##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 QUARTERLY REPORT
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-31616
 INTERNATIONAL LEASE FINANCE CORPORATION
  California
    
    22-3059110(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 10250 Constellation Blvd., Suite 3400Los Angeles, California
(Address of principal executive offices)
    
    90067
(Zip Code)
 (310) 788-1999
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
 
 TABLE OF CONTENTS
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets
March 31, 2009 and December 31, 2008
    
    
    2Condensed Consolidated Statements of Income
Three months ended March 31, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Comprehensive Income
Three months ended March 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2009 and 2008
    
    
    5Notes to Condensed Consolidated Financial
Statements
    
    
    7Item 2. Managements Discussion and Analysis of the Financial
Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market
Risk
    
    
    27Item 4. Controls and Procedures
    
    
    28Part II. Other InformationItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 6. Exhibits
    
    
    30Signatures
    
    
    31EX-12EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except share and per share amounts)
 (Unaudited)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents, including
interest bearing accounts of $1,081,213 (2009) and $2,382,068
(2008)
    
    $
    1,359,261
    
    
    $
    2,385,948Restricted cash
    
    
    265,235
    
    
    
    Notes receivable, net of allowance,
and net investment in finance and
sales-type leases
    
    
    376,935
    
    
    
    383,086Flight equipment under operating leases
    
    
    56,262,750
    
    
    
    55,372,328Less accumulated depreciation
    
    
    12,604,736
    
    
    
    12,152,18943,658,014
    
    
    
    43,220,139Deposits on flight equipment purchases
    
    
    454,185
    
    
    
    568,549Lease receivables and other assets
    
    
    542,056
    
    
    
    478,944Derivative assets, net
    
    
    11,481
    
    
    
    88,203Variable interest entities assets
    
    
    96,271
    
    
    
    98,746Deferred debt issue costs, less
accumulated amortization of $143,946
(2009) and $131,527 (2008)
    
    
    92,410
    
    
    
    91,899$
    46,855,848
    
    
    $
    47,315,514LIABILITIES AND SHAREHOLDERS EQUITYAccrued interest and other payables
    
    $
    449,287
    
    
    $
    441,656Current income taxes
    
    
    32,753
    
    
    
    32,083Tax benefit sharing payable to AIG
    
    
    85,000
    
    
    
    85,000Loan from AIG Funding
    
    
    1,700,000
    
    
    
    Debt financing, net of deferred debt discount of $13,438 (2009) and
$18,919 (2008)
    
    
    29,143,110
    
    
    
    31,476,668Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Foreign currency adjustment related to foreign currency denominated debt
    
    
    221,210
    
    
    
    338,100Security deposits on aircraft, overhauls and other
    
    
    1,481,023
    
    
    
    1,527,884Rentals received in advance
    
    
    288,847
    
    
    
    299,961Deferred income taxes
    
    
    4,598,439
    
    
    
    4,478,250Variable interest entities liabilities
    
    
    10,901
    
    
    
    10,699Contingencies  Note GSHAREHOLDERS EQUITYMarket Auction Preferred Stock, $100,000 per share liquidation
value; Series A and B, each having 500 shares issued
and outstanding
    
    
    100,000
    
    
    
    100,000Common stock  no par value; 100,000,000 authorized shares,
45,267,723 issued and outstanding
    
    
    1,053,582
    
    
    
    1,053,582Paid-in capital
    
    
    600,527
    
    
    
    600,237Accumulated other comprehensive income (loss)
    
    
    (149,947
    )
    
    
    (168,065
    )Retained earnings
    
    
    6,241,116
    
    
    
    6,039,459Total shareholders equity
    
    
    7,845,278
    
    
    
    7,625,213$
    46,855,848
    
    
    $
    47,315,514
  -2-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 March 31,
    
    
    March 31,2009
    
    
    2008REVENUESRental of flight equipment
    
    $
    1,261,386
    
    
    $
    1,186,753Flight equipment marketing
    
    
    1,365
    
    
    
    10,969Interest and other
    
    
    15,329
    
    
    
    17,4921,278,080
    
    
    
    1,215,214EXPENSESInterest
    
    
    355,394
    
    
    
    380,113Effect from derivatives, net of change in hedged items due to changes in
foreign exchange rates
    
    
    2,114
    
    
    
    343Effect from credit and market valuation adjustments on derivatives
    
    
    
    
    
    
    39,958Depreciation of flight equipment
    
    
    472,123
    
    
    
    449,621Provision for overhauls
    
    
    69,301
    
    
    
    71,511Flight equipment rent
    
    
    4,500
    
    
    
    4,500Selling, general and administrative
    
    
    59,746
    
    
    
    37,183963,178
    
    
    
    983,229INCOME BEFORE INCOME TAXES
    
    
    314,902
    
    
    
    231,985Provision for income taxes
    
    
    111,945
    
    
    
    82,483NET INCOME
    
    $
    202,957
    
    
    $
    149,502
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 March 31,
    
    
    March 31,2009
    
    
    2008NET INCOME
    
    $
    202,957
    
    
    $
    149,502OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXNet changes in fair value of cash flow
hedges, net of taxes of $(9,776) (2009) and
$45,401 (2008)
    
    
    18,156
    
    
    
    (84,315
    )Change in unrealized appreciation on
securities available for sale, net of taxes
of $20 (2009) and $199 (2008)
    
    
    (38
    )
    
    
    (370
    )18,118
    
    
    
    (84,685
    )COMPREHENSIVE INCOME
    
    $
    221,075
    
    
    $
    64,817
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 March 31,
    
    
    March 31,2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    202,957
    
    
    $
    149,502Adjustments to reconcile net income to net cash provided
by operating
activities:Depreciation of flight equipment
    
    
    472,123
    
    
    
    449,621Deferred income taxes
    
    
    110,433
    
    
    
    105,680Change in fair value of derivative instruments
    
    
    104,654
    
    
    
    (278,709
    )Foreign currency adjustment of non-US$ denominated debt
    
    
    (116,890
    )
    
    
    298,740Amortization of deferred debt issue costs
    
    
    12,419
    
    
    
    7,510Amortization of prepaid lease costs
    
    
    13,493
    
    
    
    15,741Other, including foreign exchange adjustments on
foreign currency denominated cash
    
    
    3,328
    
    
    
    (601
    )Changes in operating assets and liabilities:Increase in lease receivables and other assets
    
    
    (69,567
    )
    
    
    (37,563
    )Increase in accrued interest and other payables
    
    
    9,588
    
    
    
    29,666Change in current income taxes
    
    
    670
    
    
    
    (23,217
    )Decrease in rentals received in advance
    
    
    (11,114
    )
    
    
    (8,281
    )Change in unamortized debt discount
    
    
    5,481
    
    
    
    6,050Net cash provided by operating activities
    
    
    737,575
    
    
    
    714,139INVESTING ACTIVITIESAcquisition of flight equipment for operating leases
    
    
    (754,804
    )
    
    
    (1,231,127
    )Payments for deposits and progress payments
    
    
    (52,863
    )
    
    
    (157,943
    )Proceeds from disposal of flight equipment  net of gain
    
    
    
    
    
    
    118,014Advance on notes receivable
    
    
    
    
    
    
    (43,854
    )Restricted cash
    
    
    (265,235
    )
    
    
    Collections on notes receivable and finance and
sales-type leases  net of income amortized
    
    
    7,129
    
    
    
    6,829Other
    
    
    (10
    )
    
    
    Net cash used in investing activities
    
    
    (1,065,783
    )
    
    
    (1,308,081
    )FINANCING ACTIVITIESNet change in commercial paper
    
    
    (1,750,000
    )
    
    
    (97,300
    )Loan from AIG Funding
    
    
    1,700,000
    
    
    
    Proceeds from debt financing
    
    
    328,168
    
    
    
    1,447,908Payments in reduction of debt financing
    
    
    (917,207
    )
    
    
    (839,090
    )Debt issue costs
    
    
    (12,930
    )
    
    
    (6,104
    )Payment of common and preferred dividends
    
    
    (1,300
    )
    
    
    (15,568
    )(Decrease) increase in customer and other deposits
    
    
    (43,579
    )
    
    
    57,144Net cash (used in) provided by financing activities
    
    
    (696,848
    )
    
    
    546,990Net decrease in cash
    
    
    (1,025,056
    )
    
    
    (46,952
    )Effect of exchange rate changes on cash
    
    
    (1,631
    )
    
    
    1,322Cash at beginning of period
    
    
    2,385,948
    
    
    
    182,772Cash at end of period
    
    $
    1,359,261
    
    
    $
    137,142
 (Table continued on following page)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(Dollars in thousands)
(Unaudited)
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 March 31,
    
    March 31,2009
    
    2008Cash paid during the period for:Interest, excluding interest capitalized of $4,609 (2009)
and $8,575 (2008)
    
    $
    368,480
    
    
    $
    367,870Income taxes, net
    
    
    841
    
    
    
    21
 Non-Cash Investing and Financing Activities
           -6-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2009
 (Unaudited)
 Basis of Preparation
  Consolidation of Variable Interest Entities
 Consideration of ILFCs Ability to Continue as a Going Concern
    Effect of Derivative Credit Value Adjustment (CVA) and Market Value Adjustment (MVA)
 Fair Value Measurements Accounting for Derivative Instruments and Hedging
Activities
 -7-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
  Recent Accounting Pronouncements
 SFAS 141(R)
 Business Combinations
 SFAS 160
 Non-controlling Interests in Consolidated
Financial Statements, an amendment of Accounting Research Bulletin No. 51
 SFAS 161
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 (i) (ii) (iii)
 FSP FAS 132(R)-1
 Employers
Disclosures about Postretirement Benefit Plan Assets
 -8-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
  FSP FAS 107-1 and APB 28-1
 Interim Disclosures about Fair
Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting
 FSP FAS 115-2 and FAS 124-2
 Recognition and Presentation
of Other-Than-Temporary Impairments
 FSP FAS 157-4
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly Fair
Value Measurements,
 Restricted Cash
  -9-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
 Fair Value Measurements
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  CounterpartyLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Netting (a)
    
    
    Total(Dollars in thousands)March 31, 2009:Derivative
assets
    
    $
    
    
    
    $
    99,384
    (b)
    
    $
    
    
    
    $
    (87,903
    )
    
    $
    11,481Derivative
liabilities
    
    
    
    
    
    
    (87,903
    )
    
    
    
    
    
    
    87,903
    
    
    
    Total derivative
assets, net
    
    $
    
    
    
    $
    11,481
    
    
    $
    
    
    
    $
    
    
    
    $
    11,481December 31, 2008:Derivative
assets
    
    $
    
    
    
    $
    192,568
    (b)
    
    $
    
    
    
    $
    (104,365
    )
    
    $
    88,203Derivative
liabilities
    
    
    
    
    
    
    (104,365
    )
    
    
    
    
    
    
    104,365
    
    
    
    Total derivative
assets, net
    
    $
    
    
    
    $
    88,203
    
    
    $
    
    
    
    $
    
    
    
    $
    88,203
 
 (a)
    
    As permitted under FASB Interpretation No. 39 Offsetting Amounts Related to
Certain Contracts we have elected to offset derivative assets and derivative liabilities
under our master netting agreement.(b)
    
    The balance includes credit valuation adjustment (CVA) and market valuation
adjustment (MVA) of $17.6 million and $19.8 million at March 31, 2009 and December 31,
2008, respectively. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
 Accounting for the
Impairment or Disposal of Long-lived Assets Notes to Consolidated Financial Statements
 Derivative Activities
  Fair Value Measurements
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
  Asset Derivatives
    
    
    Liability DerivativesNotional Value
    
    
    Fair Value
    
    
    Notional Value
    
    
    Fair ValueUSD
    
    
    
    
    
    
    USD(In thousands)March 31, 2009:Derivatives
designated as
hedging instruments
under SFAS 133:Interest rate
contracts
    
    $
    
    
    
    $
    
    
    
    $
    1,172,768
    
    
    $
    (85,693
    )Foreign exchange
contracts
    
    
    1,655,500
    
    
    
    99,384
    
    
    £
    300,000
    
    
    
    (2,210
    )Total derivatives
designated as
hedging instruments
under SFAS 133
(a)
    
    
    
    
    
    $
    99,384
    
    
    
    
    
    
    $
    (87,903
    )December 31, 2008:Derivatives
designated as
hedging instruments
under SFAS 133:Interest rate
contracts
    
    $
    
    
    
    $
    
    
    
    $
    1,215,309
    
    
    $
    (103,622
    )Foreign exchange
contracts
    
    
    1,600,000
    
    
    
    187,589
    
    
    
    72,100
    
    
    
    (743
    )£
    300,000
    
    
    
    4,979Total derivatives
designated as
hedging instruments
under SFAS 133
(a)
    
    
    
    
    
    $
    192,568
    
    
    
    
    
    
    $
    (104,365
    )
 
 (a)
    
    Derivative assets and liabilities are presented in Derivative assets, net on our
Condensed Consolidated Balance Sheets.  -11-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
  Net Changes in Fair Value ofCash Flow Hedges in OCI, Net of TaxesThree Months EndedMarch 31, 2009
    
    
    March 31, 2008(Dollars in thousands)Gain (loss)Effective portion of
change in fair market
value of derivatives
(a)
    
    $
    (88,837
    )
    
    $
    169,388Amortization of
balances of
de-designated hedges
and other adjustments
    
    
    (121
    )
    
    
    (364
    )Foreign exchange
component of cross
currency swaps
(credited) charged to
income
    
    
    116,890
    
    
    
    (298,740
    )Income tax effect
    
    
    (9,776
    )
    
    
    45,401Net changes in fair
value of cash flow
hedges, net of
taxes
    
    $
    18,156
    
    
    $
    (84,315
    )
 
 (a)
    
    2009 includes $2,213 of CVA and MVA. CVA and MVA was recorded in income for the
period ended March 31, 2008. See Note A  Basis of Preparation.  Amount of Unrealized Gain or (Loss)Recorded in OCI on Derivatives(Effective Portion)Three Months EndedMarch 31, 2009
    
    
    March 31, 2008(Dollars in thousands)Derivatives in SFAS 133 Cash Flow Hedging RelationshipsInterest rate contracts
    
    $
    (3,084
    )
    
    $
    (38,577
    )Foreign exchange contracts (a)
    
    
    (99,163
    )
    
    
    220,915Total
    
    $
    (102,247
    )
    
    $
    182,338
 
 (a)
    
    2009 includes $2,213 of CVA and MVA. CVA and MVA was recorded in income for the
period ended March 31, 2008. See Note A  Basis of Preparation.  Amount of Gain or (Loss) Reclassified fromAccumulated OCI Into Income(Effective Portion)Three Months EndedMarch 31, 2009
    
    
    March 31, 2008(Dollars in thousands)Location of Gain or (Loss) Reclassified from Accumulated
OCI into Income (Effective Portion)Interest rate contracts  interest expense
    
    $
    (20,669
    )
    
    $
    (254
    )Foreign exchange contracts  interest expense
    
    
    6,096
    
    
    
    15,323Foreign exchange contracts  lease revenue
    
    
    1,163
    
    
    
    (2,119
    )Total
    
    $
    (13,410
    )
    
    $
    12,950
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
   Amount of Gain or (Loss) Recognized inIncome on Derivatives (Ineffective Portion) (a)Three Months EndedMarch 31, 2009
    
    
    March 31, 2008(Dollars in thousands)Derivatives in Statement 133 Cash
Flow Hedging Relationships:Interest rate contracts
    
    $
    (195
    )
    
    $
    (226
    )Foreign exchange contracts
    
    
    (2,040
    )
    
    
    (310
    )Total
    
    
    (2,235
    )
    
    
    (536
    )Reconciliation to Condensed
Consolidated Statements of Income:Reclassification of amounts
dedesignated as hedges
recorded in AOCI
    
    
    121
    
    
    
    193Effect from derivatives, net
of change in hedged items
due to changes in foreign
exchange rates
    
    $
    (2,114
    )
    
    $
    (343
    )
 
 (a)
    
    All components of each derivatives gain or loss were included in the assessment of
effectiveness. Related Party Transactions
    Three Months EndedMarch 31, 2009
    
    March 31, 2008(Dollars in thousands)Income StatementExpense (income):Allocation of corporate costs from AIG
    
    $
    1,532
    
    
    $
    4,343Management fees paid to subsidiaries of AIG
    
    
    180
    
    
    
    234Management fees received
    
    
    (2,293
    )
    
    
    (2,453
    )Interest expense on loan from AIG Funding
    
    
    3,173
    
    
    
    
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
 March 31,
    
    December 31,2009
    
    2008(Dollars in thousands)Balance SheetAsset (liability):Taxes benefit sharing payable to AIG
    
    $
    (85,000
    )
    
    $
    (85,000
    )Accrued corporate costs payable to AIG
    
    
    (7,366
    )
    
    
    (6,092
    )Loan payable to AIG Funding
    
    
    (1,700,000
    )
    
    
    Accrued interest payable to AIG Funding
    
    
    (3,173
    )
    
    
    Income taxes payable to AIG
    
    
    (32,753
    )
    
    
    (32,083
    )Net payable for management fees and other
    
    
    (7
    )
    
    
    (3
    )
 Fair Value Measurements Derivative Activities
 Contingent Liabilities
 Guarantees
 
    
    Asset Value Guarantees:We have guaranteed a portion of the residual value of 22
aircraft to financial institutions and other unrelated third parties for a fee. These
guarantees expire at various dates through 2023 and generally obligate us to pay the
shortfall between the fair market value and the guaranteed value of the aircraft and
provide us with an option to purchase the aircraft for the guaranteed value. At March
31, 2009, the maximum commitment that we would be obligated to pay under such
guarantees, without any offset for the projected value of the aircraft, was
approximately $530 million.
    
    Aircraft Loan Guarantees:We have guaranteed two loans collateralized by aircraft
to financial institutions for a fee. The guarantees expire in 2014, when the loans
mature and obligate us to pay an amount up to the guaranteed value upon the default
of the borrower, which may be offset by a portion of the underlying value of the
aircraft collateral. At March 31, 2009, guaranteed value, without any offset for the
projected value of the aircraft, was approximately $30 million.
  Stand-by Line of Credit
  Legal Contingencies
 
    
    Flash Airlines:We are named in lawsuits in connection with the January 3, 2004
crash of our 737-300 aircraft on lease to Flash Airlines, an Egyptian carrier. The
lawsuits were filed by 122 families of victims on the flight. We believe we are
adequately covered in these cases by the liability insurance policies carried by
Flash Airlines and we have substantial defenses to the actions. We do not believe
that the outcome of these lawsuits will have a material effect on our consolidated
financial condition, results of operations or cash flows.
    
    Krasnoyarsk Airlines (KrasAir):We leased a 757-200ER aircraft to a Russian
airline, KrasAir, which is now the subject of a Russian bankruptcy-like proceeding.
The aircraft lease was assigned to another Russian carrier, Atlant-Soyuz, which
defaulted under the lease. The aircraft is currently
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2009
(Unaudited)
 located in Moscow, Russia. In the first quarter of 2009, we were informed that the
Russian customs authority had seized the aircraft during a time frame we believe to be
late 2008. The aircraft was seized on the basis of certain alleged violations by
KrasAir with respect to the import of the aircraft, including the import type and
customs fees owed. The Russian customs authority has filed a case in the general
jurisdiction court seeking an order permitting it to confiscate the aircraft due to
these alleged violations. We are not currently a party to the case, but we have filed
a pleading with the court seeking to become a party so that we can protect our
ownership rights to the aircraft. We have informed the insurance underwriters under
KrasAirs, Atlant-Soyuzs, and our insurance policies of this matter. We cannot
estimate what the outcome of this matter will be, but we do not believe that it will
be material to our consolidated financial position, results of operations or cash
flows.
  Subsequent Event
 Extension of 2004 Export Credit Agency (ECA) Facility Agreement
 Debt financing, net
of deferred debt discount
  -15-




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Statement Regarding Forward-looking Information
 Item 1A. Risk Factors, Part
I  Item 1A. Risk Factors
 Overview
  Liquidity
 Our Fleet
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Debt Financing
 Liquidity
 Industry Condition and Sources of Revenue
     Consideration of ILFCs Ability to Continue as a Going Concern
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
    Liquidity
   Our Relationship with AIG
  -18-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 AIG Loan from the FRBNY
  AIG Going Concern Consideration
  Our Potential Sale by AIG
  Critical Accounting Policies and Estimates
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  
    
    Lease Revenue
    
    Flight Equipment Marketing
    
    Provision for Overhauls
    
    Flight Equipment
    
    Derivative Financial Instruments
    
    Fair Value Measurements
    
    Income Taxes
 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations
 Debt Financings
    March 31,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Public bonds and medium-term notes
    
    $
    18,977,940
    
    
    $
    19,748,541Bank debt
    
    
    7,552,500
    
    
    
    7,558,750ECA financings
    
    
    2,624,108
    
    
    
    2,436,296Loan from AIG Funding
    
    
    1,700,000
    
    
    
    Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Total public, bank, intercompany, and subordinated debt
    
    
    31,854,548
    
    
    
    30,743,587Commercial paper
    
    
    2,000
    
    
    
    1,752,000Less: Deferred debt discount
    
    
    (13,438
    )
    
    
    (18,919
    )Total debt financing and subordinated debt
    
    $
    31,843,110
    
    
    $
    32,476,668Selected interest rates and ratios which include the economic effect of
derivative instruments:Composite interest rate
    
    
    4.37
    %
    
    
    4.51
    %Percentage of total debt at fixed rates
    
    
    62.41
    %
    
    
    63.89
    %Composite interest rate on fixed rate debt
    
    
    5.37
    %
    
    
    5.41
    %Bank prime rate
    
    
    3.25
    %
    
    
    3.25
    %
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Public Bonds and Medium-Term Notes
 Liquidity (i) (ii)
 Maximum
    
    Sold as of
    
    Sold as of
    
    Sold as ofOffering
    
    December 31, 2008
    
    March 31, 2009
    
    April 30, 2009(Dollars in millions)Registration
statement dated
August 16, 2006
(including $10.0
billion
Medium-Term Note
Program and $1.0
billion Retail
Medium-Term Note
Program)
    
    Unlimited(a)
    
    $
    6,927
    
    
    $
    6,927
    
    
    $
    6,927Euro Medium-Term
Note Programme
dated
September 2008
(b)(c)
    
    
    7,000
    
    
    
    2,334
    
    
    
    2,334
    
    
    
    2,334
 
 (a)
    
    As a result of the Companys Well Known Seasoned Issuer (WKSI) status, we have an
unlimited amount of debt securities registered for sale.(b)
    
    We have economically hedged the foreign currency risk of the notes through derivatives.(c)
    
    This is a perpetual program. As a bond matures, the principal amount becomes available
for new issuances under the program. Bank Credit Facilities
 Revolving Credit Facilities:
 Export Credit Facilities:
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Term Loans:
 Subordinated Debt
 (i) (ii) (iii)
 Commercial Paper
 Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity
 Loan from AIG
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Derivatives
 Accounting for Derivative Instruments and Hedging Activities
  Fair Value Measurements,
 Credit Ratings
  Date of Last ActionRating Agency
    
    Short-term Debt
    
    Long-term Debt
    
    Credit Watch/Review
    
    to These RatingsFitch
    
    F1
    
    A
    
    Evolving
    
    September 17, 2008Moodys
    
    P-2
    
    Baa2
    
    Negative
    
    March 17, 2009S&P
    
    A-2
    
    BBB+
    
    Negative
    
    April 2, 2009
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Existing Commitments
 Commitments Due by Fiscal YearTotal
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    Thereafter(Dollars in thousands)Public bonds and
medium-term
notes
    
    $
    18,977,940
    
    
    $
    2,427,906
    
    
    $
    4,002,397
    
    
    $
    4,380,245
    
    
    $
    3,572,141
    
    
    $
    3,542,124
    
    
    $
    1,053,127Bank Credit
Facilities
    
    
    6,500,000
    
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    2,500,000
    
    
    
    
    
    
    
    
    
    
    
    Bank Term
Loans
    
    
    1,052,500
    
    
    
    464,750
    
    
    
    102,750
    
    
    
    335,000
    
    
    
    150,000
    
    
    
    
    
    
    
    ECA
Financings
    
    
    2,624,108
    
    
    
    384,333
    
    
    
    432,677
    
    
    
    344,660
    
    
    
    315,613
    
    
    
    315,613
    
    
    
    831,212Loan From AIG
Funding
    
    
    1,700,000
    
    
    
    1,700,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated
Debt
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Commercial Paper
    
    
    2,000
    
    
    
    2,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Payments
on Debt Outstanding
(a)(b)(c)
    
    
    6,802,904
    
    
    
    1,029,935
    
    
    
    1,034,598
    
    
    
    743,853
    
    
    
    450,829
    
    
    
    273,090
    
    
    
    3,270,599Operating Leases
(d)(e)
    
    
    79,350
    
    
    
    8,050
    
    
    
    11,515
    
    
    
    11,958
    
    
    
    12,439
    
    
    
    12,938
    
    
    
    22,450Pension Obligations
(f)
    
    
    8,999
    
    
    
    1,346
    
    
    
    1,405
    
    
    
    1,463
    
    
    
    1,526
    
    
    
    1,595
    
    
    
    1,664Tax Benefit Sharing
Agreement Due to
AIG
    
    
    85,000
    
    
    
    85,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase
Commitments
    
    
    15,705,000
    
    
    
    2,013,100
    
    
    
    242,700
    
    
    
    247,600
    
    
    
    639,400
    
    
    
    2,277,900
    
    
    
    10,284,300Total
    
    $
    54,537,801
    
    
    $
    10,116,420
    
    
    $
    7,828,042
    
    
    $
    8,564,779
    
    
    $
    5,141,948
    
    
    $
    6,423,260
    
    
    $
    16,463,352
 Contingent Commitments
 Contingency Expiration by Fiscal YearTotal
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    Thereafter(Dollars in thousands)AVGs (g)
    
    $
    559,630
    
    
    $
    
    
    
    $
    
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    96,003
    
    
    $
    356,836Lines of Credit
    
    
    50,000
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total (h)
    
    $
    609,630
    
    
    $
    
    
    
    $
    50,000
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    96,003
    
    
    $
    356,836
 
 (a)
    
    Includes interest on loan from AIG Funding.(b)
    
    Future interest payments on floating rate debt are estimated using floating interest
rate in effect at March 31, 2009.(c)
    
    Includes the effect of interest rate and foreign currency derivative instruments.(d)
    
    Excludes fully defeased aircraft sale-lease back transactions.(e)
    
    Minimum rentals have not been reduced by minimum sublease rentals of $8,955 in the future
under non-cancellable subleases.(f)
    
    Our pension obligations are part of intercompany expenses, which AIG allocates to us on an
annual basis. The amount is an estimate of such allocation. The column 2009 consists of
total estimated allocations for 2009 and the column Thereafter consists of the 2014
estimated allocation. The amount allocated has not been material to date.(g)
    
    From time to time, we participate with airlines, banks and other financial institutions in
the financing of aircraft by providing asset guarantees, put options, or loan guarantees
collateralized by aircraft. As a result, should we be called upon to fulfill our obligations,
we would have recourse to the value of the underlying aircraft.(h)
    
    Excluded from total contingent commitments are $139.9 million of uncertain tax liabilities.
The future cash flows to these liabilities are uncertain and we are unable to make reasonable
estimates of the outflows. -24-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Off-Balance-Sheet Arrangements
  Results of Operations
 Three months ended March 31, 2009 versus 2008
 (i) (ii) iii (i) (ii) iii
      Increase2009
    
    2008
    
    (Decrease)Beginning of Quarter
    
    
    4.51
    %
    
    
    5.16
    %
    
    
    (0.65
    )%End of Quarter
    
    
    4.37
    %
    
    
    4.79
    %
    
    
    (0.42
    )%Average
    
    
    4.44
    %
    
    
    4.98
    %
    
    
    (0.54
    )%
 -25-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Basis of Preparation
    (i) (ii) (iii) Accounting for the
Impairment or Disposal of Long-lived Assets
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Value at Risk
     ILFC Market RiskThree months Ended
    
    Year EndedMarch 31, 2009
    
    December 31, 2008(Dollars in millions)Average
    
    High
    
    Low
    
    Average
    
    High
    
    LowCombined
    
    $
    38.3
    
    
    $
    41.6
    
    
    $
    35.1
    
    
    $
    53.2
    
    
    $
    96.2
    
    
    $
    36.1Interest Rate
    
    
    38.4
    
    
    
    41.7
    
    
    
    35.1
    
    
    
    53.7
    
    
    
    97.6
    
    
    
    36.5Currency
    
    
    0.6
    
    
    
    0.7
    
    
    
    0.5
    
    
    
    1.0
    
    
    
    1.6
    
    
    
    0.7
 -27-




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ITEM 4. CONTROLS AND PROCEDURES
 (A)
    
    Evaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our filings under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the periods specified in the
rules and forms of the Securities and Exchange Commission, and such information is
accumulated and communicated to our management, including the Chairman of the Board and
Chief Executive Officer and the Vice Chairman and Chief Financial Officer (collectively the
Certifying Officers), as appropriate, to allow timely decisions regarding required
disclosure. Our management, including the Certifying Officers, recognizes that any set of
controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.We have evaluated, under the supervision and with the participation of management,
including the Certifying Officers, the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a  15(e) and 15d  15(e) of the Securities Exchange Act
of 1934 as of March 31, 2009. Based on that evaluation, our Certifying Officers have
concluded that our disclosure controls and procedures were effective at the reasonable
assurance level at March 31, 2009.Variable Interest Entities:At March 31, 2009, our Condensed Consolidated Balance Sheet
included assets and liabilities of $96.3 million and $10.9 million, respectively, related to
Variable Interest Entities (VIEs). At December 31, 2008, the balances were $98.7 million
and $10.7 million. In addition, we recorded net gains of $0.4 million and $0.2 million for
the three months ended March 31, 2009 and 2008, respectively, related to those VIEs. Our
assessment of disclosure controls and procedures, as described above, includes the VIEs.
Each of the VIEs has a discrete number of assets and we, as lender and guarantor to the
VIEs, have been provided sufficient information to conclude that our procedures with respect
to these VIEs are effective in providing reasonable assurance that the information required
to be disclosed by us relating to these entities is reconciled, processed, summarized and
reported within the periods specified by the Securities and Exchange Commission. However,
management has been unable to assess the effectiveness of internal controls at those
entities due to our inability to dictate or modify the control over financial reporting of
those entities, or to assess those controls.(B)
    
    Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting during the
three months ended March 31, 2009, that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Flash Airlines:
 Krasnoyarsk Airlines (KrasAir):
  
 ITEM 1A. RISK FACTORS
 Item 1A. Risk Factors
  Item 1A. Risk Factors
 
    
    Relationship with AIGAIG Going Concern Consideration In connection with the preparation of its Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2009, AIG assessed its
ability to continue as a going concern. After considering several factors as outlined in
AIGs Annual Report on Form 10-K for the year ended December 31, 2008, and Quarterly
Report on Form 10-Q for the period ended March 31, 2009, AIG believes that it will have
adequate liquidity to finance and operate its businesses and continue as a going concern
for at least the next twelve months. However, it is possible that the actual outcome of
one or more of AIGs plans could be materially different or that one or more of its
significant judgments or estimates could prove to be materially incorrect, which could
raise substantial doubt about AIGs ability to continue as a going concern. If AIG is not
able to continue as a going concern, it could have a
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##### Table of Contents



PART II. OTHER INFORMATION (CONTINUED)
 significant impact on our operations, including limiting our ability to issue new debt and
to receive additional support from AIG.
 Item 1A. Risk Factors
 
 ITEM 6. EXHIBITS
  4.1
    
    The Company agrees to furnish to the Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Company and its
subsidiaries, the authorized principal amount of which does not exceed 10% of the
consolidated assets of the Company and its subsidiaries.12.
    
    Computation of Ratios of Earnings to Fixed Charges and Preferred Stock Dividends.31.1
    
    Certification of Chairman of the Board and Chief Executive Officer.31.2
    
    Certification of Vice Chairman and Chief Financial Officer.32.1
    
    Certification under 18 U.S.C., Section 1350.
 -30-




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##### Table of Contents



SIGNATURES
   May 11, 2009
    
    /S/ Steven F. Udvar-Hazy

STEVEN F. UDVAR-HAZYChairman of the Board and

Chief Executive Officer(Principal Executive Officer)May 11, 2009
    
    /S/ Alan H. LundALAN H. LUNDVice Chairman and

Chief Financial Officer(Principal Financial Officer)May 11, 2009
    
    /S/ Kurt H. SchwarzKURT H. SCHWARZSenior Vice President,

Chief Accounting Officer and
Controller(Principal Accounting Officer)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
   4.1
    
    The Company agrees to furnish to the Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Company and its
subsidiaries, the authorized principal amount of which does not exceed 10% of the
consolidated assets of the Company and its subsidiaries.12.
    
    Computation of Ratios of Earnings to Fixed Charges and Preferred Stock
Dividends.31.1
    
    Certification of Chairman of the Board and Chief Executive Officer.31.2
    
    Certification of Vice Chairman and Chief Financial Officer.32.1
    
    Certification under 18 U.S.C., Section 1350.
 -32-