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 June 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 June 30, 2000
Airplanes Limited Common Stock, $1.00 par value 30
<PAGE>
Airplanes Limited and Airplanes U.S. Trust
Form 10-Q for the Three Month Period Ended June 30, 2000
Index
Part I. Financial Information Page No.
Item 1. Financial Statements (Unaudited) 3
o Unaudited Condensed Balance Sheets - June 30, 2000 and
March 31, 2000
o Unaudited Condensed Statements of Operations -
Three Months Ended June 30, 2000 and June 30, 1999
o Unaudited Condensed Statements of Changes in Shareholders
Deficit/Net Liabilities - Three months Ended June 30, 2000
and June 30, 1999
o Unaudited Condensed Statements of Cash Flows - Three
Months Ended June 30, 2000 and June 30, 1999
o Notes to the Unaudited Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risks 29
Part II. Other Information
Item 1. Legal Proceedings 34
Item 6. Exhibits and Reports on Form 8 - K 35
Signatures
Index to Exhibits
Appendix 1 Airplanes Group Portfolio
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
AIRPLANES GROUP
UNAUDITED CONDENSED BALANCE SHEETS
<TABLE>
March 31, June 30,
------------------------------ -------------------------------
2000 2000
------------------------------ -------------------------------
Airplanes Airplanes Airplanes Airplanes
Limited Trust Combined Limited Trust Combined
--------- --------- -------- --------- --------- --------
($millions) ($millions)
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Cash 197 6 203 187 6 193
Accounts receivable
Trade receivables 24 8 32 23 9 32
Allowance for doubtful debts (10) (5) (15) (14) (6) (20)
Amounts due from Airplanes Limited - 28 28 - 26 26
Net investment in capital and sales
type leases 15 - 15 13 - 13
Aircraft, net 2,697 235 2,932 2,656 231 2,887
Other assets 3 8 11 8 8 16
------- ------- ------- ------- ------- -------
Total assets 2,926 280 3,206 2,873 274 3,147
======= ======= ======= ======= ======= =======
LIABILITIES
Accrued expenses and other liabilities 807 74 881 870 80 950
Amounts due from Airplanes Trust 28 - 28 26 - 26
Indebtedness 3,313 323 3,636 3,285 321 3,606
Provision for maintenance 258 16 274 254 14 268
Deferred income taxes 66 48 114 64 48 112
------- ------- ------- ------- ------- -------
Total liabilities 4,472 461 4,933 4,499 463 4,962
------- ------- ------- ------- ------- -------
Net liabilities (1,546) (181) (1,727) (1,626) (189) (1,815)
------- ------- ------- ------- ------- -------
2,926 280 3,206 2,873 274 3,147
======= ======= ======= ======= ======= =======
</TABLE>
3
<PAGE>
AIRPLANES GROUP
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended June 30,
----------------------------------------------------------------
1999 2000
------------------------------ ------------------------------
Airplanes Airplanes Airplanes Airplanes
Limited Trust Combined Limited Trust Combined
--------- --------- -------- --------- --------- --------
($millions) ($millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Aircraft leasing 118 11 129 106 10 116
Aircraft sales 2 - 2 1 - 1
Other income 1 - 1 - - -
Expenses
Cost of Aircraft sold (1) - (1) (1) - (1)
Depreciation and amortisation (39) (4) (43) (39) (4) (43)
Net interest expense (100) (10) (110) (115) (12) (127)
Provision for maintenance (14) (1) (15) (11) - (11)
Bad and doubtful debts (8) (1) (9) (4) (1) (5)
Provision for loss making leases, net 3 - 3 (3) - (3)
Other lease costs (3) - (3) (8) - (8)
Selling, general and administrative
expenses (8) (1) (9) (8) (1) (9)
------- ------- ------- ------- ------- -------
Operating (loss) before
provision for income taxes (49) (6) (55) (82) (8) (90)
Income tax benefit/(charge) (2) - (2) 2 - 2
------- ------- ------- ------- ------- -------
Net (loss) (51) (6) (57) (80) (8) (88)
======= ======= ======= ======= ======= =======
</TABLE>
4
<PAGE>
AIRPLANES GROUP
UNAUDITED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT/NET LIABILITIES
<TABLE>
Three Months Ended June 30, 1999 and June 30, 2000
Airplanes Limited Airplanes Trust Combined
------------------------------------- --------------- ------------
Share Net Shareholders' Net Shareholders
Capital Liabilities Deficit Liabilities Deficit/ Net
Liabilities
------------------------------------- ----------- ------------
($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 51 51 6 57
------- ------- ------- ------- -------
Balance at June 30, 1999 - 1,362 1,362 169 1,531
======= ======= ======= ======= =======
Balance at March 31, 2000 - 1,546 1,546 181 1,727
Net loss for the period 80 80 8 88
------- ------- ------- ------- -------
Balance at June 30, 2000 - 1,626 1,626 189 1,815
======= ======= ======= ======= =======
</TABLE>
5
<PAGE>
AIRPLANES GROUP
UNAUDITED CONDENSED STATEMENTS OF CASHFLOWS
<TABLE>
Three Months Ended June 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 (51) (6) (57) (80) (8) (88)
Adjustment to reconcile (net loss)
to net cash provided by operating
activities:
Depreciation and amortisation 39 4 43 39 4 43
Aircraft maintenance, net 3 - 3 (2) (2) (4)
Profit on disposal of aircraft (1) - (1) - - -
Deferred income taxes 2 - 2 (2) - (2)
Provision for loss making leases (3) - (3) 3 - 3
Provision for bad debts 8 1 9 4 1 5
Accrued and deferred interest expense 52 5 57 67 7 74
Changes in operating assets & liabilities:
Accounts receivable (17) 2 (15) (1) 1 -
Intercompany account movements 2 (2) - 2 (2) -
Other accruals and liabilities (3) - (3) (12) 2 (10)
Other assets (2) - (2)
------- ------- ------- ------- ------- -------
Net cash provided by operating activities 31 4 35 16 3 19
======= ======= ======= ======= ======= =======
Cash flows from investing activities
Purchase/Sale of aircraft 2 - 2 1 - 1
Intercompany movements - Airplanes Group
Capital and sales type leases 2 - 2 1 - 1
------- ------- ------- ------- ------- -------
Net cash provided by investing activities 4 - 4 2 - 2
======= ======= ======= ======= ======= =======
Cash flows from financing activities
Decrease in indebtedness (43) (4) (47) (28) (3) (31)
------- ------- ------- ------- ------- -------
Net cash used in financing activites (43) (4) (47) (28) (3) (31)
======= ======= ======= ======= ======= =======
Net decrease in cash (8) - (8) (10) - (10)
Cash at beginning of period 218 6 224 197 6 203
------- ------- ------- ------- ------- -------
Cash at end of period 210 6 216 187 6 193
======= ======= ======= ======= ======= =======
Cash paid in respect of:
Interest 51 5 56 48 5 53
======= ======= ======= ======= ======= =======
</TABLE>
6
<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 June 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.
7
<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 June 30, 2000
and for the three month periods ending June 30, 2000 and June 30, 1999. Such
adjustments are of a normal, recurring nature. The results of operations for
the three months ended June 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. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS No. 133") 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. 133. Airplanes Group is required to implement SFAS No. 133 by April
1, 2001.
The accompanying financial statements of Airplanes Limited and Airplanes Trust
(pages 3 to 8) 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.
8
<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 June 30, 2000,
30 of these Aircraft had been sold and one Aircraft had suffered a constructive
total loss. At June 30, 2000, 192 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
9
<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. Airplanes Group
has 28 Aircraft to remarket before June 30, 2001. These include (6 x B737
300's/400's, 6 x B727/B737-200A's, 5 x DHC 8-300's, 6 x MD83's and 1 x
B767-300). 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 Servicer is in discussions with two lessees concerning lease
receivables which may result in the Aircraft being repossessed. In the event
that the Servicer decides to repossess these Aircraft, Airplanes Group would
have additional Aircraft to place in the current market environment.
At June 30, 2000, five lessees operated thirteen Aircraft representing 9.10% 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 recent weakness in the value of the Deutsche Mark, the principal
currency in which Turkish Airlines receive their revenues (when compared
against the US dollar), may affect the ability of the Airlines to meet the US
dollar denominated rental and other payments due under the leases. Since June
30, 2000, the Servicer, on behalf of Airplanes Group, has repossessed two
B737-400 Aircraft, representing 1.43% of the Aircraft by Appraised Value from
one Turkish lessee. At June 30, 2000 the lessee was $3.0 million in arrears.
10
<PAGE>
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 have 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 US
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 June
30, 2000, Airplanes Group leased 64 Aircraft representing 29.67% 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 US dollar denominated
rental payments under the leases. During the three months ended June 30, 2000,
one lessee with whom the Servicer, on behalf of Airplanes Group, previously
entered into a restructuring agreement, had again failed to meet all of its
obligations under its leases. The Servicer is currently in discussion with the
lessee in respect of these matters, which may result in Aircraft being
repossessed.
At June 30, 2000, an Irish lessee of one Aircraft, representing 0.31% of the
Portfolio by Appraised Value was $4.2 million in arrears. A rescheduling of the
lessee's balance had been negotiated between the lessee and the Servicer, under
which the lessee undertook to repay the debt during July 2000. However, the
lessee has not made payments in accordance with the rescheduling agreement, and
as a result the Servicer is in discussions with the lessee.
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 June 30, 2000, Airplanes Group leased 17 Aircraft,
representing 8.55% of its portfolio by Appraised Value, to operators in Asia
and the Far East.
11
<PAGE>
The U.S. Federal Aviation Administration (the "FAA") recently issued an AD
concerning insulation for the purpose of increasing fire safety on MD-80 and
MD-11 aircraft. At June 30, 2000, 21.9% of the Aircraft in the portfolio by
Appraised Value were MD11s and MD80s. Airplanes Group could incur significant
costs in ensuring the Aircraft comply with these standards which could impact
adversely on Airplanes Group's results of operations. It is currently not clear
whether, or to what extent, manufacturers, owners or lessees would be
responsible for the costs necessary to bring aircraft in compliance with such
new standards.
12
<PAGE>
Results of Operations - Three Months Ended June 30, 2000 Compared with Three
Months Ended June 30, 1999.
Airplanes Group's results for the three months ended June 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 $19 million in cash from operations in the three months to June 30,
2000 compared to $35 million in the same period of the previous year. The
decrease in cash generated from operations in the three month period to June
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 June 30,
2000 and previous Aircraft sales. In addition, there was a net outflow of
maintenance reserves in the three months to June 30, 2000 as compared with a
net inflow in the three months to June 30, 1999. There was a net loss after
taxation for the three months to June 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 June 30, 1999 of $57 million (Airplanes
Limited: $51 million; Airplanes Trust: $6 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.
Leasing Revenues
Leasing revenues (which include maintenance reserve receipts which Airplanes
Group receives from certain of its lessees) for the three months ended June 30,
2000 were $116 million (Airplanes Limited: $106 million; Airplanes Trust: $10
million) compared with $129 million (Airplanes Limited: $118 million; Airplanes
Trust: $11 million) for the three months ended June 30, 1999. The decrease in
2000 was primarily attributable to the reduction in the number of Aircraft on
lease in the period to June 30, 2000, as a consequence of a greater number of
Aircraft off lease during the three months ended June 30, 2000 and to a lesser
extent, previous Aircraft sales. At June 30, 2000, Airplanes Group had 192 of
its 198 Aircraft on lease (Airplanes Limited: 174 Aircraft; Airplanes Trust: 18
Aircraft) compared to 200 of its 201 Aircraft on lease (Airplanes Limited: 182
Aircraft; Airplanes Trust: 18 Aircraft) at June 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 three months ended June 30, 2000. Sales revenues of $2 million
(Airplanes Limited: $2 million; Airplanes Trust: Nil) 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 three months ended June
30, 1999. The net book values of the Aircraft sold were $1 million (Airplanes
Limited: $1 million, Airplanes Trust: Nil) in the period ended June 30, 2000
and June 30, 1999.
Depreciation and Amortization
The charge for depreciation and amortization in the three months ended June 30,
2000 amounted to $43 million (Airplanes Limited: $39 million; Airplanes Trust:
$4 million) which is comparable with $43 million (Airplanes Limited: $39
million; Airplanes Trust: $4 million) for
13
<PAGE>
the comparative period in 1999.
Net Interest Expense
Net interest expense was $127 million (Airplanes Limited: $115 million;
Airplanes Trust: $12 million) in the three month period ended June 30, 2000
compared to $110 million (Airplanes Limited: $100 million; Airplanes Trust: $10
million) in the three month period ended June 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 June 30, 2000 being
offset by a higher interest rate. In addition, the net interest expense for the
three month period ended June 30, 1999 included an expense of $1 million
recognised on the value of swaptions.
The weighted average interest rate on the Class A - D Notes during the three
months to June 30, 2000 was 7.44% and the average debt in respect of the Class
A - D Notes outstanding during the period was $2,501 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 June 30, 1999
was 6.34% and the average debt in respect of the Class A - D Notes outstanding
during the period was $3,239 million.
The difference for the three months ended June 30, 2000 in Airplanes Group's
net interest expense of $127 million (Airplanes Limited: $115 million;
Airplanes Trust: $12 million) and cash paid in respect of interest of $53
million (Airplanes Limited: $48 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 June 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 June 30, 1999 (Airplanes Limited: $3 million;
Airplanes Trust: Nil).
At June 30, 2000, Airplanes Group had options on interest rate swaps
("Swaptions") with a notional principal of $289 million.
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 June 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 $5 million
in respect of bad and doubtful debts (Airplanes Limited: $4 million; Airplanes
Trust: $1 million) in the three months ended June 30, 2000, compared with an
overall net charge of $9 million for the three months ended June 30, 1999
(Airplanes Limited: $8 million; Airplanes Trust: $1 million). The net charge in
the three months ended
14
<PAGE>
June 30, 2000 was primarily as a result of provisions in respect of one Turkish
lessee, one Colombian lessee and one Irish 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 three months
to June 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 on lease to a North American lessee. Consequently, there
was an overall net charge of $3 million (Airplanes Limited: $3 million;
Airplanes Trust: $Nil million) in respect of `loss making' leases in the three
months ended June 30, 2000, compared with the three month period to June 30,
1999, where there was an overall net release of $3 million (Airplanes Limited:
$3 million; Airplanes Trust: $Nil million).
Other Lease Costs
Other lease costs, comprising mainly Aircraft related technical expenditure, in
the three months ended June 30, 2000 amounted to $8 million (Airplanes Limited:
$8 million; Airplanes Trust: $Nil million) compared to other lease costs of $3
million (Airplanes Limited: $3 million; Airplanes Trust: Nil) in the three
months to June 30, 1999. The increase in the three months ended June 30, 2000
is attributable to an increased number of Aircraft being remarketed during the
three months ended June 30, 2000. Included in the three months ended June 30,
2000 is 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 June
30, 2000 amounted to $9 million (Airplanes Limited: $8 million; Airplanes
Trust: $1 million). This is a comparable expense to that incurred in the three
months to June 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 June 30, 2000 and
the three months to June 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 June 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 June 30, 1999.
15
<PAGE>
Operating Loss
The operating loss for the three months ended June 30, 2000 was $90 million
(Airplanes Limited: $82 million; Airplanes Trust: $8 million) compared with an
operating loss of $55 million for the three months ended June 30, 1999
(Airplanes Limited: $49 million; Airplanes Trust: $6 million). Airplanes
Limited and Airplanes Trust are expected to continue to report substantial
losses in the future.
Taxes
There was a tax credit of $2 million (Airplanes Limited: $2 million; Airplanes
Trust : Nil) required in the three months to June 30, 2000, as compared with a
tax charge of $2 million (Airplanes Limited: $2 million, Airplanes Trust: $Nil)
for the three months ended June 30, 1999.
Net Loss
The net loss after taxation for the three months ended June 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 June 30, 1999 of $57
million (Airplanes Limited: $51 million; Airplanes Trust: $6 million).
16
<PAGE>
Financial Resources and Liquidity
(a) Commentary on Statement of Cashflows
There was an overall net decrease in cash of $10 million for the three
months to June 30, 2000, compared with a net decrease in cash of $8
million for the three months to June 30, 1999.
Liquidity
The cash balances at June 30, 2000 amounted to $193 million (Airplanes
Limited: $187 million; Airplanes Trust: $6 million) compared to cash
balances at June 30, 1999 of $203 million (Airplanes Limited: $197
million; Airplanes Trust: $6 million.)
Operating Activities
Net cash provided by operating activities in the three months ended June
30, 2000 amounted to $19 million (Airplanes Limited: $16 million;
Airplanes Trust: $3 million) compared with $35 million in the three months
ended June 30, 1999 (Airplanes Limited: $31 million; Airplanes Trust: $4
million). This includes cash paid in respect of interest of $53 million in
the three months to June 30, 2000 (Airplanes Limited: $48 million;
Airplanes Trust: $5 million) compared with $56 million in the three months
to June 30, 1999 (Airplanes Limited: $51 million; Airplanes Trust: $5
million). The decrease in cash provided by operating activities in the
three month period to June 30, 2000 is primarily attributable to a
reduction in lease revenues due to Aircraft sales and a greater number of
off lease Aircraft in the three months to June 30, 2000. In addition,
there was an increase in the level of maintenance payments in the three
month period to June 30, 2000.
Investing and Financing Activities
Cash flows from investing activities in the three months to June 30, 2000
reflect the cash provided by capital and sales type leases which was $1
million (Airplanes Limited: $1 million; Airplanes Trust: Nil) as compared
with $2 million in the three months ended June 30, 1999 (Airplanes
Limited: $2 million; Airplanes Trust: Nil). In the three months ended June
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 three months ended June 30, 1999.
Cash flows from financing activities in the three months to June 30, 2000
primarily reflect the repayment of $31 million of principal on Subclass
A-6, Class B and Class C Notes by Airplanes Group (Airplanes Limited: $28
million; Airplanes Trust: $3 million) compared with $47 million of
principal repaid on Subclass A6, Class B and Class C Notes by Airplanes
Group (Airplanes Limited: $43 million; Airplanes Trust: $4 million) in the
three months to June 30, 1999. The decrease in principal repayments in the
three months ended June 30, 2000 as compared to the three months ended
June 30, 1999, is due to a decrease in cash provided by operating
activities as discussed above.
17
<PAGE>
Indebtedness
Airplanes Group's indebtedness consisted of Class A-E Notes in the amount
of $3,606 million (Airplanes Limited: $3,285 million; Airplanes Trust:
$321 million) at June 30, 2000 and $3,796 million (Airplanes Limited:
$3,458 million; Airplanes Trust: $338 million) at June 30, 1999. Airplanes
Group had $591 million Class E Notes outstanding at June 30, 2000 and June
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.
(b) Comparison of Actual Cash Flows versus the 1998 Adjusted Base Case for the
Three Month Period ended July 17, 2000.
The discussion and analysis which follows is based on the results of
Airplanes Limited and Airplanes US 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 the Company's Form 10-K which is on file at the Securities and
Exchange Commission and pages 3 to 8 of this Form 10-Q Report.
For the purposes of this report, the "Three Month Period", comprises
information from the monthly cash reports dated May 15, 2000 through to
July 17, 2000. The financial data in these reports includes cash receipts
from April 12, 2000 (first day of the Collection Period for the May 2000
Report) up to July 11, 2000 (last day of the Collection Period for the
July 2000 Report). Page 26 presents the cumulative cashflow information
from March 1998 to the July 2000 Payment Date. This report, however,
limits its commentary to the Three Month Period.
The March 16, 1998 Offering Memorandum (the "Offering Memorandum") for the
Notes 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 25.
18
<PAGE>
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 generated approximately
$106.9 million in Total Cash Collections, $6.9 million less than the
Adjusted Base Case. This difference is due to a combination of the factors
set out below (the numbers in brackets refer to the line item number shown
on page 24).
[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 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 in exchange for lease extensions.
[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 lower than those assumed in the Adjusted Base Case,
including lease rate adjustments for changes in interest rates on
floating rate leases. This amounted to $1.1 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 $115.6 million,
$1.4 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 $1.5
million in the Current Arrears balance over the Three Month Period.
19
<PAGE>
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 0.4%
of the Adjusted Base Case Lease Rentals in the Three Month Period
resulting in an overall Net Stress-Related Costs assumption of 5.6% of the
Adjusted Base Case Lease Rentals. For the Three Month Period, net
stress-related costs incurred amounted to a net cash outflow of $7.5
million (6.4% of Lease Rentals) compared to $6.6 million outflow assumed
in the Adjusted Base Case, a variance of $1.0 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 $0.8 million
in accordance with these restructurings.
[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
ten off lease Aircraft at various different times during the Three
Month Period and at June 30, 2000, six 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 $0.4 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 experienced no Aircraft repossession costs. Two
B737-400 Aircraft were repossessed from a Turkish lessee in July
2000. However, no costs were incurred in respect of these
repossessions in the Three Month Period.
[14] Net Lease Rentals
20
<PAGE>
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 $106.6 million, $3.8
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
$2.9 million, $0.4 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 6.4% as compared to 5.75% assumed in the Adjusted Base
Case.
[16] Aircraft Sales
$0.6 million was received in respect of the sale of one A300 airframe
during the Three Month Period, $0.3 million less than the Adjusted
Base Case which assumed that all of the proceeds on the sale of that
airframe were received in the Three Month Period. A deposit of $0.3
million had been received in a prior period.
[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 $3.2 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 Note
Payment Period, maintenance revenue will exactly equal maintenance
expenses.
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 $27.3 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.
21
<PAGE>
[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 $12.2 million (or 10.4% of
Lease Rentals) compared to $2.4 million (or 2% of Lease Rentals)
assumed in the Adjusted Base Case. Actual Re-leasing and other
overhead costs have exceeded the Adjusted Base Case assumption
primarily due to high transition costs on Aircraft delivering to new
lessees and the level of 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 fee paid was
$10.5 million, $4.8 million more than assumed in the Adjusted Base
Case, as certain core cashflow and sales incentive fees were paid in
the Three Month Period.
Aircraft Servicer Fees consist of:
$mm
---
Retainer Fee.............................................. 5.5
Minimum Incentive Fee (FY00).............................. 1.5
Core Cashflow/Sales Incentive Fee (FY97 - FY 99).......... 3.5
----
Total Servicer Fee........................................10.5
====
The Retainer Fee is a fixed amount per month per Aircraft and changes
only as Aircraft are sold.
[23] Other Servicer Fees
Other Servicer Fees relate to fees and expenses paid to other Service
providers including the Administrative Agent, financial advisors,
legal advisors, accountants and the directors. In the Three Month
Period, Other Servicer Fees amounted to $4.6 million, $1.5 million
more 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
$57.5 million. This is $3.4 million higher than the Adjusted Base
Case, which assumed interest costs for the Three Month Period to be
$54.1 million. The variance reflects differences in actual amounts
outstanding on each bond class, and a higher than expected level of
average interest rates offset by no interest payments to the
E-Noteholders (refer to Item [33] below). The Adjusted Base Case
assumed LIBOR to be 5.75% whereas the average monthly LIBOR rate was
6.4%.
22
<PAGE>
Airplanes Group had net swap receipts of $0.2 million compared with
costs of $0.1 million assumed in the Adjusted Base Case for the Three
Month Period.
[33] Principal Payments
In the period from March 11, 1998 to July 17, 2000, total principal
payments to investors amounted to $490.4 million, (comprising of
$413.6 million to Class A investors, $46.7 million to Class B
investors, $25.2 million to Class C investors and $4.9 million to
Class D investors), $68.8 million less than assumed in the Adjusted
Base Case. The breakdown of the $68.8 million variance is set out on
page 26. In the Three Month Period, total principal payments to
investors amounted to $24.2 million, (comprising of $23.7 million to
Class A investors and $0.5 million to Class B investors), $24.3
million less than assumed in the Adjusted Base Case. The breakdown of
the $24.3 million variance is set out on page 25.
Applying the declining value assumptions to the original March 1996
fleet appraisal and adjusting for Aircraft sales, the total appraised
value was assumed to be $4,073.0 million at March 15, 1998 and
$3,540.5 million at July 17, 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 this Appraisal is
contained in Appendix 1. Applying the declining value assumptions to
the February 2000 fleet appraisal, the total appraised value was
$3,257.6 million at July 17, 2000.
Based on the appraisals 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 forms 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 appraisals were 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 Three Month Period which arose due to the factors
described above, available cashflows were not sufficient to pay all
of the scheduled Class A Principal Adjustment Amounts in the Three
Month Period. As a result, no payments of the Class C and D Scheduled
Principal Amounts were made in the Three Month Period.
Consequently at July 17, 2000, Class A Principal Adjustment Amounts
outstanding were $15 million and total deferrals of Class C and Class
D Scheduled Principal Amounts amounted to $3.8 million and $1.6
million respectively. 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 are currently suffering
from adverse pressure on market lease rates, or future appraisals
will not lead to further suspension of Class C and Class D Scheduled
Principal Amounts and Class E Minimum Interest Amounts.
23
<PAGE>
<TABLE>
<S> <C> <C> <C>
Note Report Line Name Description
---- ---------------- -----------
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 payments
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.
[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.....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 other service
Overheads...........................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 and paid post
98).................................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>
24
<PAGE>
<TABLE>
Airplanes Cashflow Performance for the Period from April 12, 2000 to July 17, 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**
Case*
<S> <C> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS $M $M $M $M
1 Lease Rentals 117.0 117.0 (0.0) 100.0% 100.0% 0.0% 121.5
2 - Renegotiated Leases (0.3) 0.0 (0.3) (0.2%) 0.0% (0.2%) 0.0
3 - Rental Resets (1.1) 0.0 (1.1) (1.0%) 0.0% (1.0%) 0.0
4 - Other 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
------- -------- ------ ------ ------ ------ --------
5 1 - 4 Contracted Lease Rentals 115.6 117.0 (1.4) 98.8% 100.0% (1.2%) 121.5
6 Movement in Current Arrears Balance (1.5) 0.0 (1.5) (1.2%) 0.0% (1.2%) 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 0.8 0.5 0.3 0.7% 0.4% 0.2% 0.5
10 - AOG (8.7) (4.9) (3.8) (7.5%) (4.2%) (3.2%) (5.1)
11 - Other Leasing Income 0.4 0.0 0.4 0.3% 0.0% 0.3% 0.0
12 - Repossession 0.0 (0.9) 0.9 0.0% (0.8%) 0.8% (1.0)
------- -------- ------ ------ ------ ------ --------
13 8 - 12 Sub-total (7.5) (6.6) (1.0) (6.4%) (5.6%) (0.8%) (6.8)
14 5+6+13 Net Lease Rental 106.6 110.5 (3.8) 91.1% 94.4% (3.3%) 114.7
15 Interest Earned 2.9 2.5 0.4 2.5% 2.1% 0.4% 2.5
16 Aircraft Sales 0.6 0.9 (0.3) 0.5% 0.7% (0.3%) 0.0
17 Net Maintenance (3.2) 0.0 (3.2) (2.7%) 0.0% (2.7%) 0.0
18 Other Receipts 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
------- -------- ------ ------ ------ ------ --------
19 14-18 Total Cash Collections 106.9 113.8 (6.9) 91.4% 97.3% (5.9%) 117.2
------- -------- ------ ------ ------ ------ --------
CASH EXPENSES
Aircraft Operating Expenses
20 - Re-leasing and other overheads (12.2) (2.4) (9.9) (10.4%) (2.0%) (8.4%) (2.4)
SG&A Expenses
21 Aircraft Servicer Fees
- Retainer Fee (5.5) (5.3) (0.1) (4.7%) (4.5%) (0.1%) (5.3)
- Minimum Incentive Fee (1.5) (0.4) (1.1) (1.3%) (0.3%) (1.0%) (0.4)
- Core Cashflow/Sales Incentive
Fee (3.5) 0.0 (3.5) (3.0%) 0.0% (3.0%) 0.0
------- -------- ------ ------ ------ ------ --------
22 21 Sub-total (10.5) (5.7) (4.8) (9.0%) (4.9%) (4.1%) (5.7)
23 Other Servicer Fees and Other
Overheads (4.6) (3.1) (1.6) (4.0%) (2.6%) (1.4%) (3.1)
------- -------- ------ ------ ------ ------ --------
24 22+23 Sub-total (15.1) (8.8) (6.4) (12.9%) (7.5%) (5.4%) (8.8)
------- -------- ------ ------ ------ ------ --------
25 24+20 Total Cash Expenses (27.3) (11.1) (16.2) (23.4%) (9.5%) (13.9%) (11.2)
======= ======== ====== ====== ====== ====== ========
NET CASH COLLECTIONS
26 19 Total Cash Collections 106.9 113.8 (6.9) 91.4% 97.3% (5.9%) 117.2
27 25 Total Cash Expenses (27.3) (11.1) (16.2) (23.4%) (9.5%) (13.9%) (11.2)
28 Movement in Expense Account 2.0 0.0 2.0 1.7% 0.0% 1.7% 0.0
29 Refinancing Expenses (accrued Mar 98) 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0
30 Interest Payments (57.5) (54.1) (3.4) (49.1%) (46.2%) (2.9%) (55.2)
31 Swap Payments 0.2 (0.1) 0.2 0.1% (0.1%) 0.2% (0.1)
------- -------- ------ ------ ------ ------ --------
32 26-31 TOTAL 24.2 48.5 (24.3) 20.7% 41.5% (20.7%) 50.7
======= ======== ====== ====== ====== ====== ========
33 PRINCIPAL PAYMENTS
Subclass A6 23.7 38.6 (14.9) 20.3% 33.0% (12.8%) 40.7
Subclass B 0.5 4.5 (4.0) 0.4% 3.8% (3.4%) 4.6
Subclass C 0.0 3.8 (3.8) 0.0% 3.2% (3.2%) 3.8
Subclass D 0.0 1.6 (1.6) 0.0% 1.4% (1.4%) 1.6
------- -------- ------ ------ ------ ------ --------
Total 24.2 48.5 (24.3) 20.7% 41.5% (20.7%) 50.7
======= ======== ====== ====== ====== ====== ========
Debt Balances at July 17, 2000
Subclass A4 200.0 200.0 200.0
Subclass A6 530.0 481.3 543.0
Subclass A7 550.0 550.0 550.0
Subclass A8 700.0 700.0 700.0
Subclass B 290.3 275.7 281.4
Subclass C 349.8 346.1 346.1
Subclass D 395.1 393.4 393.4
------- -------- --------
3,015.2 2,946.4 3,013.8
======== ======== ========
</TABLE>
25
<PAGE>
<TABLE>
Airplanes Cashflow Performance for the Period from March 11, 1998 to July 17 2000 (28 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**
Case*
<S> <C> <C> <C> <C> <C> <C> <C>
CASH COLLECTIONS $M $M $M $M
1 Lease Rentals 1,093.0 1,093.0 (0.0) 100.0% 100.0% 0.0% 1,127.0
2 - Renegotiated Leases (1.9) 0.0 (1.9) (0.2%) 0.0% (0.2%) 0.0
3 - Rental Resets (15.0) 0.0 (15.0) (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 1,076.0 1,093.0 (17.0) 98.4% 100.0% (1.6%) 1,127.0
6 Movement in Current Arrears Balance (16.3) 0.0 (16.3) (1.5%) 0.0% (1.5%) 0.0
7 less Net Stress Related Costs
8 - Bad Debts (5.2) (11.1) 5.9 (0.5%) (1.0%) 0.5% (11.4)
9 - Deferred Arrears Balance 14.9 14.9 0.0 1.4% 1.4% 0.0% 14.9
10 - AOG (38.9) (46.5) 7.6 (3.6%) (4.3%) 0.7% (48.0)
11 - Other Leasing Income 3.6 0.0 3.6 0.3% 0.0% 0.3% 0.0
12 - Repossession (6.2) (8.9) 2.7 (0.6%) (0.8%) 0.2% (9.1)
------- -------- ------ ------ ------ ------ --------
13 8 - 12 Sub-total (31.8) (51.6) 19.8 (2.9%) (4.7%) 1.8% (53.6)
14 5+6+13 Net Lease Rental 1,028.0 1,041.4 (13.4) 94.1% 95.3% (1.2%) 1,073.4
15 Interest Earned 27.1 23.4 3.7 2.5% 2.1% 0.3% 23.4
16 Aircraft Sales 137.5 137.5 0.0 12.6% 12.6% 0.0% 48.1
17 Net Maintenance (30.3) 0.0 (30.3) (2.8%) 0.0% (2.8%) 0.0
18 Other Receipts 1.0 0.0 1.0 0.1% 0.0% 0.1% 0.0
------- -------- ------ ------ ------ ------ --------
19 14 - 18 Total Cash Collections 1,163.4 1,202.3 (39.0) 106.4% 110.0% (3.6%) 1,144.9
======= ======== ====== ====== ====== ====== ========
CASH EXPENSES
Aircraft Operating Expenses
20 - Re-leasing and other overheads (63.9) (22.2) (41.8) (5.8%) (2.0%) (3.8%) (22.8)
SG&A Expenses
21 Aircraft Servicer Fees
- Retainer Fee (50.1) (49.6) (0.5) (4.6%) (4.5%) (0.0%) (49.6)
- Minimum Incentive Fee (4.5) (3.5) (1.0) (0.4%) (0.3%) (0.1%) (3.5)
- Core Cashflow/Sales Incentive
Fee (3.5) 0.0 (3.5) (0.3%) 0.0% (0.3%) 0.0
------- -------- ------ ------ ------ ------ --------
22 21 Sub-total (58.1) (53.1) (5.1) (5.3%) (4.9%) (0.5%) (53.1)
23 Other Servicer Fees and Other
Overheads (32.1) (28.6) (3.5) (2.9%) (2.6%) (0.3%) (28.6)
------- -------- ------ ------ ------ ------ --------
24 22+23 Sub-total (90.2) (81.7) (8.5) (8.3%) (7.5%) (0.8%) (81.7)
------- -------- ------ ------ ------ ------ --------
25 24+20 Total Cash Expenses (154.1) (103.8) (50.3) (14.1%) (9.5%) (4.6%) (104.5)
======= ======== ====== ====== ====== ====== ========
NET CASH COLLECTIONS
26 19 Total Cash Collections 1,163.4 1,202.3 (39.0) 106.4% 110.0% (3.6%) 1,144.9
27 25 Total Cash Expenses (154.1) (103.8) (50.3) (14.1%) (9.5%) (4.6%) (104.5)
28 Movement in Expense Account 24.7 0.0 24.7 2.3% 0.0% 2.3% 0.0
29 Refinancing Expenses (accrued
Mar 98) (16.8) 0.0 (16.8) (1.5%) 0.0% (1.5%) 0.0
30 Interest Payments (525.5) (537.4) 12.0 (48.1%) (49.2%) 1.1% (546.8)
31 Swap Payments (1.3) (1.9) 0.6 (0.1%) (0.2%) 0.1% (1.9)
------- -------- ------ ------ ------ ------ --------
32 26 - 31 TOTAL 490.4 559.1 (68.8) 44.9% 51.2% (6.3%) 491.7
======= ======== ====== ====== ====== ====== ========
33 PRINCIPAL PAYMENTS
Subclass A5 93.6 93.6 (0.0) 8.6% 8.6% (0.0%) 93.6
Subclass A6 320.0 368.7 (48.7) 29.3% 33.7% (4.5%) 307.0
Subclass B 46.7 61.3 (14.6) 4.3% 5.6% (1.3%) 55.6
Subclass C 25.2 28.9 (3.7) 2.3% 2.6% (0.3%) 28.9
Subclass D 4.9 6.6 (1.6) 0.5% 0.6% (0.2%) 6.6
------- -------- ------ ------ ------ ------ --------
Total 490.4 559.1 (68.8) 44.9% 51.2% (6.3%) 491.7
======= ======== ====== ====== ====== ====== ========
Debt Balances at July 17, 2000
Subclass A4 200.0 200.0 200.0
Subclass A5 0.0 (0.0) (0.0)
Subclass A6 530.0 481.3 543.0
Subclass A7 550.0 550.0 550.0
Subclass A8 700.0 700.0 700.0
Subclass B 290.3 275.7 281.4
Subclass C 349.8 346.1 346.1
Subclass D 395.1 393.4 393.4
------- -------- --------
3,015.2 2,946.4 3,013.8
======= ======== ========
</TABLE>
26
<PAGE>
<TABLE>
Coverage Ratios
Mar-98 Adjusted
Closing Actual Base Case*
------- ------ ----------
<S> <C> <C> <C> <C> <C>
Net Cash Collections 490.4 559.1
Add Back Interest and Swap Payments 526.8 539.4
A Net Cash Collections 1,017.1 1,098.5
(excl. interest and swap
payments)
B Swaps 1.3 1.9
c Class A Interest 302.0 306.8
d Class A Minimum 0.0 0.0
e Class B Interest 46.4 47.0
f Class B Minimum 41.4 31.7
g Class C Interest 69.4 68.8
h Class D Interest 101.3 101.0
I Class A Principal Adjustment 288.9 0.0
j Class C Scheduled 25.2 28.9
k Class D Scheduled 4.9 6.6
l Permitted Aircraft 0.0 0.0
Modifications
m Step-up Interest 0.0 0.0
n Class E Minimum 6.4 13.8
o Class B Supplemental 5.2 29.6
p Class A Supplemental 124.6 462.3
-------- -------
Total 1,017.1 1,098.5
-------- -------
[1] Interest Coverage
Class A 3.4 3.6 = 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 3.4 3.6 = a/(b+c+d)
Class B 2.6 2.8 = a/(b+c+d+e+f)
Class C 1.2 1.9 = a/(b+c+d+e+f+g+h+I+j)
Class D 1.2 1.9 = a/(b+c+d+e+f+g+h+I+j+k)
Loan to Value Ratios (in US dollars)
[3] Expected Portfolio 4,073.0 3,540.5
Value
[4] Adjusted Portfolio Value 3,257.6
Liquidity Reserve Amount
Of which - Cash 174.4 157.1 174.4
- Accrued Expenses 12.0
- Letters of Credit held
------- ------- -------
Subtotal 174.4 169.1 174.4
Less Lessee Security Deposits 54.4 37.1 54.4
------- ------- -------
Subtotal 120.0 132.0 120.0
------- ------- -------
[5] Total Asset Value 4,193.0 3,389.6 3,660.5
Note Balances as at July 17,
2000
Class A 2,393.6 57.1% 1,980.0 58.4% 1,931.2 52.8%
Class B 337.0 65.1% 290.3 67.0% 275.7 60.3%
Class C 375.0 74.1% 349.8 77.3% 346.1 69.7%
Class D 400.0 83.6% 395.1 89.0% 393.4 80.5%
------- ------- -------
3,505.6 3,015.2 2,946.4
</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 payable on each subclass of Notes plus the
interest and minimum principal payments payable on each 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
27
<PAGE>
payable on each subclass of Notes that ranks equally with or senior to the
relevant subclass of Notes in In respect of the Class A Notes, Principal
Adjustment Amount payments have been excluded as they are a function of
aircraft values.
[3] Expected Portfolio Value represents the Initial Appraised Value of each
Aircraft in the Portfolio multiplied by the Depreciation Factor at
Calculation Date divided by the Depreciation Factor at 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 Calculation Date divided by the Depreciation Factor
at Closing
[5] Total Asset Value is equal to Total Expected/Adjusted Portfolio Value plus
Liquidity Reserve Amount minus Lessee Security Deposits.
28
<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 June 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 June 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%) 539 January 15, 2004 March 15, 2019 538
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 697
Class B (LIBOR+.75%) 291 March 15, 2009 March 15, 2019 286
Class C (8.15%) 350 March 15, 2011 March 15, 2019 321
Class D (10.875%) 395 March 15, 2012 March 15, 2019 324
----- -----
3,025 2,916
===== =====
</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
29
<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 June 30, 2000, Airplanes
Group had unamortized Swaps with an aggregate notional principal balance
of $2,115 million. The aggregate notional principal of these Swaps will be
reduced to $1,225 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 $855 million by the year ended March 31, 2002 and to
an aggregate notional principal balance of $225 million by the year ended
March 31, 2003. None of the Swaps have maturity dates extending beyond
February 2004. The aggregate fair value of the Swaps at June 30, 2000 was
$14 million.
Airplanes Group Swap Book at June 30, 2000
<TABLE>
Final
Swap No. Notional Amount (I) Effective Maturity Fixed Rate Estimated Fair Market
($ Millions) Date Date Payable(ii) Value as at June 30, 2000
<S> <C> <C> <C> <C> <C>
1 120 02/15/00 07/15/00 6.1950% 48,515
2 100 01/12/00 07/15/00 6.1400% 45,303
3 10 10/15/99 07/15/00 5.8650% 6,967
4 115 02/24/00 08/15/00 6.2525% 80,609
5 60 02/15/00 08/15/00 6.3200% 31,750
6 70 04/17/00 10/15/00 6.4500% 68,340
7 5 12/15/97 10/15/00 5.8475% 14,279
8 15 01/15/97 11/15/00 6.0550% 43,689
9 5 08/15/97 12/15/00 5.9800% 27,945
10 10 10/28/99 01/15/01 5.9250% 51,919
11 30 12/23/97 03/15/01 5.8175% 170,391
12 10 11/17/99 04/15/01 5.8550% 158,790
13 85 03/28/96 04/15/01 6.0925% 386,282
14 40 10/28/97 06/15/01 5.9600% 236,932
15 15 12/15/99 08/15/01 6.2000% 99,894
16 20 05/27/98 04/15/02 6.2800% 248,023
17 35 08/16/99 04/15/02 6.2250% 494,687
18 15 12/15/99 04/15/02 6.3100% 161,356
19 10 10/27/98 05/15/02 6.2900% 73,575
20 75 04/17/00 05/15/02 6.7150% 127,727
21 400 11/15/99 06/15/02 6.1200% 3,644,417
22 10 02/16/99 07/15/02 6.2700% 188,702
23 20 09/15/98 08/15/02 6.1700% 192,039
24 40 06/15/00 12/15/02 7.1125% (113,105)
25 140 07/15/98 12/15/02 6.2400% 2,015,414
26 25 08/25/98 02/15/03 6.3900% 483,202
27 15 10/15/98 02/15/03 6.3800% 316,770
28 10 11/16/98 02/15/03 6.3900% 174,036
29 55 12/15/98 02/15/03 6.2840% 822,868
30 15 02/15/00 03/15/03 6.3965% 252,891
31 15 01/18/00 03/15/03 6.3850% 270,172
32 45 06/01/99 03/15/03 6.2200% 648,013
33 5 12/21/99 03/15/03 6.5875% 337,121
34 0 04/15/01 04/15/03 7.1850% (39,778)
35 35 06/21/99 06/15/03 6.3100% 931,069
36 60 07/15/99 08/15/03 6.2900% 1,075,363
37 10 01/18/00 10/15/03 6.4650% 202,008
30
<PAGE>
38 30 08/17/99 11/15/03 6.3300% 587,683
39 0 12/15/00 11/15/03 7.3625% (252,446)
40 95 04/26/00 11/15/03 6.6975% 149,220
41 75 03/24/00 12/15/03 6.8450% 76,755
42 90 05/15/00 01/15/04 7.2995% (477,798)
43 80 06/22/00 02/15/04 6.9775% (32,017)
----------
14,029,572
==========
</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. 13 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 US$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 US$1.92 million. In aggregate therefore,
Airplanes Group received a net cash inflow of US$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 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
31
<PAGE>
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 June 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 June 30, 2000 therefore amounted to
$289 million. The fair values of the Swaptions at June 30, 2000 was $0.1
million.
Airplanes Group Swaption Book at June 30, 2000
<TABLE>
Notional amount (i)
Swaption as at 30 June 2000 Effective Final Fixed Rate Estimated Far Market
No. ($ Millions) Date Maturity Date Receivable (ii) Value as at June 30, 2000
<S> <C> <C> <C> <C> <C>
1 4 03/16/98 10/15/00 5.000% 1
2 10 05/15/98 10/15/00 5.000% 1
3 25 09/15/98 11/15/00 5.200% 2
4 7 02/17/98 01/15/01 5.000% 1
5 24 01/15/98 05/15/01 5.000% 2,637
6 50 09/15/98 12/15/01 5.300% 2,760
7 30 01/15/98 04/15/02 5.000% 31,263
8 20 02/17/98 09/15/02 5.100% 2,258
9 14 04/15/98 09/15/02 5.100% 1,581
10 15 03/16/98 03/15/03 5.100% 3,955
11 50 07/15/98 03/15/03 5.100% 11,999
12 20 04/15/98 06/15/03 5.100% 6,626
13 10 09/15/98 09/15/03 5.300% 7,067
14 10 02/16/99 02/15/04 5.400% 10,013
--- ------
289 80,164
=== ======
</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 which have credit ratings, or which provide collateralisation
arrangements, consistent with maintaining the ratings of the Class A Notes.
32
<PAGE>
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.
33
<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 recission 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 recission 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.
In January 2000, the High Court, pending further consideration of AerFi's
recession action,
34
<PAGE>
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, Aero USA, Inc.
and Aero USA 3, Inc., both Connecticut corporations, have 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.
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 June 29, 2000).
3.3 Amendment dated June 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 April 13, 2000; May 11,
2000; June 13, 2000 (relating to the monthly report to holders of the
Certificates).
35
<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: August 11, 2000 AIRPLANES LIMITED
By: /s/ WILLIAM M. MCCANN
----------------------------------
William M. McCann
Director and Principal
Accounting Officer
Date: August 11, 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
3.2 Memorandum and Articles of Association of Airplanes Limited (incorporating
all amendments up to and including June 29, 2000).
3.3 Amendment dated June 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
<PAGE>
Appendix 1
Airplanes Group Portfolio
Particulars of the Airplanes Group Portfolio as of June 30, 2000 (except for
Appraised Values which are as of February 18, 2000) are contained in the table
below
<TABLE>
Appraised
AIRPLANES GROUP PORTFOLIO ANALYSIS Value at
Date of February 18,
Aircraft Engine Serial Manufacture/ 2000
Region Country Lessee Type Configuration Number Conversion (US$000's)
------ ------- ------ ---- ------------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Africa................Tunisia Tuninter B737-300 CFM56-3C1 24905 1-Feb-91 22,473
Tunisia Nouvelair Tunisie MD83 JT8D-219 49672 1-Jul-88 18,507
Asia & Far East.......China Xiamen B737-200QC JT8D-17A 23066 9-Dec-83 7,497
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 Xinjiang B757-200 RB211-535E4-37 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
Zealand ..............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 RB2110-535E4-37 26151 23-Jul-92 39,353
Turkey MNG Airlines Cargo A300-C4-203 CF6-50C2 83 1-May-79 16,787
Turkey Istanbul B737-400 CFM56-3C1 24683 7-Aug-90 23,863
Turkey Istanbul B737-400 CFM56-3C1 24691 9-Aug-90 23,850
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
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
<PAGE>
Appraised
AIRPLANES GROUP PORTFOLIO ANALYSIS Value at
Date of February 18,
Aircraft Engine Serial Manufacture/ 2000
Region Country Lessee Type Configuration Number Conversion (US$000's)
------ ------- ------ ---- ------------- ------ ---------- -----------
Turkey Turk Hava Yollari B737-400 CFM56-3C1 25261 9-Apr-92 24,990
Turkey Turk Hava Yollari B737-400 CFM56-3C1 26065 1-May-92 25,010
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
United Kingdom Airtours International A320-200 CFM56 294 2-Apr-92 29,483
United Kingdom Airtours International A320-200 CFM56 301 22-Apr-92 29,190
United Kingdom Airtours International A320-200 CFM56 348 17-Jun-92 28,743
United Kingdom Airtours International A320-200 CFM56-5A3 349 30-Oct-92 29,507
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
United Kingdom British Midland B737-500 CFM56-3C1 25185 18-Feb-92 19,270
United Kingdom Brymon Airways DHC8-300 PW123 334 8-Oct-92 7,507
United Kingdom Brymon Airways DHC8-300A PW123 296 1-Oct-91 7,473
Latin America.........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
Antigua Liat DHC8-102 PW120-A 113 1-Sep-88 5,543
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
Argentina LAPA B737-200QC JT8D-17A 23065 15-Oct-96 8,467
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 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
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
Colombia ACES ATR42-320 PW121-5A1 284 1-Jan-92 6,570
Colombia Avianca B757-200 RB211-535E4-37 26154 22-Sep-92 38,217
Colombia Avianca B767-200ER PW4056 25421 14-Jan-92 44,370
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
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
Mexico Mexicana B727-200A JT8D-17R 21346 1-Oct-80 3,800
Mexico Mexicana B727-200A JT8D-17R 21600 1-Nov-80 4,310
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 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
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 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
Netherlands
Antilles ALM DHC8-300C PW123 230 1-Feb-91 7,600
Netherlands ALM DHC8-300C PW123 242 1-Nov-90 7,450
Antilles
<PAGE>
Appraised
AIRPLANES GROUP PORTFOLIO ANALYSIS Value at
Date of February 18,
Aircraft Engine Serial Manufacture/ 2000
Region Country Lessee Type Configuration Number Conversion (US$000's)
------ ------- ------ ---- ------------- ------ ---------- -----------
Trinidad & BWIA International MD83 JT8D-219 49789 23-Sep-89 19,203
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
USA Idefix ATR42-300 PW120 249 1-Jun-91 6,427
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
USA Frontier Airlines, Inc. B737-300 CFM56-3B1 23177 1-Apr-86 16,173
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 TWA B767-300ER PW4060 25411 15-Jan-92 60,843
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 45997 7-Dec-93 14,097
USA Emery Worldwide DC8-73CF CFM56-2C1 46091 1-Dec-89 18,243
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 Allegheny Airlines DHC8-100 PW121 258 1-Jan-91 5,877
USA TWA MD83 JT8D-219 49575 1-Oct-87 18,403
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
Others................Cyprus Fornax Aircraft Leasing 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
Ukraine AeroSvit airlines 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 - LOI Polar Air
Cargo(2) B747-200BC JT9D-7Q 21730 7-Jun-79 34,611
Off Lease - LOI Air
Canada(3) B767-300ER PW4060 26200 1-Sep-92 62,023
Off Lease - Lease Pegasus(4) B737-400 CFM56-3C1 24345 1-Jun-89 22,333
Off Lease - Lease Emery(4) DC8-71F CFM56-2C1 45996 29-Oct-92 14,290
Off Lease B767-300ER PW4060 24948 19-Jul-91 56,300
Off Lease DHC8-300A PW123 267 4-Apr-91 7,753
----------------
3,330,139
----------------
</TABLE>
Note:
(1) Aircraft Lease Receivable Book Values are used for the Aircraft subject to
Finance Leases (7 in total) rather than the Appraised Values of these Aircraft.
(2) This Aircraft is subject to a non binding Letter of Intent to Lease and is
scheduled for delivery to the relevant lessee after June 30, 2000.
(3) This Aircraft was subject to a non binding Letter of Intent to lease and
has become subject to a lease and delivered to the lessee after June 30, 2000.
(4) These Aircraft are subject to a lease contracts and delivered to the
relevant lessee after June 30, 2000.
