AIRPLANES LTD - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number 33-99970

AIRPLANES LIMITED AIRPLANES U.S. TRUST
(Exact Name of Registrants as specified in memorandum of association or trust agreement)
JERSEY, CHANNEL ISLANDS DELAWARE
(State or other jurisdiction of incorporation or organization)
7359 13-3521640
(SIC Code) (I.R.S. Employer Identification No.)
AIRPLANES LIMITED AIRPLANES U.S. TRUST
22 GRENVILLE STREET, ST. HELIER 1100 NORTH MARKET STREET,
JERSEY, JE4 8PX RODNEY SQUARE NORTH
CHANNEL ISLANDS WILMINGTON, DELAWARE 19890-0001
(011 44 1534 609 000) (1-302-651-1000)

(Addresses and telephone numbers, including area codes, of Registrants'
principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT
None

(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

2

PART I

ITEM 1. BUSINESS

INTRODUCTION

Airplanes Limited ("AIRPLANES LIMITED") is a limited liability company
formed under the laws of Jersey, Channel Islands. Airplanes U.S. Trust
("AIRPLANES TRUST") is a Delaware business trust. "AIRPLANES GROUP" refers to
Airplanes Limited and Airplanes Trust, and in this report, we use "WE," "US" and
"OUR" to refer to Airplanes Group and its subsidiaries and Airplanes Pass
Through Trust. We are in the business of leasing aircraft to aircraft operators
around the world. At March 31, 2002, we owned 186 aircraft (the "AIRCRAFT"), 180
of which were on lease to 64 lessees in 33 countries.

On March 28, 1996, we established eight separate pass through trusts to
issue and sell $4,048 million in aggregate principal amount of subclass A-1,
A-2, A-3, A-4 and A-5 and class B, C and D pass through certificates in an
underwritten offering. We used the proceeds from this offering, together with
the proceeds from the sale of the class E notes of Airplanes Limited and
Airplanes Trust to GPA Group plc (now known as debis AirFinance Ireland plc), to
acquire a portfolio of 229 aircraft from GPA Group and its subsidiaries. We use
the rental payments that we receive from leasing the aircraft to pay interest
and principal on this debt. On March 16, 1998, we established four additional
pass through trusts to issue and sell $2,437 million in aggregate principal
amount of subclass A-6, A-7 and A-8 and class B certificates in connection with
the refinancing of our subclass A-1, A-2 and A-3 and class B certificates. On
November 20, 1998, GE Capital acquired a majority of the class E notes from GPA
Group (then known as AerFi Group and now known as debis AirFinance Ireland) and
its subsidiaries. On that date, a subsidiary of AerFi Group also granted GE
Capital an option to acquire the residual interest in Airplanes Trust. See below
at "Airplanes Trust" for more information about the option. The subclass A-5
certificates were fully repaid as of May 15, 1998. We established a new pass
through trust on March 15, 2001 to issue and sell $750 million in aggregate
principal amount of subclass A-9 certificates which rank equally in right of
payment with our outstanding subclass A-6 and A-8 certificates. We used the
proceeds from this offering to refinance our subclass A-4 and A-7 certificates
and the corresponding subclass A-4 and A-7 notes.

AIRPLANES PASS THROUGH TRUST

"AIRPLANES PASS THROUGH TRUST" and the "TRUST" refer to all the pass
through trusts created under the Airplanes Pass Through Trust Agreement dated
March 28, 1996 (the "TRUST AGREEMENT") among Airplanes Limited, Airplanes Trust
and Bankers Trust Company (now known as Deutsche Bank Trust Company Americas),
as trustee (the "TRUSTEE"), except where it is clear that this term means only a
particular pass through trust. The certificates issued by each pass through
trust each represent a fractional undivided beneficial interest in two
corresponding classes or subclasses of notes issued and cross-guaranteed by
Airplanes Limited and Airplanes Trust pursuant to indentures dated as of March
28, 1996 (as amended or supplemented, the "INDENTURES") they entered into with
Bankers Trust Company (now known as Deutsche Bank Trust Company Americas), as
trustee (the "INDENTURE TRUSTEE"), and held by that trust. The two corresponding
classes of notes and guarantees held by each trust are the principal sources of
payment for the class or subclass of certificates issued by that trust.

AIRPLANES LIMITED

Airplanes Limited is a special purpose limited liability company formed on
November 3, 1995 under the laws of Jersey, Channel Islands. Its sole purposes
are to (a) acquire, own, manage, maintain, lease, re-lease, modify and sell
(subject to restrictions under its indenture) the aircraft, (b) finance and
refinance these activities, including guaranteeing the obligations of its
subsidiaries and of Airplanes Trust, (c) manage its interest rate and currency
risks, and (d) engage in other activities related to the aircraft and their
financing.

Airplanes Limited's principal assets are the intercompany loans it has
advanced to its subsidiaries and 95% of the capital stock of Airplanes Holdings
Limited. As of March 31, 2002, Airplanes Holdings owned a total of 172 aircraft
directly and through its aircraft-owning subsidiaries, and owned a number of
aircraft-leasing subsidiaries which lease aircraft from the aircraft-owning
subsidiaries and sublease them to lessees. The remaining 5% of the capital stock
of Airplanes Holdings is owned by GECAS. See below "Risk Factors -- Risks
3

Relating to Tax" for a discussion of the tax benefits of this 5% ownership by
GECAS and the risk of losing these benefits. Airplanes Limited has no ownership
or leasehold interests in any real property.

For information on the capital stock of Airplanes Limited, including a
discussion of annual dividends, see "Item 5. Market for Registrants' Common
Equity and Related Shareholder Matters."

Airplanes Limited is managed by a board of directors, which is currently
composed of five directors. See "Item 10. Directors And Executive Officers Of
The Registrants -- Directors and Controlling Trustees" for details on these
directors. Airplanes Limited does not have any employees or executive management
of its own and relies solely on service providers to service, lease and re-lease
aircraft and perform other executive and administrative responsibilities. For a
description of the services provided by the service providers, see "Item 10.
Directors and Executive Officers of the Registrants -- The Servicer" and "-- The
Administrative Agent and Cash Manager."

We have taken steps to structure Airplanes Limited and its acquisition of
the aircraft-owning and aircraft-leasing subsidiaries from GPA Group (now known
as debis AirFinance Ireland) in 1996 to ensure that its assets would not be
consolidated with the assets of debis AirFinance Ireland and would not otherwise
become available to its creditors in any bankruptcy or insolvency proceeding
involving debis AirFinance Ireland or any of its affiliates. For a description
of the risks if these steps are not effective, see below "Risk Factors -- Risks
Relating to Bankruptcy."

AIRPLANES TRUST

Airplanes Trust is a Delaware statutory business trust formed in November
1995. Its sole purposes are to (a) acquire, own, manage, maintain, lease,
re-lease, modify and sell (subject to restrictions under its indenture) the
aircraft, (b) finance and refinance these activities, including guaranteeing the
obligations of its subsidiaries and of Airplanes Limited, (c) manage its
interest rate and currency risks and (d) engage in other activities related to
the aircraft and their financing.

Airplanes Trust's principal assets are the intercompany loans it has
advanced to its subsidiaries and 100% of the capital stock of AeroUSA, which as
of March 31, 2002, owned 14 aircraft. The shares of AeroUSA and AeroUSA 3 are
held by separate voting trusts with First Security Bank of Utah, acting as
trustee, in order to satisfy the U.S. Federal Aviation Administration
regulations regarding the U.S. citizenship of the owners of U.S.-registered
aircraft. Airplanes Trust has no ownership or leasehold interests in any real
property.

debis AirFinance, Inc., a wholly-owned subsidiary of debis AirFinance
Ireland, holds the residual ownership interest in all of the property of
Airplanes Trust. In connection with the sale of the class E notes to GE Capital
by GPA Group (now known as debis AirFinance Ireland) and its subsidiaries in
1998, GPA, Inc. (now known as debis AirFinance, Inc.) granted an option to GE
Capital for it to purchase this residual ownership interest in Airplanes Trust
for $1.00. If GE Capital does not exercise this option before its expiry date,
which is 30 days after notice of the dissolution of the trust, the option will
become void. Upon repayment in full of all of the indebtedness of Airplanes
Trust and the dissolution of Airplanes Trust, legal title to the AeroUSA shares
and other property of Airplanes Trust will revert to debis AirFinance, Inc. or
GE Capital, if GE Capital has exercised its option.

Airplanes Trust has five controlling trustees, who are the same individuals
as those who currently serve as directors of Airplanes Limited, and a Delaware
trustee, Wilmington Trust Company. For information on its management, see "Item
10. Directors and Executive Officers of the Registrants." Airplanes Trust does
not have any employees or executive officers of its own and relies solely on
service providers to service, lease and re-lease the aircraft and perform other
executive and administrative responsibilities. For a description of these
services, see "Item 10. Directors and Executive Officers of the Registrants --
The Servicer" and "-- The Administrative Agent and Cash Manager."

We have taken steps to structure Airplanes Trust and its acquisition of the
aircraft-owning and aircraft-leasing subsidiaries from GPA Group (now known as
debis AirFinance Ireland) in 1996 to ensure that its assets would not be
consolidated with the assets of debis AirFinance Ireland and would not otherwise
become available to its creditors in any bankruptcy or insolvency proceeding
involving debis AirFinance Ireland or any of

4

its affiliates. For a description of the risks if these steps are not effective,
see below "Risk Factors -- Risks Relating to Bankruptcy."

RISK FACTORS

The following summarizes various risks and uncertainties which may
materially affect the ability of Airplanes Limited and Airplanes Trust to pay
interest, principal or any premium on the notes and hence our ability to pay
interest, principal or any premium on our certificates in full at or before
their respective final maturity dates. These risks and uncertainties are not the
only ones relevant to the certificates, the notes and guarantees, the trust or
Airplanes Group.

This Form 10-K contains forward-looking statements that involve risks and
uncertainties. In most cases, you can identify these forward-looking statements
by terms such as "may," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," "continue" or similar terms that relate to
the future or express uncertainty. Our actual results could differ materially
from those anticipated in these forward-looking statements. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined below, that may impact our results of operations.

RISKS RELATING TO PAYMENT ON THE NOTES AND CERTIFICATES

REDUCED CASH FLOWS ADVERSELY AFFECT JUNIOR NOTEHOLDERS AND
CERTIFICATEHOLDERS.

Administrative and lease expenses and certain other payments in the
ordinary course of business are senior to the notes in priority of payment and
are therefore payable before any payments are made on the notes (and thus the
corresponding certificates).

Additionally, minimum principal amounts on the class A and class B notes
are payable before interest on the class C and class D notes, and principal
adjustment amount on the class A notes is payable before scheduled principal
payments on the class C and class D notes. Since the appraised value of our
aircraft has declined at a rate faster than that originally assumed in the base
case assumptions in our original prospectus dated March 28, 1996 (the "1996 BASE
CASE"), we have been required to pay principal adjustment amount on the class A
notes with a consequential deferral of scheduled principal payments on the class
C and class D notes.

To the extent that we have sufficient available funds, we are required to
pay a minimum principal amount on the class A notes in order to maintain certain
loan to initial appraised value ratios. We are currently ahead of the required
class A minimum principal payment schedule to the extent of $110 million because
the accelerated principal payments resulting from payment of class A principal
adjustment amounts have enabled us to maintain those loan to initial appraised
value ratios. Accordingly, no payments are currently due in respect of the
minimum principal amount on the class A notes. However, our overall cash
performance since September 11, 2001, has been significantly weaker than was
assumed in the base case assumptions in our offering memorandum dated March 15,
2001 (the "2001 BASE CASE"), the reasons for which are discussed in "Item 7 --
Management's Discussions and Analysis of Financial Condition and Results of
Operations." In light of our current and expected cash performance, we expect
that we will not be able to continue paying class A principal adjustment amount
in full and therefore, in time, we will no longer be ahead of the required class
A minimum principal payment schedule. We expect this to occur in the latter half
of 2003, when we will have to recommence payments of minimum principal on the
class A notes. Since minimum principal on the class A notes ranks ahead of
interest and minimum principal on the class B notes and interest on the class C
and class D notes in the order of priority, and, given our current expectations
as to our future performance, we believe that our cash flows may be inadequate
to pay interest and minimum principal on the class B notes and interest on the
class C and D notes in the latter half of 2003.

Our actual results may differ from our current expectations, as further
explained in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Recent Developments." However, such
differences as may arise are only likely to affect the timing of when we may
cease to pay interest and minimum principal on the class B notes and interest on
the class C and D notes.

5

In the event that cash flows are inadequate to pay interest and minimum
principal on the class B notes and interest on the class C and D notes, it is
likely to be a long period of time before we will be able to resume making any
payments on these notes. Further, in these circumstances, we may be unable to
repay in full principal on some or all of these classes of notes by their final
maturity date. The more junior the class of notes is in the order of priority,
the greater the risk that we may be unable to repay in full principal on that
class of notes by its final maturity date. In addition, to the extent that we do
resume making payments on these notes, payments will be made according to the
priority of payment, commencing with the then most senior class and only making
payments on more junior classes to the extent of available cash flows. A failure
to make payments on a class of notes will result in failure to make payments on
the corresponding class of certificates.

This vulnerability of the various classes of notes has been reflected in
actions taken by the rating agencies which reevaluated several structured
aircraft financings in the wake of the terrorist attacks in the United States on
September 11, 2001. On December 12, 2001, Moody's announced a downgrade of our
class C certificates from Baa2 to Ba3 and a downgrade of the class D
certificates from Ba2 to B2. On December 21, 2001, Fitch downgraded the class C
certificates from BBB to BB and the class D certificates from BB to B and left
our class A to D certificates on credit watch negative. On March 25, 2002,
Standard & Poor's downgraded our class C certificates from BBB to BB+ and our
class D certificates from BB to B-. Standard & Poor's affirmed the rating on the
class A and B certificates but left the class C and D certificates on credit
watch negative. Most recently on June 24, 2002, Fitch further downgraded the
class C certificates from BB to B+ and the class D certificates from B to CCC
and downgraded the class A certificates from AA to A+ and the class B
certificates from A to BBB+.Given the continuing difficulties in the aircraft
industry and their impact on the factors which determine our revenues, there can
be no assurance that the rating agencies will not further downgrade any class of
our certificates.

The ratings of the certificates address the likelihood of the timely
payment of interest and the ultimate payment of principal and premium, if any,
on the certificates. A rating is not a recommendation to buy, sell or hold
certificates because ratings do not comment as to market price or suitability
for a particular investor. A rating may be subject to revision, suspension or
withdrawal at any time by the assigning rating agency.

SUBORDINATION PROVISIONS RESTRICT THE RIGHTS OF JUNIOR NOTEHOLDERS AND
CERTIFICATE HOLDERS.

In general, the rights and remedies with respect to a note event of default
are exercisable only by the trustee of and the holders of the most senior class
of notes outstanding, and then only to the extent that there is an event of
default with respect to that senior class of notes. The class A notes are the
most senior class of notes currently outstanding. A failure to make a required
payment on a class of notes is a default only with respect to that class of
notes and the corresponding certificates. Accordingly, if an event of default
occurs with respect to a class of notes, the holders of that class of notes (and
thus, the corresponding certificates) will not be permitted to enforce their
rights until all amounts owing under any more senior class of notes outstanding
and certain other amounts have been paid in full.

CERTIFICATEHOLDERS HAVE NO SECURITY INTEREST IN THE AIRCRAFT OR THE LEASES TO
SECURE OUR REPAYMENT OF THE CERTIFICATES.

None of the certificateholders, the trustee or the security trustee has any
security interest, mortgage, charge or similar interest in any aircraft in our
portfolio or in the related leases. If the trust defaults on payments to
certificateholders on the certificates, neither certificateholders nor anybody
acting on their behalf can sell the aircraft or exercise other remedies with
respect to the aircraft or the leases to repay the principal and interest that
we owe them, which they would have been able to do if they had held a security
interest in the aircraft or the leases. Airplanes Limited and Airplanes Trust
have, however, pledged to the security trustee, as security for the notes and
their other obligations, one-third of the ordinary share capital of each of
AeroUSA, Airplanes Holdings and their subsidiaries, cash balances in the
accounts and investments made with our cash balances.

6

THE TRUST HAS LIMITED SOURCES OF INCOME FROM WHICH TO REPAY THE CERTIFICATES.

The trust is a pass through trust. The principal assets of the trust are
the notes and guarantees, and its only sources of payment on the certificates
are payments by Airplanes Limited and Airplanes Trust on those notes and
guarantees, including proceeds from any disposition of them. If Airplanes
Limited and Airplanes Trust do not make payments on the notes and guarantees to
the trust, the trust has no other funds to make payments to certificateholders
on the certificates. The certificates and notes are not guaranteed by the
trustee, the security trustee, the indenture trustee, the servicer, the
administrative agent, the cash manager or any of their affiliates, and
certificateholders cannot look to them or anyone else to repay them if we
default in payment on the certificates.

AIRPLANES LIMITED AND AIRPLANES TRUST HAVE LIMITED SOURCES OF INCOME FROM WHICH
TO REPAY THE NOTES AND GUARANTEES.

The principal assets of Airplanes Limited and Airplanes Trust are shares of
their direct subsidiaries and intercompany loans to their direct and indirect
subsidiaries. Airplanes Limited and Airplanes Trust do not directly own any of
the aircraft and are dependent on payments and distributions from their
subsidiaries for their cash flow. If their subsidiaries do not make principal or
interest payments to Airplanes Limited and Airplanes Trust on the intercompany
loans, or if their subsidiaries do not make any distributions to them, Airplanes
Limited and Airplanes Trust would have less cash available to make payments to
the trust on the notes or guarantees. Also, if withholding or other taxes are
imposed on payments or distributions to Airplanes Limited and Airplanes Trust,
or if other significant tax liabilities arise, Airplanes Limited and Airplanes
Trust would have less cash available to make payments to the trust. In these
circumstances, the trust would have less cash available to make payments to
certificateholders on the certificates.

AIRPLANES LIMITED AND AIRPLANES TRUST HAVE OTHER CLAIMS THAT RANK SENIOR OR
EQUAL TO THE NOTES AND GUARANTEES.

Airplanes Limited and Airplanes Trust have guaranteed a significant number
of their respective subsidiaries' obligations to lessees. Payments on these
guarantees will be treated as lease expenses and will rank ahead of other
payment obligations of Airplanes Limited and Airplanes Trust.

CLAIMS ON OUR SUBSIDIARIES ARE EFFECTIVELY SENIOR TO THE CLAIMS OF
CERTIFICATEHOLDERS ON AIRPLANES LIMITED AND AIRPLANES TRUST, AND OUR
SUBSIDIARIES MAY HAVE MATERIAL CONTINGENT LIABILITIES UNKNOWN TO US.

Any claims on the subsidiaries of Airplanes Limited and Airplanes Trust are
effectively senior to the notes and guarantees because the subsidiaries would
generally have to make payments on those claims before making payments or
distributions to Airplanes Limited and Airplanes Trust. These claims include any
payment obligations to lessees and other contingent liabilities, such as
liabilities to third parties from operating and leasing the aircraft. There may
also be liabilities of this type that arose before we acquired our subsidiaries
from GPA Group (now known as debis AirFinance Ireland) in 1996 of which we are
not aware. If the subsidiaries are called upon to pay any of these contingent
liabilities, we would have less cash available to make payments to
certificateholders.

THE NOTES AND CERTIFICATES ARE SUBJECT TO EARLY REFINANCING OR REDEMPTION WHICH
MAY REDUCE THE YIELD ON CERTIFICATEHOLDERS' INVESTMENT IN THE CERTIFICATES.

The notes, and the corresponding certificates, may be refinanced or
redeemed at the applicable redemption price at our option on any payment date.
They may also be redeemed at par upon the occurrence of specified adverse tax
events affecting Airplanes Group. Available funds from the sale of aircraft and
other available collections will also be used to repay the certificates under
the priority of payments provided in the indentures. If any refinancing or early
redemption of the certificates occurs, the yield on certificateholders'
investment in the certificates could be adversely affected.

7

THERE IS NO PUBLIC MARKET FOR THE CERTIFICATES.

The certificates have a limited trading market which may harm
certificateholders' ability to sell them or depress the price at which
certificateholders sell them. The certificates are listed only on the Luxembourg
Stock Exchange. No one has an obligation to make a market in the certificates.
We do not intend to seek approval for quotation through any automated quotation
system. Future trading prices for the certificates depend on many factors,
including general economic conditions, our financial condition, performance and
prospects and the market's then current perception of the commercial aircraft
industry and the operating lease business generally.

RISKS RELATING TO AIRPLANES GROUP AND THIRD PARTIES

WE HAVE A HISTORY OF INCURRING NET LOSSES IN OUR OPERATIONS.

Airplanes Group has incurred net losses since its inception and expects to
continue to incur substantial and increasing net losses. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a further discussion of these net losses.

WE HAVE NO MANAGEMENT RESOURCES AND DEPEND ON SERVICE PROVIDERS TO OPERATE OUR
BUSINESS AND COLLECT OUR REVENUES.

We have no employees or executive management resources of our own and rely
solely on the servicer, administrative agent, cash manager and other service
providers for all aircraft servicing, leasing, re-leasing, sales and other
executive and administrative functions relating to our portfolio. If these
service providers do not perform their contractual obligations to us, our
operations and cash flow may suffer, thereby adversely affecting the timing of
payments on, and ultimate repayment of, the certificates. We may find it
difficult to recover damages for any of these third parties' poor performance
pursuant to their contracts and may not be able to terminate these contracts by
ourselves. In particular, our rights to terminate the servicing agreement are
very limited. We cannot guarantee that we will continue our arrangements with
the existing service providers or that they will continue their relationship
with us until the certificates are paid in full. If a service provider resigns
or if we terminate any service provider, we may be unable to find a suitable
replacement that we can engage on suitable terms, which would harm our
operations and impede our cash flow. The appointment of replacement service
providers may also cause the rating agencies to lower or withdraw the ratings on
the certificates. You should refer to "Item 10. Directors and Executive Officers
of the Registrants" for more detailed information on the responsibilities we
have delegated to the service providers.

THE SERVICER WILL NOT BE LIABLE TO US FOR LOSSES WE INCUR IN CONNECTION WITH ITS
PERFORMANCE OF THE SERVICES.

The servicer will not be liable to us for losses we incur in connection
with its performance of the services, except where a court has finally
adjudicated that the losses have been directly caused by the servicer's willful
misconduct or gross negligence. In addition, we have agreed to indemnify the
servicer on an after-tax basis for a broad range of losses in connection with
its performance of the services. Any such indemnification payments would rank
senior to payments on the notes and certificates, which would further reduce
funds available to make payments on the notes and certificates.

WE DEPEND ON SWAP COUNTERPARTIES IN MANAGING INTEREST RATE RISKS. IF OUR SWAP
COUNTERPARTIES DEFAULT, OR IF WE ARE UNABLE TO FIND SUITABLE SWAP
COUNTERPARTIES, THERE MAY BE A MISMATCH BETWEEN OUR FIXED AND FLOATING RATE
ASSETS AND LIABILITIES WHICH COULD REDUCE OUR CASH FLOW.

We manage interest rate risks arising from any mismatch between fixed and
floating rate lease rental payments and fixed and floating rate interest
obligations through swaps and other derivative instruments. This strategy for
managing interest rate risks is dependent upon our ability to enter into
interest rate swaps with eligible counterparties and on the counterparties
fulfilling their contractual obligations. If a counterparty defaults or if we
are unable to find eligible counterparties willing to enter into interest rate
swaps with us because of our financial condition, a mismatch between our fixed
and floating rate interest obligations and fixed and floating rate
8

lease receipts may arise, which could further harm our cash flow and adversely
affect our ability to make payments on the notes and certificates.

GECAS, THE SERVICER, MAY HAVE CONFLICTS OF INTEREST IN MANAGING OUR PORTFOLIO AS
A RESULT OF ITS OTHER AIRCRAFT MANAGEMENT ACTIVITIES.

In addition to acting as the servicer for Airplanes Group, GECAS manages a
large portfolio of aircraft owned by its affiliates, including the GE group of
companies, and third parties, including other securitization vehicles such as
Lease Investment Flight Trust and Aircraft Finance Trust. GECAS also arranges
aircraft or engine financings and other lease transactions and GE Capital, an
affiliate of GECAS, is the owner of the class E notes. GECAS may therefore face
conflicts of interest in managing and marketing our portfolio for re-lease or
sale. The aircraft it manages for itself or others may compete with our aircraft
when they are being marketed for re-lease or sale. These conflicts will arise as
decisions affecting some aircraft that GECAS is managing or that GECAS or one of
its affiliates owns may be adverse to other aircraft also managed by GECAS. The
servicing agreement provides that the standard of care applicable in cases where
such conflicts arise requires that GECAS not discriminate between aircraft on an
unreasonable basis. For a fuller description of the standard of care, see "Item
10. Directors and Executive Officers of the Registrants -- The Servicer -- The
Servicing Agreement." While GECAS has agreed to perform the services for us with
reasonable care and diligence at all times, GECAS may give preference to its
affiliates and other third parties under the terms of its other marketing and
servicing arrangements. In addition, GECAS is not obliged to inform us of any
conflicts of interest of which it is aware. If, as a result of a conflict of
interest, GECAS makes a decision potentially adverse to us, it could have a
material adverse effect on the servicing of our aircraft, which may cause
additional reduction in our cash flow, thereby potentially adversely affecting
the timing or amounts of payments on the notes and certificates. See "Item 10.
Directors and Executive Officers of the Registrants -- The Servicer" for more
information on the activities of the servicer.

THE ADMINISTRATIVE AGENT AND CASH MANAGER MAY HAVE CONFLICTS OF INTEREST BECAUSE
OF THEIR PARENT COMPANIES' OTHER AIRCRAFT MANAGEMENT ACTIVITIES AND OWNERSHIP
INTERESTS.

debis AirFinance B.V. and debis AirFinance Ireland, parent companies of the
administrative agent and the cash manager, manage a large portfolio of aircraft
owned by themselves, their affiliates and third parties. debis AirFinance
Ireland also acts as the servicer for AerCo Limited, a securitization vehicle
similar to Airplanes Group, and currently holds the class D-2, E-1 and E-2 notes
issued by AerCo. Subsidiaries of debis AirFinance Ireland also act as
administrative agent and cash manager for AerCo. As a result, the administrative
agent and the cash manager of Airplanes Group may from time to time have
conflicts of interest in performing their obligations to Airplanes Group. While
the roles of the administrative agent and the cash manager are more limited than
those of the servicer, any conflicts of interest that they cannot resolve could
have an adverse impact on Airplanes Group and on our ability to make payments on
the notes and certificates.

OUR LEGAL COUNSEL MAY HAVE CONFLICTS OF INTEREST IN NEGOTIATING SOME OF OUR
AGREEMENTS BECAUSE THEY ALSO REPRESENT PARTIES WITH WHICH WE DEAL.

Airplanes Group and debis AirFinance Ireland are represented by the same
Jersey, Irish and United States legal counsel, and we anticipate that this
multiple representation will continue. Our legal counsel may face conflicts of
interest when negotiating agreements between Airplanes Group and debis
AirFinance Ireland. If a significant dispute does arise in the future between
Airplanes Group and debis AirFinance Ireland or any of their respective
affiliates, we anticipate that we will retain separate counsel to represent us.

9

RISKS RELATING TO THE AIRCRAFT

THE COMMERCIAL AIRCRAFT MARKET IS CYCLICAL. DECREASED DEMAND FOR OR EXCESS
SUPPLY OF AIRCRAFT CAN DEPRESS AIRCRAFT VALUES AND LEASE RATES, WHICH MAY CAUSE
US TO BE UNABLE TO RE-LEASE OR SELL AIRCRAFT ON FAVORABLE TERMS AND CAN DECREASE
CASH AVAILABLE TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.

The market for commercial jet aircraft is cyclical and can produce sharp
increases or decreases in aircraft values and lease rates depending on the level
of supply or demand. During the past year, there was a general downturn in the
world economic climate, with a consequential negative impact on the commercial
aviation industry. The effects of this downturn were exacerbated by the
terrorist attacks of September 11, 2001 and the subsequent and continuing
political and economic fallout. This has resulted in a sharp increase in the
availability of aircraft for lease leading to significant overcapacity,
increased downtime, declines in lease rates, additional lease restructurings,
unanticipated redeliveries of aircraft with associated costs, and a fall in the
realizable value for aircraft (particularly older technology models) in open
market sales.

Airlines increasingly prefer jet aircraft to turboprop aircraft, and new
generation Stage 3 aircraft to older Stage 3 aircraft (which make up a
significant proportion of our portfolio), and so the markets for these types of
aircraft remain unfavorable in terms of both aircraft values and lease rates,
particularly following the events of September 11, 2001.

The conditions in the aircraft market depend upon, among other things, the
business cycle for the lessees and buyers, as well as general economic
conditions worldwide or in specific regions. The condition of the market at the
time when any of our aircraft are being marketed for re-lease or sale will
affect our ability to re-lease or sell those aircraft on satisfactory terms.
Unsatisfactory market conditions, such as those we are currently experiencing,
mean that the lease rates and, where applicable, sales proceeds that we obtain
are unfavorable and less than those assumed in the 2001 Base Case, resulting in
decreased cash flows available to make payments on the notes and certificates.

THE AIRCRAFT VALUES AND LEASE RATES FOR AIRCRAFT MAY FLUCTUATE SIGNIFICANTLY
BECAUSE OF FACTORS OUTSIDE OUR CONTROL AND AFFECT OUR CASH FLOW.

Decreases in aircraft values or lease rates may cause a decrease in our
cash flows. Depending on market conditions, we may be unable to re-lease or sell
aircraft on terms that will allow us to make payments on the notes and
certificates. Aircraft values and lease rates depend on various factors that are
outside our control, including:

- general economic conditions affecting lessee operations as discussed
above, including passenger demand and the cost of fuel and other
expenses;

- the supply of and demand for used aircraft;

- manufacturer production levels and prices for new aircraft;

- interest rates, currency exchange rates and credit availability;

- retirement and obsolescence of aircraft models;

- re-introduction into service of aircraft previously in storage;

- governmental regulations; and

- lack of capacity in the aircraft traffic control system.

Additional factors outside our control that may lead to sharp increases or
decreases in aircraft values or lease rates for specific aircraft include:

- manufacturer production levels and competition between aircraft
manufacturers, such as the current competition between The Boeing
Company and Airbus Industrie, which has led to an increased supply of
new aircraft at lower prices;
10

- manufacturers merging or leaving the aircraft industry, such as the
merger between Boeing and McDonnell Douglas and the bankruptcy of Fokker
N.V., which has led to the termination of production of MD and Fokker
aircraft and a resulting decrease in the values and lease rates for our
MD and Fokker aircraft;

- the maintenance and operating history of the aircraft;

- the number of operators using a particular type of aircraft (which may
be reduced by bankruptcy or industry consolidation) and the supply of
that type of aircraft;

- legal or regulatory requirements that prevent re-leasing or selling that
type of aircraft;

- the discovery of manufacturing defects in an aircraft model; and

- new regulatory requirements relating to an aircraft model.

THE CONCENTRATION OF AIRCRAFT TYPES IN OUR PORTFOLIO COULD MAGNIFY THE IMPACT OF
DECLINES IN LEASE RATES OR AIRCRAFT VALUES AND ADVERSELY AFFECT OUR CASH FLOW.

As of March 31, 2002, each of the B737-400, MD-83 and A320-200 models of
aircraft comprised more than 10% of our portfolio by appraised value as of
January 31, 2002 and, in addition, each of the B737-300, B737-500, B767-300ER,
DC8, MD-11 and F-100 models of aircraft comprised more than 5% of our portfolio
by appraised value as of January 31, 2002. Furthermore, at March 31, 2002,
widebody aircraft comprised more than 15%, and turboprop aircraft comprised more
than 5% of our portfolio by appraised value as of January 31, 2002. The
concentration on particular models or types of aircraft magnifies the adverse
impact to our cash flow of a decline in lease rates or aircraft values for these
models or types of aircraft and of specific governmental or technical
regulations imposed on those aircraft types. In this connection, we have seen
(x) decreasing popularity of the turboprop aircraft, the cessation of production
of MD-83s and MD-11s, the reduction in demand for B767s including in particular
B767s powered by Pratt & Whitney engines, and the bankruptcy of Fokker, (y)
noise regulations restricting the use of Stage 2 aircraft which, as of March 31,
2002, accounted for approximately 3% of our portfolio by appraised value as of
January 31, 2002, and (z) Airworthiness Directives ("ADS") with respect to the
MD-80s, MD-11s and B737s, all as described more fully below in "-- The Aircraft,
Related Leases and Collateral." These events have caused, and are likely to
continue to cause, our overall lease rates and the aircraft values to
significantly decrease and may cause us to incur significant costs which would
further reduce our cash flow.

THE ACTUAL MARKET VALUE OF THE AIRCRAFT MAY BE LESS THAN THE APPRAISED VALUE AND
PROCEEDS FROM DISPOSITIONS OF THE AIRCRAFT MAY BE INADEQUATE TO MAKE PAYMENTS ON
THE NOTES AND CERTIFICATES.

The appraised values of the aircraft are determined based on the assumption
that there is an "open, unrestricted stable market environment with a reasonable
balance of supply and demand" and take into account long-term trends, including
current expectations of particular models becoming obsolete more quickly, as a
result of airlines switching to different models or manufacturers ceasing
production, and expected declines in lease rates. Appraised values for an
aircraft do not necessarily reflect the market value for the aircraft at a
specific time and you should not rely on appraised values as an indication of
the price that we could obtain if we sold an aircraft. The aircraft market is
cyclical and there may be imbalances of supply and demand at any one time,
especially for specific aircraft types. At the high point in the industry cycle,
the current market value of some aircraft may be at or above their appraised
values while the current market value of others may be significantly less than
their appraised values. At a low point in the industry cycle such as we are
experiencing currently, the current market value of most aircraft types is
likely to be less, or in many cases, much less, than appraised values and
neither market value nor appraised value should be relied upon as a measure of
realizable value. If we sell an aircraft to repay the notes, the proceeds may be
significantly less than its appraised value. We may therefore have insufficient
cash to make payments on the notes to pass through to the certificateholders.
Market values may also be affected adversely by poor market lease rates for
aircraft at any given time.
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SOME OF OUR LESSEES MAY EXERCISE PURCHASE OPTIONS AT PRICES THAT ARE LESS THAN
THE PROPORTIONATE SHARE OF THE UNPAID PRINCIPAL OF THE NOTES AND CERTIFICATES
ALLOCABLE TO THE RELEVANT AIRCRAFT THEREBY REDUCING CASH AVAILABLE TO US TO MAKE
PAYMENTS ON THE NOTES AND CERTIFICATES.

As of March 31, 2002, eight lessees had options to purchase a total of 19
aircraft, representing 4.79% of our portfolio by appraised value as of January
31, 2002. There is a risk that the purchase prices may be less than the
proportionate share of the unpaid principal of the notes and certificates
allocable to the aircraft being purchased. If those options are exercised, there
could be additional reductions in the amount, or a delay in the timing, of
payments on the notes and certificates.

WE MAY BE UNABLE TO REPOSSESS, RE-LEASE OR SELL THE AIRCRAFT IF THE LESSEES DO
NOT DISCHARGE LIENS ON THE AIRCRAFT, WHICH WOULD REDUCE CASH AVAILABLE TO US TO
MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.

Liens which secure the payment of airport taxes, customs duties, air
navigation charges, landing charges, crew wages, repairer's charges or salvage
may attach to the aircraft in the normal course of operations. The sums which
these liens secure may be substantial and could exceed the value of the
aircraft. In some jurisdictions, a holder of aircraft liens may have the right
to detain, sell or cause the forfeiture of the aircraft. While our lessees are
generally required to discharge all liens arising during the term of their
leases, their failure to discharge any liens may impair our ability to
repossess, re-lease or sell the aircraft if the lessee defaults, which could
have an adverse effect on our cash flow.

OUR LESSEES MAY FAIL TO MAINTAIN REGISTRATION OF OUR AIRCRAFT, WHICH MAY AFFECT
THEIR ABILITY TO MAKE PAYMENTS TO US AND REDUCE OUR CASH AVAILABLE TO MAKE
PAYMENTS ON THE NOTES AND CERTIFICATES.

All aircraft in operation must be duly registered with an appropriate
aviation authority. If any lessee fails to maintain a valid registration of an
aircraft, the lessee operator or, in some cases, the owner or lessor may be
subject to penalties which may result in a lien being placed on the aircraft.
Loss of registration could also have other adverse effects, including grounding
of the aircraft and loss of insurance, which may prevent the aircraft from
generating cash flow and have an adverse effect on our ability to make payments
on the notes and certificates.

THE AVAILABILITY OF NEW, MORE TECHNOLOGICALLY ADVANCED AIRCRAFT MAY IMPAIR OUR
ABILITY TO RE-LEASE OR SELL AIRCRAFT AND REDUCE OUR CASH AVAILABLE TO MAKE
PAYMENTS ON THE NOTES AND CERTIFICATES.

The availability of newer, more technologically advanced aircraft could
adversely affect our ability to re-lease or sell our aircraft because lessees
and buyers of used aircraft tend to favor these newer, more technologically
advanced models. Within the last year, particularly following the events of
September 11, 2001, demand for some older narrowbody Stage 3 aircraft, which
make up a significant proportion of our portfolio, has been adversely affected
by the availability of new generation narrowbody Stage 3 aircraft. Although this
risk is common to all aircraft lessors, it is particularly significant for us
because we have a comparatively older portfolio and will need to re-lease all of
our aircraft at least once before the final maturity date of the certificates.
Our ability to manage these technological risks through modifications to
aircraft and sales of aircraft is limited by the significant costs of
modifications and by the restrictions imposed on modifications to and sale of
aircraft under the indentures.

In addition, in light of the age of our fleet, should the current
oversupply of aircraft continue in the longer term, certain of our aircraft may
become obsolete earlier than the useful life expectancies assumed in the 2001
Base Case and/or we may be unable to realize the residual values assumed in the
2001 Base Case at the end of the useful lives of certain of our aircraft.

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INCREASED REGULATION OF THE AIRCRAFT INDUSTRY MAY CAUSE US TO INCUR MORE
EXPENSES OR MAY IMPAIR OUR ABILITY TO RE-LEASE OR SELL AIRCRAFT AND REDUCE OUR
CASH AVAILABLE TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.

The aircraft industry is heavily regulated and aviation authorities may
adopt additional regulations in jurisdictions where our aircraft are registered
or operate. In particular, governmental regulations, especially in North America
and Europe, impose increasingly strict noise and emissions levels and enhanced
safety and security requirements for aircraft, such as fire safety insulation,
traffic collision avoidance systems and emergency locator transmitters. We may
have to incur significant costs in order to comply with additional regulations.
In addition, because our portfolio is composed of a significant number of older
aircraft and we have a heavy concentration of some types of aircraft,
increasingly stringent noise or emissions regulations that disproportionately
affect older aircraft or particular types of aircraft, such as the U.S. Federal
Aviation Administration ("FAA") fire safety regulations on MD-80 and MD-11
aircraft, could have a significant adverse impact on our results. We will incur
significant costs in order to comply with these regulations. For example, it
will cost an estimated $14.1 million to comply with the MD-11 and MD-80 fire
safety regulations, $3.4 million of which has been incurred in the year to March
31, 2002 in relation to seven aircraft. In addition, aircraft that fail to
comply with noise or emissions regulations could be prohibited from flying into
some jurisdictions, which will adversely affect their values and lease rates.

RISKS RELATING TO THE LEASES AND CASH FLOWS FROM LEASE PAYMENTS

THE RENTAL PAYMENTS AND SALE PROCEEDS FROM THE AIRCRAFT MAY NOT BE ADEQUATE TO
SUPPORT THE REQUIRED PAYMENTS ON THE NOTES AND CERTIFICATES.

Our primary sources of cash flow are payments under the leases and proceeds
from the sale of aircraft. This cash flow is affected by our ability to manage
maintenance and other costs, collect payments under the leases and maintain a
constant stream of cash flows by re-leasing aircraft upon lease expiration or
termination and by selling aircraft on favorable terms. It is also dependent on
factors outside our control, such as performance by the lessees and the service
providers, exercise by lessees of any purchase or early termination options, and
external economic factors such as those discussed above under "Risk Factors --
Risks Relating to the Aircraft." It is therefore possible that we may not have
enough funds from these rental payments and sale proceeds to make payments on
the notes and certificates.

The appraised value of our portfolio has declined at a rate greater than
that originally expected in our 1996 Base Case and our overall cash performance
has been weaker than was assumed in the 2001 Base Case. These factors, which
were exacerbated by the events of September 11, 2001 and the subsequent and
continuing political and economic fallout have led to the downgrading of the
class C and class D certificates. If these conditions continue, cash flow
available to make payments on the notes and certificates will be reduced with
the potential consequences described above under "-- Risks Relating to Payment
on the Notes and Certificates."

OUR OPERATIONAL AND FINANCIAL RESTRICTIONS MAY AFFECT OUR ABILITY TO COMPETE AND
MAINTAIN THE CASH FLOW TO REPAY THE NOTES AND CERTIFICATES.

The indentures and constitutive documents of Airplanes Limited and
Airplanes Trust impose restrictions on how we operate our business. These
restrictions may limit our ability to compete against other lessors who are not
subject to similar restrictions or who have greater financial resources than we
do. For example, we are not permitted to grant concessionary rental rates to
airlines in return for equity investments in the airlines. Additionally, we
cannot sell aircraft at prices below a specified target price except in limited
circumstances and in limited aggregate amounts, which may restrict our ability
to sell aircraft to generate cash flow. For example, the current market value of
our MD-11s is below the specified target sales price, which prevents us from
selling these aircraft in compliance with the indenture requirements. See "The
Aircraft, Related Leases and Collateral -- The Lessees -- Commercial
Opportunities for our MD-11 Aircraft" below for more information on our MD-11
aircraft. There are also restrictions on who we can lease our aircraft to and
limits on leasing to lessees in particular geographic regions. Many competing
aircraft lessors do not operate under similar restrictions or have a stronger
financial position or other strengths and therefore have a competitive advantage
over us when negotiating

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leases and sales. These restrictions could adversely affect the amount and
timing of cash flows and payments on the notes and certificates.

WE MAY NOT BE ABLE TO GENERATE SUFFICIENT FUNDS TO REPAY THE NOTES AND
CERTIFICATES IF WE CANNOT RE-LEASE AIRCRAFT QUICKLY AND ON FAVORABLE TERMS.

We may not be able to re-lease the aircraft upon expiration or termination
of the leases without incurring significant downtime. If we cannot quickly
re-lease the aircraft, or if we cannot obtain favorable rates and lease terms
for the aircraft, our cash flow could be negatively affected. Our ability to
re-lease aircraft at acceptable lease rates and terms may suffer because of a
number of factors, including:

- economic conditions affecting the airline industry;

- the supply of competing aircraft and demand for particular aircraft
types;

- increased bargaining power of lessees as they join global alliances with
other airlines;

- reduced number of potential lessees as airlines consolidate or file for
bankruptcy;

- competition from other lessors; and

- restrictions on our flexibility imposed by the indentures.

The events of September 11, 2001, together with a general downturn in
international economic conditions, have resulted in an oversupply of aircraft
available for lease, increased downtime and a decline in lease rates.

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The following table shows the number and type of aircraft as of March 31,
2002 that we must re-lease during the next five years. The table assumes that
(1) no lease terminates early, (2) there are no sales of aircraft and (3)
existing letters of intent will result in leases. Additional aircraft may need
to be re-leased if they become available through early terminations, if letters
of intent do not result in leases or if new leases are for short terms.

AIRPLANES GROUP EXPECTED LEASE PLACEMENT REQUIREMENT AS OF MARCH 31, 2002

Our longest lease is scheduled to expire in November 2012. Therefore we
will be required to re-lease all of our aircraft at least once before the final
maturity date for the certificates. We currently expect that the turboprop
aircraft, older widebody aircraft, Stage 2 aircraft and some older Stage 3
narrowbody aircraft will prove difficult to re-lease because of the factors
noted above. If we cannot on a timely basis re-lease the aircraft that are
coming off lease or can only re-lease them at lease rates lower than the lease
rates assumed in our 2001 Base Case, cash flow available to make payments on the
notes and certificates will be reduced with the potential consequences described
above under "-- Risks Relating to Payment on the Notes and Certificates." There
are currently 54 aircraft which are scheduled to come off lease within a year
from March 31, 2002. Our forecasts assume that future lease rates for many of
these aircraft will be lower than currently contracted rates.

WE MAY NOT BE ABLE TO OBTAIN REQUIRED LICENSES, CONSENTS AND APPROVALS, AND
CONSEQUENTLY OUR CASH FLOW MAY BE REDUCED.

A number of lessees require specific licenses, consents or approvals for
different aspects of the lease. These include consents from governmental or
regulatory authorities to make payments under the leases and to the import,
re-export or de-registration of the aircraft. If we cannot obtain the required
governmental licenses, consents and approvals, if these requirements are
increased by subsequent changes in applicable law or
15

administrative practice, or if the licenses, consents or approvals are
withdrawn, we may be unable to re-lease or sell our aircraft. In that case, our
cash flow would be further reduced thereby adversely affecting our ability to
make payments on the notes and certificates.

LESSEES MAY NOT PERFORM REQUIRED AIRCRAFT MAINTENANCE, CAUSING THE AIRCRAFT
VALUES AND LEASE RATES TO DECLINE AND THEREBY REDUCING OUR CASH FLOW.

The standard of maintenance observed by our lessees and the condition of
the aircraft at the time of lease or sale may affect the aircraft values and
lease rates on our aircraft. If a lessee fails to perform required or
recommended maintenance on an aircraft during the term of the lease or does not
comply with all applicable governmental requirements, the aircraft could be
grounded and we may incur substantial costs to restore the aircraft to an
acceptable maintenance condition before its re-lease or sale. Also, an
increasing number of lessees with better credit no longer provide any cash
maintenance reserves. If the lessees do not perform their maintenance
obligations in any month, or if the maintenance costs for any month exceed the
maintenance payments made by the lessees or are more than our maintenance
reserves, we will have to fund these maintenance costs out of cash flow from the
leases for that month. As a result, our cash flow may be volatile from month to
month and it may harm our ability to make payments on the notes and certificates
after paying significant maintenance costs, especially as the aircraft age.

OUR AIRCRAFT INSURANCE MAY NOT BE AVAILABLE OR MAY NOT BE ADEQUATE TO COVER THE
LOSSES OR LIABILITIES WE INCUR, REDUCING CASH OTHERWISE AVAILABLE TO MAKE
PAYMENTS ON THE NOTES AND CERTIFICATES.

Our lessees are required under the leases to maintain property and
liability insurance covering their operation of the aircraft and to indemnify us
against any damages. Although we believe that this insurance will be adequate to
cover all likely claims, we cannot guarantee that losses and liabilities from
one or more aviation accidents and other catastrophic events will not exceed the
insurance coverage limits. If the proceeds of insurance held by the lessees or
contingent policies held by us do not cover the losses or liabilities we incur,
or if our lessees default in fulfilling their insurance or indemnification
obligations, we would have to cover these losses or liabilities which would
reduce cash flow available to make payments on the notes and certificates.

The effects of the events of September 11, 2001, have included, amongst
other things, increased insurance premiums required by the insurance markets. In
particular, airlines worldwide are currently experiencing difficulties in
maintaining war insurance cover and some other types of insurance cover in the
amounts required under their leases with us and other lessors. While these
insurance issues have been mitigated in certain jurisdictions by a number of
temporary government schemes, and the emergence of a limited available insurance
market, in the absence of longer term satisfactory solutions on this matter, it
may be necessary for certain aircraft to be grounded. This would likely reduce
our cash flows if, as a result, aircraft were returned early and/or we do not
receive rental payments from lessees which are affected by such developments.

OUR HEDGING POLICY MAY NOT ADEQUATELY MANAGE OUR INTEREST RATE RISKS, INCLUDING
THE ASSOCIATED LESSEE CREDIT RISKS, AND WE MAY NOT BE ABLE TO PURCHASE AN
ADEQUATE PORTFOLIO OF SWAPTIONS IF REQUIRED TO MITIGATE OUR INTEREST RATE RISKS,
INCLUDING THE ASSOCIATED LESSEE CREDIT RISKS. IN THIS CASE, THERE COULD BE A
MISMATCH BETWEEN OUR FIXED AND FLOATING RATE ASSETS AND LIABILITIES WHICH COULD
REDUCE OUR CASH FLOW.

We manage our interest rate risks, including the associated lessee credit
risks, through the use of swaps and, as necessary, swaptions which we enter into
with third parties. However, our hedging policy may not adequately manage these
risks. Following consultation with the rating agencies, it is not currently
proposed to purchase any further swaptions primarily due to the low interest
rate environment and our current cash flow performance. We may also have
insufficient cash flow available to purchase the total amount of any swaptions
required or, in light of our current financial condition and our current or
future ratings, we may be unable to find counterparties willing to enter into
swaps with us. If our hedging policy does not adequately manage our interest
rate risks, including the associated lessee credit risks, we cannot find
counterparties or we do not have sufficient cash flow to
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purchase the total amount of any swaptions required, a mismatch between our
fixed and floating rate interest obligations and fixed and floating rate lease
receipts may arise, which could harm our cash flow and adversely affect our
ability to make payments on the notes and certificates.

WITHHOLDING TAXES MAY BE IMPOSED ON LEASE RENTALS, INCREASING OUR COSTS AND
REDUCING OUR CASH FLOW.

We have tried to structure our leases so that either withholding taxes do
not apply to lease payments or, if withholding taxes do apply, the lessees are
obliged to pay corresponding additional amounts so that we always receive the
full lease payment. However, if withholding taxes must be paid and we cannot
recover additional amounts from the lessees, that would further reduce funds
available to make payments on the notes and certificates.

RISK OF LESSEE DEFAULT

LESSEES IN WEAK FINANCIAL CONDITION COULD FAIL TO MAKE LEASE PAYMENTS, CAUSING
OUR REVENUES TO FALL BELOW THE LEVEL REQUIRED TO MAKE PAYMENTS ON THE NOTES AND
CERTIFICATES.

There is a significant risk that lessees in weak financial condition may
default on their obligations under the leases. If lessees do not make rent and
maintenance payments or are significantly in arrears, we may have less cash flow
available to make payments on the notes and certificates. The ability of each
lessee to perform its obligations under its lease depends primarily on its
financial condition, which may be affected by many factors beyond its control,
including competition, fare levels, passenger demand, currency exchange rates,
operating costs (including fuel and labor costs), cost and availability of
financing, and environmental and other governmental regulation. Because a
substantial portion of business and, especially, leisure airline travel is
discretionary, the general economic conditions of the geographic regions where
our lessees operate also affects their ability to meet their lease obligations.
Since the majority of our leases require lease payments in U.S. dollars, any
weakness in the local currency in which a lessee operates against the U.S.
dollar could also adversely affect its ability to pay us.

The events of September 11, 2001, together with world economic conditions,
have resulted in a number of our lessees experiencing financial difficulties.
Two significant European carriers (Sabena and Swissair) have since filed for
bankruptcy and major European and American carriers have announced large losses.
We have agreed to rental holidays, rental restructurings, the early return of
aircraft and similar measures for a number of lessees. You should expect that
some of our current or future lessees will continue to be in a weak financial
position, and a sizeable proportion of our lessees will continue to be in
significant arrears on their rental or maintenance payments at any particular
time.

The current level of defaults and arrears may not be representative of
future defaults and arrears, and defaults and arrears may increase if the
airline industry faces continued difficulties. Some regions where our lessees
are based, such as Asia or Latin America, may be more susceptible than others to
economic downturns. See "-- The Aircraft, Related Leases and Collateral -- The
Lessees" below for a more detailed discussion of the regional concentrations of
our lessees and economic conditions which may impact their financial condition
and ability to perform their obligations to us. Whatever the cause, any
financial weakness on the part of our lessees may result in reduced cash flows
available to us to make payments on the notes and certificates.

WE MAY NOT BE ABLE TO TERMINATE LEASES OR REPOSSESS AIRCRAFT WHEN A LESSEE
DEFAULTS, CAUSING US TO INCUR UNEXPECTED REPOSSESSION COSTS THAT REDUCE OUR CASH
FLOW.

If there is an event of default under a lease, we have the right to
terminate the lease and repossess the aircraft. However, it may be difficult,
expensive and time-consuming for us to enforce our rights in some circumstances,
especially if the lessee contests the termination or is bankrupt or under court
protection. Delays resulting from proceedings to repossess an aircraft add to
the period when the aircraft is not generating cash flow for us. In addition, we
may incur significant costs in trying to repossess an aircraft and in performing
17

maintenance and other work necessary to make the aircraft available for re-lease
or sale, including retrieval or reconstruction of aircraft records. We may also
incur swap breakage costs. Our efforts to repossess an aircraft following a
lessee's default may also be limited by the laws of the local jurisdiction which
may delay or prevent repossession. If we do terminate a lease and repossess the
aircraft, we may be unable to re-lease the aircraft promptly and/or at a
satisfactory lease rate. All of this may adversely affect the cash flow
available to make payments on the notes and certificates.

RISKS RELATING TO TAX

OWNING THE CERTIFICATES MAY HAVE TAX CONSEQUENCES FOR CERTIFICATEHOLDERS AND MAY
REDUCE CERTIFICATEHOLDERS' INCOME.

Ownership of the certificates may subject certificateholders to withholding
of income taxes in the United States, Jersey or other jurisdictions in which
Airplanes Group, its aircraft-owning and aircraft-leasing subsidiaries and the
lessees are organized, reside or operate. The tax consequences of the purchase
of the certificates depend to some extent upon certificateholders' individual
circumstances.

PRE-1998 AEROUSA LOSSES MAY NOT BE AVAILABLE TO OFFSET FUTURE TAXABLE INCOME OF
AEROUSA, AS A RESULT OF WHICH AEROUSA MAY HAVE TO PAY ADDITIONAL U.S. FEDERAL
INCOME TAX AND HAVE LESS CASH FLOW TO PAY AIRPLANES TRUST WHICH WILL HAVE LESS
CASH TO MAKE PAYMENTS ON THE NOTES AND CERTIFICATES.

AeroUSA had net operating loss carryforwards for U.S. federal income tax
purposes when GE Capital acquired all of the class E notes on November 20, 1998.
As a result of that acquisition, AeroUSA's pre-1998 net operating loss
carryforwards may only be utilized to offset up to $452,000 of taxable income
per year and possibly to offset certain "built in" gains (which existed at the
time of the acquisition) on aircraft sold prior to November 20, 2003. To the
extent that the pre-1998 net operating loss carryforwards are not available to
offset taxable income of AeroUSA in future years, AeroUSA will be required to
pay additional U.S. federal income tax which will reduce the amount available to
pay to Airplanes Trust and which will have a negative impact on the cash flow of
Airplanes Trust available to make payments on the notes and certificates.

AEROUSA MAY INCUR ADDITIONAL TAX LIABILITIES AS A RESULT OF FILING CONSOLIDATED
TAX RETURNS WITH GENERAL ELECTRIC COMPANY ("GE") OR DEBIS AIRFINANCE, INC. THERE
WILL BE A NEGATIVE IMPACT ON THE CASH FLOW OF AIRPLANES GROUP IF AEROUSA INCURS
ANY SUCH LIABILITIES.

AeroUSA and its wholly owned subsidiary, AeroUSA 3 Inc. (together, the
"AEROUSA GROUP"), filed U.S. federal consolidated tax returns and certain state
and local tax returns with GPA, Inc. (now known as debis AirFinance, Inc.) and
its subsidiaries (together, the "DEBIS AIRFINANCE U.S. TAX GROUP") through
November 20, 1998. Since November 20, 1998, the AeroUSA group has filed U.S.
federal consolidated tax returns and certain state and local tax returns with GE
and its subsidiaries (together, the "G.E. TAX GROUP"). As members of the
consolidated tax groups, the AeroUSA group is jointly and severally liable for
the applicable U.S. federal or state and local tax liabilities of the debis
AirFinance U.S. tax group for the period through November 20, 1998 and of the GE
U.S. tax group for the period since November 20, 1998. There are ongoing U.S.
federal, state and local tax audits with respect to taxes previously reported by
the debis AirFinance U.S. tax group.

GE, AeroUSA and Airplanes Trust have entered into a tax sharing agreement
pursuant to which GE has agreed to indemnify members of the AeroUSA group
against any U.S. federal, state or local tax liabilities of any member of the GE
U.S. tax group (other than an AeroUSA group member) which are imposed on the
AeroUSA group that are related to any tax period or portion of a tax period
beginning after November 20, 1998 and are tax liabilities that the AeroUSA group
would not have incurred if they were not members of the GE U.S. tax group.
Furthermore, under this tax sharing agreement, (1) AeroUSA has agreed to pay GE
(in cash if a payment is then due by the GE U.S. tax group to a tax authority,
otherwise in the form of subordinated non-interest bearing notes) its share of
tax liabilities based on the amount of tax liabilities that the AeroUSA group
would have incurred if it were not included in the GE U.S. tax group and (2) GE
has agreed to pay AeroUSA, at the time such tax savings

18

are realized, an amount equal to any tax savings by any member of the GE U.S.
tax group (other than a member of the AeroUSA group) for any tax period after
November 20, 1998 as a result of any tax asset generated by the AeroUSA group.
Similar provisions contained in a tax sharing agreement between GPA Group (now
known as debis AirFinance Ireland), GPA, Inc. (now known as debis AirFinance,
Inc.), AeroUSA and Airplanes Trust which terminated on November 20, 1998 remain
applicable in respect of tax periods ending on or before November 20, 1998.

The receipt by Airplanes Trust or AeroUSA of any amounts from GE, debis
AirFinance Ireland or debis AirFinance, Inc., as applicable, pursuant to the tax
sharing agreements will depend upon the financial condition and liquidity of GE,
debis AirFinance Ireland or debis AirFinance, Inc., as applicable, at the time
any claim is made. To the extent any tax claims are successfully made against
the AeroUSA group and those amounts are not indemnified by GE, debis AirFinance
Ireland or debis AirFinance, Inc. under the relevant tax sharing agreements,
those claims will have a negative impact on the cash flow available to Airplanes
Group to make payments on the notes and certificates. In addition, because the
notes and certificates are not secured directly or indirectly by the aircraft or
the leases, substantially all of the assets of the AeroUSA group, including the
aircraft, would be available for attachment and satisfaction of any of those
claims.

AIRPLANES LIMITED, AIRPLANES HOLDINGS AND AIRPLANES HOLDINGS' NON-U.S.
SUBSIDIARIES MAY BE SUBJECT TO U.S. FEDERAL INCOME TAX AS A RESULT OF ACTIONS OF
THE SERVICER OR ADMINISTRATIVE AGENT OR, IN THE CASE OF AIRPLANES HOLDINGS AND
ITS IRISH TAX RESIDENT AIRCRAFT OWNING SUBSIDIARIES, BECAUSE THEY MAY NOT
BENEFIT FROM THE U.S.-IRISH TAX TREATY, WHICH WOULD NEGATIVELY AFFECT THEIR CASH
FLOW.

Whether Airplanes Limited, Airplanes Holdings and Airplanes Holdings'
non-U.S. subsidiaries will be subject to U.S. federal income tax may depend on
the manner in which the activities of the servicer and administrative agent are
performed, and in the case of Airplanes Holdings and its Irish tax resident
aircraft owning subsidiaries, will depend on qualification for the benefits of
the income tax treaty between the United States and Ireland (the "TREATY").

Prior to GE Capital's acquisition of the class E notes, Airplanes Holdings
and its Irish tax resident aircraft owning subsidiaries qualified for treaty
benefits by virtue of a ruling obtained by AerFi Group (now known as debis
AirFinance Ireland) from the U.S. competent authority, which applied to AerFi
Group and its qualified affiliates. Following the acquisition of the class E
notes by GE Capital, Airplanes Holdings and its Irish tax resident aircraft
owning subsidiaries ceased to be affiliates of AerFi Group. Airplanes Holdings
applied for its own ruling on similar grounds to those on which the AerFi Group
ruling was based. On October 20, 2001, the ruling by the U.S. competent
authority was granted to Airplanes Holdings and its Irish tax resident aircraft
owning subsidiaries. There can be no assurance that the activities of the
servicer or the administrative agent will not subject Airplanes Limited,
Airplanes Holdings and Airplanes Holdings' non-U.S. subsidiaries to U.S. federal
income tax on some or all of their income in the future.

In the event that Airplanes Limited, Airplanes Holdings or Airplanes
Holdings' non-U.S. subsidiaries are subject to U.S. federal income tax on some
or all of their income, the cash flow available to make payments on the notes
and certificates would be reduced.

THE OPERATIONS OF AIRPLANES LIMITED, AIRPLANES TRUST AND AEROUSA MAY BECOME
SUBJECT TO IRISH CORPORATE TAXES WHICH WOULD REDUCE THEIR CASH FLOWS.

Airplanes Limited, Airplanes Trust and AeroUSA do not intend to be treated
as doing business in Ireland and, therefore, do not expect to be subject to
Irish corporate tax. However, if their operations differ from those intended,
they could become subject to Irish taxes.

19

WE WILL NOT PAY ANY ADDITIONAL AMOUNTS TO MAKE UP FOR ANY WITHHOLDING TAX THAT
MAY APPLY AND REDUCE THE AMOUNTS CERTIFICATEHOLDERS RECEIVE.

We will not make any additional payments to certificateholders for any
withholding or deduction required by applicable law on payments on either the
notes or the certificates. We will use reasonable efforts to avoid the
application of withholding taxes or other deductions. If withholding taxes
cannot be avoided, however, we may redeem the notes and certificates. If we do
not redeem them, we will reduce the net amount of interest that is passed
through to certificateholders by the amount of any withholding or deduction.

WE MAY LOSE IRISH CORPORATE TAX BENEFITS WHICH WOULD REDUCE OUR CASH FLOW AND
IMPAIR OUR ABILITY TO REPAY THE NOTES AND CERTIFICATES.

Airplanes Limited owns 95% of the capital stock of Airplanes Holdings and
GECAS owns the remaining 5%. The 5% shareholding by GECAS is intended to entitle
Airplanes Holdings and some of its Irish tax-resident subsidiaries to continue
to be eligible for a reduced rate of corporate tax and other corporate tax
benefits for Shannon, Ireland certified companies, including a preferential 10%
corporate tax rate. If GECAS reduces or relocates its operations for any reason
so that it fails to maintain, among other things, specified employment levels in
Ireland, or if GECAS resigns or its appointment is terminated in accordance with
the terms of the servicing agreement, then Airplanes Holdings and those other
companies (a) may become subject to Irish corporate taxation at general Irish
statutory rates, which are currently 20% for trading income, and are expected to
fall to 12.5% for 2003 and subsequent years, and (b) may lose the ability to
deduct interest payments to Airplanes Limited from their income in calculating
their liability to Irish tax. The loss of these tax benefits would likely have a
materially adverse effect on Airplanes Limited's ability to make payments on its
notes and guarantees.

Upon the scheduled termination of the preferential 10% tax rate on December
31, 2005, Airplanes Holdings and its Irish tax resident subsidiaries will become
subject to Irish corporate tax on their net trading income, which would include
leasing income, at a 12.5% tax rate as provided for in the Irish Finance Act of
1999. There can be no assurance that this tax rate will not be changed in the
future.

RISKS RELATING TO BANKRUPTCY

OUR ASSETS MAY BE CONSOLIDATED WITH THOSE OF DEBIS AIRFINANCE IRELAND OR ITS
SUBSIDIARIES IF THEY BECOME BANKRUPT OR INSOLVENT, LEAVING FEWER ASSETS
AVAILABLE TO REPAY THE CERTIFICATES.

We have taken steps to structure Airplanes Group and our transactions,
especially the 1996 transaction whereby we acquired our portfolio of aircraft
from GPA Group (now known as debis AirFinance Ireland), to ensure that our
assets would not be consolidated with the assets of debis AirFinance Ireland and
would not become available to debis AirFinance Ireland's creditors in any
bankruptcy or insolvency proceeding involving debis AirFinance Ireland or any of
its affiliates. If debis AirFinance Ireland or any of its subsidiaries becomes
bankrupt or insolvent, there is a legal risk that a court or other authority
could decide that these steps were not effective to insulate our assets from
debis AirFinance Ireland's assets or that debis AirFinance Ireland's transfer of
aircraft to us in 1996 was improper. As a result, the aircraft and our other
assets could become available to repay debis AirFinance Ireland's creditors and
we could lose all of our rights in the aircraft and our other assets. If that
happens, we would have less cash flow available to make payments on the notes
and certificates.

20

THE AIRCRAFT, RELATED LEASES AND COLLATERAL

OVERVIEW

As of March 31, 2002, our portfolio comprised a total of 186 aircraft, of
which 180 aircraft were on lease to 64 lessees in 33 countries and 6 aircraft
were off-lease. At March 31, 2002, one of these off-lease aircraft was subject
to a letter of intent for lease. As of the date of this Form 10-K, the aircraft
subject to the letter of intent for lease had been delivered to the lessee, one
of the five unplaced off-lease aircraft had become subject to a lease contract
and been delivered to the lessee, one aircraft had become subject to a letter of
intent for lease, one aircraft had become subject to a letter of intent for
sale, one aircraft had been sold and one aircraft was available for marketing.
Since March 31, 2002, a further nine aircraft had become off-lease, of which two
have been sold, two were subject to letters of intent for lease and five were
available for marketing. As of March 31, 2002, the weighted average remaining
contracted lease term of our portfolio (by appraised value as of January 31,
2002 and without giving effect to purchase options or extension options) was 27
months. Our longest lease is scheduled to expire in November 2012. Therefore we
will be required to re-lease all of our aircraft at least once before the final
maturity date of the certificates. See "Risk Factors -- Risks Relating to the
Leases and Cash Flows for Lease Payments" for a description of the risks
certificateholders could face if aircraft are not re-leased.

APPRAISALS

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

For the appraisals as of January 31, 2002, we obtained independent
appraisals from three independent appraisers and calculated the appraised value
of each aircraft by taking the average of the three appraisals. On this basis,
the average appraised value for our portfolio of 186 aircraft was approximately
$2,799.1 million as of January 31, 2002, as compared to $3,113.2 million for the
same 186 aircraft based on appraisals as of January 31, 2001.

The appraised value of each aircraft in our portfolio by each of the three
independent appraisers as of January 31, 2002 can be found in "Airplane Group
Portfolio Analysis" below. The aggregate appraised values calculated by each of
the three independent appraisers for our portfolio, calculated by adding up the
appraised value by that appraiser of each aircraft in our portfolio, are as
follows:

You should not rely on the appraised value as a measure of the realizable
value of any aircraft. See "Risk Factors -- Risks Relating to the Aircraft" for
a discussion of the risks associated with the appraised value.

PORTFOLIO INFORMATION

The tables set forth below summarize important information about our
portfolio. For a more detailed analysis of the aircraft, see "--Airplanes Group
Portfolio Analysis" below.

21

As of March 31, 2002, 96.81% of the aircraft in our portfolio by appraised
value as of January 31, 2002 held or were capable of holding a noise certificate
issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago
Convention or have been shown to comply with the Stage 3 noise levels set out in
Section 36.5 of Appendix C of Part 36 of the United States Federal Aviation
Regulations (assuming for this purpose that turboprop aircraft are Stage 3
aircraft). We refer to this as being "STAGE 3" compliant and call these aircraft
"STAGE 3 AIRCRAFT."

The remaining 3.19% of the aircraft by appraised value as of January 31,
2002 held or were capable of holding a noise certificate issued under Chapter 2
of the Chicago Convention or have been shown to comply with the Stage 2 noise
levels set out in Section 36.5 of Appendix C of Part 36 of the United States
Federal Aviation Regulations but do not comply with the requirements for a Stage
3 aircraft. We refer to this as being "STAGE 2" compliant and call these
aircraft "STAGE 2 AIRCRAFT." Most jurisdictions have adopted these U.S.
classifications, which consider Stage 2 aircraft that have been hushkitted to be
Stage 3 aircraft. For purposes of the table below, Stage 2 aircraft that have
been hushkitted are considered to be Stage 3 aircraft and referred to as "STAGE
3HK."

The following table lists the aircraft by type and number as of March 31,
2002 and the percentage of our portfolio they represent by appraised value as of
January 31, 2002. For the purpose of this table, turboprop aircraft are
considered to be Stage 3 aircraft.

22

The following table sets forth the exposure of our portfolio by lessee as
of March 31, 2002 according to the number of aircraft and the appraised value as
of January 31, 2002.

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

(1) Total number of lessees = 64

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

(3) As of March 31, 2002, one of the six off-lease aircraft was subject to a
letter of intent for lease to a new lessee. As of the date of this Form
10-K, the aircraft subject to the letter of intent for lease had been
delivered to the lessee, one of the five unplaced off-lease aircraft had
become subject to a lease contract and had been delivered to the lessee,
one aircraft had become subject to a letter of intent for lease, one
aircraft had become subject to a letter of intent for sale, one aircraft
had been sold and one aircraft was available for marketing. Since March 31,
2002, a further nine aircraft had become off-lease, of which two have been
sold, two were subject to letters of intent for lease and five were
available for marketing.

23

The following table sets forth the exposure of our portfolio by country of
domicile of lessees as of March 31, 2002 according to the number of aircraft and
the appraised value of the portfolio as of January 31, 2002.

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

(1) Total number of countries = 33

(2) As of March 31, 2002, one of the six off-lease aircraft was subject to a
letter of intent for lease to a lessee in Iceland. As of the date of this
Form 10-K, the aircraft subject to the letter of intent for lease had been
delivered to the lessee, one of the five unplaced off-lease aircraft had
become subject to a lease contract and had been delivered to the lessee in
Turkey, one aircraft had become subject to a letter of intent for lease to
a lessee in Cyprus, one aircraft had become subject to a letter of intent
for sale, one aircraft had been sold and one aircraft was available for
marketing. Since March 31, 2002, a further nine aircraft had become
off-lease, of which two have been sold, two were subject to letters of
intent for lease and five were available for marketing.

24

The following table sets forth the exposure of our portfolio by regions in
which lessees are domiciled as of March 31, 2002 according to the number of
aircraft and the appraised value of our portfolio as of January 31, 2002.

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

(1) As of March 31, 2002, one of the six off-lease aircraft was subject to a
letter of intent for lease to a lessee in Europe. As of the date of this
Form 10-K, the aircraft subject to the letter of intent for lease had been
delivered to the lessee, one of the five unplaced off-lease aircraft had
become subject to a lease contract and had been delivered to the lessee in
Europe, one aircraft had become subject to a letter of intent for lease to
a lessee in Europe, one aircraft had become subject to a letter of intent
for sale, one aircraft had been sold and one aircraft was available for
marketing. Since March 31, 2002, a further nine aircraft had become
off-lease, of which two had been sold, two were subject to letters of
intent for lease and five were available for marketing.

The following table sets forth the exposure of the portfolio by year of
aircraft manufacture or conversion to freighter as of March 31, 2002 according
to the number of aircraft and the appraised value of the aircraft as of January
31, 2002. See note 2 to "Airplanes Group Portfolio Analysis" below for the
original manufacture dates for the aircraft that were converted into freighters.

25

The following table sets forth the exposure of the portfolio by seat
category as of March 31, 2002 according to the number of aircraft and the
appraised value of the portfolio as of January 31, 2002.

26

AIRPLANES GROUP PORTFOLIO ANALYSIS
AT MARCH 31, 2002

- ---------------
Note:
(1) Aircraft International Leasing Ltd is an indirect 100% subsidiary of Lan
Chile Airlines.

30

(2) The table above reflects the date of conversion to a freighter
configuration, for the aircraft listed below. The following table sets forth
the date of original manufacture for those aircraft.

(3) As of March 31, 2002, one of the off-lease aircraft (MSN 26024) was subject
to a letter of intent for lease to a lessee in Iceland. As of the date of
this Form 10-K, the aircraft subject to the letter of intent for lease had
been delivered to the lessee, one of the five unplaced off-lease aircraft
had become subject to a lease contract and delivered to the lessee in
Turkey, one aircraft had become subject to a letter of intent for lease to a
lessee in Cyprus, one aircraft had become subject to a letter of intent for
sale, one aircraft had been sold and one aircraft was available for
marketing. Since March 31, 2002, a further nine aircraft had become
off-lease, of which two have been sold, two were subject to letters of
intent for lease and five were available for marketing.

31

THE LEASES

Most of the leases are operating leases under which we generally retain the
benefit, and bear the risk, of the residual value of the aircraft at the end of
the lease. As of March 31, 2002, we had 180 leases in effect, covering our whole
portfolio except for six aircraft which were off-lease. As of March 31, 2002,
one of these off-lease aircraft was subject to a letter of intent for lease. The
remaining five unplaced aircraft represented 1.92% of our portfolio by appraised
value as of January 31, 2002. As of the date of this Form 10-K, the aircraft
subject to the letter of intent for lease had been delivered to the lessee, one
of the five unplaced off-lease aircraft had become subject to a lease contract
and had been delivered to the lessee, one aircraft had become subject to a
letter of intent for lease, one aircraft had become subject to a letter of
intent for sale, one aircraft had been sold and one aircraft was available for
marketing. Since March 31, 2002, a further nine aircraft had become off-lease,
of which two have been sold, two were subject to letters of intent for lease and
five were available for marketing. All leases are managed by the servicer
according to the servicing agreement.

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

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

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

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

The following is a summary of the principal terms of the leases as of March
31, 2002, with reference to appraised values as of January 31, 2002.

LEASE TERM................. As of March 31, 2002, the weighted average
remaining contracted lease term of the aircraft
(weighted by appraised value as of January 31, 2002
and without giving effect to purchase options,
early terminations or extensions) was 27 months.
The longest lease was scheduled to expire in
November 2012.

RENTALS.................... As of March 31, 2002, rent under 164 of the leases,
representing 89.62% by appraised value of our
portfolio as of January 31, 2002, was payable
monthly in advance, and rent under 16 of the
leases, representing 10.34% by appraised value of
our portfolio as of January 31, 2002, was payable
monthly in arrears.

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

EXTENSION OPTIONS.......... Some of the leases contain an extension option
pursuant to which, depending on the negotiations
with the lessee at the time of signing of the
32

lease, either we or the lessee could extend the
term of the lease at either the existing lease rate
or at the future market rate. As of March 31, 2002,
24 of the leases representing 15.40% of our
portfolio by appraised value as of January 31,
2002, included an extension option.

EARLY TERMINATION
OPTIONS.................... Some of the leases contain an early termination
option pursuant to which the lessee may terminate
the lease before the scheduled expiration date if
specified conditions are met. As of March 31, 2002,
37 of the leases representing 6.68% of our
portfolio by appraised value as of January 31, 2002
include an early termination option. Assuming that
all these options are exercised for the earliest
possible termination, the weighted average
remaining lease term of our portfolio would be 26
months.

PURCHASE OPTIONS........... As of March 31, 2002, eight lessees had outstanding
options to purchase a total of 19 aircraft,
representing 4.79% of our portfolio by appraised
value as of January 31, 2002. The latest date on
which a purchase option could be exercised is
November 4, 2006 for a purchase of a B767-200ER.

SECURITY DEPOSITS.......... As of March 31, 2002, lessees under 145 of the
leases representing 74.86% of our portfolio by
appraised value as of January 31, 2002 have
provided security for their obligations. As of
March 31, 2002, we had $32 million in cash security
deposits in respect of 92 aircraft representing
48.99% of our portfolio by appraised value as of
January 31, 2002, and $124 million in letters of
credit in respect of 68 aircraft representing
36.75% of our portfolio by appraised value as of
January 31, 2002.

GUARANTEES................. In 39 of the leases, we have received guarantees of
the lessee's performance obligations under the
lease. These guarantees were issued by the lessee's
parent company or shareholders.

MAINTENANCE................ The leases contain detailed provisions specifying
maintenance standards and aircraft redelivery
conditions generally to be met at the lessees'
expense. During the term of each lease, we require
the lessee to maintain the aircraft in accordance
with an agreed maintenance program designed to
ensure that the aircraft meets applicable
airworthiness and other regulatory requirements.
Lessees must provide monthly maintenance reserves
under approximately 115 of the leases. Under the
balance of the leases, the lessee or the lessor may
be required to make certain adjustment payments to
one another if at redelivery the aircraft or
specified items do not meet the required standards
under the lease. Heavy maintenance on significant
components of an aircraft, such as the airframe and
the engines, is generally required to be performed
on a cycle of several years and the cost of this
maintenance may be material in relation to the
value of the aircraft, with the overhaul of a
single component often exceeding $1 million.
Pursuant to the leases, if and when an aircraft is
transferred from one lessee to another between
maintenance overhauls, the transferring lessee is
generally required to pay for that portion of the
succeeding overhaul that can be attributed to its
use of the aircraft under its lease.

Depending on the credit of the lessee and other
factors, we may require that the lessee pay cash
maintenance reserves (79 leases as of March 31,
2002, representing 48.95% of our portfolio by
appraised value as of January 31, 2002) or provide
a combination of maintenance reserves and letters
of credit or guarantees (12 leases as of March 31,
2002, representing 3.82% of our portfolio by
appraised value as of January 31, 2002). If the
lessee pays maintenance reserves, we will have to
reimburse it for maintenance it actually performs
on the aircraft. Our obligation to reim-
33

burse maintenance is classified as an expense and
therefore ranks senior to any payments on the notes
and certificates.

If the lessee is not required to pay maintenance
reserves or provide letters of credit or
guarantees, we have to rely on the lessee's credit
and its ability to maintain the aircraft during the
lease term and return it in good condition or make
any maintenance payments required at the end of the
lease. If maintenance is required on the aircraft
but not performed, or the lessee fails to pay, we
have to fund this maintenance ourselves. As of
March 31, 2002, we recorded approximately $257
million of maintenance reserves liability.

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

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

INSURANCE.................. The lessees bear responsibility through an
operational indemnity to carry insurance for
liabilities arising out of the operation of the
aircraft. The indemnity includes liabilities for
death or injury to persons and damage to property
that ordinarily would attach to the operator of the
aircraft. The lessees are also required to carry
comprehensive liability insurance and hull
insurance, and any further insurance that is
customary in the commercial aircraft industry, and
to indemnify us against all liabilities, including
where the liability to us as owner and lessor
attaches by law. We are required under the leases
to be named as an additional insured on hull and
liability policies. Most of the leases also require
the lessee to maintain the liability insurance for
a specified period between one and three years
after termination of that lease. Under the
servicing agreement, the servicer is required to
monitor the lessees' performance of obligations
with respect to the insurance provisions of the
applicable leases. We also carry contingent hull
and liability insurance consistent with industry
practice which acts as a backup for Airplanes
Group's interests in instances where a lessee's
policy lapses or when the insurable loss is in
excess of the lessee's coverage. The amount of the
contingent liability policies may not be the same
as the insurance required under the lease. The
amount of war third party contingent insurance and
other types of cover are subject to a number of
limitations imposed by the aviation insurance
industry particularly following the terrorist
attacks of September 11, 2001.

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

34

THIRD PARTY LIABILITY
INSURANCE................ The minimum third party liability limits under the
leases range from $250 million in respect of
turboprop aircraft to $750 million in respect of
widebody aircraft. In some cases, the lessee
carries more insurance than the minimum specified
in the lease. We also have in place our own
contingent liability coverage to cover any
liability in excess of the lessee's coverage or any
liability resulting from a lapse for any reason of
a lessee's coverage. Following the terrorist
attacks of September 11, 2001, the aviation
insurance markets applied a U.S.$50 million limit
on war third party (non-passenger) liability
insurance. We require lessees to either buy
additional insurance in the commercial markets or
obtain equivalent protection under applicable
governmental schemes. While these insurance issues
have been mitigated in certain jurisdictions by a
number of temporary government schemes, and the
emergence of a limited available insurance market,
in the absence of longer term satisfactory
solutions on this matter, it may be necessary for
certain aircraft to be grounded. This would likely
reduce our cash flows if as a result aircraft were
returned early and/or we do not receive rental
payments from lessees which are affected by such
developments.

AIRCRAFT PROPERTY
INSURANCE.................. In all cases, the sum of the stipulated loss value
and our own additional coverage in place is at
least equal to the appraised value of the aircraft.
Permitted deductibles, which generally apply only
in the case of a partial loss, range from $50,000
for turboprop aircraft to $1 million for widebody
aircraft. Following insurance market developments
in the aftermath of the terrorist attacks of
September 11, 2001, cover for Confiscation by the
State of Registration (as required under the
majority of leases) is not available from the
insurance markets since January 1, 2002. The change
has been implemented by the insurance industry as
lessees renew their insurances. However, this like
other "war" related issues is fluid and such cover
may become generally available in the future.

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

SUBLEASES AND WET LEASES... Under most of our current leases, the lessee may
sublease the aircraft without our consent if
specified conditions are met. Under most of our
current leases, the lessee may also "WET LEASE" the
aircraft (leasing the aircraft to another airline
with a crew and services provided by the lessee)
without our consent so long as the lessee does not
part with operational control of the aircraft.
Where there is a sublease or a wet lease, the
lessee remains fully liable to us for all its
payment and performance obligations under the lease
and we have no contractual relationship with the
sublessee or the wet lessee. The following lessees
sublease their aircraft: Philippine Airlines, which
subleases one aircraft to Air Philippines,
Schreiner Airways, which subleases two aircraft to
Aero Contractors Co. of Nigeria Ltd., and Idefix, a
subsidiary of ATR, which subleases one ATR 42-300
aircraft to American Eagle. Leases with new lessees
are based on a pro forma lease that includes
restrictions on subleases and wet leases into
specified prohibited countries.
35

COMPLIANCE WITH GOVERNMENTAL AND TECHNICAL REGULATION

In addition to the general requirements regarding maintenance of the
aircraft, aviation authorities from time to time issue ADs requiring the
operators of aircraft to take particular maintenance actions or make particular
modifications with respect to all aircraft of a particular type. Manufacturer
recommendations may also be issued. To the extent that a lessee fails to perform
ADs that are required to maintain its certificate of airworthiness or other
manufacturer requirements in respect of an aircraft (or if the aircraft is not
currently subject to a lease), Airplanes Group may have to bear or share (if the
lease requires it) the cost of compliance. Other governmental regulations
relating to noise and emissions levels may be imposed not only by the
jurisdictions in which the aircraft are registered, including as part of the
airworthiness requirements, but also in other jurisdictions where the aircraft
operate. A number of jurisdictions including the United States have adopted, or
are in the process of adopting, noise regulations which ultimately will require
all aircraft to comply with the most restrictive currently applicable standards.
Some of the jurisdictions that impose these regulations restrict the future
operation of aircraft that do not meet Stage 3 noise requirements and prohibit
the operation of those aircraft in those jurisdictions. As 3.19% of our
portfolio by appraised value as of January 31, 2002 did not meet the Stage 3
requirements as of March 31, 2002, these regulations may adversely affect
Airplanes Group because our non-compliant aircraft will not be able to operate
in those jurisdictions and we may incur substantial costs to comply with the
Stage 3 requirements.

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

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

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

The FAA has issued an AD concerning insulation for the purpose of
increasing fire safety on MD-80 and MD-11 aircraft. As of March 31, 2002, we had
three MD-11 and 26 MD-80 aircraft, representing a total of 20.3% of our
portfolio by appraised value as of January 31, 2002. We will incur significant
costs in ensuring these aircraft comply with these standards. To date, we have
completed the modification of seven aircraft at a cost of $3.4 million. We
expect to complete the modification of eight aircraft by December 2002 at an
estimated cost of approximately $3.6 million and to modify the remaining 14
aircraft by December 2005 at an estimated cost of approximately $7.1 million.

The FAA has also issued an AD mandating the modification of affected
lapjoints on Boeing 737 aircraft when the aircraft has completed 50,000 cycles.
The estimated cost to implement this modification for each aircraft is
approximately $230,000 per aircraft. Based on the current cycles completed to
date by our 60 Boeing 737 aircraft, representing 34.14% of our portfolio by
appraised value as of January 31, 2002, our Boeing 737 aircraft are not likely
to require these modifications prior to 2007. However, we could incur
significant costs in the future in ensuring our Boeing 737 aircraft comply with
these standards, which could impact adversely our results of operations.

36

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

The Ground Proximity Warning System ("GPWS") is an avionics system, which
detects an aircraft's proximity to the earth. The FAA and the European Joint
Airworthiness Authorities have mandated the installation of an enhanced GPWS in
all aircraft by 2005. The enhanced version enables the system to correlate the
aircraft's current position with a database of obstructions in the horizontal
plane (high mountain peaks, buildings, antennae etc.). All new generation Airbus
and Boeing aircraft have GPWS and require only a software upgrade. 180 of our
aircraft will require the full modification, some of which will be completed
under cost sharing arrangement with lessees. The estimated cost to implement
this modification is $120,000 per aircraft.

THE LESSEES

As of March 31, 2002, our aircraft were on lease to 64 lessees in 33
countries throughout the world. See "-- Portfolio Information" for the countries
and regions where our lessees reside.

A number of our lessees are in a relatively weak financial position. As of
March 31, 2002, amounts outstanding for a period greater than 30 days in respect
of rental payments, maintenance reserves and other miscellaneous amounts due
under the leases (net of amounts in respect of default interest and cash in
transit) amounted to $11.5 million in respect of 19 lessees (who leased a
combined total of 58 aircraft representing 23.23% of our portfolio by appraised
value as of that date) and $10.8 million in respect of six former lessees. Of
the total $22.3 million, $5.7 million was in arrears for a period between 30 and
60 days, $3.0 million was in arrears for a period between 60 and 90 days and
$13.6 million was in arrears for a period greater than 90 days. Some of these
lessees have consistently been significantly in arrears in their respective
rental payments and some are known to be currently experiencing financial
difficulties.

As of March 31, 2002, in addition to the $22.3 million in respect of
payments past due more than 30 days, we had agreed to allow nine lessees to
defer rent, maintenance and miscellaneous payments totaling $16.5 million for
periods ranging from five months for one lessee in respect of $0.7 million and
up to 84 months for one lessee in respect of $9.2 million. In the past,
restructurings have typically involved delaying rental payments for periods of
up to 12 months and/or the reduction of current rentals usually in exchange for
extensions of the relevant leases. In addition, some restructurings have
involved forgiveness of amounts of past due rent, voluntary terminations of
leases prior to lease expiration, the replacement of aircraft with less
expensive aircraft and the arrangement of subleases from the lessee to another
aircraft operator. In other cases, it has been necessary to repossess aircraft
from lessees which have defaulted and re-lease the aircraft to other lessees.
While the servicer attempts to limit concessions, the current international
commercial aircraft market is characterized not only by a large number of weak
lessees, but also by overcapacity of available aircraft in every aircraft
category and restructuring of leases is often the only way to keep our aircraft
in use and earning revenues. The servicer is still pursuing negotiations with
some lessees and we expect further restructurings to be agreed with a consequent
adverse effect on operating revenues.

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

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

37

LATIN AMERICA

At March 31, 2002, lessees with respect to 26.79% of the aircraft by
appraised value as of January 31, 2002 operated in Latin America, principally
Brazil, Mexico, Colombia and Chile. The prospects for lessee operations in these
countries depend in part on the general level of political stability and
economic activity and policies in those countries. Future developments in the
political systems or economies of these countries or the implementation of
future governmental policies in these countries may materially affect these
lessees' operations.

Economic volatility may increase in these and other emerging markets in the
aftermath of the current global slowdown and the events of September 11, 2001,
which may cause further difficulties for our lessees.

Brazil. During 1999, Brazil experienced significant downturns in its
economy and financial markets, including large decreases in financial asset
prices and dramatic decreases in the value of its currency. While there has been
some stabilization in the Brazilian economy, any future general deterioration in
the Brazilian economy will mean that lessees may be unable to generate
sufficient revenues in Brazilian currency to pay rental payments in U.S. dollars
under the leases. At March 31, 2002, Airplanes Group leased 16 aircraft
representing 11.83% of our portfolio by appraised value as of January 31, 2002
to operators in Brazil. Accordingly, any future deterioration in the Latin
American economies, especially Brazil, could lead to a material decrease in
Airplanes Group's leasing revenues and an increase in default related costs.

At March 31, 2002, we had eight Fokker 100 aircraft, representing 2.74% of
our portfolio by appraised value as of January 31, 2002, on lease to a Brazilian
lessee that was party to a restructuring agreement with us which was signed in
2000 in respect of the leases for six Fokker 100 aircraft. Under the 2000
restructuring agreement, all arrears were to be paid with interest by December
31, 2003. At March 31, 2002, this lessee was current on all payments. The lessee
has also signed an agreement which provides for rental deferrals of 50% for the
period from September 2001 to June 2002, and rental deferrals of 35% from July
to December 2002, with repayment before the expiry of the current leases.

The Brazilian lessee of three MD-11 aircraft, representing 5.70% of our
portfolio by appraised value as of January 31, 2002, had negotiated with the
servicer rental reductions (including some forgiveness of past due amounts)
coupled with extensions of the leases. However, subsequently, the lessee
experienced further financial difficulties. Following additional discussions
with the servicer, agreement in principle has been reached with the lessee on a
restructuring that includes further lease extensions and deferrals. However,
this agreement is subject to a condition subsequent relating to the
restructuring of the ownership of the lessee. In the absence of the fulfilment
of this condition subsequent, we will have the right to terminate these leases.

In addition, in 1999, we entered into a restructuring agreement with
Transbrasil, a former lessee, under which it repaid a restructured amount of
approximately $1.9 million over 12 months. At March 31, 2002, Transbrasil had
arrears of $2.4 million, and the servicer is currently in negotiations with
Transbrasil regarding repayment. An accounting provision has been made against
our receivables for the excess of the arrears over the cash security held.

See "Item 3. Legal Proceedings" for details of legal proceedings involving
a Brazilian airline.

Argentina. On May 17, 2001, a lessee of two B737-200A aircraft
representing 0.24% of our portfolio by appraised value as of January 31, 2002
filed for protection from its creditors. The lessee continued to pay certain of
the rentals while under the protection of the bankruptcy courts and the security
in the form of a surety bond has been drawn and payment has been received. Since
March 31, 2002, the servicer has concluded the sale of these two aircraft to the
lessee.

Colombia. Colombia has recently suffered economically as a result of the
deterioration in the value of the Colombian peso and the resulting negative
impact on the Colombian economy. As of March 31, 2002, we leased 10 aircraft,
representing 6.56% of our portfolio by appraised value as of January 31, 2002,
to three Colombian lessees. Because of the continued weakness in the value of
the Colombian peso, as well as general deterioration in the Colombian economy,
these lessees may be unable to generate sufficient revenues in Colombian pesos
to pay the U.S. dollar denominated rental payments under the leases.

38

In particular, as of March 31, 2002, we leased six aircraft, representing
5.05% of our portfolio by appraised value as of January 31, 2002, to one of our
three Colombian lessees. On June 27, 2001, the Servicer signed a restructuring
agreement with the lessee including lease extensions, rental reductions and
deferrals. The lessee has continued to perform in line with this agreement.

During the year to March 31, 2002, one Colombian lessee of three DC8-71F
aircraft representing 1.30% of our portfolio by appraised value at January 31,
2002 agreed to extend the leases for two of the aircraft for a period of 18
months with a reduction of approximately 27% in lease rentals effective
immediately.

NORTH AMERICA

As of March 31, 2002, we had 24 aircraft, representing 10.81% of our
portfolio by appraised value as of January 31, 2002, on lease to ten U.S.
lessees, and eight aircraft, representing 9.32% of our portfolio by appraised
value as of January 31, 2002, on lease to one Canadian lessee. The commercial
aircraft industry in North America is highly sensitive to general economic
conditions. Since air travel is largely discretionary, the industry has suffered
severe financial difficulties during economic downturns. Over the last several
years, nearly half of the major North American passenger airlines have entered
into plans of reorganization or sought protection through bankruptcy, insolvency
or other similar proceedings and several major U.S. airlines have ceased
operations. The general downturn in the economy combined with the temporary
suspension of flights within and into the U.S. after September 11, 2001,
together with an immediate reduction in passenger numbers and flight schedules
has left many U.S. airlines in a weakened financial condition.

One U.S. lessee leases ten DC8-71F aircraft, representing 4.12% of our
portfolio by appraised value at January 31, 2002. The servicer, following
discussions with the lessee, has negotiated an extension of the leases in
respect of seven of the aircraft for an average period of 21 months with a
reduction of approximately 32% in lease rentals. Two aircraft will be returned
fifteen months before the original lease expiry date and one lease remains
unchanged.

On August 13, 2001, a U.S. lessee of three DC8-71F freighter aircraft,
representing 1.45% of our portfolio by appraised value as of January 31, 2002
announced that it was suspending flight operations as a result of safety
concerns in respect of the lessee. The lessee has continued to meet its
obligations under the leases. The servicer is currently in discussions with the
lessee regarding the early return of these aircraft which currently have lease
expiry dates between December 2003 and July 2004.

At March 31, 2002, the servicer was in discussions with one U.S. lessee of
two B737-200A aircraft, representing 0.3% of our portfolio by appraised value at
January 31, 2002, regarding the lessee's arrears. The lessee had sought a
deferral of repayments and a reduction in rentals. During May 2002, these
aircraft were redelivered by the lessee. The servicer continues to discuss the
settlement of arrears with the lessee.

On January 10, 2001, TWA, one of our former lessees, filed for Chapter 11
bankruptcy protection in the U.S. TWA had leased two aircraft from Airplanes
Group, which represented 2.40% of our aircraft by appraised value as of January
31, 2002. On April 9, 2001, American Airlines assumed the leases in respect of
these aircraft subject to certain amendments, including an extension of the
lease term by 11 years in respect of the MD-83 aircraft and a reduction of the
lease term by 4.5 years in respect of the B767-300ER aircraft and a reduction in
monthly rentals by 26.5% in respect of the MD-83 aircraft and by 6% in respect
of the B767-300ER aircraft.

ASIA & FAR EAST

As of March 31, 2002, 25 aircraft representing 13.39% of our portfolio by
appraised value as of January 31, 2002 were on lease to 12 lessees in this
region. The commercial aircraft industry in Asia was adversely affected by the
severe economic and financial difficulties experienced in the region during 1998
and 1999. Since 1999, there has been some stabilization and recovery in the
economies of this region.

During the year to March 31, 2000, a rescheduling agreement was signed with
a Philippine lessee which committed to pay its outstanding arrears of $2.7
million over the 36 months to September 2002. As of the date of this Form 10-K,
the lessee has paid in accordance with the rescheduling agreement.

39

EUROPE (EXCLUDING CIS)

As of March 31, 2002, 53 aircraft representing 32.07% of our portfolio by
appraised value as of January 31, 2002 were on lease to 19 lessees in this
region. The commercial aircraft industry in European countries, as in the rest
of the world generally, is highly sensitive to general economic conditions.
Because a substantial portion of airline travel (business and especially
leisure) is discretionary, the industry has tended to suffer severe financial
difficulties during economic downturns. Accordingly, the financial prospects for
European lessees can be expected to depend largely on the level of economic
activity in Europe generally and in the specific countries in which these
lessees operate. The current downturn, as exacerbated by the events of September
11, 2001 and the subsequent and continuing economic and political fallout, or
any future recession or other worsening of economic conditions in one or more of
these countries, may have a material adverse effect on the ability of European
lessees to meet their financial and other obligations under the leases. A weak
euro or high fuel prices may also adversely affect the financial condition of
our European lessees. In addition, commercial airlines in Europe face, and can
be expected to continue to face, increased competitive pressures, in part as a
result of the continuing deregulation of the airline industry by the EU. There
can be no assurance that competitive pressures resulting from such deregulation
will not have a material adverse impact on the operations of our European
lessees.

Turkey. As of March 31, 2002, 10 aircraft, representing 7.44% of our
portfolio by appraised value as of January 31, 2002, were leased to three
lessees in Turkey. Any weakness in the value of the euro, the principal currency
in which the Turkish airlines receive their revenues, and of the Turkish lira
may affect the ability of these lessees to meet the U.S. dollar denominated
rental and other payments due under the leases. During the year ended March 31,
2002, a Turkish lessee of five B737-400 aircraft and two B737-500 aircraft,
representing 5.56% of our portfolio by appraised value at January 31, 2002,
signed an extension of the leases in respect of six of those aircraft, for an
average of 23 months from lease expiry at rates approximately 30% below the then
current rentals.

The servicer also concluded discussions with one Turkish lessee of one A300
aircraft, representing 0.41% of our portfolio by appraised value as of January
31, 2002, regarding payment arrears, which resulted in a deferral of outstanding
obligations which are to be repaid over a period of 10 months and a change from
a fixed rental to a rental based on aircraft usage.

Spain. As of March 31, 2002, following negotiations with the servicer, one
Spanish lessee, representing 3.34% of our portfolio by appraised value at
January 31, 2002, had signed a restructuring of its payment obligations under
its leases with us, which includes an extension of certain of the leases to
compensate for a reduction in lease rentals of approximately 15%. Further
amendments to this restructuring, including further rental reductions for the
winter period, have also been agreed.

Italy. One Italian lessee of two B737-300 aircraft and two B737-400
aircraft at March 31, 2002 representing 3.08% of our portfolio by appraised
value at January 31, 2002, took delivery of the two B737-400 aircraft during the
three month period ended December 31, 2001. In conjunction with this delivery,
the lease rentals on both B737-300 aircraft were reduced by 14% for the
remaining period of the leases.

Macedonia. During the year ended March 31, 2002, we agreed to the early
redelivery of one MD-83 aircraft, representing 0.48% of our portfolio by
appraised value as of January 31, 2002, by one Macedonian lessee.

Czech Republic. During the year ended March 31, 2002, a Czech Republic
lessee of one B737-400 aircraft, representing 0.84% of our portfolio by apprised
value at January 31, 2002 was granted rental concessions under its lease
agreement. The rental was changed from a fixed rental to a power by the hour
(PBTH) rental for six months with a minimum rental 60% below the previous fixed
rental.

OTHER

Kazakhstan. One lessee of two B737-200A aircraft in Kazakhstan,
representing 0.23% of our portfolio by appraised value as of January 31, 2002,
was in arrears at March 31, 2002. The servicer has concluded discussions with
the lessee regarding the extension of both leases with a 45% reduction in
rentals, effective immediately, and the repayment of all arrears over a five
month period.

40

PURCHASE OPTIONS

As of March 31, 2002, eight lessees with respect to 19 aircraft,
representing 4.79% of our portfolio by appraised value as of January 31, 2002,
held options to purchase aircraft at various dates between 2002 and 2006 at
prices generally at or above their estimated appraised value at the exercise
date. Since March 31, 1998, one lessee has exercised its option to purchase
seven B737-200A aircraft, one of which was delivered on January 15, 2000, three
of which were delivered on January 5, 2001, one of which was delivered on April
30, 2001 and two of which were delivered on June 15, 2001. At March 31, 2002,
one lessee had options to purchase two aircraft, representing 0.87% of our
portfolio by appraised value as of January 31, 2002, at prices below estimated
appraised value at the exercise date. For the purposes of this paragraph, the
estimated appraised value has been arrived at by deducting the estimated
depreciation (as calculated by Airplanes Group's existing depreciation policy)
from March 31, 2002 to the option exercise date from the appraised value of each
aircraft. There is a risk that the purchase prices may be less than the
proportionate share of the unpaid principal of the notes and certificates
allocable to the aircraft being purchased. If those options are exercised, there
could be additional reductions in the amount, or a delay in the timing, of
payments on the notes and certificates.

COMMERCIAL OPPORTUNITIES FOR OUR MD-11 AIRCRAFT

As of March 31, 2002, we leased three MD-11 aircraft, representing 5.70% of
our portfolio by appraised value as of January 31, 2002, to a Latin American
lessee. These leases are expected to expire between March and December 2004.
Because the market for re-leasing these aircraft in their current passenger
configuration is currently, and is expected to remain, very weak, we are
examining all possibilities in respect of these aircraft, including, subject to
the restrictions in our indentures, selling them or converting them to freighter
aircraft. The current market value of these aircraft is such that we would not
be able to sell the aircraft at prices that would meet the indenture
requirements. Although there may be greater demand for converted freighter MD-11
aircraft than passenger MD-11 aircraft, conversion into freighter aircraft would
involve substantial cash expenditures by us.

AIRCRAFT SALES

Based on the recommendations of the servicer and the administrative agent,
the board of directors of Airplanes Limited and the controlling trustees of
Airplanes Trust have identified a number of aircraft types for potential sale so
long as the terms of a proposed sale for a particular aircraft are commercially
advantageous to Airplanes Group and the sale complies with the requirements of
the indentures. The aircraft types which have been identified for potential sale
are B737-200, B727-200, DC-9, A300 and turboprop aircraft. At March 31, 2002,
there was a total of 58 aircraft of these aircraft types in our portfolio
representing 9.21% of our portfolio by appraised value as of January 31, 2002.
Since June 1999, we have sold sixteen aircraft of these aircraft types for an
aggregate of $38 million (including sales proceeds and capital lease bullet
payments), which has been applied in accordance with the priority of payments
provided under the indentures. Since March 31, 2002, one DC9-51 aircraft and two
B737-200A aircraft have been sold and a non binding letter of intent has been
signed for the sale of one B737-200A aircraft.

ITEM 2. PROPERTIES

Airplanes Group has no ownership or leasehold interest in any real
property.

Airplanes Limited's registered and principal office is located at 22
Grenville Street, St. Helier, Jersey, JE4 8PX, Channel Islands and its telephone
number is 011-44-1534-609000.

Airplanes Trust's principal office is located at 1100 North Market Street,
Rodney Square North, Wilmington, Delaware 19890-0001, care of Wilmington Trust
Company and its telephone number is 1-302-651-1000.

For a description of Airplanes Group's interest in other property, see
"Item 1. Business -- The Aircraft, Related Leases and Collateral."

41

ITEM 3. LEGAL PROCEEDINGS

Following the default by the Brazilian airline VASP under its leases, GPA
Group (now known as debis AirFinance Ireland) sought and obtained in November
1992 a preliminary injunction for repossession of 13 aircraft and three engines,
and subsequently repossessed these aircraft and engines. Airplanes Group
acquired seven of these aircraft from GPA Group in March 1996, four of which
remain in our portfolio, representing 1.92% of our portfolio by appraised value
as of January 31, 2002. In December 1996, the High Court in Sao Paolo, Brazil,
found in favor of VASP on appeal and granted it the right to the return of the
aircraft and engines or the right to seek damages against debis AirFinance
Ireland. debis AirFinance Ireland challenged this decision and in January 2000,
the High Court granted a stay of the 1996 judgment while it considered debis
AirFinance Ireland's rescission action. In April 2002, the High Court found in
favour of debis AirFinance Ireland's recission action and overturned the 1996
judgement in favour of VASP. VASP may seek to appeal this decision of the High
Court. A risk of repossession would only arise if VASP were successful on appeal
in seeking repossession of the aircraft and the aircraft were located in Brazil.
Although none of our lessees which lease any of the relevant aircraft is based
in Brazil, some of them may operate those aircraft into Brazil from time to
time. debis AirFinance Ireland will continue to actively pursue all available
courses of action, including defending appeals to superior courts which may seek
to overturn the High Court decision of April 2002.

AeroUSA and AeroUSA 3 have in the past filed U.S. federal consolidated tax
returns and certain state and local tax returns with debis AirFinance, Inc.
(then known as AerFi, Inc.) and its subsidiaries. There are ongoing tax audits
by certain state and local tax authorities with respect to tax returns
previously reported by debis AirFinance, Inc. and its subsidiaries. debis
AirFinance believes that none of these audits will have a material adverse
impact upon the liquidity, results of operations or the financial condition of
AeroUSA.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

None.

42

PART II

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Airplanes Limited has an authorized share capital of 10,000 ordinary
shares, with $1 par value per share. 30 ordinary shares of Airplanes Limited
have been issued and are outstanding. The ordinary shares of Airplanes Limited
are not listed on any national exchange or traded in any established market.
These shares are held by Juris Limited and Lively Limited, each a Jersey limited
liability company, as bare nominees for the benefit of the following three
"CHARITABLE TRUSTS":

Under its articles of association, Airplanes Limited pays an annual fixed
cumulative preferential dividend of $4,500 (the "ANNUAL DIVIDEND AMOUNT") to the
holders of its capital stock, but only when it has distributable profits which
may lawfully be paid as dividends and provided that no event of default has
occurred and is continuing.

Mourant & Co. Trustees Limited, as trustee of each of the three charitable
trusts, has agreed pursuant to a shareholders' agreement with Airplanes Limited
and the indenture trustee not to transfer any part of the capital stock of
Airplanes Limited without the prior written approval of the indenture trustee
and all the directors of Airplanes Limited, unless the transferee is a trustee
of a substantially identical charitable trust and enters into a substantially
identical shareholders' agreement.

ITEM 6. SELECTED COMBINED FINANCIAL DATA

The selected combined financial data set out below for each of the years in
the five year period ended March 31, 2002 have been extracted or derived from
the financial statements of Airplanes Group, which have been audited by KPMG,
independent chartered accountants. These financial statements have been prepared
in accordance with generally accepted accounting principles in the United
States.

The selected combined financial data set forth below combine the operating
results, assets, liabilities and cash flows of Airplanes Limited and Airplanes
Trust. The separate balance sheets, statements of operations, statements of
comprehensive income/(loss), statements of changes in shareholders' deficit/net
liabilities and statements of cash flows, and notes thereto, of Airplanes
Limited and Airplanes Trust are contained in the financial statements included
in "Item 14 -- Exhibits, Financial Statement Schedules and Reports on Form 8-K."

43

The directors of Airplanes Limited and the controlling trustees of Airplanes
Trust believe that a combined presentation is most appropriate because:

- the assets of Airplanes Limited and Airplanes Trust are managed on the
basis of one combined aircraft fleet, and

- each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their
respective notes.

You should note that the notes and the guarantees comprise obligations of two
different legal entities owning different assets. However, the notes and
guarantees have been structured in the indentures to ensure that no payments are
made on a junior class of notes or guarantees of Airplanes Trust before all
amounts due and payable on a more senior class of notes or guarantees of
Airplanes Limited have been paid, and no payments are made on a junior class of
notes or guarantees of Airplanes Limited before all amounts due and payable on a
more senior class of notes or guarantees of Airplanes Trust have been paid.

Aircraft assets are stated on the "predecessor cost basis," that is,
reflecting debis AirFinance Ireland's historical cost less accumulated
depreciation and impairment provisions. The difference between the predecessor
cost basis and the amount of Airplanes Group's indebtedness is a significant
component of total shareholders' deficit in the combined balance sheet data. The
statements below are restated without provisions for loss making leases as
further detailed in the notes to the financial statements at note 4.

COMBINED STATEMENT OF OPERATIONS DATA(1)

COMBINED BALANCE SHEET DATA(1)

44

COMBINED STATEMENT OF CASH FLOWS(1)

OTHER DATA(1)

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

(1) The financial statements of Airplanes Group are stated in U.S. dollars
which is the principal operating currency of Airplanes Group and the
aviation industry.

(2) Revenues include maintenance reserve receipts. See Note 14 to the financial
statements.

(3) Net interest expense is significantly higher than cash paid in respect of
interest in all periods reflecting the high interest rate accruing on the
class E notes (20% adjusted for inflation) relative to the lower amount of
cash interest payable on the class E notes for so long as the other classes
of notes remain outstanding. Net interest expense is stated after crediting
interest income of $16 million in 1998, $14 million in 1999, $13 million in
2000, $14 million in 2001 and $6 million in 2002. In the year ended March
31, 2002 Net interest expense includes an adjustment of US$(5) million in
relation to the effect of change in accounting principle on the adoption of
SFAS 133.

(4) Deficiency of combined earnings after combined fixed charges represents the
amount by which Airplanes Group's loss before income taxes and fixed
charges exceeded fixed charges. Fixed charges consists of interest expense.
Because our fixed charges exceeded earnings for all periods presented, a
ratio of earnings to fixed charges is not presented.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

The following discussion and analysis is based primarily on the combined
operating results of Airplanes Limited and Airplanes Trust and not on their
results reported as individual entities. You should note that the notes and the
guarantees comprise obligations of two different legal entities owning different
assets. The directors and the controlling trustees believe that a combined
discussion is the most appropriate basis of presentation because:

- Airplanes Limited and Airplanes Trust are not intended to be regarded as
separate businesses but rather on the basis of one combined aircraft
fleet, and

- each of Airplanes Limited and Airplanes Trust has fully and
unconditionally guaranteed the performance of the other under their
respective notes.

The notes and guarantees have been structured in the indentures to ensure that
no payments are made on a junior class of notes of Airplanes Trust or Airplanes
Limited, as the case may be, before all amounts due and payable on

45

a more senior class of notes of Airplanes Limited or Airplanes Trust,
respectively, have been paid pursuant to the terms of the more senior classes of
notes or the guarantees of these notes.

Substantially all of Airplanes Group's future business is expected to
consist of aircraft operating lease activities. Airplanes Group may also engage
in aircraft sales subject to specified limitations and guidelines. Airplanes
Group's revenues and operating cash flows are determined by a number of
significant factors, including:

- trading conditions in the civil aviation industry and, in particular,
the market for aircraft on operating leases,

- the mix, relative age and popularity of the various aircraft types in
our portfolio, and

- Airplanes Group's financial resources and liquidity position relative to
its competitors who may possess substantially greater financial
resources.

Except to the extent that the strength of the U.S. dollar against some
local currencies may adversely affect the ability of some of our lessees who
operate in those currencies to pay us, the effect of changes in currency rates
on Airplanes Group is minimal because Airplanes Group conducts its business
almost entirely in U.S. dollars.

RECENT DEVELOPMENTS

OVERVIEW

We have continued to suffer from a very difficult business environment for
the commercial aircraft industry in the light of global economic conditions, as
exacerbated by the terrorist attacks of September 11, 2001 and the subsequent
and continuing political and economic fallout. The resulting reduction in
passenger numbers and consequential reduction in flight schedules by airlines,
has caused a decline in demand for aircraft. Demand for freighter aircraft has
also fallen. Some carriers have filed for bankruptcy or consolidated, whilst
others, including many of our lessees, have suffered large losses or face severe
financial difficulties. Oversupply of aircraft has resulted in increased
aircraft downtime, aircraft being parked, a fall in market value of aircraft
(especially older technology and less fuel-efficient aircraft or models no
longer in production) and lower lease rates throughout the industry. We have
ourselves experienced increased time between redelivery and re-leasing of
aircraft, a decline in lease rates upon re-leasing or extensions of leases,
requests from certain of our lessees to restructure their leases and/or allow
rental holidays, deferrals or early returns of aircraft, and a decline in sales
prices for our aircraft. Oil prices are liable to be volatile. Additionally, it
has been difficult and expensive for lessees to obtain the level of insurance
coverage required under the leases, and in many cases, they rely on short-term
government solutions. If these are not renewed and the insurance market does not
provide required coverage, it may be necessary for aircraft to be grounded. In
addition, we currently expect new ADs to be issued to improve security on
aircraft, the cost of compliance with which, to the extent that they are not the
responsibility of lessees under their leases or if the aircraft are not
currently on lease, will be our responsibility.

RESTRUCTURINGS

We have already seen a substantial number of rental restructurings,
typically involving the rescheduling of rental payments over a specified period
and/or the reduction of current rentals usually in return for extensions of the
relevant leases. These arrangements can also include forgiveness of amounts in
respect of rental arrears. While the servicer attempts to limit concessions, the
current worldwide commercial aircraft market is characterized not only by a
large number of weak lessees, but also by overcapacity of available aircraft in
almost every aircraft category and restructuring of leases is often the only way
to keep our aircraft in use and earning revenues. The servicer is still pursuing
negotiations with certain lessees and we expect further restructurings to be
agreed with a consequential adverse effect on lease rates and revenues.

46

AIRCRAFT APPRAISED VALUES

There has been a decline of 10.15% in the appraised value of our fleet in
the year to January 31, 2002, which is $143m greater than the decline assumed in
our 2001 Base Case assumptions. The appraised values are based upon the value of
the aircraft at normal utilization rates in an open, unrestricted and stable
market, and take into account long-term trends, including current expectations
of particular models becoming obsolete more quickly, as a result of airlines
switching to different models, or lease values for aircraft declining more
rapidly than previous predictions. As a theoretical value, the appraised value
is not indicative of market value and thus there is no guarantee that we would
obtain the appraised value upon sale of any aircraft, since we might sell at a
low point in the business cycle, and since appraised values are forward-looking.
If the current oversupply of aircraft continues longer term, given the age of
our fleet, certain of our aircraft may become obsolete significantly earlier
than the useful life expectancy assumed in the 2001 Base Case assumptions, which
would negatively impact appraised values further.

PERFORMANCE

The performance of our aircraft portfolio has not enabled us to meet either
the 1996 Base Case or the 2001 Base Case assumptions. In light of lease
restructurings and a weak leasing market generally, we are generating revenues
at significantly lower levels than we had expected and at levels which we
believe may be inadequate to pay scheduled principal and interest payments on
the class B notes and interest on the class C and D notes in the latter half of
2003.

Specifically, as a result of the greater than expected depreciation of the
aircraft in our portfolio, we have been required to pay class A principal
adjustment amount to the extent of available cash flows in April and May 1998
and since February 1999. Since class A principal adjustment amount ranks ahead
of scheduled principal payments on the class C and D notes, we have been unable
to make certain scheduled principal payments on the class C and D notes since
April 1999, and, since April 2000, we have not paid any scheduled principal on
the class C and D notes or paid any minimum interest on the class E notes.

We are currently ahead of the required class A minimum principal payment
schedule to the extent of $110 million because of accelerated principal payments
resulting from payment of class A principal adjustment amounts. Accordingly, no
payments are currently due in respect of the minimum principal amount on the
class A notes. However, in light of our current and expected cash performance,
we expect that we will not be able to continue paying class A principal
adjustment amount in full and therefore, in time, we will no longer be ahead of
the required class A minimum principal payment schedule. We expect this to occur
in the latter half of 2003, when we will have to recommence payments of minimum
principal on the class A notes. Since minimum principal on the class A notes
ranks ahead of interest and minimum principal on the class B notes and interest
on the class C and class D notes in the order of priority, and, given our
current expectations as to our future performance, we believe that our cash
flows may be inadequate to pay interest and minimum principal on the class B
notes and interest on the class C and D notes in the latter half of 2003.

Our actual results may differ from our current expectations. However, such
differences as may arise are only likely to affect the timing of when we may
cease to pay interest and minimum principal on the class B notes and interest on
the class C and D notes.

In the event that cash flows are inadequate to pay interest and minimum
principal on the class B notes and interest on the class C and D notes, it is
likely to be a long period of time before we will be able to resume making any
payments on these notes. Further, in these circumstances, we may be unable to
repay in full principal on some or all of these classes of notes by their final
maturity date. The more junior the class of notes is in the order of priority,
the greater the risk that we may be unable to repay in full principal on that
class of notes by its final maturity date. In addition, to the extent that we do
resume making payments on these notes, payments will be made according to the
priority of payment, commencing with the then most senior class and only making
payments on more junior classes to the extent of available cash flows. A failure
to make payments on a class of notes will result in failure to make payments on
the corresponding class of certificates.

47

IMPAIRMENT

We have reviewed our fleet for impairment in accordance with Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long Lived Assets ("SFAS 144"). Under SFAS 144, Airplanes Group's
policy is to recognize an impairment charge when an asset's carrying value is
greater than its net undiscounted expected future cash flows. The amount of the
charge is the difference between the asset's carrying value and its fair market
value. We have determined that the estimated net future cash flows to be
generated by certain of our aircraft, in particular our B767, F100 and DC8-71F
fleets, will be less than their carrying value. These aircraft have been written
down to their fair value, as estimated based on the expected net discounted
future cash flows to be generated by the aircraft over their estimated remaining
useful lives. The impairment provision of $292 million in the year to March 31,
2002 relates primarily to those three aircraft types and reflects poor perceived
future lease prospects for these aircraft.

RATINGS

On December 12, 2001, Moody's announced a downgrade of our class C notes
from Baa2 to Ba3 and a downgrade of the class D notes from Ba2 to B2. On
December 21, 2001 Fitch downgraded the class C notes from BBB to BB and the
class D notes from BB to B and left our class A to D certificates on credit
watch negative. On March 25, 2002, Standard & Poor's downgraded our class C
certificates from BBB to BB+ and our class D certificates from BB to B-.
Standard & Poor's affirmed the rating on the class A and B certificates but left
the class C and D certificates on credit watch negative. Most recently on June
24, 2002, Fitch further downgraded the class C certificates from BB to B+ and
the class D certificates from B to CCC and downgraded the class A certificates
from AA to A+ and the class B certificates from A to BBB+. Given the continuing
difficulties in the aircraft industry and their impact on the factors which
determine our revenues, there can be no assurance that the rating agencies will
not further downgrade any class of our certificates.

The ratings of the certificates address the likelihood of the timely
payment of interest and the ultimate payment of principal and premium, if any,
on the certificates. A rating is not a recommendation to buy, sell or hold
certificates because ratings do not comment as to market price or suitability
for a particular investor. A rating may be subject to revision, suspension or
withdrawal at any time by the assigning rating agency.

REMARKETING

At March 31, 2002, we had 32 aircraft scheduled to be remarketed before
December 31, 2002. These comprise three B737 300s/400s, four B727/B737-200As,
six DHC8s, four MD83s, four DC8s, one B767, one A300, one A320, three
Metro-IIIs, three DC9s, one ATR42 and one B757-200 aircraft. Furthermore, in
light of existing negotiations with certain lessees, we expect we will also
experience early redeliveries of aircraft. As a result of the current oversupply
of aircraft in the market place, we anticipate that we will experience
difficulties in placing certain of these aircraft. To the extent that we suffer
significant delays in placing these aircraft, we will incur substantial downtime
and new lease rates are likely to be lower, and in some cases materially lower,
than current lease rates.

CRITICAL ACCOUNTING POLICIES

Airplanes Group determined the critical principles by considering
accounting policies that involve the most subjective decisions or assessments.
The most critical accounting policies are those related to depreciation methods
and impairment of aircraft values since both of these involve elements which
require Airplanes Group to make assumptions as to matters that are highly
uncertain at the time the estimates are made.

48

DEPRECIATION:

Aircraft are recorded at cost and depreciated on a straight line basis over
the estimated life to their estimated residual value. The determinations of
useful life and residual value are critical to the calculation of depreciation.
The estimates of residual values are generally 15% of cost and the useful lives
are as follows:

The estimates of useful lives and residual values are reviewed at least
annually.

IMPAIRMENT:

Aircraft are periodically reviewed for impairment in accordance with SFAS
144. An impairment loss is recognized when the fair value of the undiscounted
expected future cash flows of the aircraft is less than its carrying value. The
fair value of the aircraft is generally based on independent appraisals of the
aircraft.

Under the indentures, Airplanes Group is required to obtain appraisals at
least once each year and in any case no later than March 1 of each year from at
least three independent appraisers. The appraisals assume, among other things,
that the aircraft are utilized normally in an open, unrestricted and stable
market. Short term fluctuations in the market place are disregarded and it is
assumed that there is no necessity either to dispose of a significant number of
aircraft simultaneously or to dispose of aircraft quickly.

In certain situations the impairment loss is determined based on the
estimated discounted future cash flows of an aircraft. The appraised values are
determined based on the assumption that there is an "open unrestricted stable
market environment with a reasonable balance of supply and demand." Since this
assumption may not be appropriate to certain aircraft, estimated discounted cash
flows are sometimes used as a more accurate indication of fair value. The
estimated discounted future cash flows assume, among other things, market rates
at the end of the existing lease term, other lease costs, downtime and weighted
average cost of capital.

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2002 COMPARED WITH YEAR ENDED
MARCH 31, 2001.

Airplanes Group's results for the year ended March 31, 2002 reflected a
continuation of the already apparent difficult trading conditions in the
aviation industry. The events of September 11, 2001 as discussed above at
"Recent Developments," exacerbated an already difficult situation and have had a
marked impact on the results for the year to March 31, 2002 in particular giving
rise to a decline in the fair value of the aircraft and the resulting
requirement for impairment provisions and to lessees seeking a variety of rental
restructurings including rental reductions and deferrals. These factors are
expected to have a continuing significant impact on Airplanes Group's results in
future periods.

Overall, Airplanes Group generated $120 million in cash from operations in
the year to March 31, 2002 compared to $105 million in the year ended March 31,
2001. The increase in cash generated from operations in the year ended March 31,
2002 is primarily attributable to net maintenance inflows, lower LIBOR rates on
the notes and a reduction in other lease costs. This was offset to some extent
by an increased level of lease restructurings, greater aircraft downtime, lower
interest rates on floating rate leases and a reduction in the number of aircraft
on lease as a result of previous aircraft sales. There was a net loss after
taxation for the year ended March 31, 2002 of $695 million (Airplanes Limited:
$623 million; Airplanes Trust: $72 million) compared to a net loss after
taxation for the year ended March 31, 2001 of $333 million (Airplanes Limited:
$316 million; Airplanes Trust: $17 million). The increase in the net loss for
the period was primarily attributable to impairment provisions, a decrease in
lease revenue, and additional interest being charged on accrued but unpaid class
E note interest.

49

LEASING REVENUES

Leasing revenues (which include maintenance reserve receipts which
Airplanes Group receives from certain of its lessees) for the year ended March
31, 2002 were $410 million (Airplanes Limited: $382 million; Airplanes Trust:
$28 million) compared with $471 million (Airplanes Limited: $432 million;
Airplanes Trust: $39 million) for the year ended March 31, 2001. The decrease in
2002 was primarily attributable to a reduction in lease revenues due to an
increased level of lease restructurings, greater aircraft downtime and, to a
lesser extent, lower interest rates on floating rate leases, a greater number of
off-lease aircraft during the year ended March 31, 2002 and the reduction in the
number of aircraft on lease in the year ended March 31, 2002 as a consequence of
previous aircraft sales. At March 31, 2002, Airplanes Group had 180 of its 186
aircraft on lease (Airplanes Limited: 168 aircraft; Airplanes Trust: 12
aircraft) compared to 187 of its 193 aircraft on lease (Airplanes Limited: 171
aircraft; Airplanes Trust: 16 aircraft) at March 31, 2001.

IMPAIRMENT PROVISION

Aircraft carrying values are periodically assessed for impairment in
accordance with SFAS 144. The statement requires the recognition of an
impairment when an assets carrying value is greater than its net undiscounted
expected future cash flows. Following receipt of the January 2002 appraised
values (see "Item 1 -- Business -- The Aircraft, Related Leases and Collateral
- -- Appraisals") and consideration of the estimated future cash flows to be
generated by our aircraft, an SFAS 144 assessment resulted in the requirement
for an impairment provision of $292 million (Airplanes Limited: $245 million;
Airplanes Trust: $47 million) in the year ended March 31, 2002.

DEPRECIATION AND AMORTIZATION

The charge for depreciation and amortization in the year ended March 31,
2002 amounted to $159 million (Airplanes Limited: $146 million; Airplanes Trust:
$13 million) compared with $170 million (Airplanes Limited: $154 million;
Airplanes Trust: $16 million) for the year ended March 31, 2001. The reduced
charge in the year ended March 31, 2002, resulted from the reduced depreciable
value of the fleet following the impairment provision created in the quarter
ended December 31, 2001.

AIRCRAFT SALES

Sales revenues of $5 million (Airplanes Limited: $5 million; Airplanes
Trust; $Nil) in respect of the sale of three B737-200A aircraft and one DC9-51
aircraft were received in the year ended March 31, 2002. The net book value of
the aircraft sold was $2 million (Airplanes Limited: $2 million, Airplanes Trust
$Nil) in the year ended March 31, 2002. Sales revenues of $21 million (Airplanes
Limited: $8 million, Airplanes Trust: $13 million) in respect of the sale of the
airframe from an A300 aircraft, the sale of four engines from two A300 aircraft,
the airframes of which had been sold separately and the sale of one B737-200A
aircraft were received in the year ended March 31, 2001. The net book value of
the aircraft sold was $14 million (Airplanes Limited: $4 million, Airplanes
Trust: $10 million) in the year ended March 31, 2001.

NET INTEREST EXPENSE

Net interest expense was $614 million (Airplanes Limited: $559 million;
Airplanes Trust: $55 million) in the year ended March 31, 2002 compared to $536
million (Airplanes Limited: $487 million; Airplanes Trust: $49 million) in the
year ended March 31, 2001. The increase in the amount of interest charged was
primarily due to additional interest charged on accrued but unpaid class E note
interest of $101 million offset by lower average debt and interest rates and a
gain on the sale of swaptions of $9 million in the year ended March 31, 2002.

The weighted average interest rate on the class A, B, C and D notes (taking
into account the interest rate swaps entered into by Airplanes Group and the
class E minimum interest amount but excluding the class E supplemental interest
amount and the remainder of the class E adjusted interest) during the year ended
March 31, 2002 was 7.18% and the average debt in respect of the class A, B, C
and D notes outstanding during the year was $2,797 million. The class E notes
accrue interest at a rate of 20% per annum (as adjusted by reference to the U.S.
consumer price index, effective March 28, 1996). The weighted average interest
rate on the class A, B, C
50

and D notes (also taking into account the interest rate swaps entered into by
Airplanes Group and the class E minimum interest amount but excluding the class
E supplemental interest amount and the remainder of the class E adjusted
interest) during the year ended March 31, 2001 was 7.669% and the average debt
in respect of the class A, B, C and D notes outstanding during the year was
$2,984 million.

The difference for the year ended March 31, 2002 in Airplanes Group's net
interest expense of $614 million (Airplanes Limited: $559 million; Airplanes
Trust: $55 million) and cash paid in respect of interest of $186 million
(Airplanes Limited: $169 million; Airplanes Trust: $17 million) is substantially
accounted for by the fact that interest on the class E notes is accrued but
unpaid.

Net interest expense is stated after deducting interest income earned
during the relevant year. In the year ended March 31, 2002, Airplanes Group
earned interest income (including lessee default interest) of $6 million
(Airplanes Limited: $6 million; Airplanes Trust: $Nil) compared with $14 million
in the year ended March 31, 2001 (Airplanes Limited: $14 million; Airplanes
Trust: $Nil).

BAD DEBT PROVISIONS

Airplanes Group's practice is to provide specifically for any amounts due
but unpaid by lessees based primarily on the amount due in excess of security
held and also taking into account the financial strength and condition of a
lessee and the economic conditions existing in the lessee's operating
environment. While a number of Airplanes Group's lessees failed to meet their
contractual obligations in the year ended March 31, 2002, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees, the credit exposure with regard to certain other
carriers improved in the year. Overall, there was a net charge of $3 million in
respect of bad and doubtful debts (Airplanes Limited: $2 million; Airplanes
Trust: $1 million) in the year ended March 31, 2002, compared with a net charge
of $7 million for the year ended March 31, 2001 (Airplanes Limited: $5 million;
Airplanes Trust: $2 million). The net charge in the year ended March 31, 2002
was primarily as a result of provisions required in respect of two Colombian
lessees, one Brazilian lessee and one U.S. lessee.

LOSS-MAKING LEASE PROVISIONS

Prior to the fourth quarter of the year ended March 31, 2002, we deemed
lease agreements to be "loss making" in circumstances where the contracted
rental payments were insufficient to cover the depreciation and allocated
interest attributable to the aircraft plus certain direct costs, such as legal
fees and registration costs, attributable to that lease over its term. For these
purposes, interest was allocated to individual aircraft based on the weighted
average interest cost of the principal balance of the notes and the class E
notes (excluding, in the case of the class E notes, the element of interest
which is payable only in the event that the principal amount of all the notes is
repaid). We have now determined that this provision for loss making leases and
related reserve was not appropriate under authoritative accounting literature
and we have therefore eliminated such provision. All prior periods presented in
our financial statements have been restated to reflect this change.

This change resulted in an increase/(decrease) in net loss for the year
ended March 31, 2001 of $(17) million (Airplanes Limited: $(17) million;
Airplanes Trust: $Nil) and decreased net liabilities as of April 1, 1999 of $35
million (Airplanes Limited: $34 million; Airplanes Trust: $1 million). It also
resulted in a net increase/ (decrease) in net loss for the three month periods
ended June, September and December 2001 of $1 million (Airplanes Limited: $1
million; Airplanes Trust: $Nil); $16 million (Airplanes Limited: $16 million;
Airplanes Trust; $Nil) and $4 million (Airplanes Limited: $5 million; Airplanes
Trust: $(1) million), respectively.

OTHER LEASE COSTS

Other lease costs, comprising mainly a transfer to the provision for
maintenance and aircraft related technical expenditure associated with
remarketing the aircraft, in the year ended March 31, 2002 amounted to $73
million (Airplanes Limited: $70 million; Airplanes Trust: $3 million) compared
to other lease costs of $83 million (Airplanes Limited: $81 million; Airplanes
Trust: $2 million) in the year ended March 31, 2001. The decrease in other lease
costs arises due to a lower number of new leases entered into during the year
and an increased number of lease extensions, resulting in lower transition
costs.
51

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the year ended March 31,
2002 amounted to $36 million (Airplanes Limited: $33 million; Airplanes Trust:
$3 million). This is a comparable expense to that incurred in the year ended
March 31, 2001 of $35 million (Airplanes Limited: $33 million; Airplanes Trust:
$2 million).

The most significant element of selling, general and administrative
expenses is the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of aircraft under management pursuant to a servicing agreement.
Selling, general and administrative expenses in the year ended March 31, 2002
and the year ended March 31, 2001 include $24 million (Airplanes Limited: $22
million; Airplanes Trust: $2 million) relating to GECAS servicing fees.

A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the year ended March 31, 2002 is $10
million (Airplanes Limited: $9 million; Airplanes Trust: $1 million) in respect
of administrative agency and cash management fees payable to subsidiaries of
debis AirFinance Ireland, similar to the charge of $9 million for the year ended
March 31, 2001.

OPERATING LOSS

The operating loss for the year ended March 31, 2002 was $764 million
(Airplanes Limited: $670 million; Airplanes Trust: $94 million) compared with an
operating loss of $353 million for the year ended March 31, 2001 (Airplanes
Limited: $324 million; Airplanes Trust: $29 million). Airplanes Limited and
Airplanes Trust are expected to continue to report substantial losses in the
future.

TAXES

There was a tax benefit of $64 million (Airplanes Limited: $42 million;
Airplanes Trust: $22 million) in the year ended March 31, 2002, as compared with
a tax benefit of $20 million (Airplanes Limited: $8 million, Airplanes Trust:
$12 million) for the year ended March 31, 2001. This benefit arose from the
reversal of timing differences in deferred tax (see note 18 to the financial
statements).

NET LOSS

The net loss after taxation for the year ended March 31, 2002 was $695
million (Airplanes Limited: $623 million; Airplanes Trust: $72 million) compared
with a net loss after taxation for the year ended March 31, 2001 of $333 million
(Airplanes Limited: $316 million; Airplanes Trust: $17 million). The principal
change in the year ended March 31, 2002 is the inclusion of an impairment
provision of $292 million.

RESULTS OF OPERATIONS -- YEAR ENDED MARCH 31, 2001 COMPARED WITH YEAR ENDED
MARCH 31, 2000

Airplanes Group's results for the year ended March 31, 2001 reflected a
continuation of difficult trading conditions for some of its lessees, along with
an unfavorable market for some of its aircraft, in particular widebody aircraft,
and increased levels of aircraft downtime. Overall, Airplanes Group generated
$105 million in cash from operations in the year ended March 31, 2001, compared
to $181 million in the year ended March 31, 2000. The decrease in cash generated
from operations in the year ended March 31, 2001 is primarily attributable to a
reduction in lease revenues due to a greater number of off-lease aircraft during
the year ended March 31, 2001 and a smaller portfolio of aircraft due to prior
aircraft sales. In addition, there was a net outflow of maintenance payments and
a net increase in the level of receivables before write offs, as compared with
the year ended March 31, 2000. This was partially offset by a cash receipt from
GE Capital under the terms of the tax sharing agreement. There was a net loss
after taxation for the year ended March 31, 2001 of $333 million (Airplanes
Limited: $316 million; Airplanes Trust: $17 million) compared to a net loss
after taxation for the year ended March 31, 2000 of $257 million (Airplanes
Limited: $238 million; Airplanes Trust: $19 million). The increase in the net
loss for the year ended March 31, 2001 was primarily attributable to additional
interest being charged on accrued but unpaid class E note interest, a reduction
in revenue due to aircraft downtime and provisions for bad debts.
52

LEASING REVENUES

Leasing revenues (which include maintenance reserve receipts which
Airplanes Group receives from some of its lessees) for the year ended March 31,
2001 were $471 million (Airplanes Limited: $432 million; Airplanes Trust: $39
million) compared with $501 million (Airplanes Limited: $460 million; Airplanes
Trust: $41 million) for the year ended March 31, 2000. The decrease in 2001 was
primarily attributable to the reduction in the number of aircraft on lease in
the year ended March 31, 2001, increased levels of aircraft downtime (in
particular, in respect of B767 aircraft), and, to a lesser extent, a smaller
portfolio of aircraft due to prior aircraft sales. At March 31, 2001, Airplanes
Group had 187 of its 193 aircraft on lease (Airplanes Limited: 171 aircraft;
Airplanes Trust: 16 aircraft) compared to 193 of its 199 aircraft on lease
(Airplanes Limited: 175 aircraft; Airplanes Trust: 18 aircraft) at March 31,
2000.

AIRCRAFT SALES

Sales revenues of $21 million (Airplanes Limited: $8 million, Airplanes
Trust: $13 million) in respect of the sale of an airframe of one A300 aircraft,
the sale of four engines from two A300 aircraft, the airframes of which had been
sold separately, and the sale of two B737-200A aircraft were received in the
year ended March 31, 2001. Sales revenues of $3 million (Airplanes Limited $3
million; Airplanes Trust: $Nil) in respect of the sale of three aircraft, were
received in the year ended March 31, 2000. The net book values of the aircraft
sold were $14 million (Airplanes Limited: $4 million, Airplanes Trust: $10
million) in the year ended March 31, 2001 and $1 million (Airplanes Limited: $1
million; Airplanes Trust: $Nil) in the year ended March 31, 2000.

DEPRECIATION AND AMORTIZATION

The charge for depreciation and amortization in the year ended March 31,
2001 amounted to $170 million (Airplanes Limited: $154 million; Airplanes Trust:
$16 million) which is comparable with $174 million (Airplanes Limited: $157
million; Airplanes Trust: $17 million) for the year ended March 31, 2000.

OTHER INCOME

During the year ended March 31, 2000, Airplanes Group exercised an option
to purchase shares in an airline. The option was granted under a lease which
Airplanes Group acquired when it acquired its portfolio in 1996. The shares were
subsequently sold, yielding a profit of $1 million.

NET INTEREST EXPENSE

Net interest expense was $536 million (Airplanes Limited: $487 million;
Airplanes Trust: $49 million) in the year ended March 31, 2001 compared to $468
million (Airplanes Limited: $425 million; Airplanes Trust: $43 million) in the
year ended March 31, 2000. The increase in net interest expense was primarily
due to a combination of offsetting factors: additional interest charged on
accrued but unpaid class E note interest of $70 million and a higher interest
rate on the notes, being offset by lower average debt in the year ended March
31, 2001.

The weighted average interest rate on the class A, B, C and D notes (taking
into account the interest rate swaps entered into by Airplanes Group and the
class E minimum note interest amount but excluding the class E supplemental
interest amount and the remainder of the class E adjusted interest) during the
year ended March 31, 2001 was 7.6695% and the average debt in respect of the
class A, B, C and D notes outstanding during the year was $2,984 million. The
class E notes accrue interest at a rate of 20% per annum, as adjusted to take
account of changes to the U.S. consumer price index since March 28, 1996. The
weighted average interest rate on the class A, B, C and D notes (also taking
into account the interest rate swaps entered into by Airplanes Group and the
class E minimum note interest amount but excluding the class E supplemental
interest amount and the remainder of the class E adjusted interest) during the
year ended March 31, 2000 was 6.73% and the average debt in respect of the class
A, B, C and D notes outstanding during the year was $3,160 million. The weighted
average interest rate is effected by the continued paydown of the class A and B
notes with the class C and D notes carrying a higher coupon.

53

The difference between Airplanes Group's net interest expense of $536
million (Airplanes Limited: $487 million; Airplanes Trust: $49 million) and cash
paid in respect of interest of $210 million (Airplanes Limited: $190 million;
Airplanes Trust: $20 million) for the year ended March 31, 2001 is substantially
accounted for by the fact that Airplanes Group accrued interest on the class E
notes at a rate substantially higher than amounts paid in cash.

Net interest expense is stated after deducting interest income earned
during the relevant period. In the year ended March 31, 2001, Airplanes Group
earned interest income (including lessee default interest) of $14 million
(Airplanes Limited: $14 million; Airplanes Trust: $Nil) compared with $13
million in the year ended March 31, 2000 (Airplanes Limited: $13 million;
Airplanes Trust: $Nil).

At March 31, 2001, Airplanes Group had options to enter into interest rate
swaps ("SWAPTIONS") with a notional principal balance of $378 million.

BAD DEBT PROVISIONS

Airplanes Group's practice is to provide specifically for any amounts due
but unpaid by lessees based primarily on the amount due in excess of security
held and also taking into account the financial strength and condition of a
lessee and the economic conditions existing in the lessee's operating
environment. While a number of Airplanes Group's lessees failed to meet their
contractual obligations in the year ended March 31, 2001, resulting in the
requirement for additional provisions in respect of bad and doubtful debts in
respect of these lessees, the credit exposure with regard to other carriers
improved in the year. Overall, there was a net charge of $7 million in respect
of bad and doubtful debts (Airplanes Limited: $5 million; Airplanes Trust: $2
million) in the year ended March 31, 2001, compared with an overall net charge
of $4 million for the year ended March 31, 2000 (Airplanes Limited: $2 million;
Airplanes Trust: $2 million). The net charge in the year ended March 31, 2001
was primarily as a result of provisions in respect of one Turkish lessee and one
Colombian lessee.

OTHER LEASE COSTS

Other lease costs in the year ended March 31, 2001, comprising mainly
amounts transferred to maintenance provisions and aircraft related technical
expenditure, amounted to $83 million (Airplanes Limited: $81 million; Airplanes
Trust: $2 million) compared to other lease costs of $74 million (Airplanes
Limited: $71 million; Airplanes Trust: $3 million) in the year ended March 31,
2000. The increase in the year ended March 31, 2001 was attributable to an
increased number of aircraft being remarketed, partially offset by a release of
$10 million in relation to a continuing review of the adequacy of maintenance
reserves when aircraft are re-leased.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the year ended March 31,
2001 amounted to $35 million (Airplanes Limited: $33 million; Airplanes Trust:
$2 million). This was a comparable expense to that incurred in the year ended
March 31, 2000 of $34 million (Airplanes Limited: $31 million; Airplanes Trust:
$3 million).

The most significant element of selling, general and administrative
expenses are the aircraft servicing fees paid to GECAS. Substantially all of
these amounts represent asset based fees calculated as an annual percentage of
agreed values of aircraft under management pursuant to the servicing agreement.
Selling, general and administrative expenses in the year ended March 31, 2001
included $23 million (Airplanes Limited: $21 million; Airplanes Trust: $2
million) relating to GECAS servicing fees, similar to the charge of $22 million
for the year ended March 31, 2000.

A further significant element of Airplanes Group's actual selling, general
and administrative expenses reported in the year ended March 31, 2001 was $9
million (Airplanes Limited: $8 million; Airplanes Trust: $1 million) in respect
of administrative agency and cash management fees payable to the administrative
agent and the cash manager, similar to the charge of $9 million for the year
ended March 31, 2000.

54

OPERATING LOSS

The operating loss for the year ended March 31, 2001 was $353 million
(Airplanes Limited: $324 million; Airplanes Trust: $29 million) compared with an
operating loss of $250 million for the year ended March 31, 2000 (Airplanes
Limited: $223 million; Airplanes Trust: $27 million). Airplanes Limited and
Airplanes Trust are expected to continue to report substantial losses in the
future.

TAXES

There was a tax credit of $20 million (Airplanes Limited: $8 million;
Airplanes Trust: $12 million) in the year ended March 31, 2001, as compared with
a net charge of $7 million (Airplanes Limited: charge $15 million; Airplanes
Trust: credit of $8 million) for the year ended March 31, 2000. The release
arises primarily in relation to a reduction in valuation allowances against the
realizability of net operating losses.

NET LOSS

The net loss after taxation for the year ended March 31, 2001 was $333
million (Airplanes Limited: $316 million; Airplanes Trust: $17 million) compared
with a net loss after taxation for the year ended March 31, 2000 of $257 million
(Airplanes Limited: $238 million; Airplanes Trust: $19 million). The increased
loss was primarily due to additional interest being charged on the class E
notes, a reduction in revenue due to aircraft downtime and provisions for bad
debts.

FINANCIAL RESOURCES AND LIQUIDITY

Our primary source of liquidity is rental payments made by lessees under
the leases. Our principal uses of cash rental payments are expenses related to
the aircraft and their servicing, corporate expenses and the payment of
interest, principal and any premium on indebtedness. See "-- Indebtedness" for
more information regarding our outstanding debt.

Airplanes Group's cash balances at March 31, 2002 amounted to $142 million
(Airplanes Limited: $136 million; Airplanes Trust: $6 million) compared to cash
balances at March 31, 2001 of $197 million (Airplanes Limited: $191 million;
Airplanes Trust: $6 million). This represented a decrease of $55 million in the
cash balances for the year ended March 31, 2002, compared with a net decrease in
the cash balances of $6 million for the year ended March 31, 2001. The decrease
in the year to March 31, 2002, is primarily as a result of the $40 million
reduction in the liquidity reserve on April 17, 2001.

Under the terms of Airplanes Group's indebtedness, we are required to
maintain cash balances, which we refer to as the "LIQUIDITY RESERVE AMOUNT,"
equal to (1) the amount of security deposits ($32 million at March 31, 2002),
(2) a maintenance reserve and (3) a miscellaneous reserve amount. See "-- The
Accounts -- Liquidity Reserve Amount" for circumstances under which these
amounts may be increased or decreased. The terms of Airplanes Group's
indebtedness restrict the use of this cash so that it is generally not available
to service debt. The liquidity reserve amount has been determined largely based
on an analysis of historical experience, assumptions regarding Airplanes Group's
future performance and the frequency and cost of certain contingencies in
respect of the aircraft. It is intended to provide liquidity for meeting the
cost of maintenance obligations and non-maintenance, aircraft-related
contingencies such as removing liens, complying with ADs and repossessing and
re-leasing aircraft.

In analyzing the future impact of costs, assumptions have been made
regarding their frequency and amount based on historical experience. There can
be no assurance, however, that historical experience will prove to be relevant
or that actual cash received by Airplanes Group will not be significantly less
than that assumed. Any significant adverse variation, such as we are
experiencing, may materially adversely affect our ability to make payments of
interest and principal on the notes and certificates.

During future years, we may have to incur unusually high cash expenditures
for the purpose of airframe and engine overhauls and complying with new
regulatory requirements for aircraft operating in Europe and North America.
Depending on their level and timing, these payments could further adversely
affect our ability to make

55

certain principal payments on the notes since aircraft expenses rank ahead of
payments on the notes and certificates.

OPERATING ACTIVITIES

Operating cash flows depend on many factors including the performance of
lessees and Airplanes Group's ability to re-lease aircraft, the average cost of
the notes, the efficacy of Airplanes Group's interest rate hedging policies, the
ability of Airplanes Group's swap providers to perform under the terms of their
swap and similar obligations and maintenance cash flows which, although expected
to be neutral over time, may not balance in any given year.

Net cash provided by operating activities in the year ended March 31, 2002
amounted to $120 million (Airplanes Limited: $134 million; Airplanes Trust:
$(14) million) compared with $105 million in the year ended March 31, 2001
(Airplanes Limited: $105 million; Airplanes Trust: $Nil). This includes cash
paid in respect of interest of $186 million in the year ended March 31, 2001
(Airplanes Limited: $169 million; Airplanes Trust: $17 million) compared with
the $210 million in the year ended March 31, 2001 (Airplanes Limited: $190
million; Airplanes Trust: $20 million). The increase in net cash provided by
operating activities in the year ended March 31, 2002 is primarily attributable
to net maintenance inflows, lower LIBOR rates on the notes and a reduction in
other lease costs. This was offset to some extent by an increased level of lease
restructurings, greater aircraft downtime, lower interest rates on floating rate
leases and a reduction in the number of aircraft on lease as a result of
previous aircraft sales. In addition, in the year ended March 31, 2002 there was
a net increase in the level of receivables balances before write offs, as
compared to the year ended March 31, 2001.

There was a reduction in the amount of cash paid as interest during the
year ended March 31, 2002 of $24 million, as a result of lower average debt and
a lower average interest rate.

INVESTING AND FINANCING ACTIVITIES

Cash flows from investing activities in the year ended March 31, 2002,
reflect the cash provided by capital and sales type leases which was $7 million
(Airplanes Limited: $7 million; Airplanes Trust: $Nil) comparable to the year
ended March 31, 2001. In the year ended March 31, 2002, Airplanes Group also
received net sales proceeds of $5 million (Airplanes Limited: $5 million;
Airplanes Trust: $Nil) compared to $19 million (Airplanes Limited: $6 million;
Airplanes Trust: $13 million) in the year ended March 31, 2001.

Cash flows from financing activities in the year ended March 31, 2002,
primarily reflect the repayment of $184 million of principal on the subclass A-6
notes and class B notes by Airplanes Group (Airplanes Limited: $167 million;
Airplanes Trust: $17 million) compared with $137 million of principal repaid on
the subclass A-6 and class B by Airplanes Group (Airplanes Limited: $124
million; Airplanes Trust: $13 million) in the year ended March 31, 2001. The
increase in principal repayments in the year ended March 31, 2002 as compared to
the year ended March 31, 2001, is due to an increase in cash provided by
operating activities as discussed above and the release of $40 million from the
liquidity reserve.

56

INDEBTEDNESS

Airplanes Group's outstanding indebtedness consisted of class A, B, C, D
and E notes in the amount of $3,314 million (Airplanes Limited: $3,019 million;
Airplanes Trust: $295 million) at March 31, 2002 and $3,495 million (Airplanes
Limited: $3,185 million; Airplanes Trust: $310 million) at March 31, 2001.
Airplanes Group had $591 million of class E notes outstanding at March 31, 2002
and 2001. The terms of each subclass of notes, including the outstanding
principal amount as of March 15, 2002, and estimated fair market value as of
March 31, 2002, are as follows:

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

(1) The subclass A-9 certificates were issued on March 15, 2001.

(2) The annual interest rate on the class E notes is adjusted by reference to
changes in the U.S. Consumer Price Index since March 28, 1996. As of March
31, 2002, the annual interest rate on the class E notes was 23.2%. Except
for the class E minimum interest amount and supplemental interest amount,
payable at 1% and 10% per annum respectively, no principal or interest is
payable on the class E notes until the more senior classes of notes have
all been paid in full. As of March 31, 2002, the accrued and unpaid class E
minimum interest amount and supplemental interest amount was $1,498
million.

Airplanes Group will either have to refinance the subclass A-8 certificates
in the capital markets on March 15, 2003 or pay step-up interest on them. In the
absence of sufficient cash flow, step-up interest will accrue on the subclass
A-8 certificates. Given current market conditions and the impact these
conditions have had on our performance as compared to the 2001 Base Case, we
believe that such a refinancing at this time would not be economically viable.

COMPARISON OF ACTUAL CASH FLOWS VERSUS THE 2001 BASE CASE FOR THE FOUR MONTH
PERIOD FROM JANUARY 10, 2002 TO MAY 9, 2002.

The discussion and analysis which follows is based on the results of
Airplanes Limited and Airplanes Trust and their subsidiaries as a single entity
(collectively "AIRPLANES GROUP").

The financial information set forth below was not prepared in accordance
with generally accepted accounting principles of the United States. This
information should be read in conjunction with Airplanes Group's most recent
financial information prepared in accordance with generally accepted accounting
principles of the United States.

For the purposes of this report, the "FOUR MONTH PERIOD" comprises
information from the monthly cash reports as filed at the Securities and
Exchange Commission as Forms 8-K for the relevant months ended February 15,
2002, March 15, 2002, April 15, 2002 and May 15, 2002, respectively. The
financial data in these reports includes cash receipts from January 10, 2002
(first day of the Calculation Period for the February 2002 Report) up to May 9,
2002 (last day of the Calculation Period for the May 2002 Report). Page 66
presents the cumulative cash flow information from March 2001 to the May 2002
Payment Date. This report, however, limits its commentary to the Four Month
Period. For reasons discussed above under "-- Recent Developments," we have
performed and expect to continue to perform behind the 2001 Base Case.

57

The 2001 Base Case contained assumptions in respect of Airplanes Group's
then future cash flows and expenses. Since these assumptions were developed,
global economic conditions, and particularly conditions in the commercial
aviation industry, have worsened significantly, particularly since September 11,
2001, as discussed above. Accordingly the performance of Airplanes Group has
been and is likely to continue to be worse than the 2001 Base Case, with
particular reference to those assumptions relating to aircraft re-lease rates,
aircraft values, aircraft downtime and lessee defaults.

The following is a discussion of the Total Cash Collections, Total Cash
Expenses, Interest Payments and Principal Payments in the Four Month Period and
should be read in conjunction with the analysis on page 65.

CASH COLLECTIONS

"TOTAL CASH COLLECTIONS" include Net Lease Rentals, Interest Earned,
Aircraft Sales, Net Maintenance and Other Receipts (each as defined below). In
the Four Month Period, Airplanes Group generated approximately $107.8 million in
Total Cash Collections, $26.7 million less than the 2001 Base Case. This
difference is due to a combination of the factors set out below (the numbers in
square brackets below refer to the line item number shown on page 64).

[2] RENEGOTIATED LEASES

"RENEGOTIATED LEASES" refers to the loss in rental revenue caused by a
lessee negotiating a reduction in the lease rental. Typically, this can be a
permanent reduction over the remaining lease term in exchange for other
contractual concessions from the lessee. In the Four Month Period, the amount of
revenue loss attributed to Renegotiated Leases was $22.6m, as compared to $Nil
assumed in the 2001 Base Case. This related primarily to renegotiations with
three Latin American lessees and two European lessees representing 30 aircraft
in total on lease to these lessees at March 31, 2002 and 5.7%, 5.05%, 2.9%,
5.57% and 3.34% of our portfolio by appraised value at January 31, 2002
respectively. It also relates to renegotiations with 13 other lessees in respect
of a total of 36 aircraft on lease to one North American lessee, four Latin
American lessees, five European lessees, one Asian lessee, one African lessee
and one other lessee, together representing a total of 15.19% of the portfolio
by appraised value at January 31, 2002.

For details of current lessee restructurings please refer to "Item 1 --
Business -- The Aircraft, Related Leases and Collateral -- The Lessees".

[3] RENTAL RESET -- RELEASING EVENTS WHERE NEW LEASE RATE DEVIATED FROM THE
2001 BASE CASE

"RENTAL RESETS" is a measure of the difference in rental revenue when new
lease rates are different from those assumed in the 2001 Base Case, including
lease rate adjustments for changes in interest rates on floating rate leases and
lease rates achieved where revenues are dependent on aircraft usage. Rental
Resets amounted to $14.4 million in the Four Month Period, as compared to $Nil
assumed in the 2001 Base Case. This difference relates primarily to rental
resets with two Latin American lessees, two North American lessees, two European
lessees and one African lessee together representing a total of 42 aircraft on
lease to these lessees at March 31, 2002 and 31.64% of the portfolio by
appraised value at January 31, 2002.

The events of September 11, 2001 resulted in a number of significant lease
restructurings. However not all leases of aircraft on lease to any one lessee
were subject to these restructurings. This has resulted in variances (without
duplication) attributable to certain lessees falling into both the Renegotiated
Leases and Rental Reset variance lines shown on page 65.

[5] CONTRACTED LEASE RENTALS

"CONTRACTED LEASE RENTALS" represents the current contracted lease rental
rollout which is equal to the 2001 Base Case Lease Rentals less adjustments for
Renegotiated Leases and Rental Resets. For the Four Month Period, Contracted
Lease Rentals were $103.2 million, which was $37.0 million less than assumed in
the 2001 Base Case. The difference is due to losses from Renegotiated Leases and
Rental Resets as discussed above.
58

[6] MOVEMENT IN CURRENT ARREARS BALANCE

"CURRENT ARREARS" is the total Contracted Lease Rentals outstanding from
current lessees at a given date but excluding any amounts classified as Bad
Debts. There was a net decrease of $4.0 million in the Current Arrears balance
over the Four Month Period, as compared to $Nil assumed in the 2001 Base Case.

NET STRESS-RELATED COSTS

"NET STRESS-RELATED COSTS" is a combination of all the factors which can
cause actual lease rentals to vary from the Contracted Lease Rentals. The 2001
Base Case assumed gross stress-related costs equal to 6.0% of the 2001 Base Case
Lease Rentals. However, the 2001 Base Case also assumed the recovery of certain
deferred arrears equal to 0.5% of the 2001 Base Case Lease Rentals in the Four
Month Period, resulting in an overall Net Stress-Related Costs assumption of
5.5% of the 2001 Base Case Lease Rentals. For the Four Month Period, Net
Stress-Related Costs incurred amounted to a net cash outflow of $7.6 million
(5.4% of Lease Rentals) compared to $7.9 million outflow assumed in the 2001
Base Case, a variance of $0.3 million that is due to the five factors described
in items [8] to [12] below.

[8] BAD DEBTS

"BAD DEBTS" are arrears owed by lessees who have defaulted and which are
deemed irrecoverable. Bad Debts were $Nil for the Four Month Period, $1.4
million less than the 2001 Base Case assumption of $1.4 million (1.0% of Lease
Rentals).

[9] DEFERRED ARREARS BALANCE

"DEFERRED ARREARS BALANCE" refers to current arrears that have been
capitalized and restructured into a deferred balance. In the Four Month Period,
Airplanes Group received payments totaling $0.7 million in accordance with these
restructurings. $0.3 million was received from each of a Philippine and a Latin
American lessee, owing $0.3 million, and $Nil respectively at 31 March 2002. The
balance of $0.1 million was received from one Turkish lessee owing $0.6 million
at 31 March 2002. Payments totaling $0.5 million were assumed to be received in
accordance with restructurings included in the 2001 Base Case.

[10] AIRCRAFT ON GROUND ("AOG")

"AOG" is defined as the 2001 Base Case Lease Rentals lost when an aircraft
is off-lease or deemed non-revenue earning. Airplanes Group had fourteen
aircraft AOG at various times during the Four Month Period and at March 31,
2002, six aircraft were AOG, one of which was subject to a letter of intent for
lease. In the Four Month Period, the 2001 Base Case Lease Rentals loss
attributed to AOG was $7.3 million (5.2% of Lease Rentals), as compared to $5.9
million (4.2% of Lease Rentals) assumed under the 2001 Base Case.

[11] OTHER LEASING INCOME

"OTHER LEASING INCOME" consists of miscellaneous income received in
connection with a lease other than contracted rentals, maintenance receipts and
security deposits, such as early termination payments or default interest. In
the Four Month Period, Other Leasing Income amounted to $0.2 million, as
compared to $Nil assumed under the 2001 Base Case.

[12] REPOSSESSION COSTS

"REPOSSESSION COSTS" cover legal and aircraft technical costs incurred as a
result of repossessing an aircraft. In the Four Month Period, Repossession Costs
amounted to $1.0 million on the return of two B737-300 aircraft from Balkan
Bulgarian Airlines, one B737-400 from Istanbul, one A300B4-200 from Transaer and
one DHC8-300 from Aeroel, as compared to $1.1 million assumed under the 2001
Base Case.

59

[14] NET LEASE RENTALS

"NET LEASE RENTALS" is Contracted Lease Rentals less any movement in
Current Arrears balance and Net Stress-Related Costs. In the Four Month Period,
Net Lease Rentals amounted to $99.6 million, $32.6 million less than that
assumed in the 2001 Base Case. The variance was attributable to the combined
effect of the factors outlined in items [2] and [3] and in items [6] to [12]
above.

[15] INTEREST EARNED

"INTEREST EARNED" relates to interest received on cash balances held in the
Collection and Expense Accounts. Cash held in the Collection Account consists of
the cash liquidity reserve amount of $80 million plus the security deposit
amount, in addition to the intra-month cash balances for all the rentals and
maintenance payments collected prior to the monthly payment date. The Expense
Account contains cash set aside to pay for expenses which are expected to be
payable over the next month. In the Four Month Period, interest earned amounted
to $1.1 million, $1.1 million less than that assumed in the 2001 Base Case. The
difference is due to a lower average reinvestment rate than assumed in the 2001
Base Case. The average actual reinvestment rate for the Four Month Period was
1.7% (excluding a $5 million guaranteed investment contract) as compared to the
5.2% assumed in the 2001 Base Case.

[16] AIRCRAFT SALES

Aircraft sales proceeds totalling $1.5 million were received in the Four
Month Period in respect of the sale of one B727-200A aircraft and two DC9-51
aircraft. In the 2001 Base Case all aircraft are assumed to be sold at the end
of their useful economic lives. Variances in cashflow will arise where aircraft
are sold prior to or after the end of their useful economic life.

[17] NET MAINTENANCE

"NET MAINTENANCE" refers to maintenance reserve revenue received less any
maintenance reimbursements paid to lessees. In the Four Month Period, positive
net maintenance cash flows of $5.5 million were received. The 2001 Base Case
makes no assumptions for Net Maintenance as it assumes that, over time,
maintenance revenue will equal maintenance expenditure. However, it is unlikely
that in any particular four month reporting period, maintenance revenue will
exactly equal maintenance expenses.

CASH EXPENSES

"TOTAL CASH EXPENSES" include Aircraft Operating Expenses and Selling,
General and Administrative ("SG&A") Expenses. In the Four Month Period, Total
Cash Expenses were $21.1 million compared to $18.2 million assumed in the 2001
Base Case, a negative variance of $2.9 million. A number of offsetting factors
discussed below have given rise to this.

"AIRCRAFT OPERATING EXPENSES" includes all operational costs related to the
leasing of aircraft including costs of insurance, re-leasing and other overhead
costs.

[20] RE-LEASING AND OTHER OVERHEAD COSTS

"RE-LEASING AND OTHER OVERHEAD COSTS" consist of miscellaneous re-delivery
and leasing costs associated with re-leasing events, costs of insurance and
other lessee-related overhead costs. In the Four Month Period, these costs
amounted to $6.1 million (or 4.3% of Lease Rentals) compared to $7.0 million (or
5.0% of Lease Rentals) assumed in the 2001 Base Case.

Actual Re-Leasing and Other Overhead Costs were lower than the 2001 Base
Case assumption primarily due to lower than assumed transition costs on aircraft
delivering to new lessees and lower payments made in the form of lessor
contributions to defray certain technical costs during the term of certain
leases.

SG&A Expenses relate to fees paid to the servicer and to other service
providers.

60

[21] AIRCRAFT SERVICER FEES

The "AIRCRAFT SERVICER FEES" are defined as amounts paid to the servicer in
accordance with the terms of the servicing agreement. In the Four Month Period,
the total Aircraft Servicer Fees paid were $8.7 million, $0.7 million more than
that assumed in the 2001 Base Case.

Aircraft Servicer Fees consist of:

The Retainer Fee is a fixed amount per month per aircraft and changes only
as aircraft are sold.

[23] OTHER SERVICER FEES AND OTHER OVERHEADS

"OTHER SERVICER FEES AND OTHER OVERHEADS" relate to fees and expenses paid
to other service providers including the administrative agent, the cash manager,
financial advisers, legal advisers and accountants and to the
directors/controlling trustees. In the Four Month Period, Other Servicer Fees
and Other Overheads amounted to $6.3 million, $3.1 million more than an assumed
expense of $3.2 million in the 2001 Base Case.

The Board of Directors of Airplanes Limited and the Controlling Trustees of
Airplanes Trust have negotiated a reduction in the level of Administrative
Agency and Cash Management Fees from the current level of $9.98 million to $6.25
million per annum. This new level of fees took effect on April 1, 2002 and will
be adjusted annually for inflation, commencing April 1, 2003.

[30] INTEREST PAYMENTS

In the Four Month Period, interest payments to the holders of the class A,
B, C and D notes amounted to $39.4 million which is $22.0 million lower than the
2001 Base Case. The variance reflects lower than expected level of average
interest rates. The 2001 Base Case assumed LIBOR to be 5.2% whereas the average
monthly LIBOR rate in the Four Month Period was 1.8%.

In the Four Month Period, there was a continued suspension of payments of
the class E minimum interest amount of 1% (refer to item 33 below). No payments
of class E minimum interest amount were anticipated in the 2001 Base Case.

[31] SWAP AND SWAPTION CASHFLOWS

Airplanes Group's net swap payments during the Four Month Period were $18.1
million higher than the $4.5 million assumed in the 2001 Base Case due to lower
than anticipated interest rates.

[33] PRINCIPAL PAYMENTS

In the fourteen month period from March 10, 2001 to May 15, 2002, total
principal payments amounted to $195.1 million, (comprising $174.4 million on the
class A notes and $20.7 million on the class B notes), $25.0 million less than
assumed in the 2001 Base Case. The breakdown of the $25.0 million variance is
set out on page 66. In the Four Month Period, total principal payments amounted
to $24.7 million, (comprising of $18.5 million on the class A notes and $6.2
million on the class B notes), $25.7 million less than assumed in the 2001 Base
Case. The breakdown of the $25.7 million variance is set out on page 65.

Applying the declining value assumptions to the original March 1996 fleet
appraisals and adjusting for aircraft sales, the total appraised value of the
aircraft was assumed to be $3,199.6 million at May 15, 2002. Our portfolio is
appraised annually and the most recent appraisal was obtained on January 31,
2002 and valued the

61

current portfolio at $2,799.1 million. Applying the declining value assumptions
to this appraisal, the total appraised value was $2,744.6 million at May 15,
2002.

As a consequence of the cumulative excess decline in appraised values
experienced since March 1996, combined with overall cash performance in that
period, Airplanes Group's available cash flows, after payment of expenses,
interest and class A and B minimum principal amounts, have been redirected in
accordance with the priority of payments to pay class A principal adjustment
amount throughout the fourteen month period. Class A principal adjustment amount
is intended to accelerate the principal amortization schedule of the class A
notes when the appraised value of the aircraft declines in excess of the decline
in appraised values assumed in the 1996 Base Case by reference to certain loan
to current appraised value ratios. Since the principal adjustment amounts on the
class A notes rank ahead of the scheduled principal payments on the class C and
D notes, and since available cash flows were not sufficient to pay all of the
class A principal adjustment amounts, scheduled principal payments on the class
C and D notes have been deferred on each payment date during the fourteen month
period. Total deferrals of class C and class D scheduled principal amounts
amounted to $35.9 million and $19.1 million respectively as of May 15, 2002.
There was $136.8 million outstanding class A principal adjustment amount as of
May 15, 2002.

There has been a decline of 10.15% in the appraised value of our fleet in
the year to January 31, 2002, which is $143 million greater than the decline
assumed in our 2001 Base Case assumptions. The appraised values are based upon
the value of the aircraft at normal utilization rates in an open, unrestricted
and stable market, and take into account long-term trends, including current
expectations of particular models becoming obsolete more quickly, as a result of
airlines switching to different models, manufacturers ceasing production or
lease values for aircraft declining more rapidly than previous predictions. As a
theoretical value, the appraised value is not indicative of market value and
thus there is no guarantee that we would obtain the appraised value upon sale of
any aircraft, since we might sell at a low point in the business cycle, and
since appraised values are forward-looking. If the current oversupply of
aircraft continues longer term, given the age of our fleet, certain of our
aircraft may become obsolete significantly earlier than the useful life
expectancy assumed in the 2001 Base Case assumptions, which would negatively
impact appraised values further.

OTHER ISSUES

Administrative and lease expenses and certain other payments in the
ordinary course of business are senior to the notes in priority of payment and
are therefore payable before any payments are made on the notes (and thus the
corresponding certificates).

Additionally, minimum principal amounts on the class A and class B notes
are payable before interest on the class C and class D notes, and principal
adjustment amount on the class A notes is payable before scheduled principal
payments on the class C and class D notes. Since the appraised value of our
aircraft has declined at a rate faster than that originally assumed in our 1996
Base Case, we have been required to pay principal adjustment amount on the class
A notes with a consequential deferral of scheduled principal payments on the
class C and class D notes.

To the extent that we have sufficient available funds, we are required to
pay a minimum principal amount on the class A notes in order to maintain certain
loan to initial appraised value ratios. We are currently ahead of the required
class A minimum principal payment schedule to the extent of $110 million because
the accelerated principal payments resulting from payment of class A principal
adjustment amounts have enabled us to maintain those loan to initial appraised
value ratios. Accordingly, no payments are currently due in respect of the
minimum principal amount on the class A notes. However, our overall cash
performance since September 11, 2001, has been significantly weaker than was
assumed in our 2001 Base Case, as discussed above. In light of our current and
expected cash performance, we expect that we will not be able to continue paying
class A principal adjustment amount in full and therefore, in time, we will no
longer be ahead of the required class A minimum principal payment schedule. We
expect this to occur in the latter half of 2003, when we will have to recommence
payments of minimum principal on the class A notes. Since minimum principal on
the class A notes ranks ahead of interest and minimum principal on the class B
notes and interest on the class C and class D notes in the order of priority,
and, given our current expectations as to our future performance, we believe
that our cash flows may

62

be inadequate to pay interest and minimum principal on the class B notes and
interest on the class C and D notes in the latter half of 2003.

Our actual results may differ from our current expectations, as further
explained in "-- Recent Developments." However, such differences as may arise
are only likely to affect the timing of when we may cease to pay interest and
minimum principal on the class B notes and interest on the class C and D notes.

In the event that cash flows are inadequate to pay interest and minimum
principal on the class B notes and interest on the class C and D notes, it is
likely to be a long period of time before we will be able to resume making any
payments on these notes. Further, in these circumstances, we may be unable to
repay in full principal on some or all of these classes of notes by their final
maturity date. The more junior the class of notes is in the order of priority,
the greater the risk that we may be unable to repay in full principal on that
class of notes by its final maturity date. In addition, to the extent that we do
resume making payments on these notes, payments will be made according to the
priority of payment, commencing with the then most senior class and only making
payments on more junior classes to the extent of available cash flows. A failure
to make payments on a class of notes will result in failure to make payments on
the corresponding class of certificates.

In general, the rights and remedies with respect to a note event of default
are exercisable only by the trustee of and the holders of the most senior class
of notes outstanding, and then only to the extent that there is an event of
default with respect to that senior class of notes. The class A notes are the
most senior class of notes currently outstanding. A failure to make a required
payment on a class of notes is a default only with respect to that class of
notes and the corresponding certificates. Accordingly, if an event of default
occurs with respect to a class of notes, the holders of that class of notes (and
thus, the corresponding certificates) will not be permitted to enforce their
rights until all amounts owing under any more senior class of notes outstanding
and certain other amounts have been paid in full.

The vulnerability of the various classes of notes has been reflected in
actions taken by the rating agencies which reevaluated several structured
aircraft financings in the wake of the terrorist attacks in the United States on
September 11, 2001. On December 12, 2001, Moody's announced a downgrade of our
class C certificates from rating Baa2 to Ba3 and a downgrade of the class D
certificates from Ba2 to B2. On December 21, 2001, Fitch downgraded the class C
certificates from BBB to BB and the class D certificates from BB to B and left
the class A to D certificates on credit watch negative. On March 25, 2002,
Standard & Poor's downgraded our class C certificates from rating BBB to BB+ and
our class D certificates from BB to B-. Most recently on June 24, 2002, Fitch
further downgraded the class C certificates from BB to B+ and the class D
certificates from B to CCC and downgraded the class A certificates from AA to A+
and the class B certificates from A to BBB+. Given the continuing difficulties
in the aircraft industry and their impact on the factors which determine our
revenues, there can be no assurance that the rating agencies will not further
downgrade any class of our certificates.

The ratings of the certificates address the likelihood of the timely
payment of interest and the ultimate payment of principal and premium, if any,
on the certificates. A rating is not a recommendation to buy, sell or hold
certificates because ratings do not comment as to market price or suitability
for a particular investor A rating may be subject to revision, suspension or
withdrawal at any time by the assigning rating agency.

63

64

AIRPLANES CASH FLOW PERFORMANCE FOR THE PERIOD FROM JANUARY 10, 2002 TO
MAY 15, 2002 (4 MONTHS)
COMPARISON OF ACTUAL CASH FLOWS VERSUS 2001 BASE CASE CASH FLOWS

65

AIRPLANES CASH FLOW PERFORMANCE FOR THE PERIOD FROM MARCH 10, 2001 TO
MAY 15, 2002 (14 MONTHS)
COMPARISON OF ACTUAL CASH FLOWS VERSUS 2001 BASE CASE CASH FLOWS

- ---------------
[1] "INTEREST COVERAGE RATIO" is equal to Net Cash Collections (excluding
interest and swap payments) expressed as a ratio of the interest payable on
each subclass of notes plus the interest and minimum principal payments
payable on each subclass of notes that rank senior in priority of payment to
the relevant subclass of notes.

[2] "DEBT SERVICE RATIO" is equal to Net Cash Collections (excluding interest
and swap payments) expressed as a ratio of the interest and
minimum/scheduled principal payments payable on each subclass of notes plus
the interest and minimum/scheduled principal payments payable on each
subclass of notes that ranks equally with or senior to the relevant subclass
of notes in the priority of payments. In respect of the class A notes,
principal adjustment amount payments have been excluded as they are a
function of aircraft values.

[3] "EXPECTED PORTFOLIO VALUE" represents the initial appraised value of each
aircraft in the portfolio multiplied by the depreciation factor at payment
date divided by the depreciation factor at March 1996 closing date.

[4] "ADJUSTED PORTFOLIO VALUE" represents the base value of each aircraft in the
portfolio as determined by the most recent appraisal multiplied by the
depreciation factor at payment date divided by the depreciation factor as of
the relevant appraisal date.

[5] "TOTAL ASSET VALUE" is equal to total expected/adjusted portfolio value plus
liquidity reserve amount minus lessee security deposits.
67

THE ACCOUNTS

The indentures and the security trust agreement provide that substantially
all of Airplanes Group's cash inflows and outflows occur through the rental
accounts, collection account, lessee funded account and expense account which
the cash manager, acting on behalf of the security trustee, has established and
maintains at a bank having:

- a long-term unsecured debt rating of not less than AA, or the
equivalent, by the rating agencies, or

- a certificate of deposit rating of A-1+ by Standard & Poor's, P-1 by
Moody's and F1 by Fitch,

except that, where required by the terms of the relevant leases, some rental
accounts may be established at banks having ratings of less than AA, or the
equivalent, by the rating agencies or a certificate of deposit rating of less
than A-1+ by Standard & Poor's, P-1 by Moody's and F1 by Fitch.

Except where local legal or regulatory reasons do not permit, all of these
accounts are held in the names of the security trustee, who has sole dominion
and control over the accounts, including the sole power to direct withdrawals
from or transfers among the accounts. Subject to conditions set forth in the
cash management agreement, the security trustee has delegated its authority over
the accounts to the cash manager but the security trustee is not responsible for
the acts or omissions of the cash manager.

For so long as any notes remain outstanding, funds on deposit in the
accounts will be invested and reinvested at Airplanes Group's written direction
(which direction has been delegated to the cash manager pursuant to the cash
management agreement) in one or more permitted account investments, maturing, in
the case of the collection account and expense account, such that sufficient
funds shall be available to make required payments on the first succeeding
scheduled interest payment date on the notes after those investments are made.
Investment and reinvestment of funds in the lessee funded account must be made
in a manner and with maturities that conform to the requirements of the related
leases. Investment earnings on funds deposited in any account, net of losses and
investment expenses, will (to the extent permitted by the terms of the related
leases in the case of funds in the lessee funded account) be deposited in the
collection account and treated as collections.

RENTAL ACCOUNTS

The lessees make all payments under the leases directly into the applicable
rental accounts. Pursuant to the cash management agreement, the cash manager
transfers, or causes to be transferred, all funds deposited into the rental
accounts into the collection account as collections within one business day of
receipt thereof (other than certain limited amounts, if any, required to be left
on deposit for local legal or regulatory reasons).

THE COLLECTION ACCOUNT

All of the following "COLLECTIONS" received by Airplanes Group have to be
deposited in the collection account:

- rental payments,

- payments under any letter of credit, letter of comfort, letter of
guarantee or other assurance in respect of a lessee's obligations under
a lease,

- the liquidity reserve amount,

- amounts received in respect of claims for damages or in respect of any
breach of contract for any nonpayment (including any amounts received
from any Airplanes Group subsidiary, whether by way of distribution,
dividend, repayment of a loan or otherwise and any proceeds received in
connection with a lessee's restructuring),

- net proceeds of any aircraft sale or amounts received under purchase
options and other agreements,

- proceeds of any insurance payments in respect of any aircraft or any
indemnification proceeds,

- amounts transferred from the lessee funded account to the collection
account,
68

- net payments to Airplanes Group under any swap agreement,

- investment income on all amounts on deposit in the accounts (in each
case to the extent consistent with the terms of applicable related
leases), and

- any other amounts received by any member of Airplanes Group, except
specified funds required to be segregated from Airplanes Group's other
funds, applied in connection with a redemption, received in connection
with a refinancing issue of notes and required to be paid over to any
third party.

Collections on deposit in the collection account are calculated by the cash
manager on the fourth business day immediately preceding each interest payment
date. On each payment date, the cash manager will transfer from the collection
account to the expense account the portion of Airplanes Group expenses that are
due and payable or are anticipated to become due and payable over the next
interest accrual period on the notes (the "REQUIRED EXPENSE AMOUNT") and that
have not been paid directly by the cash manager to expense payees. The cash
manager may also transfer other amounts into the expense account for
unanticipated expenses falling due and payable within that interest accrual
period. If there are available funds in accordance with "-- The Notes and
Guarantees -- Priority of Payments" on any payment date, the cash manager will
also transfer amounts in respect of expenses and costs that are not regular,
monthly recurring expenses but are anticipated to become due and payable in any
future interest accrual period ("PERMITTED ACCRUALS") to the expense account.
Amounts received in respect of segregated security deposits and maintenance
reserves are transferred directly into the lessee funded account.

LIQUIDITY RESERVE AMOUNT

Airplanes Group is required to maintain a cash balance in the collection
account under the indentures in an amount equal to the sum of:

- the maintenance reserve amount ($60 million for purposes of the "First
Collection Account Top-up" plus an additional $20 million for purposes
of the "Second Collection Account Top-up" as of March 15, 2002, as
further described below),

- a security deposit reserve amount (equal to approximately $32.3 million
as of March 15, 2002), and

- a miscellaneous reserve amount ($Nil as of March 15, 2001, as further
described below).

The required maintenance reserve amount and miscellaneous reserve amount
may be increased or decreased from time to time by an action of the board of
directors of Airplanes Limited or the controlling trustees of Airplanes Trust in
light of significant changes in, among other things, the condition of the
aircraft, the terms and conditions of future leases, the financial condition of
the lessees or prevailing industry conditions. Any reduction is subject to
confirmation in advance in writing from the rating agencies that the proposed
reduction in the liquidity reserve amount will not result in a lowering or
withdrawal of their ratings of any class of certificates.

On February 20, 2001, the board of directors of Airplanes Limited and the
controlling trustees of Airplanes Trust approved a reduction of the
miscellaneous reserve amount required to be retained by Airplanes Group in the
collection account from $40 million to $Nil as of March 15, 2001. On March 8,
2001, the board of directors of Airplanes Limited and the controlling trustees
of Airplanes Trust further approved a reduction of the maintenance reserve
amount required to be retained by Airplanes Group in the collection account from
$80 million to $60 million as of March 15, 2001 for purposes of the "First
Collection Account Top-up" (but not for the "Second Collection Account Top-up")
according to the priority of payments provided in the indentures.

The $40 million made available from the reduction of the miscellaneous
reserve amount was applied to reduce the outstanding class A principal
adjustment amount on the April 17, 2001 payment date. The reduction of the
maintenance reserve amount for purposes of the "First Collection Account Top-up"
allows an additional amount of up to $20 million to be applied, if required, to
pay the minimum hedge payments, class A minimum principal, class B interest,
class B minimum principal, class C interest and class D interest on any payment
date after March 15, 2001. This additional $20 million amount, however, is still
required to be retained by Airplanes Group in the collection account for
purposes of the "Second Collection Account Top-up." This reduction of the

69

miscellaneous reserve amount and the maintenance reserve amount did not cause
the rating agencies to lower or withdraw the ratings of any class or subclass of
certificates.

If the balance of funds on deposit in the collection account falls below
the liquidity reserve amount at any time (including as a result of Airplanes
Group's determination that the liquidity reserve amount should be increased, as
required by the applicable rating agencies or otherwise), Airplanes Group may
continue to make all payments, including required payments on the notes and the
guarantees, which rank prior to or equally with payments of accrued but unpaid
interest on the class D notes and any permitted accruals so long as the balance
of funds in the collection account does not fall below the sum of the
maintenance reserve amount and the miscellaneous reserve amount at their then
current levels. Even if the balance of funds in the collection account falls
below the sum of the maintenance reserve amount and the miscellaneous reserve
amount, Airplanes Group may continue to make all payments, including required
payments on the notes and the guarantees, of (a) all accrued but unpaid interest
and, on the final maturity date, principal of the class or subclass of the most
senior class of notes then outstanding to avoid a note event of default and (b)
payments under Airplanes Group's swap agreements.

If the aggregate outstanding principal balance of the notes is less than or
equal to the liquidity reserve amount, the balance of funds in the collection
account will be distributed in accordance with the priority of payments
established for the notes.

THE LESSEE FUNDED ACCOUNT

Some leases require that certain lessee security deposits and supplemental
rent payments to provide for maintenance reserves be segregated from other
Airplanes Group funds. These security deposits and maintenance reserves are held
in the "LESSEE FUNDED ACCOUNT" and are accounted for (and, if required by any
lease, segregated) on a per lease basis.

Funds on deposit in the lessee funded account are used to make specified
maintenance payments, security deposit repayments and other specified or
permitted payments and will not be used to make payments in respect of the notes
or the certificates at any time, including after a note event of default. In
some circumstances where lessees relinquish their rights to receive certain
maintenance and security deposit payments upon the expiration of a lease,
surplus funds may be transferred from the lessee funded account to the
collection account.

THE EXPENSE ACCOUNT

On each payment date, the cash manager withdraws the required expense
amount from the collection account to pay the expenses. To the extent that the
required expense amount has not been paid directly to expense payees, it is
deposited into the expense account. Further withdrawals of cash from the
collection account by the cash manager to satisfy expenses due and payable prior
to the next payment date that were not previously anticipated are also deposited
in the expense account. If funds on deposit in the collection account are less
than the required expense amount on any payment date, Airplanes Group will be
unable to pay the required expense amount in full, which may lead to a default
under Airplanes Group's various service agreements or other contracts under
which the expenses arise.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

INTEREST RATE SENSITIVITY

Airplanes Group's principal market risk exposure is to changes in interest
rates. This exposure arises from the notes (as illustrated in the table above at
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Indebtedness") and the derivative instruments used by Airplanes
Group to manage interest rate risk.

INTEREST RATE RISK AND MANAGEMENT

The leasing revenues of Airplanes Group are generated primarily from lease
rental payments which are based on either a fixed or floating rate, or a
combination of the two. In the case of floating rate leases, an element
70

of the rental varies in line with changes in LIBOR, generally six-month LIBOR.
See "Item 1. Business -- The Aircraft, Related Leases and Collateral -- The
Leases" for more information regarding the terms of our leases. As of March 31,
2002, leases representing approximately 90% of our portfolio by appraised value
as of January 31, 2002 provided for fixed rate rental payments and approximately
10% provided for floating rate payments.

In general, an interest rate exposure arises to the extent that Airplanes
Group's fixed and floating interest obligations in respect of the class A, B, C
and D notes do not correlate to the mix of fixed and floating rental payments
for different rental periods. This interest rate exposure can be managed through
the use of interest rate swaps and other derivative instruments. The class A and
class B notes bear floating rates of interest and the class C and class D notes
bear fixed rates of interest. The mix of fixed and floating rental payments
contains a higher percentage of fixed rate payments than the percentage of fixed
rate interest payments on the notes, including as a result of the fact that the
reset periods on floating rental payments are generally longer than the monthly
reset periods on the floating rate notes. In order to correlate the contracted
fixed and floating rental payments to the fixed and floating interest payments
on the notes, Airplanes Group enters into interest rate swaps.

Under the swaps, Airplanes Group pays fixed amounts and receives floating
amounts on a monthly basis. The swaps amortize having regard to a number of
factors, including the expected pay down schedule of the class A and B notes,
the expiry dates of the leases under which lessees are contracted to make fixed
rate rental payments and the LIBOR reset dates under the floating rate leases.
At least every three months, and in practice more frequently, the administrative
agent seeks to enter into additional swaps or sell at market value or unwind
part or all of the swaps and any future swaps in order to rebalance the fixed
and floating mix of interest obligations and the fixed and floating mix of
rental payments.

As of March 31, 2002, Airplanes Group had unamortized swaps with an
aggregate notional principal balance of $1,870 million. The aggregate notional
principal balance of these swaps reduce by their terms to $1,235 million by
March 31, 2003, to an aggregate notional principal balance of $820 million by
March 31, 2004, to an aggregate notional principal balance of $385 million by
March 31, 2005 and to an aggregate notional principal balance of $95 million by
March 31, 2006. None of the swaps has a maturity date extending beyond July 15,
2006. The aggregate fair market value of the portfolio of 48 swaps as of March
31, 2002 was estimated at $(36) million (that is, the swaps were
"out-of-the-money," meaning that if the swaps were sold then, a loss of $36
million would result) as detailed below:

AIRPLANES GROUP SWAP BOOK AT MARCH 31, 2002

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

(1) While some of the above swaps have a fixed notional amount, many amortize
over the period to the final maturity date.

(2) Airplanes Group makes fixed rate payments on a monthly actual/360 adjusted
basis under all swaps, with the exception of swap number 4 under which
Airplanes Group makes fixed rate payments calculated on a monthly 30/360
unadjusted basis.

(3) Under all swaps, Airplanes Group receives floating rate payments at one
month LIBOR, reset monthly on an actual/360 adjusted basis.

(4) The initial amounts for swaps number 38, 39, 44 and 48 are $15 million, $40
million, $30 million and $100 million respectively.

Pursuant to a decision of the directors of Airplanes Limited and the
controlling trustees of Airplanes Trust on November 8, 1999, Airplanes Group
either re-couponed or unwound and replaced 30 of its then portfolio of 44 swaps.
20 of these swaps were adjusted so that Airplanes Group's fixed payment rate
more closely reflected then current market rates. Airplanes Group received a net
cash payment of $9.33 million with respect to these 20 swaps. In addition, ten
of the 30 swaps were terminated, in return for a net payment to Airplanes Group
of $1.92 million. In aggregate, Airplanes Group received a net cash inflow of
$11.25 million as a result of this
72

recouponing or unwinding and replacement, which resulted in additional principal
payments to certificateholders but became subject to higher ongoing swap costs
due to the re-calibrating of the swaps to then current market rates, as has been
observed. (Simultaneously with these terminations, Airplanes Group put in place
a replacement swap to maintain a hedged position.) These transactions were
conducted in accordance with Airplanes Group's interest rate risk management
policies. The realized gain on the termination of these swaps has been deferred
and is being recognized over the life of the hedged transaction in accordance
with the guidance provided in ET Issue No. 84-7, "Termination of Interest Rate
Swaps."

Additional interest rate exposure will arise to the extent that lessees
owing fixed rate rental payments default and interest rates have declined
between the contract date of the lease and the date of default. This exposure
can be managed through the purchase of swaptions. If Airplanes Group purchases
swaptions, these, if exercised, will allow Airplanes Group to enter into
interest rate swap transactions under which it would pay floating amounts and
receive fixed amounts.

Because not all lessees making fixed rate rental payments are expected to
default and not all lessee defaults are expected to occur following a decline in
interest rates, Airplanes Group purchases swaptions in a notional amount less
than the full extent of the exposure associated with the lessees making fixed
rate rental payments. This notional amount (the "TARGET HEDGE") will be varied
from time to time to reflect, among other things, changes in the mix of payments
bases under future leases and in the prevailing level of interest rates.

The payment of the premium for any of these swaptions may be made at two
points in the priority of payments under the indentures. Fifty percent of any
swaption premium in any month is a "MINIMUM HEDGE PAYMENT" and is paid fourth in
Airplanes Group's order of priority of payments. The other 50% of the premium is
expended as a "SUPPLEMENTAL HEDGE PAYMENT" and is paid seventeenth in Airplanes
Group's order of priority of payments.

If there are not sufficient amounts available for distribution and a
supplemental hedge payment would not be made in any month, then Airplanes Group
will reduce the aggregate notional amount of the swaptions bought in that month
to reflect the amount that can be bought for the premium payable as a minimum
hedge payment. As a result of the outstanding class A principal adjustment
amount, no supplemental hedge payments can be made until there are sufficient
cash flows in any given month to satisfy all obligations ranking senior to the
supplemental hedge payment under the terms of the notes. From time to time the
administrative agent may also sell at market value or unwind part or all of the
swaption portfolio, for example, to reflect any decreases in the target hedge.

In the period from March 28, 1996 to March 31, 2002, Airplanes Group
purchased swaptions for interest rate swaps with an aggregate notional principal
balance of $659 million and sold swaptions with an aggregate notional principal
balance of $589 million and swaptions with an aggregate notional principal of
$70 million matured. The net aggregate notional principal balance of swaptions
at March 31, 2002 therefore amounted to $Nil.

On September 28, 2001 Airplanes Group sold its portfolio of sixteen
swaptions with a notional principal balance of $315 million. The cash receipt
from the sale totaled $11.36 million. This sale released the positive value in
our swaption portfolio and allowed that value to be applied to make additional
payments of the class A principal adjustment amount. Rating agency approval was
obtained in relation to the transaction prior to executing the sale. Following
consultation with the rating agencies, it is not currently proposed to purchase
any swaptions primarily due to the low interest rate environment and our current
cash flow performance.

The realized gain on the value of the swaptions of $8.9 million, i.e. the
sale proceeds of $11.36 million less the carrying value at June 30, 2001 of $2.5
million, has been included as a credit against interest expense in the year to
March 31, 2002.

Through the use of swaps, swaptions and other interest rate hedging
products, Airplanes Group seeks to manage its exposure to adverse changes in
interest rates based on regular reviews of its interest rate risk. There can be
no assurance, however, that Airplanes Group's interest rate risk management
strategies will be effective in this regard. In particular, because of our
current financial condition, we may have difficulty finding counterparties.
73

The directors of Airplanes Limited and the controlling trustees of
Airplanes Trust are responsible for reviewing and approving the overall interest
rate management policies and transaction authority limits. Specific hedging
contracts are approved by officers of the administrative agent acting within the
overall policies and limits. Counterparty risk is monitored on an ongoing basis.
Counterparties are subject to the prior approval of the directors of Airplanes
Limited and the controlling trustees of Airplanes Trust. Airplanes Group's
counterparties consist of the affiliates of major U.S. and European financial
institutions who have credit ratings, or provide collateralization arrangements,
which are consistent with maintaining the ratings of the class A certificates.

On April 1, 2001 we adopted Statement of Financial Accounting Standards
(SFAS) 133, "Accounting for Derivative Instruments and Certain Hedging
Activities" and SFAS 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of SFAS 133." As a result, all
derivatives are now recognized on the balance sheet at their fair value. All
derivatives are designated as either a hedge of the fair value of a recognized
asset or liability or of an unrecognized firm commitment ("fair value" hedge), a
hedge of a forecasted transaction or of the variability of cash flows to be
received or paid related to a recognized asset or liability ("cash flow" hedge),
a foreign-currency fair-value or cash-flow hedge ("foreign currency" hedge) or a
"held for trading" instrument. All of our interest rate swaps are currently
designated as cash flow hedges.

We have a detailed hedging policy, which has been approved by the board of
directors of Airplanes Limited and controlling trustees of Airplanes Trust and
the rating agencies. As part of this hedging policy we have formally documented
all relationships between hedging instruments and hedged items as well as our
risk-management objective and strategy for undertaking various hedge
transactions.

This process includes linking all derivatives that are designated as cash
flow hedges to specific liabilities on the balance sheet. We formally assess,
both at the hedge's inception and on an ongoing basis, whether the derivatives
that are used in hedging transactions are highly effective in offsetting changes
in cash flows of hedged items.

Changes in the fair value of a derivative that is highly effective and that
is designated and qualifies as a cash flow hedge are included in the item "Net
change in cash flow hedges" in "other comprehensive income" (OCI), until
earnings are affected by the variability in cash flows of the designated hedged
item.

Hedge accounting is discontinued prospectively when it is determined that
the derivative is no longer highly effective in offsetting changes in the cash
flows of the hedged item, the derivative expires or is sold, terminated, or
exercised, or it is determined that designation of the derivative as a hedging
instrument is no longer appropriate. In all situations in which hedge accounting
is discontinued, the derivative will continue to be carried at its fair value on
the balance sheet, and any changes in its fair value will be recognized in
earnings. In all situations where derivatives are designated as trading
instruments, they are carried at fair value on the balance sheet and any changes
in fair value are recognized in earnings.

The opening effect as at April 1, 2001 of the adoption of SFAS 133 was
$(38) million in other comprehensive income (i.e. if the swaps were sold then, a
loss of $38 million would have resulted) and $5 million in earnings (being the
deferred gain on early termination of interest and related derivatives). The net
change in the value of cash flow hedges for the year ended March 31, 2002 was an
increase of $2 million.

In August 2001, the Financial Accounting Standards Board issued SFAS 144,
"Accounting for the Impairment or Disposal of Long-lived Assets," which
supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-lived Assets to be disposed of." SFAS 144 established additional criteria
to determine when a long-lived asset is held for sale. It also broadens the
definition of "discontinued operations," but does not allow for the accrual of
future operating losses, as was previously permitted. SFAS 144 is effective for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. The provisions of SFAS 144 are
generally to be applied prospectively. We adopted SFAS 144 as of the beginning
of the year ending March 31, 2002 and the provisions of SFAS 144 were applied in
the determination of the impairment charge we incurred in the third quarter.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this item is submitted as a separate section of this
report. See "Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K."

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

DIRECTORS AND CONTROLLING TRUSTEES

The Directors and the Controlling Trustees of Airplanes Limited and
Airplanes Trust, respectively, their respective ages and principal activities
are as follows:

Richard Cavanagh is the President and Chief Executive Officer of The
Conference Board, Inc., a global business research and membership enterprise
based in New York City. Before taking up his current position in 1995, he served
for eight years as Executive Dean of the Kennedy School of Government at Harvard
University. Before that, he was a partner at McKinsey & Company, Inc., an
international management consulting firm. During his 17 years with McKinsey, he
took a two-year public service leave and held senior positions in The White
House Office of Management & Budget. He co-authored the management book The
Winning Performance. Mr. Cavanagh also serves as a director of Aircraft Finance
Trust (another aircraft securitization vehicle), the BlackRock Mutual Fund
family, Arch Chemicals (formerly Olin), The Fremont Group (formerly Bechtel
Investments) and The Guardian Life Insurance Company.

Roy Dantzic qualified as a chartered accountant in 1968 and started his
career with Coopers & Lybrand. Between 1970 and 1980, he engaged in corporate
advisory work, principally as a director of Samuel Montagu. In 1980, Mr. Dantzic
was appointed by the British Government as the finance director of British
National Oil Corporation and he served in this capacity until 1984. Between 1985
and 1989, he was a director of the corporate broking division of Wood McKenzie.
In 1989 he joined the board of directors of Stanhope Properties and served as
its finance director from 1992 until the company was acquired in 1995. Since May
1996, Mr. Dantzic has been the managing director of Lattice Property Holdings
Ltd.

Hugh Jenkins has spent over 20 years in senior investment management
positions. He served as Director-General of Investments for the pension plans of
the National Coal Board from 1973-1985, a director of Heron International, N.V.
from 1985-1986, Group Investment director of Allied Dunbar Insurance Plc from
1986-1989, and an executive director of the Prudential Corporation plc and
Chairman/Chief Executive of its investment management subsidiary from 1989 to
December 1995. He is currently the Chairman of Development Securities plc and a
non-executive director of EMI Group plc, Johnson Matthey plc, Gartmore European
Investment Trust plc and Development Securities (Investments) plc. Mr. Jenkins
is also an Advisory Director of London Economics Ltd.

William McCann, a chartered accountant, was the Managing Partner of Craig
Gardner/Price Waterhouse in the Republic of Ireland from 1987 to 1995. From 1991
to 1995 he was a member of the Price Waterhouse World Board. He was a director
of the Central Bank of Ireland from 1993 to 1998. Mr. McCann was a member of the
Electricity Supply Board, Ireland from 1986 to 2001 and Chairman from 1996 to
2001. Mr. McCann is currently Deputy Chairperson of the Irish Takeover Panel. He
is also a director of Canada Life Assurance (Ireland) Limited and Readymix plc
and is Chairman or a director of a number of other companies. He is a member of
the Irish National Competitiveness Council and is a Board Member of the
University College Dublin Graduate School of Business.
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Brian Hayden qualified as a mechanical engineer in 1970 and started his
career with Aer Lingus. He worked in various management positions within Aer
Lingus during the next 19 years. In 1989, he moved to GPA Group (now known as
debis AirFinance Ireland) to head the technical division as Senior Vice
President -- Technical. In 1993, he joined GECAS and is presently an Executive
Vice President with responsibility for technical management of the GECAS-owned
and managed fleet. He is a director of GECAS and a former director of Irish
Helicopters.

Neither Airplanes Limited nor Airplanes Trust has any employees or
executive management. The board of directors of Airplanes Limited and the
controlling trustees of Airplanes Trust rely on the servicer, the administrative
agent, the cash manager and the other service providers for all servicing,
executive and administrative functions. See "Item 1. Business -- Risk Factors --
Risks Relating to Airplanes Group and Third Parties" for a description of the
risks involved in relying on service providers to operate our business. The
directors and controlling trustees of Airplanes Limited and Airplanes Trust, as
well as other individuals, serve as directors of various of our subsidiaries.

AUDIT COMMITTEES

The audit committees of Airplanes Limited and Airplanes Trust, each
established in August 2000, consist of their four independent directors or
controlling trustees, respectively. The duties of each audit committee include:

(a) consideration of the independence and appointment of external
auditors and audit fees;

(b) discussion of the nature and scope of the audit with the external
auditor before any audit commences;

(c) review of the annual financial statements before submission to the
board of Airplanes Limited or controlling trustees of Airplanes
Trust;

(d) discussion of any issues and reservations arising from the audit and
any matters the auditor may wish to discuss, if necessary, in the
absence of the administrative agent, cash manager and servicer;

(e) review of Airplanes Group's internal control systems; and

(f) consideration of other topics as defined by the board of Airplanes
Limited or controlling trustees of Airplanes Trust.

THE SERVICER

GECAS provides various aircraft-related services to us as servicer under
the servicing agreement. On November 20, 1998, GECAS' affiliate, GE Capital,
acquired the class E notes previously held by GPA Group (now known as debis
AirFinance Ireland) and its subsidiaries. As the holder of the majority of the
class E notes, GE Capital has the right to appoint one director to the board of
Airplanes Limited and one controlling trustee of Airplanes Trust. GECAS also
holds 5% of the ordinary share capital of Airplanes Holdings, and its affiliate,
GE Capital, has an option to acquire the residual interest in Airplanes Trust
from debis AirFinance, Inc.

GECAS is a global commercial aviation financial services company that
offers a broad range of aircraft financial products and provides management,
marketing and technical support services to airlines, aircraft owners, lenders
and investors and various of its affiliates, including the GE Group, and other
third parties, including Aircraft Finance Trust, Lease Investment Flight Trust
and Airplanes Group. As of March 31, 2002, GECAS and its affiliates managed a
portfolio consisting of 1,363 aircraft on lease to more than 187 lessees in 65
countries throughout the world. As of March 31, 2002, GECAS has also committed
to purchase a total of 331 new aircraft from manufacturers, deliverable through
December 2007.

GECAS and its affiliates offer such financial products as finance leases
(including both direct financing and leveraged leases), operating leases and
other structured finance products (including aircraft securitization vehicles).
Its management services include collecting rental payments, arranging and
monitoring aircraft maintenance performed by others, limited technical
inspection of aircraft, arranging and monitoring insurance, arranging for
aircraft valuations, registration and de-registration, monitoring compliance
with leases, enforcement of lease provisions against lessees, confirming
compliance with applicable ADs and facilitating delivery and
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redelivery of aircraft. GECAS also arrange sales of aircraft to third parties.
GECAS, its affiliate, GE Capital, or any of its other affiliates may acquire
debt or beneficial interests in other securitization vehicles that own a
portfolio of aircraft assets.

GECAS is headquartered in Shannon, Ireland where it had 97 employees as of
March 31, 2002. GE Capital Aviation Services, Inc., of which GECAS is a
subsidiary, has a further 128 employees worldwide and has operations in
Stamford, Connecticut; Shannon, Ireland; Miami, Florida and a number of other
locations.

The table below sets forth the different aircraft comprising the GECAS
managed portfolio as of March 31, 2002 by manufacturer and by whether the
aircraft are owned and managed by affiliates of GE Capital or managed for third
parties or Airplanes Group.

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

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(1) The third parties include Lease Investment Flight Trust and Aircraft
Finance Trust. Certain aircraft included in the Other Managed Third Parties
fleet are owned by joint ventures or pursuant to other arrangements in
which unaffiliated parties have interests.

(2) For purposes of this table, seven B737 aircraft which GE Capital leases to
debis AirFinance Ireland and which are subleased to the operating lessee,
have been included in the GE Capital fleet.

(3) Turboprop and Stage 3 hushkitted aircraft have been classified as Stage 3
compliant.

THE SERVICING AGREEMENT

GECAS provides services with respect to all of the aircraft in our
portfolio pursuant to the servicing agreement. The servicing agreement provides
that the servicer will act in accordance with applicable law and with our
directions in performing the aircraft services described below. In addition, the
servicer has agreed to perform its services in accordance with the following
"GECAS SERVICES STANDARD" and "GECAS CONFLICTS STANDARD":

- GECAS must use reasonable care and diligence at all times in the
performance of the services.

- If a conflict of interest arises regarding GECAS's management, servicing
or marketing of (a) any two aircraft in our portfolio or (b) any
aircraft in our portfolio and any other aircraft managed by GECAS, GECAS
will perform its services in good faith. If the two aircraft or the
aircraft in our portfolio and the other aircraft managed by GECAS are
substantially similar in terms of objectively identifiable
characteristics that are relevant for the particular services to be
performed, GECAS will not discriminate among the aircraft or between any
of the aircraft in our portfolio and any other aircraft managed by GECAS
on an unreasonable basis. GECAS is not obliged to inform us of any
conflicts of interest.

The servicer does not have any fiduciary duty or other implied duties to us
or any other person, including any certificateholders, and its obligations will
be limited to the express terms of the servicing agreement. GECAS will not be
liable to us for any of our losses arising out of, in connection with or related
to, GECAS's management of our portfolio, except where those losses are finally
adjudicated to have resulted directly from GECAS's gross negligence or wilful
misconduct. The servicer is not obliged to take any action that it believes is
reasonably likely to violate any applicable law with respect to GECAS or its
affiliates, violate any established written policies of GE related to legal,
ethical and social matters in business practices, or lead to an investigation by
any governmental authority. In addition, the servicer does not assume any
liability or accountability for (a) the terms and conditions of the notes, (b)
the ability of Airplanes Limited or Airplanes Trust to comply with the terms and
conditions of the notes or the guarantees and (c) the structuring or
implementation of any aspect of the various transactions contemplated by this
report.

Airplanes Limited, Airplanes Trust, Airplanes Holdings and AeroUSA have
agreed to indemnify the servicer and its affiliates on an after-tax basis for
any of its losses arising out of, in connection with or related to its
performance of the services, except where those losses are finally adjudicated
to have resulted directly from GECAS's gross negligence or wilful misconduct in
respect of its obligation to apply the GECAS services standard or GECAS
conflicts standard in respect of its performance of the services.

AIRCRAFT SERVICES

The main categories of the services that are provided by the servicer are:

- lease marketing, including re-marketing, lease negotiation and
execution;

- aircraft management, including lease rent collection, ensuring aircraft
maintenance, insurance monitoring and procurement, contract compliance
by, and enforcement against, lessees, and accepting delivery and
re-delivery of aircraft;

- aircraft sales as we direct;

- monitoring of maintenance reporting, and provision of records and
information about the aircraft;

- arranging valuations and monitoring regulatory developments;

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- commercially reasonable assistance in complying with covenants relating
to the aircraft under the indentures;

- assistance in connection with public or private offerings of
certificates;

- legal and other professional services in the ordinary course of the
operating lease business; and

- periodic reporting of operational information relating to the aircraft.

The servicer has also agreed to give us and our agents access to
information and its personnel for monitoring purposes, and to separate its own
funds from our funds.

OPERATING GUIDELINES

Under the servicing agreement, GECAS is entitled to exercise the authority
necessary to give it a practicable and working autonomy in performing the
services. Airplanes Holdings, acting on behalf of Airplanes Group through the
administrative agent, has established monitoring and control procedures to
enable the servicer to properly manage our business and assets.

All transactions the servicer enters into on our behalf must be at arm's
length and on fair market value terms unless we agree otherwise. Some
transactions or matters involving the aircraft require the prior written
approval of Airplanes Holdings. These include:

- sales of aircraft unless required by a lease;

- entering into any leases, renewals or extensions on terms that do not
comply with the operating covenants under the indentures;

- terminating any lease or leases to any single lessee with respect to
aircraft having an aggregate depreciated net book value in excess of
$200 million;

- entering into any contract for the modification or maintenance of
aircraft where the costs to be incurred (a) exceed the greater of (1)
the estimated aggregate cost of a heavy maintenance check for a similar
aircraft and (2) available maintenance reserves or other collateral
under the related lease, or (b) are outside the ordinary course of our
business;

- issuing any guarantee for us, or otherwise pledging our credit, other
than with respect to trade payables in the ordinary course of business;
and

- any transaction with GE Capital or any of its affiliates not
contemplated in the servicing agreement.

BUDGET

Airplanes Holdings adopts an annual budget each year with respect to the
aircraft. The servicer has agreed to use reasonable commercial efforts to
attempt to achieve the budget each year.

SERVICING FEES

Airplanes Limited, Airplanes Holdings and AeroUSA pay an annual
index-linked fee to the servicer, payable monthly in arrears for the period each
aircraft is under management. For the year to March 31, 2002, this fee was 0.54%
of the agreed book value of each aircraft, payable monthly in arrears for the
period of time that aircraft is under GECAS's management. The servicer is
entitled to additional incentive fees based on annual cash flow generated by
leases in excess of targets and sales of aircraft, with a minimum fee of $1.5
million annually. The servicer is also entitled to additional fees in connection
with the services required to be provided by GECAS in respect of any offerings
and sales by us of certificates. Airplanes Limited, Airplanes Holdings and
AeroUSA also pay expenses incurred or approved by the servicer on our behalf,
including aircraft maintenance costs and insurance, outside professional
advisory fees and other out of pocket expenses, which may be a significant
component of our overhead costs. In the year ended March 31, 2002, aircraft
maintenance reserve expenses were $37.5 million. Other expenses, including
servicer fees, outside professional advisory fees, insurance and other out of
pocket expenses amounted to $29.8 million for the same period.
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TERM AND TERMINATION

The initial term of the servicing agreement expires on the earlier of March
28, 2014 and the payment in full of all amounts outstanding under the notes.
Each party has the right to terminate under specified circumstances. The
servicer has the right to terminate the servicing agreement if any of the
following occur:

- Airplanes Limited, Airplanes Trust, Airplanes Holdings and/or AeroUSA
fail to pay when due any servicing fees or other amounts owed to the
servicer after appropriate notice;

- Airplanes Limited, Airplanes Trust, Airplanes Holdings and/or AeroUSA
fail to perform or observe or violate in any material respect any
material term, covenant, condition or agreement under the servicing
agreement;

- any of Airplanes Limited, Airplanes Trust, Airplanes Holdings, AeroUSA
or their respective subsidiaries or affiliates has made a false or
misleading representation or warranty in the servicing agreement or any
related document that is reasonably likely to have a material adverse
effect on the servicer or on its rights and obligations under the
servicing agreement;

- an involuntary proceeding under applicable bankruptcy, insolvency,
receivership or similar law against Airplanes Limited, Airplanes Trust,
Airplanes Holdings, AeroUSA or any of their significant subsidiaries
continues for 75 days or if any of these entities goes into liquidation
or suffers a receiver or mortgagee to take possession of all or
substantially all of our or its assets, or if any of these entities
commences a voluntary proceeding under bankruptcy, insolvency,
receivership or similar law or makes a general assignment for the
benefit of their creditors;

- Airplanes Limited, Airplanes Trust, AeroUSA, Airplanes Holdings and
their respective subsidiaries and affiliates no longer own any aircraft;

- the indentures cease to be in full force and effect; or

- any guarantee in favor of the servicer by any of Airplanes Limited,
Airplanes Trust, AeroUSA, Airplanes Holdings and their respective
subsidiaries and affiliates ceases to be legal, valid and binding.

Airplanes Holdings, on behalf of itself, AeroUSA and Airplanes Limited, has
the right to terminate the servicing agreement if any of the follow occur:

- the servicer ceases to be at least 75% owned, directly or indirectly, by
GE or GE Capital;

- the servicer fails in any material respect to perform any material
services required by the servicing agreement in accordance with the
GECAS services standard or the GECAS conflicts standard, and this
failure has a material adverse effect on Airplanes Group as a whole; or

- an involuntary proceeding under bankruptcy, insolvency, receivership or
similar law against GE, GE Capital or the servicer continues undismissed
for 75 days or any of those entities goes into liquidation or suffers a
receiver or mortgagee to take possession of all or substantially all of
its assets, or if GE, GE Capital or the servicer commences a voluntary
proceeding under bankruptcy, insolvency, receivership or similar law or
makes a general assignment for the benefit of its creditors.

Airplanes Limited, AeroUSA and Airplanes Holdings also have the right to
terminate the servicing agreement upon six months' written notice to the
servicer if:

- the servicer fails to perform any of its specified tax related
undertakings to preserve the Shannon tax benefits as described below;
and

- as a result, we experience a material adverse tax event as defined in
the servicing agreement.

The servicer may resign if it determines that directions given, or services
required, would, if carried out:

- be unlawful under applicable law;

- violate GE policy as written and in effect for GE and its controlled
subsidiaries at that time;

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- be likely to lead to an investigation by any governmental authority;

- expose the servicer to liabilities for which, in the servicer's good
faith opinion, it is not adequately indemnified; or

- place the servicer in a conflict of interest so that, in the servicer's
good faith opinion, it could not continue to perform its obligations
under the servicing agreement according to its terms.

Generally, the servicer may only resign, and the parties may only terminate
the servicing agreement, if a replacement servicer has been appointed and the
rating agencies have confirmed that the current ratings of any certificates will
not be lowered or withdrawn.

TAX STATUS

Because GECAS owns 5% of the outstanding issued ordinary share capital of
Airplanes Holdings and it maintains particular employment levels in Shannon,
Ireland, Airplanes Holdings and its Irish tax-resident subsidiaries enjoy
reduced rates of corporation tax, and improved entitlements to capital
allowances. In addition, these Shannon tax benefits include the right to pay
interest in various circumstances without paying Irish withholding tax, and to
deduct payments of interest in calculating corporate tax liability. While we
expect Airplanes Holdings and our Irish tax resident subsidiaries to continue to
benefit from their status as Shannon certified companies until the scheduled
termination of the preferential tax regime on December 31, 2005, we cannot
guarantee that the management of the aircraft by the servicer will not expose
Airplanes Holdings or the Irish tax resident companies to tax liabilities
outside Ireland. The servicing agreement sets out various tax-related
undertakings of the servicer to maintain a favorable tax treatment in Ireland
for Airplanes Holdings and its Irish tax resident subsidiaries. These include:

- maintaining minimum levels of employment in Ireland if required for
Airplanes Holdings or its Irish tax resident subsidiaries to maintain
their Shannon licences and tax certification;

- holding meetings of the board of directors of the servicer in Shannon at
least quarterly, and only occasionally outside Shannon;

- holding meetings of the servicer's transaction approval committee in
Shannon at least monthly and only occasionally outside Ireland;

- a majority of the committee members must be employees of the servicer;

- generally signing aircraft-related contracts in Ireland or outside of
Ireland pursuant to a limited power of attorney;

- compensating any of the servicer's affiliates for services provided
outside Ireland in respect of the aircraft only to the extent those
services are provided by express agreement;

- ensuring the managing director of the servicer is an officer and
employee based in Shannon; and

- maintaining no offices outside Shannon.

If the servicer breaches a tax-related undertaking as a result of its gross
negligence or wilful misconduct and we experience a material tax event, our sole
remedy is to terminate the servicing agreement after notice. The servicer has
the right for any good faith commercial reason to modify the tax-related
undertakings, which could lead to a loss of favorable tax treatment for
Airplanes Holdings and its Irish tax resident subsidiaries.

ASSIGNMENT OF SERVICING AGREEMENT

None of the servicer, Airplanes Limited, Airplanes Holdings or AeroUSA can
assign their rights and obligations under the servicing agreement without the
other parties' consent. However, the servicer may delegate a portion, but not
all, of its duties to GE Capital or GE or any 75% or more owned subsidiary of GE
Capital or GE.

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PRIORITY OF PAYMENT OF SERVICING FEES AND REIMBURSABLE EXPENSES

The fees and expenses of the servicer rank senior in priority of payment to
all payments of interest, principal and any premium on the notes.

The obligations of Airplanes Limited, Airplanes Holdings and AeroUSA under
the servicing agreement have been guaranteed by each other, Airplanes Trust and
their respective subsidiaries and affiliates.

GECAS's address is GE Capital Aviation Services Limited, Aviation House,
Shannon, Ireland and its telephone number is +353-61-706500.

THE ADMINISTRATIVE AGENT AND CASH MANAGER

DEBIS AIRFINANCE IRELAND

Subsidiaries of debis AirFinance Ireland serve as our administrative agent
and cash manager. debis AirFinance Ireland is a wholly-owned indirect subsidiary
of debis AirFinance B.V., a major participant in the global commercial aviation
industry. debis AirFinance B.V., directly and through debis AirFinance Ireland
and other subsidiaries, also owns and manages aircraft, both for its own account
and for third parties, including AerCo, another aircraft securitization vehicle.
At March 31, 2002, debis AirFinance B.V. directly had 198 aircraft in its
portfolio which were on lease to 75 lessees in 36 countries and, through debis
AirFinance Ireland, had 106 aircraft in its portfolio which were on lease to 57
lessees in 28 countries. debis AirFinance Ireland is also the holder of all of
the subclass D-2, E-1 and E-2 notes of AerCo and acts as servicer for AerCo's
portfolio of aircraft. Subsidiaries of debis AirFinance Ireland also act as
administrative agent and cash manager to AerCo. Other subsidiaries of debis
AirFinance Ireland act as administrative agent and cash manager to GPA-ATR
Limited, a turboprop aircraft joint venture company in which debis AirFinance
Jetprop Limited holds 50% of the share capital.

GPA Group (now known as debis AirFinance Ireland), directly or indirectly
owned all of the aircraft, the aircraft-owning and aircraft-leasing subsidiaries
that we acquired in March 1996. We have taken steps to structure Airplanes Group
and the acquisition from debis AirFinance Ireland in 1996 to ensure that our
assets would not be consolidated with the assets of debis AirFinance Ireland and
would not otherwise become available to their creditors in any bankruptcy or
insolvency proceeding involving debis AirFinance Ireland or any of its
affiliates. See "Item 1. Business -- Risk Factors -- Risks Relating to
Bankruptcy."

At March 31, 2002, debis AirFinance B.V. employed 102 people worldwide,
with 37 employees in Shannon, Ireland, where debis AirFinance Ireland is
located. debis AirFinance B.V. has its headquarters in Amsterdam, the
Netherlands and also has an office with 5 employees in Fort Lauderdale, Florida.
debis AirFinance B.V. is currently reorganizing its operations in Shannon,
Ireland such that it expects to have 14 employees located there by August 31,
2002.

ADMINISTRATIVE AGENT

debis AirFinance Financial Services (Ireland) Limited, as administrative
agent, is responsible for providing administrative and accounting services to
the directors and controlling trustees. Its duties include:

- monitoring the performance of the servicer;

- liaising with rating agencies;

- maintaining accounting ledgers (although we retain responsibility for
all discretionary decisions and judgments relating to the preparation
and maintenance of ledgers and accounts, and we retain responsibility
for, and prepare, our financial statements);

- preparing and presenting annual budgets to us for approval;

- authorizing payment of various expenses;

- coordinating any amendments to the transaction documents other than the
leases;

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- supervising outside counsel and coordinating legal advice;

- preparing and coordinating reports to investors and the SEC and managing
investor relations with the assistance of outside counsel and auditors,
if appropriate;

- preparing, or coordinating the preparation of, all required tax returns
for our approval and filing;

- maintaining, or monitoring the maintenance of, our books and records
that are not maintained by our company secretary or the Delaware
trustee;

- preparing agendas and any required papers for meetings of the governing
bodies of Airplanes Group entities;

- assisting us in (i) developing and implementing our interest rate
management policy and developing financial models, cash flow projections
and forecasts, and (ii) making aircraft lease, sale and capital
investment decisions;

- advising us as to the appropriate levels of the liquidity reserve
amount; and

- assisting us in the refinancing of all or a portion of the notes and
certificates.

We may also ask the administrative agent to provide additional services. We
pay the administrative agent an annual fee, which has been renegotiated with
effect from April 1, 2002, of $4 million, payable monthly in arrears, and an
additional annual fee of approximately $1.25 million, which varies according to
the number of aircraft owned. These fees will be index-linked with effect from
April 1, 2003. We reimburse the administrative agent for expenses incurred on
our behalf and indemnify the administrative agent for any liability it incurs,
other than through its own deceit, fraud, wilful default or gross negligence.

The administrative agent may resign upon 60 days' written notice in defined
circumstances. We may remove the administrative agent upon 120 days' written
notice with or without cause. However, the resignation or removal of the
administrative agent will not become effective until a successor administrative
agent has been appointed with the consent of the servicer and has accepted
appointment as the successor administrative agent under the administrative
agency agreement.

CASH MANAGER

debis AirFinance Cash Manager Limited, as cash manager, provides cash
management and related services to us, including establishing and administering
our accounts, providing information about our accounts and investing the funds
held by us in the collection account and the lessee funded account in prescribed
investments ("PERMITTED ACCOUNT INVESTMENTS") on permitted terms. These accounts
(but not the rental accounts) are maintained in the name of the security
trustee. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- The Accounts" for a more detailed
description of our accounts.

The cash manager calculates monthly payments and makes other calculations
required under the cash management agreement based on data it receives from the
servicer. The cash manager also provides the trustee with the information
required for the monthly reports to the certificateholders. It is the
responsibility of the cash manager to ensure that the proceeds from the lease or
sale of our assets are deposited in the collection account. Upon the occurrence
of a note event of default, the cash manager will distribute funds in the manner
set forth in the indentures.

We pay the cash manager an annual fee of $1 million, which will be
index-linked with effect from April 1, 2003, and indemnify the cash manager
against any loss or liability it incurs, other than through its own deceit,
fraud, willful default or gross negligence, or simple negligence in the handling
of funds.

The cash manager may resign upon 30 days' written notice so long as a
replacement cash manager has been appointed. We may remove the cash manager at
any time with or without cause.

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COMPANY SECRETARY

Mourant & Co. Secretaries Limited, as company secretary for Airplanes
Limited, provides secretarial services for, and maintains the books and records,
including minute books and stock transfer records, of Airplanes Limited.

DELAWARE TRUSTEE

Wilmington Trust Company, as the Delaware Trustee for Airplanes Trust,
maintains the books and records, including minute books and trust certificate
records, of Airplanes Trust.

ITEM 11. EXECUTIVE COMPENSATION

All directors of Airplanes Limited and controlling trustees of Airplanes
Trust are compensated for travel and other expenses incurred in the performance
of their duties. Each independent director and independent controlling trustee
is paid an index-linked annual fee, currently $79,480, for their services in
both capacities. The chairman of Airplanes Limited and Airplanes Trust also
receives an additional index-linked annual fee, currently $52,987, for his
services in that capacity. In addition, Mr. Dantzic, Mr. Jenkins and Mr. McCann
each receive annual amounts, currently $7,500, $2,500 and $7,500, respectively,
for their services as directors of Airplanes Holdings and some of its
subsidiaries. Mr. Dantzic, Mr. Jenkins and Mr. McCann are also entitled to
receive an additional $1,000 in respect of each board meeting of these companies
which they attend, subject to a maximum payment of $5,000 annually for each of
them. Mr. Cavanagh and Mr. Dantzic are also each entitled to receive an
aggregate of $2,500 annually from AeroUSA and AeroUSA 3 for their services as
directors of these companies and are also entitled to receive an additional
$1,000 in respect of each board meeting of these companies which they attend,
subject to a maximum payment of $5,000 annually. On July 1, 2000, the
independent directors and independent controlling trustees were paid a one-off
amount by Airplanes Limited and Airplanes Trust equal to the amount they would
have received had their fees been index-linked from April 1, 1996, taking
account of inflation from April 1, 1996 to April 1, 1999. The aggregate fees
paid to the independent directors and independent controlling trustees by
Airplanes Trust and Airplanes Limited may not exceed $550,000 in any year. The
directors and controlling trustees are reimbursed for travel and other expenses,
and premiums for directors' and officers' insurance are paid on their behalf.
Neither the director nor the controlling trustee appointed by the holder of a
majority in aggregate principal amount of the class E notes receives
remuneration from Airplanes Limited or Airplanes Trust for his services, except
reimbursement of travel and other expenses and payment of premiums for
directors' and officers' insurance.

The directors and the controlling trustees do not receive any additional
cash or non-cash compensation from Airplanes Limited or Airplanes Trust (either
in the form of stock options, stock appreciation rights or pursuant to any
long-term incentive plan, benefit or actuarial plan or any other similar
arrangements of any kind) as salary or bonus for their services as directors or
controlling trustees. None of the directors or controlling trustees currently
has an employment contract with either Airplanes Limited or Airplanes Trust or
serves as a member of a compensation committee of either Airplanes Limited or
Airplanes Trust. The compensation of the directors of Airplanes Limited is set
forth in the Articles of Association of Airplanes Limited and that of the
controlling trustees is set forth in the Airplanes Trust Agreement. None of the
directors or controlling trustees has any beneficial ownership in any of the
equity securities of Airplanes Limited, Airplanes Trust or any of their
subsidiaries.

None of the directors, controlling trustees or any member of their
families, or any person owning five percent or more of Airplanes Limited's
capital stock, has been party to any transaction, or is party to any currently
proposed transaction, with Airplanes Limited, Airplanes Trust or any of their
subsidiaries. No director or controlling trustee or any member of his family, or
any corporation, organization or trust in which that director or controlling
trustee is an executive officer, partner, trustee or has a beneficial interest,
has been indebted in any amount to Airplanes Limited or Airplanes Trust.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Not applicable.
85

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Airplanes Group has had and currently maintains various relationships with
GE Capital and GECAS. First, GECAS acts as servicer for Airplanes Group.
Secondly, GECAS is a holder of 5% of the ordinary share capital of Airplanes
Holdings. Thirdly, Mr Hayden, an employee of GECAS, is a director of Airplanes
Limited and a controlling trustee of Airplanes Trust. Fourthly, GE Capital holds
the majority of the Airplanes Group class E notes and has an option over the
residual interest in Airplanes Trust.

Airplanes Group has had and currently maintains various relationships with
debis AirFinance Ireland plc, formerly known as AerFi Group plc which was
previously known as GPA Group plc. First, debis AirFinance Ireland acted as
promoter in establishing the entities that comprise Airplanes Group. Secondly,
Airplanes Group purchased substantially all of its assets from debis AirFinance
Ireland . See "Item 1. Business -- Introduction." Third, debis AirFinance
Ireland was a holder of 5% of the ordinary share capital of Airplanes Holdings
until November 20, 1998. Fourth, subsidiaries of debis AirFinance Ireland act as
the Administrative Agent and Cash Manager for Airplanes Group. See "Item 10.
Directors and Executive Officers of the Registrants -- Corporate Management." In
addition, on November 20, 1998, GE Capital acquired the Airplanes Group class E
notes previously held by debis AirFinance Ireland.

86

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) and (2). Financial Statements: the response to this portion of Item
14 is submitted as a separate section of this report beginning on page F-1.

* Incorporated by reference to the Registration Statement on Form S-1
(File No. 33-99978), previously filed with the Commission on December
1, 1995, and Amendments No. 1 through 5 thereto.

** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended December 31, 1996, previously filed with the Commission.

*** Incorporated by reference to the Registration Statement on Form S-1
(File No. 33-99978), previously filed with the Commission on December
30, 1997, and Amendments No. 1 through 3, thereto.

**** Incorporated by reference to the Report on Form 10-Q for the quarterly
period ended June 30, 2000, previously filed with the Commission.

***** Incorporated by reference to the Registration Statement on Form S-4
(File No. 33-58608), previously filed with the Commission on April 10,
2001 and Amendment No. 1 thereto.

****** Appendix 3 to the Offering Memorandum dated March 15, 2001 was intended
to contain the Expected Portfolio Value based on the Depreciation
Factors and the aircraft in the portfolio as of January 31, 2001, but
instead contained the Adjusted Portfolio Value based on the Depreciation
Factors and the aircraft in the portfolio as of January 31, 2001. The
Appendix 3 filed herewith contains the Expected Portfolio Value based on
the Depreciation Factors and the aircraft in the portfolio as of March
31, 2002. Notwithstanding the numbers contained in Appendix 3 to the
Offering Memorandum dated March 15, 2001, all payments on notes and
certificates determined by reference to Expected Portfolio Value as of
the applicable payment date have been calculated using the correct
Expected Portfolio Values.

(b) Reports on Form 8-K: filed on February 13, 2002, March 13, 2002, April
11, 2002 and May 13, 2002 (relating to the monthly report to holders of the
Certificates); filed on March 27, 2002 (containing a press release in respect of
ratings actions).

(d) Not applicable.

89

AIRPLANES GROUP

INDEX TO FINANCIAL STATEMENTS

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of Airplanes Limited
and the Controlling Trustees of Airplanes U.S. Trust

We have audited the accompanying balance sheets of Airplanes Limited and
Airplanes U.S. Trust ("Airplanes Group") as of March 31, 2002 and 2001, and the
related statements of operations, changes in shareholders' deficit/net
liabilities, comprehensive income/(loss) and cash flows for each of the years in
the three year period ended March 31, 2002. These financial statements are the
responsibility of management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. These standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

As described more fully in notes 9 and 11 to the financial statements, the
economic downturn as exacerbated by the September 11, 2001 terrorist attacks on
the United States has had a significant adverse effect on the aircraft industry
in general and on Airplanes Group which has resulted in reductions in aircraft
values and lease rates. If these conditions continue, they are likely to affect
Airplanes Group's ability to make scheduled principal and interest payments on
the various classes of notes.

In our opinion the financial statements referred to above present fairly,
in all material respects, the financial position of Airplanes Group as at March
31, 2002 and 2001, and the results of its operations and cash flows for each of
the years in the three year period ended March 31, 2002, in conformity with
generally accepted accounting principles in the United States.

As discussed in note 4(f) to the financial statements, in the fourth
quarter of 2002, Airplanes Group determined that the provision for loss making
leases was not appropriate under authoritative accounting literature and
eliminated the provision that had been established in prior years and maintained
through charges to earnings. Airplanes Group determined it appropriate to
eliminate such provisions retroactively and, as a result, prior period financial
statements have been restated from those previously presented. As discussed in
note 4(k) to the financial statements, on April 1, 2001, Airplanes Group changed
its method of accounting for derivative instruments and hedging activities.

KPMG
Chartered Accountants
Dublin, Ireland
June 6, 2002

F-2

AIRPLANES GROUP

BALANCE SHEETS

Commitments and Contingent Liabilities (Notes 19 and 20)

The accompanying notes are an integral part of the financial statements.
F-3

AIRPLANES GROUP

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of the financial statements.
F-4

AIRPLANES GROUP

STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

The accompanying notes are an integral part of the financial statements.
F-5

AIRPLANES GROUP

STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT/NET LIABILITIES
YEARS ENDED MARCH 31, 2000, 2001 AND 2002

The accompanying notes are an integral part of the financial statements.
F-6

AIRPLANES GROUP
STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of the financial statements.
F-7

AIRPLANES GROUP

NOTES TO THE FINANCIAL STATEMENTS

1. SECURITIZATION TRANSACTION

On March 28, 1996 (the "closing date") debis AirFinance Ireland plc (then
known as GPA Group plc) and its subsidiary undertakings ("debis") re-financed on
a long term basis certain indebtedness due to commercial banks and other senior
secured debt. The re-financing was effected through a major aircraft
securitization transaction (the "Transaction").

Under the terms of the Transaction, a combination ("Airplanes Group")
comprising Airplanes Limited, a special purpose company formed under the laws of
Jersey, Channel Islands ("Airplanes Limited") and Airplanes U.S. Trust, a trust
formed under the laws of Delaware ("Airplanes Trust") together acquired directly
or indirectly from debis a portfolio of 229 commercial aircraft (collectively
the "aircraft") and related leases (the "leases"). The Transaction was effected
by transferring existing subsidiaries of debis that owned the aircraft to
Airplanes Limited and Airplanes Trust, respectively. References to Airplanes
Group in these notes to the financial statements may relate to Airplanes Limited
and Airplanes Trust on a combined or individual basis as applicable.

Simultaneously with such transfers, Airplanes Group issued notes of $4,048
million in aggregate principal amount in four classes: class A, class B, class C
and class D ("notes") with approximately 91% of the principal amount of notes in
each class being issued by Airplanes Limited and 9% approximately by Airplanes
Trust. Airplanes Group also issued class E notes ranking after the notes and
these were taken up by debis as part consideration for the transfer of the
aircraft and certain related lease receivables. Airplanes Limited and Airplanes
Trust have each fully and unconditionally guaranteed each others' obligations
under the relevant notes.

On March 16, 1998 Airplanes Group successfully completed a refinancing of
$2,437 million related to class A and class B notes.

On November 20, 1998 debis (then known as AerFi Group plc) transferred its
holding of class E notes to GE Capital Corporation ("GE Capital").

On March 15, 2001 Airplanes Group successfully completed a refinancing of
$750 million related to Class A Notes.

2. BASIS OF PREPARATION

The accompanying financial statements of Airplanes Limited, Airplanes Trust
and the combined balance sheets, statements of operations, statements of
comprehensive income/(loss), statements of changes in shareholders' deficit/net
liabilities and statements of cash flows of Airplanes Group (together the
"Financial Statements") have been prepared on a going concern basis in
accordance with the accounting policies set out in Note 4 and in conformity with
United States of America generally accepted accounting principles.

The financial statements separately consolidate the financial statements of
Airplanes Limited and all of its subsidiary undertakings and the financial
statements of Airplanes Trust and all of its subsidiary undertakings.

3. RELATIONSHIP WITH GE CAPITAL AVIATION SERVICES LIMITED ("GECAS") AND DEBIS
AND MANAGEMENT ARRANGEMENTS

GECAS provides, in consideration for management fees, certain management
services to Airplanes Group pursuant to a servicing agreement entered into by
GECAS with certain members of Airplanes Group and their subsidiaries. Under
certain circumstances GECAS may resign from the performance of its duties in
relation to the management of all the aircraft generally or, the management of
one or more aircraft individually, provided in either case that a replacement
has been appointed to manage the aircraft. In addition, Airplanes Group will,
under certain circumstances, have the right to terminate the servicing
agreement.

As a holder of the majority of the class E notes, GE Capital has the right
to appoint one director to the board of Airplanes Limited and one of the
controlling trustees of Airplanes Trust. Airplanes Limited has a board of
F-8

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

3. RELATIONSHIP WITH GE CAPITAL AVIATION SERVICES LIMITED ("GECAS") AND DEBIS
AND MANAGEMENT ARRANGEMENTS -- (CONTINUED)

directors of five directors, including the director appointed by the holders of
the class E notes. The controlling trustees of Airplanes Trust are the same
individuals.

Certain cash management and administrative services are being provided by
debis subsidiaries to Airplanes Group, pursuant to a cash management agreement
and administrative agency agreement entered into by such debis subsidiaries with
Airplanes Group.

In the year to March 31, 2002, fees of $23.5 million and $9.9 million
(2001: $23.3 million and $9.6 million) were charged by GECAS and debis
respectively.

Although Airplanes Group's portfolio will at all times be held in two
different entities, Airplanes Limited and Airplanes Trust, Airplanes Group is
managed and the note covenants structured on the basis of a single economic
entity owning a single aircraft portfolio.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Airplanes Group's accounting policies conform with United States generally
accepted accounting principles. The following paragraphs describe the main
accounting policies followed in these financial statements.

(a) Revenue Recognition

Revenue from aircraft on operating leases is recognised as income as it
accrues over the period of the leases. Unearned revenue from capital and sales
type leases is amortised and included in income.

(b) Aircraft

Aircraft, including engines, are stated at cost less accumulated
depreciation and, where considered necessary, impairment provisions.

Aircraft carrying values are periodically assessed for impairment in
accordance with Statement of Financial Accounting Standards ("SFAS") 144
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
supercedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-lived Assets to be disposed of." SFAS 144 established additional criteria
to determine when a long-lived asset is held for sale. SFAS 144 is effective for
fiscal years beginning after December 15, 2001, and interim periods within those
fiscal years, with early application encouraged. The provisions of SFAS 144 are
generally to be applied prospectively. Airplanes Group has adopted SFAS 144 as
of April 1, 2001 and the adoption did not impact its results of operation or
financial position. SFAS 144 requires the recognition of an impairment loss for
an asset held for use when the estimate of un-discounted future cashflows
expected to be generated by the asset is less than its carrying amount.
Measurement of impairment loss is to be recognised based on the fair value of
the asset. Fair market values reflects the underlying economic value of the
aircraft, including engines, in normal market conditions (where supply and
demand are in reasonable equilibrium) and assumes adequate time for a sale and a
willing buyer and seller. Short term fluctuations in the market place are
disregarded and it is assumed that there is no necessity either to dispose of a
significant number of aircraft simultaneously or to dispose of aircraft quickly.
The fair market value of the assets is based on independent valuations of the
aircraft in the fleet and estimates of discounted future cash flows. SFAS 144
also requires that long-lived assets to be disposed of, be reported at the lower
of the carrying amount or fair value less estimated disposal costs.

F-9

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Cost comprises the invoiced cost net of manufacturers' discounts.
Depreciation is calculated on a straight line basis. The estimates of useful
lives and residual values are reviewed periodically. The current estimates for
residual values are generally 15% of cost, and for useful lives are as follows:

(c) Net Investment in Capital and Sales Type Leases

The amounts due from lessees under capital leases, where the entire cost of
the asset is recovered, are shown in the balance sheet at the net amount
receivable under these leases. The related finance revenue is recognised as
income over the period of the lease in proportion to the amounts outstanding.

(d) Provision for Maintenance

In most lease contracts the lessee has the obligation for maintenance costs
on airframes and engines and in many lease contracts the lessee makes a full or
partial prepayment, calculated at an hourly rate, from which maintenance
expenditures for major checks are disbursed. The undisbursed portion of these
prepayments are included in the provision for maintenance which may from time to
time include prepayments made by current lessees and prior lessees. At the time
an aircraft is re-leased to a new lessee, an assessment is made of the expected
maintenance reserve requirement and any excess reserve is then released through
the Statement of Operations.

Maintenance provisions also include the directors' estimate of maintenance
costs which are Airplanes Group's primary responsibility and certain amounts in
respect of the risk of lessees defaulting on obligations, which could result in
Airplanes Group incurring maintenance costs which are the lessee's primary
responsibility.

(e) Allowance for doubtful debts

Allowances are made for doubtful debts where it is considered that there is
a significant risk of non recovery.

The assessment of risk of non recovery is primarily based on the extent to
which amounts outstanding exceed the expected value of security held together
with an assessment of the financial strength and condition of a lessee and the
economic conditions existing in the lessee's operating environment.

(f) Provision for Loss Making Leases

Prior to the fourth quarter of fiscal year 2002, Airplanes Group maintained
a provision for loss making leases. A lease was deemed to be loss making in
circumstances where the contracted rental payments were insufficient to cover
the depreciation and allocated interest cost attributable to the relevant
aircraft, together with direct costs such as legal fees and other costs
attributable to the lease over its term. During the fourth quarter of 2002,
Airplanes Group determined that the provision for loss making leases was not
appropriate under authoritative accounting literature and, therefore, eliminated
the provision for loss making leases and related reserve. All prior periods
presented in the accompanying financial statements have been restated to reflect
this change.

This change resulted in an increase/(decrease) in net loss for the years
ended March 31, 2000 and 2001 of $4 million (Airplanes Limited $3 million and
Airplanes Trust $1 million) and $(17) million (Airplanes Limited: $(17) million;
Airplanes Trust: $Nil), respectively, and decreased net liabilities as of April
1, 1999 by $35 million (Airplanes Limited: $34 million; Airplanes Trust: $1
million). This change resulted in an increase/(decrease) in
F-10

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

net loss for the three-month periods ended June, September and December of 2001
of $1 million (Airplanes Limited: $1 million; Airplanes Trust: $Nil), $16
million (Airplanes Limited: $16 million; Airplanes Trust: $Nil) and $4 million
(Airplanes Limited: $5 million and Airplanes Trust: $(1) million), respectively.

(g) Taxation

Income taxes are accounted for under the asset and liability method.
Deferred income tax assets and liabilities are recognised for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred income tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognised in the period that includes
the enactment date.

Income tax is provided based on the results for the year. Airplanes
Limited's underlying taxable entities in Ireland are subject to Irish Corporate
Income Tax on approved trading operations at a rate of 10% until December 31,
2005 and thereafter, at a rate of 12.5%. Airplanes Trust's underlying taxable
entities in the U.S. are subject to U.S. Federal and State taxes on their
trading operations.

(h) Concentrations of Credit Risk

Financial instruments which potentially subject Airplanes Group to
significant concentrations of credit risk consist primarily of trade accounts
receivable and interest rates swaps and similar hedging instruments. Details of
Airplanes Group's interest rate swaps and similar hedging instruments are set
out at (i) below.

Credit risk with respect to trade accounts receivable is generally
diversified due to the number of lessees comprising Airplanes Group's customer
base and the different geographic areas in which they operate. At March 31,
2002, Airplanes Group owned 186 aircraft which it leased to 64 lessees in 33
countries, with six aircraft off-lease. The geographic concentrations of leasing
revenues is set out in Note 14.

Many of Airplanes Group's lessees are in a relatively weak financial
position because of the difficult economic conditions in the civil aviation
industry as a whole, as exacerbated by the continuing economic and political
fallout of the terrorist attacks of September 11, 2001, and because, in general,
weakly capitalised airlines are more likely to seek operating leases.

The exposure of Airplanes Group's aircraft to particular countries and
customers is managed partly through concentration limits provided for under the
terms of the notes and through obtaining security from lessees by way of
deposits, letters of credit and guarantees. Airplanes Group will continue to
manage its exposure to particular countries, regions and lessees through
concentration limits. In the normal course of its business Airplanes Group has
reached agreements with certain of its lessees to restructure their leases and
defer certain receivable balances. Details of accounts receivable, deferred
balances and provision for bad and doubtful debts are set out in Note 6.

Colombia has recently suffered economically as a result of the
deterioration in the value of the Colombian peso and the resulting negative
impact on the Colombian economy. As of March 31, 2002 Airplanes Group leased ten
aircraft to three lessees in Colombia. In particular, at March 31, 2002,
Airplanes Group leased six aircraft to one Colombian lessee which had been in
arrears. During the year to March 31, 2002, the servicer signed a restructuring
agreement with the lessee including lease extensions, rental reductions and
deferrals. The lessee has continued to perform in line with this agreement.

Airplanes Group's Brazilian lessees also continue to experience significant
difficulties due to over-capacity and adverse market conditions. At March 31,
2002, 16 of Airplanes Group's aircraft were being operated by three Brazilian
lessees. Restructuring arrangements have been agreed with certain of the
Brazilian lessees allowing for

F-11

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

rescheduling of balances owing to Airplanes Group. Receivable balances with
Brazilian lessees in total were $9.9 million at March 31, 2002.

On May 17, 2001, an Argentinian lessee of two B737-200A aircraft,
representing 0.24% of the portfolio by appraised value as of January 31, 2002,
filed for protection from its creditors. The lessee continued to pay certain of
the rentals while under the protection of the bankruptcy courts and the security
in the form of a surety bond has been drawn and payment has been received. Since
March 31, 2002, the servicer has concluded the sale of these two aircraft to the
lessee.

The commercial aviation industry in Asia has been adversely affected by the
severe economic and financial difficulties experienced in the region since
1998/1999. At March 31, 2002, 25 of Airplanes Group's aircraft were being
operated by twelve lessees in this region.

(i) Fair Value of Financial Instruments

SFAS 107 "Disclosures about Fair Value of Financial Instruments" defines
the fair value of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. Fair values of financial instruments have been
determined with reference to available market information and the valuation
methodologies discussed below. However, considerable management judgement is
required in interpreting market data to arrive at estimates of fair values.
Accordingly, the estimates presented herein may not be indicative of the amounts
that Airplanes Group could realise in a current market exchange.

(i) The fair value of cash, trade receivables and trade payables
approximates the carrying amount because of the nature and short
maturity of these instruments.

(ii) The fair value of the class A, B, C and D notes issued by Airplanes
Group outstanding at March 31, 2002 and 2001 was $2,102 million and
$2,767 million respectively. While the amount subscribed for the
class E notes was based on the appraised value of the aircraft at
the closing date, the fair value of these notes at March 31, 2002
cannot be determined, as it represents the holders' residual
interest in the aircraft owned by Airplanes Group.

(iii) Airplanes Group manages its interest rate exposure through the use
of interest rate swaps ("swaps") and options to enter into interest
rate swaps ("swaptions"). At March 31, 2002 and 2001 Airplanes Group
had entered into interest rate swaps with an aggregate notional
principal amount of $1.87 billion and $1.96 billion respectively.
Under these swap arrangements Airplanes Group will pay fixed and
receive floating amounts on a monthly basis. The primary objective
of Airplanes Group's interest rate risk management policy is to
correlate fixed and floating rate interest payments on the bonds to
the mix of contracted fixed and floating rental payments for
different rental periods in its portfolio. The fair values of
interest rate swaps are provided by third parties and are calculated
by discounting expected cash flows using market interest rates over
the remaining term of the relevant instrument. The fair value of
these swaps at March 31, 2002 and 2001 was an unrealised loss of
$36.0 million and an unrealised loss of $38.0 million respectively.

Interest rate exposures which may arise in the event that lessees paying
fixed rate rentals default is managed in part through the purchase of
swaptions. At March 31, 2002 and 2001 Airplanes Group had entered into
swaptions with a notional value of $Nil and $378 million respectively. The
fair value of the swaptions at March 31, 2002 and 2001 was $Nil and $3.5
million respectively.

Airplanes Group is exposed to losses in the event of non-performance by
counterparties to interest rate swap and swaption agreements. However, Airplanes
Group does not anticipate non-performance by these counterparties.

F-12

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

Counterparty risk is monitored on an ongoing basis. Counterparties are
subject to the prior approval of the directors of Airplanes Limited and the
controlling trustees of Airplanes Trust. Airplanes Group's counterparties at
March 31, 2002 comprise three major U.S./European financial institutions.

(j) Foreign Currency Transactions

Airplanes Group's foreign currency transactions are not significant as
virtually all revenues and most costs are denominated in U.S. dollars.

(k) Derivative Instruments and Hedging Activities

For periods prior to April 1, 2001, derivative instruments entered into to
offset Airplanes Group's exposure to interest rate risk were accounted for
together with the underlying business transactions ("hedge accounting"). In the
event of an early termination of an interest rate related derivative, the gain
was deferred and recognized as an adjustment to interest expense over the
remaining term of the underlying financial instrument.

On April 1, 2001, Airplanes Group adopted SFAS 133, "Accounting for
Derivative Instruments and Certain Hedging Activities" and SFAS 138, "Accounting
for Certain Derivative Instruments and Certain Hedging Activities, an amendment
of SFAS 133." As a result, all derivatives are now recognized on the balance
sheet at their fair value. All derivatives are designated as either a hedge of
the fair value of a recognized asset or liability or of an unrecognized firm
commitment ("fair value" hedge), a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a recognized asset
or liability ("cash flow" hedge), a foreign-currency fair-value or cash-flow
hedge ("foreign currency" hedge) or a "held for trading" instrument. All of
Airplanes Group's interest rate swaps are currently designated as cash flow
hedges while Airplanes Group's swaptions are designated as trading instruments.

Airplanes Group has a detailed hedging policy, which has been approved by
the board of directors of Airplanes Limited and controlling trustees of
Airplanes Trust and the rating agencies. As part of this hedging policy
Airplanes Group has formally documented all relationships between hedging
instruments and hedged items as well as its risk-management objective and
strategy for undertaking various hedge transactions.

This process includes linking all derivatives that are designated as
cashflow hedges to specific liabilities on the balance sheet. Airplanes Group
formally assesses, both at the hedge's inception and on an ongoing basis,
whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in cash flows of hedged items.

Changes in the fair value of a derivative that is highly effective and that
is designated and qualifies as a cash-flow hedge are included in "Net change in
cash flow hedges" in other comprehensive income ("OCI"), until earnings are
affected by the variability in cash flows of the designated hedged item.

Hedge accounting is discontinued prospectively when it is determined that
the derivative is no longer highly effective in offsetting changes in the cash
flows of the hedged item, the derivative expires or is sold, terminated, or
exercised, or it is determined that designation of the derivative as a hedging
instrument is no longer appropriate. In all situations in which hedge accounting
is discontinued, the derivative will continue to be carried at its fair value on
the balance sheet, and any changes in its fair value will be recognized in
earnings. In all situations where derivatives are designated as trading
instruments, they are carried at fair value on the balance sheet and any changes
in fair value are recognized in earnings.

The opening effect as at April 1, 2001 of the adoption of SFAS 133 was
$(38) million in other comprehensive income (i.e. if the swaps were sold then, a
loss of $38 million would have resulted) and $5 million in earnings (being the
deferred gain on early termination of interest and related derivatives).
Airplanes Group's financial statements for the first quarter of 2002 reported
the net transition adjustment of $(33) million in other comprehensive income.
The net change in the value of cash flow hedges for the year ended March 31,
2002 was

F-13

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

an increase of $2 million. It is anticipated that $12 million of net losses
included in accumulated other comprehensive loss at March 31, 2002 will be
reclassified into earnings during the year to March 31, 2003. At March 31, 2002,
Airplanes Group held derivative instruments with a maximum maturity of 52 months
to hedge its exposure to interest rate risk.

5. CASH

Substantially all of the cash balances at March 31, 2002 and 2001 are held
for specific purposes under the terms of the Transaction. Included in the cash
balances at March 31, 2002 and 2001 is restricted cash of $6 million.

6. ACCOUNTS RECEIVABLE

Deferred lease receivables at March 31, 2002 represent deferrals of rent,
maintenance and miscellaneous payments due from lessees. The most significant of
these lessees are located in Colombia and Brazil where the air transport sector
is suffering from substantial over capacity and the effects of difficult
economic conditions (see Note 4(h)).

Receivables, before allowance for doubtful debts, include amounts
classified as due after one year of $9.0 million (Airplanes Limited $6.6 million
and Airplanes Trust $2.4 million) at March 31, 2002 and $3.2 million (Airplanes
Limited $3.2 million and Airplanes Trust $Nil) at March 31, 2001.

A number of Airplanes Group's lessees are in a relatively weak financial
position. As of March 31, 2002, amounts outstanding for a period greater than 30
days in respect of rental payments, maintenance reserves and other miscellaneous
amounts due under the leases (net of amounts in respect of default interest and
cash in transit) amounted to $11.5 million in respect of 19 lessees (who leased
a combined total of 58 aircraft representing 23.23% of the portfolio by
appraised value as of that date) and $10.8 million in respect of six former
lessees. Of the total $22.3 million, $5.7 million was in arrears for a period
between 30 and 60 days, $3.0 million was in arrears for a period between 60 and
90 days and $13.6 million was in arrears for a period greater than

F-14

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

6. ACCOUNTS RECEIVABLE -- (CONTINUED)

90 days. Some of these lessees have consistently been significantly in arrears
in their respective rental payments and some are known to be currently
experiencing financial difficulties.

As of March 31, 2002, in addition to the $22.3 million in respect of
payments past due more than 30 days, Airplanes Group had agreed to allow nine
lessees to defer rent, maintenance and miscellaneous payments totaling $16.5
million for periods ranging from five months for one lessee in respect of $0.7
million and up to 84 months for one lessee in respect of $9.2 million.

7. AMOUNTS DUE FROM AIRPLANES LIMITED TO AIRPLANES TRUST

Included in the balance at March 31, 2001 and March 31, 2002 was $80
million payable from Airplanes Trust to Airplanes Limited in respect of aircraft
sales and purchases. The remaining balance of $143 million (2001: $126 million)
represents the net amount due to Airplanes Trust in respect of Airplanes Trust's
trading activities, including servicing of its debt obligations.

8. NET INVESTMENT IN CAPITAL AND SALES TYPE LEASES

The following are the components of the net investment in capital and sales
type leases of Airplanes Limited:

Aggregate lease rentals in respect of such capital and sales type leases
for the years ended March 31, 2000, 2001 and 2002 amounted to $10 million,
(Airplanes Limited $5 million, Airplanes Trust $5 million), $6 million
(Airplanes Limited $6 million, Airplanes Trust $Nil) and $7 million (Airplanes
Limited $7 million, Airplanes Trust $Nil) respectively.

Unearned revenue of $4 million (Airplanes Limited $1 million, Airplanes
Trust $3 million) $4 million (Airplanes Limited $4 million, Airplanes Trust
$Nil) and $0.4 million (Airplanes Limited $0.4 million, Airplanes Trust $Nil)
for the years ended March 31, 2000, 2001 and 2002, respectively, was amortised
and included in revenue.

F-15

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

9. AIRCRAFT

Nineteen aircraft are subject to purchase options granted to existing
lessees. At March 31, 2002, one lessee had options to purchase two aircraft at
prices below estimated appraised value at the exercise date but not below
estimated carrying value at exercise date. The latest date on which a purchase
option could be exercised is November 6, 2006.

At March 31, 2002, Airplanes Group owned 186 (2001:190) aircraft.

At March 31, 2002 six aircraft were off-lease, one of which was subject to
a letter of intent to lease and has since been delivered to the lessee.

During the last year there was a general downturn in the world economic
environment which was exacerbated by the terrorist attacks of September 11,
2001, which continues to affect the economic climate adversely. This has
resulted in a sharp increase in the availability of aircraft for lease, leading
to significant overcapacity, increased downtime, a decline in the lease rates,
increased costs due to unanticipated redeliveries of aircraft all of which have
resulted in a decline in the value of aircraft, particularly older technology
models.

As of March 31, 2002, each of the B737-400, MD-83 and A320-200 models of
aircraft comprised more than 10% of Airplanes Group's portfolio by appraised
value as of January 31, 2002 and, in addition, each of the B737-300, B737-500,
B767-300ER, DC-8, MD-11 and F-100 models of aircraft comprised more than 5% of
Airplanes Group's portfolio by appraised value as of January 31, 2002.
Furthermore, at March 31, 2002,

F-16

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

9. AIRCRAFT -- (CONTINUED)

widebody aircraft comprised more than 15%, and turboprop aircraft comprised more
than 5% of Airplanes Group's portfolio by appraised value as of January 31,
2002.

As of March 31, 2002, Airplanes Group evaluated all aircraft for impairment
and this impairment analysis resulted in 52 aircraft being identified with a
carrying value greater than the estimated undiscounted future cash flows for
such aircraft. An impairment loss was calculated for these aircraft based on the
estimated discounted future cash flows for each aircraft. For certain aircraft
the estimated discounted future cash flows were lower than the corresponding
independent appraised value. The appraised values were determined based on the
assumption that there is an "open unrestricted stable market environment with a
reasonable balance of supply and demand." Since this assumption is not
appropriate to certain aircraft estimated discounted cash flows were used as a
more accurate indication of fair value.

10. ACCRUED EXPENSES AND OTHER LIABILITIES

F-17

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

11. INDEBTEDNESS

The components of the debt are as follows:

DEBT MATURITY

The repayment terms of the class A, B, C and D notes are such that certain
principal amounts were expected to be repaid based on certain assumptions (the
"expected final payment date") or refinanced through the issue of new notes by
specified expected final payment dates but in any event are ultimately due for
repayment on specified final maturity dates (the "final maturity date"). The
expected final payment dates, final maturity dates, principal amount and
interest rates applicable to each class of note are set out below:

Discounts on notes issues and costs arising on refinanced notes are netted
against debt on the balance sheet. These amounts are accreted to the income
statement over the expected life of the refinancing notes.

On March 15, 2001, Airplanes Group successfully completed a $750 million
refinancing of its subclass A-4 and subclass A-7 notes into new subclass A-9
notes.

The dates on which principal repayments on the notes will actually occur
will depend on the cash generated by Airplanes Group and in the event that the
subclass A-8 notes are not repaid or refinanced by the expected final payment
date, additional step-up interest of 0.5% will arise.

LIBOR on the class A and class B notes equates to the London interbank
offered rate for one month U.S. dollar deposits.

F-18

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

11. INDEBTEDNESS -- (CONTINUED)

Interest on the class C and class D fixed rate notes is calculated on the
basis of a 360-day year, consisting of twelve 30-day months.

The class E notes accrue interest for each interest accrual period at a
rate of 20% per annum. The stated interest rate on the class E notes is adjusted
by reference to the U.S. consumer price index. Except for the class E note
minimum interest amount plus the class E note supplemental interest amount, each
of which are paid at a rate of 1% and 10% multiplied by the outstanding
principal balance of the class E notes, respectively, no interest will be
payable on the class E notes until all of the interest, principal and premium,
if any, on the notes have been repaid in full. The principal on the class E
notes will be repaid, subject to adequate funds being available after the
interest on the class E notes.

In general the priority of the principal payments on the notes is as set
out below;

1. Specified minimum principal amounts on the class A and the class B
notes in that order.

2. Additional amounts on the class A notes in the event that the value
of the fleet falls below specified amounts.

3. Scheduled principal repayments on the class C and class D notes in
that order.

4. Specified additional amounts on the class B notes and the class A
notes in that order.

5. Thereafter cash available to repay the principal on the notes is
applied on each payment date to repay the outstanding principal on
the class D notes, the class C notes, the class B notes and the class
A notes in that order.

Currently, on each payment date the priority of the principal amounts
outstanding in respect of the various subclasses of class A notes is subclass
A-6, subclass A-9 and subclass A-8 in that order. In the event that the subclass
A-8 refinancing due in March 2003 is not completed, the priority of the
principal amounts outstanding in respect of the various subclasses of class A
notes would be subclass A-6, subclass A-8 and subclass A-9 in that order.

The concentration on particular models or types of aircraft magnifies the
adverse impact to Airplanes Group's cash flow of a decline in lease rates or
aircraft values for these models or types of aircraft and of specific
governmental or technical regulations imposed on those aircraft types. In this
connection, Airplanes Group has seen (x) decreasing popularity of the turboprop
aircraft, the cessation of production of MD-83s and MD-11s, the reduction in
demand for B767s including in particular B767s powered by Pratt & Whitney
engines, and the bankruptcy of Fokker, (y) noise regulations restricting the use
of Stage 2 aircraft which, as of March 31, 2002, accounted for approximately 3%
of Airplanes Group's portfolio by appraised value as of January 31, 2002, and
(z) Airworthiness Directives ("ADs") with respect to the MD-80s, MD-11s and
B737s. These events have caused, and are likely to continue to cause, overall
lease rates and aircraft values to significantly decrease and may cause
Airplanes Group to incur significant costs which would further reduce its cash
flow.

Administrative and lease expenses and certain other payments in the
ordinary course of business are senior to the notes in priority of payment and
are therefore payable before any payments are made on the notes (and thus the
corresponding certificates).

Additionally, minimum principal amounts on the class A and class B notes
are payable before interest on the class C and class D notes, and principal
adjustment amount on the class A notes is payable before scheduled principal
payments on the class C and class D notes. Since the appraised value of
Airplanes Group's aircraft has declined at a rate faster than that originally
assumed in the base case assumptions in its offering memorandum dated March 28,
1996 (the "1996 Base Case"), it has been required to pay principal adjustment
amount on the class A notes with a consequential deferral of scheduled principal
payments on the class C and class D notes.

F-19

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

11. INDEBTEDNESS -- (CONTINUED)

To the extent that Airplanes Group has sufficient available funds, it is
required to pay a minimum principal amount on the class A notes in order to
maintain certain loan to initial appraised value ratios. Airplanes Group is
currently ahead of the required class A minimum principal payment schedule to
the extent of $110 million because the accelerated principal payments resulting
from payment of class A principal adjustment amounts have enabled it to maintain
those loan to initial appraised value ratios. Accordingly, no payments are
currently due in respect of the minimum principal on the class A notes. However,
the overall cash performance of Airplanes Group since September 11, 2001, has
been significantly weaker than was assumed in the base case assumptions in its
offering memorandum dated March 15, 2001 (the "2001 Base Case"). In light of its
current and expected cash performance, Airplanes Group expects that it will not
be able to continue paying class A principal adjustment amount in full and
therefore, in time, it will no longer be ahead of the required class A minimum
principal payment schedule. Airplanes Group expects this to occur in the latter
half of 2003, when it will have to recommence payments of minimum principal on
the class A notes. Since minimum principal on the class A notes ranks ahead of
interest and minimum principal on the class B notes and interest on the class C
and class D notes in the order of priority, and, given Airplanes Group's current
expectations as to its future performance, Airplanes Group believes that its
cash flows may be inadequate to pay interest and minimum principal on the class
B notes and interest on the class C and D notes in the latter half of 2003.

Airplanes Group's actual results may differ from its current expectations.
However, such differences as may arise are only likely to affect the timing of
when it ceases to pay interest and minimum principal on the class B notes and
interest on the class C and D notes.

In the event that cash flows are inadequate to pay interest and minimum
principal on the class B notes and interest on the class C and D notes, it is
likely to be a long period of time before Airplanes Group will be able to resume
making any payments on these notes. Further, in these circumstances, Airplanes
Group may be unable to repay in full principal on some or all of these classes
of notes by their final maturity date. The more junior the class of notes is in
the order of priority, the greater the risk that Airplanes Group may be unable
to repay in full principal on that class of notes by its final maturity date. In
addition, to the extent that Airplanes Group does resume making payments on
these notes, payments will be made according to the priority of payment,
commencing with the then most senior class and only making payments on more
junior classes to the extent of available cash flows. A failure to make payments
on a class of notes will result in failure to make payments on the corresponding
class of certificates.

The vulnerability of the various classes of notes has been reflected in
actions taken by the rating agencies which reevaluated several structured
aircraft financings in the wake of the terrorist attacks in the United States on
September 11, 2001. On December 12, 2001, Moody's announced a downgrade of the
class C certificates from rating Baa2 to Ba3 and a downgrade of the class D
certificates from Ba2 to B2. On December 21, 2001, Fitch downgraded the class C
certificates from BBB to BB and the class D certificates from BB to B and left
the class A to D certificates on credit watch negative. On March 25, 2002,
Standard & Poor's downgraded the class C certificates from rating BBB to BB+ and
the class D certificates from BB to B-. Standard & Poor's affirmed the rating on
the class A and B certificates but left the class C and D certificates on credit
watch negative. Most recently on June 24, 2002, Fitch further downgraded the
class C certificates from BB to B+ and the class D certificates from B to CCC
and downgraded the class A certificates from AA to A+ and the class B
certificates from A to BBB+. Given the continuing difficulties in the aircraft
industry and their impact on the factors which determine Airplanes Group's
revenues, there can be no assurance that the rating agencies will not further
downgrade any class of Airplanes Group's certificates.

The ratings of the certificates address the likelihood of the timely
payment of interest and the ultimate payment of principal and premium, if any,
on the certificates. A rating is not a recommendation to buy, sell or hold
certificates because ratings do not comment as to market price or suitability
for a particular investor. A rating may be subject to revision, suspension or
withdrawal at any time by the assigning rating agency.

F-20

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

12. PROVISION FOR MAINTENANCE

The reserve for maintenance includes maintenance reserve funds received
from lessees and provisions to cover the directors' estimate of maintenance
costs where Airplanes Group has the primary obligation for maintenance.

13. SHARE CAPITAL

The holders of the issued ordinary shares are entitled to an annual
cumulative preferential dividend of $4,500. As Airplanes Limited does not have
distributable profits this dividend has not been paid. As at March 31, 2002, the
total unpaid cumulative preferential dividend amounted to $27,000.

14. REVENUES

F-21

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

14. REVENUES -- (CONTINUED)

There are 54 aircraft which are scheduled to come off lease within one year
from March 31, 2002. It is expected that re-lease rates for many of these
aircraft will be lower than the current contracted rates.

At March 31, 2002, Airplanes Group had contracted to receive the following
minimum rentals under operating leases:

Contracted rentals are based on actual rates up to the first recalculation
date, and thereafter are based on a budget LIBOR of 3.25%, and include aircraft
subject to letters of intent to lease.

Each of Airplanes Limited and Airplanes Trust operates in one business
segment, the leasing of aircraft.

For Airplanes Limited no customer accounted for more than 10% of revenue in
any of the years ended March 31, 2000, 2001 or 2002 respectively. For Airplanes
Trust: (a) two lessees accounted for more than 10% of leasing revenue for the
year ended March 31, 2000, and these lessees accounted for 34% and 13% of
leasing revenue, respectively, (b) one lessee accounted for more than 10% of
leasing revenue in the year ended March 31, 2001 and individually this lessee
accounted for 34% of leasing revenue, (c) three lessees accounted for more than
10% of leasing revenue for the year ended March 31, 2002 and individually these
lessees accounted for 10%, 11% and 34% of leasing revenue respectively.

15. NET INTEREST EXPENSE

F-22

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

16. OTHER LEASE COSTS

17. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

In the year ended March 31, 2002, other selling, general and administrative
expenses included an amount of $10 million (Airplanes Limited $9 million,
Airplanes Trust $1 million) payable to debis in respect of Administration and
Cash Management fees comparable to the amount of $9 million (Airplanes Limited
$8 million, Airplanes Trust $1 million) payable in the years ended March 31,
2001 and 2000.

18. PROVISION FOR INCOME TAXES

References to Airplanes Limited and Airplanes Trust in the context of this
footnote refer to the underlying taxable entities of Airplanes Limited
(primarily Irish entities) and Airplanes Trust (primarily U.S. entities).

(A) AIRPLANES LIMITED

Income tax benefit of Airplanes Limited consists of the following:

Airplanes Limited's income from approved activities in Ireland is taxable
at a rate of 10% until December 31, 2005. Therefore income from trading
activities will be taxable at a rate of 12.5%.

F-23

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

18. PROVISION FOR INCOME TAXES -- (CONTINUED)

A reconciliation of differences between actual income tax benefit of
Airplanes Limited for 2000, 2001 and 2002 and the expected tax benefit based on
a tax rate of 12.5% is shown below:

Class E note interest is not deductible for tax purposes in Ireland.

Airplanes Limited has net operating loss carryforwards of approximately
$1,869 million as of March 31, 2002, (2001: $1,693 million) which are available
for offset against future taxable income with no restrictions to expiration.

The deferred tax assets and liabilities of Airplanes Limited are summarised
below:

(B) AIRPLANES TRUST

Income tax benefit of Airplanes Trust consists of the following:

F-24

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

18. PROVISION FOR INCOME TAXES -- (CONTINUED)

A reconciliation of differences between actual income tax benefit of
Airplanes Trust for 2000, 2001 and 2002 and the expected tax benefit based on
the U.S. federal statutory tax rate of 35% in 2000, 2001, and 2002 is shown
below:

Airplanes Trust has federal tax net operating loss carryforwards of
approximately $91.6 million as of March 31, 2002 (2001: $113 million) which
expire beginning in 2007 through 2021.

Deferred tax assets and liabilities of Airplanes Trust are summarised
below:

Although all of the aircraft are owned by Airplanes Trust, for tax
purposes, certain of the aircraft are treated as being leased from third parties
under U.S. "safe-harbor lease" tax rules. Under existing tax laws, certain
events could reverse the cumulative effect of this tax treatment, in which case
Airplanes Trust would be required to make payments to the third parties under
the tax indemnification clauses included in the lease agreements. As of March
31, 2000, 2001 and 2002 the maximum potential exposure under these provisions
was $0.7 million, $0.2 million and $Nil, respectively. The Trust believes that
no events have taken place which could cause such payments to become due.

Pursuant to a tax sharing agreement between Airplanes Trust and debis,
Airplanes Trust is liable to debis for its share of the consolidated tax
liability in years subsequent to the completion of the Transaction, in which
Airplanes Trust generates taxable income. However, Airplanes Trust shall satisfy
this liability in cash only to the extent that payments due to tax authorities
from debis are attributable to Airplanes Trust's share of the consolidated tax
liability; the remainder will be paid in the form of subordinated notes.
Conversely, Airplanes Trust is entitled to be reimbursed by debis for any tax
benefits provided subsequent to the completion of the Transaction, to debis from
Airplanes Trust's tax losses. debis has also indemnified Airplanes Trust for any
tax liabilities of AeroUSA, Inc. (a subsidiary of Airplanes Trust) that relate
to tax years prior to the completion of the Transaction.

F-25

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

18. PROVISION FOR INCOME TAXES -- (CONTINUED)

Subsequent to November 20, 1998, AeroUSA, Inc. and AeroUSA 3, Inc. now file
consolidated United States federal tax returns and certain local tax returns
with General Electric Company ("GE"), such returns are being filed on a calendar
basis. In addition, on November 20, 1998, Airplanes Trust entered into a tax
sharing agreement with GE which is substantially similar to the tax sharing
agreement between Airplanes Trust and debis which was in place prior to that
date and which terminated on November 20, 1998, except with respect to those
provisions relating to the position prior to the date on which AeroUSA, Inc. and
AeroUSA 3, Inc. were deconsolidated from debis AirFinance, Inc.

In relation to the tax year ended December 31, 2001, GE utilized $20.0
million of current year losses. As GE is an Alternative Minimum Tax (AMT) payor
the benefit realized will be $4.0 million and this amount will be paid to
Airplanes Group. The receivable for this amount has been included in other
assets at year end.

19. COMMITMENTS

CAPITAL COMMITMENTS

Airplanes Group did not have any material contractual commitments for
capital expenditures at March 31, 2002.

20. CONTINGENT LIABILITIES

GUARANTEES

Airplanes Limited and Airplanes Trust have unconditionally guaranteed each
others' obligations under all classes of notes issued by Airplanes Limited and
Airplanes Trust, respectively, pursuant to the securitization transaction,
details of which are set out in Note 1.

FOREIGN TAXATION

The international character of the Group's operations gives rise to some
uncertainties with regard to the impact of taxation in certain countries. The
position is kept under continuous review and the Group provides for all known
liabilities.

21. POST BALANCE SHEET EVENTS

Since March 31, 2002, one DC9-51 aircraft and two B737-200A aircraft have
been sold and a non binding letter of intent for sale has been signed for one
B737-200A aircraft.

F-26

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Airplanes U.S. Trust has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AIRPLANES U.S. TRUST

By: /s/ WILLIAM M. MCCANN
------------------------------------
Name: William M. McCann
Title: Controlling Trustee

Dated: June 25, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on June 25, 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Airplanes Limited has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

AIRPLANES LIMITED

By: /s/ WILLIAM M. MCCANN
------------------------------------
Name: William M. McCann
Title: Director

Dated: June 25, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on June 25, 2002.

AIRPLANES LIMITED AND AIRPLANES U.S. TRUST
INDEX TO EXHIBITS