Genesis Lease 6-K Current report (foreign)

EXHIBIT 99.1

PRELIMINARY NOTE

     This Interim Report should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes included in this report.

     Unless the context requires otherwise, when used in this Interim Report, (1) the terms “Genesis,” “we,” “our” and “us” refer to Genesis Lease Limited and its subsidiaries, including Genesis Funding Limited (“Genesis Funding”), Genesis Portfolio Funding I Limited (“Genesis Portfolio”) and Genesis Acquisition Limited (“Genesis Acquisition”), (2) “GECAS” refers to GE Commercial Aviation Services Limited, together with its subsidiaries, (3) all references to our shares refer to our common shares held in the form of American Depositary Shares (“ADSs”) and (4) all percentages and weighted averages of the aircraft in our portfolio have been calculated using the average of half life appraised base values as at June 30, 2009 and percentages may not total due to rounding.

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INDEX

PART I FINANCIAL INFORMATION		6
Item 1.	Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion & Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	30
PART II — OTHER INFORMATION		31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	31
Item 6.	Exhibits	31

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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Unaudited Condensed Consolidated Balance Sheet as at December 31, 2008 and June 30, 2009	7
	Unaudited Condensed Consolidated Statements of Income for the three and six months ended June 30, 2008 and 2009	8
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2009	9
	Notes to the Unaudited Condensed Consolidated Financial Statements	10

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GENESIS LEASE LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			June 30,
	2008			2009
	(USD in thousands)
ASSETS
Cash and cash equivalents	$	60,206		$	66,116
Restricted cash		33,718			30,907
Accounts receivable		548			664
Other assets		34,761			32,077
Flight equipment under operating leases, net (Note 3)		1,597,604			1,598,978
Fixed assets, net		2,224			1,913
Deferred income taxes		28,634			24,732
Total Assets	$	1,757,695		$	1,755,387
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable (Note 5)	$	35,445		$	47,333
Other liabilities (Note 6)		118,420			105,542
Debt: (Note 7)
Securitization notes		796,500			781,500
Debt facilities		331,893			325,142
Total Liabilities	$	1,282,258		$	1,259,517
Commitments and contingencies (Note 12)		—			—
Shareholders’ equity:
Par value $0.001 U.S. dollars per share; 500,000,000 shares authorized, 34,341,095 and 34,346,596 shares issued and outstanding at December 31, 2008 and June 30, 2009, respectively	$	34		$	34
Additional paid-in capital		579,971			579,918
Accumulated other comprehensive loss		(76,191	)		(63,157	)
Accumulated deficit (Note 14)		(28,377	)		(20,925	)
Total shareholders’ equity		475,437			495,870
Total liabilities and shareholders’ equity	$	1,757,695		$	1,755,387

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

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GENESIS LEASE LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2009		2008		2009
	(USD in thousands )
Revenues
Rental of flight equipment	$	52,029	$	51,065	$	106,098	$	101,890
Other income (Note 10)		412		135		1,024		6,454
Total revenues		52,441		51,200		107,122		108,344
Expenses
Depreciation		18,955		22,194		39,052		43,647
Interest (Note 11)		16,643		18,902		33,422		37,810
Maintenance		195		58		685		89
Selling, general and administrative		6,302		4,585		12,533		10,325
Total operating expenses		42,095		45,739		85,692		91,871
Income Before Taxes		10,346		5,461		21,430		16,473
Provision for income taxes (Note 4)		1,370		702		2,599		2,152
Net Income	$	8,976	$	4,759	$	18,831	$	14,321

     The following table presents the net income per share calculated for the three and six months ended June 30, 2008 and 2009:

Net income per share
Basic	$	0.25	$	0.14	$	0.52	$	0.42
Diluted	$	0.25	$	0.14	$	0.52	$	0.42

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

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GENESIS LEASE LIMITED
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2008			2009
	(USD in thousands)
Cash flows from operating activities:
Net cash provided by operating activities	$	56,035		$	51,961
Cash flows from investing activities:
Purchases of flight equipment and capitalized maintenance		(16,267	)		(32,162	)
Change in business combination		(66,874	)		2,311
Change in restricted cash		221			8,646
Purchase of fixed assets		(1,509	)		(50	)
Net cash used in investing activities		(84,429	)		(21,255	)
Cash flows from financing activities:
Proceeds from debt financings		92,000			11,499
Repayment of debt financings		—			(18,250	)
Payments for deferred financing costs and discounts		(1,791	)		(2,737	)
Share repurchases		—			(88	)
Debt repurchases		—			(8,351	)
Dividends paid		(33,963	)		(6,869	)
Net cash used in financing activities		56,246			(24,796	)
Net change in cash and cash equivalents		27,852			5,910
Cash and cash equivalents at beginning of period		30,101			60,206
Cash and cash equivalents at end of period	$	57,953		$	66,116
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	30,620		$	34,924
Income taxes	$	61		$	108
Non-cash addition to flight equipment excluded from investing activities (primarily capitalized accruals)	$	7,608		$	14,808

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

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GENESIS LEASE LIMITED
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

     Genesis Lease Limited (together with its consolidated subsidiaries, “we”, “our” and “us”), was incorporated in Bermuda on July 17, 2006 for the purpose of acquiring 41 commercial jet aircraft (the “Initial Portfolio”) and related operations from affiliates of General Electric Company (“GE”) and conducting an initial public offering (“IPO”) of our common shares. We are operated and managed as a single operating segment and are primarily engaged in the acquisition and leasing of commercial jet aircraft to airlines throughout the world.

     We have increased our portfolio by 13 aircraft from 41 upon the completion of the IPO to 54 aircraft as of June 30, 2009. Twelve aircraft were purchased during the year ended December 31, 2007, eight from affiliates of GE and four from two airlines on a sale and leaseback basis. One further aircraft was purchased from a GE affiliate during the year ended December 31, 2008.

2. Basis of Presentation

     These unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

     The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2008 and 2009 include all of our majority-owned subsidiaries’ assets and liabilities.

     Certain information and footnote disclosures required by U.S. GAAP for complete annual financial statements have been omitted and, therefore, it is suggested that these interim financial statements be read in conjunction with our audited financial statements for the year ended December 31, 2008 contained in our Annual Report on Form 20-F, filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2009. In the opinion of management, these financial statements, which have been prepared pursuant to the rules of the SEC and U.S. GAAP for interim financial reporting, reflect all adjustments, including normal recurring items which are necessary to present fairly the results, in all material respects, of our unaudited condensed consolidated financial position, results of operations, and cash flows for the interim periods presented. The results of operations for the three and six months ended June 30, 2008 and 2009 are not necessarily indicative of those for a full fiscal year.

3. Flight Equipment under Operating Leases, net

     Flight equipment under operating leases, net, consisted of the following as of December 31, 2008 and June 30, 2009:

	December 31, 2008			June 30, 2009
	(USD in thousands)
Flight equipment under operating lease	$	1,938,639		$	1,983,300
Less:
Accumulated depreciation		(341,035	)		(384,322	)
Net Book Value	$	1,597,604		$	1,598,978

     Capitalized additions in the six months ended June 30, 2009 primarily relate to capitalized planned major maintenance costs on the portfolio of aircraft net of a tax refund of $2.3 million in relation to the purchase of a business in the year ended December 31, 2008.

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4. Income Taxes (including deferred taxes)

     The provision for income taxes consisted of the following for the six months ended June 30, 2008 and 2009:

	June 30, 2008		June 30, 2009
	(USD in thousands)
Current income tax expense	$	61	$	108
Deferred tax expense		2,538		2,044
Total tax expense	$	2,599	$	2,152

     A reconciliation of the corporation tax rate to the actual income tax rate for the six months ended June 30, 2008 and 2009 is shown below:

	June 30, 2008			June 30, 2009
Irish corporation tax rate		12.50	%		12.50	%
(Decrease)/increase in rate resulting from:
Other expenses deductible for tax		(0.37	)%		—
Tax on foreign operations		—			0.56	%
Effective income tax rate		12.13	%		13.06	%

5. Accounts Payable

Accounts payable as at December 31, 2008 and June 30, 2009 were as follows:

	December 31, 2008		June 30, 2009
	(USD in thousands)
Accrued maintenance costs	$	21,204	$	36,012
Operational expenses		14,241		11,321
Total	$	35,445	$	47,333

6. Other Liabilities

     Other liabilities consisted of the following as of June 30, 2009:

						Rentals			Out-of-						Interest
	Fair					Received			the-Money						Payable
	Value of			Security		in			Lease			Accrued			on Debt,
	Derivatives			Deposits		Advance			Contracts			Interest			net			Total
									(USD in thousands)
January 1, 2009	$	87,030		$	15,678	$	9,247		$	3,067		$	821		$	2,577		$	118,420
Increase /(decrease) for period		(15,032	)		3,537		(674	)		—			(174	)		(289	)		(12,632	)
Amortization		—			—		—			(246	)		—			—			(246	)
June 30, 2009	$	71,998		$	19,215	$	8,573		$	2,821		$	647		$	2,288		$	105,542

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7. Debt

     The following table summarizes debt as of December 31, 2008 and June 30, 2009:

	December 31, 2008		June 30, 2009
	(USD in thousands)
Securitization notes (i)	$	796,500	$	781,500
Debt facilities		331,893		325,142
Total debt	$	1,128,393	$	1,106,642

(i) See Note 10.

Debt Maturities

     Aggregate maturities of principal payments during the next five years and thereafter are as follows:

	June 30, 2009
	(USD in thousands)
Within one year	$	35,419
Two years		33,186
Three years(1)		66,015
Four years(1)		92,361
Five years(1)		91,409
Thereafter(1)		788,252
Total	$	1,106,642

(1) The indenture that governs the notes issued in the securitization provides that beginning December 19, 2011 (the fifth anniversary of the securitization), all base lease cash flows received on the Initial Portfolio of 41 aircraft are applied to repay the outstanding principal balance of those notes, after payment of certain expenses and other payments pursuant to the priorities set forth in the indenture. Accordingly, because there are no specific repayment requirements, the principal maturities shown in this table for periods after December 19, 2011 reflect an estimate of the cash flows that would be required for payments on the notes based upon estimates of (i) base lease cash flows and (ii) expenses and other payments specified in the indenture. The maturity of the debt does not assume any defaults, aircraft sales, eligible extensions or potential refinancings.

8. Fair Value Measurement

     We account for derivative instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended and interpreted. In accordance with SFAS 133, all derivatives are recognized on the balance sheet at their fair value. When cash flow hedge accounting treatment is achieved under SFAS 133, the changes in fair values related to the effective portion of the derivatives are recorded in accumulated other comprehensive income, and the ineffective portion is recognized immediately in income. Changes in the fair value of forward foreign exchange contracts are recognized immediately in income.

     SFAS 157, “Fair Value Measurements”, establishes a framework for measuring fair value under U.S. GAAP, clarifies the definition of fair value within that framework, and expands disclosures about the use of fair value measurements. SFAS 157 was issued in September 2006 and is effective for fiscal years beginning after November 15, 2007.

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     Under SFAS 157, we determine fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

     Our policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy as described below. Where limited or no observable market data exists, fair value measurements for assets and liabilities are based primarily on management’s own estimates and are calculated based upon our pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results may not be realized in actual sale or immediate settlement of the asset or liability.

     Under SFAS 157, there is a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities at fair value. The three broad levels defined by the SFAS 157 hierarchy are as follows:

Level 1 — Quoted prices are available in active markets for identical assets or liabilities as at the reported date.

Level 2 — The fair values determined through Level 2 of the fair value hierarchy are derived principally from or corroborated by observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow value to be determined.

Level 3 — The fair values pertaining to Level 3 of the fair value hierarchy are derived principally from unobservable inputs from our own assumptions about market risk developed based on the best information available, subject to cost benefit analysis, and may include our own data.

     When there are no observable comparables, inputs used to determine value are derived through extrapolation and interpolation and other company-specific inputs such as projected financial data and our own views about the assumptions that market participants would use.

     In October 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS 157-3”). FSP FAS 157-3 clarifies the application of SFAS No. 157 in a market that is not active and is intended to address the following application issues:

• How the reporting entity’s own assumptions (that is, expected cash flows and appropriately risk-adjusted discount rates) should be considered when measuring fair value when relevant observable inputs do not exist.

• How available observable inputs in a market that is not active should be considered when measuring fair value.

• How the use of market quotes (for example, broker quotes or pricing services for the same or similar financial assets) should be considered when assessing the relevance of observable and unobservable inputs available to measure fair value.

     The fair values determined by us are derived principally from or corroborated by observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow fair value to be determined. Due to continuing market conditions, we applied additional inputs to the fair value determination in the form of credit spreads, credit default swaps and an assessment of the probability of our own non-performance and of default by either of the swap counterparties.

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     We adopted FSP FAS 157-3 for all financial assets and liabilities required to be measured at fair value on a recurring basis, prospectively from January 1, 2008. The application of this pronouncement did not have a material effect on our results of operations or financial position.

     In April 2009, the FASB issued FSP No. FAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(“FSP FAS 157-4”) which is effective for interim and annual reporting periods ending after June 15, 2009. FSP FAS 157-4 provides additional guidance on determining when the volume and level of activity for the asset or liability has significantly decreased. FSP FAS 157-4 also includes guidance on identifying circumstances when a transaction may not be considered orderly. Orderly assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets or liabilities and is not therefore assumed to be a distressed sale or a forced liquidation. When the reporting entity concludes there has been a significant decrease in the volume and level of activity for the asset or liability, further analysis of the information from that market is needed and significant adjustments to the related prices may be necessary to estimate fair value in accordance with FAS 157.

     We adopted FAS FSP 157-4 prospectively as required for the six month period ended June 30, 2009. The application of this pronouncement did not have a material effect on our results of operations or financial position.

The following table summarizes the fair value of our financial assets and liabilities as of June 30, 2009 by level within the fair value hierarchy.

						Using
				Quoted Prices in		Significant
				Active Markets		Other			Significant
				for Identical		Observable			Unobservable
	Net Fair Value			Assets		Inputs			Inputs
	June 30, 2009			(Level 1)		(Level 2)			(Level 3)
				(USD inthousands)
Cash and cash equivalents	$	66,116		$	66,116	$	—		$	—
Restricted cash		30,907			30,907		—			—
Derivatives:
Interest rate swaps		72,182			—		72,182			—
Forward foreign exchange contracts		(184	)		—		(184	)		—
Total	$	169,021		$	97,023	$	71,998		$	—

     We expect $38.8 million of the gross fair value of the derivatives to be recognized within one year.

     SFAS 107,Disclosure about Fair Value of Financial Instruments,(“FAS 107”) requires a company to disclose the fair value of all financial instruments along with significant assumptions used to estimate fair value and any changes to those methods and significant assumptions.

     In April 2009, the FASB issued FASB FSP FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments,(“FSP FAS 107-1”). FSP FAS 107-1 amended FAS 107, requiring that such disclosures be included in interim financial statements as well as year end financial statements. We adopted FSP FAS 107-1 as of the effective date for interim reporting periods ending after June 15, 2009.

     Our financial instruments consist principally of derivative liabilities, debt facilities, cash and cash equivalents and restricted cash. The fair value of cash and cash equivalents and restricted cash approximates the carrying value of these financial instruments because of their short term nature.

     The fair value of our debt is estimated using a discounted cash flow analysis, based on our current borrowing rates for similar types of borrowing arrangements.

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     The carrying amounts and fair values of our financial instruments as of June 30, 2009 are as follows:

	Carrying Amount of			Fair Value of
	Asset/(Liability)			Asset/(Liability)
	(USD in thousands)
Assets
Cash and cash equivalents	$	66,116		$	66,116
Restricted cash		30,907			30,907
	$	97,023		$	97,023
Liabilities
Debt	$	(1,106,642	)	$	(868,888	)
Derivatives		(71,998	)		(71,998	)
	$	(1,178,640	)	$	(940,886	)

9. Net Income per Share

     We calculate our net income per share in accordance with SFAS 128, “Earnings per Share”. Basic net income per share is computed based on the weighted average number of shares outstanding during the period, which includes the restricted share awards issued to our employees and non-employee directors.

     Diluted net earnings per share reflects the dilution potential that could occur if securities or other contracts to issue shares were exercised resulting in the issuance of stock that then shared in our net income.

     Diluted net income per share is computed by taking the weighted average number of shares for the period and adjusting for the dilutive effect of the options granted to employees.

     The following table presents the net income per share:

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008		June 30, 2009
	(USD in thousands, except share and per share amounts)
Numerator
Net income	$	8,976	$	4,759	$	18,831	$	14,321
Denominator
Weighted average shares for basic earnings per share		36,131,708		34,346,596		36,113,215		34,344,475
Effect of dilutive share options		—		—		—		—
Weighted average shares for diluted earnings per share		36,131,708		34,346,596		36,113,215		34,344,475
Net income per share
Basic	$	0.25	$	0.14	$	0.52	$	0.42
Diluted	$	0.25	$	0.14	$	0.52	$	0.42

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     Options to purchase 299,754 common shares at an exercise price between $15.51 and $26.34 per share were outstanding as of June 30, 2008 and June 30, 2009 but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares. The options expire between December 19, 2017 and May 6, 2021.

10. Other Income

     The following table summarizes other income for the three and six months ended June 30, 2008 and 2009:

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008		June 30, 2009
	(USD in thousands)
Interest income	$	412	$	135	$	1,024	$	285
Realized gains on repurchase of securitization notes (i)		—		—		—		6,169
Total	$	412	$	135	$	1,024	$	6,454

(i) During the six months ended June 30, 2009, we repurchased $15.0 million aggregate principal amount of securitization notes issued by Genesis Funding for a total price of $8.3 million, including transaction costs payable to unaffiliated financial institutions. After writing off $0.5 million relating to unamortized deferred financing costs on debt repurchases, a gain of $6.2 million was recognized for the six months ended June 30, 2009.

11. Interest

     The following table summarizes interest expense for the three and six months ended June 30, 2008 and 2009:

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2008		June 30, 2009		June 30, 2008		June 30, 2009
	(USD in thousands)
Interest on debt, net of swaps	$	15,889	$	17,367	$	31,211	$	34,775
Amortization of deferred financing costs		754		1,535		2,211		3,035
Total	$	16,643	$	18,902	$	33,422	$	37,810

     For the six months ended June 30, 2009, interest rates on our interest rate swaps varied as follows:

	Six months ended June 30, 2009
Fixed.	4.62% – 4.95%
Variable	0.31% – 0.58%

     The notional principal amounts, fair value and accrued interest of our derivatives as at June 30, 2009 are shown below:

	June 30, 2009
	Notional
	Principal		Net Fair
	Amount		Value of Derivatives		Accrued Interest
	(USD in thousands)
Current portion	$	17,868	$	38,801	$	1,545
Due greater than 12 months		997,337		33,197		—
	$	1,015,205	$	71,998	$	1,545

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12. Commitments and Contingencies

     Claims, suits and complaints arise in the ordinary course of our business. Currently, we do not believe any claims or contingent liabilities would be material to our final position or results of operations.

     Pursuant to servicing agreements entered into with General Electric Commercial Aviation Services Limited (“GECAS”) during years ended December 31, 2006, 2007 and 2008, GECAS provides us with most services related to leasing our fleet of aircraft, including marketing aircraft for lease and re-lease, collecting rents and other payments from lessees, monitoring maintenance, insurance and other obligations under leases and enforcing rights against lessees. We are obligated to pay a minimum of $2.3 million to GECAS under the Servicing Agreements for the year ending December 31, 2009.

     Under our lease agreements, the lessee is generally responsible for normal maintenance and repairs, airframe and engine overhauls, consents and approvals, and compliance with return conditions of aircraft on lease. In certain cases, we may be obligated to make contributions to the lessee for planned maintenance expenses including an amount of additional rent paid by the lessee under the lease based on current estimates of usage and future maintenance costs of the aircraft.

     The international nature of our operations may expose us to taxation in certain countries. The position is kept under continuous review and provision is made for known liabilities.

     On October 2, 2008, our servicer, on our behalf, terminated the leases of two of our A320-200 aircraft previously on lease to Deccan Aviation Limited. The aircraft were repossessed in November 2008. On April 3, 2009, our servicer, on our behalf, commenced proceedings in the UK High Court against Kingfisher Airlines Limited (formerly known as Deccan Aviation Limited) for damages arising out of the repossession. We expect that our claim will be heard in London in January 2010. The proceedings are at an early stage, and it is not possible to predict the outcome at this time.

Indemnifications

     We have agreed to indemnify GECAS and its affiliates for broad categories of losses arising out of the performance of services for our aircraft and leases, unless they are finally adjudicated to have been caused directly by GECAS’s gross negligence or wilful misconduct (including wilful misconduct that constitutes fraud) in respect of GECAS’s obligation to apply its standard of care or conflicts standard in the performance of its services. We have likewise agreed that GECAS and its affiliates have no liability to us or any other person for any losses in any way arising out of the services except as provided in the foregoing sentence (also referred to as GECAS’s “standard of liability”).

     We have also agreed to indemnify GECAS and its affiliates for losses arising out of the disclosures in our Annual Report on Form 20-F (except certain disclosures provided to us by GECAS and losses arising out of our compliance with our obligations to any holders of any securities issued by us or with any governmental regulations).

     We have also generally agreed to indemnify GECAS and its affiliates as to losses arising out of the IPO and the disclosure in the IPO prospectus, except certain disclosures provided by GECAS.

13. Other Comprehensive Loss

     Other comprehensive loss at June 30, 2009 includes changes in the fair value of derivatives net of tax. The change in other comprehensive loss for the year ended December 31, 2008 and the six months ended June 30, 2009 was as follows:

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	December 31,			June 30,
	2008			2009
	(USD in thousands)
Change in fair value of derivatives in cash flow hedging arrangements	$	(54,704	)	$	(14,893	)
Deferred tax benefit on fair value of derivatives		6,838			1,859
Change in other comprehensive loss	$	(47,866	)	$	(13,034	)

14. Accumulated Deficit

	December 31,			June 30,
	2008			2009
	(USD in thousands)
Accumulated deficit as at beginning of the year/period	$	(14,783	)	$	(28,377	)
Net income for the year/period		40,917			14,321
Dividends paid during the year /period		(54,511	)		(6,869	)
Accumulated deficit as at end of year/period	$	(28,377	)	$	(20,925	)

15. Geographic Information

     The following table presents the amount and percentage of revenues from rental of flight equipment under operating lease attributable to the indicated geographic areas based on each airline’s principal place of business for the periods indicated:

	Three Months Ended					Three Months Ended
	June 30, 2008					June 30, 2009
	(USD in					(USD in
	thousands)		%			thousands)		%
Europe	$	19,326		37	%	$	18,753		37	%
Asia/Pacific		19,771		38	%		17,951		35	%
United States and Canada		7,063		14	%		6,779		13	%
Central, South America and Mexico		2,771		5	%		5,171		10	%
Africa and the Middle East		3,098		6	%		2,411		5	%
	$	52,029		100	%	$	51,065		100	%

	Six Months Ended					Six Months Ended
	June 30, 2008					June 30, 2009
	(USD in					(USD in
	thousands)		%			thousands)		%
Europe	$	39,071		37	%	$	37,073		36	%
Asia/Pacific		39,875		38	%		35,870		35	%
United States and Canada		15,410		14	%		13,940		14	%
Central, South America and Mexico		5,553		5	%		10,372		10	%
Africa and the Middle East		6,189		6	%		4,635		5	%
	$	106,098		100	%	$	101,890		100	%

     The following table presents revenue attributable to individual countries that represent at least 10% of total revenue based on each airline’s principal place of business for the periods indicated:

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	Three Months Ended					Three Months Ended
	June 30, 2008					June 30, 2009
	(USD in					(USD in
	thousands)		%			thousands)		%
China	$	8,412		16	%	$	7,768		15	%
United States		6,227		12	%		6,158		12	%
Germany		5,936		11	%		6,442		13	%
Brazil		—		—			5,171		10	%
Spain		5,257		10	%		—		—

	Six Months Ended					Six Months Ended
	June 30, 2008					June 30, 2009
	(USD in					(USD in
	thousands)		%			thousands)		%
China	$	16,873		16	%	$	15,403		15	%
United States		13,726		13	%		12,299		12	%
Germany		11,806		11	%		12,416		12	%
Brazil		—		—			10,373		10	%
Spain		10,669		10	%		—		—

     Rental of flight equipment included additional rent of $7.2 million and $7.1 million for the three months ended June 30, 2008 and June 30, 2009, respectively and $14.7 million and $14.0 million for the six months ended June 30, 2008 and June 30, 2009, respectively.

     In the six months ended June 30, 2009, three aircraft were non-revenue generating and on the ground for the full period with one further aircraft returning to service towards the end of the period. This downtime resulted in foregone rental revenues of approximately $4.3 million and $8.7 million during the three and six months ended June 30, 2009, respectively.

16. Subsequent Events

     On July 28, 2009, the Board of Directors declared a dividend of $0.10 per share, in the aggregate amount of $3.4 million. The dividend will be paid on September 16, 2009 to shareholders of record as at the close of business on August 11, 2009.

     On July 20, 2009, we acquired a new Airbus A321 series passenger aircraft, manufactured in July 2009 and leased to U.S. Airways. Following the acquisition of this aircraft, Genesis has 55 aircraft in its portfolio.

     Subsequent events have been evaluated up to July 31, 2009.

17. New Accounting Pronouncements

     In April 2009, the FASB issued FSP No. 115-2/124-2,Recognition and Presentation of Other-Than-Temporary Impairments. FSP No. 115-2/124-2 is an amendment of SFAS No. 115,Accounting for Certain Investments in Debt and Equity Securitiesand SFAS No. 124,Accounting for Certain Investments Held by Not-for-Profit Organizations. FSP No. 115-2/124-2 amends the other-than-temporary impairment guidance for debt securities and expands the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The effective date of FSP No. 115-2/124-2 is for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted. Genesis management has concluded that the adoption of FSP No. 115-2/124-2 did not have a significant impact on Genesis’ financial position or results of operation.

     In June 2009, the FASB issued Statement No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles(“SFAS 168”). The FASB Accounting Standards Codification (Codification) will become the source of authoritative U.S. GAAP recognized by the FASB to be applied by non-governmental entities. SFAS 168 will bring together in one place all authorative GAAP

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previously held at different levels of GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this Statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Genesis management has concluded that the adoption of SFAS 168 will not have a significant impact on Genesis’ financial position or results of operation.

     In May 2009, the FASB issued Statement No. 165,Subsequent Events(“SFAS 165”). SFAS 165 addresses accounting and disclosure requirements related to subsequent events. SFAS 165 requires management to evaluate subsequent events through the date the financial statements are either issued or available to be issued, depending on the company’s expectation of whether it will widely distribute its financial statements to its shareholders and other financial statement users. Companies are required to disclose the date through which subsequent events have been evaluated. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009 and should be applied prospectively. Genesis management has concluded that the adoption of SFAS 165 did not have a significant impact on Genesis’ financial position or results of operation.

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     Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations

     The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Interim Report.The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2008 and 2009 have been prepared in accordance with U.S. GAAP, and are presented in U.S. dollars.

Cautionary note regarding forward-looking statements

     This report contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “seeks,” “estimates,” “will,” or words of similar meaning and include, but are not limited to, statements regarding the outlook for our future business and financial performance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory and other factors and risks, including adverse changes in economic conditions; the need for additional capital to finance our growth; a deterioration in the financial condition of the commercial airline industry; the cyclical nature and a significant downturn of the aviation industry; changes in demand and supply of aircraft; decrease in lease rates and value of our leased assets; competition for investment opportunities in aircraft and other aviation assets; an inability to expand due to lack of increase in demand for leased aircraft; the effect of high fuel prices on the profitability of the airline industry; the effects of terrorist attacks and geopolitical conditions on the airline industry; the effects of pandemic diseases on the airline industry; dependence on aircraft and engine manufacturers’ continuing financial stability; unforeseen difficulties and costs associated with the acquisition and/or management of our aircraft portfolio; operational restrictions imposed by our indebtedness; reliance on subsidiaries to provide funds necessary to meet our financial obligations; an inability to refinance our indebtedness on favorable terms or at all; exposure to interest rate fluctuations; our inability to pay or maintain dividends on our shares; the death, incapacity or departure of senior management; concentration of aircraft types in our aircraft portfolio; an inability to re-lease or sell aircraft on favorable terms as leases expire; the advent of superior aircraft technology that could cause our existing aircraft to become outdated and therefore less desirable; possible depreciation expenses and impairment charges; the effect of aircraft liens on our ability to repossess, re-lease or resell our aircraft; past damage to some of the aircraft in our portfolio; compliance with government regulations; effects of environmental and other regulations that may cause lessees to default on lease payments; difficulty to obtain title to two of the aircraft in our portfolio; reliance on lessees’ continuing performance of their lease obligations; potential lease defaults; the concentration of lessees in certain geographical regions; economic and political risks faced by lessees that operate in emerging markets; early termination rights contained in some leases; failure by lessees to comply with the registration requirements in the jurisdictions where they operate; inadequate insurance coverage maintained by lessees; dependence on GECAS; potential conflicts of interests between us and GECAS and its affiliates; limitations on remedies and termination rights against GECAS for unsatisfactory performance; competition with GECAS for acquisitions and dispositions of aircraft; a limited independent operating history upon which to assess our prospects or ability to pay dividends to our shareholders; the possibility that our subsidiaries may have unknown contingent liabilities; our tax status as a passive foreign investment company; failure to qualify for tax treaty benefits and U.S. statutory tax exemptions; and exposure to potential taxation in jurisdictions in which our aircraft operate, where our lessees are located or where we perform certain services.

     We expressly disclaim any obligation to update or revise any of these forward-looking statements, whether because of future events, new information, a change in our views or expectations, or otherwise.

Overview

     We are an aviation company that acquires and leases commercial jet aircraft and other aviation assets. Our aircraft are leased under long-term contracts to a diverse group of airlines throughout the world. We leverage the worldwide platform of GECAS to service our portfolio of leases, allowing our management to focus on executing our growth strategy. Our strategy is to grow our portfolio through acquisitions of aircraft from third

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parties, such as airlines and financial investors, including affiliates of GE, while paying regular quarterly dividends to our shareholders.

     As at June 30, 2009, the weighted average age of the 54 aircraft in our portfolio was 7.1 years, and the weighted average remaining lease term on our aircraft was 4.4 years.

     As at June 30, 2009, fifty-one of our aircraft are in operation and subject to net operating leases under which the lessee was responsible for most operational and insurance costs. Of those fifty-one leases, forty-seven require the payment of a fixed amount of rent during the term of the lease with rent under the remaining four leases adjusting semi-annually based on six-month LIBOR. As at June 30, 2009, three aircraft were non-revenue generating.

     In July 2009, we acquired a new Airbus A321 series passenger aircraft, manufactured in July 2009 and leased to U.S. Airways on a long-term lease.

     The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2008 and 2009 include all of our majority-owned subsidiaries’ assets and liabilities.

Factors to Consider When Evaluating Our Results of Operations

     Our growth strategy contemplates future acquisitions and leasing of additional commercial aircraft and other aviation assets. The following trends in the aircraft finance and leasing industries will have an impact on our ability to implement this growth strategy:

• General economic conditions.The long-term demand for air travel is expected to continue to grow. In the aggregate, world air travel has grown by an average of 5.3% per annum since 1978. Nevertheless, the extreme dislocation in the financial markets has continued into 2009 and many major economies have entered recession. In June 2009, IATA forecasted a $9 billion global loss for airlines in 2009. These developments, as well as a dramatic increase in oil prices through mid-2008, contributed to a number of airline bankruptcies in 2008 and 2009, particularly in the United States and in Europe. While we are not immune to these developments, we are positioned to address many of these challenges given our focus on maintaining a young, modern, fuel efficient portfolio of aircraft, a well diversified global customer base, long term leases and with GECAS as our servicer. Nevertheless, the aviation industry continues to be subject to demand shifts, and the current downturn in discretionary business and consumer spending will have a significant impact on air traffic and aircraft demand. Such shifts in demand could affect the rates at which we lease our aircraft.

• Large and growing commercial aircraft fleet to meet global demand.The long-term trend towards growth in air travel is expected to be adversely affected in the short to medium term as a result of reduced global economic activity. We do not know how long this economic downturn may prevail. Nevertheless, over the long term, we expect that economic development in emerging markets, competitive pricing resulting from the continued growth of low-cost carriers and relaxation of regulatory constraints will continue to drive further increases in air travel and aircraft demand. In its most recent market outlook (June 2009), Boeing forecasted that the passenger fleet will grow from 18,800 at the end of 2008 to 35,600 by the end of 2028. With the removal from service of older aircraft, this outlook reflects the delivery of 29,000 new aircraft worth $3.2 trillion during this period. The most recent global market forecast from Airbus is slightly more conservative, estimating the delivery of 23,385 new passenger aircraft worth $2.6 trillion during the next 20 years.

• Continued growth in aircraft leasing with significant consolidation opportunities.Over the past 20 years, the world’s airlines have leased a growing share of their aircraft. According to market data, the proportion of the global fleet under operating lease has increased from 17% in 1990 to approximately 30% in recent years. Lessors are major providers of liquidity for new and used aircraft and provide airlines with a valuable method of fleet management through the use of operating leases, financial leases and sale/leaseback transactions. In July 2008, the four largest lessors, GECAS, ILFC, CIT Group and Boeing Capital, owned or managed approximately 48% of the aggregate leased aircraft lessor portfolio, while six other lessors each controlled more than 3% of the lessor market. Beyond that, the operating lessor market is quite fragmented. We expect that leased aircraft will continue to

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	comprise an increasing percentage of total commercial aircraft. However, there may be some short term volatility given the current credit environment and uncertain economic outlook. In addition, prospective ownership changes of certain aircraft lessors, including ILFC, may have an impact on aircraft values and lease rates, as well as the aircraft financing market. It is also quite possible that, given the fragmented nature of the lessor market, consolidation within the sector could occur.
•	Aircraft values and lease rates.A number of aircraft types, particularly the Boeing 737 Next Generation and the Airbus A320 family of aircraft, experienced supply constraints in the years up to 2008. However, the airline industry has long been subject to cyclical demand patterns and the current economic downturn has led to a reduction in lease rates and asset values. As a result of recent airline bankruptcies, some newer Boeing 737 and Airbus A320 family equipment have become available and lease rates and asset values for these types have suffered some decline. Older Boeing 737 Classic aircraft (-300, -400 & - -500 series) have also become available, and we expect the lease rates and values on these types may suffer relatively larger and longer-term declines. Classic aircraft represent 1.9% of our total portfolio. Demand for larger aircraft types, such as newer examples of the 767-300ER and A330 may continue, but in the near term face market risks due to the global economic downturn and, in the medium term, the emergence of newer technology and more fuel-efficient aircraft, such as the Boeing 787 and the Airbus A350 as they enter service during the next decade.
•	Access to capital markets.Our liquidity needs include financings to acquire additional aircraft and other aviation assets to drive our growth. We plan to finance acquisitions through borrowings under our revolving credit facility and other sources including through additional debt and equity issuances. Our ability to execute our business strategy to acquire these additional aviation assets depends to a significant degree on our ability to access debt and equity capital markets. Our access to these markets will depend on a number of factors, such as our historical and expected performance, compliance with the terms of our existing debt agreements, industry and market trends, the availability of capital and relative attractiveness of alternative investments. If we are unable to raise funds through debt and equity capital markets on terms that are acceptable to us, then we may be unable to implement our growth strategy of making acquisitions of additional aircraft.

Critical Accounting Policies and Estimates

     There have been no changes to our critical accounting policies from those disclosed in our Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 6, 2009.

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Results of Operations

     The following table reflects the unaudited condensed consolidated Statements of Income for the three and six months ended June 30, 2008 and 2009.

GENESIS LEASE LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
	June 30,		June 30,		June 30,		June 30,
	2008		2009		2008		2009
	(USD in thousands)
Revenues
Rental of flight equipment	$	52,029	$	51,065	$	106,098	$	101,890
Other income		412		135		1,024		6,454
Total revenues		52,441		51,200		107,122		108,344
Expenses
Depreciation		18,955		22,194		39,052		43,647
Interest		16,643		18,902		33,422		37,810
Maintenance		195		58		685		89
Selling, general and administrative		6,302		4,585		12,533		10,325
Total operating expenses		42,095		45,739		85,692		91,871
Income before taxes		10,346		5,461		21,430		16,473
Provision for income taxes		1,370		702		2,599		2,152
Net income	$	8,976	$	4,759	$	18,831	$	14,321

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

     Rental revenues were $51.1 million for the three months ended June 30, 2009 compared to $52.0 million for the three months ended June 30, 2008, a decrease of 1.9%. This decrease was primarily due to the net impact of non-revenue generating aircraft of $1.8 million from the previous termination of leases and a decrease of $1.0 million in lease rentals from floating-rate leases due to lower interest rates during 2009, offset by rental revenues earned in the three months ended June 30, 2009 from one aircraft acquired during June 2008.

     Other income was $0.1 million for the three months ended June 30, 2009, compared to $0.4 million for the three months ended June 30, 2008. This decrease is a result of lower interest rates in the quarter.

     Depreciation of flight equipment was $22.2 million for the three months ended June 30, 2009 compared to $19.0 million for the three months ended June 30, 2008, an increase of 17.1%. This increase was primarily due to an increase of $2.4 million related to the amortization of planned major maintenance costs and an increase of $0.7 million from one additional aircraft purchased in 2008.

     Interest expense was $18.9 million for the three months ended June 30, 2009 compared to $16.6 million for the three months ended June 30, 2008, an increase of 13.6%. This increase was due to $0.9 million of interest expense associated with the financing of additional aircraft acquired in 2007 and 2008, and a $1.4 million increase in the amortization of deferred financing costs and commitment fees in connection with new borrowings in 2008 and our $1 billion revolving credit facility.

     Maintenance expense was $0.1 million for the three months ended June 30, 2009 compared to $0.2 million for the three months ended June 30, 2008. Maintenance expense reflects costs associated with the scheduled transition of aircraft to new lessees and costs associated with the repossession of aircraft.

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     Selling, general and administrative expenses were $4.6 million for the three months ended June 30, 2009 compared to $6.3 million for the three months ended June 30, 2008, a decrease of 27.2%. This decrease primarily reflects a decrease in employment and professional services costs.

     Provision for income taxes was $0.7 million for the three months ended June 30, 2009, reflecting an effective tax rate of 12.9%, compared to $1.4 million for the three months ended June 30, 2008, reflecting an effective tax rate of 13.2%.

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

     Rental revenues were $101.9 million for the six months ended June 30, 2009 compared to $106.1 million for the six months ended June 30, 2008, a decrease of 4.0%. This decrease was primarily due to the net impact of non-revenue generating aircraft of $5.4 million from the previous termination of leases and a decrease of $1.8 million in lease rentals from floating rate leases due to lower interest rates during 2009, offset by rental revenues earned in the six months ended June 30, 2009 from one aircraft acquired during June 2008.

     Other income was $6.5 million for the six months ended June 30, 2009, compared to $1.0 million for the six months ended June 30, 2008. Other income in the six months ended June 30, 2009 was due primarily to a gain of $6.2 million on the repurchase of debt securities, offset by a reduction in interest income of $0.8 million due to lower interest rates. During the six months ended June 30, 2009, we repurchased $15.0 million aggregate principal amount of securitization notes for a total price of $8.3 million. We recognized a gain of $6.2 million after writing off $0.5 million relating to unamortized deferred financing costs on the repurchased debt.

     Depreciation of flight equipment was $43.6 million for the six months ended June 30, 2009 compared to $39.1 million for the six months ended June 30, 2008, an increase of 11.8%. This increase was primarily due to an increase of $4.5 million related to the amortization of capitalized major maintenance and an increase of $0.9 million from additional aircraft purchased in 2008, offset by a charge of $1.1 million in the six months ended June 30, 2008 relating to the write-off of lessee-specific capital improvements following a lease termination.

     Interest expense was $37.8 million for the six months ended June 30, 2009 compared to $33.4 million for the six months ended June 30, 2008, an increase of 13.1%. This increase was due to $1.9 million of interest expense associated with the financing of additional aircraft acquired in 2008 and a $2.5 million increase in the amortization of deferred financing costs and commitment fees in connection with new borrowings in 2008 and our $1 billion revolving credit facility.

     Maintenance expense was $0.1 million for the six months ended June 30, 2009, compared to $0.7 million for the six months ended June 30, 2008. Maintenance expense reflects costs associated with the scheduled transition of aircraft to new lessees and costs associated with the repossession of aircraft.

     Selling, general and administrative expenses were $10.3 million for the six months ended June 30, 2009 compared to $12.5 million for the six months ended June 30, 2008, a decrease of 17.6%. This decrease primarily reflects a decrease in employment and professional services costs.

     Provision for income taxes was $2.2 million for the six months ended June 30, 2009, reflecting an effective tax rate of 13.1%, compared to $2.6 million for the six months ended June 30, 2008, reflecting an effective tax rate of 12.1%.

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Liquidity and Capital Resources

Our Cash Flows

Six Months Ended June 30, 2009 Compared to Six Months Ended June 30, 2008

     Cash flows from operations were $52.0 million for the six months ended June 30, 2009, compared with $56.0 million for the six months ended June 30, 2008. The decrease was the result of $1.6 million of decreased cash flows from leasing activities and an increase of $2.4 million in restricted cash during the six months ended June 30, 2009.

     Cash flows from investing activities relate primarily to the acquisition of aircraft, capitalized major maintenance events on the aircraft and the designation of certain restricted cash balances. Cash used in investing activities for the six months ended June 30, 2009, was $21.3 million compared with $84.4 million for the same period in 2008. The decrease in cash used in investing activities was primarily due to the acquisition of an aircraft in 2008 and a decrease in restricted cash balances for the six months ended June 30, 2009, offset by an increase in capitalized major maintenance costs.

     Cash flows from financing activities relate primarily to the net proceeds from financings, payments for repurchase of securitization notes and the payment of dividends. Cash provided by financing activities for the six months ended June 30, 2009 was $24.8 million relating to (1) net repayment of debt financings of $6.8 million, (2) payments of $8.3 million for the repurchase of the securitization notes, (3) payment of $2.7 million for financing costs associated with borrowings and (4) the payment of $6.9 million in dividends. Cash flows from financing activities for the six months ended June 30, 2008 was $56.2 million relating to (1) the payment of dividends of $34.0 million, (2) the payment of financing costs associated with borrowings of $1.8 million, offset by (3) proceeds from a debt financing of $92.0 million.

Fair Value Measurement

     We have entered into interest rate swaps to hedge the risk of variability in the cash flows associated with the floating interest rate payments on the borrowings incurred to finance a portion of the consideration paid for our portfolio of aircraft. We have also entered into forward foreign exchange contracts to hedge against the variability in the U.S. dollar to Euro foreign exchange rates.

     All derivatives are recognized on the balance sheet at their fair value. We determine fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value may depend on the credit rating and risk attaching to the counterparty of the derivative contracts.

     Our policy is to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy of SFAS No. 157,“Fair Value Measurements”(“SFAS 157”). The fair values determined by us are derived principally from or corroborated by observable market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market comparables, interest rates, yield curves and other items that allow fair value to be determined. Due to the continuing market conditions, we applied additional inputs to the fair value determination in the form of credit spreads, credit default swaps and an assessment of the probability of our own non-performance and of default by either of the swap counterparties.

     The fair value of derivatives was $(72.0) million as at June 30, 2009, which decreased 17.3% from $(87.0) million as at December 31, 2008. No gains or losses were recognized in income in respect of changes in the credit risk associated with interest rate swap derivatives.

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Our Future Sources of Liquidity

     We operate in a capital-intensive industry. We expect to fund our capital needs from retained cash flow and debt and equity financing, including borrowings under our $1 billion revolving credit facility.

     Our short-term liquidity needs include working capital for operations associated with our aircraft and cash to pay dividends to our shareholders. We expect that cash on hand, cash flow provided by operations and the availability of borrowings under our liquidity facility will satisfy our short-term liquidity needs with respect to our business. Our sole source of operating cash flows is currently from distributions and interest payments made to us by our subsidiaries, through which we hold all of the aircraft in our portfolio. Distributions of cash to us by our subsidiaries are subject to compliance with covenants contained in the agreements governing the securitization, our senior secured revolving credit facility and other debt facilities.

     Our liquidity needs also include the financing of acquisitions of additional aircraft and other aviation assets that we expect will drive our growth. We plan to finance acquisitions through cash generated by the business, borrowings under our revolving credit facility and additional debt and equity issuances.

     All of our principal debt facilities have financial covenants. If we are unable to comply with these covenants, then the amounts outstanding under these facilities may become immediately due and payable, cash generated by our subsidiaries may be unavailable to us and/or we may be unable to draw additional amounts under these facilities. The Initial Portfolio financed by Genesis Funding’s securitization requires that Genesis Funding maintain a debt service coverage ratio from November 2009 through November 2011 above the threshold specified under this financing. If lessees of the aircraft held by Genesis Funding default under their leases, then Genesis Funding may be unable to comply with this covenant and all available cashflow from the Initial Portfolio will be applied to the repayment of the securitization notes. Genesis Portfolio’s term loan facility requires that Genesis Portfolio maintain a loan-to-value ratio (tested annually) below the threshold specified in the facility. If aircraft values decline, then Genesis Portfolio may be unable to comply with this covenant and would be required to prepay outstanding borrowings to restore compliance with this covenant; otherwise, the amounts outstanding under the term loan facility would become immediately due and payable. The next measurement date of the value of the aircraft held by Genesis Portfolio is in September 2009, and we expect that Genesis Portfolio will be required to make a debt prepayment of up to $3 million to maintain compliance with this covenant. Genesis Acquisition’s revolving credit facility requires that Genesis Acquisition maintain minimum ratios of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to interest expense (tested quarterly) and a loan-to-value ratio (tested semi-annually) below the threshold specified in the revolving credit facility in respect of any aircraft financed through the revolving credit facility. As at June 30, 2009, there were no aircraft financed through Genesis Acquisition’s revolving credit facility. However, to the extent aircraft are financed in the future and subsequently aircraft values decline and/or if lessees default under their leases, then Genesis Acquisition may be unable to comply with the covenants and could lose the ability to make further borrowings under the revolving credit facility. The events that could cause our subsidiaries not to be in compliance with their financial covenants — such as a decline in aircraft values or lessee defaults — may be beyond our control, but they nevertheless could have a substantial adverse impact on the amount of our cash flow available to fund working capital, make capital expenditures and satisfy other needs, including payments of dividends to shareholders.

     In addition, our ability to execute our business strategy to acquire additional aircraft and other aviation assets depends to a significant degree on our ability to access debt and equity capital markets. Our access to these markets will depend on a number of factors, such as our historical and expected performance, compliance with the terms of our debt agreements, industry and market trends, the availability of capital and the relative attractiveness of alternative investments. If we are unable to raise funds through debt and equity capital markets on terms that are acceptable to us, then we may be unable to implement our growth strategy of making acquisitions of additional aircraft and other aviation assets.

     As at June 30, 2009, we were in compliance with the terms of the covenants under our principal debt facilities.

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Dividend Policy

     On July 28, 2009, the Board of Directors declared a dividend of $0.10 per share. The dividend will be paid on September 16, 2009 to shareholders of record as of the close of business on August 11, 2009.

     We generate significant cash flow from leases with a diversified group of commercial aviation customers. The distributable cash flow on which we focus is derived principally from our minimum contracted lease rentals, reduced by our net cash interest expenses, cash selling, general and administrative expenses, maintenance and cash taxes.

     We intend to distribute a portion of our cash flow to our shareholders, while retaining cash flow for reinvestment in our business. Retained cash flow may be used to fund acquisitions of aircraft and other aviation assets, make debt repayments, repurchase common shares and for other purposes, as determined by our management and board of directors. The declaration and payment of future dividends to holders of our common shares will be at the discretion of our board of directors and will depend on many factors, including our financial condition, cash flows, legal requirements and other factors as our board of directors deems relevant.

Share Repurchase Program

     On October 28, 2008, the Board of Directors approved a share repurchase program. Under the program, we are authorized to repurchase up to $20 million of our shares over 12 months. We expect the purchases to be made from time to time in the open market or in privately negotiated transactions and will be funded from our available cash. As of June 30, 2009, we had $14.4 million of remaining capacity available under the share repurchase program.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

     Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our lease agreements and our floating rate debt obligations such as the notes issued in the securitization and borrowings under our debt facilities. Forty-seven out of fifty-one of our lease agreements require the payment of a fixed amount of rent during the term of the lease, with rent under the remaining four leases adjusting bi-annually based on six-month LIBOR. Our indebtedness requires payments based on a variable interest rate index such as LIBOR. The majority of our lease agreements require the payment of a fixed amount of rent. Accordingly, we have entered into interest rate swaps to fix the cost associated with the majority of our financings to hedge against exposure arising from any interest rate fluctuations.

Sensitivity Analysis

     The following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts modelled. Although the following results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential impacts on our financial instruments and our four variable rate leases. It does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

     A hypothetical 100-basis point increase / decrease in our variable interest rates would increase / decrease the minimum contracted rentals on our portfolio for the six months to December 31, 2009 by $0.5 million. A hypothetical 100-basis point increase / decrease in our variable interest rate on our borrowings would result in an interest expense increase / decrease of $0.1 million for the six months to December 31, 2009.

Foreign Currency Exchange Risk

     We currently receive all of our revenue in U.S. dollars, and we pay substantially all of our expenses in U.S. dollars. However, we incur some of our expenses in other currencies, primarily the euro, and we may enter into leases under which we receive revenue in other currencies, primarily the euro. During the past several years, the U.S. dollar has generally depreciated against the euro. Depreciation in the value of the U.S. dollar relative to other currencies increases the U.S. dollar cost to us of paying such expenses. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations. During the six months ended June 30, 2009, we entered into foreign currency hedging transactions to hedge our exposure to currency fluctuations. As we currently receive all of our revenue in U.S. dollars and pay substantially all of our expenses in U.S. dollars, a change in foreign exchange rates would not have a material impact on our results of operations.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As of June 30, 2009, an evaluation was conducted under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934). Based on the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of June 30, 2009.

Changes in Internal Control over Financial Reporting During the Quarter Ended June 30, 2009

     There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — Other Information

Item 1. Legal Proceedings

     On October 2, 2008, our servicer, on our behalf, terminated the leases of two of our A320-200 aircraft previously on lease to Deccan Aviation Limited. The aircraft were repossessed in November 2008. On April 3, 2009, our servicer, on our behalf, commenced proceedings in the UK High Court against Kingfisher Airlines Limited (formerly known as Deccan Aviation Limited) for damages arising out of the repossession, including the expenses of repossessing the aircraft, revenues foregone due to aircraft downtime, expenses of preparing the repossessed aircraft into redelivery condition, and other associated expenses. We expect that our claim will be heard in London in January 2010. The proceedings are at an early stage, and it is not possible to predict the outcome at this time.

     Except for the foregoing, we have not been involved in any legal proceedings that may have, or have had, a significant effect on our business, financial position, results of operations or liquidity, and we are not aware of any proceedings that are pending or threatened that may have a material effect on our business, financial position, results of operations or liquidity. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business, principally claims relating to incidents involving aircraft and claims involving the existence or breach of a lease, sale or purchase contract. We expect that adverse claims related to incidents involving our aircraft would be covered by insurance, subject to customary deductions. However, these claims could result in the expenditure of significant financial and managerial resources, even if they lack merit and if determined adversely to us and not covered by insurance could result in significant uninsured losses.

Item 1A. Risk Factors

     The discussion of our business and operations should be read together with the risk factors contained in Item 3D of our 2008 Annual Report on Form 20-F and Item 1A in our Interim Report on Form 6-K for the three months ended March 31, 2009. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     None.

Item 3. Defaults Upon Senior Securities

     None.

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

     None.

Item 5. Other Information

     None.

Item 6. Exhibits

     None.

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