Insights on Aircraft Leasing Industry Challenges

1. A Lessor’s Experience4th EASA Industry Meeting Cologne, November 17, 2005

2. Agenda • Today’s Objectives • Introduction to AerCap • Lessors and Aviation • Our Concerns • Case Example • The Essence • Conclusive Summary • Our Request Presentation to EASA - Cologne, November 17, 2005

3. Today’s Objectives • To introduce the Aircraft Lessor Community as a significant stakeholder in Aviation • To highlight the Lessor Community’s concerns with respect to the impact of EASA Commission Regulation 2042/2003 entry into force • NOTto discuss the details of such regulations, but, • To achieve an awareness by EASA for the Lessor Community’s wishes: • To be granted the opportunity to discuss its specific issues (and suggestions for possible solutions) in dedicated meetings with appropriate EASA staff • To be granted the opportunity to be represented during formal discussions between regulators and the Aviation Industry Presentation to EASA - Cologne, November 17, 2005

4. Introduction to AerCap • Formerly known as debis AirFinance; established November ’95 • Core business: operating leasing and full service management of large securitization portfolios of aircraft • Largest operating Lessor in Europe, one of the largest worldwide • Fleet of 238 commercial aircraft (owned/managed) 1 • Over 90% of the fleet on operating lease • Forward order of 31 A320 family aircraft, 21 units due for delivery in 05/07 • Aims at expansion (additional forward orders / portfolio purchases) • Customer base: 82 Operators in 46 countries 2 • Shareholder: Cerberus Capital Management, L.P. (1)of which 30 % in EASA member states (2)of which 33 % in EASA member states Presentation to EASA - Cologne, November 17, 2005

5. Lessors and Aviation • Lessors play an essential role in the development of European Aviation, both in manufacturing and operations: • Owning up to 40% (1,400 airplanes) of the commercial transport category of airplanes in the EASA member states • Owning up to 26% (3,700 airplanes) of the commercial fleet in the rest of the world • Currently have assumed purchase obligations of over 600 aircraft from Airbus and Boeing on a speculative basis • Lessors play a significant role in the continued operation and development of the European operators: • Providing opportunities for business flexibility in answer to Industry up- and downward economic trends and access to new markets • For majority of (European) LCC’s initial start-up of their operation would not be possible without Lessor’s involvement • Long term: providing continued opportunities for fleet renewal and expansion • Lessors strive for highest Airworthiness Standards observing the combination of global Aviation Authorities rules and regulations in order to achieve flexible and maximum remarketability Presentation to EASA - Cologne, November 17, 2005

6. Our Concerns (1) • Administrative and nearly impossible burden to assess and provide the EASA approval status of used airplanes to be leased to EU operators: • Basic certification basis, SB status, listing of approved/non-approved changes, repairs, STC’s,...... • Challenging task to obtain EASA approval for (older, pre 2003) STC’s and (non-OEM) repairs (the more if STC holder does not exist anymore) • Leadtime to obtain approvals 4 - 8 months • The administrative consequences of Annex 1 (part M), in particular the differences in interpretation by the member states: • Alternative compliance (opt-out procedures) at the discretion of national authorities • The contradiction of Annex 1 (part M) versus JAR-OPS Subpart M in respect of (component) record keeping: • At least 24 mths after release TO service (JAR-OPS) versus at least 24 mths after permanent withdrawal FROM service (EASA part M) • And more...? Presentation to EASA - Cologne, November 17, 2005

7. Our Concerns (2) • Resulting in additional high aircraft transfer cost: • Physical expenditures: Modifications, Approvals, Component re-certifications and repairs: conservative exposures estimated between USD 250k and USD 1,500k for typical single Aisle aircraft in growing size • Internal resources: Lessors currently not prepared or catered for such tasks – limited engineering resources • Resulting in significant delays in the deliveries of aircraft to airlines: • 2-6 months loss in lease rental income (average single aisle aircraft: USD 175k per month) • Liability for damages incurred by customers • Dis-satisfaction of customers • All in all exposing a severe aircraft remarketability risk into Europe; a risk which, based on recent experience is rather fact than risk Presentation to EASA - Cologne, November 17, 2005

8. Case Example – summer 2005 • Aircraft: Fokker 100, average aircraft transfer cost: USD 450,000 • Re-delivering Lessee: South America region • Aircraft to be transferred to Europe (EASA member state EU-1) • Accepting Lessee: Europe, EASA member state (EU-2) • Lessor takes measures to achieve required airworthiness standard in accordance with OEM’s instructions and EU-1 CAA approved procedures for import into Europe • Aircraft exported into EU-1; working party modifies the Aircraft to required standard • Post transfer maintenance, Aircraft delivered to Accepting Lessee in compliance with EASA regulations and with EU-1 issued Certificate of Airworthiness • Accepting Lessee accepts Aircraft and applies for AOC with EU-2 CAA • EU-2 CAA, based on own inspection revokes the CofA on basis of concerns with continuing airworthiness of the aircraft or any component fitted. • Result: • Additional delay of 2 months in delivery (160 K in rentals) • Additional Aercap expenditure: in excess of USD 350k over and above average transfer cost for this type of airplane into Europe • Additional Accepting Lessee’s damages: unknown (> USD 1 million) • Aircraft still not in operation.... Presentation to EASA - Cologne, November 17, 2005

9. The Essence • Aircraft transfer cost are the sum of physical expenditures on the aircraft, and the loss of lease rentals due to extended downtime • A severe and sudden increase in future perceived aircraft transfer cost negatively impacts the remarketability and consequently the residual value of aircraft • A decrease in EU remarketability and/or residual value affects the availability of aircraft, which consequently will; • Affect the competitiveness of EU Operators through either a higher cost to lease, or, a decreased flexibility by not being able to make full use of aircraft leasing opportunities. In addition: • Lessor owned aircraft are financed by a large cross section of (major) commercial and investment banks • The cost associated with transferring aircraft from one airline to the other affects the risk profile for these banks, and as such the cost of funding, and as such the cost to lease aircraft Presentation to EASA - Cologne, November 17, 2005

10. Conclusive Summary • The EASA requirements are disrupting the flexibility based on which the EU operators can continue to lease used airplanes • It creates additional administrative and costly obstacles that are seriously hindering the (timely) placement of these airplanes at the EU operators • Severe additional aircraft transfer cost to be considered, negatively affects the availability of funding at reasonable cost, and as such the Lessors’ capability to offer aircraft to EU operators • Leasing companies are not represented in the formal discussions between the EASA and Aviation Industry, despite the significance of their role in European commercial aviation • Leasing companies are currently not participating in the drafting of the fundamental EASA regulations Presentation to EASA - Cologne, November 17, 2005

11. We ask you to..... • Engage with us in detailed and seperate series of discussions, with the aim: • To further achieve mutual understanding of the background, added value and implications of the amended and newly introduced regulations • To define possible solutions allowing effective implementation of such regulations while limiting the potential damage it may incur on the industry on the short term • To invite us, as formal industrial representatives, to participate in the committees dealing with the evaluation and design of existing respectively new regulations • To assist us in our continuous support and promotion of airworthiness improvement intentions as depicted in our leases Presentation to EASA - Cologne, November 17, 2005

12. THANK YOU FOR YOUR ATTENTIONEric P. VermeulenFleet ManagerAerCap Aviation SolutionsEmail: evermeulen@aercap.comTel.: +31 20 655 9687www.aercap.com Cologne, November 17, 2005