
    
    
    134,7302015
    
    
    107,973Thereafter
    
    
    89,334Future minimum rental payments under operating leases
    
    $
    858,754
  Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    5,6102012
    
    
    5,6102013
    
    
    3,6562014
    
    
    2,0752015
    
    
    1,901Thereafter
    
    
    1,466Future amortization of lease incentives
    
    $
    20,318
  4. INVESTMENT IN BBAM LP
   5. OTHER ASSETS
  December 31, 2010
    
    
    December 31, 2009(Dollars in thousands)Loan issuance costs, net
    
    $
    14,069
    
    
    $
    17,983Lease premiums
    
    
    2,918
    
    
    
    3,519Other assets
    
    
    2,815
    
    
    
    4,007Total other assets
    
    $
    19,802
    
    
    $
    25,509
  100




---



##### Table of Contents



Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    6012012
    
    
    6012013
    
    
    6012014
    
    
    6012015
    
    
    514Thereafter
    
    
    Total future amortization of lease premiums
    
    $
    2,918
 6. NOTES PAYABLE
       101




---



##### Table of Contents



Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    8,4562012
    
    
    30,9262013
    
    
    63,3522014
    
    
    67,4942015
    
    
    71,420Thereafter
    
    
    355,123Future Minimum Principal Payments Due
    
    $
    596,771
  Redemption Date
    
    PriceBefore April 14, 2011
    
    
    100.17
    %On or after April 14, 2011, but before October 14, 2011
    
    
    100.09
    %On or after October 14, 2011
    
    
    100.00
    %
   
    
    Bankruptcy or insolvency of BBAM LP;
 
    
    BBAM LP ceases to own, directly or indirectly, at least 50% of the Servicer;
 
    
    Summit ceases to own, directly or indirectly, at least 33.33% of the partnership
interests in BBAM LP; provided that a sale that results in such ownership being at a level
below 33.33% shall not constitute a servicer termination event if the sale is to a publicly
listed entity or other person with a net worth of at least $100 million;
 
    
    Steven Zissis ceases to be the President or Chief Executive Officer or equivalent
position of BBAM LP at any time prior to April 29, 2015 for any reason other than death or
disability; and
 
    
    50% or more of the Servicers key finance and legal team or technical and marketing team
cease to be employed by BBAM LP and are not replaced with employees with reasonably
comparable experience within 90 days.
  102




---



##### Table of Contents



7. AIRCRAFT ACQUISITION FACILITY
 Balance as of
    
    
    Balance as ofAircraft Acquisition Facility:
    
    December 31, 2010
    
    
    December 31, 2009(Dollars in thousands)Principal  Tranche A
    
    $
    377,636
    
    
    $
    410,566Principal  Tranche B
    
    
    184,000
    
    
    
    184,000Borrowings under aircraft acquisition facility
    
    
    561,636
    
    
    
    594,566Equity Tranche
    
    
    96,000
    
    
    
    96,000Total Aircraft Acquisition Facility
    
    $
    657,636
    
    
    $
    690,566
     Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    31,9112012
    
    
    154,2442013
    
    
    375,4812014 and thereafter
    
    
    Future Minimum Principal Payments Due
    
    $
    561,636
   103




---



##### Table of Contents



8. CREDIT FACILITY
     9. AIRCRAFT NOTE PAYABLE
    104




---



##### Table of Contents



Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    1,6572012
    
    
    1,7832013
    
    
    1,9002014
    
    
    2,0252015
    
    
    2,157Thereafter
    
    
    20,478Future Minimum Principal Payments Due
    
    $
    30,000
 10. DERIVATIVES
       105




---



##### Table of Contents



GainReclassifiedAdjusted
    
    
    
    
    
    
    Loss
    
    
    fromFair
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    Recognized in
    
    
    AccumulatedSwap
    
    
    Market
    
    
    
    
    
    
    Market
    
    
    
    
    
    
    Accumulated
    
    
    OtherHedge
    
    
    Contract
    
    
    Value of
    
    
    Credit
    
    
    Value of
    
    
    Deferred
    
    
    Other
    
    
    ComprehensiveInterest
    
    
    Notional
    
    
    Derivative
    
    
    Risk
    
    
    Derivative
    
    
    Tax
    
    
    Comprehensive
    
    
    Loss intoMaturity Date
    
    Rate
    
    
    Amount
    
    
    Liability
    
    
    Adjustment
    
    
    Liability
    
    
    Benefit
    
    
    Loss
    
    
    IncomeInterest rate swap contracts:10/14/2015
    
    
    4.93
    %
    
    $
    234,231
    
    
    $
    (23,155
    )
    
    $
    1,269
    
    
    $
    (21,886
    )
    
    $
    2,736
    
    
    $
    (19,150
    )
    
    $
    10/14/2015
    
    
    4.93
    %
    
    
    234,231
    
    
    
    (23,155
    )
    
    
    1,269
    
    
    
    (21,886
    )
    
    
    2,736
    
    
    
    (19,150
    )
    
    
    11/15/2015
    
    
    4.36
    %
    
    
    26,368
    
    
    
    (2,622
    )
    
    
    155
    
    
    
    (2,467
    )
    
    
    308
    
    
    
    (2,159
    )
    
    
    12/15/2015
    
    
    4.37
    %
    
    
    26,374
    
    
    
    (2,633
    )
    
    
    156
    
    
    
    (2,477
    )
    
    
    310
    
    
    
    (2,167
    )
    
    
    9/15/2015
    
    
    4.36
    %
    
    
    26,892
    
    
    
    (2,678
    )
    
    
    158
    
    
    
    (2,520
    )
    
    
    315
    
    
    
    (2,205
    )
    
    
    11/15/2015
    
    
    4.37
    %
    
    
    26,643
    
    
    
    (2,672
    )
    
    
    159
    
    
    
    (2,513
    )
    
    
    314
    
    
    
    (2,199
    )
    
    
    1/14/2015
    
    
    3.40
    %
    
    
    63,019
    
    
    
    (3,784
    )
    
    
    167
    
    
    
    (3,617
    )
    
    
    452
    
    
    
    (3,165
    )
    
    
    3/15/2018
    
    
    3.31
    %
    
    
    179,183
    
    
    
    (8,564
    )
    
    
    301
    
    
    
    (8,263
    )
    
    
    1,033
    
    
    
    (7,230
    )
    
    
    8/15/2015
    
    
    3.85
    %
    
    
    27,396
    
    
    
    (1,818
    )
    
    
    88
    
    
    
    (1,730
    )
    
    
    216
    
    
    
    (1,514
    )
    
    
    5/15/2016
    
    
    4.49
    %
    
    
    44,037
    
    
    
    (4,207
    )
    
    
    241
    
    
    
    (3,966
    )
    
    
    496
    
    
    
    (3,470
    )
    
    
    3/15/2015
    
    
    4.22
    %
    
    
    26,413
    
    
    
    (2,464
    )
    
    
    139
    
    
    
    (2,325
    )
    
    
    291
    
    
    
    (2,034
    )
    
    
    4/15/2015
    
    
    4.07
    %
    
    
    28,395
    
    
    
    (2,503
    )
    
    
    141
    
    
    
    (2,362
    )
    
    
    295
    
    
    
    (2,067
    )
    
    
    10/15/2016
    
    
    4.25
    %
    
    
    26,413
    
    
    
    (2,514
    )
    
    
    150
    
    
    
    (2,364
    )
    
    
    295
    
    
    
    (2,069
    )
    
    
    10/15/2012
    
    
    2.30
    %
    
    
    109,175
    
    
    
    (3,266
    )
    
    
    107
    
    
    
    (3,159
    )
    
    
    395
    
    
    
    (2,764
    )
    
    
    02/01/2019
    
    
    2.06
    %
    
    
    30,000
    
    
    
    1,110
    
    
    
    (85
    )
    
    
    1,025
    
    
    
    (128
    )
    
    
    897
    
    
    
    Accrued Interest
    
    
    
    
    
    
    
    
    
    
    (1,926
    )
    
    
    
    
    
    
    (1,926
    )
    
    
    
    
    
    
    
    
    
    
    Terminated Contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92
    )
    
    
    645
    
    
    
    7Total  derivative liabilities
    
    
    
    
    
    $
    1,108,770
    
    
    $
    (86,851
    )
    
    $
    4,415
    
    
    $
    (82,436
    )
    
    $
    9,972
    
    
    $
    (69,801
    )
    
    $
    7
  GainReclassifiedAdjusted
    
    
    
    
    
    
    Gain
    
    
    fromFair
    
    
    
    
    
    
    Fair
    
    
    
    
    
    
    Recognized in
    
    
    AccumulatedEURO to
    
    
    Swap
    
    
    Market
    
    
    
    
    
    
    Market
    
    
    
    
    
    
    Accumulated
    
    
    OtherUS Dollar
    
    
    Contract
    
    
    Value of
    
    
    Credit
    
    
    Value of
    
    
    Deferred
    
    
    Other
    
    
    ComprehensiveConversion
    
    
    Notional
    
    
    Derivative
    
    
    Risk
    
    
    Derivative
    
    
    Tax
    
    
    Comprehensive
    
    
    Loss intoMaturity Date
    
    Rate
    
    
    Amount
    
    
    Instrument
    
    
    Adjustment
    
    
    Instrument
    
    
    Liability
    
    
    Loss
    
    
    IncomeCross currency
coupon swap
contract:1/15/2016
    
    1EURO to US1.4452
    
    
    
    1,650
    
    
    
    2,331
    
    
    
    (106
    )
    
    
    2,225
    
    
    
    (278
    )
    
    
    1,947
    
    
    
    Terminated Contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (170
    )
    
    
    1,188
    
    
    
    258Total  derivative
asset
    
    
    
    
    
    $
    1,650
    
    
    $
    2,331
    
    
    $
    (106
    )
    
    $
    2,225
    
    
    $
    (448
    )
    
    $
    3,135
    
    
    $
    258
  Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    1212012
    
    
    1142013
    
    
    1062014
    
    
    982015
    
    
    90Thereafter
    
    
    208Total future amortization of terminated interest rate swap contract
    
    $
    737
   106




---



##### Table of Contents



Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    2962012
    
    
    2792013
    
    
    2642014
    
    
    2632015
    
    
    256Thereafter
    
    
    Total future amortization of terminated cross currency coupon swap contract
    
    $
    1,358
 11. SHARE-BASED COMPENSATION
 Description of Plan
    Valuation Assumptions
   Year endedDecember 31, 2010Risk-free interest rate
    
    2.73%  3.04%Volatility
    
    65%  70%Expected life
    
    6  9 years
   107




---



##### Table of Contents



Grant Activity
  WeightedWeighted
    
    
    averageaverage
    
    
    remainingNumber of
    
    
    exercise
    
    
    contractualshares
    
    
    price
    
    
    life (in years)Outstanding at January 1, 2010
    
    
    
    
    
    
    
    
    
    
    SARs granted
    
    
    359,605
    
    
    $
    12.42
    
    
    
    9.3SARs exercised
    
    
    
    
    
    
    
    
    
    
    SARs canceled or forfeited
    
    
    
    
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    359,605
    
    
    $
    12.42
    
    
    
    9.3Exercisable at December 31, 2010
    
    
    119,869
    
    
    $
    12.42
    
    
    
    9.3
   Weighted averagegrant date fairNumber of shares
    
    
    valueOutstanding and unvested at January 1, 2010
    
    
    
    
    
    
    RSUs granted
    
    
    240,394
    
    
    $
    12.42RSUs vested
    
    
    (80,132
    )
    
    
    12.42RSUs canceled or forfeited
    
    
    
    
    
    
    Outstanding and unvested at December 31, 2010
    
    
    160,262
    
    
    $
    12.42
   12. INCOME TAXES
    108




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Dollars in thousands)Deferred tax expense:Ireland
    
    $
    9,138
    
    
    $
    24,212
    
    
    $
    7,054France
    
    
    5
    
    
    
    (14
    )
    
    
    United States
    
    
    (74
    )
    
    
    
    
    
    
    Deferred tax expense  total
    
    
    9,069
    
    
    
    24,198
    
    
    
    7,054Current tax expense:Ireland:Current
    
    
    149
    
    
    
    156
    
    
    
    286Adjustment for prior periods tax provision
    
    
    
    
    
    
    
    
    
    
    (868
    )France
    
    
    67
    
    
    
    13
    
    
    
    52United States
    
    
    922
    
    
    
    
    
    
    
    343Current tax expense  total
    
    
    1,138
    
    
    
    169
    
    
    
    (187
    )Total Income Tax Expense
    
    $
    10,207
    
    
    $
    24,367
    
    
    $
    6,867
  December 31, 2010
    
    
    December 31, 2009(Dollars in thousands)Deferred tax asset:Net operating loss carry forwards
    
    $
    57,446
    
    
    $
    41,604Net unrealized losses on derivative instruments
    
    
    9,524
    
    
    
    7,738Other
    
    
    74
    
    
    
    Total deferred tax asset
    
    
    67,044
    
    
    
    49,342Deferred tax liability:Excess of tax depreciation over book depreciation
    
    
    (41,520
    )
    
    
    (19,162
    )Net earnings of non-European Union member subsidiary
    
    
    (22,478
    )
    
    
    (19,715
    )Total deferred tax liability
    
    
    (63,998
    )
    
    
    (38,877
    )Deferred tax asset, net
    
    $
    3,046
    
    
    $
    10,465
   109




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Percentage)Irish statutory corporate tax rate on trading income
    
    
    12.5
    %
    
    
    12.5
    %
    
    
    12.5
    %Incremental effect of higher tax rate on non-trading income
    
    
    
    
    
    
    
    
    
    
    0.5
    %Gain on purchases and sale of option to purchase Notes
    
    
    2.5
    %
    
    
    9.1
    %
    
    
    Amortization of debt purchase option
    
    
    (0.2
    %)
    
    
    0.7
    %
    
    
    Net interest expense of non-European Union member subsidiary
    
    
    (0.3
    %)
    
    
    
    
    
    
    Share-based compensation
    
    
    0.7
    %
    
    
    
    
    
    
    Impact of foreign operations  tax rate differentials
    
    
    0.9
    %
    
    
    
    
    
    
    Adjustment for prior periods tax provision
    
    
    
    
    
    
    
    
    
    
    (1.6
    %)Other
    
    
    0.1
    %
    
    
    (0.8
    %)
    
    
    1.1
    %Income tax expense
    
    
    16.2
    %
    
    
    21.5
    %
    
    
    12.5
    %
  13. OTHER LIABILITIES
  December 31, 2010
    
    
    December 31, 2009(Dollars in thousands)Unamortized lease discounts
    
    $
    1,445
    
    
    $
    2,313Lease incentive obligation
    
    
    7,841
    
    
    
    6,523Other
    
    
    4,191
    
    
    
    4,350Total Other Liabilities
    
    $
    13,477
    
    
    $
    13,186
   Year ending December 31,
    
    (Dollars in thousands)2011
    
    $
    3382012
    
    
    3382013
    
    
    3372014
    
    
    3372015
    
    
    95Thereafter
    
    
    Total future amortization of lease discounts
    
    $
    1,445
 14. SHAREHOLDERS EQUITY
    110




---



##### Table of Contents



15. ACCUMULATED COMPREHENSIVE LOSS
  Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Dollars in thousands)Net income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    48,125Net change in unrealized gain
(loss) on fair value of
derivative instruments, net of
tax benefit
    
    
    (12,498
    )
    
    
    39,749
    
    
    
    (77,528
    )Total comprehensive income (loss)
    
    $
    40,169
    
    
    $
    128,842
    
    
    $
    (29,403
    )
  16. EARNINGS PER SHARE
    111




---



##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year endedDecember 31,
    
    
    December 31,
    
    
    December 31,2010
    
    
    2009
    
    
    2008(Dollars in thousands, except share and per share data)NumeratorNet income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    48,125Less: Dividend equivalents paid to vested RSUs and SARs
    
    
    (120
    )
    
    
    
    
    
    
    Net income available to common shareholders
    
    $
    52,547
    
    
    $
    89,093
    
    
    $
    48,125DenominatorWeighted average shares outstanding-Basic
    
    
    28,264,227
    
    
    
    30,831,637
    
    
    
    33,524,074Dilutive common equivalent shares:RSUs
    
    
    40,165
    
    
    
    
    
    
    
    SARs
    
    
    3,579
    
    
    
    
    
    
    
    Weighted average shares outstanding-Diluted
    
    
    28,307,971
    
    
    
    30,831,637
    
    
    
    33,524,074Earnings per share:Basic and Diluted
    
    $
    1.86
    
    
    $
    2.89
    
    
    $
    1.44
 17. COMMITMENTS AND CONTINGENCIES
   18. RELATED PARTY TRANSACTIONS
       112




---



##### Table of Contents



2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    Thereafter
    
    
    Total(Dollars in thousands)Fixed base fee payments (1)
    
    $
    1,893
    
    
    $
    1,893
    
    
    $
    1,893
    
    
    $
    1,893
    
    
    $
    1,894
    
    
    $
    5,682
    
    
    $
    15,148Fixed administrative agency fee payments due
by B&B Air Funding (1)
    
    
    789
    
    
    
    789
    
    
    
    789
    
    
    
    789
    
    
    
    789
    
    
    
    2,367
    
    
    
    6,312Fixed administrative agency fee payments due
by B&B Air Acquisition
    
    
    240
    
    
    
    240
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    640Fixed payments for Management Expenses (1) (2)
    
    
    6,312
    
    
    
    6,312
    
    
    
    6,312
    
    
    
    6,312
    
    
    
    21,039
    
    
    
    
    
    
    
    46,287Fixed administrative agency fee payments due
by Fly Aircraft Holdings One Limited
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    12
    
    
    
    35
    
    
    
    95Total
    
    $
    9,246
    
    
    $
    9,246
    
    
    $
    9,166
    
    
    $
    9,006
    
    
    $
    23,734
    
    
    $
    8,084
    
    
    $
    68,482
 
 (1)
    
    Amounts in the table assume CPI rates in effect for 2011 remain constant in future periods.(2)
    
    The initial term of the Management Agreement is for five years, with automatic five year
renewal periods. The agreement provides for an early termination fee, which declines upon each
renewal, during the first three five-year terms. The table assumes termination of the
agreement after the initial five year term and payment of the applicable termination fee. 19. FAIR VALUE OF FINANCIAL INSTRUMENTS
     113




---



##### Table of Contents



December 31, 2010
    
    
    December 31, 2009Carrying Amount
    
    
    Fair Value
    
    
    Carrying Amount
    
    
    Fair Value(Dollars in thousands)Notes payable
    
    $
    596,190
    
    
    $
    506,761
    
    
    $
    657,649
    
    
    $
    480,084Aircraft acquisition facility
    
    
    561,636
    
    
    
    531,860
    
    
    
    594,566
    
    
    
    536,505Credit facility
    
    
    36,283
    
    
    
    36,283
    
    
    
    32,290
    
    
    
    32,290Aircraft note payable
    
    
    30,000
    
    
    
    30,000
    
    
    
    
    
    
    
    Derivative asset
    
    
    2,226
    
    
    
    2,226
    
    
    
    30
    
    
    
    30Derivative liabilities
    
    
    82,436
    
    
    
    82,436
    
    
    
    65,726
    
    
    
    65,726
       Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total(Dollars in thousands)December 31, 2010:Derivative asset
    
    
    
    
    
    
    2,226
    
    
    
    
    
    
    
    2,226Derivative liabilities
    
    
    
    
    
    
    82,436
    
    
    
    
    
    
    
    82,436December 31, 2009:Derivative asset
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    30Derivative liabilities
    
    
    
    
    
    
    65,726
    
    
    
    
    
    
    
    65,726
  114




---



##### Table of Contents



20. UNAUDITED QUARTERLY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
  March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands, except per share data)
    
    2010
    
    
    2010
    
    
    2010
    
    
    2010Total revenues
    
    $
    67,708
    
    
    $
    63,414
    
    
    $
    62,610
    
    
    $
    59,933Net income
    
    $
    16,667
    
    
    $
    13,160
    
    
    $
    12,202
    
    
    $
    10,638Earnings per share  Basic and Diluted
    
    $
    0.55
    
    
    $
    0.46
    
    
    $
    0.45
    
    
    $
    0.39
  March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,(Dollars in thousands, except per share data)
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Total revenues
    
    $
    109,080
    
    
    $
    64,519
    
    
    $
    67,795
    
    
    $
    66,141Net income
    
    $
    46,951
    
    
    $
    13,994
    
    
    $
    14,449
    
    
    $
    13,699Earnings per share  Basic and Diluted
    
    $
    1.45
    
    
    $
    0.46
    
    
    $
    0.48
    
    
    $
    0.45
 21. SUBSEQUENT EVENTS
       115




---



##### Table of Contents



Report of Independent Registered
Public Accounting Firm The Board of Directors 
and
Shareholders of Fly Leasing Limited We have audited the consolidated
balance sheets of Fly Leasing Limited as of December 31, 2010 and 2009,
and the related consolidated statements of income, shareholders’ equity
and cash flows for each of the three years in the period ended
December 31, 2010, and have issued our report thereon dated March 11,
2010 (included elsewhere in the Form 20-F). Our audits also included the
financial statement schedule listed in Item 18 of this Form 20-F. This
schedule is the responsibility of the Company’s management. Our
responsibility is to express an opinion based on our audits. In our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein. /s/
Ernst & Young LLP San Francisco, California

March 11, 2010




116



---



##### Table of Contents



Schedule I  Condensed financial information of parent
 Fly Leasing Limited
 AS OF DECEMBER 31, 2010 AND 2009
(Dollar amounts in thousands)
 December 31,
    
    
    December 31,2010
    
    
    2009AssetsCash and cash equivalents
    
    $
    154,393
    
    
    $
    95,797Notes receivable from subsidiaries
    
    
    90,219
    
    
    
    90,219Investments in subsidiaries
    
    
    303,503
    
    
    
    356,453Other assets, net
    
    
    383
    
    
    
    427Total assets
    
    
    548,498
    
    
    
    542,896LiabilitiesPayable to related parties
    
    
    27
    
    
    
    5,778Payable to subsidiaries
    
    
    51,466
    
    
    
    32,643Deferred tax liability, net
    
    
    21,181
    
    
    
    18,982Accrued and other liabilities
    
    
    920
    
    
    
    969Total liabilities
    
    
    73,594
    
    
    
    58,372Shareholders equity
    
    
    474,904
    
    
    
    484,524Total liabilities and shareholders equity
    
    $
    548,498
    
    
    $
    542,896
  117




---



##### Table of Contents



Schedule I  Condensed financial information of parent
 Fly Leasing Limited
 FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Dollar amounts in thousands, except per share data)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008RevenuesEquity in earnings of subsidiaries
    
    $
    62,920
    
    
    $
    113,051
    
    
    $
    51,622Intercompany management fee income
    
    
    5,100
    
    
    
    5,100
    
    
    
    5,100Interest and other income
    
    
    61
    
    
    
    98
    
    
    
    548Total revenues
    
    
    68,081
    
    
    
    118,249
    
    
    
    57,270ExpenseSelling, general and administrative
    
    
    13,246
    
    
    
    10,038
    
    
    
    9,567Net income from continuing operations
before provision for income taxes
    
    
    54,835
    
    
    
    108,211
    
    
    
    47,703Income tax provision (benefit)
    
    
    2,168
    
    
    
    19,118
    
    
    
    (422
    )Net income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    48,125Weighted average number of shares:Basic
    
    
    28,264,227
    
    
    
    30,831,637
    
    
    
    33,524,074Diluted
    
    
    28,307,971
    
    
    
    30,831,637
    
    
    
    33,524,074Earnings per share:Basic and Diluted
    
    $
    1.86
    
    
    $
    2.89
    
    
    $
    1.44
  118




---



##### Table of Contents



Schedule I  Condensed financial information of parent
 Fly Leasing Limited
 FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(Dollar amounts in thousands)
 Year ended
    
    
    Year ended
    
    
    Year endedDecember 31, 2010
    
    
    December 31, 2009
    
    
    December 31, 2008Cash Flows from Operating ActivitiesNet Income
    
    $
    52,667
    
    
    $
    89,093
    
    
    $
    48,125Adjustments to reconcile net income to net cash
flow provided by operating activities:Equity in earnings of subsidiaries
    
    
    (62,920
    )
    
    
    (113,051
    )
    
    
    (51,622
    )Income tax benefit
    
    
    2,168
    
    
    
    19,118
    
    
    
    (422
    )Share-based compensation
    
    
    3,720
    
    
    
    
    
    
    
    Professional fees paid by Babcock & Brown
    
    
    260
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Payable to subsidiaries
    
    
    23,103
    
    
    
    32,739
    
    
    
    34,203Other assets
    
    
    44
    
    
    
    1,578
    
    
    
    (1,217
    )Payable to related parties
    
    
    (5,751
    )
    
    
    5,337
    
    
    
    345Accrued and other liabilities
    
    
    (53
    )
    
    
    (363
    )
    
    
    426Net cash flows provided by operating activities
    
    
    13,238
    
    
    
    34,451
    
    
    
    29,838Cash Flows from Investing ActivitiesCapital contributions to subsidiaries
    
    
    (20,212
    )
    
    
    (176
    )
    
    
    (20,114
    )Distributions received from subsidiaries
    
    
    123,584
    
    
    
    128,788
    
    
    
    83,397Notes receivable from subsidiaries
    
    
    
    
    
    
    (90,219
    )
    
    
    Net cash flows provided by investing activities
    
    
    103,372
    
    
    
    38,393
    
    
    
    63,283Cash Flows from Financing ActivitiesMovement in restricted cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    19,816Dividends
    
    
    (22,407
    )
    
    
    (24,665
    )
    
    
    (67,054
    )Dividend equivalents
    
    
    (120
    )
    
    
    
    
    
    
    Collections made on subscription notes receivable
    
    
    
    
    
    
    
    
    
    
    1,827Shares repurchased
    
    
    (35,487
    )
    
    
    (9,066
    )
    
    
    (6,599
    )Net cash flows used in financing activities
    
    
    (58,014
    )
    
    
    (33,731
    )
    
    
    (52,010
    )Net increase in cash
    
    
    58,596
    
    
    
    39,113
    
    
    
    41,111Cash at beginning of period
    
    
    95,797
    
    
    
    56,684
    
    
    
    15,573Cash at end of period
    
    $
    154,393
    
    
    $
    95,797
    
    
    $
    56,684Supplemental Disclosure of Non Cash Activities:Taxes paid
    
    $
    
    
    
    $
    
    
    
    $
    
  119




---



##### Table of Contents



ITEM 19.
    
    EXHIBITS
  ExhibitNumber

    
    Description of Exhibit1.1
    
    
    Memorandum of Association*1.2
    
    
    Amended and Restated Bye-Laws of Fly Leasing Ltd.***2.1
    
    
    Deposit Agreement between Deutsche Bank Trust Company Americas and Babcock & Brown Air Limited.*4.1
    
    
    Amended and Restated Management Agreement, dated as of April 29, 2010, between Babcock & Brown Air Limited and Babcock
and Brown Air Management Co. Limited****4.2
    
    
    Servicing Agreement, dated as of October 2, 2007, among Babcock & Brown Aircraft Management LLC, Babcock & Brown
Aircraft Management (Europe) Limited, Babcock & Brown Air Funding I Limited and AMBAC Assurance Corporation.*4.3
    
    
    Administrative Services Agreement, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, AMBAC
Assurance Corporation, Babcock & Brown Air Management Co. Limited and Babcock & Brown Air Funding I Limited.*4.4
    
    
    Registration Rights Agreement, dated as of October 2, 2007, among private investors and Babcock & Brown Air Limited.*4.5
    
    
    Trust Indenture, dated as of October 2, 2007, among Deutsche Bank Trust Company Americas, BNP Paribas, AMBAC Assurance
Corporation and Babcock & Brown Air Funding I Limited.*4.6
    
    
    Security Trust Agreement, dated as of October 2, 2007, between Deutsche Bank Trust Company Americas, and Babcock &
Brown Air Funding I Limited.*4.7
    
    
    Cash Management Agreement between Deutsche Bank Trust Company Americas and Babcock & Brown Air Funding I Limited.*4.8
    
    
    Form of Director Service Agreement between Babcock & Brown Air Limited and each director thereof.*4.9
    
    
    Aircraft Acquisition Facility, dated as of November 7, 2007, among Babcock & Brown Air Acquisition I Limited, the
Lenders from time to time party thereto and Credit Suisse, New York Branch.**4.10
    
    
    Servicing and Administrative Services Agreement, dated as of November 7, 2007, among Babcock & Brown Aircraft
Management LLC, Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Acquisition I Limited and
each Aircraft Subsidiary that becomes a party thereto.**4.11
    
    
    Amendment No. 1 to Servicing Agreement, dated as of April 29, 2010, among Babcock & Brown Aircraft Management LLC,
Babcock & Brown Aircraft Management (Europe) Limited, Babcock & Brown Air Funding I Limited and AMBAC Assurance
Corporation.****4.12
    
    
    First Amendment to Servicing Agreement, dated as of April 29, 2010, among Babcock & Brown Aircraft Management LLC,
Babcock & Brown Aircraft Management (Europe) Limited and Babcock & Brown Air Acquisition I Limited.****
  120




---



##### Table of Contents



ExhibitNumber

    
    Description of Exhibit4.13
    
    
    Third Amendment to the Warehouse Loan Agreement, dated as of April 29, 2010, among Babcock & Brown Air Acquisition I
Limited, the Designated Lenders party thereto and Credit Suisse, New York Branch.****4.14
    
    
    Fly Leasing Limited Omnibus Incentive Plan.****4.15
    
    
    Form of Stock Appreciation Right Award Agreement.****4.16
    
    
    Form of Restricted Stock Unit Award Agreement.****8.1
    
    
    List of the Companys subsidiaries.12.1
    
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.12.2
    
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002.13.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
 
 *
    
    Previously filed with the Registration Statement on Form F-1, File No. 333-145994.**
    
    Previously filed with the Annual Report on Form 20-F for the year ended December 31, 2007.***
    
    Previously filed as an exhibit on Form 6-K dated June 30, 2010.****
    
    Previously filed as an exhibit on Form 6-K dated May 7, 2010.  121




---



##### Table of Contents



SIGNATURE
  Fly Leasing LimitedBy:
    /s/ Colm BarringtonColm BarringtonChief Executive Officer and Director   122