FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For July 31, 2002
AERCO LIMITED
22 Grenville Street
St. Helier
Jersey, JE4 8PX
Channel Islands
------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F |_|
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes |_| No |X|
INDEX TO EXHIBITS
Item
1. AerCo Limited June 17, 2002 Quarterly Cash Report, Analysis of Financial
Condition and Results of Operations and Particulars of AerCo's portfolio.
Page 2 of 3
SIGNATURE
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.
Dated: July 31, 2002
AERCO LIMITED
By: /s/ John McMahon
--------------------------
Name: John McMahon
Title: Attorney-in-Fact
Page 3 of 3
Item 1
AerCo Limited
Cash Analysis of Financial Condition and Results of Operations
Three Month Period from
March 15, 2002 to June 17, 2002
I BACKGROUND AND GENERAL INFORMATION
The financial information contained in this report is not prepared in
accordance with generally accepted accounting principles of the United States
or the United Kingdom but is prepared in accordance with the Company's
obligations under the Indenture. This report should be read in conjunction with
the Company's most recent financial information prepared in accordance with
generally accepted accounting principles of the United Kingdom, including a
reconciliation of net loss, shareholders' deficit and aircraft assets to
estimated amounts under generally accepted accounting principles of the United
States. For this you should refer to the Company's Form 20-F which is on file
at the Securities and Exchange Commission.
On July 15, 1998, AerCo Limited ("AerCo" or "the Company"), a Jersey limited
liability company, issued $800 million of notes in four subclasses, subclass
A-1, subclass A-2, subclass B-1 and subclass C-1 (the "1998 notes"). The
Company also issued two additional subclasses of notes, the subclass D-1 notes
and the subclass E-1 notes which were purchased by debis AirFinance Ireland
plc, formerly AerFi Group plc ("debis AirFinance"). The Company used the
proceeds from the issuance of the 1998 notes, the subclass D-1 notes and the
subclass E-1 notes (i) to acquire the issued and outstanding capital stock of
Aircraft Lease Portfolio Securitization 94-1 Limited, a Jersey limited
liability company ("ALPS 94-1") (and thereby to indirectly acquire ALPS 94-1's
portfolio of 25 aircraft and the related leases), (ii) to finance the repayment
of all of ALPS 94-1's existing financial indebtedness and (iii) to finance the
acquisition of 10 aircraft and the related leases from debis AirFinance and its
subsidiaries ("debis AirFinance Group") through the acquisition of 100% of the
capital stock of three wholly owned subsidiaries of debis AirFinance.
On May 14, 1999, AerCo consummated an exchange offer under which the 1998 notes
were exchanged for notes which are registered with the Securities and Exchange
Commission. The registration statement filed by AerCo in connection with the
1999 exchange offer went effective on April 15, 1999.
On July 17, 2000, AerCo issued a further $960 million of notes in four
subclasses, subclass A-3, subclass A-4, subclass B-2 and subclass C-2 (the
"2000 notes"). The Company also issued two additional subclasses of notes, the
subclass D-2 notes and subclass E-2 notes which were purchased by debis
AirFinance. The Company used the proceeds from the issuance of the 2000 notes,
the subclass D-2 notes and subclass E-2 notes (i) to refinance the subclass A-1
notes, (ii) to refinance the subclass D-1 notes and (iii) to acquire 30
additional aircraft (the "additional aircraft") with an appraised value of
$724.1 million, and associated leases through the acquisition of certain
aircraft owning subsidiaries, and one associated conduit leasing company, of
debis AirFinance. Certain of the additional aircraft transferred to AerCo on
July 17, 2000. The funds allocable to the remaining undelivered aircraft were
deposited into the aircraft purchase account and were used to purchase the
remaining additional aircraft as they were ready for delivery. As of January
31, 2001, all of the additional aircraft had been delivered to AerCo.
At the time of issue of the 2000 notes, AerCo undertook to complete by April
12, 2001 either an exchange offer for the 2000 notes under an effective
registration statement or to register the resale of the 2000 notes under the
U.S. Securities Act of 1933. The registration statement filed by AerCo in
connection with the 2000 exchange offer went effective on December 7, 2000 and
on that date, AerCo commenced an exchange offer under which the 2000 notes were
exchanged for notes registered with the Securities and Exchange Commission. The
exchange offer was completed on January 31, 2001. The 1998 notes (excluding the
subclass A-1 notes), the notes issued as a result of the exchange offer in
1999, the 2000 notes and the notes issued as a result of the 2000 exchange
offer are collectively referred to below as the "notes".
Applying the declining value assumptions contained in the Offering Memorandum
issued by AerCo on July 12, 2000 to the appraisal dated March 1, 1998 of the
aircraft acquired by AerCo on July 15, 1998, adjusting for aircraft sales, and
to the April 30, 2000 appraisal of the additional aircraft, the total appraised
value of AerCo's portfolio was assumed to be $1,358.9 million at June 17, 2002.
The adjusted appraised value of AerCo's portfolio at June 17, 2002 is $1,280.9
million.
At June 17, 2002, AerCo owned (directly and indirectly) 61 aircraft, all of
which are on operating leases, having sold one Fokker 100 aircraft in January
1999, a second Fokker 100 aircraft in July 1999, one B757
Page 1
aircraft and one B747 aircraft in April 2001. AerCo may also acquire further
aircraft and any related existing leases or similar arrangements from various
sellers, which may include debis AirFinance. Further aircraft may include among
other things, aircraft, engines and entities with an ownership or leasehold
interest in aircraft or engines. AerCo will finance acquisitions of further
aircraft with external funds, including issuing further notes. Any acquisition
of further aircraft will be subject to certain confirmations from the Rating
Agencies and compliance with certain operating covenants of AerCo set out in
the Indenture dated as of July 15, 1998, as amended on July 17, 2000, by and
between AerCo and Bankers Trust Company, as trustee of the notes (the
"Indenture"). As of June 17, 2002, all of the 61 aircraft were on lease to 34
lessees in 20 countries as shown on pages 14 and 15 attached.
The discussion and analysis which follows is based on the results of AerCo
Limited and its subsidiaries as a single entity (collectively the "AerCo
Group").
AerCo Group's cash receipts and disbursements are determined, in part, by the
overall economic condition of the aircraft leasing market. This, in turn, is
affected by factors including various regional economic conditions affecting
airline operations and trading; aircraft manufacturer production levels;
passenger demand; retirement and obsolescence of aircraft models; manufacturers
exiting or entering the market or ceasing to produce aircraft types;
re-introduction into service of aircraft previously in storage; governmental
regulation; air traffic control infrastructure constraints; capital market
risks and general risks of lessee default, bankruptcy and mergers.
AerCo Group's ability to compete against other lessors is determined, in part,
by the composition of its fleet in terms of mix, relative age and popularity of
the aircraft types. In addition, operating restrictions imposed by the
Indenture, and the ability of other lessors, who may possess substantially
greater financial resources, to offer leases on more favourable terms than
AerCo Group, may also impact AerCo Group's ability to compete with other
lessors.
For the purposes of this report, the "Three Month Period", referred to on page
11 "AerCo Cashflow Performance for the Period from March 15, 2002 to June 17,
2002 - Comparison of Actual Cash Flows versus Adjusted Base Case Cash Flows",
comprises information from the monthly cash reports dated April 15, May 15 and
June 17, 2002. The financial data in these reports includes cash receipts from
April 12, 2002 (first day of the Collection Period for the April 2002 Report)
up to June 11, 2002 (last day of the Collection Period for the June 2002
Report). Page 13 presents the cashflow information from July 17, 2000 to the
June 2002 Payment Date. This report however limits its commentary to the Three
Month Period.
II COMPARISON OF ACTUAL CASH FLOWS VERSUS THE ADJUSTED BASE CASE FOR THE
THREE MONTH PERIOD
The terrorist attacks of September 11, 2001 and the associated military action
by the United States and its allies in Afghanistan has had an adverse financial
impact on the aviation industry, and in particular, on the condition of some of
AerCo's lessees and their ability to perform under their leases. Since
September 11, 2001, AerCo has reached agreement with a number of its lessees
for rental reductions and deferrals, early return of aircraft and other
temporary cashflow alleviation measures designed to aid the survival of these
airlines, which has had and is expected to continue to have a negative impact
on AerCo's future cash performance. There is no certainty that AerCo`s results
for the current Three Month Period are indicative of its future cashflow
performance and/or that the aviation industry will recover in the near term or
at all from the effects of the terrorist attacks of September 11, 2001. See
Section IV Recent Developments.
The July 12, 2000 Offering Memorandum (the "Offering Memorandum") issued by
AerCo contained assumptions in respect of AerCo Group's future cash flows and
expenses (the "2000 Base Case"). These cash flows and expenses have been
adjusted for the sale of one B757-200 aircraft (MSN 28486) on April 9, 2001,
which was not anticipated at the time of preparation of the 2000 Base Case (the
"Adjusted Base Case"). These assumptions were developed prior to the events of
September 11, 2001 and do not take into account the subsequent effects that
these events have had on the global economies of the world and in particular,
the aviation industry, including aircraft leasing. Future performance can be
expected to diverge from certain assumptions contained in the Offering
Memorandum including those relating to aircraft re-lease rates, aircraft
values, aircraft downtime and lessee defaults.
Page 2
For the purpose of this report, "Net Cash Collections" is defined as Total Cash
Collections less Total Cash Expenses, Movements in the Expense Account,
Interest Payments and Swap Payments. A discussion of the Total Cash
Collections, Cash Expenses, Interest Payments and Principal Payments is given
below and should be read in conjunction with the analysis on page 11.
CASH COLLECTIONS
"Total Cash Collections" include Net Lease Rentals (Contracted Lease Rentals
less Net Stress-Related Costs), Movement in Current Arrears Balance, Interest
Earned, Aircraft Sales and Net Maintenance. In the Three Month Period, AerCo
generated approximately $34.9 million in Total Cash Collections, $9.3 million
less than the Adjusted Base Case. This difference is due to a combination of
the factors set out below (the numbers in brackets refer to the line item
number shown on page 11).
[2] Renegotiated Leases
Renegotiated Leases refers to the loss in rental revenue caused by a lessee
negotiating a reduction in the lease rental. Typically, this can be a permanent
reduction over the remaining lease term in exchange for other contractual
concessions. In the Three Month Period, an amount of $3.0 million in loss of
revenue was attributed to Renegotiated Leases, most of which related to leases
which were renegotiated post September 11, 2001.
[3] Rental Resets Including Interest Rate Adjustments for Floating Rate Leases
Rental Resets is a measure of the loss in rental revenue when new lease rates
are lower than those assumed in the Adjusted Base Case, including lease rate
adjustments for changes in interest rates on floating rate leases and lease
rates achieved where revenues are dependant on aircraft usage. AerCo currently
has 48 fixed rate leases and 13 floating rate leases. The revenue loss
attributable to Rental Resets during the Three Month Period was $3.2 million,
reflecting the poor market conditions currently being experienced in addition
to the low interest rate environment.
[4] Aircraft Sales
Aircraft Sales is a measure of the loss in rental revenue as a result of
aircraft sales. In the Three Month Period, no revenue was lost due to Aircraft
Sales.
[5] Contracted Lease Rentals
Contracted Lease Rentals represents the current contracted lease rental rollout
which equates to the 2000 Adjusted Base Case Lease Rentals less adjustments for
Renegotiated Leases, Rental Resets and Aircraft Sales. For the Three Month
Period, Contracted Lease Rentals were $39.5 million compared to $45.7 million
for the previous three month period.
[6] Movement in Current Arrears Balance
Current Arrears are the total contracted lease rentals outstanding from current
lessees at a given date and excludes any amounts classified as Bad Debts. The
Current Arrears Balance at the start of the Three Month Period was $2.7 million
versus $3.2 million at the end of the Three Month Period, giving a negative
movement of $0.5 million.
Page 3
[6] Movement in Current Arrears Balance - continued
Analysis of Current Arrears Balances
% of Current Current Movement
Appraised Arrears Arrears in Current
Country Aircraft Type Value* 17/6/02 15/3/02 Arrears
------- ------------- ------ ------- ------- ---------
$M $M $M
1 Italy**....... B737-400 3.5 0.4 1.1 0.7
2 Italy**....... A320-200 1.8 0.4 0.2 (0.2)
3 Spain......... Various 3.4 1.7 1.1 (0.6)
4 US............ DC8-71F 2.4 0.4 - (0.4)
5 Brazil**...... B737-300 1.4 0.6 0.6 -
6 Other +....... Various (0.3) (0.3) -
----- ----- -----
Total......... 3.2 2.7 (0.5)
----- ----- -----
* Appraised Value as of February 19, 2002
** Restructuring Agreements have been signed with these lessees. See Section
III Other Financial Data
+ This comprises a number of lessees none of which had significant
outstanding balances, and a number of whom had paid their rentals in
advance.
As at June 17, 2002, an amount of $3.2 million was owed to AerCo Group, against
which security deposits of $3.3 million were held.
As at March 15, 2002, an amount of $2.7 million was owed to AerCo Group,
against which security deposits of $6.9 million were held.
[7] Net Stress-Related Costs
Net Stress-Related Costs is a combination of all the factors that can cause
actual lease rentals received to differ from the Contracted Lease Rentals. The
Adjusted Base Case assumed Net Stress-Related Costs equal to 6% of the Adjusted
Base Case Lease Rentals. For the Three Month Period, Net Stress-Related Costs
led to a cash outflow of $0.5 million compared to $2.5 million outflow assumed
in the Adjusted Base Case. This variance of $2.0 million is due to the six
factors described in items [8] to [13] below.
[8] & [9] Bad Debts and Security Deposits Drawn Down
Bad Debts are arrears owed by lessees who have defaulted and which are deemed
irrecoverable. These arrears are partially offset by the utilisation of
security deposits held and amounts subsequently recovered from the defaulted
lessee. There were no bad debt write-offs or security deposit draw downs in the
Three Month Period.
[10] Deferred Arrears Balance
Deferred Arrears Balance refers to current arrears that have been capitalized
and restructured into a deferred balance. In the Three Month Period, AerCo
received payments totalling $0.3 million from one lessee in accordance with a
payment schedule agreed with that lessee. The total rescheduled receivable
amounted to $4.0 million at the end of the Three Month Period in respect of
five lessees. See Section III Other Financial Data for further information on
the restructuring agreements.
[11] Aircraft on Ground ("AOG")
AOG is defined as the Adjusted Base Case lease rental lost when an aircraft is
off-lease and non-revenue earning. There were no aircraft off lease during the
Three Month Period.
Page 4
[12] Other Leasing Income
Other Leasing Income consists of miscellaneous income received in connection
with a lease other than contracted rentals, maintenance receipts and security
deposits, such as early termination payments or default interest. There were no
cashflows from Other Leasing Income during the Three Month Period.
[13] Repossession Costs
Repossession Costs cover legal and aircraft technical costs incurred in
repossessing aircraft. In the Three Month Period, there were no repossession
costs.
[15] Net Lease Rentals
Net Lease Rentals is Contracted Lease Rentals less any movement in Current
Arrears Balance and Net Stress-Related Costs. In the Three Month Period, Net
Lease Rentals amounted to $38.5 million, $4.7 million lower than assumed in the
Adjusted Base Case. The variance was attributable to the combined effect of the
factors outlined in items [2] to [4] and in items [6] to [13] above.
[16] Interest Earned
Interest earned relates to interest received on cash balances held in the
Collection and Expense Accounts. Cash held in the Collection Account consists
of the cash liquidity reserve amount of $65 million plus the security deposit
amount, in addition to the intra-month cash balances for all the rentals and
maintenance payments collected prior to each monthly payment date. The Expense
Account contains cash set aside to pay for expenses which are expected to be
payable over the next month. In the Three Month Period, interest earned
amounted to $0.4 million, $0.5 million less than assumed in the Adjusted Base
Case, due primarily to the lower LIBOR rates currently being experienced.
[17] Aircraft Sales
There were no aircraft sales during the Three Month Period.
[18] Net Maintenance
Net Maintenance refers to maintenance reserve revenue received less any
maintenance reimbursements paid to lessees. In the Three Month Period, actual
maintenance reserve revenue received amounted to $6.1 million and maintenance
expenditure amounted to $10.1 million, generating negative net maintenance
revenue of $4.0 million. The Adjusted Base Case assumes that, over time,
maintenance revenue will equal maintenance expenditure. However, it is unlikely
that in any particular Three Month Period, maintenance revenue will exactly
equal maintenance expenses.
Cash Expenses
"Total Cash Expenses" include Aircraft Operating Expenses and Selling, General
and Administrative ("SG&A") Expenses. In the Three Month Period, Total Cash
Expenses were $4.0 million compared with an assumed amount of $3.1 million. A
number of offsetting factors discussed below have given rise to this negative
variance of $0.9 million.
[21] Re-leasing and other overhead costs
Re-leasing and other overhead costs consist of miscellaneous re-delivery and
leasing costs associated with re-leasing events. In the Three Month Period,
these costs amounted to $1.7 million, compared with $0.9 million per the
Adjusted Base Case which assumed costs to be 2% of Adjusted Base Case Lease
Rentals.
Page 5
[23] Aircraft Servicer Fees
Aircraft Servicer Fees are defined as amounts paid to the Aircraft Servicer. In
the Three Month Period, the total Aircraft Servicer Fees paid were $1.0
million, which is $0.2 million greater than the $0.8 million assumed in the
Adjusted Base Case.
Aircraft Servicer Fees consist of:
$m
---
Retainer Fee.......................... 0.5
Rent Collected Fee.................... 0.5
---
Total Aircraft Servicer Fees.......... 1.0
===
The Retainer Fee is a fixed amount per month per aircraft and changes only as
aircraft are acquired or sold.
[25] Other Servicer Fees
Other Servicer Fees relate to fees and expenses paid to other service providers
including the Administrative Agent, the Cash Manager, financial advisors, legal
advisors, accountants and to the directors. In the Three Month Period, Other
Servicer Fees amounted to $1.3 million, which is in line with the assumed
amount.
[31] Interest Payments and [32] Swap Payments
In the Three Month Period, interest payments to Noteholders amounted to $9.5
million. This is $13.6 million less than the Adjusted Base Case, which assumed
Interest Payments for the Three Month Period to be $23.1 million. No interest
was paid to the Class E noteholder which was in line with the Adjusted Base
Case for the period. The lower interest payments reflect lower actual interest
rates and lower actual bond balances than those assumed in the Adjusted Base
Case. In the Three Month Period, swap payments amounted to $10.5 million, $11.0
million greater than the assumed swap receipt of $0.5 million. This also
reflects the lower than assumed interest rate environment.
[32] Principal Payments
In the Three Month Period, total principal payments to Noteholders amounted to
$12.1 million, $6.3 million less than assumed in the Adjusted Base Case. At
June 17, 2002, total outstanding principal balances of $1,238.5 million are
$4.1 million less than that assumed in the Adjusted Base Case of $1,234.4
million.
III OTHER FINANCIAL DATA
Weakly capitalized airlines are more likely than well capitalized airlines to
seek operating leases. Therefore, many of the lessees are in a relatively weak
financial position and several of them have faced and continue to face severe
economic difficulties. Following the events of September 11, 2001, the economic
difficulties faced by many of the lessees have been greatly exacerbated.
AerCo has responded and continues to respond to the needs of lessees in
financial difficulty, where appropriate, by restructuring the applicable leases
or agreeing to rent deferrals. The restructurings will typically involve the
rescheduling of rental payments for a specified period. In addition, certain
restructurings may involve the voluntary early termination of a lease, the
replacement of aircraft with less expensive aircraft and the arrangement of
sub-leases from the lessee to another aircraft operator. In certain cases, it
may be necessary to repossess aircraft from defaulting lessees and re-lease the
aircraft to other lessees. The early termination of leases may lead AerCo to
incur swap breakage costs under its agreements with swap providers which could
be substantial.
As of June 17, 2002, amounts outstanding for more than 30 days for rental
payments due under the leases equalled $1.4 million. These leases were in
respect of aircraft representing 11.34% of the portfolio by appraised value at
February 19, 2002. The outstanding amounts are net of agreed deferrals or other
restructuring and default interest.
An Asian lessee of two B737-300 and one B737-400 aircraft representing 4.6% of
the portfolio by appraised value at February 19, 2002, was adversely affected
by the 1998 Asian economic crisis such that it sought bankruptcy protection in
1998. As part of the lessee's rehabilitation plan, the Servicer agreed with the
lessee to a schedule covering the
Page 6
payment of arrearages over the period to October 31, 2002 and the extension of
leases. At June 17, 2002, these arrearages amounted to $0.3 million. All
amounts have been paid in accordance with the scheduled terms as of June 17,
2002.
A Latin American lessee representing 2.6% of the portfolio by appraised value
at February 19, 2002 has experienced continuing cashflow difficulties in recent
years. In the recent past the Servicer agreed not to exercise its remedies in
respect of events of default which existed under the lease at that time, in
order to permit the lessee to have a stable business environment in which to
develop, negotiate and implement a long-term business plan. On June 19, 2001,
the Servicer signed a restructuring agreement, under which the lessee issued
secured and unsecured notes to replace outstanding arrears, all of which have
been cleared at this time. In addition the monthly lease rental in respect of
the aircraft was reduced by 19%. More recently the lessee has advised the
Servicer that as of July 1, 2002 no further lease rental payments will be made
to any of its lessors unless and until an agreement is signed with the lessee
accepting payment of 50% of the contracted lease rental for a period of six
months, foregoing the remaining 50%. During this period the lessee will prepare
a new business and fleet plan based on a new restructuring agreement with its
lessors. The Servicer has notified the lessee that it demands full compliance
with the lease agreement before considering any new restructuring.
As of June 17, 2002, a European lessee representing 1.8% of the portfolio by
appraised value at February 19, 2002 owed $0.4 million, all of which was
outstanding for more than 30 days. The Servicer had previously concluded a
restructuring agreement with the lessee during the previous Three Month Period
which included a deferral of current receivables of $0.9 million and a deferral
of 33% of the current rentals from April to May 2002, all of which will be
repayable from June 2002 to March 2003. The lessee repaid the June arrears
amount in accordance with the schedule of terms.
As of June 17, 2002, a European lessee representing 7.06% of the portfolio by
appraised value at February 19, 2002 owed $1.3 million, $0.8 million of which
was outstanding for more than 30 days. The Servicer is in negotiations with the
lessee regarding the payment of this overdue amount.
As of June 17, 2002 a North American lessee representing 2.40% of the portfolio
by appraised value at February 19, 2002 owed $0.4 million, $0.2 million of
which was outstanding for more than 30 days. The Servicer is in negotiations
with the lessee regarding the payment of this overdue amount.
Certain lessees have experienced periodic difficulties in meeting their
maintenance obligations under the leases. Such difficulties may be caused by a
variety of factors including the failure of the lessee to have in place an
adequate maintenance program, adverse climate and other environmental
conditions in the locations where the aircraft are operated or financial and
labor difficulties experienced by the relevant lessee.
IV RECENT DEVELOPMENTS
In July 2000, AerCo issued subclass A-3 notes in the principal amount of $565
million and bearing interest at Libor plus 0.46% with an expected final payment
date of June 15, 2002 and a final maturity date of July 15, 2025. At the time
the subclass A-3 notes were issued, the expected final payment date was
scheduled based on an assumption that these notes would be refinanced on June
15, 2002. In accordance with the terms of these notes, step-up interest of
0.50% accrues on the subclass A-3 notes if they are not repaid in full or
refinanced by their expected final payment date.
Notwithstanding the current difficult conditions in the capital markets, over
the last number of months, the Board of Directors of AerCo, in consultation
with its advisers, has given extensive consideration to the economic
feasibility of refinancing the subclass A-3 notes on or before June 15, 2002,
including a review of various structural enhancements which might have rendered
such a refinancing viable.
On May 14, 2002 the Board of Directors determined that, in the current market
conditions, it was not in the economic interests of AerCo to refinance the
subclass A-3 notes on or before June 15, 2002. On July 24, 2002 the Board of
Directors reaffirmed its decision not to refinance the subclass A-3 notes in
the current market environment. Accordingly, step-up interest of 0.50% per
annum became due and payable from June 15, 2002 on the subclass A-3 notes and
will continue to be due and payable until they are repaid in full or
refinanced. Under the schedule of required payment priorities applicable to
AerCo, step-up interest is payable after payment of
Page 7
interest, minimum principal and scheduled principal on AerCo's class A, class
B, class C and class D notes and any aircraft modification payments.
The Board of Directors of AerCo will continue to monitor market conditions and
to assess when and if a refinancing of the subclass A-3 notes is appropriate.
During the past year, there has been a general downturn in the world economic
climate, with a consequential negative impact on the commercial aviation
industry. During the Three Month Period, the slowdown in the world economic
climate has continued with a consequential continuing negative impact on the
operating conditions in the world aviation industry. This economic slowdown was
exacerbated by the events of September 11, 2001 in the United States and the
economic and political situation since those events.
The short term effects of the events of September 11, 2001 have included among
other things, a reduction in demand for air travel, grounding of aircraft by
airlines, bankruptcy and/or consolidation of airlines particularly in Europe
and the United States, reduced operations by airlines, increased costs due to
new security directives adopted by the relevant aviation authorities, increased
insurance premiums and new insurance arrangements required by the insurance
markets and fluctuations in the price of fuel.
In particular, airlines worldwide continue to experience significant
difficulties in maintaining war insurance cover in the amounts required under
their leases with AerCo and other lessors. While these insurance issues have
been mitigated in certain jurisdictions by a number of temporary government
schemes, in the absence of satisfactory solutions on this matter, it may be
necessary for the relevant aircraft to be grounded.
Such consequences are having a material adverse impact on the financial
condition of AerCo's lessees and their ability to perform under their leases
and depending on their scope and duration, which AerCo cannot predict at this
time, may continue to have such effect. The effect of any future military
action by the U.S. and its allies may also exacerbate these effects. They may
also lead to reduced demand for AerCo's aircraft, which may impact its ability
to re-lease aircraft on a timely basis and at favourable rates, and may reduce
the value of its aircraft. These effects have caused a reduction in AerCo's
cash flow which may adversely affect AerCo's ability to make payments on the
notes.
As outlined above, many of AerCo's lessees have made requests for amongst other
things, rental reductions and deferrals, early return of aircraft and other
cashflow alleviation measures. In particular, during this downturn in the
aviation industry, there has been a sharp increase in the availability of
aircraft for lease, leading to significant over capacity, increased downtime, a
decline in lease rates and a fall in the realisable value of aircraft in open
market sale transactions. The effect of these events is likely to result in
impairment provisions with respect to the carrying value of certain of AerCo's
aircraft. Adjusted as a consequence of these adverse economic, political and
trading conditions, we expect to perform behind the 2000 Base Case assumptions.
North American Concentration. At June 17, 2002, 14.9% of the aircraft by
appraised value at February 19, 2002 were leased by operators in North America.
The commercial aviation industry in North America is highly sensitive to
general economic conditions. Since airline travel is largely discretionary, the
industry has suffered severe financial difficulties during economic downturns.
Over the last several years, nearly half of the major North American passenger
airlines have filed for Chapter 11 bankruptcy protection and several major U.S.
airlines have ceased operations. The long term effect that the recent terrorist
attacks in the United States and military action in Afghanistan and any future
military action in the Middle East may have for the aviation industry in the
U.S. is not yet fully known. However, the immediate effects have included,
among other things, a reduction in demand for domestic and international
passenger air travel by U.S. citizens, a general reduction in North Atlantic
traffic and increased security costs for U.S. airlines in mitigating against
possible further acts of terrorism, resulting in reduced profits and possible
solvency or even bankruptcy issues for U.S. airlines.
Asia Pacific Concentration. At June 17, 2002, 20.55% of the aircraft by
appraised value at February 19, 2002 were leased by operators in "emerging"
markets in the Asia Pacific region, including China, the Philippines, South
Korea, Taiwan and India. One Asian lessee, leased 5.1% of the aircraft by
appraised value at February 19, 2002.
Trading conditions in Asia's civil aviation industry were adversely affected by
the severe economic and financial difficulties in the region during 1998 and
1999. The economies of the region experienced acute difficulties including many
business failures, significant depreciation of local currencies against the
dollar, downgrading of sovereign and corporate credit ratings and
internationally organized financial stability measures. One Asian lessee which
leases 4.6%
Page 8
of the aircraft by appraised value at February 19, 2002, was adversely affected
by the Asian economic crisis such that it sought bankruptcy protection in 1998.
As part of its rehabilitation plan, certain of the lessee's outstanding lease
obligations were re-scheduled in 1999. Several other airlines in the region
re-scheduled their aircraft purchase obligations, eliminated certain routes and
reduced employees. A repeat of this downturn in the region's economies may
further undermine business confidence, reduce demand for air travel and
adversely affect the Asian lessees' operations and their ability to meet their
obligations.
Latin American Concentration. At June 17, 2002, 11.58% of the aircraft by
appraised value at February 19, 2002 were leased by operators in "emerging
markets" in Latin America, principally Brazil, Chile and Colombia. The
financial prospects for lessees in Latin America depend amongst other things on
the level of political stability and economic activity and policies in the
region. Developments in other "emerging markets" may also affect the economies
of Latin American countries and the entire region.
Most significantly, in 1999, Brazil experienced significant downturns in its
economy and financial markets, with large decreases in financial asset prices
and dramatic decreases in the value of its currency. One of the lessees, TAM,
the lessee of 2.97% of the aircraft by appraised value at February 19, 2002,
operates five of the aircraft in Brazil. In addition Varig and Nordeste lease
one B737-300 and one B737-500 respectively, together representing 2.9% of the
aircraft by appraised value at February 19, 2002. Continued weakness in the
value of the Brazilian real, as well as any further general deterioration in
the Brazilian economy, means that these lessees may be unable to generate
sufficient revenues in Brazilian currency to pay the U.S. dollar-denominated
rental payments under the leases. More importantly, financial and economic
problems in Brazil, including the effects of the terrorist attacks in the
United States on September 11, 2001, could spread throughout Latin America and
other "emerging" economies, having a similar effect on many of AerCo Group's
other lessees.
AerCo leases one aircraft to a Colombian lessee, representing 2.6% of the
portfolio by appraised value at February 19, 2002. The continued deterioration
in the Colombian economy, as a result of the terrorist attacks in the United
States on September 11, 2001, may mean that this lessee may be unable to
generate sufficient revenues in the Colombian currency to pay the U.S. dollar
denominated rental repayments under the lease. (See Section III - Other
Financial Data above).
The long term effect that the recent terrorist attacks in the United States and
military action in Afghanistan and any future military action in the Middle
East may have for the aviation industry in the Latin American region is not yet
fully known. However, the immediate effects have included, among other things,
a reduction in demand for passenger air travel especially to and from the U.S.
due to fears regarding additional acts of terrorism and increased security
costs for airlines in mitigating against possible further acts of terrorism,
which may result in reduced profits and possible solvency issues for some
airlines.
European Concentration. At June 17, 2002, 53.0% of the aircraft by appraised
value at February 19, 2002 were leased by operators based in Europe. Of this
amount, lessees of 46.53% of the aircraft were based in "developed" European
markets, principally the United Kingdom and Spain. Lessees of the remaining
6.47% of the aircraft were based in "emerging" European markets, principally
Turkey. As of June 17, 2002, 22.5% of the aircraft by appraised value at
February 19, 2002 were leased to lessees in the United Kingdom.
The commercial aviation industry in Europe is very sensitive to general
economic conditions. Since air travel is largely discretionary, the industry
tends to suffer severe financial difficulties during slow economic periods. As
a result, the financial prospects for European lessees will depend on the level
of economic activity in Europe and in the specific countries where they
operate. A recession or other worsening of economic conditions in any European
country particularly if combined with high fuel prices and / or a weak euro,
may adversely affect the European lessees' ability to meet their financial and
other obligations. Since European airlines primarily receive their revenue in
euro, any weakness in the euro may adversely affect the ability of those
airlines to meet dollar denominated lease rental, fuel and other operating
costs. Competitive pressures from continuing deregulation of the airline
industry by the EU may also adversely affect European lessees' operations and
their ability to meet their obligations under the leases. In addition, the long
term effect that the recent terrorist attacks in the United States and military
action in Afghanistan and any future military action in the Middle East may
have for the European aviation industry is not yet fully known and although
European airlines currently do not appear to be as adversely impacted as
airlines in the United States, the immediate effects have included, among other
things, a drop in passenger confidence in air travel with a consequent decrease
in demand for air travel, increased security costs for European airlines,
grounding of aircraft,
Page 9
reduced profits and possible solvency or even bankruptcy issues for some
airlines which may result in the consolidation of some European airlines, and
may affect the prospects of AerCo's European lessees.
At June 17, 2002, 3.2% of the aircraft by appraised value at February 19, 2002
were on lease to Turkish lessees. Any fall in value of the Euro, the principal
currency in which Turkish airlines receive their revenues, against the U.S.
dollar, may affect the ability of these airlines to pay U.S. dollar denominated
costs including lease rentals. The long-term effect which the recent terrorists
attacks in the United States and resulting military action in Afghanistan and
any future military action in the Middle East may have for the Turkish aviation
industry is not yet fully known. However, the immediate effects have included,
among other things, a drop in passenger confidence in air travel to and from
Turkey and a consequent decrease in demand for air travel resulting in the
grounding of aircraft which, together with the continued weakness of the Euro
against the U.S. dollar, may lead to significant increases in operating costs
for airlines based in Turkey. This may adversely impact the ability of such
airlines to perform their lease obligations to AerCo Group in the future.
Compliance with Governmental and Technical Regulations. Aviation authorities in
Europe and North America have recently adopted regulations requiring the
installation of Traffic Collision Avoidance Systems, Emergency Locator
Transmitters, Enhanced Ground Proximity Warning Systems, Cargo Compartment Fire
Detection and Suppression systems, additional Flight Data Recorder parameters
and certain other systems in all aircraft by 2005. Depending on whether the
costs of complying with these regulations are borne by AerCo or the lessees,
installation of these systems could result in significant cash expenditures by
AerCo in the future.
As a result of the terrorist attacks in the United States on September 11,
2001, new security directives may be adopted by aviation authorities. The
International Civil Aviation Organization ("ICAO") requires contracting states
to mandate the incorporation of enhanced security cockpit doors and cockpity
doorway surveillance systems by November 1, 2003. Depending on whether the cost
of complying with such regulations would have to be borne by AerCo or the
lessees, such regulations could result in significant cash expenditures by
AerCo in the future.
The US Federal Aviation Administration (the "FAA") has issued an Airworthiness
Directive ("AD") that requires operators of MD-11, MD-80 and DC-10 aircraft to
replace certain insulation blankets in order to reduce the risk of fire. AerCo
has eight MD-80 series aircraft representing 9.65% of the portfolio by
appraised value at February 19, 2002. AerCo will incur significant costs in
ensuring these aircraft comply with these standards. We expect to complete the
modification of three of the eight aircraft by December 2002 at an estimated
cost of approximately $1.7 million and to modify the remaining five aircraft by
April 2005 at an estimated cost of approximately $2.1 million after lessee
contributions.
The FAA has issued an AD mandating the modification of affected lapjoints on
Boeing 737 aircraft when the aircraft has completed 50,000 cycles. The
estimated labor cost to implement such modifications for each aircraft is
approximately $270,000 per aircraft. We have 31 Boeing 737 aircraft in the
portfolio, representing 48.37% of the portfolio by appraised value at February
19, 2002. Based on the current cycles completed to date by AerCo's Boeing 737
aircraft, these Boeing 737 aircraft are not likely to require these
modifications prior to 2008. However, AerCo could incur significant costs in
ensuring its Boeing 737 aircraft comply with these standards, which could
impact adversely on AerCo's results of operations.
The FAA is also expected to issue an AD in the near future mandating a
re-design of the rudder systems of Boeing 737 aircraft. The average cost per
aircraft of such modifications is expected to be approximately $50,000. We have
31 Boeing 737 aircraft in the portfolio, representing 48.37% of the portfolio
by appraised value at February 19, 2002. Depending on the time period within
which such modifications are required to be made, the costs may be the
responsibility of the existing lessees. However, if the costs are not the
responsibility of some or all existing lessees, AerCo could incur significant
costs in ensuring its Boeing 737 aircraft comply with such modifications, which
could impact adversely on AerCo's results of operations.
All aircraft engines in the AerCo portfolio are subject to a number of mandated
inspections which are accomplished while the engine is installed on the
aircraft. In the event that an engine fails such an inspection, a shop visit
repair of the engine may be required earlier than anticipated based on normal
operating performance. Depending on whether the cost of carrying out the shop
visit would have to be borne by AerCo or the lessees, such as mandated repairs
could result in significant cash expenditures by AerCo in the future.
Page 10
AERCO Cashflow Performance for the Period from March 15, 2002 to June 17, 2002
Comparison of Actual Cash flows versus Adjusted Base Case Cash Flows
Adjusted Adjusted
Actual Base Case Variance Actual Base Case Variance
------ --------- -------- ------ --------- --------
CASH COLLECTIONS
1 Lease Rentals 45.74 45.74 (0.00) 100.0% 100.0% (0.0%)
2 - Renegotiated Leases (3.00) 0.00 (3.00) (6.6%) 0.0% (6.6%)
3 - Rental Resets (3.20) 0.00 (3.20) (7.0%) 0.0% (7.0%)
4 - Aircraft Sales 0.00 0.00 0.00 0.0% 0.0% 0.0%
------------------------------------ ----------------------------------
5 1 - 5 Contracted Lease Rentals 39.54 45.74 (6.20) 86.4% 100.0% (13.6%)
6 Movement in Current Arrears (0.50) 0.00 (0.50) (1.1%) 0.0% (1.1%)
Balance
7 less Net Stress Related Costs
8 - Bad Debts 0.00 (0.46) 0.46 0.0% (1.0%) 1.0%
9 - Security Deposits drawn down 0.00 0.00 0.00 0.0% 0.0% 0.0%
10 - Deferred Arrears (0.54) 0.26 (0.80) (1.2%) 0.6% (1.7%)
11 - AOG 0.00 (1.93) 1.93 0.0% (4.2%) 4.2%
12 - Other Leasing Income 0.00 0.00 0.00 0.0% 0.0% 0.0%
13 - Repossession 0.00 (0.37) 0.37 0.0% (0.8%) 0.8%
------------------------------------ ----------------------------------
14 8 - 13 Sub-total (0.54) (2.50) 1.96 (1.2%) (5.5%) 4.3%
15 5+6+14 Net Lease Rental 38.50 43.24 (4.74) 84.2% 94.5% (10.4%)
16 Interest Earned 0.40 0.91 (0.51) 0.9% 2.0% (1.1%)
17 Aircraft Sales 0.00 0.00 0.00 0.0% 0.0% 0.0%
18 Net Maintenance (4.00) 0.00 (4.00) (8.7%) 0.0% (8.7%)
------------------------------------ ----------------------------------
19 15 - 18 Total Cash Collections 34.90 44.15 (9.25) 76.3% 96.5% (20.2%)
==================================== ==================================
CASH EXPENSES
Aircraft Operating Expenses
20 - Insurance (0.30) 0.00 (0.30) (0.7%) 0.0% (0.7%)
21 - Re-leasing and other overheads (1.40) (0.90) (0.50) (3.1%) (2.0%) (1.1%)
------------------------------------ ----------------------------------
22 20+21 Sub-total (1.70) (0.90) (0.80) (3.7%) (2.0%) (1.7%)
SG&A Expenses
23 Aircraft Servicer Fees
- Retainer Fee (0.50) (0.40) (0.10) (1.1%) (0.9%) (0.2%)
- Rent Collected Fee (0.50) (0.40) (0.10) (1.1%) (0.9%) (0.2%)
- Previous Servicer 0.00 0.00 0.00 0.0% 0.0% 0.0%
- Sales Fee 0.00 0.00 0.00 0.0% 0.0% 0.0%
------------------------------------ ----------------------------------
24 23 Sub-total (1.00) (0.80) (0.20) (2.2%) (1.7%) (0.4%)
25 Other Servicer Fees (1.30) (1.38) 0.08 (2.8%) (3.0%) 0.2%
------------------------------------ ----------------------------------
26 24+25 Sub-total (2.30) (2.18) (0.12) (5.0%) (4.8%) (0.3%)
==================================== ==================================
------------------------------------ ----------------------------------
27 26+22 Total Cash Expenses (4.00) (3.08) (0.92) (8.7%) (6.7%) (2.0%)
==================================== ==================================
NET CASH COLLECTIONS
28 19 Total Cash Collections 34.90 44.15 (9.25) 76.3% 96.5% (20.2%)
29 26 Total Cash Expenses (4.00) (3.08) (0.92) (8.7%) (6.7%) (2.0%)
30 Movement on Expense Account 1.20 0.00 1.20 2.6% 0.0% 2.6%
31 Interest Payments (9.50) (23.10) 13.60 (20.8%) (50.5%) 29.7%
32 Swap Payments (10.50) 0.43 (10.93) (23.0%) 0.9% (23.9%)
------------------------------------ ----------------------------------
33 28 - 32 TOTAL 12.10 18.40 (6.30) 26.5% 40.2% (13.8%)
==================================== ==================================
33 PRINCIPAL PAYMENTS
Subclass A 9.10 15.40 (6.30) 19.9% 33.7% (13.8%)
Subclass B 1.80 1.80 0.00 3.9% 3.9% 0.0%
Subclass C 1.20 1.20 0.00 2.6% 2.6% 0.0%
Subclass D 0.00 0.00 0.00 0.0% 0.0% 0.0%
------------------------------------ ----------------------------------
Total 12.10 18.40 (6.30) 26.5% 40.2% (13.8%)
==================================== ==================================
*Adjusted Base Case - The cashflows and expenses assumed in the July 2000
Offerring Memorandum ("Base Case") have been adjusted to reflect the sale of
one B757-200 (MSN 28486) on April 9, 2001 which was not anticipated at the time
of preparation of the Base Case.
Page 11
Coverage Ratios
Adjusted
Closing Actual Base Case
------- ------ ---------
Net Cash Collections 9.5 23.1
Add Back Interest and
Swap Payments 10.5 (0.4)
Add Back Permitted Accruals
a Net Cash Collections 32.1 41.1
(excl. interest and swap payments)
b Swaps 10.5 (0.4)
c Class A Interest 5.2 15.0
d Class A Minimum 0.0 0.0
e Class B Interest 1.0 2.5
f Class B Minimum 0.1 0.1
g Class C Interest 1.5 3.3
h Class C Minimum 0.0 0.0
I Class D Interest 2.1 2.1
j Class D Minimum
k Class A Scheduled
l Class B Scheduled 1.6 1.6
m Class C Scheduled 1.2 1.2
n Class D Scheduled
o Permitted Aircraft Modificatons
p Step-up Interest
r Class A Supplemental 8.9 15.7
s Class E Primary Interest 0.0 0.0
t Class B Supplemental 0.0 0.0
u Class A Outstanding 0.0 0.0
------------ ------------
Total 32.1 41.1
------------ ------------
[1] Interest Coverage Ratio
Class A 2.05 2.82 = a/(b+c)
Class B 1.93 2.41 = a/(b+c+d+e)
Class C 1.76 2.01 = a/(b+c+d+e+f+g)
Class D 1.58 1.82 = a/(b+c+d+e+f+g+h+i)
[2] Debt Coverage Ratio
Class A 1.58 1.82 = a/(b+c+d+e+f+g+h+I+j+k)
Class B 1.46 1.70 = a/(b+c+d+e+f+g+h+I+j+k+l)
Class C 1.39 1.62 = a/(b+c+d+e+f+g+h+I+j+k+l+m)
Class D 1.39 1.62 = a/(b+c+d+e+f+g+h+I+j+k+l+m+n)
Loan to Value Ratios (in 100,000 dollars)
[3] Assumed Portfolio Value 1,566.7 1,358.9 1,358.9
[4] Adjusted Portfolio Value (105%) 1,345.0
Liquidity Reserve Amount
Of which - Cash 65.0 65.0 65.0
- Accrued Expenses 5.0 6.0 5.0
- Security Deposit 22.4 17.1 22.4
------------ ------------ ------------
Subtotal 92.4 88.1 92.4
Letters of Credit 0.0 0.0 0.0
Subtotal 92.4 88.1 92.4
[5] Total Asset Value 1,659.1 1,447.0 1,451.3
Note Balances as at June 15, 2002
Class A 998.4 844.9 841.0
Class B 154.8 134.7 134.5
Class C 164.1 158.9 158.9
Class D 100.0 100.0 100.0
------------ ------------ ------------
1,417.3 1,238.5 1,234.4
------------ ------------ ------------
[1] Interest Coverage Ratio is equal to Net Cash Collections (excl. interest
and swap payments) expressed as a ratio of the interest payable on each
subclass of Notes plus the interest and minimum principal payments payable
on each subclass of Notes that rank senior in priority of payment to the
relevant subclass of Notes.
[2] Debt Service Ratio is equal to Net Cash Collections (excl. interest and
swap payments) expressed as a ratio of the interest and minimum and
scheduled principal payments payable on each subclass of Note plus the
interest and minimum and scheduled principal payments payable on each
subclass of Notes that ranks equally with or senior to the relevant
subclass of Notes in the priority of payments.
[3] Assumed Portfolio Value represents the Initial Appraised Value of each
aircraft in the Portfolio multipled by the Depreciation Factor at
Calculation Date divided by the Depreciation Factor at Closing Date.
[4] Adjusted Portfolio Value represents the Base Value of each aircraft in the
Portfolio as determined by the most recent Appraisal multiplied by the
Depreciation Factor at Calculation date divided by the Depreciation Factor
at Closing Date.
The lower of the Assumed Portfolio Value or 105% of the Adjusted Portfolio
Value is used to calculate the principal repayment amounts to Noteholders.
[5] Total Asset Value is equal to Total Assumed Portfolio Value plus Liquidity
Reserve Amount.
Page 12
AERCO Cashflow Performance for the Period from July 17, 2000 to June 17, 2002
Comparison of Actual Cash flows versus Adjusted Base Case Cash Flows
Actual Base Case Variance Actual Base Case Variance
------ --------- -------- ------ --------- --------
CASH COLLECTIONS
1 Lease Rentals 354.14 354.14 (0.00) 100.0% 100.0% 0.0%
2 - Renegotiated Leases (10.90) 0.00 (10.90) (3.1%) 0.0% (3.1%)
3 - Rental Resets (11.80) 0.00 (11.80) (3.3%) 0.0% (3.3%)
4 - Aircraft Sales 0.00 0.00 0.00 0.0% 0.0% 0.0%
----------------------------------- --------------------------------
5 1 - 5 Contracted Lease Rentals 331.44 354.14 (22.70) 93.6% 100.0% (6.4%)
6 Movement in Current Arrears (2.30) 0.00 (2.30) (0.6%) 0.0% (0.6%)
Balance
7 less Net Stress Related Costs
8 - Bad Debts 0.00 (3.66) 3.66 0.0% (1.0%) 1.0%
9 - Security Deposits drawn down 0.50 0.00 0.50 0.1% 0.0% 0.1%
10 - Capitalised Arrears (1.04) 2.86 (3.90) (0.3%) 0.8% (1.1%)
11 - AOG (6.20) (14.93) 8.73 (1.8%) (4.2%) 2.5%
12 - Other Leasing Income 0.00 0.00 0.00 0.0% 0.0% 0.0%
13 - Repossession (0.30) (2.87) 2.57 (0.1%) (0.8%) 0.7%
----------------------------------- --------------------------------
14 8 - 13 Sub-total (7.04) (18.60) 11.56 (2.0%) (5.3%) 3.3%
15 5+6+14 Net Lease Rental 322.10 335.54 (13.44) 91.0% 94.7% (3.8%)
16 Interest Earned 7.40 7.01 0.39 2.1% 2.0% 0.1%
17 Aircraft Sales 50.50 51.00 (0.50) 14.3% 14.4% (0.1%)
18 Net Maintenance 9.20 0.00 9.20 2.6% 0.0% 2.6%
----------------------------------- --------------------------------
19 15 - 18 Total Cash Collections 389.20 393.55 (4.35) 109.9% 111.1% (1.2%)
=================================== ================================
CASH EXPENSES
Aircraft Operating Expenses
20 - Insurance (0.40) 0.00 (0.40) (0.1%) 0.0% (0.1%)
21 - Re-leasing and other overheads (10.00) (9.70) (0.30) (2.8%) (2.7%) (0.1%)
----------------------------------- --------------------------------
22 20+21 Sub-total (10.40) (9.70) (0.70) (2.9%) (2.7%) (0.2%)
SG&A Expenses
23 Aircraft Servicer Fees
- Retainer Fee (2.80) (3.00) 0.20 (0.8%) (0.8%) 0.1%
- Rent Collected Fee (3.20) (3.40) 0.20 (0.9%) (1.0%) 0.1%
- Previous Servicer (1.80) 0.00 (1.80) (0.5%) 0.0% (0.5%)
- Sales Fee (0.50) 0.00 (0.50) (0.1%) 0.0% (0.1%)
----------------------------------- --------------------------------
24 23 Sub-total (8.30) (6.40) (1.90) (2.3%) (1.8%) (0.5%)
25 Other Servicer Fees (15.50) (9.08) (6.42) (4.4%) (2.6%) (1.8%)
----------------------------------- --------------------------------
26 24+25 Sub-total (23.80) (15.48) (8.32) (6.7%) (4.4%) (2.3%)
=================================== ================================
----------------------------------- --------------------------------
27 26+22 Total Cash Expenses (34.20) (25.18) (9.02) (9.7%) (7.1%) (2.5%)
=================================== ================================
NET CASH COLLECTIONS
28 19 Total Cash Collections 389.20 393.55 (4.35) 109.9% 111.1% (1.2%)
29 26 Total Cash Expenses (34.20) (25.18) (9.02) (9.7%) (7.1%) (2.5%)
30 Movement on Expense Account 8.70 0.00 8.70 2.5% 0.0% 2.5%
31 Interest Payments (142.40) (189.30) 46.90 (40.2%) (53.5%) 13.2%
32 Swap Payments (42.60) 3.83 (46.43) (12.0%) 1.1% (13.1%)
----------------------------------- --------------------------------
33 28 - 32 TOTAL 178.70 182.90 (4.20) 50.5% 51.6% (1.2%)
=================================== ================================
33 PRINCIPAL PAYMENTS
Subclass A 153.50 157.50 (4.00) 43.3% 44.5% (1.1%)
Subclass B 20.10 20.30 (0.20) 5.7% 5.7% (0.1%)
Subclass C 5.10 5.10 0.00 1.4% 1.4% 0.0%
Subclass D 0.00 0.00 0.00 0.0% 0.0% 0.0%
----------------------------------- --------------------------------
Total 178.70 182.90 (4.20) 50.5% 51.6% (1.2%)
=================================== ================================
Page 13
% of
Appraised Aircraft
Value at % of by
Date of February Aircraft Appraised
Aircraft Engine Serial Manufacture 19, 2002 Appraised Value in
No. Region Country Lessee Type Configuration Number Conversion (US$ m) Value Region
- ------------------------------------------------------------------------------------------------------------------------------------
1. Asia China China Xinjiang B757-200 RB211-535E4 26153 Aug-92 34,663 2.7%
2. (Emerging) China China Southern B737-300 CFM56-3C1 26068 Jun-92 20,977 1.6%
3. China China Southern B737-300 CFM56-3C1 25604 Jan-93 20,760 1.6%
4. China Xiamen Airlines B737-500 CFM56-3C1 27153 Aug-93 19,260 1.5%
5. China Xiamen Airlines B737-500 CFM56-3C1 27155 Mar-93 19,657 1.5%
6. India Indian Airlines A300B4-200 CF6-50C2 240 May-83 8,137 0.6%
7. Indonesia Mandala Airlines B737-400 CFM56-3C1 23868 Oct-88 20,047 1.5%
8. Philippines PAL B737-300 CFM56-3B1 24465 Aug-89 18,130 1.4%
9. Philippines PAL B737-300 CFM56-3B1 24677 Mar-90 18,733 1.4%
10. Philippines PAL B737-400 CFM56-3C1 25594 May-92 23,340 1.8%
11. South Korea Asiana B737-400 CFM56-3C1 25764 Jun-92 22,570 1.7%
12. South Korea Asiana B737-400 CFM56-3C1 25765 Jul-92 22,830 1.8%
13. South Korea Asiana B737-500 CFM56-3C1 25768 May-95 20,683 1.6%
14. Taiwan FEAT MD83 JT8D-219 49952 Dec-91 17,760 1.4%
Sub-total 22.1%
15. Europe Italy Volare Spa A320-200 CFM5-5A1 85 Feb-90 23,280 1.8%
16. (Developed) Italy Blue Panorama B737-400 CFM56-3C1 24901 May-90 22,220 1.7%
17. Italy Blue Panorama B737-400 CFM56-3C1 27074 Apr-92 23,480 1.8%
18. Spain Spanair B767-300ER PW4060 24999 Feb-91 48,230 3.7%
19. Spain Spanair MD83 JT8D-219 49627 Apr-89 14,810 1.1%
20. Spain Spanair MD83 JT8D-219 49790 Oct-89 15,410 1.2%
21. Spain Spanair MD-82 JT8D-217C 49570 Feb-88 13,437 1.0%
22. UK Air 2000 B757-200 RB211-535E4 26158 Feb-93 37,237 2.9%
23. UK Airtours A320-200 CFM56-5A3 299 Apr-92 25,387 2.0%
24. UK Airtours A320-200 V2500-A1 362 Nov-92 24,600 1.9%
25. UK British Midland A320-200 V2527-A5 934 Jan-99 37,273 2.9%
26. UK British Midland A321-200 V2533-A5 1207 Apr-00 48,767 3.7%
27. UK Monarch A320-200 CFM56-5A3 391 Feb-93 26,650 2.0%
28. UK British Airways B737-500 CFM56-3C1 25789 Feb-92 19,583 1.5%
29. UK British Airways B737-300 CFM56-3C1 24908 Mar-91 20,420 1.6%
30. UK JMC Airlines A320-200 V2500-A1 354 Oct-92 25,230 1.9%
31. UK JMC Airlines A320-200 V2500-A1 411 Mar-93 27,180 2.1%
32. Belgium Virgin Express B737-400 CFM56-3C1 24270 May-89 20,190 1.6%
33. Belgium Virgin Express B737-400 CFM56-3C1 24271 Jun-89 20,123 1.5%
34. Belgium Virgin Express B737-300 CFM56-3B2 25041 Mar-91 20,387 1.6%
35. Finland Finnair MD-82 JT8D-219 49905 Oct-90 15,680 1.2%
36. Finland Finnair MD-82 JT8D-219 53245 Apr-92 16,037 1.2%
37. France Europe Airpost B737-300QC CFM56-3B2 24021 Nov-88 19,320 1.5%
38. France Aigle Azur B737-400 CFM56-3C1 26066 Jun-92 23,077 1.8%
39. Norway Braathens SAFE B737-500 CFM56-3C1 24651 Apr-90 17,790 1.4%
Sub-total 46.5%
40. Europe Hungary Malev B737-300 CFM56-3C1 24909 Apr-91 19,500 1.5%
41. (Emerging) Hungary Malev B737-400 CFM56-3C1 24904 Feb-91 23,107 1.8%
42. Turkey Pegasus B737-400 CFM56-3C1 23979 Jan-89 19,913 1.5%
43. Turkey Pegasus B737-400 CFM56-3C1 24685 May-90 21,707 1.7%
Sub-total 6.5%
44. Latin America Brazil TAM Fokker 100 TAY650-15 11341 Aug-91 9,963 0.8%
45. (Emerging) Brazil TAM Fokker 100 TAY650-15 11350 Apr-92 10,337 0.8%
46. Brazil TAM Fokker 100 TAY650-15 11351 Sep-91 9,650 0.7%
47. Brazil TAM Fokker 100 TAY650-15 11320 Apr-91 9,237 0.7%
48. Brazil TAM Fokker 100 TAY650-15 11322 Jun-91 8,723 0.7%
49. Brazil Nordeste B737-500 CFM56-3C1 26067 Jun-92 18,843 1.4%
50. Brazil Varig B737-300 CFM56-3C1 24834 Jun-90 18,690 1.4%
51. Chile AILL (1) DC8-71F CFM56-2C1 46040 Mar-91 11,543 0.9%
52. Columbia Avianca B757-200 RB211-535E4 26152 Aug-92 33,750 2.6%
Sub-total 10.0%
53. North America Canada Air Canada A320-200 CFM56-5A1 403 Dec-93 28,333 2.2%
54. (Devoloped) Canada Air Canada B767-300ER PW4060 24947 Mar-91 49,027 3.8%
55. USA BAX Global DC8-71F CFM56-2C1 46064 Mar-92 9,413 0.7%
56. USA Delta B737-300 CFM56-3B1 23345 Jul-85 13,110 1.0%
57. USA Vanguard Airlines
Inc. MD-82 JT8D-219 49931 Aug-90 16,177 1.2%
58. USA Vanguard Airlines
Inc. MD-82 JT8D-219 49932 Sep-90 16,240 1.2%
59. USA Frontier B737-300 CFM56-3C1 24856 Aug-90 19,407 1.5%
60. USA Frontier B737-300 CFM56-3B2 26440 Mar-92 20,847 1.6%
61. USA Frontier B737-300 CFM56-3B2 26442 May-92 21,003 1.6%
Sub-total 14.9%
-----------------------------
Total 1,301,865 100.0% 100.0%
=============================
1. Aircraft International Leasing Limited is an indirect 100% subsidiary of
Lan Chile.
Pages 14 & 15