WILLIS LEASE FINANCE CORPORATION

(WLFC)
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Delayed Nasdaq  -  04:00 2022-08-17 pm EDT
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08/08INSIDER SELL : Willis Lease Finance
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08/05WILLIS LEASE FINANCE CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
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08/04WILLIS LEASE FINANCE : Management Change/Compensation - Form 8-K
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WILLIS LEASE FINANCE CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/05/2022 | 09:51am EDT
The following discussion should be read in conjunction with the Unaudited
Condensed Consolidated Financial Statements and notes thereto included under
Part I, Item 1 of this Quarterly Report on Form 10-Q. In addition, reference
should be made to our audited Consolidated Financial Statements and notes
thereto and related "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in our Form 10-K for the fiscal year ended
December 31, 2021 (the "2021 Form 10-K"). In addition to historical consolidated
financial information, the following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs, including potential
impacts of the COVID-19 pandemic on our business, results of operations and
financial condition. Our actual results may differ materially from those
contained in or implied by any forward-looking statements. The financial
information included in this discussion and in our consolidated financial
statements may not be indicative of our consolidated financial position,
operating results, changes in equity and cash flows in the future. See "Special
Note Regarding Forward-Looking Statements" included earlier in this report.

Overview


Our core business is acquiring and leasing commercial aircraft and aircraft
engines and related aircraft equipment pursuant to operating leases, all of
which we sometimes collectively refer to as "equipment." As of June 30, 2022,
the majority of our leases were operating leases, with the exception of certain
failed sale-leaseback transactions classified as notes receivable under the
guidance provided by Accounting Standards Codification ("ASC") 842 and a $7.0
million investment in sales-type leases. As of June 30, 2022, we had 79 lessees
in 42 countries. Our portfolio is continually changing due to equipment
acquisitions and sales. As of June 30, 2022, $1,957.6 million of equipment held
in our operating lease portfolio, $83.3 million of notes receivable, and $7.0
million of investment in sales-type leases represented 293 engines, twelve
aircraft, one marine vessel and other leased parts and equipment. As of June 30,
2022, we also managed 351 engines, aircraft and related equipment on behalf of
other parties.

Our wholly owned subsidiary Willis Asset Management Limited ("Willis Asset
Management") is focused on the engine management and consulting business. Willis
Aeronautical Services, Inc. ("Willis Aero") is a wholly owned subsidiary whose
primary focus is the sale of aircraft engine parts and materials through the
acquisition or consignment of aircraft and engines.

We actively manage our portfolio and structure our leases to maximize the
residual values of our leased assets. Our leasing business focuses on popular
Stage IV commercial jet engines manufactured by CFMI, General Electric, Pratt &
Whitney, Rolls Royce and International Aero Engines. These engines are the most
widely used engines in the world, powering Airbus, Boeing, Bombardier and
Embraer aircraft.

Risks and Uncertainties


As a result of the COVID-19 pandemic, the Company had temporarily closed its
headquarters and other offices, required its employees and contractors to
predominately work remotely, and implemented travel restrictions, all of which
represented a significant disruption in how the Company operates its business.
In January 2022, the Company lifted travel restrictions and has also
subsequently opened its corporate headquarters and other offices for employees
and contractors to work from offices at their discretion. The Company has also
taken various proactive actions in an attempt to mitigate the financial impact
of the COVID-19 pandemic. The operations of the Company's partners and customers
have likewise been disrupted. The worldwide spread of the COVID-19 virus has
resulted in a global slowdown of economic activity. While the duration and
extent of the COVID-19 pandemic depends on future developments that cannot be
accurately predicted at this time, such as the extent and effectiveness of
containment actions, it has had an adverse effect on the global economy and the
ultimate societal and economic impact of the COVID-19 pandemic remains unknown.
In particular, the ongoing COVID-19 pandemic has caused significant disruptions
to the airline industry and has resulted in a dramatic reduction in demand for
air travel domestically and abroad, which is likely to continue for the
foreseeable future. Lower demand for air travel in turn presents significant
risks to the Company, resulting in impacts which have adversely affected the
Company's business, results of operation, and financial condition. Lower demand
for spare parts and engine and airframe leasing has negatively impacted
collections of accounts receivable, caused the Company's lessee customers to not
enter into new leases, resulted in reduced spending by new and existing
customers for leases or spare parts or equipment, resulted in lower usage fees,
caused some of the Company's customers to go out of business, and limited the
ability of the Company's personnel to travel to customers and potential
customers. The Company is not able to evaluate or foresee the full extent of
these impacts at the current time.

The scope and nature of the impact of COVID-19 on the airline industry, and in
turn our business, continue to evolve and the outcomes are uncertain. Given the
uncertainty in the rapidly changing market and economic conditions related to
COVID-19, we will continue to evaluate the nature and extent of the impact to
our business and financial position. The ultimate extent of the effects of the
COVID-19 pandemic on our Company will depend on future developments, and such
effects could exist for an extended period of time.
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In February 2022, Russia commenced a military action with Ukraine. As a result
of this action, various nations, including the United States, have instituted
economic sanctions against Russia. Further, the full impact of this action and
related sanctions on the world economy is not determinable as of the date of
these financial statements, and the specific impact on the Company's financial
condition, results of operations and cash flows is also not determinable as of
the date of these financial statements.

Critical Accounting Policies and Estimates


There have been no material changes to our critical accounting policies and
estimates from the information provided in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations included in our 2021
Form 10-K.

Results of Operations

Three months ended June 30, 2022 compared to the three months ended June 30, 2021

Revenue is summarized as follows:

                                                    Three Months Ended June 30,
                                                  2022                  2021        % Change
                                                       (dollars in thousands)
    Lease rent revenue                 $       36,704                $ 32,431         13.2  %
    Maintenance reserve revenue                24,245                  

17,278 40.3 %

    Spare parts and equipment sales             6,792                   

3,569 90.3 %

    Gain on sale of leased equipment              498                       -             N/A

    Gain on sale of financial assets            3,116                       -             N/A
    Asset transition fee                            -                   6,256       (100.0) %
    Other revenue                               6,720                   6,938         (3.1) %
    Total revenue                      $       78,075                $ 66,472         17.5  %



Lease Rent Revenue. Lease rent revenue consists of rental income from long-term
and short-term engine leases, aircraft leases, and other leased parts and
equipment. Lease rent revenue increased by $4.3 million, or 13.2%, to $36.7
million in the three months ended June 30, 2022 from $32.4 million for the three
months ended June 30, 2021. The increase is due to an increase in the number of
engines placed on lease as supported by an increase in utilization compared to
the prior year period. During the three months ended June 30, 2022, we purchased
equipment (including capitalized costs) totaling $57.1 million, which consisted
of four engines and other parts and equipment purchased for our lease portfolio.
During the three months ended June 30, 2021, we purchased equipment (including
capitalized costs) totaling $37.3 million, which consisted of five engines and
one aircraft purchased for our lease portfolio.

One customer accounted for more than 10% of total lease rent revenue during the three months ended June 30, 2022 and 2021, respectively.


At June 30, 2022, the aggregate net book value of equipment held for lease
consisted of $1,957.6 million, $83.3 million notes receivable, and $7.0 million
investment in sales-type leases. At June 30, 2021, the aggregate net book value
of equipment held for lease consisted of $1,889.9 million and $195.6 million
notes receivable. Average utilization (based on net book value) was
approximately 82% and 81% for the three months ended June 30, 2022 and 2021,
respectively.

Maintenance Reserve Revenue. Maintenance reserve revenue increased $7.0 million,
or 40.3%, to $24.2 million for the three months ended June 30, 2022 from $17.3
million for the three months ended June 30, 2021. Long-term maintenance revenue
is influenced by end of lease compensation and the realization of long-term
maintenance reserves associated with engines coming off lease. Long-term
maintenance revenue was $15.1 million for the three months ended June 30, 2022
compared to $14.8 million in the comparable prior period. "Non-reimbursable"
maintenance reserve revenue is directly influenced by on lease engine flight
hours and cycles. Engines out on lease with "non-reimbursable" usage fees
generated $9.2 million of short-term maintenance revenues compared to $2.5
million in the comparable prior period, resulting from an increase in global
flight traffic subsequent to the most significant impacts of the COVID-19
pandemic.

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Spare Parts and Equipment Sales. Spare parts sales increased by $3.2 million, or
90.3%, to $6.8 million for the three months ended June 30, 2022 compared to $3.6
million for the three months ended June 30, 2021. The increase in spare parts
sales for the second quarter of 2022 was driven by an industry-wide increase in
engine and aircraft utilization and the demand for parts associated with such
increase compared to the prior year period. There were no equipment sales for
the three months ended June 30, 2022 and 2021.

Gain on Sale of Leased Equipment. During the three months ended June 30, 2022,
we sold eight engines from the lease portfolio for a net gain of $0.5 million.
There was no gain on sale of leased equipment during the three months ended
June 30, 2021.

Gain on Sale of Financial Assets. During the three months ended June 30, 2022,
we sold four notes receivable for a net gain of $3.1 million. There was no gain
on sale of financial assets during the three months ended June 30, 2021.

Asset Transition Fee. There was no asset transition fee in the three months ended June 30, 2022. Asset transition fee of $6.3 million during the three months ended June 30, 2021 reflects a settlement received from the close out of an engine transition program.


Other Revenue. Other revenue decreased by $0.2 million, or 3.1%, to $6.7 million
for the three months ended June 30, 2022 from $6.9 million for the three months
ended June 30, 2021. Other revenue consists primarily of management fee income,
lease administration fees, third party consignment commissions earned, service
fee revenue, interest income on notes receivable related to failed
sale-leasebacks where the Company was the buyer-lessor, and other discrete
revenue items.

Depreciation and Amortization Expense. Depreciation and amortization expense
decreased by $1.7 million, or 7.4%, to $21.6 million for the three months ended
June 30, 2022 compared to $23.3 million for the three months ended June 30,
2021. The decrease reflects certain assets reaching their residual values as
compared to the prior year period.

Cost of Spare Parts and Equipment Sales. Cost of spare parts sales increased by
$3.7 million, or 114.0%, to $7.0 million for the three months ended June 30,
2022 compared to $3.3 million for the three months ended June 30, 2021 due to
higher spare parts sales and aged lot write-downs of $1.4 million. There was no
equipment or cost of equipment sales for the three months ended June 30, 2022
and 2021.

Write-down of Equipment. Write-down of equipment was $0.1 million for the three
months ended June 30, 2022. Write-down of equipment was $2.2 million for the
three months ended June 30, 2021, reflecting the write-down of four engines.

General and Administrative Expenses. General and administrative expenses increased by $0.9 million, or 4.8%, to $20.4 million for the three months ended June 30, 2022 compared to $19.5 million for the three months ended June 30, 2021.


Technical Expense. Technical expense consists of the non-capitalized cost of
engine repairs, engine thrust rental fees, outsourced technical support
services, sublease engine rental expense, engine storage and freight costs.
Technical expense increased by $1.1 million to $3.4 million for the three months
ended June 30, 2022 compared to $2.3 million for the three months ended June 30,
2021. The increase is primarily due to an increase in engine maintenance due to
industry-wide increase in engine and aircraft utilization and engine hub repairs
resulting from a Federal Aviation Administration ("FAA") airworthiness
directive, as compared to the prior year period.

Net Finance Costs. Net finance costs decreased $1.0 million, or 5.7%, to $16.0
million for the three months ended June 30, 2022 compared to $17.0 million for
the three months ended June 30, 2021.

Income Tax Expense (Benefit). Income tax expense (benefit) was $5.0 million for
the three months ended June 30, 2022 compared to $(1.9) million for the three
months ended June 30, 2021. The effective tax rate for the second quarter of
2022 was 46.1% compared to 103.1% in the prior year period. The Company's
effective tax rate differed from the U.S. federal statutory rate of 21.0%
primarily due to executive compensation exceeding $1.0 million as defined in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
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Six months ended June 30, 2022 compared to the six months ended June 30, 2021

Revenue is summarized as follows:

                                               Six Months Ended June 30,
                                           2022                2021         % Change
                                                 (dollars in thousands)
Lease rent revenue                 $      74,829            $  63,951         17.0  %
Maintenance reserve revenue               39,079               37,090          5.4  %
Spare parts and equipment sales           13,422                8,135         65.0  %
Gain on sale of leased equipment           2,796                    -       

N/A

Gain on sale of financial assets           3,116                    -             N/A
Asset transition fee                           -                6,256       (100.0) %
Other revenue                             13,650               12,165         12.2  %
Total revenue                      $     146,892            $ 127,597         15.1  %



Lease Rent Revenue. Lease rent revenue increased by $10.9 million, or 17.0%, to
$74.8 million for the six months ended June 30, 2022, compared to $64.0 million
for the six months ended June 30, 2021. The increase is due to an increase in
the number of engines placed on lease as supported by an increase in utilization
compared to the prior year period. During the six months ended June 30, 2022, we
purchased equipment (including capitalized costs) totaling $81.3 million, which
consisted of five engines and other parts and equipment purchased for our lease
portfolio. During the six months ended June 30, 2021, we purchased equipment
(including capitalized costs) totaling $63.8 million, which primarily consisted
of seven engines, one aircraft, and other parts and equipment purchased for our
lease portfolio.

One customer accounted for more than 10% of total lease rent revenue during the six months ended June 30, 2022 and 2021, respectively.


At June 30, 2022, the aggregate net book value of equipment held for lease
consisted of $1,957.6 million, $83.3 million notes receivable, and $7.0 million
investment in sales-type leases. At June 30, 2021, the aggregate net book value
of equipment held for lease consisted of $1,889.9 million and $195.6 million
notes receivable. Average utilization (based on net book value) was
approximately 83% and 80% for the six months ended June 30, 2022 and 2021,
respectively.

Maintenance Reserve Revenue. Maintenance reserve revenue increased $2.0 million,
or 5.4%, to $39.1 million for the six months ended June 30, 2022 from $37.1
million for the six months ended June 30, 2021. Long-term maintenance revenue
was $23.3 million for the six months ended June 30, 2022 compared to $31.9
million in the prior year period. Engines out on lease with "non-reimbursable"
usage fees generated $15.8 million of short-term maintenance revenues compared
to $5.2 million in the comparable prior period, resulting from an increase in
global flight traffic subsequent to the most significant impacts of the COVID-19
pandemic.

Spare Parts and Equipment Sales. Spare parts and equipment sales increased by
$5.3 million, or 65.0%, to $13.4 million for the six months ended June 30, 2022
compared to $8.1 million in the prior year period. The increase in spare parts
sales for the six months ended June 30, 2022 was driven by an industry-wide
increase in engine and aircraft utilization and the demand for parts associated
with such increase compared to the prior year period. There were no equipment
sales during the six months ended June 30, 2022 and 2021.

Gain on Sale of Leased Equipment. During the six months ended June 30, 2022, we
sold thirteen engines and other parts and equipment from the lease portfolio for
a net gain of $2.8 million. There were no sales of leased equipment during the
six months ended June 30, 2021.

Gain on Sale of Financial Assets. During the six months ended June 30, 2022, we
sold four notes receivable for a net gain of $3.1 million. There was no gain on
sale of financial assets during the six months ended June 30, 2021.

Asset Transition Fee. There was no asset transition fee in the six months ended
June 30, 2022. Asset transition fee of $6.3 million in the six months ended
June 30, 2021 reflects a settlement received from the close out of an engine
transition program.

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Other Revenue. Other revenue increased by $1.5 million, or 12.2%, to $13.7
million for the six months ended June 30, 2022 from $12.2 million for the six
months ended June 30, 2021. Other revenue consists primarily of management fee
income, lease administration fees, third party consignment commissions earned,
service fee revenue, interest income on notes receivable related to failed
sale-leasebacks where the Company was the buyer-lessor, and other discrete
revenue items. The increase for the six months ended June 30, 2022 compared to
the prior year period primarily reflects increased service revenue.

Depreciation and Amortization Expense. Depreciation and amortization expense
decreased by $4.1 million, or 8.6%, to $43.4 million for the six months ended
June 30, 2022 compared to $47.5 million for the six months ended June 30, 2021.
The decrease reflects certain assets reaching their residual values as compared
to the prior year period.

Cost of Spare Parts and Equipment Sales. Cost of spare parts and equipment sales
increased by $4.8 million, or 67.6%, to $11.9 million for the six months ended
June 30, 2022 compared to $7.1 million for the six months ended June 30, 2021
due to higher spare parts sales and aged lot write-downs of $1.4 million. There
was no cost of equipment or cost of equipment sales for the six months
ended June 30, 2022 and 2021.

Write-down of Equipment. Write-down of equipment was $21.2 million for the six
months ended June 30, 2022, primarily reflecting the write-down of three
engines. Of this write-down, $20.4 million reflects the impairment of two
engines located in Russia which were determined due to the Russia and Ukraine
conflict to be unrecoverable. The remaining write-downs were in the ordinary
course of business. Write-down of equipment was $4.1 million for the six months
ended June 30, 2021, primarily reflecting the write-down of four engines and one
airframe.

General and Administrative Expenses. General and administrative expenses
increased by $8.4 million, or 23.5%, to $44.0 million for the six months ended
June 30, 2022 compared to $35.7 million for the six months ended June 30, 2021.
The increase primarily reflects a $4.4 million increase in personnel costs,
inclusive of a $1.0 million bonus to our Executive Chairman for his 25 years of
prior service to the Company, as well as a $1.4 million reduction to the prior
year period personnel costs resulting from the Coronavirus Aid, Relief, and
Economic Security Act employee retention credit. Stock based compensation
reflected an additional $0.5 million of expense which was driven by an increase
in stock price prior to the 2021 RSA grant. Additionally, with the lifting of
travel bans and the opening of various markets, travel and related costs
increased by $2.0 million as our sales force reengaged with customers globally.

Technical Expense. Technical expense increased by $5.5 million, or 151.9%, to
$9.1 million for the six months ended June 30, 2022 compared to $3.6 million for
the six months ended June 30, 2021. The increase is primarily due to an increase
in engine maintenance due to an industry-wide increase in engine and aircraft
utilization and engine hub repairs resulting from a FAA airworthiness directive,
as compared to the prior year period.

Net Finance Costs. Net finance costs increased by $0.9 million, or 2.8%, to $32.9 million for the six months ended June 30, 2022 compared to $32.0 million for the six months ended June 30, 2021.


Income Tax Benefit. Income tax benefit was $1.5 million for the six months ended
June 30, 2022 compared to $2.3 million for the six months ended June 30, 2021.
The effective tax rate for the six months ended June 30, 2022 was 8.8% compared
to 64.1% in the prior year period. The Company's effective tax rate differed
from the U.S. federal statutory rate of 21.0% primarily due to executive
compensation exceeding $1.0 million as defined in Section 162(m) of the Code and
a discrete item recorded in 2022 associated with a write-down of engines due to
the Russia and Ukraine conflict.

Financial Position, Liquidity and Capital Resources

Liquidity


At June 30, 2022, the Company had $73.8 million of cash, cash equivalents and
restricted cash, of which $12.9 million was unrestricted. We fund our operations
primarily from cash provided by our leasing activities. We finance our growth
through borrowings secured primarily by our equipment lease portfolio. Cash of
approximately $59.0 million and $395.7 million for the six months ended June 30,
2022 and 2021, respectively, was derived from our borrowing activities. In these
same time periods, $119.7 million and $175.8 million, respectively, was used to
pay down related debt.

The impact of the COVID-19 pandemic on the global business environment has caused and could result in additional customer bankruptcies, early lease returns, payment defaults, and rental concessions which could reduce rent or result in deferred customer payments, negatively impacting our financial results.

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For any interest rate swaps that we enter into, we will be exposed to risk in
the event of non-performance of the interest rate hedge counter-parties. We
anticipate that we may hedge additional amounts of our floating rate debt in the
future.

Cash Flows Discussion

Cash flows provided by operating activities was $57.8 million and $42.8 million for the six months ended June 30, 2022 and 2021, respectively.


Cash flows from operations are driven significantly by payments made under our
lease agreements, which comprise lease revenue, security deposits and
maintenance reserves, and are offset by interest expense and general and
administrative costs. Cash received as maintenance reserve payments for some of
our engines on lease are partially restricted by our debt arrangements. The
lease revenue stream, in the short-term, is at fixed rates while a portion of
our debt is at variable rates. If interest rates increase, it is unlikely we
could increase lease rates in the short term and this would cause a reduction in
our earnings and operating cash flows. Revenue and maintenance reserves are also
affected by the amount of equipment off lease. Approximately 80% and 82%, by
book value, of our assets were on-lease as of June 30, 2022 and December 31,
2021, respectively. The average utilization rate (based on net book value) for
the six months ended June 30, 2022 and 2021 was approximately 83% and 80%,
respectively. If there is an increase in off-lease rates or deterioration in
lease rates that are not offset by reductions in interest rates, there will be a
negative impact on earnings and cash flows from operations.

Cash flows used in investing activities was $8.7 million for the six months
ended June 30, 2022 and primarily reflected $15.3 million related to leases
entered into during 2021 which were classified as notes receivable under ASC 842
and $81.3 million for the purchase of equipment held for operating lease
(including capitalized costs and prepaid deposits made in the period), offset by
proceeds from sale of equipment (net of selling expenses) and proceeds from sale
of notes receivable of $47.7 million and $40.7 million, respectively. Cash flows
used in investing activities was $101.5 million in the six months ended June 30,
2021, and primarily reflected $42.5 million related to leases entered into
during the first half of 2021 which were classified as notes receivable under
ASC 842 and $63.8 million for the purchase of equipment held for operating lease
(including capitalized costs and prepaid deposits made in the period).

Cash flows used in financing activities was $70.8 million for the six months
ended June 30, 2022 and primarily reflected $59.0 million in proceeds from debt
obligations, partially offset by $119.7 million in principal payments and $5.2
million of share repurchases. Cash flows provided by financing activities was
$208.9 million for the six months ended June 30, 2021 and primarily reflected
$395.7 million in proceeds from debt obligations, partially offset by $175.8
million in principal payments.

Preferred Stock Dividends


The Company's Series A-1 Preferred Stock and Series A-2 Preferred Stock accrue
quarterly dividends at the rate per annum of 6.5% per share. During the six
months ended June 30, 2022 and 2021, the Company paid total dividends of $1.6
million, respectively, on the Series A-1 and Series A-2 Preferred Stock.

Debt Obligations and Covenant Compliance


At June 30, 2022, debt obligations consisted of loans totaling $1,731.8 million,
net of unamortized issuance costs, payable with interest rates varying between
approximately 3.1% and 7.4%. Substantially all of our assets are pledged to
secure our obligations to creditors. For further information on our debt
instruments, see Note 5 "Debt Obligations" in Part I, Item 1 of this Quarterly
Report on Form 10-Q.

Virtually all of our debt requires our ongoing compliance with certain financial
covenants including debt/equity ratios, minimum tangible net worth and minimum
interest coverage ratios, and other eligibility criteria including customer and
geographic concentration restrictions. Under our revolving credit facility, we
can borrow no more than 85% of an engine's net book value and 65% of an
airframe's, spare parts inventory's or other assets net book value. Therefore,
we must have other available funds for the balance of the purchase price of any
new equipment to be purchased. Our revolving credit facility, certain indentures
and other debt related agreements also contain cross-default provisions. If we
do not comply with the covenants or eligibility requirements, we may not be
permitted to borrow additional funds and accelerated payments may become
necessary. Additionally, much of the debt is secured by engines and aircraft,
and to the extent that engines or aircraft are sold, repayment of that portion
of the debt could be required.

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At June 30, 2022, we were in compliance with the covenants specified in our
revolving credit facility, including the Interest Coverage Ratio requirement of
at least 2.25 to 1.00, and the Total Leverage Ratio requirement to remain below
4.50 to 1.00. The Interest Coverage Ratio, as defined in the credit facility, is
the ratio of earnings before interest, taxes, depreciation and amortization
(EBITDA) and other one-time charges to consolidated interest expense. The Total
Leverage Ratio, as defined in the credit facility, is the ratio of total
indebtedness to tangible net worth. At June 30, 2022, we were in compliance with
the covenants specified in the WEST III, WEST IV, WEST V and WEST VI indentures
and servicing and other debt related agreements.

Off-Balance Sheet Arrangements


As of June 30, 2022, we had no material off-balance sheet arrangements or
obligations that have or are reasonably likely to have a current or future
effect on our financial condition, change in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures, or capital
resources that are material to investors.

Contractual Obligations and Commitments


Repayments of our gross debt obligations primarily consist of scheduled
installments due under term loans and are funded by the use of unrestricted cash
reserves and from cash flows from ongoing operations. The table below summarizes
our contractual commitments at June 30, 2022:

                                                                            

Payment due by period (in thousands)

                                                            Less than                                                  More than
                                          Total               1 Year            1-3 Years           3-5 Years           5 Years
Debt obligations                      $ 1,748,936          $  82,008       

$ 691,879 $ 334,672 $ 640,377 Interest payments under debt obligations

                               251,414             65,282              104,184             63,325             18,623
Operating lease obligations                 6,632              1,112                2,798              1,490              1,232
Purchase obligations                      411,482             99,262              241,220             71,000                  -
Total                                 $ 2,418,464          $ 247,664          $ 1,040,081          $ 470,487          $ 660,232



From time to time we enter into contractual commitments to purchase engines
directly from original equipment manufacturers. As of the date of this report we
are currently committed to purchasing nineteen additional new LEAP-1A engines
for $269.3 million and ten additional new LEAP-1B engines for $142.2 million.
Our purchase agreements generally contain terms that allow the Company to defer
or cancel purchase commitments in certain situations. These deferrals or
conversions would not result in penalties or increased costs other than any
potential increase due to the normal year-over-year change in engine list
prices, which is akin to ordinary inflation. The Company continues to expect
demand for LEAP-1B engines to increase as the 737 Max continues to be
re-certified and aircraft (and their installed engines) that have been parked
and in storage for more than one year begin the technical process of returning
to service.

In May 2021, we entered into a commitment for future maintenance services which are anticipated to cost $24.0 million by 2024.


In December 2020, we entered into definitive agreements for the purchase of 25
modern technology aircraft engines. As part of the purchase, we have committed
to certain future overhaul and maintenance services which are anticipated to
range between $73.8 million and $112.0 million by 2030.

We have estimated the interest payments due under debt obligations by applying
the interest rates applicable at June 30, 2022 to the remaining debt, adjusted
for the estimated debt repayments identified in the table above. Actual interest
payments made will vary due to changes in the rates for one-month LIBOR.

We believe our equity base, internally generated funds and existing debt
facilities are sufficient to maintain our level of operations for the next
twelve months. A decline in the level of internally generated funds could result
if the amount of equipment off-lease increases, there is a decrease in
availability under our existing debt facilities, or there is a significant
step-up in borrowing costs. Such decline would impair our ability to sustain our
level of operations. We continue to discuss additions to our capital base with
our commercial and investment banks. If we are not able to access additional
capital, our ability to continue to grow our asset base consistent with
historical trends will be impaired and our future growth limited to that which
can be funded from internally generated capital.

                                       31

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  Table of Contents
Recent Accounting Pronouncements

The most recent adopted accounting pronouncements and accounting pronouncements
to be adopted by the Company are described in Note 1 to our Unaudited Condensed
Consolidated Financial Statements included in this Quarterly Report on Form
10-Q.

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