##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 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 3400Los Angeles, California
    
    90067(Address of principal executive offices)
    
    (Zip Code)
 (310) 788-1999
  þ 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 except for December 31,
2007)Condensed Consolidated Balance Sheets September 30, 2008 and
December 31, 2007
    
    
    2Condensed Consolidated Statements of Income Three months ended
September 30, 2008 and 2007
    
    
    3Condensed Consolidated Statements of Income Nine months ended
September 30, 2008 and 2007
    
    
    3Condensed Consolidated Statements of Comprehensive Income Three
months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Comprehensive Income Nine
months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statements of Cash Flows Nine months ended
September 30, 2008 and 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of the Financial
Condition and Results of Operations
    
    
    17Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    32Item 4T. Controls and Procedures
    
    
    33Part II. Other InformationItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 6. Exhibits
    
    
    36Signatures
    
    
    38EX-3.1EX-3.2EX-12EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except share and per share amounts)
 September 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCash and
cash equivalents, including interest bearing accounts of $4,467,954 (2008) and $171,609 (2007)
    
    $
    5,106,189
    
    
    $
    182,772Current income taxes
    
    
    146,863
    
    
    
    138,405Notes receivable, net of allowance, and net investment in finance and
sales-type leases
    
    
    431,290
    
    
    
    418,510Flight equipment under operating leases
    
    
    55,064,674
    
    
    
    52,174,479Less accumulated depreciation
    
    
    11,681,633
    
    
    
    10,376,81943,383,041
    
    
    
    41,797,660Deposits on flight equipment purchases
    
    
    557,295
    
    
    
    794,239Lease receivables and other assets
    
    
    427,003
    
    
    
    428,836Derivative assets, net
    
    
    524,036
    
    
    
    863,719Variable interest entities assets
    
    
    100,960
    
    
    
    112,059Deferred debt issue costs, less accumulated amortization of $122,782
(2008) and $110,017 (2007)
    
    
    91,895
    
    
    
    94,390$
    50,768,572
    
    
    $
    44,830,590LIABILITIES AND SHAREHOLDERS EQUITYAccrued interest and other payables
    
    $
    519,553
    
    
    $
    448,185Tax benefit sharing payable to AIG
    
    
    85,000
    
    
    
    85,000Loan from AIG
    
    
    1,671,268
    
    
    
    Debt financing, net of deferred debt discount of $20,077 (2008) and
$32,570 (2007)
    
    
    33,051,135
    
    
    
    29,451,279Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Foreign currency adjustment related to foreign currency denominated debt
    
    
    715,460
    
    
    
    968,600Security deposits on aircraft, overhauls and other
    
    
    1,543,541
    
    
    
    1,455,181Rentals received in advance
    
    
    252,968
    
    
    
    251,381Deferred income taxes
    
    
    4,421,804
    
    
    
    4,135,137Variable interest entities liabilities
    
    
    9,074
    
    
    
    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
    
    
    594,238
    
    
    
    593,455Accumulated other comprehensive income (loss)
    
    
    (187,573
    )
    
    
    (106,219
    )Retained earnings
    
    
    5,938,522
    
    
    
    5,387,961Total shareholders equity
    
    
    7,498,769
    
    
    
    7,028,779$
    50,768,572
    
    
    $
    44,830,590
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)REVENUESRental of flight equipment
    
    $
    1,267,459
    
    
    $
    1,195,054Flight equipment marketing
    
    
    5,841
    
    
    
    16,450Interest and other
    
    
    25,653
    
    
    
    44,0031,298,953
    
    
    
    1,255,507EXPENSESInterest
    
    
    394,353
    
    
    
    417,570Effect from derivatives, net of change in hedged items due to
changes in foreign exchange rates
    
    
    (82
    )
    
    
    (3,989
    )Effect from credit and market valuation adjustments on derivatives
    
    
    (51,238
    )
    
    
    Depreciation of flight equipment
    
    
    475,110
    
    
    
    447,782Provision for overhauls
    
    
    75,343
    
    
    
    81,795Flight equipment rent
    
    
    4,500
    
    
    
    4,500Selling, general and administrative
    
    
    51,701
    
    
    
    33,281949,687
    
    
    
    980,939INCOME BEFORE INCOME TAXES
    
    
    349,266
    
    
    
    274,568Provision for income taxes
    
    
    124,660
    
    
    
    90,149NET INCOME
    
    $
    224,606
    
    
    $
    184,419
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)REVENUESRental of flight equipment
    
    $
    3,712,849
    
    
    $
    3,397,566Flight equipment marketing
    
    
    44,988
    
    
    
    21,268Interest and other
    
    
    69,444
    
    
    
    84,6193,827,281
    
    
    
    3,503,453EXPENSESInterest
    
    
    1,140,886
    
    
    
    1,210,398Effect from derivatives, net of change in
hedged items due to changes in
foreign exchange rates
    
    
    7,449
    
    
    
    8,588Depreciation of flight equipment
    
    
    1,389,348
    
    
    
    1,287,483Provision for overhauls
    
    
    226,068
    
    
    
    210,205Flight equipment rent
    
    
    13,500
    
    
    
    13,500Selling, general and administrative
    
    
    136,569
    
    
    
    116,6562,913,820
    
    
    
    2,846,830INCOME BEFORE INCOME TAXES
    
    
    913,461
    
    
    
    656,623Provision for income taxes
    
    
    325,290
    
    
    
    227,668NET INCOME
    
    $
    588,171
    
    
    $
    428,955
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)NET INCOME
    
    $
    224,606
    
    
    $
    184,419OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXNet changes in cash flow hedges, net of
taxes of $40,398 (2008) and $31,631 (2007)
    
    
    (75,025
    )
    
    
    (58,744
    )Change in unrealized appreciation on
securities available for sale, net of taxes
of $91 (2008) and $142 (2007)
    
    
    (169
    )
    
    
    263(75,194
    )
    
    
    (58,481
    )COMPREHENSIVE INCOME
    
    $
    149,412
    
    
    $
    125,938
 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)NET INCOME
    
    $
    588,171
    
    
    $
    428,955OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXNet changes in cash flow hedges, net of taxes of
$43,558 (2008) and $25,755 (2007)
    
    
    (80,894
    )
    
    
    (47,831
    )Change in unrealized appreciation on securities
available for sale, net of taxes of $248 (2008)
and $106 (2007)
    
    
    (460
    )
    
    
    198(81,354
    )
    
    
    (47,633
    )COMPREHENSIVE INCOME
    
    $
    506,817
    
    
    $
    381,322
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
 (Dollars in thousands)
 2008
    
    
    2007(Unaudited)OPERATING ACTIVITIESNet income
    
    $
    588,171
    
    
    $
    428,955Adjustments to reconcile net income to net cash provided
by operating
activities:Depreciation of flight equipment
    
    
    1,389,348
    
    
    
    1,287,483Deferred income taxes
    
    
    330,473
    
    
    
    336,988Change in fair value of derivative instruments
    
    
    215,231
    
    
    
    (441,291
    )Foreign currency adjustment of non-US$ denominated debt
    
    
    (253,140
    )
    
    
    371,145Amortization of deferred debt issue costs
    
    
    22,580
    
    
    
    23,247Other, including foreign exchange adjustments on
foreign currency denominated cash
    
    
    (12,892
    )
    
    
    (6,577
    )Changes in operating assets and liabilities:Decrease in lease receivables and other assets
    
    
    33,562
    
    
    
    74,262Increase in accrued interest and other payables
    
    
    73,715
    
    
    
    156,662Change in current income taxes
    
    
    (8,458
    )
    
    
    (143,179
    )Increase in rentals received in advance
    
    
    1,587
    
    
    
    12,476Change in unamortized debt discount
    
    
    12,493
    
    
    
    3,919Net cash provided by operating activities
    
    
    2,392,670
    
    
    
    2,104,090INVESTING ACTIVITIESAcquisition of flight equipment for operating leases
    
    
    (2,951,729
    )
    
    
    (3,943,322
    )Payments for deposits and progress payments
    
    
    (248,397
    )
    
    
    (408,267
    )Proceeds from disposal of flight equipment  net of gain
    
    
    390,868
    
    
    
    87,103Advance on notes receivable
    
    
    (43,854
    )
    
    
    Collections on notes receivable and finance and
sales-type leases  net of income amortized
    
    
    23,380
    
    
    
    28,577Other
    
    
    
    
    
    
    1,729Net cash used in investing activities
    
    
    (2,829,732
    )
    
    
    (4,234,180
    )FINANCING ACTIVITIESNet change in commercial paper
    
    
    (2,932,870
    )
    
    
    1,074,978Loan from AIG
    
    
    1,671,268
    
    
    
    Proceeds from debt financing
    
    
    9,311,223
    
    
    
    3,748,168Payments in reduction of debt financing
    
    
    (2,790,991
    )
    
    
    (2,811,244
    )Debt issue costs
    
    
    (20,085
    )
    
    
    (22,307
    )Payment of common and preferred dividends
    
    
    (41,869
    )
    
    
    (29,045
    )Increase in customer and other deposits
    
    
    166,192
    
    
    
    185,588Net cash provided by financing activities
    
    
    5,362,868
    
    
    
    2,146,138Net increase in cash
    
    
    4,925,806
    
    
    
    16,048Effect of exchange rate changes on cash
    
    
    (2,389
    )
    
    
    9,379Cash at beginning of period
    
    
    182,772
    
    
    
    157,120Cash at end of period
    
    $
    5,106,189
    
    
    $
    182,547
 (Table continued on following page)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 $20,681 (2008) and $27,672 (2007)
    
    $
    1,023,533
    
    
    $
    1,135,790Income taxes, net
    
    
    3,275
    
    
    
    33,859
 Non-Cash Investing and Financing Activities
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2008
 (Unaudited)
 A.
    
    Basis of Preparation
   Effect of Out-of-Period Adjustment
 Fair Value Measurements Accounting for
Derivative Instruments and Hedging Activities Fair Value Measurements
 B.
    
    Recent Accounting Pronouncements
 SFAS 157
 Basis of Preparation.
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
 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
  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)
 FIN 39-1
 Amendment of FIN No. 39 Offsetting of Amounts Related to Certain Contracts,
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
  SFAS 162
 The Hierarchy of Generally Accepted Accounting
Principles
 FSP FAS 133-1 and FIN 45-4
 Disclosures about Credit Derivatives and Certain Guarantees: An amendment of FASB Statement
No. 133 and FASB Interpretation No. 45
 FSP FAS 157-3
 Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active
 C.
    
    Cash and Cash Equivalents
  D.
    
    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)
SEPTEMBER 30, 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 our own credit risk, in the fair value measurement of all
net derivative liabilities positions, when appropriate. The CVA is accounted for as
a decrease to the net derivative position with the corresponding increase or
decrease reflected in OCI for derivatives designated as cash flow hedges.
    
    Market Valuation Adjustment (MVA)  The MVA adjusts the valuation of
derivatives to reflect the fact that we are an end-user of derivative products.
As such the valuation is adjusted to take into account the bid-offer spread (the
liquidity risk), as we are not a dealer of derivative products. The MVA is
accounted for as a decrease to the net derivative position with the corresponding
increase or decrease reflected in OCI for derivatives designated as cash flow
hedges.
 Basis of Preparation.
 Marketable Securities
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
 Fair Value Measurements on a Non-Recurring Basis
  
    
    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: We evaluate the fair value of our
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, we also measure the fair value using an income approach based upon the
net present value of expected cash flows of the underlying loan agreement.
    
    AVGs: We measure 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, we measure 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:Fair value measurements that are quoted prices (unadjusted) in active
markets. Market price data generally is obtained from exchange markets. Our
actively traded listed common stocks are measured at fair value on a recurring
basis and classified as level 1 inputs.
    
    Level 2:Fair value measurements based on inputs other than quoted prices
included in Level 1 that are observable for the asset or liability, either directly
or indirectly. Level 2 inputs include quoted prices for similar assets and
liabilities in active markets other than quoted prices that are observable for the
asset or liability, such as interest rates and yield curves that are observable at
commonly quoted intervals. Our derivative assets and liabilities are measured on a
recurring basis and classified as level 2.
    
    Level 3:Fair value measurement based on valuation techniques that use
significant inputs that are unobservable. 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. In making the assessment, we
consider 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)
SEPTEMBER 30, 2008
(Unaudited)
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  TotalCounterparty
    
    
    September 30,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Netting (a)
    
    
    2008(Dollars in thousands)Derivative
assets
    
    $
    
    
    
    $
    569,572
    (b)
    
    $
    
    
    
    $
    (45,536
    )
    
    $
    524,036Derivative
liabilities
    
    
    
    
    
    
    (45,536
    )
    
    
    
    
    
    
    45,536
    
    
    
    Total derivative
assets, net
    
    $
    
    
    
    $
    524,036
    
    
    $
    
    
    
    $
    
    
    
    $
    524,036
 
 (a)
    
    As permitted under FIN 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 CVA and MVA adjustments of $142.0 million.  Derivatives:
    
    (Dollars in thousands)Total fair value at December 31, 2007
    
    $
    863,719Credit value and market value adjustment of fair value recorded in
OCI
    
    
    (13,485
    )Total fair value at January 1, 2008
    
    $
    850,234Change in fair value subsequent to January 1, 2008:Effective portion recorded in OCI
    
    
    (235,020
    )Ineffective portion recorded in
income
    
    
    (8,030
    )Credit value and market value adjustments recorded in OCI for the
nine months ended September 30, 2008 (a)
    
    
    (128,467
    )Change in accrued
interest
    
    
    45,319Total fair value at September 30, 2008
    
    $
    524,036
 
 (a)
    
    A portion of the adjustments relate to a foreign currency swap with a notional
amount of 500 million that settled on October 9, 2008. The CVA and MVA adjustment
calculation as of September 30, 2008, excluding the settled position, resulted in a
decrease of $27.7 million in the aggregate adjustment. Assets and Liabilities Measured at Fair Value on a Non-recurring Basis
  E.
    
    Derivative Activities
 Fair Value Measurements
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
  Nine Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,(Increase) decrease
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Effective portion of change in
fair market value of
derivatives
    
    $
    235,020
    
    
    $
    (262,837
    )
    
    $
    512,182
    
    
    $
    (154,515
    )Credit value and market value
adjustments
    
    
    141,952
    
    
    
    
    
    
    
    141,952
    
    
    
    Amortization of balances of
de-designated hedges and other
adjustments
    
    
    620
    
    
    
    2,990
    
    
    
    194
    
    
    
    (682
    )Foreign exchange component of
cross currency swaps (credited)
charged to
income
    
    
    (253,140
    )
    
    
    333,433
    
    
    
    (538,905
    )
    
    
    245,572Income tax
effect
    
    
    (43,558
    )
    
    
    (25,755
    )
    
    
    (40,398
    )
    
    
    (31,631
    )Net changes in cash flow hedges,
net of taxes
    
    $
    80,894
    
    
    $
    47,831
    
    
    $
    75,025
    
    
    $
    58,744
   Nine Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    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)
    
    $
    
    
    
    $
    (17,546
    )
    
    $
    
    
    
    $
    Offsetting changes in fair value of foreign
denominated debt related to contracts with
no hedge accounting treatment under SFAS
133
    
    
    
    
    
    
    33,572
    
    
    
    
    
    
    
    Ineffectiveness of cash flow
hedges
    
    
    8,030
    
    
    
    (4,249
    )
    
    
    111
    
    
    
    (4,547
    )Reclassification of AOCI related to
derivative instruments de-designated from
hedges
    
    
    (581
    )
    
    
    (3,189
    )
    
    
    (193
    )
    
    
    558Loss (income) related to derivative
instruments and related economically hedged
items
    
    $
    7,449
    
    
    $
    8,588
    
    
    $
    (82
    )
    
    $
    (3,989
    )
 
 (a)
    
    In the second quarter of 2007, we re-designated 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 re-designation, all derivatives qualified as
hedges under SFAS 133. - 13 -




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
   Nine Months Ended
    
    Three Months EndedIncome:
    
    September 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007(Dollars in thousands)$
    7,751
    
    
    $
    (2,182
    )
    
    $
    2,334
    
    
    $
    (90
    )
 F.
    
    Related Party Transactions
  Subsequent Events
 - Derivative
Activities
  Nine Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Income StatementExpense (income):Allocation of
corporate costs
from AIG
    
    $
    10,328
    
    
    $
    9,574
    
    
    $
    3,715
    
    
    $
    2,838Management fees
paid to
subsidiaries of
AIG
    
    
    638
    
    
    
    531
    
    
    
    215
    
    
    
    168Management fees
received
    
    
    (7,332
    )
    
    
    (7,334
    )
    
    
    (2,430
    )
    
    
    (2,496
    )Accrued
interest
payable to
AIG
    
    
    2,896
    
    
    
    
    
    
    
    2,896
    
    
    
    
 - 14 -




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
 September 30,
    
    December 31,2008
    
    2007(Dollars in thousands)Balance SheetAsset (liability):Taxes benefit sharing payable to AIG
    
    $
    (85,000
    )
    
    $
    (85,000
    )Accrued corporate costs payable to AIG
    
    
    (5,517
    )
    
    
    (1,495
    )Loan from AIG (a)
    
    
    (1,671,268
    )
    
    
    Accrued dividend payable to AIG
    
    
    
    
    
    
    (4,260
    )Accrued interest payable to AIG
    
    
    (2,896
    )
    
    
    Income taxes receivable from AIG
    
    
    146,863
    
    
    
    138,405Medium term notes, held by AIG (b)
    
    
    (200,000
    )
    
    
    (200,000
    )Net (payable) receivable for management fees and other
    
    
    (1,375
    )
    
    
    (577
    )
 
 (a)
    
    The amount outstanding under the loan was paid in full subsequent to September 30,
2008. See Note H  Subsequent Events.(b)
    
    $180.0 million of the $200 million outstanding was paid subsequent to September 30,
2008. G.
    
    Debt Financing
 Related Party Transactions
 September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Public bonds and medium-term
notes
    
    $
    21,448,257
    
    
    $
    21,360,020Bank debt and other term
debt
    
    
    10,057,270
    
    
    
    3,625,274Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Total public debt, bank debt and
subordinated debt
    
    
    32,505,527
    
    
    
    25,985,294Commercial
paper
    
    
    1,565,685
    
    
    
    4,498,555Less: Deferred debt
discount
    
    
    (20,077
    )
    
    
    (32,570
    )Total debt financing and
subordinated debt
    
    $
    34,051,135
    
    
    $
    30,451,279
  Commercial Paper
  Subsequent Events
 Bank Credit Facilities
 Revolving Credit Facilities:
 - 15 -




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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2008
(Unaudited)
  Related Party Transactions Subsequent Events
 H.
    
    Subsequent Events
 Export Credit Facilities
   Commercial Paper Funding Facility
  Related Party Transactions
 - 16 -




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 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
 - 17 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
 FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Overview
    Recent Developments
 Recent Developments
  
    
    Commercial Paper:We had $4.6 billion commercial paper outstanding and had access
to borrow an additional $1.4 billion under our commercial paper program.
    
    Revolving Credit Agreement:The commercial paper program was backed up by $6.5
billion in revolving credit facilities, of which we had the maximum amount available
to us.
    
    Automatic Shelf Registration:We had $900 million available under our retail note
program, of which we issued $130.8 million during the third quarter, and $3.3 billion
available under our medium-term note program.
    
    Euro Medium-term Note Programme:We had approximately $3.2 billion available.
    
    Export Credit Agency(ECA) Facility:We had approximately $900 million available.
 - 18 -




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Liquidity Pressure on AIG
  Revolving Credit Facilities Draw Down
  Downgrade Trigger of ECA facility
  AIG Loan from the Federal Reserve Bank of New York
 (i) (ii)
  AIG Going Concern Consideration
  - 19 -




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Future Liquidity
    Industry Condition and Sources of Revenue
    - 20 -




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
     Critical Accounting Policies and Estimates
   Fair Value Measurements: Fair Value Measurements
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
    Notes to
Condensed Consolidated Financial Statements
 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
 Financial Condition
  - 22 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Recent Developments,
   September 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Public bonds and medium-term notes
    
    $
    21,448,257
    
    
    $
    21,360,020Bank debt and other term debt
    
    
    10,057,270
    
    
    
    3,625,274Subordinated debt
    
    
    1,000,000
    
    
    
    1,000,000Total public debt, bank debt and subordinated debt
    
    
    32,505,527
    
    
    
    25,985,294Commercial paper
    
    
    1,565,685
    
    
    
    4,498,555Less: Deferred debt discount
    
    
    (20,077
    )
    
    
    (32,570
    )Total debt financing and subordinated debt
    
    $
    34,051,135
    
    
    $
    30,451,279Selected interest rates and ratios which include the economic effect of
derivative instruments:Composite interest rate
    
    
    5.01
    %
    
    
    5.16
    %Percentage of total debt at fixed rates
    
    
    66.25
    %
    
    
    73.84
    %Composite interest rate on fixed rate debt
    
    
    5.35
    %
    
    
    5.17
    %Bank prime rate
    
    
    5.00
    %
    
    
    7.25
    %
  Public Bonds and Medium-Term Notes
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Maximum
    
    Sold as of
    
    Sold as of
    
    Sold as ofOffering
    
    December 31, 2007
    
    September 30, 2008
    
    October 31, 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
    
    
    $
    6,927
    
    
    $
    6,927Euro Medium-Term
Note Programme
dated
September 2008
(b)(c)
    
    
    7,000
    
    
    
    3,832
    
    
    
    3,832
    
    
    
    3,247
 
 (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)
    
    We have economically hedged the foreign currency risk of the notes through
derivatives.(c)
    
    This is a perpetual program. As a bond matures, the principal amount becomes
available for new issuances under the program. Bank Credit Facilities
 Revolving Credit Facilities:
 Export Credit Facilities
   - 24 -




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 aircraft was $2.9 billion at September 30, 2008. At September 30, 2008, the interest rates of
the outstanding loans ranged from 2.83% to 4.71%.
  Term Loans:
 Subordinated Debt
 (i) (ii) (iii)
 Loan from AIG
  Commercial Paper
   - 25 -




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 Commercial Paper Funding Facility
   Derivatives
 Accounting for Derivative Instruments
and Hedging Activities
  Notes to Condensed Consolidated
Financial Statements.
 Credit Ratings
  - 26 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Date of Last ActionRating Agency
    
    Short-term Debt
    
    Long-term Debt
    
    Credit Watch/Review
    
    to These RatingsFitch
    
    F1
    
    A
    
    Evolving
    
    September 17, 2008Moodys
    
    P-2
    
    Baa1
    
    Direction Uncertain
    
    October 3, 2008S&P
    
    A-1
    
    A-
    
    Developing
    
    September 17, 2008
    Existing Commitments
 Commitments Due by Fiscal YearTotal
    
    2008
        2009
    
    2010
    
    2011
    
    2012
    
    Thereafter(Dollars in thousands)Public, Bank and
Term Debt
    
    $
    31,505,527
    
    
    $
    1,859,081
    
    
    $
    6,142,856
    
    
    $
    6,497,975
    
    
    $
    7,344,491
    
    
    $
    4,172,315
    
    
    $
    5,488,809Commercial Paper
    
    
    1,565,685
    
    
    
    1,500,585
    
    
    
    65,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated
Debt
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000Loan From AIG
(a)
    
    
    1,671,268
    
    
    
    1,671,268
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Payments
on Debt Outstanding
(b)(c)(d)
    
    
    7,803,433
    
    
    
    455,702
    
    
    
    1,472,084
    
    
    
    1,144,562
    
    
    
    789,796
    
    
    
    438,725
    
    
    
    3,502,564Operating Leases
(e)(f)
    
    
    77,317
    
    
    
    2,351
    
    
    
    10,150
    
    
    
    10,845
    
    
    
    11,286
    
    
    
    11,745
    
    
    
    30,940Pension Obligations
(g)
    
    
    3,065
    
    
    
    432
    
    
    
    467
    
    
    
    507
    
    
    
    547
    
    
    
    553
    
    
    
    559Tax Benefit Sharing
Agreement Due to
AIG
    
    
    85,000
    
    
    
    
    
    
    
    85,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase
Commitments (h)
    
    
    16,902,500
    
    
    
    735,300
    
    
    
    2,602,900
    
    
    
    242,700
    
    
    
    309,000
    
    
    
    977,800
    
    
    
    12,034,800Total
    
    $
    60,613,795
    
    
    $
    6,224,719
    
    
    $
    10,378,557
    
    
    $
    7,896,589
    
    
    $
    8,455,120
    
    
    $
    5,601,138
    
    
    $
    22,057,672
 Contingent Commitments
 Contingency Expiration by Fiscal YearTotal
    
    2008
    
    2009
    
    2010
    
    2011
    
    2012
    
    Thereafter(Dollars in thousands)AVGs (i)
    
    $
    558,723
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    27,841
    
    
    $
    78,950
    
    
    $
    451,932Lines of Credit
    
    
    50,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    Total (j)
    
    $
    608,723
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    77,841
    
    
    $
    78,950
    
    
    $
    451,932
 (Table continued on following page) - 27 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
 
 (a)
    
    The loan was paid in full subsequent to September 30, 2008. See Note H of Notes to Condensed
Consolidated Financial Statements.(b)
    
    Future interest payments on floating rate debt are estimated using floating interest
rate in effect at September 30, 2008.(c)
    
    Includes the effect of interest rate and foreign currency derivative instruments.(d)
    
    Does not include interest on Loan From AIG or Commercial Paper.(e)
    
    Excludes fully defeased aircraft sale-lease back transactions.(f)
    
    Amounts shown net of subleased office space.(g)
    
    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 2013
estimated allocation. The amount allocated has not been material to date.(h)
    
    Due to the Boeing strike the 2008 commitments will likely move to 2009.(i)
    
    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.(j)
    
    Excluded from total contingent commitments are $105.6 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. Other Variable Interest Entities
 Consolidation of Variable Interest Entities,
  Results of OperationsThree months ended September 30, 2008 versus 2007
 (i) (ii)
 (i) (ii) (iii)
   - 28 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  (i) (ii) (iii) (i) (ii)
   2008
    
    2007
    
    DecreaseBeginning of Quarter
    
    
    4.74
    %
    
    
    5.27
    %
    
    
    0.53
    %End of Quarter
    
    
    5.01
    %
    
    
    5.28
    %
    
    
    0.27
    %Average
    
    
    4.88
    %
    
    
    5.28
    %
    
    
    0.40
    %
     (i) (ii) (iii)
   Notes to Condensed Consolidated Financial Statements
 - 29 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
  Nine months ended September 30, 2008 versus 2007
 (i) (ii) (iii)
 (i) (ii) (iii)
   (i) (ii) (iii) (iv)
   2008
    
    2007
    
    DecreaseBeginning of Nine months
    
    
    5.16
    %
    
    
    5.24
    %
    
    
    0.08
    %End of Nine months
    
    
    5.01
    %
    
    
    5.28
    %
    
    
    0.27
    %Average
    
    
    5.08
    %
    
    
    5.26
    %
    
    
    0.18
    %
   - 30 -




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
   (i) (ii) (iii
   Notes to Condensed Consolidated Financial Statements
 - 31 -




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Value at Risk
     ILFC Market RiskNine months Ended
    
    Year EndedSeptember 30, 2008
    
    December 31, 2007(Dollars in millions)Average
    
    High
    
    Low
    
    Average
    
    High
    
    LowCombined
    
    $
    56.1
    
    
    $
    96.2
    
    
    $
    36.1
    
    
    $
    70.0
    
    
    $
    102.3
    
    
    $
    38.5Interest Rate
    
    
    56.7
    
    
    
    97.6
    
    
    
    36.5
    
    
    
    69.9
    
    
    
    102.2
    
    
    
    38.8Currency
    
    
    1.0
    
    
    
    1.6
    
    
    
    0.7
    
    
    
    0.9
    
    
    
    1.2
    
    
    
    0.7
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ITEM 4T. CONTROLS AND PROCEDURES
 (A)
    
    Evaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our filings under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the periods specified in the
rules and forms of the Securities and Exchange Commission, and such information is
accumulated and communicated to our management, including the Chairman of the Board and
Chief Executive Officer and the Vice Chairman and Chief Financial Officer (collectively
the Certifying Officers), as appropriate, to allow timely decisions regarding required
disclosure. Our management, including the Certifying Officers, recognizes that any set
of controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.We have evaluated, under the supervision and with the participation of management,
including the Certifying Officers, the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a  15(e) and 15d  15(e) of the Securities Exchange
Act of 1934 as of September 30, 2008. Based on that evaluation, our Certifying Officers
have concluded that our disclosure controls and procedures were effective at the
reasonable assurance level at September 30, 2008.Variable Interest EntitiesAt September 30, 2008, our Condensed Consolidated Balance Sheet included assets and
liabilities of $101.0 million and $9.1 million, respectively, related to Variable
Interest Entities (VIEs). At December 31, 2007, the balances were $112.1 million and
$7.0 million. In addition, we recorded a net loss of $3.2 million and $2.7 million for
the nine months ended September 30, 2008 and 2007, respectively, related to those VIEs.
Our assessment of disclosure controls and procedures, as described above, includes the
Variable Interest Entities. Each of the VIEs has a discrete number of assets and we, as
lender and guarantor to the VIEs, have been provided sufficient information to conclude
that our procedures with respect to these VIEs are effective in providing reasonable
assurance that the information required to be disclosed by us relating to these entities
is reconciled, processed, summarized and reported within the periods specified by the
Securities and Exchange Commission. However, management has been unable to assess the
effectiveness of internal controls at those entities due to our inability to dictate or
modify the control over financial reporting of those entities, or to assess those
controls.(B)
    
    Changes in Internal Control Over Financial ReportingThere have been no changes in our internal control over financial reporting during the
nine months ended September 30, 2008, that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.
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PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGSIn connection with the January 3, 2004 crash of our 737-300 aircraft on lease to
Flash Airlines in Egypt, lawsuits were initially filed by the families of 122 of
the 148 victims on the flight against us, Boeing, Honeywell International, Inc.,
and Parker-Hannifin Corporation in U.S. federal court in California and by the
families of 2 of the victims against ILFC in U.S. federal court in Arkansas.
Both cases in the U.S. were dismissed on the basis of forum non conveniens and
refiled in the Courts of First Instance in France. These plaintiffs also sued
Flash Airlines and its insurer in the same French court. As to the French case
against the U.S. defendants involving 122 of the victims, on March 6, 2008, the
Paris Appellate Court found that the particular Court of First Instance in
France did not have jurisdiction over the U.S. defendants. This Paris appellate
court decision is being appealed by the defendants to the French supreme court.
In the meantime, however, the cases may be refiled against the U.S. defendants
in California. We believe we are adequately covered in all these cases by the
liability insurance policies carried by Flash Airlines and we have substantial
defenses to the actions. We do not believe the outcome of these lawsuits will
have a material effect on our consolidated financial condition, results of
operations, or cash flows.
 
 ITEM 1A. RISK FACTORS
 Our business is subject to numerous risks and uncertainties, as described below
and under Item 1A. Risk Factorsin our Annual Report on Form 10-K for the year
ended December 31, 2007 and in the sections above titled Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Overview and Industry Conditionand Quantitative and Qualitative Disclosures
about Market Risk.We operate as a supplier and financier to airlines. The risks affecting our
airline customers are generally out of our control and impact our customers to
varying degrees. As a result, we are indirectly impacted by all the risks facing
airlines today. Our customers ability to compete effectively in the market
place and manage these risks has a direct impact on us and our operating
results.  
    
    Borrowing RisksLiquidity Risk We are dependent on our ability to borrow the funds
needed to finance the purchase of aircraft and repay our existing debt
obligations. Our liquidity is dependent on having continued access to
debt markets and maintaining our credit ratings. We have historically
fulfilled our short-term borrowing requirements through the issuance of
commercial paper. In September 2008, due to a decrease in liquidity in
the commercial paper market and the recent liquidity issues of AIG which
led to downgrades of our short-term debt rating by Moodys Investor
Service, Inc. (Moodys) and Standard & Poors, a division of The
McGraw-Hill Companies, Inc. (S&P) (S&P subsequently upgraded our
short-term debt rating), we became unable to issue commercial paper under
our commercial paper program. We cannot determine when the commercial
paper markets may be available to us again. When commercial paper became
unavailable to us, we borrowed approximately $1.67 billion from AIG
Funding, an affiliate of American International Group, Inc. (AIG), to
repay maturing commercial paper and other maturing obligations.
Subsequently we drew down the maximum amount available on our unsecured
revolving credit facilities of $6.5 billion. In October 2008, we
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PART II. OTHER INFORMATION (CONTINUED)
 repaid the amount outstanding under the loan from AIG Funding with the
proceeds received from the issuance of commercial paper under the Federal
Reserve Bank of New Yorks (NY Fed) Commercial Paper Funding Facility
(CPFF). We are looking at other ways to fund our purchase commitments
of aircraft and future maturing obligations including secured financings.
Under our existing debt agreements, we currently are permitted to enter
into secured financings totaling up to 12.5% of Consolidated Tangible Net
Assets, as defined in the debt agreements, currently an amount in excess
of $4.0 billion. We anticipate that these secured financings together
with internally generated funds will be sufficient to meet our liquidity
needs through September 30, 2009. With insufficient liquidity we could
potentially experience:
 §
    
    An inability to acquire aircraft, for which we have signed
contracts, resulting in lower growth, lost revenue, and strained
manufacturer and customer relationships; and§

    
    An inability to meet our debt maturities as they become due,
resulting in payment defaults, non-compliance with debt covenants,
further reduced credit ratings and an inability to access certain
debt markets.
 
    
    Other Risks
 Credit Ratings
 §

    
    increase our borrowing costs; and§

    
    Potentially prevent us from accessing certain capital markets,
including imposing additional restrictions under our ECAs and
making it more difficult for us to borrow under the 2004 ECA
facility.
 Key Personnel We rely upon the knowledge and talent of our employees to
successfully conduct business. The reduction in AIGs common stock price
has dramatically reduced the value of equity awards previously made to
our key employees. A loss of key personnel could hurt our business.Relationship with AIG While neither AIG nor any of its subsidiaries is
a co-obligor or guarantor of our debt securities, circumstances affecting
AIG can have an impact on us. For example, concurrent with ratings
actions recently taken on AIG by S&P, Moodys and Fitch Ratings, Inc
(Fitch), actions were taken, or statements were made, with respect to
our ratings by Moodys and S&P. As a result, we were no longer able to
borrow under our commercial paper program and borrowed approximately
$1.67 billion from an affiliate of AIG in September 2008 to repay
maturing commercial paper and other general maturing obligations.
Subsequent to September 30, 2008 we paid the amount outstanding under the
loan in full when we were granted access to the CPFF. See Note H of Notes
to Condensed Consolidated Financial Statements. We can give no assurance
how further changes in circumstances related to AIG would impact us.AIG Going Concern Consideration In connection with the preparation of its quarterly report on
Form 10-Q for the quarterly period ended September 30, 2008, AIG assessed its ability to continue
as a going concern. After considering several factors as outlined in AIGs Form 10-Q, AIG believes
that it will have adequate liquidity to finance and operate its businesses and continue as a going
concern for at least the next twelve months. However, it is possible that the actual outcome of
one or more of AIGs plans could be materially different or that one or more of its significant
judgments or estimates could prove to be materially incorrect, which could raise substantial doubt
about AIGs ability to continue as a going concern. If AIG is not able to continue as a going
concern, it could have a significant impact on our operations, including limiting our ability to
issue new debt.
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PART II. OTHER INFORMATION (CONTINUED)
 Restrictive Covenants on our Operations AIG recently experienced
serious liquidity issues and on September 22, 2008 entered into an $85
billion revolving credit facility and a guarantee and pledge agreement
with the Federal Reserve Bank of New York. We do not guarantee AIGs
obligations under the credit facility and none of our assets were pledged
to secure AIGs obligations under the credit facility.We are, however, as a subsidiary of AIG, subject to the restrictive
covenants under the facility. These covenants, among other things,
restrict our ability to:
 §

    
    incur debt;§

    
    encumber our assets;§

    
    make equity or debt investments in other parties; and§

    
    impose restrictions on our ability to pay dividends and
distributions to our equity holders.
 These covenants may affect our ability to operate and finance our
business as we deem appropriate. In addition, AIG is required to repay
the credit facility primarily from proceeds on sales of assets, including
businesses. On October 3, 2008 AIG indicated its intent to refocus on its
core property and casualty insurance businesses, generate sufficient
liquidity to repay the outstanding balance of its loan from the NY Fed
and address its capital structure. AIG intends to retain the majority of
its U.S. property and casualty and foreign general insurance businesses,
and to retain an ownership interest in certain of its foreign life
insurance operations. AIG is exploring divestiture opportunities for its
remaining businesses. As of October 31, 2008, AIG has not specifically
announced its intentions relating to ILFC.
 For a detailed discussion of risk factors affecting us, see Item 1A. Risk
Factorsin our Annual Report on Form 10-K for the year ended December 31, 2007.
 
 ITEM 6. EXHIBITS
  3.1*
    
    
    Restated Articles of Incorporation of the Company.3.2*
    
    
    Amended and Restated By-Laws of the Company.4.1
    
    
    Supplemental Agency Agreement, dated September 5,
2008, among the Company, Citibank, N.A. and Dexia Banque Internationale à
Luxembourg, société anonyme (incorporated by reference to the Companys
Current Report on Form 8-K filed with the Commission on September 8,
2008).
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PART II. OTHER INFORMATION (CONTINUED)
 4.2
    
    
    The Company agrees to furnish to the Commission
upon request a copy of each instrument with respect to issues of
long-term debt of the Company and its subsidiaries, the authorized
principal amount of which does not exceed 10% of the consolidated assets
of the Company and its subsidiaries.12*
    
    
    Computation of Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends.31.1*
    
    
    Certification of Chairman of the Board and Chief Executive Officer.31.2*
    
    
    Certification of Vice Chairman and Chief Financial Officer.32.1*
    
    
    Certification under 18 U.S.C., Section 1350.
 
 *
    
    Filed herewith - 37 -




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SIGNATURES
  INTERNATIONAL LEASE FINANCE CORPORATIONNovember 11, 2008
    
    /s/ Steven F. Udvar-HazySTEVEN F. UDVAR-HAZYChairman of the Board andChief Executive Officer(Principal Executive Officer)November 11, 2008
    
    /s/ Alan H. LundALAN H. LUNDVice Chairman andChief Financial Officer(Principal Financial Officer)November 11, 2008
    
    /s/ Kurt H. SchwarzKURT H. SCHWARZSenior Vice President,Chief Accounting Officer and Controller(Principal Accounting Officer)
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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
 
  Exhibit No.3.1*
    
    Restated Articles of Incorporation of the Company.3.2*
    
    Amended and Restated By-Laws of the Company.4.1
    
    Supplemental Agency Agreement, dated September 5,
2008, among the Company, Citibank, N.A. and Dexia Banque Internationale à
Luxembourg, société anonyme (incorporated by reference to the Companys
Current Report on Form 8-K filed with the Commission on September 8,
2008).4.2
    
    The Company agrees to furnish to the Commission
upon request a copy of each instrument with respect to issues of
long-term debt of the Company and its subsidiaries, the authorized
principal amount of which does not exceed 10% of the consolidated assets
of the Company and its subsidiaries.12*
    
    Computation of Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends.31.1*
    
    Certification of Chairman of the Board and Chief Executive Officer.31.2*
    
    Certification of Vice Chairman and Chief Financial Officer.32.1*
    
    Certification under 18 U.S.C., Section 1350.
 
 *
    
    Filed herewith - 39 -