##### 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 June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-31616
 INTERNATIONAL LEASE FINANCE CORPORATION
  California
(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
 PagePart I. Financial InformationItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets June 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Income Three months ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Income Six months ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Comprehensive Income Three months ended June 30, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Comprehensive Income Six months ended June 30, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows Six months ended June 30, 2009 and 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    21Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    39Part II. Other InformationItem 1. Legal Proceedings
    
    
    40Item 1A. Risk Factors
    
    
    40Item 5. Other Information
    
    
    42Item 6. Exhibits
    
    
    42Signatures
    
    
    43EX-10.1EX-10.2EX-12EX-31.1EX-31.2EX-32.1
  -2-




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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)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCash and cash equivalents, including
interest bearing accounts of $990,951
(2009) and $2,382,068 (2008)
    
    $
    997,456
    
    
    $
    2,385,948Restricted cash
    
    
    264,239
    
    
    
    Notes receivable, net of allowance, and
net investment in finance and sales-type
leases
    
    
    294,546
    
    
    
    383,086Flight equipment under operating leases
    
    
    57,568,176
    
    
    
    55,372,328Less accumulated depreciation
    
    
    13,025,833
    
    
    
    12,152,18944,542,343
    
    
    
    43,220,139Deposits on flight equipment purchases
    
    
    248,787
    
    
    
    568,549Lease receivables and other assets
    
    
    560,426
    
    
    
    478,944Derivative assets, net
    
    
    147,864
    
    
    
    88,203Variable interest entities assets
    
    
    92,163
    
    
    
    98,746Deferred debt issue costs, less accumulated amortization of $134,225 (2009) and $131,527 (2008)
    
    
    114,118
    
    
    
    91,899$
    47,261,942
    
    
    $
    47,315,514LIABILITIES AND SHAREHOLDERS EQUITYAccrued interest and other payables
    
    $
    475,822
    
    
    $
    441,656Current income taxes
    
    
    33,448
    
    
    
    32,083Tax benefit sharing payable to AIG
    
    
    85,000
    
    
    
    85,000Loan from AIG Funding
    
    
    1,700,000
    
    
    
    Debt financing, net of deferred debt discount of $12,046 (2009) and
$18,919 (2008)
    
    
    29,036,660
    
    
    
    31,476,668Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Foreign currency adjustment related to foreign currency denominated debt
    
    
    405,670
    
    
    
    338,100Security deposits on aircraft, overhauls and other
    
    
    1,454,043
    
    
    
    1,527,884Rentals received in advance
    
    
    301,984
    
    
    
    299,961Deferred income taxes
    
    
    4,707,192
    
    
    
    4,478,250Variable interest entities liabilities
    
    
    8,370
    
    
    
    10,699Commitments and Contingencies  Note HSHAREHOLDERS 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
    
    
    601,551
    
    
    
    600,237Accumulated other comprehensive income (loss)
    
    
    (178,161
    )
    
    
    (168,065
    )Retained earnings
    
    
    6,476,781
    
    
    
    6,039,459Total shareholders equity
    
    
    8,053,753
    
    
    
    7,625,213$
    47,261,942
    
    
    $
    47,315,514
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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 June 30,
    
    
    June 30,2009
    
    
    2008REVENUESRental of flight equipment
    
    $
    1,298,870
    
    
    $
    1,258,637Flight equipment marketing
    
    
    9,282
    
    
    
    28,178Interest and other
    
    
    22,001
    
    
    
    26,2991,330,153
    
    
    
    1,313,114EXPENSESInterest
    
    
    353,213
    
    
    
    366,419Effect from derivatives, net of change in hedged items due to changes in
foreign exchange rates
    
    
    (6,441
    )
    
    
    7,188Effect from credit and market valuation adjustments on derivatives
    
    
    
    
    
    
    11,281Depreciation of flight equipment
    
    
    488,777
    
    
    
    464,617Provision for overhauls
    
    
    74,084
    
    
    
    79,214Flight equipment rent
    
    
    4,500
    
    
    
    4,500Selling, general and administrative
    
    
    51,623
    
    
    
    47,685965,756
    
    
    
    980,904INCOME BEFORE INCOME TAXES
    
    
    364,397
    
    
    
    332,210Provision for income taxes
    
    
    127,472
    
    
    
    118,147NET INCOME
    
    $
    236,925
    
    
    $
    214,063
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(Dollars in thousands)
(Unaudited)
 June 30,
    
    
    June 30,2009
    
    
    2008REVENUESRental of flight equipment
    
    $
    2,560,256
    
    
    $
    2,445,390Flight equipment marketing
    
    
    10,647
    
    
    
    39,147Interest and other
    
    
    37,330
    
    
    
    43,7912,608,233
    
    
    
    2,528,328EXPENSESInterest
    
    
    708,607
    
    
    
    746,533Effect from derivatives, net of change in hedged items due to changes in foreign exchange rates
    
    
    (4,327
    )
    
    
    7,531Effect from credit and market valuation adjustments on derivatives
    
    
    
    
    
    
    51,238Depreciation of flight equipment
    
    
    960,900
    
    
    
    914,238Provision for overhauls
    
    
    143,385
    
    
    
    150,725Flight equipment rent
    
    
    9,000
    
    
    
    9,000Selling, general and administrative
    
    
    111,369
    
    
    
    84,8681,928,934
    
    
    
    1,964,133INCOME BEFORE INCOME TAXES
    
    
    679,299
    
    
    
    564,195Provision for income taxes
    
    
    239,417
    
    
    
    200,630NET INCOME
    
    $
    439,882
    
    
    $
    363,565
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 FOR THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 June 30,
    
    
    June 30,2009
    
    
    2008NET INCOME
    
    $
    236,925
    
    
    $
    214,063OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXNet changes in fair value of cash flow
hedges, net of taxes of $15,224 (2009) and
$(42,241) (2008)
    
    
    (28,274
    )
    
    
    78,446Change in unrealized appreciation on
securities available for sale, net of taxes
of $(32) (2009) and $(42) (2008)
    
    
    59
    
    
    
    79(28,215
    )
    
    
    78,525COMPREHENSIVE INCOME
    
    $
    208,710
    
    
    $
    292,588
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 June 30,
    
    
    June 30,2009
    
    
    2008NET INCOME
    
    $
    439,882
    
    
    $
    363,565OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXNet changes in fair value of cash flow
hedges, net of taxes of $5,448 (2009) and
$3,160 (2008)
    
    
    (10,118
    )
    
    
    (5,869
    )Change in unrealized appreciation on
securities available for sale, net of taxes
of $(12) (2009) and $157 (2008)
    
    
    22
    
    
    
    (291
    )(10,096
    )
    
    
    (6,160
    )COMPREHENSIVE INCOME
    
    $
    429,786
    
    
    $
    357,405
  -5-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 June 30,
    
    
    June 30,2009
    
    
    2008OPERATING ACTIVITIESNet income
    
    $
    439,882
    
    
    $
    363,565Adjustments to reconcile net income to net cash provided by
operating
activities:Depreciation of flight equipment
    
    
    960,900
    
    
    
    914,238Deferred income taxes
    
    
    234,379
    
    
    
    194,306Change in fair value of derivative instruments
    
    
    (75,227
    )
    
    
    (259,050
    )Foreign currency adjustment of non-US$ denominated debt
    
    
    67,570
    
    
    
    285,765Amortization of deferred debt issue costs
    
    
    22,628
    
    
    
    15,111Amortization of prepaid lease costs
    
    
    27,741
    
    
    
    29,708Other, including foreign exchange adjustments on foreign
currency denominated cash
    
    
    (8,167
    )
    
    
    (2,723
    )Changes in operating assets and liabilities:Increase in lease receivables and other assets
    
    
    (62,569
    )
    
    
    (28,166
    )Increase in accrued interest and other payables
    
    
    34,733
    
    
    
    71,363Change in current income taxes
    
    
    1,365
    
    
    
    4,446Decrease (increase) in rentals received in advance
    
    
    2,023
    
    
    
    (1,872
    )Change in unamortized debt discount
    
    
    6,873
    
    
    
    (328
    )Net cash provided by operating activities
    
    
    1,652,131
    
    
    
    1,586,363INVESTING ACTIVITIESAcquisition of flight equipment for operating leases
    
    
    (2,058,544
    )
    
    
    (2,758,278
    )Payments for deposits and progress payments
    
    
    (49,657
    )
    
    
    (191,650
    )Proceeds from disposal of flight equipment  net of gain
    
    
    89,434
    
    
    
    328,089Advance on notes receivable
    
    
    
    
    
    
    (43,854
    )Restricted cash
    
    
    (264,239
    )
    
    
    Collections on notes receivable and finance and sales-type leases
 net of income amortized
    
    
    89,246
    
    
    
    13,757Other
    
    
    (11
    )
    
    
    Net cash used in investing activities
    
    
    (2,193,771
    )
    
    
    (2,651,936
    )FINANCING ACTIVITIESNet change in commercial paper
    
    
    (1,752,000
    )
    
    
    123,837Loan from AIG Funding
    
    
    1,700,000
    
    
    
    Proceeds from debt financing
    
    
    1,328,099
    
    
    
    2,680,433Payments in reduction of debt financing
    
    
    (2,022,980
    )
    
    
    (1,883,961
    )Debt issue costs
    
    
    (44,847
    )
    
    
    (19,394
    )Payment of common and preferred dividends
    
    
    (2,560
    )
    
    
    (28,061
    )(Decrease) increase in customer and other deposits
    
    
    (52,779
    )
    
    
    117,048Net cash (used in) provided by financing activities
    
    
    (847,067
    )
    
    
    989,902Net decrease in cash
    
    
    (1,388,707
    )
    
    
    (75,671
    )Effect of exchange rate changes on cash
    
    
    215
    
    
    
    2,268Cash at beginning of period
    
    
    2,385,948
    
    
    
    182,772Cash at end of period
    
    $
    997,456
    
    
    $
    109,369
 (Table continued on following page)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Dollars in thousands)
 (Unaudited)
 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 June 30,
    
    
    June 30,2009
    
    
    2008Cash paid during the period for:Interest, excluding interest
capitalized of $7,216 (2009) and
$15,095 (2008)
    
    $
    708,278
    
    
    $
    726,895Income taxes, net
    
    
    3,673
    
    
    
    1,878
 Non-Cash Investing and Financing Activities
            -7-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2009
(Unaudited)
 Basis of Preparation
  Consolidation of Variable Interest Entities
 Consideration of ILFCs Ability to Continue as a Going Concern
    Effect of Derivative Credit Value Adjustment (CVA) and Market Value Adjustment (MVA)
 Fair Value Measurements Accounting for
Derivative Instruments and Hedging Activities
 -8-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
  Recent Accounting Pronouncements
  SFAS 141(R)
 Business Combinations
 SFAS 160
 Non-controlling Interests in Consolidated
Financial Statements, an amendment of Accounting Research Bulletin No. 51
 SFAS 161
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 (i) (ii) (iii) Derivative Activities
 SFAS 165
  -9-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
  FSP SFAS 107-1 and APB 28-1
 Interim Disclosures about Fair Value of Financial Instruments Disclosures about Fair Value of Financial
Instruments Interim Financial Reporting
 FSP SFAS 115-2 and SFAS 124-2
 Recognition and
Presentation of Other-Than-Temporary Impairments
 FSP SFAS 157-4
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
 Future Applications of Accounting Standards
 FSP SFAS 132(R)-1
 Employers Disclosures about
Postretirement Benefit Plan Assets
 -10-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
 SFAS 166
 Accounting for Transfers of Financial Assetsan
amendment of FASB Statement No. 140 Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities
 SFAS 167
 Amendments to FASB Interpretation No. 46(R) (i) (ii)
 SFAS 168
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement
No. 162
 Restricted Cash
 Subsequent Event
 Fair Value Measurements
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  -11-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
  CounterpartyLevel 1
    
    
    Level 2
    
    
    Level 3
    
    
    Netting (a)
    
    
    Total(Dollars in thousands)June 30, 2009:Derivative
assets
    
    $
    
    
    
    $
    221,830
    (b)
    
    $
    
    
    
    $
    (73,966
    )
    
    $
    147,864Derivative
liabilities
    
    
    
    
    
    
    (73,966
    )
    
    
    
    
    
    
    73,966
    
    
    
    Total derivative
assets, net
    
    $
    
    
    
    $
    147,864
    
    
    $
    
    
    
    $
    
    
    
    $
    147,864December 31, 2008:Derivative
assets
    
    $
    
    
    
    $
    192,568
    (b)
    
    $
    
    
    
    $
    (104,365
    )
    
    $
    88,203Derivative
liabilities
    
    
    
    
    
    
    (104,365
    )
    
    
    
    
    
    
    104,365
    
    
    
    Total derivative
assets, net
    
    $
    
    
    
    $
    88,203
    
    
    $
    
    
    
    $
    
    
    
    $
    88,203
 
 (a)
    
    As permitted under FASB Interpretation No. 39, Offsetting Amounts Related to Certain
Contracts, we have elected to offset derivative assets and derivative liabilities under
our master netting agreement.(b)
    
    The balance includes credit valuation adjustment (CVA) and market valuation
adjustment (MVA) of $80.6 million and $19.8 million at June 30, 2009 and December 31,
2008, respectively. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
 Accounting for the
Impairment or Disposal of Long-lived Assets Notes to Consolidated Financial Statements
 Derivative Activities
    Fair Value Measurements
  -12-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
   Asset Derivatives
    
    
    Liability DerivativesNotional Value
    
    
    Fair Value
    
    
    Notional Value
    
    
    Fair ValueUSD
    
    
    
    
    
    
    USD(In thousands)June 30, 2009:Derivatives designated as
hedging instruments under SFAS
133:Interest rate swap
contracts
    
    $
    
    
    
    $
    
    
    
    $
    1,142,911
    
    
    $
    (72,980
    )Foreign exchange swap
contracts
    
    
    1,600,000
    
    
    
    159,630
    
    
    £
    55,250
    
    
    
    (986
    )Foreign exchange swap
contracts
    
    £
    300,000
    
    
    
    58,167
    
    
    $
    
    
    
    $
    Total derivatives designated as
hedging instruments under SFAS
133 (a)
    
    
    
    
    
    $
    217,797
    
    
    
    
    
    
    $
    (73,966
    )Derivatives not designated as
hedging instruments under SFAS
133:Interest rate cap
agreements
    
    $
    106,000
    
    
    $
    4,033
    
    
    $
    
    
    
    $
    Total derivatives
    
    
    
    
    
    $
    221,830
    
    
    
    
    
    
    $
    (73,966
    )December 31, 2008:Derivatives designated as
hedging instruments under SFAS
133:Interest rate swap
contracts
    
    $
    
    
    
    $
    
    
    
    $
    1,215,309
    
    
    $
    (103,622
    )Foreign exchange swap
contracts
    
    
    1,600,000
    
    
    
    187,589
    
    
    
    72,100
    
    
    
    (743
    )£
    300,000
    
    
    
    4,979Total derivatives designated as
hedging instruments under SFAS
133 (a)
    
    
    
    
    
    $
    192,568
    
    
    
    
    
    
    $
    (104,365
    )
 
 (a)
    
    Derivative assets and liabilities are presented in Derivative assets, net on our
Condensed Consolidated Balance Sheets. -13-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Gain (Loss)Effective portion of change in
fair market value of derivatives
(a)
    
    $
    141,084
    
    
    $
    107,774
    
    
    $
    52,247
    
    
    $
    277,162Amortization of balances of
de-designated hedges and other
adjustments
    
    
    (122
    )
    
    
    (62
    )
    
    
    (243
    )
    
    
    (426
    )Foreign exchange component of
cross currency swaps (credited)
charged to
income
    
    
    (184,460
    )
    
    
    12,975
    
    
    
    (67,570
    )
    
    
    (285,765
    )Income tax
effect
    
    
    15,224
    
    
    
    (42,241
    )
    
    
    5,448
    
    
    
    3,160Net changes in cash flow hedges,
net of taxes
    
    $
    (28,274
    )
    
    $
    78,446
    
    
    $
    (10,118
    )
    
    $
    (5,869
    )
 
 (a)
    
    2009 includes $(62,620) and $(60,407) of CVA and MVA, for the three and six months ended
June 30, respectively. Changes in the CVA and MVA were recorded in income for the three and
six month periods ended June 30, 2008. See Note A  Basis of Preparation.  Amount of Unrealized Gain or (Loss)Recorded in OCI on Derivatives(Effective Portion)Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Derivatives Designated as Cash Flow Hedges Under SFAS 133Interest rate swap contracts
    
    $
    23,087
    
    
    $
    32,331
    
    
    $
    20,003
    
    
    $
    (6,246
    )Foreign exchange swap contracts (a)
    
    
    98,620
    
    
    
    84,406
    
    
    
    (543
    )
    
    
    305,321Total
    
    $
    121,707
    
    
    $
    116,737
    
    
    $
    19,460
    
    
    $
    299,075
 
 (a)
    
    2009 includes $(62,620) and $(60,407) of CVA and MVA, respectively, for the three and six
month periods ended June 30, 2009. Changes in the CVA and MVA were recorded in income for the
three and six month periods ended June 30, 2008. See Note A  Basis of Preparation.  Amount of Gain or (Loss) Reclassified fromAOCI Into Income(Effective Portion)Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Location of Gain or (Loss) Reclassified from AOCI into Income (Effective
 Portion)Interest rate contracts  interest
expense
    
    $
    4,688
    
    
    $
    (4,461
    )
    
    $
    (15,981
    )
    
    $
    (4,715
    )Foreign exchange swap contracts  interest
expense
    
    
    (24,382
    )
    
    
    16,722
    
    
    
    (18,286
    )
    
    
    32,045Foreign exchange swap contracts  lease
revenue
    
    
    317
    
    
    
    (3,298
    )
    
    
    1,480
    
    
    
    (5,417
    )Total
    
    $
    (19,377
    )
    
    $
    8,963
    
    
    $
    (32,787
    )
    
    $
    21,913
 -14-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
   Amount of Gain or (Loss) Recognizedin Income on Derivatives(Ineffective Portion) (a)Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Derivatives Designated as Cash Flow Hedges Under SFAS 133:Interest rate swap contracts
    
    $
    (195
    )
    
    $
    (271
    )
    
    $
    (390
    )
    
    $
    (497
    )Foreign exchange swap contracts
    
    
    7,214
    
    
    
    (7,111
    )
    
    
    5,174
    
    
    
    (7,421
    )Total
    
    
    7,019
    
    
    
    (7,382
    )
    
    
    4,784
    
    
    
    (7,918
    )Derivatives Not Designated as a Hedge Under SFAS 133:Interest Rate Cap Agreements (b)
    
    
    (700
    )
    
    
    
    
    
    
    (700
    )
    
    
    Reconciliation to Condensed Consolidated Statements of Income:Reclassification of amounts dedesignated as hedges
recorded in AOCI
    
    
    122
    
    
    
    194
    
    
    
    243
    
    
    
    387Effect from derivatives, net of change in hedged items
due to changes in foreign exchange
rates
    
    $
    6,441
    
    
    $
    (7,188
    )
    
    $
    4,327
    
    
    $
    (7,531
    )
 
 (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 three months ended June 30, 2009. Fair Value Disclosures of Financial Instruments
  Cash, Including Restricted Cash
 Notes Receivable
 Debt Financing
 Derivatives
 -15-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
 Guarantees Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others
  June 30, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    CarryingAmount of
    
    Fair Value
    
    Amount of
    
    Fair ValueAsset
    
    of Asset
    
    Asset
    
    of Asset(Liability)
    
    (Liability)
    
    (Liability)
    
    (Liability)(Dollars in thousands)Cash, including restricted
cash
    
    $
    1,261,695
    
    
    $
    1,261,695
    
    
    $
    2,385,948
    
    
    $
    2,385,948Notes
receivable
    
    
    76,954
    
    
    
    69,705
    
    
    
    81,327
    
    
    
    71,012Debt financing (including loan from
AIG Funding, subordinated debt and
foreign currency adjustment,
excluding debt discount)
    
    
    (32,154,376
    )
    
    
    (29,483,217
    )
    
    
    (32,833,687
    )
    
    
    (28,818,662
    )Derivative assets, net
    
    
    147,864
    
    
    
    147,864
    
    
    
    88,203
    
    
    
    88,203Guarantees
    
    
    (11,828
    )
    
    
    (14,054
    )
    
    
    (12,778
    )
    
    
    (15,209
    )
 Related Party Transactions
  Debt Financings.
 Fair Value Measurements Derivative Activities
 -16-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
  Three Months Ended
    
    Six Months EndedJune 30, 2009
    
    June 30, 2008
    
    June 30, 2009
    
    June 30, 2008(Dollars in thousands)Income StatementExpense (income):Allocation of corporate
costs from
AIG
    
    $
    3,221
    
    
    $
    2,270
    
    
    $
    3,497
    
    
    $
    6,613Management fees paid to
subsidiaries of AIG
    
    
    257
    
    
    
    189
    
    
    
    437
    
    
    
    423Management fees received
    
    
    (2,367
    )
    
    
    (2,449
    )
    
    
    (4,660
    )
    
    
    (4,902
    )Interest expense on loan
from AIG
Funding
    
    
    28,420
    
    
    
    
    
    
    
    31,593
    
    
    
    
 June 30,
    
    December 31,2009
    
    2008(Dollars in thousands)Balance SheetAsset (liability):Derivative assets, net
    
    $
    143,831
    
    
    $
    88,203Taxes benefit sharing payable to AIG
    
    
    (85,000
    )
    
    
    (85,000
    )Accrued corporate costs payable to AIG
    
    
    (5,563
    )
    
    
    (6,092
    )Loan payable to AIG Funding
    
    
    (1,700,000
    )
    
    
    Income taxes payable to AIG
    
    
    (33,448
    )
    
    
    (32,083
    )Net payable for management fees and other
    
    
    (4
    )
    
    
    (3
    )
 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 June
30, 2009, the maximum commitment that we would be obligated to pay under such
guarantees, without any offset for the projected value of the aircraft, was
approximately $530 million.
    
    Aircraft Loan Guarantees:We have guaranteed two loans collateralized by aircraft
to financial institutions for a fee. The guarantees expire in 2014, when the loans
mature and obligate us to pay an amount up to the guaranteed value upon the default
of the borrower, which may be offset by a portion of the underlying value of the
aircraft collateral. At June 30, 2009, the guaranteed value, without any offset for
the projected value of the aircraft, was approximately $30 million.
  Stand-by Line of Credit
  Legal Contingencies
 
    
    Flash Airlines:We are named in lawsuits in connection with the January 3, 2004
crash of our 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
 -17-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
 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 (TGI) civil
court in either Bobigny or Paris. The Bobigny plaintiffs challenged French
jurisdiction, whereupon the TGI 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 (KrasAir):We leased a 757-200ER aircraft to a Russian
airline, KrasAir, which is now the subject of a Russian bankruptcy-like
proceeding. The aircraft lease was assigned to another Russian carrier, Air Company
Atlant-Soyuz Incorporated, which defaulted under the lease. In the first quarter of
2009, we were informed that the Russian customs authority had seized the aircraft
during a time frame we believe to be late 2008. The aircraft was seized on the basis
of certain alleged violations by KrasAir with respect to the import of the aircraft,
including the import type and customs fees owed. The Russian customs authority filed
a case in April 2009 in the general jurisdiction court in Moscow, Russia seeking an
order permitting it to confiscate the aircraft due to these alleged
violations. Shortly after the lawsuit was filed, we intervened in the lawsuit in
order to protect our ownership rights and informed the insurance underwriters under
KrasAirs, Atlant-Soyuzs, and our insurance policies of this matter. In the second
quarter of 2009, the court decided that the seizure of the aircraft by the Russian
customs authority was improper and denied the Russian customs authoritys request to
confiscate the aircraft. Also in the second quarter of 2009, another Russian airline
signed a lease for the aircraft. The aircraft was returned to us by the Russian
customs authority and is currently undergoing maintenance in Moscow, Russia and we
are currently negotiating a resolution of all customs-related issues with the Russian
customs authority. 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.
  Debt Financings
 June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Public bonds and medium-term
notes
    
    $
    18,019,306
    
    
    $
    19,748,541Bank
debt
    
    
    7,546,250
    
    
    
    7,558,750ECA
financings
    
    
    3,221,701
    
    
    
    2,436,296Other secured financings
(a)
    
    
    161,449
    
    
    
    Loan from AIG
Funding
    
    
    1,700,000
    
    
    
    Subordinated
debt
    
    
    1,000,000
    
    
    
    1,000,000Total public, bank,
intercompany, and
subordinated debt
    
    
    31,648,706
    
    
    
    30,743,587Commercial paper and other
short-term debt
    
    
    100,000
    
    
    
    1,752,000Less: Deferred debt
discount
    
    
    (12,046
    )
    
    
    (18,919
    )Total debt financing and
subordinated
debt
    
    $
    31,736,660
    
    
    $
    32,476,668
 
 (a)
    
    Of this amount, $137.4 million of these secured financings is non-recourse to ILFC.
These secured financings were incurred by either a VIE and consolidated in accordance
with FIN 46R or by a wholly owned subsidiary of ILFC, each without recourse to ILFC. -18-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
  Extension of 2004 Export Credit Agency (ECA) Facility Agreement
 Debt
financing, net of deferred debt discount
 Subsequent Event
 Other Secured Financing Arrangements
 Variable Interest Entities.
  Loan from AIG
  -19-




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##### Table of Contents



INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2009
(Unaudited)
 Commercial Paper
  Other Short Term Financing
  Variable Interest Entities
  Entities where we are the Primary Beneficiary
   Subsequent Event
  -20-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Cautionary Statement Regarding Forward-looking Information
 Part II  Item 1A. Risk Factors, Part I  Item 1A. Risk Factors
 Overview
  Liquidity
 Our Fleet
   -21-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Debt Financing
 Liquidity
 Industry Condition and Sources of Revenue
      -22-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
    Consideration of ILFCs Ability to Continue as a Going Concern
    Liquidity
  -23-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Part II  Item 1A. Risk Factors  Liquidity Risk 
  Our Relationship with AIG
  AIG Loan from the FRBNY
  AIG Going Concern Consideration
  -24-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Our Potential Sale by AIG
  Critical Accounting Policies and Estimates
   
    
    Lease Revenue
    
    Flight Equipment Marketing
    
    Provision for Overhauls
    
    Flight Equipment
    
    Derivative Financial Instruments
    
    Fair Value Measurements
    
    Income Taxes
  Flight Equipment:
 -25-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   Part I  Item 1A. Risk
Factors Part II
 Item 1A. Risk Factors, Part II  Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations  Critical Accounting Policies and Estimates  Fair
Value Measurements
  Part
II  Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Debt Financings
   -26-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Public bonds and medium-term notes
    
    $
    18,019,306
    
    
    $
    19,748,541Bank debt
    
    
    7,546,250
    
    
    
    7,558,750ECA financings
    
    
    3,221,701
    
    
    
    2,436,296Other secured financings (a)
    
    
    161,449
    
    
    
    Loan from AIG Funding
    
    
    1,700,000
    
    
    
    Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Total public, bank, intercompany, and subordinated debt
    
    
    31,648,706
    
    
    
    30,743,587Commercial paper and other short-term debt
    
    
    100,000
    
    
    
    1,752,000Less: Deferred debt discount
    
    
    (12,046
    )
    
    
    (18,919
    )Total debt financing and subordinated debt
    
    $
    31,736,660
    
    
    $
    32,476,668Selected interest rates and ratios which include the economic effect of
derivative instruments:Composite interest rate
    
    
    4.25
    %
    
    
    4.51
    %Percentage of total debt at fixed rates
    
    
    60.54
    %
    
    
    63.89
    %Composite interest rate on fixed rate debt
    
    
    5.44
    %
    
    
    5.41
    %Bank prime rate
    
    
    3.25
    %
    
    
    3.25
    %
 
 (a)
    
    Of this amount, $137.4 million of these secured financings is non-recourse to ILFC.
These secured financings were incurred by either a variable interest entity and
consolidated in accordance with FIN 46R or by a wholly owned subsidiary of ILFC, each
without recourse to ILFC.  -27-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Public Bonds and Medium-Term Notes
 Liquidity (i) (ii)
 MaximumOffering
    
    Sold(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)
(a)
    
    Unlimited (b)Euro Medium-Term Note Programme dated
September 2008
(c)(d)
    
    
    7,000
    
    
    
    2,334
 
 (a)
    
    We intend to file a new automatic shelf registration statement for the issuance of
debt securities on or prior to August 16, 2009, which is the expiration date for the
existing registration statement dated August 16, 2006. We may not establish new
medium-term note programs under this new shelf registration statement until the public
debt markets become available to us again.(b)
    
    As a result of the Companys Well Known Seasoned Issuer (WKSI) status, we have an
unlimited amount of debt securities registered for sale.(c)
    
    We have economically hedged the foreign currency risk of the notes through
derivatives.(d)
    
    This is a perpetual program. As a bond matures, the principal amount becomes
available for new issuances under the program. Bank Credit Facilities
 Revolving Credit Facilities:
 Term Loans:
 ECA Financings
 Export Credit Facilities:
  -28-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Liquidity,
  Other Secured Financing Arrangements
   Subordinated Debt
  -29-




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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 and Other Short-Term Debt
 Commercial Paper: Liquidity
 Other short-term financing
 Loan from AIG
  Derivatives
 Accounting for Derivative Instruments and Hedging Activities
  Fair Value Measurements,
 -30-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Credit Ratings
  Rating Agency
    
    Short-term Debt
    
    Long-term Debt
    
    Credit Watch/Review
    
    Date of Last Ratings ActionFitch
    
    F2
    
    BBB
    
    Evolving
    
    May 15, 2009Moodys
    
    P-3
    
    Baa3
    
    Negative
    
    July 31, 2009S&P
    
    A-2
    
    BBB+
    
    Negative
    
    April 2, 2009
    -31-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Existing Commitments
 Commitments Due by Fiscal YearTotal
    
    2009
    
    2010
    
    2011
    
    2012
    
    2013
    
    Thereafter(Dollars in thousands)Public bonds and
medium-term
notes
    
    $
    18,019,306
    
    
    $
    1,470,676
    
    
    $
    4,001,778
    
    
    $
    4,380,107
    
    
    $
    3,571,791
    
    
    $
    3,542,019
    
    
    $
    1,052,935Bank Credit
Facilities
    
    
    6,500,000
    
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    2,500,000
    
    
    
    
    
    
    
    
    
    
    
    Bank Term
Loans
    
    
    1,046,250
    
    
    
    458,500
    
    
    
    102,750
    
    
    
    335,000
    
    
    
    150,000
    
    
    
    
    
    
    
    ECA
Financings
    
    
    3,221,701
    
    
    
    280,368
    
    
    
    506,525
    
    
    
    418,508
    
    
    
    389,461
    
    
    
    389,461
    
    
    
    1,237,378Other Secured
Financings
    
    
    161,449
    
    
    
    6,879
    
    
    
    13,016
    
    
    
    13,949
    
    
    
    14,929
    
    
    
    16,018
    
    
    
    96,658Loan From
Supplier
    
    
    100,000
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loan From AIG
Funding
    
    
    1,700,000
    
    
    
    1,700,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated
Debt
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Interest Payments
on Debt Outstanding
(a)(b)(c)
    
    
    6,739,270
    
    
    
    721,464
    
    
    
    1,066,547
    
    
    
    789,386
    
    
    
    493,581
    
    
    
    311,216
    
    
    
    3,357,076Operating Leases
(d)(e)
    
    
    76,448
    
    
    
    5,572
    
    
    
    11,393
    
    
    
    11,856
    
    
    
    12,338
    
    
    
    12,839
    
    
    
    22,450Pension Obligations
(f)
    
    
    8,999
    
    
    
    1,346
    
    
    
    1,405
    
    
    
    1,463
    
    
    
    1,526
    
    
    
    1,595
    
    
    
    1,664Tax Benefit Sharing
Agreement Due to
AIG
    
    
    85,000
    
    
    
    85,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase
Commitments
    
    
    14,272,200
    
    
    
    580,300
    
    
    
    242,700
    
    
    
    247,600
    
    
    
    639,400
    
    
    
    2,277,900
    
    
    
    10,284,300Total
    
    $
    52,930,623
    
    
    $
    7,410,105
    
    
    $
    7,946,114
    
    
    $
    8,697,869
    
    
    $
    5,273,026
    
    
    $
    6,551,048
    
    
    $
    17,052,461
 Contingent Commitments
 Contingency Expiration by Fiscal YearTotal
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter(Dollars in thousands)AVGs (g)
    
    $
    558,667
    
    
    $
    
    
    
    $
    
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    96,003
    
    
    $
    355,873Lines of Credit
    
    
    50,000
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total (h)
    
    $
    608,667
    
    
    $
    
    
    
    $
    50,000
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    96,003
    
    
    $
    355,873
 
 (a)
    
    Includes interest on loan from AIG Funding.(b)
    
    Future interest payments on floating rate debt are estimated using floating interest rate in effect at June 30, 2009.(c)
    
    Includes the effect of interest rate and foreign currency derivative instruments.(d)
    
    Excludes fully defeased aircraft sale-lease back transactions.(e)
    
    Minimum rentals have not been reduced by minimum sublease rentals of $8,602 in the future
under non-cancellable subleases.(f)
    
    Our pension obligations are part of intercompany expenses, which AIG allocates to us on an
annual basis. The amount is an estimate of such allocation. The column 2009 consists of
total estimated allocations for 2009 and the column Thereafter consists of the 2014
estimated allocation. The amount allocated has not been material to date.(g)
    
    From time to time, we participate with airlines, banks and other financial institutions in
the financing of aircraft by providing asset guarantees, put options, or loan guarantees
collateralized by aircraft. As a result, should we be called upon to fulfill our obligations,
we would have recourse to the value of the underlying aircraft.(h)
    
    Excluded from total contingent commitments are $145.7 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. -32-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Off-Balance-Sheet Arrangements
  Results of Operations
 Three Months Ended June 30, 2009 Versus 2008
 (i) (ii) (iii) (iv) (v) (vi)
   (i) (ii) (iii)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Increase2009
    
    2008
    
    (Decrease)Beginning of Quarter
    
    
    4.37
    %
    
    
    4.79
    %
    
    
    (0.42
    )%End of Quarter
    
    
    4.25
    %
    
    
    4.74
    %
    
    
    (0.49
    )%Average
    
    
    4.31
    %
    
    
    4.77
    %
    
    
    (0.46
    )%
 Basis of Preparation Derivative Activities
    (i) (ii) (iii)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Six Months Ended June 30, 2009 Versus 2008
 (i) (ii) (i) (ii) (iii) iv (v)
   (i) (ii) (iii) (iv)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Increase2009
    
    2008
    
    (Decrease)Beginning of Six Months
    
    
    4.51
    %
    
    
    5.16
    %
    
    
    (0.65
    )%End of Six Months
    
    
    4.25
    %
    
    
    4.74
    %
    
    
    (0.49
    )%Average
    
    
    4.38
    %
    
    
    4.95
    %
    
    
    (0.57
    )%
 Basis of Preparation Derivative Activities
    (i) (ii) (iii) Accounting for the Impairment or Disposal of
Long-lived Assets (i) (ii)
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   -37-




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Value at Risk
     ILFC Market RiskSix Months Ended
    
    Year EndedJune 30, 2009
    
    December 31, 2008(Dollars in millions)Average
    
    High
    
    Low
    
    Average
    
    High
    
    LowCombined
    
    $
    38.4
    
    
    $
    41.6
    
    
    $
    35.9
    
    
    $
    53.2
    
    
    $
    96.2
    
    
    $
    36.1Interest Rate
    
    
    38.6
    
    
    
    41.7
    
    
    
    36.2
    
    
    
    53.7
    
    
    
    97.6
    
    
    
    36.5Currency
    
    
    0.4
    
    
    
    0.7
    
    
    
    0.1
    
    
    
    1.0
    
    
    
    1.6
    
    
    
    0.7
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ITEM 4. CONTROLS AND PROCEDURES
 (A) Evaluation of Disclosure Controls and Procedures
   Variable Interest Entities:
 (B) Changes in Internal Control Over Financial Reporting
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Flash Airlines:
 Krasnoyarsk Airlines (KrasAir):
  
 ITEM 1A. RISK FACTORS
 Part I  Item 1A. Risk Factors Part II  Item 1A. Risk Factors
  Item 1A. Risk Factors
 
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PART II. OTHER INFORMATION (CONTINUED)
 
    
    Liquidity RiskAs of the date of this report, we are unable to access the commercial paper and public
debt markets and the maximum amount available under our senior revolving credit facilities
is outstanding. We increased the total amount available under our 2004 ECA facility by
$1.0 billion in May 2009 and at July 31, 2009, we had $682.3 million available under that
facility to use for purchases of Airbus aircraft, provided we receive consent from the
security trustee, as required due to our current long-term debt ratings. In March 2009, we
borrowed $1.7 billion from AIG Funding Inc., an affiliate of AIG, to assist in funding our
liquidity needs.
   Part I  Item 1A. Risk Factors Part II  Item 1A. Risk
Factors
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PART II. OTHER INFORMATION (CONTINUED)
 
 ITEM 5. OTHER INFORMATION
 a)
    
    During the three months ended June 30, 2009, changes were made to our board of
directors. As of the date of this quarterly report, our directors are as follows:
 Name
    
    TitleSteven F. Udvar-Hazy
    
    Chairman of the Board and Chief Executive OfficerJohn L. Plueger
    
    President, Chief Operating Officer and DirectorAlan H. Lund
    
    Vice Chairman, Chief Financial Officer and DirectorLeslie L. Gonda
    
    Chairman of the Executive Committee and DirectorWilliam N. Dooley
    
    DirectorRobert A. Gender
    
    DirectorLouis L. Gonda
    
    DirectorDavid L. Herzog
    
    DirectorAlain Karaoglan
    
    DirectorAlan M. Pryor
    
    DirectorMatthew E. Winter
    
    Director
 
 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 September 30, 2008 and incorporated herein by reference).4.1
    
    The Company agrees to furnish to the Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Company and its
subsidiaries, the authorized principal amount of which does not exceed 10% of the
consolidated assets of the Company and its subsidiaries.10.1
    
    Extension Letter, dated May 11, 2009, to Aircraft Facility Agreement, dated
as of May 18, 2004, among Whitney Leasing Limited, as borrower, the Company, as
guarantor, and the Bank of Scotland and other banks listed therein, as most recently
amended on May 29, 2008 (portions of this exhibit have been omitted pursuant to a
request for confidential treatment).10.2
    
    $2,000,000,000 Five-Year Revolving Credit Agreement, dated as of October
15, 2004, among the Company, CitiCorp USA, Inc., as Administrative Agent, and the
other financial institutions listed therein.12.
    
    Computation of Ratios of Earnings to Fixed Charges and Preferred Stock Dividends.31.1
    
    Certification of Chairman of the Board and Chief Executive Officer.31.2
    
    Certification of Vice Chairman and Chief Financial Officer.32.1
    
    Certification under 18 U.S.C., Section 1350.
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SIGNATURES
   August 7, 2009
    
    /S/ Steven F. Udvar-HazySTEVEN F. UDVAR-HAZYChairman of the Board and
Chief Executive Officer
(Principal Executive Officer)August 7, 2009
    
    /S/ Alan H. LundALAN H. LUNDVice Chairman and
Chief Financial Officer
(Principal Financial Officer)August 7, 2009
    
    /S/ Kurt H. SchwarzKURT H. SCHWARZSenior Vice President,
Chief Accounting Officer and
Controller
(Principal Accounting Officer) -43-




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
   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 September 30, 2008 and incorporated herein by reference).4.1
    
    The Company agrees to furnish to the Commission upon request a copy of each
instrument with respect to issues of long-term debt of the Company and its
subsidiaries, the authorized principal amount of which does not exceed 10% of the
consolidated assets of the Company and its subsidiaries.10.1
    
    Extension Letter, dated May 11, 2009, to Aircraft Facility Agreement, dated
as of May 18, 2004, among Whitney Leasing Limited, as borrower, the Company, as
guarantor, and the Bank of Scotland and other banks listed therein, as most recently
amended on May 29, 2008 (portions of this exhibit have been omitted pursuant to a
request for confidential treatment).10.2
    
    $2,000,000,000 Five-Year Revolving Credit Agreement, dated as of October
15, 2004, among the Company, CitiCorp USA, Inc., as Administrative Agent, and the
other financial institutions listed therein.12.
    
    Computation of Ratios of Earnings to Fixed Charges and Preferred Stock
Dividends.31.1
    
    Certification of Chairman of the Board and Chief Executive Officer.31.2
    
    Certification of Vice Chairman and Chief Financial Officer.32.1
    
    Certification under 18 U.S.C., Section 1350.
 -44-