UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
       ------------------------------------------------------------------

                                    FORM 10-K


                  FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
           SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
           -----------------------------------------------------------
                                   (MARK ONE)

             X   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           -----
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2001
                                       OR
                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          -----
                         SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from       to
                                                       -----    -----

                          Commission File No. 333-69864


                          LEASE INVESTMENT FLIGHT TRUST
             (Exact name of registrant as specified in its charter)

                                    51-65219
                             (IRS Employer I.D. No.)

                                    DELAWARE
         (State or other jurisdiction of incorporation or organization)

    1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890
                                 (302) 651-1000
          (Address and telephone number of principal executive offices)

         --------------------------------------------------------------
        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

    Indicate  by check mark  whether the  registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---    ---

    Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  X
           ---

                       This document consists of 65 pages.


                                       1
<PAGE>


                          Lease Investment Flight Trust

                          2001 Form 10-K Annual Report

                                Table of Contents


                                                                            Page
PART I
Item 1.       Business........................................................3
Item 2.       Properties.....................................................27
Item 3.       Legal Proceedings..............................................27
Item 4.       Submission of Matters to a Vote of Security Holders............27

PART II
Item 5.       Market for Registrant's Common Equity and Related
              Stockholder Matters............................................28
Item 6.       Selected Financial Data........................................29
Item 7.       Management's Discussion and Analysis of Financial Condition
              and Results of Operations......................................29
Item 7A.      Quantitative and Qualitative Disclosures about Market Risk.....36
Item 8.       Financial Statements and Supplementary Data....................39
Item 9.       Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure.......................................54

PART III
Item 10.      Directors and Executive Officers of the Registrant.............54
Item 11.      Executive Compensation.........................................61
Item 12.      Security Ownership of Certain Beneficial Owners and
              Management.....................................................61
Item 13.      Certain Relationships and Related Transactions.................62

PART IV
Item 14.      Exhibits, Financial Statement Schedules and Reports on
              Form 8-K.......................................................63


                                       2
<PAGE>

                                     PART I

Item 1.       Business

Introduction

         Lease Investment Flight Trust ("LIFT") is a  special-purpose  statutory
business trust that was formed on June 13, 2001 ("Inception")  under the laws of
the State of Delaware.  On June 26, 2001 (the "Closing Date"), LIFT acquired one
direct subsidiary,  LIFT Trust-Sub 1 ("LIFT 1"), a Delaware business trust, from
Automatic LIFT I, LP  ("Automatic"),  its beneficial  owner.  LIFT 1 has various
domestic and foreign  subsidiaries  that own or lease  aircraft.  The authorized
business of LIFT and its subsidiaries  (collectively  the "LIFT group"),  all of
which were organized prior to June 26, 2001, is limited to acquiring, financing,
re-financing,  owning, leasing,  re-leasing,  selling, maintaining and modifying
commercial jet aircraft.  The names of LIFT's 35 subsidiaries  and the number of
aircraft owned by each subsidiary are as follows:

           Name of Subsidiary                          Number of Aircraft Owned
           ------------------                          ------------------------
           LIFT Trust Sub-1                                        0
           LIFT SP Spain, LLC                                      5
           LIFT Canada, LLC                                        2
           LIFT GF UK, LLC                                         2
           LIFT France, LLC                                        3
           LIFT Turkey, LLC                                        2
           LIFT Georgia, LLC                                       1
           LIFT Portugal, LLC                                      1
           LIFT Morocco, LLC                                       1
           LIFT RS Brazil, LLC                                     1
           LIFT EJ UK, LLC                                         1
           LIFT VG Brazil, LLC                                     2
           LIFT Indonesia, LLC                                     1
           LIFT Arizona, LLC                                       1
           LIFT Malaysia, LLC                                      1
           LIFT Missouri, LLC                                      1
           LIFT Italy, LLC                                         1
           LIFT IB Spain, LLC                                      1
           LIFT A2K UK, LLC                                        1
           LIFT Russia, LLC                                        1
           LIFT CEA China, LLC                                     5
           ZIBAL Aircraft Leasing LLC                              1
           A320 Aircraft Leasing IX Corp                           0
           A320 Aircraft Leasing X Corp                            0
           MD82 Aircraft Leasing I Corporation                     0
           MD82 Aircraft Leasing II Corporation                    0
           MD82 Aircraft Leasing III Corporation                   0
           MD82 Aircraft Owner F Limited                           1
           MD82 Aircraft Owner G Limited                           1
           B737 Owner Limited                                      1
           Sinope Limited                                          1
           LIFT Ireland Leasing Limited                            0
           LIFT Indonesia Leasing, S.A.R.L.                        0
           LIFT Malaysian Leasing Limited                          0
           LIFT Bermuda Leasing Limited                            0

                                       3
<PAGE>


         The aircraft owned by Sinope Limited, B737 Owner Limited, MD82 Aircraft
Owner G Limited,  and LIFT Italy, LLC are leased to LIFT Ireland Leasing Limited
and subleased to the ultimate  operators.  The aircraft owned by LIFT Indonesia,
LLC is leased to LIFT Indonesia Leasing,  S.A.R.L. and subleased to the ultimate
operator.  The aircraft  owned by LIFT Russia,  LLC is subleased to LIFT Bermuda
Leasing  Limited and subleased to the ultimate  operator.  The aircraft owned by
LIFT Malaysia,  LLC is leased to LIFT Malaysian Leasing Limited and subleased to
the ultimate  operator.  LIFT's principal  executive offices are located at 1100
North Market  Street,  Rodney  Square North,  Wilmington,  Delaware  19890.  Its
telephone number is (302) 651-1000.

         The beneficial interests in the LIFT group were originally purchased by
Automatic,   which  is  affiliated   with  Automatic   LLC.   Automatic  LLC  is
headquartered  in  Orlando,  Florida.   Automatic  LLC,  through  its  operating
affiliates, originates, acquires and sells aircraft and services aircraft leases
and arranges  various  forms of  financings  in the aviation  leasing  industry.
Automatic  subsequently  sold 50.1% of the beneficial  interests of LIFT to four
other  affiliates  of Automatic  LLC. As a result,  Automatic  owns 49.9% of the
beneficial  interests of LIFT while the other four  affiliates  of Automatic LLC
each own 12.525% of the beneficial interests of LIFT.

         On the Closing Date, LIFT issued $1,429 million of  asset-backed  notes
(the "Initial  Notes").  As of that date,  the Initial  Notes  consisted of $400
million of Class A-1 Notes,  $260  million of Class A-2 Notes,  $425  million of
Class A-3 Notes, $60 million of Class B-1 Notes, $83 million of Class B-2 Notes,
$69 million of Class C-1 Notes,  $72 million of Class C-2 Notes,  $35 million of
Class D-1 Notes and $25 million of Class D-2 Notes.  LIFT used the proceeds from
the  sale of the  Initial  Notes  to fund  cash  reserves  of $83  million,  pay
transaction  expenses  and make the payments  described in the second  following
paragraph.

         Also on the  Closing  Date,  LIFT 1 and its  subsidiaries  agreed  with
General Electric Capital Corporation to purchase 39 commercial jet aircraft (the
"Initial  Aircraft") from General Electric  Capital  Corporation and some of its
affiliates  (collectively the "Seller") from the proceeds of $1,310.5 million of
bridge notes issued by LIFT 1 to Credit Suisse First Boston  Corporation  on the
Closing Date (the "Bridge Notes").

         In addition, LIFT agreed with Automatic on the Closing Date to purchase
LIFT 1 and its subsidiaries under a beneficial interest purchase  agreement,  to
pay to Automatic the cash purchase  price of  approximately  $5.5 million and to
repay the Bridge  Notes on behalf of LIFT 1. LIFT made these  payments  with the
proceeds from the sale of the Initial Notes and from the sale of its  beneficial
interest.  As a result,  LIFT 1 became a part of the LIFT  group on the  Closing
Date.

         On December  18, 2001,  LIFT  completed  an exchange  offer  whereby it
issued seven classes of new notes,  also designated  Class A-1, Class A-2, Class
A-3, Class B-1, Class B-2, Class C-1, and Class C-2 (the "Exchange  Notes"),  in
exchange for the seven corresponding  classes of the Initial Notes. The terms of
the Exchange Notes are identical in all material  respects to the Initial Notes,
except that the Exchange Notes are registered  under the Securities Act of 1933,
as amended.  The Class D-1 and Class D-2 Notes were not  exchanged  and remained
unregistered.  $10  million  of the Class A-2 and $34  million  of the Class A-3
Initial  Notes were not tendered in the exchange  offer and remain  outstanding.
The remaining  outstanding Initial Notes and the outstanding  Exchange Notes are
together referred to as the "Notes".

         As of December  31, 2001,  38 of the LIFT  group's 39 aircraft  were on
lease to 24  different  lessees in 17 different  countries  and one aircraft was
off-lease.  For a detailed  discussion  of the value of the  aircraft,  see "The
Aircraft Portfolio."

                                       4
<PAGE>


         The trust agreement governing LIFT (the "Trust Agreement") provides for
four  trustees.  One of the four trustees of LIFT is Wilmington  Trust  Company,
which acts as the statutory  trustee and the owner trustee.  The remaining three
trustees are the  "controlling  trustees"  and have the  authority to manage the
property and affairs of LIFT under the Trust  Agreement.  All of the controlling
trustees  are  independent  from the Seller.  One of the  controlling  trustees,
called  the  "equity  trustee",  has been  appointed  by the  holders  of LIFT's
beneficial  interest,  while  the two other  controlling  trustees,  called  the
"independent  controlling  trustees",  are  independent  of those  holders.  The
holders of the  beneficial  interest  of LIFT may remove and  replace the equity
trustee.  Each independent  controlling  trustee may designate a replacement for
the other controlling  trustee if such other controlling  trustee resigns or his
office is deemed vacant.

         The Trust Agreement  requires that any decision  relating to insolvency
proceedings, mergers or other reorganizations of LIFT be approved by a unanimous
vote of the  controlling  trustees.  Any sale of aircraft,  decisions  requiring
LIFT's  approval under the servicing  agreement for the aircraft (the "Servicing
Agreement")  or under  the  agreement  with the  administrative  agent,  and the
reduction  of any  required  level of  reserves  must be  approved by the equity
trustee and at least one of the independent  controlling  trustees. In order for
the controlling  trustees to approve an aircraft sale on other than pre-approved
terms,  they must confirm to the trustee under the  Indenture,  dated as of June
26, 2001,  pursuant to which LIFT issued the Notes (the  `Indenture"),  prior to
the sale, that the sale will not materially and adversely  affect the holders of
the Notes.  The acquisition of additional  aircraft by LIFT and the terms of any
related  financing need only be approved by the equity  trustee,  subject to the
terms of the Trust  Agreement and the Indenture,  including  confirmation by the
rating agencies rating the Notes that the transaction  will not adversely affect
the rating on the Notes.

         As is common with many other special  purpose  companies,  LIFT and its
subsidiaries do not have any officers or other employees, except, in the case of
certain  subsidiaries  of LIFT, as may be required by  applicable  law. The LIFT
group has  arranged  for  third-party  service  providers  to  provide  aircraft
servicing,  managerial  services and financial  advice.  See "Part III, Item 10.
Directors  and Executive  Officers of the  Registrant"  for further  information
regarding the management of the LIFT group.

         The LIFT group may acquire additional  commercial  passenger or freight
aircraft  from  Automatic  or the Seller  using  proceeds  from the  issuance of
additional notes and equity.  The Indenture  contains a number of conditions for
the  acquisition  of  additional  aircraft  and  for  the  financing  of such an
acquisition.  If these conditions are met, there is no limit under the Indenture
to the number of additional aircraft that the LIFT group may acquire.

         All of the net  revenues  of the LIFT group are used to pay  principal,
interest and other  amounts due on the Notes or to provide for cash reserves for
some or all of the  subclasses of Notes.  Except for accruals for the payment of
anticipated expenses and required reserves, none of the revenues will be re-used
or retained in the business of the LIFT group. In addition, none of the earnings
of the LIFT group may be distributed  to the holders of the beneficial  interest
of LIFT  until all  Notes are  repaid  in full  with the  limited  exception  of
reimbursing any payments made by those holders to cure interest shortfalls.

         Because  the Notes do not  provide for fixed  principal  payments,  the
ultimate repayment of the Notes, the amount of individual payments over time and
the speed of  repayment  are fully a  function  of the LIFT  group's  ability to
collect  revenues  from the  portfolio  of the 39  aircraft  and,  if  acquired,
additional aircraft. Set forth below in the "Risk Factors" section are a variety

                                       5
<PAGE>

of factors that, in addition to general  economic  conditions,  could  influence
materially  the  collection  of  revenues  --  principally  lease rents and sale
proceeds -- available for debt repayment.

         References in this Form 10-K to the initial appraised value of aircraft
mean the average of three  appraisals  of the  aircraft as of December 31, 2000.
For a further  discussion  of the  appraisals,  see "The  Aircraft  Portfolio  -
Appraisal of Aircraft".

Forward-Looking Statements

         Any statements  contained herein that are not historical facts, or that
might be considered opinions or projections,  whether expressed or implied,  are
meant as, and should be considered,  forward-looking  statements as that term is
defined  in  the  Private  Securities   Litigation  Reform  Act  of  1995.  Such
forward-looking  statements  include,  among others,  statements relating to the
LIFT group's  future plans,  objectives,  expectations  and  intentions  and the
assumptions underlying or relating to such plans,  objectives,  expectations and
intentions,  and may be identified by the use of words such as "expect,"  "may,"
"anticipate,"  "intend," "plan,"  "should,"  "believe,"  "estimate,"  "predict,"
"potential,"  "continue,"  or similar terms that relate to the future or express
uncertainty.  Forward-looking  statements are based on assumptions  and opinions
concerning a variety of known and unknown risks.  If any assumptions or opinions
prove  incorrect,  any  forward-looking  statements  made on that basis may also
prove materially incorrect. Important factors that could cause actual results to
differ materially from the results reflected in the  forward-looking  statements
contained  herein are  described  below  under  "Risk  Factors."  The LIFT group
assumes no obligation to update any forward-looking statements to reflect actual
results or changes in the factors affecting such forward-looking statements.

Risk Factors

         The following  summarizes  certain risks that may materially affect the
business  operations  of the LIFT  group and its  ability  to pay the  interest,
principal  and  premium,  if any, on the Notes in full at or before  their final
maturity  dates  and to  make  cash  distributions  to the  beneficial  interest
holders.  There  may be  additional  risks  and  uncertainties  not known at the
present.  There can be no assurance that payments under the aircraft leases will
be adequate to pay the interest,  principal and premium, if any, on the Notes in
accordance with their terms.

The LIFT group is a special  purpose  entity and  therefore is relying on only a
limited number of revenue sources for its business.

         It is  unlikely  that  the  LIFT  group  would  be able to  obtain  any
alternate  source of funds if any of its  limited  sources of funds  prove to be
insufficient  to pay the Notes and its other  obligations.  The sole  sources of
payment for the Notes and the other obligations of the LIFT group are:

         (1)  Funds  derived from the aircraft  owned or to be acquired by them,
              including:  rent  payments  under the leases,  security  deposits,
              maintenance  reserves and other payments under existing leases and
              any future leases, insurance and sales proceeds;

         (2)  liquidity reserves funded out of the proceeds of the Notes or that
              may  be  funded  out of  the  proceeds  of  any  future  notes  or
              beneficial  interests  in the LIFT group or  provided  through any
              future credit facilities;

         (3)  net payments under swap or other hedging agreements;

                                       6
<PAGE>


         (4)  investment earnings; and

         (5)  net proceeds from the sale of any notes issued to refinance  other
              notes.

As a result of the terrorist  attacks in the United States and the current world
economic  situation,  some if not most of the initial  lessees  may  continue to
experience   significantly   lower   revenues,   increased  costs  and  economic
uncertainties which may adversely affect the timely repayment of the Notes.

         During the  current  financial  year  there has been a downturn  in the
world economic  climate with a  consequential  negative  impact on the operating
conditions in the world  aviation  industry.  On September 11, 2001,  the United
States was attacked by  terrorists  who hijacked and crashed four United  States
commercial aircraft, with significant loss of life, property damage and economic
disruption.  As a result,  air travel in the United  States  was  suspended  for
several days. The long-term  effect that these  terrorist  attacks,  the fallout
since then and the subsequent  military  action in Afghanistan  may have for the
aviation  industry over the longer term is not yet fully known. The pre-existing
economic downturn has been exacerbated by the events of September 11 in the U.S.
and the economic and political  fallout since then.  Subsequent to these events,
two significant European carriers (Swissair and Sabena) filed for bankruptcy and
major American carriers announced very large financial losses.

         The short-term effects of the events of September 11, together with the
downturn  in the world  economic  conditions  which was  already  evident,  have
included, among other things, a reduction in demand for air travel, leading to a
contraction  of  operations  by  airlines  including  grounding  of  aircraft by
airlines, bankruptcy and/or consolidation of airlines, fluctuations in the price
of fuel,  increased costs due to new security  measures  adopted by the relevant
aviation authorities, and increased insurance premiums required by the insurance
markets.   In  particular,   airlines   worldwide  are  currently   experiencing
difficulties in maintaining  war insurance  cover in the amounts  required under
their leases with us and other lessors.  While these insurance  issues have been
mitigated in certain  jurisdictions by a number of temporary government schemes,
in the absence of longer term  satisfactory  solutions on this matter, it may be
necessary for certain aircraft to be grounded.


         Such consequences depending on their scope and duration, which the LIFT
group cannot predict at this time,  are having a material  adverse impact on the
financial  condition  of the LIFT group's  lessees and their  ability to perform
under  their  leases.  As a result,  a number of the LIFT  group's  leases  were
restructured to reduce lease rates and to provide other financial accommodations
for lessees.  The consequences of the events of September 11, 2001 may also lead
to reduced demand for the LIFT group's aircraft, which may impact its ability to
re-lease  aircraft on a timely basis and at  favorable  rates and may reduce the
value of its aircraft. These effects could cause a reduction in the LIFT group's
cash  flow,  which  would  adversely  affect  the LIFT  group's  ability to make
payments on the Notes and to  refinance  the Notes as planned.  Any  significant
reduction  in the  appraised  values of the LIFT group's  portfolio  beyond that
assumed  in the  Form  S-4  Registration  Statement  of LIFT  (Registration  No.
333-69864)  as amended,  relating to the  issuance  of the  Exchange  Notes (the
"Registration  Statement"),  may  require  the  LIFT  group  to  accelerate  the
scheduled  principal  payments  on the Class A Notes and may result in delays of
scheduled principal payments to other noteholders.

As a  result  of  the  terrorist  attacks  in the  United  States,  Moody's  has
downgraded the Class D Notes,  all three rating agencies that rate the Notes are
re-evaluating   their   ratings  of   securities   issued  by   aircraft   lease

                                       7
<PAGE>

securitization  vehicles,  including  the  Notes,  and there  may be  additional
downgrades of some or all of the Notes by one or more of these rating agencies.

         As a result of the  recession,  the terrorist  attacks of September 11,
2001 and the significant  adverse financial impact that these events have had on
the airline industry,  the rating agencies that rate the Notes have re-evaluated
their ratings of securities issued by aircraft lease securitization vehicles. On
October  30,  2001,  Moody's  placed  the Class D Notes on review  for  possible
downgrade.  On March 18, 2002,  Moody's downgraded the Class D Notes from Ba2 to
Ba3. On September 27, 2001, Standard & Poor's placed the Class D Notes on credit
watch with negative implications.  On September 20, 2001, Fitch placed the Class
A, B, C and D Notes on rating  watch  negative,  but on  December  21, 2001 they
removed the Class A, B and C Notes from this placement without any change to the
ratings of these classes.

The LIFT group has no  employees  or  managers  of its own,  and  therefore  its
ability to generate  revenues  depends on contracts  with, and  performance  by,
independent third party service providers.

         The LIFT group is  especially  dependent on service  providers  because
neither LIFT nor its  subsidiaries  have any employees or executive  managers of
their  own,  except,  in the case of  certain  subsidiaries  of LIFT,  as may be
required by applicable law.

         Inadequate  performance  and/or  resignations by service  providers may
materially  and  adversely  affect  revenues  and  costs.  In the  absence of an
ownership stake,  third party service providers may have no incentive to perform
beyond the strict requirements of their contract.

         The LIFT group relies on contracts with GE Capital  Aviation  Services,
Limited ("GECAS"), an affiliate of General Electric Capital Corporation,  as the
servicer, Phoenix American Financial Services, Inc. as the administrative agent,
Bankers  Trust  Company as the  security  trustee,  Credit  Suisse  First Boston
Corporation as the financial  advisor and the capital  markets advisor and other
service  providers  for  all  asset  servicing,   executive  and  administrative
functions.

         From time to time, the LIFT group may engage, on an arm's-length basis,
service  providers  in which the  controlling  trustees of the LIFT group have a
financial interest. In 2001, the LIFT group engaged Simat,  Helliesen & Eichner,
Inc.  ("SH&E") to provide  services in  connection  with the provision of source
materials for certain  economic  descriptions in this Form 10-K.  David Treitel,
the equity  trustee  of the LIFT  group,  is the  Chairman  and Chief  Executive
Officer of SH&E.  The foregoing  engagement did not involve more than $60,000 in
amounts payable to SH&E in 2001.

         Regarding these arrangements, please note that:

         (1)  any of these  organizations  may fail to perform  its  contractual
              obligations adequately;

         (2)  any of  these  organizations  may  exercise  contract  termination
              rights;

         (3)  The LIFT group may find it difficult  to recover  damages for poor
              performance in light of contractual limitations;

         (4)  The LIFT group may not be able to terminate the contract itself --
              in particular its rights to terminate the Servicing  Agreement are
              very limited; and

                                       8
<PAGE>


         (5)  The LIFT group may not have the legal right to locate satisfactory
              replacements on favorable terms.

The  aircraft  servicer  may face  conflicts  of interest  that could  result in
preferential  treatment  for a third party at the expense of the LIFT group.  If
the  servicer  did prefer a third  party in a  conflict  of  interest,  it could
adversely affect the LIFT group's revenues.

         GECAS  will from  time to time  have  conflicts  of  interest  that may
adversely  affect its ability to perform its obligations as the servicer for the
LIFT group because it manages  aircraft and other assets of other  entities,  in
particular for its affiliate,  General  Electric  Capital  Corporation,  and its
group.  These  conflicts  will arise if the  servicer  leases  the LIFT  group's
aircraft  to the same  entities  that are also  the  lessees  of other  aircraft
managed by the servicer. In this circumstance, decisions affecting some aircraft
may unavoidably be adverse to others.  If the servicer makes a decision  adverse
to the LIFT group's interests, the LIFT group's revenues could suffer.

         These  conflicts may be  particularly  acute when a lessee in financial
distress  needs to return some of its aircraft.  Conflicts  will also arise when
the aircraft of the LIFT group are being marketed for re-lease or sale at a time
when other aircraft managed by the servicer are being similarly marketed.  These
circumstances  may  be  especially  sensitive  where  General  Electric  Capital
Corporation  is  providing  financing  for the  marketed  aircraft  or where the
servicer's  contractual  arrangements have the effect of requiring  preferential
treatment for other aircraft.

         Under the terms of the Servicing Agreement with the servicer,  the LIFT
group is not  necessarily  entitled to be informed of all  conflicts of interest
involving  the  servicer  and is limited in its right to  replace  the  servicer
because of conflicts of interest.

Because the LIFT group's  contract limits its remedies  against the servicer for
poor  performance,  the LIFT group may at some point bear costs that will reduce
its available revenues.

         Under the Servicing Agreement, the LIFT group may not in all cases have
the right to recover damages for inadequate performance.  The LIFT group's right
to terminate the  Servicing  Agreement by reason of a failure of the servicer to
perform is,  moreover,  limited to those failures to perform that materially and
adversely affect the LIFT group as a whole.

         In particular, the servicer is not contractually responsible for, among
other things:

         (1)  the  transfer of  aircraft,  leases or other  assets to any person
              within the LIFT group;

         (2)  the adequacy of the terms of any aircraft  lease,  including  rent
              payments, maintenance reserves or security deposits;

         (3)  the reliability or creditworthiness of any lessee; and

         (4)  the terms of the Notes and the ability of the LIFT group to comply
              with the terms of the Notes.

         LIFT has agreed to indemnify the servicer and its  affiliates for broad
categories of losses arising out of the performance of services for the aircraft
and leases  held by  subsidiaries  of LIFT,  unless  the  losses  arise from the
servicer's gross negligence or willful misconduct.

                                       9
<PAGE>


Market interest rate fluctuations could change expected cash flows.

         Interest rate exposure arises to the extent that the LIFT group's fixed
and floating rate obligations under the Notes do not correlate to either or both
of the mix of fixed and floating rate rental payments for different  periods and
the timing of those payments. Although the LIFT group will attempt to hedge that
exposure as  described in "Item 7A.  Quantitative  and  Qualitative  Disclosures
about  Market  Risk",  there can be no  assurance  that it will be  effective in
implementing  its hedging goals. In addition,  the premature  termination of any
lease may result in the LIFT group incurring  prepayment or  cancellation  costs
under its hedging agreements.

Changes in the aircraft portfolio could change expected cash flows.

         The assumptions regarding the expected cash flows of the LIFT group are
subject not only to a variety of economic  factors,  but also to any substantial
change  in the  composition  of  the  aircraft  portfolio  from  that  initially
contemplated.  Any substantial  change in that composition  could  significantly
alter  expected  cash flows and the nature  and degree of risks  affecting  cash
flows. Three principal factors could affect the fleet composition:

         (1)  The  exercise of purchase  options by lessees.  The  exercise of a
              lessee  purchase  option  may result in sale  proceeds  lower than
              target sale prices of the  aircraft.  Four lessees with respect to
              five of the Initial Aircraft, representing 15.17% of the aggregate
              initial  appraised  value,  have  unexpired  options  to  purchase
              aircraft.

         (2)  The loss of aircraft through casualty or governmental  taking. The
              proceeds of insurance  and taking  awards may not be sufficient to
              compensate  for the loss of the revenue  otherwise  available from
              the affected aircraft.

         (3)  The purchase of  additional  aircraft.  The LIFT group may acquire
              additional commercial passenger or freight aircraft from Automatic
              or the Seller.  Although  any  additional  aircraft may add to the
              cash flows of the LIFT group and such  acquisitions are subject to
              confirmation  by the  rating  agencies  rating  the Notes that the
              agencies  will not lower,  qualify or  withdraw  any rating on the
              Notes as a result and other  requirements  of the  Indenture,  the
              LIFT group cannot predict the effect of additional aircraft on its
              cash flows and ability to repay the Notes.

The LIFT group will not receive enough revenues from its current aircraft leases
to repay the Notes in full and  therefore  it will have to  re-lease or sell the
aircraft in order to maintain its revenues or repay the Notes in full.

         The LIFT group will need to re-lease  aircraft as current leases expire
in order to  continue  to  generate  enough  revenue  to pay the  Notes in full.
Failing  re-leasing,  it will need to  attempt to sell the  aircraft  to provide
funds for Note  payments.  The LIFT group may be unable to  re-lease or sell the
aircraft at satisfactory  prices or on favorable terms, as discussed  further in
the second following paragraph. Further, the LIFT group's ability to re-lease or
sell aircraft on favorable terms or without significant off-lease time is likely
to be  adversely  impacted by the effects of the  September  11, 2001  terrorist
attacks in the United States.

                                       10
<PAGE>


         The  number  and types of the  aircraft  that the LIFT group must place
with lessees  through  December  31, 2006 is presented in the table below.  This
table shows the years in which the leases for these  aircraft are  contractually
scheduled to expire or will terminate. The table illustrates that the leases for
28 of the aircraft,  representing  approximately 58.78% of the aggregate initial
appraised  value,  are  scheduled  to expire or permit early  termination  on or
before December 31, 2006. The table assumes that, except as indicated,  no lease
terminates  prematurely,  no aircraft  are sold and no  additional  aircraft are
purchased.  More  aircraft  will  need  to be  re-leased  to the  extent  leases
terminate prematurely.

                                    Year Ending December 31,
                                    ------------------------
Aircraft Type          2002       2003       2004         2005       2006
-------------          ----       ----       ----         ----       ----
B767-300ER............   -          1           -           1          1
B737-300..............   1(a)       4           1           1          2
MD-82.................   1          3           -           1          3
A320-200..............   -          1           -           -          -
B747-400..............   -          -           -           -          -
B737-800..............   1          -           -           -          -
MD-11F................   -          -           -           1          -
B737-700..............   -          -           -           -          1
B737-400..............   -          -           1           1          -
B737-500..............   -          -           1           -          -
MD-83..................  -          1           -           -          -
                       ---        ---         ---         ---        ---
Total.................   3         10           3           5          7

(a)  Lessee will return the aircraft in March 2002 and pay a termination fee.

The LIFT  group  may have  difficulty  in  re-leasing  or  selling  aircraft  on
favorable terms.

         The servicer,  GECAS, has agreed to seek to re-lease  aircraft serviced
by it as they become  available upon the termination of any lease.  The servicer
has not assured the LIFT group, and the LIFT group makes no assurances,  that it
will be able to re-lease aircraft on a timely basis, at equally favorable rental
rates or otherwise on favorable lease terms.  The LIFT group's ability to obtain
timely and favorable lease terms or to sell aircraft at attractive prices may be
adversely  affected by  unpredictable  changes in general  economic  conditions,
passenger  demand and the  competitive  strength  of the airline  industry.  The
availability  of  commercial  jet  aircraft  for lease or sale has  periodically
experienced  cycles of oversupply and undersupply,  resulting in sharp decreases
and increases in aircraft values and lease rates. In addition, the September 11,
2001 terrorist  attacks in the United States and the economic  downturn have had
and are likely at least for the near term to continue to have a negative  effect
on lease rates and aircraft  values.  Among other  factors that could  influence
lease terms and sales prices are the following:

         (1)  cyclical changes in interest rates and the availability of credit;

         (2)  fluctuations  in the  cost of fuels  and  other  materials,  labor
              costs, costs associated with changing governmental regulations and
              air traffic control constraints;

         (3)  manufacturer production levels,  particularly increased production
              of new aircraft, which makes older, used models less attractive;

         (4)  the  cessation or announced  cessation of production of particular
              aircraft  models,  such  as the MD  series  and  Boeing  737-300s,

                                       11
<PAGE>

              737-400s and  737-500s,  of which there are 24 in the LIFT group's
              initial  portfolio,   representing  approximately  40.48%  of  the
              aggregate initial appraised value;

         (5)  the  operating  history of  particular  aircraft,  the identity of
              their  operators and legal and regulatory  requirements  affecting
              their operation and transfer or leasing;

         (6)  changes in aircraft  technology,  either  significant  advances by
              manufacturers or governmentally mandated  modifications,  that may
              render older models substantially less attractive or may result in
              modification costs that reduce net sales prices or rentals; and

         (7)  competition  from  aircraft  manufacturers,   airlines,   aircraft
              leasing  companies,  financial  institutions,  aircraft broker and
              special purpose leasing  vehicles that may have greater  financial
              resources and greater legal and financial flexibility to structure
              and  offer  more   favorable   leasing,   pricing   or   financing
              alternatives.

Over the life of the aircraft portfolio,  it is likely that some of the aircraft
lessees will experience financial difficulties which will cause them to delay or
miss rental payments to the LIFT group.

         The ability of each  aircraft  lessee to perform its lease  obligations
will  depend  not only on the  managerial  skills of its  employees  but also on
general  economic  conditions  in the  country or region in which it operates as
well as  competition,  fare  levels,  passenger  demand,  and  operating  costs,
including,  but not  limited  to,  the  cost of fuel.  Some of the LIFT  group's
existing lessees are in a weak financial position,  and this is likely to be the
case with future aircraft  lessees as well. As the aircraft  approach the end of
their realizable  useful life, it is increasingly  likely that the aircraft will
be leased to less  creditworthy  lessees.  In a  portfolio  the size of the LIFT
group's,  it should be expected that some aircraft  lessees may at some point be
slow in paying or may fail to pay in full. In some instances,  late payments are
recovered,  together with default interest or other similar payments required by
the  leases.  In other  instances,  a  restructuring  of the lease is  required,
involving anything from a simple  rescheduling of payments to the termination of
a lease.

         As of March 27,  2002,  five lessees with respect to ten of the Initial
Aircraft,  representing  19.11% of the aggregate  initial  appraised value, have
been  granted  reductions  in or  deferrals  of one or  more  months  of  rental
payments.  The deferred rental payments are payable over all or some part of the
remaining term of the lease. In addition, agreements have been entered into with
some lessees  which grant rent  reductions  in return for other  benefits to the
LIFT group,  such as lease  extensions.  Also,  as a result of the September 11,
2001 terrorist attacks in the United States,  the financial position of the LIFT
group's  existing  lessees is very  likely to be further  weakened,  and in some
cases  significantly  weakened,  which in turn is likely to cause an increase in
delayed, missed or reduced rental payments.

         A delayed or missed  rental  payment from a lessee  decreases  the LIFT
group's revenues, adversely affecting the timely or full repayment of the Notes.
A certain level of delinquency  has been assumed for purposes of calculating the
estimated  final  payment  date for the  Notes.  The LIFT group  cannot  assure,
however, that default levels will not increase over time.

Increased fuel prices could have a negative financial impact on the LIFT group's
current lessees and could adversely affect its ability to re-lease the aircraft.

         Oil  prices  increased  dramatically  during  1999 and  2000,  and many
airlines  reported reduced levels of profitability due to higher fuel prices. In
the  current  economic   downturn,   however,   oil  prices  have  fallen  quite

                                       12
<PAGE>

dramatically since September 2001. There has been some recent upward pressure on
prices but LIFT does not believe that these prices will return to  pre-September
2001 levels in the near future.  Any  increases in fuel costs in the current low
yield  environment  could cause lessees to  experience  or exacerbate  financial
difficulties  which  could  cause  these  lessees to delay or miss their  rental
payments.  High fuel prices could also adversely affect the LIFT group's ability
to re-lease or sell aircraft on advantageous terms.

The LIFT group faces competition from a variety of entities.

         In leasing and selling aircraft in its portfolio,  the LIFT group faces
competition from a variety of entities. These include:

         (1)  the manufacturers of aircraft, such as Boeing and Airbus;

         (2)  financial  institutions  engaged in the leasing business and other
              leasing  companies,  such as General Electric Capital  Corporation
              and International Lease Finance Corporation;

         (3)  banks and other  financial  institutions  that have  foreclosed on
              aircraft collateral;

         (4)  airlines which are disposing of aircraft; and

         (5)  other aircraft  portfolio  entities formed for purposes similar to
              those of the LIFT group.

         Many, if not most, of these  entities have greater  resources,  greater
financial flexibility and longer operating histories than the LIFT group.

Operational restrictions may harm the LIFT group's ability to compete.

         The Indenture and other governing  documents impose restrictions on how
the LIFT group operates its business.  These  restrictions may limit the ability
to  compete   effectively   in  the  aircraft   leasing   market  under  certain
circumstances.  For example,  there are  concentration  limits  contained in the
Indenture that restrict the LIFT group's  ability to lease a certain  percentage
of aircraft to any individual lessee, to lessees in particular countries,  or to
lessees in particular geographical regions. Most of the LIFT group's competitors
do not operate under such restrictions.

The concentration of lessees in a particular geographical region may amplify the
LIFT group's exposure to local economic conditions.

         The commercial  aviation  industry  throughout  the world  generally is
highly sensitive to general economic  conditions.  Because a substantial portion
of business  and,  especially,  leisure  airline  travel is  discretionary,  the
industry has tended to suffer  during  economic  downturns.  In addition,  local
economic and political  conditions  can influence  the  performance  of a lessee
located in a particular region. The effect of those local conditions on the LIFT
group will be more or less intense  depending on the concentration of the number
of its lessees in that region.

         European  concentration.  As of December  31,  2001,  lessees  based in
Europe  operated  aircraft  accounting  for  43.03%  of  the  aggregate  initial
appraised  value of the Initial  Aircraft.  These  lessees were divided  between
lessees in the  "developed"  European  markets of the  United  Kingdom,  France,
Spain,  Italy and  Portugal,  accounting  for  31.91% of the  aggregate  initial

                                       13
<PAGE>

appraised  value,  and lessees in the "emerging"  European markets of Russia and
Turkey,  accounting for the remaining 11.12% of the aggregate  initial appraised
value. The financial  prospects for lessees in the "developed"  European markets
can be  expected to depend  largely on the level of economic  activity in Europe
generally and in the specific countries in which these lessees operate. Germany,
France and Italy  experienced  negative economic growth in the fourth quarter of
2001.  While this has been  mitigated  somewhat by the moderate  growth in other
economies such as Spain and Ireland,  the euro area economy likely contracted in
the fourth quarter of 2001.  Despite the weak fourth quarter,  Europe's  economy
finished 2001 with low but positive economic growth. France and Italy are widely
expected to resume low to moderate  growth rates in 2002 and the United  Kingdom
remains  relatively  healthy.  One area of concern for  European  lessees is the
continued  weakness  of the euro.  Low or  negative  growth  rates and  currency
weakness,  combined with a possible upward movement in fuel prices,  may have an
adverse  effect on the  ability of  European  lessees to meet their  obligations
under  their  respective  leases.  In  addition,  commercial  airlines in Europe
continue to face increased competitive pressures from international carriers, EU
domestic airlines and the new breed of low cost carriers. Several major airlines
in Europe  have  collapsed  in the wake of the  terrorist  attacks in the United
States and many continue to operate on the verge of bankruptcy.  There can be no
assurance that competitive  pressures  resulting from deregulation and continued
economic  sluggishness will not have a material adverse impact on the operations
of its European lessees.

         Russian  concentration.  As of December 31,  2001,  one lessee based in
Russia  operated  an  aircraft  accounting  for 5.49% of the  aggregate  initial
appraised value of the Initial Aircraft.  The Russian lessee is the flag carrier
of that nation; however, as a result of the lack of definitive information about
its  ownership,   its  corporate  governance  has  often  been  the  subject  of
international scrutiny. Due to buoyant oil prices and a cheap currency, Russia's
economy has improved  since 1998.  According to a new study by the  Organization
for Economic Cooperation and Development,  Russian GDP growth has averaged 6.00%
over the last three years. The current environment of low oil prices is expected
to put downward pressure on government revenues, though this may be lessened due
to Russia's non-OPEC status.

         Turkish  concentration.  As of December 31,  2001,  one lessee based in
Turkey operated aircraft accounting for 5.63% of the aggregate initial appraised
value of the Initial Aircraft. After an estimated 8.20% contraction in 2001, GDP
growth of 2.00% is expected for 2002.  While the  government is committed to the
recovery  program  prescribed by the  International  Monetary  Fund, the economy
remains  saddled with high  inflation,  high debt and a volatile  currency.  The
damaging  effect of the  terrorist  attacks in the United States on tourism will
exacerbate the difficulties  faced by the Turkish economy,  and may have an even
more marked impact on the charter business of the Turkish lessee.  The low value
of the  euro,  which is the  principal  currency  in which  the  Turkish  lessee
receives its  revenue,  coupled  with  further  risk of lire  depreciation,  may
adversely  affect the ability of the lessee to meet its U.S.  dollar-denominated
rental and other payments due under the leases.

         North  Africa and Middle East  concentration.  As of December 31, 2001,
lessees  based  in  Northern  Africa  and  the  Middle  East  operated  aircraft
accounting  for 4.21% of the aggregate  initial  appraised  value of the Initial
Aircraft. Political violence has had a significant adverse impact on the general
economic  conditions in Northern Africa and the Middle East in recent years. The
economic  prospects of the North African and Middle Eastern region are dependent
on the general  political  outlook,  which can vary  greatly  from year to year.
Political  upheaval or political  violence  associated  with potential  military
conflicts in this region could adversely  affect the prospects of the lessees of
meeting their  obligations.  Any such factors could also affect the LIFT group's
ability to regain possession of the aircraft upon a default.

                                       14
<PAGE>


         One  lessee  in this  region  is the flag  carrier  of  Morocco.  As of
December 31, 2001, this carrier  operated  aircraft  accounting for 2.74% of the
aggregate  initial  appraised value of the Initial  Aircraft.  The other lessee,
based in  Tunisia,  operated  aircraft  accounting  for  1.47% of the  aggregate
initial appraised value of the Initial  Aircraft.  Both Morocco and Tunisia have
strong economic ties to Europe and are relatively stable politically.

         Asia Pacific  region  concentration.  As of December 31, 2001,  lessees
based in the Asia Pacific region, including China, India, South Korea, Malaysia,
and Indonesia,  operated aircraft accounting for 28.39% of the aggregate initial
appraised value of the Initial Aircraft. The commercial aircraft industry in the
Asia Pacific region was adversely  affected by the severe economic and financial
difficulties  experienced in the region during 1998 and 1999.  Since 1999, there
has been some  stabilization  and recovery in the economies and airlines of this
region. Thus far, with the exception of Japan, the economic outlook of the Asian
economies has remained relatively positive. China and India, two rapidly growing
aviation markets,  continue to experience high economic growth.  South Korea and
Indonesia also continue to experience  healthy  growth,  while  Malaysia,  after
nearly zero growth in 2001, is  undergoing an export-led  recovery in 2002. If a
sudden loss of  confidence in Asian  currencies or economies  recurs as in 1998,
there would be a significant adverse impact on aircraft demand in this region.

         Latin American concentration. As of December 31, 2001, lessees based in
Latin America operated  aircraft  accounting for 5.87% of the aggregate  initial
appraised value of the Initial Aircraft.  Both of the Latin American lessees are
based in Brazil. The prospects for lessee operations in Latin American countries
depend in part on the general level of political stability and economic activity
and policies in those countries. Future developments in the political systems or
economies of these countries or the implementation of future government policies
may materially affect lessee operations in those countries.

         The Brazilian economy recovered from its economic difficulties of 1999,
but the fallout from the recent  Argentine  devaluation  and last year's  energy
crisis  will cause  growth  for 2002 to be  significantly  lower than  forecast.
Continued  depreciation of the real, and other Latin American currencies,  could
lead to difficulties for lessees in paying U.S. dollar-denominated  obligations.
Mexico's  economy,   being  more  exposed  to  the  U.S.   economy,   contracted
significantly in the fourth quarter of 2001. The airlines were badly affected by
the  September  11, 2001  terrorist  attacks in the United States and required a
government  aid  package  similar  to  that  administered  in the  U.S.  Further
volatility,  the risk of economic  contagion and  continuing low growth rates in
Latin  America  could lead to a material  decrease in the LIFT  group's  leasing
revenues and an increase in default-related costs.

         North American concentration. As of December 31, 2001, lessees based in
North America operated  aircraft  accounting for 17.45% of the aggregate initial
appraised  value of the Initial  Aircraft.  Of these  lessees,  lessees based in
Canada  operated  aircraft  accounting  for  11.06%  of  the  aggregate  initial
appraised value and the remaining  lessees,  operating  aircraft  accounting for
6.39% of the aggregate  initial appraised value, were based in the U.S. The U.S.
economic  downturn  began  in April  2001  and  airlines  began  experiencing  a
reduction in traffic and  softening of yields at that time.  The  September  11,
2001 terrorist attacks in the United States more than compounded these problems,
and U.S. and Canadian  carriers,  citing reduced air travel demand,  competition
from low cost air carriers and  increased  costs,  posted  record  losses in the
fourth  quarter of 2001.  Many lessees are returning  aircraft and the number of
U.S.  commercial  aircraft in storage  has reached  record  numbers.  Also,  the
significant  bargaining  power  of  unions  in North  America  has  resulted  in
increased labor costs for North American carriers.  Recent agreements with these
unions suggest that these costs will continue to increase  despite recent events
and the current  state of the North  American  airline  industry.  Over the last
decade,  a number of the major  North  American  passenger  airlines  have filed

                                       15
<PAGE>

Chapter 11 bankruptcy  proceedings and several major United States airlines have
ceased operations  altogether.  One airline ceased operations  immediately after
the September 11, 2001 terrorist attacks, and several others remain in danger of
bankruptcy.  If the North  American  lessees  of the LIFT  group were to declare
bankruptcy or commence similar  proceedings or if their financial condition were
to otherwise deteriorate,  their ability to make timely and full rental payments
may be adversely affected.

         In the early  months of 2002,  however,  the U.S.  economy has begun to
show signs of a  recovery,  indicating  to some that the U.S.  recession  may be
ending.

Lease defaults will result in additional costs for the LIFT group.

         Although  the LIFT  group  has the  right  to  repossess  aircraft  and
exercise  remedies upon a lessee default,  it may incur significant costs in the
process.  Those  costs  include  legal  and  other  expenses  of  court or other
governmental   proceedings,   particularly  if  the  lessee  is  contesting  the
proceeding or is in bankruptcy,  to obtain possession and re-registration of the
aircraft  and flight  and export  permissions.  Delays  resulting  from any such
proceedings  would also  increase  the period of time during  which the relevant
aircraft are not productively under lease. The LIFT group may,  moreover,  incur
substantial  maintenance or repair costs that a defaulting  lessee has failed to
pay and may need to pay off liens and  governmental  charges on the  aircraft to
obtain possession or clear title and to re-market the aircraft effectively.  Any
such cost or delays may  adversely  affect the amounts  available  to pay to the
holders of the Notes.

Maintenance costs may at times be paid by the LIFT group.

         Any  failure of an aircraft to be  maintained  or modified  properly in
accordance  with  manufacturers'  requirements or  airworthiness  directives and
other governmental requirements, including those relating to noise and emissions
standards,  can  impair  the  safety of the  aircraft,  result in  grounding  or
penalties and affect the ability to re-lease or to sell the aircraft.  The costs
of maintenance  can be substantial  and may have a higher payment  priority than
that of the  Notes.  In many  cases,  the  lessee is  required  to  provide  for
maintenance or modifications.  Lessees could,  however, fail to pay those costs,
and the burden would fall on the LIFT group. In addition,  the LIFT group as the
lessor is, in some  instances,  required  to bear a portion  of the  maintenance
costs,  and the  pressure of  competition  may require it to bear an  increasing
portion of those costs in the future. Although the LIFT group established a cash
reserve  which  was  $83  million  as of  December  31,  2001,  any  significant
variations  in the costs  required  to be paid  directly  by the LIFT  group may
materially impair the ability of the LIFT group to make payments on the Notes.

Other operating costs may at times be paid by the LIFT group.

         As in the case of  maintenance  costs,  the LIFT group may incur  other
operational  costs upon a lessee default or where the terms of the lease require
it to pay a portion of those costs. Those costs include:

         (1)  the costs of casualty,  liability and political risk insurance and
              the liability costs or losses when insurance coverage has not been
              or cannot be obtained as required or is  insufficient in amount or
              scope;

                                       16
<PAGE>


         (2)  the  costs of  licensing,  exporting  or  importing  an  aircraft,
              airport taxes,  customs duties, air navigation charges and similar
              governmental  or  quasi-governmental  impositions,  which  can  be
              substantial;

         (3)  penalties and costs associated with the failure of lessees to keep
              the aircraft  registered under all appropriate local requirements;
              and

         (4)  unreimbursed or  unreimbursable  withholding taxes and other taxes
              or charges in some  jurisdictions in respect of the aircraft,  the
              leases or payments under the leases,  such as those due to changes
              in law or  inability  to  negotiate  for or enforce  reimbursement
              obligations from lessees.

         The  failure  to pay some of these  costs  can  result  in liens on the
aircraft,  and the failure to register can result in a loss of insurance.  These
matters can prevent the  re-lease,  sale or other use of the aircraft  until the
problem is cured.

Aircraft type concentrations may amplify other risk factors.

         The  concentration  of the types of aircraft held by the LIFT group may
amplify some of the factors noted above.  As of December 31, 2001,  the aircraft
owned by the LIFT group include eleven aircraft types,  three of which represent
together  56.35%  of the  aggregate  initial  appraised  value  of  the  Initial
Aircraft,   with  Boeing  767-300ERs   constituting   26.50%,   Boeing  737-300s
constituting  18.85% and Boeing  MD-82s  constituting  11.00% of that  aggregate
value. Also, narrowbody aircraft constitute 59.54%, widebody aircraft constitute
35.63% and a  freighter  aircraft  constitutes  4.83% of the  aggregate  initial
appraised value of the Initial Aircraft.

         There is currently a reduced  demand for and an  oversupply of widebody
aircraft,  and there is also very little demand for discontinued  aircraft types
such as the  MD-82s  and  MD-83s.  In both  circumstances,  this  makes  it more
difficult to lease or sell these aircraft at favorable rates.

The Aircraft Portfolio

         The following  tables set forth  details of the Initial  Aircraft as of
December  31,  2001.  See  "Item 7.  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Recent Developments" for further
information about events that have occurred subsequent to December 31, 2001.

                                       17
<PAGE>


         The  following  table  identifies  the 39 Initial  Aircraft  by type of
aircraft.

                                                             % of Portfolio by
                     Type of     Number of                 Appraised Value as of
Manufacturer        Aircraft     Aircraft      Body Type     December 31, 2000
------------        --------     --------      ---------     -----------------
Boeing              B767-300ER       5         Widebody             26.50%
Boeing              B737-300        10         Narrowbody           18.85
McDonnell Douglas   MD-82            9         Narrowbody           11.00
Airbus              A320-200         4         Narrowbody           10.96
Boeing              B747-400         1         Widebody              9.13
Boeing              B737-800         3         Narrowbody            8.37
McDonnell Douglas   MD-11F           1         Freighter             4.83
Boeing              B737-700         2         Narrowbody            4.56
Boeing              B737-400         2         Narrowbody            2.88
Boeing              B737-500         1         Narrowbody            1.71
McDonnell Douglas   MD-83            1         Narrowbody            1.21
                                    --                            -------

Total                               39                             100.00%

         All of the aircraft hold or are capable of holding a noise  certificate
issued  under  Chapter  3 of  Volume  I,  Part  II of  Annex  16 of the  Chicago
Convention or have been shown to comply with the Stage 3 noise levels set out in
Section  36.5 of  Appendix C of Part 36 of the United  States  Federal  Aviation
Regulations.


         The following  table  identifies  the countries in which the lessees of
the 39 Initial Aircraft were based as of December 31, 2001.

                                                             % of Portfolio by
                                              Number of    Appraised Value as of
Country                                       Aircraft       December 31, 2000
-------                                       --------       -----------------
United Kingdom...............................     4                  12.32%
Canada.......................................     2                  11.06
China........................................     5                   9.20
Malaysia.....................................     1                   9.13
Spain........................................     6                   8.59
United States................................     3                   6.39
South Korea..................................     2                   6.29
France.......................................     3                   6.10
Brazil.......................................     3                   5.87
Turkey.......................................     2                   5.63
Russia.......................................     1                   5.49
Italy........................................     1                   2.86
Morocco......................................     1                   2.74
India........................................     1                   2.35
Portugal.....................................     1                   2.04
Tunisia......................................     1                   1.47
Indonesia....................................     1                   1.42
Off-Lease....................................     1                   1.05
                                                 --                -------

Total........................................    39                 100.00%

                                       18
<PAGE>



         The  following  table  identifies  the  regions in which the 39 Initial
Aircraft were based as of December 31, 2001.

                                                             % of Portfolio by
                                               Number of   Appraised Value as of
Region                                         Aircraft      December 31, 2000
------                                         --------      -----------------
Developed Markets
     Europe...................................    15                 31.91%
     North America............................     5                 17.45
Emerging Markets
     Asia.....................................    10                 28.39
     Africa, Europe & Other ..................     5                 15.33
     Latin America............................     3                  5.87
Off-lease.....................................     1                  1.05
                                                 ---                ------

Total.........................................    39                100.00%


         The following table  identifies the lessees of the 39 Initial  Aircraft
as of December 31, 2001.

                                                             % of Portfolio by
                                               Number of   Appraised Value as of
Lessee                                         Aircraft      December 31, 2000
------                                         --------      -----------------
Air Canada Capital Ltd......................       2                 11.06%
China Eastern Airlines. ....................       5                  9.20
Malaysian Airline System Berhad.............       1                  9.13
Societe Air France..........................       3                  6.10
Spanair S.A.................................       5                  5.98
Air 2000 Limited............................       1                  5.73
Pegasus Hava Tasimaciligi A.S...............       2                  5.63
Aeroflot - Russian Internatilna Airlines....       1                  5.49
Korean Airlines.............................       1                  4.83
Go Fly Limited..............................       2                  4.41
American Airlines...........................       1                  4.22
VARIG S.A...................................       2                  4.16
Volare Airelines SpA........................       1                  2.86
Royal Air Maroc.............................       1                  2.74
Iberworld Airlines, S.A.....................       1                  2.61
Jet Airways.................................       1                  2.35
easyJet Airline Co. Ltd.....................       1                  2.18
SATA-Air Acores.............................       1                  2.04
Nouvelair Tunisie...........................       1                  1.47
Rio Sul, Servicos Aereso Regionais S.A......       1                  1.71
Asiana Airlines.............................       1                  1.46
P.T. Garuda Indonesia.......................       1                  1.42
Delta Air Lines.............................       1                  1.09
America West Airlines, Inc. ................       1                  1.08
Off-Lease...................................       1                  1.05
                                                  --               -------

Total.......................................      39                100.00%

Total Number of Lessees: 24

                                       19
<PAGE>



         The  following  table  identifies  the 39 Initial  Aircraft  by year of
aircraft manufacture. The average age of the 39 Initial Aircraft and the average
age  weighted by value of the 39 Initial  Aircraft as of December  31, 2001 were
approximately 6.63 and 4.90 years, respectively.

                                                             % of Portfolio by
                                             Number of     Appraised Value as of
Year of Manufacture                          Aircraft        December 31, 2000
-------------------                          --------        -----------------
1986......................................       1                    1.09%
1987......................................       4                    4.36
1988......................................       1                    1.21
1989......................................       3                    4.11
1990......................................       4                    5.02
1992......................................       1                    4.83
1993......................................       1                    1.47
1994......................................       1                    4.22
1997......................................       2                    3.66
1998......................................       7                   22.09
1999......................................      11                   36.45
2000......................................       3                   11.49
                                                --                 -------

Total.....................................      39                  100.00%

                                       20
<PAGE>



         Further particulars of the 39 Initial Aircraft, as of December 31, 2001
are contained in the table below:


<TABLE>
<CAPTION>
                                                                                                           Initial
          Country in which                       Aircraft         Engine       Serial       Date of       Appraised
Region    Aircraft is Based       Lessee           Type            Type          No.      Manufacture      Value*
------    -----------------       ------           ----            ----          --       -----------      ------
Europe (Developed)                                                                                         ($000)
<S>      <C>                <C>                <C>            <C>                <C>        <C>         <C>
         United Kingdom     Air 2000           B767-300ER     CF6-80C2-B7F       29618       5/00       $    88,898
         France             Air France         B737-300       CFM56-3C1          28672       1/98            31,697
         France             Air France         B737-300       CFM56-3C1          28673       2/98            31,347
         France             Air France         B737-300       CFM56-3C1          28569       2/98            31,598
         United Kingdom     easyJet Airline    B737-300       CFM56-3CI          29338       7/99            33,857
         United Kingdom     Go Fly Limited     B737-300       CFM56-3C1          28602       8/99            34,140
         United Kingdom     Go Fly Limited     B737-300       CFM56-3C1          28606      10/99            34,297
         Spain              Iberworld          A320-200       CFM56-5B4            879      12/98            40,486
         Portugal           SATA-              B737-300       CFM56-3C1          28570       3/98            31,577
                                 AIR Acores
         Spain              Spanair            MD82           JT8D-217A          49501      10/87            17,493
         Spain              Spanair            MD82           JT8D-217A          49509       8/89            19,057
         Spain              Spanair            MD82           JT8D-217A          49519      12/90            20,317
         Spain              Spanair            MD83           JT8D-219           49578       3/88            18,777
         Spain              Spanair            MD82           JT8D-217A          49507      10/87            17,133
         Italy              Volare             A320-200       CFM56-5B4           1152       2/00            44,325
North America (Developed)
         Canada             Air Canada         B767-300ER     CF6-80C2-B6F       30108      11/99            86,253
         Canada             Air Canada         B767-300ER     CF6-80C2-B6F       30112       9/99            85,323
         United States      America West       B737-300       CFM56-3B2          23384       8/87            16,823
         United States      American           B767-300ER     PW4060             26208       9/94            65,467
                            Airlines
         United States      Delta Air Lines    B737-300       CFM56-3B2          23376      11/86            16,847
Asia (Emerging)
         South Korea        Asiana Airlines    B737-400       CFM56-3C1          24469       7/89            22,603
         China              China Eastern      MD82           JT8D-217A          49513       4/90            19,040
         China              China Eastern      MD82           JT8D-217A          49515      10/90            19,278
         China              China Eastern      MD82           JT8D-217A          49511       3/90            19,170
         China              China Eastern      A320-200       CFM56-5B4           1093      10/99            42,573
         China              China Eastern      A320-200       CFM56-5B4           1108      11/99            42,713
         Indonesia          Garuda Indonesia   B737-400       CFM56-3C1          24512       9/89            22,090
         India              Jet Airways        B737-700       CFM56-7B24         28609      11/99            36,413
         South Korea        Korean Airlines    MD11F          PW4460             48523       9/92            75,000
         Malaysia           Malaysian          B747-400       PW4056             28427       3/98           141,867
                            Airlines System
Africa, Europe & Other (Emerging)
         Russia             Aeroflot           B767-300ER     CF6-80C2-B7F       30110      12/99            85,103
         Tunisia            Nouvelair Tunisie  MD82           JT8D-217C          53147       8/93            22,773
         Turkey             Pegasus            B737-800       CFM56-7B26         28591       4/99            42,427
         Turkey             Pegasus            B737-800       CFM56-7B26         28628       6/00            45,066
         Morocco            Royal Air Maroc    B737-800       CFM56-7B26         28592       5/99            42,443
Latin America (Emerging)
         Brazil             Rio Sul            B737-500       CFM56-3C1          28565      11/97            26,477
         Brazil             VARIG              B737-300       CFM56-3C1          28671      11/97            30,183
         Brazil             VARIG              B737-700       CFM56-7B24         28584      12/98            34,323
Off-Lease                                      MD82           JT8D-217A          49419       8/87            16,237
                                                                                                        -----------

Total                                                                                                   $ 1,551,491
</TABLE>


* At December 31, 2000.

                                       21
<PAGE>

Appraisal of Aircraft

         The LIFT group has agreed to  deliver to Bankers  Trust  Company as the
security  trustee,  commencing in 2002,  appraisals of the base value of each of
the  aircraft  owned by the LIFT  group at least  once  each year by July 1. The
appraisals must come from at least three independent appraisers that are members
of the  International  Society of  Transport  Aircraft  Trading  or any  similar
organization and be dated within 30 days prior to their delivery to the trustee.

         Three independent appraisers,  Aircraft Information Services,  Inc., BK
Associates,  Inc. and Morten Beyer & Agnew,  Inc.,  provided  appraisals  of the
value of each of the Initial  Aircraft as of December 31, 2000.  The  appraisals
assume,  among other things, that the aircraft are utilized normally in an open,
unrestricted  and stable  market,  adjusted  where  necessary to account for the
reported  maintenance  standard of the aircraft.  Values  calculated under these
assumptions  are "base values." The current  appraised value of each aircraft is
determined  by taking the  average  of the base  values  contained  in the three
appraisals.  The  appraisals  were not  based on a  physical  inspection  of the
aircraft.

         Based on the  appraisals,  the  average of the  aggregate  base  values
calculated by the appraisers for the Initial Aircraft as of December 31, 2000 is
$1,551,491,333.  Base values are not a measure of the market or realizable value
of aircraft  and you should not rely upon the base value in any  analysis of the
market or realizable value of any Initial Aircraft. In addition,  under ordinary
conditions  the LIFT group  expects the base  values of the  aircraft to decline
over time due to the aging of the aircraft,  increasing maintenance expenses and
similar factors. The LIFT group also expects that the decline in base values has
been further accelerated as a result of the September 11, 2001 terrorist attacks
in the United States. The appraisals were conducted as of December 31, 2000, and
the LIFT group  believes that the base values of the aircraft,  if determined as
of any date subsequent to December 31, 2000,  would be lower,  and in some cases
significantly lower, than the base values in the appraisals.

         The  appraised  base values  obtained  and to be obtained in the future
assume  an "open,  unrestricted  stable  market  environment  with a  reasonable
balance of supply and demand" and other factors common for like  appraisals.  At
any point in the aircraft  leasing cycle,  however,  there will be imbalances of
aircraft supply and demand and there may be particularly  pronounced  imbalances
for specific  aircraft  types.  Although  some Initial  Aircraft may have market
values  approximating or exceeding the appraised values given them, others, such
as the older  aircraft or aircraft  that are no longer in  production,  may have
market values below, and in some cases significantly below, those appraised base
values.  At a cyclical low, the market value of most aircraft types is likely to
be less than,  and in some cases  significantly  less than,  the appraised  base
values.  In addition,  the  appraised  base values of the Initial  Aircraft will
likely decline, and in some cases significantly decline, over time due to aging,
increasing  maintenance  expenses and similar  factors and have declined and may
continue to decline on account of the  September 11, 2001  terrorist  attacks in
the United States. Finally,  appraised base values, if obtained upon delivery of
the  Initial  Aircraft,  would  be  expected  to be  less,  and  in  some  cases
significantly less, than the initial appraised values,  which were determined as
of December 31, 2000.  Accordingly,  you should not place undue  reliance on the
indicated  appraised  values  as an  accurate  depiction  of  current  market or
realizable  values at any one point in time,  and you should realize that actual
current  market or realizable  values at any point in time may be  substantially
less than appraisal values.

                                       22
<PAGE>



The Leases

Payment History.

         The  following  description  relates  to the  leases  for  the  Initial
Aircraft in effect on December 31, 2001.  Any leases of additional  aircraft and
any future  leases  entered  into for the  re-lease of any Initial  Aircraft may
differ from the description provided below.

         As of December  31,  2001,  there were 24 lessees  under leases for the
Initial  Aircraft in 17 different  countries.  The LIFT group  recognized  $77.0
million of rental  income from  operating  leases and other income  representing
cash  in  lieu  of  rental  payments  received  from  General  Electric  Capital
Corporation  and the other sellers for the period from June 13, 2001 to December
31, 2001 (the "2001  Period").  This was  comprised of $5.4 million from lessees
based in the United  States of America  and $71.6  million  from  lessees  based
outside the United States of America.  During the 2001 Period, 7.0% and 93.0% of
the rental and other income was derived from lessees  based in the United States
of America and lessees based outside the United States of America, respectively,
including  10.7% from the United Kingdom,  10.3% from Canada,  10.0% from Spain,
9.2% from China and 9.0% from Indonesia.

         As a general matter,  weakly capitalized  airlines are more likely than
well capitalized  airlines to seek operating  leases. It should be expected that
varying  numbers of lessees  at any point in time will be  experiencing  payment
difficulties.

         The  servicer  has  advised  the  LIFT  group  that  in the  servicer's
experience  some lessees of aircraft  similar to the aircraft  owned by the LIFT
group  and its  affiliates  fail to make  timely  lease,  maintenance  and other
payments  from time to time over the  course  of their  leases  and that in most
instances, late payments are recovered,  together with default interest or other
similar  payments  required  by the leases.  In some  instances,  the  financial
difficulties  of a  portfolio's  lessees  may  result  in a formal  or  informal
restructuring.  Restructurings may involve the voluntary  termination of a lease
prior to its  expiration  and the  arrangement  of subleases  from the lessee to
another  aircraft  operator.  In addition,  restructurings  may involve  reduced
rental payments for a specified period, which may be several months.

Management, Lease Terms.

         All leases of the Initial  Aircraft are managed by the  servicer  under
the  Servicing  Agreement.  All of the  leases  for  the  Initial  Aircraft  are
operating  leases.  Under those leases,  the lessees agreed to lease the Initial
Aircraft  for a fixed term,  although in some cases the  lessees  have  purchase
options,  termination  rights and extension  rights.  Although most of the lease
documentation for the Initial Aircraft is fairly  standardized in many respects,
significant variations do exist as a result of lessee negotiation.

Lease Payments and Security.

         Each lease for the Initial Aircraft requires the lessee to pay periodic
rentals  during the lease  term.  Most of the rental  payments  are payable on a
fixed rate basis and are not  adjustable  by reference to market  interest  rate
changes.  Rentals under most of the leases for the Initial  Aircraft are payable
monthly in advance.  A number of the leases  require the lessee to pay  periodic
amounts as maintenance reserves or similar payments.

                                       23
<PAGE>


         With some exceptions, the lessees are required to make payments without
withholding  payment on account of any  amounts the lessor may owe the lessee or
any claims the lessee may have  against  the lessor for any breach of  contract.
Most leases  include an obligation of the lessee to gross-up  payments under the
lease where lease payments are subject to withholdings and other taxes, although
sometimes the gross-up amount will be limited to the amount that would have been
payable if such lease had never been transferred to the LIFT group. In addition,
changes in law may result in the imposition of  withholding  and other taxes and
charges that are not  reimbursable  by the lessee under the lease or that cannot
be so reimbursed  under  applicable  law and lessees may fail to reimburse  even
when  obligated  under the lease to do so. The leases for the  Initial  Aircraft
also  require  the  lessee to  indemnify  the  lessor  for some tax  liabilities
including,  in some  leases,  value added tax and stamp  duties,  but  generally
excluding income tax or its equivalent  imposed on the lessor.  The lessees must
also pay default interest on any overdue amounts.

         Under  the  leases  for the  Initial  Aircraft,  the  lessee  must  pay
operating  expenses accrued or payable during the term of the lease, which would
normally include maintenance,  overhaul, airport and navigation charges, certain
taxes,  licenses,  consents and approvals,  aircraft  registration and hull "all
risks" and public  liability  insurance  premiums.  The  lessees  are obliged to
remove  liens on the  Initial  Aircraft  other  than liens  permitted  under the
leases.

         As of December 31, 2001, lessees under 32 of the leases for the Initial
Aircraft,  representing  78.09% of the aggregate  initial  appraised  value, had
provided  either or both cash security  deposits and letters of credit to secure
their respective obligations.

Operation of the Initial Aircraft.

         The leases  require  the  lessees to operate  the  Initial  Aircraft in
compliance  with all  applicable  laws and  regulations.  The  Initial  Aircraft
generally must remain in the possession of the lessees, and any subleases of the
Initial  Aircraft must be approved by the lessor.  In some cases, the lessee may
have broad  subleasing  rights with  re-registration  rights.  Under some of the
leases,  the lessee may enter into charter or other  arrangements for the leased
aircraft if the lessee does not part with  operational  control of the aircraft.
Generally,  the  lessees  are not allowed to  re-register  the Initial  Aircraft
without the lessor's permission, except in connection with a permitted sublease.

         All of the leases for the Initial Aircraft permit the lessees to remove
or  replace  the  engines  and in some  cases  other  equipment  or  components.
Sometimes  lessees  are  allowed  to enter  into  pooling  arrangements  for the
temporary  borrowing of equipment,  in some cases without the lessor's  consent.
Under all of the leases,  the lessees may deliver the Initial Aircraft,  engines
and other equipment or components to their  manufacturer  for testing or similar
purposes,  or to other  parties for service,  maintenance,  repair or other work
required or permitted  under the lease.  The lessor's  ability to repossess  the
Initial  Aircraft  or  engines,  equipment  or  components  from any  sublessee,
transferee,  manufacturer  or other person may be restricted by liens or similar
rights and by  applicable  bankruptcy  and similar  laws,  by legal or practical
impediments to the enforcement of the right of repossession or other remedies in
local courts and by  requirements  for  de-registration  of an aircraft from the
registry, or for export of an aircraft from, the country in which the lessee, or
other person having possession of the aircraft, or its operations are located.

                                       24
<PAGE>


Maintenance and Maintenance Reserves.

         The leases for the Initial Aircraft specify  maintenance  standards and
the required condition of the Initial Aircraft upon redelivery to the lessor. In
addition,  under some of the leases,  depending  on the  condition of the leased
aircraft,  including the airframe,  engines, the auxiliary power unit or landing
gear at  redelivery,  the lessee  may have to make  adjustment  payments  to the
lessor.  During the term of each  lease,  the lessee must ensure that the leased
aircraft is maintained in accordance with an agreed maintenance program designed
to provide that the aircraft meets applicable airworthiness and other regulatory
requirements.  Under  the  leases  for  the  Initial  Aircraft,  maintenance  is
generally  performed  by the lessee or, for some of the regional  lessees,  by a
designated airline or other air authority approved maintenance  provider.  Under
most of the leases for the Initial  Aircraft,  the lessee must  provide  monthly
maintenance  reserves.  In some  cases  where the  lessee  has paid  maintenance
reserves,  those  payments will be used to reimburse the lessee for  maintenance
charges, including major airframe and engine overhauls.

         Some of the leases for the Initial Aircraft do not require  maintenance
reserves  to be paid.  In those  cases the lessor must rely on the credit of the
lessee,  reporting  by the lessee or any credit  support the lessee  provides to
ensure that the lessee returns the leased aircraft in the condition  required by
the lease upon termination,  makes any payments required based on the aircraft's
return  condition  upon   termination  of  the  lease  and  performs   scheduled
maintenance throughout the lease term.

         The leases for the Initial  Aircraft require the lessees to comply with
the  airworthiness  directives  of the relevant  aviation  authorities  and with
manufacturers'  service bulletins.  In most cases, the lessees share the cost of
compliance  with the  lessor,  and many of the  leases  require  the  lessor  to
contribute to the cost of compliance with selected  airworthiness  directives or
manufacturers'  service  bulletins  if  compliance  costs are above a  specified
threshold defined in the lease.

Lessees' Options.

         As of December  31,  2001,  the leases or side  agreements  between the
lessor and the lessee for five of the Initial Aircraft,  representing  15.17% of
the aggregate initial appraised value, granted purchase options to the lessee or
its affiliates. None of the purchase options were exercisable as of December 31,
2001.  The latest date on which a purchase  option may be  exercised is February
19, 2011 for a purchase on November 15, 2011. If a purchase option is exercised,
the proceeds  realized from the exercise may not, in some  circumstances,  equal
the principal of the Notes allocable to the relevant aircraft.

         As of December 31, 2001,  fifteen  lessees had the option to extend the
term of their lease.  The rent payable during the extension period may vary from
the rent payable prior to the extension.  As of December 31, 2001,  eight of the
leases  allowed  the  lessee  to  terminate  its  lease  prior to the  scheduled
expiration date.

Indemnification and Insurance of the Aircraft

Insurance Requirements.

         The  leases  for the  Initial  Aircraft  require  the  lessees  to bear
responsibility and carry insurance for liabilities  arising out of the operation
of the  Initial  Aircraft.  These  include  liabilities  for  death or injury to
persons and damage to property that would  ordinarily  attach to the operator of
the aircraft,  subject to customary  exclusions.  In addition,  the lessees must

                                       25
<PAGE>

carry other types of  insurance  that are  customary  in the air  transportation
industry.  These include  aircraft hull "all risks" and hull war risks insurance
at  a  value  stipulated  in  the  lease  and  aircraft  spares  insurance  on a
replacement  cost basis,  in each case  subject to  customary  deductibles.  The
servicer must monitor the lessees'  compliance with the insurance  provisions of
the leases.

         In  addition,  the LIFT  group  also has in  place  its own  contingent
liability coverage. That coverage acts as a backup for LIFT in instances where a
lessee's  policy  does not  satisfy  the  requirements  of the lease and acts as
excess  coverage  above that  provided by a lessee's  policy.  The LIFT  group's
contingent  third-party  liability  insurance covers all of the Initial Aircraft
and its contingent hull and hull war risks insurance  covers some of the Initial
Aircraft.  The  amount of war  third-party  contingent  liability  insurance  is
subject to limitations imposed by the air transportation insurance industry.

         If any of the existing  insurance  policies are canceled or  terminated
and if an  aircraft  is  re-leased,  the  servicer  may from time to time engage
insurance  experts  at the LIFT  group's  expense to advise  and  recommend  the
appropriate amount of insurance coverage the LIFT group should procure.

Liability Insurance.

         The leases for the  Initial  Aircraft  require  third  party  liability
insurance for a combined  single limit for bodily injury and property  damage in
minimum amounts ranging between $500 million and $750 million for each aircraft.
In general,  liability  coverage  on each  aircraft  includes  third party legal
liability,  passenger  legal  liability,  baggage legal  liability,  cargo legal
liability,  mail and aviation  general third party  (including  products)  legal
liability.  Post-September 11, 2001, the aviation insurance market has applied a
$50  million  limit on war  third  party  (non-passenger)  liability  insurance.
Lessees must either buy additional insurance in the limited commercial market or
obtain protection under applicable government schemes.

         In some  jurisdictions  the LIFT  group may be  liable,  as owner of an
aircraft, for obligations that may be insured against by the lessees even if the
LIFT group is not responsible  for the loss that results in the  obligation.  In
addition,  claims  may be made  against  the LIFT  group on the basis of alleged
responsibility for a loss, even if such claim is not ultimately sustained.

         The losses for which coverage is provided  include both operating costs
relating to the actual  operation  of the  aircraft as well as losses to persons
and property  resulting from the operation of the aircraft.  The latter types of
losses are generally covered by the lessees' liability insurance.

Aircraft Property Insurance.

         In addition to hull risk,  hull war and allied  peril risk and aircraft
spares  insurance  coverage  obtained by the lessees,  the LIFT group  purchases
"total loss only" coverage with respect to some Initial Aircraft. The LIFT group
is required to maintain aircraft property insurance on its aircraft in an amount
equal to the greatest of a) the note target price (as defined in the Indenture),
b) the  appraised  value for such  aircraft  or c) 110% of the net book value of
such  aircraft.  In some cases,  the lessor is allowed to  increase  the insured
value above the stipulated  loss value  consistent  with industry  practice.  In
those cases the lessee is  responsible  for any increased  premium that results.
Permitted  deductibles  range from  $100,000  to  $1,000,000;  the  deductibles,
however, apply only in the case of a partial loss.

         The leases for the  Initial  Aircraft  include  provisions  defining an
event of loss or a casualty  occurrence so that upon total loss of the aircraft,
an agreed value is payable by the lessee.  This payment is generally funded with

                                       26
<PAGE>

insurance proceeds. The air transportation insurance industry practice, however,
is to treat only a loss with  likely  repair  costs of  greater  than 75% of the
insured value of the aircraft, including the engines, as a total loss.

         All insurance  policies currently in place contain a breach of warranty
endorsement so that the additional insureds continue to be protected even if the
lessee violates one or more of the provisions of the insurance policies. In many
cases,  these  endorsements also provide that this protection will only apply if
the additional insured has not caused,  contributed to or knowingly condoned the
breach.

         Generally,  the leases for the Initial  Aircraft  require the lessee to
maintain, as part of its hull war and allied perils insurance, coverage for loss
or damage  resulting  from a  governmental  confiscation  or  requisition of the
applicable aircraft. In some countries,  however, such as France and China, that
kind of insurance  may not be  obtainable  by the lessee as it is not  permitted
under  those  countries'   laws.   Following   insurance   market   developments
post-September 11, 2001, cover for confiscation by the state of registration has
not been available from the insurance markets after January 1, 2002. That change
has been  implemented  as lessees  renew their  insurance.  However,  like other
"war"-related  issues,  this lack of  availability  is fluid and such  cover may
become generally available in the future.


Item 2.       Properties

         The LIFT  group has no  ownership  or  leasehold  interest  in any real
property.  For a  description  of the LIFT group's  interest in other  property,
including its aircraft, see "Item 1. Business."


Item 3.       Legal Proceedings

         None.


Item 4.       Submission of Matters to a Vote of Security Holders

         None.


                                       27
<PAGE>

                                     PART II

Item 5.       Market for  Registrant's  Common  Equity and  Related  Stockholder
              Matters

a)       Market Information.

         As of the date of this  Form  10-K,  no equity  securities  of the LIFT
group have been  registered  with,  or are listed on, any  national  exchange or
traded in any established market.

b)       Holders.

         There  were five  beneficial  interest  holders  of  LIFT's  beneficial
interest certificates as of December 31, 2001.

c)       Dividends.

         As of the date of this Form 10-K, no  distributions  to the  beneficial
interest  holders  have been paid or  declared  by LIFT.  Under the terms of the
Indenture,  LIFT is  restricted  from  making  distributions  to the  beneficial
interest  holders  until,  among other  things,  all  outstanding  principal and
interest balances due on the outstanding Notes have been paid in full.

Recent Sales of Unregistered Securities.

         The beneficial interest in LIFT was originally  purchased by Automatic,
which is  affiliated  with  Automatic  LLC, on June 26, 2001 for $3 million in a
private sale exempt from  registration  under section 4(2) of the Securities Act
of 1933,  as  amended.  Automatic  subsequently  sold  50.1%  of the  beneficial
interest  of LIFT to four  other  affiliates  of  Automatic  LLC.  As a  result,
Automatic  owns 49.9% of the  beneficial  interest  of LIFT while the other four
affiliates of Automatic LLC each own 12.525% of the beneficial interest of LIFT.

         On June 26, 2001, LIFT issued $1,429 million of  asset-backed  notes to
Qualified  Institutional  Buyers, as such term is defined in Rule 144A under the
Securities  Act of  1933,  as  amended,  and to  non-U.S.  persons  in  offshore
transactions  in accordance  with  Regulation S thereunder.  Credit Suisse First
Boston Corporation,  Lehman Brothers Inc. and Salomon Smith Barney Inc. acted as
initial  purchasers.  As of that date,  these  Initial  Notes  consisted of $400
million of Class A-1 Notes,  $260  million of Class A-2 Notes,  $425  million of
Class A-3 Notes, $60 million of Class B-1 Notes, $83 million of Class B-2 Notes,
$69 million of Class C-1 Notes,  $72 million of Class C-2 Notes,  $35 million of
Class D-1  Notes  and $25  million  of Class  D-2  Notes.  LIFT used part of the
proceeds  from the sale of its  beneficial  interest and the Initial Notes of $3
million and $1,429 million,  respectively,  to purchase the Initial Aircraft for
$1,310.5 million and to fund initial cash reserves of $83.0 million.

         On December  18, 2001,  LIFT  completed  an exchange  offer  whereby it
issued seven classes of new notes,  also designated  Class A-1, Class A-2, Class
A-3,  Class B-1,  Class B-2,  Class C-1 and Class C-2, in exchange for the seven
corresponding  classes of the Initial  Notes.  The terms of these Exchange Notes
are  identical in all material  respects to the Initial  Notes,  except that the
Exchange Notes are registered under the Securities Act of 1933, as amended.  The
Class D-1 and Class D-2 Notes were not  exchanged and remain  unregistered.  $10
million of the Class A-2 and $34 million of the Class A-3 Initial Notes were not
tendered in the exchange offer and remain outstanding.

                                       28
<PAGE>


         The Exchange Notes were registered on Form S-4 (file number 333-69864),
which became  effective on November 7, 2001.  The  exchange  offer  commenced on
November 8, 2001 and ended on December  18,  2001.  All Initial  Notes that were
tendered were  exchanged and global notes  representing  the Exchange Notes were
deposited with the trustee and book-entry depository on December 18, 2001.


Item 6.       Selected Financial Data

         The selected  financial  data in the following  table have been derived
from,  and  should  be read in  conjunction  with,  the  consolidated  financial
statements of the LIFT group and notes thereto appearing  elsewhere in this Form
10-K.

                                                                   December 31,
                                                                       2001
                                                                       ----
                                                                  (in thousands)

Balance Sheet Data:
   Aircraft, net                                                   $ 1,291,759
   Total assets                                                      1,418,808
   Notes payable, net of unamortized discounts                       1,387,444
   Total liabilities                                                 1,434,945
   Total beneficial interest holders' equity                           (16,137)

Statement of Income Data (1):
   Rental income from operating leases                                  64,693
   Other Income                                                         12,300
   Interest expense                                                     48,908
   Depreciation expense                                                 21,376
   Net income                                                            4,404

(1) Income  Statement  data for 2001 is for the period  from  Inception  through
    December 31, 2001.


Item 7.       Management's  Discussion  and Analysis of Financial  Condition and
              Results of Operations

         The following  should be read in conjunction  with the risk factors set
forth herein.

         On the Closing Date, LIFT issued  $1,429.0  million of Initial Notes in
nine classes:  Class A-1, Class A-2, Class A-3, Class B-1, Class B-2, Class C-1,
Class C-2,  Class D-1 and Class D-2. LIFT used the proceeds from the sale of the
Initial  Notes to fund cash  reserves,  pay  transaction  expenses  and make the
payments described in the following paragraph.  Also on the Closing Date, LIFT 1
issued  $1,310.5   million  of  Bridge  Notes  to  Credit  Suisse  First  Boston
Corporation,  the proceeds of which were used by LIFT 1 to pay to the Seller the
full aircraft purchase price for all 39 Initial Aircraft.

         Also on the Closing Date, LIFT agreed with Automatic to purchase LIFT 1
and its subsidiaries under a beneficial interest purchase  agreement,  to pay to
Automatic the cash purchase price of approximately $5.5 million and to repay the
Bridge Notes on behalf of LIFT 1. As a result,  LIFT 1 became a part of the LIFT
group on the Closing Date.

         As of  December  31,  2001,  all of the 39  Initial  Aircraft  had been
delivered to the LIFT group.

                                       29
<PAGE>


         The LIFT group consists of special purpose  entities which own aircraft
subject to  operating  leases.  The LIFT group's  business  consists of aircraft
leasing activities. The LIFT group may also engage in acquisitions of additional
aircraft and sales of aircraft.  Any acquisitions of additional aircraft and the
related  issuance of additional  notes will require  confirmation  by the rating
agencies  rating the Notes that they will not lower,  qualify or withdraw  their
ratings on the outstanding  Notes as a result.  The LIFT group's cash flows from
its leasing activities will be used to service the interest and principal on the
outstanding  Notes and to make  distribution of remaining amounts to the holders
of the beneficial interest certificates,  after the payment of expenses incurred
by the LIFT group.

         The LIFT group's ability to generate  sufficient cash from its aircraft
assets to service the  outstanding  Notes and any  additional  notes will depend
primarily on the rental rates it can achieve on leases,  the lessees' ability to
perform  according  to the terms of the leases and the prices it can  achieve on
any aircraft sales.  The LIFT group's  ability to service the outstanding  Notes
and any  additional  notes  will also  depend  on the level of the LIFT  group's
operating  expenses,  including  maintenance  obligations  that are  expected to
increase as the aircraft age, and any  unforeseen  contingent  liabilities.  The
Indenture  requires  that LIFT  maintain a cash reserve  balance on deposit in a
collections  account and permits LIFT to establish a credit facility in order to
provide a source of liquidity for its obligations.

         LIFT,  may,  under certain  circumstances,  issue  additional  notes to
acquire additional aircraft.


Critical Accounting Policies

         The policies discussed below are considered by management of LIFT to be
critical to an understanding of the LIFT group's  financial  statements  because
their  application  requires  significant  judgment,  with  financial  reporting
results  relying on estimation  about the effect of matters that are  inherently
uncertain.  Specific risks for these critical  accounting policies are described
in the following paragraphs. For all of these policies, management cautions that
future  events  rarely  develop  exactly  as  forecast,  and the best  estimates
routinely require adjustment.

Lease Revenue Recognition

         Revenue  under  operating  leases is  recognized  as rental income on a
straight-line basis over the lease term.

Depreciation

         Aircraft  are recorded at cost  reflecting  individual  account  values
established on the basis of appraisals by LIFT 1 and transferred at such cost to
LIFT.  Aircraft are depreciated on a straight-line basis over the estimated life
to its estimated residual value. Generally,  aircraft and aircraft equipment are
depreciated over estimated useful lives of 30 years from the date of manufacture
to a 15% estimated residual value.  Certain major additions and modifications to
aircraft  may  be   capitalized.   The  LIFT  group's   estimates  are  reviewed
periodically  to ensure  continued  appropriateness.  Should  the  estimates  of
economic lives and salvage prove  inappropriate  because of future  events,  the
LIFT group's result of operations could be significantly adversely affected.

Aircraft Valuation

         Aircraft are  periodically  reviewed for impairment in accordance  with
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". An

                                       30
<PAGE>

impairment  loss is recognized  when the fair value of the  undiscounted  future
cash flows of the  aircraft is less than its net book  value.  The fair value of
the aircraft is based on  independent  appraisals  of the aircraft and actual or
estimates of undiscounted future lease cash flows. The appraisals assume,  among
other things,  that the aircraft are utilized normally in an open,  unrestricted
and stable market.  Short-term  fluctuations in the market place are disregarded
and it is assumed that there is no necessity  either to dispose of a significant
number of aircraft simultaneously or to dispose of aircraft quickly.

         The LIFT  group  determined  the  critical  principles  by  considering
accounting  policies  that involve the most complex or  subjective  decisions or
assessments.  The LIFT group identified the most critical accounting policies to
be  those  related  to  lease  revenue  recognition,  depreciation  methods  and
valuation of aircraft.  The LIFT group also states these accounting  policies in
the notes to the consolidated  financial  statements and in relevant sections in
this discussion and analysis.


Recent Developments

Aircraft Novations

         On August 3, 2001, a B737-700  aircraft  that is currently  leased to a
lessee based in India was delivered to the LIFT group. The aircraft with respect
to this lessee represents  approximately 2.4% of the aggregate initial appraised
value of the Initial Aircraft.

         On August 9, 2001, a B737-400  aircraft  that is currently  leased to a
lessee based in Indonesia  was  delivered to the LIFT group.  The aircraft  with
respect to this lessee  represents  approximately  1.4% of the aggregate initial
appraised value of the Initial Aircraft.

         On September 27, 2001, a B747-400  aircraft that is currently leased to
a lessee based in Malaysia was  delivered to the LIFT group.  The aircraft  with
respect to this lessee  represents  approximately  9.1% of the aggregate initial
appraised value of the Initial Aircraft.

         On October 1, 2001, a B767-300ER aircraft that is currently leased to a
lessee  based in Russia was  delivered  to the LIFT  group.  The  aircraft  with
respect to this lessee  represents  approximately  5.5% of the aggregate initial
appraised value of the Initial Aircraft.

         On November 2, 2001, a B737-800  aircraft that is currently leased to a
lessee  based in Morocco was  delivered  to the LIFT group.  The  aircraft  with
respect to this lessee  represents  approximately  2.7% of the aggregate initial
appraised value of the Initial Aircraft.

         On December 19, 2001, three B737-300 aircraft that are currently leased
to a lessee based in France were delivered to the LIFT group.  The aircraft with
respect to this lessee  represent  approximately  6.1% of the aggregate  initial
appraised value of the Initial Aircraft.

The Aircraft and Lessees

         In October  2001,  LIFT VG Brazil,  LLC issued  notices of default to a
lessee based in Brazil after this lessee failed to meet its contractual payments
to LIFT VG Brazil,  LLC.  In March  2002,  LIFT VG Brazil,  LLC  entered  into a
restructured lease agreement as discussed below. This lessee leases one B737-300
aircraft  and one  B737-700  aircraft,  which  represent  a total of 4.2% of the
aggregate initial appraised value of the Initial Aircraft.

                                       31
<PAGE>


         In  November  2001,   LIFT  Ireland  Leasing  Limited  entered  into  a
three-month  rent deferral  agreement with a lessee based in Italy in respect of
an A320-200  aircraft.  The  deferral  commenced  in November  2001 and is to be
repaid with interest  over a period of five years.  The aircraft with respect to
this lessee  represents  approximately  2.9% of the aggregate  initial appraised
value of the Initial Aircraft.

         In  December  2001,  LIFT  Turkey,  LLC  entered  into a rent  deferral
agreement with a Turkish lessee in respect of two B737-800  aircraft.  Under the
terms of this  agreement,  a  portion  of the rent has been  deferred  for three
months  commencing  December  2001.  The  lessee  will repay the  deferral  with
interest  over 36 months.  The aircraft  with  respect to this lessee  represent
approximately  5.6% of the  aggregate  initial  appraised  value of the  Initial
Aircraft.

         In  December  2001,  LIFT SP Spain,  LLC entered  into a  restructuring
agreement with a Spanish lessee of three MD82 aircraft.  This agreement  extends
the leases for an average of seventeen  months and amends the rents for 2001 and
2002.  This  lessee  leases  four MD82  aircraft  and one MD83  aircraft,  which
represent  a total of  5.98% of the  aggregate  initial  appraised  value of the
Initial Aircraft.

         In  January  2002,  LIFT  Arizona,  LLC  entered  into a  restructuring
agreement  with a lessee  based in the United  States with respect to a B737-300
aircraft.  This  agreement  reduces the rent for  seventeen  months  starting in
December  2001 and extends the lease for  nineteen  months.  The  aircraft  with
respect to this lessee  represents  approximately  1.1% of the aggregate initial
appraised value of the Initial Aircraft.

         In January  2002,  LIFT RS Brazil,  LLC issued a notice of default to a
Brazilian lessee with respect to a B737-500 aircraft after this lessee failed to
make payments to LIFT RS Brazil,  LLC. LIFT RS Brazil,  LLC is expected to enter
into a  restructured  lease  agreement  in April 2002 as  discussed  below.  The
aircraft  with  respect  to this  lessee  represents  approximately  1.7% of the
aggregate initial appraised value of the Initial Aircraft.

         In February 2002, LIFT Ireland Leasing Limited signed  contracts with a
lessee  based in  Singapore  for  two-year  leases  of two MD-82  aircraft.  One
aircraft is currently off-lease and is expected to be delivered in May 2002. The
other aircraft was delivered in March 2002, upon return from the previous lessee
based in  Tunisia,  who  extended  the lease of the  aircraft  to meet the lease
return conditions.  These aircraft represent approximately 2.5% of the aggregate
initial appraised value of the Initial Aircraft.

         In  February  2002,  LIFT  Portugal,  LLC  signed an early  termination
agreement,  in exchange  for an early  termination  fee,  with a lessee based in
Portugal with respect to a B737-300 aircraft. The aircraft was returned in March
2002 and was delivered to a British lessee for a five-year  lease in March 2002.
This aircraft  represents  approximately 2.0% of the aggregate initial appraised
value of the Initial Aircraft.

         In February  2002,  LIFT Morocco,  LLC entered into an agreement with a
lessee  based in Spain  for a  three-year  lease of a  B737-800  aircraft.  This
aircraft,  currently  leased to a lessee  based in Morocco,  is  scheduled to be
returned  in May 2002 and be  delivered  to the Spanish  lessee  with  immediate
effect.  The aircraft with respect to this lessee represents  approximately 2.7%
of the aggregate initial appraised value of the Initial Aircraft.

         In March 2002,  LIFT VG Brazil,  LLC entered into a restructured  lease
agreement with a Brazilian lessee for a B737-300 and a B737-700 aircraft,  which
reduces rents starting from September 2001 and extends the leases for 24 months.

                                       32
<PAGE>

The aircraft  with respect to this lessee  represent  approximately  4.2% of the
aggregate initial appraised value of the Initial Aircraft.

         In  April  2002,  LIFT RS  Brazil,  LLC is  expected  to  enter  into a
restructured  lease  agreement  with respect to a B737-500  aircraft,  currently
leased to a  Brazilian  lessee,  to defer a portion  of the rent for six  months
commencing in October 2001 and to extend the lease for fifteen months beyond the
current lease expiry.  The deferral will be repaid with interest over a 36-month
period beginning March 2003. The aircraft with respect to this lessee represents
approximately  1.7% of the  aggregate  initial  appraised  value of the  Initial
Aircraft.

         The events  discussed  above  caused a  reduction  in the LIFT  group's
revenues by $0.3  million in 2001 and could  result in a permanent  reduction in
the LIFT group's  revenues as well.  These events and any similar  future events
may give  rise to the  possibility  that the LIFT  group  may not be able to pay
scheduled interest on certain Note classes on a monthly basis or may not be able
to repay in full the  principal of certain  Note  classes by the final  maturity
dates of those  classes.  For a description  of the impact of assumed  increased
levels of  delinquency  on gross  revenues  and of  permanent  changes  in gross
revenues on the expected  maturities,  weighted  average lives and yields of the
respective classes of Notes, see pages 93 to 100 of the Registration Statement.

Other Developments.

         During the  current  financial  year  there has been a downturn  in the
world economic  climate with a  consequential  negative  impact on the operating
conditions in the world  aviation  industry.  On September 11, 2001,  the United
States was attacked by  terrorists  who hijacked and crashed four United  States
commercial aircraft, with significant loss of life, property damage and economic
disruption.  As a result,  air travel in the United  States  was  suspended  for
several days. The long-term  effect that these  terrorist  attacks,  the fallout
since then and the subsequent  military  action in Afghanistan  may have for the
aviation  industry over the longer term is not yet fully known. The pre-existing
economic downturn has been exacerbated by the events of September 11 in the U.S.
and the economic and political  fallout since then.  Subsequent to these events,
two significant European carriers (Swissair and Sabena) filed for bankruptcy and
major American carriers announced very large financial losses.

         The short-term effects of the events of September 11, together with the
downturn  in the world  economic  conditions  which was  already  evident,  have
included, among other things, a reduction in demand for air travel, leading to a
contraction  of  operations  by  airlines  including  grounding  of  aircraft by
airlines, bankruptcy and/or consolidation of airlines, fluctuations in the price
of fuel,  increased costs due to new security  measures  adopted by the relevant
aviation authorities, and increased insurance premiums required by the insurance
markets.   In  particular,   airlines   worldwide  are  currently   experiencing
difficulties in maintaining  war insurance  cover in the amounts  required under
their leases with us and other lessors.  While these insurance  issues have been
mitigated in certain  jurisdictions by a number of temporary government schemes,
in the absence of longer term  satisfactory  solutions  on this matter it may be
necessary for certain aircraft to be grounded.

         Such consequences depending on their scope and duration, which the LIFT
group cannot predict at this time,  are having a material  adverse impact on the
financial  condition  of the LIFT group's  lessees and their  ability to perform
under  their  leases.  As a result,  a number of the LIFT  group's  leases  were
restructured to reduce lease rates and to provide other financial accommodations
for lessees.  The consequences of the events of September 11, 2001 may also lead
to reduced demand for the LIFT group's aircraft, which may impact its ability to
re-lease  aircraft on a timely basis and at  favorable  rates and may reduce the

                                       33
<PAGE>

value of its aircraft. These effects could cause a reduction in the LIFT group's
cash  flow,  which  would  adversely  affect  the LIFT  group's  ability to make
payments on the Notes and to  refinance  the Notes as planned.  Any  significant
reduction  in the  appraised  values of the LIFT group's  portfolio  beyond that
assumed in the Registration Statement,  may require the LIFT group to accelerate
the scheduled  principal  payments on the Class A Notes and may result in delays
of scheduled principal payments to other noteholders.

         As a result of the  recession,  the terrorist  attacks of September 11,
2001 and the significant  adverse financial impact that these events have had on
the airline industry,  the rating agencies that rate the Notes have re-evaluated
their ratings of securities issued by aircraft lease securitization vehicles. On
October  30,  2001,  Moody's  placed  the Class D Notes on review  for  possible
downgrade.  On March 18, 2002,  Moody's downgraded the Class D Notes from Ba2 to
Ba3. On September 27, 2001, Standard & Poor's placed the Class D Notes on credit
watch with negative implications.  On September 20, 2001, Fitch placed the Class
A, B, C and D Notes on rating  watch  negative,  but on  December  21, 2001 they
removed the Class A, B and C Notes from this placement without any change to the
ratings of these classes.

         On December  18, 2001,  LIFT  completed  an exchange  offer  whereby it
issued  seven  classes  of new notes in  exchange  for the  seven  corresponding
classes of the Initial Notes discussed in "Item 1. Business - Introduction."

         As of December 31,  2001,  LIFT had repaid  aggregate  principal on the
Notes of $26.2 million,  as compared to an estimate of $25.8 million that, based
on revenue and expense  assumptions  found in pages 93 to 95 of the Registration
Statement, was projected to have been repaid by December 31, 2001.

Results of Operations

         LIFT was formed on June 13, 2001 and began  significant  operations  on
June 26, 2001. As a result, the financial results during the 2001 Period are not
representative of a full year of operations.  The LIFT group reported net income
of $4.4 million for the 2001 Period,  on total  revenues of $78.6  million.  The
LIFT group's revenues  consisted of rental income from operating  leases,  other
income representing cash in lieu of rental payments received from the Seller and
interest income earned on cash balances.

         Rental  income from aircraft  subject to operating  leases for the 2001
Period was $64.7 million. Other income for the 2001 Period was $12.3 million.

         Interest  income  during  the 2001  Period was $1.6  million.  Interest
income consists  primarily of interest earned on the LIFT group's cash balances,
which are invested in short-term  highly liquid  investments as permitted by the
Indenture.  The amount of interest  income  earned varies based upon the current
interest rates paid on such  investments  and the level of cash balances held by
the LIFT group.

         Interest  expense,  including  interest  rate  swap  expense  of  $17.2
million,  was $48.9 million for the 2001 Period.  The weighted  average interest
rate on the Notes during the 2001 Period was 6.6%.  The  outstanding  balance of
the Notes at December 31, 2001 was $1,387.4  million,  net of  unamortized  note
discounts of $15.3 million. Interest expense varies based on the actual interest
rates on the floating  rate Notes,  the interest rate swap costs or proceeds and
the outstanding principal balances of the Notes.

                                       34
<PAGE>


         Depreciation and amortization  expense during the 2001 Period was $21.4
million.  The depreciation and amortization  expense is anticipated to be higher
in 2002 since the LIFT group did not own the aircraft throughout all of 2001.

         Administrative  and other  expenses  during the 2001  Period  were $4.0
million.  These expenses consist primarily of fees paid to service providers and
other general and  administrative  costs. The most significant of these fees was
the  servicer  fee,  which  amounted  to $2.4  million  in the  2001  Period.  A
significant  portion  of the fees  paid to the  servicer  corresponds  to rental
payments  due and  received.  These  fees are based upon a fixed  percentage  of
rental receipts, and will vary with rental income of the LIFT group.

Liquidity

         The LIFT  group held cash and cash  equivalents  of $97.5  million  and
restricted  cash  of  $10.5  million  at  December  31,  2001.  Restricted  cash
represents  security  deposits  from lessees that are required to be  segregated
from other funds.  The liquidity  reserve amount,  which is included in cash and
cash  equivalents,  was $83 million at December 31, 2001. The liquidity  reserve
amount is required  under the terms of the Indenture and is intended to serve as
a source of liquidity  for the LIFT group's  maintenance  obligations  and other
contingent costs.

         LIFT has the ability to enter into certain credit facilities;  however,
as of December 31, 2001, it had not done so.

         The  reduction  of cash  flow  due to the  lease  rate  restructurings,
discussed in "Recent Developments", following the crisis caused by the terrorist
attacks in the  United  States on  September  11,  2001,  the  concern  that the
aircraft will continue to be re-leased at reduced rates in the near future,  the
level of lease payment  delinquencies  and the related  increase in expenses may
adversely  affect the timing and amounts  available to pay to the holders of the
Notes.

Cash Flows from Operating Activities

         The LIFT group's cash flows from  operating  activities  depend on many
factors,  including, but not limited to, the performance of lessees and the LIFT
group's ability to re-lease  aircraft,  the average interest rates of the Notes,
the efficiency of its interest rate hedging policies and the ability of interest
rate swap providers to perform under the terms of the swap agreements.

         Net cash provided by operating  activities for the 2001 Period amounted
to $36.6 million,  primarily  reflecting net income of $4.4 million  adjusted by
non-cash  depreciation and amortization  expense of $21.4 million,  security and
other deposits of $17.0  million,  accounts  payable and accrued  liabilities of
$4.4 million and deferred  rental and other income of $2.6  million.  These were
partially  offset by restricted  cash of $10.5  million and rents  receivable of
$3.2 million.

Cash Flows from Investing and Financing Activities

         Net cash used in investing  activities for the 2001 Period  amounted to
$1,311.5  million,  which  primarily  reflects the acquisition of the 39 Initial
Aircraft.

         Net cash provided by financing  activities for the 2001 Period amounted
to $1,372.4  million due to the  receipt of  proceeds  from the  issuance of the
Initial Notes of $1,412.9  million and the beneficial  interest  certificates of

                                       35
<PAGE>

$3.0 million,  partially  offset by $26.2 million of principal  repayment on the
Notes and $17.2  million of debt  issuance  costs.  The balance of the Notes was
$1,387.4 million,  including  unamortized discount of $15.3 million, at December
31, 2001. Generally, principal and interest is repaid on the Notes monthly based
upon the cash collected,  the anticipated expenses and the cash balances held by
the LIFT group on the calculation date. As a result,  monthly principal payments
on the Notes will vary  depending on the LIFT group's  revenues and expenses for
the month.

         At December  31, 2001,  the LIFT group was a party to an interest  rate
swap agreement, which it entered into on Inception and which became effective on
the Closing Date.  The net  aggregate  amounts due to be paid or received by the
LIFT group under the  agreement are  determined  monthly and are due on the same
day as the payments  under the Notes.  The net  economic  effect of the interest
rate swap is to hedge the LIFT group's  variable  interest rate exposure against
movements in interest rates over the duration of certain lease terms. Please see
"Item 7A.  Quantitative  and  Qualitative  Disclosures  about  Market  Risk" for
further information about this interest rate swap agreement.

New Accounting Pronouncements

         In October  2001,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial  Accounting  Standards No. 144 ("SFAS 144"),  "Accounting
for the  Impairment  or  Disposal  of  Long-Lived  Assets".  SFAS 144,  which is
effective  for fiscal  years  beginning  after  December  15, 2001 with  earlier
application  encouraged,  addresses  financial  accounting and reporting for the
impairment or disposal of long-lived assets. This Statement supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be  Disposed  of",  and  the  accounting  and  reporting  provisions  of APB 30,
"Reporting  the Results of  Operations - Reporting  the Effects of Disposal of a
Segment of a Business,  and  Extraordinary,  Unusual and Infrequently  Occurring
Events and  Transactions",  for the  disposal  of a segment  of a  business  (as
previously  defined in that  Opinion).  This  Statement  also amends ARB No. 51,
"Consolidated Financial Statements", to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The implementation
of this Statement is not expected to have a material  effect on the LIFT group's
financial position, results of operations or cash flows.


Item 7A.      Quantitative and Qualitative Disclosures about Market Risk

         Interest  incurred by the LIFT group on the Notes and the rental income
received by the LIFT group under  operating  leases are based on combinations of
variable  and fixed  measures  of interest  rates.  The LIFT group is exposed to
interest  rate risk to the extent  that the mix of variable  and fixed  interest
obligations  under the Notes do not  correlate  to the mix of variable and fixed
rents under  operating  leases.  The LIFT group has engaged  advisors to monitor
interest rates in order to mitigate its exposure to unfavorable variations.  The
LIFT group utilizes  interest rate swaps that shift the risk of  fluctuations in
floating  rates to the  counterparty  in exchange for fixed payments by the LIFT
group.  Risks in the use of these instruments arise from the possible  inability
of the  counterparties  to meet the  terms of their  contracts  and from  market
movements in securities values and interest rates.

         The controlling  trustees of LIFT, with the assistance of Credit Suisse
First Boston  Corporation,  are  responsible  for  reviewing  and  approving the
overall  interest rate  management  policies and transaction  authority  limits.
Counterparty risk will be monitored on an ongoing basis.  Counterparties will be
subject to the prior approval of the controlling trustees.  Currently,  the LIFT
group's  counterparty is an affiliate of Credit Suisse First Boston Corporation.
Future  counterparties  will consist primarily of the affiliates of major United

                                       36
<PAGE>

States and European financial institutions, including special-purpose derivative
vehicles   that  have   credit   ratings  or  that   provide   collateralization
arrangements, consistent with maintaining the ratings of the Notes.

         LIFT has issued  nine  classes of Notes.  The  estimated  fair value of
these Notes at December 31, 2001 was approximately $ 1,299.1 million.  The terms
of each class of the Notes,  the outstanding  principal  amount of each class of
the Notes at December 31, 2001 and the estimated fair value of each class of the
Notes are as follows (dollars in thousands):

<TABLE>
                Outstanding                         Expected
                 Principal                           Final             Final        Estimated
Class of Note     Amount       Interest Rate      Payment Date      Maturity Date   Fair Value
-------------     ------       -------------      ------------      -------------   ----------

<S>             <C>            <C>               <C>               <C>              <C>
Class A-1       $  400,000     LIBOR + 0.390%     July 15, 2003    July 15, 2031    $  390,327
Class A-2          260,000     LIBOR + 0.430%     July 15, 2004    July 15, 2031       253,386
Class A-3          401,767     LIBOR + 0.430%    August 15, 2010   July 15, 2016       392,720
Class B-1           58,739     LIBOR + 1.120%     May 15, 2018     July 15, 2031        54,071
Class B-2           81,255             7.124%     May 15, 2018     July 15, 2031        75,862
Class C-1           69,000     LIBOR + 2.120%     May 15, 2018     July 15, 2031        51,750
Class C-2           72,000             8.093%     May 15, 2018     July 15, 2031        54,000
Class D-1           35,000     LIBOR + 2.000%     May 15, 2018     July 15, 2031        15,750
Class D-2           25,000             8.000%     May 15, 2018     July 15, 2031        11,250
                ----------                                                          ----------
                $1,402,761                                                          $1,299,116
                ==========                                                          ==========
</TABLE>


         Expected final payment dates relating to the Notes are set forth in the
Indenture.  They were determined  based on the assumptions set forth in pages 93
to 95 of the  Registration  Statement.  The actual  final  payment date for each
class of Notes is likely  to occur  earlier  or later  than the  expected  final
payment  date as a result  of  various  factors,  including  the  fact  that the
assumptions regarding revenues, interest, expenses, operating costs, stress case
scenarios and aircraft  valuations have not  corresponded to, and are not likely
in the future to correspond to, actual experience.

         The  one-month  LIBOR rate with respect to the Notes as of December 31,
2001 was 1.90%.

         The LIFT group is a party to a single  floating-to-fixed  interest rate
swap agreement with an affiliate of Credit Suisse First Boston Corporation under
which it receives  fixed  monthly  payments  based on one-month  LIBOR and makes
fixed  monthly  payments  based  on a  fixed  rate,  each  measured  against  an
amortizing  notional balance.  The following table presents,  as of December 31,
2001,  the terms and  estimated  fair value of the LIFT group's  swap  agreement
(dollars in thousands):

               Rate to be       Rate to be
  Notional    paid by the     received by the       Maturity         Estimated
   Amount      LIFT group       LIFT group            Date          Fair Value
   ------      ----------       ----------            ----          ----------
 $1,200,451       5.79%            LIBOR          June 15, 2011    $  (23,541)

                                       37
<PAGE>



         The LIFT  group  expects  to enter into  additional  swaps,  or sell at
market  values or unwind part or all of its initial swap and any future swaps on
a periodic basis, in its efforts to mitigate its exposure to unfavorable changes
in interest rates.  Any changes in the LIFT group's policy  regarding its use of
interest rate hedging  products will be subject to periodic review by the rating
agencies.

         The LIFT group is not  exposed to  significant  foreign  exchange  risk
since rents from the lessees are made in U.S. dollars.




                                       38
<PAGE>


Item 8.       Financial Statements and Supplementary Data















                 Lease Investment Flight Trust and Subsidiaries


                     Financial Statements as of December 31,
             2001 and for the Period from Inception (June 13, 2001)
                              to December 31, 2001
                                together with the
               Report of Independent Certified Public Accountants




                                       39
<PAGE>

                        Report of Independent Accountants



To the Controlling Trustees
Lease Investment Flight Trust

         In our opinion,  the  accompanying  consolidated  balance sheet and the
related  consolidated  statements of operations,  beneficial  interest  holders'
deficit  and  comprehensive  loss,  and of cash  flows  present  fairly,  in all
material respects,  the financial position of Lease Investment Flight Trust (the
"Trust") and its  subsidiaries  at December  31, 2001,  and the results of their
operations and their cash flows for the period from inception (June 13, 2001) to
December 31, 2001, in conformity with accounting  principles  generally accepted
in  the  United  States  of  America.   These   financial   statements  are  the
responsibility of the Trust's  management;  our  responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards  generally accepted in
the United  States of America,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.





PricewaterhouseCoopers LLP

New York, New York
March 8, 2002




                                       40
<PAGE>
                 Lease Investment Flight Trust and Subsidiaries
                           Consolidated Balance Sheet
                             (dollars in thousands)

                                                                    December 31,
                                                                        2001
                                                                    ------------

                                     Assets

Cash and cash equivalents                                           $    97,499
Restricted cash                                                          10,468
Rents receivable                                                          3,186
Prepaids                                                                    315
Aircraft, net                                                         1,291,759
Debt issuance cost, net                                                  15,581
                                                                    -----------

          Total assets                                              $ 1,418,808
                                                                    ===========

              Liabilities and Beneficial Interest Holders' Deficit

Accounts payable and accrued liabilities                            $     4,434
Deferred rental and other income                                          2,566
Derivative financial instruments                                         23,541
Security and other deposits                                              16,960
Notes payable:
     Class A-1                                                          400,000
     Class A-2                                                          260,000
     Class A-3                                                          401,767
     Class B-1                                                           58,739
     Class B-2                                                           81,255
     Class C-1                                                           69,000
     Class C-2                                                           72,000
     Class D-1                                                           35,000
     Class D-2                                                           25,000
     Unamortized Class D discounts                                      (15,317)
                                                                    -----------
     Total notes payable, net                                         1,387,444
                                                                    -----------

          Total liabilities                                           1,434,945
                                                                    -----------

Beneficial interest holders' deficit:
     Beneficial interest                                                  7,404
     Accumulated other comprehensive loss                               (23,541)
                                                                    -----------

          Total beneficial interest holders' deficit                    (16,137)
                                                                    -----------

Total liabilities and beneficial interest holders' deficit          $ 1,418,808
                                                                    ===========

   The accompanying notes are an integral part of these financial statements.

                                       41
<PAGE>


                 Lease Investment Flight Trust and Subsidiaries
                      Consolidated Statement of Operations
                             (dollars in thousands)


                                                                Period from
                                                                 Inception
                                                              (June 13, 2001)
                                                            to December 31, 2001
                                                            --------------------

Revenues:
   Rental income from operating leases                             $64,693
   Other income                                                     12,300
   Interest income                                                   1,645
                                                                   -------

      Total revenues                                                78,638
                                                                   -------

Expenses:
   Interest                                                         48,908
   Depreciation and amortization                                    21,376
   Administration and other                                          3,950
                                                                   -------

       Total expenses                                               74,234
                                                                   -------

Net Income                                                         $ 4,404
                                                                   =======

   The accompanying notes are an integral part of these financial statements.

                                       42
<PAGE>


<TABLE>
                 Lease Investment Flight Trust and Subsidiaries
 Consolidated Statement of Beneficial Interest Holders' Deficit and Comprehensive Loss
       For the Period from Inception (June 13, 2001) to December 31, 2001
                             (dollars in thousands)


<CAPTION>
                                                  Accumulated                            Total Beneficial
                                              Other Comprehensive   Beneficial Interest     Interest
                                                     Loss             Holders' Equity    Holders' Deficit
                                              -------------------   -------------------  ----------------

<S>                                               <C>                    <C>                <C>
Balance at June 13, 2001                          $   --                 $   --             $   --

Beneficial interest holders' contribution             --                    3,000              3,000

Comprehensive income:
   Net income                                         --                    4,404              4,404

   Other comprehensive loss:
   change in fair value of derivative
       financial instruments                       (23,541)                  --              (23,541)
                                                                                            --------

   Total comprehensive loss                                                                  (19,137)
                                                  --------               --------           --------

Balance at December 31, 2001                      $(23,541)              $  7,404           $(16,137)
                                                  ========               ========           ========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       43
<PAGE>

                 Lease Investment Flight Trust and Subsidiaries
                      Consolidated Statement of Cash Flows
                             (dollars in thousands)

                                                                 Period from
                                                                  Inception
                                                               (June 13, 2001)
                                                            to December 31, 2001
                                                            --------------------

Cash flows from operating activities:
Net income                                                      $     4,404
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation and amortization                                     21,376
   Note discount amortization                                           781
   Changes in assets and liabilities:
       Rents receivable                                              (3,186)
       Restricted cash                                              (10,468)
       Prepaids                                                        (315)
       Accounts payable and accrued liabilities                       4,434
       Deferred rental and other income                               2,566
       Security deposits                                             16,960
                                                                -----------

           Net cash provided by operating activities                 36,552
                                                                -----------

Cash flows from investing activities:
   Purchase of aircraft                                          (1,311,502)
                                                                -----------

           Net cash used in investing activities                 (1,311,502)
                                                                -----------

Cash flows from financing activities:
   Contribution of beneficial interest holders                        3,000
   Proceeds from notes payable                                    1,412,902
   Debt issuance costs                                              (17,214)
   Repayment of notes payable                                       (26,239)
                                                                -----------

           Net cash provided by financing activities              1,372,449
                                                                -----------

Net increase in cash and cash equivalents                            97,499

Cash and cash equivalents at beginning of period                       --
                                                                -----------

Cash and cash equivalents at end of period                      $    97,499
                                                                ===========

Supplemental cash flow information:
   Cash paid for interest expense                               $    44,305
                                                                ===========

   The accompanying notes are an integral part of these financial statements.

                                       44
<PAGE>

                 Lease Investment Flight Trust and Subsidiaries
                   Notes to Consolidated Financial Statements
                                December 31, 2001


Note 1 - Organization

         Lease Investment Flight Trust ("LIFT") is a  special-purpose  statutory
business  trust that was formed on June 13,  2001 under the laws of the State of
Delaware. LIFT and its other subsidiaries,  all of which were organized prior to
June 26,  2001  (collectively  the "LIFT  group"),  are  limited  to  acquiring,
financing,  re-financing,  owning, leasing, re-leasing, selling, maintaining and
modifying commercial aircraft.

         The trust agreement governing LIFT (the "Trust Agreement") provides for
four  trustees:  an Owner  Trustee  and three  Controlling  Trustees.  The Owner
Trustee  will  maintain  the books and  records of LIFT.  The three  Controlling
Trustees have the authority to manage the property and affairs of LIFT under the
Trust  Agreement.  One of the  Controlling  Trustees,  the Equity  Trustee,  was
appointed by the beneficial  interest  holders,  while the other two Controlling
Trustees are independent of the beneficial interest holders.  LIFT does not have
any officers or employees  and has  arranged for GE Capital  Aviation  Services,
Limited ("GECAS"),  Phoenix American Financial Services,  Inc., Wilmington Trust
Company,  Bankers Trust Company and Credit  Suisse First Boston  Corporation  to
provide aircraft servicing, managerial services, and financial advice.

         On the Closing Date,  LIFT Trust-Sub 1 ("LIFT 1") and its  subsidiaries
acquired the rights to 39 commercial jet aircraft (the "Initial  Aircraft") from
General Electric Capital Corporation and certain of its affiliates (together the
"Seller") from the proceeds of bridge notes issued on the same date. Also on the
Closing Date, LIFT completed a  securitization  transaction in which it received
proceeds from a private  placement  offering of notes (the "Initial  Notes") and
simultaneously  paid for the cash purchase price of LIFT 1 and repaid the bridge
notes on behalf of LIFT 1. Automatic LIFT I, LP  ("Automatic"),  an affiliate of
Automatic,  LLC,  originally  held  the  beneficial  interest  in  LIFT  and the
beneficial interest in LIFT 1. Automatic LLC, through its operating  affiliates,
originates,  acquires  and sells  aircraft  and  services  aircraft  leases  and
arranges various forms of financings in the aviation leasing industry. Automatic
subsequently  sold  50.1%  of the  beneficial  interests  of LIFT to four  other
affiliates of Automatic LLC. As a result, Automatic owns 49.9% of the beneficial
interests  of LIFT while the other four  affiliates  of  Automatic  LLC each own
12.525% of the  beneficial  interests  of LIFT.  The LIFT  group's  obligations,
including its debt  obligations,  are not  obligations  of, or guaranteed by any
lessee,  Automatic,  the Seller,  the  trustees  and  holders of the  beneficial
interest of LIFT or any other person.

         On December  18, 2001,  LIFT  completed  an exchange  offer  whereby it
issued seven classes of new notes,  also designated  Class A-1, Class A-2, Class
A-3, Class B-1,  Class B-2, Class C-1, and Class C-2 (the "Exchange  Notes" and,
together  with the  Initial  Notes,  the  "Notes"),  in  exchange  for the seven
corresponding  classes of the Initial Notes. The terms of the Exchange Notes are
identical  in all  material  respects  to the  Initial  Notes,  except  that the
Exchange Notes are registered under the Securities Act of 1933, as amended.  The
Class D-1 and Class D-2 Notes were not exchanged and remained unregistered.  $10
million of the Class A-2 and $34 million of the Class A-3 Initial Notes were not
tendered in the exchange offer and remain outstanding.

                                       45
<PAGE>


Note 2 - Summary of Significant Accounting Policies

Basis of Presentation

         The accompanying  consolidated  financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America.  All significant  intercompany  accounts and transactions  have been
eliminated.

Use of Estimates

         The  preparation of financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities  and disclosures of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during  the  reporting  period.  While  management  believes  that the
estimates  and related  assumptions  used in the  preparation  of the  financial
statements are  appropriate,  actual results could differ from those  estimates.
Significant  estimates are made in the assessment of the collectibility of lease
payments, depreciable lives and estimated residual values of leased aircraft.

Cash and Cash Equivalents

         The LIFT group  classifies  highly  liquid  investments  with  original
maturities  of  three  months  or  less  from  the  date  of  purchase  as  cash
equivalents.

Aircraft and Operating Leases

         Aircraft  are recorded at cost  reflecting  individual  account  values
established on the basis of appraisals by LIFT 1 and transferred at such cost to
LIFT.  Aircraft are depreciated on a straight-line basis over the estimated life
to its estimated residual value. Generally,  aircraft and aircraft equipment are
depreciated over estimated useful lives of 30 years from the date of manufacture
to a 15% estimated residual value.  Certain major additions and modifications to
aircraft  may  be   capitalized.   The  LIFT  group's   estimates  are  reviewed
periodically to ensure continued appropriateness.

         Revenue  under  operating  leases is  recognized  as rental income on a
straight-line basis over the lease term.

         As of  December  31,  2001,  all  of  the  Initial  Aircraft  had  been
delivered.  Pursuant to an asset purchase  agreement  with the Seller,  the LIFT
group is entitled to all cash received (and earned)  subsequent to June 26, 2001
by the Seller that relate to the aircraft identified for purchase.  Accordingly,
the LIFT group  recorded cash  received  from the Seller for lease  payments for
undelivered  aircraft as "other  income" in its statement of  operations.  Other
cash transferred by the Seller  representing  security deposits paid by lessees,
prior to June 26,  2001,  have  been  recorded  by the  LIFT  group as  security
deposits.

         Aircraft are  periodically  reviewed for impairment in accordance  with
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". An
impairment  loss is recognized  when the fair value of the  undiscounted  future
cash flows of the  aircraft is less than its net book  value.  The fair value of
the aircraft is based on  independent  appraisals  of the aircraft and actual or
estimates of undiscounted future lease cash flows. The appraisals assume,  among

                                       46
<PAGE>

other things,  that the aircraft are utilized normally in an open,  unrestricted
and stable market.  Short-term  fluctuations in the market place are disregarded
and it is assumed that there is no necessity  either to dispose of a significant
number of aircraft simultaneously or to dispose of aircraft quickly.

Maintenance Reserves

         Certain leases for the Initial  Aircraft require the lessee to bear the
obligation  for  maintenance  costs on airframes  and  engines,  and require the
lessee to make certain  payments to the lessor,  calculated on measures of usage
to cover the expected costs of scheduled  maintenance  charges,  including major
airframe and engine  overhauls.  Reserves are  maintained at amounts  considered
adequate to cover those expected payments for maintenance costs.

         The sellers of the aircraft retained their respective  reserve accounts
with respect to maintenance  reserve payments,  if any, on the Initial Aircraft.
Maintenance  obligations  will be paid from funds on deposit in the  collections
account and, to the extent available for those purposes, funds obtained from any
cash  collateral  accounts  or  under  eligible  credit  facilities  that may be
established in the future.  There is no assurance that cash flows generated from
the Initial Aircraft will be sufficient to satisfy maintenance  obligations,  to
pay expenses and to service interest and principal on the Notes.

         The  LIFT  group  had not  made any  maintenance  reimbursements  as of
December 31, 2001.

Income Taxes

         The operating  results of the LIFT group are included in the tax return
of the beneficial  interest holders of LIFT. The LIFT group is,  therefore,  not
subject to U.S. Federal, State, and local income taxes.

Accounting for Derivatives and Hedging Activities

         In the normal course of business,  the LIFT group  utilizes  derivative
financial  instruments  to manage its exposure to interest  rate risk.  The LIFT
group  will  utilize  one or more  interest  rate  swaps  that shift the risk of
fluctuations  in floating rates to a counterparty in exchange for fixed payments
by the LIFT group.  All derivatives are recognized on the balance sheet at their
fair  value.  On the date  that  the  LIFT  group  entered  into its  derivative
contract,  it designated the derivative as a hedge of the  variability of future
cash flows that are to be received or paid in connection with a recognized asset
or liability (a "cash flow" hedge), to which the LIFT group is party. Changes in
the  fair  value  of a  derivative  that is  highly  effective  as - and that is
designated and qualifies as - a cash flow hedge, to the extent that the hedge is
effective,  are  recorded in other  comprehensive  income,  until  earnings  are
affected by the variability of cash flows of the hedged  transaction.  Any hedge
ineffectiveness  (which  represents  the amount by which the changes in the fair
value  of the  derivative  exceed  the  variability  in the  cash  flows  of the
forecasted transaction) is recorded in current-period  earnings.  Changes in the
fair value of derivative  trading and  non-hedging  instruments  are reported in
current-period earnings.

         The LIFT group formally  documented all  relationships  between hedging
instruments  and hedged items,  as well as its  risk-management  objectives  and
strategy for  undertaking  various  hedge  transactions.  This process  includes
linking  all  derivatives  that are  designated  as cash flow hedges to specific
assets and  liabilities  on the  balance  sheet.  The LIFT  group also  formally
assesses  (both at the hedge's  inception and on an ongoing  basis)  whether the
derivatives that are used in hedging  transactions have been highly effective in
offsetting  changes  in the  cash  flows  of  hedged  items  and  whether  those

                                       47
<PAGE>

derivatives may be expected to remain highly  effective in future periods.  When
it is determined that a derivative is not (or has ceased to be) highly effective
as a hedge, the LIFT group discontinues hedge accounting prospectively.

Fair value of Financial Instruments

         Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial  Instruments",  requires disclosure of the fair value of
financial  instruments,  for both  assets  and  liabilities  recognized  and not
recognized on the balance  sheet,  for which it is  practicable to estimate fair
value.  Fair  values  of the LIFT  group's  financial  instruments  are based on
pricing  models or formulas  using  assumptions  about  future  interest  rates,
interest volatility and other factors.

Risks and Uncertainties

         During the  current  financial  year  there has been a downturn  in the
world economic  climate with a  consequential  negative  impact on the operating
conditions in the world  aviation  industry.  On September 11, 2001,  the United
States was attacked by  terrorists  who hijacked and crashed four United  States
commercial aircraft, with significant loss of life, property damage and economic
disruption.  As a result,  air travel in the United  States  was  suspended  for
several days. The long-term  effect that these  terrorist  attacks,  the fallout
since then and the subsequent  military  action in Afghanistan  may have for the
aviation  industry over the longer term is not yet fully known. The pre-existing
economic downturn has been exacerbated by the events of September 11 in the U.S.
and the economic and political  fallout since then.  Subsequent to these events,
two significant European carriers (Swissair and Sabena) filed for bankruptcy and
major American carriers announced very large financial losses.

         The short-term effects of the events of September 11, together with the
downturn  in the world  economic  conditions  which was  already  evident,  have
included, among other things, a reduction in demand for air travel, leading to a
contraction  of  operations  by  airlines  including  grounding  of  aircraft by
airlines, bankruptcy and/or consolidation of airlines, fluctuations in the price
of fuel,  increased costs due to new security  measures  adopted by the relevant
aviation authorities, and increased insurance premiums required by the insurance
markets.   In  particular,   airlines   worldwide  are  currently   experiencing
difficulties in maintaining  war insurance  cover in the amounts  required under
their leases with us and other lessors.  While these insurance  issues have been
mitigated in certain  jurisdictions by a number of temporary government schemes,
in the absence of longer term  satisfactory  solutions  on this matter it may be
necessary for certain aircraft to be grounded.

         Such consequences depending on their scope and duration, which the LIFT
group cannot predict at this time,  are having a material  adverse impact on the
financial  condition  of the LIFT group's  lessees and their  ability to perform
under  their  leases.  As a result,  a number of the LIFT  group's  leases  were
restructured to reduce lease rates and to provide other financial accommodations
for lessees.  The consequences of the events of September 11, 2001 may also lead
to reduced demand for the LIFT group's aircraft, which may impact its ability to
re-lease  aircraft on a timely basis and at  favorable  rates and may reduce the
value of its aircraft. These effects could cause a reduction in the LIFT group's
cash  flow,  which  would  adversely  affect  the LIFT  group's  ability to make
payments on the Notes and to  refinance  the Notes as planned.  Any  significant
reduction  in the  appraised  values of the LIFT group's  portfolio  beyond that
assumed  in the  Form  S-4  Registration  Statement  of LIFT  (Registration  No.
333-69864)  as amended,  relating to the  issuance of the  Exchange  Notes,  may
require the LIFT group to  accelerate  the scheduled  principal  payments on the
Class A Notes and may result in delays of scheduled  principal payments to other
noteholders.

                                       48
<PAGE>


         As a result of the  recession,  the terrorist  attacks of September 11,
2001 and the significant  adverse financial impact that these events have had on
the airline industry,  the rating agencies that rate the Notes have re-evaluated
their ratings of securities issued by aircraft lease securitization vehicles. On
October  30,  2001,  Moody's  placed  the Class D Notes on review  for  possible
downgrade.  On March 18, 2002,  Moody's downgraded the Class D Notes from Ba2 to
Ba3. On September 27, 2001, Standard & Poor's placed the Class D Notes on credit
watch with negative implications.  On September 20, 2001, Fitch placed the Class
A, B, C and D Notes on rating  watch  negative,  but on  December  21, 2001 they
removed the Class A, B and C Notes from this placement without any change to the
ratings of these classes.


Note 3 - Cash Balances

         The LIFT group maintains various cash accounts as required by the trust
indenture dated June 26, 2001 (the  "Indenture"),  including rental accounts,  a
collections  account,  an expense account,  and the lessee funded  accounts.  In
addition,  the equity  owners of LIFT funded a  contingent  collateral  account,
which is available, in very limited circumstances to support the Class A Notes.

         All payments (with limited exceptions) under the leases,  subsequent to
June 26, 2001, are deposited into the rental accounts and subsequently  swept to
the collection account within one business day of receipt. LIFT maintains a cash
reserve  balance  in the  collection  account  in such  amount as is  determined
monthly in  accordance  with the  Indenture.  At  December  31,  2001,  the cash
reserves  included  in the  collection  account  were  $83.0  million.  The cash
reserves  are  intended  to  provide a source of  liquidity  for the  payment of
expenses,  swap payments and interest on certain  classes of Notes.  Expenses of
the LIFT group are generally paid out of the expense  account which is generally
funded through transfers from the collections account.

         The lessee-funded  accounts are not available for general use. Security
deposits and maintenance  reserve  payments from lessees that are required to be
segregated from other funds are deposited into the lessee funded  accounts.  The
balances in the lessee  funded  accounts at December 31, 2001 were $10.5 million
and represented security deposits.

         At December 31, 2001,  the balance in a contingent  collateral  account
related to the Class A Notes was $3.0 million.


                                       49
<PAGE>


Note 4 - Aircraft under Operating Leases

         On the  Closing  Date,  LIFT 1 agreed to  purchase  39  commercial  jet
aircraft from the Seller having an aggregate cost of $1,310.5  million  pursuant
to an asset  purchase  agreement.  At  December  31,  2001,  all of the  Initial
Aircraft had been delivered to the LIFT group, as follows:

                                                        December 31, 2001
                                                        -----------------
                                                          (in thousands)

         Aircraft under operating lease                    $ 1,297,763
         Accumulated depreciation                              (19,371)
                                                           -----------
         Aircraft under operating lease, net                 1,278,392
                                                           -----------

         Aircraft off-lease                                     13,739
         Accumulated depreciation                                 (372)
                                                           -----------
         Aircraft off-lease, net                                13,367
                                                           -----------

         Aircraft, net                                     $ 1,291,759
                                                           ===========

         All  aircraft  are  compliant  with Stage 3 noise levels set out in the
United States Federal  Aviation  Regulations.  An analysis of the various lessee
expiration  periods  of the  aircraft  under  operating  leases is as follows at
December 31, 2001:

On lease for a further period of:
         More than five years.......................................  7
         From one to five years..................................... 28
         Less than one year.........................................  3
         Off- lease.................................................  1
                                                                     --

         Total aircraft portfolio .................................. 39
                                                                     ==

         As of December  31, 2001,  38 of the LIFT  group's 39 aircraft  were on
lease to 24 different lessees in 17 different  countries.  At December 31, 2001,
one aircraft was off-lease and was scheduled to be released in May 2002.

         At December 31, 2001,  future  scheduled  minimum lease  payments to be
received under  operating  leases for the years ended December 31 are as follows
(dollars in thousands):

                     2002                        $137,144
                     2003                         120,488
                     2004                         106,629
                     2005                          86,797
                     2006                          67,610
                     Thereafter                   241,780
                                                 --------

                     Total                       $760,448
                                                 ========

         The LIFT group may acquire additional  aircraft and related leases from
Automatic or the Seller using proceeds from the issuance of additional notes and
equity.  Any such  acquisition of additional  aircraft by the LIFT group will be

                                       50
<PAGE>

subject to the terms of the Indenture and will require written confirmation from
the  rating  agencies  rating  the Notes  that they will not  lower,  qualify or
withdraw their ratings on the Notes as a result of such issuance.


Note 5 - Notes Payable

         On the Closing Date,  LIFT  completed a private  placement  offering of
$1,429.0 million of securitized notes on a basis exempt from registration  under
the  Securities  Act of 1933,  as amended.  LIFT utilized the proceeds from such
Initial  Notes as  payment  for the  acquisition  of LIFT 1 from  Automatic  and
repayment of the bridge note that LIFT 1 issued to acquire the Initial Aircraft.

         On December  18, 2001,  LIFT  completed  an exchange  offer  whereby it
issued seven classes of new notes,  also designated  Class A-1, Class A-2, Class
A-3,  Class B-1,  Class B-2, Class C-1, and Class C-2, in exchange for the seven
corresponding  classes of the Initial Notes. The terms of the Exchange Notes are
identical  in all  material  respects  to the  Initial  Notes,  except  that the
Exchange Notes are registered under the Securities Act of 1933, as amended.  The
Class D-1 and Class D-2 Notes were not exchanged and remained unregistered.  $10
million of the Class A-2 and $34 million of the Class A-3 Initial Notes were not
tendered in the exchange offer and remain outstanding.

         Underwriting  and other debt issuance costs of $17.2 million which were
incurred  in  connection  with the  offering  of the  Initial  Notes  are  being
amortized  using the  effective  interest  method over the expected  life of the
Initial Notes, which is estimated to be 17 years.

         The  repayment  terms  of each  class of Notes  are such  that  certain
principal  amounts are expected to be repaid on dates which are based on certain
operating assumptions (the "Expected Final Payment Dates") or refinanced through
the issuance of new notes,  but in any event are ultimately due for repayment on
specified final maturity dates (the "Final Maturity Dates"). The interest rates,
Expected  Final Payment  Dates,  Final  Maturity Dates and estimated fair values
applicable to each class of the Notes at December 31, 2001 are listed as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                 Outstanding                           Expected
                  Principal                              Final             Final          Estimated
Class of Note      Amount         Interest Rates     Payment Dates     Maturity Dates    Fair Values
-------------      ------         --------------     -------------     --------------    -----------
<S>               <C>            <C>                <C>                <C>                <C>
 Class A-1        $  400,000     LIBOR + 0.390%      July 15, 2003     July 15, 2031      $  390,327
 Class A-2           260,000     LIBOR + 0.430%      July 15, 2004     July 15, 2031         253,386
 Class A-3           401,767     LIBOR + 0.430%     August 15, 2010    July 15, 2016         392,720
 Class B-1            58,739     LIBOR + 1.120%      May 15, 2018      July 15, 2031          54,071
 Class B-2            81,255             7.124%      May 15, 2018      July 15, 2031          75,862
 Class C-1            69,000     LIBOR + 2.120%      May 15, 2018      July 15, 2031          51,750
 Class C-2            72,000             8.093%      May 15, 2018      July 15, 2031          54,000
 Class D-1            35,000     LIBOR + 2.000%      May 15, 2018      July 15, 2031          15,750
 Class D-2            25,000             8.000%      May 15, 2018      July 15, 2031          11,250
                  ----------                                                              ----------
                  $1,402,761                                                              $1,299,116
                  ==========                                                              ==========
</TABLE>

     The 30-day LIBOR rate with respect to the Notes as of December 31, 2001 was
1.90%.

                                       51
<PAGE>


         If the Class A-1 or Class A-2 Notes are not  repaid on or before  their
respective  Expected  Final  Payment  Dates,  such  class of Notes  will  accrue
interest thereafter at the stated interest rate plus 0.50% per annum.

         The LIFT  group has the  right to make an  optional  redemption  of any
Notes.  Should the LIFT group choose to exercise an early  redemption  of any of
the Notes,  it may be  required to pay a  redemption  premium as required by the
Indenture.

         The dates on which  principal  repayments  on the Notes  will  actually
occur will depend on the cash flows generated by the rental income from the LIFT
group's portfolio of aircraft,  the LIFT group's ability to refinance any or all
of the Notes and the amount of operating  costs incurred in the ordinary  course
of business.  Amounts  received by the LIFT group and available for distribution
are paid in accordance with the priorities specified in the Indenture.


Note 6 - Derivative Financial Instruments

Interest Rate Swap

         Interest  incurred  by the LIFT  group on the Notes and the yield  from
rental  income  received by the LIFT group under  operating  leases are based on
combinations of variable and fixed measures of interest rates. The LIFT group is
exposed to interest  rate risk to the extent that the mix of variable  and fixed
interest obligations under the Notes do not correlate to the mix of variable and
fixed  yields  from  rental  income  under  leases.  The LIFT group has  engaged
advisors  to  monitor  interest  rates in  order to  mitigate  its  exposure  to
unfavorable  variations.  The LIFT group will utilize one or more  interest rate
swaps that shift the risk of fluctuations in floating rates to a counterparty in
exchange  for  fixed  payments  by the  LIFT  group.  Risks  in the use of these
instruments arise from the possible  inability of the counterparties to meet the
terms of their  contracts  and from market  movements in  derivative  values and
interest rates.  Counterparty risk will be monitored on an ongoing basis and the
counterparties  will  be  subject  to the  prior  approval  of  the  controlling
trustees.  The counterparties  will consist primarily of the affiliates of major
United States and European financial institutions and special-purpose derivative
vehicles  that will  have  credit  ratings,  or will  provide  collateralization
arrangements, consistent with maintaining the ratings of the Notes.

         At December  31, 2001,  the LIFT group was a party to an interest  rate
swap agreement which it entered into on June 13, 2001 and which became effective
on the Closing Date.  Under the  agreement,  the LIFT group pays a fixed rate of
interest to the  counterparty  based on an  amortizing  notional  amount and, in
turn, the counterparty  pays the LIFT group a rate of interest based on the same
amortizing  notional  amount  based  on  LIBOR  as set  out  below  (dollars  in
thousands):

              Rate to be      Rate to be
 Notional    paid by the    received by the      Maturity           Estimated
  Amount      LIFT group      LIFT group           Date            Fair Value
  ------      ----------      ----------           ----            ----------
$1,200,451       5.79%           LIBOR         June 15, 2011      $   (23,541)

         On December  31, 2001,  the fair value of the interest  rate swap was a
liability of approximately  $23.5 million.  At December 31, 2001, the LIFT group
estimated that $23.5 million will be transferred from other comprehensive income
to interest expense for the year ending December 31, 2002.

                                       52
<PAGE>



Note 7 - Commitments and Contingencies

         In accordance  with the terms of a servicing  agreement (the "Servicing
Agreement"),  GECAS is performing certain aircraft related services with respect
to the LIFT group's aircraft  portfolio.  Such activities include the collection
of rents and other amounts due from  lessees,  the  monitoring  of  maintenance,
insurance and other  obligations  under the aircraft leases,  the enforcement of
rights against the lessees, the remarketing of aircraft for re-lease or sale and
the performance of other specified aircraft-related services. In accordance with
the  Servicing  Agreement,  fees  payable to GECAS by LIFT include base fees and
fees  calculated  as a  percentage  of lease  rentals  received,  in addition to
certain incentive-based fees.

         The Servicing Agreement expires on the later of (i) the payment in full
of all amounts due on the Notes and other  similar  obligations  and all amounts
due to the holders of  beneficial  interests  in LIFT and (ii) the date on which
LIFT and its subsidiaries cease to own any aircraft. Each party has the right to
terminate the Servicing Agreement under specified circumstances.

         Additionally,   LIFT  has  arranged  for  Phoenix  American   Financial
Services,  Inc.,  Wilmington  Trust  Company,  Bankers  Trust Company and Credit
Suisse First Boston  Corporation  to provide  managerial  services and financial
advice.  The  aggregate  annual fee for these  services is  estimated to be $0.8
million.


Note 8 - Concentration of Credit Risk

         Credit risk with respect to operating  lease  receivables  is generally
diversified  due to the number of lessees  comprising the LIFT group's  customer
base and the different  geographic areas in which they operate.  At December 31,
2001, the LIFT group had leased aircraft to 24 lessees in 17 countries. Also, at
December  31,  2001,  eighteen  of the  aircraft  were  being  leased to lessees
domiciled  in  certain  emerging  markets,  including  those  located in Africa,
Eastern  Europe,  the Middle East,  Latin America and Asia.  The exposure of the
LIFT group's  aircraft to particular  countries and customers is managed  partly
through  concentration  limits and through  obtaining  deposits from lessees and
certain cash reserves.


                                       53
<PAGE>

Item 9.       Changes in and  Disagreements  with  Accountants on Accounting and
              Financial Disclosure

         None.


                                    PART III

Item 10.      Directors and Executive Officers of the Registrant

Controlling and Independent Trustees.

         The Trust Agreement  governing LIFT provides for four trustees.  One of
the four trustees of LIFT is Wilmington  Trust  Company,  which is acting as the
statutory  trustee and the owner trustee.  The remaining  three trustees are the
"controlling trustees" and have the authority to manage the property and affairs
of  LIFT  under  the  Trust  Agreement.  All of  the  controlling  trustees  are
independent from General Electric  Capital  Corporation.  One of the controlling
trustees,  called the "equity  trustee",  is  appointed by the holders of LIFT's
beneficial  interest,  while  the two other  controlling  trustees,  called  the
"independent controlling trustees" are independent of those holders. The holders
of the  beneficial  interest of LIFT may remove and replace the equity  trustee,
and  each  independent   controlling  trustee  may  be  replaced  by  the  other
independent controlling trustee.

         The Trust Agreement  requires that any decision  relating to insolvency
proceedings,  merger  or other  reorganization  of LIFT  must be  approved  by a
unanimous vote of the controlling trustees. Any sale of any aircraft,  decisions
requiring  LIFT's  approval under the Servicing  Agreement or the agreement with
the  administrative  agent and the  reduction of any required  level of reserves
must be  approved  by the  equity  trustee  and at least one of the  independent
controlling trustees. The controlling trustees approving aircraft sales on other
than pre-approved terms must also confirm to the indenture trustee, prior to the
sale, that the sale will not materially and adversely  affect the holders of the
Notes.  The  acquisition  of  additional  aircraft  by LIFT and the terms of any
related financing need only be approved by the equity trustee.

         The  controlling  trustees  and  their  respective  ages and  principal
activities are as follows:

    Name                             Age        Title
    ----                             ---        -----
    Joseph E. Francht, Jr.           51         Independent Controlling Trustee
    Jonathan M. Schofield            61         Independent Controlling Trustee
    David H. Treitel                 47         Equity Trustee

         Joseph E.  Francht,  Jr. - Since 1998,  Mr.  Francht has been a private
investor and consultant. He was Senior Vice President and Treasurer at Northwest
Airlines from 1990-1998,  where he was responsible for, among other things,  all
capital markets  transactions,  aircraft financing activities and fleet planning
and analysis.  He has also served as chairman of Northwest's  Pension Investment
Committee  and was on the Board of Directors of Champion Air, Inc. and Northwest
Aerospace Training Corporation.  Prior to that, from 1972-1990,  Mr. Francht was
employed as a corporate  lending  officer at Chase Manhattan Bank, now JP Morgan
Chase, and later, at Banque Paribas,  now BNP Paribas, in several senior lending
positions, including Senior Vice President-Leveraged Capital Group.

         Jonathan M. Schofield -- Mr. Schofield served as the Chairman and Chief
Executive  Officer of Airbus  Industrie of North America,  Inc., a subsidiary of
Airbus Industrie, a manufacturer of large civil aircraft,  from December 1992 to

                                       54
<PAGE>

February  2000.  He continued to serve as Chairman  from February 2000 until his
retirement  on March 31,  2001.  Prior to his  career at Airbus,  Mr.  Schofield
served  as  President  of  United  Technologies  International,  a  wholly-owned
subsidiary of United  Technologies  Corporation,  a diversified  manufacturer of
industrial  products,  from 1989 to 1992. Mr.  Schofield  serves on the Board of
Directors of Aviall Inc., Dallas, TX, BE aerospace,  Wellington,  FL; FlightTime
Corporation, Waltham, MA; and SS&C Technologies, Windsor, CT.

         David H.  Treitel - Since 1996,  Mr.  Treitel has been the Chairman and
Chief Executive Officer of Simat,  Helliesen & Eichner, Inc., a leading aviation
consulting  firm based in New York City.  Mr.  Treitel  has been with SH&E since
1977, and he served as the firm's  President from 1993 to September 1998 and its
Executive  Vice  President  from 1989 until 1993.  Mr.  Treitel also serves as a
director of Midwest Express Holdings, Inc. and a controlling trustee of Aircraft
Finance Trust, another aircraft securitization vehicle.

         As is common with many other special  purpose  companies,  neither LIFT
nor any of its subsidiaries  will have any officers or other employees,  except,
in the case of a  subsidiary,  as may be required by  applicable  law.  The LIFT
group has  arranged  for  GECAS,  Phoenix  American  Financial  Services,  Inc.,
Wilmington  Trust Company and Credit Suisse First Boston  Corporation to provide
aircraft servicing, managerial services and financial advice.

The Servicer

         The servicer and the LIFT group have entered into a Servicing Agreement
dated as of June 26, 2001. The Servicing Agreement sets forth the various duties
of GECAS as the servicer with respect to the  management and  administration  of
the aircraft and the leases, the aircraft  marketing  activities to be performed
by the servicer and the aircraft management-related  obligations of the servicer
in  connection  with  offers  and  sales by the LIFT  group  of  refinancing  or
additional notes.

         The servicer has agreed to provide its services in accordance  with the
express terms of the Servicing  Agreement.  The terms of the Servicing Agreement
provide that the servicer  will act in  accordance  with laws  applicable to it,
with directions given by the  administrative  agent on behalf of the LIFT group,
with  specified  standards  of  care  and  with  specified  standards  regarding
conflicts of interest. The duties and obligations of the servicer are limited to
those expressly set forth in the Servicing  Agreement,  and the servicer has not
undertaken  any fiduciary or other  implied  duties or  obligations  to the LIFT
group, the holders of the Notes or any other person.

         The  servicer  has  agreed to  perform  the  services  required  by the
Servicing  Agreement with  reasonable  care and diligence at all times and, if a
conflict  of  interest  arises  as to an  aircraft  of the LIFT  group and other
aircraft managed by GECAS, in good faith. In addition, to the extent that either
two or more  particular  aircraft  of the LIFT group or an  aircraft of the LIFT
group and other aircraft managed by GECAS have substantially similar objectively
identifiable  characteristics  that are relevant for purposes of the  particular
services to be  performed,  the  servicer has agreed not to  discriminate  among
those  aircraft of the LIFT group or between any  aircraft of the LIFT group and
any other managed aircraft on an unreasonable basis.

         If the servicer in good faith  determines  that  circumstances  as to a
particular  aircraft or lease require an  arm's-length  negotiation  between the
servicer or any of its affiliates  and the LIFT group and the servicer  believes
it would not be appropriate for the servicer to act on behalf of the LIFT group,

                                       55
<PAGE>

the servicer has agreed to notify the LIFT group  promptly and to withdraw  from
acting as the servicer  with respect to the matter and the LIFT group has agreed
to appoint an independent  representative to act on its behalf.  The servicer is
entitled to act on its own or its affiliates' behalf in those negotiations.

         Neither  the LIFT  group nor the  servicer  may  assign  its rights and
obligations under the Servicing Agreement without the other's prior consent. The
servicer may, however,  delegate some, but not all, of its duties to some of its
affiliates.

         Aircraft  services.  The main  categories  of aircraft  services  being
provided by the servicer under the Servicing Agreement are:

         (1)  lease marketing and remarketing, lease negotiation and execution;

         (2)  collecting  rental  payments and other  amounts due under  leases,
              aircraft maintenance,  insurance monitoring and procurement, lease
              compliance and enforcement  and accepting  delivery and redelivery
              of aircraft;

         (3)  sales services and aircraft acquisition;

         (4)  monitoring   aircraft   maintenance  and  providing   records  and
              information about the aircraft;

         (5)  using  commercially  reasonable  efforts to keep the LIFT group in
              compliance with terms of the Indenture that directly relate to the
              operation of the aircraft;

         (6)  limited  assistance  in  connection  with the  public  or  private
              offerings of any notes, such as providing  information relating to
              the  servicer  and its  affiliates  for  inclusion in any offering
              document or  prospectus,  participating  in  marketing  activities
              solely with respect to the aircraft  and  providing  underwriters,
              rating agencies and other advisors with the reasonable opportunity
              to  conduct  due  diligence  with  respect to the  servicer  as it
              relates to the aircraft;

         (7)  legal and other  professional  services with respect to the lease,
              sale or financing of the aircraft,  any amendment or  modification
              of any  lease,  the  enforcement  of the  rights of the LIFT group
              under any lease, any disputes that arise as to any aircraft or for
              any other  purpose  that the  servicer  reasonably  determines  is
              necessary in connection with the performance of its services; and

         (8)  periodic  reporting  of  operational  information  relating to the
              aircraft.

         Operating  guidelines.  Under the Servicing Agreement,  the servicer is
entitled to exercise such authority as is necessary to give it a practicable and
working autonomy in performing its services.  The Servicing  Agreement  provides
that the  servicer  will give the LIFT  group and its  agents  access to records
related to the aircraft under specified  circumstances  to enable the LIFT group
to monitor the  performance  by the servicer and not  commingle any funds of the
LIFT group with its own funds. The LIFT group, acting through the administrative
agent or directly,  has  established  monitoring and control  procedures that it
expects will enable it to properly manage its and its subsidiaries' business and
assets.

         The Servicing  Agreement requires all transactions  entered into by the
servicer on behalf of the LIFT group other than intercompany  transactions to be
at arm's length and on market terms unless  otherwise  agreed or directed by the

                                       56
<PAGE>

administrative  agent on the LIFT  group's  behalf.  Transactions  or matters on
behalf of the LIFT group that  require the  specific  approval of the LIFT group
include:

         (1)  sales of or agreements to sell aircraft, other than as required by
              a lease or the purchase agreement for the 39 Initial Aircraft;

         (2)  entering into any new leases if the lease does not comply with any
              applicable operating covenants set forth under the Indenture or if
              the lease  grants a  purchase  option in favor of the  lessee  and
              renewing or extending  existing leases,  other than as a result of
              the exercise of an extension option;

         (3)  terminating  any lease or leases to any single lessee for aircraft
              then having an aggregate  depreciated  net book value in excess of
              $75  million  unless  a  substantially   similar   replacement  or
              substitute lease is put into place;

         (4)  unless  provided for in the applicable  budget,  entering into any
              contract for the modification or maintenance of aircraft where the
              costs to be  incurred by the LIFT group will exceed the greater of
              the  estimated  aggregate  cost of a heavy  maintenance  check for
              similar  aircraft and total  refurbishment  of the related engines
              and available  maintenance  reserves or other collateral under the
              related  lease or if those  costs  would be outside  the  ordinary
              course of the business of the LIFT group;

         (5)  issuing any  guarantee  on behalf of, or  otherwise  pledging  the
              credit  of,  the LIFT  group,  other  than with  respect  to trade
              payables  in the  ordinary  course  of  business  and  other  than
              guarantees by LIFT of the obligations of its subsidiaries;

         (6)  entering into,  amending or granting a waiver with respect to, any
              transaction  between the LIFT group and General  Electric  Capital
              Corporation  or any  of its  affiliates  not  contemplated  in the
              Servicing Agreement;

         (7)  incurring any actual or contingent liability,  unless contemplated
              in the applicable  budget  pursuant to a transaction of a type for
              which the LIFT group's  specific  approval is otherwise  required,
              incurred in the ordinary  course of the business of the LIFT group
              or incurred in entering into a lease or performing any obligations
              under a lease; and

         (8)  entering into any order or  commitment  to acquire,  or acquiring,
              aircraft or aircraft  engines unless provided for in a lease,  the
              order or  commitment  to  acquire a  replacement  engine  has been
              provided for in the applicable  budget or the servicer  determines
              that the  purchase  or  exchange  of an  engine  is  necessary  or
              appropriate.

         Budgets.  The Servicing Agreement calls for the administrative agent to
adopt each year a single lease  operating  budget for all aircraft  owned by the
LIFT  group  and a  single  budget  for the  aircraft  expenses  related  to all
aircraft.

         Servicing  fees and their payment  priority.  The  Servicing  Agreement
provides that the LIFT group will pay to the servicer a base fee of $150,000 per
month,  which  increases if additional  aircraft are acquired by the LIFT group,
and a rent fee equal to 1% of the aggregate  amount of basic rent due for all or
any part of a month for any  aircraft of the LIFT group and 1% of the  aggregate

                                       57
<PAGE>

basic  rent  actually  paid for the  month.  The  servicer  also will  receive a
disposition fee equal to 1% of the gross proceeds of the sale of any aircraft of
the LIFT group.  The servicer also will be reimbursed  for aircraft  maintenance
costs and insurance,  outside legal and professional advisory fees and other out
of pocket expenses  incurred in connection with its  performance.  The aggregate
reimbursement  expenses  may be  significant.  The LIFT group has also agreed to
indemnify  the  servicer as  described  under "Risk  Factors -- Because the LIFT
group's contract limits its remedies against the servicer for poor  performance,
the LIFT  group may at some point  bear  costs  that will  reduce its  available
revenues." The  subsidiaries  of LIFT have guaranteed the obligations of LIFT to
the servicer.

         The above  fees and  expense  reimbursements  are  payable  monthly  in
arrears  on the  payment  dates for the  Notes.  The  payment  of those fees and
expenses has a payment  priority that is higher than that of all payments on the
Notes.

         The  servicer is also  entitled  to  additional  fees (the  "Additional
Servicing  Fees")  consisting  of an  additional  sales  fee for each sale of an
aircraft,  an  additional  disposition  fee for each sale of an aircraft  and an
additional  rent-related  fee  based on basic  rent  actually  paid.  Additional
Servicing Fees are payable only after all amounts on the Notes have been paid in
full.

         In  addition,  the  servicer  will be  entitled  to fees  for  aircraft
management  services under the servicing  agreement in connection with the offer
and sale by the LIFT group of refinancing  and additional  notes and any resales
of notes by any  person  who has any right to cause the LIFT  group to assist in
the resale.

         Term and termination.  The term of the Servicing  Agreement  expires on
the  later of (i) the date on which  all  amounts  due on the  Notes  and  other
similar  obligations  and  all  amounts  due to the  holders  of the  beneficial
interest  in LIFT are paid in full  and  (ii) the date on which  the LIFT  group
ceases to hold any  aircraft.  Each  party also has the right to  terminate  the
Servicing Agreement under specified circumstances.

         The servicer has the right to terminate  the  Servicing  Agreement  if,
among other things, the LIFT group defaults in its payment and other obligations
under the Servicing Agreement and related documents, any material representation
or warranty made by LIFT or any of its  subsidiaries is false or misleading in a
manner material to the servicer,  LIFT or any of its subsidiaries become subject
to  bankruptcy  or other  insolvency  proceedings,  neither  LIFT nor any of its
subsidiaries holds any aircraft or the Indenture or any guaranty in favor of the
servicer ceases to be in effect.

         The servicer may resign under the Servicing  Agreement  with respect to
all  aircraft,  or at its  election,  any  affected  aircraft  if it  reasonably
determines that directions given, or services required, would, if carried out be
unlawful under applicable law, be in violation of any corporate policy regarding
business practices or legal,  ethical or social matters, be likely to lead to an
investigation by any  governmental  authority of the servicer or its affiliates,
expose the  servicer to  liabilities  for which,  in the  servicer's  good faith
opinion,  adequate bond or indemnity has not been provided or place the servicer
in a conflict of interest with respect to which,  in the  servicer's  good faith
opinion,  the servicer could not continue to perform its  obligations  under the
Servicing Agreement.  Whether or not it resigns, the servicer is not required to
take any action of the foregoing kind. The servicer may also resign in the event
it becomes subject to unindemnified taxes.

         The LIFT group has the right to terminate the Servicing  Agreement upon
payment in full of the Notes and other similar obligations.  The LIFT group also
has the right to terminate the Servicing  Agreement if, among other things,  the
servicer  ceases to be at least 75% owned  directly  or  indirectly  by  General
Electric  Capital   Corporation  or  its  ultimate   parent,   General  Electric
Corporation, the servicer breaches its obligations under the Servicing Agreement

                                       58
<PAGE>

in a manner that is material to the LIFT group as a whole, the servicer, General
Electric  Capital  Corporation or General  Electric  Company  becomes subject to
bankruptcy  or  insolvency  proceedings,  there are  insufficient  funds for the
payment  on any  Class A Note  for a period  of 60 days or at least 10  aircraft
remain  off-lease  but  available  for re-lease for a period of at least 90 days
following specified events set forth in the Indenture.

         The LIFT group may remove the servicer for any affected aircraft if the
servicer has reasonably  determined that directions given, or services required,
would, if carried out, place the servicer in a conflict of interest with respect
to which, in the servicer's good faith opinion,  the servicer could not continue
to perform its obligations under the Servicing Agreement.

         The servicer may not resign or be removed under the Servicing Agreement
and the Servicing Agreement may not be terminated, except as described above and
unless a replacement servicer has been appointed and the LIFT group has obtained
a  confirmation  from the  rating  agencies  rating the Notes that they will not
lower, qualify or withdraw any rating as a result. If a replacement servicer has
not been appointed within 90 days after notice of any  termination,  resignation
or removal,  the  servicer  may  petition  any court  jurisdiction  to appoint a
replacement  servicer.  The  servicer may  terminate  the  Servicing  Agreement,
whether or not a  replacement  servicer  has been  appointed,  if the LIFT group
fails, after the applicable cure periods, to pay amounts due to the servicer.

Corporate Management

         Corporate  management  services  for the LIFT group will be provided by
the  administrative  agent,  Phoenix  American  Financial  Services,  Inc.,  the
financial  advisor and capital  markets  advisor,  Credit  Suisse  First  Boston
Corporation, and the owner trustee, Wilmington Trust Company.

Administrative Agent

         Phoenix  American  Financial  Services,  Inc.  will act as the  initial
administrative  agent of the LIFT group. The administrative  agent has agreed to
provide administrative, accounting and other services that include:

         (1)  monitoring  the  performance  of the  servicer and  reporting  its
              conclusions to the controlling trustees of LIFT;

         (2)  acting as a liaison  with  various  rating  agencies to assess the
              impact of  management  decisions  on the  ratings of the Notes and
              coordinating responses to rating agency questions;

         (3)  maintaining  accounting  ledgers and providing draft accounts on a
              quarterly and annual basis;

         (4)  preparing annual budgets for the LIFT group's approval;

         (5)  authorizing  the payment of expenses and determining the amount of
              expense accruals;

         (6)  coordinating  any  amendments to the agreements of the LIFT group,
              with the approval of the LIFT group;

                                       59
<PAGE>


         (7)  supervising  outside counsel and other  professional  advisers and
              coordinating legal and other  professional  advice other than with
              respect to any service or matter that is the responsibility of the
              servicer or any additional servicer;

         (8)  preparing and coordinating press releases and reports to investors
              and to the SEC, and managing investor relations;

         (9)  preparing  or  arranging  for the  preparation  of and  filing all
              required tax returns; and

         (10) overseeing  the general  operation of any  liquidity  facility and
              advising the LIFT group as to the  appropriate  reserve levels for
              the Notes.

         In  addition  to  its  services  on  behalf  of  the  LIFT  group,  the
administrative  agent has  agreed to act as the  agent for the  trustee  and the
security  trustee in managing the accounts in which the funds and investments of
the LIFT  group will be held in the name of the  security  trustee  and  related
matters. The LIFT group is not entitled to direct the administrative agent as to
these  matters.  Phoenix  American  Financial  Services,  Inc.'s  duties for the
trustee and the security trustee include:

         (1)  establishing  and maintaining the accounts held in the name of the
              security trustee and any other accounts;

         (2)  directing  withdrawals and transfers from those accounts under the
              Indenture;

         (3)  calculating   certain  monthly   payments  and  making  all  other
              calculations required under that Indenture;

         (4)  providing  reports  and  other  information   required  under  the
              Indenture;

         (5)  providing the trustee with  information  required by it to provide
              its reports to the holders of the Notes; and

         (6)  subject to specified  limitations and at the written  direction of
              the controlling trustees, directing the investment of the funds in
              those accounts in investments permitted by the Indenture.

         The administrative  agent is entitled to a fee of $624,000 per year for
the first five years of the term and $660,000 per year for the  remainder of the
term,  plus an additional  amount for any  additional  aircraft  acquired in the
future,  payable monthly in arrears in equal  installments.  The  administrative
agent is  entitled  to be  indemnified  by the LIFT  group  against  any loss or
liability incurred by the  administrative  agent in connection with its services
to the LIFT  group or as the agent for the  trustee  and the  security  trustee,
other than through its own deceit, fraud, gross negligence or willful misconduct
or that of its officers, directors, agents and employees.

                                       60
<PAGE>


Capital Markets Advisor and Financial Advisor

         Credit Suisse First Boston  Corporation will act as the initial capital
markets  advisor.  The capital  markets advisor is responsible for providing the
LIFT group with  investment  banking  advice in connection  with the issuance of
additional  notes,  financial  advice to  assist  the LIFT  group in  evaluating
interest rate risk and other  analytical  advice.  The LIFT group may remove the
capital markets  advisor at any time on 90 days' written  notice.  Credit Suisse
First  Boston  Corporation  will  act  as the  initial  financial  advisor.  The
financial  advisor is  responsible  for  assisting  the LIFT group in developing
models for the purposes of analyzing  the  financial  impact of aircraft  lease,
sale and capital investment decisions.  The agreement with the financial advisor
may be terminated by either the LIFT group or the financial  advisor on 30 days'
written notice.

Owner Trustee

         Wilmington  Trust will act as the initial  owner  trustee of LIFT.  The
owner  trustee will maintain the books and records,  including  minute books and
records  and  trust  certificate  records,  of  LIFT.  It  will  make  available
telephone,  facsimile and post office box  facilities  and will maintain  LIFT's
principal place of business in Delaware.


Item 11.      Executive Compensation

         All trustees will be compensated for travel and other expenses incurred
by them in the performance of their duties. The independent controlling trustees
and the equity trustee  receive a salary of $60,000 per annum for their services
in such capacity, as well as additional compensation in the event the LIFT group
acquires  additional  aircraft.  The  aggregate  annual  compensation  for  each
independent  controlling trustee may not exceed $100,000 per annum. In addition,
Mr.  Francht  and Mr.  Treitel  also  receive  $10,000  and  $5,000  per  annum,
respectively, for their services as either managers or directors of subsidiaries
of LIFT.


Item 12.      Security Ownership of Certain Beneficial Owners and Management

a) Security ownership of certain beneficial owners.

<TABLE>
<CAPTION>
                                      Name and Address of
Title of Class                         Beneficial Owner                       Percent of Class
--------------                         ----------------                       ----------------

<S>                                <C>                                             <C>
Beneficial Interest Certificate    Automatic LIFT I, LP                             49.9%
                                   101 Convention Center Dr., Suite 850
                                   Las Vegas, NV 89109

Beneficial Interest Certificate    Automatic LIFT II, LP                           12.525%
                                   101 Convention Center Dr., Suite 850
                                   Las Vegas, NV 89109

Beneficial Interest Certificate    Automatic LIFT III, LP                          12.525%
                                   101 Convention Center Dr., Suite 850
                                   Las Vegas, NV 89109

                                       61
<PAGE>



Beneficial Interest Certificate    Automatic LIFT IV, LP                           12.525%
                                   101 Convention Center Dr., Suite 850
                                   Las Vegas, NV 89109


Beneficial Interest Certificate    Automatic LIFT V, LP                            12.525%
                                   101 Convention Center Dr., Suite 850
                                   Las Vegas, NV 89109
</TABLE>



Item 13.      Certain Relationships and Related Transactions

         None



                                       62
<PAGE>

                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules and Reports on Form 8-K

a.       Financial Statements.

         The following are included in Part II of this report:
                                                                            Page
                                                                            ----

            Report of Independent Certified Public Accountants...............40
            Consolidated Balance Sheet.......................................41
            Consolidated Statement of Operations.............................42
            Consolidated Statement of Changes in Beneficial Interest
                Holders' Deficit and Comprehensive Loss......................43
            Consolidated Statement of Cash Flows.............................44
            Notes to Consolidated Financial Statements.......................45


b.       Current Reports on Form 8-K.

         During the  quarterly  period ended  December 31, 2001,  the LIFT group
         filed  reports on Form 8-K dated  November  15, 2001 and  December  17,
         2001.  Such reports on Form 8-K included  copies of the monthly reports
         to holders of the Notes.

c.       Exhibits required to be filed by Item 601 of Regulation S-K.

Exhibit
Number
------

3.1      Amended and Restated Trust Agreement of Lease  Investment  Flight Trust
         dated as of June 26, 2001.*

4.1      Indenture  dated as of June 26, 2001 between  Lease  Investment  Flight
         Trust, Phoenix American Financial Services,  Inc., LIFT Trust-Sub 1 and
         Bankers Trust Company.*

4.2      Form of Global Note (included in Exhibit 4.1).*

4.3      Registration  Rights  Agreement dated as of June 26, 2001 between Lease
         Investment Flight Trust and Credit Suisse First Boston Corporation.*

10.1     Asset  Purchase  Agreement  dated as of June  26,  2001  among  General
         Electric Capital Corporation, the Sellers listed on Annex A thereto and
         LIFT Trust-Sub 1.*

10.2     Security  Trust  Agreement  dated as of June  26,  2001  between  Lease
         Investment  Flight Trust,  Bankers Trust Company,  LIFT Trust-Sub 1 and
         the other parties referred to therein.*

10.3     Servicing Agreement dated as of June 26, 2001 among GE Capital Aviation
         Services, Limited and Lease Investment Flight Trust.*

10.4     Administrative  Agency  Agreement  dated  as of June 26,  2001  between
         Bankers Trust Company,  Lease Investment Flight Trust, Phoenix American
         Financial  Services,   Inc.  and  the  issuer  subsidiaries  identified
         therein.*

10.5     Reference  Agency  Agreement  dated as of June 26, 2001 between Bankers
         Trust  Company,  Lease  Investment  Flight  Trust and Phoenix  American
         Financial Services, Inc.*

10.6     Master Swap  Agreement  and Schedule  dated as of June 26, 2001 between
         Lease   Investment   Flight  Trust  and  Credit   Suisse  First  Boston
         International.*

10.7     Beneficial  Interest  Purchase  Agreement  dated  as of June  26,  2001
         between Lease Investment Flight Trust and Automatic LIFT I, LP.*

                                       63
<PAGE>


21.      Subsidiaries of Lease Investment Flight Trust.*

23.1     Consent of Aircraft Information Services, Inc.**

23.2     Consent of BK Associates, Inc.**

23.3     Consent of Morton, Beyer & Agnew.**

99.1     Appraisal of Aircraft Information Services, Inc.*

99.2     Appraisal of BK Associates, Inc.*

99.3     Appraisal of Morton, Beyer & Agnew.*

*        Incorporated  by  reference to the  Registration  Statement on Form S-4
         (File No. 333-69864)  previously filed with the Securities and Exchange
         Commission on September 21, 2001.

**       Filed herewith.


d.       Financial Statement Schedules.

         All financial statement schedules are omitted because they are not
         applicable or not required or because the required information is
         included in the financial statements or notes thereto.

                                       64
<PAGE>


                                   SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                             LEASE INVESTMENT FLIGHT TRUST
                                             by Wilmington Trust Company,
                                             not in its individual capacity but
                                             solely as the Owner Trustee


      March 27, 2002                         By:     /S/DAVID VANASKEY, JR.
      --------------                                 ----------------------
           Date                              Name:   David Vanaskey, Jr.
                                             Title:  Vice President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.



SIGNATURE                          TITLE                            DATE
---------                          -----                            ----


/S/JOSEPH E. FRANCHT, JR.    Independent Controlling Trustee     March 27, 2002
-------------------------                                        --------------
Joseph E. Francht, Jr.


/S/JONATHAN M. SCHOFIELD     Independent Controlling Trustee     March 27, 2002
------------------------                                         --------------
Jonathan M. Schofield


/S/DAVID H. TREITEL          Equity Trustee and Controlling      March 27, 2002
-------------------          Trustee                             --------------
David H. Treitel


/S/DAVID VANASKEY, JR.       Owner Trustee                       March 27, 2002
----------------------                                           --------------
Wilmington Trust Company,
not in its individual
capacity but solely as
the Owner Trustee


                                       65