1、2017 Annual Report2000 Avenue of the StarsSuite 1000NLos Angeles,CA Air Lease Corporation2017 Annual ReportTO OUR FELLOW SHAREHOLDERSWhen ALC started in early 2010,we dreamed of a clean slate company that we could build the way wewanted:a business model based on buying the most modern,fuel efficient
2、,in-demand new aircraftunder large scale purchase agreements that yielded a cost advantage;keeping the fleet young;harvesting our global customer relationships;building a strong investment grade balance sheet;borrowing unsecured in the public markets;keeping leverage,interest cost,and operating expe
3、nseslow;and managing all aspects of risk that we learned from decades of experience.You believed in us,as did our Board,customers,suppliers,debt providers,and employees.As we enterour ninth year in business,looking back with great support from all,we have established what we setout to do.In fact,ALC
4、s consistent growth and results have well surpassed our original plans.Indeed,2017 was a banner year for ALC with many firsts and milestones.We reached$15 billion inassets,$1.5 billion in revenues,and achieved a 17.5%adjusted pre-tax return on equity.Our stockprice increased by 40%achieving new all-
5、time highs.We took delivery of our first new AirbusA321neo,A350-900,and Boeing 737 MAX aircraft.Finally,we received great benefit from the TaxCuts and Jobs Act which will allow us to grow more and reduce our tax rate going forward,therebyfurther enhancing our global competitiveness.We remain proud t
6、o be an American company with avery bright future.Our path since inception was not without a few pockets of turbulence,all of which we havesuccessfully navigated to date.As with all companies,we certainly face challenges in the future:globaleconomic and political issues,increased competition,higher
7、interest rates,an evolving airlinelandscape,and engine teething problems and production delays on new aircraft models.Yet,none ofthese are really new and we have structured the company appropriately since inception to meet thesechallenges and profit from them.We firmly believe that our business mode
8、l continues to be ideally suited for our future and for thefuture of our industry,complimented by a nicely developing management business that also providesus additional tools to manage risk and develop opportunities.We continue to enjoy every moment of what we do,and we receive inspiration from the
9、 great team weare privileged to lead.To them,we give our utmost thanks,appreciation,and praise.Together,we lightour afterburners for 2018 and beyond.Respectfully yours,Steven F.Udvar-HzyJohn L.PluegerExecutive Chairman of the BoardChief Executive Officer and PresidentUNITED STATESSECURITIES AND EXCH
10、ANGE COMMISSIONWashington,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the fiscal year ended December 31,2017TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoComm
11、ission File Number 001-35121AIR LEASE CORPORATION(Exact name of registrant as specified in its charter)Delaware27-1840403(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)2000 Avenue of the Stars,Suite 1000NLos Angeles,California90067(Address of principal
12、 executive offices)(Zip Code)(Registrants telephone number,including area code):(310)553-0555Securities registered pursuant to Section 12(b)of the Act:Title of each className of each exchange on which registeredClass A Common StockNew YorkSecurities registered pursuant to Section 12(g)of the Act:Non
13、eIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the SecuritiesAct.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of theExchange Act.Yes No Indicate by check mark whether the re
14、gistrant(1)has filed all reports required to be filed by Section 13 or 15(d)of theSecurities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to filesuch reports),and(2)has been subject to such filing requirements for the past 90 days.Ye
15、s No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website,if any,everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during thepreceding 12 months(or for such shorter p
16、eriod that the registrant was required to submit and post such files).Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,and will not be contained,to the best of registrants knowledge,in definitive proxy or information stat
17、ements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the Registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or an emerging growth company.See the definitions of“larg
18、e accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.(Check One):Large accelerated filer Accelerated filer Non-accelerated filer(Do not check if asmaller reporting company)Smaller reporting company Emerging growth company
19、If an emerging growth company,indicate by check mark if the Registrant has elected not to use the extended transition periodfor complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a sh
20、ell company(as defined in Rule 12b-2 of the ExchangeAct).Yes No The aggregate market value of registrants voting stock held by non-affiliates was approximately$3.6 billion on June 30,2017,based upon the last reported sales price on the New York Stock Exchange.As of February 21,2018,there were 103,62
21、1,629shares of Class A common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEDesignated portions of the Proxy Statement relating to registrants 2018 Annual Meeting of Shareholders have beenincorporated by reference into Part III of this report.Form 10-KFor the Fiscal Year Ended December 31,201
22、7INDEXTABLE OF CONTENTSPagePART I.Item 1.Business.4Item 1A.Risk Factors.14Item 1B.Unresolved Staff Comments.38Item 2.Properties.38Item 3.Legal Proceedings.40Item 4.Mine Safety Disclosures.40PART IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases ofEquity S
23、ecurities.41Item 6.Selected Financial Data.43Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.47Item 7A.Quantitative and Qualitative Disclosures About Market Risk.67Item 8.Financial Statements and Supplementary Data.68Item 9.Changes in and Disagreements Wit
24、h Accountants on Accounting and Financial Disclosure.99Item 9A.Controls and Procedures.99Item 9B.Other Information.99PART IIIItem 10.Directors,Executive Officers and Corporate Governance.100Item 11.Executive Compensation.100Item 12.Security Ownership of Certain Beneficial Owners and Management Relat
25、ed StockholderMatters.100Item 13.Certain Relationships and Related Transactions,and Director Independence.100Item 14.Principal Accounting Fees and Services.100PART IVItem 15.Exhibits,Financial Statement Schedules.101Item 16.Form 10-K Summary.1152FORWARD LOOKING STATEMENTSThis Annual Report on Form 1
26、0-K and other publicly available documents may contain or incorporatestatements that constitute forward-looking statements within the meaning of the Private Securities LitigationReform Act of 1995.Those statements appear in a number of places in this Form 10-K and include statementsregarding,among o
27、ther matters,the state of the airline industry,our access to the capital markets,our ability torestructure leases and repossess aircraft,the structure of our leases,regulatory matters pertaining to compliancewith governmental regulations,and other factors affecting our financial condition or results
28、 of operations.Wordssuch as“expects,”“anticipates,”“intends,”“plans,”“believes,”“seeks,”“estimates”and“should,”and variationsof these words and similar expressions,are used in many cases to identify these forward-looking statements.Anysuch forward-looking statements are not guarantees of future perf
29、ormance and involve risks,uncertainties,andother factors that may cause our actual results,performance or achievements,or industry results to varymaterially from our future results,performance or achievements,or those of our industry,expressed or implied insuch forward-looking statements.Such factor
30、s include,among others,general commercial aviation industry,economic,and business conditions,which will,among other things,affect demand for aircraft,availability,andcreditworthiness of current and prospective lessees,lease rates,availability and cost of financing and operatingexpenses,governmental
31、actions and initiatives,and environmental and safety requirements,as well as the factorsdiscussed under“Item 1A.Risk Factors,”in this Annual Report on Form 10-K.We do not intend and undertakeno obligation to update any forward-looking information to reflect actual results or future events orcircumst
32、ances.3PART IITEM 1.BUSINESSOverviewAir Lease Corporation(the“Company”,“ALC”,“we”,“our”or“us”)is a leading aircraft leasingcompany that was founded by aircraft leasing industry pioneer,Steven F.Udvar-Hzy.We are principallyengaged in purchasing new commercial jet transport aircraft directly from airc
33、raft manufacturers,such as TheBoeing Company(“Boeing”)and Airbus S.A.S.(“Airbus”),and leasing those aircraft to airlines throughout theworld with the intention to generate attractive returns on equity.In addition to our leasing activities,we sellaircraft from our operating lease portfolio to third p
34、arties,including other leasing companies,financial servicescompanies,and airlines.We also provide fleet management services to investors and owners of aircraft portfoliosfor a management fee.Our operating performance is driven by the growth of our fleet,the terms of our leases,the interest rates on
35、our debt,and the aggregate amount of our indebtedness,supplemented by the gains from ouraircraft sales and trading activities and our management fees.We currently have relationships with over 200 airlines across 70 countries.We operate our business on aglobal basis,providing aircraft to airline cust
36、omers in every major geographical region,including markets suchas Asia,the Pacific Rim,Latin America,the Middle East,Europe,Africa,and North America.Many of thesemarkets are experiencing increased demand for passenger airline travel and have lower market saturation thanmore mature markets such as th
37、e United States and Western Europe.We expect that these markets will alsopresent significant replacement opportunities in upcoming years as many airlines look to replace aging aircraftwith new,modern technology,fuel efficient jet aircraft.An important focus of our strategy is meeting the needsof thi
38、s replacement market.Airlines in some of these markets have fewer financing alternatives,enabling us tocommand relatively higher lease rates compared to those in more mature markets.We mitigate the risks of owning and leasing aircraft through careful management and diversification ofour leases and l
39、essees by geography,lease term,and aircraft age and type.We believe that diversification of ouroperating lease portfolio reduces the risks associated with individual lessee defaults and adverse geopolitical andregional economic events.We mitigate the risks associated with cyclical variations in the
40、airline industry bymanaging customer concentrations and lease maturities in our operating lease portfolio to minimize periods ofconcentrated lease expirations.In order to maximize residual values and minimize the risk of obsolescence,ourstrategy is to own an aircraft during the first third of its ex
41、pected 25 year useful life.We ended 2017 with 244 owned aircraft and 50 aircraft in our managed fleet portfolio.As of December,31,2017,the net book value of our fleet increased by 10.3%,as compared to December 31,2016,to$13.3 billion,with a weighted average lease term remaining of 6.8 years and a we
42、ighted average age of 3.8 years.We have a globally diversified customer base comprised of 91 airlines in 55 countries.As of February 22,2018,all of our aircraft in our operating lease portfolio were subject to lease agreements.During 2017,we increased our total commitments with Airbus and Boeing by
43、a net 35 aircraft.As ofDecember 31,2017,we had commitments to purchase 368 aircraft from Airbus and Boeing for delivery through2023,with an estimated aggregate commitment of$27.0 billion.We ended 2017 with$23.4 billion in committedminimum future rental payments and placed 79%of our order book on lon
44、g-term leases for aircraft deliveringthrough 2020.This includes$10.1 billion in contracted minimum rental payments on the aircraft in our existingfleet and$13.3 billion in minimum future rental payments related to aircraft which will deliver between 2018 and2022.We finance the purchase of aircraft a
45、nd our business with available cash balances,internally generatedfunds,including aircraft sales and trading activities,and debt financings.Our debt financing strategy is focusedon raising unsecured debt in the global bank and debt capital markets,with a limited utilization of export credit4or other
46、forms of secured financing.In 2017,we issued$2.2 billion senior unsecured notes with an averageinterest rate of 3.16%,with maturities ranging from 2022 to 2027 and in January 2018,we issued(i)$550.0 million in aggregate principal amount of senior unsecured notes due 2021 that bear interest at a rate
47、 of2.50%and(ii)$700.0 million in aggregate principal amount of senior unsecured notes due 2025 that bear interestat a rate of 3.25%.In 2017,we increased our unsecured revolving credit facility capacity to approximately$3.8 billion,representing an 18.6%increase from 2016 and extended the final maturi
48、ty to May 5,2021.InFebruary 2018,we further increased the capacity of our unsecured revolving credit facility by 4.7%toapproximately$3.9 billion.Borrowings under our unsecured revolving credit facility will bear interest at LIBORplus a margin of 1.05%per year.We ended 2017 with total debt outstandin
49、g,net of discounts and issuance costs,of$9.7 billion,of which 85.4%was at a fixed rate and 94.6%of which was unsecured.Our composite cost offunds decreased to 3.20%as of December 31,2017 from 3.42%as of December 31,2016.On December 22,2017,the U.S.Tax Cuts and Jobs Act(the“Tax Reform Act”)was signed
50、 into law.The Tax Reform Act significantly revised the U.S.corporate income tax law by,among other things,loweringthe U.S.corporate tax rate from 35%to 21%effective January 1,2018.As a result of the Tax Reform Act,werecorded an estimated tax benefit of$354.1 million or$3.16 per diluted share due to
51、the remeasurement ofdeferred tax assets and liabilities for the quarter ended December 31,2017.In 2017,total revenues increased by 6.9%to$1.5 billion,compared to 2016.The increase in our totalrevenues is primarily due to the$1.2 billion increase in the net book value of our operating lease portfolio
52、.Ournet income for the year ended December 31,2017 was$756.2 million,or$6.82 per diluted share compared to$374.9 million,or$3.44 per diluted share for the year ended December 31,2016.The increase in our net incomeand diluted earnings per share for the year ended December 31,2017 was due to the$1.2 b
53、illion increase in thenet book value of our operating lease portfolio,and the re-measurement of our U.S.deferred tax liabilitiesassociated with the enactment of the Tax Reform Act,resulting in a tax benefit of$354.1 million.Our pre-taxprofit margin for the year ended December 31,2017 was 40.2%as com
54、pared to 40.9%for the year endedDecember 31,2016.Our adjusted net income before income taxes excludes the effects of certain non-cash items,one-time ornon-recurring items,such as settlement expense,net of recoveries,that are not expected to continue in the futureand certain other items.Our adjusted
55、net income before income taxes for the year ended December 31,2017 was$657.8 million or$5.94 per diluted share,compared to$622.9 million,or$5.67 per diluted share for the yearended December 31,2016.Our adjusted margin before income taxes for the year ended December 31,2017 was43.4%compared to 44.1%f
56、or the year ended December 31,2016.Adjusted net income before income taxes,adjusted margin before income taxes and adjusted diluted earnings per share before income taxes are measures offinancial and operational performance that are not defined by Generally Accepted Accounting Principles(“GAAP”).See
57、 Note 2 in“Item 6.Selected Financial Data”of this Annual Report on Form 10-K for a discussionof adjusted net income before income taxes and adjusted diluted earnings per share before income taxes asnon-GAAP measures and reconciliation of these measures to net income.Operations to DateCurrent FleetOu
58、r fleet,based on net book value,increased by 10.3%to$13.3 billion as of December 31,2017compared to$12.0 billion as of December 31,2016.As of December 31,2017,we owned 244 aircraft,comprisedof 188 narrowbody jet aircraft and 56 widebody jet aircraft,with a weighted average age of 3.8 years.As ofDece
59、mber 31,2016,we owned 237 aircraft,comprised of 188 narrowbody jet aircraft and 49 widebody jetaircraft,with a weighted average age of 3.8 years.In addition,we also managed 50 jet aircraft for third partyowners on a fee basis as of December 31,2017 compared to 30 jet aircraft as of December 31,2016.
60、5Geographic DiversificationOver 95%of our aircraft are operated internationally.The following table sets forth the dollar amountand percentage of our rental of flight equipment revenues attributable to the respective geographical regionsbased on each airlines principal place of business:Year EndedDe
61、cember 31,2017Year EndedDecember 31,2016Year EndedDecember 31,2015RegionAmount ofRentalRevenue%of TotalAmount ofRentalRevenue%of TotalAmount ofRentalRevenue%of Total(in thousands,except percentages)Europe.$450,62831.1%$400,49129.9%$380,29532.4%Asia(excluding China).332,28422.9%308,65823.1%223,28419.
62、0%China.324,14722.3%293,20621.9%265,45022.6%The Middle East and Africa.116,7998.1%106,3007.9%90,4167.7%Central America,South America,andMexico.102,2057.0%112,0688.4%114,6729.8%U.S.and Canada.76,6855.3%69,9185.2%54,2944.6%Pacific,Australia,and New Zealand.47,9873.3%48,3613.6%46,1333.9%Total.$1,450,73
63、5100.0%$1,339,002100.0%$1,174,544100.0%The following table sets forth the regional concentration based on each airlines principal place ofbusiness of our flight equipment subject to operating lease based on net book value as of December 31,2017 and2016:December 31,2017December 31,2016RegionNet BookV
64、alue%of TotalNet BookValue%of Total(in thousands,except percentages)Europe.$4,205,43131.7%$3,547,29429.5%Asia(excluding China).2,981,33922.4%2,739,55422.7%China.2,720,12420.5%2,779,54623.0%The Middle East and Africa.1,481,82511.2%935,9687.8%Central America,South America,and Mexico.926,7327.0%937,287
65、7.8%U.S.and Canada.599,3674.5%647,7435.4%Pacific,Australia,and New Zealand.365,4322.7%454,5333.8%Total.$13,280,250100.0%$12,041,925100.0%6At December 31,2017,2016 and 2015,we owned and managed leased aircraft to customers in thefollowing regions based on each airlines principal place of business:Dec
66、ember 31,2017December 31,2016December 31,2015RegionNumber ofCustomers(1)%of TotalNumber ofCustomers(1)%of TotalNumber ofCustomers(1)%of TotalEurope.3134.0%2731.8%2730.0%Asia(excluding China).1819.8%1821.2%1921.1%U.S.and Canada.1112.1%1214.1%1112.2%The Middle East and Africa.1112.1%78.2%88.9%China.99
67、.9%910.6%1213.4%Central America,South America,andMexico.99.9%910.6%1112.2%Pacific,Australia,and New Zealand.22.2%33.5%22.2%Total.91100.0%85100.0%90100.0%(1)A customer is an airline with its own operating certificate.For the years ended December 31,2017,2016,and 2015,China was the only individual cou
68、ntry thatrepresented at least 10%of our rental revenue based on each airlines principal place of business.In 2017,2016,and 2015,no rental revenue from any individual airline represented 10%or more of our rental revenue.Aircraft Acquisition StrategyWe seek to acquire the most highly in demand and wid
69、ely distributed,modern technology,fuel efficientnarrowbody and widebody commercial jet transport aircraft.Our strategy is to order new aircraft directly fromthe manufacturers.When placing new aircraft orders with the manufacturers,we strategically target thereplacement of aging aircraft with modern
70、technology aircraft.Additionally,we look to supplement our orderpipeline with opportunistic purchases of aircraft in the secondary market and participate in sale-leasebacktransactions with airlines.Prior to ordering aircraft,we evaluate the market for specific types of aircraft.We consider the overa
71、lldemand for the aircraft type in the marketplace based on our deep knowledge of the aviation industry and ourcustomer relationships.It is important to assess the airplanes economic viability,the operating performancecharacteristics,engine variant options,intended utilization by our customers,and wh
72、ich aircraft types it willreplace or compete with in the global market.Additionally,we study the effects of global airline passenger trafficgrowth in order to determine the likely demand for our new aircraft.For new aircraft deliveries,we source many components separately,which include seats,safetye
73、quipment,avionics,galleys,cabin finishes,engines,and other equipment.Often times we are able to achievelower pricing through direct bulk purchase contracts with the component manufacturers than would beachievable if the airframe manufacturers sourced the components for the airplane.Manufacturers suc
74、h as Boeingand Airbus install this buyer furnished equipment in our aircraft during the final assembly process at theirfacilities.With this purchasing strategy,we are able to meet specific customer configuration requirements andlower the total acquisition cost of the aircraft.Aircraft Leasing Strate
75、gyThe airline industry is a complex industry with constantly evolving competition,code shares(where twoor more airlines share the same flight),alliances,and passenger traffic patterns.This requires frequent updatingand flexibility within an airlines fleet.The operating lease allows airlines to effec
76、tively adapt and manage theirfleets through varying market conditions without bearing the full financial risk associated with these capital7intensive assets which have an expected useful life of 25 years.This fleet flexibility enables airlines to moreeffectively operate and compete in their respecti
77、ve markets.We work closely with our airline customersthroughout the world to help optimize their long-term aircraft fleet strategies.We work to mitigate the risks associated with owning and leasing aircraft and cyclical variations in theairline industry through careful management of our fleet,includ
78、ing managing customer concentrations bygeography and region,entering into long term leases,staggering lease maturities,balancing aircraft typeexposures,and maintaining a young fleet age.We believe that diversification of our operating lease portfolioreduces the risks associated with individual custo
79、mer defaults and the impact of adverse geopolitical and regionaleconomic events.In order to maximize residual values and minimize the risk of obsolescence,our strategy isgenerally to own an aircraft for approximately the first third of its expected 25 year useful life.Our management team identifies
80、prospective airline customers based upon industry knowledge andlong-standing relationships.Prior to leasing an aircraft,we evaluate the competitive positioning of the airline,thestrength and quality of the management team,and the financial performance of the airline.Management obtainsand reviews rel
81、evant business materials from all prospective customers before entering into a lease agreement.Under certain circumstances,the customer may be required to obtain guarantees or other financial support from asovereign entity or a financial institution.We work closely with our existing customers and po
82、tential lessees todevelop customized lease structures that address their specific needs.We typically enter into a lease agreement18 to 36 months in advance of the delivery of a new aircraft from our order book.Once the aircraft has beendelivered and operated by the airline,we look to remarket the ai
83、rcraft and sign a follow-on lease six to 12 monthsahead of the scheduled expiry of the initial lease term.Our leases typically contain the following key provisions:our leases are primarily structured as operating leases,whereby we retain the residual rights to theaircraft;our leases are triple net l
84、eases,whereby the lessee is responsible for all operating costs includingtaxes,insurance,and aircraft maintenance;our leases typically require all payments be made in U.S.dollars;our leases are typically for fixed rates and terms;our leases typically require cash security deposits and maintenance re
85、serve payments;andour leases contain provisions which require payment whether or not the aircraft is operated,irrespective of the circumstances.The lessee is responsible for compliance with applicable laws and regulations with respect to theaircraft.We require our lessees to comply with the standard
86、s of either the U.S.Federal Aviation Administration(“FAA”)or its equivalent in foreign jurisdictions.As a function of these laws and the provisions in our leasecontracts,the lessees are responsible to perform all maintenance of the aircraft and return the aircraft and itscomponents in a specified re
87、turn condition.Generally,we receive a cash deposit and maintenance reserves assecurity for the lessees performance of obligations under the lease and the condition of the aircraft upon return.In addition,most leases contain extensive provisions regarding our remedies and rights in the event of a def
88、aultby a lessee.The lessee generally is required to continue to make lease payments under all circumstances,including periods during which the aircraft is not in operation due to maintenance or grounding.Some foreign countries have currency and exchange laws regulating the international transfer ofc
89、urrencies.When necessary,we may require,as a condition to any foreign transaction,that the lessee orpurchaser in a foreign country obtain the necessary approvals of the appropriate government agency,financeministry,or central bank for the remittance of all funds contractually owed in U.S.dollars.We
90、attempt to8minimize our currency and exchange risks by negotiating the designated payment currency in our leases to beU.S.dollars.To meet the needs of certain of our airline customers,we have agreed to accept certain leasepayments in a foreign currency.After we agree to the rental payment currency w
91、ith an airline,the negotiatedcurrency typically remains for the term of the lease.We may enter into contracts to mitigate our foreign currencyrisk,but we expect that the economic risk arising from foreign currency denominated leases will be insignificantto us.We may,in connection with the lease of u
92、sed aircraft,agree to contribute specific additional amounts tothe cost of certain first major maintenance events or modifications,which usually reflect the usage of the aircraftprior to the commencement of the lease.We may be obligated under the leases to make reimbursements ofmaintenance reserves
93、previously received to lessees for expenses incurred for certain planned majormaintenance.We also,on occasion,may contribute towards aircraft modifications and recover any such costsover the life of the lease.MonitoringDuring the lease term,we closely follow the operating and financial performance o
94、f our lessees.Wemaintain a high level of communication with the lessee and frequently evaluate the state of the market in whichthe lessee operates,including the impact of changes in passenger air travel and preferences,emergingcompetition,new government regulations,regional catastrophes,and other un
95、foreseen shocks that are relevant tothe airlines market.This enables us to identify lessees that may be experiencing operating and financialdifficulties.This identification assists us in assessing the lessees ability to fulfill its obligations under the lease.This monitoring also identifies candidat
96、es,where appropriate,to restructure the lease prior to the lesseesinsolvency or the initiation of bankruptcy or similar proceedings.Once an insolvency or bankruptcy occurs,wetypically have less control over,and would most likely incur greater costs in connection with,the restructuring ofthe lease or
97、 the repossession of the aircraft.During the life of the lease,situations may lead us to restructure leases with our lessees.When werepossess an aircraft leased in a foreign country,we generally expect to export the aircraft from the lesseesjurisdiction.In some very limited situations,the lessees ma
98、y not fully cooperate in returning the aircraft.In thosecases,we will take appropriate legal action,a process that could ultimately delay the return and export of theaircraft.In addition,in connection with the repossession of an aircraft,we may be required to pay outstandingmechanicsliens,airport ch
99、arges,and navigation fees and other amounts secured by liens on the repossessedaircraft.These charges could relate to other aircraft that we do not own but were operated by the lessee.RemarketingOur lease agreements are generally structured to require lessees to notify us nine to 12 months inadvance
100、 of the leases expiration if a lessee desires to renew or extend the lease.Requiring lessees to provide uswith such advance notice provides our management team with an extended period of time to consider a broad setof alternatives with respect to the aircraft,including assessing general market and c
101、ompetitive conditions andpreparing to remarket or sell the aircraft.If a lessee fails to provide us with notice,the lease will automaticallyexpire at the end of the term,and the lessee will be required to return the aircraft pursuant to the conditions in thelease.Our leases contain detailed provisio
102、ns regarding the required condition of the aircraft and its componentsupon redelivery at the end of the lease term.Aircraft Sales&Trading StrategyOur strategy is to maintain a portfolio of young aircraft with a widely diversified customer base.Inorder to achieve this profile,we primarily order new p
103、lanes directly from the manufacturers,place them on longterm leases,and sell the aircraft when they near the end of the first third of their expected 25 year economicuseful lives.We typically sell aircraft that are currently operated by an airline with multiple years of lease term9remaining on the c
104、ontract,in order to achieve the maximum disposition value of the aircraft.Buyers of theaircraft may include leasing companies,financial institutions,and airlines.We also,from time to time,buy andsell aircraft on an opportunistic basis for trading profits.In the past three years ended December 31,201
105、7,wesold 101 aircraft.Additionally,we may provide management services to buyers of our aircraft asset for a fee.Aircraft Management StrategyWe supplement our core business model by providing fleet management services to third party investorsand owners of aircraft portfolios for a management fee.This
106、 allows us to better serve our airline customers andexpand our existing airline customer base by providing additional leasing opportunities beyond our own aircraftportfolio,new order pipeline,and customer or regional concentration limits.Financing StrategyWe finance the purchase of aircraft and our
107、business with available cash balances,internally generatedfunds,including aircraft sales and trading activity,and debt financings.We have structured the Company to haveinvestment grade credit metrics and our debt financing strategy has focused on funding our business on anunsecured basis.Unsecured f
108、inancing provides us with operational flexibility when selling or transitioningaircraft from one airline to another.We may,to a limited extent,utilize export credit or other forms of securedfinancing.InsuranceWe require our lessees to carry those types of insurance that are customary in the air tran
109、sportationindustry,including comprehensive liability insurance,aircraft all-risk hull insurance,and war-risk insurancecovering risks such as hijacking,terrorism(but excluding coverage for weapons of mass destruction and nuclearevents),confiscation,expropriation,seizure,and nationalization.We general
110、ly require a certificate of insurancefrom the lessees insurance broker prior to delivery of an aircraft.Generally,all certificates of insurance containa breach of warranty endorsement so that our interests are not prejudiced by any act or omission of the lessee.Lease agreements generally require hul
111、l and liability limits to be in U.S.dollars,which are shown on thecertificate of insurance.Insurance premiums are to be paid by the lessee,with coverage acknowledged by the broker or carrier.The territorial coverage,in each case,should be suitable for the lessees area of operations.We generally requ
112、irethat the certificates of insurance contain,among other provisions,a provision prohibiting cancellation or materialchange without at least 30 daysadvance written notice to the insurance broker(who would be obligated to giveus prompt notice),except in the case of hull war insurance policies,which c
113、ustomarily only provide seven daysadvance written notice for cancellation and may be subject to shorter notice under certain market conditions.Furthermore,the insurance is primary and not contributory,and we require that all insurance carriers be requiredto waive rights of subrogation against us.The
114、 stipulated loss value schedule under aircraft hull insurance policies is on an agreed-value basisacceptable to us and usually exceeds the book value of the aircraft.In cases where we believe that the agreedvalue stated in the lease is not sufficient,we make arrangements to cover such deficiency,whi
115、ch would includethe purchase of additional“Total Loss Only”coverage for the deficiency.Aircraft hull policies generally contain standard clauses covering aircraft engines.The lessee is requiredto pay all deductibles.Furthermore,the hull war policies generally contain full war risk endorsements,inclu
116、ding,but not limited to,confiscation(where available),seizure,hijacking and similar forms of retention or terroristacts.The comprehensive liability insurance listed on certificates of insurance generally include provisions forbodily injury,property damage,passenger liability,cargo liability,and such
117、 other provisions reasonably10necessary in commercial passenger and cargo airline operations.We expect that such certificates of insurance listcombined comprehensive single liability limits of not less than$500.0 million for Airbus and Boeing aircraft and$200.0 million for Embraer S.A.(“Embraer”).As
118、 a standard in the industry,airline operators policies contain asublimit for third-party war risk liability generally in the amount of at least$150.0 million.We require eachlessee to purchase higher limits of third-party war risk liability or obtain an indemnity from its respectivegovernment.The int
119、ernational aviation insurance market has exclusions for physical damage to aircraft hulls causedby dirty bombs,bio-hazardous materials,and electromagnetic pulsing.Exclusions for the same type of perilscould be introduced into liability policies in the future.We cannot assure you that our lessees wil
120、l be adequately insured against all risks,that lessees will at alltimes comply with their obligations to maintain insurance,that any particular claim will be paid,or that lesseeswill be able to obtain adequate insurance coverage at commercially reasonable rates in the future.Separately,we purchase c
121、ontingent liability insurance and contingent hull insurance on all aircraft in ourfleet and maintain other insurance covering the specific needs of our business operations.While we believe ourinsurance is adequate both as to coverages and amounts,we cannot assure you that we are adequately insuredag
122、ainst all risks.CompetitionThe leasing,remarketing,and sale of aircraft is highly competitive.We are one of the largest aircraftlessors operating on a global scale.We face competition from aircraft manufacturers,banks,financialinstitutions,other leasing companies,aircraft brokers,and airlines.Some o
123、f our competitors may have greateroperating and financial resources and access to lower capital costs than we have.Competition for leasingtransactions is based on a number of factors,including delivery dates,lease rates,lease terms,other leaseprovisions,aircraft condition,and the availability in the
124、 marketplace of the types of aircraft required to meet theneeds of airline customers.Competition in the purchase and sale of used aircraft is based principally on theavailability of used aircraft,price,the terms of the lease to which an aircraft is subject,and the creditworthinessof the lessee,if an
125、y.Government RegulationThe air transportation industry is highly regulated.We do not operate commercial aircraft,and thus maynot be directly subject to many industry laws and regulations,such as regulations of the U.S.Department of State(the“DOS”),the U.S.Department of Transportation,or their counte
126、rpart organizations in foreign countriesregarding the operation of aircraft for public transportation of passengers and property.As discussed below,however,we are subject to government regulation in a number of respects.In addition,our lessees are subject toextensive regulation under the laws of the
127、 jurisdictions in which they are registered or operate.These lawsgovern,among other things,the registration,operation,maintenance,and condition of the aircraft.We are required to register our aircraft with an aviation authority mutually agreed upon with our lessee.Each aircraft registered to fly mus
128、t have a Certificate of Airworthiness,which is a certificate demonstrating theaircrafts compliance with applicable government rules and regulations and that the aircraft is consideredairworthy.Each airline we lease to must have a valid operation certificate to operate our aircraft.Our lessees areobl
129、igated to maintain the Certificates of Airworthiness for the aircraft they lease.Our involvement with the civil aviation authorities of foreign jurisdictions consists largely of requests toregister and deregister our aircraft on those countriesregistries.We are also subject to the regulatory authori
130、ty of the DOS and the U.S.Department of Commerce(the“DOC”)to the extent such authority relates to the export of aircraft for lease and sale to foreign entities and the11export of parts to be installed on our aircraft.We may be required to obtain export licenses for parts installed inaircraft exporte
131、d to foreign countries.The DOC and the U.S.Department of the Treasury(through its Office ofForeign Assets Control,or“OFAC”)impose restrictions on the operation of U.S.-made goods,such as aircraftand engines,in sanctioned countries,as well as on the ability of U.S.companies to conduct business with e
132、ntitiesin those countries.The U.S.Patriot Act of 2001(the“Patriot Act”)prohibits financial transactions by U.S.persons,including U.S.individuals,entities,and charitable organizations,with individuals and organizationsdesignated as terrorists and terrorist supporters by the U.S.Secretary of State or
133、the U.S.Secretary of theTreasury.The U.S.Customs and Border Protection,a law enforcement agency of the U.S.Department ofHomeland Security,enforces regulations related to the import of aircraft into the United States for maintenanceor lease and the importation of parts into the U.S.for installation.J
134、urisdictions in which aircraft are registered as well as jurisdictions in which they operate may imposeregulations relating to noise and emission standards.In addition,most countriesaviation laws require aircraft tobe maintained under an approved maintenance program with defined procedures and inter
135、vals for inspection,maintenance and repair.To the extent that aircraft are not subject to a lease or a lessee is not in compliance,weare required to comply with such requirements,possibly at our own expense.EmployeesAs of December 31,2017,we had 87 full-time employees.On average,our senior managemen
136、t team hasapproximately 27 years of experience in the commercial aviation industry.None of our employees arerepresented by a union or collective bargaining agreements.Access to Our InformationWe file annual,quarterly,current reports,proxy statements and other information with the Securitiesand Excha
137、nge Commission(the“SEC”).We make our public SEC filings available,at no cost,through ourwebsite at as soon as reasonably practicable after the report is electronically filed with,orfurnished to,the SEC.The information contained on or connected to our website is not incorporated by referenceinto this
138、 Annual Report on Form 10-K and should not be considered part of this or any other report filed with theSEC.We will also provide these reports in electronic or paper format free of charge upon written request made toInvestor Relations at 2000 Avenue of the Stars,Suite 1000N,Los Angeles,California 90
139、067.Our SEC filings arealso available free of charge on the SECs website at www.sec.gov.The public may also read and copy anydocument we file with the SEC at the SECs public reference room located at 100 F Street NE,Washington,DC 20549.Please call the SEC at 1-800-SEC-0330 for further information on
140、 the operation of the publicreference room.Corporate InformationAir Lease Corporation incorporated in Delaware and launched in February 2010.Our website .We may post information that is important to investors on our website.Informationincluded or referred to on,or otherwise accessible through,our we
141、bsite is not intended to form a part of or beincorporated by reference into this report.12Executive Officers of the CompanySet forth below is certain information concerning each of our executive officers as of February 22,2018,including his/her age,current position with the Company and business expe
142、rience during the past five years.NameAgeCompany PositionPrior PositionsSteven F.Udvar-Hzy.71Executive Chairman of the Boardof Directors(since July 2016)Chairman and Chief ExecutiveOfficer,February 2010-June 2016John L.Plueger.63Chief Executive Officer,Presidentand Director(since July 2016)President
143、,Chief Operating Officerand Director,March 2010-June 2016Carol H.Forsyte.55Executive Vice President,GeneralCounsel,Corporate Secretary andChief Compliance Officer(sinceSeptember 2012)Gregory B.Willis.39Executive Vice President andChief Financial Officer(since July2016)Senior Vice President and Chief
144、Financial Officer,March 2012-June2016Marc H.Baer.53Executive Vice President,Marketing(since April 2010)Jie Chen.54Executive Vice President andManaging Director of Asia(sinceAugust 2010)Alex A.Khatibi.57Executive Vice President(sinceApril 2010)Kishore Korde.44Executive Vice President,Marketing(since
145、May 2015)Senior Vice President,Marketing,2010-May 2015Grant A.Levy.55Executive Vice President(sinceApril 2010)John D.Poerschke.56Executive Vice President ofAircraft Procurement andSpecifications(since February2017)Senior Vice President of AircraftProcurement and Specifications,March 2010-February 20
146、1713ITEM 1A.RISK FACTORSThe following important risk factors,and those risk factors described elsewhere in this report or inour other filings with the Securities and Exchange Commission,could cause our actual results to differmaterially from those stated in forward-looking statements contained in th
147、is document and elsewhere.Theserisks are not presented in order of importance or probability of occurrence.Further,the risks described beloware not the only risks that we face.Additional risks and uncertainties not currently known to us or that wecurrently deem immaterial may also impair our busines
148、s operations.Any of these risks may have a materialadverse effect on our business,reputation,financial condition,results of operations,profitability,cash flowsor liquidity.Risks Relating to Our BusinessWe cannot assure you that we will be able to enter into profitable leases for any aircraft acquire
149、d,whichfailure to do so would negatively affect our financial condition,cash flow and results of operations.We cannot assure you that we will be able to enter into profitable leases upon the acquisition of theaircraft we purchase in the future.Our financial condition,cash flow and results of operati
150、ons depend upon ourmanagement teams judgment and ability to evaluate the ability of lessees and other counterparties to performtheir obligations to us and to negotiate transaction documents.We cannot assure you that our management teamwill be able to perform such functions in a manner that will achi
151、eve our investment objectives,which wouldnegatively affect our financial condition,cash flow and results of operations.Our business model depends on the continual leasing and remarketing of our aircraft,and we may not be ableto do so on favorable terms,which would negatively affect our financial con
152、dition,cash flow and results ofoperations.Our business model depends on the continual leasing and remarketing of our aircraft in order to generatesufficient revenues to finance our growth and operations,pay our debt service obligations and generate cashflows from operations.Our ability to lease and
153、remarket our aircraft will depend on general market andcompetitive conditions at the time the leases are entered into and expire.If we are not able to lease or remarket anaircraft or to do so on favorable terms,we may be required to attempt to sell the aircraft to provide funds for ourdebt service o
154、bligations or operating expenses.Our ability to lease,remarket or sell the aircraft on favorableterms or without significant off-lease time and costs could be negatively affected by depressed conditions in theaviation industry,government and environmental regulations,increased operating costs includ
155、ing the price andavailability of jet fuel,airline bankruptcies,the effects of terrorism,war,natural disasters and/or epidemicdiseases on airline passenger traffic trends,declines in the values of aircraft,and various other general marketand competitive conditions and factors which are outside of our
156、 control.If we are unable to lease and remarketour aircraft on favorable terms,or at all,our financial condition,cash flow and results of operations would benegatively impacted.Our success depends in large part on our ability to obtain capital on favorable terms to finance our growththrough the purc
157、hase of aircraft and to repay our outstanding debt obligations as they mature.If we are notable to obtain capital on terms acceptable to us,or at all,it would significantly impact our ability to competeeffectively in the commercial aircraft leasing market and would negatively affect our financial co
158、ndition,cashflow and results of operations.Growing our fleet will require substantial additional capital.Accordingly,we will need to obtainadditional financing,which may not be available to us on favorable terms or at all.Further,we must continue tohave access to the capital markets and other source
159、s of financing in order to repay our outstanding obligations as14they mature.Our access to sources of financing will depend upon a number of factors over which we havelimited control,including:general market conditions;the markets view of the quality of our assets;the markets perception of our growt
160、h potential;interest rate fluctuations;our current and potential future earnings and cash distributions;andthe market price of our Class A common stock.Weaknesses in the capital and credit markets could negatively affect our ability to obtain financing orcould increase the costs of financing.For ins
161、tance,during the 2008 financial crisis,many companies experienceddownward pressure on their share prices and had limited or no access to the credit markets,often without regardto their underlying financial strength.If financial market disruption and volatility were to occur again,we cannotassure you
162、 that we will be able to access capital,which could negatively affect our financial condition and resultsof operations.In addition,if there are new regulatory capital requirements imposed on our private lenders,they may berequired to limit,or increase the cost of,financing they provide to us.In gene
163、ral,this could potentially increaseour financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price.If we are unable to raise additional funds or obtain capital on terms acceptable to us,we may not be ableto satisfy funding requirements for any aircraft acqui
164、sition commitments then in place.If we are unable to satisfyour purchase commitments,we may be forced to forfeit our deposits.Further,we would be exposed to potentialbreach of contract claims by our lessees and manufacturers.These risks may also be increased by the volatilityand disruption in the ca
165、pital and credit markets.Depending on market conditions at the time,we may have to relymore heavily on additional equity issuances,which may be dilutive to our stockholders,or on less efficient formsof debt financing that require a larger portion of our cash flow from operations,thereby reducing fun
166、ds availablefor our operations,future business opportunities and other purposes.Further,because our charter permits theissuance of preferred stock,if our board of directors approves the issuance of preferred stock in a futurefinancing transaction,such preferred stockholders may have rights,preferenc
167、es or privileges senior to existingstockholders,and you will not have the ability to approve such a transaction.These risks would negatively affectour financial condition,cash flow and results of operations.Incurring significant costs resulting from lease defaults could negatively affect our financi
168、al condition,cashflow and results of operations.Based on historical rates of airline defaults and bankruptcies,some of our lessees are likely to default ontheir lease obligations or file for bankruptcy in the ordinary course of our business.Those costs likely wouldinclude legal and other expenses as
169、sociated with court or other governmental proceedings,including the cost ofposting security bonds or letters of credit necessary to effect repossession of the aircraft,particularly if the lesseeis contesting the proceedings or is in bankruptcy.In addition,during any such proceedings the relevant air
170、craftwould likely not be generating revenue.We could also incur substantial maintenance,refurbishment or repaircosts if a defaulting lessee fails to pay such costs and where such maintenance,refurbishment or repairs arenecessary to put the aircraft in suitable condition for remarketing or sale.We ma
171、y also incur storage costsassociated with any aircraft that we repossess and are unable to place immediately with another lessee.Even ifwe are able to immediately place a repossessed aircraft with another lessee,we may not be able to do so at a15similar or favorable lease rate.It may also be necessa
172、ry to pay off liens,taxes and other governmental charges onthe aircraft to obtain clear possession and to remarket the aircraft effectively,including,in some cases,liens thatthe lessee might have incurred in connection with the operation of its other aircraft.We could also incur othercosts in connec
173、tion with the physical possession of the aircraft.We may suffer other negative consequences as a result of a lessee default,the related termination of thelease and the repossession of the related aircraft.It is likely that our rights upon a lessee default will varysignificantly depending upon the ju
174、risdiction and the applicable law,including the need to obtain a court orderfor repossession of the aircraft and/or consents for deregistration or export of the aircraft.We anticipate thatwhen a defaulting lessee is in bankruptcy,protective administration,insolvency or similar proceedings,additional
175、 limitations may apply.Certain jurisdictions give rights to the trustee in bankruptcy or a similar officerto assume or reject the lease or to assign it to a third party,or entitle the lessee or another third party to retainpossession of the aircraft without paying lease rentals or performing all or
176、some of the obligations under therelevant lease.In addition,certain of our lessees are owned,in whole or in part,by government-related entities,which could complicate our efforts to repossess our aircraft in that lessees domicile.Accordingly,we may bedelayed in,or prevented from,enforcing certain of
177、 our rights under a lease and in remarketing the affectedaircraft.If we repossess an aircraft,we may not necessarily be able to export or deregister and profitablyredeploy the aircraft.An aircraft cannot be registered in two countries at the same time.Before an aviationauthority will register an air
178、craft that has previously been registered in another country,it must receiveconfirmation that the aircraft has been deregistered by that countrys aviation authority.In order to deregister anaircraft,the lessee must comply with applicable laws and regulations,and the relevant governmental authoritymu
179、st enforce these laws and regulations.For instance,where a lessee or other operator flies only domestic routesin the jurisdiction in which the aircraft is registered,repossession may be more difficult,especially if thejurisdiction permits the lessee or the other operator to resist deregistration.We
180、may also incur significant costs inretrieving or recreating aircraft records required for registration of the aircraft,and in obtaining the Certificate ofAirworthiness for an aircraft.If,upon a lessee default,we incur significant costs in connection with repossessingour aircraft,are delayed in repos
181、sessing our aircraft or are unable to obtain possession of our aircraft as a resultof lessee defaults,our financial condition,cash flow and results of operations would be negatively affected.If our lessees fail to discharge aircraft liens,we may be obligated to pay the aircraft liens,which wouldnega
182、tively affect our financial condition,cash flow and results of operations.In the normal course of their business,our lessees are likely to incur aircraft liens that secure thepayment of airport fees and taxes,customs duties,air navigation charges,including charges imposed byEurocontrol,the European
183、Organization for the Safety of Air Navigation,landing charges,crew wages,salvageor other liens that may attach to our aircraft.These liens may secure substantial sums that may,in certainjurisdictions or for certain types of liens,particularly liens on entire fleets of aircraft,exceed the value of th
184、eparticular aircraft to which the liens have attached.Aircraft may also be subject to mechanicsliens as a result ofroutine maintenance performed by third parties on behalf of our lessees.Although we anticipate that the financialobligations relating to these liens are the responsibility of our lessee
185、s,if they fail to fulfill such obligations,theliens may attach to our aircraft and ultimately become our responsibility.In some jurisdictions,aircraft liens maygive the holder thereof the right to detain or,in limited cases,sell or cause the forfeiture of the aircraft.Until they are discharged,these
186、 liens could impair our ability to repossess,remarket or sell our aircraft.Our lessees may not comply with the anticipated obligations under their leases to discharge aircraft liens arisingduring the terms of the leases.If they do not,we may find it necessary to pay the claims secured by such aircra
187、ftliens in order to repossess the aircraft.Such payments would negatively affect our financial condition,cash flowand results of operations.16If our lessees fail to perform as expected and we decide to restructure or reschedule our leases,therestructuring and rescheduling would likely result in less
188、 favorable leases,which would negatively affect ourfinancial condition,cash flow and results of operations.A lessees ability to perform its obligations under its lease will depend primarily on the lesseesfinancial condition and cash flow,which may be affected by factors outside our control,including
189、:competition;passenger and air cargo rates;passenger and air cargo demand;geopolitical and other events,including war,acts of terrorism,outbreaks of epidemic diseases andnatural disasters;increases in operating costs,including the price and availability of jet fuel and labor costs;labor difficulties
190、,including pilot shortages;economic conditions and currency fluctuations in the countries and regions in which the lesseeoperates;andgovernmental regulation and associated fees affecting the air transportation business.Many of our airline customers do not have investment grade credit profiles.We ant
191、icipate that some ofour lessees will experience a weakened financial condition or suffer liquidity problems.This could lead to alessee experiencing difficulties in performing under the terms of our lease agreement.This could result in thelessee seeking relief under some of the terms of our lease agr
192、eement,or it could result in us electing to repossessthe aircraft.Any future downturns in the airline industry could greatly exacerbate the weakened financial conditionof some of these lessees and further increase the risk of delayed,missed or reduced rental payments.We may notcorrectly assess the c
193、redit risk of a lessee,or may not charge lease rates which correctly reflect the related risks,and as a result,lessees may not be able to satisfy their financial and other obligations under their leases.Adelayed,missed or reduced rental payment from a lessee would decrease our revenues and cash flow
194、.If we,inthe exercise of our remedies under a lease,repossess an aircraft,we may not receive all or any of the past-due ordeferred payments and we may not be able to remarket the aircraft promptly or at favorable rates,if at all.It is likely that restructurings and/or repossessions with some of our
195、lessees will occur in the future.Theterms and conditions of possible lease restructurings or rescheduling may result in a significant reduction of leaserevenue,which may negatively affect our financial results and growth prospects.If any request for paymentrestructuring or rescheduling is made and g
196、ranted,reduced or deferred rental payments may be payable over allor some part of the remaining term of the lease.The terms of any revised payment schedules may be unfavorableand such payments may not be made.Our default levels would likely increase over time if economic conditionsdeteriorate.If les
197、sees of a significant number of our aircraft defaulted on their leases,it would negatively affectour financial condition,cash flow and results of operations.Failure to obtain certain required licenses,consents and approvals could negatively affect our ability toremarket or sell aircraft,which would
198、negatively affect our financial condition,cash flow and results ofoperations.Airlines are subject to extensive regulation under the laws of the jurisdictions in which they areregistered and in which they operate.As a result,we expect that certain aspects of our leases will require17licenses,consents
199、 or approvals,including consents from governmental or regulatory authorities for certainpayments under our leases and for the import,export or deregistration of the aircraft.Subsequent changes inapplicable law or administrative practice may increase such requirements and governmental consent,once gi
200、ven,could be withdrawn.Furthermore,consents needed in connection with the future remarketing or sale of anaircraft may not be forthcoming.Any of these events could negatively affect our ability to remarket or sellaircraft,which would negatively affect our financial condition,cash flow and results of
201、 operations.Our aircraft require routine maintenance,and if they are not properly maintained,their value may declineand we may not be able to lease or remarket such aircraft at favorable rates,if at all,which would negativelyaffect our financial condition,cash flow and results of operations.We may b
202、e exposed to increased maintenance costs for our aircraft associated with a lessees failure toproperly maintain the aircraft or pay supplemental maintenance rent.If an aircraft is not properly maintained,itsmarket value may decline,which would result in lower revenues from its lease or sale.We enter
203、 into leasespursuant to which the lessees are primarily responsible for many obligations,which include maintaining theaircraft and complying with all governmental requirements applicable to the lessee and the aircraft,includingoperational,maintenance,government agency oversight,registration requirem
204、ents,service bulletins issued byaircraft manufacturers and airworthiness directives issued by aviation authorities.Failure of a lessee to performrequired maintenance,or comply with the applicable service bulletins and airworthiness directives during theterm of a lease could result in a decrease in v
205、alue of an aircraft,an inability to remarket an aircraft at favorablerates,if at all,or a potential grounding of an aircraft.Maintenance failures by a lessee would also likely requireus to incur maintenance and modification costs upon the termination of the applicable lease,which could besubstantial
206、,to restore the aircraft to an acceptable condition prior to remarketing or sale.Even if we are entitledto receive supplemental maintenance rents,these rents may not cover the entire cost of actual maintenancerequired.Any failure by our lessees to meet their obligations to perform required scheduled
207、 maintenance or ourinability to maintain our aircraft would negatively affect our financial condition,cash flow and results ofoperations.If we experience abnormally high maintenance or obsolescence issues with any of our aircraft or aircraft thatwe acquire,it would negatively affect our financial co
208、ndition,cash flow and results of operations.Aircraft are long-lived assets,requiring long lead times to develop and manufacture,with particulartypes and models becoming obsolete or less in demand over time when newer,more advanced aircraft aremanufactured.The weighted average age of our fleet was 3.
209、8 years as of December 31,2017.Our existing fleet,as well as the aircraft that we have ordered,have exposure to obsolescence,particularly if unanticipated eventsoccur which shorten the life cycle of such aircraft types.These events include but are not limited to governmentregulation or changes in ou
210、r airline customerspreferences,including for instance,an increased demand for morefuel efficient aircraft.These events may shorten the life cycle for aircraft types in our fleet and,accordingly,maynegatively impact lease rates,trigger impairment charges,increase depreciation expense or result in los
211、ses relatedto aircraft asset value guarantees,if we provide such guarantees.Further,variable expenses like fuel,crew size or aging aircraft corrosion control or modificationprograms and airworthiness directives could make the operation of older aircraft more costly to our lessees andmay result in in
212、creased lessee defaults or attempts to renegotiate lease terms.We may also incur some of theseincreased maintenance expenses and regulatory costs upon acquisition or remarketing of our aircraft.Any ofthese expenses or costs would negatively affect our financial condition,cash flow and results of ope
213、rations.If we acquire a high concentration of a particular model of aircraft,our financial condition,cash flow andresults of operations would be negatively affected by changes in market demand or problems specific to thataircraft model.If we acquire a high concentration of a particular model of airc
214、raft,our business and financial resultscould be negatively affected if the market demand for that model of aircraft declines.There are several scenarios18which could adversely affect the demand for an aircraft.These scenarios include but are not limited to,if theaircraft model is redesigned or repla
215、ced by its manufacturer,or if this aircraft model experiences design ortechnical problems,which could ultimately lead to the grounding of the aircraft model.This could lead to thedecline in value and lease rates of such aircraft model,and ultimately we may not be able to lease such aircraftmodel on
216、favorable terms or at all.For instance,our fleet consists of a number of widebody aircraft and many ofour new purchases will consist of newer,more fuel efficient models.Any changes in demand for these models orother models in our fleet could negatively affect our financial condition,cash flow and re
217、sults of operations.The introduction of superior aircraft technology or a new line of aircraft,in particular more fuel efficientaircraft,could cause the aircraft that we own to become outdated or obsolete or oversupplied and thereforeless desirable,which would negatively affect our financial conditi
218、on,cash flow and results of operations.As manufacturers introduce technological innovations and new types of aircraft,some of the aircraft inour fleet could become less desirable to potential lessees.In particular,the introduction recently of more fuelefficient aircraft has made some older models le
219、ss attractive and more difficult to lease.Technologicalinnovations,increased fuel efficiency,improved operating economics and new models may increase the rate ofobsolescence of existing aircraft faster than currently anticipated by our management.New aircraftmanufacturers could emerge to produce air
220、craft that compete with the aircraft we own.The introduction of newtechnologies or introduction of a new type of aircraft,in particular more fuel efficient models,may negativelyaffect the value of the aircraft in our fleet.In addition,the imposition of increased regulation regarding stringent noise
221、or emissions restrictionsmay make some of our aircraft less desirable and accordingly less valuable in the marketplace.The developmentof new aircraft and engine options could decrease the desirability of certain aircraft in our fleet and/or aircraftthat we have ordered.This could,in turn,reduce both
222、 future residual values and lease rates for certain types ofaircraft in our portfolio.Any of these risks may negatively affect our ability to lease or sell our aircraft onfavorable terms,if at all,which would negatively affect our financial condition,cash flow and results ofoperations.We are indirec
223、tly subject to many of the economic and political risks associated with emerging markets,including China,which could negatively affect our financial condition,cash flow and results of operations.Our business strategy emphasizes leasing aircraft to lessees outside of the United States,including toair
224、lines in emerging market countries.Emerging market countries have less developed economies andinfrastructure and are often more vulnerable to economic and geopolitical challenges and may experiencesignificant fluctuations in gross domestic product,interest rates and currency exchange rates,as well a
225、s civildisturbances,government instability,nationalization and expropriation of private assets and the imposition oftaxes or other charges by government authorities.The occurrence of any of these events in markets served by ourlessees and the resulting economic instability that may arise,particularl
226、y if combined with high fuel prices,couldnegatively affect the value of our aircraft subject to lease in such countries,or the ability of our lessees,whichoperate in these markets,to meet their lease obligations.As a result,lessees that operate in emerging marketcountries may be more likely to defau
227、lt than lessees that operate in developed countries.In addition,legalsystems in emerging market countries may be less developed,which could make it more difficult for us toenforce our legal rights in such countries.Further,demand for aircraft is dependent on passenger and cargo traffic,which in turn
228、 is dependent ongeneral business and economic conditions.A decrease in passenger or cargo traffic may have a negative effect onour financial condition,cash flow and results of operations.Weak or negative economic growth in emergingmarkets may have an indirect effect on the value of the assets that w
229、e acquire if airlines and other potentiallessees are negatively affected.Economic downturns can affect the values of the assets we purchase,which mayhave a negative effect on our financial condition,cash flow and results of operations.19From time to time,the aircraft industry has experienced periods
230、 of oversupply during which lease rates andaircraft values have declined,and any future oversupply could negatively affect our financial condition,cashflow and results of operations.The aircraft leasing business has experienced periods of aircraft oversupply following the September 11,2001 terrorist
231、 attacks and the 2008 financial crisis.The oversupply of a specific type of aircraft is likely todepress the lease rates for and the value of that type of aircraft,including upon sale.Further,over recent years,the airline industry has committed to a significant number of aircraft deliveries through
232、order placements withmanufacturers,and in response,aircraft manufacturers have raised their production output.The increase in theseproduction levels could result in an oversupply of relatively new aircraft if growth in airline traffic does not meetairline industry expectations.The supply and demand
233、for aircraft is affected by various cyclical and non-cyclical factors that areoutside of our control,including:passenger and air cargo demand;airline operating costs,including fuel costs;general economic conditions;geopolitical events,including war,prolonged armed conflict and acts of terrorism;outb
234、reaks of communicable diseases and natural disasters;governmental regulation,including new airworthiness directives,statutory limits on the age ofaircraft,and restrictions in certain jurisdictions on the age of aircraft for import,climate changeinitiatives and environmental regulation,and other fact
235、ors leading to obsolescence of aircraftmodels;interest and foreign exchange rates;tariffs and other restrictions on trade;the availability of credit;airline restructurings and bankruptcies;airline fleet planning that reduces capacity or changes the type of aircraft in demand;manufacturer production
236、levels and technological innovation;discounting by manufacturers on aircraft types nearing end of production;manufacturers merging or exiting the industry or ceasing to produce aircraft types;new-entrant manufacturers producing additional aircraft models,or existing manufacturersproducing new engine
237、 models or new aircraft models,in competition with existing aircraft models;retirement and obsolescence of aircraft models;20reintroduction into service of aircraft previously in storage;andairport and air traffic control infrastructure constraints.In addition,operating lessors may be sold or merged
238、 with other entities.These types of transactions maycall for a reduction in the fleet of the new entity,which could increase supply levels of used and older aircraft inthe market.Furthermore,recent and future political developments could result in increased regulation of trade,which could adversely
239、impact demand for aircraft.Any of these factors may produce sharp and prolonged decreases in aircraft lease rates and values.Theymay have a negative effect on our ability to lease or remarket the aircraft in our fleet or in our order book.Any ofthese factors could negatively affect our financial con
240、dition,cash flow and results of operations.The value of the aircraft we acquire and the market rates for leases could decline,which would have anegative effect on our financial condition,cash flow and results of operations.Aircraft values and market rates for leases have from time to time experience
241、d sharp decreases due to anumber of factors including,but not limited to,decreases in passenger and air cargo demand,increases in fuelcosts,government regulation and increases in interest rates.Operating leases place the risk of realization ofresidual values on aircraft lessors because only a portio
242、n of the equipments value is covered by contractual cashflows at lease inception.In addition to factors linked to the aviation industry generally,many other factors mayaffect the value of the aircraft that we acquire and market rates for leases,including:the particular maintenance,damage,operating h
243、istory and documentary records of the aircraft;the geographical area where the aircraft is based and operates;the number of operators using that type of aircraft;aircraft age;the regulatory authority under which the aircraft is operated;whether an aircraft is subject to a lease and,if so,whether the
244、 lease terms are favorable to thelessor;any renegotiation of an existing lease on less favorable terms;the negotiability of clear title free from mechanicsliens and encumbrances;any tax,customs,regulatory and other legal requirements that must be satisfied before the aircraftcan be purchased,sold or
245、 remarketed;grounding orders or other regulatory action that could prevent or limit utilization of our aircraft;compatibility of aircraft configurations or specifications with other aircraft owned by operators ofthat type;comparative value based on newly manufactured competitive aircraft;andthe avai
246、lability of spare parts.21Any decrease in the value of aircraft that we acquire and market rates for leases,which may result fromthe above factors or other unanticipated factors,would have a negative effect on our financial condition,cashflow and results of operations.Competition from other aircraft
247、 lessors,including lessors with greater resources or a lower cost of capitalthan ours,could negatively affect our financial condition,cash flow and results of operations.The aircraft leasing industry is highly competitive.Some of our competitors may have greater resourcesor a lower cost of capital t
248、han ours or may provide certain financial services,maintenance services or otherinducements to potential lessees that we cannot provide;accordingly,they may be able to compete moreeffectively in one or more of the markets we conduct business in.In addition,we may encounter competition from other ent
249、ities in the acquisition of aircraft such as:airlines;financial institutions;special purpose vehicles formed for the purpose of acquiring,leasing and selling aircraft;aircraft brokers;public and private partnerships,investors and funds with more capital to invest in aircraft;andother aircraft leasin
250、g companies that we do not currently consider our major competitors.Competition for a leasing transaction is based principally upon lease rates,delivery dates,lease terms,reputation,management expertise,aircraft condition,specifications and configuration and the availability of thetypes of aircraft
251、necessary to meet the needs of the customer.Competition in the purchase and sale of aircraft isbased principally on the availability of the aircraft,the price,and where applicable the terms of the lease to whichan aircraft is subject and the creditworthiness of the lessee.We will not always be able
252、to compete successfullywith our competitors,which could negatively affect our financial condition,cash flow and results of operations.The failure of any manufacturer to meet its delivery obligations to us would negatively affect our cash flowand results of operations.The supply of commercial aircraf
253、t is dominated by a few airframe manufacturers and a limited numberof engine manufacturers.As a result,we are dependent on the success of these manufacturers in remainingfinancially stable,producing products and related components which meet the airlinesdemands and fulfillingany contractual obligati
254、ons they may have to us.Should the manufacturers fail to respond appropriately to changes in the market environment or fail tofulfill any contractual obligations they might have to us,we may experience:missed or late delivery of aircraft and a potential inability to meet our contractual obligations
255、owedto any of our then lessees,resulting in potential lost or delayed revenues,lower growth rates andstrained customer relationships;an inability to acquire aircraft and related components on terms which will allow us to lease thoseaircraft to airline customers at a profit,resulting in lower growth
256、rates or a contraction in ouraircraft fleet;22a market environment with too many aircraft available,potentially creating downward pressure ondemand for the anticipated aircraft in our fleet and reduced market lease rates and sale prices;reduced demand for a particular manufacturers product as a resu
257、lt of poor customer support,creating downward pressure on demand for those aircraft and engines in our fleet and reducedmarket lease rates and sale prices for those aircraft and engines;anda reduction in our competitiveness due to deep discounting by the manufacturers,which may lead toreduced market
258、 lease rates and aircraft values and may affect our ability to remarket or sell at aprofit,or at all,some of the aircraft in our fleet.There have been recent well-publicized delays by airframe and engine manufacturers in meeting stateddeadlines in bringing new aircraft to market.If there are manufac
259、turing delays for aircraft for which we havemade future lease commitments,some or all of our affected lessees could elect to terminate their leasearrangements with respect to such delayed aircraft.Any such termination could strain our relations with thoselessees going forward and would negatively af
260、fect our cash flow and results of operations.Aircraft have limited economic useful lives and depreciate over time,which would negatively affect ourfinancial condition,cash flow and results of operations.We depreciate our aircraft for accounting purposes on a straight-line basis to the aircrafts resi
261、dual valueover its estimated useful life.If reduced demand for an aircraft causes a decline in its projected lease rates,or ifwe dispose of the aircraft for a price that is less than its depreciated book value on our balance sheet,then we willrecognize a loss on the sale of the aircraft or potential
262、ly record an impairment charge.For this reason,ourfinancial condition,cash flow and results of operations would be negatively affected.Failure to close our aircraft acquisition commitments could negatively affect our financial condition,cashflow and results of operations.As of December 31,2017,we ha
263、d entered into binding purchase commitments to acquire a total of 368new aircraft for delivery through 2023.If we are unable to maintain our financing sources or find new sources offinancing or if the various conditions to our existing commitments are not satisfied,we may be unable to closethe purch
264、ase of some or all of the aircraft which we have commitments to acquire.If our aircraft acquisitioncommitments are not closed for these or other reasons,we will be subject to several risks,including thefollowing:forfeiting deposits and progress payments and having to pay and expense certain signific
265、ant costsrelating to these commitments,such as actual damages,and legal,accounting and financial advisoryexpenses,not realizing any of the benefits of completing the transactions and damage to ourreputation and relationship with aircraft manufacturers;defaulting on our lease commitments,which could
266、result in monetary damages and damage to ourreputation and relationships with lessees;andfailing to capitalize on other aircraft acquisition opportunities that were not pursued due to ourmanagements focus on these commitments.If we determine that the capital we require to satisfy these commitments m
267、ay not be available to us,either at all or on terms we deem attractive,we may eliminate or reduce any dividend program that may be inplace at that time in order to preserve capital to apply to these commitments.These risks would negatively affectour financial condition,cash flow and results of opera
268、tions.23Certain of the agreements governing our indebtedness may limit our operational flexibility,our ability toeffectively compete and our ability to grow our business as currently planned,which would negatively affectour financial condition,cash flow and results of operations.Certain of the agree
269、ments governing our indebtedness,including our credit facilities,contain financialand non-financial covenants,such as requirements that we comply with one or more of the following covenants:maximum debt-to-equity ratios,dividend restrictions,limitations on the ability of our subsidiaries to incur de
270、bt,minimum net worth and interest coverage ratios,change of control provisions,and prohibitions against ourdisposing of our aircraft or other aviation assets without a lenders prior consent.Complying with such covenantsmay at times necessitate that we forego other opportunities,such as using availab
271、le cash to grow our aircraft fleetor promptly disposing of less profitable aircraft or other aviation assets.Moreover,our failure to comply withany of these covenants would likely constitute a default under such agreements and could give rise to anacceleration of some,if not all,of our then outstand
272、ing indebtedness,which would have a negative effect on ourbusiness and our ability to continue as a going concern.If we were unable to repay the indebtedness when dueand payable,secured lenders could proceed against,among other things,the aircraft securing such indebtedness,if any.In addition,we can
273、not assure you that our business will generate cash flow from operations in anamount sufficient to enable us to service our debt and grow our operations as planned.We cannot assure you thatwe will be able to refinance any of our debt on favorable terms,if at all.In addition,we cannot assure you that
274、 inthe future we will be able to access long-term financing or credit support on attractive terms,if at all,or qualifyfor guarantees,or obtain attractive terms for such guarantees,from the export credit agencies.Any inability togenerate sufficient cash flow,maintain our existing fleet and facilities
275、,or access long-term financing or creditsupport would negatively affect our financial condition,cash flow and results of operations.Negative changes in our credit ratings may limit our ability to obtain financing or increase our borrowingcosts which would negatively affect our financial condition,ca
276、sh flow and results of operations.We are currently subject to periodic review by independent credit rating agencies S&P,Fitch and Kroll,each of which currently maintains investment grade credit ratings with respect to us and certain of our debtsecurities,and we may become subject to periodic review
277、by other independent credit rating agencies in thefuture.An increase in the level of our outstanding indebtedness,or other events that could have a negative impacton our business,properties,financial condition,results of operations or prospects,may cause S&P,Fitch orKroll,or,in the future,other rati
278、ng agencies,to downgrade or withdraw the credit rating with respect to us or ourdebt securities,which could negatively impact our ability to secure financing and increase our borrowing costs.We cannot assure you that these credit ratings will remain in effect for any given period of time or that ara
279、ting will not be lowered,suspended or withdrawn entirely by the applicable rating agency,if,in such ratingagencys sole judgment,circumstances so warrant.Ratings are not a recommendation to buy,sell or hold anysecurity.Each agencys rating should be evaluated independently of any other agencys rating.
280、Actual oranticipated changes or downgrades in our credit ratings,including any announcement that our ratings are underfurther review for a downgrade,could increase our corporate borrowing costs and limit our access to the capitalmarkets which would negatively affect our financial condition,cash flow
281、 and results of operations.An increase in our borrowing costs would negatively affect our financial condition,cash flow and results ofoperations.We finance many of the aircraft in our fleet through a combination of short-and long-term debtfinancings.As these debt financings mature,we may have to ref
282、inance these existing commitments by enteringinto new financings,which could result in higher borrowing costs,or repay them by using cash on hand or cashfrom the sale of our assets.Moreover,an increase in interest rates under the various debt financing facilities wehave in place would have a negativ
283、e effect on our earnings and could make our aircraft leasing contractsunprofitable.24A limited percentage of our debt financings bear interest at a floating rate,such that our interest expensewould vary with changes in the applicable reference rate.As a result,our inability to sufficiently protectou
284、rselves from changes in our cost of borrowing,as reflected in our composite interest rate,may have a direct,negative impact on our net income.Our lease rental stream is generally fixed over the life of our leases,whereaswe have used floating-rate debt to finance a significant portion of our aircraft
285、 acquisitions.As of December 31,2017,we had$1.4 billion in floating-rate debt.If interest rates increase,we would be obligated to make higherinterest payments to the lenders of our floating-rate debt.Further,as we continue to incur fixed-rate debt,increased interest rates prevailing in the market at
286、 the time of the incurrence of such debt would also increase ourinterest expense.If our composite interest rate were to increase by 1.0%,we would expect to incur additionalinterest expense on our existing indebtedness as of December 31,2017,of approximately$14.3 million on anannualized basis,which w
287、ould negatively affect our financial condition,cash flow and results of operations.As such,if interest rates were to rise sharply,we would not be able to fully offset immediately thenegative impact on our net income by increasing lease rates,even if the market were able to bear such increasesin leas
288、e rates.Our leases are generally for multiple years with fixed lease rates over the life of the lease and,therefore,lags will exist because our lease rates with respect to a particular aircraft cannot generally be increaseduntil the expiration of the lease.The interest rates that we obtain on our de
289、bt financings have several components,including creditspreads,swap spreads,duration,and new issue premiums.These are all incremental to the underlying risk-freerates,as applicable.Volatility in our perceived risk of default or in a market sectors risk of default willnegatively impact our cost of fun
290、ds.We currently are not involved in any interest rate hedging activities,but we are contemplating engagingin hedging activities in the future.Any such hedging activities will require us to incur additional costs,and therecan be no assurance that we will be able to successfully protect ourselves from
291、 any or all negative interest ratefluctuations at a reasonable cost.Our substantial indebtedness incurred to acquire our aircraft requires significant debt service payments whichwould negatively affect our financial condition,cash flow and results of operations.We and our subsidiaries have a signifi
292、cant amount of indebtedness.As of December 31,2017,our totalconsolidated indebtedness,net of discounts and issuance costs,was approximately$9.7 billion and our interestpayments were$301.7 million for the year ended December 31,2017.Furthermore,we expect this amount togrow as we acquire more aircraft
293、.Our level of debt could have important consequences,including the following:making it more difficult for us to satisfy our payment obligations with respect to our debt;limiting our ability to obtain additional financing to fund the acquisition of aircraft or for othercorporate requirements;requirin
294、g a substantial portion of our cash flows to be dedicated to debt service payments instead ofother purposes,thereby reducing the amount of cash flows available for dividends,aircraftacquisitions and other general corporate purposes;increasing our vulnerability to general negative economic and indust
295、ry conditions;exposing us to the risk of increased interest rates as certain of our borrowings,including borrowingsunder our various credit facilities,are at variable rates of interest;limiting our flexibility in planning for and reacting to changes in the aircraft industry;25placing us at a disadva
296、ntage compared to other competitors;andincreasing our cost of borrowing.In addition,certain agreements governing our existing indebtedness contain financial maintenancecovenants that require us to satisfy certain ratios and maintain minimum net worth,and other restrictivecovenants that limit our abi
297、lity to engage in activities that may be in our long-term best interest.Our failure tocomply with those covenants could result in an event of default which,if not cured or waived,may result in theacceleration of some or all our debt,which would negatively affect our financial condition,cash flow and
298、 resultsof operations.Creditors of any subsidiaries we form for purposes of financing will have priority over our stockholders in theevent of a distribution of such subsidiaries assets.Some of the aircraft we acquire are held in special-purpose,bankruptcy-remote subsidiaries of ourCompany.Liens on t
299、hose assets will be held by a collateral agent for the benefit of the lenders under therespective facility.In addition,funds generated from the lease of aircraft generally are applied first to amountsdue to lenders,with certain exceptions.Creditors of our subsidiaries will have priority over us,our
300、stockholdersand our creditors relating to debt that is not guaranteed or secured by our subsidiaries or their assets in anydistribution of any such subsidiariesassets in a liquidation,reorganization or otherwise.Defaults by one or more of our significant airline customers would negatively affect our
301、 financial condition,cash flow and results of operations.The airline industry is cyclical,economically sensitive and highly competitive.Our lessees are affectedby a number of factors over which we and they have limited control,including fare levels,air cargo rates,passenger air travel and air cargo
302、demand,fuel prices and shortages,political or economic instability,currencyfluctuations in the countries and regions in which the lessees operate,availability of financing and othercircumstances affecting airline liquidity,terrorist activities,cyber risk,changes in national policy,competitivepressur
303、es,labor costs,labor actions,pilot shortages,aircraft accidents,insurance costs,recessions,healthconcerns,and other political or economic events negatively affecting the world or regional trading markets.Ourlesseesabilities to react to and cope with the volatile competitive environment in which they
304、 operate,as well asour own competitive environment,will likely affect our revenues and income.The loss of one or more of oursignificant airline customers or their inability to make operating lease payments due to financial difficulties,bankruptcy or otherwise could have a material negative effect on
305、 our cash flow and earnings.This,in turn,couldresult in a breach of the covenants contained in any of our long-term debt facilities,possibly resulting inaccelerated amortization or defaults and would negatively affect our financial condition,cash flow and results ofoperations.In the event that a les
306、see defaults under a lease,any security deposit paid or letter of credit providedby the lessee may not be sufficient to cover the lessees outstanding or unpaid lease obligations and requiredmaintenance and transition expenses.The appreciation of the U.S.dollar could negatively impact many of our les
307、sees ability to honor the terms oftheir leases and could therefore materially adversely affect our business,financial condition and results ofoperations.Many of our lessees are exposed to currency risk due to the fact that they earn revenues in their localcurrencies while a significant portion of th
308、eir liabilities and expenses are denominated in U.S.dollars,includingtheir lease payments to us,as well as fuel,debt service,and other expenses.For the year ended December 31,2017,less than 3%of our revenues were derived from customers who have their principal place of business inthe U.S.While we at
309、tempt to minimize our currency and exchange risks by negotiating the designated paymentcurrency in our leases to be U.S.dollars,the ability of our lessees to make lease payments to us in U.S.dollarsmay be adversely impacted in the event of an appreciating U.S.dollar.26Our lessees may not be able to
310、increase their revenues sufficiently to offset the impact of exchange rateson their lease payments and other expenses denominated in U.S.dollars.This is particularly true for non-U.S.airlines whose operations are primarily domestic.Currency volatility,particularly as witnessed recently in otheremerg
311、ing market countries,could impact the ability of some of our customers to meet their contractualobligations in a timely manner.Shifts in foreign exchange rates can be significant,are difficult to predict,andcan occur quickly.Certain of our subsidiaries may be restricted in their ability to make dist
312、ributions to us which would negativelyaffect our financial condition and cash flow.The subsidiaries that hold our aircraft are legally distinct from us,and some of these subsidiaries arerestricted from paying dividends or otherwise making funds available to us pursuant to agreements governing ourind
313、ebtedness.Some of our principal debt facilities have financial covenants.If we are unable to comply withthese covenants,then the amounts outstanding under these facilities may become immediately due and payable,cash generated by our subsidiaries affected by these facilities may be unavailable to us
314、and/or we may be unableto draw additional amounts under these facilities.The events that could cause some of our subsidiaries not to bein compliance with their loan agreements,such as a lessee default,may be beyond our control,but theynevertheless could have a substantial negative impact on the amou
315、nt of our cash flow available to fund workingcapital,make capital expenditures and satisfy other cash needs.For these reasons our financial condition andcash flow would be negatively affected.For a description of the operating and financial restrictions in our debtfacilities,see the section titled“M
316、anagements Discussion and Analysis of Financial Condition and Results ofOperationsLiquidity and Capital Resources.”Our aircraft may not at all times be adequately insured either as a result of lessees failing to maintainsufficient insurance during the course of a lease or insurers not being willing
317、to cover certain risks whichwould negatively affect our financial condition,cash flow and results of operations.We do not directly control the operation of any aircraft we acquire.Nevertheless,because we hold title,directly or indirectly,to such aircraft,we could be sued or held strictly liable for
318、losses resulting from theoperation of such aircraft,or may be held liable for those losses on other legal theories,in certain jurisdictionsaround the world,or claims may be made against us as the owner of an aircraft requiring us to expend resourcesin our defense.We require our lessees to obtain spe
319、cified levels of insurance and indemnify us for,and insureagainst,liabilities arising out of their use and operation of the aircraft.Lessees are also required to maintainpublic liability,property damage and all risk hull and war risk insurance on the aircraft at agreed upon levels.Some lessees may f
320、ail to maintain adequate insurance coverage during a lease term,which,although incontravention of the lease terms,would necessitate our taking some corrective action such as terminating thelease or securing insurance for the aircraft,either of which could negatively affect our financial results.More
321、over,even if our lessees retain specified levels of insurance,and indemnify us for,and insure against,liabilities arising out of their use and operation of the aircraft,we cannot assure you that we will not have anyliability.In addition,there are certain risks or liabilities that our lessees may fac
322、e,for which insurers may beunwilling to provide coverage or the cost to obtain such coverage may be prohibitively expensive.For example,following the terrorist attacks of September 11,2001,non-government aviation insurers significantly reduced theamount of insurance coverage available for claims res
323、ulting from acts of terrorism,war,dirty bombs,bio-hazardous materials,electromagnetic pulsing or similar events.At the same time,they significantly increasedthe premiums for such third-party war risk and terrorism liability insurance and coverage in general.Accordingly,we anticipate that our lessees
324、insurance or other coverage may not be sufficient to cover all claimsthat could or will be asserted against us arising from the operation of our aircraft by our lessees.Inadequateinsurance coverage or default by lessees in fulfilling their indemnification or insurance obligations will reducethe proc
325、eeds that would be received by us in the event that we are sued and are required to make payments toclaimants.Moreover,our lesseesinsurance coverage is dependent on the financial condition of insurance27companies,which might not be able to pay claims.A reduction in insurance proceeds otherwise payab
326、le to us asa result of any of these factors would negatively affect our financial condition,cash flow and results ofoperations.The death,incapacity or departure of key officers could harm our business and negatively affect our financialcondition,cash flow and results of operations.We believe our sen
327、ior managements reputation and relationships with lessees,manufacturers,buyersand financiers of aircraft are a critical element to the success of our business.We depend on the diligence,skilland network of business contacts of our management team.We believe there are only a limited number ofavailabl
328、e qualified executives in the aircraft industry,and we therefore have encountered,and will likelycontinue to encounter,intense competition for qualified employees from other companies in our industry.Ourfuture success will depend,to a significant extent,upon the continued service of our senior manag
329、ementpersonnel,particularly:Mr.Udvar-Hzy,our founder,and Executive Chairman of the Board;Mr.Plueger,ourChief Executive Officer and President;and our other senior officers,each of whose services are critical to thesuccess of our business strategies.We do not have employment agreements with Mr.Udvar-H
330、zy or Mr.Plueger.If we were to lose the services of any of the members of our senior management team,it could negatively affectour financial condition,cash flow and results of operations.Conflicts of interest may arise between us and clients who will utilize our fleet management services,whichcould
331、negatively affect our business interests,cash flow and results of operations.Conflicts of interest may arise between us and third-party aircraft owners,financiers and operatinglessors who hire us to perform fleet management services such as leasing,re-leasing,lease management and salesservices.These
332、 conflicts may arise because services we anticipate providing for these clients are also services wewill provide for our own fleet,including the placement of aircraft with lessees.We expect our fleet managementservices agreements will provide that we will use our reasonable commercial efforts in pro
333、viding services,but,tothe extent that we are in competition with the client for leasing opportunities,we will give priority to our ownfleet.Nevertheless,despite these contractual waivers,competing with our fleet management clients in practicemay result in strained relationships with them,which could negatively affect our business interests,cash flow andresults of operations.We may on occasion ente
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