1、 1 Air LeAse CorporAtionAnnual report 2011We have arrived.We took off in February 2010.in our first two years we have landed in the forefront of the aircraft leasing business.Our vision is unique.Our experience is extensive and our performance is remarkable.We are air Lease Corporation and we have a
2、rrived.2februaryALC IS LAUNCHEDJuly FArNboroUgH AIr SHow orDEr CompLEtED A$1.3 bILLIoN prIvAtE pLACEmENt oF EqUIty20102011december102 AIrCrAFt IN FLEEt oN DECEmbEr 31,2011$1.3billionprIvAtE pLACEmENt oF EqUIty$1.5billion DEbt FACILItyJulypArIS AIr SHow orDEr aPrIlINItIAL pUbLIC oFFErINg,LIStED oN tH
3、E NySE(AL)rAISED$923 mILLIoN groSS proCEEDSdecember40 AIrCrAFt IN FLEEt oN DECEmbEr 31,2010$923MillionINItIAL pUbLIC oFFErINg10240 JuneCLoSED A$1.5 bILLIoN DEbt FACILItyJANUAry FEbrUAry mArCH AprIL mAy JUNE JULy AUgUSt SEptEmbEr oCtobEr NovEmbEr DECEmbErJANUAry FEbrUAry mArCH AprIL mAy JUNE JULy AUg
4、USt SEptEmbEr oCtobEr NovEmbEr DECEmbErJanuaryFIrSt NEw AIrCrAFt DELIvEry From ALCS orDEr bookmayFIrSt AIrCrAFt DELIvEry3two years of achievement have brought ALC to the forefront of the aircraft leasing industry.7 6 our primary business is providing the worlds airlines with operating leases on new
5、aircraft from the major commercial aircraft manufacturers.We are also a strategic partner to our airline customers and assist them in modernizing,customizing,and maximizing the profitability of their fleets.We partner with the manufacturers by not only purchasing their high quality aircraft but by o
6、ffering counsel on model specifications and configurations of future designs.We provide LeAsing soLutions to the WorLds AirLines.67market comPetItIon prEmIUm AND bUSINESS trAFFICLow CoSt provIDErS rEgIoNAL opErAtorSFLAg CArrIErSCoDE SHArESALLIANCESLAbor CoNSIDErAtIoNSLEISUrE AIrLINESImPactIng future
7、 manufacturer desIgns AIrbUS A320 NEoboEINg 737 mAXAIrbUS A350-XwbboEINg 787Changing route networks.Market competition.Aircraft configurations.environmental factors.Fleet commonality.Airplane performance.Leasing is more than just a simple financial exercise it takes a comprehensive understanding of
8、aircraft capabilities and the competitive landscape.Airline requirements are constantly evolving,so ALC evaluates the mission requirements of tomorrow and helps advise the manufacturers on those future aircraft designs.oPeratIng envIronmentroUtE LENgtHtImE rEStrICtIoNSwEAtHErALtItUDEfleet ratIonalIz
9、atIon AIrCrAFt CommoNALItyENgINE CommoNALItyFLEEt SImpLIFICAtIoNenvIronmental factorsEmISSIoNS tAXESCArboN CrEDItS AND trADINgNoISE rEgULAtIoNScurrent aIrcraft choIcesmISSIoN rEqUIrEmENtSLoAD FACtormAINtENANCE CoStSFUEL bUrNopErAtINg CoSt pEr SEAt mILECompEtItorS AIrCrAFt aIrPort factorsgAtE AvAILAb
10、ILItytAkEoFF AND LANDINg SLot AvAILAbILItyrUNwAy LENgtH AND wIDtHtErmINAL SIzE AND StrUCtUrELANDINg wEIgHt FEES 10 11 With the growing demand for aircraft in the worlds emerging markets,its clear that the future of our industry expands beyond developed nations to evolving markets,making it truly glo
11、bal.While we are based in the united states,we have built a network of strong and growing relationships with airlines in every geographic region of the world.We hAve ALreAdy LAnded in 33 Countries.11101110 ChinA indiA sri LAnkA JApAn kAzAkhstAn MongoLiA neW zeALAnd vietnAM AustrALiA MALAysiA south k
12、oreA thAiLAnd itALy FrAnCe gerMAny the netherLAnds spAin CzeCh repubLiC ireLAnd norWAy russiA turkey united kingdoM brAziL MexiCo trinidAd&tobAgo CoLoMbiA united stAtes CAnAdA ethiopiA kenyA united ArAb eMirAtes south AFriCAnorth amerIca 10 AIrCrAFt euroPe 34 AIrCrAFt asIa PacIfIc 35 AIrCrAFt afrIca
13、&mIddle east 7 AIrCrAFt latIn amerIca 16 AIrCrAFt diversification by region and country is critical to our portfolio strategy.We continually monitor concentration as a key measure of our risk management policy.in just our first full year of operation,we have established strong relationships in every
14、 corner of the globe.deLivered AirLines.the number of airline relationships we have established in our short history demonstrates our approach to fleet planning.in fact,no customer accounted for more than 10%of our fleet by net book value.in the coming year,we expect more and more airlines to look t
15、o us and our pipeline of new aircraft as an important source for further fleet expansion and renewal.We hAve AirCrAFt to 55 16 17 18 14 diversification is a key component of our business strategy,so no one airline represents more than 10%of our fleet by net book value.AEr LINgUSAEromEXICoAIr ArAbIAA
16、Ir AStANAAIr AUStrALAIr CANADAAIr CHINAAIr FrANCEAIr mACAUAIr NEw zEALANDAIrASIAAIrbErLIN ALItALIAAvIANCACArIbbEAN AIrLINESCHINA SoUtHErNEtHIopIAN AIrLINESEtIHAD goAIrgoL AIrLINESHAINAN AIrLINESINtErJEtJEJU AIrkENyA AIrwAySkINgFISHEr AIrLINESkLm mIAt moNgoLIAN AIrLINESmIHIN LANkANorwEgIAN AIr SHUttL
17、EorIENt tHAI AIrLINESSHANgHAI AIrLINESSICHUAN AIrLINESSkymArk AIrLINESSoUtH AFrICAN AIrwAySSoUtHwESt AIrLINESSpICEJEtSpIrIt AIrLINESSprINg AIrLINESSrILANkAN AIrLINESSUN CoUNtrySUNEXprESSSUNwINg AIrLINEStAm AIrLINEStHomAS CooktrANSAEro AIrLINEStrANSAvIA.Com trAvEL SErvICEtrIp LINHAS AErEASUNItED CoNt
18、INENtAL vIEtNAm AIrLINESvIrgIN AUStrALIAvoLArIS vUELINgwEStJEtXIAmEN AIrLINES20 21 Boeing.Airbus.Embraer.ATR.Were providing many of the worlds airlines with operationally and environmentally efficient aircraft.Its one of the the worlds most modern fleets in fact,the average age of an Air Lease aircr
19、aft is just 3.6 years.WE hAvE onE of ThE WoRLds mosT EffIcIEnT fLEETs.We do not intend to become the supermarket of aircraft lessors.ALC has a very focused product strategy to provide the most widely distributed and in demand aircraft types.Airbus A330-200versatile mid-sized widebody built to cover
20、all-rangesEngine options.gE CF6-80E1,pw4000,rr trent 700Standard Configuration.253 passengersrange(Nm).7,250eMbrAer 190Superior range in the 91-120 seat regional jetliner categoryEngine option.CF34-10EStandard Configuration.114 passengersrange(Nm).2,400boeing 737-800Single aisle jetliner with strong
21、 seat-cost benefitsEngine options.CFm56-7bStandard Configuration.162 passengersrange(Nm).3,115Atr 72-600New technology turboprob aircraft in the 70-seat segmentEngine option.pw 127mStandard Configuration.72 passengersrange(Nm).825boeing 777-300ertwin aisle jetliner with range direct from New york to
22、 Hong kongEngine option.gE90-115bStandard Configuration.365 passengersrange(Nm).7,930Airbus A320-200 transatlantic performance capabillity brought to short-haul routesEngine options.CFm56-5b,v2500-A5Standard Configuration.150 passengersrange(Nm).3,300narrowbodIes 79%boEINg 737.37%AIrbUS A320 FAmILy.
23、30%E JEtS.12%wIdebodIes 19%AIrbUS A330-200.11%boEINg 777.5%boEINg 767.3%turboProPs 2%Atr 72-600.2%181924 25 2011 fInancIal hIghlIghts(in thousands,except per share amounts)Fy 2011 Revenues$336,741Pretax income$82,841Pretax margin 24.6%Net income$53,232Cash provided by operating activities$267,166Adj
24、usted net income 1$87,954Adjusted EBITDA 1$290,168Net income per share:Basic$0.59 Diluted$0.59(1)See notes 1 and 2 in“Selected Financial Data”for a discussion of the non-GAAP measures adjusted net income and adjusted EBITDA.26 27 to our shArehoLdersAir Lease Corporation was launched in February 2010
25、 with one simple idea:apply everything weve learned from decades in this business and create the worlds premier aircraft lessor from a clean sheet of paper,geared for shareholder returns and the future of the airline industry.in less than two years,we have built a fleet of 102 aircraft spread across
26、 55 airline customers in 33 countries,with an average fleet age of 3.6 years and average lease maturity of 6.6 years.in 2011,we took our company public on the new york stock exchange under the trading symbol AL.our financial results and key metrics are laid out in the pages before you,including our
27、pretax profit margin of 24.6%and fully diluted eps of$.59 for 2011,which is our first full year in business.We are satisfied with our results to date,yet we believe those results will be further enhanced with the benefits of economies of scale and our growing financial strength.24 25 We beLieve our
28、perForMAnCe WiLL Further ACCeLerAte With our groWing FinAnCiAL strengthALCs aircraft and fleet strategy has been clear from the beginning to offer the youngest,most fuel efficient,most environmentally friendly,most widely distributed aircraft available now,and in the future.We believe that this is t
29、he main way by which the majority of airlines will optimize their future.We think our view has been validated.During 2011 and early 2012 weve witnessed unprecedented orders for new aircraft as fuel prices remain the biggest cost threat to airline prosperity,along with environmental pressures continu
30、ing to grow larger.ALC is now well-positioned to meet the needs of our airline customers with our current fleet,plus 217 new aircraft on order as of December 31,2011 for delivery through 2020.At the same time,much noise has been made about the airframe manufacturers record increases in production ra
31、tes and the potential negative impact these increases might have on the global aircraft supply and demand equation in the face of softening economic conditions and airline profitability,particularly in some regions of the world such as Europe.While we anticipate that regional economic factors and re
32、duced airline financial performance will have some negative impact on the order books of the airframe manufacturers,they remain significantly oversold compared to their production capabilities.The overall supply of new aircraft available to the marketplace for the next several years from the manufac
33、turers remains limited,helping to make ALC an attractive leasing solution for airlines looking to procure the new aircraft they need to optimize their fleets,maximize their flexibility,and reduce their own financing risk.Volatility is nothing new in the airline industry.Our team has managed through
34、many cycles and industry conditions including aircraft oversupply and undersupply,high interest rates,airline bankruptcies,catastrophic events,pandemic outbreaks,and more.Yet,air transportation has become,and in our view will remain,the worlds form of long-distance mass transportation and an importa
35、nt engine of global commerce.We believe ALCs fleet,aircraft strategy,and long-term order book strikes the right balance between growth and conservatism.Moreover,our low leverage balance sheet positions us well to take advantage of opportunities that may present themselves in the marketplace.2011 als
36、o brought uncertainty and stress in the global capital markets,credit downgrades of multiple European countries,and the USA losing its AAA rating.Financing uncertainty reached a crescendo by the end of 2011,with banks in France,Spain,and Italy exiting dollar-based lending(the currency of aircraft fi
37、nance).However,during 2011,ALC grew its banking group from 13 to 23 banks across the USA,Canada,Europe,and Asia,with 17 of those banks providing unsecured financing as of December 31,2011.We concentrated 26 on expanding our banking relationships in the Asia Pacific region,adding credit facilities fr
38、om banks headquartered in Singapore,Japan,and Australia.We tapped the unsecured institutional private placement debt market in June 2011,and issued our first convertible unsecured bond in November 2011.As of December 31,2011,ALC achieved an overall composite interest rate of 3.14%on our total debt p
39、ortfolio,down from the previous years composite rate of 3.32%,and ended the year with a debt to equity ratio of 1.2 to 1.We are pleased with our results,and proud of our dedicated team of management and employee shareholders,all of whom are consumed with a passion for this business.It is their in-de
40、pth knowledge of our customers requirements,and the needs of the industry,coupled with an entrepreneurial culture,the spark of a youthful company,the unbridled enthusiasm of its people,the commitment to deliver superior results(to our investors,and to our customers),and the unwavering belief in our
41、business that form the core of ALCs success.In addition to our loyal and professional staff,we wish to express our gratitude and thanks to our Board of Directors for their outstanding guidance,to the many airline clients worldwide who have entrusted us with their business,to our shareholders and fin
42、anciers whose confidence in ALC has been an essential ingredient to our success,and to our major airframe,engine,and component suppliers,all of whom have supported and validated our business growth trajectory.Steven F.Udvar-HzyChAIrmAN AND ChIef exeCutIve OffICerJoHn L.PLUegerPreSIDeNt AND ChIef OPe
43、rAtINg OffICer2011 REVIEW28REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM46CONSOLIDATED BALANCE SHEETS47CONSOLIDATED STATEMENTS OF OPERATIONS48CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY49CONSOLIDATED STATEMENTS OF CASH FLOWS50NOTES TO CONSOLIDATED FINANCIAL STATEMENTS51SELECTED FINANCIA
44、L DATA63We lease our aircraft to airlines pursuant to net operating2011 REVIEWleases that require the lessee to pay for maintenance,insur-ance,taxes and all other aircraft operating expenses duringThe following section of this Annual Report consists of anthe lease term,which includes fuel,crews,airp
45、ort and naviga-overview of Air Lease Corporation(the Company)and ation charges,and insurance.The cost of an aircraft typically isreview of our business in 2011.The 2011 Review and thenot fully recovered over the term of the initial lease.There-Consolidated Financial Statements and the related notes
46、thatfore,upon expiration or early termination of a lease,we retainfollow are intended to provide perspective on,and an under-the benefit and assume the risk of the rent at which we canstanding of,the Companys consolidated financial conditionre-lease the aircraft and its equipment or the price at whi
47、chand results of operations for 2011.we can sell the aircraft and its equipment.BUSINESSWe operate our business on a global basis,providing aircraftto airline customers in every major geographical region,OVERVIEWincluding emerging and high-growth markets such as Asia,Air Lease Corporation,a Delaware
48、 corporation(the Com-the Pacific Rim,Latin America,the Middle East and Easternpany,ALC,we,our or us),is an aircraft leasingEurope.As of December 31,2011,we have entered intocompany that was launched in February 2010 by aircraft leas-leases and future lease commitments with airlines in Austra-ing ind
49、ustry pioneer Steven F.Udvar-H azy.We are principallylia,Belarus,Brazil,Bulgaria,Canada,China,Colombia,theengaged in purchasing commercial aircraft which we,in turn,Czech Republic,Ethiopia,France,Germany,India,Indonesia,lease to airlines around the world to generate attractiveIreland,Italy,Japan,Kaz
50、akhstan,Kenya,Malaysia,Mexico,returns on equity.As of December 31,2011,we owned 102Mongolia,the Netherlands,New Zealand,Norway,Russia,aircraft of which 36 were new aircraft and 66 were used air-South Africa,South Korea,Spain,Sri Lanka,Thailand,Trini-craft and we managed two aircraft.Our fleet is pri
51、ncipallydad&Tobago,Turkey,United Arab Emirates,the United King-comprised of fuel-efficient and newer technology aircraft,dom,the United States and Vietnam.consisting of narrowbody(single-aisle)aircraft,such as theBoeing 737-700/800,the Airbus A319/320/321,theWhile our primary business is to own and
52、lease aircraft,weEmbraer E190,select widebody(twin-aisle)aircraft,such asalso provide fleet management services to third parties for athe Boeing 777-300ER and the Airbus A330-200/300,and thefee.These services are similar to those we perform withATR 72-600 turboprop aircraft.We manage lease revenuesr
53、espect to our fleet,including leasing,re-leasing,lease man-and take advantage of changes in market conditions byagement and sales services.acquiring a balanced mix of aircraft types,both new andOur principal executive offices are located at 2000 Avenue ofused.Our used aircraft are generally less tha
54、n five years old.the Stars,Suite 1000N,Los Angeles,California 90067.TheAll of the aircraft we own were leased as of December 31,telephone number of our principal executive offices is2011.Additionally,as of December 31,2011,we had entered(310)553-0555 and our website address isinto binding and non-bi
55、nding purchase commitments .acquire an additional 217 new aircraft through 2020.We manage lease expirations in our fleet portfolio over vary-OPERATIONS TO DATECurrent Fleeting time periods in order to minimize periods of concentratedAs of December 31,2011,our fleet consisted of 102 aircraft,lease ex
56、pirations and mitigate the risks associated with cycli-comprised of 81 single-aisle jet aircraft,19 twin-aislecal variations in the airline industry.As of December 31,2011,widebody aircraft and two turboprop aircraft,with a weightedthe weighted average lease term remaining on our currentaverage age
57、of 3.6 years.leases was 6.6 years,and we leased the aircraft in our portfo-lio to 55 airlines in 33 countries.As of December 31,2010,theGeographic Diversificationweighted average lease term remaining on our current leasesOver 90%of our aircraft are operated internationally basedwas 5.6 years,and we
58、leased the 40 aircraft in our portfolio toon net book value.The following table sets forth the net book25 airlines in 15 countries.value and percentage of the net book value of our aircraft28portfolio operating in the indicated regions as of Decem-equipment revenue for the year ended December 31,201
59、1ber 31,2011 and December 31,2010:and the period from inception to December 31,2010,basedDecember 31,2011December 31,2010on each airlines principal place of business.RegionNet bookNet bookFor the period($in thousands)value%of totalvalue%of totalYear Endedfrom Inception toDecember 31,2011December 31,
60、2010Europe$1,782,94942.1%$688,60742.3%Customer(1)Amount ofAmount ofAsia/Pacific1,355,43232.0425,67026.1($in thousands)rental revenue%of totalrental revenue%of totalLatin America515,14512.2163,62210.0Air France$45,44413.7%$8,59815.1%North America386,1019.1254,20115.6Air Berlin$29,6428.9%$15,15326.5%A
61、frica and Middle East197,7894.697,7096.0(1)A customer is an airline with its own operating certificate.Total$4,237,416100.0%$1,629,809100.0%AIRCRAFT ACQUISITION STRATEGYAt December 31,2011 and 2010,we leased aircraft to cus-Our long term aircraft asset acquisition strategy is focused ontomers in the
62、 following regions:December 31,2011December 31,2010acquiring the highest demand and most widely distributedNumber ofNumber ofmodern technology,fuel efficient single-aisle jet aircraft,Regioncustomers(1)%of totalcustomers(1)%of totaltwin-aisle widebody aircraft and turboprop aircraft.ThisEurope1323.6
63、%624.0%Asia/Pacific2240.0832.0includes the Boeing 737-800,777-300ER,the AirbusLatin America814.6416.0A320/321,A330-200/300 the Embraer E190 and the ATRNorth America712.7416.0Africa and Middle East59.1312.072-600 aircraft.Our business model is based on orderingTotal55100.0%25100.0%these or similar ty
64、pes of aircraft directly from the manufactur-(1)A customer is an airline with its own operating certificate.ers and directly leasing these new aircraft to our customers.We will opportunistically supplement our fleet with second-The following table sets forth the dollar amount and percent-ary purchas
65、es from other owners of aircraft and participate inage of our rental of flight equipment revenues attributable tosale-leaseback transactions with airlines;however,our pri-the indicated regions based on each airlines principal placemary strategy is to acquire new aircraft from theof business:manufact
66、urers.For the periodYear Endedfrom Inception toDecember 31,2011December 31,2010In determining the needs of our lessees or prospective airlineRegionAmount ofAmount of($in thousands)rental revenue%of total rental revenue%of totalcustomers,we evaluate each potential new and used aircraftEurope$151,5664
67、5.6%$31,15754.6%acquisition to determine if it supports our primary objectiveAsia/Pacific93,23728.011,93320.9of generating profits while maintaining desired fleet charac-Latin America30,7149.24,9538.7North America39,35011.86,30911.0teristics.Our due diligence process takes into account:Africa and Mi
68、ddle East17,8525.42,7234.8Total$332,719100.0%$57,075100.0%?the needs of our airline customers at the time of acquisitionand their anticipated needs at the end of typical leasingAs our aircraft portfolio grows,we anticipate that a growingcycles;percentage of our aircraft will be located in the Asia/P
69、acific,?an aircrafts fit within our focused fleet based on its type,the Latin America,and the Africa and Middle East regions.price,age,market value,specifications and configuration,The following table sets forth the revenue attributable to indi-condition and maintenance history,operating efficiencyv
70、idual countries representing at least 10%of our rental ofand potential for future redeployment;andflight equipment revenue for the year ended December 31,?an aircraft models reliability,long-term utility for airline2011 and the period from inception to December 31,2010,customers,and appeal to a larg
71、e segment of the industry.based on each airlines principal place of business.For the periodYear Endedfrom Inception toFor used aircraft,we perform detailed technical reviews ofDecember 31,2011December 31,2010both the physical aircraft and its maintenance history to mini-CountryAmount ofAmount of($in
72、 thousands)rental revenue%of totalrental revenue%of totalmize our risk of acquiring an aircraft with defects or otherFrance$62,24018.7%$8,59815.1%service issues.In the case of new aircraft,we work directlyChina$39,60311.9%$6,09110.7%Germany$29,6428.9%$15,15326.5%with the manufacturers to outfit and
73、configure the aircraftwith our airline customers needs in mind.Our inspection ofThe following table sets forth the revenue attributable to indi-new aircraft is focused on ensuring that our customersvidual airlines representing at least 10%of our rental of flightrequired specifications and modificati
74、ons have been met.29We pursue acquisitions of additional aircraft through our rela-We may,in connection with the lease of used aircraft,agree totionships with aircraft operators,manufacturers,financialcontribute specific additional amounts to the cost of certaininstitutions,private investors and thi
75、rd-party lessors.We mayfirst major overhauls or modifications,which usually reflectalso acquire aircraft for lease directly from manufacturers inthe usage of the aircraft prior to the commencement of thethe secondary market or pursuant to sale-leaseback transac-lease,and which are covered by the pri
76、or operators usagetions with aircraft operators.For new aircraft deliveries,wefees.We may be obligated under the leases to make reim-will often separately source many components,includingbursements of maintenance reserves previously received toseats,safety equipment,avionics,galleys,cabin finishes,l
77、essees for expenses incurred for certain planned majorengines and other equipment,from the same providers usedmaintenance.We also,on occasion,may contribute towardsby aircraft manufacturers at a lower cost.Manufacturers suchaircraft modifications(e.g.,winglets and new interiors)andas The Boeing Comp
78、any(Boeing)and Airbus S.A.S.recover any such costs over the life of the lease.(Airbus)will install this buyer furnished equipment in ourThe lessee is responsible for compliance with applicable lawsaircraft during the final assembly process at their facilities.and regulations with respect to the airc
79、raft.We require ourThrough this use of our purchasing strategy,we are betterlessees to comply with the standards of either the U.S.Fed-able to modify the aircraft to meet our customers configura-eral Aviation Administration(FAA)or its equivalent in for-tion requirements and enhance lease and residua
80、l values.eign jurisdictions.Generally,we receive a cash deposit assecurity for the lessees performance of obligations under theLEASING PROCESSlease and the condition of the aircraft upon return.In addition,Our management team identifies prospective lessees basedmost leases contain extensive provisio
81、ns regarding our rem-upon industry knowledge and long-standing industry rela-edies and rights in the event of a default by a lessee.Thetionships.We seek to meet the specific needs of our airlinelessee generally is required to continue to make lease pay-customers by working closely with potential les
82、sees and,ments under all circumstances,including periods duringwhere appropriate,developing innovative lease structureswhich the aircraft is not in operation due to maintenance orspecifically tailored to address those needs.While we struc-grounding.ture aircraft leases with our airline customers nee
83、ds in mind,we,nevertheless,anticipate that most of our leases will shareSome foreign countries have currency and exchange lawssome common characteristics,including the following:regulating the international transfer of currencies.When nec-essary,we require,as a condition to any foreign transaction,?
84、most of our leases will be for fixed terms,although,wherethat the lessee or purchaser in a foreign country obtains themutually beneficial,we may provide for purchase optionsnecessary approvals of the appropriate government agency,or termination or extension rights;finance ministry or central bank fo
85、r the remittance of all funds?most of our leases will require advance monthly payments;contractually owed in U.S.dollars.We attempt to minimizeour currency and exchange risks by negotiating the desig-?most of our leases will generally provide that the lesseesnated payment currency in our leases to b
86、e U.S.dollars;payment obligations are absolute and unconditional;although,where appropriate,we may agree to leases withpayments denominated in other currencies.All guarantees?our lessees will typically be required to make lease pay-obtained to support various lease agreements are denomi-ments withou
87、t deducting any amounts that we may owe tonated for payment in the same currency as the lease.To meetthe lessee or any claims that the lessee may have againstthe needs of certain of our airline customers,a relatively smallus;number of our leases may designate the payment currency to?most of our leas
88、es will also require lessees to gross upbe Euros.As the Euro to U.S.dollar exchange rate fluctuates,lease payments to cover tax withholdings or other tax obli-airlines interest in entering into Euro-denominated leasegations,other than withholdings that arise out of transfersagreements will change.Af
89、ter we agree to the rental paymentof the aircraft to or by us or due to our corporate structure;currency with an airline,the negotiated currency typicallyandremains for the term of the lease.We occasionally may enterinto contracts to mitigate our foreign currency risk,but we?our leases will also gen
90、erally require that our lesseesexpect that the economic risk arising from foreign currencyindemnify us for certain other tax liabilities relating to thedenominated leases will be immaterial to us.leases and the aircraft,including,in most cases,value-added tax and stamp duties.30Management obtains an
91、d reviews relevant business materi-time to consider a broad set of alternatives with respect to theals from all prospective lessees and purchasers before enter-aircraft,including assessing general market and competitiveing into a lease or extending credit.Under certainconditions and preparing to re-
92、lease or sell the aircraft.If acircumstances,the lessee may be required to obtain guaran-lessee fails to provide us with notice,the lease will automati-tees or other financial support from an acceptable financialcally expire at the end of the term,and the lessee will beinstitution or other third par
93、ties.During the life of the lease,required to return the aircraft pursuant to the conditions insituations may lead us to restructure leases with our lessees.the lease.Our leases contain detailed provisions regardingWhen we repossess an aircraft leased in a foreign country,wethe required condition of
94、 the aircraft and its componentsgenerally expect to export the aircraft from the lessees juris-upon redelivery at the end of the lease term.diction.In some very limited situations,the lessees may notINSURANCEfully cooperate in returning the aircraft.In those cases,we willWe require our lessees to ca
95、rry those types of insurance thattake legal action in the appropriate jurisdictions,a processare customary in the air transportation industry,includingthat we expect would ultimately delay the return and exportcomprehensive liability insurance,aircraft all-risk hull insur-of the aircraft.In addition
96、,in connection with the reposses-ance and war-risk insurance covering risks such as hijacking,sion of an aircraft,we may be required to pay outstandingterrorism(but excluding coverage for weapons of massmechanics liens,airport charges,and navigation fees anddestruction and nuclear events),confiscati
97、on,expropriation,other amounts secured by liens on the repossessed aircraft.seizure and nationalization.We generally require a certificateThese charges could relate to other aircraft that we do notof insurance from the lessees insurance broker prior to deliv-own but were operated by the lessee.ery o
98、f an aircraft.Generally,all certificates of insurance con-MONITORINGtain a breach of warranty endorsement so that our interestsDuring the term of a lease,we monitor the operating perform-are not prejudiced by any act or omission of the lessee.Leaseance and the financial health of the lessee.Our net
99、operatingagreements generally require hull and liability limits to be inleases generally require the lessee to pay for maintenance,U.S.dollars,which are shown on the certificate of insurance.insurance,taxes and all other aircraft operating expensesInsurance premiums are to be paid by the lessee,with
100、 cover-during the lease term.age acknowledged by the broker or carrier.The territorialWe also closely follow the operating and financial perform-coverage,in each case,should be suitable for the lesseesance of our lessees so that we can identify early on thosearea of operations.We generally require t
101、hat the certificateslessees that may be experiencing operating and financial dif-of insurance contain,among other provisions,a provisionficulties.This assists us in assessing the lessees ability toprohibiting cancellation or material change without at leastfulfill its obligations under the lease for
102、 the remainder of the30 days advance written notice to the insurance broker(whoterm and,where appropriate,restructure the lease prior towould be obligated to give us prompt notice),except in thethe lessees insolvency or the initiation of bankruptcy or simi-case of hull war insurance policies,which c
103、ustomarily onlylar proceedings,at which time we would have less controlprovide seven days advance written notice for cancellationover,and would most likely incur greater costs in connectionand may be subject to shorter notice under certain marketwith,the restructuring of the lease or the repossessio
104、n of theconditions.Furthermore,the insurance is primary and notaircraft.To accomplish this objective,we maintain a high levelcontributory,and we require that all insurance carriers beof communication with the lessee and frequently evaluate therequired to waive rights of subrogation against us.state
105、of the market in which the lessee operates,including theThe stipulated loss value schedule under aircraft hull insur-impact of changes in passenger air travel and preferences,ance policies is on an agreed-value basis acceptable to usnew government regulations,regional catastrophes andand usually exc
106、eeds the book value of the aircraft.In casesother unforeseen shocks to the relevant market.where we believe that the agreed value stated in the lease isnot sufficient,we make arrangements to cover such defi-RE-LEASING OR DISPOSITION OF AIRCRAFTciency,which would include the purchase of additional To
107、talOur lease agreements are generally structured to require les-Loss Only coverage for the deficiency.sees to notify us nine to 12 months in advance of the leasesexpiration if a lessee desires to renew or extend the lease.Aircraft hull policies generally contain standard clauses cov-Requiring lessee
108、s to provide us with such advance noticeering aircraft engines.The lessee is required to pay allprovides our management team with an extended period of31deductibles.Furthermore,the hull war policies generally con-and the availability in the marketplace of the types of aircrafttain full war risk endo
109、rsements,including,but not limited to,required to meet the needs of airline customers.We believeconfiscation(where available),seizure,hijacking and similarwe are a strong competitor in all of these areas.forms of retention or terrorist acts.GOVERNMENT REGULATIONThe comprehensive liability insurance
110、listed on certificates ofThe air transportation industry is highly regulated.We do notinsurance generally include provisions for bodily injury,prop-operate commercial aircraft,and thus may not be directlyerty damage,passenger liability,cargo liability and such othersubject to many industry laws and
111、regulations,such as regu-provisions reasonably necessary in commercial passengerlations of the U.S.Department of State(the DOS),the U.S.and cargo airline operations.We expect that such certificatesDepartment of Transportation,or their counterpart organiza-of insurance list combined comprehensive sin
112、gle liability lim-tions in foreign countries regarding the operation of aircraftits of not less than$500.0 million for Airbus and Boeing air-for public transportation of passengers and property.As dis-craft and$200.0 million for Embraer S.A.(Embraer)andcussed below,however,we are subject to governme
113、nt regu-Avions de Transport R egional(ATR)aircraft.As a standardlation in a number of respects.In addition,our lessees arein the industry,airline operators policies contain a sublimitsubject to extensive regulation under the laws of the jurisdic-for third-party war risk liability in the amount of$50
114、.0 million.tions in which they are registered or operate.These lawsWe require each lessee to purchase higher limits of third-govern,among other things,the registration,operation,party war risk liability or obtain an indemnity from its respec-maintenance and condition of the aircraft.tive government.
115、We are required to register,and have registered,the aircraftIn late 2005,the international aviation insurance market uni-which we acquire and lease to U.S.carriers and to a numberlaterally introduced exclusions for physical damage to aircraftof foreign carriers where,by agreement,the aircraft are to
116、 behulls caused by dirty bombs,bio-hazardous materials andregistered in the United States,with the FAA,or in otherelectromagnetic pulsing.Exclusions for the same type of per-countries,with such countries aviation authorities as applica-ils could be introduced into liability policies.ble.Each aircraf
117、t registered to fly must have a Certificate ofAirworthiness,which is a certificate demonstrating the air-Separately,we purchase contingent liability insurance andcrafts compliance with applicable government rules and reg-contingent hull insurance on all aircraft in our fleet and main-ulations and th
118、at the aircraft is considered airworthy,or atain other insurance covering the specific needs of our busi-ferry flight permit,which is an authorization to operate anness operations.We believe our insurance is adequate bothaircraft on a specific route.Our lessees are obligated to main-as to coverages
119、and amounts.tain the Certificates of Airworthiness for the aircraft they leaseWe cannot assure stockholders that our lessees will be ade-and,to our knowledge,all of our lessees have complied withquately insured against all risks,that lessees will at all timesthis requirement.When an aircraft is not
120、on lease,we main-comply with their obligations to maintain insurance,that anytain the certificate or obtain a certificate in a new jurisdiction.particular claim will be paid,or that lessees will be able toOur involvement with the civil aviation authorities of foreignobtain adequate insurance coverag
121、e at commercially reason-jurisdictions consists largely of requests to register and dere-able rates in the future.gister our aircraft on those countries registries.We maintain key man life insurance policies on our ChairmanWe are also subject to the regulatory authority of the DOS andand CEO and our
122、 President and Chief Operating Officer.Eachthe U.S.Department of Commerce(the DOC)to the extentpolicy is in the amount of$2.0 million,with the proceedssuch authority relates to the export of aircraft for lease andpayable to us and permitted to be used for general corporatesale to foreign entities an
123、d the export of parts to be installedpurposes.on our aircraft.In some cases,we are required to obtainexport licenses for parts installed in aircraft exported to for-COMPETITIONeign countries.The leasing,remarketing and sale of aircraft is highly compet-itive.We face competition from aircraft manufac
124、turers,The DOC and the U.S.Department of the Treasury(through itsbanks,financial institutions,other leasing companies,aircraftOffice of Foreign Assets Control)impose restrictions on thebrokers and airlines.Competition for leasing transactions isoperation of U.S.-made goods,such as aircraft and engin
125、es,based on a number of factors,including delivery dates,leasein sanctioned countries,as well as on the ability of U.S.com-rates,terms of lease,other lease provisions,aircraft conditionpanies to conduct business with entities in those countries.32The U.S.Patriot Act of 2001(the Patriot Act)prohibits
126、 finan-EMPLOYEEScial transactions by U.S.persons,including U.S.individuals,As of December 31,2011,we had 47 full-time employees.entities and charitable organizations,with individuals andNone of our employees are represented by a union or collec-organizations designated as terrorists and terrorist su
127、pport-tive bargaining agreements.We believe our relationship withers by the U.S.Secretary of State or the U.S.Secretary of theour employees to be positive,which is a key component ofTreasury.We comply with the provisions of the Patriot Actour operating strategy.We strive to maintain excellentand clo
128、sely monitor our activities with foreign entities.employee relations.We provide certain employee benefits,including retirement,health,life,disability and accident insur-The U.S.Customs and Border Protection,a law enforcementance plans.agency of the U.S.Department of Homeland Security,enforces regula
129、tions related to the import of aircraft into theACCESS TO OUR INFORMATIONUnited States for maintenance or lease and the importation ofWe file annual,quarterly and current reports,proxy state-parts into the U.S.for installation.We monitor our imports forments and other information with the Securities
130、 andcompliance with U.S.Customs and Border ProtectionExchange Commission(the SEC).We make our public SECregulations.filings available,at no cost,through our website as soon as reasonably practicableThe U.S.Bureau of Export Enforcement enforces regulationsafter the report is electronically filed with
131、,or furnished to,therelated to the export of aircraft to other jurisdictions and theSEC.We will also provide these reports in electronic or paperexport of parts for installation in other jurisdictions.We moni-format free of charge upon written request made to ourtor our exports for compliance with t
132、he U.S.Bureau of Exportinvestor relations department at 2000 Avenue of the Stars,Enforcement regulations.Suite 1000N,Los Angeles,California 90067.Our SEC filingsJurisdictions in which aircraft are registered as well as juris-are also available to the public over the Internet at the SECsdictions in w
133、hich they operate may impose regulations relat-website at www.sec.gov.The public may also read and copying to noise and emission standards.In addition,mostany document we file with the SEC at the SECs public refer-countries aviation laws require aircraft to be maintainedence room located at 100 F St
134、reet NE,Washington,DC 20549.under an approved maintenance program with defined pro-Please call the SEC at 1-800-SEC-0330 for further informationcedures and intervals for inspection,maintenance and repair.on the operation of the public reference room.To the extent that aircraft are not subject to a l
135、ease or a lesseeis not in compliance,we are required to comply with suchrequirements,possibly at our own expense.We believe we are in compliance in all material respects withall applicable governmental regulations.33EXECUTIVE OFFICERS OF THE COMPANYSet forth below is the current position of each of
136、our executive officers as of March 9,2012.NameCompany PositionSteven F.Udvar-H azyChairman and Chief Executive Officer(since February 2010)John L.PluegerPresident,Chief Operating Officer and Director(since March 2010)Grant A.LevyExecutive Vice President,General Counsel and Secretary(since April 2010
137、)Marc H.BaerExecutive Vice President,Marketing(since April 2010)Alex A.KhatibiExecutive Vice President(since April 2010)Jie ChenExecutive Vice President and Managing Director of Asia(since August 2010)Gregory B.WillisSenior Vice President and Chief Financial Officer(since March 2012)John D.Poerschke
138、Senior Vice President of Aircraft Procurement and Specifications(since March 2010)DIRECTORS OF THE COMPANYSet forth below is the principal occupation or employment of each of our directors as of March 9,2012.NamePrincipal Occupation or EmploymentSteven F.Udvar-H azyAir Lease CorporationChairman and
139、Chief Executive OfficerJohn L.PluegerAir Lease CorporationPresident,Chief Operating Officer and DirectorRobert A.MiltonACE Aviation Holdings,Inc.,a holding company for Air Canada and other aviation interestsChairman and Chief Executive OfficerMatthew J.HartHilton Hotels Corporation,a global hospital
140、ity companyFormer President and Chief Operating OfficerDr.Ronald D.SugarNorthrop Grumman Corporation,a global security companyFormer Chairman and Chief Executive OfficerWilbur L.Ross,Jr.WL Ross&Co.LLC,a merchant banking firmChairman and Chief Executive OfficerAntony P.ResslerAres Management LLC,a gl
141、obal alternative asset managerA Founding Member and Chairman of the Executive CommitteeJohn G.DanhaklLeonard Green&Partners,L.P.,a private equity firmManaging PartnerIan M.SainesCommonwealth Bank of Australia,a provider of integrated financial servicesGroup Executive,Institutional Banking and Market
142、s3415MAR201217272765table below sets forth for the indicated periods the high andMARKET FOR REGISTRANTSlow sales prices for our Class A Common Stock as reportedCOMMON EQUITY AND RELATEDon the NYSE.Our Class B Non-Voting Common Stock is notcurrently listed on any national exchange or market system.ST
143、OCKHOLDER MATTERSFiscal Year 2011 Quarters Ended:HighLowMARKET INFORMATIONJune 30,2011$29.94$23.02Our Class A Common Stock has been quoted on the NewSeptember 30,201125.3618.32York Stock Exchange(the NYSE)under the symbol ALDecember 31,201123.9517.24since April 19,2011.Prior to that time,there was n
144、o publicmarket for our stock.As of September 30,2011,there wereDIVIDENDS98,885,131 shares of Class A Common Stock outstandingThe Company did not declare or pay any dividends duringheld by approximately 148 holders of record,and 1,829,3392011.The Board of Directors does not expect that the Com-shares
145、 of Class B Non-Voting Common Stock outstandingpany will pay any dividends or other distributions in the fore-held by one stockholder of record.seeable future.On March 8,2012 the closing price of our Class A CommonStock was$23.85 per share as reported by the NYSE.ThePERFORMANCE GRAPHThe graph below
146、compares the cumulative return since April 19,2011 of the Companys Class A Common Stock,the S&PMidcap Index and a customized peer group.The peer group consists of three companies:Aircastle Limited(NYSE:AYR),AerCap Holdings NV(NYSE:AER)and FLY Leasing Limited(NYSE:FLY).The peer group investment is we
147、ighted by marketcapitalization as of April 19,2011,and is adjusted monthly.An investment of$100,with reinvestment of all dividends,isassumed to have been made in our Class A Common Stock,in the peer group and in the S&P Midcap Index on April 19,2011,and the relative performance of each is tracked th
148、rough December 31,2011.The stock price performance shown in the graph isnot necessarily indicative of future stock price performance.Comparison of 9 Month Cumulative Total ReturnAssumes Initial Investment of$100December 31,2011$0$20$40$60$80$100$1204/19/114/30/115/31/116/30/117/31/118/31/119/30/1110
149、/31/1111/30/1112/31/11Air Lease CorporationS&P Midcap 400 IndexPeer Group352012 and to continue through 2020.From Airbus,we agreedMANAGEMENTS DISCUSSION ANDto purchase one additional Airbus A321 aircraft and enteredANALYSIS OF FINANCIAL CONDITIONinto a non-binding memorandum of understanding for the
150、purchase of 50 Airbus A320/321 NEO aircraft and we haveAND RESULTS OF OPERATIONScancellation rights with respect to 14 of the 50 AirbusOVERVIEWA320/321 NEO aircraft.From Boeing,we agreed to purchaseOur primary business is to acquire new and used popular andan additional 18 Boeing 737-800 aircraft,fi
151、ve Boeingfuel-efficient commercial aircraft from aircraft manufacturers777-300ER aircraft and entered into a memorandum of under-and other parties and to lease those aircraft to airlines aroundstanding for the purchase of four Boeing 787-9 aircraft.Fromthe world.We supplement our leasing revenues by
152、 providingEmbraer,we agreed to purchase an additional five Embraermanagement services to investors and/or owners of aircraftE190 aircraft.portfolios,for which we will receive fee-based revenue.We continued successful lease placements of new aircraftThese services include leasing,re-leasing,and lease
153、 manage-from our order book throughout 2011 ending the year withment and sales services,with the goal of helping our clientscontracts for the lease of 100%of the aircraft delivering inmaximize lease and sale revenues.In addition to our leasing2012,90.3%of the aircraft delivering in 2013 and 84.6%ofa
154、ctivities and management services,and depending on mar-the aircraft delivering in 2014.ket conditions,we expect to sell aircraft from our fleet toother leasing companies,financial services companies andOUR FLEETairlines.We have continued to build one of the worlds youngest,On April 25,2011,we comple
155、ted an initial public offering ofmost fuel-efficient aircraft operating lease portfolios.Duringour Class A Common Stock and listing of our Class A Com-the year ended December 31,2011,we acquired an addi-mon Stock on the New York Stock Exchange under the sym-tional 62 aircraft ending the year with a
156、total of 102 aircraft(ofbol AL.The offering was upsized by 20%and thewhich 36 were new aircraft and 66 were used aircraft).Weunderwriters exercised their over-allotment option in full,also managed two aircraft as of December 31,2011.Ourresulting in the sale of an aggregate of 34,825,470 shares ofwei
157、ghted average fleet age as of December 31,2011 wasClass A Common Stock.We received gross proceeds of3.6 years.approximately$922.9 million.Portfolio metrics of our fleet as of December 31,2011 andDuring 2011,the Company raised an incremental$1.2 billion2010 are as follows:in debt financing.This balan
158、ce was comprised of$587.6 mil-December 31,December 31,($in thousands)2011(1)2010lion in unsecured financing,which included$120.0 million inFleet size10240senior unsecured notes issued in a private placement to insti-Weighted average fleet age3.6 years3.8 yearsWeighted average remaining lease term6.6
159、 years5.6 yearstutional investors and$200.0 million in convertible seniorAggregate fleet cost$4,368,985$1,649,071notes.We ended the year with total unsecured debt outstand-(1)We acquired our existing fleet of 102 aircraft from 24 separate owners anding of$826.2 million.The Companys unsecured debt as
160、 aoperators of aircraft,51 of which were subject to existing operating leasesoriginated by 12 different aircraft lessors.The individual transactionspercentage of total debt increased from 14.6%as of Decem-ranged in size from one to eight aircraft,and from$22.3 million tober 31,2010 to 31.7%as of Dec
161、ember 31,2011.As part of our$330.2 million,respectively.The 51 existing operating leases were with 392012 financing strategy,the Company will continue to focusdifferent airline customers.Of the 51 aircraft that we acquired from otheraircraft lessors,none of the aircraft represented an entire portfol
162、io(i.e.,aon raising unsecured financing,of which we have alreadygroup of aircraft characterized by risk,geography or other common fea-raised$522.0 million during the first quarter of 2012.tures)of the respective seller lessor,and none of the seller lessors soldtheir aircraft as part of a plan to exi
163、t their respective aircraft leasingbusinesses.With respect to these transactions,we did not acquire anyDuring the year ended December 31,2011,we entered intoinformation technology systems,infrastructure,employees,other assets,binding and non-binding commitments to acquire up to 83services,financing
164、or any other activities indicative of a business.additional aircraft from Airbus,Boeing and Embraer for anestimated aggregate purchase price(including adjustmentfor anticipated inflation)of approximately$5.0 billion.Deliv-eries of the additional aircraft are scheduled to commence in36The following t
165、able sets forth the net book value and percent-Our lease placements are progressing in line with expecta-age of the net book value of our aircraft portfolio operating intions.As of December 31,2011 we have entered into con-the indicated regions as of December 31,2011 and 2010:tracts for the lease of
166、 new aircraft scheduled to be deliveredDecember 31,2011December 31,2010as follows:RegionNet bookNet bookNumber ofNumber($in thousands)value%of totalvalue%of totalDelivery yearAircraftLeased%LeasedEurope$1,782,94942.1%$688,60742.3%20124545100.0%Asia/Pacific1,355,43232.0425,67026.12013312890.3Latin Am
167、erica515,14512.2163,62210.02014262284.6North America386,1019.1254,20115.6201524520.8Africa and Middle East197,7894.697,7096.0201620Total$4,237,416100.0%$1,629,809100.0%Thereafter71Total21710046.1%The following table sets forth the number of aircraft weleased by aircraft type as of December 31,2011 a
168、nd 2010:AIRCRAFT INDUSTRY AND SOURCES OF REVENUESDecember 31,2011December 31,2010Our revenues are principally derived from operating leasesNumber ofNumber ofAircraft Typeaircraft%of totalaircraft%of totalwith scheduled and charter airlines.As of December 31,2011Airbus A319-10076.9%717.5%and December
169、 31,2010,we derived more than 90%of ourAirbus A320-2002120.6820.0Airbus A321-20032.925.0revenues from airlines domiciled outside of the U.S.,and weAirbus A330-2001110.825.0anticipate that most of our revenues in the future will beBoeing 737-70087.8512.5Boeing 737-8003029.41435.0generated from foreig
170、n lessees.The airline industry is cycli-Boeing 767-300ER32.9cal,economically sensitive,and highly competitive.AirlinesBoeing 777-200ER11.0Boeing 777-300ER43.925.0and related companies are affected by fuel price volatility andEmbraer E17522.0fuel shortages,political and economic instability,naturalEm
171、braer E190109.8ATR 72-60022.0disasters,terrorist activities,changes in national policy,com-Total102100.0%40100.0%petitive pressures,labor actions,pilot shortages,insurancecosts,recessions,health concerns and other political or eco-As of December 31,2011,we had contracted to buy 217 newnomic events a
172、dversely affecting world or regional tradingaircraft for delivery through 2020,with an estimated aggre-markets.Our airline customers ability to react to,and copegate purchase price(including adjustments for inflation)ofwith,the volatile competitive environment in which they$11.0 billion for delivery
173、 as follows:operate,as well as our own competitive environment,willAircraft Type20122013201420152016ThereafterTotalaffect our revenues and income.Airbus A320/321-200101312742Airbus A320/321 NEO(1)(2)34750Demand for air travel has consistently grown in terms of bothAirbus A330-200/300639the number of
174、 aircraft and passenger traffic over the lastBoeing 737-8004121214172079Boeing 777-300ER23540 years.The industry has remained resilient over time,whileBoeing 787-9(1)44enduring the effects of both business cycle downturns andEmbraer E175/19017118ATR 72-6008210external events.Today,air travel has pen
175、etrated most worldTotal453126242071217regions,with the highest growth now coming from emerging(1)As of December 31,2011,the Airbus A320/321 NEO aircraft and themarkets and economies.The long-term outlook for anBoeing 787-9 aircraft were subject to non-binding memoranda of under-increasing number of
176、aircraft remains robust due primarily tostanding for the purchase of these aircraft.increased passenger traffic.AVITAS,Inc.(AVITAS)fore-(2)We have cancellation rights with respect to 14 of the Airbus A320/321 NEOaircraft.casts that there will be almost 24,000 aircraft in service by2015,an increase o
177、f almost 5,000 over the level at the begin-ning of 2011.The airline industry is cyclical and generally grows along withthe economy.Historically,there has been a strong positivecorrelation between changes in world Gross Domestic Prod-uct,measured in U.S.dollars,and changes in passenger traf-fic(as in
178、dicated by revenue passenger kilometers(RPK),anindustry-standard measure of passengers flown where each37RPK represents one kilometer traveled by a payingfleet transactions necessary to facilitate growth of commer-customer).cial air transport.The business cycle effects are such that RPK declines orL
179、IQUIDITY AND CAPITAL RESOURCESsoftens within recessionary periods.However,aircraft inven-tory has trended upward consistently,regardless of the eco-OVERVIEWnomic cycle,as many aircraft are delivered during downturnsAs we grow our business,we envision funding our aircraftdespite reduced passenger tra
180、vel.purchases through multiple sources,including cash raised inour prior equity offerings,cash flow from operations,theLong-term passenger traffic growth is expected to be under-Warehouse Facility,additional unsecured debt financingpinned by projected growth in demand from emerging mar-through banks
181、 and the capital markets,credit facilities,andkets.Travel growth remains concentrated in the emerginggovernment-sponsored export guaranty and lendingmarkets of the Asia/Pacific region,Latin America and the Mid-programs.dle East while the more mature markets in the U.S.andEurope have slower growth ra
182、tes overall.According toWe have substantial cash requirements as we continue toAVITAS,the percentage of world traffic attributable to emerg-expand our fleet through our purchase commitments.How-ing markets has been continuously increasing since the earlyever,we believe that we will have sufficient l
183、iquidity to satisfy1990s.For example,in 1990,the Asia/Pacific region repre-the operating requirements of our business through the nextsented about 17%of the worlds passenger traffic,and itstwelve months.share was estimated to be approximately 29%in 2010.Since1990,Chinas passenger traffic has grown a
184、pproximatelyOur liquidity plans are subject to a number of risks and uncer-15%annually on average to 403 billion RPKs in 2010.Cur-tainties,including those described in Item 1A.Risk Factorsrently,Chinas passenger traffic is the second highest in thein our Annual Report on Form 10-K,filed with the Sec
185、uritiesworld.and Exchange Commission on March 9,2012.Macro-eco-nomic conditions could hinder our business plans,whichAVITAS expects to see considerably higher growth in 2011could,in turn,adversely affect our financing strategy.through 2015 in the Asia/Pacific region,the Middle East andLatin America,
186、as compared to North America and Europe.InDEBTfact,AVITAS forecasts that by 2015 passenger traffic in theOur debt financing was comprised of the following at Decem-Asia/Pacific region will surpass passenger traffic in Northber 31,2011 and 2010:America.December 31,December 31,($in thousands)20112010I
187、nternational Air Transport Association(IATA)projectsSecuredTerm financings$735,285$223,981some profit weakening in 2012 as a result of relatively highWarehouse facility1,048,222554,915fuel costs and softening of passenger traffic and yields.In1,783,507778,896addition,IATA believes the most significa
188、nt risk currently fac-Unsecureding airline profitability for 2012 is the economic turmoil thatTerm financings268,20913,085Convertible senior notes200,000would result from a failure of governments to resolve theRevolving credit facilities358,000120,000Eurozone sovereign debt crisis.While IATA is proj
189、ecting air-826,209133,085line industry profits of approximately$3.5 billion in 2012,it isTotal secured and unsecured debt financing2,609,716911,981also indicating that there is a significant risk that the debtLess:Debt discount(6,917)crisis in the Eurozone,if unresolved,could lead to a bankingTotal
190、debt$2,602,799$911,981crisis and cause more widespread economic weakness.IATASelected interest rates and ratios:Composite interest rate(1)3.14%3.32%projects that a scenario of this nature could cause the world-Composite interest rate on fixed debt(1)4.28%3.83%wide airline industry to experience loss
191、es of as much asPercentage of total debt at fixed rate24.3%1.40%$8.3 billion.(1)This rate does not include the effect of upfront fees,undrawn fees orissuance cost amortization.Despite industry cyclicality and current stress,we remainoptimistic about the long-term future of air transportationand,more
192、 specifically,the growing role that the aircraft leas-ing industry,and ALC specifically,provides in facilitating the38Secured Term Financingcompared to$554.9 million as of December 31,2010.As ofDuring the year ended December 31,2011,ten of our wholly-December 31,2011,the Company had pledged 38 aircr
193、aft asowned subsidiaries entered into separate secured term facili-collateral with a net book value of$1.6 billion.As of Decem-ties,with recourse to the Company,aggregating$548.8 mil-ber 31,2010,the Company had pledged 23 aircraft as collat-lion and one of our wholly-owned subsidiaries entered into
194、aeral with a net book value of$930.0 million.The Company$14.5 million,non-recourse,secured term facility.had pledged cash collateral and lessee deposits of$86.9 mil-lion and$48.3 million at December 31,2011 and Decem-The outstanding balance on our secured term facilities wasber 31,2010,respectively.
195、We intend to continue to utilize the$735.3 million and$224.0 million at December 31,2011 andWarehouse Facility to finance aircraft acquisitions throughDecember 31,2010,respectively.In connection with these2012,as this facility provides us with ample liquidity to makefacilities,the Company pledged$1.
196、1 billion and$336.8 mil-opportunistic acquisitions of aircraft on short notice.lion in aircraft collateral as of December 31,2011 and 2010,respectively.Unsecured Term FinancingsDuring the year ended December 31,2011,the CompanyWarehouse Facilityentered into 14 unsecured term facilities aggregatingOn
197、 May 26,2010,ALC Warehouse Borrower,LLC,one of our$141.6 million.We ended 2011 with a total of 16 unsecuredwholly-owned subsidiaries,entered into the Warehouseterm facilities.The total amount outstanding under ourFacility,which is a non-recourse,revolving credit facility tounsecured term facilities
198、was$148.2 million and$13.1 millionfinance the acquisition of aircraft.On April 1,2011,the Com-as of December 31,2011 and December 31,2010,pany executed an amendment to the Warehouse Facility thatrespectively.took effect on April 21,2011.This facility,as amended,pro-vides us with financing of up to$1
199、.25 billion,modified fromIn June 2011,the Company issued$120.0 million in seniorthe original facility size of$1.5 billion.We are able to draw onunsecured notes in a private placement to institutional inves-this facility,as amended,during an availability period thattors.The notes have a five-year ter
200、m and a coupon of 5.0%.ends in June 2013.Prior to the amendment of the WarehouseConvertible Senior NotesFacility,the Warehouse Facility accrued interest during theIn November 2011,the Company issued$200.0 million inavailability period based on LIBOR plus 3.25%on drawn bal-aggregate principal amount
201、of 3.875%convertible seniorances and at a fixed rate of 1.00%on undrawn balances.notes due 2018(the Convertible Notes)in an offeringFollowing the amendment,the Warehouse Facility accruesexempt from registration under the Securities Act.The Con-interest during the availability period based on LIBOR p
202、lusvertible Notes bear interest at a rate of 3.875%per annum2.50%on drawn balances and at a fixed rate of 0.75%onand are convertible at the option of the holder into shares ofundrawn balances.Pursuant to the amendment,the advanceour Class A Common Stock at a price of$30.23 per share.level under the
203、facility was increased from 65%of theappraised value of the aircraft pledged and 50%of the cashUnsecured Revolving Credit Facilitiespledged to the Warehouse Facility to 70%of the appraisedThe Company ended 2011 with a total of 13 revolvingvalue of the aircraft pledged and 50%of the cash pledged toun
204、secured credit facilities aggregating$358.0 million,eachthe Warehouse Facility.The outstanding drawn balance at thewith a borrowing rate of LIBOR plus 2.00%.The total amountend of the availability period may be converted at our optionoutstanding under our revolving credit facilities wasto an amortiz
205、ing,four-year term loan with an interest rate of$358.0 million and$120.0 million as of December 31,2011LIBOR plus 3.25%for the initial three years of the term andand December 31,2010,respectively.margin step-ups during the remaining year that increase theinterest to LIBOR plus 4.75%.As a result of a
206、mending theLIQUIDITYWarehouse Facility,we recorded an extinguishment of debtWe finance the acquisition of our aircraft through availablecharge of$3.3 million from the write-off of deferred debtcash balances,internally generated funds and debt financ-issue costs when the amendment became effective on
207、ings.As of December 31,2011,we had available liquidity ofApril 21,2011.$483.6 million comprised of unrestricted cash of$281.8 mil-During 2011,the Company drew a net$493.3 million underlion and undrawn balances under our Warehouse Facility ofthe Warehouse Facility and incrementally pledged$660.7 mil-
208、$201.8 million.lion in aircraft collateral.As of December 31,2011,the Com-pany had borrowed$1.0 billion under the Warehouse Facility39Our financing plan for 2012 is focused on continuing to raiseexport guaranteed financing for eight of our Airbus deliveriesunsecured debt in the global bank market an
209、d through inter-in 2012,aggregating to approximately$340.0 million in sov-national and domestic capital markets transactions,reinvest-ereign guaranteed financing.Additionally,we approacheding cash flow from operations and through governmentEx-Im Bank for support related to three aircraft and BNDES f
210、orguaranteed loan programs from the ECAs in support of our12 aircraft,aggregating$410.0 million in government sup-new Airbus aircraft deliveries and Ex-Im Bank in support ofported export financing.our new Boeing aircraft deliveries and direct financing fromLastly,during the first quarter of 2012,a w
211、holly-owned sub-BNDES/SBCE in support of our new Embraer deliveries.sidiary of the Company entered into a secured term facility toIn the first quarter of 2012,the Company entered into debtfinance the acquisition of aircraft.This facility provided thefacilities and obtained financing commitments for$
212、855.0 mil-Company with$192.8 million,which we will use to refinancelion.This included eight unsecured debt facilities totalingeight aircraft previously financed through the Warehouse$522.0 million,comprised of:$155.0 million in seniorFacility creating additional availability under our Warehouseunsec
213、ured notes issued in a private placement to institutionalFacility.investors;$200.0 million in short-term unsecured bridgeWe will continue to focus our financing efforts throughoutfinancing from two members of our banking group in connec-2012 on expanding our unsecured borrowing base supple-tion with
214、 the closing of four ECA supported aircraft deliveries;mented by internally generated funds and government sup-$105.0 million in unsecured term financing and$62.0 millionported export financing.of seller financing.As of March 9,2012,we had obtained long-term fundingcommitments from the ECAs and a ba
215、nking group to provideCONTRACTUAL OBLIGATIONSOur contractual obligations as of December 31,2011 are as follows:($in thousands)20122013201420152016ThereafterTotalLong-term debt obligations(1)(2)$196,374$480,852$457,816$330,520$671,009$473,145$2,609,716Interest payments on debt outstanding(3)50,46744,
216、67434,84829,05621,22229,315209,582Purchase commitments1,926,5151,525,6601,417,0231,381,288950,5153,924,31011,125,311Operating leases1,4412,3252,3952,4672,54120,70031,869Total$2,174,797$2,053,511$1,912,082$1,743,331$1,645,287$4,447,470$13,976,478(1)As of December 31,2011,the Company had$1.0 billion o
217、f debt outstanding under the Warehouse Facility which will come due beginning in June 2013.Theoutstanding drawn balance at the end of the availability period may be converted at the Companys option to an amortizing,four-year term loan and hasbeen presented as if such option were exercised in the con
218、tractual obligation schedule above.(2)As of December 31,2011,the Company had$358.0 million of debt outstanding under our revolving unsecured credit facilities.The outstanding drawnbalances may be rolled until the maturity date of each respective facility and have been presented as such in the contra
219、ctual obligation schedule above.(3)Future interest payments on floating rate debt are estimated using floating rates in effect at December 31,2011.40had entered into a binding lease commitment but for whichRESULTS OF OPERATIONSdelivery occurred during February 2011.For the periodYear Endedfrom Incep
220、tion toInterest and other income(in thousands,except share data)December 31,2011 December 31,2010Interest and other income totaled$4.0 million for the yearRevenuesended December 31,2011 compared to$1.3 million for theRental of flight equipment$332,719$57,075Interest and other4,0221,291period from in
221、ception to December 31,2010.During 2011,Total revenues336,74158,366the Company provided short-term bridge financing for theacquisition of an aircraft for which we earned$1.9 million inExpensesInterest44,86211,062fee and interest income.In addition,the Company earnedAmortization of discounts and$0.5
222、million in servicing fee revenue with respect to the twodeferred debt issue costs9,4814,883aircraft we manage.Extinguishment of debt3,349Amortization of convertible debtdiscounts35,798Interest expenseInterest expense totaled$57.7 million for the year endedInterest expense57,69251,743Depreciation of
223、flight equipment112,30719,262December 31,2011 compared to$51.7 million for the periodSelling,general and administrative44,55924,232from inception to December 31,2010.The change was pri-Stock-based compensation39,34224,044marily due to an increase in our outstanding debt balancesTotal expenses253,900
224、119,281resulting in a$33.8 million increase in interest,an increase ofIncome(loss)before taxes82,841(60,915)$4.6 million in amortization of our deferred debt issue costsIncome tax(expense)benefit(29,609)8,875and a$3.3 million charge for the extinguishment of debtNet income(loss)$53,232$(52,040)assoc
225、iated with the modification of the Warehouse Facility,Other Financial Data:offset by a one-time$35.8 million charge for the amortizationAdjusted net income(1)$87,954$2,520of convertible debt discounts recorded during 2010.Adjusted EBITDA(2)$290,168$32,973(1)Adjusted net income is a measure of financ
226、ial and operational perform-The$35.8 million charge in 2010 was a one-time,equity-ance that is not defined by GAAP.See note 1 in Selected Financial Dataelsewhere in this Annual Report for a discussion of adjusted net incomeneutral charge.This charge was a result of our issuance ofas a non-GAAP measu
227、re and a reconciliation of this measure to net$60.0 million of convertible notes at 6.0%,on May 7,2010,toincome(loss)and cash flows from operations.funds managed by Ares Management LLC and Leonard(2)Adjusted EBITDA is a measure of financial and operational performancethat is not defined by GAAP.See
228、note 2 in Selected Financial DataGreen&Partners,L.P.and members of our management andelsewhere in this Annual Report for a discussion of adjusted EBITDA as aboard of directors(and their family members or affiliates)andnon-GAAP measure and a reconciliation of this measure to net incomesimultaneously
229、entering into a forward purchase arrange-(loss)and cash flows from operations.ment with such funds managed by Ares Management LLC2011 Compared to 2010and Leonard Green&Partners,L.P.to purchase shares at aRental revenuediscounted price.As of December 31,2011,we had acquired 102 aircraft at aWe expect
230、 that our interest expense will increase as our aver-total cost of$4.4 billion and recorded$332.7 million in rentalage debt balance outstanding continues to increase.revenue for the year then ended,which included overhaulrevenue of$11.0 million.In the prior year,as of December 31,Our overall composi
231、te interest rate decreased from the prior2010,we had acquired 40 aircraft at a total cost of$1.6 billionyear as a result of our credit spreads on new debt issuancesand recorded$57.1 million in rental revenue for the periodcontinuing to tighten,combined with a low,short-term inter-from inception to D
232、ecember 31,2010,which included over-est rate environment.haul revenue of$3.6 million.The increase in rental revenuewas attributable to the acquisition and lease of additionalDepreciation expenseaircraft.The full impact on rental revenue for aircraft acquiredWe recorded$112.3 million in depreciation
233、expense of flightduring the period will be reflected in subsequent periods.equipment for the year ended December 31,2011 comparedto$19.3 million for the period from inception to December 31,All of the aircraft in our fleet were leased as of December 31,2010.The increase in depreciation expense for 2
234、011,com-2011.All of the aircraft in our fleet were leased as of Decem-pared to 2010,was attributable to the acquisition of additionalber 31,2010,except for one aircraft with respect to which weaircraft.41The full impact on depreciation expense for aircraft addedadjusted net income for 2011,compared
235、to 2010,was primar-during the year will be reflected in subsequent periods.ily attributable to the acquisition and lease of additionalaircraft.Selling,general and administrative expensesAdjusted net income is a measure of financial and operationalWe recorded selling,general and administrative expens
236、es ofperformance that is not defined by GAAP.See note 1 in$44.6 million for the year ended December 31,2011 com-Selected Financial Data elsewhere in this Annual Report forpared to$24.2 million for the period from inception toa discussion of adjusted net income as a non-GAAP measureDecember 31,2010.S
237、elling,general and administrativeand a reconciliation of this measure to net income(loss)andexpense represents a disproportionately higher percentagecash flows from operations.of revenues during our initial years of operation.As we con-tinue to add new aircraft to our portfolio,we expect selling,Adj
238、usted EBITDAgeneral and administrative expense to continue decreasingWe recorded adjusted EBITDA of$290.2 million for the yearas a percentage of our revenue.ended December 31,2011 compared to$33.0 million for theperiod from inception to December 31,2010.The change inStock-based compensation expensea
239、djusted EBITDA for 2011,compared to 2010,was primarilyStock-based compensation expense totaled$39.3 million forattributable to the acquisition and lease of additional aircraft.the year ended December 31,2011 compared to$24.0 millionfor the period from inception to December 31,2010.ThisAdjusted EBITD
240、A is a measure of financial and operationalincrease is primarily a result of timing as the full impact onperformance that is not defined by GAAP.See note 2 instock-based compensation expense for grants made duringSelected Financial Data elsewhere in this Annual Report forthe second quarter of 2010,p
241、artially offset by the effects ofa discussion of adjusted EBITDA as a non-GAAP measure andthe expense recognition pattern related to our restricteda reconciliation of this measure to net income(loss)and cashstock unit grants,which are front end loaded.We determineflows from operations.the fair value
242、 of our grants on the grant date and will recog-nize the value of the grants as expense over the vestingOFF-BALANCE SHEETperiod,with an offsetting increase to equity.ARRANGEMENTSTaxesWe have not established any unconsolidated entities for theThe effective tax rate for the year ended December 31,2011
243、purpose of facilitating off-balance sheet arrangements or forwas 35.7%compared to 14.6%for the period from inceptionother contractually narrow or limited purposes.We have,to December 31,2010.The change in effective tax rate for thehowever,from time to time established subsidiaries and cre-respective
244、 periods is primarily a result of a one-timeated partnership arrangements or trusts for the purpose of$35.8 million charge for the amortization of convertible debtleasing aircraft or facilitating borrowing arrangements.discounts recorded in 2010 which is not deductible for taxpurposes.CRITICAL ACCOU
245、NTING POLICIESNet income(loss)We believe the following critical accounting policies can haveFor the year ended December 31,2011,the Companya significant impact on our results of operations,financialreported consolidated net income of$53.2 million,or$0.59position and financial statement disclosures,a
246、nd may requireper diluted share,compared to a consolidated net loss ofsubjective and complex estimates and judgments.$52.0 million,or$1.32 per diluted share,for the period frominception to December 31,2010.The increase in net incomeLease revenuefor 2011,compared to 2010,was primarily attributable to
247、 theWe lease flight equipment principally under operating leasesacquisition and lease of additional aircraft.and report rental income ratably over the life of each lease.Rentals received,but unearned,under the lease agreementsAdjusted net incomeare recorded in Rentals received in advance on our Cons
248、ol-We recorded adjusted net income of$88.0 million for the yearidated Balance Sheet until earned.The difference betweenended December 31,2011 compared to$2.5 million for thethe rental income recorded and the cash received under theperiod from inception to December 31,2010.The change inprovisions of
249、the lease is included in Lease receivables,as acomponent of Other assets on our Consolidated Balance42Sheet.An allowance for doubtful accounts will be recognizedEstimating when we are virtually certain that Contingentfor past-due rentals based on managements assessment ofRental payments will not be
250、reimbursed requires judgmentscollectability.Our management team monitors all lesseesto be made as to the timing and cost of future maintenancewith past due lease payments(if any)and discusses relevantevents.In order to determine virtual certainty with respect tooperational and financial issues facin
251、g those lessees with ourthis contingency,our Technical Asset Management depart-marketing executives in order to determine an appropriatement analyzes the terms of the lease,utilizes available costallowance for doubtful accounts.In addition,if collection isestimates published by the equipment manufac
252、turers,andnot reasonably assured,we will not recognize rental incomethoroughly evaluates an airlines Maintenance Planning Doc-for amounts due under our lease contracts and will recognizeument(MPD).The MPD describes the required inspectionsrevenue for such lessees on a cash basis.Should a lesseesand
253、the frequency of those inspections.Our Technical Assetcredit quality deteriorate,we may be required to record anManagement department utilizes this information,combinedallowance for doubtful accounts and/or stop recognizing rev-with their cumulative industry experience,to determine whenenue until ca
254、sh is received,both of which could have a mate-major Qualifying Events are expected to occur for each rele-rial impact on our results of operations and financialvant component of the aircraft,and translates this informa-condition.tion into a determination of how much we will ultimately berequired to
255、 reimburse to the lessee.We record ContingentOur aircraft lease agreements typically contain provisionsRental revenue as the aircraft is operated when we determinewhich require the lessee to make additional rental paymentsthat a Qualifying Event will occur outside the non-cancellablebased on either
256、the usage of the aircraft,measured on thelease term or after we have collected Contingent Rentalsbasis of hours or cycles flown per month(a cycle is oneequal to the amount that we expect to reimburse to the lesseetake-off and landing),or calendar-based time(Contingentas the aircraft is operated.Rent
257、als).These payments represent contributions to thecost of major future maintenance events(QualifyingShould such estimates be inaccurate,we may be required toEvents)associated with the aircraft and typically coverreverse revenue previously recognized.In addition,if we canmajor airframe structural che
258、cks,engine overhauls,theno longer make accurate estimates with respect to a particu-replacement of life limited parts contained in each engine,lar lease,we will stop recognizing any Contingent Rental rev-landing gear overhauls and overhauls of the auxiliary powerenue until the end of such lease.unit
259、.These Contingent Rentals are generally collectedAll of our lease agreements are triple net leases whereby themonthly based on reports of usage by the lessee or collectedlessee is responsible for all taxes,insurance,and aircraftas fixed monthly rates.maintenance.In the future,we may incur repair and
260、 mainte-In accordance with our lease agreements,Contingent Rentalsnance expenses for off-lease aircraft.We recognize overhaulare subject to reimbursement to the lessee upon the occur-expense in our Consolidated Statement of Operations for allrence of a Qualifying Event.The reimbursable amount issuch
261、 expenditures.capped by the amount of Contingent Rentals received by theLessee-specific modifications such as those related to modifi-Company,net of previous reimbursements.The Company iscations of the aircraft cabin are expected to be capitalized asonly required to reimburse for Qualifying Events d
262、uring theinitial direct costs and amortized over the term of the leaselease term.The Company is not required to reimburse forinto rental revenue in our Consolidated Statement ofroutine maintenance or additional maintenance costsOperations.incurred during a Qualifying Event.All amounts of ContingentR
263、entals unclaimed by the lessee at the end of the lease termFlight equipmentare retained by the Company.Flight equipment under operating lease is stated at cost lessaccumulated depreciation.Purchases,major additions andWe record as rental revenue the portion of Contingent Rent-modifications,and inter
264、est on deposits during the construc-als that we are virtually certain we will not reimburse to thetion phase are capitalized.We generally depreciate passen-lessee as a component of Rental of flight equipment in ourger aircraft on a straight-line basis over a 25-year life from theConsolidated Stateme
265、nt of Operations.Contingent Rentalsdate of manufacture to a 15%residual value.Changes in thewhich we may be required to reimburse to the lessee areassumption of useful lives or residual values for aircraft couldreflected in our overhaul reserve liability,as a component ofhave a significant impact on
266、 our results of operations andSecurity deposits and maintenance reserves on flight equip-financial condition.At the time flight equipment is retired orment leases in our Consolidated Balance Sheet.43sold,the cost and accumulated depreciation are removedshare-based payment awards granted have been eq
267、uity clas-from the related accounts and the difference,net of proceeds,sified awards.We account for such awards by estimating theis recorded as a gain or loss.grant date fair value of the award as calculated by the Black-Scholes-Merton(BSM)option pricing model and amortiz-Our management team evaluat
268、es on a quarterly basis theing that value on a straight-line basis over the requisite ser-need to perform an impairment test whenever facts or cir-vice period less any anticipated forfeitures.The estimation ofcumstances indicate a potential impairment has occurred.Anthe fair value of share-based awa
269、rds requires considerableassessment is performed whenever events or changes injudgment,particularly since we were a private company untilcircumstances indicate that the carrying amount of an aircraftApril 2011,with a short history of operations.Key estimatesmay not be recoverable.Recoverability of a
270、n aircrafts carry-we make in determining the fair value of an award include theing amount is measured by comparing the carrying amountfair value of our Common Stock,the expected term of theof the aircraft to future undiscounted net cash flows expectedaward and the volatility of our Common Stock.To d
271、ate,weto be generated by the aircraft.The undiscounted cash flowshave principally used transaction prices from sales of ourconsist of cash flows from currently contracted leases,futureCommon Stock to determine the fair value of our Commonprojected lease rates and estimated residual or scrap valuesSt
272、ock.As we have a limited history,we have used the simpli-for each aircraft.We develop assumptions used in thefied averaging approach to estimating the expected term ofrecoverability analysis based on our knowledge of activethe award.We have estimated the volatility of our Commonlease contracts,curre
273、nt and future expectations of the globalStock by using the average historic volatility of a peer groupdemand for a particular aircraft type,and historical experi-of companies.For future awards,we will be required to con-ence in the aircraft leasing market and aviation industry,astinue to make such s
274、ubjective judgments,and while wewell as information received from third-party industryintend to continue to use the approach discussed above tosources.The factors considered in estimating the undis-make key estimates,there can be no assurance that changescounted cash flows are affected by changes in
275、 future periodsin such estimates will not have a significant impact to ourdue to changes in contracted lease rates,economic condi-results of operations in the future.tions,technology and airline demand for a particular aircrafttype.In the event that an aircraft does not meet the recover-Income taxes
276、ability test,the aircraft will be recorded at fair value in accor-We use the asset and liability method of accounting fordance with our Fair Value Policy,resulting in an impairmentincome taxes.Under the asset and liability method,deferredcharge.Deterioration of future lease rates and the residualinc
277、ome taxes are recognized for the tax consequences ofvalues of our aircraft could result in impairment chargestemporary differences by applying enacted statutory taxwhich could have a significant impact on our results of opera-rates applicable to future years to differences between thetions and finan
278、cial condition.To date,we have not recordedfinancial statement carrying amounts and the tax basis ofany impairment charges.existing assets and liabilities.The effect on deferred taxes of achange in the tax rates is recognized in income in the periodWe record flight equipment at fair value if we dete
279、rmine thethat includes the enactment date.We record a valuationcarrying value may not be recoverable.We principally use theallowance for deferred tax assets when the probability ofincome approach to measure the fair value of aircraft.Therealization of the full value of the asset is less than 50%.inc
280、ome approach is based on the present value of cash flowsBased on the timing of reversal of deferred tax liabilities,from contractual lease agreements and projected future leasefuture anticipated taxable income based on lease and debtpayments,including contingent rentals,net of expenses,arrangements
281、in place at the balance sheet date and tax plan-which extend to the end of the aircrafts economic life in itsning strategies available to us,our management considershighest and best use configuration,as well as a dispositionthe deferred tax asset recoverable.Should events occur invalue based on expe
282、ctations of market participants.Thesethe future that make the likelihood of recovery of deferred taxvaluations are considered Level 3 valuations,as the valua-assets less than 50%,a deferred tax valuation allowance willtions contain significant non-observable inputs.be required that could have a sign
283、ificant impact on our resultsof operations and financial condition.Stock-based compensationTo compensate and incentivize our employees and directors,We recognize the impact of a tax position,if that position haswe grant stock-based compensation awards.To date,wea probability of greater than 50%that
284、it would be sustainedhave granted stock options and restricted stock units.All44on audit,based on the technical merits of the position.Recog-whereas we have used floating-rate debt to finance a signifi-nized income tax positions are measured at the largestcant portion of our aircraft acquisitions.As
285、 of December 31,amount that has a probability of more than 50%of being2011,we had$2.0 billion in floating-rate debt.As of Decem-realized.Changes in recognition or measurement areber 31,2010,we had$898.9 million in floating-rate debt.Ifreflected in the period in which the change in judgmentinterest r
286、ates increase,we would be obligated to make higheroccurs.As our business develops,we may take tax positionsinterest payments to our lenders.If we incur significantthat have a probability of less than 50%of being sustained onfixed-rate debt in the future,increased interest rates prevail-audit which w
287、ill require us to reserve for such positions.Ifing in the market at the time of the incurrence of such debtthese tax positions are audited by a taxing authority,therewould also increase our interest expense.If our compositecan be no assurance that the ultimate resolution of such taxrate were to incr
288、ease by 1.0%,we would expect to incurpositions will not result in further losses.Such losses couldadditional interest expense on our existing indebtedness ashave a significant impact on our results of operations andof December 31,2011 and December 31,2010,of approxi-financial condition.mately$20.0 m
289、illion and$9.0 million,each on an annualizedbasis,which would put downward pressure on our operatingmargins.QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISKFOREIGN EXCHANGE RATE RISKThe Company attempts to minimize currency and exchangeMarket risk represents the risk of changes in value of
290、a finan-risks by entering into aircraft purchase agreements and acial instrument,caused by fluctuations in interest rates andmajority of lease agreements and debt agreements with U.S.foreign exchange rates.Changes in these factors could causedollars as the designated payment currency.Thus,most offlu
291、ctuations in our results of operations and cash flows.Weour revenue and expenses are denominated in U.S.dollars.are exposed to the market risks described below.As of December 31,2011 and December 31,2010,3.5%and3.7%,respectively,of our lease revenues were denominatedINTEREST RATE RISKin Euros.As our
292、 principal currency is the U.S.dollar,a contin-The nature of our business exposes us to market risk arisinguing weakness in the U.S.dollar as compared to other majorfrom changes in interest rates.Changes,both increases andcurrencies should not have a significant impact on our futuredecreases,in our
293、cost of borrowing,as reflected in our com-operating results.posite interest rate,directly impact our net income.Our leaserental stream is generally fixed over the life of our leases,457JAN201013030300REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRMThe Board of Directors and ShareholdersAir Lea
294、se Corporation:We have audited the accompanying consolidated balance sheets of Air Lease Corporation and subsidiaries as of December 31,2011 and 2010,and the related consolidated statements of operations,shareholders equity and cash flows for the year endedDecember 31,2011 and the period from incept
295、ion to December 31,2010.These consolidated financial statements are theresponsibility of the Companys management.Our responsibility is to express an opinion on these consolidated financialstatements based on our audit.We conducted our audit in accordance with the standards of the Public Company Acco
296、unting Oversight Board(United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement.An audit includes examining,on a test basis,evidence supporting the amountsand disclosures in the fi
297、nancial statements.An audit also includes assessing the accounting principles used and significantestimates made by management,as well as evaluating the overall financial statement presentation.We believe that our auditprovides a reasonable basis for our opinion.In our opinion,the consolidated finan
298、cial statements referred to above present fairly,in all material respects,the financialposition of Air Lease Corporation and subsidiaries as of December 31,2011 and 2010,and the results of their operations andtheir cash flows for the year ended December 31,2011 and the period from inception to Decem
299、ber 31,2010,in conformity withU.S.generally accepted accounting principles.San Francisco,CaliforniaMarch 9,201246CONSOLIDATED BALANCE SHEETS($in thousands,except share data)December 31,2011December 31,2010AssetsCash and cash equivalents$281,805$328,821Restricted cash96,15748,676Flight equipment subj
300、ect to operating leases4,368,9851,649,071Less accumulated depreciation(131,569)(19,262)4,237,4161,629,809Deposits on flight equipment purchases405,549183,367Deferred debt issue costs less accumulated amortization of$17,500 and$4,754 as ofDecember 31,2011 and December 31,2010,respectively47,60946,422
301、Deferred tax asset8,875Other assets96,05730,312Total assets$5,164,593$2,276,282Liabilities and Shareholders EquityAccrued interest and other payables$54,648$22,054Debt financing2,602,799911,981Security deposits and maintenance reserves on flight equipment leases284,154109,274Rentals received in adva
302、nce26,0178,038Deferred tax liability20,692Total liabilities$2,988,3101,051,347Shareholders EquityPreferred Stock,$0.01 par value;50,000,000 shares authorized;no shares issued oroutstandingClass A Common Stock,$0.01 par value;authorized 500,000,000 shares;issued andoutstanding 98,885,131 and 63,563,8
303、10 shares at December 31,2011 and December 31,2010,respectively984636Class B Non-Voting Common Stock,$0.01 par value;authorized 10,000,000 shares;issuedand outstanding 1,829,339 shares1818Paid-in capital2,174,0891,276,321Retained earnings(accumulated deficit)1,192(52,040)Total shareholders equity2,1
304、76,2831,224,935Total liabilities and shareholders equity$5,164,593$2,276,282(See Notes to Consolidated Financial Statements)47CONSOLIDATED STATEMENTS OF OPERATIONSFor the periodYear Endedfrom Inception to($in thousands,except share data)December 31,2011December 31,2010RevenuesRental of flight equipm
305、ent$332,719$57,075Interest and other4,0221,291Total revenues336,74158,366ExpensesInterest44,86211,062Amortization of discounts and deferred debt issue costs9,4814,883Extinguishment of debt3,349Amortization of convertible debt discounts35,798Interest expense57,69251,743Depreciation of flight equipmen
306、t112,30719,262Selling,general and administrative44,55924,232Stock-based compensation39,34224,044Total expenses253,900119,281Income(loss)before taxes82,841(60,915)Income tax(expense)benefit(29,609)8,875Net income(loss)$53,232$(52,040)Net income(loss)per share of Class A and Class B Common Stock:Basic
307、$0.59$(1.32)Diluted$0.59$(1.32)Weighted-average shares outstanding:Basic89,592,94539,511,045Diluted90,416,34639,511,045(See Notes to Consolidated Financial Statements)48CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITYClass AClass B Non-VotingPreferred StockCommon StockCommon StockPaid-inRetained($in t
308、housands,except share data)SharesAmountSharesAmountSharesAmountCapitalEarningsTotalBalance at inception$Class A Common Stock issuance55,750,9725581,026,0821,026,640Class B Non-Voting Common Stock issuance6,308,84463124,852124,915Class B conversion to Class A4,479,50545(4,479,505)(45)Issuance of warr
309、ants5,5785,578Conversion of convertible notes3,333,3333359,96760,000Convertible debt discounts35,79835,798Stock based compensation24,04424,044Net(loss)(52,040)(52,040)Balance at December 31,2010$63,563,810$6361,829,339$18$1,276,321$(52,040)$1,224,935Class A Common Stock issuance34,825,470348866,8828
310、67,230Issuance of restricted stock units843,975Tax withholdings on stock based compensation(348,124)(8,456)(8,456)Stock based compensation39,34239,342Net income53,23253,232Balance at December 31,2011$98,885,131$9841,829,339$18$2,174,089$1,192$2,176,283(See Notes to Consolidated Financial Statements)
311、49CONSOLIDATED STATEMENTS OF CASH FLOWSFor the periodYear Endedfrom Inception to($in thousands)December 31,2011December 31,2010Operating ActivitiesNet income(loss)$53,232$(52,040)Adjustments to reconcile net income(loss)to net cash provided by operating activities:Depreciation of flight equipment112
312、,30719,262Stock-based compensation39,34224,044Deferred taxes29,567(8,875)Amortization of discounts and deferred debt issue costs9,4814,883Extinguishment of debt3,349Amortization of convertible debt discounts35,798Changes in operating assets and liabilities:Other assets(17,438)(8,040)Accrued interest
313、 and other payables19,34718,864Rentals received in advance17,9798,038Net cash provided by operating activities267,16641,934Investing ActivitiesAcquisition of flight equipment under operating lease(2,529,901)(1,649,071)Payments for deposits on flight equipment purchases(360,587)(183,367)Acquisition o
314、f furnishings,equipment and other assets(86,668)(19,082)Net cash used in investing activities(2,977,156)(1,851,520)Financing ActivitiesIssuance of common stock and warrants867,2301,157,133Tax withholdings on stock based compensation(8,456)Issuance of convertible notes193,00060,000Net change in unsec
315、ured revolving facilities238,000120,000Proceeds from debt financings1,344,530796,921Payments in reduction of debt financings(84,796)(4,940)Restricted cash(47,481)(48,676)Debt issue costs(13,933)(51,305)Security deposits and maintenance reserve receipts180,862109,274Security deposits and maintenance
316、reserve disbursements(5,982)Net cash provided by financing activities2,662,9742,138,407Net increase(decrease)in cash(47,016)328,821Cash and cash equivalents at beginning of period328,821Cash and cash equivalents at end of period$281,805$328,821Supplemental Disclosure of Cash Flow InformationCash pai
317、d during the period for interest,including capitalized interest of$10,390 atDecember 31,2011 and capitalized interest of$1,769 at December 31,2010$51,986$12,723Supplemental Disclosure of Noncash ActivitiesBuyer furnished equipment,capitalized interest and deposits on flight equipmentpurchases applie
318、d to acquisition of flight equipment under operating leases$190,013$Conversion of convertible notes to Class A Common Stock$60,000(See Notes to Consolidated Financial Statements)50the Company had no such allowance,and no leases were onNOTES TO CONSOLIDATEDa cash basis.FINANCIAL STATEMENTSAll of the
319、Companys lease agreements are triple net leaseswhereby the lessee is responsible for all taxes,insurance,andNOTE 1.aircraft maintenance.In the future,we may incur repair andmaintenance expenses for off-lease aircraft.We recognizeoverhaul expense in our Consolidated Statement of Opera-ORGANIZATIONtio
320、ns for all such expenditures.In many operating lease con-Air Lease Corporation(the Company,ALC,we,ourtracts,the lessee is obligated to make periodic payments ofor us)was incorporated in the State of Delaware andsupplemental maintenance rent,which is calculated with ref-licensed to operate in the Sta
321、te of California.We commencederence to the utilization of the airframe,engines and otheroperations in February 2010 and elected a fiscal year end ofmajor life-limited components during the lease.In theseDecember 31.The Company is principally engaged in theleases,we will make a payment to the lessee
322、to compensateleasing of commercial aircraft to airlines throughout thethe lessee for the cost of the actual major maintenanceworld.We supplement our leasing revenues by providingincurred,up to the maximum of the amount of supplementalfleet management and remarketing services to third parties.mainten
323、ance rental payments made by the lessee during theWe typically provide many of the same services that we per-lease term.These payments are made upon the lesseesform for our fleet,including leasing,releasing,lease manage-presentation of invoices evidencing the completion of suchment and sales service
324、s for which we charge a fee,with thequalifying major maintenance.The Company records asobjective of assisting our clients to maximize lease or salerental revenue,the portion of supplemental maintenance rentrevenues.that is virtually certain will not be reimbursed to the lessee.PRINCIPLES OF CONSOLID
325、ATIONSupplemental maintenance rental payments which we mayThe Company consolidates financial statements of all entitiesbe required to reimburse to the lessee are reflected in ourin which we have a controlling financial interest,including theoverhaul reserve liability,as a component of Security depos
326、-account of any Variable Interest Entity in which we have aits and overhaul reserves on flight equipment leases in ourcontrolling financial interest and for which we are thus theConsolidated Balance Sheet.primary beneficiary.All material intercompany balances areLessee-specific modifications are exp
327、ected to be capitalizedeliminated in consolidation.as initial direct costs and amortized over the term of the leaseinto rental revenue in our Consolidated Statement ofRENTAL OF FLIGHT EQUIPMENTOperations.The Company leases flight equipment principally under oper-ating leases and reports rental incom
328、e ratably over the life ofINITIAL DIRECT COSTSeach lease.Rentals received,but unearned,under the leaseThe Company records as period costs those internal andagreements are recorded in Rentals received in advance onother costs incurred in connection with identifying,negotiat-the Companys Consolidated
329、Balance Sheet until earned.Theing and delivering aircraft to the Companys lessees.difference between the rental income recorded and the cashAmounts paid by us to lessees,or other parties,in connectionreceived under the provisions of the lease is included inwith the lease transactions are capitalized
330、 and amortized as aLease receivables,as a component of Other assets on thereduction to lease revenue over the lease term.Companys Consolidated Balance Sheet.An allowance fordoubtful accounts will be recognized for past-due rentalsCASH AND CASH EQUIVALENTSbased on managements assessment of collectabi
331、lity.Man-The Company considers cash and cash equivalents to beagement monitors all lessees with past due lease paymentscash on hand and highly liquid investments with originaland discuss relevant operational and financial issues facingmaturity dates of 90 days or less.those lessees with its marketin
332、g executives in order to deter-mine an appropriate allowance for doubtful accounts.In addi-RESTRICTED CASHtion,if collection is not reasonably assured,the Company willRestricted cash consists of pledged security deposits,main-not recognize rental income for amounts due under the Com-tenance reserves
333、,and rental payments related to securedpanys lease contracts and will recognize revenue for suchaircraft financing arrangements.lessees on a cash basis.As of December 31,2011 and 2010,51SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIESFLIGHT EQUIPMENTFAIR VALUE MEASUREMENTSFlight equipment under operating lease is stated at cost lessFair value is the amount that would be received to sell anaccumulated dep
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