About Willis Lease Finance

Willis Lease Finance Corporation, together with its subsidiaries, operates as a lessor and servicer of commercial aircraft and aircraft engines. As of December 31, 2022, the company managed a total lease portfolio of 324 engines, aircraft and related equipment for other parties. Willis Aeronautical Services, Inc. (Willis Aero) is a wholly-owned and vertically-integrated subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines. Willis Asset Management Limited (Willis Asset Management) is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 289 engines, excluding WLFC engines, under management as of December 31, 2022. Segments The company operates through two segments, Leasing and Related Operations; and Spare Parts Sales. Leasing and Related Operations This segment’s strategy is to lease aircraft and aircraft engines and provide related services to a diversified group of commercial aircraft operators and maintenance, repair and overhaul organizations (MROs) worldwide. Commercial aircraft operators need engines in addition to those installed on the aircraft that they operate. Spare engines are required to support fleet operation during the highly regulated maintenance cycle of aircraft engines. Furthermore, unscheduled events, such as mechanical failure, Federal Aviation Administration (FAA) airworthiness directives or manufacturer-recommended actions for maintenance, repair and overhaul of engines result in the need for spare engines. The company’s engine portfolio primarily consists of noise-compliant Stage IV commercial jet engines manufactured by CFMI, General Electric, Pratt & Whitney, Rolls Royce and International Aero Engines. These engines generally may be used on one or more aircraft types and are the most widely used engines in the world, powering Airbus, Boeing, Bombardier and Embraer aircraft. The company acquires engines for its leasing portfolio in a number of ways. The company enters into sale and lease back transactions with operators of aircraft, original equipment manufacturers of engines, and MROs. The company also purchases both new and used engines that are subject to a lease when purchased and on a speculative basis (i.e., without a lease attached from manufacturers or other parties which own such engines). Spare Parts Sales This segment’s wholly-owned and vertically-integrated subsidiary Willis Aero primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties or from the leasing portfolio. This business segment enables the company to provide end-of-life solutions for the growing supply of surplus aircraft and engines, as well as manage the full lifecycle of its lease assets, enhance the returns on its engine portfolio and create incremental value for its shareholders. Engine Leasing As of December 31, 2022, the majority of the company’s leases to air carriers, manufacturers and MROs were operating leases with the exception of certain failed sale-leaseback transactions. The company describes all of its leases as triple-net operating leases. The company enters into both long-term and short-term leases which typically provide for monthly payment. The company utilizes its credit facility as a warehouse facility to aggregate purchased assets. Generally, when the company aggregates a critical mass of assets through revolver financing, the company refinances the assets through the issuance of long-term fixed rate debt through the Asset-Backed Security (ABS) and other markets. As of December 31, 2022, the company had 80 lessees of commercial aircraft engines and related equipment, aircraft, and other leased parts and equipment in 41 countries. The company operates in a global market in which its engines are easily transferable among lessees located in many countries, which stabilizes demand and allows it to recover from a loss of a customer. The company provides other engine leasing related services, such as engine storage, Part 145 maintenance and aircraft tear down services to its customers as well. In 2011, the company entered into an agreement with Mitsui & Co., Ltd. to participate in a joint venture formed as a Dublin-based Irish limited company, Willis Mitsui & Company Engine Support Limited (WMES), for the purpose of acquiring and leasing jet engines. Each partner holds a 50% interest in the joint venture. In 2014, the company entered into an agreement with China Aviation Supplies Import & Export Corporation (CASC) to participate in a joint venture named CASC Willis Lease Finance Company Limited (CASC Willis), a joint venture based in Shanghai, China. Each partner holds a 50% interest in the joint venture. CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on meeting the fast-growing demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. Aircraft Leasing As of December 31, 2022, the company’s operating lease portfolio included five A319-100 aircraft, four ATR 72-500 aircraft, one A320-200 aircraft, one A320-233 aircraft, one A321-200 aircraft, and one Boeing 737-700. The company’s aircraft leases are triple-net leases and the lessee is responsible for making the full lease payment and paying any other expenses associated with the use of the aircraft, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes. In addition, the lessee is responsible for normal maintenance and repairs, engine and airframe overhauls, and compliance with return conditions of flight equipment on lease. Under the provisions of many leases, for certain engine and airframe overhauls, the company reimburses the lessee for costs incurred up to but not exceeding maintenance reserves the lessee has paid to it. The company requires its lessees to comply with FAA requirements. The company periodically inspects its leased aircraft. Generally, the company requires a deposit as security for the lessee’s performance of obligations under the lease and the condition of the aircraft upon return. In addition, the leases contain extensive provisions regarding its remedies and rights in the event of a default by the lessee and specific provisions regarding the condition of the aircraft upon return. The lessee is required to continue to make lease payments under all circumstances, including periods during which the aircraft is not in operation due to maintenance or grounding. Spare Parts Sales The sale of spare parts is managed by the company’s wholly-owned and vertically-integrated subsidiary, Willis Aero. Willis Aero primarily engages in the sale of aircraft engine parts and materials that it acquires via acquisition or consignment from third parties or from the leasing portfolio. This business segment enables the company to provide end-of-life solutions for the growing supply of surplus aircraft and engines, as well as manages the full lifecycle of its lease assets. Asset Management Willis Asset Management is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 289 engines, excluding WLFC engines, under management as of December 31, 2022. Competition The company’s primary competitors include AerCap Holdings N.V., GE Capital Aviation Services, Shannon Engine Support Ltd., Pratt & Whitney, Rolls-Royce Partners Finance and Engine Lease Finance Corporation. Government Regulation The company’s customers are subject to a high degree of regulation in the jurisdictions in which they operate. For example, the FAA regulates the manufacture, repair and operation of all aircraft operated in the United States and equivalent regulatory agencies in other countries, such as the European Aviation Safety Agency (EASA) in Europe, regulate aircraft operated in those countries. Such regulations also indirectly affect the company’s business operations. With respect to a particular engine or engine component, the company utilizes FAA and/or EASA certified repair stations to repair and certify engines and components to ensure marketability. History Willis Lease Finance Corporation was founded in 1985. The company, a Delaware corporation, was incorporated in 1996.