1
EXHIBIT 4

THE AIRCRAFT, RELATED LEASES AND COLLATERAL

OVERVIEW

As of January 31, 2001, our portfolio comprised a total of 193 aircraft, of
which 187 aircraft were on lease to 66 lessees in 35 countries and six aircraft
were off-lease. At January 31, 2001, three of these off-lease aircraft were
subject to lease agreements and one was subject to a letter of intent for lease.
The remaining two unplaced aircraft represented 0.34% of our portfolio by
appraised value as of January 31, 2001. As of February 20, 2001, one of the
aircraft subject to a lease agreement had been delivered to an existing lessee.
As of January 31, 2001, the weighted average remaining contracted lease term of
our portfolio (by appraised value as of that same date and without giving effect
to purchase options or extension options) was 29 months of our leases are
scheduled to expire before the expected final payment date for the subclass A-9
certificates and our longest lease is scheduled to expire in September 2008.
Therefore we will be required to re-lease of our aircraft at least once before
the expected final payment date for the subclass A-9 certificates and all of
our aircraft one or more times before the final maturity date.

APPRAISALS

Under the indentures, we are required, at least once each year and in any
case no later than March 1 of each year, to deliver to the indenture trustee
appraisals of the value of each of the aircraft in our portfolio from at least
three independent appraisers. This value (the "APPRAISED VALUE") for each
aircraft is the value for that aircraft at normal utilization rates in an open,
unrestricted and stable market, adjusted to take account of the reported
maintenance standard of that aircraft, except for the aircraft that are subject
to finance leases, which are valued at their lease receivable book values. The
appraisals are not based on physical inspection of the aircraft and do not take
into account the value of the leases, maintenance reserves or security deposits.

For the appraisals as of January 31, 2001, we obtained independent
appraisals from three independent appraisers and calculated the appraised value
of each aircraft by taking the average of the three appraisals. On this basis,
the average appraised value for our portfolio of 193 aircraft was approximately
$3,135.4 million as of January 31, 2001, as compared to $3,310.1 million for the
same 193 aircraft based on appraisals as of February 18, 2000. The reduction in
value represents utilization for the period.

The appraised value of each aircraft in our portfolio by each of the three
independent appraisers as of January 31, 2001 can be found in Exhibit 3 to this
report. The aggregate appraised values calculated by each of the three
independent appraisers for our portfolio, calculated by adding up the appraised
value by that appraiser of each aircraft in our portfolio, are as follows:

AGGREGATE
APPRAISED VALUE
APPRAISER AS OF JANUARY 31, 2001
- --------- ----------------------
(IN MILLIONS)

Airclaims Limited....................................... $2,933.5
Aircraft Information Services, Inc...................... 3,195.9
BK Associates, Inc...................................... 3,276.7
--------
Average of three appraisers............................. $3,135.4

You should not rely on the appraised value as a measure of the realizable
value of any aircraft.

PORTFOLIO INFORMATION

The tables set forth below summarize important information about our
portfolio. For a more detailed analysis of the aircraft, see Exhibit 3 to this
report.

As of January 31, 2001, 95.02% of the aircraft in our portfolio by
appraised value as of that same date held or were capable of holding a noise
certificate issued under Chapter 3 of Volume 1, Part II of Annex 16 of the
Chicago Convention or have been shown to comply with the Stage 3 noise levels
set out in Section 36.5 of Appendix C of Part 36 of the United States Federal
Aviation Regulations (assuming for this purpose that turboprop aircraft are
Stage 3 aircraft). We refer to this as being "STAGE 3" compliant and call these
aircraft "STAGE 3 AIRCRAFT."

The remaining 4.98% of the aircraft by appraised value as of January 31,
2001 held or were capable of holding a noise certificate issued under Chapter 2
of the Chicago Convention or have been shown to comply with the Stage 2 noise
levels set out in Section 36.5 of Appendix C of Part 36 of the United States
Federal Aviation Regulations but do not comply with the requirements for a Stage
3 aircraft. We refer to this as being "STAGE 2" compliant and call these
aircraft "STAGE 2 AIRCRAFT." Most jurisdictions have adopted these U.S.
classifications, which consider Stage 2 aircraft that have been hushkitted to be
Stage 3 aircraft. For purposes of the table below, Stage 2 aircraft that have
been hushkitted are considered to be Stage 3 aircraft and referred to as "STAGE
3HK."

The following table lists the aircraft by type and number as of January 31,
2001 and the percentage of our portfolio they represent by appraised value as of
that same date. For the purpose of this table, turboprop aircraft are considered
to be Stage 3 aircraft.

% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
MANUFACTURER TYPE OF AIRCRAFT AIRCRAFT BODY TYPE STAGE OF JANUARY 31, 2001
- ------------ ---------------- --------- --------- ----- -------------------

Boeing (46.68%).................. B727-200A 2 Narrowbody 2 0.23%
B737-200A 16 Narrowbody 2 2.58
B737-200A 6 Narrowbody 3hk 0.79
B737-300 8 Narrowbody 3 5.07
B737-300QC 2 Narrowbody 3 1.14
B737-400 22 Narrowbody 3 16.82
B737-500 11 Narrowbody 3 6.97
B747-200SF 1 Freighter 3 0.96
B757-200 3 Narrowbody 3 3.53
B767-200ER 1 Widebody 3 1.37
B767-300ER 4 Widebody 3 7.23
McDonnell Douglas (30.52%)....... DC8-71F 18 Freighter 3 7.64
DC8-73CF 1 Freighter 3 0.54
DC9-32 6 Narrowbody 2 0.71
DC9-51 4 Narrowbody 2 0.43
MD-11 3 Widebody 3 5.94
MD-82 2 Narrowbody 3 1.06
MD-83 23 Narrowbody 3 13.82
MD-87 1 Narrowbody 3 0.39
Airbus (11.45%).................. A300-B4-200 2 Widebody 2 0.57
A300-C4-200 1 Widebody 2 0.47
A320-200 12 Narrowbody 3 10.41
Fokker (6.15%)................... F-100 16 Narrowbody 3 6.15
De Havilland of Canada (4.43%)... DHC8-100 6 Turboprop 3 0.98
DHC8-300 13 Turboprop 3 3.00
DHC8-300C 2 Turboprop 3 0.45
ATR (0.68%)...................... ATR42-300 4 Turboprop 3 0.68
Fairchild (0.09%)................ METRO-III 3 Turboprop 3 0.09
--- ------
Total.......................... 193 100.00%
=== ======

The following table sets forth the exposure of our portfolio by lessee as
of January 31, 2001 according to the number of aircraft and the appraised value
as of that same date.

% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
LESSEE(1) AIRCRAFT OF JANUARY 31, 2001
- --------- --------- -------------------

Air Canada Capital Limited.................................. 11 8.95%
Viacao Aerea Rio-Grandense S.A. (VARIG)..................... 3 5.94
Turk Hava Yollari A.O. (THY Turkish Airlines)............... 7 5.28
Aerovias Nacionales de Colombia S.A. (AVIANCA).............. 6 5.08
BAX Global Inc.............................................. 10 4.24
Airtours International Airways Limited...................... 4 3.54
Spanair S.A................................................. 6 3.50
Compania Mexicana de Aviacion, S.A. de C.V. (MEXICANA)...... 10 3.34
Rio-Sul Servicos Aereos Regionais S.A....................... 5 3.23
TAM Transportes Aereos Meridionais S.A...................... 8 3.04
China Southern Airlines Company Limited..................... 4 2.47
Malev Hungarian Airlines plc................................ 3 2.41
Trans World Airlines Inc. (TWA)............................. 2 2.39
Lan Chile Airlines.......................................... 4 2.34
Compania Hispano Irlandesa de Aviacion S.A. (FUTURA)........ 3 2.26
Aerovias de Mexico, S.A. de C.V. (AEROMEXICO)............... 9 2.15
Meridiana SpA............................................... 3 1.89
Compagnie Nationale Air France (AIR FRANCE)................. 2 1.72
Schreiner Airways B.V....................................... 7 1.58
Air Espana S.A. (AIR EUROPA)................................ 2 1.54
Air One SpA................................................. 2 1.44
Pegasus Hava Tasimaciligi A.S............................... 2 1.42
Asiana Airlines Inc......................................... 2 1.40
Emery Worldwide Airlines, Inc............................... 3 1.40
Philippine Airlines Inc..................................... 2 1.35
American Airlines Inc....................................... 2 1.28
Aircraft International Leasing Limited (A.I.L.L.)(2)........ 3 1.27
Transportes Aereos Mercantiles Pan Americanos S.A.
(TAMPA)................................................... 3 1.27
China Xinjiang Airlines..................................... 1 1.20
Transwede Leisure AB........................................ 1 1.18
America West Airlines Inc................................... 2 1.14
Balkan Bulgarian Airlines A.D............................... 2 1.13
Eurofly SpA................................................. 2 1.09
Other (33 lessees).......................................... 51 14.23
Off-lease(3)................................................ 6 2.32
--- ------
Total..................................................... 193 100.00%
=== ======

- ---------------

(1) Total number of lessees = 66

(2) A.I.L.L. is an indirect 100% subsidiary of Lan Chile.

(3) As of January 31, 2001, three of the six off-lease aircraft were subject to
lease agreements with existing lessees and one was subject to a letter of
intent for lease to a new lessee. As of February 20, 2001, one of the
aircraft subject to a lease agreement had been delivered to Philippine
Airlines, an existing lessee.

The following table sets forth the exposure of our portfolio by country of
domicile of lessees as of January 31, 2001 according to the number of aircraft
and the appraised value of the portfolio as of that same date.

% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
COUNTRY(1) AIRCRAFT OF JANUARY 31, 2001
- ---------- --------- -------------------

United States of America.................................... 29 13.06%
Brazil...................................................... 16 12.20
Canada...................................................... 11 8.95
Spain....................................................... 11 7.29
Turkey...................................................... 10 7.17
Colombia.................................................... 10 6.55
Mexico...................................................... 19 5.49
Italy....................................................... 7 4.43
United Kingdom.............................................. 8 4.33
China....................................................... 5 3.66
Chile....................................................... 7 3.61
Hungary..................................................... 3 2.41
France...................................................... 3 2.37
Indonesia................................................... 7 1.73
Netherlands................................................. 7 1.58
South Korea................................................. 2 1.40
Philippines................................................. 2 1.35
Tunisia..................................................... 2 1.26
Sweden...................................................... 1 1.18
Bulgaria.................................................... 2 1.13
Other (15 countries)........................................ 25 6.51
Off-lease(2)................................................ 6 2.32
--- ------
Total..................................................... 193 100.00%
=== ======

- ---------------

(1) Total number of countries = 35

(2) As of January 31, 2001, three of the six off-lease aircraft were subject to
lease agreements with lessees in Indonesia and the Philippines and one was
subject to a letter of intent for lease to a lessee in the U.K. As of
February 20, 2001, one of the aircraft subject to a lease agreement had been
delivered to a lessee in the Philippines.

The following table sets forth the exposure of our portfolio by regions in
which lessees are domiciled as of January 31, 2001 according to the number of
aircraft and the appraised value of our portfolio as of that same date.

% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
REGION(1) AIRCRAFT OF JANUARY 31, 2001
- --------- --------- -------------------

Europe (excluding CIS Countries)............................ 56 33.65%
Latin America............................................... 62 29.91
North America............................................... 40 22.01
Asia & Far East............................................. 20 10.02
Africa...................................................... 2 1.26
Other (including CIS Countries)............................. 3 0.54
Australia & New Zealand..................................... 4 0.29
Off-Lease(1)................................................ 6 2.32
--- ------
Total..................................................... 193 100.00%
=== ======

- ---------------

(1) As of January 31, 2001, three of the six off-lease aircraft were subject to
lease agreements with lessees in Asia & Far East and one was subject to a
letter of intent for lease to a lessee in Europe. As of February 20, 2001,
one of the aircraft subject to a lease agreement had been delivered to a
lessee in Asia & Far East.

5
The following table sets forth the exposure of the portfolio by year of
aircraft manufacture or conversion to freighter as of January 31, 2001 according
to the number of aircraft and the appraised value of the aircraft as of that
same date. See note 4 to Exhibit 3 to this report for the original manufacture
dates for the aircraft that were converted into freighters.

% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
YEAR OF MANUFACTURER/ FREIGHTER CONVERSION AIRCRAFT OF JANUARY 31, 2001
- ------------------------------------------ --------- -------------------

1988........................................................ 15 5.37%
1989........................................................ 9 4.66
1990........................................................ 19 10.08
1991........................................................ 43 23.65
1992........................................................ 53 41.10
1993........................................................ 7 3.30
Other....................................................... 47 11.84
--- ------
Total..................................................... 193 100.00%
=== ======

The following table sets forth the exposure of the portfolio by seat
category as of January 31, 2001 according to the number of aircraft and the
appraised value of the portfolio as of that same date.

% OF PORTFOLIO BY
NUMBER OF APPRAISED VALUE AS
SEAT CATEGORY AIRCRAFT TYPES AIRCRAFT OF JANUARY 31, 2001
- ------------- -------------- --------- -------------------

Less than 51 DHC8, METRO-III, ATR42............................... 28 5.21%
91-120 B737-200, B737-500, DC9-32/51, MD-87, F-100.......... 60 18.02
121-170 B727-200, B737-300/300QC/400, MD-82/83, A320-200..... 71 48.54
171-240 B757-200, B767-200ER................................. 4 4.90
241-350 B767-300ER, MD-11, A300.............................. 10 14.20
Freighter B747-200SF, DC8-71F/73CF............................. 20 9.14
--- ------
193 100.00%
=== ======

The following table sets forth information with respect to the body type,
number of seats, engine manufacturer, production years, current fleet, number of
aircraft on order and number of operators of each aircraft type in our portfolio
as of January 31, 2001.

AIRCRAFT TYPICAL NUMBER OF ENGINE CURRENT ON NUMBER OF
TYPE & VARIANT BODY SEATS ENGINES MANUFACTURER(1) PRODUCTION YEARS FLEET ORDER OPERATORS(2)
- --------------------- ---- ------- --------- --------------- ---------------- ------- ----- ------------

A300-B4.............. Widebody 260 2 GE 1975-1985 115 -- 32
A300-C4.............. Widebody 245 2 GE 1976-1982 3 -- 1
A320-200............. Narrowbody 150 2 CFM 1988- 531 153 51
TBA -- 149 --
ATR42-300............ Turboprop 45 2 PW 1985-1997 273 -- 60
B727-200A............ Narrowbody 150 3 PW 1972-1984 854 -- 109
B737-200A............ Narrowbody 110 2 PW 1971-1988 784 -- 133
B737-300............. Narrowbody 130 2 CFM 1984-1999 1103 -- 114
B737-400............. Narrowbody 145 2 CFM 1988-1999 482 -- 75
B737-500............. Narrowbody 110 2 CFM 1989-1999 387 -- 41
B747-200............. Widebody 385 4 GE 1970-1990 204 -- 30
B757-200............. Narrowbody 195 2 RR 1982- 534 31 38
B767-200ER........... Widebody 210 2 PW 1984-1993 36 -- 8
TBA -- 1 --
B767-300ER........... Widebody 250 2 PW 1987- 161 6 27
TBA -- 6 --
DC8-71............... Freighter -- 4 CFM 1966-1969 52 -- 6
DC8-73............... Freighter -- 4 CFM 1968-1970 50 -- 4
DC9-32............... Narrowbody 95 2 PW 1967-1982 307 -- 29
DC9-51............... Narrowbody 120 2 PW 1974-1981 126 -- 9
DHC8-100............. Turboprop 35 2 PW 1983- 295 1 49
DHC8-300............. Turboprop 50 2 PW 1988- 169 31 38
F-100................ Narrowbody 100 2 RR 1987-1996 275 -- 25
MD-11................ Widebody 285 3 GE 1989-2000 195 -- 26
MD-82................ Narrowbody 145 2 PW 1981-1997 583 -- 26
MD-83................ Narrowbody 145 2 PW 1984-1999 277 -- 27
MD-87................ Narrowbody 115 2 PW 1986-1992 75 -- 12
METRO-III............ Turboprop 20 2 Garrett 1979-1992 266 -- 89

- ---------------

Source: Airclaims Limited.

(1) The above table identifies engine manufacturers by the following
abbreviations:

CFM = CFM International
GE = General Electric
PW = Pratt & Whitney
RR = Rolls Royce
TBA = To be announced (orders only)

(2) The number of operators does not include lessors.

THE LEASES

Most of the leases are operating leases under which we generally retain the
benefit, and bear the risk, of the residual value of the aircraft at the end of
the lease. As of January 31, 2001, we had 187 leases in effect, covering our
whole portfolio except for six aircraft which were off-lease. As of January 31,
2001, three of these off-lease aircraft were subject to lease agreements and one
was subject to a letter of intent for lease. The remaining two unplaced aircraft
represented 0.34% of our portfolio by appraised value as of January 31, 2001. As
of February 20, 2001, one of the aircraft subject to a lease agreement had been
delivered to an existing lessee. All leases are managed by the servicer
according to the servicing agreement.

Although the lease documentation is fairly standardized in many respects,
significant variations do exist as a result of negotiation with each lessee.

Under a majority of our leases, the lessee is responsible, either directly
or through indemnification of the lessor, for all operating expenses, including
maintenance, operating, overhaul, fuel, crews, airport and navigation charges,
taxes, licenses, consents and approvals, aircraft registration and hull and
liability insurance. In addition, the lessees must remove all liens on the
aircraft except liens that are permitted by the lease.

Each of our current leases requires the lessee to make periodic rental
payments during the term of the lease. Some of the leases also require the
lessee to pay periodic amounts as maintenance reserves or to deliver letters of
credit or guarantees for this purpose. Almost all the leases require the lessees
to make payments to us without set-off or counterclaim, and most of them include
an obligation for the lessee to gross-up payments under the lease if the lease
payments are subject to withholding or other taxes. The leases also generally
contain indemnification of the lessor for tax liabilities such as value added
tax and stamp duty tax, but not income tax.

Each lease also contains provisions which specify our rights and remedies
if the lessee defaults in making payments or performing its other obligations
under the lease. These remedies include terminating the lease and repossessing
the aircraft. However, any default by a lessee may lead to reduction of payments
under the leases and cause us to incur significant repossession and other costs,
including breakage costs under swaps. If there is an event of default due to a
lessee's bankruptcy, we may also face delays in asserting our rights if the
relevant jurisdiction imposes a mandatory waiting period between default and
repossession.

The following is a summary of the principal terms of the leases as of
January 31, 2001, with reference to appraised values as of that same date.

LEASE TERM................. As of January 31, 2001 the weighted average
remaining contracted lease term of the aircraft
(weighted by appraised value as of January 31, 2001
and without giving effect to purchase options,
early terminations or extensions) was 29 months.
The longest lease was scheduled to expire in
September 2008.

RENTALS.................... Rent under 180 of the leases, representing 92.16%
by appraised value of our portfolio as of January
31, 2001, is payable monthly in advance, and rent
under seven of the leases, representing 5.52% by
appraised value of our portfolio as of January 31,
2001, is payable monthly in arrears.

These rental payments are calculated based on a
floating rate or a fixed rate or may change from
one to the other over the course of the lease. The
rent under all of the leases is currently payable
in U.S. dollars, although in the future, some rent
may be payable in euros. Some rental payments are
based on the number of flight hours an aircraft is
operated or may vary depending on the time of year
during which the aircraft is operating.

EXTENSION OPTIONS.......... Some of the leases contain an extension option
pursuant to which, depending on the negotiations
with the lessee at the time of signing of the
lease, either we or the lessee could extend the
term of the lease at either the existing lease rate
or at the future market rate. As of January 31,
2001, 44 of the leases representing 25.87% of our
portfolio by appraised value as of that same date
include an extension option.

EARLY TERMINATION
OPTIONS.................... Some of the leases contain an early termination
option pursuant to which the lessee may terminate
the lease before the scheduled expiration date if
specified conditions are met. As of January 31,
2001, 50 of the leases representing 19.65% of our
portfolio by appraised value as of the same date
include an early termination option. Assuming that
all these options are exercised for the earliest
possible termination, the weighted average
remaining lease term of our portfolio would be 26
months.

PURCHASE OPTIONS........... As of January 31, 2001, 12 lessees had outstanding
options to purchase a total of 33 aircraft,
representing 14.00% of our portfolio by appraised
value as of that same date. The latest date on
which a purchase option could be exercised is
February 2, 2007, for a purchase of a B767-300ER on
July 31, 2007.

SECURITY DEPOSITS.......... As of January 31, 2001, lessees under 166 of the
leases representing 86.15% of our portfolio by
appraised value as of that same date have provided
security for their obligations. As of January 31,
2001, we had $35.4 million in cash security
deposits in respect of 105 aircraft representing
56.28% of our portfolio by appraised value as of
that same date, and $288.8 million in letters of
credit in respect of 129 aircraft representing
45.56% of our portfolio by appraised value as of
that same date.

GUARANTEES................. In twelve of the leases, we have received
guarantees of the lessee's performance obligations
under the lease. These guarantees were issued by
the lessee's parent company or shareholders.

MAINTENANCE................ The leases contain detailed provisions specifying
maintenance standards and aircraft redelivery
conditions generally to be met at the lessees'
expense. During the term of each lease, we require
the lessee to maintain the aircraft in accordance
with an agreed maintenance program designed to
ensure that the aircraft meets applicable
airworthiness and other regulatory requirements.
Lessees must provide monthly maintenance reserves
under approximately 110 of the leases. Under the
balance of the leases, the lessee or the lessor may
be required to make certain adjustment payments to
one another if at redelivery the aircraft or
specified items do not meet the required standards
under the lease. Heavy maintenance on significant
components of an aircraft, such as the airframe and
the engines, is generally required to be performed
on a cycle of several years and the cost of this
maintenance may be material in relation to the
value of the aircraft, with the overhaul of a
single component often exceeding $1 million.
Pursuant to the leases, if and when an aircraft is
transferred from one lessee to another between
maintenance overhauls, the transferring lessee is
generally required to pay for that portion of the
succeeding overhaul that can be attributed to its
use of the aircraft under its lease.

Depending on the credit of the lessee and other
factors, we may require that the lessee pay cash
maintenance reserves (61 leases as of January 31,
2001, representing 34.51% of our portfolio by
appraised value as of that same date) or provide a
combination of maintenance reserves and letters of
credit or guarantees (51 leases as of January 31,
2001, representing 25.22% of our portfolio by
appraised value as of that same date). If the
lessee pays maintenance reserves, we will have to
reimburse it for maintenance it actually performs
on the aircraft. Our obligation to reimburse
maintenance is classified as an expense and
therefore ranks senior to any payments on the
certificates.

If the lessee is not required to pay maintenance
reserves or provide letters of credit or
guarantees, we have to rely on the lessee's credit
and its ability to maintain the aircraft during the
lease term and return it in good condition or make
any maintenance payments required at the end of the
lease. If maintenance is required on the aircraft
but not performed, or the lessee fails to pay, we
have to fund this maintenance ourselves. As of

December 31, 2000, we recorded approximately $259
million of maintenance reserves liability.

Maintenance payments by lessees will depend upon
numerous factors including the financial condition
of the lessee and the ability of Airplanes Group to
obtain satisfactory maintenance terms in leases. An
increasing number of leases do not provide for any
maintenance payments to be made by lessees as
security for their maintenance obligations. Any
significant variations in these factors may
materially adversely affect the ability of
Airplanes Group to make payments of interest,
principal and premium, if any, on the notes and
certificates.

REDELIVERY CONDITIONS...... At least 90% of the leases provide for the aircraft
to be redelivered in a specified condition upon
expiration of the lease and/or stipulate the
payments to be made by the lessee to us or, in some
cases, by us to the lessee, to reflect the extent
to which the actual redelivery condition of the
aircraft falls below or exceeds the redelivery
condition specified in the lease.

INSURANCE.................. The lessees bear responsibility through an
operational indemnity to carry insurance for any
liabilities arising out of the operation of the
aircraft. The indemnity includes liabilities for
death or injury to persons and damage to property
that ordinarily would attach to the operator of the
aircraft. The lessees are also required to carry
comprehensive liability insurance and hull
insurance, and any further insurance that is
customary in the commercial aircraft industry, and
to indemnify us against all liabilities, including
where the liability to us as owner and lessor
attaches by law. We are required under the leases
to be named as an additional insured on hull and
liability policies. Most of the leases also require
the lessee to maintain the liability insurance for
a specified period between one and three years
after termination of that lease. Under the
servicing agreement, the servicer is required to
monitor the lessees' performance of obligations
with respect to the insurance provisions of the
applicable leases. We also carry contingent hull
and liability insurance to cover any insurable loss
in excess of the lessee's coverage. The amount of
the contingent liability policies may not be the
same as the insurance required under the lease. The
amount of third party contingent insurance is
subject to a number of limitations imposed by the
air transportation insurance industry.

Most insurance certificates contain a breach of
warranty endorsement so that an additional insured
party remains protected even if the lessee violates
any of the terms, conditions or warranties of the
insurance policies, provided that the additional
insured party has not caused, contributed to or
knowingly condoned the breach.

THIRD PARTY LIABILITY
INSURANCE.................. The minimum third party liability limits under the
leases range from $250 million in respect of
turboprop aircraft to $750 million in respect of
widebody aircraft. In some cases, the lessee
carries significantly more insurance than the
minimum specified in the lease. We also have in
place our own contingent liability coverage to
cover any liability in excess of the lessee's
coverage or any liability resulting from a lapse
for any reason of a lessee's coverage.

AIRCRAFT PROPERTY
INSURANCE.................. In all cases, the sum of the stipulated loss value
and our own additional coverage in place is at
least equal to the appraised value of the aircraft.
Permitted deductibles, which generally apply only
in the case of a partial

loss, range from $50,000 for turboprop aircraft to
$1 million for widebody aircraft.

POLITICAL RISK INSURANCE... With respect to some leases, we may arrange
separate political risk repossession insurance for
our own benefit, covering (a) confiscation,
nationalization and requisition of title of the
relevant aircraft by the government of the country
of registration and denegation and deprivation of
legal title and rights, and (b) the failure of the
authorities in that country to allow
de-registration and export of the aircraft, subject
to the conditions of the policies.

SUBLEASES AND WET LEASES... Under most of our current leases, the lessee may
sublease the aircraft without our consent if
specified conditions are met. Under most of our
current leases, the lessee may also "WET LEASE" the
aircraft (leasing the aircraft to a lessee with a
crew and services provided by the lessor) without
our consent so long as the lessee does not part
with operational control of the aircraft. Where
there is a sublease or a wet lease, the lessee
remains fully liable to us for all its payment and
performance obligations under the lease and we have
no contractual relationship with the sublessee or
the wet lessee. The following lessees sublease
their aircraft: A.I.L.L. subleases three aircraft
to Aerotransportes MAS de Carga, S.A. de C.V. (MAS
Air Cargo); Schreiner Airways subleases two
aircraft to Aero Contractors Co. of Nigeria Ltd;
and National Jet Systems Pty. Limited subleases one
aircraft to Eastern Australia Airlines. In
addition, we currently lease one ATR 42-300 to
Idefix, a subsidiary of ATR, and Idefix subleases
the aircraft to American Eagle. Leases with new
lessees will be based on a pro forma lease that
will include restrictions on subleases and wet
leases into specified prohibited countries.

COMPLIANCE WITH GOVERNMENTAL AND TECHNICAL REGULATION

In addition to the general requirements regarding maintenance of the
aircraft, aviation authorities from time to time issue ADs requiring the
operators of aircraft to take particular maintenance actions or make particular
modifications with respect to all aircraft of a particular type. Manufacturer
recommendations may also be issued. To the extent that a lessee fails to perform
ADs that are required to maintain its certificate of airworthiness or other
manufacturer requirements in respect of an aircraft (or if the aircraft is not
currently subject to a lease), Airplanes Group may have to bear or share (if the
lease requires it) the cost of compliance. Other governmental regulations
relating to noise and emissions levels may be imposed not only by the
jurisdictions in which the aircraft are registered, including as part of the
airworthiness requirements, but also in other jurisdictions where the aircraft
operate. A number of jurisdictions including the United States have adopted, or
are in the process of adopting, noise regulations which ultimately will require
all aircraft to comply with the most restrictive currently applicable standards.
Some of the jurisdictions that impose these regulations restrict the future
operation of aircraft that do not meet Stage 3 noise requirements and prohibit
the operation of those aircraft in those jurisdictions. As 4.98% of our
portfolio by appraised value as of January 31, 2001 did not meet the Stage 3
requirements as of that same date, these regulations may adversely affect
Airplanes Group because our non-compliant aircraft will not be able to operate
in those jurisdictions and we may incur substantial costs to comply with the
Stage 3 requirements.

Moreover new ADs or noise or emissions reduction requirements may be
adopted in the future and these could result in significant costs to Airplanes
Group or adversely affect the value of, or our ability to re-lease, Stage 2 or
Stage 3 aircraft. In particular, certain organizations and jurisdictions are
currently considering "STAGE 4" requirements which would tighten noise and
emissions certification requirements for newly manufactured aircraft. If these
more restrictive requirements are adopted or applied to existing aircraft types,
it could result in significant costs to Airplanes Group or adversely affect the
value of, or our ability to re-lease, aircraft in our portfolio.

Volume 2 of Annex 16 of the Chicago Convention also contains standards and
recommendations regarding limitations on vented fuel and smoke and gaseous
emissions for aircraft. While a number of countries have adopted regulations
implementing these recommendations, these regulations generally have been
prospective in nature, requiring only that newly manufactured engines meet
particular standards after a particular date. To the extent that these
regulations require modifications to the engines owned by Airplanes Group, they
would be treated similarly to ADs under the leases.

Aviation authorities in Europe and North America have recently adopted
regulations requiring the installation of traffic collision avoidance systems,
automatic emergency locator transmitters and various other systems. Depending on
whether the costs of complying with these regulations are borne by us or the
lessees, installation of these systems could result in significant cash capital
expenditures by Airplanes Group in the future.

The FAA recently issued an AD concerning insulation for the purpose of
increasing fire safety on MD-80 and MD-11 aircraft. We have three MD-11 and 26
MD-80 aircraft, representing a total of 21.21 % of our portfolio by appraised
value as of January 31, 2001. We will incur significant costs (currently
estimated to be approximately $18 million) in ensuring these aircraft comply
with these standards. We expect to complete the modification of 17 of the 29
aircraft by December 2001 at an estimated cost of approximately $11 million and
to modify the remaining 12 aircraft by December 2005.

The FAA is expected to issue an AD by the end of 2001 mandating the
modification of affected lapjoints on Boeing 737 aircraft when the aircraft has
completed 50,000 cycles. The estimated cost to implement this modification for
each aircraft is approximately $230,000 per aircraft. Based on the current
cycles completed to date by our 65 Boeing 737 aircraft, representing 33.36% of
our portfolio by appraised value as of January 31, 2001, our Boeing 737 aircraft
are not likely to require these modifications prior to 2007. However, we could
incur significant costs in the future in ensuring our Boeing 737 aircraft comply
with these standards, which could impact adversely our results of operations.

The FAA is also expected to issue an AD within 12 months mandating a
re-design of the rudder systems of Boeing 737 aircraft. The average cost per
aircraft of these modifications is expected to be approximately $50,000.
Depending on the time period within which the modifications are required to be
made, the costs may be the responsibility of existing lessees. However, if the
costs are not the responsibility of some or all existing lessees, we could incur
significant costs in ensuring that our Boeing 737 aircraft comply with these
modifications, which could impact adversely our results of operations.

THE LESSEES

As of January 31, 2001, our aircraft were on lease to 66 lessees in 35
countries throughout the world. See "-- Portfolio Information" for the countries
and regions where our lessees reside.

A number of our lessees are in a relatively weak financial position. As of
January 31, 2001, amounts outstanding for a period greater than 30 days in
respect of rental payments, maintenance reserves and other miscellaneous amounts
due under the leases (net of amounts in respect of default interest and cash in
transit) amounted to $13.2 million in respect of 18 lessees (who leased a
combined total of 36 aircraft representing 20.46% of our portfolio by appraised
value as of that date) and $16.0 million in respect of seven former lessees. Of
the total $29.2 million, $4.4 million was in arrears for a period greater than
30 days, $2.4 million was in arrears for a period greater than 60 days and $22.4
million was in arrears for a period greater than 90 days. Some of these lessees,
as well as other lessees, have consistently been significantly in arrears in
their respective rental payments and some are known to be currently experiencing
financial difficulties.

As of January 31, 2001, in addition to the $29.2 million in respect of
payments past due more than 30 days, we had agreed to allow four lessees to
defer rent, maintenance and miscellaneous payments totaling $8.7 million for
periods ranging from six months for one lessee in respect of $5.6 million and up
to 24 months for two lessees in respect of $2.3 million. In the past,
restructurings have typically involved delaying rental payments for periods of
up to 12 months. In addition, some restructurings have involved voluntary
terminations of leases prior to lease expiration, the replacement of aircraft
with less expensive aircraft and the arrangement of sub-leases from the

lessee to another aircraft operator. In other cases, it has been necessary to
repossess aircraft from lessees which have defaulted and re-lease the aircraft
to other lessees.

In addition to difficulties which have affected lessees in a given region,
individual lessees have experienced periodic difficulties in meeting their
maintenance obligations under the related leases. The difficulties have arisen
from, among other things, the failure of the lessee to have in place a
sufficiently well established maintenance program, adverse climate and other
environmental conditions in the locations where the related aircraft is operated
or financial and labor difficulties experienced by the relevant lessee. A
continuous failure by a lessee to meet its maintenance obligations under the
relevant lease could result in a grounding of the aircraft, cause us to incur
substantial costs in restoring the aircraft to an acceptable maintenance
condition before we can re-lease or sell it and adversely affect the value of
the aircraft.

The following is a discussion of the lessees experiencing difficulty by
region in which they are located.

LATIN AMERICA

Lessees with respect to 29.91% of the aircraft by appraised value as of
January 31, 2001 operate in Latin America, principally Brazil, Mexico, Colombia
and Chile. The prospects for lessee operations in these countries depend in part
on the general level of political stability and economic activity and policies
in those countries. Future developments in the political systems or economies of
these countries or the implementation of future governmental policies in these
countries may materially affect lessee operations in those countries.

Brazil. During 1999, Brazil experienced significant downturns in its
economy and financial markets, including large decreases in financial asset
prices and dramatic decreases in the value of its currency. While there has been
some stabilization in the Brazilian economy within the last twelve months, any
future general deterioration in the Brazilian economy will mean that lessees may
be unable to generate sufficient revenues in Brazilian currency to pay rental
payments in U.S. dollars under the leases. Future developments in the political
systems or economies of Brazil and other Latin American countries may have a
material adverse effect on lessee operations in those countries. At January 31,
2001, Airplanes Group leased 16 aircraft representing 12.20% of our portfolio by
appraised value as of that same date to operators in Brazil. Accordingly, any
future deterioration in the Latin American economies, especially Brazil, could
lead to a material decrease in Airplanes Group's leasing revenues and an
increase in default related costs.

At January 31, 2001, we had eight Fokker 100 aircraft, representing 3.04%
of our portfolio by appraised value as of that same date, on lease to a
Brazilian lessee that was party to a 2000 restructuring agreement with us in
respect of the leases for six Fokker 100 aircraft. Under the 2000 restructuring
agreement, all arrears are to be paid with interest by December 31, 2003. At
January 31, 2001, this lessee was current on all payments.

In addition, in 1999, we entered into a restructuring agreement with
Transbrasil, a former lessee, under which it repaid a restructured amount of
approximately $1.9 million over 12 months. At January 31, 2001, Transbrasil had
arrears of $3.0 million secured by a second priority mortgage over two of its
own aircraft, and the servicer was in negotiations with Transbrasil regarding
repayment. An accounting provision has been made against our receivables for the
excess of the arrears over the cash security held.

Following the default by the Brazilian airline VASP under its leases, GPA
Group (now known as debis AirFinance Ireland) sought and obtained in November
1992 a preliminary injunction for repossession of 13 aircraft and three engines,
and subsequently repossessed these aircraft and engines. Airplanes Group
acquired seven of these aircraft from GPA Group in March 1996, four of which
remain in our portfolio and represented 1.8% of our portfolio by appraised value
as of January 31, 2001. In December 1996, the High Court in Sao Paolo, Brazil,
found in favor of VASP on appeal and granted it the right to the return of the
aircraft and engines or the right to seek damages against debis AirFinance
Ireland. debis AirFinance Ireland has challenged this decision and in January
2000, the High Court granted a stay of the 1996 judgment while it considers
debis AirFinance Ireland's rescission action. The risk of repossession only
arises where VASP is successful in seeking repossession of the aircraft and
where the aircraft are located in Brazil. Although none of our lessees which
lease any of the relevant aircraft is based in Brazil, some of them may operate
those aircraft into Brazil from time to time. debis AirFinance Ireland has
informed Airplanes Group that it has been advised by its Brazilian counsel that
the

December 1996 High Court decision was incorrect as a matter of Brazilian law and
that it is actively pursuing all available courses of action, including appeals
to superior courts to overturn the High Court decision.

Colombia. Colombia has recently suffered economically as a result of the
deterioration in the value of the Colombian peso and the resulting negative
impact on the Colombian economy. As of January 31, 2001, we leased 10 aircraft,
representing 6.55% of our portfolio by appraised value as of that same date, to
three Colombian lessees. Because of the continued weakness in the value of the
Colombian peso, as well as general deterioration in the Colombian economy, these
lessees may be unable to generate sufficient revenues in Colombian pesos to pay
the U.S. dollar denominated rental payments under the leases.

In particular, as of January 31, 2001, we leased six aircraft, representing
5.08% of our portfolio by appraised value as of that same date, to one of our
three Colombian lessees. At January 31, 2001, this lessee was $12.0 million in
arrears, including deferrals. The servicer had agreed not to exercise its
remedies in respect of events of default currently existing under the leases in
order to permit the Colombian lessee to have a stable business environment in
which to develop, negotiate and commence implementing a long-term business plan.
During the period to January 31, 2001 we have received approximately 77% of
amounts due under the leases in cash, with the remainder provided by way of
secured and unsecured notes issued by the lessee with a maturity date of January
31, 2001. The Colombian lessee's other aircraft lessors and major creditors
agreed similar forbearance arrangements. The servicer is in discussion with the
lessee regarding an extension of this date and the continued operation of the
leases which may include the reduction of rentals or the return of some or all
of the aircraft.

NORTH AMERICA

As of January 31, 2001, we had 29 aircraft, representing 13.06% of our
portfolio by appraised value as of that same date, on lease to 11 U.S. lessees
and 11 aircraft, representing 8.95% of our portfolio by appraised value as of
that same date, on lease to one Canadian lessee. The commercial aircraft
industry in North America is highly sensitive to general economic conditions.
Since air 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 entered into
plans of reorganization or sought protection through bankruptcy, insolvency or
other similar proceedings and several major U.S. airlines have ceased
operations.

On January 10, 2001, TWA, one of our lessees, filed for Chapter 11
bankruptcy protection in the U.S. TWA leases two aircraft from Airplanes Group,
which represented 2.39% of our aircraft by appraised value as of January 31,
2001. There can be no assurances that TWA will continue to make the rental and
other payments required under the leases with Airplanes Group. TWA's failure to
make such payments would have an adverse impact on our revenues and cash flows.
As of January 31, 2001, TWA had not indicated what its intentions are with
respect to our aircraft, including whether it will continue to lease our
aircraft or whether it will seek rental reductions or other concessions if it
wishes to continue leasing our aircraft.

In March 1998, we reached an agreement with Tower Air, then the lessee of
our only B747-200SF, representing 0.96% of our portfolio by appraised value as
of January 31, 2001, which allowed Tower Air to defer payment of a security
deposit and of two months rent. In March 2000, owing to its deteriorating
financial condition, Tower Air agreed to return the aircraft and subsequently
filed for protection from its creditors under Chapter 11 of the U.S. bankruptcy
laws. The aircraft was subsequently re-leased to another U.S. lessee.

As of February 20, 2001, the servicer was in discussions with a North
American lessee of two B737-200A aircraft, representing 0.40% of our portfolio
by appraised value as of January 31, 2001, in respect of a request by the lessee
to defer a portion of monthly rental payments in the period to July 2001.

ASIA & FAR EAST

As of January 31, 2001, 20 aircraft representing 10.02% of our portfolio by
appraised value as of that same date were on lease to 11 lessees in this region.
The commercial aircraft industry in Asia was adversely affected by the severe
economic and financial difficulties experienced in the region during 1998 and
1999. Since 1999, there has been some stabilization and recovery in the
economies of this region. Prior to 1998, the market in this region
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for aircraft on operating lease demonstrated significant growth rates. If the
recessionary conditions that prevailed in large parts of the region were to
recur it would have an adverse impact on global aircraft demand.

During the year to March 31, 2000, a rescheduling agreement was signed with
a Philippine lessee which committed to pay its balance of $2.7 million over the
36 months to September 2002. As of February 20, 2001, the lessee has paid in
accordance with the rescheduling agreement.

EUROPE (EXCLUDING CIS)

As of January 31, 2001, 56 aircraft representing 33.65% of our portfolio by
appraised value as of that same date were on lease to 21 lessees in this region.
The commercial aircraft industry in European countries, as in the rest of the
world generally, is highly sensitive to general economic conditions. Because a
substantial portion of airline travel (business and especially leisure) is
discretionary, the industry has tended to suffer severe financial difficulties
during economic downturns. Accordingly, the financial prospects for European
lessees can be expected to depend largely on the level of economic activity in
Europe generally and in the specific countries in which these lessees operate. A
recession or other worsening of economic conditions in one or more of these
countries, particularly if combined with high fuel prices and/or a weak euro,
may have a material adverse effect on the ability of European lessees to meet
their financial and other obligations under the leases. In addition, commercial
airlines in Europe face, and can be expected to continue to face, increased
competitive pressures, in part as a result of the continuing deregulation of the
airline industry by the EU. There can be no assurance that competitive pressures
resulting from such deregulation will not have a material adverse impact on the
operations of our European lessees.

Bulgaria. The servicer has issued notices terminating leases with a
Bulgarian lessee in respect of two B737-300 aircraft representing 1.13% of our
portfolio by appraised value as of January 31, 2001 and is seeking to repossess
the aircraft from the lessee. The lessee was $252,000 in arrears as of January
31, 2001 and $638,000 in arrears as of February 20, 2001. The costs of
repossession and the technical costs required to ensure that the aircraft are in
a suitable condition for re-leasing may be significant.

Turkey. As of January 31, 2001, ten aircraft, representing 7.17% of our
portfolio by appraised value as of that same date, were leased to three lessees
in Turkey. The recent fall in the value of the deutsche mark, the principal
currency in which the Turkish airlines receive their revenues, may affect the
ability of these airlines to meet the U.S. dollar denominated rental and other
payments due under the leases.

Spain. As of January 31, 2001, one Spanish lessee, representing 3.50% of
our portfolio by appraised value as of that same date, was in negotiations with
the servicer on a restructuring of its payment obligations under its leases with
Airplanes Group, which would also include an extension of certain of the leases
to compensate for any proposed reduction in lease rentals.

Ireland. As of January 31, 2001, an Irish airline which formerly leased
one A300-B4-200 aircraft, representing 0.28% of our portfolio by appraised value
as of that same date, was $3.6 million in arrears (including previously
rescheduled amounts). A liquidator has been appointed to the airline to wind up
its business. As of January 31, 2001, this aircraft was subject to a letter of
intent for lease to a new lessee.

PURCHASE OPTIONS

As of January 31, 2001, 12 lessees with respect to 33 aircraft,
representing 14.00% of our portfolio by appraised value as of that same date,
held options to purchase aircraft at various dates between 2001 and 2004 at
prices generally at or above their estimated appraised value at the exercise
date. Since March 31, 1998, one lessee has exercised its option to purchase four
B737-200A aircraft, one of which was delivered on January 15, 2000 and three of
which were delivered on January 5, 2001. This lessee had options to purchase a
further three aircraft, one of which has been exercised as of February 20, 2001.
At January 31, 2001, three lessees with respect to 10 aircraft, representing
8.52% of our portfolio by appraised value as of that same date, had options to
purchase aircraft at prices below estimated appraised value at the exercise
date. (For the purposes of this analysis, the estimated appraised value has been
arrived at by deducting the estimated depreciation (as
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calculated by Airplanes Group's existing depreciation policy) from January 31,
2001 to the option exercise date from the appraised value of each aircraft).

COMMERCIAL OPPORTUNITIES FOR OUR MD-11 AIRCRAFT

As of January 31, 2001, we leased three MD-11 aircraft, representing 5.94%
of our portfolio by appraised value as of that same date, to a Latin American
lessee. These leases are expected to expire between December 2001 and September
2002. Because the market for re-leasing these aircraft in their current
passenger configuration is currently, and is expected to remain, very weak, we
are examining all possibilities in respect of these aircraft, including, subject
to the restrictions in our indentures, selling them or converting them to
freighter aircraft. The current market value of these aircraft is such that we
would not be able to sell the aircraft at prices that would meet the indenture
requirements. Although there is currently stronger demand for converted MD-11
aircraft, conversion into freighter aircraft would involve substantial cash
expenditures by us.

AIRCRAFT SALES

Based on the recommendations of the servicer and the administrative agent,
the board of directors of Airplanes Limited and the controlling trustees of
Airplanes Trust have identified a number of aircraft types for potential sale so
long as the terms of a proposed sale for a particular aircraft are commercially
advantageous to Airplanes Group and the sale complies with the requirements of
the indentures. The aircraft types which have been identified for potential sale
are B737-200, B727-200, DC-9, A300 and turboprop aircraft. At January 31, 2001,
there was a total of 65 aircraft of these aircraft types in our portfolio
representing 10.98% of our portfolio by appraised value as of the same date.
Since June 1999, Airplanes Group has sold five aircraft of these aircraft types
for an aggregate of $22.0 million, which has been applied in accordance with the
priority of payments under the indentures.