International Lease Finance 10-Q/A 2005 Q1 Quarterly report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)
QUARTERLY REPORT

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________________ to _________________________

Commission file number 001-31616

INTERNATIONAL LEASE FINANCE CORPORATION

(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 22-3059110
(I.R.S. Employer
Identification No.)

10250 Constellation Blvd., Los Angeles, California
(Address of principal executive offices) 90067
(Zip Code)

Registrant’s telephone number, including area code:(310) 788-1999

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesþ Noo

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yeso Noþ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     As of May 12, 2005, there were 42,198,119 shares of Common Stock, no par value, outstanding.

EXPLANATORY NOTE

     This Form 10-Q/A restates International Lease Finance Corporation’s (the “Company,” “ILFC”) previously issued Condensed Consolidated Financial Statements. See Management’s Discussion and Analysis of Financial Condition and Results of Operations, Controls and Procedures and the Condensed Consolidated Financial Statements, including Note B of Notes to Condensed Consolidated Financial Statements for the impact of the restatement on each period presented.

     This amendment to the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2005 amends and restates only those items of the previously filed Form 10-Q which have been affected by the restatement, although all items of the Form 10-Q are reproduced in this amendment. In order to preserve the nature and character of the disclosures set forth in such items as originally filed, no attempt has been made in this amendment to modify or update such disclosures except as required to reflect the effects of the restatement.

RESTATEMENT

     ILFC has restated its financial statements and other financial information for the years 2004, 2003, 2002, 2001 and 2000 and for the quarter ended March 31, 2005, with respect to the accounting for certain derivatives transactions and foreign currency transactions and for the accounting for certain payments from aircraft and engine manufacturers. See Selected Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note B of Notes to Consolidated Financial Statements in the 2004 Form 10-K, as amended, and Note B of Notes to Condensed Consolidated Financial Statements included herein for a discussion of the restatement and the effect on ILFC’s Consolidated Balance Sheets and Consolidated Statements of Income.

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

FORM 10-Q/A QUARTERLY REPORT

TABLE OF CONTENTS

	Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited and Restated)
Condensed Consolidated Balance Sheets March 31, 2005 and December 31, 2004		3
Condensed Consolidated Statements of Income Three months Ended March 31, 2005 and 2004		4
Condensed Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2005 and 2004		5
Condensed Consolidated Statements of Cash Flows Three months Ended March 31, 2005 and 2004		6
Notes to Condensed Consolidated Financial Statements		8
Cautionary Statement Regarding Forward Looking Information		12
Item 2. Management’s Discussion and Analysis of the Financial Condition and Results of Operations		13
Item 3. Quantitative and Qualitative Disclosures about Market Risk		23
Item 4. Controls and Procedures		24
Part II. Other Information
Item 1. Legal Proceedings		27
Item 4. Submission of Matters to a Vote of Security Holders		27
Item 6. Exhibits		27
Signatures		28
EXHIBIT 12
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)

	Restated		Restated		Restated
	March 31,		December 31,		March 31,
	2005		2004		2004
	(Unaudited)
ASSETS
Cash, including interest bearing accounts of $66,283 (March 31, 2005) $97,682 (December 31, 2004) and $139,433 (March 31, 2004)	$	66,687	$	99,747	$	156,351
Current income taxes		57,338		6,507		—
Notes receivable and net investment in finance and sales-type leases		515,398		519,739		427,405
Flight equipment under operating leases		38,665,498		36,580,296		33,955,679
Less accumulated depreciation		6,388,484		6,074,874		5,210,872
		32,277,014		30,505,422		28,744,807
Deposits on flight equipment purchases		1,383,773		1,250,168		1,167,437
Other assets		275,275		199,653		540,399
Derivative assets		976,076		1,191,602		675,823
Investments		25,676		22,979		49,204
Variable interest entities assets		148,359		152,417		161,352
Deferred debt issue costs — less accumulated amortization of $79,104 (March 31, 2005) $77,112 (December 31, 2004) and $64,295 (March 31, 2004)		65,831		59,666		54,497
	$	35,791,427	$	34,007,900	$	31,977,275
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accrued interest and other payables	$	341,510	$	264,276	$	348,156
Current income taxes						92,447
Tax benefit sharing payable to AIG		245,000		245,000		—
Debt financing, net of deferred debt discount of $37,425 (March 31, 2005), $29,502 (December 31, 2004) and $26,786 (March 31, 2004)		24,709,139		23,136,016		21,766,190
Foreign currency translation adjustment related to foreign currency denominated debt denominated debt		932,474		1,215,809		786,299
Derivative liabilities		31,262		38,810		40,135
Capital lease obligations		20,497		39,580		125,396
Synthetic lease obligations		—		—		458,727
Security and other deposits on flight equipment		1,004,941		876,590		825,418
Rentals received in advance		172,872		160,878		152,387
Deferred income taxes		2,768,110		2,630,118		2,334,845
Variable interest entities liabilities		67,245		70,886		77,781
SHAREHOLDERS’ EQUITY
Market Auction Preferred Stock, $100,000 per share liquidation value; Series A and B each having 500 shares issued and outstanding		100,000		100,000		100,000
Common stock—no par value; 100,000,000 authorized shares, 42,198,119 issued and outstanding		653,582		653,582		653,582
Paid-in capital		585,416		579,955		579,955
Accumulated other comprehensive income (loss)		73,038		22,825		(35,582	)
Retained earnings		4,086,341		3,973,575		3,671,539
Total shareholders’ equity		5,498,377		5,329,937		4,969,494
	$	35,791,427	$	34,007,900	$	31,977,275

See notes to condensed consolidated financial statements.

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Dollars in thousands)

	Restated		Restated
	2005		2004
	(Unaudited)
REVENUES
Rental of flight equipment	$	798,101	$	697,960
Flight equipment marketing		15,561		7,804
Flight equipment marketing – securitization (Note D)		—		34,117
Interest and other		15,162		23,014
		828,824		762,895
EXPENSES
Interest		240,406		228,509
Depreciation of flight equipment		318,891		284,780
Provision for overhauls		44,143		34,902
Selling, general and administrative		36,366		24,960
		639,806		573,151
INCOME BEFORE INCOME TAXES		189,018		189,744
Provision for income taxes		60,096		60,636
NET INCOME	$	128,922	$	129,108

See notes to condensed consolidated financial statements.

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Dollars in thousands)

	Restated			Restated
	2005			2004
	(Unaudited)
NET INCOME	$	128,922		$	129,108
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX
Net changes in cash flow hedges		50,358			(7,655	)
Change in unrealized appreciation on securities available for sale		(145	)		—
		50,213			(7,655	)
COMPREHENSIVE INCOME	$	179,135		$	121,453

See notes to condensed consolidated financial statements

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Dollars in thousands)

	Restated			Restated
	2005			2004
	(Unaudited)
OPERATING ACTIVITIES
Net income	$	128,922		$	129,108
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of flight equipment		318,891			284,780
Deferred income taxes		110,954			(14,492	)
Change in derivative instruments		65,945			25,421
Foreign currency adjustment of non-US$ denominated debt		(63,827	)		(37,477	)
Amortization of deferred debt issue costs		8,507			5,738
Change in unamortized debt discount		(7,923	)		(2,465	)
Changes in operating assets and liabilities:
Other assets		22,139			35,188
(Decrease) increase in current income taxes payable		(50,831	)		74,480
Increase in accrued interest and other payables		73,594			102,737
Increase in rentals received in advance		11,994			5,516
Other		5,426			(13,012	)
Net cash provided by operating activities		623,791			595,522
INVESTING ACTIVITIES
Acquisition of flight equipment for operating leases		(2,209,516	)		(1,911,934	)
(Increase) decrease in deposits and progress payments		(133,605	)		87,637
Proceeds from disposal of flight equipment — net of gain		20,975			805,921
Advances on notes receivable		(6,500	)		—
Collections on notes receivable and finance leases		11,874			15,312
Other		(2,557	)		(6,653	)
Net cash used in investing activities		(2,319,329	)		(1,009,717	)
FINANCING ACTIVITIES
Net change in commercial paper		1,785,319			280,613
Proceeds from debt financing		973,146			862,741
Payments in reduction of debt financing, capital lease obligations		(1,196,501	)		(643,321	)
Debt issue costs		(14,672	)		(8,370	)
Increase (decrease) in customer deposits		128,351			(18,496	)
Payment of common and preferred dividends		(10,976	)		(8,464	)
Net cash provided by financing activities		1,664,667			464,703
Effect of exchange rate changes on cash		(2,189	)		3,602
Net (decrease) increase in cash		(33,060	)		54,110
Cash at beginning of period		99,747			102,241
Cash at end of period	$	66,687		$	156,351

(Table continued on following page)

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Dollars in thousands)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

	Restated			Restated
	2005			2004
	(Unaudited)
Cash paid (received) during the period for:
Interest (net of amount capitalized of $14,507 (2005) and $12,712 (2004))	$	167,645		$	141,825
Income taxes, net		(28	)		647

2005

Notes receivable in the amount of $13,286 were used as partial payment for the acquisition of seven aircraft.

Aircraft previously accounted for as operating leases were converted into sales-type leases in the amount of $19,228.

$5,179 was reclassed from Retained earnings to Paid-in capital as a result of an adjustment for certain prior period compensation costs related to an incentive plan of ILFC’s parent, AIG.

Certain payments from aircraft and engine manufacturers in the amount of $91,515 reduced the basis of flight equipment under operating leases and increased Other assets.

2004

One aircraft was received in exchange for investment in finance leases and notes receivables in the amount of $23,456.

Notes in the amount of $2,700 were received as partial payment in exchange for flight equipment sold with a net book value of $23,727.

Other assets in the amount of $250,924 were received in exchange for aircraft sold into a securitization, but not yet novated, with a net book value of $250,759.

Certain payments from aircraft and engine manufacturers in the amount of $38,416 reduced the basis of flight equipment under operating leases and increased Other assets.

See notes to condensed consolidated financial statements.

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(Unaudited)

A.Basis of Preparation

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Certain reclassifications have been made to the 2004 unaudited condensed consolidated financial statements to conform to the 2005 presentation. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. These statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in International Lease Finance Corporation’s (the “Company,” “ILFC,” “management,” “we,” “our,” “us”) Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.

B.Restatement

     The following information describes the corrections in accounting for certain derivatives transactions and foreign currency transactions and for certain payments from aircraft and engine manufacturers, together with the effect on the Company’s Condensed Consolidated Statement of Income and Condensed Consolidated Balance Sheet accounts.

Derivative Instruments

     ILFC enters into derivative instruments to hedge interest rates and foreign currency risks. As part of the previously announced restatement of the financial statements of American International Group, Inc. (“AIG”), ILFC’s indirect parent corporation, AIG began an intensive review of the books and records relating to a wide variety of transactions entered into by AIG and its subsidiaries. During the review of all hedge transactions, after ILFC had filed its 2004 Form 10-K and first quarter 2005 Form 10-Q, deficiencies were identified related to ILFC’s documentation of hedge transactions and errors were identified in the application of the proper accounting for derivative related transactions under Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS 133”). The review identified:

• Documentation deficiencies related to portions of Euro denominated debt that ILFC had designated as a hedge against future operating lease payments receivable denominated in Euros. The review revealed that the documentation related to these hedges was insufficient to meet the documentation criteria under SFAS 133 and it was concluded that ILFC could not apply hedge accounting to the transactions. The economics of the transactions are not affected.

• Certain Euro denominated cash accounts associated with the aforementioned operating lease payments and certain foreign currency denominated debt required mark-to-spot treatment under Statement of Financial Accounting Standards No. 52,Foreign Currency Translation, which were not properly accounted for at the end of each quarter during the years 2004, 2003, 2002 and 2001.

• Documentation deficiencies related to four commercial paper swaps where portions of ILFC’s commercial paper program were swapped from floating into fixed interest rates. The review revealed that the documentation related to these hedges was insufficient to meet the documentation criteria under SFAS 133 and it was concluded that ILFC could not apply hedge accounting to the transactions. The economics of the transactions are not affected.

• Minor errors under SFAS 133 with respect to derivative instruments related to the reclassification to income from Accumulated other comprehensive income. The corrections will also affect derivative assets and liabilities and accrued interest.

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005
(Unaudited)

     Though the economics of the hedge transactions are not affected, the corrections will significantly increase inter-period volatility due to the non-qualification of hedge accounting treatment under SFAS 133. Thus, the effect on Net income, Retained earnings and Shareholders’ equity will differ from period to period.

Certain Payments from Aircraft and Engine Manufacturers

     In the course of ILFC’s review of its application of SFAS 133, ILFC identified an error in its accounting for certain payments received from aircraft and engine manufacturers. Under arrangements with these manufacturers, in certain circumstances the manufacturers established notional accounts for the benefit of ILFC, to which amounts were credited by the manufacturers in connection with the purchase by and delivery to ILFC and the lease of aircraft. Amounts credited to the notional accounts were used at ILFC’s direction to protect ILFC from certain events including loss when airline customers of ILFC defaulted on lease payment obligations, to provide lease subsidies and other incentives to ILFC airline customers in connection with leases of certain aircraft and to reduce ILFC’s cost of aircraft purchased.

     Historically, ILFC recorded as revenues gross lease receipts from customers who had received lease subsidies from the notional accounts and amounts paid directly to ILFC from the notional accounts in connection with lessee defaults. Amounts recorded as revenue at the time they were disbursed to ILFC or its lessees should have been recorded as a reduction of the purchase price of the aircraft at the time of delivery.

     The following table presents the consolidated balance sheet accounts as reported, compared to the restated accounts:

	March 31, 2005						December 31, 2004						March 31, 2004
	As			As			As			As			As			As
	Reported			Restated			Reported			Restated			Reported			Restated
Consolidated balance sheets:
Cash	$	66,738		$	66,687		$	101,653		$	99,747		$	153,338		$	156,351
Current income taxes receivable		70,500			57,338			19,522			6,507
Flight equipment under operating leases		39,557,429			38,665,498			37,380,712			36,580,296			34,648,226			33,955,679
Accumulated depreciation		(6,626,015	)		(6,388,484	)		(6,300,071	)		(6,074,874	)		(5,402,502	)		(5,210,872	)
Other assets		134,958			275,275			119,415			199,653			464,259			540,399
Derivative assets		988,748			976,076			1,210,908			1,191,602			707,446			675,823
Total assets		36,331,395			35,791,427			34,537,108			34,007,900			32,430,662			31,977,275
Current income taxes payable														79,501			92,447
Foreign currency adjustment														823,451			786,299
Deferred income taxes		2,967,526			2,768,110			2,825,661			2,630,118			2,495,128			2,334,845
Accumulated other comprehensive income (loss)		44,852			73,038			(9,650	)		22,825			(93,020	)		(35,582	)
Retained earnings		4,455,077			4,086,341			4,339,715			3,973,575			3,997,877			3,671,539
Total shareholders’ equity		5,838,927			5,498,377			5,663,602			5,329,937			5,238,394			4,969,494

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005
(Unaudited)

     The following table presents the consolidated statements of income accounts as reported, compared to the restated accounts:

	March 31, 2005				March 31, 2004
	As		As		As		As
	Reported		Restated		Reported		Restated
Consolidated statements of income:
Rental of flight equipment	$	829,101	$	798,101	$	722,938	$	697,960
Flight equipment marketing		16,411		15,561		9,742		7,804
Flight equipment marketing – securitization						25,610		34,117
Interest and other		12,892		15,162		21,538		23,014
Total revenues		858,404		828,824		779,828		762,895
Interest expense		253,640		240,406		233,801		228,509
Depreciation		331,225		318,891		295,609		284,780
Selling, general and administrative						25,624		24,960
Total expenses		665,374		639,806		589,936		573,151
Income before income taxes		193,030		189,018		189,892		189,744
Provision for income taxes		61,513		60,096		60,688		60,636
Net income (a)		131,517		128,922		129,204		129,108

(a) The increase (decrease) in net income for the quarters ended March 31, 2005 and 2004 as a result of the restatement for the derivative instruments was $9,758 and $4,773, respectively, and for the manufacturers’ payments was $(12,352) and $(4,869), respectively.

C. Hedging Activities (Restated)

     We use derivatives to manage exposures to interest rate and foreign currency risks. During the three months ended March 31, 2005, we recorded the following in interest expense:

	(Dollars in thousands)
(Income) loss related to derivative instruments:
Changes in fair value of non-hedging instruments	$	(15,558	)
Changes in fair value of hedging instruments		62,179
Offsetting changes in fair value of hedged items		(61,134	)
Ineffectiveness related to cash flow hedges		(361	)
	$	(14,874	)

     During the three months ended March 31, 2005, $(2.3) million (net) was reclassified from Accumulated other comprehensive (loss) income to Interest expense when interest was paid or received on our cash flow hedges. We estimate that within the next twelve months we will amortize into earnings approximately $55.3 million of the pre-tax balance in Accumulated other comprehensive income under cash flow hedge accounting in connection with our program to convert debt from floating to fixed interest rates.

     The restatement was a result of errors related to the accounting for certain derivative instruments used in meeting our objective of managing foreign currency exchange rate and interest rate risks. When interest rate and foreign currency swaps are effective as accounting hedges under the technical requirements of SFAS 133, they offset the variability of expected future cash flows or changes in the fair values of assets and liabilities, both economically and for financial reporting purposes. ILFC has historically used such instruments to effectively mitigate foreign currency and interest rate risks. The effect of our inability to apply hedge accounting for the swaps requiring restatement is that changes in their fair values must be recorded in earnings each reporting period. As a result, reported net income will be directly influenced by changes in interest rates

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2005
(Unaudited)

and currency rates. This does not effect the economics of the hedge. See Note B – Restatement for a discussion and impact on the quarterly financial statements.

D.Flight Equipment Marketing — Securitization

     We sold 34 aircraft to a trust during the first quarter of 2004. The transaction generated approximately $1.0 billion of gross proceeds. The trust was primarily funded and is owned by other subsidiaries of American International Group, Inc. (“AIG”), our ultimate parent corporation, and is consolidated by AIG. We do not consolidate the trust, nor do we consolidate the subsidiary. The transaction was structured similar to a securitization, in which the trust acquired the aircraft based on values assigned by independent appraisers. Further, an unaffiliated third party acted as capital markets advisor and initial purchaser of the notes of the securitization. Gains in the amount of $34.1 million, net of fees and expenses, related to the transaction are included inFlight Equipment Marketing — Securitizationfor the period ended March 31, 2004. A similar transaction related to 37 aircraft was completed during 2003. The Company is continuing to manage the aircraft sold to the trusts for a fee. For the three months ended March 31 we recorded management fees in the amounts of $2.5 million (2005) and $2.4 million (2004) in income related to management services provided to the trusts and $38,550 and $166,256 accounts receivable related to the management of those aircraft is included in “Other assets” on our March 31, 2005 and December 31, 2004 Consolidated Balance Sheets.

E.Related Party Transactions

     Compensation to Certain ILFC Employees From Starr International Company, Inc. (SICO)

     In 1975, the voting shareholders and Board of Directors of SICO, a private holding company whose principal asset consists of approximately 12% of AIG’s outstanding common stock as of January 31, 2005, and which has no direct ownership interest in us, decided that a portion of the capital value of SICO (AIG shares or their cash equivalent) should be used to provide an incentive plan for the current and succeeding management of all American International companies, including ILFC. At that time, SICO established the SICO Deferred Compensation Plan (the “SICO Plan”). None of the costs of the various benefits provided under the SICO Plan have been paid by ILFC.

     AIG has determined that it is required under accounting principles generally accepted in the United States of America to expense amounts attributable to deferred compensation granted to certain AIG employees under the SICO Plan. As a result, we have determined that, as a subsidiary of AIG, it is appropriate to record such compensation expense, related to our employees’ participation in the SICO Plan, in our financial statements. Total compensation expense related to the SICO Plan would not have been material to any prior year, and as such no restatement of prior financial statements is necessary. We made the determination of materiality, and evaluated the impact that expense recognition would have had on all prior years to which SICO Plan compensation would have applied. In the first quarter of 2005, we have recorded the total amount of compensation expense related to the SICO Plan that would have been recorded in all prior periods through December 31, 2004. This adjustment was recorded as a reduction of retained earnings on the Consolidated Balance Sheet of $5.2 million, with a corresponding increase to additional paid-in capital. The adjustment has no effect on total shareholders’ equity or cash flows. The amount of compensation expense related to the SICO Plan recorded in income for the first quarter of 2005 is not material.

F.Subsequent Event

     On August 11, 2005, ILFC sold 3,069,604 shares of common stock to an existing shareholder for approximately $400 million.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Forward-Looking Statements

     This quarterly report on Form 10-Q contains or incorporates statements that constitute forward-looking statements. Those statements appear in a number of places in this Form 10-Q and include statements regarding, among other matters, the state of the airline industry, the Company’s access to the capital markets, the Company’s ability to restructure leases and repossess aircraft, the structure of the Company’s leases, regulatory matters pertaining to compliance with governmental regulations and other factors affecting the Company’s financial condition or results of operations. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and “should” and variations of these words and similar expressions, are used in many cases to identify these forward-looking statements. Any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or industry results to vary materially from the Company’s future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include, among others, the risk factors described and referred to in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Recent Developments” and – “Risk Factors Affecting International Lease FinanceCorporation” and general industry economic and business conditions, which will, among other things, affect demand for aircraft, availability and creditworthiness of current and prospective lessees, lease rates, availability and cost of financing and operating expenses, governmental actions and initiatives and environmental and safety requirements. The Company will not update any forward-looking information to reflect actual results or changes in the factors affecting the forward-looking information.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     As more fully described in the Explanatory Note and in Note B of Notes to the Condensed Consolidated Financial Statements, the Company restated its financial statements and other financial information for the years 2004, 2003, 2002, 2001 and 2000 and the interim periods within those years. The Company also restated its condensed consolidated financial statements for the interim period ended March 31, 2005.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations presented below reflects certain restatements to our operating results for the three months ended March 31, 2005 and 2004.

Overview

     International Lease Finance Corporation (“the Company,” “ILFC,” “management,” “we,” “our,” “us”) primarily acquires new jet transport aircraft from The Boeing Company (“Boeing”) and AVSA, S.A.R.L., the sales subsidiary of Airbus Industries (“Airbus”) and leases these aircraft to airlines throughout the world. In addition to our leasing activity, we sell aircraft from our leased aircraft fleet to other leasing companies, financial services companies and airlines. In some cases, we provide fleet management services to companies with aircraft portfolios for a management fee. From time to time we provide asset value guarantees and loan guarantees to the buyers of aircraft or to financial institutions for a fee. We also remarket and sell aircraft owned or managed by others for a fee.

     As of March 31, 2005, we owned 699 aircraft, had twenty aircraft in the fleet that were classified as finance and sales-type leases, and provided fleet management services for 95 aircraft. We have contracted with Airbus and Boeing to buy 322 new aircraft for delivery through 2010 with an estimated purchase price of $19.5 billion, 64 of which will deliver during the remainder of 2005. The recorded basis of aircraft may be adjusted upon delivery to reflect notional credits given by the manufacturers to support the leasing of aircraft, as described in Note B—Restatement.

     Our sources of revenue are principally from scheduled and charter airlines and companies associated with the airline industry. Our revenues and results of operation are therefore affected by how our customers cope with the economic environment in which airlines operate. The airline industry is cyclical, economically sensitive and highly competitive. Airlines and related companies may be affected by political or economic instability, terrorist activities, changes in national policy, competitive pressures on certain air carriers, fuel prices and shortages, labor stoppages, insurance costs, recessions, and other political or economic events adversely affecting world or regional trading markets. Our revenues and income will be affected by our customers’ ability to react to and cope with the volatile competitive environment in which they operate, as well as our own competitive environment.

     Our primary source of revenue is from operating leases. One measure of profitability we use is a ratio called Lease Margin (see“Management’s Discussion and Analysis – Non-GAAP Financial Measures”). The airline industry is cyclical in nature and lease margins generally declined after the terrorist attacks of September 11, 2001, due to a surplus of aircraft in the market place, airline bankruptcies, higher incidents of restructurings with troubled airlines, repossessions of aircraft, depressed airline revenue yields, terrorism and worldwide health concerns such as SARS. However, since late 2003, airliner passenger and cargo traffic worldwide has exhibited measured growth. Despite rising fuel prices which significantly impacted the airline industry during 2004, and continue to negatively impact it in 2005, overall industry trends in 2004 showed continued improvement, particularly outside the United States. As a result, starting in 2004, and continuing in 2005, we see an increase in demand for newer, modern, fuel-efficient aircraft which comprise the bulk of our fleet, and an overall strengthening of lease rates. Although lease rates strengthened during 2004, and continued to strengthen in the first quarter of 2005, there is a lag between changes in market conditions and their impact on our results, as contracts signed during times of lower lease rates are still in effect. The strengthening of lease rates are starting to materialize in our results with the lease margin increasing 2.1% for the three months ended March 31, 2005 compared to the three months ended March 31, 2004, but the improvement in the airline industry has yet to be completely reflected in our financial performance. Also, increasing interest rates, along with other risk factors, may impact our future results. We believe we are well positioned in the current industry environment with signed lease agreements for all of our 2005 deliveries of new aircraft and only one aircraft in our existing fleet not placed with an airline at March 31, 2005.

13

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

     We have received tax benefits under the Foreign Sales Corporation (“FSC”) law and its successor regime, the Extraterritorial Income Act (“ETI”). In October 2004, Congress passed a bill, the American Jobs Creation Act of 2004, repealing the corporate export tax benefits under the ETI, after the World Trade Organization ruled the export subsidies were illegal. Under the bill, ETI export tax benefits for corporations would be phased out in 2005 and 2006 and cease to exist for the year 2007. We expect our effective tax rate to rise over the next two years to a rate consistent with the “expected” statutory rate.

Recent Developments

     AIG, our indirect parent, delayed filing its Annual Report on Form 10-K for the year ended December 31, 2004 to allow AIG’s Board of Directors and new management adequate time to complete an extensive review of AIG’s books and records. The review included issues arising from pending investigations into non-traditional insurance products and certain assumed reinsurance transactions by the Office of the Attorney General for the State of New York and the Securities and Exchange Commission and from AIG’s decision to review the accounting treatment of certain additional items. The findings of the review resulted in AIG’s decision to restate its financial statements for the years ended December 31, 2003, 2002, 2001 and 2000, and the quarters ended March 31, June 30, September 30 for the years 2004 and 2003.

     While neither AIG nor any of its subsidiaries is a co-obligor or guarantor of our debt securities, circumstances affecting AIG can have an impact on us. For example, concurrent with the most recent ratings actions taken by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”), Moody’s Investors Service, Inc. (“Moody’s”) and Fitch, Inc. (“Fitch”) with respect to AIG, the following ratings actions were taken or statements were made with respect to our ratings: (i) S&P retained our long-term debt rating at AA- on CreditWatch Negative and our short-term rating at A-1+ on CreditWatch Negative, (ii) Moody’s affirmed our (A1/Stable/P-1) rating with a Stable outlook and (iii) Fitch lowered our long-term rating to A+ and short-term rating to F-1 and continues to have us on Rating Watch Negative. Accordingly, we can give no assurance that any further changes in circumstances for AIG will not impact us.

Risk Factors Affecting International Lease Finance Corporation

     Our business is subject to numerous risks and uncertainties, as described below and in the section titled“Quantitative and Qualitative Disclosures about Market Risk”.

     We operate as a supplier and financier to airlines. The risks affecting our airline customers are generally out of our control and impact our customers to varying degrees. As a result, we are indirectly impacted by all the risks facing airlines today. Our ability to succeed is dependent on the financial strength of our customers. Our customers’ ability to compete effectively in the market place and manage these risks has a direct impact on us and our operating results. Risks directly or indirectly affecting our business include:

• Overall Airline Industry Risk

Ø	Demand for air travel
Ø	Competition between carriers
Ø	Fuel prices and availability
Ø	Labor costs and stoppages
Ø	Maintenance costs
Ø	Employee labor contracts
Ø	Air traffic control infrastructure constraints
Ø	Insurance costs
Ø	Security, terrorism and war
Ø	Health concerns
Ø	Equity and borrowing capacity
Ø	Environmental concerns
Ø	Government regulation
Ø	Interest rates

• Manufacturer Risk

• Borrowing Risks

Ø	Liquidity
Ø	Interest rates

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

• Other Risks

Ø	Residual value
Ø	Obsolescence
Ø	Key personnel
Ø	Foreign currency exchange rate risk

     For a detailed discussion of risk factors affecting us, see“Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations”in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.

Critical Accounting Policies and Estimates

     Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the estimates and judgments, including those related to revenue, depreciation, overhaul reserves, and contingencies. The estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

     We believe that the following critical accounting policies can have a significant impact on our results of operations, financial position and financial statement disclosures and may require subjective and complex estimates and judgments:

• Lease Revenue

• Flight Equipment Marketing

• Flight Equipment

• Capitalized Interest

• Provision for Overhauls

     For a detailed discussion on the application of these accounting policies, see“Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations”in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.

Financial Condition

     We borrow funds to purchase new and used flight equipment, including funds for progress payments during the construction phase, and to pay off maturing debt obligations. These funds are borrowed principally on an unsecured basis from various sources. During the three months ended March 31, 2005, we borrowed $973.1 million (excluding commercial paper) and $623.5 million was provided by operating activities. As of March 31, 2005, we have committed to purchase 322 new aircraft from Airbus and Boeing at an estimated aggregate purchase price of $19.5 billion for delivery through 2010. We also hold options to purchase six additional new aircraft at an estimated aggregate purchase price of approximately $361.4 million. The recorded basis of aircraft may be adjusted to reflect notional credits given by the manufacturers in connection with the leasing of aircraft. We currently expect to fund expenditures for aircraft and to meet liquidity needs from a combination of available cash balances, internally generated funds and financing arrangements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

     We have modified our borrowing strategy with the goal that, over time, we will have approximately 15% or less of our debt, excluding commercial paper, mature in any one year. Management continues to explore new funding sources and ways to diversify our investor base. Our debt financing and capital lease obligations were comprised of the following at the following dates:

	March 31,			December 31,
	2005			2004
	(Dollars in thousands)
Public term debt with single maturities	$	11,419,575		$	11,544,575
Public medium-term notes with varying maturities		5,502,867			5,972,171
Capital lease obligations		20,497			39,580
Bank and other term debt		3,363,557			2,973,525
Total term debt, bank debt, and capital lease obligations		20,306,496			20,529,851
Commercial paper		4,460,566			2,675,247
Deferred debt discount		(37,425	)		(29,502	)
Total debt financing and capital lease obligations	$	24,729,637		$	23,175,596
Selected interest rates and ratio:
Composite interest rate		4.49	%		4.34	%
Percentage of total debt at fixed rates		70.16	%		66.21	%
Composite interest rate on fixed rate debt		4.99	%		5.07	%
Bank prime rate		5.75	%		5.25	%

     The above amounts represent the anticipated settlement of our currently outstanding debt obligations. Certain adjustments required to present currently outstanding debt obligations have been recorded and presented separately on the balance sheet, including adjustments related to foreign currency and interest rate hedging activities. We have eliminated the currency exposure arising from foreign currency denominated notes by either hedging the notes through swaps or through the offset provided by operating lease payments denominated in the related currency. Foreign currency denominated debt is translated into US dollars using current exchange rates as of each balance sheet date. The foreign exchange adjustment for the foreign currency denominated debt was $932.5 million at March 31, 2005 and $1,215.8 million at December 31, 2004. Composite interest rates and percentages of total debt at fixed rates reflect the effect of derivative instruments.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Public Debt(Exclusive of the Commercial Paper Program)

     The interest on most of the public debt is effectively fixed for the terms of the notes. We have the ability to borrow under various public debt financing arrangements as follows:

	Maximum			Sold as of		Sold as of		Sold as of
	Offering			December 31, 2004		March 31, 2005		May 12, 2005
	(Dollars in millions)
Registration statement dated December 20, 2002 (including $2.88 billion Medium-Term Note Program and $1.0 billion Retail Medium-Term Note Program)	$	6,080	(a)	$	5,593	$	5,609	$	5,609
Registration statement dated December 28, 2004 (including $2.0 billion Medium Term Note Program)		7,045	(b)		—		500		1,300
Euro Medium-Term Note Programme dated		7,000			4,475		4,475		4,475
May 2004 (c)(d)

(a)	Includes $1.08 billion, which was incorporated into the registration statement from a prior registration statement, increasing the maximum offering from $5.0 billion to $6.08 billion.
(b)	Includes $2.045 billion, which was incorporated into the registration statement from a prior registration statement, increasing the maximum offering from $5.0 billion to $7.045 billion.
(c)	We have hedged the foreign currency risk of the notes through operating lease payments or derivatives.
(d)	This is a perpetual program. As a bond issue matures, the amount becomes available again under the program.

Capital Lease Obligations

     We have Export Credit lease financings which provided ten-year amortizing loans in the form of capital lease obligations. The interest rate on 62.5% of the original financed amount is 6.55% and the interest rate on 22.5% of the original financed amount is fixed at rates varying between 6.18% and 6.89%. These two tranches are guaranteed by various European Export Credit Agencies. The remaining 15% of the original financed amount was prepaid by the Company in 2000. At March 31, 2005, $20.5 million was still outstanding.

Bank Term Debt

     In January 1999, we entered into an Export Credit Facility, for up to a maximum of $4.3 billion, for aircraft delivered through 2001. The facility was used to fund 85% of each aircraft’s purchase price. This facility is guaranteed by various European Export Credit Agencies. We financed 62 aircraft using $2.8 billion under this facility over ten years with interest rates from 5.753% to 5.898%. We have collateralized the debt by a pledge of the shares of a subsidiary which holds title to the aircraft financed under the facility. At March 31, 2005, $1.5 billion was outstanding under the facility and the net book value of the related aircraft was $2.9 billion.

     During 2003, we borrowed $1.3 billion under various bank financing arrangements. The financings mature through 2009. One tranche of one of the loans totaling $410 million was funded in Japanese yen and swapped to US dollars. The interest rates are LIBOR based with spreads ranging from 0.375% to 1.625%.

     In May 2004, we entered into an Export Credit Facility for up to a maximum of $2.64 billion, for Airbus aircraft to be delivered in 2004 and 2005. The facility will be used to fund 85% of each aircraft’s purchase price. This facility becomes available as the various European Export Credit Agencies provide their guarantees for aircraft based on a six-month forward-looking calendar. The financing is for a ten-year fully amortizing loan per aircraft at an interest rate determined through a bid process. We have collateralized the debt by a pledge of the shares of a subsidiary which holds title to the aircraft financed under this facility. As of March 31, 2005, nine aircraft were financed under this facility and $603.6 million was outstanding. Subsequent to March 31, through May 12, 2005, an additional four aircraft were financed under the facility for an amount of $282.1 million. As well, subsequent to March 31, 2005, the facility expiration date was extended to May 31, 2006.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

     In August 2004, the Company received a commitment for an Ex-Im Bank comprehensive guarantee in the amount of $1.68 billion to support the financing of up to 30 new Boeing aircraft. The delivery period initially extends from September 1, 2004 through August 31, 2005. We have extended the delivery period to February 28, 2006 and may extend it further to August 31, 2006. As of March 31, 2005, we had not financed any aircraft under this facility.

Commercial Paper

     We currently have a $6.0 billion Commercial Paper Program. Under this program, we may borrow in minimum increments of $100,000 for periods from one day to 270 days. It is our intention to only sell commercial paper to a maximum amount of 75% of the total amount of the backup facilities available (seeBank Commitments). The weighted average interest rate of our commercial paper outstanding was 2.87% at March 31, 2005 and 2.34% at December 31, 2004.

Bank Commitments

     As of March 31, 2005, we had committed revolving loans and lines of credit with 30 banks aggregating $6.0 billion, including a $2.0 billion five-year tranche that expires in October of 2009 and a $4.0 billion 364-day tranche that expires in October of 2005, with a one-year term out option. Subsequent to March 31, 2005, we entered into two $500 million, 180-day revolving credit agreements with banks, each with a one-year term out option. These revolving loans and lines of credit provide for interest rates that vary according to the pricing option in effect at the time of borrowing. Pricing options include prime, a range from .25% over LIBOR to .45% over LIBOR based upon utilization, or a rate determined by a competitive bid process with the banks. The revolving loans and lines of credit are subject to facility fees of up to .10% of amounts available. This financing is used as backup for our maturing debt and other obligations. We expect to replace or extend these credit agreements on or prior to their expiration dates. We had not drawn against our revolving loans and lines of credit as of March 31, 2005. Subsequent to March 31, 2005, we drew $500 million against a revolving credit agreement.

     In March 2004, an indirect subsidiary of the Company entered into a credit facility providing for an 18-month commitment for a $500 million revolving loan. The loan backs up the subsidiary’s $1.0 billion secured note facility available to purchase new aircraft from Boeing and Airbus. We have guaranteed the subsidiary’s obligations under the credit facility and the secured note facility. The credit facility is available for borrowing only if the subsidiary is unable to sell notes under the secured note facility on acceptable terms. The subsidiary had not drawn on the credit facility or issued any notes under the secured note facility as of March 31, 2005.

Other Variable Interest Entities

     We have sold aircraft to entities owned by third parties and from time to time we have issued asset value guarantees or loan guarantees related to the aircraft sold. Management has determined ten such entities, each owning one aircraft, are Variable Interest Entities (“VIEs”) in which we are a primary beneficiary, as defined by Financial Accounting Standards Board Interpretation No. 46R (“FIN 46R”). In accordance with FIN 46R, we have consolidated these entities commencing December 31, 2003.

     The assets and liabilities of these entities are presented separately on our Balance Sheet. We do not control or own the assets nor are we obligated for the liabilities of these entities.

     We have not established any other unconsolidated entities for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. We have, however, from time to time established subsidiaries, entered into joint ventures or created other partnership arrangements with the limited purpose of leasing aircraft or facilitating borrowing arrangements.

Derivatives

     In the normal course of business, we employ a variety of derivative products to manage our exposure to interest rates and foreign currency exchange rates and the resulting impact of changes in interest rates and exchange rates on earnings with the objective to eliminate all foreign currency risk, lower our overall borrowing cost and maintain an optimal mix of variable and fixed rate interest obligations.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

We enter into derivative transactions only to economically hedge interest rate risk and currency risk and not to speculate on interest rates or currency fluctuations. These derivative products include interest rate swap agreements, currency swap agreements, and interest rate floor agreements. In 2004, as a result of a customer bankruptcy, we assumed liabilities in the form of a derivative contract. The derivative does not qualify as a hedge under Statement of Financial Accounting Standards Board No. 133 “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 138”). The derivative is carried at fair market value on our Consolidated Balance Sheets with changes in market value taken through income.

     As discussed inNote B – Restatement, we are restating financial statements and other financial information for the years 2004, 2003, and 2002 and our financial information for the years 2001 and 2000 and for each of the quarters in the years 2004 and 2003 and for the quarter ended March 31, 2005, with respect to the accounting for certain derivative transactions and foreign currency transactions.

     The errors identified related to the accounting for certain derivative instruments used in meeting our objective of managing foreign currency exchange rate and interest rate risks. When interest rate and foreign currency swaps are effective as accounting hedges under the technical requirements of SFAS 133, they offset the variablility of expected future cash flows or changes in the fair values of assets and liabilities, both economically and for financial reporting purposes. ILFC has historically used such instruments to effectively mitigate foreign currency and interest rate risks. The effect of our inability to apply hedge accounting for the swaps requiring restatement is that changes in their fair values must be recorded in earnings each reporting period. As a result, reported net income will be directly influenced by changes in interest rates and currency rates.

     ILFC’s total operating, investing and financing cash flows were unaffected by the restatement, except for the mark-to-spot treatment of certain Euro denominated cash accounts as discussed inNote B – Restatement.

     The counterparty to our derivative instruments is AIG Financial Products Corp. (“AIGFP”), a related party. The derivatives are subject to a bilateral security agreement, which, in certain circumstances, may allow one party to the agreement to require the second party to the agreement to provide collateral. Failure of the instruments or counterparty to perform under the derivative contracts would have a material impact on our results of operations.

Market Liquidity Risk

     We are in compliance with all covenants or other requirements set forth in our credit agreements. Further, we do not have any rating downgrade triggers that would automatically accelerate the maturity dates of any debt. However, a downgrade in our credit rating could adversely affect our ability to borrow on, renew existing, or obtain access to new financing arrangements and would increase the cost of such financing arrangements. For example, a downgrade in credit rating could preclude us from issuing commercial paper under our current program.

     Turmoil in the airline industry, recent developments at AIG and credit concerns regarding large corporate borrowers have led to increased uncertainty in the debt markets in which we borrow funds. While we have been able to borrow the funds necessary to finance operations in the current market environment, additional turmoil in the airline industry or political environment could limit our ability to borrow funds from our current funding sources. Should this occur we would seek alternative sources of funding, including securitizations, manufacturers’ financings, drawings upon our revolving loans and lines of credit facilities or additional short-term borrowings. If we were unable to obtain sufficient funding, we could negotiate with manufacturers to defer deliveries of certain aircraft.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

     The following summarizes our contractual obligations at March 31, 2005, and the possible effect of such obligations on our liquidity and cash flows in future periods.

Existing Commitments (Exclusive of Interest)

	Commitments Due by Fiscal Year
	Total		2005		2006		2007		2008		2009		Thereafter
	(Dollars in thousands)
Public and Bank Term Debt	$	20,285,999	$	2,626,257	$	3,721,292	$	3,626,137	$	3,809,580	$	3,710,022	$	2,792,711
Capital Lease Obligations		20,497		20,497		—		—		—		—		—
Commercial Paper		4,460,566		4,460,566		—		—		—		—		—
Operating Leases		100,253		6,233		8,629		8,951		9,303		9,594		57,543
Purchase Commitments (b)		19,552,000		3,803,800		5,487,200		4,645,000		3,696,100		1,552,700		367,200
Total	$	44,419,315	$	10,917,353	$	9,217,121	$	8,280,088	$	7,514,983	$	5,272,316	$	3,217,454

Contingent Commitments

	Contingency Expiration by Fiscal Year
	Total		2005		2006		2007		2008		2009		Thereafter
	(Dollars in thousands)
Purchase Options on New Aircraft (b)	$	361,400	$	—	$	81,400	$	280,000	$	—	$	—	$	—
Put Options (a)		327,350		23,300		—		—		—		—		304,050
Asset Value Guarantees (a)		65,689		2,500		5,452		6,815		8,178		—		42,744
Loan Guarantees (a)		143,915		—		97,677		—		—		—		46,238
Lines of Credit		50,000		—		—		—		—		—		50,000
Total	$	948,354	$	25,800	$	184,529	$	286,815	$	8,178	$	—	$	443,032

(a)	From time to time, we participate with airlines, banks and other financial institutions to assist in financing aircraft by providing asset guarantees, put options, or loan guarantees collateralized by aircraft. As a result, should we be called upon to fulfill our obligations, we would have recourse to the value of the underlying aircraft.
(b)	The recorded basis of aircraft may be adjusted to reflect notional credits given by the manufacturers in connection with the leasing of aircraft.

Non-GAAP Financial Measures

Lease Margin

     Lease Margin is defined as Rental of flight equipment less total expenses, adjusted for VIE expenses related toOther Variable Interest Entities, divided by Rental of flight equipment. Lease Margin is a measure by which we isolate and evaluate the overall profitability of our contractual leasing operations, which constitute our primary revenue generating activity. Beginning in 2004, to more accurately portray the trend of our core leasing operations, we began to adjust total expenses in the calculation of Lease Margin by excluding the above mentioned VIE expenses. Related VIE revenues are included in Interest and other and are by definition excluded from the calculation of Lease Margin.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

     VIE revenues and expenses are recorded in our 2005 net income as a result of our adoption of FIN 46R beginning December 31, 2003. The most directly comparable GAAP financial measure is Profit Margin. The following is a reconciliation of Profit Margin to Lease Margin:

	Three Months Ended
	March 31, 2005
	(Dollars in millions)
	Restated			Restated
	2005			2004
Total revenues (A)	$	828.8		$	762.9
Flight equipment marketing		(15.6	)		(41.9	)
Interest and other		(15.2	)		(23.0	)
Rental of flight equipment (B)		798.0			698.0
Total expenses (C)		639.8			573.2
VIE expenses		(5.2	)		(3.7	)
Adjusted total expenses (D)		634.6			569.5
Profit margin (A) – (C) = (E)	$	189.0		$	189.7
Lease margin (B) – (D) = (F)	$	163.4		$	128.5
Profit margin % (E) divided by (A)		22.8	%		24.9	%
Lease margin % (F) divided by (B)		20.5	%		18.4	%

Results of Operations- Three months ended March 31, 2005 versus 2004 (Restated).

     At March 31, 2005, our fleet, on which we earn rental revenue, consisted of 699 aircraft compared to a fleet of 619 aircraft at March 31, 2004. The cost of the leased fleet increased to $38.7 billion at March 31, 2005, compared to $34.0 billion at March 31, 2004.

     Revenues from the rental of flight equipment increased 14.3% to $798.1 million in 2005 compared to $698.0 million in 2004, due to an increase in the number of aircraft available for operating lease (699 at March 31, 2005 compared to 619 at March 31, 2004), partially offset by aircraft being reconfigured and redelivered and therefore not earning revenue for the entire period. We had one aircraft in our fleet that was not subject to a signed lease agreement or a signed letter of intent at March 31, 2005. Lease Margin for the period increased to 20.5% in 2005 compared to 18.4% for the same period in 2004. Profit Margin decreased to 22.8% compared to 24.9% for the same periods primarily due to revenue related to aircraft sales. Management expects factors described in ourOverviewto continue to negatively impact revenues in 2005 and beyond, even as we may see increases in the Lease Margins going forward, as some airlines continue to experience financial difficulties and improving trends in lease rates take time to be completely reflected in our lease revenues.

     In addition to leasing operations, we engage in the marketing of flight equipment throughout the lease term, as well as the sale of third party owned flight equipment on a principal and commission basis. Revenues from flight equipment marketing increased to $15.6 million in 2005 compared to $7.8 million in 2004. We sold twelve aircraft during the first quarter of 2005, eleven of which were in the form of sales-type leases, compared to three aircraft during the same period in 2004.

     Further, during the first quarter of 2004, the Company sold 34 aircraft to a trust included in the consolidated financial statements of the Company’s parent (see Note D ofNotes to Condensed Consolidated Financial Statements). The gains, net of expenses, related to the transaction is included inFlight Equipment Marketing – Securitization.

     Interest and other revenue decreased to $15.2 million in 2005 compared to $23.0 million in 2004 primarily due to a decrease in foreign currency exchange gains.

     Interest expense increased to $240.4 million in 2005 compared to $228.5 million in 2004 as a result of an increase in average debt outstanding, borrowed to finance aircraft acquisitions (excluding the effect of debt discount and foreign exchange adjustments), to $24.0 billion in 2005 compared to $22.1 billion in 2004.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Our composite borrowing rates in 2005 and 2004 were as follows:

							Increase
	2005			2004			(decrease)
Beginning of Quarter		4.34	%		4.53	%		(0.19	)%
End of Quarter		4.49	%		4.34	%		0.15	%
Average		4.42	%		4.43	%		(0.01	)%

     Interest expense for the three months ended March 31, 2005 includes a $14.8 million decrease related to derivative ineffectiveness and mark-to-market of derivatives not considered a hedge under SFAS 133.

     Depreciation of flight equipment increased 12.0% to $318.9 million in 2005 compared to $284.8 million in 2004 due to the increased cost of the fleet.

     Provision for overhauls increased to $44.1 million in 2005 compared to $34.9 million in 2004 due to an increase in the aggregate number of hours flown on which we collect overhaul revenue and against which the provision is computed and an increase in the rate used to calculate the provision.

     Selling, general and administrative expenses increased to $36.4 million in 2005 compared to $25.0 million in 2004 primarily due to higher expenses to support our larger fleet.

     We typically contract to re-lease aircraft before the end of the existing lease term. For aircraft returned before the end of the lease term, we have generally been able to re-lease aircraft within two to six months of its return. We have not recognized any impairment charges related to our fleet, as the existing service potential of the aircraft in our portfolio has not been diminished. Further, we have been able to re-lease aircraft without diminution in lease rates to an extent that would warrant an impairment write down.

     Other comprehensive income was $50.2 million in 2005 compared to a $25.8 million loss in 2004, primarily due to changes in the market value of cash flow hedges.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Value at Risk

     Measuring potential losses in fair values has recently become the focus of risk management efforts by many companies. Such measurements are performed through the application of various statistical techniques. One such technique is Value at Risk (VaR), a summary statistical measure that uses historical interest rates, foreign currency exchange rates and equity prices and which estimates the volatility and correlation of these rates and prices to calculate the maximum loss that could occur over a defined period of time given a certain probability.

     Management believes that statistical models alone do not provide a reliable method of monitoring and controlling market risk. While VaR models are relatively sophisticated, the quantitative market risk information generated is limited by the assumptions and parameters established in creating the related models. Therefore, such models are tools and do not substitute for the experience or judgment of senior management.

     We are exposed to market risk and the risk of loss of fair value and possible liquidity strain resulting from adverse fluctuations in interest rates and foreign exchange prices. We statistically measure the loss of fair value through the application of a VaR model on a quarterly basis. In this analysis ILFC’s net fair value is determined using the financial instrument and other assets. This includes tax adjusted future flight equipment lease revenues, and financial instrument liabilities, which includes future servicing of current debt. The estimated impact of current derivative positions is also taken into account.

     We calculate the VaR with respect to the net fair value by using historical scenarios. This methodology entails re-pricing all assets and liabilities under explicit changes in market rates within a specific historical time period. In this case, the most recent three years of historical information for interest rates and foreign exchange rates were used to construct the historical scenarios at March 31, 2005 and December 31, 2004, respectively. For each scenario, each financial instrument is re-priced. Scenario values for ILFC are then calculated by netting the values of all the underlying assets and liabilities. The final VaR number represents the maximum adverse deviation in fair market value incurred under these scenarios with 95% confidence (i.e. only 5% of historical scenarios show losses greater than the VaR figure). A one month holding period is assumed in computing the VaR figure. The following table presents the average, high and low VaRs on a combined basis and of each component of market risk for ILFC as of March 31, 2005 and December 31, 2004:

	ILFC Market Risk
	Three Months Ended						Year Ended
	March 31, 2005						December 31, 2004
	(Dollars in millions)
	Average		High		Low		Average		High		Low
Combined		76.4		111.7		34.6	$	69.6	$	86.3	$	34.6
Interest Rate		76.5		112.4		35.0		69.7		86.4		35.0
Currency		0.7		2.0		0.3		0.3		0.5		0.2

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ITEM 4. CONTROLS AND PROCEDURES

     (A) Restatement

Derivative Instruments

ILFC enters into derivative instruments to hedge interest rates and foreign currency risks. As part of the previously announced restatement of the financial statements of AIG, ILFC’s indirect parent corporation, AIG began an intensive review of the books and records relating to a wide variety of transactions entered into by AIG and its subsidiaries. During the review of all hedge transactions, after ILFC had filed its 2004 Form 10-K and first quarter 2005 Form 10-Q, deficiencies were identified related to ILFC’s documentation of hedge transactions and errors were identified in the application of the proper accounting for derivative related transactions under Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS 133”) and No. 52,Foreign Currency Translation (“SFAS 52”). The review identified:

• Documentation deficiencies related to portions of Euro denominated debt that ILFC had designated as a hedge against future operating lease payments receivable denominated in Euros. The review revealed that the documentation related to these hedges was insufficient to meet the documentation criteria under SFAS 133 and it was concluded that ILFC could not apply hedge accounting to the transactions. The economics of the transactions are not affected.

• Certain Euro denominated cash accounts associated with the aforementioned operating lease payments and certain foreign denominated debt required mark-to-spot treatment under SFAS 52, which were not properly accounted for at the end of each quarter during the years 2004, 2003, 2002 and 2001.

• Documentation deficiencies related to four commercial paper swaps where portions of ILFC’s commercial paper program were swapped from floating into fixed interest rates. The review revealed that the documentation related to these hedges was insufficient to meet the documentation criteria under SFAS 133 and it was concluded that ILFC could not apply hedge accounting to the transactions. The economics of the transactions are not affected.

• Minor errors under SFAS 133 with respect to derivative instruments related to the reclassification to income from Accumulated other comprehensive income. The corrections will also affect derivative assets and liabilities and accrued interest.

Certain Payments from Aircraft and Engine from Manufacturers

In the course of ILFC’s review of its application of SFAS 133, ILFC, in consultation with its independent registered public accountants, identified an error in its accounting for certain payments received from aircraft and engine manufacturers. Under arrangements with these manufacturers, in certain circumstances the manufacturers established notional accounts for the benefit of ILFC, to which amounts were credited by the manufacturers in connection with the purchase by and delivery to ILFC and the lease of aircraft. Amounts credited to the notional accounts were used at ILFC’s direction to protect ILFC from certain events including loss when airline customers of ILFC defaulted on lease payment obligations, to provide lease subsidies and other incentives to ILFC airline customers in connection with leases of certain aircraft and to reduce ILFC’s cost of aircraft purchased.

Historically, ILFC recorded as revenues gross lease receipts from customers who had received lease subsidies from the notional accounts and amounts paid directly to ILFC from the notional accounts in connection with lessee defaults. Amounts recorded as revenue at the time they were disbursed to ILFC or its lessees should have been recorded as a reduction of the purchase price of the aircraft at the time of delivery.

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ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)

     (B) Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to management of the Company, including the Chairman of the Board and Chief Executive Officer and the Vice Chairman, Chief Financial Officer and Chief Accounting Officer (collectively the “Certifying Officers”), as appropriate, to allow timely decisions regarding required disclosure. The management of the Company, including the Certifying Officers, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Under the direction of our Chief Executive Officer and Chief Financial Officer, we evaluated our disclosure controls procedures and have concluded that our disclosure controls and procedures were ineffective at the reasonable assurance level as of March 31, 2005 due to the existence of the material weaknesses described below. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. and procedures. We identified the following material weaknesses in our internal control over financial reporting:

• The Company did not maintain effective controls over the valuation and presentation and disclosure of derivative transactions entered into prior to the existence of SFAS 133. Specifically, we did not maintain adequate documentation regarding the effectiveness of certain derivative transactions used to hedge interest rate and foreign currency exchange rate risk. This control deficiency resulted in the restatement of our consolidated financial statements for the years 2004, 2003, 2002, 2001 and 2000 and the quarters of 2004 and 2003, as well as the quarter ended March 31, 2005. Additionally, this control deficiency could result in a misstatement to the financial statement line items (Derivative assets, Derivative liabilities, Accumulated other comprehensive income, and Interest expense) that would cause a material misstatement to the annual or interim financial statements. Accordingly, management concluded this control deficiency constitutes a material weakness.

• The Company did not maintain effective controls over the valuation and presentation and disclosure of certain payments received from manufacturers. This control deficiency resulted in the restatement of our consolidated financial statements for the years 2004, 2003, 2002, 2001 and 2000 and the quarters of 2004 and 2003, as well as the quarter ended March 31, 2005. Additionally, this control deficiency could result in a misstatement to the revenue accounts that would cause a material misstatement to the annual or interim financial statements. Accordingly, management concluded this control deficiency constitutes a material weakness.

As a result of these material weaknesses, management, including the Certifying Officers, concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2005.

Variable Interest Entities

The Company’s consolidated financial statements for the period ended March 31, 2005, include assets in the amount of $148.4 million, liabilities in the amount of $67.2 million and a net gain of $1.6 million related to Variable Interest Entities (“VIEs”). The Company’s assessment of disclosure controls and procedures, as described above, includes the VIEs. Each of the VIEs has a discrete number of assets and the Company, as lender and guarantor to the VIEs, has been provided sufficient information to conclude that the Company’s procedures with respect to these VIEs are effective in providing reasonable assurance that the information required to be disclosed by the Company relating to these entities is reconciled, processed, summarized and reported within the periods specified by the Securities and Exchange Commission. However, management has been unable to assess the effectiveness of internal control over financial reporting at those entities, due to the Company’s inability to dictate or modify the controls of those entities, or to assess those controls.

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ITEM 4. CONTROLS AND PROCEDURES (CONTINUED)

     (C) Changes in Internal Control Over Financial Reporting

There were no changes during the fiscal quarter ended on March 31, 2005 that materially effected, or are reasonably likely to materially effect, our internal control over financial reporting.

     (D) Remediation of Material Weaknesses in Internal Control Over Financial Reporting

As of the date of this filing, we have begun to remediate the material weaknesses in our internal control over financial reporting with respect to accounting for derivative instruments and the accounting for certain payments from engines manufacturers discussed above. The remediation actions include:

• Improving training, education, accounting reviews and adding additional staff as necessary, all designed to ensure that all relevant personnel involved in derivatives transactions understand and apply hedge accounting in compliance with SFAS 133.

• Improving training, education, accounting reviews and adding additional staff as necessary, all designed to ensure that all relevant personnel involved in the purchase of aircraft from the manufacturers understand the appropriate accounting treatment for the funds received from the manufacturers, for the related purchase of aircraft and engines and the subsequent lease of the manufacturers’ aircraft.

We will describe additional remediation efforts in our future filings.

The process and control improvements described above in this Item 4 are the only changes in our internal control over financial reporting during the period covered by this report that would have a material effect, our internal control over financial reporting. We will continue to assess our controls and procedures and will take any further actions that we deem necessary.

We believe that our Consolidated Financial Statements fairly present, in all material respects, our financial condition, results of operations and cash flows as of, and for, the periods presented and that this Quarterly Report on Form 10-Q, as amended, contains no material inaccuracies or omissions of material fact and contains the information required to be included in accordance with the Exchange Act.

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PART II. OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

There has been no change in the legal proceedings to which the Company is a party. See “Item 3. Legal Proceedings” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2004.

     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On March 31, 2005, the shareholders of the Company, by unanimous written consent, elected the following persons as directors of the Company:

• Steven F. Udvar-Hazy

• Leslie L. Gonda

• John L. Plueger

• Louis L. Gonda

• Martin J. Sullivan

• Donald Kanak

• William N. Dooley

• Steven J. Bensinger

• Alan H. Lund

     ITEM 6. EXHIBITS

          a) Exhibits

3.1	Restated Articles of Incorporation of the Company, as amended through December 9, 1992, filed November 3, 1993 (filed as an exhibit to Registration Statement No. 33-50913 and incorporated herein by reference).
3.2	Certificate of Determination of Preferences of Series A Market Auction Preferred Stock (filed December 9, 1992 as an exhibit to Registration Statement No. 33-54294 and incorporated herein by reference).
3.3	Certificate of Determination of Preferences of Series B Market Auction Preferred Stock (filed December 9, 1992 as an exhibit to Registration Statement 33-54294 and incorporated herein by reference).
3.4	Certificate of Determination of Preferences of Series C Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
3.5	Certificate of Determination of Preferences of Series D Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
3.6	Certificate of Determination of Preferences of Series E Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
3.7	Certificate of Determination of Preferences of Series F Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
3.8	Certificate of Determination of Preferences of Series G Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference).
3.9	Certificate of Determination of Preferences of Series H Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference).
3.10	Certificate of Determination of Preferences of Preferred Stock of the Company (filed as an exhibit to Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).
3.11	By-Laws of the Company, including amendment thereto dated August 31, 1990 (filed as an exhibit to Form 10-K for the year ended December 31, 2003 and incorporated herein by reference).
3.12	Unanimous Written Consent of Sole Stockholder of the Company, dated January 2, 2002, amending the Bylaws of the Company (filed as an exhibit to Form 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference).
10.1	Agreement, dated as of October 28, 2004 among the Company, Barclays Bank PLC and Export-Import Bank of the United States (filed as an exhibit to the original Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by reference).
12.	Computation of Ratios of Earnings to Fixed Charges and Preferred Stock Dividends
31.1	Certification of Chairman of the Board and Chief Executive Officer
31.2	Certification of Vice Chairman, Chief Financial Officer and Chief Accounting Officer
32.1	Certification under 18 U.S.C., Section 1350

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INTERNATIONAL LEASE FINANCE CORPORATION

August 15, 2005	/S/ Steven F. Udvar-Hazy
	STEVEN F. UDVAR-HAZY
	Chairman of the Board and
	Chief Executive Officer
August 15, 2005	/S/ Alan H. Lund
	ALAN H. LUND
	Vice Chairman,
	Chief Financial Officer
	and Chief Accounting Officer

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INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES

INDEX TO EXHIBITS

Exhibit No.
12.	Computation of Ratios of Earnings to Fixed Charges and Preferred Stock Dividends
31.1	Certification of Chairman of the Board and Chief Executive Officer
31.2	Certification of Vice Chairman, Chief Financial Officer and Chief Accounting Officer
32.1	Certification under 18 U.S.C., Section 1350

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