##### 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 September 30, 2010
 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
(State or other jurisdiction of 
incorporation or organization)
    
    22-3059110
(I.R.S. Employer
Identification No.)10250 Constellation Blvd., Suite 3400
Los 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
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
 
 TABLE OF CONTENTS
 PageTable of Definitions
    
    
    3Part I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed, Consolidated Balance Sheets
September 30, 2010 and December 31, 2009
    
    
    4Condensed, Consolidated Statements of Income
Three months ended September 30, 2010 and 2009
    
    
    5Condensed, Consolidated Statements of Income
Nine months ended September 30, 2010 and 2009
    
    
    5Condensed, Consolidated Statements of Comprehensive Income
Three months ended September 30, 2010 and 2009
    
    
    6Condensed, Consolidated Statements of Comprehensive Income
Nine months ended September 30, 2010 and 2009
    
    
    6Condensed, Consolidated Statements of Cash Flows
Nine months ended September 30, 2010 and 2009
    
    
    7Notes to Condensed, Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    36Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    62Item 4. Controls and Procedures
    
    
    63Part II. Other InformationItem 1. Legal Proceedings
    
    
    64Item 1A. Risk Factors
    
    
    64Item 6. Exhibits
    
    
    73Signatures
    
    
    74EX-10.1EX-12EX-31.1EX-31.2EX-32.1
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##### Table of Contents



TABLE OF DEFINITIONS
 AIG
    
    American International Group, Inc.AIG Funding
    
    AIG Funding, Inc.AIGFP
    
    AIG Financial Products Corp.Airbus
    
    Airbus S.A.S.AOCI
    
    Accumulated other comprehensive incomeASC
    
    FASB Accounting Standards CodificationBoeing
    
    The Boeing CompanyThe Company, ILFC, we, our, us
    
    International Lease Finance CorporationCPFF
    
    FRBNY Commercial Paper Funding FacilityCVA
    
    Credit Value AdjustmentECA
    
    Export Credit AgencyFASB
    
    Financial Accounting Standards BoardFitch
    
    Fitch Ratings, Inc.FRBNY
    
    Federal Reserve Bank of New YorkFRBNY Credit Agreement
    
    The credit agreement, dated as of
September 22, 2008, as amended,
between AIG and the FRBNYGAAP
    
    Generally Accepted Accounting
Principles in the United States of
AmericaKrasAir
    
    Krasnoyarsk AirlinesMoodys
    
    Moodys Investor Service, Inc.MVA
    
    Market Value AdjustmentOCI
    
    Other comprehensive incomeQSPE
    
    Qualifying special-purpose entitySEC
    
    U.S. Securities and Exchange CommissionS&P
    
    Standard and Poors, a division of The
McGraw-Hill Companies, Inc.VaR
    
    Value at RiskVIEs
    
    Variable Interest EntitiesVolare
    
    Estate of Volare AirlinesWKSI
    
    Well Known Seasoned Issuer
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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)
 September 30,
    
    
    December 31,2010
    
    
    2009ASSETSCash and cash equivalents, including interest bearing accounts of $3,593,513 (2010) and
$324,827 (2009)
    
    $
    3,604,860
    
    
    $
    336,911Restricted cash, including interest bearing accounts of $624,481 (2010) and $246,115
(2009)
    
    
    679,494
    
    
    
    315,156Notes receivable, net of allowance, and net investment in finance and sales-type leases
    
    
    127,990
    
    
    
    373,141Flight equipment under operating leases
    
    
    53,667,337
    
    
    
    57,718,323Less accumulated depreciation
    
    
    13,873,443
    
    
    
    13,788,52239,793,894
    
    
    
    43,929,801Flight equipment held for sale
    
    
    973,897
    
    
    
    Deposits on flight equipment purchases
    
    
    160,529
    
    
    
    163,221Lease receivables and other assets
    
    
    455,299
    
    
    
    477,218Derivative assets
    
    
    79,735
    
    
    
    190,857Variable interest entities assets
    
    
    
    
    
    
    79,720Deferred debt issue costs, less accumulated amortization of $170,598 (2010) and $146,933
(2009)
    
    
    233,485
    
    
    
    101,017$
    46,109,183
    
    
    $
    45,967,042LIABILITIES AND SHAREHOLDERS EQUITYAccrued interest and other payables
    
    $
    546,269
    
    
    $
    474,971Current income taxes
    
    
    134,537
    
    
    
    80,924Tax benefit sharing payable to AIG
    
    
    
    
    
    
    85,000Loans from AIG Funding
    
    
    
    
    
    
    3,909,567Debt financing, net of deferred debt discount of $65,381 (2010) and $9,556 (2009)
    
    
    28,953,823
    
    
    
    24,802,172Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Foreign currency adjustment related to foreign currency denominated debt
    
    
    192,800
    
    
    
    391,100Security deposits on aircraft, overhauls and other
    
    
    1,639,605
    
    
    
    1,469,956Rentals received in advance
    
    
    275,986
    
    
    
    315,154Deferred income taxes
    
    
    4,825,467
    
    
    
    4,881,558Variable interest entities liabilities, net
    
    
    
    
    
    
    6,464Commitments and Contingencies  Note LSHAREHOLDERS 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
    
    
    605,768
    
    
    
    603,542Accumulated other comprehensive income (loss)
    
    
    (75,864
    )
    
    
    (138,206
    )Retained earnings
    
    
    6,857,210
    
    
    
    6,931,258Total shareholders equity
    
    
    8,540,696
    
    
    
    8,550,176$
    46,109,183
    
    
    $
    45,967,042
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED, CONSOLIDATED STATEMENTS OF INCOME  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009  (Dollars in thousands)  (Unaudited)
 September 30, 2010
    
    
    September 30, 2009REVENUESRental of flight equipment
    
    $
    1,316,755
    
    
    $
    1,354,797Flight equipment marketing
    
    
    (57,706
    )
    
    
    (18,938
    )Interest and other
    
    
    28,247
    
    
    
    11,3201,287,296
    
    
    
    1,347,179EXPENSESInterest
    
    
    414,959
    
    
    
    332,750Effect from derivatives, net of change in hedged items due to changes in foreign exchange
rates
    
    
    1,806
    
    
    
    (8,880
    )Depreciation of flight equipment
    
    
    471,958
    
    
    
    499,721Aircraft impairment
    
    
    348,357
    
    
    
    Provision for overhauls
    
    
    135,452
    
    
    
    90,864Flight equipment rent
    
    
    4,500
    
    
    
    4,500Selling, general and administrative
    
    
    67,449
    
    
    
    47,3371,444,481
    
    
    
    966,292(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (157,185
    )
    
    
    380,887(Benefit) provision for income taxes
    
    
    (51,650
    )
    
    
    135,074NET (LOSS) INCOME
    
    $
    (105,535
    )
    
    $
    245,813
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009  (Dollars in thousands)  (Unaudited)
 September 30, 2010
    
    
    September 30, 2009REVENUESRental of flight equipment
    
    $
    3,933,265
    
    
    $
    3,915,054Flight equipment marketing
    
    
    (550,310
    )
    
    
    (15,798
    )Interest and other
    
    
    50,024
    
    
    
    48,6503,432,979
    
    
    
    3,947,906EXPENSESInterest
    
    
    1,157,533
    
    
    
    1,041,357Effect from derivatives, net of change in hedged items due to changes in foreign exchange
rates
    
    
    46,655
    
    
    
    (13,207
    )Depreciation of flight equipment
    
    
    1,437,857
    
    
    
    1,460,621Aircraft impairment
    
    
    356,506
    
    
    
    Provision for overhauls
    
    
    358,289
    
    
    
    234,250Flight equipment rent
    
    
    13,500
    
    
    
    13,500Selling, general and administrative
    
    
    144,078
    
    
    
    151,1993,514,418
    
    
    
    2,887,720(LOSS) INCOME BEFORE INCOME TAXES
    
    
    (81,439
    )
    
    
    1,060,186(Benefit) provision for income taxes
    
    
    (23,731
    )
    
    
    374,491NET (LOSS) INCOME
    
    $
    (57,708
    )
    
    $
    685,695
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED, CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009  (Dollars in thousands)  (Unaudited)
 September 30, 2010
    
    
    September 30, 2009NET (LOSS) INCOME
    
    $
    (105,535
    )
    
    $
    245,813OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAXNet changes in fair value of cash flow hedges, net of taxes of $6,630 (2010) and
$(5,469) (2009)
    
    
    (12,314
    )
    
    
    10,156Change in unrealized appreciation on securities available for sale, net of taxes of $(93)
(2010) and $(137) (2009)
    
    
    173
    
    
    
    255(12,141
    )
    
    
    10,411COMPREHENSIVE (LOSS) INCOME
    
    $
    (117,676
    )
    
    $
    256,224
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009  (Dollars in thousands)  (Unaudited)
 September 30, 2010
    
    
    September 30, 2009NET (LOSS) INCOME
    
    $
    (57,708
    )
    
    $
    685,695OTHER COMPREHENSIVE INCOME, NET OF TAXNet changes in fair value of cash flow hedges, net of taxes of $(33,542) (2010) and $(21)
(2009)
    
    
    62,292
    
    
    
    38Change in unrealized appreciation on securities available for sale, net of taxes of $(27)
(2010) and $(149) (2009)
    
    
    50
    
    
    
    27662,342
    
    
    
    314COMPREHENSIVE INCOME
    
    $
    4,634
    
    
    $
    686,009
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009  (Dollars in thousands)  (Unaudited)
 September 30, 2010
    
    
    September 30, 2009OPERATING ACTIVITIESNet (Loss) income
    
    $
    (57,708
    )
    
    $
    685,695Adjustments to reconcile net income to net cash provided by operating activities:Depreciation of flight equipment
    
    
    1,437,857
    
    
    
    1,460,621Change in deferred income taxes
    
    
    (80,965
    )
    
    
    367,038Change in fair value of derivative instruments
    
    
    206,955
    
    
    
    (191,031
    )Foreign currency adjustment of non-US$ denominated debt
    
    
    (172,920
    )
    
    
    148,020Amortization of deferred debt issue costs
    
    
    36,041
    
    
    
    31,617Amortization of debt discount
    
    
    8,472
    
    
    
    8,150Amortization of prepaid lease costs
    
    
    29,720
    
    
    
    38,576Aircraft impairment charges flight equipment marketing
    
    
    444,952
    
    
    
    7,507Aircraft impairment charges on fleet held for use
    
    
    356,506
    
    
    
    Lease expenses related to aircraft sales
    
    
    89,875
    
    
    
    Other, including foreign exchange adjustments on foreign currency denominated cash
    
    
    (43,625
    )
    
    
    (488
    )Changes in operating assets and liabilities:Decrease (increase) in lease receivables and other assets
    
    
    107,487
    
    
    
    (47,327
    )Increase in accrued interest and other payables
    
    
    73,663
    
    
    
    24,063Change in current income taxes
    
    
    53,614
    
    
    
    (9,302
    )Tax benefit sharing with AIG
    
    
    (85,000
    )
    
    
    (Decrease) increase in rentals received in advance
    
    
    (39,168
    )
    
    
    5,511Net cash provided by operating activities
    
    
    2,365,756
    
    
    
    2,528,650INVESTING ACTIVITIESAcquisition of flight equipment for operating leases
    
    
    (226,240
    )
    
    
    (2,313,557
    )Payments for deposits and progress payments
    
    
    (34,191
    )
    
    
    (52,234
    )Proceeds from disposal of flight equipment
    
    
    1,313,852
    
    
    
    164,164Increase in restricted cash
    
    
    (364,338
    )
    
    
    (290,484
    )Collections on notes receivable and finance and sales-type leases  net of
income amortized
    
    
    80,191
    
    
    
    95,733Other
    
    
    (5,091
    )
    
    
    (10
    )Net cash provided by (used in) investing activities
    
    
    764,183
    
    
    
    (2,396,388
    )FINANCING ACTIVITIESNet change in commercial paper
    
    
    
    
    
    
    (1,752,000
    )Loans from AIG Funding
    
    
    (3,909,567
    )
    
    
    1,700,000Proceeds from debt financing
    
    
    8,712,495
    
    
    
    1,394,868Payments in reduction of debt financing
    
    
    (4,594,696
    )
    
    
    (3,323,277
    )Debt issue costs
    
    
    (170,098
    )
    
    
    (48,045
    )Payment of preferred dividends
    
    
    (440
    )
    
    
    (3,262
    )Increase (decrease) in customer and other deposits
    
    
    101,349
    
    
    
    (41,475
    )Net cash provided by (used in) financing activities
    
    
    139,043
    
    
    
    (2,073,191
    )Net increase (decrease) in cash
    
    
    3,268,982
    
    
    
    (1,940,929
    )Effect of exchange rate changes on cash
    
    
    (1,033
    )
    
    
    1,438Cash at beginning of period
    
    
    336,911
    
    
    
    2,385,948Cash at end of period
    
    $
    3,604,860
    
    
    $
    446,457
 (Table continued on following page)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(Dollars in thousands)
(Unaudited)
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 September 30, 2010
    
    
    September 30, 2009Cash paid during the period for:Interest, excluding interest capitalized of $4,669 (2010) and $8,798 (2009)
    
    $
    1,102,601
    
    
    $
    1,067,499Income taxes, net
    
    
    3,620
    
    
    
    16,754
 Non-Cash Investing and Financing Activities
  Flight equipment under operating leases in the amount of $2,221,454 was transferred to Flight
equipment held for sale, of which $1,246,527 was subsequently sold.
 Net investment in finance leases of $192,161 was transferred to Flight equipment under
operating leases.
 Flight equipment under operating leases with a net book value of $60,780 was transferred to
Lease receivable and other assets, with $10,400 recorded in income, to record proceeds
receivable for the total loss of two aircraft.
 $36,799 of Deposits on flight equipment purchases were applied to Acquisition of flight
equipment under operating leases.
  $357,669 of Deposits on flight equipment purchases was applied to Acquisition of flight
equipment under operating leases.
 An aircraft with a net book value of $20,921 and released overhaul reserves in the amount of
$6,891 were reclassified to Lease receivables and other assets of $33,223 to reflect pending
proceeds from the loss of an aircraft.
 An aircraft with a net book value of $10,521 was reclassified to Lease receivables and other
assets in the amount of $2,400 with a $7,507 charge to income when reclassified to Flight
equipment held for sale.
 $1,500 was reclassified from Security deposits on aircraft, overhauls and other to Deposits
on flight equipment purchases for concessions received from manufacturers.
 A reduction in certain credits from aircraft and engine manufacturers in the amount of $742
increased the basis of Flight equipment under operating leases and decreased Lease
receivables and other assets.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010
(Unaudited)
 A. Basis of Preparation
  Recent Accounting Pronouncements. Variable Interest Entities Out of Period Adjustments
 AIG Going Concern Consideration
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 B. Recent Accounting Pronouncements
  Accounting for Transfers of Financial Assets
  Consolidation of Variable Interest Entities
 (i) (ii) Variable Interest Entities.
 Measuring Liabilities at Fair Value
  Subsequent Events
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 Future Application of Accounting Standards:
 Disclosures of the Credit Quality of Financing Receivables and the Allowance for Credit Losses
  C. Flight Equipment Marketing
  (i) (ii)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2010
    
    
    September 30, 2010(Dollars in millions)Impairment charges on Flight equipment held for sale,
aircraft sold or aircraft designated for part-out
    
    $
    21.6
    
    
    $
    425.9Lease related charges on Flight equipment held for sale or
aircraft sold
    
    
    0.7
    
    
    
    89.9Impairment of aircraft likely to be sold
    
    
    19.1
    
    
    
    19.1Loss on sale of flight equipment
    
    
    18.4
    
    
    
    18.4Other net flight equipment marketing activity
    
    
    (2.1
    )
    
    
    (3.0
    )$
    57.7
    
    
    $
    550.3
 Three months ended September 30, 2010
  Impairment and lease related charges on Flight equipment held for sale, aircraft
sold or aircraft designated for part-out:
 
    
    We recorded impairment charges aggregating $21.6 million
and lease related charges
aggregating $0.7 million related to three aircraft reclassified to Flight
equipment held for sale, two of which were part of the 53 aircraft we agreed
to sell in April 2010, as discussed in more detail below. The aggregate net
book value of the aircraft after we recorded an impairment charge of $21.6
million was approximately $55.3 million and is included in Flight equipment
held for sale on our September 30, 2010, Condensed, Consolidated Balance
Sheet.
 Impairment of aircraft likely to be sold:
 
    
    We recorded an impairment charge of $19.1 million related to three
aircraft that we were in discussions to sell to a third party. As of
September 30, 2010, we considered the sale more likely than not to occur and
deemed the aircraft to be impaired.
 Loss on sale of flight equipment:
 
    
    During the three months ended September 30, 2010, we sold two aircraft
from our fleet held for use resulting in realized losses aggregating $18.4
million.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 Nine months ended September 30, 2010
  Impairment and lease related charges on Flight equipment held for sale, aircraft
sold or aircraft designated for part-out:
 
    
    On April 13, 2010, we signed an agreement to sell 53 aircraft from our
existing fleet to a third party for an aggregate purchase price of $1.987
billion. During the nine months ended September 30, 2010, 52 of the 53
aircraft met the criteria for and were transferred to Flight equipment held
for sale, including the two aircraft transferred during the three months
ended September 30, 2010, as discussed above. Due to current market
conditions, we recorded impairment charges aggregating $330.9 million and
related lease charges aggregating $70.1 million for the nine-month period
ended September 30, 2010, related to those 52 aircraft. The aggregate net
book value of the portfolio after the recorded impairment charges of $330.9
million was approximately $1.9 billion.
    
    On July 6, 2010, we signed an agreement to sell six aircraft to a third
party. The six aircraft met the criteria for and were transferred to Flight
equipment held for sale prior to June 30, 2010, and we recorded impairment
charges of $40.1 million and lease related charges of $5.9 million for the
nine months ended September 30, 2010, related to these aircraft.
    
    During the three months ended September 30, 2010, as mentioned above, we
agreed to sell one additional aircraft to a third party. The aircraft met the
criteria for and was transferred to Flight equipment held for sale and we
recorded impairment charges of $9.8 million and lease related charges of
$91,000 related to that aircraft.
    
    On June 22, 2010, we sold two aircraft from our fleet held for use. Prior
to the transaction, we considered the sale more likely than not to occur and
deemed the aircraft to be impaired. During the nine months ended September 30, 2010, we also deemed one aircraft that
we designated for part-out to be impaired. During the nine months ended September 30, 2010,
we recorded impairment charges of $45.1 million and lease related charges of
$13.8 million related to these aircraft.
 Impairment of aircraft likely to be sold:
 
    
    We recorded an impairment charge of $19.1 million related to three
aircraft that we were in discussions to sell to a third party. As of
September 30, 2010, we considered the sale more likely than not to occur and
deemed the aircraft to be impaired.
 Loss on sale of flight equipment:
 
    
    We sold two additional aircraft from our leased fleet, resulting in
realized losses aggregating $18.4 million.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
   Nine months ended September 30, 2009
  D. Flight Equipment Impairment Analysis
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  E. Restricted Cash
 Debt Financings.
 Debt Financings.
 Debt Financings Variable Interest Entities.
 F. Flight Equipment Held for Sale
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
   Flight Equipment Held for Sale
    
    Aircraft
    
    
    Net Book ValueBalance at December 31, 2009
    
    
    
    
    
    $
    Transferred from Flight equipment under operating
lease
    
    
    59
    
    
    
    2,220,424Sold
    
    
    (31
    )
    
    
    (1,246,527
    )Flight equipment held for sale at September 30, 2010
    
    
    28
    
    
    $
    973,897
 -16-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 G. Debt Financings
 September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)SecuredSenior secured bonds
    
    $
    3,900,000
    
    
    $
    ECA financings
    
    
    2,896,428
    
    
    
    3,004,763Bank debt (a)
    
    
    2,155,000
    
    
    
    Other secured financings (b)
    
    
    1,440,556
    
    
    
    153,116Loans from AIG Funding
    
    
    
    
    
    
    3,909,56710,391,984
    
    
    
    7,067,446UnsecuredBonds and Medium-Term Notes
    
    
    16,207,220
    
    
    
    16,566,099Bank debt (c)
    
    
    2,420,000
    
    
    
    5,087,75018,627,220
    
    
    
    21,653,849Total Senior Debt Financings
    
    
    29,019,204
    
    
    
    28,721,295Less: Deferred debt discount
    
    
    (65,381
    )
    
    
    (9,556
    )28,953,823
    
    
    
    28,711,739Subordinated Debt
    
    
    1,000,000
    
    
    
    1,000,000$
    29,953,823
    
    
    $
    29,711,739
 
 (a)
    
    On April 16 2010, we entered into an amendment to our revolving credit facility dated
October 13, 2006. Upon effectiveness of this amendment, approximately $2.2 billion of our
previously unsecured bank debt became secured by the equity interests in certain of our
non-restricted subsidiaries. Those subsidiaries, upon completion of the transfer of
certain aircraft into the subsidiaries, will hold a pool of aircraft with an appraised
value of not less than 133% of the principal amount of the outstanding loans.(b)
    
    Includes secured financings non-recourse to ILFC of $117.7 million and $129.6 million
at September 30, 2010 and December 31, 2009, respectively.(c)
    
    On October 7, 2010, using available cash on hand, we prepaid in full a total of $2
billion in principal plus accrued interest related to the $2 billion revolving credit
agreement dated October 14, 2005. This floating rate obligation had an interest rate of .91% at the time of prepayment. Subsequent to repayment of this obligation, as well as
other scheduled maturities, our composite interest rate increased from 5.17% at September
30, 2010, to 5.45% at October 31, 2010.  Variable Interest Entities .
 Senior Secured Bonds
  -17-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  (i) (ii) (iii) (iv) (v) (vi)
   ECA Financings
     -18-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  (i) (ii) (iii) (iv)
 (i) (ii)
  Secured Bank Debt
  
    
    increase our permitted secured indebtedness basket under the credit facility
from 12.5% to 35% of our Consolidated Tangible Net Assets, as defined in the
credit agreement;
    
    extend the scheduled maturity date of their loans totaling
$2.155 billion to October 2012.
The extended loans will bear interest at LIBOR plus a margin of 2.15%, plus facility fees
of 0.2% on the outstanding principal balance; and
    
    permit liens securing (i)the loans held by the Electing Lenders and (ii)
certain funded term loans in an aggregate amount not to exceed $500 million.
 -19-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  (i) (ii) (iii)
  Other Secured Financing Arrangements
    -20-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  Loans from AIG Funding
  Senior Secured
Notes Unsecured Bonds and Medium Term Notes.
 Unsecured Bonds and Medium-Term Notes
 Automatic Shelf Registration
  Euro Medium-Term Note Programme
 Other Senior Notes
 -21-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  (i) (ii) (iii)
 (i) (ii) (iii) (iv) (v)
  Unsecured Bank Debt
 Revolving Credit Facility: Subsequent Event
 Secured Bank Debt
 Term Loans:
 -22-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 (i) (ii) Secured Bank Debt.
 Subordinated Debt
 (i) (ii) (iii)
  H. Derivative Activities
    Fair Value
Measurements
 -23-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
   Asset Derivatives
    
    
    Liability DerivativesNotional Value
    
    
    Fair Value
    
    
    Notional Value
    
    
    Fair ValueUSD
    
    
    
    
    
    USD(In thousands)September 30, 2010:Derivatives designated as
hedging instruments:Interest rate swap agreements (a)
    
    $
    
    
    
    $
    
    
    
    $
    655,574
    
    
    $
    (65,264
    )Foreign exchange swap agreements
    
    
    1,000,000
    
    
    
    143,948
    
    
    
    
    
    
    
    Total derivatives designated as
hedging instruments
    
    
    
    
    
    $
    143,948
    
    
    
    
    
    
    $
    (65,264
    )Derivatives not designated as
hedging instruments:Interest rate cap agreements
    
    $
    92,346
    
    
    $
    1,051
    
    
    $
    
    
    
    $
    Total derivatives
    
    
    
    
    
    $
    144,999
    
    
    
    
    
    
    $
    (65,264
    )December 31, 2009:Derivatives designated as
hedging instruments:Interest rate swap agreements (a)
    
    $
    
    
    
    $
    
    
    
    $
    1,070,513
    
    
    $
    (66,916
    )Foreign exchange swap agreements
    
    
    1,600,000
    
    
    
    254,261
    
    
    
    14,191
    
    
    
    (574
    )Total derivatives designated as
hedging instruments
    
    
    
    
    
    $
    254,261
    
    
    
    
    
    
    $
    (67,490
    )Derivatives not designated as
hedging instruments:Interest rate cap agreements
    
    $
    100,631
    
    
    $
    4,086
    
    
    $
    
    
    
    $
    Total derivatives
    
    
    
    
    
    $
    258,347
    
    
    
    
    
    
    $
    (67,490
    )
 
 (a)
    
    Converts floating interest rate debt into fixed rate debt. -24-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 During the three and nine months ended September 30, 2010 and 2009, we recorded the
following in OCI related to derivative instruments:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    

    September 30,Gain (Loss)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Effective portion of change in fair
market value of derivatives (a)
    
    $
    116,436
    
    
    $
    96,196
    
    
    $
    (104,798)
    (b)
    
    $
    148,443Amortization of balances of de-designated
hedges and other adjustments
    
    
    1,040
    
    
    
    (121
    )
    
    
    2,332
    
    
    
    (364
    )Foreign exchange component of cross currency
swaps charged (credited) to income
    
    
    (136,420
    )
    
    
    (80,450
    )
    
    
    198,300
    
    
    
    (148,020
    )Income tax effect
    
    
    6,630
    
    
    
    (5,469
    )
    
    
    (33,542
    )
    
    
    (21
    )Net changes in cash flow hedges, net of taxes
    
    $
    (12,314
    )
    
    $
    10,156
    
    
    $
    62,292
    
    
    $
    38
 
 (a)
    
    Includes $(24,397) and $22,797 of combined CVA and MVA for the three and nine month
periods ended September 30, 2010, respectively, and $26,214 and $(34,193) of combined CVA and
MVA for the three and nine month periods ended September 30, 2009, respectively.(b)
    
    Includes losses of $(15,409) on a derivative contract that matured during the nine months
ended September 30, 2010, that was de-designated as a cash flow hedge and then subsequently
re-designated during the life of the contract.  Amount of Unrealized Gain or (Loss)Recorded in OCI on Derivatives(Effective Portion)Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,Derivatives Designated as Cash Flow Hedges
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Interest rate swap agreements
    
    $
    (26,370
    )
    
    $
    (12,256
    )
    
    $
    (30,952
    )
    
    $
    7,747Foreign exchange swap agreements
    
    
    123,207
    
    
    
    82,290
    
    
    
    (147,873
    )
    
    
    81,747Total (a)
    
    $
    96,837
    
    
    $
    70,034
    
    
    $
    (178,825
    )
    
    $
    89,494
 
 (a)
    
    Includes $(24,397) and $22,797 of combined CVA and MVA for the three and nine month
periods ended September 30, 2010, respectively, and $26,214 and $(34,193) of combined CVA and
MVA for the three and nine month periods ended September 30, 2009, respectively. -25-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  Amount of Gain or (Loss) Reclassified fromAOCI Into Income(Effective Portion)Three Months Ended
    
    
    Nine Months EndedLocation of Gain or (Loss) Reclassified from AOCI
    
    September 30,
    
    

    September 30,into Income (Effective Portion)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Interest rate swap agreements  interest expense
    
    $
    (7,633
    )
    
    $
    (10,034
    )
    
    $
    (24,548
    )
    
    $
    (26,015
    )Foreign exchange swap agreements  interest expense
    
    
    (11,966
    )
    
    
    (15,386
    )
    
    
    (49,255
    )
    
    
    (33,672
    )Foreign exchange swap agreements  lease revenue
    
    
    
    
    
    
    (742
    )
    
    
    (224
    )
    
    
    738Total
    
    $
    (19,599
    )
    
    $
    (26,162
    )
    
    $
    (74,027
    )
    
    $
    (58,949
    )
   Amount of Gain or (Loss) Recognizedin Income on Derivatives(Ineffective Portion) (a)Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Derivatives Designated as Cash Flow Hedges:Interest rate swap agreements
    
    $
    (31
    )
    
    $
    (232
    )
    
    $
    (122
    )
    
    $
    (622
    )Foreign exchange swap agreements
    
    
    (152
    )
    
    
    9,559
    
    
    
    (25,781
    )
    
    
    14,733Total
    
    
    (183
    )
    
    
    9,327
    
    
    
    (25,903
    )
    
    
    14,111Derivatives Not Designated as a Hedge:Interest rate cap agreements (b)
    
    
    (583
    )
    
    
    (568
    )
    
    
    (3,011
    )
    
    
    (1,268
    )Reconciliation to Condensed, Consolidated
Statements of Income:Income effect of maturing derivative contracts
    
    
    
    
    
    
    
    
    
    
    (15,409
    )
    
    
    Reclassification of amounts de-designated as
hedges recorded in AOCI
    
    
    (1,040
    )
    
    
    121
    
    
    
    (2,332
    )
    
    
    364Effect from derivatives, net of change in
hedged items due to changes in foreign exchange
rates
    
    $
    (1,806
    )
    
    $
    8,880
    
    
    $
    (46,655
    )
    
    $
    13,207
 
 (a)
    
    All components of each derivatives gain or loss were included in the assessment of
effectiveness.(b)
    
    An additional $0.8 million of amortization of premium paid to the derivative counterparty was recognized in Interest expense during the nine months ended September 30, 2009. -26-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 I. Fair Value Measurements
  Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Counterparty Netting (a)
    
    
    Total(Dollars in thousands)September 30, 2010:Derivative assets
    
    $
    
    
    
    $
    144,999
    (b)
    
    $
    
    
    
    $
    (65,264
    )
    
    $
    79,735Derivative liabilities
    
    
    
    
    
    
    (65,264
    )
    
    
    
    
    
    
    65,264
    
    
    
    Total
    
    $
    
    
    
    $
    79,735
    
    
    $
    
    
    
    $
    
    
    
    $
    79,735December 31, 2009:Derivative assets
    
    $
    
    
    
    $
    258,347
    (b)
    
    $
    
    
    
    $
    (67,490
    )
    
    $
    190,857Derivative liabilities
    
    
    
    
    
    
    (67,490
    )
    
    
    
    
    
    
    67,490
    
    
    
    Total
    
    $
    
    
    
    $
    190,857
    
    
    $
    
    
    
    $
    
    
    
    $
    190,857
 
 (a)
    
    As permitted under GAAP, we have elected to offset derivative assets and derivative
liabilities under our master netting agreement.(b)
    
    The balance includes CVA and MVA aggregating $1.1 million and $24.2 million at
September 30, 2010 and December 31, 2009, respectively. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
    
    
    During the three months ended September 30, 2010, we recorded
impairment charges of $21.6 million related to three aircraft that were
transferred to Flight equipment held for sale and $19.1 million related to three
aircraft that remained in our leased fleet, but were deemed more likely than not
to be sold. The fair value for these aircraft was based upon recoverability
assessments performed as a result of impending sales, in which it was determined
that the carrying amount of the aircraft was not fully recoverable.
 -27-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 
    
    During the nine months ended September 30, 2010, we performed
recoverability assessments in conjunction with potential sales of aircraft and
determined that 62 aircraft were not fully recoverable. Based upon a fair value
analysis, we deemed these aircraft to be impaired and recorded charges of $425.9
million to record the aircraft to their fair value. Of the 62 aircraft that were
impaired, we sold 33 during the nine months ended September 30, 2010, designated
one aircraft for part-out and removed it from our leased fleet, and the remaining
28 were classified as Flight equipment held for sale as of September 30, 2010. In
addition, we performed recoverability assessment on three aircraft in our fleet
held for use that were deemed more likely than not to be sold, and recorded $19.1
million impairment charges related to those aircraft.
 Flight Equipment Marketing
 
    
    During the nine months ended September 30, 2009, we recorded a $7.5
million impairment charge to record an aircraft classified as Flight equipment
held for sale to its fair value. The aircraft was sold in the third quarter of
2009.
  
    
    Based on our annual recoverability review of all fleet aircraft held
for use, the carrying values of 15 aircraft were deemed to have been impaired
during the three months ended September 30, 2010, and we recorded impairment
charges aggregating $348.4 million to write these aircraft down to their
respective fair values for the three and nine month periods ended September 30,
2010. See Note D  Aircraft Impairmentfor more
information. Additionally, during the nine months ended
September 30, 2010, we deemed one additional aircraft to be impaired
and recorded an $8.1 million charge to record it at its fair
value.
  Book Value at
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation
    
    
    Book Value atDecember 31,
    
    
    Impairment
    
    
    
    
    
    
    
    
    
    
    and Other
    
    
    September 30,2009
    
    
    Charges (a)
    
    
    Reclassifications
    
    
    Sales
    
    
    Adjustments
    
    
    2010(Dollars in millions)Flight equipment
under operating
lease
    
    $
    3,398.0
    
    
    $
    (801.5
    )
    
    $
    (2,197.4
    )
    
    $
    (4.5
    )
    
    $
    (63.2
    )
    
    $
    331.4Flight equipment
held for sale
    
    
    
    
    
    
    
    
    
    
    2,194.2
    
    
    
    (1,220.6
    )
    
    
    0.3
    
    
    
    973.9Lease receivables
and other assets
    
    
    
    
    
    
    
    
    
    
    3.2
    
    
    
    (0.1
    )
    
    
    
    
    
    
    3.1Total
    
    $
    3,398.0
    
    
    $
    (801.5
    )
    
    $
    
    
    
    $
    (1,225.2
    )
    
    $
    (62.9
    )
    
    $
    1,308.4
 
 (a)
    
    We recorded impairment charges of $389.1 million during the three months ended September
30, 2010. -28-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
 J. Fair Value Disclosures of Financial Instruments
  Cash, Including Restricted Cash
 Notes Receivable
 Debt Financing
 Long-term fixed rate debt:
 Floating rate non-ECA debt:
 ECA debt:
 Junior subordinated debt:
 Derivatives
 Guarantees
 -29-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  September 30, 2010
    
    
    December 31, 2009Carrying Amount of Asset
    
    
    Fair Value of Asset
    
    
    Carrying Amount of Asset
    
    
    Fair Value of Asset(Liability)
    
    
    (Liability)
    
    
    (Liability)
    
    
    (Liability)(Dollars in thousands)Cash, including restricted cash
    
    $
    4,284,354
    
    
    $
    4,284,354
    
    
    $
    652,067
    
    
    $
    652,067Notes receivable
    
    
    83,557
    
    
    
    82,977
    
    
    
    112,060
    
    
    
    107,063Debt financing (including loans
from AIG Funding, subordinated debt
and foreign currency adjustment,
excluding debt discount)
    
    
    (30,212,004
    )
    
    
    (30,749,972
    )
    
    
    (30,112,395
    )
    
    
    (26,762,955
    )Derivative (liabilities) assets
    
    
    79,735
    
    
    
    79,735
    
    
    
    190,857
    
    
    
    190,857Guarantees
    
    
    (10,493
    )
    
    
    (12,229
    )
    
    
    (10,860
    )
    
    
    (12,886
    )
 K. Related Party Transactions
  . Debt Financings.
 Fair Value Measurements Derivative Activities
 -30-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,Income Statement
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Expense (income):Interest expense on loans from AIG Funding
    
    $
    35,382
    
    
    $
    28,342
    
    
    $
    157,926
    
    
    $
    59,936Effect from derivatives on contracts with AIGFP
    
    
    (1,223
    )
    
    
    9,448
    
    
    
    (43,644
    )
    
    
    14,475Interest on derivative contracts with AIGFP
    
    
    19,599
    
    
    
    25,420
    
    
    
    73,803
    
    
    
    59,688Lease revenue related to hedging of lease
receipts with AIGFP
    
    
    
    
    
    
    742
    
    
    
    224
    
    
    
    (738
    )Allocation of corporate costs from AIG
    
    
    22,491
    
    
    
    1,882
    
    
    
    28,369
    
    
    
    7,368Management fees received
    
    
    (2,394
    )
    
    
    (2,453
    )
    
    
    (7,079
    )
    
    
    (7,113
    )Management fees paid to subsidiaries of AIG
    
    
    44
    
    
    
    247
    
    
    
    398
    
    
    
    683
 Balance Sheet
    
    September 30, 2010
    
    
    December 31, 2009(Dollars in thousands)Asset (liability):Loans payable to AIG Funding
    
    $
    
    
    
    $
    (3,909,567
    )Derivative assets, net
    
    
    78,684
    
    
    
    186,771Income taxes payable to AIG
    
    
    (133,056
    )
    
    
    (80,924
    )Taxes benefit sharing payable to AIG
    
    
    
    
    
    
    (85,000
    )Accrued corporate costs payable to AIG
    
    
    (25,999
    )
    
    
    (5,298
    )Accrued interest payable to AIG
    
    
    
    
    
    
    (672
    )
 L. Commitments and Contingencies
 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 September 30,
2010, 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 September
30, 2010, the guaranteed value, without any offset for the projected value
of the aircraft, was approximately $24 million.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  Legal Contingencies
 
    
    Flash Airlines:We are named in lawsuits in connection with the January 3, 2004,
crash of our Boeing 737-300 aircraft on lease to Flash Airlines, an Egyptian carrier.
These lawsuits were filed by the families of victims on the flight and seek
unspecified damages for wrongful death, costs and fees. The initial lawsuit was filed
in May 2004 in California, and subsequent lawsuits were filed in California and
Arkansas. All cases filed in the U.S. were dismissed on the grounds of forum non
conveniens and transferred to the French Tribunal de Grande Instance civil court in
either Bobigny or Paris. The Bobigny plaintiffs challenged French jurisdiction,
whereupon the French civil court decided to retain jurisdiction. On appeal the Paris
Court of Appeal reversed, and on appeal the French Cour de Cassation elected to defer
its decision pending a trial on the merits. We believe we are adequately covered in
these cases by the liability insurance policies carried by Flash Airlines and we have
substantial defenses to these 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: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, Air Company Atlant-Soyuz
Incorporated, which defaulted under the lease. The aircraft has been detained by the
Russian customs authorities on the basis of certain alleged violations of the Russian
customs code by KrasAir. While we have prevailed in court proceedings, Russian custom
authorities will not provide relevant documents to permit the aircraft to be removed
from Russia. We are now pursuing alternative options to resolve the situation and, as
such, have performed a recoverability assessment of the fair value of the aircraft.
The aircraft was deemed to be impaired and we recorded an $8.1 million impairment
charge in the nine months ended September 30, 2010. The aircraft had a net book value
of $19.5 million at September 30, 2010. We cannot predict 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.
    
    Estate of Volare Airlines: In November 2004, Volare, an Italian airline, filed for
bankruptcy in Italy. Prior to Volares bankruptcy, we leased to Volare, through
wholly-owned subsidiaries, two A320-200 aircraft and four A330-200 aircraft. In
addition, we managed the lease to Volare by an entity that is a related party to us
of one A330-200 aircraft. In October 2009, the Volare bankruptcy receiver filed a
claim in an Italian court in the amount of 29.6 million against us and our related
party for the return to the Volare estate of all payments made by it to us and our
related party in the year prior to Volares bankruptcy filing. We have engaged
Italian counsel to represent us and intend
to defend this matter vigorously. We cannot predict the outcome of this matter, but we
do not believe that it will be material to our consolidated financial position,
results of operations or cash flows.
    
    Airblue Limited:We are named in a lawsuit in connection with the July 28, 2010,
crash of our Airbus A320-200 aircraft on lease to Airblue Limited, a Pakistani
carrier. The lawsuit was filed by the families of victims on the flight and seeks
unspecified damages for wrongful death, costs and fees. The case was originally filed
in a circuit court in Cook County, Illinois, but was subsequently removed to a U.S.
district court. We believe we are adequately covered in this case by the liability
insurance policies carried by Airblue Limited and we have substantial defenses to
this action. We do not believe that the outcome of this lawsuit will have a material
effect on our consolidated financial condition, results of operations or cash flows.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  M. Variable Interest Entities
 (i) (ii) Debt Financings
 Investment Activities
  (i) (ii)
 Non-Recourse Financing Structures
  -33-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
   Wholly-Owned ECA Financing Vehicles
  Other Secured Financings
 Debt Financings
 Wholly-Owned Leasing Entities
 .
 N. Out of Period Adjustments
  -34-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2010
(Unaudited)
  O. Subsequent Event
  -35-




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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
 Part II  Item 1A. Risk Factors,
 Overview
  Debt
Financing
 Operating Results
 (i) (ii) (iii)
 Impairment of aircraft sold, agreed to be sold, held for sale or designated for part-out:
 -36-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Impairment of our fleet held for use Our Fleet Industry Condition and Revenue Sources Notes to
Condensed, Consolidated Financial Statements
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2010
    
    
    September 30, 2010(Dollars in millions)Impairment of our fleet held for use
    
    $
    348.4
    (a)
    
    $
    356.5
    (a)Total aircraft impairment
    
    
    348.4
    
    
    
    356.5Impairment of aircraft held for sale, aircraft sold or aircraft
designated for
part-out
    
    
    21.6
    
    
    
    425.9Lease related charges on Flight equipment held for sale or aircraft sold
    
    
    0.7
    
    
    
    89.9Impairment of aircraft more likely than not to be sold
    
    
    19.1
    
    
    
    19.1Total impairment and lease related charges included in Flight
equipment
marketing
    
    
    41.4
    
    
    
    534.9Loss on sale of flight equipment
    
    
    18.4
    
    
    
    18.4Total sale of flight equipment
    
    
    18.4
    
    
    
    18.4Total effect on operating income
    
    $
    408.2
    (b)
    
    $
    909.8
    (b)
 
 (a)
    
    Impairment of our fleet held for use is presented separately as Aircraft impairment in our
Condensed, Consolidated Statements of Income.(b)
    
    The remaining charges of $59.8 million and $553.3 million for the three and nine months ended
September 30, 2010, respectively, is recorded in Flight equipment marketing in our Condensed,
Consolidated Statements of Income. -37-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Cost of borrowing:
 Our Fleet
  Notes to Condensed, Consolidated Financial Statements
  Number ofAircraftFlight equipment under operating leases at December 31, 2009
    
    
    993Aircraft reclassified from Net investment in finance and sales-type leases
    
    
    7Aircraft purchases
    
    
    5Aircraft sold
    
    
    (4
    )Aircraft transferred to Flight equipment held for sale (a)
    
    
    (59
    )Aircraft designated for part-out
    
    
    (1
    )Total loss
    
    
    (2
    )Flight equipment under operating leases at September 30, 2010
    
    
    939
 
 (a)
    
    As of September 30, 2010, 31 of these aircraft were sold to third parties. -38-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Debt Financing
  (i) (ii) (iii) (iv) Liquidity
 Industry Condition and Sources of Revenue
    -39-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Operating Results
  -40-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Liquidity
 (i) (ii) (iii) (iv)
 Notes to Condensed Consolidated Financial Statements.
  -41-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Operating Results
 Part II  Item 1A. Risk Factors  Liquidity Risk 
   Our Relationship with AIG
 Potential Change in Ownership
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 AIG Loan from the FRBNY
 Debt Financings-Loans from AIG Funding .
 AIG Going Concern Consideration
  Critical Accounting Policies and Estimates
   
    
    Lease Revenue
    
    Initial Indirect Costs
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
    
    Flight Equipment Marketing
    
    Provision for Overhauls
    
    Flight Equipment
    
    Derivative Financial Instruments
    
    Fair Value Measurements
    
    Income Taxes
 Part II  Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations Notes to Condensed,
Consolidated Financial Statements
 Debt Financings
  (i) (ii) (iii) (iv) Other Secured Financing
Arrangements
 -44-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  September 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)SecuredSenior secured bonds
    
    $
    3,900,000
    
    
    $
    ECA financings
    
    
    2,896,428
    
    
    
    3,004,763Bank debt (a)
    
    
    2,155,000
    
    
    
    Other secured financings (b)
    
    
    1,440,556
    
    
    
    153,116Loans from AIG Funding
    
    
    
    
    
    
    3,909,56710,391,984
    
    
    
    7,067,446UnsecuredBonds and Medium-Term Notes
    
    
    16,207,220
    
    
    
    16,566,099Bank debt (c)
    
    
    2,420,000
    
    
    
    5,087,75018,627,220
    
    
    
    21,653,849Total Senior Debt Financings
    
    
    29,019,204
    
    
    
    28,721,295Less: Deferred debt discount
    
    
    (65,381
    )
    
    
    (9,556
    )28,953,823
    
    
    
    28,711,739Subordinated Debt
    
    
    1,000,000
    
    
    
    1,000,000$
    29,953,823
    
    
    $
    29,711,739Selected interest rates and ratios which
include the economic effect of derivative
instruments:Composite interest rate (c)
    
    
    5.17
    %
    
    
    4.35
    %Percentage of total debt at fixed rates
    
    
    71.21
    %
    
    
    58.64
    %Composite interest rate on fixed rate debt
    
    
    6.26
    %
    
    
    5.42
    %Bank prime rate
    
    
    3.25
    %
    
    
    3.25
    %
 
 (a)
    
    On April 16, 2010, we entered into an amendment to our revolving credit facility dated
October 13, 2006. Upon effectiveness of this amendment, approximately $2.2 billion of our
previously unsecured bank debt became secured by the equity interests in certain of our
non-restricted subsidiaries. Those subsidiaries, upon completion of the transfer of certain
aircraft into the subsidiaries, will hold a pool of aircraft with an appraised value of not
less than 133% of the principal amount of the outstanding loans.(b)
    
    Includes secured financings non-recourse to ILFC of $117.7 million and $129.6 million at
September 30, 2010 and December 31, 2009, respectively.(c)
    
    On October 7, 2010, using available cash on hand, we prepaid in full a total of $2 billion in
principal plus accrued interest related to the $2 billion revolving credit agreement dated
October 14, 2005. This floating rate obligation had an interest rate of .91% at the time of
prepayment. Subsequent to repayment of this obligation, as well as other scheduled maturities,
our composite interest rate increased from 5.17% at September 30, 2010, to 5.45% at October
31, 2010.  -45-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
    -46-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  September 30,2010(Unaudited)Earnings:Net Income
    
    $
    152,226Add:Provision for income taxes
    
    
    102,317Fixed charges
    
    
    1,491,177Less:Capitalized interest
    
    
    (6,231
    )Earnings as adjusted (A)
    
    $
    1,739,489Fixed charges and preferred stock dividends:Preferred dividend requirements
    
    $
    775Ratio of income before provision for income taxes to net income
    
    
    167
    %Preferred dividend factor on pretax basis
    
    
    1,294Fixed Charges:Interest expense
    
    
    1,481,666Capitalized interest
    
    
    6,231Interest factors of rents
    
    
    3,280Fixed charges as adjusted (B)
    
    
    1,491,177Fixed charges and preferred stock dividends (C)
    
    $
    1,492,471Ratio of earnings to fixed charges ((A) divided by (B))
    
    
    1.17
xRatio of earnings to fixed charges and preferred stock dividends ((A) divided by (C))
    
    
    1.17
x
 Notes to Condensed, Consolidated Financial
Statements
 Senior Secured Bonds
  -47-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 (i) (ii) (iii) (iv) (v) (vi)
   ECA Financings
     -48-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 (i) (ii) (iii) (iv)
 (i) (ii)
  Secured Bank Debt
  
    
    increase our permitted secured indebtedness basket under the credit facility from
12.5% to 35% of our Consolidated Tangible Net Assets, as defined in the credit
agreement;
    
    extend the scheduled maturity date of their loans totaling
$2.155 billion to October 2012.
The extended loans will bear interest at LIBOR plus a margin of 2.15%, plus facility fees
of 0.2% on the outstanding principal balance; and
    
    permit liens securing (i) the loans held by the
Electing Lenders and (ii) certain
funded term loans in an aggregate amount not to exceed $500 million.
  -49-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 (i) (ii) (iii)
  Other Secured Financing Arrangements
    Loans from AIG Funding
  -50-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Senior Secured Notes Unsecured Bonds and Medium Term Notes.
 Unsecured Bonds and Medium-Term Notes
 Automatic Shelf Registration
  Euro Medium-Term Note Programme
 Other Senior Notes
 (i) (ii) (iii)
 (i) (ii) (iii) (iv) (v)
 -51-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Unsecured Bank Debt
 Revolving Credit Facility:
 Secured Bank Debt
 Term Loans: (i) (ii) Secured Bank Debt.
 Subordinated Debt
 (i) (ii) (iii)
  -52-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Commercial Paper
 Commercial Paper:
 Derivatives
    Credit Ratings
 (i) (ii)
  -53-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Unsecured Debt Ratings
 Rating Agency
    
    Long-term Debt
    
    Corporate Rating
    
    Outlook
    
    Date of Last Ratings ActionFitch
    
    BB
    
    BB
    
    Evolving
    
    April 30, 2010Moodys
    
    B1
    
    B1
    
    Stable
    
    August 11, 2010S&P
    
    BB+
    
    BBB-
    
    Negative
    
    January 25, 2010
 Secured Debt Ratings
 $3.9 billionRating Agency
    
    $750 Million Term Loan
    
    $550 Million Term Loan
    
    Senior Secured NotesFitch
    
    BBB-
    
    BB
    
    BBB-Moodys
    
    Ba2
    
    Ba3
    
    Ba3S&P
    
    BBB
    
    BBB-
    
    BBB-
  -54-




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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
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter(Dollars in thousands)Bonds and
medium-term notes
    
    $
    16,207,220
    
    
    $
    395,846
    
    
    $
    4,399,065
    
    
    $
    3,570,616
    
    
    $
    3,541,131
    
    
    $
    1,040,298
    
    
    $
    3,260,264Unsecured Bank Loans
(a)
    
    
    2,420,000
    
    
    
    2,000,000
    
    
    
    420,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Senior Secured Bonds
    
    
    3,900,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,350,000
    
    
    
    2,550,000Secured Bank Loans
    
    
    2,155,000
    
    
    
    
    
    
    
    
    
    
    
    2,155,000
    
    
    
    
    
    
    
    
    
    
    
    ECA Financings
    
    
    2,896,428
    
    
    
    103,275
    
    
    
    458,007
    
    
    
    428,960
    
    
    
    428,960
    
    
    
    423,863
    
    
    
    1,053,363Other Secured
Financings
    
    
    1,440,556
    
    
    
    3,332
    
    
    
    13,901
    
    
    
    14,878
    
    
    
    15,963
    
    
    
    36,716
    
    
    
    1,355,766Subordinated Debt
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Interest Payments on
Debt Outstanding
(b)(c)
    
    
    9,018,927
    
    
    
    433,237
    
    
    
    1,395,135
    
    
    
    1,191,502
    
    
    
    965,936
    
    
    
    771,128
    
    
    
    4,261,989Operating Leases (d)(e)
    
    
    62,706
    
    
    
    2,918
    
    
    
    11,968
    
    
    
    12,448
    
    
    
    12,947
    
    
    
    13,362
    
    
    
    9,063Pension Obligations (f)
    
    
    8,483
    
    
    
    1,268
    
    
    
    1,319
    
    
    
    1,370
    
    
    
    1,431
    
    
    
    1,512
    
    
    
    1,583Purchase Commitments
    
    
    13,536,200
    
    
    
    
    
    
    
    281,700
    
    
    
    639,400
    
    
    
    1,103,000
    
    
    
    1,822,700
    
    
    
    9,689,400Total
    
    $
    52,645,520
    
    
    $
    2,939,876
    
    
    $
    6,981,095
    
    
    $
    8,014,174
    
    
    $
    6,069,368
    
    
    $
    5,459,579
    
    
    $
    23,181,428
 Contingent Commitments
 Contingency Expiration by Fiscal YearTotal
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter(Dollars in thousands)AVGs (g)
    
    $
    553,483
    
    
    $
    
    
    
    $
    27,842
    
    
    $
    78,950
    
    
    $
    96,003
    
    
    $
    38,074
    
    
    $
    312,614Total (h)
    
    $
    553,483
    
    
    $
    
    
    
    $
    27,842
    
    
    $
    78,950
    
    
    $
    96,003
    
    
    $
    38,074
    
    
    $
    312,614
 
 (a)
    
    On October 7, 2010, using available cash on hand, we prepaid in full a total of $2
billion in principal plus accrued interest related to the $2 billion revolving credit
agreement dated October 14, 2005. This floating rate obligation had an interest rate of .91%
at the time of prepayment. Subsequent to repayment of this obligation, as well as other
scheduled maturities, our composite interest rate increased from 5.17% at September 30, 2010,
to 5.45% at October 31, 2010.(b)
    
    Future interest payments on floating rate debt are estimated using floating interest
rates in effect at September 30, 2010.(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 $6.9 million
receivable 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 2010 consists
of total estimated allocations for 2010 and the column Thereafter consists of the 2015
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 $209.8 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. -55-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Off-Balance-Sheet Arrangements
 Notes to Condensed, Consolidated Financial Statements
 Results of Operations
 Income before Income Taxes for the Three and Nine Months Ended September 30, 2010 Versus 2009
  
    
    Impairment of aircraft sold, agreed to be sold, held for sale or designated for
part-out:During the nine months ended September 30, 2010, we reclassified from Flight
equipment under operating leases into Flight equipment held for sale 59 aircraft that we
intended to sell to generate liquidity and completed the sale of 31 of those aircraft. Due
to current market conditions, we recorded impairment charges and lease related charges on
those aircraft during the nine months ended September 30, 2010. As part of our ongoing
fleet strategy, we completed the sale of four additional aircraft, identified another three
aircraft as likely to be sold and designated one aircraft for part-out. Impairment charges
were recorded related to those aircraft. Impairment and lease related charges related to
aircraft sold, agreed to be sold, held for sale or designated for part-out aggregated
approximately $41 million and $535 million for the three months and nine months ended
September 30, 2010, respectively.
    
    Impairment of our fleet held for use: For the three months ended September 30, 2010, we
recorded impairment charges aggregating approximately $348 million related to 15 aircraft,
as part of an annual recoverability analysis of our entire fleet held for use. The
impairment charges resulted from changes in managements outlook related to the future
recovery of the airline industry due to a decrease in demand for certain aircraft types,
expected increased volatility in fuel costs and changes in other macroeconomic conditions
which, when aggregated, resulted in lower future estimated lease rates. See Overview  Our
Fleetand Overview  Industry Condition and Revenue Sources. For the nine months ended
September 30, 2010, we recorded impairment charges related to 16 aircraft in our fleet
available for use aggregating approximately $357 million.
    
    Cost of borrowing: Our cost of borrowing is increasing as we refinance our existing debt
with new financing arrangements, reflecting relatively higher interest rates caused by our
current long-term debt ratings. Our average composite interest rate for the three- and
nine-month periods ended September 30, 2010, increased 0.94% and 0.45%, respectively, as
compared to the same periods in 2009. Our average debt outstanding decreased by
approximately $380 million and $1.6 billion for the three and nine-month periods ended
September 30, 2010, respectively, as compared to the same periods in 2009. On October 7,
2010, using available cash on hand, we prepaid in full a total of $2 billion in principal
plus accrued interest related to the $2 billion revolving credit agreement dated October
14, 2005. This floating rate obligation had an interest rate of .91% at the time of prepayment. Subsequent to repayment of this
obligation, as well as other scheduled maturities, our composite interest rate increased
from 5.17% at September 30, 2010, to 5.45% at October 31, 2010.
    
    Additionally, as our average fleet age increases, we anticipate that estimated future
overhaul reimbursements will increase. We recorded additional charges to Provision for
overhauls during the months ended September 30, 2010, to reflect the increase. See Results
of Operations  Nine Months Ended September 30, 2010.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
  Three Months Ended September 30, 2010 Versus 2009
 (i) (ii) (iii) (iv) (i) (ii)
  Notes to Condensed, Consolidated Financial Statements
 (i) (ii) (iii) (iv)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Increase2010
    
    2009
    
    (Decrease)Beginning of Quarter
    
    
    5.07
    %
    
    
    4.25
    %
    
    
    0.82
    %End of Quarter
    
    
    5.17
    %
    
    
    4.11
    %
    
    
    1.06
    %Average
    
    
    5.12
    %
    
    
    4.18
    %
    
    
    0.94
    %
 Notes to Condensed, Consolidated
Financial Statements.
 (i) (ii)
   (i) (ii) (iii)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Nine Months Ended September 30, 2010 Versus 2009
 (i) (ii) (i) (ii) (iii) (iv)
  Notes to Condensed, Consolidated Financial Statements
 (i) (ii) (iii) (iv) (i) (ii)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  2010
    
    
    2009
    
    
    Increase 
(Decrease)Beginning of nine months
    
    
    4.35
    %
    
    
    4.51
    %
    
    
    (0.16
    )%End of nine months
    
    
    5.17
    %
    
    
    4.11
    %
    
    
    1.06
    %Average
    
    
    4.76
    %
    
    
    4.31
    %
    
    
    0.45
    %
 Notes to Condensed, Consolidated Financial Statements.
 (i) (ii) (iii)
   (i) (ii) (iii) (i) (ii) (iii) (iv) v) (vi)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Value at Risk
     ILFC Market RiskAt


    
    
    
    
    AtSeptember 30, 2010
    
    
    December 31, 2009(Dollars in millions)Average
    
    
    High
    
    
    Low
    
    
    Average
    
    
    High
    
    
    LowCombined
    
    $
    64.7
    
    
    $
    106.1
    
    
    $
    20.0
    
    
    $
    46.5
    
    
    $
    80.0
    
    
    $
    35.9Interest Rate
    
    
    64.6
    
    
    
    106.1
    
    
    
    20.0
    
    
    
    46.6
    
    
    
    80.0
    
    
    
    36.2Currency
    
    
    0.1
    
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    0.7
    
    
    
    0.1
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ITEM 4. CONTROLS AND PROCEDURES
 (A)
    
    Evaluation of Disclosure Controls and Procedures
   (B)
    
    Changes in Internal Control Over Financial Reporting
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Flash Airlines:
 Krasnoyarsk Airlines:
 Estate of Volare Airlines:
 Airblue Limited:
  
 ITEM 1A. RISK FACTORS
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PART II. OTHER INFORMATION
 Capital Structure Risk
   
    
    making it more difficult for us to satisfy our obligations with respect to our
indebtedness;
 
    
    requiring us to dedicate a substantial portion of our cash flow from operations
to payments on our indebtedness, thereby reducing funds available for other
purposes, including acquiring new aircraft and exploring business opportunities;
 
    
    increasing our vulnerability to adverse economic and industry conditions;
 
    
    limiting our flexibility in planning for, or reacting to, changes in our business
and industry; and
 
    
    limiting our ability to borrow additional funds or refinance our existing
indebtedness.
 Liquidity Risk
  (i) (ii) (iii) (iv)
 Notes to Condensed Consolidated
Financial Statements.
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PART II. OTHER INFORMATION (CONTINUED)
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PART II. OTHER INFORMATION (CONTINUED)
 Borrowing Risks
 Credit Ratings Downgrade Risk -
 (i) (ii)
  Interest Rate Risk -
  Restrictive Covenants on Our Operations
  
    
    incur debt;
 
    
    encumber our assets;
    
    dispose of certain assets;
 
    
    consolidate, merge, sell or otherwise dispose of all or substantially all of our
assets;
 
    
    enter into sale-leaseback transactions;
 
    
    make equity or debt investments in other parties;
 
    
    enter into transactions with affiliates;
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PART II. OTHER INFORMATION (CONTINUED)
 
    
    make capital expenditures;
 
    
    designate our subsidiaries as unrestricted subsidiaries; and
 
    
    pay dividends and distributions.
  Managements Discussion and Analysis of Financial Condition and
Results of Operations  Debt Financings
 Relationship with AIG
 AIG as Our Parent Company
 AIG as Our Counterparty of Derivatives
 AIG Going Concern Consideration
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PART II. OTHER INFORMATION (CONTINUED)
 Key Personnel Risk
  Overall Airline Industry Risk
  
    
    Demand for air travel
    
    
    
    
    
    Geopolitical events
    
    Competition between carriers
    
    
    
    
    
    Security, terrorism and war
    
    Fuel prices and availability
    
    
    
    
    
    Worldwide health concerns
    
    Labor costs and stoppages
    
    
    
    
    
    Equity and borrowing capacity
    
    Maintenance costs
    
    
    
    
    
    Environmental concerns
    
    Employee labor contracts
    
    
    
    
    
    Government regulation
    
    Air traffic control infrastructure constraints
    
    
    
    
    
    Interest rates
    
    Airport access
    
    
    
    
    
    Overcapacity
    
    Insurance costs and coverage
    
    
    
    
    
    Natural disasters
    
    Heavy reliance on automated systems
  
    
    lower demand for the aircraft in our fleet and, generally, reduced market lease
rates and lease margins;
    
    a higher incidence of lessee defaults, lease restructurings and repossessions
affecting net income due to maintenance, consulting and legal costs associated with
the repossessions, as well as lost revenue for the time the aircraft are off lease
and possibly lower lease rates from the new lessees;
    
    a higher incidence of situations where we engage in restructuring lease rates for
our troubled customers which reduces overall lease revenue;
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PART II. OTHER INFORMATION (CONTINUED)
 
    
    an inability to immediately place new and used aircraft on commercially
acceptable terms when they become available through our purchase commitments and
regular lease terminations, resulting in lower lease margins due to aircraft not
earning revenue and resulting in payments for storage, insurance and maintenance;
and
    
    a loss if our aircraft is damaged or destroyed by an event specifically excluded
from the insurance policy such as dirty bombs, bio-hazardous materials and
electromagnetic pulsing.
 Lessee Non-Performance Risk
 Overall Airline Industry
Risk
  Airframe, Engine and Other Manufacturer Risks
  
    
    missed or late delivery of aircraft ordered by us and an inability to meet our
contractual obligations to our customers, resulting in lost or delayed revenues,
lower growth rates and strained customer relationships;
    
    an inability to acquire aircraft and related components on terms which will allow
us to lease those aircraft to customers at a profit, resulting in lower growth rates
or a contraction in our fleet;
    
    a marketplace with too many aircraft available, creating downward pressure on
demand for the aircraft in our fleet and reduced market lease rates;
    
    poor customer support from the manufacturers of aircraft and components resulting
in reduced demand for a particular manufacturers product, creating downward
pressure on demand for those aircraft in our fleet and reduced market lease rates
for those aircraft; and
    
    reduction in our competitiveness due to deep discounting by the manufacturers,
which may lead to reduced market lease rates and may impact our ability to remarket
or sell aircraft in our fleet.
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PART II. OTHER INFORMATION (CONTINUED)
  Aircraft Related Risks
 Residual Value  (i) (ii) (iii) Notes to Condensed, Consolidated Financial
Statements
 Obsolescence Risk 
 Greenhouse Gas Emissions Risk 
 Other Risks
 Foreign Currency Risk 
 Accounting Pronouncements 
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PART II. OTHER INFORMATION (CONTINUED)
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PART II. OTHER INFORMATION (CONTINUED)
 
 ITEM 6. EXHIBITS
 a)
    
    Exhibits
 3.1
    
    Restated Articles of Incorporation of the
Company (filed as an exhibit to Form 10-Q for the quarter ended
September 30, 2008, and incorporated herein by reference).3.2
    
    Amended and Restated By-laws of the Company
(filed as an exhibit to Form 10-Q for the quarter ended June 30, 2010,
and incorporated herein by reference).4.1
    
    Indenture, dated as of August 11, 2010,
between International Lease Finance Corporation and The Bank of New
York Mellon Trust Company, N.A., as paying agent, security registrar
and authentication agent and trustee (filed as an exhibit to Form 8-K
filed on August 20, 2010, and incorporated herein by reference).4.2
    
    Registration Rights Agreement, dated August
20, 2010 among International Lease Finance Corporation and Banc of
America Securities LLC, Citigroup Global Markets Inc., and J.P. Morgan
Securities Inc., as representatives of the initial purchasers (filed
as an exhibit to Form 8-K filed on August 20, 2010, and incorporated
herein by reference).4.3
    
    Supplemental Indenture, dated as of August
20, 2010 to the indenture dated August 1, 2006 between International
Lease Finance Corporation and Deutsche Bank Trust Company Americas as
trustee (filed as an exhibit to Form 8-K filed on August 20, 2010, and
incorporated herein by reference).4.4
    
    Officers Certificate dated as of August 20,
2010, establishing the terms of the Unsecured Notes (filed as an
exhibit to Form 8-K filed on August 20, 2010, and incorporated herein
by reference).4.5
    
    The Company agrees to furnish to the
Commission upon request a copy of each instrument with respect to
issues of long-term debt of the Company and its subsidiaries, the
authorized principal amount of which does not exceed 10% of the
consolidated assets of the Company and its subsidiaries.10.1
    
    Aircraft Mortgage and Security Agreement and
Guaranty, dated as of August 11, 2010, among International Lease
Finance Corporation, ILFC Ireland Limited, ILFC (Bermuda) III, Ltd.,
the additional grantors referred to therein, and Wells Fargo Bank
Northwest, National Association. (Portions of this exhibit have been
omitted pursuant to a request for confidential treatment.)12.
    
    Computation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends.31.1
    
    Certification of Chief Executive Officer.31.2
    
    Certification of Senior Vice President and Chief Financial Officer.32.1
    
    Certification under 18 U.S.C., Section 1350.
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SIGNATURES
   November 8, 2010
    /s/ Henri CourpronHENRI COURPRONChief Executive Officer
(Principal Executive Officer)November 8, 2010
    /s/ Frederick S. CromerFREDERICK S. CROMERSenior Vice President and
Chief Financial Officer (Principal Financial Officer)November 8, 2010
    /s/ Kurt H. SchwarzKURT H. SCHWARZSenior Vice President, Chief Accounting Officer and
Controller (Principal Accounting Officer) -74-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  Exhibit No.3.1
    
    
    Restated Articles of Incorporation of the Company (filed as an
exhibit to Form 10-Q for the quarter ended September 30, 2008, and incorporated
herein by reference).3.2
    
    
    Amended and Restated By-laws of the Company (filed as an exhibit to
Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by
reference).4.1
    
    
    Indenture, dated as of August 11, 2010, between International Lease
Finance Corporation and The Bank of New York Mellon Trust Company, N.A., as paying
agent, security registrar and authentication agent and trustee (filed as an
exhibit to Form 8-K filed on August 20, 2010, and incorporated herein by
reference).4.2
    
    
    Registration Rights Agreement, dated August 20, 2010 among
International Lease Finance Corporation and Banc of America Securities LLC,
Citigroup Global Markets Inc., and J.P. Morgan Securities Inc., as representatives
of the initial purchasers (filed as an exhibit to Form 8-K filed on August 20,
2010, and incorporated herein by reference).4.3
    
    
    Supplemental Indenture, dated as of August 20, 2010 to the indenture
dated August 1, 2006 between International Lease Finance Corporation and Deutsche
Bank Trust Company Americas as trustee (filed as an exhibit to Form 8-K filed on
August 20, 2010, and incorporated herein by reference).4.4
    
    
    Officers Certificate dated as of August 20, 2010, establishing the
terms of the Unsecured Notes (filed as an exhibit to Form 8-K filed on August 20,
2010, and incorporated herein by reference).4.5
    
    
    The Company agrees to furnish to the Commission upon request a copy
of each instrument with respect to issues of long-term debt of the Company and its
subsidiaries, the authorized principal amount of which does not exceed 10% of the
consolidated assets of the Company and its subsidiaries.10.1
    
    
    Aircraft Mortgage and Security Agreement and Guaranty, dated as of
August 11, 2010, among International Lease Finance Corporation, ILFC Ireland
Limited, ILFC (Bermuda) III, Ltd., the additional grantors referred to therein,
and Wells Fargo Bank Northwest, National Association. (Portions of this exhibit
have been omitted pursuant to a request for confidential treatment.)12.
    
    
    Computation of Ratios of Earnings to Fixed Charges and Preferred
Stock Dividends.31.1
    
    
    Certification of Chief Executive Officer.31.2
    
    
    Certification of Senior Vice President and Chief Financial
Officer.32.1
    
    
    Certification under 18 U.S.C., Section 1350.
 -75-