Fleet Financing

AIR LEASE CORP MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and the related notes appearing in "Item 8. Financial Statements and
Supplementary Data" of this Annual Report on Form 10-K.

Overview

Air Lease Corporation is a leading aircraft leasing company that was founded by
aircraft leasing industry pioneer, Steven F. Udvar-Házy. We are principally
engaged in purchasing the most modern, fuel-efficient new technology commercial
jet aircraft directly from aircraft manufacturers, such as Boeing and Airbus,
and leasing those aircraft to airlines throughout the world with the intention
to generate attractive returns on equity. In addition to our leasing activities,
we sell aircraft from our fleet to third-parties, including other leasing
companies, financial services companies, airlines and other investors. We also
provide fleet management services to investors and owners of aircraft portfolios
for a management fee. Our operating performance is driven by the growth of our
fleet, the terms of our leases, the interest rates on our debt, and the
aggregate amount of our indebtedness, supplemented by gains from aircraft sales
and our management fees.

2021 Overview

During the year ended December 31, 2021, we purchased and took delivery of 53
aircraft from our new order pipeline and sold three aircraft, ending the period
with a total of 382 aircraft in our owned aircraft portfolio. The weighted
average age of our fleet was 4.4 years and the weighted average lease term
remaining was 7.2 years as of December 31, 2021. The net book value of our fleet
grew by 12.4%, to $22.9 billion as of December 31, 2021 compared to $20.4
billion as of December 31, 2020. Our managed fleet increased to 92 aircraft as
of December 31, 2021 as compared to 81 as of December 31, 2020. We have a
globally diversified customer base comprised of 118 airlines in 60 countries as
of December 31, 2021. As of February 17, 2022, all aircraft in our fleet, except
for one aircraft, were subject to lease agreements or letters of intent and our
lease utilization rate for 2021 was 99.8%.

At December 20, 2021, we increased our committed order book by concluding agreements with Airbus for the purchase of 116 aircraft, including 59 A321neos, 25 A220-300s, 20 A321XLRs, seven A350Fs and five A330-900s. Aircraft deliveries are expected to begin in 2023 and continue through 2028. This is the largest individual order for new aircraft in our company’s history.

Also, in February 2022, we agreed to purchase 50 737 MAX aircraft, which
consisted of 32 incremental 737 MAX aircraft and 18 737 MAX aircraft resulting
from the conversion of three 787 aircraft from our existing orderbook.
Deliveries of the aircraft are scheduled to commence in 2024 and continue
through 2026. The additional 32 737 MAX aircraft are pursuant to a memorandum of
understanding and are subject to the negotiation of a definitive purchase
agreement.

As of December 31, 2021, and giving effect to our conversion of three Boeing 787
aircraft to 18 737 MAX aircraft in February 2022, we had commitments to purchase
431 aircraft from Boeing and Airbus for delivery through 2028, with an estimated
aggregate commitment of $27.7 billion.

We have placed approximately 99% of our committed orderbook on long-term leases
for aircraft delivering through the end of 2023 and have placed 58% of our
entire orderbook. We ended 2021 with $30.9 billion in committed minimum future
rental payments, consisting of $14.8 billion in contracted minimum rental
payments on the aircraft in our existing fleet and $16.1 billion in minimum
future rental payments related to aircraft which will deliver between 2022
through 2025.

We typically finance the purchase of aircraft and our business with available
cash balances, internally generated funds, including through aircraft sales,
preferred stock issuances, and debt financings. In 2021, we issued $3.7 billion
in aggregate principal amount of senior unsecured notes with maturities ranging
from 2022 to 2028 with a weighted average interest rate of 1.27%. In addition,
we ended 2021 with an aggregate borrowing capacity under our revolving credit
facility of $6.8 billion and total liquidity of $7.9 billion. We had total debt
outstanding of $17.2 billion, of which 94.8% was at a fixed rate and 99.2% of
which was unsecured. As of December 31, 2021, our composite cost of funds raised
through debt financings was 2.79%. In 2020 and 2021, we also issued preferred
stock with a total aggregate stated value of $850.0 million. Our preferred stock
pays dividends currently at a weighted average rate of 4.9%.
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Our total revenues for the year ended December 31, 2021 increased by 3.6% to
$2.1 billion as compared to 2020. The increase in total revenues was primarily
driven by the continued growth in our fleet, an increase in our cash collections
from our lessees as well as an increase in our aircraft sales, trading and other
activity, partially offset by the impact of cash basis accounting and lease
restructurings. The impact of cash basis accounting and lease restructurings for
the year ended December 31, 2021 resulted in a decrease in revenue of
$72.7 million and $132.5 million, respectively. During the year ended
December 31, 2021, our net income available to common stockholders was $408.2
million compared to $500.9 million for the year ended December 31, 2020. Our
diluted earnings per share for the full year 2021 was $3.57 compared to $4.39
for the full year 2020. Despite the growth of our fleet, our net income
available to common stockholders and diluted earnings per share decreased due to
the impact of lease restructurings and cash basis accounting.

Our adjusted net income before income taxes excludes the effects of certain
non-cash items, one-time or non-recurring items that are not expected to
continue in the future and certain other items. Our adjusted net income before
income taxes for the year ended December 31, 2021 was $589.7 million or $5.15
per diluted share, compared to $692.0 million, or $6.07 per diluted share for
the year ended December 31, 2020. The decrease in our adjusted net income before
income taxes was due to the impact of lease restructurings and cash basis
accounting. Adjusted net income before income taxes and adjusted diluted
earnings per share before income taxes are measures of financial and operational
performance that are not defined by U.S. Generally Accepted Accounting
Principles ("GAAP"). See "Results of Operations" below for a discussion of
adjusted net income before income taxes and adjusted diluted earnings per share
before income taxes as non-GAAP measures and a reconciliation of these measures
to net income available to common stockholders.

Update on the impact of the COVID-19 pandemic

Throughout 2021, passenger air travel gradually improved. The strong recovery in
most domestic markets, together with robust global cargo demand, resulted in
steady improvements in airline financial results throughout the year. While
domestic travel improved significantly in the United States, Europe, China and
Latin America, Inter-Asia traffic did not fare as well given more widespread
travel restrictions. It is unclear how long and to what extent travel
restrictions will remain in place. In the aggregate, the recovery of passenger
traffic from pandemic-level lows has led to a firming market for aircraft values
and lease rates. We also expect that the continued recovery of passenger traffic
and production-related issues at Boeing and Airbus may contribute to a shortage
of new technology aircraft in the years ahead, which could present a favorable
environment for aircraft lessors.

During 2021, we continued to receive requests from our customers for
accommodations, such as lease deferrals or other lease concessions; however, the
number of such requests have continued to decline throughout the year, roughly
tracking the recovery of air travel. Throughout the pandemic, on a case-by-case
basis, we have agreed to accommodations with approximately 66% of our lessees.
The majority of these accommodations have been in the form of partial lease
deferrals which, in many cases, include lease extensions. As of December 31,
2021, we had $203.2 million in outstanding deferred rentals as compared to
$144.3 million in the prior year, the increase is primarily related to Vietnam
Airlines. The majority of our outstanding deferred rentals are scheduled to be
repaid within the next two years. As of December 31, 2021, our outstanding
deferral balance represented approximately 2.6% of our total available liquidity
as of December 31, 2021. In addition to lease deferral arrangements, we have
from time to time agreed to restructure some of our lease agreements. As part of
our lease restructuring agreements, we have typically modified our existing
leases by extending the lease term and reducing our lease rates. In the
aggregate, the impact of these restructurings have extended the weighted average
lease term remaining of our fleet and have decreased our total revenues by $23.8
million and $132.5 million for the quarter and year ended December 31, 2021,
respectively.

At the beginning of the pandemic, our airline customers were under a tremendous
amount of stress, which resulted in a decline in our collection rate. However,
during 2021, our collection rate steadily increased in connection with the
recovery of passenger air travel along with the improved financial health of our
airline customers. Our collection rate for the three months and year ended
December 31, 2021 was 99.3% and 91.4%, respectively. Our collection rate is
defined as the sum of cash collected from lease rentals and maintenance
reserves, including cash recovered from outstanding receivables from previous
periods, as a percentage of the total contracted receivables due during the
period. Our collection rate is calculated after giving effect to lease deferral
arrangements made as of December 31, 2021. As our collection rate is positively
impacted by the recovery of past-due receivables, our collection rate increased
due to cash payments received from Vietnam Airlines and other lessees accounted
for on a cash basis.

During the three months ended December 31, 2021, we recorded $12.2 million in
incremental revenue from our lessees on cash basis accounting. However, during
the year ended December 31, 2021, we did not recognize a total of $72.7 million
in rental revenue
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from lessees on a cash basis of accounting as collection was not reasonably
assured. As of December 31, 2021, approximately 6.0% of our fleet by net book
value was accounted for on a cash basis of accounting.

Our lease utilization rate for the three months and year ended December 31, 2021
was 99.8%. Lease utilization rate is calculated based on the number of days each
aircraft was subject to a lease or letter of intent during the period, weighted
by the net book value of the aircraft. Lease utilization rate reflects the
amount of time our aircraft are subject to lease during a specific period. We
believe that we were successful in keeping our aircraft nearly fully utilized
during the pandemic due to the quality of our fleet and the strength of our
lessee relationships.

We continue to believe that the airline industry will ultimately recover and
aircraft travel will return to historical levels over the long term. See
"Aircraft Industry and Sources of Revenues" below for further discussion of our
industry expectations. Further, we believe we are well positioned to offer
solutions for airlines because we offer the ability to lease younger, more
fuel-efficient aircraft at a time when airlines are focused on reducing capital
requirements, achieving environmental initiatives, and managing costs.

Our fleet

We have continued to build one of the world's youngest fleets, including some of
the most fuel-efficient commercial jet aircraft. Our fleet, based on net book
value, increased by 12.4%, to $22.9 billion as of December 31, 2021, compared to
$20.4 billion as of December 31, 2020. During the year ended December 31, 2021,
we took delivery of 53 aircraft from our new order pipeline and sold three
aircraft, ending the year with a total of 382 aircraft in our owned aircraft
portfolio. As of December 31, 2021, the weighted average fleet age and weighted
average remaining lease term of our fleet as of were 4.4 years and 7.2 years,
respectively. We also managed 92 aircraft as of December 31, 2021.

Our fleet portfolio metrics at December 31, 2021 and 2020 are as follows:

                                                                 December 31, 2021                  December 31, 2020

Net book value of aeronautical equipment covered by an operating lease

                                                      $                 22.9 billion       $         20.4     billion
Weighted average fleet age(1)                                                   4.4 years                        4.1 years
Weighted average remaining lease term(1)                                        7.2 years                        6.9 years

Owned fleet                                                                           382                              332
Managed fleet                                                                          92                               81
Aircraft on order(2)(3)                                                               431                              361
Aircraft purchase options(4)                                                  -                                         25
Total                                                                                 905                              799

Current fleet contracted rentals                           $                 14.8 billion       $         13.6     billion
Committed fleet rentals                                    $                 16.1 billion       $         13.2     billion
Total committed rentals                                    $                 30.9 billion       $         26.8     billion

(1) Weighted-average fleet age and remaining lease term calculated based on net book value of our flight equipment subject
to operating lease.
(2) The table above reflects the conversion of three 787-9 aircraft to 18 737 MAX aircraft pursuant to a February 2022
agreement with Boeing.
(3) Excluded from the table above are orders for 32 Boeing 737 MAX aircraft pursuant to a February 2022 memorandum of
understanding signed with Boeing.
(4) As of December 31, 2021, we did not have any options to acquire aircraft. As of December 31, 2020, we had options to
acquire up to 25 Airbus A220 aircraft.





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The following table sets forth the net book value and percentage of the net book
value of our flight equipment subject to operating leases in the indicated
regions based on each airline's principal place of business as of December 31,
2021 and 2020:

                                                                December 31, 2021                                   December 31, 2020
                                                        Net Book                                             Net Book
Region                                                   Value                   % of Total                   Value                  % of Total
                                                                                 (in thousands, except percentages)
Europe                                            $       7,439,993                      32.5  %       $       6,413,557                    31.4  %
Asia (excluding China)                                    5,952,981                      26.0  %               5,513,498                    27.1  %
China                                                     2,934,224                      12.8  %               2,766,543                    13.5  %
The Middle East and Africa                                2,447,919                      10.7  %               2,356,418                    11.6  %
U.S. and Canada                                           1,638,450                       7.2  %               1,298,974                     6.4  %
Central America, South America and Mexico                 1,566,133                       6.8  %               1,074,792                     5.3  %
Pacific, Australia, and New Zealand                         919,304                       4.0  %                 956,568                     4.7  %
Total                                             $      22,899,004                     100.0  %       $      20,380,350                   100.0  %



The following table shows the number of aircraft in our fleet owned by aircraft type at December 31, 2021 and 2020:

                                December 31, 2021                     December 31, 2020
                            Number of                             Number of
Aircraft type                Aircraft          % of Total          Aircraft          % of Total
Airbus A319-100                        1            0.3  %                   1            0.3  %
Airbus A320-200                       31            8.1  %                  31            9.4  %
Airbus A320-200neo                    23            6.0  %                  19            5.7  %
Airbus A321-200                       26            6.8  %                  28            8.4  %
Airbus A321-200neo                    69           18.1  %                  49           14.8  %
Airbus A330-200                       13            3.4  %                  13            3.9  %
Airbus A330-300                        8            2.1  %                   8            2.4  %
Airbus A330-900neo                     9            2.4  %                   8            2.4  %
Airbus A350-900                       12            3.1  %                  11            3.3  %
Airbus A350-1000                       5            1.3  %                   2            0.6  %
Boeing 737-700                         4            1.0  %                   4            1.2  %
Boeing 737-800                        88           23.0  %                  88           26.5  %
Boeing 737-8 MAX                      28            7.3  %                  15            4.5  %
Boeing 737-9 MAX                       7            1.8  %                   -              -  %
Boeing 777-200ER                       1            0.3  %                   1            0.3  %
Boeing 777-300ER                      24            6.3  %                  24            7.2  %
Boeing 787-9                          26            6.8  %                  23            7.0  %
Boeing 787-10                          6            1.6  %                   6            1.8  %
Embraer E190                           1            0.3  %                   1            0.3  %
Total                                382          100.0  %                 332          100.0  %



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As of December 31, 2021, we had contractual commitments to purchase 431 new
aircraft, with an estimated aggregate purchase price (including adjustments for
anticipated inflation) of $27.7 billion, for delivery through 2028 as shown in
the following table. The table is subject to change based on Airbus and Boeing
delivery delays. As noted below, we expect delivery delays for some aircraft
deliveries in our orderbook. We remain in discussions with Boeing and Airbus to
determine the extent and duration of delivery delays; however, we are not yet
able to determine the full impact of the delivery delays.


                                                                             Estimated Delivery Years
Aircraft Type                             2022             2023             2024             2025             2026            Thereafter            Total
Airbus A220-100/300                          4               17               23               20               12                  -                 76
Airbus A320/321neo(1)                       27               24               26               23               32                 64                196
Airbus A330-900neo                           8                6                4                -                -                  -                 18
Airbus A350-900/1000                         3                3                3                -                -                  -                  9
Airbus A350F                                 -                -                -                -                2                  5                  7
Boeing 737-7/8/9 MAX(2)                     33               31               35                2                -                  -                101
Boeing 787-9/10(2)                          10                3                6                5                -                  -                 24
Total(3)(4)                                 85               84               97               50               46                 69                431

(1) Our Airbus A320/321neo aircraft orders include 28 long-range variants and 49 extra long-range variants.
(2) The table above reflects the conversion of three 787-9 aircraft to 18 737 MAX aircraft pursuant to a February 2022 agreement with Boeing
(3) The table above reflects future Airbus and Boeing aircraft delivery delays based on information currently available to us based on contractual
documentation.
(4) Excluded from the table above are orders for 32 Boeing 737 MAX aircraft pursuant to a February 2022 memorandum of understanding signed with Boeing.



Aircraft delivery delays

Pursuant to our purchase agreements with Boeing and Airbus, we agree to
contractual delivery dates for each aircraft ordered. These dates can change for
a variety of reasons, however for the last several years, manufacturing delays
have significantly delayed the planned purchases of our aircraft on order with
the Boeing and Airbus. Currently, the most significant delivery delays that we
are experiencing are with regards to our aircraft orders for Boeing aircraft.

Boeing has experienced significant aircraft delivery delays related to the 737
MAX aircraft stemming from the worldwide grounding of the 737 MAX beginning in
March 2019. This has resulted in material delivery delays of 737 MAX aircraft
from our orderbook. A majority of the world's aviation authorities have
re-certified the 737 MAX aircraft during the last two years, with the majority
of these re-certifications taking place in 2021. Since re-certification began,
we have been able to take delivery of 20 737 MAX aircraft. This is significantly
below our original purchase order for 60 737 MAX aircraft during this time
period. However, with a majority of the re-certification work completed, we
expect production rates and aircraft deliveries to normalize for the 737 MAX
during the next few years.

During 2020, Boeing began to experience manufacturing issues on its 787
aircraft. These issues have resulted in significant aircraft delivery delays.
During the last two years we had originally contracted with Boeing for the
delivery of 22 787 aircraft to deliver between 2020 and 2021, however due to
these manufacturing related issues we only took delivery of five 787 aircraft
during this period. Currently, Boeing has paused 787 deliveries and is currently
unable to forecast when they will resume. Accordingly, it is difficult to
forecast how many 787s we will ultimately take delivery of in 2022.

Our leases typically provide that we and our airline customer each have a
cancellation right related to certain aircraft delivery delays. Our purchase
agreements with Boeing and Airbus also generally provide that we and the
manufacturer each have cancellation rights that typically parallel our
cancellation rights in our leases. Our leases and our purchase agreements with
Boeing and Airbus generally provide for cancellation rights starting at one year
after the original contractual delivery date, regardless of cause.

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We believe that the majority of our 787 aircraft deliveries and a few of our 737
MAX aircraft in our orderbook will be delayed more than 12 months, which would
give us, our airline customers and Boeing the right to cancel these aircraft
commitments. We are working with Boeing and the respective airlines to find
commercial solutions to prevent cancellation rights from being exercised and
ultimately, to take delivery of these aircraft.

The following table, which is subject to change based on Airbus and Boeing
delivery delays, shows the number of new aircraft scheduled to be delivered as
of December 31, 2021, and gives effect to our conversion of three Boeing 787
aircraft to 18 737 MAX aircraft in February 2022, along with the lease
placements of such aircraft as of February 17, 2022. As noted above, we expect
delivery delays for all aircraft deliveries in our orderbook. We remain in
discussions with Boeing and Airbus to determine the extent and duration of
delivery delays, but we are not yet able to determine the full impact of the
delivery delays.

                                              Total number of lease        Number of aircraft in
Delivery Year                                      placements                  our orderbook                  % Leased
2022                                                        85                           85                           100.0  %
2023                                                        82                           84                            97.6  %
2024                                                        71                           97                            73.2  %
2025                                                        13                           50                            26.0  %
2026                                                         -                           46                               -  %
Thereafter                                                   -                           69                               -  %
Total                                                            251                         431


Aviation industry and sources of income

Our revenues are principally derived from operating leases with airlines
throughout the world. As of December 31, 2021, we had a globally diversified
customer base of 118 airlines in 60 different countries, with over 95% of our
business revenues from airlines domiciled outside of the U.S., and we anticipate
that most of our revenues in the future will be generated from foreign
customers.

Performance of the commercial airline industry is linked to global economic
health and development. Despite the disruption caused to the commercial airline
industry by the COVID-19 pandemic since early 2020, global air travel continues
to recover. The International Air Transport Association ("IATA") reported that
passenger traffic was up 80% in the month of December 2021 relative to the prior
year, as many domestic markets and some international markets reopened with the
rise in vaccination distribution over the course of the year. Global domestic
passenger traffic in 2021 improved significantly relative to the prior year, and
was 28% lower than 2019 as compared to 49% lower in 2020. Domestic markets have
experienced faster recovery than international markets in 2021 given generally
more relaxed travel restrictions. Total 2021 passenger traffic was 58% lower
than 2019 as compared to 66% lower in 2020, primarily due to slower recovery in
international passenger traffic. We believe vaccination progress and the advent
of new therapeutic treatments as well as easing of travel restrictions will
continue to reduce the impact of the COVID-19 pandemic on air passenger traffic
and the commercial airline industry.

Although the industry is gradually recovering from the impacts of the COVID-19
pandemic, our airline customers may continue to experience financial
difficulties in 2022 and potentially longer, which could result in additional
requests for lease accommodations, requests to return aircraft early and lease
defaults. We also continue to expect more airline reorganizations, liquidations,
or other forms of bankruptcies, which may include our aircraft customers and
result in the early return of aircraft or changes in our lease terms. A small
number of our lessees were subject to various forms of insolvency proceedings.

As of December 31, 2021, approximately 72% of the net book value of our fleet
are leased to flag carriers or airlines that have some form of governmental
ownership; however, this does not guarantee our ability to collect contractual
rent payments. We believe that having a large portion of the net book value of
our fleet on lease with flag carriers or airlines with some form of governmental
ownership, coupled with the overall quality of our aircraft and security
deposits and maintenance reserves under our leases will help mitigate our
customer default risk.

The impacts of the COVID-19 pandemic, including border restrictions and other travel limitations, initially reduced demand for some aircraft in our fleet, resulting in lower lease rates, especially for large -carriers. However, in the second half of

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2021, we experienced increased demand for our aircraft. The overall increased
demand, coupled with rising interest rates and inflation, are providing
catalysts for a rising lease rate environment and we are seeing this in the
marketplace. Lease rates can be influenced by several factors including impacts
of epidemic diseases, changes in the competitive landscape of the aircraft
leasing industry, evolving international trade matters, and aircraft delivery
delays and therefore, are difficult to project or forecast.

We and airlines around the world have continued to experience delivery delays
from Boeing, as discussed above in "Our Fleet." Aircraft manufacturer delays
have impacted the growth of our company as well as the growth of our airline
customers and airline profitability and we expect delivery delays to continue.
As a result of continued manufacturing delays, our aircraft delivery schedule
could continue to be subject to material changes and delivery delays could
potentially extend well into 2022 and beyond.

Global economic conditions are also impacting the aircraft leasing industry.
Fuel costs have increased significantly in 2022 compared to pandemic lows and
interest rates are also expected to increase in 2022. Many manufacturers and
airlines, including Boeing and some of our lessees, are also currently
experiencing wage negotiations and/or pilot shortages, which are likely to
increase their operating costs. While these events have not impacted our
lessees' ability to make lease payments to date, or Boeing's ability to meet its
contractual obligations to us, if our lessees and manufacturers are not able to
effectively manage increased operating costs, it could impact our financial
results and cash flows.

We believe the aircraft leasing industry has remained resilient over time across
a variety of global economic conditions and remain optimistic about the
long-term fundamentals of our business. We expect the aviation industry to
recover over time from the impact of COVID-19, and because of the COVID-19
pandemic, some aircraft lessors may ultimately consolidate or cease operations.
In addition, as a result of the COVID-19 pandemic, some airlines have
accelerated their plans to retire older, less fuel-efficient aircraft that have
higher maintenance costs in the current environment. We anticipate that airlines
will continue to accelerate the retirement of these types of aircraft,
ultimately increasing demand for newer aircraft over time. We also anticipate
that when airlines need to add new aircraft to their fleet, they will
increasingly elect to lease aircraft instead of purchasing aircraft to reduce
capital requirements and manage other operating expenses, and that we will
benefit from that trend. We expect a number of these trends to continue for 2022
and beyond.

Cash and capital resources

Overview

We ended 2021 with available liquidity of $7.9 billion which is comprised of
unrestricted cash of $1.1 billion and undrawn balances under our unsecured
revolving credit facility of $6.8 billion. We finance the purchase of aircraft
and our business operations using available cash balances, internally generated
funds, including through aircraft sales and trading activity, and an array of
financing products. We aim to maintain investment-grade credit metrics and focus
our debt financing strategy on funding our business on an unsecured basis with
primarily fixed-rate debt from public bond offerings. Unsecured financing
provides us with operational flexibility when selling or transitioning aircraft
from one airline to another. We also have the ability to seek debt financing
secured by our assets, as well as financings supported through the Export-Import
Bank of the United States and other export credit agencies for future aircraft
deliveries. We also issued preferred stock with a total aggregate stated value
of $850.0 million. Our access to a variety of financing alternatives including
unsecured public bonds, private capital, bank debt, secured financings and
preferred stock issuances serves as a key advantage in managing our liquidity.
Aircraft delivery delays as a product of the COVID-19 pandemic and other
manufacturer delays are expected to further reduce our aircraft investment and
debt financing needs for the next six to twelve months and potentially beyond.
We continue to monitor COVID-19 and its impact on our overall liquidity position
and outlook.

We have a balanced approach to capital allocation based on the following
priorities, ranked in order of importance: first, investing in modern, in-demand
aircraft to profitably grow our core aircraft leasing business while maintaining
strong fleet metrics and creating sustainable long-term shareholder value;
second, maintaining our investment grade balance sheet utilizing unsecured debt
as our primary form of financing; and finally, in lockstep with the
aforementioned priorities, returning excess cash to shareholders through our
dividend policy as well as regular evaluation of share repurchases, as
appropriate.

We ended 2021 with total debt outstanding of $17.2 billion as of December 31,
2021 compared to $16.7 billion in 2020. Our unsecured debt outstanding increased
to $17.1 billion as of December 31, 2021 from $16.4 billion as of December 31,
2020. Our unsecured debt as a percentage of total debt increased to 99.2% as of
December 31, 2021 from 98.2% as of December 31, 2020.


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Material Cash Sources and Requirements

We believe that we have sufficient liquidity from available cash balances, cash
generated from ongoing operations, available borrowings under our unsecured
revolving credit facility and general ability to access the capital markets for
opportunistic public bond offerings to satisfy the operating requirements of our
business through at least the next 12 months. Our material cash sources include:

• Unrestricted cash: we ended 2021 with $1.1 billion in cash without restriction

•Lease cash flows: We ended 2021 with $30.9 billion in committed minimum future
rental payments comprised of $14.8 billion in contracted minimum rental payments
on the aircraft in our existing fleet and $16.1 billion in minimum future rental
payments related to aircraft which will deliver between 2022 through 2025. These
rental payments are a primary driver of our short and long-term
operating-cash-flow. As of December 31, 2021, our minimum future rentals on
non-cancellable operating leases for the year 2022 was $2.1 billion. For further
detail on our minimum future rentals for 2023 and thereafter, see "Notes to
Consolidated Financial Statements" under "Item 8. Financial Statements and
Supplementary Data" in this Annual Report on Form 10-K.

•Unsecured revolving credit facility: Our $6.8 billion revolving credit facility
is currently syndicated across 53 financial institutions from various regions of
the world, diversifying our reliance on any individual lending institution. The
current final maturity for the facility is May 2025, although we expect to
refinance this facility in advance of this date. The facility contains standard
investment grade covenants and does not condition our ability to borrow on the
lack of a material adverse effect to us or the general economy.

•Senior unsecured bonds: We are a frequent issuer in the investment grade
capital markets, opportunistically issuing unsecured bonds, primarily through
our Medium-Term Note Program at attractive cost of funds. In 2021, we issued
$3.7 billion of Medium-Term Notes with a weighted average interest rate of 1.27%
and we expect to have continued access to the investment grade bond market in
the future.

•Aircraft sales: Proceeds from the sale of aircraft help supplement our
liquidity position. Although we have scaled back our aircraft sales activity in
recent years, assuming aircraft deliveries continue to improve, we are targeting
to sell approximately $750.0 million in aircraft for 2022.

•Other sources: In addition to the above, we generate liquidity through other
sources of debt financing (including unsecured and secured bank term loans),
issuances of preferred stock and cash received from security deposits and
maintenance reserves.

Our material cash requirements are primarily for the purchase of aircraft and
debt service payments, along with our general operating expenses. The amount of
our cash requirements depends on a variety of factors, including, the ability of
aircraft manufacturers to meet their contractual delivery obligations to us, the
ability of our lessees to meet their contractual obligations with us, the timing
of aircraft sales from our fleet, the timing and amount of our debt service
obligations, potential acquisitions, and the general economic environment in
which we operate.
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Our material cash requirements as of December 31, 2021 are as follows:

                                      2022                 2023                 2024                 2025                 2026              Thereafter              Total
                                                                                                (in thousands)
Long-term debt
obligations                      $ 2,133,882          $ 2,490,951          $ 2,892,276          $ 2,313,889          $ 3,456,845          $ 3,916,176          $ 17,204,019
Interest payments on debt
outstanding(1)                       485,115              430,603              355,149              283,628              187,168              305,769   

2,047,432

Purchase commitments(2)
(3)                                6,533,876            5,399,461            5,571,342            3,041,583            2,730,867            4,454,212   

27,731,341

Total                            $ 9,152,873          $ 8,321,015          

$8,818,767 $5,639,100 $6,374,880 $8,676,157

$46,982,792

(1) Future interest payments on floating rate debt are estimated using floating rates in effect at December 31, 2021.
(2) Purchase commitments reflect future Boeing and Airbus aircraft deliveries based on information currently available to us based on contractual documentation. Purchase
commitments include only the costs of aircraft in our committed orderbook and do not include costs of aircraft that we have the right to purchase through memorandums of
understanding or letters of intent.
(3) Due to the expected aircraft delivery delays, we expect approximately $1.3 billion of our purchase commitments will be subject to cancellation, at our option, by the time
of delivery.



The above table does not include any tax payments we may pay nor any dividends
we may pay on our preferred stock or common stock. Based on our expected cash
sources and requirements for 2022, we expect that we will continue to access the
capital markets for public bond offerings in 2022 to meet our cash requirements
for aircraft deliveries and debt service obligations.

While we have planned our aircraft investments for the remainder of 2022 and
beyond based on currently expected delivery schedules, given the current
industry circumstances, our aircraft delivery schedule could continue to be
subject to material changes. In any case, our aircraft investments will be less
than what we planned prior to the pandemic, which will slow our revenue growth,
but will further improve our strong liquidity position.

The actual delivery dates of the aircraft in our commitments table and expected
time for payment of such aircraft may differ from our estimates and could be
further impacted by the pace at which Boeing and Airbus can deliver aircraft,
among other factors. We expect to make approximately $3.5 billion to $4.5
billion in aircraft investments during 2022, which reflects a high degree of
uncertainty around the Boeing 787 program as well as other potential production
delays.

As of December 31, 2021, we were in compliance in all material respects with the
covenants contained in our debt agreements. While a ratings downgrade would not
result in a default under any of our debt agreements, it could adversely affect
our ability to issue debt and obtain new financings, or renew existing
financings, and it would increase the costs of certain financings.

Our liquidity plans are subject to a number of risks and uncertainties, including those described in “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Cash Flows

Our cash flows provided by operating activities increased by 26.3% or $286.7
million to $1.4 billion in 2021, as compared to $1.1 billion in 2020. Our cash
flow provided by operating activities during the year ended December 31, 2021
was higher due to the growth of our fleet and an increase in our cash
collections as compared to the year ended December 31, 2020. Our cash flow used
in investing activities was $3.1 billion and $2.5 billion for the years ended
December 31, 2021 and 2020, respectively, which resulted primarily from the
purchase of aircraft. Our cash flow provided by financing activities was $1.1
billion for the year ended December 31, 2021, which resulted primarily from the
issuance of senior unsecured notes and preferred stock which were used to
acquire aircraft investments. Our cash flow provided by financing activities was
$2.9 billion for the year ended December 31, 2020, which resulted primarily from
the issuance of unsecured notes partially offset by the repayment of outstanding
debt.


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Debt

Our debt financing was comprised of the following as of December 31, 2021 and
2020:
                                                         December 31, 2021            December 31, 2020
                                                        (U.S. dollars in thousands, except percentages)
Unsecured
Senior notes                                           $      16,892,058            $       15,583,544
Term financings                                                  167,000                       811,550

Total unsecured debt financing                                17,059,058                    16,395,094
Secured
Term financings                                                  126,660                       276,032
Export credit financing                                           18,301                        24,955
Total secured debt financing                                     144,961                       300,987

Total debt financing                                          17,204,019                    16,696,081
Less: Debt discounts and issuance costs                         (181,539)                     (177,743)

Debt financing, net of haircuts and issue costs $17,022,480

         $       16,518,338
Selected interest rates and ratios:
Composite interest rate(1)                                          2.79    %                       3.13%
Composite interest rate on fixed rate debt(1)                       2.90    %                       3.26%
Percentage of total debt at fixed rate                             94.80    %                      93.02%

(1) This rate does not include the effect of initial fees, facility fees, undrawn fees or the amortization of debt discounts and issue costs.



We believe that, as of December 31, 2021, we were in compliance in all material
respects with the covenants in our debt agreements, including minimum
consolidated shareholders' equity, minimum consolidated unencumbered assets, and
an interest coverage ratio test.

Senior unsecured notes (including medium term note program)

As of December 31, 2021, we had $16.9 billion in aggregate principal amount of
senior unsecured notes outstanding with remaining terms ranging from less than
one month to 8.92 years and bearing interest at fixed rates ranging from 0.70%
to 4.625%, with two notes bearing interest at a floating rate of three-month
LIBOR plus 0.35% and a floating rate of LIBOR plus 1.125%. As of December 31,
2020, we had $15.6 billion in aggregate principal amount of senior unsecured
notes outstanding bearing interest at fixed rates ranging from 2.25% to 4.625%,
with one note bearing interest at a floating rate of three-month LIBOR plus
0.67% and one note bearing interest at a floating rate of LIBOR plus 1.125%.

During the year ended December 31, 2021, we issued $3.7 billion in aggregate
principal amount of Medium-Term Notes comprised of (i) $750.0 million in
aggregate principal amount of 0.70% Medium-Term Notes due 2024, (ii) $1.2
billion in aggregate principal amount of 1.875% Medium-Term Notes due 2026,
(iii) $600.0 million in aggregate principal amount of Medium-Term Notes due 2022
bearing interest at a floating rate of three-month LIBOR plus 0.35%, (iv) $600.0
million in aggregate principal amount of 0.80% Medium-Term Notes due 2024, and
(v) $500.0 million in aggregate principal amount of 2.10% Medium-Term Notes due
2028.

In January 2022we issued $750.0 million in aggregate principal amount of medium-term notes due 2027 bearing interest at a fixed rate of 2.20% and $750.0 million in aggregate principal amount of medium-term notes due 2032 bearing interest at a fixed rate of 2.875%.

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Public senior notes (including Medium-Term Note Program).

Of our $16.9 billion aggregate principal amount of senior unsecured notes
outstanding as of December 31, 2021, approximately $16.8 billion of such notes
have been registered with the SEC. All of our fixed rate public senior notes may
be redeemed at our option in part or in full at any time and from time to time
prior to maturity at the redemption prices specified in such public senior
notes. Our public senior notes also require us to offer to purchase all of the
notes at a purchase price equal to 101% of the principal amount of the notes,
plus accrued and unpaid interest if a "change of control repurchase event" (as
defined in the applicable indenture or supplemental indenture) occurs.

Each of the indentures and the applicable supplemental indentures (collectively
the "indentures") governing these public senior notes requires us to comply with
certain covenants, including restrictions on our ability to (i) incur liens on
assets and (ii) merge, consolidate or transfer all or substantially all of our
assets.

The covenants contained in all of the indentures governing our public senior
notes are subject to certain exceptions and qualifications set forth in the
applicable indenture. In addition, the indentures governing all of our public
senior notes outstanding as of December 31, 2021 also provide for customary
events of default. If any event of default occurs, any amount then outstanding
under the relevant indentures may immediately become due and payable. These
events of default are subject to certain exceptions and qualifications set forth
in the indentures.

On May 7, 2021, we renewed and refreshed our Medium-Term Note Program, under
which we may issue, from time to time, up to $15.0 billion of debt securities
designated as our Medium-Term Notes, Series A. All of our public senior notes
issued since 2019 have consisted of Medium-Term Notes, Series A, issued under
our Medium-Term Note Program. As of February 17, 2022, we had $10.6 billion
remaining capacity under our Medium-Term Note Program.

Unsecured revolving credit facility

From December 31, 2021 and December 31, 2020we had no amounts outstanding under our unsecured revolving credit facility (the “Revolving Credit Facility”).

Borrowings under the Revolving Credit Facility accrue interest at either (a)
LIBOR plus a margin of 1.05% per year or (b) an alternative base rate plus a
margin of 0.05% per year, subject, in each case, to increases or decreases based
on declines or improvements in the credit ratings for our debt. We are required
to pay a facility fee of 0.20% per year (also subject to increases or decreases
based on declines or improvements in the credit ratings for our debt) in respect
of total commitments under the Revolving Credit Facility. Borrowings under the
Revolving Credit Facility are used to finance our working capital needs in the
ordinary course of business and for other general corporate purposes.

In 2021, we entered into an amendment and four new lender supplements to our
Revolving Credit Facility, which extended the final maturity date to May 5, 2025
and increased the total size of the facility to approximately $6.8 billion,
representing an increase of 13.3% from December 31, 2020. As of December 31,
2021, lenders held revolving commitments totaling approximately $6.1 billion
that mature on May 5, 2025, commitments totaling $575.0 million that mature on
May 5, 2023 and commitments totaling $105.0 million that mature on May 5, 2022.

The Revolving Credit Facility provides for certain covenants, including
covenants that limit our subsidiaries' ability to incur, create, or assume
certain unsecured indebtedness, and our subsidiaries' abilities to engage in
certain mergers, consolidations, and asset sales. The Revolving Credit Facility
also requires us to comply with certain financial maintenance covenants
including minimum consolidated shareholders' equity, minimum consolidated
unencumbered assets, and an interest coverage test. In addition, the Revolving
Credit Facility contains customary events of default. In the case of an event of
default, the lenders may terminate the commitments under the Revolving Credit
Facility and require immediate repayment of all outstanding borrowings.

Preferred shares

On March 5, 2019, we issued 10,000,000 shares of 6.15% Fixed-to-Floating
Non-Cumulative Perpetual Preferred Stock, Series A (the "Series A Preferred
Stock"), $0.01 par value, with an aggregate liquidation preference of $250.0
million ($25 per share). See "Item 8. Financial Statements - Note 4,
Shareholders' Equity," in this Annual Report on Form 10-K for the year ended
December 31, 2021 for a discussion of the Series A Preferred Stock dividend
rate. We may redeem shares of the Series A Preferred Stock at our
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option, in whole or in part, from time to time, on or after March 15, 2024, for
cash at a redemption price equal to $25.00 per share, plus any declared and
unpaid dividends to, but excluding, the redemption date, without accumulation of
any undeclared dividends. We may also redeem shares of the Series A Preferred
Stock at our option under certain other limited conditions. The Series A
Preferred Stock ranks on a parity with the Series B and Series C Preferred
Stock.

On March 2, 2021, we issued 300,000 shares of 4.65% Fixed Rate Reset
Non-Cumulative Perpetual Preferred Stock, Series B (the "Series B Preferred
Stock"), $0.01 par value, with an aggregate liquidation preference of $300.0
million ($1,000 per share). We will pay dividends on the Series B Preferred
Stock only when, as and if declared by our board of directors. Dividends will
accrue, on a non-cumulative basis, on the stated amount of $1,000 per share at a
rate per annum equal to: (i) 4.65% through June 15, 2026, and payable quarterly
in arrears beginning on June 15, 2021, and (ii) the Five-year U.S. Treasury Rate
as of the applicable reset dividend determination date plus a spread of 4.076%
per reset period from June 15, 2026 and reset every five years and payable
quarterly in arrears.

We may redeem shares of the Series B Preferred Stock at our option, in whole or
in part, from time to time, on any dividend payment date on or after June 15,
2026, for cash at a redemption price equal to $1,000 per share, plus any
declared and unpaid dividends, without accumulation of any undeclared dividends.
We may also redeem shares of the Series B Preferred Stock at our option under
certain other limited conditions. The Series B Preferred Stock ranks on a parity
with the Series A Preferred Stock and the Series C Preferred Stock.

In October 2021, we issued 300,000 shares of 4.125% Fixed-Rate Reset
Non-Cumulative Perpetual Preferred Stock, Series C (the "Series C Preferred
Stock"), $0.01 par value, with an aggregate liquidation preference of
$300.0 million ($1,000 per share). We will pay dividends on the Series C
Preferred Stock only when, as and if declared by our board of directors.
Dividends will accrue, on a non-cumulative basis, on the stated amount of $1,000
per share at a rate per annum equal to: (i) 4.125% through December 15, 2026,
and payable quarterly in arrears beginning on December 15, 2021, and (ii) the
Five-year U.S. Treasury Rate as of the applicable reset dividend determination
date plus a spread of 3.149% per reset period from December 15, 2026 and reset
every five years and payable quarterly in arrears.

We may redeem shares of the Series C Preferred Stock at our option, in whole or
in part, from time to time, on any dividend payment date on or after December
15, 2026, for cash at a redemption price equal to $1,000 per share, plus any
declared and unpaid dividends, without accumulation of any undeclared dividends.
We may also redeem shares of the Series C Preferred Stock at our option under
certain other limited conditions. The Series C Preferred Stock ranks on a parity
with the Series A and Series B Preferred Stock.

The following table summarizes the cash dividends per share that were paid in 2021 on our outstanding Series A, Series B and Series C Preferred Shares:

Payment dates

       Title of each class                 March 15, 2021           June 15, 2021           September 15, 2021           December 15, 2021
Series A Preferred Stock                 $      0.384375          $     0.384375          $          0.384375          $         0.384375
Series B Preferred Stock                 $             -          $    13.304167          $            11.625          $           11.625
Series C Preferred Stock                 $             -          $            -          $                 -          $         7.104167


Off-balance sheet arrangements

We have not established any unconsolidated entities for the purpose of
facilitating off-balance sheet arrangements or for other contractually narrow or
limited purposes. We have, however, from time to time established subsidiaries
or trusts for the purpose of leasing aircraft or facilitating borrowing
arrangements which are consolidated.

We have non-controlling interests in two investment funds in which we own 9.5%
of the equity of each fund. We account for our interest in these funds under the
equity method of accounting due to our level of influence and involvement in the
funds. Also, we manage aircraft that we have sold through our Thunderbolt
platform. In connection with the sale of these aircraft portfolios through our
Thunderbolt platform, we hold non-controlling interests of approximately 5.0% in
two entities. These investments are accounted for under the cost method of
accounting.
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Impact of LIBOR Transition

On March 5, 2021, the Chief Executive of the U.K. Financial Conduct Authority,
which regulates LIBOR, publicly announced that no new contracts using U.S.
dollar LIBOR should be entered into after December 31, 2021, and that
publication of certain tenors of U.S. dollar LIBOR (including overnight and one,
three, six and 12 months) will permanently cease after June 30, 2023. In the
United States, efforts to identify a set of alternative U.S. dollar reference
interest rates are ongoing, and the Alternative Reference Rate Committee
("ARRC") has recommended the use of a Secured Overnight Funding Rate ("SOFR").
SOFR is different from LIBOR in that it is a backward-looking secured rate
rather than a forward-looking unsecured rate. For cash products and loans, the
ARRC has also recommended Term SOFR, which is a forward-looking SOFR based on
SOFR futures and may in part reduce differences between SOFR and LIBOR.

As of December 31, 2021, we had approximately $0.9 billion of floating rate debt
outstanding that used either one or three-month LIBOR as the applicable
reference rate to calculate the interest on such debt, of which $80.5 million is
set to mature after June 30, 2023. Additionally, our perpetual Series A
Preferred Stock is set to accrue dividends at a floating rate determined by
reference to three-month LIBOR, if available, beginning March 15, 2024. While
all of our agreements governing LIBOR-linked debt obligations and Series A
Preferred Stock obligations that are set to mature after June 30, 2023 contain
LIBOR transition fallback provisions, the lack of a standard market practice and
inconsistency in fallback provisions in recent years is reflected across the
agreements governing our floating rate debt and Series A Preferred Stock. For
example, our Revolving Credit Facility contains benchmark replacement language
with respect to LIBOR largely based on ARRC's recommendation of Term SOFR, and
our Series A Preferred Stock contains LIBOR fallback provisions that will allow
us to determine an alternative reference rate selected by the central bank,
reserve bank, monetary authority or any similar institution that is consistent
with market practice regarding a substitute for three-month LIBOR. For our
Series A Preferred Stock, if we determine there is no such alternative reference
rate, then we must select an independent financial advisor to determine a
substitute rate for LIBOR, and if an independent financial advisor cannot
determine an alternative reference rate, the dividend rate, business day
convention and manner of calculating dividends applicable during the fixed-rate
period of the Series A Preferred Stock will be in effect.

The implementation of a substitute reference rate for the calculation of
interest rates under our LIBOR linked debt and Series A Preferred Stock
obligations may cause us to incur expenses in effecting the transition and may
result in disputes with our lenders or holders of Series A Preferred Stock over
the appropriateness or comparability to LIBOR of the substitute reference rate
selected. However, we do not expect the LIBOR transition impact will have a
material effect on our financial results based on our anticipated LIBOR linked
outstanding debt and Series A Preferred Stock at June 30, 2023.

If the rate used to calculate interest on our outstanding floating rate debt
that currently uses LIBOR and our Series A Preferred Stock were to increase by
1.0% either as a result of an increase in LIBOR or the result of the use of an
alternative reference rate determined under the fallback provisions in the
applicable debt agreement when LIBOR is discontinued, we would expect to incur
additional interest expense and preferred dividends of $9.0 million and $2.5
million, respectively on such indebtedness and our Series A Preferred Stock as
of December 31, 2021 on an annualized basis.

Credit ratings

Our superior long-term and corporate credit ratings help us reduce our cost of funds and expand our access to capital at attractive prices. Our long-term debt financing strategy is focused on continuing to raise unsecured debt in the global investment grade banking and capital markets.

The following table summarizes our current credit ratings:

                          Long-term      Corporate                      Date of Last
Rating Agency               Debt          Rating         Outlook       Ratings Action
Kroll Bond Ratings           A-             A-          Negative         March 25, 2021
Standard and Poor's          BBB            BBB          Stable           April 7, 2021
Fitch Ratings                BBB            BBB          Stable            July 1, 2021


While a ratings downgrade would not result in a default under any of our debt
agreements, it could adversely affect our ability to issue debt and obtain new
financings, or renew existing financings, and it would increase the cost of our
financings.

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Results of Operations

                                                          Year Ended                  Year Ended                  Year Ended
                                                       December 31, 2021           December 31, 2020           December 31, 2019
                                                          (in thousands,

except for amounts and percentages per share and per share) Revenue Rental of flight equipment

                           $           2,003,337       $           1,946,620       $           1,916,869
Aircraft sales, trading, and other                                  85,052                      68,819                     100,035
Total revenues                                                   2,088,389                   2,015,439                   2,016,904
Expenses
Interest                                                           462,396                     431,733                     397,320
Amortization of debt discounts and issuance costs                   50,620                      43,025                      36,691
Interest expense                                                   513,016                     474,758                     434,011
Depreciation of flight equipment                                   882,562                     780,691                     702,810
Selling, general, and administrative                               125,279                      95,684                     123,653
Stock-based compensation                                            26,516                      17,628                      20,745
Total expenses                                                   1,547,373                   1,368,761                   1,281,219
Income before taxes                                                541,016                     646,678                     735,685
Income tax expense                                               (104,384)                   (130,414)                   (148,564)
Net income                                           $             436,632       $             516,264       $             587,121
Preferred stock dividends                                         (28,473)                    (15,375)                    (11,958)
Net income available to common stockholders          $             408,159       $             500,889       $             575,163

Earnings per share of common stock
Basic                                                $                3.58       $                4.41       $                5.14
Diluted                                              $                3.57       $                4.39       $                5.09
Weighted-average shares of common stock outstanding
Basic                                                          114,050,578                 113,684,782                 111,895,433
Diluted                                                        114,446,093                 114,014,021                 113,086,323

Other financial data
Pre-tax profit margin                                              25.9  %                     32.1  %                     36.5  %
Adjusted net income before income taxes(1)           $             589,679       $             691,956       $             781,163
Adjusted pre-tax profit margin(1)                                  28.2  %                     34.3  %                     38.7  %
Adjusted diluted earnings per share before income
taxes(1)                                             $                5.15       $                6.07       $                6.91
Pre-tax return on common equity                                     8.6  %                     11.3  %                     14.2  %
Adjusted pre-tax return on common equity(1)                         9.8  %                     12.4  %                     15.4  %



(1)Adjusted net income before income taxes (defined as net income available to
common stockholders excluding the effects of
certain non-cash items, one-time or non-recurring items, that are not expected
to continue in the future and certain other items), adjusted pre-tax profit
margin (defined as adjusted net income before income taxes divided by total
revenues), adjusted diluted earnings per share before income taxes (defined as
adjusted net income before income taxes divided by the weighted average diluted
common shares outstanding) and adjusted pre-tax return on common equity (defined
as adjusted net income before income taxes divided by average common
shareholders' equity) are measures of operating performance that are not defined
by GAAP and should not be considered as an alternative to net income available
to common stockholders, pre-tax profit margin, earnings per share, diluted
earnings per share and pre-tax return on common equity, or any other performance
measures derived in accordance with GAAP. Adjusted net income before income
taxes, adjusted pre-tax profit margin, adjusted
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diluted earnings per share before income taxes and adjusted pre-tax return on
common equity are presented as supplemental disclosure because management
believes they provide useful information on our earnings from ongoing
operations.

Management and our board of directors use adjusted net income before income
taxes, adjusted pre-tax profit margin, adjusted diluted earnings per share
before income taxes and adjusted pre-tax return on common equity to assess our
consolidated financial and operating performance. Management believes these
measures are helpful in evaluating the operating performance of our ongoing
operations and identifying trends in our performance, because they remove the
effects of certain non-cash items, one-time or non-recurring items that are not
expected to continue in the future and certain other items from our operating
results. Adjusted net income before income taxes, adjusted pre-tax profit
margin, adjusted diluted earnings per share before income taxes and adjusted
pre-tax return on common equity, however, should not be considered in isolation
or as a substitute for analysis of our operating results or cash flows as
reported under GAAP. Adjusted net income before income taxes, adjusted pre-tax
profit margin, adjusted diluted earnings per share before income taxes and
adjusted pre-tax return on common equity do not reflect our cash expenditures or
changes in our cash requirements for our working capital needs. In addition, our
calculation of adjusted net income before income taxes, adjusted pre-tax profit
margin, adjusted diluted earnings per share before income taxes and adjusted
pre-tax return on common equity may differ from the adjusted net income before
income taxes, adjusted pre-tax profit margin, adjusted diluted earnings per
share before income taxes and adjusted pre-tax return on common equity, or
analogous calculations of other companies in our industry, limiting their
usefulness as a comparative measure.

The following table presents the calculation of the adjusted pre-tax profit margin (in thousands, except percentages):

                                                                               Year Ended
                                                                              December 31,
                                                           2021                   2020                    2019
                                                                               (unaudited)
Reconciliation of the numerator for adjusted pre-tax
profit margin (net income available to common
stockholders to adjusted net income before income
taxes):
Net income available to common stockholders          $        408,159       $         500,889       $        575,163
Amortization of debt discounts and issuance costs              50,620                  43,025                 36,691
Stock-based compensation                                       26,516                  17,628                 20,745
Provision for income taxes                                    104,384                 130,414                148,564
Adjusted net income before income taxes              $        589,679       

$691,956 $781,163

Denominator for adjusted pre-tax profit margin:
Total revenues                                              2,088,389               2,015,439              2,016,904
Adjusted pre-tax profit margin(a)                           28.2    %                 34.3  %              38.7    %

(a) Adjusted pre-tax profit margin is adjusted net profit before income taxes divided by total revenue

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The following table shows the calculation of adjusted diluted earnings per share
before income taxes (in thousands, except share and per share amounts):

                                                                               Year Ended
                                                                              December 31,
                                                            2021                  2020                   2019
                                                                               (unaudited)
Reconciliation of the numerator for adjusted diluted
earnings per share (net income available to common
stockholders to adjusted net income before income
taxes):
Net income available to common stockholders           $     408,159          $    500,889          $     575,163
Amortization of debt discounts and issuance costs            50,620                43,025                 36,691
Stock-based compensation                                     26,516                17,628                 20,745
Provision for income taxes                                  104,384               130,414                148,564
Adjusted net income before income taxes               $     589,679         

$691,956 $781,163

Denominator for adjusted diluted earnings per share: Weighted average diluted common shares outstanding

                                             114,446,093           114,014,021            113,086,323
Adjusted diluted earnings per share before income
taxes(b)                                              $        5.15         

$6.07 $6.91

(b) Adjusted diluted earnings per share before income taxes is adjusted net income before income taxes divided by weighted average diluted ordinary shares outstanding

The following table shows the calculation of the adjusted pre-tax return on common equity (in thousands, except percentages):

                                                                               Year Ended
                                                                              December 31,
                                                           2021                   2020                    2019
                                                                               (unaudited)
Reconciliation of the numerator for adjusted pre-tax
return on common equity (net income available to
common stockholders to adjusted net income before
income taxes):
Net income available to common stockholders          $        408,159       $         500,889       $        575,163
Amortization of debt discounts and issuance costs              50,620                  43,025                 36,691
Stock-based compensation                                       26,516                  17,628                 20,745
Provision for income taxes                                    104,384                 130,414                148,564
Adjusted net income before income taxes              $        589,679       

$691,956 $781,163

Denominator for adjusted pre-tax return on common
equity:
Common shareholders' equity as of the beginning of
the period                                           $      5,822,341       $       5,373,544       $      4,806,900
Common shareholders' equity as of the end of the
period                                                      6,158,568               5,822,341              5,373,544
Average common shareholders' equity                  $      5,990,455       

$5,597,943 $5,090,222

Adjusted pre-tax return on common equity(c)                  9.8    %                 12.4  %              15.4    %

(c) Adjusted pre-tax return on common equity is calculated as adjusted net income before income taxes divided by average common shareholders’ equity

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2021 Compared to 2020

Rental revenue

During the year ended December 31, 2021, we recorded $2.0 billion in rental
revenue, which included amortization expense related to initial direct costs,
net of overhaul revenue of $2.3 million, as compared to $1.95 billion, which
included amortization expense related to initial direct costs, net of overhaul
revenue of $31.9 million for the year ended December 31, 2020. Our owned fleet
increased to 382 aircraft with a net book value of $22.9 billion as of
December 31, 2021 from 332 aircraft with a net book value of $20.4 billion as of
December 31, 2020. The increase in total revenues was primarily driven by the
growth in our fleet and an increase in our cash collections. The impact of cash
basis accounting and lease restructurings for the year ended December 31, 2021
resulted in a decrease in revenue of $72.7 million and $132.5 million,
respectively.

Aircraft sales, trading and other income

Aircraft sales, trading, and other revenue totaled $85.1 million for the year
ended December 31, 2021 compared to $68.8 million for the year ended
December 31, 2020. During the year ended December 31, 2021, we recorded
approximately $24.0 million related to the sale of three aircraft. In addition,
we recorded approximately $34.0 million in gains related to the sale to a third
party of certain unsecured claims related to Aeromexico's insolvency
proceedings. During the year ended December 31, 2020, we recorded approximately
$31.1 million related to lease termination fees and the sale of eight aircraft
and also recorded $14.0 million in other revenue related to the repurchase of
$206.1 million in senior notes.

Interest expense

Interest expense totaled $513.0 million for the year ended December 31, 2021
compared to $474.8 million for the year ended December 31, 2020. The increase
was primarily due to an increase in our aggregate debt balance driven by the
growth of our fleet and the increase in our liquidity position, partially offset
by a decrease in our composite interest rate. We ended the year with $7.9
billion in available liquidity. We expect that our interest expense will
increase as our average debt balance outstanding continues to increase. We also
expect that the rising interest rate environment could lead to an increase in
our composite cost of funds, which would increase our interest expense.

Depreciation expense

We recorded $882.6 million in depreciation expense of flight equipment for the
year ended December 31, 2021 compared to $780.7 million for the year ended
December 31, 2020. The increase in depreciation expense for 2021 compared to
2020 was primarily attributable to the growth of our fleet during the last
twelve months.

Selling, general and administrative expenses

We recorded selling, general, and administrative expenses of $125.3 million for
the year ended December 31, 2021 compared to $95.7 million for the year ended
December 31, 2020. Selling, general, and administrative expense as a percentage
of total revenue increased to 6.0% for the year ended December 31, 2021 compared
to 4.7% for the year ended December 31, 2020. The increase in selling, general
and administrative expenses was primarily due to the increase in business
activity and increased expenses related to transition of aircraft.

Taxes

For the years ended December 31, 2021 and December 31, 2020, we reported an effective tax rate of 19.3% and 20.2%, respectively. Changes in the tax rate are mainly due to changes in permanent items.

Net income available to ordinary shareholders

For the year ended December 31, 2021, we reported consolidated net income
available to common stockholders of $408.2 million, or $3.57 per diluted share,
compared to a consolidated net income available to common stockholders of $500.9
million, or $4.39 per
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diluted share, for the year ended December 31, 2020. Despite the growth of our
fleet, our net income available to common stockholders and diluted earnings per
share decreased due to the impact of lease restructurings and cash basis
accounting.

Adjusted net profit before income taxes

For the year ended December 31, 2021, we recorded adjusted net income before
income taxes of $589.7 million, or $5.15 per diluted share, compared to an
adjusted net income before income taxes of $692.0 million, or $6.07 per diluted
share, for the year ended December 31, 2020. Our adjusted net income before
income taxes and adjusted diluted earnings per share before income taxes
decreased for the year ended December 31, 2021 as compared to 2020, primarily
due to the impact of lease restructurings and cash basis accounting.

2020 vs. 2019

Rental income

As of December 31, 2020, we owned 332 aircraft, with a net book value of $20.4
billion, and recorded $1.95 billion in rental revenue for the year then ended,
which included amortization expense related to initial direct costs, net of
overhaul revenue of $31.9 million. In the prior year, as of December 31, 2019,
we owned 292 aircraft with a net book value of $18.7 billion and recorded $1.92
billion in rental revenue for the year ended December 31, 2019, which included
overhaul revenue, net of amortization of initial direct costs, of $11.1 million.
The increase in rental revenue was primarily due to the increase in net book
value of our fleet to $20.4 billion as of December 31, 2020 from $18.7 billion
as of December 31, 2019, partially offset by approximately $49.4 million of
rental revenue we were not able to recognize because collection was not
reasonably assured for certain of our leases and the impact of lease
restructurings entered into during the period, which decreased our total revenue
by approximately $49.2 million for the year ending December 31, 2020.

Aircraft sales, trading and other income

Aircraft sales, trading, and other revenue totaled $68.8 million for the year
ended December 31, 2020, of which $31.1 million was related to the sale of eight
aircraft and lease termination fees recognized during the year then ended. In
addition, we recorded $14.0 million in other revenue related to the repurchase
of $206.1 million in senior notes. Aircraft sales, trading and other revenue
totaled $100.0 million for the year ended December 31, 2019, of which $67.8
million was related to the sale of 30 aircraft from our fleet and lease
termination fees recognized during 2019. The decrease in our aircraft sales,
trading, and other revenue for the year 2020 compared to 2019 is primarily due
to fewer aircraft sales.

Interest expense

Interest expense totaled $474.8 million for the year ended December 31, 2020
compared to $434.0 million for the year ended December 31, 2019. The increase
was primarily due to an increase in our aggregate debt balance driven by the
growth of our fleet and the increase in our liquidity position, partially offset
by the decrease in our composite interest rate. We ended the year with an
available liquidity balance of $7.7 billion. We expect that our interest expense
will increase as our average debt balance outstanding continues to increase.
Interest expense will also be impacted by changes in our composite cost of
funds.

Depreciation expense

We recorded $780.7 million in depreciation expense of flight equipment for the
year ended December 31, 2020 compared to $702.8 million for the year ended
December 31, 2019. The increase in depreciation expense for 2020 compared to
2019 was primarily attributable to the growth of our fleet.

Selling, general and administrative expenses

We recorded selling, general, and administrative expenses of $95.7 million for
the year ended December 31, 2020 compared to $123.7 million for the year ended
December 31, 2019. Selling, general, and administrative expense as a percentage
of total revenue decreased to 4.7% for the year ended December 31, 2020 compared
to 6.1% for the year ended December 31, 2019. The decrease in selling, general
and administrative expenses is primarily due to lower transactional costs
incurred and a decrease in operating expenses during the period.
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Net income available to ordinary shareholders

For the year ended December 31, 2020, we reported consolidated net income
available to common stockholders of $500.9 million, or $4.39 per diluted share,
compared to a consolidated net income available to common stockholders of $575.2
million, or $5.09 per diluted share, for the year ended December 31, 2019.
Despite the continued growth of our fleet, our net income available to common
stockholders decreased for the year 2020 as compared to 2019, due to the
decrease in our revenues as described above and an increase in depreciation and
interest expense, partially offset by a decrease in selling, general and
administrative expenses.

Adjusted net profit before income taxes

For the year ended December 31, 2020, we recorded adjusted net income before
income taxes of $692.0 million, or $6.07 per diluted share, compared to an
adjusted net income before income taxes of $781.2 million, or $6.91 per diluted
share, for the year ended December 31, 2019. Adjusted net income before income
taxes decreased for year 2020 as compared to 2019, primarily due to a decrease
in total revenues as described above and an increase in depreciation and
interest expense, partially offset by a decrease in selling, general and
administrative expenses.

Critical accounting estimates

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

flight equipment

Flight equipment under operating lease is stated at cost less accumulated
depreciation. Purchases, major additions and modifications, and interest on
deposits during the construction phase are capitalized. We generally depreciate
passenger aircraft on a straight-line basis over a 25-year life from the date of
manufacture to a 15% residual value. Changes in the assumption of useful lives
or residual values for aircraft could have a significant impact on our results
of operations and financial condition. At the time flight equipment is retired
or sold, the cost and accumulated depreciation are removed from the related
accounts and the difference, net of proceeds, is recorded as a gain or loss.

Major aircraft improvements and modifications incurred during an off-lease
period are capitalized and depreciated over the remaining life of the flight
equipment. In addition, costs paid by us for scheduled maintenance and overhauls
are capitalized and depreciated over a period to the next scheduled maintenance
or overhaul event. Miscellaneous repairs are expensed when incurred.

Our management team evaluates on a quarterly basis the need to perform an
impairment test whenever facts or circumstances indicate a potential impairment
has occurred. An assessment is performed whenever events or changes in
circumstances indicate that the carrying amount of an aircraft may not be
recoverable. Recoverability of an aircraft's carrying amount is measured by
comparing the carrying amount of the aircraft to future undiscounted net cash
flows expected to be generated by the aircraft. The undiscounted cash flows
consist of cash flows from currently contracted leases, future projected lease
rates, and estimated residual or scrap values for each aircraft. We develop
assumptions used in the recoverability analysis based on our knowledge of active
lease contracts, current and future expectations of the global demand for a
particular aircraft type, potential for alternative use of aircraft and
historical experience in the aircraft leasing market and aviation industry, as
well as information received from third-party industry sources. The factors
considered in estimating the undiscounted cash flows are affected by changes in
future periods due to changes in contracted lease rates, economic conditions,
technology, and airline demand for a particular aircraft type. In the event that
an aircraft does not meet the recoverability test and the aircraft's carrying
amount falls below estimated values from third-party industry sources, the
aircraft will be recorded at fair value in accordance with our Fair Value
Policy, resulting in an impairment charge. Deterioration of future lease rates
and the residual values of our aircraft could result in impairment charges which
could have a significant impact on our results of operations and financial
condition.

We record flight equipment at fair value if we determine the carrying value may
not be recoverable. We principally use the income approach to measure the fair
value of aircraft. The income approach is based on the present value of cash
flows from contractual lease agreements and projected future lease payments,
including contingent rentals, net of expenses, which extend to the end of the
aircraft's economic life in its highest and best use configuration, as well as a
disposition value based on expectations of market participants. These valuations
are considered Level 3 valuations, as the valuations contain significant
non-observable inputs.
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