SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 number 33-99970-01
----------
Airplanes Limited Airplanes U.S. Trust
Exact Name of Registrants as specified in
memorandum of association or trust agreement
Jersey, Channel Islands Delaware
(State or other jurisdiction of incorporation or organization)
7359 13-3521640
SIC Code (I.R.S. Employer Identification No.)
Airplanes Limited Airplanes U.S. Trust
22 Grenville Street 1100 North Market Street,
St. Helier Rodney Square North
Jersey, JE4 8PX Wilmington, Delaware
Channel Islands 19890-0001
(011 44 1534 609 000) (302-651-1000)
(Addresses and telephone numbers, including area codes,
of Registrants' principal executive offices)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Issuer Class September 30, 2000
Airplanes Limited Common Stock, $1.00 par value 30
<PAGE>
Airplanes Limited and Airplanes U.S. Trust
Form 10-Q for the Three Month Period Ended September 30, 2000
Index
Part I. Financial Information Page No.
Item 1. Financial Statements (Unaudited) 3
- Unaudited Condensed Balance Sheets -
September 30, 2000 and March 31, 2000
- Unaudited Condensed Statements of Operations -
Three Months Ended September 30,
2000 and September 30, 1999
- Unaudited Condensed Statements of Operations -
Six Months Ended September 30,
2000 and September 30, 1999
- Unaudited Condensed Statements of Changes
in Shareholders Deficit / Net
Liabilities - Six months Ended September 30, 2000
and September 30, 1999
- Unaudited Condensed Statements of Cash Flows -
Six Months Ended September 30,
2000 and September 30, 1999
- Notes to the Unaudited Condensed
Financial Statements
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
- Introduction
- Results of Operations - Three Months Ended
September 30, 2000 Compared with Three Months Ended
September 30, 1999
- Results of Operations - Six Months Ended September
30, 2000 Compared with Six Months Ended
September 30, 1999
- Comparison of Actual Cashflows Versus The 1998
Adjusted Base Case for the Three Month Period
Ended October 16, 2000
Item 3. Quantitative and Qualitative Disclosures about Market Risks 36
Part II. Other Information
Item 1. Legal Proceedings 41
Item 6. Exhibits and Reports on Form 8 - K 42
Signatures
Index to Exhibits
Appendix 1 Airplanes Group Portfolio
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
AIRPLANES GROUP
UNAUDITED CONDENSED BALANCE SHEETS
March 31, September 30,
---------------------------------------- ---------------------------------------
2000 2000
---------------------------------------- ---------------------------------------
Airplanes Airplanes Airplanes Airplanes
Limited Trust Combined Limited Trust Combined
------------ ------------ ------------ ----------- ----------- -----------
($millions) ($millions)
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash 197 6 203 187 6 193
Accounts receivable
Trade receivables 24 8 32 25 10 35
Allowance for doubtful debts (10) (5) (15) (15) (7) (22)
Amounts due from Airplanes Limited - 28 28 - 34 34
Net investment in capital and sales
type leases 15 - 15 12 - 12
Aircraft, net 2,697 235 2,932 2,618 227 2,845
Other assets 3 8 11 7 - 7
------------ ------------ ------------ ----------- ----------- -----------
Total assets 2,926 280 3,206 2,834 270 3,104
============ ============ ============ =========== =========== ===========
LIABILITIES
Accrued expenses and other liabilities 807 74 881 942 88 1,030
Amounts due from Airplanes Trust 28 - 28 34 - 34
Indebtedness 3,313 323 3,636 3,244 317 3,561
Provision for maintenance 258 16 274 256 14 270
Deferred income taxes 66 48 114 64 48 112
------------ ------------ ------------ ----------- ----------- -----------
Total liabilities 4,472 461 4,933 4,540 467 5,007
------------ ------------ ------------ ----------- ----------- -----------
------------ ------------ ------------ ----------- ----------- -----------
Net liabilities (1,546) (181) (1,727) (1,706) (197) (1,903)
------------ ------------ ------------ ----------- ----------- -----------
------------ ------------ ------------ ----------- ----------- -----------
2,926 280 3,206 2,834 270 3,104
============ ============ ============ =========== =========== ===========
</TABLE>
3
<PAGE>
<TABLE>
AIRPLANES GROUP
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended September 30,
---------------------------------------------------------------------------
1999 2000
------------------------------------ -------------------------------------
Airplanes Airplanes Airplanes Airplanes
Limited Trust Combined Limited Trust Combined
----------- ---------- ----------- ----------- ----------- -----------
($millions) ($millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Aircraft leasing 121 10 131 111 11 122
Aircraft Sales - - - - - -
Other Income - - - - - -
Expenses
Cost of Aircraft Sold - - - - - -
Depreciation and amortisation (40) (4) (44) (38) (5) (43)
Net interest expense (105) (11) (116) (120) (12) (132)
Provision for maintenance (19) (1) (20) (14) (1) (15)
Bad and doubtful debts 1 2 3 (1) (1) (2)
Provision for loss making leases, net 3 1 4 (4) - (4)
Other lease costs (5) (1) (6) (6) (1) (7)
Selling, general and administrative
expenses (9) - (9) (8) - (8)
----------- ---------- ----------- ----------- ----------- -----------
Operating (loss) before
provision for income taxes (53) (4) (57) (80) (9) (89)
Income tax benefit/(charge) (1) - (1) - 1 1
----------- ---------- ----------- ----------- ----------- -----------
Net (loss) (54) (4) (58) (80) (8) (88)
=========== ========== =========== =========== =========== ===========
The accompanying notes are an integral part of the unaudited condensed financial statements
</TABLE>
4
<PAGE>
<TABLE>
AIRPLANES GROUP
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
Six Months Ended September 30,
---------------------------------------------------------------------------
1999 2000
------------------------------------ -------------------------------------
Airplanes Airplanes Airplanes Airplanes
Limited Trust Combined Limited Trust Combined
----------- ---------- ----------- ----------- ----------- -----------
($millions) ($millions)
Revenues
<S> <C> <C> <C> <C> <C> <C>
Aircraft leasing 239 21 260 217 21 238
Aircraft sales 2 - 2 1 - 1
Other income 1 - 1 - - -
Expenses
Cost of Aircraft sold (1) - (1) (1) - (1)
Depreciation and amortisation (79) (8) (87) (77) (9) (86)
Net interest expense (205) (21) (226) (235) (24) (259)
Provision for maintenance (33) (2) (35) (25) (1) (26)
Bad and doubtful debts (7) 1 (6) (5) (2) (7)
Provision for loss making leases, net 6 1 7 (7) - (7)
Other lease costs (8) (1) (9) (14) (1) (15)
Selling, general and administrative
expenses (17) (1) (18) (16) (1) (17)
----------- ---------- ----------- ----------- ----------- -----------
Operating (loss) before
provision for income taxes (102) (10) (112) (162) (17) (179)
Income tax benefit/(charge) (3) - (3) 2 1 3
----------- ---------- ----------- ----------- ----------- -----------
Net (loss) (105) (10) (115) (160) (16) (176)
=========== ========== =========== =========== =========== ===========
The accompanying notes are an integral part of the unaudited condensed financial statements
</TABLE>
5
<PAGE>
<TABLE>
AIRPLANES GROUP
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT/NET LIABILITIES
Three Months Ended September 30, 1999 and September 30, 2000
Airplanes Limited Airplanes Trust Combined
---------------------------------------- --------------------------------
Share Net Shareholders' Net Shareholders
Capital Liabilities Deficit Liabilities Deficit/ Net
Liabilities
---------------------------------------- ---------------- -----------
($millions) ($millions) ($millions) ($millions) ($millions)
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999 - 1,311 1,311 163 1,474
Net loss for the period 105 105 10 115
---------- ---------- --------------- ---------------- -----------
Balance at September 30, 1999 - 1,416 1,416 173 1,589
========== ========== =============== ================ ===========
Balance at March 31, 2000 - 1,546 1,546 181 1,727
Net loss for the period 160 160 16 176
---------- ---------- --------------- ---------------- -----------
Balance at September 30, 2000 - 1,706 1,706 197 1,903
========== ========== =============== ================ ===========
The accompanying notes are an integral part of the unaudited condensed financial statements
</TABLE>
6
<PAGE>
<TABLE>
AIRPLANES GROUP
UNAUDITED CONDENSED STATEMENTS OF CASHFLOWS
Six Months Ended September 30,
----------------------------------------------------------------------------
1999 2000
------------------------------------- -------------------------------------
Airplanes Airplanes Airplanes Airplanes
Limited Trust Combined Limited Trust Combined
----------- ----------- ----------- ----------- ----------- -----------
($millions) ($millions)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net loss (105) (10) (115) (160) (16) (176)
Adjustment to reconcile (net loss)
to net cash provided by operating activities:
Depreciation and amortisation 79 8 87 77 9 86
Aircraft maintenance, net 6 1 7 (2) (2) (4)
Profit on disposal of aircraft (1) - (1) - - -
Deferred income taxes 3 - 3 (2) (1) (3)
Provision for loss making leases (6) (1) (7) 7 - 7
Provision for bad debts 7 (1) 6 5 2 7
Accrued and deferred interest expense 110 11 121 133 14 147
Changes in operating assets & liabilities:
Accounts receivable (10) 1 (9) 5 (2) 3
Intercompany account movements - - - 6 (6) -
Other accruals and liabilities (1) - (1) (10) 1 (9)
Other assets (2) - (2) (2) 8 6
----------- ----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities 80 9 89 57 7 64
=========== =========== =========== =========== =========== ===========
Cash flows from investing activities
Purchase/Sale of aircraft - - - - - -
Intercompany movements - Airplanes Group
Capital and sales type leases 4 - 4 3 - 3
Net cash provided by
----------- ----------- ----------- ----------- ----------- -----------
investing activities 4 - 4 3 - 3
=========== =========== =========== =========== =========== ===========
Cash flows from financing activities
Decrease in indebtedness (95) (9) (104) (70) (7) (77)
Net cash used in
----------- ----------- ----------- ----------- ----------- -----------
financing activites (95) (9) (104) (70) (7) (77)
=========== =========== =========== =========== =========== ===========
Net decrease in cash (11) - (11) (10) - (10)
Cash at beginning of period 218 6 224 197 6 203
----------- ----------- ----------- ----------- ----------- -----------
Cash at end of period 207 6 213 187 6 193
=========== =========== =========== =========== =========== ===========
Cash paid in respect of:
Interest 102 10 112 104 10 114
=========== =========== =========== =========== =========== ===========
</TABLE>
7
<PAGE>
Airplanes Group
Notes to the Unaudited Condensed Financial Statements
1. Securitization Transaction
On March 28, 1996, ("the Closing Date"), AerFi Group plc ("AerFi Group") and
its subsidiary undertakings ("AerFi") re-financed on a long term basis certain
indebtedness due to commercial banks and other senior secured debt. The
re-financing was effected through a major aircraft securitization transaction
("the Transaction").
Under the terms of the Transaction, the following special purpose vehicles
were formed: Airplanes Limited, a special purpose company formed under the laws
of Jersey, Channel Islands ("Airplanes Limited"), and Airplanes U.S. Trust, a
trust formed under the laws of Delaware ("Airplanes Trust" and together with
Airplanes Limited, "Airplanes Group"). Airplanes Group acquired directly or
indirectly from AerFi a portfolio of 229 commercial aircraft (collectively, the
"Aircraft") and related leases (the "Leases"). The Transaction was effected by
transferring existing subsidiaries of AerFi that owned the Aircraft to Airplanes
Limited and Airplanes Trust, respectively. References to Airplanes Group in
these notes to the unaudited condensed financial statements may relate to
Airplanes Limited and Airplanes Trust on a combined or individual basis as
applicable.
Simultaneously with such transfers, Airplanes Group issued notes of $4,048
million in aggregate principal amount in four classes: Class A, Class B, Class C
and Class D ("Notes") with approximately 90% of the principal amount of Notes in
each class being issued by Airplanes Limited and approximately 10% by Airplanes
Trust. Airplanes Group also issued Class E Notes of $604 million ranking after
the Notes and these were taken up by AerFi as part consideration for the
transfer of the Aircraft and certain related lease receivables. Of the $604
million Class E Notes issued, approximately $13 million were subsequently
canceled on July 30, 1996 under the terms of the Transaction.
On March 16, 1998, Airplanes Group successfully completed a refinancing of
$2,437 million of Class A and Class B Notes. On November 20, 1998, AerFi Group
and its subsidiary, AerFi, Inc. transferred their Class E Notes to General
Electrical Capital Corporation. Indebtedness at September 30, 2000 represents
the aggregate of the Class A - D Notes and Class E Notes in issue (net of
approximately $0.4 million of discounts on issue and net of $13 million of Class
E Notes subsequently canceled as referred to above). Airplanes Limited and
Airplanes Trust have each fully and unconditionally guaranteed each others'
obligations under the relevant notes.
8
<PAGE>
2. Basis of Preparation
The accompanying unaudited condensed financial statements of Airplanes
Limited, Airplanes Trust and the combined unaudited condensed balance sheets,
statements of operations, statement of changes in shareholders deficit/net
liabilities and statements of cash flows of Airplanes Group (together the
"financial statements") have been prepared on a going concern basis in
conformity with United States generally accepted accounting principles. The
financial statements are presented on a historical cost basis.
The accompanying financial statements for Airplanes Limited and Airplanes
Trust reflect all adjustments which in the opinion of management are necessary
to present a fair statement of the information presented as of September 30,
2000 and for the three month periods ending September 30, 2000 and September 30,
1999. Such adjustments are of a normal, recurring nature. The results of
operations for the three months ended September 30, 2000 are not necessarily
indicative of the results to be expected for the full year.
New Accounting Pronouncement
Statement of Financial Accounting Standard No. 138, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 138") was issued in September
1998. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
Airplanes Group is currently reviewing implementation of the requirements of
SFAS No. 138. Airplanes Group is required to implement SFAS No. 138 by April 1,
2001.
The accompanying financial statements of Airplanes Limited and Airplanes Trust
(pages 3 to 9) have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with
the requirements of the Report on Form 10-Q. Consequently, they do not include
all the disclosure normally required by generally accepted accounting
principles. For further information regarding Airplanes Group and its financial
condition, results of operations and cash flows, refer to the audited financial
statements and notes thereto included in Airplanes Group's annual Report on Form
10-K for the year ended March 31, 2000, previously filed with the Securities and
Exchange Commission.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
On March 28, 1996, Airplanes Pass Through Trust (the "Trust") issued $4,048
million of Pass Through Certificates (the "1996 Certificates") in four classes -
Class A, Class B, Class C and Class D. The Class A 1996 Certificates were
further subdivided into five separate subclasses (A-1 through A-5). Each class
and subclass of the Certificates represents an interest in two corresponding
classes or subclasses of notes (collectively, the "1996 Notes") issued by
Airplanes Limited ("Airplanes Limited") and Airplanes U.S. Trust ("Airplanes
Trust"). Airplanes Limited, together with Airplanes Trust and their respective
subsidiaries comprise Airplanes Group ("Airplanes Group"). Airplanes Limited and
Airplanes Trust have each fully and unconditionally guaranteed (the "1996
Guarantees") the other's obligations under each class or subclass of 1996 Notes.
Also on March 28, 1996, Airplanes Group received the net proceeds from an
underwritten offering of the 1996 Certificates (the "Underwritten Offering") in
exchange for the 1996 Notes. Airplanes Group used such net proceeds, together
with approximately $604 million in aggregate principal amount of a fifth class
of Airplanes Group notes (the "Class E Notes") to acquire certain subsidiaries
of AerFi Group plc ("AerFi Group" and, together with its subsidiaries and
affiliates, "AerFi"). Of the $604 million of Class E Notes issued, approximately
$13 million were canceled in July 1996 based on the purchase price adjustment
provisions in the agreements pursuant to which these subsidiaries of AerFi Group
were sold to Airplanes Group. The acquired subsidiaries owned 229 aircraft (the
"Aircraft") and related leases to 82 aircraft operators in 40 countries as at
March 31, 1996. As at September 30, 2000, 30 of these Aircraft had been sold and
one Aircraft had suffered a constructive total loss. At September 30, 2000, 193
of the remaining 198 Aircraft were on lease to 69 operators in 38 countries.
On March 16, 1998, the Trust issued additional Class A Certificates in three
separate subclasses (A-6 through A-8) and new Class B Certificates (the "1998
Refinancing Certificates" and together with the 1996 Certificates, the
"Certificates"). Also on this date, the Trust completed an underwritten offering
of the 1998 Refinancing Certificates (the "Refinancing") in exchange for an
interest in two corresponding Subclass A-6, Subclass A-7, Subclass A-8 and Class
B notes issued by Airplanes Limited and Airplanes Trust (the "1998 Refinancing
Notes and together with the 1996 Notes, the "Notes"). Airplanes Limited and
Airplanes Trust have each guaranteed the other's obligations under their
respective 1998 Refinancing Notes (the "Refinancing Guarantees" and together
with the 1996 Guarantees, the "Guarantees"). The proceeds of this offering were
used to refinance the Trust's Subclass A-1, Subclass A-2, Subclass A-3 and
existing Class B 1996 Certificates.
On November 20, 1998, AerFi Group and its subsidiary, AerFi, Inc. transferred
their Class E Notes to General Electric Capital Corporation.
The discussion and analysis which follows is based primarily on the combined
operating results of Airplanes Limited and Airplanes Trust and not on their
results reported as individual entities. It should be noted, however, that the
Notes and the Guarantees comprise obligations of two different legal entities
owning different assets. The Directors of Airplanes Limited and the
10
<PAGE>
Controlling Trustees of Airplanes Trust believe that a combined discussion is
the most appropriate basis of presentation because, inter alia, Airplanes
Limited and Airplanes Trust are not intended to be regarded as separate
businesses but rather on the basis of one combined aircraft fleet. Furthermore,
each of Airplanes Limited and Airplanes Trust has fully and unconditionally
guaranteed the performance of the other under their respective Notes. The
Guarantees have been structured to ensure that no payments are made on a junior
class of Notes of Airplanes Limited or Airplanes Trust, as the case may be,
before any amounts due and payable on a more senior class of Notes of Airplanes
Limited or Airplanes Trust, respectively, are paid pursuant to the Guarantees.
General
Substantially all of Airplanes Group's business is expected to consist of
aircraft operating lease activities. However, Airplanes Group may also engage in
aircraft sales subject to certain limitations and guidelines. Airplanes Group's
revenues and operating results are determined by a number of significant factors
including (i) trading conditions in the civil aviation industry, and in
particular, the market for aircraft on operating leases, (ii) the mix, relative
age and popularity of the various aircraft types in the portfolio of Aircraft
owned by Airplanes Group and (iii) Airplanes Group's financial resources and
liquidity position relative to its competitors who may possess substantially
greater financial resources.
Recent Developments
The aircraft leasing industry is currently being adversely affected by a
significant increase in the numbers of aircraft available for lease or sale,
with a corresponding negative impact on aircraft values and lease rates of
certain aircraft types, particularly older widebody aircraft. At September 30,
2000, Airplanes Group had 32 Aircraft to remarket before September 30, 2001.
These include (3 x B737 400s / 500s, 8 x B727/B737-200As, 7 x DHC 8s, 3 x MD83s
and 1 x B757-200). As a result of the current over supply of aircraft in the
market place, Airplanes Group may experience difficulties in placing certain of
these Aircraft at satisfactory lease rates and without incurring substantial
downtime. The recent sharp increase in jet fuel prices has significantly
increased the operating costs for airlines. In addition, the weakness of the
Euro against the U.S. dollar, the currency in which rental payments are made,
has resulted in significant increases in operating costs for many airlines based
in the Euro zone. This may adversely impact the ability of such airlines to
perform their lease obligations to Airplanes Group in the future.
At September 30, 2000, an Irish lessee of one A300-B4-200 Aircraft manufactured
in 1981, representing 0.31% of the Portfolio by Appraised Value was $3.2 million
in arrears inclusive of previously rescheduled amounts. Since September 30,
2000, a liquidator has been appointed to the airline to wind up its business.
Airplanes Group does not have any immediate placement opportunities for lease of
this Aircraft. The opportunities for lease or sale of this aircraft type are
currently extremely limited. In addition, the technical costs required to ensure
that the Aircraft is in a suitable condition for releasing may be significant.
Accordingly, the Servicer, on behalf of Airplanes Group is examining all
possibilities in respect of this Aircraft, including a worst case scenario which
would involve realizing the scrap value of the Aircraft.
11
<PAGE>
At September 30, 2000, four lessees operated eleven Aircraft representing 8.34%
of the Aircraft by Appraised Value in Turkey. Four of these carriers operate
charter flights which are heavily dependent on foreign tourists travelling to
Turkey. Any fall-off in tourist traffic may adversely affect the ability of
these carriers to operate and meet their obligations under the leases. In
addition, the fall in value of the Deutsche Mark, the principal operating
currency in which Turkish airlines receive their revenues, against the U.S.
dollar, may affect the ability of these airlines to pay U.S. dollar denominated
costs, including lease rentals. During July 2000, the Servicer, on behalf of
Airplanes Group, repossessed two B737-400 Aircraft, representing 1.43% of the
Aircraft by Appraised Value, from one Turkish lessee. At September 30, 2000,
this lessee owed Airplanes Group $2.9 million. LOI's for lease have been signed
for both Aircraft with another airline. It is currently estimated that cash
expenditure of approximately $9 million will be incurred in the third quarter to
put these Aircraft in re-leasable condition. No amounts in relation to this
expenditure have been provided in the unaudited financial statements for the
period to September 30, 2000.
During 1999, Brazil experienced significant downturns in its economy and
financial markets, including large decreases in financial asset prices and
dramatic decreases in the value of its currency. While there has been some
stabilisation in the Brazilian economy in recent months any future general
deterioration in the Brazilian economy will mean that lessees may be unable to
generate sufficient revenues in Brazilian currency to pay the U.S.
dollar-denominated rental payments under the leases. Future developments in the
political systems or economies of Brazil and other Latin American countries may
have a material adverse effect on lessee operations in those countries. At
September 30, 2000, Airplanes Group leased 63 Aircraft representing 29.41% of
its portfolio by Appraised Value to operators in Latin America of which 14
Aircraft representing 10.97% of the portfolio by Appraised Value were leased to
operators in Brazil. Accordingly, any future deterioration in the Latin American
economies, especially Brazil, could lead to a material decrease in Airplanes
Group's leasing revenues and an increase in default related costs.
Colombia has recently suffered as a result of the deterioration in the value of
the Colombian Peso and the resulting negative impact on the Colombian economy.
Airplanes Group leases to three Colombian lessees which operate ten Aircraft,
representing 6.53% of the portfolio by Appraised Value. Continued weakness in
the value of the Colombian Peso, as well as general deterioration in the
Colombian economy, will mean that these lessees may be unable to generate
sufficient revenues in the Colombian currency to pay the U.S. dollar denominated
rental payments under the leases.
Airplanes Group leases six Aircraft to one Colombian lessee, representing 5.13%
of the Portfolio by Appraised Value. At September 30, 2000, the lessee was $12.6
million in arrears. The Servicer has agreed until January 31, 2001, not to
exercise its remedies in respect of events of default currently existing under
the leases in order to permit the Colombian lessee to have a stable business
environment in which to develop, negotiate and commence implementing a long term
business plan. During this period Airplanes Group will receive approximately 77%
of amounts due under the leases in cash with the remainder provided by way of
secured and unsecured notes issued by the lessee which have a maturity date of
January 31, 2001. The Colombian lessee's other aircraft lessors and major
creditors have agreed similar forbearance
12
<PAGE>
arrangements. There can be no guarantee that the lessee will be successful in
preparing a realistic long-term business plan by January 2001. In that event
Airplanes Group will need to consider all of its alternatives including,
potentially, seeking the return of the Aircraft.
In 1998 and 1999 the economies of Indonesia, Thailand, South Korea, Malaysia and
the Philippines experienced particularly acute difficulties resulting in many
business failures, significant depreciation of local currencies against the US
dollar (the currency in which lease payments are payable), sovereign and
corporate credit ratings downgrades and defaults, and in certain cases,
internationally organized financial stability measures. Several airlines in the
region rescheduled their aircraft purchase obligations, reduced headcount and
eliminated certain routes. Since 1990, the market in this region for aircraft on
operating lease has demonstrated significant growth rates. However, should the
recessionary conditions that occurred in 1998 and 1999 and still prevail in
certain parts of the region last for a significant period of time these will
continue to have an adverse impact on operators in the region as well as global
aircraft demand. At September 30, 2000, Airplanes Group leased 17 Aircraft,
representing 8.55% of its portfolio by Appraised Value, to operators in Asia and
the Far East.
Airplanes Group currently leases three MD11 Aircraft to a Latin American lessee.
The leases expire between December 2001 and September 2002. The market for these
Aircraft in their current passenger configuration is currently, and is expected
to remain, very weak. Airplanes Group is examining all possibilities in respect
of the remarketing of these Aircraft, including the possibility of selling the
Aircraft or of converting them to freighter Aircraft. Conversion of the Aircraft
to freighter would involve substantial cash expenditure by the Airplanes Group.
The U.S. Federal Aviation Administration (the "FAA") recently issued an
Airworthiness Directive ("AD") concerning insulation for the purpose of
increasing fire safety on MD-80 and MD-11 aircraft. At September 30, 2000, 29
Aircraft representing 21.29% of the portfolio by Appraised Value were MD11s and
MD80s. Airplanes Group will incur significant costs in ensuring these Aircraft
comply with these standards. It is estimated that the necessary modification of
the 29 Aircraft will cost approximately $18 million. The modification of 17 of
the 29 Aircraft is expected to be completed in the period to December 2001 at an
estimated cost of approximately $11 million. The remaining 12 Aircraft are
expected to be modified in the period to 2005.
Airplanes Group generated $45 million in cash from operations in the three
months to September 30, 2000 which is an improvement from the three months to
June 30, 2000 when Airplanes Group generated $19 million in cash from
operations.
13
<PAGE>
Results of Operations - Three Months Ended September 30, 2000 Compared with
Three Months Ended September 30, 1999.
Airplanes Group's results for the three months ended September 30, 2000
reflected a continuation of difficult trading conditions for certain of its
lessees, along with an unfavourable market for some of its Aircraft, in
particular widebody Aircraft, and increased levels of Aircraft downtime.
Overall, Airplanes Group generated $45 million in cash from operations in the
three months to September 30, 2000 compared to $54 million in the same period of
the previous year. The decrease in cash generated from operations in the three
month period to September 30, 2000 is primarily attributable to a reduction in
lease revenues due to a greater number of off lease Aircraft during the three
months ended September 30, 2000 and previous Aircraft sales. In addition, in the
three months to September 2000, there was a net increase in the level of
receivables, as compared to the three months to September 1999 when there was a
reduction in receivables. This was partially offset by a cash receipt from
General Electric Capital Corporation under the terms of a Tax Sharing Agreement
(see Part II. Other Information - Item 1.). There was a net loss after taxation
for the three months to September 30, 2000 of $88 million (Airplanes Limited:
$80 million; Airplanes Trust: $8 million) compared to a net loss after taxation
for the three months to September 30, 1999 of $58 million (Airplanes Limited:
$54 million; Airplanes Trust: $4 million). The increase in the net loss for the
period was primarily attributable to additional interest being charged on
accrued but unpaid Class E Note interest, a reduction in revenue due to Aircraft
downtime and provisions for loss making leases and bad debts.
Leasing Revenues
Leasing revenues (which include maintenance reserve receipts which Airplanes
Group receives from certain of its lessees) for the three months ended September
30, 2000 were $122 million (Airplanes Limited: $111 million; Airplanes Trust:
$11 million) compared with $131 million (Airplanes Limited: $121 million;
Airplanes Trust: $10 million) for the three months ended September 30, 1999. The
decrease in 2000 was primarily attributable to the reduction in the number of
Aircraft on lease in the period to September 30, 2000, as a consequence of a
greater number of Aircraft off lease during the three months ended September 30,
2000 and to a lesser extent, previous Aircraft sales. At September 30, 2000,
Airplanes Group had 193 of its 198 Aircraft on lease (Airplanes Limited: 176
Aircraft; Airplanes Trust: 17 Aircraft) compared to 196 of its 201 Aircraft on
lease (Airplanes Limited: 178 Aircraft; Airplanes Trust: 18 Aircraft) at
September 30, 1999.
Aircraft Sales
There were no sales in the three months ended September 30, 2000 or September
30, 1999.
Depreciation and Amortization
The charge for depreciation and amortization in the three months ended September
30, 2000 amounted to $43 million (Airplanes Limited: $38 million; Airplanes
Trust: $5 million) which is comparable with $44 million (Airplanes Limited: $40
million; Airplanes Trust: $4 million) for the comparative period in 1999.
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<PAGE>
Net Interest Expense
Net interest expense was $132 million (Airplanes Limited: $120 million;
Airplanes Trust: $12 million) in the three month period ended September 30, 2000
compared to $116 million (Airplanes Limited: $105 million; Airplanes Trust: $11
million) in the three month period ended September 30, 1999. The increase in net
interest expense was primarily due to a combination of offsetting factors:
additional interest charged on accrued but unpaid Class E Note interest of $17
million and lower average debt in the three months to September 30, 2000 being
offset by a higher interest rate.
The weighted average interest rate on the Class A - D Notes during the three
months to September 30, 2000 was 7.67% and the average debt in respect of the
Class A - D Notes outstanding during the period was $3,006 million. The Class E
Notes accrue interest at a rate of 20% per annum (as adjusted by reference to
the U.S. consumer price index, effective March 28, 1996). The weighted average
interest rate on the Class A - D Notes during the three months to September 30,
1999 was 6.57% and the average debt in respect of the Class A - D Notes
outstanding during the period was $3,187 million.
The difference for the three months ended September 30, 2000 in Airplanes
Group's net interest expense of $132 million (Airplanes Limited: $120 million;
Airplanes Trust: $12 million) and cash paid in respect of interest of $61
million (Airplanes Limited: $56 million; Airplanes Trust: $5 million) is
substantially accounted for by the fact that interest on the Class E Notes is
accrued but unpaid.
Net interest expense is stated after deducting interest income earned during the
relevant period. In the three months ended September 30, 2000, Airplanes Group
earned interest income (including lessee default interest) of $4 million
(Airplanes Limited: $4 million; Airplanes Trust: Nil) compared with $3 million
in the three months ended September 30, 1999 (Airplanes Limited: $3 million;
Airplanes Trust: Nil).
At September 30, 2000, Airplanes Group had options on interest rate swaps
("Swaptions") with a notional principal of $289 million. (See Item 3.
Quantitative and Qualitative Disclosures about Market Risks).
Bad Debt and Loss-Making Lease Provisions
Airplanes Group's practice is to provide specifically for any amounts due but
unpaid by lessees based primarily on the amount due in excess of security held
and also taking into account the financial strength and condition of a lessee
and the economic conditions existing in the lessee's operating environment.
While a number of Airplanes Group's lessees failed to meet their contractual
obligations in the three month period ended September 30, 2000, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees, the credit exposure with regard to certain other
carriers improved in the period. Overall, there was a net charge of $2 million
in respect of bad and doubtful debts (Airplanes Limited: $1 million; Airplanes
Trust: $1 million) in the three months ended September 30, 2000, compared with
an overall net credit of $3 million for the three months ended September 30,
1999 (Airplanes Limited: $1 million; Airplanes Trust: $2 million). The net
charge in the three months ended September 30, 2000 was primarily as a result of
provisions in respect of one Turkish lessee and one Colombian lessee.
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<PAGE>
A lease agreement is deemed to be 'loss making' in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
allocated interest attributable to the Aircraft plus certain direct costs, such
as legal fees and registration costs, attributable to the lease over its term.
For these purposes, interest is allocated to individual Aircraft based on the
weighted average interest cost of the principal balance of the Notes and the
Class E Notes (excluding, in the case of the Class E Notes, the element of
interest (9% per annum) which is payable only in the event that the principal
amount of all the Notes is repaid). This results in a significant number of
leases being 'loss making' while still being cash positive. In the three months
to September 30, 2000, the only significant "loss making" lease signed related
to a B767-300ER Aircraft on lease to a North American lessee. Consequently,
there was an overall net charge of $4 million (Airplanes Limited: $4 million;
Airplanes Trust: $Nil million) in respect of 'loss making' leases in the three
months ended September 30, 2000, compared with the three month period to
September 30, 1999, where there was an overall net release of $4 million
(Airplanes Limited: $3 million; Airplanes Trust: $1 million).
Other Lease Costs
Other lease costs, comprising mainly Aircraft related technical expenditure, in
the three months ended September 30, 2000 amounted to $7 million (Airplanes
Limited: $6 million; Airplanes Trust: $1 million) compared to other lease costs
of $6 million (Airplanes Limited: $5 million; Airplanes Trust: $1 million) in
the three months to September 30, 1999. The increase in the three months ended
September 30, 2000 is attributable to a higher number of Aircraft being
remarketed, partially offset by a release of $1 million in relation to a
continuing review of the adequacy of maintenance reserves when Aircraft are
re-leased.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three month period to
September 30, 2000 amounted to $8 million (Airplanes Limited: $8 million;
Airplanes Trust: $Nil million). This is a comparable expense to that incurred in
the three months to September 30, 1999 of $9 million (Airplanes Limited: $8
million; Airplanes Trust: $1 million).
The most significant element of selling, general and administrative expenses are
the Aircraft servicing fees paid to GECAS. Substantially all of these amounts
represent asset based fees calculated as an annual percentage of agreed values
of Aircraft under management pursuant to a servicing agreement. Selling, general
and administrative expenses in the three months to September 30, 2000 and the
three months to September 30, 1999 include $6 million (Airplanes Limited: $6
million; Airplanes Trust: $Nil million) relating to GECAS servicing fees.
A further significant element of Airplanes Group's actual selling, general and
administrative expenses reported in the period to September 30, 2000 was $2
million (Airplanes Limited: $2 million; Airplanes Trust: Nil) in respect of
administrative agency and cash management fees payable to AerFi, similar to the
charge of $2 million for the period to September 30, 1999.
Operating Loss
The operating loss for the three months ended September 30, 2000 was $89 million
(Airplanes
16
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Limited: $80 million; Airplanes Trust: $9 million) compared with an operating
loss of $57 million for the three months ended September 30, 1999 (Airplanes
Limited: $53 million; Airplanes Trust: $4 million). Airplanes Limited and
Airplanes Trust are expected to continue to report substantial losses in the
future.
Taxes
There was a tax credit of $1 million (Airplanes Limited: $Nil million; Airplanes
Trust : $1 million) required in the three months to September 30, 2000, as
compared with a tax charge of $1 million (Airplanes Limited: $1 million,
Airplanes Trust: $Nil) for the three months ended September 30, 1999.
Net Loss
The net loss after taxation for the three months ended September 30, 2000 was
$88 million (Airplanes Limited: $80 million; Airplanes Trust: $8 million)
compared with a net loss after taxation for the three months ended September 30,
1999 of $58 million (Airplanes Limited: $54 million; Airplanes Trust: $4
million).
17
<PAGE>
Financial Resources and Liquidity
Commentary on Statement of Cashflows
There was no movement in the cash balance for the three months to September 30,
2000, compared with a net decrease in cash of $3 million for the three months to
September 30, 1999.
Liquidity
The cash balances at September 30, 2000 amounted to $193 million (Airplanes
Limited: $187 million; Airplanes Trust: $6 million) compared to cash balances at
September 30, 1999 of $213 million (Airplanes Limited: $207 million; Airplanes
Trust: $6 million.)
Operating Activities
Net cash provided by operating activities in the three months ended September
30, 2000 amounted to $45 million (Airplanes Limited: $41 million; Airplanes
Trust: $4 million) compared with $54 million in the three months ended September
30, 1999 (Airplanes Limited: $49 million; Airplanes Trust: $5 million). This
includes cash paid in respect of interest of $61 million in the three months to
September 30, 2000 (Airplanes Limited: $56 million; Airplanes Trust: $5 million)
compared with $51 million in the three months to September 30, 1999 (Airplanes
Limited: $48 million; Airplanes Trust: $5 million). The decrease in cash
provided by operating activities in the three month period to September 30, 2000
is primarily attributable to a greater number of off lease Aircraft during the
three months ended September 30, 2000 and a reduction in lease revenues due to
prior Aircraft sales. In addition in the three months to September 30, 2000,
there was a net increase in the level of receivables balances, as compared to
the three months to September 30, 1999 when there was a reduction in
receivables.
Investing and Financing Activities
Cash flows from investing activities in the three months to September 30, 2000
reflect the cash provided by capital and sales type leases which was $2 million
(Airplanes Limited: $2 million; Airplanes Trust: Nil) as compared with $2
million in the three months ended September 30, 1999 (Airplanes Limited: $2
million; Airplanes Trust: Nil).
Cash flows from financing activities in the three months to September 30, 2000
primarily reflect the repayment of $46 million of principal on Subclass A-6
Notes and Class B Notes, by Airplanes Group (Airplanes Limited: $42 million;
Airplanes Trust: $4 million) compared with $57 million of principal repaid on
Subclass A6, Class B and Class C Notes by Airplanes Group (Airplanes Limited:
$52 million; Airplanes Trust: $5 million) in the three months to September 30,
1999. The decrease in principal repayments in the three months ended September
30, 2000 as compared to the three months ended September 30, 1999, is due to a
decrease in cash provided by operating activities as discussed above.
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<PAGE>
Indebtedness
Airplanes Group's indebtedness consisted of Class A-E Notes in the amount of
$3,561 million (Airplanes Limited: $3,244 million; Airplanes Trust: $317
million) at September 30, 2000 and $3,740 million (Airplanes Limited: $3,407
million; Airplanes Trust: $333 million) at September 30, 1999. Airplanes Group
had $591 million Class E Notes outstanding at September 30, 2000 and September
30, 1999. In order to repay principal on the Subclass A-4, A-7 and A-8 Notes on
their expected maturity dates, Airplanes Group will have to refinance such Notes
in the capital markets. In order to avoid stepped up interest costs, $200
million of Subclass A-4 Notes, $550 million of Subclass A-7 Notes and $700
million in Subclass A-8 Notes will have to be refinanced through the sale of
further pass-through certificates by March 2003, 2001 and 2003, respectively.
There can be no assurance that the Trust will be able to sell further
pass-through certificates in the amounts and at the times required and any
failure to do so may have the impact of increasing Airplanes Group's borrowing
costs.
19
<PAGE>
Results of Operations - Six Months Ended September 30, 2000 Compared with Six
Months Ended September 30, 1999.
Airplanes Group's results for the six months ended September 30, 2000 reflected
a continuation of difficult trading conditions for certain of its lessees, along
with an unfavourable market for some of its Aircraft, in particular widebody
Aircraft, and increased levels of Aircraft downtime. Overall, Airplanes Group
generated $64 million in cash from operations in the six months to September 30,
2000 compared to $89 million in the same period of the previous year. The
decrease in cash generated from operations in the six month period to September
30, 2000 is primarily attributable to a reduction in lease revenues due to a
greater number of off lease Aircraft during the six months ended September 30,
2000 and previous Aircraft sales. In addition, there was an increased outflow of
maintenance payments and a net increase in the level of receivables, as compared
with the six months to September 1999. This was partially offset by a cash
receipt from General Electric Capital Corporation under the terms of a Tax
Sharing Agreement (see Part II. Other Information - Item 1.). There was a net
loss after taxation for the six months to September 30, 2000 of $176 million
(Airplanes Limited: $160 million; Airplanes Trust: $16 million) compared to a
net loss after taxation for the six months to September 30, 1999 of $115 million
(Airplanes Limited: $105 million; Airplanes Trust: $10 million). The increase in
the net loss for the period was primarily attributable to additional interest
being charged on accrued but unpaid Class E Note interest, a reduction in
revenue due to Aircraft downtime and provisions for loss making leases and bad
debts.
Leasing Revenues
Leasing revenues (which include maintenance reserve receipts which Airplanes
Group receives from certain of its lessees) for the six months ended September
30, 2000 were $238 million (Airplanes Limited: $217 million; Airplanes Trust:
$21 million) compared with $260 million (Airplanes Limited: $239 million;
Airplanes Trust: $21 million) for the six months ended September 30, 1999. The
decrease in 2000 was primarily attributable to the reduction in the number of
Aircraft on lease in the period to September 30, 2000, as a consequence of a
greater number of Aircraft off lease during the six months ended September 30,
2000 and to a lesser extent, previous Aircraft sales. At September 30, 2000,
Airplanes Group had 193 of its 198 Aircraft on lease (Airplanes Limited: 176
Aircraft; Airplanes Trust: 17 Aircraft) compared to 196 of its 201 Aircraft on
lease (Airplanes Limited: 178 Aircraft; Airplanes Trust: 18 Aircraft) at
September 30, 1999.
Aircraft Sales
Sales revenues of $1 million (Airplanes Limited: $1 million, Airplanes Trust:
$Nil) in respect of the sale of an airframe of one A300 Aircraft were received
in the six months ended September 30, 2000. Sales revenues of $2 million
(Airplanes Limited $2 million; Airplanes Trust: $ Nil million) in respect of the
sale of one B737-200 Aircraft and an engine from an A300 Aircraft, the airframe
of which had previously been sold, were received in the six months ended
September 30, 1999. The net book values of the Aircraft sold were $1 million
(Airplanes Limited: $1 million, Airplanes Trust: Nil) in the period ended
September 30, 2000 and September 30, 1999.
20
<PAGE>
Depreciation and Amortization
The charge for depreciation and amortization in the six months ended September
30, 2000 amounted to $86 million (Airplanes Limited: $77 million; Airplanes
Trust: $9 million) which is comparable with $87 million (Airplanes Limited: $79
million; Airplanes Trust: $8 million) for the comparative period in 1999.
Net Interest Expense
Net interest expense was $259 million (Airplanes Limited: $235 million;
Airplanes Trust: $24 million) in the six month period ended September 30, 2000
compared to $226 million (Airplanes Limited: $205 million; Airplanes Trust: $21
million) in the six month period ended September 30, 1999. The increase in net
interest expense was primarily due to a combination of offsetting factors:
additional interest charged on accrued but unpaid Class E Note interest of $34
million and lower average debt in the six months to September 30, 2000 being
offset by a higher interest rate.
The weighted average interest rate on the Class A - D Notes during the six
months to September 30, 2000 was 7.56% and the average debt in respect of the
Class A - D Notes outstanding during the period was $3,022 million. The Class E
Notes accrue interest at a rate of 20% per annum (as adjusted by reference to
the U.S. consumer price index, effective March 28, 1996). The weighted average
interest rate on the Class A - D Notes during the six months to September 30,
1999 was 6.45% and the average debt in respect of the Class A - D Notes
outstanding during the period was $3,216 million.
The difference for the six months ended September 30, 2000 in Airplanes Group's
net interest expense of $259 million (Airplanes Limited: $235 million; Airplanes
Trust: $24 million) and cash paid in respect of interest of $114 million
(Airplanes Limited: $104 million; Airplanes Trust: $10 million) is substantially
accounted for by the fact that interest on the Class E Notes is accrued but
unpaid.
Net interest expense is stated after deducting interest income earned during the
relevant period. In the six months ended September 30, 2000, Airplanes Group
earned interest income (including lessee default interest) of $8 million
(Airplanes Limited: $8 million; Airplanes Trust: Nil) compared with $6 million
in the six months ended September 30, 1999 (Airplanes Limited: $6 million;
Airplanes Trust: Nil).
At September 30, 2000, Airplanes Group had options on interest rate swaps
("Swaptions") with a notional principal of $289 million. (See Item 3.
Quantitative and Qualitative Disclosures about Market Risks).
Bad Debt and Loss-Making Lease Provisions
Airplanes Group's practice is to provide specifically for any amounts due but
unpaid by lessees based primarily on the amount due in excess of security held
and also taking into account the financial strength and condition of a lessee
and the economic conditions existing in the lessee's operating environment.
While a number of Airplanes Group's lessees failed to meet their contractual
obligations in the six month period ended September 30, 2000, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these
21
<PAGE>
lessees, the credit exposure with regard to certain other carriers improved in
the period. Overall, there was a net charge of $7 million in respect of bad and
doubtful debts (Airplanes Limited: $5 million; Airplanes Trust: $2 million) in
the six months ended September 30, 2000, compared with an overall net charge of
$6 million for the six months ended September 30, 1999 (Airplanes Limited: $7
million; Airplanes Trust: a credit of $1 million). The net charge in the six
months ended September 30, 2000 was primarily as a result of provisions in
respect of one Turkish lessee, one Colombian lessee, one Irish lessee and one US
lessee.
A lease agreement is deemed to be 'loss making' in circumstances where the
contracted rental payments are insufficient to cover the depreciation and
allocated interest attributable to the aircraft plus certain direct costs, such
as legal fees and registration costs, attributable to the lease over its term.
For these purposes, interest is allocated to individual Aircraft based on the
weighted average interest cost of the principal balance of the Notes and the
Class E Notes (excluding, in the case of the Class E Notes, the element of
interest (9% per annum) which is payable only in the event that the principal
amount of all the Notes is repaid). This results in a significant number of
leases being 'loss making' while still being cash positive. In the six months to
September 30, 2000, the significant "loss making" leases signed related to two
B737-400 Aircraft and one B737-200 Aircraft on lease to two European lessees and
three DC9 Aircraft and one B767 Aircraft on lease to two North American lessees.
Consequently, there was an overall net charge of $7 million (Airplanes Limited:
$7 million; Airplanes Trust: $Nil million) in respect of 'loss making' leases in
the six months ended September 30, 2000, compared with the six month period to
September 30, 1999, where there was an overall net release of $7 million
(Airplanes Limited: $6 million; Airplanes Trust: $1 million).
Other Lease Costs
Other lease costs, comprising mainly Aircraft related technical expenditure, in
the six months ended September 30, 2000 amounted to $15 million (Airplanes
Limited: $14 million; Airplanes Trust: $1 million) compared to other lease costs
of $9 million (Airplanes Limited: $8 million; Airplanes Trust: $1 million) in
the six months to September 30, 1999. The increase in the six months ended
September 30, 2000 is attributable to an increased number of Aircraft being
remarketed, partially offset by a release of $2 million in relation to a
continuing review of the adequacy of maintenance reserves when Aircraft are
re-leased.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six month period to
September 30, 2000 amounted to $17 million (Airplanes Limited: $16 million;
Airplanes Trust: $1 million). This is a comparable expense to that incurred in
the six months to September 30, 1999 of $18 million (Airplanes Limited: $17
million; Airplanes Trust: $1 million).
The most significant element of selling, general and administrative expenses are
the Aircraft servicing fees paid to GECAS. Substantially all of these amounts
represent asset based fees calculated as an annual percentage of agreed values
of Aircraft under management pursuant to a servicing agreement. Selling, general
and administrative expenses in the six months to September 30, 2000 and the six
months to September 30, 1999 include $12 million (Airplanes Limited: $6 million;
Airplanes Trust: $6 million) relating to GECAS servicing fees.
A further significant element of Airplanes Group's actual selling, general and
administrative
22
<PAGE>
expenses reported in the period to September 30, 2000 was $5
million (Airplanes Limited: $5 million; Airplanes Trust: Nil) in respect of
administrative agency and cash management fees payable to AerFi, similar to the
charge of $5 million for the period to September 30, 1999.
Operating Loss
The operating loss for the six months ended September 30, 2000 was $179 million
(Airplanes Limited: $162 million; Airplanes Trust: $17 million) compared with an
operating loss of $112 million for the six months ended September 30, 1999
(Airplanes Limited: $102 million; Airplanes Trust: $10 million). Airplanes
Limited and Airplanes Trust are expected to continue to report substantial
losses in the future.
Taxes
There was a tax credit of $3 million (Airplanes Limited: $2 million; Airplanes
Trust : $1 million) required in the six months to September 30, 2000, as
compared with a tax charge of $3 million (Airplanes Limited: $3 million,
Airplanes Trust: $Nil) for the six months ended September 30, 1999.
Net Loss
The net loss after taxation for the six months ended September 30, 2000 was $176
million (Airplanes Limited: $160 million; Airplanes Trust: $16 million) compared
with a net loss after taxation for the six months ended September 30, 1999 of
$115 million (Airplanes Limited: $105 million; Airplanes Trust: $10 million).
23
<PAGE>
Financial Resources and Liquidity
Commentary on Statement of Cashflows
There was a decrease of $10 million in the cash balance for the six months to
September 30, 2000, compared with a net decrease in cash of $11 million for the
six months to September 30, 1999.
Liquidity
The cash balances at September 30, 2000 amounted to $193 million (Airplanes
Limited: $187 million; Airplanes Trust: $6 million) compared to cash balances at
September 30, 1999 of $213 million (Airplanes Limited: $207 million; Airplanes
Trust: $6 million.)
Operating Activities
Net cash provided by operating activities in the six months ended September 30,
2000 amounted to $64 million (Airplanes Limited: $57 million; Airplanes Trust:
$7 million) compared with $89 million in the six months ended September 30, 1999
(Airplanes Limited: $80 million; Airplanes Trust: $9 million). This includes
cash paid in respect of interest of $114 million in the six months to September
30, 2000 (Airplanes Limited: $104 million; Airplanes Trust: $10 million)
compared with $112 million in the six months to September 30, 1999 (Airplanes
Limited: $102 million; Airplanes Trust: $10 million). The decrease in cash
provided by operating activities in the six month period to September 30, 2000
is primarily attributable to a greater number of off lease Aircraft during the
six months ended September 30, 2000 and a reduction in lease revenues due to
previous Aircraft sales. In addition, in the six months to September 30, 2000
there was a net increase in the level of receivables balances, as compared to
the six months to September 30, 1999 when there was a reduction in receivables.
Investing and Financing Activities
Cash flows from investing activities in the six months to September 30, 2000
reflect the cash provided by capital and sales type leases which was $3 million
(Airplanes Limited: $3 million; Airplanes Trust: Nil) as compared with $4
million in the six months ended September 30, 1999 (Airplanes Limited: $4
million; Airplanes Trust: Nil). In the six months ended September 30, 2000,
Airplanes Group also received sales proceeds of $1 million (Airplanes Limited:
$1 million; Airplanes Trust: Nil) compared to the receipt of $2 million
(Airplanes Limited: $2 million, Airplanes Trust: Nil) in the six months ended
September 30, 1999.
Cash flows from financing activities in the six months to September 30, 2000
primarily reflect the repayment of $77 million of principal on Subclass A-6
Notes and Class B Notes by Airplanes Group (Airplanes Limited: $70 million;
Airplanes Trust: $7 million) compared with $104 million of principal repaid on
Subclass A6, Class B and Class C Notes by Airplanes Group (Airplanes Limited:
$95 million; Airplanes Trust: $9 million) in the six months to September 30,
1999. The decrease in principal repayments in the six months ended September 30,
2000 as compared to the six months ended September 30, 1999, is due to a
decrease in cash provided by operating activities as discussed above.
24
<PAGE>
Comparison of Actual Cash Flows versus the 1998 Adjusted Base Case for the Three
Month Period ended October 16, 2000.
The discussion and analysis which follows is based on the results of Airplanes
Limited and Airplanes Trust and their subsidiaries as a single entity
(collectively "Airplanes Group").
The financial information set forth below was not prepared in accordance with
generally accepted accounting principles of the United States. This information
should be read in conjunction with Airplanes Group's most recent financial
information prepared in accordance with generally accepted accounting principles
of the United States. For this you should refer to Airplanes Group's Form 10-K
for the year ended March 31, 2000 and Form 10-Q for the financial quarter to
June 30, 2000 which are on file at the Securities and Exchange Commission and
pages 3 to 9 of this Form 10-Q Report.
For the purposes of this report, the "Three Month Period", comprises information
from the monthly cash reports as filed at the Securities and Exchange Commission
as Form 8-Ks for the relevant months dated August 15, 2000, September 15, 2000
and October 16, 2000. The financial data in these reports includes cash receipts
from July 12, 2000 (first day of the Collection Period for the August 2000
Report) up to October 10, 2000 (last day of the Collection Period for the
October 2000 Report). Page 33 presents the cumulative cashflow information from
March 1998 to the October 2000 Payment Date. This report, however, limits its
commentary to the Three Month Period.
The March 9, 1998 Offering Memorandum (the "Offering Memorandum") for the 1998
Refinancing Certificates contains assumptions in respect of Airplanes Group's
future cash flows and expenses (the "1998 Base Case"). The 1998 Base Case has
been adjusted to take account of 19 Aircraft sales which have occurred (three
DC8-71Fs, one B737-300, four B737-200As, three A300-B4-100s and eight DC9s) and
which were not anticipated in the 1998 Base Case (the "Adjusted Base Case"). For
the purpose of this report, "Net Cash Collections" is defined as Total Cash
Collections less Total Cash Expenses, Interest Payments and Swap Payments. A
discussion of the Total Cash Collections, Total Cash Expenses, Interest Payments
and Principal Payments in the Three Month Period is given below and should be
read in conjunction with the analysis on page 32.
Cash Collections
"Total Cash Collections" include Net Lease Rentals (Contracted Lease Rentals
less Movement in Current Arrears Balance and Net Stress-Related Costs), Interest
Earned, Aircraft Sales, Net Maintenance and Other Receipts. In the Three Month
Period, Airplanes Group generated approximately $118.0 million in Total Cash
Collections, $6.5 million more than the Adjusted Base Case. This difference is
due to a combination of the factors set out below (the numbers in square
brackets below refer to the line item number shown on page 31).
[2] Renegotiated Leases
Renegotiated Leases refers to the loss in rental revenue caused by a
lessee negotiating a reduction in the lease rental. Typically, this can
be a permanent reduction over the
25
<PAGE>
remaining lease term in exchange for other contractual concessions. In
the Three Month Period, the amount of revenue loss attributed to
Renegotiated Leases was $0.3 million and relates to leases renegotiated
with two lessees. The new rentals were reset at the then prevailing
market rate for these Aircraft types.
[3] Rental Resets Including Interest Rate Adjustments for Floating Rate
Leases
Rental Resets is a measure of the loss in rental revenue when new lease
rates are different to those assumed in the Adjusted Base Case, including
lease rate adjustments for changes in interest rates on floating rate
leases. This amounted to $2.3 million in the Three Month Period.
[5] Contracted Lease Rentals
Contracted Lease Rentals represents the current contracted lease rental
rollout which equates to the Adjusted Base Case Lease Rentals less
adjustments for Renegotiated Leases and Rental Resets. For the Three
Month Period, Contracted Lease Rentals were $113.3 million, $2.6 million
less than assumed in the Adjusted Base Case. The difference is due to
losses from Renegotiated Leases and Rental Resets as discussed above.
[6] Movement in Current Arrears Balance
Current Arrears is the total contracted lease rentals outstanding from
current lessees at a given date and excludes any amounts classified as
Bad Debts. There was a net negative movement of $1.0 million in the
Current Arrears Balance over the Three Month Period.
Net Stress-Related Costs
Net Stress-Related Costs is a combination of all the factors which can
cause actual lease rentals received to differ from the Contracted Lease
Rentals. The Adjusted Base Case assumed gross stress-related costs equal
to 6.0% of the 1998 Base Case Lease Rentals. However, the Adjusted Base
Case also assumed the recovery of certain deferred arrears equal to 0.1%
of the Adjusted Base Case Lease Rentals in the Three Month Period
resulting in an overall Net Stress-Related Costs assumption of 5.9% of
the Adjusted Base Case Lease Rentals. For the Three Month Period, Net
Stress-Related Costs incurred amounted to a net cash outflow of $6.0
million (5.2% of Lease Rentals) compared to $6.8 million outflow assumed
in the Adjusted Base Case, a variance of $0.8 million that is due to the
following five factors described in items [8] to [12] below.
[8] Bad Debts
Bad Debts are arrears owed by lessees who have defaulted and which are
deemed irrecoverable. There were no bad debts during the Three Month
Period.
[9] Deferred Arrears Balance
Deferred Arrears Balance refers to current arrears that have been
capitalized and restructured into a deferred balance. In the Three Month
Period, Airplanes Group received payments totaling $0.6 million in
accordance with these restructurings.
26
<PAGE>
[10] Aircraft on Ground ("AOG")
AOG is defined as the Adjusted Base Case lease rental lost when an
Aircraft is off-lease and non-revenue earning. Airplanes Group had six
Aircraft AOG at various different times during the Three Month Period and
at September 30, 2000, five Aircraft were AOG.
[11] Other Leasing Income
Other Leasing Income consists of miscellaneous income received in
connection with a lease other than contracted rentals, maintenance
receipts and security deposits, such as early termination payments or
default interest. In the Three Month Period, other leasing income
amounted to $0.7 million.
[12] Repossession Costs
Repossession Costs cover legal and aircraft technical costs incurred as a
result of repossessing an Aircraft. In the Three Month Period, Airplanes
Group made payments totalling $2.6 million as a result of the
repossession of one B747 freighter Aircraft from Tower Air in February
2000 and of two B737-400 Aircraft from a Turkish lessee in July 2000.
[14] Net Lease Rentals
Net Lease Rentals is Contracted Lease Rentals less any movement in
Current Arrears Balance and Net Stress-Related Costs. In the Three Month
Period, Net Lease Rentals amounted to $106.3 million, $2.7 million less
than assumed in the Adjusted Base Case. The variance was attributable to
the combined effect of the factors outlined in items [2] and [3] and in
items [6] to [12] above.
[15] Interest Earned
Interest Earned relates to interest received on cash balances held in the
Collection and Expense Accounts. Cash held in the Collection Account
consists of the cash liquidity reserve amount of $120 million plus the
security deposit amount, in addition to the intra-month cash balances for
all the rentals and maintenance payments collected prior to the monthly
payment date. The Expense Account contains cash set aside to pay for
expenses which are expected to be payable over the next month. In the
Three Month Period, interest earned amounted to $3.3 million, $0.8
million more than assumed in the Adjusted Base Case. The difference is
due to a combination of two factors: the Adjusted Base Case made no
assumption as to the interest earned on the intra-month cash balances in
the Collection Account and Expense Account and the average actual
reinvestment rate for the Three Month Period was 6.5% as compared to
5.75% assumed in the Adjusted Base Case.
[16] Aircraft Sales
A cash deposit of $0.2 million was received in the Three Month Period in
respect of one B737-200-QC Aircraft which is anticipated to be sold in
the next three month period. No receipt of Aircraft sales proceeds was
assumed in the Adjusted Base Case in the Three Month Period.
27
<PAGE>
Since March 1998, Airplanes Group has received net sales proceeds of
$138.0 million in respect of the sale of twenty three Aircraft (including
final bullet payment on one finance lease), nineteen of which were not
anticipated in the 1998 Base Case.
The net sales proceeds also include $0.5 million of deposits received in
respect of one B737-200-QC Aircraft which is anticipated to be sold in
the next three month period.
The net sales proceeds on the twenty three Aircraft of $137.5 million
compares with an overall Note Target Price at date of the respective sale
of $132.2 million and a depreciated (using the 1998 Base Case
depreciation assumptions) Initial Appraised Value (appraised as of
October 1995) of $143.4 million.
[17] Net Maintenance
Net Maintenance refers to maintenance reserve revenue received less any
maintenance reimbursements paid to lessees. In the Three Month Period,
negative net maintenance costs of $0.2 million were incurred. The
Adjusted Base Case makes no assumptions for Net Maintenance as it assumes
that, over time, maintenance revenue will equal maintenance expenditure.
However, it is unlikely that in any particular three month reporting
period, maintenance revenue will exactly equal maintenance expenses.
[18] Other Receipts
As set out in Part II. Other Information - Item 1 - Legal Proceedings -
Other Matters, Aero USA Inc. and Aero USA 3 Inc. file United States
federal consolidated tax returns and certain state and local tax returns
with General Electric Capital Corporation. $8.4 million was received from
General Electric Capital Corporation during the Three Month Period as
compensation under a Tax Sharing Agreement due to the utilisation by
General Electric Capital Corporation of tax losses of Airplanes Group's
US companies for the period ended December 31, 1999.
CASH EXPENSES
"Total Cash Expenses" include Aircraft Operating Expenses and Selling, General
and Administrative ("SG&A") Expenses. In the Three Month Period, Total Cash
Expenses were $13.8 million compared to $11.1 million assumed in the Adjusted
Base Case. A number of offsetting factors discussed below have given rise to
this.
Aircraft Operating Expenses includes all operational costs related to the
leasing of Aircraft including costs of insurance, re-leasing and other overhead
costs.
[20] Re-leasing and other overhead costs
Re-leasing and other overhead costs consist of miscellaneous re-delivery
and leasing costs associated with re-leasing events, costs of insurance
and other lessee-related overhead costs. In the Three Month Period, these
costs amounted to $6.0 million (or 5.2% of Lease
28
<PAGE>
Rentals) compared to $2.3 million (or 2% of Lease Rentals) assumed in the
Adjusted Base Case. Actual Re-leasing and other overhead costs exceeded
the Adjusted Base Case assumption primarily due to higher than assumed
transition costs on Aircraft delivering to new lessees and payments made
in the form of lessor contributions to defray certain technical costs
during the term of certain leases.
SG&A Expenses relate to fees paid to the Servicer and to other service
providers.
[21] Aircraft Servicer Fees
The Aircraft Servicer Fees are defined as amounts paid to the Servicer in
accordance with the terms of the Servicing Agreement. In the Three Month
Period, the total Aircraft Servicer fees paid were $5.6 million, $0.1
million less than assumed in the Adjusted Base Case.
Aircraft Servicer Fees consist of:
$mm
Retainer Fee.................................................... 5.6
Minimum Incentive Fee........................................... 0.0
Core Cashflow/Sales Incentive Fee............................... 0.0
---
Total Servicer Fee.............................................. 5.6
===
The Retainer Fee is a fixed amount per month per Aircraft and changes
only as Aircraft are sold.
[23] Other Servicer Fees and Other Overheads
Other Servicer Fees and Other Overheads relate to fees and expenses paid
to other Service providers including the Administrative Agent, the Cash
Manager, financial advisors, legal advisors, accountants and the
directors. In the Three Month Period, Other Servicer Fees amounted to
$2.3 million, $0.8 million less than an assumed expense of $3.1 million
in the Adjusted Base Case.
[30] Interest Payments and [31] Swap Payments
In the Three Month Period, interest payments to investors amounted to
$57.9 million. This is $4.2 million higher than the Adjusted Base Case,
which assumed interest costs for the Three Month Period to be $53.7
million. The variance reflects higher actual amounts outstanding on each
Note class than assumed, and a higher than expected level of average
interest rates offset by no interest payments on the Class E Notes (refer
to Item [33] below). The Adjusted Base Case assumed LIBOR to be 5.75%
whereas the average monthly LIBOR rate was 6.6%. Airplanes Group had net
swap receipts of $1.2 million compared with nil assumed in the Adjusted
Base Case for the Three Month Period.
[33] Principal Payments
In the period from March 11, 1998 to October 16, 2000, total principal
payments amounted to $537.8 million, (comprising of $457.1 million on the
Class A Notes, $50.6 million on the Class B
29
<PAGE>
Notes, $25.2 million on the Class C Notes and $4.9 million on the Class D
Notes), $68.1 million less than assumed in the Adjusted Base Case. The
breakdown of the $68.1 million variance is set out on page 33. In the
Three Month Period, total principal payments amounted to $47.4 million,
(comprising of $43.5 million on the Class A Notes and $3.9 million on the
Class B Notes), $0.7 million more than assumed in the Adjusted Base Case.
The breakdown of the $0.7 million variance is set out on page 32.
Applying the declining value assumptions to the original March 1996 fleet
appraisal and adjusting for Aircraft sales, the total appraised value of
the Aircraft was assumed to be $4,073.0 million at March 15, 1998 and
$3,496.8 million at October 16, 2000. The fleet is appraised annually and
the most recent appraisal dated February 18, 2000, valued the existing
fleet at $3,330.1 million. Details of the Appraised Values are contained
in Appendix 1. Applying the declining value assumptions to the February
2000 fleet appraisal, the total appraised value was $3,211.2 million at
October 16, 2000.
Based on the appraisal dated February 18, 2000, the decline in Aircraft
valuations in the year to February 2000 was approximately $15 million
less than the decrease implied by the Aircraft depreciation schedules
that form part of the terms of the Notes. However, as a consequence of
the decline in appraised values experienced in the year to February 1999,
combined with overall cash performance, Airplanes Group has continued to
pay Class A Principal Adjustment Amounts from the March 2000 Payment Date
(the first Payment Date for which the 2000 appraisal was effective).
Cashflows were sufficient on the March and April 2000 Payment Dates to
pay the Class C and Class D Scheduled Principal Amounts and Class E
Minimum Interest. However, as a result of an adverse movement in cashflow
performance in the six month period since the April 2000 Payment Date
which arose due to the factors described above and in the Company's Form
10-Q for the financial quarter to June 30, 2000, available cashflows were
not sufficient to pay all of the scheduled Class A Principal Adjustment
Amounts in the six month period. As a result, no payments of the Class C
and D Scheduled Principal Amounts were made in the six month period.
Consequently at October 16, 2000, Class A Principal Adjustment Amounts
outstanding were $9.5 million ($15 million at July 17, 2000) and total
deferrals of Class C and Class D Scheduled Principal Amounts amounted to
$7.7 million and $3.4 million respectively ($3.8 million and $1.6 million
respectively at July 17, 2000). The Class E Minimum Interest Amount was
also suspended in the Three Month Period.
There can be no assurances that these arrears will be paid in full or
that variations in future cashflows, which continue to suffer from
adverse pressure on market lease rates, or future appraisals will not
lead to further delays in the payment of Class A Principal Adjustment
Amounts or increases in arrears of Class C and Class D Scheduled
Principal Amounts.
30
<PAGE>
<TABLE>
Note Report Line Name Description
---- ---------------- -----------
<S> <C> <C>
CASH COLLECTIONS
[1] Lease Rentals............................... Assumptions as per the Adjusted Base Case
[2] - Renegotiated Leases....................... Change in contracted rental cash flow caused by a
renegotiated lease
[3] - Rental Resets............................. Re-leasing events where new lease rate deviated from the
Adjusted Base Case
[4] - Other.....................................
[5] Sum [1]...[4] Contracted Lease Rentals.................... Current Contracted Lease Rentals due as at the latest
Calculation Date
[6] Movement in Current Arrears Balance Current contracted lease rentals not received as at the
latest Calculation Date, excluding Bad Debts
[7] Less Net Stress related Costs
[8] - Bad Debts................................. Arrears owed by former lessees and deemed irrecoverable
[9] - Deferred Arrears Balance.................. Current arrears that have been capitalised and restructured
as a Note Payable
[10] - AOG....................................... Loss of rental due to an aircraft being off-lease and
non-revenue earning
[11] - Other Leasing Income...................... Includes lease termination payments, rental guarantees and
late payment charges
[12] - Repossession.............................. Legal and technical costs incurred in repossessing Aircraft.
[13] Sum [8]...[12] Sub-total
[14] [5]+[6]+[13] Net Lease Rentals........................... Contracted Lease Rentals less Movement in Current Arrears
Balance and Net Stress related costs
[15] Interest Earned............................. Interest earned on monthly cash balances
[16] Aircraft Sales.............................. Proceeds, net of fees and expenses, from the sale of
Aircraft.
[17] Net Maintenance............................. Maintenance Revenue Reserve received less reimbursements to
lessees
[18] Other Receipts.............................. Net proceeds received from the sale of shares held in an
airline and amounts received under the Tax Sharing Agreement
for the utilisation by GE Capital of tax losses of Airplanes
Group companies.
[19] Sum [14]...[18] Total Cash Collections.................... Net Lease Rentals + Interest Earned + Aircraft Sales + Net
Maintenance + Other Receipts
CASH EXPENSES
Aircraft Operating Expenses................. All operational costs related to the leasing of aircraft.
[20] - Releasing and Other Overheads............. Costs associated with transferring an aircraft from one
lessee to another, costs of insurance and other lessee-
related overheads
SG&A Expenses
[21] Aircraft Servicer Fees...................... Monthly and annual fees paid to Aircraft Servicer
- Retainer Fee.............................. Fixed amount per month per aircraft
- Minimum Incentive Fee..................... Minimum annual fee paid to Servicer for performance above an
annually agreed target.
- Core Cashflow/Sales Incentive Fee......... Fees (in excess of Minimum Fee above) paid to Servicer for
performance above an annually agreed target/on sale of an
aircraft.
[22] [21] Sub-total
[23] Other Servicer Fees and Other Administrative Agent, trustee and professional fees paid to
Overheads .................................. other service providers and other overheads
[24] [22]+[23] Sub-total
[25] [20]+[24] Total Cash Expenses......................... Aircraft Operating Expenses + SG&A Expenses
NET CASH COLLECTIONS
[26] [19] Total Cash Collections...................... Line 19 above
[27] [25] Total Cash Expenses......................... Line 25 above
[28] Movement in Expense Account................. Relates to reduction in accrued expense amounts
[29] Refinancing Expenses (accrued March Costs relating to the March 98 refinancing accrued on closing
98) ........................................ and paid post March 98
[30] Interest Payments........................... Interest paid on all outstanding debt
[31] Swap payments Net swap payments (paid)/received
[32] Sum [26]...[31] Total
[33] Principal payments Principal payments on debt
</TABLE>
31
<PAGE>
<TABLE>
Airplanes Cashflow Performance for the Period from July 12, 2000 to October 16, 2000 (3 Months)
Comparison of Actual Cashflows versus Adjusted Base Case* Cashflows
% of 1998 Lease Rentals under
the Adjusted Base Case
Adjusted Adjusted
-------- --------
Actual Base Case* Variance Actual Base Case* Variance Base Case**
------ ------------------- ------ ---------- -------- -----------
CASH COLLECTIONS $M $M $M $M
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Lease Rentals 115.8 115.8 0.0 100.0% 100.0% 0.0% 120.4
2 - Renegotiated Leases (0.3) 0.0 (0.3) (0.2%) 0.0% (0.2%) 0.0
3 - Rental Resets (2.3) 0.0 (2.3) (2.0%) 0.0% (2.0%) 0.0
4 - Other 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
---- ---- ---- ---- ---- ---- -----
5 1 - 4 Contracted Lease Rentals 113.3 115.8 (2.6) 97.8% 100.0% (2.2%) 120.4
6 Movement in Current Arrears (1.0) 0.0 (1.0) (0.9%) 0.0% (0.9%) 0.0
7 less Net Stress Related Costs
8 - Bad Debts 0.0 (1.2) 1.2 0.0% (1.0%) 1.0% (1.2)
9 - Deferred Arrears Balance 0.6 0.1 0.5 0.5% 0.1% 0.4% 0.1
10 - AOG (4.6) (4.9) 0.2 (4.0%) (4.2%) 0.2% (5.1)
11 - Other Leasing Income 0.7 0.0 0.7 0.6% 0.0% 0.6% 0.0
12 - Repossession (2.6) (0.9) (1.7) (2.3%) (0.8%) (1.5%) (1.0)
----- ----- ----- ------ ------ ------ -----
13 8 - 12 Sub-total (6.0) (6.8) 0.8 (5.2%) (5.9%) 0.7% (7.1)
14 5+6+13 Net Lease Rental 106.3 109.0 (2.7) 91.8% 94.1% (2.4%) 113.3
15 Interest Earned 3.3 2.5 0.8 2.9% 2.2% 0.7% 2.5
16 Aircraft Sales 0.2 0.0 0.2 0.2% 0.0% 0.2% 0.0
17 Net Maintenance (0.2) 0.0 (0.2) (0.2%) 0.0% (0.2%) 0.0
18 Other Receipts 8.4 0.0 8.4 7.2% 0.0% 7.2% 0.0
---- ---- ---- ---- ---- ---- -----
19 14 - 18 Total Cash Collections 118.0 111.5 6.5 101.9% 96.3% 5.6% 115.8
====== ====== ==== ====== ===== ==== =====
CASH EXPENSES
Aircraft Operating Expenses
20 - Re-leasing and other overheads (6.0) (2.3) (3.7) (5.2%) (2.0%) (3.2%) (2.4)
SG&A Expenses
21 Aircraft Servicer Fees
- Retainer Fee (5.6) (5.3) (0.3) (4.8%) (4.6%) (0.2%) (5.3)
- Minimum Incentive Fee 0.0 (0.4) 0.4 0.0% (0.3%) 0.3% (0.4)
- Core Cashflow/Sales Incentive 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
---- ---- ---- ---- ---- ---- -----
22 21 Sub-total (5.6) (5.7) 0.1 (4.8%) (4.9%) 0.1% (5.7)
23 Other Servicer Fees and Other (2.3) (3.1) 0.8 (2.0%) (2.6%) 0.7% (3.1)
----- ----- ---- ------ ------ ---- -----
24 22+23 Sub-total (7.9) (8.8) 0.9 (6.8%) (7.6%) 0.8% (8.8)
----- ----- ---- ------ ------ ---- -----
25 24+20 Total Cash Expenses (13.8) (11.1) (2.8) (11.9%) (9.6%) (2.4%) (11.2)
====== ====== ===== ======= ====== ====== =====
NET CASH COLLECTIONS
26 19 Total Cash Collections 118.0 111.5 6.5 101.9% 96.3% 5.6% 115.8
27 25 Total Cash Expenses (13.8) (11.1) (2.8) (11.9%) (9.6%) (2.4%) (11.2)
28 Movement in Expense Account 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
29 Refinancing Expenses (accrued Mar 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
30 Interest Payments (57.9) (53.7) (4.2) (50.0%) (46.4%) (3.6%) (54.7)
31 Swap Payments 1.2 0.0 1.2 1.0% 0.0% 1.0% 0.0
---- ---- ---- ---- ---- ---- -----
32 26 - TOTAL 47.4 46.7 0.7 40.9% 40.4% 0.6% 49.9
===== ===== ==== ===== ===== ==== =====
31
33 PRINCIPAL PAYMENTS
Subclass A6 43.5 36.6 6.8 37.5% 31.6% 5.9% 39.5
Subclass B 3.9 4.4 (0.5) 3.4% 3.8% (0.4%) 4.7
Subclass C 0.0 3.9 (3.9) 0.0% 3.4% (3.4%) 3.9
Subclass D 0.0 1.8 (1.8) 0.0% 1.6% (1.6%) 1.8
---- ---- ----- ---- ---- ------ -----
Total 47.4 46.7 0.7 40.9% 40.4% 0.6% 49.9
===== ===== ==== ===== ===== ==== =====
Debt Balances at October 16, 2000
Subclass A4 200.0 200.0 200.0
Subclass A6 486.5 444.6 503.4
Subclass A7 550.0 550.0 550.0
Subclass A8 700.0 700.0 700.0
Subclass B 286.4 271.3 276.7
Subclass C 349.8 342.2 342.2
Subclass D 395.1 391.6 391.6
------ ------ -------
2,967.8 2,899.6 2,964.0
======== ======== =======
</TABLE>
32
<PAGE>
<TABLE>
Airplanes Cashflow Performance for the Period from March 11, 1998 to October 2000 (31 Months)
Comparison of Actual Cashflows versus Adjusted Base Case* Cashflows
% of 1998 Lease Rentals under
the Adjusted Base Case
Adjusted Adjusted
-------- --------
Actual Base Case* Variance Actual Base Case* Variance Base Case**
------ ------------------- ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS $M $M $M $M
1 Lease Rentals 1,208.8 1,208.8 0.0 100.0% 100.0% 0.0% 1,247.4
2 - Renegotiated Leases (2.2) 0.0 (2.2) (0.2%) 0.0% (0.2%) 0.0
3 - Rental Resets (17.3) 0.0 (17.3) (1.4%) 0.0% (1.4%) 0.0
4 - Other 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
------- ------- ------ ------ ------ ------ ------
5 1 - 4 Contracted Lease Rentals 1,189.3 1,208.8 (19.5) 98.4% 100.0% (1.6%) 1,247.4
6 Movement in Current Arrears (17.5) 0.0 (17.5) (1.5%) 0.0% (1.5%) 0.0
7 less Net Stress Related Costs
8 - Bad Debts (5.2) (12.2) 7.0 (0.4%) (1.0%) 0.6% (12.6)
9 - Deferred Arrears Balance 15.5 15.1 0.5 1.3% 1.2% 0.0% 15.1
10 - AOG (43.6) (51.4) 7.8 (3.6%) (4.3%) 0.6% (53.0)
11 - Other Leasing Income 4.3 0.0 4.3 0.4% 0.0% 0.4% 0.0
12 - Repossession (8.8) (9.8) 1.0 (0.7%) (0.8%) 0.1% (10.1)
------- ------- ------ ------ ------ ------ ------
13 8 - 12 Sub-total (37.7) (58.4) 20.7 (3.1%) (4.8%) 1.7% (60.7)
14 5+6+13 Net Lease Rental 1,134.0 1,150.4 (16.4) 93.8% 95.2% (1.4%) 1,186.7
15 Interest Earned 30.5 25.9 4.5 2.5% 2.1% 0.4% 25.9
16 Aircraft Sales 138.0 137.5 0.5 11.4% 11.4% 0.0% 48.1
17 Net Maintenance (30.5) 0.0 (30.5) (2.5%) 0.0% (2.5%) 0.0
18 Other Receipts 9.4 0.0 9.4 0.8% 0.0% 0.8% 0.0
------- ------- ------ ------ ------ ------ ------
19 14 - 18 Total Cash Collections 1,281.4 1,313.8 (32.5) 106.0% 108.7% (2.7%) 1,260.7
======== ======== ====== ====== ====== ====== =======
CASH EXPENSES
Aircraft Operating Expenses
20 - Re-leasing and other overheads (69.9) (24.5) (45.4) (5.8%) (2.0%) (3.8%) (25.2)
SG&A Expenses
21 Aircraft Servicer Fees
- Retainer Fee (55.7) (54.9) (0.8) (4.6%) (4.5%) (0.1%) (54.9)
- Minimum Incentive Fee (4.5) (3.9) (0.6) (0.4%) (0.3%) (0.1%) (3.9)
- Core Cashflow/Sales Incentive (3.5) 0.0 (3.5) (0.3%) 0.0% (0.3%) 0.0
------- ------- ------ ------ ------ ------ ------
22 21 Sub-total (63.7) (58.8) (4.9) (5.3%) (4.9%) (0.4%) (58.8)
23 Other Servicer Fees and Other (34.3) (31.7) (2.7) (2.8%) (2.6%) (0.2%) (31.7)
------- ------- ------ ------ ------ ------ ------
24 22+23 Sub-total (98.0) (90.4) (7.6) (8.1%) (7.5%) (0.6%) (90.4)
------- ------- ------ ------ ------ ------ ------
25 24+20 Total Cash Expenses (167.9) (114.9) (53.0) (13.9%) (9.5%) (4.4%) (115.7)
======= ======= ====== ======= ====== ====== =======
NET CASH COLLECTIONS
26 19 Total Cash Collections 1,281.4 1,313.8 (32.5) 106.0% 108.7% (2.7%) 1,260.7
27 25 Total Cash Expenses (167.9) (114.9) (53.0) (13.9%) (9.5%) (4.4%) (115.7)
28 Movement in Expense Account 24.7 0.0 24.7 2.0% 0.0% 2.0% 0.0
29 Refinancing Expenses (accrued Mar 98) (16.8) 0.0 (16.8) (1.4%) 0.0% (1.4%) 0.0
30 Interest Payments (583.4) (591.2) 7.8 (48.3%) (48.9%) 0.6% (601.6)
31 Swap Payments (0.1) (1.9) 1.8 (0.0%) (0.2%) 0.1% (1.9)
------- ------- ------ ------ ------ ------ ------
32 26 - TOTAL 537.8 605.9 (68.1) 44.5% 50.1% (5.6%) 541.6
====== ====== ====== ===== ===== ====== =====
33 PRINCIPAL PAYMENTS
Subclass A5 93.6 93.6 (0.0) 7.7% 7.7% (0.0%) 93.6
Subclass A6 363.5 405.4 (41.9) 30.1% 33.5% (3.5%) 346.6
Subclass B 50.6 65.7 (15.1) 4.2% 5.4% (1.3%) 60.3
Subclass C 25.2 32.8 (7.6) 2.1% 2.7% (0.6%) 32.8
Subclass D 4.9 8.4 (3.4) 0.4% 0.7% (0.3%) 8.4
------- ------- ------ ------ ------ ------ ------
Total 537.8 605.9 (68.1) 44.5% 50.1% (5.6%) 541.6
====== ====== ====== ===== ===== ====== =====
Debt Balances at October 16, 2000
Subclass A4 200.0 200.0 200.0
Subclass A6 486.5 444.6 503.4
Subclass A7 550.0 550.0 550.0
Subclass A8 700.0 700.0 700.0
Subclass B 286.4 271.3 276.7
Subclass C 349.8 342.2 342.2
Subclass D 395.1 391.6 391.6
------- ------- ------
2,967.8 2,899.6 2,964.0
======== ======== =======
</TABLE>
33
<PAGE>
<TABLE>
Mar-98 Adjusted
Closing Actual Base Case *
------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net Cash Collections 537.8 605.9
Add Back Interest and Swap Payments 583.5 593.1
-------- --------
a Net Cash Collections 1,121.3 1,198.9
(excl. interest and swap payments) ======== =======
b Swaps 0.1 1.9
c Class A Interest 336.7 336.8
d Class A Minimum 0.0 0.0
e Class B Interest 51.8 51.5
f Class B Minimum 45.4 31.7
g Class C Interest 76.5 75.8
h Class D Interest 112.0 111.7
i Class A Principal Adjustment 332.4 0.0
i Class C Scheduled 25.2 32.8
k Class D Scheduled 4.9 8.4
l Permitted Aircraft Modifications 0.0 0.0
m Step-up Interest 0.0 0.0
n Class E Minimum Interest 6.4 15.2
o Class B Supplemental 5.2 34.1
p Class A Supplemental 124.6 499.0
-------- --------
Total 1,121.3 1,198.9
======== ========
[1] Interest Coverage Ratio
Class A 3.3 3.5 = a/(b+c)
Class B 2.9 3.1 = a/(b+c+d+e)
Class C 2.2 2.4 = a/(b+c+d+e+f+g)
Class D 1.8 2.0 = a/(b+c+d+e+f+g+h)
[2] Debt Coverage Ratio
Class A 3.3 3.5 = a/(b+c+d)
Class B 2.6 2.8 = a/(b+c+d+e+f)
Class C 1.1 1.9 = a/(b+c+d+e+f+g+h+I+j)
Class D 1.1 1.8 =
Loan to Value Ratios (in US dollars)
[3] Expected Portfolio Value 4,073.0 3,496.8
[4] Adjusted Portfolio Value 3,211.2
Liquidity Reserve Amount
Of which - Cash 174.4 155.0 174.4
- Accrued Expenses 12.0
- Letters of Credit held
------ ------ -----
Subtotal 174.4 167.0 174.4
Less Lessee Security Deposits 54.4 35.0 54.4
------ ------ -----
Subtotal 120.0 132.0 120.0
------- ------- -------
[5] Total Asset Value 4,193.0 3,343.2 3,616.8
Note Balances as at October 16, 2000
Class A 2,393.6 57.1% 1,936.5 57.9% 1,894.6 52.4%
Class B 337.0 65.1% 286.4 66.5% 271.3 59.9%
Class C 375.0 74.1% 349.8 77.0% 342.2 69.3%
Class D 400.0 83.6% 395.1 88.8% 391.6 80.2%
------- ------- -------
3,505.6 2,967.8 2,899.6
</TABLE>
* Adjusted Base Case equals the March 1998 Prospectus Base Case as adjusted
for Aircraft sales which have occurred and which were not anticipated in
the March 1998 Prospectus Base Case Assumptions
** Base Case equals the March 1998 Prospectus Base Case.
[1] Interest Coverage Ratio is equal to Net Cash Collections (excl. interest
and swap payments) expressed as a ratio payable on each subclass of Notes
plus the interest and minimum principal payments payable on each subclass
of senior in priority of payment to the relevant subclass of Notes.
[2] Debt Service Ratio is equal to Net Cash Collections (excl. interest and
swap payments) expressed as a ratio of the interest and minimum/scheduled
principal payments payable on each subclass of Note plus the interest and
minimum/scheduled payable on each subclass of Notes that ranks equally
with or senior to the relevant subclass of Notes in the In respect of the
Class A Notes, Principal Adjustment Amount payments have been excluded as
they are a function of
[3] Expected Portfolio Value represents the Initial Appraised Value of each
Aircraft in the Portfolio multiplied by the Depreciation Factor at Payment
Date divided by the Depreciation
34
<PAGE>
Factor at March 1996 Closing Date.
[4] Adjusted Portfolio Value represents the Base Value of each Aircraft in the
Portfolio as determined by the most recent Appraisal multiplied by the
Depreciation Factor at Payment Date divided by the Depreciation Factor as
of the relevant
[5] Total Asset Value is equal to Total Expected/Adjusted Portfolio Value plus
Liquidity Reserve Amount minus Lessee Security Deposits.
35
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Interest Rate Sensitivity
Airplanes Group's principal market risk exposure is to changes in interest
rates. This exposure arises from its Notes and the derivative instruments used
by Airplanes Group to manage its interest rate risk.
The terms of each subclass of Notes, including the outstanding principal amount
and estimated fair value as of September 30, 2000, are as follows:
<TABLE>
Annual Interest Estimated
Rate Principal Amount Expected Final Final Fair Value at
Subclass of Notes (Payable Monthly) at quarter end Payment Date Maturity Date September 30, 2000
----------------- ----------------- -------------- ------------- ------------- ------------------
$ Millions $ Millions
<S> <C> <C> <C> <C> <C>
Subclass A-4 (LIBOR+.62%) 200 March 15, 2003 March 15, 2019 200
Subclass A-6 (LIBOR+.34%) 496 January 15, 2004 March 15, 2019 496
Subclass A-7 (LIBOR+.26%) 550 March 15, 2001 March 15, 2019 550
Subclass A-8 (LIBOR+.375%) 700 March 15, 2003 March 15, 2019 698
Class B (LIBOR+.75%) 288 March 15, 2009 March 15, 2019 283
Class C (8.15%) 350 March 15, 2011 March 15, 2019 330
Class D (10.875%) 395 March 15, 2012 March 15, 2019 316
------ ------
2,979 2,873
====== ======
</TABLE>
Interest Rate Management
The leasing revenues of Airplanes Group are generated primarily from lease
rental payments which are either fixed or floating. In the case of floating rate
leases, an element of the rental varies in line with changes in LIBOR, generally
six-month LIBOR. Some leases carry fixed and floating rental payments for
different rental periods. There has been an increasing tendency for fixed rate
leases to be written and approximately two thirds of the leases are fixed rate
leases.
In general, an interest rate exposure arises to the extent that Airplanes
Group's fixed and floating interest obligations in respect of the Class A-D
Notes do not correlate to the mix of fixed and floating rental payments for
different rental periods. This interest rate exposure can be managed through the
use of interest rate swaps. The Class A and B Notes bear floating rates of
interest and the Class C and D Notes bear fixed rates of interest. The mix of
fixed and floating rental payments contains a higher percentage of fixed rate
payments than the percentage of fixed rate interest payments on the Notes. One
reason for this is the fact that the reset periods on floating rental payments
are generally longer than the monthly reset periods on the floating rate Notes.
In order to correlate the contracted fixed and floating rental payments to the
fixed and floating interest payments on the Notes, Airplanes Group enters into
interest rate swaps (the 'Swaps'). Under the Swaps, Airplanes Group pays fixed
amounts and receives floating amounts on a monthly basis. The Swaps amortize
having regard to the expected paydown schedule of the Class A and B Notes, the
expiry dates of the leases under which lessees are contracted to make fixed rate
rental payments and the LIBOR reset dates under the floating rates leases. At
least every three months, and in practice more frequently, AerFi Financial
Services (Ireland) Limited, a subsidiary of AerFi Group, as Airplanes Group's
administrative agent (the "Administrative Agent"), seeks to enter into
additional swaps or sell
36
<PAGE>
at market value or unwind part or all of the Swaps and
any future swaps in order to rebalance the fixed and floating mix of interest
obligations and the fixed and floating mix of rental payments. At September 30,
2000, Airplanes Group had unamortized Swaps with an aggregate notional principal
balance of $1,835 million. The aggregate notional principal of these Swaps will
be reduced to $1,345 million by the end of the fiscal year ended March 31, 2001.
These Swaps will be further reduced to an aggregate notional principal balance
of $980 million by the year ended March 31, 2002, to an aggregate notional
principal balance of $330 by the year ended March 31, 2003 and to an aggregate
notional principal balance of $35 million by the year ended March 31, 2004. None
of the Swaps have maturity dates extending beyond May 2004. The aggregate fair
value of the Swaps at September 30, 2000 was $1 million.
Airplanes Group Swap Book at September 30, 2000
<TABLE>
Final
Swap No. Notional Amount (i) Effective Maturity Fixed Rate Estimated Fair Market
($ Millions) Date Date Payable(ii) Value as at September 30, 2000
<S> <C> <C> <C> <C> <C>
1 0 12/15/97 10/15/00 5.8475% $3,321
2 0 4/17/00 10/15/00 6.4500% $10,291
3 15 1/15/97 11/15/00 6.0550% $14,296
4 5 8/15/97 12/15/00 5.9800% $13,379
5 10 10/28/99 1/15/01 5.9250% $26,542
6 165 7/31/00 1/15/01 6.7390% $12,188
7 30 12/23/97 3/15/01 5.8175% $78,968
8 60 3/28/96 4/15/01 6.0925% $170,357
9 20 11/17/99 4/15/01 5.8550% $98,069
10 55 8/15/00 5/15/01 6.7750% ($20,345)
11 25 10/28/97 6/15/01 5.9600% $111,055
12 15 12/15/99 8/15/01 6.2000% $43,187
13 20 5/27/98 4/15/02 6.2800% $148,074
14 30 8/16/99 4/15/02 6.2250% $188,772
15 15 12/15/99 4/15/02 6.3100% $53,480
16 10 10/27/98 5/15/02 6.2900% $37,906
17 15 4/17/00 5/15/02 6.7150% ($45,038)
18 355 11/15/99 6/15/02 6.1200% $1,596,296
19 10 2/16/99 7/15/02 6.2700% $58,608
20 20 9/15/98 8/15/02 6.1700% $85,317
21 140 7/15/98 12/15/02 6.2400% $675,186
22 40 6/15/00 12/15/02 7.1125% ($743,566)
23 30 8/25/98 2/15/03 6.3900% $92,978
24 15 10/15/98 2/15/03 6.3800% $58,156
25 10 11/16/98 2/15/03 6.3900% $33,309
26 50 12/15/98 2/15/03 6.2840% $274,927
27 15 2/15/00 3/15/03 6.3965% $60,334
28 15 1/18/00 3/15/03 6.3850% $52,628
29 40 6/1/99 3/15/03 6.2200% $233,926
30 20 12/21/99 3/15/03 6.5875% ($55,062)
31 0 4/15/01 4/15/03 7.1850% ($246,533)
32 50 6/21/99 6/15/03 6.3100% $261,558
33 65 7/15/99 8/15/03 6.2900% $326,889
34 15 1/18/00 10/15/03 6.4650% $22,124
35 30 8/17/99 11/15/03 6.3300% $159,271
36 0 12/15/00 11/15/03 7.3625% ($684,572)
37
<PAGE>
37 25 4/26/00 11/15/03 6.6975% ($66,514)
38 15 9/20/00 11/15/03 6.5625% ($55,180)
39 20 3/24/00 12/15/03 6.8450% ($193,966)
40 145 5/15/00 1/15/04 7.2995% ($901,582)
41 80 6/26/00 2/15/04 6.9775% ($280,116)
42 45 8/15/00 2/15/04 6.7700% ($317,542)
43 95 8/18/00 4/15/04 6.7700% ($101,730)
44 0 4/17/01 5/15/04 6.8290% ($212,325)
----------
1,077,322
</TABLE>
(i) While some of the above may have a fixed notional amount, many amortise
over the period to the final maturity date.
(ii) Each of the above Swaps is calculated on a monthly fixed actual/360
adjusted basis, with the exception of Swap No. 8 which is calculated on a
monthly fixed 30/360 unadjusted basis.
(iii) Under all Swaps, Airplanes Group receives floating at one month LIBOR,
which resets monthly.
Pursuant to a decision of the Directors of Airplanes Limited and the Controlling
Trustees of Airplanes Trust on November 8, 1999, Airplanes Group either
re-couponed or unwound and replaced thirty of its portfolio of forty four Swaps.
Twenty of these Swaps were adjusted so that Airplanes Group's fixed payment rate
more closely reflected current market rates. Airplanes Group received a net cash
payment of $9.33 million with respect to these twenty Swaps. In addition, ten of
the thirty Swaps were terminated, in return for a net payment to Airplanes Group
of $1.92 million. In aggregate therefore, Airplanes Group received a net cash
inflow of $11.25 million, but will now have higher ongoing swap costs as a
result of re-calibrating the Swaps to current market rates. Simultaneously with
these terminations, Airplanes Group put in place a replacement Swap to maintain
a fully hedged position. These adjustments and terminations released the
positive value in Airplanes Group's Swaps and allowed that value to be available
to be applied to additional payments of the Class A Principal Adjustment Amount.
These transactions were conducted in accordance with Airplanes Group's interest
rate risk management policies.
The realized gain on the termination of these Swaps has been deferred and is
being recognized over the life of the hedged transaction in accordance with the
guidance provided in ET Issue No. 84-7, "Termination of Interest Rate Swaps".
Additional interest rate exposure will arise to the extent that lessees owing
fixed rate rental payments default and interest rates have declined between the
contract date of the lease and the date of default. This exposure is managed
through the purchase of Swaptions. Airplanes Group purchases Swaptions which, if
exercised, will allow Airplanes Group to enter into interest rate swap
transactions under which it will pay floating amounts and received fixed
amounts. These Swaptions can be exercised in the event of defaults by lessees
owing fixed rate rental payments in circumstances where interest rates have
declined since the contract date of such leases. Because not all lessees making
fixed rate rental payments are expected to default and not all lessee defaults
are expected to occur following a decline in interest rates, Airplanes Group
purchases Swaptions in aggregate in a notional amount less than the full extent
of the
38
<PAGE>
exposure associated with the lessees making fixed rate rental payments.
This notional amount (the 'Target Hedge') will be varied from time to time to
reflect, inter alia, changes in the mix of payment bases under future leases and
in the prevailing level of interest rates. From time to time the Administrative
Agent may also sell at market value or unwind part or all of the outstanding
Swaptions, for example, to reflect any decreases in the Target Hedge. In the
period from March 28, 1996 to September 30, 2000, Airplanes Group purchased
Swaptions for interest rate swaps with an aggregate notional principal balance
of $483 million and sold Swaptions with an aggregate notional principal balance
of $194 million. The net aggregate notional principal balance of Swaptions at
September 30, 2000 therefore amounted to $289 million. The fair values of the
Swaptions at September 30, 2000 was $0.1 million.
Airplanes Group Swaption Book at September 30, 2000
<TABLE>
Notional amount
Swaption as at September 30, 2000 (i) Effective Final Fixed Rate Estimated Far Market
No. ($ Millions) Date Maturity Date Receivable (ii) Value as at
September 30, 2000
<S> <C> <C> <C> <C> <C>
1 4 05/15/98 10/15/00 5.000% 1
2 10 03/16/98 10/15/00 5.000% 1
3 25 09/15/98 11/15/00 5.200% 1
4 7 02/17/98 01/15/01 5.000% 1
5 24 01/15/98 05/15/01 5.000% 2,662
6 50 09/15/98 12/15/01 5.300% 7,131
7 30 01/15/98 04/15/02 5.000% 48,787
8 14 04/15/98 09/15/02 5.100% 9,977
9 20 02/17/98 09/15/02 5.100% 14,252
10 15 03/16/98 03/15/03 5.100% 591
11 50 07/15/98 03/15/03 5.100% 1,970
12 20 04/15/98 06/15/03 5.100% 4,374
13 10 09/15/98 09/15/03 5.300% 12,719
14 10 02/16/99 02/15/04 5.400% 6,627
--- -------
289 109,094
=== =======
</TABLE>
(i) Under each Swaption, if exercised, Airplanes Group would receive fixed
amounts at the rate indicated above on a monthly fixed 30/360 unadjusted
basis.
(ii) Under each Swaption, if exercised, Airplanes Group would pay floating
amounts at one month LIBOR, which resets monthly.
Through the use of the Swaps, Swaptions and other interest rate hedging
products, it is Airplanes Group's policy not to be adversely exposed to material
movements in interest rates. There can be no assurance, however, that Airplanes
Group's interest rate risk management strategies will be effective in this
regard.
The Directors of Airplanes Limited and the Controlling Trustees of Airplanes
Trust are responsible for reviewing and approving the overall interest rate
management policy and transaction authority limits. Specific hedging contracts
are approved by officers of the Administrative Agent acting within the overall
policies and limits. Counterparty risk is monitored on an ongoing basis.
Counterparties are subject to the prior approval of the Directors of Airplanes
Limited and the Controlling Trustees of Airplanes Trust. Airplanes Group's
counterparties consist of the affiliates of major U.S. and European financial
institutions
39
<PAGE>
which have credit ratings, or which provide collateralisation arrangements,
consistent with maintaining the ratings of the Class A Notes.
The quantitative disclosure and other statements in this section are
forward-looking statements that involve risks and uncertainties. Although
Airplanes Group's policy is to limit its exposure to changes in interest rates,
it could suffer higher cashflow losses as a result of actual future changes in
interest rates. It should also be noted that Airplanes Group's future exposure
to interest rate movements will change as the composition of its lease portfolio
changes or if it issues new subclasses of additional notes or refinancing notes
with different interest rate provisions from the Notes. Please refer to "Risk
Factors" in the Airplanes Group Form 10-K filed with the SEC on June 29, 2000
for more information about risks, especially lessee credit risk, that could
intensify Airplanes Group's exposure to changes in interest rates.
40
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
VASP
On November 5, 1992, AerFi obtained a preliminary injunction for repossession
and export of thirteen aircraft and three spare engines (the "Repossessed
Assets") from VASP, a Brazilian airline, which had defaulted under its lease
agreements with AerFi. On May 10, 1993, at a full hearing, the Brazilian courts
gave a decision fully validating the repossession injunction. VASP appealed this
decision to the High Court of the State of Sao Paolo (the "High Court"). On
December 18, 1996, the High Court found in favor of VASP in its appeal against
the court order granting AerFi repossession and export of the Repossessed
Assets. AerFi was instructed to return the Repossessed Assets for lease by VASP
under the terms of the original lease agreements between AerFi and VASP, within
thirty days of notification by VASP that it requires return of the assets. The
decision of the High Court was stayed pending a number of clarificatory motions
by both sides before the same court. In responding to those motions, the High
Court granted VASP the right to seek damages against AerFi in lieu of the return
of the Repossessed Assets. AerFi is appealing the December 1996 decision and the
court's responses to the clarificatory motions. As part of its appeals, AerFi
filed a recession action with the High Court which seeks to overturn the
decisions of the High Court and which seeks a stay on the December 1996 decision
pending determination of its recession action.
Seven of the thirteen aircraft which were repossessed by AerFi from VASP
following the 1992 injunction and the 1993 decision are now owned by Airplanes
Group although none of them are habitually based in Brazil. However, a number of
these aircraft operate into Brazil from time to time. The judgment of the High
Court only applies to those assets which are the subject matter of the
proceedings. VASP sought to have AerFi return the Repossessed Assets, in
connection with which the High Court served notice on AerFi for return of the
Repossessed Assets for the account, and at the risk, of VASP. AerFi has
challenged a number of matters relating to the notice, including its validity.
In addition, VASP filed a petition for calculation of the amount which it
alleges should be paid by AerFi, based on the High Court decision, seeking
damages in respect of (i) AerFi's alleged failure to comply with the court order
requiring return of the Repossessed Assets and (ii) the period during which VASP
was prevented from using the Repossessed Assets. AerFi has challenged VASP's
petition on the basis that if VASP believes it has an action for alleged damages
against AerFi in respect of the period during which VASP was prevented from
using the Repossessed Assets, VASP must commence such an action in accordance
with normal Brazilian court procedures before a court of first instance. These
preliminary matters still await a decision by the lower court. Before the High
Court, AerFi successfully challenged VASP's petition for calculation of alleged
damages arising from AerFi's alleged failure to comply with the court order
requiring return of the Repossessed Assets. As a consequence, VASP, should it
seek to recover such alleged damages, will have to prove the existence and
extent of its alleged damages. The only immediate risk to the Repossessed Assets
would arise where they are located in Brazil and where VASP was successful in
enforcing its judgement having sought repossession rather than damages.
41
<PAGE>
In January 2000, the High Court, pending further consideration of AerFi's
recession action, stayed all proceedings by VASP which seek to implement the
1996 decision.
AerFi has informed Airplanes Group that it has been advised that the December
1996 decision of the High Court in this matter is incorrect as a matter of
Brazilian law. AerFi has further informed Airplanes Group that it is actively
pursuing all courses of action that may be available to it, including appeals to
superior courts and intends to defend its position vigorously and to pursue each
of its claims and counter claims against VASP. AerFi has advised Airplanes Group
that it believes the outcome of these matters will not have a material adverse
effect on Airplanes Group's liquidity, results of operations or financial
condition.
Other Matters
Prior to the transfer of the Class E Notes held by AerFi Group and its
subsidiary, AerFi Inc. to General Electric Capital Corporation, AeroUSA, Inc.
and AeroUSA 3, Inc., both Connecticut corporations, filed United States federal
consolidated tax returns and certain state and local tax returns with AerFi,
Inc., and its subsidiaries. There are ongoing tax audits by certain state and
local tax authorities with respect to taxes previously reported by AerFi, Inc.
and its subsidiaries. AerFi believes that none of these audits will have a
material adverse impact upon the liquidity, results of operations, financial
condition or liquidity of AeroUSA Inc or AeroUSA 3, Inc.
Subsequent to November 20, 1998, AeroUSA Inc. and AeroUSA 3, Inc. file
consolidated United States federal tax returns and certain state and local tax
returns with General Electric Capital Corporation, such returns being filed on a
calendar basis. In addition, on November 20, 1998, Airplanes Trust entered into
a Tax Sharing Agreement with General Electric Capital Corporation which is
substantially similar to the Tax Sharing Agreement between Airplanes Trust and
AerFi which was in place prior to that date, and which terminated on November
20, 1998, except with respect to those provisions relating to the position prior
to the date on which AeroUSA, Inc. and AeroUSA 3, Inc. were deconsolidated from
AerFi Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.2 Memorandum and Articles of Association of Airplanes
Limited (incorporating all amendments up to and
including September 29, 2000).
3.3 Amendment dated September 29, 2000 by and among
Wilmington Trust Company, as Delaware Trustee, and
the Controlling Trustees referred to therein, to the
Airplanes US Trust Amended and Restated Trust
Agreement among AerFi Inc., as Settlor, Wilmington
Trust Company and the Controlling Trustees.
27.1 Financial Data Schedule of Airplanes Limited
27.2 Financial Data Schedule of Airplanes U.S. Trust
(b) Reports on Form 8-K: Filed for event dates July 17, 2000;
August 15, 2000; September 15, 2000 (relating to the monthly
report to holders of the Certificates).
42
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
each registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 14, 2000 AIRPLANES LIMITED
By: /s/ WILLIAM M. MCCANN
--------------------------
William M. McCann
Director and Principal
Accounting Officer
Date: November 14, 2000 AIRPLANES U.S. TRUST
By: /s/ WILLIAM M. MCCANN
--------------------------
William M. McCann
Controlling Trustee and
Principal Accounting Officer
<PAGE>
AIRPLANES LIMITED AND AIRPLANES U.S. TRUST
INDEX TO EXHIBITS
EXHIBIT NUMBER
27.1 Financial Data Schedule of Airplanes Limited
27.2 Financial Data Schedule of Airplanes U.S. Trust
<PAGE>
Appendix 1
Airplanes Group Portfolio
Particulars of the Portfolio as of September 30, 2000 by reference to Appraised
Value at February 18, 2000 are contained in the table below
<TABLE>
Appraised
Date of Value at
Aircraft Engine Serial Manufacture February 18,
Region Country Lessee Type Configuration Number Conversion (US$000's)
------ ------- ------ ---- ------------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Africa Tunisia Nouvelair Tunisie MD83 JT8D-219 49672 1-Jul-88 18,507
Tunisia Tuninter B737-300 CFM56-3C1 24905 1-Feb-91 22,473
Asia & Far East China China Southern B737-500 CFM56-3C1 24897 26-Feb-91 18,467
China China Southern B737-500 CFM56-3C1 25182 3-Feb-92 19,990
China China Southern B737-500 CFM56-3C1 25183 14-Feb-92 19,760
China China Southern B737-500 CFM56-3C1 25188 12-Mar-92 19,687
China Xiamen B737-200QC JT8D-17A 23066 9-Dec-83 7,497
China Xinjiang B757-200 RB211-535E4- 26156 25-Nov-92 39,423
India Jet Airways (India) Pvte Ltd. B737-500 CFM56-3C1 25191 10-Apr-92 19,020
Indonesia PT Mandala Airlines B737-200A JT8D-15 22278 19-Mar-80 5,077
Indonesia PT Mandala Airlines B737-200A JT8D-17A 22803 14-Feb-83 5,623
Indonesia PT Mandala Airlines B737-200A JT8D-17A 22804 1-Feb-83 5,487
Indonesia PT Mandala Airlines B737-200A JT8D-17A 23023 30-Mar-83 6,047
Malaysia Air Asia Sdn. Bhd. B737-300 CFM56-3C1 24907 1-Mar-91 22,330
Pakistan Pakistan Int Airline A300-B4-203 CF6-50C2 269 11-Aug-83 10,417
Philippines Philippine Airlines B737-300 CFM56-3B1 24770 1-Oct-90 20,480
South Korea Asiana Airlines B737-400 CFM56-3C1 24493 14-Jul-89 21,397
South Korea Asiana Airlines B737-400 CFM56-3C1 24520 21-Dec-89 23,060
Taiwan Far Eastern Air Transport MD83 JT8D-219 49950 1-Nov-91 21,123
Australia & New Australia National Jet Systems DHC8-100 PW121 229 1-Sep-90 5,040
New Zealand Air Nelson METRO-III TPE331-11 705 1-Aug-88 1,087
New Zealand Air Nelson METRO-III TPE331-11 711 1-Mar-88 1,117
New Zealand Air Nelson METRO-III TPE331-11 712 1-Jun-88 1,123
Europe Austria Rheintalflug DHC8-300 PW123 307 1-Dec-91 7,550
Bulgaria Balkan Bulgarian Airlines B737-300 CFM56-3B2 23749 1-May-87 18,907
Bulgaria Balkan Bulgarian Airlines B737-300 CFM56-3B2 23923 1-Apr-88 18,733
France Air France A320-200 CFM56-5A3 203 1-Sep-91 27,730
France Air France A320-200 CFM56 220 1-Sep-91 27,923
France Air Liberte S.A. MD83 JT8D-219 49943 1-Jul-91 20,640
Hungary Malev B737-400 CFM56-3C1 25190 7-Apr-92 25,127
Hungary Malev B737-400 CFM56-3C1 26069 2-Nov-92 25,357
Hungary Malev B737-400 CFM56-3C1 26071 13-Nov-92 25,480
Ireland Transaer International A300-B4-203 CF6-50C2 131 7-Feb-81 10,423
Italy Air One SpA B737-300 CFM56-3C1 25179 12-Feb-92 23,323
Italy Air One SpA B737-300 CFM56-3C1 25187 14-Mar-92 23,047
Italy Eurofly S.P.A MD83 JT8D-219 49390 1-Apr-86 17,327
Italy Eurofly S.P.A MD83 JT8D-219 49631 14-Jun-89 18,467
Italy Meridiana SpA MD83 JT8D-219 49792 1-Nov-89 19,120
Italy Meridiana SpA MD83 JT8D-219 49935 26-Sep-90 21,833
Italy Meridiana SpA MD83 JT8D-219 49951 25-Aug-91 20,960
Macedonia Interimpex-Avioimpex MD83 JT8D-219 49442 29-Apr-87 17,523
Netherlands Schreiner Airways DHC8-300 PW123 232 20-Oct-90 7,017
Netherlands Schreiner Airways DHC8-300 PW123 244 1-Dec-90 7,130
Netherlands Schreiner Airways DHC8-300A PW123 266 20-Mar-91 7,700
Netherlands Schreiner Airways DHC8-300A PW123 276 13-May-91 7,890
Netherlands Schreiner Airways DHC8-300A PW123 283 1-Sep-91 7,997
Netherlands Schreiner Airways DHC8-300A PW123 298 1-Apr-92 8,287
Netherlands Schreiner Airways DHC8-300A PW123 300 1-Apr-92 8,503
Norway Wideroe's Flyveselskap a/s DHC8-300 PW123 293 1-Oct-91 7,600
Norway Wideroe's Flyveselskap a/s DHC8-300 PW123 342 1-Dec-92 7,770
Spain Air Europa B737-400 CFM56-3C1 24906 24-Feb-91 23,120
Spain Air Europa B737-400 CFM56-3C1 24912 14-Jun-91 23,567
Spain Futura B737-400 CFM56-3C1 24689 3-Jul-90 24,130
Spain Futura B737-400 CFM56-3C1 24690 1-Jul-90 24,250
Spain Futura B737-400 CFM56-3C1 25180 21-Jan-92 25,553
Spain Spanair MD83 JT8D-219 49620 1-Jul-88 18,093
Spain Spanair MD83 JT8D-219 49624 1-Aug-88 18,923
Spain Spanair MD83 JT8D-219 49626 22-Oct-88 18,503
Spain Spanair MD83 JT8D-219 49709 1-Dec-88 18,377
Spain Spanair MD83 JT8D-219 49936 6-Oct-90 21,557
Spain Spanair MD83 JT8D-219 49938 1-Dec-90 20,270
Sweden Britannia Airways AB B757-200 RB2110-535E4- 26151 23-Jul-92 39,353
Turkey MNG Airlines Cargo A300-C4-203 CF6-50C2 83 1-May-79 16,787
Turkey Pegasus B737-400 CFM56-3C1 24345 1-Jun-89 22,333
Turkey Pegasus B737-400 CFM56-3C1 24684 1-Apr-90 23,893
Turkey Pegasus B737-400 CFM56-3C1 24687 25-May-90 23,587
Turkey Pegasus B737-400 CFM56-3C1 26081 10-Mar-93 26,293
<PAGE>
Particulars of the Portfolio as of September 30, 2000 by reference to Appraised
Value at February 18, 2000 are contained in the table below
Appraised
Date of Value at
Aircraft Engine Serial Manufacture February 18,
Region Country Lessee Type Configuration Number Conversion (US$000's)
------ ------- ------ ---- ------------- ------ ---------- ----------
Turkey Turk Hava Yollari B737-400 CFM56-3C1 24917 24-Jun-91 24,780
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25181 3-Feb-92 25,093
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25184 2-Mar-92 25,343
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25261 9-Apr-92 24,990
Turkey Turk Hava Yollari B737-500 CFM56-3C1 25288 16-Jun-92 19,773
Turkey Turk Hava Yollari B737-500 CFM56-3C1 25289 12-Jun-92 19,870
Turkey Turk Hava Yollari B737-400 CFM56-3C1 26065 1-May-92 25,010
United Kingdom Airtours A320-200 CFM56 294 2-Apr-92 29,483
United Kingdom Airtours A320-200 CFM56 301 22-Apr-92 29,190
United Kingdom Airtours A320-200 CFM56 348 17-Jun-92 28,743
United Kingdom Airtours A320-200 CFM56-5A3 349 30-Oct-92 29,507
United Kingdom British Midland B737-500 CFM56-3C1 25185 18-Feb-92 19,270
United Kingdom Brymon Airways DHC8-300A PW123 296 1-Oct-91 7,473
United Kingdom Brymon Airways DHC8-300 PW123 334 8-Oct-92 7,507
United Kingdom Titan Airways Limited ATR42-300 PW120 109 14-Oct-88 4,830
United Kingdom Titan Airways Limited ATR42-300 PW120 113 18-Nov-88 5,057
Latin America Antigua Liat DHC8-102 PW120-A 113 1-Sep-88 5,543
Antigua Liat DHC8-100 PW120-A 140 1-Mar-89 4,613
Antigua Liat DHC8-100 PW120-A 144 1-Mar-89 4,907
Antigua Liat DHC8-100 PW120-A 270 1-May-91 5,680
Argentina Aerolineas Argentinas S.A. B737-200A JT8D-17 21192 1-Mar-76 3,827
Argentina LAPA B737-200A JT8D-17 21193 1-Jul-76 4,010
Argentina LAPA B737-200A JT8D-17 21196 1-Jul-76 3,740
Argentina LAPA B737-200A JT8D-15 22368 1-Sep-80 5,100
Argentina LAPA B737-200A JT8D-15 22369 1-Sep-80 5,030
Argentina LAPA B737-200A JT8D-15 22633 1-Mar-81 6,390
Brazil Rio Sul B737-500 CFM56-3C1 25186 11-Mar-92 19,127
Brazil Rio Sul B737-500 CFM56-3C1 25192 14-Apr-92 19,073
Brazil Rio Sul B737-500 CFM56-3C1 26075 23-Oct-92 19,263
Brazil TAM F100 TAY650-15 11304 27-Feb-91 12,980
Brazil TAM F100 TAY650-15 11305 19-Apr-91 13,220
Brazil TAM F100 TAY650-15 11336 5-Jun-91 13,267
Brazil TAM (Meridionais) F100 TAY650-15 11284 31-Jul-90 12,133
Brazil TAM (Meridionais) F100 TAY650-15 11285 1-Aug-90 13,010
Brazil TAM (Meridionais) F100 TAY650-15 11347 1-Oct-91 13,503
Brazil TAM (Meridionais) F100 TAY650-15 11348 6-Aug-91 13,587
Brazil TAM Express S/A. F100 TAY650-15 11371 19-Dec-91 13,840
Brazil VARIG MD11 CF6-80C2-D1F 48499 31-Dec-91 65,727
Brazil VARIG MD11 CF6-80C2-D1F 48500 1-Mar-92 67,820
Brazil VARIG MD11 CF6-80C2-D1F 48501 1-Sep-92 68,740
Chile Aircraft Int. Leasing Limited DC8-71F CFM56-2C1 45810 9-Apr-92 13,940
Chile Aircraft Int. Leasing Limited DC8-71F CFM56-2C1 45970 15-Oct-92 14,617
Chile Aircraft Int. Leasing Limited DC8-71F CFM56-2C1 45976 10-Aug-91 14,377
Chile Lan Chile Airlines B737-200A JT8D-15 22397 1-Feb-81 5,690
Chile Lan Chile Airlines B737-200A JT8D-17A 22407 1-Sep-80 5,390
Chile Lan Chile Airlines B737-200A JT8D-17A 23024 1-May-83 6,690
Chile Lan Chile Airlines B767-300ER PW4060 26204 1-Oct-92 61,840
Colombia ACES ATR42-320 PW121-5A1 284 1-Jan-92 6,570
Colombia Avianca B767-200ER PW4056 25421 14-Jan-92 44,370
Colombia Avianca B757-200 RB211-535E4- 26154 22-Sep-92 38,217
Colombia Avianca MD83 JT8D-219 49939 26-Oct-90 20,487
Colombia Avianca MD83 JT8D-219 49946 18-Jul-91 21,250
Colombia Avianca MD83 JT8D-219 53120 29-Jul-92 21,770
Colombia Avianca MD83 JT8D-219 53125 2-Apr-92 21,067
Colombia Tampa DC8-71F CFM56-2C1 45849 9-Mar-91 14,487
Colombia Tampa DC8-71F CFM56-2C1 45945 19-May-92 14,967
Colombia Tampa DC8-71F CFM56-2C1 46066 24-Apr-91 14,330
Mexico Aeromexico DC9-32 JT8D-17 48125 1-Apr-80 3,883
Mexico Aeromexico DC9-32 JT8D-17 48126 1-Apr-80 4,167
Mexico Aeromexico DC9-32 JT8D-17 48127 1-Jul-80 4,453
Mexico Aeromexico DC9-32 JT8D-17 48128 1-Aug-80 4,357
Mexico Aeromexico DC9-32 JT8D-17 48129 1-Nov-80 4,503
Mexico Aeromexico DC9-32 JT8D-17 48130 1-Dec-80 4,577
Mexico Aeromexico MD82 JT8D-217 49660 1-Mar-88 17,970
Mexico Aeromexico MD82 JT8D-217A 49667 21-Jan-88 17,897
Mexico Aeromexico MD87 JT8D-219 49673 1-Dec-88 13,133
Mexico Mexicana F100 TAY650-15 11266 17-Aug-90 12,300
Mexico Mexicana F100 TAY650-15 11309 16-May-91 13,330
Mexico Mexicana F100 TAY650-15 11319 5-Apr-91 13,087
Mexico Mexicana F100 TAY650-15 11339 1-Jul-91 13,187
Mexico Mexicana F100 TAY650-15 11374 20-Jan-92 13,797
</TABLE>
<PAGE>
Particulars of the Portfolio as of September 30, 2000 by reference to Appraised
Value at February 18, 2000 are contained in the table below
<TABLE>
Date of Appraised
Aircraft Engine Serial Manufacture at February
Region Country Lessee Type Configuration Number Conversion (US$000's)
------ ------- ------ ---- -------------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mexico Mexicana F100 TAY650-15 11375 1-Dec-92 14,080
Mexico Mexicana F100 TAY650-15 11382 1-Jan-93 14,097
Mexico Mexicana F100 TAY650-15 11384 1-Jan-93 14,097
Mexico Mexicana B727-200A JT8D-17R 21346 1-Oct-80 3,800
Mexico Mexicana B727-200A JT8D-17R 21600 1-Nov-80 4,310
Netherlands ALM DHC8-300C PW123 230 1-Feb-91 7,600
Antilles
Netherlands ALM DHC8-300C PW123 242 1-Nov-90 7,450
Antilles
Trinidad & BWIA International MD83 JT8D-219 49789 23-Sep-89 19,203
Tobago
North America Canada AC Leasing A320-200 CFM56-5A1 174 1-Apr-91 26,910
Canada AC Leasing A320-200 CFM56-5A1 175 1-Apr-91 27,007
Canada AC Leasing A320-200 CFM56-5A1 232 1-Oct-91 27,210
Canada AC Leasing A320-200 CFM56-5A1 284 9-Mar-92 28,307
Canada AC Leasing A320-200 CFM56-5A1 309 13-May-92 28,130
Canada AC Leasing A320-200 CFM56-5A1 404 1-Jan-94 30,657
Canada AC Leasing (1) B737-200A JT8D-9A 20958 1-Jan-75 1,200
Canada AC Leasing (1) B737-200A JT8D-9A 20959 1-Nov-74 1,200
Canada AC Leasing (1) B737-200A JT8D-9A 21115 1-Dec-75 1,700
Canada AC Leasing (1) B737-200A JT8D-9A 21639 1-Nov-78 3,271
Canada AC Leasing (1) B737-200A JT8D-9A 21712 1-Feb-79 3,704
Canada AC Leasing (1) B737-200A JT8D-9A 22873 1-Jul-82 6,064
Canada Air Canada B767-300ER PW4060 26200 1-Sep-92 62,023
USA Allegheny Airlines DHC8-100 PW121 258 1-Jan-91 5,877
USA America West B737-300QC CFM56-3B1 23499 1-Jun-86 18,610
USA America West B737-300QC CFM56-3B1 23500 1-Jun-86 18,510
USA American Airlines MD-83 JT8D-219 49941 1-Dec-90 22,327
USA American Airlines MD-83 JT8D-219 49949 5-Aug-91 22,153
USA BAX Global DC8-71F CFM56-2C1 45811 30-May-91 14,730
USA BAX Global DC8-71F CFM56-2C1 45813 28-Apr-92 15,047
USA BAX Global DC8-71F CFM56-2C1 45946 23-Apr-92 13,583
USA BAX Global DC8-71F CFM56-2C1 45971 13-Feb-92 13,960
USA BAX Global DC8-71F CFM56-2C1 45973 27-Feb-92 13,287
USA BAX Global DC8-71F CFM56-2C1 45978 23-Apr-93 14,340
USA BAX Global DC8-71F CFM56-2C1 45993 23-Jun-93 14,433
USA BAX Global DC8-71F CFM56-2C1 45994 1-Sep-94 13,943
USA BAX Global DC8-71F CFM56-2C1 45998 21-May-93 13,350
USA BAX Global DC8-71F CFM56-2C1 46065 12-Jan-92 14,790
USA Emery Worldwide DC8-71F CFM56-2C1 45996 29-Oct-92 14,290
USA Emery Worldwide DC8-71F CFM56-2C1 45997 7-Dec-93 14,097
USA Emery Worldwide DC8-73CF CFM56-2C1 46091 1-Dec-89 18,243
USA Frontier Airlines, Inc. B737-300 CFM56-3B1 23177 1-Apr-86 16,173
USA Hawaiian Airlines DC9-51 JT8D-17 47742 1-Jun-77 3,727
USA Hawaiian Airlines DC9-51 JT8D-17 47784 1-May-79 3,713
USA Hawaiian Airlines DC9-51 JT8D-17 47796 1-Apr-79 4,233
USA Hawaiian Airlines DC9-51 JT8D-17 48122 26-Jan-81 4,723
USA Idefix ATR42-300 PW120 249 1-Jun-91 6,427
USA Polar Air Cargo B747-200BC JT9D-7Q 21730 7-Jun-79 34,611
USA TWA B767-300ER PW4060 25411 15-Jan-92 60,843
USA TWA MD83 JT8D-219 49575 1-Oct-87 18,403
USA Vanguard Airlines B737-200A JT8D-15 21735 1-Jun-79 7,623
USA Vanguard Airlines B737-200A JT8D-15 22979 1-Mar-83 8,913
Others Cyprus Fornax Aircraft Leasing Ltd. B737-200A JT8D-17 21685 1-Jan-79 5,623
Czech Republic Travel Servis B737-400 CFM56-3C1 24911 1-Apr-91 24,147
Kazakstan Air Kazakstan B737-200A JT8D-15 22090 1-May-80 5,890
Kazakstan Air Kazakstan B737-200A JT8D-15 22453 1-Mar-81 6,780
Ukraine Ukraine International B737-200A JT8D-17A 22802 1-Feb-83 7,553
Off Lease Off Lease DHC8-300A PW123 267 4-Apr-91 7,753
Off Lease - LOI Air Canada (2) B767-300ER PW4060 24948 19-Jul-91 56,300
Off Lease - LOI Garuda (2) B737-400 CFM56-3C1 24683 7-Aug-90 23,863
Off Lease - LOI Garuda (2) B737-400 CFM56-3C1 24691 9-Aug-90 23,850
Off Lease - Sale LOI ESC B737-200QC JT8D-17A 23065 15-Oct-96 8,467
European Capital (3) ---------
3,330,139
</TABLE>
Note:
(1) Aircraft Lease Receivable Book Values are used for the Aircraft subject to
Finance Leases (6 in total) rather than the Appraised Values of these Aircraft.
(2) These Aircraft are subject to non binding Letters of Intent for lease and
are scheduled for delivery to the relevant lessee after September 30, 2000.
(3) This Aircraft is subject to a non binding Letter of Intent for sale and is
scheduled for delivery after September 30, 2000.
