1
Exhibit 2
AIRPLANES GROUP PERFORMANCE ASSUMPTIONS
We have determined the expected final payment date, weighted average life
and yield of the subclass A-9 notes and certificates based on the assumptions
regarding Airplanes Group's future performance as described below. We refer to
the scenario in which all of these assumptions prove to be correct as our "Base
Case" in this report. In the following discussion, we have separately identified
and numbered for your ease of reference the assumptions that relate to the line
items that are contained in the monthly cash reports to you that we describe
under "Reports to Certificate Holders."
We have set out in the tables that follow the possible revenue scenarios
that we developed by fixing some of the assumptions and varying other
assumptions and factors that affect Airplanes Group's revenues, costs and
expenses. The assumptions do not represent a complete list of the factors that
may affect the revenues, costs and expenses of Airplanes Group, but rather
indicate those factors that could significantly affect Airplanes Group's
performance in future years. In addition, the range of possible outcomes with
respect to each assumption and the combinations of assumptions do not indicate a
comprehensive set of possible results for Airplanes Group. More severe stresses
than we have included in the tables may lead to payments of principal on the
notes, and hence also on the certificates, being delayed or decreased or, in
some cases, to an event of default.
Accordingly, you should understand that the following tables are only an
illustration of some, but not all, of the payment sensitivities of the subclass
A-9 notes and certificates to some, but not all, market and economic stresses,
and are not intended to be projections, estimates, forecasts or forward-looking
statements. It is highly likely that actual experience will vary from the
assumptions and the possible revenue scenarios reflected in the tables. The
principal factors that could cause Airplanes Group's actual revenues to differ
materially from such scenarios are the stresses we describe below and various
risk factors, including the risks that we may not be entitled to the benefits of
the U.S.-Irish tax treaty or that we lose a part of our net operating loss
carryforwards.
We have not updated or revised the information presented to reflect changes
occurring after February 9, 2001 and we do not intend to do so. As of February
20, 2001, however, we are not aware of events or circumstances since February 9,
2001 that would cause the assumptions to be unreasonable.
SUMMARY OF THE BASE CASE
The table below shows our Base Case by reference to the line items
contained in the "Summary Performance to Date" section of our future monthly
cash reports to certificate holders. In this table, Base Case items are shown as
a percentage of lease rentals on the basis of the 193 aircraft in our portfolio
as of January 31, 2001.
BASE CASE RELATED ASSUMPTION
--------- ------------------
(SEE BELOW)
------------------
Lease rentals............................................... 100.0% (1)
Net stress-related costs.................................... (6.0) (2)
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Net lease rentals........................................... 94.0
Interest earned............................................. 2.0 (3)
Net maintenance............................................. 0.0 (4)
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Total cash collections...................................... 96.0
Aircraft operating expenses................................. (5.0) (5)
SG&A(1)..................................................... (8.0) (6)
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Total cash expenses......................................... (13.0)
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Net cash collections........................................ 83.0%
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(1) Stated as a percentage of Assumed First Year's Net Revenue.
2
Net cash collections represent the amount available to pay interest and
principal on the notes and certificates.
PRIMARY REVENUE ASSUMPTIONS
We make the following assumptions about each of our main revenue line
items.
LEASE RENTALS
"LEASE RENTALS" represents all rental payments received under the leases
and the net proceeds of any aircraft sales.
We assume that: (1)
- we re-lease aircraft coming off lease at a monthly rental rate that is a
function of the age of the aircraft and the contracted monthly rental
rate as of February 9, 2001, with lease rates being assumed to decline
according to the following schedule:
YEAR IN AIRCRAFT'S PERCENTAGE DECLINE
EXPECTED USEFUL LIFE PER ANNUM
-------------------- ------------------
1-5 2%
6-15 1%
16-20 3%
21-25 5%
- we sell each aircraft only at the end of its expected useful life for a
price that is equal to 12% of the aircraft's assumed value when new,
except for the three B737-200A aircraft which are subject to existing
finance leases where their value is assumed to be the final payment under
the finance leases, which is $1 million for each of the aircraft.
NET STRESS-RELATED COSTS
"NET STRESS-RELATED COSTS" represents the net total of lost revenue due to
the combination of the following five inter-related items:
-- lost rental revenue due to aircraft downtime following the termination
or expiration of a lease;
-- bad debts realized and/or provided for; and
-- aircraft repossession costs
offset by
-- security deposits drawn after an event of default; and
-- other leasing income, which includes lease termination payments and
default interest.
- We assume that net stress-related costs are 6% per annum of lease
rentals. (2)
INTEREST EARNED
"INTEREST EARNED" represents interest earned by funds on deposit in the
collection account and any other cash balances, including the cash portion of
the liquidity reserve amount, which includes rental payments received, security
deposits and accrued maintenance expenses.
- We assume that the interest rate at which the cash balances described
above earn interest is one month LIBOR. (3)
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NET MAINTENANCE
"NET MAINTENANCE" represents maintenance payments received from lessees
under the terms of the applicable leases, less maintenance costs that we make or
expect to incur under the leases and any modification payments that we make.
- We assume that net maintenance is zero overall, although there are
likely to be variations from period to period due to the unpredictable
timing of payments. (4)
OTHER REVENUE-RELATED ASSUMPTIONS
In addition to the revenue assumptions above, we make the following
revenue-related assumptions.
- We assume that future lease terms are five years.
- We assume that we grant no purchase options to lessees and that no
existing purchase options are exercised except for the three B737-200A
aircraft which are subject to existing finance leases.
- We assume that we grant no new lease termination or extension options to
lessees and that existing termination or extension options are exercised
only when to do so would result in a rental rate at the time that is
lower than the rental rate that we would otherwise assume under
assumption (1) above.
- We assume that each aircraft has an expected useful life that
corresponds to its aircraft type as set forth in the table below or, if
longer, the number of years from the date of manufacture or conversion
to freighter service of the aircraft to the date of termination of the
current lease of the aircraft:
EXPECTED
AIRCRAFT TYPE USEFUL LIFE
------------- -----------
(YEARS)
Passenger Jet Aircraft.............................. A300 25
A320-200 25
B727-200A 22.5
B737-200A 25
B737-300/400/500 25
B757-200 25
B767-200ER/300ER 25
DC9-32/51 22.5-25
F-100 25
MD-11 25
MD-82/3/7 25
Freighter Jet Aircraft(1)........................... B747-200SF 20
DC8-71F/73CF 20
Turboprops.......................................... ATR42-300 22.5
DHC8-100/300/300C 22.5
METRO-III 22.5
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(1) Expected Useful Life in years from the date of conversion to
freighter service.
- We assume that aircraft values decline over time in accordance with the
depreciation curve described under "Description of Securities -- The
Notes and Guarantees -- Principal Amortization of Floating Rate Notes."
EXPENSE-RELATED ASSUMPTIONS
We make the following assumptions about each of our main expenses.
AIRCRAFT OPERATING EXPENSES
"AIRCRAFT OPERATING EXPENSES" represent certain operating costs incurred in
the ordinary course of the operating lease business, including insurance
expenses and leasing transaction expenses.
- We assume that aircraft operating expenses are 5.0% per annum of lease
rentals. (5)
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SG&A
"SG&A EXPENSES" represents the sum of the following expense items:
-- fees paid to GECAS as servicer of the aircraft, a portion of which will
decrease with the number of aircraft remaining in the portfolio, as
described under "Management of Airplanes Group -- The Servicer;"
-- fees paid to the administrative agent, an element of which (currently $2
million) will begin to decrease proportionately according to the number
of aircraft remaining in our portfolio, after our portfolio has been
reduced to 153 aircraft;
-- fees paid to the cash manager;
-- legal fees, underwriting fees, printing and other expenses of the
issuance and sale of any refinancing certificates and any certificates
issued in the exchange offer for the subclass A-9 certificates, as
described under "Description of Securities -- Registration
Requirements;" and
-- other selling, general and administrative expenses and other expenses.
- Assumed SG&A expenses is approximately 8.0% per annum of lease rentals
for the twelve months ending March 15, 2002, declining over time
thereafter as mentioned above. (6)
FINANCING-RELATED ASSUMPTIONS
We make the following financing-related assumptions:
- We assume that one month LIBOR remains constant at % per
annum.
- We assume that Airplanes Group makes and receives swap payments in
accordance with the contracted terms of the swaps that we will have in
place on the closing date of this offering.
- We assume that we issue A-9 certificates that rank equally in right of
payment with the outstanding class A certificates and senior to the
other classes of certificates outstanding, in each case in amounts and
with interest rates as set forth in the following table, and that we
make payments in accordance with the order of priorities set forth under
"Description of the Securities -- The Notes and Guarantees -- Priority
of Payments."
OUTSTANDING
PRINCIPAL
AMOUNT AT
CLASS OR SUBCLASS MARCH 15, 2001 ANNUAL INTEREST RATE
----------------- ------------------ ------------------------
($ MILLIONS)
A-4...................................... LIBOR + 0.620%
A-6...................................... LIBOR + 0.340%
A-8...................................... LIBOR + 0.375%
A-9...................................... LIBOR + %
B........................................ LIBOR + 0.750%
C........................................ 8.150%
D........................................ 10.875%
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- We assume that we will issue and sell refinancing certificates on the
expected final payment dates of each of the subclass A-4 and A-8
certificates and, if issued as soft bullet certificates, the A-9
certificates and on each subsequent expected final payment date of any
refinancing certificates that are soft bullet certificates on the same
terms with respect to payment priority, redemption and interest rate as
the certificates being refinanced and with maturities and amortization
schedules paid with the application of the Minimum and Supplemental
Principal Payment Amounts.
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PRINCIPAL REPAYMENTS UNDER THE BASE CASE
The following table shows, for each payment date presented, the percentage
of the initial outstanding principal balance of the subclass A-4, A-6, A-8 and
A-9 certificates expected to be outstanding on the payment date based on the
assumptions. It is highly unlikely that the assumptions will correspond to
actual experience. Therefore, principal payments on the certificates may occur
earlier or later than set forth in the table. Airplanes Group may fail to pay
principal of any class or subclass of its certificates on or prior to the
expected final payment date of that class or subclass because it does not have
the funds to make the payment according to the priorities described under "--
Priority of Payments." Such a failure will not, by itself, be an event of
default.
PERCENT OF INITIAL OUTSTANDING PRINCIPAL BALANCE OF THE
CERTIFICATES BASED ON THE BASE CASE
AGGREGATE
CLASS A
CERTIFICATES,
INCLUDING
REFINANCING
PAYMENT DATE OCCURRING IN MARCH A-4 A-6 A-8 A-9 CERTIFICATES
- ------------------------------- ------- ------ ------ ------- -------------
2001 (March 15)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Weighted Average Life (years)
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The "WEIGHTED AVERAGE LIFE" of a certificate equals P/I, where:
P = the sum of the following amounts calculated for each payment date: A X
Y,
where:
A = the principal amount that is assumed to be paid on that payment
date, and
Y = the number of years from the date that class or subclass of
certificates was issued to the relevant payment date, and
I = the initial principal balance of the relevant class or subclass of
certificate.
In each of the following tables, "EXPECTED MATURITY" means the period,
expressed in years, from March 15, 2001 through the expected final payment date.
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EFFECT OF INABILITY TO REFINANCE SUBCLASS A-4 AND SUBCLASS A-8 CERTIFICATES
The table below is based on the assumptions we described above, except that
we have assumed that no refinancing certificates are issued. If no refinancings
occur, the expected maturities (Exp) and weighted average lives (Avg) of the
certificates would be as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
EXPECTED MATURITY/
WEIGHTED AVERAGE LIFE
------------------------------------
BASE CASE NO REFINANCINGS
-------------- ----------------
EXP AVG EXP AVG
---- ---- ----- -----
Subclass A-9..........................................
MINIMUM REVENUE PERCENTAGE REQUIRED TO RETIRE CERTIFICATES
The table below shows the minimum percentage of lease rentals that will be
necessary to repay all interest and principal on the subclass A-9 certificates
by the final maturity date. If Airplanes Group received actual revenues below
the percentages of lease rentals indicated below and all of the other
assumptions prove to be correct, Airplanes Group would be unable to make the
required payments on the notes, which would constitute an event of default under
the certificates.
PERCENTAGE OF LEASE RENTALS NECESSARY TO REPAY THE
CERTIFICATES BY THE FINAL MATURITY DATE ASSUMING ACTUAL
EXPERIENCE CORRESPONDS TO THE BASE CASE UNTIL THE BEGINNING OF THE YEAR STATED
CLOSING DATE YEAR 3 YEAR 6 YEAR 10
------------ ------ ------ -------
Subclass A-9.........................................
EFFECT OF A PERMANENT CHANGE IN LEASE RENTALS
We have prepared the tables below based on the assumptions we described
above, except that we have varied the revenue received by Airplanes Group from
lease rentals by the indicated percentages, beginning in years 3 and 6 after the
closing date. If Airplanes Group received actual lease rentals as indicated
below and all of the other assumptions prove to be correct, then the expected
maturities and weighted average lives of the subclass A-9 certificates would be
as set forth below.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
ASSUMING A PERMANENT CHANGE IN LEASE RENTALS, BEGINNING IN YEAR 3
PERMANENT CHANGE IN LEASE RENTALS
AS A PERCENTAGE OF LEASE RENTALS
------------------------------------------------------------------------------------
BASE CASE +10% BASE CASE +5% BASE CASE BASE CASE -5% BASE CASE -10%
-------------- -------------- ------------ -------------- --------------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
----- ----- ----- ----- ---- ---- ----- ----- ----- -----
Subclass A-9.........
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
ASSUMING A PERMANENT CHANGE IN LEASE RENTALS, BEGINNING IN YEAR 6
PERMANENT CHANGE IN LEASE RENTALS
AS A PERCENTAGE OF LEASE RENTALS
------------------------------------------------------------------------------------
BASE CASE +10% BASE CASE +5% BASE CASE BASE CASE -5% BASE CASE -10%
-------------- -------------- ------------ -------------- --------------
EXP AVG EXP AVG EXP AVG EXP AVG EXP AVG
----- ----- ----- ----- ---- ---- ----- ----- ----- -----
Subclass A-9.........
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EFFECT OF PERMANENT DECLINE IN PORTFOLIO VALUE
If the value of our portfolio, as adjusted for our appraisals, becomes
significantly less than the value of our portfolio based on the assumptions we
described above, the Principal Adjustment Amount payable to holders of the class
A certificates may be increased. You should refer to the indentures for a
description of how these amounts are determined. Payment of this increased
amount may shorten the weighted average lives of the class A certificates and
lengthen the weighted average lives of the classes of certificates that rank
behind the class A certificates in priority of payment. The following tables
show the expected maturity and weighted average life of the subclass A-9
certificates if the adjusted portfolio value permanently declined to a given
percentage of the assumed portfolio value, beginning in years 1 and 5 after the
closing date.
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 1
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE BEGINNING IN YEAR 1
------------------------------------------------------------------
100% 90% 80% 70%
------------ ------------ ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
Subclass A-9
EXPECTED MATURITIES AND WEIGHTED AVERAGE LIVES OF CERTIFICATES
ASSUMING A PERMANENT CHANGE IN PORTFOLIO VALUE, BEGINNING IN YEAR 5
ADJUSTED PORTFOLIO VALUE AS A PERCENTAGE OF
ASSUMED PORTFOLIO VALUE BEGINNING IN YEAR 5
------------------------------------------------------------------
100% 90% 80% 70%
------------ ------------ ------------ ------------
EXP AVG EXP AVG EXP AVG EXP AVG
---- ---- ---- ---- ---- ---- ---- ----
Subclass A-9