##### 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, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-31616
 INTERNATIONAL LEASE FINANCE CORPORATION
  California
    
    22-3059110(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)10250 Constellation Blvd., Suite 3400
Los Angeles, California
(Address of principal executive offices)
    
    90067
(Zip Code)
 (310) 788-1999
 þ 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 except for December 31, 2007)Condensed Consolidated Balance Sheets
March 31, 2008 and December 31,
2007
    
    
    2Condensed Consolidated Statements of Income
Three months ended March 31, 2008 and
2007
    
    
    3Condensed Consolidated Statements of Comprehensive Income
Three months ended March 31, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 2008 and
2007
    
    
    5Notes to Condensed Consolidated Financial
Statements
    
    
    7Item 2. Managements Discussion and Analysis of the Financial
Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market
Risk
    
    
    25Item 4T. Controls and Procedures
    
    
    26Part II. Other InformationItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 6. Exhibits
    
    
    28Signatures
    
    
    30EXHIBIT 12EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32




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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)
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCash, including interest bearing accounts of $120,023 (2008) and $171,609
(2007)
    
    $
    137,142
    
    
    $
    182,772Current income taxes
    
    
    161,622
    
    
    
    138,405Notes receivable, net of allowance, and net investment in finance and
sales-type leases
    
    
    456,680
    
    
    
    418,510Flight equipment under operating leases
    
    
    53,455,779
    
    
    
    52,174,479Less accumulated depreciation
    
    
    10,807,329
    
    
    
    10,376,81942,648,450
    
    
    
    41,797,660Deposits on flight equipment purchases
    
    
    725,122
    
    
    
    794,239Lease receivables and other assets
    
    
    456,178
    
    
    
    428,836Derivative assets, net
    
    
    1,012,712
    
    
    
    863,719Variable interest entities assets
    
    
    109,611
    
    
    
    112,059Deferred debt issue costs, less accumulated amortization of $117,527
(2008) and $110,017 (2007)
    
    
    92,984
    
    
    
    94,390$
    45,800,501
    
    
    $
    44,830,590LIABILITIES AND SHAREHOLDERS EQUITYAccrued interest and other payables
    
    $
    490,712
    
    
    $
    461,496Tax benefit sharing payable to AIG
    
    
    85,000
    
    
    
    85,000Debt financing, net of deferred debt discount of $26,520 (2008) and
$32,570 (2007)
    
    
    29,968,847
    
    
    
    29,451,279Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Foreign currency adjustment related to foreign currency denominated debt
    
    
    1,267,340
    
    
    
    968,600Security deposits on aircraft, overhauls and other
    
    
    1,460,554
    
    
    
    1,441,870Rentals received in advance
    
    
    243,100
    
    
    
    251,381Deferred income taxes
    
    
    4,195,217
    
    
    
    4,135,137Variable interest entities liabilities
    
    
    7,177
    
    
    
    7,048SHAREHOLDERS 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
    
    
    593,721
    
    
    
    593,455Accumulated other comprehensive income (loss)
    
    
    (190,904
    )
    
    
    (106,219
    )Retained earnings
    
    
    5,526,155
    
    
    
    5,387,961Total shareholders equity
    
    
    7,082,554
    
    
    
    7,028,779$
    45,800,501
    
    
    $
    44,830,590
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)REVENUESRental of flight equipment
    
    $
    1,186,753
    
    
    $
    1,069,457Flight equipment marketing
    
    
    10,969
    
    
    
    2,597Interest and other
    
    
    17,492
    
    
    
    18,6231,215,214
    
    
    
    1,090,677EXPENSESInterest
    
    
    380,113
    
    
    
    381,758Effect from derivatives, net of change in hedged items due to
changes in foreign exchange rates
    
    
    343
    
    
    
    12,233Effect from credit and market valuation adjustments on derivatives
    
    
    39,958
    
    
    
    Depreciation of flight equipment
    
    
    449,621
    
    
    
    405,532Provision for overhauls
    
    
    71,511
    
    
    
    61,973Flight equipment rent
    
    
    4,500
    
    
    
    4,500Selling, general and administrative
    
    
    37,183
    
    
    
    37,183983,229
    
    
    
    903,179INCOME BEFORE INCOME TAXES
    
    
    231,985
    
    
    
    187,498Provision for income taxes
    
    
    82,483
    
    
    
    68,338NET INCOME
    
    $
    149,502
    
    
    $
    119,160
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)NET INCOME
    
    $
    149,502
    
    
    $
    119,160OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXNet changes in cash flow hedges, net of
taxes of $45,401 (2008) and $8,318 (2007)
    
    
    (84,315
    )
    
    
    (15,447
    )Change in unrealized appreciation on
securities available for sale, net of taxes
of $199 (2008) and 
$142 (2007)
    
    
    (370
    )
    
    
    (263
    )(84,685
    )
    
    
    (15,710
    )COMPREHENSIVE INCOME
    
    $
    64,817
    
    
    $
    103,450
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Dollars in thousands)
 2008
    
    
    2007(Unaudited)OPERATING ACTIVITIESNet income
    
    $
    149,502
    
    
    $
    119,160Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation of flight equipment
    
    
    449,621
    
    
    
    405,532Deferred income taxes
    
    
    105,680
    
    
    
    104,726Change in fair value of derivative instruments
    
    
    (278,709
    )
    
    
    (72,660
    )Foreign currency adjustment of non-US$ denominated debt
    
    
    298,740
    
    
    
    63,056Amortization of deferred debt issue costs
    
    
    7,510
    
    
    
    7,784Other, including foreign exchange adjustments on
foreign currency denominated cash
    
    
    (601
    )
    
    
    (1,239
    )Changes in operating assets and liabilities:(Increase) decrease in lease receivables and other assets
    
    
    (21,822
    )
    
    
    28,100Increase in accrued interest and other payables
    
    
    29,666
    
    
    
    61,737Change in current income taxes
    
    
    (23,217
    )
    
    
    (65,456
    )(Decrease) increase in rentals received in advance
    
    
    (8,281
    )
    
    
    15,536Change in unamortized debt discount
    
    
    6,050
    
    
    
    (3,437
    )Net cash provided by operating activities
    
    
    714,139
    
    
    
    662,839INVESTING ACTIVITIESAcquisition of flight equipment for operating leases
    
    
    (1,231,127
    )
    
    
    (1,866,499
    )Payments for deposits and progress payments
    
    
    (157,943
    )
    
    
    (52,664
    )Proceeds from disposal of flight equipment  net of gain
    
    
    118,014
    
    
    
    27,783Advance on notes receivable
    
    
    (43,854
    )
    
    
    Collections on notes receivable and finance and sales-type
leases  net of income amortized
    
    
    6,829
    
    
    
    14,383Other
    
    
    
    
    
    
    1,729Net cash used in investing activities
    
    
    (1,308,081
    )
    
    
    (1,875,268
    )FINANCING ACTIVITIESNet change in commercial paper
    
    
    (97,300
    )
    
    
    1,020,731Proceeds from debt financing
    
    
    1,447,908
    
    
    
    702,035Payments in reduction of debt financing
    
    
    (839,090
    )
    
    
    (533,150
    )Debt issue costs
    
    
    (6,104
    )
    
    
    (8,016
    )Payment of common and preferred dividends
    
    
    (15,568
    )
    
    
    (9,419
    )Increase (decrease) in customer and other deposits
    
    
    57,144
    
    
    
    (9,230
    )Net cash provided by financing activities
    
    
    546,990
    
    
    
    1,162,951Net decrease in cash
    
    
    (46,952
    )
    
    
    (49,478
    )Effect of exchange rate changes on cash
    
    
    1,322
    
    
    
    874Cash at beginning of period
    
    
    182,772
    
    
    
    157,120Cash at end of period
    
    $
    137,142
    
    
    $
    108,516
 (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, 2008 AND 2007
(Dollars in thousands)
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 2008
    
    2007(Unaudited)Cash paid during the period for:Interest, excluding interest
capitalized of $8,575 (2008) and
$11,174 (2007)
    
    $
    367,870
    
    
    $
    350,544Income taxes, net
    
    
    21
    
    
    
    29,067
 Non-Cash Investing and Financing Activities
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31, 2008
 (Unaudited)
 Basis of Preparation
   Recent Accounting Pronouncements
 SFAS 157
 Fair Value Measurements Fair Value Measurements Derivative Activities
 Share-Based Payment Application of FASB Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purposes of Lease Classification or Measurement Under
Statement 13, Accounting for
Leases
 SFAS 159
 The Fair Value Option for Financial
Assets and Financial Liabilities
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2008
(Unaudited)
  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) Accounting for
Derivative Instruments and Hedging Activities (iii)
 FIN 39-1
 Amendment of FIN No. 39 Offsetting of Amounts Related to Certain Contracts,
 Fair Value Measurements
  
    
    Defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date and establishes a frame work for measuring fair value;
    
    Establishes a three-level hierarchy for fair value measurements based upon the
transparency of inputs to the valuation of an asset or liability as of the
measurement date; and
    
    Expands disclosures about instruments measured at fair value.
 Fair Value Measurements on a Recurring Basis
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2008
(Unaudited)
  Derivative Contracts
 Derivative Activities
 
    
    Credit Valuation Adjustment (CVA)  The CVA adjusts the valuation of
derivatives to account for nonperformance risk of our counterparty with respect to
all net derivative assets positions. The CVA also accounts for ILFCs own credit
risk, in the fair value measurement of all net derivative liabilities positions,
when appropriate. The CVA is accounted for as either an increase or decrease to the
net derivative position with the corresponding increase or decrease reflected in
income.
    
    Market Valuation Adjustment (MVA)  The MVA adjusts the valuation of
derivatives to reflect the fact that ILFC is an end-user of derivative products.
As such the valuation is adjusted to take into account the bid-offer spread (the
liquidity risk), as ILFC is not a dealer of derivative products. The MVA is
accounted for as either an increase or decrease to the net derivative position with
the corresponding increase or decrease reflected in income.
  Marketable Securities
  Fair Value Measurements on a Non-Recurring Basis
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2008
(Unaudited)
 
    
    Aircraft:We record aircraft at fair value when we determine the carrying value
may not be recoverable, in accordance with SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assetsand other accounting pronouncements
requiring remeasurements at fair value. The fair value is measured using an income
approach based on the present value of cash flows from contractual lease agreements
and projected future lease payments, including contingent rentals, net of expenses,
which extend to the end of the aircrafts economic life in its highest and best use
configuration, as well as a disposition value, based on expectations of market
participants.
    
    Notes Receivable & Finance Lease Receivables: ILFC evaluates the fair value of
its secured notes and finance lease receivables using an income approach, which is
based upon the present value of the expected cash flows of the underlying aircraft
measured using the methodology described above. With regard to unsecured notes
receivable, ILFC also measures the fair value using an income approach based upon
the net present value of expected cash flows of the underlying loan agreement.
    
    AVGs: ILFC measures the fair value of AVGs in accordance with FIN No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, including
Indirect Guarantees of Indebtedness of Others(FIN 45) as permitted under SFAS
157. In accordance with FIN 45, ILFC measures the fair value of AVGs at the
inception of the agreement based upon the proceeds received. Subsequent
non-recurring fair value measurements are based upon the differential between the
contractual strike price and the fair value of the underlying aircraft, measured
using the methodology described above.
 Fair Value Hierarchy
  
    
    Level 1:Level 1 inputs to the valuation methodology are quoted market prices in
active markets. Our marketable securities are valued using level 1.
    
    Level 2:Inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs other than quoted prices that
are observable for the asset or liability, either directly or indirectly, for the
full term of the financial instrument, such as interest rates and yield curves that
are observable at commonly quoted intervals. Our derivative assets and liabilities
are valued using level 2 inputs.
    
    Level 3:Certain inputs to the valuation methodology are unobservable and
significant to the fair value measurement. These measurements include circumstances
in which there is little, if any, market activity for the asset or liability. In
certain cases, the inputs used to measure fair value may fall into different levels
of the fair value hierarchy. In such cases, the level in the fair value hierarchy,
within which the fair value measurement in its entirety falls, is determined based
on the lowest level input that is significant to the fair value measurement in its
entirety. Our assessment of the significance of a particular input to the fair
value measurement in its entirety requires judgment and considers factors specific
to the asset or liability. Assets and liabilities measured at fair value on a
non-recurring basis and classified as level 3 include aircraft, notes receivable,
net investment in finance leases, and AVGs.
 
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2008
(Unaudited)
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  TotalCounterparty
    
    
    March 31,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Netting
    
    
    2008(Dollars in thousands)Derivative
assets
    
    $
    
    
    
    $
    1,104,374
    
    
    $
    
    
    
    $
    (91,662
    )
    
    $
    1,012,712Derivative
liabilities
    
    
    
    
    
    
    (91,662
    )
    
    
    
    
    
    
    91,662
    
    
    
    Total derivative
assets, net
    
    $
    
    
    
    $
    1,012,712
    
    
    $
    
    
    
    $
    
    
    
    $
    1,012,712
  (Dollars in thousands)Derivatives:Total fair value at December 31,
2007
    
    $
    863,719Credit value and market value adjustment of fair
value recorded in income
    
    
    (13,485
    )Total fair value at January 1,
2008
    
    $
    850,234Effective portion of fair value recorded in
other comprehensive income
    
    
    169,388Ineffective portion of fair value recorded in
income
    
    
    (536
    )Credit value and market value adjustments of
fair value recorded in income at March 31,
2008
    
    
    (26,473
    )Change in accrued
interest
    
    
    20,099Total fair value at March 31,
2008
    
    $
    1,012,712
 Derivative Activities
 Fair Value
Measurements
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2008
(Unaudited)
 2008
    
    
    2007(Dollars in thousands)Effective portion of change in fair market
value of derivatives
    
    
    (169,388
    )
    
    
    (9,276
    )Amortization of balances of de-designated
hedges and other adjustments
    
    
    364
    
    
    
    4,320Foreign exchange component of cross currency
swaps credited to income
    
    
    298,740
    
    
    
    28,721Income tax effect
    
    
    (45,401
    )
    
    
    (8,318
    )Total
    
    $
    84,315
    
    
    $
    15,447
   Three Months EndedMarch 312008
    
    
    2007(Dollars in thousands)(Income) loss related to derivative instruments:Changes in fair value of derivative
instruments with no hedge accounting
treatment under SFAS 133 (a)
    
    $
    
    
    
    $
    (17,598
    )Offsetting changes in fair value of foreign
denominated debt related to contracts with
no hedge accounting treatment under SFAS
133
    
    
    
    
    
    
    33,621Ineffectiveness of cash flow
hedges
    
    
    536
    
    
    
    605Reclassification of AOCI related to
derivative instruments de-designated from
hedges
    
    
    (193
    )
    
    
    (4,395
    )Loss related to derivative instruments and
related economically hedged
items
    
    $
    343
    
    
    $
    12,233
 
 (a)
    
    In the second quarter of 2007, we redesignated four swaps for hedge
accounting under SFAS 133 that were previously outstanding but did not qualify
for hedge accounting treatment under SFAS 133. Subsequent to the redesignation,
all derivatives qualified as hedges under SFAS 133.   Three Months EndedMarch 312008
    
    2007(Dollars in thousands)Income:
    
    $
    2,119
    
    
    $
    (1,497
    )
 Fair Value Measurements).
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2008
(Unaudited)
 Related Party Transactions
   March 31,
    
    December 31,2008
    
    2007
    
    2007(Dollars in thousands)Expense (income):Allocation of
corporate costs
from AIG
    
    $
    4,343
    
    
    $
    2,359Management
services paid to
subsidiaries of
AIG
    
    
    234
    
    
    
    26Management fees
received
    
    
    (2,453
    )
    
    
    (2,427
    )Asset (liability):Taxes benefit
sharing payable to
AIG
    
    $
    (85,000
    )
    
    
    
    
    
    $
    (85,000
    )Accrued corporate
costs payable to
AIG
    
    
    (3,521
    )
    
    
    
    
    
    
    (1,495
    )Accrued dividend
payable to
AIG
    
    
    
    
    
    
    
    
    
    
    (4,260
    )Income taxes
receivable from
AIG
    
    
    161,622
    
    
    
    
    
    
    
    138,405Medium term notes
    
    
    (200,000
    )
    
    
    
    
    
    
    (200,000
    )Net (payable)
receivable for
management fees
and other
    
    
    (57
    )
    
    
    
    
    
    
    (577
    )
 
Derivative Activities
 Subsequent Event
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 Forward-Looking Statements
 Managements Discussion and Analysis of Financial Condition
and Results of Operations  Overview and Industry Condition, Quantitative and Qualitative
Disclosures about Market Risk Part II  Item 1A. Risk Factors, Part I  Item 1A. Risk Factors
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Overview and Industry Condition
       (i) (ii) (iii)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Fair Value Measurements   Notes to Condensed Consolidated Financial Statements
 Critical Accounting Policies and Estimates
   Fair Value Measurements:
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
 
    
    Lease Revenue
    
    Flight Equipment Marketing
    
    Flight Equipment
    
    Provision for Overhauls
    
    Income Taxes
    
    Derivative Financial Instruments
    
    Fair Value Measurements
 Financial Condition
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  March 31,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Public bonds and medium-term
notes
    
    $
    22,015,617
    
    
    $
    21,360,020Bank and other term
debt
    
    
    3,578,495
    
    
    
    3,625,274Subordinated
debt
    
    
    1,000,000
    
    
    
    1,000,000Total public debt, bank debt
and subordinated
debt
    
    
    26,594,112
    
    
    
    25,985,294Commercial
paper
    
    
    4,401,255
    
    
    
    4,498,555Less: Deferred debt
discount
    
    
    (26,520
    )
    
    
    (32,570
    )Total debt financing
    
    $
    30,968,847
    
    
    $
    30,451,279Selected interest rates and ratio:Composite interest rate,
including the economic effect
of derivative
instruments
    
    
    4.79
    %
    
    
    5.16
    %Percentage of total debt at
fixed rates
    
    
    74.40
    %
    
    
    73.84
    %Composite interest rate on
fixed rate
debt
    
    
    5.24
    %
    
    
    5.17
    %Bank prime
rate
    
    
    5.25
    %
    
    
    7.25
    %
  -18-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Public Debt ( Exclusive of the Commercial Paper Program )
  Maximum
    
    Sold as of
    
    Sold as of
    
    Sold as ofOffering
    
    December 31, 2007
    
    March 31, 2008
    
    April 30, 2008(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)
    
    $
    4,650
    
    
    $
    5,975
    
    
    $
    5,975Registration
statement
dated
November 22,
2002
(including
$2.88
billion
Medium-Term
Note Program
and $1.0
billion
Retail
Medium-Term
Note
Program)
    
    $
    6,080
    (b)
    
    
    5,922
    
    
    
    5,955
    
    
    
    6,080Euro
Medium-Term
Note
Programme
dated
September
2006 (c)(d)
    
    
    7,000
    
    
    
    3,832
    
    
    
    3,832
    
    
    
    3,832
 
 (a)
    
    Includes $645 million, which was incorporated into the registration statement from
a prior registration statement. 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)
    
    Includes $1.08 billion, which was incorporated into the registration statement from
a prior registration statement, increasing the maximum offering from $5.0 billion to
$6.08 billion.(c)
    
    We have economically hedged the foreign currency risk of the notes through
derivatives or through the offset provided by operating lease payments denominated in the
related currency.(d)
    
    This is a perpetual program. As a bond matures, the principal amount becomes
available for new issuances under the program. Bank Term Debt
    Subordinated Debt
  -19-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 (i) (ii) (iii)
 Commercial Paper
 Bank Commitments
 Bank Commitments
  Other Variable Interest Entities
   Derivatives
 Accounting for Derivative Instruments and Hedging
Activities,
  -20-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Market Liquidity Risk
    Rating Agency
    
    Short-term Debt
    
    Long-term Debt
    
    Watch
    
    Date of Last ActionFitch
    
    
    F1
    
    
    
    A
    
    
    Negative
    
    May 8, 2008 (a)Moodys
    
    
    P-1
    
    
    
    A1
    
    
    Negative
    
    May 9, 2008 (b)S&P
    
    
    A-1
    
    
    
    A+
    
    
    Negative
    
    May 8, 2008 (c)
 
 (a)
    
    In May 2008, Fitch downgraded our long-term rating to A from A+ and maintained
the Rating Watch Negative. They also affirmed the short-term rating at F1, but placed the short-term
rating on Rating Watch Negative.(b)
    
    In May 2008, Moodys affirmed the short-term rating of P-1
and put the long-term rating of A1 on review for possible downgrade.(c)
    
    In May 2008, S&P downgraded our long-term rating to A+ from AA- and the
short-term rating to A-1 from A-1+. All long-term ratings (but not the short-term
ratings) were placed on Credit Watch with negative implications.   -21-




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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
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter(Dollars in thousands)Public and Bank
Term Debt
    
    $
    25,594,112
    
    
    $
    3,791,817
    
    
    $
    4,117,187
    
    
    $
    4,284,739
    
    
    $
    4,785,567
    
    
    $
    4,109,052
    
    
    $
    4,505,750Commercial Paper
    
    
    4,401,255
    
    
    
    4,401,255
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated
Debt
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Interest Payments
on Debt Outstanding
(a)(b)
    
    
    7,402,227
    
    
    
    979,065
    
    
    
    1,090,854
    
    
    
    878,779
    
    
    
    634,463
    
    
    
    380,291
    
    
    
    3,438,775Operating Leases
(c)
    
    
    84,877
    
    
    
    6,986
    
    
    
    10,690
    
    
    
    11,407
    
    
    
    11,870
    
    
    
    12,352
    
    
    
    31,572Pension Obligations
(d)
    
    
    3,065
    
    
    
    432
    
    
    
    467
    
    
    
    507
    
    
    
    547
    
    
    
    553
    
    
    
    559Tax Benefit Sharing
Agreement Due to
AIG
    
    
    85,000
    
    
    
    
    
    
    
    85,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase
Commitments (g)
    
    
    18,794,300
    
    
    
    2,779,200
    
    
    
    2,605,500
    
    
    
    1,295,000
    
    
    
    1,399,900
    
    
    
    712,300
    
    
    
    10,002,400Total
    
    $
    57,364,836
    
    
    $
    11,958,755
    
    
    $
    7,909,698
    
    
    $
    6,470,432
    
    
    $
    6,832,347
    
    
    $
    5,214,548
    
    
    $
    18,979,056
 Contingent Commitments
 Contingency Expiration by Fiscal YearTotal
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    Thereafter(Dollars in thousands)AVGs (e)
    
    $
    571,190
    
    
    $
    27,000
    
    
    $
    
    
    
    $
    
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    437,399Lines of Credit
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    Total (f)
    
    $
    621,190
    
    
    $
    27,000
    
    
    $
    
    
    
    $
    50,000
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    437,399
 
 (a)
    
    Future interest payments on floating rate debt are estimated using floating
interest rate in effect at March 31, 2008.(b)
    
    Includes the effect of interest rate and foreign currency derivative instruments.(c)
    
    Excludes fully defeased aircraft sale-lease back transactions.(d)
    
    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 2008
consists of total estimated allocations for 2008 and the column Thereafter consists of
the 2012 estimated allocation. The amount allocated has not been material to date.(e)
    
    From time to time, we participate with airlines, banks and other financial
institutions to assist in financing aircraft by providing asset 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.(f)
    
    Excluded from total contingent commitments are $75.1 million of uncertain tax
liabilities. The amounts are included in Current taxes on our 2008 Condensed Consolidated
Balance Sheet. The future cash flows to these liabilities are uncertain and we are unable
to make reasonable estimates of the outflows.(g)
    
    The timing of purchase commitments will change related to the delays of the 787
orders. -22-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Results of Operations
 (i) (ii) (iii)
 (i) (ii)
   (i) (ii)
  Notes to Condensed
Consolidated Financial Statements
 2008
    
    2007
    
    DecreaseBeginning of Quarter
    
    
    5.16
    %
    
    
    5.24
    %
    
    
    0.08
    %End of Quarter
    
    
    4.79
    %
    
    
    5.23
    %
    
    
    0.44
    %Average
    
    
    4.98
    %
    
    
    5.24
    %
    
    
    0.26
    %
 Notes to Condensed Consolidated
Financial Statements
   -23-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
     -24-




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Value at Risk
     ILFC Market RiskThree Months Ended
    
    Year EndedMarch 31, 2008
    
    December 31, 2007(Dollars in millions)Average
    
    
    High
    
    
    Low
    
    
    Average
    
    
    High
    
    
    LowCombined
    
    $
    37.3
    
    
    $
    38.5
    
    
    $
    36.1
    
    
    $
    70.0
    
    
    $
    102.3
    
    
    $
    38.5Interest Rate
    
    
    37.7
    
    
    
    38.8
    
    
    
    36.5
    
    
    
    69.9
    
    
    
    102.2
    
    
    
    38.8Currency
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    0.9
    
    
    
    1.2
    
    
    
    0.7
 -25-




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##### Table of Contents



ITEM 4T. CONTROLS AND PROCEDURES
 (A) Evaluation of Disclosure Controls and Procedures
     (B) Changes in Internal Control Over Financial Reporting
  -26-




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
 Managements Discussion and Analysis of Financial
Condition and Results of Operations  Overview and Industry Condition Quantitative and Qualitative Disclosures about Market Risk.
   
    
    Overall Airline Industry Risk
 Ø Demand for air travelØ Competition between carriersØ Fuel prices and availabilityØ Labor costs and stoppagesØ Maintenance costsØ Employee labor contractsØ Air traffic control infrastructure constraintsØ Airport accessØ Insurance costs and coverageØ Geopolitical eventsØ Security, terrorism and warØ Worldwide health concernsØ Equity and borrowing
capacityØ Environmental concernsØ Government regulationØ Interest ratesØ OvercapacityØ Natural disasters
 
    
    Airframe, Engine and Other Manufacturer Risk
    
    Borrowing Risks
 Ø LiquidityØ Interest rate risk
 -27-




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##### Table of Contents



PART II. OTHER INFORMATION (CONTINUED)
 
    
    Other Risks
 Ø Residual valueØ ObsolescenceØ Credit riskØ Key personnelØ Foreign currency exchange rate riskØ Relationship with AIGØ Accounting pronouncements
 Item 1A. Risk
Factors
 
 ITEM 6. EXHIBITS
  3.1
    
    Restated Articles of Incorporation of the Company,
as amended through December 9, 1992, filed November 3, 1993 (filed as an
exhibit to Registration Statement No. 33-50913 and incorporated herein by
reference).3.2
    
    Certificate of Determination of Preferences of
Series A Market Auction Preferred Stock (filed December 9, 1992 as an
exhibit to Registration Statement No. 33-54294 and incorporated herein by
reference).3.3
    
    Certificate of Determination of Preferences of
Series B Market Auction Preferred Stock (filed December 9, 1992 as an
exhibit to Registration Statement 33-54294 and incorporated herein by
reference).3.4
    
    Certificate of Determination of Preferences of
Series C Market Auction Preferred Stock (filed as an exhibit to Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).3.5
    
    Certificate of Determination of Preferences of
Series D Market Auction Preferred Stock (filed as an exhibit to Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).3.6
    
    Certificate of Determination of Preferences of
Series E Market Auction Preferred Stock (filed as an exhibit to Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).3.7
    
    Certificate of Determination of Preferences of
Series F Market Auction Preferred Stock (filed as an exhibit to Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference).3.8
    
    Certificate of Determination of Preferences of
Series G Market Auction Preferred Stock (filed as an exhibit to Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference).3.9
    
    Certificate of Determination of Preferences of
Series H Market Auction Preferred Stock (filed as an exhibit to Form 10-K
for the year ended December 31, 1995 and incorporated herein by
reference).3.10
    
    Certificate of Determination of Preferences of
Preferred Stock of the Company (filed as an exhibit to Form 10-K for the
year ended December 31, 2001 and incorporated herein by reference).3.11
    
    By-Laws of the Company, including amendment thereto
dated August 31, 1990 (filed as an exhibit to Form 10-K for the year
ended December 31, 2003 and incorporated herein by reference).
 
 -28-




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##### Table of Contents



PART II. OTHER INFORMATION (CONTINUED)
 3.12
    
    Unanimous Written Consent of Sole Stockholder of
the Company, dated January 2, 2002, amending the Bylaws of the Company
(filed as an exhibit to Form 10-Q for the quarter ended September 30,
2003 and incorporated herein by reference).12.
    
    Computation of Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends31.1
    
    Certification of Chairman of the Board and Chief Executive Officer31.2
    
    Certification of Vice Chairman and Chief Financial Officer32.1
    
    Certification under 18 U.S.C., Section 1350
 -29-




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##### Table of Contents



SIGNATURES
  INTERNATIONAL LEASE FINANCE CORPORATIONMay 9, 2008
    
    /S/ Steven F. Udvar-Hazy

STEVEN F. UDVAR-HAZY
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)May 9, 2008
    
    /S/ Alan H. LundALAN H. LUND
Vice Chairman and
Chief Financial Officer
(Principal Financial Officer)May 9, 2008
    
    /S/ Kurt H. SchwarzKURT H. SCHWARZ
Senior Vice President,
Chief Accounting Officer and
Controller
(Principal Accounting Officer)
 -30-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
  Exhibit No.12.
    
    Computation of Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends31.1
    
    Certification of Chairman of the Board and Chief Executive Officer31.2
    
    Certification of Vice Chairman and Chief Financial Officer32.1
    
    Certification under 18 U.S.C., Section 1350
 -31-